Control of Air Pollution From New Motor Vehicles and New Motor Vehicle Engines; Proposed Non-Conformance Penalties for 2004 and Later Model Year Emission Standards for Heavy-Duty Diesel Engines and Heavy- Duty Diesel Vehicles

Related Material

Other Related Documents

[Federal Register: January 16, 2002 (Volume 67, Number 11)]
[Proposed Rules]
[Page 2159-2175]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ja02-18]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 86
[AMS-FRL-7129-2]
RIN 2060-AJ73

Control of Air Pollution From New Motor Vehicles and New Motor
Vehicle Engines; Proposed Non-Conformance Penalties for 2004 and Later
Model Year Emission Standards for Heavy-Duty Diesel Engines and Heavy-
Duty Diesel Vehicles

AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of proposed rulemaking.

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SUMMARY: EPA is proposing that nonconformance penalties (NCPs) be made
available for the 2004 and later model year non-methane hydrocarbons
and nitrogen oxides (NMHC+NO_X) standard for heavy-duty
diesel engines and vehicles. In general, the availability of NCPs
allows a manufacturer of heavy-duty engines (HDEs) or heavy-duty
vehicles (HDVs) (which include heavy light-duty trucks) whose engines
or vehicles fail to conform with certain applicable emission standards,
but do not exceed a designated upper limit, to be issued a certificate
of conformity upon payment of a monetary penalty. The proposed upper
limit associated with the 2004 emission standard for
NMHC+NO_X is 4.5 grams per brake-horsepower-hour for light
and medium heavy-duty engines and urban buses, and 6.0 grams per brake-
horsepower-hour for heavy heavy-duty engines.

DATES: Public comment: We must receive your comments by March 18, 2002.
Public hearing: We will hold a public hearing regarding this
proposed rule on February 15, 2002, beginning at 10:00 a.m.

ADDRESSES: Comments: We must receive your comments by the date
indicated under DATES above. Send paper copies of written comments (in
duplicate if possible) to the contact person listed below. In your
correspondence, refer to Docket A-2000-30. See Section VI.B for more
information on comment procedures.
Public hearing: We will hold a public hearing on February 15, 2002
at the Washington Dulles Airport Marriott, 45020 Aviation Drive,
Dulles, Virginia 20166. Phone: (703-471-9500). If you want to testify
at the hearing, notify the contact person listed below at least ten
days before the date of the hearing. See Section VI.B for more
information on the public-hearing procedures.
Public docket: EPA's Air Docket makes materials related to this
rulemaking available for review in Docket No. A-2001-30 located at U.S.
Environmental Protection Agency (EPA), Air Docket (6102), Room M-1500,
401 M. Street, SW, Washington, DC 20460 (on the ground floor in
Waterside Mall) from 8 a.m. to 5:30 p.m., Monday through Friday, except
on government holidays. You can reach the Air Docket by telephone at
(202) 260-4400. We may charge a reasonable fee for copying docket
materials, as provided in 40 CFR part 2.

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

SUPPLEMENTARY INFORMATION:

Regulated Entities

This proposed action would affect you if you produce or import new
heavy-duty diesel engines which are intended for use in highway
vehicles such as trucks and buses or heavy-duty highway vehicles. The
table below gives some examples of entities that may have to follow the
proposed regulations. But because these are only examples, you should
carefully examine the proposed and existing regulations in 40 CFR part
86. If you have questions, call the person listed in the FOR FURTHER
INFORMATION CONTACT section above.

------------------------------------------------------------------------
Examples of
NAICS a potentially
Category Codes SIC Codes b regulated
entities
------------------------------------------------------------------------
Industry..................... 336112 3711 Engine and
truck
manufacturers
336120
------------------------------------------------------------------------
a North American Industry Classification System (NAICS).
b Standard Industrial Classification (SIC) system code.

Access to Rulemaking Documents Through the Internet

Today's proposal is available electronically on the day of
publication from the Environmental Protection Agency Internet Web site
listed below. Electronic copies of the preamble, regulatory language,
Draft Technical Support Document, and other documents associated with
today's proposal are available from the EPA Office of Transportation
and Air Quality (formerly the Office of Mobile Sources) Web site listed
below shortly after the rule is signed by the Administrator. This
service is free of charge, except any cost that you incur for
connecting to the Internet.
Environmental Protection Agency Web Site: http://www.epa.gov/
fedrgstr/
(Either select a desired date or use the Search feature.)
Office of Transportation and Air Quality (OTAQ) Web Site: http://
www.epa.gov/otaq/
(Look in ``What's New'' or under the ``Heavy Trucks/Buses'' topic.)
Please note that due to differences between the software used to
develop the document and the software into which document may be
downloaded, changes in format, page length, etc. may occur.

Table of Contents

I. Background and Statutory Authority
A. Background to Nonconformance Penalty Rules
B. Statutory Authority
C. Heavy-duty Diesel Consent Decrees
II. Nonconformance Penalties for 2004 and Later Heavy-Duty Engines
and Heavy-Duty Vehicles
A. NCP Eligibility: Emission Standards for Which NCPs are
Proposed
1. Heavy-Duty Diesel NMHC+NO_X Standard
B. NCP Eligibility: Emission Standards for Which NCPs are Not
Proposed
1. Heavy-Duty Gasoline Standards
2. 2004 Tier 2 Medium-duty Passenger Vehicles & Heavy Light-duty
Trucks
III. Penalty Rates
A. Parameters
1. Upper Limit
2. Parameter Values
3. Penalty Curves

[[Page 2160]]

B. Issues and Alternatives
1. Adjustment to Reflect Differences in Performance (other than
fuel economy)
2. Projected Fuel Price
3. Discount Rates
IV. Economic Impact
V. Environmental Impact
VI. Public Participation
A. How Do I Submit Comments?
B. Will There Be a Public Hearing?
VII. Administrative Requirements
A. Regulatory Planning and Review: Executive Order 12866
B. Regulatory Flexibility Act, as amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 USC 601 et.
seq.
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act
E. Executive Order 13175: Consultation and Coordination with
Indian Tribal Governments
F. National Technology Transfer and Advancement Act
G. Executive Order 13045: Children's Health Protection
H. Executive Order 13132: Federalism
I. Executive Order 13211: Energy Effects
J. Plain Language

I. Background and Statutory Authority

A. Background to Nonconformance Penalty Rules

Since the promulgation of the first NCP rule in 1985, NCP rules
have generally been described as continuing ``phases'' of the NCP
program. The first NCP rule (Phase I), sometimes referred to as the
``generic'' NCP rule, established three basic criteria for determining
the eligibility of emission standards for nonconformance penalties in
any given model year (50 FR 35374, August 30, 1985). For regulatory
language, see 40 CFR 86.1103-87. First, the emission standard in
question must become more difficult to meet. This can occur in two
ways, either by the emission standard itself becoming more stringent,
or due to its interaction with another emission standard that has
become more stringent. Second, substantial work must be required in
order to meet the emission standard. EPA considers ``substantial work''
to mean the application of technology not previously used in that
vehicle or engine class/subclass, or a significant modification of
existing technology, in order to bring that vehicle/engine into
compliance. EPA does not consider minor modifications or calibration
changes to be classified as substantial work. Third, a technological
laggard must be likely to develop. Prior NCP rules have considered a
technological laggard to be a manufacturer who cannot meet a particular
emission standard due to technological (not economic) difficulties and
who, in the absence of NCPs, might be forced from the marketplace. EPA
will make the determination that a technological laggard is likely to
develop, based in large part on the above two criteria. However, these
criteria are not always sufficient to determine the likelihood of the
development of a technological laggard. An emission standard may become
more difficult to meet and substantial work may be required for
compliance, but if that work merely involves transfer of well-developed
technology from another vehicle class, it is unlikely that a
technological laggard would develop.
The criteria and methodologies established in the 1985 rule have
since been used to determine eligibility and to establish NCPs for a
number of heavy-duty emission standards. Phases II, III, IV, and V,
published in the period from 1985 to 1996, established NCPs that, in
combination, cover the full range of heavy-duty--from heavy light-duty
trucks (6,000-8,500 pounds gross vehicle weight) to the largest diesel
truck and urban bus engines. NCPs have been established for
hydrocarbons (HC), carbon monoxide (CO), nitrogen oxides
(NO_X), and particulate matter (PM). The most recent NCP rule
(61 FR 6949, February 23, 1996) established NCPs for the 1998 and later
model year NO_X standard for heavy-duty diesel engines
(HDDEs), the 1996 and later model year for Light-Duty Truck 3 (LDT3)
NO_X standard, and the 1996 and later urban bus PM standard.
A concurrent but separate final rule (61 FR 6944, February 23, 1996)
established NCPs for the 1996 LDT3 PM standard. The NCP rulemaking
phases are summarized in greater detail in the Draft Technical Support
Document for this proposal.

B. Statutory Authority

Section 206(g) of the Clean Air Act (the Act), 42 U.S.C. 7525(g),
requires EPA to issue a certificate of conformity for HDEs or HDVs
which exceed a federal emissions standard, but do not exceed an upper
limit associated with that standard, if the manufacturer pays an NCP
established by rulemaking. Congress adopted section 206(g) in the Clean
Air Act Amendments of 1977 as a response to perceived problems with
technology-forcing heavy-duty emissions standards. Following
International Harvester v. Ruckelshaus, 478 F.2d 615 (D.C. Cir. 1973),
Congress realized the dilemma that technology-forcing standards were
likely to cause. If strict standards were maintained, then some
manufacturers, ``technological laggards,'' might be unable to comply
initially and would be forced out of the marketplace. NCPs were
intended to remedy this potential problem. The laggards would have a
temporary alternative that would permit them to sell their engines or
vehicles by payment of a penalty. At the same time, conforming
manufacturers would not suffer an economic disadvantage compared to
nonconforming manufacturers, because the NCP would be based, in part,
on money saved by the technological laggard and its customer from the
nonconforming engine or vehicle.
Under section 206(g)(1), NCPs may be offered for HDVs or HDEs. The
penalty may vary by pollutant and by class or category of vehicle or
engine. HDVs are defined in section 202(b)(3)(C) of the CAA as vehicles
in excess of 6,000 pounds gross vehicle weight rating (GVWR). The
light-duty truck (LDT) classification includes trucks that have a GVWR
of 8500 lbs or less. Therefore, certain LDTs may be classified as HDVs.
Historically, LDTs up through 6000 lbs GVWR have been considered
``light light-duty trucks'' (LLDTs) and LDTs between 6,001 and 8,500
pounds GVWR have been considered ``heavy light-duty trucks'' (HLDTs).
Based on various new requirements established by the Clean Air Act
Amendments of 1990, each of these two light truck categories has been
further subdivided into groups by weight. The LLDTs are classified by
weight based on ``loaded vehicle weight,'' or LVW, which maintains its
current definition: curb weight plus 300 lbs. The trucks up through
3750 lbs LVW make up a subclass called light-duty-trucks-1, or LDT1.
Those greater than 3750 lbs LVW but less than or equal to 6000 lbs GVWR
are the subclass light-duty-trucks-2, or LDT2. The HLDTs are divided at
5750 lbs ``adjusted loaded vehicle weight,'' or ALVW. Adjusted loaded
vehicle weight is the average of the curb weight and the GVWR. The
HLDTs that are up through 5750 lbs ALVW are called light-duty trucks-3,
or LDT3. Those above 5750 lbs ALVW but less than or equal to 8500 lbs
GVWR are light-duty-trucks-4, or LDT4. The LDT3 and LDT4 subclasses
make up the HLDT vehicle class. Since NCPs can only be established for
heavy duty vehicles or engines, emission standards for light-duty
trucks of the LDT3 and LDT4 categories are the only light-duty truck
categories eligible for NCPs.
Section 206(g)(3) requires that NCPs:
Account for the degree of emission nonconformity;
Increase periodically to provide incentive for
nonconforming manufacturers to achieve the emission standards; and
Remove the competitive disadvantage to conforming
manufacturers.

[[Page 2161]]

Section 206(g) authorizes EPA to require testing of production
vehicles or engines in order to determine the emission level on which
the penalty is based. If the emission level of a vehicle or engine
exceeds an upper limit of nonconformity established by EPA through
regulation, the vehicle or engine would not qualify for an NCP under
section 206(g) and no certificate of conformity could be issued to the
manufacturer. If the emission level is below the upper limit but above
the standard, that emission level becomes the ``compliance level,''
which is also the benchmark for warranty and recall liability; the
manufacturer who elects to pay the NCP is liable for vehicles or
engines that exceed the compliance level in-use, unless, for the case
of HLDTs, the compliance level is below the in-use standard. The
manufacturer does not have in-use warranty or recall liability for
emissions levels above the standard but below the compliance level.

C. Heavy-duty Diesel Consent Decrees

On October 22, 1998, the Department of Justice and the
Environmental Protection Agency announced settlements with seven major
manufacturers of diesel engines that represent a majority of the diesel
engine market. The settlements resolved claims that they installed
computer software on heavy duty diesel engines that turned off the
engine emission control system during highway driving in violation of
the CAA's prohibition on defeat devices (42 USC 7522(a)(3)). The
settlements were entered by the Court on July 1, 1999. These consent
decrees with the Federal Government contained a number of provisions
applying to heavy-duty on-road, and in some cases, nonroad, engines.
Specific to the engines that would be addressed by the proposed 2004
NCPs, the decrees permit the continued use of non-complying engines for
a period of time (although emissions are capped by limits associated
with new supplemental test procedures). Other elements of these consent
decrees include a program under which the consent decree manufacturers
are required to invest considerable resources to evaluate
instrumentation and methodologies for on-road testing. Because the
Consent Decrees refer to NCPs for the 2004 model year, if published,
promulgation of this rule would have an impact on the penalties
determined under the Consent Decrees.

II. Nonconformance Penalties for 2004 and Later Heavy-Duty Engines
and Heavy-Duty Vehicles

A. NCP Eligibility: Emission Standards for Which NCPs are Proposed

1. Heavy-Duty Diesel NMHC+NO_X Standard
As discussed in section III.A., EPA must determine that three
criteria are met in order to determine an NCP should be established in
any given model year. For the model year 2004 heavy-duty diesel
NMHC+NO_X standard, we believe these criteria have been met
and it is therefore appropriate to establish NCPs for the 2004 model
year NMHC+NO_X standard.
The first criteria requires that the emission standard in question
must become more difficult to meet. This is the case with the 2004
NMHC+NO_X standard. The previous emission standards for this
category are 4.0 g/bhp-hr NO_X and 1.3 g/bhp-hr HC. The 2004
standards is a combined NMHC+NO_X standard of 2.4 g/bhp-hr,
or optionally a 2.5 g/bhp-hr NMHC+NO_X with a limit of 0.5 g/
bhp-hr NMHC.\1\ When promulgated, the Agency concluded that the 2004
standard was a technology forcing standard, and therefore it is logical
to conclude the standard is more difficult to meet.
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\1\ NMHC stands for non-methane hydrocarbons, which is a measure
of total hydrocarbons with the methane emissions subtracted out. For
typical on-highway diesel fueled heavy-duty engines, methane
emissions are on the order of 10 percent of the total hydrocarbon
emissions.
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The second criteria which must be met in order for EPA to determine
that an NCP should be established is substantial work must be required
to meet the emission standard. This criteria has also been met. As
discussed in both the 1997 final rule (See 62 FR 54694, October 21,
1997) which established the 2004 standards, as well as the 2000 final
rule (See 65 FR 59896, October 6, 2000) which reaffirmed those
standards, EPA projected that new emission control technologies would
be needed to achieve the 2004 standards. In these previous rulemakings
EPA pointed to technologies such as cooled exhaust gas recirculation
(EGR) and variable geometry turbochargers (VGT) as some of the
technologies manufacturers could use to meet the 2004 standards. Such
technologies have not previously been used in the on-highway heavy-duty
diesel market, and EPA estimated substantial research and development
efforts by the engine manufacturers would be undertaken to meet the
2004 standards. We continue to believe such new technologies will be
used by a number of engine manufacturers, and in fact several
manufacturers have indicated in recent statements they will use new
emission control technologies in order to achieve the 2004
standards.\2\
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\2\ See press releases from Caterpillar Inc., Cummins, Detroit
Diesel Corp. and Mack, available in EPA Air Docket A-2001-30.
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The final criteria for EPA to determine that an NCP should be
established is that a technological laggard is likely to develop. EPA
has several reasons to believe a technological laggard is likely.
First, during our recent discussions with a number of engine
manufacturers, several manufacturers have indicated they may not be
able to make the necessary technological changes to meet the 2004
emission standards for some of their high horsepower ratings by model
year 2004. Manufacturers have indicated that while they are continuing
to develop cooled EGR systems and associated technologies (such as
advanced turbocharger technologies) and have reached no definitive
conclusion, they are concerned regarding their ability to comply in
2004 with these higher horsepower engines. Engines with higher
horsepower ratings typically operate at higher boost levels (higher
intake manifold pressures), as well as higher fueling rates. This is
the case on today's engines. With the addition of cooled EGR, boost
levels must be increased even further in order to accommodate EGR while
maintaining the same power ratings. This can push both peak cylinder
pressures and turbocharger designs to their physical limitations. While
manufacturers are exploring a number of technologies to extend the
current limitations, they are concerned with their ability to do so
with all of the currently available power ratings between now and 2004.
Second, during recent discussions with engine manufacturers, one
manufacturer has indicated that some low volume engine families
currently available may not be ready by 2004. A low volume engine
family may require specific and targeted research and development
efforts in order to comply with the 2004 standards, and it is
reasonable to expect that manufacturers may focus their efforts on
these low volume products later in the development process, and time
may be too short to bring the product into compliance for the 2004
model year.
Finally, in the final rule completed in 2000 which reaffirmed the
2004 NMHC+NO_X standard, three engine manufactures as well as
the Engine Manufacturers Association (EMA),

[[Page 2162]]

commented that EPA should establish NCPs for the 2004 standards.\3\ EMA
commented the standards ``will be technology-forcing and likely will
result in the inability of some engine manufacturers and/or engine
families to comply with the standards.'' Detroit Diesel Corp. commented
``Meeting the 2004 standards will require the use of sophisticated new
emission control technology and will require emission durability
evaluation over a greatly extended useful life period. * * * Any
development setbacks or misjudgement regarding the capability or
durability of the new emission control technology could, at the last
minute, put an engine manufacturer into a laggard position and prevent
certification of an engine family. The likelihood of a technological
laggard for 2004 is at least as great and probably much greater than
for other standards for which NCPs have been provided.'' When we
finalized the reaffirmation of the 2004 NO_X+NMHC standard in
2000 we agreed that the standards were technology-forcing and that
sophisticated technologies would be required, and thus, that the first
two eligibility criteria were likely met. However, we concluded at the
time that it was too early to determine the likelihood of a
technological laggard, and further, that it was not necessary to
attempt to make such a judgement at that time. Now we are a year closer
to implementation of the 2004 standards, and manufacturers have not
revoked their claims that the likelihood of a technological laggard is
high. The fact that several engine manufacturers as well as a major
trade organization have indicated they believe a technological laggard
is likely to develop is an important indicator for the Agency regarding
the technological laggard criteria.
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\3\ See EPA Air Docket A-98-32, comments from Navistar (item IV-
D-29), Mack Truck (IV-D-06), Detroit Diesel Corp. (IV-D-28), and EMA
(IV-D-05).
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Based on this information, the Agency believes it is reasonable to
conclude that a technological laggard is likely to develop for the 2004
NMHC+NO_X standards.

B. NCP Eligibility: Emission Standards for Which NCPs are Not Proposed

1. Heavy-Duty Gasoline Standards
In a final rule published on October 6, 2000 (65 FR 59896), EPA
established more stringent emission standards for all heavy-duty
gasoline (or ``Otto-cycle'') vehicles and engines. These standards took
two forms: A chassis-based set for complete vehicles under 14,000
pounds GVWR (the chassis-based program), and an engine-based set for
all other Otto-cycle heavy-duty engines (the engine-based program).
Each of the two programs has an associated averaging, banking, and
trading (ABT) program. The new standards generally take effect starting
with the 2005 model year, but manufacturers are provided with two
additional options for early compliance, each of which provides
additional flexibility relative to the 2005 model year compliance
option.
We have considered the potential need for NCPs to be provided for
the new standards applicable to Otto-cycle heavy-duty engines and
vehicles, and have concluded at this time that NCPs are not required
for any of these standards. We recognize that in general these new
standards represent an increase in stringency over the prior federal
standards, and thus, that the first criterion for NCP eligibility is
satisfied. While some additional work is likely required to meet these
new standards, the second and third eligibility criteria are not
satisfied.
With respect to the chassis-based standards, manufacturers will
largely be using vehicles already certified to California standards to
meet the federal requirements. The new federal chassis-based standards
effectively extend the current California medium-duty vehicle standards
to a nationwide basis. California began requiring some vehicles to meet
these standards in 1998, and the phase-in reached completion in the
2001 model year. Thus, manufacturers will be producing a fleet of
vehicles for California that meets the new federal chassis-based
requirements several years prior to having to introduce the vehicles on
a nationwide basis. The technology required to meet the new federal
standards has therefore already been successfully demonstrated on this
class of vehicles, and manufacturers have up to several additional
years to further develop and improve these systems prior to introducing
them nationwide. Therefore, for vehicles required to meet the chassis-
based standards, we do not believe that substantial work, as described
above, will be necessary to meet the new standards. For similar
reasons, as well as the fact that manufacturers have not raised the
possibility of requiring NCPs, we do not believe that a technological
laggard is likely to develop for this class of vehicles.
Vehicles meeting the new engine-based standards will generally be
employing more advanced versions of technologies that are currently in
use, such as advanced catalytic converters and closed loop electronic
control of the air-fuel ratio. All heavy-duty Otto-cycle engines are
already equipped with three-way catalysts, and some recently introduced
engines featuring precise air/fuel control and superior catalyst
designs have been certified at levels below the most stringent
standards included under the three optional compliance programs. In
fact, the level of the engine-based standard under the optional
programs that manufacturers are likely to select (1.5 grams per brake-
horsepower-hour) is consistent with the recommendations of two
manufacturers providing comment on the rule. Given these factors, we do
not believe that a technological laggard is likely to emerge. Thus, for
vehicles required to meet the engine-based standards, we do not believe
that substantial work, as described above, will be necessary to meet
the new standards.
In addition, the three compliance options that we included in the
rule were developed through discussions with manufacturers, and based
on those discussions we believe that these options are viable options
that provide a range of choices and offer manufacturers flexibility to
fit the program with their product planning. Due to the availability of
these options and the discussions with manufacturers, we do not believe
that a technological laggard is likely to develop with respect to any
of the new Otto-cycle heavy-duty vehicle or engine standards. The ABT
programs also offer considerable additional flexibility to meet the new
standards.
In conclusion, based on the factors described above, we do not
believe that there is sufficient evidence at this time that either
substantial work is required to meet the new standards or that a
technological laggard is likely to develop. Therefore, we are not
proposing NCPs for any of the Otto-cycle heavy-duty emission standards.
2. 2004 Tier 2 Medium-duty Passenger Vehicles & Heavy Light-duty Trucks
In December 1999, EPA promulgated a new set of emission control
requirements for heavy-duty vehicles with a GVWR between 6,001 and
10,000 lbs. (See 65 FR 6698, February 10, 2000). These requirements
were implemented as part of EPA's Tier 2 vehicle emission control
program. Beginning in 2004, heavy light-duty trucks ( HLDTs) and
medium-duty passenger vehicles (MDPVs) are combined in an averaging set
which must meet a fleet average NO_X emission standard of
0.20 g/mi. The program phases in at 25/50/75/100% of each years sales
over the period 2004-2007. Those not included in this fleet average

[[Page 2163]]

must meet the current standards. This is referred to as the interim
program. Beginning in 2008, the fleet must average 50% at 0.20 g/mi
NO_X and the remaining 50% at 0.07 g/mi NO_X on
average. And, by 2009 the fleet must average 0.07 g./mi NO_X.
This is referred to as the Tier 2 program. This fleet average includes
all covered vehicles without regard to fuel-type or combustion cycle.
To be considered as part of the average, vehicle families must certify
to NO_X, NMOG, CO, HCHO, and PM standards in one of a number
of the emission ``bins.'' There are 11 bins available for the interim
program and eight for the Tier 2 program. In order for a family to
qualify for the program it need only be able to certify in the top bin
of each program.
EPA believes that NCPs are not necessary for either the interim or
Tier 2 programs applicable to HLDTs and MDPVs. While the standard will
be more difficult to meet, it does not involve ``substantial work'' as
defined in the regulation and discussed above, nor does EPA expect
there to be a ``technological laggard.'' The technology needed to meet
these standards is well understood now, and, as discussed in the
rulemaking, there are already a number of vehicle families capable of
meeting the requirements. To enable this technology further, EPA has
promulgated fuel quality requirements for gasoline and diesel fuel
aimed at substantially reducing sulfur content and thus enabling highly
efficient aftertreatment technology.
Beyond that, these programs are constructed with a phase-in, which
means that there is ample opportunity for technological development
with the potentially more difficult vehicle configurations deferrable
until the final year of each program's phase-in. Furthermore, the
programs are based on fleet average standards independent of fuel or
combustion cycle and do not limit emission standards to the fleet
average. In order to be certified, a vehicle family need only qualify
in one of the emission bins. For the interim and Tier 2 programs there
are three bins above the average. Generally, the top bin in the interim
program was constructed such that current technology vehicles could
qualify. The top bin of the Tier 2 program was set at the fleet average
value of the interim program.
The program also includes a number of flexibilities designed to
enhance compliance. These include a provision to allow the generation
of credits through early banking, manufacturer-developed alternative
phase-in schedules, deficit carryforward for the fleet average, and a
number of technology phase-in flexibilities such as in-use standards
and alternative certification test-cycles.
In conclusion, given the significant flexibilities and options
contained in the Tier 2 rule, we are not proposing NCPs for 2004 and
later model year HLDTs or MDPVs.

III. Penalty Rates

This proposed rule is the most recent in a series of NCP
rulemakings. The discussion of penalty rates in the Phase IV rulemaking
(58 FR 68532, December 28, 1993), Phase III rulemaking (55 FR 46622,
November 5, 1990), the Phase II rulemaking (50 FR 53454, December 31,
1985) as well as the Phase I rulemaking (50 FR 35374, August 30, 1985)
are incorporated by reference. This section briefly reviews the penalty
rate formula and discusses how EPA arrived at the penalty rates in this
proposed rule.

A. Parameters

As in the previous NCP rules, we are specifying the NCP formula for
each standard using the following parameters: COC₅₀,
COC₉₀, MC₅₀, F, and UL. The NCP formula is the
same as that promulgated in the Phase I rule. As was done in previous
NCP rules, costs include additional manufacturer costs and additional
owner costs, but do not include certification costs because both
complying and noncomplying manufacturers must incur certification
costs. COC₅₀ is an estimate of the industry-wide average
incremental cost per engine (references to engines are intended to
include vehicles as well) associated with meeting the standard for
which an NCP is offered, compared with meeting the upper limit. More
precisely, the values of COC₅₀ presented here are estimates
of the sales weighted mean incremental cost. We request comment
regarding whether it would be more appropriate to set COC₅₀
equal to the 50th percentile costs of compliance (i.e., median) instead
of the mean costs. Commenters supporting the use of the median costs
should address whether such an approach would reveal confidential
business information.
COC₉₀ is EPA's best estimate of the 90th percentile
incremental cost per-engine associated with meeting the standard for
which an NCP is offered, compared with meeting the associated upper
limit. MC₅₀ is an estimate of the industry-wide average
marginal cost of compliance per unit of reduced pollutant associated
with the least cost effective emission control technology installed to
meet the new standard. MC₅₀ is measured in dollars per g/
bhp-hr for HDEs. F is a factor used to derive MC₉₀, the 90th
percentile marginal cost of compliance with the NCP standard for
engines in the NCP category. MC₉₀ defines the slope of the
penalty rate curve near the standard and is equal to MC₅₀
multiplied by F. UL is the upper limit above which no engine may be
certified. UL is specified for each of the four service classes for
which NCPs are being proposed.
The derivation of the proposed cost parameters is described in a
support document entitled ``Draft Technical Support Document:
Nonconformance Penalties for 2004 Highway Heavy-Duty Diesel Engines,''
which is available in the public docket for this rulemaking. All costs
are presented in 2001 dollars. Because we are trying to account for
cost differences at the point of sale, all costs were converted to net
present value (NPV) for calendar year 2004 using a discount rate of 7.0
percent. The upper limits applicable to a pollutant emission standard
are described in the following section.
We requested cost information from several of the engine
manufacturers for each engine model that they plan to produce for model
year 2004. We used these estimates along with all other available
information to estimate the average and 90th percentile compliance
costs. However, as we have in previous NCP rules, we relied heavily on
the manufacturers' projections of their own costs, especially for
fixed, hardware, and warranty costs. We request comment on the
availability of other data to estimate these costs on a manufacturer-
specific basis.
It is important to note that this analysis differs from the
analyses for the model year 2004 standard-setting rulemakings in three
basic ways:
(1) The goal of this analysis is to estimate manufacturer and
operator costs during the first year of the new standards rather than
to project the long-term costs.
(2) The baselines for calculation of compliance costs differ
significantly due to issues associated with the Consent Decrees.
(3) We now have more detailed information about costs identified in
the earlier analysis, as well as cost categories not previously
included.
Thus, the costs estimated here are not comparable to the estimates
described in the standard-setting rulemakings. These differences are
discussed in detail in Chapter 3 of the Draft Technical Support
Document for this rulemaking, and only a summary will be presented
here.
First, it is necessary for this NCP analysis to focus solely on the
compliance costs associated with the first year of production, while
standard-

[[Page 2164]]

setting analyses require a longer term view. This is most significant
with respect to the costs associated with hardware, reliability
(warranty, repairs, and associated costs), and fuel consumption.
Manufacturers often make significant progress in reducing these costs
with additional time.
Second, as is discussed in Section III(A)(1) of this preamble, the
engine designs currently produced and sold under the Consent Decrees
lead us to propose an Upper Limit value of 6.0 g/bhp-hr
NMHC+NO_X, for the heavy-heavy duty service class, which
fundamentally changes the cost analysis. The penalty rate factors are
based on the compliance costs associated with lowering the emissions
from model year 2001 engines to the 2004 standard. For heavy-heavy duty
engines the NCPs are therefore based on the compliance costs associated
with lowering the emissions from 6.0 g/bhp-hr NMHC+NO_X to
the 2004 standard of 2.5g/bhp-hr NMHC+NO_X. This analysis was
not performed in the standards-setting rules, and therefore the costs
estimates in the standard-setting rule and this NCP proposal are not
comparable. For the standard-setting rules, we estimated the compliance
costs associated with bringing an engine which meets the current
NO_X standard of 4.0 g/bhp-hr into compliance with the 2.5g/
bhp-hr NMHC+NO_X. Even for the other service classes, where
we have proposed an Upper Limit based directly on the 4.0 g/bhp-hr
NO_X standard, the impact on engine designs of the alleged
defeat device strategies used by a number of engine manufacturers over
the past decade makes comparison between the standard-setting rule cost
analysis and this analysis difficult.
Finally, for this NCP proposal we have received new information
since the standard-setting FRMs. This included more detailed estimates
of actual manufacturer costs, plus data on a few additional cost items
which were not part of the standards-setting rulemaking analysis.
Specifically, we have included new cost items for vehicle manufacturer
costs, post-warranty repairs, and revenue impacts (lost revenue due to
the increased weight of the engine and the loss in freight capacity).
We did not have this information during the standard-setting rule. As a
result of the three factors summarized above, the costs estimated in
this NCP proposal are not directly comparable to the estimates
described in the standard-setting rulemakings.
The significance of the various cost categories varied with service
class. For example, the largest costs for light-heavy duty were
hardware costs, while fuel costs were relatively low. However, for
heavy-heavy duty, the fuel costs represent about half of the total cost
of compliance.
1. Upper Limit
The upper limit is the emission level established by regulation
above which NCPs are not available and a heavy duty engine cannot be
certified or introduced into commerce. CAA section 206(g)(2) refers to
the upper limit as a percentage above the emission standard, set by
regulation, that corresponds to an emission level EPA determines to be
``practicable.'' The upper limit is an important aspect of the NCP
regulations not only because it establishes an emission level above
which no engine can be certified, but it is also a critical component
of the cost analysis used to develop the NCP factors. The regulations
specify that the relevant NCP costs for determining the
COC₅₀ and the COC₉₀ factors are the difference
between an engine at the upper limit and one that meets the new
standards (see 40 CFR 86.1113-87).
The regulatory approach adopted under the NCP rules sets the Upper
Limit (UL) at the prior emission standard when a prior emission
standard exists and that standard is changed and becomes more
stringent. EPA concluded that the UL should be reasonably achievable by
all manufacturers with vehicles in the relevant class. It should be
within reach of all manufacturers of HDEs or HDVs that are currently
allowed so that they can, if they choose, pay NCPs and continue to sell
their engines and vehicles while finishing their development of
complying engines. A manufacturer of a previously certified engine or
vehicle should not be forced to immediately remove an HDE or HDV from
the market when an emission standard becomes more stringent. The prior
emissions standard meets these goals, because manufacturers have
already certified their vehicles to that standard.
EPA also concluded that the prior emission standard is the
appropriate upper limit when an emission standard is tightened by
operation of another standard. EPA recognized that the previous
standard would not necessarily represent the level that is reasonably
achievable by all manufacturers with engines in the relevant class, but
in practice the prior standard should be achievable in almost all
cases. EPA rejected a suggestion that the upper limit, in such cases,
should be more stringent than the prior emission standard, because it
would be very difficult to identify a limit that would be within reach
of, and could be met by, all manufacturers.
In this case, the new standard is a limit on the combination of
NO_X+NMHC, while the prior regulatory standards are separate
limits, one for NO_X and one for total HC. For a large
portion of the industry, there are also emissions limits set under
judicial Consent Decrees, many of which vary from the regulatory
standards, in particular for the heavy-heavy service class as discussed
latter in this section. In this situation, there is no simple way to
determine the appropriate prior emission standard to use as an Upper
Limit. One option would be to add the current NO_X and HC
standards together, resulting in a 5.3 NO_X+NMHC standard.
Another option would recognize that the HC standard has resulted in
emissions of NMHC that are generally at 0.5 or below, producing
NO_X+NMHC levels consistent with a standard of 4.5 for
engines meeting a 4.0 g/bhp-hr NO_X standard. If there were
no Consent Decree emissions limits, and the entire industry was already
operating at these levels, a 4.5 standard would be more consistent with
the policy and purposes of 40 CFR 86.1104-91, the general regulatory
provision addressing Upper Limits. A NO_X+NMHC standard of
5.3 would in effect allow for increases in NO_X above the
current regulatory emissions standards, because there is no reason to
expect NMHC levels would increase above 0.5. The UL is designed to
allow continued production of current engines, but not to allow
backsliding.
EPA also considered the CD emissions limits in this analysis, as
they establish legally binding requirements on the manufacturers that
directly affect the way engine manufacturers design their engines. In
many cases it is the CD limits, and not the regulatory standards, that
are the controlling factor and dictate the level of emissions control
required on engines produced during the term of the Decrees. Since the
role of an NCP is to address the real world problems associated with a
transition from a prior emissions requirement to a new more stringent
requirement, it is appropriate to take the CD requirements into account
where the levels required under the CD are in fact the controlling
factor in establishing the prior level of control.
For light heavy-duty, medium heavy-duty, and urban bus engines, the
CD requirements are consistent with the regulatory requirements for FTP
standards and the defeat device prohibition. Manufacturers are
currently certifying to the emissions levels provided under the CD. An
examination

[[Page 2165]]

of model year 2001 certification data shows that for both CD and non-CD
engine manufacturers, engines are generally being certified with HC
emissions below 0.3 g/bhp-hr, and no engines in these service classes
certified to the 4.0 g/bhp-hr NO_X standard have a combined
NO_X plus HC emission level greater than 4.5 g/bhp-hr.\4\
Hence, an UL of 4.5 NO_X+NMHC on the FTP would be most
consistent with the policy approach embodied in 40 CFR 86.1104-91.
---------------------------------------------------------------------------

\4\ EPA Memorandum ``Summary of Model Year 2001 Heavy-duty
Diesel Engine HC and NO_X Certification Data'', copy
available in the docket for this rulemaking.
---------------------------------------------------------------------------

For heavy heavy-duty engines, however, the CD provides a
significantly different approach. For these engines, limits are set for
Euro III and NTE levels that allow for significantly higher emissions
off the FTP than EPA would expect to allow under the defeat device
prohibition. While the FTP standard under the CD is the same as in the
regulations, it is the level of off-cycle control that drives the
design requirements for the engine manufacturers. They are the legal
requirements that drive the level of control embodied in the engine
design. Model year 2001 certification data shows that combined HC and
NO_X emissions for these engines are at or below 6.0 g/bhp-hr
when measured using the Euro III test.\5\
---------------------------------------------------------------------------

\5\ EPA Memorandum ``Summary of Model Year 2001 Heavy-duty
Diesel Engine HC and NO_X Certification Data'', copy
available in the docket for this rulemaking.
---------------------------------------------------------------------------

This NCP rulemaking focuses on technological laggards, which would
be those heavy-duty engines that need more lead time to comply with the
2004 NO_X+NMHC standard. For heavy heavy-duty engines, the
prior actual level of control that they are now achieving and
certifying to is driven by the CD levels. As such, an UL at the level
of control required under the CD would set a level that is within the
reach of all such manufacturers, including the technological laggards.
It would be reasonably achievable by all manufacturers in this class,
and would avoid forcing the technical laggards to remove an engine from
the market when the 2004 emissions standards go into effect. This UL
would be consistent with the policy embodied in the NCP regulations.
EPA recognizes that under the CD this group of heavy-duty engines
is also required to achieve the 2004 emissions levels by October 2002.
However, as discussed before, EPA has determined that there is likely
to be a technological laggard for purposes of meeting this standard in
2004. The prior deadline in the CD does not change this determination,
and means only that such manufacturers would also be subject to the
constraints in the CD, including its compliance and enforcement
provisions. EPA also recognizes that the CD calls for compliance with a
4.0 NO_X standard on the FTP with a 6.0 NO_X
standard for the Euro III, and the UL we are proposing is for the FTP.
Setting the UL at 6.0 NO_X+NMHC for the FTP would be expected
to allow continued production of engines with NO_X at their
CD levels, as the Euro III levels would not be expected to raise
serious concerns about compliance with the defeat device prohibition.
EPA also considered an UL or 4.5 or 5.3 for the heavy heavy-duty
engines An UL of 4.5 NO_X +NMHC would significantly reduce
the level of off-cycle emissions for these engines, but would do it by
requiring significant design changes at the same time design work is
underway to meet the 2.5 standard. It is questionable whether there is
adequate lead time to accomplish this in time for 2004 model year, and
it is not consistent with the policy underlying the NCP regulation
concerning ULs. In addition, the majority of the heavy-heavy cost
numbers obtained by EPA from industry involved bringing an engine to
compliance from the CD levels to the 2004 levels, and not for reducing
from some third level to the 2004 levels. EPA does not believe it could
readily develop the cost figures for such a development phase. An UL of
5.3 NO_X+NMHC would involve a hybrid of these two options--it
would involve some change from the CD levels, but less of a change than
going to the 4.5 level.
Of the three possible ULs for heavy heavy-duty engines, EPA
believes that 6.0 NO_X+NMHC is most consistent with the
policy approach embodied in 40 CFR 86.1104-91. The cost calculation in
this proposal are based on this as the UL. However, EPA invites comment
on using an UL of either 5.3 or 4.5 NO_X+NMHC, including
information on the technology such an engine would use to comply with
either 5.3 or 4.5, as well as the costs associated with these options.
2. Parameter Values
We propose that the values in Table 1 (in 2001 dollars) be used in
the NCP formula for the 2004 and later model year NMHC+NO_X
standard of 2.5 g/bhp-hr for diesel heavy-duty engines and diesel urban
bus engines at full useful life. The derivation of these parameters is
described in the Draft Technical Support Document for this rulemaking.
We request comment on our estimates of these parameters.

[[Page 2166]]

Table 1.--Proposed NCP Calculation Parameters
----------------------------------------------------------------------------------------------------------------
Light heavy- Medium heavy-
Parameter duty diesel duty diesel Heavy-duty Urban bus
engines engines diesel engines engines
----------------------------------------------------------------------------------------------------------------
COC ₅₀.......................................... $1,080 $3,360 $8,940 $4,400.
COC ₉₀.......................................... $2,610 $6,870 $14,790 $7,120.
MC ₅₀........................................... \1\ $2,000 \1\ $1,800 \1\ $7,200 \1\ $4,900
F............................................... 1.3 1.3 1.3 1.3
UL.............................................. \1\ 4.5 \1\ 4.5 \1\ 6.0 \1\ 4.5
----------------------------------------------------------------------------------------------------------------
\1\ Per gram per brake-horsepower-hour.

3. Penalty Curves
The calculation parameters listed in Table 1 are used to calculate
the penalty rates for each heavy-duty service class. These parameters
are used in the penalty rate formulas which are defined in the existing
NCP regulations (See 40 CFR 86.1113(a)(1) and (2)). Using the
parameters in Table 1, and the equations in the regulations, we have
plotted penalty rates versus compliance levels for each service class
in Figures 1-4 below. These penalty curves are for the first year of
use of the NCPs, that is, the annual adjustment factors specified in
the regulations have been set equal to one.

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B. Issues and Alternatives

The Clean Air Act requires EPA to set the NCPs ``to remove any
competitive disadvantage to manufacturers whose engines or vehicles
achieve the required degree of emission reduction''. The analysis
presented in detail in the Draft Technical Support Document deals with
an assessment of the cost of compliance, using essentially the same
methodology that has historically been used to establish NCPs. We
believe that our estimates of the costs are appropriate and that the
methodology is sound. In establishing prior NCP rules, we have
frequently made it clear that satisfying the statutory objective of
protecting the complying manufacturer was paramount.
The NCP generic rule establishes an approach which attempts to
remove any competitive disadvantage to complying manufacturers by
assessing a cost to the manufacturer of a non-complying engine in the
form of an NCP, with the expectation that this cost is at least
equivalent to or exceeds the value of the competitive benefit gained by
building a noncomplying engine. Imposing such a cost is a way to level
the playing field without interfering in the actual marketing or
pricing of the engines. The problem here is that for some factors it is
hard to quantify with certainty the value of this competitive benefit,
and EPA is concerned that the calculation may not remove all
competitive disadvantages.
1. Purchaser Perception Effects on Competition
A manufacturer of a non-complying engine generally gains a
competitive advantage or benefit of two types. The first typically
involves production expenses saved by not producing a complying engine,
such as fixed costs, hardware costs, and the like. The second category
involves, in some cases, the competitive benefits gained by producing
an engine that has better performance characteristics compared to a
complying engine, including reduced operating expenses for the
purchasers of noncomplying engines. In addition, manufacturers may
realize a reduced number of warranty claims by producing current
technology noncomplying engines.
The first category is easier to quantify, as it involves
considering costs directly incurred by the industry, and it is
generally easier to get a fuller quantification of amounts in
categories such as hardware costs. The second category is much harder
to quantify with certainty. For example, as discussed below with
respect to fuel economy, the actual amount of savings to the operator
will vary based on several factors. An even harder to quantify
competitive advantage is the benefit in the marketplace from producing
an engine that is, or may be perceived to perform better, such as being
more durable or reliable, and thus less prone to malfunction or
breakdown. Including the cost of warranty claims and related expenses
for the new technology engines in the NCP is one way to take into
consideration the expected durability of complying engines. Including
this cost helps to level the playing field with respect to this
increased cost experienced by manufacturers of complying engines. This
cost component of the NCP is therefore like the costs in the first
category--out of pocket expenses experienced by complying manufacturers
that a non-complying manufacturer might otherwise avoid.
There is significant uncertainty as to whether warranty and related
costs in the NCP calculation fully reflect the competitive benefit
gained in the marketplace by a non-complying engine. This competitive
benefit could readily be greater than the out-of-pocket warranty
expenses paid by the manufacturer of a complying engine. For example,
non-complying engines may be either perceived or may in fact be more
reliable during the early years of the transition to the new technology
engines. This difference in performance gives a competitive advantage
to producers of noncomplying engines. In order to remove this
advantage, the cost of an NCP needs to account for the marketplace
value of this difference in performance.
However, it is hard to quantify this value with certainty. For
example it is hard to quantify in dollar terms the value purchasers
will attribute to a real or perceived difference in durability or
reliability. There is little real world experience with the new
technology engines; hence it will be hard for a purchaser to judge with
certainty the actual difference in reliability and the increased costs
associated with it. It is also unlikely that the dollar amount of a
warranty claim would fully reflect the loss in value expected from a
malfunction or breakdown. The purchaser experiences both the repair
expenses as well as down time for their equipment, disruption of their
business, and other potential adverse impacts, which may not be fully
covered by payment of a warranty claim. Especially where there is
little historical evidence to rely on regarding a new technology, there
may be significant uncertainty concerning the reliability of new
technology engines when they are first introduced, and the value a
purchaser places on the proven reliability of an older technology
engine may therefore be magnified. While this proposal includes costs
related to downtime and demurrage expenses during warranty repairs in
the NCP, it is not clear how, as part of a business decision, the
engine purchasers will trade-off higher purchase costs for the
noncomplying engine versus the uncertainty of the reliability and
durability of the new technology.
This is potentially a significant issue in this action because
there is reason to believe that manufacturers may choose to make
extensive use of NCPs and continue to produce pre-2004 technology
engines. As has been the case in past NCP rules, where a noncomplying
manufacturer does essentially nothing in terms of new technology (i.e.,
produces an upper limit engine), it must pay an NCP based on
COC₉₀. The noncomplying manufacturer would then raise prices
on its engines to levels comparable to those for complying engines in
order to be able to capture back at least part of that NCP (the portion
related to first price increase). The noncomplying manufacturer may
even be able to charge a premium (relative to the first price increase
of the complying manufacturer) if the engine purchaser perceives its
``old technology'' engine to be more desirable than the relatively
unproven new technology engine.
Thus, in summary, we have three related factors affecting the issue
of whether the proposed NCP would remove competitive disadvantage
(purchase price, operating cost, purchaser perception). Even with an
NCP set at a level which addresses quantifiable cost differences
between complying and non-complying engines, in the eyes of the
purchaser there still may be an advantage to paying the higher first
cost for an engine (including the NCP) with known performance.
It is difficult to establish the degree to which the NCP
calculation discussed above will fully remove any competitive advantage
for non-compliers attributable to purchaser perception. Therefore, EPA
is requesting comment on whether there is an additional factor that
should be included in the NCP calculation and on methods to value these
potential performance advantages. If engine purchaser perception favors
noncomplying engines, this affects market share and thus business
viability, per engine amortized fixed costs, and overall profitability.
Therefore, we are considering adding a factor to the NCP formula to
address

[[Page 2170]]

such an advantage if it exists, and there is an appropriate way to
quantify it. Conceptually, such a factor would need to be equal to the
purchase price difference at which a potential purchaser would be
indifferent between purchasing a complying and non-complying engine,
after accounting for all of the factors that are currently included in
the proposed NCP calculation (e.g., fuel costs, maintenance, warranty,
demurrage, and the revenue impact of additional engine weight. These
factors are discussed in more detail in the draft Technical Support
Document for this proposal. EPA requests comment on whether such an
additional factor is needed here and if so what is the appropriate
means to implement this adjustment. Commenters who believe that such a
factor is appropriately included in the NCP calculation should provide
an empirical and quantitative basis for calculating the appropriate
level at which to set it.
2. Projected Fuel Price
One of the most significant categories of cost is the impact of the
standards on fuel consumption rates. However, this cost element is
difficult to estimate because actual fuel costs will vary based on the
price of the fuel and on the vehicle operation. We, therefore, are
requesting comment on our estimates of the economic impact of increased
fuel consumption.
Fuel price varies with time and with location. According to the
Energy Information Administration (EIA), the national average highway
diesel fuel price in February of 1999 was 95 cents per gallon (with
taxes), but in October of 2000 it was $1.67 per gallon (with taxes).
That represents a 76 percent increase in the fuel price within a two
year period. The average price for diesel fuel over the past five years
was $1.25 per gallon. This kind of variation makes it difficult to
project future prices. For our analysis, we estimated the fuel price to
be $1.50 for 2004 and 2005. This is equal to the national average
highway diesel fuel price for last year. We are requesting comment on
the use of the five-year average price of $1.25 per gallon. Our
analysis projects that fuel costs will be five cents per gallon higher
after 2005 to account for the additional cost of the very low sulfur
fuel that will be required beginning in 2006. This would also be true
if we started with the five-year average price instead of the 2000
price. Given the difficulty in projecting future fuel prices, we are
also requesting comments on the concept of adjusting the NCP based on
price of diesel fuel. This could be done in two ways. First, we could
adjust the NCP by regulation before the beginning of the 2004 model
year if we determine that the fuel price used to determine the NCP
inputs is no longer appropriate. Second, we could finalize in this
rulemaking a regulatory provision that makes COC₅₀,
COC₉₀ and MC₅₀ functions of the national average
highway diesel fuel price in the preceding year (or preceding five
years). This would be similar to the use of the Consumer Price Index to
adjust the penalties for inflation (see 40 CFR 86.113-87(a)(4). The NCP
could be adjusted ``automatically'' using the latest EIA estimate of
national average highway diesel fuel price, or some other independent
estimate.
In addition, at any given time, fuel prices before taxes can vary
regionally by as much as ±10 percent from the national
average. This is compounded by differences in state taxes, which vary
from 8 to 29 cents per gallon. This regional variability is potentially
significant for our 90th percentile analysis. Some trucks may operate
locally in an area that has fuel prices significantly higher than the
national average. However, we believe that the number of these trucks
will be relatively small, and thus did not include a regional fuel
price component in our 90th percentile analysis. Nevertheless, we
request comment on this issue.
Another important factor in estimating fuel cost is how much fuel a
model year 2004 vehicle will use over its lifetime. This is most
important for heavy-heavy duty engines. Some vehicles may be scrapped
after their useful life (435,000 miles) while others may be rebuilt
more than once and not be scrapped until after 2 million miles. Thus,
the fuel cost could vary by a factor of four from one vehicle to
another. The mileage estimates that we used in our analysis are shown
in the table below. You should read the Draft Technical Support
Document for more information about how we used these mileage
estimates.

Estimates of Lifetime Vehicle Miles Traveled (VMT) Used in Cost Analysis
------------------------------------------------------------------------
VMT for average VMT used for
vehicle COC₉₀ analysis
------------------------------------------------------------------------
Light Heavy....................... 209,000 280,000
Medium Heavy...................... 262,000 343,000
Heavy Heavy....................... 767,000 1,000,000
------------------------------------------------------------------------

Finally, our methodology for calculating the cost of changes in
fuel consumption uses estimates of average miles driven per gallon of
fuel used. These estimates are 14.0, 8.0 and 6.0 miles per gallon (MPG)
for light-, medium, and heavy-heavy duty, respectively. We used these
same estimates for both the COC₅₀ and COC₉₀
analyses. Using different estimates could significantly change the
projected costs. For a typical light-heavy duty vehicle, where we are
projecting a decrease in the brake-specific fuel consumption rate,
using a higher MPG rate would increase net costs for a given number of
miles traveled because the fuel savings would be reduced. The opposite
is true for medium- and heavy-heavy duty, where we project increases in
brake-specific fuel consumption rates. For these larger engines, using
a higher MPG rate would decrease net costs for a given number of miles
traveled. We request comment on these MPG estimates.
3. Discount Rates
All of the compliance costs in this analysis are presented in terms
of net present value (NPV) for calendar year 2004. This means that
costs that occur before 2004 are adjusted upward, and costs that occur
after 2004 are adjusted downward to reflect the time or opportunity
value of the money involved. (i.e., discounted).
In our analysis, each manufacturer's pre-production investment
costs were adjusted upward to reflect the lost opportunity cost or the
cost of borrowing the capital for the investment. A manufacturer would
typically seek to set its prices to recover this adjusted investment
from sales within the first several years of production. We used a
seven percent annual discount rate for these costs, as we have done in
previous analyses for pre-production costs. EPA also used a seven
percent discount rate in

[[Page 2171]]

Regulatory Impact Analyses for the 1997 and 2000 FRMs that established
the 2004 standards. This rate is based on studies which indicate that
this has been a reasonable opportunity cost of diverting private
capital to support Federal regulatory objectives (See OMB Circular A-
94; available at www.whitehouse.gov/omb/circulars/a094/a094.html ). We
request comment in whether this rate is appropriate for the opportunity
costs for the period of 1998 through 2003, the time period when the
2004 model year investment is being made by the manufacturers.
The NPV analysis also requires that all in-use operating costs be
adjusted downward to reflect the time value of money for future costs.
More specifically, the stream of operating costs must be discounted to
make them equivalent to costs incurred at the time of purchase. Truck
purchasers would use this approach before purchase when comparing
future operating costs of two or more engines before purchase. We used
a seven percent discount rate for these costs as well. However, there
is evidence in other contexts that users might apply a different
discount rate than seven percent when considering future operating
costs during a purchase decision. We request comment on whether there
is evidence to support the application of such an alternative discount
rate to operating costs in the various segments of the heavy duty
engine market. Your comments in support of an alternative discount rate
(a higher or lower value) should include a discussion of the supporting
economic and business rationale for the alternative rate. We have
included an example of the impact on the NCP parameters from using a
smaller discount rate (three percent) in the draft Technical Support
Document for this proposal.

IV. Economic Impact

Because the use of NCPs is optional, manufacturers have the
flexibility and will likely choose whether or not to use NCPs based on
their ability to comply with emissions standards. If no HDE
manufacturer elects to use NCPs, these manufacturers and the users of
their products will not incur any additional costs related to NCPs.
NCPs remedy the potential problem of having a manufacturer forced out
of the marketplace due to that manufacturer's inability to conform to
new, strict emission standards in a timely manner. Without NCPs, a
manufacturer which has difficulty certifying HDEs in conformance with
emission standards or whose engines fail a SEA has only two
alternatives: fix the nonconforming engines, perhaps at a prohibitive
cost, or prevent their introduction into commerce. The availability of
NCPs provides manufacturers with a third alternative: continue
production and introduce into commerce upon payment of a penalty an
engine that exceeds the standard until an emission conformance
technique is developed. Therefore, NCPs represent a regulatory
mechanism that allows affected manufacturers to have increased
flexibility. A decision to use NCPs may be a manufacturer's only way to
continue to introduce HDEs into commerce.

V. Environmental Impact

When evaluating the environmental impact of this proposed rule, one
must keep in mind that, under the Act, NCPs are a consequence of
enacting new, more stringent emissions requirements for heavy duty
engines. Emission standards are set at a level that most, but not
necessarily all, manufacturers can achieve by the model year in which
the standard becomes effective. Following International Harvester v.
Ruckelshaus, 478 F. 2d 615 (D.C. Cir. 1973), Congress realized the
dilemma that technology-forcing standards were likely to cause, and
allowed manufacturers of heavy-duty engines to certify nonconforming
vehicles/engines upon the payment of an NCP, under certain conditions.
This mechanism would allow manufacturer(s) who cannot meet technology-
forcing standards immediately to continue to manufacture these
nonconforming engines while they tackle the technological problems
associated with meeting new emission standard(s). Thus, as part of the
statutory structure to force technological improvements without driving
manufacturers out of the market, NCPs provide flexibility that fosters
long-term emissions improvement through the setting of lower emission
standards at an earlier date than could otherwise be possible. By
design, NCPs encourage the technological laggard that is using NCPs to
reduce emission levels to the more stringent standard as quickly as
possible.
However, we believe that the potential exists for there to be more
widespread use of the NCPs proposed in this rule in comparison to prior
NCPs, thus indicating the possibility for an environmental impact
somewhat greater in magnitude than we have suggested in prior NCP
rules. Nevertheless, we believe that any such impacts would be short-
term in nature. By including an annual adjustment factor that increases
the levels of the penalties, the NCP program is structured such that
the incentives to produce engines that meet the standards increase
year-by-year. The practical impact of this adjustment factor is that
the NCPs will rapidly become an obsolete option for non-complying
manufacturers. However, we have no way of predicting at this time how
many manufacturers will make use of the proposed NCPs, or how many
engine families would be subject to the NCP program. Because of these
uncertainties we are unable to accurately quantify the potential impact
the proposed NCPs might have on emission inventories, although, as
stated above, any impacts are expected to be short-term in nature.

VI. Public Participation

We request comment on all aspects of this proposal. This section
describes how you can participate in this process.

A. How Do I Submit Comments?

We are opening a formal comment period by publishing this document.
We will accept comments for the period indicated under DATES above. If
you have an interest in the program described in this document, we
encourage you to comment on any aspect of this rulemaking. We request
comment on various topics throughout this proposal.
Your comments will be most useful if you include appropriate and
detailed supporting rationale, data, and analysis. If you disagree with
parts of the proposed program, we encourage you to suggest and analyze
alternate approaches to meeting the air quality goals described in this
proposal. You should send all comments, except those containing
proprietary information, to our Air Docket (see Addresses) before the
end of the comment period.
If you submit proprietary information for our consideration, you
should clearly separate it from other comments by labeling it
``Confidential Business Information.'' You should also send it directly
to the contact person listed under FOR FURTHER INFORMATION CONTACT
instead of the public docket. This will help ensure that no one
inadvertently places proprietary information in the docket. If you want
us to use your confidential information as part of the basis for the
final rule, you should send a non-confidential version of the document
summarizing the key data or information. We will disclose information
covered by a claim of confidentiality only through the application of
procedures described in 40 CFR part 2. If you don't identify
information as confidential when we receive it, we may make it
available to the public without notifying you.

[[Page 2172]]

B. Will There Be a Public Hearing?

We will hold a public hearing in the Washington, DC area on
February 15, 2002. The hearings will start at 10:00 am and continue
until everyone has had a chance to speak.
If you would like to present testimony at a public hearing, we ask
that you notify the contact person listed above at least ten days
before the hearing. You should estimate the time you will need for your
presentation and identify any needed audio/visual equipment. We suggest
that you bring copies of your statement or other material for the EPA
panel and the audience. It would also be helpful if you send us a copy
of your statement or other materials before the hearing.
We will make a tentative schedule for the order of testimony based
on the notifications we receive. This schedule will be available on the
morning of each hearing. In addition, we will reserve a block of time
for anyone else in the audience who wants to give testimony. We will
conduct the hearing informally, and technical rules of evidence won't
apply. We will arrange for a written transcript of the hearing and keep
the official record of the hearing open for 30 days to allow you to
submit supplementary information. You may make arrangements for copies
of the transcript directly with the court reporter.

VII. Administrative Requirements

A. Regulatory Planning and Review: Executive Order 12866

Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), the Agency
is required to determine whether this regulatory action would be
``significant'' and therefore subject to review by the Office of
Management and Budget (OMB) and the requirements of the Executive
Order. The order defines a ``significant regulatory action'' as any
regulatory action that is likely to result in a rule that may:
Have an annual effect on the economy of $100 million or
more or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
Create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency;
Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or,
Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
Pursuant to the terms of Executive Order 12866, OMB has notified
EPA that it considers this a ``significant regulatory action'' within
the meaning of the Executive Order. EPA has submitted this action to
OMB for review. Changes made in response to OMB suggestions or
recommendations will be documented in the public record. This
regulation is intended to assist manufacturers that are having
difficulty developing and marketing vehicles which comply with the 2004
NMHC+NO_X standard for diesel heavy-duty engines and heavy-
duty vehicles. Without this proposed rule, a manufacturer experiencing
difficulty in complying with this new emission standard (after the use
of credits) has only two alternatives: fix the non-conforming engines
for the associated model years or not sell them at all. NCPs provide
manufacturers with additional time to bring their engines into
conformity. In addition, NCPs are calculated to deprive non-conforming
manufacturers of any cost savings and competitive advantages stemming
from marketing a non-conforming engine. Thus, NCPs will not have
significant adverse effects on competition, employment, investment,
productivity, innovation or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic or
export markets.

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

The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business that has no
more than 1,000 employees; (2) a small governmental jurisdiction that
is a government of a city, county, town, school district or special
district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
After considering the economic impacts of today's proposed rule on
small entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This
proposed rule will not impose any requirements on small entities. The
non-conformance penalties that would be established by this proposed
rule are for emission standards that pertain to heavy-duty diesel
engines. When these emission standards were established, the final
rulemaking (65 FR 59895, October 6, 2000) noted that only two small
entities were known to be affected. Those entities were small
businesses that certify alternative fuel engines or vehicles, either
newly manufactured or modified from previously certified gasoline
engines. The emission standards for heavy-duty diesel engines, for
which NCPs are proposed, do not pertain to the engines manufactured by
these businesses.

C. Paperwork Reduction Act

The information collection requirements in this proposed rule will
be submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An
Information Collection Request (ICR) document will be prepared and its
availability for comment will be announced in a separate Federal
Register document when the ICR is sent to OMB.
The existing regulations in 40 CFR part 86, subpart L require that
manufacturers seeking NCPs annually conduct a Production Compliance
Audit (PCA) for each engine configuration. This means that they must
perform additional emission testing. This testing is necessary to
determine more precisely the emission levels for engine configurations
that exceed an applicable emission standard. While the use of NCPs is
voluntary, manufacturers choosing to use them must submit the
additional testing information (40 CFR 86.1106-87). Manufacturers may
assert that some or all of the information provided is entitled to
confidential treatment as provided by 40 CFR part 2, subpart B.
EPA has previously estimated the annual burden associated with NCPs
to 906 hours and $51,786, based on a projection of six respondents per
year. We estimated the average burden hours per response to 144 hours
for reporting, and 7 hours for recordkeeping. Burden means the total
time, effort, or financial resources expended by persons to generate,
maintain, retain, or disclose or provide information to or for a
Federal agency. This includes the time needed

[[Page 2173]]

to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted.
Before EPA establishes any regulatory requirements that may
significantly or uniquely affect small governments, including tribal
governments, it must have developed under section 203 of the UMRA a
small government agency plan. The plan must provide for notifying
potentially affected small governments, enabling officials of affected
small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant Federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
This proposed rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, or
tribal governments or the private sector. The proposed rule would
impose no enforceable duty on any State, local or tribal governments or
the private sector.
EPA has determined that this rule does not contain a Federal
mandate that may result in expenditures of $100 million or more for
State, local, and tribal governments, in the aggregate, or the private
sector in any one year. Because the use of NCPs is optional,
manufacturers have the flexibility and will likely choose whether or
not to use NCPs based on their ability to comply with emissions
standards. The availability of NCPs provides manufacturers with a third
alternative: continue production and introduce into commerce upon
payment of a penalty an engine that exceeds the standard until an
emission conformance technique is developed. Therefore, NCPs represent
a regulatory mechanism that allows affected manufacturers to have
increased flexibility. Thus, today's rule is not subject to the
requirements of sections 202 and 205 of the UMRA.

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

Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (59 FR 22951, November 6, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' ``Policies that have tribal
implications'' is defined in the Executive Order to include regulations
that have ``substantial direct effects on one or more Indian tribes, on
the relationship between the Federal government and the Indian tribes,
or on the distribution of power and responsibilities between the
Federal government and Indian tribes.''
This proposed rule does not have tribal implications. It will not
have substantial direct effects on tribal governments, on the
relationship between the Federal government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
government and Indian tribes, as specified in Executive Order 13175.
The proposed non-conformance penalties and associated requirements for
heavy-duty diesel engine manufacturers in this proposal would have
national applicability, and thus would not uniquely affect the
communities of Indian Tribal Governments. Thus, Executive Order 13175
does not apply to this rule.
In the spirit of Executive Order 13175, and consistent with EPA
policy to promote communications between EPA and tribal governments,
EPA specifically solicits additional comment on this proposed rule from
tribal officials.

F. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Section 12(d) of Public Law 104-113, directs EPA
to use voluntary consensus standards in its regulatory activities
unless it would be inconsistent with applicable law or otherwise
impractical. Voluntary consensus standards are technical standards
(e.g., materials specifications, test methods, sampling procedures, and
business practices) developed or adopted by voluntary consensus
standards bodies. The NTTAA directs EPA to provide Congress, through
OMB, explanations when the Agency decides not to use available and
applicable voluntary consensus standards.
This proposed rulemaking does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.
EPA welcomes comments on this aspect of the proposed rulemaking
and, specifically, invites the public to identify potentially-
applicable voluntary consensus standards and to explain why such
standards should be used in this regulation.

G. Executive Order 13045: Children's Health Protection

Executive Order 13045: ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies
to any rule that: (1) Is determined to be ``economically significant''
as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, the Agency must evaluate the environmental health
or safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that are based on health or safety risks, such that
the analysis required

[[Page 2174]]

under section 5-501 of the Order has the potential to influence the
regulation. This proposed rule is not subject to Executive Order 13045
because it does not establish an environmental standard intended to
mitigate health or safety risks.

H. Executive Order 13132: Federalism

Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
This proposed rule does not have federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. This proposed rule proposes to
adopt non-conformance penalties for national emission standards for
certain categories of motor vehicles. The requirements of the proposed
rule would be enforced by the federal government at the national level.
Thus, Executive Order 13132 does not apply to this rule.
In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed rule
from State and local officials.

I. Executive Order 13211: Energy Effects

This proposed rule is not a ``significant energy action'' as
defined in Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR
28355, May 22, 2001) because it is not likely to have a significant
adverse effect on the supply, distribution, or use of energy. As
described in the 2000 final rule in which we affirmed the 2004 standard
(65 FR 59896, Oct. 6, 2000), we have concluded that there would be no
net long-term change in the fuel consumption performance of heavy-duty
diesel engines as a result of the 2004 model year emission standards.
However, there may be the potential for higher fuel consumption rates
in the short term as diesel engine manufacturers work to balance the
inherent tradeoff between control of NO_X emissions and fuel
consumption. The availability of NCPs for the 2004 and later model
years provides manufacturers with another option for balancing this
tradeoff and working towards optimizing fuel consumption and
emissions--they would be able to use NCPs to emit somewhat higher
NO_X levels than they would otherwise be allowed, while at
the same time avoiding undesirable fuel consumption impacts. Thus, we
have concluded that this proposed rule is not likely to have any
significant adverse energy effects.

J. Plain Language

This document follows the guidelines of the June 1, 1998 Executive
Memorandum on Plain Language in Government Writing. To read the text of
the regulations, it is also important to understand the organization of
the Code of Federal Regulations (CFR). The CFR uses the following
organizational names and conventions.
Title 40--Protection of the Environment
Chapter I--Environmental Protection Agency
Subchapter C--Air Programs. This contains parts 50 to 99, where the
Office of Air and Radiation has usually placed emission standards for
motor vehicle and nonroad engines.
Subchapter U--Air Programs Supplement. This contains parts 1000 to
1299, where we intend to place regulations for air programs in future
rulemakings.
Part 86--Control of Emissions from New and In-use Highway Vehicles
and Engines. Provisions of this part apply generally to highway
vehicles and engines used in highway vehicles.
Each part in the CFR has several subparts, sections, and
paragraphs. The following illustration shows how these fit together.

Part 86

Subpart A

Section 86.1
(a)
(b)
(1)
(2)
(i)
(ii)
(A)
(B)
A cross reference to Sec. 1048.001(b) in this illustration would
refer to the parent paragraph (b) and all its subordinate paragraphs. A
reference to ``Sec. 1048.001(b) introductory text'' would refer only to
the single, parent paragraph (b).

List of Subjects in 40 CFR Part 86

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

Dated: January 10, 2002.
Christine Todd Whitman,
Administrator.
For the reasons set forth in the preamble, chapter I, title 40 of
the Code of Federal Regulations is proposed to be amended as follows:

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

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

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

2. Section 86.1105-87 is proposed to be amended by revising
paragraph (e) and by adding paragraph (i), to read as follows:

Sec. 86.1105-87 Emission standards for which nonconformance penalties
are available.

* * * * *
(e) The values of COC_50, COC_90, and
MC₅₀ in paragraphs (a) and (b) of this section are expressed
in December 1984 dollars. The values of COC_50,
COC_90, and MC₅₀ in paragraphs (c) and (d) of this
section are expressed in December 1989 dollars. The values of
COC_50, COC_90, and MC₅₀ in paragraph
(f) of this section are expressed in December 1991 dollars. The values
of COC_50, COC_90, and MC₅₀ in
paragraphs (g) and (h) of this section are expressed in December 1994
dollars. The values of COC_50, COC_90, and
MC₅₀ in paragraph (i) of this section are expressed in
December 2001 dollars. These values shall be adjusted for inflation to
dollars as of January of the calendar year preceding the model year in
which the NCP is first available by using the change in the overall
Consumer Price Index, and rounded to the nearest whole dollar in
accordance with ASTM E29-67 (reapproved 1980), Standard Recommended
Practice for Indicating Which Places of Figures are to be Considered
Significant in Specified Limiting Values. The method was approved by
the Director of the Federal Register in accordance with 5 U.S.C. 552(a)
and 1 CFR part 51. This document is available from ASTM, 1916 Race
Street, Philadelphia, PA 19103, and is also available for inspection as
part of Docket A-91-06, located at the

[[Page 2175]]

Central Docket Section, EPA, 401 M Street, SW, Washington, DC or at the
Office of the Federal Register, 800 North Capitol Street, NW, suite
700, Washington, DC. This incorporation by reference was approved by
the Director of the Federal Register on January 13, 1992. These
materials are incorporated as they exist on the date of the approval
and a notice of any change in these materials will be published in the
Federal Register.
* * * * *
(i) Effective in the 2004 model year, NCPs will be available for
the following emission standard:
(1) Diesel heavy-duty engine non-methane hydrocarbon plus oxides of
nitrogen standard of 2.4 grams per brake horsepower-hour (or
alternatively, 2.5 grams per brake horsepower-hour with a limit on non-
methane hydrocarbon emissions of 0.5 grams per brake horsepower-hour),
in Sec. 86.004-11(a)(1)(i).
(i) For light heavy-duty diesel engines:
(A) The following values shall be used to calculate an NCP in
accordance with Sec. 86.1113-87(a):
(1) COC₅₀: $1080.
(2) COC₉₀: $2610.
(3) MC₅₀: $2000 per gram per brake horsepower-hour.
(4) F: 1.3.
(5) UL: 4.5 grams per brake horsepower-hour; notwithstanding
Sec. 86.1104-91.
(B) The following factor shall be used to calculate the engineering
and development component of the NCP for the standard set forth in
Sec. 86.004-11(a)(1)(i) in accordance with Sec. 86.1113-87(h): 0.333.
(ii) For medium heavy-duty diesel engines:
(A) The following values shall be used to calculate an NCP in
accordance with Sec. 86.1113-87(a):
(1) COC₅₀: $3360.
(2) COC₉₀: $6870.
(3) MC₅₀: $1800 per gram per brake horsepower-hour.
(4) F: 1.3.
(5) UL: 4.5 grams per brake horsepower-hour; notwithstanding
Sec. 86.1104-91.
(B) The following factor shall be used to calculate the engineering
and development component of the NCP for the standard set forth in
Sec. 86.004-11(a)(1)(i) in accordance with Sec. 86.1113-87(h): 0.167.
(iii) For heavy heavy-duty diesel engines:
(A) The following values shall be used to calculate an NCP in
accordance with Sec. 86.1113-87(a):
(1) COC₅₀: $8940.
(2) COC₉₀: $14790.
(3) MC₅₀: $7200 per gram per brake horsepower-hour.
(4) F: 1.3.
(5) UL: 6.0 grams per brake horsepower-hour; notwithstanding
Sec. 86.1104-91.
(B) The following factor shall be used to calculate the engineering
and development component of the NCP for the standard set forth in
Sec. 86.004-11(a)(1)(i) in accordance with Sec. 86.1113-87(h): 0.067.
(iv) For diesel urban bus engines:
(A) The following values shall be used to calculate an NCP in
accordance with Sec. 86.1113-87(a):
(1) COC₅₀: $4400.
(2) COC₉₀: $7120.
(3) MC₅₀: $4895 per gram per brake horsepower-hour.
(4) F: 1.3.
(5) UL: 4.5 grams per brake horsepower-hour; notwithstanding
Sec. 86.1104-91.
(B) The following factor shall be used to calculate the engineering
and development component of the NCP for the standard set forth in
Sec. 86.004-11(a)(1)(i) in accordance with Sec. 86.1113-87(h): 0.136.
(2) [Reserved]

[FR Doc. 02-1109 Filed 1-15-02; 8:45 am]
BILLING CODE 6560-50-P

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