------------------------------------------------------------------------------- On 04/16/92 [L-S document 421027, 57 FR 13416, 9123 lines] ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80 [AMS-FRL-4120-7] Regulation of Fuels and Fuel Additives; Standards for Reformulated and Conventional Gasoline AGENCY: Environmental Protection Agency. ACTION: Supplemental notice of proposed rulemaking. ----------------------------------------------------------------------------- SUMMARY: This supplemental notice of proposed rulemaking (SNPRM) describes the standards and enforcement scheme for both reformulated gasoline and for conventional gasoline sold in other areas. It also includes specific proposals for the emission models to be used in gasoline certification and enforcement. The SNPRM reflects a consensus that was reached through regulatory negotiation regarding certain provisions of the reformulated gasoline program. The preamble reflects the basis and purpose of this proposed rulemaking. A copy of the proposed regulatory language discussed herein may be obtained from Public Docket No. A-91-02 or from the contacts in the ADDRESSES section and is deemed to be part of this document. DATES: The comment period on this supplemental notice will extend through June 1, 1992. If no hearing is held on May 18, 1992, if a hearing is held to allow interested parties to comment on any specific provisions contained herein which were not in the NPRM for this rule, published July 9, 1991 (56 FR 31176). The comment period for the NPRM is also extended until such date. EPA will conduct a public hearing on this supplemental notice of proposed rulemaking on May 18, 1992, in Washington, DC, if anyone requests the hearing by May 1, 1992. The contact person listed below may be called regarding whether a public hearing will be held. EPA will conduct a public workshop on April 27 and 28, 1992, at the Best Western Domino's Farms Hotel, 3600 Plymouth Road, Ann Arbor, Michigan 48105; telephone (313) 769-9800. Discussion on the 27th will begin at 1 pm and be devoted to the issue of whether or not and, if so, how carbon monoxide (CO) should be included into the definition of VOC (as discussed in section II.A.1. of this proposal). Discussion on the 28th will begin at 9 am and be devoted to the complex model. Additional information concerning the agenda for the workshop and its location may be obtained from the contact person listed below, or from Michael Sklar at (313) 741-7817. ADDRESSES: Materials relevant to this SNPRM, including the regulatory language, are contained in Public Docket No. A-91-02, located at room M-1500, Waterside Mall (ground floor), U.S. Environmental Protection Agency, 401 M Street SW., Washington, DC 20460. The docket may be inspected from 8 a.m. until 12 noon and from 1:30 p.m. until 3 p.m. Monday through Friday. A reasonable fee may be charged by EPA for copying docket materials. FOR FURTHER INFORMATION CONTACT: Joanne I. Goldhand, U.S. EPA (SDSB-12), Emission Control Technology Division, 2565 Plymouth Road, Ann Arbor, MI 48105, Telephone: (313) 668-4504. TO REQUEST COPIES OF THIS NOTICE CONTACT: Marie Tolonen, U.S. EPA (SDSB-12), Emission Control Technology Division, 2565 Plymouth Road, Ann Arbor, MI 48105, Telephone: (313) 668-4295. SUPPLEMENTARY INFORMATION: 1. Background This notice supplements the proposal for the reformulated gasoline program which was originally published July 9, 1991 (56 FR 31176) (hereafter, the NPRM). As did the NPRM, this notice describes the provisions of both a program to require the sale of gasoline which reduces emissions of toxics and ozone-forming volatile organic compounds (VOCs) in certain nonattainment areas and a program to prohibit the gasoline sold in the rest of the country from becoming more polluting. Since the NPRM was published, agreement has been reached through the regulatory negotiation process on an outline of these programs. This supplemental notice proposes adoption of the provisions of that agreement as well as detailed provisions not specifically covered by the agreement. This section will describe the history of EPA's efforts to develop a reformulated gasoline program and especially the events which have occurred since the NPRM was published. That notice contains a more detailed discussion of the early development of the program and further information regarding portions of the program described today which were first proposed at that time. The sections which follow discuss the methods for reformulated gasoline certification (sections II through IV) and enforcement (sections V through XI), anti-dumping requirements (sections XII and XIII), compliance audits (section XIV), federal preemption (section XV), the economic and environmental impacts of the program (section XVI) and finally certain statutory requirements (sections XVII through XXII). As described further in the NPRM, this rule has been developed through a process known as negotiated rulemaking as provided under the Negotiated Rulemaking Act of 1990, Public Law 101-648. That process involves creating an advisory committee under the Federal Advisory Committee Act 1 consisting of representatives of the groups which are likely to be substantially affected by the rule and the federal agency responsible for the rule. (See the NPRM for the members of the negotiating committee and a discussion of the process for selecting them.) In a negotiated rulemaking, such a committee meets to develop a proposed rule which will be acceptable to all parties. If consensus is reached on a proposed rule, it is published as an NPRM. The committee members and the entities they represent agree to support the proposal and not to seek judicial review of the final rule if it has the same substance and effect as the consensus proposal. NOTE 1 5 U.S.C. App. 1, et seq. In this case, EPA published an NPRM while the advisory committee was still conducting negotiations. The Agency believed that although consensus of the members on an acceptable rule was possible, an NPRM was required at that time if the rule was to be completed by the statutory deadline. The notice which was published described the outline of the reformulated gasoline program and options that committee members were considering. The negotiations continued after the NPRM was published and culminated in an Agreement in Principle which each of the regulatory negotiation committee members signed on August 16, 1991. The agreement stated the members' concurrence on an outline of the underlying principles of the reformulated gasoline and anti-dumping programs. The agreement, outline and several letters between EPA and the participants which further clarify the meaning of the outline are included in the docket for this rulemaking as items III-A-7 through 24. Generally, the agreed upon reformulated gasoline program would provide refiners with two modeling options and a testing option for determining whether fuels sold in 1995 and 1996 meet the reformulated gasoline requirements. The simpler of the modeling options (the simple model) is detailed in this SNPRM and allows certification based on a fuel's oxygen, benzene, heavy metal and aromatics content and Reid Vapor Pressure (RVP). Under the agreement, EPA would develop a more complex model (the complex model) through a rulemaking to be completed by March 1, 1993. The complex model is expected to provide a method of certification based on the above parameters plus sulfur, olefins and the temperature at which 90 percent of the fuel vaporizes (T90), as well as any other parameters for which sufficient data is available regarding their effects on ozone-forming volatile organic compounds (VOC), toxic air pollutants (toxics) or oxides of nitrogen (NOx) emissions. In the first two years of the program, testing would only be permitted to determine the NOx emission effects of oxygenates other than Methyl Tertiary Butyl Ether (MTBE). Testing would eventually be permitted to qualify for inclusion in the models the emission effects of such other parameters or the effects of fuel parameters beyond the range covered in the models. The agreed upon program would allow refiners to produce reformulated gasoline, either by meeting the applicable standards on a per gallon basis or by meeting the standards on average. The agreed upon averaging program ensures that averaging will not result in smaller overall reductions in pollutants than if averaging were not permitted. It does so through the use of adjusted emission and fuel composition standards for averaged fuels, caps on per gallon levels of the relevant parameters, and compliance surveys to be performed at retail stations. The outline contains two options for compliance with the requirement that conventional gasoline not cause greater emissions of certain pollutants than occurred in 1990. During 1995 and 1996 each refiner and importer may either use the complex model to show that its conventional fuel does not have greater toxics emissions than its fuel had in 1990 or meet certain exhaust benzene and fuel compositional caps. After 1997 each producer and importer must show using the complex model that its conventional fuel has no more emissions of exhaust toxics and NOx than its 1990 annual average. This supplemental notice proposes detailed reformulated gasoline and anti- dumping programs based on the regulatory negotiation consensus. The statutory provisions which form the basis for the agreement and this SNPRM were described in the NPRM, which may be consulted for further information regarding these provisions. II. Fuel Certification Requirements In accordance with section 211(k) of the Clean Air Act, EPA requires that in order for a gasoline to be certified as reformulated, it must contain at least 2.0 weight percent oxygen, no more than 1.0 volume percent benzene, and no heavy metals (unless a waiver is granted); result in no increase in NOx emissions; and achieve required toxics and VOC emission reductions. Toxics and VOC emission requirements and EPA's derivation of them are set forth below. Throughout the negotiation process, different procedures for certifying that a gasoline complies with the NOx, toxics, and VOC requirements were discussed. Pursuant to the consensus agreement, EPA proposes in this supplemental notice two modeling options and a testing method whereby the effects of fuel properties on emissions can be determined. Models offer several advantages over testing to determine emission effects. First, models can better reflect in-use emission effects since they can be based on the results of multiple test programs. Second, individual test programs may be biased, either intentionally or unintentionally, due to vehicle selection, test design, and analysis methods. Third, fuel compositions tend to vary due in part to factors beyond the control of fuel suppliers such as variations in crude oil compositions and the inherent variability of refining processes. As a result, without one or more modeling options, each batch of fuel would have to be tested to ascertain its emission performance. Such levels of testing are neither desirable (because of the potential for intentional bias in vehicle test programs) nor practical (because of the time and expense involved in vehicle testing). Fourth, models make more efficient use of scarce and expensive emission effects data than is possible otherwise. For these reasons, EPA believes that the modeling options outlined below are necessary for the reformulated gasoline program to achieve its environmental objectives and to minimize the costs of the program. The first modeling option being proposed is a simple emissions model (described below in section II.A). Enough is known about the emission effects of several parameters in a range of fuels to model these effects with confidence at this time. These fuel parameters are Reid vapor pressure, fuel oxygen, benzene, and aromatics; the sources of information used to develop the simple model are described in this section's discussion of the simple model. At the current time, not enough data is available on the fuel effects of other parameters to include them in the simple model without running the risk of under- or over-estimating the in-use emissions from reformulated gasolines. The available data, however, is sufficient to suggest that these other parameters (sulfur, T90, and olefins) have a directional effect on emissions. To prevent the emissions benefits that would be obtained from the reformulated gasoline program from being undercut by changes in the values of these parameters, EPA is further proposing that each refiner's annual average levels of sulfur, T90 and olefins in reformulated gasoline not be allowed to exceed their 1990 annual averages for these parameters. EPA anticipates that as additional information becomes available through test programs in progress such as the Auto/Oil 2 program, it may be possible to include additional parameters in an emissions model. In particular, EPA anticipates that sufficient data will be available in 1992 or early 1993 from the Auto/Oil test program and other sources to quantify the emission effects of several additional parameters (including sulfur, T90, and olefins) for inclusion in an expanded model. NOTE 2 The Auto/Oil Air Quality Improvement Research Program is a cooperative research effort undertaken jointly by a number of major automobile and oil companies. This expanded model would be the second modeling option for fuel certification and is referred to here as the complex emissions model (described below in section II.B). Pursuant to the Agreement in Principle, EPA will issue a proposed rule by November 30, 1992 and a final rule by March 1, 1993 which will contain the specific details of the complex model. This complex model rulemaking would also address the "Phase II" reformulated gasoline VOC and toxics performance standards to take effect in the year 2000 as prescribed by section 211(k)(3). If EPA is unable to finalize the complex model rule by March 1, 1993, the required use of the complex model would be delayed one month for every month of delay in issuing the rule. This mechanism is intended to insure that the fuel producers continue to have sufficient lead time for refinery modifications prior to the effective date of the rule. EPA believes that gasoline suppliers should be required to use the most accurate and complete model available to certify their fuels in order to better ensure that the emission reductions that Congress intended reformulated gasoline to achieve actually occur in-use. However, the gasoline suppliers should also be provided with an adequate lead time in order to avoid fuel production shortfalls and economic inefficiencies brought about by changes to their refineries. EPA believes that four years is adequate lead time for fuel producers to make the necessary changes to their refineries to meet the reformulated gasoline requirements under the complex model. Some guidance on lead time is given by the Act's provision of over three years' lead time between promulgation of the rule and the start of the 1995 high ozone season. The Agency continues to believe, for the reasons expressed below, that less than a four-year lead time would be insufficient for a requirement to determine emission effects using the complex model. To prepare for implementation of the complex model, suppliers will have to determine which fuel formulations are most cost-effective for them based on the parameters included in the model and the size of such parameters' emission effects, develop the plans for refinery modifications and design any necessary refining equipment (such as desulfurization units) needed to produce such formulations, obtain the necessary permits and capital, construct the equipment, and complete start-up and equipment shakedown. Given the magnitude of the effort involved, EPA considers it reasonable to implement the complex model with four years' lead time. Therefore, EPA proposes that fuel suppliers be permitted to determine the emission effects of specific fuels by using either model (possibly augmented by testing as described below) for fuels produced before March 1, 1997 or four years after promulgation of the complex model, whichever is later. Until this date, fuel suppliers would have the option of using the complex model instead of the simple model to take advantage of the effects of parameters contained in the complex model but not contained in the simple model (as described in the following paragraphs). EPA further proposes that suppliers be required to use the complex model (appropriately augmented through testing) for fuels produced beginning March 1, 1997 or four years after promulgation of the model, whichever is later. EPA is further proposing that for fuel suppliers opting to use the simple model, each supplier's average annual levels of sulfur, T90 and olefins in reformulated gasoline not be allowed to exceed the refiner's 1990 annual average levels (as determined for the anti-dumping program described in sections XII and XIII). The available data strongly suggest that higher levels of sulfur, T90, and olefins result in higher emissions, although insufficient data exists at present to quantify these effects. These parameters therefore are not included in the simple model, and the effects of increases in the level of these parameters from their 1990 levels will not be reflected in predicted emissions using the simple model. Capping the levels of these parameters at their 1990 levels would help prevent in-use emissions from exceeding either the levels predicted by the simple model or the requirements of the Act. Further, EPA believes these levels will be achievable in 1995 since they were achieved in 1990. The Agency also believes that testing has a role in certification as a means of supplementing the models. Section III of this notice contains a detailed discussion of EPA's proposals regarding the conditions under which testing would be permitted, the manner in which test results would be used to supplement the models, and the minimum requirements for vehicle testing programs. Regardless of whether the emission effects of a gasoline are determined using the simple or complex model (with or without augmentation by vehicle testing results), each gasoline must comply with the requirements for reformulated gasoline individually, notwithstanding whether it is part of a slate of gasolines. On the other hand, credits earned from certain formulations of gasoline in a slate (including credits earned in part due to effects based on vehicle testing) may be used to show the compliance of other formulations in that slate. The credits provisions of the reformulated gasoline program are more fully discussed in section VIII. A. Simple Model As stated above, use of the simple model is a certification option for reformulated gasolines produced prior to March 1, 1997 (or until certification by the complex model is required). EPA proposes that a fuel be considered in compliance with the VOC, NOx, and toxics emission performance requirements under the simple model if it meets the compositional specifications described below. 1. VOC Emissions for Simple Model Fuels The Act requires reductions in emissions of ozone-forming VOCs. This interpretation is consistent with the focus of section 211(k) on the areas with the most extreme ozone pollution problem. Since the ozone-forming potential of methane is more than one order of magnitude lower than that of other types of volatile organic compounds commonly emitted from motor vehicles (including ethane), EPA proposes that VOC emissions be determined on a non-methane basis. EPA proposes to include ethane in VOC emissions since its ozone-forming potential is of the same order of magnitude as other straight-chain hydrocarbons and is much greater than that of methane.3 EPA currently includes ethane (but not methane) in its guidance regarding which VOC species should be included in airshed modeling used to support State Implementation Plans for ozone attainment.4 If EPA should change its guidance on which VOC species should be included in ozone modeling in the future, the definition of VOCs discussed above will be reconsidered. NOTE 3 Carter, William P.L., "Development of Ozone Reactivity Scales for Volatile Organic Compounds," presentation to EPA, 1991. The maximum ozone potential of methane is 0.0074 g ozone/g VOC; corresponding figures for ethane, propane, and n-pentadecane are 0.097, 0.23, and 0.101. NOTE 4 Draft Technical Memorandum entitled "Guidance for SIP Emissions for UAM Modeling," from William Laxton, Director, Technical Support Division, OAQPS, to all of EPA's regional offices. A final memorandum is expected by 12/31/91. The Agency solicits comment on the following concept: Carbon monoxide (CO) is not classified by EPA as a volatile organic compound. However, CO is a factor in ozone-forming photochemical reactions. A "mass-based carbon equivalent" could be assigned to CO emission reductions achieved by reformulated gasoline. This would provide a method by which the mass-based VOC increases attributable to increased volatility could be offset by a mass equivalent. Under this approach, EPA could assign the "mass carbon equivalent" by eliminating the oxygen mass from overall mass CO emissions, with adjustment made to account for the proportionately greater mass effect of carbon monoxide. It is suggested that EPA may have authority to limit such a provision to reformulated gasoline, given the requirement in section 211(k)(1) that EPA implement the program "taking into consideration * * * energy requirements." Under this approach, oxygen credits under section 211(k)(7) would not be applicable to reformulated gasoline to which the mass- based equivalent has been applied. EPA takes no position on this concept at this time, and invites comments on its technical and policy merits, as well as its legal basis. The Agency also requests interested parties to suggest other approaches which could enhance the role of oxygenates in reformulated gasoline including how atmospheric photochemistry can be accounted for in this regulatory framework. EPA intends to include a discussion of this concept in the agenda for the next complex model workshop to be held April 27 and 28. This portion of the workshop will begin at 1:00 pm on April 27. The remainder of the agenda will be devoted to the complex model. Participants in the regulatory negotiation process as well as any other interested parties are encouraged to participate in the workshop and provide comments on this concept as well as providing comments during any hearing on this proposed rulemaking, or in written comments on this proposal. In developing the final rule EPA will evaluate the record of comments and science with a view to allow the greatest flexibility for all oxygenates to lawfully compete in the marketplace. Under today's proposal, fuels sold at retail outlets must have an RVP during the high ozone season (June 1 through September 15) of no more than 7.2 psi in Class B areas and 8.1 psi in Class C areas.5 This period was chosen for the high ozone season because most of the ozone violations occur during this period. (See 56 FR 24242 for a discussion of the determination of this period.) Here Class B and Class C areas refer to those designated by the Phase II volatility control regulation (40 CFR part 80, 55 FR 23659, June 11, 1990) as requiring RVPs of 7.8 psi and 9.0 psi, respectively. (Class B areas correspond generally to the southern states and Class C areas to the northern states. The differences in climate between these two types of areas requires a corresponding difference in gasoline volatility to achieve the same emissions effect.) As discussed above, only the VOC emission effects of RVP and oxygen are included in the simple model. EPA projects that the VOC emission reduction in Class C areas from a fuel with an RVP of 8.1 psi and 2.0 weight percent oxygen will be sufficient to achieve the minimum 15% VOC emission reductions specified in section 211(k)(3) of the Act relative to the Clean Air Act baseline gasoline (which has an RVP of 8.7 psi). In Class B areas, an 8.1 psi RVP fuel with 2.0 percent oxygen (which would meet the 15% reduction requirement relative to the CAA baseline fuel) would actually have greater emissions than a fuel meeting EPA's Phase II RVP control standards for Class B areas (maximum RVP of 7.8 psi). EPA believes that when Congress designated Class B cities for inclusion in the reformulated gasoline program that it intended the reformulated gasoline program to provide emissions reductions in addition to those provided by the Phase II RVP requirements. If EPA merely required reformulated gasoline in Class B areas to meet the RVP requirement for Class C areas, then no additional reduction in VOC emissions would accrue to Class B areas from the first phase of the reformulated gasoline program beyond those mandated by Phase II RVP standards. EPA projects that relative to Phase II RVP control levels, a fuel with 7.2 psi RVP and 2.0 weight percent oxygen is necessary to provide VOC emission reductions to Class B areas similar to those obtained in Class C areas. NOTE 5 Lower RVP limits apply for fuels that comply under averaging. RVP controls also apply from May 1 to May 31 for facilities upstream of retail outlets. These issues are discussed elsewhere in this proposal. While requiring reformulated gasoline sold in Class B areas to have an RVP of no more than 7.2 psi goes beyond the minimum requirement stated in section 211(k)(3), section 211(k)(1) authorizes EPA to require emission reductions in Class B areas of this magnitude because they are achievable considering costs (see the draft regulatory impact analysis; docket identification number II-F- 7), other air quality, and non-air quality impacts and the energy implications of such a requirement. EPA cannot determine that greater reductions, by requiring even lower RVP levels, are warranted at this time for two reasons: (1) EPA's refinery modeling analyses have not examined the effects of RVP reductions on refinery operations at lower levels,6 and (2) EPA does not have sufficient test data to demonstrate emission benefits of lower volatility levels with confidence. Furthermore, extrapolating the results of these studies to lower levels may not be appropriate since the cost and emission effects of lower RVP levels are expected to respond non- linearly as RVP is decreased (because different chemical species and reformulation technologies would be affected than were considered in previous modeling efforts). Hence EPA is unable at this time to determine whether the cost and air quality effects of lower volatility standards warrant establishing lower RVP levels pursuant to section 211(k)(1). NOTE 6 The Bonner & Moore study ("Assessment of the Impacts on the Refining and Natural Gas Liquids Industries of Summer Gasoline Vapor Pressure Control," August 24, 1987, Bonner & Moore Management Science) examined the effects of reducing RVP outside of California to as low as 8.07 psi. Within California, the study examined the effects of RVP as low as 6.82 psi; however, the measurement of RVP for the study was subject to error on the order of 0.3 psi. The Turner Mason study (November 30, 1987) examined comparable RVP ranges. Furthermore, while greater reductions in RVP beyond 8.1 psi in Class C areas potentially may be cost effective, EPA believes that the 1995 implementation date provides insufficient leadtime for refiners to comply with a more stringent Class C standard in conjunction with a 7.2 standard in Class B areas and the toxics and NOx requirements. Given refiners' capacity to produce lower volatility gasoline with the available leadtime, requiring a greater reduction in RVP levels in Class C areas could be achieved only at the expense of relaxing the ability to produce 7.2 RVP gasoline for Class B areas. In addition, the lack of reliable refinery modeling data at this time, as discussed above, inhibits EPA's ability to determine whether further RVP reductions in Class C areas would be warranted. Therefore, EPA believes that to the extent the VOC reductions greater than section 211(k)(3) requires can be achieved, those greater reductions should be required in Class B areas, which otherwise would receive no benefit from the reformulated gasoline program. EPA believes that additional VOC reductions are obtainable if refiners are allowed to meet the RVP and oxygen standards through averaging. In the case of those refiners who can take advantage of averaging, EPA believes that average RVP for both Class B and Class C areas can be reduced by 0.1 psi to 7.1 and 8.0 psi, respectively, and that average oxygen concentration can be increased to 2.1 weight percent oxygen. These increments were determined as part of the regulatory negotiation consensus and would recapture the margin of safety that refiners could be expected to build into their compliance with per gallon requirements to reduce the risk of being found in violation. (See section VI.B.2 regarding compliance margins.) EPA believes the greater flexibility provided by averaging would offset the cost and difficulty of achieving these more stringent averaging requirements. EPA believes it appropriate under section 211(k)(1) to consider the potential of averaging to make greater reductions achievable, and where, as here, EPA finds averaging could make greater reductions achievable, to set more stringent averaged standards. Since refiners differ in the extent to which they can make use of averaging, EPA is proposing that refiners that want to average be required to meet RVP and oxygen standards that are more stringent than the non-averaged standards, as noted above. These tighter, averaged standards should have the potential to increase the environmental benefits of the reformulated gasoline program at no additional cost over the non-averaged standards. 2. NOx Emissions for Simple Model Fuels The Clean Air Act requires that there be no NOx emissions increase from reformulated fuels. Based on data available during the regulatory negotiations, it appeared that fuel oxygen content and the type of oxygenate used may have an impact on NOx emissions while no other simple model parameter appeared to have such an impact. Today's proposal was developed in the context of the negotiated agreement and the data then available. While the currently available data does not allow for quantifying relationships between oxygenate type and concentration and Nox emissions, it suggests that MTBE may contribute little or no NOx increase at concentrations of 2.0 to 2.7 weight percent oxygen, but that ethanol at a concentration of 3.5 weight percent oxygen may cause a NOx increase.7 EPA cannot definitively determine the effect of oxygenates on NOx emissions, due to a general lack of adequate data, a variety of concerns with the data that do exist (e.g., confounding fuel effects, limited vehicle types, testing variability, etc.), and a lack of understanding as to why different oxygenates may show different NOx effects. At the same time, EPA is aware of the benefits of oxygenates for reducing exhaust VOC, CO, and toxics emissions on a mass basis. NOTE 7 Data from EPA's Emission Factor Database and results from the Auto/Oil test programs. EPA proposes that during those months with ozone violations, MTBE in concentrations up to 2.7 weight percent oxygen and other oxygenates in concentrations up to 2.1 weight percent oxygen be assumed not to increase NOx emissions, and thus be permitted for use in reformulated gasoline at any time and in any area. Because of the lack of data on the NOx effect of oxygenates, particularly at concentrations above 2.7 weight percent oxygen in the form of MTBE and above 2.1 percent in the form of other oxygenates, EPA cannot determine that all oxygen concentrations above the 2.1/2.7 limits will definitely increase NOx emissions. Given this, EPA proposes that each state have the discretion to waive the 2.1/2.7 weight percent oxygen limits during the months with ozone violations. In view of the uncertainty about oxygenate effects on NOx emissions and because of the known benefits of oxygenates for reducing exhaust VOC, CO, and toxics emissions on a mass basis, EPA proposes under the simple model that during those months without ozone violations any oxygenate up to 3.5 weight percent oxygen be presumed to result in no NOx emission increase unless a state requests that oxygenate levels be limited to those applicable during those months with ozone violations. A state may make such a request when it believes that the use of higher oxygenate levels would interfere with attainment or maintenance of another ambient air quality standard (other than ozone) or another air quality problem. This proposal parallels the Regulatory Negotiation Agreement of August 16, 1991 and the letter to the Renewable Fuels Association dated August 14, 1991. EPA requests comments on any implementation and other issues that might arise as a result of this provision, particularly how EPA should define months with ozone violations. EPA further proposes that parties wishing to market fuels with oxygen in excess of 2.1 weight percent in the form of oxygenates other than only MTBE (but subject to the oxygenate's waiver limit) during periods where they would be prohibited, as discussed above, may petition EPA to do so. Petitioners must demonstrate, through the use of data they generate, that use of the particular type and level of oxygenate will not adversely affect NOx emissions. EPA will expeditiously process such petitions. The detailed requirements for such test programs and the data required are described in section III. EPA requests comment on whether a less burdensome demonstration is warranted for approving oxygenate concentrations not up to 2.7 weight percent oxygen (as opposed to those above 2.7 weight percent) and if so, what such requirements should be. EPA believes that the proposed approach to NOx is consistent with the intent of section 211(k)(1) that the greatest reduction in ozone-forming volatile organic compounds be achieved during that portion of the year when ozone exceedences occur, taking into consideration cost and other factors. Allowing for increased use of a wide variety of oxygenates will increase the supply of oxygenate available for use in reformulated gasoline, thereby having a controlling effect on the cost for oxygenates, especially in the first years of the program. This increased supply of oxygenate may also allow for more nonattainment areas to opt-in (See NPRM Section II.F.2 regarding opt-in) and obtain the air quality benefits of the reformulated gasoline program earlier than would have otherwise been possible. Furthermore, allowing the States the right to limit the concentration of oxygenates in reformulated gasoline should prevent the occurrence of any negative nonair- quality or other air-quality impacts that the proposed approach might otherwise permit. EPA believes that this is an appropriate treatment of concerns related to NOx emissions effects of oxygenates given the current limitations of the data and of understanding of the possible effects. 3. Toxic Emissions Under the Simple Model Under section 211(k)(3), a reformulated gasoline's toxic emission performance must meet or exceed that of a specified formula fuel or a 15 percent reduction from that of baseline gasoline, whichever is greater. Under the simple model a fuel's toxic emissions are a function of its oxygen and benzene content, its VOC emission, and its level of benzene and non-benzene aromatics. If the fuel meets the requirements regarding oxygen and benzene content and VOC performance, its level of benzene and non-benzene aromatics must be sufficiently low such that the fuel meets or exceeds the toxic emissions requirements (described later in this section.). Since sufficient information either is not yet available or has not yet been fully analyzed to determine the proper coefficients for parameters that impact toxics emissions other than oxygenate type and oxygen, aromatics, and benzene concentration, the only variables which could be adjusted under the simple model to meet the toxic emission requirement are the benzene and non-benzene aromatic concentrations. The toxic emission equations proposed below would be used to determine a fuel's toxic emission reductions and could thereby determine the limits on aromatics content for fuels with various oxygenates, oxygen concentrations, benzene levels, and RVP levels. All five of the toxic air pollutants that section 211(k)(10) of the Act specifies for control through reformulated gasoline (benzene, 1,3-butadiene, polycyclic organic matter (POM), formaldehyde, and acetaldehyde) also fall under the category of VOCs. Under high ozone (summer) conditions, all five toxics are present in exhaust emissions, and only benzene is present in evaporative, running loss and refueling emissions (nonexhaust emissions). Benzene, an aromatic compound, is a natural component of gasoline and, as such, is present in gasoline vapor emissions. Exhaust emissions include unburned benzene and benzene formed from other aromatics during the combustion process. The four other toxic air pollutants subject to control by reformulated gasoline are not present in gasoline and hence are solely products of combustion. EPA proposes to regulate aggregate toxics emissions based on the sum of both exhaust and nonexhaust toxic emissions during the summer (April 1 through September 15). (The definition of summer and winter periods for toxics control is explained later in this section.) Under winter conditions, on the other hand, EPA is assuming that nonexhaust benzene (and in fact all nonexhaust VOC) emissions will be negligible relative to exhaust toxic emissions due to low ambient temperatures. EPA therefore proposes to regulate aggregate toxics emissions during the winter period (September 16 through March 31) based exclusively on total exhaust toxic emissions. As explained in the NPRM, since exhaust emission effects will likely vary between vehicles with varying emission performance levels, all data used to develop the exhaust emission correlations contained in the simple model are weighted by emitter subclass (based on available information) to reflect in- use fleet composition as per MOBILE4.1, consistent with the assumptions made concerning baseline exhaust emissions expressed in Section II.A.3.d below. Similarly, since nonexhaust emission effects vary between vehicles that pass and fail evaporative emission standards, all data used to develop the correlations contained in the simple model for nonexhaust emissions are weighted by evaporative emitter subclass (based on available information) to reflect the in-use fleet composition as per MOBILE4.1. a. Exhaust benzene emissions. Exhaust benzene emissions can be affected by fuel modifications in two basic ways. Some fuel effects will change the fraction of benzene in the exhaust, regardless of the total VOC mass that is emitted as exhaust. For instance, increasing or decreasing the level of benzene in a fuel will lead to a direct increase or decrease in the benzene fraction of exhaust emissions. Moreover, changes in the level of benzene precursors (primarily nonbenzene aromatics) will affect the amount of benzene that is produced during combustion, also changing the benzene fraction of exhaust VOC emissions. On the other hand, fuel modifications can affect the overall level of exhaust VOC emissions by affecting the efficiency of the engine or catalyst in burning hydrocarbons. In these cases, the benzene fraction of exhaust VOC emissions may stay relatively constant and benzene exhaust emissions will change proportionally with exhaust VOC emissions. Of course, some fuel modifications can produce a combination of these two effects. EPA proposes to analyze the effect of fuel modifications on exhaust toxic emissions by separating the two types of effects described above. This applies not only to benzene but to all five toxic air pollutants. With this approach, fuel modifications which change the level of exhaust VOC emissions are considered to change the levels of exhaust toxic emissions proportionally. Under the simple model, exhaust VOC emissions for both Class B and Class C areas are affected only by fuel oxygen content according to the following relationship: Exhaust VOC (g/mi)=Exhx[1 -(0.127xOx)/2.7] Ox refers to the fuel weight percent oxygen. Exh is the baseline level of nonmethane exhaust VOC emissions as determined from MOBILE4.1; for summer conditions Exh equals 0.46 g/mi, while for winter conditions Exh equals 0.68 g/mi. The term 0.127 represents the reduction in exhaust VOC emissions achieved when 2.7 weight percent oxygen is added to the fuel. This relationship is based on an analysis (contained in the docket to this rule) 8 of fuels containing MTBE in EPA's Emission Factor Database. NOTE 8 Christian E. Lindhjem, "Effect of Oxygenates on Emissions." With respect to the effects of fuel modifications on the benzene fraction of exhaust VOC emissions, fuel benzene and fuel aromatics appear to be the primary factors. EPA proposes that the correlation used to relate fuel benzene and aromatics to the weight fraction of benzene in exhaust VOC (nonmethane) emissions for both Class B and Class C areas be: {1.818+(0.9154xBz)+[0.109x(Arom -Bz)]}/100 where Bz is the volume percent of fuel benzene and Arom is the volume percent of fuel aromatics. This equation is based on a study by Chevron 9 and indicates that exhaust benzene emissions depend on benzene content and on non-benzene aromatics content. Combining exhaust VOC emissions with the effects of benzene and aromatics on the benzene fraction of VOC emissions, benzene emissions (grams per mile) would be: NOTE 9 Communication to EPA summarizing the following studies: "Study to Determine the Fate of Benzene Precursors in Gasoline", NIPER (Under CARB Agreement 150128-32), 1988; "Exhaust Benzene Emissions from Late-Model Vehicles", API Publication No. 841-44700, 10/88; "Vehicle Evaporative and Exhaust Emissions as Influenced by Benzene Content of Gasoline", NIPER (Under CRC CAPE-35-83 and U.S. DOE), 4/86. {1.818+[0.9154xBz]+[0.109x(Arom - Bz)]}/100xExhaust VOC where Exhaust VOC is the level of VOC nonmethane exhaust emissions in grams per mile as described above. This equation is assumed to be valid for both summer and winter conditions, based on EPA test results 10 showing benzene emissions to be proportional to exhaust VOC emissions at various test temperatures. NOTE 10 (Atmospheric Environment, vol. 23, no. 2, pp. 307-320, 1989; Atmospheric Environment, vol. 24A, no. 8, pp. 2105-2112, 1990). b. Nonexhaust benzene emissions. Benzene is the only toxic air pollutant that is emitted in measurable quantities from evaporative, running loss, and refueling vapors. Reductions in fuel benzene may be expected to result in proportional reductions in benzene emissions from all of these nonexhaust emission sources. The Agency proposes to include this proportional effect of fuel benzene on nonexhaust benzene emissions in the emissions model. In addition to fuel benzene content, two other fuel parameters--RVP and fuel oxygen content--can also affect nonexhaust benzene emissions. Both parameters affect both the total level and the benzene weight fraction of evaporative, running loss, and refueling VOC emissions. The effects of RVP on evaporative, running loss, and refueling VOC emissions are well characterized in MOBILE4.1 for Class C area summer conditions within a volatility range of 7.0 to 11.7 psi and for Class B summer conditions between 6.8 and 10.5 psi. The correlations used in the simple model are based on MOBILE4.1 and are valid for 6.6 to 9.0 psi for both Class B and Class C areas (the maximum RVP allowed under the simple model, however, is 8.4 psi). EPA further proposes the use of the formulae expressed below (based on the GM vapor model 11) to model the effects of RVP and fuel oxygen content on the benzene fraction of evaporative, running loss, and refueling VOC emissions. Due to differences in temperature conditions, slight differences in nonexhaust VOC emissions occur between Class B and Class C areas. As a result, separate standards for toxics emission performance are provided for Class B and Class C areas. NOTE 11 Communication to C.E. Lindhjem from S.R. Reddy, April 16, 1991. Evaporative benzene emissions from a given vehicle include hot soak emissions (evaporative emissions from a warm vehicle after it has been running) and diurnal emissions (evaporative emissions from a sitting vehicle as the daily ambient temperatures rise and fall). Hot soak emissions occur at higher temperatures than diurnal emissions and the relative volatility of benzene is slightly greater at higher temperatures. Therefore, the benzene fraction of hot-soak VOC emissions tends to be higher for a given fuel than that for diurnal VOC emissions. Running loss emissions occur at roughly the same fuel temperature as hot-soak emissions, and therefore have similar benzene fractions. Based on the emission factors contained in MOBILE4.1, evaporative and running loss benzene emissions tend to be dominated by emissions from vehicles with inoperative emission control systems (those vehicles likely to "fail" EPA's purge and pressure tests). The benzene fraction of evaporative and running loss emissions from vehicles with properly operating systems (those vehicles likely to "pass" EPA's purge and pressure tests) and from "fail" vehicles, however, are comparable. Hence EPA proposes that the benzene weight fraction of evaporative and running loss VOC emissions for a fuel be described by the following relationships, originally derived for "fail" vehicles. The hot soak and running loss benzene fraction of VOC equals: [Bz/100]x[1.4448 - (0.080274xRVP) - (0.0684xMTBE/2.0)] The diurnal benzene fraction of VOC equals: [Bz/100]x[1.3758 - (0.080274xRVP) - (0.0579xMTBE/2.0)] where Bz is the volume percent benzene, RVP is in psi, and MTBE is the weight fraction oxygen in the form of MTBE. The formulae for evaporative and running loss benzene emissions indicate that as oxygen in the form of MTBE increases, evaporative benzene emissions tend to decrease both in absolute terms and as a fraction of evaporative VOC emissions. Test data has shown that the presence of MTBE tends to reduce benzene's partial vapor pressure and, thus, evaporative and running loss benzene emissions.12 Test data with ethanol has not shown an effect on benzene emissions separate from its effect on overall evaporative VOC emissions. Data with other oxygenates is not yet available to determine whether an effect similar to that of MTBE exists. Therefore, the oxygenate term in the formulae expressed here applies only to MTBE. NOTE 12 Ibid. The formulae also indicate that as RVP decreases, evaporative and running loss benzene emissions also decrease but at a slower rate than total VOC emissions. Hence the benzene weight fraction of evaporative and running loss VOC emissions increases as RVP decreases. Applying these equations to CAA baseline gasoline results in a hot-soak and running loss benzene emission fraction of 1.14 percent of VOC and a diurnal benzene emission fraction of 1.04 percent. Evaporative and refueling benzene emissions (mg/mi) are then determined by the following formulae. Hot soak benzene emissions (mg/mi) equal: [Bz/100]xEvap VOCx0.679x[1.4448 - (0.080274xRVP) - (0.0684xMTBE/2.0)] Diurnal benzene emissions (mg/mi) equal: [Bz/100]xEvap VOCx0.321x[1.3758 - (0.080274xRVP) - (0.0579xMTBE)/2.0)] Running loss benzene emissions (mg/mi) equal: [1.4448 - (0.0684xMTBE)/2.0 - (0.080274xRVP)]x[Bz/100]xRunVOC Evap VOC is the evaporative VOC emissions in mg/mi, as determined below, 0.679 is the hot soak fraction of evaporative VOC emissions, 0.321 is the diurnal fraction of evaporative VOC emissions, and RunVOC is the running loss VOC emissions in mg/mi. These formulae are valid for fuel oxygen levels of up to 2.7 percent in the form of MTBE. Evaporative and running loss VOC emissions in mg/mi are determined by the following formulae. In Class B areas, Evap VOC (mg/mi) equals 1000x[0.7952 - (0.2461xRVP) + (0.02293xRVPxRVP)] In Class C areas, Evap VOC (mg/mi) equals 1000x[0.813 - (0.2393xRVP) + (0.021239xRVPxRVP)] In Class B areas, RunVOC (mg/mi) equals 1000x[(0.1096xRVP) - 0.734 + (0.002791xRVPxRVP)] In Class C areas, RunVOC (mg/mi) equals 1000x[0.2963-(0.1306xRVP)+(0.016255xRVPxRVP)] The relationship of fuel benzene levels to refueling benzene emissions (mg/ mi) using the General Motors model is given by: [1.3972-(0.0591xMTBE/2.0)-(0.081507xRVP)]x[Bz/100]xRefVOC where RefVOC is the total refueling VOC emissions in mg/mi, given by: 0.04x1000x[(0.1667xRVP)-0.45] The presence of MTBE tends to reduce benzene's vapor pressure and thus refueling benzene emissions; reductions in RVP tend to increase the benzene fraction of refueling VOC emissions while reducing refueling benzene emissions on a mass basis. Applying this equation to baseline gasoline results in a benzene fraction of refueling VOC emissions of 1.0 percent. c. Nonbenzene toxic emissions. As discussed above, the only regulated toxic pollutant present in unburned gasoline is benzene; hence non-benzene toxic emissions are present only in exhaust emissions. For summer fuels EPA proposes to use the results from the Auto/Oil study to determine the 1,3- butadiene, formaldehyde, and acetaldehyde fractions of exhaust VOC emissions. The Auto/Oil data as released, however, were modified slightly to exclude the acetaldehyde and formaldehyde results for ETBE and ethanol from one of the vehicles (car #5A) due to emission results which were confirmed as being in error. Furthermore, the effect of ETBE on the weight percent of acetaldehyde was based on the test results for ethanol due to the lack of adequate fuel comparability for ETBE-containing fuels. However, for this case, the ethanol results were adjusted based on a comparison of the ETBE and ethanol results on similar fuels for which data was available. The toxics emissions for summer fuels are determined by the following formulae. 1,3-butadiene emissions in mg/mi equal: 0.00539x1000x(Exhaust VOC) where Exhaust VOC represents total exhaust VOC nonmethane emissions (including the effects of fuel oxygen) in grams per mile, and 0.00539 represents the weight fraction of 1,3-butadiene in baseline nonmethane VOC emissions (as determined by the Auto/Oil study 13. NOTE 13 Data received by EPA from the Auto/Oil Air Quality Improvement Research Program. Formaldehyde emissions in mg/mi equal: 0.01199xExhaust VOCx1000x(1+(0.42/2.7)x(MTBE)) for MTBE containing fuels, 0.01199xExhaust VOCx1000x(1+(0.358/3.55)x(ETOH)) for ethanol containing fuels, and 0.01199xExhaust VOCx1000x(1+(0.137/2.7)x(ETBE)) for ETBE containing fuels, where 0.01199 represents the weight fraction of formaldehyde in summer baseline nonmethane VOC emissions (as determined by the Auto/Oil study), Exhaust VOC represents total summer VOC (nonmethane) emissions in grams per mile, MTBE, ETOH, and ETBE refer to the weight fraction oxygen in the form of those oxygenates, and 0.42, 0.358, and 0.137 represent the increase in the weight fraction of formaldehyde emissions with the addition of 2.7 weight percent oxygen in the form of MTBE, 3.55 weight percent oxygen in the form of ethanol, and 2.7 weight percent oxygen in the form of ETBE, respectively. Acetaldehyde emissions in mg/mi equal: 0.00854xExhaust VOCx1000x(1+(0.078/2.7)x(MTBE)) for MTBE containing fuels, 0.00854xExhaust VOCx1000x(1+(0.865/3.55)x(ETOH)) for ethanol containing fuels, and 0.00854xExhaust VOCx1000x(1+(0.867/2.7)x(ETBE)) for ETBE containing fuels, where 0.00854 represents the weight fraction of acetaldehyde in summer baseline nonmethane VOC emissions (as determined by the Auto/Oil study), and 0.078, 0.865, and 0.867 represent the increase in the weight fraction of acetaldehyde emissions with the addition of 2.7 weight percent oxygen in the form of MTBE, 3.55 weight percent oxygen in the form of ethanol, and 2.7 weight percent oxygen in the form of ETBE, respectively. Emissions of polycyclic organic matter (POM) include a number of different, high molecular weight aromatics. There is no data quantifying the impacts of gasoline reformulations on POM emissions. At the present time, there are also no widely accepted test procedures for measuring POM in both the gaseous and particulate phases. In addition, POM emissions constitute a very small fraction of total toxic emissions (less than 2 percent). For these reasons, the Agency proposes that the emissions model consider POM emissions to be proportional to total exhaust nonmethane VOC emissions and not dependent on any particular fuel parameter. POM emissions in mg/mi equal: 0.00304x1000x(Exhaust VOC) where (based on EPA analyses 14), 0.00304 equals 0.0014 (the emissions of POM from the baseline fuel in grams per mile divided by 0.46 (the exhaust VOC emissions from summer baseline fuel in grams per mile). NOTE 14 "Analysis of the Economic and Environmental Effects of Methanol as an Automotive Fuel," U.S. Environmental Protection Agency, September 1989. Under winter conditions, EPA test results 15 indicate that the proportion of 1,3-butadiene in exhaust VOC emissions is the same as under summer conditions, while the mass of formaldehyde, acetaldehyde, and POM emissions are estimated to be the same as summer emissions. As a result, for all non- benzene toxics except 1,3-butadiene, the winter emissions are given by the equations expressed above with Exhaust VOC set equal to summer baseline exhaust VOC emissions (0.46 g/mi) rather than the winter value (0.68 g/mi). Winter exhaust 1,3-butadiene emissions (mg/mi), however, are to be determined by using the winter baseline exhaust VOC emissions of 0.68 g/mi. NOTE 15 Atmospheric Environment, op. cit. d. Baseline emissions. The derivation of baseline emissions used in the above formulae was described at length in section III.A. of the NPRM and the reader is referred to that document for discussion of that issue (56 FR 31179). Some changes and corrections have been made since the NPRM was published, and they are described below. i. Winter baseline gasoline. The winter baseline parameter values developed for the NPRM (56 FR 31180) have been recalculated to account for change in the length of the summer period from May 1-September 30 to April 1-September 15. This data is thus valid for use only during that period. Average values for additional parameter have been computed as shown in Table II-3. As part of the recalculation, the methodology was changed slightly from that described in the NPRM. In the final calculation of an average fuel parameter value, the contribution of each survey city's fuel consumption by month or bi-monthly period to the entire winter period was used. The final average fuel parameter value was then determined by a summation of all the cities' contributions over the entire winter period. Previously, a single value was obtained for each month or bi-monthly period which included the contribution of each city during that month or bi-monthly period. These values were then averaged to obtain the average winter value. Comments are requested on the determination of the winter values of the baseline parameters, particularly regarding the computation methodology used. Table II-3: Winter Baseline Fuel Composition API Gravity--60.4 Sulfur, ppm--338 Benzene, volume percent--1.62 RVP, psi--11.7 Octane, R+M/2--88.1 IBP, degrees F--87 T10, degrees F--111 T50, degrees F--199 T90, degrees F--332 End Point, degrees F--404 Aromatics, volume percent--26.4 Olefins, volume percent--11.9 Saturates, volume percent--61.7 ii. MOBILE4.1. The goal of EPA in developing the procedures for certifying fuel as meeting the reformulated gasoline requirements is to assure that a certified fuel will achieve the required emission reductions in-use. This goal necessitates the use of a fuel effects model which predicts in-use emissions. For the simple model, EPA has therefore used the MOBILE4.1 emissions model to determine the proposed baseline emission levels. For further discussion of the rationale behind this decision the reader is referred to the discussion in the NPRM. The final version of MOBILE4.1 was released on July 29, 1991, and is available from any regional office of EPA (August 26, 1991, 56 FR 42053) and the docket for this rulemaking. iii. Temperature conditions. MOBILE4.1 has been developed to predict motor vehicle emissions on an area-specific basis. In order to use MOBILE4.1, it therefore is necessary to specify a temperature range for the areas in which motor vehicle emissions are being evaluated. EPA proposes modeling baseline emissions under temperatures ranging from 71.6 to 91.6 degrees Fahrenheit in areas classified as Class C areas (9.0 psi RVP, classified as VOC Control Region 2 in section V.D.) and ranging from 69.4 to 94.0 degrees F in Class B areas (7.8 psi RVP, classified as VOC Control Region 1 in section V.D.). These temperatures represent the population-weighted average of minimum and maximum temperatures measured in each of 25 serious and worse ozone nonattainment areas during their ten worst ozone days in each of the months of July and August for the years 1986 to 1989 (in ten of the cities) and 1985 to 1987 (in the other fifteen cities).16 Refueling emissions were derived assuming an ambient temperature of 90 deg.F for both Class B and Class C areas. Distinguishing between the different areas did not appear justified given the similarity of Class B and Class C area temperatures, the relatively low magnitude of refueling emissions, and the wide range of times and temperatures at which refueling occurs during a day. 90 deg.F was considered to represent a severe case in order to account for average in-use refueling emissions on high ozone days. NOTE 16 Memorandum II-A-2 from Jeffrey A. Herzog and Stephen Mayotte to Public Docket No. A-91-02. For determination of winter baseline emissions, an average low temperature and an average high temperature of 39 deg.F and 57 deg.F, respectively, were utilized. These temperatures were estimated from the historical 30-year average low and high temperatures for the months of October through April for the 25 serious and worse ozone nonattainment areas.17 NOTE 17 Ibid. iv. Effects of Stage II refueling controls. As discussed in the NPRM, baseline emissions are assumed to include the benefits of a Stage II refueling vapor recovery program. The only change from the NPRM is that the efficiency of Stage II controls is now assumed to be 86 percent. EPA's regulatory impact analysis supporting refueling emission regulations estimated the efficiency of Stage II equipment to be 86 percent in areas such as California where the program is very strictly enforced. Because of the severity of ozone pollution in areas that will be covered by the reformulated gasoline program and because strong measures will be required to bring these areas into attainment, it is assumed that Stage II programs in these covered areas will be strictly enforced. v. Assumptions regarding enhanced inspection and maintenance programs. A large portion of motor vehicle emissions are attributable to a small fraction of vehicles whose emission levels are extremely high due to tampering or malmaintenance. Enhanced inspection and maintenance (I/M) programs, mandated by the Act for all serious, severe, and extreme ozone nonattainment areas, will address this category of emission sources by inspecting vehicles for proper maintenance of exhaust and evaporative emission control equipment. The Agency is in the process of developing the minimum criteria for enhanced I/M programs. In the NPRM, the Agency proposed to include the impacts of enhanced I/M programs on baseline emission projections since enhanced I/M programs will be in place when requirements for reformulated gasoline take effect. While the minimum criteria for enhanced I/M programs are still undefined, for the purposes of the simple model proposed in this notice, the program is assumed to include an anti-tampering gas cap check for evaporative and running loss emissions and a 2500 rpm idle test for exhaust hydrocarbons. These tests were chosen because EPA is confident that the definition of enhanced I/M will include tests at least this stringent. The in-use emission impacts of these potential I/M provisions were included in the MOBILE4.1 modeling to determine baseline emissions. The assumptions regarding enhanced I/M programs, for the purposes of the complex model, will be defined in the complex model rulemaking. e. Simple model performance of toxic emissions. Using the emissions effects proposed above and the assumptions described in section II.A.3.d. concerning baseline emissions, the following table lists EPA's estimated toxics emissions from Clean Air Act baseline summer gasoline and the formula fuel assuming the oxygenate type in the formula fuel is MTBE. The selection of MTBE for use in the formula fuel was based on the likelihood that MTBE will be the most heavily used oxygenate. In addition, MTBE yields slightly larger toxics emission reductions than other oxygenates tested to date due to its effect on nonexhaust benzene emissions. Since MTBE will be widely available for use in reformulated gasolines, EPA believes it is appropriate to base toxics emission standards on a formula fuel resulting in the greatest achievable reductions in toxic emissions. Table II-4.--Summer Toxic Emission Performance of Formula Fuel [Summer Toxic Air Pollutants (TAPs), mg/mi] Formula w/ Baseline MTBE (8.7 (8.7 RVP) RVP) Class Class Class Class B C B C Exhaust VOCs (g/mi) 0.46 0.46 0.42 0.42 Total VOCs (g/mi) 1.23 1.23 1.19 1.19 Exhaust Benzene (mg/mi) 30.1 30.1 22.3 22.3 Evaporative Benzene 4.3 3.8 2.6 2.2 Running Loss Benzene 4.9 4.5 2.9 2.6 Refueling Benzene 0.4 0.4 0.3 0.3 1,3-Butadiene 2.5 2.5 2.2 2.2 Formaldehyde 5.5 5.5 6.6 6.6 Acetaldehyde 3.9 3.9 3.8 3.8 POMs 1.4 1.4 1.3 1.3 Total TAPs 53.1 52.0 41.9 41.3 Using the emissions effects proposed above and the assumptions described in section II.A.5 concerning baseline emissions, the following table lists EPA's estimated toxics emissions from winter baseline gasoline and from the formula fuel assuming the oxygenate type in the formula fuel is MTBE. Table II-5.--Winter Toxics Performance of Formula Fuel [Winter Toxic Air Pollutants (TAPs), mg/mi] Winter Formula w/ baseline MTBE Class Class Class Class B C B C Exhaust VOCs (g/mi) 0.68 0.68 0.62 0.62 Total VOCs/1/ (g/mi) 0.68 0.68 0.62 0.62 Exhaust Benzene (mg/mi) 40.8 40.8 33.0 33.0 1,3-Butadiene 3.7 3.7 3.3 3.3 Formaldehyde 5.5 5.5 6.6 6.6 Acetaldehyde 3.9 3.9 3.8 3.8 POMs 1.4 1.4 1.3 1.3 Total TAPs 55.3 55.3 47.9 47.9 /1/ Assuming that wintertime evaporative emissions are negligible. (See earlier discussion.) Under section 211(k)(3), reformulated gasoline must meet the emissions performance of the formula fuel or the minimum performance standard specified in section 211(k)(3)(B), whichever is more stringent. For Class B areas, using the simple model with the formula fuel produces a 21.1 percent reduction in toxics emissions in the summer and a 13.5 percent reduction in the winter. For Class C areas, using the simple model and its modeling assumptions with the formula fuel produces a 20.7 percent reduction in toxics emissions in the summer and a 13.5 percent reduction in the winter. For purposes of toxics emission control, the winter period is assumed to be September 16 through March 31 since this period coincides with the time period during which winter gasoline will be produced. While summer gasoline would not be required at retail outlets until June 1, it would be required at terminals by May 1 and hence would be produced or imported by fuel suppliers at some earlier date. Fuel producers have indicated that production of summer gasoline could begin as early as March 1. In some cases, production of summer gasoline would not begin until after April 1, but in no case would it begin later than May 1. EPA believes that April 1 represents a reasonable average date for the beginning of summer gasoline production and proposes its use to determine summer and winter time periods for the purposes of the toxics compliance periods. When weighted according to fuel consumption (53.2 percent of gasoline is consumed during the winter period and 46.8 percent is consumed during summer), the annual average toxic emissions reduction is 17.1 percent from baseline levels in Class B areas and 16.9 percent in Class C areas. Based on the simple model correlations presented in this section, EPA believes that refiners are capable of achieving toxic emission reductions of this magnitude in conjunction with the VOC emission reductions discussed earlier. EPA believes that without the flexibility provided by an averaging program, requiring greater reductions in toxic emissions is not warranted at this time given refiners' need to produce gasoline at current and projected octane levels (more stringent toxics emissions standards would likely necessitate lowering aromatics levels, which would also reduce fuel octane levels) and the overall cost effectiveness of toxics emissions reductions relative to the corresponding health benefits, as discussed in the Regulatory Impact Analysis. As discussed in section VI.B.2, the Agency believes it appropriate for standards met on average to be more stringent than standards met on a per- gallon basis. Based on the discussion in section VI.B.2, EPA proposes that averaged toxic emission standards be 1.5 percentage points more stringent than the relevant per-gallon standards. Adding a 1.5 percentage point margin to the Class B and Class C results above would result in an 18.6 percent reduction requirement in Class B areas and an 18.4 percent reduction requirement in Class C areas; given the uncertainties in measuring toxic emission levels and the levels of fuel parameters that affect toxic emissions, and given the additional compliance and regulatory burden involved in establishing and enforcing separate Class B and Class C area standards, EPA believes that a single year-round standard is appropriate. EPA proposes that this standard be set at a level 18.5 percent lower than emissions from the annual average baseline emission level. Under the authority of section 211(k)(1) to set tighter standards, EPA believes that the greater flexibility and reduced cost afforded to gasoline refiners and importers by an averaging program allow EPA to require a greater reduction in toxics emissions than is required under section 211(k)(3). In addition, EPA estimates that the approximate 1.5 percentage point margin will be more than sufficient to recoup any compliance margin refiners would have otherwise had to maintain to ensure achievement of the toxics requirements in the absence of an averaging program. In sum, the tighter averaged standard should have the potential to increase the environmental benefits of the reformulated gasoline program while not increasing the cost of obtaining those benefits. For suppliers who opt to certify their gasolines on a per-gallon basis, EPA proposes that separate summer and winter toxics performance standards be based on the performance of the formula fuel under summer and winter conditions, respectively. Using the simple model, the summer performance standard would be a 21.1 percent reduction in toxic emissions in Class B areas and a 20.7 percent reduction in toxic emissions in Class C areas, relative to summer baseline gasoline. The winter performance standard would be a 13.5 percent reduction in toxic emissions relative to winter baseline gasoline. EPA believes that applying the annual averaged emission reductions (17.1 in Class B areas and 16.9 in Class C areas) as separate summer and winter per gallon standards would not be appropriate, since such standards would essentially require a greater and less cost effective reduction in toxics emissions in the winter months than is achieved by the winter formula fuel but would not reduce total toxic emissions. B. Complex Model As stated in the introduction to this section, EPA will issue a proposed rule no later than November 30, 1992 and a final rule by March 1, 1993 which will contain the specifics of a complex model to evaluate the emissions effects of a larger number of fuel parameters than are included in the proposed simple model. The complex model will be developed in a fashion similar to the simple model. However, the specific relationships used to relate simple model parameters to emissions may change as additional data becomes available and as the Agency's projections of the effectiveness of enhanced I/M programs and Stage II refueling controls develop. These relationships will be defined as part of the development of the complex model. While EPA believes that it is important to use the most accurate and complete model available for fuel certification, EPA also believes that fuel suppliers need adequate lead time to modify and adjust their production processes. Therefore, use of the complex model is not required prior to March 1, 1997. Beginning on March 1, 1997 (or four years after promulgation of the complex model, whichever is later), however, all reformulated gasoline must be certified by the complex model (augmented as appropriate by vehicle testing results). This timing was developed as part of the regulatory negotiation and, as discussed earlier, it provides the time required to develop the additional capacity needed to supply sufficient quantities of reformulated gasoline and provides adequate lead time for refiners to make any necessary refinery changes. Until March 1, 1997, refiners who produce reformulated gasoline would have a choice of certifying their fuel by using the simple model, the complex model, or by augmenting the models with vehicle testing (section III). EPA has developed two options for application of the complex model during the first two years of the program. Under the first option, if a refiner opts to utilize the complex model before March 1, 1997, the reformulated gasoline can have no worse VOC, NOx, or toxic emissions performance than would be predicted by the complex model for a simple-model fuel (minimum 2.0 percent oxygen, maximum 1.0 percent benzene, and maximum RVP of 8.1 psi in Class C areas and 7.2 psi in Class B areas) having that refiner's average 1990 levels of sulfur, olefins, and T90. This requirement would prevent fuel suppliers from supplying higher-emitting fuels than would be required under the simple model by electing to use the complex model to evaluate emissions performance. Since the complex model may contain parameters capped under the simple model and may also attribute larger emission effects for one or more simple model parameters, emission reductions for a fuel evaluated under the complex model may be larger than for the same fuel evaluated under the simple model. For example, under the simple model, a fuel producer with sulfur levels below the CAA baseline fuel level achieves a certain emission reduction due only to the parameters contained in the simple model. Under the complex model, however, that fuel producer would likely be able to claim an emissions benefit for its low sulfur level and relax the requirements on simple model parameters. The resulting fuel would meet the performance standards according to the complex model but would fall short of the standards according to the simple model. Because this option requires such producers to produce fuels that meet the required performance according to the simple model, such producers would be required to produce fuels that would achieve lower in-use emissions than required according to the complex model. However, once the complex model is required beginning March 1, 1997, such producers would be able to reduce the extent of reformulation needed to meet the requirements of the Act. As a result, this option may require capital expenditures during the first two years of the program from such producers that would not be required after March 1, 1997. For example, under this option, a fuel supplier with low levels of sulfur, T90, or olefins would be required to reduce RVP to a greater extent than would be required in 1997, when the complex model is required and they would be able to take credit for their low sulfur, T90, or olefin levels (assuming the complex model includes these parameters). To some extent, however, this added cost might be offset to the extent these expenditures would be required to meet the Phase II standards which take effect in 2000. This option would preserve the environmental benefits that would be realized using the simple model. However, it may also provide greater flexibility to fuel suppliers with higher 1990 baseline levels of sulfur, T90, and olefins, thereby effectively "rewarding" fuel suppliers with higher-emitting 1990 baseline fuels. The second option EPA is considering would allow refiners to certify fuels using only the complex model during the initial years of the program without any reference to simple model fuel performance. This option is not included in the negotiated agreement and, as noted above, this option may result in higher emissions prior to 1997 than would the first option. However, this option would be more cost effective than the first option since it would allow refiners to make one refinery change which would be effective both before and after 1997. Additionally, the Clean Air Act sets absolute emission standards for reformulated gasoline, and the complex model will reflect the best available model of emissions by incorporating these parameters; hence, it arguably should be allowed to supplant the simple model as soon as possible. Finally, the many parameters of the complex model give refiners more methods of reformulating gasoline than does the simple model, thereby allowing refiners to choose the method which is most cost effective for them. On the other hand, the emission reduction requirements for reformulated gasoline under the simple model are considered to be achievable and cost effective; therefore, equivalent emission reductions under this option also would be achievable and cost effective, considering suppliers' freedom to choose either model and the additional flexibility the complex model offers refiners. Since this option would allow suppliers with low 1990 baseline levels of sulfur, T90, or olefins to claim these benefits of their fuels, this option effectively rewards suppliers of lower-emitting 1990 baseline fuels. However, under this option a supplier with very low levels of sulfur, T90, and olefins might be able to meet the standards using the complex model with RVP levels that exceed the per-gallon RVP caps established as part of the simple model and might thereby affect the ability of the Agency to enforce compliance with the requirements of the Act while the simple model is in use. Therefore, EPA proposes that this option include the caps on RVP included in the simple model averaging program. Finally, this option could result in smaller emission reductions during the first two years than the 15 percent emission reduction goal implied by the Act. Fuel suppliers with high levels of sulfur, T90, and olefins would meet (and in some cases exceed) the 15 percent reduction requirement relative to their 1990 fuels, but not necessarily relative to the Clean Air Act baseline fuel. At the same time, fuel suppliers with low levels of these parameters would be able to meet the requirements of the Act, but with smaller reductions in emissions relative to their 1990 fuels. To resolve these problems, EPA proposes that the second option be restricted to Class A and Class B areas only. The VOC performance standard in such areas would be set equal to the projected emissions of a simple model fuel (7.2 psi RVP, 2 percent oxygen, 1 percent benzene, and other parameters set equal to 1990 industry average levels) using the complex model. The Agency believes that this performance standard is appropriate since it would require the same emissions performance for all fuel suppliers while still providing suppliers greater flexibility in meeting the requirements of the Act. EPA believes that providing this additional flexibility is of greater significance for Class B area fuels than for Class C area fuels because of the greater capital and operating expenditures needed to achieve the much lower Class B RVP levels. In addition, EPA believes that the second option would have a significantly smaller effect on enforcement in Class A and B areas than in Class C areas. The enforcement problems associated with this proposal are considerably simpler to overcome for areas that are geographically distinct and are served by distinct fuel distribution networks. Class C areas that are mandated for inclusion in this program often overlap, and many of the areas that either already have opted into the reformulated gasoline program or are eligible to do so are adjoining. Class A and B areas, by contrast, tend to be served by distinct fuel distribution systems. Finally, the Agency believes the potential diminution of emission reductions in Class A and B areas would be offset by the increase in the number of areas that would be able to opt into the reformulated gasoline program. The potential increase in opt-in would result from the enlarged supply of usable oxygenates resulting from this option: since the complex model is anticipated to include parameters with significant reduction potential for NOx as well as VOC and toxics emissions, this option would allow fuel suppliers the flexibility to utilize a wider range of oxygenates in Class B areas. While EPA is not aware of any interactive effects (as defined in section III) among the parameters contained in the simple model, EPA anticipates that fuel parameters with dilution and interactive effects will be identified in the future, and that fuel suppliers may wish to have such parameters incorporated in the complex model to simplify certification of fuels with such parameters. If fuel parameters have negative dilution or interactive effects, then mixing of fuels containing these parameters in the fungible fuel supply could result in degradation of the emission performance of all fuel in the fungible fuel supply. Therefore inclusion of such fuel parameters in the complex model may not be appropriate. The issue of how to include fuel parameters with dilution or interactive effects in the complex model will be dealt with in more detail in the subsequent rulemaking that will define the complex model. EPA requests comment on this issue at this time. III. Vehicle Testing to Augment the Emission Models The negotiated agreement is largely silent on the use of vehicle testing to augment 18 the emission models. The agreement does state that "vehicle testing will be permitted to qualify new parameters but not to modify the coefficients of existing model parameters" and further states that as new parameters are added to the complex model, the model shall be used to quantify the effect of the new parameters. To the extent that the proposals in this section go beyond those discussed in the NPRM or outlined in the agreement, EPA believes that they are consistent with the intent of the agreement and the provisions of the Act. Comments are requested on the specific proposals presented in this section. NOTE 18 The distinction between "augmenting" the complex model through vehicle testing and "revising" the model itself is discussed more fully in Section III.A.1. A. Purposes, Objectives, and Limitations of Vehicle Testing 1. Purpose of Vehicle Testing Vehicle testing is the primary way that the effects of various gasoline formulations on motor vehicle emissions can be determined. As described above and in the NPRM, data from vehicle testing programs forms the bulk of the basis for the simple model described above. This will also be the case for the complex model when it is developed. At the same time, when the subject of fuel certification by vehicle testing is discussed, most people envision a single test program of two or three fuels with the decision to certify being derived solely from the results of this single test program. EPA believes that fuel certification through such a single test program is inherently less reliable than certification through a testing-based model due to the strong likelihood that a far greater amount of testing was used to develop the model than that involved in any single test program and due to the fact that the potentially varying and conflicting results of numerous test programs can be considered together in a model. Even when no other data on the emissions effect of a fuel parameter exists, the statistical variance associated with any limited testing program raises the concern that a fuel will show emission effects during testing that would not occur in-use. Therefore, EPA proposes that testing only be permitted in conjunction with the models to augment them where fuel effects on emissions are not covered in the models. A distinction is drawn between "augmenting" a model and "updating" or "revising" a model. Augmentation involves modifying a model's predicted emission effects based on the results of vehicle testing submitted to EPA by industry that quantify the emission effects of new parameters or the extension of emission effects from already-included parameters, as discussed at length in this section. Augmentations to a model would be valid for a limited period of time and would apply only to those fuel suppliers requesting the use of the augmentation or claiming emission effects from the fuel parameter for which the augmentation was developed. Augmentations would be permitted on a temporary basis only as discussed below in Section III.A.5. Updates or revisions to a model would involve changes to the base model (to which further augmentations would be applied), and would affect all fuel suppliers. Revisions to the model would be developed by EPA and are expected to involve a rulemaking process. Revisions may involve new parameters, extension of the effects of already-included parameters, or changes to the coefficients of already-included parameters. EPA generally envisions that augmentations that are valid at the time the model is being revised would be proposed as revisions to the model. Although it is likely that any such augmentations would be proposed and accepted as a revision to the model given the extent of the data required for the augmentation, whether such augmentations would be proposed and finalized as revisions to the model would depend on the level of statistical confidence in the test result, various factors such as the existence of valid concerns with the original data since the time of the augmentation, and test results or other data obtained by EPA or other parties that dispute the conclusions drawn from the testing performed for the augmentation. The most likely time for concerns with the original data to come to light would be in comments provided on a proposal. As a result, in most instances, EPA would anticipate that augmentations would be proposed as revisions to the model. As discussed in Section II, data with which to develop an emission model is limited for many fuel parameters. The simple model includes only some of the fuel parameters that are known to have an effect on emissions. EPA has chosen to include in the simple model only those parameters for which the emission effects have been quantified with sufficient assurance to justify their inclusion. The complex model required for use in 1997 and to be released in 1993 is intended to include a number of additional parameters whose effects on emissions are now being substantiated and quantified through ongoing Agency and industry test programs. These parameters include sulfur, T90, and olefins. Additional parameters which affect emissions will periodically be incorporated in the complex model as they are discovered and quantified over time. In order to encourage fuel suppliers to identify and develop innovative and cost effective fuel reformulations that reduce emissions and to permit their use prior to such time as they could be incorporated into the complex model, EPA considers the use of vehicle testing to augment the models to be an important alternative to fuel certification by modeling alone. 2. Objectives of the Vehicle Testing Process Under the Simple Model EPA believes that fuels certified by vehicle testing should be evaluated in conjunction with the most complete emission model available to more accurately determine the emission benefits of the fuels being tested. Therefore, EPA proposes that with the following exception, vehicle testing not be permitted to augment the simple model. Approval to use oxygenates at concentrations greater than 2.7 weight percent oxygen in the form of MTBE 19 or 2.1 weight percent oxygen in the form of other oxygenates, up to the waivered limit for the oxygenate in question, would require the submittal to EPA of data that demonstrates that the oxygenate in question does not increase NOx emissions. EPA would evaluate such data, along with data already available and obtained from other sources, and process such petitions expeditiously. For such fuels, VOC and toxics emissions would still be determined using the simple model. States would be permitted to prohibit specific oxygenates in non-VOC controlled reformulated gasolines at levels in excess of 2.1 weight percent oxygen (2.7 weight percent oxygen in the form of MTBE) as per section II.A.2 unless the Administrator finds that specific oxygenates do not increase NOx at higher levels. If the Administrator were to make such a finding, the oxygenate in question would be permitted in reformulated gasolines up to the level specified in the finding without further restriction. NOTE 19 Note that the waivered limit for MTBE corresponds to an oxygen concentration of 2.7 weight percent. Hence a fuel supplier wishing to use MTBE at greater concentrations would have to complete the waiver process as well as the vehicle testing process outlined in this section. EPA further proposes that to obtain approval to use an oxygenate at such elevated levels, a formal vehicle testing program to augment the simple model be required as outlined in this section. Based on results from the testing program, petitioners would have to demonstrate that the oxygenate at such concentrations does not increase NOx emissions. For such fuels, VOC and toxics emissions still would be determined using the simple model. EPA requests comment on whether less burdensome requirements (relative to those outlined in the remainder of section III.) are appropriate for oxygenate concentrations between 2.1 and 2.7 weight percent oxygen, and if so, what such requirements should be. 3. Objectives of the Vehicle Testing Process Under the Complex Model EPA believes that the objective of testing under the complex model should be to evaluate the emission effects of fuels whose emission effects cannot be adequately represented by the model. Such fuels would include fuels claiming emission effects from parameters not included in the complex model as well as fuels containing complex model parameters at levels beyond the range covered by the model. Without this constraint, it may be possible for a fuel producer to use the statistical variance associated with testing to demonstrate emission effects through the testing option which would not be demonstrated in-use, when tested to a greater degree, or when modeled. For example, a fuel that would fail to meet the VOC requirement by a small margin when evaluated under the complex model could be tested and potentially pass due to the testing error associated with any vehicle testing program. In addition, allowing testing of existing modeled parameters would essentially make the complex model, and thus, the emission performance standards, a fluid target. Fuel producers would lose the certainty associated with a fixed model and the confidence that their capital investments will be useful for at least a fixed amount of time. Therefore, EPA proposes that vehicle testing be used only to determine the emission effects of the parameter(s) not adequately represented by the complex model. The complex model would be used to determine the emission effects of fuel parameters covered by the model since the model would likely be based on more data than would be generated by any individual test program. The emission effects of the fuel in question would be determined by combining the emission effects determined through vehicle testing with the emission effects predicted by the complex model. Furthermore, EPA proposes that each testing program be used to identify the effects of only one new fuel parameter, unless the changes in other fuel parameters are a natural and inherent consequence of the primary fuel modification. These proposals, taken together, would alleviate the concerns raised above. In addition, EPA proposes that fuel suppliers opting to augment the complex model through vehicle testing must examine the extent to which emissions are affected when fuels containing the fuel parameter(s) being tested are mixed with other fuels. The Agency is concerned with two potential problems when different fuels are combined. First, the emission effects of a parameter, as determined from vehicle testing, may not behave linearly as fuels with one level of the parameter are mixed with fuels with different levels of the same parameter. The degree to which this process occurs is referred to in this notice as the parameter's dilution effect. Second, the emission effects of various fuel parameters may be affected by the presence or level of other fuel parameters. The degree to which this process occurs is referred to in this notice as the interactive effect. If such effects were to be present, actual emission performance of the fuel mixture in-use could be worse than the emission performance predicted from the complex model augmented by vehicle testing results. Therefore, EPA proposes that the testing process be structured so as to identify dilution and interactive effects. Since the presence of adverse dilution and interactive effects could seriously undermine the in-use effectiveness of this program, EPA believes that the only alternative to testing for such effects would be to segregate the fuel in question throughout the distribution system. Even this alternative may not be fully satisfactory, since such fuels would still be mixed with other fuels in vehicle fuel tanks. 4. Limitations on Vehicle Testing In addition to the limitations on testing described in the previous two sections, EPA proposes that petitioners be required to obtain advance approval from the Agency for proposed vehicle testing programs. EPA would only consider petitions to augment the model based on the results of approved testing programs. EPA would further retain the discretion to evaluate other data when evaluating petitions to augment the complex model and when determining the nature, extent, and limitations of the augmentation. Petitioners would be required to include the following information when submitting a test program plan for approval: the fuel parameter to be evaluated for emission effects; the number and description of vehicles to be used in the test, including model year, model name, VIN number, mileage, emission performance, and technology type; the fuels to be used in the testing program, characterized as defined in section B.4.; the pollutants and emission categories intended to be evaluated; the methods and precautions to be used to ensure that the effects of the parameter in question are independent of the effects of other parameters already included in the complex model; a description of the quality assurance procedures to be used during the test program, and the identity and location of the organization performing the testing. For test programs that focus only on exhaust emissions, petitioners would have to include a justification as to why nonexhaust emissions should be assumed to be unaffected by the fuel parameter in question. EPA fully anticipates, and would encourage petitioners to submit the information listed above in stages beginning with the most general and ending with the most specific in order to streamline the approval process and eliminate wasted effort. EPA would provide petitioners with a justification for rejection of a proposed testing program that fails to provide adequate information and assurances as described above. Rejected programs could be modified to address Agency concerns and re-submitted for approval. These provisions would provide the Agency with greater assurance that petitioners would not selectively report test results to the Agency that support their petitions. Petitioners would still be able to "game" the testing process by pre-screening vehicles to obtain a test fleet with the desired sensitivity to the proposed parameter. However, such a test fleet would have to be re-tested as part of the formal test program and hence would be subject to the variability inherent in vehicle testing, which would tend to reduce the gaming benefits from pre-screening. EPA believes that the risks and costs associated with re-testing would dissuade petitioners from attempting to manipulate the testing process in this manner. EPA further proposes that the results of all approved testing programs be submitted to the Agency, even if the parameter in question proves not to provide an emission benefit. The Agency believes this requirement is necessary to ensure that all available data is at the Agency's disposal when evaluating proposed augmentations to the complex model and when updating the model itself. EPA does not intend to use this provision to limit legitimate, innovative test programs. Rather, EPA is only interested in preventing the creation of artificial fuel parameters that claim to be the source of emission effects which are in reality only normal statistical variability. For example, a fuel's 10 percent distillation point (T10) is closely related to its RVP. A testing program to identify the effects of T10 may indicate that an emission effect from T10 exists when the effect is actually due to differences in the fuels' RVPs or to statistical variability. At the same time, some measure of a fuel's volatility above 100 deg. F (the RVP test is conducted at 100 deg. F) could be very relevant to running losses, where tank temperatures can reach 120-135 deg. F. A proposed test program to identify the effects of T10 would require the petitioner to identify specific measures to be taken to isolate the emission effects of T10 from those of RVP, which is anticipated to be included in the complex model. In this example, EPA might require that the candidate and candidate-baseline fuels contain identical RVP levels. This provision would eliminate one potential means by which petitioners would be able to "game" the testing process and produce fuels that meet requirements under the model but do not meet requirements in-use. 5. Duration of Acceptance of Emission Effects Determined by Vehicle Testing The Agency is concerned that fuel suppliers not be allowed to claim emission effects in perpetuity based on the testing program described in this section due to the lower statistical confidence in the effects compared to those included in an updated complex model. The Agency also recognizes the need for fuel suppliers to recoup investments made to reformulate gasoline, including investments to utilize the emission effects identified through vehicle testing. EPA therefore proposes that petitioners be permitted to use emission effects determined through vehicle testing only for a limited period of time. In general, this period of time would extend until an updated version of the complex model takes effect. As discussed in section 1, EPA anticipates that most currently valid augmentations to the complex model would be proposed for inclusion in the updated model. Assuming that no serious, valid comments were received arguing against inclusion, such augmentations would be included in the updated model. Updates to the complex model will be proposed no more than five years apart. Since some augmentations may be in place for a relatively short period of time before the model is next updated, the Agency may not be able to adequately assess the augmentation. However, if a proposed update to the complex model is issued within three years of the time at which the augmentation takes effect, then in certain circumstances, fuel suppliers would be permitted to continue using the augmentation to determine the emission effects of reformulated gasolines. Specifically, if the Agency does not formally accept, reject, or modify the augmentation in question for inclusion in the updated complex model, then the augmentation would remain available until the next update to the model takes effect. If the Agency reviews the augmentation and either excludes the augmentation entirely or includes the augmentation in a modified form, then the augmentation would remain available for five years from the date the augmentation took effect or for three years of fuel production, whichever is shorter. This provision, however, would apply only to those refiners that either contributed 50 percent or more of the costs directly attributable to testing in support of the augmentation, or that have already begun producing a fuel utilizing the augmentation at the time of the proposal. In the latter case, the refiner would be able to continue producing fuel utilizing the augmentation up to the maximum fraction of fuel production which had previously utilized the augmentation and only to the extent (on average) that the augmentation had been used (e.g., up to or down to the average concentration or level of a new parameter or the extension of an existing parameter). Fuel suppliers not meeting either of these two criteria would be able to use the augmentation until the date the update to the model is promulgated. The minimum allowable period of five years from augmentation approval or three years of production of a certified fuel, whichever is shorter, is intended to provide fuel suppliers which invested substantially in the augmentation through either vehicle testing or refinery modifications with essentially the same period of time to recoup the costs regardless of when EPA grants them the augmentation. By restricting the continued use of the augmentation only to those fuel suppliers who would otherwise be most economically disadvantaged, EPA believes it can minimize the environmental detriment that might otherwise occur. EPA requests comment on this proposal. EPA further proposes that augmentations to the model for the effects of a given parameter over a particular range be permitted only once. Whether the emission effects of a parameter are either included in an updated model or not, once the minimum time period for use of a model augmented with the effects of that parameter has expired, the augmentation can neither be used or renewed (even with data from a second identical test program). Further testing would be permitted, however, to provide EPA with the additional data needed to include the effect in a future update to the model. 6. Application of Augmentations The testing process outlined in this section is focused on certifying a specific fuel with a specific concentration of the relevant parameter(s). However, fuel suppliers may wish to produce a range of fuels incorporating parameters for which testing has already been performed without having to repeat the testing process. The Agency recognizes the need to preserve flexibility for fuel suppliers given variations in crude oil feedstocks and the refining process. However, the Agency also recognizes the need to ensure the emission reduction benefits of fuels deemed to be reformulated gasolines are actually achieved in-use. The emission benefits of parameters as determined through testing of particular fuel formulations are difficult to extrapolate to other formulations due to potential interactive and dilution effects. EPA therefore proposes that fuel suppliers be permitted to claim the emission effects of parameters determined through vehicle testing for other fuels subject to the following conditions. First, the concentration of the parameter must not exceed the concentration of the parameter in the candidate fuel for which testing was performed if increasing the concentration of the parameter is beneficial to emissions, or be less than the candidate fuel concentration of the parameter if the opposite is true, since the emission effects of the parameter at such levels would not be known. For example, if testing of an emission-reducing additive at concentrations in excess of 5 percent had never been performed, then that additive would not be permitted at concentrations in excess of 5 percent; further, if a naturally-occurring emission-increasing ingredient had never been tested in reformulated gasoline at concentrations less than 10 percent, then gasolines would not be given credit for any marginal emission benefits of the ingredient at concentrations of less than 10 percent. Second, the parameter may only be introduced into fuels containing parameters for which interactive effects with the parameter in question have been tested as described in section III.B.6. This requirement would help assure that the emissions benefits predicted for a given fuel are actually achieved in-use by preventing fuel suppliers from introducing fuels with unknown and potentially unfavorable interactive effects into the fuel supply. 7. Exclusive Rights, Confidentiality, and Public Comment on Proposed Augmentations The Agency recognizes that the provision of exclusive rights for the use of emission-affecting parameters to fuel suppliers who conduct vehicle testing may encourage more testing than would occur without exclusive rights. However, the Agency also recognizes that provision of exclusive rights may increase the overall cost of the reformulated gasoline program, since cost- saving reformulation methods would not be freely available. The Agency further recognizes that the regulatory burden of administering a system of exclusive rights would be significant and does not believe that the benefits of such a system (in the form of more rapid innovation) would justify its costs (in the form of less-widespread adoption of innovations once discovered and higher administrative costs). Further, there is some question whether EPA would have statutory authority to grant such exclusive rights, and in any case fuel suppliers are able to apply for patents on additives or reformulation process technology independent of any administrative system of exclusive rights for emission effects identified through vehicle testing. Therefore, EPA proposes that any fuel supplier be permitted to utilize any emission effect identified through vehicle testing, subject to the constraints of patent law or other applicable legal restrictions. EPA requests comment on this approach and on whether it might discourage the development of innovative formulations not protected by patents or other applicable legal restrictions. EPA also requests comment on whether the expected benefits of any additional innovations that may be stimulated by the granting of exclusive rights would warrant the regulatory burden and reduced market efficiency associated with a system of exclusive rights. EPA also invites comments on its statutory authority to grant exclusive rights. The Agency also recognizes that, given the costs of vehicle testing and reformulated gasoline production, fuel suppliers may wish to keep vehicle testing results confidential for competitive reasons. However, confidentiality would eliminate the possibility of public comment on proposed augmentations to the model. The Agency anticipates that public comment on proposed updates to the model would be permitted, since model updates would be subject to the rulemaking process. The Agency also proposes that public comment on requests by fuel producers to augment the models through vehicle testing also be permitted. Providing for comment would allow interested parties to review and comment on the testing process employed and to submit supporting or countervailing data. Further, since proposed augmentations to the model would be likely to be considered for inclusion in future updates to the complex model, other fuel suppliers may have a significant interest in evaluating the impact of the proposed augmentation on their fuels and, in some cases, may undertake additional testing to confirm or disprove the proposed emission effect. The Act provides the Agency with 180 days to act on requests for fuel certification, which the Agency interprets to include verification of vehicle test results once a petition to augment the model is complete. EPA believes that this time is sufficient to permit public comment on vehicle test results. The Agency recognizes that provision for public comment implies that vehicle testing results could not be treated as confidential business information; however, EPA believes the potential gains in the quantity and quality of data used to determine augmentations are significant, and outweigh the potential benefits from additional testing that might be encouraged by treating the information as confidential. EPA requests comment on the proposals outlined above regarding non-exclusivity of rights to use emission effects established through vehicle testing and the opportunity for public comment. B. General Vehicle Test Program Requirements 1. Seasonal Variation in Testing Requirements In order to be certified as reformulated, a gasoline must meet VOC emission requirements in the high ozone season; separate toxic emission requirements in summer and winter or on an averaged year-round basis; and NOx emission requirements and the oxygen, benzene, and heavy metal content requirements year-round (see section III of the NPRM.) As discussed in Section II of this notice, the Agency does not have sufficient data to model winter emissions. While differences between the effects of fuel parameters under summer and winter conditions beyond those discussed in Section II may exist, the Agency does not have any evidence to date to suggest that they are significant. Therefore, EPA will apply the model developed for summer emissions to winter fuels as well for purposes of determining their VOC emissions. The Agency is concerned that allowing winter testing for some fuel parameters while modeling the effects of other parameters based on summer emission data creates the possibility of "gaming" the testing process. Fuel suppliers could use the summer model to determine the effects of parameters that would behave unfavorably under winter conditions and use winter testing to determine the effects of parameters that would behave favorably under winter conditions. This possibility may result in fuels being certified for winter use (through a combination of winter testing and summer modeling) that result in smaller emission reductions in-use than are intended by the Act or than would occur by using the summer model. Therefore, EPA proposes at this time that all testing be performed under summer ambient conditions. The Agency requests comment on this proposal, on whether winter testing should be permitted, and on the potential for gaming if winter testing were permitted. 2. Pollutants To Be Measured When testing to augment the simple model (i.e., fuels containing oxygenates at levels beyond those covered by the model), EPA proposes that only the exhaust emissions of carbon monoxide (CO), carbon dioxide (CO2), hydrocarbons, and nitrogen oxides (NOx) be reported. While only the NOx measurement would be used to determine whether the oxygenate at the levels in question increases NOx emissions, the Agency believes the reporting of the other emission measurements would be necessary for test validation purposes and would add little, if any, cost to the test program. To the extent testing is performed to augment the complex model, EPA proposes that it be performed to determine the emission effects on all the pollutants covered by the reformulated gasoline certification requirements, including toxics. (As discussed above, carbon monoxide and carbon dioxide emissions should be measured to permit validation of test results.) Failure to have such a requirement could allow fuel producers to "game" the certification requirements by permitting them to utilize the modeling option for one pollutant when it would be advantageous and the test results for another pollutant when it would be advantageous. Certified reformulated gasolines may then not meet all of the applicable emission reduction requirements in-use. For example, the model augmented by test results may indicate that a fuel meets the VOC requirement but fails the toxics requirement, while the model alone may indicate that the fuel meets the toxics requirement. Allowing the petitioner to claim the toxics emission effects predicted by the model while claiming VOC benefits determined through testing would ignore fuel effects on toxics that may not be addressed by the model. Testing costs could be significantly reduced if only VOC and NOx emissions were measured by testing, and toxics emissions were allowed to be modeled. However, since the testing option could only be used when the candidate fuel's parameters fall outside of the range of the model, EPA believes that seldom will adequate information be available to allow toxics emissions to be adequately modeled if adequate information was not available to do so for VOC and NOx. If a fuel parameter is expected to affect VOC or NOx and is not covered by the model, toxics emissions may very well be affected and should be measured. However, the Agency proposes that automatic testing for dilution and interactive effects be limited to NOx and VOC emissions. As discussed in section II, toxics emissions are largely (1) due to specific precursors contained in the fuel and (2) otherwise proportional to VOC emissions. Therefore, EPA expects that any dilution or interactive effects for toxics emissions should result from such effects on VOC emissions. However, EPA reserves the right to require that toxics be measured during such testing when evidence exists that adverse dilution and interactive effects may exist for toxics and not VOC and NOx emissions. Furthermore, as discussed more fully in section III.D, the Agency proposes that in most cases duplicate testing not be required for the measurement of toxics emissions. This would also reduce the testing costs associated with evaluating the toxics emission impacts of the fuel parameter in question. To better optimize the test program for the particular fuel parameter being evaluated, the Administrator may approve a request to waive certain of the pollutant measurement requirements proposed in this section. Any such waiver would have to be obtained in advance. A request for such a waiver should include an adequate justification for the requested change, including the rationale for the request and supporting data and information. Such a request must justify the reason that measurement of certain pollutants is clearly not necessary, and identify those pollutants for which additional testing may be warranted. An example might be a petition that reducing the concentration of a certain high molecular weight paraffin decreased VOC emissions even though the overall concentration of similar paraffins remained the same. In this case the petitioner may be able to justify a reduced need for toxics measurement, since the concentration of one high molecular weight paraffin relative to that of another would not be expected to impact toxics concentrations in the exhaust. However, given the uncertainty associated with such a fuel change significantly affecting VOC emissions, a greater amount of testing may be justified for VOC emissions to enable a greater degree of statistical confidence in the test results. As a result, the fuel supplier may be able to justify to EPA that a greater amount of testing for VOC emissions and a lesser amount of testing for toxics emissions may be warranted. 3. Types of Emissions to be Monitored Under this rulemaking, when testing oxygenates to augment the simple model, the only pollutant of interest is NOx. EPA therefore proposes that such testing involve testing for exhaust emissions only, since NOx is present only in exhaust emissions. However, when testing to augment the complex model, NOx, VOC, and toxics emissions are all relevant to determining the parameter's emission effects; the latter two pollutants occur in both exhaust and nonexhaust emissions. Fuel parameters that affect nonexhaust emissions are likely to have an exhaust emission effect as well, while the opposite is not necessarily true. As a result, combining testing for some emission types with modeling for other emission types would reduce the cost of vehicle testing while not compromising the integrity of the testing process, while combining testing for some pollutants or seasons with modeling for other pollutants or seasons might compromise the integrity of the testing process. EPA therefore proposes that the testing option be coordinated with the modeling option such that a fuel producer could (1) test for all emission types (exhaust, evaporative, running losses, and refueling); (2) test for exhaust, evaporative, and running loss emissions and model refueling emissions, or (3) test for exhaust emissions only and model evaporative, running loss, and refueling emissions. For example, the producer would likely choose to test for all emission types if the parameter in question were expected to favorably affect all emission types. However, if the parameter in question were expected to favorably affect exhaust and running emissions but not to affect refueling emissions, the producer would likely choose to model refueling emissions while testing for the other emission types. If the parameter in question were expected to affect exhaust emissions only, the fuel producer would likely choose to test for exhaust emissions while modeling evaporative, running loss, and refueling emissions in order to reduce the cost of the test program. If the fuel supplier wishes to model nonexhaust emissions for a fuel or fuels undergoing exhaust emission testing, the fuel supplier would have to demonstrate that the candidate fuel's nonexhaust emissions can be determined accurately by the complex model. Limitations on the applicability of the complex model will be included in the complex model rulemaking. If the fuel supplier cannot demonstrate compliance with these limitations for the fuel or fuels in question, then nonexhaust emission testing would have to be conducted. By allowing nonexhaust emissions to be modeled under appropriate circumstances even though exhaust emissions are determined through testing, EPA believes that the candidate fuel's emissions would be more accurately determined, and testing resources could be focused on those emission effects which the model predicts with the least degree of certainty (i.e., exhaust emissions). The model will be based on emission testing results from a large number of vehicles, resulting in greater accuracy from using the model to predict nonexhaust emissions than from a vehicle testing program if the fuel can be modeled accurately. Additionally, by freeing resources for testing, the results from testing could then be used to improve the models over the long run. 4. Test fuels To isolate the effects of compositional changes on emissions, EPA proposes that a candidate-baseline fuel be defined and produced for each candidate fuel. The candidate-baseline fuels would help ensure that emission effects identified through vehicle test programs reflect the emission effects of the parameter in question rather than the normal testing variability associated with the emission effects of other parameters. The candidate-baseline fuels also would more closely reflect the properties of the fuels found in-use and would more closely reflect the properties of the fuels for which the parameter effects would be claimed. The Clean Air Act baseline fuel would not satisfy these requirements; therefore, EPA proposes that the candidate- baseline fuel for augmentation of the simple model contain 25 volume percent aromatics, 1 volume percent benzene, and no oxygenates; have an RVP of 8.1 psi, and have Clean Air Act section 211(k)(10)(B)(i) baseline gasoline levels of all other parameters, including the parameter in question. EPA further proposes that the candidate-baseline fuel for augmentation of the complex model contain 25 volume percent aromatics, 1 volume percent benzene, and 2.0 weight percent oxygen in the form of MTBE (2.0 percent oxygen in the form of the parameter being tested if it is an oxygenate other than MTBE); have an RVP of 8.1 psi, and have Clean Air Act section 211(k)(10)(B)(i) baseline gasoline levels of all other parameters, including the parameter in question. If the parameter is not specified for CAA baseline gasoline, EPA proposes that the level of the parameter in the candidate-baseline fuel be comparable to the level found in gasoline representative of in-use reformulated gasolines; EPA further proposes that petitioners be required to obtain approval for the candidate-baseline level of this parameter from the Agency prior to beginning their vehicle test programs. Such approval would depend in part on the use of an appropriate basis for determining "representative" gasoline. EPA further proposes that the candidate fuel be compositionally identical to the candidate-baseline fuel except for the level of the parameter in question and, to the extent necessary to compensate for changes in the level of the parameter in question, the level of paraffins. The level of the parameter in question would be zero for parameters neither defined in CAA baseline fuel, nor present in representative in-use reformulated gasolines. If the parameter is defined in CAA baseline fuel, then it would have to be present in the candidate-baseline fuel at CAA baseline fuel levels. If the parameter is not defined for CAA baseline fuel but is found in representative in-use reformulated gasolines, then it would have to be present in the candidate-baseline fuel at the levels found in such representative gasolines. EPA further proposes that petitioners be permitted to request the Administrator to establish alternative levels for the parameter in question in the candidate-baseline fuel as part of their initial petition in order to expedite the determination of the candidate-baseline fuel properties. EPA proposes that for all candidate-baseline fuels, paraffin content be altered to balance changes in the levels of other fuel constituents to best isolate the effects of the fuel parameter being varied in concentration. Paraffin content is proposed to balance other fuel composition changes since paraffin effects on emissions are thought to be more neutral than the effects of other, more complex major constituents of CAA baseline gasoline (such as olefins and aromatics) due to their straight chain molecular form. EPA requests comment on the proposed definition of the candidate-baseline fuel and on the use of paraffin levels to balance changes in other fuel components. In determining the composition of candidate-baseline fuel, two other issues also would have to be addressed. First, non-compositional properties of the candidate and candidate-baseline fuels, such as RVP and T90, may differ as a natural result of compositional differences between the two fuels. EPA proposes that the complex model be used to compensate for such differences when evaluating vehicle testing results. Second, variations due to blending may cause properties not included in the complex model to vary between the candidate and candidate-baseline fuels, and such properties may have significant emission effects not predicted by the model. Hence EPA proposes that the properties of the candidate-baseline fuel be required to be the same as those of the candidate fuel within the tolerances defined in Table III-1. Failure to meet this requirement would reduce the certainty that emission effects found in vehicle testing are due to the parameter in question and not due to emission effects of parameters included in the complex model that differ from the effects predicted by the model. However, if a petitioner could show that it is not feasible to meet all such tolerances for the petitioner's candidate-baseline fuel due either to (1) naturally-resulting changes in fuel parameters arising from changes in the parameter(s) in question or (2) blending technology limitations, EPA would consider waiving the relevant tolerances. However, the request must come prior to the start of the test program. The Agency further proposes to use the complex model (including prior test results used to augment the model where appropriate) to adjust for differences between the candidate and candidate-baseline fuels. Due to the difficulty in accurately measuring the initial boiling point (IBP) and the fact that its value tends to be controlled by the RVP and the 10% distillation point, EPA proposes that no limitations be placed on IBP blending tolerances for testing purposes. EPA further proposes that a minimum octane requirement of 87 (measured by the (R+M)/2 method) be met for all fuels used in vehicle testing. Table III-1.--Fuel Parameter Blending Tolerances for Candidate-Baseline Fuel Blending, Relative to the Candidate Fuel Tolerance Parameter /1/ Sulfur, ppm +/-25 Benzene, vol percent +/-0.3 RVP, psi +/-0.3 10%, deg.F +/-5 50%, deg.F +/-5 90%, deg.F +/-5 End Point, deg.F +/-20 Oxygenates, vol percent +/-1.5 Aromatics, vol percent +/-2.7 Olefins, vol percent +/-2.5 Saturates, vol percent +/-2.0 /1/ Letter to Paul Machiele, EPA, from Robert H. Pahl, Manager, Fuels and Lubricants, Phillips Petroleum Co., May 13, 1991. Blending tolerances for detergent additives have not been defined since the measurement methods for such additives have not yet been determined. EPA requests comment on the appropriateness of including such tolerances for detergent additives and the appropriate tolerances to use. The Agency is also concerned that including detergent additives in test fuels may improve the emission performance of some test vehicles independently of the effects of the fuel parameter(s) in question due to the removal of fuel injector and intake valve deposits. EPA requests comment on whether the candidate and candidate-baseline fuels should include detergent additives and on what types of test procedures would avoid distortion of test results due to the effects of detergent additives. EPA proposes that additional fuels be tested in order to determine the fuel's dilution and interactive effects. To determine the effects of diluting the parameter in question for parameters not included in the complex model, petitioners must test the effects of the fuel parameter at the level found in the candidate-baseline fuel, the level proposed for the candidate fuel, and at least one intermediate level half-way between the candidate-baseline fuel level and the candidate fuel level (+/-10 percent of the full range of levels being tested for the parameter in question). Other differences in the composition of the three fuels should be minimized, with paraffins used to offset changes in the level of the affected parameter among the three fuels (as described above for the candidate and candidate-baseline fuels). If the fuel were to contain a complex model parameter at levels beyond the range covered by the model, and if the intermediate fuel described above were to fall within the range covered by the model, additional testing to determine dilution effects would not be necessary. Instead, EPA proposes that the test results for the candidate fuel be used in conjunction with the complex model to analyze the dilution effect for the parameter in question. To determine the presence or absence of interactive effects, EPA proposes that at least two additional fuels be tested. The fuels would contain levels of each modeled parameter (within the limits of the complex model) and other parameters whose emission effects have been determined through vehicle testing (within the limits for which their effects have been determined) such that VOC and toxic emissions would be expected to be at a maximum level for the first fuel (based on fuels approved or likely to be approved for use in the fungible fuel supply for the area in which the fuel(s) containing the new parameter would be sold) and at a minimum level for the second fuel. Both fuels would contain the parameter in question at candidate fuel levels. Though the fuels would not have maximum and minimum levels of NOx, the Agency believes that any interactive effects on NOx would still be apparent from vehicle test results with the proposed fuels. EPA further proposes that the initial values of specific fuel parameters for the two fuels be defined as shown in Table III-2, and that the values shown in Table III-2 be modified as the range of values covered by the complex model changes or as fuels with values beyond those shown below are certified for inclusion in the fungible fuel supply in the areas in question. The Agency also proposes to expand Table III-2 to include new parameters identified through vehicle testing or added to the complex model. Table III-2.--Fuel Parameter Values For Fuels Used In Interactive Effects Testing Parameter value High Low Fuel parameter VOC VOC Sulfur, ppm 700 50 Benzene, vol percent 1.3 0.8 RVP, psi 8.4 7.0 90% distillation point, deg. F 350 280 MTBE, vol percent 8.25 15 Aromatics, vol percent 32.0 20 Olefins, vol percent 5.0 20 The manner in which test results from these fuels would be used to determine whether interactive effects are present is described in Section 6 below. In order to maximize the accuracy and confidence in the results from a test program of the magnitude under consideration here it is good practice to ensure that systematic changes have not occurred during the course of testing which might overwhelm the fuel effects being measured. As a result, EPA proposes that the first of the fuels described above to be tested in any given vehicle be retested in that vehicle at the end of the test program. EPA requests comment on this additional testing requirement. To better optimize the test program to the needs of the particular fuel parameter, the Administrator may approve a request to waive certain of the test fuel requirements proposed in this section. Any such waiver would have to be obtained in advance. A request for such a waiver should include an adequate justification for the requested change, including the rationale for the request and supporting data and information. Such a request must demonstrate the lack of a need to test all of the test fuels, and identify those fuels for which additional testing may be warranted. An example might be a petition that is merely extending the range of a parameter already included in the model. In this case, it may be possible for the petitioner to demonstrate to EPA that previous testing for the parameter in question demonstrated the lack of dilution or interactive effects, and therefore extensive testing for these purposes would provide little additional benefit. However, if these fuels are not tested, a greater amount of testing may be warranted on the candidate and candidate baseline fuels to establish the effect of the parameter with a greater degree of certainty. As a result, the fuel supplier may be able to justify to EPA that a test program which increases testing of the candidate and candidate baseline fuels and decreases testing of the dilution and interactive effects test fuels may be more appropriate than one in which all fuels are tested equally. 5. Determination of Parameter Dilution Effects To determine whether parameter dilution effects are acceptable, EPA proposes that a linear interpolation of the parameter's emission effects between baseline and candidate fuel levels of the parameter in question be developed to determine the estimated effect of the fuel parameter on VOC and NOx emissions assuming a linear relationship between parameter levels and emission effects. The reduction in emissions achieved by the intermediate fuel would then be compared to the reduction in emissions projected from the linear interpolation for the parameter levels found in the intermediate fuel; this comparison would be performed separately for VOC and NOx emissions. The emission reductions associated with the intermediate fuel would be determined through vehicle testing unless the effects of the fuel parameter, at the level under consideration, could be determined using the complex model. (As discussed in Section III.B.4, the complex model, augmented with prior vehicle testing results, would be used to compensate for differences in other fuel parameters among the three fuels.) If the reductions achieved by the intermediate fuel exceed those expected from the linear interpolation for both VOC and NOx emissions, then the fuel parameter would be considered to dilute in a favorable manner. If the upper 90 percent confidence limits for the emission effects of the parameter at the intermediate fuel concentration were less than the expected effects based on the linear interpolation for either VOC or NOx emissions, then the fuel parameter would be considered to dilute in an unfavorable manner. If the reductions achieved by the intermediate fuel were less than the expected effect based on the linear interpolation but the upper 90 percent confidence limit of the emission effects for the intermediate fuel were to exceed the expected effect for both VOC and NOx emissions, the dilution effects would be considered to be indeterminate but acceptable given the inherent uncertainties associated with vehicle testing. The determination of the 90 percent confidence limits is described more fully in section III.D.2.b. For fuel parameters already included in the complex model, however, EPA is concerned that the approach outlined above ignores the information incorporated in the complex model regarding the effect of that fuel parameter on emissions. EPA desires to include this information when evaluating the dilution effect of the fuel parameter in question and requests comments on procedures to accomplish this objective. Toxics emissions are directly related to VOC emissions. Therefore, unfavorable VOC dilution effects would be expected to cause unfavorable dilution effects on toxics emissions. However, a parameter's effects on toxics emissions may not be due solely to its effect on VOC emissions. Therefore, EPA proposes that the portion of a parameter's toxics emission effects which cannot be attributed to VOC emission effects be assumed to behave in a linear manner when the parameter in question is diluted. For example, consider a parameter that would achieve a 10 percent toxics reduction while reducing VOC emissions by 6 percent. Six percentage points of the toxics reduction would be attributed to the effects of the parameter on VOC emissions while four percentage points would be attributed to independent effects of the parameter on toxics emissions. If the parameter were to show an unfavorable dilution effect such that at one-half the candidate fuel concentration, VOC emissions were reduced by only 1 percent, the projected linear VOC emission effect of the parameter at candidate fuel levels would be a 2 percent reduction. The corresponding projected linear toxics emission effect of the parameter at candidate fuel levels would be a 6 percent reduction (2 percent due to the VOC effect and 4 percent due to the independent effects of the parameter on toxics emissions). EPA requests comment on these proposals and on other means of treating parameters having unfavorable dilution effects. 6. Determination of Interactive Effects The absence of interactive effects could be demonstrated by showing that the VOC and NOx emission effects of the affected fuel parameter did not change as other fuel parameters vary. To determine whether interactive effects exist and/or would be acceptable, EPA proposes that the observed emission effects of the affected fuel parameter in the candidate fuel (relative to the candidate-baseline fuel) be compared to the emission effects for the fuel parameter in the high and low emission fuels described in section III.B.4 for both VOC and NOx emissions. To determine the VOC and NOx emission reductions due to the fuel parameter in question in the high and low emission fuels, the emissions measured from these two fuels would be compared to the emissions predicted by the complex model (augmented as necessary by testing results for parameters other than the one in question) for these two fuels. EPA is considering a number of different tests of the statistical significance of such interactive effects, based on the 90 percent confidence intervals for the observed emission reductions from the candidate, high, and low emission fuels, and (for fuel parameters already in the model) the information on this parameter already available. At this time, EPA proposes to base the emission reductions of the candidate fuel parameter on the smallest of the mean emission reductions (for each pollutant separately) found above in the three evaluations of the candidate fuel parameter. This would provide the greatest assurance that the emission reductions granted via the testing option would be achieved in-use. The Agency requests comments on this proposal. The Agency recognizes that the emission reductions calculated from the high and low emission fuels could be confounded by differences between the complex model's correlations and the measured effects of the complex model parameters in the particular test program. Therefore, EPA proposes that fuel suppliers be permitted to test the high and low emission fuels without the fuel parameter in question instead of predicting these emissions using the complex model. EPA requests comment on this proposed flexibility. EPA also requests comment on whether the testing of the high and low emission fuels without the fuel parameter in question should be required (i.e., not optional), avoiding the need to use the complex model to predict these emissions. The preceding discussion assumes that the interactive effects identified through testing cannot be traced to a specific cause. If the cause of the interactive effect can be identified, it may be appropriate to determine a greater beneficial augmentation due to the parameter in question than the smallest effect identified through the procedure above, as well as include an interactive term in the complex model. Therefore, EPA proposes that petitioners be permitted to test additional fuels to identify the cause of the interactive effect and the magnitude of the effect for representative in- use fuels (again subject to Agency approval regarding the appropriateness of the petitioner's definition of representative gasoline). EPA further proposes that petitioners be required to obtain approval from the Administrator for the proposed additional testing before beginning such testing. Petitioners would be permitted to claim larger benefits for the parameter in question based on the results of such tests, subject to the approval of the Administrator. EPA requests comment on this issue and on appropriate methods for determining the size of the augmentation granted in such cases. EPA also recognizes that the fuels specified in Table III-2 are extreme in their compositions and properties. EPA anticipates that as experience is gained with the reformulated gasoline program, the definition of the high and low emitting fuels may warrant revision to more closely reflect the range of fuels included in the fungible supply of reformulated gasoline. In addition, EPA recognizes that the range of fuel properties in certain regions may be substantially smaller than the national range; therefore, the Agency may consider basing its definitions of the high and low-emitting fuels on such regional fuel property ranges for fuels that would be sold only in specific regions. EPA requests comment on the fuel property ranges specified in Table III-2, on the proposals outlined above for regional or national fuel property ranges, and on whether the benefits of regionally-based augmentations to the complex model would be large enough to justify to additional distributional, administrative, and record-keeping costs. C. Vehicle Testing Procedures For the reformulated gasoline program to achieve actual in-use reductions in fuel-related VOC and toxics emissions, certification test results must correlate with reductions in in-use emissions. No test procedure, however, is completely representative of all in-use conditions. The range of vehicle uses and operating conditions and the range of geographical and climatic conditions throughout the country prevent a single test procedure from being entirely representative. However, EPA has developed or is in the process of developing test procedures which attempt to reflect a broad spectrum of in- use vehicle operating conditions. These test procedures have been used in part to develop the emission factors in EPA's MOBILE4.1 emission model, which in turn has been used to develop the modeling option for fuel certification. To maintain consistency between the certification methods, these test procedures are also proposed below for fuel certification by vehicle testing. As discussed in section III.A.4., EPA reserves the right to evaluate the quality of testing data submitted in support of petitions to augment the models, to reject test data or analyses submitted to the Agency if such data or analyses are found to be insufficient, flawed, or otherwise deficient, and to include test data or analyses from other sources when evaluating the proposed augmentation to the model. 1. Statistical Analysis Requirements EPA proposes to base its determination of the emission effects for the parameter in question on only the mean emission effects from vehicle testing. EPA further proposes to specify the test fleet size, test fleet makeup, and number of tests to facilitate the accuracy of the mean emission effects. Given this level of specification for vehicle testing programs, EPA does not believe that additional statistical criteria need to be applied. This proposal is consistent with the use of the mean emission effects from test data to develop the simple model and is also consistent with the process expected to be used to develop the complex model. 2. High Ozone Season Exhaust Emission Testing EPA proposes that exhaust emissions be measured through the use of the Federal Test Procedure (FTP) for new vehicle certification (subpart B of part 86 of the Code of Federal Regulations) with modifications to allow vehicle preconditioning between tests on different fuels and to provide for benzene, formaldehyde, acetaldehyde, and 1,3-butadiene sampling and analysis. POM, the fifth toxic regulated, is not a measurable quantity since there are many different compounds included in the term. A detailed discussion of this proposal is contained in section V.B.1.a. of the NPRM. 3. High Ozone Season Evaporative and Running Loss Emission Testing EPA also proposes that the FTP, with some modifications, be used for the measurement of evaporative emissions. This test procedure, however, is currently being revised. The proposed revision was published at 55 FR 1914 on January 19, 1990 and the final procedure is projected to be issued in early 1992. The proposed procedure would improve the accuracy and scope of the evaporative emission test and incorporate a running loss emission test. EPA also proposes that the procedure be modified for reformulated gasoline vehicle testing to provide for the sampling and analysis of benzene emissions and to include a seven-day diurnal cycle. These modifications were discussed in section V.B.1.b. of the NPRM, and the reader is referred to that discussion for more detail. As discussed in the section on modeling above, EPA proposes to use average temperatures for the ten highest ozone days from June through September in the 25 serious and worse ozone non-attainment areas to determine the temperatures to be used in evaporative and running loss emission testing. Using the highest temperatures experienced on ozone non-attainment days would overstate the magnitude of evaporative emissions experienced in-use and therefore would distort and reduce the in-use effectiveness of emission control strategies. For Class C areas, the average low and average high temperatures for the ten highest ozone days were 71.6 deg. F and 91.6 deg. F, respectively; for Class B areas, the corresponding temperatures were 69.4 deg. F and 94.0 deg. F. The differences between Class B and Class C temperatures are not large enough to alter evaporative and running loss emissions significantly; EPA therefore proposes that the Class C temperatures be used in evaporative and running loss emission testing. 4. High Ozone Season Refueling Emission Testing There is currently no Federal Test Procedure for refueling emissions. However, in 1987 a test procedure for certifying onboard refueling controls was proposed by EPA (52 FR 31162, August 19, 1987). EPA proposes that the proposed version of the onboard test procedure be utilized for refueling emission measurement. EPA further proposes that if procedures are promulgated to certify onboard refueling controls that are different from the proposed procedures, then the modified version would apply. Because refueling emissions' contribution to total baseline emissions is low, and because refueling emissions are more easily modeled than other types of emissions, the Agency considers it unlikely that fuel suppliers would test for refueling emissions. Because certain areas where reformulated gasoline will be sold have Stage II refueling controls, and all moderate and worse ozone nonattainment areas will have Stage II by 1995, EPA proposes that the actual emission result from any refueling testing performed be adjusted downward by 86 percent (see section II discussion of Stage II effectiveness). In addition, the air toxics sampling requirements proposed for evaporative and running loss emissions are proposed for refueling emissions, as well. 5. Fuel Parameter Measurement Precision One source of error in testing programs as described in this section is uncertainty in the composition and properties of the fuels being tested. Since fuel testing is far less expensive than vehicle emission testing, EPA believes it is highly cost effective to measure the fuels' properties multiple times to reduce the uncertainty in projected emissions due to uncertainty in fuel composition. As a result, EPA proposes that, at minimum, the properties defined in Table III-1 be measured a sufficient number of times to reduce the 95 percent confidence interval, as calculated using a standard t-test, to the tolerances defined in Table III-3. Table III-3.--Fuel Parameter Measurement Tolerances for Fuel Certification by Vehicle Testing Measurement tolerance (95% confidence Parameter interval) API Gravity, deg. API +/-0.1 Sulfur, ppm +/-5 Benzene, vol percent +/-0.05 RVP, psi +/-0.08 Octane, (R+M)/2 +/-0.1 IBP, deg. F None 10%, deg. F +/-3 50%, deg. F +/-3 90%, deg. F +/-3 End Point, deg. F +/-5 Total oxygenates, vol percent +/-0.2 Total aromatics, vol percent +/-0.5 Total olefins, vol percent +/-0.3 Total saturates, vol percent +/-1.0 EPA recognizes that fuels used in vehicle testing may differ significantly in composition in terms of specific chemical species while appearing to be identically composed in terms of broad chemical families. The Agency further recognizes that such compositional differences may result in emission effects, and that such differences may confound or be used to "game" testing programs. For example, the candidate fuel might have a hydrocarbon content with naturally low emissions while the candidate-baseline fuel might have a hydrocarbon content with naturally high emissions, independent of the parameter in question. In such a case, emission effects determined through testing would not be the sole result of the parameter in question. Therefore, EPA proposes that the composition of fuels used in vehicle testing be fully characterized by gas chromatography or equivalent analysis methods (following the methodology used in the Auto/Oil study) and the results submitted to EPA. Petitioners would have the option of either submitting these results for approval prior to beginning vehicle testing or including these results in their completed petition. However, in either case, EPA would retain the authority to require modifications to the test fuels to ensure that their compositions are appropriate. Hence petitioners electing not to obtain prior approval of their fuel compositions would assume the risk that EPA may require modifications to the petitioner's test fuels upon receipt of the completed petition, thereby invalidating any testing the petitioner may have completed. The Agency requests comment on this proposal. D. Vehicle Selection General Requirements Section 211(k)(3) of the CAA specifies that the required reductions in VOC and toxics emissions are to be measured from the emissions of those pollutants from "baseline vehicles." Section 211(k)(10)(A) defines baseline vehicles as representative model year 1990 (MY-90) vehicles. In the interest of simplifying test fleet vehicle selection, EPA proposes to allow the use of not only MY-90 vehicles, but also closed-loop MY-89 through MY-91 vehicles which are technologically equivalent (e.g., have adaptive learning) and are representative of MY-90 vehicles in terms of any vehicle characteristics which could affect emission performance and behavior. In addition, EPA requests comments on an option where 1985 through 1988 model year vehicles could be substituted for their 1990 model year counterpart if the 1990 version had an engine and exhaust system that was not different from the earlier model year versions in ways that could affect the emission performance of the vehicles (i.e., if the model's EPA emission certification data were "carried over" through the 1990 model year). This option would increase the availability of high-emitting test vehicles and thereby reduce the cost of vehicle test programs. One problem with this option is the possibility that "running changes" (changes in the engine or exhaust system which EPA considers, for vehicle certification purposes, not to affect emissions) may have occurred that affect the vehicle's response to fuel modification. EPA requests comments on the types of running changes which would be acceptable under this option and those which should disqualify a vehicle from the test program. Furthermore, EPA is proposing that heavy-duty gasoline vehicles need not be included in the test fleet. Given the overwhelming predominance of light-duty vehicles and light-duty trucks in the gasoline vehicle market, inclusion of heavy-duty vehicles in the test fleet would have an insignificant effect on the result of the vehicle test programs. Therefore, the added testing burden associated with heavy-duty engine/vehicle testing is not warranted. Another consideration in vehicle selection is the condition of the test vehicles. EPA believes that Congress intended that the required VOC and toxics emission reductions be achieved not only at certification but also in- use. In order for this to be true, the test vehicles' condition should be representative of that of in-use vehicles. Therefore, for the purposes of the reformulated gasoline program, representative vehicles would be defined as having not only a technology mix representative of the 1990 model year fleet (as described below) but also emission performance typical of the in-use emission performance of 1990 vehicles over their lifetime. In addition, such vehicles should have accumulated a minimum of 4,000 miles of service to assure break-in of engine and emission control system components. No further mileage accumulation requirements are being proposed at this time; however, EPA requests comment on the appropriateness of additional mileage accumulation requirements. While the goal is to test vehicles with emissions representative of in-use 1990 vehicle emissions, the actual in-use emission performance of 1990 model year vehicles over their time in service can only be predicted. Based on information in EPA's emission factors database 20 and MOBILE4.1, exhaust VOC emissions vary widely across the in-use fleet, with some vehicles emitting at levels more than 20 times the standard. Evaporative and running loss emissions also vary significantly, apparently due to the effects of component failure, poor maintenance, or tampering. Refueling emissions, which were not controlled on 1990 MY vehicles, are more a function of ambient conditions and fuel tank size than vehicle type. NOx emissions tend to vary much less than VOC emissions and essentially match the proportion of vehicles in each emitter group. Since exhaust CO and toxics emissions for the most part mirror exhaust VOC emissions, representative CO and toxics distributions should be obtained by obtaining a representative VOC distribution. EPA proposes that exhaust VOC emission performance be the primary basis for selecting vehicles for the test fleet. The Agency also proposes that evaporative emission performance be a secondary basis, which, as discussed below, would be handled through disabling key components of the evaporative systems on vehicles obtained through screening for exhaust emission performance. As discussed below, EPA proposes that the relative number of vehicles tested for the various emission types (exhaust, evaporative, running loss, and refueling) and the number of vehicles tested with various emission performance levels shall be based in large part on the contribution of each category to in-use emissions as estimated using MOBILE4.1 with an enhanced I/M program as defined in Section II. These estimates may change upon the introduction or update of the complex model. NOTE 20 EPA's Emission Factors Database on MICRO in the Michigan Terminal System (MTS) computer network system. 2. Vehicle Selection Criteria for Exhaust Emission Testing a. Categorizing test vehicles by emission performance. As discussed in the NPRM, it is the goal of EPA that the test fleet for emission testing have an emission performance which is representative of in-use emissions of 1990 MY vehicles. As a result, EPA proposed in the NPRM that the test fleet be divided into three exhaust VOC emitter subfleets (normal, high, and very-high and super). While EPA did not have information at that time demonstrating that vehicles from the different emitter groups would respond differently to fuel changes, EPA recognized that the potential existed and hoped that information would be forthcoming to support such a position. However, since the time of the NPRM, such information has not been forthcoming. Some data from the Auto/Oil test program as well as data from EPA's test program at ATL suggest that high, very-high, and super emitting vehicles may respond differently to some fuel changes than normal emitting vehicles, but this data does not allow for distinguishing between high, very-high, and super emitting vehicles. As a result, EPA proposes that the test fleet be divided into two exhaust VOC emitter subfleets consisting of normal emitters and all higher emitting vehicles. Based on the assumptions made for the simple model and the consequent results from MOBILE4.1, EPA projects that the representation and in-use emission impact of each emitter group would be as expressed in Table III-4. EPA requests comments on this approach for determining test fleet composition. Table III-4.--Emitter Groups and In-Use Emissions Emission fraction Fraction of in- use Emitter group fleet VOCs NOx Normal: >2xTHC Standard (>0.82 g/mi) 0.82 0.50 0.81 All High or worse: >/=2xTHC Standard (>/=0.82 g/mi) 0.18 0.50 0.19 In order to simplify the process of obtaining a test fleet while still maintaining statistical confidence in the test results and assuring representativeness of the test fleet, EPA is considering and requests comment on a second option for test vehicle selection. Under this option, the test vehicles would not be subdivided into emitter classes, but the emission performance of the test fleet as a whole would be required to be representative of the in-use fleet. Specifically, under this option, EPA proposes that the test fleet have an average VOC (NMHC) emission rate of between 0.4 and 0.6 g/mi on the indolene test fuel. In this way, the test fleet would have an average emission rate generally representative of the average in-use exhaust emission rate of 0.46 g/mi (NMHC) for 1990 MY vehicles as predicted by MOBILE4.1 when the same inspection and maintenance program assumptions are made as were discussed in Section II.A.3 for the simple model. Under this option exhaust VOC emission rates for all vehicles in the test fleet would not exceed 1.6 g/mi. This restriction would reduce the potential that test programs would be based on unusual test fleets composed primarily of very clean vehicles with a small number of extremely high emitting vehicles (super emitters) to arrive at the average in-use emission rate. Since no fixed number of higher emitters and potentially fewer higher emitters could be tested under this option, it offers more flexibility for selecting vehicles for a test fleet than the option proposed above in which the test fleet would be subdivided into two emitter groups. At the same time, EPA believes that this option may provide greater statistical confidence in the test results than the option proposed above, since the data from all vehicles can be treated as a single sample instead of dividing the test fleet into separate subfleets. This assumes, however that the two emitter groups do not respond in a substantially different manner to fuel changes. If higher emitting vehicles do respond differently to fuel changes, then there is the chance that some emission effects peculiar to vehicles with these emission performance levels may not be discovered. While EPA acknowledges this limitation, the data currently available is not adequate to draw a clear distinction between the emission effects on normal and higher emitting vehicles for the fuel parameters tested to date. Furthermore, the additional burden on test fleet selection caused by requiring the testing of a large number of higher emitting vehicles may be less warranted if more stringent inspection and maintenance program requirements are imposed than those assumed for this rulemaking, since higher emitters would be less likely to be found in the in-use fleet. EPA requests comments on whether higher emitters are likely to respond in a substantially different manner to fuel changes than normal emitters and whether this option would be more appropriate than the option proposed above for determining test fleet composition. Requiring a test fleet with a certain emission performance distribution necessitates that vehicles be obtained which have the desired emission performance. Vehicles with such emission characteristics could be obtained either directly from the in-use fleet or through intentional disablement of emission control systems of normal emitting vehicles. EPA proposes that vehicles for reformulated gasoline testing be obtained by randomly selecting vehicles with the desired emission performance from the in-use fleet and testing those vehicles in their as-received condition. This method would help assure that the vehicles selected for testing would have emission control problems which would be truly representative of in-use emission problems. However, the Agency also requests comment on an option whereby normal emitting vehicles would be intentionally disabled to produce higher emitting vehicles (high, very-high, and/or super emitting vehicles). Such an option may be able to provide some benefits in terms of reduced test variability, thereby increasing the statistical confidence in the test results. However, the Agency has concerns that it may be difficult to disable vehicles in a manner that would be representative of in-use vehicles. EPA requests comment under this option on ways to ensure that intentionally-disabled vehicles accurately reflect the emission effects of fuel changes in the in-use fleet. Regardless of the vehicle selection methodology chosen, prescreening of test vehicles' emission performance would be necessary to place them in the appropriate emitter group. EPA proposes that prescreening tests be conducted using EPA vehicle certification fuel (Indolene) over the Federal Test Procedure since these were the conditions which were used to generate the data for the in-use emission distribution. EPA also proposes allowing prescreening tests to be performed using the Clean Air Act baseline gasoline and/or the I/M 240 test procedure. Results from such tests can be correlated with FTP test results with Indolene (as outlined in proposed Sec. 80.62 of the accompanying regulations). b. Technology representation of the emitter group subfleets. The Clean Air Act requires that representative model year 1990 vehicles achieve an emissions reduction when using reformulated gasoline compared to emissions when using a baseline gasoline. There were various engine and exhaust system technologies in use in 1990. To ensure that a fuel achieves the required emissions reductions when using reformulated gasoline, the vehicle technologies which should govern the selection of vehicles for the test fleet are those which are likely to impact the emission performance of a fuel in a vehicle. EPA proposed a number of options in the NPRM for how best to determine the technology representation in each emitter group sub-fleet, and the reader is referred to the NPRM for discussion of the various options. At this time, EPA proposes the option whereby the manufacturer is specified along with the four vehicle technology categories listed in Table III-5. This option provides greater assurance that the test fleet accurately represents the in-use fleet than do the other options discussed in the NPRM. In addition, EPA proposes that approximately 30 percent of the vehicles selected for each sub-fleet from Table III-5 be light-duty trucks (LDTs) to reflect the representation of LDTs in the light-duty vehicle fleet. EPA believes that the benefits of providing flexibility in determining the selection of LDTs for the test fleet outweigh the benefits of accuracy achieved by specifying which vehicles from Table III-5 should be LDTs. EPA is evaluating whether the technology classifications used in Table III- 5 are necessary and appropriate and whether other classification methods should be added or substituted. EPA requests comment on the proposed categories and technological distinctions used and whether others would be more appropriate. Vehicles would be added to the test subfleet(s) in the order in which they appear in the table. If more vehicles would be included in a test subfleet than are represented in Table III-5, then the additional vehicles would be selected starting over with vehicle number one. Table III-5.--Test Vehicle Characteristics Vehicle Fuel Air Tech. No. system Catalyst injection EGR group Manufacturer 1 Multi 3W No Air EGR 1 GM. 2 Multi 3W No Air NoEGR 2 Ford. 3 TBI 3W No Air EGR 3 GM. 4 Multi 3W No Air EGR 1 Honda. 5 Multi 3W+OX Air EGR 4 Ford. 6 Multi 3W Air EGR 5 Toyota. 7 Multi 3W No Air NoEGR 2 GM. 8 TBI 3W No Air EGR 3 Chrysler. 9 Multi 3W No Air EGR 1 Ford. 10 TBI 3W Air EGR 6 GM. 11 TBI 3W+OX Air EGR 7 Chrysler. 12 TBI 3W No Air NoEGR 8 Honda. 13 Multi 3W No Air EGR 1 Toyota. 14 Multi 3W No Air NoEGR 2 Chrysler. 15 TBI 3W No Air EGR 3 Ford. 16 Carb 3W+OX Air EGR 9 Toyota. 17 Multi 3W No Air EGR 1 GM. 18 Multi 3W+OX Air EGR 4 GM. 19 Multi 3W No Air EGR 1 Nissan. 20 Multi 3W No Air NoEGR 2 Mazda. 21 TBI 3W No Air EGR 3 GM. It must be pointed out that the vehicle technology distribution discussed above would apply to each of the emitter group subfleets separately. Failure to have such a requirement could result in each subfleet being composed of vehicles which would not be representative of the in-use fleet as a whole, and thereby allow gaming of the test program. The results from each subfleet would be used independently of each other, which could result in inappropriate test results. However, if EPA adopts the option in which the test fleet is not divided into emitter group subfleets, then the vehicle technology distribution discussed above would apply to the test fleet as a whole. c. Number of test vehicles. Exhaust emissions represent the emission category most likely to be tested due to the number of fuel parameters which may affect exhaust emissions. Furthermore, a much greater variability in the fuel effects would be expected with exhaust emissions than with the other emission types due to the complexity of combustion chemistry and engine behavior. As a result, statistical uncertainty in the exhaust emission reduction estimate would have the greatest impact on the uncertainty in the overall test result. For this reason, an adequate number of vehicles should be tested for their exhaust emissions. In order to keep statistical uncertainty reasonably low while at the same time limiting the test fleet size to reasonable levels, EPA proposes that the test fleet for exhaust emissions consist of a minimum of 20 vehicles. The basis for a 20-vehicle test fleet is discussed more fully below. In addition, the Agency proposes that replicate testing be performed and reported to verify that the emission results obtained in the first set of tests are repeatable. The following replicate testing requirements would apply to emissions of each pollutant listed in Table III-6 and would apply independently to each vehicle tested, in addition to the requirements outlined elsewhere regarding vehicle testing. In recognition of the costly nature of testing for toxic emissions (adding toxics measurement increases the cost of a single test by roughly 50 percent), each vehicle-fuel combination would only be tested once for toxics. EPA believes that this may not unduly reduce confidence in the effect of the given fuel parameter on toxics emissions, because toxic emissions are dominated by benzene emissions, which appear to be well understood and to be primarily a function of fuel benzene and non-benzene aromatics and total VOC emissions. Following replicate testing, the average of the two test results shall be used if emissions for the second test differ from emissions for the first test by less than the percentage shown in Table III-6. If emissions for the second test differ from emissions for the first test by more than the percentage in Table III-6, then a third test shall be performed. If the results of one of the three tests differs by more than the percentage in Table III-6 from the average of the other two, then the average of the two closest test results shall be used. If not, then the average of all three tests shall be used. If a third test was necessary because of variability in VOC or NOx emissions, then toxics would also be measured during this third test and the results averaged with the first toxics measurement unless the VOC and NOx results from the first test were discarded, in which case only the results from the third test would be used. Table III-6.--Replicate Testing Requirements Allowable percentage Pollutant difference VOC 10 NOx 10 EPA further proposes that the distribution of the test fleet among the emitter groups be defined so as to minimize statistical uncertainty. This is most straightforward for VOC emissions, since the emitter groups were based on VOC emission performance. (NOx emission levels in the in-use fleet tend to follow a normal distribution making it more difficult to distinguish unique groups within the in-use fleet.) Since toxics emissions are strongly dependent on VOC emissions, EPA is reasonably confident that the uncertainty in toxics emissions would be minimized when the uncertainty in VOC emissions are minimized. In the case of NOx emissions, however, this is not necessarily the case. Emission changes often differ between VOC and NOx emissions, and this is expected to translate over to the effect of fuel changes on emissions as well. Nevertheless, statistical uncertainty in the measurement of fuel changes may not differ significantly between VOC and NOx emissions. At this time, EPA can not be certain that optimizing the test fleet to minimize the uncertainty in VOC emission measurement will or will not minimize the uncertainty for NOx emissions. Due to this lack of certainty on how best to optimize the test fleet for statistical confidence in NOx emissions, EPA proposes to focus on VOC emissions when distributing the test fleet among the emitter groups. The uncertainty associated with VOC emissions is quite complex. The EF database and additional testing by EPA at ATL indicate that higher emitting vehicles tend to have significantly greater variability in emission effects than normal emitting vehicles. As such, in order to minimize statistical uncertainty, a proportionately greater number of higher emitting vehicles (relative to such vehicles' contributions to the in-use emissions inventory) should be tested than normal emitting vehicles. Based on EPA's experience during the ATL test program, however, it appears that a substantial portion of the variability in the emission performance of not only high emitting vehicles, but also normal emitting vehicles is due to vehicles exhibiting trends in emissions in each succeeding test unrelated to fuel changes or to vehicles with highly unstable emission performance, even when tested on the same fuel. EPA believes that by stabilizing vehicle performance before testing for emission effects, the variability of both normal emitting and higher emitting vehicles would be reduced to levels below those observed during the EF and ATL test programs without significantly affecting the representativeness of the test vehicles to those in the in-use fleet. Further, EPA believes that such pre-screening and stabilization would lower the variability of higher emitting vehicles to the level of variability for normal emitting vehicles. Since the contribution of normal emitting and higher emitting vehicles to total VOC emissions is approximately equal (as shown in Table III-4), EPA believes that vehicle testing programs should include equal numbers of normal and higher emitting vehicles. This emissions breakdown is based on the definition of enhanced I/M described in section II.A.3.v. above. Since these independent test programs will be used to augment the complex model and not the simple model, the distribution between normal and higher emitters here should be consistent with the emissions distribution utilized in developing the complex model later this year. Therefore, should EPA propose a different emissions distribution for the complex model, EPA would also propose that this new distribution also be utilized for testing purposes. EPA further proposes that the test fleet used in vehicle testing consist of no fewer than 20 cars, distributed as discussed above between normal and higher emitting vehicles. The initial Auto/Oil test program (as reported in Technical Bulletin #1), which consisted of 20 vehicles, achieved 95 percent confidence intervals for emission effects of approximately plus or minus two percentage points. This level of statistical confidence was achieved by testing a large number of fuels (i.e., 8 pairs of fuels measuring the same emissions effect), testing only normal emitting vehicles, and including only low-mileage, properly maintained vehicles in their test fleet. Since the proposed test program outlined in this section would require testing on fewer fuels, and would require the inclusion of vehicles with a larger range of emission performance and potentially greater emissions variability, EPA anticipates that such test programs would not be able to maintain equivalent levels of statistical confidence. However, by implementing programs to stabilize the emission performance of test vehicles prior to including them in the test program, EPA believes that the standard deviation in the test results can approach those achieved in the Auto/Oil test program. Since the size of emission benefits identified through vehicle testing could easily be as small as five percent, a test fleet of 20 vehicles should be maintained to reduce the relative impact of sampling uncertainty to acceptable levels. EPA therefore proposes this test fleet composition and further proposes that larger test fleets have proportionately larger emitter group sub-fleet sizes. To improve the statistical power of test program results, EPA proposes and requests comment on an option whereby NOx emission effects for all vehicles included in a test program would be analyzed as a single population regardless of the VOC emission level of the vehicles. Given that the effect of fuel changes on NOx emissions may not be significantly different between vehicles from different VOC emitter groups, this may be a more appropriate means of analyzing the NOx data. While it will not improve the statistical confidence in the VOC emissions result, it should improve the statistical confidence in the NOx emission result. Under the option discussed in section 2.a. whereby test programs would consist of a set of vehicles with an average VOC emission rate of 0.4-0.6 grams/mile, however, VOC emission effects would be analyzed as a single population to improve the statistical confidence in the VOC test results as well as the NOx test results. As discussed above, EPA's ATL test program indicated that for some vehicles, emissions decreased with each subsequent test, independent of fuel changes. This trend appears to contribute significantly to the high degree of variability found in this test program. Therefore, EPA proposes and requests comment on the following option to improve the confidence of test results. Under this option, all vehicles would be tested in their in-use condition and would be required to demonstrate consistent exhaust emission performance, using a reference fuel that includes deposit-control additives, before being tested to determine emission effects of fuel parameters. An alternative solution to this problem might be to intentionally disable elements of normal-emitting vehicles' emission control system to produce higher emitting vehicles that would behave more consistently. However, the Agency is concerned that intentionally-disabled vehicles may not adequately reflect the emission effects of fuel modifications on in-use high and very high/super emitters. A final technique considered by the Agency to reduce test result variability involves increasing the required size of the test fleet. EPA requests comment on these and other techniques to reduce the variability of emission effects determined through vehicle testing and on the appropriateness of the levels of variability permitted. As data regarding the frequency and emission effects of specific vehicle problems becomes available, the Administrator may choose to modify the required minimum composition of the test fleet to assure the inclusion of representative high and super-emitting vehicles. The Administrator may also choose to modify the required minimum test fleet composition if the intentional disablement approach is chosen. These issues will be re-examined during the rulemaking process for the complex model. To better optimize the test program to the needs of the particular fuel parameter, the Administrator may approve a request to waive certain of the requirements proposed in this section, specifically those relating to the number of test vehicles and their distribution among the emitter groups. Any such waiver would have to be obtained in advance. A request for such a waiver should include an adequate justification for the requested change, including the rationale for the request and supporting data and information. With regard to the emitter group distribution, the petitioner should demonstrate that the contribution of normal and higher emitting vehicles to the total in-use emission inventory is different than that shown in Table III-4. d. Maximum required size of the test program. In order to limit the testing burden, while at the same time maintaining the greatest degree of flexibility and permitting the greatest degree of optimization of the test program for the parameter in question, EPA has proposed in a number of places throughout Section III that if the petitioner can provide EPA with a rationale and supporting data they be permitted to deviate from the requirements otherwise specified. As long as EPA can be assured that equivalent statistical confidence is being achieved in the test program, the overall test burden can be lower than that specified, and in fact EPA anticipates that requests to optimize and reduce the overall test burden will comprise the majority of the requests to deviate from the specified requirements. However, in some cases, the petitioner may opt to take on a greater testing burden in order to better evaluate the fuel parameter or additive. While EPA will not prohibit a petitioner from taking on a greater testing burden, EPA proposes that in no case are more than 550 valid vehicle tests of exhaust emissions to be required of the petitioner by EPA to determine the exhaust emission effect. However, if the test variability is so high that little confidence could otherwise be placed in the test results, then EPA proposes that we retain the flexibility to increase the maximum required number of tests by 100. If reasonable confidence in the results from a test program of the magnitude being considered here is to be achieved, the standard deviation about the mean percent change in emissions between the candidate and candidate baseline fuels for the various vehicles in the test fleet should be less than 15 percentage points (e.g., if the mean measured effect was a 10 percent reduction, one standard deviation would consist of a range in the percent reduction of from -5 to 25). If the two optional fuels are tested, then the above calculation would be performed for both the low emission fuel and the high emission fuel, as well as the candidate baseline fuel. Separate standard deviations for VOC and NOx would be calculated for each of the three fuel pairs. The three standard deviations for each pollutant would then be averaged for comparison with the 15.0 percentage point limit. Testing performed under the Auto/Oil test program showed a standard deviation of 12-13 percentage points, so a limit of 15 percentage points should be readily achievable.21 Without any attempt to reduce testing variability (i.e., by pre-testing on a standard baseline fuel), EPA found standard deviations ranging from 15 to 18 percentage points in its in-use emission factors test program, where the vehicles are found in all degrees of maintenance. NOTE 21 Memorandum: "Vehicle Exhaust Testing Standard Deviations," From Steve Mayotte, Chemical Engineer, Regulation Development and Support Division, to Richard A. Rykowski, Senior Project Manager, Regulation Development and Support Division, March 11, 1992. Since applying a limit on the maximum standard deviation separately to the variability in both VOC and NOx emissions could result in the invalidation of all of the results from a test program even though the standard deviation for only one of the pollutants is marginally above the limit, EPA proposes and requests comment on a requirement that standard deviations for VOC and NOx be averaged together and be less than 15 percentage points. EPA further proposes that for each test for which all pollutants, including toxics, are measured, the maximum number of required tests would be reduced by four sevenths of a test (rounded to the nearest whole number of tests) to take into account the increased cost associated with measurement of toxics emissions. The maximum number of tests described above is roughly equivalent to those involved with a 20 vehicle test program with three measurements of VOC and NOx emissions and two measurements of toxics per fuel-vehicle combination on a total of six test fuels (the two optional fuels described in this section could increase this number to eight). As indicated earlier, EPA believes that statistically valid results can be achieved within these testing limits. EPA is also committed to keeping these test costs below $1 million (in today's dollars) insofar as the above statistical considerations can be satisfied. EPA believes the above test limits would do so. EPA requests comments on both the statistical validity and cost of these test limits. 3. Vehicle Selection Criteria for Evaporative and Running Loss Emission Testing a. In-use emission performance. In order to ensure that test vehicles have evaporative and running loss emission performance typical of the in-use emission performance of 1990 vehicles over their lifetime, EPA proposes that the test fleet include not only vehicles which have normal evaporative and running loss emissions, but also vehicles having high evaporative and running loss emissions. Since the causes of high evaporative and running loss emissions are far fewer and far better understood than those of exhaust emissions, obtaining high emitters from the in-use fleet would not be necessary to develop a representative test fleet. EPA therefore proposes that in-use high emitters need not be obtained unless the Agency later finds them necessary to better represent in-use emissions. Instead, EPA proposes that high emitters may be obtained through intentional disablement of the evaporative systems of normal emitting vehicles. This approach would permit vehicles selected for evaporative and refueling emission testing that have normal emissions to be the same ones that are tested as high emitters following disablement of their emission control systems. The disablements would be those which are representative of the evaporative emission control problems of tampered and poorly maintained vehicles in the in-use fleet. These emission control problems primarily involve inadequate purge of the evaporative emission canister and missing or defective gas caps. The Agency proposes that these problems be modeled by disconnecting the canister and removing the gas cap. The proportion of "fail" vehicles with these intentional disablements would reflect the relative emission contribution of vehicles with these two emission control problems to the in-use emission inventory assuming an operative enhanced I/M program. At the present time EPA proposes that when testing vehicles in a "fail" condition, 25 percent of the test vehicles have their canisters disconnected and 75 percent have their gas caps removed. While 42 percent of in-use "fail" vehicles would be expected to be disabled in both manners, emissions from such vehicles are not significantly greater than for vehicles with only their gas caps removed. As an alternative to testing both properly operating and disabled vehicles as described above, EPA also proposes that testing of only normal emitting vehicles be permitted, with the emissions of the high emitters modeled. Evaporative and running loss emissions are fairly well understood, especially if they are uncontrolled as is the case if the evaporative canister is removed and/or if the gas cap is removed. As a result, the testing burden could be significantly reduced if emissions from these vehicles were modeled instead. b. Vehicle technology. As discussed in the NPRM, EPA proposes that vehicles selected for exhaust emission testing should be adequate to represent evaporative emission control technology as well. c. Number of test vehicles. As discussed in the NPRM, while it is important that evaporative and running loss emissions be determined with a high degree of certainty, the variance in emission results with these emissions is expected to be low since the relationship between these emissions and their causes is relatively simple, well-behaved, and consistent. As a result, fewer vehicles need to be tested for such emissions than for exhaust emissions to achieve comparable confidence intervals. Therefore, EPA proposes that a minimum of 10 normal emitters be tested. These vehicles are to be the first 10 vehicles listed in Table III-5. If "fail" vehicles were to be tested, then the same 10 vehicles would also be tested in a disabled condition according to the proportions discussed in section a. above. 4. Vehicle Selection Criteria for Refueling Emission Testing EPA proposes that vehicles for refueling emission testing be selected from the test fleet used for exhaust emission testing, and that just the first five vehicles listed in Table III-5 be considered adequate. The relationship between refueling emissions and their causes is also very simple, well- behaved, and consistent from vehicle to vehicle. As a result, fewer vehicles need to be tested for such emissions than for other emission types to achieve comparable confidence intervals. For additional discussion of vehicle selection criteria for refueling emission testing, the reader is referred to section V.C.4 of the NPRM (56 FR 31201). E. Use of Test Results in Fuel Certification The manner in which the test data is to be analyzed should be consistent with the goal that the emission benefits from reformulated gasoline be realized in-use. Therefore, EPA proposes that for each pollutant, augmentation of the models with vehicle testing results reflect (1) an appropriate vehicle technology distribution and (2) the contribution of each category of emissions to total vehicle emissions. The vehicle selection criteria discussed in the previous section are intended to provide test data which reflect an appropriate technology distribution (as outlined in Table III-5). In order to weight appropriately the contribution of each emission category to total vehicle emissions, EPA proposes the use of the emission category weightings used in EPA's MOBILE4.1 model to weight all of the different emission categories for use with the testing option. These weightings represent the Agency's most complete and accurate estimation of the relative contribution of each emission category to in-use emissions and have been used to determine baseline emissions. The thirteen different categories for both VOC and toxics emissions include: normal exhaust VOC emitter, high exhaust VOC emitter, and very-high/super exhaust VOC emitter; pass, purge fail, and pressure fail for hot soak, diurnal, and running loss; and refueling. The three NOx emission categories include normal exhaust VOC emitter, high exhaust VOC emitter, and very-high/super exhaust VOC emitter. EPA proposes that the following method be used to determine a fuel's total emission effects for fuel certification. First, the emission reduction in each emission category due to the parameter in question would be determined separately for each pollutant through vehicle testing. In order to accomplish this, the test data would be manipulated in the following manner separately for each fuel tested. For exhaust emissions, EPA proposes that: (1) an average emission rate be determined separately for the vehicles within each emitter class within each of the applicable vehicle technology groups on each fuel and that these average emission rates be used to calculate the average percent reduction in emissions for each technology/emitter group. EPA proposes that these percent reductions be weighted together based on the sales contribution of each technology group to the 1990 fleet. Furthermore, EPA proposes that for normal emitters the percent reductions of each technology group also be weighted based upon the average base emission rate of each of the technology groups, and that these emission rates be those which have been determined by EPA through testing on Indolene in EPA's emission factor (EF) test program. The EF data base does not contain information on toxic emissions. However, since exhaust toxic emissions tend to be roughly proportional to exhaust VOC emissions, the weightings developed for VOC emissions are assumed to also be valid for toxic emissions. A similar emissions weighting technique, though technically more accurate, is not feasible for high or very high and super emitting vehicles at this time because of insufficient data to distinguish the average emission rates among the vehicle technology groups. The sales fractions, average emission rates, and overall weighting factors for each of the nine vehicle technology groups for normal emitting vehicles are shown in Table III-6. If one or more of the technology groups is not represented in the test fleet, the weighting factors for the technology groups which are represented in the test fleet must be renormalized to total 1.0. Table III-6.--Vehicle Technology Group Weighting Factors Normal exhaust Normal emission vehicle rates weightings Sales VOC Tech /1/ and group fraction VOC NOx toxics NOx 1 0.323 0.278 0.519 0.336 0.300 2 0.210 0.228 0.570 0.180 0.215 3 0.209 0.230 0.479 0.180 0.179 4 0.105 0.435 0.918 0.171 0.173 5 0.077 0.179 0.389 0.052 0.054 6 0.022 0.200 0.460 0.017 0.019 7 0.021 0.389 0.613 0.030 0.023 8 0.017 0.278 0.583 0.017 0.017 9 0.016 0.285 0.712 0.017 0.020 /1/ Note that for high and very-high and super emitting vehicles, the sales fraction represents the weighting factor for all pollutant types. Once the exhaust emissions have been weighted based upon the vehicle technology categories to determine the average percent reduction for each emitter group, EPA proposes that these percentages be weighted together based upon the contribution of each emitter group to total in-use exhaust emissions as estimated by EPA's EF database and MOBILE4.1. Once again, due to a lack of data for toxics emissions, the value for VOC emissions will be assumed to apply. These emitter group weighting factors are shown in Table III-7. Table III-7.--Emitter Group Weighting Factors for Exhaust Emissions VOC Toxics NOx Normal 0.52 0.52 0.82 High 0.21 0.21 0.11 Very-High and Super 0.27 0.27 0.07 For evaporative and running loss emissions, EPA proposes that the average emission rate be determined separately for both pass and fail vehicles, and that these average emission rates be used to calculate the average percent reduction in emissions for the emitter group. EPA proposes that these percent reductions be weighted together based on the relative contribution of the pass and fail vehicles to total in-use evaporative and running loss emissions. These weighting factors, based upon MOBILE4.1 data, are shown in Table III-8. Since there are no vehicle technology classes or emitter group classifications for refueling emissions, the average percent reduction for refueling emissions would be based merely on the average emission rates from the vehicles tested. Table III-8.--Emitter Group Weighting Factors for Evaporative and Running Loss Emissions Hot Running soak Diurnal loss Pass 0.29 0.29 0.41 Fail 0.71 0.71 0.59 Once the emission effects for each pollutant type are determined, they would be modified to take into account any dilution or interactive effects determined through testing (as discussed in sections III.B.5 and III.B.6.) and used to modify the appropriate equations in the emission model. The determination of these effects would follow the procedure described above. The candidate fuel's total emission performance for VOC, toxics, and NOx would then be determined through use of the model as modified with vehicle testing results. The model would weight the emission effects to reflect emission values for each emission category and each pollutant type based on the distribution used by MOBILE4.1, thereby assuring that emission reduction estimates reflect in-use conditions. Finally, the total vehicle emission effects from the candidate fuel would be compared to the applicable emission standards to determine whether the standards would be met by the candidate fuel. Confidentiality of test data and exclusive rights to the effects of parameters determined through vehicle testing were discussed in section III.A.6. EPA proposes that if confidentiality and exclusive rights are not granted, the Agency publish the augmented complex model equations based on emission effects as determined through testing. EPA requests comment on this proposal. F. EPA Confirmatory Testing and Fee Schedule EPA proposes that fuel producers perform the certification testing and that EPA confirm the accuracy of the test results and on that basis certify the reformulated gasoline, if appropriate. However, EPA proposes that the Agency reserve the right to observe and monitor the progress of test programs and if deemed necessary to perform some confirmatory tests of its own to assure the validity of the test results and the emission performance of the reformulated fuel before allowing augmentation of the model. EPA anticipates that if any confirmatory test is performed that it will be of a limited nature and focused only on those aspects of the test program which are unexpected. Nevertheless, EPA reserves the right to charge fees of an amount sufficient to recoup all costs associated with such confirmatory testing, and the Agency reserves the right to do so. The exact nature of the methods used to calculate and collect such fees and any limit on such fees is deferred to the complex model rulemaking. IV. Fuel Certification Procedures Section 211(k)(4) of the Clean Air Act requires that EPA include in the reformulated gasoline regulations procedures under which the Administrator shall certify reformulated gasoline as complying with the reformulated gasoline requirements. The procedures are to provide that any person may petition the Administrator to certify a fuel formulation or slate of fuel formulations as meeting the applicable requirements. They also are to require that the Administrator act on any such petition within 180 days of receipt. In the event that the Administrator fails to act within that time, section (k)(4) provides that the fuel shall be deemed certified until the Administrator completes action on the petition. A. Emission Model Certification Procedures For any fuel for which the model is used to determine VOC or toxics emission performance and for which the fuel supplier plans to and in fact does produce reformulated gasoline that meets or exceeds the reformulated gasoline requirements on a per gallon or averaged basis (if the fuel supplier plans to meet the requirements on average, the "averaged" standards must be met), EPA proposes that such gasoline be deemed certified without submitting a petition to EPA unless EPA notifies the supplier otherwise. Because certification by the model is expected not to entail the exercise of expert judgment, but merely "plugging in" fuel parameter values, EPA does not believe that it must affirmatively approve a petition for certification for the fuel to be deemed certified in these situations. The Administrator would reserve the right to deny a fuel if it found a mistake to have been made. If a fuel supplier, however, plans to produce only oxygen and/or benzene credit-requiring gasoline, the fuel supplier must submit a petition for certification to EPA. To ensure that the credits will in fact be available for use as needed, the petition also should include evidence of an agreement with a supplying refinery, importer, or oxygenate blender (for oxygen credits only) who intends to produce credit-generating gasoline and who will transfer enough credits for the credit-requiring gasoline to meet the requirements for each of the averaging periods during which the fuel is sold. Because of the need for EPA to review these submittals, credit-requiring gasoline could not be deemed certified upon receipt of the submittals, even if the gasoline was certified using the model. EPA proposes that any certificate issued for a credit-requiring gasoline be conditioned on enough credits being obtained to demonstrate compliance with the reformulated gasoline requirements on average. If at the end of the compliance period sufficient credits had not been obtained, the certificate would be void ab initio, and penalties could be levied for all credit- requiring gasoline that had been produced or imported. It would not be a violation of the certificate for credits to be obtained from a source or sources different from that which had been identified in the certification application, or for the refiner or importer to produce or import credit- generating reformulated gasoline that generates enough credits to offset the credit-requiring reformulated gasoline that was produced, so that no credits were required. In the case of fuels for which credits were to be obtained from another refiner, importer, or oxygenate blender, the certificate would remain in effect for as long as the agreement with the other refiner, importer, or oxygenate blender lasted. This approach provides refiners with maximum flexibility in obtaining and selling credits subject to the constraints of the Act. The advantage of this approach is that credit-requiring gasoline could only be sold as reformulated gasoline if the necessary agreements for the production of a sufficient quantity of the credit-generating gasoline had been reached. EPA thus would have adequate assurance that gasolines would be produced in the right mix and volumes to meet the reformulated gasoline requirements on average. This approach would not ensure, however, that the right mix and volumes of gasoline would actually be supplied to each covered area. Other provisions proposed today will address these issues, however. (See Section VI.B.) B. Oxygenate demonstration For gasoline containing oxygenates (other than just MTBE) above 2.1 weight percent oxygen and up to their maximum wavier concentration or other constraints under the substantially similar requirements of section 211(f)(1) of the Clean Air Act, EPA proposes that testing be permitted to augment the simple model for NOx emission effects, unless the reformulated gasoline is certified under the complex model to be promulgated in 1993. For such fuels, VOC and toxic emissions would still be determined using the simple model. For any fuel for which oxygenate testing is used to determine the oxygenate's effect on NOx emission, EPA proposes that the fuel supplier petition EPA to revise the maximum oxygen content to allow concentrations of oxygenates other than MTBE up to 2.7% oxygen by weight, and that EPA grant such petition before the fuel containing the oxygenate may be certified and sold as reformulated gasoline. EPA believes that because of the many issues that must be properly addressed by a testing program for the test results to be considered reliable indications of emission performance, EPA will need to exercise its judgement to determine whether the fuel should be certified. To permit EPA to do so, the petition to revise the maximum oxygen content provisions of Sec. 80.41(e) must demonstrate the use of that oxygenate's effect on NOx emission through testing and would have to contain specific information describing the gasoline that was used as the baseline, the candidate oxygenate(s), the vehicles used (manufacturer, mileage; model year, model type, and vehicle identification number, the test facility, the number of tests and their results, both in the form of raw data and as summarized results incorporating the raw data and the statistical analysis methods utilized. The certification procedures outlined in this section require effective compliance surveys to ensure that the mix of gasoline supplied to each covered area meets the standards on average for reformulated gasoline. These surveys are discussed in section VI-D of this notice. V. General Enforcement Program Requirements A. Introduction Section 211(k)(5) of the Clean Air Act prohibits the sale of gasoline not certified as reformulated ("conventional gasoline") in certain ozone nonattainment areas ("covered areas") beginning January 1, 1995. Under the enforcement scheme proposed here, refiners and importers would be required to designate all gasoline as either reformulated or conventional; all reformulated gasoline would have to meet the certification requirements; and conventional gasoline would be marked to allow its detection if sold in a covered area and also labeled on the product transfer documentation as not for sale to ultimate consumers in a covered area. EPA is proposing that averaging be permitted in demonstrating compliance with certification requirements regarding oxygen and benzene content, and VOC and toxics emission performance. This averaging program would require that all reformulated gasoline produced at each refinery or imported by an importer (with certain exceptions) which does not meet the standards on a per-gallon basis must meet somewhat more stringent averaged standards over an averaging period. The reasons for and derivation of the more stringent averaging standards are explained in the section of this notice on certification requirements. Refiners choosing to average toxics and VOC performance standards would have to demonstrate compliance with the more stringent standards on average by each of its refineries. Compliance with the more stringent oxygen and benzene averaging standards also would be required on a refinery basis, but credits could be purchased from other parties to achieve compliance. Companies could decide whether to meet one or more of the standards on average and the rest on a per gallon basis. (The NOx and heavy metals requirements cannot be averaged.) Under the simple emission model being proposed for this rulemaking, VOC emission performance is a function of RVP standards and oxygen content. Therefore, each of these components must be met separately during the VOC averaging period by the refinery or importer to achieve VOC emission performance compliance. An oxygenate blender must meet the oxygen standards, either on a per-gallon basis or on average, for all reformulated gasoline blendstock for oxygenate blending received by the oxygenate blender. Reformulated gasoline will be designated on a per-batch basis as to which specific requirements are being satisfied on a per-gallon basis and which requirements are being averaged to meet the standards over an averaging period. Gasoline which meets the reformulated gasoline requirements on a per- gallon basis for all requirements will reduce record keeping and reporting responsibilities for refiners, importers and oxygenate blenders while simplifying enforcement inspections. If some requirements are met on a per- gallon basis and other requirements are averaged over the control period, the refiner, importer or oxygenate blender will have increased record keeping and reporting responsibilities. Oxygen and benzene credits could be transferred to other companies who may then use them to demonstrate compliance with the oxygen and benzene standards. Oxygenate blenders may create, transfer and use oxygen credits to demonstrate compliance with the oxygen standard. No credit trading program is being proposed for VOC and toxics emission performance. B. Program Duration By statute, the reformulated gasoline requirements for NOx, oxygen, benzene, heavy metals and toxics apply year round. The VOC standards apply only during the high ozone season. In a separate rulemaking involving gasoline volatility, EPA has proposed that the high ozone season be designated as June 1 through September 15 (56 FR 24248, May 29, 1991). For the reasons which are described in that proposed regulation, EPA believes June 1 through September 15 is the appropriate high ozone season for the reformulated gasoline program. Retail outlets and wholesale purchaser-consumers would be required to sell or use VOC-controlled reformulated gasoline beginning June 1. For all parties upstream of the retail outlets or wholesale purchaser-consumers, EPA is proposing that VOC-controlled standards be met beginning May 1. EPA believes that it is necessary for upstream parties to be required to meet the VOC- controlled standards on May 1 in order to ensure that gasoline meeting this standard is available at all retail outlets by June 1. EPA believes most retail outlets will be able to replace non-VOC controlled gasoline with VOC- controlled gasoline, and thereby meet the VOC requirements by June 1 through normal product turn-over as opposed to more difficult means (e.g., by purging storage tanks of non-VOC-controlled gasoline). In order for upstream parties to meet the VOC-controlled standards by May 1, reformulated gasoline meeting the VOC standard for each VOC-control region must be produced by refineries or imported by importers and shipped sufficiently in advance so that reformulated gasoline meeting the RVP standards will be supplied to terminals serving each covered area by May 1. C. Geographic Scope Effective January 1, 1995, only reformulated gasoline may be sold to ultimate consumers in any covered area. "Covered area" is defined in section 211(k)(10)(D) as follows: The 9 ozone nonattainment areas having a 1980 population in excess of 250,000 and having the highest ozone design value during the period 1987 through 1989 shall be covered areas for purposes of this subsection. Effective one year after the reclassification of any ozone nonattainment area as a severe ozone nonattainment area under section 181(b), such severe area shall also be a covered area for purposes of this subsection. While Congress did not clearly specify the meaning of "nonattainment area" in this definition, EPA interprets nonattainment area in this context to mean metropolitan areas with boundaries as follows: The MSA/CMSA, excluding such portion of an MSA/CMSA which does not violate the ozone NAAQS and does not contribute significantly to the MSA/CMSA's violation of the ozone NAAQS, and including those counties near (or contiguous with) the MSA/CMSA that are in violation of the ozone NAAQS and which contribute to the MSA/CMSA's violation of the ozone NAAQS. EPA believes that both the statutory language and the legislative history amply support this approach. Proposed Sec. 80.65 contains a detailed listing of the areas covered by the reformulated gasoline regulations. Textually, this view is consistent with the statutory presumption in title I, section 107(d)(4)(A) (iv) and (v), that the boundaries for Serious, Severe and Extreme ozone nonattainment areas be the relevant MSA/CMSA. Although a single metropolitan area (such as Los Angeles), may comprise more than one nonattainment area in the title I designation process, EPA believes that Congress did not intend that this possibility would affect the identity of the nine reformulated gasoline "covered areas" under section 211(k)(10)(D). The text of section 211(k)(10)(D) also clearly implies that Congress intended "covered area" to include, at a minimum, all existing Severe and Extreme ozone nonattainment areas meeting the population cut-off. This implication arises from the second sentence of section 211(k)(10)(D), which specifies that an ozone nonattainment area shall become a "covered area" one year after it is reclassified as a Severe ozone nonattainment area. Requiring that areas reclassified as Severe will become covered areas, while leaving any area originally classified as Severe out of the program indefinitely, would make little sense. Since designation under title I of ozone nonattainment areas could lead to a single metropolitan area (such as Los Angeles) containing more than one nonattainment area, Congress could not have intended for more than one portion of the same metropolitan area to be counted amongst the nine worst areas in section 211(k)(10)(D). Allowing such counting could potentially defeat Congress's clear intention that all Severe areas meeting the population cut-off be initially covered (if EPA designated the nine worst metropolitan areas under Title I to contain more than 9 Serious or Severe nonattainment areas). EPA therefore believes that Congress did not intend that this possibility could affect the identity of the nine reformulated gasoline "covered areas" under section 211(k)(10)(D). The legislative history also supports EPA's interpretation that Congress intended to include nine metropolitan areas. References to reformulated gasoline coverage for "nine cities" appear repeatedly and invariably in the floor debates on the conference bill,22 and Senator Durenberger cited "Los Angeles" in the singular as an example of "a nonattainment area." 23 The Conference Committee Report describes the reformulated gasoline provisions as mandating "[c]leaner, reformulated gasoline * * * in the nine cities with the most severe ozone pollution beginning in 1995." 24 No reference to any portion of a metropolitan area appears anywhere in the legislative history of this provision. In addition, both the House and Senate committee reports' discussion of title I ozone nonattainment areas contain a virtually identical list of cities by classification.25 Based on 1986-88 data, Los Angeles appears as a single entry in the Extreme category, and eight cities appear in the Severe category (with a design value cutoff of 0.19 parts per million). NOTE 22 See Cong. Rec. S16922, S16961-62 (Oct. 27, 1990); Cong. Rec. H12856, H12927 (Oct. 26, 1990). NOTE 23 Cong. Rec. S16923 (Oct. 27, 1990). NOTE 24 H.R. Rep. No. 101-952, 101st Cong., 2d Sess. 336 (October 26, 1990). NOTE 25 H.R. Rep. No. 101-490, 101st Cong. 2d Sess. 230 (May 17, 1990); S. Rep. No. 101-228, 101st Cong., 1st Sess. 35 (Dec. 20, 1989). The provision ultimately enacted references nine nonattainment areas with a minimum 1980 population of 250,000 and design values based on 1987-89 data. This was a change from the earlier versions of the legislation, which identified the reformulated gasoline covered areas as those with an ozone design value of 0.18 parts per million or above,26 or as those classified under title I as Severe or Extreme.27 This is most logically construed to show an intention to exclude certain areas by population, and to include an area or areas not previously covered. Based on then-available data and the lists in the committee reports, this change most reasonably should be read to exclude from coverage Muskegon, Michigan (a Severe area with a 1980 population of less than 250,000), and instead to include Hartford, Connecticut (a Serious area). Congress adopted the simplest means to reference this group of cities. NOTE 26 See S. 1630, Sec. 217; H.R. 3030, section 212(n). NOTE 27 Cong. Rec. H2839-4 (May 23, 1990). Section 211(k)(10)(D) also provides that effective one year after an area is reclassified as a severe ozone nonattainment area under section 181(b), that area will also be a "covered area." In addition, under section 211(k)(6) any other ozone nonattainment area will be included in the reformulated gasoline program at the request of the Governor of the State in which the area is located. D. VOC-Control Regions EPA is proposing that reformulated gasoline covered areas be grouped together into areas similar in scope to the classifications used in 40 CFR 80.27(a), the volatility control program for 1992 and later, termed in this proposal as VOC-Control Region 1 and VOC-Control Region 2.28 These classifications are similar, but not identical, to the American Society of Testing of Materials (ASTM) Class B and C areas. The proposed regulations specify the states which are included in each region. Since a covered area cannot have two standards, covered areas which are partially in VOC-Control Regions 1 and partially in VOC-Control Region 2 would be included in VOC- Control Region 1 which has a more stringent RVP standard, with the exception of the Philadelphia area.29 EPA believes that such a grouping would effectively satisfy Congressional intent that each covered area meet the reformulated standards, for reasons which are fully discussed in section VI below. NOTE 28 Under Phase II volatility regulations, the RVP standard for VOC- Control Region 1 (Class B) is 7.8 RVP and for VOC-Control Region 2 (Class C) the RVP standard is 9.0 psi. NOTE 29 The Philadelphia-Wilmington-Trenton (Philadelphia) area is located partially in VOC-Control Region 1 and partially in VOC-Control Region 2, but EPA is proposing that this area would be included in VOC-Control Region 2, because the portion of the area that is located in VOC-Control Region 1 is very small in comparison to the portion located in VOC-Control Region 2. The only portion of the Philadelphia area that is located in VOC-Control Region 1 is Cecil County, Maryland, which has a population of about 70,000 out of the total 6 million population for the Philadelphia area. EPA believes that Cecil County, Maryland will be supplied with reformulated gasoline from Baltimore, Maryland, however, which is classified as VOC- Control Region 1, thus providing Cecil County with more environmentally beneficial Region 1 gasoline. E. Effective Date Section 211(k)(5) makes the reformulated gasoline program effective January 1, 1995, in the nine originally covered nonattainment areas. Under section 211(k)(6)(A), the effective date of the program in any area which opts into the program is January 1, 1995, or one year after EPA receives the request to include the area in the program, whichever is later. Section 211(k)(6)(B) provides that EPA may extend the effective date of the program for one or more opt-in areas by up to three years if, upon petition, the Agency finds that there is an insufficient domestic capacity to produce reformulated gasoline. F. Simple Model vs. Complex Model EPA is proposing that the simple model be used for fuel certification and enforcement purposes until March 1, 1997 with the expectation that the complex model will be promulgated by March 1, 1993. In the event that the complex model is not promulgated as expected, EPA is proposing that the simple model be used an additional month for every month the complex model is delayed. G. Requirements for Refiners and Importers EPA believes that refiners' and importers' actions after producing or importing reformulated gasoline are integral to ensuring that reformulated gasoline meets the requirements and goals of the Clean Air Act. EPA proposes that they be responsible for sampling and testing each batch of reformulated gasoline for properties and characteristics to determine whether it meets its certification requirements. Once properly tested and found to be in compliance, the gasoline would be designated for certain regions and time periods (e.g., VOC-controlled gasoline must be sold to the ultimate consumers in the high ozone season, and in the proper VOC Region). The refiner or importer would create the product transfer documents containing this information. These documents will accompany the gasoline and direct it to its destination of ultimate use during the appropriate control period. The proper execution of these responsibilities will be instrumental to an environmentally-effective reformulated gasoline program. 1. Determination of Characteristics EPA proposes that the properties and characteristics of all reformulated gasoline produced by a refinery or imported by an importer be determined by sampling and testing before the gasoline leaves the refinery or import facility. Each batch of gasoline would be tested for each of the fuel properties relevant to determining whether the characteristics of the gasoline met the reformulated gasoline requirements. Prior to March 1, 1997, the test results for these properties could be used in the simple model to determine reformulated gasoline characteristics for accounting and compliance purposes. On or after March 1, 1997, the results would be used in the complex model, assuming the complex model is promulgated by March 1, 1993. The accuracy of reformulated gasoline test results is of critical importance for the reformulated gasoline program. For this reason, under the proposed rule each refiner and importer also would be required to carry out a program of independent sampling and testing of the reformulated gasoline that is produced or imported. Under one option, every batch of reformulated gasoline would be sampled and tested by an independent laboratory. Under an alternative option, every batch would be sampled by an independent laboratory. EPA would select up to ten percent of these samples which then would be analyzed by the independent laboratory. EPA is proposing confirmatory testing for several reasons. It would allow refiner or importer problems in sample analysis to be flagged by an independent company and corrected by the refiner or importer before the gasoline is shipped from the refinery or import facility or would allow the refiner or importer to adjust its books if the gasoline has already been shipped. Based on the existing gasoline transportation system, EPA expects that reformulated gasoline almost always will be combined after it leaves the refinery into a fungible mixture with reformulated gasoline from other refineries. Once a refiner's or importer's reformulated gasoline is so mixed, it is not possible to verify its test results to determine whether the gasoline met its certification requirements at the time of production or importation. In many cases, mixing will occur at the refinery or importer facility even before the gasoline is transferred to another party. Under this scenario, there would be no opportunity to look behind the refiner's or importer's reported test results (unless EPA inspectors happened to be at the refinery or import facility at the time the gasoline was produced or imported). An additional reason for confirmatory testing is that, without such a requirement, determining compliance on average would be based largely on the paper trail produced by a refinery or importer, without any corroborating evidence that such test results were actually obtained or that credits were actually created. Once the gasoline leaves the refinery or importer, it can only be tested for minimums and maximums, rather than for a particular refinery's or importer's specific compliance. Therefore, in an averaging program as compared to a mandatory per-gallon compliance program where gasoline can be tested at any point for per-gallon compliance, it becomes even more important that a safeguard against fraud be built into the system by being able to look behind the test results generated by the refinery or importer, especially in a program as complex as reformulated gasoline. EPA believes independent confirmatory sampling and testing will reduce the risk of bias or mistake by a refinery or importer facility laboratory. For example, a refinery's laboratory could develop a practice of retesting results which indicate gasoline is out of compliance, but not retesting those results which indicate compliance, thus injecting an inappropriate bias into that laboratory's results overall. It also is possible that a laboratory could, through the use of improper equipment or procedures, produce systematically improper results. Under EPA's proposal, refiners and importers would have two options for meeting the independent analysis requirement. Under one option, every batch of reformulated gasoline would be sampled and tested by the independent laboratory. This option probably would be appropriate in the case of a refiner or importer that does not operate its own laboratory. In such a situation, the refiner or importer could use the results of the independent laboratory to determine the properties of the reformulated gasoline produced or imported in order to demonstrate compliance. The second option proposed by EPA would require that a refiner or importer implement a program whereby an independent laboratory would collect a representative sample of each batch of reformulated gasoline produced or imported, but conduct an analysis of only up to ten percent of the samples collected. This would be in addition to the refiner's or importer's own testing. Under this option, the independent laboratory would retain samples for thirty days (which could be extended to 180 days at EPA's request), and EPA would identify to the independent laboratory which samples to analyze. In this manner, the refiner or importer would not know in advance which samples would be subject to confirmatory analysis. Under either option for independent analysis, each refiner and importer would be required to identify to EPA a designated independent laboratory for each of its refineries and import facilities. To be an independent laboratory, a laboratory must be independent from the refinery or importer. The only exception is where the laboratory is operated by a gasoline pipeline company that is owned and operated by a consortium of at least four autonomous refiners or importers. To qualify as autonomous, the refiners or importers must be financially independent of each other. As competitors in the gasoline market, each refiner or importer would be interested in ensuring accurate testing so that a particular company would not gain an unfair advantage over the others. The Agency believes that such a jointly-owned consortium would serve to create sufficient independence on the pipeline laboratory's part so that it could provide unbiased test results. Use of a laboratory that has been debarred or suspended under the Governmentwide Debarment and Suspension regulations, 40 CFR part 32, or the Debarment, Suspension and Ineligibility provisions of the Federal Acquisition Regulations, 48 CFR part 9, subpart 9.4, would not constitute compliance with the requirements of analysis by an independent laboratory. In order to allow EPA and the independent laboratory to positively identify the gasoline that was sampled under the independent analysis program, the refiner or importer would be required to establish procedures under which the independent laboratory would independently determine the volume of each batch sampled and certain identifying features of the batch (e.g., date, time, tank number, etc.). The refiner or importer also would be required to have the independent laboratory submit reports to the refiner or importer and to EPA each calendar quarter, detailing analyses conducted on the samples collected, and the batch-specific information obtained at the refinery or import facility. The proposed regulations include a methodology for comparing the results for each parameter from the refiner or importer's laboratory (if conducted) and the independent laboratory. This methodology includes use of reproducibility statistics for each of the properties which are included in the simple model. (The statistics included in the proposed regulations are the ASTM reproducibility figures for each of the parameters except oxygen; the reproducibility figure for oxygen was derived by EPA's motor vehicle emissions laboratory from the repeatability statistics for the oxygenate testing method being proposed in these regulations.) Test results of the two laboratories within the listed ranges would indicate general agreement on the test results and the refiner or importer would use its test results for accounting and compliance purposes. If the test results vary by more than the range listed in the regulations, however, it would indicate that there is a problem with one or both of the tests. In this situation, the refiner or importer would have to choose one of two options. The refiner or importer could use the least favorable of the two results, which would be the larger number for the volume percent for all properties, except specified oxygenates, where the refiner or importer must use the smaller number for determining all parameters except RVP; for measuring RVP, the larger oxygen volume percent number would be used. The other choice for the refiner or importer would be to continue having the gasoline analyzed for the property at additional independent laboratories until there is a 90% confidence that the value of the property falls within the acceptable listed ranges. EPA is proposing an alternative to the independent analysis requirement for certain refiners that produce gasoline using computer-controlled in-line blending equipment. Under this alternative the refiner would have an independent audit conducted of the documents generated during the course of such in-line blending as confirmation of the refiner's reported batch properties. This audit option would be appropriate only in the case of relatively sophisticated in-line blending operations, where sufficient gasoline quality checks and cross-checks occurred to allow a meaningful audit. In order to use this audit option, a refiner would be required to petition EPA to allow its use for a particular in-line blending operation. EPA would then evaluate the petition on the basis of the particular equipment and procedures in place at the petitioner-refiner's refinery. The types of factors which would be relevant to EPA's review of the petition would include whether the operation had on-line analysis capability, and if so, for which parameters and the frequency of results; the frequency of off-line confirmatory analyses; the use of an accumulator device to collect a representative sample of the entire batch; the degree and nature of retention of analyses results; any analyses conducted on any of the batch downstream from the refinery (e.g., by a pipeline); and the overall quality assurance program of the operation. EPA believes the audit alternative for certain in-line blending operations is appropriate both because of the difficulty of obtaining a representative sample of gasoline that has been produced through in-line blending in some cases, and because of the confidence in the results from a paper audit of such an operation. In certain in-line blending operations, the gasoline that is blended goes directly from the refinery into a pipeline, where it may be fungibly mixed with other gasoline. Such a blend may occur over a period of up to twenty-four hours, and result in the production of up to 300,000 barrels of gasoline. A sample collected at one time at the point of in-line blending would be representative only of the gasoline being blended at the time the sample was collected, and may not be representative of the gasoline that was produced in the blend before or after the sample was collected. A sophisticated in-line blending operation, however, has multiple safeguards to monitor (and record) the properties of the blend on an on-going basis. EPA believes a review of these records would provide a high degree of confidence as to the overall properties of the blend. Under the audit alternative for in-line blending confirmation, the audit would be conducted by an independent auditor using the same standards and using the same methodologies that are specified for the independent refinery audit requirement described in section XIV of this preamble. EPA believes any in-line blending audits that are conducted would constitute partial compliance with this independent refinery audit requirement. The scope of these two audit requirements are different, however, in that a refinery audit requires the auditor to review in detail records which reflect only twenty percent of a refiner's production (unless material instances of regulatory noncompliance are discovered), whereas an in-line blending audit would require the auditor to review each of a refiner's in-line blends for consistency with the refiner's claimed properties for the blend. 2. Gasoline Designations Also vital to a workable enforcement program is proper designation of the different categories of gasoline (e.g., VOC-controlled versus non-VOC- controlled) for accounting and product transfer documentation purposes. This allows any party in the distribution chain to ensure that it is in compliance by refusing gasoline without the proper designations on the product transfer documentation. EPA proposes that refiners or importers designate each batch of gasoline as belonging to one of two major categories: Reformulated or conventional gasoline. Further, any conventional gasoline would have to be marked by the refinery or import facility with the marker phenolphthalein and clearly labeled as not intended for sale for use in motor vehicles within a covered area. Reformulated gasoline would require more specialized designations, as a result of the varying requirements it must meet. Each batch of reformulated gasoline would have to be labeled VOC-controlled or not VOC-controlled. Only VOC-controlled gasoline could be sold to vehicle owners in covered areas during the high-ozone season (June 1--September 15) and only VOC-controlled gasoline could be sold by parties upstream of the retail outlets in the covered areas beginning May 1. VOC-controlled gasoline would be further categorized for use in one of two VOC regions: VOC Region 1 or VOC Region 2. For an explanation of the two VOC Regions, see section V-D. of this notice. Gasoline designated for either region would have to satisfy all requirements, including VOC control, of a certificate for the region of its intended use. Reformulated gasoline also would have to be classified as oxygenated fuels program reformulated gasoline (OPRG) or not OPRG. 30 This classification reflects the fact that a reformulated gasoline covered area may also be an oxygenated fuels gasoline covered area. The reasons for this classification are discussed more fully below. NOTE 30 State programs implemented pursuant to section 211(m) of the Clean Air Act. The above designations would direct gasoline to its appropriate ultimate destination during a particular time period. The following designations would provide additional information for those handling the gasoline downstream from the refinery or import facility. EPA proposes that the refiner or importer designate as reformulated blendstock for oxygenate blending (RBOB) that petroleum product which, when blended with a specified type and percentage of oxygenate, meets the definition of reformulated gasoline, and to which any approved oxygenate is added at any place other than the refinery or import facility where this product is produced or imported. If the product is designated as not RBOB, it is fungible reformulated gasoline which meets its certification requirements, and can be treated as such. If the product is designated as RBOB, however, refiners, importers and oxygenate blenders are subject to requirements intended to ensure that the proper oxygenate type and amount are added before the gasoline is used, as discussed more fully below. In addition, for each batch of gasoline produced, imported or blended, the refiner, importer, or oxygenate blender must designate which reformulated gasoline requirements are being complied with on a per-gallon basis and which are being complied with on average. This requirement is important for accounting purposes because the appropriate volumes and characteristics of averaged gasoline must be recorded and, more generally, the designation determines to which record keeping and reporting requirements a refiner, importer or oxygenate blender would be subject. H. Standards for Compliance on a Per Gallon Basis The standards for compliance on a per-gallon basis are listed in Table V-1. Table V-1.--Standards for Compliance on a Per-Gallon Basis Characteristic Standard RVP: VOC-Region 1 (psi maximum) 7.2 VOC-Region 2 (psi maximum) 8.1 Benzene (volume % maximum) 1.0 Toxics emission reduction (% minimum): Summer toxics controlled: VOC-Region 1 21.1 VOC-Region 2 20.7 Winter toxics controlled 13.5 Oxygen (weight %): Minimum 2.0 Maximum: VOC-controlled MTBE 2.7 Other than MTBE 1 2.1 Non-VOC-controlled 2 3.5 NOx emission (increase over baseline) none Sulfur, T-90, and Olefins (annual average increase over 1990 baseline) none Heavy metals 3 none 1 Another limit may be established through testing. 2 Up to 3.5% oxygen will be presumed to result in no NOx increase (and may be used) except (1) during those months with ozone violations (at the discretion of the impacted state) and (2) in those areas where the state has notified the Administrator that the use of an oxygenate would interfere with attainment or maintenance of another ambient air quality standard or other air quality problem. Lawful use of any combination of these substances requires that they be "Substantially Similar" under section 211(f) of the Clean Air Act, or be permitted under a waiver granted by the Administrator under the authority of section 211(f)(4). 3 The Administrator under section 211(k)(2)(D) may waive this requirement for a heavy metal other than lead if it is determined that addition of the heavy metal to the gasoline will not increase, on an aggregate mass or cancer-risk basis, toxic air pollutants from motor vehicles. These per-gallon standards are less stringent than the compliance standards applicable for purposes of averaging (discussed in a later section of this preamble), with the exception of the standards for NOx emission, heavy metals, sulfur, T-90, and olefins, and the oxygen maximum standards which are the same for both per-gallon and average compliance gasoline. Caps are set for oxygen content for per-gallon compliance also in the event that a party decides not to average, but has added oxygen higher that the statutory standard. After a certain percentage of oxygen has been added, there is a concern that NOx emissions will increase. Oxygen maximums address the no NOx increase requirement in section 211(k)(2)(A) of the Clean Air Act, and were agreed to through the Regulatory Negotiation process. Under the proposed regulations, on each occasion a refiner or importer produces or imports a batch of reformulated gasoline, the toxics emission reduction, RVP, benzene and oxygen content standards must be designated as having been met either on a per-gallon basis or on an averaged basis. For example, a refiner could designate one batch as meeting the benzene standard on a per-gallon basis and another batch as meeting that standard on an averaged basis during the same benzene averaging period. EPA believes there are advantages to the per-gallon compliance approach. To the extent standards are designated for per-gallon compliance, refiners and importers have simpler and less costly accounting, record keeping, and reporting requirements. In addition, the independent compliance audits (discussed below) for gasoline designated for per-gallon compliance should be less complex and, as a result, less costly. Moreover, if all of a refiner's or importer's gasoline is designated for per-gallon compliance, that party would not be obligated to assist in payment for the covered area surveys (discussed below). I. Downstream Oxygenate Blending Section 211(k)(2)(B) of the Act requires that reformulated gasoline have an oxygen content of 2.0 percent or more by weight, and section 211(k)(7)(A) provides that oxygen credits may be generated and used to achieve compliance. The regulations being proposed by EPA allow the oxygen content requirement to be satisfied either based upon the oxygen content of gasoline produced at a refinery or imported, or based upon the oxygen content of a gasoline to which oxygenates have been added downstream of the refinery or import facility. In order to assure that reformulated gasoline which is produced through downstream oxygen blending meets other reformulated gasoline requirements, additional regulatory controls are being proposed. Several new definitions are being proposed to address downstream oxygenate blending. An oxygenate blending facility is defined as a facility (including a truck) at which oxygenate is added to gasoline or blendstock, and an oxygenate blender is any person who owns, leases, operates, controls, or supervises such an oxygenate blending facility. The definition of oxygenate blender thus includes persons who blend oxygenate in terminal storage tanks as well as persons who "splash blend" oxygenates in gasoline delivery trucks. A new category of petroleum product, reformulated gasoline blendstock for oxygenate blending, or RBOB, is defined as a petroleum product which, when blended with a specific type and percentage of oxygenate downstream of the refinery or import facility, meets the definition of reformulated gasoline. The characteristics of RBOB when blended with the specified oxygenate must conform with the values for RVP, toxics, and benzene designated by the refiner or importer which anticipated the addition of a specific type and amount of oxygen in the finished gasoline. As a result, it is proposed that refiners and importers be permitted to sell for use in covered areas RBOB only if the RBOB will meet the specifications of a particular reformulated gasoline certification after the oxygenate is added. Such a certification would specify the type or types (e.g., ethanol, MTBE or other oxygenates) and the minimum and maximum percentage of oxygenate in the finished gasoline, and would allow the finished gasoline to have an oxygen percentage within the allowable range and of the specified type or types. This is because the refinery or importer has relied on the addition of the specific type and amount of oxygenate in calculating its reformulated characteristics for compliance purposes. If a different amount or type of oxygenate was added, the refinery or importer's calculated numbers would no longer be accurate. In order to provide downstream oxygenate blenders with as much flexibility as possible, refiners and importers would be required to specify the full range of oxygenate types and percentages which would result in the resulting reformulated gasoline having a toxics emission reduction percentage which was at least as large as the refiner or importer calculated for the batch; a benzene content and RVP at least as small as the refiner or importer calculated for the batch; and other properties that conform to other reformulated gasoline requirements (e.g., no NOx increase). The oxygen standards being proposed are stated in terms of weight percent oxygen. This must be distinguished from volume percent oxygenate, which is the typical measure for blending oxygenates, particularly at the terminal level. For example, a "ten percent ethanol blend" typically refers to a volume percent. In order to calculate the weight percent oxygen in an oxygenate blend, several factors must be taken into consideration. These are: temperature and specific gravity of the oxygenate and the gasoline, and, for ethanol, the amount of denaturant, which is some fraction of the volume ethanol added to the gasoline. Elsewhere in this notice, it is stated that standard temperature will be 60 degrees Fahrenheit. In order to calculate the weight percent oxygen in the blend, the weight percent oxygenate must be calculated. Accordingly, to calculate the weight percent oxygenate from volume percent oxygenate, specific gravities of the oxygenate and the blend must be taken into consideration. (Specific gravities (or densities) as well as weight percent oxygen in the oxygenate may be found in Table V-2 for common fuel oxygenates.) Table V-2.--Specific Gravity and Weight Percent Oxygen of Common Oxygenates Specific Weight gravity % at 60 Oxygenate oxygen deg.F Methanol 0.4993 0.796 Ethanol 0.3473 0.794 Propanols 0.2662 0.789 Butanols 0.2158 0.810 Pentanols 0.1815 0.817 Methyl Tertiary Butyl Ether (MTBE) 0.1815 0.744 Hexanols 0.1566 0.823 Tertiary Amyl Methyl Ether (TAME) 0.1566 0.770 Ethyl Tertiary Butyl Ether (ETBE) 0.1569 0.755 The following equation describes the conversion from volume percent oxygenate to weight percent oxygenate: [ ...Illustration appears here... ] Where W=weight fraction (for percent, multiply by 100) oxygenate=oxygenate in the blend bl=blend V=volume fraction d=specific gravity. The specific gravity of the oxygenate is known (see Table V-2) and, if the specific gravity of the blend has been measured and is, therefore, known, the calculation is straightforward. If, however, the specific gravity of the blend is unknown, it can be estimated as the volume weighted contribution of the specific gravities of the gasoline to which the oxygenate is added and the oxygenate itself: [ ...Illustration appears here... ] Where gas=gasoline to which oxygenate is added. The weight fraction of oxygen in the blend is simply the product of the weight fraction of oxygen in the oxygenate (from Table V-2) and the weight fraction of oxygenate in the blend. Therefore, the weight fraction of oxygen in the blend is: [ ...Illustration appears here... ] Where oxygen/oxygenate=oxygen in the oxygenate. Substituting equations (1) and (2) in equation (3), results in: [ ...Illustration appears here... ] For blends with more than one oxygenate, the equation becomes: [ ...Illustration appears here... ] The following examples demonstrate use of the equation: Question 1: Suppose nine gallons of neat ethanol are blended with 91 gallons of gasoline to make 100 gallons of ethanol blend gasoline. The specific gravity of the gasoline is 0.74. What is the weight percent oxygen in this blend? Answer 1: In this case, the volume fraction of ethanol is 0.09 and the volume fraction of gasoline is 0.91. The specific gravity of neat ethanol (from Table V-2) is 0.794 and the specific gravity of the gasoline is stated to be 0.74. Hence, the weight fraction of oxygen can be calculated using equation (4) as follows: [ ...Illustration appears here... ] Therefore the weight fraction of oxygen in such a blend is 0.0333 or 3.33 percent. Question 2: Suppose 1000 gallons of MTBE are blended with 6000 gallons of gasoline to make 7000 gallons of MTBE blend gasoline. The specific gravity of the gasoline is 0.75. What is be the weight percent oxygen in this blend? Answer 2: In this case, the volume fraction of MTBE is 1000/7000 or 0.1429 and the volume fraction of gasoline is 6000/7000 or 0.8571. The specific gravity of neat MTBE (from Table V-2) is 0.744 and the specific gravity of the gasoline is stated to be 0.75. Hence, the weight fraction of oxygen can be calculated using equation (4) as follows: [ ...Illustration appears here... ] Therefore the weight fraction of oxygen in such a blend is 0.0258 or 2.58 percent. In the following example, multiple oxygenates are used. Question 3: Suppose 800 gallons of MTBE and 200 gallons of TAME are blended with 6000 gallons of gasoline to make 7000 gallons of blend gasoline. The specific gravity of the gasoline is 0.73. What is be the weight percent oxygen in this blend? Answer 3: In this case, the volume fraction of MTBE is 800/7000 or 0.1143, the volume fraction of TAME is 200/7000 or 0.0286 and the volume fraction of gasoline is 6000/7000 or 0.8571. The specific gravity of neat MTBE (from Table V-2) is 0.744, of neat TAME is 0.770 and the specific gravity of the gasoline is stated to be 0.75. Hence, the weight fraction of oxygen can be calculated using equation (5) as follows: [ ...Illustration appears here... ] Therefore the weight fraction of oxygen in such a blend is 0.0252 or 2.52 percent. Under the proposed rule, refiners and importers would be required to verify through periodic sampling and testing that RBOB produced or imported will meet the specifications of the applicable certificate after the specified oxygenate is added. The specified type and amount or range of amounts of oxygenate to be added must be included in the product transfer documentation in order to inform the oxygenate blender of the oxygen requirements of the specific RBOB. The oxygenate blender would be required to add at least the minimum amount of oxygen, and would be allowed to add additional oxygenate of the specified type or types up to the specified maximum. The oxygenate blender may then designate the resulting reformulated gasoline as achieving oxygen compliance either per-gallon (if the gasoline contains at least 2.0% oxygen) or on average. If average compliance is designated, the oxygenate blender is responsible for accounting for the oxygen percentage for average compliance purposes. At the end of the averaging period, the oxygenate blender would have to achieve the applicable oxygen average standard. EPA is proposing that refiners and importers must take certain affirmative steps to ensure that RBOB produced or imported is in fact blended with the oxygenate type and amount specified by the refiner or importer. Because each separate RBOB is specific as to its oxygenate requirements, RBOB can be combined in the transportation system prior to oxygenate blending only with other RBOB which has oxygenate requirements which are exactly the same. If different RBOB's having different oxygenate requirements were combined before the oxygenate was added, or if RBOB were combined with finished reformulated gasoline, the gasoline resulting from an RBOB-oxygenate blend would not conform to the RBOB's certificate. In order to ensure that RBOB is not contaminated with other RBOB or with reformulated gasoline before oxygenate blending, it is proposed that refiners and importers of RBOB be required to identify distinguishing properties of the RBOB (as opposed to the finished reformulated gasoline), and to include these properties on the product transfer documentation. With this information, parties downstream from the refinery or import facility (e.g., pipelines, distributors, etc.) may conduct quality assurance sampling and testing programs of the RBOB to the point of oxygenate blending. The proposal would further require refiners and importers to conduct a quality assurance sampling and testing program of the blending operation of each oxygenate blender who receives any RBOB produced or imported by the refiner or importer. This program requires refiners and importers to determine whether its gasoline, subsequent to the oxygenate blending, meets the requirements of the certification under which the RBOB was produced or imported. Such a quality assurance program would monitor the quality of the RBOB to the point of blending, the quality and purity of the oxygenate blendstock, and the precision of the oxygenate blender's operation. EPA is proposing that the rate of sampling and testing, at each oxygenate blender's operation, be one sample for each 200,000 barrels of RBOB produced or imported by that refiner or importer which is blended by an oxygenate blender in a terminal storage tank, or one sample every month, whichever is more frequent. In the case of oxygenate blenders who splash blend in trucks without using computer-controlled in-line blending equipment, EPA is proposing a quality assurance sampling and testing frequency for refiners and importers of one sample for each 50,000 barrels of that supplier's RBOB which is blended by that blender, but at least one sample each month; in the case of oxygenate blenders who splash blend using computer-controlled in-line blending equipment, however, EPA is proposing a sampling and testing frequency of one sample for each 100,000 barrels of that supplier's RBOB that is blended, but at least one sample each two months. The sampling frequency for each particular blending situation reflects the different volumes of gasoline blended in each batch. RBOB which is blended with oxygenate in a terminal storage tank will produce many times the reformulated gasoline of that mixed in a truck. For example, a truck may only be able to blend 190 barrels, while a terminal storage tank may blend 29,000 barrels. As a consequence, the smaller the batch of RBOB blended with oxygenate, the more batches will need to be sampled to determine compliance. If the testing results indicate the blended gasoline does not conform to the relevant certification, the refiner or importer is required to take several additional actions: immediately take steps to stop the sale of the sampled gasoline; determine the cause of the nonconformity in order to prevent future nonconformities; and increase the frequency of sampling and testing. EPA is proposing that refiners and importers have a contract in place with each oxygenate blender who adds oxygenate to RBOB produced or imported by the refiner or importer, which gives the refiner or importer the authority to take the actions required by the results of the quality assurance program and to specify the procedures which are necessary in order to ensure proper oxygenate blending. Requiring such a contract also makes more certain that refiners and importers will be aware of the specific oxygenate blender who is blending the RBOB produced or imported by the refiner or importer. EPA believes this requirement is appropriate, because the refiner or importer is responsible for the blended gasoline meeting VOC and toxics emission reduction requirements. If the proper amount and type of oxygenate is not added, then the refiner or importer cannot demonstrate such compliance. EPA is proposing, as an alternative to these contractual and oversight restrictions to the transfer of RBOB, that refiners and importers be allowed to assume as the basis for calculating toxics emission performance, benzene content, and RVP, that the "worst case" (for the environment) oxygen type and amount was added to RBOB that is produced or imported. This worst case assumes that the appropriate maximum and minimum oxygen requirements will be met downstream because they will be subject to downstream (including retail level) enforcement testing. Thus, all reformulated gasoline is required to contain a minimum 1.5% (by weight) oxygen. Moreover, reformulated gasoline also is subject to maximum oxygen standards: 2.7% (by weight) oxygen contributed by MTBE; 2.1% (by weight) oxygen contributed by other oxygenates in the case of gasoline designated as VOC-controlled (unless this limit is raised through testing); and 3.5% (by weight) oxygen contributed by ethanol in the case of gasoline not designated as VOC-controlled. EPA intends to monitor for compliance with these maximums, and because they are oxygenate type-dependent, to monitor the oxygenate type in addition to the weight percent. In the case of toxics emission reduction percentage and benzene content, as the oxygen volume percent gets smaller, the toxics emission reduction becomes smaller, and the benzene content becomes larger (also worse for the environment); as a result, the "worst case" (worse for the environment) assumption would be 1.5% (by weight) of whichever of the approved oxygenates that has the smallest volume percentage at 1.5 weight percent. For ethanol and MTBE, for example, the volume percentages of these two oxygenates that are necessary to result in 1.5 weight percent oxygen (assuming RBOB which has a density of 0.7420) are 8.37% in the case of MTBE and 4.05% in the case of ethanol. Thus, if ethanol and MTBE were the only two approved oxygenates, the "worst case" assumption for calculating toxics emission reduction and benzene content would be 1.5% (by weight) of oxygen from ethanol. In the case of RVP, as the ethanol percentage gets larger, the RVP becomes larger (worse for the environment); as a result, the "worst case" assumption would be the maximum allowed ethanol content. Reformulated gasoline that is designated as VOC-controlled currently is restricted to a maximum 2.1% (by weight) of oxygen contributed by ethanol. Also, the standard for RVP applies only to VOC-controlled reformulated gasoline. As a consequence, the "worst case" oxygenate blending assumption for RVP compliance calculations would be 2.1% (by weight) of oxygen from ethanol. Should a higher ethanol content be approved through testing, this higher amount would be used as the "worst case" assumption. EPA is proposing requirements for oxygenate blenders that are intended to ensure the proper oxygenate is blended with RBOB. Oxygenate blenders who blend oxygenate with RBOB in gasoline storage tanks at terminals (i.e., other than splash blenders), are required to sample and test following each blending operation to determine if the resulting gasoline meets the certification under which the RBOB was produced or imported. EPA believes this frequency of sampling and testing is justified, because the volumes involved in such terminal blending normally are quite large. EPA also is proposing that periodic sampling and testing for oxygenate type and percentage be carried out by the oxygenate blender in the case of oxygenate splash blending. The proposed rule requires in the case of splash blenders who use computer-controlled in-line blending equipment that at least one sample per every five hundred splash blended batches be sampled and tested, but at least as frequently as one sample every three months. In the case of splash blenders who do not use computer-controlled in-line blending equipment, the frequency would be the greater of one sample for every one hundred trucks loaded, or once per month. In either case, EPA is proposing increased testing frequency if a test result revealed the gasoline did not comply with its certification. Even though a periodic sampling program will not ensure that all gasoline blended meets relevant requirements, such a program will allow oxygenate blenders to monitor generally the quality of RBOB and blendstock and the mechanics of the blending operation. EPA believes that a periodic (as opposed to an every-batch) sampling and testing requirement for splash blenders is appropriate because testing for each truck would be costly. An oxygenate blender would blend a much larger volume of gasoline in a tank than an oxygenate blender who splash blends in a truck. Therefore, a splash blender would have to test many more times for the same volume of reformulated gasoline than a tank blender, resulting in an economic advantage for the tank blender. Moreover, splash blenders rely on the motion of the delivery truck while being driven from the terminal to the retail outlet to mix the gasoline blendstock with the oxygenate. As a result, the sample normally would have to be taken from the truck after it has left the terminal. One issue involving sampling and testing of splash blended gasoline is how the sample should be collected. Collecting a sample from most gasoline trucks requires opening the hatch at the top of the truck. EPA does not believe that opening a truck hatch for the purpose of collecting a sample would violate state or local vapor control rules, and, therefore, is proposing that samples of gasoline that has been splash-blended be taken in this manner. Comments on this issue are requested, however. J. Penalties Section 211(d)(1) of the Clean Air Act provides for penalties for violations of the reformulated gasoline requirements, as follows: (d)(1) Civil Penalties.--Any person who violates subsection * * * (k) * * * of this section or the regulations provided under subsection * * * (k) * * * shall be liable to the United States for a civil penalty of not more than $25,000 for every day of such violation and the amount of economic benefit or savings resulting from the violation * * *. Any violation with respect to a regulation prescribed under subsection * * * (k) * * * of this section which establishes a regulatory standard based upon a multiday averaging period shall constitute a separate day of violation for each and every day in the averaging period. EPA is proposing regulations that would apply this Clean Air Act penalty provision to the regulations being proposed for reformulated and conventional gasoline, by specifying the number of days of violation that would result from the different types of regulatory requirements being proposed. The proposed regulations include provisions for calculating the number of days of violation for violations of: (1) Averaged standards; (2) per-gallon standards; (3) minimum and maximum content requirements; and (4) non-standard requirements and prohibitions. In addition, EPA is proposing rebuttable presumptions for the amount of economic benefit associated with the production of reformulated gasoline that does not meet applicable standards, for the length of time that gasoline remains in the gasoline distribution system, and for the properties of gasoline for which refiner/importer or independent analysis requirements are not met. 1. Averaged Standards Violations In the case of violations of averaged standards, the proposed regulations restate the statutory provision regarding the number of days of violation and provide--in accordance with section 211(d) of the Act--that a violation of a multi-day average standard constitutes a separate violation for each day in the averaging period. In the case of a refiner that attempts (but fails) to meet the benzene content standard on average, for example, the number of days of violation would be 365, the number of days in the year-long benzene averaging period. The penalty in this example thus would be not more than $9,125,000 ($25,000x365=$9,125,000) plus the amount of the economic benefit or savings. EPA also is proposing that violations of the credit creation requirements would constitute a violation for each day in the averaging period during which the credits were allegedly created. For example, the number of days of violation for a refiner that transfers bogus benzene credits would be 365 (the length of the benzene averaging period). This approach is consistent with section 211(d)(1) of the Clean Air Act, because the improper creation and transfer of credits is a "violation with respect to a regulation prescribed under subsection * * * (k) * * * which establishes a regulatory standard based upon a multi-day averaging period * * *." Under the reformulated gasoline regulations, credits can only be created or used by a party that achieves compliance on average (as opposed to per-gallon). As a result, the creation and transfer of credits is integral to the multi-day averaging portion of the reformulated gasoline regulations. EPA considered, but rejected, an alternative of proposing that violations of the credit creation/transfer requirements would constitute a single day of violation, because it would create an inadequate disincentive against cheating in some situations. For example, a refiner could produce only reformulated gasoline that achieves compliance per-gallon (and in fact meets these standards), obtain no credits from any other party, yet sell credits to another refiner. These credits would be bogus, because the refiner did not create or obtain any valid credits to transfer. The transferor of these bogus credits could receive millions of dollars for the sale of the bogus credits, in which case a penalty of up to $25,000 plus economic benefit (for a single day of violation) would not be an adequate deterrent. Under the proposed approach, the penalty would be up to $9,125,000 (in the case of the year-long benzene standard) plus economic benefit, which would constitute an adequate deterrent. The actual amount of the penalty would depend upon a number of different factors, such as the number of improper credits wrongfully created or transferred, the refiner or importer's degree of willfulness and/or negligence, its degree of cooperation or noncooperation, and its history of noncompliance. 2. Per-Gallon Standards Violations EPA also is proposing the method for calculating the number of days of violation for gasoline manufactured or imported for which compliance is achieved on a per-gallon (as opposed to averaged) basis, and where the per- gallon standard is violated. EPA is proposing that refiners be under a continuing obligation to correct the violation, so that violations of such per-gallon standards would constitute a separate day of violation for each and every day the non-complying gasoline remains in the gasoline distribution system. EPA proposes that such a violation begin on the day such non- complying gasoline is produced or imported, and end when the violation is corrected, but if not corrected, then on the last day that any such gasoline is offered for sale or is dispensed to any ultimate consumer for use in a motor vehicle./31/ NOTE /31/ EPA will discuss in a later paragraph its proposal for a rebuttable presumption that gasoline remains in the distribution system for twenty-five days. EPA believes this approach to calculating the number of days of violation for gasoline produced in violation of per-gallon standards is appropriate because the adverse environmental consequence of producing or importing reformulated gasoline that fails to meet such a standard continues so long as this gasoline is, or has the potential for, being used to fuel motor vehicles. Under EPA's proposal, therefore, the days of violation would continue to accrue until the gasoline produced in violation of the per-gallon standard no longer is, or has the potential to be, dispensed into motor vehicles. The violation could be corrected (stopping the accumulation of additional days of violation) only if all of the violating gasoline is re- blended or re-refined in such a manner that it meets all per-gallon standards. A violation of this type would not be considered corrected if, through fungible mixing with other gasoline, the gasoline mixture meets the per- gallon standard for the parameter that was violated originally. Rather, in order to correct a violation after such mixing occurs, the mixture would have to be adjusted so that its properties would be equal to the properties that would have existed if the violator's gasoline in the mixture had met the applicable standard when produced (if produced under a per-gallon standard) or had been equal to the properties claimed by the violator that produced the gasoline (if produced under an averaged standard). For example, if a batch of gasoline produced by a refiner under the per- gallon benzene standard (not more than 1.0 vol % benzene) contains 1.2 vol % benzene, this gasoline would violate the per-gallon benzene standard. If the refiner does nothing to correct the violation, the number of days of violation would include every day beginning on the day the gasoline was produced, and continuing through the last day any of this gasoline was dispensed for use in motor vehicles. If the refiner is able to isolate this gasoline prior to fungible mixing, the violation could be corrected by adding a sufficient volume of gasoline to reduce the benzene content of the batch to 1.0 vol %, which would stop the increase in the number of days of violation. In the event the gasoline in this example has been fungibly mixed, the tested benzene content of the mixture may be below 1.0 vol % as a result of lower benzene contents of other gasolines in the fungible mixture. The original violation, however, would not be considered corrected as a result of the overall benzene content of the mixture. In order to correct the violation of the fungible mixture, the refiner would have to add a sufficient quantity of low-benzene gasoline to the mixture, so that the mixture would have the same overall benzene content as would have existed if the refiner's gasoline had been produced to meet the benzene per-gallon standard. For purposes of determining the number of days of violation for per-gallon violations, EPA is proposing that the length of time gasoline remains in the distribution system be deemed to be twenty-five days unless the regulated party or EPA provides evidence proving the gasoline remained in the distribution system for a shorter or longer time period. EPA is proposing this rebuttable presumption in order to avoid potentially difficult issues of fact in proving the precise movements of a particular volume of gasoline within the distribution system. EPA believes that twenty-five days is an appropriate presumption for the length of time that gasoline remains in the distribution system. After gasoline is produced or imported, it must be transported to a bulk terminal, either by pipeline, coastal tanker, or barge, and may be further transported to a smaller bulk plant by truck or rail. The gasoline then must be transported by truck to the retail outlet where it will be dispensed into motor vehicles. The total length of time gasoline remains in the distribution system is thus the sum of the times required for each of the various transport legs, plus the storage times at the terminal, bulk plant (if applicable), and at the retail station. A study conducted by Jack Faucett Associates has estimated the lengths of time required for each of these stages in the movement of gasoline from the refinery to the point of being dispensed into a motor vehicle; /32/ the results of this study are summarized in Table V-3. NOTE /32/ Jack Faucett Associates, "Petroleum Storage and Transport Times," presented to EPA September 26, 1986. A copy of this report has been placed in the public docket for this rulemaking. Table V-3.--Estimated Transport and Storage Times for Gasoline Number of days required for stage Stage in distribution system Average Range Transport: To the Bulk Terminal Pipelines May 9.4 0-20 September 10.7 0-24 Coastal Tanker 3.2 1.5-7.3 Inland Barge 3.0 0.5-17.5 To the Bulk Plant Rail 2.5 0.5-10 Truck 0.5 0.2-2 To the Retail Outlet 0.1 0.05-1 Storage: Bulk Terminals May 11.7 3-30 September 12.4 3-30 Bulk Plants 4 1-20 Retail Outlets 3.9 0.5-45 According to the Faucett study, the average length of time gasoline remains in the distribution system is twenty-five days, with an overall range of less than one day to over fifty-five days. While section 211(d) of the Act specifies the number of days of violation when a multi-day averaging period is involved, it does not specifically discuss the number of days of violation where averaging is not involved. The statute just states that the penalty is $25,000 for every day of violation, plus the economic benefit or savings. Today's proposal is designed to clarify, for different activities, the number of days a party may be in violation for such activities. The Agency seeks comments on its proposal for a rebuttable presumption for the length of time gasoline remains in the distribution system, including whether such a presumption is appropriate and if so, whether twenty-five days is an appropriate length of time. For violations of per-gallon standards, EPA is in effect proposing an ongoing requirement on the refiner or importer to correct any violations of applicable per-gallon standards for each batch of gasoline introduced into commerce in violation of such per-gallon standards. This obligation to cure continues until the noncomplying gasoline either is brought into compliance or no longer remains in the gasoline distribution system. EPA is proposing that each day the refiner or importer fails to correct such violation shall be considered a separate violation by EPA. EPA also is proposing rebuttable presumptions for the properties of gasoline that is produced or imported without the required refiner/importer sampling and testing to determine the gasoline's properties for purposes of determining whether the gasoline violated standards as well as whether any such violation has been corrected. EPA believes that presumed properties are necessary in such a situation, because the true properties of gasoline may be unknown if the gasoline is not sampled and tested before leaving the refinery. 33 NOTE 33 Under the proposed independent analysis requirement, refiners and importers would have a sample collected of every batch of reformulated gasoline that is produced or imported, but only 10% of the samples would be analyzed normally. Industry contends that testing 100% of the samples imposes too large an economic burden, and that if necessary, 10% testing should be sufficient. In addition, if the independent analysis requirements are not met, there could be no independent sample collected. As a result, gasoline could be produced or imported where no independent analysis will be available. The properties that EPA is proposing are the "worst case" values for each of the relevant properties, and were derived from the Motor Vehicle Manufacturer's Association (MVMA) 1990 national fuel survey. 34 Refiners could rebut these values using other evidence of the properties of the gasoline in question. 35 This other evidence could consist of sampling and testing of the gasoline downstream from the refinery or import facility (e.g., by a pipeline company), or of evidence of the properties of the blendstocks used to produce the gasoline. EPA believes the 1990 MVMA data are an appropriate basis for setting the presumptions regarding "worst case" gasoline. Conventional gasoline that is produced in 1995 and subsequent years probably will be similar to gasoline that was produced in 1990 (the anti- dumping requirements are intended to prevent degradation below 1990 levels). EPA is aware of no reason why the dirtiest gasoline that was produced in 1990 is likely to be different from the dirtiest gasoline that could be produced in 1995 and later. NOTE 34 These values were obtained from the 1990 MVMA gasoline sampling database. The values for sulfur, benzene, 90% distillation, aromatics, and olefins were determined by adding three standard deviation units to the mean for each of these parameters. This approach yields a "reasonable worst case" value which is not determined by an unusually high maximum value, but rather reflects the upper boundary of approximately the central 99% of the values. As a result, this approach results in the exclusion of "outlier" values that may be contained in the dataset. The value for RVP was determined in a similar manner, but from a restricted data set. Because RVP was regulated by zones in 1990, the data set used in the calculation was not that for the nation as a whole, but rather the summertime samples from Buffalo, New York, the city in the MVMA program with the highest average summer RVP. Because Oxygen is a component that is added to ordinary gasoline rather than being a naturally occurring constituent, its "reasonable worst case" value is taken to be zero percent by weight. NOTE 35 EPA is proposing the worst case values for this rebuttable presumption because of the difficulty the Agency would have in proving the true properties of gasoline that had not been sampled and tested. By contrast, in the case of the presumption being proposed for the length of time gasoline remains in the distribution system (i.e., the average time) the proof of the true length of time would in many cases be fairly available to the Agency, through pipeline and other distribution records. Moreover, to the extent facts do exist regarding the true properties of gasoline that had not been sampled and tested (e.g., production records), these facts normally would be much more available to the refiner or importer than to the Agency for use in rebutting the presumed worse case values. In the case of reformulated gasoline that is produced or imported without meeting the independent analysis requirements, and where this failure is the direct fault of the refiner or importer, EPA is proposing that a refiner or importer could not rebut the presumed "worst case" values using testing that was carried out by the refiner that produced, or the importer that imported, the gasoline. EPA is proposing this restriction on the means for rebutting the presumed gasoline values because of the risks for cheating in the absence of this limit. For example, a refiner could produce non-complying gasoline but generate false test results that show the gasoline met all standards. In the absence of the independent analysis process, the refiner's false results could be the only evidence of the properties of the gasoline in question. If the refiner in this example could merely present its test results to rebut the presumed values, EPA would have no basis to refute the refiner's evidence. In the case of a failure to meet the independent analysis requirements that was not the fault of the refiner or importer, however, this risk of cheating would not be as great, so that in such a situation refiners and importers would be able to use their test results to rebut the presumed values. For example, if a refiner had a contract in place with an independent laboratory that required all of the procedures specified in the independent analysis provision, but the independent laboratory failed to retain a sample taken from a particular batch of reformulated gasoline for the required length of time, this would constitute a failure to meet the independent analysis requirement so that the worst case values would apply to this batch. If the refiner did not cause the sample retention violation in this example, the refiner's test results could be used to rebut the presumed worst case values for the batch. Even in cases where refiners and importers are precluded from using their own test results to rebut the presumed worst case values, however, these parties would be able to present other evidence of the properties of the gasoline in question, such as the downstream testing or blendstock evidence described above. 3. Minimum and Maximum Requirement Violations EPA is proposing that the number of days of violation for violations of the minimum and maximum requirements would be calculated based upon the number of days the gasoline actually fails to meet the minimum or maximum requirement (or as long as such non-complying gasoline remains in the gasoline distribution system). Thus, for example, if reformulated gasoline is found at a gasoline terminal that contains less than 1.2 wt % oxygen, the gasoline would be in violation of the 1.5 wt % oxygen minimum requirement. The number of days of this violation would be calculated beginning on the first day the oxygen content of the gasoline in question fell below 1.5 wt %, and would continue until the oxygen content of this gasoline reached 1.5 wt %. In contrast to the case of violations of per-gallon production/import standards, discussed above, the correction of minimum/maximum violations could be accomplished through fungible mixing only. EPA believes it is appropriate to distinguish the number of days of violation for violations of the minimum and maximum requirements from such calculations for violations of per-gallon standards by refiners and importers. At the time gasoline is produced or imported, the minimum and maximum requirements would be relevant only to gasoline that is produced to meet an averaged standard.36 Moreover, the requirements for meeting the minimum and maximum requirements would exist in addition to the requirements for meeting average standards. As a result, if a refiner violates both the minimum/maximum requirements and the average standards, penalties would apply to the average standard violation separately from penalties for the minimum/ maximum violation. NOTE 36 Per-gallon standards are more rigorous than the minimums and maximums in every case, so that gasoline properly produced to meet per-gallon standards could not violate the minimums or maximums. In addition, the minimum and maximum requirements would apply to all persons in the gasoline distribution network, while the per-gallon and averaged standards would apply only to the refiner or importer that produced or imported the gasoline. Parties downstream from the refinery or import facility normally could determine only whether the gasoline on hand violates the applicable minimums and maximums, and not whether the gasoline was produced under, or in violation of, per-gallon or averaged standards. As a result, such a downstream party normally would have insufficient knowledge to take the actions described above that are necessary to correct a per-gallon production/import standard violation. A downstream party could, however, take actions to correct a minimum/maximum violation (e.g., by adding a sufficient volume of offsetting product). 4. Non-Standard Requirements and Prohibitions The Agency is proposing that the number of days of violation for the violation of any affirmative requirement and/or prohibition not involving a gasoline standard (as discussed above) would be calculated to include each day the requirement remains unaccomplished or the prohibited activity remains uncorrected. In such cases, EPA is proposing regulations that impose an ongoing duty to comply with such affirmative requirement and/or prohibition, and it is therefore a continuing violation until the requirement is accomplished or the prohibited activity is corrected. For example, under the proposed regulations refiners would be required to have a compliance audit conducted at the conclusion of each calendar year of the refiner's activities during the calendar year, and to have a report of this audit submitted to EPA by May 30. In the event a refiner did not have this required report submitted to EPA by May 30, this would constitute a violation of an affirmative requirement. The number of days of this violation would be calculated by adding the number of days from May 30 until the day the required report is submitted to EPA. Where a prohibited activity is not subject to an ongoing obligation to correct, then the days of violation would be limited to the day or days on which the prohibited activity occurred. 5. Rebuttable Presumption Regarding Economic Benefit The reformulated gasoline penalty provision at section 211(d)(1) of the Clean Air Act states that penalties are up to $25,000 per day per violation plus the economic benefit or savings resulting from the violation. In the case of violations of the reformulated gasoline or anti-dumping standards, the amount of economic benefit or savings accruing to the violator primarily would be a function of the properties of the gasoline that is produced. Gasoline that does not meet applicable standards normally would be less costly to produce than gasoline that meets applicable standards, and the economic benefit normally would reflect this difference.37 NOTE 37 A violator could have economic benefit or savings resulting from a violation in addition to the lesser cost to produce the violating gasoline. For example, a violator could reap economic benefits from an increased market share generated by selling less expensive non-complying gasoline. In addition, economic benefit would include the time value of any ill-gotten money. Because of the complexities of the economics of refinery operations, the proof of this economic benefit would be difficult for the Agency, and in most cases would require facts that are wholly within the control of the violator. In certain situations, moreover, the properties of the gasoline that is produced may not be known, which would make proof of the economic benefit extremely difficult or impossible. For example, if a refiner does not perform or does not properly perform the required sampling and testing of gasoline at the refinery, there may be little or no evidence of the properties of the gasoline that was produced. In such a case, EPA could have no basis for alleging the amount of economic benefit realized by the refiner, even if the refiner provided EPA with all of its refinery records. For these reasons, EPA believes that a rebuttable presumption regarding the per-gallon economic benefit resulting from the production of reformulated gasoline that does not meet applicable standards would be appropriate. At this time, however, EPA is not proposing the specific amount of economic benefit that would be presumed. EPA anticipates that this amount, or the mechanism for deriving this amount, will be proposed as part of a later rulemaking involving reformulated gasoline, scheduled to be proposed by November 1, 1992. In order to facilitate this later rulemaking, EPA requests comments as to an appropriate level of economic benefit that should be presumed.38 NOTE 38 The regulatory language that would implement such an economic benefit presumption could be proposed as follows: The amount of economic benefit or savings resulting from the violation of any multi-day averaging standard, per-gallon standard, per-gallon minimum or per-gallon maximum under Secs. 80.41(b)(1), (d)(1), or (e)(1), or requirement to determine the properties of gasoline produced or imported under Secs. 80.70(b) or (c) shall be deemed to be [a worst case scenario amount, or a price determined through a petroleum industry index] for each gallon of gasoline giving rise to the violation; unless the respective party or EPA demonstrates by reasonably specific showings, by direct or circumstantial evidence, that the economic benefit arising from such violation was less than or more than the economic benefit described above. EPA believes there are at least two different approaches for setting the level of this economic benefit presumption. First, the economic benefit could be determined by using the price difference between reformulated and conventional gasoline at the time the gasoline in question is produced. It is possible that a price index, such as the prices published by the New York Mercantile Exchange, could form a basis for setting the difference in price between conventional and reformulated gasoline. Setting the economic benefit through the use of such an index has the advantage of automatically adjusting to changes in market prices, which presumably would reflect changes in the costs of producing reformulated and conventional gasoline. One disadvantage to this approach is that it generally would provide an average of the reformulated to conventional price difference, and may not accurately reflect the actual difference in the cost of production at any particular refinery. Another method would be to determine how much savings could be achieved by producing the dirtiest "worst-case" gasoline. Under this approach, the "worst-case" (for the environment) could be determined for each parameter relevant for reformulated gasoline, and the incremental refinery savings could be calculated for producing gasoline having such "worst-case" properties as compared to the cost of producing gasoline that meets applicable standards. The advantage to this approach to setting the level of the economic benefit presumption is that it would constitute the worst case scenario, which would ensure that the economic benefit of noncompliance would be recovered in every case.39 The disadvantage of this approach is that changing market conditions could render the presumed number inaccurate, and an understated economic benefit assumption could result in an inadequate deterrent against violations. NOTE 39 EPA believes the worst case economic benefit presumption would be appropriate, as opposed to an average benefit presumption, because the facts necessary to rebut the presumption normally would be more readily available to refiners/importers than to the Agency. 6. Anti-dumping Requirements and Prohibitions The violation-day calculation methods being proposed also would apply, where applicable, to the standards, requirements, and prohibitions for anti- dumping, in the same manner as discussed above for reformulated gasoline. The primary difference between the reformulated gasoline and the anti-dumping programs, in this context, is that there are no per-gallon production/import standards nor any minimum/maximum requirements under anti-dumping. As a result, the violation-day calculation methods being proposed for these categories of requirements would have no application under anti-dumping. The violation-day calculation methods for violations of average standards and of affirmative requirements and prohibitions would apply under anti-dumping, however. EPA also is proposing a rebuttable presumption for the properties of conventional gasoline that would apply in the case of a refiner or importer that failed to sample and test its gasoline for purposes of determining whether the party's gasoline violated standards as well as whether any such violation has been corrected. As is being proposed for reformulated gasoline, the presumed values represent the "worst case" levels for the parameters relevant to conventional gasoline. These presumptive values would not apply if a refiner or importer conducted the required sampling and testing, and these values could be rebutted in the same manner that was discussed for reformulated gasoline. EPA believes that a rebuttable presumption regarding the economic benefit associated with violations of the anti-dumping requirements may be appropriate, similar to the economic benefit presumption discussed for reformulated gasoline. This presumption could be based upon the differences in the cost to produce the worst case conventional gasoline (similar to the worst case gasoline discussed above for reformulated gasoline benefit presumption), but compared to the cost to produce average conventional gasoline. The specifics of this presumption would be proposed by EPA in the later rulemaking involving reformulated gasoline, scheduled to be proposed by November 1, 1992. In order to facilitate this later rulemaking, EPA requests comments regarding whether such a presumption would be appropriate for conventional gasoline, and if so, an appropriate method for deriving such a presumed benefit. VI. Compliance on Average Section 211(k)(7) of the Act provides that credits may be created for reformulated gasoline which contains more oxygen, or less benzene or aromatic hydrocarbons than prescribed by the standards for these parameters,40 and that such credits may be used, or transferred to another person for use within the same covered area where the credits were earned, to demonstrate compliance with the reformulated gasoline standards. This subsection also forbids the use of credits to achieve compliance to the extent that the average levels of oxygen and benzene in any covered area would exceed the levels which would occur in the absence of averaging, i.e., if all reformulated gasoline in the covered area complied on a per-gallon basis. NOTE 40 However, given EPA's determination that the VOC and toxics performance standards of section 211(k)(3)(B) are more stringent than the gasoline content standards of section 211(k)(3)(A), today's proposed regulations do not specify a standard for aromatic hydrocarbons content, and, for this reason, the proposed regulations do not include aromatic hydrocarbon credits. A. Geographic Scope of Averaging Program As just noted, the Act specifies that credits earned for exceeding reformulated gasoline standards may be used in the covered area in which they were earned. In other words, to the extent reformulated requirements are being met on average, they should be met on average in each covered area. Otherwise, one covered area could receive less environmentally beneficial reformulated gasoline as a result of another area receiving more beneficial reformulated gasoline. One method of meeting this statutory requirement would be a separate averaging program in each covered area. Separate programs would require regulated parties to account for the ultimate destination of all reformulated gasoline and demonstrate compliance with averaged standards through record keeping, reporting, and auditing requirements. Such a covered area-based averaging program would be exceptionally complex to implement, however, especially as additional areas opt-in. This is because the current gasoline distribution system relies on transporting a basically fungible product to speed distribution and reduce costs. Moreover, as additional areas opt-in to the program, the complexities of keeping separate records for each covered area would become extremely time-consuming. This is especially true of local terminals serving more than one covered area. Furthermore, developing a distribution system to accommodate gasoline which can only be delivered to a specific covered area could result in a totally segregated distribution system, which would significantly increase costs. As a result, EPA is proposing a different averaging program. While not requiring averaging specifically by each covered area, EPA's proposal is designed to assure that in fact for each covered area the standards are met, on average, with the reformulated gasoline requirements. EPA proposes that any refinery be allowed to average across its entire reformulated gasoline product with an exception. During the VOC averaging period RVP and oxygen would be averaged by VOC- Control Regions and as OPRG or non-OPRG gasoline, as long as certain conditions are met to ensure that standards are met on average in each covered area. EPA's proposal for refinery-based averaging has compelling advantages over a covered area-based averaging program. Because different covered areas would require reformulated gasolines with different properties, a covered area- based program thus would restrict the degree to which reformulated gasoline could be transported from the refinery to the covered areas in fungible mixtures, which could have serious market consequences. In addition, the regulated parties at the covered area level could have difficulty obtaining sufficient credit-generating reformulated gasoline to offset credit-requiring reformulated gasoline previously sent to the covered area, because in many cases the gasoline would be produced or imported by a different person. Under the refinery-based averaging program being proposed, on the other hand, most reformulated gasoline produced or imported can be transported in fungible mixtures with other reformulated gasoline. Moreover, the refinery has control over the types and amounts of credit-generating and credit- requiring reformulated gasoline produced, and can take the steps it deems necessary to ensure, together with other refineries serving a covered area, that standards are met on average. B. Mechanisms to Ensure Each Covered Area Receives the Full Benefits of Reformulated Gasoline EPA believes that three program features of the proposed refinery-based averaging program would achieve the statutory goal of ensuring that the benefits of reformulated gasoline are fully realized by each covered area. First, EPA is proposing that reformulated gasoline included in the averaging program be subject to maximum and minimum per-gallon requirements for relevant parameters which are close to the statutory standard. The proposed minimums and maximums would significantly constrain potential fluctuations of these parameters compared to what would occur without such strict maximums and minimums. Second, the standards for average compliance would be more stringent than for per-gallon compliance, which provides additional assurance that the actual average levels of regulated parameters will not represent a degradation from the actual average levels expected in the absence of an averaging program. Third, a refiner would be required to conduct a program of surveys in each covered area to which the refiner supplies averaged gasoline to measure the average levels of regulated parameters. In covered areas where measured levels fall short of the reformulated standards, refiners and importers that supplied that area with averaged reformulated gasoline would be required to meet tighter reformulated averaged standards and minimums and maximums for the reformulated gasoline they produce or import in future averaging periods. The more stringent requirements would be expected to increase the likelihood that standards are met on average. Further, the threat of the more stringent standards being triggered by a showing that the reformulated standards are not being met on average would likely provide a more powerful incentive to participants in the averaging program to take steps adequate to ensure that standards are met on average in each covered area. Each of these components of the averaging program is discussed more fully below. 1. Minimums and Maximums EPA proposes establishing maximum levels for RVP and benzene, and a minimum level is established for oxygen content for gasoline for which compliance is achieved on average. The proposed minimums/maximums are listed in Table VI-2. EPA believes minimum/maximums will reduce the risk of geographical and temporal spiking. The adverse health effects of VOC result from short term elevated levels of ozone (or smog).41 These adverse health effects that could result from short term exposure to elevated VOC levels are prevented through the RVP maximum and the oxygen minimum (under the simple model, VOC emissions are a function of RVP level and oxygen content). NOTE 41 Ozone is created from a complex chemical reaction of VOC in the presence of sunlight. Ozone severely irritates the eyes, nose and throat and directly reduces lung function, and appears to have adverse effects on the body's immune system. No minimum is being proposed for the toxics emission performance standard. EPA believes this approach is valid because a maximum is being proposed for benzene, which comprises approximately 75 percent of the toxics emission. Therefore, the benzene maximum indirectly will also control toxics emissions. In a covered area that fails a toxics survey, moreover, the averaged standard for toxics emission performance is made more stringent. In addition, the adverse health effects of toxic air pollutants are cumulative over long periods of time, so that temporal spiking of toxics emissions is not a concern as it is for VOC emissions. As a consequence, the control of average toxics emissions (which is being proposed) is more relevant for protecting human health than controls over each gallon of gasoline through a maximum per-gallon toxics standard (which is not being proposed). EPA believes that the specific maximum and minimum levels being proposed are appropriate in that they allow the regulated parties production flexibility, while reducing the extent to which averaged gasoline may deviate from standards, thereby protecting against adverse health consequences. 2. Averaged Standards The standards proposed for benzene content, oxygen content, RVP, and toxics emissions performance on average are numerically more stringent than those which apply on a per-gallon basis. The Agency believes the more stringent averaged standards fully recapture the margin of safety that gasoline suppliers can be expected to build into their fuels to comply with the per- gallon standards. The need for refiners to build a margin of safety into their plans for compliance under the per gallon standards arises from the existence of error in the measurement of fuel properties. The possibility exists that fuel properties measured as being in compliance in one measurement may not be in compliance in a second measurement. Further, the possibility exists that the first measurement may show compliance even though the actual fuel properties would be out of compliance. Under the per gallon standards, if EPA determines that a fuel sample is out of compliance based upon valid Agency measurements, then the batch of fuel from which the sample was taken is out of compliance, regardless of whether other measurements show compliance with the standards. Instead of including a margin of safety in the design and production of its fuel, fuel suppliers could measure the properties of each batch of fuel several times and in several different laboratories, thereby reducing the probability that the average measured properties differ significantly from the actual values. However, this method is costly, particularly for small batches of gasoline, and it does not eliminate the risk that EPA may still measure a different number in its compliance testing. Even more importantly, the time involved in obtaining multiple measurements from several different laboratories prior to distributing the fuel is impractical due to the amount of fuel that would have to be stored and the resulting disruption in fuel supply. Thus, EPA believes that the great majority of fuel suppliers will choose to utilize a compliance margin approach to avoid these problems. Under this approach, suppliers would establish target values for relevant fuel properties that are more stringent than the regulatory requirements. Suppliers would be confident that fuels measured to meet these more stringent target values would in fact conform to the regulatory requirements; further, they would be confident that measurements of fuel properties taken for enforcement purposes would show their fuel as being in compliance. EPA defines the margin of safety as being equal to the difference between the target value and the regulatory requirement for each fuel property. This margin of safety would be based on the repeatability 42 and reproducibility 43 of the method used to measure the property in question. EPA proposes to base its estimate for the margin of safety on the 95% confidence interval for measurement reproducibility.44 This interval can change over time, however, as analytical techniques improve and refinery technology becomes more sophisticated. Therefore, the Agency believes it appropriate to consider its experience with RVP repeatability in determining these confidence intervals. NOTE 42 Repeatability is defined by the American Society for Testing and Materials (ASTM) as a "quantitative expression of the random error associated with a single operator in a given laboratory obtaining replicate results with the same apparatus under constant operating conditions on identical test materials within a short period of time." ASTM D 3244-77, paragraph 3.8. NOTE 43 Reproducibility is defined by the ASTM as a "quantitative expression of the random error associated with operators working in different laboratories, each obtaining single results on identical test material when applying the same method." ASTM D-3244-7, paragraph 3.9. NOTE 44 EPA believes that repeatability statistics need not be considered in estimating margins of safety, and that such estimates may be based upon reproducibility statistics only, because the error associated with repeatability is included in reproducibility statistics. Prior to the implementation of regulations requiring RVP control, the legal and economic incentives for accurate measurement and control of RVP were minimal. Standard analytical methods for measuring the RVP of gasoline were considered to have repeatability levels of approximately 0.6 psi. The implementation of Phase I volatility controls introduced legal and economic incentives for accurate determination of RVP levels, and the standard analytical methods were upgraded to achieve a repeatability level of approximately 0.3 psi. Recent improvements in existing analytical methods implemented in EPA's Ann Arbor laboratory have been able to consistently achieve repeatability levels of approximately 0.1 psi. The six-fold improvement in RVP measurement repeatability (and similar improvements in measurement reproducibility), achieved in a five-year time frame, reflect the increased importance of precise, accurate RVP measurements. EPA believes such improvement will continue to occur in the case of reformulated gasoline, because the cost of RVP control increases as the level of RVP drops. The incentives for accurate measurement of aromatic content and benzene levels are at present comparable to those that existed for RVP measurement five years ago. Based on the Agency's experience with RVP repeatability, therefore, EPA believes it is appropriate to project increases in measurement precision and accuracy for these parameters as well. In the case of benzene, current standard procedures for benzene testing have reproducibility levels of approximately 0.3 volume percent at the maximum level of benzene permitted under the Act. Given the need to control benzene to meet the benzene limit specified in the Act for reformulated gasoline, the impact of benzene content on toxics emissions, and the ability of fuel suppliers to sell benzene credits, EPA believes it appropriate to project increases in benzene measurement precision that are comparable to those achieved for RVP (i.e., to 0.05 volume percent or lower). Alternative measurement methods with comparable or better reproducibility levels than the current standard procedures (such as ASTM procedure D4053 and D3606) currently exist, demonstrating the potential for improved precision. A similar situation applies to oxygenate measurement since oxygen credits may be sold in a manner similar to benzene credits under today's proposal. Current incentives for precise oxygenate measurement are limited, but the reformulated gasoline program will create strong legal and economic incentives to improve oxygenate measurement reproducibility. Furthermore, unlike for RVP and benzene which are components of gasoline, fuel suppliers can more easily control the level of oxygenate in their fuels by measuring the amount of oxygenate added to a known quantity of non-oxygenated gasoline. Therefore, EPA believes it appropriate to project an improvement in current reproducibility levels for the most commonly used oxygenates to a level of approximately 0.1 weight percent oxygen or lower. Aromatics are not directly controlled by the Act or by today's proposal. However, aromatics content affects toxics emissions (as do RVP levels, oxygen content, and benzene content), hence the ability to accurately measure aromatics affects the margin of safety that fuel suppliers would be likely to maintain for toxics compliance. Current standard practices for aromatics measurements yield reproducibility levels of between 2.5 and 3.5 volume percent for levels of aromatics found in current gasoline blends. EPA believes that substantial improvements in aromatics measurement are possible for the reasons outlined above, but EPA believes the incentives for such improvements are not as strong as for benzene since the benefits of more precise and accurate aromatics measurement are limited to the effect of aromatics on toxics emissions. EPA believes it reasonable to project improvements in aromatics reproducibility to 1.25 volume percent or less. Alternative measurement methods with reproducibility levels that are comparable or better than current standard methods (such as the procedures currently in use at EPA's Ann Arbor laboratory) demonstrate the potential for improved precision but are not currently in widespread use. Using 1.25 volume percent as a conservative estimate for aromatics reproducibility, 0.05 volume percent for benzene reproducibility, 0.1 psi for RVP reproducibility, and 0.1 weight percent for oxygen content reproducibility, the implied margin of safety for toxics emissions can be calculated using the equations discussed earlier in Section II. This margin of safety can be calculated by taking the root mean square of the effect of the margin of safety for each parameter. The resulting calculation yields a toxics emissions margin of safety of approximately 1.5 percentage points or lower of emission reduction. Additional improvements in aromatics reproducibility to levels below 1.25 volume percent are expected to reduce the margin of safety that refiners can be expected to maintain. As such improvements are made, fuel suppliers will be able to maintain margins of safety smaller than 1.5 percentage points of toxics emissions. The incremental stringency of the toxics standards under averaging should therefore result in fully recapturing the margin of safety, as well as obtaining greater environmental benefits than would be obtained without averaging. The same is also expected for the VOC performance standards under averaging. These projections and the associated proposed increment in the stringency of standards under averaging are summarized in Table VI-1. Table VI-1.--Margins of safety Current Projected Fuel parameter reproducibility reproducibility Increment Benzene, vol % 0.3 0.05 0.05 Oxygen, wt % 0.6-0.75 0.1 0.1 RVP, psi 0.1-0.35 0.1 0.1 Aromatics, vol % 2.5-3.5 1.25 n/a Toxics, % reduction n/a n/a 1.5 Under the proposed rule, the averaged toxics emissions reduction would be determined over an averaged period of January 1 through December 31. The summer toxics reduction model would be used to determine emissions for gasoline designated as summer toxics-controlled gasoline, and the winter toxics reduction model for gasoline designated as winter toxics-controlled gasoline. The Agency is proposing that each refinery would be required to designate gasoline using the summer toxics model beginning on the date it begins to produce VOC-controlled gasoline, and continuing until the date the refinery begins to produce gasoline that is not VOC-controlled, but for a maximum of five and one-half months. During the remainder of the year (a minimum of six and one-half months) the refinery would be required to use the winter toxics model. (This discussion applies equally to importers, but for clarity will be couched in terms of refineries only.) The Agency is proposing that the time during which summer toxics designated gasoline could be produced be limited. An economic incentive to produce more summer toxics gasoline derives from the fact that it is easier technically and less costly for a refiner to meet the summer toxics reductions than the winter toxics reduction. Without the proposed time limit, there would be an economic incentive for refiners to produce more summer toxics gasoline for a longer time period than was used by EPA in determining the appropriate summer toxics emission model, thus skewing the averaged standards. The summer toxics emission model is based upon the time period from April 1 through September 15, described in section II-A.3.e. EPA considered proposing that the summer model would be required for calculating toxics emissions for all gasoline produced during the high ozone season, June 1 through September 15. This option was rejected, however, because refiners will need to produce VOC-controlled gasoline substantially before June 1 to ensure that facilities upstream of the retailer meet the VOC-controlled gasoline standards on May 1. By requiring refiners to begin using the summer toxics model when they begin producing VOC-controlled gasoline, the production periods for gasoline designated as VOC-controlled and for gasoline designated for summer toxics will coincide totally or in large part. Some refiners may find that they need to produce VOC-controlled gasoline for a longer time period than five and one-half months, in order to supply markets located at different distances from the refinery. For example, a hypothetical refinery located in Houston, Texas that supplies gasoline to Houston and also to New York City may have to begin producing VOC-controlled gasoline as early as March 15 in order to bring gasoline in the refiner's New York City terminals up to the VOC-controlled standards by May 1. This same refiner may have to continue producing VOC-controlled gasoline until September 15, in order that the gasoline in the refiner's Houston terminals meets the VOC-controlled standards until September 15. It may be necessary, therefore, for this refiner to produce VOC-controlled gasoline for six months (March 15 through September 15). This refinery would begin producing gasoline designated for summer toxics on March 15, but would be required to stop producing summer toxics gasoline on September 1, however, due to the five and one-half month maximum for summer toxics. During the September 1 through September 15 period, this hypothetical refinery would produce gasoline that is designated as VOC-controlled and winter toxics. EPA is proposing that RVP for reformulated gasoline covered areas be averaged separately for VOC-Control Region 1 and VOC-Control Region 2. EPA believes this will ensure that VOC-Control Region 1 would receive an appropriate share of lower RVP gasoline. Otherwise, for example, gasoline having 7.1 psi RVP could be produced and shipped to VOC Region 2, and through averaging allow "dirtier" reformulated gasoline to be shipped to VOC Region 1. 3. Compliance Surveys In an effort to maximize the benefits of an averaging program and still remain faithful to Congress' intent that each covered area be supplied with gasoline that meets the applicable requirements on average, EPA proposes alternative averaging requirements. First, as the statute provides, a fuel supplier may use any credits it earns (or obtains from another supplier in the case of oxygen and benzene credits) in the covered area in which the credits were earned. Under this approach, the supplier would have to maintain records sufficient to confirm where credit-generating and credit-requiring gasoline was sold. In the alternative, a fuel supplier could avoid direct monitoring of where its credits were earned and used, and instead prove that covered areas where it supplied reformulated gasoline received the correct mix of averaged gasoline by conducting a survey of the average quality of the gasoline in each covered area where it supplied averaged gasoline. (In the place of individual surveys, fuel suppliers could cooperatively conduct a comprehensive program of surveys that would determine the average quality of averaged fuel in affected covered areas.) If the survey revealed that the gasoline being sold in a covered area did not meet the reformulated gasoline standards on average, however, the supplier would be subject to more stringent averaged standards and minimum/maximum requirements in the following control periods. EPA expects that the threat of tighter standards would provide fuel suppliers with ample incentive to ensure that, indeed, the right mix of gasoline is sold in each covered area. In essence, the alternative averaging requirements would give fuel suppliers the opportunity to obtain greater administrative flexibility. The requirement that they conduct a survey to establish that the covered area meets the standards, on average, plus the threat of future tighter standards, provides an adequate assurance that the alternative averaging requirements will accomplish the statutory objective. The compliance surveys being proposed by EPA would monitor the average benzene, oxygen, RVP, and toxics emission performance of gasoline being sold at retail outlets to determine if the levels for these parameters meet per- gallon (as opposed to average) standards. In the event a covered area fails a survey, both the standards for average compliance and the maximum/minimums would be made more rigorous than initial standards. No adjustment in the oxygen minimum is being proposed. EPA believes this approach is appropriate, however, because VOC and toxics emission performance are a function of oxygen content; if the oxygen content is sufficiently low that a covered area is not achieving the requirements for VOC or toxics emission reductions, ratchets will occur. For example, if a covered area fails a toxics survey as a result of inadequate oxygen, a toxics ratchet will result. As discussed elsewhere in this preamble, the VOC emission reduction requirement of section 211(k) is achieved only if both the oxygen and the RVP standards are met. As a result, a survey failure of either the oxygen or the RVP standards indicates the VOC emission reduction requirement has not been achieved in the covered area. Although no oxygen ratchet is included, an RVP ratchet is required in the case of a survey failure for either oxygen or RVP. EPA believes the RVP ratchet will provide an adequate incentive to deter both RVP and oxygen noncompliance.45 EPA is seeking comments on this issue. NOTE 45 As is explained above, the survey if focused on gasoline that meets average standards (samples that violate the minimums/maximums are excluded from the survey). A survey failure results from an excessive proportion of "high average" gasoline in a city during a survey. C. Standards for Compliance on Average The initial standards for compliance on average, which are more rigorous than the standards for per-gallon compliance, are listed in Table VI-2. This table also includes the adjusted standards for averaged reformulated gasoline to be supplied to a covered area which fails a survey, which is discussed in the following section. Table VI-2.--Standards for Compliance on Average /1/ Initial standards 1st adjustment 2d adjustment Per gal Per gal Per gal Category Average max/min Average max/min Average max/min RVP (psi): VOC Region 1 7.1 7.4 max 7.0 7.3 max 6.9 7.2 max VOC Region 2 8.0 8.3 max 7.9 8.2 max 7.8 8.1 max Toxics: Benzene (volume %) 0.95% 1.3% max 0.90% 1.2% max 0.85% 1.1% max Toxics emission reduction (%) 18.5% none 19.5% none 20.5% none Oxygen: (Weight %) 2.1% 1.5% min N/A N/A N/A N/A /1/ Parties who achieve compliance on average must, in addition, meet the per-gallon requirements for NOx emission and heavy metals content, and the average requirements for sulfur, T-90, and olefins. D. Adjustment of Standards for Average Compliance 1. Compliance Surveys--An Introduction As noted above, EPA is proposing that each refinery and importer that chooses to comply with applicable requirements on average without the administrative burden of documenting the movement of each gallon of its averaged gasoline must conduct a gasoline quality survey in each covered area that is supplied with any reformulated gasoline produced at that refinery or imported. These surveys are intended to ensure that the statutory requirements for reformulated gasoline are met on average in each covered area by determining if the gasoline being sold in each covered area meets the reformulated gasoline requirements on average. In the event that the survey results in any particular covered area indicate that the gasoline does not meet these requirements on average, the standards for compliance on average for that covered area would be adjusted. This survey requirement would be a condition of averaging without required documentation of averaged gasolines' movement. If a refiner or importer did not conduct the required surveys or document the movement of each gallon of averaged gasoline, it would have to meet the per-gallon standards for all of its gasoline. Under EPA's proposal, this survey requirement would be satisfied if a survey program covering all covered areas receiving averaged gasoline were carried out in lieu of each refiner and importer conducting independent survey programs. EPA believes that it would be possible for a consortium of refiners and importers who intend to average across covered areas to plan and carry out a comprehensive survey program, that would be significantly less expensive than the alternative of each party conducting a program individually. EPA is proposing that either type of survey program be conducted by a company that is independent of any refiner or importer (the "surveyor") and pursuant to a survey plan which EPA has approved by December 1 of the year preceding the year in which the surveys are conducted. Moreover, under EPA's proposal, a contract would have to be in effect with the surveyor which includes each of the elements of the survey plan, and the surveyor must have been paid the amount of money necessary to complete the survey plan, or this money placed into an appropriate escrow account to assure the money necessary for the surveys is available. EPA believes these requirements (that the survey plan must be concurred in, and contracted and paid for in advance) are necessary in order to ensure before averaging takes place that the required surveys will occur. In the event that a survey program (either individual or comprehensive) does not occur, a refiner or importer would have violated the proposed regulations for all gasoline which does not meet per-gallon standards. Merely enforcing these violations, however, would not provide the information which would be generated by a survey, which EPA believes is essential to determining the effectiveness of the overall program if any average-compliance reformulated gasoline is produced. EPA is proposing a mechanism for refiners and importers to seek EPA approval for survey program plans, whereby such approval must be requested of EPA by September 1 of the year preceding the year in which the surveys would occur. EPA would then have 90 days to decide whether to approve the survey plans. Because refiners and importers must have survey plans which EPA has approved by December 1 (91 days after September 1), EPA believes that in most cases it would be prudent for refiners and importers to work proposed survey plans with EPA and other interested parties well in advance of the September 1 deadline. EPA's evaluation of a survey plan petition would be based upon whether the plan satisfied each of the criteria included in the proposed regulations (which are discussed in this section). EPA believes it is necessary under any survey program that refiners and importers who supply averaged reformulated gasoline to a covered area not know in advance when a survey will occur, in order to avoid any possibility that a refiner or importer could "game" the survey program by supplying non- representative clean gasoline for the survey period. In order to preserve the needed element of surprise, EPA is proposing that the surveyor obtain survey dates, and in the case of a comprehensive plan the locations, from EPA, and that EPA would not supply this information to the surveyor more than two weeks in advance of the date of any survey. EPA believes that this two-week interval is sufficiently short that a refiner or importer would be unable to replace gasoline at retail outlets in advance of the survey, even if the refiner or importer did learn of the impending survey. In addition, EPA is proposing that surveyors be required to keep the survey locations and dates confidential. EPA is proposing that survey plans include several provisions which are intended to ensure that the survey is properly carried out. First, the surveyor is required to send to EPA, upon EPA's request made within thirty days of its receipt of the survey report, a duplicate of each gasoline sample taken during a survey, so that EPA can perform confirmatory analysis of the sample. In the event EPA's analysis of a sample is different from the surveyor's, EPA would have the discretion to substitute its results as the basis for calculating the parameter averages for the survey. In addition, EPA is proposing that surveyors be required to allow EPA representatives to periodically monitor the conduct of the survey, which gives EPA the ability to determine if the survey is being conducted in accordance with the survey plan. EPA also is proposing that surveyors be required to submit reports of surveys to EPA at the conclusion of each survey. These reports are intended to include sufficient information for EPA to evaluate whether the survey was properly carried out, as well as providing EPA with the data necessary to determine whether a covered area passed or failed the survey. Under EPA's proposal, a survey would be defined as all of the valid samples collected pursuant to an approved survey plan in a covered area during seven consecutive days. 2. Number of Surveys a. Number of surveys under an individual refiner survey program. EPA is proposing that if a refiner or importer elects to satisfy the compliance survey requirement by conducting an individual survey program (as opposed to participating in a comprehensive program), that the refiner or importer be required to conduct a series of four surveys in each covered area which is supplied with reformulated gasoline by that refiner or importer. Each refiner or importer would be required to survey the covered area's gasoline supply, and not just that supplier's fuel in the area. EPA believes that every covered area (including any areas that could opt into the program) is supplied with gasoline by more than one refiner or importer, and in the case of the larger covered areas, by at least dozens of such parties. Because each such refiner and importer would be required to conduct the series of four surveys, each covered area potentially would be surveyed a relatively large number of times and at least at the frequency required under the comprehensive program (discussed below). EPA believes this frequency of sampling would be sufficient to determine whether each covered area is receiving reformulated gasoline which meets the applicable standards on average for the same reasons which are discussed below for the comprehensive program. b. Number of surveys under a nationwide program. EPA believes that any difficulties in ensuring that standards are met on average in each covered area are more likely to occur near the beginning of the reformulated gasoline program than after it has been in place for some time. This belief is based upon knowledge that initial implementation of the program will involve adjustments in the distribution system for gasoline, different document- handling procedures, different refinery procedures, implementation of new pipeline specifications, and a variety of similar changes. As these new procedures are mastered, however, refiners and importers involved in the averaging program should be better able to comply on average in each covered area. Therefore, EPA believes that early in the program relatively more surveys should be conducted to determine whether standards are in fact being met on average. For the nine covered areas specified in the Act, EPA believes that 120 separate unannounced surveys in 1995 would provide adequate indication of whether standards are being met on average in each area, and also would reveal the existence of any temporal "spikes" during the averaging period. This number of surveys would, on average, result in a survey being conducted in each covered area during each month of 1995. If these surveys were spaced evenly through the year, a covered area would receive about four separate surveys during the high ozone season, each of which would determine whether the VOC standard is being met, and the toxics survey series would be based upon about thirteen surveys, which would provide a relatively substantial data base for determining average toxics emission reduction levels. If the 1995 surveys reveal that standards are being met in each area, the Agency believes that progressively fewer surveys will suffice to provide the necessary assurance, according to the following schedule: 1995 120 surveys. 1996 80 surveys. 1997 60 surveys. 1998 and thereafter 50 surveys. These survey numbers would result in the annual average number of surveys being conducted in each covered area declining from more than one per month in 1995 (13.3 surveys per covered area) to just under one every other month in 1998 and later (5.5 surveys per covered area). EPA believes that even the smaller number of surveys in 1998 and later would provide sufficient basis for EPA to infer whether covered areas are meeting standards on average. In the event that other ozone non-attainment areas opt-into the program, the number of surveys required for each year would be increased in proportion to the increase in total reformulated gasoline gallons likely to be produced as a result of these areas opting in. For example, if areas that opt-into the program as of 1995 consumed 10 billion gallons of gasoline in 1994, and if the nine originally covered areas consumed about 25 billion gallons in 1994, then the numbers of surveys for 1995 and subsequent years would be determined as follows: 1995 120+(120x(10/25))=168 1996 80+(80x(10/25))=112 1997 60+(60x(10/25))=84 1998 and thereafter 50+(50x(10/25))=70 In the event that a covered area fails a survey according to the criteria discussed below, the presumption that compliance is getting easier over time and thus that non-compliance is less likely in subsequent years is obviously flawed, at least for the area in question. The Agency is thus proposing that in such situations the decrease in the number of surveys that would normally take place in the year after the failure(s) be reduced so that a higher level of scrutiny is possible in the area(s) that failed. This general approach of increasing the level of survey activity upon finding a failure is analogous to increased intensity of inspection used in industrial quality control sampling. Specifically, it is proposed that the otherwise applicable reduction in number of surveys be diminished in proportion to the failed areas' share of total gallons of reformulated gasoline in covered areas. For example, if an area with a 6-billion gallon volume in 1995 fails a survey in that year and total 1995 volume in covered areas is 35 billion gallons, then the number of surveys in 1996 would be 87 rather than the originally scheduled 80--a 17% cut in the 40-survey reduction that would otherwise have happened in 1996. This example assumes that no other areas have opted into the program. EPA proposes that the increased intensity of survey activity remain in place as long as the more stringent standard brought about by the failure is applicable. At the outset of the program it is important to quickly establish whether the gasoline suppliers of each covered area are able and willing to comply. It is thus being proposed that each of the nine originally covered areas receive at least one VOC survey in 1995 and that opt-in areas receive at least one such survey during the first year in which they are covered by the program. Beyond this basic distributional constraint and the requirement that a series of four surveys be used to determine toxics compliance (as discussed below), EPA believes that the rest of the surveys available in a given year should be available for allocation to monitor gasoline most closely in those areas where there is some reason to believe that standards are less likely to be met on average or where air quality problems are most severe. EPA believes further that it is in the best position to determine when and where these conditions exist, which is an additional reason for the requirement that EPA inform the surveyor of the dates and locations for surveys. EPA believes it is in this position as a result of its overall responsibility for monitoring nationwide gasoline quality, not only under the reformulated gasoline program but also for other gasoline quality programs (e.g., gasoline volatility). As a result, EPA has data and experience regarding the times and places where gasoline quality violations have occurred in the past, and which provides EPA with insight for scheduling the reformulated gasoline surveys. 3. Other Required Survey Design Features a. Survey duration. Because of concerns that averaging could lead to possible short-term sharp peaks or "spikes" in undesirable gasoline qualities that could contribute to episodes of poor ambient air quality, EPA believes that the surveys must be of limited time duration. Specifically, the surveys should be designed in such a way as to make statistical inference at an acceptable precision level regarding gasoline quality for a non-attainment area during a period of time no longer than a week. While peak emission levels are not of as much concern for toxics as for VOC levels, the desire to capture any season-specific elevations in toxic emissions suggests that toxics surveys be similarly limited to a one-week period, though the results of four surveys will be combined for making toxics compliance determinations. b. Location of retail outlets for sample collection, and number of samples per survey. EPA believes that the survey plan must include procedures which will result in samples being collected at a sufficient number of retail outlets having sufficient diversity that the resulting data is reflective of all gasoline which is being dispensed in the covered area. The types of diversity which must be addressed include the portion of the gasoline which is dispensed at retail outlets which operate under different brand names and as independents; the portion which is dispensed at retail outlets which dispense a large volume of gasoline versus those which dispense a small volume; the portions which are dispensed in different geographical sections of the covered area (e.g., downtown areas versus suburbs); the portions which are of different gasoline grades (e.g., regular, mid-grade, and premium); plus any other factors which could affect the available gasoline. For this reason, EPA believes that the survey approach of simply sampling each retail outlet located on a major road in the covered area probably would not be acceptable, because the retail outlets located on such a road may be disproportionate with regard any of the factors listed above. The number of samples collected during a survey also must result in an appropriate degree of confidence in the average values for oxygen, benzene, aromatic hydrocarbons and RVP which result from the survey. Thus, EPA believes a survey should include a minimum number of samples which is sufficient to establish such that a one-sided 95% confidence interval can be created about the sample mean to assure that the error in predicting the mean is less than the an appropriate tolerance for each parameter. Under EPA's proposal, the appropriate tolerance level for RVP is 0.1 psi; for benzene content (by volume) is 0.05%; and for oxygenate content (by weight) is 0.1%. These tolerance levels are being proposed because they represent the incremental difference for each parameter between the per-gallon standard and the initial average standard. For example, the per-gallon oxygen standard is 2.0% and the average standard is 2.1%, or a 0.1% difference. EPA believes it is necessary for the survey to be able to detect differences in these parameters at least to this degree of precision. No tolerance level is being proposed for aromatic hydrocarbon, however, because EPA is unaware of an appropriate basis for setting a tolerance for this parameter. In addition, EPA believes that the sample numbers derived through the analysis for the remaining three parameters will result in a sufficiently large sample size to provide an appropriate level of confidence for the aromatic hydrocarbon average. The equation for determining the number of samples required to meet this requirement is as follows: [ ...Illustration appears here... ] where Z = 1.645 (the appropriate standard normal variate for 95% confidence) e = error tolerance s = standard deviation N = sample size For example, for calculating the number of samples required to provide the required confidence for the average level of RVP, then, Z=1.645; e=0.1; and s=0.496. Solving the above equation for N results in 67 samples which must be collected. One additional consideration which EPA believes must be addressed in the survey program plan is that the standard deviation, s, for each of these parameters must be determined and justified in the plan. (In the example for calculating sample size for RVP, above, the standard deviation value used, 0.495, was derived from RVP testing data which previously had been conducted.) These standard deviation values may be based upon data from other testing programs, if available and appropriate for use in these programs. It may be necessary, however, to conduct a pilot survey in a covered area in order to establish acceptable standard deviation values. 4. Determination of Compliance on the Average The purpose of compliance surveys is to ensure that refinery/importer averaging achieves the same compliance on average with the reformulated gasoline standards as covered area averaging, and thus does not result in poorer air quality than would have otherwise occurred with covered area-based averaging or with straight per-gallon standards. Given this purpose, EPA believes that samples exceeding the prescribed minimum or maximums for oxygen, benzene, and RVP should be excluded from surveys on grounds that the maximums and minimums are included in this program in order to increase the likelihood that standards will be met on average. Refiners/importers whose product exceeds the minimum and maximum criteria are subject to detection (and are thus likely to be deterred) through auditing of their analysis program, by direct enforcement sampling programs, and by enforcement use of survey analysis results. EPA is proposing that failure of a survey or survey series for a reformulated gasoline characteristic (benzene content, VOC, or toxics emission reduction) should be defined as when the average of the values for that characteristic for all samples in the survey falls short of the non- averaged standard for that characteristic. This approach imposes a significant level of risk on the refineries servicing an area if their product is, on average, precisely at the averaged emission reduction standard. The level of risk may be reduced by producing gasoline that is somewhat better than the averaged standard, and by selecting a relatively large sample size. The industry can exercise some control over the risk of incorrect survey failures through the setting of production targets. Industry also can propose survey plans which include larger numbers of samples per survey. Survey determinations of average VOC emission reduction levels as determined by average RVP and oxygen levels (and the consequent adjustments of standards, maximum levels, and survey frequency that result if the survey shows the RVP or oxygen standards have not been met on average) are intended to provide assurance that averaging is not resulting in either short or long term air quality degradation relative to what would occur under covered area- based averaging or with straight per-gallon standards. Thus EPA is proposing that the average RVP and oxygen levels be determined from surveys conducted in a single week during the high ozone season and this average compared to the non-averaged standard to decide whether the requisite reductions have been achieved on average. Since the chronic effect of toxic emission is considered to be of more importance than short-term exposure to toxic emission "spikes", determinations of average toxic levels are appropriately made on the basis of averaging over a longer period of time, but with provisions for assuring that the data set used be representative of the whole averaging period of one calendar year. Thus EPA is proposing that all of the compliance data collected in a covered area during a calendar year, but from a minimum of a series of four surveys (as defined above) be combined to determine average levels of toxics reduction. These four surveys would be timed so that two of them fall during the high ozone season and two fall outside of that season. The "simple model" would be applied separately to the analytic results for each sample and then the resulting emission reduction figures averaged. If the average benzene level or toxics emission reduction falls short of the non-averaged standard, then the area is considered to have failed for that characteristic. 5. Adjusted Standards for Compliance on Average Based Upon Survey Results Under EPA's proposed regulations, the standards for compliance on average and the per-gallon maximums/minimums would be adjusted for covered areas which fail a survey or survey series. These adjusted standards are summarized in Table VI-2. EPA believes these adjustments are appropriate for achieving the goal of ensuring that each covered area receives the full benefits of reformulated gasoline, because each adjustment represents significant movement closer to the per-gallon standards. After a second adjustment, there is only minimal or no difference between the average standards and the per- gallon standards. For example, in the case of RVP standards for VOC-Control Region 1, the initial per-gallon maximum is 7.4 psi and the per-gallon standard is 7.2 psi; the first adjusted maximum is 7.3 psi; and the second adjusted maximum is 7.2 psi, which is equal to the per-gallon standard. Moreover, because averaging permits refiners and importers flexibility in achieving compliance, they would have a heightened incentive to assure compliance after a single ratchet, in order to avoid the loss of all flexibility (for practical purposes) which would result from a second ratchet. The standards for a covered area would be tightened beginning in the year following the year in which a survey failure occurred. This would be true for a failure of a VOC emission performance survey or a benzene content or toxics emission performance survey series. Another approach would be to impose the adjusted standards immediately upon a survey failure, rather than waiting until the following year. However, there would necessarily be a time lag between the actual conduct of a survey and the availability of the results of that survey, because of the time needed for sample and data analysis. Moreover, additional time would be required for refiners and importers to begin producing gasoline to meet the new standards, and for this gasoline to travel through the distribution network to the covered area. In the case of a toxics or benzene failure, the survey series normally would encompass most of a calendar year, leaving little if any time to implement an adjusted standard in the year of the survey series. In the case of VOC, the earliest a VOC survey could be conducted is the first week of June; considering that the high ozone season ends on September 15, insufficient time would remain for gasoline to be produced to meet an adjusted standard and reach the covered area. The proposal also provides for standards which have been tightened as a result of a survey failure to be relaxed if the affected covered area passes in two consecutive years all surveys for the particular standard (benzene, RVP, or toxics emission performance) that had been tightened. If a covered area that had such a previously tightened-then-relaxed standard later fails a survey for that standard, the standard is once again tightened and becomes ineligible for future relaxation regardless of the number of subsequent surveys. For example, if a covered area failed a benzene survey series in 1995 (i.e., the average benzene content of all samples taken in a covered area during four surveys during 1995 was greater than 1.0% by volume), the averaged benzene standard for that covered area beginning in 1996 would be changed from 0.95% to 0.90%, and the maximum benzene level would be changed from 1.3% to 1.2%. If that same covered area passed the benzene surveys conducted in 1996 and 1997, the benzene average and maximum standards for that covered area would be relaxed to 0.95% and 1.3%, respectively, beginning in 1998. If, however, the covered area failed a benzene survey series in 1998, the average and maximum standards would once again be adjusted to 0.90% and 1.2%, and could not thereafter be made less stringent regardless of the results of subsequent benzene surveys. 6. Applicability of Adjusted Standards As explained above, the proposed rules require that when a survey or series of surveys show the reformulated gasoline supplied to a covered area does not meet a reformulated gasoline standard on average, a tightened standard must be met in the following year. This adjustment is necessary to ensure that all standards are met on average in the covered area. As a result, the adjusted standard must apply to each refinery that produces gasoline, and to each importer that imports gasoline, that could reasonably be expected to be supplied to the affected covered area. EPA is proposing, therefore, that any adjusted standard apply to all averaged gasoline produced at a refinery which supplies any gasoline to the affected covered area (subject to the de minimis exception, discussed below), rather than the alternative of applying an adjusted standard only to that portion of the refinery's averaged gasoline refinery which is actually supplied to the covered area. EPA believes the proposed approach is necessary to adequately increase the likelihood that the standard is met in all covered areas. This is because the averaged gasoline supplied to an area which failed a survey also was likely supplied to areas which were not surveyed 46 (and which could have failed a survey if one had been conducted). Adjusting the standard for all of a refinery's averaged gasoline increases the probability that all covered areas supplied by that refinery will meet all standards on average. Moreover, the fungible distribution of gasoline requires that the ratchet apply to all the averaged gasoline produced by a refinery to ensure that portion of the ratcheted gasoline is actually delivered to the covered area which failed the survey. NOTE 46 Surveys are required in each covered area only in the first year in which averaged gasoline is supplied to a covered area. In addition, if different standards applied to different portions of averaged gasoline produced at the same refinery and delivered to different covered areas, affected regulated parties would be required to segregate the different gasolines in order to ensure that the proper gasoline goes to each covered area. This type of segregation would significantly constrain the transportation of gasoline as a fungible commodity with possibly serious market consequences. EPA also is proposing that adjusted standards apply to each refinery which supplied any averaged gasoline to a covered area at any time during a year a survey failure occurred (subject to the de minimis exception, discussed below), regardless of whether that refinery supplies gasoline to that covered area during the period the adjusted standard is in effect. In other words, a refinery may not avoid an adjusted standard by discontinuing its supply of gasoline to a covered area having an adjusted standard. EPA believes this approach is appropriate because a refinery that supplied a covered area during a year there was a survey failure may have contributed to that survey failure. If the refinery merely changes the destination of its gasoline to another covered area, without applying the adjustment, the refinery could cause a survey failure in the second covered area.47 NOTE 47 Surveys measure the quality of gasoline at retail outlets, which normally is a mixture of gasolines from numerous sources (due to fungible mixing, exchange agreements, etc.). As a result, in the event of a survey failure the extent to which any particular refinery or importer was responsible for the failure (if at all) normally would be unknown. A potential consequence of applying adjusted averaged standards to refineries even if they no longer supply the area having a failed survey is that refiner decisions to change markets may be affected for reasons unrelated to the adjusted standard. For example, the refining costs of gasoline supplied to an area with standards adjusted to be more stringent may be higher than for gasoline subject to non-adjusted standards. A refiner, therefore, may feel compelled to stay in that market because the higher costs of producing gasoline to meet the adjusted standards may make it difficult if not impossible to compete in an alternative market with non-adjusted standards.48 NOTE 48 A refiner also could avoid the extra cost of producing gasoline to meet the adjusted averaged standard by producing gasoline under the per- gallon standard, which is not subject to adjustments. EPA is proposing an exception to the requirement that adjusted standards would apply to a refinery that supplied any reformulated gasoline to a covered area that failed a survey. A refinery would not be required to adjust its standard for average compliance as a result of supplying gasoline to the covered area in the year of a survey failure or to an area having an adjusted standard, if the volume of gasoline supplied was very small, and where the refiner could show that it was unaware that any gasoline from the refinery supplied the covered area. For purposes of this proposed exception, the volume supplied would be less than one percent of the refinery's annual production of reformulated gasoline, or 100,000 barrels, whichever is less. Thus, for example, if a refinery's annual production of reformulated gasoline is 11 million barrels, the volume threshold for this exception would be 100,000 barrels (the lesser of 110,000 barrels (1% of 11 million barrels) or 100,000 barrels). If 60,000 barrels of gasoline from this hypothetical refinery were purchased on the spot market and transported to a covered area that had an adjusted standard in such a manner that the refiner had no knowledge of the delivery to this covered area, the refinery would not be subject to the adjusted standard. EPA believes that this de minimis exception is appropriate, because of the small volumes of reformulated gas which are involved. A typical covered area may have gasoline sales of 150 million barrels per year; 100,000 barrels is such a small portion of this total that it is unlikely it could influence the overall gasoline quality in the area. On the other hand, a refiner could sell on the spot market gasoline that was produced at a particular refinery, that could be transported to a covered area outside that refinery's normal distribution. In such a case, the refiner may have no knowledge any gasoline from the refinery was in fact used in a covered area with a failed survey or adjusted standard. EPA is proposing 100,000 barrels as the minimum, because this represents the capacity of a typical offshore petroleum barge. One additional exception to the requirement that adjusted standards apply to all of a refinery's averaged production relates to the difference in reformulated gasoline supplied to the different VOC-Control Regions. For example, if Houston, Texas, which is VOC-Control Region 1, failed an RVP survey, refineries which supply gasoline to Houston must apply the adjusted RVP standards only to gasoline produced for VOC-Control Region 1 and not for gasoline produced for VOC-Control Region 2. Under EPA's proposal, refiners are required to inform EPA of each refinery participating in the averaging program and the covered areas which receive averaged gasoline from that refinery. This information would be submitted at the time of registration and as a part of each periodic and interim report. EPA will rely on these declarations to identify the refineries to which any adjusted standards apply. As a portion of its enforcement and audit programs, moreover, EPA intends to scrutinize the ultimate destinations of averaged gasoline produced at each refinery. If a refinery is found to have supplied a covered area having an adjusted standard, the refiner will be found in violation if its production at that refinery does not meet the adjusted standards. EPA is proposing that adjusted standards apply to all reformulated gasoline imported by an importer that supplied a covered area that failed a survey, but with a significant exception. Unlike a refinery, which is in a single fixed location with relatively fixed distribution systems, an importer may import gasoline at facilities located throughout the country, and may use different facilities at different times. As a result, there is less certainty of knowing in advance which covered areas are supplied with gasoline imported by a particular importer. In addition, due to the wide-ranging movement of gasoline in this country, through pipelines and by water transport, the ultimate destinations of gasoline arriving at a particular port of entry may be difficult to ascertain. At the same time, it is unlikely that gasoline which is imported at a facility located at one end of the country will be transported to covered areas located at the opposite end. In order to address these considerations, EPA is proposing that an importer must apply adjusted standards only to gasoline which it imports at a facility located in a region of the country from which there is significant gasoline movement to the region in which the covered area having the adjusted standards is located. The plan being proposed by EPA for importers is based upon data on gasoline movement between Petroleum Administration for Defense Districts (PADDs) contained in Petroleum Storage and Transportation, National Petroleum Council, April 1989, which is summarized in Table VI-3. Table VI-3.--GASOLINE MOVEMENTS FROM PADD TO PADD (In thousands of barrels per day) To PADD PADD PADD PADD PADD From I II III IV V PADD I n/a 225 5 0 0 PADD II 142 n/a 196 70 0 PADD III 2,579 871 n/a 0 60 PADD IV 0 47 34 n/a 41 PADD V 0 0 1 0 n/a From these data, EPA constructed a matrix of PADDs from which it is likely that gasoline will be transported to any other PADD. For example, it is likely that gasoline supplied to covered areas located in PADD I comes from facilities (refineries and import facilities) located in PADDs I, II, and III, and it is unlikely that covered areas located in PADD I are supplied from facilities located in any PADD other than PADDs I, II or III. (In constructing its matrix, EPA discounted the possibility of gasoline movements from PADDs I and V to PADD III, because the volumes are relatively small.) If a covered area located in PADD I failed a survey for toxics emission reduction in 1996, for example, each importer would be required to apply the adjusted standard to all reformulated gasoline for which compliance is achieved on average and which is imported into any facility located in PADDs I, II, or III during 1997 or later, but not to gasoline imported into facilities located in PADDs IV or V. If, however, imported gasoline entered the country at a facility located in PADDs IV or V and was then transported to a covered area with the adjusted standard, the importer also would be required to apply the adjusted standard to gasoline imported at that additional facility. EPA requests comments on this proposal for identifying which imported gasoline must be subject to adjusted standards. E. Averaging periods Under EPA's proposal, the averaging period for toxics emission performance and benzene and oxygen content is the calendar year since they are year-round requirements. Since VOC emission performance is controlled only during the high ozone season, however, a flexible VOC averaging period (which requires that RVP and oxygenate standards be met for this time period) is proposed encompassing the time during which any particular refinery or importer produces or imports VOC-controlled gasoline. The proper length of the averaging periods was explored during the regulatory negotiation process. Gasoline refiners and importers requested averaging periods which were as long as possible, as the longer averaging periods provided greater flexibility for achieving compliance. Other parties to the regulatory negotiations had suggested averaging periods that are much shorter (one week, or one month), in order to minimize the likelihood of large swings in the levels for the averaged parameters. EPA believes the longer averaging periods contained in EPA's proposal, both the one year period for toxics, benzene, and oxygen period, and the period for averaging VOC over the entire season for this gasoline are acceptable because achieving the overall environmental goals of the program is assured through the use of other regulatory safeguards, such as minimums and maximums and gasoline quality surveys in covered areas. The date that a particular refinery or importer begins producing or importing VOC-controlled reformulated gasoline depends upon the length of time necessary to transport the gasoline from the refinery or import facility to the covered area where the gasoline will be used. For example, gasoline produced at a refinery on the Gulf coast for use in the Northeast may take a month or more to travel by pipeline to that market, while gasoline produced at a refinery located in the Northeast may have little or no travel time to that market. As a result, EPA is proposing that the VOC averaging period for each refinery and importer begin on the date the refinery or importer first begins producing or importing VOC-controlled gasoline, and end on the date it stops producing or importing VOC-controlled gasoline, however, the end of the VOC averaging period shall not be later than September 15. EPA believes this flexible VOC-averaging season would allow regulated parties to maximize operations without compromising environmental benefits. Even though some gasoline which is designated as being VOC-controlled will be used outside the high ozone season (because of gasoline arriving at the covered area in advance of May 1 or remaining in the covered area after September 15), the minimum for oxygenate and the maximum for RVP will constrain the extent to which this gasoline is able to offset VOC-controlled gasoline which is used between June 1 and September 15. EPA will be conducting inspections during the VOC control period to determine compliance with RVP and oxygen standards and to audit product transfer documents to ensure that gasoline designated as VOC-controlled is being sold. An additional constraint on this possibility is the surveys, which will monitor for full compliance with the VOC emission performance requirements during the high ozone season. F. Constraints on oxygen averaging Section 211(m) of the Clean Air Act requires states with certain carbon monoxide nonattainment areas to require, by 1992 unless EPA grants a waiver, an oxygen content of no less than 2.7% by weight during the portion of the year prone to high ambient levels of carbon monoxide. In conjunction with this reformulated gasoline rulemaking, EPA has in separate Federal Register notices proposed various guidelines for states to follow in implementing this oxygenated fuels program. Some areas in the country will be included both in the reformulated gasoline and the oxygenated fuels programs. One implication of such an overlap is that gasoline containing 2.7% oxygen or more in compliance with the oxygenated fuels program could be used to meet the 2.1% average oxygen content requirement of the reformulated gasoline program. Under such a scenario, the gasoline delivered to covered areas not included in the oxygenated fuels program would be prone to contain less than 2.1% oxygen, which would undercut the reformulated gasoline program. The compliance surveys will reduce the likelihood that this will occur, because, in the event oxygen levels were sufficiently low, the area would fail a VOC survey. In order to address this concern, EPA is proposing that refiners, importers and oxygenate blenders may not use oxygen credits generated from reformulated gasoline which is produced or imported for use in oxygen program control areas during oxygen program control periods (or OPRG) to achieve oxygen requirements for reformulated gasoline not intended for this use. In short, parties would not be able to use the 2.7% oxygen levels required under the oxygen program to generate credits to meet the 2.1% oxygen requirement of reformulated gasoline distributed to non-oxygen program areas. An additional concern is how to determine which gasoline containing higher than 2.1% oxygen is in fact OPRG. This determination is made more complicated because parties will have a legitimate need to ship OPRG gasoline to oxygen program control areas in advance of the beginning of the oxygen program control period, in order to "blend up" the oxygen content of gasoline in terminals and retail outlets to the oxygen levels required by that program. If, however, a party classifies highly oxygenated gasoline as not OPRG when in fact the gasoline is used to "blend up" for oxygenated fuels program purposes, the reformulated gasoline program is undercut because covered areas which are not in the oxygen program will be denied the full benefits of oxygen, on average. For this reason, EPA is proposing that parties be required to classify gasoline as OPRG if the gasoline contains in excess of 2.0% oxygen and arrives at a terminal serving an oxygen program control area beginning within five days of the beginning of the oxygen program control period and ending on the last day of the control period (unless the gasoline is segregated and clearly marked as not intended for use during the control period, and in fact is not delivered to any retail outlet during the control period). It would be inappropriate to deem all gasoline containing 2.7% oxygenate to be OPRG, however, because a refiner could produce gasoline with this oxygenate content for use in non-oxygenate program areas in order to boost average oxygenate levels for the refiner's non-OPRG gasoline. EPA seeks comments to this approach for addressing the proper classification of OPRG. An additional constraint on oxygen averaging and credit trading is that oxygen requirements (either per-gallon or on average) must be met for VOC- controlled gasoline, independent of the annual oxygen averaging standard. This constraint is necessary because under the simple model, VOC emission reduction is a function not only of RVP level, but also of oxygen content. Gasoline which has an acceptable level of RVP but less than 2.0% weight (per- gallon) or 2.1% weight (average) oxygen would not have an acceptable level of VOC reduction. In the case of average compliance, oxygen levels achieved for VOC-controlled gasoline could be used to meet the overall annual oxygen standard, but oxygen levels of non-VOC-controlled gasoline could not be used to meet the 2.1% oxygen standard for VOC-controlled gasoline. When the OPRG, non-OPRG constraint on oxygen averaging and the VOC- controlled, overall oxygen constraint are combined, the result is four separate categories of reformulated gasoline which must each meet the per- gallon or average oxygen standard. These are: OPRG, VOC-controlled; non-OPRG, VOC-controlled; OPRG overall; and non-OPRG overall. G. Credit trading Under this proposal, credits created from reformulated gasoline which on average contains more than 2.1% oxygen or less than 0.95% benzene may be transferred for use by another refinery or importer to achieve compliance with the oxygen and benzene requirements. Credit trading is explicitly authorized for oxygen and benzene credits by section 211(7)(b). Under today's proposal, benzene credits may not, however, be used to achieve compliance with the toxics emission performance requirement, with the result that oxygen or benzene credits traded away or received do not alter a refiner or importer's compliance calculations for toxics emission performance. Moreover, oxygen credits from non-VOC controlled gasoline may not be used to meet the oxygen requirement for VOC-controlled gasoline. In addition, oxygen credits earned from OPRG gasoline may not be used to meet the oxygen standard for gasoline designated as non-OPRG. For example, oxygen credits earned from reformulated gasoline that is designated as being non-VOC-controlled and OPRG may not be used to achieve compliance for the category of gasoline designated as VOC-controlled (either OPRG or non-OPRG). Oxygen credits earned from gasoline in the VOC-controlled categories may, however, be used to achieve compliance with the overall oxygen requirement, so long as the OPRG, non-OPRG designations are not crossed. For example, credits earned from VOC- controlled, non-OPRG gasoline may be used to meet the overall oxygen requirement for non-OPRG gasoline, but not for OPRG gasoline. EPA believes that the reformulated gasoline credit program, like all credit programs, must be based only upon credits which are validly created. In implementing the lead phasedown credit program, EPA identified situations where a transfer of "credits" occurred, but where the "credits" were not properly created. In some of these situations, the transferee who ultimately attempted to achieve compliance using the bogus credits (and who may have been a third or fourth party transferee) acted in good faith, paying a fair price for what the transferee thought were valid credits. Even in this type of situation, however, EPA proposes that bogus credits not be allowed to achieve compliance, regardless of the good faith of the transferee. The risk of credits being determined bogus should be on the private parties to a transaction, as treating bogus credits as valid would lead to a failure to achieve the oxygen and benzene standards mandated by the Clean Air Act. The best protection for purchasers of credits against the possibility that purchased credits are bogus is to use normal business methods of protection, such as dealing with reputable companies and requiring contract clauses which protect against any liability resulting from bogus credits. EPA has included in its proposed regulations provisions which address this area. These provisions set forth the order in which credits are to be used, in situations where some credits are properly created and some are improperly created. The properly created credits will be applied first to any credit transfers before the transferor may apply any credits to achieve its own compliance. These provisions are not, however, intended to restrict persons who may facilitate trades between credit transferor and transferee. H. Example of compliance calculations This section seeks to illustrate the proposed method for calculating compliance using a hypothetical refinery which produces reformulated gasoline for both VOC Regions 1 and 2, for which no adjusted standards are in effect, which produces gasoline for both per-gallon and average compliance, which produces some reformulated gasoline for oxygenate blending, and which produces both oxygenated fuels program reformulated gasoline and non-OPRG, and winter and summer toxics gasoline. This hypothetical refinery produced a total of six batches of reformulated gasoline or RBOB during the year under consideration; these batches are summarized in Table VI-4. Table VI-4.--Specifications for Batches of Gasoline Produced by Hypothetical Refinery Batch Number 1 2 3 4 5 6 Date of production 3/1 4/15 9/1 10/1 11/1 12/1 Volume (gallons) 100 100 250 175 200 175 Designations: VOC-Control Yes Yes Yes No No No RVP Region 1 2 2 1 1 2 OPRG No No No Yes Yes Yes RBOB No No No No Yes No Toxics Summer Summer Winter Winter Winter Winter Average--Per-Gal Designations: RVP average average average n/a n/a n/a Toxics average average average per-gal average average Benzene average average average average per-gal average Oxygenate average average per-gal average average average Characteristics: RVP (psi) 7.3 6.8 7.8 n/a n/a n/a Toxics (% reduction) /1/ 18.5 18.3 18.1 13.2 18.2 18.3 Benzene (%) 0.90 0.85 0.92 1.20 0.98 0.80 Oxygenate (%) 2.3 1.7 2.2 2.7 0.0 2.7 Running Compliance Calculation /2/ RVP (VOC Region 1) /3/ -20 -20 -20 -20 -20 -20 RVP (VOC Region 2) 0 30 80 80 80 80 Toxics /4/ 0 -20 80 80 140 105 Benzene /5/ 5 15 22.5 -21.25 -21.25 5 Oxygen (Non-OPRG; VOC only) /6/ 20 -20 -20 -20 -20 -20 Oxygen (OPRG; overall) 0 0 0 105 105 210 /1/ Toxics (% reduction) is calculated by use of the applicable summer or winter emission model. /2/ Running compliance is calculated as complying total minus actual total for RVP and benzene; and actual total minus complying total for oxygen and toxics emission performance. /3/ RVP compliance measurement is in RVP-gallons. /4/ Toxics compliance measurement is in toxics emission reduction percent- gallons. /5/ Benzene compliance measurement is in benzene content percent-gallons (by volume). /6/ Oxygen compliance measurement is in oxygen content percent-gallons (by weight). It is necessary to account for oxygen independently in four categories: VOC-controlled, OPRG; VOC-controlled, non-OPRG; overall OPRG; and overall non-OPRG. In this example, however, all VOC-controlled gasoline also is non-OPRG, so the listed oxygen averages account for all four categories. Batch 1--100 gallons Following its production of batch 1 on March 1 the refiner for the hypothetical refinery calculated the status of its compliance with the reformulated gasoline requirements at that time. It designated this batch as VOC-controlled for VOC-Region 1, and indicated the RVP standard would be met on average, so the refiner calculated the compliance total RVP-gallons using the 7.1 psi average compliance standard for VOC-Control Region 1 as follows: Compliance total RVP-gallons=volumexRVP standard =100x7.1=710 RVP-gallons and the actual total RVP-gallons for that batch as follows: Actual total RVP-gallons=volume * RVP for batch=100x7.3=730 RVP-gallons Because actual total RVP-gallons must be less than or equal to the complying total RVP-gallons in order to be in compliance, the refiner subtracted the actual total from the complying total, and determined it had a deficit 20 RVP-gallons following batch 1. The refiner also had designated benzene for average compliance for batch 1, so it calculated the benzene compliance status following this batch. The complying total benzene content percent-gallons were calculated using the 0.95% standard for average benzene compliance as follows: Compliance total benzene percent-gallons=volumexbenzene standard=100x0.95%=95 benzene percent-gallons AND THE ACTUAL TOTAL BENZENE CONTENT PERCENT-GALLONS FOR THAT BATCH AS FOLLOWS: Actual total benzene percent-gallons=volumexbenzene for batch=100x0.90%=90 benzene percent-gallons Because the benzene actual total must be less than or equal to the complying total in order to be in compliance, the refiner subtracted the actual total from the complying total, and determined it was a positive 5 benzene content percent-gallons following batch 1. Toxics was designated for average compliance for batch 1, but because the toxics emission reduction for this batch of 18.5% was equal to the standard for average compliance for this characteristic, the refiner knew it was even for toxics emission reduction-gallons following batch 1. The refiner calculated the toxics emission reduction for this batch using the summer emission model since the gasoline was designated as summer toxics gasoline. Lastly, the refiner calculated the status of his oxygen compliance, which also was designated for average compliance. Because batch 1 was designated as not oxygen program reformulated gasoline, and was VOC-controlled, the oxygen tally for this batch went into the non-OPRG, VOC-controlled category. In addition, because the batch was not designated as reformulated gasoline for oxygenate blending, the refiner would have to account for the oxygen status of this batch as opposed to a downstream oxygenate blender. The complying total oxygen content percent-gallons was calculated using the 2.1% standard for average compliance as follows: Compliance total oxygen percent-gallons=volumexoxygen averaging standard=100x2.1%=210 oxygen percent-gallons AND THE ACTUAL TOTAL OXYGEN CONTENT PERCENT-GALLONS FOR THAT BATCH WAS CALCULATED AS FOLLOWS: Actual total oxygen percent-gallons=volumexoxygen content of batch=100x2.3%=230 oxygen percent-gallons Because for oxygen actual total must be greater than or equal to complying total in order to be in compliance, the refiner subtracted the complying total from the actual total, and determined it was a positive 20 oxygen content percent-gallons for the non-OPRG, VOC-controlled category following batch 1. Batch 2--100 Gallons The refiner calculated the status of his compliance following batch 2. This batch also was designated as VOC-controlled for VOC-Region 2, and RVP again was designated for average compliance, so the refiner calculated the compliance total RVP-gallons using the 8.0 psi average compliance standard for VOC-Control Region 2 as follows: Compliance total RVP-gallons=volumexRVP standard=100x8.0=800 RVP-gallons and the actual total RVP-gallons for that batch as follows: Actual total RVP-gallons=volumexRVP for batch=100x7.7=770 RVP-gallons Because actual total RVP-gallons must be less than or equal to the complying total RVP-gallons in order to be in compliance, the refiner subtracted the actual total from the complying total, and determined it had a positive 30 RVP-gallons for batch 2. Benzene was designated for average compliance for batch 2, making the benzene calculations as follows: Compliance total benzene percent-gallons=volumexbenzene standard=100x0.95%=95 benzene percent-gallons and Actual total benzene percent-gallons=volumexbenzene for batch 2=100x0.85%=85 benzene percent-gallons The refiner subtracted the actual total from the complying total, and determined it was a positive 10 benzene content percent-gallons for batch 2 and a net positive 15 benzene percent-gallons for batches 1 and 2. Toxics was designated as summer toxics for average compliance for batch 2, so the refiner calculated the compliance total using the 18.5% standard as follows: Compliance total toxics reduction percent-gallons=volumex18.5% standard=100x18.5%=1,850 toxics reduction percent-gallons AND THE ACTUAL TOTAL TOXICS REDUCTION PERCENT-GALLONS AS FOLLOWS: Actual total toxics reduction percent-gallons=volumextoxics reduction percent for batch=100x18.3%=1,830 toxics reduction percent-gallons For toxics compliance, the actual total must be greater than or equal to the compliance total, giving the refiner a deficit 20 toxics reduction percent- gallons (1,850-1,830=-20) following batch 2. For batch 2, oxygen was designated for average compliance, as not OPRG, as not RBOB, and as VOC-controlled. As a result, the refiner included the oxygen for this batch in his non-OPRG, VOC-controlled category accounting as follows: Compliance total oxygen percent-gallons=volumexoxygen averaging standard=100x2.1=210 oxygen percent-gallons and Actual total oxygen percent-gallons=volumexoxygen content of batch=100x1.7=170 oxygen percent-gallons This constituted a deficit 40 oxygen content percent-gallons (170-210=-40) for batch 2, and a net -20 oxygen content percent-gallons (non-OPRG, VOC- controlled) for batches 1 and 2. Batch 3--250 Gallons Batch 3, which had an RVP of 7.8 psi, was designated for average compliance and was designated as VOC-controlled for VOC-Region 2, so the refiner calculated the compliance total RVP-gallons using the 8.0 psi average compliance standard for VOC-Control Region 1 as follows: Compliance total RVP-gallons=volumexRVP standard=250x8.0=2,000 RVP-gallons and the actual total RVP-gallons for that batch as follows: Actual total RVP-gallons=volumexRVP for batch=250x7.8=1,950 RVP-gallons This gave the refiner a positive 50 RVP-gallons for batch 3. Moreover, because batches 2 and 3 were the only batches designated by the refiner as VOC-controlled for Region 2, the 80 RVP net represented the overall compliance calculation for the refiner for RVP for Region 2. Benzene was designated for average compliance for batch 3, making the benzene calculations as follows: Compliance total benzene percent-gallons=volumexbenzene standard=250x0.95%=237.5 benzene percent-gallons and Actual total benzene percent-gallons=volumexbenzene for batch 2=250x0.92%=230 benzene percent-gallons giving the refiner a positive 7.5 benzene percent-gallons for batch 3, and a net 22.5 benzene gallons for batches 1, 2, and 3 (5+10+7.5=22.5). The toxics reduction for batch 3 was 18.1%, and was designated for winter toxics, average compliance, making the compliance calculation as follows: Compliance total toxics reduction percent-gallons = volumex18.5% standard = 250x18.5% = 4,625 toxics reduction percent-gallons and Actual total toxics reduction percent-gallons = volumextoxics reduction percent for batch = 250x18.1= 4,525 toxics reduction percent-gallons The refiner was a positive 100 toxics reduction percent-gallons for batch 3 (4,625 - 4,525 = 100), and a net 80 toxics reduction percent-gallons for the first three batches (0 + -20 + 100 = 80). Oxygen was designated for per-gallon compliance for batch 3 (and complied with the 2.0% oxygen per-gallon standard), so the refiner did not include batch 3 oxygen in his compliance calculation. Batch 4--175 Gallons Batch 4 had a benzene content of 1.2%, the compliance calculation of which was as follows: Compliance total benzene percent-gallons = volumexbenzene standard = 175x0.95% = 166.25 benzene percent-gallons and Actual total benzene percent-gallons = volumexbenzene for batch 2 = 175x1.2% = 210 benzene percent-gallons giving the refiner a negative 43.75 benzene percent-gallons for batch 4 (166.25 - 210 = -43.75), and a net -21.25 benzene gallons for the first four batches. Toxics for batch 4 was designated for per-gallon compliance (and met the 13.5% reduction winter-time toxics per-gallon standard), so the refiner did not include batch 4 toxics reduction in his compliance calculation. Oxygen in batch 4, of 2.7%, was designated for average compliance, non- RBOB, non-VOC-controlled, but was designated as OPRG. As a result, the refiner included the oxygen for this batch in his OPRG overall category accounting as follows: Compliance total oxygen percent-gallons = volumexoxygen averaging standard = 175x2.1% = 367.5 oxygen percent-gallons and Actual total oxygen percent-gallons = volumexoxygen content of batch = 175x2.7% = 472.5 oxygen percent-gallons yielding a positive 105 oxygen percent-gallons for the refiner's OPRG overall oxygen category following batch 4. Batch 5--200 Gallons Batch 5 was designated for per-gallon compliance for benzene (and at 0.98% benzene by volume met the 1.0% per-gallon benzene standard), so the refiner did not include batch 5 benzene in his compliance calculation. The toxics reduction for batch 5 was 18.2%, and was designated for average compliance, making the compliance calculation as follows: Compliance total toxics reduction percent-gallons = volumex18.5% standard = 200x18.5% = 3,700 toxics reduction percent-gallons and Actual total toxics reduction percent-gallons = volumextoxics reduction percent for batch = 200x18.2% = 3,640 toxics reduction percent-gallons yielding a positive 60 toxics reduction percent-gallons for this batch, and a net 140 toxics reduction percent-gallons through batch 5. Batch 5, which has a zero oxygen content when it left the refinery, was designated as RBOB. As a result, the oxygen in this batch would be accounted for by the oxygenate blender, and the refiner did not include it in his compliance calculation. Batch 6--175 Gallons The benzene content of batch 5 was 0.8% and was designated for average compliance for this characteristic, making the compliance calculation: Compliance total benzene percent-gallons = volumexbenzene standard = 175x0.95% = 166.25 benzene percent-gallons and Actual total benzene percent-gallons = volumexbenzene for batch 2 = 175x0.8% = 140 benzene percent-gallons yielding a positive 26.25 benzene percent-gallons for batch 6, and a net 5 benzene percent-gallons for all six batches. This figure represented the overall compliance figure for the one year benzene averaging period, and indicated compliance for this refiner for this standard. In addition, this indicates the refiner has generated 5 benzene credits which could be transferred to another refinery or importer for use in achieving compliance with the benzene standard. The toxics reduction for batch 6 was 18.3%, and was designated for average compliance, making the compliance calculation as follows: Compliance total toxics reduction percent-gallons = volumex18.5% standard = 175x18.5% = 3,237.5 toxics reduction percent-gallons and Actual total toxics reduction percent-gallons = volumextoxics reduction percent for batch = 175x18.3 = 3,202.5 toxics reduction percent-gallons yielding a negative 35 toxics reduction percent-gallons for this batch, and a net positive 105 toxics reduction percent-gallons for all six batches. This represents compliance with the toxics reduction standard for the refiner for the one year toxics averaging period. Batch 6 had a 2.7% oxygen content, was designated for average compliance and in the OPRG overall category (because this batch was non-VOC-controlled). Compliance was calculated as follows: Compliance total oxygen percent-gallons = volumexoxygen averaging standard = 175x2.1% = 367.5 oxygen percent-gallons and Actual total oxygen percent-gallons = volumexoxygen content of batch = 175x2.7% = 472.5 oxygen percent-gallons yielding a positive 105 oxygen percent-gallons in the OPRG overall oxygen category for this batch, and an overall positive 210 OPRG oxygen percent- gallons. This indicates the refiner is in compliance for this category, and has generated 210 oxygen credits for the OPRG category. The refiner could transfer the OPRG overall oxygen credits to another refinery or party for use in achieving the oxygen standard for OPRG overall-designated gasoline. The net oxygen compliance calculation for the non-OPRG, VOC-controlled category includes only batches 1 and 2, and is a negative 20 oxygen percent- gallons. Because OPRG overall oxygen credits may not be used to achieve compliance for non-OPRG, VOC-controlled gasoline, the refiner could not apply the 210 OPRG overall oxygen credits to offset this non-OPRG, VOC-controlled oxygen deficit. As a result, it would be necessary for this refiner to acquire 20 non-OPRG, VOC-controlled oxygen credits generated by another refinery, importer, or oxygenate blender in order to achieve compliance for this category. VII. Compliance Record Keeping and Reporting Requirements A. Record keeping requirements EPA is proposing that all parties in the gasoline distribution network who are involved with reformulated gasoline in any manner, from its production to its sale at retail outlets, should be required to maintain certain records. The scope of the records retention requirement for each type of party, and therefore the cost to the party, reflects that party's opportunity to alter the quality of reformulated gasoline. Refiners, importers and oxygenate blenders are required to maintain records which are adequate to allow independent auditors and EPA inspectors to determine if gasoline classified as reformulated in fact met all reformulated gasoline requirements, and in the case of reformulated gasoline blendstock for oxygenate blending, whether the required quality assurance programs were properly carried out. All regulated parties, including refiners, importers, and oxygenate blenders, as well as retailers and all types of distributors, are required to maintain records of the product transfer documentation which must be transferred with all reformulated gasoline. These records are important in the case of gasoline found downstream of the refinery that does not conform to the reformulated gasoline requirements. EPA's proposed regulations create presumptive liability for most parties in the gasoline distribution network for the gasoline found in violation, from the refinery to the point of violation. Product transfer documents reveal at least who had transferred which gasoline to whom, which may assist EPA in determining the cause of the violation. It has been EPA's experience in enforcing the lead contamination regulations, 40 CFR Secs. 80.22-23, and the volatility regulations, 40 CFR 80.27-28, that some parties are unwilling to reveal to EPA some or all of their gasoline suppliers, and that other parties have incomplete information about the specifics of gasoline transfers (e.g., volumes, dates, properties of gasoline). This is caused in some cases by a retailer who has purchased gasoline on the spot market even though that retailer has an exclusive supply requirement with one distributor, making the retailer unwilling to reveal what amounts to a contract violation. The proposed requirement that transfer documents be maintained will cure this problem, or will create separate penalties for a party who is unwilling to reveal its gasoline suppliers. In addition to product transfer documents, all regulated parties are required to maintain records of quality assurance (QA) programs they conduct. These programs (except for certain required QA programs for refiners, importers, and oxygenate blenders) are not mandatory, but are a required defense element if a violation is found. This records retention requirement will enable EPA to more effectively evaluate such quality assurance programs when violations are documented. B. Reporting requirements EPA is proposing that refiners, importers, and oxygenate blenders submit periodic reports to EPA. EPA's proposal is that reports be filed by January 31 of each year to demonstrate compliance with toxics emission performance and benzene and oxygen content (outside of the VOC averaging period) requirements for the previous calendar year, and that reports must be filed by October 15 of each year to demonstrate compliance with RVP and oxygen requirements for VOC-controlled reformulated gasoline. EPA also is proposing that interim toxics, benzene and oxygen reports be filed by April 30, July 31, and October 31 of each year to cover the prior calendar quarter. These interim reports would not demonstrate compliance with averaging requirements for these parameters, per se, because compliance is based upon averages over the entire yearly averaging period. For example, a company could have produced or imported gasoline during any quarter which on average has less than the annual average standard for toxics emission performance reduction, and still meet this standard over the entire year. The advantage of interim reports is that they compel regulated parties to monitor the status of their annual compliance during the course of the year. Most companies probably would do so anyway, which would make the incremental cost of the interim reporting requirement small. In addition, the interim reports would allow EPA to monitor the status of compliance during the course of a year. In the event a particular regulated party's interim reports indicate one or more parameter is falling significantly short of the averaged standards, EPA may be able to take actions to prevent violations instead of merely reacting to violations after they occur. EPA is proposing that annual reports be filed for reformulated gasoline which meets standards on a per-gallon basis. Such reports on per-gallon compliance gasoline would allow EPA to monitor the overall production and importation of reformulated gasoline and to better gauge its volumes and distribution. In addition, these reports would compel a regulated party to assert, in an officially signed and sworn document, that the gasoline in fact met standards on a per-gallon basis. A party who knowingly makes such a statement, if it is false, may be liable for criminal as well as civil penalties. As a result, EPA believes that requiring such affirmative act would result in some parties using greater care in ascertaining whether reformulated gasoline that is produced or imported in fact meets per-gallon standards. VIII. Inability to Produce Conforming Gasoline in Extraordinary Circumstances EPA is proposing that in appropriate extreme and unusual circumstances (e.g., a natural disaster or Act of God) that are clearly outside the control of a refiner, importer, or oxygenate blender and that could not have been avoided by the exercise of prudence, diligence, and due care, EPA may permit a refiner, importer, or oxygenate blender, for a brief period, to distribute gasoline that does not meet the requirements for reformulated gasoline. Under EPA's proposed regulatory language, EPA would as a matter of enforcement policy, allow the distribution of noncomplying gasoline provided that (1) It is in the public interest to do so (i.e., distribution of the nonconforming gasoline is necessary to meet projected shortfalls that cannot otherwise be avoided); (2) the refiner, importer, or oxygenate blender (a) exercised prudent planning and was not able to avoid the violation and has taken all reasonable steps to minimize the extent of the nonconformity; (b) can show how the requirements for reformulated gasoline will be expeditiously achieved; (c) agrees to make up air quality associated with the nonconforming gasoline, where practicable; and (d) pays to the U.S. Treasury an amount equal to the economic benefit of the nonconformity minus the amount expended in making up the loss in air quality. IX. Conventional Gasoline Marker EPA is proposing that all conventional gasoline be marked with a marker by the refiner at the refinery or by the importer at the point of importation to allow its detection if it is sold in a covered area. Persons downstream of the refinery or import facility would be required to conduct quality assurance programs to test conventional gasoline for the presence of the marker and reformulated gasoline for the absence of a marker. EPA is proposing use of the marker phenolphthalein. This chemical has been chosen because it satisfies most of the requirements EPA believes are important for a tracer. Phenolphthalein, C19H14O4, in its pure form is a white solid which is soluble in methanol, water and gasoline. Phenolphthalein is non-toxic, is legal for use in gasoline under section 211(f)(1) of the Clean Air Act,/49/ and does not have an adverse impact on vehicle exhaust or evaporative emission. It is easily tested, readily available to the industry, and easily introduced at the refinery in known concentrations. NOTE /49/ The Clean Air Act requires that additives to gasoline be substantially similar to those used in certifying vehicles. The term "substantially similar" has been interpreted for unleaded gasoline at 56 FR 5352, (February 11, 1991). Under EPA's proposal, phenolphthalein, which costs approximately $10 per pound, would be added to conventional gasoline at the rate of 1 part per million. At this rate, one pound of phenolphthalein would treat 50,000 barrels of gasoline, at a cost of $0.00004 per gallon. The presence of phenolphthalein in gasoline may be detected in the field using a simple screening test, which involves adding one teaspoon of a Ph negative water-based reagent (e.g., a mixture of washing soda and water) to a quart sample of gasoline. For gasoline which contains more than one percent ethanol, an additional step of adding one crystal of lye to the sample is necessary. A pink color at the bottom of the sample indicates the presence of phenolphthalein. This screening test would allow detection of phenolphthalein in concentrations as low as 50 ppb, which allows detection in the field of as little as five percent marked conventional gasoline in reformulated gasoline. An additional quantitative laboratory procedure is being proposed for phenolphthalein in gasoline. Under EPA's proposed scheme, the field color screen would be used to indicate the presence of the marker (and, therefore, the presence of conventional gasoline), and the laboratory procedure would be used to establish the precise concentration. EPA is proposing that all persons in the gasoline distribution network be responsible for requirements relating to the marker, with the exception of retailers and wholesale purchaser-consumers not located in covered areas. As a consequence, EPA intends to conduct compliance inspections at all points in the gasoline distribution network. Specifically, gasoline refineries and importers will be inspected and audited to monitor compliance with the requirement that the marker was added to all conventional gasoline produced or imported. EPA will inspect persons downstream from refiners and importers to monitor for the absence of the marker from reformulated gasoline and the presence of the marker in conventional gasoline. EPA requests comments as to the suitability of phenolphthalein for use as a marker for conventional gasoline, and whether any other single additive may be more suitable for this use. EPA believes that the necessary properties for a marker are that it should be easy to detect in the field in low concentrations; be difficult to remove from gasoline; be readily available and inexpensive; be non-proprietary (including the marker and any chemicals or methods used in its detection); be non-toxic; and not cause gasoline to violate the "substantially similar" requirements of section 211(f)(1) of the Clean Air Act. X. Blendstock, Export, and Storage Issues Selling or dispensing conventional gasoline by any person for resale in any covered area without segregating such gasoline from reformulated gasoline and clearly marking such conventional gasoline as "conventional gasoline, not for sale to ultimate consumer in a covered area" is specifically prohibited by section 211(k)(5) of the Clean Air Act. EPA therefore proposes that conventional gasoline be labeled on the product transfer documentation as prescribed by the Act, as well as marked with a tracer (described above). In certain limited situations, however, certain petroleum product which is not reformulated gasoline may not require the marker and might have a legitimate presence within a covered area. These limited situations include gasoline which is intended for export and product which is blendstock. Gasoline which is intended for export, and thus is not sold or dispensed for resale in a covered area is, by statute, not covered by the reformulated gasoline requirements. Under the proposed rule, however, EPA will presume that all gasoline found within the United States is being offered for sale in the United States, unless the gasoline is segregated and the paperwork which accompanies the gasoline clearly indicates that the gasoline is solely for export. In addition, EPA is proposing that all petroleum product found at terminals be classified as "gasoline" and not as blendstock unless (1) the product is segregated; (2) the accompanying paperwork clearly identifies the product as (a) blendstock which does not comply with requirements for reformulated or (b) RBOB which will comply with the requirements for reformulated gasoline subsequent to the addition of the proper type and volume of oxygenate or (c) conventional gasoline; and (3) some aspect of the product's quality makes the product unsuitable for use as gasoline (e.g., the product's octane is outside the normal range for gasoline). These presumptions are necessary to prevent the exemptions from the requirements for exports and blendstocks from being misused. Gasoline which is not reformulated but which is intended for sale outside any covered area may properly be present in a covered area if the gasoline was produced at a refinery within the covered area for shipment outside the covered area or is being trans-shipped through the covered area. EPA's proposal assumes that all gasoline found inside a covered area is intended for sale in that covered area, however, unless the gasoline is segregated, the accompanying paperwork clearly identifies the gasoline as conventional and not for sale in any covered area, and the gasoline contains the required marker. When violations are found at a retail outlet or wholesale purchaser- consumer facility the above-described defenses will not be available because the gasoline has reached its ultimate destination. The gasoline is now clearly intended for sale to ultimate consumers at retail outlets and the wholesale purchaser-consumer has purchased the gasoline only for its own use and, therefore, is the ultimate consumer of the gasoline. XI. Prohibitions, Liabilities, and Defenses A. Prohibitions Section 211(k)(5)(A) of the Clean Air Act prohibits "[t]he sale or dispensing by any person of conventional gasoline to ultimate consumers in any covered area." Section 211(k)(5)(B) of the Act prohibits the sale or dispensing "of conventional gasoline for resale in any covered area, without (i) segregating such gasoline, and (ii) clearly marking such conventional gasoline as 'conventional gasoline, not for sale to [an] ultimate consumer in a covered area.' " In addition, section 211(k)(5) provides that a party who "purchases properly segregated and marked conventional gasoline and thereafter labels, represents, or wholesales such gasoline as reformulated gasoline shall also be in violation of this subsection." In addition to these statutory prohibitions, which, in effect, prohibit the sale of conventional gasoline for use in any covered area, the proposed regulations contain other prohibitions designed to ensure that the goals of the reformulated gasoline program are achieved. For example, the regulations prohibit gasoline from being represented as reformulated unless it meets the specifications of a reformulated gasoline certification and meets applicable maximums and minimums. The regulations also impose restrictions on reformulated gasoline relating to time or place of use (e.g., VOC-controlled gasoline must be sold during the high ozone season, and must meet the requirements for the appropriate VOC-Control Region). In addition, the regulations prohibit the combining of reformulated gasoline blendstock for oxygenate blending (RBOB) with any other gasoline or blendstock unless it is blended with the proper type and amount of oxygenate, and they prohibit RBOB from being represented as reformulated gasoline until such blending occurs. B. Liabilities EPA is proposing that when a violation of any of the prohibitions involving the nature of gasoline (properties, time/place of use, etc.) is found at a facility, the facility operator should be presumed liable for that violation. In addition, EPA is proposing that each person in the gasoline distribution network upstream from that facility should also be presumed liable for the violation. This regulatory scheme closely follows the liability regulations for lead contamination (40 CFR 80.21-23) and volatility (40 CFR 80.27-28). The rationale for presuming liability not only on the part of the operator of the facility where the violation is found, but also on the part of the upstream parties, is that any of these parties could have caused the violation. For example, if gasoline containing the conventional gasoline marker is found being offered for sale at a retail outlet in a covered area, this violation could be the result of actions by any person from the refiner/ importer through the retailer: The retailer could have purchased conventional gasoline and relabeled it as reformulated; a distributor could have relabeled conventional gasoline as reformulated and sold it to the retailer as such; a pipeline could have mixed conventional gasoline with reformulated, thereby rendering the mixture outside the definition of reformulated; or the refiner could have shipped gasoline represented to be reformulated when the gasoline in fact was conventional. When a violation is found, the preferable approach would be for EPA to establish the person who caused the violation at the time of the inspection and to hold only that person liable for the violation. In practice, however, this approach usually is not possible. In a program like reformulated gasoline, it probably will be necessary to ship gasoline samples to a laboratory for testing to determine if the gasoline meets requirements, a process which takes a minimum of several days. As a result, the inspectors will not know at the time of an inspection if there is a violation. By the time test results indicating a violation are completed, the EPA inspectors will have traveled away from the facility, making it impracticable for the inspectors to conduct the in-depth follow-up necessary to determine the cause of the violation. Moreover, even if inspectors know at the time of an inspection that a violation exists, it is not always possible to establish the cause of the violation. For example, a field screen test for gasoline volatility, which inspectors are able to conduct during an inspection at a gasoline facility, gives a fairly reliable indication of whether gasoline meets the volatility requirements. It has been EPA's experience in enforcing the volatility requirements, however, that even given this knowledge the inspectors are often unable to determine the cause of a violation, for a variety of reasons: relevant records may not be available; employees who are present may not have necessary knowledge; the violation could have been caused at a facility hundreds (or thousands) of miles away; or the companies involved may not cooperate with the EPA inspectors. The regulatory device of presuming liability on the part of each person who may have been responsible for a violation resolves this dilemma by placing the burden of establishing the cause of the violation on those persons who are in the best position to do so; i.e., the persons who actually produced, imported, sold, offered for sale, dispensed, supplied, offered for supply, stored, transported, or caused the transportation of the gasoline (referred to collectively in this preamble as persons "involved with" the gasoline). This presumption of liability may be overcome by each party, however, as discussed in the next section of this preamble. The presumptive liability for parties upstream from a facility found in violation includes each party who was involved with any of the gasoline contained in the storage tank found in violation. For example, if a gasoline storage tank at a retail outlet containing gasoline represented to be reformulated is found to contain the conventional gasoline marker, each distributor who supplied any of the gasoline contained in that storage tank would be presumed liable. This would include the distributor for the most recent delivery, and unless the storage tank was empty at the time of that delivery (which is almost never the case), the distributors for the several previous deliveries. These additional distributors are also presumed liable because the gasoline contained in the storage tank on the day of the inspection is to some extent a mixture of the gasoline delivered over the previous several deliveries. Carriers are a sub-category of distributors that do not take title to the product they store or transport. As a result of this distinction, liability presumptions for carriers traditionally have been different from those of other distributors under 40 CFR part 80 enforcement schemes. For example, under the volatility regulations, carriers are presumed liable only for violations found at the carrier's facility, whereas all other parties (e.g., distributors and refiners) are presumed liable when a violation is found downstream from the party. EPA believes that under the reformulated gasoline program, however, carriers should be treated equally with other parties who store or transport reformulated gasoline, and who thereby have opportunities to cause violations. Under EPA's proposal, therefore, carriers who stored or transported gasoline upstream from a facility found in violation would be held presumptively liable for the violation. C. Defenses EPA's proposed regulations include defenses for each party who is presumed liable for a violation. These defenses require that a party presumed liable show it did not cause the violation, that the product transfer documents for its gasoline met applicable requirements, and that the party had an on-going quality assurance program for its gasoline. In the case of violations found at facilities identified by a refiner's brand name, the refiner is also required to impose certain obligations on persons involved with the refiner's branded gasoline, which are intended to ensure that the gasoline meets all requirements. The first defense element, that the party show it did not cause the violation, is best accomplished by establishing the cause of the violation, and that this cause was the fault of another person. A party who was involved with the gasoline found in violation, and who had some business relationship with the other parties involved with the gasoline, is in the best position to investigate the facts and ascertain the cause of the violation. It has been EPA's experience in enforcing other gasoline quality regulations that the parties involved with the gasoline (and who are each thereby presumed liable and have these same defense requirements) often will work collectively to ascertain who among them caused the violation and thereby establish who did not cause the violation. If a party is unable to determine the actual cause of a violation, it may be able to meet this defense element through circumstantial evidence indicating that it could not have caused the violation. Evidence of the other two defense elements (transfer documents showing all relevant gasoline met requirements and a quality assurance program) could be presented as part of this showing. In the case of a refiner, sampling and testing results showing that the gasoline met requirements at the time it left the refinery normally would constitute strong circumstantial evidence that the refiner did not cause the violation. This type of testing evidence would not be conclusive in all cases, however, because the refiner could have been responsible for the violation as a result of actions which occurred downstream. For example, a refiner could ship to its own downstream terminal two products, one VOC- controlled and one not VOC-controlled, intended for use at different times. If these products become commingled after leaving the refinery, the product intended for the VOC-control period could be in non-compliance. The refiner thus could have "caused" this violation even though the product was in compliance when it left the refinery. This logic would apply equally to violations found downstream from importers and oxygenate blenders. For any distributor, reseller, or carrier, other strong evidence that it did not cause the violation would be test results showing that the relevant gasoline met applicable standards when one of these parties delivered it to the next parties in the distribution chain. For a retailer or wholesale purchaser-consumer, test results showing that the gasoline in its storage tank was in compliance at the beginning of the control period is evidence that it did not cause the violation by mixing gasoline appropriate for different time periods. For example, in a case where gasoline violating the VOC-control requirements is found during the high ozone season at a retail outlet, the retailer could show he did not cause this violation by failing to replace non-VOC-controlled gasoline in the storage tank with VOC-controlled in advance of the high ozone season if he had test results for gasoline sampled on June 1 showing that the gasoline met VOC-control requirements on that date. Evidence accounting for all gasoline received and dispensed, and evidence establishing that the distributor represented all gasoline received met applicable requirements, would also assist a retailer in showing it did not cause the violation. The second element of the defense is the requirement that all product transfer documents for all relevant gasoline met applicable requirements. For the operator of the facility found in violation, this would require product transfer documents covering all of the gasoline contained in the storage tank found in violation, including a sufficient number of previous deliveries to account for any product mixing that may have occurred in the tank. For example, if a 100,000 bbl capacity terminal storage tank containing 50,000 bbls is found to violate the benzene maximum standard, the distributor who operates the terminal would be required to produce product transfer documents covering his receipt(s) of all gasoline which comprised the 50,000 bbls. In addition, if the storage tank contained any gasoline at the time the 50,000 bbls was received (e.g., a tank "heel"), the product transfer documents for this additional gasoline must also be produced. The product transfer documentation requirement is for all relevant gasoline, which requires a party to account for all of the gasoline. In order to show that all gasoline has been included in an accounting, a party normally would be required to provide evidence of the volume and timing of gasoline sold, dispensed, or transferred to another party, and to show that this balances with the volume and timing of gasoline received. The third defense element requires that the party must have conducted a gasoline quality assurance sampling and testing program. This defense element is in addition to the elements previously discussed. Even if a party is able to establish it did not cause a violation and presents product transfer documents covering all relevant gasoline, the party still would be held liable if it had not conducted an appropriate quality assurance program. Even though the quality assurance programs discussed here are not mandatory, but are elements of an affirmative defense, EPA believes the overall success of the reformulated gasoline program is closely linked to regulated parties' quality assurance programs. EPA inspectors cannot be in all places at all times to monitor compliance. As a result, for reformulated gasoline to perform as expected, it is incumbent on persons in the petroleum industry to implement procedures and to use care sufficient to ensure that reformulated gasoline is not contaminated and is used in the proper time and place. EPA believes that quality assurance programs play an indispensable role in informing parties whether their procedures and practices regarding reformulated gasoline have been successful. Quality assurance programs provide parties the opportunity to detect tendered gasoline that does not meet requirements or conform to the shipping documents, to take appropriate steps to stop the use of noncomplying gasoline and correct the documents (or inform the gasoline's recipient of the correct specifications), and to take actions to prevent future violations. Such actions could include requiring a particular shipper to produce independent test results of future gasoline tendered to support the specifications documented, or in extreme cases, refusing to accept gasoline from a particular person. EPA is proposing that, at all points in the distribution network, all parties (including retailers) should be responsible for monitoring gasoline classified as reformulated for the absence of the proposed phenolphthalein marker. Under other 40 CFR part 80 enforcement schemes, a quality assurance program is not a required defense element for retailers and wholesale purchaser-consumers, due in large part to the testing costs of those programs. For example, volatility compliance screening requires equipment which costs approximately $10,000 and must be used by a trained operator. In contrast, in the reformulated gasoline program, the screening method being proposed for the conventional gasoline marker costs only pennies per test, and the procedure is relatively simple. EPA believes that requiring this defense element for all parties is justified by the ease and low cost of the marker test, and the importance to the program of preventing conventional gasoline use in covered areas. Under EPA's proposed regulations, an adequate quality assurance program for all parties upstream from the retailer or wholesale purchaser consumer would include testing every batch for the conventional gasoline marker. Retailers and wholesale purchaser consumers would be required to sample and test daily or after each load is delivered, whichever is less frequent. The retailer may choose to sample out of the storage tank or from the gasoline tanker delivery truck. In this manner, if the retailer determines that conventional gasoline has been or is about to be delivered, it may take appropriate steps to correct the situation. EPA believes that this frequency of testing at the retail level will be adequate to prevent the introduction of conventional gasoline into the marketplace. In addition, EPA is proposing that at points upstream from retail outlets or wholesale purchaser consumers, parties should be required to conduct quality assurance programs to ensure that reformulated gasoline meets requirements for minimums and maximums, and that the characteristics of reformulated gasoline are consistent with the time and place of use and are accurately stated in the product transfer documents. For example, if a violation of the oxygen minimum standard is found at a retail outlet, each distributor that supplied gasoline to that retail outlet would be required to present evidence of a quality assurance program for oxygen content conducted on that distributor's gasoline. EPA believes that taking samples from the delivery truck or retail outlet storage tank does not violate state laws or OSHA regulations. At least one state has a law that prohibits the opening of the gasoline tanker delivery truck hatch while the gasoline is being dispensed, but this requirement does not prohibit the taking of samples from the truck or storage tank either before or after the gasoline is dispensed. Furthermore, OSHA regulations exempt workers downstream from bulk facilities from benzene exposure standards who store, transport, distribute or dispense gasoline. EPA recommends that regulated parties who deal with gasoline employ customary safe practices when sampling and testing. The quality assurance program defense requires a party to show that upon discovering violating product, the party immediately stopped selling, supplying, storing, or transporting the product. The gasoline must be clearly designated as product that is not intended to be sold, supplied, dispensed, transported or distributed. Transportation is appropriate only for the purpose of correcting the violating product. Under such circumstances, the party may transport the gasoline to a geographic area having a standard, such as RVP, with which the gasoline complies, and must be clearly marked as not for sale within any covered area. The gasoline may be stored until a time period when the gasoline complies, or until the compliance period ends. Storage is appropriate only when the violating gasoline was discovered through an oversight program and the stored gasoline is sealed until a time when the product can be distributed. The party must also show that it promptly remedied the violation by removing the violating product or adding a sufficient quantity of complying product, and that it took actions to prevent future violations. One other quality assurance program applies to certain special situations. In the event that a violation involving gasoline that is or previously had been classified as reformulated gasoline blendstock for oxygenate blending is found, parties presumed liable (including upstream distributors and carriers) would be required, in order to establish a defense, to present evidence of periodic sampling and testing of RBOB to show that this product had not been altered or contaminated. In addition to the defense elements described above (showing non-causation, product transfer documents, and a quality assurance program), EPA is proposing that a branded refiner must meet additional requirements if the violation is found at a branded facility. Specifically, the named refiner must show that the violation was caused by an act in violation of law or sabotage or vandalism, or by an act in violation of a contractual obligation imposed by the refiner on the party operating under the refiner's brand name and designed to prevent such violations, and despite a periodic sampling and testing by the refiner to assure compliance with the contractual obligations and to prevent future violations. In the case of violation caused by a party not under contract with the refiner (e.g., a carrier), the refiner must show that the violation occurred in spite of efforts by the refiner (such as a periodic sampling and testing) designed to assure that violations do not occur. EPA believes these additional requirements for branded refiners are appropriate because of the degree of control refiners have over gasoline that is sold under the refiner's brand name. This proposed defense element for branded refiners is closely modeled upon the enforcement schemes followed in the gasoline lead contamination, volatility, and diesel fuel sulfur content regulations. These additional requirements would apply equally to branded importers. XII. Anti-Dumping Requirements for Conventional Gasoline A. Introduction Section 211(k)(8) of the Act requires that the gasoline sold in areas not participating in the reformulated gasoline program not be more polluting than it was in 1990. The purpose of this "anti-dumping" section is to ensure that fuel components that cause harmful emissions and that are removed from or limited in reformulated gasoline not be "dumped" into conventional (nonreformulated) gasoline, and to likewise ensure that environmentally beneficial fuel components not be used to make reformulated gasoline to the detriment of conventional gasoline. The anti-dumping program regulates only conventional gasolines and their emissions of specified pollutants. The following sections present the issues associated with the anti-dumping program and the proposed methods for implementing the anti-dumping provisions. First, the emission requirements of post-1994 conventional fuels are discussed in section B. In section C, individual baseline determination is discussed. Finally, in section D, data submission and baseline approval are discussed. Anti-dumping compliance and enforcement issues are covered in section XIII. Comments, data and technical analyses regarding all aspects of the anti-dumping provisions and EPA proposal are requested. B. Emission Requirements 1. Emission Requirements EPA proposes that in 1995 and 1996 the requirements of section 211(k)(8) of the Act be met by requiring that the exhaust benzene emissions of a refiner's /50/ or importer's conventional gasoline not exceed its baseline exhaust benzene emissions. Described below are two proposed methods for meeting this requirement. EPA is proposing two methods for compliance with the anti- dumping requirements during 1995-96 for the same reason two compliance methods are being proposed for reformulated gasoline as discussed in section II. While a refiner may choose which of the two methods it wishes to use, it must use the same model for both the reformulated gasoline and the anti- dumping programs. The anti-dumping program is inherently tied to the reformulated gasoline program in that the specific model used to certify reformulated gasoline will affect which fuel components are likely to be dumped. The effect of these components on conventional gasoline emissions must be the same as on reformulated gasoline emissions. Otherwise, incentives will exist to shift dirty components to conventional fuel areas using whichever model predicts the lowest emissions increase due to those components. Refiners making either only reformulated gasoline or only conventional gasoline may choose either model. NOTE 50 See section XIII.B for a discussion of the inclusion of "blender" in the definition of refiner. Under the first method, the exhaust benzene emissions due to conventional gasoline would be determined using the simple model discussed in section II.A. Of the nonoxygenate parameters which affect emissions, only the effects of fuel benzene and fuel aromatic content on exhaust benzene would be included in the model. This is sufficient during this period because, by the simple model, these are the only fuel components which will be removed from reformulated gasoline which affect toxic emissions. Effectively, this model would yield the weight fraction of benzene in the exhaust, adjusted to correct emissions units. In addition, EPA proposes that compliance with this first method also require that the annual average sulfur, olefin and T90 values of a party's conventional gasoline not exceed its baseline values of those parameters by more than 25 percent. Increases in these fuel parameters are known to qualitatively increase VOC and/or NOx emissions, but were not included in the complex model because their effect could not yet be confidently quantified. These limits were part of the negotiated agreement and will provide some assurance that conventional gasoline emissions will not rise prior to use of the complex model. EPA does not expect the levels of these parameters in conventional gasoline to naturally increase due to the reformulated gasoline program, since the simple model for reformulated gasoline only places caps on these three fuel parameters and does not require their reduction. However, these relaxed caps for conventional gasoline will prevent future refinery modifications from negatively affecting these three parameters to a significant degree. It should be noted that 125 percent of 330 deg.F, the weighted 51 average baseline value of T90, is about 413 deg.F, which is about 5 deg.F higher than the average endpoint temperature. Additionally, the ASTM maximum T90 is about 370 deg.F, or about 112 percent of 330 deg.F. Thus, the magnitude of the 125 percent "cap" on T90 may be inconsequential with regard to gasoline production (i.e., no "substantially similar" 52 gasoline is likely to be produced which has a T90 in this range). The 125 percent caps on sulfur and olefins may, for some refineries, also result in fuels which are not substantially similar, but this is less apparent than for T90. NOTE 51 Based on a 5 1/2 month summer, 6 1/2 month winter weighting. NOTE 52 Absent a waiver, section 211(f) of the Act prohibits introducing gasoline or gasoline additives into commerce which are not substantially similar to those used in the certification of new motor vehicles. EPA recently updated an interpretive rule concerning what is substantially similar unleaded gasoline (56 FR 5352 (February 11, 1991)). The second method for determining compliance during 1995 and 1996 is to use the complex model described in section IV.B. The nonoxygenate parameters that will likely be included in this model include, at minimum, benzene, aromatics, RVP, sulfur, olefins, and T90. Under this method, all the parameters affecting exhaust benzene emissions would be part of the model, and thus there would be no need for separate "caps" on other fuel parameters as in the method of compliance described above. To determine compliance with the exhaust benzene requirement by either model, a refiner's baseline fuel parameter values would be plugged into the model and would yield a resulting baseline emissions value. At the end of a compliance period, the average fuel parameter values of a refiner's conventional gasoline over that period would be plugged into the model. The resulting emissions value would then be compared to the baseline emissions value to determine if the party is in or out of compliance with the anti- dumping requirements. The issue of how to treat oxygen content in the baseline and for compliance purposes was not addressed by the negotiated agreement. Several issues surround the decision of whether to include or exclude oxygen as a baseline and/or compliance parameter. First, if the actual oxygen content of conventional gasoline had to be maintained 53 at some non-zero value, this required oxygen plus the spillover of reformulated gasoline could result in the conventional gasoline areas receiving much more oxygen than they received in 1990, possibly to the detriment of those areas opting into the reformulated gasoline program. As discussed in the NPRM in section IX.C.3.d, no increase in emissions is expected in conventional gasoline areas because the spillover of reformulated gasoline and the use of oxygenated fuels in those CO nonattainment areas which are not receiving reformulated gasoline is expected to increase the average oxygen content of fuel in the anti-dumping area(s) over 1990 levels. Any localized decreases and increases in emissions which may occur are unlikely to be in CO nonattainment areas, and are also unlikely to be in ozone nonattainment areas as more areas opt into the reformulated gasoline program. NOTE 53 If oxygen content were included in the simple model for exhaust benzene, oxygen content would be required to be maintained to show compliance with the exhaust benzene requirement if the values of the other parameters which affect exhaust benzene emissions did not change. Second, certain combinations of inclusion or exclusion of fuel oxygen content in the baseline and compliance calculations could be beneficial or detrimental to a refiner's compliance with the anti-dumping provisions and could ultimately have negative environmental consequences. For instance, if a refiner's 1990 gasoline contained oxygen and oxygen was required to be accounted for in both the baseline and compliance calculations, the refiner would have to adjust its conventional gasoline composition (in order to maintain its emissions at 1990 levels) if its post-1994 oxygen content was less than that of its 1990 gasoline. This adjustment would have to be made despite the fact that some of its reformulated gasoline was sold in anti- dumping areas. If the oxygenate in that spillover could be included in the compliance calculation, the refiner would likely not have to adjust its conventional gasoline composition unless other parameter changes caused increased emissions. This scenario thus penalizes those who produced reformulated gasoline early or who were producing cleaner gasoline in general in 1990 because they would have to adjust their conventional gasoline composition while those who had no oxygen in 1990 do not face this consequence. Thus, EPA does not believe that inclusion of oxygen in both the baseline and compliance calculations in this manner is a viable option. On the other hand, if oxygen was not a baseline parameter but was included in compliance calculations, a refiner who used oxygen in its post-1994 conventional gasoline would benefit because it would have relatively high baseline emissions since there would be no oxygenate in its baseline. Its compliance emissions would be reduced due to any level of oxygenate use thereby allowing other components to be "dumped" into its conventional gasoline up to its baseline. Under this scenario, although spillover oxygen would not be accounted for, the oxygen used in the CO nonattainment areas (not receiving reformulated gasoline) would be included in a refiner's conventional gasoline compliance calculation. As previously stated, oxygenated fuel use in those CO nonattainment areas that do not receive reformulated gasoline, plus spillover of reformulated gasoline, are expected to increase the average oxygen content in the anti-dumping areas over 1990 levels. However, neither spillover nor oxygenated fuel use alone are expected to increase post-1994 oxygen levels over 1990 levels. This option effectively credits the oxygen contribution of oxygenated fuels twice, once explicitly, once implicitly. Thus EPA also does not believe this to be a viable option. Finally, oxygen content was not included in the statutory definition of summertime baseline fuel. Clearly, Congress could have included an oxygen content value for the summertime statutory baseline gasoline since oxygenate use in 1990 could easily have been calculated. While oxygen content is not required to be excluded from the statutory wintertime baseline, EPA proposed to exclude it as discussed in 56 FR 31179-31180. Based on the discussion above, EPA considers the following two methods of dealing with oxygen content in the baseline and compliance calculations to be viable options. Comments are requested on these proposed options: a. Include in either model only a positive difference between a refiner's or importer's post-1994 annual average oxygen value and its individual baseline oxygen value (i.e., in the actual calculation, include oxygen in the baseline and include the larger of the baseline oxygen value or the annual average post-1994 oxygen level in the compliance calculation). If the difference is negative (i.e., less oxygen in post-1994 conventional gasoline than in the 1990 gasoline) no effect of oxygen would result because the baseline oxygen value would be used in the compliance calculation as well as in the baseline emissions determination. This option would assume that the oxygen in reformulated gasoline spillover and use of oxygenated fuels outside of reformulated gasoline areas would more than counteract any decrease in the oxygen content of a refiner's conventional gasoline. It also allows a refiner to get credit for a real increase in its conventional gasoline oxygen content and the associated reduction in emissions. b. Exclude oxygen content in the baseline and exclude it in compliance calculations. This option does not penalize a refiner for a reduction in oxygen content (i.e., sufficient oxygen assumed due to spillover and oxygenated fuel) from 1990 but also does not give credit for a real increase in the oxygen content of its conventional gasoline. With no credit for increased oxygen content, there would be less flexibility in adjusting the other conventional gasoline components in the model. EPA requests comments on the inclusion or exclusion of oxygen content as a baseline and compliance parameter, and on the options presented above. 2. Emission Requirements in 1997 and Beyond Based on the negotiated agreement, EPA proposes that in 1997 and beyond, section 211(k)(8) of the Act be implemented by requiring that the exhaust toxic emissions and the NOx emissions of a party's conventional gasoline not exceed that party's baseline exhaust toxic and NOx emissions, and that compliance with this requirement be determined using the complex model described in Section II.B. The exhaust toxics emissions requirement for 1997 and beyond differs from the 1995-6 requirements in that all five pollutants section 211(k)(10)(C) defines as toxics are included. These are exhaust benzene, formaldehyde, acetaldehyde, 1,3-butadiene and POM. The 1997 and beyond requirements also differ from the 1995-6 requirements in that, in 1997, NOx emissions are controlled. In 1995-6, no adjustment to reformulated gasoline composition will be necessary to reduce NOx emissions. Thus, there should be no dumping of high NOx emission components in conventional gasoline. Although EPA is concerned that high oxygenate levels may contribute to increased NOx emissions, the Act states that any NOx emissions increase due to oxygenate use can be offset by VOC, CO and toxic emissions reductions which are also due to oxygenate use. The VOC and CO emissions reductions which occur with oxygenate use are clearly much greater than any potential NOx increase as discussed in sections III.B, IX.C.2.c and IX.C.3.c in the NPRM. Thus, EPA proposes to disregard any deleterious oxygenate effects on NOx emissions for anti-dumping purposes. All the fuel parameters identified as affecting toxic emissions will be included in the complex model. As stated previously, these will likely include oxygen, benzene, aromatics, RVP, sulfur, olefins and T90. The sum of the baseline exhaust toxic emissions is the value that must not be exceeded by the annual average exhaust toxic emissions due to a refiner's or importer's post-1996 conventional gasoline. C. Baseline and Compliance Determination 1. Introduction Section 211(k)(8) of the Act provides that an individual baseline (comprised of individual baseline fuel parameter and exhaust emission values) be determined for each refiner (including blenders, see discussion in section XIII.B) and importer if sufficient data exist from which to determine a baseline representative of that party's 1990 gasoline. Additionally, the Act states that if no adequate or reliable data exist regarding the gasoline sold by a refiner or importer in 1990, the refiner or importer must use the statutory baseline gasoline fuel parameters (found in section III.A) as its baseline fuel parameters. After consulting with refiners and importers, EPA believes that there likely will be insufficient directly measured 1990 parameter data available, even in the case of some of the largest refiners, from which to determine representative individual baseline parameters. At the same time, EPA is concerned about the use of the statutory baseline parameters by those without individual baseline data. Since the statutory baseline gasoline is supposed to approximate the average 1990 gasoline quality and composition, some refiners and importers presumably supplied 1990 gasoline that was more polluting than the CAA baseline and others presumably supplied less polluting gasoline. Thus, if the statutory baseline gasoline parameters are required for those without sufficient data, some would be able to produce "dirtier" gasoline than they did in 1990 and others would be penalized because they would have to meet a stricter emissions standard than would be required based on their 1990 gasoline. Even if the average emissions would be the same whether individual baselines or the CAA baseline were used, EPA believes the competitive effects could be extreme. Detailed in sections 2 through 5 below are the Agency's proposed methods for baseline determination. Proposed compliance requirements are briefly discussed in these sections and are more fully discussed in section XIII. These proposed methods are intended to make best use of available data while attempting to eliminate loopholes and prevent gaming (e.g., the "dumping" of emission-increasing components or the creation of unfair competitive situations). Thus, different methods of baseline determination are proposed for different refinery operational modes, as discussed in section IX.D of the NPRM. Section 6 details the statutory baseline fuel parameters for anti- dumping. Section 7 discusses baseline determination for parties involved in both domestic gasoline production and importation of gasoline. Section 8 details potential concerns for isolated distribution areas. Section 9 discusses the option of obtaining a refinery-specific individual baseline. Section 10 discusses the limitation on individual baseline applicability with regard to production volume. Comments are requested concerning any and all aspects of individual baseline determination. 2. Producers of Blendstocks and Finished Gasoline a. Baseline. The Agency proposes the following methods for the determination of a refiner's individual baseline when the gasoline under consideration is produced at a refinery engaged in the production of gasoline blendstocks from crude oil and the subsequent mixing of those blendstocks to form finished gasoline. A refinery shall have been in normal operation for a minimum of six months in 1990 in order to develop an individual baseline. Method 1: By Method 1, a required fuel parameter would be determined from a refiner's records of 1990 shipments of finished gasoline and gasoline blendstocks 54, as follows. Gasoline blendstocks, of the types listed in Table XII-1, which left a refinery in 1990 would be included in a refiner's or refinery's baseline determination if the refiner could show that the blendstocks were blended with other components to form gasoline. If the blendstocks so identified were used by a refiner who would have its individual baseline parameters determined by the three methods proposed here, that refiner would subtract the qualities and volumes of such blendstocks from its individual baseline determination. This requirement is intended to minimize double-counting of blendstock properties in the baseline determination. The measured parameter value and volume of each shipment of gasoline or blendstock would be used in the determination of the overall value of a parameter at a single refinery. NOTE 54 For a discussion of why EPA believes gasoline blendstocks should be included in both baseline determinations as well as compliance calculations, see section XIII.C. Table XII-1.--Gasoline Blendstocks Reformate Light coker naphtha Straight run naphtha FCC naphtha C5 + Isomerate Hydrocrackate Alkylate Poly gasoline Dimate Toluene/xylene Isobutane Normal butane Raffinate Natural gasoline Pyrolysis gasoline Aromatics Light paraffins FC Gas The blendstocks listed in Table XII-1 are intended to represent the range of blendstocks which are likely to be used in the production of gasoline. The "names" of the listed blendstocks should be considered the names by which a blendstock or stream is commonly or commercially known, based on its composition, the unit in which it was produced and other characteristics. EPA realizes that within a refinery, blendstock streams of approximately the same composition and characteristics as the listed blendstocks may have different names. If a refiner has a blendstock or stream which is similar in composition or characteristic to the listed blendstocks, that blendstock should be included in the baseline determination, if appropriate based on this discussion. EPA believes the inclusion of blendstocks in the baseline determination is authorized under section 211(k)(8) of the Act. Inclusion of blendstocks is necessary to implement Congressional intent for the anti- dumping provisions of section 211(k), and will limit, if not preclude, the use of blendstocks to "cheat" or otherwise subvert the goals of the anti- dumping program. EPA also believes that section 211(c) provides independent authority for inclusion of blendstocks in today's anti-dumping proposals. EPA's statutory authority for this proposal is therefore based on both section 211(k) and section 211(c) of the Act. Method 2: By Method 2, a required fuel parameter would be determined from a refiner's 1990 gasoline blendstock composition data and 1990 production records. This would apply to those blendstocks used in the production of gasoline within the refinery. Additionally, gasoline blendstocks, of the types listed in Table XII-1, which left a refinery in 1990 would be included in a refiner's or refinery's baseline determination if the refiner could show that the blendstocks were blended with other components to form gasoline. If the blendstocks so identified were used by a refiner who would have its individual baseline parameters determined by the three methods proposed here, that refiner would subtract the qualities and volumes of such blendstocks from its individual baseline determination. This requirement is intended to minimize double-counting of blendstock properties in the baseline determination. By this method, the average parameter value of each type of gasoline blendstock would be determined from the measured parameter value and associated volume of each type of blendstock. As will be discussed below, the associated volume would be the volume of a batch of blendstock, or for a continuous process, a volume proportional to the amount of the blendstock blended to form finished gasoline in that month. Method 3: By Method 3, a required fuel parameter would be determined from a refiner's 1991/2 blendstock composition data and 1990 production records. This would apply to those blendstocks used in the production of gasoline within the refinery. Additionally, gasoline blendstocks, of the types listed in Table XII-1, which left a refinery in 1990 would be included in a refiner's or refinery's baseline determination if the refiner could show that the blendstocks were blended with other components to form gasoline. If the blendstocks so identified were used by a refiner who would have its individual baseline parameters determined by the three methods proposed here, that refiner would subtract the qualities and volumes of the blendstocks from its individual baseline determination. This requirement is intended to minimize double-counting of blendstock properties in the baseline determination. By this method, the average 1991/2 parameter value of each type of gasoline blendstock would be determined from the measured parameter value and volume of each 1991/2 batch of that type of blendstock. The average 1991/2 parameter value and the total 1990 volume of each type of blendstock would then be used to determine the overall value of the parameter at a single refinery. EPA proposes to issue technical guidelines for an EPA-certified auditor (as discussed in paragraph D.1) to follow when performing the audit of baseline submission data. Such guidelines would require that operational and other types of changes in a refinery were accounted for, and that based on these changes it would be possible to estimate a baseline representative of 1990 production. In order that the fuel parameter values obtained by Method 3 adequately represent the 1990 values of those parameters the refiner must provide detailed documentation of its 1990 and 1991/2 refinery operations. This documentation will allow the baseline auditor (discussed in paragraph D.1) to compare 1990 and 1991/2 operations, intermediates and products and adjust the baseline parameter determination accordingly. EPA also proposes to allow 1991/2 finished gasoline data to be used to estimate 1990 baseline parameters. In addition to requiring the same detailed documentation of 1990 and 1991/2 operations as above, the volumetric fraction of each blendstock in 1991/2 finished gasoline must be within five (5) percent of the volumetric fraction of the blendstock used in 1990 finished conventional gasoline. For example, if a refiner's 1990 finished gasoline contained 30 volume percent reformate, 1991/2 finished gasoline data may be used (provided all other parameter values also conformed to these requirements) as long as it contained 28.5-31.5 volume percent reformate. Allowing the use of 1991/2 finished gasoline data may reduce the costs associated with sampling and testing. Application of these methods is hierarchical in that the method drawing on the best available data must be used to determine the baseline value of a fuel parameter. If a refiner has data available for a baseline parameter determination by Method 1, then the value of that baseline parameter must be established using that method. If insufficient data is available for a Method 1 determination, but sufficient data exists for a Method 2 determination, then the refiner must use Method 2. If insufficient data is available for a Method 2 determination but sufficient data exists for baseline determination by Method 3, then Method 3 must be used. This hierarchical application of the three methods applies separately to each fuel parameter at each refinery. As previously stated, EPA believes that to avoid potentially detrimental air quality and competitiveness effects, use of the statutory baseline parameters should be avoided if baseline parameters can be estimated with reasonable accuracy. While the data needed for Method 1 is obviously more reliable than that required for Method 3, EPA considers the data needed for Method 3, as well as that for Methods 1 and 2, to be reliable and adequate for the purposes of determining baseline fuel parameter values for the anti- dumping program. Thus, EPA proposes that all gasoline produced in the type of refinery discussed in this Section be subject to baseline determination by Methods 1, 2 or 3. Further discussion on the use of Methods 2 and 3 can be found in Section IX.D.2 of the NPRM. The proposed equations for calculating baseline fuel parameters by each of the above methods are listed in Sec. 80.91 of the proposed regulations. EPA is also proposing that samples that have been retained but not yet analyzed may be mixed together in volumes proportional to the volume of the batch or shipment from which the sample was taken and the mixture analyzed for the required fuel parameters. Blendstock samples obtained from continuous processes over a calendar month may be mixed together in equal volumes to form one blendstock sample (e.g., all samples of reformate taken in a calendar month may be mixed) and the sample analyzed for the required fuel parameters. Blendstock parameter values so obtained from sampling of continuous processes shall be weighted according to the volumetric fraction of that blendstock in the finished gasoline produced in that calendar month. EPA believes that this type of linear blending and determination of parameters is satisfactory for baseline determination, as it is implicit in Congress' direction to the Administrator with regards to the determination of an average winter baseline gasoline in section 211(k)(10)(B)(ii) of the Act. Analyzing such mixtures may reduce testing costs significantly. EPA is also proposing that the sampling and measurement techniques used to determine baseline parameters must yield results which would be equivalent to the results obtained per the techniques and methodologies proposed under the reformulated gasoline program. The baseline auditor would verify that historical data (i.e., 1990 and 1991 data) were obtained using test procedures which yielded equivalent results. In order to use any method, a sufficient number of shipments or blendstock batches (of one type of blendstock) must have been sampled, or a sufficient number of samples taken from continuous processes, in a calendar month over a minimum of 6 months that will enable an auditor to determine the baseline parameters of the refinery, for instance, by a material balance around the refinery, including the tank farm. This requirement will insure that the average parameter values calculated by the above methods will adequately represent a refiner's 1990 gasoline quality and composition, including representative summer and winter data. EPA proposes that the 6 month period must consist of 3 summer months and 3 winter months. Assuming that summertime gasoline is produced beginning in March, EPA proposes that summertime gasoline for Method 3 be gasoline produced from April 1 through September 15, inclusive, and that wintertime gasoline be gasoline produced from September 16 through March 31, inclusive. The above segregation also applies to blendstock production. Average parameter values will be determined for each season and the seasonal values weighted on a 46.8/53.2 percent summer/winter split to yield an annual average parameter value. These percentages represent the volumetric fraction of gasoline consumed in 1990 during the summer and winter periods listed above and are consistent with the splits used in the reformulated gasoline program. It should be noted that all available samples must be analyzed and the results used in baseline determination if more than the minimum number of samples are available. Comments are requested on this proposal, specifically on whether the sampling requirements for each method are sufficient. Comments are requested on the proposed methods of baseline parameter determination, the likely availability of data for each parameter by each method, the extent to which the data obtained by each method will be representative of actual 1990 data, and any other aspects of these proposed methods and associated proposed regulations. b. Baseline adjustment for work-in-progress. Prior to passage of the CAA Amendments of 1990 some refiners had made significant financial commitments to change their future gasoline quality through the construction or upgrading of certain process units critical to gasoline production. Many of these projects were "work-in-progress" (WIP) and were not completed in 1990, the baseline year for the anti-dumping controls. These projects were, in many cases, initiated (at least in part) to comply with some other regulatory requirement such as EPA's diesel desulfurization rules promulgated in 1989 and due to take effect in 1993. Some refiners' strategies for complying with these prior regulatory requirements entail changing their gasoline quality in ways that will increase some types of emissions over 1990 levels. In the case of at least some of these refiners, compliance with the anti-dumping requirements (to not exceed 1990 emissions levels) could only be accomplished by not operating, or not fully operating, the new or upgraded unit. The inability to make use of the new or upgraded unit could in turn threaten the financial viability of some companies. At the same time, the likely increase in total emissions in anti-dumping areas as a result of the new or upgraded units at the small number of refineries that had WIP in 1990 is not expected to be great. As explained in Alabama Power Company v. Castle, 636 F.2d 323, 357 (D.C. Cir 1979), agencies possess "equitable discretion . . . to afford case-by- case treatment--taking into account circumstances peculiar to individual parties in the application of a general rule to particular cases, or even in appropriate cases to grant dispensation from the rule's operation." EPA proposes to exercise its "equitable" discretion to afford limited relief to refiners that would be extraordinarily burdened by application of the anti- dumping requirement that they not exceed their 1990 emissions. Specifically, EPA proposes that any refiner that meets the criteria listed below be allowed to modify its baseline determination to account for WIP. Based on the negotiated agreement, the requirements for obtaining a modification include that the refiner would have to petition the Agency in order to obtain this modification and would have to show all of the following: i. That at least a five (5) percent difference exists between the refiner's baseline exhaust benzene emissions with and without the work-in-progress (WIP) adjustment. ii. That the WIP was associated with other regulatory requirements. iii. That failure to grant this adjustment would result in an extraordinary regulatory burden, i.e., a substantial portion of the refiner's capital would be at risk if the adjustment were not granted. Based on comments received from refiners concerning the minimum value for a refiner's capital to be at risk, EPA proposes that "substantial portion of the refiner's capital" be that the capital (including capitalized engineering costs) involved in the WIP exceed 10 percent of the refinery's depreciated plant and equipment value as of the WIP start-up date. EPA believes that above this level, the economic viability of some refiners, particularly smaller refiners, could be jeopardized. Comments are requested on the appropriateness of this value. iv. That such an adjustment would not cause a refiner's baseline exhaust benzene emissions to exceed the exhaust benzene emissions due to the statutory baseline parameters by more than five (5) percent. However, a refiner whose WIP-adjusted baseline emissions exceeds 105 percent of CAA baseline emissions does not have to reduce its emissions further to 105 percent of the CAA baseline if its WIP-adjusted baseline emissions are less than its pre-WIP baseline emissions. The "five percent" values proposed in i and iv above were deemed to be reasonable by those participating in the regulatory negotiation process. Comments are requested on the effect of allowing this modification of baseline determination and the criteria which might be required to establish the right to modify a Method 1, 2 or 3 baseline determination as discussed. c. Baseline recalculations. Sometime after a refiner's initial baseline fuel parameters and emissions are determined and approved, several potential situations could occur which would necessitate recalculation of a refiner's baseline. For instance, a refinery could be sold or be started up after not having been in operation in 1990. EPA proposes that the baselines of all parties involved in such, or similar, transactions be recalculated to reflect these changes. For example, in the case of a refinery which was sold, both the buyer's and seller's baseline fuel parameter values would have to be recalculated to reflect the addition and subtraction of the fuel parameter values and associated volumes of the refinery being exchanged. In the case of a refinery not in operation in 1990 but started up at a later date, the refiner's baseline would be recalculated to reflect the addition of the restarted refinery's volume of gasoline. Since there would be no 1990 baseline for that refinery's gasoline, pursuant to section 211(k)(8), the CAA baseline gasoline parameters would be used for that gasoline in the recalculation of the refiner's baseline. EPA is proposing that within 30 days of a refiner's baseline fuel parameter values becoming incomplete or inadequate due to the events described, or to similar events, the refiner would submit the appropriate documentation to an auditor which is certified for baseline verification and recalculation as discussed in section D. Comments are requested on this proposal. EPA proposes that when a refinery is permanently shut down, the refiner would not recalculate its baseline. EPA believes that a refinery should not have to be left open (particularly a dirty refinery) to retain an individual refiner baseline. If a baseline recalculation was required, a refiner could just minimally run the refinery to retain its individual refiner baseline. Likewise, should a refinery which was in operation in 1990 be shut down and started up at a later date, the refiner or refinery would still have its 1990 baseline characteristics. d. Compliance. EPA proposes that a refiner whose gasoline is produced in a refinery operating as described under this heading would determine its compliance with the anti-dumping provisions as discussed briefly below and in detail in section XIII. The post-1994 finished gasoline, and gasoline blendstocks of the types listed in Table XII-1, which left a refinery would be included in a refiner's or refinery's compliance calculation (and thus be accounted for). Transfer documentation would be issued on such gasoline and gasoline blendstocks in accordance with the requirements specified in section XIII.C. Certain blendstocks would be excluded from a refiner's or refinery's compliance calculation, including those blendstocks which are: i. accounted for by another refiner, ii. sold at certain prices indicative of use in nongasoline products, iii. to be used as feedstock, or iv. never to be used in finished gasoline. The parameter values of the post-1994 finished gasoline, and blendstocks of the types listed in Table XII-1, which were acquired by a refinery and were accounted for by another refiner would be volumetrically subtracted from the acquiring refiner's or refinery's compliance calculation. Unaccounted for blendstocks of the types listed in Table XII-1 which were acquired by a refinery for use in gasoline blending would be included in the acquiring refiner's or refinery's compliance calculation. 3. Producers of Blendstocks Only a. Baseline. Certain industries, such as the petrochemical and natural gas liquids industries, supply gasoline blendstocks to refiners and blenders. EPA believes that if such parties did not produce gasoline in 1990 and will not produce gasoline in the future (since gasoline production is not their business), they could not "dump" gasoline components from reformulated into conventional gasoline, nor could they purchase "dumped" components for blending with finished gasoline. EPA proposes that those parties which produced gasoline blendstocks but not finished gasoline in 1990, and which will not produce finished gasoline in the future, not have an individual baseline. The blendstocks purchased from these parties would be accounted for by the refiner or blender who purchases them. Comments are requested on this proposal. b. Compliance. Because parties under this heading did not produce gasoline in 1990 and would not produce gasoline in the future, they would not have a baseline, and thus would not be subject to compliance under the anti-dumping program. 4. Purchasers of Blendstocks and/or Finished Gasoline a. Baseline. An issue not addressed by the negotiated agreement is the determination of individual baselines for those refiners who exclusively purchase blendstocks and/or finished gasoline and mix these purchased components to form another finished gasoline. Refiners engaged in this type of refinery operation are commonly called "blenders". EPA proposes requiring the use of Method 1 (discussed in paragraph C.2) for baseline fuel parameter determination for gasoline produced in a refinery where gasoline blendstocks and/or finished gasoline are simply purchased or otherwise received (including intra-company transfers) and mixed to form finished gasoline. If a blender does not have the data required for a Method 1 determination of all of the required parameters, EPA proposes that the blender have the CAA baseline parameters as its individual baseline parameters. b. Compliance. For compliance purposes (which are further discussed in section XIII), EPA proposes that the average emissions of unaccounted for blendstocks could not exceed the blender's baseline, either as determined by Method 1 or, if the blender did not have the data required for a Method 1 determination of all of the required parameters, the CAA baseline. As will be discussed in Section XIII, the blender would determine its post- 1994 parameter values by volume weighting the parameter values of the blendstocks it adds to other blendstocks or to finished gasoline. The blender would also be allowed to mix finished gasoline and blendstocks, which have been accounted for by a refiner with an individual baseline, and oxygenates without accounting for the composition and resulting emissions due to those components. EPA also proposes that a blender be allowed to include oxygenates in its compliance calculation if EPA chooses to include oxygen content in the compliance calculation under the option discussed in paragraph B.1. This would give blenders who only blend oxygenates, gasoline and "accounted for" blendstocks the ability to blend without regulatory burden while giving credit for the emission reduction benefits of oxygenates which blenders who combine unaccounted for blendstocks can utilize. A blender could not blend those blendstocks which have been "marked" (indicating the blendstock is not for use in finished gasoline) by a refiner with an individual baseline. EPA believes this proposal will allow blenders to purchase fungible gasoline and will not reduce the availability of blendstocks yet will maintain air quality since the emissions from the blendstocks mixed to produce gasoline or added to finished gasoline cannot exceed the Clean Air Act baseline emissions or, if calculable, the blender's individual baseline emissions. This accounting will require the purchase of blendstocks which consist of low-emissions producing components (e.g., natural gas liquids) to offset the use of high-emissions producing components (e.g., toluene) in order that the emissions do not exceed the blender's baseline emissions. Additionally, EPA does not believe that blends of accounted for and unaccounted for components (i.e., finished gasoline, oxygenates and blendstocks) will result in emission increases or air quality deterioration because the finished gasolines would have been previously accounted for under some other refiner's baseline and the addition of oxygenate would at worst only increase NOx emissions. Under the provisions of section 211(k)(8) of the Act, NOx emission increases, when due to oxygenate, can be offset by equivalent mass reductions in exhaust toxic, VOC and CO emissions due to oxygenate. As discussed in Section B.2, any increase in NOx emissions will be more than made up for by decreases in toxic, VOC and CO emissions. Comments are requested on this proposal. 5. Importers a. Baseline. EPA proposes requiring the use of Method 1 (discussed in paragraph C.2 above) for baseline fuel parameter determination for an importer who imported gasoline and gasoline blendstocks into the U.S. in 1990. If the importer does not have the data required for a Method 1 determination of all of the required parameters for every batch of gasoline or gasoline blendstocks imported, the Agency proposes that the importer have the CAA baseline parameters and resulting emissions as its individual baseline parameters and emissions. An importer who did not import gasoline and/or gasoline blendstocks into the U.S. in 1990 but who does so after 1994 would have the CAA baseline parameters as its individual baseline parameters. Additionally, EPA proposes that if an importer, which is also a refiner, can show that it imported more than 75 percent of its 1990 gasoline production into the U.S. in 1990, it may determine a baseline per the methods described in paragraph C.2. EPA believes that this percentage (75) represents a significant portion of a refiner's gasoline production. Use of the methods described in paragraph C.2 would require baseline verification by an EPA- approved auditor, and thus gaming would be prevented. Comments are requested on the appropriateness of this 75 percent requirement. This proposal differs slightly from that proposed in Section IX.D.4 in the NPRM, but EPA believes that this proposal will avoid the risk of baseline emissions that could be artificially high due to the inability to track the 1990 gasoline and blendstock imports of most importers. Since artificially high baselines would not be allowed, it is also being a more environmentally beneficial proposal. EPA believes that this approach is still fair and equitable to importers. EPA does not believe that, in general, importers, particularly those who are not refiners, will have adequate 1990 composition data on their imported gasoline and blendstocks from which to establish an individual baseline under Method 1. If importers were allowed to establish individual baselines based on 1991-2 data (except for those importers who meet the 75 percent criteria described above), it is likely these baselines could be very high compared to that of a domestic refiner since there would be no way (1) to prevent the importer from choosing high emission gasoline to import in 1991-2 simply to get an advantageous baseline and (2) to insure the 1991-2 gasoline was the same as 1990 gasoline imported. While EPA expects the proposed use of a baseline auditor to adequately verify domestic refiners' baselines, it does not believe such a system would be effective in dealing with importers' baselines, unless the importer was also a refiner which met the 75 percent criteria. EPA believes that to allow importers to develop high baseline emissions without the data required by Method 1, would encourage gaming, i.e., high-emissions producing gasoline and blendstocks could leave the U.S. (from a refiner with a relatively low baseline) and come back in via an importer with a high baseline. This clearly would be dumping, and thus would be environmentally, as well as competitively, detrimental. It would also allow importers to meet a less stringent standard overall than domestic refiners. Comments are requested on this proposal. b. Compliance. As discussed in section XIII, the emissions of an importer's post-1994 gasoline and gasoline blendstocks could not exceed its individual baseline emissions as determined above. Additionally, an importer would be subject to the compliance requirements discussed under paragraph C.2 with regard to the subtraction of accounted for blendstocks and finished gasoline acquired by the importer and the inclusion of unaccounted for blendstocks in its compliance calculation. 6. Anti-Dumping Statutory Baseline Parameters EPA is proposing an annual compliance period (which is discussed in section XIII) for conventional gasoline. Thus only one set of statutory baseline gasoline parameters is required since there are no seasonal compliance requirements. The annual average baseline parameters shown below were determined by weighting the summer and winter baseline gasoline parameters on a 46.8/53.2 percent summer/winter split to yield an annual average parameter value. These percentages represent the volumetric fraction of gasoline consumed in 1990 during the summer period of April 1-September 15 and winter period of September 16-March 31 and are consistent with the splits used in the reformulated gasoline equations. This baseline parameter set contains no oxygen. Table XII-2.--Annual Average Baseline Parameters Benzene, volume percent 1.58 Aromatics, volume percent 29.0 Olefins, volume percent 10.6 Saturates, volume percent 60.4 RVP, psi 10.3 IBP, degrees F 89 T10, degrees F 119 T50, degrees F 208 T90, degrees F 331 End Point, degrees F 409 Octane, (R+M)/2 87.7 API Gravity 59.0 Sulfur, ppm 338 Based on the proposals for baseline determination discussed in several sections above, no refiner (who is not considered a "blender") would be allowed to use the baseline parameters above as part of its individual baseline determination unless it obtained and started up a refinery which was not in operation in 1990 (i.e., had achieved relatively normal operation for at least 6 months in 1990) or unless its post-1994 production volume exceeded its 1990 maximum gasoline production (per the requirements discussed in paragraph C.10). A refiner who is considered a "blender" would use these parameters as its baseline parameters unless it had adequate data for a baseline determination by the proposed Method 1. An importer would also have these parameters as its individual baseline parameters unless it had adequate data for a baseline determination by the proposed Method 1 or met the "75 percent" criteria discussed in paragraph C.5. Comments are requested on the parameter values listed above and on the methodology used to obtain them. 7. Multiple Modes of Operation The Agency proposes and requests comments on the following requirements for a refiner's baseline determination if a refiner engages in the production of gasoline from one or both of the two types of refinery operational modes discussed in sections 2 and 4 above and/or also imports finished gasoline and/or blendstocks. The Agency proposes that separate baselines be established for each of the different modes of refinery operation, on a domestic and import basis. For instance, a refiner who owns a refinery which produces blendstocks, and who also owns a refinery which purchases blendstocks and who also imports gasoline which is produced in both types of refineries (i.e., it imports gasoline which was produced in a refinery from which it imported more than 75 percent of the refinery's 1990 gasoline production into the U.S. and for which it developed an individual baseline and it also imported gasoline which must meet the CAA baseline, i.e., which was not from its own refinery meeting the "75 percent" criteria discussed in paragraph 5) would have four (4) individual baselines. As will be discussed in paragraph C.9, a refiner with more than one refinery operating as discussed in paragraph C.2 may choose to have separate baselines for each of its refineries. An equation governing the determination of a refiner's baseline is listed in Sec. 80.91(f)(iii) in the proposed regulations. Each of a refiner's domestic baselines would be determined from the average fuel parameter values and total 1990 gasoline shipment volume of each of its domestic refineries operating in a single mode. An importer's baseline would likewise be determined from the average fuel parameter values and total 1990 gasoline shipment volume of each refinery which operates in one of the two modes and from which it receives finished gasoline. EPA believes that this approach prevents anticompetitive effects which could hurt smaller refiners, blenders and importers. A larger, more versatile entity which engages in more than one of the operations (refining, blending, importing) could potentially average its gasoline properties over the different operations whereas a smaller, less versatile entity does not have this opportunity. EPA also believes that this approach prevents dumping and prevents the production or importation of significant quantities of "dirtier" than average gasoline which was not part of a refiner's or importer's 1990 production or sales. Additionally, accounting for (1) a refiner's individual baseline, (2) the limit of individual baseline applicability (discussed in paragraph 10 below) and (3) gasoline from most blending and import operations having the CAA baseline parameters could raise difficult compliance and even baseline questions. For example, a refiner who had a relatively low baseline in 1990 and did not import in 1990 may decide to import in 1995. The imported gasoline could be required to meet the CAA baseline emission level or the lower emission baseline of the refiner, or the refiner's baseline could be recalculated to account for the imported gasoline. Likewise, in the case of a refiner with a relatively high baseline, it could potentially import gasoline under its high baseline with potentially no volume limit on the imported gasoline. Comments are requested on the proposed method of baseline determination. 8. Geographic Considerations As stated in section IX.D.6 of the NPRM, in certain geographical areas, "localized dumping" could occur. In these areas, EPA proposes to allow any person to petition EPA to establish an individual refinery baseline for refineries under certain circumstances. The refinery would have to be located in an isolated gasoline distribution system which contains a reformulated gasoline opt-in area surrounded by a conventional gasoline area, and where it is shown that significant increases in toxic emissions are occurring in the conventional gasoline area. If EPA found that localized dumping was occurring, it would grant the petition, define refineries in the affected area as individual refiners and establish baselines for each refinery. EPA's authority to establish such individual baselines is based on section 211(c) of the Act which allows the Administrator to regulate fuels or fuel additives to protect the public health or welfare. A refinery's individual baseline so established would not be incorporated into the refiner's baseline if those facilities were owned by a larger entity. However, a refiner that has two or more refineries in a defined area may determine a baseline for that area by incorporating all of the refineries in that area. In no case is a refinery to have an individual baseline and to also be included in the baseline of the larger entity. Comments concerning this proposal are requested. 9. Establishment of Refinery-Specific Individual Baselines In certain instances, a refiner may desire to have an individual baseline for each of its refineries. For instance, suppose a refiner has a refinery which has low baseline emissions and a refinery which has high baseline emissions, and the low emission refinery will soon be producing primarily reformulated gasoline. If the operations of the high emission refinery do not change, the refiner would be out of compliance with the anti-dumping requirements because the contribution of the low emission refinery fuel in the anti-dumping calculation would be less. Thus, the refiner would be penalized for producing reformulated gasoline while maintaining conventional gasoline operations that are very similar to its 1990 operations. EPA proposes to allow a refiner to establish individual baselines for each of its refineries. Thus, the refiner would not have its own individual baseline. A refiner may only establish an individual baseline for each of its refineries or none of its refineries (i.e., use a refiner-wide baseline). This is analogous to and consistent with the reformulated gasoline situation. Although the Clean Air Act refers to gasoline sold by a refiner, blender or importer (section 211(k)(8)(A)), EPA believes that refinery specific baselines are allowed. The Act does not specify an averaging unit for baseline determination, though it does provide for emissions averaging between refineries for compliance. There are three possible options for baseline determination. Baselines could be determined on a refinery basis, on a refiner basis or on some combination of the two. During the regulatory negotiation, it was agreed that the pure refiner basis would be unfair to certain refiners. Allowing refiners to simply pick a combination of averaged and individual refinery baselines would give large refiners an opportunity to game the system and potentially grant them a significant advantage over small refiners. Therefore, EPA is proposing to allow refiners to choose only refiner-wide averaging or refinery-by-refinery baselines. It is likely that less localized dumping would occur in those locales where individual refineries have individual baselines. If refinery-specific individual baselines are allowed, all requirements applicable to refiners would also apply to refineries with individual baselines for compliance purposes. Comments are requested on this proposal, specifically regarding whether this should be allowed without restrictions, or if not, what requirements should be considered. 10. Limitation on Applicability of Individual Baseline In order that new gasoline production capacity or purchased volumes of blendstock or gasoline do not allow the production of conventional gasoline which is worse, with respect to emissions, than a gasoline having the parameters listed in section 6, the Agency proposes to limit the application of a refiner's individual baseline to a certain portion of its post-1994 conventional gasoline production and to apply the values of the parameters listed in section 6 (i.e., the CAA baseline parameters) to the volume in excess of this amount. This proposal would also apply to the imported gasoline of importers which have an individual baseline as discussed in section 5. The application of the CAA baseline parameters would only apply to those refiners whose post-1994 production of gasoline (reformulated plus conventional) exceeded their 1990 gasoline production volume. In these cases, the growth in total gasoline production (post-1994 minus 1990) would be allocated to conventional and reformulated gasoline production according to the ratio of post-1994 conventional and reformulated gasoline production. The refiner's individual baseline would apply to all conventional gasoline production except for the growth in production which was allocated to conventional gasoline. The CAA baseline parameters would be applied to the calculated growth in conventional gasoline production. For example, assume that a refiner produced 100 barrels of gasoline in 1990 and 120 barrels (combined reformulated and conventional gasoline production) in 1995. The refiner's total growth would be 20 barrels. Also assume that of the 120 barrels produced in 1995, 65 barrels were reformulated gasoline and 55 barrels were conventional gasoline. The conventional fraction of the refiner's 1995 total production would be 55/120. The fraction of the refiner's total growth which would be allocated to conventional gasoline production would be about 9.2 barrels, or 55/120 times 20. The difference between its 1995 conventional production (55 barrels) and this calculated conventional growth (9.2 barrels) would be the refiner's 1990 conventional base volume (45.8 barrels). In this case, the refiner's individual baseline would be applied to the 45.8 barrels and the CAA baseline parameters (listed in Table XII-2) would be applied to the 9.2 barrels. It should be noted that a refiner or importer would not have to produce or import two kinds of conventional gasoline. The refiner or importer would be simply required to comply with the production weighted average of the two resulting baseline emission figures. For a refiner, its 1990 total volume would be its 1990 actual gasoline production, or WIP-adjusted production, (including oxygenate volume). Note that the 1990 conventional base gasoline volume (to which is applied the refiner's individual baseline) changes as both the total volume of post-1994 gasoline produced or imported, and the fraction of that which is conventional gasoline changes. EPA believes that actual 1990 production better accounts for day-to-day operations, including normal down times, and would thus better reflect future refinery and gasoline production operations since all refinery units are not likely to run at their maximum production ability for the entire year as might be assumed in a modeling demonstration. Additionally, 1990 gasoline production in the U.S., in general, approached near-full capacity. EPA also proposes that if a refiner could demonstrate that extenuating circumstances (i.e., catastrophic failure by fire, explosion, accident, weather, etc.) resulted in down time of at least one (1) month for one or more units, the baseline auditor could adjust the 1990 gasoline production volume to account for operation of the unit at the average production capacity of the other units which produced gasoline blendstocks in 1990. EPA believes this proposal for a volume limitation with respect to individual baseline applicability will create a level playing field and avoid market distortions. EPA believes this is necessary to prevent the purchase and subsequent blending of low emission gasoline up to the higher CAA baseline emissions. In addition to increased motor vehicle emissions, this could result in increased market share for some entities and anti-competitive effects. EPA believes the proposed limitation on the amount of conventional gasoline which is compared to the individual baseline, as outlined above, is authorized under section 211(c) of the Act. EPA is exercising its discretion under section 211(c) because of the increase in emissions that otherwise could occur, as described above. Comments are requested on this proposal. Comments are also requested on a second option which would apply a refiner's or importer's individual baseline to all of its post-1994 conventional gasoline produced or imported regardless of growth. This option would replace the earlier option which would apply the CAA baseline fuel parameters to "new" conventional gasoline volume (i.e., individual refiners would not be able to choose between the two options). D. Individual Baseline Data Submission and Approval 1. Auditor Certification EPA proposes that Agency-certified auditors be utilized to verify a refiner's data submission package. EPA also proposes that an auditor be independent of the refiner. EPA would certify auditors based on criteria developed by the Agency in consultation with persons who are knowledgeable in the technical aspects of the refining industry, including refinery and terminal operations. In addition to developing auditor certification criteria, the Agency, again in consultation with technical experts, would develop technical guidelines for an auditor to consider while conducting the audit of baseline data submissions. EPA plans to have consulted with the appropriate technical experts by March 31, 1992. Comments on the use of an auditor for baseline data verification, relationship of the auditor to the submitter, technical expert consultations, criteria the auditors of baseline data should be required to meet, and any dates proposed here are requested. 2. Data Submission The Agency proposes that refiners and importers submit their baseline data package to a certified auditor on or before January 31, 1993. EPA believes this is sufficient time for refiners and importers to gather and prepare the required data. Data submissions are required from all refiners, including blenders, and importers. An entity which is permitted under this proposal to utilize the CAA baseline parameters as its individual baseline parameters, and does so, shall submit a letter by the chief executive officer or designee indicating that insufficient data exists for a baseline determination by the methods allowed for that entity. The Agency proposes the submission requirements found at Sec. 80.92(b) of the proposed regulations. Data submissions are to include all data required for Method 1 determination of each parameter. If the data available are insufficient for a baseline parameter determination by Method 1, all data available for a Method 2 parameter determination would also be submitted. Likewise, if insufficient data exists for determination of a parameter by Method 2, then all data for a Method 3 determination would also be submitted. Thus if a Method 3 determination is to be used for a baseline parameter determination, all of the refiner's available data on determining that parameter would be submitted. The submission package must also include a letter signed by the chief executive officer of the company, or designee, stating that the data submitted is the extent of the data available for the determination of all the required baseline fuel parameter values. For each of the three proposed methods of baseline fuel parameter determination, EPA proposes that the data include the sampling dates of each shipment, batch or stream, the volume associated with each sampled shipment, batch or stream, fuel parameter measurement dates and the values of measured fuel parameters. Supporting details such as test procedure identification and name and address of testing facility would need to be included to the extent they are available. EPA also proposes that additional support data include identification of batches or shipments as either produced at the refinery, purchased from within or outside of the company, or transferred from within or outside of the company. Also, a summary sheet detailing each incidence of blendstock transfer or purchase and each incidence of gasoline shipment is required. Summary sheets are intended to limit the amount of paperwork submitted and for ease of reviewing the data. For use of a Method 3 determination, the supporting data comparing 1990 and 1991/2 blendstock composition include key process operating conditions (e.g., feed and product stream compositions, catcracker cutpoints, catalyst types, operating temperatures, reformer RON, etc.), intermediate feedstocks and other information an auditor may need to compare 1990 and 1991/2 operations. Comments are requested as to the adequacy and necessity of this type of data and on any other details that should be included as required supporting documentation. Concerning use of a work-in-progress modified baseline, EPA proposes that submissions include all the data required to determine the refinery unadjusted baseline plus the corresponding data required for supporting and calculating a work-in-progress adjusted baseline. EPA is also proposing that if, due to work-in-progress, a refiner was not able to collect reliable 1991 data, the refiner's baseline be calculated using estimated values for the refinery as it will be affected by the work-in-progress, once completed. The estimated values would be established from production records, lab analyses, engineering data, historical and comparative data and refinery models. Within 6 months of the facility achieving normal operation, actual operating data would be used to reconcile such estimates and the resultant modified baseline calculations. Such reconciliation must be provided to an auditor who will verify that the refiner's original estimate was reasonably accurate employing criteria developed by the technical panels discussed in paragraph D.1 above. If the refiner calculates a new baseline exhaust emissions value which is within five (5) percent of the estimated value, the refiner need not have the auditor verify the new, actual baseline, but may simply submit the new baseline data to EPA. If the baseline exhaust emissions value is different by more than five percent, the data must be submitted to an auditor for verification. EPA proposes that submitted data be reported in tabular form by parameter, calendar month and refinery for the following parameters: benzene content; aromatic content; olefin content; sulfur content; distillation temperatures at 10, 50 and 90 percent evaporated points; oxygen content and oxygenate type; and RVP. The submission would also include the refiner's estimate of its overall baseline fuel parameter values and its baseline emissions values. This estimate must of course be verified by the auditor. Comments on the details of these submission requirements are requested, particularly concerning the amount and type of data requested. 3. EPA Approval EPA proposes that the auditor verify the accuracy of the submitted data. Comments are requested on the methods to be used by an auditor to verify data. The Agency further proposes that the auditor forward results of verification to EPA within three (3) months of receipt of the submitted data. In order to benefit from public comment while the Agency evaluates the data, EPA would publish individual baseline data in the Federal Register within two (2) months of receipt from the auditor without first evaluating it. The Agency proposes to publish baseline data in the form of fuel parameter values by refiner or importer and for each refinery of a refiner or importer with more than one refinery. EPA would decide on the adequacy and reliability of submitted individual baseline data and notify the affected party of approval within five (5) months of publication of the data in the Federal Register. The Agency proposes to conduct investigations of potential baseline discrepancies in a confidential manner involving EPA, the auditor and the refiner or importer. Comments concerning any aspect of the suggested methods for implementing these anti-dumping provisions, as well as comments on any issues not discussed, are requested. XIII. Anti-Dumping Compliance and Enforcement Requirements for Conventional Gasoline A. Introduction Under EPA's proposed anti-dumping program, refiners and importers average the exhaust benzene emission (benzene) of all conventional gasoline and certain refinery products produced or imported on an annual basis across all facilities in the country operated by a single regulated party, except in those cases where the refiner has established a separate baseline for each of its refineries, or for those refiners distributing conventional gasoline into an approved specified geographic area as discussed previously. In addition, sulfur, olefins and T-90 would not be allowed to exceed 125% of their average 1990 baseline levels on an annual basis. Refiners and importers with insufficient data to establish a 1990 baseline, would use the baseline values provided in the Clean Air Act. Refiners that both operate a domestic refinery and import gasoline or gasoline blendstocks would have separate baselines and would have to determine compliance for such operations separately. EPA considered implementing separate summer and winter averaging periods, rather than an annual averaging period. However, EPA determined that the environmental benefits from the implementation of two averaging periods were not significant enough to justify the record keeping and reporting requirements needed for two averaging periods. In addition, industry representatives to the negotiated rulemaking strongly advocated the longer averaging period in that it provided greater flexibility in meeting the anti- dumping requirements. Under EPA's proposal, the anti-dumping enforcement program would consist of a combination of the following enforcement mechanisms to monitor compliance with the regulations, including: (1) Registration of regulated parties, (2) record keeping, (3) reporting, (4) company-commissioned audits, and (5) Agency audits. The Agency believes all the mechanisms proposed are necessary to ensure compliance with the regulations. This belief is based, in large part, on the Agency's experience in enforcing the lead phasedown program. In that program, compliance improved dramatically when the Agency shifted from an enforcement program based merely on the review of periodic reports to one that included enforcement audits. B. Regulated Parties Under EPA's proposal, the anti-dumping requirements would fall into two general categories. Under the first general category of requirements, persons who produce or import gasoline or certain gasoline blendstocks would be required to meet the average standards for exhaust benzene emissions, sulfur, T-90, and olefins. Under the second general category of requirements, refiners and importers would be required to add a chemical marker to certain specified gasoline blendstocks that could not be used in blending gasoline. In addition, any person in the gasoline distribution network could not transport, store, or sell gasoline containing this marker. The first category of anti-dumping requirements, that gasoline and gasoline blendstocks must meet standards for exhaust benzene emissions, sulfur, T-90, and olefins, would apply to refiners and importers. The anti-dumping requirements of section 211(k)(8) of the Clean Air Act apply to any refiner, blender, or importer. The terms "refiner" 55 and "importer" 56 have been defined and applied in earlier environmental regulatory programs involving gasoline.57 EPA proposes that these definitions continue to apply for purposes of the anti-dumping requirements. Section 211 does not define gasoline "blenders," nor has EPA defined it previously as a separate category of regulated party for purposes of gasoline regulations. Under other gasoline regulations, blenders have been generally included within the definition of refiner. NOTE 55 "Refiner" is defined as "any person who owns, leases, operates, controls, or supervises a refinery," 40 CFR 80.2(i), and "refinery" is defined as "a plant at which gasoline is produced," 40 CFR 80.2(h). NOTE 56 "Importer" is defined as "a person who imports gasoline or gasoline blending stocks or components from a foreign country into the United States * * *" 40 CFR 80.2(r). NOTE 57 Current regulatory programs that involve gasoline include the lead phasedown program, 40 CFR 80.20, and the gasoline volatility program, 40 CFR 80.27-28. Thus, under existing regulatory programs involving gasoline, any person who adds any gasoline blendstock 58 to gasoline 59 or who combines gasoline blendstocks to produce gasoline (i.e., a "blender") is included in the definition of refiner, because such a person is "producing" gasoline. 60 The proposed anti-dumping regulations would follow this approach. NOTE 58 "Gasoline blending stock or component" is defined as "any liquid compound which is blended with other liquid compounds or with lead additives to produce gasoline," 40 CFR 80.2(s). NOTE 59 "Gasoline" is defined as "any fuel sold in any State for use in motor vehicles and motor vehicle engines, and commonly or commercially known or sold as gasoline (footnote omitted)," 40 CFR 80.2(c). NOTE 60 Under the gasoline volatility program, a special category of refiner was created for any person who adds ethanol to gasoline, termed an "ethanol blender." "Ethanol blender" is defined as "any person who owns, leases, operates, controls, or supervises an ethanol blending plant," 40 CFR 80.2(v), and "ethanol blending plant" is defined as "any refinery at which gasoline is produced solely through the addition of ethanol to gasoline, and at which the quality or quantity of gasoline is not altered in any other manner," 40 CFR 80.2(u). A separate definition was created for ethanol blenders under the gasoline volatility program because special provisions are included for gasoline containing 9 to 10 volume percent ethanol, 40 CFR 80.27(d), and, as a result, special regulatory requirements were necessary for ethanol blenders, see, e.g., 40 CFR 80.28(g)(6). The second proposed category of anti-dumping requirements involves specified petroleum products which could not be used for gasoline blending. These requirements would apply to all persons in the gasoline distribution network, from refiners and importers through retailers. Under EPA's proposal (discussed more fully below), refiners and importers would be required to add a chemical marker to these blendstocks in order to identify this product to persons downstream in the gasoline distribution network. In order to ensure that marked blendstocks are not added to gasoline, EPA proposes that all persons in the gasoline distribution network (including refiners, importers, distributors, resellers, carriers, retailers, and wholesale purchaser- consumers), be prohibited from selling, dispensing, storing, or transporting these marked blendstocks for use in blending gasoline. A similar prohibition applies to selling, dispensing, storing, or transporting marked gasoline for use as a motor vehicle fuel. C. Accounting for Gasoline and Gasoline Blending Stocks Under EPA's proposal, the anti-dumping requirements would apply to all gasoline and, with certain exceptions, all petroleum products usable for gasoline blending that the refiner produces. Similar provisions would apply to importers. Under the proposal, refiners and importers would have to demonstrate that the annual average properties of the total conventional gasoline and these products do not exceed the specified requirements. The regulations identify those petroleum products that are produced at a gasoline refinery and that are normally used as gasoline blendstock, or RPAD, which must either be accounted for by the refiner or importer in its anti- dumping compliance calculations or designated not for use in blending gasoline. "APP" is the term used in the proposal for blendstocks included by a refiner or importer in their anti-dumping compliance calculations. The term for those blendstocks not accounted for in compliance calculations is "NAPP." EPA is proposing that all petroleum products that are produced at a refinery, plus all finished conventional gasoline, be either accounted for in anti-dumping compliance calculations (APP), or, if not accounted (NAPP), be prohibited from use in blending gasoline. With certain exceptions, NAPP would be marked with an easily detectable chemical marker. This will ensure that the environmental benefits envisioned by Congress for the anti-dumping program are actually achieved, and will avoid anticipated distortions of the market. These problems stem from the economic incentives created by the differences in baselines between different refiners and importers. Certain refiners (i.e. downstream blenders) may likely have standards for anti- dumping compliance that will be more lenient than for other refiners, which could create a mechanism and incentive for parties to add dirtier fractions to finished gasoline. This discrepancy in anti-dumping standards occurs because under the proposed regulations refiners who operated crude oil refineries in 1990 would have baselines that are based upon gasoline produced in 1990, while refiners that were not in operation in 1990 (i.e., some downstream blender-refiners) would have the Clean Air Act statutory baselines.61 NOTE 61 The Clean Air Act statutory baseline represents the nationwide average properties of all gasoline produced in 1990, so that approximately half of the gasoline produced in 1990 was cleaner than the statutory baseline, and approximately half was dirtier. Refiners who in 1990 produced the cleaner half of the gasoline thus would have baselines that are more rigorous than the statutory baseline. For example, a refiner having a rigorous 1990 baseline could produce conventional gasoline meeting its baseline, and have additional "dirty" fractions left over from its production of reformulated gasoline that could not be used within the refiner's standards for compliance. This refiner then could sell both the finished conventional gasoline and the dirty fractions to a blender-refiner who has a less rigorous default baseline. Because of the blender-refiner's less rigorous baseline, the blender-refiner could simply add the dirty fractions back into the gasoline. There are many other similar situations which could occur. The goal of preventing the "dumping" of the refiner's dirty fractions thus would be frustrated. This issue was discussed at great length during the advisory committee negotiations with this rulemaking, with no clear resolution. It was recognized that certain segments of the industry, such as downstream blenders or new refiner-blenders, could derive a significant competitive advantage as a result of their less stringent baseline. Several regulated parties that operate refineries have brought this competitive advantage risk to EPA's attention subsequent to the initial notice of proposed rulemaking. EPA believes there will be blendstocks, such as aromatics, available in the marketplace as a result of the stringent requirements placed on reformulated gasoline, and they will have a high potential of being "dumped" in conventional gasoline. If the cost of these components is below the cost of conventional gasoline, they will almost assuredly be dumped if there is no regulatory mechanism to prevent it. EPA's experience in the 1970's and 1980's with enforcement of the lead contamination rules showed that the few cents wholesale price differential between leaded and unleaded gasoline provided the necessary incentive for significant fuel-switching. Today's proposal, to account for blendstocks in anti-dumping compliance determinations, would provide both an environmental benefit and address this potential competitive advantage. EPA's proposal should prevent this subversion of the anti-dumping program by requiring a refiner to account not only for the finished gasoline it produces, but also for those specified refinery products which have a significant potential of being blended in gasoline. EPA has limited the scope of the applicable requirements by defining the specific refinery produced products or mixtures of these products that either must be accounted for or designated not for use in gasoline. The Agency seeks comments on the adequacy of the list of products proposed as it relates to the specific requirements discussed below. Thus a refiner or importer would have either to account for the properties of these petroleum products or APP in its determination of compliance under the anti-dumping requirements or designate it as NAPP. The primary mechanism proposed for assuring that non-accounted for petroleum products are not blended with gasoline, would be to prohibit the downstream blending of these products. In addition, in order to notify potential downstream blenders if blendstocks have or have not been accounted for, refiners would be required to add a chemical marker to all NAPP, with certain exceptions as described below, and to identify accounted-for blendstocks in the product transfer documents. An exception to the marking requirement for NAPP is being proposed where it is sold by the refiner or importer for a cost that is sufficiently high that there would be no economic incentive for use in gasoline blending. EPA had considered establishing a fixed minimum price or fixed percentage above the cost of gasoline, above which the refiner or importer would not have to mark the product. Instead the Agency decided to propose a cost threshold which more realistically reflects the product's likelihood to be used as blendstock. This would be predicated not only on the product's cost but also on its octane value relative to the octane 62 of both regular and premium grades of gasoline. The proposal, therefore, provides for the computation of a "minimum price" which is based on the octane of the product as well as the octane and price of both regular and premium gasoline. The computation is based on the price charged by that refiner or importer for gasoline over the last two months or, in the absence of such information, the price charged for gasoline within the state over the time period. EPA believes such information is generally available, however, there may be other sources for pricing information which may be more reliable or appropriate for this purpose such as the New York Mercantile Exchange. EPA requests comment on this aspect of the proposal. NOTE 62 The octane of a particular petroleum product is relevant to the likelihood of its use in gasoline blending because much gasoline blending has the purpose of increasing the octane of the gasoline being blended. For example, premium grade gasoline often is produced simply by raising the octane of regular grade gasoline through the addition of higher-octane blendstocks. For this reason, the value of a petroleum product as a blendstock rises as the product's octane rises. Any refiner or importer that produces or imports any of the products identified in the regulations as RPAD would not be required to mark such products if they exceed the minimum price. Refinery produced products which require a high degree of purity, for which the marker could be a potential contaminant, would likely exceed the proposed cost threshold. EPA believes that persons who purchase a petroleum product costing sufficiently more than gasoline would have little or no incentive to add such product to gasoline. Two other exceptions to the requirement for marking NAPP are being proposed. A refiner or importer that produces or imports RPAD may be selling that product to the next purchaser for use by that purchaser in some chemical process other than for blending gasoline in the United States. EPA is proposing that if the seller obtains certain contractual commitments from the purchaser regarding its use, the requirement for marking the product would not apply. This contractual commitment would require that the purchaser agree not to use the product in blending gasoline in the United States (but that would not restrict exports of the product). EPA also is proposing that the product could not be transferred to a third person in the United States, in order to provide more certainty in the product's use. EPA believes that the contractual restrictions would be less effective in preventing the use of NAPP in gasoline blending if the NAPP were transferred through several persons. In addition, the contract must require that the purchaser provide records regarding the use of the product and that the seller retain these records. If EPA discovers that such product has been used in the blending of gasoline, the refiner that sold the product will be deemed in violation. EPA has proposed that the seller can establish a defense to liability based, in part, on implementing a quality assurance program of oversight designed to assure the purchaser's compliance with the requirements of the contract. Another exception to marking NAPP involves product that will be used by the next purchaser as a feedstock in a refinery process. If the refiner sells a particular product directly to a refiner and the seller obtains a contractual commitment that the product will be used as a feedstock, the requirement for marking would not apply. Use of a product as a feedstock would require that it undergo a substantial change in its chemical properties or be separated substantially into its fractional constituents. The mere blending of such product with other product(s) would not constitute use as a feedstock. If EPA discovers that such product is not being used as a feedstock, the seller would be in violation. Here too, the proposal establishes that an adequate quality assurance program to ensure compliance with the requirements of the contract would constitute a partial defense to liability. EPA has considered alternatives to the requirement for marking refinery products. One such alternative could be to require a continuous paper trail with every product that tracked its ultimate use. However, because of the extensive "brokering" and commingling that could occur with any product, it is unlikely that any paper trail would be effective or meaningful. Another option would be to require that all refinery produced products which have the potential of being used to produce gasoline and are included on the list for RPAD would have to be included in compliance calculations unless it meets one of the exceptions. This would eliminate the marking requirement and many of the proposed liability scheme and defense issues. The Agency believes the more reasonable approach is to try to limit the extent of products that would have to be marked as proposed through the various exceptions discussed previously. EPA recognizes that the requirement for marking is not without controversy and, therefore, requests comments on other approaches that would provide a mechanism to account for the properties of products that are ultimately used in blending gasoline and would not provide an opportunity for parties to "dump" as discussed previously. Importers of gasoline or gasoline blending stock or RPAD would be subject to these same requirements and restrictions. Under EPA's proposal, any person who imports any product that is produced at a crude oil refinery that produces any gasoline would be considered an "importer" for purposes of the anti-dumping requirements, and would be required to meet these regulatory responsibilities for all gasoline and RPAD. EPA's proposed regulations would not reach a person who is not a refiner (i.e., a person who does not own, lease, operate, control, or supervise any facility that produces gasoline) or an importer as described above. For example, a person who produces natural gas liquids (NGL) but does not produce any gasoline, would be able to sell NGL for use as a gasoline blending component without accounting for or marking it. Any person who would add any non-refiner produced NGL to finished gasoline, however, would be a refiner subject to the anti-dumping requirements and as such would have to account for the properties of these products in its compliance calculations. EPA believes the exclusion of non-refiners from regulatory control is appropriate, because by definition these persons do not produce gasoline (reformulated or otherwise), and as a result cannot "dump" dirty fractions. Moreover, to the extent products produced by non-refiners are used by a blender-refiner in the production of gasoline, the blender-refiner would be required to include the product in its anti-dumping compliance calculations. A similar distinction is proposed for importers; importers of products that are not produced at a gasoline refinery would not be subject to the anti- dumping requirements. A blender-refiner who does add any non-accounted for imported product to gasoline would be required to account for the product for anti-dumping purposes. Under EPA's proposal, gasoline and other petroleum products would be included in the anti-dumping compliance calculations only once, in order to avoid double counting of products. Thus, a refiner would not include in its compliance calculations gasoline it did not produce or gasoline blendstocks accounted for by others. The regulations require the producer or importer of a feedstock, subject to a contractual commitment, to exclude such product from its compliance calculations. However, the refiner that uses the feedstock shall include the final volume and fuel properties of the product after refinery processing in its compliance determination. A refiner that uses a blendstock accounted for by another, or APP, as a feedstock would have to "back out" the properties and volume of the original blendstock and include the volume and properties of the product after refinery processing. Also under EPA's proposal, the inclusion of oxygenates in anti-dumping accounting by refiners and importers would be optional. Any refiner or importer that elects to include oxygenates in its compliance calculations, however, would be required also to include oxygenates in its baseline calculations. This approach for the addition of oxygen to conventional gasoline is appropriate, because such oxygen blending only makes the gasoline cleaner with regard to those properties regulated under anti-dumping. For example, as the volume of conventional gasoline is expanded through the addition of oxygenate, the values for benzene, sulfur, T-90 and olefins become smaller. Thus, a refiner that adds only oxygenate to finished gasoline would not be required to demonstrate compliance with the anti-dumping averaging requirements. Refiners who are downstream "blenders" in most cases would have limited responsibilities under the anti-dumping program. Such blender-refiners would not be required to meet anti-dumping averaging standards for products in the following categories that are combined in the blending operation: finished gasoline; oxygenates; or gasoline blending stocks that already have been accounted for by a refiner or importer or APP, (and for which the blender- refiner has product transfer documentation identifying such prior accounting). These blender-refiners would be required to account for any gasoline blending stocks that are used that have not already been accounted for (i.e., blending stocks for which the blender-refiner does not have product transfer documents identifying prior accounting). This would generally be limited to non-refinery produced blendstocks, for example Natural Gas Liquid. Although section 211(k)(8) of the Act specifies that the gasoline of each refiner, blender and importer shall be subject to the anti-dumping requirements, EPA believes that inclusion of blendstocks in a refiner's or importer's anti-dumping compliance calculations is necessary in order to accomplish Congressional intent with the anti-dumping provisions, i.e., that emissions in the "anti-dumping areas" not increase due to the production and use of reformulated gasoline. EPA believes that section 211(k)(8) authorizes the inclusion of blendstocks in a refiner's or importer's compliance calculations, because blendstock is, by definition, any product that is added to gasoline. In effect, then, blendstock merely is "gasoline" that has not yet been combined to achieve its final form. EPA believes that additional authority for inclusion of blendstocks can be found at section 211(c) of the Act. This section requires consideration of: (1) All relevant and available scientific evidence, and (2) other technologically or economically feasible methods of control of emissions when public health could be endangered due to use of fuel or fuel additive. As discussed below, the exhaust benzene emissions of gasoline blendstocks could increase if blendstocks were not controlled as proposed. Additionally, inclusion of blendstocks in the anti-dumping compliance determination can be shown to be a very economical as well as a technologically feasible method for achieving compliance with the anti-dumping provisions. The anti-dumping requirements for 1995-6 require that the exhaust benzene emissions of a refiner or importer not exceed its 1990 exhaust benzene emissions. Benzene is an EPA Class A carcinogen (proven human carcinogen).63 The weight fraction of benzene in exhaust emissions depends on the average benzene and aromatic levels of the fuel (oxygen effects benzene exhaust emissions to the extent that it effects exhaust VOC emissions). NOTE 63 "Cancer Risk From Outdoor Exposure to Air Toxic, External Draft Review," U.S. EPA, OAR, OAQPS, September 1989. Because reformulated gasoline requires a minimum oxygen content of 2.0 weight percent, approximately 5-11 volume percent of reformulated gasoline will be oxygenate, depending on the type of oxygenate. With the additional restriction of a maximum aromatic content of 25 volume percent in reformulated gasoline, it is conceivable that the blendstock displaced by the oxygenate could be high aromatic blendstock (i.e., reformate). If sufficient economic incentives exist, this blendstock could be "dumped" into conventional gasoline. For example, in the nine extreme and severe ozone nonattainment areas, reformulated gasoline will comprise about 22 percent of the nation's annual gasoline market. If 11 percent of this reformulated gasoline is oxygenate, approximately 3.1 percent of conventional gasoline could be "dumped" high aromatic blendstock. Assuming an average aromatic content of this blendstock to be about 65 volume percent, the average aromatic content of the Clean Air Act statutory anti-dumping baseline increases from 29 to 30.1 percent. A proportional change could occur in the benzene content, increasing it from 1.58 to 1.64 volume percent. The benzene exhaust emission weight fraction increases from 5.51 to 5.68, or about 3 percent, when the high aromatic blendstocks are dumped into conventional gasoline. EPA believes this outcome could occur if blendstocks are not controlled as proposed. Control of blendstocks is thus expected to play an important role in minimizing detrimental health and environmental effects in the anti-dumping areas. The cost of eliminating this increase in benzene emissions should be quite low if blendstocks are included in the anti-dumping compliance determination as proposed. In 1990, high aromatic streams, other refinery process streams and oxygenate were used to achieve desired octane levels. In fact, there was excess octane. Thus the ability and capacity to attain certain octane levels existed in 1990 and likely still exists. If blendstocks are included in the anti-dumping compliance determination of a refiner, EPA expects that the production of high aromatic streams will decrease because the refiner has the choice of producing inexpensive premium gasoline or reducing reformer severity. EPA believes the latter would occur and that the cost of this proposal would thus be low because the non-high aromatic streams used for octane purposes in 1990 will be sufficient to account for any decrease in octane due to a decrease in aromatic, and these other processes are already in place. However, if blendstocks are not included in a refiner's compliance determination, the incentive to reproduce high aromatic blendstocks could be great because of the existing reformer capacity which could be utilized to produce aromatics for even small profits. Additionally, if blendstocks are not included in each refiner's compliance determination, the refining industry could be encouraged to make and use relatively inexpensive, high aromatic blendstock streams for conventional gasoline (for octane purposes) rather than only slightly more expensive, "cleaner" alternate streams such as alkylate. This could create market distortions since refiners with high baselines could use more aromatics, if blendstocks are not counted, to produce more premium conventional gasoline than those with low baselines. Those with low baselines would likely be the producers of such high aromatic streams since it would not be included in their compliance determination. Thus, different incentives would be created to increase production and remain in various markets. Based on the above discussion, EPA believes that the environmental benefits would be large, at a relatively small cost, if blendstocks are included in a refiner's or importer's anti-dumping compliance calculation. D. Petroleum Products Banned for Use as Gasoline Blendstock, or NAPP Under EPA's proposal, petroleum products not accounted for in compliance calculations, or NAPP, could not be used by refiners as a gasoline blendstock in the production of conventional gasoline. EPA's proposal involves prohibitions, liabilities and defenses that are similar to those being proposed under the reformulated gasoline program for preventing the use of conventional gasoline as reformulated. Regulated parties' facilities found with gasoline containing NAPP (i.e., found containing the NAPP marker) would be deemed to be in violation, as would all parties in the gasoline distribution network upstream of the facility where the marked gasoline was found. The same provision applies to facilities found with blendstocks for use in gasoline that are marked. Similar to the proposal under reformulated gasoline, any person that is presumed liable would have the opportunity to establish a defense based on showing that it did not cause the violation; that all of the person's gasoline is supported by transfer documentation that is appropriate for the product; and that the person has in place a quality assurance program of periodic sampling and testing to detect the presence of the NAPP marker. The NAPP marker quality assurance sampling and testing provision EPA is proposing would not create an affirmative requirement that regulated parties must conduct such a program. Rather, this program would constitute one required defense element if and when EPA found a violation involving NAPP at a regulated party's facility. In addition, the proposed NAPP marker provision specifies periodic sampling and testing, as opposed to sampling and testing following every batch or every day. EPA does not anticipate issuing regulations on the specific frequency at which sampling and testing must occur under such a periodic program, but does intend to provide guidance on suggested frequencies for parties at different points in the distribution chain (e.g., distributors vs. retailers), and criteria for adjusting the frequency of sampling and testing (e.g., when a party finds NAPP-marked gasoline). In order to assist EPA in formulating this guidance, EPA requests comments as to the sampling and testing frequencies and adjustments which would be appropriate. At this time, EPA is not proposing the specific chemical that would be used as the NAPP marker. EPA anticipates that this chemical will be proposed as part of a later rulemaking involving reformulated gasoline, scheduled to be in 1992. In order to facilitate this later rulemaking, EPA requests comments as to an appropriate marker. EPA believes that the necessary properties for a NAPP marker are the same as those discussed above for the conventional gasoline marker: (1) It should be easy to detect in the field in low concentrations; (2) Difficult to remove from gasoline; (3) Readily available and inexpensive; (4) Non-proprietary (including the marker and any chemicals or methods used in its detection); (5) Non-toxic; and (6) Not cause gasoline to violate the "substantially similar" requirements of section 211(f)(1) of the Clean Air Act. E. Compliance Determination EPA proposes that refiners and importers would be required to demonstrate compliance for finished conventional gasoline and APP that is produced or imported. Several options are being proposed for determining the relevant properties for compliance purposes. A refiner or importer could analyze for the relevant properties of each batch of finished gasoline and accounted-for refined products. As an alternative, refiners that produce gasoline other than through refining crude oil would be allowed to determine compliance on the basis of the analyzed properties of each batch of non-accounted blendstock received. The blendstock-analysis alternative is appropriate because EPA believes the properties controlled under this program react in a linear manner when combined; i.e., the net values for exhaust benzene emissions, sulfur, T-90, and olefins are the same whether measured before or after blendstocks are combined with gasoline or with other blendstocks. Under the blendstock-analysis option, the refiner would be required to account for blendstock as of the date it was received by the blender-refiner, as opposed to the date this product was used in the production of gasoline. Date-of-receipt accounting is necessary because blendstock that is received by a refiner during one averaging period could be used to produce gasoline during more than one averaging period. For example, on December 20, 1995, a refiner could receive a batch of blendstock and add it to a tank containing blendstocks that were received earlier. These combined blendstocks could then be used in the production of gasoline until February 1, 1996, which means the blendstock would have been used to produce gasoline both in the 1995 and 1996 averaging periods. The refiner in this example would have difficulty accounting for the blendstock as of the date it is used in gasoline production, but no difficulty accounting as of the date the blendstock is received. Parties that use gasoline or blendstock that already have been accounted for would be required to exclude such product from compliance calculations. As a result, parties that use the gasoline-analysis option would be required also to analyze each batch of accounted-for gasoline and blendstock received, and subtract the volume and properties of this accounted-for product from the party's gasoline analysis results. In this manner, the prior accounted-for product would not be double counted. Under the blendstock-analysis option, a party would be able to analyze only the non-accounted-for blendstock, and base compliance calculations of the volumes and analyses results from this product only. Under either the gasoline-analysis or the blendstock-analysis options, parties would have the additional option of analyzing each batch of gasoline or blendstock, or of combining the samples taken from more than one batch for composite analysis. Under the composite analysis option, parties would be required to store samples under conditions calculated to ensure the samples do not deteriorate prior to analysis, and to combine samples in volumes that are proportional to the volumes of the batches from which the samples were taken. The analyses results from the composite sample then would be representative of the total of the volumes from all the batches represented in the composite. Under EPA's proposal, parties would be allowed to combine samples collected over no more than one month in a single composite. EPA believes the composite analysis option is appropriate because of the linear reaction of the parameters regulated under anti-dumping when combined (as discussed above). This option would provide regulated parties significant cost savings, moreover, in that parties would be required to conduct only twelve analyses during a year, instead of the alternative of analyzing each batch. EPA recognizes that if certain refiners significantly increase their production of conventional gasoline in 1995 and later years there could be a corresponding degradation in quality of the overall nationwide conventional gasoline pool. This would occur if those refiners with "dirtier" than Clean Air Act baselines increase their production of conventional gasoline significantly in 1995 and/or if refiners with "cleaner" than Clean Air Act baselines decrease their production from 1990 levels. This, therefore, raises the question of which baseline should be applied to such increased conventional gasoline production to mitigate this potential problem. A related problem occurs because of the absence, in 1990, of both conventional and reformulated gasoline, to form a basis for comparison with conventional and reformulated gasoline volumes in 1995 and later. For example, a refiner's total 1990 production would be considered conventional gasoline, while its 1995 production will typically include both reformulated and conventional gasolines. As a result, post-1994 conventional gasoline volume will most likely be less than 1990 volumes and, therefore, not provide a basis for meaningful comparison in 1995. For this reason, EPA is proposing that a compliance baseline should be calculated which would then be the standard for the average fuel properties for determining compliance with anti-dumping requirements. The compliance baseline would be calculated as a weighted average of a refiner or importer's 1990 baseline and the Clean Air Act statutory baseline. This weighting would be based on the volume of conventional gasoline and blendstocks produced during the averaging period and the volume produced in excess of the 1990 "equivalent" volume produced during the averaging period. EPA believes it is appropriate and even-handed to require refiners and importers that expand volumes over 1990 levels to determine compliance using the Clean Air Act statutory baseline for a portion of these expanded volumes. A refiner that has a more stringent baseline (requiring the production of "cleaner" than average gasoline) would be able to use the less stringent (for that refiner) Clean Air Act baseline for a portion of its excess volume; a refiner that has a less stringent baseline (allowing the production of "dirtier" than average gasoline) would be required to use the more stringent (for that refiner) Clean Air Act baseline for a portion of its excess volume. F. Registration EPA is proposing that all refiners and importers of conventional gasoline would be required to register with EPA prior to the first averaging period during which the refiner or importer would produce or import conventional gasoline. The purpose of a registration requirement is to allow EPA to accurately identify all the refiners and importers of conventional gasoline and establish a data base for compliance monitoring. The proposal also would require timely notification to EPA of any change in the registration information that had been submitted by any such parties. G. Record Keeping EPA is proposing that all refiners and importers of conventional gasoline would be required to maintain records that describe the composition of conventional gasoline and gasoline blendstocks produced or imported as well as unaccounted for blendstocks received from others that are subject to the anti-dumping requirements. This generally would include records related to the determination of applicable fuel properties for all gasoline and blendstocks utilized in the determination of compliance, as well as the determination of all product volumes. Refiners and importers would also be required to keep all transfer documentation for gasoline, APP and NAPP produced or imported and gasoline blendstocks received. All contractual documents related to the sale or purchase of feedstocks or products sold to parties not for use in blending gasoline would have to be kept as well. The purpose of these record keeping requirements would be to support all tests, analyses and measurements for all components or properties necessary for the determination of compliance with the anti-dumping requirements and to establish a defense to liability if EPA discovers any violations. Retention of such documents by the appropriate parties would also enable EPA to trace conventional gasoline back to the appropriate refiner or importer, would allow the preparation of necessary reports, would allow independent auditors to complete all audit requirements, and would allow the production of documents necessary for comprehensive compliance audits by the Agency. EPA is proposing that such records be retained for a period of five years. Refiners who blend only already-accounted-for finished gasoline and blending stocks, and/or oxygenates (e.g., ethanol splash blenders), would be required to retain product transfer documents for all finished gasoline and blending stocks used. Such a refiner thus would be able to demonstrate that, in fact, all of the blending stocks had product transfer documents stating that the product had been accounted for. In addition, such a refiner would be required to retain documents showing the volumes of finished gasoline, blending stocks, and oxygenates used. These documents would allow independent auditors (and EPA auditors) to verify that the volume of all gasoline sold matches the sum of the volumes of finished gasoline, accounted-for blending stocks, and oxygenates used. H. Independent Sampling and Testing Under EPA's proposal, compliance with the average anti-dumping standards for benzene, sulfur, T-90, and olefins would be based upon the properties and volumes of the conventional gasoline and blendstock produced by a refiner, excluding previously accounted-for gasoline and blend stocks as discussed in the previous section. (This discussion applies equally to importers, but for simplicity of language, will be couched in terms of refiners only.) These properties and volumes would be determined through sampling, testing, and volume measurement of the conventional gasoline produced by the refiner. As a result, the accuracy of a refiner's compliance demonstration would be no greater than the accuracy of the refiner's sampling, testing, and volume measurement methodologies. Because the proposed standards for anti-dumping compliance are averaged standards, without any maximum's or minimum's, no sample of conventional gasoline would indicate a violation of the anti-dumping standards, regardless of the levels of benzene, sulfur, T-90 and olefins for that sample. Rather, the properties of a sample of gasoline are relevant to anti-dumping compliance only when combined with the properties (and volumes) of all other conventional gasoline produced by the refiner. An additional constraint on the relevance of a single sample of conventional gasoline would exist in the case of refiners who determined compliance based upon analysis of composite samples rather than upon analysis of each batch of gasoline produced. For the composite sample case, the refiner would not have separate book entries of the properties of each batch of gasoline produced, but rather would have a single set of test results from the analysis of the composite sample, from the end of the composite period. EPA believes it is important that the anti-dumping program include a mechanism to enable EPA to detect if a particular refiner has inappropriately analyzed a batch or batches of gasoline or has purposefully falsified the laboratory results. Given the anti-dumping program's sole reliance on the results of the laboratory analyses, EPA is concerned about the absence of a mechanism to independently verify the refiner's laboratory results. Moreover, in its enforcement of other gasoline programs (e.g., lead phasedown), EPA has discovered refiners who make the decision to cheat when they believe the cheating may not be discovered. EPA believes the propensity for such cheating is proportional to the profit that can be derived, minus the likelihood of the cheating being detected. Under the anti-dumping program being proposed, however, it may be possible to cheat and thereby make substantial illegal profits. One option for preventing unintentional or intentional inaccurate gasoline analyses would be to require refiners to have an independent laboratory collect a sample and determine the volume of each batch of conventional gasoline that is produced. This is the approach that is being proposed for reformulated gasoline. Even if the independent laboratory did not analyze each sample it collected, the refiner would not know which batches would be scrutinized. (The option of having random sample collection and analysis is flawed, because under random sampling a unscrupulous refiner would know which batches were sampled, and, therefore, which to enter into its books correctly.) Under the composite analysis approach, the independent laboratory could independently create composite samples (based upon the independently determined batch volumes), and the refiner would not know which composites would be scrutinized. Thus, independent sample collection (and random sample analysis) would constitute a significant deterrent against most forms of refiner cheating. However, EPA is concerned about the added expense that independent sampling and testing would add to the cost of the anti-dumping program, both to the regulated parties and to EPA. Moreover, the impact will likely be greater on smaller refineries and importers. On the other hand, significant environmental degradation and anti-competitive effects may be prevented by further ensuring that anti-dumping requirements are met through independent sampling and testing. EPA, therefore, encourages comment on whether any independent sampling and testing should be imposed for anti-dumping, the cost of such a requirement, the environmental and competitive benefits of such a requirement, and, if imposed, what level of sampling and testing is appropriate. I. Company-Commissioned Audits All refiners and importers are required to have the results of independent audits submitted to EPA. These required audits are similar to those required for reformulated gasoline enforcement (discussed in more detail in section XIV below). These audits are to be distinguished from the audits required in establishing a refiner's or refinery's baseline. J. Agency Audits The Agency intends to implement a program of enforcement audits of importers and refiners to help determine compliance with the anti-dumping requirements. These audits aid the review of compliance with the registration, record-keeping, reporting and auditing requirements. Directed field inspections can be utilized in conjunction with an Agency audit if evidence is revealed through an Agency audit that necessitates additional investigation. The Agency has found from its enforcement of the lead phasedown program that on-site audits are an extremely effective method of looking behind records and reports submitted to the Agency to determine a regulated party's compliance. Therefore, the Agency believes that this would be an effective approach for this program as well. K. Examples of Anti-Dumping Compliance Calculations Example 1 The hypothetical refiner in this example produced gasoline in 1990, and has established a baseline for anti-dumping purposes based on that production. The refiner's 1990 baseline is described in Table XIII-1. Table XIII-1.--1990 Gasoline Production by Hypothetical Refiner 1990 Property value Volume of gasoline and blendstock produced (bblsx1,000) 1,000 Sulfur (ppm) 340 T-90 (deg F) 325 Olefins (vol %) 11.5 Aromatics (vol %) 27.5 Benzene (vol %) 1.68 Oxygen (wt %) 0.5 Exhaust Benzene 6.03 The exhaust benzene value in Table XIII-1 was calculated by the refiner based upon the refiner's baseline average values for aromatics, benzene, and oxygen, using the formula at Sec. 80.104(b) of the proposed regulations,64 as follows: NOTE 64 For the purposes of this hypothetical, the exhaust benzene option that includes oxygen is being used. In the event the final regulations adopt the option that does not include oxygen in exhaust benzene calculations, the alternative formula that excludes oxygen would be used for calculating exhaust benzene. EXHBEN=[1.818+(0.9154x1.68)+(0.109x(27.5--1.68))]x[1--(0.127x(0.5/2.7))] =(1.818+1.5379+2.814)x(1--0.0235) =6.171x0.9765 =6.03 In 1995, the hypothetical refiner produced and received the conventional gasoline and other petroleum products described in Table XIII-2. In addition, the refiner produced 700 thousand barrels of reformulated gasoline in 1995. Table XIII-2. Gasoline and Other Petroleum Products Produced and Received by a Hypothetical Crude Oil Refiner Line No. 1. Batch number 1 2 3 4 2. Volume (bblx1,000) 105 150 150 125 3. Product type gasoline gasoline gasoline gasoline 4. Produced/received produced produced received produced 5. Designation (APP, NAPP, Other) 6. Sulfur (ppm) 350 375 365 325 7. T-90 (deg F) 350 336 295 330 8. Olefins (vol %) 11.1 11.8 12 11.7 9. Aromatics (vol %) 19 23 26 23 10. Benzene (vol %) 1.42 1.4 1.6 1.34 11. Oxygen (vol %) 2.4 2.1 0 2.1 [ ...Table continues... ] Line No. 1. 5 6 7 8 2. 170 130 50 15 3. gasoline natural gas toluene/xylene toluene/xylene 4. produced received produced produced 5. Other APP NAPP 6. 330 65 37 37 7. 345 250 242 242 8. 10 2.5 0.1 0.1 9. 25 6.2 97.1 97.1 10. 1.35 1.45 7 7 11. 2.3 0 0 0 After the end of 1995, the hypothetical refiner was able to calculate its compliance baselines for each of the parameters regulated under anti-dumping, using the formula at Sec. 80.103(a)(1) of the proposed regulations. To do this, the refiner first calculated its 1990 equivalent conventional gasoline volume ("Veq") according to the formula at Sec. 80.103(a)(1)(i) as follows: [ ...Illustration appears here... ] Because the total volume of the conventional gasoline and blendstock produced by the refiner in 1995 (net 450 kbbls 65) was greater than the refiner's 1990 equivalent conventional gasoline volume (300 kbbls), the refiner used the equation at Sec. 80.103(a)(1)(iii) to calculate the compliance baseline for each parameter regulated under anti-dumping. The refiner's compliance baseline ("CB") calculation for sulfur was based upon the refiner's 1990 baseline for sulfur (340 ppm), the refiner's equivalent conventional gasoline volume for 1990 (391.3 kbbls), the Clean Air Act default baseline for sulfur (338 ppm), and the refiner's production volume of conventional gasoline and APP in 1995 (450 kbbls) as follows: NOTE 65 The refiner's net production volume of conventional gasoline and APP during 1995 was based upon the sum of the volumes of batches 1, 2, 4, 5, and 7, and subtracting the volume of batch 3 (105+150+125+170+50-150=450). The volumes of batches 6 and 8 were excluded from this calculation altogether. The reasons the batches of conventional gasoline and blendstocks were treated in these manners are discussed below. CBsulfur (ppm)=((340x391)+(338x(450-391)))/450=339.51 Based upon this calculation, in order for the hypothetical refiner to achieve compliance with the anti-dumping sulfur requirements the average sulfur content of the hypothetical refiner's conventional gasoline and APP would have to be less than 125% of 339.51 ppm. The remainder of the refiner's compliance baseline values were calculated in a similar manner, and were as follows: T-90 (deg F) 325.79 Olefins (vol %) 11.38 Exhaust benzene 6.05 The refiner then calculated its averages for each of these parameters, to determine if it was in compliance. This required the refiner to evaluate all of the gasoline and other petroleum products produced and received during 1995, to determine which products must be included in the refiner's compliance calculations, which must be excluded from these calculations, and which must be subtracted from the refiner's calculations. Batches 1, 2, 4, and 5 were of finished gasoline that was produced by the hypothetical refiner during 1995. As a result, the volumes and the properties of these batches were included in the refiner's compliance calculations. Batch number 3 was of gasoline that was received from another refiner, and used by the hypothetical refiner as a blendstock in producing its gasoline. Because the refiner that produced the gasoline from batch 3 was required to account for its volume and properties, the hypothetical refiner was required to subtract the volume and properties of batch 3 from the remainder of its compliance calculations to prevent double counting.66 NOTE 66 The hypothetical refiner would be required to exclude the volume and properties of batch 3 regardless of how this gasoline was used by the hypothetical refiner. Because the hypothetical refiner used the batch 3 gasoline as a blendstock for other gasoline that was being included in compliance calculations, the batch 3 gasoline volume and properties had to be "backed out" of the hypothetical refiner's calculations. The batch 3 volume and properties also would have had to be backed out if this gasoline was used as a feedstock by the hypothetical refiner. If the hypothetical refiner had merely resold the batch 3 gasoline without making any changes to it, the hypothetical refiner could have prevented double counting batch 3 by excluding the batch 3 volume and properties from the refiner's compliance calculations altogether. Batch number 6 was of natural gasoline that the hypothetical refiner purchased from a non-refiner (i.e., a company that neither produced nor imported any gasoline during 1995), and that the hypothetical refiner used as a blendstock in the production of its gasoline. As a result, this product was neither APP nor NAPP, and could be used by the hypothetical refiner to produce gasoline provided that this refiner included the product in its compliance calculations. Because the hypothetical refiner used the natural gasoline as a blendstock, the natural gasoline's volume and properties were subsumed in the volume and properties of the gasoline the natural gasoline was used to produce, and which the refiner included in its compliance calculations. For this reason, the refiner did not separately add the volume and properties of batch number 6 to its compliance calculations. Batch number 7 was toluene/xylene that was produced by the hypothetical refiner as part of its refinery operations. As a result, this product met the definition of RPAD (Refinery produced Product that must be Accounted for or Designated as not for use in gasoline blending). The refiner thus had two options for this product: It could include the volume and properties in its compliance calculations (i.e., designate the product as APP) which would allow a downstream blender-refiner to use the toluene/xylene as a gasoline blending stock; or it could take the required steps to insure the product would not be used in gasoline blending (i.e., designate the product as NAPP). The refiner elected to sell this batch of toluene/xylene to a downstream blender-refiner for use in gasoline blending, and as a result the hypothetical refiner included the volume and properties of the batch in its compliance calculations. Batch number 8 was also of toluene/xylene, but the hypothetical refiner decided to not sell this batch for gasoline blending, and declared it as NAPP. As a result, the hypothetical refiner was required to meet one of the three requirements designed to ensure that the product is not used by any refiner in the production of gasoline: (1) add the chemical marker to the product; (2) sell the product for a price that exceeded the price calculated using the formula at Sec. 80.101(b)(1) of the proposed regulations; or (3) sell the product under the terms of a contract that meets the requirements of Sec. 80.101(b)(2) of the proposed regulations. To aid in its decision, the hypothetical refiner calculated the price for which the toluene/xylene could be sold without adding the marker or having the specified contractual terms. This calculation was based upon the maximum prices and minimum octanes of the regular and premium grades of gasoline sold by the hypothetical refiner in the two months preceding the date the toluene/xylene was sold, which were as follows: Premium: Price (per gal) $0.75 Octane (R+M/2) 92 Regular: Price (per gal) $0.60 Octane (R+M/2) 87 In addition, the refiner determined that the blending octane of the toluene/ xylene was 110. Applying these figures to the equation at Sec. 80.101(b)(1) of the proposed regulations, the refiner calculated the minimum price ("MPprd") as follows: [ ...Illustration appears here... ] Thus, the hypothetical refiner could sell the toluene/xylene without meeting the marking or contract requirements for NAPP if it charged at least $1.81 per gallon for this product. The compliance calculation method required for the hypothetical refiner is the equation at section 103(c)(1) of the proposed regulations, because this refiner has an individual baseline. Using this formula, the refiner's compliance calculation ("APARM") for sulfur (in ppm) was as follows: APARMsulfur={(105x350)+(150x375)- (150x365)+(125x325)+(170x330)+(50x37)}/{105+150- 150+125+170+50}=(36750+56250-54750+40625+56100+1850)/450=304.06 Because the refiner's compliance calculation for sulfur (304.06 ppm) was less than the 125 percent of the refiner's compliance baseline for sulfur (339.51x1.25=424.39 ppm), the refiner was in compliance for sulfur for the 1995 anti-dumping averaging period. The refiner calculated the compliance values for the remainder of the parameters regulated under anti-dumping in the same manner as it used for the sulfur calculation, with the following results: Compliance Compliance Compliance standards Parameter calculation baseline /1/ Sulfur 304.06 339.51 424.39 T-90 344.22 325.79 407.24 Olefins 9.56 11.38 14.22 Exhaust benzene 5.80 6.05 6.05 /1/ Compliance standards are calculated by multiplying the compliance baseline times 1.25 in the case of sulfur, T-90, and olefins. In the case of exhaust benzene emissions, the compliance standard is equal to the compliance baseline. In the case of each of these parameters, the hypothetical refiner's compliance calculation was less than the refiner's compliance standard, indicating that the refiner was in compliance for each parameter during the 1995 averaging period. 2. Example 2 In 1995, the hypothetical refiner in this example operated a terminal at which ethanol and other petroleum products were splash blended with base gasoline in gasoline delivery trucks owned and operated by the hypothetical refiner. The refiner-blender was not in operation in 1990, and as a result does not have an individual baseline for anti-dumping purposes. The compliance baseline for this refiner is, therefore, the Clean Air Act default baseline, which is as follows: Sulfur (ppm) 338 T-90 (deg F) 331 Olefins (vol %) 10.6 Exhaust benzene 6.17 During 1995, this hypothetical blender-refiner received the shipments of gasoline and gasoline blending stocks, and produced the gasoline, described in Table XIII-3. Table XIII-3.--Gasoline and Blending Stocks Received, and Gasoline Produced, by a Hypothetical Downstream Blender-refiner Batch number 1 2 3 4 5 Volume (bbl x 1,000) 5 0.5 1 3.5 /2/ 10 Product type gasoline ethanol raffinate NGL /1/ gasoline Produced/received received received received received produced Designation (APP, NAPP, Other) other APP other Sulfur (ppm) 350 0 65 149 T-90 (deg F) 350 180 250 206 Olefins (vol %) 11.1 0 2.5 0.8 Aromatics (vol %) 19 0 6.2 2.6 Benzene (vol %) 1.42 0 1.45 0.4 Oxygen (vol %) 0 34.7 0 0 Exhaust benzene 5.03 0 3.66 2.42 /1/ NGL is Natural Gas Liquids, that in this hypothetical was produced as a by-product of natural gas generation by a company that does not produce any gasoline. /2/ The volume of gasoline produced (10,000 bbls) represents the sum of the volumes of the gasoline and blending stocks that were splash blended in gasoline delivery trucks by the hypothetical refiner. The hypothetical refiner in this example did not use any feedstock in the production of gasoline (i.e., did not substantially change the chemical properties of any gasoline or blendstock, as occurs in a petroleum refinery), and as a result the refiner has the option of calculating compliance on the basis of the volumes and properties of the gasoline and blendstocks that was received during the averaging period, rather than on the basis of the volumes and properties of gasoline that was produced. Because it would be very difficult for this hypothetical refiner to sample and test each truck subsequent to splash blending (the process that would be required for determining compliance based upon gasoline production), this refiner elected to use the gasoline/product-receipt option. In determining its compliance, the hypothetical refiner was required to include only batches 2 and 4 in its calculations. Batch 1 was excluded from the refiner's compliance calculations because it was gasoline that would have been included in the compliance calculations by the refiner that produced it. This exclusion was necessary to prevent double counting this product. Similarly, batch 3 was raffinate that was designated as APP by the refiner that produced it, indicating the original refiner had already accounted for this product. Batch 4, on the other hand, was natural gas liquids that the hypothetical refiner purchased from a natural gas production company. As a result, this petroleum product was not APP (i.e., had not been accounted for by any refiner), and the hypothetical blender-refiner in this example was required to include it in its compliance calculations. Batch 2 was ethanol, which the refiner included in its calculations. 67 NOTE 67 Section 80.104(a)(1)(ii) of the proposed regulations contains two options regarding the inclusion of oxygen in anti-dumping calculations. This hypothetical assumes the option under which a refiner includes the oxygen used, to the extent such use exceeds the refiner's baseline oxygen use. Because the Clean Air Act default baseline oxygen use is zero, the hypothetical refiner in this example (who used the Clean Air Act default baseline) is able to include all of the oxygen it used during the averaging period. Because the hypothetical refiner in this example used the Clean Air Act default baseline for anti-dumping, the compliance calculation method at Sec. 80.104(c)(2) of the proposed regulations were used by this refiner. This method requires the refiner first to calculate the complying total for each regulated parameter using the formula at Sec. 80.71(e)(1) of the proposed regulations, based upon the volumes of the relevant batches, and the relevant standard. The hypothetical refiner's complying total calculation for sulfur was based upon the volumes for batches 2 (.5 kbbls) and 4 (3.5 kbbls), and the standard for sulfur (338 ppm) as follows: Complying totalsulfur=(0.5+3.5)x338 = 1,352 The complying totals for the remainder of the regulated parameters were calculated in a similar manner, and are the following: T-90 1,324 Olefins 42.4 Exhaust benzene 24.68 The compliance standards for these parameters were calculated by multiplying sulfur, T-90 and olefins times 125 percent, and exhaust benzene emissions by 1, to yield the following: Sulfur 1,690 T-90 1,655 Olefins 53.0 Exhaust benzene 24.68 The refiner next calculated the actual totals for each of the regulated parameters using the formula at Sec. 80.71.(e)(2) of the proposed regulations, based upon the volumes and tested levels of the regulated parameters for each relevant batch. The refiner's actual total calculation for sulfur, based upon the volumes of batches 2 and 4, and the sulfur levels for these batches (zero and 325 ppm, respectively), was as follows: Actual totalsulfur=(0.5x0)+(3.5x149)=521.5 The actual totals for the other parameters also were calculated using this formula, with the following results: T-90 811 Olefins 2.8 Exhaust benzene 68 8.47 In the case of each parameter, because the compliance total was less than the compliance standard, the hypothetical refiner was in compliance for the 1995 averaging period. NOTE 68 The exhaust benzene emissions calculation for batch number 2 results in a negative result. The actual total used for batch number 2, therefore, is zero, because exhaust benzene emissions cannot be less than zero. XIV. Compliance Audits Under the reformulated gasoline and anti-dumping programs, EPA is proposing that, as a part of the reporting requirement, each refiner, importer, and oxygenate blender commission an audit of the information which forms the basis of the reports. EPA is proposing that each of these regulated parties should be required to commission such an audit at the conclusion of each calendar year, the scope of the audit to cover the activities of the party relative to the reformulated gasoline and anti-dumping requirements for the previous calendar year and which are the subject of the required reports to EPA. The purpose of a compliance audit is to corroborate the reports submitted by the regulated party to EPA. Reports of the compliance audits must be filed with EPA by May 30 of each year. Under EPA's proposal, submission of the auditor's report is required, and failure to do so will constitute a reporting violation by the refiner, importer, or oxygenate blender. This compliance audit requirement is a new concept for EPA report filers, although other governmental agencies (e.g., the Securities and Exchange Commission) also require compliance audits of reports filed. The compliance audits being proposed are an outgrowth of EPA's experience with the lead phasedown program, which included averaging, credits, and periodic reports, and for which EPA-conducted audits are an essential part. Because the reformulated gasoline program is significantly more complex than is the lead phasedown program, EPA believes that audits are correspondingly more important than in lead phasedown. These audits are not intended as a substitute for enforcement audits conducted by EPA, but are intended to serve as a means of improving compliance with the reformulated gasoline program by identifying problem areas to the regulated parties. Such audits would also assure parties that the records on which they base periodic reports will be reviewed and cross-checked for accuracy by a disinterested third party (as well as possibly by EPA); will lead to the correction of simple arithmetic errors; will aid in correcting misconceptions about regulatory requirements; and generally will deter the making of false reports. A. Standards for Audits The proposed regulations require that an audit must be conducted by a certified public accountant in accordance with the Statement on Standards for Attestation Engagements (Am. Inst. of Certified Pub. Accountants 1991), which provide general professional guidance to certified public accountants in the conduct of audits for other than historical financial statements. The proposed regulations also include specific instructions relating to the subject areas which must be included in each audit, and the minimum records and audit procedures which are appropriate for each subject area. The Attestation Standards deal with the need for technical competence, independence in mental attitude, due professional care, adequate planning and supervision, sufficient evidence, and appropriate reporting. These Standards require that audits of this type must be performed by a practitioner having adequate technical training and proficiency in the attest 69 function and adequate knowledge of the subject matter of the audit. NOTE 69 An attest engagement is defined as "one in which a practitioner is engaged to issue or does issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party." Attestation Standards Sec. 100.01 (footnotes omitted). The proposed regulations contain a detailed description of the specific audit requirements for each of the elements of the reformulated gasoline and anti-dumping programs which are subject to audit review, and the records and procedures which must be included in the audit. The records and audit procedures which are specified are the minimum necessary for an audit, however, and an auditor is expected to use professional judgement to devise audit procedures to correspond with the facts of each individual audit in light of the internal company's accounting, operating and administrative controls. The proposed regulations provide also that in the event the specified audit procedures are not followed for any reason, the deviation and the reason therefore must be included in the audit report. This type of deviation normally would occur when, because of the nature of the operation or records at a particular company and based upon the auditor's professional judgment, the auditor concludes that different procedures are appropriate. Audits of all regulated parties should include a comprehensive examination of the systems and procedures employed to assure compliance with the regulations. Such review should include a examine of the administrative, operating, and accounting controls established by the company. The documentation and audit procedures to be examined are of necessity different for refiners, importers and oxygenate blenders and should be specific to the reformulated gasoline or anti-dumping requirements as applicable. The auditor is required to submit a report that discusses conclusions and reservations with respect to the regulated party's compliance with the applicable requirements. Final reports should be prepared in accordance with the appropriate Attestation Standards and a copy submitted directly to the EPA. EPA is proposing that information collected during the course of an independent audit could be used in any enforcement action against the party whose operation was audited. EPA believes this use of audit-obtained information is appropriate because such information is analogous to that contained in a regulated party's report to EPA, and information in a party's report to EPA is a principal means of demonstrating compliance or non- compliance in any enforcement action. B. Use of debarred auditors not permitted EPA is proposing that audits must be performed by auditors who have not been debarred or suspended under the terms of the Governmentwide Debarment and Suspension regulations at 40 CFR part 32, or the Debarment, Suspension, and Ineligibility provisions of the Federal Acquisition Regulations, FAR subpart 9.4. Actions which can result in a company being so debarred include, among others, the commission of fraud or a criminal offense in connection with obtaining or performing a public or private transaction; violation of antitrust statutes; commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, making false claims or obstruction of justice; and commission of an offense indicating a lack of business integrity or business honesty. The companies and individuals who have been debarred are identified in Lists of Parties Excluded from Federal Procurement or Non-Procurement Programs, which is published monthly by the Government Printing Office. EPA believes it is appropriate to exclude the use of auditors who have been debarred because of the serious questions debarment raises about an auditor's honesty, integrity, or ability to perform an audit properly. Because of the complexity of the reformulated gasoline program, it is particularly critical that only the most competent and scrupulous companies be allowed to perform these audits. As a result, if a regulated party's submission under the compliance audit requirement is from an auditor who is debarred, the party will be considered to have violated the compliance audit requirement. Moreover, in the event that EPA discovers that a auditor, in the conduct of a compliance audit under this program, violates the standards of the debarment regulations referenced above, EPA will consider referring the matter to EPA's debarring official for a debarment action under 40 CFR part 32. XV. Federal Preemption Whenever the federal government regulates in an area, the issue of preemption of State action in the same area is raised. The regulations proposed here will affect virtually all of the gasoline sold in the United States. As opposed to commodities that are produced and sold in the same area of the country, gasoline produced in one area is often distributed to other areas. The national scope of gasoline production and distribution suggests that federal rules should preempt State action to avoid an inefficient patchwork of potentially conflicting regulations. Indeed, Congress provided in the 1977 Amendments to the Clean Air Act that federal fuels regulations preempt non-identical State controls except under certain specified circumstances (see, section 211(c)(4) of the Clean Air Act). EPA believes that the same approach to federal preemption is desirable for the reformulated gasoline and anti-dumping programs. EPA, therefore, is issuing today's proposed rule under the authority of sections 211 (k) and (c), and propose under section 211(c)(4) that dissimilar State controls be preempted unless either of the exceptions to federal preemption specified by section 211(c)(4) applies. Those exceptions are: (B) Any State for which application of section 209(a) [of the Clean Air Act] has at any time been waived under section 209(b) [of the Clean Air Act] may at any time prescribe and enforce, for the purpose of motor vehicle emission control, a control or prohibition respecting any fuel or fuel additive. (C) A State may prescribe and enforce, for the purposes of motor vehicle emission control, a control or prohibition respecting the use of a fuel or fuel additive in a motor vehicle or motor vehicle engine if an applicable implementation plan for such State under section 110 [of the Clean Air Act] so provides. The Administrator may approve such provision in an implementation plan, or promulgate an implementation plan containing such a provision, only if he finds that the State control or prohibition is necessary to achieve the national primary or secondary ambient air quality standard which the plan implements. The Administrator may find that a State control or prohibition is necessary to achieve that standard if no other measures that would bring about timely attainment exist or if no other measures exit and are technically possible to implement, but are unreasonable or impracticable. The Administrator may make a finding of necessity under this subparagraph even if the plan for the area does not contain an approved demonstration of timely attainment. The Regulatory Negotiation agreement was not intended to modify the provisions of section 211(c)(4)(B). Under this provision, once the State of California has received a waiver under section 209(b) of the Clean Air Act, it has the ability to regulate fuels and fuel additives without the need for a waiver under section 211 of the Clean Air Act. In accordance with the intent of Congress in enacting sections 209(b) and 211(c)(4)(B) of the Clean Air Act, California has used, and EPA understands will continue to use, these provisions to design a program to meet its unique needs. EPA believes that the limited federal preemption proposed here appropriately balances the utility and efficacy of uniform national rules with States' needs to address their unique pollution problems. XVI. Environmental and Economic Impacts The contents of this supplemental proposal are not expected to affect the environmental or economic impacts of the reformulated gasoline program as it was proposed in EPA's notice of proposed rulemaking (56 FR 31176). These impacts are also described in greater detail in the Regulatory Impact Analysis supporting the rulemaking, which is available in Public Docket No. A-91-02, located at Room M-1500, Waterside Mall (ground floor), U.S. Environmental Protection Agency, 401 M Street SW., Washington, DC 20460. XVII. Public Participation A. Comments EPA desires full public participation in arriving at its final decisions, and therefore solicits comments on all aspects of this supplementary proposal from all interested parties. However, EPA does request that comments be limited to issues affected by this SNPRM and not address issues in the NPRM which remain unchanged here. Wherever applicable, full supporting data and detailed analysis should be submitted to allow EPA to make maximum use of the comments. Commenters are especially encouraged to provide specific suggestions for changes to any aspects of the regulations that they believe need to be modified or improved. All comments should be directed to the EPA Air Docket, Docket No. A-91-02 (See "ADDRESSES"). Commenters desiring to submit proprietary information for consideration should clearly distinguish such information from other comments to the greatest possible extent, and clearly label it "Confidential Business Information." Submissions containing such proprietary information should be sent directly to the contact person listed above, and not to the public docket, to ensure that proprietary information is not inadvertently placed in the docket. Information covered by such a claim of confidentiality will be disclosed by EPA only to the extent allowed and by the procedures set forth in 40 CFR part 2. If no claim of confidentiality accompanies the submission when it is received by EPA, it may be made available to the public without further notice to the commenter. B. Public Hearing Any person desiring to testify at the public hearing (see "DATES") should notify the contact person listed above of such intent at least 7 days before the hearing date. Persons wishing to testify at the hearing should also provide an estimate of the time required for the presentation of the testimony and notification of any need for audio/visual equipment. It is suggested that sufficient copies of the statement or material to be presented be brought to the hearing for distribution to the audience (suggested number of 300). In addition, a sign-up sheet will be available at the registration table the morning of the hearing for scheduling of the order of testimony. The official record of the hearing will be kept open for 30 days following the hearing to allow submission of rebuttal and supplementary testimony. All such submittals should be directed to the EPA Air Docket, Docket No. A-91-02 (See "ADDRESSES"). The hearing will be conducted informally, and technical rules of evidence will not apply. Written transcripts of the hearing will be made and a copy thereof placed in the docket. Anyone desiring to purchase a copy of the transcript should make individual arrangements with the court reporter recording the proceedings. XVIII. Compliance with the Regulatory Flexibility Act Under Section 605 of the Regulatory Flexibility Act, the Administrator is required to certify that a regulation will not have a significant adverse economic impact on a substantial number of small business entities or perform a regulatory flexibility analysis. EPA has determined that the reformulated gasoline program will be likely to have a significant adverse economic impact on a substantial number of small business entities and accordingly has prepared the following proposed regulatory flexibility analysis. Comments on this analysis are welcomed and will be included in a final regulatory flexibility analysis to be included in the final rule. As part of the Administrator's effort to ensure that the regulations did not unnecessarily affect small business entities, the small business entities which will be affected by this rulemaking have been represented in the negotiated rulemaking processes which led, in substantial part, to this supplemental proposal. The following organizations which represent in whole or in part the interests of affected small businesses were formal participants in the negotiated rulemaking process and signatories to the agreement in principle: National Corn Growers Association, Renewable Fuels Association, Oxy-fuels Association, Rocky Mountain Refiners Association, National Council of Farmer Cooperatives, Society of Independent Gasoline Marketers of America, Petroleum Marketers of America Association, Independent Liquid Terminals Association, Association of Independent Refiners of America. EPA believes that the participation of these parties has assured adequate consideration of the special position of smaller entities in the marketplace. During the negotiated rulemaking sessions and the public hearing on the July NPRM, the small businesses which are potentially affected by the rule made their interests known. Pursuant to the Regulatory Flexibility Act, this draft regulatory flexibility analysis will summarize the issues small businesses have raised and the resolutions (if any) of their concerns contained in today's proposal. EPA requests comment on the topics in this analysis and any other issues affecting small businesses, if any. Many of the affected small businesses were concerned about the treatment of oxygenates. Some made oxygenates and were thus concerned that EPA not favor certain oxygenates in the way that it ensured that there would be no NOx increase. The evidence about the effect of oxygenates on NOx emissions is not complete. Some testing has been done which shows that while oxygen in fuel lowers CO and VOC emissions, at some concentrations and in some forms it may raise NOx emissions. In order to avoid any unnecessary discrimination against oxygenates EPA has developed a two step process for determination of NOx effects. Generally, all oxygenates will be treated equally and deemed to create no NOx increase up to 3.5% oxygen or the waiver limit for such oxygenate. In some cases, states may determine that because the area has summertime ozone problems or NOx would interfere with the attainment of another NAAQS, the area needs to make even more conservative assumptions about the relationship between oxygenates and NOx. In such cases and during the relevant months, the regulations presume that MTBE (the most thoroughly tested oxygenate) will cause no NOx increase to 2.7% (by weight) oxygen and that other oxygenates will cause no NOx increase to 2.1% (by weight) oxygen. In all events, EPA will review petitions regarding new oxygenates as soon as possible to determine whether there is evidence of a NOx increase due to their use and at what levels. If no NOx increase is found to occur at levels higher than 2.1% (by weight) then EPA will approve their use at higher levels during such periods. Given the review accorded oxygenate testing, any detrimental effects on other oxygenates may be temporary or even avoided. The differing treatment of MTBE and other oxygenates will have the greatest impact on use of ethanol because it is one of the widest used oxygenates. It is likely that a limitation on ethanol use will tend to affect small (and large) ethanol makers adversely since the market for ethanol may not grow as much as the market for MTBE. It may be that terminal operators not affiliated with major oil companies would be adversely affected because they may be more likely to do ethanol blending than terminals associated with large refiners. EPA has attempted to deal with the needs of blenders in its proposed reformulated gasoline and antidumping enforcement schemes by enabling them to use already certified blendstocks and/or baseline comparisons as appropriate. Smaller businesses were also concerned with the definition of domestic capacity to produce reformulated gasoline. There is currently no fixed definition of that term in the regulatory negotiation agreement or the Clean Air Act. Suggested definitions have required all constituents of reformulated gasoline to be domestically produced or available at domestic ports. If the Administrator finds that there is insufficient domestic capacity to produce reformulated gasoline, he may extend the date for the start of the program in opt-in areas for up to three years. Thus this issue may affect both the market for imported oxygenates and the certainty refiners can have about the effective date of opt-ins and thus the demand. While some of the commenters were concerned with creating a strong domestic market for their oxygenates many more were concerned that the definition be as broad as possible. If domestic capacity were broadly construed, EPA would not extend the start of the program in opt-in areas due to insufficient supply. An unexpected extension might make a small refiner's investments in improvements useless. Small refiners have less of an ability to absorb risk or to obtain financing for risky investments than do their larger competitors. Thus small refiners want a broad definition. It is in the interest of domestic oxygenate producers to have a limited definition in order that demand for their supplies be high. But they, as indeed all gasoline and gasoline component suppliers, will be able to operate most efficiently if uncertainty about opt-ins is minimized. EPA is concerned that there may be an impact on terminal operators and gasoline distributors who currently blend unfinished gasoline components with ethanol for attainment area use. If these blenders are not producing their own ethanol, the cost of ethanol to them will rise. There will be no associated rise in the price they will receive for their gasoline since they sell into unaffected areas. EPA does not know the extent to which these blenders do not produce ethanol and requests comment on this issue. Several small business commenters are refiners with only one refinery. These commenters were concerned with the ability of larger refiners to average their baseline fuels across many refineries for the anti-dumping provisions. They believed that such an averaging provision gave a competitive advantage to large refiners and permitted degradation of air quality in non- reformulated fuel areas which was not intended by Congress. While EPA is sympathetic to their concerns, the Act clearly requires the baseline to be determined on a refiner basis and therefore EPA cannot take away this right. EPA allows baseline determination on a refiner or refinery basis, at the refiner's option, to enhance flexibility; however, to protect small refiners and the environment a refiner must choose either to determine the baseline for its refineries on a refinery by refinery basis or a refiner basis. If one refinery's baseline is determined based on its own data, then the calculation of the baseline for the other refineries of that refiner must not include that refinery. The smaller refiners were also concerned that there be some variance procedure in cases when they could not produce reformulated gasoline through no fault of their own. Since these refiners generally have only one refinery and can often supply only one market, they are more prone to suffer from being unable to supply reformulated gasoline than a major refiner with refineries proximate to the pipeline. Section 80.73 of the regulations proposed today provide a mechanism for sale of conventional gasoline in covered areas under certain very circumscribed conditions. The smaller refiners acknowledged that these conditions (i.e., no fault, return of economic advantage, continuing efforts, etc.) were necessary to avoid abuse of the provision. XIX. Statutory Authority The statutory authority for the standards proposed today is granted to EPA by sections 114, 211(c) and (k) and 301 of the Clean Air Act, as amended; 42 U.S.C. 7414, 7545(c) and (k), and 7601. XX. Administrative Designation and Regulatory Analysis Pursuant to Executive Order 12291, EPA must judge whether a regulation is "major" and therefore subject to the requirement that a Regulatory Impact Analysis be prepared. Major regulations have an annual effect on the economy in excess of $100 million, have a significant adverse impact on competition, investment, employment or innovation, or result in a major price increase. The Administrator has determined that reformulated gasoline will cost well in excess of $100 million per year and therefore should be classified as a major rule. A Draft Regulatory Impact Analysis (RIA) for the reformulated gasoline program has been prepared and placed in the docket. The final RIA will be completed contemporaneously with the final reformulated gasoline rule. The Draft Regulatory Impact Analysis was submitted to the Office of Management and Budget (OMB) for review as required by Executive Order 12291. Any written comments from OMB and any EPA response to those comments as placed in the public docket for this rulemaking. XXI. Reporting and Recordkeeping Requirements Under the Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq., EPA must obtain OMB clearance for any activity that will involve collecting substantially the same information from 10 or more non-Federal respondents. (As stated in the notice of proposed rulemaking, these information collection requirements have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An Information Collection Request document has been prepared by EPA (ICR No. [1591]) and a copy may be obtained from Sandy Farmer, Information Policy Branch; EPA; 401 M St., SW. (PM-223); Washington, DC 20460 or by calling (202) 382-2740.) Send comments regarding the collection of information, including suggestions for reducing the burden of this collection to Chief, Information Policy Branch; EPA; 401 M St., SW. (PM-223); Washington, DC 20503; and to the Office of Management and Budget, Washington, DC, 20503, marked "Attention: Desk Officer for EPA." The final Rule will respond to any OMB or public comments on the information collection requirements contained in this proposal. XXII. Regulatory Language A copy of the proposed regulatory language discussed in this preamble may be obtained from Public Docket No. A-91-02 or from the contacts listed in the ADDRESSES section. List of Subjects in 40 CFR Part 80 Fuel additives, Gasoline, Motor vehicle pollution, Penalties, Reporting and recordkeeping requirements. Dated: March 31, 1992. William K. Reilly, Administrator. [FR Doc. 92-8449 Filed 4-15-92; 8:45 am] BILLING CODE 6560-50-M