5/9/96 STATEMENT OF PRINCIPLES FOR THE REGULATION OF EXHAUST EMISSIONS FROM HANDHELD SPARK-IGNITED ENGINES AT OR BELOW 19 KILOWATTS PREFACE The Environmental Protection Agency (EPA) agrees to draft a preamble and proposed rule that will include, to the maximum extent possible, consistent with EPA s legal obligations, the agreements contained in this statement of principles (SOP). This SOP applies to new spark ignited engines at or below 19 kW for use in handheld applications. The draft preamble and proposed rule will form the basis of a notice of proposed rulemaking (NPRM) for Phase 2 emission standards for all new nonroad spark-ignition engines at or below 19 kilowatts subject to the exclusion and exemption provisions contained herein. The signatories have reached agreement on many of the basic issues that will apply to handheld engines in Phase 2, such as the pollutants to be regulated, the emission standards, phased in effective dates, and a test program for certain non-regulated pollutants. The signatories agree to support a program that promotes technological advancement of durable engine and emission control technology. The signatories agree that the program should strive to produce verifiable reductions in engine emissions over the useful lives of the engines and that the responsibility for verification testing is most appropriately placed with the manufacturers. Consequently, the signatories have reached conceptual agreement on issues such as production line and in-use testing, and the implementation of a technology review designed to assess the appropriateness of Phase 3 emission standards. However, a significant number of important, unresolved issues remain. To the extent possible in the time remaining prior to publication of the NPRM, the parties will continue their efforts to reach agreement on these unresolved issues. All outstanding issues will be addressed during the rulemaking process. Each party to this SOP, other than EPA, agrees not to file negative comments on the NPRM as to the agreed upon provisions included in this SOP. If the NPRM includes the agreements contained in this SOP, each party to the SOP other than EPA agrees to file a memorandum in the docket to that effect and to acknowledge that it participated in negotiating the SOP. Each party, other than EPA, agrees not to take any action to inhibit the adoption in the final rule of the agreed-upon provisions included in this SOP. Each party, other than EPA, agrees not to challenge in court the agreements in this SOP which are included in a final rule. If the final rule is challenged in court, and if the final rule and preamble include the agreements contained in this SOP, each party, other than EPA, agrees to file a memorandum informing the court that it participated in negotiating the agreements contained in this SOP. STATEMENT OF PRINCIPLES The signatories agree to the proposal of a single Notice of Proposed Rulemaking to regulate the exhaust emissions of small spark ignited engines at or below 19 kW. The emission standard related provisions applicable to small handheld engines (Effective Dates, Engine Classifications, Emission Standards, PM and Toxics Test Program, Test Procedures, Voluntary Incentive and Recognition Program, Certification: Averaging, Banking and Trading) will be based upon the items listed below. The non-emission standard related provisions of the proposed rule (Definitions, Applicability, Certification Program, Production Line Testing, In Use Program, Imports, Dealer Responsibility, Technology Review/Phase 3, and Tampering) shall be identical for all engines subject to the rule, to the extent possible and provided modifications are not necessary due to differences in emission standard related provisions. Where such provisions are proposed that will not be identical for all engines, the signatories will be consulted during development of any such proposal and will have full opportunity to comment after proposal. Items not addressed in this SOP will be developed during the rulemaking process. A. DEFINITIONS The signatories agree that, to the greatest extent possible, terms defined in the Phase 1 rule shall have the same meanings in the Phase 2 rule. Additionally, the signatories agree to define the following terms necessary to implement provisions described in this SOP. In-use credit: An emission credit derived from the difference between the mean in-use emission results of a regulated pollutant, or pair of pollutants in the case of HC+NOx, and the applicable emission standard. Technology subgroup: A group of engine families from one or more manufacturers having similar size, application, useful life and emission control equipment; e.g. Class III, residential, non-catalyst, two stroke, engine used in generator set applications. B. APPLICABILITY 1. This statement of principles is applicable to handheld equipment and spark ignited engines used in handheld products subject to the following exclusions. These exclusions, to the extent described in the Phase 1 rule, apply as described in that rule. a. Engines used to propel marine vessels. b. Engines used to propel any motor vehicle as defined in section 216 of the Clean Air Act including motorcycles. c. Engines used to propel aircraft. d. Engines used to propel recreational vehicles. e. Engines used solely for competition. f. Engines used exclusively in emergency and rescue equipment where no certified engines are available to power the equipment safely and practically. g. Engines used to power stationary sources regulated by a federal New Source Performance Standard promulgated under section 111 of the Act. h. Engines that are both: Used in underground mining or in underground mining equipment; AND are regulated by the Mining Safety and Health Administration (MSHA) in 30 CFR parts 7, 31, 32, 36, 56, 57, 70 and 75. i. Engines produced for export. 2. Exemptions will be provided as in the Phase 1 rule for uncertified engines used for purposes of research, investigations, demonstrations or training. 3. Exemptions will also be provided as appropriate for reasons of national security. An automatic national security exemption will be proposed, similar to that in the marine SNPRM (61 FR 4618) for nonroad engines and equipment that exhibit combat features, i.e. armor and or weaponry. C. EFFECTIVE DATES The standards will be phased in on a percentage of production basis as shown below. The percentages listed below represent the minimum percentage of an individual manufacturer s total production of nonexempt, nonexcluded handheld engines (not percentage of engine families) destined for U.S. use that must be certified to all applicable standards and comply with all applicable related emission requirements; e.g. labeling, warranty, production line and in-use testing, etc. TABLE 1: PHASE IN PERCENTAGES FOR ALL HANDHELD STANDARDS MODEL YEAR PRODUCTION 2002 20% 2003 40% 2004 70% 2005 100% D. ENGINE CLASSIFICATIONS Engine classification will be based upon engine displacement as in the Phase 1 rule with Classes I and II being reserved for nonhandheld engines. TABLE 2: HANDHELD ENGINE CLASSIFICATIONS ENGINE CLASS APPLICATION DISPLACEMENT IN CUBIC CM III HANDHELD less than 20 IV HANDHELD greater than or = 20, less than 50 V HANDHELD greater than or = 50 E. EMISSION STANDARDS 1. The percentages of engines listed in Table 1 must meet the standards listed in Table 3 for their useful lives. These standards are predicated upon a multiplicative deterioration factor (df) of 1.0 and useful lives of 50 hours for residential handheld engines and 300 hours for commercial handheld engines. Manufacturers will declare at the time of certification whether an engine family is "commercial" or "residential". The definitions of "commercial" and "residential" will be determined in the rulemaking process. TABLE 3: HC+NOx AND CO STANDARDS FOR HANDHELD ENGINES ENGINE CLASS HC + NOx (g/kW/hr) CO (g/kW/hr) III 210 805 IV 172 805 V 116 603 2. Two-stroke engines used to power snowthrowers will be subject to the handheld standards at the manufacturer's option. 3. Engines used exclusively in wintertime-only applications, such as snowthrowers or ice augers, need not certify to or comply with the HC+NOx standard at the option of the manufacturer. 4. A provision will be included to provide relief to small volume equipment manufacturers to permit the use of Phase 1 engines for a certain period of time when they can make a showing that no certified Phase 2 engine is available with suitable physical or performance characteristics to power a piece of equipment in production prior to 2002. F. PM AND TOXICS TEST PROGRAM FOR CLASS III, IV, AND V ENGINES The Phase 2 regulations adopted for handheld engines pursuant to this SOP will not establish small engine emission standards for particulate matter or toxic air contaminants listed under section 112(b) of the Clean Air Act. To evaluate the levels of these pollutants from Phase 2 handheld engines, the signatories agree that a particulate matter and toxics test program will be conducted. Elements of a PM and Toxics Test Program for Class III, IV, and V engines include: (1) PPEMA, in cooperation with EPA, commits to a test program to evaluate and quantify emissions of particulate matter and toxics including, but not limited to: formaldehyde, acetaldehyde, benzene, toluene, and 1,3 butadiene. (2) Testing under this program will be conducted on Phase 2 technology handheld engines. (3) Testing under this program will be of sufficient magnitude to represent the range of new basic technologies used to comply with the Phase 2 small engine standards. CARB test data may be used where appropriate. (4) No enforcement will be tied to this testing program. (5) Test data will be made available promptly to EPA for distribution to other interested parties. (6) Testing will be conducted at EPA, industry, and/or independent facilities. G. TEST PROCEDURES The 2-mode steady state Cycle C test procedure will apply to all Class III, IV, and V engines as it did in the Phase 1 rule except that the modal weighting factors for the Phase 2 rule, will be 0.85 for Mode 1 (100% max. power) and 0.15 for Mode 2 (idle mode). A large number of unresolved issues regarding the Phase 2 test procedure still exist . The issues include: testing precision, calibration requirements, data sampling requirements, long term data storage, requirements for natural gas and liquefied petroleum gas, and requirements for ambient test cell conditions. The signatories agree these could be resolved during the rulemaking process. H. CERTIFICATION PROGRAM A simplified version of the Phase 1 Certification Program will be provided to the extent possible and appropriate. The following outlines the elements of the program: (1) streamlined annual certification application (2) coordination with the California Air Resources Board (CARB) (3) possible automation of submittal I. PRODUCTION LINE TESTING The signatories agree that an efficient, flexible Production Line Testing (PLT) program, designed to verify production of complying engines is appropriate. At the same time, the signatories recognize that when clear compliance is shown for a family, it is reasonable to reduce or curtail testing. The basic components of a PLT program are listed below. Additional specific details of the PLT program will be developed through the rulemaking process. (1) Self-auditing plan, covering all engine families each model year in a statistically valid manner. (2) The Cumulative Sum (CumSum) procedure will be proposed in the NPRM. Alternate test schemes may be proposed by industry. The signatories agree it is desirable to avoid a multiplicity of individual, diverse test schemes, but recognize that there may be situations where a single test scheme is not appropriate for specific engine families or companies. (3) Manufacturers will randomly select engines from each engine family from the production line without regard to engine configuration. (4) California audit test data is acceptable to be used as input into the statistical scheme to determine compliance for 50-state engine families. (5) Production line testing will employ the full Federal Test Procedure (FTP). EPA will seek comments in the NPRM on the appropriateness of alternative test procedures that preserve the enforceability of the PLT program. (6) All exhaust pollutants for which standards are promulgated in the Phase 2 rule will be tested and resultant test data will be reported to EPA quarterly. (7) If an engine family exceeds the test program determinant of exceedance, the manufacturer will provide appropriate data to EPA within a certain number of days. EPA will review the data and other pertinent information and may notify the manufacturer that it intends to suspend or revoke the manufacturer's certificate of conformity in whole or in part for that engine family. (8) The suspension or revocation of a certificate of conformity shall not occur before thirty (30) days after notification from EPA of its intent to suspend or revoke. Hearing procedures by which a manufacturer may contest the suspension or revocation of a certificate will be provided similar to those in the Phase 1 Selective Enforcement Auditing (SEA) regulations. The certificate is automatically suspended with respect to any individual engine that fails to comply with applicable standards during this testing process. (9) During this thirty (30) day period described in paragraph I 8 above, EPA will maintain a dialogue and coordinate with the manufacturer to facilitate the approval of the required production line change in order to eliminate the need to halt production, if possible. (10) EPA will approve or disapprove the manufacturer's production line change within fifteen (15) days of receipt. Disapproval of the manufacturer's production line change could result in certificate suspension or revocation, with hearing procedures as described above. If EPA does not respond to the manufacturer's proposed change within fifteen (15) days of receipt, the proposed change will be deemed acceptable to EPA. (11) The manufacturer, in concert with EPA, will then determine the number of non-complying engines which have been introduced into commerce. (12) EPA may conduct Selective Enforcement Audits as a backstop ; for example, when it receives evidence of improper testing procedures or evidence of a non-conformity that was not being addressed in the normal Production Line Testing process. Routine or random SEAs shall not be a part of the final program. J. IN-USE PROGRAM 1. IN-USE TESTING The signatories agree that an efficient, flexible testing program designed to ensure and verify compliance of in-use engines with applicable emission standards is appropriate. The signatories agree to establish an in-use testing program with basic components as follows. Additional specific details of the program will be developed through the rulemaking process: (a) In-use testing will employ the full Federal Test Procedure (FTP). (b) All exhaust pollutants for which standards are promulgated in the Phase 2 rule will be tested. (c) EPA will select a portion of each manufacturer's engine families to be in- use tested each year (up to 25% of families). Manufacturers may elect to conduct testing of additional families, and to test more frequently. Additional in-use credits may be generated or required from such testing. (d) The in-use testing scheme will employ a method to increase the number of engines to be tested when individual engine failures occur, up to a maximum of ten engines per family per year. Except for small volume families, the minimum number (n) of engines tested will be four. (e) All in-use test results will be reported electronically each quarter to EPA. Reporting of data which suggests an emission exceedance (mean > standard) will occur within a certain number of days of the last test. (f) EPA will have the right to spot check a manufacturer to evaluate testing practices. EPA will provide reasonable notice of such checks unless it has evidence of improper test practices. (g) EPA may conduct its own in-use testing, including testing of properly maintained consumer owned engines, through the full useful life of the engines for enforcement purposes. (h) Bench aging of in-use engines will be permitted only for technology subgroups where correlation between field aged and bench aged engines can be shown (see J2). 2. BENCH AGING CORRELATION The signatories agree that bench aging is an appropriate way to obtain in-use emission data from small spark ignited gasoline engines, provided that the bench aging process can be shown initially and periodically to correlate with field aging. Consequently the signatories agree to the basics of a bench aging correlation strategy as follows. Additional specific details will be developed in the rulemaking.: (a) An initial bench-aging/field-aging correlation program will be conducted by manufacturers under EPA guidance. A portion of the field engines will be aged in individual usage or fleets where the manufacturer does not carry out or exercise control over the engines maintenance, or limit their usage such that the engines are no longer used in a way that is representative of typical in-use engines. (b) Emission testing will employ the full Federal Test Procedure (FTP). (c) All exhaust pollutants for which standards are promulgated in the phase 2 rule will be measured for correlation purposes (d) Engines will be aged to the full regulatory useful life on the bench and in the field except that commercial engines may be aged to 75% of the full regulatory useful life for correlation testing purposes only. (e) Correlation and sample sizes will be determined as appropriate. (f) Engine manufacturers will conduct a correlation spot check program periodically of each technology subgroup to verify that emissions from bench-aged engines correlate with emissions from field-aged engines. 3. IN-USE CREDIT PROGRAM The signatories agree that reasonable means must exist to address emission exceedances of in-use engines, including those exceedances of in-use engines identified by Production Line Testing, that: 1) provide an incentive to manufacturers to build emission-durable engines; 2) can be implemented practically; 3) provide an incentive to perform additional in-use testing; 4) offset additional emissions that occur as a result of the exceedance of the standard; and 5) are not unduly burdensome to the manufacturers. The signatories agree that a mandatory recall program does not meet these five criteria, although a manufacturer may conduct a voluntary recall in lieu of remedying emission exceedances through the in-use credit program or alternative methods provided in this SOP. The signatories believe that successful implementation of the in-use credit program and the other alternatives described herein will provide a comprehensive remedy to address in- use emission exceedances so that EPA will not, in practice, order mandatory recall of Phase 2 certified engines. Additional specific details of the in-use credit program will be developed during the rulemaking process: (a) In-use credits generated or required will be based on an engine family's in-use emission level relative to its applicable standard, as determined from the In-use Testing Program. (b) A multiplicative factor will be used to adjust credits earned based on sample size. (c) In-use credits will be used at a higher rate than the in-use credits were generated. (d) In-use credits will have an unlimited life during the Phase 2 program. (e) For credit computational purposes, U.S. sales figures will be used. (f) In-use credit banking and trading is allowed, but trading may be limited between categories of engines. (g) All credit calculations indicating surpluses and deficits will be reported electronically at the conclusion of in-use testing for that model year. (h) An appropriate in-use credit formula will be developed in the rulemaking to account for the different power ratings of engines and the different regulatory useful lives of residential and commercial engines. (i) In the case of in-use testing of carry-over engine families, and in the absence of other applicable test data, the test results from one model year will be assumed to apply to four years worth of production: the model year tested, the next model year and the two previous model years. In-use credits will be generated or required, as appropriate. 4. ALTERNATIVE METHODS TO ADDRESS IN-USE EXCEEDANCES OF STANDARDS The signatories agree that the primary method for manufacturers to address in-use exceedances of standards will be applying credits generated through the in-use credit program. If the manufacturer has insufficient in-use credits, it should first investigate the possibility of purchasing credits through available sources. However, appropriate alternative methods will be considered. Manufacturers will be allowed to implement all appropriate alternative methods prior to EPA making a determination of substantial nonconformity. EPA will make a determination of substantial nonconformity only when use of in-use credits and/or appropriate alternative methods do not adequately address the exceedance. Alternatives should meet the following criteria: (a) Alternatives must have a nexus to the emission problem caused by the subject engine family. (b) The alternative must cost substantially more than foregone compliance costs and consider the time value of foregone costs. (c) Alternatives must offset at least 100% of the exceedance of the standard, subject to the other listed criteria. (d) Alternatives must consider the degree of environmental harm caused by the exceedance. (e) Alternatives must consider the time value of the foregone environmental benefit resulting from the exceedance.. (f) Alternatives will be subject to a cost cap that will be established in the rulemaking process. (g) Alternatives may not include measures the manufacturer planned to undertake irrespective of the need to address the exceedance. (h) Alternatives must be able to be implemented expeditiously and completed in a reasonable time. (i) Alternatives must not force the manufacturer out of business. (j) The implementation potential of an alternative must be considered. K. IMPORTS The Imports program will be similar to the program for Phase 1. Essentially, this program bars the importation of uncertified, regulated small engines except that a one-time personal use exemption will permit the importation of three non- conforming small engines (or pieces of equipment containing such engines) for personal use but not for purposes of resale . L. VOLUNTARY INCENTIVE AND RECOGNITION PROGRAM FOR HANDHELD ENGINES A voluntary program will be created to identify handheld engines that have HC+NOx certification levels substantially below the Phase 2 standards. Manufacturers who participate in this program will be allowed to display a symbol (yet to be determined) on their products, packaging, or advertisements indicating that the engine qualifies for the program. The signatories recognize that further specific details of the program need to be formulated, but they agree on certain basic concepts of the program. To qualify for the program, certified engine emission levels must be a certain percentage below the Phase 2 HC + NOx standard. EPA and industry will agree on the administration of the program. In addition, manufacturers will receive a waiver on production line testing if an engine family achieves a certification level a certain percentage or more below the HC + NOx standard. The two percentages referenced in this paragraph may be different. M. CERTIFICATION: AVERAGING, BANKING AND TRADING (ABT) No certification ABT program will be created for handheld engines. In-use credits generated in the in-use ABT program are not applicable for use in certification. N. DEALER RESPONSIBILITY The signatories agree that, except as noted in this paragraph, these regulations will not impose any obligation on the dealers or repair facilities to bring into compliance any products found to have been tampered, nor will dealers or repair facilities be required to report defects to EPA. Dealers and repair facilities will be prohibited from tampering or causing tampering, but, are not prohibited from working on tampered products. Dealers and repair facilities will not be required to restore products submitted to them with tampered emission controls to certified configurations unless the repair involves the component or system that has been tampered. In that case, dealers and repair facilities will be required to restore the system to a certified and properly functioning configuration but will not be required to demonstrate that the products comply with applicable emission standards. In repairing or replacing emission control parts and systems, dealers and repair facilities may use parts represented by their manufacturers to be functionally equivalent to original equipment (OE) parts. O. TECHNOLOGY REVIEW/PHASE 3 The signatories recognize that technological advances and/or cost reductions may occur after promulgation of the Phase 2 rule that could make greater, but still cost- effective reductions feasible in handheld emission levels. At the same time, the signatories agree that industry requires certainty and stability for its business planning. Without such certainty, industry would not commit to the investment that these standards will require, and without such certainty and stability these investments might never be recouped. EPA will commit to conducting a technology review and publishing a Notice of Proposed Rulemaking in 2001 announcing any intended amendments to the standard levels or other program elements or EPA s desire to maintain the existing standards or program. The final rulemaking will be completed by 2002 and, if Phase 3 standards are adopted, they will be phased in on a percentage basis and over a period of time similar to Phase 2, beginning no earlier than model year 2007. This schedule is intended to provide a minimum five year period between the implementation of Phase 2 standards and the implementation of any Phase 3 standards to aid manufacturers in recouping their investments in Phase 2 technology P. TAMPERING The signatories agree that the tampering prohibitions from Phase 1 shall be adopted in Phase 2 except that a provision will be added to permit the removal, subject to approval by EPA, of emission control devices or elements of design that interfere with the safe and/or practical use of emergency and rescue equipment. SIGNATORIES TO STATEMENT OF PRINCIPLES DATED 5/9/96 FOR HANDHELD SPARK-IGNITED ENGINES AT OR BELOW 19 KILOWATTS _____________________________________________________________________ Signature Representing Date _____________________________________________________________________ Signature Representing Date _____________________________________________________________________ Signature Representing Date _____________________________________________________________________ Signature Representing Date _____________________________________________________________________ Signature Representing Date _____________________________________________________________________ Signature Representing Date