State of Alaska Petition for Exemption From Diesel Fuel Sulfur
Requirement
Related Material
[Federal Register: April 28, 1998 (Volume 63, Number 81)]
[Proposed Rules]
[Page 23241-23254]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ap98-28]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 69 and 80
[FRL-5999-6]
State of Alaska Petition for Exemption From Diesel Fuel Sulfur
Requirement
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: On March 14, 1994, EPA granted the State of Alaska a waiver
from the requirements of EPA's low-sulfur diesel fuel program for motor
vehicles, permanently exempting Alaska's remote areas and providing a
temporary exemption for areas of Alaska served by the Federal Aid
Highway System. The exemption applied to certain requirements in
section 211(i) and (g) of the Clean Air Act, as implemented in EPA's
regulations. On December 12, 1995, the Governor of Alaska petitioned
EPA to permanently exempt the areas covered by the temporary exemption.
In this document, EPA is proposing to grant Alaska's petition for a
permanent exemption for areas of Alaska served by the Federal Aid
Highway System.
This proposed rulemaking, if finalized, is not expected to have a
significant impact on the ability of Alaska's communities to attain the
National Ambient Air Quality Standards for carbon monoxide and
particulate matter, due to the limited contribution of emissions from
diesel motor vehicles in those areas and the sulfur level currently
found in motor vehicle diesel fuel used in Alaska. However, if
circumstances change such that the exemption is no longer appropriate
under Section 325 based on consideration of the factors relevant under
that section, EPA could withdraw this exemption in the future after
public notice and comment.
DATES: EPA will conduct a public hearing on today's proposal May 21,
1998, if one is requested by May 12, 1998. If a hearing is held,
comments on this proposal must be submitted on or before June 22, 1998.
If no hearing is held, comments must be submitted on or before May 28,
1998. For additional information on the public hearing see
Supplementary Information.
ADDRESSES: Comments should be submitted in duplicate to Mr. Richard
Babst, Environmental Engineer, Fuels Implementation Group, Fuels and
Energy Division (6406-J), 401 M Street S.W., Washington, D.C. 20460.
Public Hearing: A public hearing, if held, will be at the Anchorage
Federal Building, room 135, in Anchorage, Alaska.
Docket: Copies of information relevant to this petition are
available for inspection in public docket A-96-26 at the Air Docket of
the EPA, first floor, Waterside Mall, room M-1500, 401 M Street S.W.,
Washington, D.C. 20460, (202) 260-7548, between the hours of 8:00 a.m.
to 5:30 p.m. Monday through Friday. A duplicate public docket has been
established at EPA Alaska Operations Office--Anchorage, Federal
Building, Room 537, 222 W. Seventh Avenue, #19, Anchorage, AK 99513-
7588, and is available from 8:00 a.m. to 5:00 p.m. Monday through
Friday. A reasonable fee may be charged for copying docket materials.
FOR FURTHER INFORMATION CONTACT: Mr. Richard Babst, Environmental
Engineer, Fuels Implementation Group, Fuels and Energy Division (6406-
J), 401 M Street S.W., Washington, D.C. 20460, (202) 564-9473.
SUPPLEMENTARY INFORMATION:
Public Hearing Information
Anyone wishing to testify at the public hearing scheduled for May
21, 1998, should notify Richard Babst by telephone at (202) 564-9473,
by fax at (202) 565-2085, or by Internet message at
babst.richard@epa.gov. If the above contact person fails to receive any
requests for testifying on this proposal by May 12, 1998, the hearing
will be canceled without further notification. Persons interested in
determining if the hearing has been canceled should contact the person
named above after May 12, 1998.
The public hearing, if held, will begin at 9:00 a.m and continue
until all interested parties have had an opportunity to testify. A
sign-up sheet will be available at a registration table the morning of
the hearing for scheduling testimony for those who have not previously
notified the contact person listed above. Testimonies will be scheduled
on a first come, first serve basis. EPA suggests that approximately 25
to 50 copies of the statement or material to be presented be brought to
the hearing for distribution to the audience. In addition, EPA would
find it helpful to receive an advance copy of any statement or material
to be presented at the hearing in order to give EPA staff adequate time
to review the material before the hearing. Such advance copies should
be submitted to the contact person listed above.
The hearing will be conducted informally and technical rules of
evidence will not apply. Because a public hearing is designed to give
interested parties an opportunity to participate in the proceeding,
there are no adversary parties as such. Statements by participants will
not be subject to cross examination by other participants. A written
transcript of the hearing will be placed in the public docket for
review. Anyone desiring to purchase a copy of the transcript should
make individual arrangements with the court reporter recording the
proceeding. The EPA Presiding Officer is authorized to strike from the
record statements which he deems irrelevant or repetitious and to
impose reasonable limits on the duration of the statement of any
witness. EPA asks that persons who testify attempt to limit their
testimony to ten minutes, if possible.
The Administrator will base her final decision with regard to
Alaska's petition for exemption from the diesel fuel sulfur content
requirement on the record of the public hearing, if held, and on any
other relevant written submissions and other pertinent information.
This information will be available for public inspection at the EPA Air
Docket, Docket No. A-96-26 (see ADDRESSES). For more information on
public participation, see SUPPLEMENTARY INFORMATION: VII. Public
Participation.
Table of Contents
I. Regulated Entities
II. Electronic Copies of Rulemaking Documents
III. Background
IV. Petition for Exemption
V. Comments Received and Other Issues
VI. Decision for Permanent Exemption
VII. Public Participation
VIII. Statutory Authority
IX. Administrative Designation and Regulatory Analysis
X. Compliance With the Regulatory Flexibility Act
XI. Paperwork Reduction Act
XII. Unfunded Mandates Act
I. Regulated Entities
Entities potentially regulated by this action are refiners,
marketers, distributors, retailers and wholesale purchaser-consumers of
diesel fuel for
[[Page 23242]]
use in the state of Alaska. Regulated categories and entities include:
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Examples of regulated
Category entities
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Industry.................................. Petroleum distributors,
marketers, retailers
(service station owners and
operators), wholesale
purchaser consumers (fleet
managers who operate a
refueling facility to
refuel motor vehicles).
Individuals............................... Any owner or operator of a
diesel motor vehicle.
Federal Government........................ Federal facilities,
including military bases
which operate a refueling
facility to refuel motor
vehicles.
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This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists the types of entities that EPA is now aware
could potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your facility is regulated by this action, you should carefully examine
the criteria contained in Secs. 80.29 and 80.30 of title 40 of the Code
of Federal Regulations as modified by today's action. If you have
questions regarding the applicability of this action to a particular
entity, consult one of the persons listed in the preceding FOR FURTHER
INFORMATION CONTACT section.
II. Electronic Copies of Rulemaking Documents
The preamble and regulatory language are also available
electronically from the EPA Internet Web site. This service is free of
charge, except for any cost you already incur for Internet
connectivity. An electronic version is made available on the day of
publication on the primary Web site listed below. The EPA Office of
Mobile Sources also publishes these notices on the secondary Web site
listed below.
http://www.epa.gov/fedrgstr/EPA-AIR/(either select desired date or
use Search feature)
http://www.epa.gov/OMSWWW/(look in What's New or under the specific
rulemaking topic)
Please note that due to differences between the software used to
develop the document and the software into which the document may be
downloaded, changes in format, page length, etc. may occur.
III. Background
Section 211(i)(1) of the Act prohibits the manufacture, sale,
supply, offering for sale or supply, dispensing, transport, or
introduction into commerce of motor vehicle diesel fuel which contains
a concentration of sulfur in excess of 0.05 percent by weight, or which
fails to meet a cetane index minimum of 40 beginning October 1, 1993.
Section 211(i)(2) requires the Administrator to promulgate regulations
to implement and enforce the requirements of paragraph (1), and
authorizes the Administrator to require that diesel fuel not intended
for motor vehicles be dyed in order to segregate that fuel from motor
vehicle diesel fuel. Section 211(i)(4) provides that the States of
Alaska and Hawaii may seek an exemption from the requirements of
subsection 211(i) in the same manner as provided in section 325
<SUP>1</SUP> of the Act, and requires the Administrator to take final
action on any petition filed under this subsection, which seeks
exemption from the requirements of section 211(i), within 12 months of
the date of such petition.
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\1\ Section 211(i)(4) mistakenly refers to exemptions under
section 324 of the Act (``Vapor Recovery for Small Business
Marketers of Petroleum Products''). The proper reference is to
section 325, and Congress clearly intended to refer to section 325,
as shown by the language used in section 211(i)(4), and the United
States Code citation used in section 806 of the Clean Air Act
Amendments of 1990, Public Law No. 101-549. Section 806 of the
Amendments, which added paragraph (i) to section 211 of the Act,
used 42 U.S.C. 7625-1 as the United States Code designation for
section 324. This is the proper designation for section 325 of the
Act. Also see 136 Cong. Rec. S17236 (daily ed. October 26, 1990)
(statement of Sen. Murkowski).
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Section 325 of the Act provides that upon application by the
Governor of Guam, American Samoa, the Virgin Islands, or the
Commonwealth of the Northern Mariana Islands, the Administrator may
exempt any person or source, or class of persons or sources, in such
territory from any requirement of the Act, with some specific
exceptions. Such exemption may be granted if the Administrator finds
that compliance with such requirement is not feasible or is
unreasonable due to unique geographical, meteorological, or economic
factors of such territory, or such other local factors as the
Administrator deems significant.
IV. Petition for Exemption
On February 12, 1993, the Honorable Walter J. Hickel, then Governor
of the State of Alaska, submitted a petition to exempt motor vehicle
diesel fuel in Alaska from subsections (1) and (2) of section 211(i),
except the minimum cetane index requirement of 40. Subsection (1)
prohibits motor vehicle diesel fuel from having a sulfur concentration
greater than 0.05 percent by weight, or failing to meet a minimum
cetane index of 40. Subsection (2) requires the Administrator to
promulgate regulations to implement and enforce the requirements of
subsection (1), and authorizes the Administrator to require that diesel
fuel not intended for motor vehicles be dyed in order to segregate that
diesel fuel from motor vehicle diesel fuel. The petition requested that
the Environmental Protection Agency (EPA) temporarily exempt motor
vehicle diesel fuel manufactured for sale, sold, supplied, or
transported within the Federal Aid Highway System from meeting the
sulfur content requirement specified in section 211(i) until October 1,
1996. The petition also requested a permanent exemption from such
requirements for those areas of Alaska not reachable by the Federal Aid
Highway System. The petition was based on geographical, meteorological,
air quality, and economic factors unique to the State of Alaska.
The petition was granted on March 22, 1994 (59 FR 13610) and
applied to all persons in Alaska subject to section 211(i) and related
provisions in section 211(g) of the Act and EPA's low-sulfur
requirement for motor vehicle diesel fuel in 40 CFR 80.29. Persons in
communities served by the Federal Aid Highway System were exempt from
compliance with the diesel fuel sulfur content requirement until
October 1, 1996. Persons in communities that are not served by the
Federal Aid Highway System were permanently exempt from compliance with
the diesel fuel sulfur content requirement. Both the permanent and
temporary exemptions apply to all persons who manufacture, sell,
supply, offer for sale or supply, dispense, transport, or introduce
into commerce, in the State of Alaska, motor vehicle diesel fuel.
Alaska's exemptions do not apply to the minimum cetane requirement for
motor vehicle diesel fuel.
On December 12, 1995, the Honorable Governor Tony Knowles, Governor
of the State of Alaska, petitioned the Administrator for a permanent
exemption for all areas of the state
[[Page 23243]]
served by the Federal Aid Highway System, that is, those areas covered
only by the temporary exemption. On August 19, 1996, EPA extended the
temporary exemption until October 1, 1996 (61 FR 42812), to give ample
time for the agency to consider comments to that petition that were
subsequently submitted. Today's proposed decision addresses EPA's final
action on the petition submitted on December 12, 1995. EPA proposes to
grant the petition for a permanent exemption for all areas of the state
served by the Federal Aid Highway System. This proposed permanent
exemption, when combined with the previously granted permanent
exemption for all areas of the state not served by the Federal Aid
Highway System, would effectively provide the entire state of Alaska a
permanent exemption. While this exemption would be permanent, EPA would
reserve the right to withdraw it in the future after public notice and
comment if circumstances change such that the exemption is no longer
appropriate under section 325 based on consideration of the factors
relevant under that section.
The following subsections summarize the state's support for the
exemption as provided for in the petition and rationale for the
agency's proposed rule to grant the exemption. Comments received by the
agency, subsequent submittals by Alaska, and additional rationale for
the agency's rule to grant the permanent exemption are provided in
section V.
A. Geography and Location of the State of Alaska
Alaska is about one-fifth as large as the combined area of the
lower 48-states. Because of its extreme northern location, rugged
terrain and sparse population, Alaska relies on barges to deliver a
large percentage of its petroleum products. No other state relies on
this type of delivery system to the extent Alaska does.
Only 35 percent of Alaska's communities are served by the Federal
Aid Highway System, which is a combination of road and marine highways.
The remaining 65 percent of Alaska's communities are served by barge
lines and are referred to as ``off-highway'' or ``remote'' communities.
Although barge lines can directly access some off-highway communities,
those communities that are not located on a navigable waterway are
served by a two-stage delivery system: over water by barge line and
then over land to reach the community.
Because of the State's high latitude, it experiences seasonal
extremes in the amount of daily sunlight and temperature, which in turn
affects the period of time during which construction can occur, and,
ultimately, the cost of construction in Alaska.
According to the petition, Alaska's extreme northern location
places it in a unique position to fuel transcontinental cargo flights
between Europe, Asia, and North America. Roughly 75 percent of all air
transit freight between Europe and Asia lands in Anchorage, as does
that between Asia and the United States. The result is a large market
for jet fuel (Jet-A kerosene) produced by local refiners, which
decreases the relative importance of highway diesel fuel to these
refiners. Based on State tax revenue receipts and estimates by Alaska's
refiners, diesel fuel consumption for highway use represents roughly
five percent of total Alaska distillate fuel consumption.<SUP>2</SUP>
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\2\ EPA independently verified these statements and estimates
based on statistics from the Federal Highway Administration and the
Department of Energy. These statistics show that the proportion of
jet fuel consumption compared to total distillate consumption is
approximately 65 percent for Alaska, compared to approximately 26
percent for the United States. The per-capita consumption of jet
fuel is approximately 26.6 barrels per year for Alaska, compared to
approximately 2.1 barrels per year for the United States. The
proportion of diesel fuel consumption for highway use compared to
total distillate consumption is approximately three percent for
Alaska, compared to approximately 29 percent for the United States.
The per-capita consumption of diesel fuel for highway use is
approximately 1.2 barrels per year for Alaska, compared to
approximately 2.3 barrels per year for the United States.
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B. Climate, Meteorology and Air Quality
Alaska's climate is colder than that of the other 49 states. The
extremely low temperatures experienced in Alaska during the winter
imposes a more severe fuel specification requirement for diesel fuel in
Alaska than in the rest of the country. This specification, known as a
``cloud point'' specification <SUP>3</SUP> significantly affects
vehicle start-up and other engine operations. Alaska has the most
severe cloud point specification for diesel fuel in the U.S. at
-56 deg.F. Because Alaska experiences extremely low temperatures in
comparison to the other 49 states, and the cloud point specifications
for diesel fuel in the lower 49 states are not as severe, most diesel
fuel used in Alaska is produced by refiners located in Alaska. Jet-A
kerosene meets the same cloud point specification as No. 1 diesel fuel
(which is marketed primarily during the winter in Alaska, as opposed to
No. 2 diesel fuel which is marketed primarily in the summer) and is
commonly mixed with or used as a substitute for No. 1 diesel fuel.
However, because Jet-A kerosene can have a sulfur content as high as
0.3 percent, the motor vehicle diesel fuel sulfur requirement of 0.05
percent would generally prohibit using Jet-A kerosene from being used
as a fuel for motor vehicles.
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\3\ The cloud point defines the temperature at which cloud or
haze or wax crystals appears in the fuel. The purpose of the cloud
point specification is to ensure a minimum temperature above which
fuel lines and other engine parts are not plugged by solids that
form in the fuel. This specification is designated by the American
Society for Testing and Materials (ASTM) in its ``Standard
Specification for D975-96 Diesel Fuel Oils'', and varies by area of
the country and by month of the year based on historical temperature
records. Alaska has the most stringent cloud point specification in
the United States. For example in January, Alaska's cloud point
specification is -56 deg.F, -26 deg.F, and -2 deg.F for the northern
(above 62 deg. latitude), southern (below 62 deg. latitude), and
Aleutian Islands plus southeastern coast region, respectively. In
contrast, the most stringent cloud point specification in January in
the lower-48 states is -29 deg.F for Minnesota. For the State of
Washington, from which some imported distillate is imported into
Alaska, the January cloud point specification is +19.4 deg.F and
0 deg.F for the western and eastern parts of the State,
respectively.
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Ice formation on the navigable waters during the winter months
restricts fuel delivery to off-highway areas served by barge lines.
Therefore, fuel is generally only delivered to these areas between the
months of May and October. This further restricts the ability of fuel
distributors in Alaska to supply multiple grades of petroleum products
to these communities.
The only violations of national ambient air quality standards in
Alaska have been for carbon monoxide (CO) and particulate matter
(PM10). CO violations have only been recorded in the State's
two largest communities: Anchorage and Fairbanks. PM10
violations have only been recorded in two rural communities, Mendenhall
Valley of Juneau and Eagle River in Anchorage. The most recent
PM10 inventories for these two communities show that these
violations are largely the result of fugitive dust from paved and
unpaved roads, and that diesel motor vehicles are responsible for less
than one percent of the overall PM10 being emitted within
the borders of each of these areas <SUP>4</SUP>. Moreover, Eagle River
has not had a violation of the PM10 standard since 1986.
Mendenhall Valley has initiated efforts for road paving to be
implemented to control road dust. The sulfur content of diesel fuel is
not expected to have a significant impact on ambient PM10 or
CO levels in any of these areas because of the minimal contribution by
diesel motor vehicles to PM10 in these areas and the
insignificant
[[Page 23244]]
effect of diesel fuel sulfur content on CO emissions.
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\4\ ``PM10 Emission Inventories for the Mendenhall
Valley and Eagle River Areas,'' prepared for the U.S. Environmental
Protection Agency, Region X, by Engineering-Science, February 1988.
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Finally, EPA recognizes that the primary purpose of reducing the
sulfur content of motor vehicle diesel fuel is to reduce vehicle
particulate emissions. Additional benefits cited in the final rule (55
FR 34120, August 21, 1990) include a reduction in sulfur dioxide
(SO2) emissions and the ability to use exhaust after-
treatment devices on diesel fueled vehicles, which would result in some
reduction of HC and CO exhaust emissions. The use of high-sulfur diesel
fuel may cause plugging or increased particulate sulfate emissions in
diesel vehicles equipped with trap systems or oxidation catalysts, and
could impair the ability of oxidation catalysts to reduce HC and CO
exhaust emissions. However, any increase in sulfate particulate
emissions would likely have an insignificant effect on ambient
PM10 levels in Alaska since current diesel motor vehicle
contributions to PM10 emissions are minimal. Also, the lower
sulfur requirement for motor vehicle diesel fuel will have no impact on
the attainment prospects of Fairbanks and Anchorage with respect to CO,
since reducing sulfur content has no direct affect on CO emissions.
Since Alaska is in attainment with the ozone and SO2
national ambient air quality standards, there is currently no concern
for reducing HC or SO2 emissions.
The Agency recognizes that granting this exemption means Alaska
will forego the potential benefits to its air quality resulting from
the use of low-sulfur diesel fuel. However, EPA believes that the
potential benefits to Alaska's air quality are minimal and are far
outweighed by the increased costs resulting from factors unique to
Alaska to communities served by the Federal Aid Highway System.
C. Economic Factors
In complying with the section 211(i) sulfur requirement, refiners
have the option to invest in the process modifications necessary to
produce low-sulfur diesel fuel for use in motor vehicles, or not invest
in the process modifications and only supply diesel fuel for off-
highway purposes (e.g., heating, generation of electricity, non-road
vehicles). Most of Alaska's refiners indicated that local refineries
would choose to exit the market for highway diesel fuel if an exemption
from the low-sulfur requirement is not granted. This is because of
limited refining capabilities, the small size of the market for highway
diesel fuel in Alaska, and the costs that would be incurred to produce
low-sulfur diesel fuel.
Demand for Jet-A kerosene, which is also sold as No. 1 diesel fuel
because it meets Alaska's winter cloud point specification, accounts
for about half of Alaska's distillate consumption and dominates refiner
planning. A survey of the refiners in Alaska, conducted by the State,
revealed that it would cost over $100,000,000 in construction and
process modifications to refine Alaska North Slope (ANS) crude into
diesel fuel that would meet the 0.05 percent sulfur requirement to meet
the demand for highway diesel fuel. Among the reasons for the high cost
include the construction costs in Alaska, which are 25 to 65 percent
higher than costs in the lower 48 states, and the cost of modifying the
fuel production process itself. The petition states that because there
is such a small demand for highway diesel fuel in Alaska, the costs
that would be incurred to comply with section 211(i)'s sulfur
requirement are excessive in light of the expected benefits. Without an
exemption from having to meet this requirement, most refiners would
choose to exit the market for highway diesel fuel.
Whether low-sulfur diesel fuel is produced in Alaska or imported
from the lower-48 states or Canada, there remains the problem of
segregating the two fuels for transport to communities along the FAHS
accessible only by navigable waterways and subsequent storage of the
fuels in those communities. Fuel is delivered to these communities only
between the months of May and October due to ice formation which blocks
waterways leading to these communities for much of the remainder of the
year. The fuel supplied to these communities during the summer months
must last through the winter and spring months until resupply can
occur. Additionally, the existing fuel storage facilities limit the
number of fuel types that can be stored for use in these communities.
The cost of constructing separate storage facilities and providing
separate tanks for transport of low-sulfur diesel fuel for motor
vehicles could be significant. This is largely due to the high cost of
construction in Alaska relative to the lower 48 states, and the
constraints inherent in distributing fuel in Alaska. One alternative to
constructing separate storage facilities is to supply only low-sulfur
diesel fuel to these communities. However, the result would require use
of the higher cost, low-sulfur diesel fuel for all diesel fuel needs.
This would greatly increase the already high cost of living in these
communities, since a large percentage of distillate consumption in
these communities is for off-highway uses, such as operating diesel
powered electrical generators.
D. Environmental Factors
Information provided to EPA by the State of Alaska indicates that
refiners supply and distribute standard diesel fuel in the summer which
has a sulfur content of approximately 0.3 percent by weight, and supply
and distribute Jet-A kerosene in the winter as an Arctic-grade diesel,
which has a sulfur content between 0.065 and 0.11 percent by weight
from Alaskan refiners, and 0.03 percent by weight from one refiner in
the lower-48 states. Thus, the reported level of sulfur in motor
vehicle diesel fuel used in Alaska is below the current ASTM sulfur
specification which allows up to 0.5 percent by weight. Therefore, in
general, the impact of not requiring the low-sulfur motor vehicle
diesel fuel program in Alaska is not as significant as it would be if
the current fuel approached the ASTM allowable sulfur content level.
Although the State's largest communities, Fairbanks and Anchorage,
are CO nonattainment areas, granting this exemption is not expected to
have any significant impact on ambient CO levels because the sulfur
content in diesel fuel does not significantly affect CO emissions. Two
rural communities are designated nonattainment areas with respect to
particulate matter (PM10); however, diesel motor vehicle
exhaust is responsible for less than one percent of the overall
PM10 being emitted within the borders of these two areas
where fugitive dust is reported to be the most significant problem.
Thus, EPA believes that granting a permanent exemption to communities
served by the Federal Aid Highway System will not have a significant
impact on the ability of any of these communities to meet the current
national ambient air quality standards.
V. Comments Received and Other Issues
This section addresses issues and comments that EPA needed more
time to consider at the time of the August 19, 1996 extension of the
temporary exemption for areas served by the Federal Aid Highway System.
A. Availability of Arctic-Grade, Low-Sulfur Diesel Fuel From Out-of-
State Refiners
In a letter to the Alaska Department of Environmental Conservation
of July 20, 1995, the Clean Air Coalition suggested that importing low-
sulfur diesel fuel is a low cost option to comply with the low-sulfur
highway diesel fuel requirement, since highway diesel fuel
[[Page 23245]]
is such a small part of the diesel fuel market in Alaska. It also noted
that Southeast Alaska already imports low-sulfur diesel fuel from Puget
Sound.
Although the 1995 staff report from the Low-Sulfur Diesel Task
Force agreed that some low-sulfur diesel fuel is being imported to
Southeast Alaska, generally from the Puget Sound area, an October 13,
1997 letter to EPA from the Alaska Department of Environmental
Conservation, indicated that much of this ``low-sulfur'' diesel fuel
may not comply with the Federal sulfur requirements for motor vehicle
diesel fuel. Much of the ``low-sulfur'' fuel being imported is, in
fact, downgraded Jet-A kerosene. The letter explains that in Southeast
Alaska, jet fuel is a significant portion of the distillate market, but
tank storage is limited. Because of this storage limitation and the
very specific requirements for jet fuel, two of the three major
distributors surveyed by the Alaska Department of Environmental
Conservation purchase only Jet-A kerosene to supply all their customers
for aviation and other uses, including motor vehicles. But even if some
diesel fuel being imported to Southeast Alaska is actually low-sulfur
motor vehicle fuel rather than Jet-A kerosene, it would not be arctic
grade. In Southeast Alaska, the climate is mild enough to use the same
fuel that is refined for the Seattle area. Consequently, the fuel being
imported into Southeast Alaska either does not meet the Federal sulfur
requirements for motor vehicles, or is not arctic grade, or both.
The Low-Sulfur Diesel Task Force also investigated the potential
for importing low-sulfur motor vehicle diesel fuel from British
Columbia, which has required low-sulfur diesel fuel as of April 15,
1995.<SUP>5</SUP> The task force concluded that Canada does not appear
to be a significant source of low-sulfur highway diesel fuel to Alaska.
In support of this contention, Alaska's December 12, 1995 Petition for
Exemption stated that the British Columbia Ministry of Environment
reported supplies of low-sulfur diesel in British Columbia ``will
remain tight''. The Petition also stated that, based on discussions
with Alaska refiners, ``Canadian fuel does not seem to be available for
Alaska'', and one Alaska refiner reported that diesel fuel ``is sold
from Alaska into the Yukon Territory and northern British Columbia.''
The petition concludes that ``sufficient Canadian fuel is not available
to meet Alaska's diesel fuel needs for an arctic-grade low-sulfur
diesel fuel.''
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\5\ British Columbia is the Canadian Province directly north of
the State of Washington, and directly south and east of Southeast
Alaska. Directly north of British Columbia and east of the interior
of Alaska is the Canadian Province of Yukon, which does not require
low-sulfur motor vehicle diesel fuel.
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EPA believes, based on the information provided, that adequate
supplies of arctic-grade low-sulfur diesel fuel are not likely to be
available for import into Alaska. Even if U.S. refiners in the lower-48
states wanted to enter this market, they would have to confront the
similar problem that would be encountered by the Alaskan refiners of
changing or modifying the refineries to produce low-sulfur arctic-grade
motor vehicle diesel fuel, or Jet-A kerosene that meets the Federal
motor vehicle sulfur requirement. The Alaskan refiners, which produce
significant amounts of Jet-A kerosene, apparently have already
concluded that the small highway diesel market in Alaska is too small
for such changes and modifications to be economical. Economic
feasibility directly relates to availability, since EPA does not have
authority to require refiners to enter or remain in the motor vehicle
diesel fuel market in Alaska. Finally, Canada is not a likely source of
imports, because its refiners apparently do not have the capacity to
export low-sulfur diesel fuel to Alaska.
B. Cost of Importing Low-Sulfur Diesel Fuel
In letters to the Alaska Department of Environmental Conservation
of July, 1995 and October 30, 1995, the Clean Air Coalition suggested
that Alaskan refineries and fuel distributors have not documented that
there will be any increase to the consumer in complying with the low-
sulfur requirement, and that increasing imports is a viable alternative
to fuel produced in-state. The Clean Air Coalition noted that it costs
five cents a gallon to import the fuel, and companies already import a
significant amount of fuel to sell alongside fuel produced in-state. It
further noted that Southeast Alaska already imports low-sulfur diesel
from Puget Sound with no additional costs to consumers.
The 1995 staff report of the Low-Sulfur Diesel Task Force indicated
that diesel fuel being shipped to Southeast Alaska is not segregated in
shipping barges, and the same fuel that is sold for non-road uses, such
as heating oil, is also sold as motor vehicle diesel fuel. The
distributors buy the fuel that has the lowest cost. The report noted
that low-sulfur diesel fuel can vary from six cents more expensive to
three cents less expensive per gallon than high sulfur
fuel.<SUP>6</SUP>
---------------------------------------------------------------------------
\6\ For an independent ``snap-shot'' assessment of the price
difference between low and high sulfur diesel fuel, EPA looked at
one time-period, the weeks of August 1 through August 29, 1997. From
summary statistics published in ``The Oil Daily'' for that time
period, EPA calculated the difference between the average price of
low-sulfur diesel fuel and the average price of high-sulfur diesel
fuel. This calculated price difference was 0.79 and 1.16 cents per
gallon for the Gulf Coast and New York areas, respectively. The Oil
Daily also provides summary statistics for the Los Angeles area, but
not for high-sulfur fuel, which apparently is not distributed in Los
Angeles.
---------------------------------------------------------------------------
Alaska's December 12, 1995 Petition for Exemption indicates the
cost of transporting diesel fuel to Alaska depends on the destination.
In Southeast Alaska the transportation costs would not increase by
using low-sulfur diesel fuel because fuel is already imported to that
area. However, the shipping costs would increase for other areas which
currently obtain their fuel from in-state refineries. For example, the
shipping cost for low-sulfur diesel fuel from the Puget Sound area to
Anchorage would be approximately four cents per gallon, according to
one distributor.
In its September 3, 1997 submittal of information to EPA, the
Alaska Department of Environmental Conservation said it surveyed three
major distributors in Southeast Alaska. Two of these distributors
indicated they provide only low-sulfur diesel fuel (they downgrade Jet-
A kerosene to sell as diesel fuel), but it does not meet the 0.05
percent low sulfur motor vehicle diesel fuel requirement. Excluding
distillate sold as jet fuel, an estimated 23 percent of diesel fuel is
sold for on-road uses.<SUP>7</SUP> These distributors indicated the
price difference between the low-sulfur (Jet-A kerosene) and high-
sulfur diesel fuels vary from one to four cents per gallon.
Consequently, for these two distributors because of the lack of
separate storage capacity, the estimated price increase for non-motor
vehicle users in Juneau is $92,000 to $368,000 per year. In its October
13, 1997 letter to EPA, the Alaska Department of Environmental
Conservation verified that the ``low-sulfur'' diesel fuel being
imported into Southeast Alaska is Jet-A kerosene, which tends to be
more expensive than low-sulfur motor vehicle diesel fuel but does not
necessarily meet the Federal sulfur requirements.
---------------------------------------------------------------------------
\7\ EPA calculated that if jet fuel were included in the total
distillate sales, the estimate for on-road uses in Southeast Alaska
would be eight percent, which is consistent with earlier estimates
by the Alaska Department of Environmental Conservation that motor
vehicle use of total distillates is approximately five percent
statewide.
---------------------------------------------------------------------------
In evaluating the cost of importing low-sulfur diesel fuel, EPA has
[[Page 23246]]
considered two principle components of importation costs: (1) The cost
of the fuel to be imported, and (2) the shipping costs. These
components are discussed separately, as follows.
The cost of the fuel to be imported is difficult to assess because
of the limited information. The 1995 Staff Report of the Low-Sulfur
Diesel Task Force indicated that low-sulfur diesel fuel can vary from
six cents more expensive to three cents less expensive per gallon than
high-sulfur diesel fuel. Two major fuel distributors for Southeast
Alaska recently estimated the difference in cost between low-sulfur
diesel fuel and high-sulfur diesel fuel to be one to four cents per
gallon. The actual costs could be even higher. As indicated by these
two distributors, the low-sulfur diesel fuel they import is downgraded
Jet-A kerosene, which is arctic grade but does not necessarily meet the
low-sulfur motor vehicle requirements.
One would ordinarily presume that if the diesel fuel meeting the
low-sulfur requirements cost less, it would be the fuel of choice for
the importers. However, according to the October 13, 1997 letter from
the Alaska Department of Environmental Conservation, the distributors
import the more expensive Jet-A kerosene for all uses because limited
storage prevents segregation among the intended uses. Thus, while
importing low-sulfur motor vehicle diesel fuel could reduce the cost of
the fuel, this cost reduction would apparently be more than offset by
the increased cost associated with segregated storage. Further, that
fuel which is currently refined and distributed as low-sulfur motor
vehicle diesel fuel is not arctic grade.
Consequently, increased costs would be incurred if arctic grade
low-sulfur motor vehicle diesel fuel were required. Further, this does
not mean that refiners in the lower-48 states will produce the required
low-sulfur fuel, or if they did produce it that they would necessarily
sell it based on current market prices (see the previous Subsection A.
Availability of arctic-grade, low sulfur diesel fuel from out-of-state
refiners).
EPA understands that diesel fuel is currently shipped to Southeast
Alaska, primarily from the Puget Sound area. Thus, any cost increase
due to shipping low-sulfur diesel fuel to Southeast Alaska would be the
cost associated with segregating the low-sulfur motor vehicle diesel
fuel from the higher-sulfur diesel fuel designated for non-motor
vehicle uses. This can be accomplished either by separate tanks on the
shipping vessels, or by making separate trips for the low-sulfur diesel
fuel designated for motor vehicle use. EPA believes that this cost
would be either zero or minimal.
Increased shipping costs to other areas of Alaska may be more than
minimal. For areas that already receive imported distillate, current
shipping cost estimates are for shipments of non-segregated distillate,
of which only about five percent is intended for highway use. Similarly
as with Southeast Alaska, the low-sulfur requirement would require
either segregated or separate shipments for motor vehicle diesel fuel,
but EPA believes that this cost increase would be either zero or
minimal. For areas that are now served by in-state refineries, low-
sulfur diesel fuel for motor vehicles would have to be imported,
thereby adding shipping costs. The Alaska Clean Air Coalition noted
that it currently costs five cents a gallon to import fuel. One
distributor estimated a cost of four cents per gallon for shipping
imported fuel from Puget Sound to Anchorage. This analysis may be
purely academic, however, in refiners in the lower-48 states decide to
not produce the required low-sulfur arctic grade diesel fuel because of
the small motor vehicle diesel market in Alaska.
C. Costs of Storing and Distributing Low-Sulfur Diesel Fuel
The Alaska Center for the Environment, in a letter of June 19, 1996
to the EPA, commented that Canada experienced no increase in
distribution costs after requiring low-sulfur diesel fuel. This
information was reportedly obtained from a January 11, 1995 meeting
with the Alaska Department of Environmental Conservation. The
implication of this comment is that distribution costs projected for
low-sulfur diesel fuel in Alaska may be overstated.
The 1995 staff report of the Low-Sulfur Diesel Task Force indicated
that the increase in distribution costs for low-sulfur diesel fuel can
vary widely. For Southeast Alaska the increase in distribution cost
would likely be zero. For other areas of the state, three distributors
that provided data indicated a five, seven and twenty cents-per-gallon
increase in distribution costs for low-sulfur diesel fuel.
Similarly, the December 12, 1995 Petition for Exemption indicated
the cost increase would vary depending on the location. It indicated
that fuel segregation is the major contributor to distribution costs
because the highway diesel market is less than five percent of the
distillate market. Distributors ``cannot be expected'' to import and
supply low-sulfur distillate for the other 95 percent of the market.
According to the petition, distribution costs are likely to be higher
in Kodiak and other lower volume distribution locations, which would
have to recover the increased cost of tank and piping additions or
modifications over a small volume of fuel. One distributor in Kodiak
stated that its cost increase might be as high as 20 cents-per-gallon.
In contrast, one distributor in Anchorage indicated it would not have
to build a new tank for low-sulfur diesel, and reported it would have
no increase in distribution cost.
In its August 5, 1997 submittal to EPA, the Alaska Department of
Environmental Conservation estimated that if low-sulfur diesel fuel
were required for highway vehicles, even if only during the summer, the
distribution cost increases would range from five to twenty cents per
gallon. In its September 3, 1997 submittal of information to EPA, the
Alaska Department of Environmental Conservation said it surveyed three
major distributors in Southeast Alaska. One of these distributors
indicated it imports both high and low sulfur (downgraded Jet-A
kerosene) diesel fuel into Southeast Alaska, but it mixes the two
together because it does not have separate storage facilities. The
other two distributors indicated they provide only low-sulfur diesel
(downgraded Jet-A kerosene), but it does not meet the 0.05 percent low
sulfur diesel fuel requirement. Thus, if low-sulfur diesel fuel were
required for motor vehicles, these distributors would have to either
provide for separate storage, or purchase complying diesel fuel for all
uses.
In a January 27, 1998 telephone conversation, the Alaska Department
of Environmental Conservation indicated that cost is not the only
factor in considering expansion of fuel storage capacity. It cited an
example of the difficulties Mapco has had in expanding its storage
capacity at an Anchorage tank farm. Mapco has been trying
unsuccessfully for four years to get the necessary permits, but has not
been able to overcome the Alaska Department of Conservation
requirements, the coastal zone management requirements, and objections
by the adjacent residential neighborhood.
In its October 13, 1997 letter to EPA, the Alaska Department of
Environmental Conservation indicated that it is not ``completely
reasonable [to compare] British Columbia's experience with
implementation of low sulfur diesel, because British Columbia is less
remote and does not have the same climate as Alaska.'' The interior of
Alaska borders Yukon, and considering geography and climate, it would
be more appropriate to compare to Yukon's
[[Page 23247]]
experience. But Yukon does not require low-sulfur motor vehicle diesel
fuel.
Considering the available information, EPA believes that storage
and distribution costs would likely increase, and the extent would
depend on the area and the distributor. Those costs could likely range
from zero or minimal to very high (e.g., in Kodiak).
D. Alternative Fuel or Fuel Standard
In a letter of July 20, 1995 to the Alaska Department of
Environmental Conservation, the Clean Air Coalition proposed three
alternatives to a permanent statewide exemption to the low sulfur
diesel fuel requirement. The first suggested alternative is to exclude
Southeast Alaska from any exemption. This area already imports low-
sulfur diesel for transportation, power generation and home use from
Puget Sound with no additional cost to consumers. The second suggested
alternative is to require Alaska to import low-sulfur diesel in the
summer months only, and ``allow'' Alaska to use ``winter diesel'' in
the colder months. The third suggested alternative is to require Alaska
to use ``winter diesel'' year-round, even though the ``winter diesel''
does not ``fully meet Clean Air Act standards.'' It notes that Chevron
produces a ``winter diesel fuel'' with 0.03 percent sulfur content, and
other companies sell it with a sulfur content from 0.65 to 0.10
percent. EPA presumes that this ``winter diesel'' is Jet-A kerosene,
which meets the stringent Alaskan winter diesel fuel cloud point
specification of -56 deg. F, and consequently is commonly mixed with,
or used as a substitute for, No. 1 diesel fuel in Alaska.
In a letter of April 23, 1996 to the EPA, the Alaska Center for the
Environment proposed the same three alternatives to a permanent
statewide exemption of the low-sulfur diesel fuel requirement. The
letter also references the staff report of the Low-Sulfur Diesel Task
Force in noting that the sulfur content of Alaskan Jet-A kerosene
contains from 0.03 to 0.09 percent sulfur, and that requiring Jet-A
kerosene year-round would simply result in the importation of Jet-A
kerosene increasing from the current 13 percent to 21 percent.
Alternative 1: Exclude Southeast Alaska
In support of the alternative that Southeast Alaska be excluded
from any exemption, the Clean Air Coalition stated that Southeast
Alaska already imports low-sulfur diesel for transportation, power
generation and home use from Puget Sound with no additional cost to
consumers. In its August 5, 1997 submittal to EPA, the Alaska
Department of Environmental Conservation stated that diesel fuel for
all uses is imported to Southeast Alaska from the lower 48 states by
barge, and on-road and non-road diesel is not segregated. Currently,
market price determines whether high or low-sulfur diesel is
distributed. If low-sulfur diesel were required for highway use, either
separate storage may be needed to segregate the highway fuel, or
citizens using diesel for home heating would have to bear any
associated price increases for all the diesel fuel to meet the low-
sulfur requirement. In the latter case, the Alaska Department of
Environmental Conservation estimated that if a five cent per gallon
increase occurs, home heating costs could increase $430,000 per year.
In its September 3, 1997 submittal of information to EPA, the
Alaska Department of Environmental Conservation indicated it surveyed
three major distributors in Southeast Alaska. One of these distributors
indicated it imports both high and low sulfur (downgraded Jet-A
kerosene) diesel fuel into Southeast Alaska, but it mixes the two
together because it does not have separate storage facilities. The
other two distributors indicated they provide only low-sulfur diesel
(downgraded Jet-A kerosene) to sell as diesel fuel. These distributors
indicated the price difference between the low and high-sulfur diesel
fuels vary from one to four cents per gallon. In its October 13, 1997
letter to EPA, the Alaska Department of Environmental Conservation
clarified that these two distributors import only Jet-A kerosene
because jet fuel is a large portion of their market and they are unable
to segregate that fuel because of lack of storage facilities. Thus,
they purchase the generally more expensive Jet-A kerosene to supply all
users of distillate.
The Alaska Department of Environmental Conservation also raised an
equity issue. Southeast Alaska residents would be required to bear the
cost of any increases due to the low-sulfur requirements, while
residents in other areas of the state would be exempted. Finally, the
Department of Environmental Conservation stated that Southeast Alaska
does not have a major highway system--transport of goods and freight
between towns occurs by water or air.
After considering the issues raised, EPA concluded the expected air
quality benefits associated with excluding Southeast Alaska from the
exemption would be negligible or minimal, and EPA is concerned about
the potential for cost increases, not only for motor vehicle uses, but
also for other uses, as discussed below.
First EPA considered the impact of an exemption from the motor
vehicle diesel fuel sulfur requirements on air quality benefits in
Southeast Alaska. All parties generally agree that Southeast Alaska
already imports a low-sulfur fuel for some of its market. Also, the
portion of fuel that is used for motor vehicles is relatively small. To
the extent Southeast Alaska is currently importing low-sulfur diesel
fuel that already meets the Federal requirements for motor vehicles, no
additional air quality benefits would result from requiring low-sulfur
diesel for motor vehicle use. To the extent Southeast Alaska is
currently importing low-sulfur non-complying diesel fuel (e.g., Jet-A
kerosene with sulfur content above 0.05 percent by weight), minimal air
quality benefits would result from requiring that fuel to meet the 0.05
percent sulfur requirement. To the extent Southeast Alaska is currently
importing high-sulfur diesel fuel, requiring the use of low-sulfur
highway diesel fuel would likely result in a certain amount of reduced
per-vehicle emissions.
The only national ambient air quality standards nonattainment area
in Southeast Alaska is the Mendenhall Valley in Juneau for
PM10, where diesel truck exhaust, brake wear and tire wear
combined contribute less than one percent to the PM10
inventory.<SUP>8</SUP> By contrast, the largest sources of
PM10 in Mendenhall Valley are fugitive and windblown dust
which account for 89 percent of the annual inventory. This means that
the maximum reduction in PM10 that can be achieved by
totally eliminating all motor vehicle diesel emissions is only one
percent. Low-sulfur motor vehicle diesel fuel meeting the Federal
sulfur content requirement would eliminate only a portion of that one
percent. Consequently, EPA believes that the air quality benefits of
reducing motor vehicle diesel exhaust by requiring low-sulfur diesel
fuel for motor vehicles would be negligible. (For discussion on
localized environmental impacts see Subsection E: Local environmental
effects. Also, EPA is not addressing future requirements, including for
the new national ambient air quality standard for PM2.5, in
this proposed rule--see Subsection H: New National Ambient Air Quality
Standards).
---------------------------------------------------------------------------
\8\ ``PM10 Emission Inventories for the Mendenhall
Valley and Eagle River Areas,'' prepared for the U.S. Environmental
Protection Agency, Region X, by Engineering-Science, February 1988.
---------------------------------------------------------------------------
The Clean Air Coalition raised the issue that secondary air quality
benefits
[[Page 23248]]
of low-sulfur highway diesel fuel could be significant. Because
distillate fuel shipments in Southeast Alaska are generally not
segregated by end-use, a requirement for low-sulfur highway diesel fuel
might spill over into the distillates transported for non-highway uses,
such as for heating and electrical generation.
EPA agrees that there could be secondary air quality benefits to
requiring low-sulfur diesel fuel in Southeast Alaska, however, EPA does
not know the extent of that potential impact. If suppliers and
distributors in Southeast Alaska elect in-full or in-part to not
segregate diesel fuel by end-use in response to the motor vehicle low-
sulfur diesel fuel requirement, except possibly for Jet-A kerosene,
they would have to supply the more restrictive low-sulfur motor vehicle
diesel fuel for the non-motor vehicle uses. The air quality benefits--
primarily reduced particulate emissions--would depend on the change in
proportion of the non-motor vehicle diesel fuel that would meet the
motor vehicle low-sulfur diesel fuel requirement, the change in sulfur
content between the diesel fuel that is currently distributed and that
which would be distributed under a motor vehicle low-sulfur diesel fuel
requirement, and the change in emissions between the current and the
motor vehicle low-sulfur diesel fuel for the various non-motor vehicle
diesel combustion sources. Such diesel sources include, but are not
limited to, utility diesel electrical power generators, small diesel
electrical power generators (e.g., for construction and remote sites,
backup generators for businesses, hospitals and homes, etc.),
construction and farm vehicles (e.g., road graders, bull-dozers, farm
tractors, etc.), construction and farm equipment (e.g., air
compressors, harvesters, etc.) and heaters (e.g., industrial boilers,
home furnaces, kerosene heaters, etc.).
Since fugitive and windblown dust account for 89 percent of the
annual PM10 inventory, the maximum that total emissions from
all petroleum products (including diesel fuel, bunker fuel, fuel oil,
kerosene, gasoline, etc.) can contribute is only 11 percent of the
annual inventory. Assuming a best case scenario in which all petroleum
fuels (not just the motor vehicle diesel fuels) were to meet the
Federal sulfur content requirement for motor vehicle diesel fuel, only
a portion of the 11 percent of the annual inventory of PM10
would be eliminated.
Considering the cost impact of requiring low-sulfur highway diesel
fuel, market price and storage facilities determines whether high or
low-sulfur diesel is distributed to Southeast Alaska. To the extent
Southeast Alaska is currently importing low-sulfur diesel that meets
the Federal sulfur content requirement for motor vehicle diesel fuel,
no additional costs would result from requiring low-sulfur diesel for
motor vehicle use. To the extent Southeast Alaska is currently
importing diesel fuel that does not meet the Federal sulfur content
requirement, EPA assumes that the current market results in the lowest
overall fuel cost and that higher overall fuel costs would result from
requiring low-sulfur diesel for motor vehicle use. Even though low-
sulfur motor vehicle diesel fuel (non-arctic grade) would normally be
priced less than Jet-A kerosene in the typical market, apparently this
lower cost would not offset the anticipated cost of modifying or
expanding the available storage facilities in Southeast Alaska to
provide for segregated storage. Consequently, the low-sulfur
requirement for motor vehicle diesel fuel is likely to result in higher
fuel costs.
These higher fuel costs would likely be passed on to consumers. If
segregated storage is provided only for Jet-A kerosene and not for
motor vehicle fuel, citizens using the unsegregated low-sulfur motor
vehicle fuel for home heating, electricity and other non-road uses
would also have to bear the associated price increase. Because non-road
applications of diesel fuel use significantly higher quantities of the
fuel,<SUP>9</SUP> this overall cost to homeowners and businesses could
be significant.
---------------------------------------------------------------------------
\9\ According to its September 3, 1997 submittal to EPA, the
Alaska Department of Environmental Conservation stated that the two
major distributors in Southeast Alaska that they surveyed and that
import only Jet-A kerosene indicated on-road uses of diesel fuel
account for only 23 percent of their diesel fuel sales, excluding
that which is intended for use by jets. Thus, excluding use by jets,
non-road uses of diesel fuel account for more than three times the
volume of diesel fuel that is used on-road.
---------------------------------------------------------------------------
Because of the lack of significant air quality and cost benefits of
excluding Southeast Alaska from the exemption, EPA has rejected this
alternative. However, EPA may revisit this alternative in the future if
the exemption that is promulgated subsequent to this proposal is no
longer appropriate under Sec. 325 based on consideration of the factors
relevant under that section.
Alternative 2: Exclude the Summer Seasons From the Exemption
This alternative is designed to achieve some benefits for Alaska by
requiring the use of low-sulfur diesel fuel for at least part of the
year, but to avoid the unique requirements and constraints associated
with Alaska's arctic climate during the winter. In its August 5, 1997
submittal to EPA, the Alaska Department of Environmental Conservation
stated that importing low-sulfur diesel fuel only during the summer
months is problematic. Alaskan refiners cannot produce low-sulfur
diesel fuel and thus would be cut out of the market, and distributors
would need additional storage to segregate the low-sulfur diesel fuel,
even though segregation might only be necessary for part of the year.
EPA previously concluded in this proposed rule that requiring low-
sulfur highway diesel fuel in Alaska is not expected to have a
significant impact on ambient PM10 or CO levels in Alaska,
or Alaska's prospects for attainment with the national ambient air
quality standards (see Subsection IV.B: Climate, Meteorology and Air
Quality). Consequently, requiring low-sulfur highway diesel fuel in
Alaska for only part of the year would also not be expected to have a
significant impact on ambient PM<INF>10 </INF>or CO levels in Alaska,
or Alaska's prospects for attainment with the national ambient air
quality standards. (For discussion on localized environmental impacts--
see Subsection E: Local environmental effects. EPA is not addressing
future requirements in this proposed rule, including for the new
national ambient air quality standard for PM2.5--see
Subsection H: New National Ambient Air Quality Standards.)
However, costs would arise from either segregated shipping, storage
and distribution for the diesel fuel intended for highway use during
the summer season, or refining costs associated with producing
unsegregated low-sulfur distillate for all distillate uses, except
possibly for jet fuel, in Alaska during the summer season. This cost is
not well defined, but based on the limited available information, seems
to range from zero to significant depending on the specific location
within Alaska. (See Section IV.C: Economic Factors and Section V.C:
Costs of Storing and Distributing Low-Sulfur Diesel Fuel.) Also, there
are non-economic barriers to expanding storage capacity (see Subsection
V.C: Costs of Storing and Distributing Low-Sulfur Diesel Fuel).
The cost of expanded storage capacity would have to be borne not
only by distributors and wholesalers, but also retailers, individual
businesses that store distillate fuels for their own use, and
individuals that store distillate fuels for their own use. Alaska's
unique climate and geographical conditions cause supply disruptions,
especially during the winter season. To account for the supply
disruptions, communities, businesses, and individuals in Alaska,
perhaps except in Southeast Alaska,
[[Page 23249]]
need to stock winter supplies during the summer and transition season.
Consequently, they are taking delivery of summer and winter supplies at
the same time during part of the year. Additional storage would be
needed to segregate the regulated low-sulfur fuel used in the summer
season from the unregulated higher-sulfur fuel needed for the winter
season. As noted earlier in this proposed rule, low-sulfur diesel fuel
as currently produced does not meet the ``cloud point'' specification
required for Alaska's cold temperatures, and if used during the winter
season, would significantly affect engine start-up and operation.
Other existing seasonally driven fuels programs (particularly in
the lower 48 states) such as oxygenated gasoline for control of carbon
monoxide (CO) during winter seasons and low-volatility gasoline for
control of volatile organic compounds (VOCs) during summer seasons,
rely on refineries and distribution systems that are oriented
primarily, or in large part, to supplying gasoline for motor vehicles.
This distribution system has adequate storage for transitioning between
seasons, and since supply disruptions generally do not occur in the
lower 48 states, there is no need to supply and stock fuel for the
winter season.
Another confounding factor in Alaska is only less than five percent
of Alaska's refining and distribution systems are oriented to supplying
highway diesel fuel, and Alaska's highway diesel fuel is not segregated
from distillates intended for other uses, such as heating and power
generation. Assuming that distributors would supply low-sulfur diesel
only for motor vehicle use under this alternative, the distribution and
storage costs would be spread out among only one to two percent of the
distillate flowing through the system. <SUP>10</SUP> Assuming that
distributors would supply low-sulfur diesel for all distillate uses in
the summer season under this alternative, except possibly jet fuel, the
higher cost of the low-sulfur diesel fuel would be forced on the non-
highway users of the distillate, as well as the additional cost of
segregating that fuel from the winter supplies.
---------------------------------------------------------------------------
\10\ The summer season in Alaska is approximately three to four
months duration. Since motor vehicle use of distillate is less than
five percent, only one to two percent of the distillate would then
be used for motor vehicles during the summer season.
---------------------------------------------------------------------------
Another consideration is the administrative and enforcement burden
of such a seasonal program. The need to stock winter fuel during the
summer and transition seasons might conflict with a regulatory
requirement that only low-sulfur diesel be sold for highway use during
the summer season. Any regulatory accommodation to allow for stocking
of fuel for the winter would complicate enforcement of the summer-time
requirement. For an enforcement agency to determine whether a violation
has occurred and to subsequently prosecute the violator, the agency
would have to determine and subsequently prove that a summer-time sale
or distribution of non-complying distillate is intended for highway use
rather than for other uses such as heating or power generation, and
that it is intended for use during the summer season.
For all of the above reasons, EPA rejects the alternative of
requiring low-sulfur highway diesel fuel only in the summer. However,
EPA may revisit this alternative in the future if the exemption that is
promulgated subsequent to this proposal is no longer appropriate under
Sec. 325 based on consideration of the factors relevant under that
section.
Alternative 3: Require ``Winter Diesel'' Year-Round
This alternative is intended to take advantage of the generally
lower sulfur content of Jet-A kerosene and its ability to serve as an
arctic-grade motor vehicle diesel fuel during the winter season. The
staff report of the Low-Sulfur Diesel Task Force states that Jet-A
kerosene has a sulfur content specification of 0.3 percent. It tends to
have lower sulfur content than standard diesel fuel, but generally does
not meet the regulatory requirement for low-sulfur highway diesel of
0.05 percent maximum. For example from the high-sulfur North Slope
crude, Mapco produces Jet-A kerosene with 0.09 percent sulfur. As the
North Slope crude supplies dwindle over time, the sulfur content of
that crude is expected to increase. Chevron imports Jet-A kerosene with
0.03 percent sulfur.
EPA previously concluded in Section IV.B. of this proposed rule
that requiring low-sulfur highway diesel fuel in Alaska is not expected
to have a significant impact on ambient PM10 or CO levels in
Alaska, or Alaska's prospects for attainment with the national ambient
air quality standards. Since Jet-A kerosene has a sulfur content
requirement that is less stringent than that of motor vehicle diesel
fuel, requiring Jet-A kerosene in Alaska would also have little or no
impact on Alaska meeting the national ambient air quality standards.
Another disadvantage to this alternative is the potential for
higher costs of fuel for heating and power generation in areas not
served by jet traffic. EPA believes that jet fuel generally costs more
than regular diesel fuel. <SUP>11</SUP> Except when used during the
winter for general distillate fuel uses, Jet-A kerosene may be
segregated from regular diesel fuel in some areas served by jet traffic
because of the unique requirements for jet fuel and its higher cost.
---------------------------------------------------------------------------
\11\ EPA looked at the weeks of August 1 thru August 29, 1997
of ``The Oil Daily'' and calculated the difference between the
average price of low-sulfur diesel fuel and the average price of Jet
fuel. For this time period, jet fuel cost more than low-sulfur
diesel fuel by 2.55, 2.78, and 2.00 cents per gallon for the Gulf
Coast, New York, and Los Angeles areas, respectively.
---------------------------------------------------------------------------
However, in areas not served by jet traffic, EPA assumes that the
higher cost Jet-A kerosene is not typically used, except possibly
during the winter season as an arctic-grade distillate. This
alternative of requiring Jet-A kerosene for motor vehicles would result
in either the higher cost of segregated shipping, storage and
distribution, which would be passed on to the consumers of the Jet-A
kerosene for use in motor vehicles, or the higher cost of the Jet-A
kerosene for unsegregated shipping and storage, which would be passed
on to consumers of the fuel for all distillate uses, including heating
and power generation. As previously addressed, the increased cost of
segregated shipping, storage and distribution varies widely depending
on the specific location within the state. Based on some estimates by
the Alaska Department of Environmental Conservation, the costs of
segregated shipping, storage and distribution for non-road use could be
significant.
For all of the above reasons, EPA rejects the alternative of
requiring Jet-A kerosene year-round.
E. Local Environmental Effects
In a letter to the Alaska Department of Environmental Conservation
of July 20, 1995, the Alaska Clean Air Coalition stated that Anchorage
has a significant problem with a wintertime ``brown cloud'' when snow
covers the ground, although it indicated that it hadn't yet studied the
components of that ``brown cloud.'' It also pointed out that the
proportion of total particulates that are caused by diesel engines are
expected to rise over the next 20 years as other sources of pollution
decline, and that diesel particulate emissions from motor vehicle
engines increase to twice the federal standard for motor vehicle
engines if high-sulfur fuel is used with engines that are equipped with
catalytic converters.
The Alaska Clean Air Coalition indicates it is concerned not only
with the local health impacts of PM10, but also that of
PM2.5, at levels below the national air quality standards.
It
[[Page 23250]]
submitted a copy of a 1996 study <SUP>12</SUP> showing correlation
between respiratory health effects in Anchorage and CO and
PM10 at ambient levels below the national ambient air
quality standards. This study showed that winter concentrations of CO
were significantly associated with bronchitis and upper respiratory
illness, and with automobile exhaust emissions. In a March 11, 1997
letter to EPA, the Alaska Clean Air Coalition references the above
study and indicated that ``local officials'' have found a highly
significant correlation between CO and PM2.5, but no
significant relationship between PM10 and PM2.5.
Besides the health problems associated with PM10, which in
Anchorage typically comes from reentrained road materials, ``healthy''
Anchorage workers and their families have more bronchitis and upper
respiratory infection during carbon monoxide ``episodes'', which are
linked to vehicle exhaust during the winter.
---------------------------------------------------------------------------
\12\ ``Particulate Air Pollution and Respiratory Disease in
Anchorage, Alaska'', Gordian, Ozkaynak, Sue, Morris, and Spengler,
Environmental Health Perspectives, vol. 104, number 3, March 1996.
---------------------------------------------------------------------------
In a June 19, 1996 letter to the EPA, the Alaska Clean Air
Coalition stated that it believes some neighborhoods have much higher
diesel exposure than the existing emissions inventory indicates.
Attached to this letter were April 25, 1994 and August 11, 1995 letters
to the Alaska Department of Environmental Conservation, and a written
version of an oral testimony at the Anchorage School District Budget
Hearing Meeting of January 19, 1995, in which the University Area
Community Council of Anchorage stated that it had received complaints
about diesel fumes. Residents near a transportation facility, at which
diesel buses are started early in the mornings and warmed up for
lengthy periods of time, complained of diesel fumes entering their
homes prior to 6:00 am during clear, cold temperature inversion days.
EPA has concluded that low-sulfur diesel fuel would not
significantly mitigate localized impacts in Alaska, and therefore, has
determined that the issue of localized impacts does not form a basis
for denying Alaska's Petition for exemption. Considering localized
impacts on the scale of a town or city, EPA already concluded in
Section IV.B. of this Proposed rule that the sulfur content of diesel
fuel is not expected to have a significant impact on ambient
PM10 or CO levels in Alaska, or Alaska's prospects for
attainment with the national ambient air quality standards for
PM10 or CO. This is because of the minimal contribution by
motor vehicles, and likely insignificant contribution of petroleum fuel
combustion by non-motor vehicle sources, to PM10 in areas
with PM10 attainment problems, and the insignificant effect
of diesel fuel sulfur content on CO emissions.
Considering localized impacts on the micro-scale level of one
intersection or several blocks, EPA believes there could be some
impacts, such as the example presented by the Alaska Clean Air
Coalition. While EPA believes that such impacts might range from
minimal to significant in these micro scale areas, EPA also believes
that requiring low-sulfur diesel will not effectively mitigate the
exposure risk to the elevated ambient levels of diesel exhaust in these
areas.
Even if EPA decided to require low-sulfur diesel fuel for motor
vehicles (that is, to deny Alaska's Petition for Exemption), any
existing micro-scale hot spot and its associated total health impact
would substantially be unaffected. While the localized ambient
PM10 and PM2.5 levels might be mitigated to some
extent by the use of low-sulfur diesel fuel, the remaining levels of
localized ambient PM10 and PM2.5 would still be a
health concern. Further, the localized ambient levels of CO and other
toxics would not be mitigated by the use of low-sulfur diesel fuel.
Alternatively, reducing the amount of total diesel exhaust in these
micro-scale areas would significantly reduce the total health impact.
Localized hot spots typically result from high rates of emissions
concentrated in a small area, such as emissions from a large number of
vehicles in one intersection or parking area, over a time frame that is
short enough to not allow for effective dispersal of those emissions
under the prevailing meteorological conditions. This underlying problem
can be most effectively addressed by reducing the number of vehicles
(or number of vehicles running) in the localized area, or by reducing
the amount of time the vehicles spend (or the time the vehicles spend
running) in the localized area. Such mitigation measures might include
traffic control measures to limit, or bans to eliminate, vehicle
traffic in those areas, or restrictions on engine idling while parked.
Such measures are most effectively addressed at the local level by
the communities, businesses and local and state governments. In the
example provided by the Alaska Clean Air Coalition, the October 13,
1997 letter to EPA from the Alaska Department of Environmental
Conservation indicates that the Municipality of Anchorage is working on
addressing this issue.
It has located monitors in the vicinity and it is working with
local agencies to explore options to help alleviate or resolve the
problem. In addition, some changes were made to the ventilation system
of the building that had the greatest number of complaints.
F. Year 2004 and Later Engines
On October 21, 1997 (62 FR 54693), EPA promulgated new combined
emission standards for HC and NOX for 2004 and later heavy-
duty diesel motor vehicle engines. These standards are more stringent
than the 1998 to 2003 individual emissions standards for HC and
NOX, and are expected to achieve a 50 percent reduction in
NOX emissions. A secondary effect of these standards may be
a decrease in particulate emission levels. As with engines currently
marketed, the engine manufacturers are expected to design their future
engines and emission control systems considering the diesel fuel sulfur
content requirement that became effective in 1993 (no greater than 0.05
percent sulfur by weight). However, EPA subsequently permanently
exempted that requirement in Alaska for areas not served by the Federal
Aid Highway System (FAHS), and temporarily exempted that requirement
for areas served by the FAHS until October 1, 1998; thus, old and
current technology engines have been, and are now, operating in Alaska
using higher sulfur diesel fuel. New technology (low NOX)
engines will be operated using higher sulfur diesel fuel in the areas
not served by the FAHS, because of the existing permanent exemption. If
EPA now grants Alaska a permanent exemption from the diesel fuel low-
sulfur requirement in the areas served by the FAHS, the new technology
(low NOX) engines in Alaska would be operated on diesel fuel
with a higher sulfur content throughout the state. One engine
manufacturer cited three concerns if this situation were to occur.
The first concern of operating the new technology (low
NOX) engines using high-sulfur fuel is the same concern as
operating current technology engines on high-sulfur fuel: condensation
of sulfuric acids on the cylinder walls of the engine, thereby causing
increased piston ring and cylinder liner wear. This increased wear
would require more frequent replacement of the piston rings and
cylinder liners, and more frequent oil change intervals. If the piston
rings and cylinder liners are not replaced often enough, the sulfuric
acids could migrate past the piston rings into the crankcase. This
would cause increased wear of other critical engine
[[Page 23251]]
components, such as the main bearings. This situation would require
more frequent major engine overhauls.
The second concern of operating new technology (low NOX)
engines using high-sulfur diesel fuel is its impact on exhaust gas
recirculation (EGR) systems. EGR systems are likely to be extensively
used on the engines designed to meet the 2004 and later NOX
requirement. Without EGR, sulfur in the exhaust is not a significant
problem because the temperature of the exhaust system is typically high
enough to prevent condensation of the sulfuric acids. However, if some
of the exhaust is directed back into the engine intake, which is the
strategy of EGR systems, condensation of the sulfuric acids could occur
on the walls of the EGR components and the air intake system. It may be
possible to prevent sulfuric acid damage to the EGR system through the
use of exotic materials in the EGR components, which can withstand the
sulfuric acids. Alternatively, increased maintenance could mitigate the
impact of the sulfuric acids by periodically replacing the components
of the EGR and air intake system most susceptible to acid damage.
The third concern of operating new (low NOX) technology
engines using high-sulfur fuel is its impact on exhaust after-treatment
emission control devices, such as catalytic converters. Sulfur in fuel
can render the catalyst ineffective, allowing exhaust pollutants to
pass through the catalyst.
Catalytic converters may be used for NOX control on some
engines designed to meet the 2004 and later emission standards,
although such catalysts have not yet been perfected for use on heavy-
duty diesel engines. If they are perfected and used, and if EPA grants
Alaska an exemption to the low-sulfur diesel fuel requirement, they
would likely be rendered ineffective on those engines operated in
Alaska using high-sulfur diesel fuel. This would impact the
NOX and particulate emission levels produced by those
engines in Alaska, but would not likely affect the operation or
durability of those engines. Increased NOX emissions are not
an issue in Alaska, since Alaska has no areas in non-attainment with
the NAAQS for ozone. While Alaska does have two designated non-
attainment areas for PM10, diesel-fueled motor vehicles
contribute less than one percent to the PM10 emissions in
those areas.
In conclusion, while using higher-sulfur diesel fuel in new
technology (low-NOX) diesel engines may increase certain
maintenance costs for owners and operators of those engines, depending
on the engine-specific technology and materials used, EPA believes that
those potential costs would be mitigated to some extent by the lower
cost of the higher-sulfur diesel fuel and would be much less than the
total potential costs of requiring low-sulfur diesel fuel in Alaska.
Further, EPA believes that the potential air quality benefits that
would be forgone by allowing the use of higher-sulfur diesel fuel in
new technology (low NOX) engines are insignificant in
Alaska. Therefore, based on the concerns about operating new technology
(low NOX) engines on higher sulfur diesel fuel, EPA
concludes that granting Alaska's petition is appropriate under section
325.
G. Manufacturers Emissions Warranty and Recall Liability
The Engine Manufacturers Association (EMA) submitted comments on
April 10, 1996, to the docket for previous Federal Register Notices
related to Alaska's Petition for Exemption (this Proposed rule uses
that same docket), and to EPA concerning warranty and recall liability.
The EMA stated that 1994 and later heavy-duty diesel engines that are
designed to meet the 1994 emissions standards with the use of low-
sulfur diesel fuel, and which are operated on high sulfur diesel fuel,
will not comply with those 1994 emission standards. Consequently, if
EPA grants Alaska an exemption from meeting the sulfur requirement for
highway diesel fuel, EPA should also include a corresponding exemption
for heavy-duty diesel engine manufacturers and the users of the
vehicles in which these engines are placed. The heavy-duty diesel
engine manufacturers should be exempted from any liability for ensuring
that their 1994 and later model year product lines meet the 1994 and
later model year emission standards for engines sold and used in
Alaska. They should also be exempted from the warranty requirements of
secton 207 of the Clean Air Act, and from liability (including fines
and recalls) for any engine affected by the fuel exemption. Users of
vehicles in which 1994 and later model year heavy-duty engines are
placed should be exempted from tampering liability in the exempted
territory. Finally, the exemption should allow either the continued use
of 1991 type heavy-duty diesel engine technology or the use of 1994
type heavy-duty diesel engines with the after-treatment device removed.
In support of its position, the EMA offered the following
explanation. In promulgating the 1994 and later heavy duty engine
emission standards, EPA recognized that, for several reasons, a
reduction in diesel fuel sulfur content was required by the engine
manufacturers in order to enable their engines to meet the 1994 0.10 g/
bhp-hr particulate emission standard. First, fuel sulfur contributes to
diesel engine emissions. Approximately two percent of the sulfur in the
fuel is directly emitted as sulfate particulates, which cannot be
controlled by engine modifications since the combustion process does
not remove any sulfur or change its form into a non-particulate
substance. Second, catalyzed after-treatment devices are much more
effective in the removal of the soluble organic fraction of
particulates than non-catalyzed devices. However, some catalysts react
with the SO2 in the exhaust and form additional sulfates,
such that total particulates have been found to be higher with an
oxidation catalyst or a catalyzed trap than without such after-
treatment device when high-sulfur diesel fuel is used. Third, prolonged
use of high-sulfur diesel fuel in vehicles equipped with oxidation
catalysts will render the catalytic device inoperative, and thus impair
the emissions control equipment. There is also a concern that using a
high sulfur content fuel over a long period of time may have a tendency
to cause plugging of ceramic monolith-type filters, which could lead to
more serious engine malfunction and warranty claims.
On October 9, 1996, EPA received a similar comment on behalf of the
EMA. In this comment, the EMA concerns are reiterated, and EPA is urged
to provide a corresponding exemption to the Alaska exemption for
catalyzed engines that would allow the owners to remove the catalysts,
allow the manufacturers to sell the engines without the catalyst
installed, and limit the manufacturer's obligation to warrant the
emissions performance of such engines. The comment states that vehicle
owners are already experiencing engine failures directly resulting from
catalyst plugging, and this problem will be worse in cold weather. The
comment also argues that in areas where high sulfur diesel fuel is
permitted, the owners of catalyzed engines are not achieving the
particulate matter reductions for which their engines are designed, and
it makes no sense for EPA to require the costly emission technology
that actually has an adverse environmental impact.
In its August 5, 1997 submittal to EPA, the Alaska Department of
Environmental Conservation noted that it had recent discussions with
industry. Those discussions indicated that some vehicles have been
experiencing problems at extreme cold temperatures on the North Slope,
but industry
[[Page 23252]]
attributes these problems to temperature and not the sulfur content of
the fuel.
Information collected by EPA from several heavy-duty engine
manufacturers demonstrates that catalyst plugging is mainly a cold
temperature problem and not a high-sulfur fuel issue. For example,
Cummins Engine Company attests that plugging is more a function of cold
temperature operation than it is of fuel sulfur levels. Additionally,
data from other heavy-duty engine manufacturers further supports this
statement. The EPA is also aware that the majority of the plugged
catalyst problems have been eliminated. A letter to EPA of September
19, 1997, on behalf of the EMA, indicated that the immediate problems
that led to EMA's request for possible enforcement discretion regarding
the removal of catalytic converters because of the plugging problem
have been resolved. However, EMA and its members continue to ``have
concerns regarding the use of high-sulfur fuel.''
Accordingly, EPA sees no need for an exemption that allows the
removal of catalysts in the field, or that permits manufacturers to
introduce into commerce catalyzed-engines without catalysts, or that
limits a manufacturer's obligation to warrant the emissions performance
of an engine.
H. New National Ambient Air Quality Standards
EPA has recently promulgated more stringent national ambient air
quality standards (NAAQS) for ozone and particulate matter. However,
EPA has not yet published guidance for implementation of those
standards, and EPA does not have the air quality monitoring data for
Alaska by which to base its likely attainment status, especially for
PM2.5. Consequently, it is not possible for EPA to address
the impact of today's proposed rule on the ability of Alaska to attain
the new NAAQS. EPA is therefore setting aside the issue of attainment
with the new NAAQS in today's rule. EPA reserves the right to revisit
this issue in the future, after public notice and comment, if the
exemption is no longer appropriate under section 325 based on
consideration of the factors relevant under that section.
I. Status of Certain Marine Highway Communities
In granting both a permanent and a temporary exemption in its March
22, 1994 Notice, EPA distinguished between those areas served by the
Federal Aid Highway System and those not served by the Federal Aid
Highway System. Areas not served by the Federal Aid Highway System were
deemed to be remote areas and qualified for the permanent exemption.
Areas served by the Federal Aid Highway System, including the Marine
Highway System, were qualified only for the temporary exemption. In
letters of February 9, 1995 and April 12, 1995, the Alaska Department
of Environmental Conservation requested that EPA consider certain
communities served by the Marine Highway System, and one served only by
a barge line, on the Alaska Peninsula, Kodiak Island and the Aleutian
Islands to be remote communities and subject to the permanent
exemption. It indicated that these communities have few vehicles (all
but three have an average daily traffic of 499 vehicles or less) and
highway diesel fuel sales amount to only a small fraction of total
diesel fuel sales (e.g., only about one percent or less). EPA decided
to not address this issue in today's proposed rule because today's
proposed rule to effectively grant a statewide permanent exemption
makes this issue moot. However, if EPA reconsiders or withdraws its
decision to grant a permanent exemption for areas served by the Federal
Aid Highway System, this issue may need to be addressed at that time.
VI. Decision for Permanent Exemption
In this notice, the Agency is proposing to grant a permanent
exemption from the diesel fuel sulfur content requirement of 0.05
percent by weight to those areas in Alaska served by the Federal Aid
Highway System. For the same reasons, the Agency also is proposing to
grant a permanent exemption from those provisions of section 211(g)(2)
<SUP>13</SUP> of the Act that prohibit the fueling of motor vehicles
with high-sulfur diesel fuel. Sections 211(g) and 211(i) both restrict
the use of high-sulfur motor vehicle diesel fuel.
---------------------------------------------------------------------------
\13\ This subsection makes it unlawful for any person to
introduce or cause or allow the introduction into any motor vehicle
of diesel fuel which they know or should know contains a
concentration of sulfur in excess of 0.05 percent (by weight). It
would clearly be impossible to hold persons liable for misfueling
with diesel fuel with a sulfur content higher than 0.05 percent by
weight, when such fuel is permitted to be sold or dispensed for use
in motor vehicles. The proposed exemptions would include exemptions
from this prohibition, but not include the prohibitions in section
211(g)(2) relating to the minimum cetane index or alternative
aromatic levels.
---------------------------------------------------------------------------
Further, consistent with the March 22, 1994 Notice of Final
Decision (59 FR 13610), dyeing diesel fuel to be used in nonroad
applications will be unnecessary in Alaska as long as the diesel fuel
has a minimum cetane index of 40. The motor vehicle diesel fuel
regulations, codified at 40 CFR 80.29, provide that any diesel fuel
which does not show visible evidence of the dye solvent red 164 shall
be considered to be available for use in motor vehicles and subject to
the sulfur and cetane index requirements. The Alaska Department of
Environmental Conservation and various refiners in Alaska have
indicated to EPA that all diesel fuel manufactured for sale and
marketed in Alaska, for use in both motor vehicle and nonroad
applications, meets the minimum cetane requirement for motor vehicle
diesel fuel.
Today's proposed rule would exempt diesel fuel in Alaska from the
sulfur requirement. Therefore, as long as the diesel fuel in Alaska has
a minimum cetane index of 40, dyeing diesel fuel to be used in nonroad
applications will be unnecessary in Alaska. However, in the event high-
sulfur diesel fuel is shipped from Alaska to the lower-48 states, it
would be necessary for the shipping facility to add dye to the
noncomplying fuel before it is introduced into commerce in the lower-48
states. In addition, supporting documentation (e.g., product transfer
documents) must clearly indicate the fuel may not comply with the
sulfur standard for motor vehicle diesel fuel and is not to be used as
a motor vehicle fuel. Conversely, EPA will not require high-sulfur
diesel fuel to be dyed if it is being shipped from the lower-48 states
to Alaska, but supporting documentation must substantiate that the fuel
is only for shipment to Alaska and that it may not comply with the
sulfur standard for motor vehicle diesel fuel.
EPA will assume that all diesel fuel found in any state, except in
the state of Alaska, is intended for sale in any state and subject to
the diesel fuel standards, unless the supporting documentation clearly
substantiates the fuel is to be shipped only to Alaska. The
documentation should further clearly state that the fuel may not comply
with the Federal diesel fuel standards. If such product enters the
market of any state, other than Alaska (e.g., is on route to or at a
dispensing facility in a state other than Alaska), and is found to
exceed the applicable sulfur content standard, all parties will be
presumed liable, as set forth in the regulations. However, EPA will
consider this evidence in determining whether a party caused the
violation.
With regard to the storage of diesel fuel in any state other than
Alaska, a refiner or transporter will not be held liable for diesel
fuel that does not comply with the applicable sulfur content standard
and dye requirement if it can show that the diesel fuel is truly
[[Page 23253]]
being stored and is not being sold, offered for sale, supplied, offered
for supply, transported or dispensed. However, once diesel fuel leaves
a refinery or transporter facility, a party can no longer escape
liability by claiming that the diesel fuel was simply in storage.
Although diesel fuel may temporarily come to rest at some point after
leaving a refinery or transporter facility, the intent of the
regulations is to cover all diesel fuel being distributed in the
marketplace. Once diesel fuel leaves a refinery or shipping facility it
is in the marketplace and as such is in the process of being sold,
supplied, offered for sale or supply, or transported.
The basis for today's proposed rule is that compliance with the
motor vehicle sulfur requirement in Alaska for areas served by the
Federal Aid Highway System is unreasonable because it would create an
economic burden for refiners, distributors and consumers of diesel
fuel. This economic burden is created by unique meteorological
conditions in Alaska and a set of unique distillate product demands in
the state. As a result of these conditions, it is reasonable to not
mandate that low-sulfur motor vehicle diesel fuel be available for use
in Alaska for areas served by the Federal Aid Highway System.
In the August 19, 1996 Notice of Final Decision (61 FR 42812), the
EPA believed that a 24-month continuation of the temporary exemption
for areas served by the Federal Aid Highway System from the diesel fuel
sulfur content requirement was reasonable and appropriate so that the
Agency could consider recent comments on the state's petition. A
permanent exemption was not appropriate at that time because EPA had
not yet verified all relevant information and comments submitted by
other interested parties.
Alaska's December 12, 1995 petition included a compilation of
information provided by a Task Force (in which an EPA representative
participated) that was established after the February 12, 1993 petition
to further evaluate the conditions as described in that earlier
petition. These conditions included: the availability of arctic-grade
low-sulfur diesel fuel from out-of-state refiners, the costs associated
with importing the fuel, and the costs of storing and distributing the
fuel to areas on the highway system. The conditions and factors that
were identified in the initial petition were expanded upon in the task
force review. At that time the Agency believed there were several
issues that merited further consideration prior to making a final
decision to act on the state's request for a permanent exemption. These
issues included consideration of an alternative fuel standard or fuel,
local environmental effects, manufacturers emissions warranty and
recall liability, and the impact of EPA possibly tightening motor
vehicle emission standards for model year 2004 and later heavy-duty
engines (which EPA subsequently promulgated in 1997).
The comments and other issues that are summarized in this notice
were subsequently considered by the Agency, prior to issuing this
proposed rule on the State's request for a permanent exemption.
VII. Public Participation
Following the August 27, 1993 publication of EPA's proposed
decision to grant the first exemption from the low-sulfur diesel fuel
requirements requested by Alaska, there was a thirty day comment
period, during which interested parties could request a hearing or
submit comments on the proposal. The Agency received no request for a
hearing. Comments were received both in support of the proposal to
grant the exemption and expressing concerns over the impact of granting
the exemption. These comments were considered in the Agency's decision
to grant the initial temporary exemption. The Agency received Alaska's
request for a permanent exemption for the Federal Aid Highway System
areas in December of 1995. Since that time, the Agency has received
comments on the petition from the Alaska Center for the Environment,
the Alaska Clean Air Coalition, and the Engine Manufacturers of
America. EPA believed the issues raised by the comments that were
submitted and possible tightening of heavy-duty motor vehicle engine
standards in 2004 necessitated further consideration before the Agency
made a decision on Alaska's request for a permanent waiver.
The Agency is publishing this action as a proposed rule to allow
interested parties an additional opportunity to request a hearing or to
submit comments. The comment period will close May 28, 1998, unless the
Agency receives a request to testify at a public hearing by May 12,
1998. If EPA receives a request to testify at a public hearing, the
comment period will be extended until 30 days after the public hearing.
Any adverse comments received by the close of the comment period will
be addressed in a subsequent final rule that will be published in the
Federal Register.
VIII. Statutory Authority
Authority for the action in this proposed rule is in sections 211
(42 U.S.C. 7545) and 325(a)(1) (42 U.S.C. 7625-1(a)(1)) of the Clean
Air Act, as amended.
IX. Administrative Designation and Regulatory Analysis
Under Executive Order 12866 <SUP>14</SUP>, the Agency must
determine whether a regulation is ``significant'' and therefore subject
to OMB review and the requirements of the Executive Order. The Order
defines ``significant regulatory action'' as one that is likely to
result in a rule that may:
---------------------------------------------------------------------------
\14\ 58 FR 51736 (October 4, 1993)
---------------------------------------------------------------------------
(1) Have an annual effect on the economy of $100 million or more,
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments of communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof, or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
this Executive Order. <SUP>15</SUP>
---------------------------------------------------------------------------
\15\ Id. at section 3(f)(1)-(4).
---------------------------------------------------------------------------
It has been determined that this proposed rule is not a
``significant regulatory action'' under the terms of Executive Order
12866 and is therefore not subject to OMB review.
X. Compliance With the Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that
Federal Agencies examine the impacts of their regulations on small
entities. The act requires an Agency to prepare a regulatory
flexibility analysis in conjunction with notice and comment rulemaking,
unless the Agency head certifies that the rule will not have a
significant impact on a substantial number of small entities. 5 U.S.C.
605(b).
Today's proposed action to make permanent the temporary exemption
of the low-sulfur diesel fuel requirements in the State of Alaska, will
not result in any additional economic burden on any of the affected
parties, including small entities involved in the oil industry, the
automotive industry and the automotive service industry. EPA is not
imposing any new requirements on regulated
[[Page 23254]]
entities, but instead is continuing an exemption from a requirement,
which makes it less restrictive and less burdensome.
Therefore, the Administrator certifies that this proposed rule will
not have a significant impact on a substantial number of small
entities, and that a regulatory flexibility analysis is not necessary
in connection with this proposed rule.
XI. Paperwork Reduction Act
The Paperwork Reduction Act of 1980, 544 U.S.C. 3501 et seq., and
implementing regulations, 5 CFR part 1320, do not apply to this action
as it does not involve the collection of information as defined
therein.
XII. Unfunded Mandates Act
Under section 202 of the Unfunded Mandates Reform Act of 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a federal mandate with estimated costs to the
private sector of $100 million or more, or to state, local, or tribal
governments of $100 million or more in the aggregate. Under section
205, EPA must select the most cost-effective and least burdensome
alternative that achieves the objectives of the rule and is consistent
with statutory requirements. Section 203 requires EPA to establish a
plan for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that this proposed rule imposes no new federal
requirements and does not include any federal mandate with costs to the
private sector or to state, local, or tribal governments. Therefore,
the Administrator certifies that this proposed rule does not require a
budgetary impact statement.
List of Subjects
40 CFR Part 69
Air pollution control, Alaska.
40 CFR Part 80
Environmental protection, Diesel fuel, Fuel additives, Gasoline,
Imports, Labeling, Motor vehicle pollution, Penalties, Reporting and
recordkeeping requirements.
Dated: April 14, 1998.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, title 40, chapter I of the
Code of Federal Regulations is proposed to be amended as follows:
PART 69--SPECIAL EXEMPTIONS FROM REQUIREMENTS OF THE CLEAN AIR ACT
1. The authority citation for part 69 is revised to read as
follows:
Authority: 42 U.S.C. 7545(1) and (g), 7625-1.
2. Subpart E consisting of Sec. 69.51 is added to read as follows:
Subpart E--Alaska
Sec.
69.51 Exemptions.
Subpart E--Alaska
Sec. 69.51 Exemptions.
(a) Persons in the state of Alaska, including but not limited to,
refiners, importers, distributors, resellers, carriers, retailers or
wholesale purchaser-consumers may manufacture, introduce into commerce,
sell, offer for sale, supply, dispense, offer for supply, or transport
diesel fuel, which fails to meet the sulfur concentration or dye
requirements of 40 CFR 80.29, in the state of Alaska if the fuel is
used only in the state of Alaska.
(b) Persons outside the state of Alaska, including but not limited
to, refiners, importers, distributors, resellers, carriers, retailers
or wholesale purchaser-consumers may manufacture, introduce into
commerce, sell, offer for sale, supply, offer for supply, or transport
diesel fuel, which fails to meet the sulfur concentration or dye
requirements of Sec. 80.29, outside the state of Alaska if the fuel is:
(1) Used only in the state of Alaska; and
(2) Accompanied by supporting documentation that clearly
substantiates the fuel is for use only in the state of Alaska and does
not comply with the Federal sulfur standard applicable to motor vehicle
diesel fuel.
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
1. The authority citation for part 80 continues to read as follows:
Authority: Sec. 114, 211, and 301(a) of the Clean Air Act, as
amended (42 U.S.C. 7414, 7545 and 7601(a)).
2. Section 80.29 is amended by revising paragraph (a)(1)
introductory text to read as follows:
Sec. 80.29 Controls and prohibitions on diesel fuel quality.
(a) Prohibited activities. (1) Beginning October 1, 1993, no
person, including but not limited to, refiners, importers,
distributors, resellers, carriers, retailers or wholesale purchaser-
consumers, shall manufacture, introduce into commerce, sell, offer for
sale, supply, dispense, offer for supply or transport any diesel fuel
for use in motor vehicles, except as provided in 40 CFR 69.51, unless
the diesel fuel:
* * * * *
[FR Doc. 98-10710 Filed 4-27-98; 8:45 am]
BILLING CODE 6560-50-U
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