Regulation of Fuels and Fuel Additives: Revision to the Oxyg [Federal Register: October 5, 1995 (Volume 60, Number 193)] [Proposed Rules] [Page 52135-52143] >From the Federal Register Online via GPO Access [wais.access.gpo.gov] ======================================================================= ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80 [AMS-FRL-5302-4] Regulation of Fuels and Fuel Additives: Revision to the Oxygen Maximum Standard for Reformulated Gasoline AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Environmental Protection Agency (EPA or the Agency) is proposing to revise the regulations for reformulated gasoline in two ways. The first revision would raise the maximum oxygen content for volatile organic [[Page 52136]] compounds (VOC)-controlled gasoline (i.e, summertime reformulated gasoline) under the Simple Model to the maximum oxygen content allowed under section 211(f) of the Clean Air Act (CAA, or the Act), as much as 3.5-4.0 percent by weight, depending on the oxygenate selected. This revision would further provide that the maximum oxygen content of VOC- controlled reformulated gasoline would be lowered in any state, should the governor request a lower oxygen content based on air quality concerns. The second revision would adjust the maximum oxygen content allowed for both summertime and wintertime reformulated gasolines under the Simple Model to account for variations in the density of the base gasolines to which the oxygenates are added. DATES: EPA will conduct a hearing (date and location to be announced) if a request for such is received by October 20, 1995. The comment period on this notice will close November 6, 1995, unless a hearing is requested, in which case the comment period will close 30 days after the close of the public hearing. ADDRESSES: Interested parties may submit written comments (in duplicate, if possible) to Public Docket No. A-95-29 at Air Docket Section, U.S. Environmental Protection Agency, Waterside Mall, Room M- 1500, 401 M Street S.W., Washington, D.C. 20460. The Agency requests that commenters also send a copy of any comments to Christine M. Brunner at the address listed below in the ``Further Information'' section. Materials relevant to the reformulated gasoline final rule are contained in Public Dockets A-91-02 and A-92-12. Public Docket A-93-49 contains materials relevant to the renewable oxygenate requirement for reformulated gasoline; some of these materials may also be relevant to today's action. These dockets are located at Room M-1500, Waterside Mall (ground floor), U.S. Environmental Protection Agency, 401 M Street S.W., Washington, D.C. 20460. The docket may be inspected from 8:00 a.m. until 5:00 p.m. Monday through Friday. A reasonable fee may be charged by EPA for copying docket materials. FOR FURTHER INFORMATION CONTACT: Christine M. Brunner, U.S. EPA (RDSD- 12), Regulation Development and Support Division, 2565 Plymouth Road, Ann Arbor, MI 48105. Telephone: (313) 668-4287. To request copies of this document, contact Delores Frank, U.S. EPA (RDSD-12), Regulation Development and Support Division, 2565 Plymouth Road, Ann Arbor, MI 48105. Telephone: (313) 668-4295. SUPPLEMENTARY INFORMATION: I. Electronic Copies of Rulemaking Documents Through the Technology Transfer Network Bulletin Board System (TTNBBS) A copy of this notice is also available electronically on the EPA's Office of Air Quality Planning and Standards (OAQPS) Technology Transfer Network Bulletin Board System (TTNBBS). The service is free of charge, except for the cost of the phone call. The TTNBBS can be accessed with a dial-in phone line and a high-speed modem per the following information: TTN BBS: 919-541-5742 (1200-14400 bps, no parity, 8 data bits, 1 stop bit) Voice Help-line: 919-541-5384 Accessible via Internet: TELNET ttnbbs.rtpnc.epa.gov Off-line: Mondays from 8:00 AM to 12:00 Noon ET A user who has not called TTN previously will first be required to answer some basic informational questions for registration purposes. After completing the registration process, proceed through the following menu choices from the Top Menu to access information on this rulemaking. GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards) OMS--Mobile Sources Information Rulemaking and Reporting <3> Fuels <9> File Area #9...Reformulated gasoline At this point, the system will list all available files in the chosen category in reverse chronological order with brief descriptions. These files are compressed (i.e., ZIPed). Today's notice can be identified by the following title: OXCPNPRM.ZIP. To download this file, type the instructions below and transfer according to the appropriate software on your computer: ownload,

rotocol, xamine, ew, ist, or elp Selection or to exit: D filename.zip You will be given a list of transfer protocols from which you must choose one that matches with the terminal software on your own computer. The software should then be opened and directed to receive the file using the same protocol. Programs and instructions for de- archiving compressed files can be found via ystems Utilities from the top menu, under rchivers/de- archivers. After getting the files you want onto your computer, you can quit the TTNBBS with the oodbye command. 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. II. Introduction 40 CFR 80.41 contains the standards for certification under the reformulated gasoline program. Paragraph (g) of this section specifies that reformulated gasoline designated as VOC-controlled (i.e., for sale during the ozone season) must have no more than 2.7 percent by weight (wt) oxygen per gallon. The regulations further specify that if a state notifies the Administrator that it wishes to have the oxygen standard increased for VOC-controlled reformulated gasoline, a higher cap of 3.5 wtwill be approved by the Administrator provided that there have been ``no occasions within the three preceding years when the ozone ambient air quality standard was exceeded within any covered area within the state.'' EPA expects that a state would make this request primarily to permit and encourage the use of ethanol at volumes of up to 10(which, as will be discussed in sections VIII and IX, is equivalent to approximately 3.5-4.0 wt12xygen, depending upon the specific gravity of the base gasoline). In requesting and obtaining this different standard, the states would not be requiring the use of this maximum level of oxygen; rather, an increase in the standard for maximum oxygen content would provide refiners the option to produce reformulated gasoline with oxygen up to that level. Section 80.41(g) further states that the maximum oxygen content for non-VOC-controlled reformulated gasoline is 3.5 wt, unless a state requests that EPA limit the oxygen content to 2.7 wt 10ue to concerns that ``the use of an oxygenate will interfere with attainment or maintenance of an ambient air quality standard, or will contribute to an air quality problem.'' In reexamining this reformulated gasoline provision, EPA believes that the maximum oxygen content for VOC-controlled reformulated gasoline is an unnecessary regulatory burden on gasoline and oxygenate producers, and that the requirements for a state to choose a higher oxygen level are also burdensome. Thus, EPA is proposing to raise the maximum oxygen content of VOC-controlled reformulated gasoline to a higher oxygen level (nominally 3.5-4.0 wt) than currently allowed for VOC-controlled reformulated gasoline. Specifically, EPA proposes to increase the maximum oxygen content of VOC-controlled reformulated gasoline such that reformulated gasoline containing [[Page 52137]] up to 10 vol 2.121996e-313thanol can be certified. Additionally, EPA proposes that upon request of the Governor to the Administrator, the maximum oxygen content of reformulated gasoline sold in that state would be capped at a lower level on the basis of air quality concerns. In short, the maximum oxygen content provisions for VOC-controlled reformulated gasoline would adopt the same approach as the current provisions for non-VOC-controlled reformulated gasoline. EPA is also proposing to increase the maximum oxygen contents for both VOC- and non-VOC-controlled reformulated gasoline to accommodate differences in specific gravities of the base gasolines to which the oxygenates are added. These provisions would allow the oxygenates used in reformulated gasoline to be used up to their lawful limits per section 211(f), including the terms of any waiver issued under that provision, without concern for the density of the base gasoline to which the oxygenate is added. There are a number of benefits to be gained by these changes to the regulation. As discussed in the following sections, these include the potential for reduced burden on the states and industry, reduced cost for compliance with the reformulated gasoline requirements, and reduced costs to the consumers. The following sections present the background behind the oxygen maximum standard; the options considered for modification of the requirements; the economic, environmental, and energy implications of the proposed actions; and technical reasons for increasing the maximum oxygen content for VOC- and non-VOC-controlled reformulated gasoline. III. History of the Reformulated Gasoline Standard for Maximum Oxygen Content (Oxygen Cap) The Act requires that reformulated gasoline have no NOx emissions increase compared to the statutory baseline gasoline for baseline vehicles [section 211(k)(2)(A)]. Furthermore, the Act specifies that reformulated gasoline contain a minimum of 2.0wt oxygen. As summarized in the final rule on reformulated gasoline (February 16, 1994, 59 FR 7721-22), data available early in the rulemaking process to the Agency and to the regulatory negotiation (Reg-Neg) Advisory Committee indicated that fuel oxygen content and the type of oxygenate used had an impact on NOx emissions while no other parameter of the Simple Model appeared to have such an impact. Based on these data and the agreements reached in the Reg-Neg process, EPA proposed provisions that would cap the oxygen content of VOC-controlled reformulated gasoline (see 57 FR 13416) this was reflected in both the Reg-Neg agreement and an accompanying letter to the Renewable Fuels Association. The draft regulations specified a test program by which a petitioner could demonstrate no increase in NOx emissions to justify a higher than 2.1/2.7 wt12xygen content in reformulated gasoline sold in the ozone season. As discussed in the subsequent proposal (February 26, 1993, 58 FR 11732-33), additional data revealed no need to differentiate between oxygenates, and it was proposed that the oxygen cap be 2.7 wt 0.000000or all oxygenates during ozone months. However, at that time the Agency continued to believe that increasing oxygen content from 2.7 wtto 3.5 wtmight result in increased NOx emissions, and, thus, proposed prohibiting the use of VOC-controlled reformulated gasoline containing more than 2.7 wt oxygen unless a state requested otherwise and provided supporting data from the specified test program. In April 1992, EPA proposed that reformulated gasoline sold outside of the ozone season contain a maximum of 3.5 wt12xygen (57 FR 13420). This proposal was consistent with the Reg-Neg agreement and all data available at the time. If a state believed that the use of an oxygenate would interfere with attainment or maintenance of another ambient air quality standard or other air quality problem, and so notified the Administrator, the maximum oxygen content for reformulated gasoline sold in that state would be 2.7 wt(unless the state petitioned for another maximum oxygen content following a data collection process specified elsewhere in the draft regulations). Additional data made available during development of the final rule, including the final form of the Complex Model (the compliance model required to be used starting in 1998, voluntarily prior to that time), showed that increased oxygen content should actually result in no increase in NOx emissions. The fuel changes expected upon addition of oxygen (i.e., reduced sulfur, olefins, aromatics and increased E300 1 and E200 based on the dilution effect of adding oxygenate) should result in a net decrease in NOx emissions, based on the Complex Model. While the expected increase in E200 would increase NOx emissions, the sum of the other expected changes (which all decrease NOx) should result in an overall NOx reduction. However, the Simple Model provisions did not directly control these expected changes to gasoline qualities that were expected to occur when oxygenates were added. In other words, although the dilution effects were expected, they, and their associated effects on NOx emissions, were not assured under the terms of the Simple Model. The Agency stated that since there was no assurance under the Simple Model that oxygenate addition would not increase NOx emissions, and since the more oxygenate that is added the greater the possible increase in E200 (and thus the greater the possibility for a NOx increase), it was appropriate to cap the maximum oxygen content (See 59 FR 7719-20). In the final regulations, the Agency specified that only requests to raise the cap to 3.5 wt 0.000000or VOC- controlled reformulated gasoline from states that could demonstrate no ozone exceedances over the prior three years would be considered for approval. This provision replaced the proposed test program to demonstrate no NOx increase resulting from the use of oxygen at higher levels. The provisions for non-VOC-controlled (outside of the ozone season) reformulated gasoline remained the same as proposed. \1\ E300 and E200 are defined in 40 CFR 80.45. --------------------------------------------------------------------------- IV. Proposed Changes to Oxygen Cap Requirements Upon further consideration of the issues, EPA now believes that the current provisions relating to increasing the maximum oxygen content of VOC-controlled reformulated gasoline are unnecessarily burdensome and should be changed. Specifically, EPA proposes to increase the maximum oxygen content of VOC-controlled reformulated gasoline such that reformulated gasoline containing up to 10 vol 2.121996e-313thanol can be certified. EPA also proposes that the oxygen content of reformulated gasoline sold in that state will be limited to a lower level upon the request of the Governor on the basis of local air quality concerns. To obtain this lower maximum oxygen content, the Governor notify the Administrator that the use of an oxygenate at higher levels would interfere with attainment or maintenance of a National Ambient Air Quality Standard, or will contribute to an air quality problem. The lower oxygen cap would become effective 30 days after the Administrator announced the lower standard in the Federal Register. This lower maximum would be the maximum allowed under section 211(f), but not to exceed 3.2 wt12xygen when ethanol is the oxygenate. Under 211(f), MTBE is limited to 15 [[Page 52138]] voland ethanol to 10 volBlending MTBE at 15 voladds approximately 2.712xygen. However, due to variations in the density of gasoline, it is possible that when trying to achieve an oxygen content of 2.7, the addition of 15 volMTBE or 7.8 vol 2.121996e-313thanol may result in an oxygen content as high as 3.2(see section VIII below for further explanation). As a consequence, EPA is proposing that if a governor requests to lower the oxygen cap from 3.5, the maximum oxygen content in that state would be lowered to a level equivalent to a nominal 2.7 but not to exceed 3.2 As discussed in detail below in section VI.D, EPA believes it is very unlikely that a NOx increase will occur for any one batch of reformulated gasoline, and that the potential NOx increase, if any, would be small. A ``worst case'' scenario would involve the expected increase in E200, but with no other dilution effects that would reduce NOx, offsetting the increase in E200. Under such a scenario, NOx emissions for a batch of reformulated gasoline would increase by about 0.12 0.000000or an oxygen content change from 2.7 to 3.5 wtHowever, there are several reasons why such a scenario is speculative and unlikely to occur. First, the toxics standards for reformulated gasoline should lead to reduced aromatics levels even without the addition of oxygenates, and this will lead to reduced NOx emissions. Second, the addition of oxygenates would normally lead to all of the additional dilution effects noted above, and not just to the increase in E200. It is unlikely that a refiner would intentionally offset the dilution effects for sulfur, olefins, and aromatics, allowing only E200 to increase. It appears that the antidumping provisions which affect conventional gasoline, combined with the limits on fuel parameters governed by each refiner's 1990 baseline operating levels limit the ability of refiners to adjust refinery operations to that degree. Thus while there is no specific provision in the Simple Model requiring that individual batches of gasoline containing more than 2.7 wt12xygen have sulfur, olefin, aromatic, and E200 levels that do not increase NOx emissions, an increase is unlikely and if it should occur it would be small. EPA believes it is likely that batches of reformulated gasoline will exhibit the dilution effects. Thus, on average across all of the reformulated gasoline sold by all refiners in an area, a NOx reduction, or at least no increase in NOx, is likely to occur. The Agency requests comments on these conclusions, particularly on the likely reaction of refiners to the ability to blend higher levels of oxygenate in VOC-controlled reformulated gasoline and how dilution effects may be anticipated in the production of reformulated gasoline. Given the small likelihood of NOX increases under the Simple Model for individual batches of reformulated gasoline (from increases in E200, without corresponding NOX reductions from reductions in other parameters), the likelihood that overall reformulated gasoline should lead to NOX reductions on average, and the benefits of increased oxygenate use, EPA now believes it is appropriate to revise the oxygen content cap under the Simple Model by raising it to the limit allowed under section 211(f) of the Act. This would remove what appears to be an unnecessary limitation on oxygenate use under the current regulations. While neither the Complex Model nor other basic facts have changed since the oxygen cap was promulgated in December 1993, EPA has reevaluated the need for such a cap and is now proposing to make revisions in light of this reevaluation. In raising the cap, the Agency believes that it will make it easier for higher levels of oxygen to be used in VOC-controlled reformulated gasoline (this will primarily affect the use of ethanol, since at present ethanol is the only oxygenate which legally can be blended at levels in excess of 2.7 wt12xygen). This proposed action, however, will retain the initiative at the state level to restrict higher oxygen levels in reformulated gasoline, consistent with respect to how this issue was handled for non-VOC-controlled (``wintertime'') reformulated gasoline. Although as explained in section VI below the Agency believes that this action will have no significant environmental impact, by leaving this initiative with the states this action accommodates those states which are particularly concerned about potential local air quality impacts of increased ethanol use. EPA proposes that any decrease in the maximum allowed oxygen content (at the request of a state), be effective 30 days after EPA publishes notice in the Federal Register of such change. This would provide reasonable notice of the change to all affected parties. EPA also proposes that, if today's proposal is finalized, the higher maximum oxygen content would become effective 60 days after publication of the final regulations in the Federal Register. If states do not want reformulated gasoline with the higher oxygen content to be sold in their state beginning with this effective date, they must notify the Administrator prior to the that date. After the proposed regulations took effect, states may request to lower the maximum oxygen content at any time. EPA requests comments on all aspects of this proposed action. V. Economic Impacts The largest part of the cost associated with Phase I (1995-1999) reformulated gasoline is the oxygen content required by the Act. Since ethanol generally costs less than MTBE per gallon (due largely to the pro-rated tax credit available to ethanol blenders in both the federal and some state tax codes) and contains almost twice as much oxygen per gallon, it has a considerable economic advantage as an oxygenate. However, this cost advantage varies by geographic market and can also be offset by the incremental costs for distribution and segregation of ethanol blends, which are much higher than for MTBE blends. Production and distribution costs for the oxygenates plays a major role in determining market share. Refiners must also consider a variety of other operating costs when selecting an oxygenate for reformulated gasoline (or any other fuel). One of the costs associated with reformulated gasoline under the Simple Model is the cost associated with control of Reid vapor pressure (RVP). Most of the required reductions of VOC emissions are obtained in reformulated gasoline through reductions in RVP. The cost per finished gallon of reformulated gasoline for producing the sub-RVP blendstock to be blended with ethanol is lower on average by about 0.04-0.05 cents per gallon when the ethanol is blended at the maximum concentration possible instead of lower concentrations. Hence, it is slightly more economically attractive to use ethanol at 10 vol(roughly 3.5-4.0 wt oxygen) than at 7.8 vol(2.7 wt). The small economic advantage provided by lifting the oxygen cap may be sufficient enough to allow some refiners to use ethanol during the ozone season when otherwise they would not do so. While the overall impact of this is expected to be marginal, it should contribute toward an increase in the total volume of ethanol produced in this country during the summer. It is not expected to affect the overall production capacity of ethanol, however, due to the much greater demand during the winter, and the fact that any additional benefits of this action to the ethanol industry will be short-lived, since the oxygen cap provisions only affect reformulated gasoline sold through the year 1997. There is also some potential that today's proposal will result in a change [[Page 52139]] in the volume of ethanol used in reformulated gasoline areas. This could occur if refiners elect to shift ethanol use in the summer months from use as an octane enhancer in conventional gasoline, presumably a lower value use, to a presumably higher value use as an reformulated gasoline oxygenate. Unless some states choose to lower the cap, the consumption of ethanol may increase and that of MTBE decrease in most area(s), and as a result on average in reformulated gasoline areas as a whole. However, it is not possible to predict how the refining industry will react to this added flexibility. Comments on this issue are requested by the Agency. There is the potential for a number of other economic impacts as a result of this proposed action. If summertime consumption of ethanol increases in reformulated gasoline areas, ethanol producers are expected to benefit. To the extent that the use of ethanol is concentrated in several states where ethanol is particularly economically attractive and that some refiners decide to use ethanol in those areas, the proposed oxygen cap modifications may result in slight economic benefits to both refiners (who benefit from the additional flexibility of having a broader range of oxygenate options) and ethanol producers (who may benefit from reductions in transportation or storage costs). The consumers of reformulated gasoline containing ethanol may, in turn, benefit from these changes. MTBE producers could be adversely affected if less MTBE is used in reformulated gasoline as a result of this proposed change. Nonetheless, by reducing the hurdles to using the maximum amount of ethanol and increasing the flexibility of refiners in selecting oxygenates, this action is expected to reduce the overall negative economic impacts and regulatory burden of the reformulated gasoline program. Comments on any of the assumptions and issues raised in this section are requested. VI. Environmental and Energy Impacts Since today's action may result in some localized increase in summertime ethanol use at higher levels than would otherwise have occurred, some of the concerns that have been raised in the past regarding ethanol use in reformulated gasoline must be reexamined. The Agency has examined the environmental and energy impacts of modifying the oxygen cap requirements under the Simple Model. This proposal has the potential to slightly increase summertime ethanol consumption nationally, or at least to shift ethanol consumption from conventional fuel areas to reformulated gasoline areas (and consequently decrease MTBE consumption in reformulated gasoline areas). To the extent that increases in the use of ethanol occur in some locations barring state actions to lower the oxygen cap, there may be some environmental impacts, as discussed below. EPA expects there to be no change in the energy implications of the reformulated gasoline program as a result of today's proposed action. The Agency requests comment on the various aspects of the environmental and energy impact analyses presented below. A. NOX Emissions Impact As mentioned above, the primary concern with allowing higher levels of oxygen in VOC-controlled reformulated gasoline under the Simple Model has in the past been the potential for increased NOX emissions. The Agency concluded in the final rule for reformulated gasoline, on the basis of results generated by the Complex Model, that the use of greater levels of oxygen would not by itself increase NOX emissions (although the associated higher levels of oxygenates could theoretically increase emissions due to the unpredictable impacts of dilution). The Complex Model is the most accurate and complete model relating fuel composition to emissions performance currently available for use in the reformulated gasoline program. EPA would have required use of the Complex Model for purposes of certification during the entire reformulated gasoline program, however, based on leadtime considerations, EPA promulgated the Simple Model for use during the first three years of the reformulated gasoline program (e.g., through 1997). This decision was based on the fact that EPA had every confidence that on average the refiners certifying their fuel using the Simple Model will achieve the emission reductions that Congress intended for the reformulated gasoline program (see 59 FR 7721-22 for more discussion of this issue). In any case, EPA clearly determined that changing the oxygen content of reformulated gasoline is unlikely to have any negative impact on NOX emissions, regardless of the type of oxygenate under consideration. Consequently, today's proposed action is not expected to increase NOX emissions when reformulated gasoline is compared to baseline gasoline, and thus should satisfy the requirements of section 211(k)(2) of the Act. Individual states may still have some concerns about the impact of increased oxygen levels on NOX. The basis for their concerns is the uncertainty about the impact of reformulated gasoline in-use. The reformulated gasoline program, including all of the standards and provisions discussed in today's action, is based on the emissions reductions to be obtained from 1990 technology vehicles using baseline gasoline. To the extent that the emissions impacts of various reformulated gasolines are different for other-than-1990 technology vehicles, states may have concerns about the NOX (or other) emissions impacts of today's proposed action. Consequently, it is reasonable to permit the states to limit the oxygen content of reformulated gasoline in their state on the basis of their concerns. B. VOC Emissions Impacts Phase I reformulated gasoline is required to yield a 15reduction in emissions of volatile organic compounds (VOC) from 1990 technology vehicles using a baseline gasoline. Under the Simple Model, at least a 15reduction is guaranteed for any reformulated gasoline that meets all of the specifications of the model. The use of greater volumes of ethanol (per gallon and overall) can affect VOC emissions, as described below. In general, EPA believes today's proposed action would have no or slightly positive impacts on VOC emissions. 1. RVP Boost Although ethanol slightly increases the RVP of a gasoline to which it is added, there is no potential for an increase in the RVP of a VOC- controlled reformulated gasoline under the Simple Model as a result of any modifications to the oxygen cap. This is because the Simple Model includes RVP specifications for reformulated gasoline that are not being modified by today's proposal. Comments and additional information on this issue are requested. 2. Commingling Another concern with the potential for increased use of ethanol- containing reformulated gasoline is the phenomenon described as commingling. A detailed analysis describing the commingling effect can be found in the Regulatory Impact Analysis for the final rule on reformulated gasoline (December, 1993; available in public docket A-92- 12). To summarize briefly, when ethanol is mixed with gasoline, a non- linear increase in the RVP is observed. The non-linear nature of ethanol's blending RVP means that the mixing of ethanol blends with other [[Page 52140]] non-ethanol containing gasolines downstream of the refinery (e.g., in vehicle fuel tanks) can result in an additional vapor pressure increase across the in-use pool of gasoline. This RVP increase caused by fuel mixing is what is referred to as the commingling effect. EPA's analysis of the commingling effect shows that commingling can significantly increase VOC emissions in some instances. The effect increases as ethanol's share of the reformulated gasoline oxygenate market increases, up to a maximum ethanol market share of approximately 50However, after examination of the commingling analysis, EPA believes that there may be a commingling benefit associated with today's proposal. Due to the non-linear nature of the RVP boost curve for ethanol, the commingling impact should be less with the use of higher concentrations of ethanol (e.g., 10 vol 2.121996e-313thanol, roughly 4.0 wt12xygen) in fewer gallons of gasoline than would occur with the use of a lower concentration (e.g., 7.8 vol 2.121996e-313thanol, roughly 2.7 wt oxygen) added to more gallons of gasoline. Thus, from a national perspective there may be a slight commingling benefit associated with today's rule. To the extent today's proposal would cause a slight increase in the amount of ethanol used throughout the reformulated gasoline program, or cause a shift in ethanol use from states which maintain the current cap to states which do not restrict oxygen content, or cause a shift from conventional gasoline to reformulated gasoline, commingling-related VOC emissions will also be shifted. The overall impact of commingling on the states in which ethanol use increases would depend on the magnitude of the increase. If total ethanol volume in a state remains the same and the use of 10 vol 2.121996e-313thanol blends increases, then there will be a beneficial effect as a result of commingling because of the reduced number of ethanol-containing gallons of reformulated gasoline available in the marketplace. Any comments or additional data on this issue are requested. C. Toxics Emissions Impact The Complex Model indicates that some oxygenates, such as ethanol, provide smaller air toxic benefits than others (e.g., MTBE) when used at identical oxygen levels. However, today's proposal does not alter the toxics performance standards under the Simple Model. Hence, refiners will still be required to comply with the toxics standards regardless of the type of oxygenate or volume of oxygen used. D. Impacts of Dilution Under the Simple Model As discussed above in section IV, under the Simple Model there is no provision actually requiring the expected impact of dilution on the other gasoline components (fuel parameters or fuel qualities). The concerns which led EPA to retain the oxygen cap of 2.7 wt 10n the final rule for reformulated gasoline centered not around the impact of oxygen itself on NOX, but on the impact of other fuel parameters, which are impacted by the addition of oxygenates, on NOX. This concern prompted EPA to retain the cap on oxygen, thus limiting the volumes of oxygenates used in reformulated gasoline, in the final rule. If the refiner makes no other changes to the gasoline production process, the addition of an oxygenate will dilute the concentration of other fuel components. While most dilution impacts are beneficial, some may be detrimental (e.g., the E200 effect on NOX previously discussed). Because NOX emissions are only affected by dilution effects (NOX emissions do not increase solely due to an oxygen content change) and because it is highly unlikely that an increase in E200 will occur absent the other dilution effects, NOX emissions are not expected to increase with increased oxygenate volumes (which accompany higher oxygen contents). Furthermore, EPA believes that while in any given gallon the theoretical combination of fuel effects may be detrimental, it is highly unlikely that this would be the case, especially when the average of all reformulated gasoline sold in a given area is considered. As a result, EPA now believes that the previous concern that uncontrolled variations in the other fuel parameters could increase NOX emissions is too unlikely to occur to warrant continuing the cap on oxygen content. Increasing the cap from 2.7to a higher level should not increase in any way the likelihood that refiners will certify batches of reformulated gasoline that have increased NOX levels over the baseline gasoline. However, from an overall perspective, there may be a slight shift toward ethanol from MTBE in states which do not limit the higher oxygen content proposed today. The average oxygen level within that state should theoretically remain at minimum average 2.1 wtas a result of the oxygen averaging and trading provisions of the reformulated gasoline program. Hence, it is reasonable to assume that if more ethanol is used to produce higher oxygen content blends (e.g., 10 vol ethanol yielding roughly 3.5-4.0 wt12xygen), the MTBE-containing reformulated gasoline used in that area would contain somewhat less than 2.1 wt12xygen. Since ethanol has a higher oxygen content per volume of oxygenate than MTBE, it takes less ethanol than MTBE to achieve the same oxygen content. (For example, to create an reformulated gasoline containing 2.7 wt12xygen, it takes about 7.8 volume percent (vol) ethanol but almost 15 volMTBE.) Even when ethanol is blended at 10 vol 2.121996e-313vels (roughly 3.5-4.0 wt4332130xygen), it displaces less gasoline than MTBE blended to reach 2.7 wtAs a result, a shift towards ethanol would result in a lower volume of total oxygenates blended in an reformulated gasoline area, and potentially an overall reduction in the amount of dilution that would occur. While the Complex Model shows that less NOX reductions could occur with less dilution from an increased amount of ethanol in the reformulated gasoline oxygenate pool, the change in NOX reductions is very small, no more than 1 percent. EPA expects, for a number of reasons, that any air quality effects resulting from such differences as a result of a change in the oxygen cap would be minimal. First of all, any increase in ethanol use resulting from today's proposal is expected to be small. Second, the change in emissions due to the differences in dilution between ethanol and MTBE predicted by the Complex Model is fairly small. Third, reformulated gasoline producers are required under the Simple Model not to exceed their 1990 baseline levels of sulfur, T90, and olefins. These caps limit the impact of any air quality effects related to differences in dilution between oxygenates. The Agency requests comments on the issue of the potential environmental impacts resulting from changes in dilution as a result of today's proposal. E. Non-Air Quality Impacts The Agency is concerned about other environmental impacts of an action that might alter the relative amounts of oxygenates used under the reformulated gasoline program. In response to the proposed renewable oxygenate requirement (58 FR 68343), EPA received many comments identifying some of the negative environmental impacts which allegedly could occur from an increase in production of ethanol. Most of these comments focused on the water and soil quality implications of increased corn farming for ethanol production. Given that EPA [[Page 52141]] does not expect the proposed modification of the oxygen cap to result in significant increases in ethanol consumption overall, it is not expected that any large increase in total corn output would result from this action. To the extent that small increases in ethanol production do occur as a result of today's proposal, the impact on corn production is likely to be small as well. Thus, the non-air quality impacts associated with the proposed modification to the oxygen cap would be negligible. The Agency requests comments on these assumptions, and on other non-air quality impacts that could result under today's proposal. F. Energy Impacts In addition to potential environmental impacts, EPA has examined the potential energy impacts of today's proposal. While the production of much of the ethanol in the country generates (on the margin) more energy and uses less petroleum than went into its production, a study by the Department of Energy submitted with comments to the renewable oxygenate requirement proposal indicated that the margin virtually disappears when ethanol is used to make VOC-controlled reformulated gasoline (see the final Regulatory Impact Analysis for the renewable oxygenate requirement, June 29, 1994). The energy loss and additional petroleum consumption necessary to reduce the volatility of the blend (to offset the volatility increase caused by the ethanol) causes the petroleum balance to go negative when compared to MTBE-blended reformulated gasoline, while the overall balance of fossil energy consumption remains slightly positive. Since, however, today's proposed action is not expected to significantly increase the total volume of ethanol produced in this country over the next two years (through 1997), the energy impacts of the reformulated gasoline program are expected to remain essentially unchanged as a result of this proposal. VII. Other Alternatives As an alternative to the proposal described above, EPA also requests comment on two alternatives. The first alternative would remove the oxygen cap entirely, allowing up to the maximum oxygen content permitted under section 211(f), (includes up to 10 vol ethanol--roughly 3.5-4.0 wt12xygen--or 15 volMTBE, roughly 2.7-3.2 wt12xygen), yearround for both VOC and non-VOC controlled reformulated gasoline. Under this option, the regulations would not limit the oxygen content of reformulated gasoline even if a state notifies EPA of environmental reasons for such a limit. EPA believes that this option is less desirable because it eliminates a state's ability to control the oxygen content of both VOC-controlled and non-VOC-controlled reformulated gasoline, regardless of the environmental implications for their state. Given some uncertainty over the in-use emissions implications of the use of reformulated gasoline with a higher oxygen content, as discussed above in section VI.A, it is reasonable to allow states to evaluate the environmental implications of increasing the oxygen content for their specific situation and based upon their unique concerns. The Agency requests comments on the potential benefits and detriments of electing to remove the oxygen cap entirely. The second alternative would maintain the cap (at 2.7 wt) in the summertime, but allow states to request a higher maximum oxygen content (up to the maximum allowed under section 211(f)). Currently, states may request a higher cap, but must show that no ozone exceedances had occurred in a covered area during the previous three years. This alternative would remove the ``no ozone exceedances'' requirement, reducing the burden on the states and allowing them to quickly and easily have reformulated gasoline with the higher oxygen content. EPA believes that this alternative option in effect presumes that increased oxygen might cause an increase in NOX emissions from RFG, and is therefore inconsistent with EPA's view that increased oxygen does not adversely affect NOX emissions for RFG. Today's proposal would establish the higher maximum oxygen content, unless a state requests that it be lowered, based upon EPA's view that a higher oxygen content does not increase NOX emissions in 1990 technology vehicles. EPA requests comments on the appropriateness of this alternative option, and in particular a comparison of the relative benefits of the option being proposed today compared to this alternative option, as well as a comparison of the relative benefits of the second and third options. VIII. Effect of Base Gasoline Density on Oxygen Content and Related Proposal As stated earlier, section 80.41(g) of the final rule specifies a maximum oxygen content of 2.7 wt(and in limited cases 3.5 wt) for VOC-controlled Simple Model reformulated gasoline and 3.5 wt(unless a state requests that it be 2.7 wt 0.000000or environmental reasons), for non- VOC-controlled Simple Model reformulated gasoline. These maximums (or caps) are consistent with the Simple Model valid range upper limit for oxygen content. In a later rulemaking (59 FR 36944, July 20, 1994), however, EPA changed the upper limit of the valid range for oxygen content from 3.5 wtto 4.0 wt(for both the Simple and Complex Models) to accommodate compositional (i.e., specific gravity or, equivalently, density) differences in the base gasoline to which the ethanol is added. Variations in the base gasoline specific gravity can cause the oxygen content of the final oxygenated blend to vary for the same volume of oxygenate. For example, for a 10 vol 2.121996e-313thanol blend, the oxygen content could vary, roughly, from 3.4 to 4.0 wtFor all oxygenates, variations in the base gasoline density can cause the resulting oxygen content to vary for the same volume of an oxygenate. Although EPA changed the valid range of the models, the Agency did not at that time address changing the maximum oxygen content allowed in reformulated gasoline under section 80.41(g). Subsequent to this, EPA stated in guidance that ``* * * [it] believes that the maximum oxygen content provisions for reformulated gasoline should accommodate blended oxygenates that meet the applicable Clean Air Act section 211(f) `substantially similar' and waiver provisions. In consequence, EPA believes the oxygen maximums specified in 80.41(g) should be adjusted to reflect the expected maximum oxygen content when (RBOB) is blended with 10 vol 2.121996e-313thanol in the case of non-VOC-controlled RFG and 7.7 vol ethanol in the case of VOC-controlled reformulated gasoline.\2\'' \2\ U.S. Environmental Protection Agency, ``RFG/Anti-Dumping Questions and Answers,'' Question 1 of the ``Standards'' section, April 18, 1995. A copy of this document has been placed in the public docket for today's action and may be found on the TTNBBS (see ``Supplementary Information'' section of this notice). --------------------------------------------------------------------------- RBOB is the acronym for ``reformulated gasoline blendstock for oxygenate blending'' which is a base gasoline blendstock which requires only the addition of an oxygenate to become reformulated gasoline. The guidance stated that the adjusted oxygen maximum for VOC-controlled reformulated gasoline would be 3.2 wt(the maximum expected for MTBE at 15 vol12r ethanol at 7.8 vol·onsidering density variations in the base gasoline), and for non-VOC-reformulated gasoline, 4.0 wt(the maximum expected for ethanol at 10.0 vol onsidering density variations in the base gasoline). The guidance further stated that EPA would make these changes in a future rulemaking but allow parties to use the adjusted maximums in the meantime. The maximum 3.2 wt 10s 0.5 wt [[Page 52142]] greater than the 2.7 wtmaximum oxygen content allowed for VOC- controlled reformulated gasoline under the final rule; the difference of 0.5 wt 10s consistent with raising the valid maximum oxygen content under the Simple and Complex Models from 3.5 wtto 4.0 wt As discussed earlier, the Agency is today proposing that the maximum oxygen content for VOC-controlled reformulated gasoline be the maximum allowed under the section 211(f) ``substantially similar'' provision and waiver provisions. (Currently, ethanol may be blended up to 10 volume percent and MTBE up to 15 volume percent.) EPA is proposing that the maximum oxygen content for non-VOC-controlled reformulated gasoline also be the maximum allowed under the section 211(f) ``substantially similar'' provision and waiver provisions rather than be capped at a specific oxygen content as in the final rule.\3\ This would allow reformulated gasoline to contain ethanol up to the current legal maximum 10 volume percent and MTBE up to the current legal maximum 15 volume percent, without concern for the density of the non-oxygenated gasoline. Additionally, allowing the maximum oxygenate volumes (and thus maximum oxygen contents) specified in 211(f) would make this provision (40 CFR 80.41(g)(1)) consistent with the upper end of the valid range for oxygen in both the Simple and Complex models. As stated in the July 20, 1994 rulemaking, increasing the maximum oxygen value will have no adverse environmental impact. \3\ This provision would only apply under the RFG simple model. Under the complex model, there would be no oxygen cap in the regulations. The maximum oxygen content allowed under Sec. 211(f) would, of course, continue to apply to complex model RFG as well as all other gasoline. --------------------------------------------------------------------------- In those cases where a state has requested the lower maximum oxygen content for its RFG, the Agency proposes that the oxygen maximum standard value be increased from the current 2.7 wtto the maximum allowed under section 211(f), but not to exceed 3.2 wtwhen ethanol is used. As mentioned above, 3.2 wt12xygen is equivalent to about 7.7 vol 2.121996e-313thanol and is the highest maximum increase in oxygen content over 2.7 wtthat might be encountered due to variations in the base gasoline density. In practice, the Agency does not expect ethanol- containing blends certified under these provisions to contain more than 7.7 vol 2.121996e-313thanol, as there are tax credit and other deterrents to going higher than 7.7 volbut lower than 10 vol(which would exceed 3.2 wt oxygen). Comments are requested on this aspect of today's proposal. IX. Public Participation EPA desires full public participation in arriving at its final decisions and solicits comments on all aspects of this proposal. Wherever applicable, full supporting data and detailed analysis should also be submitted to allow EPA to make maximum use of the comments. All comments should be directed to the EPA Air Docket, Docket A-95-29 (See ADDRESSES). See the DATES section for the deadline for submission of comments. Any proprietary information being submitted for the Agency's consideration should be markedly distinguished from other submittal information and clearly labelled ``Confidential Business Information.'' Proprietary information should be sent directly to the contact person listed above, and not to the public docket, to ensure that it is not inadvertently placed in the docket. Information thus labeled and directed shall be covered by a claim of confidentiality and will be disclosed by EPA only to the extent allowed and by the procedures set forth in 40 CFR Part 2. If no claim of confidentiality accompanies a submission when it is received by EPA, it may be made available to the public without further notice to the commenter. X. Compliance with the Regulatory Flexibility Act The Regulatory Flexibility Act of 1980 requires federal agencies to examine the effects of their regulations and to identify any significant adverse impacts of those regulations on a substantial number of small entities. Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities. In fact, today's proposals are designed to remove overly burdensome regulations and make it easier for refiners to use ethanol in reformulated gasoline, and thus to ensure market access for ethanol in reformulated gasoline. XI. Administrative Designation Pursuant to Executive Order 12866 (58 FR 51735 (October 4, 1993)), the Agency must determine whether the regulatory action is ``significant'' and therefore subject to OMB review and the requirements of the executive order. The Order defines ``significant regulatory action'' as one that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlement, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Pursuant to the terms of Executive Order 12866, it has been determined that this notice of proposed rulemaking is not a ``significant regulatory action''. XII. Paperwork Reduction Act The Paperwork Reduction Act of 1980, 44 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. XIII. Unfunded Mandates Act Under section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in expenditure by State, local, and tribal governments, in the aggregate; or by the private sector, of $100 million or more. 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 the action proposed today does not include a Federal mandate that may result in estimated costs of $100 million or more to either State, local or tribal governments in the aggregate, or to the private sector. This action has the net effect of reducing burden of the reformulated gasoline program on regulated entities, as well as the States. Therefore, the requirements of the Unfunded Mandates Act do not apply to this action. [[Page 52143]] XIV. Statutory Authority The statutory authority for the actions proposed today is granted to EPA by Sections 211(c), (k) and 301 of the Clean Air Act, as amended; 42 U.S.C. 7545(c),(k), and 7601. List of Subjects in 40 CFR Part 80 Environmental protection, Air pollution control, Fuel additives, Gasoline, Motor vehicle pollution, Reporting and recordkeeping requirements. Dated: September 27, 1995. Carol M. Browner, Administrator. For the reasons set out in the preamble, part 80 of title 40 of the Code of Federal Regulations is amended as follows: PART 80--REGULATION OF FUELS AND FUEL ADDITIVES 1. The authority citation for part 80 continues to read as follows: Authority: Sections 114, 211, and 301(a) of the Clean Air Act as amended (42 U.S.C. 7414, 7545, and 7601(a)). 2. Section 80.41 is amended by revising paragraph (g) to read as follows: Sec. 80.41 Standards and requirements for compliance. * * * * * (g) Oxygen maximum standard. (1) The per-gallon standards for maximum oxygen content, which apply to reformulated gasoline subject to the simple model per-gallon or average standards, are as follows: (i) The standard shall be the maximum allowed under the provisions of section 211(f) of the Act; except that (ii) The standard shall not exceed 3.2 percent by weight for ethanol within the boundaries of any state if the state notifies the Administrator that the use of an oxygenate will interfere with attainment or maintenance of an ambient air quality standard or will contribute to an air quality problem. (2) A state may request the standard specified in paragraph (g)(1)(ii) of this section separately for reformulated gasoline designated VOC-controlled and reformulated gasoline not designated as VOC-controlled. (3) The standard in paragraph (g)(1)(ii) of this section shall apply 30 days after the Administrator publishes a notice in the Federal Register announcing such a standard. * * * * * [FR Doc. 95-24583 Filed 10-4-95; 8:45 am] BILLING CODE 6560-50-P