Control of Air Pollution from New Motor Vehicles; Second
Amendment to the Tier 2/Gasoline Sulfur Regulations
[Federal Register: June 12, 2002 (Volume 67, Number 113)]
[Rules and Regulations]
[Page 40169-40185]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn02-9]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[AMS-FRL-7221-9]
RIN 2060-AJ71
Control of Air Pollution from New Motor Vehicles; Second
Amendment to the Tier 2/Gasoline Sulfur Regulations
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
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SUMMARY: EPA is taking direct final action to clarify, correct, amend,
and revise certain provisions of the Tier 2/Gasoline Sulfur regulations
(February 10, 2000), hereinafter referred to as the Tier 2 rule. First,
today's action corrects typographical errors and makes other minor
revisions to clarify the regulations governing compliance with the Tier
2 rule. Second, it modifies the effective date of the regulatory butane
test method for determining the sulfur content of butane, a gasoline
blendstock. Third, today's rule modifies the Geographic Phase-in Area
(GPA) program by replacing the variable standard for GPA gasoline with
a flat average standard of 150 ppm sulfur. Fourth, it allows an
approved small refiner, under limited circumstances, to seek a
temporary adjustment to its interim small refiner per-gallon cap
standard. Finally, it amends certain provisions of the small refiner
and Averaging, Banking, and Trading (ABT) programs as well as
compliance and enforcement provisions to assist regulated entities with
program implementation and compliance.
DATES: This direct final rule is effective September 10, 2002, without
further notice, unless we receive adverse comments or a request for a
public hearing by July 12, 2002. Should we receive any adverse comments
on this direct final rule, we will publish a timely withdrawal in the
Federal Register informing the public that this rule will not take
effect.
ADDRESSES: Comments: All comments and materials relevant to today's
action should be submitted to Public Docket No. A-97-10 at
the following address: U.S. Environmental Protection Agency (EPA), Air
Docket (6102), Room M-1500, 401 M Street, SW., Washington, DC
20460.
Docket: Materials related to this rulemaking are available at EPA's
Air Docket for review at the above address (on the ground floor in
Waterside Mall) from 8 a.m. to 5:30 p.m., Monday through Friday, except
on government holidays. You can reach the Air Docket by telephone at
(202) 260-7548 and by facsimile at (202) 260-4400. You may
be charged a reasonable fee for photocopying docket materials, as
provided in 40 CFR Part 2.
FOR FURTHER INFORMATION CONTACT: Mary Manners, U.S. EPA, National
Vehicle and Fuels Emission Laboratory, Assessment and Standards
Division, 2000 Traverwood, Ann Arbor MI 48105; telephone (734)
214-4873, fax (734) 214-4051, e-mail
manners.mary@epa.gov.
SUPPLEMENTARY INFORMATION: EPA is publishing this rule without a prior
proposal because we view this action as noncontroversial and anticipate
no adverse comment. However, in the "Proposed Rules"
section of today's Federal Register publication, we are publishing a
separate document that will serve as the proposal to adopt the
provisions in this Direct Final rule if adverse comments are filed.
This rule will be effective on September 10, 2002 without further
notice unless we receive adverse comment or a request for a public
hearing by July 12, 2002. If we receive adverse comment on one or more
distinct amendments, paragraphs, or sections of this rulemaking, we
will publish a timely withdrawal in the Federal Register indicating
which provisions are being withdrawn due to adverse comment. We may
address all adverse comments in a subsequent final rule based on the
proposed rule. We will not institute a second comment period on this
action. Any parties interested in commenting must do so at this time.
Any distinct amendment, paragraph, or section of today's rulemaking for
which we do not receive adverse comment will become effective on the
date set out above, notwithstanding any adverse comment on any other
distinct amendment, paragraph, or section of today's rule.
[[Page 40170]]
Regulated Entities
This action will affect you if you produce, distribute, or sell
gasoline.
The table below gives some examples of entities that may have to
comply with the regulations. However, since these are only examples,
you should carefully examine these and other existing regulations in 40
CFR part 80. If you have any questions, please call the person listed
in the FOR FURTHER INFORMATION CONTACT section above.
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Examples of potentially
Category NAICS codes \a\ SIC codes \b\ regulated entities
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Industry......... 324110........... 2911............ Petroleum Refiners
Industry......... 422710........... 5171............ Gasoline Marketers and
422720........... 5172............ Distributors
Industry......... 484220........... 4212............ Gasoline Carriers
484230........... 4213............
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\a\ North American Industry Classification System (NAICS).
\b\ Standard Industrial Classification (SIC) system code.
Access to Rulemaking Documents Through the Internet
Today's action is available electronically on the day of
publication from EPA's Federal Register Internet Web site listed below.
Electronic copies of this preamble, regulatory language, and other
documents associated with today's final rule are available from the EPA
Office of Transportation and Air Quality Web site listed below shortly
after the rule is signed by the Administrator. This service is free of
charge, except any cost that you already incur for connecting to the
Internet.
EPA Federal Register Web Site: http://www.epa.gov/fedrgstr/
EPA-AIR/ (Either select a desired date or use the Search feature.)
Tier 2/Gasoline Sulfur home page: http://www.epa.gov/otaq/
tr2home.htm
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.
Outline of This Preamble
I. Corrections of Typographical Errors and Other Minor Revisions
II. Effective Date for Butane Test Method
III. Standards and Compliance for Refiners, Importers, and
Individual Refineries
A. Parent Company Compliance with the Corporate Pool Average
Standards
B. Partially-Owned Refineries
C. Using Credits and Allotments to Achieve Compliance in 2005
IV. Standards and Compliance for Refiners/Importers That Provide
Gasoline to the Geographic Phase-in Area
A. Standards for Gasoline Sold in the Geographic Phase-in Area
B. Credit Generation Beginning in 2004
C. Compliance with the Corporate Pool Average Standard by GPA
Gasoline Producers
V. Small Refiners
A. Subsidiary Ownership
B. Adjustment of the Small Refiner Per-gallon Sulfur Standard
VI. Allotments and Credits
A. Generation of Credits in 2000
B. Generation of Allotments in 2003
C. Oxygenate Blenders
D. Conversion of Allotments to Credits
E. Deletion of the Discount Factor for Type A Allotments
F. Standard Applicable Under Sec. 80.310
VII. Downstream Standards and Compliance
A. Test Requirements for S-RGAS and Non-S-GAS
Combined to Produce Mid-Grade Gasoline
B. Identifying S-RGAS Prior to Full Receipt Testing
C. S-RGAS Product Transfer Documentation Requirements for
Transfers of Custody
VIII. Compliance Requirements and Enforcement
A. Liability for Geographic Phase-In Area (GPA) Gasoline
B. Recordkeeping for Allotments
C. Attest Engagement Requirements
IX. Administrative Requirements
A. Administrative Designation and Regulatory Analysis
B. Regulatory Flexibility
C. Paperwork Reduction Act
D. Intergovernmental Relations
1. Unfunded Mandates Reform Act
2. Executive Order 13084: Consultation and Coordination
with Indian Tribal Governments
3. Executive Order 13132 (Federalism)
E. Executive Order 13211: Energy Effects
F. National Technology Transfer and Advancement Act
G. Executive Order 13045: Children's Health Protection
H. Congressional Review Act
X. Statutory Provisions and Legal Authority
I. Corrections of Typographical Errors and Other Minor Revisions
Today's rule finalizes corrections of typographical errors and
other minor revisions as described in the following chart. These
revisions do not change the substance or intent of the sulfur
regulations.
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Sec. 80.46(h)..................... Revised to add ASTM standard
method D 3246-96,
"Standard Test Method
for Sulfur in Petroleum Gas
by Oxidative
Microcoulometry,"
which was inadvertently
removed in a prior
rulemaking action.
Sec. 80.195(c)(4)................. Revised the wording of
Sec. 80.195(c)(4)
for clarity. This revision
does not change the
substance or meaning of
this provision.
Sec. 80.205(a).................... Revised to change
"value" to
"level" for
purposes of consistency
with the language of other
regulatory provisions. This
revision does not change
the substance or meaning of
this provision.
Sec. 80.216(f)(1)................. Revised to change
"Sec. 80.219'
to
"Sec. 80.80.2
19(a)" for clarity.
Sec. 80.216(f)(2)................. Revised to change
"Sec. 80.219'
to
"Sec. 80.219(
a)" and add the words
"including GPA"
for clarity.
Sec. 80.275(a)(2)(i).............. Revised to correct a
typographical error in the
equation. The equation
includes the term
"SAa" which
should be "Sa".
Sec. 80.275(a)(2)(v).............. Revised to correct a
typographical error in the
equation. The equation
includes the Term Sa, which
should be Sa.
Sec. 80.275(h).................... Added paragraph (h) to
clarify that allotments and
credits under
Sec. 80.275 are
expressed in ppm-gallons to
be consistent with
regulatory intent and other
regulatory provisions.
[[Page 40171]]
Sec. 80.370(a)(4)................. Revised to change the word
"content" to
"level" for
consistency with other
regulatory provisions. This
revision does not change
the substance or meaning of
this provision.
Sec. 80.410(h)(7)(ii)............. Revised to add reference to
Sec. 80.415 for
clarity.
Sec. 80.415(g)(4)................. Revised to add a parentheses
at the end of the provision
which was omitted in the
final rule.
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II. Effective Date for Butane Test Method
The Tier 2 rule amended 40 CFR 80.46(a) to require the use of
ASTM-D 3246-96 to determine the sulfur content of butane.
However, we did not intend for this requirement to apply until January
1, 2004, when refiners that produce gasoline by blending butane into
previously certified gasoline must comply with a butane sulfur content
standard. As a result, today's rule modifies Sec. 80.46(a) to
clarify that the compliance date of the regulatory butane test method,
ASTM D 3246-96, is January 1, 2004. In the absence of today's
clarification, the compliance date under the Tier 2 rule for the butane
test method requirement would be incorrectly stated as April 10, 2000,
the effective date of the Tier 2 rule.
III. Standards and Compliance for Refiners, Importers and Individual
Refineries
A. Parent Company Compliance With the Corporate Pool Average Standards
The preamble to the Tier 2 rule states that, for purposes of
compliance with the corporate pool average standards in 2004 and 2005,
a parent company is considered to be the refiner of any refinery
facilities owned by wholly-owned \1\ subsidiaries of the parent
company. As such, a parent company must comply with the corporate pool
average standards for any gasoline produced at the refineries owned by
its wholly-owned subsidiaries, as well any gasoline produced at any
refineries it owns. See 65 FR at 6755 (February 10, 2000). The
regulations at Sec. 80.195(c), however, do not contain language
to implement this requirement. As a result, today's rule adds
§Sec. 80.195(c)(6)(i) and (ii) to include such language.
We believe, however, in the situation described above (i.e., where
refineries are wholly-owned by a parent company), the parties (i.e.,
parent and subsidiaries) should have the option to demonstrate
compliance with the corporate pool average standards either on a
corporate parent level or a subsidiary level. Under this approach, a
parent company may: (1) Demonstrate compliance with the corporate pool
average standards for all of the gasoline produced at refineries owned
by its wholly-owned subsidiaries as well as the refineries owned by the
parent company itself, or (2) be deemed in compliance if it
demonstrates compliance for the gasoline produced at its own refineries
and each wholly-owned subsidiary demonstrates compliance for the
gasoline produced at its own refineries. The environmental benefits of
the sulfur rule will not be compromised by allowing this option, since
compliance on a subsidiary level would result in the corporate pool
average standards being met by a greater number of pools with fewer
refineries in each pool over which to average the sulfur content.
Today's rule, therefore, also adds Sec. 80.195(c)(6)(iii) to
provide for this option. Where the parent company opts to have each
subsidiary comply individually, the parent company would remain liable
for any violations by the subsidiary. See Sec. 80.395(a)(11).
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\1\ Compliance with the corporate pool average standards
for partially owned refineries is discussed in preamble section
III.B. below. Note that while a parent company is responsible for
its wholly-owned subsidiaries for purposes of compliance with the
corporate pool average standards, subsidiaries in which a refiner
has a 50 percent or greater ownership interest must be included in a
refiner's employee and crude capacity data for purposes of meeting
the employee and crude capacity criteria for small refiner status
under Sec. 80.225(a). This difference in the way
subsidiaries are treated under the corporate pool and small refinery
provisions is due to the different purposes of these provisions. For
a further discussion of the treatment of subsidiaries under the
small refiner provisions, see preamble section V of today's rule.
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A foreign parent company may demonstrate compliance with the
corporate pool average standards for all of the gasoline produced at
refineries owned by the foreign parent company's wholly-owned U.S.
subsidiaries, or each U.S. subsidiary owned by the foreign parent
company may demonstrate compliance for its own refineries. Where the
foreign parent company opts to demonstrate compliance for its wholly-
owned U.S. subsidiaries, any gasoline imported into the U.S. that was
produced at the foreign parent company's foreign refineries, or at
foreign refineries owned by foreign subsidiaries of the foreign parent
company, would not be included in the foreign parent company's
corporate pool compliance calculations, since the regulations provide
that the sulfur standards, including the corporate pool average
standards, are to be met by the importer for all imported gasoline. See
Sec. 80.195(a)(4). Like a domestic parent company, where
parties opt to have each wholly-owned U.S. subsidiary comply
individually, the foreign parent company would remain liable under
Sec. 80.395(a)(11) for any violations by the subsidiary.
Today's rule also adds language to the reporting provisions in
Sec. 80.370(c) to address the corporate pool compliance options
discussed above. Where a parent company chooses to comply for the
refineries of its wholly-owned subsidiaries, today's rule requires such
parent company to identify in its corporate pool average reports to EPA
all refinery facilities and subsidiaries wholly-owned by the parent
company, and any refinery facilities owned by the parent company's
subsidiaries (in the case of a foreign parent company, any U.S.
refinery facilities owned by the foreign parent company and any U.S.
subsidiaries wholly-owned by the foreign parent company, and any
refinery facilities owned by the foreign parent company's U.S.
subsidiaries). Where the parent company's wholly-owned subsidiaries
comply with the corporate pool average standards individually, each
subsidiary must submit the required corporate pool annual compliance
reports for its own refineries and identify in the reports the parent
company and each refining facility owned by the subsidiary.
B. Partially-Owned Refineries
In some situations a refinery may be owned by more than one party.
The Tier 2 rule specifically addresses situations in which a refinery
is owned by a joint venture. See Sec. 80.195(c)(5). EPA
considers a joint venture to be a situation in which two or more
parties collectively own and operate one or more refineries. See 65 FR
6755. EPA expects that most cases of shared refinery ownership will be
considered joint ventures under the regulations. There are situations,
however, where a refinery is owned by more than one party, but not all
parties participate in the refinery's operation. Although in this
situation the joint owners are not considered a joint venture under the
regulations, such a refinery is considered a separate entity and the
refiner of that refinery is the business entity consisting of the joint
owners. We believe that, in such a situation, one of the owners should
be allowed to include the refinery in its corporate pool for purposes
of compliance with the corporate pool average standards, as the
regulations allow in joint venture situations. As a result, today's
rule adds Sec. 80.195(c)(5)(iii) to allow a refinery that is
collectively owned to be included in
[[Page 40172]]
one of the owner's corporate pool for purposes of compliance with the
corporate pool average standards. Today's rule also revises
Sec. 80.395(a)(12) (providing for joint venture liability) to
include liability for business entities consisting of joint owners of a
refinery or refineries.
C. Using Credits and Allotments To Achieve Compliance in 2005
The regulations currently require a refiner or importer, in 2005,
to demonstrate compliance with the 90 ppm corporate pool average
standard by calculating its actual corporate average sulfur level using
the actual sulfur levels of each batch of gasoline and then applying
allotments, as necessary, to meet the 90 ppm standard. Credits may not
be used to achieve compliance with the corporate pool average standard.
See Sec. 80.315(c)(4). The regulations also require a refiner
for each refinery, or an importer, beginning in 2005, to demonstrate
compliance with the refinery or importer average standard by
calculating the actual refinery or importer sulfur level using the
actual sulfur levels of each batch of its gasoline, and applying
credits, as necessary, to meet the 30 ppm refinery average standard.
The regulations identify the corporate pool average and refinery
average standards as two separate standards and refiners and importers
are required to comply with each standard independently.
In 2005 only, refiners and importers may use allotments as well as
credits to demonstrate compliance with the refinery or importer average
standard.\2\ See Sec. 80.195(b)(4). These credits or allotments
may be obtained from any source. A refiner with more than one refinery
may use credits generated by one or more of its refineries that have an
average sulfur level below 30 ppm toward meeting the refinery average
standard at one of the other refineries in the refiner's corporate
pool. Alternatively, the refinery may choose to bank or sell its
credits, as permitted by the regulations. In 2005, the same allotments
used to demonstrate compliance with the corporate pool standard may be
used by a refinery in the pool toward its demonstration of compliance
with the refinery average standard, or some of the allotments may be
used by one refinery and the remainder used by another refinery or
refineries in the pool. For example, a refiner with two refineries who
obtains 30 allotments to achieve compliance with the corporate pool
standard may also apply all 30 allotments to one refinery, or some of
the allotments to each of the two refineries, toward meeting the
refinery average standard (e.g., 15 allotments to each refinery; 20
allotments to one refinery and 10 allotments to the other; etc.). The
current regulations, however, do not clearly address how allotments may
be used to demonstrate compliance with the corporate pool average
standard and the refinery average standard in 2005. As a result,
today's rule adds Sec. 80.195(b)(4) to make this
clarification.\3\
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\2\ Note, however, that allotments may be converted to
credits and used to demonstrate compliance with the refinery or
importer average standard as provided under Sec. 80.275(e).
\3\ The preamble to the Tier 2 rule states that, in 2005,
a refiner first must demonstrate compliance with the corporate pool
average standard of 90 ppm, and then demonstrate compliance with the
refinery average standard using a maximum of 90 ppm as the average
sulfur level for each refinery, and applying credits to bring each
refinery's average down to 30 ppm. See 65 FR 6760. In a Question and
Answer document dated May 2000, we indicated that this preamble
discussion is not consistent with the manner in which compliance is
demonstrated under the regulations; i.e., compliance with the
corporate pool average standards and with the refinery average
standards is demonstrated separately, and refiners are required to
use actual sulfur levels in computing the refinery average, as
compared to using the presumed levels of 90 ppm for each refinery
after demonstrating compliance with the corporate pool average
standard. As a result, we withdrew the preamble discussion as
guidance for interpreting the regulations on this particular issue.
We stated that the regulations do not impose any particular priority
on compliance with the corporate average and refinery average
standards in 2005. Contrary to statements in the preamble, refiners
need not first demonstrate compliance with the corporate pool
average standard; rather, each standard is independent of the other
and must be met as such.
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IV. Standards and Compliance for Refiners/Importers That Provide
Gasoline to the Geographic Phase-in Area
A. Standards for Gasoline Sold in the Geographic Phase-in Area
In the Tier 2 rule, we established a geographic area in which the
low sulfur gasoline program will be phased-in differently than the
national program. This program, referred to as the Geographic Phase-In
Area (GPA) program, covers seven states in the Rocky Mountains and
Upper Great Plains,\4\ as well as Alaska.
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\4\ Colorado, Idaho, Montana, New Mexico, North Dakota,
Utah, and Wyoming.
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The GPA program provides refiners additional flexibility in
complying with the requirements of the low sulfur gasoline program.
More specifically, the program provides that refiners may temporarily
meet less stringent standards from 2004 through 2006 for gasoline sold
in the GPA. Since the low sulfur gasoline standards under the national
program require compliance with a 30 ppm refinery average standard and
an 80 ppm cap in 2006, the geographic phase-in provides an additional
year to reach those standards. This extra year and the somewhat less
stringent standards during the phase-in provide the refining industry
the opportunity for a more orderly transition to the 30/80 ppm
standards in 2007.
In the First Amendment to the Tier 2 rule (66 FR 19296, April 13,
2001), we identified 74 counties in six states that adjoin the core GPA
states which should be included in the GPA. The intention of this
amendment was to ensure a smooth transition to low sulfur gasoline
nationwide and to mitigate the potential for gasoline supply shortages.
The amended GPA is shown in Figure 1 below.\5\
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\5\ The eight core GPA states contain a number of American
Indian reservations. These reservations are fully included in the
GPA under today's action. The adjacent counties discussed above also
contain 25 American Indian reservations. If a reservation is only
partly within a GPA state or adjacent county, it is considered fully
in the area for purposes of the GPA program. This is consistent with
the inclusion of entire states or counties in the program.
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BILLING CODE 6560-50-P
[[Page 40173]]
[GRAPHIC]
[TIFF OMITTED]
TR12JN02.027
BILLING CODE 6560-50-C
The requirements for gasoline sold in the GPA, as prescribed by the
Tier 2 rule, are summarized in Table 1 below. Gasoline produced by any
refiner and/
[[Page 40174]]
or importer can be sold in the GPA provided that the refiner and/or
importer registers with us (See Sec. 80.217) and sells gasoline
within the GPA that is consistent with the requirements specified in
the regulations.
Table 1. Gasoline Sulfur Standards for the Geographic Phase-In
Area
[Excludes small refiners]
------------------------------------------------------------------------
Compliance as of: 2004 2005 2006
------------------------------------------------------------------------
Refinery GPA Gasoline 150 150 150
Average,\a\ ppm..............
Corporate Pool Average,\b\ ppm 120 90 Not
Applicable
Per-Gallon Cap,\c\ ppm........ 300 300 300
------------------------------------------------------------------------
NOTES
\a\ The refinery average standard for GPA gasoline is the most stringent
of: 150 ppm; the refinery 1997-1998 baseline plus 30 ppm; or the
sulfur level from which early credits were generated plus 30 ppm.
Refiners can use credits or allotments to meet the average.
\b\ Applies only to refiners/importers which sell more than 50 percent
of their gasoline outside the GPA.
\c\ In 2004, both GPA and Non-GPA gasoline may have a sulfur content as
high as 350 in which case the refinery or importer becomes subject to
a correspondingly more stringent cap standard in 2005.
The Tier 2 rule (See Sec. 80.216(a)) states that those
refiners or importers that sell gasoline to the GPA, regardless of
whether they are located within or outside of the area, have refinery/
importer standards for gasoline sold within the GPA that are equal to
the least of (1) 150 ppm, (2) the refinery's or importer's
1997-98 average sulfur level plus 30 ppm or (3) the refinery's or
importer's lowest actual annual sulfur level plus 30 ppm in any year
2000-2003 if credits are generated. The intent of the second and
third conditions for determining the refinery/importer standards, also
known as "anti-backsliding" conditions, was to prevent
refineries that have relatively "clean" (i.e., low sulfur)
baselines from becoming dirtier (i.e., backsliding to 150 ppm) and
producing higher sulfur gasoline during the interim years of the
program.
After the Tier 2 rule was promulgated, one refiner submitted
comments opposing the anti-backsliding concept. This refiner argued
that the anti-backsliding provision potentially eliminates the intended
flexibility of the GPA program. Furthermore, this refiner believed that
the provision creates an unfair, anti-competitive market situation
among refiners competing in the same area (IVA-01). While some
gasoline that is sold in the GPA may have an annual average standard of
150 ppm sulfur, other gasoline that is produced at refineries with
clean baselines is subject to a more stringent standard. Refiners that
currently have access to and rely on sweet (relatively low sulfur)
crude slates are especially concerned. These refiners may not be able
to comply with the program's standards if they lose their access to
these sweet crude slates due to economics (e.g., a given refiner loses
its sweet crude contract to a higher bidder) or lack of availability
(there is some evidence that suggests that crude quality, especially in
PADD IV, is declining and becoming more sour \6\). An unintended
consequence of the anti-backsliding provision is that if such
refineries should lose their current sweet crude slate, they would have
to install desulfurization equipment in order to comply with the GPA
standards. Thus, the GPA program would have little benefit for such
refiners.
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\6\ Swain, Edward J.; Processed-crude Quality in US
Continues Downward Trend; Oil & Gas Journal; March 13, 2000.
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We have reassessed the concerns raised and find that they have
merit on both technical and equity grounds. There is no technical
reason why gasoline sulfur levels would automatically increase at
refineries with cleaner baselines if we eliminated the anti-backsliding
provision. As noted by commenters, however, there are situations where
changed circumstances mean the anti-backsliding provision would have
the unintended consequence of depriving a GPA refinery of any benefit
from the GPA provision. Therefore, we believe it is appropriate to
eliminate the anti-backsliding provisions from the GPA program. As a
result, all gasoline that is designated as GPA gasoline must meet a
refinery average standard for GPA gasoline equal to 150 ppm sulfur from
2004 through 2006 regardless of the refiner's 1997-1998 baseline
or whether such refiner generates credits during the 2000-2003
time frame by producing gasoline with sulfur levels below 150 ppm.
Because no gasoline designated as GPA gasoline to be sold in 2004 has
been produced, the GPA standard finalized by today's rule supercedes
any approvals of GPA standards issued under the prior provisions at
Sec. 80.216(a). Therefore, for any refiner or importer who has
received a letter from EPA approving a GPA standard below 150 ppm, that
refiner's or importer's standard for GPA gasoline is changed to 150 ppm
by today's rule.
Even though we have revised the GPA program to set a refinery or
importer annual average sulfur standard of 150 ppm for gasoline sold in
the GPA, the overall emission benefits of the early years of the Tier 2
rule are not reduced over those described in the final rule. The air
quality analysis of the Tier 2 rule was based on the premise that all
gasoline produced or used in the GPA would be at a sulfur level of 150
ppm. We believe that setting a flat standard of 150 ppm for GPA
gasoline as described above will still allow the objectives of the GPA
program to be achieved. In addition, we expect little or no increase in
the gasoline sulfur levels as a result of today's action and thus
forecast the same air quality benefits.
B. Credit Generation Beginning in 2004
The Tier 2 rule provides that a refiner for any refineries and
importers may generate credits in 2004 and beyond if the annual average
sulfur level of the gasoline that they produce or import during a given
compliance year is less than their applicable annual average gasoline
sulfur standard in that year (See Sec. 80.310). For GPA
gasoline, credits are calculated as follows:
CRa=Va×(SStd −
Sa)
Where:
CRa = Credits generated for the averaging period.
Va = Total annual volume of gasoline produced at a refinery
or imported during the averaging period.
SStd = The least of 150 ppm, the refinery's or importer's
1997-98 baseline, or the refinery's lowest actual annual average
sulfur content for any year from 2000 through 2003 during which the
refinery generated credits or allotments.\7\
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\7\ The definition of SStd for GPA gasoline was
subsequently changed to read "the standard for GPA gasoline
established for a refinery under Sec. 80.216(a)." 66
FR 19296 (April 13, 2001).
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[[Page 40175]]
Sa = Actual annual average sulfur level of gasoline produced
at a refinery or imported during the averaging period exclusive of any
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credits.
As discussed in section IV.A., above, we are eliminating the anti-
backsliding provisions from the GPA program, therefore all gasoline
that is designated as GPA gasoline will now have an annual average
standard equal to 150 ppm sulfur. To prevent refineries that have
existing low gasoline sulfur baselines from generating windfall credits
(now that their GPA standard will be 150 ppm), we are also modifying
the credit generation rules (beginning in 2004) for GPA gasoline. We
believe that the amended regulations will allow for the generation of
credits during the 2004-06 period comparable to the number of
credits that could be generated under the Tier 2 rule, even though the
standard for all GPA gasoline will be 150 ppm sulfur. For example,
through this amendment, a refinery with a 50 ppm sulfur baseline will
have a revised standard of 150 ppm for its GPA gasoline, as opposed to
80 ppm (i.e., 50 ppm baseline + 30 ppm) under the Tier 2 rule.\8\ If
today's rule eliminated the anti-backsliding provisions but did not
revise the credit generation provisions, then the SStd would
always be 150 ppm for purposes of credit generation. Consequently, the
same refiner producing gasoline (assume 10,000 gallons for
simplification) at 80 ppm (which is 30 ppm higher than its existing
baseline) in 2004 for sale in the GPA would generate 700,000 ppm-gal
credits (10,000 gallons * (150−80 ppm sulfur)) without taking any
steps to produce lower sulfur gasoline. Therefore, for purposes of
credit generation for GPA refineries, we are preserving the calculus
used for credit generation purposes in 2004 and beyond (even though
refineries are now subject to a 150 ppm standard) by replacing
"SStd with "SCredit" , as
discussed below.
---------------------------------------------------------------------------
\8\ This assumes that no credits were generated from
2000-2003 by going 10 percent below 50 ppm which would
decrease the standard even further.
---------------------------------------------------------------------------
Under today's final rule, credits for GPA gasoline are calculated
as follows from 2004 through 2006 \9\:
---------------------------------------------------------------------------
\9\ Except for gasoline and diesel producing refineries
that choose the Gasoline/Diesel compliance date option under the low
sulfur diesel fuel program (See Sec. 80.540). Under this
option, refineries that fully comply with the low sulfur diesel fuel
requirements by 2006 may extend their GPA gasoline standards through
2008.
CRa = Va × (SCredit −
Sa)
Where:
CRa = Credits generated for the averaging period.
Va = Total annual volume of gasoline produced at a refinery
or imported during the averaging period.
SCredit = The least of 150 ppm or the refinery's or
importer's 1997-98 baseline or the refinery's lowest annual
average sulfur content for any year from 2000 through 2003 during which
the refinery generated credits or allotments.
Sa = Actual annual average sulfur level of gasoline produced
at a refinery or imported during the averaging period exclusive of any
credits.
From 2004 through 2006, all GPA gasoline will have a standard of
150 ppm sulfur. For credit generation purposes, refineries with
existing baselines cleaner than 150 ppm will generate credits relative
to their baseline while refineries with existing baselines dirtier than
150 ppm will generate credits relative to 150 ppm. Similar to how
credits are generated in 2000 through 2003, credits for GPA gasoline
produced in 2004 through 2006 may only be generated if the annual
average sulfur level for the gasoline produced during the averaging
period is less than 0.9 of the refinery's sulfur level that is used for
credit generation purposes (i.e., 90 percent of the sulfur baseline for
refineries with baselines below the 150 ppm standard and 90 percent of
150 ppm (135 ppm) for refineries with baselines above the standard).
For example, a refinery with a baseline of 100 ppm sulfur that
lowers its sulfur level to 75 ppm in 2004 would generate credits equal
to Va (volume of gasoline produced at the refinery)*
(Scredit−Sa) where Scredit
equals 100 ppm and Sa equals 75 ppm (100 − 75 ppm
equals 25 ppm), thus ppm-gallon credits would equal Va * 25
ppm. On the other hand, a refinery with a baseline of 200 ppm that
lowers its sulfur level to 125 ppm in 2004 would also generate ppm-
gallon credits equal to Va * 25 ppm (150−125 ppm). The
refiner in the first example generates credits from a 100 ppm starting
point (despite the 150 ppm annual average standard applicable to all
GPA gasoline) whereas the refiner in the second example generates
credits from a 150 ppm starting point since its current baseline is not
cleaner than the 150 ppm annual average standard applicable to all GPA
gasoline.
Once a GPA refiner/importer begins complying under the national
program in 2007, credits are generated relative to the 30 ppm refinery
average standard.
In summary, the provisions of this section under today's final rule
eliminate the anti-backsliding standards provision of the Tier 2 rule
and set the standard for GPA gasoline uniformly at 150 ppm for the
duration of the GPA program (in general, from 2004 through 2006). In
addition, this rule modifies the credit generation requirements of the
ABT program that begin in 2004 to prevent the potential for windfall
credits. This modification will allow for the generation of credits
during the 2004-06 period comparable to the number of credits
that could be generated under the Tier 2 rule, even though the standard
for GPA gasoline will be 150 ppm sulfur.
C. Compliance With the Corporate Pool Average Standard by GPA Gasoline
Producers
The Tier 2 rule provides that a refiner or importer must meet the
corporate pool average standards under Sec. 80.195 if GPA-
designated gasoline comprises less than 50 percent of the refiner's or
importer's total gasoline production or volume of imported product
during the annual averaging period. See Sec. 80.216(f). The
preamble to the Tier 2 rule indicates that we intended GPA gasoline
refiners and importers that are subject to the corporate pool average
standards to use the same compliance process as other refiners and
importers subject to the corporate pool average standards in
2004-2005. See 65 FR 6763. Thus, refiners and importers of GPA
gasoline that are subject to the corporate pool average standards must
demonstrate compliance with both the corporate pool average standard
and the applicable refinery or importer average standard in the same
manner as other refiners and importers; i.e., GPA refiners and
importers subject to the corporate pool average standards must comply
with the corporate pool standard and their GPA refinery or importer
average standard (and non-GPA refinery or importer standard)
independently. See preamble section III.C. above. Under this approach,
compliance with the refinery or importer annual average and corporate
pool standards is based on the refinery's or importer's actual sulfur
levels, and credits or allotments, as appropriate, may be applied to
achieve the standard if the actual sulfur level does not meet the
standard. We believe, however, that the current regulations at
Sec. 80.205(f), may be read to be inconsistent with this
approach. This provision provides that, "For GPA refiners subject
to the corporate pool average that produce some GPA gasoline, the
refinery average sulfur value for its GPA gasoline shall be the average
sulfur value of the gasoline after applying credits." Because we
believe this provision may be misleading and is unnecessary, today's
rule deletes this paragraph.
[[Page 40176]]
V. Small Refiners
A. Subsidiary Ownership
Under the Tier 2 rule, a small refiner is defined as any person
who: (1) Produces gasoline at a refinery by processing crude oil
through refinery processing units; (2) employed an average of no more
than 1,500 people, based on the average number of employees for all pay
periods from January 1, 1998, to January 1, 1999; and (3) had an
average crude capacity less than or equal to 155,000 barrels per
calendar day for 1998. See Sec. 80.225(a)(1). Section
80.225(a)(2) provides that, for purposes of determining the number of
employees and crude capacity, the refiner must include the employees
and crude capacity of any subsidiary companies, any parent company and
subsidiaries of the parent company, and any joint venture partners. The
regulations, however, do not specify the level of ownership that is
required before a subsidiary must be included.
We believe that a refining company that has assets against which
capital may be raised, such as subsidiary companies in which it has a
50 percent or greater ownership interest, or whose parent company has
such assets, is in a better position to finance and install
desulfurization equipment to comply with the sulfur standards in 2004.
As a result, today's rule specifies that a subsidiary must be included
in the small refiner's employee and crude capacity calculations if the
refiner or the parent company of the refiner has a 50 percent or
greater ownership interest in the subsidiary. This action is consistent
with the intent of the small refiner hardship provisions to provide
flexibility for small business refiners that lack the resources
available to larger companies to raise capital for investing in
desulfurization equipment by allowing them additional time to comply
with the sulfur standards. This interpretation is also consistent with
the Small Business Administration's regulations regarding size
eligibility and standards. See 13 CFR 121.103.
B. Adjustment of the Small Refiner Per-gallon Sulfur Standard
Since the final Tier 2 rule was issued, EPA has become aware of the
possibility that some small refiners may face unusual circumstances
that could impede their access to the special interim sulfur program
developed for small refiners. We are aware of at least one small
refiner that appears to face extreme difficulty in meeting the minimum
requirements to participate in the interim program, specifically the
per-gallon cap sulfur standard established under Sec. 80.240.
We did not intend for the partial sulfur reductions that the interim
per-gallon standards require in our small refiner interim program to
prevent such small refiners from benefitting from the program. To
address this problem, we are adding a new provision that will, under
limited circumstances, allow an approved small refiner to seek a
temporary adjustment to its interim small refiner per-gallon cap
standard. Such a small refiner will still be required to meet its
established refinery annual average sulfur standards under
Sec. 80.240.
Under today's new provision, a refiner with approved small refiner
status may request that EPA adjust its established per-gallon cap
standard. An application for such a waiver must demonstrate that
complying with the established small refiner per-gallon standard would
effectively require the refiner to comply with the general (non-small-
refiner) sulfur standards in 2004, 2005, and 2006 instead of the less
stringent interim standards in the small refiner program for 2004
through 2007. Depending on the facts provided by the refiner about the
difficulty that the established cap causes, EPA may, in its discretion,
adjust the applicable small refiner per-gallon cap and establish the
duration of such an adjusted per-gallon cap. Under no circumstances
will EPA approve an adjusted per-gallon cap above 450 ppm sulfur or an
adjusted per-gallon cap that applies beyond December 31, 2007.
Any small refiner for which EPA adjusts its per-gallon cap standard
must also obtain and use sulfur credits or allotments to offset the
emission increase from any batch of gasoline that exceeds the
established per-gallon sulfur standard. The number of credits or
allotments required to be used for this offset is calculated from the
difference between the adjusted per-gallon cap and the established cap
under Sec. 80.240. The purpose of this requirement is to ensure
that the overall environmental benefit of the gasoline sulfur program
is maintained. Since excursions of a refinery's gasoline sulfur levels
increase emissions, we believe that it is warranted to require that any
such excess emissions be offset by lower emissions at this or another
refinery. In addition to offsetting the increase in emissions, the
requirement to use credits/allotments will also provide an incentive
for refiners using this provision to minimize the frequency and degree
that their gasoline exceeds their established per-gallon cap standard.
Today's new provision requires the refiner to use sulfur credits or
allotments in numbers equal to the degree that any batches of gasoline
exceed the established per-gallon standard over the course of each year
in which the adjusted cap standard is in effect. Such credits or
allotments must be separate from and in addition to any credits or
allotments used by the refiner to comply with its annual average
standard. The refiner must obtain and use the required total number of
credits or allotments for the year by the time it submits its annual
sulfur batch report. An adjustment to a small refiner's established
per-gallon cap or the use of credits or allotments to offset the
adjustment will not affect compliance with the annual average standard,
which will continue to be based on the actual sulfur levels of each of
that averaging period's gasoline batches and any credits or allotments
applied against the annual average standard.
Under today's new provision, a small refiner that has an adjusted
per-gallon cap will be liable for violations of the regulation if it
either produces a batch of gasoline that exceeds the adjusted cap or it
fails to apply the required number of credits or allotments to offset
the cap adjustment. In the refiner's annual batch report to EPA, it
must demonstrate that the required number of credits or allotments has
been used to offset the per-gallon cap adjustment. A failure to use the
required number of credits or allotments will constitute a violation,
and each subsequent day that the required number of credits or
allotments is not used constitutes a separate day of violation.
Because small refiners constitute a relatively small fraction of
national gasoline production, and because the required credits or
allotments will offset an adjustment of the per-gallon standard, we
believe any adverse environmental consequences of this provision will
be very small.
VI. Allotments and Credits
A. Generation of Credits in 2000
In designing the ABT provisions for the gasoline sulfur program, we
intended to permit refiners to earn sulfur credits for gasoline
produced during the year 2000. The regulations governing the creation
of credits require all gasoline produced during the averaging period,
defined as January 1 through December 31, to be included in the credit
calculation. Because the rule was issued at the beginning of 2000,
refiners that were not in immediate compliance with its sampling,
testing, and documentation requirements were
[[Page 40177]]
unable to generate year 2000 credits. Today's amendment permits
refiners to generate year 2000 credits using an averaging period less
than the full calendar year, beginning with the first full month for
which all required data is available.
B. Generation of Allotments in 2003
Section 80.285(a) provides that early credits in 2000-2003
may only be generated by refiners that produce gasoline from crude oil.
EPA intended this limitation also to apply to the generation of early
allotments, since the same rationale for including this limitation for
early credits applies to early allotments (i.e., refiners that do not
produce gasoline from crude oil do not have the same need for the
allotment program because they will not have to make the same level of
investment in desulfurization technology as refiners that process crude
oil). See 65 FR 6762 for further discussion of the rationale for this
limitation. However, language to implement this limitation for early
allotment generation was inadvertently omitted in the final rule. As a
result, today's rule corrects this oversight by including language in
Sec. 80.275(a)(1) which limits early allotment generation in
2003 to those refiners that produce gasoline from crude oil.
C. Oxygenate Blenders
Under the Tier 2 rule, oxygenate blenders are subject to the
requirements and prohibitions applicable to downstream parties and the
prohibition specified in Sec. 80.385(e), but they are not
subject to the provisions for refiners, including the refinery and
corporate pool average standards in Sec. 80.195. See
Sec. 80.212. Because oxygenate blenders are not subject to the
refinery average standards, the regulations provide that oxygenate
blenders may not generate credits beginning in 2004, since these
credits are generated based on reductions from the refinery average
standard. See Sec. 80.285(b)(3). The same rationale applies to
the generation of allotments in 2004-2005, since allotments are
generated based on reductions from the corporate pool average
standards. See Sec. 80.275(b). However, language to implement
this limitation regarding allotments was inadvertently omitted in the
final rule. Today's rule corrects this oversight by adding
Sec. 80.275(b)(4) which provides that oxygenate blenders may
not generate allotments in 2004-2005. See 65 FR 6761, 6800, for
further discussion of the treatment of oxygenate blenders under the
sulfur rule.
D. Conversion of Allotments to Credits
Section 80.275(c) of the Tier 2 rule states that allotments
generated in 2003 or 2004 which are carried over to 2005 and used to
meet the corporate pool standard in 2005 are discounted by 50 percent.
Such allotments that have been carried over may also be converted into
credits for compliance with the refinery average standard in 2005 and
beyond. As a result, where allotments generated in 2003 or 2004 are
carried over to 2005 and then converted into credits, such credits
would retain only 50 percent of the value of the original allotments
generated in 2003 or 2004. However, the rule also allows allotments to
be converted into credits before being carried over to 2005. Such
credits would not be discounted when they are carried over, and,
therefore, would retain 100 percent of the value of the original
allotments. Further, an allotment that is converted into a credit
before being carried over to 2005 may be reconverted into an allotment
for use in achieving compliance with the corporate pool average in
2005, but the allotment will be discounted 50 percent (i.e., bringing
the value of the carried-over allotment back to what it would have been
if it had never been converted to a credit). See 65 FR at 6765.
Language to implement these conversion requirements was inadvertently
omitted in the final rule. As a result, today's final rule adds
Sec. 80.275(e)(3) to address these requirements.
E. Deletion of the Discount Factor for Type A Allotments
The preamble to the Tier 2 rule states that early allotments
generated in 2003 may be discounted depending on the refiner's actual
sulfur level. If a refiner fully demonstrates compliance by producing
gasoline with an actual annual average sulfur level of zero to 30 ppm,
the allotments retain their full value. For actual annual average
sulfur levels of 31-60 ppm, which are indicative of a partial
demonstration of compliance with the ultimate low sulfur standard, the
allotments are discounted 20 percent. See 65 FR 6759. The current
regulations at Sec. 80.275(a)(2)(i) and (a)(2)(ii), however,
include a discount factor (0.8) for early allotments generated based on
annual average sulfur levels of zero to 30 ppm. This was an error in
the final rule. Today's rule corrects this oversight by eliminating the
discount factor for such allotments. Allotments generated based on
actual annual sulfur levels of 31-60 ppm will continue to be
discounted by 20 percent (thus a discount factor of 0.8).
F. Standard Applicable Under Sec. 80.310
Section 80.310(a) provides that a refiner, for any refinery, or
importer may generate credits in 2004 and thereafter if the annual
average sulfur level for gasoline produced or imported for the
averaging period is less than the applicable refinery or importer
annual average sulfur standard for that refinery or importer in that
year. However, the 30 ppm refinery or importer annual average standard
does not become effective until 2005. See Sec. 80.195(a). As
indicated in the equation in Sec. 80.310(b), EPA intended
credits beginning in 2004 to be generated based on reductions from the
30 ppm annual average standard (or small refiner or GPA standard, as
applicable). See also 65 FR 6763. As a result, today's rule revises
Sec. 80.310(a) to clarify that, for refiners and importers that
are not subject to the small refiner or GPA standards, the refinery or
importer annual average 30 ppm sulfur standard applicable to the
refinery or importer beginning in 2005 applies for purposes of credit
generation in 2004 and beyond.
VII. Downstream Standards and Compliance
A. Test Requirements for S-RGAS and Non-S-RGAS
Combined to Produce Mid-Grade Gasoline
Section 80.210(d)(3) provides that gasoline comprised in whole or
in part of small refiner gasoline (S-RGAS)\10\ may qualify for
the S-RGAS downstream standards provided that: (1) The gasoline
is sampled and tested at the location after the most recent receipt of
gasoline into the tank; and (2) the test result establishes that the
sulfur content of the gasoline is over the cap standard. It is common
in the gasoline distribution system for a terminal to supply transport
trucks with midgrade gasoline by blending regular grade gasoline from
one tank with premium grade gasoline from another tank. This mixing
occurs as the truck is receiving gasoline from the different tanks. We
believe the requirements for sampling and testing S-RGAS under
the sulfur rule may have the effect of constricting the use of this
common blending procedure. For example, if premium grade S-RGAS
is blended with regular grade non-S-RGAS, under the current
regulations, sampling and testing would
[[Page 40178]]
be required before the resulting midgrade gasoline could be designated
as S-RGAS on PTDs.
---------------------------------------------------------------------------
\10\ The sulfur regulations define S-RGAS as
"gasoline that is subject to the standards under
Sec. 80.240 or Sec. 80.270, including Certified
Sulfur-FRGAS as defined in Sec. 80.410, except that no
batch of gasoline may be classified as S-RGAS if the actual
sulfur content is less than the applicable per-gallon refinery cap
standard specified in Sec. 80.195."
Sec. 80.210(a).
---------------------------------------------------------------------------
It was not the Agency's intention to constrict the use of this
common blending procedure to create midgrade gasoline by imposing a
possibly prohibitive new testing requirement on such blending.
Therefore, the Agency is adding Sec. 80.210(e)(5) to clarify
that in instances where S-RGAS is combined with non-S-RGAS
in truck compartments for the sole purpose of producing midgrade
gasoline, the resulting gasoline may be classified on product transfer
documents as S-RGAS even though no S-RGAS sampling and
testing was conducted after the midgrade mixture was created. However,
if the combining of the two products was not for the purpose of
producing midgrade gasoline, this testing exemption would not apply.
B. Identifying S-RGAS Prior to Full Receipt of Gasoline
As indicated in Section A, above, for gasoline to qualify as
S-RGAS, a terminal must sample and test the gasoline subsequent
to the most recent receipt of gasoline into the terminal's storage
tank. See Sec. 80.210(d)(3). The terminal is not required to
perform the testing until the entire load of new gasoline is received
into the storage tank. However, it is a common industry practice for
terminals to provide gasoline to a truck at the terminal's truck rack
at the same time the terminal is receiving gasoline into the same
storage tank that is supplying the truck. In some cases, the gasoline
already in the terminal's storage tank is classified as S-RGAS
when the new delivery of gasoline is received into the tank, while the
new delivery of gasoline is not classified as S-RGAS. In other
cases, the gasoline in the storage tank is not classified as
S-RGAS, while the new delivery of gasoline is classified as
S-RGAS. Until all of the new load of gasoline has been received
into the storage tank, the current rule requires that the truck carrier
be given a product transfer document (PTD) with the designation of the
gasoline already in the storage tank, regardless of the status of the
gasoline from the new delivery.
There is concern about this classification procedure because in
many situations gasoline is bottom-loaded into the terminal storage
tank while the truck rack is also being supplied from the bottom of the
storage tank. Where S-RGAS is loaded into the bottom of a
terminal storage tank containing non-S-RGAS, and the truck is
also being loaded from the tank bottom, the truck may be receiving a
load that properly meets the standards for S-RGAS, but the PTD
for the gasoline would indicate that it is non-S-RGAS. Because of
the non-S-RGAS designation, the higher small refiner standard
would not apply to this gasoline, and, as a result, the gasoline may be
found in violation if tested by the Agency. To remedy this situation,
today's rule adds Sec. 80.210(e)(6) to permit a terminal to
issue to the trucker a PTD which states that the product is
S-RGAS before the storage tank fully receives the load of
S-RGAS product. This provision applies only in situations where
S-RGAS is loaded into a terminal storage tank simultaneously
supplying gasoline to the truck, and only until full receipt of the
load of S-RGAS into the storage tank. At that point, the regular
testing requirements would apply.
C. S-RGAS Product Transfer Documentation Requirements for
Transfers of Custody
The Tier 2 rule requires that on each occasion when downstream
parties transfer title or custody of gasoline that is classified as
S-RGAS, the transferor must provide the transferee with PTDs
identifying the S-RGAS status and standard applicable to such
gasoline. See Sec. 80.210(e)(2). Whether the gasoline is
classified as S-RGAS on the PTDs depends upon 1) the gasoline
being comprised in whole or in part of S-RGAS, 2) the receipt of
a PTD stating that the product is S-RGAS, and 3) a test result
confirming that the sulfur content exceeds the regulatory threshold
under Sec. 80.210(d)(3). The intent of these PTD identification
requirements is to provide the transferee with accurate S-RGAS
information about the gasoline received. Where a downstream party
transferring custody of gasoline provides accurate information as to
S-RGAS status and sulfur standard, as applicable, to its
transferee on its Bill of Lading (BOL), the Agency believes that the
goal of transferring accurate S-RGAS information is effectively
satisfied. Therefore, in situations in which both a custody PTD on a
BOL and a separate title PTD are generated by a downstream party for
the same gasoline, the requirement of S-RGAS status and standard
transmission is satisfied if both the custody transfer PTD and the
title transfer PTD accurately provide the required information, or the
custody transfer PTD provides the required information and the title
transfer PTD indicates that the required information is contained in
the custody PTD. Today's rule adds Sec. 80.210(e)(7) to clarify
these PTD requirements for S-RGAS.
VIII. Compliance Requirements and Enforcement
A. Liability for Geographic Phase-In Area (GPA) Gasoline
Sections 80.395(a)(5) and (a)(6) provide for liability for
violations of the GPA use prohibitions at Sec. 80.219(c). The
language currently in these provisions imposes presumptive liability on
those parties who sold or transferred the gasoline found to be in
violation, as well as on those parties who caused another party to
violate the GPA requirements. However, these provisions do not include
presumptive liability for those parties actually operating the
facilities where the violations occurred the very parties with
the most obvious and logical ties to the violations. The language in
these provisions was meant to replicate the liability language for
similar violations in EPA regulations, such as the Tier 2 rule's cap
standard violations in Sec. 80.395(a)(3) and (a)(4), and the
reformulated gasoline (RFG) program's violations in
Sec. 80.79(a)(1) and (a)(3). These other liability sections
impose presumptive liability not only on the parties who sold or
transferred the gasoline in violation, but also on those parties at
whose facilities the violation occurred. Today's rule revises
Sec. 80.395(a)(5) and (a)(6) to be consistent with the
more logical liability scheme and violation provisions already
incorporated into other EPA fuel programs.
B. Recordkeeping for Allotments
Section 80.365 of the Tier 2 rule contains requirements for
retaining records which demonstrate compliance with the sulfur
standards and requirements. This section is intended to cover records
pertaining to the generation, use, and transfer of credits and
allotments. See 65 FR 6810. Section 80.365(d)(2) contains requirements
regarding the length of time records pertaining to early credits must
be kept. However, this provision incorrectly does not include similar
requirements for early allotments. This was an oversight in the final
rule. Today's rule corrects this oversight by revising
Sec. 80.365(d)(2) to provide that the records required to be
kept for early credits must also be kept for early allotments.
C. Attest Engagement Requirements
Under Sec. 80.415(a)(3) of the Tier 2 rule, if a refinery's
or importer's annual average sulfur content for any year in which early
credits were generated was less than the refinery's or importer's
baseline level, the attest engagement for that refinery or importer
must include
[[Page 40179]]
as a finding the lowest annual sulfur level as the new baseline value.
For GPA gasoline 30 ppm must be added to this new baseline value to
obtain the GPA standard, not to exceed 150 ppm.
The attest provisions of Sec. 80.415(a)(3) were intended to
address the baseline adjustments required under
Sec. 80.216(a)(2) and 80.240(d) for GPA and small
refiners.\11\ However, as currently written, Sec. 80.415(a)(3)
suggests that any refiner or importer who generates early credits in
2000 through 2003 must adjust its baseline if the refinery's or
importer's annual average sulfur content in any year in which early
credits were generated was less than the refinery's or importer's
baseline. This would mean that early credits generated in a subsequent
year would be based on reductions from an adjusted baseline level
rather than the refinery's actual baseline level. However, the
regulations do not require such an adjustment for non-GPA or non-small
refiners. For any annual averaging period from 2000 through 2003, early
credits and allotments are generated based on reductions from the
refinery's 1997-1998 sulfur baseline. See Sec. 80.305.
If, for example, a refinery generates credits in 2002 by producing
gasoline that is 10 percent lower in sulfur content than its
1997-1998 baseline, the refinery does not have to produce even
cleaner gasoline in 2003 to generate credits. Credit generation in 2003
would also be based on reductions from the refinery's 1997-1998
sulfur baseline.
---------------------------------------------------------------------------
\11\ Section 80.240(d) provides that, for any small
refiner who generates early credits or allotments, the applicable
small refinery baseline for purposes of establishing the small
refinery's standard is the lowest annual average sulfur level for
any year in which the refinery generated early credits or
allotments. Section 80.216(a)(2) provides that any GPA refiner whose
actual annual average sulfur level decreases to a level lower than
the refinery's GPA standard during the period 2000 through 2003, the
applicable GPA standard will be the lowest average sulfur level for
any year in which the refinery generated early credits or
allotments, plus 30 ppm, not to exceed 150.00 ppm. As discussed
above in Section IV.A., today's rule deletes the provisions of
Sec. 80.216(a)(2).
---------------------------------------------------------------------------
As a result, today's rule revises the attest provisions to clarify
that the requirements of Sec. 80.415(a)(3) only apply to attest
reports for small refiners that are subject to the baseline adjustment
requirements under Sec. 80.240(d), and GPA refiners that are
subject to the adjustment provisions under
Sec. 80.285(b)(1)(ii) for purposes of credit generation
beginning in 2004. Today's rule also clarifies that the attest
requirements for small refiners in Sec. 80.415(a)(4) apply to
attest reports in 2004 through 2007. In addition,
Sec. 80.415(a) has been renumbered to provide better
organization of these provisions.
Today's rule also adds Sec. 80.415(b)(6) to require the
attest engagement to agree with the information in the refinery's or
importer's batch reports filed with EPA under the RFG/conventional
gasoline regulations, and the refinery's or importer's laboratory test
results, with the information contained in the annual sulfur report
required under Sec. 80.370. This requirement is necessary to
verify the information submitted in the annual report required under
Sec. 80.370. Omission of this requirement was an oversight in
the final rule.
IX. Administrative Requirements
A. Administrative Designation and Regulatory Analysis
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency is required to determine whether this regulatory action would be
"significant" and therefore subject to review by the Office
of Management and Budget (OMB) and the requirements of the Executive
Order. The order defines a "significant regulatory action"
as any regulatory action that is likely to result in a rule that may:
· Have an annual effect on the economy of $100 million
or more or adversely affect in a material way the economy, a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or state, local, or tribal governments or
communities;
· Create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency;
· Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or,
· Raise novel legal or policy issues arising out of
legal mandates, the President's priorities, or the principles set forth
in the Executive Order.
Pursuant to the terms of Executive Order 12866, we have determined
that this final rule is not a "significant regulatory
action."
B. Regulatory Flexibility Act (RFA), as Amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 USC 601 et.
seq.
The RFA generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to notice and comment
rulemaking requirements under the Administrative Procedure Act or any
other statute unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
Small entities include small businesses, small organizations, and small
governmental jurisdictions.
For purposes of assessing the impacts of today's direct final rule
on small entities, small entity is defined as: (1) A small business
refiner that had no more than 1500 employees corporate-wide, based on
the average number of employees for all pay periods from January 1,
1998 to January 1, 1999; and a corporate crude capacity less than or
equal to 155,000 barrels per calendar day for 1999 \12\; (2) a
small governmental jurisdiction that is a government of a city, county,
town, school district or special district with a population of less
than 50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.
---------------------------------------------------------------------------
\12\ This definition of a small business refiner was
established under the Tier 2 Rule. See Sec. 80.225.
---------------------------------------------------------------------------
After considering the economic impacts of today's direct final rule
on small entities, I certify that this action will not have a
significant economic impact on a substantial number of small entities.
This direct final rule will not have any adverse economic impact on
small entities. Today's rule corrects, amends, and revises certain
provisions of the Tier 2 rule (65 FR 6698, February 10, 2000),
regulated entities will find it easier to comply with the requirements
of the Tier 2 rule. More specifically, today's action corrects
typographical errors and makes other minor revisions to clarify the
regulations governing compliance with the Tier 2 rule. Second, it
modifies the effective date of the regulatory butane test method for
determining the sulfur content of butane, a gasoline blendstock. Third,
today's rule modifies the GPA program by replacing the variable
standard for GPA gasoline with a flat average standard of 150 ppm
sulfur. Fourth, it allows an approved small refiner, under limited
circumstances, to seek a temporary adjustment to its interim small
refiner per-gallon cap standard. Finally, it amends certain provisions
of the small refiner and ABT programs as well as compliance and
enforcement provisions to assist regulated entities with program
implementation and compliance.
C. Paperwork Reduction Act
The information collection requirements in this rule have been
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An
Information Collection Request (ICR) document has been
[[Page 40180]]
prepared by EPA (ICR No. 2073.01) and a copy may be obtained from Sandy
Farmer, Collection Strategies Division; U.S. Environmental Protection
Agency (2822); 1200 Pennsylvania Ave., NW, Washington, DC 20460 or by
calling (202) 260-2740. The information requirements are not
effective until OMB approves them.
Certain small refiners may provide this requested information in
order for EPA to consider granting specific relief relating to the
gasoline sulfur requirements. This relief would be in the form of an
adjustment to one of the gasoline sulfur standards that apply to small
refiners, the per-gallon cap sulfur standard. The information will
allow EPA to assess the need for such relief and to grant the
appropriate relief based on the small refiner's situation. This
information will be provided voluntarily by letter and will be treated
by EPA as Confidential Business Information.
EPA estimates that between one and 5 small refiners may request an
adjustment in their per-gallon cap sulfur standards, and that a one-
time effort of about 2 hours will be required to prepare the
application letter. We estimate the total industry-wide burden to be
less than $1000. Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a Federal agency. This
includes the time needed to review instructions; develop, acquire,
install, and utilize technology and systems for the purposes of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements; train personnel to be able to respond to
a collection of information; search data sources; complete and review
the collection of information; and transmit or otherwise disclose the
information.
An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.
D. Intergovernmental Relations
1. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments, and the private sector. Under section 202 of the
UMRA, we generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with "federal
mandates" that may result in expenditures to state, local, and
tribal governments, in the aggregate, or to the private sector, of $100
million or more for any single year. Before promulgating a rule for
which a written statement is needed, section 205 of the UMRA generally
requires us to identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, most cost-effective, or least
burdensome alternative that achieves the objectives of the rule. The
provisions of section 205 do not apply when they are inconsistent with
applicable law. Moreover, section 205 allows us to adopt an alternative
that is not the least costly, most cost-effective, or least burdensome
alternative if we provide an explanation in the final rule of why such
an alternative was adopted.
Before we establish any regulatory requirement that may
significantly or uniquely affect small governments, including tribal
governments, we must develop a small government plan pursuant to
section 203 of the UMRA. Such a plan must provide for notifying
potentially affected small governments, and enabling officials of
affected small governments to have meaningful and timely input in the
development of our regulatory proposals with significant federal
intergovernmental mandates. The plan must also provide for informing,
educating, and advising small governments on compliance with the
regulatory requirements.
This rule contains no federal mandates for state, local, or tribal
governments as defined by the provisions of Title II of the UMRA. The
rule imposes no enforceable duties on any of these governmental
entities. Nothing in the rule will significantly or uniquely affect
small governments.
We have determined that this rule does not contain a federal
mandate that may result in estimated expenditures of more than $100
million to the private sector in any single year. This action has the
net effect of correcting, amending, and revising certain provisions of
the Tier 2 rule. Therefore, the requirements of the UMRA do not apply
to this action.
2. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
Executive Order 13175, entitled "Consultation and
Coordination with Indian Tribal Governments" (59 FR 22951,
November 6, 2000), requires EPA to develop an accountable process to
ensure "meaningful and timely input by tribal officials in the
development of regulatory policies that have tribal
implications." This final rule does not have tribal implications,
as specified in Executive Order 13175. Today's rule does not uniquely
affect the communities of American Indian tribal governments since the
motor vehicle fuel and other related requirements for private
businesses in today's rule will have national applicability.
Furthermore, today's rule does not impose any direct compliance costs
on these communities and no circumstances specific to such communities
exist that will cause an impact on these communities beyond those
discussed in the other sections of today's document. The effect of
today's rule is no more significant than the Tier 2 rule for tribes
under the original provisions of the GPA program; under today's action,
gasoline sold in certain tribal lands will be subject to a flat average
standard of 150 ppm sulfur. Thus, Executive Order 13175 does not apply
to this rule.
3. Executive Order 13132 (Federalism)
Executive Order 13132, entitled "Federalism"
(64 FR 43255, August 10, 1999), requires us to develop an accountable process
to ensure "meaningful and timely input by state and local
officials in the development of regulatory policies that have
federalism implications." "Policies that have federalism
implications" is defined in the Executive Order to include
regulations that have "substantial direct effects on the states,
on the relationship between the national government and the states, or
on the distribution of power and responsibilities among the various
levels of government.
Under Section 6 of Executive Order 13132, we may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the federal government provides the funds necessary to pay the direct
compliance costs incurred by state and local governments, or we
consults with state and local officials early in the process of
developing the proposed regulation. We also may not issue a regulation
that has federalism implications and that preempts state law, unless
the Agency consults with state and local officials early in the process
of developing the proposed regulation.
Section 4 of the Executive Order contains additional requirements
for rules that preempt state or local law, even if those rules do not
have
[[Page 40181]]
federalism implications (i.e., the rules will not have substantial
direct effects on the states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government). Those
requirements include providing all affected state and local officials
notice and an opportunity for appropriate participation in the
development of the regulation. If the preemption is not based on
express or implied statutory authority, we also must consult, to the
extent practicable, with appropriate state and local officials
regarding the conflict between state law and federally protected
interests within the Agency's area of regulatory responsibility.
This rule does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. This rule clarifies and corrects
certain provisions of an earlier rule that adopted national standards
to control gasoline sulfur. The requirements of the rule will be
enforced by the federal government at the national level. Thus, the
requirements of Section 6 of the Executive Order do not apply to this
rule.
E. Executive Order 13211: Energy Effects
This rule is not subject to Executive Order 13211, "Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use" (66 FR 28355, May 22, 2001) because it is
not a significant regulatory action under Executive Order 12866.
F. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Section 12(d) of Public Law 104-113, directs
us to use voluntary consensus standards in our regulatory activities
unless it would be inconsistent with applicable law or otherwise
impractical. Voluntary consensus standards are technical standards
(e.g., materials specifications, test methods, sampling procedures, and
business practices) developed or adopted by voluntary consensus
standards bodies. The NTTAA directs us to provide Congress, through
OMB, explanations when we decide not to use available and applicable
voluntary consensus standards.
This rule references technical standards adopted by us through
previous rulemakings. No new technical standards are established in
today's rule. The standards referenced in today's rule involve the
measurement of gasoline fuel parameters and motor vehicle emissions.
The measurement standards for gasoline fuel parameters referenced in
today's rule are all voluntary consensus standards.
G. Executive Order 13045: Children's Health Protection
Executive Order 13045, "Protection of Children from
Environmental Health Risks and Safety Risks" (62 FR 19885, April
23, 1997) applies to any rule that 1) is determined to be
"economically significant" as defined under Executive Order
12866, and 2) concerns an environmental health or safety risk that we
have reason to believe may have a disproportionate effect on children.
If the regulatory action meets both criteria, section 5-501 of
the Executive Order directs us to evaluate the environmental health or
safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by us.
This rule is not subject to the Executive Order because it is not
an economically significant regulatory action as defined by Executive
Order 12866. Furthermore, this rule does not concern an environmental
health or safety risk that we have reason to believe may have a
disproportionate effect on children.
H. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to Congress and the comptroller General of the United
States. We will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to publication of
the rule in the Federal Register. A Major rule cannot take effect until
60 days after it is published in the Federal Register. This action is
not a "major rule" as defined by 5 U.S.C. 804(2). This rule
will be effective September 10, 2002.
X. Statutory Provisions and Legal Authority
Statutory authority for the fuel controls set in today's final rule
comes from section 211(c) of the CAA (42 U.S.C. 7545(c)), which allows
us to regulate fuels that either contribute to air pollution which
endangers public health or welfare or which impair emission control
equipment. Additional support for the procedural and enforcement-
related aspects of the fuel controls in today's final rule, including
the record keeping requirements, comes from sections 114(a) and 301(a)
of the CAA.
List of Subjects in 40 CFR Part 80
Environmental protection, Fuel additives, Gasoline, Imports,
Labeling, Motor vehicle pollution, Penalties, Reporting and
recordkeeping requirements.
Dated: May 23, 2002.
Christine Todd Whitman,
Administrator.
For the reasons set forth in the preamble, 40 CFR part 80 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: 42 U.S.C. 7414, 7545 and 7601(a).
2. In Sec. 80.46:
a. Paragraph (a)(2) is revised as set forth below; and
b. Paragraph (h) is amended by adding after the phrase "ASTM
standard methods" the phrase "D 3246-96,
"Standard Test Method for Sulfur in Petroleum Gas by Oxidative
Microcoulometry'."
Sec. 80.46 Measurement of reformulated gasoline fuel
parameters.
(a) * * *
(2) Beginning January 1, 2004, the sulfur content of butane must be
determined by the use of ASTM standard method D 3246-96, entitled
"Standard Test Method for Sulfur in Petroleum Gas by Oxidative
Microcoulometry."
* * * * *
3. Section 80.195 is amended by revising paragraphs (b)(4) and
(c)(4), and adding paragraphs (c)(5)(iii) and (c)(6) to read as
follows:
Sec. 80.195 What are the gasoline sulfur standards for
refiners and importers?
* * * * *
(b) * * *
(4) In 2005 only, the refinery or importer annual average sulfur
standard may be met using allotments or credits as provided under
Sec. 80.275, or credits as provided under Sec. 80.315.
The same allotments used to demonstrate compliance with the corporate
pool
[[Page 40182]]
average standard may be used by a refinery in the corporate pool toward
a demonstration of compliance with the refinery average standard, or by
an importer for demonstration of compliance with the importer average
standard. Alternatively, some of the allotments may be used toward a
demonstration of compliance with the refinery average standard by one
refinery in the corporate pool and the remainder used by another
refinery or refineries in the corporate pool.
(c) * * *
(4) The corporate pool average standards do not apply to approved
small refiners subject to the gasoline sulfur standards under
Sec. 80.240.
(5) * * *
(iii) In the case of a refinery that is owned by a two or more
parties that is not a joint venture under this paragraph (c)(5), the
business entity consisting of the joint owners is the refiner of that
refinery. One of the owners of such a refinery may include the refinery
in its corporate pool for purposes of complying with the corporate pool
average standards under this section, with the same requirements and
limitations that apply under paragraph (c)(5)(ii) of this section.
(6)(i) A parent company is the refiner of any refinery facilities
owned by the parent company's wholly-owned subsidiaries for purposes of
compliance with the corporate pool average standards under this
section.
(ii) A parent company must include in its corporate pool all of the
gasoline produced at any refineries owned by the parent company and any
refineries owned by the parent company's wholly-owned subsidiaries; or
(iii) A parent company may be deemed in compliance with the
corporate pool average standards if the parent company includes in its
corporate pool the gasoline produced by any refineries owned by the
parent company, and each wholly-owned subsidiary of the parent company
individually complies with the corporate pool average standards for the
gasoline produced at the refineries owned by the wholly-owned
subsidiary.
* * * * *
4. Section 80.205 is amended by revising the definition of
Sa following the equation in paragraph (a) and removing
paragraph (f) to read as follows:
Sec. 80.205 How is the annual refinery or importer average and
corporate pool average sulfur level determined?
(a) * * *
Where:
Sa = The refinery or importer annual average sulfur
level, or corporate pool average level, as applicable.
* * * * *
5. Section 80.210 is amended by adding paragraphs (e)(5), (e)(6)
and (e)(7) to read as follows:
Sec. 80.210 What sulfur standards apply to gasoline downstream
from refineries and importers?
* * * * *
(e) * * *
(5) Gasoline from a terminal tank containing S-RGAS that is
combined with gasoline from a terminal tank containing non-S-RGAS
for the purpose of blending mid-grade gasoline in a transport truck may
be classified on product transfer documents as S-RGAS, provided
that the S-RGAS was combined with non-S-RGAS for the sole
purpose of producing midgrade gasoline.
(6) Where S-RGAS is being delivered into a terminal storage
tank containing non-S-RGAS which is simultaneously supplying
gasoline to a transport truck, the terminal may identify the gasoline
as S-RGAS before the delivery into the terminal tank is complete
without performing the tests required in paragraph (d)(3) of this
section. Upon completion of the delivery of S-RGAS into the
terminal tank, the terminal may classify the gasoline as S-RGAS
only if it meets the criteria for S-RGAS following testing in
accordance with the requirements of paragraph (d)(3) of this section.
(7) The information relating to S-RGAS required to be
included in product transfer documentation under this paragraph (e)
must be included in the product transfer documents which accompany the
transfer of custody of the gasoline. Product transfer documents that
transfer title of the gasoline may fulfill the requirements under this
paragraph (e) by indicating that the required information relating to
S-RGAS is contained in the product transfer documents which
accompany the transfer of custody of the gasoline.
* * * * *
6. Section 80.216 is amended by revising paragraphs (a) and (f) to
read as follows:
Sec. 80.216 What standards apply to gasoline produced or
imported for use in the GPA?
(a) The refinery or importer annual average sulfur standard for
gasoline produced or imported for use in the geographic phase-in area
under Sec. 80.215, and designated as GPA gasoline under
Sec. 80.219(a), shall be 150.00 ppm.
* * * * *
(f)(1) A refiner or importer whose gasoline production or volume of
imported gasoline in 2004 or 2005 is comprised of more than 50 percent
of gasoline designated as GPA gasoline under Sec. 80.219(a)
shall not be required to meet the corporate pool average standards
under Sec. 80.195 for its gasoline production or imported
gasoline during the applicable averaging period.
(2) A refiner or importer whose gasoline production or volume of
imported gasoline in 2004 or 2005 is comprised of less than 50 percent
of gasoline designated as GPA gasoline under Sec. 80.219(a)
must meet the corporate pool average standards under
Sec. 80.195 for all the refiner's gasoline production or the
importer's volume of imported gasoline, including GPA gasoline, during
the applicable averaging period.
* * * * *
7. Section 80.225 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 80.225 What is the definition of a small refiner?
(a) * * *
(2) For the purpose of determining the number of employees and
crude capacity under paragraph (a)(1) of this section, the refiner
shall include the employees and crude capacity of any subsidiary
companies, any parent company and subsidiaries of the parent company,
and any joint venture partners. A subsidiary under this paragraph means
any subsidiary in which the refiner or parent company has a 50% or
greater ownership interest.
* * * * *
8. A new Sec. 80.271 is added to subpart H under the
heading "Allotment Trading Program" to read as follows:
Sec. 80.271 How can a small refiner obtain an adjustment of
its 2004-2007 per-gallon cap standard?
(a) EPA may in its discretion adjust the small refiner per-gallon
cap sulfur standard established for a refinery under
Sec. 80.240(a) (the established small refiner per-gallon
standard) if the refiner demonstrates that the burden of complying with
the established small refiner per-gallon standard would effectively
prevent the refiner from participating in the small refiner relief
provided in Sec. 80.240. No refiner will be eligible for an
adjustment of its established per-gallon standard above 450 ppm. The
refinery annual average sulfur standards in Sec. 80.240(a) are
not affected by this section.
(b) A refiner wishing to apply for such an adjustment of its
established small refiner per-gallon sulfur standard under
[[Page 40183]]
Sec. 80.240(a) must send a letter to Gasoline Sulfur Program,
U.S. EPA, Office of Transportation and Air Quality, 2000 Traverwood
Dr., Ann Arbor, MI 48105 no later than January 1, 2003. Such
application must include the following information:
(1) A detailed description of the nature of the difficulty that the
per-gallon cap creates;
(2) The refiner's proposed adjusted per-gallon cap standard and the
proposed duration for the adjustment, including an explanation of how a
lower per-gallon cap standard or shorter duration would not address the
hardship;
(3) The refiner's expected actual annual average sulfur level
(i.e., prior to the use of any credits or allotments) for each year
that the adjustment would be in effect;
(4) The refiner's estimate of the number of gallons of gasoline it
produces that will exceed the established small refiner per-gallon
standard under Sec. 80.240(a) for each year that the adjusted
per-gallon cap would apply; and
(5) The number of sulfur credits or allotments that the refiner
estimates will be required under paragraph (d) of this section for each
year that the adjusted per-gallon cap would apply and a plan for
obtaining this number of credits or allotments.
(6) Other relevant information that EPA requests.
(c) EPA will evaluate each application for an adjusted per-gallon
cap sulfur standard on a case-by-case basis. EPA may impose any
reasonable conditions on adjustments granted under this section. EPA
may in its discretion set forth the duration of the adjusted per-gallon
cap sulfur standard but in no case shall it extend beyond December 31,
2007.
(d)(1) A small refiner with an adjusted per-gallon sulfur cap
standard under paragraph (a) of this section must obtain and use sulfur
credits or allotments to offset the amount that the adjusted standard
exceeds the established small refiner per-gallon standard under
Sec. 80.240(a). The number of sulfur credits or allotments
needed for each year that the adjusted per-gallon cap would apply is
calculated on a per-batch basis according to paragraph (d)(2) of this
section and summed over the averaging period.
(2) The formula for determining the number of sulfur credits or
allotments that such a small refiner is required to use for any batch
of gasoline exceeding the established small refiner per-gallon standard
under Sec. 80.240(a) is as follows:
CRb = Vb ×
(Sb−Sc)
Where:
CRb = number of sulfur allotments or sulfur credits needed
for the gasoline batch (ppm-gallons)
Vb = Volume of the gasoline batch (gallons)
Sb = Sulfur level of the gasoline batch (ppm)
Sc = Small refiner per-gallon cap standard established for
that refinery under Sec. 80.240(a), in ppm.
(3) Sulfur credits or allotments used when a small refiner exceeds
an established per-gallon cap sulfur standard under
Sec. 80.240(a) must be separate from and in addition to credits
or allotments used for any other purposes provided under
Sec. 80.275 or Sec. 80.315.
(e) The approving official for an adjustment under this section is
the Director of the Office of Transportation and Air Quality in the EPA
Office of Air and Radiation.
9. Section 80.275 is amended by:
a. Revising paragraph (a)(1);
b. Revising the first equation and second equation in paragraph
(a)(2)(i);
c. Revising the second equation in paragraph (a)(2)(ii);
d. Revising the equation in paragraph (a)(2)(v);
e. Adding paragraphs (b)(4), (e)(3), and (h); and
f. Redesignating paragraph (c)(2) as paragraph (c)(2)(i) and adding
a new paragraph (c)(2)(ii).
The revisions and additions read as follows:
Sec. 80.275 How are allotments generated and used?
(a) * * *
(1) During 2003 only, any domestic or foreign refiner who produces
gasoline from crude oil may have the option to generate credits in
accordance with the provisions of Sec. 80.305 or generate
allotments and credits under paragraph (a)(2) of this section.
(2) * * *
(i) * * *
SATypeB = (30 − Sa) × V
SATypeA = V × 90
* * * * *
(ii) * * *
SATypeA = (SBase − 30) × V
* * * * *
(v) * * *
SATypeA = ((SBase − Sa)
× V) × 0.8
* * * * *
(b) * * *
(4) Oxygenate blenders may not generate allotments under this
section.
* * * * *
(c) * * *
(2) * * *
(ii) Small refiners subject to the standards under
Sec. 80.240 and that have received an adjustment of their per-
gallon cap sulfur standards pursuant to Sec. 80.271(a) may also
use sulfur allotments to meet the requirements of
Sec. 80.271(d)(1) for any refinery that has received such an
adjustment.
* * * * *
(e) * * *
(3) Allotments generated in 2003 or 2004 which are carried over to
2005 are discounted by 50 percent. The discounted allotments may be
used to demonstrate compliance with the corporate pool average standard
in 2005, or they may be converted into credits for use in demonstrating
compliance with the refinery average standard in 2005, or in a
subsequent averaging period, in accordance with the provisions of this
paragraph (e). Any allotments generated in 2003 or 2004 that are
converted into credits before being carried over to 2005 are not
discounted. Any allotments generated in 2003 or 2004 that are converted
into credits before being carried over to 2005 may be reconverted into
allotments for use in demonstrating compliance with the corporate pool
average standard in 2005, but such reconverted allotments are
discounted by 50 percent.
* * * * *
(h) Allotments and credits under this program are in units of
"ppm-gallons".
* * * * *
10. Section 80.285 is amended by revising paragraph (b)(1)(ii) to
read as follows:
Sec. 80.285 Who may generate credits under the ABT program?
* * * * *
(b) * * *
(1) * * *
(ii) Refiners and importers of gasoline designated as GPA gasoline
under Sec. 80.219, using the least of 150 ppm, or the
refinery's or importer's 1997-1998 sulfur baseline calculated
under Sec. 80.295, or the refinery's lowest annual average
sulfur content for any year from 2000 through 2003 during which the
refinery generated credits or allotments (for any party generating
credits under both paragraphs (b)(1)(i) of this section and this
paragraph (b)(1)(ii), such credits must be calculated separately); or
* * * * *
11. Section 80.305 is amended by adding a new paragraph (f) to read
as follows:
Sec. 80.305 How are credits generated during the time period
2000 through 2003?
* * * * *
(f) For gasoline produced during the year 2000, the averaging
period for
[[Page 40184]]
credits generated in accordance with paragraph (a) of this section may
be less than the full calendar year. Such partial-year averaging period
will begin with the first full month for which all applicable sampling,
testing, and documentation requirements are met.
12. Section 80.310 is amended by:
a. Revising paragraph (a);
b. Revising the equation in paragraph (b);
c. Removing the definition of Sstd and adding a
definition of SCredit in its place following the equation in
paragraph (b); and
d. Adding paragraph (d).
The revisions and additions read as follows:
Sec. 80.310 How are credits generated beginning in 2004?
(a) A refiner for any refinery, or an importer, may generate
credits in 2004 and thereafter if the annual average sulfur level for
gasoline produced or imported for the averaging period is less than 30
ppm; or, for refiners that are subject to the small refiner standards
in Sec. 80.240, the small refiner annual average sulfur
standard applicable to that refinery; or, for refiners and importers
subject to the GPA standards in Sec. 80.216, the least of
150.00 ppm, or the refinery's or importer's 1997-1998 sulfur
level calculated under Sec. 80.295, or the refinery's lowest
annual average sulfur content for any year from 2000 through 2003
during which the refinery generated credits or allotments.
(b) * * *
CRa = Va x (SCredit −
Sa)
* * * * *
SCredit = 30 ppm; or the sulfur standard for a small
refinery established under Sec. 80.240; or, for gasoline
designated as GPA gasoline under Sec. 80.219, the least of
150.00 ppm, or the refinery's or importer's 1997-1998 sulfur
level calculated under Sec. 80.295, or the refinery's lowest
annual average sulfur content for any year from 2000 through 2003
during which the refinery generated credits or allotments.
* * * * *
(d) Refiners and importers of GPA gasoline may generate credits
under this section only if the annual average sulfur level for the
gasoline produced or imported during the annual averaging period is
less than 0.90 of the refinery's or importer's sulfur level as
calculated under Sec. 80.295.
13. Section 80.315 is amended by revising the introductory text of
paragraphs (a) and (b)(1) to read as follows:
Sec. 80.315 How are credits used and what are the limitations
on credit use?
(a) Credit use. Credits may be used to meet the applicable refinery
or importer annual average sulfur standards under Sec. 80.195,
Sec. 80.216, or Sec. 80.240, or may be used to meet the
offset requirement under Sec. 80.271(d)(1) for any refinery
with an adjustment of itsper-gallon cap standard pursuant to
Sec. 80.271(a), provided that:
* * * * *
(b) Credit transfers. (1) Credits obtained from other persons may
be used to meet the annual average standards specified in
Sec. 80.195, Sec. 80.216, or Sec. 80.240, or
may be used to meet the offset requirement under
Sec. 80.271(d)(1) for any refinery with an adjustment of
itsper-gallon cap standard pursuant to Sec. 80.271(a), if all
the following conditions are met:
* * * * *
14. Section 80.365 is amended by revising paragraph (d)(2) to read
as follows:
Sec. 80.365 What records must be kept?
* * * * *
(d) * * *
(2) Early credits and allotments. (i) Where the party generating
the credits or allotments does not transfer the credits or allotments,
records must be kept for 5 years from the date of creation, use, or
termination, whichever is later.
(ii) Where early credits or allotments are transferred, records
relating to such credits or allotments shall be kept by both parties
for 5 years from the date the credits or allotments were transferred,
used, or terminated, whichever is later.
* * * * *
15. Section 80.370 is amended by revising paragraph (a)(4) and
adding new paragraphs (a)(7)(v), (c)(4) and (c)(5) to read as follows:
Sec. 80.370 What are the sulfur reporting requirements?
* * * * *
(a) * * *
(4) The annual average sulfur level of the gasoline produced or
imported;
* * * * *
(7) * * *
(v) For any batch of small refiner gasoline produced by any
refinery with an adjustment of its per-gallon cap standard under
Sec. 80.271(a), the number of sulfur credits or allotments
required under paragraph (d)(1) of this section, the number of credits
or allotments used, and the source(s) of these credits or allotments.
* * * * *
(c) * * *
(4) A parent company must identify in the corporate pool average
reports required under paragraph (c)(1) of this section any refinery
facilities owned by the parent company, any subsidiaries wholly-owned
by the parent company, and any refinery facilities of the parent
company's wholly-owned subsidiaries, except as provided in paragraph
(c)(5) of this section.
(5) Where the wholly-owned subsidiaries of a parent company comply
with the corporate pool average standards individually pursuant to
Sec. 80.195(c)(6)(ii):
(i) The corporate pool average reports required under paragraph
(c)(1) of this section must be submitted by each wholly-owned
subsidiary of the parent company;
(ii) Each wholly-owned subsidiary of the parent company must
identify in the corporate pool average reports required under paragraph
(c)(1) of this section the subsidiary's parent company and any refinery
facilities of the subsidiary; and
(iii) The parent company must submit the corporate pool average
reports required under paragraph (c)(1) of this section for any
refinery facilities owned by the parent company which are not the
refinery facilities of the parent company's wholly-owned subsidiaries.
* * * * *
16. Section 80.385 is amended by revising paragraph (b) and adding
a new paragraph (g) to read as follows:
Sec. 80.385 What acts are prohibited under the gasoline sulfur
program?
* * * * *
(b) Cap standard violation. Produce, import, sell, offer for sale,
dispense, supply, offer for supply, store or transport gasoline that
does not comply with the applicable sulfur cap standard under
Sec. 80.195, Sec. 80.216, Sec. 80.210,
Sec. 80.220, Sec. 80.240, or does not comply with an
adjusted cap standard approved for a small refiner under
Sec. 80.271.
* * * * *
(g) Failure to use sufficient sulfur credits or allotments to
offset a per-gallon cap adjustment. For a small refiner that has an
approved adjustment of its per-gallon cap sulfur standard for a
refinery under Sec. 80.271, to fail to obtain (or generate) and
use the required number of sulfur credits or allotments to offset the
revised per-gallon cap sulfur standard under Sec. 80.217(d).
17. Section 80.395 is amended by revising paragraphs (a)(5),
(a)(6), and (a)(12), and adding a new paragraph (a)(13) to read as
follows:
[[Page 40185]]
Sec. 80.395 Who is liable for violations under the gasoline
sulfur program?
(a) * * *
(5) GPA use violation. Any refiner, importer, distributor,
reseller, carrier, retailer, wholesale purchaser-consumer, or oxygenate
blender who owned, leased, operated, controlled or supervised a
facility where a violation of Sec. 80.385(f) occurred, is
deemed in violation of Sec. 80.385(f).
(6) Causing a GPA use violation. Any refiner, importer,
distributor, reseller, carrier, retailer, wholesale purchaser-consumer,
or oxygenate blender who produced, imported, sold, offered for sale,
dispensed, supplied, offered for supply, stored, transported, or caused
the transportation or storage of gasoline that violates
Sec. 80.385(f), is deemed in violation of
Sec. 80.385(c).
* * * * *
(12) Joint venture and joint owner liability. Each partner to a
joint venture, or each owner of a facility owned by two or more owners,
is jointly and severally liable for any violation of this subpart that
occurs at the joint venture facility or facility owned by the joint
owners, or is committed by the joint venture operation or any of the
joint owners of the facility.
(13) Failure to use credits violation. Any small refiner that has
an approved adjustment of its per-gallon cap under Sec. 80.271
and that does not obtain (or generate) and use the required number of
sulfur credits or allotments under Sec. 80.271(d) by the time
it submits its annual report under Sec. 80.370 is deemed in
violation of Sec. 80.385(g).
* * * * *
18. Section 80.405 is amended by adding a new paragraph (e) to read
as follows:
Sec. 80.405 What penalties apply under this subpart?
* * * * *
(e) Any person liable under Sec. 80.395(a)(13) for failing
to obtain (or generate) and use the total required number of sulfur
credits or allotments under Sec. 80.271(d) for a calendar year
is subject to a separate day of violation for each day until the
required number of credits or allotments is used.
19. Section 80.410 is amended by revising paragraph (h)(7)(ii) to
read as follows:
Sec. 80.410 What are the additional requirements for gasoline
produced at foreign refineries having an individual small refiner
sulfur baseline, foreign refineries granted temporary relief under
Sec. 80.270, or baselines for generating credits during 2000
through 2003?
* * * * *
(h) * * *
(7) * * *
(ii) Be licensed as a Certified Public Accountant in the United
States and a citizen of the United States, or be approved in advance by
EPA based on a demonstration of ability to perform the procedures
required in Sec. 80.125 through 80.130,
Sec. 80.415 and this paragraph (h); and
* * * * *
20. Section 80.415 is amended by;
a. Adding paragraphs (a)(2)(iii), (a)(2)(iv), and (b)(6);
b. Removing paragraphs (a)(4) and (a)(5); and
c. Revising paragraphs (a)(3) and (g)(4).
The additions and revisions read as follows:
Sec. 80.415 What are the attest engagement requirements for
gasoline sulfur compliance applicable to refiners and importers?
* * * * *
(a) * * *
(2) * * *
(iii) If the annual average sulfur level for any year in which
credits were generated for 2000 through 2003 was less than the baseline
level under paragraph (a)(1) of this section, for small refiners report
as a finding the lowest annual sulfur level as the new baseline value
for purposes of establishing the small refiner standards under
Sec. 80.240, and for GPA gasoline report as a finding the
lowest annual sulfur level as the new sulfur level for purposes of
credit generation under Sec. 80.310, if lower than 150.00 ppm.
(iv) If the refinery being reviewed is a small refinery and the
annual volume under paragraph (b)(2) of this section is greater than
the baseline volume, calculate the applicable standard in accordance
with Sec. 80.240(c).
(3) Obtain a written representation from the company representative
stating the sulfur value that the company used as its baseline and
agree that number to paragraphs (a)(1) and (a)(2) of this section and
to the reports to EPA.
(b) * * *
(6) Agree the information in the refinery's or importer's batch
reports filed with EPA under Sec. 80.75 and 80.105, and
any laboratory test results, with the information contained in the
annual sulfur report required under Sec. 80.370.
* * * * *
(g) * * *
(4) Obtain the refiner's or importer's representation as to the
portion of the deficit under paragraph (g)(3) of this section that was
resolved with credits, or the portion that was resolved with allotments
in 2004 or 2005 only (compliance deficits for GPA gasoline cannot be
carried forward).
* * * * *
[FR Doc. 02-13802 Filed 6-11-02; 8:45 am]
BILLING CODE 6560-50-P
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