Control of Emissions of Air Pollution From Nonroad Diesel Engines and Fuel [[pp. 28477-28526]]

[Federal Register: May 23, 2003 (Volume 68, Number 100)]
[Proposed Rules]
[Page 28477-28526]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23my03-39]

[[pp. 28477-28526]]
Control of Emissions of Air Pollution From Nonroad Diesel Engines
and Fuel

[[Continued from page 28476]]
[[Page 28477]]

previous year. Equipment manufacturers using the percent of production
allowance, would also have to calculate the percent of production the
exempted engines represented for the appropriate year. Each report
would include a cumulative calculation (both total number and, if
appropriate, the percent of production) for all years the equipment
manufacturer has used the transition provisions for each of the
proposed Tier 4 power categories. In order to ease the reporting burden
on equipment manufacturers, EPA intends to work with the manufacturers
to develop an electronic means for submitting information to EPA.
EPA is requesting comment on whether these reporting requirements
should also apply to the current Tier 2/Tier 3 transition program, and
if so, how these provisions should be phased in for equipment
manufacturers using the current Tier 2/Tier 3 transition provisions.
Because equipment manufacturers are already required to keep the
information we would require under the reporting requirements described
above, we believe such a reporting requirement could be implemented to
cover exempted engines produced in the 2005 model year. We request
comments on the appropriate start date should we adopt such reporting
requirements for equipment manufacturers for the Tier 2/Tier 3
transition program.
d. Labeling Requirements for Engine and Equipment Manufacturers
Engine manufacturers are currently required to label their
certified engines with a label that contains a variety of information.
Under this proposal, we are proposing that engine manufacturers would
be required to identify on the engine label if the engine is exempted
under the Tier 4 transition program. In addition, equipment
manufacturers would be required to apply a label to the engine or piece
of equipment that identifies the equipment as using an engine produced
under the Tier 4 transition program for equipment manufacturers. These
proposed labeling requirements would allow EPA to easily identify the
exempted engines and equipment, verify which equipment manufacturers
are using these exceptions, and more easily monitor compliance with the
transition provisions. Labeling of the equipment could also help U.S.
Customs to quickly identify equipment being imported using the
exemptions for equipment manufacturers.
EPA is requesting comment on whether these labeling requirements
should also apply to the current Tier 2/Tier 3 transition program, and
if so, how these provisions should be phased in for engine
manufacturers and equipment manufacturers. Due to limited impact of
such a labeling requirement, we believe such a requirement could be
implemented to cover model year 2005 engines and equipment using those
engines. We request comments on the appropriate start date should we
adopt such labeling requirements for engine manufacturers and equipment
manufacturers for the Tier 2/Tier 3 transition program.
4. What Are the Proposed Requirements Associated With Use of Transition
Provisions for Equipment Produced by Foreign Manufacturers?
Under the current regulations, importers are treated as equipment
manufacturers and are each allowed the full allowance under the
transition provisions. Therefore, under the current provisions,
importers of equipment from a foreign equipment manufacturer could as a
group import more excepted equipment from that foreign manufacturer
than 80% of that manufacturer's production for the U.S. market or more
than the small volume allowances identified in the transition
provisions. Therefore, the current regulation creates a potentially
significant disparity between the treatment of foreign and domestic
equipment manufacturers. EPA did not intend this outcome, and does not
believe it is needed to provide reasonable leadtime to foreign
equipment manufacturers.
Under this proposal, only the nonroad equipment manufacturer that
is most responsible for the manufacturing and assembling process would
qualify for the allowances or other relief provided under the Tier 4
transition provisions. Foreign equipment manufacturers who comply with
the compliance related provisions discussed below would receive the
same allowances and other transition provisions as domestic
manufacturers. Foreign equipment manufacturers who do not comply with
the compliance related provisions discussed below would not receive
allowances. Importers that have little involvement in the manufacturing
and assembling of the equipment would not receive any allowances or
other transition relief directly, but could import exempt equipment if
it is covered by an allowance or transition provision associated with a
foreign equipment manufacturer. This would allow transition allowances
and other provisions to be used by foreign equipment manufacturers in
the same way as domestic equipment manufacturers, while avoiding the
potential for importers unnecessarily using allowances. For the
purposes of this proposal, a foreign equipment manufacturer would
include any equipment manufacturer that produces equipment outside of
the United States that is eventually sold in the United States.
All foreign nonroad equipment manufacturers wishing to use the
transition provisions would have to comply with all requirements of the
regulation discussed above including: notification, recordkeeping,
reporting and labeling. Along with the equipment manufacturer's
notification described earlier, a foreign nonroad equipment
manufacturer would have to comply with various compliance related
provisions similar to those adopted in several fuel regulations
relating to foreign refiners.\304\ As part of the notification, the
foreign nonroad equipment manufacturer would have to:
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\304\ See, for example, 40 CFR 80.410 concerning provisions for
foreign refiners with individual gasoline sulfur baselines.
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(1) Agree to provide EPA with full, complete and immediate access
to conduct inspections and audits;
(2) Name an agent in the District of Columbia for service of
process;
(3) Agree that any enforcement action related to these provisions
would be governed by the Clean Air Act;
(4) Submit to the substantive and procedural laws of the United
States;
(5) Agree to additional jurisdictional provisions;
(6) Agree that the foreign nonroad equipment manufacturer will not
seek to detain or to impose civil or criminal remedies against EPA
inspectors or auditors for actions performed within the scope of EPA
employment related to the provisions of this program;
(7) Agree that the foreign nonroad equipment manufacturer becomes
subject to the full operation of the administrative and judicial
enforcement powers and provisions of the United States without
limitation based on sovereign immunity; and
(8) Submit all reports or other documents in the English language,
or include an English language translation.
In addition to these proposed requirements, we are requesting
comment on requiring foreign equipment manufacturers that participate
in the transition program to comply with a bond requirement for engines
imported into the U.S. We describe a bond program below which we
believe could be an important tool to ensure that foreign equipment
manufacturers are subject to the same

[[Page 28478]]

level of enforcement as domestic equipment manufacturers. We believe a
bonding requirement for the foreign equipment manufacturer is an
important enforcement tool in order to ensure that EPA has the ability
to collect any judgements assessed against a foreign equipment
manufacturer for violations of these transition provisions. We request
comments on all aspects of the specific program we describe here, but
also on alternative measures which would achieve the same goal. A memo
has been placed in the docket for today's notice that contains draft
regulatory language that would apply if we adopted a bonding
requirement as discussed in this section.\305\
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\305\ ``Potential Bond Regulations for Foreign Equipment
Manufacturers Under the Tier 4 Nonroad Diesel Proposal,'' EPA
memorandum from Leslie Kirby-Miles, U.S. EPA/OECA to Docket A-2001-
28.
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Under a bond program, the participating foreign equipment
manufacturer would have to obtain annually a bond in the proper amount
that is payable to satisfy United States judicial judgments that
results from administrative or judicial enforcement actions for conduct
in violation of the Clean Air Act. The foreign equipment manufacturer
would have three options for complying with the bonding requirement.
The foreign equipment manufacturer could:
(1) Post a bond by paying the amount of the bond to the Treasurer
of the United States;
(2) obtain a bond in the proper amount from a third party surety
agent, provided EPA agrees in advance as to the third party and the
nature of the surety agreement; or
(3) obtain an EPA waiver from the bonding requirement, if the
foreign equipment manufacturer can show that it has assets of an
appropriate value in the United States.
EPA expects the third bond option to address instances where an
equipment manufacturer produces equipment outside the United States
containing flexibility engines, but also has facilities (and thus
significant assets) inside the United States. Under this third option,
such a manufacturer could apply to the EPA for a waiver of the bonding
requirement.
Since EPA's concerns of compliance will relate to the nature and
tier of engine used in the transition equipment, we believe the bond
value should be related to the value of the engine used. Therefore, we
are requesting comment on a value of the bond set at a level designed
to represent approximately 10% of the cost of the engine for each piece
of transition equipment produced for import into the United States
under this program. So that manufacturers have certainty regarding the
bond amounts and so that there isn't a need for extensive data
submittals and evaluation between EPA and the manufacturer, we request
comment on EPA specifying in this rulemaking the estimated average cost
for a Tier 4 engine on which the bond would be based. For example, we
believe cost estimates on the order of those contained in Table 10.3-3
of the draft RIA may be an appropriate basis. Under this approach,
transition equipment using engines in the less than 25 horsepower
category would require a bond of $150 per piece of equipment (10
percent of $1,500), equipment using engines in the 25-50 horsepower
range would require a bond of $250 per piece of equipment (10 percent
of $2,500), etc. We also request comment on whether 10 percent is a
sufficient value for the bond or whether higher values, such as 50
percent, or lower values are more appropriate.
Finally, if a foreign equipment manufacturer's bond is used to
satisfy a judgment, the foreign equipment manufacturer would then be
required to increase the bond to cover the amount used within 90 days
of the date the bond is used.
In addition to the foreign equipment manufacturer requirements
discussed above, EPA also proposes to require importers of exempted
equipment from a complying foreign equipment manufacturer to comply
with certain provisions. EPA believes these importer provisions are
essential to EPA's ability to monitor compliance with the transition
provisions. EPA proposes that the regulations would require each
importer to notify EPA prior to their initial importation of equipment
exempted under the Tier 4 transition provisions. Importers would be
required to submit their notification prior to the first calendar year
in which they intend to import exempted equipment from a complying
foreign equipment manufacturer under the transition provisions. The
importer's notification would need to include the following
information:
(1) The name and address of importer (and any parent company);
(2) The name and address of the manufacturers of the exempted
equipment and engines the importer expects to import;
(3) Number of exempted equipment the importer expects to import for
each year broken down by equipment manufacturer and power category; and
(4) The importer's use of the transition provisions in prior years
(number of flexibility engines imported in a particular year, under
what power category, and the names of the equipment and engine
manufacturers).
In addition, EPA is proposing that any importer electing to import
to the United States exempted equipment from a complying foreign
equipment manufacturer would have to submit annual reports to EPA. The
annual report would include the number of exempted equipment the
importer actually imported to the United States in the previous
calendar year; and the identification of the equipment manufacturers
and engine manufacturers whose exempted equipment/engines were
imported.

C. Engine and Equipment Small Business Provisions (SBREFA)

The Regulatory Flexibility Act (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. Since EPA
believes that the proposed rule may have a significant economic impact
on small businesses, we intend to prepare a regulatory flexibility
analysis as part of this rulemaking, and have prepared an initial
regulatory flexibility analysis (IRFA) pursuant to section 603 of the
RFA which is part of the record for this proposal.
Under section 609(b) of the RFA, a Small Business Advocacy Review
Panel (SBAR Panel or Panel) is required to be convened prior to
publication of an IRFA that an agency may be required to prepare under
the RFA. Section 609(b) directs the Panel to, through outreach with
small entity representatives (SERs), report on the comments of the SERs
and make findings on issues related to identified elements of an IRFA
under section 603 of the RFA (see Section X.C of this preamble for more
discussion on the elements of an IRFA). The purpose of the Panel is to
gather information to identify potential impacts on small businesses
and to develop options to mitigate these concerns. At the completion of
the SBAR Panel process, the Panel is required to prepare a Final Panel
Report. This report includes background information on the proposed
rule being developed, information on the types of small entities that
would be subject to the proposed rule, a description of efforts

[[Page 28479]]

made to obtain the advice and recommendations of representatives of
those small entities, and a summary of the comments that have been
received to date from those representatives. Once completed, the Panel
report is provided to the agency issuing the proposed rule and included
in the rulemaking record. The report provides the Panel and the Agency
with an opportunity to identify and explore potential ways of shaping
the proposed rule to minimize the burden of the rule on small entities
while achieving the rule's purposes and when consistent with Clean Air
Act statutory requirements.
EPA has approached this process with care and diligence. To
identify representatives of small businesses for this process, we used
the definitions provided by the Small Business Administration (SBA) for
manufacturers of nonroad diesel engines and vehicles. The categories of
small entities in the nonroad diesel sector that will potentially be
affected by this rulemaking are defined in the following table:

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Defined as small entity by
Industry SBA if: Major SIC codes
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Engine manufacturers................... Less than 1,000 employees. Major Group 35.
Equipment manufacturers:
--construction equipment........... Less than 750 employees... Major Group 35.
--industrial truck manufacturers less than 750 employees... Major Group 35.
(i.e., forklifts).
--all other nonroad equipment Less than 500 employees... Major Group 35.
manufacturers.
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One small engine manufacturer and 5 small equipment manufacturers
agreed to serve as Small Entity Representatives (SERs) throughout the
SBAR Panel process for this proposal. These companies represented the
nonroad market well, as the group of SERs consisted of businesses that
manufacture various types of nonroad diesel equipment.
The following are the provisions recommended by the SBAR Panel,
including both the provisions that we, EPA, are proposing and those on
which we are requesting comment. As described in section VII.B above,
there are other provisions that apply to all equipment manufacturers;
however, most of the discussion in this section is geared to small
entities only. We request comment on all aspects of both the provisions
recommended by the Panel and on those that we are proposing in today's
action.
1. Nonroad Diesel Small Engine Manufacturers
a. Lead Time Transition Provisions for Small Engine Manufacturers
i. What the Panel Recommended
The transition provisions recommended by the SBAR Panel for engines
produced or imported by small entities are listed below. For all of the
provisions, the Panel recommended that small engine manufacturers and
small importers must have certified engines in model year 2002 or
earlier in order to take advantage of these provisions. Each
manufacturer would be limited to 2,500 units per year as this number
allows for some market growth. The Panel recommended these stipulations
in order to prohibit the misuse of the transition provisions as a tool
to enter the nonroad diesel market or to gain unfair market position
relative to other manufacturers.
Currently, certified nonroad diesel engines produced by small
manufacturers all have a horsepower rating of 80 or less. The
transition provisions that the Panel considered were dependent upon
what approach, or approaches, were proposed for the rulemaking.
? For an approach with two phases of standards:
? An engine manufacturer could skip the first phase and
comply on time with the second; or,
? A manufacturer could delay compliance with each phase of
standards for three years.
? For an approach that entails only one phase of standards,
the manufacturer could opt to delay compliance. It was recommended that
the length of the delay be three years; however the Panel suggested
that we request comment on whether this delay period should be two,
three, or four years. Each delay would be pollutant specific (i.e., the
delay would apply to each pollutant as it is phased in).
The Panel believed that these options could offer an opportunity to
reduce the burden on small manufacturers while at the same time meet
the regulatory goals of the Agency. The Panel further believed that
these options would not put small manufacturers at a significant
disadvantage as they would be in compliance with the Tier 4 standards
in the long run and the options would give them more lead time to
comply. The Panel also felt that a complete exemption from the upcoming
standards (even assuming that such an exemption could be justified
legally) would put these manufacturers at a competitive disadvantage as
the rest of the market would be producing compliant engines and
eventually there would not be equipment designed to accommodate their
engines.
ii. What EPA is Proposing
Due to the structure of the standards and their timing as discussed
in Section III, EPA is proposing transition provisions for small engine
manufacturers which encompass both approaches recommended by the Panel,
with the inclusion of the 2,500 unit limit (as suggested by the Panel)
for each manufacturer.
? First, with regard to PM:
? Engines under 25 hp and those between 75 and 175 hp have
only one standard so the manufacturer could delay compliance with these
standards for up to three years. Based on available data, we believe
that there are no small manufacturers of nonroad diesel engines above
175 hp.
? For engines between 50 and 75 hp, EPA is proposing a one
phase program with the option to delay compliance for one year if
interim standards are met. For this power category we are treating the
PM standard as a two phase standard with the stipulation that small
manufacturers cannot use PM credits to meet the interim standard.
Furthermore, if a small manufacturer elects the optional approach to
the standard (elects to skip the interim standard), no further relief
will be provided.
? Second, with regard to NO_X:
? There is no change in the NO_X standard for
engines under 25 hp and those between 50 and 75 hp. For these two power
bands EPA is proposing no special provisions.
? For engines in the 25-50 hp and the 75-175 hp categories we
are proposing a three year delay in the program consistent with the
one-phase approach recommendation above. Based on available data, we
believe that there are no small manufacturers of nonroad diesel engines
above 175 hp.
b. Hardship Provisions for Small Engine Manufacturers
i. What the Panel Recommended

[[Page 28480]]

The Panel recommended two types of hardship provisions for small
engine manufacturers. These provisions are:
? For the case of a catastrophic event, or other extreme
unforseen circumstances, beyond the control of the manufacturer that
could not have been avoided with reasonable discretion (i.e., fire,
tornado, supplier not fulfilling contract, etc.); and
? For the case where a manufacturer has taken all reasonable
business, technical, and economic steps to comply but cannot.
Either hardship relief provision would provide lead time for up to
2 years, and a manufacturer would have to demonstrate to EPA's
satisfaction that failure to sell the noncompliant engines would
jeopardize the company's solvency, EPA may also require that the
manufacturer make up the lost environmental benefit.
ii. What EPA is Proposing
EPA is proposing to adopt the Panel recommendations for hardship
provisions for small engine manufacturers. While perhaps ultimately not
necessary given the phase-in schedule discussed above, such provisions
provide a useful safety valve in the event of unforeseen extreme
hardship.
c. Other Small Engine Manufacturer Issues
i. What the Panel Recommended
The Panel also recommended that an ABT program be included as part
of the overall rulemaking program. In addition, the Panel suggested
that EPA take comment on including specific ABT provisions for small
engine manufacturers.
ii. What EPA is Proposing
As discussed above, an ABT program has been included in the overall
program in this rule proposal. ABT is being proposed in today's action
as it is intended to enhance the flexibility offered to engine
manufacturers that will be of assistance in making the transition to
meet the stringent standards proposed in today's rules in the leadtime
proposed. As noted in Section VII.A, EPA is proposing to retain the
basic structure of the current nonroad diesel ABT program, though a
number of changes (which will help to accommodate implementation of the
proposed emission standards) are being proposed today.
Though the Panel recommended small engine manufacturer-specific ABT
provisions, such provisions are not being included in this proposal.
EPA does not believe it would be appropriate to provide a different ABT
program for small engine manufacturers, especially given the provisions
mentioned above. Discussions during the SBAR process indicated that
small volume manufacturers would need extra time to comply due to cost
and personnel constraints, and there is little reason to believe that
small manufacturer specific ABT provisions could create an incentive to
accelerate compliance. Small manufacturers would of course be able to
participate in the general ABT program, which EPA believes will provide
sufficient lead time for small entities.
2. Nonroad Diesel Small Equipment Manufacturers
a. Transition Provisions for Small Equipment Manufacturers
i. What the Panel Recommended
The Panel recommended that EPA adopt the transition provisions
described below for small manufacturers and small importers of nonroad
diesel equipment. These transition provisions are similar to those in
the Tier 2/3 rule (see 89.102). The recommended transition provisions
are as follows:
? Percent-of-Production Allowance: Over a seven model year
period, equipment manufacturers may install engines not certified to
the new emission standards in an amount of equipment equivalent to 80
percent of one year's production. This is to be implemented by power
category with the average determined over the period in which the
flexibility is used.
? Small Volume Allowance: A manufacturer may exceed the 80
percent allowance in seven years as described above, provided that the
previous Tier engine use does not exceed 700 total over seven years,
and 200 in any given year. This is limited to one family per power
category.
Alternatively, the Panel also recommended, at the manufacturer's
choice by hp category, a program that eliminates the ``single family
provision'' restriction with revised total and annual sales limits as
shown below:
? For categories <175 hp--525 previous Tier engines (over 7
years) with an annual cap of 150 units (these engine numbers are
separate for each hp category defined in the regulations)
? For categories of £ 175hp--350 previous Tier
engines (over 7 years) with an annual cap of 100 units (these engine
numbers are separate for each hp category defined in the regulations)
The Panel recommended that EPA seek comment on the total number of
engines and annual cap values listed above. In contrast to the Tier 2/
Tier 3 rule promulgated in 1998, SBA expects the transition to the Tier
4 technology will be more costly and technically difficult. Therefore,
the small equipment manufacturers may need more liberal flexibility
allowances especially for equipment using the lower hp engines. The
Panel's recommended flexibility may not adequately address the
approximately 50 percent of small business equipment models where the
annual sales per model is less than 300 and the fixed costs are higher.
Thus, the SBA and OMB Panel members recommended that comment be sought
on implementing the small volume allowance (700 engine provision) for
small equipment manufacturers without a limit on the number of engine
families which could be covered in any hp category.
? Due to the changing nature of the technology as the
manufacturers transition from Tier 2 to Tier 3 and Tier 4, the Panel
recommended that the equipment manufacturers be permitted to borrow
from the Tier 3/Tier 4 flexibilities for use in the Tier 2/Tier 3 time
frame.
? Lastly, the Panel recommended proposing a continuation of
the current transition provisions, without modifications to the levels
or nature of the provisions, that are available to these manufacturers.
To maximize the likelihood that the application of these provisions
will result in the availability of previous Tier engines for use by the
small equipment manufacturers, the Panel recommended that--similar to
the application of flexibility options that are currently in place--
these provisions should be provided to all equipment
manufacturers.\306\
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\306\ The Panel recognized that, similar to the Tier 2/3
standards, it may be necessary to provide transition provisions for
all equipment manufacturers, not just for small entities; and the
Panel recommended that this be taken into account. However, the work
of the SBAR Panel is meant to develop regulatory alternatives for
small manufacturers, thus the Panel nominally recommended transition
provisions for small equipment manufacturers only.
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During the SBAR Panel process, an issue was raised requesting that
EPA establish a provision which would allow small entity manufacturers
to request limited ``application specific'' alternative standards for
equipment configurations which present unusually challenging technical
issues for compliance. The Panel recommended that EPA seek comment on
the need for and value of special application specific standards for
small equipment manufacturers.
ii. What EPA is Proposing
EPA is in fact proposing the Percent-of-Production and Small Volume
Allowances for all equipment manufacturers, and explicitly took the

[[Page 28481]]

Panel report into account in making that proposal (see Section VII.B.
above). The Agency believes that this proposal should provide the type
of transition leeway recommended by the Panel. EPA believes that the
transition provisions could allow small equipment manufacturers to
postpone any redesign needed on low sales volume or difficult equipment
packages, thus saving both money and strain on limited engineering
staffs. Within limits, small equipment manufacturers would be able to
continue to use their current engine/equipment configuration and avoid
out-of-cycle equipment redesign until the allowances are exhausted or
the time limit passes.
With respect to these transition provisions, EPA requests comment
on the Panel's suggested exemption and annual cap values listed above.
As discussed above in Section VII.B, EPA also requests comment on
implementing the small volume allowance provision without the single
family limit provision using caps slightly lower than 700 units, with
this provision being applied separately to each engine power category
subject to the proposed standards.
Similar to the discussion in Section VII.B above, EPA requests
comment on new proposed requirements associated with use of transition
provisions by foreign importers. During the SBREFA Panel process, the
Panel discussed the possible misuse of the transition provisions by
using them as a loophole to enter the nonroad diesel equipment market
or to gain unfair market position relative to other manufacturers. The
Panel recognized that this was a possible problem, and believed that
the requirement that small equipment manufacturers and importers have
reported equipment sales using certified engines in model year 2002 or
earlier was sufficient to alleviate this problem. Upon further
analysis, EPA found that importers of equipment from a foreign
equipment manufacturer could as a group import more excepted equipment
from that foreign manufacturer than 80% of that manufacturer's
production for the United States market or more than the small volume
allowances identified in the transition provisions. This also creates a
potentially significant disparity between the treatment of foreign and
domestic equipment manufacturers. EPA did not intend this outcome, and
does not believe it is needed to provide reasonable leadtime to foreign
equipment manufacturers.
Therefore, as explained earlier in Section VII.B, EPA is requesting
comment on the additional requirement that only the nonroad diesel
equipment manufacturer that is most responsible for the manufacturing
and assembling process, and therefore the burden of complying with the
proposed standards, would qualify for the allowances provided under the
small equipment manufacturer transition provisions. Under this
requirement, only an importer that produces or manufactures nonroad
diesel equipment would be eligible for these transition provisions. An
importer that does not manufacture or produce equipment does not face a
burden in complying with the proposed standard, and therefore would not
receive any allowances under these transition provisions directly, but
could import exempt equipment if it is covered by an allowance or
transition provisions associated with a foreign small equipment
manufacturer. EPA believes that this requirement transfers the
flexibility offered in these transition provisions to the party with
the burden and would allow transition provisions and allowances to be
used by foreign equipment manufacturers in the same way as domestic
equipment manufacturers, while avoiding the potential for misuse by
importers of unnecessary allowances. EPA also sees no reason that this
provision should not apply in the same way to all importers, and thus
(as explained in Section VII.B) is proposing that the provision apply
uniformly.
EPA is also proposing the Panel's recommendation that equipment
manufacturers be allowed to borrow from Tier 4 flexibilities in the
Tier 2/3 timeframe. See the more extended discussion on this issue in
Section VII.B above.
With regard to the Panel recommendation for a provision allowing
small manufacturers to request limited ``application specific''
alternative standards for equipment configurations which present
unusually challenging technical issues for compliance, EPA requests
comment on this recommendation. EPA believes that the need for such a
provision has not been established and that it likely would provide
more lead time than can be justified, and could undermine emission
reductions which are achievable. Moreover, no participant in the SBAR
process offered any empirical support that such a problem even exists.
Nor have such issues been demonstrated (or raised) by equipment
manufacturers, small or large, in implementing the current nonroad
standards. In addition, EPA believes that any application-specific
difficulties can be accommodated by the transition provisions the
Agency is proposing including ABT. Nonetheless, in keeping with the
SBAR recommendations, comment is requested on the value of, and need
for, special application specific standards for small equipment
manufacturers.
b. Hardship Provisions for Small Equipment Manufacturers
i. What the Panel Recommended
The Panel also recommended that two types of hardship provisions be
extended to small equipment manufacturers. These provisions are:
? For the case of a catastrophic event, or other extreme
unforseen circumstances, beyond the control of the manufacturer that
could not have been avoided with reasonable discretion (i.e. fire,
tornado, supplier not fulfilling contract, etc.).
? For the case where a manufacturer has taken all reasonable
business, technical, and economic steps to comply but cannot. In this
case relief would have to be sought before there is imminent jeopardy
that a manufacturer's equipment could not be sold and a manufacturer
would have to demonstrate to the Agency's satisfaction that failure to
get permission to sell equipment with a previous Tier engine would
create a serious economic hardship. Hardship relief of this nature
cannot be sought by a ``integrated'' manufacturer (one which also
manufactures the engines for its equipment).
ii. What EPA is Proposing
EPA is proposing that the Panel recommended hardship provisions be
extended to small equipment manufacturers in addition to the transition
provisions described above. To be eligible for these hardship
provisions (as well as the proposed transition provisions), equipment
manufacturers and importers must have reported equipment sales using
certified engines in model year 2002 or earlier. As explained earlier,
this proposal is needed to thwart misuse of these provisions as a
loophole to enter the nonroad diesel equipment market or to gain unfair
market position relative to other manufacturers. We request comment on
this restriction.
As explained earlier, hardship relief would not be available until
other allowances have been exhausted. Either relief provision would
provide small equipment manufacturers with additional lead time for up
to two model years based on the circumstances, but EPA may require
recovery of the lost environmental benefit.
EPA requests comment on all of the aspects of the proposed hardship
provisions for small equipment manufacturers.

[[Page 28482]]

D. Phase-In Provisions

In Section III we described the proposed NO_X and NMHC
standards phase-in schedule. This phase-in requirement is based on
percentages of a manufacturer's production for the U.S. market. We
recognize, however, that manufacturers need to plan for compliance well
in advance of the start of production, and that actual production
volumes for any one model year may differ from their projections. On
the other hand, we believe that it would be inappropriate and
infeasible to base compliance solely on a manufacturer's projections.
That could encourage manufacturers to overestimate their production of
complying phase-in engines, and could result in significantly lower
emission benefits during the phase-in. We voiced the same concern with
respect to the highway HDDE phase-in schedule (see 66 FR 5109). As in
the highway HDDE program we propose to initially only require nonroad
diesel manufacturers to project compliance with the phase-in based on
their projected production volumes, provided that they made up any
deficits (in terms of percent of production) the following year.
Because we expect that a manufacturer making a good-faith
projection of sales would not be very far off of the actual production
volumes, we are proposing to limit the size of the deficit that would
be allowed, as in the highway program. In all cases, the manufacturer
would be required to produce at least 25% of its production in each
phase-in power category as ``phase-in'' engines (meeting the proposed
NO_X and NMHC standards or demonstrating compliance through
use of ABT credits) in the phase-in years (after factoring in any
adjustments for Early Introduction or Blue Sky Series engine credits;
see Section VII.E). This minimum required production level would be 20%
for the 75-175 hp category if a manufacturer exercises the option to
comply with a reduced phase-in schedule in lieu of using banked Tier 2
ABT credits, as discussed in Section III.B1.b. Another important
proposed restriction is that manufacturers would not be allowed to have
a deficit in the year immediately preceding the completion of the
phase-in to 100%. This would help ensure that manufacturers are able to
make up the deficit. Since they could not produce more than 100% low-
NO_X engines after the final phase-in year, it would not be
possible to make up a deficit from this year. These provisions are
identical to those adopted in the highway HDDE program.

E. What Might Be Done To Encourage Innovative Technologies?

1. Incentive Program for Early or Very Low Emission Engines
In our rulemakings for heavy-duty highway engines and light-duty
Tier 2 vehicles, we expressed our view that providing incentives for
manufacturers to introduce engines emitting at very low levels early,
or at levels significantly below the final standards, is appropriate
and beneficial. We believe that such inducements may help pave the way
for greater and/or more cost effective emission reductions from future
engines and vehicles. We believe this also holds for the early
introduction of low-emitting nonroad diesel engines. We also believe
that the opportunity for a practical early-engine program is even
greater for the nonroad sector than for the highway sector, considering
the long lead times before these proposed nonroad diesel standards
would take effect, the large variety of applications (and therefore
potential pull-ahead opportunities) in the nonroad sector, the large
number of machines fueled at dedicated fuel stations on construction
sites, farms, and industrial complexes, and the widespread availability
of very low sulfur diesel fuel at highway outlets after 2006, even
sooner in some areas. Thus we are proposing an early-engine incentive
program very similar to that adopted for highway engines and vehicles.
Specifically, we are proposing that manufacturers be permitted to
take credit for engines certified to this rule's proposed standards
prior to the 2011 model year in exchange for making fewer engines
certified to these standards in or after the 2011 model year. In other
words, clean engines sold earlier than required reduces the requirement
to sell similar engines later. The emission standards levels must
actually be met by qualifying engines to earn the early introduction
credit, without use of ABT credits. Therefore, the early introduction
engine credit is an alternative to the ABT program in that any early
engines or vehicles can earn either the engine credit or the ABT
emission credit, but not both. The purpose of the incentive is to
encourage introduction of clean technology engines earlier than
required in exchange for added flexibility during the phase-in years.
Any early engine credits earned for a diesel-fueled engine would be
predicated on the assurance by the manufacturer that the engine would
indeed be fueled with low sulfur diesel fuel in the marketplace. We
expect this would occur through selling such engines into fleet
applications, such as municipal maintenance fleets, large construction
company fleets, or any such well-managed centrally-fueled fleet.
Because obtaining a reliable supply of 15 ppm maximum sulfur diesel
fuel prior to the 2011 model year will require some effort by nonroad
diesel machine operators, we believe it is necessary and appropriate to
provide a greater incentive for early introduction of clean diesel
technology. Therefore, we propose to count one early diesel engine as
1.5 diesel engines later. This extra early credit for diesel engines
means that fewer clean diesel engines than otherwise would be required
may enter the market during the years 2011 and later. But, more
importantly, it means that emission reductions would be realized
earlier than under our base program. We believe that providing
incentives for early emission reductions is a worthwhile goal for this
program, because improving air quality is an urgent need in many parts
of the country as explained in Section II, and because the early
learning opportunity with new technologies can help to ensure a smooth
transition to Tier 4 standards. Therefore, we are proposing these
provisions for manufacturers willing to make the early investment in
cleaner engines.
We are proposing to provide this early introduction credit to
diesel engines at or above 25 hp that meet all of today's Tier 4
emissions standards (NO_X, PM, and NMHC) in the applicable
power category. We are also providing this early introduction credit to
diesel engines that pull-ahead compliance with only the PM standard.
However, a PM-only early engine would offset only the ``phase-out''
engines during the phase-in years (those required to meet the Tier 4
standard for PM but not for NO_X or NMHC); it would not
offset engines required to meet the Tier 4 NO_X, NMHC, and PM
standards. Tier 4 engines certified to, or required to meet, the 2008
PM standard would not participate in this program, either as credit
generators or as credit users.
An important aspect of the early incentive provision is that it
must be done on an engine count basis. That is, a diesel engine meeting
new standards early would count as 1.5 such diesel engines later. This
contrasts with a provision done on an engine percentage basis which
would count one percent of diesel engines early as 1.5 percent of
diesel engines later. Basing the incentive on an engine count would
alleviate any possible influence of fluctuations in engine sales in
different model years.

[[Page 28483]]

Another important aspect of this proposed program is that it would
be limited to engines sold prior to the 2011 model year for engines at
or above 175 hp, prior to the 2012 model year for engines between 75
and 175 hp, or prior to the 2013 model year for engines between 25 and
75 hp. In other words, as in the highway program, nonroad diesel
engines sold during the transitional ``phase-in'' model years would not
be considered ``early'' introduction engines and would therefore
receive no early introduction credit. However, such engines and
vehicles would still be able to generate ABT credits. As with the
phase-in itself, and for the same reasons, we are proposing that an
early introduction credit could only be used to offset requirements for
engines in the same power category as the credit-generating engine (see
Section III.B).
As a further incentive to introduce clean engines and vehicles
early, we are also proposing a provision that would give manufacturers
an early introduction credit equal to two engines during or after the
phase-in years. This ``Blue Sky'' incentive would apply for diesel
engines achieving standards levels at one-half of the proposed long-
term NO_X standard while also meeting the NMHC and PM
standards. Due to the extremely low emission levels to which these Blue
Sky series engines and vehicles would need to certify, we believe that
the double engine count credit is appropriate. Table VII.E-1 shows the
emission levels that would be required for diesel engines to earn any
early introduction credits (other than ABT credits).

Table VII.E-1.--Proposed Program for Early Introduction of Clean Engines
At or Above 25 hp
------------------------------------------------------------------------
Per engine
Category Must meet \a\ credit
------------------------------------------------------------------------
Early PM-only \b\............. 0.01 g/bhp-hr (=75 hp) or PM 0.02
g/bhp-hr PM (<75 hp)
or 0.02 g/bhp-hr PM
(<75 hp).
Early Engine \b\.............. above-indicated PM 1.5-to-1
standard +
0.30/0.14 g/bhp-hr NO_X
/ NMHC (>=75 hp) or
3.5 g/bhp-hr NMHC +
NO_X (<75 hp).
Blue Sky Series Engine........ as above for Early 2-to-1
Rnginr, except must
meet 0.15 g/bhp-hr
NO_X standard.
------------------------------------------------------------------------
Notes:
\a\ Engines in all 3 categories must also meet the Tier 4 crankcase
emissions requirements.
\b\ Engine count credits must be earned prior to the start of phase-in
requirements in applicable power categories (prior to 2103 for 25-75
hp engines).

We welcome comment on these proposed provisions, as well as other
ideas for encouraging the introduction of Tier 4 engines early, or of
engines cleaner than Tier 4 levels. One area we especially seek comment
on is whether or not engines below 25 hp that achieve the proposed
long-term Tier 4 PM standard for 25-75 hp engines of 0.02 g/bhp-hr, or
engines below 75 hp that achieve the proposed long-term Tier 4
NO_X standard for £75 hp engines of 0.30 g/bhp-hr,
should gain credits under this program that could be used to offset
requirements for larger engines, as a means of encouraging the
migration of clean technologies to smaller engines.
2. Continuance of the Existing Blue Sky Program
In the 1998 final rule, the Agency established its original Blue
Sky Series Engine program for nonroad diesel engines (63 FR 56968; see
preamble Section III.I). This program encourages the early introduction
of engines with emission levels (as measured on a transient test) about
40% lower than the Tier 2 standards levels. Manufacturers could
designate these engines as Blue Sky Series engines and sell them for
use in state, municipal, or commercial programs calling for these
cleaner engines (but not in the ABT program, to avoid double-counting
of emission reductions). Because the Agency's direction for the nonroad
engine program was not completely settled at the time, the 1998 final
rule limited the Blue Sky program to engines built in the 2004 and
earlier model years, but discussed our intent to consider extending it
later. This Tier 4 proposal does provide more clarity for the future
direction of the nonroad engine program, and so at this time we are
asking for comment on extending or revising the existing Blue Sky
Series engine program. We believe that the levels set for the existing
Blue Sky program are not stringent enough to warrant their continuance
into the Tier 4 years, but we also note that the lack of a transient
certification test in Tier 3 may make continuance of this program
beyond 2004, perhaps through Tier 3 (and Tier 2 for engines under 50
hp), useful. We welcome comment on this, as well as on any experience
with the program thus far, plans to use it in the future, whether the
standards and test cycle should be changed and, if so, beginning in
what model year.

F. Provisions for Other Test and Measurement Changes

This section contains further detail and explanation regarding
several related nonroad diesel engine emissions test and measurement
provisions. There are five topics which will be discussed: (1) EPA's
proposed supplemental nonroad transient test; (2) an additional cold
start transient test requirement for nonroad diesel engines; (3) a
provision for control of smoke testing; (4) steady-state testing; (5)
maximum test speed; and (6) general improvements to test procedure
precision.
1. Supplemental Transient Test
Nonroad diesel engines and equipment for the most part run on a
more transient basis than their highway diesel counterparts through
operations such as shifting loads, powering auxiliary equipment and
performing repetitive tasks. A smaller, but significant, transient
segment of nonroad equipment operates in a constant-speed manner for
most or all of its useful life as with electrical generating sets, arc
welders and the like. However, nonroad test regulations to date have
tended to not capture a broad area of real world operating
characteristics and the emissions which result from these modes of
equipment operation. The Agency believes that it is important to ensure
that nonroad engines meet emission standards in-use under typical
operating conditions so that the expected benefits of the program will
be achieved over the life of the program. The supplemental nonroad
diesel engine transient test provisions EPA is proposing are intended
to help achieve this goal. Steady-state emission testing of nonroad
diesel engines will be retained because it covers types of in-use
diesel engine

[[Page 28484]]

operation not represented in nonroad diesel transient operation.
Steady-state emission testing provides a benchmark as well for simpler
test programs, like Selective Enforcement Audits (SEAs).
As explained in section III.C. above, EPA is proposing to
supplement its steady-state emission testing in nonroad diesel engines
with a transient duty emission test procedure for nonroad diesel
engines, the Nonroad Transient Composite (NRTC) \307\ test cycle. The
Agency's NRTC cycle is described in proposed regulations at 40 CFR part
1039. A detailed discussion of the proposed transient test cycle and
its derivation is contained in Chapter 4 of the Draft RIA for this
proposal. Like current nonroad diesel standards, any new emission
standards would apply to certification, Selective Enforcement Audits
(SEAs), and equipment in actual use for engines covered by the
standards.
---------------------------------------------------------------------------

\307\ Memoranda to Docket A-2001-28: ``Speed and Load Operating
Schedule for the Nonroad Transient Composite test cycle'' and ``NRTC
Cycle Construction''.
---------------------------------------------------------------------------

EPA's supplemental nonroad transient test will apply to a nonroad
diesel engine when that engine must first show compliance with EPA's
proposed Tier 4 PM and NO_X+NMHC emissions standards which
are based on the performance of the advanced post-combustion emissions
control systems (e.g. CDPFs and NO_X adsorbers), with the
specific exception of engines under 25 hp for PM and under 75 hp for
NO_X. The transient duty cycle would be applicable to Tier 4
phase-in engines, as well as the phase-out engines (as defined in
section III.B.1.b of this preamble). However, we are seeking comment on
whether the transient test procedure should only be required for the PM
standard for phase out engines. The table VII.F.-1 below outlines the
dates for implementation of this requirement and notes specific
exceptions for phase-in of some engine standards.

Table VII.F.-1. Implementation Model Year for Nonroad Transient Testing
------------------------------------------------------------------------
Transient test
Power category implementation
model year \a\
------------------------------------------------------------------------
< 25 hp................................................. 2013
25 <= hp < 75........................................... \b\ 2013
75 <= hp < 175.......................................... 2012
175 <= hp <= 750 hp..................................... 2011
£750 hp....................................... \c\ 2011
------------------------------------------------------------------------
Note:
\a\ We are taking comment on whether the transient test procedure should
only be required for the PM standard for phase out engines under 750
hp and we are seeking comment on not requiring the transient test
procedure for carry over engines over 750 hp.
\b\ The transient test would apply in 2012 for any engines in the 50-75
hp range that choose not to comply with the proposed 2008 transitional
PM standard.
\c\ Beginning in 2014, when the phase-in has been completed, the
transient test would apply to all nonroad engines £750 hp,
however we are taking comment on this approach.

While manufacturers of nonroad diesel engines under 75 hp are not
subject to the transient test procedure and therefore not required to
submit data demonstrating that their engines will meet the Tier 4
nonroad PM emission standard beginning in 2008, it is our expectation
that manufacturers, in anticipation of the transient test requirements
and in accordance with applicable defeat device prohibitions, would
design their engines with effective, in-use control over the expected
range of operating conditions, including transients. Given this, we
feel this affords a good balance to address workload constraints for
these manufacturers as they prepare for addressing Tier 4 compliance.
As explained earlier in section III of this preamble, actual submission
of transient test data will not be required of engine manufacturers in
these power categories until 2013.\308\ EPA recognizes that the timing
of interim standards for these engines could otherwise force
manufacturers of smaller engines to have to certify under the proposed
NRTC duty cycle test requirement before the requirement applies to the
broader market of engine manufacturers in the 2011 to 2013 time frame.
---------------------------------------------------------------------------

\308\ See Note ``b'' in Table VII-F-1 above for engines between
25 and 75 hp (19-56 kW).
---------------------------------------------------------------------------

The Agency notes however that some manufacturers have reported
difficulties measuring transient PM emissions in 750 hp and over
engines under full-flow constant volume sampling (CVS) emission
measurement systems. It has been reported that this may be due to
difficulties apportioning the large exhaust volumes to sample
emissions. Additionally, manufacturers have raised concerns regarding a
requirement to conducttransient testing for engines over 750 hp, based
on concerns related to facility impacts and sales volumes that are
particular for engines over 750 hp. To address the concerns raised, the
Agency is taking comment on not requiring the engine manufacturer to
conduct transient testing for engines over 750 hp for purposes of
certification. Manufacturers would have the option to submit an
engineering analysis that demonstrates compliance with the applicable
transient standard. This engineering analysis would have to include
relevant test data, such as steady state test data, that would support
the engineering analysis.
Similarly, PM exhaust emissions gathered from these large engines
using partial flow sampling systems (PFSS) tend to be high in volatile
PM fractions \309\ under some low load operating modes. To date,
volatile PM measured from PFSS has not been proven to be consistently
comparable to volatile PM measured by a full-flow CVS. The pressure
across the filter and other sample zone conditions, coupled with
differences in the dilution rate and method and residence time, may
combine to yield a different PM composition in PFSS than in full-flow
CVS systems at these operating conditions. EPA requests comment from
manufacturers on the use of PFSS test practices for PM emission data
collection in these large displacement engines.
---------------------------------------------------------------------------

\309\ Memorandum to Docket ``Partial Flow Testing Concerns in
Large Nonroad Diesel Engines as Regards Emission Testing Through
Partial Flow Sampling'', Docket A-2001-28.
---------------------------------------------------------------------------

EPA recognizes that there may be practical difficulties with
emission testing in large nonroad diesel engines over 750 hp, systems
which often have multiple exhaust manifolds and may incorporate several
catalysts or other pieces of emission control equipment. Further, the
Agency does not intend at this time to require that manufacturers use
PFSS to determine PM emissions from their engines for certification. A
large engine manufacturer may, however, choose to submit PM data to the
Agency using PFSS as an alternative test method, if that manufacturer
can demonstrate test equivalency using a paired-T test, as outlined in
regulations at 40 CFR 86.1306-07.
EPA is also proposing, as an alternative to the NRTC for a limited
class of engines, a Constant Speed Variable Load (CSVL) transient duty
cycle. The CSVL transient duty cycle is derived from the EPA's Arc
Welder Highly Transient Torque application duty cycle. The CSVL cycle
is described in the proposed regulations at 40 CFR 1039.510. Because of
the more limited range of engine operation in the CSVL cycle,
manufacturers must ensure that engines certified with data generated
with this cycle are used exclusively in constant-speed applications.
Accordingly, these engines must include labeling information indicating
this limited emission certification. An example of engines in this
category of

[[Page 28485]]

nonroad diesel equipment include power generating sets which are very
tightly governed for operating speed changes. Other ``constant speed''
equipment may be less closely regulated for changes in speed such as
those that utilize a 3% droop-type of engine speed governor. One might
expect that this latter group would more easily pass cycle performance
statistics over a constant speed transient test than the more speed
change-sensitive former group, represented by electrical generating
sets, for example. However, both types of constant speed engines
experience some fluctuations in speed and load during operation in-use
and the CSVL duty cycle would capture emissions from these infrequent
modes of operation, as well.
Transient testing requires consideration of statistical parameters
for verifying that test engines adequately follow the prescribed
schedule of speed and load values. The proposed regulations in Sec.
1065.530 detail these statistical parameters (or ``cycle statistics'')
for nonroad diesel engines. These values are somewhat different than
the comparable values for highway diesel engines to take into account
the characteristics of the nonroad composite cycle and the CSVL cycle.
Note also that we are proposing to modify certain cycle statistics
previously established for nonroad spark-ignition engines. These
changes generally allow testing spark-ignition engines in a way that
follows the speed and load traces somewhat less precisely than
previously established. All of the proposed changes for spark-ignition
engines are consistent with the comparable cycle statistics we are
proposing for nonroad diesel engines.
While designed to control for a broad range of constant-speed
nonroad engines, the Agency's CSVL cycle has an average speed which may
be lower than the speed which a manufacturer considers optimal for
their engines in-use. Further, EPA recognizes that some constant speed
equipment may operate near or at its rated engine rpm during much of
that equipment's useful life. As such, EPA is proposing that constant-
speed engines tested in the laboratory with installed speed governors
be required to meet cycle statistics for engine load, but not for
engine speed. This addresses the concern that different engines may
have different degrees of engine speed variation and that some engines
may be set to operate at speeds slightly different than the defined
point of maximum test speed. At the same time, the installed governor
forces the test engine to operate in a way that is representative of
in-use operation. This is described further in Chapter 4 of the Draft
RIA for this rulemaking.
Engine manufacturers have raised additional concerns about
designing constant-speed engines to meet emission standards over the
CSVL cycle. These concerns generally focus on the fact that the cycle
has relatively light engine loads and is derived from an arc welder
powered by a naturally aspirated engine. Manufacturers questioned the
representativeness of this cycle for generators, which is a more common
application for constant-speed engines. We continue to believe that
transient testing of these engines will add assurance that they control
emissions under real in-use operation. While the CSVL cycle does not
capture the full operating experience of every engine application, we
believe that engines designed to this cycle will control emissions
effectively under other types of transient operation not specifically
included in the certification procedure. Especially given the
anticipated emission-control technologies, we believe engines that are
capable of meeting emission standards on the CSVL cycle will have the
transient-response characteristics that are appropriate for controlling
emissions at higher engine loads and for less dynamic transient
operation. At the same time, we share engine manufacturers' interest in
creating duty cycles that achieve in-use emission reductions without
requiring approaches that lead to laboratory improvements unrelated to
an engine's in-use operation. We are therefore expecting to continue
discussions with engine manufacturers to pursue the possibility of
developing a constant-speed transient cycle that addresses these
concerns. We request comment on the extent to which the CSVL cycle will
pose design burdens or constraints unrelated to improving in-use
emission control.
EPA recently adopted a similar transient duty cycle for spark-
ignition constant-speed engines (67 FR 68242, 68298-99, November 8,
2002). This duty cycle, which is based on the same underlying engine
operation of an arc welder powered by a diesel engine, includes a
combination of equal parts typical and high-transient operation. There
was no effort to modify the schedule of engine operation to make it
more representative of spark-ignition engines, so the expectation was
that the same cycle would eventually apply to nonroad diesel engines.
Aside from the different selection of engine operation from the
available operating welder described above, the proposed constant-speed
transient cycle includes several adjustments that would need to be
factored into the ``spark-ignition'' cycle before it could be applied
to nonroad diesel engines. These adjustments include renormalization
with a more robust engine map (based on updated specifications of the
original engine) and ``I-alpha'' corrections to synchronize
measurements made with and without a flywheel (see Section 4.2.8.1 of
the Draft RIA). EPA requests comment on whether the previously adopted
constant-speed transient cycle (in modified form) should apply equally
to nonroad diesel engines. Conversely, if EPA adopts the proposed
constant-speed transient cycle for nonroad diesel engines, we would
expect to change the regulations for spark-ignition engines to align
with the conclusions in this rulemaking. EPA accordingly requests
comment on these same issues as they relate to spark-ignition engines.
EPA is proposing an optional test cycle specifically for engines
used in transport refrigeration units (TRUs). These engines would be
certified to a four-mode steady-state duty cycle, developed by the
California-EPA Air Resources Board.\310\ Two modes would be run at the
engine's maximum test speed, one mode at 50% of observed engine torque
and the other mode at 75% of observed engine torque. The third and
fourth modes would be run at the engine's intermediate test speed and,
again, one mode would be run at 50% of observed engine torque and the
other mode at 75% of observed engine torque. All four modes would be
weighted equally in determining an operating mode's contribution to the
engine's emissions.
---------------------------------------------------------------------------

\310\ Information on the proposed TRU cycle may be found on the
California ARB Web site at http://www.arb.ca.gov/diesel/dieselrrp.htm.

---------------------------------------------------------------------------

Manufacturers certifying engines to the TRU cycle would need to
state on the emission control label that the engines may only be used
in TRUs, provide installation instructions to ensure they will operate
only in the modes covered by the test cycle, and keep records on
delivery destinations for these engines. Although these engines would
not be subject to a transient duty cycle, they would be subject to not-
to-exceed standards based on any normal operation that they might
experience in the field. Manufacturers of these engines may petition
EPA at certification for a waiver of the requirement to provide smoke
emission data for their constant-torque engines. We request comment on
whether different modes, or different weighting

[[Page 28486]]

factors, would be more appropriate for characterizing TRU emissions.
2. Cold Start Testing
EPA is proposing to include a requirement for a cold start
transient test to be run in conjunction with the Agency's proposed
nonroad diesel engine transient test. While EPA does not have available
a database of emission information to characterize cold start emissions
from all power categories of nonroad diesel engines, EPA has been able
to analyze the second-by-second in-use operation of some forty pieces
of Tier 1 and older nonroad equipment. Using a subset of equipment from
this study, the Agency characterized the ``average'' workday of each
piece of equipment in the data set \311\ and attempted to define the
role ``cold start'' operation, generally characterized by lower exhaust
temperatures and higher-than-idle engine speeds, played in engine
emissions. Generally, the Agency found that times when the engine was
operating at cold start, higher engine emission rates were seen than
during normal, temperature-stabilized operation of the engine. These
cold start, or ``warming-up'', periods were seen to last on average ten
minutes after equipment key-on for the units in our study.
---------------------------------------------------------------------------

\311\ Memorandum to Docket, ``Analysis of Second-by-Second
Emission and Activity Data for a Private Rental Fleet of
Construction Equipment'' Docket A-2001-28.
---------------------------------------------------------------------------

The Agency found, that over an eight to ten hour workday, a piece
of nonroad equipment would spend between 25 and 35 percent of its in-
use day running in idle operation at a relatively low rate of emission
output. With downtime on the equipment for operator lunch times and
equipment transport, there could be a further period of an hour or more
of low to no emissions from the equipment in-use. At first key-on of
the workday, and with each additional ``key-on'' cold start event
during the day, the equipment experiences a period of higher emissions
until it reaches a stabilized operating temperature. Start-up of the
equipment after a period of downtime which lasted an hour or more was
generally seen to experience rates of engine emissions similar to those
seen at first key-on, or cold start, and were considered periods of
cold start emissions, as well. The total time the equipment in the
study spent at these higher rates of ``cold start'' engine emissions
could be estimated to generate approximately one-tenth of the engine
emissions that the equipment would be expected to produce over the
whole workday. Therefore, EPA proposes to weight the emission test
results from its additional cold start transient test requirement as
one tenth of the composite transient emission test results for a
particular engine. The Agency requests comments as to the robustness of
this weighting factor and as to its applicability across the spectrum
of nonroad diesel equipment.
In addition, EPA requests comment on the potential to apply an
approach adopted for commercial spark-ignition engines, in which
engines operate over a single ``warm-start'' cycle (67 FR 68298,
November 8, 2002; see 40 CFR 1048.510), to nonroad diesel engines. The
regulations for these spark-ignition engines address cold-start
emissions indirectly through a combination of provisions. First, the
warm-up period before emission measurement can start is limited to
three minutes of operation. As a result, any engine operation after
this three-minute period is fully accounted for by emission
measurements. Second, the regulations direct manufacturers to design
their emission-control systems to start working as soon as possible
after engine starting and to describe in their application for
certification how their engines meet this objective. For engines that
take advantage of the period of unmeasured emissions with a design that
has unnecessarily high emissions, we can consider this a defeat device
and deny certification. Manufacturers therefore need to take steps to
design their engines and any emission-control equipment to control
emissions during the warm-up period without the additional effort of
supplemental cold-start testing. EPA requests comment on whether this
approach would be appropriate for nonroad diesel engines. In
particular, we request comment on how long the warm-up period prior to
start of emissions measurement should be for diesel engines. The three-
minute warm-up period specified for these spark-ignition engines
reflects the time needed for their catalysts to start working. The
emission-control technologies anticipated for diesel engines under this
proposal would need additional time, perhaps 10 minutes, before they
achieved nearly full effectiveness in controlling diesel emissions. Any
comments regarding this approach should address how the changed
procedure would affect measured emission levels and how the emission
standard should be adjusted to reflect these changes.
3. Control of Smoke
Manufacturers are currently responsible for testing and reporting
results for nonroad ``peak acceleration'' and ``lugging'' smoke
emissions. These regulations are detailed in 40 CFR 89.113 \312\ and
refer the reader back to 40 CFR 86, subpart I, which was developed for
highway engines. This rulemaking however proposes to replace the
present Federal Smoke Procedure for nonroad engines with the ISO 8178
Part 9 nonroad smoke procedure as the method and standards by which
engine manufacturers will certify their nonroad engines. This new smoke
testing procedure with its related smoke standards will become
effective for a particular engine when that engine is certified to
EPA's proposed Tier 4 or transition PM and NO_X-NMHC
standards. Proposed regulations may be found at 40 CFR part 1039.
---------------------------------------------------------------------------

\312\ Smoke testing guidelines are detailed under ISO 8178-9,
First Ed. 10-15-2000, ``Reciprocating internal combustion engines-
Exhaust emission measurement-Part 9: Test cycles and test procedures
for test bed measurement of exhaust gas smoke emissions from
compression ignition engines operating under transient conditions''.
A copy of the testing procedure may be found for reference only in
Docket A-2001-28.
---------------------------------------------------------------------------

The ISO-TC70/SC8/WG1 committee developed a nonroad smoke test
procedure, ISO 8178-9 and finalized it on October 15, 2000. Recognizing
the value of harmonized test procedures and limit standards, EPA is
proposing through this rulemaking to use ISO 8178-9 for smoke testing
of nonroad diesel engines. EPA has analyzed ISO 8178-9 and concluded
that it is appropriate for adoption within the Agency's nonroad test
procedures. It is important to note that the ISO 8178-9 smoke emissions
test procedure is very different from the procedure specified in
Subpart I of Part 86. As a consequence, in adopting the ISO 8178-9
procedure, EPA proposes to revise the numerical limit value associated
with this ISO procedure. EPA proposes that the appropriate (maximum)
numerical standard for ISO 8178-9 peak (acceleration) smoke value
measurement will be 20 percent opacity, peak smoke values at 3x, 6x,
and 9x will be 18 percent opacity, 16 percent opacity and 14 percent
opacity, respectively, and the lug smoke value will be 10 percent
opacity. The Agency has determined this value on review of data from
smoke tests on various engines \313\ across differing programs and
requests comment as to the appropriateness of these particular limit
values.
---------------------------------------------------------------------------

\313\ ``Nonroad Diesel Engine Smoke Testing and Limited Filter
Analysis'' May, 2001.Final Report to Engine Manufacturers
Association from Southwest Research Institute. Docket A-2001-28
---------------------------------------------------------------------------

Some state governments have expressed a desire for a federal smoke
regulatory program that would enable

[[Page 28487]]

them to test in-use nonroad engines in a manner that would permit
action against gross emitters of smoke. In a like manner, EPA could
propose additional smoke testing regulations as part of any future
rulemaking which would address manufacturer's in-use smoke test
requirements. The main elements of any in-use smoke program would be a
new Federal smoke standard(s) and test procedure for new engines,
guidance from EPA for state in-use smoke control programs (including a
full smoke test procedure and accompanying state limit values), and a
means by which the data from the two programs could be related. The
current smoke test procedure from Part 86, Subpart I does not provide
data comparable to the most practical in-use smoke test procedure, a
snap-idle acceleration test with measured opacity. However, based on
the current ISO 8178-9 procedure, EPA believes data from an ISO 8178-9
certification smoke test could provide the desired link.
In applying nonroad smoke standards and procedures to engines rated
50 hp and under, EPA has chosen to exempt one-cylinder engines, the
large majority of which are being used in generator sets and other
constant-speed applications, from the smoke standards. EPA still
believes that testing of these engines is unique in ways that would
need to be addressed before requiring smoke standards and testing for
this class of engines. These engines tend to produce puffs of smoke
that may make the smoke measurement erratic. The Agency believes the
air quality impact of this decision will be minimal. EPA expects to
reconsider this issue in the future in relation to other in-use testing
concerns.
Finally, the Agency proposes to exempt from smoke standards those
nonroad diesel engines which have certified PM emission levels or
Family Emission Limits (FELs) below 0.05 g/hp-hr. The Agency believes
that engines meeting an FEL below 0.05 g/hp-hr would utilized control
technology, such as particulate traps, that would provide adequate
smoke control.
4. Steady-State Testing
Recognizing the variety of both power classes and work applications
to be found within the nonroad vehicle and engine population, EPA will
retain current Federal steady-state test procedures for nonroad
engines. The steady state duty cycle applicable in each of the
following categories: 1) nonroad engines 25 hp and greater; 2) nonroad
engines less than 25 hp; and 3) nonroad engines having constant-speed,
variable-load applications, (e.g., generator sets) as set out in Table
VII.F-2. The steady-state cycles remain, respectively, the 8-mode
cycle, the 6-mode cycle and the 5-mode cycle.\314\ We envision
manufacturers that satisfy the requirements to certify on the steady
state ISO 8178-D2 duty cycle might likewise satisfy the requirements to
test over the Constant Speed Variable Load Duty Cycle (CSVL).
Manufacturers will be required to meet emission standards under steady-
state conditions, in addition to meeting emission standards under the
proposed supplemental transient test cycle. Steady-state test cycles
are needed so that testing for certification will reflect the broad
range of operating conditions experienced by these engines. A steady-
state test cycle represents an important type of modern engine
operation, in power and speed ranges that are typical in-use. The mid-
to-high speeds and loads represented by present steady-state testing
requirements are the speeds and loads at which these engines are
designed to operate for extended periods for maximum efficiency and
durability. Details concerning the three steady-state procedures for
nonroad engines and equipment can be found in proposed regulations at
proposed 40 CFR 1039.510 and in the three appendices which follow that
section, one for each cycle.
---------------------------------------------------------------------------

\314\ The three proposed steady-state test cycles are similar to
test cycles found in the International Standard ISO 8178-4:1996 (E)
and remain consistent with the existing 40 CFR part 89 steady state
duty cycles.
---------------------------------------------------------------------------

Manufacturers would perform each steady-state test following all
applicable test procedures in proposed regulations at proposed 40 CFR
part 1039, e.g., procedures for engine warm-up and exhaust emissions
measurement. We are proposing that the testing must be conducted with
all emission-related engine control variables in the maximum
NO_X-producing condition which could be encountered for a 30
second or longer averaging period at a given test point. Table VII.F.-2
below summarizes the steady-state testing requirements by individual
engine power categories.

Table VII.F-2.--Summary of Steady-State Test Requirements
----------------------------------------------------------------------------------------------------------------
Steady-state testing requirements
--------------------------------------------------------------------------
Nonroad engine power classes 8-Mode cycle (ISO 8178- 6-Mode cycle (ISO 8178- 5-Mode cycle (ISO 8178-
4 C1) 4 G3) 4 D2)
----------------------------------------------------------------------------------------------------------------
hp < 25 (kW < 19).................... NA \a\................. applies................ applies \b\.
25 <= hp < 75 (19 <= kW < 56)........ applies................ NA \a\................. applies \b\.
75 <= hp <175 (56 <= kW <130) applies................ NA \a\................. applies \b\.
175 <= hp <=750 (130 <= kW <=560).... applies................ NA \a\................. applies \b\.
hp £750 (kW £560) applies................ NA \a\................. applies \b\.
----------------------------------------------------------------------------------------------------------------
\a\ Testing procedure not applicable to this class of engines.
\b\ For constant, or nearly constant, speed engines and equipment with variable, or intermittent, load.

5. Maximum Test Speed
We are proposing to make a slight change to how test cycles are
specified. We are proposing to apply the existing definition of maximum
test speed in part 1065 to nonroad CI engines. This definition of
maximum test speed is the single point on an engine's normalized
maximum power versus speed curve that lies farthest away from the zero-
power, zero-speed point. This is intended to ensure that the maximum
speed of the test is representative of actual engine operating
characteristics and is not improperly used to influence the parameters
under which their engines are certified. In establishing this
definition of maximum test speed, it was our intent to specify the
highest speed at which the engine is likely to be operated in use.
Under normal circumstances this maximum test speed should be close to
the speed at which peak power is achieved. However, in past
discussions, some manufacturers have indicated that it is possible for
the maximum test speed to be unrepresentative of in-use operation.
Since we were aware of this potential during the original development
of this

[[Page 28488]]

definition, we included provisions to address issues such as these.
Part 1065 allows EPA to modify test procedures in situations where the
specified test procedures would otherwise be unrepresentative of in-use
operation. Thus, in cases in which the definition of maximum test speed
resulted in an engine speed that was not expected to occur with in-use
engines, we would work with the manufacturers to determine the maximum
speed that would be expected to occur in-use.
6. Improvements to the Test Procedures
We are proposing changes to the test procedures to improve the
precision of emission measurements. These changes address the potential
effect of measurement precision on the feasibility of the standards. It
is important to note that these changes are not intended to bias
results high or low, but only to improve the precision of the
measurements. Based on our experience with these modified test
procedures, and our discussions with manufacturers about their
experiences, we are confident that these changes will not affect the
stringency of the standards. These changes are summarized briefly here,
and the rationale for the changes affecting Constant Volume Sampling
(CVS) and PM testing are summarized in a memo to the docket (Air Docket
A-99-06, IV-B-11), which was originally submitted in support of the
recent highway heavy-duty diesel engine rule (66 FR 5001, January 18,
2001). The rationale for any other changes are summarized in a memo to
the docket for this proposal.
Many of the changes are to the PM sampling procedures. The PM
procedures will be the same as those finalized as part of the highway
heavy-duty diesel engine rule (66 FR 5001, January 18, 2001). These
include changes to the type of PM filters that are used and
improvements in how PM filters are weighed before and after emission
measurements, including requirements for more precise microbalances.
Another area includes changes to the CVS dilution air and flow
measurement specifications to allow for lower dilution ratios. These
changes are also the same as those changes finalized in the highway
rule.
Another area of change is the NO_X calibration procedure.
These changes are also the same as those changes finalized in the
highway rule. The new calibration procedures will result in more
precise continuous measurement of very low concentrations of
NO_X.
Other changes are being proposed to allow for other measurement
options, including the complete or partial adoption of the
International Standards Organization's test procedures as specified in
ISO 8178-1 (2002-2003 revision) and ISO 8178-11 DIS. EPA has
participated in draft changes to these procedures and feels that
adopting these procedures, at least in part, would not only allow for
the use of the most technically correct procedures, but would also
improve harmonization with international standards, which might offer
cost savings for some manufacturers. EPA requests comments on the
appropriateness of adopting parts of or all of ISO 8178-1 (2002-2003
revision) and ISO 8178-11 DIS.
If finalized, manufacturers would be allowed to use the new
procedures immediately for all certifications of all engines (i.e. to
certify any nonroad engine, not just Tier 4 engines), and manufacturers
will also be able to use their current procedures up to a certain
transition date to allow for a gradual transition to the new
procedures. The reason for this is that some of these changes may not
be convenient or cost-effective in the short term, and manufacturers
may be willing to live with some slightly lower measurement precision
in order to lower short-term testing costs. We believe, though, that
manufacturers should be able to individually optimize their test
facilities in this manner. In addition, it is important for
manufacturers to understand that we will conduct our confirmatory
testing in the manner specified in these regulations.
We are also proposing a new regulatory provision that specifies the
steps that someone would need to follow to demonstrate that their own
alternate measurement procedure is as good as or better than the
procedure specified by our regulations. This provision will be the same
as that finalized for highway testing, which can be found in 40 CFR
86.1306-07. The proposed test procedure changes just discussed can be
found in 40 CFR Part 1065 of the proposed regulations.

G. Not-To-Exceed Requirements

EPA is proposing to adopt not-to-exceed (NTE) emission standards
for new non-road diesel engines which are similar to those the Agency
set for highway heavy-duty diesel engines. Specifically, the Agency
proposes to adopt for non-road diesel engines NTE specifications
similar to those finalized as part of the heavy-duty highway diesel
engine rulemaking. These specifications are currently published in 40
CFR 86.007-11 and 40 CFR 86.1370-2007.
NTE standards are set as multipliers of FTP standards, therefore,
the NTE standards are also set as emissions mass per unit work
performed (i.e. brake-specific, g/kW-hr). EPA proposes that non-road
NTE standards be applicable to NO_X, CO, THC, and PM mass
emissions from the engines subject to this proposed rule. These
standards are evaluated against EPA-prescribed procedures for
conducting in-use testing. Such tests may be conducted in an engine or
chassis dynamometer laboratory, or they may be conducted on a piece of
non-road equipment operating normally in-use by using EPA-prescribed
field-testing procedures.
For new nonroad diesel engines, EPA proposes that manufacturers
state in their application for certification that they are able to meet
the NTE standards under all conditions that may reasonably be expected
to occur in normal equipment operation and use. Manufacturers will have
to maintain a detailed description of any testing, engineering
analysis, and other information that forms the basis for their
statement. This information may include a variety of steady-state
emission measurements not included in the prescribed emission testing
duty cycles. It may also include a continuous trace showing how
emissions vary during the transient test or operation manufacturers
believe are representative of the way their engines normally operate in
the field. This data may also consist of field testing data. Any of the
aforementioned data may be analyzed using the NTE data reduction
procedures proposed in this regulation; with the final emissions data
set then compared to the appropriate NTE standards.
EPA requests comment on an alternative NTE specification that
differs from the highway NTE specification. If adopted, this would be
the sole NTE test procedure for Tier 4 nonroad diesel engines. The
alternative utilizes all engine operation to determine compliance.
Other differences in its data reduction procedures would eliminate the
need for measuring engine torque for the alternative NTE, which can be
particularly difficult on-board nonroad vehicles. These alternative
procedures would also eliminate the need for an absolute exhaust flow
measurement for these engines by relying on a signal linearly
proportional to standard exhaust flow. This alternative approach would
address some concerns of the ease of practical in-use implementation of
NTE testing. For more detailed information on EPA's NTE provisions,
refer to Chapter 4.3 of the draft RIA for this proposal.

[[Page 28489]]

H. Certification Fuel

It is well-established that measured emissions may be affected by
the properties of the fuel used during the test. For this reason, we
have historically specified allowable ranges for test fuel properties
such as cetane and sulfur content. These specifications are intended to
represent most typical fuels that are commercially available in use.
This helps to ensure that the emissions reductions expected from the
standards occur in use as well as during emissions testing. Because we
are proposing to lower the upper limit for in-use nonroad diesel fuel
sulfur content to 500 ppm in 2007, and again to 15 ppm in 2010, we are
also proposing to establish new ranges of allowable sulfur content for
testing. These are proposed to be 300 to 500 ppm (by weight) for model
year 2008 to 2010 engines, and 7 to 15 ppm (by weight) for 2011 and
later model year engines. We believe that these ranges best correspond
to the fuels that diesel machines will potentially see in use. (See 66
FR 5112-5113 where we adopted a similar approach to certification fuels
for highway HDDEs.) These specifications will apply to emission testing
conducted for certification, selective enforcement audits, in-use, and
NTE testing, as well as any other laboratory engine testing for
compliance purposes for engines in the designated model years. Any
compliance testing of previous model year engines will be done with the
fuels designated in our regulations for those model years. Note that we
are allowing certification with fuel meeting the 7 to 15 ppm sulfur
specification in 2010 for under 11 hp, air-cooled, hand-startable, DI
engines certified under the proposed optional standard provision
discussed in Section III.B.1.d.i.
It is important to note that while these specifications include the
maximum sulfur level allowed for in-use fuel, we believe that it is
generally appropriate to test using the most typical fuels. As for
highway fuel, we expect that, under the 15 ppm maximum sulfur
requirement, refineries will typically produce diesel fuel with about 7
ppm sulfur, and that the fuel could have slightly higher sulfur levels
after distribution. Thus, we expect that we would use fuel having a
sulfur content between 7 and 10 ppm sulfur for our emission testing.
This is the same as the range we indicated would be used for HDDE
engine testing in model year 2007 and later (66 FR 5002); and as with
the highway fuel, should we determine that the typical in-use nonroad
diesel fuel has significantly more sulfur than this, we would adjust
this target upward.
We are also proposing two options for early use of the new 7 to 15
ppm diesel test fuel. The first would be available beginning in the
2007 model year for engines employing sulfur-sensitive technology.
(Model year 2007 coincides approximately with the introduction of 15
ppm highway fuel.) This allowance to use the new fuel in model years
before 2011 would only be available for engines which the manufacturer
demonstrates will be operated in use on fuel with 15 ppm sulfur or
less. Any testing that we perform on these engines would also use fuel
meeting this lower sulfur specification. This optional certification
fuel provision is intended to encourage the introduction of low-
emission diesel technologies in the nonroad sector. These engines will
be able to use the lower sulfur fuel throughout their operating life,
given the early availability of this fuel under the highway program,
and the assured availability of this fuel for nonroad engines by mid-
2010.
Considering that our proposed Tier 4 program would subject engines
under 75 hp to new emission standards in 2008 when 15 ppm maximum
sulfur fuel will be readily available from highway fuel pumps (and will
enter the nonroad fuel market shortly after in 2010), we believe it is
appropriate to provide a second, less proscriptive, option for use of
15 ppm sulfur certification fuel. This option would be available to any
manufacturers willing to take extra steps to encourage the use of this
fuel before it is required in the field. We are proposing to allow the
early use of 15 ppm certification fuel for 2008-2010 engines under 75
hp, provided the certifying manufacturer ensures that ultimate
purchasers of equipment using these engines are informed that the use
of fuel meeting the 15 ppm specification is recommended, and also
recommends to equipment manufacturers buying these engines that labels
be applied at the fuel inlet to remind users of this recommendation.
This option would not apply to those 50-75 hp engines not being
certified to the 0.22 g/bhp-hr PM standard, under the manufacturers'
option discussed in Section III.B.1.a. Comment is request on whether or
not application of this label should be mandatory for the equipment
manufacturers, and on whether the engine manufacturers should supply
the labels.
We believe that there may be a very small loss of emissions benefit
from any of these engines for which the operator chooses to ignore the
recommendation. This is because the engine manufacturer will be
designing the engine to comply with the emissions standards when tested
using 15 ppm fuel, potentially resulting in slightly higher emissions
when it is not operated on the 15 ppm fuel. We also believe, however,
that this is more than offset overall by the encouragement this
provision provides for early use of 15 ppm fuel. We are not proposing
that this option be available for engine designs employing oxidation
catalysts or other sulfur-sensitive exhaust emission control devices
except under the more restrictive provision for early use of 15 ppm
fuel described above, involving a demonstration by the manufacturer
that the fuel will indeed be used. Because these devices could
potentially have very high sulfur-to-sulfate conversion rates, and
because very high-sulfur fuels will still be available to some extent,
we believe that allowing this provision for these engines would risk
very high PM emissions until the 15 ppm nonroad fuel is introduced.
Comment is requested on whether or not we should deal with early use of
15 ppm test fuel to certify catalyst-equipped engines in some other
way, such as through a weighted-average emissions criterion using
results from testing on both higher-and lower-sulfur fuels. We are also
not proposing to make this second early 15 ppm test fuel option
available for engines not subject to a new Tier 4 standard in 2008 as
these engines should already be designed to meet applicable standards
in earlier years without need for the 15 ppm fuel.
We are also proposing a similar provision for use of certification
fuel meeting the proposed 300-500 ppm sulfur specification before the
2008 model year. We believe certification of model year 2006 and 2007
engines being designed to meet new Tier 2 or Tier 3 emission standards
taking effect in those years (2006 for engines at or above 175 hp and
2007 for 100-175 hp engines) should be able to use this fuel, provided
the certifying manufacturer is willing to take measures equivalent to
those discussed above to encourage the early use of this fuel (a
recommendation to the ultimate purchaser to use fuel with 500 ppm
maximum sulfur and a recommendation to equipment manufacturers to so
label their equipment). We also request comment as above on whether the
labeling should be mandatory. The widespread availability of 500 ppm
sulfur highway fuel, the short time that these 2006 and 2007 engines
could use higher sulfur fuels if an operator were to ignore the
recommendation, and the eventual use

[[Page 28490]]

of 15 ppm sulfur fuel in most of these engines for most of their
operating lives, gives us confidence that this provision to encourage
early use of lower sulfur fuel would be beneficial to the environment
overall. As with the proposed change to 300-500 ppm cert fuel for model
years 2008-2010, engine manufacturers would design their engines to
comply based on the test fuel specifications for certification and
compliance testing. The change from a fuel specification for compliance
testing that ranges up to 2000 ppm sulfur for Tier 2 and 3 engines to a
specification of 500 ppm sulfur maximum could have some limited effect
on the emissions control designs used on these Tier 2 and 3 engines, in
that it would be slightly easier to meet the Tier 2 and 3 standards
using the lower sulfur test fuel. In general, it is reasonable to set
specifications of test fuel reflecting representative in-use fuels, and
here the engines are expected to be using fuel with sulfur levels of
500 ppm or lower until 2010, and 15 ppm or lower after that. In this
case, any impact on expected engine emissions from this change in test
fuel for Tier 2 and 3 is expected to be slight.
We note that under current regulations manufacturers are already
allowed to conduct testing with certification fuel sulfur levels as low
as 300 ppm. The additional proposed provision for early use of 300-500
ppm sulfur test fuel would, however, result in any compliance testing
conducted by the Agency being done with fuel meeting the 300-500 ppm
specification. Likewise choice of the option for early use of 15 ppm
sulfur test fuel would result in any Agency testing being done using
that fuel. However, under both of these early certification fuel
options involving a recommended fuel use provision, the Agency would
not reject engines from in-use testing for which there was evidence or
suspicion that the engine had been fueled at some time with higher
sulfur fuel.
Finally, we are proposing to extend a provision adopted in the 1998
final rule. In that rule we set a 2000 ppm upper limit on the test fuel
sulfur concentration for any testing to be performed by the Agency on
Tier 1 engines under 50 hp and Tier 2 engines at or above 50 hp. We did
not extend this provision to later model year engines at that time
because we felt that more time was needed to assess trends in fuel
sulfur levels for fuels used in nonroad diesels. At this time we are
not aware of any additional information that would indicate that a
change in this test specification is warranted. More importantly,
because the fuel regulation we are proposing would make 500 ppm maximum
sulfur nonroad diesel fuel available by mid-2007, Tier 3 engines at or
above 50 hp (which phase in beginning in 2006) will be in the field for
only 1\1/2\ years prior to the in-use introduction of 500 ppm fuel, and
Tier 2 engines under 50 hp (which phase in beginning in 2004) will be
in the field for at most 3\1/2\ years prior to this time. We believe it
is appropriate to avoid adding the unnecessary complication of frequent
multiple changes to the test fuel specification. We are therefore
proposing to extend the 2000 ppm limit to testing conducted on engines
until the 2008 model year when the 500 ppm maximum test fuel sulfur
level takes effect as discussed above.

I. Labeling and Notification Requirements

As explained in Section III, the emissions standards contained in
the proposed regulations would make it necessary for manufacturers to
employ exhaust emission control devices that require very low-sulfur
fuel (less than 15 ppm) to ensure proper operation. This action
therefore proposes to restrict the sulfur content of diesel fuel used
in these engines. However, the 2008 emissions standards would be
achievable with less sensitive technologies and thus it could be
appropriate for those engines to use diesel fuel with up to 500 ppm
sulfur. There could be situations in which vehicles requiring either 15
ppm fuel or 500 ppm may be accidentally or purposely misfueled with
higher-sulfur fuel. Any of these misfueling events could seriously
degrade the emission performance of sulfur-sensitive exhaust emission
control devices, or perhaps destroy their functionality altogether.
In the highway rule we adopted a requirement that heavy-duty
vehicle manufacturers notify each purchaser that the vehicle must be
fueled only with the applicable low-sulfur diesel fuel. We also
required that diesel vehicles be equipped by the manufacturer with
labels near the refueling inlet to indicate that low sulfur fuel is
required.\315\ We are proposing similar requirements here.
Specifically, we are proposing that manufacturers notify each purchaser
that the nonroad engine must be fueled only with the applicable low-
sulfur diesel fuel, and ensure that the equipment is labeled near the
refueling inlet to indicate that low sulfur fuel is required. We
believe that these measures would help owners find and use the correct
fuel and would be sufficient to address misfueling concerns. Thus, more
costly provisions, such as fuel inlet restrictors, should not be
necessary.
---------------------------------------------------------------------------

\315\ We also required that highway vehicles be labeled on the
dashboard. Given the type of equipment using nonroad CI engines, we
are proposing equivalent dashboard requirement here.
---------------------------------------------------------------------------

Beginning in model year 2011, the required fuel would be 15 ppm.
For these engines, the label should state: ``ULTRA LOW-SULFUR NONROAD
DIESEL FUEL OR ON-HIGHWAY DIESEL FUEL ONLY (15 parts per million)''.
For model years 2008 to 2010, when the proposed test fuel would contain
300 to 500 ppm sulfur, the label should state: ``LOW-SULFUR NONROAD
DIESEL FUEL, ULTRA LOW-SULFUR NONROAD DIESEL FUEL, OR ON-HIGHWAY DIESEL
FUEL ONLY (500 ppm maximum)''. Engine manufacturers may choose during
earlier model years to certify engines using test fuel with sulfur
levels between 500 and 2,000 ppm. We would not require that these
engines be labeled.
This approach would ensure that the proper functioning of the
emission controls is not compromised by misfueling, while allowing
owners flexibility with respect to in-use fuels in those cases in which
their engines do not use sulfur-sensitive technologies.
For non-integrated manufacturers, the engine manufacturer will be
required to provide such a label to the equipment manufacturer, which
the equipment manufacturer will be required to install. Optionally, if
an equipment manufacturer chooses to install its own label, the engine
manufacturer will not be required to provide the label.

J. Temporary In-Use Compliance Margins

The Tier 4 standards will be challenging for diesel engine
manufacturers to achieve, and will require manufacturers to develop and
adapt new technologies for a large number and wide variety of engine
platforms. Not only will manufacturers be responsible for ensuring that
these technologies will allow engines to meet the standards at the time
of certification, they will also have to ensure that these technologies
continue to be highly effective in a wide range of in-use environments
so that their engines would comply in use when tested by EPA.
Furthermore, for the first time, these nonroad diesel engines will be
subject to a new transient test cycle and NTE standards. However, in
the early years of a program that introduces new technology, there are
risks of in-use compliance problems that may not appear in the
certification process or

[[Page 28491]]

during developmental testing. Thus, we believe that for a limited
number of model years after new standards take effect it is appropriate
to adjust the compliance levels for assessing in-use compliance for
diesel engines equipped with particulate traps or NO_X
adsorbers. This would provide assurance to the manufacturers that they
will not face recall if they exceed standards by a small amount during
this transition to clean technologies. This approach is very similar to
that taken in the light-duty highway Tier 2 final rule (65 FR 6796) and
the highway heavy-duty rule (66 FR 5113-5114), both of which involve
similar approaches to introducing the new technologies.
Table VII.J-1 shows the in-use adjustments that we propose to
apply. These adjustments would be added to the appropriate FELs (see
Section VII.A) or, for engines certified to the standards without the
use of credits, to the standards themselves, in determining the in-use
compliance level for a given in-use hours accumulation. These
adjustment levels were chosen to be roughly equivalent to the temporary
in-use standard adjustments adopted for the heavy-duty highway program.
Note also the limiting of these adjustments to engines certified to
FELs below certain threshold levels. This is similar to the approach
taken in the heavy-duty rule which applied the in-use standards only to
vehicles using advanced low-emission technologies (see 66 FR 5113-
5114). Our intent is that these add-on levels be available only for
highly-effective advanced technologies such as particulate traps and
NO_X adsorbers. As in our other mobile source programs, we do
not believe that the standards are stringent enough or the required
technology change radical enough to warrant add-ons for other proposed
standards changes (the NO_X standard for 25-75 hp engines,
the 2008 PM standards for engines below 75 hp, or the NMHC standards).

Table VII.J-1.--Add-on Levels Used in Determining In-use Standards
----------------------------------------------------------------------------------------------------------------
PM add-on
NO_X add-on level to FEL \a\ (g/bhp- level to FEL
Engine power Model years hr) \b\ (g/bhp-
hr)
----------------------------------------------------------------------------------------------------------------
25<= hp <75 (19 <= kW < 56)................ 2013-2014 none...............................
75 <= hp <175 (56 <= kW < 130)............. 2012-2015 0.10 for operating hours <=4000.... 0.01
0.20 for operating hours 4000.
hp £=175 (kW £=130).... 2011-2015 0.10 for operating hours <=4000....
0.20 for operating hours 4000.
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Applicable only to those engines with FELs at or below 1.5 g/bhp-hr NO_X.
\b\ Applicable only to those engines with FELs at or below the Tier 4 PM standard.

Note that these in-use add-on levels apply only to engines
certified through the first few model years of the new standards and
having FELs below the specified levels. The in-use add-ons are
available through model year 2015 for such engines above 75 hp because
our proposed implementation schedule does not complete the phase-in
process in these power categories until 2014. The 2015 date provides 2
years for the designers of those engine models that are last to be
phased in (which may comprise upwards of 50% of sales and a large
number of low-volume engine models) to discover and resolve any
problems not showing up in the certification process or developmental
testing.\316\ This is the same period as that provided in the highway
HDDE rule.
---------------------------------------------------------------------------

\316\ Flexibility provisions such as our ABT program and the
incentive program for early or very low emission engines may result
in some engines that incorporate the advanced emission control
technologies even later. However, we do not believe it is
appropriate to adjust the in-use compliance levels for engines on
which achieving the standard is delayed by manufacturer's choice,
nor did we do so in our highway HDDE program.
---------------------------------------------------------------------------

During the certification demonstration, manufacturers will still be
required to demonstrate compliance with the unadjusted Tier 4
certification standards using deteriorated emission rates. Therefore,
the manufacturer will not be able to use these in-use standards as the
design targets for the engine. They will need to project that most
engines would meet the standards in-use without adjustment. The in-use
adjustments will merely provide some assurance that they would not be
forced to recall engines because of some small miscalculation of the
expected deterioration rates.

K. Monitoring and Reporting of Emissions Related Defects

We are proposing to apply the defect reporting requirements of
Sec. 1068.501 to replace the provisions of 40 CFR part 85 for nonroad
engines. The requirements obligate manufacturers to tell us when they
learn that emission control systems are defective and to conduct
investigations under certain circumstances to determine if an emission-
related defect is present. We are also proposing a requirement that
manufacturers initiate these investigations when warranty information,
parts shipments, and any other information which is available indicates
that a defect investigation may be fruitful. For this purpose, we
consider defective any part or system that does not function as
originally designed for the regulatory useful life of the engine or the
scheduled replacement interval specified in the manufacturer's
maintenance instructions. The parts and systems are those covered by
the emissions warranty, and listed in Appendix I and II of part 1068.
We believe the investigation requirement proposed in this rule will
allow both EPA and the engine manufacturers to fully understand the
significance of any unusually high rates of warranty claims and parts
replacements for parts or parameters that may have an impact on
emissions. We believe that as part of its normal product quality
practices prudent engine manufacturers already conduct a thorough
investigation when available data indicate recurring parts failures.
Such data is valuable and readily available to most manufacturers and,
under this proposal it must be considered to determine whether or not
there is a possible defect of an emission-related part.
Defect reports submitted in compliance with the current regulations
are based on a single threshold applicable to engine families of all
production volumes. No affirmative requirement for gathering
information about the full extent of the problem was applicable. For
very large volume engine families, the proposed approach may result in
fewer total defect reports being submitted by manufacturers than the
traditional approach because the

[[Page 28492]]

number of defects triggering the submission requirement generally rises
in proportion to the engine family size. The single threshold in the
existing regulations results in reporting of defects in the smallest
engine families covered by this regulation very rarely because a
relatively high proportion of such engines would have to be known to be
defective before reporting is required under a fixed threshold scheme.
Therefore, under this proposal, the threshold for reporting for the
smallest engine families has been decreased as compared to the current
requirements.
We are aware that accumulation of warranty claims and part
shipments will likely include many claims and parts that do not
represent defects, so we are establishing a relatively high threshold
for triggering the manufacturer's responsibility to investigate whether
there is, in fact, a real occurrence of an emission-related defect.
Manufacturers are not required to count towards the investigation
threshold any replacement parts they require to be replaced at
specified intervals during the useful life, as specified in the
application for certification and maintenance instructions to the
owner, because shipment of such parts clearly do not represent defects.
All such parts would be excluded from investigation of potential
defects and reporting of defects, whether or not any specific part was,
in fact, shipped for specified replacement.
This proposal is intended to require manufacturers to use
information we would expect them to keep in the normal course of
business. We believe in most cases manufacturers would not be required
to institute new programs or activities to monitor product quality or
performance. A manufacturer that does not keep warranty or replacement
part information may ask for our approval to use an alternate defect-
reporting methodology that is at least as effective in identifying and
tracking potential emissions related defects as the proposed
requirements. However, until we approve such a request, the proposed
thresholds and procedures continue to apply.
The thresholds for investigation proposed today are 4 percent of
total production to date, or 4,000 engines, whichever is less, but
never fewer than 40 for any single engine family in one model year.
These thresholds are reduced by 50 percent for defects related to any
aftertreatment devices, including particulate traps, because these
components typically play such a significant role in controlling engine
emissions. For example, for an engine family with a sales volume of
20,000 units in a given model year, the manufacturer would have to
investigate potential emission-related defects if there were warranty
claims or parts shipments for replacing electronic control units in 800
or more engines; or catalytic converters on 400 or more engines. For an
engine family with sales volume of 500 units in a given model year, the
manufacturer would have to investigate potential emission-related
defects if there were warranty claims or parts shipments of electronic
control units in 40 or more engines; or catalytic converters on 20 or
more engines. Please note, manufacturers would not investigate for
emission related defects until either warranty claims or parts
shipments separately reach the investigation threshold. We recognize
that a part shipment may ultimately be associated with a particular
warranty claim in the manufacturer's database and, therefore, warranty
claims and parts shipments would not be aggregated for the purpose of
triggering the investigation threshold under this proposal.
In order to carry out an investigation to determine if there is an
emission-related defect, manufacturers would have to use available
information such as preexisting assessments of warranted parts or other
replaced parts. Manufacturers would also have to gather information by
assessing previously unexamined parts submitted with warranty claims
and replacement parts which are available or become available for
examination and analysis. If available parts are deemed too voluminous
to conduct a timely investigation, manufacturers would be permitted to
employ appropriate statistical analyses of representative data to help
draw timely conclusions regarding the existence of a defect. These
investigative activities should be summarized in the periodic reports
of recently opened or closed investigations as discussed below. It is
important to note that EPA does not regard having reached the
investigation thresholds as conclusive proof of the existence of a
defect, only that initiation of an appropriate investigation is merited
to determine whether a defect exists.
The second threshold in this proposal specifies when a manufacturer
must report that there is an emission-related defect. This threshold
involves a smaller number of engines because each potential defect has
been screened to confirm that it is an emission-related defect. In
counting engines to compare with the defect-reporting threshold, the
manufacturer would consider a single engine family and model year.
However, when a defect report is required, the manufacturer would
report all occurrences of the same defect in all engine families and
all model years which use the same part. For engines subject to this
proposal, the threshold for reporting a defect is 0.25 percent of total
production for any single engine family, or 250 defects, whichever is
less. The thresholds are reduced 50 percent for reporting defects
related to aftertreatment devices. Additionally, this proposal requires
a minimum of 5 defects before a report must be filed so that limited
isolated parts failures that occur for low volume engine families do
not require a defect report. It is important to note that while EPA
regards occurrence of the defect threshold as proof of the existence of
a reportable defect, it does not regard that occurrence as conclusive
proof that recall or other action is merited.
If the number of engines with a specific defect is found to be less
than the threshold for submitting a defect report, but information,
such as warranty claims or parts shipment data, later indicates
additional potentially defective engines, under this proposal the
information must be aggregated for the purpose of determining whether
the threshold for submitting a defect report has been met. If a
manufacturer has actual knowledge from any source that the threshold
for submitting a defect report has been met, a defect report would have
to be submitted even if the trigger for investigating has not yet been
met. For example, if manufacturers receive information from their
dealers, technical staff or other field personnel showing conclusively
that there is a recurring emission-related defect, they would have to
submit a defect report if the submission threshold is reached.
For both the investigation and reporting thresholds, Sec. 1068.501
specifies lower thresholds for very large engines. A defect in these
engines can have a much greater impact than defects in smaller engines
due to their higher g/hr emission rates and the increased likelihood
that such large engines will be used more continuously.
Under this proposal at specified times the manufacturer would also
have to report open investigations as well as recently closed
investigations that did not require a defect report. We are not
proposing a fixed time limit for manufacturers to complete their
investigations. The periodic reports required by the regulations,
however, will allow us to monitor these investigations and determine if
it is necessary or appropriate for us to take further action.

[[Page 28493]]

We are requesting comment on this approach, especially with respect
to the thresholds. Should we adopt slightly higher thresholds for
nonroad engines given their relatively small engine family sizes?
Should we focus the defect reporting requirements more on
aftertreatment defects since such defects will generally have more
significant impacts than other defects? We are also requesting comment
on whether these reporting requirements should also apply to the
current Tier 2/Tier 3 compliance program, and if so, when these
provisions should be applied.

L. Rated Power

We are proposing to add a definition of ``maximum engine power'' to
the regulations. This term would be used instead of previously
undefined terms such as ``rated power'' or ``power rating'' to specify
the applicability of the standards. The addition of this definition is
intended to allow for more objective applicability of the standards.
More specifically, we are proposing that:

Maximum engine power means the measured maximum brake power
output of an engine. The maximum engine power of an engine
configuration is the average maximum engine power of the engines
within the configuration. The maximum engine power of an engine
family is the highest maximum engine power of the engines within the
family.

Currently, since rated power and power rating are undefined, they are
determined by the engine manufacturer. This makes the applicability of
the standards too subjective and confusing. One manufacturer may choose
to define rated power as the maximum measured power output, while
another may define it as the maximum measured power at a specific
engine speed. Using this second approach, an engine's rated power may
be somewhat less than the true maximum power output of the engine.
Given the importance of engine power in defining which standards an
engine must meet and when, we believe that it is critical that a
singular power value be determined objectively according to a specific
regulatory definition.
We are also adding a clarification to the regulations recognizing
that actual engine power will vary to some degree during production.
The proposed regulations would require manufacturers to specify a range
of actual maximum engine power for each engine configuration. As noted
above, we would base the applicability of the standards on the average
maximum power of the engines.

M. Hydrocarbon Measurement and Definition

Both the existing standards and the proposed Tier 4 standards apply
to nonmethane hydrocarbons, rather than total hydrocarbons. Methane
emissions generally are considered to be nonreactive with respect to
ozone, and are not regulated under part 89. However, excluding methane
requires that it be separately measured, which complicates the
measurement procedures. While we are not proposing to change the
standards to total hydrocarbons we are requesting comment on the need
to measure methane and the appropriateness of excluding it from our
standards.

N. Auxiliary Emission Control Devices and Defeat Devices

Existing nonroad regulations prohibit the use of a defeat device
(see 40 CFR 89.107) in nonroad diesel engines. The defeat device
prohibition is intended to ensure that engine manufacturers do not use
auxiliary emission control devices (AECD) which sense engine operation
in a regulatory test procedure and as a result reduce the emission
control effectiveness \317\ of that procedure. In today's notice we are
proposing to supplement existing nonroad test procedures with a
transient engine test cycle and NTE emission standards with associated
test requirements. As such, the Agency believes that a clarification of
the existing nonroad diesel engine regulations regarding defeat devices
is required in light of these proposed additional emission test
requirements. The defeat device prohibition makes it clear that AECDs
which reduce the effectiveness of the emission control system are
defeat devices, unless one of several conditions is met. One of these
conditions is that an AECD which operates under conditions ``included
in the test procedure'' \318\ is not a defeat device. While the
existing defeat device definition does contain the term ``test
procedure'', and therefore should be interpreted as including the
supplemental testing requirements, we want to make it clear that both
the supplemental transient test cycle and NTE emission test procedures
are included within the defeat device regulations as conditions under
which an operational AECD will not be considered a defeat device.
Therefore, we are proposing to clarify the defeat device regulations by
specifying the appropriate test procedures (i.e., the existing steady-
state procedures and the supplemental tests).
---------------------------------------------------------------------------

\317\ Auxiliary emission control device is defined at 40 CFR
89.2 as `` any element of design that senses temperature, vehicle
speed, engine RPM, transmission gear, or any other parameter for the
purpose of activating, modulating, delaying or deactivating the
operation of any part of the emission control system.''
\318\ 40 CFR 89.107(b)(1) states ``Defeat device includes any
auxiliary emission control device (AECD) that reduces the
effectiveness of the emission control system under conditions which
may reasonably be expected to be encountered in normal operation and
use unless such conditions are included in the test procedure.''
---------------------------------------------------------------------------

We are also proposing today to provide clarification regarding the
engine manufacturers certification reporting requirements with respect
to the description of AECDs. The proposed clarification will aid engine
manufacturers in preparing a complete application for certification
which will allow EPA to review the application in a timely manner.
Under the existing nonroad engine regulations, manufacturers are
required to provide a generalized description of how the emissions
control system operates and a ``detailed'' description of each AECD
installed on the engine (See 40 CFR 89.115(d)(2)). This proposal is
intended to clarify what is meant by ``detailed.''
Under the nonroad diesel Tier 1 standards there was limited use of
AECDs. AECDs have begun to be much more common with the Tier 2
standards, and we expect this trend to continue. Engines designed to
meet the significantly more stringent Tier 4 standards will certainly
rely on sophisticated technologies that will likely employ very complex
AECDs. We have seen a similar trend with highway heavy-duty diesel
engines. In the late 1980's, few highway HDDEs had electronic controls
and most manufacturers relied on in-cylinder techniques to control
emissions. However, with the application of technologies such as
electronically controlled fuel systems, electronically controlled EGR
systems, and variable geometry turbochargers, highway HDDEs now have
numerous AECDs which are used both for performance as well as emissions
control.
A thorough disclosure of the presence and purpose of AECDs is
essential in allowing EPA to evaluate the AECD and determine whether it
represents a defeat device. Clearly, any AECD which is not fully
identified in the manufacturer's application for certification cannot
be appropriately evaluated by EPA and therefore cannot be determined to
be acceptable by EPA. Our proposed clarifications to the certification
application requirements include additional detail specific to those
AECDs which the manufacturer believes are necessary to protect the
engine or the equipment in which it is installed against damage or
accident (``engine

[[Page 28494]]

protection'' AECDs). While the definition of a defeat device allows as
an exception strategies needed to protect the engine and equipment
against damage or accident, we intend to continue our policy of closely
reviewing the use of this exception. In evaluating whether a reduction
in emissions control effectiveness is needed for engine protection, EPA
will closely evaluate the actual technology employed on the engine
family, as well as the use and availability of other emission control
technologies across the industry, taking into consideration how
widespread the use is, including its use in similar engines and similar
equipment. While we have specified additional information related to
engine protection AECDs in the proposed regulations, we reserve the
right to request additional information on a case-by-case basis as
necessary.
In the last several years, EPA has issued extensive guidance on the
disclosure of AECDs for both highway and nonroad diesel engine
manufactures.\319\ This proposal does not impose any new certification
burden on engine manufacturers, rather, it clarifies the existing
certification application regulations by specifying what type of
information manufacturers must submit regarding AECDs.
---------------------------------------------------------------------------

\319\ See EPA Dear Manufacturer Letter VPCD-98-13, ``Heavy-duty
Diesel Engines Controlled by Onboard Computers: Guidance on
Reporting and Evaluating Auxiliary Emission Control Devices and the
Defeat Device Prohibition of the Clean Air Act'', October 15, 1998
and EPA Advisory Circular 24-3, ``Implementation of Requirements
Prohibiting Defeat Devices for On-Highway Heavy-Duty Diesel
Engines.'' A copy of both of these documents is available in EPA Air
Docket A-2001-28
---------------------------------------------------------------------------

Finally, we take this opportunity to emphasize that the information
submitted must be specific to each engine family. The practice of
describing AECDs in a ``common'' section, wherein the strategies are
described in general for all the manufacturer's engines, is acceptable
as long as each engine family's application contains specific
references to the AECDs in the common section which clearly indicate
which AECDs are present on that engine family, and the application
contains specific calibration information for that engine family's
AECDs. The proposed regulatory requirements can be found at 40 CFR
89.115(d)(2) in today's notice.
We are requesting comment on whether these clarifications should
also be applied to the current Tier 2/Tier 3 compliance program, and if
so, when these provisions should be applied.

O. Other Issues

We are also proposing other minor changes to the compliance program
for Tier 4 nonroad engines. For example, we are proposing that engine
manufacturers be required to provide installation instructions to
equipment manufacturers to ensure that engine cooling systems,
aftertreatment exhaust emission controls, and related sensors are
properly installed by the equipment manufacturer. Proper installation
of these systems is critical to the emission performance of the
equipment. Equipment manufacturers would be expected to follow the
instructions to avoid improper installation that could render emission
controls inoperative, and subject the equipment manufacturer to
penalties for t violation of a prohibited act.
Under the existing regulations and the proposed new regulations,
engine manufacturers are responsible for all emission-related
components, both in terms of emission performance during certification
and in-use testing, and emission-related warranties. This requires that
engine manufacturers provide their engines with the necessary emission
controls before selling them to equipment manufacturers. We are
proposing to use the same approach as is used with highway engines,
where the engine manufacturer is required to either install catalysts
or traps before selling the engine to a vehicle manufacturer, or to
ship the catalyst or trap with the engine, with appropriate
installation instructions. We are requesting comment on whether this is
appropriate for nonroad engines equipped with traps and other
aftertreatment exhaust emission controls. We are concerned that
allowing engine manufacturers to sell engines without traps included
might lead to equipment being introduced into service without the
emission controls properly installed. We are requesting comment on
whether it is sufficient to require manufacturers to fully describe in
their installation instructions all necessary emission control hardware
, and whether the engine manufacturer should be held responsible for
ensuring the aftertreatment is properly installed, including requiring
some management by the engine manufacturers of the installation
process, such as auditing the installations and reporting the results
to EPA.
In Sec. 89.109, we limit the amount of maintenance that
manufacturers can perform during service accumulation. We are proposing
to continue these limits in the proposed new Sec. 1039.125. However,
we are not carrying over the provisions of Sec. 89.109(h)(2) (iii) and
(iv) that are related to allowances for additional maintenance for
engines equipped with onboard diagnostic systems that include visible
warning lights. We believe that these provisions would be better
addressed in a rulemaking addressing onboard diagnostic standards.
Both the existing regulations and the proposed regulations specify
default criteria to define engine family groups, but allow exceptions
for cases where other groups would more appropriately represent similar
emission characteristics. The proposed regulations specify the same
criteria as part 89, plus two new criteria. We are proposing that
mechanically controlled engines and electronically controlled engines
generally be certified in separate engine families. We are also
proposing that engines in different power categories generally must be
in separate engine families.
We are proposing to clarify the applicability of the nonroad CI
standards to engines operating on alcohols and other oxygenated fuels.
As part of this, we are proposing to add a requirement that
compression-ignition alcohol-fueled engines be required to comply with
the evaporative emission control requirements in 40 CFR 1048.105. That
section allows manufacturers to comply with the requirement by
incorporating simple emission controls. This requirement is not
expected to have a significant impact on manufacturers since we are not
aware of any alcohol-fueled nonroad engines currently in production.
The proposed provision is merely intended to prevent new emission
problem from occurring in the future.
We are proposing to change the way in which manufacturers specify
deterioration factors (DFs) for Tier 4 trap-equipped engines. The
current regulations specify that the DFs for engines with
aftertreatment devices must be multiplicative. They must be expressed
as a proportion of the engine's initial emission rate. Manufacturers
have indicated in past discussions that, given the general operating
mechanism of PM traps and the very low PM levels emitted, trap
deterioration is not expected to depend on the initial emission rate,
as increased emissions from deterioration that tend to be non-sulfate
PM, and therefore not related to the initial emissions rate. Therefore,
we are proposing to specify additive DFs for PM that account for a
fixed amount of deterioration and are independent of the engine's
initial emission rate.

[[Page 28495]]

We are proposing to extend to CI engines that operate on unrefined
natural gas the same provisions we have adopted for similar SI engines.
Such engines are sometimes used to operate pumps at oil fields where
unrefined natural gas is a readily available and inexpensive fuel
source. This provision would allows manufacturers greater flexibility
with respect to engine adjustment to address variability in fuel
properties.
In addition, we are proposing to require that manufacturers label
uncertified engines that they import for stationary applications.
Because these engines look the same as or very similar to regulated
nonroad engines, it can be difficult to distinguish the two without
labels. These labels will also help manufacturers and others who import
these engines to avoid potential problems with customs inspections.
Another labeling issue relates to the primary emission control
information label that engine manufacturers put on every certified
engine they produce. The current regulations require equipment
manufacturers to put a duplicate label on the equipment if the engine
is installed in a way that obscures the label on the engine. We are
proposing to clarify this requirement for duplicate labels to ensure
that labels are accessible without creating a supply of duplicate
labels that are not authentic and used appropriately. Specifically, we
are proposing to require engine manufacturers to supply duplicate
labels to equipment manufacturers that request them and keep records to
show how many labels they supply. Similarly, we are proposing to
require equipment manufacturers to request from engine manufacturers a
specific number of duplicate labels, with a description of which engine
and equipment models are involved and why the duplicate labels are
necessary. Equipment manufacturers would need to destroy any excess
labels and keep records to show the disposition of all the labels they
receive. We request comment on these provisions. In addition, we
request comment on an alternative approach to labeling equipment. If
equipment manufacturers were required to add a label to each piece of
equipment with basic information related to the engine's emission
controls, the information would be most accessible in all situations.
Such a label would need to at least identify the engine manufacturer,
engine family and serial number, manufactured date, power rating, and
any important engine specifications. This would make it easier for us
to verify that engines are meeting requirements and it would be easier
for U.S. Customs (Bureau of Customs and Border Protection) to clear
imported equipment with certified engines. Note that some equipment
manufacturers have already been voluntarily attaching such labels or
plates to their equipment. We request comment on a uniform requirement
to apply labels to equipment using nonroad diesel engines to uniquely
identify the installed engine.
We are also clarifying the general requirement that all engines
subject to this final rule may not cause or contribute to an
unreasonable risk to public health, welfare, or safety, especially with
respect to noxious or toxic emissions that may increase as a result of
emission-control technologies. The proposed regulatory language, which
addresses the same general concept as the existing Sec. 89.106,
implements sections 202(a)(4) and 206(a)(3) of the Act and clarifies
that the purpose of this requirement is to prevent control technologies
that would cause unreasonable risks, rather than to prevent trace
emissions of any noxious compounds. This requirement prevents the use
of emission-control technologies that produce high levels of pollutants
for which we have not set emission standards, but nevertheless pose a
risk to the public.
In the part 89 regulations we use the same definition for
``aircraft'' as is used in 40 CFR part 87. The definition, which is
used to exclude aircraft engines from the part 89 regulations, states
that aircraft means ``any airplane a U.S. airworthiness certificate or
equivalent foreign airworthiness certificate has is issued.'' We are
proposing to use this same definition for the new part 1039
regulations. We believe that this definition encompasses all vehicles
that are capable of sustained air travel above treetop heights using
compression ignition engines. We request comment on whether there are
any aircraft that do not meet this definition, and use compression-
ignition engines, but that should not be regulated under part 1039.
Finally, we are not revising at this time the regulation on
preemption of state and local controls currently found in Part 89. This
regulation will continue in effect. We are, however, considering
whether we should clarify the binding regulatory nature of this
language, consistent with the decision of the court in Engine
Manufacturers Association v. EPA, 88 F.3d 1075 (D.C. Cir. 1996).

VIII. Nonroad Diesel Fuel Program: Compliance and Enforcement
Provisions

Section IV above describes the proposed program for the reduction
of sulfur in nonroad, locomotive and marine (NRLM) diesel fuel. In
general, this proposal would require refiners and importers to meet a
500 ppm sulfur standard for nonroad, locomotive, and marine diesel fuel
starting June 1, 2007 and to meet a 15 ppm standard for nonroad diesel
fuel beginning June 1, 2010. Locomotive and marine diesel fuel would
remain subject to the 500 ppm standard. Among other provisions, Section
IV also describes a temporary non-highway distillate baseline
percentage method to differentiate volumes of diesel fuel subject to
the NRLM standards and volumes of diesel fuel subject to the highway
fuel standards; provisions to identify unregulated fuel such as heating
oil; provisions for diesel fuel credit generation and use; and special
provisions for small refiners, refiners seeking hardship relief, and
parties supplying diesel fuel to Alaska and U.S. territories.
As with earlier fuel programs, we have developed a comprehensive
set of compliance and enforcement provisions designed to promote
effective and efficient implementation of this fuel program and thus to
achieve the full environmental potential of the program. The proposed
compliance provisions are designed to ensure that nonroad, locomotive,
and marine diesel fuel sulfur content requirements are met throughout
the distribution system, from the refiner or importer through the end
user, subject to certain provisions applicable during the early
transition years. Several of these provisions are described in Section
IV above, and others are summarized in this section. The full details
of all proposed provisions are found in the regulatory language
associated with today's notice.
The proposed compliance and enforcement provisions discussed in
this section fall into several broad categories:
? Fuel uses covered and not covered under the proposed
program;
? Provisions not described in Section IV applicable to
refiners and importers;
? Provisions not described in Section IV applicable to
parties downstream of the refinery or importer;
? Special provisions regarding additives, kerosene, and the
use of motor oil in fuel;
? Fuel testing and sampling requirements;
? Records required to be kept (including those applying under
the

[[Page 28496]]

small refiner and refiner hardship provisions);
? Reporting requirements;
? Exemptions from the program; and
? Provisions concerning liability, defenses, and penalties
for noncompliance.

A. Fuel Covered and Not Covered by this Proposal

1. Covered Fuel
As discussed in section IV.A.1 above, this proposed standards
generally cover all the diesel fuel that is intended or likely to be
used in nonroad, locomotive, and marine (NRLM) applications that is not
already covered by the standards for highway diesel fuel. For the
purposes of this preamble, this fuel is defined primarily by the type
of engine which it is used to power: land-based nonroad, locomotive,
and marine diesel engines.
2. Special Fuel Provisions and Exemptions
Section IV.A.1 above also describes several types of petroleum
distillate that are not covered by this proposal, including jet fuel
and heating oil. In addition, the next paragraphs discuss several
provisions and exemptions for nonroad diesel fuel that we propose to
apply in special circumstances.
a. Fuel Used in Military Applications
We propose to treat NRLM diesel fuel used in military applications
in the same manner as the recent highway diesel rule. We propose to
define NRLM diesel fuel so that JP-5 and JP-8 military fuel that is
used or intended for use in NRLM diesel engines would be subject to all
of the requirements applicable to NRLM diesel fuel. However, we also
propose to exempt JP-5 and JP-8 fuels from the proposed diesel fuel
content and other requirements in certain circumstances. First, these
fuels would be exempt if they were used in tactical military equipment
that have a national security exemption. Due to national security
considerations, EPA's existing regulations allow the military to
request and receive national security exemptions (NSE) for their NRLM
diesel engines from emissions regulations if the operational
requirements for such engines warrant such an exemption. This proposal
would not change these provisions. Second, these fuels would also be
exempt if they were used in tactical military equipment that is not
covered by a national security exemption but for national security
reasons, needs to be fueled on the same fuel as motor vehicles or
nonroad equipment with a national security exemption such as the need
to be ready for immediate deployment overseas. Use of JP-5 and JP-8
fuel not meeting the proposed NRLM diesel fuel standards in a NRLM
diesel engine other than the tactical military equipment described
above would be prohibited under today's rule.
EPA and the Department of Defense will develop a process to address
the tactical nonroad equipment to be covered by the diesel fuel
exemption. Based on data provided by the Department of Defense to date
in the context of implementing a similar exemption provision in the
highway program, EPA believes that providing an exemption for JP-5 and
JP-8 fuel used in tactical nonroad equipment would not have any
significant environmental impact.
b. Fuel Used in Research and Development
This proposed rule would permit parties to request an exemption
from the sulfur or other standards for NRLM diesel fuel used for
research, development and testing purposes (``R & D exemption''). We
recognize that there may be legitimate research programs that require
the use of diesel fuel with higher sulfur levels than allowed under
this proposed rule. As a result, this proposal contains provisions for
obtaining an exemption from the prohibitions for persons distributing,
transporting, storing, selling, or dispensing NRLM diesel fuel that
exceeds the standards, where such diesel fuel is necessary to conduct a
research, development, or testing program.
Under the proposed rule, parties seeking an R & D exemption would
be required to submit an application for exemption to EPA that
describes the purpose and scope of the program, and the reasons why
higher-sulfur diesel fuel is necessary. Upon presentation of the
required information, an exemption could be granted at the discretion
of the Administrator, with the condition that EPA could withdraw the
exemption in the event the Agency determines the exemption is not
justified. In addition, an exemption based on false or inaccurate
information could be considered void ab initio. Fuel subject to an
exemption would be exempt from certain provisions of this proposed
rule, including the sulfur standards, provided certain requirements are
met. These requirements include the segregation of the exempt fuel from
non-exempt NRLM and highway diesel fuel, identification of the exempt
fuel on product transfer documents, pump labeling, and where
appropriate, the replacement, repair, or removal from service of
emission systems damaged by the use of the high sulfur fuel.
c. Fuel Used in Racing Equipment
This proposed rule would provide no exemption from the sulfur or
other content standard and other requirements of the proposal for
diesel fuel used in racing. Under certain conditions, racing vehicles
would not be considered nonroad vehicles. See, for example, 40 CFR
89.2, definition of ``nonroad vehicle''. The fuel used by such racing
vehicles would not necessarily be considered nonroad diesel fuel.
However, we believe that there is a realistic chance that such fuel
also could be used in NRLM equipment, and therefore, should be
considered NRLM diesel fuel. During the highway diesel rulemaking, we
received no comments supporting the need for an exemption for racing
fuel. We are not aware of any advantage for racing vehicles or racing
equipment to use fuel having higher sulfur levels than are required by
this proposed rule, and we are concerned about the potential for
misfueling of nonroad equipment and motor vehicles that could result
from having a high sulfur (e.g., 3,400 ppm) fuel for vehicle or nonroad
equipment available in the marketplace. Consequently, as was the case
with the highway diesel rule, this proposal does not provide an
exemption from the nonroad diesel fuel requirements for fuel used in
racing vehicles or equipment.
d. Fuel for Export
Fuel produced for export, and that is actually exported for use in
a foreign country, would be exempt from the fuel content standards and
other requirements of this proposed rule, such as the non-highway
baseline provisions. Such fuel would be considered as intended for use
in the U.S. and subject to the proposed standards unless it was
designated by the refiner as for export only and product transfer
documents stated that the fuel was for export only. Fuel intended for
export would need to be segregated from all fuel intended for use in
the U.S., and distributing or dispensing such fuel for domestic use
would be illegal.

B. Additional Requirements for Refiners and Importers

The primary requirements proposed today for refiners and importers
are discussed in Section IV above. In that section, we discuss the
general structure of the compliance and enforcement provisions
applicable to refiners and importers, including fuel content standards,
baseline provisions, and credit provisions. In this subsection, we
discuss several additional requirements

[[Page 28497]]

for refiners and importers that are not addressed in Section IV. In
addition, Sections VIII.D, E, and F below discuss several provisions
that apply to all parties in the diesel fuel production and
distribution system, including refiners and importers.
1. Transfer of Credits
This proposal includes provisions for diesel sulfur credit
transfers that are essentially identical to other fuels rules that have
credits provisions. As in other fuels rules, nonroad diesel sulfur
credits could only be transferred between the refiner or importer
generating the credits and the refiner or importer using the credits.
If a credit purchaser could not use all the credits it purchased from
the refiner who generated them, the credits could be transferred one
additional time. We recognize that there is potential for credits to be
generated by one party and subsequently purchased and used in good
faith by another party, where the credits are later found to have been
calculated or created improperly, or otherwise found to be invalid. As
with the reformulated gasoline rule, the Tier 2/Gasoline Sulfur rule,
and the highway diesel rule, invalid credits purchased in good faith
would not be valid for use by the purchaser. To allow such use would
not be consistent with the environmental goals of the regulation. In
addition, both the seller and purchaser of invalid credits would have
to adjust their credit calculations to reflect the proper credits and
either party (or both) could be deemed in violation if the adjusted
calculations demonstrated noncompliance. The parties to such a credit
transaction can be expected to develop contractual provisions to
address these circumstances.
Nevertheless, in a situation where invalid credits are transferred,
our strong preference would be to hold the credit seller liable for the
violation, rather than the credit purchaser. As a general matter we
would expect to enforce a shortfall in credit compliance calculations
against the credit seller, and we would expect to enforce a compliance
shortfall (caused by the good faith purchase of invalid credits)
against a good faith purchaser only in cases where we are unable to
recover sufficient valid credits from the seller to cover the
shortfall. Moreover, in settlement of such cases we would strongly
encourage the seller to purchase credits to cover the good faith
purchaser's credit shortfall. EPA would consider the covering of a
credit deficit through the purchase of valid credits a very important
factor in mitigation of any case against a good faith purchaser,
whether the purchase of valid credits is made by the seller or by the
purchaser.
2. Additional Provisions for Importers and Foreign Refiners Subject to
the Credit Provisions or Hardship Provisions
Since this proposed rule includes several compliance options that
could be used by NRLM diesel fuel importers and foreign refiners, we
are also proposing specific compliance and enforcement provisions to
ensure compliance for imported NRLM diesel fuel. These additional
foreign refiner provisions are similar to those under the conventional
gasoline regulations, the gasoline sulfur regulations and the highway
diesel fuel regulations (see 40 CFR 80.94, 80.410 and 80.620).
Under this proposal, standards for NRLM diesel fuel produced by
refineries owned by foreign refiners must be met by the importer,
unless the foreign refiner has been approved to produce NRLM diesel
fuel under the credit provisions, small refiner provisions or hardship
provisions of this proposal. If the foreign refiner is approved under
any of these provisions, the volume requirements would be met by the
foreign refiner's refinery(s) and the foreign refinery(s) would be the
entity(s) generating, using, banking or trading credits for the NRLM
diesel fuel produced for and imported into the U.S. We are proposing
that importers themselves not be eligible for small refiner or hardship
relief. Importers may participate in the proposed credit programs;
however, an importer and a foreign refiner may not generate credits for
the same fuel.
Any foreign refiner that applies for and obtains approval to
produce NRLM diesel fuel subject to credit provisions, small refiner
provisions or the hardship provisions would be subject to the same
requirements as domestic refiners operating under the same provisions.
Additionally, we are proposing provisions for foreign refiners similar
to the provisions at 40 CFR 80.94, 80.410, and 80.620, which include:
? Segregation of NRLM diesel fuel produced at the foreign
refinery until it reaches the U.S. and separate tracking of volumes
imported into each PADD;
? Controls on product designation;
? Load port and port of entry testing; and
? Requirements regarding bonds and sovereign immunity.
These provisions would aid the Agency in tracking NRLM diesel fuel
from the foreign refinery to its point of import into this country. We
believe these provisions would be necessary and sufficient to ensure
that foreign refiners' compliance could be monitored and that the
proposed diesel fuel requirements could be enforced against foreign
refiners. For more discussion of the rationale for these enforcement
provisions, see preamble to the final Anti-Dumping Foreign Refiners
rule (see 62 FR 45533, Aug. 28, 1997) and the gasoline sulfur rule (see
65 FR 6698, February 10, 2000).
3. Proposed Provisions for Transmix Facilities
In the petroleum products distribution system, certain types of
interface mixtures in product pipelines cannot be added in any
significant quantity to either of the adjoining products that produced
the interface. These mixtures are known as ``transmix.'' The pipeline
and terminal industry's practice is to transport transmix via truck,
pipeline, or barge to a facility with an on-site fractionator that is
designed to separate the products. The owner or operator of such a
facility is called a ``transmix processor.'' Such entities are
generally considered to be a refiner under existing EPA fuel
regulations.
Under the non-highway baseline percentage approach proposed in
today's diesel rule, absent special treatment transmix processors that
wished to commingle highway and NRLM fuel would need to comply with the
baseline percentage requirements. Transmix processors, as with
conventional refiners, are also currently subject to the ``80 percent/
20 percent'' production requirements for 15 ppm and 500 ppm highway
diesel fuel. In both of these cases, producing fuel in set percentages
appears to be inconsistent with the inherent nature of the transmix
processors' business. Unlike conventional refiners, transmix processors
refine shipments of fuel that vary in volume and timing--largely
unpredictably. Complying with set percentages of different highway and
NRLM sulfur grades would be very difficult, probably resulting in
either a need to purchase credits or to postpone processing of some
shipments.
In light of this disproportionate burden on transmix processors, we
propose that transmix processors could choose to not be covered by both
the proposed non-highway baseline provision and the TCO provisions for
highway diesel fuel. This would only be an option for diesel fuel
produced according to typical operational practices involving
separation of transmix and not, for example, diesel fuel produced due
to the blending of blend stocks. If the processor chooses not to be
covered by these provisions,

[[Page 28498]]

then the processor could produce highway or NRLM diesel fuel without
these limits on production or percentages. For example, the processor
could choose whether to produce 15 ppm highway, 500 ppm highway, 500
ppm NRLM, or 15 ppm NR in any proportions, during the time periods when
the non-highway baseline volume percentage or the highway TCO are
applicable. We are concerned that to discourage abuse, some reasonable
limit on a transmix processor's production volume that could be
exempted from the requirements may be necessary. Thus, we propose to
limit it to 105% of its 2003-2005 average production but seek comment
on whether additional flexibility is warranted.
The processor would still need to properly designate its fuel with
the proper product transfer documents and, in the case of heating oil
between 2007 and 2014 and locomotive and marine fuel between 2010 and
2014, to apply the specified marker and comply with other reporting and
recordkeeping requirements applicable to refiners. A processor choosing
this approach would not be eligible to generate or use NRLM or highway
sulfur credits.
Because the volume of fuel involved would be small and the fuel
processed would already have been ``off-spec,'' we believe that
providing these options for transmix processors would have essentially
no environmental impact and would not affect the efficient functioning
of the proposed program or the existing highway diesel program. Rather,
these options would allow fuel volume to remain in the highway and/or
NRLM markets that might otherwise be forced into the heating oil
market.
4. Highway or Nonroad Diesel Fuel Treated as Blendstock (DTAB)
Under the proposed program, a situation could arise for importers
where that was expected to comply with the 15 ppm NR or highway
standard is found to be slightly higher in sulfur than the standard.
Rather than require that importer to account for, and report, that fuel
as 500 ppm fuel, we propose to allow the importer to designate the non-
complying fuel as blendstock--``diesel fuel treated as blendstock'' or
DTAB--rather than as either highway or nonroad diesel fuel. In its
capacity as a refiner, the party could blend this DTAB fuel with lower
sulfur diesel fuel to cause the sulfur level of the combined product to
meet the 15 ppm nonroad or highway standard.
Where previously certified diesel fuel is used to reduce the sulfur
level of the DTAB to 15 ppm or less, the party, in its refiner
capacity, would report only the volume of the imported DTAB as the
amount of diesel fuel produced. This avoids the double counting that
would result if the same diesel fuel is reported twice. If the product
that is blended with the DTAB is not previously certified diesel fuel,
but is also blendstock, the total combined volume of the DTAB and other
blendstock would constitute the batch produced.
When an importer classifies diesel fuel as DTAB, that DTAB would
not count toward the importer's calculations under the highway diesel
rule's temporary compliance option, toward credit generation or use, or
for compliance calculations under the non-highway baseline
approach.\320\ The same party, however, would include the DTAB in such
calculations in its capacity as refiner. We believe such an approach
would increase the supply of 15 ppm fuel by reducing the volume of
near-compliant fuel that is downgraded to higher sulfur designations.
In essence, it allows importers the same flexibility that refiners have
within their refinery gate.
---------------------------------------------------------------------------

\320\ Importer/refiners availing themselves of the DTAB
provisions would still be subject to the non-highway distillate
baseline provisions, downgrading provisions, and other provisions
applicable to any importer or refiner.
---------------------------------------------------------------------------

C. Requirements for Parties Downstream of the Refinery or Import
Facility

In order for the environmental benefits of the proposed program to
be ensured, parties in the fuel distribution system downstream of the
refinery (including pipelines, terminals, bulk plants, wholesale
purchaser-consumers, and retailers) must in most cases keep the various
grades of fuel in the system separate. Owners and operators of nonroad
diesel equipment must also be required in certain circumstances to use
fuels meeting specific sulfur content standards. The following
paragraphs discuss several provisions that we propose to apply to these
parties: segregation of various fuel sulfur grades; diesel fuel pump
labeling; use of used motor oil in diesel fuel; use of kerosene in
diesel fuel; use of additives in diesel fuel; requirements for end
users; and provisions covering downgrading of undyed diesel fuel to
different grades of fuel. These provisions are analogous to similar
provisions that apply to highway diesel fuel under the highway program.
1. Product Segregation and Contamination
This subsection discusses the various grades and uses of NRLM fuel
under the proposed program and when these fuel grades must be
segregated from each other. In later subsections, we discuss related
requirements for product transfer documents to identify fuels
throughout the distribution system and provisions relating to the
liability all parties in the distribution face for preventing
contamination of these different fuel sulfur grades.
a. The Period From June 1, 2007 through May 31, 2010
Starting June 1, 2007, NRLM fuel having a sulfur content exceeding
500 ppm that is produced or imported under the credit, small refiner,
or hardship provisions would need to be segregated from other NRLM fuel
subject to the 500 ppm standard, until the point where IRS dye is
added. After that point the 500 ppm NRLM fuel could be mixed with NRLM
small refiner, hardship or credit fuel, but could not be mixed with
heating oil without changing the designation to heating oil. However,
during this period there would also be nonroad equipment equipped with
engines subject to emission standards, where some of this equipment is
expected to be equipped with sulfur sensitive technology that needs to
operate on 500 ppm or less sulfur fuel in order to meet the proposed
emission standards in-use. Fuels sold for use in, or dispensed into,
these engines would need to be identified as meeting the 15 ppm
standard or the 500 ppm standard, as applicable, and if so identified
it would need to meet such standard, and avoid being contaminated with
higher sulfur fuels.
We are proposing an additional segregation requirement for heating
oil. As provided in Section IV of the preamble, such fuel would be
required to be identified by a marker and segregated throughout the
distribution system to the end user. It could not be used as nonroad,
locomotive or marine fuel but could only be used as heating oil. NRLM
fuel could, however, be used as heating oil. To be able to effectively
enforce the segregation of heating oil, we are proposing that heating
oil be marked by the refiner or importer by the addition of 6 mg/L of
solvent yellow 124.
b. The Period From June 1, 2010 through May 31, 2014
Because of the extreme sulfur sensitivity of the expected engine
emission control systems beginning in model year 2011 for nonroad
diesel engines, it would be imperative that the distribution system
segregate nonroad diesel fuel subject to the 15 ppm sulfur standard
from higher sulfur distillate products, such as 500 ppm diesel fuel
produced by small refiners or through the use of credits, heating oil,
and jet fuel.

[[Page 28499]]

We are also concerned about potential misfueling of engines
requiring 15 ppm fuel at retail or wholesale purchaser-consumer
facilities as defined under this proposal, or other end-user
facilities, even when segregation of 15 ppm fuel from the higher-sulfur
grades of diesel fuel has been maintained in the distribution system.
Thus, downstream compliance and enforcement provisions of the proposed
rule are aimed at both preventing contamination of nonroad diesel fuel
subject to the 15 ppm sulfur standard and preventing misfueling of new
nonroad equipment.
As proposed in Section IV above, small refiners would be able to
continue to produce 500 ppm nonroad fuel, until June 1, 2014. Other
refiners could also produce fuel under the 500 ppm nonroad standard,
through the use of credits, but only until June 1, 2012. In either
case, we are proposing that during this period the 500 ppm fuel must be
segregated from 15 ppm nonroad fuel throughout the distribution system,
including the end user. We are also proposing that refiners and
importers wishing to distribute 500 ppm nonroad diesel fuel during this
period be required to petition the Agency for approval of a plan
demonstrating the segregation of such fuel. The plan would also be
required to include a quality assurance program that would ensure that
the 500 ppm fuel would not cause fuel subject to the 15 ppm standard to
be contaminated, and to ensure that model year 2011 and later nonroad
diesel engines would not be misfueled.
As discussed in section IV above, we propose that during this
period, locomotive and marine fuel be segregated using the same marker
as was used for heating oil before June 1, 2010. During this time,
heating oil would not be marked but would be segregated based on its
sulfur content, since no other fuel could exceed 500 ppm.
c. After May 31, 2014
After all regulatory flexibilities have expired, the three
remaining fuels (15 ppm highway and nonroad fuel, 500 ppm locomotive
and marine fuel, and heating oil) would be segregated based on their
sulfur content and identifying information on product transfer
documents.
2. Diesel Fuel Pump Labeling To Discourage Misfueling
For any multiple-fuel program like the two-step program proposed
today, we believe that the clear labeling of nonroad diesel fuel pumps
would be vital so that end users could readily distinguish between the
several grades of fuel that may be available at fueling facilities, and
properly fuel their nonroad equipment. Section VII above describes the
labels that manufacturers would be required to place on model year 2011
and later nonroad equipment, and information that would be provided to
nonroad equipment owners. Today's proposal includes requirements for
labeling fuel pump stands at retail facilities, including bulk plants
or portable fuel storage facilities used as a fueling facility, and
wholesale purchaser-consumer facilities.
To help prevent misfueling of nonroad, locomotive and marine
engines, and to thus assure the environmental benefits of the program
are realized, we are proposing pump labeling requirements similar to
those adopted in the highway diesel rule (40 CFR 80.570). These labels
would apply to diesel fuel dyed for tax purposes, and thus generally
could not be used in highway vehicles. The proposed fuel pump dispenser
labeling requirements would supersede the non-highway labeling
requirement established by the highway diesel rule on June 1, 2007.
These pump dispenser labeling requirements are discussed separately for
each of four time periods: Beginning June 1, 2006, June 1, 2007-August
31, 2010; September 1, 2010-August 31, 2014; and September 1, 2014
forward.
We are also proposing to amend the pump dispenser labeling language
in the highway diesel regulations for consistency with this proposal.
Because the highway diesel rule prohibits highway diesel fuel with
sulfur levels above 500 ppm, the highway diesel rule and this proposal
have different meanings for the terms ``low sulfur'' and ``high
sulfur'', and the highway diesel rule does not use the term ``ultra
low-sulfur.'' Further, because the highway diesel rule did not need to
categorize the different uses of non-highway diesel fuel, the highway
diesel rule and this proposal have different meanings for the term
``nonroad''.\321\ The proposed amendments to the highway pump dispenser
labeling language are to avoid confusion at the fuel pumps caused by
labels with terms that would otherwise have different meanings
depending on whether the pump dispenser is designated to dispense
highway or non-highway diesel fuel. We are also proposing to add
effective dates to each paragraph of the labeling provisions of the
highway diesel rule for consistency with the additional pump labeling
sections of this proposal, and to distinguish the non-highway labeling
requirement effective June 1, 2006 under the highway diesel rule from
the non-highway labeling requirements of this proposal effective 2007.
---------------------------------------------------------------------------

\321\ In the highway diesel rule, the term ``high-sulfur'' means
diesel fuel with a sulfur level greater than 15 ppm, whereas in this
proposal it means diesel fuel with a sulfur level greater than 500
ppm. In the highway diesel rule, the term ``low-sulfur'' means
diesel fuel with a sulfur level of no greater than 15 ppm, whereas
in this proposal it means diesel fuel with a sulfur level of no
greater than 500 ppm. In addition, the term ``nonroad'' as used in
the highway diesel rule means ``non-highway'' (i.e., all fuel that
is not highway fuel), but the term ``nonroad'' as used in this
proposal excludes locomotive diesel, marine diesel and heating oil.
---------------------------------------------------------------------------

a. Pump Labeling Requirements for 2006
We propose to amend the pump dispenser labeling language of the
highway diesel rule for consistency with this proposal, and to avoid
confusion at the fuel pumps caused by labels with terms that would
otherwise have different meanings depending on whether the pump
dispenser is dispensing highway or non-highway diesel fuel.
For pumps dispensing highway diesel fuel subject to the 500 ppm
sulfur standard of Sec. 80.520(c), we propose that the label read as
follows:

LOW-SULFUR HIGHWAY DIESEL FUEL (500 ppm Maximum)

WARNING

May damage model year 2007 and later highway vehicles and engines.
Federal Law prohibits use in these vehicles
For pumps dispensing highway diesel fuel subject to the 15 ppm
sulfur standard of Sec. 80.520(a)(1), we propose that the label read
as follows:

ULTRA LOW-SULFUR HIGHWAY DIESEL FUEL (15 ppm Maximum)

Recommended for use in all diesel vehicles and engines.
Required for model year 2007 and later highway diesel vehicles and
engines.
For pumps dispensing diesel fuel for non-highway equipment that
does not meet the standards for motor vehicle diesel fuel, we propose
that the label read as follows:

NON-HIGHWAY DIESEL FUEL (May Exceed 500 ppm Sulfur)

WARNING

May damage or destroy highway engines and their emission controls.
Federal Law prohibits use in any highway vehicle or engine
b. Pump Labeling Requirements for 2007-2010
As discussed in section IV of the preamble, between June 1, 2007
and August 31, 2010, this proposal would

[[Page 28500]]

not require end users to dispense fuel meeting the 500 ppm sulfur
standard into nonroad, equipment, locomotives or marine vessels. During
this time period, small refiner fuel and fuel produced under the credit
provisions with sulfur levels exceeding 500 ppm would still exist in
the distribution system. Furthermore, this fuel could be mixed
downstream at the point where the fuels are dyed for IRS tax purposes
with fuel meeting the 500 ppm standard and introduced into nonroad,
locomotive and marine engines. During this time period, there would
also be nonroad equipment with engines subject to ``pull-ahead''
emission standards (i.e., engines equipped with emission controls that
allow them to meet standards earlier than required). Some of this pull-
ahead equipment is expected to be equipped with sulfur sensitive
technology that would need to operate on fuel of 500 ppm or less sulfur
in order to meet the proposed emission standards in-use. For this
reason, it is important that NRLM end users be able to know the sulfur
level of the fuel they are purchasing and dispensing. Therefore, fuel
pump dispensers for the various sulfur grades would also need to be
properly labeled.
For pumps dispensing 500 ppm (maximum) sulfur content diesel fuel
for nonroad equipment engines subject to pull-ahead standards, we
propose that the label read as follows:

LOW-SULFUR NON-HIGHWAY DIESEL FUEL

(500 ppm Maximum)

WARNING

Not for Use In Highway Vehicles or Engines
It is also likely that prior to June 1, 2010 some 15 ppm (maximum)
diesel fuel will be introduced into the nonroad market early. Both the
engine and fuel credit provisions envision such early introduction of
2011-compliant engines and 15 ppm fuel. Thus, it is important that
nonroad end users be able to know when they are purchasing diesel fuel
with 15 ppm or less sulfur. For pumps dispensing 15 ppm (maximum)
sulfur content diesel fuel for nonroad equipment engines subject to
pull-ahead standards, we propose that the label read as follows:

ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL

(15 ppm Maximum)

Required for All Model Year 2011 and Newer Nonroad Diesel Engines
Recommended for Use in All Nonroad, Locomotive and Marine Diesel
Engines

WARNING

Not for Use in Highway Vehicles or Engines
For all other nonroad equipment, locomotive, and marine engine
diesel fuel pumps (that is, pumps dispensing diesel fuel having a
sulfur content greater than 500 ppm) we propose that the label read as
follows:

HIGH-SULFUR NON-HIGHWAY DIESEL FUEL

(May Exceed 500 ppm)

WARNING

Not for Use In Highway Vehicles or Engines
Not for Use in Nonroad, Locomotive, or Marine Engines after August 31,
2010
May Damage Engines Certified for Use on Low-Sulfur or Ultra-Low Sulfur
Diesel Fuel
During this time period, as discussed in section IV.B.2.b, it would
be necessary to segregate heating oil from nonroad, locomotive and
marine diesel fuel to avoid circumventing the intent of the first step
of the proposed nonroad standards--that PM and SO₃ benefits
be achieved by producing fuel to the NRLM diesel fuel standards in an
amount that fully corresponds to the amount of fuel used in these
engines. Consequently, for pumps dispensing non-highway diesel fuel for
use other than in nonroad, locomotive or marine engines, such as for
use in stationary diesel engines or as heating oil, we propose that the
label read as follows:

HEATING OIL (May Exceed 500 ppm Sulfur)

WARNING

Federal Law Prohibits Use in Highway Vehicles or Engines, or in
Nonroad, Locomotive, or Marine Engines
May Damage Engines Certified for Use on Low-Sulfur or Ultra-Low Sulfur
Diesel Fuel
c. Pump Labeling Requirements for 2010-2014
Beginning September 1, 2010, with certain exceptions, all fuel
introduced into any nonroad engine, regardless of year of manufacture,
would be required to meet the 15 ppm standard. The exceptions are that
segregated small refiner nonroad diesel fuel and credit nonroad diesel
fuel would be allowed to meet the 500 ppm sulfur standard only for use
in pre-model year 2011 engines. This limited use of 500 ppm fuel would
continue through August 31, 2014,\322\ after which all nonroad fuel
would have to meet the 15 ppm standard. Fuel for use in locomotive and
marine engines would be required to meet the 500 ppm standard without
exception. As discussed in section IV.B.3.b, during this time period,
it would be necessary to segregate the 500 ppm (maximum) locomotive and
marine diesel fuel from the small refiner and credit 500 ppm (maximum)
nonroad diesel fuel to ensure an adequate supply of ultra low-sulfur
(15 ppm maximum) nonroad diesel fuel for nonroad purposes.
---------------------------------------------------------------------------

\322\ Production of 500 ppm fuel under the credit provisions
would be allowed until June 1, 2012, but small refiner fuel subject
to the 500 ppm standard could continue to be produced until June 1,
2014 and would be available to end users until September 1, 2014.
---------------------------------------------------------------------------

For pumps dispensing 15 ppm (maximum) sulfur content nonroad diesel
fuel, we propose that the label read as follows:

ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL

(15 ppm Maximum)

Required for all Model Year 2011 and Newer Nonroad Diesel Engines
Recommended for Use in All Nonroad, Locomotive and Marine Diesel
Engines

WARNING

Not for Use in Highway Vehicles or Engines
For pumps dispensing segregated small refiner or credit 500 ppm
(maximum) nonroad diesel fuel, as discussed in section IV.B.3.b, we
propose that the label read as follows:

LOW-SULFUR NON-HIGHWAY DIESEL FUEL

(500 ppm Maximum)

WARNING

May Damage Model Year 2011 and Newer Nonroad Engines
Federal Law Prohibits Use in All Model Year 2011 and Newer Nonroad
Engines
Not for Use In Highway Vehicles or Engines
For pumps dispensing marked 500 ppm sulfur (maximum) locomotive and
marine diesel fuel, as discussed in section IV.B.3.b, we propose that
the label read as follows:

[[Page 28501]]

LOW-SULFUR LOCOMOTIVE OR MARINE DIESEL FUEL

(500 ppm Maximum)

WARNING

Federal Law Prohibits Use in Other Nonroad Engines or in Highway
Vehicles or Engines
May Damage Model Year 2007 and Newer Highway Diesel Engines and 2011
and Newer Nonroad Diesel Engines
For pumps dispensing high-sulfur fuel for use as heating oil, we
propose that the label read as follows:

HEATING OIL (May Exceed 500 ppm Sulfur)

WARNING

Federal Law Prohibits Use in Highway Vehicles or Engines, or in
Nonroad, Locomotive, or Marine Engines
May Damage Engines Certified for Use on Low-Sulfur or Ultra-Low Sulfur
Diesel Fuel
d. Pump Labeling Requirements for 2014 and Beyond
Beginning September 1, 2014, all nonroad fuel distributed to end-
users would be required to meet the 15 ppm standard, without exception.
Locomotive and marine fuel would continue to be subject to the 500 ppm
standard, without exception. The pump labels for heating oil would
continue to be the same as for the period 2010 through 2014.
For pumps dispensing nonroad diesel fuel, we propose that the label
read as follows:

ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL

(15 ppm Maximum)

Required for all Nonroad Diesel Engines
Recommended for Use in All Nonroad, Locomotive and Marine Diesel
Engines

WARNING

Not for Use in Highway Vehicles or Engines
For pumps dispensing locomotive or marine diesel fuel, we propose
that the label read as follows:

LOW-SULFUR LOCOMOTIVE OR MARINE DIESEL FUEL

(500 ppm maximum)

WARNING

HEATING OIL (May Exceed 500 ppm Sulfur)

WARNING

Federal Law Prohibits Use in Highway Vehicles or Engines, or in
Nonroad, Locomotive, or Marine Engines
May Damage Engines Certified for Use on Low-Sulfur or Ultra-Low Sulfur
Diesel Fuel
e. Nozzle Size Requirements or Other Requirements To Prevent
Misfueling
Like the highway diesel fuel program, the proposed NRLM diesel fuel
program does not include a nozzle size requirement. In part this is
because we are not aware of an effective and practicable scheme to
prevent misfueling through the use of different nozzle sizes or shapes,
and in part because we do not believe that improper fueling would be a
significant enough problem to warrant such an action. In the preamble
to the highway diesel fuel rule, we stated our belief that the use of
unique nozzles, color-coded scuffguards, or dyes to distinguish the
grades of diesel fuel may be useful in preventing accidental use of the
wrong fuel. (See 66 FR 5119, January 18, 2001.) However, we did not
finalize any such requirements, for the reasons described in the RIA
for that final rule (Chapter IV.E.).
Similar reasoning applies to the proposed NRLM diesel fuel program.
For example, 15 ppm diesel fuel would be the dominant fuel in the
market by 2010, likely comprising more than 80 percent of all number 2
distillate. Furthermore, after 2010, we believe that 500 ppm diesel
fuel would have limited availability until 2014. High-sulfur distillate
for heating oil uses would remain, but will only exist in significant
volumes in certain parts of the country. In any event, we believe that
most owners and operators of new nonroad diesel engines and equipment
would not risk voiding the general warranty and the emissions warranty
by misfueling.
Although in the highway diesel fuel rule we did not finalize any
provisions beyond fuel pump labeling requirements, we recognized that
some potential for misfueling would still exist. Consequently, we
expressed a desire to continue to explore with industry simple, cost-
effective approaches that could further minimize misfueling potential
such as color-coded nozzles/scuff guards. Since the highway diesel rule
was promulgated, we have had discussions with fuel retailers, wholesale
purchaser-consumers, vehicle manufacturers, and nozzle manufacturers
and continue to examine different methods for preventing accidental or
intentional misfueling under the highway diesel fuel sulfur program. To
date, no consensus exists among the affected stakeholders, including
engine and truck manufacturers, truck operators, fuel retailers, and
fuel nozzle manufacturers. However, we will continue discussions with
these and other stakeholders. We will consider any new developments
that result from these highway discussions in a future nonroad action.
3. Use of Used Motor Oil in New Nonroad Diesel Equipment
We understand that used motor oil is sometimes blended with diesel
fuel for use as fuel in nonroad diesel equipment. Such practices
include blending used motor oil directly into the equipment fuel tank,
blending it into the fuel storage tanks, and blending small amounts of
motor oil from the engine crank case into the fuel system as the
equipment is operated.
However, motor oil normally contains high levels of sulfur. Thus,
the addition of used motor oil to nonroad diesel fuel could
substantially impair the sulfur-sensitive emissions control equipment
expected to be used by engine manufacturers to meet the emissions
standards proposed in today's NPRM. Depending on how the oil is
blended, it could increase the sulfur content of the fuel by as much as
200 ppm. As a result, we believe blending used motor oil into nonroad
diesel fuel could render inoperative the expected emission control
technology and potentially cause driveability problems. It should be
prohibited as a violation of the tampering prohibition in the Act. See
CAA Sections 203(a)(3), 213(d).
Therefore, like the highway diesel rule, this proposal would
prohibit any person from introducing or causing or allowing the
introduction of used motor oil, or diesel fuel containing used motor

[[Page 28502]]

oil, into the fuel delivery systems of nonroad equipment engines
manufactured in model year 2011 and later. The only exception to this
would be where the engine was explicitly certified to the emission
standard with used motor oil added and the oil was added in a manner
consistent with the certification.
4. Use of Kerosene in Diesel Fuel
As we discussed in the highway diesel final rule, kerosene is
commonly added to diesel fuel to reduce fuel viscosity in cold weather
(see 66 FR 5120, January 18, 2001). This proposal would not limit this
practice with regard to 500 ppm NRLM diesel fuel. However the resulting
blend would still be subject to the 500 ppm sulfur standard. Consistent
with the highway diesel fuel rule, kerosene that is used, intended for
use, or made available for use as, or for blending with, 15 ppm sulfur
nonroad diesel fuel would itself be required to meet the 15 ppm
standard starting June 1, 2010 and must be itself classified as
``nonroad diesel fuel'' unless it was already classified as ``motor
vehicle diesel fuel.'' This classification as nonroad diesel fuel use
could be made by the kerosene fuel's refiner or could be made by a
downstream party at the point when that party chooses to use the
kerosene in its possession for use as nonroad diesel fuel subject to
the 15 ppm sulfur standard.
To help ensure that only distillates that comply with the proposed
15 ppm nonroad diesel fuel standard are blended into 15 ppm nonroad
diesel fuel, this proposal would require that kerosene meeting the 15
ppm standard and distributed by the transferring party for use in
nonroad equipment engines must be accompanied by PTDs accurately
stating that the product meets the 15 ppm sulfur standard. (See Section
VIII.E.7, below.)
As a general matter, any party who would blend kerosene, or any
blendstock, into nonroad diesel fuel, or who would produce nonroad
diesel fuel by mixing blendstocks, would be a refiner and would be
subject to the requirements and prohibitions applicable to refiners
under the proposed rule. However, under this proposal, in deference to
the longstanding and widespread practice of blending kerosene into
diesel fuel at downstream locations, downstream parties who only blend
kerosene into nonroad diesel fuel will not be subject to the
requirements applicable to other refiners, provided that they do not
alter the fuel in any other way. This activity is treated the same way
under the final highway diesel rule.
In order to ensure the continued compliance of 15 ppm fuel with the
15 ppm standard, downstream parties choosing to blend kerosene into 15
ppm nonroad diesel fuel would be required to either have a PTD for that
kerosene indicating compliance with the 15 ppm standard, or to have
test results for the kerosene establishing such compliance. Further,
downstream parties choosing to blend kerosene into 15 ppm nonroad
diesel fuel would be entitled to the 2 ppm adjustment factor discussed
above for both the kerosene and the diesel fuel into which it is
blended at downstream locations, provided that the kerosene had been
transferred to the party with a PTD indicating compliance with that
standard. Sulfur test results from downstream locations of parties who
do not have such a PTD for their kerosene will not be subject to this
adjustment factor, either for the kerosene itself, or for the nonroad
diesel fuel into which it is blended.
Any party who causes the sulfur content of nonroad diesel fuel
subject to the 15 ppm sulfur standard to exceed 15 ppm by blending
kerosene into nonroad diesel fuel, or by using high sulfur kerosene as
nonroad diesel fuel, would be subject to liability for violating the
sulfur standard. Similarly, parties who cause the sulfur level of
nonroad diesel fuel subject to the 500 ppm nonroad diesel fuel to
exceed that standard by blending kerosene into the fuel, would also be
subject to liability.
The proposed rule would not require refiners or importers of
kerosene to produce or import kerosene meeting the 15 ppm sulfur
standard. However, we believe that refiners will produce low sulfur
kerosene in the same refinery processes that they use to produce low
sulfur diesel fuel, and that the market will drive supply of low sulfur
kerosene for those areas where, and during those seasons when, the
product is needed for blending with nonroad, as well as highway, diesel
fuel. We request comments regarding this proposed provision.
5. Use of Diesel Fuel Additives
Diesel fuel additives include lubricity improvers, corrosion
inhibitors, cold-operability improvers, and static dissipaters. Use of
such additives is distinguished from the use of kerosene by the low
concentrations at which they are used and their relatively more complex
chemistry.\323\ The suitability of diesel fuel additives for use in
diesel fuel meeting a 500 ppm sulfur specification has been well
established due to the existence of 500 ppm highway diesel fuel in the
marketplace since 1993. The suitability of additives for use in 15 ppm
diesel fuel was addressed in the highway diesel program, which requires
highway diesel fuel to meet a 15 ppm sulfur standard beginning in 2006.
Our review of data submitted by additive and fuel manufacturers to
comply with EPA's Fuel and Fuel Additive Registration requirements
indicates that additives to meet every purpose, including static
dissipation, are currently in common use which meet a 15 ppm cap on
sulfur content.\324\ Since such low-sulfur additives are currently in
use side-by-side with high-sulfur additives, it is reasonable to
conclude that there is not a significant difference in their cost. The
ability of industry to provide low-sulfur additives is supported by the
fact that diesel fuel meeting a 10 ppm cap on sulfur content has been
marketed in Sweden for some time and is beginning to be marketed in
other countries such as Germany. Fifteen ppm diesel fuel is also being
made available to a number of centrally fueled fleets across the U.S.
---------------------------------------------------------------------------

\323\ Diesel fuel additives are used at concentrations commonly
expressed in parts per million. Diesel fuel additives can include
specially-formulated polymers and other complex chemical components.
Kerosene is used at much higher concentrations, expressed in volume
percent. Unlike diesel fuel additives, kerosene is a narrow
distillation fraction of the range of hydrocarbons normally
contained in diesel fuel.
\324\ See Chapter IV.D. of the RIA for the highway diesel fuel
rule for more information on diesel fuel additives, EPA Air docket
A-99-06, docket item V-B-01. Also See 40 CFR part 79.
---------------------------------------------------------------------------

Even if not yet available for certain purposes, we believe that it
is reasonable to assume that low-sulfur additives will become available
before the 15 ppm sulfur standard for highway diesel fuel becomes
effective in 2006. This will be well in advance of the proposed 2010
implementation date for a 15 pm sulfur standard on nonroad diesel fuel.
As discussed in section V of today's preamble, we expect that
reducing the sulfur content of NRLM diesel fuel to meet proposed sulfur
standards would not have a disproportionate impact on fuel lubricity
compared to the reduction in lubricity associated with desulfurizing
highway diesel fuel. We have no reason to expect that this situation
would be any different with respect to the potential impact on nonroad
diesel fuel properties other than fuel lubricity which might require
the use of additives such as cold flow, and susceptibility to static
build up. Consequently, our estimate of the increase in additive use
that would

[[Page 28503]]

result from the adoption of the proposed rule parallels that under the
highway program. We estimate that the use of lubricity additives would
increase, and that the use of other additives would be unaffected.\325\
We request comment on this assessment.
---------------------------------------------------------------------------

\325\ See Section IV.G. of today's preamble for a discussion of
the potential impact of the proposed sulfur standards on fuel
lubricity.
---------------------------------------------------------------------------

Similar to the highway diesel rule, this proposed rule would allow
the use of diesel fuel additives with a sulfur content greater than 15
ppm in nonroad diesel fuel. However, nonroad diesel fuel containing
such additives would remain subject to the proposed 15 ppm sulfur cap.
We believe that it is most appropriate for the market to determine how
best to accommodate increases in the fuel sulfur content from the
refinery gate to the end user, while maintaining the 15 ppm cap, and
whether such increases result from contamination in the distribution
system or diesel additive use. By providing this flexibility, we
anticipate that market forces will encourage an optimal balance between
the competing demands of manufacturing fuel lower than the 15 ppm
sulfur cap, limiting contamination in the distribution system, and
limiting the additive contribution to fuel sulfur content.
As in the highway diesel program, additive manufacturers that
market additives with a sulfur content higher than 15 ppm and blenders
that use them in nonroad diesel fuel subject to the proposed 15 ppm
sulfur standard would have additional requirements to ensure that the
15 ppm sulfur cap is not exceeded. The 15 ppm sulfur cap on highway
diesel fuel that becomes effective in 2006 may encourage the gradual
retirement of additives that do not meet a 15 ppm sulfur cap. The
proposed 15 ppm sulfur cap for nonroad diesel fuel in 2010 may further
this trend. However, we do not anticipate that this will result in
disruption to additive users and producers or a significant increase in
cost. Additive manufacturers commonly reformulate their additives on a
periodic basis as a result of competitive pressures. We anticipate that
any reformulation that might need to occur to meet a 15 ppm sulfur cap
will be accomplished prior to the implementation of the 15 ppm sulfur
cap on highway diesel fuel in 2006.
Like the highway diesel fuel rule, this proposed rule would limit
the continued use in nonroad diesel fuel that is subject to the
proposed 15 ppm sulfur standard of additives that exceed 15 ppm sulfur.
These additives would be limited to use in concentrations of less than
one volume percent. We believe that this limitation is appropriate and
would not cause any undue burden because the diesel fuel additives for
which this flexibility was included are always used today at
concentrations well below one volume percent. Further, one volume
percent is the threshold above which the blender of an additive becomes
subject to all the requirements applicable to a refiner. See 40 CFR
79.2(d)(1).
The specific proposed requirements regarding the use of diesel fuel
additives in nonroad diesel fuel subject to the proposed 15 ppm
standard are as follows:
? Additives that have a sulfur content at or below 15 ppm
must be accompanied by a PTD that states: ``The sulfur content of this
additive does not exceed 15 ppm.''
? Additives that exceed 15 ppm sulfur could continue to be
used in nonroad diesel fuel subject to the proposed 15 ppm sulfur
standard provided that they are used at a concentration of less than
one volume percent and their transfer is accompanied by a PTD that
lists the following:
(1) A warning that the additive's sulfur content may exceed 15 ppm,
(2) The additive's maximum sulfur concentration,
(3) The maximum recommended concentration for use of the additive
in diesel fuel, and,
(4) The contribution to the sulfur level of the fuel that would
result if the additive is used at the maximum recommended
concentration.
Blenders of additives that exceed 15 ppm in sulfur content would be
liable if their actions caused the sulfur content of the finished
nonroad diesel fuel to exceed 15 ppm. In some cases, blenders may not
find it feasible to conduct testing, or otherwise obtain information on
the sulfur content of the fuel either before or after additive
blending, without incurring substantial cost. We anticipate that
blenders would manage the risk associated with the use of additives
above 15 ppm in sulfur content under such circumstances with actions
such as the following:
? Selecting an additive with minimal sulfur content above 15
ppm that is used at a low concentration, and
? Working with their upstream suppliers to provide fuel of
sufficiently low sulfur content to accommodate the small increase in
sulfur content which results from the use of the additive.
This is similar to the way distributors would manage contamination
from their distribution hardware, such as tank trucks. Distributors
would not necessarily test for fuel sulfur content after each
opportunity for contamination, but rather will rely on mechanisms set
up to minimize the contamination, and to obtain fuel sufficiently below
the standard to accommodate the increase in sulfur content from the
contamination.
The recordkeeping, reporting, and PTD provisions associated with
these proposed requirements are discussed in Section VIII.E below. The
liability provisions are discussed in Section VIII.F below.
The 1993 and 2007 highway diesel programs did not contain any
requirements regarding the maximum sulfur content of additives used in
highway diesel fuel subject to a 500 ppm sulfur cap.\326\ Our
experience under the highway program indicates that application of the
500 ppm sulfur cap throughout the distribution system to the end-user
has been sufficient to prevent the use of additives from jeopardizing
compliance with the 500 ppm sulfur standard. The potential increase of
several ppm in the sulfur content of diesel fuel which might result
from the use of diesel additives raises substantial concerns regarding
the impact on compliance with a 15 ppm sulfur cap. However, this is not
the case with respect to the potential impact on compliance with a 500
ppm sulfur cap. The current average sulfur content of highway diesel
fuel of 340 ppm provides ample margin for the minimal increase in the
fuel sulfur content which might result from the use of additives. We
expect that this would also be the case for NRLM fuel subject to the
proposed 500 ppm sulfur standard. Therefore, we are not proposing any
requirements regarding the sulfur content of additives used in NRLM
fuel subject to the proposed 500 ppm sulfur standard. We believe that
the proposed requirement that NRLM fuel comply with the 500 ppm sulfur
cap throughout the distribution system to the end-user would be
sufficient to ensure that entities who introduce additives into such
fuel take into account the potential increase in fuel sulfur content.
---------------------------------------------------------------------------

\326\ The 500 ppm highway diesel final rule contains the
requirement that highway diesel fuel not exceed 500 ppm in sulfur
content at any point in the fuel distribution system including after
the blending of additives. Fuel Quality Regulations for Highway
Diesel Fuel Sold in 1993 and Later Calendar Years, Final Rule, 55 FR
34120, August 21, 1990.
---------------------------------------------------------------------------

6. End User Requirements
In light of the importance of ensuring that the proper fuel is used
in nonroad, locomotive, and marine engines covered

[[Page 28504]]

by the proposed program, we propose to prohibit any person from fueling
such an engine with fuel not meeting the applicable sulfur standard.
We propose that (1) no person may introduce, or permit the
introduction of, fuel that exceeds 15 ppm sulfur content into nonroad
equipment with a model year 2011 or later engine; (2) beginning
December 1, 2010, no person may introduce, or permit the introduction
of locomotive or marine fuel into any nonroad diesel engine; (3)
beginning December 1, 2010, no person may introduce, or permit the
introduction of any fuel exceeding 15 ppm sulfur content into any
nonroad diesel engine regardless of year of manufacture, except that
segregated 500 ppm nonroad diesel fuel produced by qualified small
refiners, hardship refiners, or refiners using credits may be
introduced into pre-2011 model year nonroad diesel engines; (4)
beginning December 1, 2010, no person may introduce, or permit the
introduction of fuel exceeding 500 ppm sulfur content into any
locomotive or marine diesel engine; and (5) beginning December 1, 2014,
no person may introduce, or permit the introduction of, fuel exceeding
15 ppm sulfur content into any nonroad diesel engine.
7. Anti-Downgrading Provisions
The highway diesel rule restricts downgrading of 15 ppm highway
diesel fuel to 500 ppm highway diesel fuel, from June 1, 2006-May 31,
2010 by preventing downstream entities from intentionally downgrading
15 ppm highway fuel. This is to protect the nationwide availability of
15 ppm highway fuel. The concern was that since both 15 ppm highway
fuel and 500 ppm highway fuel were expected to be comparably priced,
entities downstream of the refinery could simply take delivery of
whichever fuel was cheapest and commingle the two fuel grades into a
single pool of 500 ppm highway fuel. We chose not to restrict
downgrading to non-highway fuel grades, however, for three reasons.
First, in order to avoid reprocessing costs, an outlet was needed for
legitimately downgraded fuel produced through contamination in the
distribution system. Second, the price differential between 15 ppm fuel
and high sulfur non-highway fuel was expected to be sufficient to deter
any intentional downgrading. Third, many of the entities such as
retailers and fleets that might have an incentive to downgrade 15 ppm
highway fuel do not market non-highway fuel, and therefore would have
no opportunity to do so.
With this proposal, however, all NRLM diesel fuel would also be
required to meet the 500 ppm sulfur standard beginning June 1, 2007 and
it could be mixed fungibly with 500 ppm sulfur highway fuel up to the
point where dye was added for IRS excise tax purposes. As a result,
application of the current anti-downgrading provision in the highway
diesel rule is ambiguous with respect to what would and would not be
allowed under this proposal. Furthermore, the assumption in the highway
rule that the price differential between 15 ppm highway and non-highway
fuel would be sufficient to deter intentional downgrading would not
necessarily be valid any longer, given the application of the 500 ppm
sulfur standard to NRLM diesel fuel. For these reasons, we propose that
the anti-downgrading provisions contained in 40 CFR 80.527 be modified
to restrict downgrading of undyed 15 ppm diesel fuel to any 500 ppm
diesel fuel, whether the 500 ppm sulfur fuel is intended for highway
purposes or NRLM purposes. We would continue to allow unrestricted
downgrading of undyed 15 ppm diesel fuel to fuel which is marked as
heating oil.
We further propose that the downgrading restriction apply to any
undyed 15 ppm diesel fuel produced. Since the two fuels would be
distributed together, this modification to the downgrading limitations
would be needed to enable enforcement of the highway diesel fuel
downgrading limitations. We are not proposing any extension of that the
anti-downgrading provisions beyond their current set date of June 1,
2010. The purpose of the anti-downgrading provisions is to ensure
availability of 15 ppm highway fuel nationwide, and we do not
anticipate this as a concern after June 1, 2010. This proposal allows
early credit for 15 ppm NRLM diesel fuel produced beginning June 1,
2009. Although availability is not an issue for this fuel, it will be
fungible with highway fuel subject to the 15 ppm sulfur standard.
Consequently, we seek comment on whether the anti-downgrading provision
could expire then as well without negatively impacting the availability
of 15 ppm diesel fuel for highway vehicles. We request comment on these
proposed revisions of the anti-downgrading provisions.\327\
---------------------------------------------------------------------------

\327\ Since the time of the highway diesel final rule, we have
become aware of the need for several other clarifications of the
anti-downgrading provisions. We intend to address these general
issues through a future amendment to the highway diesel rule.
---------------------------------------------------------------------------

While these proposed downgrading provisions apply primarily to
parties in the distribution system downstream of the refiners and
importers, these requirements would also apply to refiners and
importers.

D. Diesel Fuel Sulfur Sampling and Testing Requirements

1. Testing Requirements
As part of today's action, we are proposing a new approach for fuel
sulfur measurement. The details of this approach are described below,
followed by a description of who would be required to conduct fuel
sulfur testing as well as what fuel they would be required to test.
a. Test Method Approval, Recordkeeping, and Quality Control
Requirements
Most current and past EPA fuel programs designated specific
analytical methods which refiners, importers, and downstream parties
use to analyze fuel samples at all points in the fuel distribution
system for regulatory compliance purposes. Some of these programs have
also allowed certain specific alternative methods which may be used as
long as the test results are correlated to the designated test method.
The highway diesel rule (66 FR 5002, January 18, 2001), for example,
specifies one designated test method and three alternative methods for
measuring the sulfur content of highway diesel fuel subject to the 15
ppm sulfur standard. The rule also specifies one designated method and
three alternative methods for measuring the sulfur content of highway
diesel fuel subject to the 500 ppm sulfur standard.
The highway diesel fuel sulfur rule also announced the Agency's
intention to adopt a performance-based test method approach in the
future, as well as our intention to continue working with the industry
to develop and improve sulfur test methods. Under today's action, we
are proposing to adopt a performance-based test method approach for
diesel fuel subject to the 15 ppm sulfur standard. We are also
proposing to adopt such an approach as an option for diesel fuel
subject to the 500 ppm sulfur standard. The current approach for
measuring the sulfur content of diesel fuel subject to the 500 ppm
sulfur standard, i.e., using the designated sulfur test method or one
of the alternative test methods with correlation could continue to be
used.

[[Page 28505]]

Table IV-D-1.--Designated and Alternative Sulfur Test Methods Allowed
Under the Highway Diesel Program
------------------------------------------------------------------------
Sulfur test method 500 ppm 15 ppm
------------------------------------------------------------------------
ASTM D 2622-98 as modified, Designated........ Alternative.
Standard Test Method for Sulfur
in Petroleum Products by X-Ray
Spectrometry.
ASTM D 3120-96, Standard Test .................. Alternative.
Method for Trace Quantities of
Sulfur in Light Liquid
Petroleum Hydrocarbons by
Oxidative Microcoulometry.
ASTM D 4294, Standard Test Alternative.......
Method for Sulfur in Petroleum
and Petroleum Products by
Energy-Dispersive X-ray
Fluorescence Spectrometry.
ASTM D 5453-00, Standard Test Alternative....... Alternative.
Method for Determination of
Total Sulfur in Light
Hydrocarbons, Motor Fuels and
Oils by Ultraviolet
Fluorescence.
ASTM D 6428-99, Test Method for Alternative....... Designated.
Total Sulfur in Liquid Aromatic
Hydrocarbons and Their
Derivatives by Oxidative
Combustion and Electrochemical
Detection.
------------------------------------------------------------------------

Under the performance-based approach, a given test method would be
approved for use in a specific laboratory by meeting certain precision
and accuracy criteria specified in the regulations. The method would be
approved for use by that laboratory as long as appropriate quality
control procedures were followed. Properly selected precision and
accuracy values potentially would allow multiple methods and multiple
commercially available instruments to be approved, thus providing
greater flexibility in method and instrument selection while also
encouraging the development and use of better methods and
instrumentation in the future. Under this approach, there would be no
designated sulfur test method as specified under previous regulations.
Since any test method that meets the specified performance criteria
may qualify, this type of approach does not conflict with the
``National Technology Transfer and Advancement Act of 1995'' (NTTAA),
section 12(d) of Public Law 104-113, and the Office of Management and
Budget (OMB) Circular A-119. Both of these documents are designed to
encourage the adoption of standards developed by ``voluntary consensus
bodies'' and to reduce reliance on government-unique standards where
such consensus standards would suffice. Under the performance criteria
approach proposed today, methods developed by consensus bodies as well
as methods not yet approved by a consensus body would qualify for
approval provided they met the specified performance criteria as well
as the recordkeeping and reporting requirements for quality control
purposes.
i. How Can a Given Method Be Approved?
Under the proposed performance criteria approach, a given test
method would be approved for use under today's program by meeting
certain precision and accuracy criteria. Approval would apply on a
laboratory/facility-specific basis. If a company chose to employ more
than one laboratory for fuel sulfur testing purposes, then each
laboratory would have to separately seek approval for each method it
intends to use. Likewise, if a laboratory chose to use more than one
sulfur test method, then each method would have to be approved
separately. Separate approval would not be necessary for individual
operators or laboratory instruments within a given laboratory facility.
The specific precision and accuracy criteria that we are proposing
were derived from existing sulfur test methods that are either required
or allowed under the highway diesel fuel sulfur program. The first
criterion, precision, refers to the consistency of a set of
measurements and is used to determine how closely analytical results
can be duplicated based on repeat measurements of the same material
under prescribed conditions. To demonstrate the precision of a given
sulfur test method under the performance-based approach, a laboratory
facility would perform 20 repeat tests over 20 days on samples taken
from a homogeneous supply of a commercially available diesel fuel. We
request comment on an alternative number of days over which these 20
repeat tests should be conducted. Using the test results \328\ of ASTM
D 3120 for diesel fuel subject to the 15 ppm sulfur standard, the
precision would have to be less than 0.72 ppm.\329\ Similarly, using
the test results of ASTM D 2622 for diesel fuel subject to the 500 ppm
sulfur standard, the precision would have to be less than 9.68 ppm.
---------------------------------------------------------------------------

\328\ Sulfur Repeatability of Diesel by Method at 15 ppm, ASTM
Report on Low Level Sulfur Determination in Gasoline and Diesel
Interlaboratory Study--A Status Report, June 2002.
\329\ 0.72 ppm is equal to 1.5 times the standard deviation of
ASTM D 3120, where the standard deviation is equal to the
repeatability of ASTM D 3120 (1.33) divided by 2.77. 9.68 ppm is
equal to 1.5 times the standard deviation of ASTM D 2622, where the
standard deviation is equal to the repeatability of ASTM D 2622
(26.81) divided by 2.77. Since the conditions of the precision
qualification test admit more sources of variability than the
conditions under which ASTM repeatability is determined (longer time
span, different operators, environmental conditions, etc.) the
repeatability standard deviation derived from the round robin was
multiplied by what we believe to be a reasonable adjustment factor,
1.5, to compensate for the difference in conditions.
---------------------------------------------------------------------------

The second criterion, accuracy, refers to the closeness of
agreement between a measured or calculated value and the actual or
specified value. To demonstrate the accuracy of a given test method
under the performance-based approach, a laboratory facility would be
required to perform 10 repeat tests on a standard sample, the mean of
which for diesel fuel subject to the 15 ppm sulfur standard could not
deviate from the Accepted Reference Value (ARV) of the standard by more
than 0.54 ppm and for diesel fuel subject to the 500 ppm sulfur
standard could not deviate from the ARV of the standard by more than
7.26 ppm.\330\ These tests would be performed using commercially
available gravimetric sulfur standards. Ten tests would be required
using each of two different sulfur standards--one in the range of 1-10
ppm sulfur and the other in the range of 10-20 ppm sulfur for 15 ppm
fuel and one in the range of 100-200 ppm sulfur and the other in the

[[Page 28506]]

range of 400-500 ppm sulfur for 500 ppm sulfur diesel fuel. Therefore,
a minimum of 20 total tests would be required for sufficient
demonstration of accuracy for a given sulfur test method at a given
laboratory facility. Finally, any known interferences for a given test
method would have to be mitigated.
---------------------------------------------------------------------------

\330\ 0.54 and 7.26 are equal to 0.75 times the precision values
of 0.72 for 15 ppm sulfur diesel and 9.68 for 500 ppm sulfur diesel,
respectively.
---------------------------------------------------------------------------

These requirements are not intended to be overly burdensome.
Indeed, we believe these requirements are equivalent to what a
laboratory would do during the normal start up procedure for a given
test method. In addition, we believe this approach would allow
regulated entities to know that they are measuring diesel fuel sulfur
levels accurately and within reasonable site reproducibility limits.
Nevertheless, we request comment on this performance criteria approach
and the specific precision and accuracy criteria we are proposing.
ii. What Information Would Have To Be Reported to the Agency?
For test methods that have already been approved by a voluntary
consensus standards body \331\ (VCSB), such as ASTM or the
International Standards Organization (ISO), each laboratory facility
would be required to report to the Agency the precision and accuracy
results as described above for each method for which it is seeking
approval. Such submissions to EPA, as described elsewhere, would be
subject to the Agency's review for 90 days, and the method would be
considered approved in the absence of EPA comment. Laboratory
facilities would be required to retain the fuel samples used for
precision and accuracy demonstration for 30 days. We seek comment on an
alternative number of days for which such fuel samples should be
retained.
---------------------------------------------------------------------------

\331\ These are standard-setting organizations, like ASTM, and
ISO that have broad representation of all interested stakeholders
and make decisions by consensus.
---------------------------------------------------------------------------

For test methods that have not been approved by a VCSB, full test
method documentation, including a description of the technology/
instrumentation that makes the method functional, as well as subsequent
EPA approval of the method would also be required. These submissions
would also be subject to the Agency's review for 90 days, and the
method would be considered approved in the absence of EPA comment.
Submission of VCSB methods would not be required since they are
available in the public domain. In addition, industry and the Agency
have likely had substantial experience with such methods. The approval
of non-VCSB methods would be valid for five years. After this time
period, the approval would be rescinded unless the method had been
adopted by a consensus body. If, a consensus body does not ultimately
approve the method then the method could no longer be used as an
approved method.
As described above, federal government and EPA policy is to use
standards developed by voluntary consensus bodies when available. The
purpose of the NTTAA, at least in part, is to foster consistency in
regulatory requirements, to take advantage of the collective industry
wisdom and wide-spread technical evaluation required before a test
method is approved by a consensus body, and to take advantage of the
ongoing oversight and evaluation of a test method by the consensus body
that results from wide-spread use of an approved method e.g., the
ongoing round-robin type analysis and typical annual updating of the
method by the consensus body. These goals are not met where the Agency
allows use of a non-consensus body test method in perpetuity. Moreover,
it is not possible to realize many of the advantages that result from
consensus status where a test method is used by only one or a few
companies. It will not have the practical scrutiny that comes from
ongoing wide-spread use, or the independent scrutiny of the consensus
body and periodic updating. In addition, EPA does not have the
resources to conduct the degree of initial scrutiny or ongoing scrutiny
that are practiced by consensus bodies. Nevertheless, EPA believes it
is appropriate to allow limited use of a proprietary test method for a
limited time, even though the significant advantages of consensus test
methods are absent, because EPA can evaluate the initial quality of a
method and a company may have invested significant resources in
developing a method. However, if after a reasonable time a test method
fails to gain consensus body approval, EPA believes approval of the
method should be withdrawn because of the absence of ongoing consensus
oversight. Accordingly, we propose that a non-VCSB method will cease to
be qualified five years from the date of its original approval by EPA
in the absence of VCSB approval.
To assist the Agency in determining the performance of a given
sulfur test method, non-VCSB methods, in particular, we propose to
reserve the right to send samples of commercially available fuel to
laboratories for evaluation. Such samples would be intended for
situations in which the Agency had concerns regarding a test method
and, in particular, its ability to measure the sulfur content of a
random commercially available diesel fuel. Laboratory facilities would
be required to report their results from three tests of this material
to the Agency.
iii. What Quality Control Provisions Would Be Required?
We are proposing to require ongoing Quality Control (QC) procedures
for sulfur measurement instrumentation. These are procedures used by
laboratory facilities to ensure that the test methods they have
qualified and the instruments on which the methods are run are yielding
results with appropriate accuracy and precision, e.g., that the results
from a particular instrument do not ``drift'' over time to yield
unacceptable values. It is our understanding that most laboratories
already employ QC procedures, and that these are commonly viewed as
important good laboratory practices. Under the performance-based
approach, laboratories would be required, at a minimum, to abide by the
following QC procedures for each instrument used to certify batches of
diesel fuel under these regulations:
(1) Follow the mandatory provisions of ASTM D 6299-02, Standard
Practice for Applying Statistical Quality Assurance Techniques to
Evaluate Analytical Measurement System Performance. Laboratories would
be required to construct control charts from the mandatory QC sample
testing prescribed in paragraph 7.1, following the guidelines under A
1.5.1 for individual observation charts and A 1.5.2 for moving range
charts.
(2) Follow ASTM D6299-02 paragraph 7.3.1 (check standards) using a
standard reference material. Check standard testing would be required
to occur at least monthly and should take place following any major
change to the laboratory equipment or test procedure. Any deviation
from the accepted reference value of the check standard greater than
1.44 ppm for diesel fuel subject to the 15 ppm sulfur standard and
19.36 ppm for diesel fuel subject to the 500 ppm sulfur standard \332\
would have to be investigated.
---------------------------------------------------------------------------

\332\ 1.44 ppm is equal to two times the proposed precision of
0.72 ppm for 15 ppm diesel and 19.36 is equal to two times the
proposed precision of 9.68 ppm for 500 ppm diesel.
---------------------------------------------------------------------------

(3) Upon discovery of any QC testing violation of A 1.5.2.1 or A
1.5.3.2 or check standard deviation greater than 1.44 ppm and 19.36 ppm
for 15 ppm sulfur diesel and 500 ppm sulfur diesel, respectively, as
provided in item 2 above, any measurement made while the system was out
of control would be required to be tagged as suspect and an

[[Page 28507]]

investigation conducted into the reasons for this anomalous
performance. We also propose that refiners and importers would be
required to retain batch samples for a limited amount of time. For
example, a retain period could be equal to the interval between QC
sample tests. If an instrument was found to be out of control, we
propose that all of the retained samples since the last time the
instrument was shown to be in control would have to be retested. We
seek comment on alternative ways to handle situations in which a method
goes out of control at some unknown point in time between check
standard tests or between QC sample tests.
(4) QC records, including investigations under item 3 above would
be required to be retained for five years and to be provided to the
Agency upon request.
b. Requirements To Conduct Fuel Sulfur Testing.
Given the importance of assuring that nonroad diesel fuel
designated to meet the 15 ppm sulfur standard in fact meets that
standard, we are proposing that refiners and importers must test each
batch of nonroad diesel fuel designated to meet the 15 ppm sulfur
standard and to maintain records of such testing. Requiring that
refiners and importers test each batch of fuel subject to the 15 ppm
nonroad standard would assure that compliance could be confirmed
through testing records, and even more importantly, would assure that
nonroad diesel fuel exceeding the 15 ppm standard was not introduced
into commerce as fuel for use in nonroad equipment having sulfur-
sensitive emission control devices. Batch testing is currently not
required under the highway diesel rule, and instead such testing is
typically performed to establish a defense to potential liability.
However, for the same reasons discussed above, we propose to extend
this batch testing requirement to 15 ppm sulfur highway diesel fuel
beginning in 2006.
We are not proposing to require downstream parties to conduct
every-batch testing. However, we believe most downstream parties would
voluntarily conduct ``periodic'' sampling and testing for quality
assurance purposes if they wanted to establish a defense to presumptive
liability, as discussed in VIII.G below.
2. Two Part-Per-Million Downstream Sulfur Measurement Adjustment
We believe that it would be appropriate to recognize sulfur test
variability in determining compliance with the proposed nonroad diesel
fuel sulfur standard downstream of a refinery or import facility. Thus,
we propose that for all 15 ppm sulfur nonroad diesel fuel at locations
downstream of the refinery or import facility, sulfur test results
could be adjusted by subtracting two ppm. The sole purpose of this
downstream compliance provision is to address test variability
concerns. We anticipate that the reproducibility of sulfur test methods
is likely to improve to two ppm or even less by the time the 15 ppm
sulfur standard for highway diesel fuel is implemented--four years
before implementation date of the proposed 15 ppm standard for nonroad
diesel fuel. With this provision, we anticipate that refiners would be
able to produce diesel fuel with an average sulfur level of
approximately 7-8 ppm and some contamination could occur throughout the
distribution system, without fear of causing a downstream violation due
solely to test variability. As test methods improve in the future, we
propose to reevaluate whether two ppm is the appropriate allowance for
purposes of this compliance provision.
3. Sampling Requirements
This proposed rule would adopt the same sampling methods adopted by
the highway diesel rule (66 FR 5002, January 18, 2001). The requirement
to use these methods would be effective for nonroad diesel fuel June 1,
2007. These same methods were also adopted for use in the Tier 2/
Gasoline Sulfur rule.\333\ These sampling methods are American Society
for Testing and Materials (ASTM) D 4057-95 (manual sampling) and D
4177-95 (automatic sampling from pipelines/in-line blending).
---------------------------------------------------------------------------

\333\ 65 FR 6833-34 (Feb. 10, 2000). These methods are also
proposed for use under the RFG and CG rules. See 62 FR 37337 et seq.
(July 11, 1997).
---------------------------------------------------------------------------

4. Alternative Sampling and Testing Requirements for Importers of
Diesel Fuel Who Transport Diesel Fuel By Tanker Truck
We understand that importers who transport diesel fuel into the
U.S. by tanker truck are frequently relatively small businesses that
could be subject to a substantial burden if they were required to
sample and test each batch of nonroad or highway diesel fuel imported
by truck, especially where a trucker imports many small loads of diesel
fuel. Therefore, we are proposing that truck importers could comply
with an alternative sampling and testing requirement, involving a
sampling and testing program of the foreign truck loading terminal, if
certain conditions were met. For an importer to be eligible for the
alternative sampling and testing requirement, the terminal would have
to conduct sampling and testing of the nonroad or highway diesel fuel
immediately after each receipt into its terminal storage tank or
immediately before loading product into the importer's tanker truck
storage compartments. Moreover, the importer would be required to allow
EPA to conduct periodic quality assurance testing of the terminal's
diesel fuel, and the importer would be required to assure that EPA
would be allowed to make unannounced inspections and audits, to sample
and test fuel at the foreign terminal facility, to assure that the
terminal maintained sampling and testing records, and to submit such
records to EPA upon request. We request comment on this proposal.

E. Fuel Marker Test Method

As discussed in section IV.B.2.a.i above, we propose the use of
solvent yellow 124 to differentiate diesel fuel intended for different
uses. This marker is currently use in Europe. However, there is
currently no test procedure recognized by the European Union to
quantify the presence of the solvent yellow 124 in distillate fuels.
The most commonly accepted method used in the European Union is based
on the chemical extraction of the Euromarker using hydrocloric acid
solution and cycloxane, and the subsequent evaluation of the extract
using a visual spectrometer to determine the concentration of the
marker.\334\ This test is inexpensive and easy to use for field
inspections. However, the test involves reagents that require some
safety precautions and the small amount of fuel required in the test
must be disposed of as hazardous waste. Nevertheless, we believe that
such safety concerns are manageable here in the U.S. just as they are
in Europe and that the small amount of waste generated can be handled
along with other similar waste generated by the company conducting the
test, and that the associated effort/costs would be negligible.
---------------------------------------------------------------------------

\334\ Memorandum to the docket entitled ``Use of a Visible
Spectrometer Based Test Method in Detecting the Presence and
Determining the Concentration of Solvent Yellow 124 in Diesel
Fuel.''
---------------------------------------------------------------------------

Similar to the approach proposed regarding the measurement of fuel
sulfur content discussed in Section VIII.D. above, we are proposing a
performance-based procedure to measure the concentration of solvent
yellow 124 in distillate fuel. Section VIII.D above describes our
rationale for

[[Page 28508]]

proposing performance-based test procedures. Under the performance-
based approach, a given test method could be approved for use in a
specific laboratory or for field testing by meeting certain precision
and accuracy criteria. Properly selected precision and accuracy values
potentially would allow multiple methods and multiple commercially
available instruments to be approved, thus providing greater
flexibility in method and instrument selection while also encouraging
the development and use of better methods and instrumentation in the
future. For example, we are hopeful that with more time and effort a
simpler test can be developed that can avoid the use of reagents and
the generation of hazardous waste that is by product of the current
commonly accepted method.
Under the performance criteria approach proposed today, methods
developed by consensus bodies as well as methods not yet approved by a
consensus body would qualify for approval provided they met the
specified performance criteria as well as the recordkeeping and
reporting requirements for quality control purposes. There would be no
designated marker test method. We request comment on whether it would
be more appropriate to adopt a designated marker test method. Such
comments would be most useful if they include complete details on a
suitable designated marker test method.
1. How Could a Given Marker Test Method Be Approved?
Under the proposed performance criteria approach, a given marker
test method would be approved for use under today's program by meeting
certain precision and accuracy criteria. Approval would apply on a
laboratory/facility-specific basis. If a company chose to employ more
than one laboratory for fuel marker testing purposes, then each
laboratory would have to separately seek approval for each method it
intends to use. Likewise, if a laboratory chose to use more than one
marker test method, then each method would have to be approved
separately. Separate approval would not be necessary for individual
operators or laboratory instruments within a given laboratory facility.
The method would be approved for use by that laboratory as long as
appropriate quality control procedures were followed.
In developing the precision and accuracy criteria for the sulfur
test method, EPA drew upon the results of an interlaboratory study
conducted by the American Society for Testing and Materials (ASTM) to
support ASTM's standardization of the sulfur test method.
Unfortunately, there has not been sufficient time for industry to
standardize the test procedure used to measure the concentration of
solvent yellow 124 in distillate fuels or to conduct an interlaboratory
study regarding the variability of the method. Nevertheless, the
European Union has been successful in implementing its marker
requirement while relying on the marker test procedures which are
currently available, as noted above. We are proposing to use this
procedure to establish the precision and accuracy criteria on which a
marker test procedure would be approved under the performance-based
approach. We request comment on the suitability of the proposed
reference marker test method, including whether standardized
acceptability criteria exist regarding the visible spectrometer
apparatus and associated measurement procedure used in performing the
test.
There has been substantial experience in the use of the proposed
reference market test method since the August 2002 effective date of
the European Union's marker requirement. However, EPA is aware of only
limited summary data on the variability of the reference test method
from a manufacturer of the visible spectrometer apparatus used in the
testing.\335\ The stated resolution of the test method from in the
materials provided by this equipment manufacturer is 0.1 mg/L, with a
repeatability of plus or minus 0.08 mg/L and a reproducibility of plus
or minus 0.2 mg/L.\336\ In the lack of more extensive data, we propose
to use these available data as the basis of our proposed precision and
accuracy criteria as discussed below. We request that comments which
suggest that these data are unsuitable for the intended use also
include additional test data where possible to improve the derivation
of precision and accuracy criteria.
---------------------------------------------------------------------------

\335\ Technical Data on Fuel/Dye/Marker & Color Analyzers, as
downloaded from the Petroleum Analyzer Company L.P. Web site at
http://www.paclp.com/product/PetroSpec/lit_pspec/DTcolor.pdf.

\336\ Repeatability and reproducibility are terms related to
test variability. ASTM defines repeatability as the difference
between successive results obtained by the same operator with the
same apparatus under constant operating conditions on identical test
materials that would, in the long run, in the normal and correct
operation of the test method be exceeded only in one case in 20.
Reproducibility is defined by ASTM as the difference between two
single and independent results obtained by different operators
working in different laboratories on identical material that would,
in the long run, be exceeded only in one case in twenty.
---------------------------------------------------------------------------

Using a similar methodology to that employed in deriving the
proposed sulfur test procedure precision value results in a precision
value for the marker test procedure of 0.043 mg/L.\337\ However, we are
concerned that the use of this precision value, because it is based on
very limited data, might preclude the acceptability of test procedures
that would be adequate for the intended regulatory use. In addition,
the lowest measurement of marker concentration that would have
relevance under the regulations is 0.1 mg per liter. Consequently, we
are proposing that the precision of a marker test procedure would need
to be less than 0.1 mg/L for it to qualify. We request comment on this
proposed precision level.
---------------------------------------------------------------------------

\337\ See Section VIII.D. of this proposal for a discussion of
the methodology used in deriving the proposed precision and accuracy
values for the sulfur test method.
---------------------------------------------------------------------------

We are proposing that to demonstrate the accuracy of a given test
method, a laboratory facility would be required to perform 10 repeat
tests, the mean of which could not deviate from the Accepted Reference
Value (ARV) of the standard by more than 0.05 mg/L. We believe that the
proposed accuracy level is not overly restrictive, while being
sufficiently protective considering that the lowest marker level of
regulatory significance would be 0.1 mg/L. Ten tests would be required
using each of two different marker standards, one in the range of 0.1
to 1 mg/L and the other in the range of 4 to 10 mg/L of solvent yellow
124. Therefore, a minimum of 20 total tests would be required for
sufficient demonstration of accuracy for a given marker test method at
a given laboratory facility. Finally, any known interferences for a
given test method would have to be mitigated. We are proposing that
these tests be performed using commercially available solvent yellow
124 standards. Since the European Union's marker requirement would have
been in effect for over six years and we expect this requirement to
continue indefinitely, we believe that such standards would be
available by the implementation date for this proposed rule. We request
comment on this assessment and on whether we should allow facilities
that conduct the proposed tests to blend up their own marker standards
using a pure supply of the fuel marker.
We request comment on the proposed precision and accuracy criteria
described above. These requirements are not intended be overly
burdensome. To the contrary, we believe these requirements are
equivalent to what a laboratory would do during the normal start up
procedure for a given test

[[Page 28509]]

method. In addition, we believe this approach would allow regulated
entities to know that they are measuring fuel marker levels accurately
and within reasonable site reproducibility limits.
2. What Information Would Have To Be Reported to the Agency?
As noted above, the European Union's (EU) marker requirement would
have been in effect for over six years prior to the effective data for
the proposed marker requirements and we expect the EU requirement to
continue indefinitely. Thus, we anticipate that the European testings
standards community will likely have standardized a test procedure to
measure the concentration of solvent yellow 124 in distillate fuels
prior to the implementation of the proposed marker requirement. Given
the limited duration of the proposed marker requirements, we do not
anticipate that the United States testing standards community would
enact such a standardized test procedure. To the extent that marker
test methods that have already been approved by a voluntary consensus
standards body \338\ (VCSB), such as the International Standards
Organization (ISO) or the American Society for Testing and Materials
(ASTM), each laboratory facility would be required to report to the
Agency the precision and accuracy results as described above for each
method for which it is seeking approval. Such submissions to EPA, as
described elsewhere, would be subject to the Agency's review for 30
days, and the method would be considered approved in the absence of EPA
comment. Laboratory facilities would be required to retain the fuel
samples used for precision and accuracy demonstration for a limited
amount of time (e.g., 30 days).
---------------------------------------------------------------------------

\338\ These are standard-setting organizations, like ASTM, and
ISO that have broad representation of all interested stakeholders
and make decisions by consensus.
---------------------------------------------------------------------------

F. Requirements for Recordkeeping, Reporting, and Product Transfer
Documents

1. Registration of Refiners and Importers
By December 31, 2004, refiners and importers that may produce or
supply NRLM diesel fuel by June 1, 2007 would be required to register
with EPA. There would be no need to register if a refiner (and all its
refineries), or an importer, is already registered under the highway
diesel program. The registration would include the following
information:
? Corporate name and address of the refiner or importer and
any parent companies and a contact person.
? Name and address of all refineries or import facilities
(including, for importers, the PADD(s)).
? A contact person.
? Location of records.
? Business activity (refiner or importer).
? Capacity of each refinery in barrels of crude oil per
calendar day.
2. Application for Small Refiner Status
We propose that an application of a refiner for small refiner
status be submitted to EPA by June 1, 2005 and include the following
information:
? The name and address of each location at which any employee
of the company, including any parent companies or subsidiaries,\339\
worked during the 12 months preceding January 1, 2003;
---------------------------------------------------------------------------

\339\ ``Subsidiary'' here covers entities of which the parent
company has 50 percent or greater ownership.
---------------------------------------------------------------------------

? The average number of employees at each location, based on
the number of employees for each of the company's pay periods for the
12 months preceding January 1, 2003;
? The type of business activities carried out at each
location; and
? The total crude oil refining capacity of the corporation.
We define total capacity as the sum of all individual refinery
capacities for multiple-refinery companies, including any and all
subsidiaries, as reported to the Energy Information Administration
(EIA) for 2002, or in the case of a foreign refiner, a comparable
reputable source, such as professional publication or trade
journal.\340\ Refiners do not need to include crude oil capacity used
in 2002 through a lease agreement with another refiner in which it has
no ownership interest.
---------------------------------------------------------------------------

\340\ We will evaluate each foreign refiner's documentation of
crude oil capacity on an individual basis.
---------------------------------------------------------------------------

The crude oil capacity information reported to the EIA or
comparable reputable source is presumed to be correct. However, in
cases where a company disputes this information, we propose to allow 60
days after the company submits its application for small refiner status
for that company to petition us with detailed data it believes shows
that the EIA or other source's data was in error. We would consider
this data in making a final determination about the refiner's crude oil
capacity.
Small refinery facilities could not be approved for small refiner
status unless the refinery produces diesel fuel from crude oil. This is
because a small refiner's relief is intended to address the hardship
encountered in making capital improvements to a crude oil refinery. No
such costs are involved in operations that only blend previously
refined products.
3. Applying for Refiner Hardship Relief
As discussed above in Section IV.C.2, a refiner seeking general
hardship relief under the proposed program would apply to EPA and
provide several types of financial and technical information, such as
internal cash flow data and information on bank loans, bonds, and
assets as well as detailed engineering and construction plans and
permit status. Applications for hardship relief would be due June 1,
2005.

[[Page 28510]]

4. Applying for a Non-Highway Distillate Baseline Percentage
As discussed in section IV above, we are proposing that refiners or
importers wishing to fungibly distribute highway and NRLM fuel from any
refinery or import facility apply to EPA for a non-highway baseline
percentage for each such refinery or facility. Refiners or importers
would provide EPA with data to quantify its annual average production
or importation of distillate that was dyed for use in any non-highway
application for each year during the period from January 1, 2003
through December 31, 2005. Specifically, this data would consist of the
following for each batch of diesel fuel during this period:
? The date the refiner finished production of the batch
? The volume of the batch
? Whether the fuel in the batch was dyed
We propose that applications for non-highway baselines be submitted
to EPA by February 28, 2006. We would act on these baselines by June 1,
2006, in time for the refiner or importer to earn early credits if they
wished.
5. Pre-Compliance Reports
We believe that an early general understanding of the progress of
the refining industry in complying with the proposed requirements would
be valuable to both the affected industries and EPA. As with the
highway diesel program, we propose that each refiner and importer
provide annual reports on the progress of and plans for each of their
refineries or import facilities. These pre-compliance reports would be
required by June 1 of each year beginning in 2005 and continuing up
through 2010, or until the entity produced or imported any 15 ppm
nonroad fuel, whichever is later.
EPA would maintain the confidentiality of information submitted in
pre-compliance reports to the full extent authorized by law. We would
report generalized summaries of this data following the receipt of the
pre-compliance reports. We recognize that plans may change for many
refiners or importers as the compliance dates approach. Thus,
submission of the report would not impose an obligation to follow
through on plans projected in the pre-compliance reports.
Pre-compliance reports could, at the discretion of the refiner/
importer, be submitted in conjunction with the annual compliance
reports proposed below and/or the pre-compliance and annual compliance
reports required under the highway diesel program, so long as all
information required in all reports is clearly provided.
In their pre-compliance reports, refiners and importers would need
to include the following information:
? Any changes in their basic corporate or facility
information since registration.
? Estimates of the volumes (in gallons) of each sulfur grade
of highway and non-highway fuel produced (or imported) at each refinery
(or facility). These volume estimates would be provided both for fuel
produced from crude oil, as well as any fuel produced from other
sources.
? For entities expecting to participate in the credit
program, estimates of numbers of credits to be earned and/or used.
? Information regarding engineering plans such as design and
construction, the status of obtaining any necessary permits, and
capital commitments for making the necessary modifications to produce
low sulfur nonroad diesel fuel, and actual construction progress.
? The pre-compliance reports in 2006 and later years must
provide an update of the progress in each of these areas.
6. Annual Compliance Reports and Batch Reports for Refiners and
Importers
After the nonroad diesel sulfur requirements begin on June 1, 2007,
refiners and importers would be required to submit annual compliance
reports for each refinery that demonstrated compliance with the
proposed requirements. If a refiner produces 15 ppm or 500 ppm fuel
early under the credit provisions, its annual compliance reporting
requirement would begin on June 1 following the beginning of the early
fuel production. These reporting requirements would sunset after all
flexibility provisions end (i.e., 2012 for non-small refiners and 2014
for small refiners). Annual compliance reports would be due on August
31 of the year.
A refiner's (for each refinery) or importer's annual compliance
report would include the following information:
? Report demonstrating compliance with the applicable sulfur
content requirements using the non-highway baseline percentage approach
or demonstrating compliance using an alternative compliance option
e.g., a small refiner option or the option to dye all nonroad,
locomotive/marine diesel fuel at the refinery, as applicable.
? Report on the generation, use, transfer and retirement of
diesel sulfur credits. Credit transfer information would include the
identification of the number of credits obtained from, or transferred
to, each entity. Reports would also show the credit balance at the
start of the period, and the balance at the end of the period. NRLM or
nonroad diesel sulfur credit information would be required to be stated
separately from highway diesel credit information since the 2 credit
programs would be treated separately.
? Batch reports for each batch produced or imported providing
information regarding volume, sulfur level, cetane/aromatics standard
compliance and whether the fuel was dyed and/or marked. The
certification that fuel was marked with the specified chemical marker
at the refinery or import facility would apply to heating oil for the
period June 1, 2007 through June 1, 2010 and to locomotive and marine
fuel for the period June 1, 2010 through June 1, 2014.
? For a small refiner that elects to produce 15 ppm nonroad
diesel fuel by June 1, 2006 and therefore is eligible for a limited
relaxation in its interim small refiner gasoline sulfur standards, the
annual reports would also include specific information on gasoline
sulfur levels and progress toward highway and nonroad diesel
desulfurization.
7. Product Transfer Documents (PTDs)
Today we are proposing that refiners and importers must provide
information on commercial PTDs that would identify diesel fuel
distributed for use in nonroad, locomotive, or marine equipment or
motor vehicles, as appropriate, and state which sulfur standard the
fuel is subject to. PTDs must state whether NRLM fuel complies with the
500 ppm sulfur standard or the 15 ppm sulfur standard. This would
continue to be necessary even after 2010, since locomotive and marine
engines could still use 500 ppm diesel fuel after all nonroad equipment
would have to use 15 ppm fuel. Until all highway fuel sulfur content
must meet the 15 ppm sulfur standard in 2010, it would be necessary for
PTDs to indicate if 500 ppm fuel is dyed or undyed, and in all cases,
PTDs would need to indicate if 15 ppm fuel is dyed or undyed, so that
its appropriate use can be determined by transferees. Moreover, some
nonroad diesel fuel, such as segregated small refiner fuel, could
exceed the 15 ppm standard until as late as August 31, 2014; however,
it could only be used in model year 2010 and earlier nonroad diesel
engines.
We believe this additional information on commercial PTDs is
necessary because of the importance of keeping the several sulfur
grades and uses of diesel fuel separate from one

[[Page 28511]]

another in the distribution system. Each party in the system would
better be able to identify which type of fuel it is dealing with and
could more effectively ensure that they were meeting the proposed
requirements of the program. This in turn would help ensure that
misfueling of sulfur sensitive engines does not occur and that the
program would otherwise result in the needed emission reductions.
Except for transfers to truck carriers, retailers and wholesale
purchaser-consumers, this proposal would allow use of product codes to
convey the information. We believe that more explicit language on PTDs
to these parties is necessary since employees of such parties are less
likely to be aware of the meaning of product codes. PTDs would not be
required for transfers of product into nonroad, locomotive, or marine
equipment at retail outlets or wholesale purchaser-consumer facilities.
a. The Period From June 1, 2007 through May 31, 2010
During the first years of the program, unique PTDs would be
required to distinguish the types of fuel that could be produced and
sold and any restrictions on its use \341\:
---------------------------------------------------------------------------

\341\ Note that for each time period discussed in this
subsection, we expect few if any areas would be supplied with all
the potential types of fuel listed.
---------------------------------------------------------------------------

? Undyed 500 ppm fuel.
? Undyed 15 ppm fuel.
? Dyed 500 ppm fuel (not for use in highway vehicles).
? Dyed 15 ppm fuel (not for use in highway vehicles).
? Dyed high-sulfur fuel (not for use in highway vehicles or
certain nonroad engines).
? Marked heating oil (not for use in NRLM equipment or
highway vehicles).
b. The Period from June 1, 2010 through May 31, 2014
Beginning June 1, 2010, unique PTDs would be required to
distinguish the types of fuel that could be produced and sold during
this period:
? Undyed 15 ppm.
? Dyed 15 ppm fuel (not for use in highway vehicles).
? Dyed 500 ppm fuel (not for use in model year 2011 and later
nonroad engines, or highway vehicles).
? Marked 500 ppm locomotive and marine fuel (not for use in
nonroad equipment or highway vehicles).
? Heating oil (not for use in NRLM equipment or highway
vehicles).
c. The Period After May 31, 2014
Beginning June 1, 2014, unique PTDs would be required to
distinguish remaining types of fuel that could be produced and sold
during this period.
? Undyed 15 ppm fuel.
? Dyed 15 ppm fuel (not for use in highway vehicles).
? 500 ppm locomotive and marine fuel (not for use in nonroad
equipment or highway vehicles).
? Heating oil (not for use in highway vehicles or NRLM
equipment).
d. Kerosene and Other Distillates To Reduce Viscosity
To assure that downstream parties can determine the sulfur level of
kerosene or other distillates that may be distributed for use for
blending into 15 ppm highway or NRLM diesel fuel, e.g. to reduce
viscosity in cold weather, this proposal would require that PTDs
identify distillates specifically distributed for such use as meeting
the 15 ppm standard.
e. Exported Fuel
Consistent with other fuels rules, NRLM diesel fuel to be exported
from the U.S. would not be required to meet the sulfur content
requirements of the proposed regulations. For example, where a refiner
designates a batch of diesel fuel for export, and can demonstrate
through commercial documents that the fuel was exported, that volume
would not be used in calculating compliance with applicable baselines.
Product transfer documents accompanying the transfer of custody or
title to such fuel at each point in the distribution system would be
required to state that the fuel is for export only and may not be used
in the United States.
f. Additives
This proposal would require that PTDs for additives for use in
nonroad diesel fuel state whether the additive complies with the 15 ppm
sulfur standard. Like the highway diesel rule, this proposal would
allow the sale of additives, for use by fuel terminals or other parties
in the diesel fuel distribution system, that have a sulfur content
greater than 15 ppm under specified conditions.
Under this proposal for additives that have a sulfur content not
exceeding 15 ppm, the PTD would state: ``The sulfur content of this
additive does not exceed 15 ppm.''. For additives that have a sulfur
content exceeding 15 ppm, the additive manufacturer's PTD, and PTDs
accompanying all subsequent transfers, would provide: a warning that
the additive's sulfur content exceeds 15 ppm; the maximum sulfur
content of the additive; the maximum recommended concentration for use
of the additive in diesel fuel, stated as gallon of additive per gallon
of diesel fuel; and the increase in sulfur concentration of the fuel
the additive will cause when used at the maximum recommended
concentration.
We are also proposing provisions for additives sold to owner/
operators for use in diesel powered nonroad equipment. This is because
of the concern that additives designed for engines not requiring 15 ppm
sulfur content fuel, such as locomotives or marine engines, could
accidentally be introduced into nonroad engines if they have no label
stating appropriate use. Under this proposal, end user additives for
use in highway or NRLM diesel engines would be required to be
accompanied by information that states that the additive either:
complies with the 15 ppm sulfur content requirements or that it has a
sulfur content exceeding 15 ppm and is not for use in model year 2011
or later nonroad diesel equipment. We believe this information is
necessary for end users to determine if an additive is appropriate for
nonroad equipment use.
8. Recordkeeping Requirements
Under the highway rule, refiners that produce or importers that
import highway diesel fuel must maintain the following records for each
batch of diesel fuel produced or imported) The batch designations; the
applicable sulfur content standard; whether the fuel is dyed or undyed;
whether the fuel is marked or unmarked; the batch volumes; whether the
fuel was dyed or undyed, and sampling and testing records. The refiner
or importer would also be required to maintain records regarding credit
generation, use, transfer, purchase, or termination, separately for
highway and nonroad credit programs.
We propose that these requirements from the highway rule be applied
to all nonroad, locomotive, and marine diesel fuel subject to this rule
as well.
9. Record Retention
This proposal would adopt a retention period of 5 years for all
records required to be kept by the rule. This is the same period of
time required in other fuels rules, and it coincides with the
applicable statute of limitations. We believe that for other reasons,
most parties in the distribution system would maintain some or all of
these records for this length of time even without the requirement.
This retention period would apply to PTDs, records of any test
results performed by any regulated party for quality assurance purposes
or otherwise

[[Page 28512]]

(whether or not such testing was required by this rule), along with
supporting documentation such as date of sampling and testing, batch
number, tank number, and volume of product. Business records regarding
actions taken in response to any violations discovered would also be
required to be maintained for 5 years.
All records required to be maintained by refiners or importers
participating in the generation or use of credits, hardship options (or
by importers of diesel fuel produced by a foreign refiner approved for
the temporary compliance option or a hardship option), including small
refiner options, would also be covered by the retention requirement.

G. Liability and Penalty Provisions for Noncompliance

1. General
The liability and penalty provisions of the proposed NRLM diesel
sulfur rule would be very similar to the liability and penalty
provisions found in the highway diesel sulfur rule, the gasoline sulfur
rule, the RFG rule and other EPA fuels regulations.\342\ Regulated
parties would be subject to prohibitions which are typical in EPA fuels
regulations, such as prohibitions on selling or distributing fuel that
does not comply with the applicable standard, and causing others to
commit prohibited acts. Liability would also arise under the NRLM
diesel rule for prohibited acts specific to the diesel sulfur control
program, such as introducing nonroad diesel fuel not meeting the 15 ppm
sulfur standard into model year 2011 or later nonroad equipment. In
addition, parties would be liable for a failure to meet certain
requirements, such as the recordkeeping, reporting, or PTD
requirements, or causing others to fail to meet such requirements.
---------------------------------------------------------------------------

\342\ See section 80.5 (penalties for fuels violations); section
80.23 (liability for lead violations); section 80.28 (liability for
gasoline volatility violations); section 80.30 (liability for
highway diesel violations); section 80.79 (liability for violation
of RFG prohibited acts); section 80.80 (penalties for RFG/CG
violations); section 80.395 (liability for gasoline sulfur
violations); section 80.405 (penalties for gasoline sulfur
regulations).; and section 80.610-614 (prohibited acts, liability
for violations, and penalties for highway diesel sulfur
regulations).
---------------------------------------------------------------------------

Under this proposal, the party in the diesel fuel distribution
system that controls the facility where a violation occurred, and other
parties in that fuel distribution system (such as the refiner,
reseller, and distributor), would be presumed to be liable for the
violation.\343\ As in the Tier 2 gasoline sulfur rule and the highway
diesel fuel rule, the proposed rule would explicitly prohibit causing
another person to commit a prohibited act or causing non-conforming
diesel fuel to be in the distribution system. Non-conforming includes:
(1) diesel fuel with sulfur content above 15 ppm incorrectly designated
as appropriate for model year 2011 or later nonroad equipment or other
engines requiring 15 ppm fuel; (2) diesel fuel with sulfur content
above 500 ppm incorrectly designated as appropriate for nonroad
equipment or locomotives or marine engines after the applicable date
for the 500 ppm standard for these pieces of equipment; or (3)
distillates not containing required markers or otherwise not complying
with the requirements of this proposal. Parties outside the diesel fuel
distribution system, such as diesel additive manufacturers and
distributors, would also be subject to liability for those diesel rule
violations which could have been caused by their conduct.
---------------------------------------------------------------------------

\343\ An additional type of liability, vicarious liability, is
also imposed on branded refiners under the proposal.
---------------------------------------------------------------------------

This proposal also would provide affirmative defenses for each
party presumed liable for a violation, and all presumptions of
liability would be rebuttable. In general, in order to rebut the
presumption of liability, parties would be required to establish that:
(1) the party did not cause the violation; (2) PTD(s) exist which
establish that the fuel or diesel additive was in compliance while
under the party's control; and (3) the party conducted a quality
assurance sampling and testing program. As part of their affirmative
defense diesel fuel refiners or importers, diesel fuel additive
manufacturers, and blenders of high sulfur additives into diesel fuel,
would also be required to provide test results establishing the
conformity of the product prior to leaving that party's control.
Branded refiners would have additional affirmative defense elements to
establish. The proposed defenses under the nonroad diesel sulfur rule
are similar to those available to parties for violations of the highway
diesel sulfur, RFG, gasoline volatility, and the gasoline sulfur
regulations. This proposed rule would also clarify that parent
corporations are liable for violations of subsidiaries, in a manner
consistent with the gasoline sulfur rule and the highway diesel sulfur
rule. Finally, the proposed NRLM diesel sulfur rule mirrors the
gasoline sulfur rule and the highway diesel sulfur rule by clarifying
that each partner to a joint venture would be jointly and severally
liable for the violations at the joint venture facility or by the joint
venture operation.
As is the case with the other EPA fuels regulations, the proposed
diesel sulfur rule would apply the provisions of section 211(d)(1) of
the Clean Air Act (Act) for the collection of penalties. These penalty
provisions currently subject any person that violates any requirement
or prohibition of the diesel sulfur rule to a civil penalty of up to
$31,500 for every day of each such violation and the amount of economic
benefit or savings resulting from the violation. A violation of a NRLM
diesel sulfur standard would constitute a separate day of violation for
each day the diesel fuel giving rise to the violation remains in the
fuel distribution system. Under the proposed regulation, the length of
time the diesel fuel in question remains in the distribution system is
deemed to be twenty-five days unless there is evidence that the fuel
remained in its distribution system a lesser or greater amount of time.
This is the same time presumption that is incorporated in the RFG,
gasoline sulfur and highway diesel sulfur rules. The penalty provisions
would also be similar to the penalty provisions for violations of these
regulations.
EPA has included in this proposal two prohibitions for ``causing''
violations: (1) causing another to commit a violation; and (2) causing
non-complying diesel fuel to be in the distribution system. These
causation prohibitions are like similar prohibitions included in the
gasoline sulfur and the highway diesel sulfur regulations, and, as
discussed in the preamble to those rules, EPA believes they are
consistent with EPA's implementation of prior motor vehicle fuel
regulations. See the liability discussion in the preamble to the
gasoline sulfur final rule, at 65 FR 6812 et seq.
The prohibition against causing another to commit a violation would
apply where one party's violation is caused by the actions of another
party. For example, EPA may conduct an inspection of a terminal and
discover that the terminal is offering for sale nonroad diesel fuel
designated as complying with the 15 ppm sulfur standard, while it, in
fact, had an actual sulfur content greater than the standard.\344\ In
this scenario, parties in the fuel distribution system, as well as
parties in the distribution system of any diesel additive that had been
blended into the fuel, would be presumed liable

[[Page 28513]]

for causing the terminal to be in violation. Each party would have the
right to present an affirmative defense to rebut this presumption.
---------------------------------------------------------------------------

\344\ At downstream locations the violation would occur if EPA's
test result showed a sulfur content of greater than 17 ppm, which
takes into account the two ppm adjustment factor for testing
reproducibility for downstream parties.
---------------------------------------------------------------------------

The prohibition against causing non-complying diesel fuel to be in
the distribution system would apply, for example, if a refiner
transfers non-complying diesel fuel to a pipeline. This prohibition
could encompass situations where evidence shows high sulfur diesel fuel
was transferred from an upstream party in the distribution system, but
EPA may not have test results to establish that parties downstream also
violated a prohibited act with this fuel.
The Agency would expect to enforce the liability scheme of the NRLM
diesel sulfur rule in the same manner that we have enforced the similar
liability schemes in our prior fuels regulations. As in other fuels
programs, we would attempt to identify the party most responsible for
causing the violation, recognizing that party should primarily be
liable for penalties for the violation.
2. What Are the Proposed Liability Provisions for Additive
Manufacturers and Distributors, and Parties That Blend Additives Into
Diesel Fuel?
a. General
The final highway diesel rule permits the blending of diesel
additives with sulfur content in excess of 15 ppm into 15 ppm highway
diesel fuel under limited circumstances. As more fully discussed
earlier in this preamble, this proposed rule would permit downstream
parties to blend fuel additives having a sulfur content exceeding 15
ppm into 15 ppm nonroad diesel, provided that: (1) The blending of the
additive does not cause the diesel fuel's sulfur content to exceed the
15 ppm sulfur standard; (2) the additive is added in an amount no
greater than one volume percent of the blended product; and (3) the
downstream party obtained from its additive supplier a product transfer
document (``PTD'') with the additive's sulfur content and the
recommended treatment rate, and that it complied with such treatment
rate.
Since the proposed rule would permit the limited use in nonroad
diesel fuel of additives with high sulfur content, the Agency believes
it would be more likely that a diesel fuel sulfur violation could be
caused by the use of high sulfur additives. This could result from the
additive manufacturer's misrepresentation or inaccurate statement of
the additive's sulfur content or recommended treat rate on the
additive's PTD, or an additive distributor's contamination of low
sulfur additives with high sulfur additives during transportation. The
increased probability that parties in the diesel additive distribution
system could cause a violation of the sulfur standard warrants the
imposition by the Agency of increased liability for such parties.
Therefore, the proposed rule, like the final highway diesel rule, would
explicitly make parties in the diesel additive distribution system
liable for the sale of nonconforming diesel fuel additives, even if
such additives have not yet been blended into diesel fuel. In addition,
the proposed rule would impose presumptive liability on parties in the
additive distribution system if diesel fuel into which the additive has
been blended is determined to have a sulfur level in excess of its
permitted concentration. This presumptive liability would differ
depending on whether the blended additive was designated as meeting the
15 ppm sulfur standard (a ``15 ppm additive'') or designated as a
greater than 15 ppm sulfur additive (a ``high sulfur additive''), as
discussed below.
b. Liability When the Additive Is Designated as Complying With the 15
ppm Sulfur Standard
Additives blended into diesel fuel downstream of the refinery would
be required to have a sulfur content no greater than 15 ppm, and be
accompanied by PTD(s) accurately identifying them as complying with the
15 ppm sulfur standard, with the sole exception of diesel additives
blended into nonroad diesel fuel at a concentration no greater than one
percent by volume of the blended fuel.
All parties in the fuel and additive distribution systems would be
subject to presumptive liability if the blended fuel exceeds the sulfur
standard. The two ppm downstream adjustment would apply when EPA tests
the fuel subject to the 15 ppm sulfur standard. Low sulfur additives
present a less significant threat to diesel fuel sulfur compliance than
would occur with the use of additives designated as possibly exceeding
15 ppm sulfur. Thus, parties in the additive distribution system of the
low sulfur additive could rebut the presumption of liability by showing
the following: (1) Additive distributors would only be required to
produce PTDs stating that the additive complies with the 15 ppm sulfur
standard; (2) additive manufacturers would also be required to produce
PTDs complying in an accurate manner with the regulatory requirements,
as well as producing test results, or retained samples on which tests
could be run, establishing the additive's compliance with the 15 ppm
sulfur standard prior to leaving the manufacturer's control. Once their
presumptive liability was refuted by producing such documentation in a
convincing manner, these additive system parties would only be held
responsible for the diesel fuel non-conformity in situations in which
EPA can establish that the party actually caused the violation.
Under this proposed rule, parties in the diesel fuel distribution
system would have the typical affirmative defenses of other fuels
rules. For parties blending an additive into their diesel fuel, the
requirement of producing PTDs showing that the product complied with
the regulatory standards would necessarily include PTDs for the
additive that was used, affirming the compliance of the additive and
the fuel.
c. Liability When The Additive Is Designated as Having a Possible
Sulfur Content Greater Than 15 ppm
Under this proposed rule, a nonroad diesel additive would be
permitted to have a maximum sulfur content above 15 ppm if the blended
fuel continues to meet the 15 ppm standard and the additive is used at
a concentration no greater than one volume percent of the blended fuel.
However, if nonroad diesel fuel containing that additive is found by
EPA to have high sulfur content, then all the parties in both the
additive and the fuel distribution chains would be presumed liable for
causing the nonroad diesel fuel violation.
Since this type of high sulfur additive presents a much greater
probability of causing diesel fuel non-compliance, parties in the
additive's distribution system would have to satisfy an additional
element to establish an affirmative defense. In addition to the
elements of an affirmative defense described above, parties in the
additive distribution system for such a high sulfur additive would also
be required to establish that they did not cause the violation, an
element of an affirmative defense that is typically required in EPA
fuel programs to rebut presumptive liability.
Parties in the diesel fuel distribution system would essentially
have to establish the same affirmative elements as in other fuels
rules, with an addition comparable to the highway diesel rule. Blenders
of high sulfur additives into 15 ppm sulfur nonroad diesel fuel, would
have to establish a more rigorous quality control program than would
exist without the addition of such a high sulfur additive. The Agency
believes that parties blending high sulfur additives into their 15 ppm
sulfur nonroad diesel fuel should be required

[[Page 28514]]

to produce test results establishing that the blended fuel was in
compliance with the 15 ppm sulfur standard after being blended with the
high sulfur additive. This additional defense element would be required
as an added safeguard to ensure nonroad diesel fuel compliance, since
the blender has voluntarily chosen to use an additive which increases
the risk of diesel fuel non-compliance.

H. How Would Compliance With the Sulfur Standards Be Determined?

EPA is today proposing that compliance with the diesel sulfur
standards would be determined based on the sulfur level of the diesel
fuel, as measured using a testing methodology approved under the
provisions discussed in Section VIII.D of this preamble. We further
propose that any evidence from any source or location could be used to
establish the diesel fuel sulfur level, provided that such evidence is
relevant to whether the level would have been in compliance if the
regulatory sampling and testing methodology had been correctly
performed. This is consistent with the approach taken under the
gasoline sulfur rule and the highway diesel sulfur rule.
The proposed regulations would provide that the primary determinant
of compliance with the sulfur standards would be use of an approved
test method. Additionally, other information could be used under the
proposed rule, including test results using a non-approved method, if
the evidence is relevant to determining whether the sulfur level would
meet applicable standards had compliance been determined using an
approved test methodology. While the use of such a non-approved method
might produce results relevant to determining sulfur content, this
would not remove any liability for failing to conduct required batch
testing using an approved test method.
For example, the Agency might not have sulfur results derived from
an approved test method for diesel fuel sold by a terminal, yet the
terminal's own test results, based on testing using methods other than
those approved under the regulations, could reliably show an exceedence
of the sulfur standard. Under this proposed rule, evidence from the
non-approved test method could be used to establish the diesel fuel's
sulfur level that would have resulted if an approved test method had
been conducted. This type of evidence is available for use by either
the EPA or the regulated party, and could be used to show either
compliance or noncompliance. Similarly, absent the existence of sulfur
test results using an approved method, commercial documents asserting
the sulfur level of diesel fuel or additive could be used as some
evidence of what the sulfur level of the fuel would be if the product
would have been tested using an approved method.
The Agency believes that the same statutory authority for EPA to
adopt the gasoline sulfur rule's evidentiary provisions, Clean Air Act
section 211(c), provides appropriate authority for our proposal of the
evidentiary provisions of today's diesel sulfur rule. For a fuller
explanation of this statutory authority, see Section VI(I) of the
gasoline sulfur final rule preamble, 65 FR 6815, February 10, 2000.

IX. Public Participation

We request comment on all aspects of this proposal. This section
describes how you can participate in this process.

A. How and to Whom Do I Submit Comments?

We are opening a formal comment period by publishing this document.
We will accept comments for the period indicated under DATES above. If
you have an interest in the program described in this document, we
encourage you to comment on any aspect of this rulemaking. We request
comment on various topics throughout this proposal.
Your comments will be most useful if you include appropriate and
detailed supporting rationale, data, and analysis. If you disagree with
parts of the proposed program, we encourage you to suggest and analyze
alternate approaches to meeting the air quality goals described in this
proposal. You should send all comments, except those containing
proprietary information, to our Air Docket (see Addresses) before the
end of the comment period.
You may submit comments electronically, by mail, or through hand
delivery/courier. To ensure proper receipt by EPA, identify the
appropriate docket identification number in the subject line on the
first page of your comment. Please ensure that your comments are
submitted within the specified comment period. Comments received after
the close of the comment period will be marked ``late.'' EPA is not
required to consider these late comments. If you wish to submit CBI or
information that is otherwise protected by statute, please follow the
instructions in Section IX.B. Do not use EPA Dockets or e-mail to
submit CBI or information protected by statute.
1. Electronically
If you submit an electronic comment as prescribed below, EPA
recommends that you include your name, mailing address, and an e-mail
address or other contact information in the body of your comment. Also
include this contact information on the outside of any disk or CD ROM
you submit, and in any cover letter accompanying the disk or CD ROM.
This ensures that you can be identified as the submitter of the comment
and allows EPA to contact you in case EPA cannot read your comment due
to technical difficulties or needs further information on the substance
of your comment. EPA's policy is that EPA will not edit your comment,
and any identifying or contact information provided in the body of a
comment will be included as part of the comment that is placed in the
official public docket, and made available in EPA's electronic public
docket. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment.
i. EPA Dockets
Your use of EPA's electronic public docket to submit comments to
EPA electronically is EPA's preferred method for receiving comments. Go
directly to EPA Dockets at http://www.epa.gov/edocket, and follow the
online instructions for submitting comments. To access EPA's electronic
public docket from the EPA Internet Home Page, select ``Information
Sources,'' ``Dockets,'' and ``EPA Dockets.'' Once in the system, select
``Quick Search,'' and then key in Docket ID No. OAR-2003-0012. The
system is an ``anonymous access'' system, which means EPA will not know
your identity, e-mail address, or other contact information unless you
provide it in the body of your comment.
ii. E-mail
Comments may be sent by electronic mail (e-mail) to nrt4@epa.gov,
Attention Docket ID No. A-2001-28. In contrast to EPA's electronic
public docket, EPA's e-mail system is not an ``anonymous access''
system. If you send an e-mail comment directly to the Docket without
going through EPA's electronic public docket, EPA's e-mail system
automatically captures your e-mail address. E-mail addresses that are
automatically captured by EPA's e-mail system are included as part of
the comment that is placed in the official public docket, and made
available in EPA's electronic public docket.

[[Page 28515]]

iii. Disk or CD ROM
You may submit comments on a disk or CD ROM that you mail to the
mailing address identified in Section IX.A.2 below. These electronic
submissions will be accepted in WordPerfect or ASCII file format. Avoid
the use of special characters and any form of encryption.
2. By Mail
Send your comments to: Air Docket, Environmental Protection Agency,
Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC, 20460,
Attention Docket ID No. A-2001-28.
3. By Hand Delivery or Courier
Deliver your comments to: EPA Docket Center, (EPA/DC) EPA West,
Room B102, 1301 Constitution Ave., NW., Washington, DC., Attention
Docket ID No. A-2001-28. Such deliveries are only accepted during the
Docket's normal hours of operation from 8:30 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays.
B. How Should I Submit CBI to the Agency?
Do not submit information that you consider to be CBI
electronically through EPA's electronic public docket or by e-mail.
Send or deliver information identified as CBI only to the following
address: U.S. Environmental Protection Agency, Assessment and Standards
Division, 2000 Traverwood Drive, Ann Arbor, MI, 48105, Attention Docket
ID No. A-2001-28. You may claim information that you submit to EPA as
CBI by marking any part or all of that information as CBI (if you
submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as
CBI and then identify electronically within the disk or CD ROM the
specific information that is CBI). Information so marked will not be
disclosed except in accordance with procedures set forth in 40 CFR part
2.
In addition to one complete version of the comment that includes
any information claimed as CBI, a copy of the comment that does not
contain the information claimed as CBI must be submitted for inclusion
in the public docket and EPA's electronic public docket. If you submit
the copy that does not contain CBI on disk or CD ROM, mark the outside
of the disk or CD ROM clearly that it does not contain CBI. Information
not marked as CBI will be included in the public docket and EPA's
electronic public docket without prior notice. If you have any
questions about CBI or the procedures for claiming CBI, please consult
the person identified in the FOR FURTHER INFORMATION CONTACT section.

C. Will There Be a Public Hearing?

We will hold three public hearings; in Los Angeles, Chicago, and
New York City. The hearings will be held on the following dates and
start at the following times, and continue until everyone present has
had an opportunity to speak.

------------------------------------------------------------------------
Hearing location Date Time
------------------------------------------------------------------------
New York, New York, Park Central June 10, 2003..... 9:00 a.m. EDT.
New York, 870 Seventh Avenue at
56th Street, New York, NY
10019, Telephone: (212) 247-
8000, Fax: (212) 541-8506.
Chicago, Illinois, Hyatt Regency June 12, 2003..... 9:00 a.m. CDT.
O'Hare, 9300 W. Bryn Mawr
Avenue, Rosemont, IL 60018,
Telephone: (847) 696-1234, Fax:
(847) 698-0139.
Los Angeles. California, Hyatt June 17, 2003..... 9:00 a.m. PDT.
Regency Los Angeles, 711 South
Hope Street, Los Angeles,
California, USA. 90017,
Telephone: (213) 683-1234, Fax:
(213) 629-3230.
------------------------------------------------------------------------

If you would like to present testimony at a public hearing, we ask
that you notify the contact person listed above at least ten days
before the hearing. You should estimate the time you will need for your
presentation and identify any needed audio/visual equipment. We suggest
that you bring copies of your statement or other material for the EPA
panel and the audience. It would also be helpful if you send us a copy
of your statement or other materials before the hearing.
We will make a tentative schedule for the order of testimony based
on the notifications we receive. This schedule will be available on the
morning of each hearing. In addition, we will reserve a block of time
for anyone else in the audience who wants to give testimony.
We will conduct the hearing informally, and technical rules of
evidence won't apply. We will arrange for a written transcript of the
hearing and keep the official record of the hearing open for 30 days to
allow you to submit supplementary information. You may make
arrangements for copies of the transcript directly with the court
reporter.
We will conduct the hearing informally, and technical rules of
evidence won't apply. We will arrange for a written transcript of the
hearing and keep the official record of the hearing open for 30 days to
allow you to submit supplementary information. You may make
arrangements for copies of the transcript directly with the court
reporter.

D. Comment Period

The comment period for this rule will end on August 20, 2003.

E. What Should I Consider as I Prepare My Comments for EPA?

You may find the following suggestions helpful for preparing your
comments:
1. Explain your views as clearly as possible.
2. Describe any assumptions that you used.
3. Provide any technical information and/or data you used that
support your views.
4. If you estimate potential burden or costs, explain how you
arrived at your estimate.
5. Provide specific examples to illustrate your concerns.
6. Offer alternatives.
7. Make sure to submit your comments by the comment period deadline
identified.
8. To ensure proper receipt by EPA, identify the appropriate docket
identification number in the subject line on the first page of your
response. It would also be helpful if you provided the name, date, and
Federal Register citation related to your comments.

X. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to review by the Office of Management and Budget
(OMB) and the requirements of this Executive Order.

[[Page 28516]]

The Executive 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.
A draft Regulatory Impact Analysis has been prepared and is
available in the docket for this rulemaking and at the internet address
listed under ``How Can I Get Copies of This Document and Other Related
Information?'' above. This action was submitted to the Office of
Management and Budget for review under Executive Order 12866. Estimated
annual costs of this rulemaking are estimated to be $1.2 billion per
year, thus this proposed rule is considered economically significant.
Written comments from OMB and responses from EPA to OMB comments are in
the public docket for this rulemaking.

B. Paperwork Reduction Act

The information collection requirements in this proposed 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. The
Agency proposes to collect information to ensure compliance with the
provisions in this rule. This includes a variety of requirements, both
for engine manufacturers and for fuel producers. Information-collection
requirements related to engine manufacturers are in EPA ICR
#1897.05; requirements related to fuel producers are in EPA ICR
#1718.05. Section 208(a) of the Clean Air Act requires that
manufacturers provide information the Administrator may reasonably
require to determine compliance with the regulations; submission of the
information is therefore mandatory. We will consider confidential all
information meeting the requirements of section 208(c) of the Clean Air
Act.
As shown in Table X-1, the total annual burden associated with this
proposal is about 215,000 hours and $16 million, based on a projection
of 470 respondents. The estimated burden for engine manufacturers is a
total estimate for both new and existing reporting requirements. The
fuel-related requirements represent our first regulation of nonroad
diesel fuel, so those burden estimates reflect only new reporting
requirements. 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; and transmit or otherwise disclose the
information.

Table X-1.--Estimated Burden for Reporting and Recordkeeping
Requirements
------------------------------------------------------------------------
Annual Annual
Industry sector Number of burden costs (in
respondents hours millions)
------------------------------------------------------------------------
Engines.......................... 95 160,000 $12.5
Fuels............................ 375 55,000 3.7
----------------------------------
Total........................ 470 215,000 16.2
------------------------------------------------------------------------

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.
Comments are requested on the Agency's need for this information,
the accuracy of the provided burden estimates, and any suggested
methods for minimizing respondent burden, including through the use of
automated collection techniques. Send comments on the ICR to the
Director, Collection Strategies Division; U.S. Environmental Protection
Agency (2822); 1200 Pennsylvania Ave., NW., Washington, DC 20460; and
to the Office of Information and Regulatory Affairs, Office of
Management and Budget, 725 17th St., NW., Washington, DC 20503, marked
``Attention: Desk Officer for EPA.'' Include the ICR number in any
correspondence. Since OMB is required to make a decision concerning the
ICR between 30 and 60 days after May 23, 2003, a comment to OMB is best
ensured of having its full effect if OMB receives it by July 23, 2003.
The final rule will respond to any OMB or public comments on the
information collection requirements contained in this proposal.

C. Regulatory Flexibility Act (RFA), as Amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et
seq.

1. Overview
The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis for 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 the purposes of assessing the impacts of today's rule on small
entities, a small entity is defined as: (1) A small business that meets
the definitions based on the Small Business Administration's (SBA) size
standards (see table below); (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. The
following table provides an overview of the primary SBA small business
categories potentially affected by this regulation:

[[Page 28517]]

------------------------------------------------------------------------
Defined as small
Industry entity by SBA if: Major SIC a codes
------------------------------------------------------------------------
Engine manufacturers............ Less than 1,000 Major Group 35.
employees.
Equipment manufacturers:........
--construction equipment.... Less than 750 Major Group 35.
employees.
--industrial truck Less than 750 Major Group 35.
manufacturers (i.e. employees.
forklifts).
--all other nonroad Less than 500 Major Group 35.
equipment manufacturers. employees.
Fuel refiners................... Less than 1500 b.. 2911.
Fuel distributors............... (varies).......... (varies).
------------------------------------------------------------------------
Notes:
a Standard Industrial Classification
b EPA has included in past fuels rulemakings a provision that, in order
to qualify for the small refiner flexibilities, a refiner must also
have a company-wide crude refining capacity of no greater than 155,000
barrels per calendar day. EPA has included this criterion in the small
refiner definition for a nonroad diesel sulfur program as well.

2. Background
Controlling emissions from nonroad engines and equipment, in
conjunction with diesel fuel quality controls, has very significant
public health and welfare benefits, as explained in Section II of this
preamble. We are proposing new engine standards and related provisions
under sections 213(a)(3) and (4) of the Clean Air Act which, among
other things, direct us to establish (and from time to time revise)
emission standards for new nonroad diesel engines. Similarly, section
211(c)(1) authorizes EPA to regulate fuels if any emission product of
the fuel causes or contributes to air pollution that may endanger
public health or welfare, or that may impair the performance of
emission control technology on engines and vehicles.
In accordance with Section 603 of the RFA, EPA prepared an initial
regulatory flexibility analysis (IRFA) that examines the impact of the
proposed rule on small entities along with regulatory alternatives that
could reduce that impact. The IRFA is available for review as part of
the draft RIA for the rule. This is available in the public docket and
is summarized below.
3. Summary of Regulated Small Entities
The following section discusses the small entities directly
regulated by this proposed rule.
a. Nonroad Diesel Engine Manufacturers
Using information from the industry profile that was conducted for
the nonroad diesel sector, EPA identified a total of 61 engine
manufacturers. The top 10 engine manufacturers comprise 80 percent of
the total market, while the other 51 companies make up the remaining 20
percent.\345\ Of the 61 manufacturers, four fit the SBA definition of a
small entity. These four manufacturers were Anadolu Motors, Farymann
Diesel GMBH, Lister-Petter Group, and V & L Tools (parent company of
Wisconsin Motors LLC, formerly ``Wis-Con Total Power''). These
businesses comprise 8 percent of the total engine sales for the year
2000.
---------------------------------------------------------------------------

\345\ All sales information used for this analysis was 2000
data.
---------------------------------------------------------------------------

b. Nonroad Diesel Equipment Manufacturers
To determine the number of equipment manufacturers, EPA also used
the industry profile that was conducted. From this, EPA identified over
700 manufacturers with sales and/or employment data that could be
included in the screening analysis. These businesses included
manufacturers in the construction, agricultural, and outdoor power
equipment (mainly, lawn and garden equipment) sectors of the nonroad
diesel market. The equipment produced by these manufacturers ranged
from small walk-behind equipment (sub-25 hp engines) to large mining
and construction equipment (using engines in excess of 750 hp). Of the
manufacturers with available sales and employment data (approximately
500 manufacturers), small equipment manufacturers represent 68 percent
of total equipment manufacturers (and these manufacturers account for
11 percent of nonroad diesel equipment industry sales). Thus, the
majority of the small entities that could potentially experience a
significant impact as a result of this rulemaking are in the nonroad
equipment manufacturing sector.
c. Nonroad Diesel Fuel Refiners
Our current assessment is that 26 refiners (collectively owning 33
refineries) meet SBA's definition of a small business for the refining
industry. The 33 refineries appear to meet both the employee number and
production volume criteria mentioned above. These small refiners
currently produce approximately 6 percent of the total high-sulfur
diesel fuel. It should be noted that because of the dynamics in the
refining industry (e.g., mergers and acquisitions), the actual number
of refiners that ultimately qualify for small refiner status under a
future nonroad diesel sulfur program could be different than this
initial estimate.
d. Nonroad Diesel Fuel Distributors and Marketers
The industry that transports, distributes, and markets nonroad
diesel fuel encompasses a wide range of businesses, including bulk
terminals, bulk plants, fuel oil dealers, and diesel fuel trucking
operations, and totals thousands of entities that have some role in
this activity. More than 90 percent of these entities would meet small
entity criteria. Common carrier pipeline companies are also a part of
the distribution system; 10 of them are small businesses.
4. Potential Reporting, Recordkeeping, and Compliance
As with any emission control program, the Agency must have the
assurance that the regulated entities will meet the emissions standards
and all related provisions. For engine and equipment manufacturers, EPA
is proposing to continue the reporting, recordkeeping, and compliance
requirements prescribed for these categories in 40 CFR part 89. Key
among these are certification requirements and provisions related to
reporting of production, emissions information, use of transition
provisions, etc.
For any fuel control program, EPA must have the assurance that fuel
produced by refiners meets the applicable standard, and that the fuel
continues to meet the standard as it passes downstream through the
distribution system to the ultimate end user. This is particularly
important in the case of diesel fuel, where the aftertreatment
technologies expected to be used to meet the engine standards under
consideration are highly sensitive to sulfur. The recordkeeping,
reporting and compliance provisions of the proposed rule are fairly
consistent with those in place today for other fuel programs, including
the current 15 ppm highway diesel regulation. For example,

[[Page 28518]]

recordkeeping involves the use of product transfer documents, which are
already required under the 15 ppm highway diesel sulfur rule (40 CFR
80.560).
5. Relevant Federal Rules
The proposed certification fees rule, through the Agency's
Certification and Compliance Division (CCD), may have some impact on
the upcoming rule, and the Panel recommended that we take into
consideration the effects that this rule may have on small businesses.
The fuel regulations that we expect to propose would be similar in
many respects to the existing sulfur standard for highway diesel fuel.
We are not aware of any area where the regulations under consideration
would directly duplicate or overlap with the existing federal, state,
or local regulations; however, several small refiners will also be
subject to the gasoline sulfur and highway diesel sulfur control
requirements, as well as air toxics requirements.
More stringent nonroad diesel sulfur standards may require some
refiners to obtain permits from state and local air pollution control
agencies under the Clean Air Act's New Source Review program prior to
constructing the desulfurization equipment needed to meet the
standards.
The Internal Revenue Service (IRS) has an existing rule that levies
taxes on highway diesel fuel only. The rule requires that nonroad
diesel (un-taxed) fuel be dyed so that regulators and customers will
know which type of fuel is which. Because of the need to separate dyed
from undyed diesel fuel, some marketers may choose to install extra
tanks. Therefore, fuel marketers have claimed that, if two grades of
nonroad fuel are allowed in the marketplace, they may decide to
maintain two segregated tanks for both nonroad (dyed 500 ppm and dyed
15 ppm) and highway diesel fuels (undyed 500 ppm and undyed 15 ppm),
during the transition periods for both of these fuels.
6. Summary of SBREFA Panel Process and Panel Outreach
a. Significant Panel Findings
The Small Business Advocacy Review Panel (SBAR Panel, or the Panel)
considered many regulatory options and flexibilities that would help
mitigate potential adverse effects on small businesses as a result of
this rule. During the SBREFA Panel process, the Panel sought out and
received comments on the regulatory options and flexibilities that were
presented to SERs and Panel members. The major flexibilities and
hardship relief provisions that are recommended by the Panel, along
with specific recommendations by individual Panel members, are
described below and are also located in Section 9 of the SBREFA Final
Panel Report which is available in the public docket.\346\
---------------------------------------------------------------------------

\346\ Final Panel Report of the Small Business Advocacy Review
Panel on EPA's Proposed Rule-Control of Emissions of Air Pollution
From Land-Based Nonroad Compression Ignition Engines, December 23,
2003.
---------------------------------------------------------------------------

b. Panel Process
As required by section 609(b) of the RFA, as amended by SBREFA, we
also conducted outreach to small entities and convened a SBAR Panel to
obtain advice and recommendations of representatives of the small
entities that potentially would be subject to the rule's requirements.
On October 24, 2002, EPA's Small Business Advocacy Chairperson
convened a Panel under Section 609(b) of the RFA. In addition to the
Chair, the Panel consisted of the Deputy Director of EPA's Office of
Transportation and Air Quality, the Chief Counsel for Advocacy of the
Small Business Administration, and the Administrator of the Office of
Information and Regulatory Affairs within the Office of Management and
Budget. As part of the SBAR Panel process, we conducted outreach with
representatives from the various small entities that would be affected
by the proposed rulemaking. We met with these Small Entity
Representatives (SERs) to discuss the potential rulemaking approaches
and ways to decrease the impact of the rulemaking on their industries.
We distributed outreach materials-including background on the nonroad
diesel sector, possible regulatory approaches, and possible rulemaking
alternatives to the SERs on October 30, 2002. On November 13, 2002 the
Panel met with the SERs to discuss the outreach materials and receive
initial feedback on the approaches and alternatives detailed in the
outreach packet. The Panel received written comments from the SERs
following the meeting in response to discussions had at the meeting and
the questions posed to the SERs by the Agency. The SERs were
specifically asked to provide comment on regulatory alternatives that
could help to minimize the impact on small businesses as a result of
the rulemaking.
In general, SERs representing the nonroad diesel equipment
manufacturers raised concerns about the added cost of compliance and
the increase in size of compliant engines (and how this would affect
their products). SERs representing the nonroad diesel fuel industry
raised comments that generally included anticipated difficulty in going
to a lower grade of fuel and the need for increased tankage to carry
interim grades of fuel. All SERs raised concerns that small entities do
not have the capital and have fewer resources which make compliance
difficult. Thus, they maintain that there is a need to provide
alternatives and provisions to address these issues, as (per their
view) more stringent emission standards could impose more significant
adverse impacts on small entities than on large businesses. (For the
most part, EPA has not found the facts to support these contentions in
this proposal, and thus is not proposing separate provisions applicable
only to small entities.)
The Panel's findings and discussions are based on the information
that was available during the term of the Panel and issues that were
raised by the SERs during the outreach meetings and in their comments.
It was agreed that EPA should consider the issues raised by the SERs
(and discussions had by the Panel itself) and that EPA should consider
comments on flexibility alternatives that would help to mitigate any
negative impacts on small businesses. Alternatives discussed throughout
the Panel process include those offered in previous or current EPA
rulemakings, as well as alternatives suggested by SERs and Panel
members, and the Panel recommended that all be considered in the
development of the rule. Though some of the flexibilities suggested may
be appropriate to apply to all entities affected by the rulemaking, the
Panel's discussions and recommendations are focused mainly on the
impacts, and ways to mitigate adverse impacts, on small businesses. In
addition some of the provisions, such as the equipment manufacturer
transition provision, that apply to all entities also help to mitigate
the effects on small entities. A summary of these recommendations is
detailed below, and a full discussion of the regulatory alternatives
and hardship provisions discussed and recommended by the Panel can be
found in the SBREFA Final Panel Report. A complete discussion of the
transition and hardship provisions that we are proposing in today's
action can be found in Sections VII.C and III.A of this preamble. Also,
the Panel Report includes all comments received from SERs (Appendix B
of the Report), a summary of those comments (Section 8), and summaries
of the two outreach meetings that were held with the SERs

[[Page 28519]]

(Appendices C and D). In accordance with the RFA/SBREFA requirements,
the Panel evaluated the aforementioned materials and SER comments on
issues related to the Initial Regulatory Flexibility Analysis (IRFA).
The following sections describe the Panel recommendations, along with
specific recommendations by individual Panel members, from the SBAR
Panel Report.
c. Transition Flexibilities
The Panel recommended that EPA consider and seek comment on a wide
range of regulatory alternatives to mitigate the impacts of the
rulemaking on small businesses, including those flexibility options
described below. As previously stated, the following discussion is a
summary of the SBAR Panel recommendations; our proposals regarding
these recommendations are located in earlier sections of this rule
preamble.
i. Nonroad Diesel Engines
(a) Transition Flexibility Alternatives for Small Engine Manufacturers
The Panel recommended the following transition flexibilities to be
considered, which were dependent upon what approach, or approaches, EPA
proposes for the rulemaking.
? For an approach with two phases of standards:
? An engine manufacturer could skip the first phase and
comply on time with the second; or,
? a manufacturer could delay compliance with each phase of
standards.
? For an approach that entails only one phase of standards,
the manufacturer could opt to delay compliance. The Panel recommended
that the length of the delay be a three year period; the Panel also
recommended that EPA take comment on whether this delay period should
be two, three, or four years. Each delay would be pollutant specific
(i.e., the delay would apply to each pollutant as it is phased in).
(b) Hardship Provisions for Small Engine Manufacturers
The Panel also recommended that two types of hardship provisions be
extended to small engine manufacturers. These provisions are:
? For the case of a catastrophic event, or other extreme
unforseen circumstances, beyond the control of the manufacturer that
could not have been avoided with reasonable discretion (i.e. fire,
tornado, supplier not fulfilling contract, etc.); and
? For the case where a manufacturer has taken all reasonable
business, technical, and economic steps to comply but cannot do so.
Either relief provision would provide lead time for up to 2 years--
in addition to the transition flexibilities listed above--and a
manufacturer would have to demonstrate to the Agency's satisfaction
that failure to sell the noncompliant engines would jeopardize the
company's solvency. EPA could require that the manufacturer make up the
lost environmental benefit through the use of programs such as
supplemental environmental projects.
For the transition flexibilities listed above, the Panel
recommended that engine manufacturers and importers must have certified
engines in model year 2002 or earlier in order to take advantage of
these provisions. Each manufacturer would be limited to 2500 units per
year. This number allows for some market growth. The Panel recommended
these provisions in order to prohibit the misuse of these transition
provisions as a tool to enter the nonroad diesel market or to gain
unfair market position relative to other manufacturers.
(c) Other Small Engine Manufacturer Issues
It was also recommended by the SBAR Panel that an averaging,
banking, and trading (ABT) program be included as part of the overall
rulemaking program, and, as discussed above, ABT has been included in
the program.
During the SBREFA panel process several alternative approaches for
engine standards were examined and considered by the panel. See Section
3.1.1 of the SBAR panel report. The SBA Chief Counsel for the Office of
Advocacy also offered some observations about the impacts of the
standards for engines less than 70 hp on affected small engine and
equipment manufacturers which are based on the performance of PM or
NO_X advanced aftertreatment devices. While the other Panel
members did not join in these observations, the Panel recommended that
the Administrator carefully consider these points and examine further
the factual, legal and policy questions raised here in developing the
proposed rule. First, given the available information, the Office of
Advocacy stated that they had substantial doubts about the technical
feasibility and cost of engineering aftertreatment devices into a wide
diversity of nonroad diesel applications for engines less than 70 hp.
They stated that considerable concern has been raised regarding the
technical feasibility of PM and NO_X advanced aftertreatment
devices, even for larger engines, and particularly in the case of
NO_X adsorbers. Second, the low retail cost and low annual
production for many of these applications make it extremely difficult
for the equipment manufacturer to absorb these additional costs. The
Office of Advocacy believes that, based on the available information,
the Agency does not have a sufficient basis to move forward with a
proposal that would require nonroad engines under 70 hp to use
aftertreatment devices. Based on the SERs' concerns about the technical
feasibility of the Tier 4 standards, and the technical information
discussed in the Panel report, SBA recommended that we include a
technological review of the standards in the 2008 time frame in the
rulemaking proposal. The Panel recommended that we consider this
recommendation.
The SBA Office of Advocacy stated that considerable concern has
been raised regarding the technical feasibility of PM and
NO_X aftertreatment devices, particularly in the case of
NO_X adsorbers. As explained in the preamble, we have found
no factual basis for this statement with respect to PM controls based
on use of advanced aftertreatment for engines between 25 and 75 hp. We
are not proposing standards based on performance of advanced
aftertreatment for engines under 25 hp, and for NO_X, for
engines 75 hp and under.
With respect to the PM standards for these engines, however, EPA
disagrees with the statement made by the Office of Advocacy that, based
on available information, we do not have a sufficient basis to move
forward with this proposed rulemaking requiring nonroad engines under
70 hp to use aftertreatment devices. As we have documented in the
preamble and elsewhere in this Draft RIA, EPA believes that the
standards for PM for engines in these power ranges are feasible at
reasonable cost, and will help to improve very important air quality
problems, especially by reducing exposure to diesel PM and by aiding in
attainment of the PM 2.5 National Ambient Air Quality Standards
(NAAQS). Indeed, given these facts, EPA is skeptical that an
alternative of no PM standards for these engines would be appropriate
under section 213(a)(4). Moreover, the statement regarding cost impacts
fails to account for transition flexibilities provided all equipment
manufacturers as part of the proposal.
Further discussion of alternative engine standards below 75 hp can
be found in Section VI of this preamble and Chapter 11 and 12 of the
draft RIA, specifically the discussion of Options 5a and 5b. EPA
invites comment on these specific small engine alternatives, as

[[Page 28520]]

well as all other alternative options discussed in Section VI of this
preamble. We invite comments specifically on the costs of using
advanced aftertreatment devices, particularly on engines below 75 hp.
ii. Nonroad Diesel Equipment
(a) Transition Flexibility Alternatives for Small Equipment
Manufacturers
The Panel recommended that EPA propose to continue the transition
flexibilities offered for the Tier 1 and Tier 2 nonroad diesel emission
standards, as set out in 40 CFR 89.102, with some potential
modifications. The recommended transition flexibilities are:
? Percent-of-Production Allowance: Over a seven model year
period, equipment manufacturers may install engines not certified to
the new emission standards in an amount of equipment equivalent to 80
percent of one year's production. This is to be implemented by power
category with the average determined over the period in which the
flexibility is used.
? Small Volume Allowance: A manufacturer may exceed the 80
percent allowance in seven years as described above, provided that the
previous Tier engine use does not exceed 700 total over seven years,
and 200 in any given year. This is limited to one family per power
category. Alternatively, at the manufacturer's choice by hp category, a
program that eliminates the ``single family provision'' restriction
with revised total and annual sales limits as shown below:
? For categories <=175 hp--525 previous Tier engines (over 7
years) with an annual cap of 150 units (these engine numbers are
separate for each hp category defined in the regulations)
? For categories of £175hp--350 previous Tier
engines (over 7 years) with an annual cap of 100 units (these engine
numbers are separate for each hp category defined in the regulations).
The Panel recommended that EPA seek comment on the total number of
engines and annual cap values listed above. Specifically, the SBA and
OMB Panel members recommended that EPA seek comment on implementing the
small volume allowance (700 engine provision) for small equipment
manufacturers without a limit on the number of engine families which
could be covered in any hp category.
? In addition, due to the changing nature of the technology
as the manufacturers transition from Tier 2 to Tier 3 and Tier 4, the
Panel recommended that the equipment manufacturers be permitted to
borrow from the Tier 3/Tier 4 transition flexibilities for use in the
Tier 2/Tier 3 time frame.
To maximize the likelihood that the application of these transition
provisions will result in the availability of previous Tier engines for
use by the small equipment manufacturers, the Panel recommended that
these three provisions be provided to all equipment manufacturers. As
explained earlier in the preamble, this is essentially the approach
that EPA is proposing.
(b) Hardship Provisions for Small Equipment Manufacturers
The Panel also recommended that two types of hardship provisions be
extended to small equipment manufacturers. These are generally the same
as provided above for small engine manufacturers:
? For the case of a catastrophic event, or other extreme
unforseen circumstances, beyond the control of the manufacturer that
could not have been avoided with reasonable discretion (i.e. fire,
tornado, supplier not fulfilling contract, etc.); and
? For the case where a manufacturer has taken all reasonable
business, technical, and economic steps to comply but cannot. In this
case relief would have to be sought before there is imminent jeopardy
that a manufacturer's equipment could not be sold and a manufacturer
would have to demonstrate to the Agency's satisfaction that failure to
get permission to sell equipment with a previous Tier engine would
create a serious economic hardship. Hardship relief of this nature
cannot be sought by a manufacturer which also manufactures the engines
for its equipment.
Hardship relief would not be available until other allowances have
been exhausted. Either relief provision would provide additional lead
time for up to 2 model years based on the circumstances, but EPA could
require recovery of the lost environmental benefit. To be eligible for
the hardship provisions listed above (as well as the flexibilities
detailed above), the Panel recommended that equipment manufacturers and
importers must have reported equipment sales using certified engines in
model year 2002 or earlier. This requirement is to prohibit the misuse
of these flexibilities as a loophole to enter the nonroad diesel
equipment market or to gain unfair market position relative to other
manufacturers.
iii. Nonroad Diesel Fuel Refiners
(a) Regulatory Flexibility Alternatives for Diesel Fuel Refiners
The Panel considered a range of options and regulatory alternatives
for providing small refiners with flexibility in complying with new
sulfur standards for nonroad diesel fuel. Taking into consideration the
comments received on these ideas, as well as additional business and
technical information gathered about potentially affected small
entities, the Panel recommended that whether EPA proposes a one-step or
a two-step approach, EPA should provide for delayed compliance for
small refiners as shown below.

Small Refiner Options Under 2-Step Nonroad Diesel Base Programs Recommended Sulfur Standards
[in parts per million (ppm)]
\a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Under 2-step program 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Small \b\............................. ......... 500 500 500 15 15 15 15 15 15
Small..................................... ......... ......... ......... ......... 500 500 500 500 15 15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ New standards are assumed to take effect June 1 of the applicable year.
\b\ Assumes 500 ppm standard for marine + locomotive fuel for non-small refiners for 2007 and later and for small refiners for 2010 and later.

(b) Small Refiner Incentives for Early Compliance
In addition to these standards, the Panel recommended that EPA
propose certain transition provisions to encourage early compliance
with the diesel fuel sulfur standards. The Panel recommended that EPA
propose that small refiners be eligible to select one of the two
following options:
? Credits for Early Desulfurization: The Panel recommended
that the

[[Page 28521]]

Agency propose, as part of an overall trading program, a credit trading
system that allows small refiners to generate and sell credits for
nonroad diesel fuel that meets the small refiner standards earlier than
that required in the above table. Such credits could be used to offset
higher sulfur fuel produced by that refiner or by another refiner that
purchases the credits.
? Limited Relief on Small Refiner Interim Gasoline Sulfur
Standards: The Panel recommended that a small refiner producing its
entire nonroad diesel fuel pool at 15 ppm sulfur by June 1, 2006, and
that chooses not to generate nonroad credits for its early compliance,
receive a 20 percent relaxation in its assigned small refiner interim
gasoline sulfur standards. However, the Panel recommended that the
maximum per-gallon sulfur cap for any small refiner remain at 450 ppm.
(c) Refiner Hardship Provisions
The Panel recommended that EPA propose refiner hardship provisions
modeled after those established under the gasoline sulfur and highway
diesel fuel sulfur program (see 40 CFR 80.270 and 80.560).
Specifically, the Panel recommended that EPA propose a process that,
like the hardship provisions of the gasoline and highway diesel rules,
allows refiners to seek case-by-case approval of applications for
temporary waivers to the nonroad diesel sulfur standards, based on a
demonstration to the Agency of extreme hardship circumstances. This
provision would allow domestic and foreign refiners, including small
refiners, to request additional flexibility based on a showing of
unusual circumstances that result in extreme hardship and significantly
affect the ability of the refiner to comply by the applicable date,
despite its best efforts.
iv. Nonroad Diesel Fuel Distributors and Marketers
The diesel fuel approach being considered by the Agency includes
the possibility of there being two grades of nonroad diesel fuel (500/
15 ppm) in the market place for at least a transition period. The
distributors support a one-step approach because it has no significant
impact on their operations. The distributors offered some suggestions
on how they might deal with this issue, but indicated that there would
be adverse impact in some circumstances. The Panel recommended that EPA
study this issue further. The costs and related issues relevant to fuel
distributors are further discussed in Chapter 7 of the proposed rule
Regulatory Impact Analysis.
EPA invites comments on all aspects of the proposal and its impacts
on the regulated small entities.

D. 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, EPA
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 in any
one year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA 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 EPA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
Administrator publishes with the final rule an explanation of why that
alternative was not adopted.
Before EPA establishes any regulatory requirements that may
significantly or uniquely affect small governments, including tribal
governments, it must have developed under section 203 of the UMRA a
small government agency plan. The plan must provide for notifying
potentially affected small governments, enabling officials of affected
small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant federal
intergovernmental mandates, and 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 would significantly or uniquely affect
small governments.
EPA has determined that this rule contains federal mandates that
may result in expenditures of more than $100 million to the private
sector in any single year. EPA believes that the proposal represents
the least costly, most cost-effective approach to achieve the air
quality goals of the rule. The costs and benefits associated with the
proposal are discussed above and in the Draft Regulatory Impact
Analysis, as required by the UMRA.

E. Executive Order 13132: Federalism

Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA 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, EPA 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 EPA
consults with State and local officials early in the process of
developing the proposed regulation. EPA 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 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, EPA 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 proposed rule does not have federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national

[[Page 28522]]

government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132.
Although Section 6 of Executive Order 13132 does not apply to this
rule, EPA did consult with representatives of various State and local
governments in developing this rule. EPA has also consulted
representatives from STAPPA/ALAPCO, which represents state and local
air pollution officials.
In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed rule
from State and local officials.

F. 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 proposed rule does not have tribal implications as specified
in Executive Order 13175. This rule will be implemented at the Federal
level and impose compliance costs only on engine manufacturers and ship
builders. Tribal governments will be affected only to the extent they
purchase and use equipment with regulated engines. Thus, Executive
Order 13175 does not apply to this rule. EPA specifically solicits
additional comment on this proposed rule from tribal officials.

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

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 EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, Section 5-501 of the Order directs the Agency 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 the Agency.
This proposed rule is not subject to the Executive Order because it
does not involve decisions on environmental health or safety risks that
may disproportionately affect children.
The effects of ozone and PM on children's health were addressed in
detail in EPA's rulemaking to establish the NAAQS for these pollutants,
and EPA is not revisiting those issues here. EPA believes, however,
that the emission reductions from the strategies proposed in this
rulemaking will further reduce air toxic emissions and the related
adverse impacts on children's health.

H. Executive Order 13211: Actions that Significantly Affect Energy
Supply, Distribution, or Use

This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy. If promulgated,
this proposed rule would decrease fuel production by less than 4000
barrels per day and would increase fuel production costs, distribution
costs, and prices by less than ten percent. The reader is referred to
Section V above for the estimated cost, price and production impacts of
the proposed fuel program.

I. National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C.
272 note) directs EPA to use voluntary consensus standards in its
regulatory activities unless doing so 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) that are developed or
adopted by voluntary consensus standards bodies. NTTAA directs EPA to
provide Congress, through OMB, explanations when the Agency decides not
to use available and applicable voluntary consensus standards.
This proposed rule involves technical standards. The following
paragraphs describe how we specify testing procedures for engines
subject to this proposal.
The International Organization for Standardization (ISO) has a
voluntary consensus standard that can be used to test nonroad diesel
engines. However, the current version of that standard (ISO 8178) is
applicable only for steady-state testing, not for transient testing. As
described in the Draft Regulatory Impact Analysis, transient testing is
an important part of the proposed emission-control program for these
engines. We are therefore not proposing to adopt the ISO procedures in
this rulemaking.
EPA welcomes comments on this aspect of the proposed rulemaking
and, specifically, invites the public to identify potentially
applicable voluntary consensus standards and to explain why such
standards should be used in this regulation.

J. Plain Language

This document follows the guidelines of the June 1, 1998 Executive
Memorandum on Plain Language in Government Writing. To read the text of
the regulations, it is also important to understand the organization of
the Code of Federal Regulations (CFR). The CFR uses the following
organizational names and conventions.
Title 40--Protection of the Environment
Chapter I--Environmental Protection Agency
Subchapter C--Air Programs. This contains parts 50 to 99, where the
Office of Air and Radiation has usually placed emission standards for
motor vehicle and nonroad engines.
Subchapter U--Air Programs Supplement. This contains parts 1000 to
1299, where we intend to place regulations for air programs in future
rulemakings.
Part 1039--Control of Emissions from New Nonroad Compression-
ignition Engines. Most of the provisions in this part apply only to
engine manufacturers.
Part 1065--General Test Procedures for Engine Testing. Provisions
of this part apply to anyone who tests engines to show that they meet
emission standards.
Part 1068--General Compliance Provisions for Engine Programs.
Provisions of this part apply to everyone.

Each part in the CFR has several subparts, sections, and
paragraphs. The following illustration shows how these fit together.

Part 1039

Subpart A

Sec. 1039.1
(a)
(b)
(1)
(2)
(i)
(ii)

[[Page 28523]]

A cross reference to Sec. 1039.1(b) in this illustration would
refer to the parent paragraph (b) and all its subordinate paragraphs. A
reference to ``Sec. 1039.1(b) introductory text'' would refer only to
the single, parent paragraph (b).

XI. Statutory Provisions and Legal Authority

Statutory authority for the engine controls proposed today can be
found in sections 213 (which specifically authorizes controls on
emissions from nonroad engines and vehicles), 203-209, 216 and 301 of
the CAA, 42 U.S.C. 7547, 7522, 7523, 7424, 7525, 7541, 7542, 7543, 7550
and 7601.
Statutory authority for the proposed fuel controls is found in
sections 211(c) and 211(i) of the CAA, which allow EPA to regulate
fuels that either contribute to air pollution which endangers public
health or welfare or which impair emission control equipment which is
in general use or has been in general use. 42 U.S.C. 7545 (c) and (i).
Additional support for the procedural and enforcement-related aspects
of the fuel controls in the proposed rule, including the record keeping
requirements, comes from sections 114(a) and 301(a) of the CAA. 42
U.S.C. sections 7414(a) and 7601(a).

List of Subjects

40 CFR Part 69

Environmental protection, Air pollution controls.

40 CFR Part 80

Fuel additives, Gasoline, Imports, Labeling, Motor vehicle
pollution, Penalties, Reporting and recordkeeping requirements.

40 CFR Part 89

Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research, Vessels,
Warranties.

40 CFR Part 1039

40 CFR Part 1065

Environmental protection, Administrative practice and procedure,
Incorporation by reference, Reporting and recordkeeping requirements,
Research.

40 CFR Part 1068

Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Motor vehicle pollution,
Penalties, Reporting and recordkeeping requirements, Warranties.

Dated: April 15, 2003.
Christine Todd Whitman,
Administrator.
For the reasons set forth in the preamble, we propose to amend
parts 69, 80, 89, 1039, 1065, and 1068 of title 40 of the Code of
Federal Regulations as follows:

PART 69--SPECIAL EXEMPTIONS FROM THE REQUIREMENTS OF THE CLEAN AIR
ACT

1. The authority citation for part 69 is revised to read as
follows:

Authority: 42 U.S.C. 7545(c), (g) and (i), and 7625-1.

Subpart E--[Amended]

2. Section 69.51 is revised to read as follows:

Sec. 69.51 Motor vehicle diesel fuel.

(a) Diesel fuel that is designated for use only in Alaska and is
used only in Alaska, is exempt from the sulfur standard of 40 CFR
80.29(a)(1) and the dye provisions of 40 CFR 80.29(a)(3) and 40 CFR
80.29(b) until the implementation dates of 40 CFR 80.500, provided
that:
(1) The fuel is segregated from nonexempt diesel fuel from the
point of such designation; and
(2) On each occasion that any person transfers custody or title to
the fuel, except when it is dispensed at a retail outlet or wholesale
purchaser-consumer facility, the transferor must provide to the
transferee a product transfer document stating:
This diesel fuel is for use only in Alaska. It is exempt from the
federal low sulfur standards applicable to highway diesel fuel and red
dye requirements applicable to non-highway diesel fuel only if it is
used in Alaska.
(b) Beginning on the implementation dates in 40 CFR 80.500, motor
vehicle diesel fuel that is designated for use in Alaska or is used in
Alaska, is subject to the applicable provisions of 40 CFR part 80,
Subpart I, except the language of product transfer documents under 40
CFR 80.590 and pump dispenser labels under 40 CFR 80.570(a) and (b) may
be modified, as applicable, to reflect the fact that certain motor
vehicle and non-motor vehicle diesel fuels or heating oil that would
otherwise be required to be segregated due to the red dye requirement
for non-motor vehicle fuels under Sec. Sec. 80.510(c) and 80.520(b)(2)
are permitted to be commingled, distributed and dispensed as one fuel,
due to the exemption from the red dye requirement under 40 CFR 69.52(b)
and (c), if they meet the same sulfur and cetane and/or aromatics
standards as the motor vehicle diesel fuel.
(c) The Governor of Alaska may submit for EPA approval, by April 1,
2002, a plan for implementing the motor vehicle sulfur standard in
Alaska as an alternative to the temporary compliance option provided
under Sec. Sec. 80.530-80.532. If EPA approves an alternative plan,
the provisions as approved by EPA under that plan shall apply to the
diesel fuel subject to this paragraph (b).
3. A new Sec. 69.52 is added to read as follows:

Sec. 69.52 Non-motor vehicle diesel fuel.

(a) Definitions. (1) Areas accessible by the Federal Aid Highway
System are the geographical areas of Alaska designated by the State of
Alaska as being accessible by the Federal Aid Highway System.
(2) Areas not accessible by the Federal Aid Highway System are all
other geographical areas of Alaska.
(3) Nonroad, locomotive, or marine diesel fuel shall have the same
meaning as provided in 40 CFR 80.2.
(b) Non-motor vehicle diesel fuel and heating oil that is used or
intended for use in areas of Alaska accessible by the Federal Aid
Highway System is subject to the provisions of 40 CFR Part 80, Subpart
I, except:
(1) The fuel is exempt from the red dye requirements, and the
presumptions associated with the red dye requirements, under Sec. Sec.
80.510(c) and 80.520(b)(2). Exempt fuel under this paragraph (b) must
be segregated from motor vehicle diesel fuel, unless it meets the same
sulfur standard and applicable cetane and/or aromatics standards as the
motor vehicle diesel fuel and it is not marked by yellow solvent 124
under Sec. Sec. 80.510 and 80.511.
(2) The language of product transfer documents under 40 CFR 80.590
and pump dispenser labels under 40 CFR 80.570--80.573 may be modified,
as applicable, to reflect the fact that the fuel is exempt from the red
dye requirement under paragraph (b) (1) of this section, and that the
exempt fuel that would otherwise be required to be segregated from
motor vehicle diesel fuel is permitted to be commingled, distributed
and dispensed with the motor vehicle fuel if it meets the same sulfur
standard and applicable cetane and/or aromatics standards as the motor
vehicle fuel and is not marked by

[[Page 28524]]

yellow solvent 124 under Sec. Sec. 80.510 and 80.511. Further, the
following language shall be added to the product transfer documents:
``Exempt from red dye requirement applicable to diesel fuel for non-
highway purposes if it is used only in Alaska.''
(3) For purposes of calculating a non-highway baseline percentage
under 40 CFR 80.533, Alaska refiners and importers:
(i) Must declare under 40 CFR 80.533(c)(i)(C), as applicable, that
the fuel was exempt under 69.52 from the dye provisions and did not
meet the definition of motor vehicle diesel fuel; and
(ii) As an alternative to the submission of batch data for the
baseline period under 40 CFR 80.533(c), may assume 30 percent for the
non-highway baseline percentage.
(c) Non-motor vehicle diesel fuel and heating oil that is
designated for use only in areas of Alaska not accessible by the
Federal Aid Highway System, or is used only in areas of Alaska not
accessible by the Federal Aid Highway System, is excluded from the
applicable provisions of 40 CFR Part 80, Subpart I; except that:
(1) All model year 2011 and later nonroad diesel engines and
equipment must be fueled only with diesel fuel that meets the
specifications of Sec. 80.510(b), and the product transfer document
requirements under 40 CFR 80.590 and pump dispenser labels under 40 CFR
80.570--80.573, except that, (i) The language of product transfer
documents under 40 CFR 80.590 and pump dispenser labels under 40 CFR
80.570--80.573 may be modified, as applicable, to reflect the fact that
the fuel is undyed and unmarked, and that diesel fuel for motor
vehicles, nonroad equipment, locomotive or marine engines, and heating
oil that meet the same sulfur, cetane and/or aromatics standards that
would otherwise be required to be segregated are permitted to be
commingled, distributed and dispensed as one fuel under this section
(c), and
(ii) The following language shall be added to the product transfer
documents: ``Exempt from red dye requirement applicable to diesel fuel
for non-highway purposes if it is used only in Alaska.''
(2) Diesel fuel that is exempt under this section, except when
paragraph (c)(1) of this section applies, must meet the requirements
for product transfer documents under 40 CFR 80.590, except the
following language shall be substituted for the language specified
under (a)(5) of that section:
(i) Until August 31, 2010:

This diesel fuel is for use only in those areas of Alaska not
accessible by the Federal Aid Highway System. It is exempt from the
federal sulfur standards applicable to highway, nonroad, locomotive
and marine diesel fuel, and the red dye requirements applicable to
non-highway diesel fuel. It may not be used in model year 2007 and
newer highway vehicles.

(ii) After August 31, 2010:

(3) Diesel fuel that is exempt under this section, except when
paragraph (c)(1) of this section applies, must meet the labeling
requirements under Sec. Sec. 80.570-80.573, except the following
language shall be substituted for the language on the labels:
(i) Until August 31, 2010:

HIGH-SULFUR DIESEL FUEL

(May Exceed 500 ppm)

WARNING

Federal Law Prohibits Use in Model Year 2007 and Newer Highway
Vehicles.
(ii) After August 31, 2010

HIGH-SULFUR DIESEL FUEL

(May Exceed 500 ppm)

WARNING

Federal Law Prohibits Use in Any Highway Vehicle or in Any Model
Year 2011 and Newer Nonroad Engine.

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

4. The authority citation for part 80 continues to read as follows:

Authority: 42 U.S.C. 7414, 7545 and 7601(a).

5. Section 80.2 is amended by revising paragraphs (f), (j), (o),
(x), (y), (nn), and (xx) and adding paragraphs (yy) through (ooo) to
read as follows:

Sec. 80.2 Definitions

* * * * *
(f) Previously certified diesel fuel or PCD means diesel fuel that
previously has been included by a refiner or importer in a batch for
purposes of complying with the standards and requirements of subpart I
of this part.
* * * * *
(j) Retail outlet means any establishment, whether stationary or
mobile, at which gasoline, diesel fuel, methanol, natural gas or
liquified petroleum gas is sold or offered for sale for use in motor
vehicles, nonroad engines, locomotive engines or marine engines.
* * * * *
(o) Wholesale purchaser-consumer means any organization that is an
ultimate consumer of gasoline, diesel fuel, methanol, natural gas, or
liquified petroleum gas and which purchases or obtains gasoline, diesel
fuel, natural gas or liquified petroleum gas from a supplier for use in
motor vehicles, nonroad engines, locomotive engines or marine engines
and, in the case of gasoline, diesel fuel, methanol or liquified
petroleum gas, receives delivery of that product into a storage tank of
at least 550-gallon capacity substantially under the control of that
organization.
* * * * *
(x) Diesel fuel means any fuel sold in any State or Territory of
the United States and suitable for use in diesel engines, and which is
commonly or commercially known or sold as number 1 or number 2 diesel
fuel, or any distillate or nondistillate fuel that has comparable
physical or chemical properties.
* * * * *
(nn) Batch of diesel fuel means a quantity of diesel fuel which is
homogeneous with regard to those properties that are specified for
motor vehicle, nonroad, locomotive or marine diesel fuel under subpart
I of this part.
* * * * *
(xx) Diesel fuel additive means any substance not composed solely
of carbon and/or hydrogen, or of diesel blendstocks, that is added,
intended for adding, used, or offered for use in motor vehicle diesel
fuel or NRLM diesel fuel subsequent to the production of diesel fuel by
processing crude oil from refinery processing units, or in diesel motor
vehicle or NRLM fuel systems.
(yy) [Reserved]
(zz) [Reserved]
(aaa) [Reserved]
(bbb) Nonroad (NR) diesel fuel means any diesel fuel, or any
distillate product, that is used, intended for use, or made available
for use, as a fuel in land based diesel engines subject to the
provisions of either 40 CFR part 89 or part 1039.
(ccc) Locomotive and marine (LM) diesel fuel means any diesel fuel,
or any distillate product, that is used, intended for use, or made
available for use, as a fuel in diesel engines subject to the
provisions of either 40 CFR part 92 or part 94, or marine diesel
engines subject to the provisions of part 89.

[[Page 28525]]

(ddd) Nonroad, locomotive, and marine (NRLM) diesel fuel means any
diesel fuel, or any distillate product, that is used, intended for use,
or made available for use, as a fuel in diesel engines subject to the
provisions of either 40 CFR part 89, part 92, part 94, or part 1039.
(eee) Heating oil means any number 1 or number 2 distillate (other
than jet fuel) that does not meet the definitions of motor vehicle,
nonroad, locomotive, marine or NRLM diesel fuel. For example, heating
oil can include fuel suitable for use in furnaces, boilers, stationary
diesel engines, and similar applications and which is commonly or
commercially known or sold as heating oil, fuel oil, and similar trade
names.
(fff) Diesel fuel blending stock, blendstock, or component means
any liquid compound which is blended with other liquid compounds to
produce diesel fuel.
(ggg) Transmix means an interface mixture in a product pipeline
that cannot practicably be added to either of the adjoining products
that produced the interface and still meet product specifications and
standards. For example, a mixture of gasoline and diesel fuel would
generally be considered transmix.
(hhh)-(iii) [Reserved]
(jjj) Fuel marker means the fuel marker required in heating oil
from 2007 through 2010 pursuant to Sec. 80.510(c)(1) and in locomotive
and marine diesel fuel from 2010 through 2014 pursuant to the
requirements of Sec. 80.510(c)(2).
(kkk) Solvent yellow 124 means N-ethyl-N-[2-[1-(2-
methylpropoxy)ethoxyl]-4-phenylazo]-benzeneamine.
(lll) Nonroad diesel engine means, for the purposes of subpart I of
this part only, a land-based nonroad diesel engine subject to the
provisions of either 40 CFR part 89 or part 1039.
(mmm) Locomotive diesel engine means, for purposes of subpart I of
this part only, a diesel engine subject to the provisions of 40 CFR
part 92.
(nnn) Marine diesel engine means, for purposes of subpart I of this
part only, a marine diesel engine subject to the provisions of either
40 CFR part 89 or 40 CFR part 94.
(ooo) Transmix processor means a refiner who produces diesel fuel
or gasoline from transmix.
6. Section 80.230 is amended by revising paragraphs (b)(1) and
(b)(2) to read as follows:

Sec. 80.230 Who is not eligible for the hardship provisions for small
refiners?

* * * * *
(b)(1)(i) Refiners who qualify as small under Sec. 80.225, and
subsequently employ more than 1,500 people as a result of merger with
or acquisition of or by another entity, or exceed the 155,000 bpcd
crude capacity limit as a result of merger with or acquisition of or by
another entity after January 1, 2004, are disqualified as small
refiners. If this occurs the refiner shall notify EPA in writing no
later than 20 days following this disqualifying event.
(ii) Except as provided under paragraph (b)(1)(iii) of this
section, any refiner whose status changes under this paragraph shall
meet the applicable standards of Sec. 80.195 within a period of up to
24 months of the disqualifying event for any of its refineries that
were previously subject to the small refiner standards of Sec.
80.240(a). However, such period shall not extend later than December
31, 2007, or, for refineries for which the Administrator has approved
an extension of the small refiner gasoline sulfur standards under Sec.
80.553(c), December 31, 2010.
(iii) A refiner may apply to EPA for additional time to comply with
the standards of Sec. 80.195 if more than 24 months would be required
for the necessary engineering, permitting, construction, and start-up
work to be completed. Such applications must include detailed technical
information supporting the need for additional time and a proposed
amount of additional time. EPA will base a decision to approve
additional time on information provided by the refiner and on other
relevant information. In no case will EPA extend the compliance date
beyond December 31, 2007, or, for refineries for which the
Administrator has approved an extension of the small refiner gasoline
sulfur standards under Sec. 80.553(c), December 31, 2010.
(2) Any refiner who qualifies as small under Sec. 80.225 may elect
to meet the standards under Sec. 80.195 by notifying EPA in writing no
later than November 15 prior to the year the change will occur. Any
refiner whose status changes under this paragraph shall meet the
standards under Sec. 80.195 beginning with the first averaging period
subsequent to the status change.
* * * * *
7. Section 80.240 is amended by adding paragraph (f) to read as
follows:

Sec. 80.240 What are the small refiner gasoline sulfur standards?

* * * * *
(f)(1) In the case of a refiner without approved small refiner
status under Sec. 80.235 who acquires a refinery from a refiner with
approved small refiner status, the applicable small refiner standards
under paragraph (a) of this section will apply to the acquired small
refinery for a period up to 24 months from the date of acquistion of
the refinery, but no later than December 31, 2007, or, for a refinery
for which the Administrator has approved an extension of the small
refinery gasoline sulfur standards under Sec. 80.553(c), December 31,
2010, after which time the standards of Sec. 80.195 shall apply to the
acquired refinery.
(2) A refiner may apply to EPA for additional time to comply with
the standards of Sec. 80.195 for the acquired refinery if more than 24
months would be required for the necessary engineering, permitting,
construction, and start-up work to be completed. Such applications must
include detailed technical information supporting the need for
additional time and a proposed amount of additional time. EPA will base
a decision to approve additional time on information provided by the
refiner and on other relevant information. In no case will EPA extend
the compliance date beyond December 31, 2007, or, for a refinery for
which the Administrator has approved an extension of the small refiner
gasoline sulfur standards under Sec. 80.553(c), December 31, 2010.
8. Section 80.500 is amended by revising the section heading to
read as follows:

Sec. 80.500 What are the implementation dates for the motor vehicle
diesel fuel sulfur control program?

9. Section 80.501 is amended by revising paragraph (a) to read as
follows:

Sec. 80.501 What diesel fuel is subject to the provisions of this
subpart?

(a) Included fuel and additives. The provisions of this subpart
apply to motor vehicle diesel fuel as defined in Sec. 80.2(y);
nonroad, locomotive, or marine diesel fuel as defined in Sec.
80.2(ddd); diesel fuel additives as defined in Sec. 80.2(xx), heating
oil as defined in Sec. 80.2(eee), and motor oil that is used as or
intended for use as fuel in diesel motor vehicles or nonroad,
locomotive, or marine engines or is blended with diesel fuel for use in
diesel motor vehicles or nonroad, locomotive, or marine engines at any
downstream location, as provided in Sec. 80.522.
* * * * *
10. A new Sec. 80.510 is added to read as follows:

Sec. 80.510 What are the standards and marker requirements for
nonroad, locomotive, and marine diesel fuels?

(a) Beginning June 1, 2007. Except as otherwise specifically
provided in this

[[Page 28526]]

subpart, all NRLM diesel fuel is subject to the following per-gallon
standards:
(1) Sulfur content. 500 parts per million (ppm) maximum.
(2) Cetane index and aromatic content.
(i) A minimum cetane index of 40; or
(ii) A maximum aromatic content of 35 volume percent.
(b) Beginning June 1, 2010. Except as otherwise specifically
provided in this subpart, all NR diesel fuel is subject to the
following per-gallon standards:
(1) Sulfur content. 15 parts per million (ppm) maximum.
(2) Cetane index and aromatic content.
(i) A minimum cetane index of 40; or
(ii) A maximum aromatic content of 35 volume percent.
(c) Marker provisions. (1) Beginning June 1, 2007, or June 1, 2006,
as applicable under Sec. 80.534, and prior to June 1, 2010:
(i) A refiner or importer shall add 6 milligrams per liter of
solvent yellow 124 to any heating oil.
(ii) All NRLM and motor vehicle diesel fuel produced by a refiner
or imported by an importer shall be free of solvent yellow 124.
(iii) Any diesel fuel that contains greater than or equal to 0.1
milligrams per liter of solvent yellow 124 shall be deemed to be
heating oil and shall be prohibited from use in any motor vehicle,
nonroad, locomotive, or marine diesel engine.
(iv) Any diesel fuel that contains less than 0.1 milligrams per
liter of solvent yellow 124 shall be considered motor vehicle diesel
fuel, NR, LM, or NRLM, as appropriate.
(2) Beginning June 1, 2010 and prior to June 1, 2014:
(i) A refiner or importer shall add 6 milligrams per liter of
solvent yellow 124 to any LM diesel fuel.
(ii) All NR produced by a refiner or imported by an importer shall
be free of solvent yellow 124.
(iii) Any diesel fuel which contains greater than or equal to 0.1
milligrams per liter of solvent yellow 124 shall be deemed to be LM
diesel and shall be prohibited from use in any motor vehicle or nonroad
diesel engine.
(iv) Any diesel fuel which contains less than 0.1 milligrams per
liter of solvent yellow 124 shall be considered other than locomotive
and marine diesel fuel and subject to the applicable requirements.
(d) Pursuant and subject to the provisions of Sec. Sec. 80.536,
80.554, 80.560, and 80.561:
(1) Until June 1, 2010, nonroad, locomotive, and marine NRLM diesel
fuel produced or imported in full compliance with the requirements of
those sections is exempt from the per-gallon sulfur content standard
and cetane or aromatics standard of paragraph (a) of this section;
(2) Until June 1, 2014, NR diesel fuel produced or imported in full
compliance with the requirements of those sections is exempt from the
per-gallon standards of paragraph (b) of this section but is subject to
a per-gallon standards for sulfur content, cetane, and aromatics of
paragraph (a) of this section.
11. A new Sec. 80.511 is added to read as follows:

Sec. 80.511 What are the per-gallon and marker requirements that
apply to nonroad, locomotive, and marine diesel fuels and heating oil
downstream of the refinery or importer?

(a) Applicable dates for marker requirements at downstream
locations. (1) From June 1, 2006 through May 31, 2010, all NRLM shall
contain less than 0.10 milligrams per liter of the marker solvent
yellow 124.
(2) Beginning June 1, 2010, all NR diesel fuel shall contain less
than 0.10 milligrams per liter of the marker solvent yellow 124.
(b) Applicable dates for per-gallon standards at downstream
locations. All NR, LM, and NRLM diesel fuel at any downstream location
shall comply with the same per-gallon sulfur content and cetane index
or aromatics standard (``per-gallon standards'' for purposes of this
section) of Sec. 80.510, except as follows:
(1)(i) The per-gallon standards of Sec. 80.510(a) shall apply
beginning August 1, 2007 for all downstream locations other than retail
outlets or wholesale purchaser-consumer facilities, and shall apply
starting October 1, 2007 for retail outlets and wholesale purchaser-
consumer facilities.
(ii) The per-gallon standards of of Sec. 80.510(b) shall apply
beginning July 15, 2010 for all downstream locations other than retail
outlets or wholesale purchaser-consumer facilities, and shall apply
starting September 1, 2010 for retail outlets and wholesale purchaser-
consumer facilities.
(2) Prior to July 15, 2010 at all downstream locations other than
retail outlets and wholesale purchaser-consumer facilities and prior to
September 1, 2010 at retail outlets and wholesale purchaser-consumer
facilities, the 500 ppm per-gallon standard of Sec. 80.510(a) shall
not apply at downstream locations once the diesel fuel has been dyed
red per Internal Revenue Service Code (26 U.S.C. 4082) for any fuel
that was produced or imported pursuant to the provisions of Sec.
80.536(f) or Sec. 80.554(a) or mixed with fuel produced pursuant to
these provisions.
(3) Beginning December 1, 2014, all NR diesel fuel at all
downstream locations shall comply with the sulfur standard of Sec.
80.510(b).
(c) Fuel redesignated at a downstream location. Subject to the
provisions of Sec. 80.527, nonroad, locomotive, and marine diesel fuel
may be redesignated at a downstream location to diesel fuel subject to
a different Sec. 80.510 per-gallon standard, high sulfur NRLM diesel
fuel, LM diesel fuel, or heating oil, provided that the PTD reflects
the standard of the new designation and:
(1) The new PTD complies with the appropriate PTD provisions of
Sec. 80.590;
(2) Fuel redesignated as high sulfur NRLM diesel fuel complies with
the requirements of Sec. 80.536(f)(1) (i) through (iv); and
(3) Fuel redesignated as 500 ppm NR diesel fuel after June 1, 2010
complies with the requirements of Sec. 80.536(g)(2) (i) through (iii).
12. A new Sec. 80.512 is added to read as follows:

Sec. 80.512 May an importer treat diesel fuel as blendstock?

An importer may exclude diesel fuel that it imports from its
calculations under the motor vehicle diesel fuel temporary compliance
option and credit calculations under Sec. Sec. 80.530-80.532, and from
its non-highway baseline and nonroad, locomotive and marine diesel fuel
credit calculations under Sec. Sec. 80.534-80.536, and instead the
importer may designate such diesel fuel as diesel fuel treated as
blendstock (DTAB), if all the following conditions are met:
(a) The DTAB must be included in all applicable baseline, credit
and compliance calculations for diesel fuel for a refinery operated by
the same company that is the importer. That company must meet all
refiner standards and requirements.
(b) The importer-company may not transfer title to the DTAB to
another party until the DTAB has been used to produce diesel fuel and
all refiner standards and requirements have been met for the diesel
fuel produced.
(c) The refinery at which the DTAB is used to produce diesel fuel
must be physically located at either the same terminal at which the
DTAB first arrives in the U.S., the import facility, or at a facility
to which the DTAB is directly transported from the import facility.
(d) The DTAB must be completely segregated from any other diesel
fuel,

[[Continued on page 28527]]

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Control of Emissions of Air Pollution From Nonroad Diesel Engines and Fuel [[pp. 28477-28526]]

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