[Federal Register Volume 59, Number 55 (Tuesday, March 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6669]


[[Page Unknown]]

[Federal Register: March 22, 1994]


_______________________________________________________________________

Part VII





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 80




State of Alaska Petition for Exemption From Diesel Fuel Sulfur 
Requirement; Final Rule
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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-4853-2]

 
State of Alaska Petition for Exemption From Diesel Fuel Sulfur 
Requirement

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of final decision.

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SUMMARY: On February 12, 1993, the Governor of Alaska submitted a 
petition requesting that the State of Alaska be considered for certain 
exemptions from the diesel fuel sulfur requirements of section 211(i) 
of the Clean Air Act, as amended. Alaska did not request an exemption 
from the minimum cetane requirement for motor vehicle diesel fuel as 
set forth in section 211(i) of the Act.
    Today's final decision grants the exemptions requested by the State 
of Alaska from the diesel fuel sulfur content requirement of section 
211(i) of the Act and related provisions in section 211(g). The 
exemptions are based on the finding that it is unreasonable to require 
persons in Alaska who are located in remote communities not served by 
the Federal Aid Highway System (FAHS), and, at this time, for persons 
served by the FAHS in Alaska, to comply with the sulfur requirement of 
section 211(i) and those related portions of EPA's motor vehicle diesel 
fuel regulations, 40 CFR part 80, due to Alaska's unique geographical, 
meteorological and economic factors, as well as significant local 
factors.

DATES: The exemptions are effective on March 22, 1994, pursuant to 5 
U.S.C. 553(d)(1), which allows publication of a rule less than 30 days 
before its effective date, where, as here, such rule grants or 
recognizes an exemption or relieves a restriction.

ADDRESSES: Copies of information relevant to this final decision notice 
are available for inspection in public docket A-93-14 at the Air Docket 
(LE-131) of the EPA, room M-1500, 401 M Street SW., Washington, DC 
20460, (202) 260-7548, between the hours of 8:30 a.m. to noon and 1:30 
p.m. to 3:30 p.m. on Monday through Friday. A duplicate public docket, 
AK1-1993-1, has been established at U.S. EPA Region X, 1200 Sixth 
Avenue (AT-082), Seattle, WA 98101, (206) 553-0180, and is available 
between the hours of 8 a.m. to 11:30 a.m. and 12:30 p.m. to 4:30 p.m. 
on Monday through Friday. As provided in 40 CFR part 2, a reasonable 
fee may be charged for copying services.

FOR FURTHER INFORMATION CONTACT: Ms. Whitney Trulove-Cranor, 
Environmental Protection Specialist, Field Operations and Support 
Division (6406J), 401 M Street SW., Washington, DC 20460, (202) 233-
9036.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 211(i)(1) of the Act makes it unlawful, effective October 
1, 1993, for any person to manufacture, sell, supply, offer for sale or 
supply, dispense, transport, or introduce into commerce motor vehicle 
diesel fuel which contains a concentration of sulfur in excess of 0.05 
percent (by weight), or which fails to meet a cetane index minimum of 
40. Section 211(i)(3) establishes the sulfur content for fuel used in 
the certification of heavy-duty diesel vehicles and engines. Section 
211(i)(4) provides that the States of Alaska and Hawaii may seek 
exemption from the requirements of this subsection in the same manner 
as provided in section 3251 of the Act, and requires the 
Administrator to take final action on any petition filed under this 
section, which seeks exemption from the requirements of section 211(i), 
within 12 months of the date of such petition.
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    \1\Section 211(i)(4) mistakenly refers to exemptions under 
section 324 of the Act (``Vapor Recovery for Small Business 
Marketers of Petroleum Products''), while the proper reference is to 
section 325. Congress clearly intended to refer to section 325, as 
shown by the language used in section 211(i)(4), and the United 
States Code citation used in section 806 of the Clean Air Act 
Amendments of 1990, Public Law No. 101-549. Section 806 of the 
Amendments, which added paragraph i to section 211 of the Act, used 
42 U.S.C. 7625-1 as the United States Code designation for section 
324. This is the proper designation for section 325 of the Act. Also 
see 136 Cong. Rec. S17236 (daily ed. October 26, 1990) (statement of 
Sen. Murkowski).
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    Section 325 of the Act provides that upon application by the 
Governor of Guam, American Samoa, the Virgin Islands, or the 
Commonwealth of the Northern Mariana Islands, the Administrator may 
exempt any person or source in such territory from various requirements 
of the Act, including section 211(i). An exemption may be granted if 
the Administrator finds that compliance with such requirements is not 
feasible or is unreasonable due to unique geographical, meteorological, 
or economic factors of such territory, or other local factors as the 
Administrator deems significant.

II. Petition for Exemption

    On February 12, 1993, the Honorable Walter J. Hickel, Governor of 
the State of Alaska, submitted a petition to exempt motor vehicle 
diesel fuel in Alaska from all of the requirements of section 211(i) 
except the minimum cetane index requirement of 40. The petition 
requested a short-term exemption for areas accessible by the FAHS and a 
permanent exemption for areas not accessible by the FAHS. The short-
term exemption would exempt motor vehicle diesel fuel manufactured for 
sale, sold, supplied, or transported within the FAHS from meeting the 
sulfur content requirement specified in section 211(i) until October 1, 
1996. Those areas of Alaska not reachable by the FAHS would be 
permanently exempt from the sulfur content requirement of section 
211(i). The petition was based on geographical, meteorological, air 
quality, and economic factors unique to the State of Alaska.
    The following discussion summarizes the contents of the petition.

A. Geography and Location of the State of Alaska

    At 586,000 square miles in area, Alaska is about one-fifth as large 
as the combined area of the lower 48 states. Because of its extreme 
northern location, rugged terrain and sparse population, no other state 
relies on barges to deliver petroleum products to the extent Alaska 
does. Only 35% of Alaska's communities are served by the FAHS which is 
a combination of road and marine highways. Communities accessible by 
the FAHS account for 69% of the total State population. The remaining 
65% of Alaska's communities are served by barge lines and are referred 
to as ``remote'' communities. Although barge lines can directly access 
some remote communities, those communities that are not located on a 
navigable river are served by a two-stage delivery system: over water 
by barge line and then over land to reach the community. Remote 
communities with populations over 100 account for 13% of the total 
State population. The remaining 18% of the population consists of 
remote communities with populations less than 100 persons. In 1990, the 
State's total population was only 550,043.
    Because of the State's high latitude, it experiences seasonal 
extremes in the amount of daily sunlight, which in turn affects the 
cost of construction in Alaska. For example, the city of Anchorage, 
located at 61 deg. latitude, receives approximately 19 hours of 
sunlight on a summer day, and approximately 5.5 hours of sunlight on a 
winter day; whereas, the community of Point Barrow, located at 71 deg. 
latitude, receives approximately 24 hours of sunlight on a summer day, 
and approximately zero hours of sunlight on a winter day. Alaska's 
petition states that this limitation on the amount of winter-time 
daylight is one reason why construction costs in the State are high 
compared to the lower 48 states.
    According to the petition, Alaska's extreme northern location 
places it in a unique position to fuel transcontinental cargo flights 
between Europe, Asia, and North America. Roughly 75% of all air transit 
freight between Europe and Asia lands in Anchorage, as does that 
between Asia and the United States. The result is a large market for 
jet-A fuel produced by local refiners, which decreases the importance 
of highway diesel fuel to these refiners. Based on State tax revenue 
receipts and estimates by Alaska's refiners, diesel fuel consumption 
for highway use represents roughly 5% of total distillate fuel 
consumption.

B. Climate, Meteorology and Air Quality

    Alaska's climate is colder than that of the other 48 states. The 
extremely low temperatures experienced in Alaska during the winter 
impose a unique fuel composition requirement for diesel fuel in Alaska, 
known as a ``cloud point'' specification.2 Although all highway 
diesel fuels, which are governed by the American Society of Testing and 
Materials (ASTM) product specifications, are required to meet a cloud 
point specification, the cloud point varies from one area to another 
since it is based on the tenth percentile minimum ambient temperature 
for the area in which the fuel will be used.3 Alaska has the most 
severe cloud point specification for diesel fuel in the U.S. at -56 
deg.F. For this reason, all diesel fuel used in the State of Alaska is 
produced by refiners located in Alaska. Jet-A kerosene meets the same 
cloud point specification as No. 1 diesel fuel (which is marketed 
primarily during the winter as opposed to No. 2 diesel fuel which is 
marketed primarily in the summer) and is commonly mixed with or used as 
a substitute for No. 1 diesel fuel. However, because jet-A kerosene is 
allowed a maximum sulfur content of 0.3%, the new diesel fuel sulfur 
requirement of 0.05% would prohibit using jet-A and No. 1 diesel fuel 
interchangeably.
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    \2\The cloud point defines the temperature at which a cloud or 
haze of wax crystals appears in the oil. Its purpose is to ensure a 
minimum temperature above which fuel lines and other engine parts 
are not plugged by solids that form in the fuel.
    \3\Annual Book of ASTM Standards, Designation D975-89 ``Standard 
Specification for Diesel Fuel Oils,'' Current edition approved March 
31, 1989.
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    Ice formation during the winter months restricts fuel delivery to 
remote areas served by barge lines. Therefore, fuel is generally only 
delivered to these areas between the months of May and October. This 
further restricts the ability of fuel distributors in Alaska to supply 
multiple grades of petroleum products to remote communities.
    The only violations of ambient air quality standards in Alaska are 
for carbon monoxide (CO) and particulate matter (PM10). CO 
violations have only been recorded in the State's two largest 
communities: Anchorage and Fairbanks. PM10 violations have only 
been recorded in two rural communities, Mendenhall Valley of Juneau and 
Eagle River, a community within the boundaries of Anchorage. The most 
recent PM10 inventories for these two communities show that these 
violations are the result of fugitive dust from paved and unpaved 
roads, and that motor vehicle exhaust is responsible for less than one 
percent of the overall PM10 being emitted within the borders of 
each of these areas.4 Moreover, Eagle River has not had a 
violation of the PM10 standard since 1986 and plans to apply for a 
change in its attainment status. Mendenhall Valley has plans for 
extensive road paving to be implemented to control road dust. The 
sulfur content of diesel fuel is not expected to have any significant 
impact on ambient PM10 or CO levels in any of these areas because 
of the minimal contribution by motor vehicles to PM10 in these 
areas and because diesel fuel sulfur content has no direct effect on 
vehicle CO emissions.5
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    \4\``PM10 Emission Inventories for the Mendenhall Valley 
and Eagle River Areas,'' prepared for the U.S. Environmental 
Protection Agency, Region X, by Engineering-Science, February 1988.
    \5\Some reduction of vehicle CO and hydrocarbon (HC) emissions 
may occur as an indirect result of the use of aftertreatment devices 
which may be used by engine manufacturers to comply with the more 
stringent 1994 particulate standards (55 FR 34121, August 21, 1990). 
Although it is possible that the use of high-sulfur diesel fuel will 
have an adverse effect on the function of such aftertreatment 
devices, negating the benefit of CO reduction, engine out emissions 
of CO will not be affected by the use of high-sulfur diesel. 
Furthermore, diesel powered vehicles are inherently low CO emitters 
and do not contribute significantly to ambient CO levels.
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C. Economic Factors

    Alaska states in its petition that local refineries have limited 
refining capabilities. Demand for jet-A kerosene, which is sold as No. 
1 diesel fuel because it meets Alaska's winter cloud point 
specification, accounts for almost fifty percent (50%) of distillate 
consumption and dominates refiner planning. A survey of the refiners in 
Alaska, conducted by the State, revealed that it would cost over 
$100,000,000 in construction and process modifications to refine Alaska 
North Slope (ANS) crude into 0.05% sulfur diesel fuel to meet the 
demand for highway diesel fuel. Among the reasons for the high cost 
include the construction costs in Alaska, which range from 25% to 65% 
higher than costs in the lower 48 states, and the cost of modifying the 
fuel production process itself. The petition states that because there 
is such a small demand for highway diesel fuel in Alaska, the costs 
that would be incurred to comply with section 211(i)'s sulfur 
requirement are excessive; and without an exemption from having to meet 
this requirement, most refiners would choose to exit the market for 
highway diesel fuel. Although one refiner has discovered a low-cost 
approach to producing 0.05% sulfur diesel fuel, information provided to 
EPA subsequent to the receipt of this petition revealed that this fuel 
is a custom Arctic Heating Fuel that has its own unique specifications 
and does not meet all ASTM standards for highway diesel fuels such as 
No. 1 and No. 2 diesel. Therefore, this low-sulfur diesel fuel would 
not be marketed for commercial use, but only for internal use in fleet 
vehicles on the North Slope.6
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    \6\Letter from Robert G. Kratsas, Manager, Environment, Health 
and Safety, ARCO Alaska, Inc. to Commissioner John A. Sandor of the 
Alaska Department of Environmental Conservation (DEC), March 10, 
1992, and letter from George R. Snodgrass, Staff Engineer, Air 
Sciences, ARCO Alaska, Inc. to Ronald G. King of the Alaska DEC, 
April 9, 1993.
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    Currently, barge shipments of diesel fuel to remote communities do 
not require segregation of diesel fuel used in motor vehicles from 
diesel fuel used for off-highway purposes. It would be costly to create 
separate storage facilities and tankage for transportation of low-
sulfur highway diesel fuel to remote communities, where motor vehicle 
diesel fuel consumption represents less than 5% of total distillate 
consumption. Since the majority of diesel fuel consumption in these 
communities is for off-highway purposes (generation of electricity, 
heat, non-road vehicles) the cost associated with converting the entire 
diesel fuel supply to low-sulfur diesel would be prohibitive, 
increasing the overall cost of living in these communities. Currently, 
it is not uncommon for the cost of electricity to exceed 50 cents/kwh 
in remote communities, as opposed to the cost of electricity for 
communities on the FAHS, which ranges from 6.6 cents/kwh to 11.25 
cents/kwh. In comparison, the national average cost of electricity in 
1992 was 6.8 cents/kwh for all sources (i.e., residential, commercial, 
industrial, and other).7
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    \7\``Monthly Energy Review,'' Energy Information Administration, 
U.S. Department of Energy, March 1993.
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    The Alaska Department of Environmental Conservation (ADEC) has 
estimated that refiners would have to charge an additional 28 to 46 
cents per gallon of highway diesel fuel to recover the cost of the 
investment to produce low-sulfur diesel fuel, compared to an estimated 
3 to 5 cents per gallon increase for the lower 48 states. Currently, 
the price of diesel fuel marketed on the FAHS in Alaska ranges from 
$1.09 to $1.21 per gallon. Prices of diesel fuel in remote communities 
currently range from $1.45 to $2.65 per gallon.

D. Environmental Factors

    Information provided to EPA by the State of Alaska subsequent to 
receipt of the petition indicates that the current sulfur content for 
diesel fuel in Alaska averages approximately 0.1% by weight for nine 
months of the year, and 0.25% by weight for the remaining three months 
of the year. Thus, the current level of sulfur in motor vehicle diesel 
fuel used in Alaska is well below the current ASTM sulfur specification 
of 0.5% (by weight).8
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    \8\American Society for Testing and Materials Standard D975.
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III. Public Participation

    Following the August 27, 1993 publication of EPA's proposed 
decision to grant the exemptions requested by Alaska, there was a 
thirty day comment period, during which interested parties could 
request a hearing or submit comments on the proposal. The Agency 
received no request for a hearing. Comments in support of EPA's 
proposal to grant the exemptions were received from Kodiak Oil Sales, 
Inc., BP Exploration (Alaska), Inc., and BP Pipeline (Alaska), Inc. The 
Engine Manufacturers Association (EMA) submitted comments expressing 
concern about engine manufacturer's warranty and recall liability for 
diesel vehicles in Alaska fueled with high sulfur diesel fuel. The 
Alaska Department of Environmental Conservation (DEC) submitted a 
request to the Agency that this final decision notice address the issue 
of dyeing diesel fuel not intended for use in motor vehicles. In light 
of their petition for exemption from the diesel sulfur requirements, 
the Alaska DEC requested a waiver from having to dye noncomplying 
diesel fuel.

Manufacturer's Emissions Warranty

    The Agency acknowledges that vehicles which were certified with low 
sulfur diesel fuel may be unable to meet federal emissions standards if 
they are fueled with high sulfur diesel fuel. However, EPA believes 
that waiving engine manufacturers' liability from the general warranty 
provisions of section 207 is not necessary to protect manufacturers 
from unreasonable warranty recoveries by purchasers. The emission 
defect warranty requirements under section 207(a) of the Act require an 
engine manufacturer to warrant that the engine shall conform at the 
time of sale to applicable emission regulations and that the engine is 
free from defects which cause the engine to fail to conform with 
applicable regulations for its useful life. In practice, this warranty 
is applicable to a specific list of emissions and emissions related 
engine components.
    It has been consistent EPA policy that misuse and/or improper 
maintenance of a vehicle or engine by the purchaser, including 
misfueling, may create a reasonable basis for denying warranty coverage 
for the specific emissions and emissions related engine components 
affected by this misuse. In this case, while use of fuel exempted from 
the sulfur content limitation cannot be considered ``misfueling,'' it 
will have the same adverse effect on emissions control components. 
Thus, EPA believes that where the use of high sulfur diesel fuel will 
have an adverse impact on the emissions durability of specific engine 
parts or systems, such as a trap oxidizer or other aftertreatment 
devices, the manufacturer will have a reasonable basis for denying 
warranty coverage on that part or other related parts. However, as has 
consistently been EPA's policy, those components not adversely affected 
by the use of high sulfur diesel should continue to receive full 
emissions warranty coverage.

Recall Liability

    Heavy-duty engine manufacturers are responsible for recalling and 
repairing engines that do not comply with emission requirements for 
their useful lives. EPA tests engine classes to determine whether 
engines comply with applicable emission standards when properly used 
and maintained. Under section 207(c), if a substantial number of 
engines in a specific engine class do not comply when tested, that 
entire class can be recalled. If a situation arose in which an engine 
fueled with exempted diesel fuel were included in an EPA in-use 
compliance test program, EPA would determine, on a case-by-case basis, 
if the noncompliance were the result of the use of the exempted diesel 
fuel. If it were determined that the exempted fuel was the cause of the 
engine's failure to meet the applicable emission standards, that fact 
would be considered before seeking a recall of the class. Given the 
fact that high sulfur diesel fuel will be used in vehicles in Alaska 
until at least October 1, 1996, the Agency does not intend to use test 
results (emissions levels) from these vehicles to show noncompliance by 
those engines for the purpose of recalling an engine class.9 In 
cases in which it was determined that the overall class was subject to 
recall, however, individual engines would not be excluded from repair 
on the basis of the fuel used. Manufacturers are responsible for 
repairing any engine in the recalled class regardless of its history of 
tampering or malmaintenance. The situation that would occur in Alaska 
is no different and, thus, the manufacturers should remain liable for 
performing recall repairs on these engines when required.
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    \9\If the Agency determines that areas on the highway system 
will have to comply with the low sulfur diesel fuel requirements 
beginning October 1, 1996, any motor vehicle introduced into 
commerce on or after that date, which is registered in an area 
located on the highway system, would be subject to using low sulfur 
diesel fuel. These vehicles would also be subject to EPA's in-use 
compliance test program. If such vehicles are found to be in 
noncompliance with emissions standards, EPA may use the test results 
as a basis for determining the recall of an engine class.
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Dyeing Noncomplying Diesel Fuel

    The motor vehicle diesel fuel regulations, codified at 40 CFR 
80.29, provide that any diesel fuel which does not show visible 
evidence of the dye 1,4 dialkylamino-anthraquinone shall be considered 
to be available for use in motor vehicles, and subject to the sulfur 
and cetane index requirements. Although today's action exempts diesel 
fuel in Alaska from the sulfur requirement until at least October 1, 
1996, it does not exempt diesel fuel in Alaska from the minimum cetane 
requirement.
    The Alaska DEC and various refiners in Alaska have indicated to EPA 
that all diesel fuel manufactured for sale and marketed in Alaska, for 
use in both motor vehicle and nonroad applications, meets the minimum 
cetane requirement for motor vehicle diesel fuel. Therefore, dyeing 
diesel fuel to be used in nonroad vehicles will be unnecessary in 
Alaska as long as it has a minimum cetane index of 40.10 However, 
in the event that high sulfur diesel fuel is exported from Alaska to 
the lower-48 states, it would be necessary for the importer facility to 
add dye to the noncomplying fuel before it is introduced into commerce. 
At this time, EPA will not require high-sulfur diesel fuel to be dyed 
if it is being exported from the lower-48 states to Alaska. However, 
the product must be clearly marked as diesel fuel for export only that 
does not comply with the sulfur standard for motor vehicle diesel fuel, 
and supporting documentation substantiates that it is for export to 
Alaska only.
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    \1\0If EPA determines that areas located on the highway system 
will be required to use low sulfur diesel fuel beginning October 1, 
1996, diesel fuel manufactured for sale and marketed on the highway 
system that does not have visible evidence of the dye will be 
presumed to be intended for use in motor vehicles and must be in 
compliance with the maximum 0.05% sulfur standard, as well as the 
minimum cetane standard of 40.
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IV. Final Decision

    Presently, refiners in the State of Alaska are the only source of 
highway diesel fuels meeting the arctic cloud point specification. Such 
fuels are not currently available in the lower 48 states. Given the 
petroleum refining, storage and distribution infrastructure in the 
State of Alaska, in-state refiners and residents of remote communities 
would be most affected if required to comply with the section 211(i) 
diesel fuel sulfur content requirement.
    In complying with the section 211(i) sulfur requirement, refiners 
have the option to invest in the process modifications necessary to 
produce low-sulfur diesel fuel for use in motor vehicles, or not invest 
in the process modifications and only supply diesel fuel for off-
highway purposes (e.g., heating, generation of electricity, fuel for 
non-road vehicles). Most of Alaska's refiners indicated that given the 
minuscule size of the highway diesel fuel market in Alaska, they could 
not justify the investments required to produce low-sulfur diesel fuel 
and would choose to exit the market for highway diesel fuel if this 
exemption is not granted. Although one refiner appears to have 
discovered a low-cost approach to producing a diesel fuel that meets 
the section 211(i) sulfur requirement, this fuel does not meet ASTM 
viscosity specifications for No. 1 diesel. Another limitation to this 
low-cost approach is that the process modifications involved in 
producing low-sulfur diesel fuel would result in a substantial decrease 
in yield. The refiner indicated to EPA that even if it could produce a 
commercial grade low-sulfur diesel fuel, it would primarily be for 
internal use only, as the refiner does not have the capacity to supply 
Alaska's highway diesel fuel market. In addition, the cost and 
logistics of distribution to areas on the highway system would also be 
prohibitive due to the location of the refineries.11
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    \1\1Letter from George R. Snodgrass, Staff Engineer, Air 
Sciences, ARCO Alaska, Inc., to Ronald G. King of the Alaska DEC, 
April 9, 1993.
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    Because compliance with the low-sulfur requirement would, at this 
time, create a severe economic burden for refiners, distributors and 
consumers of diesel fuel in the State of Alaska, EPA grants a three 
year exemption from this requirement to communities served by the 
Federal Aid Highway System until October 1, 1996.12 This economic 
burden is created by unique meteorological conditions in Alaska and 
unique distillate product demands as outlined above. As a result of 
these conditions, low-sulfur diesel fuel was not available for 
commercial use in Alaska by October 1, 1993, when the section 211(i) 
requirement went into effect.
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    \1\2EPA will consider a community to be served by the Federal 
Aid Highway System if it can be reached by an on-road vehicle from 
the contiguous road system or by barge on the marine highway system. 
All other communities not accessible by the contiguous road or 
marine highway system will be considered remote communities.
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    EPA believes that a three year exemption from the diesel fuel 
sulfur content requirement is a reasonable time period for areas served 
by the FAHS. During the exemption period, the State of Alaska plans to 
establish a Task Force (in which an EPA representative will 
participate) to evaluate further the availability of arctic-grade, low-
sulfur diesel fuel from out-of-state refiners, the costs associated 
with importing the fuel, and the costs of storing and distributing the 
fuel to areas on the highway system. If the Task Force's evaluation 
provides adequate proof that it is not economically feasible to produce 
or import an arctic-grade diesel fuel that meets the 0.05% sulfur 
requirement, and that it would not be feasible for EPA to impose an 
intermediate sulfur content standard for motor vehicle diesel fuel used 
in areas served by the highway system, and no other alternatives are 
discovered, the State will have adequate time to prepare and submit 
another exemption request. If a new exemption request is submitted, EPA 
will publish another notice in the Federal Register and re-examine the 
issue of an exemption.
    Although the State's largest communities, Fairbanks and Anchorage, 
are CO nonattainment areas, granting this exemption is not expected to 
have any significant impact on ambient CO levels because the sulfur 
content in diesel fuels does not directly affect CO emissions as 
explained above. Two rural communities are designated nonattainment 
areas with respect to PM10; however, motor vehicle exhaust is 
responsible for less than one percent of the overall PM10 being 
emitted within the borders of these two areas, where the PM10 
violations are attributable to fugitive dust. Consequently, EPA 
believes that granting a three year exemption to communities served by 
the highway system will not have any significant impact on the 
attainment prospects of either of these communities.
    Whether low-sulfur diesel fuel is produced in Alaska or imported 
from the lower 48 states or Canada,\13\ there remains the problem of 
segregating the two fuels for transport to communities located off the 
highway system and storage of the fuels thereafter. Fuel is delivered 
to these communities by barge lines and off-road transport only between 
the months of May and October due to ice formation which blocks 
waterways leading to these communities for much of the remainder of the 
year. The fuel supplied to these communities during the summer months 
must last through the winter and spring months until the ice has melted 
and resupply can occur. Additionally, the existing fuel storage 
facilities limit the number of fuel types that can be stored for use in 
these communities. The cost of constructing separate storage facilities 
and providing separate tanks for transport of low-sulfur diesel fuel to 
remote communities is prohibitive. This is largely due to the high cost 
of construction in Alaska and the constraints inherent in distributing 
fuel to Alaska's remote communities as outlined above. One alternative 
to constructing separate storage facilities is to supply only low-
sulfur diesel fuel to these communities. However, the result would 
require use of the higher cost, low-sulfur diesel fuel for all diesel 
fuel needs. This would greatly increase the already high cost of living 
in these communities since approximately 95% of distillate consumption 
in these communities is for nonroad uses, such as operating diesel 
powered electrical generators.
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    \13\Although low-sulfur diesel fuel is not currently available 
in Canada, Environment Canada is working with diesel fuel refiners 
in Canada and manufacturers of diesel vehicles to create Memoranda 
of Understanding, whereby 0.05% sulfur diesel fuel, which also meets 
the cetane index requirement of 40, is expected to be available in 
some parts of Canada by October 1, 1994. The availability and cost 
of low-sulfur diesel fuel from Canada will be a consideration in 
future exemption requests, if any, from Alaska for areas served by 
the FAHS.
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    Given that highway diesel fuel consumption represents less than 5% 
of total distillate consumption in remote communities, that many 
villages have a total of only one or two vehicles, and that these 
communities are currently in attainment with all air quality standards, 
EPA believes that the cost of using low-sulfur diesel fuel in remote 
communities far outweighs the benefits. Because the Agency believes 
that requiring remote communities to comply with the section 211(i) 
sulfur requirement would create a severe economic burden on 
distributors of diesel fuel to these communities and the residents of 
these communities themselves, and because the Agency believes the 
unique conditions faced by remote communities are not likely to change 
in the future, the Agency has decided to permanently exempt communities 
that are not served by the contiguous road or marine highway system 
from the 0.05% (by weight) sulfur requirement of section 211(i) of the 
Act.
    For the same reasons, the Agency is also exempting Alaska from 
those provisions of section 211(g)(2) of the Act that prohibit the 
fueling of motor vehicles with high-sulfur diesel fuel.\14\ Although 
Alaska did not explicitly request an exemption from this provision in 
its petition, it is reasonable to read the petition as including such a 
request. Sections 211(g) and 211(i) both restrict the use of high-
sulfur motor vehicle diesel fuel, and exempting Alaska from section 
211(i)'s sulfur content requirement but not from section 211(g)'s 
related prohibition would provide no relief from the problems Alaska 
presented in their petition. Therefore, areas in Alaska served by the 
FAHS are exempt from the related 211(g)(2) provisions until October 1, 
1996, and remote areas, not accessible by the FAHS, are permanently 
exempt from these related provisions.
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    \14\This subsection makes it unlawful for any person to 
introduce or cause or allow the introduction into any motor vehicle 
of diesel fuel which they know or should know contains a 
concentration of sulfur in excess of 0.05 percent (by weight). It 
would clearly be impossible to hold persons liable for misfueling 
with diesel fuel with a sulfur content higher than 0.05%, when such 
fuel is permitted to be sold or dispensed for use in motor vehicles. 
The exemptions granted today would include exemptions from this 
prohibition, but not include the prohibitions in Sec. 211(g)(2) 
relating to the minimum cetane index or alternative aromatic levels.
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    The exemptions granted today will apply to all persons in Alaska 
subject to the prohibitions of sections 211(i) and (g) of the Act and 
the diesel fuel requirements in 40 CFR part 80. The exemptions will 
apply to all persons who manufacture, sell, supply, offer for sale or 
supply, dispense, transport, or introduce into commerce motor vehicle 
diesel fuel, or who introduce diesel fuel into motor vehicles, in 
Alaska. However, today's action does not exempt Alaska from the minimum 
cetane or alternative aromatic content requirement for motor vehicle 
diesel fuel. Consequently, diesel fuel intended for use in motor 
vehicles remains subject to the cetane or alternative aromatic content 
requirement as explained in the ``Public Participation'' section above.
    EPA recognizes that the primary purpose of reducing the sulfur 
content of diesel fuel is to reduce vehicle particulate emissions. 
Additional benefits cited in the diesel final rule (55 FR 34120, August 
21, 1990) include a reduction in sulfur dioxide (SO2) emissions 
and the ability to use exhaust aftertreatment devices on diesel fueled 
vehicles, which would result in some reduction of HC and CO exhaust 
emissions. Despite the possibility that the use of high-sulfur diesel 
fuel may have an adverse effect on the function of aftertreatment 
devices, or cause an increase in particulate sulfate emissions in 
diesel vehicles equipped with such devices, any increase in sulfate 
particulate emissions would likely be insignificant in Alaska since 
current motor vehicle contributions to PM10 emissions are minimal, 
as previously discussed in section II, part B. Also, the lower sulfur 
requirement for motor vehicle diesel fuel will have no impact on the 
attainment prospects of Fairbanks and Anchorage with respect to CO, 
since reducing sulfur content has no direct affect on CO emissions, 
also discussed in section II, part B. Since Alaska is currently in 
attainment with HC and SO2 air quality standards, there is 
currently no concern for reducing HC or SO2 emissions. 
Additionally, the extent to which exhaust aftertreatment devices will 
be used on diesel vehicles, and the extent to which damage would occur 
to these devices as a result of using high-sulfur diesel fuel, is 
relatively uncertain at this time. Given the limited number of vehicles 
that may be affected, EPA plans to handle warranty and recall liability 
issues on a case-by-case basis.
    The Agency recognizes that granting these exemptions means Alaska 
will forego the potential benefits to its air quality resulting from 
the use of low-sulfur diesel fuel. The Agency believes that the 
potential benefits to Alaska's air quality are minimal and far 
outweighed by the increased costs to remote communities, and at this 
time, to communities served by the highway system. For this reason, EPA 
grants the requested exemptions.

V. Statutory Authority

    Authority for the final action in this notice is in sections 
211(i)(4) (42 U.S.C. 7545(i)(4)) and 325(a)(1) (42 U.S.C. 7625-1(a)(1)) 
of the Clean Air Act, as amended.

VI. Administrative Designation and Regulatory Analysis

    Under Executive Order (E.O.) 12866, the Agency must judge whether a 
regulation is a ``significant regulatory action'' and thus subject to 
OMB review and the requirements of the Executive Order. The decision 
announced today alleviates any potential adverse economic impacts in 
Alaska and is not a significant regulatory action as defined in E.O. 
12866.

VII. Impact on Small Entities

    Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 605(b), the 
Administrator certifies that this rule will not have significant 
economic impact on a substantial number of small entities. Today's 
final decision will not have an adverse economic impact on small 
business entities, as the action eases requirements otherwise 
applicable to affected entities. Thus, it will not result in a 
significant adverse impact on a substantial number of small business 
entities.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq., and 
implementing regulations, 5 CFR part 1320, do not apply to this action 
as it does not involve the collection of information as defined 
therein.


    Dated: March 14, 1994.
Carol M. Browner,
Administrator.
[FR Doc. 94-6669 Filed 3-21-94; 8:45 am]
BILLING CODE 6560-50-P