[Federal Register Volume 59, Number 84 (Tuesday, May 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10434]


[[Page Unknown]]

[Federal Register: May 3, 1994]


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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80

[AMS-FRL-4879-7]
RIN 2060-AF13

 

Regulation of Fuels and Fuel Additives: Individual Foreign 
Refinery Baseline Requirements for Reformulated Gasoline

AGENCY: Environmental Protection Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The EPA is proposing to amend the reformulated gasoline 
regulations to define criteria and procedures by which foreign refiners 
establish individual refinery baselines that reflect the properties and 
volume of the gasoline that was produced at a foreign refinery in 1990 
and imported for use within the United States. EPA is seeking comments 
on a wide range of matters in this proposal, including the air quality 
effects of the proposed approach. Where the requisite showing is made 
through a petition process, importers of reformulated gasoline produced 
at the foreign refinery would be allowed to use the individual foreign 
refinery baseline values to demonstrate compliance with the 
reformulated gasoline standards with regard to gasoline produced at 
that foreign refinery and imported into the United States only during 
the period 1995 through 1997 and only up to a volume of gasoline each 
year that equals the foreign refinery's 1990 import volume, and subject 
to certain limitations and conditions that are proposed as well. This 
amendment would allow imported reformulated gasoline to be evaluated 
relative to individual refinery baselines in a manner that is similar 
to that applicable to reformulated gasoline produced at domestic 
refineries. Individual foreign refinery baselines could be used only 
with reformulated gasoline under this proposal, and such baselines 
could not be used with conventional gasoline.
    EPA specifically states that it seeks comments on the proposed 
approach for foreign refinery baselines and on any underlying 
assumptions, as well as any other options for regulating imported 
reformulated gasoline that would be fair to all regulated parties and 
would achieve the environmental benefits intended for reformulated 
gasoline by the Clean Air Act.

DATES: The comment period will close on June 23, 1994. EPA will hold a 
public hearing on this proposal on May 23, 1994, beginning at 10 a.m.

ADDRESSES: Send comments to Public Docket A-94-25 at the address below. 
It is also requested that a duplicate copy of comments be sent to the 
person listed in the FOR FURTHER INFORMATION CONTACT section of this 
document. Materials relevant to this NPRM are contained in Public 
Dockets A-91-02 and A-92-12 located at Room M-1500, Waterside Mall 
(ground floor), U.S. Environmental Protection Agency, 401 M Street SW., 
Washington, DC 20460. The docket may be inspected from 8 a.m. until 12 
noon and from 1:30 p.m. until 3 p.m. Monday through Friday. A 
reasonable fee may be charged by EPA for copying docket materials.
    The meeting will be held at the Hyatt Regency Hotel, 2799 Jefferson 
Davis Highway, Arlington, Virginia 22202.

FOR FURTHER INFORMATION CONTACT: George Lawrence, Field Operations and 
Support Division, U.S. EPA (6406J), 401 M Street, SW., Washington, DC 
20460, Telephone: (202) 233-9307.

SUPPLEMENTARY INFORMATION: To Request Copies of This Document Contact: 
Helen Sablack, Field Operations and Support Division, U.S. EPA (6406J), 
401 M Street, SW., Washington, DC 20460, Telephone: (202) 233-9402.
    Copies of this proposed rule are available on the OAQPS Technology 
Transfer Network Bulletin Board System (TTNBBS). The TTNBBS can be 
accessed with a dial-in phone line and a high-speed modem (PH# 919-541-
5742). The parity of your modem should be set to none, the data bits to 
8, and the stop bits to 1. Either a 1200, 2400, 9600, or 14400 baud 
modem should be used. When first signing on, the user will be required 
to answer some basic informational questions for registration purposes. 
After completing the registration process, proceed through the 
following series of menus:

(T) GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards)
(M) OMS
(K) Rulemaking and Reporting
(3) Fuels
(9) Reformulated gasoline

    A list of ZIP files will be shown, all of which are related to the 
reformulated gasoline rulemaking process. The individual foreign 
refinery baseline proposed rule is identified by the title: 
``FORBASE.ZIP.'' To download this file, type the instructions below and 
transfer according to the appropriate software on your computer:

ownload, rotocol, xamine, ew, ist, or elp
Selection or  to exit: D FORBASE.ZIP

    You will be given a list of transfer protocols from which you must 
choose one that matches with the terminal software on your own 
computer. Then go into your own software and tell it to receive the 
file using the same protocol. Programs and instructions for de-
archiving compressed files can be found via ystems Utilities from 
the top menu, under rchivers/de-archivers.

Background

    On December 15, 1993 the EPA Administrator issued the final 
regulations implementing the reformulated gasoline and anti-dumping 
programs (the Final Rule), as prescribed by section 211(k) of the Clean 
Air Act (the Act). See 59 FR 7716 (February 16, 1994).
    Under the final rule, compliance by refiners and importers with 
certain reformulated gasoline and anti-dumping standards is measured 
against baselines that are intended to reflect 1990 gasoline quality. 
Domestic refiners are required to establish individual refinery 
baselines of the quality and quantity of the gasoline that was produced 
by the refiner in 1990. Domestic refinery baselines must be calculated 
using, in hierarchical order based on the availability of data, 1990 
gasoline test data (Method 1), 1990 blendstock test data (Method 2), or 
post-1990 blendstock and/or gasoline test data (Method 3).
    Under the rule, domestic importers of foreign-refined gasoline are 
treated differently. They are required to establish baselines of the 
quality and quantity of 1990 gasoline that they import using 1990 
gasoline test data (Method 1) if available. If Method 1 data are not 
available, importers are assigned a baseline approximating average 
gasoline quality in the United States in 1990--the statutory 
baseline.1 EPA anticipates that most importers, like most domestic 
refiners, lack the actual 1990 testing data necessary to establish a 
baseline using Method 1. As a result, EPA expects most importers will 
be assigned the statutory baseline, with the consequence that most 
gasoline produced at foreign refineries will be evaluated using the 
statutory baseline. The baseline-setting scheme is specified in 40 CFR 
80.91 through 80.93 and is discussed in the Preamble to the final rule 
at 59 FR 7791 (February 16, 1994).
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    \1\The ``statutory'' baseline is calculated pursuant to section 
211(k)(10)(B) of the Act which defines the statutory baseline for 
summertime gasoline and instructs the Administrator to establish the 
properties of the statutory baseline for wintertime gasoline based 
on average 1990 qualities of wintertime gasoline. EPA's Final Rule 
specifies the properties of the statutory baseline for wintertime 
gasoline in Sec. 80.45(b)(2), and annual statutory baseline gasoline 
properties in Sec. 80.91(c)(5).
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    Before January 1, 1998, refiners and importers have the option of 
certifying reformulated gasoline using either the ``simple'' model or 
``early use of the complex model.'' Under either of these reformulated 
gasoline certification approaches, compliance with certain standards is 
determined in relation to the baseline established for each refinery or 
importer. Under the simple model, the annual average levels for sulfur, 
T-90, and olefins are limited to each refinery's or importer's baseline 
levels for these parameters.2 Under early use of the complex model 
(in contrast to mandatory use of the complex model beginning in 1998) 
refinery- or importer-specific standards for VOC, toxics, and NOX 
emissions performance are set in part using refiner or importer 
baseline levels for sulfur, T-90, and olefins.3
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    \2\The reformulated gasoline ``simple'' model requirements 
include standards for oxygen, benzene, RVP, and toxics emissions 
which are unrelated to refinery or importer baselines, in addition 
to standards for sulfur, T-90, and olefins which are in relation to 
refinery or importer baselines. See Secs. 80.41 (a) and (b).
    \3\Under early use of the ``complex'' model, a refiner or 
importer calculates refinery- or importer-specific standards for 
VOC, toxics, and NOX emissions performance by using the complex 
model to evaluate a gasoline with ``simple'' model values for 
benzene, RVP, oxygen, and aromatics, and the refiner's or importer's 
individual baseline values for sulfur, T-90, and olefins. See 
Sec. 80.41(j).
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    Beginning on January 1, 1998, only the complex model may be used to 
certify reformulated gasoline, and the basis for all compliance with 
the reformulated gasoline complex model standards is determined in 
relation to 1990 statutory baseline gasoline. See Secs. 80.41(i)(2)-
(i)(3). As a result, beginning in 1998 refiner or importer baselines 
are no longer relevant to determining compliance with reformulated 
gasoline standards.
    Compliance with the standards for conventional gasoline (the 
``anti-dumping'' standards) is measured against refinery or importer 
baselines beginning in January 1995 and thereafter. See Sec. 80.101. As 
a result of the baseline-setting requirements of the final rule 
discussed above, domestic refiners would determine compliance with the 
anti-dumping standards in relation to refinery-specific baselines, 
while most or all importers of gasoline produced at foreign refineries 
would determine compliance in relation to the statutory baseline.
    In developing the final rule, EPA evaluated comments regarding the 
proposed approach for establishing baselines for imported gasoline, 
including comments submitted on behalf of Petroleos de Venezuela, S.A. 
(PDVSA), the Venezuelan national oil company, in response to the April 
16, 1992 reformulated gasoline proposal, at 57 FR 13416. In their 
comments, PDVSA said that the proposal for imported gasoline baselines 
is unfair in that it treats domestic and foreign refiners differently. 
PDVSA also stated in its comments that this difference in treatment of 
domestic and foreign refiners conflicted with the requirements of the 
General Agreement on Tariffs and Trade (GATT). EPA officials held a 
series of meetings on the foreign refiner baseline issue during the 
Fall of 1992 and during 1993. These included meetings with PDVSA 
officials, regarding whether PDVSA has the data necessary to establish 
a baseline of the quality of its gasoline that was used in the United 
States in 1990, and whether EPA could formulate an adequate enforcement 
scheme for a program that included individual foreign refinery 
baselines. EPA also met with domestic refiners on this issue, to hear 
their concerns, and with representatives of other agencies, primarily 
officials from the Office of the U.S. Trade Representative and the 
State Department, to better understand the GATT requirements. EPA's 
February 26, 1993 reformulated gasoline proposal also invited comment 
on these issues. See 58 FR 11758.
    As a result of these comments and meetings, EPA considered 
provisions allowing foreign refiners to establish individual refinery 
baselines in a manner similar to that required for domestic refiners. 
See discussion in the Preamble to the final rule at 59 FR 7785-7788 
(February 16, 1994). EPA was not prepared to adopt such provisions by 
the court ordered deadline for the final rule of December 15, 1993, but 
it stated at that time that it would continue to consider this issue 
and continue discussions with PDVSA. Since issuance of the final rule, 
EPA has continued to consider this question, including the relationship 
of the GATT and the reformulated gasoline rule, and is seeking comments 
on its proposal in this notice to allow foreign refiners to establish 
individual refinery baselines under limited circumstances. While EPA 
does not necessarily agree with PDVSA position on GATT requirements, 
EPA desires to remove the uncertainty in this regard and we believe the 
proposal does that in a manner fully protective of human health and the 
environment.

II. The Proposed Limited Use of Individual Foreign Refinery Baselines

    Under today's proposal, importers would be allowed limited use of a 
baseline established for an individual foreign refinery to demonstrate 
compliance with the reformulated gasoline standards for gasoline 
produced at that foreign refinery and imported for use in the United 
States. The use of individual foreign refinery baselines would be 
conditioned and limited in the following ways:
     EPA would have to specifically approve the baseline for 
the foreign refinery. In order to obtain a baseline, the foreign 
refiner would have to submit a petition to EPA, which would include the 
same types of gasoline and blendstock testing data and refinery 
modelling analyses that domestic refiners must submit. In addition, a 
foreign refiner would have to support its baseline petition with a 
report prepared by an independent baseline auditor, and like for 
domestic refiners EPA would have to approve the auditor. One key aspect 
of a foreign refiner's baseline petition is that it would have to 
conclusively establish the quality and volume of gasoline that was used 
in the United States in 1990, and not just the refinery's overall 
gasoline quality in 1990.
     Individual foreign refinery baselines could be used by 
importers only to demonstrate compliance with reformulated gasoline 
standards and only prior to January 1, 1998. They could not be used to 
demonstrate compliance with anti-dumping standards.
     The total volume of imported reformulated gasoline that 
could be subject to the individual baseline for any foreign refinery 
would be limited each year to the volume of that refinery's gasoline 
used in the United States in 1990.
     The importer would be required to establish that any 
imported gasoline that would be subject to an individual foreign 
refinery baseline actually came from that refinery, through gasoline 
inspections and attest engagements conducted by independent inspectors 
and auditors at the foreign refinery.
     EPA inspectors would have to receive full access to the 
foreign refinery to conduct announced and unannounced inspections and 
audits related to the individual foreign refinery's baseline or any 
gasoline produced at the foreign refinery.
    These conditions and limits are discussed more fully below.
    Under the final rule, individual baselines are used to certify 
reformulated gasoline and demonstrate compliance with the reformulated 
gasoline standards only during 1995 through 1997. Beginning January 1, 
1998 all reformulated gasoline compliance must be certified using the 
statutory baseline. See Secs. 80.41(h)-(j). This constraint also would 
apply to importers of reformulated gasoline who under today's proposal 
had previously used individual foreign refinery baselines.
    Importers would be able to use an individual foreign refinery 
baseline for reformulated gasoline for 1995 through 1997 only if all of 
these conditions and limits are fully met. If any condition is not met 
with regard to a specific foreign refinery, then importers would not be 
allowed to use the foreign refinery's individual baseline. If any such 
conditions are not met subsequent to the time the importer uses the 
individual foreign refinery baseline, then the importer would be 
required to recalculate its compliance using the statutory baseline, 
even if the failure to meet the conditions occurs during a subsequent 
averaging period. This potentially could expose the importer to 
substantial penalties if subsequent use of the statutory baseline 
causes the importer to be in non-compliance with the reformulated 
gasoline requirements.4
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    \4\Under section 211(d) of the Clean Air Act, violators of the 
reformulated gasoline requirements and standards are subject to a 
maximum penalty of $25,000 per violation per day, plus economic 
benefit. Violations of multi-day (averaging) standards constitute a 
separate day of violation for each day in the averaging period.
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    EPA is proposing that importers who use a foreign refinery's 
individual baseline would use that baseline, and the volume of the 
foreign refinery's reformulated gasoline involved, to calculate a new 
importer baseline for use during that year. The total of the 
reformulated gasoline imported by the importer during the relevant 
averaging period would then be evaluated against this new importer 
baseline to determine compliance by the importer with the reformulated 
gasoline standards. This proposed method for using foreign refinery 
baselines is illustrated by the following example.
    A hypothetical importer has been assigned the statutory baseline. 
During 1996 he imports reformulated gasoline totalling 900,000 barrels 
of gasoline produced at hypothetical foreign refinery A, and 800,000 
barrels of gasoline produced at hypothetical foreign refinery B. 
Foreign refiner A has an individual refinery baseline, and the sulfur 
baseline level is 400 ppm, and a baseline volume of 1,000,000 
barrels.5 Foreign refiner B does not have an individual refinery 
baseline, and the importer would use the statutory baseline, which for 
sulfur is 338 ppm, for the refinery B volume. The average sulfur 
content of the imported gasoline that was produced at foreign refinery 
A was 375 ppm, and the average sulfur content of the imported gasoline 
that was produced at foreign refinery B was 360 ppm.
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    \5\Because the 1990 baseline volume assigned to Refinery A is 
greater than 900,000 barrels, the importer may use Refinery A's 
individual baseline for all 900,000 barrels imported from that 
refinery.
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    The hypothetical importer would calculate a new sulfur baseline of 
370.80 ppm as follows:

TP03MY94.000

    The hypothetical importer then would compute the average sulfur 
content of all gasoline imported during the year, of 365.00 ppm, as 
follows:

TP03MY94.001

Because the 365.00 ppm overall average sulfur content of the gasoline 
imported is less than the 370.80 ppm calculated baseline for the 
importer, the importer meets the sulfur standard applicable to the 
importer. Note that the imported gasoline produced at foreign refinery 
A would not be required to separately meet the 400 ppm sulfur baseline 
applicable to refinery A, and the imported gasoline produced at foreign 
refinery B would not be required to separately meet the 338 ppm sulfur 
baseline applicable to refinery B.

A. Establishing Individual Foreign Refinery Baselines

    In order to establish an individual baseline for a foreign refinery 
under this proposal, a petition would have to be submitted to EPA in a 
manner analogous to the baseline submissions required for domestic 
refiners. The petition would have to contain the Method 1, Method 2, 
and/or Method 3 data, collected and evaluated in the same manner as is 
required of domestic refiners under Sec. 80.91. The baseline data would 
have to be submitted in the same manner as is required of domestic 
refiners under Sec. 80.93, except that EPA is proposing to modify the 
requirements in Sec. 80.93 related to the dates by which baseline 
submissions are due.
    Under Sec. 80.93 domestic refiners are required to submit data 
collected before December 15, 1993 by June 1, 1994, or by September 1, 
1994 if data is collected subsequent to December 15, 1993. As a result 
of the timing of this proposal, these dates are not reasonable for 
baseline petitions for foreign refiners. EPA is therefore proposing 
that any petition for an individual foreign refinery baseline would be 
required to be submitted to the Administrator within six months 
following the date the individual foreign refinery baseline final 
regulation is signed. This approach is analogous to the lead time 
afforded domestic refiners in the final rule for baseline submissions.
    Another departure from the baseline submission requirements of 
Sec. 80.93 is that baseline data for foreign refineries would have to 
be submitted in such a manner that EPA could determine the quality and 
quantity of the gasoline produced at the foreign refinery during 1990 
that was used in the United States. Baseline submissions by domestic 
refiners are not required to focus on the 1990 U.S. market share of 
refinery production, because it is assumed that all gasoline produced 
at a domestic refinery is used in the United States, unless the refiner 
shows certain gasoline was exported. This proposal that foreign 
refinery baseline petitions would be required to establish U.S. market 
gasoline quality and quantity is critical, because the quality of a 
foreign refinery's U.S. market gasoline in many cases would be 
different from the quality of the refinery's overall gasoline quality. 
Under the proposal, if EPA is unable to determine both the quality and 
quantity of the gasoline that was produced by any foreign refinery in 
1990 and used in the United States, the individual foreign refinery 
baseline petition would be denied.
    The accuracy and completeness of the data and conclusions contained 
in the individual foreign refinery baseline petition would have to be 
verified by an independent EPA-approved auditor, in the same manner as 
is required of domestic refiners under Sec. 80.92. Thus, the auditor 
would have to be approved by EPA according to the criteria, specified 
in Sec. 80.92, which include approval of the auditor's independence and 
technical ability.
    EPA is proposing that a petition for an individual foreign refinery 
baseline must be submitted by the foreign refiner. EPA believes the 
foreign refiner is the most appropriate person to submit such a 
petition, because it is the foreign refiner who will possess most or 
all of the information that would support such a petition.
    EPA also is proposing that the petition must contain a declaration 
by the owner or president of the foreign refiner business that the 
information submitted in the petition is accurate and complete. EPA is 
further proposing that the foreign refiner owner or president would be 
required to affirmatively declare that EPA auditors and inspectors will 
be given full and immediate access to all refinery premises, for 
purposes of compliance with the EPA inspection requirements EPA has 
proposed in Sec. 80.84(f). The declarations by the foreign refiner 
owner or president would be mandatory conditions for EPA approval of 
any foreign refinery baseline petition. EPA is proposing this 
declaration requirement in order to ensure that in each case of a 
foreign refiner seeking an individual baseline, refiner officials at 
the highest levels of the business are aware of the refiner commitments 
that are necessary for use of a foreign refinery's baseline.

B. Establishing the Refinery-of-Origin

    EPA is proposing regulatory requirements that would, for any batch 
of imported gasoline claimed to be subject to an individual foreign 
refinery baseline, establish the identity of the foreign refinery at 
which the gasoline was produced. The proposed requirements would 
include the testing of samples of the gasoline in question collected 
subsequent to loading into the ship at the port serving the foreign 
refinery, but before the ship leaves that port. These test results from 
the foreign refinery loading point would then be compared with test 
results of samples of the gasoline in question collected when the ship 
arrives at the United States port of entry. Sampling and testing of 
gasoline at the U.S. port of entry is required by the final rule, at 
Secs. 80.65(e)-(f).
    The proposed regulations include criteria for evaluating whether 
the test results of the gasoline samples from the foreign refinery 
loading port match the test results of the gasoline samples from the 
U.S. port of entry. The test results would have to agree, for each 
parameter included in the evaluation of reformulated gasoline, within 
the limits used for comparing domestic refiner and independent 
laboratory test results, which are specified in Sec. 80.65(f).
    The volume of gasoline contained in each shipment of imported 
gasoline claimed to be subject to an individual foreign refinery 
baseline also would have to be confirmed. The inspection at the foreign 
refinery loading port would have to establish the volume loaded onto 
the ship, which would be compared to the volume determination at the 
U.S. port of entry. EPA is proposing that these two volume 
determinations, corrected for temperature and density, would have to 
agree within one percent. EPA believes this level of correlation is 
appropriate, because it is well within the level of correlation 
normally expected in commercial transactions. EPA understands that 
protests normally are initiated if ship volume determinations in 
commercial dealings differ by 0.5%. Nevertheless, EPA requests comment 
as to the appropriate level of correlation which should be required, 
and as to any other approach to confirming volumes that would be 
preferable to that proposed.
    In the event any single parameter, or the volumes involved, would 
not agree in the manner proposed, the individual foreign refinery 
baseline could not be used by the importer for the specific batch of 
imported gasoline for which there is parameter value or volume 
disagreement.
    EPA believes that in most cases the gasoline contained in each 
compartment of a ship would constitute a separate batch, because the 
gasoline would not be homogeneous across more than one compartment, and 
would therefore not meet the batch definition of Sec. 80.2(gg). In 
consequence, EPA believes that in most cases the sampling, testing, and 
volume determinations would have to be performed separately for each of 
a ship's compartments. In addition, it is EPA's understanding that the 
current practice for inspecting the gasoline transported by ship is to 
separately sample each compartment, even when the same grade of 
gasoline is being transported in more than one compartment of a ship.
    EPA also is proposing that the independent laboratory would be 
required to determine the refinery of origin, and thereby establish 
whether the gasoline loaded onto the ship was in fact produced at that 
refinery. The laboratory also would determine whether the foreign 
refinery's gasoline has been combined with gasoline produced at any 
other refinery. Only gasoline that is produced at the foreign refinery 
or origin would be eligible for use with the foreign refinery's 
baseline, yet it is possible that gasoline loaded onto a ship at a port 
serving a foreign refinery could have been produced at a different 
refinery. For example, two refineries could be linked to a port by a 
common pipeline, or gasoline could be produced at a foreign refinery 
and then transferred by ship to storage tanks located at a second 
foreign refinery.
    The proposed requirements related to determining the refinery of 
origin would confirm that gasoline loaded into a ship at the port 
serving a foreign refinery was in fact produced at the foreign refinery 
and therefore that the foreign refinery's individual baseline would be 
applicable. This confirmation of the source refinery by the independent 
inspector normally would require the review of documents that reflect 
all transfers and storage of the gasoline in question from the point of 
production at the source refinery to the point of ship loading. The 
inspector thus would be required to establish the refinery of origin 
and that there was no fungible mixing of the gasoline in question with 
any gasoline produced at any other refinery prior to loading onto the 
ship.
    An additional proposed requirement that relates to establishing the 
refinery-of-origin for imported gasoline is the proposal for attest 
engagements at the foreign refinery. This attest requirement would 
supplement the requirements regarding an independent laboratory 
determination of the source refinery of gasoline. The focus of the 
attest engagement, however, would be on the refinery operations while 
the independent laboratory's primary focus would be on the 
transportation and storage of gasoline from the refinery to the point 
of ship loading.
    Under the proposed procedures, the attester would be required to 
confirm the overall production for the refinery in question, and to 
confirm that the portion claimed to have been transferred to ships for 
shipment to the United States was a part of that overall production. 
The attester also would be required to confirm the transfer of gasoline 
from the refinery to the ships, and to identify the ships into which 
the gasoline was transferred. EPA requests comment on whether these 
proposed attest procedures are appropriate and adequate.
    EPA is proposing that the sampling, testing, and volume 
determinations at the foreign refinery loading port would have to be 
performed by an independent laboratory that is U.S.-based. The proposed 
criteria for independence are the same criteria that apply for the 
independent sampling and testing requirement for domestic refiners and 
importers, and that are specified at Sec. 80.65(f)(2)(ii). Similarly, 
EPA is proposing that the attest requirements would have to be 
fulfilled by certified public accountants (CPA's) that are United 
States citizens, or members of a firm that is a U.S. corporation.
    The proposed requirements that the independent laboratories and 
CPA's be U.S.-based is intended to result in laboratories and CPA's 
over which EPA may easily exercise jurisdiction. EPA's ability to 
inspect, obtain judicial enforcement, or submit information requests 
under section 114 of the Clean Air Act is significantly more effective 
in the case of a person that is a United States citizen or a United 
States corporation. These enforcement approaches may not be easily 
available against non-U.S. corporations or citizens. EPA seeks comment 
on the proposed requirement that independent laboratories and CPA's be 
U.S. corporations or citizens.

C. The Volume Limitation on Use of Individual Foreign Refinery 
Baselines

    EPA is proposing that the total volume of imported reformulated 
gasoline that could be subject to the individual baseline for any 
foreign refinery would be limited each year to the volume of that 
refinery's gasoline that was used in the United States in 1990. It has 
been argued that this proposed volume constraint would limit any 
potential adverse environmental effects of gasoline imported under 
individual foreign refinery baselines in comparison to the final rule, 
as is discussed more fully below.
    The proposed volume constraint would apply separately to each 
foreign refinery having an individual baseline, and would apply across 
all of the importers who import gasoline produced at each foreign 
refinery. Thus, for example, if the gasoline produced at a particular 
foreign refinery having an individual baseline is imported by ten 
importers during a specific year, the volume constraint applicable to 
that foreign refinery would apply to the ten importers collectively. 
Any of the hypothetical refinery's gasoline that is imported that year 
beyond the proposed volume constraint would be subject to the baseline 
otherwise applicable to the importer (normally the statutory baseline), 
and the individual foreign refinery's baseline would not apply to this 
excess volume.
    EPA is proposing that the date gasoline is imported would be the 
criterion for determining which gasoline would qualify for use of an 
individual foreign refinery baseline. In the event importers claim use 
of an individual foreign refinery's baseline for a volume in excess of 
the proposed volume constraint, the gasoline that is first imported 
that equals the volume constraint would receive use of the individual 
baseline. Thus, the proposed volume constraint would apply based on the 
date the gasoline is imported into the United States, and not based on 
the date the gasoline is produced. Beginning on January 1 of each year 
the volume constraint accounting would begin anew.
    EPA is not proposing any regulatory mechanisms that would provide 
importers a running accounting of the volume of a particular foreign 
refinery's gasoline that has been imported subject to an individual 
refinery baseline. Moreover, EPA would not know the total volume of 
imported gasoline claimed to be subject to any particular foreign 
refinery's baseline until quarterly or annual reports are submitted to 
EPA. EPA expects that importers would make private arrangements with 
their foreign refiner business partners to track the volume of each 
foreign refinery's gasoline that is imported under each individual 
foreign refinery's baseline. In this way EPA believes that importers 
would be able to know whether any particular batch of imported gasoline 
would be within the volume constraint that would apply to the foreign 
refinery that produced the gasoline.
    The proposed consequences for the importer that would result from 
claiming use of an individual foreign refinery's baseline beyond the 
proposed volume constraint are discussed below.
    EPA is proposing that any reformulated gasoline that is imported 
during 1994 and for which an individual foreign refinery baseline is 
used would be combined with such gasoline imported during 1995 for 
purposes of the proposed volume constraint. This proposal for combining 
compliance calculations for gasoline imported during 1994 and 1995 is 
analogous to the requirement in the final rule that reformulated 
gasoline produced or imported in 1994 must be combined with 
reformulated gasoline produced or imported in 1995 for determining 
compliance with average standards. See Sec. 80.67(i).
    EPA is further proposing to expand the 1990 baseline volume to 
allow for imports during 1994, but this expanded baseline volume would 
apply only for gasoline imported during 1994-1995. The mechanism 
proposed for this volume expansion is to multiply the foreign 
refinery's 1990 baseline volume times 1.17, which would result in an 
additional volume equal to two months of the 1990 baseline volume. EPA 
believes this approach for expanding the 1990 baseline volume to cover 
imports during 1994 is appropriate, because it would allow imports 
subject to an individual baseline to begin in November 1994 and to 
continue at the same rate as would be allowed for 1995.
    EPA requests comment on this proposal for combining gasoline 
imports in 1994 and 1995 for purposes of applying the proposed volume 
constraint on use of an individual foreign refinery's baseline, and on 
the proposed mechanism for calculating an expanded 1990 individual 
foreign refinery baseline volume for use during 1994 and 1995.

D. The Requirement To Allow EPA Inspections and Audits

    EPA is proposing that, as a condition of use by an importer of an 
individual foreign refinery's baseline, EPA inspectors and auditors 
would have to be given full access to conduct inspections and audits 
related to the foreign refinery's baseline and to the gasoline produced 
at the foreign refinery. The proposed access for inspections and audits 
would be at the foreign refinery, at any place gasoline produced at the 
foreign refinery for the U.S. market is located, and at any location 
where documents are kept that relate to the foreign refinery's baseline 
or to gasoline produced at the foreign refinery for the U.S. market. 
EPA is proposing that the access would have to be granted in response 
to inspections or audits that either are announced or unannounced.
    EPA is proposing the inspection and audit access requirement in 
order to allow EPA inspectors and auditors to confirm the baseline 
submissions that would relate to any foreign refinery. In addition, EPA 
inspections and audits would confirm the information related to 
refinery-of-origin that is reported to EPA. The proposed access 
requirements related to foreign refineries would provide EPA with 
access analogous to that exercised over domestic refiners to conduct 
inspections and audits. EPA historically has conducted inspections and 
audits of domestic refineries in order to ensure compliance with 
gasoline quality rules, including the lead phasedown requirements at 
Sec. 80.20, and the gasoline volatility requirements at Secs. 80.27-28. 
EPA intends to follow this enforcement approach with the reformulated 
gasoline program. EPA believes it is important that it have comparable 
access to foreign refinery operations under the proposed approach for 
foreign refinery baseline in order to meet its enforcement 
responsibilities.
    The scope of the proposed access requirement is intended to allow 
EPA to inspect or audit wherever documents are located that would 
relate to an individual foreign refinery's baseline, or to the 
production or shipping of gasoline that would be subject to such a 
baseline. In addition, the access proposal would ensure EPA access to 
collect samples of any gasoline that would be subject to an individual 
foreign refinery baseline.
    EPA is proposing that the access requirement would terminate on 
January 1, 2003. This proposed termination date is five years following 
January 1, 1998, the last date individual foreign refinery baselines 
could be used. Five years is the statutory limitation that applies to 
potential liability for violations of the reformulated gasoline 
requirements. EPA also is proposing that its inspection and audit 
access would be limited to gasoline produced before 1998 and to 
documents that relate to such gasoline. This proposed limitation on the 
access requirement also corresponds to the January 1, 1998 date 
individual foreign refinery baselines would become unavailable.
    EPA would conduct these inspections or audits at facilities 
controlled by the foreign refiner. As a result, EPA inspectors and 
auditors would have to be given access to conduct inspections or audits 
by the foreign refiner and by the country in which the foreign 
refiner's facilities are located. Any failure to grant access, 
therefore, would be the result of an action or decision by the foreign 
refiner or the foreign country. Nevertheless, the consequences of any 
failure to give EPA full and immediate access would fall on the U.S. 
importers of that foreign refiner's gasoline. In consequence, EPA 
believes any importer who would claim use of an individual foreign 
refinery's baseline would be expected to protect itself against this 
possibility through whatever means it would feel prudent, such as 
assurances from the foreign refiner that the access requirement would 
be met, or contractual indemnification provisions that would apply in 
the event the access requirement is not met.
    The proposed consequences for the importer that would result from 
any failure to meet the access requirements are discussed below.

E. Failure To Meet Requirements

    EPA is proposing that a foreign refinery's individual baseline 
could not be used by any importer if EPA were to determine that 
information submitted to EPA to establish the foreign refinery's 
individual baseline is inaccurate, or if EPA were denied access to the 
foreign refinery to conduct an inspection or audit. EPA also is 
proposing that a foreign refinery's individual baseline could not be 
used by the importer of a specific batch of gasoline in the event any 
of the foreign refinery baseline requirements would not be met with 
respect to that batch of gasoline.
    Thus, for example, if EPA would determine that a foreign refinery's 
individual baseline submittal is in error, an individual baseline for 
that refinery could not be used by any importer during any year, unless 
the Administrator determines a shorter period is appropriate. 
Similarly, if EPA were to attempt to conduct an inspection or audit of 
a foreign refinery and were to be denied full and immediate access, the 
individual baseline for that refinery could not be used by any importer 
during any year, unless the Administrator determines a shorter period 
is appropriate. In this situation, any importer who had previously 
submitted reports to EPA for any averaging period that included use of 
the foreign refinery's individual baseline would be required to 
recompute its compliance calculations, ab initio, using the baseline 
that would apply to the importer in the absence of the foreign 
refinery's individual baseline--normally the statutory baseline. This 
recalculation by the importer would be required even if the 
recalculation would result in violations by the importer of the 
reformulated gasoline standards. It would be no defense for the 
importer to argue it used the foreign refinery's individual baseline in 
a good faith belief the baseline information was accurate, or that the 
foreign refiner would allow EPA to conduct inspections and audits.
    A similar result would occur if EPA were to discover that a 
particular batch of imported gasoline, claimed by the importer to be 
subject to a foreign refinery's individual baseline, in fact is not 
entitled to use of that baseline. This could occur, for example, if 
through the CPA attest engagement or through an EPA audit it were 
discovered that the gasoline comprising the batch was not produced at 
the foreign refinery claimed by the importer. Another example of 
gasoline that would not be entitled to use of a foreign refinery's 
baseline would be a batch of gasoline that is imported subsequent to 
the date when the total volume of imported gasoline for which use of 
the foreign refinery's baseline is claimed equals the baseline volume 
for that foreign refinery. In these cases the importer who improperly 
claimed use of the foreign refinery's individual baseline, but not 
other importers of gasoline produced by that foreign refinery, would be 
required to recompute its compliance calculations, ab initio, as 
described above.
    EPA is proposing that these consequences would be imposed on the 
importers, because there are clear barriers to effective enforcement 
directly against foreign refiners. This would occur even in a case 
where EPA could prove that gasoline was improperly imported using a 
foreign refinery's individual baseline, and where the improper use was 
the fault of the foreign refiner, for example by submitting false 
baseline information or by refusing to allow EPA inspections or audits. 
In such a case EPA could not bring effective enforcement against the 
foreign refiner. As a result, in order to preserve the integrity of the 
reformulated gasoline program, EPA proposes that importers would be 
ultimately responsible for the proper establishment and use of 
individual foreign refinery baselines.
    EPA believes that importers would be able to decide whether and 
when to claim use of a foreign refinery's individual baseline. This 
approach is predicated on the assumption that importers would be 
expected to use great care in making this decision, and would do so 
only if the importer has complete confidence the foreign refinery 
baseline information was properly submitted to EPA and the foreign 
refiner intends to fully and properly comply with all requirements 
related to use of individual foreign refinery baselines, including 
requirements that apply years into the future. EPA also would expect 
importers to require the foreign refiner to carry out a gasoline volume 
tracking scheme that would enable importers to know with certainty that 
any batch of imported gasoline for which use of the foreign refinery's 
individual baseline would be claimed is within the foreign refinery's 
baseline volume.

III. Justification for Proposed Amendment to Final Rule

    When EPA issued the final rule on December 15, 1993 the Agency was 
not fully satisfied that the baseline-setting scheme applicable to 
importers, and thereby applicable to foreign refiners, was the optimum 
solution. In preparing the final rule, EPA focused on three major 
issues regarding the use of individual baselines for foreign refiners 
in the reformulated and conventional gasoline programs. EPA's 
overriding consideration, and the basis for EPA's focus on these 
issues, was the ultimate environmental consequences of the baseline-
setting scheme. The three issues are: (1) The technical problems with 
using baseline-setting Methods 2 and 3 to accurately predict the 
qualities of gasoline imported in 1990 from a foreign refiner; (2) the 
ability of the agency to adequately verify and enforce the use of 
foreign refiner individual baselines, including problems identifying 
the refinery of origin of imported gasoline and enforcing performance 
standards against a foreign refiner; and (3) any risk that would result 
from providing refiners or importers with options in establishing 
baselines.
    The final regulations for reformulated and conventional gasoline, 
promulgated on December 15, 1993 pursuant to a court ordered deadline, 
attempt to resolve these issues. These issues, however, are complex and 
have potentially broad consequences. EPA therefore announced that it 
would continue to consider individual baselines for foreign refiners 
after promulgation of the Final Rules in mid-December 1993. This 
consideration has resulted in today's proposal, with EPA inviting 
comments on the proposed resolution described above.
    The first issue involved whether and when it would be appropriate 
to allow refiners or importers an option in establishing individual 
baselines. In general, EPA's Final Rule takes the approach that options 
should not be allowed. Given a choice, a refiner or importer would tend 
to choose the option requiring the least expense overall, which would 
also presumably be the least protective of the environment. Avoiding 
options should therefore tend to avoid skewing the program in a way 
that would reduce air quality benefits. EPA described this gaming 
concern in the preamble to the Final Rule, at 59 FR 7785 (February 16, 
1994).
    Under EPA's Final Rule, domestic refiners are basically provided no 
choice regarding individual baselines--they must develop an individual 
baseline, using one or more of three different methods or modelling 
approaches. Since gasoline produced by domestic refiners made up an 
overwhelming majority of the gasoline sold in the U.S. in 1990, the 
average of all domestic refiner baselines should closely approximate 
the average 1990 quality of gasoline sold in 1990. Importers are 
treated like domestic refiners in that they are not provided an option 
on how to develop an individual baseline. A major difference, however, 
is that importers may use only the first of the three modeling methods. 
If the data are not available for this method, the importer defaults to 
the statutory baseline. In general, EPA expects all or almost all 
importers to default to the statutory baseline.
    For foreign refiners, EPA considered whether it should also require 
that all foreign refiners establish individual baselines before they 
could import either conventional or simple model reformulated gasoline 
into the U.S. However, as discussed later, EPA had considerable doubt 
about the ability of baseline-setting Methods 2 and 3 to accurately 
predict the quality of that portion of a foreign refiner's production 
sent to the U.S. in 1990. EPA believed many foreign refiners would 
therefore not be able to use these models, and mandating use of an 
individual baseline might therefore lead to a ban on importation of 
gasoline from those foreign refiners not able to develop such 
baselines.6 In addition, EPA had serious questions whether it 
could adequately verify the accuracy of individual baselines for 
foreign refiners under such a scenario. The current Final Rule resolves 
these concerns by not allowing foreign refiners to establish individual 
baselines, and regulating the introduction of gasoline into the U.S. 
through the importer. Importers must establish an individual baseline 
in the manner described above.
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    \6\EPA considered the option of banning foreign supplies of 
gasoline that were not produced under a verifiably accurate 
individual baseline. This option appeared to redress the issue of 
the loss of a ``netting out'' effect due to the presumed loss of 
``cleaner'' than statutory baseline foreign gasoline. However, EPA 
believes that many foreign refiners do not possess adequate data to 
establish an individual baseline. It has been agreed that the 
consequence of banning foreign supplies of gasoline, both to the 
nation's energy security and to competitive pricing, would be 
unfair.
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    The air quality impact of allowing foreign refiners a choice in 
what baseline to use, such as would result from the petition process 
proposed today, depends in large part on which foreign refiners 
ultimately would have the ability, and would choose, to produce 
reformulated gasoline for importation into the U.S., and on the 
individual baselines of those foreign refiners who would make this 
choice. If a significant number of foreign refiners sent gasoline to 
the U.S. in 1990 that was cleaner than the statutory baseline, those 
refiners would not be expected to choose to establish an individual 
baseline but would instead default to the statutory baseline. Refiners 
who sent gasoline to the U.S. in 1990 that was dirtier than the 
statutory baseline might well decide to petition for an individual 
baseline, assuming they could satisfy all of the conditions for 
establishing an individual baseline. In such a case, this might result 
in certain foreign refiners being allowed to degrade the emissions 
performance of their gasoline down from its actual 1990 quality to the 
statutory baseline. Under this approach other foreign refiners might be 
allowed to establish accurate and verifiable individual baselines that 
are dirtier than the statutory baseline, and thereby continue to 
produce at this quality.
    In comparison, the current regulatory provisions provide foreign 
refiners with no choice. As described above, foreign refiners whose 
1990 gasoline was cleaner than the statutory baseline may degrade the 
quality of their gasoline down to the statutory baseline, while foreign 
refiners whose 1990 gasoline was dirtier than the statutory baseline 
are required to reformulate to meet the stricter statutory baseline.
    It is important to note that EPA does not have any clear evidence 
as to the actual average quality of gasoline imported into the U.S. in 
1990. EPA does not know, for example, whether a significant amount of 
such gasoline was cleaner than the statutory baseline. While it would 
be reasonable to assume that at least some imported gasoline was 
cleaner and some was dirtier than the statutory baseline, EPA is not in 
a position to quantify this in any reliable manner. As such, it is not 
clear whether or how much providing foreign refiners with an option in 
establishing an individual baseline would actually skew the air quality 
impacts of these programs in a negative direction. As mentioned above, 
a second major issue EPA has considered involves the technical limits 
of Methods 1, 2 or 3 in predicting the qualities of that portion of a 
foreign refiner's 1990 gasoline production that was sent to the 
U.S.7 Foreign refiners likely did not send the majority of their 
gasoline to the United States in 1990. Foreign refiners may not have 
exported the majority of their gasoline to the United States in 1990. 
Domestic refiners, on the other hand, are assumed to have distributed 
(and to continue to distribute) the majority of their gasoline within 
the U.S. In the absence of actual 1990 data, domestic refiners may 
calculate individual baselines using models developed by EPA that 
depend, in part, on the fact that the majority of the modelled gasoline 
is distributed in the U.S. However, foreign refiners typically did not 
distribute the majority of their 1990 gasoline within the U.S., 
rendering the models inappropriate for those refiners.8
---------------------------------------------------------------------------

    \7\These technical limits have important implications for the 
first issue discussed above. For example, if EPA required that 
foreign refiners establish individual baselines, without providing 
any choice on defaulting to the statutory baseline, then many 
foreign refiners might not be able to develop such baselines and EPA 
would confront a situation involving whether or not it should ban 
the importation of gasoline from such foreign refiners.
    \8\EPA believes it is possible that in certain limited 
situations a foreign refiner may be able to establish a baseline of 
U.S.-market gasoline quality and quantity. For example, a foreign 
refiner potentially could establish that in 1990 its refinery 
produced only a limited number of gasoline blending components, and 
therefore could be capable of producing only a predictable and 
limited number of gasoline types from these blending components. In 
such a case, it is possible that a baseline could be established 
based on the ``cleanest'' of the gasoline types, without actually 
showing that this was the gasoline supplied to the U.S. market. 
Under this approach, the foreign refiner's baseline would be the 
most rigorous baseline possible given the refinery configuration.
---------------------------------------------------------------------------

    The third major issue of concern involves whether EPA can 
accurately verify individual baselines of foreign refiners and 
effectively enforce standards for foreign produced gasoline based on 
such individual baselines. EPA was concerned that it would not be able 
to effectively exercise authority to inspect foreign facilities and 
require the production of records or samples, or to require accurate 
auditing of the compliance of foreign operations. This includes, for 
example, EPA's ability to ensure the accuracy of an individual foreign 
refiner baseline, EPA's ability to clearly identify the refinery of 
origin for gasoline imported into the U.S. (the ``tracking'' issue), 
and EPA's ability to easily access foreign records, samples, and 
facilities for inspections and other compliance measures.
    With respect to tracking refinery of origin, EPA believes it must 
be able to establish with certainty which baseline attaches to each 
specific batch of gasoline imported into the U.S. The distribution of 
foreign produced gasoline is significantly distinct from domestic 
distribution patterns. As described in the preamble to the final rule, 
see 59 FR 7785 (February 16, 1994), the association of a refinery-
specific baseline with the gasoline produced at a domestic refinery is 
relatively uncomplicated, because compliance is determined at the 
refinery level before fungible mixing in the gasoline distribution 
system. The source refinery for gasoline is clear before the gasoline 
leaves the refinery. In the case of all imported gasoline, on the other 
hand, the gasoline will be transported from the refinery to the U.S. 
port of entry prior to the point at which the imported gasoline would 
have to be associated with a foreign refinery-specific baseline. This 
stage of transportation from the foreign refinery to the U.S. port of 
entry could be by fungible means for any imported gasoline, with the 
consequence that fungible mixing could obscure the identity of the 
source refinery for any batch of imported gasoline. For a discussion of 
these and other enforcement and compliance related issues, see the 
preamble to the final rule at 59 FR 7787 (February 16, 1994).
    Finally, it is important to place the role of individual baselines 
in their proper context for the reformulated and conventional gasoline 
programs. For conventional gasoline, the individual baseline of a 
refiner or importer establishes the applicable emissions standard for 
the conventional gasoline they produce or import. On average, a 
refiner's or importer's conventional gasoline has to meet an emissions 
performance standard measured by the performance of their individual 
baseline. If the refiner or importer is assigned the statutory baseline 
instead of an individual baseline, then performance is measured against 
the statutory baseline. This performance standard applies on an annual 
basis starting with 1995. The statutory basis for these requirements 
are found in section 211(k)(8) of the Act.
    The individual baseline plays a much more limited rule in the 
reformulated gasoline program. For the first three years of that 
program, three specific fuel qualities are capped at the level of a 
refiner's or importer's individual baseline.\9\ Starting January 1, 
1998, a refiner or importer's individual baseline has no relevance in 
the reformulated gasoline program. This short term requirement is part 
of the standards adopted by EPA and commonly called the simple model. 
The refiner and importer specific caps on the three parameters were 
based on EPA's understanding of the directional impacts of these 
parameters on emissions, the lack of adequate data to fully model the 
emissions impacts of these three gasoline parameters when EPA proposed 
the simple model, and the lead time needed before requiring use of a 
subsequent, more complex emissions performance model adopted by EPA in 
the final rule. Further discussion of this may be found in the preamble 
to the final rule at 59 FR 7720 (February 16, 1994).
---------------------------------------------------------------------------

    \9\The three parameters are sulfur, olefins, and T-90 or E300. 
See Sec. 80.41(h)(2).
---------------------------------------------------------------------------

    The final rule's requirements for individual baselines resolves 
these various concerns in a straightforward manner. EPA is seeking 
comment on whether this proposal addresses all of the above concern, in 
a manner that achieves the environmental goals intended for 
reformulated gasoline while at the same time addressing the equity 
concerns that previously have been raised, by placing clear limits and 
conditions on the use of individual baselines for foreign refiners. 
These limits and conditions would be designed to address the issues 
described above--concerns about skewing of air quality benefits in a 
negative direction by providing options in establishing individual 
baselines, concerns about the technical limits of the refinery modeling 
used to establish baselines, and finally concerns over the Agency's 
ability to adequately verify individual baselines for foreign refiners 
and adequately ensure compliance by imported gasoline with standards 
based on individual baselines.

A. Accuracy of Individual Foreign Refiner Baselines

    As described in detail above, this proposed amendment provides that 
parties that desire to establish an individual baseline for a foreign 
refinery would submit a petition to EPA's Assistant Administrator for 
Air and Radiation to establish a reliable and verifiable individual 
baseline. The petitioner would also submit data adequate to establish 
the volume of gasoline exported to the United States during 1990.
    The Assistant Administrator would only approve petitions when the 
individual baseline had been established with sufficient certainty, to 
the satisfaction of the Assistant Administrator. The Assistant 
Administrator's decision whether to approve a petition would depend, in 
part, on the certainty with which the foreign refiner's 1990 fuel 
properties and volume data could be verified by a U.S.-based 
independent baseline auditor and by EPA, as discussed above. In 
requiring that a petitioner bear the burden of demonstrating to the 
Assistant Administrator that the individual baseline and the data 
submitted in support of an individual baseline is accurate and 
verifiable, and in requiring that a U.S.-based attestor corroborate 
that demonstration, the amendment provides for appropriate certainty in 
establishing accurate individual baselines.
    EPA requests comment as to whether the proposal would result in 
appropriate certainty as to any foreign refinery baseline that would be 
established.

B. Certainty as to Refinery-of-Origin

    In the preamble to the final rule, EPA expressed concern about 
effectively determining the refinery-of-origin for specific batches of 
imported gasoline so as to determine the appropriate baseline to be 
applied to the product. However, EPA is proposing and seeking comment 
on procedures that are designed to ensure that importers effectively 
track gasoline from the point of gasoline production to the port-of-
entry into the U.S.
    Strict tracking and segregation of reformulated gasoline that is 
produced by foreign refiners and that would be subject to an individual 
baseline is necessary to assure compliance with this program. Only by 
matching a discrete volume of gasoline with an individual baseline 
would an importer be able to accurately calculate its compliance with 
this proposed amendment to the reformulated gasoline program. Further, 
such tracking and segregation is necessary for EPA to ensure that use 
of an individual baseline remains within the foreign refiner's volume 
cap.
    Today's proposed amendment of the final rule seeks to provide for 
certainty with respect to establishing the refinery-of-origin of 
imported gasoline through the use of independent sampling and testing 
that would be required upon loading on-board ship at the refinery-of-
origin and upon receipt by an importer at a U.S. port-of-entry. The 
sampling and testing at both ends of the shipment would help to assure 
that the volume and parameters of the product subject to the individual 
baseline are identical. Additionally, the independent laboratory would 
verify the foreign refinery-of-origin before the shipment leaves the 
foreign port.
    The amendment proposes that batch specific information pertaining 
to the parameters and volume of the batch would be collected by an 
independent laboratory upon loading of the product and a report filed 
with EPA. This information would be available for comparison with batch 
specific information required to be collected by importers upon receipt 
of product.
    Further, the tracking system would help to ensure that EPA could 
determine that the imported reformulated gasoline produced subject to 
an individual baseline was not commingled with gasoline produced under 
another baseline en route from its source to the U.S. port-of-entry.
    Today's proposal also would require that an importer exercising the 
option to use a foreign refinery's individual baseline must demonstrate 
that an annual attestation engagement is conducted of the foreign 
refinery for each year of individual baseline use. The engagement would 
be undertaken by a U.S.-based CPA or firm. This requirement would be 
equivalent with attest engagement requirements applicable to domestic 
refiners and importers under the Final Rule. The engagement would 
verify that the gasoline loaded on-board ship was produced by the 
refinery for which individual baseline use is claimed.
    The practical effect of today's proposal would be to condition the 
use of individual foreign refinery baselines upon strict tracking of 
reformulated gasoline. An importer's use of a foreign refinery's 
individual baseline would depend upon the importer's ability to 
establish with certainty that the reformulated gasoline for which the 
individual baseline is claimed was, in fact, produced at the foreign 
refinery for which the individual baseline is applicable.
    EPA requests comment regarding whether there would be appropriate 
certainty as to the refinery of origin of any imported gasoline that 
would use an individual foreign refinery's baseline under this 
proposal.

C. The Limited Potential for Adverse Air Quality Effects From Gaming

    It has been argued that the proposed constraints on the use of 
individual baselines by importers would limit the potential for gaming 
associated with establishing baselines for imported gasoline, and in 
consequence the potential for adverse air quality effects from such 
gaming.
    If all foreign refiners sending gasoline to the U.S. established 
accurate and verifiable baselines, and concerns about tracking refinery 
of origin and other compliance concerns were resolved, then it has been 
agreed, those baselines and the gasoline produced under them clearly 
and easily would lead to the air quality benefits expected from 
conventional and reformulated gasoline. This might be considered the 
``ideal'', or best possible result. As described earlier, however, 
there is considerable doubt about whether accurate, verifiable, and 
enforceable baselines can be expected for all foreign refiners.
    The Final Rule addresses these problems in effect by requiring all 
foreign refiners to produce gasoline using the statutory baseline--
those cleaner than the statutory baseline are allowed to degrade down 
to that baseline, while those dirtier than the statutory baselines are 
required to clean up to that baseline. While the Final Rule would not 
allow the average quality of foreign produced gasoline to degrade below 
the statutory baseline, it might in fact require that foreign gasoline 
be cleaner on average than would be required if all refiners did 
establish individual baselines.10
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    \1\0This would occur if the average quality of all gasoline 
imports in 1990 was dirtier than the statutory baseline.
---------------------------------------------------------------------------

    One concern regarding the approach used in the Final Rule is that 
it treats all foreign refiners as a class (by assigning the statutory 
baseline to all imported gasoline), yet the factors that led to 
grouping foreign refiners as a class may not apply equally to all 
foreign refiners. The result of the class approach to resolving the 
foreign refiner baseline issue could be considered unfair to any 
particular foreign refiner who would be able to accurately establish 
refinery baselines, and who would be able to establish with certainty 
the refinery of origin for gasoline imported into the United States. On 
the other hand, and as has been discussed above, allowing each foreign 
refiner to choose whether to establish individual refinery baselines 
creates the potential for gaming with consequent adverse environmental 
effects. The challenge for EPA, then, is to create a regulatory 
mechanism for imported gasoline baselines that is as fair as possible 
to each foreign refiner, but that also achieves the environmental goals 
intended for reformulated gasoline.
    The proposed revisions would allow certain foreign refiners the 
option to petition for the right to establish individual baselines 
under carefully controlled circumstances. As discussed above, this 
proposed scheme has a potential for adverse air quality effects, in 
comparison to the current Final Rule, because some importers would have 
an option as to which baseline would apply to imported reformulated 
gasoline. Presumably, foreign refiners and their U.S. importer business 
partners would elect to seek to establish individual foreign refinery 
baselines only if the foreign refinery produced gasoline in 1990 that 
was ``dirtier'' than the statutory baseline alternative to an 
individual foreign refinery baseline. In the case of foreign refineries 
that produced gasoline in 1990 that was ``cleaner'' than the statutory 
baseline, on the other hand, the foreign refiners and their U.S. 
importer business partners presumably would use the less stringent and 
less costly statutory baseline option. EPA's ``gaming'' concern would 
result from these likely decisions by ``dirtier'' and ``cleaner'' 
foreign refiners. The potential adverse air quality consequence would 
result from the volume of imported gasoline during 1995 through 1997 
that would use a ``dirtier''-than-statutory baseline, and the loss to 
the U.S. gasoline pool during 1995 through 1997 of gasoline produced to 
meet a ``cleaner''-than-statutory baselines. There may or may not be an 
adverse air quality impact in relation to the ``ideal'' scenario 
described above, depending on whether the average quality of gasoline 
imported from foreign refiners in 1990 was different from the statutory 
baseline and how much reformulated gasoline is imported in 1995 through 
1997.
    EPA has been unable to identify any foreign refiners other than 
PDVSA who intend to produce any reformulated gasoline,11 though 
there nevertheless could be some because there is no requirement that 
refiners must announce their intentions at this time. The absence of 
identified foreign reformulated gasoline refiners (other than PDVSA) 
does present the possibility that there will be few, if any, foreign 
reformulated gasoline refiners who would have a ``cleaner''-than 
statutory baseline (but who would opt for the statutory baseline). If 
true, this would resolve EPA's gaming concern.
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    \1\1EPA does expect some imports of reformulated gasoline under 
the Final Rule's provision that applies to a foreign refinery that 
is owned by the U.S. importer and where at least 75% of the 
refinery's 1990 production was imported into the U.S. These 
refineries are relevant to this discussion.
---------------------------------------------------------------------------

    Moreover, even to the extent there are foreign refiners who would 
qualify for ``cleaner''-than-statutory baselines EPA believes there is 
a possibility that their gasoline would nevertheless be cleaner than 
the statutory baseline, which would limit the likelihood for adverse 
air quality effects. This possibility was presented to EPA by a foreign 
refiner who argued that such ``clean'' refiners may in fact be 
technologically incapable of relaxing production parameters so as to 
realize a benefit from the statutory baseline. To the extent this may 
be true, such ``clean'' refiners might reduce any adverse air quality 
impact associated with providing an option to establish individual 
baselines.
    The principal reason limiting the potential for adverse air quality 
effects from gaming under today's proposal is, however, that use of 
``dirtier''-than-statutory individual baselines would be restricted. It 
has been argued that this would in turn limit any adverse air quality 
effects, in relation to the current final rule.12 At the same 
time, any reformulated gasoline imported under an individual baseline 
would be required to meet the same standards that apply to any other 
refiner, foreign or domestic, with the same baseline. For the three 
parameters of interest under the simple model for reformulated 
gasoline, sulfur, olefins, and T-90, reformulated gasoline produced by 
a foreign or domestic refiner with an individual baseline would have to 
meet an annual average limit set at 100% of the individual baseline 
level for those parameters. This effectively requires that the gasoline 
stay as clean as it was in 1990, for those three specific parameters.
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    \1\2It is important to note that the potential for adverse air 
quality effects discussed in this preamble is in relation to 
gasoline that would be imported under the approach contained in the 
Final Rule, i.e., to imported gasoline that meets the statutory 
baseline. That comparison may not be fair. Another comparison that 
may be more appropriate would be with imported gasoline that is 
produced to each foreign refinery's individual baseline, like is 
done for domestic refiners. When imported gasoline is compared based 
on individual foreign refinery baselines, there may be no potential 
for adverse air quality effects from today's proposal.
---------------------------------------------------------------------------

    EPA has considered the level of emissions that would result from 
gasoline imported under the approach contained in the final rule, 
versus gasoline imported under the approach described in today's 
proposal. While no baselines have been established yet for any refiner 
or importer, PDVSA has submitted to the reformulated gasoline docket a 
record that describes the baseline it would be able to establish if 
given the opportunity. The baseline it describes is dirtier than the 
statutory baseline for some parameters, and cleaner for other 
parameters. In the case of sulfur and olefins, PDVSA's stated baseline 
levels would be significantly higher than the statutory baseline: 
PDVSA's claimed sulfur level is 644 parts per million (ppm), and the 
statutory baseline level is 339 ppm; PDVSA's claimed olefin level is 22 
vol% and the statutory baseline level is 9.2 vol%. The environmental 
implication is that NOX emissions are higher with larger sulfur 
and olefin levels.
    Taking into account the volume of PDVSA's gasoline that is used in 
the Northeast U.S.--its primary market, EPA's preliminary analysis 
shows that PDVSA's 1995 gasoline would increase overall NOX 
emissions there by only 0.08% during the high ozone season,13 in 
comparison to the case where PDVSA would produce gasoline to meet the 
statutory baseline for sulfur and olefins.
---------------------------------------------------------------------------

    \1\3The high ozone season is the appropriate period for 
evaluating NOX emissions, because NOX is of primary 
concern as an ozone precursor.
---------------------------------------------------------------------------

    Also, PDVSA's 1995 gasoline quality will be approximately equal to 
the quality of statutory gasoline in terms of VOC emissions, and will 
be much cleaner in terms of toxics emissions.14
---------------------------------------------------------------------------

    \1\4EPA has placed in the docket an analysis of the 
environmental impacts of the use of gasoline having properties equal 
to those described by PDVSA.
---------------------------------------------------------------------------

    The proposed program elements that would help to limit the impact 
of ``dirtier''-than-statutory baselines are the limited volume of a 
foreign refinery's reformulated gasoline that could use the individual 
baseline, the limited time period during which the individual baseline 
could be used, the fact that the individual baseline could be used only 
for reformulated gasoline, and EPA's belief that the individual 
baseline option would not be attractive to most foreign refiners.
1. The Volume Limitation on Use of Individual Refinery Baselines
    An importer's use of a foreign refinery's individual baseline is 
proposed to be limited to volumes of reformulated gasoline equivalent 
to the foreign refinery's 1990 volume of gasoline imports to the U.S. 
This volume constraint is described above.
    The volume cap limiting use of an individual baseline for 
reformulated gasoline production (until January 1, 1998) to a foreign 
refiner's 1990 import volumes ensures that the use of an individual 
baseline is constrained by historical import volumes. Volumes imported 
above the 1990 constraint would be subject to the importer's statutory 
baseline. Foreign-produced reformulated gasoline subject to an 
individual baseline, within the 1990 volume cap limitation, would be 
measured for compliance against gasoline produced in 1990, and 
therefore would be at least as clean as the foreign refiner's 1990 
gasoline. However, any reformulated gasoline produced by a foreign 
refiner above the 1990 volume would be evaluated relative to the 
statutory baseline and therefore would be at least as clean as 
reformulated gasoline produced using the statutory baseline.
2. The Time Limitation on the Use of Individual Foreign Refinery 
Baselines
    A further constraint on potential adverse air quality effects is 
the time limit on an importer's use of a foreign refiner's individual 
baseline. It would be limited to the period commencing when 
reformulated gasoline is first imported into the U.S. and continues 
through December 31, 1997. After 1997, individual baselines have no 
further relevance to the requirements for reformulated gasoline, and 
all importers and domestic refiners are required by the Final Rule to 
measure compliance with the reformulated gasoline standards against the 
statutory baseline. Therefore, the effect of this regulation would be 
limited to this three year period only.
3. The Number of Foreign Refiners Who Would Seek to Use Individual 
Foreign Refinery Baselines Would be Limited
    This proposal is predicated on the assumption that the costs 
inherent in producing reformulated gasoline and meeting the 
requirements of the reformulated gasoline program, including those 
costs necessary to establish an individual baseline, will deter most 
foreign refiners from selecting the individual baseline option, thereby 
further limiting any potential adverse air quality impact. These costs 
include extensive refinery modifications; costs associated with 
petitioning EPA for an individual baseline and providing adequate 
information to establish with certainty that the baseline determination 
is accurate; a baseline audit; and the record keeping and product 
tracking associated with complying with the proposed annual compliance 
audits.
    EPA believes that few refiners have made the requisite capital 
investments necessary to produce reformulated gasoline. Therefore, it 
currently appears that the number of foreign refiners who would take 
advantage of this proposed amendment would be limited.
    In addition, the limited time period during which individual 
foreign refinery baselines could be used may limit the number of 
foreign refiners that would take advantage of this option, because the 
costs associated with exercising this option described above, could 
only be recouped within the 1995 through 1997 time frame.
4. Conventional Gasoline Not Affected by This Proposed Amendment
    EPA's concern for gaming in the case of conventional gasoline is 
substantially greater than its concern with respect to reformulated 
gasoline. First, there is likely to be significantly more conventional 
gasoline imported into the U.S. than reformulated gasoline. Second, the 
Final Rule provides that individual baseline will be the basis for 
conventional gasoline compliance into the foreseeable future while an 
individual baseline for reformulated gasoline is applicable only until 
December 31, 1997. Accordingly, due to these volumetric and long term 
distinctions between reformulated gasolines and conventional gasolines, 
the potential for adverse air quality impact is significantly larger if 
individual foreign refinery baselines could be used with conventional 
gasoline, as compared with the potential if individual foreign refinery 
baselines could be used with reformulated gasoline.
    The Final Rule requires that domestic refiners apply their 
individual baselines to conventional gasoline production. EPA 
anticipates that nationwide use of individual baselines will result in 
gasoline quality that approximately equals the statutory baseline. 
However, EPA believes that an option to use individual baselines by 
foreign refiners in the production of conventional gasoline would 
result in significant skewing, in a negative direction, of the average 
quality of imported gasoline based on the gaming scenario described 
above.
    A skewing in a negative direction of the average of baselines with 
respect to foreign conventional gasoline, is of significant concern 
because EPA anticipates that most foreign sources of gasoline will 
provide conventional gasoline to the U.S. This assumption is based on 
EPA's belief that few foreign producers of gasoline have invested in 
the capital equipment necessary for complying with the reformulated 
gasoline program. Further, the increased costs of capitalization 
realized by a refiner entering the reformulated gasoline market would 
be exacerbated by the continuing costs of overseas shipping under the 
segregated fuels requirement proposed in this amendment. Accordingly, 
there appears to be few economic incentives for foreign refiners to 
reallocate production from conventional to reformulated gasolines.
    Thus, EPA is not proposing to change the approach contained in the 
Final Rule pertaining to baselines for imported conventional gasoline, 
and EPA expects all or almost all importers to default to the statutory 
baseline.
    EPA requests comment as to the magnitude of any potential adverse 
air quality consequences that would result from gaming under today's 
proposal.

D. EPA's Compliance Oversight Authority

    The preamble to the Final Rule expresses EPA's concern that it 
would lack adequate compliance monitoring and enforcement techniques to 
ensure that foreign refineries comply fully with the reformulated 
gasoline program. This concern arose out of the perceived need to bring 
any enforcement actions against importers that would rely on baseline 
audits and inspections of foreign refiners, and that these foreign 
refiners may not be subject to the full panoply of enforcement 
mechanisms available with domestic corporations.
    Today's proposed amendment, however, provides for compliance 
monitoring and enforcement pertaining to foreign-produced reformulated 
gasoline to focus on domestic importers. Such foreign-produced 
reformulated gasoline would be subject to the full array of monitoring 
and enforcement devices available to EPA. It has been argued that 
importers' potential liability, including but not limited to exposure 
to potential relegation to compliance with the statutory baseline, will 
be adequate to ensure that importers would import gasoline using an 
individual foreign refinery's baseline only where the importer has 
sufficient confidence the requirements of this program would be met, 
including the compliance monitoring provisions that require the 
cooperation of the foreign refiner and the government of the country in 
which the foreign refiner is located. These compliance monitoring and 
enforcement provisions appears to be equivalent to EPA's compliance 
monitoring and enforcement authority over domestic refiners.
    The proposal provides that, as a condition for the use of a foreign 
refinery's individual baseline, EPA would be guaranteed full and 
immediate access to conduct compliance oversight inspections, collect 
gasoline samples and perform compliance audits at the foreign refinery. 
EPA's compliance audits supplement the baseline certification and 
annual audits specified elsewhere in this proposal. EPA's compliance 
oversight authority is proposed to last until January 1, 2003, 
consistent with the statute of limitations governing violations of the 
reformulated gasoline program and associated statutes governing the 
submission of information to the U.S. government.
    In addition, foreign refiners electing to petition to use an 
individual baseline would be required to engage a domestic CPA to 
conduct a baseline certification audit and annual attest engagements. 
EPA anticipates that and is seeking comment on whether the professional 
standards governing the conduct of such audits, as well as the 
amenability of a U.S. CPA to EPA compliance monitoring and enforcement, 
is adequate assurance that EPA can effectively monitor foreign refiners 
for program compliance.

E. EPA Seeks Comment on Today's Proposal, or Any Alternative Approaches

    Today's proposal is an attempt to resolve the issue of baselines 
for foreign refiners in a more appropriate manner, with the intent of 
achieving several important, but different, goals. One goal is that the 
environmental benefits intended for reformulated gasoline by the Clean 
Air Act be realized. The other goal is that all regulated parties who 
are similarly situated be treated alike, with the differences in 
treatment between domestic and foreign refiners limited to those 
measures necessary to appropriately accommodate differences in their 
situations and protect human health and environmental values. EPA 
recognizes that there may be other methods for regulating imported 
reformulated gasoline that resolve these two goals in ways that are 
preferable to the approaches contained both in the Final Rule and in 
today's proposal. EPA requests comment as to any alternative approaches 
to regulating imported reformulated gasoline that achieves the 
environmental benefits required by the Clean Air Act for reformulated 
gasoline, and that treats domestic and foreign refiners in a manner 
consistent with the provisions of the GATT.

IV. Public Participation

    EPA invites comment on all aspects of today's notice. EPA has 
specifically requested comments on a number of areas throughout the 
previous discussion. A list of these and other areas for comment are 
the following:
     Any alternative approaches to regulating imported 
reformulated gasoline that achieve the environmental benefits required 
by the Clean Air Act for reformulated gasoline, and that treat domestic 
and foreign refiners in a manner consistent with the provisions of the 
GATT.
     The accuracy of any foreign refinery baseline that would 
be established under the proposal.
     The identification of the refinery of origin of any 
imported gasoline that would use an individual foreign refinery's 
baseline under today's proposal.
     Whether today's proposal would result in the environmental 
benefits that are intended by the reformulated gasoline provisions of 
the Clean Air Act.
     The issue of when foreign refinery baseline petitions 
would be due.
     The appropriate approach for correlating the volume 
determination at the foreign refinery and at the U.S. port of entry.
     The adequacy of the proposed attest procedures.
     The proposed requirement that independent laboratories and 
CPA's be U.S. corporations or citizens.
     The proposal for combining gasoline imports in 1994 and 
1995 for purposes of applying the proposed volume constraint on use of 
an individual foreign refinery's baseline.
     The proposed mechanism for calculating an expanded 1990 
individual foreign refinery baseline volume for use during 1994 and 
1995.

V. Administrative Designation and Regulatory Analysis

A. Executive Order 12866

    Under Executive Order 12866, (58 FR 51735 (October 4, 1993)) the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The Order defines ``significant regulatory action'' as 
one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlement, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action'' 
because of the potential impacts on portions of the domestic refining 
and gasoline importing industry. As such, this action was submitted to 
OMB for review. Changes made in response to OMB suggestions or 
recommendations will be documented in the public record.

B. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA), 
5 U.S.C. 605(b), the Administrator certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities.
    The issue of baselines for imported reformulated gasoline is 
discussed generally in section VII-C of the Regulatory Impact Analysis 
that was prepared to support the Final Rule for reformulated gasoline. 
A copy of this document may be found in the reformulated gasoline 
docket, number A-92-12, at the location identified in the ADDRESSES 
section of this document.
    The RFA of 1980 requires federal agencies to examine the effects of 
proposed regulations and to identify significant adverse impacts on a 
substantial number of small entities. Because the RFA does not provide 
concrete definitions of ``small entity,'' ``significant impact,'' or 
``substantial number,'' EPA has established guidelines setting the 
standards to be used in evaluating impacts on small businesses.15 
For purposes of the proposed individual foreign refinery requirements 
for reformulated gasoline, a small entity is any business which is 
independently owned and operated and not dominant in its field as 
defined by SBA regulations under section 3 of the Small Business Act.
---------------------------------------------------------------------------

    \1\5U.S. Environmental Protection Agency, Memorandum to 
Assistant Administrators, ``Compliance with the Regulatory 
Flexibility Act,'' EPA Office of Policy, Planning, and Evaluation, 
1984. In addition, U.S. Environmental Protection Agency, Memorandum 
to Assistant Administrators, ``Agency's Revised Guidelines for 
Implementing the Regulatory Flexibility Act,'' Office of Policy, 
Planning, and Evaluation, 1992.
---------------------------------------------------------------------------

    The Agency believes that the individual foreign refinery baseline 
requirements being proposed today are unlikely to have a significant 
economic impact on a substantial number of small entities. The 
businesses affected will be either a relatively small number of major 
domestic oil companies who would compete with imported gasoline that is 
produced at foreign refineries for which individual baselines are 
established, or importers who would import gasoline that is produced by 
foreign refineries for which individual baselines are established. EPA 
expects the number of foreign refineries for which individual baselines 
will be established will be small, with the result that the number of 
affected domestic refiners and importers also will be small.
    However, EPA invites comment on the question of significant impacts 
on small entities. EPA also requests all relevant data which justify 
any conclusions submitted.

C. The Paperwork Reduction Act

    The information collection requirements in this proposal have been 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request document has been prepared by EPA (ICR 
No. 1591.04) and a copy may be obtained from Sandy Farmer, Information 
Policy Branch, EPA, 401 M St., SW. (Mail Code 2136), Washington, DC 
20460 or by calling (202) 260-2740.
    This collection of information has an estimated recordkeeping and 
reporting burden averaging 4.1 hours per respondent. This estimate 
includes time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    Send comments regarding the burden estimate or any other aspect of 
this collection of information, including suggestions for reducing this 
burden to Chief, Information Policy Branch, EPA, 401 M St., SW. (Mail 
Code 2136), Washington, DC 20460, and to the Office of Information 
Regulatory Affairs, Office of Management and Budget, Washington, DC 
20503, marked ``Attention: Desk Officer for EPA.'' The final rule will 
respond to any OMB or public comments on the information collection 
requirements contained in this proposal.

VI. Statutory Authority

    The statutory authority for the rules proposed today is granted to 
EPA by sections 114, 211 (c) and (k), and 301 of the Clean Air Act, as 
amended, 42 U.S.C. 7414, 7545 (c) and (k), and 7601.

List of Subjects in 40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, Motor vehicle pollution, Penalties, Reporting and 
recordkeeping requirements.

    Dated: April 21, 1994.
Carol M. Browner,
Administrator.

    For the reasons set forth in the preamble, part 80 of title 40 of 
the Code of Federal Regulations are proposed to be amended as follows:

PART 80--REGULATIONS OF FUELS AND FUEL ADDITIVES

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

    Authority: Sections 114, 211 and 301(a) of the Clean Air Act as 
amended, 42 U.S.C. 7414, 7545 and 7601(a).

    2. Section 80.84 is proposed to be added to subpart D to read as 
follows:


Sec. 80.84  Individual baselines for foreign refineries.

    (a) Definitions. For purposes of this section, ``foreign refinery'' 
shall mean a specific refinery located outside the United States, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
and the Commonwealth of the Northern Mariana Islands.
    (b) Conditions for use of individual foreign refinery baselines. 
For purposes of compliance with the reformulated gasoline standards of 
Sec. 80.41, any importer may use a baseline established for a foreign 
refinery as the importer's individual baseline, but only for gasoline 
produced at that foreign refinery and provided that:
    (1) The Administrator has approved separate 1990 baseline 
properties and volume for the foreign refinery, as specified under 
paragraph (c) of this section;
    (2) The importer is able to establish that the imported gasoline 
was produced at the foreign refinery, as specified under paragraph (d) 
of this section;
    (3) An attest engagement is conducted of the foreign refinery 
operation for the calendar year during which the separate foreign 
refinery baseline is claimed by the importer, as specified under 
paragraph (e) of this section; and
    (4) Authorized representatives of the Administrator are given full 
and immediate access and are allowed to conduct inspections, review 
records and other documents, collect gasoline samples, and perform 
audits relating to the foreign refinery, as specified under paragraph 
(f) of this section.
    (c) Establishing individual foreign refinery baselines. (1) Any 
foreign refiner may seek a separate baseline for a foreign refinery by 
submitting a petition to the Assistant Administrator of EPA's Office of 
Air and Radiation, such petition to include the Method 1-, 2-, and/or 
3-type data as specified in Sec. 80.91 for the foreign refinery, 
submitted as specified in Sec. 80.93, and verified as specified in 
Sec. 80.92 except that the baseline auditor shall be an individual who 
is a United States citizen.
    (2) The Assistant Administrator of EPA's Office of Air and 
Radiation may grant such petition if the properties and volume of the 
gasoline produced at the foreign refinery and imported for use in the 
United States in 1990 are established to the satisfaction of the 
Assistant Administrator.
    (3) Any petition under this paragraph (c) of this section shall:
    (i) Contain a declaration, signed by the owner or president of the 
foreign refiner business, that contains the following language:

    The information contained in this individual baseline petition 
is complete and accurate.
    I agree that any EPA inspector or auditor will be given 
immediate and complete access to the premises of [the name of 
foreign refinery for which an individual baseline is requested], to 
any other location where gasoline produced at [the name of the 
foreign refinery] for use in the United States during the period 
December 1994 through December 1997 is stored or transported, and to 
any other location where documents are kept which relate to this 
baseline petition or to the quality and/or quantity of the gasoline 
produced at the foreign refinery for use in the United States during 
the period December 1, 1994 through December 31, 1997, regardless of 
whether these inspections are announced in advance or are 
unannounced;

and
    (ii) Be submitted by [insert date 6 months after publication of the 
Final Rule].
    (d) Establishing refinery-of-origin. In order to establish the 
refinery-of-origin with regard to any batch of imported gasoline:
    (1) The gasoline to which the individual foreign refinery baseline 
would apply may not be combined with gasoline produced at any other 
refinery prior to arrival at the United States port-of-entry;
    (2)(i) A United States-based independent laboratory shall:
    (A) Collect a representative sample of the batch subsequent to 
loading on the ship that will transport the gasoline to the United 
States, and prior to departure of that ship from the port serving the 
refinery-of-origin;
    (B) Analyze such sample for each property specified in 
Sec. 80.65(e)(1) using the methodologies specified in Sec. 80.46;
    (C) Independently determine the volume of the batch;
    (D) Independently determine the refinery at which the subject 
gasoline was produced, and that the subject gasoline was not combined 
with gasoline produced at any other refinery before loading on the 
ship.
    (E) Obtain the EPA-assigned registration number of the refinery at 
which the batch was produced;
    (F) Determine the name and country of registration of the ship used 
to transport the batch to the United States port-of-entry; and
    (G) Determine the date the ship departs from the port serving the 
refinery-of-origin.
    (ii) A laboratory shall be considered independent only if it meets 
the criteria specified in Sec. 80.65(f)(2)(iii).
    (iii) In order to be considered United States-based, the laboratory 
must be a United States corporation engaged in the business of gasoline 
sampling and testing, or an individual who is a United States citizen 
who is engaged in the business of gasoline sampling and testing in the 
United States.
    (iv) The independent laboratory shall submit to the Administrator a 
report containing the information required under paragraph (d)(2)(i) of 
this section, within thirty days following the date of the independent 
laboratory's inspection. This report shall include a description of the 
method used to determine the identity of the refinery at which the 
subject gasoline was produced, that the subject gasoline was not mixed 
with gasoline produced at any other refinery, and a description of the 
gasoline's movement and storage between production at the source 
refinery and ship loading.
    (v) The refinery-of-origin sampling and testing required under 
paragraph (d)(2) of this section is in addition to the sampling and 
testing required at the port-of-entry under Secs. 80.65 (e) and (f).
    (3) The importer shall meet the sampling and testing requirement, 
under Sec. 80.65(f)(1)(i), whereby an independent laboratory samples 
and tests each batch of imported gasoline.
    (4)(i) The results of testing of the batch sample collected at the 
refinery-of-origin under paragraph (d)(2) of this section, when 
compared to the results of testing of the batch sample collected at the 
United States port-of-entry under Sec. 80.65(f)(1)(i), must for each 
parameter be within the range specified for the parameter under 
Sec. 80.65(e)(2)(i);
    (ii) The volume determination for the batch at the refinery-of-
origin under paragraph (d)(2) of this section, when compared to the 
volume determination for the batch at the United States port-of-entry 
under Sec. 80.65(f), must be within  1% where such volume 
determinations are corrected for temperature and density;
    (iii) The ship identified under paragraph (d)(2) of this section 
must be the same ship that is used to transport the gasoline on arrival 
at the United States port-of-entry; and
    (iv) The refinery-of-origin, volume, shipment date, and ship name 
under paragraph (d)(2) of this section must be confirmed by the attest 
engagement under paragraph (f) of this section.
    (e) Attest requirements. (1) The attest engagement required under 
paragraph (b)(3) of this section shall be conducted by a United States-
based CPA in accordance with the procedures specified in Secs. 80.126 
and 80.127.
    (2) The CPA shall: (i) Obtain a gasoline inventory reconciliation 
analysis for the current year from the refinery which includes 
reformulated gasoline, RBOB, conventional gasoline, and other non-
finished gasoline petroleum products, whether imported into the United 
States or not;
    (ii) Test the mathematical accuracy of the calculations contained 
in the analysis; and
    (iii) Agree the beginning and ending inventories to the refinery's 
perpetual inventory records.
    (3) The CPA shall: (i) Obtain a separate listing of all tenders 
during the current year of reformulated gasoline produced at the 
refinery for use in the United States, such listing to include the date 
the tender was transported from the refinery, the method of 
transportation of the tender from the refinery to the point of ship 
loading, the identification of any storage of the gasoline prior to the 
point of ship loading, and the name and country of registration of the 
ship used for transporting the gasoline from the refinery to the United 
States;
    (ii) Test the mathematical accuracy of the calculations contained 
in the listings;
    (iii) Agree the listing's tender volumes to the gasoline inventory 
reconciliation in paragraph (e)(2) of this section; and
    (iv) Confirm that the gasoline comprising the tender was not mixed 
with gasoline produced at any other refinery between its production and 
ship loading.
    (4)(i) The CPA shall prepare a report on the attest engagement 
summarizing the procedures performed and the findings in accordance 
with the Sec. 80.125(b), and shall include in the report, for each 
tender of reformulated gasoline, the volume, date shipped, and ship 
name and country of registration.
    (ii) The CPA report for each calendar year shall be submitted to 
EPA not later than May 31 of the following year.
    (5) In order to be considered a United States-based CPA, a CPA firm 
must be a United States corporation, or an individual CPA must be a 
United States citizen who is a licensed CPA in the United States.
    (f) EPA inspections. The inspections, reviews, collections, and 
audits under paragraph (b)(4) of this section may be conducted:
    (1)(i) At the foreign refinery;
    (ii) At any other location where gasoline produced at the foreign 
refinery for use in the United States is stored or transported; and
    (iii) At any other location where documents are kept which relate 
to the quality and/or quantity of the gasoline produced at the foreign 
refinery for use in the United States;
    (2) Either announced in advance, or unannounced;
    (3) At any time prior to January 1, 2003; and
    (4) With relation to any gasoline produced:
    (i) During 1990 and any other year for which data are submitted to 
EPA in support of an individual baseline; and
    (ii) For use in the United States during the period December 1994 
through December 1997.
    (g) Failure to meet requirements. If any requirement specified in 
paragraphs (b) through (f) of this section is not fully met for any 
calendar year, or if the Administrator determines that the information 
submitted to EPA under paragraphs (b) through (f) of this section is 
inaccurate in whole or in part, then compliance with the requirements 
of Secs. 80.41 (h) and (i) by an importer shall be measured, ab initio 
and for each and every calendar year or for such other period of time 
as the Administrator may determine, from the baseline that otherwise 
would apply to the importer in the absence of the operation of this 
section.
    (h) Volume constraints. (1) During any calendar year the total 
volume of gasoline imported by one or more importers to which a foreign 
refinery's baseline applies shall not be greater than the refinery's 
1990 baseline volume.
    (2) Where the volume of gasoline for which the foreign refinery's 
baseline is claimed by one or more importers during any calendar year 
exceeds the refinery's 1990 baseline volume, the refinery's baseline 
applies only to the first volume of that refinery's gasoline that is 
imported into the United States that equals the 1990 baseline volume.
    (3) In the event any importer uses a foreign refinery baseline in 
violation of the volume constraint specified in paragraphs (h) (1) 
through (2) of this section the importer shall, ab initio, calculate 
compliance using the baseline values that properly apply under 
paragraphs (h) (1) through (2) of this section.
    (4) In the event any gasoline is imported before January 1, 1995 
for which a separate foreign refinery baseline is claimed:
    (i) Such gasoline shall be combined with gasoline imported during 
1995 for which the separate foreign refinery baseline is claimed for 
purposes of the volume constraint specified in paragraphs (h) (1) 
through (2) of this section; and
    (ii) An adjusted 1990 baseline volume for the foreign refinery 
shall be calculated, for use during the combined 1994 and 1995 period 
only, by multiplying the 1990 baseline volume for the foreign refinery 
times 1.17.

[FR Doc. 94-10434 Filed 5-2-94; 8:45 am]
BILLING CODE 6560-50-P