[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17002]


[[Page Unknown]]

[Federal Register: July 20, 1994]


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


ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 85

[AMS-FRL-5011-9]

 

Air Pollution Control; Preemption of State Regulation for Nonroad 
Engine and Vehicle Standards

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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

SUMMARY: EPA is promulgating a final rule that sets forth requirements 
and procedures for EPA authorization of California enforcement of 
standards and other requirements relating to the control of emissions 
from new nonroad vehicles or engines under section 209(e) of the Clean 
Air Act (Act), as amended.
    The rule includes definitions of the categories of new nonroad 
engines and vehicles that the Act specifies as preempted from state 
regulation. These definitions of ``farm equipment'', ``construction 
equipment'', and ``locomotive'' clarify which nonroad engines and 
vehicles may be subject to state regulation because such regulation is 
not preempted. The definition of ``new'' in this rulemaking applies to 
all new nonroad engines and vehicles with the exception of locomotives 
and engines used in locomotives. This rule also provides procedures by 
which EPA may authorize California to enforce standards and provides 
guidance for states that adopt California standards. Finally, the rule 
discusses the criteria to be used by EPA in its analysis of California 
authorization requests. The rule will provide guidance to California, 
other states, and vehicle and engine manufacturers regarding new 
nonroad engine and vehicle preemption.

EFFECTIVE DATE: This regulation becomes effective August 19, 1994.

ADDRESSES: Copies of material relevant to this rulemaking have been 
placed in Docket A-91-18 and are available for public inspection 
between the working hours of 8 a.m. to 4 p.m., Monday through Friday, 
at: U.S. Environmental Protection Agency, Air and Radiation Docket and 
Information Center, Room M1500, First Floor Waterside Mall, 401 M 
Street, SW., Washington, DC 20460 (Telephone (202) 260-7548). A 
reasonable fee will be charged by EPA for copying docket material.

FOR FURTHER INFORMATION CONTACT: David Dickinson, Attorney Advisor, 
Manufacturers Operations Division (6405-J), U.S. Environmental 
Protection Agency, Washington, DC 20460, Telephone: (202) 233-9256.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Statutory Authority and Background
II. Discussion of Final Rule and Comments Received
    A. Changes to Proposed Rule for Final Rule
    B. Nonroad Engines and Vehicles
    C. Definitions of ``new'' as used in ``new nonroad engine'' and 
``new nonroad vehicle''
    D. Definition of ``farm equipment''
    E. Definition of ``construction equipment''
    F. Definition of ``locomotive''
    G. Application of Definitions; Primary Use Test
    H. Labeling Requirement
    I. Authorization Criteria and Procedures
    J. State Adoption of California Standards and Test Procedures
    K. Rulemaking Procedure
    L. Executive Order 12291
    M. Paperwork Reduction Act
    N. Regulatory Flexibility Act

I. Statutory Authority and Background

    EPA is required under section 209(e) of the Clean Air Act (Act), as 
amended, 42 U.S.C. 7543, to ``issue regulations to implement'' 
subsection (e). Section 209(e) of the Act addresses the state adoption 
of emission standards for new nonroad vehicles and engines.
    Under section 209(e), all states are preempted from adopting 
emissions standards for ``[n]ew engines which are used in construction 
equipment or vehicles or used in farm equipment or vehicles and which 
are smaller than 175 horsepower'' or for ``[n]ew locomotives or new 
engines used in locomotives''. In this final rule, EPA defines these 
preempted categories, except that EPA does not define the term ``new'' 
with respect to locomotives and engines used in locomotives. For new 
nonroad engines and vehicles not included in the preempted categories, 
EPA is directed to authorize California, after notice and opportunity 
for public hearing, to enforce such standards and other requirements as 
California adopts for the regulation of such engines and vehicles, if 
these regulations meet the criteria set forth in the Act. Several of 
the criteria to be used for nonroad engine and vehicle authorizations 
are similar to the requirements applicable to waivers of Federal 
preemption of emission standards for new motor vehicles under section 
209(b). Section 209(a) prohibits state adoption of emission standards 
for new motor vehicles and engines. Section 209(b) directs EPA to waive 
this prohibition for California if certain criteria are met. Other 
states may adopt California nonroad vehicle or engine emission 
standards under section 209(e) if they comply with several 
requirements.
    This rule was proposed at 56 FR 45866, Sept. 6, 1991. A public 
hearing was held on September 20, 1991. Many industries presented 
comments through an association or individually. Represented in the 
comments presented at the hearing and submitted in writing are the 
following: engine manufacturers; manufacturers and dealers of various 
types of equipment including agricultural, construction, mining, 
utility, and lawn and garden; manufacturers of emission controls; 
railroads; manufacturers of industrial trucks; the San Diego County Air 
Pollution Control District; and the State of California.

II. Discussion of Final Rule and Comments Received

A. Changes to Proposed Rule for Final Rule

    After reviewing the comments received, EPA has made the following 
changes to the Notice of Proposed Rulemaking (NPRM) for the final rule. 
First, the final rule establishes one definition of ``new'' that 
applies equally to domestically manufactured and imported vehicles and 
engines. Second, the definition of ``new'' applies to all nonroad 
engines other than locomotives and engines used in locomotives. EPA 
will define ``new'' locomotives and ``new'' engines used in locomotives 
in its locomotive standards promulgated under section 213 of the Act. 
Third, in the final rule EPA defines the word ``commercial,'' as used 
in the definitions of ``farm equipment'' and ``construction 
equipment.'' Fourth, EPA makes minor modifications to the definitions 
of ``construction equipment'' and ``locomotive.'' Fifth, the proposed 
federal labeling requirement is deleted. Sixth, EPA changes its 
interpretation of section 209(e) so that California may adopt, but not 
enforce, nonroad standards prior to EPA authorization. Seventh, EPA 
changes the standard of review of California's primary use 
determination to a preponderance of the evidence standard. Finally, EPA 
changes its interpretation of ``consistent with this section'' in 
section 209(e)(2)(A)(iii) to include section 209(b)(1)(C).

B. Nonroad Engines and Vehicles

    In the NPRM, EPA acknowledged that at some point it would be 
necessary to clarify whether certain internal combustion engines, such 
as those used in movable pumps, generators, and compressors, are 
stationary sources and therefore subject to regulations under Title I 
of the Act or are mobile sources and therefore potentially subject to 
nonroad regulations under Title II of the Act. The issue is complex. 
The definitions of ``stationary source'' in sections 111(3) and 302(z) 
of the Act and of ``nonroad engine'' in section 216(10) of the Act do 
not make clear under which Title certain internal combustion engines 
belong. The engines in question are those used in equipment for reasons 
other than propulsion.
    Ingersoll-Rand, the Engine Manufacturers Association (EMA), and the 
Equipment Manufacturers Institute (EMI), among others, commented that 
EPA should determine in this rulemaking that both self-propelled and 
transportable equipment are mobile sources. This would clarify to 
manufacturers that transportable farm and construction equipment are 
exempted from state regulation for purposes of control of emissions.
    EPA agrees that the above issue needs to be addressed and has 
resolved this issue in a rulemaking implementing section 213 of the 
Act.\1\ Section 213 requires EPA to ``conduct a study of emissions from 
nonroad engines and nonroad vehicles to determine if such emissions 
cause, or significantly contribute to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' The 
section further provides that if the Administrator determines that 
nonroad emissions are ``significant contributors'' in more than one 
ozone or carbon monoxide (CO) nonattainment area, the Administrator 
shall promulgate standards for such nonroad engines.
---------------------------------------------------------------------------

    \1\On June 17, 1994 a final rule was published (59 FR 31306) for 
nonroad engines 37 kilowatts (50 horsepower) which provides a 
definition of nonroad engine.
---------------------------------------------------------------------------

    EPA studied nonroad emissions and issued a report in November 
1991.\2\ In the June 17, 1994 rulemaking EPA determined, based on the 
study data and the docket of the rulemaking (A-91-24), that emissions 
from nonroad sources are significant contributors to ozone and CO in 
more than one nonattainment area. EPA's final rule also includes 
regulations that set forth emission standards for CO, hydrocarbon (HC), 
oxides of nitrogen (NOX) and smoke emissions from large new 
nonroad compression-ignition engines at or above 37 kilowatts in power, 
with the exclusion for certain types of engines.\3\ Within EPA's 37 
kilowatt and above nonroad rule a definition of nonroad engine is 
provided. Section 89.2 of the 37 kilowatt and above rule provides the 
following definition:
---------------------------------------------------------------------------

    \2\Nonroad Engine and Vehicle Emission Study, EPA publication 
number 21A-2001, November, 1991. Available in EPA docket A-91-24 or 
from the National Technical Information Service (NTIS).
    \3\59 FR 31306, June 17, 1994.
---------------------------------------------------------------------------

    Nonroad engine means:
    (1) Except as discussed in (2) below, a nonroad engine is any 
internal combustion engine:
    (i) in or on a piece of equipment that is self-propelled or serves 
a dual purpose by both propelling itself and performing another 
function (such as garden tractors, off-highway mobile cranes and 
bulldozers); or
    (ii) in or on a piece of equipment that is intended to be propelled 
while performing its function (such as lawnmowers and string trimmers); 
or
    (iii) that, by itself or in or on a piece of equipment, is portable 
or transportable, meaning designed to be and capable of being carried 
or moved from one location to another. Indicia of transportability 
include, but are not limited to, wheels, skids, carrying handles, 
dolly, trailer, or platform.
    (2) An internal combustion engine is not a nonroad engine if:
    (i) the engine is used to propel a motor vehicle or a vehicle used 
solely for competition, or is subject to standards promulgated under 
section 202 of the Act; or
    (ii) the engine is regulated by a federal New Source Performance 
Standard promulgated under section 111 of the Act; or
    (iii) the engine otherwise included in (1)(iii) remains or will 
remain at a location for more than 12 consecutive months or a shorter 
period of time for an engine located at a seasonal source. A location 
is any single site at a building, structure, facility, or installation. 
Any engine (or engines) that replaces an engine at a location and that 
is intended to perform the same or similar function as the engine 
replaced will be included in calculating the consecutive time period. 
An engine located at a seasonal source is an engine that remains at a 
seasonal source during the full annual operating period of the seasonal 
source. A seasonal source is a stationary source that remains in a 
single location on a permanent basis (i.e., at least two years) and 
that operates at that single location approximately three ( or more) 
each year. This paragraph does not apply to an engine after the engine 
is removed from the location.
    For purposes of consistency with section 213, and the reasons set 
forth in the 37 kilowatt and above regulation,\4\ EPA has decided to 
adopt and apply this definition to today's section 209(e) rulemaking.
---------------------------------------------------------------------------

    \4\EPA incorporates by reference the 37 kilowatt and above 
nonroad regulation at 59 FR 31306, June 17, 1994.
---------------------------------------------------------------------------

    The California Air Resources Board's (CARB) utility engine 
regulation (the California Utility Rule) affects only engines smaller 
than 25 horsepower. EPA believes that equipment that uses such small 
engines is intended to be mobile. For example, equipment that uses 
engines smaller than 25 horsepower includes hand-held and portable 
equipment, which EPA believes are clearly nonroad, mobile sources.

C. Definition of ``New'' as Used in ``New Nonroad Engine,'' and ``New 
Nonroad Vehicle''

    In the NPRM, EPA defined ``new nonroad engine'' and ``new nonroad 
vehicle'' to mean a nonroad engine or a nonroad vehicle the equitable 
or legal title to which has never been transferred to an ultimate 
purchaser. Ultimate purchaser was proposed to be defined as the first 
person who in good faith purchases such a new nonroad vehicle or 
nonroad engine for purposes other than resale. Additionally, with 
respect to imported nonroad engines, EPA proposed to define ``new'' 
nonroad engine to be a nonroad engine manufactured after the effective 
date of a regulation issued under section 213 which would be applicable 
to such engine had it been manufactured for importation into the United 
States. These definitions also applied to ``new locomotives'' and ``new 
engines used in locomotives.''
    Comments on EPA's proposed definition of ``new'' were several. 
First, CARB, the San Diego Air Pollution Control Board (SDAPCB), and 
the Manufacturers of Emissions Controls Association (MECA) supported 
EPA's definition. CARB asked that EPA clarify which regulatory 
activities states may perform; for example, whether states may require 
in-use testing and impose add-on or retrofit requirements. On the other 
hand, many commenters, including U.S. Representative Terry Bruce, the 
Equipment Manufacturers Institute (EMI), the Engine Manufacturers 
Association (EMA), and the Portable Power Equipment Manufacturers 
Association (PPEMA), opposed EPA's proposed definition and proposed 
that ``new'' should mean manufactured after either the effective date 
of the Clean Air Act Amendments, November 15, 1990, or after federal 
regulations take effect. These commenters believe that Congress 
intended an ``absolute'' preemption. That is, the nonroad engines and 
vehicles in the preempted categories manufactured after November 15, 
1990 would never be subject to any kind of state emission regulation. 
EMA commented that if EPA does not accept the latter definition, it 
should expand its proposed definition so that engines remain ``new'' 
until they have exceeded their useful life.
    Commenters in the railroad industry also supported a definition of 
``new'' as ``manufactured after November 1990'' and stated further that 
the railroad industry has traditionally been preempted from state 
regulation, such as in the area of safety. The same commenters 
indicated that they believe that state control of locomotive emissions 
or state enforcement of federal standards would interfere with 
interstate commerce. Railroad commenters also stated that any standards 
for rebuilt or remanufactured engines or locomotives should be uniform 
federal standards--not state standards. Furthermore, if remanufactured 
engines were rebuilt to comply with such federal standards, they should 
be considered ``new''.
    Commenters also opposed the proposed definition regarding imported 
vehicles and engines because the definition of ``new'' was different 
depending upon whether the nonroad engine was produced domestically or 
abroad.
    These proposed definitions for ``new nonroad vehicles'' and ``new 
nonroad engines'' parallel the definitions of ``new motor vehicles'' 
and ``new motor vehicle engines'' in section 216 of the Clean Air Act. 
The definition of ``new'' proposed for imported nonroad engines was 
intended to address nonconforming engines which may become subject to 
federal emission requirements at the time the engine or vehicle is 
imported into the United States. The Agency has decided to delete this 
definition of ``new'' for imported engines. EPA agrees with the 
commenters that imports and domestic products should generally be 
treated alike for regulatory purposes. The Agency has addressed the 
importation of nonroad engines which do not conform to federal emission 
standards at the time of importation.5 Today's rule, in any event, 
treats domestic and imported nonroad engines the same way for purposes 
of determining whether they are preempted from state regulation.
---------------------------------------------------------------------------

    \5\See 59 FR 31306, June 17, 1994, which sets forth CO, HC, 
particulate matter, NOx and smoke opacity standards for 50 hp 
and above nonroad engines and vehicles. EPA is imposed certain 
restrictions on the importation of nonconforming nonroad engines 
based on existing regulations for the importation of nonconforming 
motor vehicles and motor vehicle engines.
---------------------------------------------------------------------------

    This final rule establishes a definition for all domestically 
manufactured and imported ``new nonroad engines,'' ``new nonroad 
vehicles,'' other than ``new locomotives'' and ``new engines used in a 
locomotive.''6 New nonroad engines and new nonroad vehicles are 
defined as engines and vehicles the equitable or legal title to which 
has not been transferred to an ultimate purchaser. The ultimate 
purchaser is defined as the first person who in good faith purchases 
such engine or vehicle for purposes other than resale. For some engines 
or vehicles the passage of title in the United States may not formally 
occur or manufacturers may retain title and lease the engines or 
equipment. In these cases, a domestic or imported nonroad engine or 
nonroad vehicle will retain its status as ``new'' until such engine or 
vehicle is ``placed into service.'' An engine or vehicle is considered 
``placed into service'' when the engine or vehicle is used for its 
functional purposes. EPA believes that the definition of new should 
include the ``placed into service'' addition to the motor vehicle 
definition of new found in section 216 of the Act because of the nature 
of the nonroad market. Nonroad engines and nonroad vehicles are often 
leased and maintained by the manufacturer well into the useful life of 
the nonroad equipment. A piece of equipment, the title of which has 
passed to the ultimate purchaser, should not be treated differently 
than a piece of equipment which is being used but has not yet passed to 
an ultimate purchaser.
---------------------------------------------------------------------------

    \6\As discussed below, EPA is deferring its definitions of 
``new'' locomotives and ``new'' engines used in a locomotive for the 
purpose of this regulation. EPA shall define these terms in a later 
rulemaking, under section 213 of the Act, specifically regulating 
locomotives.
---------------------------------------------------------------------------

    The Agency believes that this definition of ``new'' comports with 
the language, intent and structure of the Clean Air Act and the 
definition of ``new'' contained in the 37 kilowatt and above regulation 
and is therefore a permissible construction of the statute. Contrary to 
the assertion of some commenters, EPA's definition of ``new'' is 
consistent with the dictionary definition of the word as ``having 
existed or been made but a short time.'' Webster's Ninth New Collegiate 
Dictionary, 1990. Generally speaking, manufactured products are sold 
soon after they are made and are considered new until they are sold or 
used. The commenters' definition of new--anything manufactured after 
the Clean Air Act Amendments' enactment or an applicable regulation's 
promulgation--would mean, by contrast, that any engine manufactured 
after a certain date would be new forever. This is certainly not the 
plain meaning of ``new.'' Congress could have stated that the federal 
preemption applied to certain equipment manufactured after a certain 
date, but Congress did not do so. Elsewhere in Title II, Congress 
specified that a provision only applied to products manufactured after 
a certain date (see, section 218 requiring a ban on engines 
manufactured after the 1992 model year that require leaded gasoline) or 
first introduced into commerce after a certain date (see, section 
211(f) regarding prohibition on fuels that are not substantially 
similar to fuels used to certify vehicles as meeting emission 
standards). The lack of such a date here further supports that Congress 
intended ``new'' to mean newly manufactured and not yet sold.
    The legislative record also shows Congressional intent that ``new'' 
should refer to newly manufactured products. In his colloquy with 
Senator Wilson explaining the final version of section 209(e), Senator 
Chafee notes that ``because the preemption is limited to new engine 
standards only, States can continue to require existing and in-use 
nonroad engines to reduce emissions . . .'' [Emphasis added] 136 Cong. 
Rec. S17237 (October 26, 1990). This language is echoed by similar 
language from Senator Baucus in his report to the Senate on the 
conference bill. 136 Cong. Rec. S16976 (October 27, 1990). If Congress 
intended the definition of new nonroad engines or equipment, and as a 
result the preemption, to apply to an engine for its entire life, then 
it would appear that there would be no distinction between new and in-
use nonroad engines, as an engine manufactured after a certain date 
would always be new. Yet the statements of Senator Chafee and Senator 
Baucus clearly contemplate such a distinction.
    The Agency's definition of new is also consistent with the way the 
Act approaches motor vehicle emission control. As noted earlier, 
section 216 defines new in the context of motor vehicles as ``a motor 
vehicle the equitable or legal title to which has never been 
transferred to an ultimate purchaser.'' The Act applies federal 
emissions standards to ``new'' vehicles. These federal standards are 
enforced through certification, assembly line, and recall testing. 
States, on the other hand, have a role in motor vehicle emission 
control through inspection/maintenance programs and are not restricted 
from controlling used vehicles. The section 209(a) prohibition of state 
regulation of motor vehicles addresses only ``new'' motor vehicles and 
engines and prohibits state regulation that occurs before sale, 
titling, or registration of the vehicle.7
---------------------------------------------------------------------------

    \7\Section 209(a) provides, in part, ``. . . No State shall 
require certification, inspection, or any other approval relating to 
the control of emissions from any new motor vehicle or new motor 
vehicle engine as condition precedent to the initial retail sale, 
titling (if any), or registration of such motor vehicle, motor 
vehicle engine, or equipment.''
---------------------------------------------------------------------------

    The Clean Air Act Amendments of 1990 take a parallel approach to 
nonroad standards and enforcement. Section 213 provides EPA with 
authority to set standards for ``new'' engines and provides for federal 
enforcement of such standards in the same manner as motor vehicle 
enforcement. Furthermore, nothing on the face of section 209(e) or 
section 213 indicates that Congress intended ``new'' to be interpreted 
differently in the nonroad and motor vehicle contexts. Given that the 
preemption provisions for new motor vehicles and new nonroad engines 
appear in the same section of the Clean Air Act, it is reasonable to 
believe that Congress did not intend for the word ``new'' to be defined 
differently within the same section without stating this intent 
explicitly.8
---------------------------------------------------------------------------

    \8\EPA recognizes that regulation of locomotives presents unique 
circumstances, including questions regarding interstate commerce, 
that require special attention. EPA is therefore deferring its 
definition of ``new locomotive'' and ``new engine used in a 
locomotive'' until a later rulemaking dealing specifically with 
regulation of locomotives.
---------------------------------------------------------------------------

    There is not a compelling policy or factual justification for 
defining new differently in the nonroad and motor vehicle contexts. 
State regulation of nonroad engines does not generally present any 
greater degree of disruption of the movement of products, engines or 
equipment between states than does regulation of motor vehicles. The 
comments provide little if any justification, in terms of relevant 
distinctions between motor vehicles and nonroad engines, to justify 
such a significant departure from EPA's established practice for 
regulating mobile sources.
    The Agency's definition of new is also consistent with case law. In 
Allway Taxi, Inc. v. City of New York,9 the court held that where 
the exercise of local police power serves the purpose of a federal 
act--the Clean Air Act in that case--the preemptive effect of the act 
should be narrowly construed. In keeping with that principle, EPA 
believes that section 209(e) should be construed narrowly in order to 
protect states' rights, particularly in an area such as public health 
in which states traditionally exercise control. California's nonroad 
regulations will serve the purpose of the federal act by improving air 
quality.
---------------------------------------------------------------------------

    \9\Allway Taxi, Inc. v. City of New York, 340 F. Supp. 1120 
(S.D.N.Y.), aff'd, 468 F.2d 624 (2d Cir. 1972).
---------------------------------------------------------------------------

    In Allway Taxi, the court discussed the federal preemption of new 
motor vehicles and interpreted the meaning of new motor vehicle as 
defined in Section 216 of the Act. The court noted that this definition 
``reveals a clear congressional intent to preclude states and 
localities from setting their own exhaust emission control standards 
only with respect to the manufacture and distribution of new 
automobiles.''10 The court stated further that the narrow purpose 
in the definition is reinforced by prohibiting states and localities 
from setting emission standards before the initial sale or registration 
of an automobile. Congress specifically declared that section 209 did 
not preempt states from regulation of the use or movement of motor 
vehicles after they have reached their ultimate purchasers.11
---------------------------------------------------------------------------

    \1\0Id. at 1124.
    \1\1Id.
---------------------------------------------------------------------------

    EPA believes that the further a state requirement is removed in 
time from the manufacture and distribution of new engines, the less 
interstate commerce is likely to be burdened. Furthermore, the legality 
of particular regulatory controls that a state may impose on nonroad 
vehicles or engines that are no longer new will depend upon the burden 
that such controls place on interstate commerce. In fact, the court in 
Allway Taxi stated that a state or locality is not free to impose its 
own emission control measures the moment after a new car is bought and 
registered. ``That would be an obvious circumvention of the Clean Air 
Act and would defeat the congressional purpose of preventing 
obstruction to interstate commerce.''\12\ The court further stated that 
federal preemption does not, however, preclude a state from imposing 
its own exhaust emission control standards upon the resale or 
reregistration of the automobile. Furthermore, states are not precluded 
from setting standards for licensing of vehicles for commercial use. 
These types of regulations, which are more removed, ``would cause only 
minimal interference with interstate commerce, since they would be 
directed primarily to intrastate activities and the burden of 
compliance would be on individual owners and in-state users and not on 
manufacturers and distributors.''\13\
---------------------------------------------------------------------------

    \12\Id.
    \13\Id.
---------------------------------------------------------------------------

    EPA expects that the principles articulated in Allway Taxi will be 
applied by the courts to any State adoption of in-use controls. For 
example, manufacturers have voiced a concern that California would 
attempt to impose in-use emission control measures that would apply 
immediately after a new vehicle or engine were purchased. As the Allway 
Taxi court said, such standards applied to almost-new vehicles would be 
an attempt to circumvent section 209 preemption and would obstruct 
interstate commerce.\14\
---------------------------------------------------------------------------

    \14\Id. EPA expects the reasoning and policy outlined above in 
the Allway Taxi discussion to apply to locomotives although its 
implementation is dependent upon the ultimate definition of new 
locomotive.
---------------------------------------------------------------------------

    It should be noted that section 209(e)(2) of the Act does not 
prevent California or other states from regulating nonroad engines and 
vehicles in use.15 EPA believes that the requirements of section 
209(e)(2) apply only to new nonroad engines and vehicles. The 
requirements of section 209(e)(2) are only required for nonroad engines 
and vehicles the regulation of which has been preempted. The language 
of section 209(e)(2) does not state any clear preemption, either for 
new or in use vehicles. The only clear preemption of state regulation 
of nonroad engines occurs in section 209(e)(1) and section 
209(a).16 Both of these subsections are limited to new engines and 
vehicles. Given the general legal presumption against reading a 
preemption more broadly than explicitly required, as discussed in 
Allway Taxi, a preemption of state regulation of nonroad engines and 
vehicles in use should not be readily implied.
---------------------------------------------------------------------------

    \1\5In-use testing and recall programs of the type set forth in 
section 207 ensure compliance with standards required to be met by 
manufacturers at the time of certification of the engine. Because 
these in-use standards relate to the original manufacture of the 
engine and place the burden of compliance upon the manufacturer, 
they are deemed to be standards affecting a new motor vehicle or a 
new nonroad engine and thus require a waiver under the criteria of 
section 209(b) or 209(e)(2) respectively.
    \1\6Section 209(a) applies to nonroad vehicles because of the 
language of section 213(d) of the Act, which specifically requires 
that EPA's standards regulating nonroad engines and vehicles be 
subject to sections 206, 207, 208 and 209 of the Act, with such 
modifications of the applicable regulations as the Administrator 
deems appropriate. Thus, Congress clearly anticipated that all of 
section 209 would be applicable to nonroad engines. Subsections (a) 
through (d) of section 209 do not specifically reference nonroad 
engines, nor do sections 206, 207 or 208. However, the language of 
section 213(d) clearly is intended to apply such provisions to 
nonroad engines. Further indication of Congress' intent is the 
language of the last sentence of section 209(e)(1) , which states 
that subsection 209(b) does not apply for purposes of subsection 
(e)(1). (Section 209(b) provides the procedure under which 
California can receive a waiver of section 209(a) preemption for 
motor vehicles.) This sentence would not have been necessary unless 
subsection 209(a) through (d) otherwise applied.
---------------------------------------------------------------------------

    Another indication that section 209(e)(2) was not intended to apply 
to most in-use regulations of nonroad engines is the fact that neither 
the Senate nor the House version of the 1990 Act amendments would have 
preempted state regulation of anything but new nonroad engines. Neither 
version would have expressly preempted regulation in use. It would be 
unusual for a bill to come out of conference with a broader preemption 
than existed in either house and without any mention in the legislative 
history that such broader preemption had been mandated. In fact, both 
Senators Chafee and Baucus believed that the scope of the preemption 
had been narrowed from the House bill, not widened.17
---------------------------------------------------------------------------

    \1\7Both Senators declare that state preemption is limited to 
new locomotives and new small farm and construction equipment. Both 
mention that states may still regulate other new nonroad equipment, 
presumedly after receiving EPA approval. Finally, each declare that 
states also fully retain existing authority to regulate emissions 
from all types of existing or in-use nonroad engines by specifying 
fuel quality specifications, operational modes or characteristics or 
measures that limit the use of nonroad engines or equipment.
---------------------------------------------------------------------------

    In fact, as the legislative history indicates, it appears that 
Congress intended the preemption provisions of section 209, as applied 
to nonroad engines, to be analogous to the preemption provisions as 
applied to motor vehicles, except that California cannot request any 
waiver of the Federal preemption of state regulation of new small farm 
and construction equipment and locomotives.
    Further indication that section 209(e)(2) was not intended to apply 
to in-use regulations is the fact that, if the subsection were applied 
to in-use regulations, then California would be the only government 
(local, state or federal) that could directly set regulations for 
nonroad engines in use. EPA's mandate under section 213 applies only to 
new engines. Therefore, EPA will not promulgate standards for in-use 
regulation of nonroad engines under section 213, beyond in-use 
regulations normally associated with new certified engines (e.g. in-use 
testing and recall requirements under section 207). States other than 
California would not be able to regulate nonroad engines in use (e.g. 
operation controls under section 209(d)) until California regulates 
them and could only regulate them in a manner identical to California's 
regulations. Nothing in the legislative history indicates such a 
dramatic departure from the current ability of states and local 
authorities to regulate emissions of mobile sources in use. Therefore, 
if section 209(e)(2) is determined to apply to in-use regulations, the 
entire United States regulatory scheme for regulation of nonroad 
engines in use would be dependent on the actions of one state, 
California. Congress could not have meant to grant such plenary power 
to a single state.
    This is especially true given the location-specific nature of in-
use regulations. In-use regulations, such as time of use or place of 
use restrictions (e.g. high occupancy vehicle lanes) are typically very 
site specific. An in-use regulation suitable for California, or in part 
of California, may have little or no relevance or practicality to the 
type of in-use regulation suitable for another area. Such regulations 
which primarily effect local users are more appropriately controlled 
and implemented by local and state governments.
    Moreover, section 209(d) of the Act clearly limits the preemption 
of state regulation in use. It states that ``nothing in this part shall 
preclude or deny to any other State or political subdivision thereof 
the right otherwise to control, regulate, or restrict the use, 
operation or movement of registered or licensed motor vehicles.'' As 
was stated above, section 209 as a whole applies equally to nonroad 
engines. Thus, section 209(d) should be interpreted to mean that, 
unless state regulation of use of nonroad engines is specifically 
preempted, section 209 should not be interpreted to grant any implicit 
preemption, except within the framework of Allway Taxi.
    Given the language of section 209 and the lack of any express 
preemption, the legislative history of these provisions, and the 
general presumption against providing broad preemption where such 
preemption is not made explicit, EPA believes that it is clear that 
section 209(e)(2) does not apply to in use regulation of nonroad 
engines.
    While EPA recognizes the important principle of narrowly construing 
the preemptive effect of the Act as explained in Allway Taxi, EPA also 
notes that certain state regulations that may be characterized as ``in-
use'' regulations may be preempted because they are effectively 
regulations on the design of new engines rather than on the use of 
``in-use'' engines. Industry has expressed concern that states might 
impose retrofit requirements on nonroad engines and vehicles as soon as 
they are introduced into commerce, or when such engines are being 
rebuilt, or at a date after which nonroad engines are typically 
rebuilt.18 EPA recognizes that CARB does not envision a retrofit 
requirement and that, because of the nature of the nonroad market, it 
is unlikely that other states would adopt such a requirement.19 
However, given EPA's definition of new and the scope of the definition 
within this rulemaking, this issue could arise when other states plan 
their in-use emission strategy. In such a case, EPA believes that a 
retrofit requirement mandating a retrofit of a nonroad engine 
immediately after the engine is no longer new is adverse to the 
Congressional intent of section 209(e) and the principles laid out in 
Allway Taxi. Therefore, in this scenario, such a retrofit requirement 
would be deemed an in-use emission standard relating back to the 
original design of the new engine by the original engine manufacturer 
(OEM) and would be subject to the waiver criteria of section 209(e)(2). 
Within this same scenario, only California could adopt such a 
requirement and other states could only adopt California's requirement 
if California subsequently was granted a waiver. However, after a 
reasonable amount of time has passed and the engine is no longer new 
(most likely when an engine is being rebuilt), modest retrofit 
requirements would most likely not be deemed to significantly affect 
the OEM and thus such requirements would not be subject to subsection 
209(e)(2). In this second scenario, the modest retrofit requirements 
would still be subject to challenge in court under the Allway Taxi 
criteria.20
---------------------------------------------------------------------------

    \1\8See Oral Statement of the Engine Manufacturers Association, 
Docket entry IV-F-7, which states ``The ultimate purchaser must have 
the assurance that the engine . . . she might purchase, and which 
properly meets EPA requirements--is `good' until that engine is 
ready to be rebuilt. No state should be allowed to impose retrofit 
standards on engines which otherwise conform to EPA requirements.''
    \1\9See Letter from Mr. Cackette, CARB to Mr. Mandel, EMA, dated 
July 20, 1993, Docket entry IV-I-55.
    \2\0EPA's definition of ``new'' does not present a problem for 
engines or equipment that do not sell relatively quickly (e.g., 
within a year of being made) in California. If California's 
regulation set standards applicable to ``new'' engines, i.e, as of 
the date title passed, regardless of when the engine was produced, 
then an engine manufactured in 1990 but not sold until 1994 would be 
subject to 1994 emission standards. This problem is avoided since 
California's Utility Engine Rule ties the date of manufacture to the 
standard, therefore a 1990 engine would be subject to a 1990 
standard and a 1994 engine subject to a 1994 standard.
---------------------------------------------------------------------------

    Therefore, the Agency has determined that nonroad engines and 
nonroad vehicles will be ``new'' for purposes of the Act until the 
equitable or legal title passes to the ultimate purchaser, or if title 
passage does not occur, then the engine or vehicle will be new until 
placed into service.

D. Definition of Farm Equipment

    The NPRM defined ``farm equipment'' to mean any internal combustion 
engine-powered machine primarily used in the commercial production and/
or harvesting of food, fiber, wood, or commercial organic products.
    Several manufacturers and trade groups were concerned that the 
definition was too narrow. These commenters thought it necessary to 
change the words ``primarily used in'' to ``designed for use in''. They 
asserted that the designer is the only one who knows what tasks a 
particular machine was meant to perform. They also thought that the 
definition should include engines used in post-harvest processing and 
storage that take place on the farm (the U.S. Department of Agriculture 
had a similar comment) and transportation which takes place on the 
farm. Caterpillar, Inc., PPEMA, EMI and others were concerned that the 
word ``commercial'' might exclude equipment used in the public sector 
(e.g., state agricultural programs) or on cooperative or communal 
farms.
    CARB, SDAPCB, and MECA, on the other hand, thought the definition 
was too broad. CARB and SDAPCB believed that the word ``commercial'' 
was not only necessary but needed to be defined. Suggestions for the 
definition were supplied. MECA suggested that the definition should be 
site and use specific. CARB also thought the wording should be changed 
to ``production and harvesting'' in place of ``and/or''. CARB provided 
their characterization of typical farm equipment (self-propelled and 
operated independent of other equipment) and a partial list of pieces 
of equipment that should not be included under the definition of farm 
equipment (utility vehicles used by a farmer to check his crops or 
portable power units used to generate electricity for another piece of 
equipment).
    EPA does not believe that ``designed for use in'' should be added 
to the definition of nonroad engine. While a machine's designer may 
have designed the machine with certain tasks in mind, EPA believes that 
the intention of the designer is less important than the actual use to 
which the equipment is put. A machine may have been designed to assist 
farmers in some process, but if more than 50 percent of these machines 
are now used by homeowners, it may fairly be considered other than farm 
equipment. Requiring that equipment ``be designed for use'' on a farm 
would also leave the categorization of farm equipment entirely up to 
the manufacturers who might, in turn, choose to categorize products as 
farm equipment merely to avoid state regulation. Additionally, although 
requested, commenters have not provided examples of where the absence 
of ``designed for'' in the definition would make a difference in the 
preemption of some engines.
    EPA also did not agree with CARB's description of farm and non-farm 
equipment because it did not address the machines which are likely to 
be used in both situations. Classifying equipment that is uniquely farm 
or non-farm related is straightforward. The more difficult equipment to 
characterize is multiple use equipment. Whether and when such equipment 
is preempted from state regulation is addressed under Section G--the 
Application of Definitions, Primary Use Test section of this rule.
     CARB's further comment, that EPA should require that equipment be 
involved in both production and harvesting in order to be considered 
farm equipment, does not account for the specialization of farm 
machinery. Most farm equipment is used for a specific job: cultivating, 
planting, harvesting, etc., rather than for tasks involving both 
production and harvesting. The impetus for CARB's comment is the desire 
to separate the harvest of tree farms from that of natural forests 
which might contain no element of production and to ensure that 
landscaping and groundskeeping are not considered farming.
    Under EPA's definition, however, harvesting trees from a natural 
forest is considered farming. Plant nurseries would also be considered 
farming, as plants are a product that is grown and gathered. The 
American Association of Nurserymen supported the proposed definition. 
At the same time, CARB's concern that landscaping and groundskeeping 
might be considered farming is alleviated. Although cutting and 
trimming are involved in these operations, production and harvesting 
are not, so equipment used would not be farm equipment unless used 
primarily on farms. (See Scope of Preemption section)
    MECA suggested that the definition be changed to ``. . . used on a 
farm . . .'' to require site specificity. While most of the preempted 
equipment is operated on farms, EPA has not included this suggestion 
out of concern that it may create ambiguity for some operations, like 
plant nurseries.
    The SDAPCB was also concerned that the phrase ``commercial organic 
products'' would allow some chemical and man-made products to be 
considered farm produce and thus their associated processing equipment 
to be considered farm equipment. The list of acceptable farm products 
is broad and may include items not generally considered farm products. 
However, the equipment used in any processing after the harvest is not 
considered farm equipment. Thus, equipment used to make chemical or 
man-made products would not be considered farm equipment.
    As noted in the NPRM, EPA intended harvesting to be the last 
operation in the farming process to be considered ``farming'' and, 
therefore, equipment that performed any function later in the process, 
i.e., processing or storing, would not be preempted. However, the U.S. 
Department of Agriculture (USDA) commented that all activities 
associated with planting, harvesting and on-farm processing of 
agricultural products for use on the farm should be considered farm 
activities. The Nisei Farmers League had similar comments with respect 
to on-farm activities although they did not limit the operations to 
those preparing products for further use on the farm. Therefore, EPA 
decided that equipment used in certain post-harvesting operations will 
be accepted within the preemption category when they relate directly to 
the continued operation of the farm. Those activities include such 
things as grinding, drying, and storage operations of products usually 
used in the future on the farm. Examples of crops subject to these 
activities are hay, silage, and other animal feed. For less traditional 
agricultural operations such as nurseries, equipment used in similar 
operations will also be considered farm equipment. Machinery that is 
used on crops for continued use in that agricultural operation, such as 
conveyors (hay bale loaders) and ensiles, will be considered farm 
equipment. Post-harvest processing of crops in preparation for sale 
will not be considered farm operations.
    SDAPCB expressed the concern that the definition is so broad that 
it could limit the state's ability to regulate stationary equipment 
used in the refining, handling, cleaning or processing of food 
products. We believe that the above discussion of what post-harvesting 
processing may still be considered farming should alleviate that 
concern.
    EMI supplied EPA with a proposed definition which many others 
supported.21 EPA's definition is nearly as inclusive as EMI's 
definition. One of the differences between the two was the inclusion in 
the EMI definition of storage and processing activities of the 
harvested product. EPA's resolution of how such activities should be 
treated is discussed above. Another difference was EMI's inclusion of 
off-road transportation. We do not believe that such nonroad vehicles 
should usually be considered farm equipment as they are primarily used 
to transport persons or property on or off farms and are not unique to 
farms. EMI's definition also could include vehicles which are 
frequently used for property maintenance of a sort which is also not 
unique to farms. EMI noted at the public hearing that under its 
definition such equipment as lawn mowers would be included.22 Such 
a definition of farm equipment is overly broad.
---------------------------------------------------------------------------

    \2\1EMI proposed that ``farm equipment or vehicle'' means any 
engine-powered machine, device, apparatus, or movable stationary 
source which is self-propelled or transportable and which is 
designed by the manufacturer for use, or is used, to supply 
mechanical, hydraulic, pneumatic or electric power, for: preparation 
for production, production, harvesting, processing, storage or off-
road transportation of food, fiber, animal feed, other organic 
material or any other agricultural product or commodity, or any 
product used in an agricultural operation; handling of products or 
water related to the care of animals; movement of animals; or 
operation or maintenance of a farmstead, ranch or logging operation.
    \2\2 See Transcript of Sept. 20,1991 Public Hearing regarding 
Authorization of Nonroad Standards in California at page 139, line 
5.
---------------------------------------------------------------------------

    EPA has decided to define ``commercial'' in the final rule as ``an 
activity engaged in as a vocation.'' Farming does not have to be the 
sole or primary vocation. If a person engages in vocations in addition 
to farming, farming would still be a vocation. EPA believes that a 
dollar threshold would not serve the purpose of distinguishing 
residential from commercial use. EPA defined farm equipment as 
equipment used for ``commercial'' purposes to prevent the inclusion of 
such activities as backyard gardening in the definition of farming. 
There is no reason to believe that Congress meant to include equipment 
used in these operations which are not conventionally considered to be 
farms. Thus, equipment used on an agricultural school farm would fall 
under this definition of commercial because it is equipment used to 
educate students to farm as a vocation. Also, equipment used on farms 
that grow crops only for livestock would be considered to be farm 
equipment. Finally, equipment would be farm equipment if found on 
``subsistence'' farms, defined by Webster's New Collegiate Dictionary 
as farming that provides all or almost all the goods required by the 
farm family usually without any significant surplus for sale. EMA and 
PPEMA's suggestion that any piece of equipment that is used on a farm 
is farm equipment would preclude from potential CARB regulation many 
types of machines that are incidental to living on a farm and not used 
in operations normally associated with growing or harvesting 
agricultural products. An example would be the lawn mowers that EMI 
said should be deemed farm equipment.
    In the final rule, farm equipment is defined as any internal 
combustion engine-powered machine primarily used in the commercial 
production and/or harvesting of food, fiber, wood, or commercial 
organic products or for the processing of such products for further use 
on the farm.

E. Definition of Construction Equipment

    The NPRM stated that ``construction equipment'' means any internal 
combustion engine-powered machine primarily used on commercial 
construction sites.
    Many of the comments concerning this definition were similar to 
those comments provided regarding the definition of farm equipment. 
Several manufacturers and trade groups were concerned that the 
definition was too narrow. They thought it necessary to change the 
words ``primarily used in'' to ``designed for use in.'' Caterpillar, 
the Construction Industry Manufacturer's Association (CIMA) and others 
were concerned that the word ``commercial'' might exclude equipment 
used on public works projects or in residential construction. The EPA 
exclusion of mining equipment from this preempted category drew 
unfavorable comments from EMA, EMI, CIMA, and the American Mining 
Congress (AMC). The American Association of Nurserymen (AAN) requested 
that EPA explicitly recognize that landscape contracting involves 
earthmoving and is thus construction.
    CARB, SDAPCB and MECA, on the other hand, thought the definition 
was too broad. CARB and SDAPCB recommended that all auxiliary equipment 
such as compressors and pumps be excluded from preemption. Both 
believed that the phrase ``commercial construction sites'' be defined. 
MECA suggested that the definition should be site and use specific. 
Both CARB and SDAPCB approved of our mining equipment exclusion.
    EPA's response to the comments that the phrase ``designed for'' 
should be part of the construction equipment definition is identical to 
the Agency's response to the same comments under the Definition of 
``farm equipment'' section of this rule. Please refer to that section 
for further discussion.
    The comments on the use of the word ``commercial'' may be 
approached in a manner similar to the way they were addressed under the 
definition of ``farm equipment.'' EPA believes that defining 
``commercial'' in the final rule as ``an activity engaged in as a 
vocation'' is as appropriate in the context of construction equipment 
as it is in the context of farm equipment. ``Commercial'' in the 
construction equipment definition is meant to distinguish equipment 
that homeowners typically use to perform repairs on their own property 
from equipment typically used by contractors. Construction of public 
works projects is ``commercial'' under this definition.
    MECA suggested that the definition be changed to ``. . . used in 
construction and located on . . .'' to specify the activity involved. 
This is a reasonable suggestion. EPA believes that including these 
recommended words in the definition will make it clear that the 
function of machinery is as important as its location on a site on 
which construction occurs.
    EMA, EMI, CIMA, AMC and others pointed out that mining operations 
(surface mining) share with construction sites the use of many of the 
same machines. While this may be true, Congress expressed no intent to 
preempt from state regulation equipment used in mining operations. 
According to Webster's Third New International Dictionary (1971 
unabridged) construction is ``the act of putting parts together to form 
a complete integrated object.'' Although EPA's definition includes 
operations such as demolition and painting which take place outside the 
actual structural fabrication, the definition still would not include 
mining, which Webster's defines as ``getting ore, metals, coal or 
precious stones out of the earth.'' These are not construction 
activities. Additionally, underground mining usually employs uniquely 
designed equipment unlike equipment found on a construction site. 
Surface mining, while sharing some equipment, is a separate activity 
not associated with construction. The regulation of equipment, however, 
that is used in surface mining and is also primarily used in 
construction activities, as defined in this rule, would be preempted.
    As discussed in the NPRM, a number of diverse activities take place 
on a construction site. Earthmoving is one such activity, and thus, 
landscape contracting could use construction equipment as AAN notes. 
AAN made no mention of the specific earthmoving equipment in question; 
thus, the primary use test (See Scope of Preemption section) must be 
applied to such machinery. Groundskeeping is not a construction 
activity. AAN did state its support of EPA's definition of construction 
equipment.
    Ingersoll-Rand thought that the words ``commercial'' and ``primary 
use'' should be deleted and that the definitions of farm and 
construction equipment should be broadened to include any machine that 
includes an engine belonging to an engine family which is used in 
construction equipment. The issue of commercial is considered above. 
Ingersoll-Rand's use of the engine family concept is addressed, as is 
the primary use issue, in the Application of Definitions, Primary Use 
Test section.
    SDAPCB and CARB thought that the definition should exclude 
ancillary equipment such as electrical generators and air compressors. 
CARB argued that these machines are not specifically construction 
machines in that they perform the same functions in other types of 
applications. While this is true, such equipment may be employed in 
construction activity; the question then becomes one of primary use, 
which is discussed in the Application of Definitions, Primary Use Test 
section.
    For the reasons discussed above, construction equipment is defined 
in the final rule as any internal combustion engine-powered machine 
primarily used in construction and located on commercial construction 
sites.

F. Definition of Locomotive

    The NPRM defined locomotive as a self-propelled piece of on-track 
equipment (other than equipment designed for operation both on highways 
and rails, specialized maintenance equipment, and other similar 
equipment) designed for moving other equipment or carrying freight or 
passenger traffic or both.
    EMA noted a difference between the NPRM definition and the 
definition given in the Locomotive Inspection Act (LIA) upon which the 
EPA definition was based, but did not recommend EPA use the LIA 
definition in the definition EMA provided. The only difference between 
the EPA definition and the LIA definition is that the LIA definition of 
locomotive includes a piece of equipment without propelling motors but 
with one or more control stands. This item was not included by EPA 
since if it has no propelling motors it will not be of concern for 
purposes of engine emissions regulations. It is noted that neither the 
Association of American Railroads (AAR) nor any railroad companies that 
commented on the NPRM, such as Union Pacific and Southern Pacific, had 
any specific comments on the definition of locomotive.
    EMA provided definitions for ``locomotive'' and ``locomotive 
engine.''\23\ Under this definition, the regulation of any engine 
mounted on a locomotive (such as an engine driving a crane or winch) 
would be preempted. The dictionary definition of ``locomotive'' is a 
``self-propelled vehicle, usually diesel or electric, that travels on 
rails and moves railroad cars.''\24\
---------------------------------------------------------------------------

    \23\EMA recommended the following definitions: ``Locomotive'' 
means a self-propelled piece of on-track railroad equipment (other 
than equipment designed for operation both on-highway and on-track) 
and ``Locomotive engine'' means an engine included in a locomotive. 
See Statement of Engine Manufacturers Association, Docket entry IV-
G-19.
    \24\Websters II, New Riverside University Dictionary, 1988.
---------------------------------------------------------------------------

    EMA's definition of locomotive engine goes beyond the specific 
purpose of locomotion to include any other engine that might be placed 
on a locomotive. EPA believes that the term ``locomotive engine'' is 
limited to the engine used to propel the locomotive and other railroad 
cars. However, EPA does believe that the term ``engines used in 
locomotives,'' as found in section 209(e)(1)(B), can be defined to 
include other engines which are mounted on a locomotive regardless of 
whether they are used for purposes of self-propulsion. EPA notes that 
under this definitional framework the ``locomotive'' is only that piece 
of on-track equipment which is self-propelling and is designed for 
moving other cars containing equipment, freight, or passengers. 
``Engines used in locomotives'' thus includes an engine placed in the 
locomotive to propel the train and also includes other engines mounted 
on the locomotive for auxiliary power generation for the train, but 
does not include engines mounted on the train elsewhere than the 
locomotive. An engine providing power for a crane or winch, for 
example, would only be considered preempted from state regulation (if 
it otherwise met the requirements for ``new'') as ``an engine used in 
[a] locomotive'' if such engine were mounted on the locomotive. EPA 
believes these definitions reflect the intent of Congress to reduce the 
burden on interstate commerce for the railroad industry, and address 
EMA's concerns regarding auxiliary engines.\25\
---------------------------------------------------------------------------

    \25\See Letter from Glenn Keller, EMA to Joanne Goldhand, EPA, 
Docket entry IV-I-54.
---------------------------------------------------------------------------

    Regulation of auxiliary engines whose primary function are not for 
propulsion is addressed by EPA in its final regulation for nonroad 
engines 37 kilowatt (50 hp) and above under section 213 of the Act.\26\
---------------------------------------------------------------------------

    \26\59 FR 31306, June 17, 1994.
---------------------------------------------------------------------------

    EPA has stricken the word ``carrying'' from the definition of 
locomotive. This was done to avoid implying that any persons or 
property that were moved by the engine had to be located directly on 
the locomotive. The word ``moving'' in the definition is all that is 
needed to give the correct meaning.
    For the final rule, EPA has decided that a ``locomotive'' means a 
self-propelled piece of on-track equipment (other than equipment 
designed for operation both on highways and rails, specialized 
maintenance equipment, and other similar equipment) designed for moving 
other equipment, freight or passenger traffic. EPA has also decided 
that the term ``engines used in locomotives'' means either an engine 
placed in the locomotive to move other equipment, freight, or passenger 
traffic, or an engine mounted on the locomotive to provide auxiliary 
power.

G. Application of Definitions; Primary Use Test

1. Introduction
    EPA is defining farm equipment as any internal combustion engine-
powered machine primarily used in the commercial production and/or 
harvesting of food, fiber, wood, or commercial organic products or for 
the processing of such products for further use on the farm. EPA is 
defining construction equipment as any internal combustion engine-
powered machine primarily used in construction and located on 
commercial construction sites. Many types of equipment are used almost 
exclusively for farming and construction (e.g., tractors and 
bulldozers). In the case of such equipment, the applicability of EPA's 
definition is clear: they are farm or construction equipment and thus 
preempted from state regulation. Other types of equipment, however, are 
used not only for farming or construction, but for other purposes as 
well (e.g., pumps used for irrigation and swimming pools). The issue 
thus arises whether or not such multi-purpose equipment should be 
considered farm or construction equipment and thus preempted from state 
regulation.
2. EPA's Proposal
    In the NPRM, EPA proposed a ``primary use'' test to assess whether 
state regulation of multiple use equipment would be preempted. EPA 
proposed that in order for state regulation to be preempted, equipment 
must be ``primarily used''--used 51 percent--as farm or construction 
equipment. Under this test, for example, a compressor used 51 percent 
in farming or construction applications would be preempted from state 
regulation. EPA proposed 51 percent as a reasonable use cut-off point 
because it corresponds to a bare ``majority''. EPA believed that the 
preempted category would be unreasonably expanded if state regulation 
could be preempted simply because a small fraction of such equipment 
was used in farm or construction applications.
3. Comments on and Alternatives to EPA's Proposal
    During the comment period following the hearing EPA received 
comments from industry and CARB opposing the primary use test. EMI, 
EMA, PPEMA, Industrial Truck Association (ITA), Construction Industry 
Air Quality Coalition (CIAQC), and Ingersoll-Rand Company stated that 
the primary use test is unauthorized and should not be employed. They 
stated that the plain meaning of the preemption provision does not 
permit EPA to apply a percentage test to determine if equipment is farm 
or construction equipment. Congress, they contended, meant to preempt 
state regulation of all nonroad engines used in farm or construction 
equipment, even if only a small fraction of the equipment is 
represented in these preempted categories. CIMA commented that the 
proposed test would be unworkable because the data on which to base a 
primary use finding are unavailable, and Deere and Company and others 
similarly stated that accurate data cannot be obtained, in part because 
of the rental market.
    On the other side of the issue, CARB argued that the 51 percent 
primary use test is contrary to Congressional intent. CARB noted that 
it is unlikely that Congress intended to so limit California's 
authority to control emissions from nonroad sources given the broad 
waiver of federal preemption it provides California in the area of 
motor vehicle emission control.
    CARB initially supported a position that equipment should be 
defined as farm or construction equipment only if more than 75 percent 
of the equipment is used in farming or construction. CARB noted, in its 
comments supporting a 75 percent cutoff, that this would ensure that 
state regulation would be preempted only for equipment primarily used 
on farm or construction sites. Commenters submitted alternative 
proposals.
    EMA and the Outdoor Power Equipment Institute (OPEI) proposed that 
EPA should define the scope of preemption in terms of the primary use 
of the engine family, not the equipment. EMA proposed that the Agency 
consider preempting for state regulation any engine line ``used in'' 
farm or construction equipment regardless of the extent which the 
engine line is used in other types of equipment. CARB and MECA both 
commented that only regulation of the individual engines actually used 
in farm or construction equipment should be preempted. CARB also 
proposed that preemption apply only to regulation of engines 
exclusively designed for and used in the farm and construction 
industries. Failing that, both CARB and MECA believed that the 51 
percent test for determining how equipment was primarily used was too 
low. CARB recommended that state regulation of multiple-use equipment 
be preempted only if more than 75 percent of the equipment is used in 
farming or construction. CARB noted that this would ensure that any 
preempted equipment was primarily used on farms or at construction 
sites.
    PPEMA proposed that EPA use a different test to determine whether 
multi-use equipment should be considered farm or construction equipment 
for purposes of determining the scope of federal preemption. This test 
would be that federal preemption applies whenever equipment is used in 
more than de minimis amounts for farming or construction, and such 
equipment is necessary to perform farming and construction activities. 
PPEMA did not state any criteria to be used in determining such a ``de 
minimis'' amount or determining what ``necessary'' is. PPEMA supported 
this proposal with several arguments.
    First, PPEMA argued that a de minimis test follows the plain 
language of the statute. PPEMA argued that the ``plain language'' of 
the statute does not include modifiers such as ``primarily'' or 
``predominantly'' and thus does not in any way imply that Congress 
intended for EPA to apply a percentage test to determine if equipment 
was used for farming or construction. PPEMA contended that Congress 
intended to preempt state regulation of all nonroad engines used in 
farm and construction equipment.
    Second, PPEMA argued that Congress explicitly limited the scope of 
preemption by specifying that preemption would apply to regulation of 
engines used in farm and construction equipment smaller than 175 
horsepower. Thus, according to PPEMA, there is no need for EPA to 
clarify the scope of preemption further.
    PPEMA's final argument is that a de minimis test would not unduly 
expand the scope of federal preemption. Equipment would be preempted 
only if it were found in more than de minimis amounts and were 
necessary to the performance of farm and construction operations.
4. Response to Comments
    a. Primary Use Test
    EPA has decided to apply the primary use test to determine which 
multiple-use equipment will be considered farm or construction 
equipment and thus preempted from state regulation. As explained in the 
NPRM, the ``primary use'' test is the most appropriate method for 
classifying (as farm or construction, or other) multiple use equipment. 
Industry commenters who believe EPA must consider multiple-use 
equipment to be farm or construction equipment beg the question of what 
is farm and construction equipment. Some industry commenters stated 
that EPA could not use the primary use test because the language of 
section 209(e)(1) refers to new engines which are used in construction 
or farm equipment or vehicles, not to engines which are ``primarily'' 
used in construction of farm equipment or vehicles. These comments miss 
the point of the primary use test. The test is not used to define 
``used in'', but is used to define ``construction equipment'' and 
``farm equipment''. In order to identify an engine used in farm or 
construction equipment, EPA must first determine whether a piece of 
equipment is farm or construction equipment. Equipment used only 
incidentally (perhaps 10 percent) in farm or construction applications 
is not fairly considered to be farm or construction equipment. A type 
of equipment such as a pump, for example, is not farm equipment merely 
because it is used on a handful of farms and otherwise used exclusively 
in residential settings. Therefore, the engine used in this type of 
equipment is not an engine used in farm or construction equipment and, 
therefore, regulation of that engine type is not preempted.
    EPA believes that the terms ``farm equipment'' and ``construction 
equipment'' are best identified by referring to the general use of the 
equipment. EPA does not believe that the de minimis approach suggested 
by PPEMA is an appropriate approach to defining these terms. EPA does 
not believe that a piece of equipment primarily used in non-
construction or non-farming activities should be defined as 
construction or farm equipment merely because it is or could be used 
for some farm or construction applications. Such a definition would 
inappropriately expand the preempted categories.
    Similarly, EPA does not agree with CARB's initial proposal that 
equipment should be defined as farm and construction equipment only if 
more than 75 percent of the equipment is used in farm or construction. 
EPA believes that the 51 percent cutoff is a better measure of whether 
or not a piece of equipment is farm or construction equipment, 
especially given Congress's apparent intent to protect new farm and 
construction equipment from state regulation. If equipment is used more 
than half the time in farm or construction applications, then it should 
be considered farm or construction equipment even if it has some 
applications outside of the farm or construction area. A 75 percent 
threshold would be inappropriate because equipment that may be used 
regularly and predominantly in farm and construction applications could 
still be used enough in other applications to prevent a 75 percent 
threshold to be met. EPA believes its final decision on this issue will 
not unduly limit California's authority to control emissions from 
nonroad sources.
    Thus, EPA has decided to retain the 51 percent criterion for the 
primary use determination. It believes this criterion is in keeping 
with Congress's implicit goal of striking a balance between the 
competing interests of national uniformity of regulatory requirements 
and state control over sources of in-state pollution. This test still 
permits California to regulate new engines that are installed in 
machines used in farms or at construction sites if most of such engines 
are in equipment not used in those situations.
    Since the frequency with which multiple use equipment is used on 
farms or at construction sites ranges from ``almost never'' to ``every 
day'', it is clear that a line must be drawn somewhere along this 
continuum. Many comments were received addressing the selection of 51 
percent as the primary use cut-off point. EPA selected it because it 
corresponds to a bare ``majority''.
    As noted previously, PPEMA would like to see this limit lowered to 
de minimis amounts. This would mean that equipment used more often than 
this small amount in preempted categories would be judged farm or 
construction equipment and thus its regulation would be preempted. 
Therefore, under such a limit, items such as lawn mowers and hedge 
trimmers could be judged farm or construction equipment. EPA believes 
that this result, and such a low threshold by which a lawn mower could 
be considered a piece of farm or construction equipment, is not 
consistent with Congressional intent of preempting state regulation of 
new farm and construction equipment.
    No matter what number is chosen as the cutoff there will always be 
some categories of equipment that fall just above or just below the 
line. No commenter has made a strong case for why EPA should select a 
cut-off point other than the 51 percent cut-off. EPA notes CARB's most 
recent submittal, dated July 20, 1993,27 (see discussion below) 
which recognizes the use of a primary use test by EPA.
---------------------------------------------------------------------------

    \2\7See Letter from Tom Cackette, CARB to Richard Wilson, EPA, 
Docket entry IV-I-52. This letter discusses an agreement between 
CARB and certain industry representatives regarding whether certain 
equipment types should or should not be considered farm or 
construction equipment, subject to EPA's review.
---------------------------------------------------------------------------

    EPA believes the primary use test is in keeping with Congress' 
implicit goal of striking a balance between the competing interests of 
national uniformity of regulatory requirements and state control over 
sources of in-state pollution. Under this test, equipment used for a 
majority of the time in farming and construction is preempted from 
California regulation. Conversely, equipment used primarily by 
consumers and in consumer settings would more than likely be subject to 
California regulation since their use in farming or construction would 
most likely not meet the primary use test. This test, therefore, 
preempts California from regulating new engines that are installed in 
any equipment which is primarily used in the commercial production and/
or harvesting of food, fiber, wood, or commercial organic products or 
for the processing of such products for further use on the farm. This 
test also preempts California from regulating new engines that are 
installed in equipment which is primarily used in construction and 
located on commercial construction sites.
    EPA's application of the primary use test in this rule is similar 
to the proposed application of the 51 percent primary use test found in 
the notice of proposed rulemaking. That is, EPA believes that it is 
appropriate for CARB to make a preliminary determination of primary use 
for multiple-use equipment that is in question in a CARB regulation 
such as the Utility Engine Rule. (EPA's discussion of CARB's role in 
such determinations is found below in Section K). CARB will be required 
to come forward with evidence, data, agreements with industry, and 
analysis to support a finding that a category or subcategory of 
equipment is primarily not used in farm or construction applications 
and is thus subject to state regulation.
    CARB and the major industry commenters had a series of meetings 
during which they discussed whether various types of equipment should 
fall into a preempted category or a non-preempted category should EPA 
adopt its proposed primary use test based on 51 percent usage. As a 
result, on July 20, 1993, EPA received a letter from CARB explaining 
the process by which it and major industry commenters28 reached 
agreement on lists of equipment which would or would not be considered 
as farm or construction equipment based on the primary use test as set 
out in the Notice of Proposed Rulemaking for this section 209(e) 
rule.29 CARB noted that EMI had not reached agreement with the 
primary use test but apparently was in agreement with the categorized 
lists of equipment and this seems to be supported by EMI's letter to 
CARB during this time period.30
---------------------------------------------------------------------------

    \2\8The major industry groups that met with CARB included the 
Engine Manufacturers Association, the Portable Power Equipment 
Manufacturers Association, the Industrial Truck Association, the 
Outdoor Power Equipment Institute, the Construction Industry 
Manufacturers Association, and the Equipment Manufacturers Institute 
(EMI).
    \2\9See Letter from Tom Cackette, CARB to Richard Wilson, EPA, 
Docket entry IV-I-52.
    \3\0See Letter from Gary Baise, Counsel to EMI to Mike Kenny, 
CARB, Docket entry IV-I-53.
---------------------------------------------------------------------------

    EPA recognizes the significance of these lists for several reasons. 
The lists are intended to be exhaustive of all equipment currently in 
existence, according to CARB, and eliminates uncertainty regarding the 
categorization, as farm or construction or other, of any equipment 
currently in production. For any currently existing equipment under 25 
horsepower that is not considered on the list, EPA believes 
manufacturers will have the ability to petition CARB for the 
appropriate categorization. Further, the lists of equipment are generic 
such that any modifications to existing equipment types would fall into 
existing categories, with appropriate review by CARB, and thereby 
reduce any burden on manufacturers to produce large amounts of new 
information to support their position that such modified equipment is 
farm or construction.
    For newly developed equipment, which is not a modification of 
existing equipment or included on the lists, CARB and manufacturers 
will classify it as preempted or non-preempted based upon, among other 
things, a description of the equipment, its intended application, and 
projected sales market. EPA believes the classification process will be 
clear and predictable and will not require substantial new information. 
It is anticipated that CARB and the manufacturers will continue to work 
together to minimize the information gathering burden for the small 
number of newly developed types of equipment.
    The existence of these lists is noted here merely as an example of 
how CARB and industry foresee the future categorization of nonroad 
equipment. As CARB noted in its July 20, 1993 letter, EPA maintains its 
independent authority under section 209(e) to review each separate CARB 
nonroad authorization request and to determine, by examining data as 
explained in section II(K) of this preamble, whether such equipment is 
indeed farm or construction equipment.
    b. Subcategorization
    The USDA commented that some of California's suggested categories 
might be too inclusive because they were not subcategorized as to 
professional or non-professional use, particularly chain saws.
    As noted in the NPRM, unless there is a very clear delineation of 
types of equipment within a category, all similar pieces of equipment 
could remain together in one group rather than being split into 
multiple sub-groups. Not every product may be susceptible to 
subcategorization because there may not be clear delineations defining 
types of equipment. However, in cases when subcategories of equipment 
can be identified they should be separately grouped and not subjected 
to state regulation. It would be inappropriate for California to 
regulate a subcategory of multiple-use equipment which is primarily 
used as farm or construction equipment. In preparing its use 
determination California should look carefully at whether there are 
subcategories of equipment that are primarily used on farms or 
construction sites. California should not aggregate a group of 
equipment that can be subcategorized that is primarily used as farm or 
construction equipment with subcategories that are not used as farm or 
construction equipment in order to extend its reach into federally 
preempted categories. When commenters bring to EPA's attention a 
product that is primarily used as farm or construction equipment but is 
also used in other applications, EPA will carefully review California's 
categorization determination as part of its authorization process.
    c. Data for use determination
    The preamble to the NPRM provided that in determining primary use 
California would consider national sales data to demonstrate whether 
CARB's various equipment categories were or were not preempted. PPEMA, 
ITA and others commented that sales data do not correlate with actual 
use and that hours-of-use would be a better measure. EMI, CIMA and 
others were concerned with the year-to-year variability of sales, while 
OPEI and Caterpillar stated that accurate sales data were not 
available.
    CARB suggested that, if a primary use test were used, it be 
permitted to apply the best data available in making its determination 
and requested that national sales data, mentioned in the NPRM, not be 
mandated. EPA agrees that California should employ the most relevant 
information and data at hand to make its determination of primary use. 
The classes of equipment in the Utility Engine Rule regulation and in 
any potential future California regulations that may employ a usage 
test are so varied and unique that EPA is not in a position to specify 
the type of data to be used. Therefore, EPA is not mandating CARB to 
use any specific type of data, e.g. national sales data; however, 
California should select the appropriate data base keeping in mind that 
EPA will review any use determination as part of an authorization 
request by California under the preponderance of the evidence standard 
of review. (See discussion in Section K below regarding this standard 
of proof.)
    d. Equipment versus engine line
    The primary use test described in the NPRM is based upon an 
assessment of whether multiple use equipment is primarily used as farm 
or construction equipment. Several commenters suggested that the 
preemption should be based instead on a primary use test of an engine 
manufacturer's engine line. (An engine line is all the engines produced 
by a manufacturer with many common characteristics such as number of 
cylinders, displacement, calibration, etc.) Two rules would be followed 
under their suggested system: (1) state regulation of all engines used 
in farm and construction equipment would be preempted, and (2) state 
regulation of all engines from an engine line which is primarily used 
in farm and construction equipment (no matter what else they are 
installed in) would be preempted.
    Primary use would mean 51% under the engine line test also. Under 
this suggested system, in a situation in which 70 percent of an engine 
line went to farm and construction equipment and 30 percent went to 
other equipment, regulation of the entire engine line would be 
preempted. Thus state control of the 30 percent fraction of the engines 
would be preempted even though they would be installed in equipment 
that could not be considered farm or construction equipment and that 
Congress intended the state be allowed to regulate. If the fractions 
were reversed, state control of the 30 percent fraction would be 
preempted since it was used in farm and construction equipment while 
state regulation of the 70 percent fraction would not be preempted and 
would be subject to state requirements.
    The commenters suggest that the engine-line test is preferable 
because engines are generally designed by engine-line, not by 
equipment. Under the equipment-based test, engine manufacturers would 
have to divide their engine lines based on the use of the engines in 
equipment. Thus, the exact same engines might have to be divided into 
two families.
    In the equipment application method, if an engine manufacturer has 
an engine line where 70 percent of the engines go to farm and 
construction equipment (and their regulation would therefore be 
preempted) and 30 percent go to other equipment (and state regulation 
would not be preempted), the manufacturer must decide whether to split 
the engine line and manufacture the 30 percent portion of the engines 
to meet California's standards (and label them as such) or discontinue 
the production of those engines for California.31 If the example 
is reversed with 70 percent of the engines going into other equipment 
and 30 percent going into farm and construction, the manufacturer could 
decide to produce and certify its entire line to meet California's 
standards or to split its engine line into two separate engine types--
one certified for sale in California and one not. Therefore, under the 
equipment-based test, equipment manufacturers would have to maintain an 
awareness of their California and non-California markets and specify 
the number of engines of each type they will need.
---------------------------------------------------------------------------

    \3\1This discussion presumes that California will actually 
promulgate regulations for the engine line in question.
---------------------------------------------------------------------------

    However, engine manufacturers may also have to divide their engine 
lines under their proposed engine-line approach. If 30 percent of an 
engine line is used in farm and construction equipment and the 
remainder is used in non-preempted equipment, then under the 
commenters' plan, the engine line would be split, because 30 percent of 
the engine line would be preempted but the remainder would be subject 
to state regulation. Therefore, the problem the commenters sought to 
avoid would not be avoided.
    On the other hand, there are several advantages of an equipment-
based determination. The only requirement of an equipment-based 
determination would be to develop two lists--one of farm and 
construction equipment and one of other equipment (non-farm and non-
construction equipment). With these two lists the equipment 
manufacturer knows the type of engine it needs in each piece of 
equipment produced--either a preempted (farm or construction) engine or 
an engine that complies with California emission requirements if 
California has such requirements.
    Enforcement under the equipment-based method would be relatively 
simple. An inspector would only have to determine whether a piece of 
equipment was farm or construction equipment, or an other type of 
equipment. If it is farm or construction equipment, nothing more need 
be done, as the piece of equipment would not be subject to state 
regulation. If it is not farm or construction equipment, the inspector 
need only look for the required CARB label if there are California 
standards for that type of equipment. Enforcement would require 
additional steps if an engine line based system were used: for example, 
the inspector would have to determine whether a non-preempted piece of 
equipment contained an engine from a manufacturer who claimed its 
entire engine line as preempt from state regulation.
    If the primary use determination were based on an engine line, EPA 
would have several concerns. As with the equipment based method, two 
equipment lists would still be developed, but additionally each engine 
line for every engine manufacturer must be determined to be preempted 
or not after gathering data on whether the engines were now installed 
in farm or construction equipment. This would add another layer of 
calculations to the process. According to many of those who commented 
at the public hearing, engine destination data are difficult to obtain. 
In a case where most engines in an engine line are used in non-
preempted equipment, the engine line would be split, causing the same 
burden as manufacturers stated would occur in the equipment-based 
method and which they wanted to avoid. Additionally, this method would 
give a competitive advantage to manufacturers who now make engine lines 
which are primarily used in farm and construction equipment. Such 
manufacturers, who have engines for which state regulation is 
preempted, would enjoy an advantage over a manufacturer whose engines 
are not preempted and therefore must meet California's emission 
standards. Ford Motor Company recognized this issue and expressed its 
concerns and disagreement with EMA on this issue.
    EPA is also concerned that the commenters' method would be contrary 
to section 209 in that it is overinclusive and inconsistent in its 
definition of farm and construction equipment. Under the commenters' 
method, if 70 percent of the engines in an engine line were used in 
farm and construction equipment and 30 percent were used in other 
equipment, the entire engine line would be preempted. Thus, the 
regulation of some engines would be preempted even though they are not 
used in farm or construction equipment. This would create a preemption 
greater than that contemplated by the statute. Moreover, the method is 
inconsistent in application: if 70 percent of the engines in an engine 
line were used in non-preempted equipment but the remainder were used 
in farm or construction equipment, California could only regulate 70 
percent of the engines, not 100 percent. Therefore, the method gives 
engine manufacturers the benefit of full preemption when the majority 
of the engines are preempted, but it does not allow full California 
regulation if the majority of the engines are not preempted. This 
inconsistency appears arbitrary and could result in higher emissions 
(as noted by Ford Motor Company) because California would be precluded 
from regulating engines that it would otherwise be able to regulate 
under a more evenhanded approach.
    Furthermore, this approach does not solve the question that is at 
the heart of the ``primary use'' issue: i.e., when should a multiple 
use piece of equipment be defined as farm and/or construction 
equipment? In order to determine whether an engine line is being used 
30 percent in farm and construction equipment or 70 percent in farm or 
construction equipment, one still must know what is meant by farm and 
construction equipment. This approach, taken by itself, does not 
provide an answer. Finally, manufacturers did not explain how a newly 
developed engine line would be judged (preempted or non-preempted) 
since there would be no existing data upon which to base a 
determination.
    EMA stated that the equipment-based method would result in higher 
certification costs than the engine-line method. EPA believes that 
under both methods, engine manufacturers could face additional costs 
for any engine they wished to certify for sale in California. These 
costs would include research and development expenses to develop a 
cleaner engine, and administrative and testing expenses associated with 
the state certification process. Those engine manufacturers who chose 
to compete in the California market would face higher certification 
costs than those who did not, but there should be little difference in 
certification costs between the two methods.
    In the final rule, rather than use the engine-line method, EPA is 
requiring a primary use test that preempts California from regulating 
new engines that are installed in equipment that is primarily used in 
farming or construction settings.

H. Labeling Requirement

    The NPRM would require engine manufacturers to label new engines 
which are used in construction equipment or vehicles or used in farm 
equipment or vehicles and which are smaller than 175 horsepower. The 
label would state to which standard or standards (California, Federal, 
or both) the engine is certified.
    Most commenters opposed the labeling requirement. CARB stated that 
it intended to require labels on engines that comply with California 
emission regulations. CARB, EMI, and EMA agreed that a federal labeling 
requirement was not appropriate until EPA determined under section 213 
whether federal standards were necessary. In fact, EMI argued that 
authority for labeling lies in section 213, not section 209(e).
    EPA has decided to not implement a labeling requirement under 
section 209(e). It should be noted that the regulation setting forth 
federal nonroad standards under section 213 contains a labeling 
requirement.32
---------------------------------------------------------------------------

    \3\2See 59 FR 31306, June 17, 1994, specifically 40 CFR Part 89, 
Subpart B, Sec. 89.110-96.
---------------------------------------------------------------------------

I. Authorization Criteria and Procedures

    In the NPRM, EPA noted that sections 209(b) and (e) are in many 
respects alike and in those respects should be similarly interpreted. 
One difference between the two provisions that the Agency identified, 
however, was an apparent difference in the sequence of California and 
EPA actions. In this regard, EPA focused on the following language of 
section 209(b):

    (b)(1) The Administrator shall, after notice and opportunity for 
public hearing, waive application of this section to any State which 
has adopted standards . . . for the control of emissions from new motor 
vehicles or new motor vehicle engines prior to March 30, 1966. . . . 
(Emphasis added.)

EPA interpreted the phrase ``has adopted'' to mean that the 
Administrator could waive the prohibition of section 209(a) after a 
state has adopted standards. By contrast, section 209(e)(2) provides 
that ``the Administrator shall . . . authorize California to adopt and 
enforce motor vehicle emission standards.'' EPA concluded that the 
difference in language indicated that California must receive 
authorization from EPA before it can adopt any nonroad standards or 
requirements.
    CARB took issue with EPA's interpretation of section 209(e)(2) as 
requiring California to obtain authorization before adopting 
regulations. It believed that for several reasons, EPA could and should 
follow the same process under section 209(e) as it follows in granting 
motor vehicle waivers under section 209(b). First, CARB argued that 
although section 209(e) states that ``the Administrator shall . . . 
authorize California to adopt and enforce standards . . . ,'' sections 
209(a) and (b) could be similarly construed when read together. Section 
209(a) states that ``no state . . . shall adopt or attempt to enforce. 
. . .'' The only exception to the prohibition is if the Administrator 
grants a waiver under section 209(b). Thus, considered together, 
sections 209(a) and (b) could be construed to preclude prior adoption 
of a regulation by a state unless a waiver is granted.
    CARB noted that despite this language, EPA has consistently 
interpreted sections 209(a) and (b) to provide that the waiver process 
commences after state regulatory adoption. EPA's rationale has been 
that the Administrator should consider a ``final'' regulation when 
making a determination to waive federal preemption of state regulations 
that may differ from federal regulations. Between the time CARB holds a 
hearing on a proposed regulation and submission of the final regulation 
to the California Office of Administrative Law (OAL), significant 
changes could be made to the regulation. Under the California 
procedures for adopting regulations, CARB releases a ``Staff Proposal: 
Initial Statement of Reasons for Proposed Rulemaking'' along with a 
Notice for Public Comment. The comment period is forty-five days. A 
Board hearing takes place at the end of this forty-five day period. 
CARB makes modifications to the regulation after the hearing. These 
modifications are made available for public comment for fifteen days. 
CARB then prepares a ``Final Statement of Reasons for Rulemaking'' in 
which it addresses changes made to the regulation and summarizes and 
responds to all comments received during the public comment period. 
This document is submitted to the Executive Officer, who signs an 
Executive Order which formally adopts the final version of the 
regulations. Then CARB is required to submit the final regulation to 
OAL, which reviews regulations adopted by state agencies. OAL has 
thirty days to review and either approve or disapprove. It has 
authority to disapprove if (1) the regulation is inconsistent with 
California law or (2) improper procedure has been followed. If OAL 
disapproves, CARB has 120 days to modify the regulation, re-adopt, and 
re-submit the regulation to OAL.33
---------------------------------------------------------------------------

    \3\3Cal. Admin. Code tit. 2, Secs. 11340-11356 (1989).
---------------------------------------------------------------------------

    Thus, significant changes could be made to a regulation between the 
CARB hearing and adoption as well as after CARB adoption due to the 
review by OAL. If significant changes were to occur, the waiver 
California received would be insufficient to cover the regulations as 
adopted and California would be forced to reapply for a waiver of a now 
final regulation.
    EPA finds California's argument persuasive. As an initial matter, 
the Agency no longer believes that the difference in language between 
sections 209(b) and (e) was intended to delineate a difference in the 
sequence of events surrounding adoption and authorization. The use of 
the past tense in section 209(b) (``has adopted'') was merely intended 
to identify the states that could obtain a waiver for motor vehicle 
standards. (In fact, California alone had adopted such standards prior 
to March 30, 1966, and therefore, all other states have been prohibited 
from adopting emission control standards for new motor vehicles except 
as provided under section 177.) EPA also acknowledges that sections 
209(a) and (b) could be read to require California to obtain a waiver 
prior to adopting motor vehicle standards, but the Agency has not so 
interpreted these provisions. Therefore, sections 209(b) and (e) need 
not be interpreted as requiring different adoption and authorization 
processes.
    Moreover, EPA believes section 209(e) should be interpreted to 
allow a process like that established under section 209(b) for the same 
reasons EPA construed 209(b) to permit California to seek a waiver 
after it has adopted motor vehicle standards. It is inefficient for EPA 
to rule on a waiver or authorization request for what amounts to a 
regulatory recommendation. Until California adopts its program, neither 
California nor EPA can be sure that the program for which a waiver or 
authorization is requested is the program that the responsible official 
will sign into law. If there is a difference between the program 
submitted to EPA by California and the program California eventually 
adopts, any waiver or authorization granted may be insufficient to 
cover the enacted program.
    In fact, EPA received comments that illustrate the confusion that 
would result if California were required to receive EPA authorization 
before it could adopt final regulations. Several commenters were 
concerned that CARB had modified its proposed Utility Engine Rule twice 
since CARB had requested EPA authorization in December 1990. The 
commenters requested that EPA clarify that it will grant authorization 
based on the most recent version it has received from CARB and that if 
any changes are made after an authorization is granted, California must 
resubmit its authorization request. EPA believes that today's change 
allowing California to adopt before receiving EPA authorization 
resolves this confusion and inefficiency.34
---------------------------------------------------------------------------

    \3\4 EPA notes, however, that as with motor vehicle waivers 
under section 209(b), if CARB substantively amends a rule, EPA would 
expect CARB to request a new authorization.
---------------------------------------------------------------------------

    At the same time, EPA does not believe that section 209(e) may be 
interpreted to permit California to enforce any nonroad regulations 
before receiving authorization. Were California to enforce its 
regulations before it receives authorization, it would defeat the 
protection section 209(e) was established to provide--that California's 
nonroad program only go forward if EPA authorizes it in accordance with 
the provisions of that section. Thus, EPA believes that while 
California may adopt nonroad regulations before receiving EPA 
authorization, its adoption must be conditioned upon EPA's authorizing 
those regulations under 209(e). In short, California may adopt, but not 
enforce, nonroad standards prior to EPA authorization.
    Regarding the authorization criteria, EPA proposed that the first 
two criteria be interpreted the same as for section 209(b). These 
criteria are first, that no waiver or authorization shall be granted if 
EPA finds that California's determination that its standards will be, 
in the aggregate, at least as protective of public health and welfare 
as applicable Federal standards is arbitrary and capricious. Second, no 
waiver or authorization shall be granted if California does not need 
such standards to meet compelling and extraordinary conditions.
    The language of the third criterion, however, was not as clearly 
similar to section 209(b). Section 209(e)(2)(A)(iii) stated that no 
authorization shall be granted if ``California standards and 
accompanying enforcement procedures are not consistent with this 
section.'' EPA proposed that ``this section'' be interpreted to mean 
consistent with sections 209(a) and 209(e)(1).
    Commenters disagreed with EPA's proposed interpretation of 
``consistent with this section,'' stating that ``consistent with 
section 209'' should mean all of section 209, particularly section 
209(b). Some commenters also proposed that ``consistent with this 
section'' should include section 213.
    EPA has determined that, given the plain language of section 
209(e), interpreting ``consistent with this section'' to mean 
``consistent with section 213'' is not a reasonable statutory 
interpretation. The phrase ``consistent with this section'' clearly 
refers to section 209, not section 213. EMA proposed to interpret this 
phrase to refer to section 222 of the Clean Air Act Amendments of 1990. 
This would require consistency with both sections 209 and 213 of the 
Act. Absent any legislative history to explain the intent of 
``consistent with this section'', however, this interpretation would 
give to the phrase a meaning clearly different than its plain meaning 
in light of its placement in section 209 alone.
    The Agency has decided, however, that it is reasonable and effects 
Congressional intent to interpret ``consistent with this section'' to 
include all of section 209, including section 209(b)(1)(C). Hence, EPA 
believes that it should review nonroad authorization requests under the 
same ``consistency'' criterion that it reviews motor vehicle waiver 
requests.
    Under section 209(b)(1)(C), the Administrator shall not grant 
California a motor vehicle waiver if she finds that California 
standards and accompanying enforcement procedures are not consistent 
with section 202(a) of the Act. EPA has interpreted this criterion in 
previous motor vehicle waiver decisions. First, California's standards 
are not consistent with section 202(a) if there is inadequate lead time 
to permit the development of technology necessary to meet those 
requirements, giving appropriate consideration to the cost of 
compliance within that time frame. Second, California's accompanying 
enforcement procedures would be inconsistent with section 202(a) if the 
federal and California test procedures were inconsistent, that is, 
manufacturers would be unable to meet both the state and the federal 
test requirements with one test vehicle or engine.
    EPA's review of nonroad authorization requests will include the 
following. First, CARB must request EPA authorization of its adopted 
nonroad standards. Second, EPA shall not grant an authorization if (1) 
EPA determines that CARB's ``in the aggregate'' determination is 
arbitrary and capricious; (2) California does not need such standards 
to meet compelling and extraordinary conditions; and (3) if 
California's nonroad standards are not consistent with section 209, 
i.e., that they not be inconsistent with section 209(a), section 
209(e), and section 209(b), as EPA has interpreted that subsection in 
the context of motor vehicle waivers.

J. State Adoption of California Standards and Test Procedures

    EPA received comments on several aspects regarding how other states 
may adopt California nonroad standards and test procedures. First, both 
EMA and EMI argued that other states that decide to adopt California 
standards should be subject to the same process as California. However, 
the Act neither requires that states obtain EPA authorization to impose 
California's nonroad engine standards nor authorizes the Agency to 
require that states do so. Under section 209(e)(2)(B), any state which 
has plan provisions approved under part D of Title I of the Act 
(generally states within ozone nonattainment areas) may adopt and 
enforce, ``after notice to the Administrator,'' California standards. 
Language requiring that other states request and receive authorization 
from EPA is noticeably absent. Indeed, the statutory text reads as 
authorizing states to adopt California standards on their own volition. 
In contrast, section 209(e)(2)(A) clearly states that California must 
receive authorization from EPA. Moreover, the language of section 
209(e)(2)(B) is nearly identical to section 177 which provides that 
``any state which has plan provisions approved under this part may 
adopt and enforce'' California motor vehicle emission standards. Under 
section 177 New York, Massachusetts and Maine have adopted California 
standards, and other states are considering following suit. These 
States did not ask for EPA authorization before they adopted the 
California standards, nor did EPA or the automobile industry suggest 
that they needed such authorization.\35\
---------------------------------------------------------------------------

    \35\Ford Motor Co. v. EPA, 606 F.2d 1293, 1298 (D.C. Cir. 1979).
---------------------------------------------------------------------------

    Several commenters stated that section 209(e)(2)(B) required that 
California be subject to a two-year lead time requirement. EPA does not 
agree with this interpretation. Section 209(e)(2)(A) requires EPA to 
authorize California regulation of nonroad engines unless the 
Administrator makes certain findings, including that California's 
standards are ``not consistent with this section.'' As discussed 
earlier, EPA interprets that phrase as requiring that California's 
standards are technologically feasible in the available lead time. 
Since California is thus required to provide adequate lead time under 
section 209(e)(2)(A), it would not make sense to interpret section 
209(e)(2)(B) as independently requiring at least two years of lead 
time. Instead, EPA interprets section 209(e)(2)(B)'s reference to two 
years of lead time in the same way it interprets the virtually 
identical provision in section 177: that an adopting state must provide 
two years of lead time before the California standards take effect in 
the adopting state and California must have adopted standards two years 
before commencement of the period for which the standards take effect 
in the adopting state, but California may adopt standards having less 
than two years of lead time in California.

K. Rulemaking Procedure

    In the NPRM, EPA proposed definitions for the new engines used in 
the preempted categories: farm equipment, construction equipment, and 
locomotives. For equipment types that are used in a variety of 
applications, EPA also proposed a primary use test to assess whether 
such equipment is primarily used as farm or construction equipment. New 
engines used primarily in this equipment would be preempted from state 
regulation. EPA proposed that in determining ``primary use'', CARB 
would use sales data to show that an equipment type was or was not 
primarily used in farming or construction. When CARB requested EPA to 
authorize its proposed regulations, EPA would review California's 
determination regarding the primary use of particular equipment.
    In the Proposed Authorization Decision, 53 FR 45876, September 6, 
1991, EPA proposed to review the decision California made regarding the 
primary use of nonroad equipment under an arbitrary and capricious 
standard of review, the standard of review that section 209(e)(2) 
requires that the Administrator use in reviewing California's 
determination that its standards ``will be, in the aggregate, at least 
as protective of public health and welfare as applicable Federal 
standards.''
    Several commenters, including EMA, EMI, PPEMA, and the Railway 
Engineering-Maintenance Suppliers Association, Inc. (REMSA) stated that 
EPA's proposed approach to determining the primary use of nonroad 
engines and equipment inappropriately relinquished authority to 
California. They pointed out that the primary use determination goes to 
the scope of the federal preemption accorded by section 209(e)(1), and 
argued that such a threshold determination should be made by EPA, not 
California. To the extent that California did have a role in 
determining primary use, they urged that EPA apply a clear and 
compelling evidence standard of review instead of the less strict 
arbitrary and capricious test in reviewing California's determinations.
    EPA believes these commenters are essentially correct in that the 
scope of federal preemption is not for California to decide and that 
EPA should have a greater role in making that determination than the 
Agency's proposal would have required. At the same time, EPA sees 
nothing wrong with having California make a preliminary determination 
as to the use of nonroad engines and equipment. California's coming 
forward with the evidence and analysis to support such a determination 
is in keeping with the role California has with regard to other aspects 
of the waiver and authorization requests it makes under section 209.
    Notably, sections 209(b) and (e) expressly place the burden of 
coming forward on California only with regard to the determination of 
the aggregate protectiveness of California's program. Nevertheless, 
under section 209(b) California has traditionally addressed not only 
the protectiveness determination but also the other two criteria set 
forth in section 209(b)(1)(B) and (C). This approach simply reflects 
the fact that California is the party interested in obtaining the 
waiver. Similarly, under section 209(e) EPA believes it appropriate for 
California to make a preliminary use determination (primary use, as 
discussed above) based on the available evidence and for EPA to review 
that determination in light of any public comments and additional 
evidence received.
    EPA agrees with the industry commenters that the arbitrary and 
capricious standard of review is not appropriate for review of 
California's primary use determination. The arbitrary and capricious 
standard is generally applied in two types of circumstances: (1) where 
the decision-maker must apply his expertise to resolve complex issues, 
or (2) where the decision-maker has been accorded discretion in making 
the decision under review. Underlying the arbitrary and capricious 
standard is a recognition that the reviewing authority either does not 
have as much expertise as the decision-maker or that the judgment of 
the reviewing authority should not be substituted for that of the 
decision-maker to whom discretion has been granted. An illustration of 
this approach to application of the arbitrary and capricious standard 
of review is Congress' specification of that standard for California's 
protectiveness determination under section 209. The legislative history 
of that section makes clear that Congress sought to give California 
broad leeway to design a program that in California's judgment was best 
suited to the unique set of circumstances faced by that state.
    Neither reason for applying the arbitrary and capricious standard 
of review applies to California's primary use determinations. 
California does not have unique expertise in determining the use of 
nonroad engines and equipment. Nor is there any indication that 
Congress sought to accord California discretion to determine the scope 
of federal preemption. Indeed the fact that Congress prohibited all 
state regulation of certain categories of new nonroad equipment and 
required California to obtain EPA authorization to regulate any other 
categories suggests a strong congressional interest in limiting state 
regulation affecting makers of new nonroad engines and equipment. While 
preemption provisions are generally construed narrowly, congressional 
intent to prohibit states from regulating in certain areas must also be 
safeguarded. EPA believes the arbitrary and capricious standard of 
review would not sufficiently reflect congressional intent to prohibit 
state regulation of farm and construction equipment.
    At the same time, EPA does not believe that the much stricter clear 
and compelling evidence standard suggested by CIAQC is the appropriate 
standard of review. CIAQC argued that in Motor and Equipment 
Manufacturers Association, Inc., 627 F.2d 1095, (D.C. Cir. 1979) (MEMA 
I), the court found that the Administrator's use of a clear and 
compelling evidence standard to evaluate California's request for a 
waiver for enforcement procedures was valid. EPA disagrees with CIAQC's 
application of MEMA I.
    As an initial matter, MEMA I does not deal with the threshold 
matter of the scope of preemption. On such matters the court is silent 
as to the appropriate standard of review beyond providing general 
guiding principles. Instead, the court focuses on the standard of 
review to be employed by EPA on California's protectiveness 
determination. In fact, the section of the decision cited by CIAQC 
focuses on this issue, not on the issue of preemption. There the court 
not only states that California's determination is presumed to satisfy 
the waiver requirements, but that the burden of proving otherwise falls 
on the party attacking the determination. It is in this context that 
the court notes that the Administrator determined that there must be 
``clear and compelling evidence'' to show that California's proposed 
procedures undermine the protectiveness of California's standards. It 
is in the context of a party challenging California's protectiveness 
determination that the clear and compelling standard comes into play. 
Thus, EPA believes that the clear and compelling standard is neither 
applicable nor appropriate for its review of CARB's primary use 
determination.
    The Agency considers the preponderance of the evidence standard of 
review to be appropriate for its review of California's primary use 
determination. If EPA were to make the determination itself, it would 
apply such a test in making it. There is no reason to apply a different 
test simply because California has made an initial determination. 
Public commenters may supplement the record assembled by California in 
support of its determination, and the Agency will weigh all the 
evidence in reviewing California's determination. To the extent 
California's determination is supported by a preponderance of the 
evidence in the record, EPA will accept it.
    Several commenters stated that EPA was denying interested parties 
their due process rights by attempting to consider California's request 
for authorization for its Utility Engine Rule at the same time it is 
seeking comment on its proposed criteria for authorizing nonroad 
requests. The commenters argued that a final rule under section 209(e) 
was necessary to comment meaningfully on the CARB authorization 
request.
    EPA believes parties should be given another opportunity to comment 
on California's utility engine rule after today's rule implementing 
section 209(e) has become final. Thus, EPA will publish in the Federal 
Register a Notice of Opportunity for Public Hearing and Request for 
Comments regarding California's request for authorization of its 
Utility Engine Rule. Interested parties will have the opportunity to 
submit written comments, and if requested, EPA will hold a hearing. 
This will provide interested parties with an opportunity to comment on 
California's request after today's rule is finalized.

L. Executive Order 12866

    In the NPRM, EPA stated it had determined that the proposed rule is 
not ``major'' within the criteria set forth in section 1(b) of 
Executive Order (E.O.) 12291 and was therefore not required to prepare 
a Regulatory Impact Analysis (RIA). Since the NPRM E.O. 12291 has been 
replaced by 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 entitlements, grants, 
user fees, or loan programs or the rights and obligations or 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.
    Comments were received from EMI which suggested that an RIA be 
performed under the guidelines set forth in E.O. 12291. EPA will 
examine these comments in the context of E.O. 12866. In connection with 
every ``significant regulatory action'' as defined at section 3(f)(1) 
(Annual effect on the economy of $100 million * * *), E.O. 12866 
requires an RIA be performed. EMI submitted that the second and third 
independent criteria for a ``major rule'' under E.O. 12291, were met by 
both the NPRM and CARB's Utility Engine Rule currently before EPA.
    In relation to the second criterion for determining whether a rule 
is ``major'', EMI stated that its member manufacturers of farm and 
construction equipment will incur costs in attempting to comply with 
EPA's rule and CARB's Utility Engine Rule. EMI also states that both 
consumers of farm and construction equipment and California's economy 
will incur costs as a result of geographically diverse emission 
standards. EMI makes reference to no evidence or cost data in support 
of its claim.
    EMI points to the potential of diverse or multiple emission 
standards as its support that United States farm and construction 
equipment manufacturers would be unduly hindered in the international 
marketplace as evidence that the rule meets the third criterion for a 
``major rule''. Again, EMI makes no reference to any examples of costs 
or evidence to support its belief.
    EPA still believes that an RIA is not needed for the NPRM or the 
final rule. Today's rule does not itself impose any increase in costs 
to individual industries or the State of California. Indeed, the rule 
merely sets out definitions and criteria for nonroad authorization 
requests. California makes cost determinations as part of its own 
rulemaking and provides the rulemaking record to EPA as part of an 
authorization request. At the same time, EPA notes that while its rule 
does not impose any direct costs on equipment manufacturers, the more 
narrowly the scope of preemption is drawn, the more opportunities 
California has to impose costs through regulations.
    Pursuant to the terms of E.O. 12866, OMB notified EPA that it 
considered the action a ``significant regulatory action'' within the 
meaning of the Executive Order. EPA has submitted this action to OMB 
for review. Changes made in response to OMB suggestions or 
recommendations will be documented in the public record.

M. Paperwork Reduction Act

    In the NPRM, EPA stated that the proposed rule did not contain any 
additional information collection requirements subject to OMB review 
under the Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq. 
(PRA). The purpose of the PRA is ``to minimize and control burdens 
associated with the collection of information by federal agencies from 
individuals, businesses and other private institutions, and State and 
local governments.'' 5 CFR 1320.1.
    EPA received comments from two parties claiming that the PRA 
applied to the proposed rule and that such application would require 
changes within the proposed rule. North American Equipment Dealers 
Association (NAEDA) and EMI indicated that the ``primary use'' test 
would cause an increase of burdensome paperwork, with manufacturers 
dependent upon dealers and end users to provide the requisite 
information to determine primary use. At the same time, EMI noted that 
EPA did not specify any particular paperwork requirements. In addition, 
EMI did not indicate that any information need be submitted to EPA. 
Instead, EMI apparently supposes that under the PRA a greater 
administrative burden would be created by implementing a primary use 
information collection system as opposed to a ``designed for'' test and 
information collection system, and thus claims the latter should be 
implemented.
    EPA finds these comments are not relevant to the question of 
whether the Paperwork Reduction Act applies to the proposed and final 
rule. Although EPA finds the comments helpful in understanding the 
distinction between the ``primary use'' versus ``designed for'' issue, 
the comments fail to set forth any basis for asserting that the final 
rule, which adopts the proposed primary use test, contains any 
additional information collection requirements. Indeed, the comments 
presuppose the applicability of the PRA and focus on options to make 
information collection less burdensome without recognizing the 
significance of the fact that EPA has not required any information 
collection from manufacturers, dealers, or any private entity. EPA did 
not propose and has not included in the final rule any paperwork 
requirements and thus imposes no burden upon manufacturers, dealers or 
end users of nonroad equipment to submit to EPA any information 
regarding the use of nonroad equipment. EPA recognizes that in order 
for California to receive authorization from EPA for non-preempted 
nonroad equipment, California must present sufficient information that 
nonroad equipment is not used more than 51 percent as farm or 
construction equipment. California may thus require submission of 
relevant information to determine primary use, but EPA has not.
    EPA has determined that the Paperwork Reduction Act does not apply 
towards this rulemaking. EPA has not set forth any specific 
requirements for these entities to collect or submit any data to EPA.

N. Regulatory Flexibility Act

    In the NPRM, EPA stated that the proposed regulation would not have 
a significant impact on a substantial number of small entities. EPA 
determined that the proposed rule would affect manufacturers of nonroad 
equipment, a group without a substantial number of small entities.
    EPA received public comments which suggested that the proposed rule 
would in fact affect small entities. One small business equipment 
dealer commented that if the proposed rule and CARB's Utility Engine 
Rule are enacted, and nonroad farm and construction equipment is 
separately regulated by California, then it would be adversely 
impacted. This same dealer, along with the Far West Equipment Dealers 
Association (FWEDA), stated that a scenario would arise where new and 
used nonroad farm and construction equipment purchased outside 
California would cost less than that found in California, and would 
thus adversely affect dealers of such equipment within California. 
FWEDA provided examples of several pieces of farm or construction 
equipment, and their projected cost increases in order to meet proposed 
CARB emission standards, in an effort to present the price differential 
for California dealers of such equipment. In addition, FWEDA states 
that the purchasers/users of their farm and construction equipment 
within California will be at an unfair cost disadvantage in relation to 
users outside of California's boundary.
    For purposes of Regulatory Flexibility Act analysis, the issue is 
whether the final rule will have a significant impact on a substantial 
number of small entities. EPA makes no change in its determination in 
the NPRM that the final rule will have no significant impact on a 
substantial number of small entities since the rule imposes no burden 
on any entities. However, EPA reminds the parties which submitted 
comments on the applicability of the Regulatory Flexibility Act that 
California is specifically preempted from regulation of farm and 
construction equipment under 175 horsepower. The pieces of equipment 
cited by FWEDA as being potentially affected are preempted from 
regulation by California. Thus, the apprehension that such equipment 
will cost less outside of California is unfounded, as such equipment 
will be subject only to the federal regulations.
    As a result, EPA has determined, as required under the Regulatory 
Flexibility Act, that the final rule does not have a significant impact 
on a substantial number of small entities.

List of Subjects for 40 CFR Part 85

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Federal preemption, Motor vehicle pollution, 
Nonroad engine and vehicle pollution, Reporting and recordkeeping 
requirements, and State controls.

    Dated: July 1, 1994.
Carol Browner,
Administrator.

    Therefore, 40 CFR Part 85 is amended as follows:

PART 85--CONTROL OF AIR POLLUTION FROM MOTOR VEHICLES AND MOTOR 
VEHICLE ENGINES

    1. The authority citation for part 85 is revised to read as 
follows:

    Authority: 42 U.S.C. 7521, 7522, 7524, 7525, 7541, 7542, 7543, 
7547, and 7601(a), unless otherwise noted.

    2. Part 85 is amended by adding subpart Q to read as follows:
Subpart Q--Preemption of State Standards and Waiver Procedures for 
Nonroad Engines and Nonroad Vehicles
85.1601  Applicability.
85.1602  Definitions.
85.1603  Application of definitions; scope of preemption.
85.1604  Procedures for California nonroad authorization requests.
85.1605  Criteria for granting authorization.
85.1606  Adoption of California standards by other states.

Subpart Q--Preemption of State Standards and Waiver Procedures for 
Nonroad Engines and Nonroad Vehicles


Sec. 85.1601   Applicability.

    The requirements of this subpart are applicable to nonroad engines 
and nonroad vehicles.


Sec. 85.1602   Definitions.

    As used in this subpart, all terms not defined shall have the 
meaning given them in the Clean Air Act, as amended.
    Commercial means an activity engaged in as a vocation.
    Construction equipment or vehicle means any internal combustion 
engine-powered machine primarily used in construction and located on 
commercial construction sites.
    Engine used in a locomotive means either an engine placed in the 
locomotive to move other equipment, freight, or passenger traffic, or 
an engine mounted on the locomotive to provide auxiliary power.
    Farm equipment or vehicle means any internal combustion engine-
powered machine primarily used in the commercial production and/or 
commercial harvesting of food, fiber, wood, or commercial organic 
products or for the processing of such products for further use on the 
farm.
    Locomotive means a self-propelled piece of on-track equipment 
(other than equipment designed for operation both on highways and 
rails, specialized maintenance equipment, and other similar equipment) 
designed for moving other equipment, freight, or passenger traffic.
    New means a domestic or imported nonroad vehicle or nonroad engine 
the equitable or legal title to which has never been transferred to an 
ultimate purchaser. Where the equitable or legal title to an engine or 
vehicle is not transferred to an ultimate purchaser until after the 
engine or vehicle is placed into service, then the engine or vehicle 
will no longer be new after it is placed into service. A nonroad engine 
or vehicle is placed into service when it is used for its functional 
purposes. The term ultimate purchaser means, with respect to any new 
nonroad vehicle or new nonroad engine, the first person who in good 
faith purchases such new nonroad vehicle or new nonroad engine for 
purposes other than resale. This definition of new shall not apply to 
locomotives or engines used in locomotives.
    Nonroad engine means:
    (1) Except as discussed in paragraph (2) of this definition, a 
nonroad engine is any internal combustion engine:
    (i) In or on a piece of equipment that is self-propelled or serves 
a dual purpose by both propelling itself and performing another 
function (such as garden tractors, off-highway mobile cranes and 
bulldozers); or
    (ii) In or on a piece of equipment that is intended to be propelled 
while performing its function (such as lawnmowers and string trimmers); 
or
    (iii) That, by itself or in or on a piece of equipment, is portable 
or transportable, meaning designed to be and capable of being carried 
or moved from one location to another. Indicia of transportability 
include, but are not limited to, wheels, skids, carrying handles, 
dolly, trailer, or platform.
    (2) An internal combustion engine is not a nonroad engine if:
    (i) The engine is used to propel a motor vehicle or a vehicle used 
solely for competition, or is subject to standards promulgated under 
section 202 of the Act; or
    (ii) The engine is regulated by a federal New Source Performance 
Standard promulgated under section 111 of the Act; or
    (iii) The engine otherwise included in paragraph (1)(iii) of this 
definition remains or will remain at a location for more than 12 
consecutive months or a shorter period of time for an engine located at 
a seasonal source. A location is any single site at a building, 
structure, facility, or installation. Any engine (or engines) that 
replaces an engine at a location and that is intended to perform the 
same or similar function as the engine replaced will be included in 
calculating the consecutive time period. An engine located at a 
seasonal source is an engine that remains at a seasonal source during 
the full annual operating period of the seasonal source. A seasonal 
source is a stationary source that remains in a single location on a 
permanent basis (i.e., at least two years) and that operates at that 
single location approximately three (or more) each year. This paragraph 
does not apply to an engine after the engine is removed from the 
location.
    Primarily used means used 51 percent or more.


Sec. 85.1603  Application of definitions; scope of preemption.

    (a) For equipment that is used in applications in addition to 
farming or construction activities, if the equipment is primarily used 
as farm and/or construction equipment or vehicles, as defined in this 
subpart, it is considered farm or construction equipment or vehicles.
    (b) States are preempted from adopting or enforcing standards or 
other requirements relating to the control of emissions from new 
engines smaller than 175 horsepower, that are primarily used in farm or 
construction equipment or vehicles, as defined in this subpart.
    (c) States are preempted from adopting or enforcing standards or 
other requirements relating to the control of emissions from new 
locomotives or new engines used in locomotives.
    (d) No state shall enforce any standards or other requirements 
relating to the control of emission from new nonroad engines or 
vehicles except as provided for in this subpart.


Sec. 85.1604  Procedures for California nonroad authorization requests.

    (a) California shall request authorization to enforce its adopted 
standards and other requirements relating to the control of emissions 
from new nonroad vehicles or engines that are otherwise not preempted 
by Sec. 85.1603(b) or 85.1603(c) from the Administrator of EPA and 
provide the record on which the state rulemaking was based.
    (b) After receipt of the authorization request, the Administrator 
shall provide notice and opportunity for a public hearing regarding 
such requests.


Sec. 85.1605  Criteria for granting authorization.

    (a) The Administrator shall grant the authorization if California 
determines that California standards will be, in the aggregate, at 
least as protective of public health and welfare as applicable Federal 
standards.
    (b) The authorization shall not be granted if the Administrator 
finds that:
    (1) The determination of California is arbitrary and capricious;
    (2) California does not need such California standards to meet 
compelling and extraordinary conditions; or
    (3) California standards and accompanying enforcement procedures 
are not consistent with section 209.


Sec. 85.1606  Adoption of California standards by other states.

    Any state other than California which has plan provisions approved 
under Part D of Title I of the Clean Air Act may adopt and enforce 
emission standards, for any period, for new nonroad vehicles or engines 
subject to the following requirements:
    (a) The state must provide notice to the Administrator that it has 
adopted such standards.
    (b) Such standards shall not apply to new engines which are used in 
construction equipment or vehicles or used in farm equipment or 
vehicles and which are smaller than 175 horsepower or to new 
locomotives or new engines used in locomotives.
    (c) Such standards and implementation and enforcement shall be 
identical, for the period concerned, to the California standards 
authorized by the Administrator.
    (d) The state shall adopt such standards at least two years before 
commencement of the period for which the standards take effect.
    (e) California shall have adopted such standards two years before 
commencement of the period for which the standards take effect in the 
state that is adopting under section 209(e)(2)(B).

[FR Doc. 94-17002 Filed 7-19-94; 8:45 am]
BILLING CODE 6560-50-P