[Federal Register Volume 60, Number 193 (Thursday, October 5, 1995)]
[Proposed Rules]
[Pages 52135-52143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24583]



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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[AMS-FRL-5302-4]


Regulation of Fuels and Fuel Additives: Revision to the Oxygen 
Maximum Standard for Reformulated Gasoline

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA or the Agency) is 
proposing to revise the regulations for reformulated gasoline in two 
ways. The first revision would raise the maximum oxygen content for 
volatile organic 

[[Page 52136]]
compounds (VOC)-controlled gasoline (i.e, summertime reformulated 
gasoline) under the Simple Model to the maximum oxygen content allowed 
under section 211(f) of the Clean Air Act (CAA, or the Act), as much as 
3.5-4.0 percent by weight, depending on the oxygenate selected. This 
revision would further provide that the maximum oxygen content of VOC-
controlled reformulated gasoline would be lowered in any state, should 
the governor request a lower oxygen content based on air quality 
concerns. The second revision would adjust the maximum oxygen content 
allowed for both summertime and wintertime reformulated gasolines under 
the Simple Model to account for variations in the density of the base 
gasolines to which the oxygenates are added.

DATES: EPA will conduct a hearing (date and location to be announced) 
if a request for such is received by October 20, 1995. The comment 
period on this notice will close November 6, 1995, unless a hearing is 
requested, in which case the comment period will close 30 days after 
the close of the public hearing.

ADDRESSES: Interested parties may submit written comments (in 
duplicate, if possible) to Public Docket No. A-95-29 at Air Docket 
Section, U.S. Environmental Protection Agency, Waterside Mall, Room M-
1500, 401 M Street S.W., Washington, D.C. 20460. The Agency requests 
that commenters also send a copy of any comments to Christine M. 
Brunner at the address listed below in the ``Further Information'' 
section.
    Materials relevant to the reformulated gasoline final rule are 
contained in Public Dockets A-91-02 and A-92-12. Public Docket A-93-49 
contains materials relevant to the renewable oxygenate requirement for 
reformulated gasoline; some of these materials may also be relevant to 
today's action. These dockets are located at Room M-1500, Waterside 
Mall (ground floor), U.S. Environmental Protection Agency, 401 M Street 
S.W., Washington, D.C. 20460. The docket may be inspected from 8:00 
a.m. until 5:00 p.m. Monday through Friday. A reasonable fee may be 
charged by EPA for copying docket materials.

FOR FURTHER INFORMATION CONTACT: Christine M. Brunner, U.S. EPA (RDSD-
12), Regulation Development and Support Division, 2565 Plymouth Road, 
Ann Arbor, MI 48105. Telephone: (313) 668-4287. To request copies of 
this document, contact Delores Frank, U.S. EPA (RDSD-12), Regulation 
Development and Support Division, 2565 Plymouth Road, Ann Arbor, MI 
48105. Telephone: (313) 668-4295.

SUPPLEMENTARY INFORMATION:

I. Electronic Copies of Rulemaking Documents Through the Technology 
Transfer Network Bulletin Board System (TTNBBS)

    A copy of this notice is also available electronically on the EPA's 
Office of Air Quality Planning and Standards (OAQPS) Technology 
Transfer Network Bulletin Board System (TTNBBS). The service is free of 
charge, except for the cost of the phone call. The TTNBBS can be 
accessed with a dial-in phone line and a high-speed modem per the 
following information:

TTN BBS: 919-541-5742
(1200-14400 bps, no parity, 8 data bits, 1 stop bit)
Voice Help-line: 919-541-5384
Accessible via Internet: TELNET ttnbbs.rtpnc.epa.gov
Off-line: Mondays from 8:00 AM to 12:00 Noon ET

    A user who has not called TTN previously will first be required to 
answer some basic informational questions for registration purposes. 
After completing the registration process, proceed through the 
following menu choices from the Top Menu to access information on this 
rulemaking.

 GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards)
 OMS--Mobile Sources Information
 Rulemaking and Reporting
<3> Fuels
<9> File Area #9...Reformulated gasoline

    At this point, the system will list all available files in the 
chosen category in reverse chronological order with brief descriptions. 
These files are compressed (i.e., ZIPed). Today's notice can be 
identified by the following title: OXCPNPRM.ZIP. To download this file, 
type the instructions below and transfer according to the appropriate 
software on your computer:

ownload, rotocol, xamine, ew, ist, or elp
Selection or  to exit: D filename.zip

    You will be given a list of transfer protocols from which you must 
choose one that matches with the terminal software on your own 
computer. The software should then be opened and directed to receive 
the file using the same protocol. Programs and instructions for de-
archiving compressed files can be found via ystems Utilities from 
the top menu, under rchivers/de- archivers. After getting the files 
you want onto your computer, you can quit the TTNBBS with the oodbye 
command. Please note that due to differences between the software used 
to develop the document and the software into which the document may be 
downloaded, changes in format, page length, etc., may occur.

II. Introduction

    40 CFR 80.41 contains the standards for certification under the 
reformulated gasoline program. Paragraph (g) of this section specifies 
that reformulated gasoline designated as VOC-controlled (i.e., for sale 
during the ozone season) must have no more than 2.7 percent by weight 
(wt%) oxygen per gallon. The regulations further specify that if a 
state notifies the Administrator that it wishes to have the oxygen 
standard increased for VOC-controlled reformulated gasoline, a higher 
cap of 3.5 wt% will be approved by the Administrator provided that 
there have been ``no occasions within the three preceding years when 
the ozone ambient air quality standard was exceeded within any covered 
area within the state.'' EPA expects that a state would make this 
request primarily to permit and encourage the use of ethanol at volumes 
of up to 10% (which, as will be discussed in sections VIII and IX, is 
equivalent to approximately 3.5-4.0 wt% oxygen, depending upon the 
specific gravity of the base gasoline). In requesting and obtaining 
this different standard, the states would not be requiring the use of 
this maximum level of oxygen; rather, an increase in the standard for 
maximum oxygen content would provide refiners the option to produce 
reformulated gasoline with oxygen up to that level. Section 80.41(g) 
further states that the maximum oxygen content for non-VOC-controlled 
reformulated gasoline is 3.5 wt%, unless a state requests that EPA 
limit the oxygen content to 2.7 wt% due to concerns that ``the use of 
an oxygenate will interfere with attainment or maintenance of an 
ambient air quality standard, or will contribute to an air quality 
problem.''
    In reexamining this reformulated gasoline provision, EPA believes 
that the maximum oxygen content for VOC-controlled reformulated 
gasoline is an unnecessary regulatory burden on gasoline and oxygenate 
producers, and that the requirements for a state to choose a higher 
oxygen level are also burdensome. Thus, EPA is proposing to raise the 
maximum oxygen content of VOC-controlled reformulated gasoline to a 
higher oxygen level (nominally 3.5-4.0 wt%) than currently allowed for 
VOC-controlled reformulated gasoline. Specifically, EPA proposes to 
increase the maximum oxygen content of VOC-controlled reformulated 
gasoline such that reformulated gasoline containing 

[[Page 52137]]
up to 10 vol% ethanol can be certified. Additionally, EPA proposes that 
upon request of the Governor to the Administrator, the maximum oxygen 
content of reformulated gasoline sold in that state would be capped at 
a lower level on the basis of air quality concerns. In short, the 
maximum oxygen content provisions for VOC-controlled reformulated 
gasoline would adopt the same approach as the current provisions for 
non-VOC-controlled reformulated gasoline.
    EPA is also proposing to increase the maximum oxygen contents for 
both VOC- and non-VOC-controlled reformulated gasoline to accommodate 
differences in specific gravities of the base gasolines to which the 
oxygenates are added. These provisions would allow the oxygenates used 
in reformulated gasoline to be used up to their lawful limits per 
section 211(f), including the terms of any waiver issued under that 
provision, without concern for the density of the base gasoline to 
which the oxygenate is added.
    There are a number of benefits to be gained by these changes to the 
regulation. As discussed in the following sections, these include the 
potential for reduced burden on the states and industry, reduced cost 
for compliance with the reformulated gasoline requirements, and reduced 
costs to the consumers. The following sections present the background 
behind the oxygen maximum standard; the options considered for 
modification of the requirements; the economic, environmental, and 
energy implications of the proposed actions; and technical reasons for 
increasing the maximum oxygen content for VOC- and non-VOC-controlled 
reformulated gasoline.

III. History of the Reformulated Gasoline Standard for Maximum Oxygen 
Content (Oxygen Cap)

    The Act requires that reformulated gasoline have no NOx 
emissions increase compared to the statutory baseline gasoline for 
baseline vehicles [section 211(k)(2)(A)]. Furthermore, the Act 
specifies that reformulated gasoline contain a minimum of 2.0wt% 
oxygen. As summarized in the final rule on reformulated gasoline 
(February 16, 1994, 59 FR 7721-22), data available early in the 
rulemaking process to the Agency and to the regulatory negotiation 
(Reg-Neg) Advisory Committee indicated that fuel oxygen content and the 
type of oxygenate used had an impact on NOx emissions while no 
other parameter of the Simple Model appeared to have such an impact.
    Based on these data and the agreements reached in the Reg-Neg 
process, EPA proposed provisions that would cap the oxygen content of 
VOC-controlled reformulated gasoline (see 57 FR 13416) this was 
reflected in both the Reg-Neg agreement and an accompanying letter to 
the Renewable Fuels Association. The draft regulations specified a test 
program by which a petitioner could demonstrate no increase in NOx 
emissions to justify a higher than 2.1/2.7 wt% oxygen content in 
reformulated gasoline sold in the ozone season. As discussed in the 
subsequent proposal (February 26, 1993, 58 FR 11732-33), additional 
data revealed no need to differentiate between oxygenates, and it was 
proposed that the oxygen cap be 2.7 wt% for all oxygenates during ozone 
months. However, at that time the Agency continued to believe that 
increasing oxygen content from 2.7 wt% to 3.5 wt% might result in 
increased NOx emissions, and, thus, proposed prohibiting the use 
of VOC-controlled reformulated gasoline containing more than 2.7 wt% 
oxygen unless a state requested otherwise and provided supporting data 
from the specified test program.
    In April 1992, EPA proposed that reformulated gasoline sold outside 
of the ozone season contain a maximum of 3.5 wt% oxygen (57 FR 13420). 
This proposal was consistent with the Reg-Neg agreement and all data 
available at the time. If a state believed that the use of an oxygenate 
would interfere with attainment or maintenance of another ambient air 
quality standard or other air quality problem, and so notified the 
Administrator, the maximum oxygen content for reformulated gasoline 
sold in that state would be 2.7 wt% (unless the state petitioned for 
another maximum oxygen content following a data collection process 
specified elsewhere in the draft regulations).
    Additional data made available during development of the final 
rule, including the final form of the Complex Model (the compliance 
model required to be used starting in 1998, voluntarily prior to that 
time), showed that increased oxygen content should actually result in 
no increase in NOx emissions. The fuel changes expected upon 
addition of oxygen (i.e., reduced sulfur, olefins, aromatics and 
increased E300 1 and E200 based on the dilution effect of adding 
oxygenate) should result in a net decrease in NOx emissions, based 
on the Complex Model. While the expected increase in E200 would 
increase NOx emissions, the sum of the other expected changes 
(which all decrease NOx) should result in an overall NOx 
reduction. However, the Simple Model provisions did not directly 
control these expected changes to gasoline qualities that were expected 
to occur when oxygenates were added. In other words, although the 
dilution effects were expected, they, and their associated effects on 
NOx emissions, were not assured under the terms of the Simple 
Model. The Agency stated that since there was no assurance under the 
Simple Model that oxygenate addition would not increase NOx 
emissions, and since the more oxygenate that is added the greater the 
possible increase in E200 (and thus the greater the possibility for a 
NOx increase), it was appropriate to cap the maximum oxygen 
content (See 59 FR 7719-20). In the final regulations, the Agency 
specified that only requests to raise the cap to 3.5 wt% for VOC-
controlled reformulated gasoline from states that could demonstrate no 
ozone exceedances over the prior three years would be considered for 
approval. This provision replaced the proposed test program to 
demonstrate no NOx increase resulting from the use of oxygen at 
higher levels. The provisions for non-VOC-controlled (outside of the 
ozone season) reformulated gasoline remained the same as proposed.

    \1\ E300 and E200 are defined in 40 CFR 80.45.
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IV. Proposed Changes to Oxygen Cap Requirements

    Upon further consideration of the issues, EPA now believes that the 
current provisions relating to increasing the maximum oxygen content of 
VOC-controlled reformulated gasoline are unnecessarily burdensome and 
should be changed. Specifically, EPA proposes to increase the maximum 
oxygen content of VOC-controlled reformulated gasoline such that 
reformulated gasoline containing up to 10 vol% ethanol can be 
certified. EPA also proposes that the oxygen content of reformulated 
gasoline sold in that state will be limited to a lower level upon the 
request of the Governor on the basis of local air quality concerns. To 
obtain this lower maximum oxygen content, the Governor notify the 
Administrator that the use of an oxygenate at higher levels would 
interfere with attainment or maintenance of a National Ambient Air 
Quality Standard, or will contribute to an air quality problem. The 
lower oxygen cap would become effective 30 days after the Administrator 
announced the lower standard in the Federal Register. This lower 
maximum would be the maximum allowed under section 211(f), but not to 
exceed 3.2 wt% oxygen when ethanol is the oxygenate. Under 211(f), MTBE 
is limited to 15 

[[Page 52138]]
vol% and ethanol to 10 vol%. Blending MTBE at 15 vol% adds 
approximately 2.7% oxygen. However, due to variations in the density of 
gasoline, it is possible that when trying to achieve an oxygen content 
of 2.7%, the addition of 15 vol% MTBE or 7.8 vol% ethanol may result in 
an oxygen content as high as 3.2% (see section VIII below for further 
explanation). As a consequence, EPA is proposing that if a governor 
requests to lower the oxygen cap from 3.5%, the maximum oxygen content 
in that state would be lowered to a level equivalent to a nominal 2.7% 
but not to exceed 3.2%.
    As discussed in detail below in section VI.D, EPA believes it is 
very unlikely that a NOx increase will occur for any one batch of 
reformulated gasoline, and that the potential NOx increase, if 
any, would be small. A ``worst case'' scenario would involve the 
expected increase in E200, but with no other dilution effects that 
would reduce NOx, offsetting the increase in E200. Under such a 
scenario, NOx emissions for a batch of reformulated gasoline would 
increase by about 0.12% for an oxygen content change from 2.7 to 3.5 
wt%. However, there are several reasons why such a scenario is 
speculative and unlikely to occur. First, the toxics standards for 
reformulated gasoline should lead to reduced aromatics levels even 
without the addition of oxygenates, and this will lead to reduced 
NOx emissions. Second, the addition of oxygenates would normally 
lead to all of the additional dilution effects noted above, and not 
just to the increase in E200. It is unlikely that a refiner would 
intentionally offset the dilution effects for sulfur, olefins, and 
aromatics, allowing only E200 to increase. It appears that the 
antidumping provisions which affect conventional gasoline, combined 
with the limits on fuel parameters governed by each refiner's 1990 
baseline operating levels limit the ability of refiners to adjust 
refinery operations to that degree. Thus while there is no specific 
provision in the Simple Model requiring that individual batches of 
gasoline containing more than 2.7 wt% oxygen have sulfur, olefin, 
aromatic, and E200 levels that do not increase NOx emissions, an 
increase is unlikely and if it should occur it would be small. EPA 
believes it is likely that batches of reformulated gasoline will 
exhibit the dilution effects. Thus, on average across all of the 
reformulated gasoline sold by all refiners in an area, a NOx 
reduction, or at least no increase in NOx, is likely to occur. The 
Agency requests comments on these conclusions, particularly on the 
likely reaction of refiners to the ability to blend higher levels of 
oxygenate in VOC-controlled reformulated gasoline and how dilution 
effects may be anticipated in the production of reformulated gasoline.
    Given the small likelihood of NOX increases under the Simple 
Model for individual batches of reformulated gasoline (from increases 
in E200, without corresponding NOX reductions from reductions in 
other parameters), the likelihood that overall reformulated gasoline 
should lead to NOX reductions on average, and the benefits of 
increased oxygenate use, EPA now believes it is appropriate to revise 
the oxygen content cap under the Simple Model by raising it to the 
limit allowed under section 211(f) of the Act. This would remove what 
appears to be an unnecessary limitation on oxygenate use under the 
current regulations. While neither the Complex Model nor other basic 
facts have changed since the oxygen cap was promulgated in December 
1993, EPA has reevaluated the need for such a cap and is now proposing 
to make revisions in light of this reevaluation.
    In raising the cap, the Agency believes that it will make it easier 
for higher levels of oxygen to be used in VOC-controlled reformulated 
gasoline (this will primarily affect the use of ethanol, since at 
present ethanol is the only oxygenate which legally can be blended at 
levels in excess of 2.7 wt% oxygen). This proposed action, however, 
will retain the initiative at the state level to restrict higher oxygen 
levels in reformulated gasoline, consistent with respect to how this 
issue was handled for non-VOC-controlled (``wintertime'') reformulated 
gasoline. Although as explained in section VI below the Agency believes 
that this action will have no significant environmental impact, by 
leaving this initiative with the states this action accommodates those 
states which are particularly concerned about potential local air 
quality impacts of increased ethanol use.
    EPA proposes that any decrease in the maximum allowed oxygen 
content (at the request of a state), be effective 30 days after EPA 
publishes notice in the Federal Register of such change. This would 
provide reasonable notice of the change to all affected parties. EPA 
also proposes that, if today's proposal is finalized, the higher 
maximum oxygen content would become effective 60 days after publication 
of the final regulations in the Federal Register. If states do not want 
reformulated gasoline with the higher oxygen content to be sold in 
their state beginning with this effective date, they must notify the 
Administrator prior to the that date. After the proposed regulations 
took effect, states may request to lower the maximum oxygen content at 
any time.
    EPA requests comments on all aspects of this proposed action.

V. Economic Impacts

    The largest part of the cost associated with Phase I (1995-1999) 
reformulated gasoline is the oxygen content required by the Act. Since 
ethanol generally costs less than MTBE per gallon (due largely to the 
pro-rated tax credit available to ethanol blenders in both the federal 
and some state tax codes) and contains almost twice as much oxygen per 
gallon, it has a considerable economic advantage as an oxygenate. 
However, this cost advantage varies by geographic market and can also 
be offset by the incremental costs for distribution and segregation of 
ethanol blends, which are much higher than for MTBE blends. Production 
and distribution costs for the oxygenates plays a major role in 
determining market share.
    Refiners must also consider a variety of other operating costs when 
selecting an oxygenate for reformulated gasoline (or any other fuel). 
One of the costs associated with reformulated gasoline under the Simple 
Model is the cost associated with control of Reid vapor pressure (RVP). 
Most of the required reductions of VOC emissions are obtained in 
reformulated gasoline through reductions in RVP. The cost per finished 
gallon of reformulated gasoline for producing the sub-RVP blendstock to 
be blended with ethanol is lower on average by about 0.04-0.05 cents 
per gallon when the ethanol is blended at the maximum concentration 
possible instead of lower concentrations. Hence, it is slightly more 
economically attractive to use ethanol at 10 vol% (roughly 3.5-4.0 wt% 
oxygen) than at 7.8 vol% (2.7 wt%).
    The small economic advantage provided by lifting the oxygen cap may 
be sufficient enough to allow some refiners to use ethanol during the 
ozone season when otherwise they would not do so. While the overall 
impact of this is expected to be marginal, it should contribute toward 
an increase in the total volume of ethanol produced in this country 
during the summer. It is not expected to affect the overall production 
capacity of ethanol, however, due to the much greater demand during the 
winter, and the fact that any additional benefits of this action to the 
ethanol industry will be short-lived, since the oxygen cap provisions 
only affect reformulated gasoline sold through the year 1997.
    There is also some potential that today's proposal will result in a 
change 

[[Page 52139]]
in the volume of ethanol used in reformulated gasoline areas. This 
could occur if refiners elect to shift ethanol use in the summer months 
from use as an octane enhancer in conventional gasoline, presumably a 
lower value use, to a presumably higher value use as an reformulated 
gasoline oxygenate. Unless some states choose to lower the cap, the 
consumption of ethanol may increase and that of MTBE decrease in most 
area(s), and as a result on average in reformulated gasoline areas as a 
whole. However, it is not possible to predict how the refining industry 
will react to this added flexibility. Comments on this issue are 
requested by the Agency.
    There is the potential for a number of other economic impacts as a 
result of this proposed action. If summertime consumption of ethanol 
increases in reformulated gasoline areas, ethanol producers are 
expected to benefit. To the extent that the use of ethanol is 
concentrated in several states where ethanol is particularly 
economically attractive and that some refiners decide to use ethanol in 
those areas, the proposed oxygen cap modifications may result in slight 
economic benefits to both refiners (who benefit from the additional 
flexibility of having a broader range of oxygenate options) and ethanol 
producers (who may benefit from reductions in transportation or storage 
costs). The consumers of reformulated gasoline containing ethanol may, 
in turn, benefit from these changes. MTBE producers could be adversely 
affected if less MTBE is used in reformulated gasoline as a result of 
this proposed change. Nonetheless, by reducing the hurdles to using the 
maximum amount of ethanol and increasing the flexibility of refiners in 
selecting oxygenates, this action is expected to reduce the overall 
negative economic impacts and regulatory burden of the reformulated 
gasoline program.
    Comments on any of the assumptions and issues raised in this 
section are requested.

VI. Environmental and Energy Impacts

    Since today's action may result in some localized increase in 
summertime ethanol use at higher levels than would otherwise have 
occurred, some of the concerns that have been raised in the past 
regarding ethanol use in reformulated gasoline must be reexamined. The 
Agency has examined the environmental and energy impacts of modifying 
the oxygen cap requirements under the Simple Model. This proposal has 
the potential to slightly increase summertime ethanol consumption 
nationally, or at least to shift ethanol consumption from conventional 
fuel areas to reformulated gasoline areas (and consequently decrease 
MTBE consumption in reformulated gasoline areas). To the extent that 
increases in the use of ethanol occur in some locations barring state 
actions to lower the oxygen cap, there may be some environmental 
impacts, as discussed below. EPA expects there to be no change in the 
energy implications of the reformulated gasoline program as a result of 
today's proposed action.
    The Agency requests comment on the various aspects of the 
environmental and energy impact analyses presented below.

A. NOX Emissions Impact

    As mentioned above, the primary concern with allowing higher levels 
of oxygen in VOC-controlled reformulated gasoline under the Simple 
Model has in the past been the potential for increased NOX 
emissions. The Agency concluded in the final rule for reformulated 
gasoline, on the basis of results generated by the Complex Model, that 
the use of greater levels of oxygen would not by itself increase 
NOX emissions (although the associated higher levels of oxygenates 
could theoretically increase emissions due to the unpredictable impacts 
of dilution). The Complex Model is the most accurate and complete model 
relating fuel composition to emissions performance currently available 
for use in the reformulated gasoline program. EPA would have required 
use of the Complex Model for purposes of certification during the 
entire reformulated gasoline program, however, based on leadtime 
considerations, EPA promulgated the Simple Model for use during the 
first three years of the reformulated gasoline program (e.g., through 
1997). This decision was based on the fact that EPA had every 
confidence that on average the refiners certifying their fuel using the 
Simple Model will achieve the emission reductions that Congress 
intended for the reformulated gasoline program (see 59 FR 7721-22 for 
more discussion of this issue). In any case, EPA clearly determined 
that changing the oxygen content of reformulated gasoline is unlikely 
to have any negative impact on NOX emissions, regardless of the 
type of oxygenate under consideration. Consequently, today's proposed 
action is not expected to increase NOX emissions when reformulated 
gasoline is compared to baseline gasoline, and thus should satisfy the 
requirements of section 211(k)(2) of the Act.
    Individual states may still have some concerns about the impact of 
increased oxygen levels on NOX. The basis for their concerns is 
the uncertainty about the impact of reformulated gasoline in-use. The 
reformulated gasoline program, including all of the standards and 
provisions discussed in today's action, is based on the emissions 
reductions to be obtained from 1990 technology vehicles using baseline 
gasoline. To the extent that the emissions impacts of various 
reformulated gasolines are different for other-than-1990 technology 
vehicles, states may have concerns about the NOX (or other) 
emissions impacts of today's proposed action. Consequently, it is 
reasonable to permit the states to limit the oxygen content of 
reformulated gasoline in their state on the basis of their concerns.

B. VOC Emissions Impacts

    Phase I reformulated gasoline is required to yield a 15% reduction 
in emissions of volatile organic compounds (VOC) from 1990 technology 
vehicles using a baseline gasoline. Under the Simple Model, at least a 
15% reduction is guaranteed for any reformulated gasoline that meets 
all of the specifications of the model. The use of greater volumes of 
ethanol (per gallon and overall) can affect VOC emissions, as described 
below. In general, EPA believes today's proposed action would have no 
or slightly positive impacts on VOC emissions.
1. RVP Boost
    Although ethanol slightly increases the RVP of a gasoline to which 
it is added, there is no potential for an increase in the RVP of a VOC-
controlled reformulated gasoline under the Simple Model as a result of 
any modifications to the oxygen cap. This is because the Simple Model 
includes RVP specifications for reformulated gasoline that are not 
being modified by today's proposal. Comments and additional information 
on this issue are requested.
2. Commingling
    Another concern with the potential for increased use of ethanol-
containing reformulated gasoline is the phenomenon described as 
commingling. A detailed analysis describing the commingling effect can 
be found in the Regulatory Impact Analysis for the final rule on 
reformulated gasoline (December, 1993; available in public docket A-92-
12). To summarize briefly, when ethanol is mixed with gasoline, a non-
linear increase in the RVP is observed. The non-linear nature of 
ethanol's blending RVP means that the mixing of ethanol blends with 
other 

[[Page 52140]]
non-ethanol containing gasolines downstream of the refinery (e.g., in 
vehicle fuel tanks) can result in an additional vapor pressure increase 
across the in-use pool of gasoline. This RVP increase caused by fuel 
mixing is what is referred to as the commingling effect.
    EPA's analysis of the commingling effect shows that commingling can 
significantly increase VOC emissions in some instances. The effect 
increases as ethanol's share of the reformulated gasoline oxygenate 
market increases, up to a maximum ethanol market share of approximately 
50%. However, after examination of the commingling analysis, EPA 
believes that there may be a commingling benefit associated with 
today's proposal. Due to the non-linear nature of the RVP boost curve 
for ethanol, the commingling impact should be less with the use of 
higher concentrations of ethanol (e.g., 10 vol% ethanol, roughly 4.0 
wt% oxygen) in fewer gallons of gasoline than would occur with the use 
of a lower concentration (e.g., 7.8 vol% ethanol, roughly 2.7 wt% 
oxygen) added to more gallons of gasoline. Thus, from a national 
perspective there may be a slight commingling benefit associated with 
today's rule.
    To the extent today's proposal would cause a slight increase in the 
amount of ethanol used throughout the reformulated gasoline program, or 
cause a shift in ethanol use from states which maintain the current cap 
to states which do not restrict oxygen content, or cause a shift from 
conventional gasoline to reformulated gasoline, commingling-related VOC 
emissions will also be shifted. The overall impact of commingling on 
the states in which ethanol use increases would depend on the magnitude 
of the increase. If total ethanol volume in a state remains the same 
and the use of 10 vol% ethanol blends increases, then there will be a 
beneficial effect as a result of commingling because of the reduced 
number of ethanol-containing gallons of reformulated gasoline available 
in the marketplace. Any comments or additional data on this issue are 
requested.

C. Toxics Emissions Impact

    The Complex Model indicates that some oxygenates, such as ethanol, 
provide smaller air toxic benefits than others (e.g., MTBE) when used 
at identical oxygen levels. However, today's proposal does not alter 
the toxics performance standards under the Simple Model. Hence, 
refiners will still be required to comply with the toxics standards 
regardless of the type of oxygenate or volume of oxygen used.

D. Impacts of Dilution Under the Simple Model

    As discussed above in section IV, under the Simple Model there is 
no provision actually requiring the expected impact of dilution on the 
other gasoline components (fuel parameters or fuel qualities). The 
concerns which led EPA to retain the oxygen cap of 2.7 wt% in the final 
rule for reformulated gasoline centered not around the impact of oxygen 
itself on NOX, but on the impact of other fuel parameters, which 
are impacted by the addition of oxygenates, on NOX. This concern 
prompted EPA to retain the cap on oxygen, thus limiting the volumes of 
oxygenates used in reformulated gasoline, in the final rule.
    If the refiner makes no other changes to the gasoline production 
process, the addition of an oxygenate will dilute the concentration of 
other fuel components. While most dilution impacts are beneficial, some 
may be detrimental (e.g., the E200 effect on NOX previously 
discussed). Because NOX emissions are only affected by dilution 
effects (NOX emissions do not increase solely due to an oxygen 
content change) and because it is highly unlikely that an increase in 
E200 will occur absent the other dilution effects, NOX emissions 
are not expected to increase with increased oxygenate volumes (which 
accompany higher oxygen contents). Furthermore, EPA believes that while 
in any given gallon the theoretical combination of fuel effects may be 
detrimental, it is highly unlikely that this would be the case, 
especially when the average of all reformulated gasoline sold in a 
given area is considered. As a result, EPA now believes that the 
previous concern that uncontrolled variations in the other fuel 
parameters could increase NOX emissions is too unlikely to occur 
to warrant continuing the cap on oxygen content. Increasing the cap 
from 2.7% to a higher level should not increase in any way the 
likelihood that refiners will certify batches of reformulated gasoline 
that have increased NOX levels over the baseline gasoline.
    However, from an overall perspective, there may be a slight shift 
toward ethanol from MTBE in states which do not limit the higher oxygen 
content proposed today. The average oxygen level within that state 
should theoretically remain at minimum average 2.1 wt% as a result of 
the oxygen averaging and trading provisions of the reformulated 
gasoline program. Hence, it is reasonable to assume that if more 
ethanol is used to produce higher oxygen content blends (e.g., 10 vol% 
ethanol yielding roughly 3.5-4.0 wt% oxygen), the MTBE-containing 
reformulated gasoline used in that area would contain somewhat less 
than 2.1 wt% oxygen. Since ethanol has a higher oxygen content per 
volume of oxygenate than MTBE, it takes less ethanol than MTBE to 
achieve the same oxygen content. (For example, to create an 
reformulated gasoline containing 2.7 wt% oxygen, it takes about 7.8 
volume percent (vol%) ethanol but almost 15 vol% MTBE.) Even when 
ethanol is blended at 10 vol% levels (roughly 3.5-4.0 wt% oxygen), it 
displaces less gasoline than MTBE blended to reach 2.7 wt%. As a 
result, a shift towards ethanol would result in a lower volume of total 
oxygenates blended in an reformulated gasoline area, and potentially an 
overall reduction in the amount of dilution that would occur. While the 
Complex Model shows that less NOX reductions could occur with less 
dilution from an increased amount of ethanol in the reformulated 
gasoline oxygenate pool, the change in NOX reductions is very 
small, no more than 1 percent.
    EPA expects, for a number of reasons, that any air quality effects 
resulting from such differences as a result of a change in the oxygen 
cap would be minimal. First of all, any increase in ethanol use 
resulting from today's proposal is expected to be small. Second, the 
change in emissions due to the differences in dilution between ethanol 
and MTBE predicted by the Complex Model is fairly small. Third, 
reformulated gasoline producers are required under the Simple Model not 
to exceed their 1990 baseline levels of sulfur, T90, and olefins. These 
caps limit the impact of any air quality effects related to differences 
in dilution between oxygenates. The Agency requests comments on the 
issue of the potential environmental impacts resulting from changes in 
dilution as a result of today's proposal.

E. Non-Air Quality Impacts

    The Agency is concerned about other environmental impacts of an 
action that might alter the relative amounts of oxygenates used under 
the reformulated gasoline program. In response to the proposed 
renewable oxygenate requirement (58 FR 68343), EPA received many 
comments identifying some of the negative environmental impacts which 
allegedly could occur from an increase in production of ethanol. Most 
of these comments focused on the water and soil quality implications of 
increased corn farming for ethanol production. Given that EPA 

[[Page 52141]]
does not expect the proposed modification of the oxygen cap to result 
in significant increases in ethanol consumption overall, it is not 
expected that any large increase in total corn output would result from 
this action. To the extent that small increases in ethanol production 
do occur as a result of today's proposal, the impact on corn production 
is likely to be small as well. Thus, the non-air quality impacts 
associated with the proposed modification to the oxygen cap would be 
negligible. The Agency requests comments on these assumptions, and on 
other non-air quality impacts that could result under today's proposal.

F. Energy Impacts

    In addition to potential environmental impacts, EPA has examined 
the potential energy impacts of today's proposal. While the production 
of much of the ethanol in the country generates (on the margin) more 
energy and uses less petroleum than went into its production, a study 
by the Department of Energy submitted with comments to the renewable 
oxygenate requirement proposal indicated that the margin virtually 
disappears when ethanol is used to make VOC-controlled reformulated 
gasoline (see the final Regulatory Impact Analysis for the renewable 
oxygenate requirement, June 29, 1994). The energy loss and additional 
petroleum consumption necessary to reduce the volatility of the blend 
(to offset the volatility increase caused by the ethanol) causes the 
petroleum balance to go negative when compared to MTBE-blended 
reformulated gasoline, while the overall balance of fossil energy 
consumption remains slightly positive. Since, however, today's proposed 
action is not expected to significantly increase the total volume of 
ethanol produced in this country over the next two years (through 
1997), the energy impacts of the reformulated gasoline program are 
expected to remain essentially unchanged as a result of this proposal.

VII. Other Alternatives

    As an alternative to the proposal described above, EPA also 
requests comment on two alternatives. The first alternative would 
remove the oxygen cap entirely, allowing up to the maximum oxygen 
content permitted under section 211(f), (includes up to 10 vol% 
ethanol--roughly 3.5-4.0 wt% oxygen--or 15 vol% MTBE, roughly 2.7-3.2 
wt% oxygen), yearround for both VOC and non-VOC controlled reformulated 
gasoline. Under this option, the regulations would not limit the oxygen 
content of reformulated gasoline even if a state notifies EPA of 
environmental reasons for such a limit. EPA believes that this option 
is less desirable because it eliminates a state's ability to control 
the oxygen content of both VOC-controlled and non-VOC-controlled 
reformulated gasoline, regardless of the environmental implications for 
their state. Given some uncertainty over the in-use emissions 
implications of the use of reformulated gasoline with a higher oxygen 
content, as discussed above in section VI.A, it is reasonable to allow 
states to evaluate the environmental implications of increasing the 
oxygen content for their specific situation and based upon their unique 
concerns. The Agency requests comments on the potential benefits and 
detriments of electing to remove the oxygen cap entirely.
    The second alternative would maintain the cap (at 2.7 wt%) in the 
summertime, but allow states to request a higher maximum oxygen content 
(up to the maximum allowed under section 211(f)). Currently, states may 
request a higher cap, but must show that no ozone exceedances had 
occurred in a covered area during the previous three years. This 
alternative would remove the ``no ozone exceedances'' requirement, 
reducing the burden on the states and allowing them to quickly and 
easily have reformulated gasoline with the higher oxygen content. EPA 
believes that this alternative option in effect presumes that increased 
oxygen might cause an increase in NOX emissions from RFG, and is 
therefore inconsistent with EPA's view that increased oxygen does not 
adversely affect NOX emissions for RFG. Today's proposal would 
establish the higher maximum oxygen content, unless a state requests 
that it be lowered, based upon EPA's view that a higher oxygen content 
does not increase NOX emissions in 1990 technology vehicles. EPA 
requests comments on the appropriateness of this alternative option, 
and in particular a comparison of the relative benefits of the option 
being proposed today compared to this alternative option, as well as a 
comparison of the relative benefits of the second and third options.

VIII. Effect of Base Gasoline Density on Oxygen Content and Related 
Proposal

    As stated earlier, section 80.41(g) of the final rule specifies a 
maximum oxygen content of 2.7 wt% (and in limited cases 3.5 wt%) for 
VOC-controlled Simple Model reformulated gasoline and 3.5 wt% (unless a 
state requests that it be 2.7 wt% for environmental reasons), for non-
VOC-controlled Simple Model reformulated gasoline. These maximums (or 
caps) are consistent with the Simple Model valid range upper limit for 
oxygen content.
    In a later rulemaking (59 FR 36944, July 20, 1994), however, EPA 
changed the upper limit of the valid range for oxygen content from 3.5 
wt% to 4.0 wt% (for both the Simple and Complex Models) to accommodate 
compositional (i.e., specific gravity or, equivalently, density) 
differences in the base gasoline to which the ethanol is added. 
Variations in the base gasoline specific gravity can cause the oxygen 
content of the final oxygenated blend to vary for the same volume of 
oxygenate. For example, for a 10 vol% ethanol blend, the oxygen content 
could vary, roughly, from 3.4 to 4.0 wt%. For all oxygenates, 
variations in the base gasoline density can cause the resulting oxygen 
content to vary for the same volume of an oxygenate.
    Although EPA changed the valid range of the models, the Agency did 
not at that time address changing the maximum oxygen content allowed in 
reformulated gasoline under section 80.41(g). Subsequent to this, EPA 
stated in guidance that

    ``* * * [it] believes that the maximum oxygen content provisions 
for reformulated gasoline should accommodate blended oxygenates that 
meet the applicable Clean Air Act section 211(f) `substantially 
similar' and waiver provisions. In consequence, EPA believes the 
oxygen maximums specified in 80.41(g) should be adjusted to reflect 
the expected maximum oxygen content when (RBOB) is blended with 10 
vol% ethanol in the case of non-VOC-controlled RFG and 7.7 vol% 
ethanol in the case of VOC-controlled reformulated gasoline.\2\''

    \2\ U.S. Environmental Protection Agency, ``RFG/Anti-Dumping 
Questions and Answers,'' Question 1 of the ``Standards'' section, 
April 18, 1995. A copy of this document has been placed in the 
public docket for today's action and may be found on the TTNBBS (see 
``Supplementary Information'' section of this notice).
---------------------------------------------------------------------------

    RBOB is the acronym for ``reformulated gasoline blendstock for 
oxygenate blending'' which is a base gasoline blendstock which requires 
only the addition of an oxygenate to become reformulated gasoline. The 
guidance stated that the adjusted oxygen maximum for VOC-controlled 
reformulated gasoline would be 3.2 wt% (the maximum expected for MTBE 
at 15 vol% or ethanol at 7.8 vol% considering density variations in the 
base gasoline), and for non-VOC-reformulated gasoline, 4.0 wt% (the 
maximum expected for ethanol at 10.0 vol% considering density 
variations in the base gasoline). The guidance further stated that EPA 
would make these changes in a future rulemaking but allow parties to 
use the adjusted maximums in the meantime. The maximum 3.2 wt% is 0.5 
wt% 

[[Page 52142]]
greater than the 2.7 wt% maximum oxygen content allowed for VOC-
controlled reformulated gasoline under the final rule; the difference 
of 0.5 wt% is consistent with raising the valid maximum oxygen content 
under the Simple and Complex Models from 3.5 wt% to 4.0 wt%.
    As discussed earlier, the Agency is today proposing that the 
maximum oxygen content for VOC-controlled reformulated gasoline be the 
maximum allowed under the section 211(f) ``substantially similar'' 
provision and waiver provisions. (Currently, ethanol may be blended up 
to 10 volume percent and MTBE up to 15 volume percent.) EPA is 
proposing that the maximum oxygen content for non-VOC-controlled 
reformulated gasoline also be the maximum allowed under the section 
211(f) ``substantially similar'' provision and waiver provisions rather 
than be capped at a specific oxygen content as in the final rule.\3\  
This would allow reformulated gasoline to contain ethanol up to the 
current legal maximum 10 volume percent and MTBE up to the current 
legal maximum 15 volume percent, without concern for the density of the 
non-oxygenated gasoline. Additionally, allowing the maximum oxygenate 
volumes (and thus maximum oxygen contents) specified in 211(f) would 
make this provision (40 CFR 80.41(g)(1)) consistent with the upper end 
of the valid range for oxygen in both the Simple and Complex models. As 
stated in the July 20, 1994 rulemaking, increasing the maximum oxygen 
value will have no adverse environmental impact.

    \3\ This provision would only apply under the RFG simple model. 
Under the complex model, there would be no oxygen cap in the 
regulations. The maximum oxygen content allowed under Sec. 211(f) 
would, of course, continue to apply to complex model RFG as well as 
all other gasoline.
---------------------------------------------------------------------------

    In those cases where a state has requested the lower maximum oxygen 
content for its RFG, the Agency proposes that the oxygen maximum 
standard value be increased from the current 2.7 wt% to the maximum 
allowed under section 211(f), but not to exceed 3.2 wt% when ethanol is 
used. As mentioned above, 3.2 wt% oxygen is equivalent to about 7.7 
vol% ethanol and is the highest maximum increase in oxygen content over 
2.7 wt% that might be encountered due to variations in the base 
gasoline density. In practice, the Agency does not expect ethanol-
containing blends certified under these provisions to contain more than 
7.7 vol% ethanol, as there are tax credit and other deterrents to going 
higher than 7.7 vol% but lower than 10 vol% (which would exceed 3.2 wt% 
oxygen).
    Comments are requested on this aspect of today's proposal.

IX. Public Participation

    EPA desires full public participation in arriving at its final 
decisions and solicits comments on all aspects of this proposal. 
Wherever applicable, full supporting data and detailed analysis should 
also be submitted to allow EPA to make maximum use of the comments. All 
comments should be directed to the EPA Air Docket, Docket A-95-29 (See 
ADDRESSES). See the DATES section for the deadline for submission of 
comments.
    Any proprietary information being submitted for the Agency's 
consideration should be markedly distinguished from other submittal 
information and clearly labelled ``Confidential Business Information.'' 
Proprietary information should be sent directly to the contact person 
listed above, and not to the public docket, to ensure that it is not 
inadvertently placed in the docket. Information thus labeled and 
directed shall be covered by a claim of confidentiality and will be 
disclosed by EPA only to the extent allowed and by the procedures set 
forth in 40 CFR Part 2. If no claim of confidentiality accompanies a 
submission when it is received by EPA, it may be made available to the 
public without further notice to the commenter.

X. Compliance with the Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 requires federal agencies to 
examine the effects of their regulations and to identify any 
significant adverse impacts of those regulations on a substantial 
number of small entities. Pursuant to section 605(b) of the Regulatory 
Flexibility Act, 5 U.S.C. 605(b), the Administrator certifies that this 
rule will not have a significant economic impact on a substantial 
number of small entities. In fact, today's proposals are designed to 
remove overly burdensome regulations and make it easier for refiners to 
use ethanol in reformulated gasoline, and thus to ensure market access 
for ethanol in reformulated gasoline.

XI. Administrative Designation

    Pursuant to Executive Order 12866 (58 FR 51735 (October 4, 1993)), 
the Agency must determine whether the regulatory action is 
``significant'' and therefore subject to OMB review and the 
requirements of the executive order. The Order defines ``significant 
regulatory action'' as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlement, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this notice of proposed rulemaking is not a 
``significant regulatory action''.

XII. Paperwork Reduction Act

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

XIII. Unfunded Mandates Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a Federal mandate that may result in 
expenditure by State, local, and tribal governments, in the aggregate; 
or by the private sector, of $100 million or more. Under Section 205, 
EPA must select the most cost-effective and least burdensome 
alternative that achieves the objectives of the rule and is consistent 
with statutory requirements. Section 203 requires EPA to establish a 
plan for informing and advising any small governments that may be 
significantly or uniquely impacted by the rule.
    EPA has determined that the action proposed today does not include 
a Federal mandate that may result in estimated costs of $100 million or 
more to either State, local or tribal governments in the aggregate, or 
to the private sector. This action has the net effect of reducing 
burden of the reformulated gasoline program on regulated entities, as 
well as the States. Therefore, the requirements of the Unfunded 
Mandates Act do not apply to this action.

[[Page 52143]]


XIV. Statutory Authority

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

List of Subjects in 40 CFR Part 80

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

    Dated: September 27, 1995.
Carol M. Browner,
Administrator.
    For the reasons set out in the preamble, part 80 of title 40 of the 
Code of Federal Regulations is amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

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

    2. Section 80.41 is amended by revising paragraph (g) to read as 
follows:


Sec. 80.41  Standards and requirements for compliance.

* * * * *
    (g) Oxygen maximum standard. (1) The per-gallon standards for 
maximum oxygen content, which apply to reformulated gasoline subject to 
the simple model per-gallon or average standards, are as follows:
    (i) The standard shall be the maximum allowed under the provisions 
of section 211(f) of the Act; except that
    (ii) The standard shall not exceed 3.2 percent by weight for 
ethanol within the boundaries of any state if the state notifies the 
Administrator that the use of an oxygenate will interfere with 
attainment or maintenance of an ambient air quality standard or will 
contribute to an air quality problem.
    (2) A state may request the standard specified in paragraph 
(g)(1)(ii) of this section separately for reformulated gasoline 
designated VOC-controlled and reformulated gasoline not designated as 
VOC-controlled.
    (3) The standard in paragraph (g)(1)(ii) of this section shall 
apply 30 days after the Administrator publishes a notice in the Federal 
Register announcing such a standard.
* * * * *
[FR Doc. 95-24583 Filed 10-4-95; 8:45 am]
BILLING CODE 6560-50-P