[Federal Register Volume 61, Number 58 (Monday, March 25, 1996)]
[Rules and Regulations]
[Pages 12030-12041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7162]



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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80

[AMS-FRL-5444-7]
RIN 2060-AG17


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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA or the Agency) today 
revises the regulations for reformulated gasoline in two ways. These 
changes only apply to reformulated gasoline certified using the Simple 
Model, which applies until January 1, 1998. First, the maximum allowed 
level of oxygen in reformulated gasoline is set at 3.2 percent by 
weight (``wt%''), where a state notifies the Administrator that a limit 
is needed for various air quality concerns. Second, absent such a state 
notification, the maximum limit on oxygen content for reformulated 
gasoline certified using the Simple Model would be that set by the 
valid range limits of the Simple Model. In addition, the provisions of 
section 211(f) of the Clean Air Act (``CAA'' or ``the Act'') continue 
to apply to reformulated as well as other gasolines. These provisions 
independently set a maximum oxygen content for motor vehicle gasoline.

EFFECTIVE DATE: This rule will be effective on March 18, 1996.

ADDRESSES: Materials relevant to this FRM are contained in Public 
Docket No. A-95-29. Materials relevant to the reformulated gasoline 
final rule are contained in Public Dockets A-91-02

[[Page 12031]]
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 SW., 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, Fuels 
and Energy Division, 2565 Plymouth Road, Ann Arbor, MI 48105. 
Telephone: (313) 668-4287. To request copies of this document, contact 
Delores Frank, U.S. EPA, Fuels and Energy 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: OXCPFRM.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

A. Background

    As stated in the proposal (NPRM) to this rule (60 FR 52135, October 
5, 1995), 40 CFR 80.41 contains the standards for certification under 
the reformulated gasoline program. Paragraph (g) of section 80.41 
specified that reformulated gasoline designated as VOC-controlled (i.e. 
for sale during the summertime ozone season) must have no more than 2.7 
wt% oxygen per gallon. The regulations further specified 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% would 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. The requirements of this paragraph (g) apply to 
reformulated gasoline certified under the Simple Model, which is 
applicable until January 1, 1998.
    In reexamining this reformulated gasoline provision, EPA determined 
that the maximum oxygen content for VOC-controlled reformulated 
gasoline generally was an unnecessary regulatory burden on gasoline and 
oxygenate producers, and that the requirements for a state to choose a 
higher oxygen level were also too rigid.
    Therefore, EPA proposed to raise the maximum oxygen content of VOC-
controlled reformulated gasoline to a higher oxygen level than was 
allowed by the regulation. Additionally, EPA proposed 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. These two changes would 
make the maximum oxygen content provisions for VOC-controlled 
reformulated gasoline similar to those for non-VOC-controlled 
reformulated gasoline.
    Today's action promulgates the provisions contained in the NPRM, 
with the exception that the references to the maximum oxygen content 
allowed under section 211(f) of the Act are deleted as unnecessary. 
This deletion does not change the substantive effect of the regulation. 
The maximum oxygen content allowed under section 211(f) continues to 
apply to reformulated gasoline and does not need to be referenced in 
this regulatory provision. There are a number of benefits to be gained 
by these changes to the regulation. These benefits include the 
potential for reduced burden on the states and industry, reduced cost 
of compliance with the reformulated gasoline requirements, and reduced 
costs to consumers. Discussion of the changes promulgated today, 
comments received on the proposal, and EPA's responses to these 
comments are presented below.

B. Final Rule

    The maximum cap on oxygen content is deleted from section 80.41(g), 
so that the maximum amount of oxygen allowed in reformulated as well as 
other gasolines would be that allowed under section 211(f) of the Act 
subject to the limits of the valid range for use of the Simple 
Model.1 There is an exception to this general rule. Where a 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, then the maximum amount of 
oxygen shall not exceed 3.2 wt% oxygen from ethanol.2 The state

[[Page 12032]]
may request this maximum for either VOC-controlled or non-VOC-
controlled reformulated gasoline.

    \1\ The maximum amount allowed under section 211(f) of the Act 
is the amount that is substantially similar to gasoline used in the 
motor vehicle certification process, or allowed under a waiver 
granted under section 211(f)(4). In 1991, EPA issued an interpretive 
rule increasing the maximum amount of oxygen that EPA believes is 
allowed under the substantially similar criteria of section 211(f)--
from 2.0 to 2.7 wt% oxygen. See 56 FR 5352 (February 11, 1991). In 
addition, the valid range of the Simple Model sets a maximum of 4.0 
wt% oxygen. See 40 CFR 80.42(c).
    \2\ The maximum content is phrased as a limit on the amount of 
oxygen from ethanol because that is the only oxygenate that 
currently may be blended lawfully above approximately 2.7 wt% 
oxygen, under section 211(f) of the Act.
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    This is in effect the same revision that EPA proposed. It revises 
the current regulation in the following ways: (1) It treats VOC-
controlled and non-VOC-controlled reformulated gasoline the same, under 
the Simple Model, as far as the maximum oxygen standard, (2) it deletes 
the oxygen cap in the regulation except where a state notifies EPA of 
air quality problems, (3) it revises the criteria for imposing an 
oxygen cap on request from a state, and (4) it changes the oxygen cap 
to 3.2 wt% oxygen from ethanol where a state requests a cap.

III. Summary of and Response to Comments

A. General

    EPA received over 50 comments on this proposal. Over half of the 
comments were from individual citizens supporting the proposal and 
thanking EPA and the Administration for their continued efforts to 
enhance ethanol's usage in the reformulated gasoline program. EPA 
agrees that the use of ethanol in reformulated gasoline is an important 
issue of public policy. From the remaining comments, the substantive 
remarks applicable to this rulemaking are addressed here. Several 
commenters also remarked on issues not related to this rulemaking, for 
example, suggestions for other rules and other aspects of the 
reformulated gasoline program they would like modified. These remarks 
are not addressed here.
    Several commenters that supported the rule indicated that EPA had 
not addressed many of the benefits of higher oxygenate and/or 
specifically ethanol use, such as reducing U.S. dependence on imported 
oil; stabilizing greenhouse gas emissions; benefits if the oxygenate is 
from a renewable feedstock; benefits to the rural economy; and 
development of alternative energy sources.
    EPA had proposed that today's rule would be effective 60 days after 
publication in the Federal Register. However, commenters suggested 
making the rule effective immediately since VOC-controlled reformulated 
gasoline can be certified/used anytime prior to the beginning of the 
ozone season and a delay in the effective date would disrupt marketing 
plans and perpetuate the burden which EPA was attempting to reduce. EPA 
agrees with the commenter and thus is making today's action effective 
immediately upon signature of the Administrator.

B. Reformulated Gasoline Regulatory Negotiation

    In developing the reformulated gasoline rulemaking, EPA 
participated in a regulatory negotiation (RegNeg) with interested 
parties. The result of this process was an agreement in principle (AIP) 
which contained an outline of the proposed reformulated gasoline rules. 
As a signatory to the AIP, EPA agreed to draft proposed rules 
consistent with the AIP outline and to give serious consideration to 
the outline in developing the final rule.
    The AIP states that reformulated gasoline under the Simple Model 
would be deemed to result in no increase in NOX emissions if it 
contained no more than 2.1 wt% oxygen or 2.7 wt% oxygen solely from 
MTBE. The AIP also states that other oxygenates may be approved at 2.7 
wt% if no adverse NOX impacts can be shown. As discussed in the 
NPRM, in the February 26, 1993 proposal (58 FR 11722) EPA proposed to 
allow all oxygenates to be used up to a 2.7 wt% oxygen contribution. At 
that point, EPA believed that increasing oxygen content to 3.5 wt% 
might increase NOX emissions, so it limited use of the higher 
oxygen content to those states which requested a higher oxygen content 
and could provide supportive test data. In the December 1993 final rule 
(59 FR 7716, February 16, 1994), EPA maintained the 2.7 wt% cap, but 
allowed a state to request a higher cap of 3.5 wt% if it had had no 
ozone exceedances for the previous three years.
    Only a few commenters addressed this issue. One commenter stated 
that during RegNeg, 2.7 wt% oxygen was deemed to not increase NOX 
emissions. The commenter stated that that conclusion was subject to 
reassessment, and thus it was appropriate to consider modifying that 
portion of the rule at this time. Two other commenters, however, stated 
that the proposal was a breach of RegNeg which specifically limited the 
maximum summertime oxygen content. One commenter indicated they could 
only support this change if all RegNeg participants approved.
    EPA does not believe that today's rulemaking to increase the 
maximum oxygen content of summertime reformulated gasoline is a breach 
of the RegNeg agreement. EPA did follow the AIP by drafting proposed 
rules consistent with the AIP outline and seriously considering the 
outline when developing the final reformulated gasoline rule. In fact, 
the 2.7 wt% summertime oxygen cap was part of that rule. In any case, 
EPA's regulatory actions at this time, several years after the AIP, 
must be based on a current exercise of discretion, taking into account 
present facts and circumstances. For example, EPA's Complex Model, one 
of the models used to certify reformulated gasoline, shows no increase 
in NOX emissions with increased fuel oxygen content. Second, EPA 
believes that other factors (such as increasing base gasoline levels 
for sulfur and other fuel parameters in anticipation of lower levels in 
the final gasoline blend due to dilution when oxygenate is added) will 
not occur and thus will not increase NOX emissions when higher 
oxygen contents are allowed. Additionally, today's rule simply modifies 
the final reformulated gasoline rule which contained provisions (which 
were not part of the AIP) allowing the higher oxygen content under 
certain circumstances.

C. Substantially Similar

    Today's rule allows all oxygenates to be used in summertime 
reformulated gasoline (which is certified under the Simple Model) up to 
the limits in oxygen and/or oxygenate content specified for that 
oxygenate or combination of oxygenates under the substantially similar 
requirements of section 211(f) of the Act, or up to the limits which 
have been granted a waiver under that section, subject to the valid 
range limits of the Simple Model. Realistically, because of compliance 
requirements and oxygenate/gasoline economics, EPA expects only a few 
oxygenates to be used in reformulated gasoline.
    A few commenters expressed concern that raising the maximum oxygen 
cap for all oxygenates to the highest allowable levels could 
potentially have negative effects on vehicles. One commenter stated 
that EPA should consider the American Automobile Manufacturer's 
Association's (AAMA's) recommended oxygenate limits. AAMA's fuel 
specifications (which also address other fuel components) are based on 
automotive requirements for optimum performance and maximum durability. 
In some cases, as with ethanol, the AAMA limits agree with the limits 
specified or waivered under section 211(f), but for other oxygenates, 
like isopropyl alcohol, they do not. Additionally, the commenter stated 
that under AAMA's fuel specification, use of certain oxygenates, e.g., 
methanol, at waivered or substantially similar levels is undesirable. 
Finally, one commenter stated that EPA should clarify specific 
oxygenate/maximum oxygen content values.
    Although EPA understands the intent of the AAMA fuel specification, 
and the

[[Page 12033]]
desire to have the most optimum fuel for automotive use, today's rule 
will not result in a fuel which is significantly different from fuels 
already in the marketplace or which could be in the marketplace. This 
rulemaking simply allows summertime reformulated gasoline to have a 
slightly higher maximum oxygen content, under the Simple Model, than it 
did last summer. Currently, all conventional gasoline and wintertime 
reformulated gasoline, with the exception of California gasoline, could 
contain oxygenates up to those levels specified or waivered under 
section 211(f). The ``substantially similar'' or waivered limits of 
section 211(f) apply to all gasoline in the country, conventional and 
reformulated gasoline. Additionally, it would not be technically sound, 
and could result in anti-competitive effects, to allow the 
``substantially similar'' definitions to be valid for one fuel but not 
for another. For these reasons, EPA is retaining the intent of its 
proposal language on this aspect, namely that for summertime 
reformulated gasoline the maximum oxygen content shall be the maximum 
allowed under the provisions of section 211(f). This includes fuels 
with oxygen/oxygenate contents deemed ``substantially similar'' under 
211(f) and fuels which contain oxygen/oxygenates at levels which have 
been waivered under 211(f).
    EPA also proposed to increase the maximum oxygen content of non-
VOC-controlled reformulated gasoline from the current 3.5 wt% oxygen 
(which was meant to be akin to 10 vol% ethanol) to the maximum allowed 
under the section 211(f) ``substantially similar'' provision and any 
waivers granted under that section. All comments received on this issue 
supported this change.
    Today's rulemaking does not change the maximum oxygen and/or 
oxygenate contents allowed for the various oxygenates under the 
``substantially similar'' and waiver provisions, and as a result these 
provisions are not addressed here.

D. Environmental Impacts

    Some comments supported the proposal as having no significant 
environmental impact. One commenter stated that, assuming that this 
proposal results primarily in increased ethanol use, ethanol production 
is both energy-efficient and environmentally sound. Several other 
commenters opposed the proposal based on expected environmental harm, 
and questioned EPA's environmental assessment. One commenter stated 
that it opposes the rule until EPA can demonstrate, with more 
appropriate analyses, that no detrimental environmental impacts result. 
These commenters were particularly concerned with increases in NOX 
and VOC emissions. Their comments are discussed in more detail below. 
One commenter questioned the use of models to estimate environmental 
impact, asserting that it is scientifically dishonest to draw 
conclusions from a scientific model, since model output is a 
mathematical reflection of model input. This commenter felt that EPA 
should draw its conclusions solely from measured data. One commenter 
said that concerns about water and soil implications of increased corn 
farming for ethanol production do not reflect the increasing use of 
sustainable agricultural practices which save money and better protect 
the environment.
    EPA has examined the environmental impacts of modifying the oxygen 
cap requirements under the Simple Model, and those impacts are expected 
to be minimal. As will be discussed (section E), EPA stands by its use 
of the Simple and Complex Models to estimate environmental impact, as 
they are the basis of the reformulated gasoline program.
1. NOX Emissions Impacts
    As stated in the NPRM, EPA has 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, for purposes of compliance with the no 
NOX increase requirements for reformulated gasoline 3. In 
addition, an increase in the maximum oxygen content is not expected to 
increase NOX emissions from reformulated gasoline compared to a 
gasoline with a lesser oxygen content when viewed from the perspective 
of the entire in-use fleet.

    \3\  Under section 211(k)(2), reformulated gasoline is not 
allowed to increase NOX emissions from baseline vehicles when 
compared to the statutory baseline gasoline.
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    Some commenters disagree with EPA's determination that an increase 
in the maximum oxygen content would not be expected to increase 
NOX emissions. These commenters feel that EPA has not provided 
adequate justification that environmental detriment will not occur, and 
that EPA does not adequately justify the expected impact on NOX 
emissions. One commenter pointed out that the Auto-Oil research studies 
show increased NOX with increased oxygenate use, and even that all 
data sets show the same or increased NOX emissions. Theoretically, 
oxygenated fuels are used to reduce CO by enleaning the air/fuel 
mixture and should therefore increase NOX emissions. Further, this 
commenter pointed to EPA's 1989 Guidance, and other Agency studies, 
which conclude that ethanol blends increase NOX.
    The MOBILE model is EPA's best model available for predicting 
emissions from the in-use fleet because it accounts for the current in-
use technology distribution as well as the mix of normal and high-
emitting vehicles, i.e., vehicles of different ages. EPA believes that 
accounting for both normal-emitters and high-emitters is crucial in the 
estimation of in-use emissions. The current MOBILE model shows no 
increase in NOX emissions with increased fuel oxygen content.
    EPA recognizes that much of the currently available data suggests 
that increases in oxygen content will increase NOX emissions. 
However, most of this data was collected on normal-emitting, properly 
maintained vehicles representing a subset of the technologies available 
in-use. EPA has concluded that robust conclusions concerning the in-use 
fleet cannot be drawn from such data. Both the MOBILE model and the 
Complex Model, which is essentially a major subset of the MOBILE model 
because it represents 1990 technology, include emission estimates for 
both normal-emitting and high-emitting vehicles, and thus may provide 
more accurate estimates of the effects of oxygen on NOX. For 
example, the high-emitter portion of the Complex Model indicates that 
increases in oxygen content decrease NOX emissions. Such an effect 
might be due to the cooler burn that oxygenates effect on combustion, 
or a suppression of preignition by the high octane value of the 
oxygenate. Regardless, a weighted representation of normal-emitter and 
high-emitter effects in the Complex Model results in oxygen having 
essentially no effect on NOX overall. The MOBILE model, which is 
designed to represent the in-use distribution of vehicle technologies 
and emission levels, concurs with the Complex Model in this respect.
    Conversely, other commenters agreed that increased oxygenate use 
would not result in increased NOX emissions. Assuming that ethanol 
use would increase, one commenter stated that ethanol displaces other 
gasoline components which have greater NOX impacts. Additionally, 
as noted in the NPRM, increased E200 does increase NOX, but the 
overall effect is decreased NOX. This commenter included data 
which showed no statistically significant NOX emissions increase 
from splash-blending ethanol to get 3.5 wt% oxygen. Another commenter 
pointed out that preliminary data show that the

[[Page 12034]]
summer 1995 reformulated gasoline program reduced NOX emissions 
somewhat. In general, this commenter believed that NOX emissions 
will be lower and sulfur, olefins and aromatics will not increase 
(supported by the 1995 data), but stated that this cannot be concluded 
for all batches.
    EPA has concluded, 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--as discussed below). As will be 
discussed, use of the Complex Model in determining the emissions 
impacts of reformulated gasoline is appropriate and correct. However, 
EPA recognizes that, in-use, individual states may still have some 
concerns about the impact of increased oxygen levels on NOX 
emissions from the in-use fleet. EPA is retaining an option whereby 
states could elect to maintain the currently promulgated lower maximum 
oxygen content.
    One commenter pointed out that a no NOX increase is specified 
in the Clean Air Act. This commenter believes that oxygen use in 
gasoline leads to increased NOX emissions and that this regulation 
is in violation of the Act by allowing any oxygenation of reformulated 
gasoline. This commenter feels that allowing 10% ethanol, which results 
in the highest NOX increases, would seem to compound the 
``marginally legal'' interpretation of the Act.
    As stated above, EPA has determined that increased oxygen does not 
result in increased NOX emissions when evaluated with the Complex 
Model. Therefore this action in no way violates section 211(f) of the 
Act.
2. VOC Emissions Impacts
    Several commenters were opposed to the proposal to increase the 
maximum oxygen content because it would result in increased summertime 
VOCs, at a time when those emissions present the greatest problem. One 
commenter pointed out that a result of this proposal could be to 
displace MTBE with ethanol, increasing the market-share of ethanol-
containing reformulated gasoline and increasing VOC emissions in those 
areas. Another commenter felt that EPA's argument that most of the VOC 
reductions are due to RVP incorrectly suggests that the reactivity of 
the VOC emissions has little to do with ozone formation. However, other 
commenters agreed that, as long as there is no RVP allowance for 10% 
ethanol blends, increases in evaporative VOC emissions should be 
minimal. A final commenter felt that the proposal would result in 
beneficial VOC impacts.
    EPA continues to believe that increased maximum oxygen content is 
unlikely to negatively affect VOC emissions, and could have slightly 
positive impacts. Although ethanol does slightly increase the RVP of 
gasoline to which it is added, there is no potential for an increase in 
RVP in a VOC-controlled reformulated gasoline under the Simple Model 
because the RVP specifications are not being changed. A fuel producer 
would have to use other means to reduce RVP when ethanol is added.
    Two commenters noted apparent inconsistencies in the assumption of 
ethanol use and potential increases in evaporative emissions. 
Specifically, commenters pointed out that in the December 1993 final 
rule, EPA had stated that a 1 psi RVP allowance for ethanol blends 
could forfeit all VOC emissions reductions of the reformulated gasoline 
program. Yet, they say, in this proposal, EPA stated that ethanol 
``slightly'' increases the RVP of gasoline to which it is added. They 
suggest that EPA should correctly characterize the RVP impact.
    The statements are not inconsistent. As stated above, while ethanol 
does increase RVP if RVP is not otherwise controlled, the reformulated 
gasoline standards limit RVP for all reformulated gasolines.

E. Complex Model

    Several commenters thought EPA had inappropriately used the Complex 
Model to estimate the impact of higher oxygen content on NOX 
emissions from reformulated gasoline. They stated that the Complex 
Model was designed for reformulated gasoline certification and that it 
was not an air quality or emissions inventory model. Most of these 
commenters stated that EPA's MOBILE model is the most appropriate tool 
for forecasting emissions and demonstrating air quality impacts. Other 
commenters said that the MOBILE model, the Complex Model and the CARB 
Predictive Model should all be used in any evaluation of NOX 
emissions impacts. One commenter said that neither the Complex Model 
nor the CARB model is directly applicable to EPA's analysis regarding 
this rulemaking.
    The Complex Model is not an air quality or emissions inventory 
model, and EPA did not propose using the Complex Model for such 
purposes. Improved air quality is the purpose of the reformulated 
gasoline program, and significant reductions in ozone-forming VOC 
emissions and toxics emissions will be realized because of the program. 
The MOBILE model is a valuable tool for estimating the air quality 
impacts of fuels for an in-use fleet, as it includes a wide variety of 
vehicle ages and technologies. The impact of Federal reformulated 
gasoline (but not California Phase 2 reformulated gasoline at this 
point) on in-use emissions can be estimated using the MOBILE model. 
However, for certification purposes, the effects of the reformulated 
gasoline program must be determined relative to 1990 technology 
vehicles run on 1990 baseline gasoline. This rulemaking is aimed at 
establishing the requirements for certification of gasoline as meeting 
the reformulation requirements established under the CAA, including 
compliance with the oxygen content and no NOX increase 
requirements. For this reason and the reasons discussed in section D, 
EPA believes that the Complex Model is the most appropriate tool for 
estimating changes in NOX emissions due to this rulemaking, for 
purposes of compliance with the no NOX increase requirement for 
reformulated gasoline under section 211(k)(2) of the Act. EPA did 
evaluate the air quality impacts of this rulemaking, which are 
addressed in section D. As indicated there, both the Complex Model and 
the MOBILE model show no increase in NOX emissions with increased 
oxygen content.
    EPA certifies fuels as meeting the reformulated gasoline 
requirements on the basis of a comparison to 1990 technology vehicles. 
Both the Simple and Complex Models are tools through which this 
certification is carried out. There are no oxygen caps under the 
Complex Model other than the upper limits for the valid range of the 
model, set at 4.0 wt% oxygen. For reformulated gasoline, the Complex 
Model results must show no increase in NOX emissions over 
statutory baseline levels. As discussed, the Complex Model shows no 
increase in NOX emissions when oxygen content is increased. EPA 
has made and continues to make a variety of decisions, including 
setting the Phase II reformulated gasoline standards, based on the 
Complex Model, again, because that it is the basis for reformulated 
gasoline certification.
    Several commenters indicated that EPA's finding that increased 
oxygen will not increase NOX emissions is due to statutory 
constraints placed on the model and certain key assumptions. EPA agrees 
that certain statutory requirements and certain assumptions have 
affected the emission effects estimated by the Complex Model.

[[Page 12035]]
Commenters expressed concern about the size of the high-emitter 
database and the fact that the Complex Model represents only a portion 
of the in-use fleet, which could make it an inappropriate tool for 
estimating emissions impacts of the overall fleet. EPA's conclusions 
regarding oxygen effects on NOX are based on test data from 1986 
and later closed-loop, adaptive-learning vehicles with 3-way or 2-way 
plus oxidation catalysts (i.e., 1990 technology), and would apply to 
much of the fleet. EPA acknowledges that the results of the Complex 
Model do not automatically apply to the entire in-use fleet, but 
nonetheless believes that it is not inappropriate, especially given the 
agreement between the Complex Model and the MOBILE model with regard to 
the impact of oxygen content on NOX emissions.
    Several commenters indicated that, theoretically, due to air/fuel 
enleanment and combustion theory, NOX emissions should increase 
with increased oxygen content. EPA believes however, that NOX 
emissions increases due to increased oxygen content would not 
necessarily occur. The fundamental science behind closed-loop, 
adaptive-learning designs (i.e., the 1990 technology contained in the 
Complex Model) argues that enleanment due to oxygenate addition would 
be offset by reduced air intake. Because of the offset enleanment 
effects, NOX emissions will not necessarily increase with 
increased oxygen content. The test data on which the Complex Model is 
based supports this.
    One commenter stated that numerous studies, including Auto-Oil 
studies, have shown increased NOX emissions with increased fuel 
oxygen content. EPA does not refute these studies--vehicle technologies 
and ages certainly affect emissions results, and EPA recognizes that in 
these instances, NOX increases were observed. However, as 
discussed earlier in section D, the Complex Model, which is the basis 
of EPA's analysis for this rulemaking, has both a normal-emitter 
portion and a high-emitter portion. The effect of oxygen on NOX 
emissions for these two emitter groups, when weighted, yields 
essentially no negative change in NOX emissions with increased 
oxygen content.
    One commenter stated that the normal emitter part of the Complex 
Model is consistent with theory but the high emitter part is not, and 
therefore, overall, the model is incorrect. EPA does not believe that 
simply because one part of the model ``disagrees'' with theory and 
another part of the model ``agrees'' with theory that the model is 
incorrect. Many factors affect the emission results predicted by the 
Complex Model, and it is inappropriate to discount those results simply 
because they do not agree with theory. The Complex Model was adopted 
after rigorously analyzing a broad spectrum of empirical test data. The 
commenters objections fail to show the invalidity of this test data or 
the analysis leading to the Complex Model.
    Unlike the Complex Model, the CARB Predictive Model, also a fuel 
certification model, shows that NOX emissions increase with 
increased fuel oxygen content. According to most commenters on this 
issue, the difference in NOX predictions between the models is due 
to differences in approach to model development. Commenters mentioned 
that the CARB model contains more data, represents more of the in-use 
fleet and differs in its treatment of high emitters. For these reasons, 
commenters say, the CARB model is more appropriate for estimating 
emissions impacts in California associated with oxygen changes. EPA 
agrees that the difference in NOX predictions between the two 
models is due to different approaches to model development. Factors 
such as vehicle technologies, vehicle age, and quality control during 
testing all affect predicted emissions results. Because of the manner 
in which normal-emitting and high-emitting vehicles are included in the 
Complex Model, EPA believes that the Complex Model is the more 
appropriate tool for estimating NOX impacts due to fuel changes, 
for certification of reformulated gasoline. Together with the MOBILE 
model, the Complex Model is also appropriate for in-use evaluation 
purposes, from a national perspective.
    In contrast with most of the comments on this issue, one commenter 
stated that EPA's suggestion that the Complex Model was not 
representative of the in-use fleet is unfounded. The reformulated 
gasoline program is meant to reduce ozone through VOC (and NOX) 
emissions reductions. Based on the Complex Model, these reductions 
should occur. EPA believes that the Complex Model and the MOBILE model 
are sound tools for predicting the impact on in-use NOX emissions 
from the regulatory change adopted today from the perspective of the 
fleet nationwide. It may not be the most appropriate tool for 
predicting local in-use emissions, however, given differences in local 
fleets versus the fleet on which the Complex Model is based. That is 
one of the reasons EPA is providing states with an option that would 
lower the oxygen maximum to 3.2 wt % oxygen from ethanol.

F. Dilution

    In the proposal, EPA stated that it expected no NOX increases 
due to this rulemaking because (1) the Complex Model shows no increase 
in NOX emissions with increased oxygen content, (2) the addition 
of oxygenate to a base gasoline dilutes other fuel parameters which 
overall should yield a net reduction in NOX emissions, and (3) EPA 
does not expect fuel producers to offset the dilution effects, i.e., to 
purposely take fuel parameters back toward their original value in the 
base gasoline. Several commenters agreed with EPA. In fact one 
commenter stated that the argument that dilution effects should result 
in net decrease in NOX can be strengthened by reviewing California 
data and the outstanding performance of reformulated gasoline during 
the summer of 1995.
    One commenter stated that the proposal relies heavily on 
``expected'' fuel changes. Because these changes are not guaranteed, 
the commenter stated that they should not be counted in estimating 
NOX emissions. This commenter also stated that EPA does not allow 
such latitude (i.e., the use of ``expected'' fuel changes) with state 
implementation plans (SIPs) and should not take advantage of it in this 
case. The focus of this rulemaking is determining what regulatory 
controls, if any, are appropriate to implement the Act's requirement 
that reformulated gasoline not increase NOX emissions compared to 
baseline gasoline. In that context, expected fuel changes are quite 
relevant. Fuel producers must determine for themselves the most cost-
effective means for complying with the reformulated gasoline 
requirements. When complying under the Simple Model, which is all that 
is affected by today's rulemaking, refiners must meet the Simple Model 
RVP and toxics requirements, oxygen and benzene content requirements 
and ensure that the finished gasoline and reformulated gasoline 
blendstock for oxygenate blending, or RBOB, (plus oxygenate) they 
produce will not exceed their baseline values for sulfur, olefins and 
T90. The values of these latter three fuel parameters then, on average, 
should be less than or equal to the baseline values, and reductions in 
these values have been shown to reduce NOX emissions. It is 
possible but highly unlikely that E200 could increase (aside from the 
increase due to dilution), and no data to refute EPA's assumption on 
this matter has been submitted. Thus EPA is highly confident that the 
expected fuel changes will occur, on average, and that there will be no 
net increase in NOX

[[Page 12036]]
emissions. An additional maximum cap on oxygen is not reasonably needed 
to achieve this result.
    It is not possible, nor necessary, for EPA to know exactly what 
fuel changes each refiner will make, as long as the requirements of the 
reformulated gasoline program are met. The overall premise of this rule 
is that the Complex Model shows--even without the effects of other fuel 
changes--no increase in NOX emissions with increased oxygen. Any 
other fuel changes will either increase or decrease NOX emissions, 
and EPA is simply saying that it believes, given the other requirements 
of the program, that the net effect of these other fuel changes will be 
to further reduce NOX. EPA's discussion of ``expected'' fuel 
changes are based on refinery studies as well as discussions with the 
industry, have been discussed in other works and rules related to the 
reformulated gasoline program and have not been significantly refuted.

G. Ethanol Market Share

    Several comments were received regarding how this change to the 
reformulated gasoline regulation would impact ethanol use. Several felt 
that this change would result in increased ethanol use. However, one 
commenter felt that since EPA is not changing RVP standards for 
reformulated gasoline, summer 10 vol % ethanol blends would be produced 
only by using sub-RVP blendstock, which is in short supply.
    Assuming that ethanol use would increase, commenters cited many 
benefits that would be realized by this change. One commenter stated 
that even a modest increase in the use of ethanol would provide 
associated energy gains and environmental benefits. Another commenter 
felt a potential effect of the change may be to shift ethanol use from 
conventional areas, and most likely would reduce ethanol exports. Other 
commenters noted that increased ethanol use would benefit rural America 
by increasing grain production.
    One commenter felt that an expanded market opportunity for ethanol 
would not necessarily harm the domestic MTBE/methanol market. This 
commenter pointed out that domestic MTBE is not able to meet 
reformulated gasoline demand. As much as 895 million gallons of MTBE 
could be imported to satisfy reformulated gasoline demand, and this 
deficit is 30 times the potential demand this change will create for 
ethanol. This commenter also pointed out that this change creates a 
demand for ethanol which is only a fraction of that which would have 
been created by the renewable oxygenate standard.
    EPA recognizes that this change in the maximum oxygen content 
allowed in reformulated gasoline may result in slightly increased 
ethanol use. This increase in the ethanol market could well result in 
the benefits these commenters have mentioned. However, today's action 
does not guarantee an increase or decrease in marketshare for any 
oxygenate. EPA today is simply removing a regulatory burden, the 
current oxygen content cap. Ultimate use of any oxygenate, including 
ethanol, will depend on the economic situation of each fuel producer.

H. Commingling

    One commenter stated that the commingling concern discussed in the 
proposal was exaggerated. However, many commenters on this issue 
disagreed with EPA's comment that there may be a slight commingling 
benefit due to this rule if (under an assumption of constant ethanol 
volume) there are fewer gallons of reformulated gasoline at the 10 vol% 
ethanol rather than more gallons at 7.8 vol%. Most believed that 
summertime VOC emissions in nonattainment areas would increase, due to 
commingling, as a result of this rule. Commenters said that if ethanol 
use increases (or MTBE market share decreases) during the summer, there 
will be more gallons of ethanol-containing reformulated gasoline, and 
more instances of commingling. One commenter stated that commingling 
effects are complex and dependent on a number of factors--oxygenate 
market share, consumer purchase patterns, etc. This commenter stated 
that EPA's analysis cannot justify a conclusion that commingling 
impacts are improved or worsened by the proposed rule. Another 
commenter stated that EPA should evaluate the persistence of the 
commingling RVP boost. This commenter stated that the persistence will 
be increased since there will be a higher concentration of ethanol in 
the tank.
    EPA agrees with the commenter's statement that a reduction or 
increase in commingling impacts cannot be concluded. In the proposal, 
EPA discussed some scenarios under which the impact of today's rule 
could increase or decrease the commingling effects. However, as 
indicated in the Regulatory Impact Analysis (RIA) to the December 1993 
final rule, commingling is affected by several factors including 
ethanol marketshare and ethanol content. This rulemaking may result in 
changes in ethanol marketshare in reformulated gasoline and/or 
conventional gasoline areas, or in changes in the ethanol content of 
reformulated gasoline and/or conventional gasoline, compared to last 
year. Depending on whether such changes occur, and their magnitude, it 
is possible that VOC emissions could increase or decrease, due to 
commingling, as a result of this rule. EPA believes, however, that it 
would be difficult to quantify or compare the commingling impact of 
ethanol at 7.8 vol% (as in 1995) to the 10 vol% which is allowed by 
today's action.
    Several commenters indicated that EPA appeared to be contradicting 
itself not only in the proposal, but in conflict with earlier work not 
directly related to this rulemaking. For instance, one commenter stated 
that EPA was inconsistent with its expected change (or no change) in 
ethanol use--``should contribute to ethanol increase'' and ``* * * 
total ethanol volume remains the same''. EPA does not agree with 
commenters in this regard. EPA cannot be assured of any one outcome, 
e.g., whether ethanol marketshare increases or decreases, whether more 
ethanol is used in fewer gallons of reformulated gasoline compared to 
last year, or whether ethanol volumes will shift from conventional to 
reformulated gasoline areas or from one reformulated gasoline area to 
another. These factors will be resolved in the marketplace after 
promulgation of this rule. The language contained in the proposal 
represented EPA's thoughts about possible outcomes for given scenarios.
    One commenter mentioned that in the Renewable Oxygenate proposal, 
EPA excluded ethanol as a renewable oxygenate when used in VOC-
controlled reformulated gasoline because the commingling VOC increase 
were unacceptable. In that proposal, commingling VOC increases were 
deemed unacceptable because the increased use of ethanol could approach 
a 30% marketshare. An ethanol marketshare of that magnitude would 
certainly have unacceptable increases in VOC emissions due to 
commingling. However, although the effect of today's action on 
oxygenate marketshare cannot be definitively determined, it almost 
certainly will not approach the 30% level (for ethanol) discussed in 
the Renewable Oxygenate proposal. For this reason, EPA's commingling 
concerns regarding that proposal are not applicable to today's 
rulemaking.
    A few commenters were concerned that any commingling benefits would 
occur in attainment areas--where it's not needed. Again, as stated 
above, EPA can only estimate the commingling impact of today's rule. 
Marketplace dynamics will determine, among other things, whether more 
ethanol is produced, whether it is used in

[[Page 12037]]
conventional or reformulated gasoline areas, and whether ethanol 
volumes shift geographically. One commenter expressed concern that by 
referring to a national basis, EPA has lost sight of the specificity of 
reformulated gasoline to nonattainment areas. EPA has not lost sight of 
the area specificity of the reformulated gasoline program but again was 
attempting to estimate potential impacts of today's rule.

I. Energy Impacts

    One commenter stated that EPA was underestimating the potential 
energy benefits, including benefits for increased displacement of 
gasoline and imported MTBE (energy security, trade balance). A few 
commenters questioned the DOE study mentioned in the proposal--one 
mentioned that the cited study was draft--and provided a copy of the 
final report which had a more positive energy balance attributable to 
ethanol production. It showed that ethanol production is 25% more 
energy efficient than gasoline. Another commenter indicated that recent 
USDA studies have shown a positive energy balance for the production of 
ethanol.
    EPA agrees that use of ethanol has some positive energy 
implications, depending on various circumstances, including whether it 
is used in VOC-controlled or non-VOC-controlled reformulated gasoline. 
However, because the additional ethanol use allowed by today's rule 
will be only be roughly 2.2 vol% (per gallon) over 1995 levels, EPA 
does not expect the energy impacts of the overall reformulated gasoline 
program to change significantly due to this rulemaking.

J. Economic Impacts

    As stated in the NPRM, the largest part of the cost associated with 
Phase I reformulated gasoline is the oxygen content required by the 
Act. Lifting the oxygen cap may provide an economic advantage by 
allowing some refiners to use ethanol during the ozone season when they 
would not otherwise be able to do so. However, as discussed in the 
NPRM, refiners must consider a variety of factors when selecting an 
oxygenate for reformulated gasoline (or any other fuel).
    Several commenters supported EPA's economic assessment of the 
impact of today's action. Some suggested that further economic benefit 
may occur due to an expanded industrial base and additional jobs from 
increased domestic oxygenate production. Additional positive economic 
impacts suggested by commenters include reduced consumer reformulated 
gasoline cost and increased farm income. One commenter felt the higher 
oxygen cap would allow refiners to maximize the displacement value of 
ethanol, reducing the cost of RBOB and ethanol-containing reformulated 
gasoline. This commenter also stated that since ethanol costs are lower 
than MTBE costs, additional use of ethanol would increase market 
penetration of ethanol and provide greater savings for consumers. One 
commenter explained that the current cap denies refiners the dilution 
benefits of higher ethanol blends to meet the reformulated gasoline 
toxics requirements cost-effectively. This commenter indicated that to 
use ethanol now, refiners must produce a blendstock lower in RVP and 
aromatics.
    One commenter was concerned that EPA's economic assessment ignored 
the effect of this rule on alkylates. This commenter stated that both 
alkylates and oxygenates (ethers) use olefins as a feedstock, are high 
octane blending components, and can contribute to emissions reductions. 
If olefin feedstocks are limited, by maximizing oxygenates, alkylate 
feedstocks will also be limited, therefore limiting the emissions 
benefits of alkylates. A refiner's lowest cost option will likely be to 
substitute oxygenates for alkylates, leaving olefins and aromatics in 
gasoline. According to this commenter, the California reformulated 
gasoline program regulates out olefins and aromatics by increasing 
alkylates and oxygenates while the Federal reformulated gasoline 
program has shifted gasoline from alkylates to oxygenates with 
questionable improvement in emissions. Further, this commenter states 
that by replacing alkylates with oxygenates, consumers will be paying 
substantially more per mile driven, since alkylates increase fuel 
economy. This commenter concludes that EPA neglected these issues in 
its economic analysis and only superficially addressed economic burden, 
without regard for actual impact on consumers. This commenter suggests 
that the Agency review what has actually occurred in the marketplace, 
and consider the economic burden on consumers.
    EPA did not intend to evaluate the impact of oxygenate as a whole, 
but merely the impact of slightly increased oxygenate use, as this 
rulemaking seeks only to increase the maximum allowable oxygen content, 
one limited aspect of the oxygen content requirements in the 
reformulated gasoline program. EPA believes increasing the maximum 
allowable oxygen content increases flexibility in oxygenate choice for 
refiners, which can only be economically beneficial for fuel producers 
and consumers. As most of this increased oxygenate use is likely to be 
ethanol, this provision will have little impact on the refinery trade-
off between alkylate and oxygenate production.

K. Compliance Burden

    As stated in the NPRM, EPA expects today's action will reduce the 
regulatory burden on gasoline and oxygenate producers, and will 
simplify the requirements for a state to choose a different maximum 
oxygen level. Several commenters agreed that this change in the 
regulation would reduce the burden on fuel producers and on the states. 
This change would provide increased flexibility in meeting the 
reformulated gasoline requirements and maximize the efficiency of 
oxygenate use. One commenter pointed out that it would also reduce the 
burden for blenders, simplifying logistics and inventory management by 
eliminating the need to change ethanol blending volumes on a seasonal 
basis. However, some commenters felt that this change could increase 
the burden on the states by requiring them to request a lower cap. 
These commenters felt that estimating a reduced burden on the states 
assumes that the states want to increase oxygenates. Finally, one 
commenter felt that when proposing these changes, EPA must address 
actual or potential regulatory conflicts between technical changes and 
fuel changes, and not focus solely on attempts to reduce administrative 
burden.
    EPA continues to believe that this regulatory change in the maximum 
oxygen content of reformulated gasoline will reduce the regulatory 
burden on gasoline and oxygenate producers and blenders, and on the 
states. Even if the majority of states prefer to keep the lower oxygen 
cap, the requirements for doing so are minimal. The Complex Model has 
revealed that there is no technical reason to limit the oxygen content 
of gasoline certified as reformulated gasoline, hence the reduction in 
burden is justified.

L. California

    Several commenters felt that California should be exempt from the 
requirements of this regulation for a variety of environmental and 
regulatory reasons. First, California has unique air quality problems. 
One commenter stated that the higher maximum oxygen content allowed 
under today's action could have a detrimental effect on California's 
ability to meet the National Ambient Air Quality Standards (NAAQS). 
Additionally, California retains its authority to regulate fuels.

[[Page 12038]]
See section 211(c)(4)(B) of the CAA. Under this authority, California 
has limited the oxygen content of gasoline sold in the state to 2.7 
wt%. Commenters felt that, for these reasons, California should not be 
required to go through the bureaucratic opt-out hurdle and should be 
specifically exempted from the rule.
    EPA recognizes California's unique environmental problems and 
regulatory authority. While the Federal standards for reformulated and 
conventional gasoline do apply in California, if California has imposed 
its own more stringent regulations, as it has regarding oxygen content, 
then fuel producers must abide by California's more stringent 
standards. Thus, because California's oxygen maximum is more stringent 
than EPA's, that maximum would be the controlling maximum in the state, 
and the Governor of California would not be required to request a lower 
oxygen maximum.

M. State Requests for Lower Oxygen Maximum (Cap)

    In the NPRM, EPA proposed that the maximum oxygen content of 
reformulated gasoline sold in a state will be limited to a lower level 
upon the request of the state on the basis of local air quality 
concerns. EPA expects that such a request would come from the Governor 
of the state or their authorized representative. To obtain the lower 
maximum oxygen content, the state must notify the Administrator that 
the use of an oxygenate at higher levels would interfere with 
attainment or maintenance of an ambient air quality standard, or will 
contribute to an air quality problem. EPA proposed that the lower 
oxygen cap would become effective 30 days after the Administrator 
announced the lower standard in the Federal Register.
    Some commenters had concerns regarding the procedures and 
requirements for the lowering of the maximum oxygen content by the 
Governor. One commenter stated that the EPA must include notice and 
comment rulemaking procedures for any change to an reformulated 
gasoline rule, per section 307(d)(1), including states requesting a 
lower cap. EPA disagrees with this comment. EPA does not agree that a 
separate rulemaking must be conducted in response to each state's 
request for a lower oxygen maximum. Through this rulemaking, EPA is 
establishing a petition-based process that will address, on a case-by-
case basis, future individual state requests for a lower oxygen maximum 
standard under the Simple Model. The regulations establish a clear and 
objective criteria for EPA to apply in these future non-rulemaking, 
adjudication actions. These criteria specify that a state's 
notification to the Administrator must include a notification 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. This application of regulatory criteria on a case-by-case 
basis to future individual situations does not require notice and 
comment rulemaking, either under section 307(d) of the Clean Air Act or 
the Administrative Procedure Act.
    It is not uncommon for the Agency to establish such a petition-
based process within its regulations as a way to apply the criteria 
established in a regulation to a wide variety of individual cases. The 
reformulated gasoline regulations, for example, include a petition 
process for approval of individual baseline, augmentations of the 
Complex Model, exemptions, alternative test procedures, and the like. 
EPA believes that approach is most appropriate here as well, as it will 
allow for expeditious and consistent Agency action on the individual 
request presented by states.
    The provision allowing a Governor to request a lower maximum oxygen 
content is the same as allowed for non-VOC-controlled reformulated 
gasoline in the December 1993 rule. No notice and comment procedures 
were specified in that situation, and similarly, none are required 
under today's rulemaking. This commenter also objected to the proposed 
30 days from publication (in the Federal Register) effective date for 
the lower cap. This commenter felt that refiners would need at least 90 
days to sell off stocks of 10 vol% ethanol reformulated gasoline. 
Another commenter supported the states rights to have a lower cap, but 
suggested that it become effective in 60 days rather than 30 days. A 
third commenter felt that as much as 6 months would be needed before a 
new, lower oxygen maximum took effect. A final commenter suggested that 
if a request would take effect 30 days after publication, the 
announcement should be published within 15 days of EPA's receipt of the 
request. These timing concerns were supported by another commenter who 
could not support allowing states to impose different oxygen caps, 
suggesting that this could strain gasoline distribution bulk storage 
capacity.
    EPA agrees with commenters that 30 days may be too short a 
transition for fuel producers. Therefore the period has been extended 
to 60 days. A longer extension would not be practical, since this 
change only applies to the Simple Model during the summer seasons of 
1996 and 1997. Based upon information previously supplied to the 
Agency,4 EPA believes that 60 days will be sufficient to use the 
higher-oxygen content reformulated gasoline, thus minimizing storage 
and distribution problems. While this provision could potentially add 
another layer of fuel distinction to the reformulated gasoline program, 
the impact is expected to be small, primarily because the use of 
specific oxygenates tends to occur in geographic pockets. Use of 
ethanol (in reformulated gasoline) for instance, is prevalent in 
certain areas of the country and is very limited in other areas. Those 
states where it is widely used are not likely to request a lower oxygen 
maximum, because in those states, ethanol likely provides significant 
economic benefits. In states which request a lower maximum, it is 
likely that ethanol use in that state has always been minimal. For 
clarification purposes, states are not allowed to choose any lower 
maximum oxygen content. The lower oxygen maximum would be 3.2 wt% 
oxygen for ethanol for all cases where a lower maximum is requested by 
a state.

    \4\ U.S. EPA, ``Final Regulatory Impact Analysis and Summary and 
Analysis of Comment For: Renewable Oxygenate Requirement for 
Reformulated Gasoline,'' June 29, 1994.
---------------------------------------------------------------------------

    Comments were mixed regarding the requirements which states must 
fulfill when requesting the lower oxygen maximum. One commenter stated 
that EPA needed to verify in the final rule that a state would merely 
have to notify EPA of its intent to have a lower cap. Those commenters 
opposed to allowing states to request a lower maximum oxygen cap felt 
that a state should be required to demonstrate ``to the satisfaction of 
the Administrator'' that unique localized circumstances exist which 
require the lower oxygen. According to these commenters, states should 
be required to include specific modeling and test data.
    Another commenter felt that states should be allowed to use models 
more appropriate to their region (than the Complex Model) to make 
demonstrations for the lower oxygen maximum.
    EPA believes that each state should retain the greatest flexibility 
in addressing local concerns over increased oxygenate use. This will 
minimize the risk that increased oxygenate use will interfere with 
local air quality problems. Thus, EPA is retaining its proposed 
language on this issue. This provisions will maintain

[[Page 12039]]
EPA's intent of increased flexibility and reduced burden for the 
states, as well as other parties which may benefit by today's action.
    Several commenters questioned the need for a lower cap at all. 
These commenters felt that EPA's technical findings on the air quality 
effects of higher ethanol reformulated gasoline blends shows no adverse 
impact and are technically sound. Additionally, these commenters felt 
that many stakeholders have participated in the research, and the 
conclusions should therefore be difficult to challenge. While EPA is 
confident of its technical findings, it recognizes that general 
modelling will not apply to all regions of the country, and that there 
may exist unique regions that may be negatively impacted by the 
increased oxygen content. Therefore the option of requesting the lower 
standard is appropriate.
    Finally, some commenters were concerned that a state's request for 
a lower maximum oxygen content be to control average oxygen content, 
and not to discriminate against a particular oxygenate. They did not 
want the lower cap to be a marketplace barrier to ethanol. States must 
request a lower maximum oxygen content based on air quality concerns. 
Regardless of which oxygen maximum a state has, the reformulated 
gasoline program is neutral with respect to the type of oxygenate used 
to satisfy the oxygen requirement.

N. Performance

    In the proposal, EPA did not address potential engine or vehicle 
performance problems that might occur as a result of this rulemaking, 
primarily because none attributable solely to this rulemaking are 
expected. Although this rule will essentially allow a slightly higher 
ethanol content in summertime reformulated gasoline than was allowed 
last summer, the increase will not result in gasoline ethanol contents 
which are greater than those currently in the marketplace in 
conventional gasoline and wintertime reformulated gasoline. 
Additionally, if a refiner was determining compliance based on the 
Complex Model, he could have produced reformulated gasoline containing 
10 vol% ethanol last summer. Thus, since this rulemaking does not allow 
a significantly different fuel into the marketplace, no performance 
problems are expected, and thus the issue was not addressed in the 
proposal. A few comments were, however, received on this issue.
    One commenter expressed concern that an increase in allowable 
ethanol content will increase compatibility problems for consumer 
vehicles, resulting in higher maintenance costs. This commenter also 
stated that truck mixing, typically how ethanol blends are produced, 
can be insufficient--stratification can occur with one layer having a 
higher (than 10 vol%) alcohol content. Although it is possible that 
fuels containing greater than 10 vol% ethanol could result in vehicle 
or engine performance problems, and that truck mixing could result in a 
non-complying fuel, such concerns are not directly or solely applicable 
to this rulemaking. As discussed above, the maximum oxygen content of 
summertime reformulated gasoline allowed by today's rule is limited to 
the maximum ethanol content allowed under section 211(f), namely 10 
vol%. The potential performance and mixing problems cited could occur 
with any gasoline containing up to the maximum amount of ethanol 
allowed under section 211(f).
    Another commenter expressed concern about the impact of this 
regulation on small engines, particularly nonroad engines. This 
commenter stated that EPA had not considered the effects of this 
rulemaking on small engines. The commenter was concerned that increased 
oxygenates would lead to deterioration in the condition and performance 
of small two-cycle engines, and cited several potential performance 
problems. The performance problems included vapor lock; warm start; 
increased fuel consumption; deposition problems; separation of mixing 
oil; swelling of rubber parts; corrosion; extraction of rubber material 
and deposition at other locations. Although the commenter claimed that 
some of these problems had occurred recently in tests with 10 vol% 
ethanol blends, no data was provided to support this claim. The 
commenter noted that with present levels of allowable oxygenates, some 
performance problems have been noted and was concerned that increasing 
the allowed level would cause more serious performance problems. Of 
particular concern were enleanment-related problems which can occur 
with oxygenated fuels. As stated by the commenter, small engines 
without oxygen sensors cannot compensate for changing oxygen levels.
    EPA understands the concerns expressed by this commenter regarding 
oxygenated fuels and small, particularly nonroad, engines. EPA 
evaluated the impact of oxygenated fuels with regard to potential 
performance and other related problems in its April 1995 ``Technical 
Overview of the Effects of Reformulated Gasoline on Automotive and Non-
Automotive Engine Performance'' (EPA420-R-95-001) and concluded that 
``Reformulated gasolines are expected to have little or no influence on 
the incidence of many engine performance concerns * * *.'' Regarding 
enleanment-related problems, EPA did state that, as with any oxygenated 
fuel, minor adjustments to the fuel intake system may be required to 
compensate for an enleanment effect. Nonetheless, as stated before, 
since today's rulemaking does not result in a fuel which is 
significantly different than other oxygenated fuels currently 
available, EPA does not expect new or unique performance problems, for 
either automotive or non-automotive engines, due to the higher oxygen 
content allowed by today's action.
    This same commenter also stated that EPA had not considered the 
impact of increased oxygenate levels on other EPA rulemakings involving 
small engine technology and emission levels. The commenter stated that 
several regulatory programs for small nonroad engines were in the 
development process, e.g., Phase 2 exhaust emission regulations for 
small gasoline engines. These programs may require significant changes 
in technology, and today's rulemaking may undermine the purpose and 
effect of those regulatory programs and create regulatory conflict 
between fuel and technology changes.
    As stated earlier, EPA did not address potential performance 
problems in the proposal to today's FRM because none were expected. The 
fuel changes that might occur as a result of today's rule will not 
create a significantly different fuel than is already in commerce. In 
any case, today's regulatory changes only apply under the Simple Model 
which may not be used to certify reformulated gasoline after December 
31, 1997. EPA has reviewed the upcoming nonroad engine regulations. 
Phase 1 of the nonroad regulatory program was promulgated on July 3, 
1995 (60 FR 34582), and the program takes effect in 1997. Engine 
certification began about January 1996. Because the fuels allowed under 
today's rule are not significantly different than current fuels, EPA 
does not believe that engine design changes would have occurred for 
engines designed to meet the Phase 1 nonroad regulations. Additionally, 
the final Phase 2 nonroad regulations will not take effect until some 
model years after 1997. Today's rulemaking is therefore not expected to 
affect compliance under either Phase 1 or 2 of this nonroad program.
    The commenter also expressed concern about the possible increased 
use of methanol, particularly with regard to material deterioration and 
phase separation. Methanol use in

[[Page 12040]]
reformulated gasoline or any other gasoline is limited to those 
methanol blends which have received a waiver under section 211(f). 
Today's rulemaking does not change this requirement in any way.

O. Alternatives

    In the notice of proposed rulemaking, EPA requested comment on two 
alternatives to the proposal. The first alternative was to remove the 
oxygen cap entirely, allowing up to the maximum oxygen content 
permitted under section 211(f), (including up to 10 vol% ethanol, 
roughly 3.5-4.0 wt% oxygen, or 15 vol% MTBE, roughly 2.7--3.2 wt% 
oxygen), year-round 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 the 
environmental reasons for such a limit.
    The comments received on this first alternative were mixed. One 
commenter opposed the alternative because they felt it eliminated 
flexibility for the states in meeting their air quality needs. In 
addition, the commenter stated that this alternative plan could create 
uncertainty in the marketplace for areas with programs which currently 
limit reformulated gasoline's oxygen content. Two other commenters 
supported this alternative to remove the oxygen cap entirely, and not 
allow states to restore the cap simply by notifying the Agency. They 
felt this approach would provide incentives to use ethanol in non-
traditional markets, such as the East Coast. A final commenter stated 
that the proposal was preferable to either of the alternatives 
suggested by EPA.
    The second alternative presented by EPA in the NPRM would maintain 
the oxygen 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.
    This alternative was not opposed by commenters, though it was felt 
that the proposal was the better option. Those supporting this second 
alternative felt it would be far less disruptive to the reformulated 
gasoline program than the first alternative would be.
    EPA is proceeding with the original proposal, and did not choose to 
implement either of these alternatives. EPA believes it is important to 
maintain flexibility for the states in meeting their air quality goals, 
and thus does not desire to implement the first alternative. Since 
there was little support for the second alternative, and since it does 
less to accomplish the goals of the proposal, EPA has also rejected the 
second alternative.

IV. 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.

V. 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''.

VI. 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.

VII. 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.

VIII. 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: March 18, 1996.
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:

[[Page 12041]]



Sec. 80.41  Standards and requirements for compliance.

* * * * *
    (g) Oxygen maximum standard.
    (1) The per-gallon standard for maximum oxygen content, which 
applies to reformulated gasoline subject to the simple model per-gallon 
or average standards, is as follows:
    (i) Oxygen content shall not exceed 3.2 percent by weight from 
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.
    (ii) A state may request the standard specified in paragraph 
(g)(1)(i) of this section separately for reformulated gasoline 
designated as VOC-controlled and reformulated gasoline not designated 
as VOC-controlled.
    (2) The standard in paragraph (g)(1)(i) of this section shall apply 
60 days after the Administrator publishes a notice in the Federal 
Register announcing such a standard.
* * * * *
[FR Doc. 96-7162 Filed 3-22-96; 8:45 am]
BILLING CODE 6560-50-P