[Federal Register Volume 62, Number 51 (Monday, March 17, 1997)]
[Rules and Regulations]
[Pages 12564-12572]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6023]


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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 79

[FRL-5707-7]


Registration of Fuels and Fuel Additives: Changes in 
Requirements, and Applicability to Blenders of Deposit Control Gasoline 
Additives

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: This action finalizes several specific changes to existing 
regulations which require the registration and testing of designated 
motor vehicle fuels and fuel additives (F/FAs) by their manufacturers. 
Included are changes to the regulatory definitions of ``fuel 
manufacturer,'' ``additive,'' and ``small business,'' as well as 
modifications to grouping rules for biodiesel and synthetic fuels. 
These changes will streamline F/FA registration and testing burdens and 
reduce the number of respondents, while maintaining the informational 
value of the program and its contributions to the public health and 
environmental goals of the Clean Air Act.
    Another previously proposed change, to establish a de minimis 
provision for F/FAs containing certain ``atypical'' elements, is not 
addressed in this action. However, in a direct final rule also 
published elsewhere in this issue of the Federal Register, certain 
deadlines related to testing of atypical F/FAs are extended while EPA 
determines the most appropriate disposition of the de minimis proposal.

EFFECTIVE DATE: This action will be effective on May 16, 1997.

ADDRESSES: Documents related to this final rule have been placed in 
Public Docket No. A-90-07 located at the U.S. EPA, Air Docket Section, 
Room M-1500, 401 M Street S.W., Washington, DC 20460. The docket is 
open for public inspection from 8:00 a.m. until 5:30 p.m., Monday 
through Friday, except on Federal holidays. A reasonable fee may be 
charged for photocopying.

FOR FURTHER INFORMATION CONTACT: Jim Caldwell (202-233-9303) or Joseph 
Fernandes (202-233-9016), U.S. EPA, Office of Mobile Sources, Fuels and 
Energy Division, Mail Code 6406J, 401 M Street SW, Washington, DC 
20460.

SUPPLEMENTARY INFORMATION: Electronic copies of this rule and earlier 
rulemaking documents related to the F/FA Registration Program are 
available free of charge on EPA's Technology Transfer Network Bulletin 
Board System (TTNBBS, phone access 919-541-5742) and on the Internet 
(http://www.epa.gov/omswww). Parties requiring assistance may call Mr. 
Fernandes at (202) 233-9016.

I. Regulated Entities

    Regulated categories and entities potentially affected by this 
action include:

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                Category                  Examples of regulated entities
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Industry...............................  Manufacturers of gasoline and  
                                          diesel fuel.                  
                                         Manufacturers of additives for 
                                          gasoline and diesel fuel.     
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your entity is regulated by this action, you should carefully examine 
this preamble and the changes to the regulatory text. You should also 
carefully examine all provisions of the registration program at 40 CFR 
part 79.

II. Introduction

A. Background

    The F/FA registration program is authorized by section 211 of the 
Clean Air Act (CAA) and codified in 40 CFR part 79. In accordance with 
CAA sections 211(a) and (b)(1), basic registration requirements 
applicable to gasoline and diesel fuels and their additives were issued 
in 1975. These regulations require manufacturers to submit information 
on their F/FA products, such as the commercial identity, chemical 
composition, purpose-in-use, and range of concentration, in order to 
have such products registered by the EPA.
    Additional registration requirements, implementing sections 
211(b)(2) and (e), were proposed in April 1992 and

[[Page 12565]]

February 1994 (57 FR 13168 and 59 FR 8886, respectively) and were 
finalized on June 27, 1994 (59 FR 33042). The additional regulations 
require manufacturers, as part of their F/FA registration 
responsibilities, to conduct tests and submit information on the health 
effects of their F/FA products. These requirements are organized within 
three tiers. Tier 1 requires analysis of the combustion and evaporative 
emissions of F/FAs and a survey of existing scientific information on 
the public health and welfare effects of these emissions. To the extent 
that adequate test data are not already available (as defined in the 
regulations), Tier 2 requires manufacturers to conduct specified 
toxicology tests to screen for potential adverse health effects of the 
F/FA emissions. Additional testing may be required under Tier 3 at 
EPA's discretion.
    The rule also includes several provisions to reduce the information 
collection and testing burdens. Among these provisions is a voluntary 
grouping and cost sharing program which allows manufacturers of similar 
F/FAs to pool their resources and efforts in complying with the 
requirements. Special provisions for small manufacturers are also 
included.
    On July 11, 1996, EPA published a Notice of Proposed Rulemaking 
(NPRM, 61 FR 36535), proposing several specific changes to the F/FA 
registration regulations.\1\ The proposed modifications were designed 
to reduce the number of respondents and streamline the requirements of 
the program. For example, EPA proposed to change the definition of a 
fuel manufacturer so that the addition of a small volume of an additive 
to fuel would not by itself cause a party to be considered a fuel 
manufacturer. EPA also proposed to change the definition of an additive 
to exclude substances composed solely of carbon and/or hydrogen. 
Together, these two proposals were expected to relieve hundreds of 
businesses from existing regulatory responsibilities to register and 
test F/FAs. Other proposals potentially affected small businesses, 
biodiesel and synthetic fuel manufacturers, and manufacturers of 
atypical F/FAs (i.e., those containing elements other than carbon, 
hydrogen, oxygen, nitrogen, and sulfur). In response to the NPRM, EPA 
received 43 written comments, which are available in the docket for 
public review.
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    \1\ In addition to the NPRM, a direct final rule, ``Registration 
of Fuels and Fuel additives: Minor Changes to the Testing 
Requirements for Registration,'' appeared in the same issue of the 
Federal Register (61 FR 36506, July 11, 1996). Another technical 
change was promulgated in a subsequent direct final rule, 
``Registration of Fuels and Fuel Additives: Minor Revisions'' (61 FR 
58744, November 18, 1996).
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B. Today's Actions

    This final rule promulgates most of the revisions proposed in the 
NPRM of July 11, 1996. The specific regulatory revisions are discussed 
in Sections III through VII of this preamble, including analyses of the 
public comments related to each issue.
    One of the provisions which EPA proposed in the NPRM was a de 
minimis provision, which would delete standard Tier 2 requirements for 
certain atypical F/FAs when the atypical elements are present at very 
low concentrations. Additives qualifying for this de minimis provision 
were proposed to be those containing no atypical elements other than 
aluminum, boron, calcium, sodium, zinc, magnesium, phosphorus, 
potassium, and/or iron, where the total of these elements would not 
exceed 25 parts per million when the additive is mixed in fuel at the 
maximum recommended concentration.
    The proposed de minimis provision is not finalized in today's 
action, but is still under consideration. EPA received significant 
public comment about all aspects of the proposal, and has not yet fully 
analyzed the suggestions therein. Nevertheless, EPA is aware that this 
delay in resolving the de minimis issue might result in significant 
uncertainty for manufacturers of atypical additives, who do not know 
whether EPA will finalize the proposed exemption or what the scope of 
the final exemption might be, but who nonetheless face regulatory 
deadlines in the near future. In particular, all F/FA manufacturers 
(except some small businesses and others qualifying for specific 
exemptions or alternative deadlines) are required by May 27, 1997 to 
either (1) submit the results of completed Tier 2 testing to EPA, or 
(2) demonstrate the existence of suitable arrangements for Tier 2 test 
completion by May 27, 2000. However, if EPA does adopt a de minimis 
provision in a future rulemaking action, some atypical manufacturers 
would not be subject to these Tier 2 requirements.
    To permit EPA to consider all issues raised in response to the 
proposed provision, without any unnecessary adverse impact on the 
manufacturers, EPA is publishing elsewhere in this issue of the Federal 
Register a direct final rule, extending each of the two deadlines 
related to Tier 2 testing by 18 months, for all atypical F/FAs.2 
Thus, during the time needed by EPA to complete its determination of 
the most appropriate disposition of the de minimis proposal, 
potentially-affected manufacturers will be relieved of compliance 
deadlines which might no longer apply to them. EPA estimates that the 
18-month extension will be adequate for the Agency to complete its 
analysis and publish a final rule (or other notification as 
appropriate), while still leaving sufficient time for manufacturers of 
atypical F/FAs to comply with any applicable requirements to secure 
contractual arrangements for timely completion of Tier 2 testing.
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    \2\ Deadlines for requirements not proposed to be affected by 
the de minimis provision (i.e., Tier 1 and potential Alternative 
Tier 2 and/or Tier 3 requirements) are not affected by these 
extensions.
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III. Fuel Manufacturer and Additive Definitions

A. Background

    In the NPRM of July 11, 1996, EPA proposed several changes 
affecting the definition of a fuel additive and the definition of a 
fuel manufacturer. These changes were intended to ease regulatory 
burdens by reducing the number of entities subject to F/FA registration 
responsibilities and by streamlining certain registration requirements.
    First, EPA proposed to revise the definition of an additive (at 
Sec. 79.2(e)) to exclude substances composed solely of carbon and/or 
hydrogen. The proposed change would reinstate the definition that was 
in effect prior to the final rule of May 27, 1994, and would provide 
regulatory relief to perhaps hundreds of companies considered to be 
``fuel manufacturers'' only because they add common hydrocarbon stocks 
to finished fuels.
    Similarly, EPA proposed to revise the definition of a fuel 
manufacturer (at 79.2(d)) to exclude those parties whose 
``manufacturing'' activity consists only of adding small amounts of 
detergent and/or other performance additives to fuel. Specifically, EPA 
proposed that parties which merely add additives in amounts accounting 
for less than 1 percent by volume of the resulting additive/fuel 
mixture would not be considered fuel manufacturers by virture of this 
activity. In such cases, the registration and testing requirements for 
the additives themselves are already being met by the responsible 
additive manufacturers. Thus, including as fuel manufacturers those 
entities whose only relevant activity is the blending of such additives 
into fuel has the effect of

[[Page 12566]]

increasing the number of F/FA registration respondents while yielding 
little incremental information to EPA.
    The proposed ``one-percent solution'' described above would not 
change the registration responsibilities of parties who add oxygenates 
in amounts sufficient to produce mixtures categorized as non-
baseline.\3\ EPA judged that it is generally appropriate for 
manufacturers of oxygenated fuels to share (along with oxygenate 
manufacturers) the responsibility for registering and testing these 
mixtures. The blending of oxygenates in relatively large volumes can 
cause substantive changes in the basic properties, emission 
composition, and toxic potential of the fuel. Furthermore, in the case 
of most oxygenates, the blending is accomplished ``upstream'' by fuel 
refiners and importers. Thus, other manufacturing activities besides 
the addition of oxygenate generally define these blenders as fuel 
manufacturers and make them responsible for F/FA registration and 
testing requirements.
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    \3\ As specified in Sec. 79.56(e)(3), non-baseline F/FAs contain 
(among other criteria) no elements in addition to carbon, hydrogen, 
oxygen, nitrogen, and sulfur, and, in the case of gasoline F/FAs, 
contain 1.5 percent or more oxygen by weight, and, in the case of 
diesel F/FAs, contain 1.0 percent or more oxygen by weight.
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    However, certain physical properties prevent transport of ethanol-
containing fuel through the pipeline distribution system, so that 
ethanol must be added to fuel downstream rather than at the refinery. 
In addition to refiners and importers, therefore, many ethanol blenders 
are terminal operators and truckers who are considered ``fuel 
manufacturers'' only because of their oxygenate-blending activity. Some 
of these entities qualify for the small business exemption at 
79.58(d)(2), which exempts them from Tier 1 and Tier 2 testing 
responsibilities. As fuel manufacturers, however, they must still 
comply with the reporting requirements of the F/FA registration 
program. As pointed out in the NPRM, these requirements may constitute 
a significant paperwork burden for such respondents, while adding 
little information to EPA in regard to oxygenated fuels beyond that 
which is available through other program reporting mechanisms.
    Recognizing the unique market structure for ethanol blending 
activities, EPA proposed to revise the fuel manufacturer definition to 
exclude oxygenate blenders who meet the regulatory definition of a 
small business. For convenient reference, it was also proposed that the 
definition of ``oxygenate compound'' at 40 CFR 79.50 also be 
incorporated at 40 CFR 79.2(k).

B. Summary of Comments and Final Actions

    Comments about the proposed definition changes were overwhelmingly 
supportive and, with some modification, EPA is finalizing them in 
today's action. The modifications are discussed below.
    Several commenters said that the proposed new definition of a fuel 
manufacturer could be misinterpreted as excluding or changing the 
requirements of fuel refiners and importers, in addition to entities 
whose fuel ``manufacturing'' activity is limited to the blending of 
additives or oxygenates into fuel. EPA did not intend the proposed 
changes to affect any of the existing registration and testing 
responsibilities of refiners and importers for any of the fuel 
formulations they produce or blend. Accordingly, the regulatory 
language for the revised definitions has been modified to eliminate the 
potential ambiguity.
    Some commenters said that all oxygenate blenders other than 
refiners and importers should be excluded from the definition of a fuel 
manufacturer, not just those oxygenate blenders which are small 
businesses (docket items VII-D-06, VII-D-12, VII-D-14). They stated 
that this broad exemption would level the playing field among blenders 
without impeding the development of health effects data, since 
oxygenate manufacturers and major fuel refiners and importers would 
retain this responsibility.
    EPA has carefully considered the commenters' arguments in relation 
to other provisions of the F/FA registration and testing program. The 
program is structured around the concept that business entities which 
profit from the sale of a F/FA product should generally share 
responsibility for its potential effects on the public health and 
welfare. Such businesses have thus been required to share in the 
burdens associated with determining these potential effects. However, 
this general principle is tempered by various provisions which 
recognize that other factors, such as characteristics of the F/FA 
marketplace and distribution system, must also be taken into account 
when assigning the regulatory burdens. For example, the special 
provision for relabeled additives (Sec. 79.58(a)) provides an exemption 
based on the position of a business entity in the product marketing and 
distribution chain. The special provisions for small businesses 
(Sec. 79.58(d)) also grant exemptions based upon financial and 
marketplace factors. Moreover, provisions finalized in today's action 
permit this exemption to ``pass through'' to customers of small 
businesses, regardless of the size of the customers, to prevent 
disruption of marketplace relationships (see section IV.B, below).
    EPA's proposal to exclude as fuel manufacturers those oxygenate 
blenders who meet small business criteria would certainly provide 
additional regulatory relief to this financial segment of the industry. 
However, as pointed out by the commenters, the proposed change would 
not fully resolve the underlying problem it was intended to address: 
The regulation's unequal impact on different segments of the oxygenate 
marketplace.
    EPA identified this in the NPRM as the basic problem which was 
proposed to be addressed through regulatory revision. Specifically, in 
the background discussion provided in the NPRM, EPA described the 
oxygenate marketplace characteristics which created the need for the 
proposed change as follows: ``In the case of oxygenates other than 
ethanol, the oxygenate is generally added to gasoline at the fuel 
refinery, before the gasoline is distributed through the pipeline. 
These `upstream' blenders tend to be relatively limited in number, and 
often are large fuel manufacturing businesses. Ethanol, on the other 
hand, is generally prohibited from transport through the pipeline * * 
*, and must be added to the fuel downstream. Thus, rather than being 
blended by relatively few fuel refiners, ethanol is added to fuel by 
large numbers of terminal operators, fuel halers, and some fuel 
retailers * * *'' (61 FR 36537).
    EPA thus recognized in the NPRM that, among the various fuel 
oxygenates, only ethanol blending involved numerous entities other than 
importers and refiners. Logically, the inclusion of oxygenate blenders 
as fuel manufacturers when they are not otherwise fuel importers or 
refiners has a potentially greater disruptive impact on the ethanol 
marketplace than on the market for other oxygenates. To alleviate some 
of this imbalance, EPA proposed in the NPRM to exempt small oxygenate 
blenders from the fuel manufacturer definition, noting that many of the 
entities involved in ethanol blending already qualify for small 
business exemptions and thus have requirements limited only to 
paperwork submittal. However, upon reconsideration, EPA agrees with the 
commenters that a more equitable outcome can be attained by exempting 
all entities whose only ``manufacturing'' activity is the blending of 
oxygenate. This would restrict the

[[Page 12567]]

regulatory responsibility for registration and testing of ethanol and 
ethanol blends to the same types of business entities that are subject 
to these requirements with respect to other oxygenates and oxygenate 
blends, i.e., oxygenate manufacturers, fuel refiners, and importers.
    Thus, for the reasons discussed above, this final rule revises the 
definition of a fuel manufacturer to specifically exclude oxygenate 
blenders, regardless of their size, if they are not also fuel refiners 
or importers.

IV. Small Business Provisions

A. Tax-Based Revenue

    Under Sec. 79.58(d), qualification for the F/FA program's small 
business provisions is based in part on a manufacturer's total annual 
sales revenue: a $50 million limit for manufacturers of baseline and 
non-baseline F/FAs, and a $10 million limit for manufacturers of 
atypical F/FAs. After these criteria were promulgated, communications 
from trade organizations (docket item VI-D-05) suggested that the total 
sales limits should be revised to take tax effects into account. These 
organizations pointed out that sales and excise taxes accumulate as the 
fuel passes along the refining-distribution-marketing chain, but are 
generally not included in the price paid for the fuel (nor in the gross 
sales revenue of the seller) until the fuel is marketed at the retail 
level. The accumulated sales and excise taxes may represent a 
considerable portion of a small retailer's fuel-related sales revenues. 
Thus, the commenters said, small marketers would be disadvantaged in 
comparison with small refiners and other upstream businesses unless 
these tax effects were reflected in the small business definition.
    EPA found these arguments persuasive, and proposed to change 
Sec. 79.58(d) to allow revenue representing the collection of taxes to 
be excluded from a manufacturer's total annual sales for the purpose of 
qualifying as a small business. EPA also proposed to revise 
Sec. 79.59(b)(5)(ii) to require the submittal, at EPA's request, of 
documentation showing the validity of sales amounts excluded as taxes. 
All comments received about these proposals (docket items VII-D-02, 
VII-D-06, and VII-D-21) were supportive, and the proposed regulatory 
changes are finalized in today's final rule.

B. Extension of Applicability of Tier 2 Exemption

    Under the existing regulations, it is possible for the manufacturer 
of an additive to be exempt from Tier 2 testing requirements under the 
special provisions for small businesses, while larger fuel 
manufacturers who buy and blend this additive into fuel do not qualify 
for the exemption and must still test the additive/fuel mixture. As 
described in the NPRM, this combination of circumstances has led to 
awkward and unintended outcomes. EPA thus proposed to revise 
Sec. 79.58(d) to exempt fuel manufacturers from Tier 2 requirements 
arising from the use of an additive which is itself exempt from Tier 2 
under the small business provisions.
    The one comment received on this issue (docket item VII-D-27) was 
supportive. However, the commenter suggested that the ``pass through'' 
of the Tier 2 exemption should apply not only to parties who blend an 
exempted additive into fuel, but also to other additive manufacturers 
who buy and blend the exempted additive with other additives and then 
bring the resulting multifunctional additive to the marketplace. The 
commenter was concerned that non-exempt customers who are secondary 
additive manufacturers, just like those who are fuel manufacturers, 
might stop purchasing the additive in lieu of having to conduct their 
own Tier 2 testing.
    EPA agrees that this situation falls within the intent of the 
proposal. That is, passing the Tier 2 exemption through to secondary 
additive manufacturers as well as fuel manufacturers will help preserve 
the business base of small additive manufacturers by shielding their 
customers from Tier 2 requirements. The new regulatory language at 
Sec. 79.58(d)(6) extends the applicability of the small business 
exemption accordingly. However, the ``pass through'' of the Tier 2 
exemption to secondary additive manufacturers only applies if the 
secondary manufacturer blends the exempted additive with one or more 
other registered additives and/or substances containing only carbon 
and/or hydrogen. This approach is consistent with the conditions 
qualifying for exemption from periodic additive reporting requirements, 
under Sec. 79.5(b).

C. Small Business Definition Basis

    While supportive of the tax-related changes discussed above, one 
commenter also said that the small business definition should be 
further changed, such that only fuel-related revenue would be included 
in determining whether a business is considered ``small'' for the 
purpose of this program (docket item VII-D-02). The revenue amounts 
specified in the small business definition adopted in May 1994 were 
selected to strike a reasonable balance between EPA's scientific (and 
statutorily-mandated) need for information and the financial ability of 
responsible business entities to provide that information. Thus, the 
revenue cut-off points were selected on the basis of the total sales 
revenue of the ultimate parent companies of registered F/FA 
manufacturers. EPA did not propose to change this basic aspect of the 
small business definition, and is not addressing this issue in this 
rulemaking.

V. Biodiesel Provisions

A. Background

    Biodiesel fuels and most blends of bio-and conventional diesel fuel 
contain more than 1.0 weight percent oxygen and thus, according to 
Sec. 79.56(e)(3)(ii)(B), fall into the non-baseline diesel category. 
Under Sec. 79.56(e)(4)(ii)(B)(2), as adopted in May 1994, biodiesel 
fuels derived from vegetable oil (``mixed alkyl esters of plant 
origin'') are grouped separately from biodiesel fuels derived from 
animal fat (``mixed alkyl esters of animal origin''). For each group, 
the representative to be used in health effects testing is required to 
be that member product with the highest maximum recommended 
concentration reported in its registration data. During testing, the 
selected product is to be used at this maximum concentration.
    In the rule promulgated in May, 1994, EPA established the two 
separate biodiesel groups because of concern that the composition of 
animal-derived and vegetable-derived fuels might differ considerably, 
and thus might demonstrate different toxicological properties. Both 
vegetable oil and animal fat are composed of triglycerides, and the 
process used to convert the triglycerides to fuel (i.e., an 
esterification process in which an alcohol is reacted with fat or oil) 
is the same for both. As discussed in the preamble to the May 1994 
rule, EPA understood that up to 3.0 percent of the resulting chemical 
mixture may be composed of non-esterified reactants, other reaction 
products, and possible contaminants, and EPA was concerned that these 
components could vary significantly between the different feedstocks.
    In subsequent communications with EPA (see docket item VI-E-01), 
representatives of the industry asserted that biodiesel produced from 
different lipid sources are substantially the same. As a result of its 
evaluation of these arguments, EPA proposed to revise the

[[Page 12568]]

grouping rules in Sec. 79.56(e)(4)(ii)(B)(2) to permit animal-and 
vegetable-derived biodiesels to be grouped together. EPA requested 
comment on this proposed change, as well as data comparing the 
composition and emissions of biodiesel fuels derived from different 
feedstocks.
    In the NPRM, EPA also requested comment on a possible change to the 
rule governing the biodiesel blend selected to serve as the group 
representative, such that a particular percent blend would be specified 
(e.g., 100 percent or 20 percent) rather than requiring the highest 
concentration registered for a biodiesel product to be used. Comments 
were also requested on the practicality of different blend options with 
respect to their compatibility with test vehicles or engines.

B. Summary of Comments

    Comments submitted by the National Biodiesel Board (NBB) and the 
Fats and Proteins Research Foundation, Inc. (FPRF) supported the 
proposal to permit biodiesel F/FAs derived from animal fats, vegetable 
fats, used/recycled vegetable oils, fats and greases to be consolidated 
into one group (Docket items VII-D-17 and VII-D-19). NBB and FPRF 
commented that biodiesel F/FAs from these various sources have similar 
composition. They stated that the primary difference is a shift in the 
composition of saturated fatty esters, e.g., soybean oil is typically 
12-15 percent saturated while tallow is typically 50 percent saturated. 
NBB stated that this difference appears to have little effect on 
biodiesel emission characteristics, and submitted a recent study 
demonstrating that these fuels respond in a similar manner when burned 
in a diesel engine.\4\ The FPRF commented that it would be inconsistent 
with the treatment of petroleum-based fuels and economically 
detrimental to biodiesel manufacturers to require duplicate testing for 
different biofuels.
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    \4\ Van Gerpen, J. Comparison of the Engine Performance and 
Emission Characteristics of Vegetable Oil-Based and Animal Fat-Based 
BIodiesel. Iowa State University, August 1996. (Docket item VII-D-
19).
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    In regard to EPA's concerns about the non-esterified portion of 
biodiesel, NBB noted that the American Society for Testing and 
Materials (ASTM) Biodiesel Task force (within Committee D2, Section E2 
on diesel fuels) has been working actively to develop and promulgate a 
standard for biodiesel. According to NBB, the ASTM standard will 
minimize any source-related differences which might exist in the non-
ester fraction. The standard is expected to set a minimum conversion of 
the starting fats and oils to 97.9% ester product, based on the free 
and total glycerine specification. NBB said that the remaining 2.1% of 
non-ester materials is nearly all composed of partially reacted lipids, 
primarily monoglycerides and diglycerides. Under the ASTM standard, 
trace byproducts would be limited in composition and amount by ash, 
flashpoint, free glycerine, acid value, carbon residue, and sediment 
specifications. The NBB suggested that, once the ASTM standard for 
biodiesel is finalized, the Agency should incorporate it into the 
specifications for the biodiesel group representative.
    In response to EPA's request for comment about the most appropriate 
biodiesel blend for use in health effects testing, one commenter 
(docket item VII-D-28) felt that testing should be done on a 
formulation which reflects the levels at which biodiesel would actually 
be expected to be blended, i.e., 20 percent or less. On the other hand, 
the NBB supported the choice of 100 percent biodiesel as the group 
representative. NBB said that valid approximations of the potential 
health effects of biodiesel blends may be determined from utilizing 
data resulting from the testing of base diesel fuel and 100 percent 
biodiesel, extrapolating the data based on scientific observations of 
the linear trends of emissions. NBB stated that the use of 100 percent 
biodiesel in health effects testing need not be precluded by concerns 
about engine compatibility, so long as recognized problems (i.e., 
accelerated deterioration of fuel hoses and fuel pump seals) are 
addressed in the testing protocol. However, NBB also noted that the 
potential market applications for biodiesel range from less than 5 
percent for low blend/premium diesel to 100 percent applications in 
marine and underground mining markets. Vehicles subject to urban bus 
and/or clean fuel fleet regulatory programs are likely to operate on 20 
percent blends due to operating performance features such as increased 
lubricity and economic competitiveness vis-a-vis other alternative 
fuels. Off-road markets such as underground mining and marine will 
likely use blends approaching 100 percent in order to comply with 
environmental and safety regulations.

C. Analysis and Conclusions

    While the available data are not comprehensive, EPA agrees with 
industry commenters that plant- and animal-derived biodiesel fuels 
appear to have generally similar chemical composition. It is EPA's 
understanding that, whether the feedstock is plant or animal, the 
nonesterified fraction of biofuel is mostly composed of partially 
reacted lipids of different chain lengths, primarily monoglycerides and 
diglycerides. EPA is encouraged to learn that ASTM is developing 
compositional standards designed to ensure biodiesel quality. For the 
reasons discussed in the previous section, the ASTM standards, when 
finalized, should serve to further limit both the amount and chemical 
variability of non-ester components and any other differences that may 
exist between biodiesel fuels derived from plant and animal feedstocks. 
Thus, the Agency's earlier concern about the possible variation in non-
ester components depending on plant or animal lipid source is largely 
allayed.
    For these reasons, grouping of biodiesel F/FAs based upon their 
plant vs. animal feedstock origin does not appear to be warranted at 
this time. Accordingly, as proposed, the Agency is today revising the 
grouping rule for biodiesel F/FAs to permit plant and animal biodiesel 
F/FAs to group together and be represented by one group representative 
for compliance with Tier 1 and Tier 2 testing requirements.
    Nevertheless, EPA wishes to emphasize that the data currently 
available do not demonstrate equivalent composition and emission 
characteristics across all biodiesel formulations. In fact, significant 
variations may exist even within the same feedstock. For example, 
soybeans grown under different climatological conditions may have 
different chemical compositions and, therefore, could have different 
emission profiles. The potential use of waste cooking oils and recycled 
grease as biodiesel feedstocks may also present cause for concern. In 
addition to lipid source, the identity of the alcohol used in the 
biodiesel production process may also have significant effects on both 
regulated and unregulated emissions. Furthermore, if the proposed ASTM 
standards for biodiesel fuels are not finalized, or if the final 
standards do not provide the expected level of biodiesel quality 
control, then additional variability concerns are likely to arise.
    It is important to recall, therefore, that Tiers 1 and 2 are 
largely intended to provide screening-level information. Under the Tier 
3 testing authority specified in 79.54, EPA may require not only 
follow-up testing on the group representative which underwent Tier 1 
and Tier 2 testing, but also may require testing of one or more other 
members of a group. Thus, even though this final rule will allow all 
biodiesel F/FAs to

[[Page 12569]]

group together and be represented in Tier 1 and Tier 2 testing by one 
test substance, EPA is not precluded from requiring any other 
vegetable-derived, animal-derived, or other biodiesel F/FAs to undergo 
separate testing in the future under the Tier 3 authority.
    In regard to selecting the biodiesel group representative, EPA has 
decided that 100 percent biofuel is most appropriate for the screening 
purposes of Tiers 1 and 2. EPA has received industry assurances, both 
in written comments (docket item VII-D-19) and in follow-up 
communications,\5\ that the use of 100 percent biofuel does not require 
significant engine modifications. Furthermore, while 20 percent 
biodiesel formulations are expected to predominate in the commercial 
marketplace during the short term, both lower and higher percent blends 
may see greater market penetration in the future. For example, the 
state of Iowa has announced plans for a one-year trial of five percent 
biodiesel fuel in its vehicle fleet.\6\ At the other extreme, some 
biodiesel manufacturers have registered blends of up to 50 percent, and 
100 percent biofuels are anticipated for certain nonroad applications.
---------------------------------------------------------------------------

    \5\ See memorandum of December 6, 1996 from Joseph Sopata to 
Docket A-90-07, entitled, ``Phone Conversations with Leroy Watson of 
the National Biodiesel Board (NBB).''
    \6\ ``Iowa DOT to Use 5% blends of Biodiesel in State Fleet,'' 
Oxyfuel News, Vol VIII, No. 45, Page 6, November 18, 1996.
---------------------------------------------------------------------------

    In view of the diversity of biodiesel fuel blend percentages and 
the uncertainty about future usage patterns, EPA believes that Tier 1 
and Tier 2 testing on 100 percent biofuel will provide the most useful 
and widely applicable screening information. These tests will furnish a 
detailed profile of the emissions produced during the combustion of 
biofuel itself as well as screening information on the potential 
toxicity of these emissions. Such data can be expected to help inform 
EPA's initial evaluation, not only of 100 percent biofuel, but also of 
various percentage biodiesel fuels. It must be noted, however, that EPA 
does not accept the biodiesel industry's suggestion that such data can 
just be extrapolated to give valid approximations of the effects of 
various biodiesel blends. This suggestion implicitly assumes that the 
emissions generated by any given biodiesel percentage blend are simply 
the weighted sum of the emissions generated separately by baseline 
diesel fuel and 100 percent biofuel, without regard to possible 
interactions between them. To strengthen the credibility of this 
assumption, detailed characterization of the combustion emissions from 
biodiesel blends would be required. EPA therefore encourages the 
biodiesel industry group to consider conducting, on a voluntary basis, 
emission characterization tests on one or more biodiesel percentage 
blends, parallel to the Tier 1 testing required to be run on the 100 
percent biofuel group representative. If submitted to EPA along with 
the required Tier 1 submittal, such information could help to allay 
EPA's concerns about the possible variability of different biodiesel 
blends.
    A direct final rule published elsewhere in this issue of the 
Federal Register (see discussion in section II.B of this preamble) 
includes a change extending the Tier 1 deadline for biodiesel F/FAs to 
one year from today's date. Interested readers should consult that 
notice for additional information.

VI. Synthetic Fuel Provisions

A. Background

    Under Secs. 79.56(e)(3) (i)(B) and (ii)(B), a fuel derived from any 
source other than conventional petroleum is assigned to a non-baseline 
category. Further, under Sec. 79.56(e)(4)(ii) (A)(3) and (B)(3), 
separate non-baseline groups are defined for formulations derived in 
whole or in part from each non-conventional source or process, 
including coal, tar or oil sands, shale, and recycled chemical or 
petrochemical products. The objective of these grouping provisions was 
to assure separate testing for fuels which EPA expected would differ 
from conventional fuels in composition or other properties, and which 
therefore might have different public health impacts.
    Following promulgation of the regulations in May 1994, EPA received 
communications from some affected industries (e.g., see docket items 
VI-D-02 and VI-D-03), indicating that fuels derived from ``synthetic'' 
feedstocks (``synfuels'') do not necessarily differ from fuels derived 
from conventional petroleum sources. Based on this information, EPA 
solicited substantive comment and supporting data relevant to possible 
revision of the rules for grouping these fuels. Several alternatives 
were discussed in the proposal, including (1) case-by-case assignment 
of a synfuel to a baseline or non-baseline group, determined by 
comparative compositional analysis, (2) baseline or non-baseline 
assignment determined by the proportion of the final fuel derived from 
a non-conventional source, and (3) elimination of the distinction 
between conventional petroleum and some or all non-conventional crude 
sources as a criterion for group assignment. Changes to the rules for 
selecting group representatives were also proposed. In addition, EPA 
proposed to eliminate the phrase ``non-conventional process'' as a 
grouping criterion [in Secs. 79.56(e)(4) (ii)(A)(3) and (ii)(B)(3)], 
because the phrase was open to misinterpretation and confusion.

B. Summary of Comments

    EPA received over twenty written comments on these issues, all 
strongly in favor of removing the general distinction between synthetic 
and conventional sources as a criterion for group assignment. Some 
commenters provided analytic data and other information showing that 
properties of crude oil derived from tar (or oil) sands are well within 
the range for conventional crude and that, after processing, these 
fuels are frequently lower in sulfur, olefins, and metal content than 
conventional fuels (see, for example, docket items VII-D-03, VII-D-04, 
VII-D-15, VII-D-25, VII-D-29, VII-D-34, VII-D-42). Commenters pointed 
out that commercialized synfuels are subject to the same EPA 
regulations and industry specifications (e.g., ASTM and pipeline 
requirements) as conventional fuels, and are totally commingled and 
fungible with them. They felt that grouping based on the proportion of 
synthetically-derived component would therefore not only be arbitrary, 
but would create unjustifiable market restrictions.
    Information submitted in regard to coal-derived fuels similarly 
supported their categorization as baseline fuels, without respect to 
blend ratio. One commenter, reporting the results of a recent analysis 
of fuels derived from coal liquefaction processes, stated that these 
distillates are similar to petroleum in terms of hydrocarbon 
composition and are of adequate quality to be blended directly into 
refinery streams (docket item VII-D-41). The U.S. Department of 
Energy's Pittsburgh Energy Technology Center submitted data (docket 
item VII-D-43) showing that coal-derived Fischer-Tropsch diesel fuels 
were superior to petroleum-derived fuels in terms of performance 
(higher cetane number and lower aromatic content) and ``cleanliness'' 
(heteroatom composition and paraffin distribution).

C. Conclusions

    EPA has reviewed the qualitative and quantitative information 
submitted by the commenters and agrees that motor vehicle fuels derived 
from oil or tar sands or synthesized from coal appear

[[Page 12570]]

to fall within the broad range of properties  and  components  of  
other  F/FAs that are categorized as baseline. Today's final rule 
deletes fuels derived from these sources from the list of 
synthetically-derived fuels considered to be non-baseline, thus 
allowing them to join the baseline F/FA groups. As noted in section 
V.C. of this preamble, however, EPA retains the authority in Sec. 79.54 
to require additional testing at the Tier 3 level, including testing of 
different representative(s) of a group than those tested at the Tier 1 
and/or Tier 2 level. For example, under Tier 3, EPA could require 
special analyses of the composition or emissions of members of the 
baseline F/FA group that are derived from non-conventional sources. 
Separate toxicology testing of these or other group members could also 
be required under Tier 3.
    In addition to the change described above, today's final rule 
deletes ``non-conventional process'' from the non-baseline grouping 
criteria. No comments were received regarding the grouping of motor 
vehicle fuels which might be synthesized from shale or from recycled or 
other petrochemical sources (e.g., used motor oils, recovered chemical 
spills, recycled plastics, industrial waste streams), and EPA has not 
changed the grouping rules or group representative specifications for 
these fuels.

VII. Tier I Exposure Analysis

    In the NPRM, EPA proposed to delete the Tier 1 requirement [at 
Sec. 79.52(c)] to provide a qualitative discussion of potential public 
exposure to F/FA emission products. Since it was to be based on data 
already required to be submitted for registration (e.g., annual and 
projected production volume, marketing,  and  distribution  data  for  
F/FA products), EPA concluded upon review that the required discussion 
would add little or no incremental value to other data requirements. 
Public commenters agreed that this requirement was redundant and should 
be deleted.
    In this final rule, therefore, EPA has deleted Sec. 79.52(c) and 
modified the introductory paragraph in Sec. 79.52(a) accordingly. 
Deletion of this Tier 1 requirement does not in any way imply that EPA 
considers population exposure data to be unimportant. On the contrary, 
information on exposures is necessary for quantitative risk assessment. 
However, rigorous population exposure studies that would be useful to 
risk assessment are complex, expensive, and beyond the intended scope 
of the Tier 1 and Tier 2 screening requirements. As described above and 
in the proposed rule, the information that was to be submitted under 
the original Tier 1 requirement would generally be based on production 
and sales data. The resulting qualitative analysis would be only 
inferentially related to actual population exposure and, in any case, 
is already available to EPA in manufacturers' basic registration data 
submittals (see Secs. 79.59(b) (2) and (3)). As such, it would be 
duplicative and of little incremental value in assessing risk.

VIII. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), the Agency 
must determine whether this regulatory action is ``significant'' and 
therefore subject to OMB review and the requirements of the Executive 
Order. The order defines ``significant regulatory action'' as any 
regulatory action that is likely to result in a rule that may:

    (1) Have an annual effect on the economy of $100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations 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, EPA has determined 
that this direct final rule is not a ``significant regulatory action''. 
In fact, the provisions finalized by this action will decrease the 
number of parties to which these regulations apply and will reduce the 
requirements and costs of other parties subject to the regulations.

B. Regulatory Flexibility

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant impact on a substantial 
number of small entities. Small entities include small businesses, 
small not-for-profit enterprises, and small governmental jurisdictions. 
This rule will reduce or eliminate the reporting and testing 
requirements for many small businesses, and will simplify compliance 
and reduce potential testing requirements for all affected parties.

C. Paperwork Reduction Act

    Per the Paperwork Reduction Act 44 U.S.C. 3501 et seq., and 
implementing regulations, 5 CFR part 1320, this action does not involve 
the addition of any collection of information as defined therein.

D. Unfunded Mandates Reform 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 promulgated 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 final rule does not establish 
regulatory requirements that may significantly or uniquely affect small 
governments. In fact, this final rule has the net effect of reducing 
the burden of the fuel and fuel additive registration program on 
regulated entities. Therefore, the requirements of the Unfunded 
Mandates Act do not apply.

E. Submission to Congress and the General Accounting Office

    Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business 
Regulatory Enforcement Fairness Act of 1996, EPA submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives and the Comptroller General of the 
General Accounting Office prior to publication of the rule in today's 
Federal Register. This rule is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

List of Subjects in 40 CFR Part 79

    Environmental protection, Fuel additives, Gasoline, Motor vehicle

[[Page 12571]]

pollution, Penalties, Reporting and recordkeeping requirements.

    Dated: March 4, 1997.
Carol M. Browner,
Administrator.

    For the reasons set out in the preamble, part 79 of chapter I of 
title 40 of the Code of Federal Regulations is amended as follows:

PART 79--[AMENDED]

    1. The authority citation for part 79 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7524, 7545 and 7601.

    2. Section 79.2 is amended by revising paragraphs (d) and (e) and 
by adding paragraph (k), to read as follows:


Sec. 79.2  Definitions.

* * * * *
    (d) Fuel manufacturer means any person who, for sale or 
introduction into commerce, produces, manufactures, or imports a fuel 
or causes or directs the alteration of the chemical composition of a 
bulk fuel, or the mixture of chemical compounds in a bulk fuel, by 
adding to it an additive, except:
    (1) A party (other than a fuel refiner or importer) who adds a 
quantity of additive(s) amounting to less than 1.0 percent by volume of 
the resultant additive(s)/fuel mixture is not thereby considered a fuel 
manufacturer.
    (2) A party (other than a fuel refiner or importer) who adds an 
oxygenate compound to fuel in any otherwise allowable amount is not 
thereby considered a fuel manufacturer.
    (e) Additive means any substance, other than one composed solely of 
carbon and/or hydrogen, that is intentionally added to a fuel named in 
the designation (including any added to a motor vehicle's fuel system) 
and that is not intentionally removed prior to sale or use.
* * * * *
    (k) Oxygenate compound means an oxygen-containing, ashless organic 
compound, such as an alcohol or ether, which may be used as a fuel or 
fuel additive.
    3. Section 79.52 is amended by revising the first sentence in 
paragraph (a) and removing and reserving paragraph (c), to read as 
follows:


Sec. 79.52  Tier 1.

    (a) General Specifications. Tier 1 requires manufacturers of 
designated fuels or fuel additives (or groups of manufacturers pursuant 
to Sec. 79.56) to supply to the Administrator the identity and 
concentration of certain emission products of such fuels or additives 
and any available information regarding the health and welfare effects 
of the whole and speciated emissions of such fuels or additives. * * *
* * * * *
    4. Section 79.56 is amended by revising paragraphs (e)(3)(i)(A)(5), 
(e)(3)(i)(B), (e)(3)(ii)(A)(5), (e)(3)(ii)(B), (e)(4)(ii)(A)(3) 
introductory text, (e)(4)(ii)(A)(3)(i), (e)(4)(ii)(B)(1), 
(e)(4)(ii)(B)(1), (e)(4)(ii)(B)(2) introductory text, 
(e)(4)(ii)(B)(2)(ii), (e)(4)(ii)(B)(3) introductory text, and 
(e)(4)(ii)(B)(3)(i); and by adding paragraph (e)(4)(ii)(B)(2)(iv) to 
read as follows:


Sec. 79.56  Fuel and fuel additive grouping system.

* * * * *
    (e) * * *
    (3) * * *
    (i) * * *
    (A) * * *
    (5) Derived only from conventional petroleum, heavy oil deposits, 
coal, tar sands, and/or oil sands.
    (B) The Non-Baseline Gasoline category is comprised of gasoline 
fuels and associated additives which conform to the specifications in 
paragraph (e)(3)(i)(A) of this section for the Baseline Gasoline 
category except that they contain 1.5 percent or more oxygen by weight 
and/or may be derived from sources other than those listed in paragraph 
(e)(3)(i)(A)(5) of this section.
* * * * *
    (ii) * * *
    (A) * * *
    (5) Derived only from conventional petroleum, heavy oil deposits, 
coal, tar sands, and/or oil sands.
    (B) The Non-Baseline Diesel category is comprised of diesel fuels 
and associated additives which conform to the specifications in 
paragraph (e)(3)(ii)(A) of this section for the Baseline Diesel 
category except that they contain 1.0 percent or more oxygen by weight 
and/or may be derived from sources other than those listed in paragraph 
(e)(3)(ii)(A)(5) of this section.
* * * * *
    (4) * * *
    (ii) * * *
    (A) * * *
    (3) Separate non-baseline gasoline groups shall also be defined for 
gasoline formulations derived from each particular petroleum source not 
listed in paragraph (e)(3)(i)(A)(5) of this section.
    (i) Such groups may include, but are not limited to, those derived 
from shale, used oil, waste plastics, and other recycled chemical/
petrochemical products.
* * * * *
    (B) * * *
    (1) For diesel fuel and additive products which contain 1.0 percent 
or more oxygen by weight in the form of alcohol(s) and/or ether(s):
    (i) A separate non-baseline diesel group shall be defined by each 
individual alcohol or ether listed as a component in the registration 
application or basic registration data of any such fuel or additive.
    (ii) For each such group, the representative to be used in testing 
shall be a formulation consisting of the diesel base fuel blended with 
the relevant alcohol or ether in an amount equivalent to the highest 
actual or recommended concentration-in-use of the alcohol or ether 
recorded in the basic registration data of any member fuel or additive 
product.
    (2) A separate non-baseline diesel group is also defined for each 
of the following classes of oxygenating compounds: mixed nitroso-
compounds; mixed nitro-compounds; mixed alkyl nitrates; mixed alkyl 
nitrites; peroxides; furans; mixed alkyl esters of plant and/or animal 
origin (biodiesel). For each such group, the representative to be used 
in testing shall be formulated as follows:
* * * * *
    (ii) The selected compound shall be the one recorded in any member 
product's registration application with the highest actual or 
recommended maximum concentration-in-use.
* * * * *
    (iv) The compound thus selected shall be the group representative, 
and shall be used in testing at the following concentration:
    (A) For biodiesel groups, the representative shall be 100 percent 
biodiesel fuel.
    (B) Otherwise, the group representative shall be the selected 
compound mixed into diesel base fuel at the maximum recommended 
concentration-in-use.
    (3) Separate non-baseline diesel groups shall also be defined for 
diesel formulations derived from each particular petroleum source not 
listed in paragraph (e)(3)(i)(A)(5) of this section.
    (i) Such groups may include, but are not limited to, those derived 
from shale, used oil, waste plastics, and other recycled chemical/
petrochemical products.
* * * * *
    5. Section 79.58 is amended by revising the last sentence of 
paragraph (d)(1) and adding paragraph (d)6), to read as follows:


Sec. 79.58  Special provisions.

* * * * *

[[Page 12572]]

    (d) * * *
    (1) * * * Total annual sales means the average of the 
manufacturer's total sales revenue, excluding any revenue which 
represents the collection of federal, state, or local excise taxes or 
sales taxes, in each of the three years prior to such manufacturer's 
submittal to EPA of the basic registration information pursuant to 
Sec. 79.59(b)(2) through (b)(5).
* * * * *
    (6) In the case of an additive for which the manufacturer is not 
required to meet the requirements of Tier 2 pursuant to paragraph 
(d)(3) of this section:
    (i) A fuel manufacturer which blends such an additive into fuel 
shall not be required to meet the requirements of Tier 2 with respect 
to such additive/fuel mixture.
    (ii) An additive manufacturer which blends such an additive with 
one or more other registered additive products and/or with substances 
containing only carbon and/or hydrogen shall not be required to meet 
the requirements of Tier 2 with respect to such additive or additive 
blend.
* * * * *


Sec. 79.59  [Amended]

    6. Section 79.59 is amended by removing paragraph (c)(4)(iii) and 
by removing and reserving paragraph (c)(7)(iii).

[FR Doc. 97-6023 Filed 3-14-97; 8:45 am]
BILLING CODE 6560-50-P