[Federal Register Volume 63, Number 4 (Wednesday, January 7, 1998)]
[Rules and Regulations]
[Pages 926-987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33314]



[[Page 925]]

_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Parts 9, 85, and 86



Control of Air Pollution From New Motor Vehicles and New Motor Vehicle 
Engines: State Commitments to National Low Emission Vehicle Program; 
Final Rule

  Federal Register / Vol. 63, No. 4 / Wednesday, January 7, 1998 / 
Rules and Regulations  

[[Page 926]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9, 85, and 86

[AMS-FRL-5938-8]
RIN 2060-AF75


Control of Air Pollution From New Motor Vehicles and New Motor 
Vehicle Engines: State Commitments to National Low Emission Vehicle 
Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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

SUMMARY: Today EPA is finalizing the necessary federal regulations for 
a voluntary clean car program called the National Low Emission Vehicle 
(``National LEV'') program, which is designed to reduce smog and other 
pollution from new motor vehicles. The program will come into effect 
only if the northeastern states (members of the Ozone Transport 
Commission or ``OTC'') and the auto manufacturers sign up for it. The 
National LEV regulations allow manufacturers to commit to meet tailpipe 
standards for cars and light light-duty trucks that are more stringent 
than EPA can mandate. Manufacturers have said they would be willing to 
commit to the program if the OTC States also make binding commitments 
to the program. Once the program comes into effect, it would be 
enforceable in the same manner as any other federal new motor vehicle 
program.
    After spending years helping to develop the program, the OTC States 
and the auto manufacturers must now decide whether to commit to it and 
allow the country to benefit from significant reductions in pollution. 
National LEV would also achieve the same (or better) emission 
reductions in the Ozone Transport Region (OTR) as would OTC State 
adopted new motor vehicle programs. Under National LEV there would be 
substantial harmonization of federal and California new motor vehicle 
standards and test procedures, which would enable manufacturers to 
design and test vehicles to one set of standards nationwide. The 
program would demonstrate how cooperative, partnership efforts can 
produce a smarter, cheaper program that reduces regulatory burden while 
increasing protection of the environment and public health.

DATES: This regulation is effective January 7, 1998. The information 
collection requirements contained in this rule has been approved by the 
Office of Management and Budget (OMB) and has an assigned OMB control 
number of 2060-0345.

ADDRESSES: Materials relevant to this final rule have been placed in 
Public Docket No. A-95-26. The docket is located at the Air Docket 
Section, U.S. Environmental Protection Agency, 401 M Street SW, 
Washington, DC 20460 (Telephone 202-260-7548; Fax 202-260-4400) in Room 
M-1500, Waterside Mall, and may be inspected weekdays between 8:00 a.m. 
and 5:30 p.m. A reasonable fee may be charged by EPA for copying docket 
materials. For further information on electronic availability of this 
final rule, see the SUPPLEMENTARY INFORMATION section below.

FOR FURTHER INFORMATION CONTACT: Karl Simon, Office of Mobile Sources, 
U.S. Environmental Protection Agency, 401 M Street SW, Washington, DC 
20460. Telephone (202) 260-3623; Fax (202) 260-6011; e-mail 
[email protected].

SUPPLEMENTARY INFORMATION:

Regulated entities

    Entities potentially regulated by this action are those that 
manufacture and sell motor vehicles in the United States. Regulated 
categories and entities include:

------------------------------------------------------------------------
                                                Examples of regulated   
                 Category                             entities          
------------------------------------------------------------------------
Industry..................................  New motor vehicle           
                                             manufacturers.             
------------------------------------------------------------------------

    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 activities are regulated by this action, you should carefully 
examine the applicability criteria in Sec. 86.1701-99. If you have 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the preceding FOR FURTHER 
INFORMATION CONTACT section.

Obtaining Electronic Copies of the Regulatory Documents

    The preamble, regulatory language, response to comments document, 
and other related documents are also available electronically from the 
EPA Internet Web site. This service is free of charge, except for any 
cost you already incur for internet connectivity. The electronic 
Federal Register version is made available on the day of publication on 
the primary Web site listed below. The EPA Office of Mobile Sources 
also publishes Federal Register notices and related documents on the 
secondary Web site listed below.
    1. http://www.epa.gov/docs/fedrgstr/EPA-AIR/ (either select desired 
date or use Search feature)
    2. http://www.epa.gov/OMSWWW/lev-nlev.htm
    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.

I. Outline

    The preamble is organized into the following sections.

I. Outline
II. Background
III. National LEV Start Date
IV. National LEV Will Produce Larger VOC and NOx Emission Reductions 
in the OTR Compared to OTC State Adopted Section 177 Programs
V. OTC State Commitments
    A. Duration of OTC State Commitments and of the National LEV 
Program
    B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and 
EPA Finding that National LEV is in Effect
    C. OTC State Commitments, Manufacturer Opt-Ins, and EPA Finding 
that National LEV is in Effect
    1. Initial Opt-In by OTC States
    2. Manufacturer Opt-Ins
    3. EPA Finding that National LEV is in Effect
    4. SIP Revisions
VI. Incentives for Parties to Keep Commitments to Program
    A. Offramp for Manufacturers for OTC State Violation of 
Commitment
    1. OTC State No Longer Accepts National LEV as a Compliance 
Alternative
    2. OTC State Fails to Submit SIP Revision Committing to National 
LEV
    3. OTC State Submits Inadequate SIP Revision Committing to 
National LEV
    4. OTC State Without an Existing ZEV Mandate Adopts a Backstop 
ZEV Mandate
    B. Offramp for Manufacturers if OTC State or Manufacturer 
Legitimately Opts Out of National LEV
    C. Offramp for Manufacturers for EPA Failure to Consider In-Use 
Fuel Issues
    D. Offramps for OTC States
    1. Manufacturer Opt-Out
    2. Periodic Equivalency Determination
    E. Lead Time Under Section 177
VII. National LEV Will Produce Creditable Emissions Reductions 
Because it is Enforceable
    A. OTC States Will Keep Their Commitments to National LEV
    B. It is Unlikely That National LEV Would Be Found Not to 
Produce Emission Reductions Equivalent to OTC State Section 177 
Programs

[[Page 927]]

    C. EPA is Unlikely to Fail to Consider In-Use Fuels Issues Upon 
a Manufacturer's Request
VIII. Additional Provisions
    A. Early Reduction Credits for Northeast Trading Region
    B. Calculation of Compliance with Fleet Average NMOG Standards
    C. Certification of Tier 1 Vehicles in a Violating State
    D. Provisions Relating to Changes to Stable Standards
    E. Nationwide Trading Region
    F. Elimination of Five-Percent Cap on Sales of Tier 1 Vehicles 
and TLEVs in the OTR
    G. Technical Corrections to Final Framework Rule
    H. Clarifications to Final Framework Rule
    1. Operation of National LEV Vehicles on In-Use Fuels
    2. Clarification of Banking and Trading Provisions
    3. Recordkeeping Requirements
IX. Supplemental Federal Test Procedures
    A. Background
    B. Elements of the CARB Proposal and Applicability Under 
National LEV
    1. Test Procedure
    2. Emission Standards
    a. LEVs and ULEVs
    b. Tier 1 Vehicles and TLEVs
    3. Implementation Schedule
    4. Implementation Compliance
X. Administrative Requirements
    A. Administrative Designation
    B. Regulatory Flexibility
    C. Unfunded Mandates Reform Act
    D. Congressional Review of Agency Rulemaking
    E. Reporting and Recordkeeping Requirements
    F. Effective Date
XI. Judicial Review
XII. Statutory Authority

II. Background 1
---------------------------------------------------------------------------

    \1\ Although this section contains a brief summary of the 
National LEV program and the process that led up to it, this notice 
assumes that the reader has an in-depth understanding of the 
National LEV program and is familiar with the previous National LEV 
rulemaking notices (i.e., the August, 1997, Supplemental Notice of 
Proposed Rulemaking (SNPRM); the October, 1995, Notice of Proposed 
Rulemaking (NPRM); and the June, 1997, Final Framework Rule cited in 
n.2). Readers should review those documents for in-depth discussion 
of the program, the process and other background information.
---------------------------------------------------------------------------

    Today's Final Rule (FRM) is another step towards a voluntary clean 
car program (``National LEV'') that can help control emissions 
nationwide as well as in the northeastern states. As discussed in 
previous Federal Register notices,2 there have been a number 
of regulatory and other steps in the development of this program. 
Today's notice concludes the federal regulatory steps necessary to set 
up the voluntary clean car program, which will then come into effect if 
the auto manufacturers and the OTC States commit to it. In June of this 
year, EPA published a final rule setting forth the framework for the 
program, including the specific standards that would apply to new motor 
vehicles if manufacturers opted in. See 62 FR 31192 (June 6, 1997) 
(``Final Framework Rule''). Today's rule finalizes the regulations for 
the National LEV program. It is now up to the OTC States and the auto 
manufacturers to determine whether the program will come into effect.
---------------------------------------------------------------------------

    \2\  See 60 FR 4712 (Jan. 24, 1995), 60 FR 52734 (Oct. 10, 
1995); 62 FR 31192 (June 6, 1997); 62 FR 44754 (Aug. 22, 1997).
---------------------------------------------------------------------------

    Under the National LEV program, auto manufacturers will have the 
option of agreeing to comply with tailpipe standards that are more 
stringent than EPA can mandate prior to model year (MY) 2004. Once 
manufacturers commit to the program, the standards will be enforceable 
in the same manner that other federal motor vehicle emissions control 
requirements are enforceable. See the Final Framework Rule at 62 FR 
31201-31223 for a detailed discussion of the program structure, 
tailpipe and related standards, and legal authority for and 
enforceability of National LEV. Manufacturers have indicated their 
willingness to volunteer to meet these tighter emissions standards if 
EPA and the northeastern states (i.e., those in the Ozone Transport 
Commission (OTC) or the ``OTC States'') agree to certain conditions, 
including providing manufacturers with regulatory stability and 
reducing regulatory burdens by harmonizing federal and California motor 
vehicle emissions standards.
    The National LEV program has been developed through an 
unprecedented, cooperative effort by the OTC States, auto 
manufacturers, environmentalists, fuel providers, EPA and other 
interested parties. The OTC States and environmentalists provided the 
opportunity for this cooperative effort by pushing for adoption of the 
California Low Emission Vehicle (CAL LEV) program throughout the 
northeast Ozone Transport Region (OTR). Under EPA's leadership, the 
states, auto manufacturers, environmentalists, and other interested 
parties then embarked on a process to develop a voluntary National LEV 
program, a process marked by extensive public participation and a focus 
on joint problem solving. See the Final Framework Rule at 62 FR 31199 
and the NPRM at 60 FR 52739-52740 for further discussion of public 
participation in the National LEV decision making process.
    National LEV will provide public health and environmental benefits 
by reducing air pollution nationwide. Both inside and outside the OTR, 
National LEV will reduce ground level ozone, the principle harmful 
component in smog, as well as emissions of other pollutants, including 
particulate matter (PM), benzene, and formaldehyde. The Final Framework 
Rule contains a substantive discussion on the health and environmental 
benefits of the National LEV program. See 62 FR 31195. EPA has 
determined that the National LEV program will result in emissions 
reductions in the OTR that are equivalent to or greater than the 
emissions reductions that would be achieved through adoption of the CAL 
LEV program in the OTR. National LEV will also provide manufacturers 
regulatory stability and reduce regulatory burden by harmonizing 
federal and California motor vehicle standards. This will reduce 
testing and design costs for motor vehicles, as well as allow more 
efficient distribution and marketing of vehicles nationwide. See the 
Final Framework Rule at 60 FR 31195-31197 and 31224 for further 
discussion of the benefits of the National LEV program.
    In addition to the national public health benefits that would 
result from National LEV, the program has been motivated largely by the 
OTC's efforts to reduce motor vehicle emissions either by adoption of 
the CAL LEV program throughout the OTR or by adoption of the National 
LEV program. One of the OTC States' efforts was a petition the OTC 
filed with EPA. On December 19, 1994, EPA approved this petition, which 
requested that EPA require all OTC States to adopt the CAL LEV program 
(called the Ozone Transport Commission Low Emission Vehicle (OTC LEV) 
program). See 60 FR 4712 (January 24, 1995) (``OTC LEV Decision''). See 
the Final Framework Rule at 60 FR 31195 for a summary of EPA's 
decision. In March, 1997, the U.S. Court of Appeals for the District of 
Columbia affirmed states' rights to adopt the CAL LEV program, but 
reversed EPA's decision requiring the OTC States to do so. Virginia v. 
EPA, 108 F.3d 1397 (D.C. Cir. 1997). Some, but not all, OTC States have 
adopted CAL LEV programs to date.
    Given statutory constraints on EPA, National LEV will be 
implemented only if it is agreed to by the OTC States and the auto 
manufacturers. EPA does not have authority to force either the OTC 
States or the manufacturers to sign up to the program. EPA cannot 
require the auto manufacturers to meet the National LEV standards, 
absent the manufacturers' consent, because section 202(b)(1)(C) of the 
Clean Air Act (CAA, or ``the Act'') prevents EPA itself from mandating 
new exhaust standards applicable before model year 2004. The auto 
manufacturers have indicated that they would be willing to opt into

[[Page 928]]

National LEV only if the OTC States make certain commitments, including 
committing to allow the manufacturers to comply with National LEV in 
lieu of certain CAL LEV programs adopted under section 177 of the CAA 
(Section 177 Programs). EPA cannot require the OTC States to make such 
commitments (although EPA can issue regulations to help make the 
commitments enforceable). Thus, National LEV cannot come into effect 
absent the agreement of the auto manufacturers and the OTC States.
    Over the past several years, the OTC States and the auto 
manufacturers have conducted negotiations to develop an agreement on 
National LEV to be contained in a Memorandum of Understanding (MOU). 
The parties have reached agreement on most provisions of the National 
LEV program. Each side has sent EPA an MOU that it has initialed, 
indicating its agreement with the National LEV program as contained in 
that Memorandum of Understanding.3 Although there are 
differences in the two Memoranda, they show that agreement has been 
reached between the OTC States and the auto manufacturers on most of 
the provisions of the National LEV program. Based on the MOUs provided 
to the Agency, EPA issued the Final Framework Rule on June 6, 1997, 
setting the framework for and describing most of the elements of the 
National LEV program.
---------------------------------------------------------------------------

    \3\ See Docket No. A-95-26, IV-G-31 and IV-G-34.
---------------------------------------------------------------------------

    Although the parties had hoped to jointly sign a comprehensive MOU 
affirming their mutual agreement on the National LEV program, the 
parties now agree that further discussions are unlikely to result in 
resolution of the last outstanding issues. Nonetheless, EPA and the 
parties believe that National LEV would provide substantial public 
health and environmental benefits. Failure to come to agreement on a 
National LEV program would be a significant lost opportunity to improve 
the nation's air quality.
    EPA believes there is sufficient common ground between the parties 
to provide a basis for a National LEV program to which all parties 
could agree to opt into. EPA believes that finalizing a program for the 
OTC States and manufacturers to evaluate as a whole presents the 
greatest likelihood that the country will achieve the benefits of 
National LEV, on which many stakeholders worked hard over the years. 
EPA encourages the auto manufacturers and OTC States to opt in so the 
country does not lose the significant benefits of National LEV.
    Today's final rule (FRM) finalizes regulations on issues relating 
to how the OTC States will voluntarily opt in to the National LEV 
program and commit to allow motor vehicle manufacturers to comply with 
the National LEV program in lieu of state Section 177 Programs. These 
issues include the duration of the OTC State commitments, the 
instruments and process through which the OTC States will commit to the 
program, and the substantive details of their commitments.
    Today's FRM also addresses several other outstanding structural 
details of the National LEV program. These provisions include the 
timing of OTC State and auto manufacturer opt-ins to the National LEV 
program, incentives for the parties to keep their commitments to the 
National LEV program and conditions under which OTC States and 
manufacturers could exit the program (``offramps''), and the start date 
of the National LEV program.
    In addition, today's FRM includes several modifications and 
clarifications of several issues addressed to some extent in the Final 
Framework Rule. These include provisions relating to how the off-cycle 
supplemental federal test procedure would apply to National LEV 
vehicles and provisions relating to banking and trading of emissions 
credits. For additional explanation of the rationale for today's rule 
and responses to comments, see the Summary and Analysis of Comments for 
the Final Rule.

III. National LEV Start Date

    In the SNPRM, EPA proposed to have the National LEV program start 
in MY1999, which reflected a change from the original proposed start 
date of MY1997.5 See 62 FR 44756-57. EPA explained that this 
change in the start date was necessary because requiring a start date 
of MY1997 or MY1998 was unrealistic given the delays associated with 
finalizing the program and the inability of manufacturers to produce 
and certify National LEV vehicles before MY1999. Additionally, EPA 
noted that there was no longer a legal requirement for National LEV to 
produce emissions reductions at least equivalent to those that would be 
produced by OTC LEV due to the court case overturning EPA's decision 
granting the OTC's petition. (See Virginia v. EPA, supra.) EPA received 
no negative comments regarding this proposed change in program start 
date. EPA is today finalizing its proposal to have the National LEV 
program start in MY1999 in the OTR.
---------------------------------------------------------------------------

    \5\ The National LEV program will start in MY2001 nationwide. 
The nationwide start date was not at issue in the SNPRM.
---------------------------------------------------------------------------

    The change in program start date reflects in part EPA's belief 
that, given the voluntary nature of the National LEV program, it would 
be unreasonable to retain the MY1997 start date and have the program 
begin with some manufacturers having debits from not meeting the fleet 
average NMOG standards for MY1997 and MY1998. Such debits would be 
difficult to erase given the increasing stringency of the fleet average 
NMOG standards and the limited ability of manufacturers to modify their 
production plans quickly, once the program is in effect, to manufacture 
a number of National LEV vehicles sufficient to demonstrate compliance 
with the applicable fleet average NMOG standards.
    The MY1999 start date for the National LEV program does not mean 
that the program is being delayed two years, but merely that the 
National LEV requirements for MY1997 and MY1998 are being dropped from 
the regulations. Therefore, the fleet average NMOG standards for MY1999 
are 0.148 g/mi for light-duty vehicles and light-duty trucks (0-3750 
pounds LVW) and 0.190 g/mi for light-duty trucks between 3750-5750 
pounds LVW. As stated above, the MY2001 nationwide fleet average NMOG 
standards remain unchanged.
    EPA also took comment on allowing manufacturers to sell California-
certified vehicles 6 instead of National LEV vehicles 
throughout the Northeast Trading Region (NTR) for MY1999 and MY2000 as 
a means to help manufacturers meet their fleet average NMOG standards 
for these two model years. Manufacturers expressed concern that they 
might have difficulty producing and certifying National LEV vehicles 
for MY1999 given that certification of MY1999 vehicles will likely 
start before EPA is able to find that National LEV is in effect. EPA 
believes it is appropriate to provide some limited flexibility to 
manufacturers in a way that does not undercut the environmental 
benefits of the fleet average NMOG standards in the first year of the 
program. Thus, for MY1999 only, EPA will issue federal National LEV 
certificates that will allow manufacturers to sell California-certified 
TLEV, LEV, ULEV, and ZEV vehicles throughout the NTR and will count

[[Page 929]]

those vehicles to determine compliance with National LEV requirements. 
For MY2000, EPA will also issue certificates that will allow 
manufacturers to sell California-certified TLEVs throughout the NTR and 
to count those vehicles to determine compliance with National LEV 
requirements.
---------------------------------------------------------------------------

    \6\ ``California-certified vehicles'', as the term is used in 
this rule, are those vehicles which have received an Executive Order 
from California and a federal certificate of conformity which allows 
the sale of such vehicles only in the state of California and other 
states that have adopted the California motor vehicle emission 
standards under Section 177 of the Clean Air Act.
---------------------------------------------------------------------------

    The harmonization of the federal and California motor vehicle 
emission requirements have left few differences between National LEV 
and California-certified TLEV and cleaner vehicles. EPA believes that 
production and certification of vehicles meeting both federal and 
California requirements, done currently by some manufacturers, should 
be much more attractive when the National LEV program is in effect. 
However, program differences do exist and federal requirements such as 
the Certification Short Test (CST) and high-altitude requirements 
remain part of the federal program.7 Using Federal 
certificates to allow manufacturers to certify and sell MY1999 
California-certified TLEVs, LEVs, ULEVs, and ZEVs throughout the NTR 
will give them an additional mechanism to comply with the fleet average 
NMOG standards by increasing the production and sale of their 
California-certified vehicles. Manufacturers may still certify and sell 
National LEV vehicles for MY1999 using the National LEV program 
requirements, and such vehicles could be sold nationwide. EPA is not 
allowing sale of California Tier 1 vehicles throughout the NTR because 
EPA does not believe that certification of vehicles to California Tier 
1 standards proves that such vehicles meet the Federal Tier 1 tailpipe 
emission standards and EPA cannot justify replacing Federal Tier 1 
vehicles with California Tier 1 vehicles in the federal motor vehicle 
emissions program. EPA has consistently taken this position on 
California Tier 1 vehicles throughout the development of the National 
LEV program.
---------------------------------------------------------------------------

    \7\ There are different federal and California test procedures 
for evaporative emissions. Manufacturers generally use the option in 
California's regulations which allows testing using the federal 
requirements. EPA expects manufacturers will continue using this 
option when certifying vehicles for sale in California. The National 
LEV program requires emission testing using the federal 
requirements.
---------------------------------------------------------------------------

    California-certified TLEVs, LEVs, ULEVs and ZEVs can be sold in the 
NTR in MY1999 if they receive a federal National LEV certificate. This 
certificate will state that, for MY1999, a California-certified vehicle 
sold in the NTR only will be considered a National LEV vehicle and meet 
all National LEV requirements. EPA believes that the compliance testing 
done to obtain a California certificate of conformity for these vehicle 
categories is sufficient to meet the certification requirements for the 
National LEV program in MY1999. Allowing California certification to 
substitute for National LEV certification for vehicles sold in the NTR 
does not mean that EPA is waiving compliance with the Certification 
Short Test (CST) and high-altitude requirements. However, EPA believes 
that a vehicle complying with the MY1999 California TLEV, LEV, ULEV, or 
ZEV emission standards will also most likely meet the Federal Tier 1 
CST and high-altitude requirements. Currently, Federal Tier 1 vehicles 
are being certified as meeting the CST and high-altitude requirements 
and EPA, in its certification review and testing, has not identified 
any problems manufacturers have had in complying with these two 
requirements. EPA expects that California-certified TLEVs, LEVs, ULEVs, 
and ZEVs would also meet the Federal Tier 1 CST and high-altitude 
certification requirements and is thus willing to allow a degree of 
uncertainty regarding actual demonstration of compliance with these 
requirements in MY1999 in order to facilitate the start of the National 
LEV program for those manufacturers which may find it difficult to 
certify and sell National LEV vehicles in the NTR. EPA does not believe 
it is appropriate to waive demonstration with these requirements beyond 
MY1999 because manufacturers will have had sufficient time to 
incorporate compliance with the CST and high-altitude requirements into 
their MY2000 National LEV vehicles. EPA believes there should be 
minimal adverse environmental impact from substituting California-
certified TLEVs, LEVs, ULEVs and ZEVs for National LEV vehicles in 
MY1999.
    Today's Final Rule addresses the issue of National LEV vehicle 
sales in MY1999 by issuing a Federal National LEV certificate to those 
vehicles sold in the NTR instead of expanding current policies and 
allowing the sale of California-certified vehicles throughout the NTR. 
By granting a Federal certificate to these vehicles, EPA retains its 
authority to enforce the provisions of the National LEV program. 
Compliance with many of these provisions, such as compliance with the 
fleet average NMOG requirements and credit trading, is dependent on 
meeting conditions associated with the National LEV certificate. EPA is 
not waiving compliance with the National LEV requirements in the NTR in 
MY1999. By requiring a federal National LEV certificate for MY1999 
California-certified vehicles sold in the NTR, this provision ensures 
that EPA may enforce all of the National LEV regulations applicable to 
MY1999 vehicles.8 California-certified vehicles receiving a 
Federal National LEV certificate allowing sale in the NTR may not be 
sold outside the NTR.
---------------------------------------------------------------------------

    \8\ The manufacturers have suggested that EPA address the issue 
of MY1999 and MY2000 vehicles through expansion of the cross border 
sales policy, which currently allows sales of vehicles certified to 
California's emissions standards and other requirements in states 
contiguous to, or within 50 miles of, California and states that 
have a program adopted under section 177 in place. See note 49 for 
further discussion of the cross border sales policy. The approach 
that EPA is adopting in today's rule is separate from and will have 
no effect on the cross border sales policy.
---------------------------------------------------------------------------

    EPA believes it is also appropriate to issue Federal certificates 
that will allow manufacturers to sell California-certified TLEVs 
throughout the NTR in MY2000. As discussed below in sections VIII.E and 
IX, EPA does not expect manufacturers to produce and sell many TLEVs 
after MY2000 because other provisions in the National LEV and 
California LEV programs will provide incentives and requirements which 
will minimize TLEV production. EPA believes it would be more 
environmentally beneficial and cost-effective to have manufacturers use 
their resources to certify and produce cleaner LEVs and ULEVs rather 
than TLEVs, which will shortly be phased out of production.9 
Issuing Federal certificates to allow manufacturers to sell California-
certified TLEVs in the NTR in MY2000 does not mean that more TLEVs will 
be sold in this region because manufacturers will still need to 
demonstrate compliance with the fleet average NMOG standard in the NTR 
in MY2000, and all TLEVs sold in the NTR are to be included in the 
compliance calculations. Instead, EPA is making the determination that 
the environmental benefits of issuing Federal certificates allowing the 
sale of California-certified TLEVs in the NTR in MY2000 outweighs the 
cost and any environmental detriment associated with manufacturers not 
completing all of the testing generally required to meet the 
certification requirements necessary to produce and sell a National LEV 
TLEV in the NTR in MY2000. EPA is not waiving compliance with any 
National LEV standards, but is accepting California certification as 
sufficient to

[[Page 930]]

demonstrate compliance with TLEV standards for the purpose of 
certification.
---------------------------------------------------------------------------

    \9\ Manufacturers can continue to produce and sell TLEV vehicles 
after MY2000 under the National LEV and California LEV programs as 
long as they obtain a National LEV certificate for the TLEVs and 
meet the applicable fleet average NMOG standards. EPA is not 
requiring manufacturers to discontinue TLEV production, which 
remains a manufacturer decision.
---------------------------------------------------------------------------

    This special provision regarding the sale of California-certified 
TLEVs is applicable only in the NTR and only in MY2000. This provision 
is intended to provide manufacturers with flexibility in meeting the 
fleet average NMOG standards in the NTR. When the National LEV 
requirements are effective nationally in MY2001, however, 
manufacturers' full production efforts will be focused on meeting 
California and National LEV requirements. If a manufacturer plans to 
continue producing TLEVs after MY2000, then such vehicles must meet all 
of the National LEV requirements, including the CST and high-altitude 
requirements. In meeting the certification requirements for a MY2001 
National LEV TLEV, manufacturers may carry over any appropriate data 
from their MY2000.
    EPA is not issuing Federal certificates allowing California-
certified vehicles to be sold under National LEV outside the NTR in 
MY1999. There is no justification for allowing such sales and, unlike 
in the NTR, there is no requirement that manufacturers produce anything 
but Federal Tier 1 vehicles. If manufacturers wish to generate early 
reduction credits in the All State Trading Region in MY1999 and MY2000, 
they must do so using National LEV vehicle sales in that region.

IV. National LEV Will Produce Larger VOC and NOX Emission 
Reductions in the OTR Compared to OTC State Adopted Section 177 
Programs

    Modeling done in support of the Final Framework Rule showed that 
the National LEV program would provide greater emission reductions than 
those from OTC LEV (which is equivalent to state-by-state adoption of 
the CAL LEV program throughout the OTR). See 62 FR 44757. The SNPRM 
proposed several changes to modeling assumptions. As proposed, and in 
light of public comments, EPA has modified some of the assumptions in 
the modeling, particularly regarding when various programs would start. 
This modeling supports EPA's conclusion in today's rule that, given 
current assumptions and best information about future vehicle 
performance 10 and the migration of people and vehicles, the 
NOX and VOC emission reductions from National LEV are 
equivalent to or greater than those from state-by-state adoption of 
Section 177 Programs throughout the OTR.
---------------------------------------------------------------------------

    \10\ EPA's National LEV modeling does not incorporate any 
factors relating to the effect of fuel sulfur levels on the 
emissions performance of National LEV vehicles, outside of any 
factors already included in the MOBILE 5a model. Studies being 
conducted by the auto and oil industries analyzing the impact of 
sulfur on the emissions performance of LEV vehicles are ongoing. EPA 
has not attempted to quantify a sulfur impact on National LEV 
vehicle emissions as part of the equivalency modeling because the 
studies and associated analyses have not yet been completed. 
Additionally, any quantifiable impact would apply to both the 
National LEV and OTC State Section 177 Programs and would not alter 
any equivalency determination.
---------------------------------------------------------------------------

    The first set of changes to the modeling relates to the start dates 
of National LEV and Section 177 Programs. As proposed in the SNPRM, the 
updated modeling includes a start date of MY1999 (rather than MY1997) 
for the National LEV program. The updated modeling analysis for the OTC 
State Section 177 Programs (in the absence of National LEV) also more 
accurately reflects expected reductions from OTC State Section 177 
Programs than did the analysis described in the Final Framework Rule. 
The modeling for that rule assumed that all of the OTC States had 
Section 177 Programs in effect for MY1999 and later. In reality, only 
six of the OTC States have adopted programs that could be effective in 
MY1999 and there is no longer a specific legal requirement for the 
other states to adopt a Section 177 Program. Thus, EPA's analysis 
assumes Section 177 Programs will exist only in those OTC States that 
have adopted a Section 177 Program.11 EPA believes that this 
realistic assumption is the proper comparison to National LEV since 
legally, individual state adoption is the only manner in which 
California vehicles can be required in the Northeast.
---------------------------------------------------------------------------

    \11\ Start date assumptions for EPA's modeling are MY1999 for 
the National LEV program in the OTR, MY2001 for the National LEV 
program nationwide, MY1996 for Section 177 Programs in New York and 
Massachusetts, MY1998 for a Section 177 Program in Connecticut, and 
MY1999 for Section 177 Programs in Rhode Island, New Jersey, and 
Vermont. The dates for state Section 177 Programs reflect the 
effective dates for current state Section 177 Programs. Maine has 
taken steps to adopt a Section 177 Program. EPA has included Maine 
with the other six OTC States that have adopted a Section 177 
Program, and has given Maine's program a start date of MY2001, 
recognizing that even though Maine has not yet completed all the 
steps to make its program go into effect, it has finished most of 
the actions and is expected to complete its adoption actions in the 
near future.
---------------------------------------------------------------------------

    EPA believes its current modeling makes the appropriate assumptions 
and correctly estimates a realistic level of OTC State Section 177 
Programs. However, to test its assumptions, EPA also ran as a third 
case a sensitivity analysis assuming that all of the OTC States adopted 
Section 177 Programs. For the six OTC States without a Section 177 
Program in place as of July 1, 1997, EPA assumed that the programs 
became effective in MY2001, the earliest time a state that had not yet 
adopted a Section 177 Program could legally enforce such a program, 
given the two year lead time requirement in section 177 of the Act. 
This analysis showed that, even with all 13 OTC States having a Section 
177 Program in place at the earliest possible times, National LEV still 
provided greater emission reductions in the Northeast.
    EPA has also changed some of its modeling assumptions regarding the 
status of federal and state motor vehicle programs in MY2005 and later, 
in part as a result of changes EPA made regarding the duration of 
National LEV. To the extent possible, EPA has attempted to make these 
new assumptions, which affect all three cases analyzed by EPA, 
consistent from one case to the next. Although EPA has made assumptions 
regarding future regulatory actions, these assumptions in no way limit 
EPA's options in future regulatory actions, nor do they indicate that 
EPA has prejudged those future actions.
    In the National LEV case, EPA assumes National LEV will be in place 
in all OTC States through MY2005, which is the latest model year the 
program would be considered a compliance alternative in those OTC 
States which have adopted a Section 177 Program if EPA issues Tier 2 
standards at least as stringent as National LEV standards by December 
15, 2000. In MY2006, the seven OTC States with Section 177 Programs 
already adopted are assumed, for modeling purposes, to have those 
programs go into effect.12 The model assumes the rest of the 
country will have a Tier 2 program which, for modeling purposes, is 
considered to be equivalent to the National LEV program.
---------------------------------------------------------------------------

    \12\ Under the National LEV program duration requirements (see 
section V.A) the OTC States are only committed to have the Naitonal 
LEV program as a compliance alternative to a Section 177 Program 
until MY2006.
---------------------------------------------------------------------------

    The two modeling cases which analyze emission reductions without 
the National LEV program assume, for modeling purposes, that a Tier 2 
program equivalent to National LEV would go into effect in MY2005. One 
case assumes Tier 1 standards in effect until then in those states that 
have not adopted a Section 177 Program. The other case assumes Tier 1 
standards in effect until then in all states outside the OTR (except 
California). The MY2005 start date for Tier 2 was chosen as a 
reasonable estimation for modeling purposes, given the National LEV 
program deadline of December 15, 2000

[[Page 931]]

date for EPA action on the Tier 2 program (which has been incorporated 
into the modeling assumption for the National LEV case) in conjunction 
with lead time for manufacturers to prepare to comply with Tier 2 
standards. The MY2005 start date for Tier 2 also represents a 
reasonable midpoint, for modeling purposes, between the MY2004 and 
MY2006 deadlines included in the MOUs. EPA is not precluded by the 
National LEV program from implementing a Tier 2 program in MY2004 if it 
determines Tier 2 standards should apply in that model year.
    EPA's modeling shows that National LEV would achieve greater 
emission reductions in the OTR than individual OTC State Section 177 
Programs. EPA's conclusion would not change even if all OTC States were 
to adopt Section 177 Programs. The emission levels are listed in the 
Table 1 below. The modeling is based on National LEV starting in MY1999 
in the OTR and MY2001 in the rest of the country, with Federal Tier 1 
vehicles making up the federal non-NLEV fleet. EPA did not include 
existing OTC State zero emission vehicle (ZEV) sales mandates in either 
of its modeling runs since these mandates are not affected by the 
National LEV rule. ZEV sales mandates would thus have similar effects 
on emission levels in both modeling cases and would not affect the 
relative emissions benefits of National LEV compared to those of OTC 
State Section 177 Programs.
    All other assumptions used in the modeling included in the Final 
Framework Rule, the SNPRM, and today's rule remain consistent with 
those used throughout the National LEV process. EPA believes it is 
important to keep consistent assumptions to provide a comparison 
between benefits from the National LEV program and state Section 177 
Programs in the OTR.

Table 1.--Ozone Season Weekday Emissions for Highway Vehicles in the OTR
                               (tons/day)                               
------------------------------------------------------------------------
                                                   OTC State   National 
             Year                   Pollutant       CAL LEV       LEV   
------------------------------------------------------------------------
2005..........................  NMOG............       1,573       1,499
                                NOX.............       2,526       2,403
2007..........................  NMOG............       1,480       1,366
                                NOX.............       2,427       2,226
2015..........................  NMOG............       1,386       1,148
                                NOX.............       2,367       1,899
------------------------------------------------------------------------

V. OTC State Commitments

    This section describes the substance of the OTC States' commitments 
to National LEV. It also addresses the process (including timing) by 
which OTC States and auto manufacturers would commit to National LEV 
and by which EPA would find the program in effect.

A. Duration of OTC State Commitments and of the National LEV Program

    Today's Final Rule takes a different approach to the duration of 
the OTC State commitments than was proposed in the SNPRM. As discussed 
in the SNPRM, the MOUs initialed by the OTC States and the auto 
manufacturers both had the duration of the National LEV program (and 
hence the duration of both the OTC States' and the auto manufacturers' 
commitments) depend on whether, by January 1, 2001, EPA issued 
mandatory new motor vehicle standards (``Tier 2 standards'') that were 
at least as stringent as National LEV and that would go into effect no 
later than MY2006. If EPA issued the specified standards by that time, 
the auto manufacturers would stay in National LEV until the Tier 2 
standards became effective, and the OTC States would not enforce their 
own state Section 177 Programs until MY2006. If EPA did not issue the 
specified regulations by that time, then National LEV would end with 
MY2003 and, starting in MY2004, in any state where California or OTC 
LEV standards were not in place, the applicable standards for 
manufacturers would revert back to the federal Tier 1 standards. 
Although EPA rejected the MOU approach in the Final Framework Rule, EPA 
has reconsidered the issue based on the comments submitted by the OTC 
States and the auto manufacturers, and has decided to adopt the 
approach agreed upon by the OTC States and the auto manufacturers. 
Thus, under 40 CFR 1701(c) and 1705(e) and (g) of today's rule, the 
commitments of the OTC States and the auto manufacturers to National 
LEV last until MY2006, unless EPA fails to promulgate Tier 2 standards 
at least as stringent as National LEV on or before December 15, 2000, 
in which case the commitments last until MY2004.13
---------------------------------------------------------------------------

    \13\ If EPA promulgates Tier 2 standards at least as stringent 
as National LEV on or before December 15, 2000, and those standards 
are in effect in MY2004 or MY2005, the manufacturers will become 
subject to those standards upon their effective date, but the OTC 
States' commitments to National LEV will not end until MY2006.
---------------------------------------------------------------------------

    EPA had proposed in the SNPRM that the OTC States would commit to 
the National LEV program until MY2006. This meant that the OTC States 
would have committed to accept manufacturers' compliance with National 
LEV (or equally or more stringent mandatory federal standards) as an 
alternative to compliance with a state Section 177 Program through 
MY2005. The length of the auto manufacturers' commitment was set in the 
Final Framework Rule. Under that rule, manufacturers that opted into 
the program would be bound to comply with National LEV until the first 
model year for which manufacturers would be subject to a mandatory 
federal tailpipe emissions program at least as stringent as the 
National LEV program with respect to NMOG, NOX and carbon 
monoxide (CO) exhaust emissions (``Tier 2 standards''). Under section 
202(b)(1)(C) of the Clean Air Act, EPA could not mandate such standards 
prior to MY2004. Thus, the manufacturers' commitment to National LEV 
was to last at least until MY2004 and could last longer.
    In the Final Framework Rule, EPA did not accept the MOU provisions 
for setting the duration of the National LEV program. EPA rejected the 
MOU provisions because it was concerned about setting up a program that 
would have the country take a step backward environmentally if the 
Agency failed to act by a specified deadline. EPA has reconsidered its 
views.
    The main reason for changing the program duration is the comments 
received from the OTC States and the auto industry. The auto industry 
made it clear that stability until MY2006 is very important, and the 
OTC States were clear that they were uncomfortable with committing to 
allow National LEV as a compliance alternative until MY2006 if EPA were 
not to issue Tier 2 standards by January 1, 2001. The OTC States' 
primary reason for wanting to tie the duration of the program to 
promulgation of Tier 2 standards is that they need to know sooner 
rather than later how the Tier 2 standards and the California LEV 
program compare so that they can determine whether they will need to 
have an enforceable California LEV program to meet their air quality 
goals. EPA believes that an orderly air quality planning process is 
important and believes that the OTC States are in the best position to 
know what would be most useful to them in that process. EPA has decided 
to defer to the OTC States' judgment on this matter.
    Having decided that the length of the OTC States' commitment should 
depend on whether EPA issues Tier 2 standards, EPA believes it would be 
unfair not to have the manufacturers' commitment also depend on whether 
EPA issues Tier 2 standards. First, that is the agreement that was 
reached by the OTC States and the manufacturers. It would be unfair to 
hold the manufacturers in for longer than they had agreed to in the MOU

[[Page 932]]

while giving the OTC States the benefit of the agreement. Second, an 
unintended consequence of EPA's decision not to tie the end of National 
LEV to EPA's issuance of the Tier 2 regulations is that several groups 
interpreted that as a signal that EPA was not intending to perform its 
statutory duty under CAA section 202(i)(3) to evaluate the need for, 
technological feasibility of, and cost effectiveness of new standards, 
and to issue new standards if warranted. EPA has every intention of 
meeting its statutory obligations under the CAA and does not want to 
send a contrary message. Third, EPA now believes that if National LEV 
comes into effect and manufacturers change all their manufacturing 
facilities over to build LEV technology, it is highly unlikely that 
they would actually change the technology back to Tier 1. A combination 
of the cost of changing back to old technology and adverse publicity 
from selling ``dirty'' cars probably should be sufficient incentive to 
keep manufacturers using LEV technology. One manufacturer's decision, 
announced this summer, to sell LEV technology (albeit certified at Tier 
1 levels) nationally and various marketing campaigns touting clean cars 
are evidence that ``clean'' cars can be used as a selling point. Thus, 
today's Final Rule modifies the duration of the manufacturers' 
commitment to National LEV.

B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and EPA 
Finding That National LEV Is in Effect

    EPA is establishing a process and deadlines for the OTC States and 
the manufacturers to opt into the National LEV program and for EPA to 
find the program in effect. The process and timing are unchanged from 
EPA's proposal in the SNPRM. Because National LEV needs to be in place 
as soon as possible to ensure that it is available for MY1999, 40 CFR 
86.1706 sets the following deadlines based on the date of signature of 
this Final Rule.14 Seventy-five days from signature of this 
FRM, EPA must determine whether the National LEV program is in effect 
(see section V.C.3 below for the criteria for finding National LEV in 
effect). This finding will be based on the OTC States' initial opt-in 
packages from their Governors and state environmental commissioners or 
secretaries (discussed below in section V.C) that were submitted no 
later than 45 days from the date of signature of this rule and on the 
manufacturers' opt-ins submitted no later than 60 days from signature 
of this rule.15 If EPA finds National LEV in effect, all 
parties are bound by their commitments to the program. While any party 
that misses its deadline for opt-in is not barred from submitting a 
late opt-in, EPA is only required to consider timely opt-ins in 
determining whether National LEV is in effect. Moreover, given the very 
short timeframe for the opt-in process and the fact that some parties 
may be reluctant to opt in before they know whether others will do so, 
a late opt-in is likely to jeopardize the start-up of the program.
---------------------------------------------------------------------------

    \14\ EPA will provide directly affected parties actual notice 
and make copies of the FRM available within a week of signature. 
Upon request, copies of the FRM will also be made available to other 
parties in the same timeframe.
    \15\ If one of these deadlines would otherwise fall on a weekend 
or federal holiday, the FRM sets the deadline as the next business 
day.
---------------------------------------------------------------------------

    As proposed, after the initial opt-ins and an EPA finding that the 
program is in effect, the OTC States will generally have one year from 
the date of the in-effect finding to submit the final portion of their 
opt-ins, which is a SIP revision committing the state to the National 
LEV program and allowing manufacturers to comply with National LEV as 
an alternative to a state Section 177 Program, as described in more 
detail in section V.C.4 below. For a few states, specifically Delaware, 
New Hampshire, Virginia and the District of Columbia, the deadline is 
eighteen months, rather than one year, from the date of the in-effect 
finding. These states have particular circumstances related to their 
state rulemaking processes that make a one-year deadline unrealistic. 
If a state were to miss its deadline for submission of its SIP revision 
committing to National LEV, the manufacturers would have the 
opportunity to opt out of the program, as discussed further in section 
VI.

C. OTC State Commitments, Manufacturer Opt-Ins, and EPA Finding That 
National LEV Is in Effect

    This section describes the process for the OTC States and the 
manufacturers to commit to the National LEV program and for EPA to find 
the program in effect. This includes how the OTC States will commit to 
the program, the elements of their commitments, the permissible 
conditions on OTC State and manufacturer opt-ins, and the criteria that 
EPA will use to find the program in effect.
1. Initial Opt-In by OTC States
    As proposed, the OTC States will commit to National LEV in two 
steps, the first of which is an opt-in package from each state's 
Governor and environmental commissioner, indicating the OTC State's 
intent to opt into National LEV. The second step is a SIP revision 
incorporating the OTC States' commitment to National LEV in state 
regulations, which EPA will approve into the federally-enforceable SIP.
    To opt into National LEV, within 45 days of signature of this rule, 
the Governor (or Mayor, in the District of Columbia) will submit to EPA 
an executive order or a letter committing the OTC State to the National 
LEV program. As specified in 40 CFR 86.1705(e), the executive order or 
letter will contain three main elements. First, it will state that its 
purpose is to opt the state into National LEV. Second, it will state 
that the Governor is forwarding a letter signed by the head of the 
state environmental agency (or other appropriate agency or department), 
which specifies the details of the state's commitment to the National 
LEV program. Third, it will state that the Governor has directed the 
head of the state environmental agency to take the necessary steps to 
adopt regulations and submit a SIP revision committing the state to 
National LEV in accordance with the requirements of the National LEV 
regulations. In addition, OTC States with existing ZEV mandates 
16 may add language confirming that the opt-in will not 
affect the state's requirements pertaining to ZEVs.
---------------------------------------------------------------------------

    \16\ ZEV mandates are those state regulations or other laws that 
impose (or purport to impose) obligations on auto manufacturers to 
produce or sell a certain number or percentage of ZEVs. Any OTC 
State with a ZEV mandate that was adopted prior to the signature 
date of this rule is considered a state with an existing ZEV 
mandate.
---------------------------------------------------------------------------

    The Governor's executive order or letter will enclose a letter 
signed by the state environmental commissioner or secretary of the 
appropriate state department (``commissioner's letter''), which 
specifies the details of the state's commitment to National LEV. 
Alternatively, if an OTC State has proposed regulations meeting the 
requirements for a SIP revision specified below, the state may 
substitute the proposed regulations for the portions of the 
commissioner's letter for which they are duplicative. In that case, the 
Governor will send to EPA the Governor's executive order or letter, the 
proposed regulations, and a letter from the commissioner, which will 
contain the elements specified below that were not included in the 
proposed regulations.
    As proposed, the commissioner's letter will include the following 
elements. First, it will indicate that National LEV would achieve 
reductions of VOC and NOx emissions equivalent to or greater 
than the reductions that

[[Page 933]]

would be achieved through state adopted Section 177 Programs in the 
OTR. Second, it will indicate that the state intends National LEV to be 
the state's new motor vehicle emissions control program. Third, it will 
state that for the duration of the state's participation in National 
LEV, the state will accept National LEV or mandatory federal standards 
of at least equivalent stringency as a compliance alternative to any 
state Section 177 Program. As EPA is defining it here, a state Section 
177 Program is any regulation or other law, except a ZEV mandate, 
adopted by an OTC State in accordance with section 177 and which is 
applicable to passenger cars, light-duty trucks up through 6,000 pounds 
GVWR, and/or medium-duty vehicles from 6,001 to 14,000 pounds GVWR if 
designed to operate on gasoline, as these vehicle categories are 
defined under the California regulations. (This commitment would not 
restrict states from adopting and implementing requirements under 
section 177 for heavy-duty trucks and engines and diesel-powered 
vehicles between 6,001 and 14,000 pounds GVWR.) The letter will further 
state that the state's participation in National LEV extends until 
MY2006, except as provided in the National LEV regulations' provisions 
addressing the duration of the OTC State commitments and state 
offramps. However, in a change from the proposal (discussed in section 
V.A above), the letter will add that if no later than December 15, 
2000, EPA does not issue mandatory new motor vehicle standards (``Tier 
2 standards'') at least as stringent as National LEV and that would go 
into effect no later than MY2006, then the state's participation in 
National LEV extends only until MY2004, except as provided in the 
National LEV provisions for state offramps. The offramps allow the OTC 
States to exit National LEV if an auto manufacturer were to decide to 
exit the program. OTC States without existing ZEV mandates would add a 
statement that the state accepts National LEV as a compliance 
alternative to any ZEV mandates. OTC States with existing ZEV mandates 
would add a statement that their acceptance of National LEV as a 
compliance alternative for state Section 177 Programs does not include 
or have any effect on the OTC State's ZEV mandates.
    Fourth, the commissioner's letter will include both an explicit 
recognition that the manufacturers are opting into National LEV in 
reliance on the OTC States' opt-ins, and a recognition that the 
commitments in the initial OTC State opt-in package have not yet gone 
through the state rulemaking process to be incorporated into state 
regulations, so they do not yet have the force of law; in addition, the 
letter will recognize that the state's executive branch must comply 
with any laws passed by the state legislature that might affect the 
state's commitment. The manufacturers' comments opposed inclusion of 
the proposed language stating that the provisions of the state's letter 
would not have the force of law until adopted as state regulations and 
that the state must comply with any state legislation that might affect 
the commitment. The manufacturers expressed concern that these 
provisions undermine the states' commitments. However, a number of 
states have indicated to EPA that they could not make a commitment of 
this nature before completing the states' rulemaking processes, unless 
they included language to clarify the legal nature of the initial state 
commitment. In light of the fact that the states will not have 
sufficient time to complete a rulemaking before opting into National 
LEV, EPA believes it is appropriate for the opt-in provisions to allow 
the states to include the language that EPA proposed. EPA does not 
believe this language will in any way affect the degree to which the 
states are legally or politically bound by their initial opt-ins.
    Fifth, the commissioner's letter will include an acknowledgment 
that, if a manufacturer were to opt out of National LEV pursuant to the 
opt-out provisions in the National LEV regulations, the transition from 
the National LEV requirements to any state Section 177 Program or ZEV 
mandate would be governed by the National LEV regulations. Sixth, 
similar to the manufacturers' opt-in letters, the commissioner's letter 
will state that the state supports the legitimacy of the National LEV 
program and EPA's authority to promulgate the National LEV regulations.
    The OTC States have indicated that they support certain commitments 
regarding ZEV mandates by including those provisions in the MOU voted 
on by the OTC and initialed by the OTC pursuant to the vote. Consistent 
with the provisions in the MOU initialled by the OTC, for states 
without existing ZEV mandates, the commissioner's letter will state 
that the state intends to forbear from adopting a ZEV mandate effective 
during the period of the state's participation in National LEV. In this 
rule, EPA is defining an existing ZEV mandate as a ZEV mandate adopted 
by an OTC State prior to the signature date of this rule. The 
manufacturers commented that the states should commit that they will 
forbear from adopting ZEV mandates, rather than only stating their 
intent to forbear from such action. However, the OTC States have 
expressed their concern about attempting to bind future legislatures in 
this way and have consistently indicated that such language would not 
be acceptable to them. As it stated in the NPRM (60 FR 52740) and SNPRM 
(62 FR 44760) for National LEV, EPA believes that the decision 
regarding adoption of ZEV mandates by OTC States must be left up to 
each individual OTC State, to the extent permitted under section 177. 
Thus, EPA believes it is appropriate to include the language supported 
by the OTC States here. If any OTC State would prefer to commit that it 
will forbear from adopting a ZEV mandate, it may make that commitment 
in its opt-in.
    The commissioner's letter from OTC States that have not adopted a 
Section 177 Program at the time of signature of this rule need not 
include a commitment or statement of intent to forbear from adopting a 
Section 177 Program effective during the period of the state's 
commitment to National LEV, as long as the state commits to accept 
National LEV as a compliance alternative to any such program. EPA took 
comment on such a provision in the SNPRM (60 FR 44760) because the 
draft MOU initialed by the manufacturers included a statement that 
certain OTC States would forbear from adopting such ``backstop'' 
Section 177 Programs,17 while the draft MOU initialed by the 
OTC States did not include any statement regarding adoption of such 
backstop programs. The comments on the SNPRM from the manufacturers and 
the OTC States reiterate these positions. In particular, the 
manufacturers stated that allowing all OTC States to adopt backstop 
Section 177 Programs would destabilize the National LEV program. The 
manufacturers are concerned that the prospect of a return to Tier 1 
vehicles in at least some OTC States if a state violates its commitment 
to National LEV is a powerful incentive for states to abide by their 
commitments that would be lost with widespread backstops. EPA agrees 
that the absence of backstops in some OTC States would contribute to 
program stability in the manner that the manufacturers suggest. 
However, EPA does not believe it is necessary to bar states from 
adopting backstops to provide this source of stability, as it is highly 
unlikely that all or nearly all OTC States will adopt backstop Section

[[Page 934]]

177 Programs effective during the relevant time period and it is 
unlikely that more than a few (if any) states outside the OTR would 
adopt backstop programs. In addition, the OTC States said that they are 
unwilling to commit not to adopt backstop programs. Thus, EPA does not 
believe it is appropriate to include a provision committing not to 
adopt a backstop Section 177 Program as an element of the OTC States' 
commitments to National LEV.
---------------------------------------------------------------------------

    \17\  ``Backstop'' Section 177 Programs are programs that allow 
National LEV as a compliance alternative to the Section 177 Program 
requirements.
---------------------------------------------------------------------------

    Finally, the commissioner's letter may include a statement that the 
state's opt-in to National LEV is conditioned on all of the motor 
vehicle manufacturers listed in the National LEV regulations opting 
into National LEV pursuant to the National LEV regulations and on EPA 
finding National LEV to be in effect. However, as with the 
manufacturers' opt-ins, no conditions other than those specified in the 
regulations may be placed on any of the state opt-in instruments (the 
Governor's executive order or letter, the commissioner's letter, or the 
SIP revision).
    The OTC States commented that the regulations should allow an OTC 
State to condition its opt-in on signature of an acceptable independent 
agreement with the manufacturers to promote advanced technology 
vehicles (ATVs). An agreement on ATVs has not been contemplated to be 
part of the National LEV regulations, but has been discussed as a 
separate agreement between the OTC States and the auto manufacturers. 
At one point, the OTC States and manufacturers reached consensus on the 
substance and language of an ATV agreement, which was to establish 
mechanisms for sharing information not only about advanced technology 
vehicles and alternative fuels, but also about the incentives and 
infrastructure development necessary to make new technology feasible. 
This agreement was attached to the MOUs initialed by the manufacturers' 
organizations and the OTC. EPA supports this agreement, but does not 
believe that opt-ins to National LEV need be conditioned on final 
signature of the agreement. If the OTC States and manufacturers want to 
finalize the agreement (contingent on National LEV coming into effect), 
they can and should do so before the due date for the OTC State opt-
ins. There is no reason to delay finalizing the ATV agreement until 
after the OTC States have opted in. Thus, although OTC States can 
refuse to opt in if there is no ATV agreement, they cannot send in an 
opt-in which is conditioned on an ATV agreement being signed.
    In the regulations at 40 CFR 86.1705 (e) and (g), EPA is providing 
specific language for each element of the OTC States' opt-ins to be 
included in the Governor's executive order or letter, the 
commissioner's letter, and the SIP revision. Although it is somewhat 
unusual for EPA to identify specific language for state submissions, 
EPA believes that this is an appropriate situation to do so. Because 
the OTC States and manufacturers are signing up for a voluntary program 
and are unlikely to sign an MOU, using specified language will ensure 
that they sign up to the same program. Otherwise, the opt-ins might not 
represent agreement on the terms and conditions of the voluntary 
National LEV program. However, in a slight modification to the proposed 
approach, the final regulations provide that for the Governors' and 
commissioners' letters, a state may opt into National LEV using the 
specified language or ``substantively identical language.'' Because the 
first step of the OTC States' commitments to National LEV will occur 
before the states can complete their rulemaking processes, EPA 
recognizes that some slight wording variations may be necessary for 
individual states. For the subsequent SIP revisions, however, states 
will have the opportunity to go through notice-and-comment rulemaking 
on the specified language. Moreover, because the deadline for 
manufacturers to opt into National LEV is after the deadline for the 
OTC States, the manufacturers will have the opportunity to assess the 
adequacy of any state opt-ins that vary from the specified language. If 
the variation is sufficient to undercut the assurance that the state 
will carry out its commitment to National LEV, the manufacturers may 
decide not to opt into National LEV. However, the manufacturers would 
not have an opportunity to assess beforehand any variations in the SIP 
revision language submitted by the states. Prior to opt-in, the 
manufacturers can evaluate the SIP revision language specified in the 
regulations to determine whether they view the language as an adequate 
expression of the states' commitments to National LEV, but they would 
not have the opportunity to evaluate any variations on that specified 
language. The importance of ensuring that all parties know what they 
are signing up to at the time of opt-in further supports the 
requirement for states to use exact language for the SIP revisions.
    Despite the possibility that states may opt into National LEV even 
with slight non-substantive variations in the language of the 
Governor's letter or commissioner's letter, EPA emphasizes that any 
differences must be minor and non-substantive. Because the Governor's 
letter and commissioner's letter are political as well as legal 
documents, even language without direct legal effect is important to 
bind the state politically to carry out its commitment. Hence, EPA and/
or the manufacturers are likely to view variations in such language as 
substantive changes to the state's commitment. To avoid invalid opt-
ins, EPA expects most, if not all, OTC States to use the specified 
language unmodified. Only a few OTC States commented that they might 
need to make unspecified changes in the language. In addition, as 
discussed further below, EPA will find National LEV in effect without 
providing for additional notice-and-comment on whether the conditions 
are met for finding National LEV in effect. EPA may proceed without 
additional rulemaking or other process if the Agency's in-effect 
finding is essentially a nondiscretionary action based on clear factual 
determinations. If EPA must use its discretion to determine whether a 
state has adequately committed to National LEV, that might require 
further rulemaking and substantially delay implementation of the 
program. However, if the OTC States use the language specified in the 
regulations, which EPA has determined to be adequate through a notice-
and-comment rulemaking, EPA will be able to find National LEV in effect 
on that basis.
    EPA also recognizes that a state may wish to include background 
information, especially in the Governor's executive order or letter. 
This is permissible under today's regulations, providing that the 
additional information does not add conditions to the state's opt-in.
2. Manufacturer Opt-Ins
    As proposed, the motor vehicle manufacturers' opt-ins to National 
LEV are due within 60 days from signature of this Final Rule. As 
provided in the Final Framework Rule, a manufacturer will opt into 
National LEV by submitting a written notification signed by the Vice 
President for Environmental Affairs (or a company official of at least 
equivalent authority who is authorized to bind the company to the 
National LEV program) that unambiguously and unconditionally states 
that the manufacturer is opting into the program, subject only to 
conditions expressly contemplated by the regulations. See 40 CFR 
86.1705(c)(2). The only permissible conditions on a manufacturer's opt-
in notification would be that the OTC States or the auto manufacturers 
specified by the manufacturer opt into National LEV pursuant to the 
National

[[Page 935]]

LEV regulations and that EPA find the program to be in effect. These 
conditions parallel the permissible conditions described above for the 
OTC States' opt-ins.
    One commenter voiced a concern that the opt-in language that would 
commit the manufacturers ``not to seek to certify any vehicle except in 
compliance with the regulations in subpart R'' would prevent 
manufacturers from certifying heavy-duty vehicles. The statement would 
not have that effect. Heavy-duty vehicles are not covered by the 
National LEV program, so they would not need to be (and could not be) 
certified under the National LEV regulations. Similarly, this opt-in 
language would not preclude manufacturers from seeking to certify a 
vehicle for sale only in California and states that have the California 
program in effect. The opt-in language also would not commit 
manufacturers to obtain National LEV certificates for vehicles sold 
outside the United States.
3. EPA Finding That National LEV Is In Effect
    The OTC States' and the auto manufacturers' opt-ins will become 
effective upon EPA's receipt of the opt-in notification or, if the opt-
in is conditioned, upon the satisfaction of that condition. As provided 
in 40 CFR 86.1706, EPA will find National LEV in effect if each of the 
listed manufacturers submits an opt-in notification that complies with 
the requirements for opt-ins, each of the opt-in notifications 
submitted by an OTC State complies with the requirements for opt-ins, 
and any conditions placed upon any of the opt-ins are satisfied. Thus, 
if all the parties that opted into National LEV agree to participate in 
the program, even if fewer than all OTC States opt into National LEV, 
EPA will find the program in effect. EPA believes that National LEV 
should be a national program--effective in all states but California. 
This would provide the OTR with emissions reductions greater than what 
could be achieved without National LEV and would simplify distribution 
and other aspects of the sale of motor vehicles. Moreover, the 
manufacturers have stated that they are not willing to opt into 
National LEV unless each and every OTC State opts into National LEV. 
However, if the OTC States and auto manufacturers are willing to 
participate in a National LEV program even if all OTC States do not opt 
in, EPA will not stand in the way of National LEV going into effect. By 
allowing each of the parties in National LEV to condition their 
agreement to opt in on specified other parties opting in, EPA is 
leaving it up to each of the parties to decide what is an acceptable 
basis for its own participation. EPA expects that each motor vehicle 
manufacturer and each OTC State will carefully evaluate the National 
LEV program as a whole and make the choice as to whether and under what 
conditions it chooses to participate.
    Once all conditions on opt-ins are satisfied, the manufacturers 
will be subject to the National LEV requirements for new motor vehicles 
for the duration of the program, and the OTC States that opt in will be 
committed to participate in the National LEV program for the duration 
of their commitments, as discussed above in section V.A.
    While the OTC States' SIP revisions are a necessary component of 
their commitments to National LEV, EPA will make the finding as to 
whether National LEV is in effect and National LEV will begin before 
the OTC States' SIP revisions are due. Through an executive order or 
letter, the Governor of each state will have opted into National LEV 
and started the process for submission of an approvable SIP revision. 
Also, as discussed further below, an OTC State's failure to submit the 
SIP revision within the time provided for submission would give 
manufacturers an opportunity to opt out of the National LEV program. 
See Sec. VI.A.2; 40 CFR 86.1707(f). Together, this high level directive 
for action and the consequences of a failure to conclude the action 
provide substantial assurance that the OTC States will submit their SIP 
revisions within the specified time.
    EPA will publish the finding that National LEV is in effect in the 
Federal Register, but the Agency will not go through additional 
rulemaking to make this determination. In the Final Framework Rule, EPA 
stated that further Agency rulemaking to find National LEV in effect 
would be unnecessary because EPA would establish the criteria for the 
finding through notice-and-comment rulemaking, and EPA's finding that 
the criteria are satisfied would be an easily verified objective 
determination. See 62 FR 31226 (June 6, 1997). The public has had full 
opportunity to comment on the adequacy of the elements of the 
manufacturers' and OTC States' opt-ins. Thus, EPA will find that 
National LEV is in effect without conducting further rulemaking if the 
Agency determines that each of the listed manufacturers has submitted 
an opt-in notification that includes the specified elements in approved 
language without qualifications, each of the opt-in notifications 
submitted by an OTC State includes the specified elements in specified 
or substantively identical language without qualifications, and any 
conditions placed upon any of the opt-ins have been satisfied.
4. SIP Revisions
    Within one year (eighteen months for a few specified states, as 
discussed above in section V.B) of the date set for EPA's finding that 
National LEV is in effect, the OTC States will complete the second 
phase of their commitments to National LEV by submitting SIP revisions 
to EPA incorporating their commitments (``National LEV SIP 
revisions''). As proposed and specified in 40 CFR 86.1705(g), the SIP 
revisions will contain the following elements incorporated in 
enforceable state regulations.
    The first regulatory provision will commit that, for the duration 
of the state's commitment to National LEV, the manufacturers may comply 
with National LEV or mandatory federal standards of at least equivalent 
stringency as a compliance alternative to any state Section 177 Program 
(which is any regulation or other law, except a ZEV mandate, adopted by 
an OTC State in accordance with section 177 and which is applicable to 
passenger cars, light-duty trucks up through 6,000 pounds GVWR, and 
medium-duty vehicles from 6,001 to 14,000 pounds GVWR if designed to 
operate on gasoline, as these vehicle categories are defined under the 
California regulations).18 This provision would not restrict 
states from adopting and implementing requirements under section 177 
for heavy-duty trucks and engines and diesel-powered vehicles between 
6,001 and 14,000 pounds GVWR. The regulations will also commit the 
state to participate in National LEV until MY2006, except as provided 
in the National LEV regulatory provisions for the duration of the OTC 
State commitments, including provisions for state offramps. However, as 
discussed in section V.A above, the regulations will also provide that 
if, no later than December 15, 2000, EPA has not issued mandatory new 
motor vehicle standards (``Tier 2 standards'') at least as stringent as 
National LEV that would go into effect no later than MY2006, then the 
state is committed to participate in National LEV only until MY2004, 
except as provided in the National LEV provisions for state offramps. 
States that do not have an existing ZEV mandate (see n. 16 above)

[[Page 936]]

will additionally provide that manufacturers may comply with National 
LEV as a compliance alternative to any ZEV mandates for the duration of 
the state's commitment to National LEV.
---------------------------------------------------------------------------

    \18\ OTC States that had Section 177 Programs at the time of 
opt-in would need to modify their existing regulations in accordance 
with this provision.
---------------------------------------------------------------------------

    The second element of the state regulations will explicitly 
acknowledge that, if a manufacturer were to opt out of National LEV 
pursuant to the opt-out provisions in the National LEV regulations, the 
transition from the National LEV requirements to any state Section 177 
Program or ZEV mandate (for states without existing ZEV mandates) would 
be governed by the National LEV regulations, thereby incorporating 
these National LEV provisions by reference into state law.
    The SIP submission to EPA will include state regulations containing 
the elements discussed above, and a transmittal letter or similar 
document from the state commissioner forwarding those regulations. As 
proposed, four additional elements of the SIP commitment must be 
included either in the transmittal letter or the state regulations. 
First, the state will commit to support National LEV as an acceptable 
alternative to state Section 177 Programs for the duration of the 
state's commitment to National LEV. Second, the state would recognize 
that its commitment to National LEV is necessary to ensure that 
National LEV remain in effect. Third, the state will state that it is 
submitting the SIP revision to EPA in accordance with the National LEV 
regulations. Fourth, each OTC State without an existing ZEV mandate 
(see n. 16 above) will state that, for the duration of the state's 
commitment to National LEV, the state intends to forbear from adopting 
a ZEV mandate effective during the period of the state's participation 
in National LEV. See section V.C.1 above for further discussion of OTC 
State commitments relating to ZEV mandates. As discussed in section 
V.C.1 above, OTC States that had not adopted a Section 177 Program at 
the time of signature of this rule would not need to commit not to 
adopt backstop Section 177 Programs.
    EPA will be able to find that an OTC States' SIP submission meets 
the National LEV SIP requirements and to approve it into the SIP 
without further rulemaking as long as the submission both includes the 
language specified in the regulations without additional conditions and 
meets the CAA requirements for approvable SIP submissions. In the 
SNPRM, EPA provided full opportunity for public comment on the language 
that the states would use in their SIP revisions. Today's rule 
finalizes that language with a few modifications arising from the 
public comments. Thus, in reviewing such a SIP submittal, EPA will only 
have to determine whether the submittal includes the specified language 
without additional conditions, and whether it meets the statutory 
criteria for approvable SIP submissions, as laid out in sections 
110(a)(2) and 110(l) of the CAA. Section 110(a)(2), in relevant part, 
specifies that the state must have provided public notice and a hearing 
on the SIP provisions and the submission must provide necessary 
assurances that the state will have adequate personnel, funding and 
authority under state law to carry out the provisions. Section 110(l) 
(discussed in more detail below) provides that SIP revisions must not 
interfere with attainment or any other applicable requirement.
    In this case, these requirements for EPA's approval are easily 
verified objective criteria. They leave EPA little discretion in 
deciding whether a state submission meets the requirements for a 
National LEV SIP revision, and consequently remove any benefits to be 
derived from conducting notice-and-comment rulemaking on each approval. 
Determining whether the language of the SIP submittal tracks the 
language provided in the final regulations and whether the state has 
substantively qualified or conditioned that language through 
modifications or additions is a straightforward, essentially 
ministerial task. This is also true for assessing whether the state has 
provided notice and a public hearing on the SIP submission. Because 
National LEV is a federal program, the state needs no personnel or 
funding to carry it out, so there is nothing related to the requirement 
for adequate personnel and funding for EPA to evaluate. For a state 
with existing regulations requiring compliance with a state Section 177 
Program, EPA will merely have to determine whether the state has 
modified its regulations to include the language in the National LEV 
regulations to accept National LEV as a compliance alternative for the 
specified duration of the state commitment, as well as the additional 
provisions specified above. Again, this is a very simple, objective 
assessment. Finally, EPA has determined that National LEV would provide 
reductions in the OTR equivalent to or greater than OTC State Section 
177 Programs in the OTR (see section IV), so that an OTC State 
commitment to National LEV would not interfere with attainment or any 
other Act requirement. See below for further discussion of this point.
    Incorporating the OTC States' commitments to National LEV in state 
regulations approved into the SIPs will substantially enhance the 
stability of the National LEV program and support giving states credit 
for SIP purposes for emissions reductions from National LEV. A SIP 
revision would clearly indicate a state's commitment to National LEV 
and would reiterate the state executive branch's support for the 
National LEV program. More importantly, an approved SIP revision is 
federal law and hence has binding legal effect. General Motors Corp. v. 
U.S., 496 U.S. 530, 540 (1990).
    In the SNPRM, EPA explained the circumstances under which EPA 
believes these SIP commitments would have binding effect. Several 
commenters disagreed with EPA's legal interpretations. Of course, 
whether a subsequent state law or regulation could be approved into the 
SIP or whether it would be preempted by the earlier National LEV SIP 
revision would be a fact-specific determination that could not be made 
unless and until a state took final action arguably in conflict with 
its National LEV SIP revision. Although this is an issue that might 
never arise, EPA believes it is appropriate to lay out the key legal 
principles that EPA believes would apply in such circumstances so that 
any OTC State that submits a National LEV SIP revision does so with a 
full understanding of how its commitment to National LEV would be 
enforceable.
    A National LEV SIP revision would provide that the state commits to 
accept National LEV or mandatory federal standards of at least 
equivalent stringency as a compliance alternative to a state program 
under section 177 for a specified time period. EPA approves SIP 
submissions through a federal notice-and-comment rulemaking process 
under section 110(k) of the Act. Approved SIP submissions are 
incorporated by reference into the CFR and are enforceable federal law. 
If a state adopted new state law or regulations that violated this 
commitment in the SIP (e.g., by requiring compliance only with a state 
Section 177 Program), this new state law would conflict with the 
federally-approved National LEV SIP revision and would not be valid 
prior to EPA approval into the SIP of the new law. Prior to such 
action, the new state law would be precluded by the federal law with 
which it conflicted (i.e., the SIP revision EPA had approved). The 
courts have held that where Congress has the power under the Supremacy 
Clause of the U.S. Constitution to preempt an area of state law (which 
it has with respect to air pollution controls), state law is preempted 
if either Congress evidences

[[Page 937]]

an intent to occupy a given field, or to the extent that the state law 
actually conflicts with federal law. Hence, the later state regulation 
that did not allow National LEV as a compliance alternative would be 
preempted by the federally-approved National LEV SIP provision and 
would be unenforceable against the manufacturers. Manufacturers could 
bring suit against the state to clarify that the new state law was not 
enforceable until approved by EPA, thereby enforcing the initial SIP 
commitment in federal court.
    To revise the SIP, the state would have to submit the new 
provisions and EPA would have to approve them into the SIP through 
notice-and-comment rulemaking. If EPA approved the new provisions, they 
would take effect. If EPA disapproved the new provisions, then the new 
state law would continue to conflict with the federally-approved SIP 
revision (which is federal law) containing the state commitment to 
National LEV, and manufacturers could seek a judicial determination 
that the federally-approved National LEV SIP revision commitment 
preempted the new state law.
    Once a state has an approved SIP provision committing to accept 
National LEV as a compliance alternative for a specified duration, 
under section 110(l) of the CAA, EPA would be obligated to disapprove a 
subsequent SIP revision that violated the state's commitment if EPA 
were to find that the SIP revision would interfere with other states' 
ability to attain or maintain the national ambient air quality 
standards (NAAQS). Specifically, section 110(l) provides that EPA must 
disapprove a plan revision if it ``interfere[s] with any applicable 
requirement concerning attainment and reasonable further progress * * * 
or any other applicable requirement of this Act.'' By the terms of its 
rulemaking, National LEV comes into and stays in effect only if all 
relevant states commit to allow it as a compliance alternative. If 
National LEV comes into effect, a number of OTC States, as well as 
states outside the OTR, are likely to rely on National LEV as a means 
of attaining and maintaining the ozone NAAQS. These states are likely 
to forego adoption of other control measures because they will count on 
reductions from National LEV to meet their attainment and maintenance 
obligations. In this manner, other states will be relying on each of 
the OTC States keeping its commitment to National LEV. An OTC State 
breaking its commitment to allow National LEV as a compliance 
alternative could lead to the dissolution of the National LEV program, 
which in turn would likely deprive other states of the emission 
reductions from National LEV, and could thereby interfere with those 
other states' ability to attain. As discussed above, in the SIP 
revisions committing to National LEV, each OTC State would explicitly 
recognize that the state's commitment to National LEV is necessary to 
ensure that the program remain in effect.
    One commenter opposed EPA's reading of section 110 on several 
grounds, focusing in particular on the potential effects on states 
downwind from the violating state. The commenter objects to anything 
that would discourage a state that committed to National LEV from 
implementing a Section 177 Program if that state finds in the future 
that National LEV will not prevent emissions within that state from 
interfering with attainment in downwind states. The commenter claims 
that the commitment to National LEV would violate the section 
110(a)(2)(D) requirement that emissions in a state cannot interfere 
with attainment or maintenance in downwind states.
    EPA rejects the suggestion that a state's commitment to National 
LEV has the potential to interfere with that state's ability to comply 
with section 110(a)(2)(D). Section 110(a)(2)(D) requires SIPs to 
``contain adequate provisions prohibiting * * * any source or other 
type of emissions activity within the State from emitting any air 
pollutant in amounts which will * * * contribute significantly to 
nonattainment in, or interfere with maintenance by, any other state. * 
* *'' Thus, section 110(a)(2)(D) holds a state responsible for reducing 
a given quantity of emissions that contributes significantly to 
nonattainment in another state. It does not mandate any particular 
measure for reducing those emissions, and the Circuit Court of Appeals 
for the District of Columbia, in Virginia v. EPA, 108 F. 3d 1397 (D.C. 
Cir. 1997), precluded EPA from requiring states to adopt a program 
under section 177. States commonly make choices between emissions 
control measures, and the decision to adopt one measure often precludes 
another, usually due to practical constraints such as incompatible 
technology, limited resources, lead time requirements, etc. The choice 
of National LEV is no different. In selecting National LEV as a means 
of controlling emissions from new motor vehicles, a state will be fully 
aware that the choice requires giving up the ability to adopt a state 
Section 177 Program for a given period of time, except under specified 
circumstances. EPA has determined that National LEV produces equivalent 
or greater emissions reductions than OTC State-by-State adoption of 
Section 177 Programs. Thus, the only way in which adoption of OTC State 
Section 177 programs in lieu of National LEV could help meet OTC 
States' section 110(a)(2)(D) obligations is if California were to adopt 
more stringent CAL LEV requirements, all or almost all OTC States also 
adopted such standards, and the timing of the adoptions was such that 
the standards would become effective earlier than the date on which the 
OTC States' participation in National LEV would have ended had the 
states opted into National LEV instead. For National LEV to come into 
effect in MY1999, OTC States must evaluate the alternatives based on 
the information available at this time and make a choice now as to 
whether to opt into National LEV. As is often the case, if state 
regulators wait until they have perfect information about all possible 
options, one option--National LEV, which now looks to be the most 
attractive option--will no longer be available. Nor is it an option for 
OTC States to opt into National LEV without making an enforceable 
commitment for the specified duration. National LEV is a voluntary 
program for both states and manufacturers, and manufacturers are 
unwilling to supply National LEV vehicles without assurance that their 
future compliance obligations will remain stable for the specified 
duration. Therefore, a commitment by OTC States to accept compliance 
with National LEV for the specified duration is an integral and 
critical element of National LEV. Based on the options and information 
available now to OTC States and only the possibility that California 
will tighten its standards at some point in the future, an OTC State 
that made an enforceable commitment to National LEV for the specified 
duration could not be said to be interfering with attainment of 
downwind states, nor could that commitment be held unenforceable in the 
future. Of course, for most OTC States, National LEV is only one of the 
actions they will need to take to meet their CAA obligations. States 
committed to National LEV would remain responsible for compliance with 
section 110(a)(2)(D) and would be able to use other means to achieve 
the necessary reductions. Thus, the state commitments to National LEV 
in no way violate section 110(a)(2)(D), nor are they consequently 
unenforceable as the commenter suggests.
    The commenter further asserts that EPA is attempting to prohibit 
states from adopting Section 177 Programs

[[Page 938]]

and this is illegal and contrary to section 177, which provides states 
the right to adopt state standards for new motor vehicles that are 
identical to California standards. EPA agrees that section 177 clearly 
provides states the right to adopt the California standards. Under 
National LEV, states make the choice whether to exercise that right and 
implement the California standards, or to commit to accept 
manufacturers' compliance with an alternative set of emissions controls 
on new motor vehicles for a limited period of time. The OTC States and 
the manufacturers developed the basic framework and requirements for 
the National LEV program and the fundamental agreement on which it is 
based. EPA does not have the authority to require the manufacturers to 
produce National LEV vehicles without their agreement or to require the 
OTC States to commit to National LEV. Absent the voluntary actions of 
the manufacturers and OTC States there will be no National LEV Program. 
However, if the manufacturers and OTC States choose to commit to 
National LEV and bring the program into being, it is in no way contrary 
to section 177 or any other provision of the Clean Air Act for EPA to 
enforce the agreement in the manner provided in today's rule.
    The commenter further contends that EPA's reading of section 110(l) 
is incorrect for several reasons. As discussed above, under EPA's 
interpretation, section 110(l) could bar EPA from approving into the 
SIP a state submission that would revoke an earlier SIP provision 
committing a state to accept National LEV as a compliance alternative 
for a specified duration. First, the commenter states that based on the 
same analysis, EPA could use its authority under section 110(k)(5) to 
require even unwilling states to revise their SIPs to accept National 
LEV as a compliance alternative on the theory that failure to do so 
would frustrate National LEV and thus interfere with attainment in 
neighboring states. The commenter states that EPA has no such authority 
under section 110(k)(5), (under Commonwealth of Virginia v. 
Environmental Protection Agency, 108 F.3d 1397 (D.C. Cir. 1997).
    EPA rejects the contention that the section 110(k)(5) analysis is 
comparable to EPA's interpretation of section 110(l). As emphasized 
above, National LEV is a voluntary program. Enforcing an agreement that 
states have voluntarily entered into is a fundamentally different 
action from mandating that states enter into an agreement. More 
specifically, EPA's interpretation of section 110(l) relies on the 
effect that a violation of a state commitment is likely to have on 
other states that have relied upon the National LEV program. A program 
will not be useful for state air pollution control and planning 
purposes unless there is some assurance that it will continue over 
time, and EPA has attempted to structure National LEV so as to provide 
such an assurance of stability. Given this structure, states will 
likely reasonably rely on achieving a certain quantity of emissions 
reductions from National LEV and hence will likely decide not to adopt 
other pollution control measures. Since most measures take time to 
adopt and implement, the sudden and unexpected loss of emissions 
reductions from National LEV would be likely to cause a significant 
delay in some states' emissions control efforts. As a consequence, it 
would affect such states' ability to meet the statutory and regulatory 
deadlines for attainment as well as the obligation to protect the 
health and welfare of their citizens. In contrast, if OTC States did 
not commit to National LEV and the program never came into effect, 
while the opportunity for emissions reductions from National LEV would 
be lost, states would never have expected to receive those reductions, 
would not have foregone opportunities for other types of emissions 
reductions, and would not be disadvantaged in their ability to pursue 
other measures. Under those circumstances, EPA would have no basis for 
finding that failure to include a commitment to National LEV would make 
a SIP substantially inadequate to attain the NAAQS or otherwise comply 
with any requirement of the CAA.
    The commenter also cites section 110(a)(2)(D) to argue that section 
110 holds each state responsible only for emissions within its 
jurisdiction and requires a state to take action only if those 
emissions are interfering with attainment in another state. EPA agrees 
that section 110(a)(2)(D) only applies to emissions activity within the 
state, but EPA is here relying on section 110(l), not section 
110(a)(2)(D). Section 110(l) simply provides that EPA shall not approve 
a revision if it ``would interfere with any applicable requirement 
concerning attainment and reasonable further progress * * * or any 
other applicable requirement of [the] Act.'' (Emphasis added.) Section 
110(l) makes no reference to emissions activities within the state, and 
EPA declines to attempt to read in such a limitation.
    The commenter states further that it would not violate section 110 
for EPA to approve into a SIP state provisions that replace National 
LEV with a section 177 program when the section 177 program would 
result in equivalent or lower emissions within the state. If the 
manufacturers might choose to opt out of National LEV as a consequence 
of an EPA approval of such a revision, the revision would jeopardize 
all of the emissions reductions from the National LEV program and 
states without backstop programs could experience the significantly 
higher emissions that would be produced by Tier 1 vehicles. Thus, it is 
highly unlikely that the proposed SIP revision would not interfere with 
attainment in at least some states that had relied upon National LEV, 
even if emissions in the violating state remained stable or decreased 
and vehicles from the violating state that migrated into other states 
emitted at the same or lower levels. For these reasons, section 110(l) 
could require EPA to disapprove the state's proposed revision.
    Finally, the commenter states that EPA could not find that a 
proposed SIP revision breaking the state's commitment to National LEV 
would interfere with attainment under section 110(l) because 
manufacturers would be allowed to sell Tier 1 vehicles in the violating 
state even if they do not opt out of National LEV. In that situation, 
approval of the section 177 program would reduce emissions in that 
state in comparison to the Tier 1 requirements that would otherwise 
apply. EPA disagrees with the commenter's analysis of how this 
situation would relate to the requirements of section 110(l). Given the 
likelihood that manufacturers would opt out of National LEV if EPA were 
to approve the SIP revision, approval of the SIP revision would be 
likely to result in overall higher emissions from Tier 1 requirements 
in many states, not just one, and a number of these states are likely 
to be relying on the reductions from National LEV. Moreover, the 
violating state has the ability to avoid some or all of the negative 
emissions effects of its action, either by not taking the action in the 
first place, or by curing its violation, as discussed above in section 
VI.A.1.19 In contrast, other states cannot prevent a state 
from violating, but rather must rely on EPA's disapproval to retain the 
emissions reductions that they are relying on for

[[Page 939]]

attainment. Under these circumstances, the fact that the violating 
state had taken action that caused Tier 1 requirements to apply in that 
state would not prevent EPA from disapproving that state's SIP revision 
on the grounds that the revision would interfere with attainment in 
other states.
---------------------------------------------------------------------------

    \19\ If a state violated its commitment, it would have the 
ability to limit the period of time for which it would receive Tier 
1 vehicles to approximately two full model years by curing the 
violation. Even if EPA were to approve the SIP revision, the state 
would receive Tier 1 vehicles for two years pursuant to the 
requirement for lead time under section 177. Thus, an EPA 
disapproval of a violating state's proposed SIP revision would not 
necessarily result in higher emissions in the violating state 
compared to the result if EPA had approved the proposed SIP 
revision.
---------------------------------------------------------------------------

VI. Incentives for Parties to Keep Commitments to Program

    Once it comes into effect, National LEV is designed to be a stable 
program that will remain in effect until replaced by mandatory federal 
tailpipe standards of at least equivalent stringency, provided such 
standards are necessary and cost-effective. Manufacturers have the 
option, but not the requirement, to participate in National LEV. 
Manufacturers have indicated a willingness to opt into the program, but 
only if the EPA and the OTC States make certain commitments. To give 
the manufacturers both assurance that the commitments will be kept and 
recourse if they are not, the program includes a few specified 
conditions (``offramps'') that would allow manufacturers to opt out of 
National LEV if EPA or the OTC States did not keep their commitments. 
In addition, the OTC States also need assurance that National LEV will 
continue to provide the benefits they anticipated when they opted into 
the program, both in terms of the number of manufacturers covered by 
the program and the level of emissions reductions that the program was 
designed to achieve. Thus, National LEV also includes limited offramps 
for the OTC States to protect against changes in anticipated emission 
benefits or the number of covered manufacturers. Both the 
manufacturers' and the OTC States' offramps, set forth in 40 CFR 
86.1707, are structured to maximize all parties' incentives to maintain 
the agreed-upon program provisions and thereby to maximize the 
stability of National LEV over its intended duration.
    In the unlikely event that any of the offramps were triggered and 
manufacturers or OTC States opted out, today's regulations set forth 
which requirements would apply, the timing of such requirements, the 
states in which they would apply, and the manufacturers that would have 
to comply with them. The main purpose of these provisions is to enhance 
the stability of the program by minimizing the incentives for EPA or 
the OTC States to act in a manner that would trigger an offramp. 
Additionally, EPA has structured the offramp provisions such that no 
single event automatically would end the National LEV program. EPA will 
continue to make National LEV available as long as one or more 
manufacturers and one or more OTC States wish to remain in the program. 
EPA recognizes, of course, that if a significant number of OTC States 
or manufacturers were to opt out of National LEV, after a certain point 
it is unlikely that the remaining parties would choose to continue the 
program. However, the issue is highly unlikely to arise, and if it did, 
it is not clear what would be the critical mass of opt-outs sufficient 
to end the program. Rather than deciding now how many OTC State and 
auto manufacturer opt-outs would be significant enough to end National 
LEV, EPA believes it is both more appropriate and more efficient to 
leave that decision to the OTC States and manufacturers to decide, in 
the unlikely event that an offramp is triggered and significant opt-
outs occur. EPA has received no comments on the SNPRM opposing this 
general approach.
    In the NPRM, EPA proposed that the manufacturers' right to opt out 
of the National LEV program would be limited to two conditions. These 
offramps were: (1) EPA modification of a Stable Standard, except as 
specifically provided, and (2) an OTC State's failure to meet or keep 
its commitment regarding adoption or retention of a state motor vehicle 
program under section 177. The Final Framework Rule addressed the first 
offramp (recodified in today's rule at 40 CFR 86.1707(d)), which would 
allow manufacturers to opt out of National LEV if EPA were to modify a 
Stable Standard except as provided for under the National LEV 
regulations. The second offramp is addressed in today's Final Rule. EPA 
also is adding a third type of offramp related to auto manufacturers' 
concerns regarding the effects of using federal fuel (instead of 
California fuel) on emissions control systems. This is discussed in 
section VI.C below. In addition, as proposed in the SNPRM, today's 
Final Rule includes a fourth type of offramp that allows manufacturers 
to opt out based on an OTC State or another manufacturer legitimately 
opting out of National LEV. Today's rule also finalizes two offramps 
for OTC States. An OTC State may opt out if a manufacturer opts out or 
if EPA makes a finding that National LEV will not produce (or is not 
producing) emissions reductions in the OTR equivalent to state Section 
177 Programs in the OTR. Finally, this section discusses EPA's 
interpretation of Section 177 if an offramp is taken.

A. Offramp for Manufacturers for OTC State Violation of Commitment

    As established in today's Final Rule, there are several ways in 
which an OTC State might break its commitment and thereby allow 
manufacturers to opt out of National LEV. These are: (1) taking final 
action in violation of the commitment to continue to allow National LEV 
as a compliance alternative to a Section 177 Program or to a ZEV 
mandate (in those OTC States without existing ZEV mandates); (2) 
failing to submit a National LEV SIP revision within the timeframe set 
forth in the National LEV regulations; (3) submitting an inadequate 
National LEV SIP revision; and (4) taking final action (by an OTC State 
without an existing ZEV mandate) adopting a ZEV mandate effective 
during the state's commitment to National LEV. 20 The 
discussion below addresses each of these possible types of OTC State 
violations individually. EPA does not believe that any of these 
scenarios are likely to arise under the National LEV program. 
Nevertheless, spelling out in the regulations the consequences under 
each of these scenarios will provide the parties certainty regarding 
the worst-case outcomes, and more importantly, allows EPA to structure 
the consequences so as to minimize the likelihood that any of these 
scenarios will occur.
---------------------------------------------------------------------------

    \20\ In addition, as discussed in the following section, 
manufacturers may opt out if an OTC State takes a legitimate 
offramp.
---------------------------------------------------------------------------

1. OTC State No Longer Accepts National LEV as a Compliance Alternative
    The most significant way in which an OTC State could violate its 
commitment to National LEV would be to attempt to have a Section 177 
Program that was in effect during the state's commitment to National 
LEV 21 and that did not allow National LEV or mandatory 
federal standards of at least equivalent stringency as a compliance 
alternative. 22 (An OTC State would not be in violation of 
its commitment under National LEV if it had (or adopted) a Section 177 
Program that was effective after the end of its commitment to National 
LEV that did not allow National LEV as a compliance alternative.) This 
could happen if an

[[Page 940]]

OTC State accepted National LEV as a compliance alternative to a state 
Section 177 Program or a ZEV mandate (in an OTC State without an 
existing ZEV mandate) and then took final action purportedly removing 
the alternative compliance provisions from its regulations, leaving 
only the state Section 177 Program or ZEV mandate requirements in 
place. It would also happen if an OTC State took final action 
purportedly adopting a Section 177 Program or a ZEV mandate (in an OTC 
State without an existing ZEV mandate) without providing for National 
LEV as a compliance alternative. 23 This violation of the 
OTC State's commitment to National LEV attempts to impose a compliance 
burden directly on the manufacturers and would abandon the most 
fundamental element of the agreement underlying the voluntary National 
LEV program.
---------------------------------------------------------------------------

    \21\ An OTC State's commitment to National LEV lasts until 
MY2006, unless EPA fails to issue Tier 2 standards at least as 
stringent as National LEV on or before December 15, 2000, in which 
case the commitment lasts until MY2004.
    \22\ Throughout this preamble, EPA often uses ``National LEV as 
a compliance alternative'' as shorthand for ``National LEV or 
mandatory federal standards of at least equivalent stringency as a 
compliance alternative.''
    \23\ In addition, an OTC State with a Section 177 Program in its 
regulations at the time of opt-in that does not already permit 
manufacturers to comply with National LEV as a compliance 
alternative might fail to modify those existing regulations within 
the time-frame provided, which is the same as the deadline for 
submission of the state's SIP revision. The consequences of this 
type of violation would differ slightly from the consequences of 
other types of violations that attempted to have a Section 177 
Program without allowing National LEV as a compliance alternative, 
as noted below in n.24.
---------------------------------------------------------------------------

    The consequences of such a violation, as discussed below and set 
forth in 40 CFR 86.1707(e), take into account the seriousness of the 
breach of the commitment, even though the violation would not 
necessarily directly burden the manufacturers. Once a state adequately 
commits to National LEV through an approved SIP revision, even if the 
state were to change its regulations to disallow compliance with 
National LEV, the requirement would not be enforceable until EPA 
approved a further SIP revision incorporating the change, as discussed 
above in section V.C.4. Yet, although the violation might not actually 
impose any burden on the manufacturers because it is not enforceable, 
manufacturers should not be bound to comply with more stringent 
National LEV requirements in the violating state and should not be 
bound to continue in the National LEV program, as even an unenforceable 
Section 177 Program would create risks and uncertainties for 
manufacturers. Manufacturers would be at risk of having to defend 
against a state enforcement action. The question of whether EPA could 
approve a proposed state SIP revision deleting National LEV as a 
compliance alternative--if only by virtue of the lack of precedence for 
this issue and its dependence on the specific facts--would create 
further uncertainty for manufacturers.
    Manufacturers would be able to opt out at any time after an OTC 
State took final action that would (or attempted to) require 
manufacturers to comply with a Section 177 Program or a ZEV mandate (in 
an OTC State without an existing ZEV mandate) prior to the end of the 
state's commitment to National LEV without allowing them to comply with 
National LEV or mandatory federal standards of at least equivalent 
stringency as an alternative, even if the effective date of the state 
requirement were some time in the future. The final state action would 
be the action promulgating the state law or regulations at issue, not 
the act of defending such law or regulations in litigation. Thus, a 
self-effectuating state law purporting to impose a Section 177 Program 
without including National LEV as a compliance alternative would be 
final state action, as would final state regulations purporting to 
impose such a program. A state law directing the relevant state agency 
to change its regulations to remove National LEV as a compliance 
alternative would not be a final state action, but the regulations 
promulgated in accordance with that directive would be final state 
action.
    The manufacturers commented that the definition of ``final state 
action'' should include the date on which a state passes legislation 
that requires a state environmental agency to eliminate National LEV as 
a compliance alternative, even if that state legislation is not self-
effectuating. EPA is concerned that it may not necessarily be clear in 
a particular instance how a law directing a state agency to change its 
regulations relating to National LEV would actually be implemented by 
the state agency. Depending on the substantive results of the state 
rulemaking process implementing the directives of the law and the 
timing of such regulations, the state may or may not actually violate 
its commitment to the program. Rather than attempting to hypothesize 
the effect of final state regulations once promulgated, EPA believes it 
is appropriate to define a final state action as the action that 
finalizes the state law or regulations that would be directly 
applicable to the motor vehicle manufacturers upon the effective date 
of such law or regulations.
    Today's rule provides that, if an OTC State were to violate its 
commitment by purportedly disallowing National LEV as a compliance 
alternative, there would be both automatic consequences in the 
violating state and an opportunity for manufacturers to opt out of 
National LEV.24 Two significant elements determine the 
consequences in the violating state. The first element is the 
manufacturers' National LEV compliance obligations in the violating 
state. The second element is when the state Section 177 Program or ZEV 
mandate requirements apply to manufacturers. Outside of the violating 
state, manufacturers would continue to be subject to the National LEV 
requirements unless they opted out of the National LEV program.
---------------------------------------------------------------------------

    \24\ In an OTC State that had a Section 177 Program in its 
regulations at the time of opt-in and that had never accepted 
National LEV as a compliance alternative to the Section 177 Program 
requirements, the consequences in the violating state discussed in 
this section would not apply, given EPA's interpretation of section 
177. See section VI.E. However, the provisions for a manufacturer's 
offramp would be the same for a state that failed to modify existing 
regulations to accept National LEV as a compliance alternative as 
for any other state action not allowing National LEV as a compliance 
alternative.
---------------------------------------------------------------------------

    Until the violating state's Section 177 Program or ZEV mandate 
requirements apply, the manufacturers' compliance obligations in that 
state would be governed by the terms of the National LEV regulations. 
In a state that had violated its commitment by attempting to have a 
Section 177 Program or ZEV mandate without allowing National LEV as a 
compliance alternative, beginning with the next model 
year,25 the National LEV regulations would allow 
manufacturers to sell vehicles complying with Tier 1 tailpipe standards 
in that state and those vehicles would not be counted in determining 
whether the NLEV fleet average NMOG standard was met. Because model 
years generally run somewhat ahead of the calendar years with the same 
numbers, generally this will result in a near-term or immediate change 
in the manufacturers' compliance obligations.
---------------------------------------------------------------------------

    \25\ The ``next model year'' would be the model year named for 
the calendar year following the calendar year in which the OTC State 
took final state action violating its commitment. For example, if an 
OTC State violated its commitment by taking final state action in 
calendar year 1999, the next model year would be MY2000.
---------------------------------------------------------------------------

    EPA had proposed that, until the violating state's Section 177 
Program requirements applied (which might not be until MY2006), the 
manufacturers would only have to meet the federal Tier 1 tailpipe 
standards for vehicles sold in the violating state, and those vehicles 
would not be used to calculate the manufacturers' fleet NMOG averages. 
Several commenters objected to this provision on the basis that the 
violating state or a downwind state might need emissions reductions 
from controls on new motor vehicles in the

[[Page 941]]

violating state during the timeframe in which National LEV regulations 
required that federal Tier 1 standards be met in the violating state. 
In response, EPA is modifying this provision slightly to allow a 
violating state to ``cure'' a violation and regain the benefits of 
National LEV (with respect to manufacturers that had not opted out of 
National LEV) by reversing the action that caused the violation. EPA 
believes it is highly unlikely that a state would violate its 
commitment in the first place, let alone that it would do so and then 
reverse its action shortly thereafter. Nevertheless such a scenario can 
be envisioned, for example, in the situation where a state was counting 
on an alternative means of obtaining needed emissions reductions and 
then found that the alternative was for some reason not viable. EPA 
believes that it is appropriate to structure the National LEV 
regulations so as to maximize states' incentives to uphold their 
commitments to National LEV without, under certain circumstances, 
foreclosing a state from obtaining the benefits of National LEV for the 
remainder of the National LEV program.
    Under today's final rule, rather than allowing manufacturers to 
sell only Tier 1 vehicles in a violating state for as long as the 
manufacturers are governed by National LEV in that state, if the 
violating state reverses its action (by taking final action 
withdrawing, nullifying or otherwise reversing the final action that 
violated its commitment), after a transition period, vehicles sold in 
that state by manufacturers that had not opted out of National LEV 
would once again be subject to the National LEV fleet average NMOG 
requirements. Vehicles would be subject to the fleet average NMOG 
standard as of the model year named for the second calendar year after 
the violating state took the final action reversing the action that 
broke its commitment or as of the model year named for the fourth 
calendar year following the calendar year in which the violating state 
took the final action, whichever is later. For example, if the 
violating action occurred in 1999 and the violating state reversed that 
action in 2000, vehicles sold in that state would count towards the 
NLEV NMOG fleet average starting with MY2003 (the model year named for 
the fourth calendar year following the calendar year in which the 
violating action occurred). If the violating action action occurred in 
1999 and was reversed in 2002, vehicles in that state would count 
towards the NLEV NMOG fleet average starting with MY2004 (the model 
year named for the second calendar year in which the violating action 
was reversed). EPA believes that it is important to provide OTC States 
that commit to National LEV with an incentive to keep their commitments 
and that this approach provides such an incentive.26
---------------------------------------------------------------------------

    \26\ The commenters mistakenly assumed that, in the absence of 
this provision, a state that broke its commitment would immediately 
get the benefits of a state Section 177 Program. Rather, under 
section 177, a violating state would only be entitled to Tier 1 
vehicles for at least two years after it broke its commitment. Thus, 
for at least two years, the National LEV provision that 
manufacturers that stay in the program are obligated to provide only 
Tier 1 vehicles in the violating state is consistent with what would 
happen under section 177 if the violating state's action ended the 
program. (For ease of administration, if a violating state is in and 
then out and then back in the National LEV program, EPA has extended 
the period that would otherwise be provided by section 177 to ensure 
that when a states' vehicles again count towards calculation of the 
NMOG average, all of a manufacturer's vehicles in the first covered 
model year count towards the NMOG average.) Even were lead time not 
required by section 177, EPA believes it is appropriate to give 
manufacturers time to comply with new motor vehicle requirements 
pursuant to a change in a state's requirements.
---------------------------------------------------------------------------

    The earliest date on which the violating state's Section 177 
Program or ZEV mandate would apply is governed by the two model-year 
lead time requirement of section 177, EPA's regulations on model year 
at 40 CFR part 85 subpart X and the National LEV regulations. This date 
would apply only for any auto manufacturer that opted out of National 
LEV as a result of the violating state's action (provided that it is 
later than the effective date of the opt-out), for any auto 
manufacturer that decided to comply with the violating state's 
requirements even though it otherwise chose to stay in National LEV, 
and for all manufacturers if EPA approved the violating state's program 
into the SIP.27 (As discussed above, EPA believes the 
violating state's refusal to allow National LEV as a compliance 
alternative would not otherwise be effective until MY2006 (or MY2004, 
if EPA failed to issue Tier 2 standards at least as stringent as 
National LEV on or before December 15, 2000).) Thus, if none of these 
situations occurred, the only requirements applicable to manufacturers 
in the violating state would be the National LEV regulations, which 
would allow manufacturers to sell in the violating state vehicles that 
meet Tier 1 tailpipe standards and to exclude those vehicles from the 
fleet average NMOG calculation for the time period discussed above.
---------------------------------------------------------------------------

    \27\ Some commenters have expressed the view that, if an OTC 
State were to delete National LEV as a compliance alternative, the 
State's new (or revised) Section 177 Program would not be preempted 
by the federally approved National LEV SIP revision nor would EPA 
have the legal authority to disapprove the revised state program if 
it were submitted to EPA for approval into the SIP. As discussed in 
this preamble and the Response to Comments for today's rule, EPA 
disagrees with these commenters. However, if these commenters were 
correct regarding the legal status of the revised state program 
disallowing National LEV as a compliance alternative, the earliest 
date on which the violating state's Section 177 Program or ZEV 
mandate would apply is governed by the lead time requirements in 
section 177 and EPA's regulations on model year at 40 CFR Part 85 
subpart X and in the National LEV regulations.
---------------------------------------------------------------------------

    After National LEV is in effect, a change to a state regulation 
that deletes National LEV as a compliance alternative attempts to 
change the manufacturers' obligations. In that circumstance, as 
discussed in section VI.E below, EPA interprets section 177 to require 
two years of lead time from the date that the state takes final action 
changing its regulations (or other law) deleting National LEV as a 
compliance alternative, regardless of when the state adopted its 
previous Section 177 Program. Thus, pursuant to the model year 
regulations at 40 CFR part 85 subpart X and today's regulations at 40 
CFR 86.1707, the earliest the state Section 177 Program or ZEV mandate 
requirements could apply would be to engine families for which 
production begins after the date two calendar years from the date of 
the final state action. For example, if the violating state promulgated 
regulations purportedly removing National LEV as a compliance 
alternative on June 1, 2000, the earliest the state Section 177 Program 
or ZEV mandate requirements could apply would be to engine families 
that began production on or after June 1, 2002, which might apply to 
some, but certainly not all, MY2003 vehicles.
    In the SNPRM, EPA raised the issue of whether manufacturers should 
have at least four, rather than two, years of lead time from the date 
that the state takes final action changing its regulations to delete 
National LEV as a compliance alternative. The manufacturers' comments 
advocated that there should be four years of lead time from the date of 
the state violation of its commitment, but they did not suggest any way 
(other than enforcing the commitment in a SIP) to make such a 
requirement for lead time legally enforceable against a state that was 
already in violation of its commitment to accept National LEV as a 
compliance alternative to a state Section 177 Program. Numerous other 
commenters opposed the idea of providing four years of lead time on the 
basis that it is contrary to the statutory language governing lead time 
for state programs adopted under section 177. The MOUs initialled by 
the OTC and manufacturers' organizations did not

[[Page 942]]

allude to a four-year lead time under any circumstances, indicating 
that the parties had not raised this in their negotiations, let alone 
agreed upon it, as an appropriate element of the National LEV program. 
Finally, the National LEV regulations provide several other significant 
disincentives to an OTC State breaking its commitment, as discussed in 
this section, and a four-year lead time would likely add little to 
these existing disincentives. Thus, EPA does not believe it would be 
reasonable to try to require a four-year lead time under section 177 
for a state violation of its commitment to National LEV.
    The combined effect of the National LEV regulations allowing 
manufacturers to comply with Tier 1 tailpipe standards in the violating 
state and the requirement for two-years lead time before the state 
Section 177 Program or ZEV mandate requirements could apply means that, 
if an OTC State were to violate its commitment by not allowing National 
LEV as a compliance alternative, manufacturers would be subject to only 
Tier 1 tailpipe standards (and not the NLEV NMOG average) in that state 
for at least two years. As a consequence, the violating state could not 
claim SIP credits for control of emissions from new motor vehicles 
meeting anything more stringent than Tier 1 tailpipe standards during 
that period. EPA believes that this would provide a powerful incentive 
for the OTC States to uphold their commitments to accept National LEV 
as a compliance alternative for the specified duration.
    EPA recognizes that it may take manufacturers some time to take 
advantage of the less stringent Tier 1 tailpipe standards, and that, 
consequently, the hardware of the vehicles supplied to the violating 
state may not change dramatically in the short-term. However, 
manufacturers would be able to revise vehicle compliance levels rapidly 
to provide that, for warranty and recall purposes, the vehicles are 
only complying with Tier 1 tailpipe standards. This means that, over 
the life of those vehicles, they would only be required to produce 
emissions below the 50,000 mile and 100,000 mile Tier 1 standards and 
enforcement action could not be taken to require those vehicles to meet 
any more stringent standards.28 As long as manufacturers are 
not required to sell vehicles meeting standards more stringent than 
Tier 1 in the violating state, it would not be appropriate for EPA to 
approve SIP credits for any emissions reductions beyond the levels 
provided by Tier 1 tailpipe standards. Those vehicles would not be 
included in calculating the manufacturers' compliance with the National 
LEV fleet average NMOG standards. Thus, the state would not receive 
emission credits beyond Tier 1 levels if the vehicles sold in that 
state were certified to Tier 1 levels when sold in that state because 
the SIP would not provide in any way for such vehicles to meet emission 
standards more stringent than Tier 1 levels.
---------------------------------------------------------------------------

    \28\ See section VIII.C for discussion of how EPA's vehicle 
certification process would allow a manufacturer to provide vehicles 
meeting Tier 1 standards in a violating state.
---------------------------------------------------------------------------

    In addition to the relaxed emissions standards that would apply to 
vehicles sold in the violating state, the other incentive for OTC 
States not to violate their commitments is that manufacturers would 
also be able to opt out of National LEV if an OTC State violated its 
commitment to the program by not allowing National LEV as a compliance 
alternative. As proposed, the FRM does not set a time limit for 
manufacturers to exercise their right to opt out as long as the state 
is in violation of its commitment. After a manufacturer opted out, 
there also would be no opportunity for the state to cure the violation 
by changing the state law or regulations to accept National LEV as a 
compliance alternative and thereby negate an opt-out that a 
manufacturer had already submitted, regardless of whether that opt-out 
had become effective already. However, once a violating state took 
final action to cure the violation, manufacturers that had not already 
opted out could not opt out based on the violation that the state had 
cured.
    The Final Framework Rule gives EPA an opportunity to make a finding 
as to the validity of an opt-out based on a change to a Stable 
Standard. See 62 FR 31202-07. This both provides a safe harbor for a 
manufacturer that relies on an EPA determination of validity, and 
provides for rapid resolution in the United States Court of Appeals for 
the District of Columbia if the validity is disputed, thereby avoiding 
protracted litigation in federal district court. In contrast, EPA does 
not believe such a process is necessary here. The validity of an opt-
out based on a state disallowing National LEV as a compliance 
alternative should be a straight-forward factual determination. 
Consequently, EPA believes there is very little benefit to be gained by 
providing for an EPA determination of the validity of such an opt-out, 
and today's final rule does not provide for such a determination.
    As proposed, a manufacturer that opts out of National LEV based on 
a state violation of its commitment to National LEV must continue to 
comply with National LEV until the opt-out becomes effective (although 
Tier 1 tailpipe standards will apply in the violating state, as 
discussed above). A manufacturer's opt-out notification must specify 
the effective date of the opt-out, which in no event could be any 
earlier than the next model year (i.e., the model year named for the 
calendar year following the calendar year in which the manufacturer 
opted out).29 After the effective date of its opt-out, a 
manufacturer would have to comply with any non-violating state's 
Section 177 Program (except for ZEV mandates) provided that at least 
two-years lead time (as provided in section 177) had passed since the 
adoption of the state's Section 177 Program. Other than those ZEV 
mandates that would be unaffected by the National LEV program (i.e., 
existing ZEV mandates), if a manufacturer opts out, it would not be 
subject to any other ZEV mandates until two years of lead time had 
passed, which would run from the date the manufacturer opts out of 
National LEV and be measured according to the section 177 implementing 
regulations. After the effective date of a manufacturer's opt-out, in a 
non-violating state without a Section 177 Program, the manufacturer 
must meet all applicable federal standards that would apply in the 
absence of National LEV.
---------------------------------------------------------------------------

    \29\ If, however, an OTC State took a legitimate offramp as 
discussed below, a manufacturer could not use a delayed effective 
date of opt out to continue to comply with National LEV in a state 
that had opted out after that state's opt-out became effective. As 
discussed below in section VI.D, an OTC State legitimately opting 
out of National LEV is required to provide manufacturers at least 
two-years lead time.
---------------------------------------------------------------------------

    The following summarizes the tailpipe standards that would apply if 
an OTC State violated its commitment by not allowing National LEV as a 
compliance alternative. For vehicles sold in the violating state, all 
manufacturers would be allowed to sell vehicles meeting Tier 1 
standards and to exclude those vehicles from the NMOG fleet average 
beginning in the next model year after the date of the state violation 
for at least the two-year lead time set forth in section 177 and the 
implementing regulations; then manufacturers would become subject to 
the state Section 177 Program only if the manufacturer opted out of 
National LEV and its opt-out had become effective, if the manufacturer 
decided to comply with the violating state's new Section

[[Page 943]]

177 Program while remaining in National LEV, or if EPA approved the 
state's requirements into the SIP. If a manufacturer opted out, before 
the opt-out became effective, the manufacturer would continue to be 
subject to all National LEV requirements for vehicles sold outside of 
the violating state. Once a manufacturer's opt-out had become 
effective, for vehicles sold outside of the violating state, the 
manufacturer would have to comply with any backstop state Section 177 
Programs (except ZEV mandates) that a state had adopted at least two 
years before the effective date of opt-out and, in other states, would 
have to comply with all applicable federal standards that would apply 
in the absence of National LEV. Manufacturers would not have to comply 
with any ZEV mandates (except those that were unaffected by National 
LEV) until the model year that would start two years after the date EPA 
received the manufacturer's opt out. Manufacturers that did not opt out 
would continue to be subject to all National LEV requirements for 
vehicles sold outside of the violating state and, in the violating 
state, would be allowed, under the National LEV regulations, to sell 
vehicles meeting Tier 1 tailpipe standards for two years following the 
state violation and to exclude those vehicles from the NMOG fleet 
average. However, if the violating state reversed the action that broke 
its commitment, vehicles sold in the violating state would count 
towards the NLEV NMOG fleet average as of the model year named for the 
second calendar year after the violating state took the final action 
reversing the action that broke its commitment or as of the model year 
named for the fourth calendar year following the calendar year in which 
the violating state took the final action breaking its commitment, 
whichever is later.30 To the extent these provisions would 
give a manufacturer less than the two-years lead time set forth in 
section 177, the manufacturer would waive that protection by opting 
into National LEV and then setting an effective date in its opt-out 
notification that was earlier than the two-years lead time would 
provide. To the extent these provisions would give a manufacturer more 
than the two-years lead time set forth in section 177, by opting into 
National LEV the OTC States agree to provide the additional time.
---------------------------------------------------------------------------

    \30\ For example, if the violating action occurred in 1999 and 
the violating state reversed that action in 2000, vehicles sold in 
that state would count towards the NLEV NMOG fleet average starting 
with MY2003 (the model year named for the fourth calendar year 
following the calendar year in which the violating action occurred). 
If the violating action occurred in 1999 and was reversed in 2002, 
vehicles in that state would count towards the NLEV NMOG fleet 
average starting with MY2004 (the model year named for the second 
calendar year after which the violating action was reversed).
---------------------------------------------------------------------------

2. OTC State Fails to Submit SIP Revision Committing to National LEV
    The second way in which an OTC State could violate its commitment 
to National LEV would be to fail to submit a SIP revision to EPA 
containing the state's regulatory commitment to the program. The 
consequences of this violation differ slightly from a situation where a 
state does submit such a SIP revision, receives EPA approval for it, 
but then violates the commitment by attempting to remove National LEV 
as a compliance alternative. Failure to submit a SIP revision would not 
necessarily indicate that the state was attempting to impose a 
compliance obligation on the manufacturers contrary to the terms of the 
fundamental agreement underlying the voluntary National LEV program. 
Consequently, if manufacturers did not choose to opt out of National 
LEV, they would continue to be subject to all the National LEV 
requirements for vehicles sold both within and outside of the violating 
state, and the National LEV program would continue. However, the 
portion of the OTC State commitments to be contained in the SIP 
revisions is critical to the long-term enforceability of the state 
commitments, so EPA believes it is important to allow the manufacturers 
to opt out of National LEV if a state fails to submit a SIP revision. 
This will provide incentive for OTC States to submit their National LEV 
SIP revisions and provide manufacturers recourse in the event of a 
state failure to do so. This offramp is addressed in 40 CFR 86.1707(f).
    As under the previous scenario, there would be no time limit for 
manufacturers to exercise their right to opt out of National LEV if an 
OTC State had missed the deadline for its National LEV SIP revision and 
had not yet submitted such a SIP revision. Once the state submitted its 
SIP revision, even if after the deadline, manufacturers would no longer 
have the opportunity to decide to opt out of National LEV. Unlike the 
previous scenario, a state that had missed the deadline for its SIP 
submission would have a limited opportunity to cure the violation. For 
the first six months from the deadline for the SIP submission, 
manufacturers would only be able to opt out conditioned on the state 
not submitting a SIP revision within six months of the initial 
deadline. If the state submitted the revision within that six-month 
grace period, any opt-outs based on that violation would be invalidated 
and would not come into effect.
    The manufacturers commented that the National LEV regulations 
should not provide a six-month grace period for states to submit their 
SIP revisions beyond the one-year (or for a few states, eighteen-month) 
period provided for the SIP submissions because the deadline provides 
states adequate time to submit their SIP revisions. EPA believes this 
limited opportunity to cure is appropriate here. While the timeframes 
provided for the OTC States to submit their SIP revisions are feasible, 
they are very tight and do not give much leeway for delays that may 
occur in the state regulatory processes. Moreover, the MOUs initialed 
by the OTC and the manufacturers' associations provided that OTC States 
would have two years to submit their SIP revisions committing to 
National LEV. Even if they needed to take advantage of the grace 
period, the deadline for most of the OTC States to submit their SIP 
revisions to EPA would still be sooner than provided under the 
initialed MOUs and no state would have a deadline any later than the 
MOUs provided. In light of this, together with the fact that failure to 
submit this SIP revision would not pose the risk of any immediate 
change in the manufacturers' compliance obligations, it is reasonable 
to provide a limited grace period for OTC States to submit their SIP 
revisions without jeopardizing the benefits of the National LEV 
program.
    After the six-month grace period, the state's submission of a SIP 
revision would not negate a manufacturer's opt-out that EPA had already 
received, even if the manufacturer's opt-out had not yet become 
effective. However, no manufacturer would be able to opt out after the 
state submitted the SIP revision, no matter how late the state was. As 
under the previous scenario, whether or not an OTC State has failed to 
submit a SIP revision by a given date and thereby provided a basis for 
an opt-out is a very clear cut issue. Consequently, EPA is not 
providing for an EPA determination of the validity of an opt-out based 
on this violation.
    If a manufacturer opts out it may set the effective date of its 
opt-out no earlier than MY2000 (or MY2001 if the violating state is the 
District of Columbia, New Hampshire, Delaware or Virginia) or the next 
model year after EPA's receipt of the opt-out, whichever is 
later.31 If a manufacturer opts out of

[[Page 944]]

National LEV, in the violating state, the National LEV regulations 
would allow the manufacturer to meet Tier 1 tailpipe standards and 
would not require those vehicles to be included in the fleet average 
NMOG calculations. These special provisions for vehicles sold in the 
violating state generally would start with the next model year after 
EPA receives the manufacturer's opt-out notification (e.g., MY2000 for 
a manufacturer that opts out in calendar year 1999) and continue until 
the effective date set in the opt-out notice.32 As under the 
scenario above, the violating state would not receive SIP credits for 
emissions reductions from vehicles meeting anything more stringent than 
the Tier 1 tailpipe standards while those standards apply. Once the 
manufacturer's opt-out had become effective, the manufacturer would be 
subject to a Section 177 Program in the violating state if the two-year 
lead time requirement of section 177 had been met.
---------------------------------------------------------------------------

    \31\ If, however, an OTC State took a legitimate offramp as 
discussed below, a manufacturer could not use a delayed effective 
date of opt out to continue to comply with National LEV in a state 
that had opted out after the state opt-out became effective. As 
discussed below in section VI.D an OTC State legitimately opting out 
of National LEV is required to provide manufacturers at least two-
years lead time.
    \32\ However, these special provisions would start no earlier 
than MY2001 if the District of Columbia, New Hampshire, Delaware or 
Virginia were the violating state and no earlier than MY2000 if 
another OTC State were the violating state.
---------------------------------------------------------------------------

    If a manufacturer opted out of National LEV, in non-violating 
states it would continue to meet all National LEV requirements until 
the effective date of its opt out. For vehicles sold in the 
nonviolating states, once the opt-out became effective the manufacturer 
would be subject to any backstop Section 177 Programs for which the 
two-year lead time requirement of section 177 had been met (running 
from the date the state adopted the backstop program), or would be 
subject to Tier 1 requirements in states without such programs. 
Manufacturers would not have to comply with any ZEV mandates (except 
those that were unaffected by National LEV) until the model year that 
would start two years after the date EPA received the manufacturer's 
opt-out notification. To the extent that these regulations would 
provide a manufacturer with less than the two-year lead time set forth 
in section 177, the manufacturer waives that protection by opting into 
National LEV and then setting an effective date in its opt-out 
notification. To the extent that these provisions would provide 
manufacturers more than the two-years lead time set forth in Section 
177, by opting into National LEV the OTC States agree to provide the 
additional time.
3. OTC State Submits Inadequate SIP Revision Committing to National LEV
    A third way in which an OTC State could violate its commitment to 
National LEV would be to submit a SIP revision that did not meet the 
requirements for a National LEV SIP revision, and thus did not 
adequately commit the state to the National LEV program. Today's rule, 
40 CFR 86.1707(g), maintains the principle EPA had proposed, 
specifically that a violation of this commitment would allow 
manufacturers to opt out. However, today's rule takes a somewhat 
different approach towards when a manufacturer could opt out based on 
an inadequate SIP revision.
    EPA proposed that manufacturers would be able to opt out if EPA 
disapproved a National LEV SIP revision, and either the state failed to 
submit a corrected SIP revision within one year of EPA's disapproval, 
or the state submitted a modified SIP revision and EPA subsequently 
disapproved the revision. Under the proposal, the date of the violation 
that would allow a manufacturer to opt out of National LEV would be 
either the state's failure to submit a National LEV SIP revision 
committing to National LEV within one year of EPA's disapproval of its 
initial SIP revision, or publication of EPA's second disapproval. EPA 
also considered and took comment on several alternative approaches.
    The auto manufacturers' comments supported their right to opt out 
if an OTC State were to submit an inadequate National LEV SIP 
submission, but opposed the proposed process and timing for using such 
an offramp. The manufacturers believe that the proposal did not provide 
them a real opportunity to opt out in a timely fashion if a SIP 
submission did not adequately commit an OTC State to National LEV. The 
manufacturers calculated that EPA's proposal might not allow them to 
opt out until MY2004 if a state submitted an inadequate SIP. Given the 
expected duration of National LEV, the autos felt this effectively 
prevented them from opting out if a state were to fail to submit an 
adequate SIP revision.
    The SIP revisions are a critical component of the OTC States' 
commitments to National LEV. The auto manufacturers should have a right 
to opt out of the program if an OTC State that has opted into National 
LEV does not follow through on its commitment. EPA agrees with the 
manufacturers that the proposal did not provide them an adequate or 
realistic opportunity to ensure that OTC States submitted adequate SIP 
revisions. Thus, the FRM takes a slightly different approach than EPA 
proposed.
    Today's rule allows manufacturers to opt out of National LEV if an 
OTC State has not submitted an adequate SIP revision and either EPA has 
taken final action on the state's submission finding that it did not 
meet the requirements for a National LEV SIP revision or at least 12 
months has passed since the state submitted its National LEV SIP 
submission to EPA and EPA has not approved it as meeting the 
requirements for a National LEV SIP revision. By prohibiting 
manufacturers from opting out until after EPA has had one year to take 
action on a SIP submission, the FRM respects EPA's role in evaluating 
and approving SIPS, as delegated by Congress under section 110(k) of 
the Act. By allowing manufacturers to opt out immediately if EPA 
disapproves a SIP submission or if EPA fails to act within one year of 
receiving the submission, it gives manufacturers a real opportunity to 
opt out in a timely fashion if a SIP submission is inadequate. This 
should provide additional incentive for OTC States to send in 
submissions that meet the requirements for adequate National LEV SIP 
revisions and thereby increase the stability of the program.
    As with the other types of state violations, there is no deadline 
for manufacturers to opt out based on this offramp. Also, there would 
be no opportunity for an OTC State to cure the violation with respect 
to a manufacturer that had already opted out, although manufacturers 
that had not opted out could no longer do so once EPA had taken final 
action finding the State's submission met all the requirements for a 
National SIP revision. The action allowing opt out is very clear, and 
hence the regulations do not provide for an EPA determination of the 
validity of an opt-out based on this type of violation.
    Again consistent with the previous scenarios, if a manufacturer 
opts out it may set the effective date of its opt-out as early as the 
next model year or any model year thereafter.\33\ Manufacturers' 
obligations under National LEV and state Section 177 Programs would be 
identical to those described if a state failed to submit a SIP 
revision.
---------------------------------------------------------------------------

    \33\ If, however, an OTC State took a legitimate offramp as 
discussed below, a manufacturer could not use a delayed effective 
date of opt out to continue to comply with National LEV in a state 
that had opted out after the state opt-out became effective. As 
discussed below in section VI.D an OTC State legitimately opting out 
of National LEV is required to provide manufacturers at least two 
years lead time.

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

[[Page 945]]

4. OTC State Without an Existing ZEV Mandate Adopts a Backstop ZEV 
Mandate
    OTC States without ZEV mandates will also state in their opt-ins 
that they do not intend to adopt a ZEV mandate that would be effective 
during the state's commitment to National LEV. EPA took comment on 
whether auto manufacturers should be able to opt out if an OTC State 
without an existing ZEV mandate acted contrary to its stated intent and 
adopted a backstop ZEV mandate (i.e., a ZEV mandate that allows 
National LEV as a compliance alternative) with an effective date during 
the state's commitment to National LEV.\34\ Today's final rule, 40 CFR 
86.1707(h), provides such an offramp for manufacturers. EPA believes 
this is appropriate given the differing positions of the manufacturers 
(who wanted the OTC States to agree that they would not adopt a ZEV 
mandate) and the OTC States (who were willing to state their current 
intent not to adopt a ZEV mandate). It is also appropriate given that 
the OTC States without existing ZEV mandates have little incentive to 
adopt backstop ZEV mandates since they have agreed that a manufacturer 
would not have to comply with a backstop ZEV mandate until the later of 
the end of the OTC State's commitment to National LEV (MY2006 or 
MY2004, depending upon EPA's issuance of Tier 2 standards) or two years 
after either the manufacturer or the OTC State opts out of National 
LEV.
---------------------------------------------------------------------------

    \34\ If an OTC State without an existing ZEV mandate adopts a 
ZEV mandate that does not allow National LEV as a compliance 
alternative, the opt-out provisions discussed in Section VI.A.1 
above apply.
---------------------------------------------------------------------------

    Sec. 86.1707(h) allows manufacturers 35 to opt out of 
National LEV if an OTC State without an existing ZEV mandate takes 
final action adopting a backstop ZEV mandate that would become 
effective during the state's commitment to National LEV. This offramp 
does not allow manufacturers to opt out if a state adopts a ZEV mandate 
that could not come into effect until the end of the state's commitment 
(i.e., until MY2006 or MY2004, depending on EPA's issuance of Tier 2 
standards). Adoption of a backstop ZEV mandate would not impose an 
immediate compliance obligation on auto manufacturers, so EPA has 
structured the offramp and its consequences to be similar to those for 
an OTC State's failure to submit its National LEV SIP revision on time. 
Consequently, if manufacturers did not choose to opt out of National 
LEV, they would continue to be subject to all the National LEV 
requirements for vehicles sold both within and outside of the violating 
state, and the National LEV program would continue.
---------------------------------------------------------------------------

    \35\ Only those manufacturers that are large enough that they 
would be subject to the ZEV mandate if it comes into effect could 
opt out based on an OTC State's adoption of a ZEV mandate.
---------------------------------------------------------------------------

    As for other offramps based on OTC State actions, there would be no 
time limit for manufacturers to exercise their right to opt out of 
National LEV if an OTC State without an existing ZEV mandate adopted a 
backstop ZEV mandate. Final action reversing the violating state's 
adoption of a backstop ZEV mandate would not negate a manufacturer's 
opt-out that EPA had already received, even if the manufacturer's opt-
out had not yet become effective. However, if the violating state were 
to take final action reversing itself and deleting the backstop ZEV 
mandate, no manufacturer would be able to opt out after such final 
action. ``Final action'' shall have the same meaning here as discussed 
above in Section VI.A.1. EPA is not providing for an EPA determination 
of the validity of an opt-out under this provision because it should be 
very clear cut whether an OTC State has adopted a backstop ZEV mandate.
    If a manufacturer opts out, it may set the effective date of its 
opt-out as early as the next model year after EPA's receipt of the opt-
out notification.36 If a manufacturer opts out of National 
LEV, in the violating state, the National LEV regulations would allow 
the manufacturer to meet Tier 1 tailpipe standards and would not 
require those vehicles to be included in the fleet average NMOG 
calculations. These special provisions for vehicles sold in the 
violating state would start with the next model year after EPA receives 
the manufacturer's opt-out (e.g., MY2000 for a manufacturer that opts 
out in calendar year 1999) and continue until the effective date set in 
the opt-out notice. As under the scenario above, the violating state 
would not receive SIP credits for emissions reductions from vehicles 
meeting anything more stringent than the Tier 1 tailpipe standards 
while those standards apply. Once the manufacturer's opt-out had become 
effective, the manufacturer would be subject to a Section 177 Program 
in the violating state if the two-year lead time requirement of section 
177 had been met.
---------------------------------------------------------------------------

    \36\ If, however, an OTC State took a legitimate offramp as 
discussed below, a manufacturer could not use a delayed effective 
date of opt out to continue to comply with National LEV in a state 
that had opted out after the state opt-out became effective. As 
discussed below in section VI.D an OTC State legitimately opting out 
of National LEV is required to provide manufacturers at least two 
years of lead time.
---------------------------------------------------------------------------

    If a manufacturer opted out of National LEV, in non-violating 
states it would continue to meet all National LEV requirements until 
the effective date of its opt out. For vehicles sold in the 
nonviolating states, once the opt-out became effective the manufacturer 
would be subject to any backstop Section 177 Programs for which the 
two-year lead time requirement of section 177 had been met (running 
from the date the state adopted the backstop program), or would be 
subject to Tier 1 requirements in states without such programs. 
Manufacturers would not have to comply with any ZEV mandates (except 
those that were unaffected by National LEV) until the model year that 
would start two years after the date EPA received the manufacturer's 
opt-out notification. To the extent that these regulations would 
provide a manufacturer with less than the two-year lead time set forth 
in section 177, the manufacturer waives that protection by opting into 
National LEV and then setting an effective date in its opt-out 
notification. To the extent that these provisions would give 
manufacturers more than the two-years lead time set forth in section 
177, by opting into National LEV the OTC States agree to provide the 
additional time.

B. Offramp for Manufacturers if OTC State or Manufacturer Legitimately 
Opts Out of National LEV

    Following the general principle that parties should be able to exit 
National LEV if there is a significant change in the assumptions that 
underlay their decision to opt in initially, 40 CFR 86.1707(j) 
finalizes EPA's proposal that a manufacturer also could opt out if an 
OTC State or another manufacturer were to opt out of National LEV 
legitimately.37 This offramp could be used within 30 days of 
EPA's receipt of an OTC State or a manufacturer opt-out. The 
manufacturer could set an effective date for its opt-out beginning the 
next model year after the date of the manufacturer's opt-out, or any 
model year thereafter. EPA would not determine the validity of opt-out 
under this offramp unless EPA is to determine the validity of the 
initial opt-out.

[[Page 946]]

Manufacturers' obligations under National LEV and state Section 177 
Programs would be identical to those described if a state failed to 
submit a SIP revision, except that no state would be a violating state. 
EPA received no comments on this provision.
---------------------------------------------------------------------------

    \37\ The validity of any opt-out from National LEV would depend 
in part on whether the underlying condition allowing opt out has 
actually occurred. Where the initial OTC State or manufacturer's 
opt-out was invalid, it would not provide an offramp for another 
manufacturer to opt out of National LEV. Thus, throughout this 
notice when EPA refers to an initial opt-out as the condition that 
allows another opt-out, it refers only to valid initial opt-outs.
---------------------------------------------------------------------------

C. Offramp for Manufacturers for EPA Failure to Consider In-Use Fuel 
Issues

    Believing that the effects of fuel sulfur were not adequately 
addressed by EPA in the National LEV program, the auto manufacturers 
recommended in June, 1997, that National LEV should include an offramp 
for manufacturers related to in-use fuels issues and that they should 
be allowed to exit the National LEV program if EPA were to act (or fail 
to act) in a specified manner to resolve specific sulfur-related 
issues. Such an offramp would alleviate their concern that the sulfur 
levels of in-use fuels outside California may affect the on-board 
diagnostic (OBD) systems and tailpipe emissions of National LEV 
vehicles. The manufacturers outlined six different conditions related 
to EPA actions (or lack of action) on these issues that they believe 
should allow them to opt out of National LEV. In the SNPRM, EPA 
proposed an additional offramp that took into account three of the six 
conditions advanced by manufacturers and rejected the remaining three. 
(A complete discussion of these six conditions and EPA's rationale for 
selecting only three can be found in the SNPRM, 62 FR at 44768-44771.) 
The proposed offramp was structured such that manufacturers could opt 
out of National LEV only if EPA failed to consider certain vehicle 
modifications, on-board diagnostic control systems, or preconditioning 
of vehicles when requested to do so by a manufacturer as a result of an 
alleged effect of fuel with high sulfur levels. Today's final rule 
incorporates this offramp as it was proposed.
    EPA recognizes that this remains an important issue for the 
manufacturers and other interested parties, and 40 CFR 86.1707(i) sets 
forth a process to allow potential problems related to potential fuel 
sulfur effects on emissions performance of National LEV vehicles to be 
addressed within the context of National LEV as more information 
becomes available. These problems will be addressed on a case-by-case 
basis. EPA will respond to a manufacturer's request, supported by data, 
for appropriate relief for a specific engine family or families 
adversely affected by sulfur in a manner covered by one of the 
conditions incorporated into the National LEV regulations for the fuel 
sulfur offramp.
    EPA also recognizes that the effects of sulfur on emission control 
systems is an issue that raises concerns beyond the context of the 
National LEV program and is being addressed in numerous other actions. 
These include testing being done to support EPA's Tier 2 Study and the 
Ozone Transport Assessment Group's recommendation to EPA to explore 
reducing fuel sulfur levels. EPA is working with the various 
stakeholders in developing and analyzing data to quantify any sulfur 
effects on current and future technology vehicles. EPA has said that in 
appropriate instances, EPA will address sulfur effects on specific 
mobile source programs. In March, 1997, EPA released a paper entitled 
``OBD & Sulfur White Paper: Sulfur's Effect on the OBD Catalyst Monitor 
on Low Emission Vehicles.'' This paper summarized the sulfur concerns 
and the available data, and outlined EPA's approach to resolving OBD/
sulfur issues on a case-by-case basis.38 The fundamental 
suggested approach of addressing these issues on a case-by-case basis 
remains EPA's expected approach. The offramp related to fuel sulfur 
effects in today's final rule is entirely consistent with the approach 
outlined in EPA's revised paper.
---------------------------------------------------------------------------

    \38\ OBD and Sulfur White Paper, March 1997 (Docket A-95-26, IV-
B-06). This paper has been revised to address comments EPA received 
on the March, 1997 paper. A copy is included in the docket for this 
rule (A-95-26, VII-J-02).
---------------------------------------------------------------------------

    Today's final rule contains a fuel sulfur offramp identical to that 
proposed in the SNPRM. This offramp could be triggered under the three 
following conditions:
    (1) If, upon a written request from a manufacturer in relation to 
the certification of an OBD catalyst monitor system, EPA declines to 
consider the use of the system because it indicates sulfur-induced 
passes when exposed to high-sulfur gasoline, even though it functions 
properly on low-sulfur gasoline.
    (2) If, upon a written request from a manufacturer, EPA declines to 
consider, on a case-by-case basis, the manufacturer's suggested 
modifications to vehicles that exhibit sulfur-induced malfunction 
indicator light (MIL) illuminations due to high-sulfur gasoline so as 
to eliminate the sulfur-induced MIL.
    (3) If, upon a written request from a manufacturer, EPA declines to 
consider, on a case-by-case basis, prior to in-use testing, pre-
conditioning procedures designed solely to remove the effects of high 
sulfur from currently available gasoline.
    EPA has defined a process for manufacturers to opt out of National 
LEV if one of the conditions described above were to occur. A 
manufacturer must send a request to EPA in writing identifying the 
particular problem at issue, demonstrating that it is due to in-use 
fuel sulfur levels, requesting that EPA consider taking a specified 
action in response, and demonstrating the emissions impact of the 
requested change. For some changes, engineering judgement may be 
sufficient to demonstrate the emissions impact. The Agency would have 
60 days to respond to the manufacturer's request in writing, stating 
the Agency's decision and explaining the basis for the decision. If EPA 
were to fail to respond in this manner in the timeframe allotted, 
manufacturers would have 180 days after the deadline for the EPA 
response to decide to opt out of National LEV. Once EPA responds to the 
manufacturer's request, even if after the 60-day deadline, a 
manufacturer that had not yet opted out based on this offramp would no 
longer be able to do so, although if EPA had already received a 
manufacturer's opt-out, that opt-out would be unaffected by EPA's 
subsequent response. Only the manufacturer that sent the initial 
request to EPA would be able to opt out if EPA failed to respond.
    Consistent with opt-outs based on other offramps, a manufacturer 
that opts out based on this offramp must continue to comply with 
National LEV until the opt-out becomes effective. The manufacturer may 
set the effective date of its opt-out as early as the next model year 
or any model year thereafter.39 After the effective date of 
its opt-out, the manufacturer would be subject to any backstop Section 
177 Programs (except for ZEV mandates) provided that at least two-years 
lead time (as provided in section 177) had passed since the adoption of 
the state's Section 177 Program, or would be subject to Tier 1 
requirements in states without such backstops. Other than those ZEV 
mandates that would be unaffected by the National LEV rogram (i.e., 
existing ZEV mandates), if a manufacturer opts out, it would not be 
subject to any other ZEV mandates until two years of lead time has 
passed, which would run from the date the manufacturer opts out of 
National LEV and would be measured according to the section 177 
implementing regulations.
---------------------------------------------------------------------------

    \39\ The next model year would be the model year named for 
calendar year after which EPA received the opt-out notification.
---------------------------------------------------------------------------

    Several commenters highlighted this offramp as an area of some 
concern.

[[Page 947]]

These comments and EPA's responses are detailed in the Response to 
Comments document. In general, the auto manufacturers felt that the 
proposed offramp did not go far enough to protect their interests. They 
would have preferred that the regulations allow a manufacturer to opt 
out if EPA did not approve the manufacturer's suggested solution to an 
alleged problem if the manufacturer felt corrective action was 
justified. EPA's proposed (and final) regulations instead require EPA 
to consider allowing corrective action based on a request from a 
manufacturer accompanied by a persuasive demonstration that a problem 
does indeed exist. EPA believes that following the manufacturers' 
approach would destabilize the program by putting EPA in what could be 
an untenable position of either giving a manufacturer the ability to 
opt out or allowing the manufacturer to dictate a substantive outcome 
which EPA did not believe was warranted.
    Several state government commenters saw the addition of this 
offramp as a new issue that had not arisen in prior discussions and 
that had potentially destabilizing impacts on the National LEV program. 
The American Petroleum Institute likewise commented that it did not 
support this offramp. Contrary to some commenters' concerns, this 
offramp cannot be used by the manufacturers to dictate a particular 
result, nor does it destabilize the National LEV program. The offramp 
makes it clear that EPA intends to follow through on its commitment in 
the OBD & Sulfur Status Report to look at potential fuel sulfur effects 
on a case-by-case basis. The offramp does not expand whatever right to 
substantive judicial review a manufacturer would otherwise have of an 
EPA decision related to potential fuel sulfur effects. Rather, to avoid 
providing manufacturers an opportunity to opt out of the program, this 
offramp requires EPA to provide a written response to a manufacturers' 
request. Some commenters expressed the concern that this offramp would 
require EPA to act in the absence of necessary information. EPA does 
not read the provision that way. Rather, if a manufacturer submits 
insufficient information (perhaps by failing to characterize the 
potential fuel sulfur effect adequately or to provide adequate 
information regarding the effects of the requested change), EPA could 
deny the request or ask the manufacturer to submit additional 
information without triggering an offramp, provided that EPA explained 
its response in writing. EPA does not believe the fuel sulfur offramp 
destabilizes the National LEV program given that it sets up a process 
rather than requiring a substantive result and given that EPA does not 
foresee any problem complying with the process.

D. Offramps for OTC States

    In light of the practically and legally binding commitments that 
the OTC States would make to the National LEV program, this Final Rule 
also identifies the limited circumstances under which the OTC States 
would no longer be bound by those commitments. There are two 
circumstances in which an OTC State could opt out of National LEV: (1) 
if a manufacturer were to opt out of National LEV; or (2) if, based on 
a periodic equivalency determination, EPA were to find that certain 
circumstances had changed that would have changed EPA's initial 
determination that National LEV would produce emissions reductions 
equivalent to OTC State Section 177 Programs. The first offramp, found 
in 40 CFR 86.1707(e) through (j), is being finalized as proposed. The 
second offramp, found in 40 CFR 86.1707(k), has been modified somewhat 
from the proposal, as described below in more detail. If an OTC State 
were to take an identified legitimate offramp from National LEV, it 
would no longer be bound by any commitments that it made to the program 
in its initial opt-in package, other than its commitment to follow the 
National LEV regulations to transition from National LEV to a state 
Section 177 Program. An OTC State that was already in violation of its 
National LEV commitments would not be able legitimately to opt out of 
National LEV based on a manufacturer's opt-out.
    To opt out of National LEV, the state official that signed the 
commissioner's letter in that state would send EPA an opt-out 
notification letter. The letter would state that the OTC State was 
opting out of National LEV and specify the condition allowing the state 
to opt out. The date of the state opt-out would be the date that EPA 
received the opt-out letter, but there would be a two-year transition 
period before the state opt-out would become effective and the state 
could require compliance with a Section 177 Program or ZEV mandate (in 
a state without an existing ZEV mandate) without allowing National LEV 
as a compliance alternative. Whether an opt-out letter alone would 
itself remove National LEV as a compliance alternative as of the 
effective date of the opt-out depends on how the state regulations are 
written. In opting into National LEV the state could structure its 
regulations and SIP to provide that National LEV would not be an 
alternative to the state's Section 177 Program if the state had opted 
out of National LEV pursuant to the National LEV regulations and the 
opt-out had become effective.
1. Manufacturer Opt-Out
    As proposed, an OTC State would be able to opt out of National LEV 
without violating its commitment if a manufacturer opted out of 
National LEV under one of the identified offramps for 
manufacturers.40 All parties would have made the choice to 
opt into National LEV with an understanding about the manufacturers and 
states that would be subject to the program. If those fundamental 
assumptions were to change, the parties to the voluntary program should 
have the opportunity to reevaluate their commitments and choose to opt 
out. Some OTC States have indicated, for example, that they believe it 
would not be feasible in their states to have some manufacturers 
subject to National LEV while others that had opted out of National LEV 
were subject to Section 177 Program requirements.
---------------------------------------------------------------------------

    \40\ The condition allowing an OTC State to opt out would only 
arise if the initial manufacturers' opt-out were valid. See n. 37.
---------------------------------------------------------------------------

    If a manufacturer opted out, OTC States would have a three-month 
period to submit an opt-out letter. The start of the three-month period 
would depend on the reason the manufacturer opted out. If a 
manufacturer were to opt out because of state action or inaction, or 
because of EPA's failure to consider a manufacturer's request related 
to effects of in-use fuels, the three-month period would start on the 
date EPA received the manufacturer's opt-out notification.41 
For a manufacturer's opt-out based on a change to a Stable Standard, 
the three-month period would start on the date of EPA's finding that 
the opt-out was valid or the date of a final judicial ruling that a 
disputed opt-out was valid. If a state did not opt out within that 
three-month period, the opportunity to opt out based on that 
manufacturer action would no longer be available.
---------------------------------------------------------------------------

    \41\ However, if a manufacturer were to opt out because a state 
failed to submit a SIP revision by the applicable deadline and the 
manufacturer submitted the opt-out notification within six months of 
the applicable deadline for the SIP revision, the manufacturer's 
opt-out would not be final until the end of that six-month period. 
That date (not the date of the manufacturer's opt-out) would start 
the three-month period for state opt out.
---------------------------------------------------------------------------

    The state opt-out could not become effective until the state had 
provided manufacturers with the two-year lead time set forth in section 
177, with the two-year lead time to start on the date

[[Page 948]]

that EPA received that state's opt-out letter. Manufacturers commented 
that for manufacturers that had not opted out of National LEV, states 
that have opted out should provide four, rather than two, years of lead 
time. As discussed above in section VI.A.1, section 177 does not 
require states to provide manufacturers four years of lead time from 
the date that manufacturers are notified that the state will no longer 
accept National LEV as a compliance alternative to a state Section 177 
Program. Several commenters opposed providing four years of lead time 
under any circumstances and agreed that section 177 does not provide 
such lead time. Moreover, the MOUs initialled by the OTC and the 
manufacturers' associations provided only two model years of lead time 
before a state election to no longer be bound by its obligations under 
the MOU would become effective. Thus, EPA believes it is appropriate to 
finalize the proposed approach, which provides for two years of lead 
time before a state opt-out becomes effective.
    Until the OTC State's opt-out became effective, manufacturers that 
had not opted out of National LEV or whose opt-outs had not yet become 
effective would continue to be subject to all the National LEV 
requirements for vehicles sold in that state. Manufacturers whose opt-
outs had already become effective would not be affected by the state 
opt-out. Once the state opt-out became effective, all manufacturers 
would be subject to the state's Section 177 Program, if it had been 
adopted at least two years previously.42 As the existence of 
a manufacturer opt-out as the basis for the state opt-out is a simple 
factual determination, the rule does not provide for EPA to evaluate 
the validity of a state opt-out before it could become effective.
---------------------------------------------------------------------------

    \42\ This is true even for a manufacturer that had opted out and 
set an effective date for its opt-out that was later than the 
effective date of the state's opt-out.
---------------------------------------------------------------------------

2. Periodic Equivalency Determination
    EPA had proposed that an OTC State could opt out of National LEV if 
EPA were to change a Stable Standard in a way that made National LEV 
less stringent and, if the change had been known at the start of 
National LEV, it would have changed EPA's initial determination that 
National LEV would produce emissions reductions at least equivalent to 
the adopted OTC State Section 177 Programs. In today's Final Rule, EPA 
is departing somewhat from the proposal. Today's rule is very similar 
to the proposal regarding how subsequent equivalency determinations 
would be made, but takes a different approach regarding when they would 
be made. Today's rule allows an OTC State to request an equivalency 
determination at any time during the state's commitment to National 
LEV, rather than limiting states' ability to request such a 
determination to those times when EPA changes a Stable Standard. This 
offramp for OTC States is comparable to the manufacturers' offramp if 
EPA makes certain types of changes to Stable Standards that make the 
Standards more stringent.
    In section IV above, EPA discussed its determination that National 
LEV would produce equivalent or greater emissions reductions than the 
alternative of adopted OTC State Section 177 Programs. In the modeling, 
EPA assumed that, in the absence of National LEV, Section 177 Programs 
would be in place in those OTC States that currently have adopted such 
programs (including backstop programs) and that, in all other states 
(except California) Tier 1 standards would apply through MY2004 and 
Tier 2 standards equivalent to National LEV would apply thereafter. 
Today's rule allows an OTC State that is in the National LEV program to 
request EPA to reevaluate whether National LEV is still equivalent to 
the alternative approach of OTC State Section 177 Programs. Within six 
months of receiving the request, EPA is to conduct such a 
determination.
    As proposed, in reevaluating equivalency, EPA would use the same 
model and inputs as it used in the initial equivalency 
determination.43 EPA would modify the modeling only to 
reflect (1) the effect of changes in EPA regulations governing new 
motor vehicles and implementation of such regulations (to the extent 
implementation is reflected in the model), and (2) the effect of having 
Section 177 Programs (identical in stringency to the Section 177 
Programs modeled in the initial equivalency determination) in any 
additional OTC States that had adopted section 177 backstop programs 
after the initial equivalency determination. In reevaluating 
equivalency, EPA believes that the focus of the evaluation should be 
the ongoing validity of the initial decision to opt into National LEV, 
not whether the parties would make the same decision at the time of the 
reevaluation based on then-current conditions. This is consistent with 
the approach that the parties took to the periodic equivalency 
evaluation in the initialed MOUs. At the time of their opt-ins, the 
parties should not have anticipated that EPA would change its new motor 
vehicle regulations in a way that would affect one of the basic 
assumptions used to calculate the relative benefits of National LEV and 
the alternative of OTC State Section 177 Programs. Thus, it is 
appropriate to reevaluate the equivalency of the two approaches given 
such a change, and provide the OTC States an opportunity to opt out of 
National LEV if it is no longer equivalent to the alternative.
---------------------------------------------------------------------------

    \43\ Modeling assumptions that would remain unchanged from those 
used in the initial equivalency determination include: assumptions 
related to vehicle miles traveled, MOBILE5a model inputs, inspection 
and maintenance programs, reformulated gasoline, and permanent 
migration effects.
---------------------------------------------------------------------------

    As proposed, the FRM provides that any equivalency reevaluation 
will include the effect of Section 177 Programs in any additional OTC 
States that adopt Section 177 Programs after the initial equivalency 
determination. This represents a compromise between the OTC States' and 
manufacturers' positions. In making the initial equivalency 
determination, EPA is comparing National LEV to the alternative of OTC 
State Section 177 Programs. See section IV. As discussed above, EPA's 
determination assumes that Section 177 Program requirements would apply 
in those OTC States that currently have the programs (including 
backstop programs) in their state law or regulations and that mandatory 
federal standards would apply in the other OTC States. The OTC States 
requested that EPA take a somewhat different approach to the initial 
equivalency determination by assuming that Section 177 Programs would 
also apply in particular OTC States that are currently in the process 
of developing such regulations. For the initial determination, such a 
change in the assumption about which OTC States have LEV programs would 
have no effect on EPA's finding that National LEV would produce 
emissions reductions at least equivalent to those that would be 
produced by the alternative. EPA performed a sensitivity analysis for 
the initial equivalency determination to analyze the effects of the 
most optimistic assumptions regarding adoption of Section 177 Programs 
by OTC States, which indicated that even with those assumptions 
National LEV would still produce emissions reductions equivalent to or 
greater than that alternative. However, given the OTC States' concern, 
EPA believes it would be appropriate to modify the inputs to any 
reevaluation to reflect the then-current reality in terms of which OTC 
States had actually adopted Section 177 Programs. The modeling would

[[Page 949]]

continue to assume that all states with Section 177 Programs would have 
the same requirements used in the initial equivalency modeling, as 
discussed above. Thus, the reevaluation would not reflect any changes 
in the states' legal authority under the CAA to adopt programs 
subsequent to their decision to opt into National LEV, but it would 
take into account subsequent actions taken by the OTC States based on 
legal authority they had at the time of the decision.
    EPA does not believe it would be appropriate to include in the 
reevaluation of equivalency the effects of other changes in 
circumstances affecting emissions reductions under National LEV or the 
alternative, such as changes to California's LEV program. At the time 
of opt-in, all of the parties will be aware that circumstances might 
change over the period that National LEV is in effect. For example, 
California might modify its requirements during that time. In making 
the decision to opt into National LEV and choose it over the 
alternative for a given period of time, the parties will have to 
evaluate the likelihood that any of the relevant circumstances would 
change sufficiently to reverse their inclination to opt in. Thus, the 
OTC States will have to consider the likelihood that California would 
modify its CAL LEV requirements and the likely effect of such a 
modification, and decide whether to commit to National LEV in lieu of a 
state Section 177 Program that could include any subsequent changes to 
CAL LEV. By opting in, the OTC States will have made the decision that 
the possibility of those benefits is outweighed by the certainty of the 
benefits from National LEV (if it goes into effect). The reevaluation 
of equivalency should not allow parties to reconsider that initial 
choice with the benefit of hindsight. National LEV will only come into 
effect if the parties to the program commit to it for a specified 
duration, and an EPA change to the underlying standards should not 
become an opportunity to undermine that basic commitment.
    Several commenters disagreed with this approach, arguing that any 
changes California makes to its LEV program should be reflected in any 
future equivalency determinations, particularly since California is 
contemplating tightening its LEV program. EPA believes that states 
should take the possibility of future changes to the California LEV 
program into account in deciding whether to opt in. As noted above, 
given the uncertainties regarding changes to California's program and 
the much greater benefits of National LEV as compared to OTC State 
Section 177 Programs (based on the current CAL LEV program), EPA 
believes it is reasonable and prudent for states to commit to keep 
National LEV as a compliance alternative until MY2006. EPA recognizes 
that this raises the possibility that OTC States might be foregoing 
enforcement of a tighter California LEV program for a year or two. 
However, for practical or legal reasons, states often have to make 
regulatory choices without complete information and taking one 
regulatory approach often precludes changing course in midstream even 
if it turns out that another approach might have been better.
    Although today's rule generally adopts the approach to periodic 
equivalency findings contained in the MOUs initialed by the OTC and the 
auto manufacturers' trade associations, it does differ in one respect. 
Whereas the MOUs provided for such findings every three years and upon 
an OTC State's request, today's rule provides for such findings only 
upon the request of an OTC State that is participating in National LEV. 
There might not be a need for an equivalency finding every three years. 
If there is a need, an OTC State can request one.
    If EPA were to find that National LEV was not equivalent to OTC 
State Section 177 Programs, under today's rule, the OTC States would 
have three months to opt out, running from the date that EPA found that 
National LEV would no longer produce emissions reductions equivalent to 
those that would be produced by OTC State Section 177 Programs. If a 
state did not opt out within that three month period, the opportunity 
to opt out based on that finding would no longer be available.
    Also consistent with the other state offramp, a state opt-out based 
on a finding of inequivalency could not become effective for model 
years (as defined in Subpart X) that commence prior to the date two 
years after the date that EPA received the state's opt-out letter. If a 
state took this offramp, the manufacturers' obligations would be 
determined the same way as described in the preceding section (when an 
OTC State opts out because a manufacturer opted out).

E. Lead Time Under Section 177

    Sec. 86.1707's provisions discussed above incorporate and rely on 
EPA's interpretation of section 177's requirements related to state 
adoption of the CAL LEV program. Section 177 of the Act provides the 
legal authority for states to adopt ``standards relating to the control 
of emissions from new motor vehicles'' and governs the timing of 
implementation of such requirements. It provides that a state may adopt 
new motor vehicle standards only if they are identical to California 
standards for a given model year for which EPA has granted a waiver, 
and the state must ``adopt such standards at least two years before 
commencement of such model year (as determined by regulation of the 
Administrator).'' EPA has previously adopted regulations interpreting 
this provision. See 40 CFR 85.2301 et seq. These regulations do not 
adequately address the issue of when the two-year lead time starts for 
backstop Section 177 Programs (i.e., a Section 177 Program that allows 
National LEV as a compliance alternative) after National LEV has come 
into effect.
    Today's final regulations address the issue of when under section 
177 and EPA's implementing regulations the two-year lead time period 
would start if, after National LEV came into effect, a state with a 
backstop Section 177 Program were to delete National LEV as a 
compliance alternative (either in violation of its commitment to 
National LEV or legitimately by taking an offramp) or if a manufacturer 
legitimately decided to opt out of National LEV. These regulations and 
EPA's underlying interpretation of section 177 apply only in the 
context of the National LEV program, and only in the special 
circumstances that arise when a state has a backstop Section 177 
Program that allows National LEV as a compliance alternative and 
National LEV has gone into effect.
    The intent of the two-year lead time provision in section 177 is 
obvious in the context of a state deleting National LEV as a compliance 
alternative in violation of its commitment. If a state has a Section 
177 Program (or a ZEV mandate) that allows National LEV as a compliance 
alternative and National LEV is in effect, and then the state changes 
those regulations to require compliance with the Section 177 Program or 
ZEV mandate (and does so in a way that violates its commitment to 
National LEV), then the two-year lead time required by section 177 
would start to run when the revised regulations (or other state laws) 
were adopted. Although the Section 177 Program (or ZEV mandate) was 
previously on the books, it would have been a very different program 
because it allowed National LEV as a compliance alternative. Deleting 
National LEV as a compliance alternative once National LEV is in effect 
is essentially the same as adopting a new Section 177 Program (or ZEV 
mandate), and section 177

[[Page 950]]

prohibits states from enforcing a new program without providing at 
least two-years lead time.
    The meaning of the two-year lead time provision in section 177 is 
ambiguous in the context of a backstop Section 177 Program (or ZEV 
mandate) where a state legitimately opts out of National LEV. There are 
at least three possible ways to approach this provision in this 
context. One possible approach is that the two-year lead time period 
starts when the state adopts the backstop Section 177 Program (or ZEV 
mandate). Under this interpretation, section 177 would require the 
state to have adopted its backstop Section 177 Program (or ZEV mandate) 
at least two years before the model year to which it applies. After the 
two-year lead time had run from the date of adoption, the state could 
remove National LEV as a compliance alternative and require immediate 
compliance with the Section 177 Program (or ZEV mandate) at any time. 
Another possible approach is that, if a manufacturer will need to 
comply with a state Section 177 Program after National LEV has come 
into effect, the two-year lead time runs from the date that the 
manufacturer knew that it would need to comply with the state Section 
177 Program rather than with National LEV. Several of the OTC States' 
comments strongly supported the first approach, focusing on section 
177's use of the word ``adopt.'' In addition, these commenters 
expressed concern that the second approach, which EPA proposed, could 
set a precedent for other reinterpretations to ``fit unique 
circumstances.'' The comments stated that it would be inappropriate to 
discourage a state from availing itself of a right granted by Congress, 
and they stated that EPA's proposed interpretation is inconsistent with 
the CAA and federal district and appellate court decisions.
    Nevertheless, EPA does not believe the first approach is a proper 
application of section 177 in the National LEV context. The two-year 
lead time requirement is intended to give manufacturers time to make 
the changes in product planning, production and distribution that are 
involved in switching from one motor vehicle program to another. It 
recognizes the practical difficulties in making large production shifts 
in very short time-frames. Where manufacturers have had the legal 
authority to comply with National LEV in lieu of the state program, 
allowing states to drop National LEV as a compliance alternative with 
no lead time would prevent manufacturers from receiving the protection 
that Congress conferred on manufacturers in section 177.44 
EPA does not believe it is appropriate to interpret the statute in a 
manner that negates the intended purpose of the provision, and hence 
does not agree that the alternative interpretation is inconsistent with 
either the CAA or the court cases to date that have addressed the 
implementation of section 177. In addition, EPA is explicitly stating 
that this interpretation is only warranted by and is confined to the 
unique circumstances presented by backstop programs under National LEV, 
and thus EPA does not believe this interpretation will set a precedent 
that could be applied in inappropriate circumstances. Finally, EPA does 
not agree that this interpretation discourages a state from exercising 
a right provided by Congress. EPA does not believe that Congress 
provided a state the right to accept National LEV as a compliance 
alternative and then impose a backstop Section 177 Program without 
providing any time for the manufacturers to meet the new requirements. 
Thus, EPA is not adopting this approach.
---------------------------------------------------------------------------

    \44\ EPA is rejecting the date of state adoption of regulations 
as the starting date for determining whether the section 177 lead 
time requirement has been met only in those situations where a state 
has adopted a backstop Section 177 Program and National LEV has come 
into effect. For those states that already have backstop Section 177 
Programs, if National LEV does not come into effect, the date of 
adoption of the state regulations is still the controlling date for 
determining when the two-year lead time requirement has been met. In 
those states, the only legal option available to manufacturers has 
been to comply with the state Section 177 Program. The theoretical 
possibility that they might not have to comply with the state 
requirements does not mean that they have not been given the two-
year lead time required by section 177. EPA did not receive any 
comments disagreeing with this application of section 177.
---------------------------------------------------------------------------

    EPA is therefore adopting the second approach to section 177 under 
these limited circumstances. EPA believes this is the most appropriate 
way to implement section 177 in this special circumstance, as long as 
manufacturers are able to waive the two-year lead time requirement. 
Given that the failure to provide statutory lead time renders 
noncomplying state programs unenforceable, rather than rendering them 
void,45 there should be little question that manufacturers 
have the ability to waive the lead time requirement if they choose. The 
manufacturers' comments did not question their ability to waive lead 
time under section 177. This approach to section 177 (including both 
when lead time starts and that manufacturers can waive the lead time) 
ensures that, in the context of National LEV and state backstop Section 
177 Programs, two of Congress' purposes in adopting section 177 are 
met--it protects manufacturers from having insufficient time to switch 
from one motor vehicle program to another, and it allows states to 
ensure that they can achieve the extra emissions reductions from motor 
vehicles contemplated by section 177.
---------------------------------------------------------------------------

    \45\ See American Automobile Manufacturers Ass'n v. Greenbaum, 
No. 93-10799-MA, slip op. at 23, 1993 WL 442946 (D. Mass. Oct. 27, 
1993), aff'd., 31 F.3d 18 (1st Cir., 1994).
---------------------------------------------------------------------------

    However, the OTC States indicated that even if section 177 did not 
require the amount of lead time incorporated in the National LEV 
regulations, the OTC States were willing to agree to provide that lead 
time. Thus, as an alternative legal theory independent of the proper 
interpretation or application of section 177, by opting into National 
LEV, the OTC States agree to provide manufacturers with the lead time 
provided in the National LEV final regulations if a state deletes 
National LEV as a compliance alternative (including legitimately opting 
out of National LEV) or a manufacturer legitimately opts out of 
National LEV.
    EPA's interpretation of section 177 is reflected in today's final 
regulations 40 CFR 86.1707 regarding what requirements would apply in 
the unlikely event that an OTC State were to break its commitment to 
National LEV or that a manufacturer or an OTC State were to opt out of 
National LEV. For example, if a state with a backstop Section 177 
Program were to delete National LEV as a compliance alternative after 
National LEV had come into effect, the state would have changed the 
manufacturers' regulatory obligations and the manufacturers would be 
entitled to two-years lead time running from the date of the state 
action purporting to change the manufacturers' regulatory obligation. 
By opting into National LEV, manufacturers would not be agreeing to 
waive the lead time required under section 177 in a circumstance where 
a state broke its commitment to National LEV and deleted National LEV 
as a compliance alternative. Thus the manufacturer would get the full 
two-years lead time set by section 177.
    Another example demonstrates how the waiver provision modifies the 
two-year lead time. If an offramp were triggered and a manufacturer 
were to decide to opt out of National LEV and then set an effective 
date one year from the time of its opt out, under today's regulations, 
upon the effective date of the opt out, the manufacturer would be 
required to comply with Section 177 Programs (except for backstop ZEV 
mandates) in any state that had not broken its commitment to National 
LEV. To the extent that this provides the

[[Page 951]]

manufacturer with less than two-years lead time, the manufacturer will 
have waived the lead time provision by opting into National LEV 
combined with setting the effective date for its opt-out. For backstop 
ZEV mandates, however, manufacturers would not have to comply with the 
ZEV mandate until the two-year lead time period had passed (which would 
start running from the date of the manufacturer's opt-out) because in 
opting into National LEV manufacturers are not waiving the two-year 
lead time with respect to ZEV mandates. Additionally, by opting in, the 
OTC States are agreeing to provide this two-years of lead time 
regardless of the applicability of section 177.
    A third possible approach to section 177's two-year lead time 
requirement provides an alternative basis for today's rule. Under this 
approach, the lead time requirement differs depending upon the factual 
setting. In some instances, measuring lead time from the date of state 
adoption of a backstop Section 177 Program still provides manufacturers 
adequate protection and thereby implements both the clear language of 
the statute and the clear intent of the provision. For example, in 
opting into National LEV, a manufacturer is choosing to accept a 
compliance alternative that involves some risk of a rapid change in the 
manufacturer's regulatory obligations if the manufacturer opts out. 
However, as provided here, the program that the manufacturer is opting 
into provides substantial protection for manufacturers with regard to 
the applicability of backstop Section 177 Programs upon an opt-out. 
Because the manufacturer controls the effective date of the opt-out and 
the manufacturer would not be subject to a backstop Section 177 Program 
until its opt-out became effective, the manufacturer can ensure that it 
does not become subject to a Section 177 Program without whatever lead 
time it views as adequate. In this situation, the statutory intent to 
ensure that manufacturers have lead time is met by providing that a 
state can immediately implement a Section 177 Program for any 
manufacturer whose opt-out from National LEV is effective, if the 
backstop Section 177 Program was adopted at least two years previously. 
Thus, for situations where the manufacturer controls the date that it 
becomes subject to the Section 177 Program, section 177 would start the 
two-year lead time period from the date of state adoption of the 
backstop Section 177 Program.
    The other type of situation is one where the state takes an action 
imposing requirements on a manufacturer under section 177 and the 
manufacturer has no control over the timing of those requirements. For 
example, a state might remove National LEV as a compliance alternative 
from its state regulations, leaving only the Section 177 Program 
requirements in place, which the state had adopted at least two years 
earlier. In that instance, making the manufacturer immediately subject 
to the section 177 requirements would be contrary both to the purposes 
of the section 177 lead time requirement and to the intended operation 
of National LEV. By opting into National LEV the manufacturer did not 
accept the possibility that a state might commit to National LEV and 
then violate that commitment. Nor is there any way for the manufacturer 
to protect itself against an immediate application of the section 177 
requirements by the violating state, except not to opt into National 
LEV at all. Under the circumstances where the state controls the timing 
of the applicability of the Section 177 Program, the section 177 lead 
time provisions would be implemented by requiring two years of lead 
time from the date that the manufacturer knew it would become subject 
to the state's Section 177 Program without the option of complying with 
National LEV as an alternative.
    Today's interpretation of section 177 applies only in the unique 
situation presented by National LEV--where states and manufacturers are 
both voluntarily opting into the national program. It does not 
necessarily provide any guidance for other circumstances.

VII. National LEV Will Produce Creditable Emissions Reductions Because 
It Is Enforceable

    In the Final Framework Rule, EPA noted that National LEV must be an 
enforceable program to grant states credits for SIP purposes for 
emission reductions from National LEV vehicles. As discussed in the 
Final Framework Rule, there are two aspects to ensuring that National 
LEV is enforceable. See 62 FR 31225 (June 6, 1997). First, the National 
LEV program emissions standards and requirements must be enforceable 
against those manufacturers that have opted into the program and are 
operating under its provisions. In the Final Framework Rule, EPA found 
that the National LEV program meets this aspect of enforceability. 
Second, the National LEV program itself must be sufficiently stable to 
make it likely to achieve the expected emissions reductions. To achieve 
the expected emissions reductions from National LEV, the offramps must 
not be triggered and the program must remain in effect for its expected 
lifetime. EPA also found in the Final Framework Rule that the program 
elements finalized in that rule would contribute to a stable National 
LEV program. In today's notice, EPA finds that the complete National 
LEV program as contained in today's Final Rule and the Final Framework 
Rule will be sufficiently stable to make the program enforceable and 
hence creditable for SIP purposes.
    The only circumstances that would allow the National LEV program to 
terminate prematurely would be an OTC State's failure to meet the 
commitments it makes regarding adoption of motor vehicle programs under 
section 177 of the Act, certain EPA changes to Stable Standards, an EPA 
determination that National LEV would no longer produce emission 
reductions equivalent to or greater than OTC State Section 177 
Programs, or certain EPA actions or inactions related to in-use 
fuels.46 The Final Framework Rule described the basis for 
EPA's belief that the Agency is unlikely to change any of the Stable 
Standards in a manner that would give the auto manufacturers the right 
to opt out of National LEV.47 Here EPA finds that National 
LEV is stable because EPA believes that an OTC State is unlikely to 
fail to meet its commitments to National LEV, National LEV is likely to 
continue to produce equivalent (or better) emission reductions than OTC 
State Section 177 Programs, and EPA is unlikely to act in a manner that 
would allow manufacturers to opt out based on the proposed offramps 
related to in-use fuels.
---------------------------------------------------------------------------

    \46\ OTC States could also opt out if a manufacturer opted out, 
and manufacturers could opt out if either another manufacturer or an 
OTC State opted out. Yet for purposes of evaluating the stability of 
the National LEV program, EPA need not consider these secondary opt-
out opportunities because they would only arise if an OTC State or 
EPA had already triggered another offramp.
    \47\ The list of Non-Core Stable Standards which previously 
referenced the federal Tier 1 Supplemental Federal Test Procedures 
(SFTP) requirements has been updated to reflect the SFTP provisions 
in today's rule. This does not affect EPA's rationale for finding 
the National LEV program stable, as discussed in the Final Framework 
Rule.
    Due to the change in the duration of the auto's commitment 
(discussed in section V.A. above), EPA has reworded 40 CFR 
86.1705(d)(10). The wording changes do not change the intent of the 
provision, however, which is to clarify that EPA's promulgation of 
Tier 2 standards effective in MY2004 or later does not allow 
manufacturers to opt out of National LEV.
---------------------------------------------------------------------------

A. OTC States Will Keep Their Commitments to National LEV

    As discussed above, there are four ways in which an OTC State could 
violate its commitments to National LEV and allow the manufacturers to 
opt out

[[Page 952]]

of the program: (1) Attempt to have a state Section 177 Program 
(including ZEV mandates, except in states with existing ZEV mandates) 
that was in effect and that did not allow National LEV as a compliance 
alternative for the duration of the state's commitment to National LEV; 
(2) in states without existing ZEV mandates, adopt a backstop ZEV 
mandate that would come into effect before the end of the state's 
commitment to National LEV, even if the state allows National LEV as a 
compliance alternative to the ZEV mandate for the duration of the 
state's commitment to National LEV; (3) fail to submit a National LEV 
SIP revision to EPA by the specified date; or (4) fail to submit an 
adequate National LEV SIP revision. EPA is confident that the OTC 
States will keep all of their commitments to National LEV for the 
duration of the program. The OTC States' practical ability to meet 
their commitments, the fact that the OTC States would have made 
commitments to the program through both practically binding instruments 
and legally binding instruments, and the effects of a violation of 
their commitments, all combine to support a finding that the states are 
unlikely to trigger an offramp for manufacturers.
    First, the OTC States should have no practical difficulty carrying 
out their commitments. After the OTC States have opted into National 
LEV and the program has come into effect, the states will need to adopt 
regulations (or modify existing regulations) to commit to accept 
National LEV as a compliance alternative for the specified duration and 
to submit those regulations to EPA as a SIP revision within one year 
(or for a few states, eighteen months) of the date of EPA's finding 
that National LEV is in effect. Based on discussions with each of the 
OTC States on the time needed to complete a rulemaking in that state 
and the absence of any comments to the contrary, EPA believes that 
these are realistic deadlines for state action, which would provide 
sufficient time for the states to complete their regulatory processes 
and submit their SIP revisions. (See docket no. A-95-26 for memo on 
these discussions.) See the SNPRM (60 FR 44754 at 44775) for further 
discussion of how the timing and political significance of the initial 
opt-ins enhances the likelihood that the states will submit their SIP 
revisions in a timely manner.
    Once EPA has approved a National LEV SIP revision, the state will 
be legally bound to uphold its commitment. As discussed above in 
section V.C.4, an approved SIP provision committing a state to accept 
National LEV as a compliance alternative to a state Section 177 Program 
or ZEV mandate would preempt a conflicting state law that required 
manufacturers to comply with a state Section 177 Program or ZEV mandate 
without allowing National LEV as a compliance alternative. Until EPA 
approved a subsequent SIP revision, manufacturers could enforce the 
initial SIP commitment in federal court. Furthermore, EPA would be 
obligated to disapprove a subsequent SIP revision that violated a 
state's commitment to allow National LEV as a compliance alternative 
for the specified period if it would interfere with other states' 
ability to attain the NAAQS. Other states are likely to have reasonably 
relied upon the emissions reductions from National LEV for attainment 
and maintenance, and the effect of approving the new SIP revision would 
very likely be to deprive the states of those reductions.
    For states without existing ZEV mandates, the statement of intent 
not to adopt a backstop ZEV mandate effective during the period of the 
state's commitment to National LEV need not be incorporated as a 
legally enforceable element of the state's SIP revision. However, there 
are still strong practical disincentives for a state to adopt such a 
provision, as it would allow the manufacturers to opt out of National 
LEV with all of the negative environmental consequences that doing so 
would entail, as discussed below. In addition, OTC States would have 
very little incentive to adopt a backstop ZEV mandate effective during 
the period of the state's commitment to National LEV because such a 
backstop would offer a state very little protection against a 
manufacturer's opt-out from National LEV. A backstop state Section 177 
Program, which would require compliance with the fleet average NMOG 
provisions of the CAL LEV program, would apply to any manufacturer that 
had opted out of National LEV immediately upon such a manufacturer's 
opt-out becoming effective. Thus, adoption of a backstop state Section 
177 Program at least two years prior to the effective date of a 
manufacturer's opt-out would allow the program to apply as soon as the 
manufacturer was no longer subject to the National LEV requirements, 
without the state providing an additional two years of lead time. 
However, in their commitments to National LEV, OTC States would commit 
to, and section 177 would require, that they provide manufacturers at 
least two years of lead time from the date of the manufacturer's opt-
out prior to any ZEV mandate becoming effective, regardless of the 
effective date of the manufacturer's opt-out. Thus, the only potential 
benefit from adoption of a backstop ZEV mandate effective during the 
period of the state's commitment to National LEV would be to avoid the 
additional delay in the applicability of the mandate that would be 
caused by the time required for adoption, but not to avoid the delay 
caused by providing the required lead time. Given that the state 
commitments to National LEV extend until MY2006 at the latest, it is 
highly unlikely that a manufacturer would opt out of National LEV 
within a timeframe in which such a delay could have any effect. With 
virtually no benefit to be gained from such an action, combined with 
the fact that it would allow manufacturers to opt out of National LEV, 
EPA believes it is highly unlikely that any state without an existing 
ZEV mandate would adopt a backstop ZEV mandate effective during the 
period of the state's commitment to National LEV.
    Even if the state were not bound to its commitment legally, the 
practical effects of not meeting its commitment provide an independent 
basis for finding that National LEV is stable. The structure of the 
opt-out provisions establishes substantial disincentives for OTC States 
to violate their commitments, given the requirements that would apply 
to vehicles sold in the violating state, the opportunity it would 
provide for manufacturers to opt out of National LEV, and the 
consequences of such an opt-out. As discussed in detail above in 
section VI.A.1, for an OTC State that has violated its commitment by 
attempting to have a state Section 177 Program that does not allow 
National LEV as a compliance alternative, the consequences in that 
violating state would be that under National LEV all manufacturers 
would be able to comply with Tier 1 tailpipe standards and not count 
those vehicles in the fleet NMOG average. Thus, as provided in 40 CFR 
86.1707(e)(2), the violating state would receive SIP credits based on 
this reduced compliance obligation. Similarly, if a state failed to 
submit its SIP revision committing to National LEV, submitted an 
inadequate SIP revision, or adopted a backstop ZEV mandate effective 
during the period of the state's commitment to National LEV, the same 
reduced tailpipe standard requirements would apply in the violating 
state for any manufacturer that opted out of National LEV until the 
manufacturer's opt-out became effective. Thus, the violating state 
would (or is likely to, depending upon the type of violation) receive 
higher emitting

[[Page 953]]

vehicles and commensurately fewer SIP credits. (See section VI.A above 
for a discussion of timing of requirements applicable to manufacturers 
under various options.)
    In addition, states will be further discouraged from violating 
their commitments because a state violation would give manufacturers 
the opportunity and reason to opt out of National LEV, and manufacturer 
opt-outs would hurt air quality in all states. If National LEV is in 
effect, a substantial number of the OTC States and probably all of the 
37 States are unlikely to have backstop Section 177 Programs in place. 
States without backstop Section 177 Programs would not be able to 
implement a state Section 177 Program for over two years because of the 
time needed to adopt a program and the two years of lead time required 
under section 177. During this period, manufacturers that had opted out 
of National LEV would have to comply only with federal Tier 1 standards 
for sales of new motor vehicles in those states without backstop 
programs. Also, sales of these Tier 1 vehicles would further increase 
vehicle emissions in both the violating state and states with backstop 
Section 177 Programs as well, through migration of dirtier Tier 1 
vehicles and transport of air pollution from states receiving Tier 1 
vehicles.
    EPA is confident that the combination of the feasibility of 
compliance with the OTC State commitments, the practical and legal 
constraints on a state breaking its commitment, and the environmental 
and SIP-related consequences of a state breaking its commitment make it 
highly unlikely that an OTC State that has opted into National LEV will 
violate any of its commitments to the program.

B. It Is Unlikely That National LEV Would Be Found Not To Produce 
Emission Reductions Equivalent to OTC State Section 177 Programs

    As discussed in section VI.D.2 above, today's Final Rule allows OTC 
States to request that EPA do a periodic equivalency finding to 
determine whether modifications to EPA new motor vehicle regulations 
(or their implementation, to the extent that is reflected in the 
modeling) will reverse EPA's finding that National LEV is equivalent to 
(or better than) OTC State Section 177 Programs. EPA believes it is 
unlikely to change the result of its equivalency determination as a 
result of the periodic determinations. The primary, and perhaps only, 
possible circumstance that could cause a change in the equivalency 
finding would be EPA modifying a new motor vehicle regulation in a way 
that makes it significantly less stringent.48 It is highly 
unlikely that this would occur. Given the greater emissions reductions 
that would be produced by National LEV compared to the alternative of 
OTC State Section 177 Programs (discussed above in section IV), only a 
significant weakening of an EPA regulation would be likely to change 
EPA's determination that National LEV would produce emissions 
reductions at least equivalent to the alternative. Such a weakening of 
an EPA new motor vehicle regulation would be contrary to EPA's mission 
of environmental protection and would jeopardize the National LEV 
program, which the Agency strongly supports. EPA has invested 
significant resources in facilitating the negotiations between the 
parties and developing the regulatory framework for the National LEV 
program, and the Agency would not lightly jeopardize the results of 
this effort. The discussion in the SNPRM as to why EPA would not make a 
Stable Standard less stringent in a way that would change the 
equivalency determination applies to changes to all new motor vehicle 
standards. See Section VII.B of the SNPRM, 62 FR 44776.
---------------------------------------------------------------------------

    \48\ The OTC States have suggested that changes in 
implementation of EPA new motor vehicle regulations might also 
affect the equivalency determination. EPA is not aware that the 
model reflects this type of implementation of EPA regulations.
---------------------------------------------------------------------------

C. EPA Is Unlikely To Fail To Consider In-Use Fuels Issues Upon a 
Manufacturer's Request

    EPA also believes that the Agency is unlikely to act or fail to act 
in a manner that would allow the manufacturers to opt out of National 
LEV based on the offramp related to in-use fuels. As discussed above, 
today's Final Rule provides autos with an offramp if EPA fails to 
consider certain manufacturer requests regarding the potential effects 
of fuel sulfur levels on the emission performance of National LEV 
vehicles.
    Given the nature of the offramp, EPA believes it is highly unlikely 
that it would ever be triggered. This offramp does not guarantee 
manufacturers any particular substantive outcome to their requests, nor 
does it provide manufacturers any additional rights (beyond what 
rights, if any, are provided otherwise under the Clean Air Act and the 
Administrative Procedure Act) to a particular substantive outcome or to 
have the substantive outcome reviewed by a court. Rather, this offramp 
formalizes the process EPA previously committed to follow in addressing 
potential problems related to the higher sulfur levels in fuel supplied 
nationally (including in the OTC States) than in California. If ongoing 
additional investigations indicate problems that need to be addressed, 
EPA will need to reassess the fuel sulfur issue in both the National 
LEV context and other EPA motor vehicle emission control programs, as 
discussed above in section VI.C. Given EPA's recognition of the 
manufacturers' concerns and the ongoing process for resolving them 
outside of the National LEV context, EPA believes it is highly unlikely 
that the Agency would fail to respond to a manufacturer's request to 
address any problems that are identified or decline to consider any 
reasonable solutions. In addition, EPA would have all the same 
incentives here to avoid taking any action that would jeopardize the 
benefits from the National LEV program, as discussed above for changes 
to new motor vehicle requirements that could result in a change to the 
equivalency finding.

VIII. Additional Provisions

A. Early Reduction Credits for Northeast Trading Region

    As was proposed, under today's rule manufacturers may generate 
early reduction credits for sales of vehicles in the Northeast Trading 
Region (NTR) in MY1997 and MY1998, prior to the start of National LEV 
in MY1999. 40 CFR 86.1710(c)(8). No commenters opposed early reduction 
credits. The ability to generate these credits will provide 
manufacturers added flexibility as well as create an incentive for them 
to introduce cleaner vehicles into this region before MY1999, thus 
providing air quality benefits sooner.
    Today's rule takes the same approach to these early reduction 
credits in the NTR as the Final Framework Rule took to the early 
reduction credits earned in the 37 States before MY2001.40 CFR 
86.1710(c)(7). Since the credits cannot be used or traded before 
MY1999, EPA is proposing to treat any credits earned in the NTR before 
MY1999 as if earned in MY1999 for annual discounting purposes. This is 
consistent with EPA's approach to early reduction credits in the 37 
States and with California's approach to allowing early generation of 
credits. These credits will be subject to the normal discount rate 
starting with MY1999, meaning they will retain their full value for 
MY2000 and will be discounted from then on. In addition, consistent 
with the approach to early reduction credits in the 37 States, early 
reduction credits in the NTR will be subject to a one-time ten percent 
discount applied in MY1999, as discussed below.

[[Page 954]]

    Manufacturers will be able to generate early reduction credits in 
the NTR by supplying vehicles with lower emissions than otherwise 
required during this time period in any OTC State that is in National 
LEV for MY1999 and later. Specifically, manufacturers would be able to 
generate credits for sales of TLEVs, LEVs, ULEVs and ZEVs sold in the 
OTR outside New York and Massachusetts in MY1997, and outside of New 
York, Massachusetts and Connecticut in MY1998, to the extent that such 
vehicles can be sold under EPA's cross-border sales 
policy.49 Additionally, manufacturers could generate credits 
for sales of vehicles achieving a lower fleet average NMOG value than 
required under the state Section 177 Programs in New York and 
Massachusetts in MY1997, and in New York, Massachusetts and Connecticut 
in MY1998, assuming that those states commit to National LEV for MY1999 
and later. Manufacturers would not be able to take credit for vehicles 
sold to meet the applicable NMOG averages in New York, Massachusetts 
and Connecticut in MY1997 and MY1998, as that would be using vehicles 
required independent of National LEV to reduce the stringency of the 
National LEV requirements, and hence would be ``double-counting.''
---------------------------------------------------------------------------

    \49\ See docket no. A-95-26, IV-A-03 for EPA's cross border 
sales policy. The current cross border sales policy allows sales of 
vehicles certified to California's emission standards in states 
contiguous to, or within 50 miles of, California and states that 
have a program adopted under section 177 in place. Thus, in the OTR 
for MY1997 and MY1998, manufacturers are allowed to sell California 
vehicles in Maine, New Hampshire, Vermont, Massachusetts, New York, 
Rhode Island, New Jersey, Pennsylvania, and Connecticut.
---------------------------------------------------------------------------

    EPA believes that there are substantial benefits to early 
introductions of cleaner vehicles. However, the Final Framework Rule 
included a discount for early reduction credits in the 37 States in 
part to address a concern that giving full, undiscounted credits for 
all early reductions may generate some windfall credits. See 62 FR 
31214-31215. ``Windfall'' credits are credits given for emission 
reductions the manufacturer would have made even in the absence of an 
early credit program. The purpose of giving credits for early 
reductions is to encourage manufacturers to make reductions that they 
would not have made but for the credit program. Because credits can be 
used to offset higher emissions in later years, if manufacturers are 
given credits for early reductions they would have made even without a 
credit program, an early credit provision could decrease the 
environmental benefits of the program.
    Although EPA took comment on the potential for windfall credits in 
the NTR and in the 37 State region and whether ten percent is an 
appropriate discount factor for each region, EPA decided that 
circumstances had not changed since the Final Framework Rule in a way 
that would justify reducing the discount factor below 10%. To the 
contrary, Honda's introduction nationally of LEV technology vehicles 
(albeit certified to Tier 1 levels) confirmed that National LEV and the 
ability to earn early reduction credits are not the only reasons 
manufacturers would move to cleaner vehicle technology.

B. Calculation of Compliance with Fleet Average NMOG Standards

    Today's final rule contains provisions for the calculation of 
compliance with the National LEV fleet NMOG average in the event that 
fewer than 49 states are participating in the program. These provisions 
are necessary even though EPA continues to believe that National LEV 
should be a 49-state program and the auto manufacturers have repeatedly 
stated that all thirteen OTC States must opt in for National LEV to 
come into effect. If the auto manufacturers and the relevant OTC States 
are interested in National LEV proceeding even with less than 49 states 
participating, EPA would want National LEV to proceed. Additionally, 
after the program is found in effect, it is possible that National LEV 
would continue even if one or more OTC States opt out at a future time. 
Therefore, National LEV requirements must provide for the possibility 
of having less than 49 states in the program, which will necessitate 
changes in the Final Framework Rule's provisions for determining 
compliance with the fleet average NMOG standards.
    In the SNPRM, EPA proposed to modify the Final Framework Rule so 
that the fleet average NMOG calculation would not include vehicle sales 
in any OTC State that legitimately opts out once that opt-out becomes 
effective.50 This would help ensure that states that opt 
into National LEV will receive the anticipated emissions benefits as 
long as they and the auto manufacturers participate in National LEV. 
The opposite approach (i.e., including all vehicle sales in any OTC 
States that are not participating in National LEV) would concentrate 
cleaner cars in those OTC States with state Section 177 Programs at the 
expense (environmentally) of OTC States committed to National LEV. EPA 
is finalizing the program to have manufacturers not include vehicles 
sold in a state that opts out of the program in their fleet average 
NMOG compliance calculations for the Northeast Trading Region (NTR) or 
All States Trading Region (ASTR). This action provides the maximum 
emission benefits to the states participating in the National LEV 
program. Additionally, vehicles sold in an OTC State that was not 
participating in National LEV will be included in the fleet average 
NMOG compliance calculations for that state, and it would be 
inequitable to count those vehicles in compliance calculations for the 
National LEV program as well.
---------------------------------------------------------------------------

    \50\ EPA's treatment of vehicle sales in OTC States that break 
their commitments is addressed in the regulatory provisions and 
preamble discussion of manufacturer and OTC State offramps. See 
section VI above and 40 CFR 86.1707.
---------------------------------------------------------------------------

    EPA also took comment on whether to count in a manufacturer's fleet 
average NMOG calculation those California-certified vehicles that are 
sold under EPA's Cross Border Sales (CBS) policy in states that are 
participating in National LEV. A National LEV program consisting of 
less than all of the OTC States would necessitate the continuation of 
EPA's CBS policy for those manufacturers producing vehicles certified 
separately to Federal and California standards. This policy allows 
manufacturers to introduce into commerce California-certified vehicles 
in states that are contiguous to California or other states that have 
adopted the Section 177 Program. The policy was designed to alleviate 
the burden on dealerships located in border regions of states with a 
Section 177 Program from having to stock, service, and sell two types 
of vehicles: those meeting the California emission requirements and 
those meeting the Federal emission requirements. If a state were not 
participating in National LEV and instead had a Section 177 Program in 
effect, under the CBS policy manufacturers would be allowed to sell 
California-certified vehicles in National LEV states bordering the non-
participating state. The necessity of continuing the Cross-Border Sales 
policy raises the issue of how to count such California-certified 
vehicles sold in those contiguous states in calculating the 
manufacturer's compliance with its National LEV fleet average NMOG 
requirement.
    EPA has decided to allow manufacturers to include all National LEV 
vehicles and California-certified vehicles sold in the NTR in MY1999 
and MY2000 (including California Tier 1 vehicles) in their fleet 
average NMOG compliance calculations for the NTR in MY1999 and MY200 
(except for any vehicles sold in an OTC State that has not opted in or 
that otherwise has its own Section 177 Program). If all these

[[Page 955]]

California-certified vehicles were not included in the compliance 
calculation, a manufacturer could detrimentally affect its compliance 
with the fleet average NMOG standards in the NTR by selling higher-
emitting California-certified vehicles, which would not be included in 
its NTR compliance calculation nor in any calculation done to show 
compliance with a state Section 177 Program. These vehicles would 
decrease the size of the manufacturer's fleet in the NTR and allow the 
manufacturer to demonstrate compliance with applicable fleet average 
NMOG standards using a smaller fleet size than was actually sold in the 
NTR.
    EPA has also decided to allow manufacturers to count only vehicles 
certified to federal standards in the fleet average NMOG calculation 
for MY2001 and later. No California-certified vehicles sold in National 
LEV states will count in a manufacturer's fleet average NMOG compliance 
calculation after MY2000. Given the nationwide trading region that will 
go into effect in MY2001, it becomes much more difficult for a 
manufacturer to artificially decrease the size of its National LEV 
fleet and thereby artificially inflate its NLEV NMOG fleet average 
through sales of California-certified vehicles. The much larger number 
of vehicles included in the ASTR means that any sales of California 
vehicles in the NTR under the CBS policy will not have a generally 
noticeable effect on the calculated fleet averages in the ASTR. 
California-certified vehicles sold in the NTR after MY2000 will also 
likely be LEVs and ULEVs, as discussed in sections IX and VIII.E, so 
there is even less likelihood of a detrimental environmental impact 
from the sale of California-certified vehicles in the NTR. The auto 
manufacturers' comments supported not including California-certified 
vehicles in their fleet average NMOG compliance calculations after 
MY2000.

C. Certification of Tier 1 Vehicles in a Violating State

    If an OTC State violates its commitment to National LEV, in some 
instances manufacturers will have the option of supplying vehicles 
meeting only the Tier 1 emission standards in the violating state. To 
exercise this option, manufacturers could sell different vehicles 
(i.e., Tier 1 vehicles) to the violating OTC State than they are 
selling to the other states (i.e., TLEVs, LEVs, ULEVs and ZEVs). 
Alternatively, manufacturers could sell the same vehicles to all 
states, but have a label that indicates that vehicles sold in the 
violating OTC State are only certified to Tier 1 levels. Such vehicles 
sold in the violating OTC State would have Tier 1 tailpipe standards 
for their compliance levels (which would govern recall and warranty 
actions and SIP credits), but would have TLEV, LEV, ULEV or ZEV 
tailpipe standards for their compliance levels when sold in other 
states covered by the National LEV program.
    It is possible that a manufacturer could begin vehicle 
certification for a given model year before learning that it is only 
required to sell Tier 1 vehicles in a given state. In such a situation, 
EPA will allow a manufacturer to change the compliance levels of its 
vehicles sold in a violating OTC State through the submission of 
running changes to EPA. A running change is a mechanism manufacturers 
use to obtain approval from EPA for modifications or additions to 
vehicles or engines that have already been certified by EPA but are 
still in production. By allowing a manufacturer to change the 
compliance levels of its vehicles through a running change that applies 
only to vehicles sold in a violating OTC State, manufacturers will have 
a procedure to respond in a timely fashion to a state breaking its 
commitment, which will provide a real disincentive for an OTC State to 
break its commitment.
    Manufacturers currently use running changes in the federal 
certification process to obtain EPA approval of a change in a specified 
vehicle configuration or an addition of a vehicle or engine to an 
approved engine family that is still in production.51 A 
manufacturer may notify the Administrator in advance of or concurrent 
with making the addition or change. The manufacturer must demonstrate 
to EPA that all vehicles or engines affected by the change will 
continue to meet the applicable emission standards. This demonstration 
can be based on an engineering evaluation and testing if the 
manufacturer determines such testing is necessary. The Administrator 
may require that additional emission testing be performed if the 
manufacturer's determination is not supported by the data included in 
its running change application. EPA may disapprove a running change 
request, which could then require manufacturers to remedy vehicles or 
engines produced under the request.
---------------------------------------------------------------------------

    \51\  See 40 CFR 86.079-32, 86.079-33, and 86.082-34.
---------------------------------------------------------------------------

    EPA will exercise its current authority to allow manufacturers to 
use a running change to modify quickly the compliance level of their 
National LEV vehicles to Tier 1 tailpipe standards when the National 
LEV regulations set the only applicable tailpipe standards at Tier 1 
levels in a particular state. Such running changes will reflect only 
the change in emission standards the vehicles are required to meet. 
After such running change has been made, vehicles sold in a state for 
which Tier 1 standards are applicable will be treated as Tier 1 
vehicles for purposes of federal enforcement requirements and warranty 
limits and would not count in the manufacturers' NMOG fleet average.
    If a manufacturer wished to sell vehicles with Tier 1 compliance 
levels in a violating OTC State and more stringent compliance levels in 
other states, it would be required to modify its certification 
application to reflect the change and install a modified Vehicle 
Emission Control Information (VECI) label. The label would state that 
the vehicle complies with TLEV, LEV, ULEV or ZEV standards (whichever 
is applicable), but if such vehicle is sold in the specified violating 
OTC State, such vehicle is certified to Tier 1 tailpipe standards. The 
modified VECI label will highlight the distinction in vehicle 
compliance levels to consumers and the general public.52 EPA 
believes that running changes for this particular situation may be 
allowed by applying good engineering judgment, rather than additional 
emission testing, since a vehicle certified to National LEV TLEV, LEV, 
ULEV, or ZEV standards should also meet Federal Tier 1 standards. In 
the instance where an engineering evaluation is judged to be 
insufficient to support a change, EPA will require additional data.
---------------------------------------------------------------------------

    \52\ Such a running change would not have a retroactive effect. 
Any vehicle sold as a TLEV, LEV, ULEV or ZEV (i.e., any vehicle 
without a label that said Tier 1 was the applicable standard for 
sales in the relevant state at the time of the sale) would still be 
subject to warranty and recall for the tailpipe standards applicable 
to that category. EPA believes it would be unacceptable for a 
consumer who purchases a LEV that, at the time of sale in that 
state, is being sold as a vehicle certified to LEV standards for 
that state to find out later that the vehicle has mysteriously been 
converted to a Tier 1 vehicle.
---------------------------------------------------------------------------

    Vehicles complying only with Tier 1 tailpipe standards and sold in 
an OTC State that has violated its National LEV commitment will be 
treated as Tier 1 vehicles in that state for purposes of demonstrating 
compliance with federal requirements and SIP credits. These vehicles 
will be held only to the Tier 1 tailpipe standards for purposes of 
recall liability in that state. For example, a National LEV vehicle 
certified to LEV standards but sold as a Tier 1 vehicle in a violating 
state would not be subject to recall action in the violating state if 
the

[[Page 956]]

problem causing the recall did not cause the vehicle to exceed the Tier 
1 standards.53
---------------------------------------------------------------------------

    \53\ EPA is considering making significant changes to its 
existing federal compliance program, currently targeted to begin 
with MY2000 (these changes are referred to as CAP 2000, or 
Compliance Assurance Program 2000). While CAP 2000 is still pre-
proposal, EPA has established a docket (A-96-50), which contains 
information on the concepts currently being considered. Once 
promulgated, CAP 2000 may have some potential ramifications for 
quickly changing certification designations for National LEV 
vehicles sold in an OTC State that had violated its National LEV 
commitment. In particular, EPA is considering significantly 
streamlining its current certification program and requiring 
manufacturers to perform an in-use verification testing program to 
demonstrate that the streamlined certification procedures are 
capable of predicting in-use compliance. This program would apply to 
all federally certified vehicles, including Tier 1 vehicles. Thus, 
CAP 2000 could also possibly apply to any National LEV vehicles that 
were only required to comply with Tier 1 tailpipe standards under 
the proposal outlined above.
---------------------------------------------------------------------------

D. Provisions Relating to Changes to Stable Standards

    The Final Framework Rule provided that, with certain exceptions, 
manufacturers would be able to opt out of National LEV if EPA changed a 
motor vehicle requirement that it had designated a ``Stable Standard.'' 
The Stable Standards are divided into two categories: Core Stable 
Standards and Non-Core Stable Standards. Core Stable Standards 
generally are the National LEV standards that EPA could not impose 
absent the consent of the manufacturers. Non-Core Stable Standards 
generally are other federal motor vehicle standards that EPA does not 
anticipate changing for the duration of National LEV. For both Core and 
Non-Core Stable Standards, EPA can make changes to which manufacturers 
do not object. For Non-Core Stable Standards, EPA can also make changes 
that do not increase the stringency of the standard or that harmonize 
the standard with the comparable California standard. EPA can make 
other changes to any of the Stable Standards, but such changes would 
allow the manufacturers to opt out of National LEV. See the Final 
Framework Rule for more detail on the specific Stable Standards and the 
offramp for manufacturers associated with changes to the Stable 
Standards (62 FR 31202-31207).
    As proposed in the SNPRM, EPA is making a few minor changes to the 
provisions for opt-outs based on a change to a Stable Standard. See 40 
CFR 86.1707(d). Under the Final Framework Rule, EPA had an opportunity 
to prevent an opt-out based on a change to a Stable Standard from 
coming into effect by withdrawing the change to the Stable Standard 
before the effective date of the opt-out. To give EPA sufficient time 
to withdraw the change and prevent the opt-out, under the Final 
Framework Rule, such an opt-out could not become effective until the 
model year named for the second calendar year following the calendar 
year in which the manufacturer opted out.
    As proposed in the SNPRM, this Final Rule deletes the provisions 
that allowed the Agency the ability to prevent an opt-out by 
withdrawing a change that had allowed manufacturers to opt out. Today's 
rule also sets the earliest effective date of an opt-out based on a 
change to a Core Stable Standard to be the same as the earliest 
effective date of an opt-out based on a violation of an OTC State 
commitment to National LEV. Thus, an opt-out based on an EPA change to 
a Core Stable Standard or an OTC State violation of its commitment to 
National LEV could become effective beginning in the ``next model 
year'' after the manufacturer opts out.54 See section VI.A 
above for further discussion of the effective date of opt-outs based on 
an OTC State violation of its commitment to National LEV.
---------------------------------------------------------------------------

    \54\ The ``next model year'' is the model year named for the 
calendar year following the calendar year in which EPA received the 
opt-out notification. For example, if EPA received the opt-out in 
2000, the ``next model year'' would be MY2001.
---------------------------------------------------------------------------

    EPA does not believe that this change will adversely affect the 
stability of the National LEV program. For the reasons discussed in the 
SNPRM (60 FR 44776), EPA is highly unlikely to make any change to a 
Stable Standard that may allow the manufacturers to opt out. EPA 
received no comments opposing this proposed change. See the SNPRM 
section VIII.D for additional discussion of the reasons why EPA 
believes this change is appropriate.
    In the Final Framework Rule, EPA stated that, if a manufacturer 
were to take an offramp because EPA changed a Stable Standard, the 
applicable state or federal standards would apply. At that time, EPA 
did not discuss in detail the timing for when state or federal 
standards would apply. As proposed in the SNPRM (60 FR 44779), today's 
rule provides that, if a manufacturer validly opted out of National LEV 
based on an EPA change to a Stable Standard, once the manufacturer's 
opt-out was effective, the manufacturer's obligations would be 
determined in the same manner as if the manufacturer had opted out 
because an OTC State failed to submit its National LEV SIP revision on 
time (except that no state could be treated as a violating state). As 
of the effective date of its opt-out, the manufacturer would be subject 
to any backstop Section 177 Programs for which the two-year lead time 
requirement of section 177 had been met (running from the date the 
state adopted the backstop program), and would be subject to Tier 1 
requirements in states without such programs. Manufacturers would be 
subject to backstop ZEV mandates for model years (as defined in Part 
85, Subpart X) commencing two years after the date of EPA's receipt of 
the opt-out notification. To the extent that these regulations would 
provide a manufacturer with less than the two-year lead time set forth 
in section 177, the manufacturer waives that protection by opting into 
National LEV and then setting an effective date in its opt-out 
notification that provides for less than two-years lead time. To the 
extent these regulations would provide a manufacturer with more time 
than required by section 177, by opting into National LEV the OTC 
States commit to provide the lead time set forth in the National LEV 
regulations.

E. Nationwide Trading Region

    The National LEV program, as set forth in the Final Framework Rule, 
required manufacturers to determine compliance with the fleet average 
NMOG standards for the two classes of National LEV vehicles in two 
separate trading regions: the OTC States and the 37 States making up 
the rest of the country (except California). In the SNPRM, EPA proposed 
to remove the requirement for two trading regions for MY2001 and later 
model years and instead establish a nationwide trading region. EPA 
cited the elimination of the legal requirement for National LEV to 
provide equivalent emission reductions to the OTC LEV program and the 
change in program start dates for both National LEV and OTC State 
Section 177 Programs as the major reasons for it to reconsider the 
necessity of separate trading regions. See 62 FR 44779-80. In today's 
rule in 40 CFR 86.1710, EPA is establishing a nationwide trading region 
which manufacturers will use to demonstrate compliance with National 
LEV standards in MY2001 and later.
    It is important that the emissions reductions expected from 
National LEV in the OTR are actually achieved. Various aspects of the 
program, such as the periodic equivalency determination and the 
separate trading regions, were designed to ensure the expected quantity 
of emission reductions in the OTR. However, EPA believes that a 
nationwide trading region will not detrimentally affect the 
environmental benefits of National LEV in the OTR. EPA has received no 
data showing significantly different vehicle model sales in different 
regions of the country

[[Page 957]]

and has no reason to expect that manufacturers' compliance with a 
nationwide trading region will lead to greater numbers of higher-
emitting vehicles in the OTR.
    Even if vehicle model sales levels were significantly different in 
various regions of the country, a discrepancy between the emissions 
produced by the fleets sold in the OTR and outside the OTR would only 
be possible if a manufacturer's fleet was made up of a number of engine 
families certified to Tier 1, TLEV, and LEV standards. After MY2000, a 
manufacturer's fleet would have to include Tier 1 vehicles and TLEVs, 
as well as LEVs and ULEVs, for there to be even a possibility of 
introducing a greater percentage of dirtier vehicles in the OTR than in 
the rest of the country. As noted in the SNPRM, EPA does not believe 
significant numbers of Tier 1 vehicles and TLEVs will be sold in the 
OTR after MY2000, since other provisions of the National LEV program 
will act to reduce the incentive to sell substantial numbers of such 
vehicles at that time.
    Two factors support EPA's belief that the OTC States participating 
in the National LEV program will receive vehicles with the same level 
of emissions control under a nationwide trading region as would be 
expected if the program retained two trading regions. First, beginning 
in MY2001, National LEV regulations prohibit manufacturers from 
offering for sale any Tier 1 vehicles and TLEVs in the NTR unless the 
same engine families are certified and offered for sale in California 
in the same model year. See 62 FR 31218 (June 6, 1997); 40 CFR 
86.1711.55 California's more stringent fleet average NMOG 
standard and SFTP phase-in requirements, as described in section IX, 
will act to limit the number of Tier 1 and TLEV engine families 
certified and sold in California, and, therefore, the number sold in 
the NTR. Second, even though the National LEV fleet average NMOG 
standard is not as stringent as California's, the 0.075 g/mi and 0.100 
g/mi standards applicable under National LEV for MY2001 and later will 
make it difficult for manufacturers to include substantial numbers of 
Tier 1 vehicles and TLEVs in their fleet and still comply with the 
fleet average NMOG standard. Each Tier 1 vehicle or TLEV sold by a 
manufacturer would have to be offset by more than one ULEV vehicle in 
order for that manufacturer to remain in compliance with the applicable 
fleet average NMOG standards. Therefore, EPA believes there are strong 
incentives for manufacturers to limit or even eliminate the production 
and sale of Tier 1 vehicles and TLEVs in the NTR in MY2001 and later, 
which would result in a nationwide vehicle fleet of essentially LEVs. 
This result is not dependent on having a separate trading region in the 
OTR.
---------------------------------------------------------------------------

    \55\ As stated in the SNPRM, manufacturers will not be required 
always to sell exactly the same engine families in both California 
and the NTR because in some instances, that would not be possible. 
In the specific case of Tier 1 engine families, National LEV 
maintains Federal Tier 1 standards while California has its own Tier 
1 standards, so a manufacturer could not sell an identical 
California Tier 1 vehicle as a Federal Tier 1 vehicle in the NTR 
under the National LEV program. Therefore, for purposes of this 
provision, EPA will consider a National LEV Tier 1 or TLEV engine 
family the same as a California Tier 1 or TLEV engine family if the 
National LEV engine family has the same technology (hardware and 
software) as the comparable California engine family. A manufacturer 
could always certify a Tier 1 or TLEV engine family as a 50-state 
family and avoid this issue.
---------------------------------------------------------------------------

    A nationwide trading region will also reduce manufacturers' and 
EPA's administrative burden in demonstrating and assessing compliance 
with the National LEV fleet average NMOG standards. Compliance under 
one nationwide trading region rather than two separate regions for 
MY2001 and later model years will reduce the manufacturers' compliance 
burden by eliminating the need specifically to track and report vehicle 
sales in two separate regions and maintain two separate tallies of 
credits and debits specific to the two regions. A single trading region 
will also reduce EPA's administrative burden in determining whether 
manufacturers are complying with the applicable fleet average NMOG 
standards. Given a nationwide fleet that is all or almost all LEVs, a 
separate trading region for the OTR will not have any significant air 
quality benefit and will add additional unnecessary complexity to the 
National LEV program. Moreover, even separate trading regions would not 
have required manufacturers to demonstrate program compliance on an OTC 
state-by-state basis, but would instead have only required compliance 
demonstrations based on regionwide sales. Separate trading regions 
would thus have been of limited value to OTC States wishing to use 
National LEV program vehicle tracking requirements to check on the 
different types of vehicles sold within individual states.
    Under today's rule, National LEV retains the NTR, which would apply 
for MY1999-2000 and cover vehicles sold in the OTC States. The second 
region would be the All States Trading Region (ASTR), which will 
include all states in National LEV except for California, and apply for 
2001 and later model years. Manufacturers will demonstrate compliance 
with the fleet average NMOG standards in these two regions under the 
provisions set forth in today's rule and the Final Framework Rule. EPA 
is eliminating the 37 State trading region that was finalized in the 
Final Framework Rule.
    Manufacturers can generate early reduction credits in the states 
outside the NTR before MY2001 to apply to compliance in the ASTR from 
MY2001 on. Manufacturers could also use credits generated in the NTR 
for demonstrating compliance in the ASTR from MY2001 on at the same 
value as if the manufacturer had used them in the NTR under the Final 
Framework Rule. However, a manufacturer could not apply early reduction 
credits generated outside the NTR to offset any debits generated in the 
NTR before MY2001. Using credits generated outside the NTR to offset 
debits generated in the NTR during MY1999 and MY2000 would decrease the 
environmental benefits that should accrue in the NTR.
    Shifting from the NTR in MY2000 to the ASTR in MY2001 does raise 
special transition issues for manufacturers that end MY2000 with debits 
in the NTR. (If a manufacturer ends MY2000 with credits in the NTR, 
these credits would be subject to the usual discounting (rather than to 
the special provisions for early reduction credits) and then could be 
applied either in the ASTR or the NTR. Section 86.1710(d)(2) 
specifically addresses this situation. If a manufacturer ends MY2000 
with debits in the NTR, it can make up those debits only with NTR 
credits. This is necessary to ensure that the NTR gets the intended 
environmental benefits from starting the program in the NTR two years 
before it starts in the rest of the country. A manufacturer than ends 
MY2000 with debits in the NTR must calculate its fleet average NMOG 
value in the NTR for MY2001. If the manufacturer does not have any 
credits in the NTR in MY2001 (and it does not obtain NTR credits from 
another manufacturer), then it will be subject to an enforcement action 
for the MY2000 debits. If the manufacturer has credits in MY2001 in the 
NTR, these must be applied to offset its MY2000 NTR debits. If the 
MY2000 debits exceed the MY2001 credits, then the manufacturer would be 
subject to an enforcement action for the remaining MY2000 debits. In 
addition to calculating fleet average NMOG values for the NTR, the 
manufacturer must also calculate fleet average NMOG values for the 
ASTR. After calculating the level of debits or credits in the ASTR, the 
level must be adjusted by deducting all

[[Page 958]]

credits used to offset MY2000 debits in the NTR.
    The National LEV program will allow a manufacturer to demonstrate 
compliance with the fleet average NMOG standards using actual 
production data in lieu of actual sales data if the manufacturer is 
demonstrating compliance with the fleet average NMOG standards in the 
ASTR. A manufacturer will need to petition EPA to allow production 
volume to be used in lieu of actual sales volume and would have to 
submit the petition to EPA within 30 days after the end of the model 
year. EPA will grant such a petition if the manufacturer establishes, 
to the satisfaction of the Administrator, that production volume is 
functionally equivalent to sales volume. Manufacturers will still have 
to keep sales data in the NTR to demonstrate compliance with the ban on 
the sale of Tier 1 and TLEV engine families in the NTR if such engine 
families are not certified for sale in California for the same model 
year, but such data would not be reported to EPA as part of a regular 
report. EPA has previously allowed manufacturers to use production 
volume in lieu of sales volume as part of the Tier 1 standards phase-
in.

F. Elimination of Five-Percent Cap on Sales of Tier 1 Vehicles and 
TLEVs in the OTR

    EPA's Final Framework Rule codified the OTC States' and 
manufacturers' recommendation that National LEV include provisions 
limiting the sale of Tier 1 vehicles and TLEVs in the NTR after MY2000. 
The first provision is that manufacturers may sell in the NTR Tier 1 
vehicles and TLEVs only if the same or similar engine families are 
certified and offered for sale in California as Tier 1 vehicles and 
TLEVs. This provision is being retained in the National LEV program. 
The second provision is a five-percent cap on sales of Tier 1 vehicles 
and TLEVs in the NTR starting in MY2001, which allows all manufacturers 
to sell Tier 1 vehicles and TLEVs in the NTR to the extent permitted 
under the first limitation as long as the overall Tier 1 vehicle and 
TLEV fleet does not exceed five percent of the National LEV vehicles 
sold in the NTR. EPA proposed to delete the five-percent cap provision 
because of the change in the OTC States' legal obligation since this 
provision was proposed and because of the additional administrative 
burden it would entail if EPA were to adopt the proposal to have a 
single trading region starting in MY2001. Furthermore, EPA believes the 
five-percent cap would not provide any air quality benefit given the 
expected fleet make-up after MY2000 and the other limitation on sales 
of these vehicles in the NTR. See 62 FR 44781 (August 22, 1997).
    EPA has decided to delete the five-percent cap provision from the 
National LEV program. The court reversal of the requirement that all 
OTC States adopt Section 177 Programs effective in MY1999 means there 
is no longer a legal requirement that EPA find that National LEV is 
equivalent to state Section 177 Programs throughout the OTR. 
Additionally, the expected benefits in the OTR of National LEV as 
compared to OTC State adopted Section 177 Programs has increased. 
Therefore, there is no legal need and less practical need for a five-
percent cap to control NOX emissions.
    EPA also believes the five percent cap is not necessary because it 
expects manufacturers will not introduce significant numbers of Tier 1 
vehicles and TLEVs after MY2000 in the national, let alone the 
Northeast, market. This means that National LEV will not have a 
NOX penalty when compared to OTC State adopted Section 177 
Programs. A National LEV fleet, made up primarily of LEV vehicles, will 
have similar effects on NOX emissions when compared to a CAL 
LEV fleet consisting primarily of LEV and ULEV vehicles since both 
types of vehicles have the same NOX emission standards. The 
provision limiting manufacturers' sale in the NTR of Tier 1 vehicles 
and TLEVs based on Calfornia certification also provides additional 
assurance. A staff report on SFTP revisions issued by the California 
Air Resources Board offers further support for EPA's decision to drop 
the five percent cap requirement. In this report, CARB states that 
their cost estimates assume that the entire California new motor 
vehicle fleet will be certified to LEV or more stringent standards by 
MY 2001, although they note that ``in actuality, staff estimates that 
something less than five percent of new motor vehicles will be 
certified to the Tier 1 and TLEV emission standards by the 2001 model 
year'' due to the stringency of the fleet average NMOG standard in 
California.56 For all these reasons, EPA believes that any 
sales of Tier 1 vehicles and TLEVs in the NTR after MY2000 will make up 
less than five percent of the fleet in any instance, and does not 
believe having a separate requirement to ensure such sales limits is 
needed.
---------------------------------------------------------------------------

    \56\ Staff Report: Public Hearing to Consider Adoption of New 
Certification Tests and Standards to Control Exhaust Emissions from 
Aggressive Driving and Air-Conditioner Usage for Passenger Cars, 
Light-Duty Trucks, and Medium-Duty Vehicles under 8501 Pounds Gross 
Vehicle Weight Rating. State of California, California Environmental 
Protection Agency, Air Resources Board, July, 1997.
---------------------------------------------------------------------------

    Finally, even if there were some benefit to the NTR from a five-
percent cap, EPA believes the benefit would be so minimal that it would 
not justify the administrative burden given the single trading region 
that applies after MY2000. Requiring compliance demonstrations with the 
five-percent cap would negate any administrative savings associated 
with the All State Trading Region for 2001 and later model years and 
the provision allowing manufacturers to demonstrate compliance through 
production data. Moreover, retention of the five-percent cap would not 
provide any additional assurance that National LEV will continue to 
provide a quantity of emissions reductions at least equivalent to the 
quantity that would be provided by OTC State Section 177 Programs as 
demonstrated through EPA's periodic equivalency determination. The 
mobile source emissions model used in the original equivalency 
determination, including fleet make-up in the OTR, will be used as part 
of the equivalency determination, unless all parties agree to use an 
updated modeling methodology. Modifications made to the model in the 
course of a periodic equivalency determination would take into account 
changes in EPA's rules and regulations and implementation of such rules 
and regulations, not changes in the emissions inventory assumptions 
used in the original equivalency determination.

G. Technical Corrections to Final Framework Rule

    The Agency is also making several minor technical corrections to 
the National LEV regulations issued in the Final Framework Rule. A June 
24, 1997 letter from the American Automobile Manufacturers Association 
(AAMA) and Association of International Automobile Manufacturers (AIAM) 
(available in the public docket for review) suggests a number of 
technical corrections to the regulations EPA promulgated on June 6, 
1997. The corrections detailed by AAMA/AIAM have been reviewed by EPA 
and incorporated in today's rule to the extent that they are necessary 
and appropriate. In addition, a number of changes must be made to 
reflect the start of the program in MY1999, rather than MY1997, which 
was used as a placeholder in the Final Framework Rule. These revisions 
are detailed in the Response to Comments document for today's Final 
Rule.
    In the Final Framework Rule, EPA required manufacturers to track 
vehicles

[[Page 959]]

to the ``point of first sale'' for purposes of determining compliance 
with fleet average NMOG standards (62 FR 31212, June 6, 1997). EPA 
defined ``point of first sale'' as ``the location where the completed 
LDV or LDT is purchased'' and it ``may be a retail customer, dealer, or 
secondary manufacturer.'' See 40 CFR 86.1702-97(b). EPA recognized that 
requiring manufacturers to always track vehicle sales to the ultimate 
purchaser would add an additional burden on manufacturers without 
having any significant effect on air quality.
    Requiring manufacturers to track vehicles to the point of first 
sale was intended to impose similar requirements on manufacturers as 
those associated with EPA's Tier 1 standard phase-in compliance 
requirements found in 40 CFR 86.094-8 and 86.094-9. In the Tier 1 
program, manufacturers could demonstrate compliance ``based on total 
actual U.S. sales of light-duty vehicles of the applicable model year 
by a manufacturer to a dealer, distributor, fleet operator, broker, or 
any other entity which comprises the point of first sale.'' See 40 CFR 
86.094-8(a)(1)(i)(B)(1)(i). EPA believes the National LEV vehicle sales 
tracking requirements operate in the same manner as those found in the 
Tier 1 regulations, but the auto manufacturers have notified EPA of 
their concern that National LEV imposes different requirements. 
(Document available in docket A-95-26.)
    To eliminate confusion about the required level of vehicle tracking 
necessary to demonstrate compliance with National LEV fleet average 
NMOG standards, today's final rule modifies the definition of ``point 
of first sale'' in the National LEV program such that it is equivalent 
to the ``point of first sale'' language found in the Tier 1 
regulations. EPA did not intend to limit ``point of first sale'' 
entities to those specifically listed in the National LEV regulations. 
EPA also does not intend to limit a manufacturer to tracking vehicles 
only to the point of first sale if a manufacturer decides further 
tracking gives it a more accurate account of vehicle sales in the 
different trading regions or if a manufacturer's current vehicle 
tracking system is set up to track vehicles beyond the point of first 
sale. However, as noted in the Final Framework Rule, EPA does not 
believe this additional level of tracking vehicles is necessary.

H. Clarifications to Final Framework Rule

    Based on comments and other letters submitted by the auto 
manufacturers, EPA believes that some provisions and discussions in the 
Final Framework Rule and preamble could cause confusion. Thus, EPA is 
taking the opportunity here to clarify a few issues addressed in the 
Final Framework Rule.
1. Operation of National LEV Vehicles on In-Use Fuels
    In the Final Framework Rule EPA reiterated a set of three 
principles originally presented in the October 10, 1995 NPRM. These 
principles, agreed upon by representatives of the auto industry, some 
segments of the oil industry, and the OTC States, stated:
    (1) Adoption of the National LEV program does not impose unique 
gasoline requirements on any state. Gasoline specified for use by any 
state will have the same effect on the National LEV program as on the 
OTC LEV program.
    (2) Testing is needed to evaluate the effects of non-California 
gasoline on emissions control systems.
    (3) If testing results show a significant effect, EPA will conduct 
a multi-party process to resolve the issue without adversely affecting 
SIP credits or actual emission reductions when compared to OTC LEV 
using fuels available in the OTR or imposing obligations on 
manufacturers different from the obligations they would have had under 
OTC LEV.
    The Agency continues to hold to these principles, but at the 
request of some members of the auto industry EPA will clarify some 
related statements made in the Final Framework Rule. As noted in the 
Final Framework Rule, EPA anticipates that auto manufacturers will take 
advantage of the option to certify vehicles under the National LEV 
program using California Phase II reformulated gasoline (62 FR 31219, 
June 6, 1997). Consequently, vehicles will be designed by auto 
manufacturers to achieve the applicable emission standards using fuel 
meeting the California specifications. Under the National LEV Program, 
vehicles in actual use will be using the range of fuels commercially 
available across the country. In the preamble to the final regulations, 
EPA stated that ``section 86.1705-97(g)(5) [renumbered as 86.1701(d) in 
today's rule] requires auto manufacturers to design National LEV 
vehicles to operate on fuels that are otherwise required under 
applicable federal regulations.'' In this context, the use of the word 
``operate'' refers to the overall performance of the vehicle, such as 
starting, acceleration, etc. It is not intended to convey that a 
gasoline-powered vehicle using commercially available fuel outside 
California would necessarily achieve the same emissions performance as 
it would using the relatively cleaner fuel required in California. 
Nonetheless, the emission reductions potentially realized by the 
National LEV program remain significant relative to the alternative of 
a fleet of Tier 1 vehicles operating on the same commercially-available 
fuels.57 To clarify another provision, 40 CFR 86.1701(d) 
does not require manufacturers to design methanol, ethanol, electric, 
compressed natural gas, or propane vehicles to operate on gasoline or 
any alternative fuel other than the type (methanol, ethanol, 
electricity, etc.) of fuel for which it was designed.
---------------------------------------------------------------------------

    \57\ The auto and oil industries are currently conducting 
studies designed to quantify the emissions performance of LEV-type 
vehicles when operated on gasoline with varius levels of sulfur. The 
data tabulation and associated analyses for these studies are not 
yet completed.
---------------------------------------------------------------------------

2. Clarification of Banking and Trading Provisions
    In the Final Framework Rule, EPA included a limitation on the 
nature of the emissions credits recognized under the National LEV 
program. (See 40 CFR 86.1710(c)(10).) In the preamble, EPA stated that, 
as with other emission credits or allowances recognized under the Act, 
any emissions credits generated under the National LEV program are not 
the holder's property, but instead are a limited authorization to emit 
the designated amount of emissions. Consequently, nothing in the 
National LEV regulations or any other provision of law should be 
construed to limit EPA's authority to terminate or limit this 
authorization through a rulemaking. In their comments, manufacturers 
expressed their concern that this provision might affect the status of 
the National LEV averaging, banking and trading provisions as a Core 
Stable Standard, which, if EPA made certain changes to those 
provisions, would allow the manufacturers to opt out of the National 
LEV program.
    The limitation at issue is a standard provision for EPA emissions 
trading programs. EPA believes it is important to make it clear that 
while emissions credits can be generated, banked, bought and sold 
pursuant to regulatory authorization, they do not constitute property. 
Rather, they are only a limited authorization to emit a designated 
amount of emissions. In establishing a credit trading system, EPA is 
providing an alternative means of compliance with statutory or 
regulatory limits on emissions. In authorizing the generation and use 
of emissions credits, EPA has in no way given up its regulatory 
authority to limit emissions further by modifying either the underlying 
regulatory

[[Page 960]]

emission limitations or the way they may be achieved through generation 
or use of emissions credits. As a consequence, if EPA were to modify 
the provisions relating to emissions credits under National LEV, the 
Agency would not be subject to challenge on the grounds that its action 
was a taking of private property protected under the Fifth Amendment to 
the U.S. Constitution.
    However, the limits on the nature of emissions credits included in 
the Final Framework Rule are not intended to affect the opt-out 
provisions of the National LEV program. If EPA modified any of the 
National LEV banking and trading provisions in a manner that triggered 
an offramp based on a change to a Stable Standard, the manufacturers 
would be able to opt out of National LEV. In stating the limited nature 
of emissions credits, EPA only intended to preserve its regulatory 
authority to make regulatory changes affecting such credits, in the 
unlikely event that EPA decided such changes were appropriate. Section 
86.1710(c)(10) does not nullify either the designation of the banking 
and trading provisions as a Core Stable Standard or the manufacturers' 
ability to opt out if EPA changes them over a manufacturer objection. 
Nevertheless, to clarify further its intent, EPA is adding the 
following language to the end of 40 CFR 86.1710(c)(10): ``If EPA were 
to terminate or limit the authorization to emit associated with 
emissions credits generated under the provisions of this section, this 
paragraph (c)(10) would have no effect on manufacturers' ability to opt 
out of the National LEV program pursuant to Sec. 86.1707.''
3. Recordkeeping Requirements
    Under the final National LEV regulations, EPA may void certificates 
ab initio only for a manufacturer's failure to retain records or 
provide such information as specified upon request. EPA will enforce 
most of the other National LEV requirements through conditioning the 
certificate and identifying individual noncomplying vehicles in the 
event of a violation.
    EPA has determined that the authority to void certificates ab 
initio for major record-keeping and reporting violations is an 
important enforcement mechanism for programs in which compliance must 
be demonstrated using data held by manufacturers. For many flexible 
compliance schemes, such as averaging, banking and trading approaches 
or phase-ins of requirements, the absence of records and reports on how 
the regulated entities complied could preclude EPA from enforcing the 
underlying substantive requirements. For example, EPA could never prove 
that a particular vehicle violates a fleet average or a phase-in by 
testing that vehicle; enforcement of a fleet average or a phase-in 
depends on accurate records for the entire fleet. Thus, in return for 
giving regulated parties some flexibility in meeting the requirements, 
EPA must have a mechanism to ensure that the manufacturers keep the 
records and make the reports necessary to verify compliance.
    In their comments, the manufacturers expressed concerns about EPA's 
authority to void ab initio certificates for recordkeeping or reporting 
violations. As discussed above, EPA believes that this enforcement 
mechanism is an important tool to ensure compliance with the provisions 
of the National LEV program such as averaging, banking, and trading of 
fleet average NMOG credits and debits. However, EPA does not intend to 
use this authority for every recordkeeping or reporting violation which 
might occur under the National LEV regulations. Most violations will 
likely be minor, such as submitting late reports or not providing all 
of the required information, and would be considered violations of 
section 203(a)(1) of the Act, subjecting the manufacturer to applicable 
civil penalties. EPA would only void a certificate ab initio for the 
most egregious record-keeping and reporting violations, where a 
manufacturer's records or reporting are so substantially incomplete 
that EPA cannot determine compliance with the fleet average NMOG 
standard or other substantive requirements. EPA regulations currently 
provide for voiding certificates ab initio for record-keeping and 
reporting violations for several motor vehicle requirements with some 
compliance flexibility. (See e.g., Tier 1 (40 CFR 86.094-23), and 
evaporative emissions (40 CFR 86.096-23)). Both precedent and practical 
enforcement concerns support providing this strong penalty as a 
critical means to ensure the enforceability of underlying substantive 
requirements.

IX. Supplemental Federal Test Procedures

A. Background

    The Federal Test Procedure (FTP) is the vehicle test procedure 
historically used by EPA and the California Air Resources Board (CARB) 
to determine the compliance of light-duty vehicles and light-duty 
trucks with the conventional or ``on-cycle'' exhaust emission 
standards. Using the FTP, emissions performance is tested while the 
vehicle is driven over a ``typical'' driving schedule (a pattern of 
acceleration and deceleration over a given period of time), using a 
dynamometer to simulate the vehicle-to-road interface. Pursuant to the 
requirements of section 206(h) of the CAA, EPA has promulgated 
revisions to the Federal Test Procedure to make the test procedure 
better represent the manner in which vehicles are actually driven (61 
FR 54852, October 22, 1996). These revisions added the Supplemental 
Federal Test Procedure (SFTP) with accompanying emission standards. The 
SFTP emission standards promulgated by EPA are appropriate for vehicles 
meeting EPA's Tier 1 emission standards. EPA did not propose LEV-
stringency standards as part of its FTP revisions. In addition, the 
earlier National LEV final rulemaking (62 FR 31192, June 6, 1997) did 
not include LEV-stringency standards for the SFTP test procedure.
    EPA and CARB coordinated closely their review of the FTP, their 
research efforts, and the development of their respective off-cycle 
policies. On April 23, 1997, CARB published a proposal detailing their 
approach to addressing off-cycle emissions in the State of 
California.\58\ Following a comment period that remained open through 
May 6, 1997, CARB released a notice of public hearing accompanied by a 
staff report regarding its proposed adoption of SFTP test procedures 
and standards (``Staff Report'').\59\ The CARB proposal had four basic 
elements to it: test procedures, emission standards for LEVs and ULEVs, 
emission standards for Tier 1 vehicles and TLEVs, and a phase-in 
schedule. CARB adopted SFTP requirements largely consistent with their 
proposal at a public hearing on July 24, 1997, then subsequently 
released a Notice of Public Availability of Modified Text for a 15 day 
comment period on September 5, 1997 (``15-day Notice'').\60\
---------------------------------------------------------------------------

    \58\ Draft Regulatory Measure to Control Emissions During Non-
Federal Test Procedure Driving Conditions From Passenger Cars, 
Light-Duty Trucks and Medium-Duty Vehicles Under 8,500 Pounds Gross 
Vehicle Weight Rating, Mail-Out #MSC 97-06, April 23, 1997. 
Available in the public docket for review, and also at http://
arbis.arb.ca.gov/msprog/macmail/macmail.htm.
    \59\ Notice of Public Hearing to Consider Adoption of New 
Certification Tests and Standards to Control Emissions from 
Aggressive Driving and Air-Conditioner Usage for Passenger Cars, 
Light-Duty Trucks, and Medium-Duty Vehicles Under 8,501 Pounds Gross 
Vehicles Weight Rating, Mail Out #97-13, May 27, 1997. Available in 
the public docket for review, and also at http://arbis.arb.ca.gov/
msprog/macmail/macmail.htm#msc9713.
    \60\ Notice of Public Availability of Modified Text: Public 
Hearing to Consider Adoption of New Certification Tests and 
Standards to Control Emissions from Aggressive Driving and Air- 
Conditioner Usage for Passenger Cars, Light-Duty Trucks, and Medium-
Duty Vehicles under 8,501 Pounds Gross Vehicle Weight Rating, Mail-
Out # MSC 97-17, September 5, 1997. Available in the public docket 
for review, and also at http:///www.arb.ca.gov/msprog/macmail/
macmail.htm.

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

[[Page 961]]

    EPA stated in the National LEV Final Framework Rule its intent to 
harmonize the SFTP requirements of the National LEV program with 
California, and proposed to do so in the SNPRM once California 
completed the adoption of such requirements under its LEV program. As 
CARB has completed the adoption of SFTP requirements into its LEV 
program, today's rule harmonizes the CARB and National LEV SFTP 
programs.\61\ The following sections address this harmonization, 
including changes made as a result of CARB's public hearing on July 24, 
1997 and as published in their 15-day Notice, as well as those changes 
resulting from public comments received on EPA's SNPRM. A more detailed 
discussion of the SFTP standards and test procedures can be found in 
the SNPRM (62 FR 44782, August 22, 1997).
---------------------------------------------------------------------------

    \61\ Based on comments from AAMA/AIAM with which EPA agrees, a 
practical result of making this change is that the list of Non-Core 
Stable Standards in 40 CFR 86.1707(d) must be updated to reflect the 
change in emphasis from the federal SFTP to the California SFTP. 
Today's regulations thus incorporate the California SFTP as a Non-
Core Stable Standard.
---------------------------------------------------------------------------

B. Elements of the CARB Proposal and Applicability Under National LEV

1. Test Procedure
    CARB adopted high speed, high acceleration, and air conditioner 
supplemental test procedures that are in all respects identical to the 
procedures adopted by EPA. In fact, CARB incorporated by reference the 
federal regulations for SFTP test procedures. Therefore, as proposed in 
the SNPRM, the SFTP test procedures for all vehicles covered by 
National LEV are those currently contained in federal regulations (40 
CFR 86.158, 86.159, 86.160, 86.161, 86.162, 86.163, and 86.164).
2. Emission Standards
    California adopted two sets of emission standards, one applicable 
to LEVs, ULEVs, and super ULEVs (SULEVs), and the other applicable to 
Tier 1 vehicles and TLEVs. However, the only SULEVs in CARB's 
regulations are in their Medium-Duty Vehicle category, a class of 
vehicles not covered by the National LEV Program, and consequently not 
covered in the following discussion of emission standards or in today's 
regulations. In addition to the items discussed below, today's final 
rule makes several changes to be consistent with changes announced at 
CARB's hearing and published in their 15-day Notice. These include 
revisions to the language regarding ``A/C-on Specific Calibrations'' 
found in the regulations in paragraphs 86.1708(e)(3) and 86.1709(e)(3), 
and revisions to the ``Lean-On-Cruise'' Calibration Strategies language 
found in paragraphs 86.1708(e)(4) and 86.1709(e)(4).
a. LEVs and ULEVs
    For each of the affected vehicle weight categories, CARB adopted a 
set of SFTP certification standards that applies to LEVs and ULEVs (see 
Table 1). These standards apply only to gasoline, diesel, and fuel-
flexible vehicles while operating on gasoline or diesel fuel. These 
standards apply at 4,000 miles, and in conjunction with the low-mileage 
standards, CARB provides for no in-use vehicle compliance requirements 
(recall testing) for SFTP standards. Today's rule adopts the standards 
shown in Table 1 as the SFTP standards applicable to LEVs and ULEVs 
covered under the National LEV Program. These standards apply to the 
National LEV Program in the same manner as adopted by CARB, in that 
they apply at 4,000 miles and there will be no in-use enforcement to 
these SFTP standards for LEVs and ULEVs. For further information and 
justification for this approach, see the SNPRM (62 FR 44783-44784, 
August 22, 1997).
    A commenter pointed out that the proposed regulations contained 
incorrect SFTP standards for light-duty trucks from 3751 to 5750 pounds 
loaded vehicle weight (the preamble to the proposed regulations 
contained the correct standards). This error has been corrected in 
today's final rule.

                  Table 1--US06 and SC03 4,000 Mile Certification Standards for LEVs and ULEVs                  
----------------------------------------------------------------------------------------------------------------
                                                                           US06  (g/mi)               SC03  (g/ 
                                                             ---------------------------------------     mi)    
       Vehicle type           Loaded vehicle weight  (lbs.)                                         ------------
                                                                NMHC+NOX        CO        NMHC+NOX        CO    
----------------------------------------------------------------------------------------------------------------
LDV.......................  All.............................         0.14          8.0         0.20          2.7
LDT.......................  0-3,750.........................         0.14          8.0         0.20          2.7
                            3,751-5,750.....................         0.25         10.5         0.27          3.5
----------------------------------------------------------------------------------------------------------------

b. Tier 1 Vehicles and TLEVs
    CARB's final SFTP standards for Tier 1 vehicles and TLEVs are 
identical to those promulgated by EPA for Tier 1 vehicles. As under the 
federal regulations, these standards apply at 50,000 and 100,000 miles, 
and vehicles certifying to these standards face an in-use compliance 
requirement. Additionally, CARB also maintains EPA's higher 
NMHC+NOx standard for diesel vehicles, as well as EPA's 
exemption of alternative fuel Tier 1 vehicles and TLEVs from compliance 
with the SFTP standards. As proposed in the SNPRM, today's final rule 
adopts CARB's treatment of Tier 1 vehicles and TLEVs.
3. Implementation Schedule
    Today's final rule also adopts CARB's four year implementation 
schedule for SFTP emission standards, which requires compliance of 100 
percent of the fleet by MY2004. Beginning with a minimum of 25 percent 
of the fleet in MY2001, the schedule then requires 50 and 85 percent in 
MY2002 and MY2003, respectively. Although Tier 1 vehicles and TLEVs are 
certified to standards of different stringency than LEVs and ULEVs, 
CARB allows the number of vehicles from both groups to be combined for 
the purpose of determining compliance with the phase-in schedule. 
However, CARB ensures an adequate phase-in of LEVs and ULEVs complying 
with the SFTP by requiring that the percentage of LEVs and ULEVs 
meeting the SFTP requirements also meet the required phase-in schedule. 
This means that meeting the phase-in percentage with the subset of the 
fleet made up of LEVs and ULEVs will also meet the overall phase-in 
requirement if a manufacturer has no Tier 1 vehicles or TLEVs. If a 
manufacturer does have some Tier 1 or TLEV engine families, it would 
have the choice of certifying some proportion of those vehicles to the

[[Page 962]]

SFTP standards or expending some effort phasing in additional LEV or 
ULEV engine families in order to maintain compliance with the phase-in 
requirements. Consistent with the SNPRM, today's rule adopts the same 
SFTP implementation schedule finalized by CARB, including provisions 
consistent with the methodology noted above.
    To provide some additional flexibility, CARB uses a concept of 
equivalent phase-in schedules, which are allowed in place of the 
required phase-in schedule. This approach allows manufacturers to use 
an alternative phase-in schedule providing that the alternative 
measures up to the required schedule according to a set methodology. 
The equivalent phase-in methodology calculates credits by weighting the 
required phase-in percentages in each model year of the phase-in 
schedule by the number of model years prior to and including the last 
model year of the scheduled phase-in, then summing these credits over 
the phase-in period. These ``credits'' are calculated for the required 
phase-in schedule. In the case of the CARB SFTP phase-in, the required 
``credits'' are: (25% * 4 years) + (50% * 3 years) + (85% * 2 years) + 
(100% * 1 year) = 520. Any alternative phase-in that results in an 
equal or larger cumulative total number of credits by the end of the 
last model year of the scheduled phase-in is acceptable. This allows 
manufacturers some additional flexibility while ensuring no loss in 
overall emissions over the phase-in schedule. Additionally, using this 
methodology, manufacturers can gain credits towards their phase-in 
through early introductions of vehicles meeting the applicable 
requirement even prior to the beginning of the required phase-in (e.g., 
10 percent compliance five years before full phase-in gains 50 
``points'' towards the total required). Regardless of the number of 
``points'' earned by a given alternative schedule, phase-in of 100% 
must be achieved in the required final year of the phase-in. CARB made 
one change to this element of the SFTP in the 15-day Notice, adding 
language that requires manufacturers who choose to use an alternative 
phase-in schedule to submit the schedule they intend to use ``before or 
during calendar year 2001 for passenger cars and light-duty trucks and 
calendar year 2003 for medium-duty vehicles.'' Today's rule adopts an 
alternative phase-in schedule methodology consistent with the 
methodology adopted by CARB, including the changes contained in the 15-
day Notice.
    As proposed in the SNPRM, this alternative phase-in schedule will 
be enforced much like the current enforcement provisions regarding non-
compliance with a phase-in schedule. Specifically, failure to attain 
the required credits will be regarded as a failure to satisfy the 
conditions on which the certificate was issued. Vehicles sold in 
violation of that condition will not be covered by the certificate and 
hence will be subject to the currently available penalties. Today's 
regulations contain appropriate revisions to 40 CFR 86.096-30 to 
implement this approach.
4. Implementation Compliance
    To determine manufacturer compliance with the SFTP phase-in levels 
under the National LEV program, EPA proposed to give the manufacturers 
the option of combining their entire fleet of light-duty vehicles and 
light light-duty trucks such that this combined fleet meets the 
applicable phase-in requirements. EPA also proposed to have 
manufacturers demonstrate compliance with the phase-in requirements 
based on vehicles sold outside California, but requested comment on 
having compliance determinations based on vehicles sold only in 
California or in all states.
    As noted in the SNPRM, EPA supports allowing manufacturers to 
combine light-duty vehicles and light-duty trucks into one fleet for 
the purpose of the SFTP phase-in requirements. This approach is 
consistent with CARB's implementation of the SFTP phase-in, and is the 
approach contained in today's final rule. However, EPA noted in the 
SNPRM some concerns with allowing manufacturers to show compliance with 
National LEV SFTP requirements based on a manufacturer's California 
fleet mix as opposed to its National LEV fleet mix. AAMA/AIAM commented 
that manufacturers have already planned which products will be meeting 
the early-term SFTP requirements in California, and that using national 
sales volumes would cause changes in their phase-in plans without 
adequate lead time, creating an undue burden. Based on this, as well as 
on this commenter's definition of harmonization (``identical in every 
aspect to the California requirements''), AAMA/AIAM expressed support 
for the option of using California sales volumes to assess compliance 
with the SFTP phase-in schedule.
    EPA has decided to adopt language in today's rule that addresses 
the concerns heard from the auto companies by basing the SFTP phase-in 
compliance on vehicle sales in California. EPA understands the 
implications of requiring a separate phase-in for vehicles outside 
California, and agrees that the burden of requiring such a phase-in is 
unnecessary. However, EPA is adding language to the SFTP phase-in under 
National LEV to assure that SFTP vehicles are not underrepresented in 
states outside of California. Given that the phase-in will be 
demonstrated using California sales, unique cases could potentially 
arise whereby the California version of a vehicle is certified to the 
SFTP but the version distributed federally is not. Without some 
protective language in the regulations, there would be no obligation or 
requirement for the version marketed in the 49 states outside 
California to comply with the SFTP, and although the phase-in would be 
met in California, certainly the potential exists for the rest of the 
country to fall unacceptably short of the phase-in percentage. To 
protect against this type of scenario, yet to allow auto manufacturers 
the flexibility of only having to demonstrate compliance with the 
phase-in in California, EPA is adding the additional requirement that, 
for every engine family certified to SFTP standards in California, the 
``sibling'' of that vehicle certified under the National LEV program 
outside California must also be certified to the SFTP standards. 
Today's regulations define the relationship between California and 
federal ``sibling'' vehicles as vehicles of the same make and model, 
and with the same number of cylinders, the same cylinder configuration, 
the same cylinder volume, the same transmission class, and the same 
axle ratio. However, the ability to use California sales to demonstrate 
phase-in compliance applies only to those years of the phase-in with a 
less than 100 percent compliance requirement (MY2001-2003). When 
California is scheduled to achieve 100 percent compliance with the SFTP 
in MY2004, the National LEV fleet must also have attained 100 percent 
compliance in that model year.

X. Administrative Requirements

A. Administrative Designation

    Under Executive Order 12866 (58 FR 51735), 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 a ``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

[[Page 963]]

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, it has been 
determined that this rule is not a ``significant regulatory action'' 
because the regulations in this rule will not have annual impacts on 
the economy that are likely to exceed $100 million. This rule, along 
with the Final Framework Rule, sets forth the National LEV program 
regulations. The Final Framework Rule was determined to be a 
significant regulatory action. See 62 FR 31231 and the Regulatory 
Impact Analysis. EPA has submitted this rule to OMB for review. Changes 
made in response to OMB suggestions or recommendations will be 
documented in the public record. EPA has updated the Regulatory Impact 
Analysis (RIA) prepared for the Final Framework Rule. Changes reflect 
the current program start dates, updated cost information, and other 
changes to the emissions reduction modeling as discussed in Sec. IV.

B. Regulatory Flexibility

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this rule. EPA has also 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. Only manufacturers of motor 
vehicles, a group which does not contain a substantial number of small 
entities, will have to comply with the requirements of this rule.

C. Unfunded Mandates Reform Act

    Under sections 202 and 205 of the Unfunded Mandates Reform Act of 
1995 (UMRA), EPA generally must prepare a written statement to 
accompany any proposed or final rule that includes a federal mandate 
that may result in expenditures by state, local, or tribal governments 
in the aggregate, or by the private sector, of $100 million or more in 
any one year.
    EPA has determined that the written statement requirements of 
sections 202 and 205 of UMRA do not apply to today's rule, and thus do 
not require EPA to conduct further analyses pursuant to those 
requirements. National LEV is not a federal mandate because it does not 
impose any enforceable duties and because it is a voluntary program. 
Because National LEV would not impose a federal mandate on any party, 
section 202 does not apply to this rule. Even if these unfunded 
mandates provisions did apply to this rule, they are met by the 
Regulatory Impact Analysis prepared pursuant to Executive Order 12866 
and contained in the docket.
    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 not prepared such a plan because small 
governments would not be significantly or uniquely impacted by the 
rule.

D. Congressional Review of Agency Rulemaking

    Under section 801(a)(1)(A) of the Administrative Procedure Act 
(APA) as amended by the Small Business Regulatory Enforcement Reform 
Act of 1996, EPA has 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. 
Today's rule is not a ``major rule'' as defined in section 804(2) of 
the APA, as amended.

E. Reporting and Recordkeeping Requirements

    The Office of Management and Budget (OMB) has approved the 
information collection requirements contained in this rule under the 
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and 
has assigned OMB control number 2060-0345.
    The information collection would be conducted to support the 
averaging, banking and trading provisions included in the National LEV 
program. These averaging, banking and trading provisions would give 
automobile manufacturers a measure of flexibility in meeting the fleet 
average NMOG standards. EPA would use the reported data to calculate 
credits and debits and otherwise ensure compliance with the applicable 
production levels. When a manufacturer has opted into the voluntary 
National LEV program, reporting would be mandatory as per the 
regulations included in this rulemaking. This rulemaking would not 
change the requirements regarding confidentiality claims for submitted 
information, which are generally set out in 40 CFR part 2.
    The information collection burden associated with this rule 
(testing, record keeping and reporting requirements) is estimated to 
average 241.3 hours annually for a typical manufacturer. It is expected 
that approximately 25 manufacturers will provide an annual report to 
EPA. However, the hours spent annually on information collection 
activities by a given manufacturer depends upon manufacturer-specific 
variables, such as the number of engine families, production changes, 
emissions defects, and so forth.
    Burden means the total time, effort, or financial resouces expended 
by persons to generate, maintain, retain, or disclose or provide 
information to or for a Federal agency. This estimate also includes the 
time needed to: review instructions; develop, acquire, install, and 
utilize technology and systems for the purposes of collecting, 
validating, and verifying information, processing and maintaining 
information, and disclosing and providing information; adjust the 
existing ways to comply with any previously applicable instructions and 
requirements; train personnel to be able to respond to a collection of 
information; search data sources; complete and review the collection of 
information; and transmit or otherwise disclose the information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15. EPA is 
amending the table in 40 CFR Part 9 of currently approved ICR numbers 
issued by OMB for various regulations to list the information 
requirements contained in this rule.
    Send comments on the Agency's need for this information, the 
accuracy of the provided burden estimates, and any suggested methods 
for minimizing respondent burden, including through the use of 
automated collection techniques to the Director, OPPE Regulatory 
Information Division; U.S. Environmental Protection Agency (2137); 401 
M St., S.W., Washington, D.C. 20460; and to the Office of Information 
and Regulatory Affairs, Office of Management and Budget, 725 17th St., 
N.W., Washington, D.C. 20503, marked ``Attention: Desk Officer for 
EPA.'' Include the ICR number in any correspondence.

F. Effective Date

    This rule is effective upon the date of publication. This expedited 
effective

[[Page 964]]

date is necessary to provide effective final regulations to guide the 
process for the OTC States and auto manufacturers to opt into the 
National LEV program in time for the program to begin in model year 
1999. Given their planning and production schedules, manufacturers have 
informed EPA that the Agency must find National LEV in effect early in 
the 1998 calendar year, at the latest, to allow them to comply with the 
National LEV requirements for MY1999 vehicles. This requires that the 
OTC States and the manufacturers complete the opt-in process as soon as 
possible. While the timing for opt-ins is based on the signature date 
of the rule, rather than its effective date, it would not be 
appropriate for parties to have to make the decision to opt in to the 
program before this rule becomes effective, and if the effective date 
of these regulations were delayed until thirty days from publication, 
depending upon the length of time between signature and publication, it 
is possible that the deadline for OTC State opt-ins would occur before 
the rule became effective. In addition, because National LEV is a 
voluntary program, this rule, by itself, does not place a burden on any 
party. Rather, it provides an opportunity for the OTC States and the 
manufacturers to avail themselves of the benefits of the National LEV 
program and voluntarily to become subject to its requirements. Finally, 
in the SNPRM, EPA took comment on the timing for parties to opt into 
National LEV, and none of the parties potentially affected by the rule 
objected to this timing. Given the lack of burden on affected parties 
and the need to make this rule effective upon publication, the Agency 
finds good cause for expediting the effective date of the rule. EPA 
believes that this is consistent with 5 U.S.C. 553(d) (1) and (3).

XI. Judicial Review

    Under section 307(b)(1) of the Act, EPA hereby finds that these 
regulations are of national applicability. Accordingly, judicial review 
of this action is available only by filing of a petition for review in 
the United States Court of Appeals for the District of Columbia Circuit 
within 60 days of publication in the Federal Register. Under section 
307(b)(2) of the Act, the requirements which are the subject of today's 
rule may not be challenged later in judicial proceedings brought by EPA 
to enforce these requirements. This rulemaking and any petitions for 
review are subject to the provisions of section 307(d) of the Clean Air 
Act.

XII. Statutory Authority

    The promulgation of these regulations is authorized by sections 
177, 202, 203, 204, 205, 206, 207, 208, 209 and 301 of the Clean Air 
Act as amended by the Clean Air Act Amendments of 1990 (CAAA) (42 
U.S.C. 7507, 7521, 7522, 7523, 7524, 7525, 7541, 7542, 7543, and 
7601).

List of Subjects

40 CFR Part 9

    Environmental protection, Reporting and recordkeeping requirements.

40 CFR Part 85

    Confidential business information, Imports, Labeling, Motor vehicle 
pollution, Reporting and recordkeeping requirements, Research, 
Warranties.

40 CFR Part 86

    Administrative practice and procedure, Confidential Business 
Information, Incorporation by reference, Labeling, Motor vehicle 
pollution, Reporting and recordkeeping requirements.

    Dated: December 16, 1997.
Carol M. Browner,
Administrator.

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

PART 9--[AMENDED]

    1. The authority citation for part 9 continues to read as follows:

    Authority: 7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001, 2003, 
2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C. 9701; 33 
U.S.C. 1251 et seq., 1311, 1313d, 1314, 1318, 1321, 1326, 1330, 
1342, 1344, 1345 (d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR, 
1971-1975 Comp., p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 
300g-1, 300g-2, 300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2, 
300j-3, 300j-4, 300j-9, 1857 et seq., 6901-6992k, 7401-7671q, 7542, 
9601-9657, 11023, 11048.

    2. The table in Sec. 9.1 is amended by adding the new entries in 
numerical order under the indicated heading to read as follows:


Sec. 9.1  OMB approvals under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
                                                             OMB control
                      40 CFR citation                            No.    
------------------------------------------------------------------------
                  *        *        *        *        *                 
Control of Air Pollution From New and In-Use Motor Vehicles             
 and New and In-Use Motor Vehicle Engines: Certification                
 and Test Procedures:                                                   
                  *        *        *        *        *                 
    86.1705................................................    2060-0345
    86.1707................................................    2060-0345
    86.1708................................................    2060-0345
    86.1709................................................    2060-0345
    86.1710................................................    2060-0345
    86.1712................................................    2060-0345
    86.1713................................................    2060-0345
    86.1714................................................    2060-0345
    86.1717................................................    2060-0345
    86.1721................................................    2060-0345
    86.1723................................................    2060-0345
    86.1724................................................    2060-0345
    86.1725................................................    2060-0345
    86.1726................................................    2060-0345
    86.1728................................................    2060-0345
    86.1734................................................    2060-0345
    86.1735................................................    2060-0345
    86.1770................................................    2060-0345
    86.1771................................................    2060-0345
    86.1776................................................    2060-0345
    86.1777................................................    2060-0345
    86.1778................................................    2060-0345
                  *        *        *        *        *                 
------------------------------------------------------------------------

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

    3. The authority citation for part 85 continues to read as follows:

    Authority: 42 U.S.C. 7521, 7522, 7524, 7525, 7541, 7542, and 
7601(a).

Subpart P--[Amended]

    4. Section 85.1515 is amended by revising paragraph (c) to read as 
follows:


Sec. 85.1515  Emission standards and test procedures applicable to 
imported nonconforming motor vehicles and motor vehicle engines.

* * * * *
    (c) Nonconforming motor vehicles or motor vehicle engines of 
1994 OP model year and later conditionally imported pursuant to 
Sec. 85.1505 or Sec. 85.1509 shall meet all of the emission 
standards specified in 40 CFR part 86 for the model year in which 
the motor vehicle or motor vehicle engine is modified. At the option 
of the ICI, the nonconforming motor vehicle may comply with the 
emissions standards in 40 CFR 86.1708-99 or 86.1709-99, as 
applicable to a light-duty vehicle or light light-duty truck, in 
lieu of the otherwise applicable emissions standards specified in 40 
CFR part 86 for the model year in which the nonconforming motor 
vehicle is modified. The provisions of 40 CFR 86.1710-99 do not 
apply to imported nonconforming motor vehicles. The useful life 
specified in 40 CFR part 86 for the model year in which the motor 
vehicle or motor

[[Page 965]]

vehicle engine is modified is applicable where useful life is not 
designated in this subpart.
* * * * *

PART 86--CONTROL OF AIR POLLUTION FROM NEW AND IN-USE MOTOR 
VEHICLES AND NEW AND IN-USE MOTOR VEHICLE ENGINES: CERTIFICATION 
AND TEST PROCEDURES

    5. The authority citation for part 86 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671(q).

    6. Section 86.1 is amended by revising the entry for ASTM E29-90 in 
the table in paragraph (b)(1) and by revising the entry to the table in 
paragraph (b)(4), to read as follows:


Sec. 86.1  Reference materials.

* * * * *
    (b) * * *
    (1) * * *

------------------------------------------------------------------------
         Document number and name             40 CFR part 86 reference  
------------------------------------------------------------------------
                  *        *        *        *        *                 
ASTM E29-90, Standard Practice for Using    86.609-84; 86.609-96; 86.609-
 Significant Digits in Test Data to          97; 86.609-98; 86.1009-84; 
 Determine Conformance with Specifications.  86.1009-96; 86.1442;       
                                             86.1708-99; 86.1709-99;    
                                             86.1710-99; 86.1728-99     
                  *        *        *        *        *                 
------------------------------------------------------------------------

    (4) *        *        *

------------------------------------------------------------------------
           Document no. and name              40 CFR part 86 reference  
------------------------------------------------------------------------
                  *        *        *        *        *                 
California Regulatory Requirements          86.612-97; 86.1012-97;      
 Applicable to the National Low Emission     86.1702-99; 86.1708-99;    
 Vehicle Program, October, 1996.             86.1709-99; 86.1717-99;    
                                             86.1735-99; 86.1771-99;    
                                             86.1775-99; 86.1776-99;    
                                             86.1777-99; Appendix XVI;  
                                             Appendix XVII.             
                  *        *        *        *        *                 
------------------------------------------------------------------------

Subpart A--[Amended]

    7. Section 86.096-30 is amended by reserving paragraph (a)(22) and 
by adding paragraphs (a)(23) and (a)(24), to read as follows:


Sec. 86.096-30  Certification.

* * * * *
    (a) * * *
    (22) [Reserved]
    (23)(i) The Administrator will issue a National LEV certificate of 
conformity for 1999 model year vehicles or engines certified to comply 
with the California TLEV, LEV, or ULEV emission standards.
    (ii) This certificate of conformity shall be granted after the 
Administrator has received and reviewed the California Executive Order 
a manufacturer has received for the same vehicles or engines.
    (iii) Vehicles or engines receiving a certificate of conformity 
under the provisions in this paragraph can only be sold in the states 
included in the NTR, as defined in Sec. 86.1702, and those states where 
the sale of California-certified vehicles is otherwise authorized.
    (24)(i) The Administrator will issue a National LEV certificate of 
conformity for 2000 model year vehicles or engines certified to comply 
with the California TLEV emission standards.
    (ii) This certificate of conformity shall be granted after the 
Administrator has received and reviewed the California Executive Order 
a manufacturer has received for the same vehicles or engines.
    (iii) Vehicles or engines receiving a certificate of conformity 
under the provisions in this paragraph can only be sold in the states 
included in the NTR, as defined in Sec. 86.1702, and those states where 
the sale of California-certified vehicles is otherwise authorized.
* * * * *


Sec. 86.097-1  [Redesignated as Sec. 86.099-1]

    8. Section 86.097-1 is redesignated as Sec. 86.099-1 and revised to 
read as follows:


Sec. 86.099-1  General applicability.

    Section 86.099-1 includes text that specifies requirements that 
differ from those specified in Sec. 86.094-1. Where a paragraph in 
Sec. 86.094-1 is identical and applicable to Sec. 86.099-1, this may be 
indicated by specifying the corresponding paragraph and the statement 
``[Reserved]. For guidance see Sec. 86.094-1.''.
    (a) through (b) [Reserved]. For guidance see Sec. 86.094-1.
    (c) National Low Emission Vehicle Program for light-duty vehicles 
and light light-duty trucks. A manufacturer may elect to certify 1999 
and later model year light-duty vehicles and light light-duty trucks to 
the provisions of the National Low Emission Vehicle Program contained 
in subpart R of this part. Subpart R of this part is applicable only to 
those manufacturers that opt into the National Low Emission Vehicle 
Program, under the provisions of that subpart, and that have not 
exercised a valid opt-out from the National Low Emission Vehicle 
Program, which opt-out has gone into effect under the provisions of 
Sec. 86.1707. All provisions of this subpart are applicable to vehicles 
certified pursuant to subpart R of this part, except as specifically 
noted in subpart R of this part.
    (d) [Reserved]
    (e) through (f) [Reserved]. For guidance see Sec. 86.094-1.

Subpart B--[Amended]

    9. Section 86.101 is amended by revising paragraph (c) to read as 
follows:


Sec. 86.101  General applicability.

* * * * *
    (c) National Low Emission Vehicle Program for light-duty vehicles 
and light light-duty trucks. A manufacturer may elect to certify 1999 
and later model year light-duty vehicles and light light-duty trucks to 
the provisions of the National Low Emission Vehicle Program contained 
in subpart R of this part. Subpart R of this part is applicable only to 
those manufacturers that opt into the National Low Emission Vehicle 
Program, under the provisions of subpart R of this part, and that have 
not exercised a valid opt-out from the National Low Emission Vehicle 
Program, which opt-out has gone into effect under the provisions of 
Sec. 86.1707. All provisions of this subpart are applicable to vehicles 
certified pursuant to subpart R of this part, except as specifically 
noted in subpart R of this part.

Subpart R--[Amended]

    10. The table of contents to subpart R is revised to read as 
follows:

Subpart R--General Provisions for the Voluntary National Low 
Emission Vehicle Program for Light-Duty Vehicles and Light-Duty 
Trucks

Sec.
86.1701-99  General applicability.
86.1702-99  Definitions.
86.1703-99  Abbreviations.
86.1704-99  Section numbering; construction.
86.1705-99  General provisions; opt-in.
86.1706-99  National LEV program in effect.
86.1707-99  General provisions; opt-outs.
86.1708-99  Exhaust emission standards for 1999 and later light-duty 
vehicles.
86.1709-99  Exhaust emission standards for 1999 and later light 
light-duty trucks.
86.1710-99  Fleet average non-methane organic gas exhaust emission 
standards for light-duty vehicles and light light-duty trucks.
86.1711-99  Limitations on sale of Tier 1 vehicles and TLEVs.
86.1712-99  Maintenance of records; submittal of information.

[[Page 967]]

86.1713-99  Light-duty exhaust durability programs.
86.1714-99  Small-volume manufacturers certification procedures.
86.1715-99  [Reserved]
86.1716-99  Prohibition of defeat devices.
86.1717-99  Emission control diagnostic system for 1999 and later 
light-duty vehicles and light-duty trucks.
86.1718-99  through 86.1720-99  [Reserved]
86.1721-99  Application for certification.
86.1722-99  [Reserved]
86.1723-99  Required data.
86.1724-99  Test vehicles and engines.
86.1725-99  Maintenance.
86.1726-99  Mileage and service accumulation; emission measurements.
86.1727-99  [Reserved]
86.1728-99  Compliance with emission standards.
86.1729-99  through 86.1733-99  [Reserved]
86.1734-99  Alternative procedure for notification of additions and 
changes.
86.1735-99  Labeling.
86.1736-99  through 86.1769-99  [Reserved]
86.1770-99  All-Electric Range Test requirements.
86.1771-99  Fuel specifications.
86.1772-99  Road load power, test weight, and inertia weight class 
determination.
86.1773-99  Test sequence; general requirements.
86.1774-99  Vehicle preconditioning.
86.1775-99  Exhaust sample analysis.
86.1776-99  Records required.
86.1777-99  Calculations; exhaust emissions.
86.1778-99  Calculations; particulate emissions.
86.1779-99  General enforcement provisions.
86.1780-99  Prohibited acts.


Sec. 86.1701-97  [Redesignated as Sec. 86.1701-99 and Amended]

    11. Section 86.1701-97 is redesignated as Sec. 86.1701-99 and 
amended by revising paragraphs (a) and (c) and by adding paragraph (d), 
to read as follows:


Sec. 86.1701-99  General applicability.

    (a) The provisions of this subpart may be adopted by vehicle 
manufacturers pursuant to the provisions specified in Sec. 86.1705. The 
provisions of this subpart are generally applicable to 1999 and later 
model year light-duty vehicles and light light-duty trucks to be sold 
in the Northeast Trading Region, and 2001 and later model year light-
duty vehicles and light light-duty trucks to be sold in the United 
States. In cases where a provision applies only to certain vehicles 
based on model year, vehicle class, motor fuel, engine type, vehicle 
emission category, intended sales destination, or other distinguishing 
characteristics, such limited applicability is cited in the appropriate 
section or paragraph. The provisions of this subpart shall be referred 
to as the ``National Low Emission Vehicle Program'' or ``National LEV'' 
or ``NLEV.''
* * * * *
    (c) The requirements of this subpart apply to new vehicles 
manufactured by covered manufacturers through model year 2003. In 
addition, the requirements of this subpart apply to new vehicles 
manufactured by covered manufacturers for model years prior to the 
first model year for which a mandatory federal exhaust emissions 
program for light-duty vehicles and light light-duty trucks is at least 
as stringent as the National LEV program with respect to NMOG, 
NOX, and CO exhaust emissions, as determined by the 
Administrator, provided that such a program is promulgated no later 
than December 15, 2000, and is effective no later than model year 2006.
    (d) Adoption of the National LEV program does not impose gasoline 
or other in-use fuel requirements and is not intended to require any 
new federal or state regulation of fuels. Vehicles under National LEV 
will be able to operate on any fuels, including conventional gasoline, 
that, in the absence of the National LEV program, could be sold under 
federal or state law.


Sec. 86.1702-97  [Redesignated as Sec. 86.1702-99 and Amended]

    12. Section 86.1702-97 is redesignated as Sec. 86.1702-99 and 
amended in paragraph (b) by revising the definitions for ``Averaging 
sets,'' ``Core Stable Standards,'' ``Non-Core Stable Standards,'' 
``Northeast Trading Region,'' and ``Point of first sale'' and by adding 
new definitions in alphabetical order for ``All States Trading 
Region,'' ``Axle Ratio,'' ``Covered state,'' ``Existing ZEV Mandate,'' 
``Ozone Transport Commission States,'' ``Section 177 Program,'' and 
``ZEV Mandate,'' to read as follows:


Sec. 86.1702-99  Definitions.

* * * * *
    (b) * * *
* * * * *
    All States Trading Region (ASTR) means the region comprised of all 
states except the OTC States that have not opted into National LEV 
pursuant to the opt-in provisions at Sec. 86.1705 or that have opted 
out of National LEV and whose opt-outs have become effective, as 
provided at Sec. 86.1707; California; and any state outside the OTR 
with a Section 177 Program in effect that does not allow National LEV 
as a compliance alternative.
* * * * *
    Averaging sets are the categories of LDVs and LDTs for which the 
manufacturer calculates a fleet average NMOG value. The four averaging 
sets for fleet average NMOG value calculation purposes are:
    (1) Class A delivered to a point of first sale in the Northeast 
Trading Region;
    (2) Class A delivered to a point of first sale in the All States 
Trading Region;
    (3) Class B delivered to a point of first sale in the Northeast 
Trading Region;
    (4) Class B delivered to a point of first sale in the All States 
Trading Region.
* * * * *
    Axle ratio means the number of times the input shaft to the 
differential (or equivalent) turns for each turn of the drive wheels.
* * * * *
    Core Stable Standards means the standards and other requirements 
listed in Sec. 86.1707(d)(9)(i) (A) through (F).
* * * * *
    Covered state means a state that meets the conditions specified 
under Sec. 86.1705(d).
* * * * *
    Existing ZEV Mandate means any state regulation or other law that 
imposes (or purports to impose) obligations on auto manufacturers to 
produce, deliver for sale, or sell a certain number or percentage of 
ZEVs and that was adopted prior to December 16, 1997.
* * * * *
    Non-Core Stable Standards means the standards and other 
requirements listed in Sec. 86.1707(d)(9)(i) (G) through (L).
* * * * *
    Northeast Trading Region (NTR) means the region comprised of the 
states that meet the conditions specified under Sec. 86.1705(d).
* * * * *
    Ozone Transport Commission States or OTC States means the States of 
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, 
New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Virginia, 
and the District of Columbia.
* * * * *
    Point of first sale is the location where the completed light-duty 
vehicle or light-duty truck is purchased, also known as the final 
product purchase location. The point of first sale may be a retail 
customer, dealer, distributor, fleet operator, broker, secondary 
manufacturer, or any other entity which comprises the point of first 
sale. In cases where the end user purchases the completed vehicle 
directly from the

[[Page 967]]

manufacturer, the end user is the point of first sale.
* * * * *
    Section 177 Program means state regulations or other laws, except 
ZEV Mandates, that apply to any of the following categories of motor 
vehicles: passenger cars, light-duty trucks up through 6,000 pounds 
GVWR, and medium-duty vehicles from 6,001 to 14,000 pounds GVWR if 
designed to operate on gasoline, as these categories of motor vehicles 
are defined in the California Code of Regulations, Title 13, Division 
3, Chapter 1, Article 1, Section 1900.
* * * * *
    ZEV Mandate means any state regulation or other law that imposes 
(or purports to impose) obligations on auto manufacturers to produce, 
deliver for sale, or sell a certain number or percentage of ZEVs.


Sec. 86.1703-97  [Redesignated as Sec. 86.1703-99 and Amended]

    13. Section 86.1703-97 is redesignated as Sec. 86.1703-99 and 
amended in paragraph (b) by adding ``ASTR'' and ``OTC'' as new 
abbreviations in alphabetical order, to read as follows:


Sec. 86.1703-99  Abbreviations.

* * * * *
    (b) * * *
* * * * *
    ASTR--All States Trading Region
* * * * *
    OTC--Ozone Transport Commission
* * * * *


Sec. 86.1704-97  [Redesignated as Sec. 87.1704-99 and Amended]

    14. Section 86.1704-97 is redesignated as Sec. 86.1704-99.


Sec. 86.1705-97  [Redesignated as Sec. 86.1705-99 and Amended]

    15. Section 86.1705-97 is redesignated as Sec. 86.1705-99 and 
amended by revising the heading of the section, by revising paragraphs 
(a) introductory text, (a)(2), (a)(3), and (b) through (g), to read as 
follows:


Sec. 86.1705-99  General provisions; opt-in.

    (a) Covered manufacturers. Covered manufacturers must comply with 
the provisions in this subpart, and in addition, must comply with the 
requirements of 40 CFR parts 85 and 86. A manufacturer shall be a 
covered manufacturer if:
* * * * *
    (2) Where a manufacturer has included a condition on opt-in 
provided for in paragraph (c)(2) of this section, that condition has 
been satisfied; and
    (3) The manufacturer has not opted out, pursuant to Sec. 86.1707, 
or the manufacturer has opted out but that opt-out has not become 
effective under Sec. 86.1707.
    (b) Covered manufacturers must comply with the standards and 
requirements specified in this subpart beginning in model year 1999. A 
manufacturer not listed in Sec. 86.1706(c) that opts into the program 
after EPA issues a finding pursuant to Sec. 86.1706(b) that the program 
is in effect must comply with the standards and requirements of this 
subpart beginning in the model year named for the calendar year after 
the calendar year in which EPA receives the manufacturer's opt-in. 
Light-duty vehicles and light light-duty trucks sold by covered 
manufacturers must comply with the provisions of this subpart.
    (c) Manufacturer opt-ins. (1) To opt into the National LEV program, 
a motor vehicle manufacturer must submit a written opt-in notification 
to the Administrator signed by a person or entity within the 
corporation or business with authority to bind the corporation or 
business to its election and holding the position of vice president for 
environmental affairs or a position of comparable or greater authority. 
The manufacturer shall send a copy of this notification to : Director, 
Vehicles Programs and Compliance Division; U.S. Environmental 
Protection Agency; 2565 Plymouth Road; Ann Arbor, Michigan, 48105. The 
notification must unambiguously and unconditionally (apart from the 
permissible conditions specified in paragraph (c)(2) of this section) 
indicate the manufacturer's agreement to opt into the program and be 
subject to the provisions in this subpart, and include the following 
language:

    XX COMPANY, its subsidiaries, successors and assigns hereby opts 
into the voluntary National LEV program, as set forth in 40 CFR part 
86, subpart R, and agrees to be legally bound by all of the 
standards, requirements and other provisions of the National LEV 
program. XX COMPANY commits not to challenge EPA's authority to 
establish or enforce the National LEV program, and commits not to 
seek to certify any vehicle except in compliance with the 
regulations in subpart R.

    (2) The opt-in notification may indicate that the manufacturer opts 
into the program subject to either or both of the following conditions:
    (i) That the Administrator finds under Sec. 86.1706 that the 
National LEV program is in effect, to be indicated with the following 
language:

    This opt-in is subject to the condition that the Administrator 
make a finding pursuant to 40 CFR 86.1706 that the National LEV 
program is in effect.

    (ii) That certain states (limited to the OTC States) and/or motor 
vehicle manufacturers opt into National LEV pursuant to Sec. 86.1705, 
to be indicated with the following language (language in brackets 
indicates that either or both formulations are acceptable):

    This opt-in is subject to the condition that [each of the states 
of [list state names]/[and] each of the following manufacturers 
[list manufacturer names]] opt into National LEV pursuant to 40 CFR 
86.1705.

    (3) A manufacturer shall be considered to have opted in upon the 
Administrator's receipt of the opt-in notification and satisfaction of 
the conditions set forth in paragraph (c)(2) of this section, if 
applicable.
    (d) Covered states. An OTC State shall be a covered state if:
    (1) The state has opted into National LEV pursuant to paragraph (e) 
of this section;
    (2) Where a state has included a condition on opt-in provided for 
in paragraph (e)(3)(viii) of this section, that condition has been 
satisfied; and
    (3) The state has not opted out, pursuant to Sec. 86.1707, or the 
state has opted out but that opt-out has not become effective under 
Sec. 86.1707.
    (e) OTC State opt-ins. To opt into the National LEV program, a 
state must submit an opt-in notification to the Administrator, with a 
copy to Director, Vehicle Programs and Compliance Division; U.S. 
Environmental Protection Agency; 2565 Plymouth Road; Ann Arbor, 
Michigan, 48105. The notification must contain the following or 
substantively identical language:
    (1)(i) An Executive Order signed by the governor of the state (or 
the mayor of the District of Columbia) that unambiguously and 
unconditionally (apart from the permissible conditions set forth in 
this section) indicates the state's agreement to opt into the National 
LEV program and includes the following language (language in brackets 
indicates that either formulation is acceptable):

    This Executive Order [commits STATE to/opts STATE into] the 
National Low Emission Vehicle (National LEV) program, in accordance 
with the EPA National LEV program regulations at 40 CFR part 86, 
subpart R.
    I hereby direct HEAD OF APPROPRIATE STATE AGENCY to forward to 
EPA with my concurrence the [enclosed letter signed/enclosed letter 
and proposed regulations signed and proposed] by the HEAD OF 
APPROPRIATE STATE AGENCY, which [specifies/specify] the details of 
STATE's commitment to the National LEV program.
    I hereby direct APPROPRIATE STATE AGENCY to follow the 
procedures prescribed

[[Page 968]]

by the general statutes of STATE to take the necessary steps to 
adopt regulations and submit a state implementation plan (SIP) 
revision committing STATE to National LEV in accordance with the EPA 
National LEV program regulations on SIP revisions at 40 CFR part 86, 
subpart R, and with section 110 of the Clean Air Act and its 
implementing regulations at 40 CFR parts 51 and 52.

    (ii) States with Existing ZEV Mandates may add language to the 
Executive Order submitted pursuant to this paragraph (e)(1) confirming 
that this opt-in will not affect the state's requirements pertaining to 
ZEVs.
    (2)(i) If a state does not submit an Executive Order pursuant to 
paragraph (e)(1) of this section, a letter signed by the governor of 
the state (or the mayor of the District of Columbia) that unambiguously 
and unconditionally (apart from the permissible conditions set forth in 
this section) indicates the state's agreement to opt into the National 
LEV program and includes the following language (language in brackets 
indicates that either formulation is acceptable):

    This submittal is made in accordance with the EPA National Low 
Emission Vehicle (National LEV) regulations at 40 CFR part 86, 
subpart R to [commit STATE to/opt STATE into] the National LEV 
program.
    [I am forwarding to EPA the [enclosed letter signed enclosed 
letter and proposed regulations which were signed and proposed] by 
HEAD OF APPROPRIATE STATE AGENCY at my direction, and which 
[specifies/specify] the details of STATE's commitment to the 
National LEV program. I am forwarding to EPA and concur with the 
[enclosed letter signed/enclosed letter and proposed regulations 
signed and proposed] by HEAD OF APPROPRIATE STATE AGENCY, which 
[specifies/specify] the details of STATE's commitment to the 
National LEV program.]
    I [hereby direct/have directed] APPROPRIATE STATE AGENCY to 
follow the procedures prescribed by the general statutes of STATE to 
take the necessary steps to adopt regulations and submit a state 
implementation plan (SIP) revision committing STATE to National LEV 
in accordance with the EPA National LEV regulations on SIP revisions 
at 40 CFR part 86, subpart R, and with section 110 of the Clean Air 
Act and its implementing regulations at 40 CFR parts 51 and 52.

    (ii) States with Existing ZEV Mandates may add language to the 
letter submitted pursuant to this paragraph (e)(2) confirming that this 
opt-in will not affect the state's requirements pertaining to ZEVs.
    (3) A letter signed by the head of the appropriate state agency 
that would unconditionally (except as set forth in this section) 
include the following:
    (i) States without a Section 177 Program, or with a Section 177 
Program but not an Existing ZEV Mandate, shall include the following 
language:

    National LEV is designed as a compliance alternative for OTC 
State programs adopted pursuant to section 177 of the Clean Air Act 
that apply to passenger cars, light-duty trucks up through 6,000 
pounds GVWR, and/or medium-duty vehicles from 6,001 to 14,000 pounds 
GVWR if designed to operate on gasoline, as these categories of 
motor vehicles are defined in the California Code of Regulations, 
Title 13, Division 3, Chapter 1, Article 1, Section 1900. For the 
duration of STATE's participation in National LEV, [STATE will allow 
manufacturers to / manufacturers may] comply with National LEV or 
equally stringent mandatory federal standards in lieu of compliance 
with any program adopted by STATE pursuant to the authority provided 
in section 177 of the Clean Air Act applicable to the vehicle 
classes specified above, including any ZEV mandates. STATE's 
participation in National LEV extends until model year 2006, except 
as provided in 40 CFR 86.1707. If, no later than December 15, 2000, 
the US EPA does not adopt standards at least as stringent as the 
National LEV standards provided in 40 CFR part 86 subpart R that 
apply to new motor vehicles in model year 2004, 2005 or 2006, 
STATE's participation in National LEV extends only until model year 
2004, except as provided in 40 CFR 86.1707.
    For the duration of STATE's participation in National LEV, STATE 
[intends to/will] forbear from adopting and implementing a ZEV 
mandate effective before model year 2006.

    (ii) States with a Section 177 Program and an Existing ZEV Mandate, 
shall include the following language:

    National LEV is designed as a compliance alternative for OTC 
State programs adopted pursuant to section 177 of the Clean Air Act 
that apply to passenger cars, light-duty trucks up through 6,000 
pounds GVWR, and medium-duty vehicles from 6,001 to 14,000 pounds 
GVWR if designed to operate on gasoline, as these categories of 
motor vehicles are defined in the California Code of Regulations, 
Title 13, Division 3, Chapter 1, Article 1, Section 1900. With the 
exception of any requirements pertaining to ZEVs, for the duration 
of STATE's participation in National LEV, [STATE will allow 
manufacturers to / manufacturers may] comply with National LEV or 
equally stringent mandatory federal standards in lieu of compliance 
with any program adopted by STATE pursuant to the authority provided 
in section 177 of the Clean Air Act applicable to the vehicle 
classes specified above. STATE's participation in National LEV 
extends until model year 2006, except as provided in 40 CFR 86.1707. 
If, no later than December 15, 2000, the US EPA does not adopt 
standards at least as stringent as the National LEV standards 
provided in 40 CFR part 86 subpart R that apply to new motor 
vehicles in model year 2004, 2005 or 2006, STATE's participation in 
National LEV extends only until model year 2004, except as provided 
in 40 CFR 86.1707. Any existing or future requirement pertaining to 
ZEVs is not affected by STATE's acceptance of National LEV as a 
compliance alternative for other state requirements.

    (iii) All states shall include the following language:

    Based on EPA's determination in the preamble to the final 
National LEV rule [CITE], STATE believes that National LEV will 
achieve reductions of VOC and NOX emissions that are 
equivalent to or greater than the reductions that would be achieved 
through OTC State adoption of California Low Emission Vehicle 
programs in the Ozone Transport Region.

    (iv) All states shall include the following language:

    STATE intends National LEV to be STATE's new motor vehicle 
emissions control program.

    (v) All states shall include the following language:

    STATE recognizes that motor vehicle manufacturers are committing 
to National LEV with the expectation that, until model year 2006 
(or, under the circumstances specified above, model year 2004), the 
OTC States that commit to the National LEV program will allow 
National LEV as a compliance alternative for state programs adopted 
pursuant to the authority provided in section 177 of the Clean Air 
Act, applying to the vehicle classes specified above (except any 
requirements pertaining to ZEVs in states with Existing ZEV 
Mandates). It is our intent to abide by this commitment. [However, 
the provisions of this letter will not have the force of law until 
STATE adopts them as state regulations. / Regulations providing for 
STATE's opt-in to National LEV have been approved for proposed 
rulemaking by APPROPRIATE STATE AGENCY on [INSERT DATE]. However, 
they will not have the force and effect of law until they are 
approved as final regulations.] Adoption of state regulations and 
the contents of a final state implementation plan revision will be 
determined through a state rulemaking process pursuant to the state 
requirements at [CITE to STATE law] and federal law. Also, STATE 
must comply with any subsequent STATE legislation that might affect 
this commitment.

    (vi) All states shall include the following language:

    If the manufacturers exit the National LEV program pursuant to 
the EPA National LEV regulations at 40 CFR 86.1707, STATE 
[acknowledges / provides in its proposed rule] that the transition 
from National LEV requirements to any STATE program adopted pursuant 
to the authority provided in section 177 of the Clean Air Act 
applying to the vehicle classes specified above, including any 
requirements pertaining to ZEVs (except any requirements pertaining 
to ZEVs in states with Existing ZEV Mandates), will proceed in 
accordance with the EPA National LEV regulations at 40 CFR 86.1707.

    (vii) All states shall include the following language:

    STATE supports the legitimacy of the National LEV program and 
EPA's authority to promulgate the National LEV regulations.

[[Page 969]]

    (viii) Any state may include the following language:
    [This [commitment/opt-in] / As provided in the proposed 
regulations, STATE's opt-in] is conditioned on all motor vehicle 
manufacturers (listed in EPA regulations at 40 CFR 86.1706(c)) 
opting into National LEV and on EPA finding that National LEV is in 
effect pursuant to 40 CFR 86.1706.

    (4) In lieu of statements described in paragraphs (e)(3)(i), 
(e)(3)(ii) and (e)(3)(vi) of this section, states may submit proposed 
regulations containing the provisions required under paragraphs (g)(1), 
(g)(2), (g)(3), and (g)(5) of this section.
    (f) A state shall be considered to have opted in upon the 
Administrator's receipt of the opt-in notification and satisfaction of 
the conditions set forth in paragraph (e)(3)(viii) of this section, if 
applicable.
    (g) Each OTC State that opts into National LEV pursuant to 
paragraph (e) of this section shall submit a state implementation plan 
(SIP) revision within one year and seventy-five days of December 16, 
1997 except for the District of Columbia, New Hampshire, Delaware, and 
Virginia, for which the deadline is 18 months and seventy-five days 
from December 16, 1997. The SIP revisions shall include the following 
using identical or substantively identical language:
    (1) Covered states without any Section 177 Program, or with a 
Section 177 Program but not an Existing ZEV Mandate, shall submit 
regulations containing the following language:

    For the duration of STATE's participation in National LEV, 
manufacturers may comply with National LEV or equally stringent 
mandatory federal standards in lieu of compliance with any program, 
including any mandates for sales of zero emission vehicles (ZEVs), 
adopted by STATE pursuant to the authority provided in section 177 
of the Clean Air Act applicable to passenger cars, light-duty trucks 
up through 6,000 pounds GVWR, and/or medium-duty vehicles from 6,001 
to 14,000 pounds GVWR if designed to operate on gasoline, as these 
categories of motor vehicles are defined in the California Code of 
Regulations, Title 13, Division 3, Chapter 1, Article 1, Section 
1900.
    STATE's participation in National LEV extends until model year 
2006, except as provided in 40 CFR 86.1707. If, no later than 
December 15, 2000, the US EPA does not adopt standards at least as 
stringent as the National LEV standards provided in 40 CFR part 86 
subpart R that apply to new motor vehicles in model year 2004, 2005 
or 2006, STATE's participation in National LEV extends only until 
model year 2004, except as provided in 40 CFR 86.1707.

    (2) Covered states with a Section 177 Program and an Existing ZEV 
Mandate shall submit regulations containing the following language:

    With the exception of any STATE requirements pertaining to zero 
emission vehicles (ZEVs), for the duration of STATE's participation 
in National LEV, manufacturers may comply with National LEV or 
equally stringent mandatory federal standards in lieu of compliance 
with any program adopted by STATE pursuant to the authority provided 
in section 177 of the Clean Air Act applicable to passenger cars, 
light-duty trucks up through 6,000 pounds GVWR, and/or medium-duty 
vehicles from 6,001 to 14,000 pounds GVWR if designed to operate on 
gasoline, as these categories of motor vehicles are defined in the 
California Code of Regulations, Title 13, Division 3, Chapter 1, 
Article 1, Section 1900.
    STATE's participation in National LEV extends until model year 
2006, except as provided in 40 CFR 86.1707. If, no later than 
December 15, 2000, the US EPA does not adopt standards at least as 
stringent as the National LEV standards provided in 40 CFR part 86 
subpart R that apply to new motor vehicles in model year 2004, 2005 
or 2006, STATE's participation in National LEV extends only until 
model year 2004, except as provided in 40 CFR 86.1707.
    Any existing or future STATE requirement pertaining to ZEVs is 
not affected by STATE's acceptance of National LEV as a compliance 
alternative for other state requirements.

    (3) All covered states shall submit regulations containing the 
following language:

    If a covered manufacturer, as defined at 40 CFR 86.1702, opts 
out of the National LEV program pursuant to the EPA National LEV 
regulations at 40 CFR 86.1707, the transition from National LEV 
requirements to any STATE section 177 program applicable to 
passenger cars, light-duty trucks up through 6,000 pounds GVWR, and/ 
or medium-duty vehicles from 6,001 to 14,000 pounds GVWR if designed 
to operate on gasoline, as these categories of motor vehicles are 
defined in the California Code of Regulations, Title 13, Division 3, 
Chapter 1, Article 1, Section 1900, will proceed in accordance with 
the EPA National LEV regulations at 40 CFR 86.1707.

    (4) All covered states shall accompany the regulatory language with 
the following language:

    STATE commits to support National LEV as an acceptable 
alternative to state Section 177 Programs for the duration of 
STATE's participation in National LEV.
    STATE recognizes that its commitment to National LEV is 
necessary to ensure that National LEV remain in effect.
    STATE is submitting this SIP revision in accordance with the 
applicable Clean Air Act requirements at section 110 and EPA 
regulations at 40 CFR Part 86 and 40 CFR Parts 51 and 52.

    (5) States without Existing ZEV Mandates shall accompany the 
regulatory language with the following language:

    For the duration of STATE's participation in National LEV, STATE 
[intends to / will] forbear from adopting and implementing a ZEV 
mandate effective prior to model year 2006. Notwithstanding the 
previous sentence, if, no later than December 15, 2000, the US EPA 
does not adopt standards at least as stringent as the National LEV 
standards provided in 40 CFR part 86 subpart R that apply to new 
motor vehicles in model year 2004, 2005 or 2006, STATE [intends to / 
will] forbear from adopting and implementing a ZEV mandate effective 
prior to model year 2004.


Sec. 86.1706-97   [Redesignated as Sec. 86.1706-99]

    16. Section 86.1706-97 is redesignated as Sec. 86.1706-99 and is 
revised to read as follows:


Sec. 86.1706-99  National LEV program in effect.

    (a) No later than March 2, 1998, EPA shall issue a finding as to 
whether National LEV is in effect. EPA shall base this finding on opt-
in notifications from OTC States submitted pursuant to Sec. 86.1705(e) 
and received by EPA January 30, 1998, and on opt-in notifications from 
manufacturers submitted pursuant to Sec. 86.1705(c) and received by EPA 
February 17, 1998.
    (b) EPA shall find that the National LEV program is in effect and 
shall subsequently publish this determination if the following 
conditions have been met:
    (1) All manufacturers listed in paragraph (c) of this section have 
lawfully opted in pursuant to Sec. 86.1705(c) and any conditions placed 
on the opt-ins allowed under Sec. 86.1705(c)(2) have been met (apart 
from a condition that EPA find the National LEV program in effect);
    (2) Each OTC State that opts in has lawfully opted in pursuant to 
Sec. 86.1705(e) and any conditions placed on opt-ins by OTC States that 
are allowed under Sec. 86.1705(e)(3)(viii) have been met (apart from a 
condition that EPA find the National LEV program in effect); and
    (3) No valid opt-out has become effective pursuant to Sec. 86.1707.
    (c) List of manufacturers of light-duty vehicles and light-duty 
trucks:

American Honda Motor Company, Inc.
American Suzuki Motor Corporation
BMW of North America, Inc.
Chrysler Corporation
Fiat Auto U.S.A., Inc.
Ford Motor Company
General Motors Corporation
Hyundai Motor America
Isuzu Motors America, Inc.
Jaguar Motors Ltd.
Kia Motors America, Inc.
Land Rover North America, Inc.
Mazda (North America) Inc.
Mercedes-Benz of North America
Mitsubishi Motor Sales of America, Inc.
Nissan North America, Inc.

[[Page 970]]

Porsche Cars of North America, Inc.
Rolls-Royce Motor Cars Inc.
Saab Cars USA, Inc.
Subaru of America, Inc.
Toyota Motor Sales, U.S.A., Inc.
Volkswagen of America, Inc.
Volvo North America Corporation

    17. Section 86.1707-99 is added to subpart R to read as follows:


Sec. 86.1707-99  General provisions; opt-outs.

    A covered manufacturer or covered state may opt out of the National 
LEV program only according to the provisions of this section. Vehicles 
certified under the National LEV program must continue to meet the 
standards to which they were certified, regardless of whether the 
manufacturer of those vehicles remains a covered manufacturer. A 
manufacturer that has opted out remains responsible for any debits 
outstanding on the effective date of opt-out, pursuant to 
Sec. 86.1710(d)(3).
    (a) Procedures for opt-outs--manufacturers. To opt out of the 
National LEV program, a covered manufacturer must notify the 
Administrator as provided in Sec. 86.1705(c)(1), except that the 
notification shall specify the condition and final action allowing opt-
out, indicate the manufacturer's intent to opt out of the program and 
no longer be subject to the provisions in this subpart, and specify an 
effective date for the opt-out. The effective date shall be specified 
in terms of the first model year for which the opt-out shall be 
effective, but shall be no earlier than the applicable date indicated 
in paragraphs (d) through (j) of this section. For an opt-out pursuant 
to paragraph (d) of this section, the manufacturer shall specify the 
revision triggering the opt-out and shall also provide evidence that 
the triggering revision does not harmonize the standard or requirement 
with a comparable California standard or requirement, if applicable, or 
that the triggering revision has increased the stringency of the 
revised standard or requirement, if applicable. The notification shall 
include the following language:

    XX COMPANY, its subsidiaries, successors and assigns hereby opt 
out of the voluntary National LEV program, as set forth in 40 CFR 
part 86, subpart R.

    (b) Procedures for opt-outs--OTC states. To opt out of the National 
LEV program, a covered state must notify the Administrator through a 
written statement from the head of the appropriate state agency. A copy 
of the notification shall be sent to the Director, Vehicle Programs and 
Compliance Division; U.S. Environmental Protection Agency; 2565 
Plymouth Road; Ann Arbor, Michigan, 48105. The notification shall 
specify the final action allowing opt-out, indicate the state's intent 
to opt out of the program and no longer be subject to the provisions in 
this subpart, and specify an effective date for the opt-out. The 
effective date shall be specified in terms of the first model year for 
which the opt-out shall be effective, but shall be no earlier than the 
applicable date indicated in paragraphs (d) through (k) of this 
section. The notification shall include the following language:

    STATE hereby opts out of the voluntary National LEV program, as 
set forth in 40 CFR part 86, subpart R.

    (c) Procedures for opt-outs--EPA notification. Upon receipt of an 
opt-out notification under this section, EPA shall promptly notify the 
covered states and covered manufacturers of the opt-out. Publication in 
the Federal Register of notice of receipt of the opt-out notification 
is sufficient but not necessary to meet EPA's obligation to notify 
covered states and covered manufacturers.
    (d) Conditions allowing manufacturer opt-outs--change to Stable 
Standards. A covered manufacturer may opt out if EPA promulgates a 
final rule or takes other final agency action making a revision not 
specified in paragraph (d)(9)(iii) of this section to a standard or 
requirement listed in paragraph (d)(9)(i) of this section and the 
covered manufacturer objects to the revision.
    (1) A covered manufacturer may opt out within 180 calendar days of 
the EPA action allowing opt-out under this paragraph (d). A valid opt-
out based on a revision to a Core Stable Standard shall be effective no 
earlier than the model year named for the calendar year following the 
calendar year in which EPA receives the manufacturer's opt-out 
notification. A valid opt-out based on a revision to a Non-Core Stable 
Standard may become effective no earlier than the first model year to 
which that revision applies.
    (i) Only a covered manufacturer that objects to a revision may opt 
out if EPA adopts that revision, except that if such a manufacturer 
opts out, other manufacturers that did not object to the revision may 
also opt out pursuant to paragraph (j) of this section. An objection 
shall be sufficient for this purpose only if it was filed during the 
public comment period on the proposed revision and the objection states 
that the proposed revision is sufficiently significant to allow opt-out 
under this paragraph (d).
    (ii) [Reserved]
    (2) Within sixty days of receipt of an opt-out notification under 
this paragraph (d), EPA shall determine whether the opt-out is valid by 
determining whether the alleged condition allowing opt-out has occurred 
and whether the opt-out complies with the requirements under paragraphs 
(a) and (d) of this section. An EPA determination regarding the 
validity of an opt-out is not a rule, but is a nationally applicable 
final agency action subject to judicial review pursuant to section 
307(b) of the Clean Air Act (42 U.S.C. 7607(b)).
    (3) A manufacturer that has submitted an opt-out notification to 
EPA under this paragraph (d) remains a covered manufacturer until the 
opt-out has come into effect under paragraph (d)(1) of this section and 
EPA or a reviewing court determines that the opt-out is valid.
    (4) In the event that a manufacturer petitions for judicial review 
of an EPA determination that an opt-out is invalid, the manufacturer 
remains a covered manufacturer until final judicial resolution of the 
petition. Pending resolution of the petition, and starting with the 
model year for which the opt-out would have come into effect under 
paragraph (d)(1) of this section if EPA had determined the opt-out was 
valid, the manufacturer may certify vehicles to any standards in this 
part applicable to vehicles certified in that model year and sell such 
vehicles without regard to the limitations contained in Sec. 86.1711. 
However, if the opt-out is finally determined to be invalid, the 
manufacturer will be liable for any failure to comply with 
Secs. 86.1710 through 86.1712.
    (5) Upon the effective date of a manufacturer's opt-out under this 
paragraph (d), that manufacturer shall be subject to all requirements 
(except ZEV Mandates) that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.) and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted at 
least two years before the effective date of a manufacturer's opt-out, 
a manufacturer waives its right under section 177 of the Clean Air Act 
to two years of lead time to the extent that the effective date of its 
opt-out provides for less than two years of lead time and to the extent 
such a waiver is necessary. With respect to ZEV Mandates, the 
manufacturer will

[[Page 971]]

not be deemed to have waived its two-year lead time under section 177 
of the Clean Air Act. A manufacturer shall not be subject to any ZEV 
Mandates (except Existing ZEV Mandates) in OTC States until the model 
year (as defined in part 85, subpart X) that commences two years after 
the date of EPA's receipt of the manufacturer's opt-out notice.
    (6) If a covered manufacturer opts out under this paragraph (d), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
the date of either an EPA finding that the opt-out is valid, or a 
judicial ruling that a disputed opt-out is valid. The state's opt-out 
notification shall specify an effective date for the state's opt-out no 
earlier than two calendar years after the date of EPA's receipt of the 
state's opt-out notification and shall provide that the opt out is not 
effective for model years (as defined in part 85, subpart X) that 
commence prior to this effective date.
    (7) In a state that opts out pursuant to paragraph (d)(6) of this 
section, obligations under National LEV shall be unaffected for covered 
manufacturers until the effective date of the state's opt-out. Upon the 
effective date of the state's opt-out, in that state covered 
manufacturers shall comply with any state standards and other 
requirements in effect pursuant to section 177 of the Clean Air Act or, 
if such state standards are not in effect, with all requirements that 
would apply to a manufacturer that had not opted into the National LEV 
program, including all applicable standards and other requirements 
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.).
    (8) In a state that has not opted out, obligations under National 
LEV shall be unaffected for covered manufacturers.
    (9)(i) The following are the emissions standards and requirements 
that, if revised, may provide covered manufacturers the opportunity to 
opt out pursuant to paragraph (d)(1) of this section:
    (A) The tailpipe emissions standards for NMOG, NOx, CO, 
HCHO, and PM specified in Sec. 86.1708(b) and (c) and Sec. 86.1709(b) 
and (c);
    (B) Fleet average NMOG standards and averaging, banking and trading 
provisions specified in Sec. 86.1710;
    (C) Provisions regarding limitations on sale of Tier 1 vehicles and 
TLEVs contained in Sec. 86.1711;
    (D) The compliance test procedure (Federal Test Procedure) as 
specified in subparts A and B of this part, as used for determining 
compliance with the exhaust emission standards specified in 
Sec. 86.1708(b) and (c) and Sec. 86.1709(b) and (c);
    (E) The compliance test fuel, as specified in Sec. 86.1771;
    (F) The definition of low volume manufacturer specified in 
Sec. 86.1702;
    (G) The on-board diagnostic system requirements specified in 
Sec. 86.1717;
    (H) The light-duty vehicle refueling emissions standards and 
provisions specified in Sec. 86.099-8(d), and the light-duty truck 
refueling emissions standards and provisions specified in Sec. 86.001-
9(d);
    (I) The cold temperature carbon monoxide standards and provisions 
for light-duty vehicles specified in Sec. 86.099-8(k), and for light 
light-duty trucks specified in Sec. 86.099-9(k);
    (J) The evaporative emissions standards and provisions for light-
duty vehicles specified in Sec. 86.099-8(b), and the evaporative 
emissions standards and provisions for light light-duty trucks 
specified in Sec. 86.099-9(b);
    (K) The reactivity adjustment factors and procedures specified in 
Sec. 86.1777(d);
    (L) The Supplemental Federal Test Procedure, standards and phase-in 
schedules specified in Secs. 86.1708(e), 86.1709(e), 86.127(f) and (g), 
86.129(e) and (f), 86.130(e), 86.131(f), 86.132(n) and (o), 86.158, 
86.159, 86.160, 86.161, 86.162, 86.163, 86.164, and Appendix I to this 
part, paragraphs (g) and (h).
    (ii) The standards and requirements listed in paragraphs 
(d)(9)(i)(A) through (d)(9)(i)(F) of this section are the ``Core Stable 
Standards''; the standards and requirements listed in paragraphs 
(d)(9)(i)(G) through (d)(9)(i)(L) of this section are the ``Non-Core 
Stable Standards.''
    (iii) The following types of revisions to the Stable Standards 
listed in paragraph (d)(9)(i) of this section do not provide covered 
manufacturers the right to opt out of the National LEV program:
    (A) Revisions to which covered manufacturers do not object;
    (B) Revisions to a Non-Core Stable Standard that do not increase 
the overall stringency of the standard or requirement;
    (C) Revisions to a Non-Core Stable Standard that harmonize the 
standard or requirement with the comparable California standard or 
requirement for the same model year (even if the harmonization 
increases the stringency of the standard or requirement), provided 
that, if the relevant California factor is raised to 1.0 or higher, EPA 
can only raise to 1.0 any of the reactivity adjustment factors 
specified in 86.1777 applicable to gasoline meeting the specifications 
of 86.1771(a)(1); and
    (D) Revisions to cold temperature carbon monoxide standards and 
provisions for light-duty vehicles (as specified in Sec. 86.099-8(k)) 
and for light light-duty trucks (as specified in Sec. 86.099-9(k)) that 
are effective after model year 2000.
    (10) Promulgation by EPA of mandatory tailpipe standards and other 
related requirements effective model year 2004 or later does not 
provide an opportunity to opt out of the National LEV program.
    (e) Conditions allowing manufacturer opt-outs--state Section 177 
Program that does not allow National LEV as a compliance alternative. A 
covered manufacturer may opt out of National LEV if a covered state 
takes final action such that it has in its regulations or state law a 
state Section 177 Program and/or a ZEV Mandate (except in a state with 
an Existing ZEV Mandate), that does not allow National LEV as a 
compliance alternative for the duration of the state's commitment to 
the National LEV program. The state's commitment to National LEV 
extends until model year 2006. If, no later than December 15, 2000, EPA 
has not adopted standards at least as stringent as the National LEV 
standards provided in 40 CFR part 86, subpart R that apply to new motor 
vehicles in model year 2004, 2005 or 2006, the state's commitment to 
National LEV only extends until model year 2004. A manufacturer could 
opt out based on this condition even if the state regulations or law 
are contrary to an approved SIP revision committing the state to 
National LEV pursuant to Sec. 86.1705(g). For purposes of this 
paragraph (e), such a state shall be called the ``violating state.''
    (1) A covered manufacturer may opt out any time after the violating 
state takes such final action, provided that the violating state has 
not withdrawn or otherwise nullified the relevant final action prior to 
EPA's receipt of the opt-out notification. An opt-out under this 
paragraph (e) shall be effective no earlier than the model year named 
for the calendar year following the calendar year in which EPA receives 
the manufacturer's opt-out notification.
    (2) As of the model year named for the calendar year following the 
calendar year of the violating state's final action, the violating 
state shall no longer be included in the applicable trading region for 
purposes of calculating covered manufacturers' compliance with the 
fleet average NMOG standards under Sec. 86.1710, and Sec. 86.1711 shall 
no longer apply to vehicles sold in the violating state. Beginning in 
that model year and until the violating state's requirements become 
effective pursuant

[[Page 972]]

to sections 110(l) and 177 of the Clean Air Act or until the date 
specified in the following sentence, whichever is earlier, the National 
LEV program allows covered manufacturers to certify and produce for 
sale vehicles meeting the exhaust emission standards of Sec. 86.096-
8(a)(1)(i) and subsequent model year provisions or Sec. 86.097-
9(a)(1)(i) and subsequent model year provisions in the violating state. 
If the violating state withdraws or otherwise nullifies the relevant 
violating final action, vehicles sold in that state shall count towards 
the covered manufacturers' fleet NMOG standards under Sec. 86.1710 and 
be subject to Sec. 86.1711 as of the model year named for the second 
calendar year following the calendar year in which the violating state 
took the final action nullifying or withdrawing the final violating 
action, or as of the model year named for the fourth calendar year 
following the calendar year in which the violating state took the 
violating final action, whichever is later. The two-year lead time 
required by section 177 of the Clean Air Act for the state Section 177 
Program or ZEV Mandate shall run from the date of the violating final 
action. Notwithstanding an earlier effective date of a manufacturer's 
opt-out under this paragraph (e), the manufacturer's opt-out is not 
effective in the violating state until the two-year lead time for the 
violating state's program has passed (which shall run from the date of 
the violating final action). For model years for which vehicles sold in 
the violating state do not count towards the National LEV NMOG average, 
in calculating emissions reductions from new motor vehicles creditable 
for state implementation plan requirements, the violating state's 
emissions reductions shall be based on the emission standards of 
Secs. 86.096--8(a)(1)(i), 86.097-9(a)(1)(i) and subsequent model year 
provisions, and shall not be based on the National LEV standards, 
provided that vehicles sold in the violating state are certified to 
Tier 1 levels when sold in that state.
    (3) Upon the effective date of a manufacturer's opt-out under this 
paragraph (e) in any covered state that is not a violating state under 
this paragraph (e), that manufacturer shall be subject to all 
requirements (except ZEV Mandates) that would apply to a manufacturer 
that had not opted into the National LEV program, including all 
applicable standards and other requirements promulgated under title II 
of the Clean Air Act and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted by a 
non-violating state at least two years before the effective date of a 
manufacturer's opt-out, a manufacturer waives its right under section 
177 of the Clean Air Act to two years of lead time to the extent that 
the effective date of its opt-out provides for less than two years of 
lead time and to the extent such a waiver is necessary. With respect to 
ZEV Mandates, the manufacturer will not be deemed to have waived its 
two-year lead time under section 177 of the Clean Air Act. A 
manufacturer shall not be subject to any ZEV Mandates (except Existing 
ZEV Mandates) in OTC States until the model year (as defined in part 
85, subpart X) that commences two years after the date of EPA's receipt 
of the manufacturer's opt-out notice.
    (4) If a covered manufacturer opts out under this paragraph (e), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
EPA's receipt of the manufacturer's opt-out notification. The state's 
opt-out notification shall specify an effective date for the state's 
opt-out no earlier than two calendar years after the date of EPA's 
receipt of the state's opt-out notification and shall provide that the 
opt-out is not effective for model years (as defined in part 85, 
subpart X), that commence prior to this effective date.
    (5) In a non-violating state that opts out pursuant to paragraph 
(e)(4) of this section, obligations under National LEV shall be 
unaffected for covered manufacturers until the effective date of the 
non-violating state's opt-out. Upon the effective date of the state's 
opt-out, in that state covered manufacturers shall comply with any 
state standards and other requirements in effect pursuant to section 
177 of the Clean Air Act or, if such state standards are not in effect, 
with all requirements that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.).
    (6) In a non-violating state that has not opted out, obligations 
under National LEV shall be unaffected for covered manufacturers.
    (f) Conditions allowing manufacturer opt-outs--failure to submit 
SIP revision. A covered manufacturer may opt out of National LEV if a 
covered state fails to submit a National LEV SIP revision on the date 
specified in Sec. 86.1705(g). For purposes of this paragraph (f), such 
a state shall be called the ``violating state.''
    (1) A covered manufacturer may opt out any time after the violating 
state misses the deadline for its National LEV SIP revision, provided 
that EPA has not received a National LEV SIP revision from the 
violating state prior to EPA's receipt of the manufacturer's opt-out 
notification. If a manufacturer opts out within 180 calendar days from 
the deadline for the state to submit its National LEV SIP revision, the 
opt-out must be conditioned on the state not submitting a National LEV 
SIP revision within 180 calendar days from the deadline for such SIP 
revision. If the state submits such a SIP revision within the 180-day 
period, any manufacturer opt-outs under this paragraph (f) would be 
invalidated and would not come into effect. An opt-out under this 
paragraph (f) shall be effective no earlier than model year 2000 (or 
model year 2001 if the violating state is the District of Columbia, New 
Hampshire, Delaware, or Virginia) or the model year named for the 
calendar year following the calendar year in which EPA receives the 
opt-out notification, whichever is later.
    (2) For a manufacturer that opts out under this paragraph (f), as 
of model year 2000 (or model year 2001 if the violating state is the 
District of Columbia, New Hampshire, Delaware, or Virginia) or the 
model year named for the calendar year following the calendar year in 
which EPA receives the opt-out notification, whichever is later, the 
violating state shall no longer be included in the applicable trading 
region for purposes of calculating that manufacturer's compliance with 
the fleet average NMOG standards under Sec. 86.1710 and the 
manufacturer does not have to comply with Sec. 86.1711 for vehicles 
sold in the violating state. Beginning in that model year and until the 
manufacturer's opt-out becomes effective, the National LEV program 
allows a manufacturer that has opted out under this paragraph (f) to 
certify and produce for sale vehicles meeting the exhaust emission 
standards of Sec. 86.096-8(a)(1)(i) and subsequent model year 
provisions or Sec. 86.097-9(a)(1)(i) and subsequent model year 
provisions in the violating state. For model years in which vehicles 
sold in the violating state do not count towards the National LEV NMOG 
average, in calculating emission reductions from new motor vehicles 
creditable for state implementation plan requirements, the violating 
state's emissions reductions shall be based on the emissions standards 
of Secs. 86.096-8(a)(1)(i), 86.097-9(a)(1)(i), and subsequent model 
year provisions, and shall not be based

[[Page 973]]

on the National LEV standards, provided that vehicles sold in the 
violating state are certified to Tier 1 levels when sold in that state. 
National LEV obligations in the violating state remain unchanged for 
those manufacturers that do not opt out based on this condition.
    (3) Upon the effective date of a manufacturer's opt-out under this 
paragraph (f), in any covered state that is not a violating state under 
this paragraph (f), that manufacturer shall be subject to all 
requirements (except ZEV Mandates) that would apply to a manufacturer 
that had not opted into the National LEV program, including all 
applicable standards and other requirements promulgated under title II 
of the Clean Air Act and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted by a 
non-violating state at least two years before the effective date of a 
manufacturer's opt-out, a manufacturer waives its right under section 
177 of the Clean Air Act to two years of lead time to the extent that 
the effective date of its opt-out provides for less than two years of 
lead time and to the extent such a waiver is necessary. With respect to 
ZEV Mandates, the manufacturer will not be deemed to have waived its 
two-year lead time under section 177 of the Clean Air Act. A 
manufacturer shall not be subject to any ZEV Mandates (except Existing 
ZEV Mandates) in OTC States until the model year (as defined in part 
85, subpart X) that commences two years after the date of EPA's receipt 
of the manufacturer's opt-out notice.
    (4) If a covered manufacturer opts out under this paragraph (f), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
EPA's receipt of the manufacturer's opt-out notification. The state's 
opt-out notification shall specify an effective date for the state's 
opt-out no earlier than two calendar years after the date of EPA's 
receipt of the state's opt-out notification and shall provide that the 
opt-out is not effective for model years (as defined in part 85, 
subpart X), that commence prior to this effective date.
    (5) In a non-violating state that opts out pursuant to paragraph 
(f)(4) of this section, obligations under National LEV shall be 
unaffected for covered manufacturers until the effective date of the 
non-violating state's opt-out. Upon the effective date of the state's 
opt-out, in that state covered manufacturers shall comply with any 
state standards and other requirements in effect pursuant to section 
177 of the Clean Air Act or, if such state standards are not in effect, 
with all requirements that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.).
    (6) In a non-violating state that has not opted out, obligations 
under National LEV shall be unaffected for covered manufacturers.
    (g) Conditions allowing manufacturer opt-outs--inadequate National 
LEV SIP submission. A covered manufacturer may opt out of National LEV 
if EPA disapproves a covered state's National LEV SIP submission or 
finds that it fails to meet the requirements for a National LEV SIP 
revision set forth in Sec. 86.1705(g) or if EPA has not taken final 
action regarding such a SIP submission and more than one year has 
passed since such SIP submission was submitted to EPA. For purposes of 
this paragraph (g), such a state shall be called the ``violating 
state.''
    (1) A covered manufacturer may opt out any time after EPA has 
disapproved a state's National LEV SIP submission or found that it does 
not meet the requirements of Sec. 86.1705(g), provided that EPA has not 
subsequently approved a revised National LEV SIP revision from that 
state and found that the SIP revision meets the requirements of 
Sec. 86.1705(g). A covered manufacturer may also opt out any time after 
one year EPA's receipt of a state's National LEV SIP submission, 
provided that EPA has not approved the revision or has not found that 
the SIP revision meets the requirements of Sec. 86.1705(g). An opt-out 
under this condition shall be effective no earlier than the model year 
named for the calendar year following the calendar year in which the 
EPA receives the manufacturer's opt-out notification.
    (2) For a manufacturer that opts out under this paragraph (g), as 
of the model year named for the calendar year following the calendar 
year in which EPA receives the opt-out notification, the violating 
state shall no longer be included in the applicable trading region for 
purposes of calculating that manufacturer's compliance with the fleet 
average NMOG standards under Sec. 86.1710 and the manufacturer does not 
have to comply with Sec. 86.1711 for vehicles sold in the violating 
state. Beginning in that model year and until the manufacturer's opt-
out becomes effective, the National LEV program allows a manufacturer 
that has opted out under this paragraph (g) to certify and produce for 
sale vehicles meeting the exhaust emission standards of Sec. 86.096-
8(a)(1)(i) and subsequent model year provisions or Sec. 86.097-
9(a)(1)(i) and subsequent model year provisions in the violating state. 
For model years in which vehicles sold in the violating state do not 
count towards the National LEV NMOG average, in calculating emission 
reductions from new motor vehicles creditable for state implementation 
plan requirements, the violating state's emissions reductions shall be 
based on the emissions standards of Secs. 86.096-8(a)(1)(i), 86.097-
9(a)(1)(i), and subsequent model year provisions, and shall not be 
based on the National LEV standards, provided that vehicles sold in the 
violating state are certified to Tier 1 levels when sold in that state. 
National LEV obligations in the violating state remain unchanged for 
those manufacturers that do not opt out based on this condition.
    (3) Upon the effective date of a manufacturer's opt-out under this 
paragraph (g), in any covered state that is not a violating state under 
this paragraph (g), that manufacturer shall be subject to all 
requirements (except ZEV Mandates) that would apply to a manufacturer 
that had not opted into the National LEV program, including all 
applicable standards and other requirements promulgated under title II 
of the Clean Air Act and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted by a 
non-violating state at least two years before the effective date of a 
manufacturer's opt-out, a manufacturer waives its right under section 
177 of the Clean Air Act to two years of lead time to the extent that 
the effective date of its opt-out provides for less than two years of 
lead time and to the extent such a waiver is necessary. With respect to 
ZEV Mandates, the manufacturer will not be deemed to have waived its 
two-year lead time under section 177 of the Clean Air Act. A 
manufacturer shall not be subject to any ZEV Mandates (except Existing 
ZEV Mandates) in OTC States until the model year (as defined in part 
85, subpart X) that commences two years after the date of EPA's receipt 
of the manufacturer's opt-out notice.
    (4) If a covered manufacturer opts out under this paragraph (g), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar

[[Page 974]]

days of EPA's receipt of the manufacturer's opt-out notification. The 
state's opt-out notification shall specify an effective date for the 
state's opt-out that is no earlier than two calendar years after the 
date of EPA's receipt of the state's opt-out notification and shall 
provide that the opt-out is not effective for model years (as defined 
in part 85, subpart X that commence prior to this effective date.
    (5) In a non-violating state that opts out pursuant to paragraph 
(g)(4) of this section, obligations under National LEV shall be 
unaffected for covered manufacturers until the effective date of the 
non-violating state's opt-out. Upon the effective date of the state's 
opt-out, in that state covered manufacturers shall comply with any 
state standards and other requirements in effect pursuant to section 
177 of the Clean Air Act or, if such state standards are not in effect, 
with all requirements that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.).
    (6) In a non-violating state that has not opted out, obligations 
under National LEV shall be unaffected for covered manufacturers.
    (h) Conditions allowing manufacturer opt-outs--adoption of a ZEV 
Mandate. A covered manufacturer to which a ZEV Mandate might apply may 
opt out of National LEV if a covered state without an Existing ZEV 
Mandate takes final action such that it has in its regulations or state 
law a ZEV Mandate that allows National LEV as a compliance alternative 
that would be effective during the state's commitment to National LEV. 
For purposes of this paragraph (h), such a state shall be called the 
``violating state.''
    (1) A covered manufacturer may opt out any time after the violating 
state takes the final action, provided that the violating state has not 
withdrawn or otherwise nullified the relevant final action prior to 
EPA's receipt of the opt-out notification. An opt-out under this opt-
out condition shall be effective no earlier than the model year named 
for the calendar year following the calendar year in which EPA receives 
the manufacturer's opt-out notification.
    (2) For a manufacturer that opts out under this paragraph (h), as 
of the model year named for the calendar year following the calendar 
year in which EPA receives the opt-out notification, the violating 
state shall no longer be included in the applicable trading region for 
purposes of calculating that manufacturer's compliance with the fleet 
average NMOG standards under Sec. 86.1710 and the manufacturer does not 
have to comply with Sec. 86.1711 for vehicles sold in the violating 
state. Beginning in that model year and until the manufacturer's opt-
out becomes effective, the National LEV program allows a manufacturer 
that has opted out under this paragraph (h) to certify and produce for 
sale vehicles meeting the exhaust emission standards of Sec. 86.096-
8(a)(1)(i) and subsequent model year provisions or Sec. 86.097-
9(a)(1)(i) and subsequent model year provisions in the violating state. 
For model years in which vehicles sold in the violating state do not 
count towards the National LEV NMOG average, in calculating emission 
reductions from new motor vehicles creditable for state implementation 
plan requirements, the violating state's emissions reductions shall be 
based on the emissions standards of Secs. 86.096-8(a)(1)(i), 86.097-
9(a)(1)(i), and subsequent model year provisions, and shall not be 
based on the National LEV standards, provided that vehicles sold in the 
violating state are certified to Tier 1 levels when sold in that state. 
National LEV obligations in the violating state remain unchanged for 
those manufacturers that do not opt out based on this condition.
    (3) Upon the effective date of a manufacturer's opt-out under this 
paragraph (h), in any covered state that is not a violating state under 
this paragraph (h), that manufacturer shall be subject to all 
requirements (except ZEV Mandates) that would apply to a manufacturer 
that had not opted into the National LEV program, including all 
applicable standards and other requirements promulgated under title II 
of the Clean Air Act and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted by a 
non-violating state at least two years before the effective date of a 
manufacturer's opt-out, a manufacturer waives its right under section 
177 of the Clean Air Act to two years of lead time to the extent that 
the effective date of its opt-out provides for less than two years of 
lead time and to the extent such a waiver is necessary. With respect to 
ZEV Mandates, the manufacturer will not be deemed to have waived its 
two-year lead time under section 177 of the Clean Air Act. A 
manufacturer shall not be subject to any ZEV Mandates (except Existing 
ZEV Mandates) in OTC States until the model year (as defined in part 
85, subpart X) that commences two years after the date of EPA's receipt 
of the manufacturer's opt-out notice.
    (4) If a covered manufacturer opts out under this paragraph (h), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
EPA's receipt of the manufacturer's opt-out notification. The state's 
opt-out notification shall specify an effective date for the state's 
opt-out that is no earlier than two calendar years after the date of 
EPA's receipt of the state's opt-out notification and shall provide 
that the opt-out is not effective for model years (as defined in part 
85, subpart X) that commence prior to this effective date.
    (5) In a non-violating state that opts out pursuant to paragraph 
(h)(4) of this section, obligations under National LEV shall be 
unaffected for covered manufacturers until the effective date of the 
non-violating state's opt-out. Upon the effective date of the state's 
opt-out, in that state covered manufacturers shall comply with any 
state standards and other requirements in effect pursuant to section 
177 of the Clean Air Act or, if such state standards are not in effect, 
with all requirements that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.).
    (6) In a non-violating state that has not opted out, obligations 
under National LEV shall be unaffected for covered manufacturers.
    (i) Conditions allowing manufacturer opt-outs--EPA failure to 
consider in-use fuel issues. A covered manufacturer may opt out of 
National LEV if EPA does not meet its obligations related to fuel 
sulfur effects, as those obligations are set forth in paragraph (i)(7) 
of this section.
    (1) A manufacturer may request in writing that EPA consider taking 
a specific action with regard to a fuel sulfur effect described in 
paragraph (i)(7) of this section. The request must identify the alleged 
fuel sulfur related problem, demonstrate that the problem exists and is 
caused by in-use fuel sulfur levels, ask EPA to consider taking a 
specific action, and demonstrate the emissions impact of the requested 
change. Within 60 calendar days of EPA's receipt of the manufacturer's 
request, EPA must consider the manufacturer's request and respond to it 
in writing, stating the Agency's decision and explaining the basis for 
the decision. The date of EPA's response is the date the response is 
signed.

[[Page 975]]

    (2) If EPA fails to respond to a manufacturer's request within the 
time provided, the covered manufacturer that submitted the request may 
opt out within 180 calendar days of the deadline for the EPA response. 
(If such a manufacturer opts out, other manufacturers that did not 
submit requests may also opt out pursuant to paragraph (j) of this 
section.) An opt-out notification under this paragraph (i) is not valid 
if received by EPA after EPA responds to the request, even if EPA 
responds after the expiration of the 60-day EPA deadline. An opt-out 
under this paragraph (i) shall be effective no earlier than the model 
year named for the calendar year following the calendar year in which 
EPA receives the manufacturer's opt-out notification.
    (3) Upon the effective date of a manufacturer's opt-out under this 
paragraph (i), the manufacturer shall be subject to all requirements 
(except ZEV Mandates) that would apply to a manufacturer that had not 
opted into the National LEV program, including all applicable standards 
and other requirements promulgated under title II of the Clean Air Act 
(42 U.S.C. 7521 et seq.) and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted at 
least two years before the effective date of a manufacturer's opt-out, 
a manufacturer waives its right under section 177 of the Clean Air Act 
to two years of lead time to the extent that the effective date of its 
opt-out provides for less than two years of lead time and to the extent 
such a waiver is necessary. With respect to ZEV Mandates, the 
manufacturer will not be deemed to have waived its two-year lead time 
under section 177 of the Clean Air Act. A manufacturer shall not be 
subject to any ZEV Mandates (except Existing ZEV Mandates) in OTC 
States until the model year (as defined in part 85, subpart X) that 
commences two years after the date of EPA's receipt of the 
manufacturer's opt-out notice.
    (4) If a covered manufacturer opts out under this paragraph (i), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
EPA's receipt of the manufacturer's opt-out notification. The state's 
opt-out notification shall specify an effective date for the state's 
opt-out that is no earlier than two calendar years after the date of 
EPA's receipt of the state's opt-out notification and shall provide 
that the opt out is not effective for model years (as defined in part 
85, subpart X), that commence prior to this effective date.
    (5) In a state that opts out pursuant to paragraph (i)(4) of this 
section, obligations under National LEV shall be unaffected for covered 
manufacturers until the effective date of the state's opt-out. Upon the 
effective date of the state's opt-out, in that state covered 
manufacturers shall comply with any state standards and other 
requirements in effect pursuant to section 177 of the Clean Air Act or, 
if such state standards are not in effect, with all requirements that 
would apply to a manufacturer that had not opted into the National LEV 
program, including all applicable standards and other requirements 
promulgated under title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.).
    (6) In a state that has not opted out, obligations under National 
LEV shall be unaffected for covered manufacturers.
    (7) Following are the actions that a manufacturer may request EPA 
to consider under paragraph (i)(1) of this section:
    (i) During the certification process and upon a manufacturer's 
written request, EPA will consider allowing the use of an on-board 
diagnostic system (as required by Sec. 86.1717), that functions 
properly on low sulfur gasoline, but indicates sulfur-induced passes 
when exposed to high sulfur gasoline.
    (ii) Upon a manufacturer's written request, if vehicles exhibit 
illuminations of the emission control diagnostic system malfunction 
indicator light (as defined in Sec. 86.094-17(c)) due to high sulfur 
gasoline, EPA will consider allowing modifications to such vehicles on 
a case-by-case basis so as to eliminate the sulfur-induced 
illumination.
    (iii) Upon a manufacturer's written request, prior to in-use 
testing, that presents information to EPA regarding pre-conditioning 
procedures designed solely to remove the effects of high sulfur from 
currently available gasoline, EPA will consider allowing such 
procedures on a case-by-case basis.
    (j) Conditions allowing manufacturer opt-outs--OTC State or 
manufacturer opts out. A covered manufacturer may opt out of National 
LEV if a covered state or another covered manufacturer opts out of the 
National LEV program pursuant to this section.
    (1) If a covered manufacturer's opt-out under this paragraph (j) is 
based on a covered state's or covered manufacturer's opt-out under 
paragraph (e), (f), (g), (h), (i), (j) or (k) of this section, the 
manufacturer may opt out within 90 calendar days of EPA's receipt of 
the underlying state's or manufacturer's opt-out notification. If a 
manufacturer's opt-out under this paragraph (j) is based on a 
manufacturer's opt-out under paragraph (d) of this section, the 
manufacturer may only opt out within 90 calendar days of the date of 
either an EPA finding or a judicial ruling that the opt-out under 
paragraph (d) of this section is valid. An opt-out under this paragraph 
(j) shall be effective no earlier than the model year named for the 
calendar year following the calendar year in which the EPA receives the 
manufacturer's opt-out notification.
    (2) Upon the effective date of a manufacturer's opt-out under this 
paragraph (j), in any covered state that manufacturer shall be subject 
to all requirements (except ZEV Mandates) that would apply to a 
manufacturer that had not opted into National LEV, including all 
applicable standards and other requirements promulgated under title II 
of the Clean Air Act and any state standards and other requirements 
(except ZEV Mandates) in effect pursuant to section 177 of the Clean 
Air Act (42 U.S.C. 7507). For any state Section 177 Program that 
allowed National LEV as a compliance alternative and was adopted at 
least two years before the effective date of a manufacturer's opt-out, 
a manufacturer waives its right under section 177 of the Clean Air Act 
to two years of lead time to the extent that the effective date of its 
opt-out provides for less than two years of lead time and to the extent 
such a waiver is necessary. With respect to ZEV Mandates, the 
manufacturer will not be deemed to have waived its two-year lead time 
under section 177 of the Clean Air Act. A manufacturer shall not be 
subject to any ZEV Mandates (except Existing ZEV Mandates) in OTC 
States until the model year (as defined in part 85, subpart X) that 
commences two years after the date of EPA's receipt of the 
manufacturer's opt-out notice.
    (3) If a covered manufacturer opts out under this paragraph (j), 
any covered state that is not a violating state under paragraph (e), 
(f), (g) or (h) of this section may opt out within 90 calendar days of 
EPA's receipt of the manufacturer's opt-out notification. The state's 
opt-out notification shall specify an effective date for the state's 
opt-out no earlier than two calendar years after the date of EPA's 
receipt of the state's opt-out notification and shall provide that the 
opt-out is not effective for model years (as defined in part 85, 
subpart X), that commence prior to this effective date.
    (4) In a state that opts out pursuant to paragraph (j)(3) of this 
section, obligations under National LEV shall be unaffected for covered 
manufacturers

[[Page 976]]

until the effective date of the state's opt-out. Upon the effective 
date of the state's opt-out, in that state covered manufacturers shall 
comply with any state standards and other requirements in effect 
pursuant to section 177 of the Clean Air Act or, if such state 
standards are not in effect, with all requirements that would apply to 
a manufacturer that had not opted into the National LEV program, 
including all applicable standards and other requirements promulgated 
under title II of the Clean Air Act (42 U.S.C. 7521 et seq.).
    (5) In a state that has not opted out, obligations under National 
LEV remain unaffected for covered manufacturers.
    (k) Conditions allowing OTC State opt-outs--EPA finding of 
inequivalency. Any covered state may opt out of National LEV if EPA 
determines that National LEV would not produce (or is not producing) 
emissions reductions at least equivalent to the OTC State Section 177 
Programs.
    (1) At any time during National LEV, a covered state may request in 
writing that EPA reevaluate its initial equivalency determination (of 
December 16, 1997) that National LEV would produce emissions reductions 
at least equivalent to the OTC State Section 177 Programs that would be 
operative in the absence of National LEV. Within 180 calendar days of 
receipt of the state's request, EPA must take final agency action to 
determine whether the determination that National LEV will produce at 
least equivalent emission reductions to OTC State Section 177 Program 
is still valid. These EPA determinations are not rules, but are 
nationally applicable final agency actions subject to judicial review 
pursuant to section 307(b) of the Clean Air Act (42 U.S.C. 7607(b)). In 
reevaluating its equivalency determination, EPA shall use the same 
Mobile emission factor model and the same inputs and assumptions 
(including vehicle miles traveled, MOBILE5a model inputs, inspection 
and maintenance programs, reformulated gasoline, and permanent 
migration effects) as used in the initial determination, with the 
following exceptions:
    (i) In modeling the emission reductions from National LEV, EPA 
shall use any revised federal new motor vehicle standard or other 
requirement in place of the standard or other requirement as it existed 
when EPA made its initial determination; and, to the extent that the 
modeling reflects EPA's implementation of federal new motor vehicle 
standards or other requirements, EPA shall take any changes in such 
implementation into account.
    (ii) In modeling the emissions reductions that would be achieved 
through the OTC State Section 177 Programs that would apply in the 
absence of National LEV, EPA shall take into account all Section 177 
Programs adopted by OTC States (including programs that allow National 
LEV as a compliance alternative) that had been adopted subsequent to 
EPA's initial equivalency determination. In accounting for the 
emissions effect of OTC State Section 177 Programs, EPA shall continue 
to assume that all OTC State Section 177 Programs have the same 
substantive requirements used in EPA's initial equivalency 
determination and shall not model any effects of state regulation of 
medium-duty vehicles (as defined in the California Code of Regulations, 
Title 13, Division 3, Chapter 1, Article 1, Section 1900).
    (2) A covered state may opt out of National LEV within 90 calendar 
days of a final EPA determination pursuant to paragraph (k)(1) of this 
section that National LEV would not produce (or is not producing) 
emissions reductions at least equivalent to OTC State Section 177 
Programs. The state's opt-out notification shall specify an effective 
date for the state's opt-out that is no earlier than two calendar years 
after the date of EPA's receipt of the state's opt-out notification and 
shall provide that the opt-out is not effective for model years (as 
defined in part 85, subpart X), that commence prior to this effective 
date.
    (3) If a covered state opts out based on this condition, a covered 
manufacturer may opt out of National LEV pursuant to paragraph (j) of 
this section.
    (4) In a state that opts out pursuant to paragraph (k)(1) of this 
section, obligations under National LEV shall be unaffected for covered 
manufacturers until the effective date of that state's opt-out. Upon 
the effective date of the state's opt-out, in that state covered 
manufacturers shall comply with any state standards and other 
requirements in effect pursuant to section 177 of the Clean Air Act or, 
if such state standards and other requirements are not in effect, with 
all requirements that would apply to a manufacturer that had not opted 
into the National LEV program, including all applicable standards and 
other requirements promulgated under title II of the Clean Air Act (42 
U.S.C. 7521 et seq.).


Sec. 86.1708-97  [Redesignated Sec. 86.1708-99 and Amended]

    18. Section 86.1708-97 is redesignated as Sec. 86.1708-99 and 
amended by revising the section heading, by removing Table R97-7 and 
redesignating Tables R97-1 through R97-6 as Tables R99-1 through R99-6, 
by revising the references ``R97-1'', ``R97-2'', ``R97-3'', ``R97-4'', 
``R97-5'', and ``R97-6'', to read ``R99-1'', ``R99-2'', ``R99-3'', 
``R99-4'', ``R99-5'', and ``R99-6'', respectively, wherever they appear 
in the section, by revising paragraphs (b)(1)(i), (b)(1)(iii)(B), and 
(c), and by adding paragraph (e) to read as follows:


Sec. 86.1708-99  Exhaust emission standards for 1999 and later light-
duty vehicles.

* * * * *
    (b)(1) Standards. (i) Exhaust emissions from 1999 and later model 
year light-duty vehicles classified as TLEVs, LEVs, and ULEVs shall not 
exceed the standards in Tables R99-1 and R99-2 in rows designated with 
the applicable vehicle emission category. These standards shall apply 
equally to certification and in-use vehicles, except as provided in 
paragraph (c) of this section. The tables follow:

   Table R99-1.--Intermediate Useful Life (50,000 mile) Standards (g/mi) for Light-Duty Vehicles Classified as  
                                             TLEVs, LEVs, and ULEVs                                             
----------------------------------------------------------------------------------------------------------------
                  Vehicle emission category                       NMOG          CO          NOX          HCHO   
----------------------------------------------------------------------------------------------------------------
TLEV........................................................        0.125          3.4          0.4        0.015
LEV.........................................................        0.075          3.4          0.2        0.015
ULEV........................................................        0.040          1.7          0.2        0.008
----------------------------------------------------------------------------------------------------------------


[[Page 977]]


   Table R99-2.--Full Useful Life (100,000 mile) Standards (g/mi) for Light-Duty Vehicles Classified as TLEVs,  
                                                 LEVs, and ULEVs                                                
----------------------------------------------------------------------------------------------------------------
                                                                                                     PM (diesels
           Vehicle emission category                 NMOG          CO          NOX          HCHO        only)   
----------------------------------------------------------------------------------------------------------------
TLEV...........................................        0.156          4.2          0.6        0.018         0.08
LEV............................................        0.090          4.2          0.3        0.018         0.08
ULEV...........................................        0.055          2.1          0.3        0.011         0.04
----------------------------------------------------------------------------------------------------------------

 * * * * *
    (iii) *  *  *
    (B) The applicable NMOG emission standards for flexible-fuel and 
dual-fuel light-duty vehicles when certifying the vehicle for operation 
on gasoline shall be the NMOG standards in Tables R99-3 and R99-4 in 
the rows designated with the applicable vehicle emission category, as 
follows:

 Table R99-3.--Intermediate Useful Life (50,000 mile) NMOG Standards (g/
  mi) for Flexible-Fuel and Dual-Fuel Light-Duty Vehicles Classified as 
                         TLEVs, LEVs, and ULEVs                         
------------------------------------------------------------------------
                  Vehicle emission category                      NMOG   
------------------------------------------------------------------------
TLEV........................................................       0.25 
LEV.........................................................       0.125
ULEV........................................................       0.075
------------------------------------------------------------------------


 Table R99-4.--Full Useful Life (100,000 mile) NMOG Standards (g/mi) for
  Flexible-Fuel and Dual-Fuel Light-Duty Vehicles Classified as TLEVs,  
                             LEVs, and ULEVs                            
------------------------------------------------------------------------
                  Vehicle emission category                      NMOG   
------------------------------------------------------------------------
TLEV........................................................       0.31 
LEV.........................................................       0.156
ULEV........................................................       0.090
------------------------------------------------------------------------

* * * * *
    (c) In-use emission standards. (1) 1999 model year light-duty 
vehicles certified as LEVs and 1999 through 2002 model year light-duty 
vehicles certified as ULEVs shall meet the applicable intermediate and 
full useful life in-use standards in paragraph (c)(2) of this section, 
according to the following provisions:
    (i) [Reserved]
    (ii) The applicable in-use emission standards for vehicle emission 
categories and model years not shown in Tables R99-5 and R99-6 shall be 
the intermediate and full useful life standards in paragraph (b) of 
this section.
    (2) Light-duty vehicles, including flexible-fuel and dual-fuel 
light-duty vehicles when operated on gasoline and on an available fuel 
other than gasoline, shall meet all intermediate and full useful life 
in-use standards for the applicable vehicle emission category and model 
year in Tables R99-5 and R99-6, as follows:

      Table R99-5.--Intermediate Useful Life (50,000 mile) In-Use Standards (g/mi) for Light-Duty Vehicles      
----------------------------------------------------------------------------------------------------------------
     Vehicle emission category              Model year            NMOG          CO          NOX          HCHO   
----------------------------------------------------------------------------------------------------------------
LEV................................  1999                           0.100          3.4          0.3        0.015
ULEV...............................  1999-2000                      0.055          2.1          0.3        0.012
                                     2001-2002                      0.055          2.1          0.3        0.008
----------------------------------------------------------------------------------------------------------------


          Table R99-6.--Full Useful Life (100,000 mile) In-Use Standards (g/mi) for Light-Duty Vehicles         
----------------------------------------------------------------------------------------------------------------
     Vehicle emission category              Model year            NMOG          CO          NOX          HCHO   
----------------------------------------------------------------------------------------------------------------
LEV................................  1999                           0.125          4.2          0.4        0.018
ULEV...............................  1999-2002                      0.075          3.4          0.4        0.008
----------------------------------------------------------------------------------------------------------------

* * * * *
    (e) SFTP Standards. Exhaust emissions from 2001 and later model 
year light-duty vehicles shall meet the additional SFTP standards in 
this paragraph (e) according to the implementation schedules in this 
paragraph (e). The standards set forth in this paragraph (e) refer to 
exhaust emissions emitted over the Supplemental Federal Test Procedure 
(SFTP) as set forth in subpart B of this part and collected and 
calculated in accordance with those procedures.
    (1) Tier 1 vehicles and TLEVs. The SFTP exhaust emission levels 
from new 2001 and subsequent model year light-duty vehicles certified 
to the exhaust emission standards in Sec. 86.099-8(a)(1)(i) and 
subsequent model year provisions and light-duty vehicles certified as 
TLEVs shall not exceed the standards in Table R99-7.1, according to the 
implementation schedule in this paragraph (e)(1).

              Table R99-7.1.--SFTP Exhaust Emission Standards (g/mi) for Tier 1 Vehicles and TLEVs              
----------------------------------------------------------------------------------------------------------------
                                                                                             CO                 
                                                               NMHC + NOX --------------------------------------
             Useful life                     Fuel type         composite                              Composite 
                                                                             A/C test    US06 test      option  
----------------------------------------------------------------------------------------------------------------
Intermediate........................  Gasoline..............         0.65          3.0          9.0          3.4

[[Page 978]]

                                                                                                                
                                      Diesel................         1.48           NA          9.0          3.4
Full................................  Gasoline..............         0.91          3.7         11.1          4.2
                                      Diesel................         2.07           NA         11.1          4.2
----------------------------------------------------------------------------------------------------------------

    (i) Phase-in requirements--2001 to 2003 model years. For the 
purposes of this paragraph (e)(1)(i) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of the following types of vehicles sold in 
California: light-duty vehicles certified to the exhaust emission 
standards in Sec. 86.099-8(a)(1)(i) and subsequent model year 
provisions, and light light-duty trucks certified to the exhaust 
emission standards in Sec. 86.099-9(a)(1)(i) and subsequent model year 
provisions, and light-duty vehicles and light light-duty trucks 
certified as TLEVs. As an option, a manufacturer may elect to have its 
total light-duty vehicle and light light-duty truck fleet defined, for 
the purposes of this paragraph (e)(1)(i) only, as the total projected 
number of the manufacturer's light-duty vehicles and light light-duty 
trucks, other than zero emission vehicles, certified and sold in 
California.
    (A) Manufacturers of light-duty vehicles and light light-duty 
trucks, except low volume manufacturers, shall certify a minimum 
percentage of their light-duty vehicle and light light-duty truck fleet 
according to the following phase-in schedule:

------------------------------------------------------------------------
                         Model year                           Percentage
------------------------------------------------------------------------
2001.......................................................           25
2002.......................................................           50
2003.......................................................           85
------------------------------------------------------------------------

    (B) [Reserved]
    (ii) Phase-in requirements--2004 and later model years. For the 
purposes of this paragraph (e)(1)(ii) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of the following types of vehicles sold in the 
United States: light-duty vehicles certified to the exhaust emission 
standards in Sec. 86.099-8(a)(1)(i) and subsequent model year 
provisions, and light light-duty trucks certified to the exhaust 
emission standards in Sec. 86.099-9(a)(1)(i) and subsequent model year 
provisions, and light-duty vehicles and light light-duty trucks 
certified as TLEVs. As an option, a manufacturer may elect to have its 
total light-duty vehicle and light light-duty truck fleet defined, for 
the purposes of this paragraph (e)(1)(ii) only, as the total projected 
number of the manufacturer's light-duty vehicles and light light-duty 
trucks, other than zero emission vehicles, certified and sold in the 
United States.
    (A) In 2004 and subsequent model years, manufacturers of light-duty 
vehicles and light light-duty trucks, including low volume 
manufacturers, shall certify 100 percent of their light-duty vehicle 
and light light-duty truck fleet to the standards in this paragraph 
(e)(l).
    (B) [Reserved]
    (iii) Phase-in requirements--vehicles sold outside California. 
Light-duty vehicles and light light-duty trucks sold outside California 
shall be certified to the applicable emission standards in this 
paragraph (e) if a vehicle has been certifed to the emission standards 
in this paragraph (e) for sale in California and is identical in the 
following respects:
    (A) Vehicle manufacturer;
    (B) Vehicle make and model;
    (C) Cylinder block configuration (L-6, V-8, and so forth);
    (D) Displacement;
    (E) Combustion cycle;
    (F) Transmission class; and
    (G) Axle ratio.
    (2) LEVs and ULEVs. The SFTP standards in this paragraph (e)(2) 
represent the maximum SFTP exhaust emissions at 4,000 miles +/-250 
miles or at the mileage determined by the manufacturer for emission 
data vehicles in accordance with Sec. 86.1726. The SFTP exhaust 
emission levels from new 2001 and subsequent model year light-duty 
vehicle LEVs and ULEVs shall not exceed the standards in the following 
table, according to the implementation schedule in this paragraph 
(e)(2)(i).

   Table R99-7.2.--SFTP Exhaust Emission Standards (g/mi) for LEVs and  
                                  ULEVs                                 
------------------------------------------------------------------------
              US06 Test                            A/C Test             
------------------------------------------------------------------------
    NMHC + NOX             CO            NMHC + NOX             CO      
------------------------------------------------------------------------
0.14.............           8.0               0.20               2.7    
------------------------------------------------------------------------

    (i) Phase-in requirements--2001 to 2003 model years. For the 
purposes of this paragraph (e)(2)(i) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of light-duty vehicles and light light-duty 
trucks certified as LEVs and ULEVs sold in California.
    (A) Manufacturers of light-duty vehicles and light light-duty 
trucks, except low volume manufacturers, shall certify to the standards 
in this paragraph (e)(2) a minimum percentage of their light-duty 
vehicle and light light-duty truck fleet according to the following 
phase-in schedule:

------------------------------------------------------------------------
                         Model year                           Percentage
------------------------------------------------------------------------
2001.......................................................           25
2002.......................................................           50
2003.......................................................           85
------------------------------------------------------------------------

    (B) Manufacturers may use an ``Alternative or Equivalent Phase-in 
Schedule'' to comply with the phase-in requirements. An ``Alternative 
Phase-in'' is one that achieves at least equivalent emission reductions 
by the end of the last model year of the scheduled phase-in. Model-year 
emission reductions shall be calculated by multiplying the percent of 
vehicles (based on the manufacturer's projected California sales volume 
of the applicable vehicle fleet) meeting the new requirements per model 
year by the number of model years implemented prior to and including 
the last model year of the scheduled phase-in. The ``cumulative total'' 
is the summation of the model-year emission reductions (e.g., a four 
model-year 25/50/85/100 percent phase-in schedule would be calculated 
as: (25%* 4 years) + (50%* 3 years) + (85%* 2 years) + (100%* 1 year)

[[Page 979]]

= 520). Any alternative phase-in that results in an equal or larger 
cumulative total than the required cumulative total by the end of the 
last model year of the scheduled phase-in shall be considered 
acceptable by the Administrator under the following conditions: All 
vehicles subject to the phase-in shall comply with the respective 
requirements in the last model year of the required phase-in schedule; 
and if a manufacturer uses the optional phase-in percentage 
determination in paragraph (e)(1)(i) of this section, the cumulative 
total of model-year emission reductions as determined only for light-
duty vehicles and light light-duty trucks certified to this paragraph 
(e)(2) must also be equal to or larger than the required cumulative 
total by end of the 2004 model year. Manufacturers shall be allowed to 
include vehicles introduced before the first model year of the 
scheduled phase-in (e.g., in the previous example, 10 percent 
introduced one year before the scheduled phase-in begins would be 
calculated as: (10%* 5 years) and added to the cumulative total).
    (ii) Phase-in requirements--2004 and later model years. For the 
purposes of this paragraph (e)(2)(ii) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of light-duty vehicles and light light-duty 
trucks certified as LEVs and ULEVs sold in the United States.
    (A) In 2004 and subsequent model years, manufacturers of light-duty 
vehicles and light light-duty trucks, including low volume 
manufacturers, shall certify 100 percent of their light-duty vehicle 
and light light-duty truck fleet to the standards in this paragraph 
(e)(2).
    (iii) Phase-in requirements--vehicles sold outside California. 
Light-duty vehicles and light light-duty trucks sold outside California 
shall be certified to the applicable emission standards in this 
paragraph (e) if a vehicle has been certifed to the emission standards 
in this paragraph (e) for sale in California and is identical in the 
following respects:
    (A) Vehicle manufacturer;
    (B) Vehicle make and model;
    (C) Cylinder block configuration (L-6, V-8, and so forth);
    (D) Displacement;
    (E) Combustion cycle;
    (F) Transmission class; and
    (G) Axle ratio.
    (3) A/C-on specific calibrations. A/C-on specific calibrations 
(e.g. air to fuel ratio, spark timing, and exhaust gas recirculation), 
may be used which differ from A/C-off calibrations for given engine 
operating conditions (e.g., engine speed, manifold pressure, coolant 
temperature, air charge temperature, and any other parameters). Such 
calibrations must not unnecessarily reduce the NMHC+NOX 
emission control effectiveness during A/C-on operation when the vehicle 
is operated under conditions which may reasonably be expected to be 
encountered during normal operation and use. If reductions in control 
system NMHC+NOX effectiveness do occur as a result of such 
calibrations, the manufacturer shall, in the Application for 
Certification, specify the circumstances under which such reductions do 
occur, and the reason for the use of such calibrations resulting in 
such reductions in control system effectiveness. A/C-on specific 
``open-loop'' or ``commanded enrichment'' air-fuel enrichment 
strategies (as defined below), which differ from A/C-off ``open-loop'' 
or ``commanded enrichment'' air-fuel enrichment strategies, may not be 
used, with the following exceptions: Cold-start and warm-up conditions, 
or, subject to Administrator approval, conditions requiring the 
protection of the vehicle, occupants, engine, or emission control 
hardware. Other than these exceptions, such strategies which are 
invoked based on manifold pressure, engine speed, throttle position, or 
other engine parameters shall use the same engine parameter criteria 
for the invoking of this air-fuel enrichment strategy and the same 
degree of enrichment regardless of whether the A/C is on or off. 
``Open-loop'' or ``commanded'' air-fuel enrichment strategy is defined 
as enrichment of the air to fuel ratio beyond stoichiometry for the 
purposes of increasing engine power output and the protection of engine 
or emissions control hardware. However, ``closed-loop biasing,'' 
defined as small changes in the air-fuel ratio for the purposes of 
optimizing vehicle emissions or driveability, shall not be considered 
an ``open-loop'' or ``commanded'' air-fuel enrichment strategy. In 
addition, ``transient'' air-fuel enrichment strategy (or ``tip-in'' and 
``tip-out'' enrichment), defined as the temporary use of an air-fuel 
ratio rich of stoichiometry at the beginning or duration of rapid 
throttle motion, shall not be considered an ``open-loop'' or 
``commanded'' air-fuel enrichment strategy.
    (4) ``Lean-on-cruise'' calibration strategies. (i) In the 
Application for Certification, the manufacturer shall state whether any 
``lean-on-cruise'' strategies are incorporated into the vehicle design. 
A ``lean-on-cruise'' air-fuel calibration strategy is defined as the 
use of an air-fuel ratio significantly greater than stoichiometry, 
during non-deceleration conditions at speeds above 40 mph. ``Lean-on-
cruise'' air-fuel calibration strategies shall not be employed during 
vehicle operation in normal driving conditions, including A/C usage, 
unless at least one of the following conditions is met:
    (A) Such strategies are substantially employed during the FTP or 
SFTP;
    (B) Such strategies are demonstrated not to significantly reduce 
vehicle NMHC+NOX emission control effectiveness over the 
operating conditions in which they are employed;
    (C) Such strategies are demonstrated to be necessary to protect the 
vehicle occupants, engine, or emission control hardware.
    (ii) If the manufacturer proposes to use a ``lean-on-cruise'' 
calibration strategy, the manufacturer shall specify the circumstances 
under which such a calibration would be used, and the reason or reasons 
for the proposed use of such a calibration.
    (iii) The provisions of this paragraph (e)(4) shall not apply to 
vehicles powered by ``lean-burn'' engines or diesel-cycle engines. A 
``lean-burn'' engine is defined as an Otto-cycle engine designed to run 
at an air-fuel ratio significantly greater than stoichiometry during 
the large majority of its operation.
    (5) Applicability to alternative fuel vehicles. These SFTP 
standards do not apply to vehicles certified on fuels other than 
gasoline and diesel fuel, but the standards do apply to the gasoline 
and diesel fuel operation of flexible-fuel vehicles and dual-fuel 
vehicles.
    (6) Single-roll electric dynamometer requirement. For all vehicles 
certified to the SFTP standards, a single-roll electric dynamometer or 
a dynamometer which produces equivalent results, as set forth in 
Sec. 86.108, must be used for all types of emission testing to 
determine compliance with the associated emission standards.


Sec. 86.1709  [Redesignated as Sec. 86.1709-99 and Amended]

    19. Section 86.1709-97 is redesignated as Sec. 86.1709-99 and 
amended by revising the section heading, by removing Table R97-14 and 
redesignating Tables R97-8 through R97-13 as Tables R99-8 through R99-
13, by revising the references ``R97-8'', ``R97-9'', ``R97-10'', ``R97-
11'', ``R97-12'', and ``R97-13'' to read ``R99-8'', ``R99-9'', ``R99-
10'', ``R99-11'', ``R99-12'', and ``R99-13'', respectively, wherever 
they appear in the section, by revising paragraphs (b)(1)(i), 
(b)(1)(iii) (B), and (c), and by adding paragraph (e) to read as 
follows:

[[Page 980]]

Sec. 86.1709-99  Exhaust emission standards for 1999 and later light 
light-duty trucks.

* * * * *
    (b)(1) Standards. (i) Exhaust emissions from 1999 and later model 
year light light-duty trucks classified as TLEVs, LEVs, and ULEVs shall 
not exceed the standards in Tables R99-8 and R99-9 in rows designated 
with the applicable vehicle emission category and loaded vehicle 
weight. These standards shall apply equally to certification and in-use 
vehicles, except as provided in paragraph (c) of this section. The 
tables follow:

 Table R99-8.--Intermediate Useful Life (50,000 mile) Standards (g/mi) for Light Light-Duty Trucks Classified as
                                             TLEVs, LEVs, and ULEVs                                             
----------------------------------------------------------------------------------------------------------------
                                         Vehicle emission                                                       
        Loaded vehicle weight                category             NMOG          CO          NOX          HCHO   
----------------------------------------------------------------------------------------------------------------
3751................................  TLEV..................        0.125          3.4          0.4        0.015
                                      LEV...................        0.075          3.4          0.2        0.015
                                      ULEV..................        0.040          1.7          0.2        0.008
3751-5750...........................  TLEV..................        0.160          4.4          0.7        0.018
                                      LEV...................        0.100          4.4          0.4        0.018
                                      ULEV..................        0.050          2.2          0.4        0.009
----------------------------------------------------------------------------------------------------------------


 Table R99-9.--Full Useful Life (100,000 mile) Standards (g/mi) for Light Light-Duty Trucks Classified as TLEVs,
                                                 LEVs, and ULEVs                                                
----------------------------------------------------------------------------------------------------------------
                                                                                                           PM   
       Loaded vehicle weight           Vehicle emission       NMOG        CO        NOX        HCHO     (diesels
                                           category                                                      only)  
----------------------------------------------------------------------------------------------------------------
0-3750............................  TLEV.................      0.156        4.2        0.6      0.018       0.08
                                    LEV..................      0.090        4.2        0.3      0.018       0.08
                                    ULEV.................      0.055        2.1        0.3      0.011       0.04
3751-5750.........................  TLEV.................      0.200        5.5        0.9      0.023       0.10
                                    LEV..................      0.130        5.5        0.5      0.023       0.10
                                    ULEV.................      0.070        2.8        0.5      0.013       0.05
----------------------------------------------------------------------------------------------------------------

* * * * *
    (iii) * * *
    (B) The applicable NMOG emission standards for flexible-fuel and 
dual-fuel light light-duty trucks when certifying the vehicle for 
operation on gasoline shall be the NMOG standards in Tables R99-10 and 
R99-11 in the rows designated with the applicable vehicle emission 
category and loaded vehicle weight, as follows:

Table R99-10.--Intermediate Useful Life (50,000 mile) NMOG Standards (g/
 mi) for Flexible-Fuel and Dual-Fuel Light Light-Duty Trucks Classified 
                        as TLEVs, LEVs, and ULEVs                       
------------------------------------------------------------------------
  Loaded                                                                
  vehicle                 Vehicle emission category                NMOG 
  weight                                                                
------------------------------------------------------------------------
0-3750....  TLEV................................................   0.25 
            LEV.................................................   0.125
            ULEV................................................   0.075
3751-5750.  TLEV................................................   0.32 
            LEV.................................................   0.160
            ULEV................................................   0.100
------------------------------------------------------------------------


Table R99-11.--Full Useful Life (100,000 mile) NMOG Standards (g/mi) for
Flexible-Fuel and Dual-Fuel Light Light-Duty Trucks Classified as TLEVs,
                             LEVs, and ULEVs                            
------------------------------------------------------------------------
  Loaded                                                                
  vehicle                 Vehicle emission category                NMOG 
  weight                                                                
------------------------------------------------------------------------
0-3750....  TLEV................................................   0.31 
            LEV.................................................   0.156
            ULEV................................................   0.090
3751-5750.  TLEV................................................   0.40 
            LEV.................................................   0.200
            ULEV................................................   0.130
------------------------------------------------------------------------

* * * * *
    (c) In-use emission standards. (1) 1999 model year light light-duty 
trucks certified as LEVs and 1999 through 2001 model year light light-
duty trucks certified as ULEVs shall meet the applicable intermediate 
and full useful life in-use standards in paragraph (c)(2) of this 
section, according to the following provisions:
    (i) [Reserved]
    (ii) The applicable in-use emission standards for vehicle emission 
categories and model years not shown in Tables R99-12 and R99-13 shall 
be the intermediate and full useful life standards in paragraph (b) of 
this section.
    (2) Light light-duty trucks, including flexible-fuel and dual-fuel 
light light-duty trucks when operated on gasoline and on an available 
fuel other than gasoline, shall meet all intermediate and full useful 
life in-use standards for the applicable vehicle emission category, 
loaded vehicle weight, and model year in Tables R99-12 and R99-13, as 
follows:

    Table R99-12.--Intermediate Useful Life (50,000 mile) In-Use Standards (g/mi) for Light Light-Duty Trucks   
----------------------------------------------------------------------------------------------------------------
  Loaded                                                                                                        
  vehicle           Vehicle emission category         Model year     NMOG         CO          NOX        HCH0   
  weight                                                                                                        
----------------------------------------------------------------------------------------------------------------
0-3750....  LEV.....................................        1999       0.100         3.4         0.3       0.015
            ULEV....................................   1999-2002       0.055         2.1         0.3       0.008
3751-5750.  LEV.....................................        1999       0.130         4.4         0.5       0.018

[[Page 981]]

                                                                                                                
            ULEV....................................   1999-2002       0.070         2.8         0.5       0.009
----------------------------------------------------------------------------------------------------------------


       Table R99-13.--Full Useful Life (100,000 mile) In-Use Standards (g/mi) for Light Light-Duty Trucks       
----------------------------------------------------------------------------------------------------------------
  Loaded                                                                                                        
  vehicle           Vehicle emission category         Model year     NMOG         CO          NOX        HCHO   
  weight                                                                                                        
----------------------------------------------------------------------------------------------------------------
0-3750....  LEV.....................................        1999       0.125         4.2         0.4       0.018
            ULEV....................................   1999-2002       0.075         3.4         0.4       0.011
3751-5750.  LEV.....................................        1999       0.160         5.5         0.7       0.023
            ULEV....................................   1999-2002       0.100         4.4         0.7       0.013
----------------------------------------------------------------------------------------------------------------

* * * * *
    (e) SFTP Standards. Exhaust emissions from 2001 and later model 
year light light-duty trucks shall meet the additional SFTP standards 
in this paragraph (e) according to the implementation schedules in this 
paragraph (e). The standards set forth in this paragraph (e) refer to 
exhaust emissions emitted over the Supplemental Federal Test Procedure 
(SFTP) as set forth in subpart B of this part and collected and 
calculated in accordance with those procedures.
    (1) Tier 1 vehicles and TLEVs. The SFTP exhaust emission levels 
from new 2001 and subsequent model year light light-duty trucks 
certified to the exhaust emission standards in Sec. 86.099-9(a)(1)(i) 
and subsequent model year provisions and light light-duty trucks 
certified as TLEVs shall not exceed the standards in Table R99-14.1, 
according to the implementation schedule in this paragraph (e)(1).

              Table R99-14.1.--SFTP Exhaust Emission Standards (g/mi) for Tier 1 Vehicles and TLEVs             
----------------------------------------------------------------------------------------------------------------
                                                                                             CO                 
                                                               NMHC + NOX --------------------------------------
         Useful life               Fuel type      LVW (lbs)    composite                              Composite 
                                                                             A/C test    US06 test      option  
----------------------------------------------------------------------------------------------------------------
Intermediate.................  Gasoline........       0-3750         0.65          3.0          9.0          3.4
                                 ..............    3751-5750         1.02          3.9         11.6          4.4
                               Diesel..........       0-3750         1.48           NA          9.0          3.4
                                 ..............    3751-5750           NA           NA           NA           NA
Full.........................  Gasoline........       0-3750         0.91          3.7         11.1          4.2
                                 ..............    3751-5750         1.37          4.9         14.6          5.5
                               Diesel..........       0-3750         2.07           NA         11.1          4.2
                                 ..............    3751-5750           NA           NA           NA           NA
----------------------------------------------------------------------------------------------------------------

    (i) Phase-in requirements--2001 to 2003 model years. For the 
purposes of paragraph (e)(1)(i) of this section only, each 
manufacturer's light-duty vehicle and light light-duty truck fleet 
shall be defined as the total projected number of the following types 
of vehicles sold in Calfornia: light-duty vehicles certified to the 
exhaust emission standards in Sec. 86.099-8(a)(1)(i) and subsequent 
model year provisions, and light light-duty trucks certified to the 
exhaust emission standards in Sec. 86.099-9(a)(1)(i) and subsequent 
model year provisions, and light-duty vehicles and light light-duty 
trucks certified as TLEVs. As an option, a manufacturer may elect to 
have its total light-duty vehicle and light light-duty truck fleet 
defined, for the purposes of this paragraph (e)(1)(i) only, as the 
total projected number of the manufacturer's light-duty vehicles and 
light light-duty trucks, other than zero emission vehicles, certified 
and sold in California.
    (A) Manufacturers of light-duty vehicles and light light-duty 
trucks, except low volume manufacturers, shall certify a minimum 
percentage of their light-duty vehicle and light light-duty truck fleet 
according to the following phase-in schedule:

------------------------------------------------------------------------
                       Model year                           Percentage  
------------------------------------------------------------------------
2001....................................................              25
2002....................................................              50
2003....................................................              85
------------------------------------------------------------------------

    (B) [Reserved]
    (ii) Phase-in requirements--2004 and later model years. For the 
purposes of paragraph (e)(1)(ii) of this section only, each 
manufacturer's light-duty vehicle and light light-duty truck fleet 
shall be defined as the total projected number of the following types 
of vehicles sold in the United States: light-duty vehicles certified to 
the exhaust emission standards in Sec. 86.099-8(a)(1)(i) and subsequent 
model year provisions, light light-duty trucks certified to the exhaust 
emission standards in Sec. 86.099-9(a)(1)(i) and subsequent model year 
provisions, and light-duty vehicles and light light-duty trucks 
certified as TLEVs. As an option, a manufacturer may elect to have its 
total light-duty vehicle and light light-duty truck fleet defined, for 
the purposes of this paragraph (e)(1)(ii) only, as the total projected 
number of the manufacturer's light-duty vehicles and light light-duty 
trucks, other than zero emission vehicles, certified and sold in the 
United States.
    (A) In 2004 and subsequent model years, manufacturers of light-duty 
vehicles and light light-duty trucks, including low volume 
manufacturers, shall certify 100 percent of their light-duty vehicle 
and light light-duty truck

[[Page 982]]

fleet to the standards in this paragraph (e)(1).
    (B) [Reserved]
    (iii) Phase-in requirements--vehicles sold outside California. 
Light-duty vehicles and light light-duty trucks sold outside California 
shall be certified to the applicable emission standards in this 
paragraph (e) if a vehicle has been certifed to the emission standards 
in this paragraph (e) for sale in California and is identical in the 
following respects:
    (A) Vehicle manufacturer;
    (B) Vehicle make and model;
    (C) Cylinder block configuration (L-6, V-8, and so forth);
    (D) Displacement;
    (E) Combustion cycle;
    (F) Transmission class; and
    (G) Axle ratio.
    (2) LEVs and ULEVs. The SFTP standards in this paragraph (e)(2) 
represent the maximum SFTP exhaust emissions at 4,000 miles +/-250 
miles or at the mileage determined by the manufacturer for emission 
data vehicles in accordance with Sec. 86.1726. The SFTP exhaust 
emission levels from new 2001 and subsequent model year light light-
duty truck LEVs and ULEVs shall not exceed the standards in the 
following table, according to the implementation schedule in this 
paragraph (e)(2).

   Table R99-14.2--SFTP Exhaust Emission Standards (g/mi) for LEVs and  
                                  ULEVs                                 
------------------------------------------------------------------------
                 US06 test                            A/C test          
------------------------------------------------------------------------
             NMHC + NOX                CO         NMHC + NOX         CO 
------------------------------------------------------------------------
0.25...............................   10.5  0.27.................    3.5
------------------------------------------------------------------------

    (i) Phase-in requirements--2001 to 2003 model years. For the 
purposes of this paragraph (e)(2)(i) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of light-duty vehicles and light light-duty 
trucks certified as LEVs and ULEVs sold in California.
    (A) Manufacturers of light-duty vehicles and light light-duty 
trucks, except low volume manufacturers, shall certify to the standards 
in this paragraph (e)(2) a minimum percentage of their light-duty 
vehicle and light light-duty truck fleet according to the following 
phase-in schedule:

------------------------------------------------------------------------
                         Model year                           Percentage
------------------------------------------------------------------------
2001.......................................................           25
2002.......................................................           50
2003.......................................................           85
------------------------------------------------------------------------

    (B) Manufacturers may use an ``Alternative or Equivalent Phase-in 
Schedule'' to comply with the phase-in requirements. An ``Alternative 
Phase-in'' is one that achieves at least equivalent emission reductions 
by the end of the last model year of the scheduled phase-in. Model-year 
emission reductions shall be calculated by multiplying the percent of 
vehicles (based on the manufacturer's projected California sales volume 
of the applicable vehicle fleet) meeting the new requirements per model 
year by the number of model years implemented prior to and including 
the last model year of the scheduled phase-in. The ``cumulative total'' 
is the summation of the model-year emission reductions (e.g., a four 
model-year 25/50/85/100 percent phase-in schedule would be calculated 
as: (25%*4 years)+(50%*3 years)+(85%*2 years)+(100%*1 year) = 520). Any 
alternative phase-in that results in an equal or larger cumulative 
total than the required cumulative total by the end of the last model 
year of the scheduled phase-in shall be considered acceptable by the 
Administrator under the following conditions: All vehicles subject to 
the phase-in shall comply with the respective requirements in the last 
model year of the required phase-in schedule; and if a manufacturer 
uses the optional phase-in percentage determination in paragraph 
(e)(1)(i) of this section, the cumulative total of model-year emission 
reductions as determined only for light-duty vehicles and light light-
duty trucks certified to this paragraph (e)(2) must also be equal to or 
larger than the required cumulative total by the end of the 2004 model 
year. Manufacturers shall be allowed to include vehicles introduced 
before the first model year of the scheduled phase-in (e.g., in the 
previous example, 10 percent introduced one year before the scheduled 
phase-in begins would be calculated as: (10%*5 years) and added to the 
cumulative total).
    (ii) Phase-in requirements--2004 and later model years. For the 
purposes of this paragraph (e)(2)(ii) only, each manufacturer's light-
duty vehicle and light light-duty truck fleet shall be defined as the 
total projected number of light-duty vehicles and light light-duty 
trucks certified as LEVs and ULEVs sold in the United States.
    (A) In 2004 and subsequent model years, manufacturers of light-duty 
vehicles and light light-duty trucks, including low volume 
manufacturers, shall certify 100 percent of their light-duty vehicle 
and light light-duty truck fleet to the standards in this paragraph 
(e)(2).
    (B) [Reserved]
    (iii) Phase-in requirements--vehicles sold outside California. 
Light-duty vehicles and light light-duty trucks sold outside California 
shall be certified to the applicable emission standards in this 
paragraph (e) if a vehicle has been certifed to the emission standards 
in this paragraph (e) for sale in California and is identical in the 
following respects:
    (A) Vehicle manufacturer;
    (B) Vehicle make and model;
    (C) Cylinder block configuration (L-6, V-8, and so forth);
    (D) Displacement;
    (E) Combustion cycle;
    (F) Transmission class; and
    (G) Axle ratio.
    (3) A/C-on specific calibrations. A/C-on specific calibrations 
(e.g., air to fuel ratio, spark timing, and exhaust gas recirculation), 
may be used which differ from A/C-off calibrations for given engine 
operating conditions (e.g., engine speed, manifold pressure, coolant 
temperature, air charge temperature, and any other parameters). Such 
calibrations must not unnecessarily reduce the NMHC+NOX 
emission control effectiveness during A/C-on operation when the vehicle 
is operated under conditions which may reasonably be expected to be 
encountered during normal operation and use. If reductions in control 
system NMHC+NOX effectiveness do occur as a result of such 
calibrations, the manufacturer shall, in the Application for 
Certification, specify the circumstances under which such reductions do 
occur, and the reason for the use of such calibrations resulting in 
such reductions in control system effectiveness. A/C-on specific 
``open-loop'' or ``commanded enrichment'' air-fuel enrichment 
strategies (as defined below), which differ from A/C-off ``open-loop'' 
or ``commanded enrichment'' air-fuel enrichment strategies, may not be 
used, with the following exceptions: Cold-start and warm-up conditions, 
or, subject to Administrator approval, conditions requiring the 
protection of the vehicle, occupants, engine, or emission control 
hardware. Other than these exceptions, such strategies which are 
invoked based on manifold pressure, engine speed, throttle position, or 
other engine parameters shall use the same engine parameter criteria 
for the invoking of this air-fuel enrichment strategy and the same 
degree of enrichment regardless of whether the A/C is on or off. 
``Open-loop'' or ``commanded'' air-fuel enrichment strategy is defined 
as enrichment of the air to fuel ratio beyond stoichiometry for the 
purposes of increasing engine power output and the protection of engine 
or emissions

[[Page 983]]

control hardware. However, ``closed-loop biasing,'' defined as small 
changes in the air-fuel ratio for the purposes of optimizing vehicle 
emissions or driveability, shall not be considered an ``open-loop'' or 
``commanded'' air-fuel enrichment strategy. In addition, ``transient'' 
air-fuel enrichment strategy (or ``tip-in'' and ``tip-out'' 
enrichment), defined as the temporary use of an air-fuel ratio rich of 
stoichiometry at the beginning or duration of rapid throttle motion, 
shall not be considered an ``open-loop'' or ``commanded'' air-fuel 
enrichment strategy.
    (4) ``Lean-on-cruise'' calibration strategies. (i) In the 
Application for Certification, the manufacturer shall state whether any 
``lean-on-cruise'' strategies are incorporated into the vehicle design. 
A ``lean-on-cruise'' air-fuel calibration strategy is defined as the 
use of an air-fuel ratio significantly greater than stoichiometry, 
during non-deceleration conditions at speeds above 40 mph. ``Lean-on-
cruise'' air-fuel calibration strategies shall not be employed during 
vehicle operation in normal driving conditions, including A/C usage, 
unless at least one of the following conditions is met:
    (A) Such strategies are substantially employed during the FTP or 
SFTP;
    (B) Such strategies are demonstrated not to significantly reduce 
vehicle NMHC+NOx emission control effectiveness over the 
operating conditions in which they are employed;
    (C) Such strategies are demonstrated to be necessary to protect the 
vehicle occupants, engine, or emission control hardware.
    (ii) If the manufacturer proposes to use a ``lean-on-cruise'' 
calibration strategy, the manufacturer shall specify the circumstances 
under which such a calibration would be used, and the reason or reasons 
for the proposed use of such a calibration.
    (iii) The provisions of this paragraph (e)(4) shall not apply to 
vehicles powered by ``lean-burn'' engines or diesel-cycle engines. A 
``lean-burn'' engine is defined as an Otto-cycle engine designed to run 
at an air-fuel ratio significantly greater than stoichiometry during 
the large majority of its operation.
    (5) Applicability to alternative fuel vehicles. These SFTP 
standards do not apply to vehicles certified on fuels other than 
gasoline and diesel fuel, but the standards do apply to the gasoline 
and diesel fuel operation of flexible-fuel vehicles and dual-fuel 
vehicles.
    (6) Single-roll electric dynamometer requirement. For all vehicles 
certified to the SFTP standards, a single-roll electric dynamometer or 
a dynamometer which produces equivalent results, as set forth in 
Sec. 86.108, must be used for all types of emission testing to 
determine compliance with the associated emission standards.


Sec. 86.1710-97  [Redesignated as Sec. 86.1710-99 and Amended]

    20. Section 86.1710-97 is redesignated as Sec. 86.1710-99 and 
amended by redesignating Tables R97-15 and R97-16 as Tables R99-15 and 
R99-16, by revising the references ``R97-15'' and ``R97-16'' to read 
``R99-15'' and ``R99-16'', respectively, wherever they appear in the 
section, by adding introductory text to paragraph (a), by revising 
paragraphs (a)(1), (a)(3)(i), (a)(3)(iii) (A) and (B), (a)(4)(i), 
(a)(4)(iii) (A) and (B), (a)(5)(ii), (b)(4), (c) (1) and (2), (c)(6) 
through (c)(8), (d), (e)(2), and (e)(4)(ii), and by adding paragraph 
(c)(9), to read as follows:


Sec. 86.1710-99  Fleet average non-methane organic gas exhaust emission 
standards for light-duty vehicles and light light-duty trucks.

    (a) Fleet average NMOG standards and compliance. (1) Each 
manufacturer shall certify light-duty vehicles or light light-duty 
trucks to meet the exhaust emission standards in this subpart for 
TLEVs, LEVs, ULEVs, or ZEVs, or the exhaust emission standards of 
Sec. 86.096-8(a)(1)(i) and subsequent model year provisions or 
Sec. 86.097-9(a)(1)(i) and subsequent model year provisions, such that, 
using the applicable intermediate useful life standards, the 
manufacturer's fleet average NMOG values for light-duty vehicles and 
light light-duty trucks sold in the applicable region according to the 
specifications of Tables R99-15 and R99-16 are less than or equal to 
the standards in Tables R99-15 and R99-16 in the rows designated with 
the applicable vehicle type, loaded vehicle weight, and model year, as 
follows:

Table R99-15--Fleet Average Non-Methane Organic Gas Standards (g/mi) for
  Light-Duty Vehicles and Light Light-Duty Trucks Sold in the Northeast 
                             Trading Region                             
------------------------------------------------------------------------
                                                                  Fleet 
         Vehicle type           Loaded vehicle    Model year     average
                                    weight                        NMOG  
------------------------------------------------------------------------
Light light-duty vehicles.....  All...........  1999..........     0.148
                                                2000..........     0.095
and                                                                     
Light light-duty trucks.......  0-3750........                          
Light light-duty trucks.......  3751-5750.....  1999..........     0.190
                                                2000..........     0.124
------------------------------------------------------------------------


Table R99-16--Fleet Average Non-Methane Organic Gas Standards (g/mi) For
 Light-Duty Vehicles and Light Light-Duty Trucks Sold in the All States 
                             Trading Region                             
------------------------------------------------------------------------
                                                                  Fleet 
         Vehicle type           Loaded vehicle    Model year     average
                                    weight                        NMOG  
------------------------------------------------------------------------
Light-duty vehicles...........  All...........  2001 and later     0.075
and                                                                     
Light light-duty trucks.......  0-3750........                          
Light light-duty trucks.......  3751-5750.....  2001 and later     0.100
------------------------------------------------------------------------


[[Page 984]]

* * * * *
    (3)(i) Each manufacturer's applicable fleet average NMOG value for 
all light light-duty trucks from 0-3750 lbs. loaded vehicle weight and 
light-duty vehicles sold in the applicable region according to Tables 
R99-15 and R99-16 shall be calculated in units of g/mi NMOG according 
to the following equation, where the term ``Sold'' means sold in the 
applicable region according to Tables R99-15 and R99-16, and the term 
``Vehicles'' means light light-duty trucks from 0-3750 lbs loaded 
vehicle weight and light-duty vehicles: (((No. of Vehicles Certified to 
the Federal Tier 1 Exhaust Emission Standards and Sold) x (0.25))+((No. 
of TLEVs Sold excluding HEVs) x  (0.125)) +((No. of LEVs Sold excluding 
HEVs) x (0.75))+((No. of ULEVs Sold excluding HEVs) x (0.040))+(HEV 
contribution factor))/(Total No. of Vehicles Sold, including ZEVs and 
HEVs).
    (A) For model years 1997 through 2000, ``Vehicles'' in the 
preceding equation shall include California-certified vehicles, 
including vehicles certified to California Tier 1 standards.
    (B) For model years 2001 and later, ``vehicles'' in the preceding 
equation shall not include California-certified vehicles unless they 
are also certified under the National LEV program.
* * * * *
    (iii)(A) For any model year in which a manufacturer certifies its 
entire fleet of light-duty vehicles and light light-duty trucks from 0-
3750 lbs LVW to intermediate useful life NMOG emission standards 
specified in Secs. 86.1708 and 86.1709 that are less than or equal to 
the applicable fleet average NMOG standard specified in Tables R99-15 
and R99-16, the manufacturer may elect not to calculate a fleet average 
NMOG value for such vehicles for that model year.
    (B) The fleet average NMOG value for a manufacturer electing under 
paragraph (a)(3)(iii)(A) of this section not to calculate a fleet 
average NMOG value shall be deemed to be the applicable fleet average 
NMOG standard specified in Table R99-15 or R99-16 for the applicable 
model year.
* * * * *
    (4)(i) Each manufacturer's applicable fleet average NMOG value for 
all light light-duty trucks from 3751-5750 lbs loaded vehicle weight 
sold in the applicable region according to Tables R99-15 and R99-16 
shall be calculated in units of g/mi NMOG according to the following 
equation, where the term ``Sold'' means sold in the applicable region 
according to Tables R97-15 and R97-16, and the term ``Vehicles'' means 
light light-duty trucks from 3751-5750 lbs loaded vehicle weight: 
(((No. of Vehicles Certified to the Federal Tier 1 Exhaust Emission 
Standards and Sold) x (0.32))+((No. of TLEVs Sold excluding 
HEVs) x (0.160))+((No. of LEVs Sold excluding HEVs) x (0.100))+(No. of 
ULEVs Sold excluding HEVs) x (0.050))+(HEV Contribution factor))/(Total 
No. of Vehicles Sold, including ZEVs and HEVs).
    (A) For model years 1997 through 2000, ``Vehicles'' in the 
preceding equation shall include California-certified vehicles, 
including vehicles certified to California Tier 1 standards.
    (B) For model years 2001 and later, ``Vehicles'' in the preceding 
equation shall not include California-certified vehicles unless they 
are also certified under the National LEV program.
* * * * *
    (iii)(A) For any model year in which a manufacturer certifies its 
entire fleet of light light-duty trucks from 3751-5750 lbs LVW to 
intermediate useful life NMOG emission standards specified in 
Sec. 86.1709 that are less than or equal to the applicable fleet 
average NMOG requirements specified in Tables R99-15 and R99-16, the 
manufacturer may elect not to calculate a fleet average NMOG value for 
such vehicles for that model year.
    (B) The fleet average NMOG value for a manufacturer electing under 
paragraph (a)(4)(iii)(A) of this section not to calculate a fleet 
average NMOG value shall be deemed to be the applicable fleet average 
NMOG standard specified in Table R99-15 or R99-16 for the applicable 
model year.
* * * * *
    (5) * * *
    (ii) Adequate information includes the number of vehicles 
purchased, vehicle makes and models, and the associated engine 
families. A copy of the letter should be sent to: Director, Vehicle 
Programs and Compliance Division, U.S. Environmental Protection Agency, 
2565 Plymouth Road, Ann Arbor, Michigan, 48105.
* * * * *
    (b) * * *
    (4) For each applicable region and model year, a manufacturer's 
available credits or level of debits shall be the sum of credits or 
debits derived from the respective class A and class B averaging sets 
for that region and model year. Paragraph (d)(2)(ii)(C) of this section 
contains a special provision for manufacturers that end model year 2000 
with a debit balance in the NTR.
    (c) * * *
    (1) Only credits generated in the NTR may be used to offset NMOG 
debits incurred in the NTR. Manufacturers may use in the ASTR credits 
generated in the NTR.
    (2) Only after credits are earned may they be used, traded, or 
carried over to another model year. Before trading or carrying over 
credits to the next model year, a manufacturer must apply available 
credits to offset any of its debits from the same region, where the 
deadline to offset such debits has not yet passed.
* * * * *
    (6) Prior to model year 2001, low volume manufacturers may earn 
credits in the NTR to transfer to other motor vehicle manufacturers for 
use in the NTR or the ASTR, or to bank for their own use in the ASTR. 
Such credits will be calculated as set forth in paragraphs (a) and (b) 
of this section, except that the applicable fleet average NMOG standard 
shall be 0.25 g/mi NMOG for the averaging set for light light-duty 
trucks from 0-3750 lbs LVW and light-duty vehicles or 0.32 g/mi NMOG 
for the averaging set for light light-duty trucks from 3751-5750 lbs 
LVW. Credits shall be discounted in accordance with the provisions in 
paragraph (c)(4) of this section.
    (7) Prior to model year 2001, manufacturers may earn credits in the 
ASTR states that are not in the NTR and may bank those credits for use 
in the ASTR. Such credits will be calculated as set forth in paragraphs 
(a) and (b) of this section, except that the applicable fleet average 
NMOG standard shall be 0.25 g/mi NMOG for the averaging set for light 
light-duty trucks from 0-3750 lbs LVW and light-duty vehicles or 0.32 
g/mi NMOG for the averaging set for light light-duty trucks from 3751-
5750 lbs LVW, and ``sold'' shall mean sold in the ASTR states that are 
not in the NTR.
    (i) Emission credits earned in the ASTR states outside the NTR 
prior to model year 2001 shall be treated as generated in model year 
2001.
    (ii) In the 2001 model year, a one-time discount rate of 10 percent 
shall be applied to all credits earned under the provisions of this 
paragraph (c)(7).
    (iii) These credits shall be discounted in accordance with the 
provisions in paragraph (c)(4) of this section.
    (8) Manufacturers may earn and bank credits in the NTR for model 
years 1997 and 1998. In states without a Section 177 Program effective 
in model year 1997 or 1998, such credits will be calculated as set 
forth in paragraphs (a) and (b) of this section, except that the 
applicable fleet average NMOG standard shall be 0.200 g/mi NMOG for the 
averaging set for light light-duty trucks from 0-3750 lbs LVW and 
light-duty

[[Page 985]]

vehicles or 0.256 g/mi NMOG for the averaging set for light light-duty 
trucks from 3751-5750 lbs LVW. In states that opt into National LEV and 
have a Section 177 Program effective in model year 1997 or 1998, such 
credits will equal the unused credits earned in those states.
    (i) Emissions credits earned in the NTR prior to the 1999 model 
year shall be treated as generated in the 1999 model year.
    (ii) In the 1999 model year, a one-time discount rate of 10 percent 
shall be applied to all credits earned under the provisions of this 
paragraph (c)(8).
    (iii) These credits shall be discounted in accordance with the 
provisions in paragraph (c)(4) of this section.
    (9) There are no property rights associated with credits generated 
under the provisions of this section. Credits are a limited 
authorization to emit the designated amount of emissions. Nothing in 
the regulations or any other provision of law should be construed to 
limit EPA's authority to terminate or limit this authorization through 
a rulemaking. If EPA were to terminate or limit the authorization to 
emit associated with emissions credits generated under the provisions 
of this section, this paragraph (c)(9) would have no effect on 
manufacturers' ability to opt out of the National LEV program pursuant 
to Sec. 86.1707.
    (d) Fleet average NMOG debits. (1) Manufacturers shall offset any 
debits for a given model year by the fleet average NMOG reporting 
deadline for the model year following the model year in which the 
debits were generated. Manufacturers may offset debits by generating 
credits or acquiring credits generated by another manufacturer. Only 
credits generated in the NTR may be used to offset NMOG debits 
generated in the NTR.
    (2) The provisions of this paragraph (d)(2) apply only when a 
manufacturer has a debit balance in the NTR at the end of model year 
2000. Manufacturers shall offset any debits incurred in the NTR for 
model year 2000 by the fleet average NMOG reporting deadline for model 
year 2001.
    (i) A manufacturer may offset debits generated in the NTR in model 
year 2000 either by generating credits in the NTR in model year 2001 or 
by applying NTR credits acquired under the provisions of this section.
    (ii) If a manufacturer has a debit balance in the NTR at the end of 
model year 2000, then such manufacturer shall be required to calculate 
fleet average NMOG values for both the NTR and the ASTR for model year 
2001.
    (A) The NTR values shall be calculated according to paragraphs (a) 
and (b) of this section, with the fleet average NMOG standards equal to 
the standards for model year 2001 in the ASTR.
    (B) If such a manufacturer has a credit balance in the NTR for 
model year 2001, before trading or carrying over credits to the next 
model year, the manufacturer must apply available NTR credits to offset 
its debits in the NTR.
    (C) Notwithstanding paragraph (b)(4) of this section, for the ASTR 
and model year 2001, such a manufacturer's available credits or level 
of debits shall be the sum of credits or debits derived from the 
respective class A and class B averaging sets for the ASTR and model 
year 2001, minus any credits used pursuant to paragraph (d)(2)(ii)(B).
    (iii) To transfer a credit as an NTR credit earned in model year 
2001, a manufacturer must have credits generated in the NTR based on 
separate fleet average NMOG values calculated for the NTR in model year 
2001. In addition, the number of model year 2001 NTR credits available 
for a manufacturer to transfer cannot exceed the manufacturer's 
available number of model year 2001 ASTR credits. Any transferred model 
year 2001 NTR credits shall be deducted from the manufacturer's 
available model year 2001 ASTR credits.
    (3)(i) Failure to meet the requirements of paragraphs (a) through 
(d) of this section within the required timeframe for offsetting debits 
will be considered to be a failure to satisfy the conditions upon which 
the certificate(s) was issued and the individual noncomplying vehicles 
not covered by the certificate shall be determined according to this 
section.
    (ii) If debits are not offset within the specified time period, the 
number of vehicles not meeting the fleet average NMOG standards and not 
covered by the certificate shall be calculated by dividing the total 
amount of debits for the model year by the fleet average NMOG standard 
applicable for the model year and averaging set in which the debits 
were first incurred. If both averaging sets are in debit, any 
applicable credits will first be allocated between the averaging sets 
according to the manufacturer's expressed preferences. Then, the number 
of vehicles not covered by the certificate shall be calculated using 
the revised debit values.
    (iii) EPA will determine the vehicles for which the condition on 
the certificate was not satisfied by designating vehicles in those 
engine families with the highest certification NMOG emission values 
first and continuing until a number of vehicles equal to the calculated 
number of noncomplying vehicles as determined above is reached. If this 
calculation determines that only a portion of vehicles in an engine 
family contribute to the debit situation, then EPA will designate 
actual vehicles in that engine family as not covered by the 
certificate, starting with the last vehicle produced and counting 
backwards.
    (4) If a manufacturer opts out of the National LEV program pursuant 
to Sec. 86.1707, the manufacturer continues to be responsible for 
offsetting any debits outstanding on the effective date of the opt-out 
within the required time period. Any failure to offset the debits will 
be considered to be a violation of paragraph (d)(1) of this section and 
may subject the manufacturer to an enforcement action for sale of 
vehicles not covered by a certificate, pursuant to paragraph (d)(2) of 
this section.
    (5) For purposes of calculating tolling of the statute of 
limitations, a violation of the requirements of paragraph (d)(1) of 
this section, a failure to satisfy the conditions upon which a 
certificate(s) was issued and hence a sale of vehicles not covered by 
the certificate, all occur upon the expiration of the deadline for 
offsetting debits specified in paragraph (d)(1) of this section.
* * * * *
    (e) * * *
    (2) A manufacturer may not sell credits that are not available for 
sale pursuant to the provisions in paragraphs (c)(2) or (d)(2) of this 
section.
* * * * *
    (4) * * *
    (ii) Failure to offset the debits within the required time period 
will be considered a failure to satisfy the conditions upon which the 
certificate(s) was issued and will be addressed pursuant to paragraph 
(d)(3) of this section.
* * * * *


Sec. 86.1711-97   [Redesignated as Sec. 86.1711-99 and Amended]

    21. Section 86.1711-97 is redesignated as Sec. 86.1711-99 and 
amended by removing and reserving paragraph (b).


Sec. 86.1712-97  [Redesignated as Sec. 86.1712 and Amended]

    22. Section 86.1712-97 is redesignated as Sec. 86.1712-99 and 
amended by revising paragraphs (a)(2)(iii), (b)(1), and (b)(3)(vi), to 
read as follows:

[[Page 986]]

Sec. 86.1712-99  Maintenance of records; submittal of information.

    (a) * * *
    (2) * * *
    (iii) EPA engine family, or if applicable for model year 1999 or 
2000, the California engine family;
* * * * *
    (b) * * *
    (1) Each covered manufacturer shall submit an annual report. Except 
as provided in paragraph (b)(2) of this section, the annual report 
shall contain, for each averaging set, the fleet average NMOG value 
achieved, all values required to calculate the NMOG value, the number 
of credits generated or debits incurred, and all the values required to 
calculate the credits or debits. For each applicable region (NTR and 
ASTR), the annual report shall contain the resulting balance of credits 
or debits.
* * * * *
    (3) * * *
    (vi) Region (NTR or ASTR) to which the credits belong.
* * * * *


Sec. 86.1713-97   [Redesignated as Sec. 86.1713-99]

    23. Section 86.1713-97 is redesignated as Sec. 86.1713-99.


Sec. 86.1714-97   [Redesignated as Sec. 86.1714-99]

    24. Section 86.1714-97 is redesignated as Sec. 86.1714-99.


Sec. 86.1716-97   [Redesignated as Sec. 86.1716-99 and Amended]

    25. Section 86.1716-97 is redesignated as Sec. 86.1716-99 and 
amended by removing and reserving paragraph (b).


Sec. 86.1717-97   [Redesignated as Sec. 86.1717-99 and Amended]

    26. Section 86.1717-97 is redesignated as Sec. 1717-99 and amended 
by revising the section heading, to read as follows:


Sec. 86.1717-99  Emission control diagnostic system for 1999 and later 
light-duty vehicles and light-duty trucks.

* * * * *


Sec. 86.1721-97   [Redesignated as Sec. 86.1721-99]

    27. Section 86.1721-97 is redesignated as Sec. 86.1721-99.


Sec. 86.1723-97   [Redesignated as Sec. 86.1723-99]

    28. Section 86.1723-97 is redesignated as Sec. 86.1723-99 and is 
revised to read as follows:


Sec. 86.1723-99  Required data.

    The provisions of Sec. 86.096-23 and subsequent model year 
provisions apply to this subpart, with the following exceptions and 
additions:
    (a) The provisions of Sec. 86.096-23(c)(1) and subsequent model 
year provisions apply to this subpart, with the following addition:
    (1) For all TLEVs, LEVs, and ULEVs certifying on a fuel other than 
conventional gasoline, manufacturers shall multiply the NMOG exhaust 
certification level for each emission-data vehicle by the appropriate 
reactivity adjustment factor listed in Sec. 86.1777(d)(2)(i) or 
established by the Administrator pursuant to Appendix XVII of this part 
to demonstrate compliance with the applicable NMOG emission standard. 
For all TLEVs, LEVs, and ULEVs certifying on natural gas, manufacturers 
shall multiply the NMOG exhaust certification level for each emission-
data vehicle by the appropriate reactivity adjustment factor listed in 
Sec. 86.1777(d)(2)(i) or established by the Administrator pursuant to 
Appendix XVII of this part and add that value to the product of the 
methane exhaust certification level for each emission-data vehicle and 
the appropriate methane reactivity adjustment factor listed in 
Sec. 86.1777(d)(2)(ii) or established by the Administrator pursuant to 
Appendix XVII of this part to demonstrate compliance with the 
applicable NMOG emission standard. Manufacturers requesting to certify 
to existing standards utilizing an adjustment factor unique to its 
vehicle/fuel system must follow the data requirements described in 
Appendix XVII of this part. A separate formaldehyde exhaust 
certification level shall also be provided for demonstrating compliance 
with emission standards for formaldehyde.
    (2) [Reserved]
    (b) The provisions of Sec. 86.096-23(l) introductory text and 
subsequent model year provisions do not apply to this subpart. The 
following shall instead apply to this subpart:
    (1) Additionally, manufacturers certifying vehicles shall submit 
for each model year 2001 through 2004 light-duty vehicle and light 
light-duty truck engine family, the information listed in Sec. 86.096-
23(l)(1) and (2). If applicable, manufacturers shall also submit 
``Alternative or Equivalent Phase-in Schedules'' before or during 
calendar year 2001 for light-duty vehicles and light light-duty trucks.
    (2) [Reserved]
    (c) In addition to the provisions of Sec. 86.096-23 and subsequent 
model year provisions, the following requirements shall apply to this 
subpart:
    (1) For each engine family certified to TLEV, LEV, or ULEV 
standards, manufacturers shall submit with the certification 
application, an engineering evaluation demonstrating that a 
discontinuity in emissions of non-methane organic gases, carbon 
monoxide, oxides of nitrogen and formaldehyde measured on the Federal 
Test Procedure (subpart B of this part) does not occur in the 
temperature range of 20 to 86 deg F. For diesel vehicles, the 
engineering evaluation shall also include particulate emissions.
    (2) [Reserved]


Sec. 86.1724   [Redesignated as Sec. 86.1724-99 and Amended]

    29. Section 86.1724-97 is redesignated as Sec. 86.1724-99 and 
amended by revising paragraph (b) introductory text and adding 
paragraph (b)(2), to read as follows:


Sec. 86.1724-99  Test vehicles and engines.

* * * * *
    (b) The provisions of Sec. 86.096-24(b) and subsequent model year 
provisions apply to this subpart with the following additions:
* * * * *
    (2) For vehicles certified to the SFTP exhaust emission standards, 
if air conditioning is projected to be available on any vehicles within 
the engine family, the selection of engine codes will be limited 
selections which have air conditioning available and would require that 
any vehicle selected under this section has air conditioning installed 
and operational.


Sec. 86.1725-97   [Redesignated as Sec. 86.1725-99 and Amended]

    30. Section 86.1725-97 is redesignated as Sec. 86.1725-99 and 
amended by adding paragraph (d), to read as follows:


Sec. 86.1725-99  Maintenance.

* * * * *
    (d) When air conditioning SFTP exhaust emission tests are required, 
the manufacturer must document that the vehicle's air conditioning 
system is operating properly and that system parameters are within 
operating design specifications prior to testing. Required air 
conditioning system maintenance is performed as unscheduled maintenance 
that does not require the Administrator's approval.


Sec. 86.1726-97   [Redesignated as Sec. 86.1726-99 and Amended]

    31. Section 86.1726-97 is redesignated as Sec. 86.1726-99 and

[[Page 987]]

amended by revising paragraph (c)(1), to read as follows:


Sec. 86.1726-99  Mileage and service accumulation; emission 
measurements.

* * * * *
    (c) * * *
    (1) For vehicles certified to the SFTP exhaust emission standards, 
complete exhaust emission tests will include both the FTP and the SFTP 
tests. The Administrator will accept the manufacturer's determination 
of the mileage at which the engine-system combination is stabilized for 
emission data testing if (prior to testing) a manufacturer determines 
that the interval chosen yields emissions performance that is stable 
and representative of design intent. Sufficient mileage should be 
accumulated to reduce the possible effects of any emissions variability 
that is the result of insufficient vehicle operation. Of primary 
importance in making this determination is the behavior of the 
catalyst, EGR valve, trap oxidizer or any other part of the ECS which 
may have non-linear aging characteristics. In the alternative, the 
manufacturer may elect to accumulate 4,000 mile +/-250 miles on each 
test vehicle within an engine family without making a determination.
* * * * *


Sec. 86.1728-97   [Redesignated as Sec. 86.1728-99]

    32. Section 86.1728-97 is redesignated as Sec. 86.1728-99.


Sec. 86.1734-97   [Redesignated as Sec. 86.1734-99]

    33. Section 86.1734-97 is redesignated as Sec. 86.1734-99.


Sec. 86.1735-97   [Redesignated as Sec. 86.1735-99]

    34. Section 86.1735-97 is redesignated as Sec. 86.1735-99.


Sec. 86.1770-97   [Redesignated as Sec. 86.1770-99 and Amended]

    35. Section 86.1770-97 is redesignated as Sec. 86.1770-99 and 
amended by revising paragraph (a)(2), to read as follows:


Sec. 86.1770-99  All-Electric Range Test requirements.

* * * * *
    (a) * * *
    (2) Driving schedule.
    (i) Determination of All-Electric Range--Highway. At the end of the 
cold soak period, the vehicle shall be placed, either driven or pushed, 
onto a dynamometer and operated through an Urban Dynamometer Driving 
Schedule, found in 40 CFR part 86, Appendix I, until the vehicle is no 
longer able to maintain within 5 miles per hour of the speed 
requirements or within 2 seconds of the time requirements of the 
driving schedule. For hybrid electric vehicles, this determination 
shall be performed without the use of the auxiliary power unit.
    (ii) Determination of All-Electric Range--Urban. At the end of the 
cold soak period, the vehicle shall be placed, either driven or pushed, 
onto a dynamometer and operated through a Highway Fuel Economy Driving 
Schedule, found in 40 CFR part 600, Appendix I, until the vehicle is no 
longer able to maintain within 5 miles per hour of the speed 
requirements or within 2 seconds of the time requirements of the 
driving schedule. For hybrid electric vehicles, this determination 
shall be performed without the use of the auxiliary power unit.
* * * * *


Sec. 86.1771-97   [Redesignated as Sec. 86.1771-99]

    36. Section 86.1771-97 is redesignated as Sec. 86.1771-99.


Sec. 86.1772-97   [Redesignated as Sec. 86.1772-99 and Amended]

    37. Section 86.1772-97 is redesignated as Sec. 86.1772-99 and 
amended by revising the section heading, to read as follows:


Sec. 86.1772-99   Road load power, test weight, and inertia weight 
class determination.

* * * * *


Sec. 86.1773-97   [Redesignated as Sec. 86.1773-99 and Amended]

    38. Section 86.1773-97 is redesignated as Sec. 86.1773-99 and 
amended by adding paragraph (d), to read as follows:


Sec. 86.1773-99  Test sequence; general requirements.

* * * * *
    (d) A manufacturer has the option of simulating air conditioning 
operation during testing at other ambient test conditions provided it 
can demonstrate that the vehicle tailpipe exhaust emissions are 
representative of the emissions that would result from the SC03 cycle 
test procedure and the ambient conditions of paragraph 86.161-00. The 
Administrator has approved two optional air conditioning test 
simulation procedures, AC1 and AC2, for the 2001 to 2003 model years 
only. If a manufacturer desires to conduct an alternative SC03 test 
simulation other than AC1 and AC2, or the AC1 and AC2 simulations for 
the 2004 and subsequent model years, the simulation test procedure must 
be approved in advance by the Administrator.


Secs. 86.1774-97 through 86.1780-97   [Redesignated as Secs. 86.1774-99 
through 86.1780-99]

    39. Section 86.1774-97 is redesignated as Sec. 86.1774-99.
    40. Section 86.1775-97 is redesignated as Sec. 86.1775-99.
    41. Section 86.1776-97 is redesignated as Sec. 86.1776-99.
    42. Section 86.1777-97 is redesignated as Sec. 86.1777-99.
    43. Section 86.1778-97 is redesignated as Sec. 86.1778-99.
    44. Section 86.1779-97 is redesignated as Sec. 86.1779-99.
    45. Section 86.1780-97 is redesignated as Sec. 86.1780-99.


Appendix XVIII to part 86   [Amended]

    46. Appendix XVIII to part 86 is amended by redesignating the 
second of the two paragraphs currently designated as (b)(3) as 
paragraph (b)(4).

[FR Doc. 97-33314 Filed 12-31-97; 8:45 am]
BILLING CODE 6560-50-P