[Federal Register Volume 64, Number 60 (Tuesday, March 30, 1999)]
[Rules and Regulations]
[Pages 15208-15255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6175]



[[Page 15207]]

_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 90



Phase 2 Emission Standards for New Nonroad Spark-Ignition Nonhandheld 
Engines At or Below 19 Kilowatts; Final Rule

  Federal Register / Vol. 64, No. 60 / Tuesday, March 30, 1999 / Rules 
and Regulations  

[[Page 15208]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 90

[FRL-6308-6]
RIN 2060-AE29


Phase 2 Emission Standards for New Nonroad Spark-Ignition 
Nonhandheld Engines At or Below 19 Kilowatts

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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

SUMMARY: In this action, EPA is finalizing a second phase of emission 
regulations to control emissions from new nonroad spark-ignition 
nonhandheld engines at or below 19 kilowatts (25 horsepower). These 
engines are used principally in lawn and garden equipment in 
applications such as lawnmowers and garden tractors. The standards will 
result in an estimated 59 percent reduction of emissions of 
hydrocarbons plus oxides of nitrogen from those achieved under the 
current Phase 1 standards applicable to nonhandheld engines. The 
standards will result in important reductions in emissions which 
contribute to excessively high ozone levels in many areas of the United 
States.
    In compliance with the Paperwork Reduction Act, this document 
announces that the information collection requirements contained in 
this final rule have not been submitted to the Office of Management and 
Budget for approval.

DATES: The amendments to 40 CFR part 90 are effective June 1, 1999.

ADDRESSES: Materials relevant to this final rule, including the Final 
Regulatory Impact Analysis are contained in Public Docket A-96-55, 
located at room M-1500, Waterside Mall (ground floor), U.S. 
Environmental Protection Agency, 401 M Street, S.W., Washington, DC 
20460. The docket may be inspected from 8:00 a.m. until 5:30 p.m., 
Monday through Friday. A reasonable fee may be charged by EPA for 
copying docket materials.
    For further information on electronic availability of this final 
rulemaking, see SUPPLEMENTARY INFORMATION below.

FOR FURTHER INFORMATION CONTACT: Robert Larson, U.S. EPA, Engine 
Programs and Compliance Division, (734) 214-4277, 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Content of the Final Rule
    A. Emission Standards and Related Provisions
    1. Class Structure
    2. HC+NOX Emission Standards
    3. NMHC+NOX Standards for Class I and II Natural Gas 
Fueled Engines
    4. CO Emission Standards
    5. Useful Life Categories
    6. Selection of Useful Life Category
    7. Emission Standard Feasibility at Longer Useful Life
    B. Averaging, Banking, and Trading
    C. Test Procedures
    D. Compliance Program
    1. Certification
    2. Production Line Testing--Cumulative Summation Procedure
    3. Selective Enforcement Auditing
    4. Voluntary In-Use Testing
    E. Flexibilities
    1. Carry-Over Certification
    2. Small Volume Engine Manufacturer Definition
    3. Small Volume Engine Family Definition
    4. Flexibilities for Small Volume Engine Families and Small 
Volume Engine Manufacturers
    5. Flexibilities for Small Volume Equipment Manufacturers and 
Small Volume Equipment Models
    6. Small Volume Equipment Manufacturer Definition
    7. Small Volume Equipment Model Definition
    8. Hardship Provision
    F. Nonregulatory Programs
     1.Voluntary ``Green'' Labeling Program
     2.Voluntary Fuel Spillage Reduction Program
    G. General Provisions
    1. Model Year and Annual Production Period Flexibilities
    2. Definition of Handheld Engines
    3. Small Displacement Nonhandheld Engine Class
    4. Liquefied Petroleum Gas Fueled Indoor Power Equipment
    5. Dealer Responsibility
    6. Engines Used in Recreational Vehicles and Applicability of 
the Small SI Regulations to Model Airplanes
    7. Engines Used in Rescue and Emergency Equipment
    8. Replacement Engines
    9. Record keeping and Information Requirements
    10. Engine Labeling
    11. Emission Warranty
    12. Other
III. Projected Impacts
    A. Environmental Benefit Assessment
    1. Roles of HC and NOX in Ozone Formation
    2. Health and Welfare Effects of Tropospheric Ozone
    3. Estimated Emissions Impact of Final Regulations
    4. Health and Welfare Effects of CO Emissions
    5. Health and Welfare Effects of Hazardous Air Pollutant 
Emissions
    6. Particulate Matter
    B. Costs and Cost-Effectiveness
    1. Engine Technologies
    2. Engine Costs
    3. Equipment Costs
    4. Operating Costs
    5. Cost Per Engine and Cost-Effectiveness
IV. Public Participation
V. Administrative Requirements
    A. Administrative Designation and Regulatory Analysis
    B. Regulatory Flexibility
    C. Paperwork Reduction Act
    D. Unfunded Mandates Reform Act
    E. Congressional Review Act
    F. National Technology Transfer and Advancement Act
    G. Executive Order 13045
    H. Executive Order 12875: Enhancing the Intergovernmental 
Partnership
    I. Executive Order 13084: Consultation and Coordination with 
Indian tribal Governments
VI. Statutory Authority

Regulated Entities

    Entities potentially regulated by this action are those that 
manufacture or introduce into commerce new nonhandheld small spark-
ignition nonroad engines or equipment. Regulated categories and 
entities include:

------------------------------------------------------------------------
                Category                  Examples of regulated entities
------------------------------------------------------------------------
Industry...............................  Manufacturers or importers of
                                          new nonroad small (at or below
                                          19 kW) spark-ignition
                                          nonhandheld engines and
                                          equipment.
------------------------------------------------------------------------

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 company is regulated by this action, you should carefully examine 
the applicability criteria in section Sec. 90.1 of title 40 of the Code 
of Federal Regulations. 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 and Final Regulatory Impact 
Analysis (Final RIA) are also available electronically from the EPA 
Internet Web site. This service is free of charge, except for any cost 
already incurred for Internet connectivity. The electronic version of 
this final rule 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.


[[Page 15209]]


1. http://www.epa.gov/docs/fedrgstr/EPA-AIR/

(either select desired date or use Search feature)

2. http://www.epa.gov/OMSWWW/

(look in What's New or under the specific rulemaking topic)
    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. Introduction

A. Background

    On January 27, 1998, EPA issued a Notice of Proposed Rulemaking 
(NPRM) proposing a second phase of regulations to control emissions 
from new handheld and nonhandheld nonroad SI engines at or below 19 
kilowatts (25 horsepower) (``small SI engines'') (63 FR 3950). This 
action was preceded by a March 27, 1997, Advanced Notice of Proposed 
Rulemaking (62 FR 14740). EPA solicited comment on virtually all 
aspects of the NPRM. EPA held a public hearing on February 6, 1998, and 
the public comment period for the NPRM closed March 13, 1998. Today's 
action finalizes this rulemaking activity for nonhandheld engines in 
adopting a Phase 2 set of emission standards and compliance program 
requirements for Class I and Class II nonhandheld engines. EPA is not 
at this time finalizing a Phase 2 program for handheld engines, as 
described in more detail below. EPA will further address the Phase 2 
program for handheld engines in future Federal Register notices.
    Today's action is taken in response to Section 213(a)(3) of the 
Clean Air Act which requires EPA's standards for nonroad engines and 
vehicles to achieve the greatest degree of emission reduction 
achievable through the application of technology which the 
Administrator determines will be available, giving appropriate 
consideration to cost, lead time, noise, energy and safety factors. The 
standards and other compliance program requirements being adopted today 
satisfy this Clean Air Act mandate.
    The NPRM contained lengthy discussion of the proposed standards, 
the expected costs of their implementation, and the potential costs and 
benefits of adopting more stringent standards such as those that were 
then under consideration by the California Air Resources Board (ARB). 
In the NPRM, EPA explicitly asked for comment regarding the level of 
the proposed standards and the impacts and timing for implementing more 
stringent standards, so as to allow it to establish the most 
appropriate standards in the final rule. In particular, EPA requested 
comment on the impacts and timing for implementing emission standards 
that would require the same types of technology as anticipated by 
proposed rules under consideration at that time by the California ARB.
    After the close of the comment period and upon reviewing the 
information supplied during the comment period, EPA determined that it 
was desirable to get further details regarding the technological 
feasibility, cost and lead time implications of meeting standards more 
stringent than those contained in the NPRM. EPA's NPRM already 
contained estimates of the costs and feasibility of more stringent 
standards. Some commenters had charged that, based on these 
discussions, EPA's proposed standards would not be stringent enough to 
satisfy the stringency requirements of Clean Air Act Section 213(a)(3). 
For the purpose of gaining additional information on feasibility, cost 
and lead time implications of more stringent standards, EPA had several 
meetings, phone conversations, and written correspondence with specific 
engine manufacturers, with industry associations representing engine 
and equipment manufacturers, with developers of emission control 
technologies and suppliers of emission control hardware, with 
representatives of state regulatory associations, and with members of 
Congress. EPA also sought information relating to the impact on 
equipment manufacturers, if any, of changes in technology potentially 
required to meet more stringent standards than were contained in the 
NPRM. Additionally, EPA received numerous comments on the NPRM 
requesting closer harmonization with the compliance program provisions 
adopted by the State of California. In some cases, EPA also discussed 
these harmonization issues with manufacturers and industry association 
representatives to improve the Agency's understanding of the needs and 
benefits to the industry of such harmonization.
    As EPA has stated on prior occasions, in adopting this final rule 
EPA wished to consider all relevant information that became available 
during the rule development process. This includes information received 
during the comment period on the NPRM, and, to the extent possible, 
important information which became available after the formal NPRM 
comment period had concluded. To the extent that post-NPRM information 
has expanded or updated the knowledge of the Agency regarding 
technological feasibility, production lead time estimates for 
incorporating improved designs, costs to manufacturers, costs to 
consumers and similar factors, it is reasonable to expect that the 
improved information may result in changing assessments of how a 
pending rule can best achieve regulatory goals compared to what had 
been expected at the time of the NPRM. This is especially true in the 
case of a rulemaking concerning an industry, like small SI engines, 
that is undergoing relatively rapid technological innovation.
    EPA published a Notice of Availability highlighting the additional 
information gathered in response to the NPRM (see 63 FR 66081, December 
1, 1998). After analyzing this information, the Agency concluded that 
more stringent standards for Class I nonhandheld engines, used in 
applications such as residential lawn mowers, consistent with those 
adopted by California are indeed achievable on the national scale. This 
final rule for nonhandheld engines adopts emission standards 
considerably more stringent than those proposed for Class I nonhandheld 
engines. The technologies (principally conversion of side-valve engines 
to clean overhead valve designs) that EPA anticipates will be used in 
achieving compliance with the Class I standard are well known and were 
discussed in the NPRM.
    However, since the publication of the NPRM, there have been rapid 
advances in emission reduction technologies for handheld engines. EPA 
has received information which could potentially support handheld 
standards much more stringent that those proposed in the NPRM. In light 
of this new information, and in the interest of providing an 
opportunity for public comment on this new technology and on more 
stringent levels for handheld engine emission standards, EPA intends to 
address Phase 2 regulations for handheld engines (such as trimmers, 
brush cutters, and chainsaws) in a separate Supplemental Notice of 
Proposed Rulemaking (SNPRM) in June of 1999, with a final rule in March 
of 2000.
    The reader is referred to the Notice of Availability, the NPRM 
itself, as well as to the docket for this rulemaking, for the range of 
additional information upon which the Agency has relied in adopting 
this final program for small SI nonhandheld engines.

B. Overview of Final Program

    The following provides an overview of the provisions in these Phase 
2 rules for nonhandheld engines. Additional

[[Page 15210]]

detail explaining the program as well as discussion of information and 
analyses which led to the adoption of these requirements is contained 
in subsequent sections.
    As proposed and consistent with Phase 1 rules, these Phase 2 rules 
distinguish between engines used in handheld equipment and those used 
in nonhandheld equipment. In today's action, Phase 2 emission standards 
are set for distinct engine size categories referred to as ``engine 
classes'' within the nonhandheld engine equipment designation. The 
following table summarizes the HC+NOX emission standards for 
Class I and Class II nonhandheld engines and when these standards take 
effect for each engine class.

                      Table 1.--Phase 2 HC +NOX Emission Standards for Class I and Class II
----------------------------------------------------------------------------------------------------------------
                                                  NPRM                                   FRM
                                    ----------------------------------------------------------------------------
            Engine class              HC+NOX (g/kW-                   HC+NOX (g/kW-
                                           hr)          Time line          hr)                Time line
----------------------------------------------------------------------------------------------------------------
Class I............................            25.0       2001                 16.1  August 1, 2007; in
                                                                                      addition, any Class I
                                                                                      engine family initially
                                                                                      produced on or after
                                                                                      August 1, 2003 must meet
                                                                                      the Phase 2 Class I
                                                                                      standards before they may
                                                                                      be introduced into
                                                                                      commerce.
Class II...........................            12.1  2001-2005                 12.1  2001-2005.
----------------------------------------------------------------------------------------------------------------

    As indicated in this table, the emission standards being finalized 
for Class I engines are considerably more stringent than the base 
emission levels included in the proposal. This reflects the Agency's 
analysis of the information EPA received in direct response to the 
questions posed in the NPRM concerning the desirability and feasibility 
of more stringent standards than the base levels proposed, as well as 
other information made available to the Agency before and since the 
proposal. The level of these standards will result in an estimated 59 
percent annual reduction in combined hydrocarbon and oxides of nitrogen 
(HC+NOX) emissions from these small SI nonhandheld engines 
compared to the Phase 1 emission requirements for these engines when 
the effects of this Phase 2 rule are fully phased in.
    Another feature of the Phase 2 nonhandheld standards is that they 
are phased in over a number of years, allowing the manufacturers an 
orderly and efficient transition of engine designs and technologies 
from those complying with the existing Phase 1 standards to those 
necessary to meet the Phase 2 requirements. Thus, for example, the 
manufacturers of Class II engines are required to meet a gradually 
decreasing standard on average for this segment of their product line 
during model years 2001 through 2005. During this time frame, EPA 
anticipates that such a manufacturer would continue to change more and 
more of its Class II engines designs to designs capable of meeting the 
final 12.1 g/kW-hr standards, averaging emission performance with older 
designs and thus meeting on average the declining standard in effect 
for that model year (see preamble Section II.A.2). Finally, by 2005 in 
this example, the manufacturer would have had sufficient time and 
resources to change the designs and production tooling to meet the 12.1 
g/kW-hr standard on average for all its Class II engines. Similarly, a 
two-stage schedule has been developed to uniquely meet the industry 
needs for converting the Class I engines. For these nonhandheld 
classes, EPA has concluded that the phased-in and two-stage 
implementation schedules are necessary in order to make the ultimate 
standards achievable through the application of the specific 
technologies that EPA analyzed for nonhandheld engines.
    These standards and the other compliance program elements being 
adopted today also consider expected in-use deterioration. In contrast 
to the Phase 1 rules which only regulate the emission performance of 
engines when new, the Phase 2 standards being adopted today also 
reflect expected deterioration in emission performance as an engine is 
used. Manufacturers will be required to evaluate the emission 
deterioration performance of their engine designs and certify their 
designs to meet these standards after anticipated emission 
deterioration of a typical in-use engine over its useful life. 
Different useful life ranges have been adopted based on the type of 
engine and equipment in which the engine is installed. For example, a 
Class II nonhandheld engine will be certified for from 250 to 1000 
hours of use based on design features and the intended use of the 
installation (a high priced piece of industrial equipment would more 
likely be equipped with an engine with design features intended to make 
it most durable and thus certified to the emission standards assuming 
1000 hours of in-use operation, for example).
    The certification program requires that the manufacturer determine 
an appropriate methodology for accumulating hours of operation to 
``age'' an engine in a manner which duplicates the same type of wear 
and other deterioration mechanisms expected under typical consumer use 
which could affect emission performance. EPA expects bench testing will 
be used to conduct this aging operation because this can save time and 
perhaps money, but actual in-use operation (e.g., cutting grass) will 
also be allowed. Emission tests will be conducted when the engine is 
new and when it has finished accumulating the equivalent of its useful 
life. The engine must pass standards both when it is new and at the end 
of its designated useful life to qualify for certification. 
Additionally, the new engine and fully aged engine emission test levels 
are compared to determine the expected deterioration in emission 
performance for other engines of this design; such engines may be 
tested as they come off the end of a production line, in which case 
their new engine emission levels are adjusted by the deterioration 
factor determined from the certification engine to predict useful life 
emission performance.
    Selection of engines for testing as they come off the production 
line will be conducted according to the provisions of the Production 
Line Testing (PLT) program. This program is explained in more detail in 
a following section but, briefly, its intent is to allow a sampling of 
engines as produced throughout the production period to be tested for 
emission performance to assure that the design intent as certified 
prior to production has been successfully transferred by the 
manufacturer to mass production in a production line setting. The 
volume of PLT testing required by the manufacturer depends on how close 
the test results from the initial engines tested are to the standards; 
if these test

[[Page 15211]]

engines indicate the design is particularly low emitting, few engines 
need be tested, while those designs with emission levels very close to 
the standards will need additional tests to make sure the design is 
being produced with acceptable emission performance.
    While this compliance program will not require the manufacturer to 
conduct any in-use testing to verify continued satisfactory emission 
performance in the hands of typical consumers, an optional program for 
such in-use testing is being provided. EPA believes it is important for 
manufacturers to conduct in-use testing to assure the success of their 
designs and to factor back into their design and/or production process 
any information suggesting emission problems in the field. While not 
mandating such a program, EPA encourages such testing by allowing a 
manufacturer to avoid the cost of the PLT program for a portion of its 
product line by instead supplying data from in-use engines. Under this 
voluntary in-use testing program, up to twenty percent of the engine 
families certified in a year can be designated for in-use testing by 
the manufacturer. For these families, no PLT testing will be required 
for two model years including that model year. Instead, the 
manufacturer will select a minimum of three engines off the assembly 
line or from another source of new engines and emission test them when 
aged to at least 75 percent of their useful life under typical in-use 
operating conditions for this engine. The information relating to this 
in-use testing program will be shared with EPA. If any information 
derived from this program indicates a substantial in-use emission 
performance problem, EPA anticipates the manufacturer will seek to 
determine the nature of the emission performance problem and what 
corrective actions might be appropriate. EPA will offer its assistance 
in analysis of the reasons for unexpectedly high in-use emission 
performance and what actions might be appropriate for reducing these 
high emissions. Whether or not a manufacturer chooses to conduct such a 
voluntary in-use testing program, EPA may choose to conduct its own in-
use compliance program. If EPA were to determine that an in-use 
noncompliance investigation was appropriate, the Agency expects it 
would conduct its own in-use testing program, separate from this 
voluntary manufacturer testing program, to determine whether a specific 
class or category of engines is complying with applicable in-use 
standards.
    All these general provisions of this compliance program are also 
expected to become part of California's compliance program for these 
classes of small engines.1 Importantly, the testing and data 
requirements, engine family descriptors, compliance statements and 
similar testing and information requirements of these federal Phase 2 
nonhandheld regulations are, to the best of EPA's knowledge, the same 
general compliance program requirements adopted by the California ARB. 
This is advantageous to manufacturers marketing the same product 
designs in California as in the other states, as they need prepare only 
one set of certification application information, supplying one copy to 
the ARB for certification in the State of California and one copy to 
EPA for federal certification. This similar treatment under the 
regulations also extends to the PLT program and the optional in-use 
testing program, such that any test data and related information 
developed for the ARB should also satisfy the federal regulatory 
requirements being adopted today.
---------------------------------------------------------------------------

    \1\ While the voluntary in-use test program may not be codified 
in the California ARB Tier 2 rules for these engines, the ARB has 
agreed to adopt this same voluntary in-use test program and allow 
for the same decreased PLT testing.
---------------------------------------------------------------------------

    In addition to the regulatory provisions outlined above, this rule 
adopts special provisions for small volume engine manufacturers, small 
volume engine families produced by other engine manufacturers, and 
small volume equipment manufacturers who rely on other manufacturers to 
supply them with these small SI nonhandheld engines. These special 
small volume provisions lessen the demonstration requirements and in 
some cases delay the effective dates of the standards so as to smooth 
the transition to these Phase 2 requirements. This is especially 
important for these small volume applications since the eligible 
manufacturers involved may not have the resources to ensure that 
engines complying with these Phase 2 standards will be available under 
the time frames otherwise established under these regulations. Since 
these provisions are limited to small volume applications, the risk to 
air quality is negligible. However, without these provisions, the 
economic impacts to small volume manufacturers could be increased and 
the possibility of reduced product offering would be great, especially 
for those products intended to serve niche markets which satisfy 
special needs. These flexibilities are explained more fully in section 
II.B. and are detailed in the regulations.

II. Content of the Final Rule

    The following sections provide additional detail on the provisions 
of the final rule outlined above.

A. Emission Standards and Related Provisions

1. Class Structure
    This final rule maintains the same basic class structure as 
implemented in the Phase 1 regulations for these nonhandheld engines. 
The Phase 1 rules established separate classes based on engine size in 
recognition of the greater difficulty in controlling emissions from 
smaller displacement engines compared to larger displacement engines. 
That rule also separated engine classes into those intended for use in 
equipment typically carried by the operator during its use such as 
chain saws or string trimmers (referred to as handheld equipment) and 
those engines normally used in equipment which is not carried by the 
operator including, for example, lawnmowers and generators (this 
equipment being referred to as nonhandheld). These usage distinctions 
seemed appropriate because the small engine industry is for the most 
part split between these two categories, with very few manufacturers 
making both handheld engines and nonhandheld engines, and because the 
nature of these two industry segments is quite different with, for 
example, the handheld engine manufacturers for the most part producing 
engines specifically for use in their own equipment (i.e., engine and 
equipment manufacturers) while nonhandheld engine manufacturers 
typically do not also make equipment but rather are suppliers of 
engines to the equipment industry; other characteristics important to 
regulatory analysis also differ between these two industry segments. 
Thus, it still seems appropriate to consider these industries 
separately, and thus the class structure adopted today maintains the 
distinction between handheld and nonhandheld classes, with today's rule 
establishing the Phase 2 program for nonhandheld Class I and Class II. 
In addition, as discussed above, a Phase 2 program for handheld engines 
is not being adopted in today's action, but will be addressed in future 
Federal Register notices.
2. HC+NOX Emission Standards
    More stringent HC+NOX emission standards are being 
finalized for Class I engines than were proposed, and the 
HC+NOX emission standards for Class II engines are being 
adopted as proposed. The Clean Air Act at section 213 (a) (3) requires 
the Agency to adopt standards that result in the greatest emission

[[Page 15212]]

reductions achievable through the application of technology which the 
Administrator determines will be available, giving appropriate 
consideration to cost, lead time, noise, energy and safety factors. As 
a result of information now available, much of it in the form of 
comments received during the NPRM comment period, EPA has determined 
that standards more stringent than those proposed for Class I engines 
are feasible during the next decade. With the adoption of these Class I 
and Class II standards, emissions will be reduced an estimated 59 
percent compared to the Phase 1 nonhandheld engines. The standards 
being adopted today reach the goal of maximum achievable reductions for 
nonhandheld engines under section 213 of the Clean Air Act. The nation 
should continue to benefit from improved emission performance for this 
category of engines at least through 2010 as these standards take 
effect and fleet turnover to cleaner engines occurs.
    The following table compares the proposed levels of standards and 
the final levels of standards being adopted today.

                      Table 2.--Phase 2 HC +NOX Emission Standards for Class I and Class II
----------------------------------------------------------------------------------------------------------------
                                                  NPRM                                   FRM
                                    ----------------------------------------------------------------------------
            Engine Class              HC+NOX (g/kW-                   HC+NOX (g/kW-
                                           hr)          Time line          hr)                Time line
----------------------------------------------------------------------------------------------------------------
Class I............................            25.0       2001                 16.1  August 1, 2007; in
                                                                                      addition, any Class I
                                                                                      engine family initially
                                                                                      produced on or after
                                                                                      August 1, 2003 must meet
                                                                                      the Phase 2 Class I
                                                                                      standards before they may
                                                                                      be introduced into
                                                                                      commerce.
Class II...........................            12.1  2001-2005                 12.1  2001-2005.
----------------------------------------------------------------------------------------------------------------

    For Class I, the NPRM acknowledged that a standard of the level 
being adopted today was technically feasible. Indeed, one of the 
technology changes available to achieve these standards (adopting an 
overhead valve configuration) has already been done on some Class I 
engines and is also anticipated to be a primary choice for 
manufacturers of Class II engines to meet their Phase 2 emission 
levels. The issues impacting a decision on the most appropriate Class I 
standards, rather, concerned the lead time necessary for the industry 
to convert their Class I designs and production facilities to meet 
these standards, the cost of this conversion, and the subsequent 
potential adverse impact on sales of any such increase in cost passed 
along to consumers. Both the industry and EPA now have an improved 
understanding of the lead time necessary to convert Class I engines to 
designs capable of meeting these low emission standards and the costs 
that would result. While the manufacturers' uncertainties regarding 
consumer acceptance may not be fully resolved, EPA believes the 
anticipated price increases resulting from this action will not have a 
significant adverse impact on sales, principally due to the fact that 
once fleet turnover becomes significant and Class I overhead valve 
engine products do not have to compete with side-valve engine products, 
consumer acceptance of overhead valve engines should no longer be an 
issue. Furthermore, major manufacturers of Class I engines support the 
adoption of these standards in the time frame required 2. 
Specifically, Class I engines must all meet the 16.1 g/kW-hr 
HC+NOX standard starting with engines produced on or after 
August 1, 2007. Additionally, all new engine families first produced on 
or after August 1, 2003 will also need to comply with this standard. 
This latter provision recognizes that manufacturers adopting new engine 
designs in a time frame so close to the 2007 production requirement to 
meet the standard should be anticipating meeting that standard in their 
design strategy. Furthermore, sufficient time exists between now and 
August 1, 2003 to allow for new designs to meet the Phase 2 standard. 
Finally, EPA expects the manufacturers will take advantage of this 
production window between August 2003 and August 2007 to smooth the 
transition to a fully complying product line by August 2007 by phasing 
in production of Phase 2 engines during these four years. Thus, the 
environment should benefit by the early introduction of complying 
engines, and the manufacturers will benefit by the flexibility to 
introduce engines during this transition period in a manner and 
schedule which best fits their individual needs.
---------------------------------------------------------------------------

    \2\ See docket A-96-55, memorandum IV-E-68, entitled ``Meeting 
with Tecumseh Products Company, Briggs & Stratton and Latham & 
Watkins''.
---------------------------------------------------------------------------

    This standard for Class I engines is identical to the standard 
adopted by the State of California as part of its Tier 2 regulations 
for this class of small spark-ignition engines. However, these federal 
regulations tend to allow additional time in consideration of the need 
to convert perhaps additional designs not targeted, at least initially, 
for the California market, and of the significantly greater cost and 
logistical burden of converting production facilities to meet the much 
larger federal sales volumes. Nevertheless, this alignment in standards 
should assist the industry in targeting production and distribution of 
engines since, when fully implemented, an engine meeting California 
standards will also meet federal standards (and vice versa); such an 
engine can be sold anywhere in the United States.
    While EPA anticipates manufacturers may choose to meet the Class I 
Phase 2 standard by converting their engines to OHV designs (similar to 
the case for Class II engines as explained in the NPRM), other options 
are also available such as the adoption of improved fuel metering and/
or the use of a catalytic converter. The standards adopted today do not 
rely on only one technology, nor do they mandate use of any specific 
technology.
    As proposed, the final rule adopts standards of 12.1 g/kW-hr 
HC+NOX for Class II engines, phased in over the 2001 through 
2005 model years. Again, when coupled with the actions being taken with 
regard to Class I engines, this standard and phase in schedule is 
technically feasible and provides sufficient lead time for changing 
engine designs and production facilities.
3. NMHC+NOX Standards for Class I and II Natural Gas Fueled 
Engines
    As proposed, EPA is adopting separate optional standards for small 
SI nonhandheld engines fueled by natural gas. For typical gasoline-
fueled engines, the methane portion is around 5 to 10 percent of total 
hydrocarbons. However, for engines fueled with natural gas, the methane 
portion can be around 70 percent. The methane from these

[[Page 15213]]

engines has a very low ozone forming potential compared to the other 
hydrocarbons in the engine's exhaust. Therefore, from an ozone forming 
potential perspective, it is appropriate to provide an alternative set 
of emission standards for engines fueled with natural gas. These 
standards have been adjusted to provide equivalent stringency to the 
HC+NOX standards for gasoline-fueled engines as are being 
adopted today. Aside from these standards, all other aspects of this 
rule pertain equally to engines fueled with natural gas as those fueled 
with gasoline.

    Table 3.--Phase 2 NMHC +NOX Emission Standards for Class I and II
------------------------------------------------------------------------
                                 NMHC+NOX (g/kW-
          Engine Class                 hr)              Time line
------------------------------------------------------------------------
Class I........................            14.8  August 1, 2007; in
                                                  addition, any Class I
                                                  engine family
                                                  initially produced on
                                                  or after August 1,
                                                  2003 must meet the
                                                  Phase 2 Class I
                                                  standards before they
                                                  may be introduced into
                                                  commerce.
Class II1......................            11.3  2001-2005.
------------------------------------------------------------------------

4. CO Emission Standards
    This final rule adopts the CO emission standards contained in the 
proposal for Class I and Class II engines (e.g., 610 g/kW-hr), and 
thereby maintains the same CO emission standard as in the Phase 1 rules 
(e.g., 519 g/kW-hr), when adjusted for deterioration. At this time, it 
does not appear that additional reductions in CO emissions from these 
engines will be needed to allow most areas of the country to attain the 
CO ambient air quality standard. However, it should be noted that many 
of the emission control techniques likely to be adopted to meet the 
Phase 2 HC+NOX standards, in particular the conversion from 
side-valve to clean overhead valve designs, improved fuel metering, and 
combustion chamber improvements, should also result in lower CO 
emissions. So, although the final CO standard remains the same as the 
proposed standard, EPA expects some CO emission reduction will occur as 
a result of the technology adopted to comply with the more stringent 
HC+NOX standards. EPA is not able at this time, however, to 
quantify the expected level of CO reductions to a sufficiently precise 
degree that the Agency can confidently set a more stringent standard 
than was proposed.
5. Useful Life Categories
    Along with adopting a more stringent numerical standard for Class I 
engines, the minimum certification demonstration useful life has also 
been extended from 66 hours to 125 hours. The higher useful life 
designation is technically appropriate; the lower 66 hour value was 
proposed as a means of saving the industry cost during certification 
demonstration (see discussion in the NPRM, at 63 FR 3969). However, the 
extra cost is relatively small while the higher hours of operation 
provide an improved opportunity to assess emission deterioration. 
Additionally, the 125 hour designation is aligned with California's 
requirements. Thus, a manufacturer intending to sell Class I engines in 
both the State of California and federally (the vast majority of 
engines) would have to accumulate 125 hours of service during 
certification to meet the California requirement; in this case, no 
extra burden is placed on the manufacturer by adopting this requirement 
federally. The minimum certification demonstration useful life for 
Class II engines is 250 hours, as proposed.
6. Selection of Useful Life Category
    EPA proposed that the engine manufacturers would be responsible for 
assuring that the correct useful life was used for certification 
demonstration and labeling purposes (see proposed 90.105(a)). Specific 
criteria were proposed which the manufacturers could use in documenting 
their determinations of useful life category selection. Comments 
received suggested such a requirement was overly rigid and unnecessary. 
EPA remains very concerned that the manufacturers select the most 
appropriate useful life category for each engine to assure it is 
properly evaluated during certification and to assure that any 
averaging, banking and trading program which allows the exchange of 
emission credits across engine families in different useful life 
categories is also fair and environmentally sound. However, so as not 
to add potentially unnecessary burden on the industry, these rules 
adopt a less rigid methodology for determining useful life categories. 
The proposal provided for EPA intervention in the selection of the 
appropriate useful life category for an engine. This potential 
intervention would have the effect of adding uncertainty for the 
manufacturer, and of limiting its ability to fully plan and execute in 
a timely fashion its product certification program. The program being 
adopted today rests the responsibility with the industry to make their 
best, most conscientious selection. We expect that manufacturers of 
Class I and II engines will have a good idea of the types of equipment 
their engines are typically used in and, from their marketing 
information, a reasonably accurate projection of the relative volumes 
in such typical applications. Additionally, based on design features 
these manufacturers build into their engines, they have a good idea of 
the expected useful life in such applications. Relying on this 
information, manufacturers should be able to make good selections of 
appropriate useful life categories for their engines. While these final 
rules leave that responsibility to the manufacturer, EPA expects to 
periodically review the manufacturers' decisions to assure ourselves 
that this regulation is being properly implemented and to determine 
whether modifications to these rules are appropriate. We note that this 
approach results in the same regulatory requirement as the State of 
California, eliminating any extra burden in this regard due to federal 
rules.
7. Emission Standards Feasibility at Longer Useful Life
    In response to the NPRM, some commenters suggested the standard 
should be proportionately higher for engines certified to higher useful 
life ages. The reasoning given was that since engines are expected to 
have emissions deterioration with accumulation of hours of use, the 
more the hours of use the higher the amount of deterioration and thus 
the higher should be the standards. However, this presumes no design 
difference between an engine intended for a useful life of, for 
example, 250 hours versus one designed

[[Page 15214]]

for a useful life of 1000 hours. This is not the case. Engines designed 
for higher useful life markets have superior design features (such as 
advance fuel metering designs including fuel injection) which should 
result in an ability to calibrate for lower emissions when the engine 
is new and also have a lower rate of emission deterioration during 
service accumulation. The combined impact of such trends will allow 
engines designed for a high useful life to meet the same standards as 
engines designed for a shorter useful life. Thus, these final rules 
adopt the same standard for all engines in a nonhandheld class 
regardless of their intended useful life.

B. Averaging, Banking, and Trading

    In this final rule, EPA is establishing a certification averaging, 
banking, and trading (ABT) program for Phase 2 nonroad SI nonhandheld 
engines at or below 19 kW. Averaging means the exchange of emission 
credits among engine families within a given engine manufacturer's 
product line. Averaging allows a manufacturer to certify one or more 
engine families to Family Emissions Limits (FELs) above the applicable 
emission standard. However, the increased emissions would have to be 
offset by one or more engine families certified to FELs below the same 
emission standard, such that the average emissions in a given model 
year from all of the manufacturer's families (weighted by various 
parameters including engine power, useful life, and number of engines 
produced) are at or below the level of the emission standard. Banking 
means the retention of emission credits by the engine manufacturer 
generating the credits for use in future model year averaging or 
trading. Trading means the exchange of emission credits between engine 
manufacturers which then can be used for averaging purposes, banked for 
future use, or traded to another engine manufacturer.
    The new program would be the first ABT program for nonroad SI 
engines, since the Phase 1 rule did not include an ABT program. EPA 
believes this new program is an important element in making the 
stringent Phase 2 emissions standards adopted in this final rule 
achievable with regard to technological feasibility, lead time, and 
cost. The new ABT program is intended to enhance the flexibility 
offered to engine manufacturers that will be needed in changing their 
entire product lines to meet the stringent HC+NOX standards 
being adopted. The ABT program also encourages the early introduction 
of cleaner engines certified under the Phase 2 requirements, thus 
securing earlier emission benefits.
    EPA believes that the new ABT program is consistent with the 
statutory requirements of section 213 of the Clean Air Act. Although 
the language of section 213 is silent on the issue of averaging, it 
allows EPA considerable discretion in determining what regulations are 
most appropriate for implementing section 213. The statute does not 
specify that a specific standard or technology must be implemented, and 
it requires EPA to consider costs, lead time, and other factors in 
making its determination of ``the greatest degree of emissions 
reduction achievable through the application of technology which the 
Administrator determines will be available.'' Section 213(a)(3) also 
indicates that EPA's regulations may apply to nonroad engine classes in 
the aggregate, and need not apply to each nonroad engine individually. 
Finally, EPA believes the ABT program is consistent with the statutory 
requirements of the Clean Air Act.
    The ABT program being finalized with today's action is similar in 
many ways to the program proposed for nonhandheld engines. Changes to 
the proposed program have been made in response to comments received on 
the proposal and the revised standards for Class I engines. The 
following discussion summarizes the main provisions of the ABT program 
being finalized and explains the main differences from the proposed ABT 
program.
    As noted above, the ABT program will apply to Phase 2 small SI 
nonhandheld engines. The ABT program will be available for 
HC+NOX emissions but will not be available for CO emissions. 
The ABT program will also apply to natural gas-fueled engines. All 
credits for natural gas-fueled engines will be determined against the 
applicable NMHC+NOX standards. In addition, manufacturers 
will be allowed to freely exchange NMHC+NOX credits from 
engines fueled by natural gas with HC+NOX credits from 
engines fueled by fuels other than natural gas in the ABT program.
    Cross-class exchange of ABT credits between nonhandheld engine 
families will not be restricted. EPA had proposed restricting using 
credits from Class I engines in determining compliance of Class II 
engines since the standard proposed for Class I engines was 
considerably less stringent than that proposed for Class II engines; it 
would have been quite easy to generate credits in Class I and use them 
to offset FELs above the standard for Class II engines. However, 
because of the tighter standards being adopted for Class I engines and 
the one restriction (discussed below) regarding generation of credits 
from Class II engines, EPA is far less concerned that credits from 
Class I could result in delays in technology improvement for Class II, 
and does not believe that any cross-class restrictions for nonhandheld 
engines are necessary. Therefore, all restrictions on cross-class 
credit exchanges for small SI nonhandheld engines have been eliminated.
    As part of the ABT program, EPA is setting upper limits on the FEL 
values that may be declared by manufacturers under the Phase 2 
standards. (The FEL is established by the manufacturer and takes the 
place of the emission standard for all compliance determinations.) The 
proposed FEL upper limits were based on the previous set of standards 
(i.e., the Phase 1 standards) for nonhandheld engines after accounting 
for in-use deterioration, which is typically how EPA establishes such 
limits. Therefore, EPA is adopting HC+NOX FEL upper limits 
of 32.2 g/kW-hr for Class I engines and 26.8 g/kW-hr for Class II 
engines as proposed, even though the HC+NOX emission 
standard adopted for Class I engines is more stringent than originally 
proposed.
    EPA is finalizing one limitation that applies to Class II engines 
only. As proposed, because of concerns over the potential to generate 
significant credits from existing Phase 1 engines against the Phase 2 
standards, EPA is requiring that a manufacturer's production-weighted 
average of HC+NOX FELs for Class II engines may not exceed 
13.6 g/kW-hr in model year 2005, 13.1 g/kW-hr in model year 2006, and 
12.6 g/kW-hr in model years 2007 and later. This calculation is based 
strictly on the FELs and does not allow the manufacturer to factor in 
the use of credits, as is done when a manufacturer demonstrates 
compliance with the HC+NOX standard of 12.1 g/kW-hr. EPA 
believes this approach will ensure that Class II engines are converted 
to OHV or OHV-comparable technology in a reasonable time frame while 
still encouraging the early introduction of cleaner, more durable 
technology and ensuring that manufacturers have the flexibility 
provided by an ABT program to comply with the new standards. For Class 
I, EPA does not have a similar concern since the standards being 
adopted are expected to provide only limited opportunity to generate 
large amounts of credits from existing engines.
    All credits will be calculated based on the difference between the 
manufacturer-established FEL and the Phase 2 HC+NOX standard 
for the

[[Page 15215]]

applicable model year using the following equation.

Credits=(Standard--FEL) x Production x Power x Useful life x Load 
Factor

    At the time of certification, manufacturers must also supply 
information to EPA on the terms used in the above noted equation. 
``Production'' represents the manufacturer's U.S. production of engines 
for the given engine family, excluding exported engines and engines 
that will be sold in California. ``Power'' represents the maximum modal 
power of the certification test engine over the certification test 
cycle. ``Useful Life'' is the regulatory useful life established by the 
manufacturer for the given engine family. ``Load Factor'' is a constant 
that is dependent on the test cycle over which the engine is certified.
    Under the new ABT program for small SI nonhandheld engines, credits 
will have an unlimited credit life and will not be discounted in any 
manner.
    The equation being adopted for credit calculation in today's action 
has been revised from the proposal in two ways. First, EPA proposed 
that manufacturers use the 49-state sales of an engine family instead 
of 49-state production levels. However, because of the non-integrated 
nature of the nonroad small SI market, EPA believes it would be very 
difficult for manufacturers to determine actual sales. EPA believes 
that production levels should provide an appropriately accurate 
estimate of sales. Second, EPA proposed that manufacturers use a sales-
weighted average maximum modal power for all of the engine 
configurations within an engine family as opposed to the maximum modal 
power of the certification test engine. Because a large fraction of 
engine families include multiple configurations, EPA believes it would 
create unnecessary burden on engine manufacturers to determine the 
maximum modal power of every engine configuration. Using a consistent 
approach for estimating the maximum modal power based on the 
certification test engine simplifies the program for manufacturers. At 
the same time, it should not have any significant impact on the 
relative number of credits generated under the program from engines 
with FELs below the standards versus engines with FELs above the 
standards.
    Under the new ABT program, manufacturers of small SI nonhandheld 
engines will be allowed to use portions of the ABT program prior to 
implementation of the Phase 2 standards to provide an incentive to 
accelerate introduction of cleaner technologies into the marketplace. 
The Agency believes that making bankable credits available prior to the 
effective date of the new standards will reward those manufacturers who 
take on the responsibility of complying with the Phase 2 requirements 
sooner than required and will result in early environmental benefits. 
Under the early banking provisions for small SI engines, manufacturers 
will be allowed to begin using the averaging and banking portions of 
the ABT program beginning with the 1999 model year for engines 
certified to the Phase 2 requirements and produced after the effective 
date of this action. However, as was the case with certain provisions 
included in the proposal, the ability of a manufacturer to generate 
early credits also is being limited by the regulatory provisions being 
adopted today. The protocols adopted in these regulations assure that a 
manufacturer will only generate credits from engines cleaner than those 
otherwise anticipated to be available. In this way, manufacturers are 
rewarded for the extra effort of designing and producing lower emitting 
engines and the environment benefits from this extra effort. The 
regulatory provisions adopted today assure that the amount of credits 
received for the early introduction of a low emitting engine are 
appropriate considering both the current designs of engines and the 
changes in emission performance necessary to meet the Phase 2 standards 
as well as the degree to which the industry and consumers would benefit 
from the opportunity to generate early credits.
    For Class I and Class II engines, manufacturers may generate early 
credits to be used for averaging or banking purposes from only those 
engine families certified with FELs at or below the final Phase 2 
standard (i.e., 16.1 g/kW-hr HC+NOX for Class I engines, and 
12.1 g/kW-hr HC+NOX for Class II engines (or 14.8 g/kW-hr 
NMHC+NOX for Class I and 11.3 g/kW-hr NMHC+NOX 
for Class II natural gas-fueled engines)). As proposed, all early 
credits for Class II engines will be calculated against the initial 
Phase 2 HC+NOX standard of 18.0 g/kW-hr. For Class I 
engines, because the Phase 2 standards initially only apply to new 
engine family designs produced for the first time on or after August 1, 
2003, EPA will allow manufacturers to generate early credits from any 
other Class I engines (i.e., those produced before August 1, 2003) if 
they are certified with an FEL at or below 16.1 g/kW-hr; the amount of 
the credit will be determined by the difference between the engine 
family's FEL and a HC+NOX level of 20.5 g/kW-hr. The 
manufacturer may continue generating early credits from such Class I 
engine families for as long as it continues producing the engine family 
until August 1, 2007 since, at that time, all Class I engines families 
are subject to the Phase 2 standards. The 20.5 g/kW-hr level is based 
on the same assumption as the initial Class II phase-in standard that 
half of the engines are at the Phase 1 Class I standard and the other 
half are at the Phase 2 Class I standard adopted today. (Any Class I 
engine family for which a manufacturer wishes to start generating 
credits for the first time after August 1, 2003, will not be eligible 
for early credits. Such families will be eligible to generate credits 
under the standard provisions of the ABT program against the Phase 2 
standard of 16.1 g/kW-hr.)
    All engines for which the manufacturer generates early credits must 
comply with all requirements for Phase 2 engines (e.g., the Production 
Line Testing program requirements). Manufacturers of nonhandheld 
engines will not be allowed to trade their early engine credits to 
other manufacturers until the first effective model year of the Phase 2 
standards for the applicable engine class.
    To be eligible for early credits for an engine family, EPA had 
originally proposed that a nonhandheld engine manufacturer would have 
to certify and comply with the initial Phase 2 standards for its entire 
production line in the class containing that family. EPA proposed this 
requirement as a means of limiting the ability of the manufacturer to 
generate inappropriately large amounts of early credits. However, 
because EPA is adopting significantly tighter standards for Class I 
engines than originally proposed, the ability of the manufacturer of 
Class I engines to easily generate large amounts of early credits is 
greatly diminished. Additionally, EPA believes all current 
manufacturers of Class II engines would meet this requirement with 
their currently certified Phase 1 engines, in which case the proposed 
restriction would have no effect. Therefore, EPA is not adopting such a 
requirement in today's action.
    In establishing the set of declining standards for Class II 
engines, EPA assumed a certain phase-in of OHV or comparably clean and 
durable technology during the transition years. In order to encourage 
manufacturers to meet the assumed phase-in schedule, EPA proposed to 
limit the use of credits in two situations that were dependent on 
whether the manufacturer met the

[[Page 15216]]

assumed OHV phase in schedule. First, manufacturers would only be 
allowed to trade credits from Class II engines to Class I engines if 
they met the assumed phase-in schedule. Second, manufacturers would 
only be allowed to use early banked Class II credits beginning in 2001 
or later if they met the OHV or comparably clean engine production 
phase-in schedule estimates for that model year. Because EPA is 
finalizing significantly tighter Class I standards and because EPA is 
adopting caps on the long term levels of FELs, EPA does not believe 
that the proposed limits on the use of credits which were tied to 
whether a manufacturer was meeting the assumed OHV technology phase in 
are necessary. These aspects of the final rule should eliminate EPA's 
concern that introduction of OHV or comparably clean engine technology 
could be delayed. Therefore, EPA is not finalizing the limits on the 
use of credits that were dependent on a manufacturer showing compliance 
with the assumed OHV phase-in schedule for Class II engines.
    As discussed in section II.E. of today's notice, EPA is finalizing 
several compliance flexibility provisions for engine manufacturers and 
equipment manufacturers that allow the limited use of Phase 1 engines 
in the Phase 2 time frame. Phase 1 engines sold by engine manufacturers 
under the flexibility provisions will be excluded from the ABT program. 
In other words, engine manufacturers will not have to use credits to 
certify Phase 1 engines used for the flexibility provisions even though 
they would likely exceed the newly adopted Phase 2 standards.
    Another flexibility provision described in section II.E. of today's 
notice allows engine manufacturers to certify Class II side-valve 
engine families with annual sales of 1,000 units or less to an 
HC+NOX cap of 24.0 g/kW-hr starting with the 2010 model 
year. For such engine families, the ABT program allows manufacturers to 
exclude such engine families for the 2010 model year and later. As 
noted in section II.E., EPA is dropping the portion of the proposed 
flexibility for small volume Class II SV engine families for model 
years 2001 through 2009 that would have allowed them to meet the 24.0 
g/kW-hr HC plus NOX level and be included in the ABT program 
(for model years 2001 through 2004) if they exceeded this level. In its 
place, the Agency is adopting a flexibility that allows small volume 
engine families to meet the Phase 1 requirements for model years 2001 
through 2009. Class II SV engine families taking advantage of this 
flexibility during the 2001 to 2009 model years would be excluded from 
the ABT program.
    As noted elsewhere in today's notice, EPA is adopting a number of 
provisions that address post-certification compliance aspects of the 
new standards for nonhandheld engines. In one specific case, EPA is 
allowing manufacturers to use credits from the certification ABT 
program to address excess emissions situations determined after the 
time of certification. As noted in the discussion on compliance, EPA 
does not believe that the typical type of enforcement action that could 
be taken when a substantial nonconformity is identified (i.e., an 
engine family recall order) would generally be workable for small SI 
engines given the nature of the market. Instead, for the purposes of 
implementing the PLT program, EPA is adopting provisions to allow 
manufacturers to use engine certification ABT credits to offset limited 
emission performance shortfalls for past production of engines 
determined through the PLT program as described in section II.D. of 
today's notice. Under the adopted provisions, manufacturers are allowed 
to use all engine credits available to them to offset such emission 
performance shortfalls without any cross-class restrictions.
    EPA is not allowing manufacturers to automatically use ABT credits 
to remedy a past production nonconformance situation in the Selective 
Enforcement Audit (SEA) program. As described in today's action, EPA 
expects to primarily rely on the PLT program to monitor the emissions 
performance of production engines. However, EPA expects that SEAs may 
be conducted in certain cases. Therefore, as discussed in section 
II.D., if EPA determines that an engine family is not complying with 
the standards as the result of an SEA, EPA plans to work with the 
manufacturer on a case-by-case basis to determine an appropriate method 
for dealing with the nonconformity. The option(s) agreed upon by EPA 
and the engine manufacturer may, or may not, include the use of ABT 
credits to make up for any ``lost'' emission benefits uncovered by the 
SEA.

C. Test Procedures

    The test procedure being adopted for the Phase 2 nonhandheld 
program is the steady state procedure currently used in Phase 1, with 
several modifications. These test procedure modifications were proposed 
for the reasons contained in the proposal (63 FR at 3976-77). No 
adverse comment was received on these proposals. First, engines 
equipped with an engine speed governor must use the governor to control 
engine speed during the test cycle modes with the exception of Mode 1 
or Mode 6. Second, the proposed test procedure for NMHC is being 
adopted. This test procedure will allow proper measurement of methane 
emissions from spark-ignition engines and permit appropriate 
determination of the NMHC emission for natural gas-fueled engines. 
Additionally, several cycle operational modifications have also been 
adopted as recommended by EMA (see section 4 of the Summary and 
Analysis of Comments).
    Finally, one comment was received in regards to special test 
procedures accepted by EPA during the Phase 1 rulemaking and their 
continued use into Phase 2. EPA will continue to accept special test 
procedures during Phase 2 (including those approved under Phase 1) as 
long as they continue to result in emission compliance determinations 
expected to be equivalent to those resulting from use of the Phase 2 
test procedures. Under this approach, manufacturers who test their 
engines using fuel satisfying California's requirements are allowed, as 
under Phase 1 rules, to adjust their test results in a manner which EPA 
determines would yield the same emission levels had the engines been 
tested using the test fuels meeting the specifications in the federal 
regulations.

D. Compliance Program

    The compliance program being adopted today for Phase 2 nonhandheld 
engines is comprised of three parts: a pre-production certification 
program during which the manufacturer evaluates the expected emission 
performance of the engine design including the durability of that 
emission performance; an assembly line test program which samples 
product coming off the assembly line to assure the design as certified 
continues to have acceptable emission performance when put into mass 
production; and a voluntary in-use test program during which 
participating manufacturers evaluate the in-use emission performance of 
their product under typical operating conditions. Standards have been 
set for each class. The manufacturer divides its product offering based 
upon specific design criteria which have a potential for significantly 
different emission performance; these subdivisions are called engine 
families. Each engine family is required to meet the standard 
applicable for the class in which that engine resides unless the 
manufacturer chooses to participate in the ABT program also being 
adopted today.

[[Page 15217]]

    The ABT program has already been described (see section II.B. for 
discussion of the ABT program). The other provisions of the compliance 
program are explained in more detail below. In all cases, to the best 
of EPA's knowledge, the requirements of this federal compliance program 
are sufficiently similar to the requirements of the California Air 
Resources Board program for these engines such that for engine families 
sold in both the State of California and federally, the engines 
selected for testing, the test procedures under which they are tested 
and the data and other information required to be supplied by 
regulations will be the same under both programs. Thus, we expect that 
a manufacturer will compile one application for certification 
satisfying the information needs of both programs and thus saving the 
manufacturer time and expense. Similarly, the EPA and California 
compliance programs are expected to share information such that any 
production line testing or in-use testing conducted for one program 
will satisfy the similar needs of the other program, again minimizing 
the burden on the manufacturers.
1. Certification
    This section addresses the certification program finalized today 
for nonhandheld engine manufacturers. The proposed rule discussed the 
certification program at 63 FR 3981. Several comments were submitted in 
response to the proposal. EPA addresses these comments and provides 
detailed explanations of why the Agency retained provisions as proposed 
or changed the proposed provisions in the Summary and Analysis of 
Comments document at section 5. The certification process as required 
in the Act is an annual process and requires that manufacturers 
demonstrate that regulated engines will meet appropriate standards 
throughout their useful lives. The Act prohibits the sale, importation 
or introduction into commerce of regulated engines when not covered by 
a certificate.
    The proposal would have required nonhandheld engine manufacturers 
to estimate the in-use deterioration of their engine families by 
different methods depending on the type of engine technology (see 63 FR 
3981). For manufacturers of nonhandheld side valve (SV) engines or 
engines with aftertreatment (i.e., catalysts), the proposal would have 
required that one engine from each engine family be either field aged 
or bench aged to its full useful life to demonstrate compliance. If a 
manufacturer were to choose the bench aging option, the emission 
results would have had to be adjusted using the field/bench adjustment 
program. The field/bench adjustment program was described in the 
proposal at 63 FR 3977. These results, either the field aged or 
adjusted bench aged, would have been used to calculate a deterioration 
factor which would then be applied to the results of testing done on 
new engines in the certification, PLT or SEA programs. For 
manufacturers of nonhandheld engines with overhead valve technology, 
the proposal would have allowed manufacturers to use an industry-wide 
assigned deterioration factor for certification. Manufacturers of 
overhead valve nonhandheld engines would have also been allowed under 
the proposal to establish their own deterioration factors by field 
aging a minimum of three engines per family to their full useful lives, 
provided they established deterioration factors for all of their engine 
families within a useful life category. Manufacturers of overhead valve 
engines would have been required to participate in an industry-wide 
Field Durability and In-use Performance Demonstration Program. This 
program is described in the proposal at 63 FR 3989 and its primary 
purpose was to verify whether the industry-wide assigned deterioration 
factors were appropriate.
    EPA received a significant number of comments regarding the 
complexity of the proposed certification program, the inappropriateness 
of an assigned deterioration factor for all useful life categories for 
nonhandheld engines with overhead valve technology, the prohibitive 
expense of field aging engines, and the advantages of harmonizing EPA's 
final certification program with that of the California Air Resources 
Board. EPA now believes the complexity of the proposed program would 
make it difficult to manage and organize the certification program for 
both industry and the Agency. EPA also believes that harmonizing its 
programs with the California Air Resources Board will allow the 
industry to more efficiently comply with the final emission standards 
and requirements. Additionally, EPA is concerned the field/bench 
adjustment program may not be statistically reliable enough to 
establish appropriate deterioration factors (in an effort to control 
the cost of this program, only a minimum amount of data was proposed to 
be required; this small amount of data hurts the statistical 
reliability of any resulting decision).
    Based on comments received and EPA's further evaluation of the 
proposed certification program, EPA is finalizing the certification 
program with the following significant changes to the proposal. These 
changes, and other less significant changes, are also discussed in the 
Summary and Analysis of Comments document. In today's final rule, EPA 
is adopting a significantly less complex certification program that 
harmonizes with the certification program adopted by the California Air 
Resources Board as part of its Tier 2 regulations. In this program, 
manufacturers of nonhandheld engines of all technologies are required 
to demonstrate that their regulated engines comply with appropriate 
emission standards throughout the engines' useful lives. To account for 
emission deterioration over time, manufacturers must establish 
deterioration factors for each regulated pollutant for each engine 
family. The final rule allows manufacturers to establish deterioration 
factors by using bench aging procedures which appropriately predict the 
in-use emission deterioration expected over the useful life of an 
engine or an in-use evaluation which directly accounts for this 
deterioration. As is the case with many EPA mobile source regulations, 
multiplicative deterioration factors may not be less than one. 
Additionally, where appropriate and with suitable justification, 
deterioration factors may be carried over from one model year to 
another and from one engine family to another.
    Today's final rule also provides flexibility for small volume 
engine manufacturers and small volume engine families, allowing 
manufacturers to optionally use assigned deterioration factors 
established by the Agency. The deterioration factors, either assigned 
or generated, are used to determine whether an engine family complies 
with each emission standard in the certification program, the 
production line testing program, and the Selective Enforcement Auditing 
program.
    As in Phase 1, manufacturers can submit certification applications 
to the Agency electronically, either on a computer disk or through 
electronic mail, making the certification application process efficient 
for both manufacturers and the Agency. Also, EPA and the California Air 
Resources Board will have a common application format allowing 
manufacturers to more easily apply for certification.
2. Production Line Testing--Cumulative Summation Procedure
    This section addresses the production line testing (PLT) program 
finalized today for nonhandheld engine manufacturers. The proposed rule 
discussed the PLT program at 63 FR 3984-89. Several comments were

[[Page 15218]]

submitted in response to the proposal. EPA addresses these comments and 
provides detailed explanations of why the Agency retained provisions as 
proposed or changed the proposed provisions in the Summary and Analysis 
of Comments document at section 5. The PLT program adopted in today's 
rule requires manufacturers to conduct manufacturer-run testing 
programs using the Cumulative Summation Procedure (CumSum).3 
EPA is finalizing the program as proposed with the following 
significant modifications. These changes, and other less significant 
changes, are also discussed in the Summary and Analysis document. The 
proposal would have required manufacturers of handheld engine families 
to participate in the PLT program while allowing nonhandheld 
manufacturers the option of participating in the PLT program or 
electing to remain eligible for traditional Selective Enforcement 
Audits. EPA received comments both in favor of finalizing this option 
for nonhandheld manufacturers and removing this option and requiring 
all manufacturers, handheld and nonhandheld, to participate in the PLT 
program. Because the SEA program can only provide a single snapshot of 
a manufacturer's production, while the PLT program has the ability to 
evaluate a manufacturer's production throughout the model year, EPA 
believes that the PLT program provides a better evaluation of a 
manufacturer's production than the SEA program. Further, the PLT 
program does not disrupt a manufacturer's normal day to day activities. 
Therefore, the proposed option for nonhandheld manufacturers to elect 
to continue to rely on Selective Enforcement Audits is not being 
finalized, and nonhandheld manufacturers are required to conduct PLT 
programs using the CumSum approach in today's final rule.
---------------------------------------------------------------------------

    \3\ The CumSum procedure has been promulgated for marine engines 
in EPA's spark-ignition marine rule at 40 CFR Part 91 (61 FR 52088, 
October 4, 1996). In this section, ``PLT'' refers to the 
manufacturer-run CumSum procedure. ``PLT'' does not include 
Selective Enforcement Auditing (SEA), which is addressed separately 
in Section II.D.3 of this preamble.
---------------------------------------------------------------------------

    The PLT proposal also included an opportunity for the Agency to 
approve alternative methods to the CumSum approach if those alternative 
methods met certain statistical criteria, including: the alternative 
methods produce substantially the same levels of producer and consumer 
risk as CumSum, provide for continuous sampling, and include an 
appropriate decision mechanism for determining noncompliance. EPA 
received comments in support of the proposal to allow manufacturers to 
submit alternative test schemes for PLT, but also suggesting that the 
above criteria were too restrictive and would result in a program so 
closely aligned with CumSum that, by implication, the manufacturer 
would have no reason to pursue the alternative. Therefore, these 
commenters recommended EPA should either make the criteria less 
restrictive, or remove the specific criteria altogether. EPA believes 
that the proposed criteria would be crucial to developing any 
alternative production line testing program, and that the Agency could 
not approve an alternative program with less restrictive criteria. EPA 
also believes the CumSum procedure is an accurate and appropriate 
production line testing program for those manufacturers covered by the 
production line testing requirements. Therefore, in response to 
industry comments suggesting that there would be little utility in 
being able to seek approval of alternate methods under EPA's proposed 
criteria, EPA is not adopting the proposed option that would have 
allowed manufacturers to apply for alternative PLT methods.
    The CumSum program, as finalized, requires manufacturers to conduct 
testing on each of their engine families (except where relieved of this 
requirement under provisions granting small volume flexibility). The 
maximum sample size that could be required for each engine family is 30 
engines or 1 percent of a family's projected production, and the number 
of tests ultimately required is determined by the results of the 
testing. EPA and the California ARB have harmonized their PLT programs 
and both will require manufacturers to use the CumSum procedure for 
testing production engines. Manufacturers will be able to submit PLT 
reports to the Agency electronically, either on a computer disk or 
through electronic mail, which will save both the industry and EPA time 
and money.
    As mentioned in the discussion on ABT, above, manufacturers may, 
for a limited amount of production, use ABT credits to offset the 
estimated excess emission of previously produced noncomplying engine 
designs as determined in the PLT program. For future production, the 
manufacturer would be expected to correct the noncompliance problem 
causing the emission noncompliance either by changing the production 
process, changing the design (which would require recertification) or 
raising the FEL to compensate for the higher emissions (also requiring 
recertification). In the event a manufacturer raises an FEL as a result 
of a PLT failure, it may do so for future production as well as past 
production. EPA expects few instances in which the manufacturer will 
correct a PLT failure through raising the FEL since that would imply 
the manufacturer incorrectly set the initial FEL levels for that 
family; frequent use of this remedy would suggest the manufacturer was 
incapable of correctly setting the FELs for its product, in which case 
EPA would have to reconsider allowing a manufacturer to participate in 
the ABT program at its option. It should also be noted that, as 
proposed, compliance with the standards will be required of every 
covered engine. Thus, every engine that failed a PLT rest would be 
considered in noncompliance with the standards and must be brought into 
compliance. EPA's rules allowing the use of the average of tests to 
determine compliance with the PLT program is intended only as a tool to 
decide when it is appropriate to suspend or revoke the certificate of 
conformity for that engine family, and is not meant to imply that not 
all engines have to comply with the standards or applicable FEL.
    Under the flexibilities section, we also note that small volume 
manufacturers and small volume engine families need not be included in 
the PLT program at the manufacturer's option. Finally, EPA proposed 
that exceptionally low emitting engines could also be exempted from PLT 
testing at the manufacturer's option, however, they would also not be 
able to generate ABT credits. Manufacturers have indicated that they 
would much rather have the credits available from a low emitting engine 
design than the alternative of reduced PLT testing. Therefore, this 
proposed option has not been adopted.
3. Selective Enforcement Auditing
    The proposal discussed Selective Enforcement Auditing (SEA) at 63 
FR 3987-88. The SEA program is not the Agency's preferred production 
line testing program for small nonhandheld engines, and the CumSum 
approach is being finalized as the PLT program that manufacturers will 
conduct. Specific comments submitted regarding SEA, and EPA's 
responses, are discussed in the Summary and Analysis of Comments 
document at section 5. The SEA program is included in today's final 
rule as a ``backstop'' to the CumSum program and would be used in cases 
where there is evidence of improper testing or of a nonconformity that 
is not being addressed by the CumSum program. The SEA program, as 
finalized, will also apply to engine

[[Page 15219]]

families optionally certified to the small volume manufacturer 
provisions and the small volume engine family provisions, in cases 
where manufacturers elect not to conduct PLT testing for such families. 
However, as for other families, EPA does not expect families certified 
under the small volume provisions will be routinely tested through an 
SEA program.
    In contrast to the PLT program, manufacturers who fail an SEA will 
not have the automatic option of using ABT credits to remedy 
noncomplying engines already introduced into commerce. The PLT program 
was designed to allow a manufacturer to continually evaluate its entire 
production and quickly respond to the results throughout the model 
year. EPA believes that allowing a manufacturer to use credits, for a 
limited amount of engines, to remedy past production emission failures 
is consistent with the continual evaluation provided by the PLT 
program. The SEA program, in contrast, is designed to be a one time, 
unannounced inspection of a manufacturer's production line with 
definitive passing or failing results. EPA believes that is this type 
of a compliance program, where at most only a few engine families might 
be tested each year, manufacturers must place more emphasis on the 
transition from certification to the production line and must set 
initial FELs accurately. To encourage accurate FEL settings at the time 
of certification, the SEA program does not allow manufacturers to 
automatically remedy SEA failures by retroactively adjusting FELs. 
Remedies for the SEA failure are best determined on a case-by-case 
basis which might include the use of ABT credits if agreeable to both 
EPA and the manufacturers.
4. Voluntary In-Use Testing
    This section addresses the voluntary in-use testing program 
finalized today for nonhandheld engine manufacturers. The proposed rule 
discussed the in-use testing program at 63 FR 3989. Several comments 
were submitted in response to the proposal. EPA addresses these 
comments and provides detailed explanations of why the Agency retained 
provisions as proposed or changed the proposed provisions in the 
Summary and Analysis of Comments document at section 5. The proposal 
would have required manufacturers of nonhandheld engines manufactured 
with overhead valve technology to conduct up to a total of 24 emissions 
tests on engines that were field aged to their full useful lives. The 
primary function of these in-use tests was to verify that the industry-
wide deterioration factors predicted for the overhead valve engines 
were appropriate. Based on industry comments regarding the prohibitive 
expense of conducting field aged in-use tests, EPA is not adopting the 
proposed in-use programs in today's rule.
    However, EPA still desires meaningful in-use data so that it can 
more appropriately assess the actual emissions inventory of this 
industry. Therefore, EPA is adopting a voluntary in-use testing 
program. The voluntary in-use testing program gives nonhandheld engine 
manufacturers the option of using a portion of their PLT resources to 
generate field aged emissions data. At the start of each model year, 
manufacturers may elect to place up to 20 percent of their engine 
families in this voluntary program. For those families in this program, 
manufacturers would not be required to conduct PLT for two model years, 
the current year and the subsequent year (the California Air Resources 
Board has indicated that they would also exempt families in this in-use 
testing program from their PLT requirements). Instead, manufacturers 
would place a minimum of three randomly selected production engines in 
existing consumer owned, independently owned, or manufacturer owned 
fleets. Manufacturers would install the engines in equipment that 
represents at least 50 percent of the production for an engine family 
and age the engine/equipment combination in actual field conditions to 
at least 75 percent of each engine's useful life. Once an engine in 
this program has been sufficiently field aged, the manufacturer would 
conduct an emissions test on that engine. Manufacturers would have 
three calendar years from the date they notified the Agency of their 
intent to include a family in the program to complete testing.
    While this compliance program will not require the manufacturer to 
conduct any in-use testing to verify continued satisfactory emission 
performance in the hands of typical consumers, an optional program for 
such in-use testing is being provided. EPA believes it is important for 
manufacturers to conduct in-use testing to assure the success of their 
designs and to factor back into their design and/or production process 
any information suggesting emission problems in the field. If any 
information derived from this program indicates a substantial in-use 
emission performance problem, EPA anticipates the manufacturer will 
seek to determine the nature of the emission performance problem and 
what corrective actions might be appropriate. EPA will offer its 
assistance in analysis of the reasons for unexpectedly high in-use 
emission performance and what actions might be appropriate for reducing 
these high emissions. Whether or not a manufacturer chooses to conduct 
such a voluntary in-use testing program, EPA may choose to conduct its 
own in-use compliance program. If EPA were to determine that an in-use 
noncompliance investigation was appropriate, the Agency expects it 
would conduct its own in-use testing program, separate from this 
voluntary manufacturer testing program, to determine whether a specific 
class or category of engines is complying with applicable in-use 
standards.
    Although EPA is not finalizing the mandatory in-use testing 
programs proposed, the Agency is finalizing the in-use noncompliance 
provisions as proposed (see 63 FR 4026: Subpart I 90.808). Under these 
provisions, if the Agency determines that a substantial number of 
engines within an engine family, although properly used and maintained, 
do not conform to the appropriate emission standards, the manufacturer 
will be required to remedy the problem and conduct a recall of the 
noncomplying engine family as required by CAA section 207. However, we 
also recognize the practical difficulty in implementing an effective 
recall program as it would likely be impossible to properly identify 
the owners of equipment using small engines (there is no national 
requirement to register the ownership of such equipment), and it is 
also highly questionable whether owners or operators of such equipment 
would respond to an emission-related recall notice. Therefore, under 
the final program EPA's intent is to allow manufacturers to nominate 
alternative remedial measures to address potential non-compliance 
situations, as the proposed rulemaking notice discussed (see 63 FR 
3992). EPA expects that, if successfully implemented, the use of these 
alternatives should obviate the need for the Agency to make findings of 
substantial nonconformity. In evaluating these alternatives, EPA would 
consider those alternatives which (1) represent a new initiative that 
the manufacturer was not otherwise planning to perform at that time and 
that has a nexus to the emission problem demonstrated by the subject 
engine family; (2) cost substantially more than foregone compliance 
costs and consider the time value of the foregone compliance costs and 
the foregone environmental benefit of the subject family; (3) offset at 
least

[[Page 15220]]

100 percent of the exceedance of the standard or FEL; and (4) are able 
to be implemented effectively and expeditiously and completed in a 
reasonable time. These criteria would function as ground rules for 
evaluating projects to determine whether their nature and burden is 
appropriate to remedy the environmental impact of the nonconformity 
while providing assurance to the manufacturer that EPA would not 
require excessive projects.
    In addition to being evaluated according to the above criteria, 
alternatives would be subject to a cost cap. EPA would apply a cost cap 
of 75 percent above and beyond the foregone costs adjusted to present 
value, provided the manufacturer can appropriately itemize and justify 
these costs. EPA believes that this is an appropriate value which is 
both ``substantial'' and sufficient to encourage manufacturers to 
produce emission durable engines.
    Given the important role that alternative remedial measures may 
play, EPA intends to develop guidance regarding alternative remedial 
measures. EPA will seek the input of the regulated industry, as well as 
other concerned stakeholders, in developing such guidance.

E. Flexibilities

    In the NPRM, EPA proposed a number of flexibilities to ease the 
transition from the Phase 1 to the Phase 2 program, to ensure that the 
Phase 2 standards are cost-effective and achievable, and to reduce the 
compliance burden while maintaining the environmental benefits of the 
rule. Several comments were received on the flexibilities proposed, 
some supporting the proposals and others offering recommended changes. 
In addition, the need for modifications to the proposed set of 
flexibilities evolved out of the investigations which led to other 
changes to the proposal including the adoption of more stringent Class 
I standards than were proposed. The following is a summary of the 
revised flexibilities for this rulemaking.
1. Carry-Over Certification
    Consistent with other mobile source emission certification 
programs, EPA will allow a manufacturer to use test data and other 
relevant information from a previous model year certification program 
to satisfy the same requirements for the existing model year 
certification program as long as the data and other information are 
still valid. Such ``carry-over'' of data and information is common in 
mobile source programs where the engine family being certified in the 
current model year is identical to the engine family previously 
certified.
2. Small Volume Engine Manufacturer Definition
    EPA proposed a number of flexibilities for engine manufacturers 
defined as small volume engine manufacturers; these flexibilities are 
identified in section II.E.4, below. While supporting these 
flexibilities, EMA and OPEI, on behalf of their members, commented that 
revisions to the definitions of small volume equipment manufacturer and 
small volume engine manufacturer were appropriate to protect the 
interests of engine manufacturers who would or would not meet the 
proposed definition. Specifically, EMA and OPEI recommended eliminating 
the ``small engine manufacturer'' definition altogether, and relying 
instead on an expanded definition of small volume engine family to meet 
the goal of assuring an adequate supply of engines for niche equipment 
applications, especially as produced by small volume equipment 
manufacturers. According to EMA and OPEI, providing any additional 
relief to small volume engine manufacturers would put these 
manufacturers at an unfair competitive advantage over engine 
manufacturers whose production volumes were too large to qualify for 
this relief.
    The issue of the small volume engine family definition is discussed 
in the subsequent section. Regarding the availability of flexibilities 
targeted specifically for the small volume engine manufacturers, EPA 
remains convinced that the relatively small technical and production 
resources available to the smallest engine manufacturers makes their 
job of complying with Phase 2 emission standards significantly more 
difficult than for larger manufacturers with comparably greater 
technical and financial resources available to apply toward solving 
this problem. Consequently, without some additional flexibilities under 
these regulations, the small volume manufacturer would be much less 
likely to produce engines complying with the Phase 2 regulations or, if 
able to make the necessary design changes, would only be able to spread 
the cost of such changes over considerably fewer production engines. In 
such a case, not only would small volume engine manufacturers be 
financially stressed compared to their larger competitors, but they 
might need to pass along to their consumers a higher per unit price 
increase in an attempt to recover at least part of their cost of 
compliance. Higher price increases would make their product less 
competitive. In the extreme, either due to pricing pressures or simply 
due to the limitations in technical capability, without additional 
flexibilities, small volume engine manufacturers might not be able to 
continue providing engines to their customers. The engine manufacturers 
could go out of business and their customers could suffer from a lack 
of engine supply. This potential for loss in engine availability would 
more likely fall on the shoulders of small equipment manufacturers who 
provide niche products and who are the more typical customers of the 
small volume engine manufacturers.
    EPA continues to believe flexibilities aimed at the small volume 
engine manufacturer are appropriate and is retaining the definition of 
small volume engine manufacturers as proposed. As proposed, to qualify 
as a small volume engine manufacturer a nonhandheld engine manufacturer 
may produce no more than 10,000 engines annually.
3. Small Volume Engine Family Definition
    EPA proposed that manufacturers of small volume nonhandheld engine 
families (those families with annual production of 1000 units or less) 
be provided cost saving flexibilities. These flexibilities are 
described in section II.E.4. Without such flexibilities, the cost and 
other difficulties of modifying these small volume engine families to 
comply with the Phase 2 standards may be difficult enough that the 
manufacturer might either be unable to complete the modification of the 
engine design in time or may choose for economic reasons to discontinue 
production of the small volume engine family. The impact of such a 
scenario would of course fall on the engine manufacturer through 
reduced engine sales, but would also fall perhaps even more 
significantly on small volume equipment applications, the most typical 
use for these small volume engine families. Due to the unique character 
of these small volume equipment applications, it is quite possible the 
equipment manufacturer might not be able to find a suitable replacement 
engine. In such case, the equipment manufacturer would also be 
significantly impacted through lost sales, and consumers would be 
harmed through the loss in availability of the equipment.
    As noted in the prior section, EMA and OPEI commented that EPA 
should redefine the small volume family production volume limit from 
the 1000 unit maximum proposed for nonhandheld engine families to a 
level of less than 5,000 units. Tecumseh

[[Page 15221]]

requested the addition of an option of 1 percent of a manufacturer's 
total production as the upper limit for determining small volume engine 
families.
    EPA has re-examined the production limits for small volume engine 
families and has determined that the interests of preserving the 
availability of small volume families would be better served by raising 
the small volume engine family definition to 5,000 for nonhandheld 
engine families. A larger number of niche equipment applications will 
now be served and the risk of loss in engine availability reduced. At 
the same time, the potential for adverse emission impacts remains very 
small. Given this provision 99 percent of nonhandheld engines will 
still be covered by the full compliance program and subject to the 
earliest practical implementation of the rule.
    The recommendation by Tecumseh to base the small volume definition 
optionally on a varying scale equal to one percent (1 percent) of the 
engine manufacturer's sales volume is rejected as departing from the 
basis that absolute size of the family dictates whether it is a niche 
application. Furthermore, a small volume engine definition based on the 
total production volume of the manufacturer would disproportionately 
benefit the largest manufacturers who, in all other respects, tend to 
be in the best position to comply with the Phase 2 regulations.
4. Flexibilities for Small Volume Engine Families and Small Volume 
Engine Manufacturers
    The flexibilities proposed for small volume engine manufacturers 
and small volume engine families received general support in comments 
to the NPRM. One modification to the proposed flexibilities is being 
adopted. To provide additional time to convert the many small volume 
engine families to designs complying with the Phase 2 standards and to 
provide additional lead time for small volume manufacturers, EPA is now 
adopting a provision that would allow the use of Phase 1 engines 
through model year 2009. Therefore, all manufacturers will have until 
2010 to certify small volume nonhandheld engine families to Phase 2 
requirements. Similarly, small volume engine manufacturers will have 
until 2010 to certify all of their Class I and Class II engine families 
to Phase 2 requirements.
    EPA proposed allowing small volume engine families and small volume 
engine manufacturers to continue producing Phase 1 engines until the 
last year of the phase in of the Phase 2 standard applicable to the 
engine's class. However, since the Class I standards being adopted 
today are significantly more stringent than the standards upon which 
this proposed flexibility was based, the number of engine families 
required to be modified and, especially, the degree of modification 
necessary has increased. This adds significantly to the technical and 
resource burden on the engine manufacturer. As anticipated in the 
proposal, EPA expects the major engine manufacturers will choose to 
modify their small volume engine families last as these represent niche 
markets. Additionally, these niche applications may represent some of 
the more difficult engine applications due to their unique 
requirements. The experience gained in designing, producing and getting 
in-use feedback on their larger engine family designs should be helpful 
in minimizing the cost and assuring the performance of the small volume 
engines. The design challenges for the small volume engine manufacturer 
have similarly increased suggesting more time to accomplish the 
transition to Phase 2 standards would be warranted. EPA expects 
manufacturers will take advantage of the extra time being adopted today 
to smooth the transition to Phase 2 standards by bringing the small 
volume engines into compliance throughout this time period. Due to the 
fact that the circumstances vary greatly from one manufacturer to 
another, it would be inappropriate to mandate a percent phase-in 
schedule or some other mandatory rate of phase-in for these small 
volume engine families and small volume manufacturers. Therefore, only 
a final compliance requirement of model year 2010 is being adopted. EPA 
has also considered the air quality impact of this flexibility and 
determined that one percent of the total small engine production is 
likely to take advantage of this option to delay compliance with the 
Phase 2 standards with a negligible impact on the emission benefits 
expected from this rule.
    The following summarizes the flexibilities available to 
manufacturers of small volume engine families and small volume engine 
manufacturers for these engines.
    a. Can certify to Phase 1 standards and regulations until 2010 for 
eligible engine families; these engine families are excluded from ABT;
    b. Can certify using assigned deterioration factors;
    c. Can elect to not participate in PLT; SEA is still applicable.
    Regarding the exclusion from ABT of engine families which take 
advantage of delaying implementation of the Phase 2 standards, this 
provision is being adopted to protect against a situation in which a 
manufacturer may choose to redesign and produce a small volume engine 
family with low emissions (e.g., meeting the Phase 2 standards) but 
still certify it under these small volume provisions and generate 
credits all the way up to the Phase 1 standards level. Since this 
flexibility is intended to provide small volume manufacturers and 
manufacturers of small volume engine families the flexibility to delay 
implementation of the Phase 2 standard if necessary, it would be 
inappropriate and unfair to other manufacturers to also allow them to 
generate extra credits even after redesigning their product.
5. Flexibilities for Small Volume Equipment Manufacturers and Small 
Volume Equipment Models
    EPA proposed flexibilities based upon equipment manufacturer needs 
aimed at assuring the continued supply under the Phase 2 regulations of 
engines for unique, typically small volume applications. These 
flexibilities included allowing the small volume equipment manufacturer 
to continue using Phase 1 compliant engines up until the third year 
after phase-in of the final Phase 2 standards for that engine class if 
the equipment manufacturer was unable to find a suitable Phase 2 engine 
before then. Second, EPA proposed to allow individual small volume 
equipment models to continue using Phase 1 compliant engines throughout 
the time period the Phase 2 regulation is in effect if no suitable 
Phase 2 engine was available and the equipment was in production at the 
time these Phase 2 rules were adopted. Finally, EPA proposed a hardship 
provision that would allow any equipment manufacturer for any of its 
applications to continue using a Phase 1 engine for up to one more year 
beyond the last phase-in of the final standard for that engine class if 
the requirement to otherwise use a Phase 2 compliant engine would cause 
substantial financial hardship.
    In this final rule, EPA is adopting flexibilities which can be 
exercised by small volume equipment manufacturers. These flexibilities 
were supported by comments to the proposal and are adopted as proposed 
except that the criteria for determining whether someone is a small 
volume equipment manufacturer has been revised (see discussion in the 
following section II.E.6). Specifically, as proposed and for the 
reasons described in the proposal, the small volume equipment 
manufacturer will be allowed to use Phase 1 engines for up to three 
years beyond the last phase-in year for the standard applicable to that 
engine class

[[Page 15222]]

(or engine class and equipment category combination in the case of 
Class III and IV engines) if they demonstrate to EPA that no suitable 
Phase 2 engine is available. Secondly, small volume equipment models 
will be allowed to use Phase 1 compliant engines throughout the time 
the Phase 2 rule is in effect as long as that piece of equipment is in 
production as of the effective date of this rule and the manufacturer 
demonstrates to EPA that no suitable Phase 2 engine is available. 
Finally, EPA is adopting the hardship provision which will allow 
equipment manufacturers an additional year beyond the final phase-in of 
a standard to start using a Phase 2 compliant engine if they can 
demonstrate that earlier use would cause a significant financial 
hardship.
6. Small Volume Equipment Manufacturer Definition
    EPA proposed that small volume equipment manufacturers would be 
defined as those whose annual production for sale in the U.S. across 
all models would be 2500 or fewer nonhandheld engines.
    EMA and OPEI commented that the Small Business Administration 
definition of a small manufacturer should be used instead of the 
definition proposed by EPA for small volume equipment manufacturers. 
Under this definition, according to EMA and OPEI, equipment 
manufacturers who employed fewer than 500 persons would all be eligible 
for the small volume flexibilities. Alternatively, EMA and OPEI 
recommended that the small volume equipment manufacturer definition be 
expanded to include all equipment manufacturers using nonhandheld 
engines who produce 5000 or fewer units annually.
    EPA has considered the recommendations received in comments to the 
NPRM and analyzed the production data available to the Agency. As 
explained in the proposal, opting to use a definition of 500 or fewer 
employees as recommended by EMA and OPEI would capture a group of 
equipment manufacturers with a wide-range of equipment production 
volumes including some who produce up to 700,000 units annually. It 
would also include a group of equipment manufacturers with a wide range 
of financial capabilities, including some which have much larger 
revenue streams compared to those that would be covered by the proposed 
definition. EPA believes the impact of this rule is more closely tied 
to the volume of units produced by the manufacturer (for example, if 
the equipment needed to be modified to accommodate a Phase 2 engine, 
the impact would best be analyzed as a per unit impact) than to the 
number of persons employed by a firm. Therefore, establishing 
flexibilities under these emission rules should be based on the 
production volume of the manufacturer, not the number of employees. 
However, EPA agrees there would be advantages in expanding the 
definition of small volume equipment manufacturer to include slightly 
larger manufacturers who are still, compared to the rest of the 
industry, amongst the smallest. Therefore, EPA is adopting a small 
volume equipment definition of 5000 or fewer annual production for 
equipment using nonhandheld engines. This limit covers approximately 
two percent of the annual sales in each category. Providing the 
flexibilities outlined above in section II.E.5 allows significant 
relief to these smallest equipment manufacturers while at the same time 
assuring the vast majority of equipment uses the lowest emitting 
engines available.
7. Small Volume Equipment Model Definition
    The small volume equipment model definition proposed would cover 
nonhandheld models of 500 or less annual production. As proposed, such 
small volume equipment models can use Phase 1 engines throughout Phase 
2 if the manufacturer of these equipment models can demonstrate no 
Phase 2 compliant engine is available for existing models; if the 
equipment is ``significantly modified'' then this exemption ends, since 
during this modification design accommodations could be made to accept 
an engine meeting Phase 2 standards. This provision was proposed to 
permit unnecessary equipment redesign when the emission benefit from 
such a redesign would be negligible.
    Comments were received from EMA and OPEI recommending raising the 
production limit to 5000 units for nonhandheld applications rather than 
the 500 annual production limit proposed. EPA's analysis of production 
data indicates that the 500 cutoff would exempt less than approximately 
one percent of annual sales from required use of Phase 2 engines but 
approximately 73 percent of the equipment models, thus providing 
substantial relief to many small volume applications without 
compromising the air quality benefits of this final rule. In contrast, 
a level such as 5000 for the cutoff of a small volume equipment model 
definition would benefit more equipment manufacturers (up to 87 percent 
of the equipment models) but at a significant air quality loss, as up 
to six percent of the units sold could be exempt. This is too great of 
an emissions penalty and therefore this option is rejected. EPA is 
adopting as proposed a definition of small volume equipment model as 
500 or fewer units annual production for nonhandheld equipment.
8. Hardship provision
    EMA commented that manufacturers should not have to demonstrate a 
major impact on company solvency and that substantial negative economic 
impact or loss of market share should be enough in order to qualify for 
relief under the proposed hardship provision.
    This hardship provision is intended to cover those extreme and 
unanticipated circumstances which, despite the equipment manufacturer's 
best efforts, place it in a situation where a lack of Phase 2 complying 
engines will cause such great harm to the company that the ability of 
the company to stay in business is at stake. It is not intended to 
protect an equipment manufacturer against any financial harm or 
potential loss of market share. EPA believes the original intent of 
this provision is reasonable and that the proposed criteria are 
reasonable. Equipment manufacturers in less dire situations may benefit 
from the other flexibilities being adopted today. The rules for this 
hardship provision are being adopted as proposed.

F. Nonregulatory Programs

    EPA discussed a voluntary ``green'' labeling program and a 
voluntary fuel spillage and evaporative emission reduction program in 
the preamble to the NPRM. These programs are discussed in this section 
of the preamble. The particulate matter (PM) and hazardous air 
pollutant (HAP) testing program for handheld engines discussed in the 
NPRM will be addressed in the upcoming SNPRM for handheld engines.
1. Voluntary ``Green'' Labeling Program
    EPA discussed the concept of a voluntary program for labeling 
engines with superior emission performance as a way of providing public 
recognition and also allowing consumers to easily determine which 
engines have especially clean emission performance. EPA discussed a 
threshold of around 50 percent of the proposed standard (e.g., around 
12.5 g/kW-hr for Class I engines) as the level below which engines 
would qualify for ``green'' labeling. EPA requested comment on all 
aspects of the program, as well as indication of interest on the part 
of consumer groups, engine and

[[Page 15223]]

equipment manufacturers, and others in working with the Agency to 
develop and implement the program.
    EPA received support for the voluntary ``green'' labeling program 
concept from several commenters, as well as suggestions for the design 
of such a program. Other commenters argued that a green labeling 
program is inconsistent with ABT, and still others supported a 
mandatory comprehensive labeling program to identify emissions levels 
above and below standards.
    EPA remains committed to promoting clean technology, and is 
interested in developing a green labeling program for small SI engines 
in a way that does not confuse consumers or undermine environmental 
goals of the Phase 2 regulations. In the design of a program, it would 
be necessary to review appropriate levels for a green label, given the 
increased stringency of Class I standards in the final program, as well 
as to consider the appropriate interface between a green labeling 
program and the ABT program that is being finalized for nonhandheld 
engines. EPA will continue to pursue the development of voluntary green 
labeling program for small SI engines as a nonregulatory program.
2. Voluntary Fuel Spillage and Evaporative Emission Reduction Program
    In the preamble to the NPRM, EPA discussed interest in involving 
stakeholders in the design of a voluntary fuel spillage and evaporative 
emission reduction program specifically for the small engine industry 
and its customers. EPA requested comment on the proposed voluntary 
partnership program, and indication of interest in participating in the 
partnership. Comments on this concept included both disappointment that 
EPA has not done more in these areas, as well as a willingness on the 
part of several commenters to work with EPA. EPA remains committed to 
developing voluntary programs to address fuel spillage and evaporative 
emission reductions, but these programs are not part of the regulations 
being adopted today. At this time, EPA has not been able to determine 
the technical feasibility of substantially controlling fuel spillage 
and evaporative emissions from the small engine equipment sector and 
therefore has not been able to determine that a program mandating such 
controls would be achievable for this industry.

G. General Provisions and Recommendations

    In the NPRM for the Phase 2 program, EPA discussed a number of 
general provisions impacting Phase 2 engines, including: model year and 
annual production period flexibilities, definition of handheld engines, 
small displacement nonhandheld engine class, liquefied petroleum gas 
fueled indoor power equipment, dealer responsibility, engines used in 
recreational equipment, engines used in rescue and emergency equipment, 
and replacement engines. EPA received comments on several of these 
issues, as well as recommendations on other general issues. These 
general provisions and other recommendations and issues are discussed 
in this section of the preamble. See Section 8 of the Summary and 
Analysis of Comments for additional discussion of these issues.
1. Model Year Definition and Annual Production Period Flexibilities
    The final program includes the same model year definition as was in 
effect for Phase 1, and annual production period flexibilities which 
were established under Phase 1 only for Class II engines. While EPA is 
finalizing the model year definition in effect for the Phase 1 program 
for the Phase 2 program, and is also finalizing flexibilities similar 
to those in Phase 1 for the start-up of the Phase 2 program for Class 
II nonhandheld engines, EPA is also clarifying in this final rule the 
standards to which Class II Phase 2 engine would be subject at the 
start-up of the program. Under the final rule, Class II engine families 
are required to be certified to the Phase 2 program by September 1, 
2001. In addition, engine families first certified to the Phase 2 
program on or before August 31, 2001, and designated as ``2001 model 
year'' families, are required to meet the 2001 emission standards 
(e.g., 18.0 g/kW-hr HC+NOX). These engine families are also 
required to re-certify for the 2002 model year by January 1, 2002. 
Engine families first certified to the Phase 2 program on or before 
August 31, 2001, and designated as ``2002 model year'' families, are 
required to meet the 2002 model year standards (e.g., 16.6 g/kW-hr 
HC+NOX).
2. Definition of Handheld Engine
    EPA is finalizing the same definition for handheld engine as was in 
effect for Phase 1. Commenters suggested a displacement cutoff to 
determine which engines would meet less stringent ``handheld'' 
standards, but EPA is not adopting this suggestion. In response to 
comments from Honda and others, in a separate regulatory action, EPA 
intends to propose modifications to criteria for determining whether an 
engine could be classified as handheld that, if finalized, would be 
applicable for the remainder of Phase 1 and also apply for the Phase 2 
program. The expected proposed modification would permit a manufacturer 
to exceed the weight limits (14 kg for generators or pumps, or 20 kg 
for one-person augers) in cases where the manufacturer could 
demonstrate that the extra weight was the result of using a four stroke 
engine or other technology cleaner than the otherwise currently allowed 
two stroke engine.
3. Small Displacement Nonhandheld Engine Class
    EPA is not adopting a small displacement nonhandheld Class in 
today's rule. As discussed in the preamble to the NPRM, although EPA 
had considered establishing a new class for the smallest nonhandheld 
engines, such a class and separate standards for the class were not 
proposed. Rather, EPA requested comment on the need for such a class 
and what size engines should be included. Comments and additional 
information were received on this issue, some of which supported 
setting standards equivalent to the handheld standards for engines of 
the same displacement. EPA believes that the appropriate standards for 
these smallest nonhandheld engine classes should be considered in 
context with the standards adopted for similar size engines used in 
handheld applications. Therefore, EPA is deferring a decision on this 
issue and will reconsider it as part of the previously mentioned 
planned supplementary proposal for handheld engines.
4. Liquefied Petroleum Gas Fueled Indoor Power Equipment
    As proposed, the final Phase 2 program is applicable to 
manufacturers of liquefied petroleum gas (LPG) fueled indoor power 
equipment. Comments to the NPRM on this issue included a suggestion 
that EPA exempt from regulation small manufacturers of propane-powered 
spark-ignited engines used solely for indoor applications and subject 
to OSHA indoor air quality standards and objections to EPA's assertion 
of jurisdiction over such equipment. The commenters suggested that 
since OSHA sets permissible exposure limits for indoor air toxins and 
since these particular pieces of equipment are designed solely for use 
indoors, EPA has neither the need nor the right to regulate such 
equipment. In

[[Page 15224]]

response, however, OSHA does not set equipment emission standards; EPA 
has that responsibility. Additionally, the emissions from this 
equipment can be effectively controlled through the EPA regulations 
being adopted today. While many of the manufacturers of propane-powered 
spark-ignition engines are small volume manufacturers, the regulations 
being adopted today also minimize the regulatory burden on these 
manufacturers.
    Comments were also received requesting EPA regulations allow the 
testing and reporting of emission on a concentration basis rather than 
a mass basis. Measurement of concentration of emissions can be less 
expensive than mass emissions and EPA understands that at least some 
manufacturers of propane-powered spark-ignition engines are already 
using such equipment to check the performance of their engines after 
they have been converted to run on propane. However, while 
concentration measurements can give an indication of the emission 
performance of an engine, it is a far less adequate test than the mass-
based emission test adopted with the Phase 1 rules and being continued 
with today's action.
    Another comment came from a supplier of gasoline engines whose 
engines have been used in propane-powered equipment after conversion to 
run on this alternative fuel. This manufacturer is concerned that, even 
though it is not responsible for the changes made to the engine to 
allow use of propane, its name nevertheless remains on the engine after 
the conversion and it may be subject to warranty claims which result 
from the conversion and are therefore not the fault of the original 
engine manufacturer. Thus this original engine manufacturer requested 
EPA mandate that all companies which convert gasoline-fueled engines to 
run on propane be required to declare themselves engine manufacturers 
and satisfy the certification and other compliance responsibilities of 
this rule including emission warranty. Such persons or companies 
currently engaged in making these conversions have the option of not 
declaring themselves a manufacturer or certifying if they can assure 
themselves and EPA that the conversions they are making do not increase 
the emissions of the engine 4. However, in making these 
modifications, the modifier also assumes responsibility for any 
emission-related problems due to the modification; such emission-
related problems would not be the responsibility of the original engine 
manufacturer. While sympathetic toward the original engine 
manufacturer's concern of potentially increased warranty burden, EPA is 
retaining the policy of allowing modifications to certified engines so 
long as the modifier has good reason to believe such modifications do 
not increase emissions. Under such a policy, no emission increase 
should occur. Requiring the modifier to re-certify, in this case, would 
have no expected emission benefit but would add greatly to the burden 
on the modifier.
---------------------------------------------------------------------------

    \4\ See EPA publications ``Mobile Source Enforcement Memorandum 
No. 1A'' (6-25-74); ``Addendum to Mobile Source Enforcement 
Memorandum 1A'' (9-4-97); and, ``Revision to Addendum to Mobile 
Source Enforcement Memorandum 1A'' (6-1-98), docket A-96-55, items 
IV-B-02, IV-B-03 and IV-B-04 respectively.
---------------------------------------------------------------------------

5. Dealer Responsibility
    The preamble to the proposed Phase 2 program clarified that the 
Phase 2 program adds no additional responsibilities for dealers. As in 
the NPRM, the final rule contains no new constraints or 
responsibilities for dealers and repair facilities beyond those 
contained in the Phase 1 rule.
6. Engines Used in Recreational Vehicles and Applicability of the Small 
SI Regulations to Model Airplanes
    EPA is not adopting any revisions to the provisions relating to 
engines used in recreational vehicles established in the Phase 1 
program. No revisions were proposed by the Phase 2 NPRM. EPA does 
intend to address recreational vehicle issues in a separate regulatory 
action. This separate rulemaking will address the applicability of the 
small SI regulations to engines used in model airplane applications, 
and EPA expects to propose to consider engines that serve ``only to 
propel a flying vehicle * * * through air'' to be recreational engines 
provided they also meet the other existing criteria that apply to that 
term. As ``recreational'' engines they would be effectively excluded 
from the small SI program.
7. Engines Used in Rescue and Emergency Equipment
    EPA is finalizing the provision, as proposed, that for the 
remainder of Phase 1 as well as for Phase 2, exempts engines which are 
used exclusively in emergency and rescue equipment from compliance with 
any standards if the equipment manufacturer can demonstrate that no 
certified engine is available to power the equipment as safely and 
practically. No comments were received on this proposal.
8. Replacement Engines
    EPA proposed to continue replacement engine provisions from the 
August 7, 1997 rulemaking (62 FR 42638), which amended the Phase 1 rule 
to allow engine manufacturers to sell uncertified engines from 
replacement purposes subject to certain controls designed to prevent 
abuse. In addition, the Phase 2 proposal contained additional 
safeguards and reporting and record keeping requirements to further 
ensure against abuse.
    The final Phase 2 program for replacement engines goes beyond the 
August 7, 1997 rule in one area. It includes the amendment which 
permits uncontrolled engines to be sold for pre-regulatory equipment, 
and Phase 1 engines to be sold for equipment built with Phase 1 
engines, subject to the above constraints (90.1003(b)(5)(iv)). The 
final rule does not include other provisions from the Phase 2 proposal 
that were added to the August 7, 1997 rule. Based on comments from 
manufacturers, and an assessment that eliminating these provisions will 
result in no loss of environmental benefits, EPA has decided to 
eliminate these other requirements in interest of reducing the record 
keeping and reporting burden on manufacturers. Note that EPA intends to 
propose minor modifications to the replacement engine regulations in a 
separate regulatory action in order to clarify the responsibilities of 
importers.
9. Record keeping and Information Requirements
    The ICRs have been revised for final rule and estimate the average 
annual public reporting burden for the collection of information 
required under the rule for a typical engine manufacturer (see section 
V.C. of preamble). In addition, EPA has significantly streamlined the 
compliance program requirements for final rule.
10. Engine Labeling
    EPA proposed two alternatives for engine labeling. These 
alternatives differed only in the treatment of useful life hours. As 
indicated in the preamble to the NPRM, EPA believes inclusion of the 
number of hours of emission compliance for which the engine is properly 
certified would provide an important tool to consumers in making their 
purchase decisions between competing engines. EPA anticipates 
manufacturers will use the useful life hours of the engine as a 
marketing tool. For example a manufacturer might advertise that an 
engine family is

[[Page 15225]]

certified as emissions durable to 1000 hours. Thus, inclusion of 
meaningful useful life hours would have the potential of providing a 
market place mechanism regarding manufacturers who design engines for 
longer useful life periods.
    The two alternatives for designating useful life on the engine 
label were to (1) simply state the useful life hours or (2) use a 
designator of useful life hours, for example, A, B, or C, and then 
adding words on the label to direct the consumer to the owner's label 
for an explanation of the meaning of A, B and C. This latter option was 
proposed only for nonhandheld engines and was based on the concern 
expressed by nonhandheld engine manufacturers during the development of 
the Statement of Principles for these engines that consumers could be 
confused by the meaning of the useful life period if the specific 
number of hours was included on the label. However, as indicated in the 
preamble to the NPRM, EPA was concerned that an ``A, B, C'' designation 
may not provide the same useful information to the consumer as directly 
including the useful hours on the label and specifically requested 
comment on this issue.
    In their comments on the proposal, EMA and OPEI indicated they 
remained concerned that consumers might believe the emissions 
compliance period could mean something else, for example, the expected 
life for which the engine would provide satisfactory product 
performance to the consumer. EMA and OPEI indicated ``(c)onsumer 
purchasers are not sophisticated enough to understand the difference 
between the EPA term of art ``useful life'' and the expected time of 
ownership of their newly purchased lawnmower. Nor will they understand 
the difference between emission performance and product performance.'' 
Therefore, they recommended adopting an option whereby the engine 
manufacturer could indicate A, B, or C on its required engine label, 
make reference to the owner's manual for additional explanation and 
explain in the owner's manual the meaning of A, B, and C where it would 
be easier to provide an adequate explanation of the meaning behind an 
emission performance period. In contrast, the North American Equipment 
Dealers Association (NAEDA) commented that a buyer would not know the 
meaning of useful life designations such as A, B, or C prior to the 
purchase of the equipment since the explanation of these designations 
would only appear in the owner's manual which is not normally 
accessible to the consumer prior to purchase. Also, Honda commented 
specifically that engine labeling requirements should be harmonized 
between California and federal rules to allow an engine to be labeled 
for different standards and different classes. This recommendation from 
Honda aligns with numerous other general comments on the importance of 
harmonization between California and federal rules.
    EPA remains concerned that an ``A, B, C'' designation of useful 
life may not be as informative of the expected emission performance 
period as a direct listing of the certified hours. Especially in light 
of NAEDA's comment, EPA is concerned about the ability of consumers to 
use such designations to make informed purchase decisions if their only 
source of explanation is the owner's manual. However, it is also not 
clear that including the hours listing directly on the label is the 
optimum alternative since, as suggested by EMA and OPEI comments, 
consumers may not fully understand the meaning of the emissions 
performance useful life hours listing and could instead, for example, 
believe the hours refer to perhaps a parts warranty period for the 
equipment in which the engine is installed. EPA is also aware of 
labeling options being considered by California that would allow 
removing the actual hours of operation from the engine label and 
including additional information on the product, perhaps not 
permanently affixed to the engine, which would satisfy the need to 
properly inform consumers. Allowing such labeling would also serve the 
goal of harmonization as supported by Honda.
    Therefore, EPA is finalizing regulations which, as proposed, allow 
the manufacturer to use an engine label which includes the actual 
emissions period useful life as certified by the engine manufacturer or 
a label which includes an ``A, B or C'' designation and refers to the 
owners manual for further information. Based on conversations with both 
EMA and OPEI representatives, EPA also expects to work in partnership 
with the industry in developing consumer outreach material to better 
inform consumers of the emission improvements available through 
purchase of equipment using Phase 2 engines. EPA expects such outreach 
material will better serve the informational needs of consumers than 
the just relying on either of these labeling options. Additionally, the 
rules allow other labeling options which the Administrator determines 
satisfies the information intent of the label. This option is intended 
to allow for the nationwide use of the California labeling system. In 
evaluating the adequacy of an alternative label, EPA would consider the 
extent to which the manufacturer's alternative engine label combined 
with other readily accessible consumer information adequately informs 
the consumer of the emission performance of the engine.
11. Emission Warranty
    As proposed, EPA is not adopting revisions to the base emission 
performance warranty period of two years of engine use from the date of 
sale for this nonhandheld program. EPA will address comments from 
handheld manufacturers that relate specifically to whether additional 
flexibility is needed for some handheld products in the supplemental 
proposal for the Phase 2 handheld program. In addition, EPA is not 
adopting the proposed separate Phase 1 and Phase 2 provisions which 
would have required differing warranty statements. The final provisions 
specifying what manufacturers must warrant, therefore, remains 
unchanged from the existing rule.
12. Other Issues
    A number of other of issues were considered in the development of 
this final rule, based on comments received on the proposal. These 
include defect reporting requirements, aftermarket provisions, closed 
crankcase provisions and exclusion from HC+NOX standards for 
engines used exclusively in the wintertime, CO adjustments for open 
crankcase breathers, NOX converter placement during testing, 
usage meters, and metric units. Comments received on these issues, and 
EPA's response to those comments, can be found in Section 8 of the 
Summary and Analysis of Comments document.

III. Projected Impacts

A. Environmental Benefit Assessment

    National Ambient Air Quality Standards (NAAQS) have been set for 
criteria pollutants which adversely affect human health, vegetation, 
materials and visibility. Concentrations of ozone (O3) are 
impacted by HC and NOX emissions. Ambient concentrations of 
CO are, of course, impacted by CO emissions. EPA believes that the 
standards set in this rule would reduce emissions of HC and 
NOX and help most areas of the nation in their progress 
towards compliance with the NAAQS for ozone. The following provides a 
summary of the roles of HC and NOX in ozone formation, the 
estimated emissions impact of this rule, and the health and welfare 
effects of ozone, CO,

[[Page 15226]]

hazardous air pollutants, and particulate matter. Much of the 
evaluation of the health and environmental effects related to HC, 
NOX and CO found in this section is also discussed in the 
Regulatory Impact Analysis (RIA).
1. Roles of HC and NOX in Ozone Formation
    Both HC and NOX contribute to the formation of 
tropospheric ozone through a complex series of reactions. In a 1991 
report, researchers emphasize that both HC and NOX controls 
are needed in most areas of the United States.5 EPA's 
primary reason for controlling emissions from small SI nonhandheld 
engines is the role of their HC emissions in forming ozone. Of the 
major air pollutants for which NAAQS have been designated under the 
CAA, the most widespread problem continues to be ozone, which is the 
most prevalent photochemical oxidant and an important component of 
smog. The primary ozone NAAQS represents the maximum level considered 
protective of public health by the EPA. Ozone is a product of the 
atmospheric chemical reactions involving oxides of nitrogen and 
volatile organic compounds. These reactions occur as atmospheric oxygen 
and sunlight interact with hydrocarbons and oxides of nitrogen from 
both mobile and stationary sources.
---------------------------------------------------------------------------

    \5\ National Research Council, Rethinking the Ozone Problem in 
Urban and Regional Air Pollution, National Academy Press, 1991.
---------------------------------------------------------------------------

    A critical part of this problem is the formation of ozone both in 
and downwind of large urban areas. Under certain weather conditions, 
the combination of NOX and HC has resulted in urban and 
rural areas exceeding the national ambient ozone standard by as much as 
a factor of three. Thus it is important to control HC over wider 
regional areas if these areas are to come into compliance with the 
ozone NAAQS.
2. Health and Welfare Effects of Tropospheric Ozone
    Ozone is a powerful oxidant causing lung damage and reduced 
respiratory function after relatively short periods of exposure 
(approximately one hour). The oxidizing effect of ozone can irritate 
the nose, mouth, and throat causing coughing, choking, and eye 
irritation. In addition, ozone can also impair lung function and 
subsequently reduce the respiratory system's resistance to disease, 
including bronchial infections such as pneumonia.
    Elevated ozone levels can also cause aggravation of pre-existing 
respiratory conditions such as asthma.6 Ozone can cause a 
reduction in performance during exercise even in healthy persons. In 
addition, ozone can also cause alterations in pulmonary and extra 
pulmonary (nervous system, blood, liver, endocrine) function.
---------------------------------------------------------------------------

    \6\ United States Environmental Protection Agency, Review of the 
National Ambient Air Quality Standards for Ozone--Assessment of 
Scientific and Technical Information: OAQPS Staff Paper, EPA-450/2-
92-001, June 1989, pp. VI-11 to 13.
---------------------------------------------------------------------------

    The newly revised primary NAAQS 7 for ozone based on an 
8-hour standard of 0.08 parts per million (ppm) is set at a level that, 
with an adequate margin of safety, is protective of public health. EPA 
also believes attainment of the new primary standard will substantially 
protect vegetation. Ozone effects on vegetation include reduction in 
agricultural and commercial forest yields, reduced growth and decreased 
survivability of tree seedlings, increased tree and plant 
susceptibility to disease, pests, and other environmental stresses, and 
potential long-term effects on forests and ecosystems.
---------------------------------------------------------------------------

    \7\ See 62 FR 38896, Friday, July 18, 1997.
---------------------------------------------------------------------------

    High levels of ozone have been recorded even in relatively remote 
areas, since ozone and its precursors can travel hundreds of miles and 
persist for several days in the lower atmosphere. Ozone damage to 
plants, including both natural forest ecosystems and crops, occurs at 
ozone levels between 0.06 and 0.12 ppm.8 Repeated exposure 
to ozone levels above 0.04 ppm can cause reductions in the yields of 
some crops above ten percent.9 While strains of some crops 
are relatively resistant to ozone, many crops experience a loss in 
yield of 30 percent at ozone concentrations below the pre-revised 
primary NAAQS.10 The value of crops lost to ozone damage, 
while difficult to estimate precisely, is on the order of $2 billion 
per year in the United States.11 The effect of ozone on 
complex ecosystems such as forests is even more difficult to quantify. 
However, there is evidence that some forest types are negatively 
affected by ambient levels of ozone.12 Specifically, in the 
San Bernadino Mountains of southern California, ozone is believed to be 
the agent responsible for the slow decline and death of ponderosa pine 
trees in these forests since 1962.13
---------------------------------------------------------------------------

    \8\ U.S. EPA, Review of NAAQS for Ozone, p. X-10.
    \9\ U.S. EPA, Review of NAAQS for Ozone, p. X-10.
    \10\ See 62 FR 38856, Friday, July 18, 1997.
    \11\ U.S. EPA, Review of NAAQS for Ozone, p. X-22.
    \12\ U.S. EPA, Review of NAAQS for Ozone, p. X-27.
    \13\ U.S. EPA, Review of NAAQS for Ozone, p. X-29.
---------------------------------------------------------------------------

    Finally, by trapping energy radiated from the earth, tropospheric 
ozone may contribute to heating of the earth's surface, thereby 
contributing to global warming (that is, the greenhouse 
effect),14 although tropospheric ozone is also known to 
reduce levels of UVB radiation reaching the earth's surface, the 
increase of which is expected to result from depletion of stratospheric 
ozone.15
---------------------------------------------------------------------------

    \14\ NRC, Rethinking the Ozone Problem, p. 22.
    \15\ The New York Times, September 15, 1992, p. C4.
---------------------------------------------------------------------------

3. Estimated Emissions Impact of the Final Regulation
    The emission standards set by today's action should reduce average 
in-use exhaust HC+NOX emissions from small SI nonhandheld 
engines approximately 59 percent beyond Phase 1 standards for 
nonhandheld engines by year 2027, by which time a complete fleet 
turnover is realized. This translates into an annual nationwide 
reduction of roughly 395,000 tons of exhaust HC+NOX in year 
2027 over that expected from Phase 1. Reductions in CO beyond Phase 1 
levels, due to improved technology, are also to be expected by year 
2027.
    Along with the control of all hydrocarbons, these standards should 
be effective in reducing emissions of those hydrocarbons considered to 
be hazardous air pollutants (HAPs), including benzene and 1,3-
butadiene. However, the magnitude of reduction would depend on whether 
the control technology reduces the individual HAPs in the same 
proportion as total hydrocarbons.
    These emission reduction estimates are based on in-use population 
projections using growth estimates, engine attrition (scrappage), 
activity indicators and new and in-use engine emission factors. Data on 
activity indicators were based on the Phase 1 small SI regulation. 
Estimates of engine populations were based on population data available 
from the PSR databases 16 and data provided by Engine and 
Equipment manufacturers and on a study done for the California Air 
Resources Board by Booz Allen & Hamilton (BAH). Population projections 
into the future are based on a linear growth assumption. Attrition 
rates (based on the probability that an engine remains in service into 
a specific calendar year) for all engines included in this analysis are 
developed on the

[[Page 15227]]

assumption that the equipment attrition function may be represented by 
a cumulative Normal distribution function. The in-use emission factor 
is based on a multiplicative deterioration factor which is a function 
of the square root of hours of equipment usage.
---------------------------------------------------------------------------

    \16\ Power Systems Research, Engine Data and Parts Link data 
bases, St. Paul, Minnesota, 1992.
---------------------------------------------------------------------------

1992.
    For the analysis summarized in Table 4, emission inventories were 
developed using EPA's NONROAD Model for the two regulated nonhandheld 
engine classes as well as for all pieces of equipment using engines 
covered by this rule. The total annual nationwide HC, NOX 
and CO emissions from small SI nonhandheld engines included in this 
rule were estimated for both the baseline (that is, with Phase 1 
controls applied) and controlled (Phase 2) scenarios.
    For the controlled scenario, EPA assumed all nonhandheld engines 
would be converted to overhead valve technology. As for deterioration 
factors, they were determined in some cases using manufacturer-supplied 
confidential in-use emission data and for others EPA depended on 
relevant information from EPA's certification data base.

                          Table 4: Projected Annual Nationwide Exhaust HC+NOX Emissions
                                                   [Tons/year]
----------------------------------------------------------------------------------------------------------------
                                                      Without
                                                     proposed      With proposed   Tons reduced     Percentage
                      Year                           controls        controls      from Phase 1      reduction
                                                     (Phase 1)                       baseline
----------------------------------------------------------------------------------------------------------------
2000............................................         427,063         427,063
2005............................................         453,129         347,065         106,064            23.4
2010............................................         499,648         242,370         257,278            51.5
2015............................................         547,514         226,571         320,943            58.6
2020............................................         596,343         243,118         353,225            59.2
2025............................................         651,818         269,871         381,947            59.3
----------------------------------------------------------------------------------------------------------------

4. Health and Welfare Effects of CO Emissions
    Carbon monoxide (CO) is a colorless, odorless gas which can be 
emitted or otherwise enters into ambient air as a result of both 
natural processes and human activity. Although CO exists as a trace 
element in the troposphere, much of human exposure resulting in 
elevated levels of carboxyhemoglobin (COHb) in the blood is due to 
incomplete fossil fuel combustion, as occurs in small SI engines.
    The concentration and direct health effect of CO exposure are 
especially important in small SI nonhandheld engines because the 
operator of a small SI engine application is typically near the 
equipment as it functions. In some applications, the operator must be 
adjacent to the exhaust outlet and is in the direct path of the exhaust 
as it leaves the engine. According to numbers published in the Nonroad 
Engine and Vehicle Emission Study (NEVES), a 4-stroke, 2.9 kW lawnmower 
engine emits 1051.1 g/hr CO.
    The toxicity of CO effects on blood and tissues, and how these 
effects manifest themselves as organ function changes, have also been 
topics of substantial research efforts. Such studies provided 
information for establishing the National Ambient Air Quality Standard 
for CO. The current primary and secondary NAAQS for CO are 9 parts per 
million for the one-hour average and 35 parts per million for the 
eight-hour average.
5. Health and Welfare Effects of Hazardous Air Pollutant Emissions
    The focus of today's action is reduction of HC emissions as part of 
the solution to the ozone nonattainment problem. However, direct health 
effects are also a reason for concern due to direct human exposure to 
emissions from small SI nonhandheld engines during operation of 
equipment using such engines. Of specific concern is the emission of 
hazardous air pollutants (HAPs). In some applications, the operator 
must be adjacent to the exhaust outlet and is in the direct path of the 
exhaust as it leaves the engine. Today's regulatory action should be 
effective in reducing HAPs such as benzene and 1,3-butadiene, in so far 
as these are components of the HC emissions being reduced by the Phase 
2 standards.
    Benzene is a clear, colorless, aromatic hydrocarbon which is both 
volatile and flammable. Benzene is present in both exhaust and 
evaporative emissions. Health effects caused by benzene emissions 
differ based on concentration and duration of exposure. The 
International Agency for Research on Cancer (IARC), classified benzene 
as a Group I carcinogen, namely an agent carcinogenic to humans. 
Occupational studies continue to provide the bulk of evidence of 
benzene's carcinogenicity. Workers are exposed at much higher levels 
than is the general public. Human epidemiologic studies of highly 
exposed occupational cohorts have demonstrated that exposure to benzene 
can cause acute nonlymphocytic leukemia and other blood disorders, that 
is, preleukemia and aplastic anemia. Additionally, changes in blood and 
bone marrow consistent with hematotoxicity are recognized in humans and 
experimental animals. Benzene has also been linked with genetic changes 
in humans and animals.
    1,3-butadiene is a colorless, flammable gas at room temperature. 
This suspected human carcinogen is insoluble in water and its two 
conjugated double bonds make it highly reactive. 1,3-butadiene is 
formed in internal combustion engine exhaust by the incomplete 
combustion of the fuel and is assumed not present in evaporative and 
refueling emissions. The Health Risk Assessment of 1,3-Butadiene (EPA/
600/P-98/001A, February 1998), concludes that 1,3-butadiene is a known 
human carcinogen, based on three types of evidence: (1) Excess leukemia 
in workers occupationally exposed to 1,3-butadiene (by inhalation), (2) 
occurrence of a variety of tumors in mice and rats by inhalation, and 
(3) evidence in animals and humans that 1,3-butadiene is metabolized 
into genotoxic metabolites. Other health effects due to very high 
levels of exposure include heart, blood and lung diseases.
    Since air toxic levels generally decrease in proportion to overall 
emissions once emission control technology is applied, the amount of 
benzene and 1,3-butadiene produced by new small SI engines should 
diminish after this rule becomes effective. Consequently, exposure to 
HAPs from new nonhandheld engines would be reduced, as would associated 
health and

[[Page 15228]]

environmental effects. Although there is little data on direct health 
effects of small SI engines, the Swedish study concludes benzene 
emissions from chain saw engines as being rather high. No study has 
been conducted involving the health effects of HAP emissions 
specifically from nonhandheld engines.
6. Particulate Matter
    Particulate matter, a term used for a mixture of solid particles 
and liquid droplets found in the air, has been linked to a range of 
serious respiratory health problems. These fine particles are of health 
concern because they easily reach the deepest recesses of the lungs. 
Batteries of scientific studies have linked particulate matter, 
especially fine particles (alone or in combination with other air 
pollutants), with a series of significant health problems including 
premature death, aggravated asthma and chronic bronchitis and increased 
hospital admissions. EPA has recently (July 1997) announced new NAAQS 
standards for particulate matter (PM) , by adding two new primary PM2.5 
standards set at concentrations of 15 micrograms per cubic meter 
(/3), annual arithmetic mean, 
and 65 /3, 24-hour average, to 
provide increased protection against the PM-related health effects 
found in community studies.

B. Cost and Cost-Effectiveness

    EPA has calculated the cost-effectiveness of this rule by 
estimating costs and emission benefits for these engines. EPA made best 
estimates of the combination of technologies that an engine 
manufacturer might use to meet the new standards, best estimates of 
resultant changes to equipment design, engine manufacturer compliance 
program costs and engine fuel savings in order to assess the expected 
economic impact of the Phase 2 emission standards. Emission benefits 
are taken from the results of the environmental benefit assessment (see 
section III.A, above). The cost-effectiveness result of this rule is 
$852 per ton of HC+NOX when fuel savings are not taken into 
account. When fuel savings are also considered, the cost-effectiveness 
calculation results in--$507 per ton of HC+NOX. This section 
describes the background and analysis behind these results.
    The analysis for this rulemaking is based on data from engine 
families certified to EPA's Phase 1 standards, as of September 1998, 
and information on the latest technology development and related 
emission levels since the publication of the NPRM. The analysis does 
not include any production volumes that are covered by California ARB's 
standards. California ARB will implement emission standards for many of 
these engines prior to the federal Phase 2 regulations. Therefore, this 
rule only accounts for costs for each engine sold outside California 
and those engines sold in California that are not covered by the 
California ARB rules, such as those used in farm and construction 
equipment. Although EPA expects that engines already designed to meet 
California ARB's current standards would incur no additional design 
cost to meet federal standards, no effort was made to estimate which 
models would be sold in California and subject to California ``Tier 1'' 
standards.19 Rather, for the purpose of this final rule, any 
Phase 1 engine design that would need to be modified to meet Phase 2 
standards was assumed to incur the full cost of that modification, 
including design cost. Similarly, the cost to equipment manufacturers 
was assumed to be fully attributed to this federal rule even if an 
equipment manufacturer would have to make the same modifications in 
response to the California ARB regulation. The details of EPA's cost 
and cost-effectiveness analyses can be found in Chapters 4 and 7 of the 
Final Regulatory Impact Analysis (RIA) for this rule.
---------------------------------------------------------------------------

    \19\ For purposes of analyzing small engine and equipment 
manufacturer impacts of this rule, including the benefits of the 
small volume flexibilities being adopted, EPA considered that those 
manufacturers who are located in California are likely to be 
marketing their engines and equipment in California and thus will be 
directly impacted by California's rules, not EPA's Phase 2 rules; 
this assumption, however, was not used in the development of the 
overall cost and cost effectiveness of EPA's Phase 2 rules. 
Therefore, these industry cost values are slightly overstated and 
the cost effectiveness numbers are slightly overstated.
---------------------------------------------------------------------------

1. Engine Technologies
    Table 5 lists the changes in technology, compared to Phase 1 
engines, that have been considered in the cost estimation for this 
rulemaking. As discussed in section IV.A of this preamble, the 
standards would require different engine improvements amongst the 
nonhandheld and handheld engines and engine designs within those 
classes. For example, Class I and II side valve (SV) design engines are 
expected to require conversion to clean overhead valve (OHV) designs to 
reduce new engine out emissions and increase emission durability. Some 
OHV engine families in Class I and II are expected to decrease 
emissions through the use of enleanment, increased cooling and internal 
redesign such as piston ring design improvements. Additional detail 
regarding the impact of these modifications can be found in Chapters 3 
and 4 for the Final RIA.

 Table 5.--Potential Technology Improvements per Class and Engine Design
------------------------------------------------------------------------
            Class                 Engine design         Technologies
------------------------------------------------------------------------
I...........................  4 stroke--SV........  Clean OHV or other
                                                     innovative fuel
                                                     system
                                                     technologies.
I...........................  4 stroke--OHV.......  Carburetor
                                                     Improvements.
                                                    Combustion Chamber
                                                     Improvements and
                                                     Intake System.
                                                    Improved Oil
                                                     Consumption (Piston
                                                     oil control rings,
                                                     valve stem seals).
I...........................  2 stroke............  Conversion to 4-
                                                     stroke and clean
                                                     OHV.
II..........................  4 stroke--SV........  Conversion to clean
                                                     OHV.
II..........................  4 stroke--OHV.......  Carburetor
                                                     Improvements.
                                                    Combustion Chamber
                                                     Improvements and
                                                     Intake System.
                                                    Improved Oil
                                                     Consumption (Piston
                                                     oil control rings,
                                                     valve stem seals).
------------------------------------------------------------------------


[[Page 15229]]

2. Engine Costs
    The engine cost increase is based on incremental purchase prices 
for new engines and is comprised of variable costs (for hardware, 
assembly time and compliance programs), and fixed costs (for R&D and 
retooling). Variable costs were applied on a per engine basis and fixed 
costs were amortized at seven percent over five years. Engine 
technology cost estimates were based on the study by ICF and EF&EE in 
October 1996 entitled ``Cost Study for Phase Two Small Engine Emission 
Regulations'' and confidential cost estimates provided by industry. 
Details of the assumed costs and analysis can be found in Chapters 4 
and 7 of the RIA.
    Analysis of the EPA Phase 1 certification database, as of September 
1998, was conducted to determine a potential impact of the Phase 2 
standards on each manufacturer assuming use of the ABT program 
available to engine manufacturers. While ABT is permitted across 
classes, this analysis considered only ABT within each class since some 
manufacturers produce substantially in only one nonhandheld class. The 
choice of technologies for emission improvement of these engine 
families was based on the engine family that would be most influential 
in reducing a manufacturer's overall average emission level within that 
class. In addition, costs in the NPRM for conversion from SV to OHV 
were updated based on a letter received from one major engine 
manufacturer which asserted the NPRM cost estimates were incomplete. 
The cost analysis was updated with consideration of confidential cost 
information from several engine manufacturers in order to most 
accurately reflect expected costs.
    For Class I, review of the September 1998 EPA Phase 1 database 
showed that 31 percent of the engine families, 8 SV engine families and 
11 Class I OHV engine families, will need to incorporate at least some 
of the technologies listed in Table 5. For Class II, review of the 
September 1998 EPA Phase 1 certification database shows that 17 percent 
of the engine families, 4 Class II SV engine families and 22 OHV engine 
families, will need to incorporate emission improvements from amongst 
those listed in Table 5. The incorporation of such technologies will 
require both variable and fixed expenditures.
    The Phase 2 emission standards for this diverse industry will 
impact companies differently depending on a company's current product 
offering and related deteriorated emission characteristics used in 
establishing FELs for use in averaging emissions across engine 
families. Some large companies may improve the emission characteristics 
of their large volume engine families to provide credits for their 
smaller volume families. These companies may also improve a few engine 
families notably or all of their engine families slightly. The real 
world impact on engine manufacturers will be influenced by many factors 
including their ability to reduce the emissions from their major impact 
engine family in light of competition with others in the marketplace.
3. Equipment Costs
    While equipment manufacturers would bear no responsibility for 
meeting emission standards, they may need to make changes in the design 
of their equipment models to accommodate the Phase 2 engines. EPA's 
treatment of the impacts of the program therefore includes an analysis 
of costs for equipment manufacturers. The 1996 PSR EOLINK database was 
utilized as the source of information for equipment manufacturers, with 
models and sales estimates covering all classes. The costs for 
equipment conversion for nonhandheld equipment was derived from the 
ICF/EF&EE cost study 20 and improved through the work by ICF 
and EPA on the small business impact analyses for this rulemaking. For 
Class I EPA conducted its own analysis using PSR estimated production 
data and employment and financial information from Dunn and Bradstreet. 
Full details of EPA's cost analysis can be found in Chapter 4 of the 
RIA. EPA has assumed that capital costs would be amortized at seven 
percent over ten years.
---------------------------------------------------------------------------

    \20\ ICF and Engine, Fuel and Emissions Engineering, 
Incorporated; ``Cost Study for Phase Two Small Engine Emission 
Regulations'', Draft Final Report, October 25, 1996, in EPA Air 
Docket A-93-29, Item #II-A-04.
---------------------------------------------------------------------------

    This rulemaking assumes that the majority of Class I engines will 
be converted from SV to OHV design in order to meet the emission 
standards. The major equipment types that use Class I engines are 
lawnmowers, generator sets, pumps, and tillers. For lawnmowers, it is 
assumed that the Class I engine redesign would have a minimal impact on 
equipment redesign for small volume manufacturers and a potential 
impact on larger volume manufacturers. This understanding is based on 
several factors. First, it is EPA's understanding that the smaller 
volume, and some larger volume, equipment manufacturers for niche 
markets allow space for a variety of engines to be used on their 
equipment. Therefore these equipment manufacturers will have nearly no 
equipment impacts. Second, it is EPA's understanding that some larger 
equipment manufacturers may have incorporated close packaging around 
the engine in order to be unique in the marketplace. However, the 
conversion from SV to OHV is not required until August 1, 2007 (except 
for new engine models initially produced on or after August 1, 2003) 
and therefore it is assumed that this long lead time will provide 
equipment manufacturers the time to incorporate equipment redesigns and 
replace tooling dies prior to this date and within the cycle of 
equipment redesign and/or tooling replacements. The same assumptions 
have been made for the applications of generator sets, pumps and 
tillers.
    The Class II engine change from SV to OHV design will have a large 
impact on equipment changes. Review of the PSR database for equipment 
manufacturers that utilize Class II SV engines reveals that the 
majority (90 percent) of small engine equipment is produced from 32 
companies with the remaining 353 companies representing only 10 percent 
of the overall production. EPA's work analyzing small business impacts, 
as summarized in the work with ICF Incorporated,21 indicates 
that many of the small businesses, indicated by the PSR database to use 
SV Class II engines, have already converted or are in the process of 
converting to using OHV engine design due to market forces or changes 
in their engine manufacturer's offerings. These companies tend to 
produce professional or commercial equipment and competition has driven 
the use of OHV engines. The study also revealed that at least one 
equipment manufacturer that produces a large volume of equipment has 
already switched its lines from SV to OHV. For this analysis, EPA 
assumed that, except for this one large manufacturer, all other 
manufacturers will convert their engines to the use of OHV designs in 
direct response to this rule with all such cost attributable to this 
rule. EPA has assumed that any switch from SV to OHV engines by 
equipment manufacturers is a cost incurred due to this rulemaking. The 
cost estimates were based on equipment application (garden tractor, 
tiller, commercial turf, etc.) and in the case of the commercial turf 
equipment, on the power of the engine within that application.
---------------------------------------------------------------------------

    \21\ ``Small Business Impact Analysis of New Emission Standards 
for Small Spark-Ignition Nonroad Engines and Equipment'', ICF 
Incorporated, September 1997, located in EPA Air Docket A-96-55, 
Item#II-A-01 .

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

[[Page 15230]]

4. Operating Costs
    The total life-cycle operating costs for this rulemaking include 
any expected decreases in fuel consumption. Life cycle costs have been 
calculated per class using the NONROAD emission model. The model 
calculates fuel savings from the years of implementation to 2027 and 
takes into account factors including equipment scrappage, projected 
yearly sales increase per equipment type and engine power. Details on 
the assumptions and calculations on fuel savings are included in 
Chapter 4 and 7 of the RIA.
    A fuel consumption savings of 15 percent has been assumed from 
Class I and Class II SV engines as they are converted to OHV design. 
OHV designs are expected to result in improved fuel economy since data 
show that OHV engines can run at leaner air-to-fuel ratios than SV 
engines.
5. Cost Per Engine and Cost-Effectiveness
a. Cost Per Engine
    Total costs for this rulemaking vary per year as engine families 
are phased-in to compliance with the Phase 2 standards over several 
years, capital costs are recovered and compliance programs are 
conducted. The term ``uniform annualized cost'' is used to express the 
cost of this rulemaking over the years of this analysis.
    The methodology used for estimating the uniform annualized cost per 
engine is as follows. Cost estimates from 1995 to 1997, for technology 
and compliance programs respectively, were estimated and calculated to 
1998 dollars through multiplication of the estimates by the applicable 
GDP implicit price deflators. The Phase 1 database was then analyzed, 
using ABT per manufacturer, to determine (1) the number of engine 
families per class, (2) the total number of engines per engine design, 
and (3) the year of technology implementation. The total estimated 
variable and capital costs per year were then calculated by multiplying 
the number of engine families and corresponding production volume by 
the fixed and variable costs per technology grouping, respectively. For 
compliance program costs, the costs for certification bench aging were 
estimated based on the number of families in the 1998 database and the 
expected certification date in the phase in. The variable costs are 
marked up to estimate cost to the consumer. Markups include 16 percent 
by the engine manufacturer, 5 percent by the equipment manufacturer and 
5 percent by the mass merchandiser. All costs per year were then 
discounted seven percent to the first year of Phase 2 regulation per 
class, 2007 for Class I and 2001 for Class II. A uniform annualized 
cost was then calculated. Costs per engine are calculated from the 
uniform annualized cost for the first full year of implementation of 
the Phase 2 standard, 2007, and the last year of this analysis, 2027. 
The average cost per engine is calculated from these two values and the 
results are presented in Table 6 in 1998 dollars.
    The yearly fuel savings (tons/yr) per class were calculated using 
the NONROAD model. The yearly fuel savings (tons/yr) from 2001-2027 
were converted to savings ($) through conversion to gallons per year 
multiplied by $0.794 (a 1995 average refinery price to end user, 
without taxes adjusted to 1998 dollars). The yearly fuel savings were 
then discounted by 7 percent to the first year of Phase 2 regulation, 
for each Class. The yearly results were totaled and then divided by an 
annualized factor to yield the uniform annualized fuel savings. The 
fuel savings for each engine class was calculated for the production 
years of 2010 and 2025. The average of these two values was utilized as 
the average fuel savings per engine per class per year as is shown in 
Table 6.
    The average resultant cost per engine class is calculated by 
subtracting the average fuel savings from the average cost, see Table 
6. See Chapter 7 of the RIA for more details of this analysis.

  Table 6.--Engine Yearly Fuel Savings and Resultant Cost per Engine, Engine Costs Based on Uniform Annualized
                                                      Costs
                                                     [1998$]
----------------------------------------------------------------------------------------------------------------
                                                                     Cost per       Savings per   Resultant cost
                              Class                                   engine          engine        per engine
----------------------------------------------------------------------------------------------------------------
I...............................................................          $19.63          $14.22           $5.41
II..............................................................           12.64           55.72        ($43.08)
----------------------------------------------------------------------------------------------------------------

b. Cost-Effectiveness
    EPA has estimated the cost-effectiveness (i.e., the cost per ton of 
emission reduction) of the HC+NOX standard over the typical 
lifetime of the nonhandheld equipment that would be covered by today's 
rule. EPA has examined the cost-effectiveness by performing a 
nationwide cost-effectiveness analysis in which the net present value 
of the cost of compliance per year is divided by the fleet turnover. 
The resultant cost-effectiveness is $852 cost/ton HC+NOX 
without fuel savings and -$507 with fuel savings. Chapter 7 of the RIA 
contains a more detailed discussion of the cost-effectiveness analysis.
    The overall cost-effectiveness of this rule on HC+NOX 
emission reductions, with fuel savings, is shown in Table 7. Table 7 
contains the cost effectiveness of other nonroad rulemakings, which 
reflect fuel savings, to which the cost-effectiveness of this 
rulemaking can be compared.

     Table 7.--Cost-Effectiveness of the Phase 2 Standards With Fuel Savings Compared to Other Nonroad Rules
----------------------------------------------------------------------------------------------------------------
                                                              NPV cost/NPV
                          Standard                             ton  (With                 Pollutants
                                                              fuel savings)
----------------------------------------------------------------------------------------------------------------
Phase 2 Small SI Nonhandheld Engines <19 kW Phase 2........       -$507      HC+NOX
Small SI Engines <19 kW Phase 1............................         217      HC+NOX
Spark Ignition Marine Engines..............................        1000      HC

[[Page 15231]]

 
Nonroad CI Tier \2/3\ Standards............................     410-650      HC+NOX
----------------------------------------------------------------------------------------------------------------
Note: Not all in the same year dollars Cost Per Engine and Cost-Effectiveness.

IV. Public Participation

    The process for developing this final rule provided several 
opportunities for formal public comment. EPA published an Advance 
Notice of Proposed Rulemaking (ANPRM) in March 1997 (see 62 FR 14740, 
March 27, 1997) which announced the signing of two Statements of 
Principles (SOPs) with the small engine industry and several other 
interested parties. The ANPRM and included SOPs outlined programs which 
would increase the stringency of the small engine regulations compared 
to Phase 1 rules. Comments were received in response to this ANPRM 
which, in combination with the programs outlined in the ANPRM, formed 
the basis of the Notice of Proposed Rulemaking (NPRM) which was 
published in January 1998 (63 FR 3950, January 27, 1998). A public 
hearing was held on February 11, 1998 during which oral testimony was 
received on the proposal. Written comments were received during the 
formal comment period for the proposal and some additional written 
comments were received after the formal comment period closed. To 
expand upon comments received during the comment period and to address 
specific questions EPA had of the industry regarding technical 
feasibility and cost of some options for the final standards, EPA also 
solicited and received additional information after the close of the 
formal comment period and participated in a number of phone 
conversations and meetings with industry representatives for this 
purpose. All of this information including documentation of phone calls 
and meetings has been included in the docket for this final rule. Since 
considerable information was received after the formal comment period 
closed, a notice of availability of this supplemental information was 
also published on December 1, 1998 (63 FR 66081) alerting interested 
parties to the availability of this supplemental information. All 
information received, regardless of the date of receipt, was, to the 
maximum extent possible, considered in the development of this final 
rule. EPA has prepared a detailed Summary and Analysis of Comments 
document which describes the comments received since the publication of 
the NPRM and presents the Agency's response to each of these comments. 
The Summary and Analysis of Comments document is available in the 
docket for this rule.

V. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866, the Agency must assess whether this 
regulatory action is ``significant'' and therefore subject to Office of 
Management and Budget (OMB) review and the requirements of the 
Executive Order (58 FR 51735, Oct. 4, 1993). The order defines 
``significant regulatory action'' as any regulatory action that is 
likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or,
    (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.

Pursuant to the terms of Executive Order 12866, EPA has determined that 
this rulemaking is a ``significant regulatory action'' because the new 
standards and other regulatory provisions, are expected to have an 
annual effect on the economy in excess of $100 million. A Regulatory 
Impact Analysis has been prepared and is available in the docket 
associated with this rulemaking. This action was submitted to OMB for 
review as required by Executive Order 12866. Any written comments from 
OMB are in the public docket for this rulemaking.

B. Regulatory Flexibility

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this final rule. The Agency has 
also determined that this rule will not have a ``significant impact on 
a substantial number of small entities.''
    EPA has identified industries that are subject to this rule and has 
contacted small entities and small entity representatives to gain a 
better understanding of potential impacts of the Phase 2 program on 
their businesses. This information was useful in estimating potential 
impacts of this rule on affected small entities, the details of which 
are more fully discussed in Chapter 8 of the Final RIA. Small not-for-
profit organizations and small governmental jurisdictions are not 
expected to be impacted by this proposal. Thus EPA's impact analysis 
focuses on small businesses. For purposes of the impact analysis, 
``small business'' is defined by number of employees, according to 
published Small Business Administration (SBA) definitions.
    The Agency desires to minimize, to the extent appropriate, impacts 
on those companies which may be adversely affected, and to ensure that 
the emissions standards are achievable. Thus, flexibility provisions 
for the rule (discussed in section II.E.) were developed based on 
analysis of information gained through discussions with potentially 
affected small entities as well as analysis of other sources of 
information, as detailed in Chapter 8 of the Final RIA. Many of the 
flexibilities in today's rule should benefit both engine and equipment 
manufacturers qualifying as small.
    The economic impact of the final rule on small engine and equipment 
manufacturers was evaluated using a ``sales test'' approach which 
calculates annualized compliance costs as a function of sales revenue. 
The ratio is an indication of the severity of the potential impacts. 
EPA expects that, at worst, four small engine manufacturers and 70 
small equipment manufacturers would be impacted by more than one 
percent of their sales revenue. EPA

[[Page 15232]]

guidance provides that if fewer than 100 small entities are affected by 
more than one percent of their annual sales income, this does not 
amount to a ``significant impact on a substantial number'' of small 
entities. This base case analysis assumes that no manufacturers take 
advantage of the flexibilities being offered and that there would be no 
passthrough of costs in price increases, and can therefore be 
characterized as depicting worst-case impacts. Thus, EPA expects 
today's rule to have a minimal impact on small business entities.
    However, EPA is finalizing a number of flexibilities to further 
reduce the burden of compliance on small-volume engine or equipment 
manufacturers and small-volume product lines. The Agency received a 
number of comments from engine manufacturers which were generally 
supportive of the flexibilities initially proposed, but which suggested 
changes in production caps and other provisions. EPA has incorporated 
many of these suggested changes to the extent possible, keeping in mind 
equity and air quality considerations. Given the flexibilities being 
afforded to the engine and equipment manufacturers, the results of the 
analysis suggest that of those small entities analyzed, only three 
small business engine manufacturers and three small business equipment 
manufacturers would likely experience an impact of greater than one 
percent of their sales revenue. These six companies represent only 
about three percent of the total number of small business manufacturers 
on which the analysis was based. Other outreach activities have also 
indicated that the impact of today's rule can be minimized given 
sufficient lead time to incorporate the new technology with normal 
model changes. Again, the Agency has not attempted to quantify the 
beneficial impact on small business manufacturers of the lead time 
provided (which can include delaying the impact of these rules up until 
the 2010 model year).
    Some, but not all, of the flexibility provisions were considered in 
the impact assessment on small entities (see Chapter 8 of the Final 
RIA). Those flexibilities not considered include a hardship relief 
provision (described in section II.E.), which was developed to further 
ensure the standards can be achieved. Although it is difficult to 
project utilization of such a provision, EPA expects that it could 
further reduce the economic impact of the rule.
    The results of the impact analysis show minimal impacts on small 
businesses. EPA expects that such impacts will be negligible if small 
companies take advantage of the above mentioned flexibilities, and if 
companies are able to pass through most of their costs through to 
customers, as was considered likely by most small companies contacted. 
Many of these entities are involved in filling niche markets, and are 
thus in a better position to pass these costs along to the ultimate 
consumers. Furthermore, EPA's outreach activities with small entities 
indicated that many engine and equipment manufacturers have already 
begun the switch from side-valve engine technology to producing or 
using overhead valve engine technology for reasons other than today's 
rule. They should therefore not incur substantial additional costs as a 
result of this program. The ample lead time being afforded by today's 
rule should also allow for an orderly transition to the more advanced 
technology.

C. Paperwork Reduction Act

    The information collection requirements in this rule will be 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request (ICR) document has been prepared by EPA 
and a copy may be obtained from Sandy Farmer by mail at OPPE Regulatory 
Information Division; U.S. Environmental Protection Agency (2137); 401 
M St., SW., Washington, DC 20460, by e-mail at 
farmer.sandyepamail.epa.gov, or by calling (202) 260-2740. A copy may 
also be downloaded off the internet at http://www.epa.gov/icr. The 
information requirements are not effective until OMB approves them.
    The information planned to be collected via this final rule is 
necessary to assure that the engine manufacturers required to seek 
certification of their engines have fulfilled all the essential 
requirements of these regulations. In particular, this information will 
document the design of the engine for which certification is sought, 
the type(s) of equipment in which it is intended to be used and the 
emission performance of these engines based upon testing performed by 
or on behalf of the engine manufacturer. Additional, essential 
information is necessary to document the results of testing performed 
by the manufacturer under a mandated production line testing program to 
determine that the engines, as manufactured continue to have acceptable 
emission performance. Finally, if the manufacturer elects to conduct 
testing of in-use engines under a voluntary in-use testing program 
adopted in these final regulations, information is necessary to 
document the results of that in-use testing program.
    Table 8 provides a listing of this rulemaking's information 
collection requirements along with the appropriate information 
collection request (ICR) numbers. The cost of this burden has been 
incorporated into the cost estimate for this rule. The Agency has 
estimated that the public reporting burden for the collection of 
information required under this rule would average approximately 
156,816 hours annually for the industry at an estimated annual cost of 
$9,489,386. The hours spent by an individual manufacturer on 
information collection activities in any given year would be highly 
dependent upon manufacturer specific variables, such as the number of 
engine families, production changes, emission defects etc.

                     Table 8: Public Reporting Burden
------------------------------------------------------------------------
                 Type of information                    OMB Control No.
------------------------------------------------------------------------
Certification.......................................           2060-0338
Averaging, banking and trading......................           2060-0338
Production line testing.............................                 N/A
Pre-certification and testing exemption.............           2060-0007
Engine exclusion determination......................           2060-0124
Emission defect information.........................           2060-0048
Importation of nonconforming engines................           2060-0294
------------------------------------------------------------------------


[[Page 15233]]

    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This 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.

D. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act'') requires that the Agency prepare a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in expenditure by State, local, and tribal governments, 
in aggregate, or by the private sector, of $100 million or more in any 
one year. Section 203 requires the Agency to establish a plan for 
obtaining input from and informing, educating, and advising and small 
governments that may be significantly or uniquely affected by the rule.
    Under section 205 of the Unfunded Mandates Act, the Agency must 
identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule for which a budgetary impact statement must 
be prepared. The Agency must select from those alternatives the least 
costly, most cost-effective, or least burdensome alternative that 
achieves the objectives of the rule, unless the Agency explains why 
this alternative is not selected or the selection of this alternative 
is inconsistent with law.
    Because this final rule is estimated to result in the expenditure 
by State, local and tribal governments or the private sector of greater 
than $100 million in any one year, the Agency has prepared a budgetary 
impact statement and has addressed the selection of the least costly, 
most cost-effective or least burdensome alternative. While this rule 
does not impose enforceable obligations on state, local, and tribal 
governments, which do not produce small SI nonhandheld engines or 
equipment, EPA has estimated the rule to cost the private sector an 
annualized cost of $230 million per year. However, the Agency has 
appropriately considered cost issues in developing this rule as 
required by section 213(a)(3) of the Clean Air Act, and has designed 
the rule such that it will in EPA's view be a cost-effective program. 
Because small governments would not be significantly or uniquely 
affected by this rule, the Agency is not required to develop a plan 
with regard to small governments.
    The unfunded mandates statement under section 202 must include: (1) 
A citation of the statutory authority under which the rule is adopted; 
(2) an assessment of the costs and benefits of the rule including the 
effect of the mandate on health, safety and the environment; (3) where 
feasible, estimates of future compliance costs and disproportionate 
impacts upon particular geographic or social segments of the nation or 
industry; (4) where relevant, an estimate of the effect on the national 
economy; and (5) a description of the EPA's consultation with state, 
local, and tribal officials. Since this rule is estimated to impose 
costs to the private sector in excess of $100 million per year, it is 
considered a significant regulatory action. Therefore, EPA has prepared 
the following statement with respect to UMRA sections 202 through 205.
1. Statutory Authority
    This rule establishes standards for emissions of HC+NOX 
and CO from small nonroad SI nonhandheld engines pursuant to section 
213 of the Clean Air Act. Section 216 defines the terms ``nonroad 
engine'' and ``nonroad vehicle.'' Section 213(a)(3) requires these 
standards to achieve the greatest degree of emission reduction 
achievable through the application of technology which the 
Administrator determines will be available for the engines or vehicles 
to which such standards apply, giving appropriate consideration to the 
cost of applying such technology within the period of time available to 
manufacturers and to noise, energy, and safety factors associated with 
the application of such technology. Section 213(b) requires the 
standards to take effect at the earliest possible date considering the 
lead time necessary to permit the development and application of the 
requisite technology, giving appropriate consideration to the cost of 
compliance within such period and energy and safety. Section 213(d) 
provides that the standards shall be subject to sections 206, 207, 208 
and 209 of the CAA, with such modifications of the applicable 
regulations implementing such sections as the Administrator deems 
appropriate, and shall be enforced in the same manner as standards 
prescribed under section 202. Therefore, the statutory authority for 
this rule is as follows: sections 203, 204, 205, 206, 207, 208, 209, 
213, 215, 216, and 301(a) of the Clean Air Act, as amended. Moreover, 
this rule is being issued pursuant to a court order entered in Sierra 
Club v. Browner, No. 93-0124 and consolidated cases (D.D.C.).
2. Social Costs and Benefits
    The social costs and benefits of this rule are discussed in detail 
in sections III.A. and III.B. of this notice, and in Chapters 3 through 
8 of the Final RIA. Those discussions are incorporated into this 
statement by reference.
3. Effects on the National Economy
    As stated in the UMRA, macroeconomic effects tend to be measurable, 
in nationwide economic models, only if the economic effect of the 
regulation reaches 0.25 to 0.5 percent of gross domestic product (in 
the range of $15 billion to $30 billion). A regulation with a smaller 
aggregate effect is highly unlikely to have any measurable impact in 
macroeconomic terms unless it is highly focused on a particular 
geographic region or economic sector. Because the economic impact of 
the small SI nonhandheld engine Phase 2 rule is far less than these 
thresholds, no estimate of this rule's effect on the national economy 
has been conducted.
4. Consultation with Government Officials
    Today's rule does not create a mandate on state, local or tribal 
governments, since it does not impose any enforceable duties on these 
entities which do not produce small SI nonhandheld engines or 
equipment. Thus, EPA did not consult with state, local or tribal 
governments in the context of discussing mandated costs that would 
apply to such governments. However, EPA did consult with state 
governmental representatives, and with representatives of associations 
representing state air regulatory agencies, in the contexts of 
developing the most stringent achievable regulations and of addressing 
state ozone attainment needs. The consulted entities include the 
California ARB, the Wisconsin DNR, and NESCAUM. These consultations are 
documented in the

[[Page 15234]]

record for this rule, and are reflected and discussed in the SOPs, the 
ANPRM, the NPRM, the Notice of Availability, and today's final 
rulemaking notice.
5. Regulatory Alternatives Considered
    The Clean Air Act requires that standards under section 213(a)(3) 
result in the greatest degree of emission reductions achievable from 
available technology, considering costs, lead time, noise, energy and 
safety factors. While EPA has substantial discretion to weigh these 
different factors in setting standards under section 213(a)(3), EPA may 
not simply select the least costly, most cost-effective, or least 
burdensome method of achieving the objectives of the rule if such 
method does not obtain the greatest achievable emission reduction. In 
order to ensure the cost-effectiveness of this rule and still fulfill 
the intent of the Clean Air Act, EPA has adopted numerous flexibility 
provisions that reduce the burden of the Phase 2 program for small 
volume manufacturers and manufacturers of small volume models and 
families. These provisions are discussed in section II.E. of today's 
notice. Moreover, the technological options considered for the rule's 
standards and related provisions are discussed in section II.A. of the 
notice. Section II.B. discusses the ABT program adopted for the final 
rule, and section II.D. discusses the compliance program for Phase 2 
nonhandheld engines. In EPA's view, these discussions demonstrate that 
the Agency is adopting the most cost-effective rule allowed under 
section 213(a)(3) for nonhandheld Phase 2 engines, and the Agency 
incorporates them into this statement.

E. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit 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 United States prior 
to publication of the rule in the Federal Register. This rule is a 
``major rule'' as defined by 5 U.S.C. 804(2). This rule will be 
effective June 1, 1999.

F. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, Section 12(d) (15 
U.S.C. 272 note), directs EPA to use voluntary consensus standards in 
its regulatory activities unless doing so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This final rule involves technical standards. While commenters 
suggested the use of ISO 8178 test procedures for measuring emissions, 
the Agency has decided not to rely on the ISO procedures in this 
rulemaking. The Agency has determined that these procedures would be 
impractical because they rely too heavily on reference testing 
conditions. Since the test procedures in these regulations need to be 
used not only for certification, but also for production line testing, 
selective enforcement audits, and in-use testing, they must be broadly 
based. In-use testing is best done outside tightly controlled 
laboratory conditions so as to be representative of in-use conditions. 
EPA has determined that the ISO procedures are not sufficiently broadly 
usable in their current form for this program, and therefore cannot be 
adopted by reference. EPA has instead chosen to continue to rely on the 
procedures outlined in 40 CFR Part 90. EPA is hopeful that future ISO 
test procedures will be developed that are usable for the broad range 
of testing needed, and that such procedures could then be adopted by 
reference.

G. Executive Order 13045

    Executive Order 13045, entitled ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), applies to any rule that: (1) Was initiated after April 21, 1997 
or for which a Notice of Proposed Rulemaking was published after April 
21, 1998; (2) is determined to be ``economically significant'' as 
defined under Executive Order 12866; and (3) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets all 
three criteria, the Agency must evaluate the environmental health or 
safety effects of the planned rule on children; and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency.
    This final rule is not subject to Executive Order 13045, because 
substantive actions were initiated before April 21, 1997 and EPA 
published a Notice of Proposed Rulemaking before April 21, 1998. 
Moreover, this rulemaking does not involve risk assessments in which 
EPA would consider risks to infants and children. This is because 
today's rule is intended to result in the greatest achievable emissions 
reductions that are technically feasible, rather than to achieve a 
threshold of protecting public health and the environment. Therefore, 
EPA does not have reason to believe this action involves environmental 
health and safety risks that present a disproportionate risk to 
children.

H. Executive Order 12875: Enhancing the Intergovernmental Partnership

    Under Executive Order 12875, EPA may not issue a regulation that is 
not required by statute and that creates a mandate upon a State, local 
or tribal government, unless the Federal government provides the funds 
necessary to pay the direct compliance costs incurred by those 
governments, or EPA consults with those governments. If EPA complies by 
consulting, Executive Order 12875 requires EPA to provide to the Office 
of Management and Budget a description of the extent of EPA's prior 
consultation with representatives of affected State, local and tribal 
governments, the nature of their concerns, copies of any written 
communications from the governments, and a statement supporting the 
need to issue the regulation. In addition, Executive Order 12875 
requires EPA to develop an effective process permitting elected 
officials and other representatives of State, local and tribal 
governments ``to provide meaningful and timely input in the development 
of regulatory proposals containing significant unfunded mandates.''
    Today's rule does not create a mandate on State, local or tribal 
governments. The rule does not impose any enforceable duties on these 
entities, which do not produce small SI nonhandheld engines or 
equipment. Accordingly, the requirements of section 1(a) of Executive 
Order 12875 do not apply to this rule.

[[Page 15235]]

I. Executive Order 13084: Consultation and Coordination With Indian 
Tribal Governments

    Under Executive Order 13084, EPA may not issue a regulation that is 
not required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments, or EPA consults with those 
governments. If EPA complies by consulting, Executive Order 13084 
requires EPA to provide to the Office of Management and Budget a 
description of the extent of EPA's prior consultation with 
representatives of affected tribal governments and a statement 
supporting the need to issue the regulation. In addition, Executive 
Order 13084 requires EPA to develop an effective process permitting 
elected officials and other representatives of Indian tribal 
governments ``to provide meaningful and timely input in the development 
of regulatory policies on matters that significantly or uniquely affect 
their communities.''
    Today's rule does not significantly or uniquely affect the 
communities of Indian tribal governments because it imposes no 
enforceable obligations on them. Accordingly, the requirements of 
section 3(b) of Executive Order 13084 do not apply to this rule.

VI. Statutory Authority

    Authority for the actions set forth in this rule is granted to EPA 
by sections 202, 203, 204, 205, 206, 207, 208, 209, 213, 215, 216, and 
301(a) of the Clean Air Act as amended (42 U.S.C. 7521, 7522, 7523, 
7524, 7525, 7541, 7542, 7543, 7547, 7549, 7550, and 7601(a)).

List of Subjects in 40 CFR Part 90

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Confidential business information, Imports, 
Labeling, Nonroad source pollution, Reporting and record keeping 
requirements, Research, Warranties.

    Dated: March 3, 1999.
Carol M. Browner,
Administrator.
    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as follows:

PART 90--CONTROL OF EMISSIONS FROM NONROAD SPARK-IGNITION ENGINES

    1. The authority citation for part 90 continues to read as follows:

    Authority: Sections 203, 204, 205, 206, 207, 208, 209, 213, 215, 
216, and 301(a) of the Clean Air Act, as amended (42 U.S.C. 7522, 
7523, 7524, 7525, 7541, 7542, 7543, 7547, 7549, 7550, and 7601(a)).

Subpart A--General

    2. Section 90.1 is amended by removing the period at the end of 
paragraph (b)(5)(iv) and by adding a semicolon in its place and adding 
paragraphs (b)(6) and (d) and by revising paragraph (c) to read as 
follows:


Sec. 90.1  Applicability.

* * * * *
    (b) * * *
    (6) Engines that are used exclusively in emergency and rescue 
equipment where no certified engines are available to power the 
equipment safely and practically, but not including generators, 
alternators, compressors or pumps used to provide remote power to a 
rescue tool. The equipment manufacturer bears the responsibility to 
ascertain on an annual basis and maintain documentation available to 
the Administrator that no appropriate certified engine is available 
from any source.
    (c) Engines subject to the provisions of this subpart are also 
subject to the provisions found in subparts B through M of this part, 
except that subparts C, H, and M of this part apply only to Phase 2 
engines as defined in this subpart.
    (d) Certain text in this part is identified as pertaining to Phase 
1 or Phase 2 engines. Such text pertains only to engines of the 
specified Phase. If no indication of Phase is given, the text pertains 
to all engines, regardless of Phase.
    3. Section 90.3 is amended by adding the following definitions in 
alphabetical order to read as follows:


Sec. 90.3  Definitions.

* * * * *
    Aftertreatment means the passage of exhaust gases through a device 
or system such as a catalyst whose purpose is to chemically alter the 
gases prior to their release to the atmosphere.
* * * * *
    DF or df means deterioration factor.
    Eligible production or U.S. production means Phase 2 engines 
produced for purposes of being used in the United States, and includes 
any engine exported and subsequently imported in a new piece of 
equipment, but excludes any engine introduced into commerce, by itself 
or in a piece of equipment, for use in a state that has established its 
own emission requirements applicable to such engines pursuant to a 
waiver granted by EPA under section 209(e) of the Clean Air Act.
    Equipment manufacturer means a manufacturer of equipment using 
engines covered by the provisions of this Part who does not also 
manufacture engines covered by the provisions of this Part.
* * * * *
    Family Emission Limit or FEL means an emission level that is 
declared by the manufacturer to serve in lieu of an emission standard 
for the purposes of certification, production line testing, and 
Selective Enforcement Auditing for engines participating in the 
averaging, banking and trading program. A declared FEL will also serve 
in lieu of an emission standard where the manufacturer elects to 
perform voluntary in-use testing under this part. An FEL must be 
expressed to the same number of decimal places as the applicable 
emission standard.
* * * * *
    HC+NOX means total hydrocarbons plus oxides of nitrogen.
* * * * *
    New Class I engine family means any group of engines that employ a 
design that is different from engine families that the engine 
manufacturer has previously certified, and does not include any engine 
family certified on the basis of carryover data or any engine family 
that differs from another engine family solely as a result of a running 
change.
    NMHC+NOX means nonmethane hydrocarbons plus oxides of 
nitrogen.
* * * * *
    Overhead valve engine means an otto-cycle, four stroke engine in 
which the intake and exhaust valves are located above the combustion 
chamber within the cylinder head. Such engines are sometimes referred 
to as ``valve-in-head'' engines.
    Phase 1 engine means any handheld or nonhandheld engine, that was 
produced under a certificate of conformity issued under the regulations 
in this part to the standard levels defined for Phase 1.
    Phase 2 engine means any nonhandheld engine that was produced under 
a certificate of conformity under the regulations in this part to the 
standards defined for Phase 2 engines.
* * * * *

[[Page 15236]]

    Round, rounded or rounding means, unless otherwise specified, that 
numbers will be rounded according to ASTM-E29-93a, which is 
incorporated by reference in this part pursuant to Sec. 90.7.
* * * * *
    Side valve engine means an otto-cycle, four stroke engine in which 
the intake and exhaust valves are located to the side of the cylinder, 
not within the cylinder head. Such engines are sometimes referred to as 
``L-head'' engines.
    Small volume engine family means any nonhandheld engine family 
whose eligible production in a given model year are projected at the 
time of certification to be no more than 5,000 engines.
    Small volume engine manufacturer means, for nonhandheld engines, 
any engine manufacturer whose total eligible production of nonhandheld 
engines are projected at the time of certification of a given model 
year to be no more than 10,000 nonhandheld engines.
    Small volume equipment manufacturer means, for nonhandheld 
equipment, any equipment manufacturer whose production of nonhandheld 
equipment subject to regulation under this part or powered by engines 
regulated under this part, does not exceed 5,000 pieces for a given 
model year or annual production period excluding that equipment 
intended for introduction into commerce for use in a state that has 
established its own emission requirements applicable to such equipment 
or engines in such equipment, pursuant to a waiver granted by EPA under 
section 209(e) of the Clean Air Act.
    Small volume equipment model means, for nonhandheld equipment, any 
unique model of equipment whose production subject to regulations under 
this part or powered by engines regulated under this part, does not 
exceed 500 pieces for a given model year or annual production period 
excluding that equipment intended for introduction into commerce for 
use in a state that has established its own emission requirements 
applicable to such equipment or engines in such equipment, pursuant to 
a waiver granted by EPA under section 209(e) of the Clean Air Act.
* * * * *

Subpart B--Emission Standards and Certification Provisions

    4. Section 90.103 is amended by revising paragraph (a) introductory 
text, and paragraphs (a)(3) and (a)(5) and by adding paragraphs (a)(6) 
through (a)(8) to read as follows:


Sec. 90.103  Exhaust emission standards.

    (a) Exhaust emissions for new Phase 1 and Phase 2 nonroad spark 
ignition engines at or below 19 kilowatts (kW), shall not exceed the 
following levels. Throughout this part, NMHC+NOX standards 
are applicable only to natural gas fueled engines at the option of the 
manufacturer, in lieu of HC+NOX standards.

                                  Table 1.--Phase 1 Exhaust Emission Standards
                                            [Grams per kilowatt-hour]
----------------------------------------------------------------------------------------------------------------
                                          Hydrocarbons+oxides
        Engine displacement class             of nitrogen        Hydrocarbons   Carbon monoxide     Oxides of
                                                (HC+NOX)                                          nitrogen (NOX)
----------------------------------------------------------------------------------------------------------------
I.......................................               16.1    ...............              519  ...............
II......................................               13.4    ...............              519  ...............
III.....................................  ...................              295              805             5.36
IV......................................  ...................              241              805             5.36
V.......................................  ...................              161              603             5.36
----------------------------------------------------------------------------------------------------------------


                           Table 2.--Phase 2 Class I Engine Exhaust Emission Standards
                                            [grams per kilowatt-hour]
----------------------------------------------------------------------------------------------------------------
          Engine class                HC+NOX         NMHC+NOX           CO                Effective date
----------------------------------------------------------------------------------------------------------------
I...............................            16.1            14.8             610  August 1, 2007; in addition,
                                                                                   any Class I engine family
                                                                                   initially produced on or
                                                                                   after August 1, 2003 must
                                                                                   meet the Phase 2 Class I
                                                                                   standards before they may be
                                                                                   introduced into commerce.
----------------------------------------------------------------------------------------------------------------


                                       Table 3.--Phase 2 Class II Engine Exhaust Emission Standards by Model Year
                                                                ]grams per kilowatt-hour]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Model Year
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              2005  and
                 Engine Class                          Emission requirement             2001          2002          2003          2004          later
--------------------------------------------------------------------------------------------------------------------------------------------------------
II............................................  HC +NOX                                     18.0          16.6          15.0          13.6          12.1
                                                NMHC+NOX                                    16.7          15.3          14.0          12.7          11.3
                                                CO                                         610           610           610           610           610
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    (3) Notwithstanding paragraph (a)(2) of this section, two stroke 
engines used to power lawnmowers or other nonhandheld equipment may 
meet Phase 1 Class III, IV or V standards and requirements, as 
appropriate, through model year 2002 subject to the provisions of 
Sec. 90.107(e), (f) and (h). Such engines shall not be included in any 
computations of Phase 2 averaging, banking, or trading credits or 
eligible production.
* * * * *
    (5) Notwithstanding paragraph (a)(2) of this section, engines used 
exclusively to power products which are used

[[Page 15237]]

exclusively in wintertime, such as snowthrowers and ice augers, at the 
option of the engine manufacturer, need not certify to or comply with 
standards regulating emissions of HC, NOX, HC+NOX 
or NMHC+NOX, as applicable. If the manufacturer exercises 
the option to certify to standards regulating such emissions, such 
engines must meet such standards. If the engine is to be used in any 
equipment or vehicle other than an exclusively wintertime product such 
as a snowthrower or ice auger, it must be certified to the applicable 
standard regulating emissions of HC, NOX, HC+NOX 
or NMHC+NOX as applicable.
    (6) In lieu of certifying to the applicable Phase 2 standards, 
small volume engine manufacturers as defined in this part may, at their 
option, certify their engines families as Phase 1 engines until the 
2010 model year. Such engines shall not exceed the applicable Phase 1 
standards and are excluded from the averaging, banking and trading 
program and any related credit calculations. Beginning with the 2010 
model year, these engines must meet the applicable Phase 2 standards.
    (7) In lieu of certifying to the applicable Phase 2 standards, 
manufacturers of small volume engine families, as defined in this part 
may, at their option, certify their small volume engine families as 
Phase 1 engines until the 2010 model year. Such engines shall not 
exceed the applicable Phase 1 standards and are excluded from the 
averaging, banking and trading program and any related credit 
calculations. Beginning with the 2010 model year, these engines must 
meet the applicable Phase 2 standards.
    (8) Notwithstanding the standards shown in Table 3 of this section, 
the HC+NOX (NMHC+NOX) standard for Phase 2 Class 
II side valve engine families with annual production of 1000 or less 
shall be 24.0 g/kW-hr (22.0 g/kW-hr) for model years 2010 and later. 
Engines produced subject to this provision may not exceed this standard 
and are excluded from the averaging, banking and trading program and 
any related credit calculations.
* * * * *
    5. Section 90.104 is amended by adding introductory text and adding 
paragraphs (d) through (h) to read as follows:


Sec. 90.104  Compliance with emission standards.

    Paragraphs (a) through (c) of this section apply to Phase 1 engines 
only. Paragraphs (d) through (h) of this section apply only to Phase 2 
engines.
* * * * *
    (d) The exhaust emission standards (FELs, where applicable) for 
Phase 2 engines set forth in this part apply to the emissions of the 
engines for their full useful lives as determined pursuant to 
Sec. 90.105.
    (e) For all Phase 2 engines, if all test engines representing an 
engine family have emissions, when properly tested according to 
procedures in this part, less than or equal to each Phase 2 emission 
standard (FEL, where applicable) in a given engine class and given 
model year, when multiplicatively adjusted by the deterioration factor 
determined in this section, that family complies with that class of 
emission standards for purposes of certification. If any test engine 
representing an engine family has emissions adjusted multiplicatively 
by the deterioration factor determined in this section, greater than 
any one emission standard (FEL, where applicable) for a given 
displacement class, that family does not comply with that class of 
emission standards.
    (f) Each engine manufacturer must comply with all provisions of the 
averaging, banking and trading program outlined in subpart C of this 
part for each engine family participating in that program.
    (g)(1) Small volume engine manufacturers and small volume engine 
families may, at their option, take deterioration factors for 
HC+NOX (NMHC+NOX) and CO from Table 1 of this 
section, or they may calculate deterioration factors for 
HC+NOX (NMHC+NOX) and CO according to the process 
described in paragraph (h) of this section. For technologies that are 
not addressed in Table 1 of this section, the manufacturer may ask the 
Administrator to assign a deterioration factor prior to the time of 
certification.
    (2) Table 1 follows:

      Table 1: Nonhandheld Engine HC+NOX (NMHC+NOX) and CO Assigned Deterioration Factors for Small Volume
                                 Manufacturers and Small Volume Engine Families
----------------------------------------------------------------------------------------------------------------
                                           Side valve engines      Overhead valve
                                         ----------------------        engines
              Engine class                                     ----------------------        Engines with
                                             HC+NOX       CO       HC+NOX                   aftertreatment
                                           (NMHC+NOX)            (NMHC+NOX)     CO
----------------------------------------------------------------------------------------------------------------
Class I.................................           2.1     1.1           1.5     1.1  Dfs must be calculated
                                                                                       using the formula in Sec.
                                                                                        90.104(g)(3).
Class II................................           1.6     1.1           1.4     1.1
----------------------------------------------------------------------------------------------------------------

    (3) Formula for calculating deterioration factors for engines with 
aftertreatment:

DF = [(NE * EDF) - (CC * F)]/(NE - CC)

Where:
DF = deterioration factor
NE = new engine emission levels prior to the catalyst (g/kW-hr)
EDF = deterioration factor for engines without catalyst as shown in 
Table 1
CC = amount converted at 0 hours in g/kW-hr
F = 0.8 for HC (NMHC) and 0.0 for NOX for Class I and II 
engines
F = 0.8 for CO for all classes of engines

    (h)(1) Manufacturers shall obtain an assigned df or calculate a df, 
as appropriate, for each regulated pollutant for all Phase 2 engine 
families. Such dfs shall be used for certification, production line 
testing, and Selective Enforcement Auditing.
    (2) For engines not using assigned dfs from Table 1 of this 
section, dfs shall be determined as follows:
    (i) On at least one test engine representing the configuration 
chosen to be the most likely to exceed HC+NOX 
(NMHC+NOX) emission standards, (FELs where applicable), and 
constructed to be representative of production engines pursuant to 
Sec. 90.117, conduct full Federal test procedure emission testing 
pursuant to the regulations of subpart E of this part at the number of 
hours representing stabilized emissions pursuant to Sec. 90.118. If 
more than one engine is tested, average the results and round to the 
same number of decimal places contained in the applicable standard, 
expressed to one additional significant figure;
    (ii) Conduct such emission testing again following aging the 
engine. The aging procedure should be designed to

[[Page 15238]]

allow the manufacturer to appropriately predict the in-use emission 
deterioration expected over the useful life of the engine, taking into 
account the type of wear and other deterioration mechanisms expected 
under typical consumer use which could affect emissions performance. If 
more than one engine is tested, average the results and round to the 
same number of decimal places contained in the applicable standard, 
expressed to one additional significant figure;
    (iii) Divide the full useful life emissions (average emissions, if 
applicable) for each regulated pollutant by the stabilized emissions 
(average emissions, if applicable) and round to two significant 
figures. The resulting number shall be the df, unless it is less than 
1.0, in which case the df shall be 1.0.
    (iv) At the manufacturer's option additional emission test points 
can be scheduled between the stabilized emission test point and the 
full useful life test period. If intermediate tests are scheduled, the 
test points must be evenly spaced over the full useful life period 
(plus or minus 2 hours) and one such test point shall be at one-half of 
full useful life (plus or minus 2 hours). For each pollutant 
HC+NOX (NMHC+NOX) and CO, a line must be fitted 
to the data points treating the initial test as occurring at hour zero, 
and using the method of least-squares. The deterioration factor is the 
calculated emissions durability period divided by the calculated 
emissions at zero hours.
    (3) EPA may reject a df if it has evidence that the df is not 
appropriate for that family within 30 days of receipt from the 
manufacturer. The manufacturer must retain actual emission test data to 
support its choice of df and furnish that data to the Administrator 
upon request. Manufacturers may request approval by the Administrator 
of alternate procedures for determining deterioration. Any submitted df 
not rejected by EPA within 30 days shall be deemed to have been 
approved.
    (4) Calculated deterioration factors may cover families and model 
years in addition to the one upon which they were generated if the 
manufacturer submits a justification acceptable to the Administrator in 
advance of certification that the affected engine families can be 
reasonably expected to have similar emission deterioration 
characteristics.
    (5) Engine families that undergo running changes need not generate 
a new df if the manufacturer submits a justification acceptable to the 
Administrator concurrent with the running change that the affected 
engine families can be reasonably expected to have similar emission 
deterioration characteristics.
    6. Section 90.105 is revised to read as follows:


Sec. 90.105  Useful life periods for Phase 2 engines.

    (a) Manufacturers shall declare the applicable useful life category 
for each engine family at the time of certification as described in 
this section. Such category shall be the category which most closely 
approximates the expected useful lives of the equipment into which the 
engines are anticipated to be installed as determined by the engine 
manufacturer. Manufacturers shall retain data appropriate to support 
their choice of useful life category for each engine family. Such data 
shall be furnished to the Administrator upon request.
    (1) For nonhandheld engines: Manufacturers shall select a useful 
life category from Table 1 of this section at the time of 
certification.
    (2) Table 1 follows:

     Table 1: Useful Life Categories for Nonhandheld Engines [hours]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Class I...........................................    125    250     500
Class II..........................................    250    500    1000
------------------------------------------------------------------------

    (3) [Reserved]
    (4) [Reserved]
    (5) Data to support a manufacturer's choice of useful life 
category, for a given engine family, may include but are not limited 
to:
    (i) Surveys of the life spans of the equipment in which the subject 
engines are installed;
    (ii) Engineering evaluations of field aged engines to ascertain 
when engine performance deteriorates to the point where usefulness and/
or reliability is impacted to a degree sufficient to necessitate 
overhaul or replacement;
    (iii) Warranty statements and warranty periods;
    (iv) Marketing materials regarding engine life;
    (v) Failure reports from engine customers; and
    (vi) Engineering evaluations of the durability, in hours, of 
specific engine technologies, engine materials or engine designs.
    (b) [Reserved]
    7. Section 90.106 is amended by revising paragraph (a) and adding 
new paragraph (b)(3) to read as follows:


Sec. 90.106  Certificate of conformity.

    (a)(1) Except as provided in Sec. 90.2(b), every manufacturer of 
new engines produced during or after model year 1997 must obtain a 
certificate of conformity covering such engines; however, engines 
manufactured during an annual production period beginning prior to 
September 1, 1996 are not required to be certified.
    (2) Except as required in paragraph (b)(3) of this section, Class 
II engines manufactured during an annual production period beginning 
prior to September 1, 2000 are not required to meet Phase 2 
requirements.
    (b) * * *
    (3) Manufacturers who commence an annual production period for a 
Class II engine family between January 1, 2000 and September 1, 2000 
must meet Phase 2 requirements for that family only if that production 
period will exceed 12 months in length.
* * * * *
    8. Section 90.107 is amended by removing the period at the end of 
paragraph (d)(5) and adding a semicolon in its place, by removing 
``and'' at the end of paragraph (d)(9), by removing the period at the 
end of paragraph (d)(10) and adding a semicolon in its place, and by 
adding new paragraph (d)(11) to read as follows:


Sec. 90.107  Application for certification.

* * * * *
    (d) * * *
    (11) This paragraph (d)(11) is applicable only to Phase 2 engines.
    (i) Engine manufacturers participating in the averaging, banking 
and trading program as described in subpart C of this part shall 
declare the applicable Family Emission Limit (FEL) for 
HC+NOX (NMHC+NOX).
    (ii) Provide the applicable useful life as determined under 
Sec. 90.105.
* * * * *
    9. Section 90.108 is amended by adding paragraphs (c) and (d) to 
read as follows:


Sec. 90.108  Certification.

* * * * *
    (c) For certificates issued for engine families included in the 
averaging, banking and trading program as described in subpart C of 
this part:
    (1) Failure to comply with all applicable averaging, banking and 
trading provisions in this part will be considered to be a failure to 
comply with the terms and conditions upon which the certificate was 
issued, and the certificate may be determined to be void ab initio.
    (2) The manufacturer shall bear the burden of establishing to the 
satisfaction of the Administrator that the conditions upon which the 
certificate was granted were satisfied or waived.

[[Page 15239]]

    (d) The Administrator may, upon request by a manufacturer, waive 
any requirement of this part otherwise necessary for the issuance of a 
certificate. The Administrator may set such conditions in a certificate 
as he or she deems appropriate to assure that the waived requirements 
are either satisfied or are demonstrated, for the subject engines, to 
be inappropriate, irrelevant or met by the application of a different 
requirement under this chapter. The Administrator may indicate on such 
conditional certificates that failure to meet these conditions may 
result in suspension or revocation or the voiding ab initio of the 
certificate.
    10. Section 90.113 is amended by revising the section heading and 
adding two sentences to the beginning of paragraph (a) to read as 
follows:


Sec. 90.113  In-use testing program for Phase 1 engines.

    (a) This section applies only to Phase 1 engines. In-use testing 
provisions for Phase 2 engines are found in subpart M of this part. * * 
*
* * * * *
    11. Section 90.114 is amended by removing ``and'' at the end of 
paragraph (c)(9), by removing the period at the end of paragraph 
(c)(10) and adding a semicolon in its place and by adding new 
paragraphs (c)(11) and (f) to read as follows:


Sec. 90.114  Requirement of certification--engine information label.

* * * * *
    (c) * * *
    (11) For Phase 2 engines, the useful life category as determined by 
the manufacturer pursuant to Sec. 90.105. Such useful life category 
shall be shown by one of the following statements to be appended to the 
statement required under paragraph (c)(7) of this section:
    (i) ``EMISSIONS COMPLIANCE PERIOD: [useful life] HOURS''; or
    (ii) ``EMISSIONS COMPLIANCE PERIOD: CATEGORY [fill in C, B or A as 
indicated and appropriate from the tables in Sec. 90.105], REFER TO 
OWNER'S MANUAL FOR FURTHER INFORMATION'';
* * * * *
    (f) Manufacturers electing to use the labeling language of 
paragraph (c)(11)(ii) of this section must provide in the documents 
intended to be conveyed to the ultimate purchaser, the statement:
    (1) For nonhandheld engines: The Emissions Compliance Period 
referred to on the Emissions Compliance label indicates the number of 
operating hours for which the engine has been shown to meet Federal 
emission requirements. For engines less than 225 cc displacement, 
Category C=125 hours, B=250 hours and A=500 hours. For engines of 225 
cc or more, Category C=250 hours, B=500 hours and A=1000 hours.
    (2) [Reserved]
    (3) The manufacturer must provide, in the same document as the 
statement in paragraph (f)(1) of this section, a statement of the 
engine's displacement or an explanation of how to readily determine the 
engine's displacement. The Administrator may approve alternate language 
to the statement in paragraph (f)(1) of this section, provided that the 
alternate language provides the ultimate purchaser with a clear 
description of the number of hours represented by each of the three 
letter categories for the subject engine's displacement.
    12. Section 90.116 is amended by revising paragraph (d)(6) and 
(d)(7) and adding paragraphs (d)(8) through (d)(10) to read as follows:


Sec. 90.116  Certification procedure--determining engine displacement, 
engine class, and engine families.

* * * * *
    (d) * * *
    (6) The location of valves, where applicable, with respect to the 
cylinder (e.g. side valves or overhead valves);
    (7) The number of catalytic converters, location, volume and 
composition;
    (8) The thermal reactor characteristics;
    (9) The fuel required (e.g. gasoline, natural gas, LPG); and
    (10) The useful life category.
* * * * *
    13. Section 90.117 is amended by revising paragraph (a) to read as 
follows:


Sec. 90.117  Certification procedure--test engine selection.

    (a) For Phase 1 engines, the manufacturer must select, from each 
engine family, a test engine that the manufacturer determines to be 
most likely to exceed the emission standard. For Phase 2 engines, the 
manufacturer must select, from each engine family, a test engine of a 
configuration that the manufacturer determines to be most likely to 
exceed the HC+NOX (NMHC+NOX) Family Emission 
Limit (FEL), or HC+NOX (NMHC+NOX) standard if no 
FEL is applicable.
* * * * *
    14. Section 90.118 is amended by revising the section heading and 
adding a new paragraph (e) to read as follows:


Sec. 90.118  Certification procedure--service accumulation and usage of 
deterioration factors.

* * * * *
    (e) For purposes of establishing whether Phase 2 engines comply 
with applicable exhaust emission standards or FELs, the test results 
for each regulated pollutant as measured pursuant to Sec. 90.119 shall 
be multiplied by the applicable df determined under Sec. 90.104 (g) or 
(h). The product of the two numbers shall be rounded to the same number 
of decimal places contained in the applicable standard, and compared 
against the applicable standard or FEL, as appropriate.
    15. Section 90.120 is amended by adding paragraph (c) to read as 
follows:


Sec. 90.120  Certification procedure--use of special test procedures.

* * * * *
    (c) Optional procedures approved during Phase 1 can be carried over 
to Phase 2, following advance approval by the Administrator, to the 
extent the alternate procedure continues to yield results equal to the 
results from the specified test procedures in subpart E of this part.
    16. Section 90.122 is amended by revising the first sentence of 
paragraph (a) and adding paragraph (d)(4) as follows:


Sec. 90.122  Amending the application and certificate of conformity.

    (a) The engine manufacturer must notify the Administrator when 
either an engine is to be added to a certificate of conformity, an FEL 
is to be changed, or changes are to be made to a product line covered 
by a certificate of conformity. * * *
* * * * *
    (d)* * *
    (4) If the Administrator determines that a revised FEL meets the 
requirements of this subpart and the Act, the appropriate certificate 
of conformity will be amended, or a new certificate will be issued to 
reflect the revised FEL. The certificate of conformity is revised 
conditional upon compliance with Sec. 90.207(b).
* * * * *
    17. Subpart C, which was formerly reserved, is added to part 90 to 
read as follows:

Subpart C--Certification Averaging, Banking, and Trading Provisions

Sec.
90.201  Applicability.
90.202  Definitions.
90.203  General provisions.
90.204  Averaging.
90.205  Banking.
90.206  Trading.
90.207  Credit calculation and manufacturer compliance with emission 
standards.
90.208  Certification.

[[Page 15240]]

90.209  Maintenance of records.
90.210  End-of-year and final reports.
90.211  Request for hearing.

Subpart C--Certification Averaging, Banking, and Trading Provisions


Sec. 90.201  Applicability.

    The requirements of this subpart C are applicable to all Phase 2 
spark-ignition engines subject to the provisions of subpart A of this 
part except as provided in Sec. 90.103(a). These provisions are not 
applicable to any Phase 1 engines. Participation in the averaging, 
banking and trading program is voluntary, but if a manufacturer elects 
to participate, it must do so in compliance with the regulations set 
forth in this subpart. The provisions of this subpart are applicable 
for HC+NOX (NMHC+NOX) emissions but not for CO 
emissions.


Sec. 90.202  Definitions.

    The definitions in subpart A of this part apply to this subpart. 
The following definitions also apply to this subpart:
    Averaging means the exchange of emission credits between engine 
families within a given manufacturer's product line.
    Banking means the retention of emission credits by the manufacturer 
generating the emission credits or obtaining such credits through 
trading, for use in future model year averaging or trading as permitted 
in this part.
    Emission credits represent the amount of emission reduction or 
exceedance, by an engine family, below or above the applicable 
HC+NOX (NMHC+NOX) emission standard, 
respectively. FELs below the standard create ``positive credits,'' 
while FELs above the standard create ``negative credits.'' In addition, 
``projected credits'' refer to emission credits based on the projected 
applicable production volume of the engine family. ``Reserved credits'' 
are emission credits generated within a model year waiting to be 
reported to EPA at the end of the model year. ``Actual credits'' refer 
to emission credits based on actual applicable production volume as 
contained in the end-of-year reports submitted to EPA. Some or all of 
these credits may be revoked if EPA review of the end-of-year reports 
or any subsequent audit action(s) reveals problems or errors of any 
nature with credit computations.
    Trading means the exchange of emission credits between 
manufacturers.


Sec. 90.203  General provisions.

    (a) The certification averaging, banking, and trading provisions 
for HC+NOX and NMHC+NOX emissions from eligible 
engines are described in this subpart.
    (b) An engine family may use the averaging, banking and trading 
provisions for HC+NOX and NMHC+NOX emissions if 
it is subject to regulation under this part with certain exceptions 
specified in paragraph (c) of this section. HC+NOX and 
NMHC+NOX credits shall be interchangeable subject to the 
limitations on credit generation, credit usage, and other provisions 
described in this subpart.
    (c) A manufacturer shall not include in its calculation of credit 
generation and may exclude from its calculation of credit usage, any 
new engines:
    (1) Which are intended to be exported, unless the manufacturer has 
reason or should have reason to believe that such engines have been or 
will be imported in a piece of equipment; or
    (2) Which are subject to state engine emission standards pursuant 
to a waiver granted by EPA under section 209(e) of the Act, unless the 
manufacturer demonstrates to the satisfaction of the Administrator that 
inclusion of these engines in averaging, banking and trading is 
appropriate.
    (d) For an engine family using credits, a manufacturer may, at its 
option, include its entire production of that engine family in its 
calculation of credit usage for a given model year.
    (e)(1) A manufacturer may certify engine families at Family 
Emission Limits (FELs) above or below the applicable emission standard 
subject to the limitation in paragraph (f) of this section, provided 
the summation of the manufacturer's projected balance of credits from 
all credit transactions for all engine classes in a given model year is 
greater than or equal to zero, as determined under Sec. 90.207.
    (2) A manufacturer of an engine family with an FEL exceeding the 
applicable emission standard must obtain positive emission credits 
sufficient to address the associated credit shortfall via averaging, 
banking, or trading.
    (3) An engine family with an FEL below the applicable emission 
standard may generate positive emission credits for averaging, banking, 
or trading, or a combination thereof.
    (4) In the case of a Selective Enforcement Audit (SEA) failure, 
credits may be used to cover subsequent production of engines for the 
family in question if the manufacturer elects to recertify to a higher 
FEL. Credits may not be used to remedy a nonconformity determined by an 
SEA, except that the Administrator may permit the use of credits to 
address a nonconformity determined by an SEA where the use of such 
credits is one component of a multi-part remedy for the previously 
produced engines and the remedy, including the use of credits and the 
quantity of credits being used, is such that the Administrator is 
satisfied that the manufacturer has strong and lasting incentive to 
accurately verify its new engine emission levels and will set or reset 
its FELs for current and future model years so that production line 
compliance is assured.
    (5) In the case of a production line testing (PLT) failure pursuant 
to subpart H of this part, a manufacturer may revise the FEL based upon 
production line testing results obtained under subpart H of this part 
and upon Administrator approval pursuant to Sec. 90.122(d). The 
manufacturer may use credits to cover both past production and 
subsequent production of the engines as needed as allowed under 
Sec. 90.207(c).
    (f) No Phase 2 engine family may have a HC + NOX FEL 
that is greater than 32.2 g/kW-hr for Class I engines and 26.8 g/kW-hr 
for Class II engines.
    (g)(1) Credits generated in a given model year by an engine family 
subject to the Phase 2 emission requirements may only be used in 
averaging, banking or trading, as appropriate, for any other engine 
family for which the Phase 2 requirements are applicable. Credits 
generated in one model year may not be used for prior model years, 
except as allowed under Sec. 90.207(c).
    (2) For the 2005 model year and for each subsequent model year, 
manufacturers of Class II engines must provide a demonstration that the 
production weighted average FEL for HC+NOX (including 
NMHC+NOX FELs), for all of the manufacturer's Class II 
engines, will not exceed 13.6 g/kW-hr for the 2005 model year, 13.1 g/
kW-hr for the 2006 model year and 12.6 g/kW-hr for the 2007 and each 
subsequent Phase 2 model year. Such demonstration shall be subject to 
the review and approval of the Administrator, shall be provided at the 
time of the first Class II certification of that model year and shall 
be based on projected eligible production for that model year.
    (h) Manufacturers must demonstrate compliance under the averaging, 
banking, and trading provisions for a particular model year by 270 days 
after the end of the model year. Except as provided in Sec. 90.207(c), 
an engine family generating negative credits for which the manufacturer 
does not obtain or generate an adequate number of positive credits by 
that date from the same or previous model year engines will violate the 
conditions of the

[[Page 15241]]

certificate of conformity. The certificate of conformity may be voided 
ab initio pursuant to Sec. 90.123 for this engine family.


Sec. 90.204  Averaging.

    (a) Negative credits from engine families with FELs above the 
applicable emission standard must be offset by positive credits from 
engine families having FELs below the applicable emission standard, as 
allowed under the provisions of this subpart. Averaging of credits in 
this manner is used to determine compliance under Sec. 90.207(b).
    (b) Cross-class averaging of credits is allowed across all classes 
of nonroad spark-ignition nonhandheld engines at or below 19 kW.
    (c) Credits used in averaging for a given model year may be 
obtained from credits generated in the same model year by another 
engine family, credits banked in previous model years, or credits of 
the same or previous model year obtained through trading. The 
restrictions of this paragraph notwithstanding, credits from a given 
model year may be used to address credit needs of previous model year 
engines as allowed under Sec. 90.207(c).
    (d) The use of credits generated under the early banking provisions 
of Sec. 90.205(b) is subject to regulations under this subpart.


Sec. 90.205  Banking.

    (a)(1) Beginning August 1, 2007, a manufacturer of a Class I engine 
family with an FEL below the applicable emission standard for a given 
model year may bank credits in that model year for use in averaging and 
trading. For new Class I engine families initially produced during the 
period starting August 1, 2003 through July 31, 2007, a manufacturer of 
a Class I engine family with an FEL below the applicable emission 
standard for a given model year may bank credits in that model year for 
use in averaging and trading.
    (2) [Reserved]
    (3) Beginning with the 2001 model year, a manufacturer of a Class 
II engine family with an FEL below the applicable emission standard for 
a given model year may bank credits in that model year for use in 
averaging and trading.
    (4) [Reserved]
    (5) [Reserved]
    (6) Negative credits may be banked only according to the 
requirements under Sec. 90.207(c).
    (b)(1) For Class I engine families initially produced during the 
period beginning with the 1999 model year and prior to August 1, 2003, 
a manufacturer may bank early credits for engines with HC + 
NOX FELs below 16.1 g/kW-hr. All early credits for such 
Class I engines shall be calculated against a HC + NOX level 
of 20.5 g/kW-hr and may continue to be calculated against the 20.5 g/
kW-hr level until August 1, 2007.
    (2) Beginning with the 1999 model year and prior to the applicable 
date listed in paragraph (a) of this section for Class II engines, a 
manufacturer may bank early credits for all Class II engines with 
HC+NOX FELs below 12.1 g/kW-hr. All early credits for Class 
II engines shall be calculated against a HC+NOX level of 
18.0 g/kW-hr.
    (3) [Reserved]
    (4) [Reserved]
    (5) [Reserved]
    (6) Engines certified under the early banking provisions of this 
paragraph are subject to all of the requirements of this part 
applicable to Phase 2 engines.
    (c) A manufacturer may bank actual credits only after the end of 
the model year and after EPA has reviewed the manufacturer's end-of-
year reports. During the model year and before submittal of the end-of-
year report, credits originally designated in the certification process 
for banking will be considered reserved and may be redesignated for 
trading or averaging in the end-of-year report and final report.
    (d) Credits declared for banking from the previous model year that 
have not been reviewed by EPA may be used in averaging or trading 
transactions. However, such credits may be revoked at a later time 
following EPA review of the end-of-year report or any subsequent audit 
actions.


Sec. 90.206  Trading.

    (a) An engine manufacturer may exchange emission credits with other 
engine manufacturers in trading.
    (b) Credits for trading can be obtained from credits banked in 
previous model years or credits generated during the model year of the 
trading transaction.
    (c) Traded credits can be used for averaging, banking, or further 
trading transactions.
    (d) Traded credits are subject to the limitations on use for past 
model years, as set forth in Sec. 90.204(c).
    (e) In the event of a negative credit balance resulting from a 
transaction, both the buyer and the seller are liable, except in cases 
involving fraud. Certificates of all engine families participating in a 
negative trade may be voided ab initio pursuant to Sec. 90.123.


Sec. 90.207  Credit calculation and manufacturer compliance with 
emission standards.

    (a) For each engine family, HC+NOX [NMHC+NOX] 
certification emission credits (positive or negative) are to be 
calculated according to the following equation and rounded to the 
nearest gram. Consistent units are to be used throughout the equation.

Credits = Production x (Standard--FEL) x Power x Useful life x Load 
Factor
Where:

Production = eligible production as defined in this part. Annual 
production projections are used to project credit availability for 
initial certification. Eligible production volume is used in 
determining actual credits for end-of-year compliance determination.
Standard = the current and applicable Small SI engine HC+NOX 
(NMHC+NOX) emission standard in grams per kilowatt hour as 
determined in Sec. 90.103 or, for early credits, the applicable 
emission level as specified in Sec. 90.205(b).
FEL = the family emission limit for the engine family in grams per 
kilowatt hour.
Power = the maximum modal power of the certification test engine, in 
kilowatts, as calculated from the applicable federal test procedure as 
described in this part.
Useful Life = the useful life in hours corresponding to the useful life 
category for which the engine family was certified.
Load Factor = 47 percent (i.e., 0.47) for Test Cycle A and Test Cycle 
B. For approved alternate test procedures, the load factor must be 
calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR30MR99.000


[[Page 15242]]


Where:

%MTT modei = percent of the maximum FTP torque for mode i.
%MTS modei = percent of the maximum FTP engine rotational 
speed for mode i.
WF modei = the weighting factor for mode i.

    (b) Manufacturer compliance with the emission standards is 
determined on a corporate average basis at the end of each model year. 
A manufacturer is in compliance when the sum of positive and negative 
emission credits it holds is greater than or equal to zero, except that 
the sum of positive and negative credits may be less than zero as 
allowed under paragraph (c) of this section.
    (c) If, as a result of production line testing as required in 
subpart H of this part, an engine family is determined to be in 
noncompliance pursuant to Sec. 90.710, the manufacturer may raise its 
FEL for past and future production as necessary. Further, a 
manufacturer may carry a negative credit balance (known also as a 
credit deficit) for the subject class and model year and for the next 
three model years. The credit deficit may be no larger than that 
created by the nonconforming family. If the credit deficit still exists 
after the model year following the model year in which the 
nonconformity occurred, the manufacturer must obtain and apply credits 
to offset the remaining credit deficit at a rate of 1.2 grams for each 
gram of deficit within the next two model years. The provisions of this 
paragraph are subject to the limitations in paragraph (d) of this 
section.
    (d) Regulations elsewhere in this part notwithstanding, if an 
engine manufacturer experiences two or more production line testing 
failures pursuant to the regulations in subpart H of this part in a 
given model year, the manufacturer may raise the FEL of previously 
produced engines only to the extent that such engines represent no more 
than 10 percent of the manufacturer's total eligible production for 
that model year, as determined on the date when the FEL is adjusted. 
For any additional engine families determined to be in noncompliance, 
the manufacturer must conduct offsetting projects approved in advance 
by the Administrator.
    (e) If, as a result of production line testing under this subpart, 
a manufacturer desires to lower its FEL it may do so subject to 
Sec. 90.708(c).
    (f) Except as allowed at paragraph (c) of this section, when a 
manufacturer is not in compliance with the applicable emission standard 
by the date 270 days after the end of the model year, considering all 
credit calculations and transactions completed by then, the 
manufacturer will be in violation of the regulations in this part and 
EPA may, pursuant to Sec. 90.123, void ab initio the certificates of 
engine families for which the manufacturer has not obtained sufficient 
positive emission credits.


Sec. 90.208  Certification.

    (a) In the application for certification a manufacturer must:
    (1) Submit a statement that the engines for which certification is 
requested will not, to the best of the manufacturer's belief, cause the 
manufacturer to be in noncompliance under Sec. 90.207(b) when all 
credits are calculated for the manufacturer's engine families.
    (2) Declare an FEL for each engine family for HC+NOX 
(NMHC+NOX). The FEL must have the same number of significant 
digits as the emission standard.
    (3) Indicate the projected number of credits generated/needed for 
this family; the projected applicable eligible annual production 
volume, and the values required to calculate credits as given in 
Sec. 90.207.
    (4) Submit calculations in accordance with Sec. 90.207 of projected 
emission credits (positive or negative) based on annual production 
projections for each family.
    (5) (i) If the engine family is projected to have negative emission 
credits, state specifically the source (manufacturer/engine family or 
reserved) of the credits necessary to offset the credit deficit 
according to projected annual production.
    (ii) If the engine family is projected to generate credits, state 
specifically (manufacturer/engine family or reserved) where the 
projected annual credits will be applied.
    (iii) The manufacturer may supply the information required by this 
section in the form of a spreadsheet detailing the manufacturer's 
annual production plans and the credits generated or consumed by each 
engine family.
    (b) All certificates issued are conditional upon manufacturer 
compliance with the provisions of this subpart both during and after 
the model year of production.
    (c) Failure to comply with all provisions of this subpart will be 
considered to be a failure to satisfy the conditions upon which the 
certificate was issued, and the certificate may be determined to be 
void ab initio pursuant to Sec. 90.123.
    (d) The manufacturer bears the burden of establishing to the 
satisfaction of the Administrator that the conditions upon which the 
certificate was issued were satisfied or waived.
    (e) Projected credits based on information supplied in the 
certification application may be used to obtain a certificate of 
conformity. However, any such credits may be revoked based on review of 
end-of-year reports, follow-up audits, and any other verification steps 
considered appropriate by the Administrator.


Sec. 90.209  Maintenance of records.

    (a) The manufacturer must establish, maintain, and retain the 
following adequately organized and indexed records for each engine 
family:
    (1) EPA engine family identification code;
    (2) Family Emission Limit (FEL) or FELs where FEL changes have been 
implemented during the model year;
    (3) Maximum modal power for the certification test engine;
    (4) Projected production volume for the model year; and
    (5) Records appropriate to establish the quantities of engines that 
constitute eligible production as defined in Sec. 90.3 for each FEL.
    (b) Any manufacturer producing an engine family participating in 
trading reserved credits must maintain the following records on an 
annual basis for each such engine family:
    (1) The engine family;
    (2) The actual applicable production volume;
    (3) The values required to calculate credits as given in 
Sec. 90.207;
    (4) The resulting type and number of credits generated/required;
    (5) How and where credit surpluses are dispersed; and
    (6) How and through what means credit deficits are met.
    (c) The manufacturer must retain all records required to be 
maintained under this section for a period of eight years from the due 
date for the end-of-model year report. Records may be retained as hard 
copy or reduced to microfilm, ADP diskettes, and so forth, depending on 
the manufacturer's record retention procedure; provided, that in every 
case all information contained in the hard copy is retained.
    (d) Nothing in this section limits the Administrator's discretion 
in requiring the manufacturer to retain additional records, or submit 
information not specifically required by this section, if otherwise 
permitted by law.
    (e) Pursuant to a request made by the Administrator, the 
manufacturer must submit to the Administrator the information that the 
manufacturer is required to retain.
    (f) EPA may, pursuant to Sec. 90.123, void ab initio a certificate 
of conformity

[[Page 15243]]

for an engine family for which the manufacturer fails to retain the 
records required in this section or to provide such information to the 
Administrator upon request.


Sec. 90.210  End-of-year and final reports.

    (a) End-of-year and final reports must indicate the engine family, 
the engine class, the actual production volume, the values required to 
calculate credits as given in Sec. 90.207, and the number of credits 
generated/required. Manufacturers must also submit how and where credit 
surpluses were dispersed (or are to be banked) and/or how and through 
what means credit deficits were met. Copies of contracts related to 
credit trading must be included or supplied by the broker, if 
applicable. The report must include a calculation of credit balances to 
show that the credit summation for all engines is equal to or greater 
than zero (or less than zero in cases of negative credit balances as 
permitted in Sec. 90.207(c)). For model year 2005 and later, the report 
must include a calculation of the production weighted average 
HC+NOX (including NMHC+NOX) FEL for Class II 
engine families to show compliance with the provisions of 
Sec. 90.203(g)(2).
    (b) The calculation of eligible production for end-of-year and 
final reports must be based on engines produced for the United States 
market, excluding engines which are subject to state emission standards 
pursuant to a waiver granted by EPA under section 209(e) of the Act. 
Upon advance written request, the Administrator will consider other 
methods to track engines for credit calculation purposes that provide 
high levels of confidence that eligible production or sales are 
accurately counted.
    (c)(1)End-of-year reports must be submitted within 90 days of the 
end of the model year to: Manager, Engine Compliance Programs Group 
(6403-J), U.S. Environmental Protection Agency, Washington, DC 20460.
    (2) Unless otherwise approved by the Administrator, final reports 
must be submitted within 270 days of the end of the model year to: 
Manager, Engine Compliance Programs Group (6403-J), U.S. Environmental 
Protection Agency, Washington, DC 20460.
    (d) Failure by a manufacturer to submit any end-of-year or final 
reports in the specified time for any engines subject to regulation 
under this part is a violation of Sec. 90.1003(a)(2) and section 213(d) 
of the Clean Air Act for each engine.
    (e) A manufacturer generating credits for banking only who fails to 
submit end-of-year reports in the applicable specified time period (90 
days after the end of the model year) may not use the credits until 
such reports are received and reviewed by EPA. Use of projected credits 
pending EPA review is not permitted in these circumstances.
    (f) Errors discovered by EPA or the manufacturer in the end-of-year 
report, including errors in credit calculation, may be corrected in the 
final report.
    (g) If EPA or the manufacturer determines that a reporting error 
occurred on an end-of-year or final report previously submitted to EPA 
under this section, the manufacturer's credits and credit calculations 
must be recalculated. Erroneous positive credits will be void except as 
provided in paragraph (h) of this section. Erroneous negative credit 
balances may be adjusted by EPA.
    (h) If EPA review determines a reporting error in the 
manufacturer's favor (that is, resulting in an increased credit 
balance) or if the manufacturer discovers such an error within 270 days 
of the end of the model year, EPA shall restore the credits for use by 
the manufacturer.


Sec. 90.211  Request for hearing.

    An engine manufacturer may request a hearing on the Administrator's 
voiding of the certificate under Secs. 90.203(h), 90.206(e), 90.207(f), 
90.208(c), or 90.209(f), pursuant to Sec. 90.124. The procedures of 
Sec. 90.125 shall apply to any such hearing.

Subpart D--Emission Test Equipment Provisions

    18. Section 90.301 is amended by revising paragraph (a) and adding 
paragraph (d) to read as follows:


Sec. 90.301  Applicability.

    (a) This subpart describes the equipment required in order to 
perform exhaust emission tests on new nonroad spark-ignition engines 
and vehicles subject to the provisions of subpart A of this part. 
Certain text in this subpart is identified as pertaining to Phase 1 or 
Phase 2 engines. Such text pertains only to engines of the specified 
Phase. If no indication of Phase is given, the text pertains to all 
engines, regardless of Phase.
* * * * *
    (d) For Phase 2 Class I, and Phase 2 Class II natural gas fueled 
engines, the following sections from 40 CFR Part 86 are applicable to 
this subpart. The requirements of these sections which pertain 
specifically to the measurement and calculation of non-methane 
hydrocarbon (NMHC) exhaust emissions from otto cycle heavy-duty engines 
must be followed when determining the NMHC exhaust emissions from Phase 
2 Class I, and Phase 2 Class II natural gas fueled engines. Those 
sections are: 40 CFR 86.1306-90 Equipment required and specifications; 
overview, 40 CFR 86.1309-90 Exhaust gas sampling system; otto-cycle 
engines, 40 CFR 86.1311-94 Exhaust gas analytical system; CVS bag 
sampling, 40 CFR 86.1313-94(e) Fuel Specification--Natural gas-fuel, 40 
CFR 86.1314-94 Analytical gases, 40 CFR 86.1316-94 Calibrations; 
frequency and overview, 40 CFR 86.1321-94 Hydrocarbon analyzer 
calibration, 40 CFR 86.1325-94 Methane analyzer calibration, 40 CFR 
86.1327-94 Engine dynamometer test procedures, overview, 40 CFR 
86.1340-94 Exhaust sample analysis, 40 CFR 86.1342-94 Calculations; 
exhaust emissions, 40 CFR 86.1344-94(d) Required information--Pre-test 
data, 40 CFR 86.1344-94(e) Required information--Test data.
    19. Section 90.302 is revised to read as follows:


Sec. 90.302  Definitions.

    The definitions in Sec. 90.3 apply to this subpart. The following 
definitions also apply to this subpart.
    Intermediate speed means the engine speed which is 85 percent of 
the rated speed.
    Natural gas means a fuel whose primary constituent is methane.
    Rated speed means the speed at which the manufacturer specifies the 
maximum rated power of an engine.
    20. Section 90.308 is amended by revising paragraph (c) to read as 
follows:


Sec. 90.308  Lubricating oil and test fuels.

* * * * *
    (c) Test fuels--service accumulation and aging. Unleaded gasoline 
representative of commercial gasoline generally available through 
retail outlets must be used in service accumulation and aging for 
gasoline-fueled spark-ignition engines. As an alternative, the 
certification test fuels specified under paragraph (b) of this section 
may be used for engine service accumulation and aging. Leaded fuel may 
not be used during service accumulation or aging.
    21. Section 90.329 is amended by adding paragraph (c) to read as 
follows:


Sec. 90.329  Catalyst thermal stress test.

* * * * *
    (c) Phase 2 engines. The catalyst thermal stress test is not 
required for engine families certified to the Phase 2 standards.

[[Page 15244]]

Subpart E--Gaseous Exhaust Test Procedures

    22. Section 90.401 is amended by adding paragraphs (c) and (d) to 
read as follows:


Sec. 90.401  Applicability.

* * * * *
    (c) Certain text in this subpart is identified as pertaining to 
Phase 1 or Phase 2 engines. Such text pertains only to engines of the 
specified Phase. If no indication of Phase is given, the text pertains 
to all engines, regardless of Phase.
    (d) For Phase 2 Class I, and Phase 2 Class II natural gas fueled 
engines, the following sections from 40 CFR part 86 are applicable to 
this subpart. The requirements of these sections which pertain 
specifically to the measurement and calculation of non-methane 
hydrocarbon (NMHC) exhaust emissions from otto cycle heavy-duty engines 
must be followed when determining the NMHC exhaust emissions from Phase 
2 Class I, and Phase 2 Class II natural gas fueled engines. Those 
sections are: 40 CFR 86.1327-94 Engine dynamometer test procedures, 
overview, 40 CFR 86.1340-94 Exhaust sample analysis, 40 CFR 86.1342-94 
Calculations; exhaust emissions, 40 CFR 86.1344-94(d) Required 
information--Pre-test data, and 40 CFR 86.1344-94(e) Required 
information--Test data.
    23. Section 90.404 is amended by adding a sentence after the first 
sentence of paragraph (b) to read as follows:


Sec. 90.404  Test procedure overview.

* * * * *
    (b) * * * For Phase 2 Class I and Phase 2 Class II natural gas 
fueled engines the test is also designed to determine the brake-
specific emissions of non-methane hydrocarbons. * * *
* * * * *
    24. Section 90.409 is amended by revising paragraph (a)(3) to read 
as follows:


Sec. 90.409  Engine dynamometer test run.

    (a) * * *
    (3) For Phase 1 engines, at the manufacturer's option, the engine 
can be run with the throttle in a fixed position or by using the 
engine's governor (if the engine is manufactured with a governor). In 
either case, the engine speed and load must meet the requirements 
specified in paragraph (b)(12) of this section. For Phase 2 Class I and 
Phase 2 Class II engines equipped with an engine speed governor, the 
governor must be used to control engine speed during all test cycle 
modes except for Mode 1 or Mode 6, and no external throttle control may 
be used that interferes with the function of the engine's governor; a 
controller may be used to adjust the governor setting for the desired 
engine speed in Modes 2-5 or Modes 7-10; and during Mode 1 or Mode 6 
fixed throttle operation may be used to determine the 100 percent 
torque value.
* * * * *
    25. Section 90.410 is amended by revising paragraph (b) to read as 
follows:


Sec. 90.410  Engine test cycle.

* * * * *
    (b) For Phase 1 engines and Phase 2 Class I and II engines not 
equipped with an engine speed governor, during each non-idle mode, hold 
both the specified speed and load within  five percent of 
point. During the idle mode, hold speed within  ten percent 
of the manufacturer's specified idle engine speed. For Phase 2 Class I 
and II engines equipped with an engine speed governor, during Mode 1 or 
Mode 6 hold both the specified speed and load within  five 
percent of point, during Modes 2-3, or Modes 7-8 hold the specified 
load with  five percent of point, during Modes 4-5 or Modes 
9-10, hold the specified load within the larger range provided by +/
-0.27Nm (+/-0.2 lb-ft), or +/-ten (10) percent of point, and during the 
idle mode hold the specified speed within  ten percent of 
the manufacturer's specified idle engine speed (see Table 1 in Appendix 
A to subpart E of this part for a description of test Modes). The use 
of alternative test procedures is allowed if approved in advance by the 
Administrator.
* * * * *
    26. Section 90.427 is amended by revising paragraph (a) to read as 
follows:


Sec. 90.427  Catalyst thermal stress resistance evaluation.

    (a) The purpose of the evaluation procedure specified in this 
section is to determine the effect of thermal stress on catalyst 
conversion efficiency for Phase 1 engines. The thermal stress is 
imposed on the test catalyst by exposing it to quiescent heated air in 
an oven. The evaluation of the effect of such stress on catalyst 
performance is based on the resultant degradation of the efficiency 
with which the conversions of specific pollutants are promoted. The 
application of this evaluation procedure involves the several steps 
that are described in the following paragraphs.
* * * * *

Subpart F--Selective Enforcement Auditing

    27. Section 90.503 is amended by revising paragraphs (f)(3) and 
(f)(4) to read as follows:


Sec. 90.503  Test orders.

* * * * *
    (f) * * *
    (3) Any SEA test order for which the family or configuration, as 
appropriate, fails under Sec. 90.510 or for which testing is not 
completed will not be counted against the annual limit.
    (4) When the annual limit has been met, the Administrator may issue 
additional test orders to test those families or configurations for 
which evidence exists indicating nonconformity, or for which the 
Administrator has reason to believe are not being appropriately 
represented or tested in Production Line Testing conducted under 
subpart H of this part, if applicable. An SEA test order issued 
pursuant to this provision will include a statement as to the reason 
for its issuance.
    28. Section 90.509 is amended by revising paragraph (b) to read as 
follows:


Sec. 90.509  Calculation and reporting of test results.

* * * * *
    (b)(1) Final test results are calculated by summing the initial 
test results derived in paragraph (a) of this section for each test 
engine, dividing by the number of tests conducted on the engine, and 
rounding to the same number of decimal places contained in the 
applicable standard. For Phase 2 engines only, this result shall be 
expressed to one additional significant figure.
    (2) Final deteriorated test results (for Phase 2 test engines only) 
are calculated by applying the appropriate deterioration factors, from 
the certification process for the engine family, to the final test 
results, and rounding to the same number of decimal places contained in 
the applicable standard.
* * * * *
    29. Section 90.510 is amended by revising paragraph (b) to read as 
follows:


Sec. 90.510  Compliance with acceptable quality level and passing and 
failing criteria for selective enforcement audits.

* * * * *
    (b) For Phase I engines, a failed engine is an engine whose final 
test results pursuant to Sec. 90.509(b), for one or more of the 
applicable pollutants exceed the emission standard. For Phase 2 
engines, a failed engine is an engine whose final deteriorated test 
results pursuant to

[[Page 15245]]

Sec. 90.509(b), for one or more of the applicable pollutants exceed the 
emission standard (FEL, if applicable).
* * * * *
    30. Section 90.512 is amended by revising paragraph (b) to read as 
follows:


Sec. 90.512  Request for public hearing.

* * * * *
    (b)The manufacturer's request shall be filed with the Administrator 
not later than 15 days after the Administrator's notification of his or 
her decision to suspend, revoke or void, unless otherwise specified by 
the Administrator. The manufacturer shall simultaneously serve two 
copies of this request upon the Director of the Engine Programs and 
Compliance Division and file two copies with the Hearing Clerk of the 
Agency. Failure of the manufacturer to request a hearing within the 
time provided constitutes a waiver of the right to a hearing. 
Subsequent to the expiration of the period for requesting a hearing as 
of right, the Administrator may, in his or her discretion and for good 
cause shown, grant the manufacturer a hearing to contest the 
suspension, revocation or voiding.
* * * * *

Subpart G--Importation of Nonconforming Engines

    31. Section 90.612 is amended by revising paragraph (g) to read as 
follows:


Sec. 90.612  Exemptions and exclusions.

* * * * *
    (g) Applications for exemptions and exclusions provided for in 
paragraphs (b), (c), and (e) of this section are to be mailed to: U.S. 
Environmental Protection Agency, Office of Mobile Sources, Engine 
Compliance Programs Group (6403-J), Washington, D.C. 20460, Attention: 
Imports.
    32. Subpart H, which was previously ``reserved'', is added to part 
90 to read as follows:

Subpart H--Manufacturer Production Line Testing Program

Sec.
90.701  Applicability.
90.702  Definitions.
90.703  Production line testing by the manufacturer.
90.704  Maintenance of records; submission of information.
90.705  Right of entry and access.
90.706  Engine sample selection.
90.707  Test procedures.
90.708  Cumulative Sum (CumSum) Procedure.
90.709  Calculation and reporting of test results.
90.710  Compliance with criteria for production line testing.
90.711  Suspension and revocation of certificates of conformity.
90.712  Request for public hearing.
90.713  Administrative procedures for public hearing.

Subpart H--Manufacturer Production Line Testing Program


Sec. 90.701  Applicability.

    (a) The requirements of this subpart are applicable to all Phase 2 
nonroad nonhandheld engines families subject to the provisions of 
subpart A of this part unless otherwise exempted in this subpart.
    (b) The procedures described in this subpart are optional for small 
volume engine manufacturers and small volume engine families as defined 
in this part. Small volume engine manufacturers and small volume engine 
families for which the manufacturer opts not to conduct testing under 
this subpart pursuant to this paragraph shall remain subject to the 
Selective Enforcement Auditing procedures of subpart F of this part.
    (c) Engine families for which the manufacturer opts to conduct in-
use testing pursuant to subpart M of this part are exempt from this 
subpart, but shall remain subject to the Selective Enforcement Auditing 
procedures of subpart F of this part.


Sec. 90.702  Definitions.

    The definitions in subpart A of this part apply to this subpart. 
The following definitions also apply to this subpart.
    Configuration means any subclassification of an engine family which 
can be described on the basis of gross power, emission control system, 
governed speed, injector size, engine calibration, and other parameters 
as designated by the Administrator.
    Test sample means the collection of engines selected from the 
population of an engine family for emission testing.


Sec. 90.703  Production line testing by the manufacturer.

    (a) Manufacturers of small SI engines shall test production line 
engines from each engine family according to the provisions of this 
subpart.
    (b) Production line engines must be tested using the test procedure 
specified in subpart E of this part except that the Administrator may 
approve minor variations that the Administrator deems necessary to 
facilitate efficient and economical testing where the manufacturer 
demonstrates to the satisfaction of the Administrator that such 
variations will not significantly impact the test results. Any 
adjustable engine parameter must be set to values or positions that are 
within the range recommended to the ultimate purchaser, unless 
otherwise specified by the Administrator. The Administrator may specify 
values within or without the range recommended to the ultimate 
purchaser.


Sec. 90.704  Maintenance of records; submission of information.

    (a) The manufacturer of any new small SI engine subject to any of 
the provisions of this subpart must establish, maintain, and retain the 
following adequately organized and indexed records:
    (1) General records. A description of all equipment used to test 
engines in accordance with Sec. 90.703. Subpart D of this part sets 
forth relevant equipment requirements in Secs. 90.304, 90.305, 90.306, 
90.307, 90.308, 90.309, 90.310 and 90.313.
    (2) Individual records. These records pertain to each production 
line test conducted pursuant to this subpart and include:
    (i) The date, time, and location of each test;
    (ii) The number of hours of service accumulated on the test engine 
when the test began and ended;
    (iii) The names of all supervisory personnel involved in the 
conduct of the production line test;
    (iv) A record and description of any adjustment, repair, 
preparation or modification performed prior to and/or subsequent to 
approval by the Administrator pursuant to Sec. 90.707(b)(1), giving the 
date, associated time, justification, name(s) of the authorizing 
personnel, and names of all supervisory personnel responsible for the 
conduct of the repair;
    (v) If applicable, the date the engine was shipped from the 
assembly plant, associated storage facility or port facility, and the 
date the engine was received at the testing facility;
    (vi) A complete record of all emission tests performed pursuant to 
this subpart (except tests performed directly by EPA), including all 
individual worksheets and/or other documentation relating to each test, 
or exact copies thereof, in accordance with the record requirements 
specified in Secs. 90.405 and 90.406; and
    (vii) A brief description of any significant events during testing 
not otherwise described under paragraph (a)(2) of this section, 
commencing with the test engine selection process and including such 
extraordinary events as engine damage during shipment.
    (3) The manufacturer must establish, maintain and retain general 
records, pursuant to paragraph (a)(1) of this section, for each test 
cell that can be

[[Page 15246]]

used to perform emission testing under this subpart.
    (b) The manufacturer must retain all records required to be 
maintained under this subpart for a period of one year after completion 
of all testing required for the engine family in a model year. Records 
may be retained as hard copy (i.e., on paper) or reduced to microfilm, 
floppy disk, or some other method of data storage, depending upon the 
manufacturer's record retention procedure; provided, that in every 
case, all the information contained in the hard copy is retained.
    (c) The manufacturer must, upon request by the Administrator, 
submit the following information with regard to engine production:
    (1) Projected production or actual production for each engine 
configuration within each engine family for which certification has 
been requested and/or approved;
    (2) Number of engines, by configuration and assembly plant, 
scheduled for production or actually produced.
    (d) Nothing in this section limits the Administrator's discretion 
to require a manufacturer to establish, maintain, retain or submit to 
EPA information not specified by this section and otherwise permitted 
by law.
    (e) All reports, submissions, notifications, and requests for 
approval made under this subpart must be addressed to: Manager, Engine 
Compliance Programs Group (6403J), U.S. Environmental Protection 
Agency, Washington, DC 20460.
    (f) The manufacturer must electronically submit the results of its 
production line testing using EPA's standardized format. The 
Administrator may exempt manufacturers from this requirement upon 
written request with supporting justification.


Sec. 90.705  Right of entry and access.

    (a) To allow the Administrator to determine whether a manufacturer 
is complying with the provisions of this subpart or other subparts of 
this part, one or more EPA enforcement officers may enter during 
operating hours and upon presentation of credentials any of the 
following places:
    (1) Any facility, including ports of entry, where any engine to be 
introduced into commerce or any emission-related component is 
manufactured, assembled, or stored;
    (2) Any facility where any test conducted pursuant to this or any 
other subpart or any procedure or activity connected with such test is 
or was performed;
    (3) Any facility where any test engine is present; and
    (4) Any facility where any record required under Sec. 90.704 or 
other document relating to this subpart or any other subpart of this 
part is located.
    (b) Upon admission to any facility referred to in paragraph (a) of 
this section, EPA enforcement officers are authorized to perform the 
following inspection-related activities:
    (1) To inspect and monitor any aspect of engine manufacture, 
assembly, storage, testing and other procedures, and to inspect and 
monitor the facilities in which these procedures are conducted;
    (2) To inspect and monitor any aspect of engine test procedures or 
activities, including test engine selection, preparation and service 
accumulation, emission test cycles, and maintenance and verification of 
test equipment calibration;
    (3) To inspect and make copies of any records or documents related 
to the assembly, storage, selection, and testing of an engine; and
    (4) To inspect and photograph any part or aspect of any engine and 
any component used in the assembly thereof that is reasonably related 
to the purpose of the entry.
    (c) EPA enforcement officers are authorized to obtain reasonable 
assistance without cost from those in charge of a facility to help the 
officers perform any function listed in this subpart and they are 
authorized to request the manufacturer to make arrangements with those 
in charge of a facility operated for the manufacturer's benefit to 
furnish reasonable assistance without cost to EPA.
    (1) Reasonable assistance includes, but is not limited to, 
clerical, copying, interpretation and translation services; the making 
available on an EPA enforcement officer's request of personnel of the 
facility being inspected during their working hours to inform the EPA 
enforcement officer of how the facility operates and to answer the 
officer's questions; and the performance on request of emission tests 
on any engine which is being, has been, or will be used for production 
line or other testing.
    (2) By written request, signed by the Assistant Administrator for 
Air and Radiation, and served on the manufacturer, a manufacturer may 
be compelled to cause the personal appearance of any employee at such a 
facility before an EPA enforcement officer. Any such employee who has 
been instructed by the manufacturer to appear will be entitled to be 
accompanied, represented, and advised by counsel.
    (d) EPA enforcement officers are authorized to seek a warrant or 
court order authorizing the EPA enforcement officers to conduct the 
activities authorized in this section, as appropriate, to execute the 
functions specified in this section. EPA enforcement officers may 
proceed ex parte to obtain a warrant or court order whether or not the 
EPA enforcement officers first attempted to seek permission from the 
manufacturer or the party in charge of the facility(ies) in question to 
conduct the activities authorized in this section.
    (e) A manufacturer must permit an EPA enforcement officer(s) who 
presents a warrant or court order to conduct the activities authorized 
in this section as described in the warrant or court order. The 
manufacturer must also cause those in charge of its facility or a 
facility operated for its benefit to permit entry and access as 
authorized in this section pursuant to a warrant or court order whether 
or not the manufacturer controls the facility. In the absence of a 
warrant or court order, an EPA enforcement officer(s) may conduct the 
activities authorized in this section only upon the consent of the 
manufacturer or the party in charge of the facility(ies) in question.
    (f) It is not a violation of this part or the Clean Air Act for any 
person to refuse to permit an EPA enforcement officer(s) to conduct the 
activities authorized in this section if the officer(s) appears without 
a warrant or court order.
    (g) A manufacturer is responsible for locating its foreign testing 
and manufacturing facilities in jurisdictions where local law does not 
prohibit an EPA enforcement officer(s) from conducting the entry and 
access activities specified in this section. EPA will not attempt to 
make any inspections which it has been informed local foreign law 
prohibits.


Sec. 90.706  Engine sample selection.

    (a) At the start of each model year, the small SI engine 
manufacturer will begin to randomly select engines from each engine 
family for production line testing at a rate of one percent of the 
projected production of that family. Each engine will be selected from 
the end of the assembly line.
    (1) For newly certified engine families: After two engines are 
tested, the manufacturer will calculate the required sample size for 
the model year for each pollutant 
(HC+NOX(NMHC+NOX) and CO) according to the Sample 
Size

[[Page 15247]]

Equation in paragraph (b) of this section.
    (2) For carry-over engine families: After one engine is tested, the 
manufacturer will combine the test with the last test result from the 
previous model year and then calculate the required sample size for the 
model year for each pollutant according to the Sample Size Equation in 
paragraph (b) of this section.
    (b)(1) Manufacturers will calculate the required sample size for 
the model year for each pollutant for each engine family using the 
Sample Size Equation in this paragraph. N is calculated for each 
pollutant from each test result. The higher of the two values for the 
number N indicates the number of tests required for the model year for 
an engine family. N is recalculated for each pollutant after each test. 
Test results used to calculate the variables in the following Sample 
Size Equation must be final deteriorated test results as specified in 
Sec. 90.709(c).
[GRAPHIC] [TIFF OMITTED] TR30MR99.001

Where:

N = required sample size for the model year.
t95 = 95% confidence coefficient. It is dependent on the 
actual number of tests completed, n, as specified in the table in 
paragraph (b)(2) of this section. It defines one-tail, 95% confidence 
intervals.
 = actual test sample standard deviation calculated from the 
following equation:
[GRAPHIC] [TIFF OMITTED] TR30MR99.002

xi = emission test result for an individual engine.
x = mean of emission test results of the actual sample.
FEL = Family Emission Limit or standard if no FEL.
n = The actual number of tests completed in an engine family.

    (2) The following table specifies the Actual Number of Tests (n) & 
1-tail Confidence Coefficients (t95):

----------------------------------------------------------------------------------------------------------------
                n                       t95              n              t95              n              t95
----------------------------------------------------------------------------------------------------------------
2...............................            6.31              12            1.80              22           1.72
3...............................            2.92              13            1.78              23           1.72
4...............................            2.35              14            1.77              24           1.71
5...............................            2.13              15            1.76              25           1.71
6...............................            2.02              16            1.75              26           1.71
7...............................            1.94              17            1.75              27           1.71
8...............................            1.90              18            1.74              28           1.70
9...............................            1.86              19            1.73              29           1.70
10..............................            1.83              20            1.73              30           1.70
11..............................            1.81              21            1.72                           1.645
----------------------------------------------------------------------------------------------------------------

    (3) A manufacturer must distribute the testing of the remaining 
number of engines needed to meet the required sample size N, evenly 
throughout the remainder of the model year.
    (4) After each new test, the required sample size, N, is 
recalculated using updated sample means, sample standard deviations and 
the appropriate 95% confidence coefficient.
    (5) A manufacturer must continue testing and updating each engine 
family's sample size calculations according to paragraphs (b)(1) 
through (b)(4) of this section until a decision is made to stop testing 
as described in paragraph (b)(6) of this section or a noncompliance 
decision is made pursuant to Sec. 90.710(b).
    (6) If, at any time throughout the model year, the calculated 
required sample size, N, for an engine family is less than or equal to 
the actual sample size, n, and the sample mean, x, for HC + 
NOX (NMHC+NOX) and CO is less than or equal to 
the FEL or standard if no FEL, the manufacturer may stop testing that 
engine family.
    (7) If, at any time throughout the model year, the sample mean, x, 
for HC + NOX (NMHC+NOX) or CO is greater than the 
FEL or standard if no FEL, the manufacturer must continue testing that 
engine family at the appropriate maximum sampling rate.
    (8) The maximum required sample size for an engine family 
(regardless of the required sample size, N, as calculated in paragraph 
(b)(1) of this section) is the lesser of thirty tests per model year or 
one percent of projected annual production for that engine family for 
that model year.
    (9) Manufacturers may elect to test additional engines. Additional 
engines, whether tested in accordance with the testing procedures 
specified in Sec. 90.707 or not, may not be included in the Sample Size 
and Cumulative Sum equation calculations as defined in paragraph (b)(1) 
of this section and Sec. 90.708(a), respectively. However, such 
additional test results may be used as appropriate to ``bracket'' or 
define the boundaries of the production duration of any emission 
nonconformity determined under this subpart. Such additional test data 
must be identified and provided to EPA with the submittal of the 
official CumSum results.
    (c) The manufacturer must produce and assemble the test engines 
using its normal production and assembly process for engines to be 
distributed into commerce.
    (d) No quality control, testing, or assembly procedures shall be 
used on any test engine or any portion thereof, including parts and 
subassemblies, that have not been or will not be used during the 
production and assembly of all other engines of that family, unless the 
Administrator approves the modification in production or assembly 
procedures in advance.


Sec. 90.707  Test procedures.

    (a)(1) For small SI engines subject to the provisions of this 
subpart, the prescribed test procedures are specified in subpart E of 
this part.
    (2) The Administrator may, on the basis of a written application by 
a manufacturer, prescribe test procedures other than those specified in 
paragraph (a)(1) of this section for any small SI engine the 
Administrator determines is not susceptible to satisfactory testing 
using procedures specified in paragraph (a)(1) of this section.
    (b)(1) The manufacturer may not adjust, repair, prepare, or modify 
any test engine and may not perform any emission test on any test 
engine unless this adjustment, repair, preparation, modification and/or 
test is documented in the manufacturer's engine assembly and inspection 
procedures and is actually performed by the manufacturer on every 
production line engine or unless this adjustment, repair,

[[Page 15248]]

preparation, modification and/or test is required or permitted under 
this subpart or is approved in advance by the Administrator.
    (2) The Administrator may adjust or cause to be adjusted any engine 
parameter which the Administrator has determined to be subject to 
adjustment for certification, Production Line Testing and Selective 
Enforcement Audit testing, to any setting within the physically 
adjustable range of that parameter, as determined by the Administrator, 
prior to the performance of any test. However, if the idle speed 
parameter is one which the Administrator has determined to be subject 
to adjustment, the Administrator may not adjust it or require that it 
be adjusted to any setting which causes a lower engine idle speed than 
would have been possible within the physically adjustable range of the 
idle speed parameter if the manufacturer had accumulated 12 hours of 
service on the engine under paragraph (c) of this section, all other 
parameters being identically adjusted for the purpose of the 
comparison. The manufacturer may be requested to supply information 
necessary to establish an alternate minimum idle speed. The 
Administrator, in making or specifying these adjustments, may consider 
the effect of the deviation from the manufacturer's recommended setting 
on emission performance characteristics as well as the likelihood that 
similar settings will occur on in-use engines. In determining 
likelihood, the Administrator may consider factors such as, but not 
limited to, the effect of the adjustment on engine performance 
characteristics and information from similar in-use engines.
    (c) Service accumulation. (1) Unless otherwise approved by the 
Administrator, prior to performing exhaust emission production line 
testing, the manufacturer may accumulate up to 12 hours of service on 
each test engine. For catalyst-equipped engines, the manufacturer must 
accumulate a number of hours equal to the number of hours accumulated 
to represent stabilized emissions on the engine used to obtain 
certification.
    (2) Service accumulation must be performed in a manner using good 
engineering judgment to obtain emission results representative of 
production line engines.
    (d) Unless otherwise approved by the Administrator, the 
manufacturer may not perform any maintenance on test engines after 
selection for testing.
    (e) If an engine is shipped to a remote facility for production 
line testing, and an adjustment or repair is necessary because of 
shipment, the engine manufacturer must perform the necessary adjustment 
or repair only after the initial test of the engine, except in cases 
where the Administrator has determined that the test would be 
impossible or unsafe to perform or would permanently damage the engine. 
Engine manufacturers must report to the Administrator, in the quarterly 
report required by Sec. 90.709(e), all adjustments or repairs performed 
on test engines prior to each test.
    (f) If an engine cannot complete the service accumulation or an 
emission test because of a malfunction, the manufacturer may request 
that the Administrator authorize either the repair of that engine or 
its deletion from the test sequence.
    (g) Testing. A manufacturer must test engines with the test 
procedure specified in subpart E of this part to demonstrate compliance 
with the applicable FEL (or standard where there is no FEL). If 
alternate or special test procedures pursuant to regulations at 
Sec. 90.120 are used in certification, then those alternate procedures 
must be used in production line testing.
    (h) Retesting. (1) If an engine manufacturer reasonably determines 
that an emission test of an engine is invalid because of a procedural 
error, test equipment problem, or engine performance problem that 
causes the engine to be unable to safely perform a valid test, the 
engine may be retested. A test is not invalid simply because the 
emission results are high relative to other engines of the family. 
Emission results from all tests must be reported to EPA. The engine 
manufacturer must also include a detailed explanation of the reasons 
for invalidating any test in the quarterly report required in 
Sec. 90.709(e). If a test is invalidated because of an engine 
performance problem, the manufacturer must document in detail the 
nature of the problem and the repairs performed in order to use the 
after-repair test results for the original test results.
    (2) Routine retests may be conducted if the manufacturer conducts 
the same number of tests on all engines in the family. The results of 
these tests must be averaged according to procedures of Sec. 90.709.


Sec. 90.708  Cumulative Sum (CumSum) procedure.

    (a) (1) Manufacturers must construct separate CumSum Equations for 
each regulated pollutant (HC+NOX (NMHC+NOX) and 
CO) for each engine family. Test results used to calculate the 
variables in the CumSum Equations must be final deteriorated test 
results as defined in Sec. 90.709(c). The CumSum Equation is 
constructed as follows:

Ci=max[0 0R (Ci-1+Xi-(FEL+F))]

Where:

Ci=The current CumSum statistic.
Ci-1=The previous CumSum statistic. Prior to any 
testing, the CumSum statistic=0 (i.e. C0=0).
Xi=The current emission test result for an individual 
engine.
FEL=Family Emission Limit (the standard if no FEL).
F=.25 x .

    (2) After each test pursuant to paragraph (a)(1) of this section, 
Ci is compared to the action limit, H, the quantity which 
the CumSum statistic must exceed, in two consecutive tests, before the 
engine family may be determined to be in noncompliance for a regulated 
pollutant for purposes of Sec. 90.710.

Where:

H=The Action Limit. It is 5.0 x , and is a function of the 
standard deviation, .
=is the sample standard deviation and is recalculated after 
each test.

    (b) After each engine is tested, the CumSum statistic shall be 
promptly updated according to the CumSum Equation in paragraph (a) of 
this section.
    (c)(1) If, at any time during the model year, a manufacturer amends 
the application for certification for an engine family as specified in 
Sec. 90.122(a) by performing an engine family modification (i.e. a 
change such as a running change involving a physical modification to an 
engine, a change in specification or setting, the addition of a new 
configuration, or the use of a different deterioration factor) with no 
changes to the FEL (where applicable), all previous sample size and 
CumSum statistic calculations for the model year will remain unchanged.
    (2) If, at any time during the model year, a manufacturer amends 
the application for certification for an engine family as specified in 
Sec. 90.122 (a) by modifying its FEL (where applicable) for future 
production, as a result of an engine family modification, the 
manufacturer must continue its calculations by inserting the new FEL 
into the sample size equation as specified in Sec. 90.706(b)(1) and 
into the CumSum equation in paragraph (a) of this section. All previous 
calculations remain unchanged. If the sample size calculation indicates 
that additional tests are required, then those tests must be performed. 
CumSum statistic calculations must not indicate that the family has 
exceeded the action limit for two consecutive tests. Where applicable,

[[Page 15249]]

the manufacturer's final credit report as required by Sec. 90.210 must 
break out the credits that result from each FEL and corresponding 
CumSum analysis for the set of engines built to each FEL.
    (3) If, at any time during the model year, a manufacturer amends 
the application for certification for an engine family as specified in 
Sec. 90.122 (a) (or for an affected part of the year's production in 
cases where there were one or more mid-year engine family 
modifications), by modifying its FEL (where applicable) for past and/or 
future production, without performing an engine modification, all 
previous sample size and CumSum statistic calculations for the model 
year must be recalculated using the new FEL. If the sample size 
calculation indicates that additional tests are required, then those 
tests must be performed. The CumSum statistic recalculation must not 
indicate that the family has exceeded the action limit for two 
consecutive tests. Where applicable, the manufacturer's final credit 
report as required by Sec. 90.210 must break out the credits that 
result from each FEL and corresponding CumSum analysis for the set of 
engines built to each FEL.


Sec. 90.709  Calculation and reporting of test results.

    (a) Initial test results are calculated following the applicable 
test procedure specified in Sec. 90.707 (a). The manufacturer rounds 
these results to the number of decimal places contained in the 
applicable emission standard expressed to one additional significant 
figure.
    (b) Final test results are calculated by summing the initial test 
results derived in paragraph (a) of this section for each test engine, 
dividing by the number of tests conducted on the engine, and rounding 
to the same number of decimal places contained in the applicable 
standard expressed to one additional significant figure.
    (c) The final deteriorated test results for each test engine are 
calculated by applying the appropriate deterioration factors, derived 
in the certification process for the engine to the final test results, 
and rounding to the same number of decimal places contained in the 
applicable standard.
    (d) If, at any time during the model year, the CumSum statistic 
exceeds the applicable action limit, H, in two consecutive tests for 
any regulated pollutant, (HC+NOX (NMHC+NOX) or 
CO) the engine family may be determined to be in noncompliance and the 
manufacturer must notify EPA by contacting its official EPA 
certification representative within ten working days of such exceedance 
by the CumSum statistic.
    (e) Within 45 calendar days of the end of each quarter, each engine 
manufacturer must submit to the Administrator a report which includes 
the following information:
    (1) The location and description of the manufacturer's or other's 
exhaust emission test facilities which were utilized to conduct testing 
reported pursuant to this section;
    (2) Total production and sample sizes, N and n, for each engine 
family;
    (3) The FEL (standard, if no FEL) against which each engine family 
was tested;
    (4) A description of the process to obtain engines on a random 
basis;
    (5) A description of the test engines;
    (6) For each test conducted:
    (i) A description of the test engine, including:
    (A) Configuration and engine family identification;
    (B) Year, make, and build date;
    (C) Engine identification number; and
    (D) Number of hours of service accumulated on engine prior to 
testing;
    (ii) Location where service accumulation was conducted and 
description of accumulation procedure and schedule;
    (iii) Test number, date, test procedure used, initial test results 
before and after rounding, final test results before and after rounding 
and final deteriorated test results for all exhaust emission tests, 
whether valid or invalid, and the reason for invalidation, if 
applicable;
    (iv) A complete description of any adjustment, modification, 
repair, preparation, maintenance, and/or testing which was performed on 
the test engine, was not reported pursuant to any other paragraph of 
this subpart, and will not be performed on all other production 
engines;
    (v) A CumSum analysis, as required in Sec. 90.708, of the 
production line test results for each engine family; and
    (vi) Any other information the Administrator may request relevant 
to the determination whether the new engines being manufactured by the 
manufacturer do in fact conform with the regulations with respect to 
which the certificate of conformity was issued;
    (7) For each failed engine as defined in Sec. 90.710(a), a 
description of the remedy and test results for all retests as required 
by Sec. 90.711(g);
    (8) The date of the end of the engine manufacturer's model year 
production for each engine family; and
    (9) The following signed statement and endorsement by an authorized 
representative of the manufacturer:

    This report is submitted pursuant to Sections 213 and 208 of the 
Clean Air Act. This production line testing program was conducted in 
complete conformance with all applicable regulations under 40 CFR 
Part 90. No emission-related changes to production processes or 
quality control procedures for the engine family tested have been 
made during this production line testing program that affect engines 
from the production line. All data and information reported herein 
is, to the best of (Company Name) knowledge, true and accurate. I am 
aware of the penalties associated with violations of the Clean Air 
Act and the regulations thereunder. (Authorized Company 
Representative.)


Sec. 90.710  Compliance with criteria for production line testing.

    (a) A failed engine is one whose final deteriorated test results 
pursuant to Sec. 90.709(c), for HC+NOX (NMHC+NOX) 
or CO exceeds the applicable Family Emission Limit (FEL) or standard if 
no FEL.
    (b) An engine family shall be determined to be in noncompliance, if 
at any time throughout the model year, the CumSum statistic, 
Ci, for HC+NOX (NMHC+NOX) or CO, is 
greater than the action limit, H, for that pollutant, for two 
consecutive tests.


Sec. 90.711  Suspension and revocation of certificates of conformity.

    (a) The certificate of conformity is suspended with respect to any 
engine failing pursuant to Sec. 90.710(a) effective from the time that 
testing of that engine is completed.
    (b) The Administrator may suspend the certificate of conformity for 
an engine family which is determined to be in noncompliance pursuant to 
Sec. 90.710(b). This suspension will not occur before thirty days after 
the engine family is determined to be in noncompliance and the 
Administrator has notified the manufacturer of its intent to suspend. 
During this thirty day period the Administrator will work with the 
manufacturer to achieve appropriate production line changes to avoid 
the need to halt engine production, if possible. The Administrator will 
approve or disapprove any such production line changes proposed to 
address a family that has been determined to be in noncompliance under 
this subpart within 15 days of receipt. If the Administrator does not 
approve or disapprove such a proposed change within such time period, 
the proposed change shall be considered approved.
    (c) If the results of testing pursuant to the regulations in this 
subpart indicate that engines of a particular family produced at one 
plant of a manufacturer do not conform to the regulations in this part 
with respect to which the certificate of conformity was issued, the 
Administrator may suspend the

[[Page 15250]]

certificate of conformity with respect to that family for engines 
manufactured by the manufacturer at all other plants.
    (d) Notwithstanding the fact that engines described in the 
application for certification may be covered by a certificate of 
conformity, the Administrator may suspend such certificate immediately 
in whole or in part if the Administrator finds any one of the following 
infractions to be substantial:
    (1) The manufacturer refuses to comply with any of the requirements 
of this subpart.
    (2) The manufacturer submits false or incomplete information in any 
report or information provided to the Administrator under this subpart.
    (3) The manufacturer renders inaccurate any test data submitted 
under this subpart.
    (4) An EPA enforcement officer is denied the opportunity to conduct 
activities authorized in this subpart and a warrant or court order is 
presented to the manufacturer or the party in charge of the facility in 
question.
    (5) An EPA enforcement officer is unable to conduct activities 
authorized in Sec. 90.705 because a manufacturer has located its 
facility in a foreign jurisdiction where local law prohibits those 
activities.
    (e) The Administrator shall notify the manufacturer in writing of 
any suspension or revocation of a certificate of conformity in whole or 
in part, except that the certificate is immediately suspended with 
respect to any failed engines as provided for in paragraph (a) of this 
section.
    (f) The Administrator may revoke a certificate of conformity for an 
engine family after the certificate has been suspended pursuant to 
paragraph (b) or (c) of this section if the proposed remedy for the 
nonconformity, as reported by the manufacturer to the Administrator, is 
one requiring a design change or changes to the engine and/or emission 
control system as described in the application for certification of the 
affected engine family.
    (g) Once a certificate has been suspended for a failed engine, as 
provided for in paragraph (a) of this section, the manufacturer must 
take the following actions before the certificate is reinstated for 
that failed engine:
    (1) Remedy the nonconformity;
    (2) Demonstrate that the engine conforms to the applicable 
standards (FELs, where applicable) by retesting the engine in 
accordance with these regulations; and
    (3) Submit a written report to the Administrator, described in 
Sec. 90.709(e)(7), after successful completion of testing on the failed 
engine, which contains a description of the remedy and test results for 
each engine in addition to other information that may be required by 
this part.
    (h) Once a certificate for a failed engine family has been 
suspended pursuant to paragraph (b) or (c) of this section, the 
manufacturer must take the following actions before the Administrator 
will consider reinstating the certificate:
    (1) Submit a written report to the Administrator which identifies 
the reason for the noncompliance of the engines, describes the proposed 
remedy, including a description of any proposed quality control and/or 
quality assurance measures to be taken by the manufacturer to prevent 
future occurrences of the problem, and states the date on which the 
remedies will be implemented; and
    (2) Demonstrate that the engine family for which the certificate of 
conformity has been suspended does in fact comply with the regulations 
of this part by testing as many engines as needed so that the CumSum 
statistic, as calculated in Sec. 90.708(a), falls below the action 
limit. Such testing must comply with the provisions of this part. If 
the manufacturer elects to continue testing individual engines after 
suspension of a certificate, the certificate is reinstated for any 
engine actually determined to be in conformance with the Family 
Emission Limits (or standards if no FEL) through testing in accordance 
with the applicable test procedures, provided that the Administrator 
has not revoked the certificate pursuant to paragraph (f) of this 
section.
    (i) Once the certificate has been revoked for an engine family, if 
the manufacturer desires to continue introduction into commerce of a 
modified version of that family, the following actions must be taken 
before the Administrator may issue a certificate for that modified 
family:
    (1) If the Administrator determines that the proposed change(s) in 
engine design may have an effect on emission performance deterioration, 
the Administrator shall notify the manufacturer within five working 
days after receipt of the report in paragraph (h)(1) of this section 
whether subsequent testing under this subpart will be sufficient to 
evaluate the proposed change or changes or whether additional testing 
will be required;
    (2) After implementing the change or changes intended to remedy the 
nonconformity, the manufacturer must demonstrate that the modified 
engine family does in fact conform with the regulations of this part by 
testing as many engines as needed from the modified engine family so 
that the CumSum statistic, as calculated in Sec. 90.708(a) using the 
newly assigned FEL if applicable, falls below the action limit; and
    (3) When the requirements of paragraphs (i)(1) and (i)(2) of this 
section are met, the Administrator shall reissue the certificate or 
issue a new certificate, as the case may be, to include that family. As 
long as the CumSum statistic remains above the action limit, the 
revocation remains in effect.
    (j) At any time subsequent to a suspension of a certificate of 
conformity for a test engine pursuant to paragraph (a) of this section, 
but not later than 15 days (or such other period as may be allowed by 
the Administrator) after notification of the Administrator's decision 
to suspend or revoke a certificate of conformity in whole or in part 
pursuant to paragraph (b), (c), or (f) of this section, a manufacturer 
may request a hearing as to whether the tests have been properly 
conducted or any sampling methods have been properly applied.
    (k) Any suspension of a certificate of conformity under paragraph 
(d) of this section shall:
    (1) Be made only after the manufacturer concerned has been offered 
an opportunity for a hearing conducted in accordance with Secs. 90.712 
and 90.713; and
    (2) Not apply to engines no longer in the possession of the 
manufacturer.
    (l) After the Administrator suspends or revokes a certificate of 
conformity pursuant to this section and prior to the commencement of a 
hearing under Sec. 90.712, if the manufacturer demonstrates to the 
Administrator's satisfaction that the decision to suspend or revoke the 
certificate was based on erroneous information, the Administrator shall 
reinstate the certificate.
    (m) To permit a manufacturer to avoid storing non-test engines 
while conducting subsequent testing of the noncomplying family, a 
manufacturer may request that the Administrator conditionally reinstate 
the certificate for that family. The Administrator may reinstate the 
certificate subject to the following condition: the manufacturer must 
commit to performing offsetting measures that remedy the nonconformity 
at no expense to the owners, and which are approved in advance by the 
Administrator for all engines of that family produced from the time the 
certificate is conditionally reinstated if the CumSum statistic does 
not fall below the action limit.

[[Page 15251]]

Sec. 90.712  Request for public hearing.

    (a) If the manufacturer disagrees with the Administrator's decision 
to suspend or revoke a certificate or disputes the basis for an 
automatic suspension pursuant to Sec. 90.711(a), the manufacturer may 
request a public hearing.
    (b) The manufacturer's request shall be filed with the 
Administrator not later than 15 days after the Administrator's 
notification of his or her decision to suspend or revoke, unless 
otherwise specified by the Administrator. The manufacturer shall 
simultaneously serve two copies of this request upon the Manager of the 
Engine Compliance Programs Group and file two copies with the Hearing 
Clerk for the Agency. Failure of the manufacturer to request a hearing 
within the time provided constitutes a waiver of the right to a 
hearing. Subsequent to the expiration of the period for requesting a 
hearing as of right, the Administrator may, in his or her discretion 
and for good cause shown, grant the manufacturer a hearing to contest 
the suspension or revocation.
    (c) A manufacturer shall include in the request for a public 
hearing:
    (1) A statement as to which engine configuration(s) within a family 
is to be the subject of the hearing; and
    (2) A concise statement of the issues to be raised by the 
manufacturer at the hearing, except that in the case of the hearing 
requested under Sec. 90.711(j), the hearing is restricted to the 
following issues:
    (i) Whether tests have been properly conducted (specifically, 
whether the tests were conducted in accordance with applicable 
regulations under this part and whether test equipment was properly 
calibrated and functioning);
    (ii) Whether sampling plans and statistical analyses have been 
properly applied (specifically, whether sampling procedures and 
statistical analyses specified in this subpart were followed and 
whether there exists a basis for distinguishing engines produced at 
plants other than the one from which engines were selected for testing 
which would invalidate the Administrator's decision under 
Sec. 90.711(c));
    (3) A statement specifying reasons why the manufacturer believes it 
will prevail on the merits of each of the issues raised; and
    (4) A summary of the evidence which supports the manufacturer's 
position on each of the issues raised.
    (d) A copy of all requests for public hearings will be kept on file 
in the Office of the Hearing Clerk and will be made available to the 
public during Agency business hours.


Sec. 90.713  Administrative procedures for public hearing.

    The administrative procedures for a public hearing requested under 
this subpart shall be those procedures set forth in the regulations 
found at Secs. 90.513 through 90.516. References in Sec. 90.513 to 
Sec. 90.511(j), Sec. 90.512(c)(2), Sec. 90.511(e), Sec. 90.512, 
Sec. 90.511(d), Sec. 90.503, Sec. 90.512(c) and Sec. 90.512(b) shall be 
deemed to mean Sec. 90.711(j), Sec. 90.712(c)(2), Sec. 90.711(e), 
Sec. 90.712, Sec. 90.711(d), Sec. 90.703, and Sec. 90.712(c) and 
Sec. 90.712(b), respectively. References to ``test orders'' in 
Sec. 90.513 are not applicable.
    33. Subpart I is amended by revising the subpart heading to read as 
follows:

Subpart I--Emission-related Defect Reporting Requirements, 
Voluntary Emission Recall Program, Ordered Recalls

    34. Section 90.801 is amended by designating the existing text as 
paragraph (a) and adding paragraphs (b), (c), (d), (e), (f) and (g) to 
read as follows:


Sec. 90.801  Applicability.

* * * * *
    (b) Phase 2 engines subject to provisions of subpart B of this part 
are subject to recall regulations specified in 40 CFR part 85, subpart 
S, except as otherwise provided in this section.
    (c) Reference to section 214 of the Clean Air Act in 40 CFR 
85.1801(a) is deemed to mean section 216 of the Clean Air Act.
    (d) Reference to section 202 of the Act in 40 CFR 85.1802(a) is 
deemed to mean section 213 of the Act.
    (e) Reference to ``family particulate emission limits'' as defined 
in part 86 promulgated under section 202 of the Act'' in 40 CFR 
85.1803(a) and 85.1805(a)(1) is deemed to mean ``family emission 
limits'' as defined in subpart C of this part 90 promulgated under 
section 213 of the Act''.
    (f) Reference to ``vehicles or engines'' throughout 40 CFR part 85, 
subpart S is deemed to mean ``Phase 2 nonroad small SI engines at or 
below 19 kW.''
    (g) In addition to the requirements in 40 CFR 85.1805(a)(9) for 
Phase 2 engines include a telephone number provided by the 
manufacturer, which may be used to report difficulty in obtaining 
recall repairs.
    35. Section 90.802 is amended by adding a sentence at the end of 
the introductory text to read as follows:


Sec. 90.802  Definitions.

    * * * The definitions of 40 CFR 85.1801 also apply to this part.
* * * * *
    36. Section 90.803 is amended by revising paragraph (c) to read as 
follows:


Sec. 90.803  Emission defect information report.

* * * * *
    (c) The manufacturer must submit defect information reports to 
EPA's Engine Compliance Programs Group not more than 15 working days 
after an emission-related defect is found to affect 25 or more engines 
manufactured in the same certificate or model year. Information 
required by paragraph (d) of this section that is either not available 
within 15 working days or is significantly revised must be submitted to 
EPA's Engine Compliance Programs Group as it becomes available.
* * * * *
    37. Section 90.805 is amended by revising paragraph (a) to read as 
follows:


Sec. 90.805  Reports, voluntary recall plan filing, record retention.

    (a) Send the defect report, voluntary recall plan, and the 
voluntary recall progress report to: Group Manager, Engine Compliance 
Programs Group, (6403-J), Environmental Protection Agency, Washington, 
D.C. 20460.
* * * * *
    38. A new Sec. 90.808 is added to subpart I read as follows


Sec. 90.808  Ordered recall provisions.

    (a) Effective with respect to Phase 2 small SI engines:
    (1) If the Administrator determines that a substantial number of 
any class or category of engines, although properly maintained and 
used, do not conform to the regulations prescribed under section 213 of 
the Act when in actual use throughout their useful life (as defined 
under Sec. 90.105), the Administrator shall immediately notify the 
manufacturer of such nonconformity and require the manufacturer to 
submit a plan for remedying the nonconformity of the engines with 
respect to which such notification is given.
    (i) The manufacturer's plan shall provide that the nonconformity of 
any such engines which are properly used and maintained will be 
remedied at the expense of the manufacturer.
    (ii) If the manufacturer disagrees with such determination of 
nonconformity and so advises the Administrator, the Administrator shall 
afford the manufacturer and other interested persons an opportunity to 
present their views and evidence in support thereof at a public 
hearing. Unless, as a result of such hearing, the Administrator 
withdraws such determination of nonconformity, the Administrator shall, 
within 60 days after the completion of

[[Page 15252]]

such hearing, order the manufacturer to provide prompt notification of 
such nonconformity in accordance with paragraph (a)(2) of this section. 
The manufacturer shall comply in all respects with the requirements of 
this subpart.
    (2) Any notification required to be given by the manufacturer under 
paragraph (a)(1) of this section with respect to any class or category 
of engines shall be given to dealers, ultimate purchasers, and 
subsequent purchasers (if known) in such manner and containing such 
information as required in subparts I and M of this part.
    (3)(i) Prior to an EPA ordered recall, the manufacturer may perform 
a voluntary emissions recall pursuant to regulations at Sec. 90.804. 
Such manufacturer is subject to the reporting and recordkeeping 
requirements of Sec. 90.805.
    (ii) Once EPA determines that a substantial number of engines fail 
to conform with the requirements of section 213 of the Act or this 
part, the manufacturer will not have the option of a voluntary recall.
    (b) The manufacturer bears all cost obligation a dealer incurs as a 
result of a requirement imposed by paragraph (a) of this section. The 
transfer of any such cost obligation from a manufacturer to a dealer 
through franchise or other agreement is prohibited.
    (c) Any inspection of an engine for purposes of paragraph (a)(1) of 
this section, after its sale to the ultimate purchaser, is to be made 
only if the owner of such vehicle or engine voluntarily permits such 
inspection to be made, except as may be provided by any state or local 
inspection program.

Subpart J--Exclusion and Exemption of Nonroad Engines From 
Regulations

    39. Section 90.905 is amended by revising paragraph (f) to read as 
follows:


Sec. 90.905  Testing exemption.

* * * * *
    (f) A manufacturer of new nonroad engines may request a testing 
exemption to cover nonroad engines intended for use in test programs 
planned or anticipated over the course of a subsequent one-year period. 
Unless otherwise required by the Director, Engine Programs and 
Compliance Division, a manufacturer requesting such an exemption need 
only furnish the information required by paragraphs (a)(1) and (d)(2) 
of this section along with a description of the recordkeeping and 
control procedures that will be employed to assure that the engines are 
used for purposes consistent with Sec. 90.1004(b).
    40. Section 90.906 is amended by revising paragraphs (a) 
introductory text and (a)(3) introductory text to read as follows:


Sec. 90.906  Manufacturer-owned exemption and precertification 
exemption.

    (a) Any manufacturer owned nonroad engine, as defined by 
Sec. 90.902, is exempt from Sec. 90.1003, without application, if the 
manufacturer complies with the following terms and conditions:
* * * * *
    (3) Unless the requirement is waived or an alternative procedure is 
approved by the Director, Engine Programs and Compliance Division, the 
manufacturer must permanently affix a label to each nonroad engine on 
exempt status. This label should:
* * * * *
    41. Section 90.909 is amended by revising paragraph (c) to read as 
follows:


Sec. 90.909  Export exemptions.

* * * * *
    (c) EPA will maintain a list of foreign countries that have in 
force nonroad emission standards identical to U.S. EPA standards and 
have so notified EPA. This list may be obtained by writing to the 
following address: Group Manager, Engine Compliance Programs Group, 
Engine Programs and Compliance Division (6403-J), Environmental 
Protection Agency, Washington, D.C. 20460. New nonroad engines exported 
to such countries must comply with U.S. EPA certification regulations.
* * * * *
    42. Section 90.911 is revised to read as follows:


Sec. 90.911  Submission of exemption requests.

    Requests for exemption or further information concerning exemptions 
and/or the exemption request review procedure should be addressed to: 
Group Manager, Engine Compliance Programs Group, Engine Programs and 
Compliance Division (6403J), Environmental Protection Agency, 
Washington, D.C. 20460.

Subpart K--Prohibited Acts and General Enforcement Provisions

    43. Section 90.1003 is amended by revising paragraphs (a)(2), 
(a)(4)(i), (b)(4), and (b)(5) and by redesignating paragraphs 
(a)(4)(iii) and (a)(4) (iv) as paragraphs (a)(4) (iv) and (a)(4)(v) 
respectively, and by adding new paragraphs (a)(4)(iii) and (b)(6) to 
read as follows:


Sec. 90.1003  Prohibited acts.

    (a) * * *
    (2) (i) For a person to fail or refuse to permit access to or 
copying of records or to fail to make reports or provide information 
required under Sec. 90.1004.
    (ii) For a person to fail or refuse to permit entry, testing or 
inspection authorized under Secs. 90.126, 90.506, 90.705, 90.1004, or 
90.1207.
    (iii) For a person to fail or refuse to perform tests or to have 
tests performed as required under Secs. 90.119, 90.504, 90.703, 
90.1004, 90.1204.
    (iv) For a person to fail to establish or maintain records as 
required under Secs. 90.209, 90.704, 90.805, or 90.1004.
    (v) For a person to fail to submit a remedial plan as required 
under Sec. 90.808.
* * * * *
    (4)* * *
    (i) To sell, offer for sale, or introduce or deliver into commerce, 
a nonroad engine unless the manufacturer has complied with the 
requirements of Sec. 90.1103.
* * * * *
    (iii) To fail or refuse to comply with the requirements of 
Sec. 90.808.
* * * * *
    (b)* * *
    (4) Certified nonroad engines shall be used in all equipment or 
vehicles that are self-propelled, portable, transportable, or are 
intended to be propelled while performing their function, unless the 
manufacturer of the equipment or vehicle can prove that the vehicle or 
equipment will be used in a manner consistent with paragraph (2) of the 
definition of Nonroad engine in Sec. 90.3. Nonroad vehicle and 
equipment manufacturers may continue to use noncertified nonroad 
engines built prior to the applicable implementation date of the Phase 
1 rule until noncertified engine inventories are depleted; further 
after the applicable implementation of the Phase 2 regulations in this 
part, nonroad vehicle and equipment manufacturers may continue to use 
Phase 1 engines until Phase 1 engine inventories are depleted. 
Stockpiling (i.e., build up of an inventory of uncertified engines or 
Phase 1 engines beyond normal business practices to avoid or delay 
compliance with the Phase 1 or Phase 2 regulations in this part, 
respectively) will be considered a violation of this section.
    (5) A new nonroad engine, intended solely to replace an engine in a 
piece of nonroad equipment that was originally produced with an engine 
manufactured prior to the applicable implementation date as described 
in Secs. 90.2, 90.103 and 90.106, or with an engine that was

[[Page 15253]]

originally produced in a model year in which less stringent standards 
under this part were in effect, shall not be subject to the 
requirements of Sec. 90.106 or prohibitions and provisions of 
paragraphs (a)(1) and (b)(4) of this section provided that:
    (i) The engine manufacturer has ascertained that no engine produced 
by itself or the manufacturer of the engine that is being replaced, if 
different, and certified to the requirements of this subpart, is 
available with the appropriate physical or performance characteristics 
to repower the equipment; and
    (ii) The engine manufacturer or its agent takes ownership and 
possession of the old engine in partial exchange for the replacement 
engine; and
    (iii) The replacement engine is clearly labeled with the following 
language, or similar alternate language approved in advance by the 
Administrator: THIS ENGINE DOES NOT COMPLY WITH FEDERAL NONROAD OR ON-
HIGHWAY EMISSION REQUIREMENTS. SALE OR INSTALLATION OF THIS ENGINE FOR 
ANY PURPOSE OTHER THAN AS A REPLACEMENT ENGINE IN A NONROAD VEHICLE OR 
PIECE OF NONROAD EQUIPMENT WHOSE ORIGINAL ENGINE WAS NOT CERTIFIED, OR 
WAS CERTIFIED TO LESS STRINGENT EMISSION STANDARDS THAN THOSE THAT 
APPLY TO THE YEAR OF MANUFACTURE OF THIS ENGINE, IS A VIOLATION OF 
FEDERAL LAW SUBJECT TO CIVIL PENALTY; and
    (iv) Where the replacement engine is intended to replace an engine 
built after the applicable implementation date of regulations under 
this part, but built to less stringent emission standards than are 
currently applicable, the replacement engine shall be identical in all 
material respects to a certified configuration of the same or later 
model year as the engine being replaced.
    (6)(i) Regulations elsewhere in this part notwithstanding, for 
three model years after the phase-in of Class I and Class II Phase 2 
standards; i.e. through August 1, 2010 for Class I engines and through 
model year 2008 for Class II engines, small volume equipment 
manufacturers as defined in this part may continue to use, and engine 
manufacturers may continue to supply, engines certified to Phase 1 
standards (or identified and labeled by their manufacturer to be 
identical to engines previously certified under Phase 1 standards), 
provided the equipment manufacturer has demonstrated to the 
satisfaction of the Administrator that no certified Phase 2 engine is 
available with suitable physical or performance characteristics to 
power a piece of equipment in production prior to the initial effective 
date of Phase 2 standards, as indicated in 90.103(a). The equipment 
manufacturer must also certify to the Administrator that the equipment 
model has not undergone any redesign which could have facilitated 
conversion of the equipment to accommodate a Phase 2 engine.
    (ii) Regulations elsewhere in this part notwithstanding, for the 
duration of the Phase 2 rule in this part, equipment manufacturers who 
certify to the Administrator that annual eligible production of a 
particular model of equipment will not exceed 500 for a Class I model 
in production prior to August 1, 2007 or a Class II model in production 
prior to the 2001 model year, may continue to use in that model, and 
engine manufacturers may continue to supply, engines certified to Phase 
1 requirements, (or identified and labeled by their manufacturer to be 
identical to engines previously certified under Phase 1 standards). To 
be eligible for this provision, the equipment manufacturer must have 
demonstrated to the satisfaction of the Administrator that no certified 
Phase 2 engine is available with suitable physical or performance 
characteristics to power the equipment. The equipment manufacturer must 
also certify to the Administrator that the equipment model has not 
undergone any redesign which could have facilitated conversion of the 
equipment to accommodate a Phase 2 engine.
    (iii) An equipment manufacturer which is unable to obtain suitable 
Phase 2 engines and which can not obtain relief under any other 
provision of this part, may, prior to the date on which the 
manufacturer would become in noncompliance with the requirement to use 
Phase 2 engines, apply to the Administrator to be allowed to continue 
using Phase 1 engines, through August 1, 2008 for Class 1 engines and 
through the 2006 model year for Class II engines, subject to the 
following criteria:
    (A) The inability to obtain Phase 2 engines is despite the 
manufacturer's best efforts and is the result of an extraordinary 
action on the part of the engine manufacturer that was outside the 
control of and could not be reasonably foreseen by the equipment 
manufacturer; such as canceled production or shipment, last minute 
certification failure, unforeseen engine cancellation, plant closing, 
work stoppage or other such circumstance; and
    (B) the inability to market the particular equipment will bring 
substantial economic hardship to the equipment manufacturer resulting 
in a major impact on the equipment manufacturer's solvency.
    (iv) The written permission from the Administrator to the equipment 
manufacturer shall serve as permission for the engine manufacturer to 
provide such Phase 1 engines required by the equipment manufacturers 
under this paragraph (b)(6) of this section. As Phase 1 engines, these 
engines are exempt from Production Line Testing requirements under 
subpart H of this part and in-use testing provisions under subpart M of 
this part, and are excluded from the certification averaging, banking 
and trading program of subpart C of this part.

Subpart L--Emission Warranty and Maintenance Instructions

    44. Section 90.1103 is amended by revising paragraphs (a) and (b) 
to read as follows:


Sec. 90.1103  Emission warranty, warranty period.

    (a) Warranties imposed by this subpart shall be for the first two 
years of engine use from the date of sale to the ultimate purchaser.
    (b) The manufacturer of each new nonroad engine must warrant to the 
ultimate purchaser and each subsequent purchaser that the engine is 
designed, built and equipped so as to conform at the time of sale with 
applicable regulations under section 213 of the Act, and the engine is 
free from defects in materials and workmanship which cause such engine 
to fail to conform with applicable regulations for its warranty period.
* * * * *
    45. Section 90.1104 is amended by adding paragraph (e) to read as 
follows:


Sec. 90.1104  Furnishing of maintenance instructions to ultimate 
purchaser.

* * * * *
    (e) If a manufacturer includes in an advertisement a statement 
respecting the cost or value of emission control devices or systems, 
the manufacturer shall set forth in the statement the cost or value 
attributed to these devices or systems by the Secretary of Labor 
(through the Bureau of Labor Statistics). The Secretary of Labor, and 
his or her representatives, has the same access for this purpose to the 
books, documents, papers, and records of a manufacturer as the 
Comptroller General has to those of a recipient of assistance for 
purposes of section 311 of the Act.
    46. A new subpart, Subpart M is added to part 90 to read as 
follows:

[[Page 15254]]

Subpart M--Voluntary In-Use Testing

Sec.
90.1201  Applicability.
90.1202  Definitions.
90.1203  Voluntary Manufacturer In-use testing program.
90.1204  Maintenance, aging and testing of engines.
90.1205  In-use test program reporting requirements.
90.1206  Reserved.
90.1207  Entry and access.
90.1208--90.1249  [Reserved]

Subpart M--Voluntary In-Use Testing


Sec. 90.1201  Applicability.

    The provisions of this subpart from Sec. 90.1201 through 
Sec. 90.1249 are applicable to all nonhandheld Phase 2 engines subject 
to the provisions of subpart A of this part.


Sec. 90.1202  Definitions.

    For the purposes of this subpart, except as otherwise provided, the 
definitions in subparts A and C of this part apply to this subpart.


Sec. 90.1203  Voluntary Manufacturer In-Use Testing Program.

    (a) Manufacturers may elect to participate in the voluntary in-use 
testing program by notifying the Administrator in writing of their 
intent to conduct emissions testing on in-use engines prior to the 
beginning of each model year. The notification must include a list of 
engine families the manufacturer has selected to include in the testing 
program.
    (b) Each engine family included in the voluntary in-use testing 
program is exempted from the Production Line Testing requirements 
according to Sec. 90.701(c) for two model years, the current model year 
and the subsequent model year. Manufacturers may only include up to 
twenty percent of their eligible engine families in this in-use testing 
program each model year.
    (c) The manufacturer must randomly select or procure a minimum of 
three engines, from each family included in the voluntary program, for 
emissions testing. These three engines may be selected or procured 
from:
    (1) Existing consumer or independently owned fleets,
    (2) Existing manufacturer owned fleets, or
    (3) The production line and placed into either manufacturer or 
consumer owned fleets. Although a minimum of three engines must be 
emissions tested from each engine family in this testing program, a 
manufacturer may elect to emissions test more than three engines per 
family.
    (d) The manufacturer or the manufacturer's designee must:
    (1) Age the selected engines in equipment representing the top 50 
percent, by production, of available equipment for the engine family.
    (2) Age the selected engines to at least 75 percent of each 
engines' useful life as determined pursuant to Sec. 90.105.
    (3) Age the engine/equipment combination in actual field conditions 
encountered with typical use of the equipment as described in the 
owner's manual or other literature sold with the equipment or engine.
    (e) Documents obtained in the procurement or aging process must be 
maintained as required in Sec. 90.121.
    (f) The manufacturer must complete testing within three calendar 
years from the time they notified the Administrator of their intent to 
participate in the voluntary in-use testing program, unless otherwise 
approved by the Administrator; the Administrator will give such 
approval upon acceptance of documentation demonstrating that 
appropriate in-use testing will take a longer period of time.


Sec. 90.1204  Maintenance, aging and testing of engines.

    (a) Prior to aging the engines and after appropriate stabilization, 
manufacturers may optionally conduct emissions testing on the engines, 
according to the test procedures described in subpart E of this part. 
These tests to serve as baseline references.
    (b) Manufacturers must obtain information regarding the accumulated 
usage, maintenance, operating conditions, and storage of the test 
engines.
    (1) The manufacturer may take reasonable measures to assure that 
the engines and equipment were properly used and maintained during the 
field aging process, but additional maintenance to that indicated in 
the owners manual or other literature sold with the equipment or engine 
is prohibited.
    (2) Unless otherwise approved by the Administrator, once a 
manufacturer begins aging and/or testing an engine, the manufacturer 
may not remove that engine from the selected sample unless that engine 
experiences catastrophic mechanical failure or safety concerns 
requiring major engine repair.
    (c) The manufacturer may perform minimal set-to-spec maintenance on 
components of a test engine that are not subject to parameter 
adjustment. Components subject to parameter adjustment must be sealed 
and tamperproof and may not be adjusted for testing. Unless otherwise 
approved by the Administrator, maintenance to any test engine may 
include only that which is listed in the owner's instructions for 
engines with the amount of service and age of the test engine.
    (d) After aging each engine to at least 75 percent of the engine's 
useful life as determined pursuant to Sec. 90.105, at least one valid 
emission test, according to the test procedure outlined in subpart E of 
this part, is required for each test engine. Data from other emission 
testing or performance testing performed on a test engine must be 
supplied to EPA, and may not be used for the purpose of determining the 
need for maintenance on an engine.
    (e) Documents obtained in the procurement, aging, maintenance, or 
testing process must be maintained as required in Sec. 90.121.


Sec. 90.1205  In-use test program reporting requirements.

    (a) The manufacturer shall submit to the Administrator within 
ninety (90) days of completion of testing for a given model year's 
engines, all emission testing results generated from the voluntary in-
use testing program. The following information must be reported for 
each test engine:
    (1) Engine family;
    (2) Model;
    (3) Application;
    (4) Engine serial number;
    (5) Date of manufacture;
    (6) Hours of use;
    (7) Date and time of each test attempt;
    (8) Results (if any) of each test attempt;
    (9) Schedules, descriptions and justifications of all maintenance 
and/or adjustments performed;
    (10) Schedules, descriptions and justifications of all 
modifications and/or repairs; and
    (11) A listing of any test engines that were deleted from the aging 
process or testing process and technical justifications to support the 
deletion.
    (b) All testing reports and requests for approvals made under this 
subpart shall be addressed to: Manager, Engine Compliance Programs 
Group (6403-J), U.S. Environmental Protection Agency, Washington, D.C. 
20460.


Sec. 90.1206  [Reserved]


Sec. 90.1207  Entry and access.

    (a) To allow the Administrator to determine whether a manufacturer 
is complying with the provisions under this subpart, EPA enforcement 
officers or their authorized representatives, upon presentation of 
credentials, shall be permitted entry, during operating hours, into any 
of the following places:

[[Page 15255]]

    (1) Any facility where engines undergo or are undergoing aging, 
maintenance, repair, preparation for aging, selection for aging or 
emission testing.
    (2) Any facility where records or documents related to any of 
activities described in paragraph (a)(1) of this section are kept.
    (3) Any facility where any engine that is being tested or aged, was 
tested or aged or will be tested or aged is present.
    (b) Upon admission to any facility referred to in paragraph (a) of 
this section, EPA enforcement officers or EPA authorized 
representatives are authorized to perform those activities set forth in 
Sec. 90.705 (b) and also to inspect and make copies of records related 
to engine aging (service accumulation) and maintenance.
    (c) The provisions of Sec. 90.705(c), (d), (e), (f) and (g) also 
apply to entry and access under this subpart.


Secs. 90.1208--90.1249  [Reserved]

[FR Doc. 99-6175 Filed 3-29-99; 8:45 am]
BILLING CODE 6560-50-P