[Federal Register Volume 67, Number 103 (Wednesday, May 29, 2002)]
[Proposed Rules]
[Pages 37548-37608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11736]



[[Page 37547]]

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Part IV





Environmental Protection Agency





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40 CFR Part 94



Control of Emissions of Air Pollution From New Marine Compression-
Ignition Engines at or Above 30 Liters/Cylinder; Proposed Rule

  Federal Register / Vol. 67, No. 103 / Wednesday, May 29, 2002 / 
Proposed Rules  

[[Page 37548]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 94

[AMS-FRL-7207-3]
RIN 2060-AJ98


Control of Emissions of Air Pollution from New Marine 
Compression-Ignition Engines At or Above 30 Liters/Cylinder

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this action, we are proposing emission standards for new 
marine diesel engines at or above 30 liters per cylinder and 2.5 to 30 
liters per cylinder on U.S. vessels. Marine diesel engines at or above 
30 liters per cylinder are very large marine engines used primarily for 
propulsion power on ocean-going vessels such as container ships, 
tankers, bulk carriers, and cruise ships. The vessels that use these 
engines are flagged in the United States and in other countries. 
Nationwide, these engines contribute to ozone and carbon monoxide 
nonattainment and to ambient particulate matter levels, particularly in 
commercial ports and along coastal areas.
    We are proposing emission controls for these engines at or above 30 
liters per cylinder on U.S. vessels. We are proposing a first tier that 
is equivalent to the internationally negotiated oxides of nitrogen 
standards and would be enforceable under U.S. law for new engines built 
in 2004 and later. We are also considering adoption of a subsequent 
second tier of standards, which would reflect additional reductions 
that can be achieved through engine-based controls, and would apply to 
new engines built after 2006 or later. In addition, we are proposing 
voluntary low-emission engine standards that reflect advanced oxides of 
nitrogen emission-control technologies. Meeting these standards would 
likely require the use of technologies such as selective catalyst 
reduction or fuel cells. If the second tier is promulgated, we would 
review the second tier standards prior to their effective date to take 
into consideration continued development of new technologies, such as 
selective catalyst reduction and water-based emission reduction 
techniques, and international activity such as action at the 
International Maritime Organization to set more stringent international 
standards. Consistent with these factors, EPA is also considering not 
adopting Tier 2 standards in this rulemaking, and instead establishing 
a schedule for a future rulemaking and addressing Tier 2 standards in 
that future rulemaking.
    Emissions from all marine diesel engines at or above 30 liters per 
cylinder, regardless of flag of registry, currently account for about 
1.5 percent of national mobile source oxides of nitrogen emissions. 
This contribution can be significantly higher on a port-specific basis 
(5 to 25 percent of mobile source emissions in certain key ports by the 
year 2020). The standards discussed in this notice, which would apply 
only to new engines on U.S. flag vessels, are expected to reduce these 
national emissions by about 11 percent by 2030.
    The contribution of these engines to national mobile source 
hydrocarbon and carbon monoxide inventories is small, less than 0.1 
percent, and we are considering standards to ensure that these 
emissions do not increase on a engine-specific basis. The contribution 
of these engines to the national mobile source particulate matter 
inventory is about 2.6 percent. Reductions in particulate emissions 
could be obtained from setting a sulfur content standard for the fuels 
that are used by these engines, and we request comment on whether we 
should adopt such standards and, if so, the level of sulfur that should 
be allowed.
    We are also proposing new requirements for engines at or above 2.5 
liters per cylinder but less than 30 liters per cylinder. The Tier 2 
standards finalized for these engines in our 1999 commercial marine 
diesel engine rule apply beginning in 2007. Until then, engine 
manufacturers are encouraged to voluntarily comply with the Tier 1 
standards, which are equivalent to the internationally negotiated 
NOX standards. The international NOX standards 
are not yet enforceable. Given that they have not yet entered into 
force, we believe it is appropriate to begin to require engine 
manufacturers to certify these engines to the Tier 1 standards, 
starting in 2004. We are also proposing to eliminate the foreign trade 
exemption for all marine diesel engines, which was available for 
engines installed on vessels that spend less than 25 percent of total 
operating time with 320 kilometers of U.S. territory.
    The proposed standards would apply to engines installed on vessels 
flagged in the United States. Recognizing that foreign-flag vessels 
constitute a significant portion of emissions from these engines, we 
are seeking comment on whether the proposed standards and existing 
Category 1 and Category 2 standards should also apply to marine engines 
on foreign vessels entering U.S. ports and to no longer exclude such 
foreign vessels from the emission standards. If we were to determine 
that the standards should apply to engines on foreign vessels that 
enter U.S. ports, then all emission standards for marine diesel engines 
would apply, including those we finalized for marine diesel engines 
less than 30 liters per cylinder in our 1999 rule.

DATES: Comments: Send written comments on this proposed rule by July 
16, 2002. See Section IX.A of SUPPLEMENTARY INFORMATION for more 
information about written comments.
    Hearing: We will hold a public hearing on June 13, 2002 in Long 
Beach, California. See Section IX.B of SUPPLEMENTARY INFORMATION for 
more information about the public hearing.

ADDRESSES: Comments: You may send written comments in paper form or by 
e-mail. We must receive them by the date indicated under DATES above. 
Send paper copies of written comments (in duplicate, if possible) to 
the contact person listed below. You may also submit comments via e-
mail to ``[email protected].'' In your correspondence, refer to Docket 
A-2001-11. See Section IX.A for more information on comment procedures.
    Docket: EPA's Air Docket makes materials related to this rulemaking 
available for review in Public Docket A-2001-11 at the following 
address: U.S. Environmental Protection Agency (EPA), Air Docket (6102), 
Room M-1500 (on the ground floor in Waterside Mall), 401 M Street, 
S.W., Washington, DC 20460 between 8 a.m. to 5:30 p.m., Monday through 
Friday, except on government holidays. You can reach the Air Docket by 
telephone at (202)260-7548, and by facsimile at (202)260-4400. We may 
charge a reasonable fee for copying docket materials, as provided in 40 
CFR part 2.
    Hearing: We will hold a public hearing at the Hyatt Regency, 200 
South Pine Avenue, Long Beach, California, 90802 (562) 491-1234. If you 
want to testify at the hearing, notify the contact person listed below 
at least ten days before the date of the hearing. See Section IX.B for 
more information on the public hearing procedures.

FOR FURTHER INFORMATION CONTACT: Margaret Borushko, U.S. EPA, National 
Vehicle and Fuels Emission Laboratory, 2000 Traverwood, Ann Arbor, MI 
48105; Telephone (734)214-4334; Fax: (734)214-4816, E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION: 

Affected Entities

    This proposed action would affect companies and persons that 
manufacture, sell, or import into the

[[Page 37549]]

United States new marine compression-ignition engines for use on 
vessels flagged or registered in the United States; companies and 
persons that make vessels that will be flagged or registered in the 
United States and that use such engines; and the owners/operators of 
such U.S.-flag vessels. We are inviting comment on including foreign 
flagged vessels. Further requirements apply to companies and persons 
that rebuild or maintain these engines. Affected categories and 
entities include:

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                                   NAICS code
            Category                   \a\                  Examples of potentially affected entities
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Industry........................        333618  Manufacturers of new marine diesel engines.
Industry........................        336611  Manufacturers of marine vessels.
Industry........................        811310  Engine repair and maintenance.
Industry........................           483  Water transportation, freight and passenger.
Industry........................        324110  Petroleum refineries.
Industry........................        422710  Petroleum Bulk Stations and Terminals; Petroleum and Petroleum
                                        422720   Products Wholesalers.
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\a\ North American Industry Classification System (NAICS).

    This list is not intended to be exhaustive, but rather provides a 
guide regarding entities likely to be affected by this action. To 
determine whether particular activities may be affected by this action, 
you should carefully examine the proposed regulations. You may direct 
questions regarding the applicability of this action to the person 
listed in FOR FURTHER INFORMATION CONTACT.

Additional Information About This Rulemaking

    Emission standards for new marine diesel engines at or above 30 
liters per cylinder were considered by EPA in two previous rulemakings, 
in 1996 and in 1999. The notice of proposed rulemaking for the first 
rule (for the control of air pollution from new gasoline spark-ignition 
and diesel compression-ignition marine engines) can be found at 59 FR 
55930 (November 1994); a supplemental notice of proposed rulemaking can 
be found at 61 FR 4600 (February 7, 1996); and the final rule can be 
found at 61 FR 52088 (October 4, 1996). The notice of proposed 
rulemaking for the second rule (for the control of air pollution from 
new compression-ignition marine engines at or above 37 kW) can be found 
at 63 FR 68508 (December 11, 1998); the final rule can be found at 64 
FR 73300 (December 29, 1999). These documents are available on our 
websites, http://www.epa.gov/otaq/marine.htm and http://www.epa.gov/otaq.marinesi.htm This proposal relies in part on information that was 
obtained for those rulemakings, which can be found in Public Dockets A-
92-28 and A-97-50. Those dockets are incorporated by reference into the 
docket for this proposal, A-2001-11.

Obtaining Electronic Copies of the Regulatory Documents

    The preamble, regulatory language, Draft Regulatory Support 
Document, and other rule documents are also available electronically 
from the EPA Internet Web site. This service is free of charge, except 
for any cost incurred for internet connectivity. The electronic version 
of this proposed rule is made available on the date of publication on 
the primary web site listed below. The EPA Office of Transportation and 
Air Quality also publishes Federal Register notices and related 
documents on the secondary web site listed below.
    1. http://www.epa.gov/docs/fedrgstr/EPA-AIR (either select desired 
date or use Search features).
    2. http://www.epa.gov/otaq (look in What's New or under the 
specific rulemaking topic)
    Please note that due to differences between the software used to 
develop the documents and the software into which the document may be 
downloaded, format changes may occur.

Table of Contents

I. Introduction

    A. Overview
    B. How Is This Document Organized?
    C. What Requirements Are We Proposing or Considering?
    D. Why Is EPA Taking This Action?
    E. Putting This Proposal Into Perspective

II. The Air Quality Need

    A. Overview
    B. What are the Public Health and Welfare Concerns Associated 
with Emissions from Category 3 Diesel Marine Engines Subject to the 
Proposed Standards?
    C. Contribution from Category 3 Marine Diesel Engines

III. What Engines Are Covered?

    A. What is a Marine Vessel?
    B. What is a Category 3 Marine Diesel Engine?
    C. What is a New Marine Diesel Engine?
    D. What is a New Marine Vessel?
    E. Would the Foreign Trade Exemption Be Retained?

IV. Standards and Technological Feasibility

    A. What engine emission standards are under consideration?
    B. When would the engine emission standards apply?
    C. What information supports the technological feasibility of 
the engine emission standards?
    D. Is EPA considering not adopting Tier 2 Standards in this 
rulemaking?
    E. Is EPA considering any fuel standards?

V. Demonstrating Compliance

    A. Overview of Certification
    B. Other Certification and Compliance Issues
    C. Test Procedures for Category 3 Marine Engines
    D. Comparison to Annex VI Compliance Requirements

VI. Projected Impacts

    A. What are the anticipated economic impacts of the proposed 
standards?
    B. What are the anticipated economic impacts of the standards 
under consideration?
    C. What are the anticipated emission reductions of the standards 
under consideration?
    D. What is the estimated cost per ton of pollutant reduced for 
this proposal and alternatives we are considering?
    E. What are the estimated health and environmental benefits for 
this proposal?
    F. What would be the impacts of a low sulfur fuel requirement?

VII. Other Approaches We Considered

    A. Standards Considered
    B. Potential Impacts of the Regulatory Alternatives
    C. Summary
    D. Speed-based vs. Displacement-based Emission Standards

VIII. The Blue Cruise Program

    A. What Is the Blue Cruise Program?
    B. How Would the Program Work?

IX. Public Participation

    A. How do I submit comments?
    B. Will there be a public hearing?

X. Administrative requirements

    A. Administrative Designation and Regulatory Analysis (Executive
Order 12866)
    B. Regulatory Flexibility Act (RFA), as Amended by the Small 
Business

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Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 
et seq.
    C. Paperwork Reduction Act
    D. Intergovernmental Relations
    E. National Technology Transfer and Advancement Act
    F. Protection of Children (Executive Order 13045)
    G. Federalism (Executive Order 13132)
    H. Energy Effects (Executive Order 13211)

I. Introduction

A. Overview

    Marine diesel engines can be significant contributors to local 
ozone, CO, and PM levels, particularly in commercial ports and along 
coastal areas. In recognition of their inventory impact, we recently 
set emission standards for new marine diesel engines above 37 kW but 
less than 30 liters per cylinder (64 FR 73300, December 29, 1999). The 
standards contained in that rule cover emissions of oxides of nitrogen 
(NOX), particulate matter (PM), hydrocarbons (HC), and 
carbon monoxide (CO), and go into effect in 2004-2007, depending on 
engine size. Those standards are more stringent than the international 
standards contained in Annex VI to the International Convention on the 
Prevention of Pollution from Ships, 1973, as Modified by the Protocol 
of 1978 Relating Thereto (this convention is also known as MARPOL; the 
standards are referred to as the Annex VI NOX limits).\1\ 
They also cover more pollutants, as the MARPOL limits are for 
NOX emissions only. As described in Section D, below, the 
Annex has not yet gone into force because the requisite number of 
countries have not ratified it. Prior to the effective date of the 
national standards, engine manufacturers are encouraged to voluntarily 
comply with the Annex VI NOX limits pending entry into force 
of Annex VI. We developed a voluntary certification program to enable 
engine manufacturers to certify to the Annex VI NOX limits 
prior to the Annex VI requirements entering into force. The national 
emission requirements apply only to engines on vessels flagged in the 
United States. Marine engines on foreign vessels were not covered by 
the rule.
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    \1\ Annex VI was adopted by a Conference of the Parties to 
MARPOL on September 26, 1997, but has not yet entered into force. 
Copies of the conference versions of the Annex and the NOx Technical 
Code can be found in Docket A-95-50, Document II.B.01. Copies of 
updated versions can be obtained from the International Maritime 
Organization (www.imo.org.)
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    We did not set standards for new marine diesel engines at or above 
30 liters per cylinder in our 1999 rule. Our analysis at the time 
indicated that the Annex VI NOX limits were appropriate 
given the operating characteristics and fuel used by these engines. 
Rather than duplicate the Annex VI emission control program in our 
federal regulations, we encouraged engine manufacturers to comply with 
the Annex VI limits using our voluntary certification program.
    We also indicated that we would revisit the need to adopt emission 
limits for these engines under the Clean Air Act if the Annex does not 
go into effect internationally.
    Although more than four years have gone by since Annex VI was 
adopted by the Parties to the Convention, it has not yet entered into 
force. There is growing concern in the United States that there are no 
enforceable standards for these large marine engines. Also, recently 
developed inventories suggest that the inventory contribution of these 
engines can be very high in individual port areas. We estimate that 
these engines account for about 1.5 percent of national mobile source 
NOX emissions. This contribution can be significantly higher 
on a port-specific basis. For example, we estimate that these engines 
contribute about 7 percent of mobile source NOX in the 
Metropolitan Statistical Areas (MSA) of Baton Rouge/New Orleans and 
Wilmington NC, about 5 percent of mobile source NOX in the 
Miami/ Fort Lauderdale and Corpus Christi MSAs, and about 4 percent in 
the Seattle/Tacoma/Bremerton/Bellingham MSA. In addition, these ships 
can have a significant impact on inventories in areas without large 
commercial ports. For example, Santa Barbara estimates that engine on 
ocean-going marine vessels contribute about 37 percent of total 
NOX in their area. These emissions are from ships that 
transit the area, and ``are comparable to (even slightly larger than) 
the amount of NOX produced onshore by cars and truck.\2\ 
These emissions are expected to increase to 62 percent by 2015.
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    \2\ Memorandum to Docket A-2001-11 from Jean Marie Revelt, 
``Santa Barbara County Air Qualilty News, Issue 62, July-August 2001 
and other materials provided to EPA by Santa Barbara County,'' March 
14, 2002. Air Docket A-2001-11, Document No. II-A-47.
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    We estimate the contribution of these engines to national PM levels 
is about 2.6 percent, but can also be higher on a port-specific area 
(see Table 2.6-1 in the draft Regulatory Support Document (RSD) for 
this rule and associated text). The estimated contribution of these 
engines to national HC and CO emissions is negligible. The inventory 
contribution of these engines to national NOX, PM, HC, and 
CO levels is expected to increase as emissions from other mobile 
sources decrease due to our recently finalized emission control 
programs for highway vehicles and heavy-duty trucks. Reductions in the 
inventories of these pollutants will lead to health benefits, as 
described in Section II.
    In addition, manufacturers of diesel engines, including marine 
diesel engines, have gained greater experience with the emission 
control technologies that can be applied to these engines. Our analysis 
indicates that greater emission reductions can be achieved by 
optimizing currently available control technologies that are being used 
to achieve the Annex VI NOX limits.
    This Notice discusses two tiers of NOX emission controls 
for these engines. The first tier is equivalent to the internationally 
negotiated NOX standards and would be enforceable under U.S. 
law for new engines built in 2004 and later. The second tier of 
NOX standards, if implemented, would reflect additional 
reductions that can be achieved through engine-based emission controls, 
and would apply to new engines built after 2006 or later. We are also 
considering standards for HC and CO emissions to ensure that these 
emissions do not increase on an engine-specific basis. Particulate 
matter emissions from these engines are primarily due to the 
characteristics of the fuel they use (residual fuel), and we are 
requesting comment on whether we should consider a sulfur content limit 
for that fuel. We would review the Tier 2 standards prior to their 
effective date to take into consideration continued development of new 
technologies, such as selective catalyst reduction and water-based 
emission reduction techniques, and international activity such as 
action at International Maritime Organization (IMO) to set more 
stringent international standards.
    Consistent with our 1999 commercial marine diesel engine standards, 
this proposal also contains voluntary low emission standards for marine 
diesel engines at or above 30 liters per cylinder. As emissions from 
most mobile source categories continue to decline, emissions from 
marine vessels and associated port equipment are becoming an 
increasingly significant source for local, regional, and global 
emissions. Because of the slow turnover of vessels and associated 
equipment, there is an opportunity and need for the ports, shipping 
companies, engine manufacturers, and fuel suppliers to work on a 
collaborative effort to expedite and further reduce emissions beyond 
the Annex VI NOX limits and U.S. national standards. Two 
components of this proposal can help encourage these actions. The first 
is voluntary low emission standards set at

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80 percent below the Annex VI NOX limits. These standards 
can be used in state-based initiatives and are expected to require the 
use of advanced technologies such as fuel cells or selective catalyst 
reduction. The second is the voluntary Blue Cruise program, in which 
participant vessel owners can receive special recognition from EPA for 
installing and using technologies that reduce waste and air emissions.
    We are also proposing new requirements for engines at or above 2.5 
liters per cylinder but less than 30 liters per cylinder. The Tier 2 
standards we finalized for these engines in our 1999 commercial marine 
diesel rule are effective in 2007. Until then, and pending entry into 
force of Annex VI, we encouraged engine manufacturers to voluntarily 
comply with Tier 1 standards, which are equivalent to the 
internationally negotiated NOX standards. Because Annex VI 
has not gone into force, they remain unenforceable. Due to the 
continued uncertainty regarding entry into force of Annex VI, we 
believe it is appropriate to begin to require engine manufacturers to 
certify these engines to the Tier 1 standards, starting in 2004. We are 
also proposing to eliminate the foreign trade exemption for all marine 
diesel engines, which was available for engines installed on vessels 
that spend less than 25 percent of total operating time with 320 
kilometers of U.S. territory. To date, this exemption has not been 
requested by engine manufacturers.
    The standards discussed in this Notice, which would apply to 
engines installed on vessels flagged in the United States, are intended 
to help reduce ozone inventories and avoid a range of associated 
adverse health effects. The costs of the proposed Tier 1 standards are 
negligible and reflect certification and compliance costs only. We do 
not anticipate that there will be any engineering or design costs 
associated with the Tier 1 standards as manufacturers are already 
certifying engines to Annex VI requirements through our voluntary 
certification program. The estimated cost to industry of complying with 
the Tier 2 standards being considered is about $115,000 per engine, 
with an additional estimated cost of about $5,000 annually to maintain 
equipment. This represents a 7 percent increase in the total engine 
cost and about 0.1 percent increase in the total vessel cost. We 
estimate the aggregate costs (annualized over 20 years) of the Tier 2 
standards under consideration to be about $1.6 million annually. The 
economic impacts and environmental benefits of the proposal and Tier 2 
standards under consideration are described in Section VI, below.
    The impact of the standards on air quality in specific areas will 
depend in part on the characteristics of the fleet of vessels that 
operate in that area, particularly on the proportion of foreign-flag 
ships to U.S.-flag ships. Recognizing that foreign-flag vessels 
constitute a significant portion of emissions from these engines and 
that the internationally negotiated NOX standards for these 
engines are not yet enforceable, we are seeking comment on whether the 
standards should also apply to marine engines on foreign vessels 
entering U.S. ports and to no longer exclude such foreign vessels from 
the emission standards under 40 CFR 94.1(b)(3). While EPA's current 
standards for marine vessels do not apply to foreign flag vessels, EPA 
is inviting comments on whether it should change this approach. If we 
were to apply our emission standards to foreign vessels that enter U.S. 
ports as part of this rulemaking effort, then the standards would apply 
to any marine engine that is manufactured after the standards become 
effective and that is installed on such a foreign vessel and would be a 
condition of port entry. The standards would also apply to any marine 
engine installed on such a foreign vessel that is manufactured (or that 
otherwise become new) after the standards become effective. While we 
are seeking comment on applying the standards to foreign vessels that 
use U.S. ports, we may require such standards for foreign vessels in 
2003.

B. How Is This Document Organized?

    This document contains ten parts. After this introductory section, 
Section II describes the air quality need for this rulemaking and 
projected benefits. That section contains a description of the human 
health and welfare effects of exposure to ozone, PM, and CO and reports 
our inventory estimates for this source for current and future years. 
In Section III, we describe the set of engines that would be required 
to comply with the proposed standards and our reasoning behind this 
scope of application. Sections IV and VII contain the proposed emission 
standards and alternatives under consideration, effective dates, and 
testing requirements. We also discuss the technological feasibility of 
the standards discussed in this Notice, and alternative approaches. 
Section V describes various compliance provisions. Section VI 
summarizes the projected impacts of the standards and discusses their 
benefits. Section VIII describes a voluntary incentive program in which 
participant vessel owners can receive special recognition from EPA for 
installing and using technologies that reduce waste and air emissions. 
Finally, Sections IX and X contain information about public 
participation, how we satisfied our administrative requirements, and 
the statutory provisions and legal authority for this proposal. 
Additional information on many of these topics can be found in the 
Draft Regulatory Support Document for this proposal.

C. What Requirements Are We Proposing or Considering?

    The NOX emission standards for marine diesel engines at 
or above 30 liters per cylinder (Category 3 marine diesel engines) 
would consist of two tiers. Tier 1 would apply to new engines built in 
2004 and later and would be equivalent to the Annex VI NOX 
limits adopted by the Parties to MARPOL in 1997. We are also 
considering Tier 2 NOX standards that would apply to new 
engines built after 2006 or later and consist of a NOX limit 
30 percent below the Tier 1/Annex VI limit. The year that EPA considers 
most appropriate at this time is 2007. For both tiers of standards, we 
would define NOX standards as a function of maximum engine 
speed, consistent with Annex VI, but are requesting comment on the 
merits of defining Tier 2 NOX standards instead as a 
function of engine displacement. Both tiers of standards can be met 
through engine-based emission-control technologies. The Annex VI 
NOX limits are based on certification on distillate fuel, 
which has a lower nitrogen content than the residual fuel that these 
engines are most likely to use in operation. We are proposing numerical 
emission limits based on residual fuel, but allow for certification 
testing using distillate or residual fuel. In either case, we are 
proposing that the test results be adjusted to account for the nitrogen 
content of the fuel, and then be compared to the proposed emission 
limits. The fuel quality adjustment is described in Section IV.A.2, 
below.
    In addition to the Tier 2 NOX limits, we are considering 
hydrocarbon and carbon monoxide emission limits at 0.4 g/kW-hr and 3.0 
g/kW-hr, respectively. These standards would ensure that these 
emissions do not increase on an engine-specific basis. We are also 
considering adoption of a schedule to review any Tier 2 standards prior 
to their effective date to take into consideration continued 
development of new technologies, such as selective catalyst reduction 
and water-based emission reduction techniques, and international 
activity such as action at IMO to adopt more stringent standards

[[Page 37552]]

internationally. We request comment on the hydrocarbon and carbon 
monoxide standards.
    We are not planning to adopt a Tier 2 standard for particulate 
emissions from these engines. Most of the particulate emissions are a 
result of the high sulfur and ash content of the fuel used by these 
engines, and there is no acceptable measurement procedure for fuels 
with these characteristics. We are requesting comment, however, on 
whether we should consider a fuel sulfur content limit for the fuels 
used by these engines. One option, for example, would be to set a 
sulfur content cap equivalent to the limit for fuel used in 
SOX Emission Control Areas provided in Regulation 14 of 
MARPOL Annex VI. Pursuant to that regulation, the sulfur content of 
fuel used by vessels operating in those areas cannot exceed 15,000 ppm. 
The United States could also pursue this option through procedures 
contained in Regulation 14 of MARPOL Annex VI. That regulation provides 
for the designation of SOX emission control areas. We 
estimate that reducing the sulfur content of residual fuel to 15,000 
ppm may decrease the PM inventory of these engines 18 percent and the 
SOX inventory by 44 percent (See Section VI.F, below). In 
connection with this option, we are seeking comment as to which areas 
of the United States should be considered for designation as 
SOX emission control areas under MARPOL Annex VI, and 
whether and how we should seek the cooperation of Canada, Mexico, and 
the Carribean in designating these areas. Both of these options are 
discussed in Section VI.E, below.
    We are also proposing voluntary low emission NOX 
standards for Category 3 marine diesel engines. These standards, which 
represent an 80 percent reduction from the Annex VI NOX 
limits, are intended to encourage the introduction and more widespread 
use of low-emission technologies. Manufacturers could be motivated to 
exceed emission requirements either to gain early experience with 
certain technologies or as a response to market demand or local 
government programs. Ship owners could take advantage of these and 
other emission reduction technologies to receive special recognition 
from EPA for installing and using technologies that reduce waste and 
air emissions under our proposed voluntary Blue Cruise program.
    To implement these standards for marine diesel engines at or above 
30 liters per cylinder in an effective way, we are proposing several 
compliance requirements. In general, the proposed compliance program 
reflects our traditional manufacturer-based approach. This is in 
contrast to the international approach reflected in Annex VI, which 
holds the vessel owner responsible for compliance once the engine is 
delivered onboard. Many of the proposed compliance provisions, 
including certification application, engine labeling, and warranty 
requirements, are similar or identical to the compliance provisions 
that we finalized in our 1999 rulemaking. In addition, we are including 
a post-installation verification provision which would require an 
emission test after an engine is installed on a vessel. We are also 
proposing a field measurement provision that would apply to engines 
with adjustable parameters or add-on emission control devices. 
Manufacturers of these engines would be required to equip the engine 
with a field measurement device. The owner of a vessel with such an 
engine would have to perform a field measurement when the vessel 
approaches within 175 nautical miles (200 statutory miles) of the U.S. 
coastline from the open sea or when it adjusts an engine parameter 
within that distance. The results of this field measurement will 
demonstrate that the engine is in compliance with the relevant 
standards when it is operated in an area that affects U.S. air quality. 
EPA will work with the U.S. Coast Guard to develop procedures to verify 
onboard performance of these field measurement provisions, as Coast 
Guard has the general authority to carry out such procedures on 
vessels.
    We are also proposing new requirements for engines at or above 2.5 
liters per cylinder but less than 30 liters per cylinder. The Tier 2 
standards we finalized for these engines in our 1999 commercial marine 
diesel rule are effective in 2007. Until then, and pending entry into 
force of Annex VI, we encouraged engine manufacturers to voluntarily 
comply with Tier 1 standards, which are equivalent to the 
internationally negotiated NOX standards. Because Annex VI 
has not gone into force, they remain unenforceable. While the U.S. is 
beginning the ratification process for Annex VI, due to the continued 
uncertainty regarding its entry into force of Annex VI, we believe it 
is appropriate to begin to require engine manufacturers to certify 
these engines to the Tier 1 standards, starting in 2004. We are also 
proposing to eliminate the foreign trade exemption for all marine 
diesel engines, which was available for engines installed on vessels 
that spend less than 25 percent of total operating time with 320 
kilometers of U.S. territory. To date, this exemption has not been 
requested by engine manufacturers.
    The standards discussed above would apply to engines installed on 
vessels flagged in the United States. Recognizing that foreign-flag 
vessels constitute a significant portion of emissions from these 
engines and that the internationally negotiated NOX 
standards for these engines are not yet enforceable, we are seeking 
comment on whether the standards should also apply to marine engines on 
foreign vessels entering U.S. ports and to no longer exclude such 
foreign vessels from the emission standards under 40 CFR 94.1(b)(3). If 
we were to apply our emission standards to foreign vessels that enter 
U.S. ports, then the standards would apply to any marine engine that is 
manufactured after the standards become effective and that is installed 
on such a foreign vessel. The standards would also apply to any marine 
engine installed on such a foreign vessel that is manufactured (or that 
otherwise become new) after the standards become effective. As 
discussed below, if the standards were to apply to foreign flag 
vessels, EPA would consider any significant differences between this 
proposed rule and Annex VI.

D. Why Is EPA Taking This Action?

    We developed this emission control program to fulfill our 
obligations under Section 213 of the Clean Air Act. That section, 
described in more detail in Section E, below, requires us to set 
standards for new nonroad engines. In addition, there are important 
public health and welfare reasons supporting the standards proposed in 
this document. As described in Section II.B, Category 3 marine diesel 
engines contribute to air pollution which causes public health and 
welfare problems. Emissions from these engines contribute to ground 
level ozone and ambient PM and CO levels, especially in and near 
commercial ports and waterways.\3\ Exposure to ground level ozone, PM, 
and CO can cause serious respiratory problems. These emissions also 
contribute to other environmental problems, including acid deposition, 
eutrophication, and nitrification.
---------------------------------------------------------------------------

    \3\ Ground-level ozone, the main ingredient in smog, is formed 
by complex chemical reactions of volatile organic compounds (VOCs) 
and NOX in the presence of heat and sunlight. 
Hydrocarbons (HC) are a large subset of VOC, and to reduce mobile-
source VOC levels we set maximum emissions limits for hydrocarbon 
and particulate matter emissions.
---------------------------------------------------------------------------

    This action is a departure from the emission control strategy we 
finalized in 1999 (64 FR 73300, December 29, 1999) in that we are 
considering no longer

[[Page 37553]]

relying solely on MARPOL Annex VI for controlling emissions from 
Category 3 marine diesel engines. While the Annex VI NOX 
limits apply to engines installed on vessels constructed on or after 
January 1, 2000, those standards are not enforceable until the Annex 
enters into force. As specified in Article 6 of the Annex, it will 
enter into force twelve months after the date on which not less than 
fifteen member states, the combined merchant fleets of which constitute 
not less than 50 percent of the gross tonnage of the world's merchant 
shipping, have ratified the agreement. To date, more than four years 
after it was adopted, the Annex has been ratified by only 6 countries 
representing 15.8 percent of the world's merchant shipping.\4\ In 
addition, the Annex VI NOX limits no longer reflect the 
greatest degree of emission control that can be achieved using newer 
technology, given appropriate lead time. Since we finalized our 
commercial marine diesel engine standards in 1999 (64 FR 73300, 
December 29, 1999), engine manufacturers continue to make progress in 
applying land-based emission control technologies to marine diesel 
engines. Improvements in fuel systems and engine cooling can reduce 
Category 3 engine emissions even more than the Annex VI NOX 
limits would require. Some engine manufacturers are also experimenting 
with water emulsification and injection and aftertreatment, including 
selective catalyst reduction, for even greater reductions. These 
emission control technologies are described in greater detail in 
Section IV.
---------------------------------------------------------------------------

    \4\ The countries that have ratified Annex VI are Sweden, 
Norway, Bahamas, Singapore, Marshall Islands, and Malawi. 
Information about Annex VI ratification can be found at www.imo.org 
(look under Conventions, Status of Conventions--Complete List).
---------------------------------------------------------------------------

E. Putting This Proposal Into Perspective

    This proposal should be considered in the broader context of EPA's 
nonroad emission-control programs, international activities, including 
MARPOL Annex VI, our previous marine emission control program, European 
Union (EU) initiatives, and activities at the state level. These 
programs and actions are discussed below.
1. EPA's Nonroad Emission-Control Programs
    Clean Air Act section 213(a)(1) directs us to study emissions from 
nonroad engines and vehicles to determine, among other things, whether 
these emissions ``cause, or significantly contribute to, air pollution 
that may reasonably be anticipated to endanger public health or 
welfare.'' Section 213(a)(2) further requires us to determine whether 
emissions of CO, VOCs, and NOX from all nonroad 
engines significantly contribute to ozone or CO emissions in more than 
one nonattainment area. If we determine that emissions from all nonroad 
engines are significant contributors, section 213(a)(3) then requires 
us to establish emission standards for classes or categories of new 
nonroad engines and vehicles that in our judgment cause or contribute 
to such pollution. We may also set emission standards under section 
213(a)(4) regulating any other emissions from nonroad engines that we 
find contribute significantly to air pollution.
    We completed the Nonroad Engine and Vehicle Emission Study, 
required by Clean Air Act section 213(a)(1), in November 1991.\5\ On 
June 17, 1994, we made an affirmative determination under section 
213(a)(2) that nonroad emissions are significant contributors to ozone 
or CO in more than one nonattainment area. We also determined that 
these engines make a significant contribution to PM and smoke emissions 
that may reasonably be anticipated to endanger public health or 
welfare. In the same document, we set a first phase of emission 
standards (now referred to as Tier 1 standards) for land-based nonroad 
diesel engines rated at or above 37 kW. In 1998, we set more stringent 
Tier 2 and Tier 3 emission levels for new land-based nonroad diesel 
engines at or above 37 kW and adopted Tier 1 standards for nonroad 
diesel engines, including marine diesel engines, less than 37 kW. Our 
other emission-control programs for nonroad engines are listed in Table 
I.E-1. This proposal takes another step toward the comprehensive 
nonroad engine emission-control strategy envisioned in the Act by 
proposing enforceable emission limits for marine diesel engines at or 
above 30 liters per cylinder.
---------------------------------------------------------------------------

    \5\ This study, the Nonroad Engine and Vehicle Emission Study 
(NEVES) is available in docket A-92-28.

                              Table I.E-1.--EPA's Nonroad Emission-Control Programs
----------------------------------------------------------------------------------------------------------------
             Engine category                     Final rulemaking                          Date
----------------------------------------------------------------------------------------------------------------
Land-based diesel engines [ge] 37 kW--     56 FR 31306.................  June 17, 1994
 Tier 1.
Spark-ignition engines [le]19 kW--Phase 1  60 FR 34581.................  July 3, 1995.
Spark-ignition marine....................  61 FR 52088.................  October 4, 1996.
Locomotives..............................  63 FR 18978.................  April 16, 1998.
Land-based diesel engines................  63 FR 56968.................  October 23, 1998.
    --Tier 1 and Tier 2 for engines < 37
     kW (these standards also apply to
     marine diesel engines < 37 kW)
    --Tier 2 and Tier 3 for engines [ge]
     37 kW
Commercial marine diesel engines above 37  64 FR 73300.................  December 29, 1999.
 kW (Standards apply to engines less than
 30 liters per cylinder only).
Spark-ignition engines [le]19 kW (Non-     64 FR 15208.................  March 30, 1999.
 handheld)--Phase 2.
Spark-ignition engines [le]19 kW           65 FR 24268.................  April 25, 2000.
 (Handheld)--Phase 2.
Nonroad large spark-ignition engines,      66 FR 51098 (proposal)......  October 5, 2001.
 recreational vehicles, and recreational
 marine diesel engines.
Marine evap. (includes highway                                         Expected 2002
 motorcycles).
----------------------------------------------------------------------------------------------------------------

2. MARPOL Annex VI
    In response to growing international concern about air pollution 
and in recognition of the highly international nature of maritime 
transportation, the IMO developed a program to reduce NOX 
and SOX emissions from marine vessels.\6\ \7\ The 
development of Annex

[[Page 37554]]

VI took place between 1992 and 1997. The Annex VI engine emission 
limits cover only NOX emissions; there are no restrictions 
on PM, HC, or CO emissions. They are based on engine speed and apply to 
engines above 130 kW. These standards are set out in Table I.E-2. 
Originally, these standards were expected to reduce NOX 
emissions by 30 percent when fully phased in. EPA inventory analysis, 
based on newly estimated emission factors for these engines, indicates 
that the expected reduction is on the order of about 20 percent. The 
EPA inventory analysis is described in more detail in the Draft 
Regulatory Support Document for this proposal.
---------------------------------------------------------------------------

    \6\ The Annex covers a several air emissions from marine 
vessels: ozone depleting substances, NOX, SOX, 
VOCs from tanker operations, incineration, fuel oil quality. There 
are also requirements for reception facilities and platforms and 
drilling rigs.
    \7\ To obtain copies of this document, see Footnote 1, above.
---------------------------------------------------------------------------

    With regard to implementation, the Annex VI NOX limits 
apply to each diesel engine with a power output of more than 130 kW 
installed on a ship constructed on or after January 1, 2000, or that 
undergoes a major conversion on or after January 1, 2000. The Annex 
does not distinguish between marine diesel engines installed on 
recreational or commercial vessels; all marine diesel engines above 130 
kW would be subject to the standards regardless of their use. The test 
procedures to be used to demonstrate compliance are set out in the 
Annex VI NOX Technical Code.\8\ They are based on ISO 8178 
and are performed using distillate fuel. Engines can be pre-certified 
or certified after they are installed onboard. After demonstrating 
compliance, pre-certified engines would receive an Engine International 
Air Pollution Prevention (EIAPP) certificate. This document, to be 
issued by the Administration of the flag country, is needed by the ship 
owner as part of the process of demonstrating compliance with all of 
the provisions of Annex VI and obtaining an International Air Pollution 
Prevention (IAPP) certificate for the vessel once the Annex goes into 
force. The Annex also contains engine compliance provisions based on a 
survey approach. These survey requirements would apply after the Annex 
goes into force. An engine is surveyed after it is installed, every 
five years after installation, and at least once between 5-year 
surveys. Engines are not required to be tested as part of a survey, 
however. The surveys can be done by a parameter check, which can be as 
simple as reviewing the Record Book of Engine Parameters that must be 
maintained for each engine and verifying that current engine settings 
are within allowable limits.
---------------------------------------------------------------------------

    \8\ To obtain copies of this document, see Footnote 1, above.
---------------------------------------------------------------------------

    After several years of negotiation, the Parties to MARPOL adopted a 
final version of Annex VI at a Diplomatic Conference on September 26, 
1997. However, as noted in Section I.C, above, the Annex has not yet 
gone into force. Pending entry into force, ship owners and vessel 
manufacturers have begun installing compliant engines on relevant ships 
beginning with the date specified in Regulation 13: January 1, 2000. In 
addition, ship owners must bring existing engines into compliance if 
the engines undergo a major conversion on or after that date.\9\ As 
defined in Regulation 13 of Annex VI, a major conversion is when the 
engine is replaced by a new engine, it is substantially modified, or 
its maximum continuous rating is increased by more than 10 percent. To 
facilitate implementation while the Annex is not yet in force and to 
allow engine manufacturers to certify their engines before the Annex 
goes into force, we set up a process for manufacturers to obtain a 
Statement of Voluntary Compliance.\10\ An EPA-issued Statement of 
Voluntary Compliance should be exchangeable for an EIAPP certificate 
once the Annex goes into effect in the United States.
---------------------------------------------------------------------------

    \9\ As defined in Regulation 13 of Annex VI, a major conversion 
means the engine is replaced by a new engine, it is substantially 
modified, or its maximum continuous rating is increased by more than 
10 percent.
    \10\ For more information about our voluntary certification 
program, see ``guidance for Certifying to MARPOL Annex VI,'' VPCD-
99-02. This letter is available on our website: http://www.epa.gov/otaq/regs/nonroad/marine/ci/imolettr.pdf and in Docket A-2001-11, 
Document No. II-B-01.
---------------------------------------------------------------------------

    The U.S. government is preparing the appropriate documents for the 
President to submit Annex VI to the Senate for its advice and consent 
to ratification. Besides setting standards for NOX 
emissions, Annex VI regulates ozone-depleting emissions, sulfur oxides 
emissions and shipboard incineration, and contains other 
environmentally protective measures. In transmitting Annex VI to the 
Senate, the Administration will work with Congress on new legislation 
to implement the Annex. At the same time, the United States government 
supports a revision of the Annex VI standards for NOX 
emissions, taking into account the emission reduction potential of new 
control technologies. By ratifying the Annex, the United States will 
continue its leadership in promoting environmentally responsible 
international emission standards at the IMO and recognize the role the 
IMO plays in protecting the world's marine environment from pollution. 
As described in Section I.E.4, below, we have already requested MEPC to 
begin consideration of more stringent NOX emission limits 
for marine diesel engines. In addition, once the Annex goes into force, 
amendment of NOX standards will be made easier through the 
tacit amendment process that would then apply.
3. EPA's Commercial Marine Diesel Engine Rules
    Although we included marine diesel engines in the development of 
our 1996 marine rule, we did not finalize standards for these engines 
at that time. At the time, we were considering standards based on Tier 
1 land-based nonroad diesel emission controls. Emerging emission 
control technologies for diesel engines, particularly the Tier 2 land-
based nonroad emission control technologies, led us to reconsider our 
approach and to defer standards for these engines to a later 
rulemaking.
    In our 1999 commercial marine diesel engine rule, we distinguished 
between different types of marine diesel engines. The three categories 
of marine diesel engines, contained in Table I.E-3, were intended to 
reflect differences in the land-based counterparts of these engines.

            Table I.E-3.--Marine Engine Category Definitions
------------------------------------------------------------------------
                                   Displacement per       Land-based
            Category                   cylinder           equivalent
------------------------------------------------------------------------
1...............................  disp. < 5 liters    Agricultural
                                   (and power  37 kW).     construction
                                                       equipment.
2...............................  5 liters < disp. <  Locomotives.
                                   30 liters.
3...............................  disp     No mobile source
                                   30 liters.          equivalent Power
                                                       plant generators.
------------------------------------------------------------------------


[[Page 37555]]

    The final standards for Category 1 and Category 2 marine diesel 
standards were more stringent than the Annex VI NOX limits, 
reflecting the greater degree of emission control that would be 
achievable through the application of technologies that would be used 
on the land-based equivalents of these engines to meet the nonroad Tier 
2 and locomotive Tier 1 standards. The standards also cover more 
pollutants than Annex VI, including standards for HC, CO, and PM as 
well as NOX. The emission standards we finalized for 
Category 1 and Category 2 marine diesel engines are similar to the 
nonroad Tier 2 and locomotive Tier 1 standards, respectively.
    We did not finalize standards for Category 3 marine diesel engines 
in 1999. Instead, we deferred to the Annex VI NOX emission 
control program. This decision was based on our technological analysis 
of control strategies for these engines which indicated that the 
appropriate standards should reflect reductions that can be obtained 
from injection rate shaping and some timing retard. These control 
technologies were consistent with the Annex VI NOX limits. 
While some Category 3 engines were already using Tier 2 engine 
technologies including turbocharging, injection improvements, 
electronics, and more efficient cooling, these technologies were being 
used to increase fuel efficiency and obtain optimal operation. Next-
generation technologies such as exhaust gas recirculation (EGR), 
selective catalyst reduction (SCR), and water injection were still 
under development for marine diesel engines of that size. Because the 
Annex VI NOX limits would likely be implemented 
independently of any Clean Air Act requirement, EPA believed that it 
would be unnecessary and redundant to adopt the same program under the 
Clean Air Act. Vessel owners were anticipated to begin complying with 
the Annex VI NOX limits beginning in 2000, as indicated in 
the Annex.
    Since 1999, Category 3 marine diesel engine manufacturers have 
continued to research emission control technologies and explore ways to 
transfer land-based diesel engine technologies to marine diesel 
engines. These technologies and emission control strategies are 
described in Sections IV and VII below, and in the draft Regulatory 
Support Document for this rule. Due to these advances, and due to the 
contribution of these engines to ozone and PM levels, we believe it is 
now appropriate to consider a second tier of emission limits for 
Category 3 marine diesel engines that will achieve greater reductions 
than those expected from the Annex VI NOX limits.
4. Continuing Action at the IMO
    At the time the Annex VI NOX limits were adopted, 
several Member States expressed concern that the NOX limits 
would not result in the emissions reductions they were intended to 
achieve. Due to the efforts of these Member States, the Conference of 
the Parties adopted a resolution that provides for review of the 
emission limits with the aim of adopting more stringent limits taking 
into account the adverse effects of such emissions on the environment 
and any technological developments in marine engines. This review is to 
occur at a minimum of five-year intervals after entry into force of the 
Annex and, if appropriate, amend the NOX limits to reflect 
more stringent controls.
    In March of 2000, the United States requested MEPC to begin 
consideration of more stringent emission limits for marine diesel 
engines.\11\ EPA's analysis of emission control technology for our 1999 
rulemaking indicated that more stringent standards are feasible for all 
Category 1 and Category 2 marine diesel engines. Engine manufacturers 
were also beginning to apply these emission control strategies to 
Category 3 marine diesel engines, as well as more advanced strategies 
such as water emulsification and selective catalyst reduction. 
Reflecting the potential emission reductions that could be obtained 
from applying these strategies to all marine diesel engines, the U.S. 
recommended Annex VI Tier 2 NOX limits be set at 25 to 30 
percent below the existing Annex VI NOX limits for all 
engines subject to the regulation (engines above 130 kW), to go into 
effect in 2007. This would allow a 7-year period of stability for the 
Annex VI NOX limits, permit engine manufacturers to adjust 
their engine designs to include new emission control technologies, and 
allow manufacturers of marine diesel engines at or above 30 liters per 
cylinder to develop emission control strategies for those large 
engines. This recommendation was briefly discussed at the 44th session 
of the MEPC (London, March 3-16, 2000), but was not acted on. The 
United States will continue to promote more stringent standards at IMO 
and encourage MEPC to adopt a second tier of emission limits that will 
reflect available technology and reduce the impact of marine diesel 
engines on the world's air quality.
---------------------------------------------------------------------------

    \11\ MEPC 44/11/7, Prevention of Pollution from Ships, Revision 
of the NOX Technical Code, Tier 2 emission limits for 
marine diesel engines at or above 130 kW, submitted by the United 
States. This document is available at Docket A-2001-11, Document No. 
II-A-16.
---------------------------------------------------------------------------

5. European Union Actions
    In February, 1999, the European Commission D-GXI commissioned a 
report to ``consider, analyse and recommend policy options to further 
the objective of reducing the harmful environmental impact of 
SOX and NOX from ships operating in European 
waters.\12\ The final report was completed in August 2000. The report 
explores two types of regulatory options, regulatory standards and 
incentive plans, for both fuel and engine emission controls. The report 
is currently under consideration by the Commission.
---------------------------------------------------------------------------

    \12\ Davies, M. E., et al., Study on the Economic, Legal, 
Environmental and Practical Implications of a European Union System 
to Reduce Ship Emissions of SOX and NOX, Final 
Report for European Commission Contract B4-3040/98/000839/MAR/B1, 
August 2000. This report is available at http://www.europa.eu.int/comm/environment/air/transport.htm#3. A copy can also be found in 
Docket A-2001-11, Document No. II-A-17.
---------------------------------------------------------------------------

    In January 2001, the Directorate-General for the Environment issued 
a discussion paper entitled ``A Community Strategy on Air Pollution 
from Seagoing Ships.''\13\ This paper contains a description of issues 
and solicits comments that will be used to develop a European emission 
control strategy for marine vessels. The discussion paper envisions two 
products: a Commission Communication and a proposal to amend EU 
Directive 1999/32 on the Sulphur Content of Liquid Fuels.
---------------------------------------------------------------------------

    \13\ This discussion paper can be found at http://www.europa.eu.int/comm/environment/air/future_transport.htm (Under 
``pollutant emissions from ships'' then ``new developments''). A 
copy of this paper can also be found in Docket A-2001-11, Document 
No. II-A-28.
---------------------------------------------------------------------------

    The discussion paper notes that current inventory analysis 
indicates that ships will account for 75% and 60% of EU land 
SOX and NOX emissions, respectively. A new 
inventory study currently being commissioned will shed more light on 
these contributions, particularly in-port contributions. The discussion 
paper also describes current EU and international regulatory regimes 
and the potential for further reductions. Regarding SOX 
emissions, EU Directive 1999/32 currently prohibits the use of marine 
distillate fuels having more than 2,000 ppm sulfur in Community 
territorial waters. While there is an exemption for ships coming from 
third countries, those ships must use low sulfur distillate after they 
make their first stop at a Community port. There is some concern that 
this approach encourages ships to burn heavy fuel

[[Page 37556]]

while in Community waters. Regarding NOX emissions, the 
paper describes the MARPOL Annex VI requirements, the EPA standards 
established in 1999, and the U.S. action to encourage IMO to consider 
more stringent NOX limits. The paper does not suggest 
potential emission control programs for the EU, but it requests comment 
support for more stringent standards.
6. Action By Individual European Countries
    In 1996 the Swedish Maritime Administration, the Swedish 
Shipowners' Association and the Swedish Ports' and Stevedores' 
Association arrived at a Tripartite Agreement to decrease ship nitrogen 
oxides and sulphur emissions by 75% within five years. The parties 
agreed to establish an environmental program on differentiated fairway 
and port dues for NOX levels and fuel sulphur content. The 
program was constructed by first raising the ship related dues (from 
Swedish Kroner (SEK) 3.90 per gross tonne (GT) for oil tankers and SEK 
3.60 per GT for ferries and other ships to SEK 5.30 and SEK 5.00 
respectively) from which the discounts would be subtracted\14\. For use 
of low sulphur fuels a credit of SEK 0.90 per GT was given for ships 
operating on bunker oils of a sulphur content of less than 0.5 per cent 
by weight for ferries and less than 1.0 per cent for other ships. For 
low NOX emissions, if the emission at 75 per cent engine 
load is above 12 g/kWh, no NOX discount is given. Below this 
level the discount increases continuously down to a level of 2 g/kWh 
where the discount is SEK 1.60 per GT. A maximum discount of SEK 2.50 
per GT is possible. The program entered into force January 1, 1998 and 
as of 1999, twenty of Sweden's fifty two ports have introduced 
environmentally differentiated harbour dues for reduced sulphur fuels, 
reduced NOX emissions or both. Ferries are using new 
technologies, including water emulsion systems (20-50% Nox reduction) 
and SCR systems (up to 95% NOX reduction), to achieve the 
low emission levels. To overcome initial problems and encourage the 
installation of catalytic converters, the Swedish Maritime 
Administration agreed to reimburse shipowners for the fairway dues paid 
during the first five years of the program (thru 2002). ``Based on 
known planned installations, the National Maritime Administration 
expects that by 1 January 2001 the scheme will have reduced 
NOX emissions from ships calling at Swedish ports by 40-45 
per cent compared to the situation in 1995.''\15\
---------------------------------------------------------------------------

    \14\ One Swedish Kroner (SEK) is about $0.09
    \15\ A further detailed discussion of this topic can be found at 
http://www.sjofartsverket.se/navigering/htm/frameset.htm.
---------------------------------------------------------------------------

    Over the past three years several other localities worldwide have 
also incorporated adjustments in port dues based on compliance with 
emission levels. The Port of Mariehamn, on the Finnish Island of Aland 
differentiates its harbor dues with regard to ships' emissions of 
NOX and sulphur. The proposal in 1999 was to ``give ships 
emitting less than 10 g/kWh NOX a rebate on a linear scale 
where the reduction of the port due is 8 per cent for ships emitting 
less than 1 gramme, and 1 per cent for ships emitting 9 g/kWh. Ships 
using bunker oils with less than 0.5 per cent sulphur (by weight) will 
receive an additional reduction of 4 per cent. For vessels meeting the 
latter criteria and having NOX emissions of less than 1 g/
kWh the proposal is to offer an extra rebate of 8 per cent. Such ships 
will, if the scheme is adopted, get a total reduction of 20 per 
cent.''\16\ The Norwegian government has a program for environmental 
differentiation of the tonnage tax (Proposition No. 1 1999/2000). The 
differentiation is based on a Ship Environment Index System (SEIS). The 
SEIS is based on up to seven different environmental parameters, 
including sulphur and NOX emissions with a maximum of 10 
points of which 6 points are from the abatement of NOX and 
sulphur emissions. The program will raise the tonnage tax by 50 per 
cent and ships registered according to the environmental index system 
will receive rebates in proportion to their environmental score. Ships 
that earn 10 points will not pay more than they did before the new 
scheme began operating and ships that do not register or do not earn 
any points will have to pay the full tax.''\17\ The Green Award 
Foundation, with the Port of Rotterdam and some ports in Portugal and 
South Africa offers reduced harbor dues for tankers of more than 20,000 
DWT. To earn the award, the shipowner and the vessel must comply with 
national and international laws and regulations as well as demonstrate 
environmental and safety awareness in a number of areas affecting 
management and crew competence as well as technical provisions which 
includes exhaust emissions.
---------------------------------------------------------------------------

    \16\ A further detailed discussion of this topic can be found at 
http://www.sjofartsverket.se/navigering/htm/frameset.htm.
    \17\ A further detailed discussion of this topic can be found at 
http://www.sjofartsverket.se/navigering/htm/frameset.htm.
---------------------------------------------------------------------------

7. State Actions: SCAQMD, Alaska and Texas Smoke Requirements
    Several states have programs that address smoke emissions from 
marine engines. This section summarizes the programs in SCAQMD, Alaska 
and Texas.
    SCAQMD: California's South Coast Air Quality Management District's 
Rule 401 states ``(b)(1) A person shall not discharge into the 
atmosphere from any single source of emission whatsoever any air 
contaminant for a period or periods aggregating more than three minutes 
in any one hour which is: (A) As dark or darker in shade as that 
designated No. 1 on the Ringelmann Chart as published by the United 
States Bureau of Mines; or (B) Of such opacity as to obscure an 
observer's view to a degree equal to or greater than does smoke 
described in subparagraph (b)(1)(A) of this rule.''\18\ The Port of 
Long Beach has issued literature requiring compliance with the SCAQMD 
rules through their Smoke Stack Emissions Program.\19\
---------------------------------------------------------------------------

    \18\ A further detailed discussion of this topic can be found at 
http://www.aqmd.gov/rules/html/r401.html.
    \19\ A further detailed discussion of this topic can be found at 
www.polb.com.
---------------------------------------------------------------------------

    The Port of Long Beach and the Port of Los Angeles also require, as 
of May 1, 2001, a Voluntary Commercial Cargo Ship Speed Reduction 
Program. The ``Air Quality Compliance Zone'' is with a 12 knot speed 
restriction beginning 20-nautical miles from Point Fermin to the 
boundaries of the existing mandatory Precautionary Area. The purpose is 
to reduce air pollution from ships in the South Coast Air Basin.\20\
---------------------------------------------------------------------------

    \20\ A further detailed discussion of this topic can be found at 
http://www.polb.com/NavAlert.htm.
---------------------------------------------------------------------------

    Alaska: Under Alaska's present state law, with some exceptions, 
``ships must keep emissions from reducing visibility through the 
exhaust plume by more than 20% while in Alaska waters. Diesel exhausts 
and other smoky discharges from ships can create a haze that hangs over 
coastal communities. DEC receives regular complaints from coastal 
community residents about these emissions. The state has certified 
readers who observe the emissions coming from a cruise ship's 
smokestack to determine if the standards are being exceeded.''\21\
---------------------------------------------------------------------------

    \21\ A further detailed discussion of this topic can be found at 
http://www.state.ak.us/local/akpages/ENV.CONSERV/press/2001/rel_1115.htm.
---------------------------------------------------------------------------

    Texas: The Texas Natural Resource Conservation Commission Chapter 
111 of the document on Control of Air Pollution From Visible Emissions 
and Particulate Matter contains requirements of visible emissions from

[[Page 37557]]

ships. The document, section 111.111(a)(6)(A) and (B), state that ``(A) 
Visible emissions shall not be permitted from any railroad locomotive, 
ship or any other vessel to exceed an opacity of 30% for any five-
minute period, except during reasonable periods of engine start-up. (B) 
Compliance with subparagraph (A) of this paragraph shall be determined 
by applying the following test methods, as appropriate: (i) Test Method 
9, (40 CFR part 60, Appendix A), or (ii) equivalent test method 
approved by the executive director and EPA.'' This document was 
effective June 11, 2000.\22\
---------------------------------------------------------------------------

    \22\ A further detailed discussion of this topic can be found at 
http://www.tnrcc.state.tx.us/oprd/rules/pdflib/111a.pdf.
---------------------------------------------------------------------------

II. The Air Quality Need

A. Overview

    This proposal contains a regulatory strategy for Category 3 marine 
diesel engines on U.S. vessels. Marine diesel engines at or above 30 
liters per cylinder are very large marine engines used primarily for 
propulsion power on ocean-going vessels such as container ships, 
tankers, bulk carriers, and cruise ships. The vessels that use these 
engines are flagged in the United States and in other countries. 
Category 3 engines have not been regulated under our nonroad engine 
programs. Nationwide, these engines are a significant source of mobile 
source air pollution. As described in Section II.C, below, emissions 
from all Category 3 marine diesel engines, regardless of flag of 
registry, currently account for about 1.5 percent of national mobile 
source NOX, and 2.6 percent of national mobile source PM 
inventories.
    We conducted a study of emissions from nonroad engines, vehicles, 
and equipment in 1991, as directed by the Clean Air Act, section 213(a) 
(42 U.S.C. 7547(a)). Based on the results of that study, we determined 
that emissions of NOX, VOCs (including HC), and CO from 
nonroad engines and equipment contribute significantly to ozone and CO 
concentrations in more than one noattainment area (see 59 FR 31306, 
June 17, 1994). Given this determination, section 213(a)(3) of the Act 
requires us to establish (and from time to time revise) emission 
standards for those classes or categories of new nonroad engines, 
vehicles, and equipment that in our judgment cause or contribute to 
such air pollution. We have determined that commercial marine diesel 
engines cause or contribute to such air pollution (see also the 
proposed commercial marine diesel engine preamble at 63 FR 68508, 
December 11, 1998 and the final rule at 64 FR 73300, December 29, 
1999).
    Where we determine that other emissions from new nonroad engines, 
vehicles, or equipment significantly contribute to air pollution that 
may reasonably be anticipated to endanger public health or welfare, 
section 213(a)(4) authorizes EPA to establish (and from time to time 
revise) emission standards from those classes or categories of new 
nonroad engines, vehicles, and equipment that cause or contribute to 
such air pollution. We have determined that commercial marine diesel 
engines cause or contribute to such air pollution (see also the 
proposed commercial marine diesel engine preamble at 63 FR 68508, 
December 11, 1998 and the final rule at 64 FR 73300, December 29, 
1999).

B. What Are the Public Health and Welfare Concerns Associated With 
Emissions From Category 3 Diesel Marine Engines Subject to the Proposed 
Standards?

    The engines that would be subject to the proposed standards 
generate emissions of NOX, HC, PM and CO that contribute to 
ozone and CO nonattainment as well as adverse health effects associated 
with ambient concentrations of PM. This section contains a summary of 
the general health effects of these substances. Further information can 
be found in Chapter 2 of the Draft Regulatory Support Document. 
National and selected port city inventories are set out in Section 
II.C, and estimates of the expected impact of the proposed control 
program are described in Section VI.
1. Ozone and its Precursors
    Volatile organic compounds (VOC) and NOX are precursors 
in the photochemical reaction which forms tropospheric ozone. Ground-
level ozone, the main ingredient in smog, is formed by complex chemical 
reactions of VOCs and NOX in the presence of heat and 
sunlight. Hydrocarbons (HC) are a large subset of VOC, and to reduce 
mobile-source VOC levels we set maximum emissions limits for 
hydrocarbon and particulate matter emissions.
    A large body of evidence shows that ozone can cause harmful 
respiratory effects including chest pain, coughing, and shortness of 
breath, which affect people with compromised respiratory systems most 
severely. When inhaled, ozone can cause acute respiratory problems; 
aggravate asthma; cause significant temporary decreases in lung 
function of 15 to over 20 percent in some healthy adults; cause 
inflammation of lung tissue; produce changes in lung tissue and 
structure; may increase hospital admissions and emergency room visits; 
and impair the body's immune system defenses, making people more 
susceptible to respiratory illnesses. Children and outdoor workers are 
likely to be exposed to elevated ambient levels of ozone during 
exercise and, therefore, are at a greater risk of experiencing adverse 
health effects. Beyond its human health effects, ozone has been shown 
to injure plants, which has the effect of reducing crop yields and 
reducing productivity in forest ecosystems.
    There is strong and convincing evidence that exposure to ozone is 
associated with exacerbation of asthma-related symptoms. Increases in 
ozone concentrations in the air have been associated with increases in 
hospitalization for respiratory causes for individuals with asthma, 
worsening of symptoms, decrements in lung function, and increased 
medication use, and chronic exposure may cause permanent lung damage. 
The risk of suffering these effects is particularly high for children 
and for people with compromised respiratory systems.
    Ground level ozone today remains a pervasive pollution problem in 
the United States. In 1999, 90.8 million people (1990 census) lived in 
31 areas designated nonattainment under the 1-hour ozone NAAQS.\23\ 
This sharp decline from the 101 nonattainment areas originally 
identified under the Clean Air Act Amendments of 1990 demonstrates the 
effectiveness of the last decade's worth of emission-control programs. 
However, elevated ozone concentrations remain a serious public health 
concern throughout the nation.
---------------------------------------------------------------------------

    \23\ National Air Quality and Emissions Trends Report, 1999, 
EPA, 2001, at Table A-19. This document is available at http://www.epa.gov/oar/aqtrnd99/. The data from the Trends report are the 
most recent EPA air quality data that have been quality assured. A 
copy of this table can also be found in Docket No. A-2001-11, 
Document No. II-A-XX.
---------------------------------------------------------------------------

    Over the last decade, declines in ozone levels were found mostly in 
urban areas, where emissions are heavily influenced by controls on 
mobile sources and their fuels. Twenty-three metropolitan areas have 
realized a decline in ozone levels since 1989, but at the same time 
ozone levels in 11 metropolitan areas with 7 million people have 
increased.\24\ Regionally,

[[Page 37558]]

California and the Northeast have recorded significant reductions in 
peak ozone levels, while four other regions (the Mid-Atlantic, the 
Southeast, the Central and Pacific Northwest) have seen ozone levels 
increase. The highest ambient concentrations are currently found in 
suburban areas, consistent with downwind transport of emissions from 
urban centers. Concentrations in rural areas have risen to the levels 
previously found only in cities.
---------------------------------------------------------------------------

    \24\ National Air Quality and Emissions Trends Report, 1998, 
March, 2000, at 28. This document is available at http://www.epa.gov/oar/aqtrnd98/. Relevant pages of this report can be 
found in Memorandum to Air Docket A-2000-01 from Jean Marie Revelt, 
September 5, 2001. This memorandum is available in Air Docket A-
2001-11, Document No. II-A-XX.
---------------------------------------------------------------------------

    To estimate future ozone levels, we refer to the modeling performed 
in conjunction with the final rule for our most recent heavy-duty 
highway engine and fuel standards.\25\ We performed ozone air quality 
modeling for the entire Eastern U.S. covering metropolitan areas from 
Texas to the Northeast.\26\ This ozone air quality model was based upon 
the same modeling system as was used in the Tier 2 air quality 
analysis, with the addition of updated inventory estimates for 2007 and 
2030. The results of this modeling were examined for those 37 areas in 
the East for which EPA's modeling predicted exceedences in 2007, 2020, 
and/or 2030 and the current 1-hour design values are above the standard 
or within 10 percent of the standard. This photochemical ozone modeling 
for 2020 predicts exceedences of the 1-hour ozone standard in 32 areas 
with a total of 89 million people (1999 census) after accounting for 
light- and heavy-duty on-highway control programs.\27\ We expect the 
NOX control strategy contained in this Notice for Category 3 
marine engines will further assist state efforts already underway to 
attain and maintain the 1-hour ozone standard.
---------------------------------------------------------------------------

    \25\ Additional information about this modeling can be found in 
our Regulatory Impact Analysis: Heavy-Duty Engine and Vehicle 
Standards and Highway Diesel Fuel Sulfur Control Requirements, 
document EPA420-R-00-026, December 2000. Docket No. A-2001-11, 
Document No. II-A-XX. This document is also available at http://www.epa.gov/otaq/diesel.htm#documents.
    \26\ We also performed ozone air quality modeling for the 
western United States but, as described further in the air quality 
technical support document, model predictions were well below 
corresponding ambient concentrations for our heavy-duty engine 
standards and fuel sulfur control rulemaking. Because of poor model 
performance for this region of the country, the results of the 
Western ozone modeling were not relied on for that rule.
    \27\ Regulatory Impact Analysis: Heavy-Duty Engine and Vehicle 
Standards and Highway Diesel Fuel Sulfur Control Requirements, US 
EPA, EPA420-R-00-026, December 2000, at II-14, Table II.A-2. Docket 
No. A-2001-11, Document Number II-A-XX. This document is also 
available at http://www.epa.gov/otaq/diesel.htm#documents.
---------------------------------------------------------------------------

    In addition to the health effects described above, there exists a 
large body of scientific literature that shows that harmful effects can 
occur from sustained levels of ozone exposure much lower than 0.125 
ppm.\28\ Studies of prolonged exposures, those lasting about 7 hours, 
show health effects from prolonged and repeated exposures at moderate 
levels of exertion to ozone concentrations as low as 0.08 ppm. The 
health effects at these levels of exposure include transient pulmonary 
function responses, transient respiratory symptoms, effects on exercise 
performance, increased airway responsiveness, increased susceptibility 
to respiratory infection, increased hospital and emergency room visits, 
and transient pulmonary respiratory inflammation.
---------------------------------------------------------------------------

    \28\ Additional information about these studies can be found in 
Chapter 2 of ``Regulatory Impact Analysis: Heavy-Duty Engine and 
Vehicle Standards and Highway Diesel Fuel Sulfur Control 
Requirements,'' December 2000, EPA420-R-00-026. Docket No. A-2001-
11, Document Number II-A-XX. This document is also available at 
http://www.epa.gov/otaq/diesel.htm#documents.
---------------------------------------------------------------------------

    Prolonged and repeated ozone concentrations at these levels are 
common in areas throughout the country, and are found both in areas 
that are exceeding, and areas that are not exceeding, the 1-hour ozone 
standard. Areas with these high concentrations are more widespread than 
those in nonattainment for that 1-hour ozone standard. Monitoring data 
indicate that 333 counties in 33 states exceed these levels in 1997-
99.\29\ The Agency's recent photochemical ozone modeling forecast that 
111 million people are predicted to live in areas that are at risk of 
exceeding these moderate ozone levels for prolonged periods of time in 
2020 after accounting for expected inventory reductions due to controls 
on light- and heavy-duty on-highway vehicles.\30\
---------------------------------------------------------------------------

    \29\ A copy of these data can be found in Air Docket A-2001-11, 
Document No. II-A-XX.
    \30\ Memorandum to Docket A-99-06 from Eric Ginsburg, EPA, 
``Summary of Model-Adjusted Ambient Concentrations for Certain 
Levels of Ground-Level Ozone over Prolonged Periods,'' November 22, 
2000, at Table C, Control Scenario--2020 Populations in Eastern 
Metropolitan Counties with Predicted Daily 8-Hour Ozone greater than 
or equal to 0.080 ppm. Docket A-2001-11, Document Number II-B-XX.
---------------------------------------------------------------------------

2. Particulate Matter
    Category 3 marine engines that would be subject to the proposed 
standards contribute to ambient particulate matter (PM) levels in two 
ways. First, they contribute through direct emissions of particulate 
matter. Second, they contribute to indirect formation of PM through 
their emissions of organic carbon, especially HC. Organic carbon 
accounts for between 27 and 36 percent of fine particle mass depending 
on the area of the country.
    Particulate matter represents a broad class of chemically and 
physically diverse substances. It can be principally characterized as 
discrete particles that exist in the condensed (liquid or solid) phase 
spanning several orders of magnitude in size. All particles equal to 
and less than 10 microns are called PM10. Fine particles can 
be generally defined as those particles with an aerodynamic diameter of 
2.5 microns or less (also known as PM2.5), and coarse 
fraction particles are those particles with an aerodynamic diameter 
greater than 2.5 microns, but equal to or less than a nominal 10 
microns.
    Particulate matter, like ozone, has been linked to a range of 
serious respiratory health problems. Scientific studies suggest a 
likely causal role of ambient particulate matter (which is attributable 
to several sources including mobile sources) in contributing to a 
series of health effects.\31\ The key health effects categories 
associated with ambient particulate matter include premature mortality, 
aggravation of respiratory and cardiovascular disease (as indicated by 
increased hospital admissions and emergency room visits, school 
absences, work loss days, and restricted activity days), aggravated 
asthma, acute respiratory symptoms, including aggravated coughing and 
difficult or painful breathing, chronic bronchitis, and decreased lung 
function that can be experienced as shortness of breath. Observable 
human noncancer health effects associated with exposure to diesel PM 
include some of the same health effects reported for ambient PM such as 
respiratory symptoms (cough, labored breathing, chest tightness, 
wheezing), and chronic respiratory disease (cough, phlegm, chronic 
bronchitis and suggestive evidence for decreases in pulmonary 
function). Symptoms of immunological effects such as wheezing and 
increased allergenicity are also seen. Exposure to fine particles is 
closely associated with such health effects as premature mortality or 
hospital admissions for cardiopulmonary disease.
---------------------------------------------------------------------------

    \31\ EPA (1996) Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information OAQPS Staff Paper. EPA-452/R-96-013. 
Docket Number A-99-06, Documents Nos. II-A-18, 19, 20, and 23. The 
particulate matter air quality criteria documents are also available 
at http://www.epa.gov/ncea/partmatt.htm.
---------------------------------------------------------------------------

    PM also causes adverse impacts to the environment. Fine PM is the 
major cause of reduced visibility in parts of the United States. Other 
environmental impacts occur when particles deposit

[[Page 37559]]

onto soils, plants, water or materials. For example, particles 
containing nitrogen and sulphur that deposit on to land or water bodies 
may change the nutrient balance and acidity of those environments. 
Finally, PM causes soiling and erosion damage to materials, including 
culturally important objects such as carved monuments and statues. It 
promotes and accelerates the corrosion of metals, degrades paints, and 
deteriorates building materials such as concrete and limestone.
    The NAAQS for PM10 were established in 1987. According 
to these standards, the short term (24-hour) standard of 150 [mu]g/m\3\ 
is not to be exceeded more than once per year on average over three 
years. The long-term standard specifies an expected annual arithmetic 
mean not to exceed 50 [mu]g/m\3\ over three years. Recent PM10 
monitoring data indicate that 14 designated PM10 
nonattainment areas with a projected population of 23 million violated 
the PM10 NAAQS in the period 1997-99. In addition, there are 
25 unclassifiable areas that have recently recorded ambient 
concentrations of PM10 above the PM10 NAAQS.\32\
---------------------------------------------------------------------------

    \32\ EPA adopted a policy in 1996 that allows areas with 
PM10 exceedances that are attributable to natural events 
to retain their designation as unclassifiable if the State is taking 
all reasonable measures to safeguard public health regardless of the 
sources of PM10 emissions.
---------------------------------------------------------------------------

    Current 1999 PM2.5 monitored values, which cover about a 
third of the nation's counties, indicate that at least 40 million 
people live in areas where long-term ambient fine particulate matter 
levels are at or above 16 [mu]g/m\3\ (37 percent of the population in 
the areas with monitors).\33\ This 16 [mu]g/m\3\ threshold is the low 
end of the range of long term average PM2.5 concentrations 
in cities where statistically significant associations were found with 
serious health effects, including premature mortality.\34\ To estimate 
the number of people who live in areas where long-term ambient fine 
particulate matter levels are at or above 16 [mu]g/m\3\ but for which 
there are no monitors, we can use modeling. According to our national 
modeled predictions, there were a total of 76 million people (1996 
population) living in areas with modeled annual average 
PM2.5 concentrations at or above 16 [mu]g/m\3\ (29 percent 
of the population).\35\
---------------------------------------------------------------------------

    \33\ Memorandum to Docket A-99-06 from Eric O. Ginsburg, Senior 
Program Advisor, ``Summary of 1999 Ambient Concentrations of Fine 
Particulate Matter,'' November 15, 2000. Air Docket A-2001-11, 
Document No. II-B-XX.
    \34\ EPA (1996) Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information OAQPS Staff Paper. EPA-452/R-96-013. 
Docket Number A-99-06, Documents Nos. II-A-18, 19, 20, and 23. The 
particulate matter air quality criteria documents are also available 
at http://www.epa.gov/ncea/partmatt.htm.
    \35\ Memorandum to Docket A-99-06 from Eric O. Ginsburg, Senior 
Program Advisor, ``Summary of Absolute Modeled and Model-Adjusted 
Estimates of Fine Particulate Matter for Selected Years,'' December 
6, 2000. Air Docket A-2001-11, Document No. II-B-XX.
---------------------------------------------------------------------------

    To estimate future PM2.5 levels, we refer to the 
modeling performed in conjunction with the final rule for our most 
recent heavy-duty highway engine and fuel standards, using EPA's 
Regulatory Model System for Aerosols and Deposition (REMSAD).\36\ The 
most appropriate method of making these projections relies on the model 
to predict changes between current and future states. Thus, we have 
estimated future conditions only for the areas with current 
PM2.5 monitored data (which cover about a third of the 
nation's counties). For these counties, REMSAD predicts the current 
level of 37 percent of the population living in areas where fine PM 
levels are at or above 16 [mu]g/m\3\ to increase to 49 percent in 
2030.\37\
---------------------------------------------------------------------------

    \36\ Additional information about the Regulatory Model System 
for Aerosols and Deposition (REMSAD) and our modeling protocols can 
be found in our Regulatory Impact Analysis: Heavy-Duty Engine and 
Vehicle Standards and Highway Diesel Fuel Sulfur Control 
Requirements, document EPA420-R-00-026, December 2000. Docket No. A-
2001-11, Document No. A-II-XX. This document is also available at 
http://www.epa.gov/otaq/disel.htm#documents.
    \37\ Technical Memorandum, EPA Air Docket A-99-06, Eric O. 
Ginsburg, Senior Program Advisor, Emissions Monitoring and Analysis 
Division, OAQPS, Summary of Absolute Modeled and Model-Adjusted 
Estimates of Fine Particulate Matter for Selected Years, December 6, 
2000, Table P-2. Docket Number 2001-11, Document Number II-B-XX.
---------------------------------------------------------------------------

3. Carbon Monoxide
    Carbon monoxide (CO) is a colorless, odorless gas produced through 
the incomplete combustion of carbon-based fuels. Carbon monoxide enters 
the bloodstream through the lungs and reduces the delivery of oxygen to 
the body's organs and tissues. The health threat from CO is most 
serious for those who suffer from cardiovascular disease, particularly 
those with angina or peripheral vascular disease. Healthy individuals 
also are affected, but only at higher CO levels. Exposure to elevated 
CO levels is associated with impairment of visual perception, work 
capacity, manual dexterity, learning ability and performance of complex 
tasks.
    High concentrations of CO generally occur in areas with elevated 
mobile-source emissions. Peak concentrations typically occur during the 
colder months of the year when mobile-source CO emissions are greater 
and nighttime inversion conditions are more frequent. This is due to 
the enhanced stability in the atmospheric boundary layer, which 
inhibits vertical mixing of emissions from the surface.
    The current primary NAAQS for CO are 35 parts per million for the 
one-hour average and 9 parts per million for the eight-hour average. 
These values are not to be exceeded more than once per year. Air 
quality carbon monoxide value is estimated using EPA guidance for 
calculating design values. In 1999, 30.5 million people (1990 census) 
lived in 17 areas designated nonattainment under the CO NAAQS.\38\
---------------------------------------------------------------------------

    \38\ National Air Quality and Emissions Trends Report, 1999, 
EPA, 2001, at Table A-19. This document is available at http://www.epa.gov/oar/aqtrnd99/. The data from the Trends report are the 
most recent EPA air quality data that have been quality assured. A 
copy of this table can also be found in Docket No. A-200111, 
Document No. II-A-XX.
---------------------------------------------------------------------------

    Nationally, significant progress has been made over the last decade 
to reduce CO emissions and ambient CO concentrations. Total CO 
emissions from all sources have decreased 16 percent from 1989 to 1998, 
and ambient CO concentrations decreased by 39 percent. During that 
time, while the mobile source CO contribution of the inventory remained 
steady at about 77 percent, the highway portion decreased from 62 
percent of total CO emissions to 56 percent while the nonroad portion 
increased from 17 percent to 22 percent.\39\ Over the next decade, we 
would expect there to be a minor decreasing trend from the highway 
segment due primarily to the more stringent standards for certain 
light-duty trucks (LDT2s).\40\ CO standards for passenger cars and 
other light-duty trucks and heavy-duty vehicles did not change as a 
result of other recent rulemakings.
---------------------------------------------------------------------------

    \39\ National Air Quality and Emissions Trends Report, 1998, 
March, 2000; this document is available at http://www.epa.gov/oar/aqtrnd98/. National Air Pollutant Emission Trends, 1900-1998 (EPA-
454/R-00-002), March, 2000. These documents are available at Docket 
No. A-2000-01, Document No. II-A-72. See also Air Quality Criteria 
for Carbon Monoxide, US EPA, EPA 600/P-99/001F, June 2000, at 3-10. 
Air Docket A-2001-11, Document Number II-A-XX. This document is also 
available at http://www.epa.gov/ncea/coabstract.htm.
    \40\ LDT2s are light light-duty trucks greater than 3750 lbs. 
loaded vehicle weight, up through 6000 gross vehicle weight rating.
---------------------------------------------------------------------------

4. Other Welfare and Environmental Effects
    In addition to the health and welfare concerns just described, 
Category 3 marine diesel engines can contribute to regional haze, acid 
deposition, and eutrophication and nitrophication. Further information 
on these effects can

[[Page 37560]]

be found in Chapter 2 of the Draft Regulatory Support Document.

C. Contribution From Category 3 Marine Diesel Engines

1. National Inventories
    We developed baseline Category 3 vessel emissions inventories under 
contract with E. H. Pechan & Associates, Inc.\41\ Inventory estimates 
were developed separately for vessel traffic within 25 nautical miles 
of port areas and vessel traffic outside of port areas but within 175 
nautical miles of the coastline. The inventories include all Category 3 
traffic, including that on the Great Lakes. Different techniques were 
used to develop the port and non-port inventories. For port areas we 
developed detailed emissions estimates for nine specific ports using 
port activity data including port calls, vessel types and typical times 
in different operating modes. Emissions estimates for all other ports 
were developed by matching each of those ports to one of the nine 
specific ports already analyzed based on characteristics of port 
activity, such as predominant vessel types, harbor draft and region of 
the country. The detailed port emissions were then scaled to the other 
ports based on relative port activity. We developed non-port emissions 
inventories using cargo movements and waterways data, vessel speeds, 
average dead weight tonnage per ship, and assumed cargo capacity 
factors. More detailed information regarding the development of the 
baseline emissions inventories can be found in Chapter 6 of the Draft 
Regulatory Support Document.
---------------------------------------------------------------------------

    \41\ ``Commercial Marine Emission Inventory Development,'' E.H. 
Pechan and Associates, Inc. and ENVIRON International Corporation, 
April, 2002.
---------------------------------------------------------------------------

    There has been little study of the transport of marine vessel 
NOX emissions and the distance they may travel to impact air 
quality on land. Pollutant transport is a very complicated subject, and 
the transport distance can vary dramatically depending on a variety of 
factors, including the pollutant under consideration, as prevailing 
wind speed and direction, and other atmospheric conditions. When we 
consider how far off the coast to include emissions in our baseline the 
correct answer may well vary depending on geographic area and 
prevailing atmospheric conditions. Thus, in developing baseline 
emissions inventories we looked at two scenarios that we believe 
reasonably bracket the distances from shore that vessel emissions my be 
emitted and expected in impact air quality on land. First, we looked 
only at the pollutants emitted within 25 nautical miles of a port area 
as a reasonable lower bound to estimate the national inventory of 
Category 3 marine diesel engines. As an upper bound we considered all 
Category 3 emissions within 175 nautical miles of shore.
    Not surprisingly, these two different distances yield different 
inventory results. The 1996 NOX and PM emissions inventories 
are shown in Table II.C-1. We used 1996 as the starting point for this 
analysis because that is the most recent year that we have detailed 
information available for the nine specific port areas. As will be 
discussed later in this section, this initial analysis shows that the 
contribution from U.S. and foreign flagged vessels differs between 
these two areas.

 Table II.C-1.--Category 3 Marine Diesel Engine 1996 Baseline Emissions
                               Inventories
                          [thousand short tons]
------------------------------------------------------------------------
                         Scenario                           NOX     PM
------------------------------------------------------------------------
Within 25 nautical miles of ports........................    101     9.3
Within 175 nautical miles of coast.......................    190    17
------------------------------------------------------------------------

    For the remainder of the analysis associated with the proposed 
emissions standards we will consider all emissions that occur within 
175 nautical miles from the coast as our primary scenario. We request 
comment on all aspects of our emissions inventories. In particular, we 
request comment on whether we should consider a range different than 
175 nautical miles from the coast as our primary scenario, and why. We 
also request comment on whether we should consider different distances 
from the coast for different areas of the country. For example, should 
we consider a smaller distance on the East coast than the West coast to 
account for prevailing wind patterns?
    We will continue to investigate this issue throughout this 
rulemaking, and will incorporate any new information into the final 
rule. For example, the U.S. Department of Defense (DoD) has presented 
information to us recommending that a different, shorter (offshore 
distance) limit be established rather than the proposed 175 nautical 
miles as the appropriate location where emissions from marine vessels 
would affect on-shore air quality. DoD's extensive work on the marine 
vessels issue in Southern California resulted in a conclusion that 
emissions within 60 nautical miles of shore could make it back to the 
coast due to eddies and the nature of the sea breeze effects. Satellite 
data however showed a distinct tendency for a curved line of 
demarcation separating the offshore (unobstructed) or parallel ocean 
wind flow from a region of more turbulent, recirculated air which would 
impact on-shore areas. That curved line of demarcation was close to San 
Nicolas Island which is about 60 nautical miles offshore. Studies and 
published information on other coastal areas in California indicates 
that they experience somewhat narrower (perhaps 30 nautical miles) 
region of ``coastal influence.'' The Gulf Coast and the U.S. East coast 
would similarly have their own unique meteorological conditions that 
might call for different lines of demarcation between on-shore and off-
shore effects.
    To estimate inventories for years after 1996, we developed 
inventory projections based on expected increases in vessel freight 
movement and expected changes in vessel characteristics, as well as 
fleet turnover based on 25 years as the average age of the world fleet 
at time of scrappage. We also take the MARPOL Annex VI NOX 
limits into account because, although these international 
NOX standards are not yet in force, we expect that most, if 
not all shipbuilders and shipping companies around the world are 
currently complying with them, and we expect this trend to continue. 
Our estimated emissions inventories are based on the assumption that 
all vessels built after 1999, both U.S. and foreign flagged, will 
comply with the MARPOL NOX limits. Table II.C-2 shows the 
future year NOX and PM inventories for selected years out to 
2030. More detailed information regarding the development of the future 
year emissions inventories can be found in Chapter 6 of the Draft 
Regulatory Support Document. We request comment on these inventory 
projections. In particular, we request comment on whether freight 
growth will continue at the exponential rate that is has seen in the 
past, and for how long such exponential growth can be expected to 
continue.
    One very important consideration in projecting future year 
inventories is the make up and size of the future vessel fleet. The 
size and make up of the future U.S. flagged fleet is dependent on 
vessel construction at U.S. shipyards, the nature of vessel replacement 
practices, and any growth in the number of ships in the fleet. 
Projecting future vessel production at U.S. shipyards is difficult for 
two reasons. First, vessel construction totals for U.S. shipyards

[[Page 37561]]

have varied quite a bit from year to year, with no clear trends. 
Second, the U.S. government discontinued subsidies to U.S. shipyards in 
1983, creating a dramatic downward shift in production at U.S. 
shipyards. We request comment on likely future production at U.S. 
shipyards, including production estimates and the rationale behind the 
estimates. Vessel replacement practices also play a role in future year 
emissions inventory projections. For example, the current U.S. flagged 
fleet contains a large number of older steamships. We request comment 
on whether these steamships are likely to be replaced with diesels when 
they are scrapped. We also request comment on whether there are any 
other vessel replacement practices or trends that we should consider 
when projecting future year emissions inventories. As shown in Chapter 
6 of the Draft Regulatory Support Document, a substantial portion of 
the U.S. flagged fleet is over 30 years old. We request comment on the 
size and nature of any increase in U.S. shipbuilding activity that may 
occur in the near future in an effort to replace the aging fleet. 
Finally, we request comment on whether the total number of U.S. flagged 
vessels is expected to grow substantially in the future and why.

             Table II.C-2.--Future Year NOX and PM Inventories for Category 3 Marine Diesel Engines
                                              [thousand short tons]
----------------------------------------------------------------------------------------------------------------
                                                     NOX                                     PM
               Year               ------------------------------------------------------------------------------
                                      Ports      Non-ports     All areas      Ports      Non-ports    All areas
----------------------------------------------------------------------------------------------------------------
1996.............................          101           89          190             9            8           17
2010.............................          146          128          274            14           12           26
2020.............................          196          172          367            20           16           37
2030.............................          288          243          531            30           24           54
----------------------------------------------------------------------------------------------------------------

    Baseline emission inventory estimates for the year 2000 for 
Category 3 marine diesel engines are summarized in Table II.C-3 in the 
context of other emissions sources. This table shows the relative 
contributions of the different mobile-source categories to the overall 
national mobile-source inventory. Of the total emissions from mobile 
sources, all Category 3 marine diesel engines contributed about 1.5 
percent of NOX and 2.6 percent of PM emissions in the year 
2000.
    Our draft emission projections for 2020 for Category 3 marine 
diesel engines show how emissions from these engines are expected to 
increase over time if left uncontrolled beyond the MARPOL Annex VI 
NOX limits. The projections for 2020 are summarized in Table 
II.C-4 and indicate that Category 3 marine diesel engines are expected 
to contribute 5.7 percent NOX and 5.8 percent of PM 
emissions in the year 2020. Population growth and the effects of other 
regulatory control programs are factored into these projections. The 
relative importance of uncontrolled nonroad engines is higher than the 
projections for 2000 because there are already emission control 
programs in place for the other categories of mobile sources which are 
expected to reduce their emission levels. The effectiveness of all 
control programs is offset by the anticipated growth in engine 
populations.

                                   Table II.C-3.--Modeled Annual Emission Levels for Mobile-Source Categories in 2000
                                                                  [thousand short tons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      NOX                     HC                     CO                     PM
                                                            --------------------------------------------------------------------------------------------
                          Category                                      Percent of             Percent of             Percent of              Percent of
                                                                Tons      mobile       Tons      mobile       Tons      mobile       Tons       mobile
                                                                          source                 source                 source                  source
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total for engines subject to proposed standards (U.S.               79         0.6          2         0.0          4         0.0         7.0         1.0
 flagged commercial marine--Category 3)....................
Commercial Marine CI--Category 3...........................        195         1.5          8         0.1         16         0.0        18.0         2.6
Commercial Marine CI--Categories 1 and 2...................        700         5.2         22         0.3        103         0.1        20           2.9
Highway Motorcycles........................................          8         0.1         84         1.1        329         0.4         0.4         0.1
Nonroad Industrial SI  19 kW....................        306         2.3        247         3.2      2,294         2.9         1.6         0.2
Recreational SI............................................         13         0.1        737         9.6      2,572         3.3         5.7         0.8
Recreation Marine CI.......................................         24         0.2          1         0.0          4         0.0         1           0.1
Marine SI Evap.............................................          0         0.0         89         1.2          0         0.0         0           0.0
Marine SI Exhaust..........................................         32         0.2        708         9.2      2,144         2.7        38           5.4
Nonroad SI < 19 kW.........................................        106         0.8      1,460        18.9     18,359        23.5        50           7.2
Nonroad CI.................................................      2,625        19.6        316         4.1      1,217         1.6       253          36.3
Locomotive.................................................      1,192         8.9         47         0.6        119         0.2        30           4.3
Total Nonroad..............................................      5,201        39        3,719        48       27,157        35         418          60
Total Highway..............................................      7,981        60        3,811        50       49,811        64         240          34
Aircraft...................................................        178         1          183         2        1,017         1          39           6
Total Mobile Sources.......................................     13,360       100        7,713       100       77,985       100         697         100
Total Man-Made Sources.....................................     24,444  ..........     18,659  ..........    100,064  ..........     3,093    ..........
Mobile Source percent of Total Man-Made Sources............         55  ..........         41  ..........         78  ..........        23    ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 37562]]


                                   Table II.C-4.--Modeled Annual Emission Levels for Mobile-Source Categories in 2020
                                                                  [thousand short tons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      NOX                     HC                     CO                     PM
                                                            --------------------------------------------------------------------------------------------
                          Category                                      Percent of             Percent of             Percent of              Percent of
                                                                Tons      mobile       Tons      mobile       Tons      mobile       Tons       mobile
                                                                          source                 source                 source                  source
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total for engines subject to proposed standards (U.S.              150         2.3          5         0.1          9         0.0        14.0         2.2
 flagged commercial marine--Category 3)....................
Commercial Marine CI--Category 3...........................        367         5.7         17         0.3         37         0.0        37.0         5.8
Commercial Marine CI--Categories 1 and 2...................        617         9.6         24         0.4        125         0.1        19.0         3.0
Highway Motorcycles........................................         14         0.2        144         2.3        569         0.6         0.8         0.1
Nonroad Industrial SI  19 kW....................        486         7.6        348         5.5      2,991         3.3         2.4         0.4
Recreational SI............................................         27         0.4      1,706        27.1      5,407         6.0         7.5         1.2
Recreation Marine CI.......................................         39         0.6          1         0.0          6         0.0         1.5         0.2
Marine SI Evap.............................................          0         0.0        102         1.6          0         0.0         0           0.0
Marine SI Exhaust..........................................         58         0.9        284         4.5      1,985         2.2        28           4.4
Nonroad SI < 19 kW.........................................        106         1.7        986        15.6     27,352        30.3        77          12.0
Nonroad CI.................................................      1,791        28.0        142         2.3      1,462         1.6       261          40.6
Locomotive.................................................        611         9.5         35         0.6        119         0.1        21           3.3
Total Nonroad..............................................      4,116        63        3,789        60       40,053        44         455          70
Total Highway..............................................      2,050        33        2,278        36       48,903        54         145          23
Aircraft...................................................        232         4          238         4        1,387         2          43           7
Total Mobile Sources.......................................      6,398       100        6,305       100       90,343       100         643         100
Total Man-Made Sources.....................................     16,374  ..........     16,405  ..........    114,011  ..........     3,027    ..........
Mobile Source percent of Total Man-Made Sources............         39  ..........         38  ..........         79  ..........        21    ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Inventories for Specific Ports
    In the previous section we presented estimates of Category 3 marine 
diesel engine emissions as percentages of the national mobile source 
inventory. Total national man-made source inventories were also 
included in Tables II.C-3 and II.C-4 for comparison. However, marine 
vessel activity tends to be concentrated in port areas, and thus we 
would expect that Category 3 marine diesel engines would have a 
proportionately bigger impact on the mobile source pollution 
inventories of port areas. Using the port-specific Category 3 
inventories developed for use in our national inventory in conjunction 
with total port area inventories developed in support of the heavy-duty 
on-highway 2007 rule, we developed estimates of the contribution of 
Category 3 marine diesel engines to the mobile source NOX 
and PM inventories of several selected port areas, including several 
ozone nonattainment areas. The NOX results are shown in 
Table II.C-5, and the PM results are shown in Table II.C-6. As can be 
seen from these tables, the relative contribution of Category 3 marine 
diesel engine pollution to mobile source pollution is expected to 
increase in the future. This is due both to the expected growth of 
shipping traffic in the future and the effect of emissions control 
programs already in place for other mobile sources.

 Table II.C-5.--Modeled NOX Inventories as a Percentage of Mobile Source
                       NOX in Selected Port Areas
------------------------------------------------------------------------
                                                       Percent of mobile
----------------------------------------------------- source NOX from C3
                                                     -------------------
Ozone nonattainment area?          Port area            1966      2020
------------------------------------------------------------------------
Y........................  Baton Rouge and New             7.4      15.8
                            Orleans, LA.
Y........................  Los Angeles/Long Beach,         2.0       8.6
                            CA.
Y........................  Beaumont/Port Arthur, TX.       1.4       3.1
Y........................  Houston/Galveston/              1.5       4.9
                            Brazoria, TX.
Y........................  Baltimore/Washington, DC.       2.1      11.4
Y........................  Philadelphia/Wilmington/        1.8       6.9
                            Atlantic City.
Y........................  New York/New Jersey......       1.0       6.2
N........................  Seattle/Tacoma/Bremerton/       4.3      26.3
                            Bellingham, WA.
N........................  Miami/Ft. Lauderdale, FL.       5.4      28.1
N........................  Portland/Salem, OR.......       1.9      11.9
N........................  Wilmington, NC...........       6.9      26.8
N........................  Corpus Christi, TX.......       4.8      12.2
N........................  Brownsville/Harlington/         1.8       6.6
                            San Benito, TX.
------------------------------------------------------------------------


[[Page 37563]]


Table II.C-6--Modeled PM Inventories as a Percentage of Mobile Source PM
                         in Selected Port Areas
------------------------------------------------------------------------
                                                       Percent of mobile
-----------------------------------------------------  source PM from C3
                                                     -------------------
                      Port area                         1996      2020
------------------------------------------------------------------------
Baton Rouge and New Orleans, LA.....................      12.1      22.6
Los Angeles/Long Beach, CA \1\......................       3.9      10.8
Beaumont/Port Arthur, TX............................       7.4      18.3
Houston/Galveston/Brazoria, TX......................       3.3       8.5
Baltimore/Washington DC.............................       3.2       9.6
Philadelphia/Wilmington/Atlantic City...............       2.8       6.3
New York/New Jersey.................................       1.6       5.7
Seattle/Tacoma/Bremerton/Bellingham, WA.............       8.5      25.5
Miami/Ft. Lauderdale, FL............................      10.6      28.7
Portland/Salem, OR..................................       3.9      12.1
Wilmington, NC......................................       8.1      22.4
Corpus Christi, TX..................................       6.0       9.6
Brownsville/Harlington/San Benito, TX...............       3.1      14.9 
------------------------------------------------------------------------
\1\ PM nonattainment area.

3. Emissions in Nonport Areas
    These ships can also have a significant impact on inventories in 
areas without large commercial ports. For example, Santa Barbara 
estimates that engines on ocean-going marine vessels contribute about 
37 percent of total NOX in their area. These emissions are 
from ships that transit the area, and ``are comparable to (even 
slightly larger than) the amount of NOX produced onshore by 
cars and truck.\42\ These emissions are expected to increase to 62 
percent by 2015. While Santa Barbara's exact conditions may be unique 
due to the relative close proximity of heavily used shipping channels 
to shore and the meteorological conditions in their area, other coastal 
areas may also have relatively high inventory impacts from ocean-going 
vessels.
---------------------------------------------------------------------------

    \42\ Memorandum to Docket A-2001-11 from Jean Marie Revelt, 
``Santa Barbara County Air Quality News, Issue 62, July-August 2001 
and other materials provided to EPA by Santa Barbara County,'' March 
14, 2002. Air Docket A-2001-11.
---------------------------------------------------------------------------

4. Contribution by Flag
    It is important to determine how much of the Category 3 marine 
diesel engine pollution inventory is contributed by U.S. flagged 
vessels given that we are considering whether to restrict application 
of the proposed standards and standards under consideration to U.S. 
flag vessels only or to apply the standards to all vessels (U.S. and 
foreign-flag entering U.S. ports). We estimated the relative 
contribution of U.S. and foreign flagged vessels separately for the 
port areas and the non-port areas due to the fact that we had different 
data sets available to us for the two areas.
    We estimated the contribution of U.S. flagged vessels for the ports 
areas using port call data obtained from the U.S. Maritime 
Administration (MARAD). These data contained all port calls in 1999 to 
U.S. ports by vessels of greater than 1000 gross registered tons, 
including the country in which they are flagged and the number of port 
calls each vessel made. An analysis of the port call data shows that 
U.S. flagged vessels only account for 6.4 percent of port calls to U.S. 
ports. For the lack of more detailed information regarding the breakout 
of U.S. and foreign flagged vessel emissions we applied the percentage 
of port calls from U.S. and foreign flagged vessels to the national 
ports inventories to determine the relative contributions of each to 
the national ports inventories.
    We used freight tonnage data from the U.S. Army Corp of Engineers 
(USACE) to develop relative U.S. and foreign flagged emissions 
contributions in non-ports areas within 175 nautical miles of the 
coast. In contrast to the data for the ports areas, the USACE data 
suggests that more than 80 percent of the non-ports emissions come from 
U.S. flagged vessels.
    The relative contributions from U.S. and foreign flagged vessels 
are quite different between the ports areas and the non-ports areas. 
Some of this difference can be explained through U.S. cabotage law, 
which requires that any vessel operating between two U.S. ports be U.S. 
flagged. Thus, while most port traffic is foreign flagged, the foreign 
flagged vessels would tend to come into a single U.S. port and then 
leave U.S. waters. In contrast, U.S. flagged vessels would typically 
travel from one U.S. port to another, thus accounting for a higher 
percentage of the non-ports emissions. We request comment on this 
assessment of U.S. and foreign flagged vessel contributions, as well as 
additional data that would help us further understand the relative 
contributions of U.S. and foreign flagged vessels to the national 
pollution inventories.
    For the purposes of the future inventory projections we assumed 
that the current split of U.S. and foreign flagged emissions would 
continue. However, this assumption, in combination with our assumed 
growth rates, implies that the manufacture of Category 3 vessels in the 
U.S. for the U.S. flagged fleet would occur in the future at rates 
greater than the recent build rate of around two vessels per year. More 
likely, seven to nine new U.S. flagged vessels would need to be built 
per year to accommodate the U.S. flagged vessel emissions growth 
assumptions. We request comment on whether the U.S. flagged fleet is 
expected to grow at this rate in the future, or instead whether a 
growing fraction of vessel emissions would come from foreign flagged 
vessels in the future. Specifically, we request comment on the likely 
replacement rates and expected new capacity of the U.S. fleet in the 
future.

III. What Engines Are Covered?

    The scope of application of this proposal is broadly set by Clean 
Air Act section 213(a)(3), which instructs us to set standards for new 
nonroad engines and new nonroad vehicles. In this case, the proposed 
rule is intended to cover all new marine diesel engines installed on 
vessels flagged or registered in the United States that have a specific 
engine displacement greater than or equal to 30 liters per cylinder. 
Under the requirements of the Clean Air Act, once emission standards 
apply to a group of

[[Page 37564]]

engines, a manufacturer of a new engine must get a certificate of 
conformity from us before selling an engine, importing an engine, or 
otherwise introducing an engine into commerce in the United 
States.43 44 We also require vessel manufacturers to install 
only certified engines on new vessels that will be flagged or 
registered in the United States once emission standards apply. The 
certificate of conformity (and corresponding engine label) provide 
assurance that engine manufacturers have met their obligation to make 
engines that meet the emission standards over the useful life we 
specify in the regulations.
---------------------------------------------------------------------------

    \43\ The term ``manufacturer'' means any person engaged in the 
manufacturing or assembling of new engines or importing such engines 
for resale, or who acts for and is under the control of any such 
person in connection with the distribution of such engines. 40 CFR 
94.2.
    \44\ For this proposal, we consider the United States to include 
the States, the District of Columbia, the Commonwealth of Puerto 
Rico, the Commonwealth of the Northern Mariana Islands, Guam, 
American Samoa, and the Virgin Islands. See CAA section 302(d) 
definition of ``State.''
---------------------------------------------------------------------------

    The scope of application for emission standards for commercial 
marine diesel engines up to 30 liters per cylinder was established in 
our 1999 rulemaking (64 FR 73300, December 29, 1999). In that rule, we 
adopted a set of clarifying definitions that apply to those commercial 
marine diesel engines and the vessels that use them. We are proposing 
to apply those definitions to Category 3 marine diesel engines for the 
purpose of identifying the engines and vessels that must comply with 
the proposed standards. According to those definitions, which can be 
found in 40 CFR 94.2, a Category 3 marine diesel engine would be 
subject to the proposed standards if it is:
    [sbull] Manufactured after the emission standards become effective, 
whether domestic or imported;
    [sbull] Installed for the first time in a marine vessel flagged in 
the U.S. after having been used in another application subject to 
different emission standards; or
    [sbull] Installed on a new vessel flagged in the U.S.
    At the same time we are soliciting comment on whether the emission 
standards should also apply to marine engines on foreign vessels 
entering U.S. ports and to no longer exclude such foreign vessels from 
the emission standards under 40 CFR [sect] 94.1(b)(3). We are inviting 
comment on whether to modify the definition of a ``new marine engine'' 
to find that engine emission standards would apply to Category 1, 2 and 
3 marine diesel engines that are manufactured after the standards 
become effective and that are installed on a foreign flagged vessel 
that enters a U.S. port. If we were to adopt such an approach, we 
anticipate the standards would also apply to any marine engine that is 
installed on a foreign vessel if the vessel is manufactured (or that 
otherwise become new) after the standards become effective.
    We are also proposing to eliminate the foreign trade exemption. 
Under this exemption, contained in 40 CFR section 94.906(d), engines on 
vessels flagged or registered in the United States that spend less than 
25 percent of total operating time within 320 kilometers of U.S. 
territory are not required to comply with the proposed limits. This 
would generally affect auxiliary engines, which are usually less than 
30 liters per cylinder.
    EPA is not considering inclusion of gas turbines in this rulemaking 
given the limited amount of information that we currently have about 
emissions from turbines. EPA's current belief is that gas turbines 
generally have lower emissions than diesels. However, we are requesting 
that commenters provide to us any emissions information that is 
available as well as whether it would be appropriate to regulate 
turbines and diesels together. Commenters supporting the regulation of 
turbines should also address whether any special provisions would be 
needed for the testing and certification of turbines.
    In the remainder of this section we discuss the proposed scope of 
application of the rule in greater detail.

A. What Is a Marine Vessel?

    For the purpose of our marine diesel engine standards, ``marine 
vessel'' has the meaning specified in the General Provisions of the 
United States Code, 1 U.S.C. 3 (see 40 CFR 94.2). According to that 
definition, the word ``vessel'' includes ``every description of 
watercraft or other artificial contrivance used, or capable of being 
used, as a means of transportation on water.''

B. What Is a Category 3 Marine Diesel Engine?

    In our 1999 commercial marine diesel engine rule, we defined marine 
engine as an engine that is installed or intended to be installed on a 
marine vessel. We also differentiated between three types of marine 
diesel engines. As explained in that rule, this approach is necessary 
because marine diesel engines are typically derivatives of land-based 
diesel engines and the land-based engines are not all subject to the 
same numerical standards and effective dates.
    The definitions for the different categories of marine diesel 
engines are contained in 40 CFR 94.2. Category 1 marine diesel engines, 
those having a rated power greater than or equal to 37 kilowatts and a 
specific engine displacement less than 5.0 liters per cylinder, are 
similar to land-based nonroad engines used in construction and farm 
equipment. Category 2 marine diesel engines, those having a specific 
engine displacement greater than or equal to 5.0 liters per cylinder 
but less than 30 liters per cylinder, are most often similar to 
locomotive engines. Category 1 and Category 2 marine diesel engines are 
used as propulsion engines (i.e., an engine that moves a vessel through 
the water or directs the movement of a vessel (40 CFR 94.2)) on tugs, 
fishing vessels, supply vessels, and smaller cargo vessels. They are 
also used as auxiliary engines (i.e., a marine engine that is not a 
propulsion engine (40 CFR 94.2)) to provide electricity for navigation 
equipment and crew service or other services such as pumping or 
powering winches or anchors.
    Category 3 marine diesel engines, which are the primary focus of 
this proposal, are defined as having a specific engine displacement 
greater than or equal to 30 liters per cylinder. These are very large 
engines used for propulsion on large vessels such as container ships, 
tankers, bulk carriers, and cruise ships. Most of these engines are 
installed on ocean-going vessels, although a few are found on ships in 
the Great Lakes. Category 3 marine diesel engines have no land-based 
mobile source counterpart, although they are similar to engines used to 
generate electricity in municipal power plants. In marine applications 
they are either mechanical drive or indirect drive. Mechanical drive 
engines can be direct drive (engine speed is the same as propeller 
speed; this is common on very large ships) or have a gearbox (i.e., 
they have reduction gears; this is common on ships using medium speed 
Category 3 marine diesel engines). Indirect drive engines are used to 
generate electricity that is then used to turn the propeller shaft. 
These are common in cruise ships since they have heavy electricity 
demands. Category 3 marine diesel engines typically operate at a lower 
speed and higher power than Category 1 and Category 2 engines, with the 
slowest speed being 130-200 rpm.

[[Page 37565]]



            Table III.B-1--Marine Engine Category Definitions
------------------------------------------------------------------------
                  Displacement per
   Category           cylinder          hp range (kW)       rpm range
------------------------------------------------------------------------
1.............  disp. < 5 liters            37-2,300       1,800-3,000
                 (and power [ge] 37
                 kW).
2.............  5 [le] disp. < 30        1,500-8,000         750-1,500
                 liters.
3.............  disp [ge] 30 liters.     2,500-80,000         80-900
------------------------------------------------------------------------

C. What Is a New Marine Diesel Engine?

1. The Current Regulatory Definition
    As set out in 40 CFR 94.2, a new marine engine is (i) a marine 
engine, the equitable or legal title to which has never been 
transferred to an ultimate purchaser; (ii) a marine engine installed on 
a vessel, the equitable or legal title to such vessel has never been 
transferred to an ultimate purchaser; or (iii) a marine engine that has 
not been placed into service on a vessel. In cases where the equitable 
or legal title to an engine or vessel is not transferred to an ultimate 
purchaser prior to its being placed into service, an engine ceases to 
be new after it is placed into service.
    What this means is that a marine engine is new and is subject to 
the proposed standards before its initial sale is completed or it is 
placed into service. Practically, it means that any engine must meet 
the proposed emission standards that are in effect the first time it is 
sold or placed into service or the first time the vessel on which it is 
installed is sold or placed into service. This is true for any engine 
that is sold for the first time as a marine engine (placed into service 
on a marine vessel), regardless of whether it has previously been used 
in other nonroad or on-highway purposes. This clarification is 
necessary because some marine engines are made by ``marinizing'' 
existing land-based nonroad or highway engines. Without this 
clarification a marinized used highway or land-based engine would not 
be subject to the standards since its title was already transferred to 
the initial highway or land-based nonroad user.
    With respect to imported marine diesel engines, 40 CFR 94.2 defines 
``new'' as an engine that is not covered by a certificate of conformity 
at the time of importation and that was manufactured after the starting 
date of the emissions standards which are applicable to such engine (or 
which would be applicable to such engine had it been manufactured for 
importation into the United States). According to this definition, the 
proposed standards would apply to engines that are imported by any 
person, whether newly manufactured or used, and whether they are 
imported as uninstalled engines or if they are already installed on a 
marine vessel that is imported into the U.S. In one example, a person 
may want to import a vessel built after the effective date of the 
standards but the engine does not have a certificate of conformity from 
EPA because the engines and vessel were manufactured elsewhere. We 
would still consider it to be a new engine or vessel, and it would need 
to comply with the applicable emission standards. This provision is 
important to prevent manufacturers from trying to avoid the emission 
standards by building vessels abroad, transferring their title, and 
then importing them as used vessels.
2. Should Engines on Foreign Flag Vessels That Enter U.S. Ports Be 
Covered?
    Today's proposal solicits comment on whether to modify the 
definition of a ``new'' marine engine to find that engine emission 
standards apply to Category 1, 2, and 3 marine diesel engines that are 
built after the standards become effective and that are installed on 
foreign flag vessels that enter U.S. ports. Such vessels and their 
engines would be subject to U.S. engine emission standards as a 
condition of port state entry.
    The 1999 marine engine rule did not apply to marine engines on 
foreign vessels. 40 CFR 94.1(b)(3). At that time we concluded that 
engines installed on vessels flagged in another country that come into 
the United States temporarily will not be subject to the emission 
standards. Those vessels are not considered imported under the U.S. 
customs laws, and under the interpretation adopted in that rule we did 
not consider their engines ``new'' for purposes of Clean Air Act 
section 213, 42 U.S.C. 7547. 64 FR 73300, 73302 (Dec. 12, 1999).
    Section 213 authorizes regulation of ``new nonroad engine'' and 
``new nonroad vehicle.'' However, Title II of the Clean Air Act does 
not define either ``new nonroad engine'' or ``new nonroad vehicle.'' 
Section 216 defines a ``new motor vehicle engine'' to include an engine 
that has been ``imported.'' EPA modeled the current regulatory 
definitions of ``new nonroad engine''and ``new marine engine'' at 40 
CFR 89.2 and 40 CFR 94.2, respectively, after the statutory definitions 
of ``new motor vehicle engine'' and ``new motor vehicle.'' Because 
``new nonroad engine'' is not defined in the statute, EPA is seeking 
comment on whether ``new nonroad engine'' could be defined to include 
marine engines on foreign vessels that enter U.S. ports and that are 
manufactured after the standards go into effect, whether or not they 
are considered imported under the U.S. customs laws. EPA also invites 
comment on whether the term ``import,'' which is not defined in Title 
II, should be defined to include foreign flag vessels, for purposes of 
the definition of ``new nonroad engine'' only, whether or not they are 
considered imported under the U.S. customs laws.
    EPA has discretion in defining ``new nonroad engine'' as it is used 
in Section 213 of the Act. EPA solicits comment on whether it would be 
appropriate and within EPA's authority to exercise this discretion to 
define ``new nonroad engine'' to include marine engines on foreign 
vessels that enter US ports, in light of environmental and 
international oceans policy and any other relevant factors, including 
consideration of their significant emissions contribution to air 
quality problems in the United States. If EPA were to regulate foreign-
flagged vessels, such vessels would be subject to enforcement as a 
condition of port entry.
    Even if EPA determined that it had the discretion to define ``new 
nonroad engine'' as outlined above, EPA could conclude that the most 
appropriate exercise of its discretion would involve retention of the 
1999 definition of ``new nonroad engine.'' EPA could conclude that 
revising the definition would not be warranted at this time because of 
the potential implications that setting engine emission standards for 
foreign vessels might have on international commerce and future 
international negotiations under MARPOL and in other fora. EPA will 
consider, therefore, whether setting a national standard in this 
situation and changing its interpretation of ``new nonroad engine'' to 
apply this standard to foreign vessels could adversely affect the U.S.' 
position with respect to the variety of other international issues that 
are addressed under MARPOL and in other fora. In considering whether to 
impose requirements on foreign vessels that are

[[Page 37566]]

more stringent than those imposed on such vessels by their flag states 
or which may be more stringent than those set out in international 
instruments (or agreements), EPA will consider whether this would raise 
questions of international oceans policy or would have adverse 
ramifications on U.S. foreign policy.
    In such a case, it might be more appropriate at this time to 
exercise any discretion EPA may have by retaining the 1999 definition 
of ``new nonroad engine.''
    However EPA decides this issue it would be free to revisit it in 
the future as appropriate. For example, EPA could revisit any decision 
to retain the 1999 definition if negotiations with other nations do not 
lead to international agreement on emissions that adequately protect 
air quality in the U.S. when foreign vessels enter U.S. ports.
    EPA also clarifies that any extension of the rule to foreign flag 
vessels would not include extension to any warship, naval auxiliary, or 
other ship owned or operated by a foreign state and used for government 
noncommercial service.
3. Should Engines on Foreign Flag Vessels Be Covered Regardless of the 
Number of Their Annual Visits?
    If we were to apply the standards to engines that are manufactured 
after the standards become effective and that are installed on foreign 
flag vessels that enter U.S. ports, one thing to consider is whether 
this provision should be limited by the number of times a vessel visits 
U.S. ports annually.
    Were we to apply the standards to engines on foreign flag vessels, 
using a strict approach, any engines on a vessel manufactured (or that 
otherwise becomes new) after the effective date of the standards, or 
manufactured before the effective date but has engines that are 
manufactured after the effective date, that comes to the United States, 
whether once a year, twenty times a year, or even more, would be 
required to have compliant engines.
    An alternative approach would apply the standards only to those 
vessels that are frequent visitors to the United States. A review of 
1999 data on vessel entrances from the United States Maritime 
Administration for 1999 indicates that there is considerable variation 
in the number of vessel entrances per ship. According to that data, 
which is described in more detail in Chapter 2 of the draft Regulatory 
Support Document for this rulemaking, there were about 2,500 foreign 
flag vessels that made only one or two entrances into the United States 
in 1999. These vessels accounted for 33 percent of all foreign flag 
vessels that entered this country, but they accounted for only about 5 
percent of all vessel entrances. There were about 3,900 foreign flag 
vessels that entered the United States four or fewer times in that 
year, accounting for about 52 percent of all vessels, but they 
accounted for only about 12.5 percent of all vessel entrances. In other 
words, there is a large set of vessels that come to the United States 
only a few times a year. The vast majority of entrances by foreign flag 
vessels, 87.5 percent, are made by about 3,700 vessels that come here 5 
or more times a year. We estimate that emissions from engines on 
foreign flag vessels were on average about 1.7 tons NOX per 
vessel in 2000. This means that foreign vessels that enter U.S. ports 
only once or twice a year contributed about 6,100 tons of 
NOX in 2000 (about 3 percent of total Category 3 
NOX emissions of 195,000 tons), and foreign flag vessels 
that entered U.S. ports four or fewer times a year contributed about 
14,500 tons of NOX in 2000 (about 7.4 percent of Category 3 
NOX emissions).
    If we were to conclude that it was appropriate under the Clean Air 
Act to apply the standards to engines on foreign flag vessels, it might 
be appropriate to exempt engines on foreign-flag vessels that come to 
the United States only a few times a year. This could be a temporary 
exemption that would apply only as long as a vessel remains below the 
threshold number of vessel entrances. To qualify for such an exemption, 
the shipowner would have to show that the ship does not frequently 
enter U.S. ports. This demonstration could be made based on the average 
number of times the vessel entered the United States in the previous 
two years, for existing vessels, or on the expected usage of the vessel 
for new vessels (e.g., a regular container or tanker route), for new 
vessels. In any case, a shipowner that did not obtain an exemption 
would have to demonstrate in some form that the vessel's engines are 
compliant. In other words, under such an approach, each foreign flag 
that seeks to enter a U.S. port would be required to have either a 
compliant engines or an exemption from the program based on the 
frequency of its visits. Under this approach, such a requirement would 
apply for every trip, not just trips in excess of the threshold number 
of trips to obtain the exemption.
    This alternative relies on the assumption that a vessel that enters 
the United States only periodically does not have dramatically 
different number of vessel entrances from year to year. We request 
comment on whether this is, in fact, the case. Another important aspect 
of such an exemption for foreign flag vessels, if we were to include 
them in this rule, is what would happen if the vessel wished to make a 
third, or fifth, entry into a U.S. port. This is important because of 
the certification burden associated with making that extra annual trip. 
The owner of a ship with such an exemption would have to be confident 
that the vessel would not seek entry more than the allowable number of 
times. Alternatively, it might be possible to petition EPA for 
permission to enter an extra time. This might require entering into a 
settlement agreement in advance of a violation of the terms of the 
exemption. The settlement could include a fine, a restriction on the 
number of entries in the future, or some other requirement. We seek 
comment on this as well as alternative methods to address the case in 
which a ship would seek to enter U.S. ports in excess of the number of 
visits specified in the exemption, and on whether obtaining an advance 
agreement with EPA would be too burdensome.
    We request comment on all aspects of this potential alternative. 
Specifically, we request comment on the number of times a ship should 
be allowed to enter U.S. ports in a twelve-month period before being 
required to have compliant engines. We also request comment on whether 
there is much variability in port entries from year to year for vessels 
that come to U.S. ports only periodically.

D. What is a New Marine Vessel?

    The definition of new vessel is set out in 40 CFR 94.2. This 
definition is similar to the definition of new engine: a new marine 
vessel is a vessel the equitable or legal title of which has never been 
transferred to an ultimate purchaser. In the case where the equitable 
or legal title to a vessel is not transferred to an ultimate purchaser 
prior to its being placed into service, a vessel ceases to be new when 
it is placed into service. Thus, a vessel is new and must have a 
certified engine and meet any other requirements for new vessels until 
its initial sale is completed or it is placed into service.
    In addition, a vessel is considered to be new when it has been 
modified such that the value of the modifications exceeds 50 percent of 
the value of the modified vessel. As noted in our 1999 rulemaking, this 
provision is intended to prevent someone from re-using the hull or 
other parts from a used vessel to avoid emission standards. When 
applying this provision, the modifications must be completed prior

[[Page 37567]]

to the effective date of the standards that would otherwise apply. For 
example, if a second tier of engine standards goes into effect in 2007, 
modifications that are completed by December 31, 2006 will not trigger 
the engine requirements and the engines on that vessel would not have 
to meet the standards. However, if the vessel modifications are 
completed on or after January 1, 2007, and they exceed 50 percent of 
the value of the modified vessel, then the engines on the vessel must 
meet the standards regardless of whether they have been changed as part 
of the vessel modification.
    The definition in 40 CFR 94.2 refers to the ``value'' of the 
modifications, rather than the costs. This should therefore be based on 
the appraised value of the vessel before modifications compared with 
the value of the modified vessel. The following equation demonstrates 
the calculation, showing that a vessel is new if:
[GRAPHIC] [TIFF OMITTED] TP29MY02.012

    If the value of the modifications exceeds 50 per cent of the final 
value of the modified vessel, we would treat the vessel as new under 40 
CFR part 94. To evaluate whether the modified vessel would be 
considered new, one would need to project the fair market value of the 
modified vessel based on an objective assessment, such as an appraisal 
for insurance or financing purposes, or some other third-party 
analysis. While the preliminary decision can be based on the projected 
value of the modified vessel, the decision must also be valid when 
basing the calculations on the actual assessed value of the vessel 
after modifications are complete.

E. Would the Foreign Trade Exemption Be Retained?

    In addition to their main propulsion engines, which are generally 
Category 3 marine diesel engines, ocean-going commercial vessels 
typically have several Category 1 and Category 2 engines that are used 
in auxiliary power applications. They provide electricity for important 
navigational and maneuvering equipment, and crew services.
    Several commenters to our earlier marine diesel engine rulemaking 
expressed concern that requiring ship owners to obtain and use 
compliant Category 1 and Category 2 engines for vessels that spend most 
of their time outside the U.S. could be burdensome for those vessels if 
these engines need to be repaired or replaced when they are away from 
U.S. ports. Consequently, we provided a foreign trade exemption for 
these engines. A vessel owner can obtain this exemption for Category 1 
and Category 2 marine diesel engines if it can be demonstrated to the 
Administrator's satisfaction that the vessel: (a) Will spend less than 
25 percent of its total engine operation time within 320 kilometers of 
U.S. territory; or (b) will not operate between two U.S. ports (40 CFR 
94.906(d)). Engines that are exempt under this provision must be 
labeled to indicate that they have been certified only to the MARPOL 
Annex VI NOX curve limits and that they are for use solely 
on vessels that meet the above criteria.
    Today, we are proposing to eliminate this foreign trade exemption 
because the conditions that led to the need for it no longer hold. 
Specifically, we have learned that many engine spare parts are kept 
onboard vessels to enable ship operators to perform maintenance and 
repairs while the ship is underway. In addition, obtaining parts that 
are not kept onboard is not expected to be a problem. Modern package 
delivery systems should allow ship owners to obtain parts quickly, even 
overnight, and necessary parts can be shipped to the next convenient 
port on a ship's route. In the unlikely case that an engine fails 
catastrophically and must be replaced by a compliant engine, we are 
confident that the ship operator will be able to make arrangements to 
obtain a certified engine since the major manufacturers of marine 
diesel engines operate abroad as well as in the United States. Because 
the burden associated with repairing or replacing engines away from the 
United States is not significant, we believe it is appropriate to 
eliminate the exemption. We do not expect this change to have any 
impact on shipowners and operators, however, we request comments on the 
elimination of this exemption. Would this change have any measurable 
impact on U.S. flag shipowners or operators? Would it put U.S. flag 
shipowners or operators at a competitive disadvantage, in particular if 
a Tier 2 standard is included in the final rule? If so, please provide 
information supporting this concern.

IV. Standards and Technological Feasibility

A. What Engine Emission Standards Are Under Consideration?

    Manufacturers of Category 3 marine engines have available a wide 
range of technologies to control emissions. Many of these technologies 
are similar to those that have been developed for smaller nonroad and 
highway diesel engines. While Category 3 marine engines are much larger 
than other regulated diesel engines, many of the same engineering 
principles of emission formation and control apply. In fact, 
manufacturers have applied significant effort to reduce emissions from 
these engines, both to meet Annex VI NOX standards and to 
develop technologies to address concerns in specific areas. At the same 
time, it is clear that a substantial opportunity remains to adapt 
technologies to Category 3 marine engines
    The following discussion of emission standards and the associated 
control technologies applies without respect to whether the standards 
ultimately apply only to U.S.-flag vessels or to all vessels calling on 
U.S. ports. Engine technology has become a very global field, with 
emission-control technology and compliant engines coming from all parts 
of the world. Manufacturers and owners of foreign-flag vessels would 
not face any unique constraints in using engines certified to EPA 
emission standards compared with U.S.-flag vessels. Nevertheless, we 
are proposing emission standards only for engines installed on U.S.-
flag vessels, so references in this section to Category 3 marine 
engines apply specifically to those engines that would be subject to 
the proposed emission standards, unless otherwise noted.

    Clean Air Act section 213 directs EPA to adopt standards 
requiring: * * *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.

To implement this Clean Air Act directive, we are seeking comment on 
two separate tiers of emission standards

[[Page 37568]]

for new marine diesel engines, as described below.
    This section also describes an approach for setting Tier 2 HC and 
CO standards, applying Tier 1 standards to engines between 2.5 and 30 
liters per cylinder, and defining voluntary low-emission standards.
1. Tier 1 Emission Standards
    We propose to adopt a first tier of standards starting in the 2004 
model year \45\ equivalent to the Annex VI NOX limits. 
Manufacturers have introduced basic emission-control technologies for 
all types of marine diesel engines in response to the Annex VI 
standards. This effort has demonstrated the feasibility of in-cylinder 
technologies including optimized turbocharging, higher compression 
ratio, and optimized fuel injection, which generally includes timing 
retard and changes to the number and size of injector holes to increase 
injection pressure.
---------------------------------------------------------------------------

    \45\ We are proposing to base model years on the date on which 
the engine is first assembled. In other rules, we have defined the 
date of manufacture to be the date of the final assembly of the 
engine. However, we recognize that Category 3 engines are often 
disassembled for shipment to the site at which it is installed in 
the ship.
---------------------------------------------------------------------------

    As described in Section V, we are proposing to accept emission data 
for Tier 1 certification based on testing with either distillate or 
residual fuel. Since most or all manufacturers have been using 
distillate fuel to comply with Annex VI requirements, we expect 
manufacturers to meet Tier 1 standards generally by submitting their 
available emission data from testing with distillate fuels. However, 
since Annex VI does not include detailed specifications for test fuels, 
we believe that we will need to correct emission data for the effect of 
fuel nitrogen content. This correction is described later in this 
section. We would require that certified engines continue to meet Tier 
1 emission standards throughout their useful life when tested with 
either distillate or residual fuel, after correction for the effect of 
fuel nitrogen. The proposed Tier 1 NOX limits, reflecting 
the fuel adjustment, are set out in Table IV.A-1.

      Table IV.A-1.--Proposed Tier 1 NOX Emission Limits (g/kW-hr)*
------------------------------------------------------------------------
       Engine speed (n)            n [ge] 130 rpm**       n < 130 rpm
------------------------------------------------------------------------
Tier 1........................      45.0xn-0.2 + 1.4              18.4
------------------------------------------------------------------------
* The proposed regulations specify emission standards based on testing
  with measured emission values corrected to take into account the
  nitrogen content of the fuel. Emission values are corrected to values
  consistent with testing engines with fuel containing 0.4 weight
  percent nitrogen. Testing with fuel containing 0.2 weight-percent
  nitrogen (typical for in-use distillate marine fuels) would have a
  correction of 1.4 g/kW-hr, so the proposed Tier 1 NOX standards would
  match the Annex VI NOX standards at this test point.
** No cap would apply to engines over 2000 rpm, because Category 3
  engines all have engine speeds well below that speed.

    We are also proposing to apply the Tier 1 standards to all marine 
diesel engines with specific displacement between 2.5 and 30 liters per 
cylinder. This would apply to these engines from 2004 to 2006, after 
which the EPA Tier 2 marine engine emission standards established in 
December 1999 would apply (64 FR 73300, December 29, 1999). All testing 
to show compliance for these engines would be based on testing with 
distillate fuels meeting the specifications in 40 CFR 94.108.\46\ As 
with the Category 3 engines, this would merely formalize the Annex VI 
standards, which these engines should already meet. Including these 
engines in this proposal would remove any ambiguity regarding the 
applicability of emission standards. We are not proposing to include 
engines under 2.5 liters per cylinder, because the December 1999 
emission standards generally start already in 2004. Marine diesel 
engines below 0.9 liters per cylinder need not meet EPA emission 
standards until 2005. Most of those engines are under 130 kW and are 
therefore not subject to Annex VI standards.
---------------------------------------------------------------------------

    \46\ Without the fuel-based corrections described below, the 
proposed Tier 1 standards for these engines default to 
NOX = 45.0 -0.2, with emissions 
capped at 9.8 g/kW-hr for engine speeds over 2000 rpm.
---------------------------------------------------------------------------

2. Effect of Fuel Variables on Emission Standards
    Another objective of the Clean Air Act is to adopt test procedures 
that represent in-use operating conditions as much as possible, 
including specification of test fuels consistent with the fuels that 
compliant engines will use over their lifetimes. This raises the 
question of testing Category 3 marine engines with distillate and 
residual fuel. Distillate fuel has a higher quality than residual fuel, 
but costs significantly more, so vessels with Category 3 marine engines 
primarily use residual fuel. The Annex VI emission standard is based on 
allowing manufacturers to test with marine distillate fuels, which 
generally have nitrogen levels of 0.0 to 0.4 weight percent. As 
discussed in the Draft Regulatory Support Document, NOX 
emission levels increase with greater amounts of nitrogen that are 
bound up in the fuel. Residual fuels generally have higher nitrogen 
concentrations (typically 0.2 to 0.6 weight percent).
    We are proposing that manufacturers of Category 3 engines may 
certify that they meet the applicable emission standards using either 
distillate or residual fuel. The proposed regulations include a range 
of fuel specifications for each fuel type (40 CFR 94.108). However, for 
testing engines after installation in the vessel, we would expect 
manufacturers to use residual fuel. This would add assurance that 
emission-control technologies reduce emissions under real operation in 
vessels. Without this assurance, manufacturers could implement and 
optimize technologies to achieve substantial emission control with 
distillate fuel without necessarily reducing emissions when engines 
operate with residual fuel.
    To appropriately account for the emission-related effects of fuel 
quality, we analyzed the effect of nitrogen in contributing to 
NOX emissions. The first step is to assign a default 
nitrogen content for distillate fuels as a benchmark to properly 
characterize the Annex VI NOX standards. Fuel sampling shows 
an average concentration of 0.2 percent nitrogen in distillate fuel by 
weight (i.e., weight percent).\47\ The comparable average value for 
residual fuels is 0.4 weight percent. To adjust the standard for 
testing with high-nitrogen residual fuel, we calculated the amount of 
additional NOX that would form if all the additional fuel-
bound nitrogen would react to form NOX. This calculation 
depends on assigning a value for brake-specific fuel consumption, for 
which we use 220 g/

[[Page 37569]]

kW-hr.\48\ The resulting correction of 1.4 g/kW-hr shows up as an 
additive term in the equation in Table IV.A-1, since it is a constant 
value (independent of speed), assuming a consistent brake-specific fuel 
consumption rate.\49\ For all testing with Category 3 engines, we would 
require measuring fuel-bound nitrogen and correcting measured values to 
what would occur with a nitrogen concentration of 0.4 weight percent 
(see Section V). This corrected value would be used to determine 
whether the engine meets emission standards or not. This correction 
methodology would apply equally to testing with distillate or residual 
fuels. Note that Annex VI includes a 10-percent allowance for higher 
emissions when performing simplified in-use testing with residual fuel. 
However, we believe that the nitrogen-based correction for any testing 
with any fuel is a better way to ensure that the targeted emission 
reductions are achieved in use.
---------------------------------------------------------------------------

    \47\ Lloyds report.
    \48\ ``Commercial Marine Emissions Inventory Development, Draft 
Final Report,'' EPA Work Assignment Number 1-1, Prepared by ENVIRON 
International Corporation, April 2002.
    \49\ In contrast, Annex VI and the proposed Tier 1 standards 
allow for a 10-percent increase in emissions when testing with 
residual fuel, which makes the fuel correction a function of engine 
speed. For most Category 3 engines, 1.4 g/kW-hr is roughly 10 
percent of the Annex VI NOX emission standard.
---------------------------------------------------------------------------

    This proposed approach to account for fuel nitrogen would help us 
ensure that engines meet the targeted level of emission control for the 
whole range of in-use fuels. At the same time, it allows substantial 
testing flexibility without compromising our ability to set an emission 
standard requiring the greatest degree of emission reductions for any 
given fuel. We request comment on this approach to testing with 
distillate and residual fuels. In particular, we request comment on the 
appropriate adjustment in the emission standard to account for the 
effects of testing with residual and distillate fuels in general and 
fuel-bound nitrogen in particular. We also request comment on how this 
approach to test fuels affects the cost of emission testing.
3. Tier 2 Emission Standards
    EPA is considering adoption of a second tier of standards that 
would reflect additional reductions that could be achieved through 
engine-based controls and would apply to new engines built after 2006 
or later. The year that EPA considers most appropriate at this time is 
2007. The NOX standards we are considering for potential 
Tier 2 standards are based on a 30 percent reduction from Tier 1 to 
allow manufacturers both greater flexibility in choosing the 
combination of emission control technologies to apply to their engines 
and a compliance margin for certification purposes. The NOX 
limits we are considering for a second tier of standards are contained 
in Table IV.A-2.

   Table IV.A-2.--Tier 2 Standards Currently Under Consideration, NOX
                       Emission Limits (g/kW-hr)*
------------------------------------------------------------------------
       Engine speed (n)            n [ge] 130 rpm**       n < 130 rpm
------------------------------------------------------------------------
Tier 2........................      31.5xn-0.2 + 1.4              13.3
------------------------------------------------------------------------
* See notes to Table IV.A-1.
** See notes to Table IV.A-1.

    Control of diesel engine emissions typically focuses on 
NOX and PM emissions. HC and CO limits for diesel engines 
generally receive less attention because the diesel combustion process 
inherently prevents high rates of HC and CO emissions. We estimate that 
HC emissions are currently at 0.4 g/kW-hr, which is significantly lower 
than NOX emissions from Category 3 engines, even after 
manufacturers substantially reduce NOX emissions. 
Hydrocarbon emissions nevertheless combine with NOX 
emissions to form ozone. We have generally adopted emission standards 
for other types of diesel engines in the form of a single standard for 
combined NOX and HC emissions. To prevent increases in HC 
emissions, we are considering a Tier 2 standard at the baseline level 
of 0.4 g/kW-hr. This may achieve modest reductions in HC emissions, but 
more importantly would prevent HC emission increases that might 
otherwise result from controlling NOX emissions alone. We 
request comment on whether we should set an emission standard for HC 
emissions and how to best to set an appropriate standard if one is 
warranted. We further request comment on setting a combined 
NOX+HC standard for Category 3 engines as part of a second 
tier of standards. Commenters supporting a NOX+HC standard 
should also address how to use NOX-only onboard emission 
measurements in the context of a NOX+HC standard, since it 
may not be possible to measure HC emissions.
    We do not expect manufacturers to apply control technologies to 
reduce CO emissions. In fact, for current technologies, CO emissions 
generally decrease as manufacturers improve fuel consumption rates, so 
there is no incentive that would lead manufacturers to increase CO 
emissions. In other EPA programs for diesel engines, we generally set 
CO emission standards to prevent emission increases over time. We are 
considering this same approach with Tier 2 standards for Category 3 
marine engines. Uncontrolled CO levels are generally less than 1 g/kW-
hr. We are therefore considering a Tier 2 emission standard of 3 g/kW-
hr for these engines, which would ensure that manufacturers don't cause 
significant increases in CO emissions when applying technologies 
designed to address NOX emissions. A tighter standard may 
cause a manufacturer to spend a disproportionate amount of effort 
developing emission-control technologies for small changes in CO 
emissions. We request comment on regulating CO emission levels this way 
and specifically whether this is an appropriate level for a CO emission 
standard.
    Regarding PM from Category 3 marine engines, the majority of 
emissions comes directly from the high concentration of sulfur in the 
fuel. Short of changing in-use fuel quality, emission-control 
technologies only address the remaining portion of PM, since engine 
technologies are ineffective at reducing sulfur-related PM emissions. 
Furthermore, no acceptable procedure exists for measuring PM from 
Category 3 marine engines, because current established PM test methods 
show unacceptable variability when sulfur levels exceed 0.8 weight 
percent, which is common for both residual and distillate marine fuels 
for Category 3 engines. No PM test method or calculation methodology 
has been developed to correct that variability for these engines. For 
these reasons, we are not considering a PM standard for Category 3 
engines. We request comment on our approach; commenters supporting PM 
emission standards should address these issues and suggest

[[Page 37570]]

an appropriate standard reflecting an achievable level of control, 
considering costs and other statutory factors. See the section below 
for discussion of regulating in-use fuels to achieve PM, 
SOX, and possibly additional NOX reductions.
    Testing has shown that optimizing engine systems and developing 
additional control technologies will allow manufacturers of Category 3 
marine engines to meet emission standards more stringent than Annex VI 
levels. Such improvements will require additional time. As discussed in 
Section IV.C, we believe manufacturers can achieve these proposed 
emission standards by further optimizing their designs and developing 
additional technologies for better control of fuel injection, charge 
air induction and mixing, and the overall design of combustion chambers 
and the timing of combustion events. We request comment on the level of 
the Tier 2 standards. Section IV.B discusses the timing of introducing 
the proposed Tier 1 standards and the Tier 2 standards under 
consideration.
4. Emission Effects of Test Conditions and Engine Operating Modes
    Section V describes how we propose to address varying test 
conditions for emission measurements to show that engines meet emission 
standards when operated over the ISO E3 duty cycle. In general, we 
define a range of conditions for barometric pressure, humidity, ambient 
air temperature and ambient water temperature for testing according to 
the proposed duty cycle. Weighted engine emissions may not exceed the 
emission standards within the specified ranges of ambient conditions. 
For humidity and ambient water temperature, we specify a proposed 
method for correcting emission levels to a reference condition. We 
don't propose to allow any correction or adjustment based on varying 
ambient air temperatures or barometric pressures within the specified 
ranges. The specified ranges of test conditions apply to both 
laboratory testing and testing onboard a vessel. We are also proposing 
other provisions that would require equivalent emission control under 
other ambient conditions.
    An additional concern relates to the way emissions vary under 
different engine operating conditions. For Category 1 and Category 2 
engines, we adopted ``not-to-exceed'' provisions to define an objective 
measure to ensure that engines would be reasonably controlling 
emissions under the whole range of expected normal operation, as well 
as the defeat-device prohibition. Since these smaller engines are mass 
produced for a wide range of vessels used in many different 
applications, we expected ``normal operation'' for these engines to 
vary considerably around the ideal propeller curve. We are not 
considering not-to-exceed standards for Category 3 engines, since each 
engine intended to operate on a propeller curve is matched with a 
propeller for custom installation on a specific vessel. Also, the very 
large mass of ocean-going vessels make them relatively insensitive to 
perturbations caused by varying vessel loads, water currents, or 
weather conditions. As a result, engine operation should invariably be 
limited to a very narrow range around the propeller curve. Propulsion 
engines that operate at constant speed (whether coupled to a variable-
pitch propeller or generator for electric-drive units) will similarly 
operate over a very narrow range. Moreover, we are considering a 
requirement that manufacturers test their production engines after 
installation on the vessel to show compliance with Tier 2 emission 
standards, which further removes the possibility of engines departing 
significantly from areas of engine operation over for which they are 
demonstrated to control emissions.
    The proposed ISO E3 duty cycle includes four test modes weighted to 
reflect the operation of commercial marine vessels. The modal 
weightings are based on 70 percent of engine operation occurring at 75 
percent or more of the engine's maximum power. For Category 1 and 
Category 2 engines, we have applied this same duty cycle, which 
reflects the way such engines are expected to operate. We are 
concerned, however, that Category 3 engines operate at significantly 
lower power levels when they are operating within range of a port. Ship 
pilots generally operate engines at reduced power for several miles to 
approach a port, with even lower power levels very close to shore. 
Because of the relatively low weighting of the low-power test modes, it 
is very possible that manufacturers could meet emission standards 
without significantly reducing emissions at the low-power modes that 
are more prevalent for these engines as they operate close to 
commercial ports. This issue would generally not apply to vessels that 
rely on multiple engines providing electric-drive propulsion, since 
these engines can be shut down as needed to maintain the desired engine 
loading.
    We are considering a variety of options to address this concern. We 
could re-weight the modes of the duty cycle to emphasize low-power 
operation. This has several disadvantages. For example, we have no 
information to provide a basis for applying different weighting 
factors. Also, changing the duty cycle would depart from the historic 
norm for marine engine testing. This would make it more difficult to 
make use of past emission data, which is all based on the established 
modal weighting. An alternative approach would be to cap emission rates 
at the two low-power modes. We could set the cap at the same level as 
the emission standard, or allow for a small variation above the 
emission standard. For mechanically controlled engines, such an 
approach could dictate the overall design of the engine. On the other 
hand, we expect most or all new engines to have electronic controls, 
which would enable the manufacturer to target emission controls 
specifically for low-power operation without affecting the 
effectiveness of emission controls at higher power. We request comment 
on the need to adopt special provisions to ensure appropriate control 
of emissions during low-power operation. We specifically request 
comment on an additional requirement to limit emission levels of the 
two low-power modes to the level of the NOX emission 
standard for each engine.
    An additional concern relates to variation in emission levels 
between test modes. The proposed defeat device provisions (which 
already apply to Category 1 and Category 2 engines) would prevent 
manufacturers from producing their engines to control emissions more 
effectively at established test points than at other points not 
included in the test. This is especially important for Category 3 
engines that leave the U.S., because we are expecting ship operators to 
measure emissions to show that the engines still meet emission 
standards within a certain range of a U.S. port. As described in 
Section V.B.10, outside the U.S., ship operators may make adjustments 
outside the range of adjustable parameters to which the engine is 
certified. Engine manufacturers would be required to develop emission 
targets to allow the operator to ensure that the engine has been 
readjusted to the certified configuration. These emission targets would 
vary with operating conditions and would include targets for engine 
speeds other than the test points speeds. We are proposing that 
Category 3 engine manufacturers design their engines to achieve 
equivalent control for varying engine speeds after any changes are made 
to compensate for changes such as switching fuels. In identifying the 
NOX

[[Page 37571]]

emission targets, manufacturers would have the choice of either 
applying the same injection timing map for the tested and nontested 
engine speeds, or ensuring that NOX emissions for nontest 
speeds follow a linear interpolation between test points. Ship 
operators would be required to adjust their engines to have 
NOX levels below the target level.
5. Voluntary Low-Emission Standards
    We are also proposing voluntary low-emission standards, consistent 
with the approach we have taken in several other programs, to encourage 
the introduction and more widespread use of low-emission technologies. 
Manufacturers would need to reduce emissions 80 percent below Annex VI 
levels (excluding the nitrogen adjustment), as shown in Table IV.A-1, 
to qualify their engines for designation as voluntary low-emission 
engines. These reduced emission levels would apply to testing with both 
residual and distillate fuels, with the appropriate adjustments for 
nitrogen content of the fuel. Data show that engines utilizing 
selective catalytic reduction are capable of meeting these emission 
levels. If we establish an objective qualifying level for voluntary 
low-emission engines, this would make it easier for state and local 
governments or individual port authorities to develop meaningful 
incentive-based programs to encourage preferential use of these very 
low-emitting engines.
    Engines certified to the voluntary low-emission standards would 
also need to meet HC and CO levels at levels we are considering for the 
second tier of standards. The voluntary low-emission standards are 
contained in Table IV.A-3.

    Table IV.A-3.--Proposed Blue Sky NOX Emission Limits (g/kW-hr)\*\
------------------------------------------------------------------------
       Engine speed (n)           n [ge] 130 rpm\**\      n < 130 rpm
------------------------------------------------------------------------
Blue Sky......................       9.0xn-0.2 + 1.4               4.8
------------------------------------------------------------------------
* See notes to Table IV.A-1.
** See notes to Table IV.A-1.

6. Hotelling Emissions
    In addition to emissions from engines while the ship is moving in 
port, many ships run one or more engines to produce electricity for 
ship operations while in port for loading and unloading. These 
emissions are concentrated locally in the port area, which may have a 
disproportionate effect on neighboring communities. Several options are 
available specifically to address this concern for ``hotelling'' 
emissions. Many of these go beyond our usual approach of setting 
emission standards for new engines, but we request comment on these and 
other possible approaches, given the potential to achieve substantial 
additional reductions in this area.
    Focusing on port emissions raises several questions. (1) Would it 
be appropriate for regulatory provisions to focus on reducing emissions 
specifically from port facilities, including hotelling emissions from 
ships? (2) Should EPA provide targets or incentives to encourage port 
authorities to reduce overall port emissions, including land-based 
equipment and vehicles? (3) What form might such a policy take--
regulatory, voluntary, administered by EPA or local governments, 
including financial or logistical incentives? (4) Is it appropriate to 
adopt national policies to ensure emission reductions in all port areas 
or should such policy development be tailored to port-specific 
concerns? (5) Should EPA emission standards differentiate between in-
port and transit emission levels? If so, what form or emission levels 
would be appropriate for in-port operations?
    While we are not proposing to take action to address hotelling or 
other in-port emissions separately, we request comment on these issues 
and on any other possible approaches to encourage or ensure that 
emission controls are applied appropriately in port areas.

B. When Would the Engine Emission Standards Apply?

    Proposing emission standards for new Category 3 marine engines 
starting in 2004 allows less than the usual lead time for meeting EPA 
requirements. We note, however, that manufacturers are already meeting 
the Annex VI standards, which apply to engines installed on vessels 
built on or after January 1, 2000. The Tier 1 standards proposed in 
this document require no additional development, design, or testing 
beyond what manufacturers are already doing to meet Annex VI standards.
    Under the proposed EPA regulations, engine manufacturers would need 
to comply with emission standards for all engines produced after the 
specified date. This date would be based on the point of final engine 
assembly, which for large Category 3 marine engines typically occurs 
when the engine is installed in the vessel. Shipbuilders and owners 
would not be responsible for meeting EPA standards, but we are 
proposing to apply the prohibition from 40 CFR 94.1103(a)(5), which 
prevents shipbuilders from selling vessels with noncompliant engines if 
they initiate construction of a vessel after the date that regulations 
begin to apply. This raises a question about vessels whose keel is laid 
before new standards take effect if vessel completion does not occur 
until after standards take effect. This question is best addressed by 
an example--if EPA were to adopt Tier 2 standards that would apply in 
January 2007 and if a ship's keel is laid in June 2006, with final 
vessel assembly in June 2007, that vessel could use Tier 1 engines only 
if the engine manufacturer completes the engine assembly before January 
1, 2007. This should not be an issue for Tier 1 engines, since vessels 
are generally already using engines that meet Annex VI NOX 
limits.
    As described in the Draft Regulatory Support Document, 
manufacturers are well underway in pursuing emission-control 
technologies that would reduce emissions from Category 3 marine engines 
beyond Annex VI levels. If EPA were to adopt Tier 2 standards in a 
final rule in 2003, manufacturers would have four years to implement 
technologies needed to meet such standards by 2007. This would include 
time in the early years for selecting specific approaches and 
developing those technologies. Manufacturers would also need that time 
to integrate the various technologies into an overall engine design 
that performs well and is durable. Given that engine manufacturers 
already have limited experience in applying these technologies to 
Category 3 marine engines, we believe the Tier 2 standards will be 
achievable in the time frame under consideration. In addition, Tier 2 
emission standards are already scheduled to apply to Category 2 engines 
in 2007. To the extent that some Category 3 engines compete directly 
with Category 2 engines, sharing an implementation date helps in 
maintaining a level playing field between competitive engines. We 
request comment on the implementation

[[Page 37572]]

dates for the Tier 2 program under consideration.

C. What Information Supports the Technological Feasibility of the 
Engine Emission Standards?

    Annex VI calls for marine diesel engines over 130 kW to meet 
emission standards if they are installed on vessels built on or after 
January 1, 2000. Engine manufacturers are meeting the Annex VI 
standards today with a variety of emission-control technologies. 
Chapter 4 of the Draft Regulatory Support Document identifies several 
technologies that individual manufacturers have already incorporated to 
reduce emissions. The most common approach has been to focus on 
increased compression ratio, adapted fuel injection, valve timing and 
different fuel nozzles to trim NOX emissions. Manufacturers 
have generally been able to do this with little or no increase in fuel 
consumption. By building engines that can meet the Annex VI standards, 
manufacturers have shown that they can meet the identical Tier 1 
standards proposed here for Category 3 marine engines.
    As described in the Draft Regulatory Support Document, we have 
relied on existing data to account for fuel effects in selecting the 
proposed Tier 1 and potential Tier 2 NOX emission standards 
for testing Category 3 marine engines with residual fuel. Engines 
designed to meet Annex VI NOX standards using in-use 
distillate fuels should be able to meet the proposed Tier 1 standards 
without adopting any new technologies.
    While manufacturers have used a wide variety of technologies to 
meet Annex VI standards for Category 3 marine engines, engines have so 
far generally incorporated only a few of the available emission-control 
technologies. To meet more stringent standards, manufacturers would 
need to integrate Tier 1 technologies more broadly into the fleet and 
pursue several additional approaches. These include:

--Improved fuel injection. This includes injection timing, injection 
pressure, rate shaping (or split injection), and common rail injection 
systems. Electronic controls would also allow for more precise metering 
and timing of individual injections.
--Intake air management. Manufacturers can use more effective 
turbocharging and aftercooling to reduce NOX emissions. 
Also, valve timing can be manipulated to vary expansion and compression 
ratios or to recirculate exhaust gases.
--Combustion chamber modifications. Several design variables affect the 
compression and mixing of the fuel-air mixture before and during 
combustion, including higher compression ratios, piston geometry, and 
injector location.

    Test data show that these technologies can reduce emissions up to 
40 percent below Annex VI NOX standards.\50\ We believe 
manufacturers could incorporate emission-control technologies to 
achieve a 30-percent reduction below Annex VI standards for all their 
Category 3 marine engines. Some industry representatives have indicated 
that this level of control is achievable.\51\ Specifying 30 percent 
instead of 40 percent allows for a compliance margin for manufacturers 
to ensure that they meet emission standards consistently with all the 
engines they produce in an engine family. This also allows for 
manufacturers to show that they meet emission standards under the range 
of prescribed testing and operating conditions, as described above, 
including measures to cap emission levels at low-power modes to the 
level of the proposed emission standards. These technologies, and 
accompanying emission data, are described in more detail in Chapter 4 
of the Draft Regulatory Support Document, while Chapter 5 adds specific 
detail regarding our estimated deployment of each of the targeted 
control technologies in the analysis to develop costs estimates related 
to the emission standards.
---------------------------------------------------------------------------

    \50\ Ingalls, M., Fritz S., ``Assessment of Emission Control 
Technology for EPA Category 3 Commercial Marine Diesel Engines,'' 
Southwest Research Institute, September 2001 (Docket A-2001-11, 
document II-A-08).
    \51\ Mayer, Hartmut, Euromot, e-mail response to EPA questions, 
January 31, 2002 (Docket A-2001-11, IIA-D-01).
---------------------------------------------------------------------------

    The analysis of emission-control technologies in most cases applies 
equally to two-stroke and four-stroke engines. While there are many 
fundamental differences between these types of engines, most emission-
control strategies could be applied effectively to both types. Perhaps 
the most significant difference between these engines is the tendency 
for significantly larger displacements and slower operating speeds with 
two-stroke engines. The emission standards for Category 3 marine 
engines incorporate the same shape of the NOX curve 
specified by Annex VI (and shown in Table IV.A-1), which reflects the 
generally increasing NOX emission levels for larger engines 
with slower operating speeds. The emission standards therefore 
implicitly take into account higher emission levels for two-stroke 
engines.
    Section VII discusses a range of alternative approaches we 
considered in developing this proposal and explains our reasons to 
defer their adoption at this time.
    If we adopt Tier 2 standards as part of this rulemaking, we intend 
to revisit and reopen the Tier 2 standards in approximately 2005. At 
that time we would fully reassess the circumstances and re-determine 
the appropriate level of the standards. We believe it is important to 
preserve our ability to coordinate our actions under the Clean Air Act 
with the future actions of the U.S. government involving MARPOL. To 
maximize this coordination and to allow for all appropriate 
harmonization, we would establish a rulemaking schedule for a future 
reopening and revisiting of any Tier 2 standards. In this future 
rulemaking we would reconsider the level of any Tier 2 standards based 
on all the circumstances then present, including the information then 
available concerning technological feasibility, cost, and other 
relevant aspects of emissions control for these engines, as well as the 
then current status of emissions standards under MARPOL. This 
reconsideration could lead to revised Tier 2 standards to reflect the 
appropriate level of the standard under the Clean Air Act based on the 
circumstances present at that time. We would implement this process by 
adopting in this rule a specific schedule for a future rulemaking, 
including for example a set date for final action on the future 
rulemaking.

D. Is EPA Considering Not Adopting Tier 2 Standards in This Rulemaking?

    EPA is also considering not adopting Tier 2 standards in this 
rulemaking, and instead establishing a schedule for a future rulemaking 
and addressing Tier 2 standards in that future rulemaking. For these 
reasons, EPA has not included proposed regulations in this Notice. In 
that future rulemaking, EPA would propose and establish appropriate 
Tier 2 standards based on an assessment of all of the circumstances 
then present, including the information then available concerning 
technological feasability, cost, and other relevant aspects of 
emissions control for these engines, as well as the then current status 
of emissions standards under MARPOL. This would be similar to the 
reopening rulemaking discussed above, involving reopening of any Tier 2 
standards adopted in the current rulemaking. However, instead of 
revisiting Tier 2 standards adopted in the current rulemaking, under 
this alternative no Tier 2 standards would be set until the future 
rulemaking. The schedule for the future rulemaking would be the same as 
that discussed above, approximately 2005, and as with the reopening

[[Page 37573]]

rulemaking this schedule would be included in the regulations adopted 
in this rulemaking.
    The benefit of this alternative would stem from its potential to 
facilitate the international process of updating the Annex VI emissions 
standards. As discussed earlier in this preamble, EPA anticipates that 
further discussions will be held at the IMO, in the Marine Environment 
Protection Committee, concerning adoption of a second, more stringent 
level of emissions standards. If delaying the initial establishment of 
Tier 2 standards to a future rulemaking facilitates the successful 
completion of updating the Annex VI emissions standards, the overall 
environmental result might be better than adoption of Tier 2 standards 
in this rulemaking. In addition, it could facilitate EPA's actions to 
harmonize its regulations as appropriate with future Annex VI 
provisions. This future rulemaking would occur whether or not Annex VI 
negotiations were concluded by that date. Delaying setting Tier 2 
standards until a future rulemaking, however, also raises the issue of 
whether adoption in this rulemaking of only Tier 1 standards and 
establishment of a schedule for a future Tier 2 rulemaking would be 
consistent with the Agency's obligations under the Clean Air Act. EPA 
invites comment on all issues associated with this alternative.

E. Is EPA Considering Any Fuel Standards?

    The majority of Category 3 engines are designed to run on residual 
fuel. This fuel is made from the very end products of the oil refining 
process, formulated from residues remaining after the primary 
distilling stages of the refining process. It has higher contents of 
ash, metals, and nitrogen that may increase exhaust emissions. Residual 
also has sulfur content up to 45,000 ppm; the global average sulfur 
concentration is currently about 27,000 ppm, though fuel sold in the 
U.S. has sulfur levels somewhat above the average.\52\ Operating on 
fuels with such high sulfur contents results in high SOX and 
direct sulfate PM emissions.
    Using a residual fuel with a lower sulfur content would reduce the 
fraction of PM emissions from ash and metals. Using distillate fuel 
instead of residual fuel could result in even lower emissions. The 
simpler molecular structure of distillate fuel may result in more 
complete combustion with reduced levels of carbonaceous PM. Operation 
on distillate fuel would also reduce NOX emissions because 
distillate fuel generally contains less nitrogen and has better 
ignition qualities. Because of these benefits, we request comment on 
fuel controls to reduce exhaust emissions from Category 3 marine 
engines.
    MARPOL Annex VI contains requirements for fuels used onboard marine 
vessels. These requirements, which will be effective when the Annex 
goes into force, consist of two parts. First, Annex VI specifies that 
the sulfur content of fuel used onboard ships cannot exceed 45,000 ppm 
(4.5 percent). Information gathered in an international monitoring 
program indicates refiners are currently complying with this 
requirement. Second, the Annex provides a mechanism to designate 
SOX emission control areas, within which ships must either 
use fuel with a sulfur content not to exceed 15,000 ppm or an exhaust 
gas cleaning system to reduce SOX emissions. To date, two 
SOX emission control areas have been designated: the North 
Sea and English Channel, and the Baltic Sea. The Annex VI fuel 
provisions do not go into effect, however, until the Annex enters into 
force (see Section I.C. above).
    Operators who choose not to use exhaust gas cleaning systems can 
meet the Annex VI SOX requirement by using low-sulfur 
residual fuel or by switching to distillate fuel while they operate in 
SOX Emission Control Areas. Due to the nature of distillate 
fuel, this would also reduce NOX emissions. In general, 
engines that are designed to operate on residual fuel oil are capable 
of operating on distillate fuel. For example, if the engine is to be 
shut down for maintenance, distillate fuel is often used to flush out 
the fuel system. However, there are several complications associated 
with this option. Switching to distillate fuel requires 20 to 60 
minutes, depending on how slowly the operator wants to cool the fuel 
temperatures. According to engine manufacturers, switching from a 
heated residual fuel to an unheated distillate fuel too quickly could 
cause damage to fuel pumps. There could also be fuel pump durability 
problems if the engine is operated on distillate fuel for more than a 
few days. For continued operation on distillate fuel, ships would need 
to have separate (or modified) pumps and lines. In addition, 
modification to the fuel tanks may be necessary to ensure sufficient 
capacity for low-sulfur fuel.
    Alternatively, ships can use residual fuels produced to meet the 
15,000 ppm (1.5 percent) sulfur requirement. Refiners can produce low-
sulfur residual fuel from a low-sulfur crude oil or they can put the 
fuel through a de-sulfonation step in the refinery process. They can 
also produce it by blending marine distillate fuel, which typically has 
fuel sulfur levels between 2,000 and 3,000 ppm.
    Given the PM, and SOX benefits of using low-sulfur 
residual fuels and the added NOX benefit of using distillate 
or distillate-blend fuels, we are requesting comment on whether we 
should set standards for the fuel that ships use. We are also seeking 
comment on what form such fuel standards should take. For example, we 
could adopt the Annex VI special control area sulfur limits, either 
through the Annex VI process or through regulation under the Act. This 
would set a maximum sulfur limit of 15,000 ppm. However, lower sulfur 
contents are feasible and would yield greater PM and SOX 
benefits. As a comparison, the sulfur content of highway diesel fuel is 
under 500 ppm today, with a 15-ppm cap applying starting in 2007. The 
sulfur content of nonroad diesel is not regulated, but generally ranges 
from 2,000 to 3,000 ppm. Reducing the sulfur content of the fuel would 
reduce PM and SOX emissions by 10 and 44 percent, 
respectively (see Chapter 4 of the Draft Regulatory Support Document). 
An alternative approach would be to require that ships use distillate 
fuels, which would achieve the same or greater reduction of PM and 
SOX emissions, with an additional 10-percent reduction in 
NOX emissions resulting from the decreased nitrogen content 
of the fuel. Chapter 5 of the Draft Regulatory Support Document 
presents costs estimates for these fuel-based regulatory options. We 
request comment on these possible approaches to addressing in-use fuel 
quality.
---------------------------------------------------------------------------

    \52\ Sulphur Monitoring 2002. Report to Marine Environmental 
Protection Committee, 47th Session. MEPC 47/INF.2, August 28, 2001. 
A copy of this document can be found in Docket A-2000-11.
---------------------------------------------------------------------------

    We also seek information on the costs and expected benefits of 
further reductions in allowable fuel-sulfur levels, for both ship 
owners and fuel suppliers. Finally, we seek comment on how to apply the 
standard. Historically, we have regulated in-use fuels by establishing 
minimum specifications that apply to those who sell the fuel. This 
approach may not be effective for this sector because ship owners could 
choose to purchase their fuel outside the U.S. If we don't adopt any 
requirements related to in-use fuels in this rulemaking, we could 
revisit these questions in the context of a technology review, as 
described above.
    We are not proposing fuel-based regulations in this rule because 
regulating fuel sold in the U.S. would not necessarily ensure that 
distillate fuel

[[Page 37574]]

was used in U.S. waters. The Clean Air Act limits us to setting 
requirements on fuel entered into commerce in the U.S. If we can 
regulate only the fuel sold in the U.S., then a fuel sulfur standard 
would be unlikely to have a significant impact on emissions because 
ships may choose to bunker before entering or after leaving the U.S. 
However, Regulation 14 of MARPOL Annex VI allows areas in need of 
SOX emission reductions to petition to be designated as 
SOX Emission Control Areas (SECA). Within such waters, the 
maximum sulfur content of the fuel will be limited to 15,000 ppm.\53\ 
We intend to work through the MARPOL process to designate certain areas 
in the U.S. as sulfur control areas which would require the use of 
distillate fuel. We request comment on whether all waters under U.S. 
jurisdiction or only specific areas should be designated as SECAs, and 
whether such designation(s) could be expected to have an adverse impact 
on port traffic within SECAs. EPA also invites comment on our authority 
under the Clean Air Act to regulate this fuel.
---------------------------------------------------------------------------

    \53\ Unless SOX emission controlled by secondary 
means which at present is not clear.
---------------------------------------------------------------------------

V. Demonstrating Compliance

A. Overview of Certification

1. How Would I Certify My Engines?
    We are proposing to base certification data and administration 
requirements for new Category 3 marine engines on the existing program 
for Category 1 and Category 2 marine engines. These provisions are 
contained in 40 CFR part 94, and were described in detail in the 
preamble to the FRM that promulgated those regulations (64 FR 73300, 
December 29, 1999). In general, these provisions require that a 
manufacturer do the following things to certify engines:
    [sbull] Divide engines into groups of engines with similar emission 
characteristics. These groups are called ``engine families''.
    [sbull] Test the highest emitting engine configuration within the 
family.
    [sbull] Determine deterioration rate for emissions and apply it to 
the ``zero-hour'' emission rate. The deterioration rate is essentially 
the difference between the emissions of the engine when produced and 
the point at which it would need to be rebuilt.
    [sbull] Determine the emission-related maintenance that will be 
necessary to keep the engines in compliance with the standards.
    [sbull] Submit the test data to EPA along with other information 
describing the engines within the engine family. This submission is 
called the ``application for certification''.

The certification provisions proposed for new Category 3 engines are 
discussed more fully in later sections. You should also read the 
proposed regulatory text, and the existing Category 2 regulations in 40 
CFR part 94. These later section highlight the differences that we are 
proposing to apply to Category 3.
2. How Is the Proposed Certification Method Different From That Used 
Under Annex VI?
    In general, the two methods are similar. Our certification process 
is similar to the Annex VI pre-certification process, while our 
production-line testing program (described later) is similar to the 
Annex VI initial certification survey. However, the Clean Air Act 
specifies certain requirements for our certification program that are 
different from the Annex VI requirements. The most important 
differences between the proposed approach and the method used under 
Annex VI are related to witness testing (we allow, but do not require 
witness testing), the durability requirements, and test procedures. Our 
proposed durability requirements and testing requirements are discussed 
in other sections. It is also worth noting that, as described in 
Section III, we are proposing to apply the standards based on the date 
of final assembly of the engine, while Annex VI generally applies the 
standards based on the start-date of the manufacture of the vessel 
(i.e., the date on which the keel is laid), which would generally occur 
prior to the final assembly of the engine. Overall, we believe that our 
proposed regulations are sufficiently consistent with Annex VI that 
manufacturers would be able to use a single harmonized compliance 
strategy to certify under both systems. The relationship between our 
proposed program and the Annex VI requirements is described in more 
detail in section V.D.
3. How Does a Certificate of Conformity Relate to a Statement of 
Voluntary Compliance or an EIAPP?
    The Clean Air Act requires that manufacturers obtain a certificate 
of conformity before they introduce a new engine into commerce. Once it 
goes into force, MARPOL ANNEX VI will require manufacturers to obtain 
an ``Engine International Air Pollution Prevention Certificate'' 
(EIAPP). We anticipate that engines that receive an EPA certificate of 
conformity will also be eligible for an Engine International Air 
Pollution Prevention Certificate, since the proposed Tier 1 emission 
limits are the same as the Annex VI NOX limits and the Tier 
2 limits under consideration are more stringent.
    It should be noted that EIAPPs will not be issued until the Annex 
goes into force and can be issued only by the flag state 
Administration. Prior to entry into force of the Annex, and to 
encourage vessel owners to purchase MARPOL Annex VI compliant engines, 
we have developed a voluntary certification program. Under this 
program, the engine manufacturer can apply for and obtain a Statement 
of Voluntary Compliance to the MARPOL Annex VI NOX 
limits.\54\ It is anticipated that ship owners will be able to exchange 
this Statement of Voluntary Compliance for an EIAPP after the Annex 
enters into force. If a shipowner does not have a valid Statement of 
Voluntary Compliance for an engine, it may be necessary to recertify 
the engine to obtain an EIAPP after the Annex enters into force. 
Finally, it should be noted that to obtain an EIAPP in this way, the 
Statement of Voluntary Compliance must be issued by EPA. A shipowner 
with a Statement of Voluntary Compliance issued by another 
Administration will have to apply for certification to obtain an EIAPP.
---------------------------------------------------------------------------

    \54\ Information on how to obtain a Statement of Voluntary 
Compliance can be found on our website, www.epa.gov/otaq/marine.htm.
---------------------------------------------------------------------------

4. Could I Use a Continuous Emission Monitoring System to Demonstrate 
Compliance for Certification?
    You would generally not be able to use a continuous emission 
monitoring system to generate emission data that would be sufficient 
for our certification purposes. However, as we describe later, such a 
system could probably be used for production line testing or for in-use 
verification.
5. What Would the Roles of the Engine Manufacturer and Ship Owner Be 
After the Engine Is Installed?
    Unlike the provisions of MARPOL Annex VI, under our proposed 
regulations, the engine manufacturer would have some responsibilities 
for in-use compliance. The manufacturer would be required to 
demonstrate that its engine would be capable of complying with the 
standards through the ``useful life'' of the engine (as described 
below, the useful life would generally be the first rebuild cycle). The 
manufacturer would be responsible for remedying failures that occur 
during that period. The ship owner would be

[[Page 37575]]

responsible for ensuring that all proper maintenance is performed 
during the entire service life of the engine. After Annex VI goes into 
force internationally, the ship owner would also be responsible for 
compliance with the provisions contained in the NOX 
Technical Code, including the recordkeeping requirements for the Record 
Book of Engine Parameters and the various survey requirements. EPA and 
Coast Guard will work together to develop procedures to verify onboard 
performance of Annex VI requirements, as Coast Guard has the general 
authority to carry out such procedures on vessels.
6. How Would Engines on Foreign-Flagged Vessels Be Certified?
    We are asking for comment regarding whether EPA should regulate all 
engines installed in foreign-flagged vessels that will call at a U.S. 
port (Categories 1, 2, and 3). In general, we would apply the same 
compliance provisions to foreign-flagged vessels as we would to U.S.-
flagged vessels. We do not believe that manufacturers or owners of 
foreign-flag vessels would face unique constraints compared with 
manufacturers and owners of U.S.-flag vessels. Thus, the compliance 
discussions in the section V would apply without regard to whether the 
standards ultimately apply only to U.S.-flag vessels or to all vessels 
calling on U.S. ports.
    It is worth discussing, however, how engines on foreign-flagged 
vessels would be certified if we determined that it was appropriate to 
regulate them in the rule. If we extended our regulations to these 
engines, compliance could be demonstrated for certification in one of 
two ways. Both would require that an application be submitted to EPA. 
It would not be sufficient to have obtained a certificate from a 
country other than the U.S. The simplest way to obtain an EPA 
certificate would be for the ship manufacturer to install a certified 
engine during the construction of the ship. In this case, we would 
treat this engine in the same manner as engines installed on U.S.-
flagged vessels. Our proposed regulations would already allow this. 
This approach would also work for replacement auxiliary engines. The 
ship owner would only be required to purchase a certified marine 
engine.
    The second approach would be for the engine to be certified after 
it has been installed in a vessel that will call at a U.S. port, but 
before the vessel is within 175 nautical miles of the U.S. As with our 
requirements for newly manufactured engines, we would require that 
emission test data be submitted in an application for certification to 
demonstrate that the engine complies with our requirements. This could 
be done by either the engine manufacturer or the ship owner. We 
recognize that we may need to allow different certification procedures 
to be used in these special cases. In fact, our existing regulations 
for smaller marine engines include an allowance for EPA to establish 
special certification procedures for engines on imported vessels 
([sect] 94.222). We could modify this provision to allow these special 
certification procedures for foreign-flagged vessels subject to our 
standards irrespective of whether such vessels are considered to be 
imported.
    It is also worth noting that any vessel subject to our standards 
that has one or more uncertified engines installed could be denied the 
right to enter a U.S. port, because the vessel would not be in 
compliance with U.S. law. Similarly, a vessel with an engine that has 
within 175 nautical miles of the U.S. coastline operated outside the 
range of operating parameters within which the engine is certified to 
comply with the applicable emission standard could be denied the right 
to enter a U.S. port. In addition, EPA could bring an enforcement 
action against the vessel and its operator under the Clean Air Act for 
injunctive relief and for penalties of up to $27,500 for each day that 
a violation occurs. As is described in section III.C.3, if we were to 
apply our proposed standards to foreign-flagged vessels, we would 
consider exemption provisions to allow vessels with uncertified engines 
to make occasional, but not frequent visits to U.S. ports.

B. Other Certification and Compliance Issues

1. How Are Engine Families Defined?
    We are proposing that engine grouping for the purpose of 
certification be accomplished through the application of an ``engine 
family'' definition. Engines expected to have similar emission 
characteristics throughout their useful life are proposed to be 
classified in the same engine family. We are proposing to define engine 
families consistent with MARPOL. To provide for administrative 
flexibility in the proposal, we would have the authority to separate 
engines normally grouped together or to combine engines normally 
grouped separately based upon a manufacturer's request substantiated 
with an evaluation of emission characteristics over the engine's useful 
life. We are requesting comment on the proposed requirements for 
selecting engine families. Do the proposed criteria provide sufficient 
certainty that NOX emissions would be similar for all of the 
engines within a particular family?
2. Which Engines Would Be Tested?
    We are proposing that manufacturers select the highest emitting-
engine (i.e., ``worst-case'' engine) in a family for certification 
testing. This is consistent with the Annex VI requirements. In making 
that determination, the manufacturer shall use good engineering 
judgement (considering, for example, all engine configurations and 
power ratings within the engine family and the range of installation 
options allowed). By requiring the worst-case engine to be tested, we 
are assured that all engines within the engine family are complying 
with emission standards for the smallest number of test engines. If 
manufacturers believe that the engine family is grouped too broadly, 
they may request separating engines with dissimilar calibrations (based 
on an evaluation of emission characteristics over the engine's useful 
life) into separate engine families.
    For these large marine engines, conventional emission testing on a 
dynamometer becomes more difficult. Often the engine mock-ups that are 
used for the development of these engines use a single block for many 
years, while the power assemblies are changed out. We propose that for 
Category 3 engines, certification tests may be performed on these 
engine mock-ups, provided that their configuration is the same as that 
of the production engines. In addition, we are proposing to allow 
single-cylinder tests, since a single-cylinder test should give the 
same brake-specific emission results as a full engine test, as long as 
each cylinder in an engine is equivalent in all material respects.
    We are also proposing that manufacturers be required to allow EPA 
to perform confirmatory testing using their certification engines. In 
other rules, we have required manufacturers to provide us with actual 
engines for our confirmatory testing program. However, this would not 
be practical for Category 3 engines because of their size and cost.
3. How Does EPA Treat Adjustable Parameters?
    Diesel engines are often designed with adjustable components. For 
example, it is common to be able to adjust the fuel injection timing of 
an engine. EPA has historically required that these important 
adjustable parameters be physically limited to the range over which an 
engine would comply with the standards. Thus, while an uncontrolled 
diesel engine would typically have a broad (or even unlimited) range of 
adjustability, EPA-certified engines have

[[Page 37576]]

a very narrow range of adjustability. Typically, this narrow range is 
enforced through physical stops on the adjustable parts. In some cases, 
manufacturers seal a component after final assembly to prevent any 
adjustment in use. Disabling physical stops, breaking seals, or 
otherwise adjusting an engine outside of the certified range is 
considered tampering with the emission controls, and is a violation of 
section 203(a) of the Clean Air Act.
    For marine engines, broad adjustability allows engines to be 
adjusted for maximum efficiency when used in a particular application. 
This practice simplifies marine diesel engine production, since the 
same basic engine can be used in many applications. While we recognize 
the need for this practice, we are also concerned that the engine meet 
the proposed emission limits throughout the range of adjustment. 
Therefore, the Agency has established provisions for Category 2 engines 
to allow manufacturers to specify in their applications for 
certification the range of adjustment for these components across which 
the engine is certified to comply with the applicable emission 
standards, and demonstrate compliance only across that range. We are 
proposing to also allow such adjustments for Category 3 engines. 
Practically, this requirement means that a manufacturer would specify 
different fuel injection timing calibrations for different conditions. 
These different calibrations would be designed to account for 
differences in fuel quality, which can be very significant for Category 
three engines. Operators would then be prohibited by the anti-tampering 
provisions from adjusting engines to a calibration different from the 
calibration specified by the manufacturer. (See section V.B.10 for a 
discussion of adjustments away from the U.S.) Annex VI also allows 
engines to be adjusted in use, and requires the engine manufacturer to 
include a description of the allowable adjustments in the Technical 
File for the engine.
    Given the broad range of ignition properties for in-use residual 
fuels, we expect that this allowance for Category 3 engines would 
result in a broader range of adjustment than is expected for Category 2 
engines. Because of this broader allowance, we are also proposing that 
operators be required to perform a simple field measurement test to 
confirm emissions after a parameter adjustment or maintenance 
operation. This would not be required for adjustments or maintenance 
that would not affect emissions. In addition, given the degree to which 
Category 3 engines regularly undergo major maintenance (e.g., 
replacement of an entire power assembly), we believe that all Category 
3 engines as a class should be considered to be inherently adjustable. 
We do not believe that a manufacturer could make an engine that would 
be unadjustable in practice. Therefore, we are proposing that all new 
Category 3 engines be equipped with emission measurement systems and 
with electronic-logging equipment that automatically records all 
adjustments to the engine and the results of the required verification 
tests. EPA believes this is a nominal burden. We request comment on 
this proposed requirement. It is important to emphasize that we believe 
that it is essential that the logging equipment automatically record 
all adjustments without requiring the operator to turn on the data 
logger. (As is described in section V.B.10, this requirement would 
apply to all adjustments without regard to whether they occur within 
175 nautical miles of the U.S. coast.) This would allow us to rely on 
the data log to ensure that the vessel is consistently being adjusted 
properly. We would also require that such adjustments be manually 
recorded as well, consistent with Annex VI requirements.
    We are proposing to use a simpler measurement system than the type 
specified in Chapter 6 of NOX Technical Code. As is 
described in the RSD, we believe that onboard emission equipment that 
is relatively inexpensive and easy to use could be used to verify that 
an engine is properly adjusted and is operating to the specifications 
of the engine manufacturer. We do not believe that it would be 
necessary to perform a complete certification-type emission test after 
each adjustment. Under the proposed approach, operators should be able 
to complete this testing during normal operation without stopping or 
slowing the vessel. We also expect that this equipment will provide 
useful information to the ship's crew, that will enable them to better 
monitor the engine performance from a non-emission perspective. We 
believe that the proposed requirement to include this equipment should 
result in little or no net burden to ship operators. It is worth noting 
the fact that Annex includes specifications that would allow operators 
to choose to verify emissions through onboard testing suggests that 
MARPOL also envisioned that onboard measurement systems could be of 
value to operators.
    We are requesting comment on the broader Annex VI approach to 
address engine adjustments, which is to specify that ship operators 
must keep the engine adjusted within the limits specified by the engine 
manufacturer and to verify the compliance through periodic surveys. 
Ship operators would have the choice between verifying the emissions 
performance through parameter check or through onboard testing. 
Commenters should address the reliability of this approach. We have 
concerns that the Annex VI parameter check approach could be difficult 
to enforce, since operators that adjusted their engines outside of a 
manufacturers specifications would have no incentive to record such 
violations. It is also not clear that a parameter check could be 
reliable, given the infrequency with which these surveys will likely 
occur. Commenters should address both the parameter check method and 
the testing method. Are they equivalent? Is the reliability of the 
testing method affected by whether the tests are scheduled in advance 
or are performed as part of a surprise inspection? Are surprise test 
inspections practical?
    We also have concerns that, under the Annex VI approach, 
manufacturers would not be able to identify the specific adjustments 
that would be required for the full range of in-use conditions. While 
it is known that changes in fuel properties can require changes in 
engine calibrations, the properties themselves are poorly understood. 
We do not believe that manufacturers could specify to the operator that 
if fuel property A is equal to X, fuel property B is equal to Y, and 
fuel property C is equal to Z, then the fuel injection timing should be 
adjusted to a specific setting to make sure that the engine meets the 
emission standards. Not every important fuel property is readily 
quantifable, and different fuel properties can interact to affect 
performance. How would an operator record that a parameter was properly 
adjusted for a given in-use fuel if not all of the relevant fuel 
properties are quantifiable?
    We also request comments on other approaches to ensure that engines 
with adjustable parameters meet the proposed emission requirements. 
Should we require that engine manufacturers design their engines to be 
automatically adjusted for changes in fuel quality of other conditions 
and prohibit all other adjustments? Would such a prohibition be 
practicable? We are also requesting comment on the need for and the 
feasibility of indicators on the outside of the vessel (e.g. a light) 
to indicate whether the pollution controls are working properly. 
Obviously, such a feature would need to be hard-wired into the vessel 
controls to be reliable.

[[Page 37577]]

4. How Would Engines Be Labeled?
    We are proposing that each new engine have a permanent emission 
label on the engine block, or on some other part of the engine that 
would not be replaced in service. This label would have to include 
specific emission-related information such as engine family name, model 
year, and basic maintenance specifications. This inclusion of this 
information on the label would be in addition to the recordkeeping 
requirements specified in the NOX technical code.
5. How Does EPA Ensure Durable Emission Controls?
    To achieve the full benefit of the emissions standards, we need to 
ensure that manufacturers design and build their engines with durable 
emission controls. It is also necessary to encourage the proper 
maintenance and repair of engines throughout their lifetime. The goal 
is for engines to maintain good emission performance throughout their 
in-use operation. Therefore, we believe it is necessary to adopt 
measures to address concerns about possible in-use emission performance 
degradation. The proposed durability provisions, described in the 
following sections, are intended to help ensure that engines are still 
meeting applicable standards in use. Most of these provisions are 
carried over from our program for smaller marine compression-ignition 
engines. We request comment on all aspects of this durability program.
    The most fundamental issue related to durability is the concept of 
useful life. The Clean Air Act specifies that useful life is the period 
during which an engine is required to meet the emission standards. For 
Category 3 marine engines subject to our standards, we are proposing 
that the useful life be the period during which an engine is expected 
to be properly functioning with respect to reliability and fuel 
consumption without being rebuilt. For engines that are rebuilt 
completely at one time, the useful life would be the expected period 
between original manufacture and the first engine rebuild. For engines 
that are maintained by replacing individual power assemblies, the 
useful life would be the expected period between original manufacture 
and the point at which the last power assembly is replaced. We expect 
that this period will vary to some degree among engine models. 
Therefore, we are proposing that manufacturers specify the useful life 
for their engines at the time of certification. Their specification 
would be subject to EPA approval, and could not be less than a minimum 
period of 3 years or 10,000 hours of operation (based on all engine 
operation, not just operation in or near U.S. waters). This 
specification would not limit in-use operation. Rather it would 
determine how the manufacturer would address emission deterioration 
(i.e., the manufacturer would be required to demonstrate to EPA that 
the engine would meet the standards for the full useful life). We are 
also proposing that the useful life period may not be less than any 
mechanical warranty that the manufacturer offers for the engine.
    These minimum useful life values are lower than the minimum values 
for Category 2 engines due to the effect of using residual fuel, which 
generally has much higher sulfur levels than distillate fuels. The high 
sulfur levels create a more corrosive environment within the combustion 
chamber, which decreases durability. The period of years (three years) 
is also affected by the higher usage rate in terms of hours per year. 
We request comment on this issue.
6. What Are the Manufacturer's Responsibilities for Warranty and Defect 
Reporting?
    Tied to the useful life is the minimum period for the warranty 
required under section 207(a) of the Clean Air Act. We believe it is 
important to ensure that the engine manufacturer has designed and built 
the engine to ensure that it would comply with the emission standards 
throughout its useful life, as long as it is properly maintained. 
Therefore, we are proposing that the warranty period be equal to the 
useful life period (e.g., 10,000 hours or 3 years). Under the 
performance warranty, the engine manufacturer would be responsible to 
repair any properly maintained and used engine that fails to meets the 
standard in use during the warranty period. (Engine operators would be 
responsible to repair any engines that failed to meet the standards 
because of improper maintenance.) We request comment on this approach.
    We are also proposing defect-reporting requirements. These 
provisions require Category 3 engine manufacturers to report to EPA 
whenever a manufacturer identifies a specific emission-related defect 
in 2 or more engines (or 2 or more cylinders within the same engine). 
In most cases, we would expect the defects to be identified as part of 
a manufacturer's warranty process. However, the manufacturer would be 
required to report all defects, without regard to how they were 
identified. It is important to clarify that the defect reporting 
requirements would not require the manufacturer to collect new 
information. The manufacturer would be required to track and report to 
EPA information that they obtain through normal business practice. We 
request comment on this issue.
7. What Are Deterioration Factors?
    To further ensure that the proposed emission limits are met in use, 
we are proposing to require the application of a deterioration factor 
(DF) to engines in evaluating emission control performance during the 
certification and production-line testing process. The emissions from 
new engines are adjusted using the DF to account for potential 
deterioration in emissions over the life of the engine due to aging of 
emission control technologies or devices. The resulting emission level 
is intended to represent the expected emissions at the end of the 
useful life period for a properly maintained engine. We believe that 
the effectiveness of some emission control technologies, such as 
aftertreatment, sophisticated fuel-delivery controls, and some cooling 
systems, can decline as these systems age. The DF is applied to the 
certification emission test data to represent emissions at the end of 
the useful life of the engine. We are proposing that marine diesel 
engine DFs be determined by engine manufacturers in accordance with 
good engineering practices. The DFs, however, would be subject to EPA 
approval, and must be consistent with in-use test data. For example, if 
we had in-use test data from earlier model year engines from the same 
basic engine family that showed that NOX emissions generally 
deteriorate by 0.5 g/kW-hr over the useful life, then we would approve 
a DF that assumed no deterioration in NOX emissions. 
Additionally, the DF should be calculated for the worst-case engine 
configuration offered within the engine family.
    It is not our intent to require a great deal of data gathering on 
engines that use established technology for which the manufacturers 
have the experience to develop appropriate DFs. New DF testing may not 
be needed where sufficient data already exists. However, we are 
proposing to apply the DF requirement to all engines so that we can be 
sure that reasonable methods are being used to ascertain the capability 
of engines to meet standards throughout their useful lives. Consistent 
with other programs, we propose to allow manufacturers the flexibility 
of using durability emission data from a single engine that has been 
certified to the same or more stringent standard for which all of the 
data applicable for

[[Page 37578]]

certification has been submitted. In addition, we request comment on 
whether this flexibility should be extended to allow deterioration data 
from highway, nonroad, or stationary engines to be used for similar 
marine diesel engines.
    Finally, we are proposing that DFs be calculated as an additive 
value (i.e., the arithmetic difference between the emission level at 
full useful life and the emission level at the test point) for engines 
without exhaust aftertreatment devices. In contrast, DFs should be 
calculated as a multiplicative value (i.e., the ratio of the emission 
level at full useful life to the emission level at the test point) for 
engines using exhaust aftertreatment devices. This is consistent with 
the DF requirements applicable to other diesel engines, based on 
observed patterns of emission deterioration. Given the type of emission 
controls projected to be used to meet the proposed standards 
(calibration changes and combustion chamber redesign, but not 
aftertreatment), it is possible that NOX emissions may 
actually decrease with time as the piston rings and cylinder liners 
wear (thereby reducing peak pressures). In such cases, we would require 
that the manufacturer use an additive DF of zero.
    It is important to note that one of the reasons we are proposing a 
very flexible DF program for this rulemaking because we do not expect 
deterioration to be a major problem for these engines. Our history with 
in-cylinder NOX control suggests that engine-out 
NOX emissions are relatively stable over time. If we were to 
adopt an aftertreatment-forcing standard or a standard for PM, we would 
likely consider more specific requirements for calculating DFs. For 
example, it might be appropriate to apply to these engines the more 
specific DF provisions that have been developed for on-highway heavy-
duty engines (40 CFR 86.004-26). Commenters that favor the adoption of 
an aftertreatment-forcing standard or a standard for PM should address 
whether they believe that the proposed DF program would be sufficient 
to ensure that manufacturers design their aftertreatment devices to be 
durable.
8. What Requirements Are Proposed for In-Use Maintenance?
    In previous rules, we have required manufacturers to furnish the 
ultimate purchaser of each new nonroad engine with written instructions 
for the maintenance needed to ensure proper functioning of the emission 
control system. (Generally, manufacturers require the owners to perform 
this maintenance as a condition of their emission warranties.) If such 
required maintenance is not performed by the engine operator, then in-
use emissions deterioration can result. We are proposing to require 
that Category 3 engine operators be required to perform this 
maintenance, or equivalent maintenance. This provision is comparable to 
our requirement for railroads to perform emission-related maintenance 
for locomotives (40 CFR 92.1004). In that approach, locomotive owners 
who fail to properly maintain a locomotive are subject to civil 
penalties for tampering. For marine engines, properly rebuilding 
engines and power assemblies would be considered to be a part of 
emission related maintenance. We believe that these requirements would 
generally be consistent in practice with the provisions specified for 
ship operators in Technical File required by the NOX 
Technical Code.
    An important part of this proposal is the allowance for operators 
to perform the maintenance differently than specified by the 
manufacturer, provided that maintenance is performed in such a way to 
keep the engines performing properly with respect to emissions. With 
the proposed emission verification requirements, it would be 
straightforward for ship operators to determine if their maintenance 
practices are sufficient. As long as their engines pass the 
verification tests, EPA would consider the maintenance to be 
equivalent. For ships that travel far from U.S. waters, this 
requirement would mean that maintenance would need to be performed in 
such a way that the engines would pass the verification tests before 
they come within 175 nautical miles of the U.S. coastline. (See section 
V.B.10 for more information about special provisions that apply for 
ships that travel more than 175 nautical miles from the U.S.)
    Unlike our regulation for smaller marine engines, we are not 
proposing minimum allowable maintenance intervals for Category 3 marine 
diesel engines. This is also consistent with our approach for 
locomotives. In both cases, we believe that maintenance would be 
jointly agreed to by the engine manufacturer and the engine owner prior 
to purchase.
    We are requesting comment on whether we should allow a manufacturer 
or owner to petition EPA to amend the emission-related maintenance 
instructions after the engine is in use, either within or after the 
useful life. This may be necessary because of the very long service 
lives of these engines. It may not be reasonable for us to require an 
owner of a 20-year old engine to be bound to maintenance practices that 
were set 20 years earlier. We are requesting comment on how such 
amendments would be made.
9. Do the Proposed Regulations Affect Engine Rebuilding?
    We are proposing in-use maintenance provisions that would require 
operators to perform emission related maintenance properly. We are 
proposing that this would also apply whenever an engine or engine 
subsystem is rebuilt. These provisions would require that all rebuilds 
return the engine to its original certified condition. (Failure to 
rebuild an engine to its original certified condition would be 
considered tampering with the emission controls.) We believe that the 
proposed provisions would address the vast majority of in-use 
maintenance and rebuilding practices. However, we are concerned about 
special circumstances in which an owner wants to upgrade the engine to 
be comparable to a newer configuration rather than simply returning it 
to its original configuration. Under Annex VI, such ``substantial 
modifications'' are allowed, but the owner is required to recertify the 
engine. Should we adopt a similar provision? We are also requesting 
comment on a voluntary rebuild standard for older ships with engines 
that are not subject to our standards or the Annex VI requirements. For 
example, should we create a program for owners of ships built before 
2004 to voluntarily certify that they comply with the EPA standards for 
model year 2004 ships?
    As described in the previous section, for ships that travel far 
from the U.S., the proposed in-use maintenance provisions that would 
require operators to perform emission related maintenance so that an 
engine meets the manufacturer's maintenance requirements when it is 
within 175 nautical miles of the United States. For rebuilds performed 
away from the U.S., this would require that all rebuilds be performed 
so that the engine could be returned to its original certified 
condition before the ship returns to within 175 nautical miles of the 
United States. (See section V.B.10 for more information about special 
provisions that apply for ships that travel more than 175 nautical 
miles from the U.S.)
10. Compliance With a Certificate of Conformity Beyond 175 Nautical 
Miles of the U.S. Coast
    As described in section V.B.3, we are proposing to allow engines to 
be adjusted in use in accordance with the certificate of conformity, 
and to limit

[[Page 37579]]

this adjustability under our Clean Air Act authority to prohibit 
tampering. We are also proposing different compliance requirements than 
those adopted in prior rulemakings for new nonroad vehicles and new 
nonroad engines for Category 3 marine engines installed in vessels that 
operate outside the U.S. Under this approach a vessel operator would be 
conditionally allowed to adjust an engine's operating parameters 
different from the manufacturer's specification. This would be allowed 
when a vessel that is proceeding toward or out of a U.S. port is more 
than 175 nautical miles about (200 statutory miles) from the U.S. 
coastline. More precisely, we would allow this for vessels that are 
more than 175 nautical miles from the baseline from which the 
territorial sea is measured, including U.S. states or territories 
outside of the U.S. mainland.
    This flexibility is not included in the Annex VI provisions. While 
we considered proposing our program without this flexibility, we 
believe that it is an appropriate flexibility, as is described below.
    Under the proposed approach, engine adjustments different from 
engine manufacturer's specifications would be conditional on 
readjusting the engine's parameters within its certified range and 
confirming that emissions are within the range of emissions to which 
the engine is certified to comply before a vessel seeking to enter a 
U.S. port is 175 nautical miles from the U.S. coastline. Failure to 
take these actions would constitute tampering with the engine in 
violation of section 203(a)(3)(A) of the CAA and 40 CFR 
94.1103(a)(3)(i). To confirm that emissions are within the range of 
emissions at which the engine is certified to comply, operators would 
have to perform a simple field measurement test after each parameter 
adjustment or maintenance operation that could reasonably be expected 
to affect emissions. (All adjustments and maintenance would be presumed 
to affect emissions unless there was a reasonable technical basis for 
believing that they did not affect emissions.) Furthermore, we would 
require that all new Category 3 engines be equipped with electronic-
logging equipment that automatically records all adjustments to the 
engine and the results of the required verification tests. The logging 
equipment would be required automatically record all adjustments 
without requiring the operator to turn on the data logger, without 
regard to whether they occur within 175 nautical miles of the U.S. 
coast. It would not be possible to rely on the data log to ensure that 
the vessel is consistently being adjusted properly if the operator 
could turn the logger on and off. Since the logging would occur 
automatically, we do not believe there would be a significant burden to 
the operator. Such adjustments would also have to be manually recorded 
as well. Obviously, we would not allow adjustments that damaged the 
engine or its emissions controls or otherwise prevented the engine from 
being able to comply with our regulations after the readjustment.
    Prior rulemakings that establish emission standards for new nonroad 
engines and vehicles prohibit anyone from disabling or otherwise 
tampering with an engine or vehicle that is covered by a certificate of 
conformity. See for example 40 CFR 94.1103(a)(3)(i). Our normal 
practice has been to require an engine to meet the emission standards 
at all specifications within an adjustable range. In addition, we 
normally require an engine manufacturer to make an engine's parameters 
unadjustable outside the range at which an engine is certified. We have 
adopted these practices to minimize the possibility that a certified 
engine can be intentionally or unintentionally adjusted to exceed the 
emission levels at which it is certified. If we take a different 
approach and allow Category 3 marine engines to conditionally allow a 
vessel operator to adjust an engine's operating parameters outside the 
range of specifications within which the engine is certified to comply 
with the applicable emission standards, we would be increasing the 
possibility that a certified engine would exceed the emission levels at 
which it is certified when it is in or near the United States. We are, 
nonetheless, proposing such an approach because of the unique issues 
associated with Category 3 marine engines that are installed in a 
vessel. These engines spend much of their time in international waters 
far away from U.S. coastal regions, where their emissions would have 
little or no effect on U.S. air quality. Tailoring the scope of the 
prohibition against tampering with a certified engine would allow 
vessel operators to readjust their engines for different performance 
characteristics in international waters when their emissions do not 
affect the U.S.
    Although section 203(a)(3)(A) of the CAA prohibits the disabling of 
or tampering with emission control technology on a compliant motor 
vehicle or motor vehicle engine, there is no express statutory 
prohibition on such conduct with respect to new nonroad engines or 
vehicles. Although section 213(d) does provide that emission standards 
for new nonroad engines and vehicles ``shall be enforced in the same 
manner'' as standards prescribed for new motor vehicles and new motor 
vehicle engines, it is unclear whether this means ``exactly 
equivalent'' enforcement requirements or ``analogous, comparable or 
consistent'' enforcement requirements. The CAA, therefore, is ambiguous 
as to how emission standards for new nonroad engines and vehicles 
should be enforced.
    We believe that it would be reasonable to interpret section 213(d) 
to allow the Agency to fashion enforcement provisions for new nonroad 
engines and vehicles that are consistent with, but not necessarily 
equivalent to, those applicable to new motor vehicles and new motor 
vehicle engines. Such an interpretation is consistent with the rest of 
section 213(d), which recognizes the need for different solutions to 
implement emission standards for new nonroad engines and vehicles. 
Specifically, section 213(d) provides that emission standards for 
nonroad engines and vehicles like emissions standards for new motor 
vehicles and new motor vehicle engines are subject to sections 206, 
207, 208 and 209 ``with such modifications of the applicable 
regulations implementing such sections as the Administrator deems 
appropriate.''
    In this case, the need for a different solution than the one that 
we have traditionally adopted is warranted by the fact that the engines 
we propose to regulate operate primarily outside of the United States. 
As discussed above, marine Category 3 engines installed in vessels 
spend much of their time in waters far away from U.S. coastal regions, 
where their emissions would have little or no effect on U.S. air 
quality. Enforcing emission standards for these kinds of engines, 
therefore, is different than enforcing standards for motor vehicles and 
motor vehicle engines that operate primarily, if not exclusively, 
inside the United States. However, vessel operators that adjust an 
engine's operating parameters outside the range within which the engine 
is certified to comply with the applicable emission standards, would 
have to readjust the engine's parameters to its certified calibration 
and confirm that emissions are within the range of emissions to which 
the engine is certified to comply before a vessel seeking to enter a 
U.S. port is 175 nautical miles from the U.S. coastline.
    As described in previous sections, we are proposing to apply this 
same approach for engine maintenance and rebuilding. Within 175 
nautical miles of the U.S., improper maintenance or

[[Page 37580]]

rebuilding of an engine would be considered to be tampering to the 
extent that it compromised the emission performance of the engine. On 
the other hand, engine maintenance and rebuilding that occurs more than 
175 nautical miles away from the U.S. would be treated as any other 
type of emission-related adjustment. Ship operators could maintain or 
rebuild the engine however they would choose, provided that the engine 
is returned to a certified configuration and passes the emission 
verification test specified in [sect] 94.1003(b) of the proposed 
regulations before it comes within 175 nautical miles of the U.S.
    We are proposing this limit of 175 nautical miles to control 
Category 3 emissions that affect U.S. air quality, especially emissions 
from coastwise traffic. As described in the draft RSD, we believe that 
the emissions that occur within 175 nautical miles (200 statutory 
miles) of the U.S. coastline represent a significant fraction of the 
total inventory and that these emissions can significantly affect U.S. 
air quality. Assuming a 10 mile per hour wind blowing toward the coast, 
these emissions would reach the coast in less than one day. Setting 
this threshold at some shorter distance would not adequately account 
for these emissions. We considered proposing a larger distance. The 
Ozone Transport Assessment Group \55\ has estimated that within the 
continental U.S., emissions can affect air quality as far away as 500 
statutory miles from the emission source. Other analyses have suggested 
that NOX and SOX emissions could be transported 
even farther than that. However, there is uncertainty associated with 
the transport of ship emissions. Most transport studies have focused on 
transport that occurs over land, and emissions over the ocean do not 
have the same effect as land-based emissions due to different 
meteorological conditions. While we recognize that some emissions that 
occur beyond 175 nautical miles could potentially affect U.S. air 
quality, these effects are hard to quantify. At this time, we cannot 
determine that emissions beyond 175 nautical miles would have a 
significant effect in most cases.
---------------------------------------------------------------------------

    \55\ Final Report of the Ozone Transport Assessment Group, 
Chapter 4.
---------------------------------------------------------------------------

    We will continue to investigate this issue throughout this 
rulemaking, and will incorporate any new information into the final 
rule. For example, the Department of Defense (DoD) has recently 
presented information to EPA supporting the significance of offshore 
emissions, but suggesting that a different, shorter (offshore distance) 
limit may be appropriate to address the emissions from marine vessels 
that would affect on-shore air quality. DoD's extensive work on the 
marine vessels issue in Southern California resulted in a conclusion 
that emissions within 60 nautical miles of shore could make it back to 
the coast due to eddies and the nature of the sea breeze effects. Their 
analysis of satellite data, however, showed a distinct tendency for a 
curved line of demarcation separating the offshore (unobstructed) or 
parallel ocean wind flow from a region of more turbulent, recirculated 
air which would impact on-shore areas. That curved line of demarcation 
was close to San Nicolas Island which is about 60 nm offshore from the 
California coast. DoD also indicated that studies and published 
information on other coastal areas in California indicate that they 
experience somewhat narrower (perhaps 30 nm ) region of ``coastal 
influence''. We are investigating how this information would related to 
other coastal regions such as the Gulf Coast and the East coast, which 
would be expected to have their own unique meteorological conditions 
that might call for different lines of demarcation between on-shore and 
off-shore effects.
    We believe that the proposed distance would protect U.S. air 
quality without placing an undue burden on ship operators. 
Nevertheless, we request comment on the proposed distance. We encourage 
commenters to address both the long-distance effect of marine engine 
emissions on U.S. air quality and the potential impact of this proposed 
approach on ship operations. We are requesting comment regarding the 
appropriateness of applying a single distance to all coastal regions, 
without considering prevailing wind patterns. For example, would it be 
more appropriate to set a larger distance for the Pacific coast and a 
smaller distance for the Atlantic coast? Would such an approach be 
practical? We are also requesting comment on whether we should treat 
the waters around U.S. island territories such as Guam in the same way 
that we treat the coastal waters around the continental U.S. Would 
emissions around these islands affect their air quality to the same 
extent as coastal emissions around the U.S. mainland? Alternatively, we 
could exempt the island territories from these requirements, pursuant 
to section 324(a) of the Act, if petitioned by the governors of the 
territories.
    Finally, it is worth noting that since we expect that manufacturers 
would design their engines to have good performance when adjusted to 
their compliant calibrations, it should not make a major difference to 
operators exactly where they conduct the verification test. Therefore, 
we would expect that operators that adjust their engines outside of the 
manufacturer's recommended range would begin readjusting their engines 
when they reach the 200-mile EEZ limit. This would allow them to adjust 
their engines and complete the verification test before they reached 
the proposed 175-mile limit. It would also provide time to readjust the 
engine if it were to fail the initial emission verification test. If we 
determine that some distance other than the proposed 175-mile limit 
would better divide those emissions that affect U.S. air quality from 
those emissions that do not, should we incorporate some additional 
cushion to ensure that operators would have sufficient time to readjust 
and retest an engine before its emissions could adversely affect U.S. 
air quality?
11. Are There Proposed Post-Certification Testing Requirements?
    To ensure compliance of production engines, we are proposing a 
simple testing program that is modeled loosely on our production line 
testing (PLT) requirements for other marine engines. The general object 
of any PLT program is to enable manufacturers and EPA to determine, 
with reasonable certainty, whether certification designs have been 
translated into production engines that meet applicable standards. We 
are not proposing a specific testing requirement, and would allow 
manufacturers flexibility in determining how to test the engines. 
However, we are proposing some minimum requirements. First, we would 
require that each certified engine that a manufacturer produces be 
tested. We would also require that either the test directly measure 
brake-specific emissions, or measure other parameters that provide 
equal assurance that each engine meets the standards. The testing would 
need to occur after final installation, but before final delivery to 
the ultimate purchaser. We would suspend the certificate of conformity 
for any failing engine, or if the engine manufacturer's submittal 
reveals that the tests were not performed in accordance with the 
applicable testing procedure. The manufacturer must then bring the 
engine into compliance before we could reinstate the certificate of 
conformity subsequent to a suspension. We would also suspend the 
certificate of conformity for an engine family whenever an engine 
fails. The manufacturer would need to identify and remedy the cause of 
the failure

[[Page 37581]]

before we could reinstate the certificate of conformity for future 
production within that family. EPA will work with the U.S. Coast Guard 
to develop procedures to verify onboard performance of these field 
measurement provisions, as Coast Guard has the general authority to 
carry out such procedures on vessels.
12. What Would the Prohibited Acts and Related Requirements Be?
    We are proposing to regulate Category 3 engines under 40 CFR part 
94. This means that we are proposing to extend the general compliance 
provisions for smaller marine engines to Category 3 marine engines. 
These include the general prohibition introducing an uncertified engine 
into commerce, as well as the tampering and defeat-device prohibitions. 
However, as described in Section V(B)(10), we are proposing to modify 
the tampering provision for Category 3 engines to allow operation 
outside of the otherwise allowable range of adjustment when the vessel 
is far away from the U.S. All other aspects of the existing tampering 
prohibition would apply. These prohibitions are listed in [sect] 
94.1103. EPA seeks comment on extending these provisions to Category 3 
engines, and on any additional modifications that should be made to 
these provisions to accommodate special features of these engines.
13. Would There Be General Exemptions for Engines?
    We are proposing to extend the exemptions provisions for smaller 
marine engines to Category 3 marine engines. These include, for 
example, exemptions for the purpose of national security and exemptions 
for engines built in the U.S. for export to other countries. These 
exemptions, which are described in Subpart J of 40 CFR Part 94, would 
exempt the engines from the proposed requirements, but would require 
that the manufacturer keep records or label the engines in some cases. 
Both the exemption and the related requirements are allowed under our 
general standard-setting authority.
14. What Regulations Would Apply for Imported Engines?
    We are proposing to extend the current importation provisions found 
in 40 CFR Part 94 for smaller marine engines to Category 3 marine 
engines. This means that we are proposing that engines that are 
imported would generally be subject to the proposed requirements based 
on their date of original manufacture. The existing provisions for 
smaller engines include permanent and temporary exemptions from this 
requirement. The most significant of these import exemptions for ocean-
going vessels is the allowance to temporarily import an engine for 
repair.
15. What Would Be a Manufacturer's Recall Responsibilities?
    Section 207(c)(1) of the Act specifies that manufacturers must 
recall and repair in-use engines if we determine that a substantial 
number of them do not comply with the regulations in use. We are 
proposing to apply the existing provisions for smaller marine engines 
to Category 3 marine engines. These provisions are described in Subpart 
H of 40 CFR Part 94.

C. Test Procedures for Category 3 Marine Engines

    Engine manufacturers are currently testing according to the test 
procedures outlined in The Technical Code on Control of Emission of 
Nitrogen Oxides from Marine Diesel Engines in the ``Annex VI of MARPOL 
73/78 Regulations for the Prevention of Air Pollution from Ships and 
NOX Technical Code'' from the International Maritime 
Organization. We are proposing to certify Category 3 marine engines 
using these MARPOL test procedures for diesel marine engines with 
modification. The modifications, which are described in the following 
sections, are required to ensure that the test data used for 
certification are consistent with the requirements of the Clean Air 
Act.
1. What Duty Cycle Would I Use to Test My Engines?
    The duty cycle used to measure emissions is intended to simulate 
operation in the field. Testing an engine for emissions consists of 
exercising it over a prescribed duty cycle of speeds and loads, 
typically using an engine dynamometer. The nature of the duty cycle 
used for determining compliance with emission standards during the 
certification process is critical in evaluating the likely emissions 
performance of engines designed to those standards.
    To address operational differences between engines, we are 
proposing two different duty cycles for different types of C3 marine 
engines. Engines that operate on a fixed-pitch propeller curve would be 
certified using the International Standards Organization (ISO) E3 duty 
cycle. This is a four-mode steady-state cycle developed to represent 
in-use operation of marine diesel engines. The four modes lie on an 
average propeller curve based on the vessels surveyed in the 
development of this duty cycle. We are proposing ISO E2 for propulsion 
engines that operate at a constant speed. These are the cycles used by 
MARPOL.
2. What Kind of Fuel Would Be Required for Emission Testing?
    To facilitate the testing process, we generally specify a test fuel 
that is intended to be representative of in-use fuels. Engines would 
have to meet the standard on any fuel that meets the proposed test fuel 
specifications, with one modification as described later. This test 
fuel is to be used for all testing associated with the regulations 
proposed in this document, to include certification, production line 
and in-use testing.
    We are proposing that the official test fuel specification for C3 
engines be a residual fuel. We are proposing to allow a range of fuels 
based on the ASTM D 2069-91 specifications for residual fuel. We would 
allow testing using any residual fuel meeting the specifications for 
RMH-55 grade of fuel including fuels meeting the specifications for 
RMA-10 grade of fuel. We request comment on this specification. An 
alternative to this approach might be to narrowly define a worst-case 
test fuel. Your comments should address whether the grade of the test 
fuel would affect the feasibility or the stringency of the proposed 
standard. We also are requesting comment on whether there needs to be a 
specification for ignition properties of the test fuels, such as 
cetane.
    This ASTM specification does not include any specification for the 
nitrogen content of the fuel. Organically-bound nitrogen is a normal 
component of residual fuels that has a very significant effect on 
NOX emissions. However, the effect on NOX can be 
calculated from the nitrogen content of the fuel. Therefore, we are 
proposing to include a broad specification for the nitrogen content of 
the fuel (between zero and 0.6 weight percent), and to require 
correction of the NOX emissions based on the nitrogen 
content of the fuel.
    We are also proposing to allow certification testing on marine 
distillate fuel to be consistent with MARPOL testing (see section 
IV.A.2). However, distillate fuels tend to have lower nitrogen content 
than residual fuels. To account for this, we would correct the 
NOX emissions, based on fuel nitrogen content, to be 
equivalent to testing with residual fuels. We request comment on this 
approach. Your comments should address whether we should account for

[[Page 37582]]

factors other than nitrogen content of the fuel in our correction.
    Finally, based on our current understanding of the importance of 
fuel nitrogen levels, we are proposing to also establish a nitrogen-
correction for testing Category 1 and Category 2 engines using residual 
fuel. This correction would be consistent with the Category 3 
correction. However, since the Category 1 and Category 2 standards are 
based on zero-nitrogen fuel, the Category 1 and Category 2 correction 
would correct to 0.0 percent nitrogen instead of 0.4 percent nitrogen 
for Category 3. In the Category 1 and Category 2 FRM, we intended to 
set the standards so that they could be achieved by Category 2 engines 
that use residual fuel. After reconsidering the effect of fuel 
nitrogen, we now believe that this correction is necessary to achieve 
that goal.
3. How Would EPA Account for Variable Test Conditions?
    We are not proposing to limit certification testing based on 
barometric pressure or ambient humidity. We are proposing to limit the 
allowable ambient air temperature to 13[deg]C to 30[deg]C and charge 
air cooling water to 17[deg]C to 27[deg]C. However, since a 
manufacturer would not always be able to stay within these ranges for 
tests conducted after the engine is installed in the ship, we are 
proposing to allow production testing and in-use testing under broader 
conditions. Engine manufacturers would need to provide information 
about how emissions are affected at other temperatures to allow 
production testing and in-use testing conducted under the broader 
conditions to be used to verify compliance with the emission standard.
    We are proposing to use the MARPOL Annex VI correction factors for 
temperature and humidity for certification testing. We would allow the 
use of the corrections for a broader range of test conditions, provided 
the manufacturer verifies the accuracy of the correction factors 
outside of the range of test conditions for certification.
4. How Does Laboratory Testing Relate to Actual In-Use Operation?
    If done properly, laboratory testing can provide emission 
measurements that are the same as measurements taken from in-use 
operation. However, improper measurements may be unrepresentative of 
in-use operation. Therefore, we are proposing regulatory provisions to 
ensure that laboratory measurements accurately reflect in-use 
operation. In the proposed regulations, there is a general requirement 
that manufacturers must use good engineering judgment in applying the 
MARPOL Annex VI test procedures to ensure that the emission 
measurements accurately represent emissions performance from in-use 
engines. We are proposing specific requirements that the manufacturers 
ensure that intake air and exhaust restrictions and coolant and oil 
temperatures are consistent with in-use operation. Most importantly, we 
are proposing that manufacturers' simulation of charge-air cooling 
replicate the performance of in-use coolers within [plusmn]3[deg]C.
    The definition of maximum test speed, (the maximum engine speed in 
revolutions per minute, or rpm) is an important aspect of the test 
cycles proposed in this document. Under Annex VI, engine manufacturers 
are allowed to declare the rated speeds for their engines, and to use 
those speeds as the maximum test speeds for emission testing. However, 
we are concerned that a manufacturer could declare a rated speed that 
is not representative of the in-use operating characteristics of its 
engine in order to influence the parameters under which their engines 
could be certified. Therefore, we are proposing to apply the current 
definition of ``maximum test speed'' in [sect] 94.107 to Category 3 
engines that are subject to our standards.
5. What is Required to Perform a Simplified Onboard Measurement?
    We are proposing that simplified onboard measurements be used to 
confirm proper adjustment of in-use engines as described in sections 
V.B.3 and V.B.10. These systems must be capable of measuring 
NOX concentration, exhaust temperature, engine speed, and 
engine torque. Operators would compare the NOX concentration 
and exhaust temperature to limits provided by the manufacturer. Tests 
that showed emissions higher than allowed under the manufacturer's 
specifications would mean that the engine was not properly adjusted. If 
the engine was within 175 nautical miles of the U.S. coast, then this 
would require that the engine be readjusted and retested. Such 
exceedances 175 nautical miles of the U.S. coast would not be 
considered to be violations of the regulations, provided they were 
corrected immediately.

D. Comparison to Annex VI Compliance Requirements

1. Why are EPA's proposed compliance requirements different from the 
Annex VI requirements?
    We have attempted to propose compliance requirements that are 
sufficiently consistent with Annex VI that manufacturers would be able 
to use a single harmonized compliance strategy to certify under both 
systems. However, the Clean Air Act specifies certain requirements for 
our compliance program that are different from the Annex VI 
requirements. The most important differences between the proposed 
approach and the method used under Annex VI are related to witness 
testing, the durability requirements, and test procedures. It is the 
durability requirements of the Clean Air Act that represent the most 
fundamental differences between the Annex VI certification program and 
the program required by the Clean Air Act. Section 213 of the Act 
requires that the engine manufacturer be responsible for ensuring 
compliance with the emission standards for the full useful life of the 
engine. The Annex VI certification provisions do not include this kind 
of requirement, and make the ship operators fully responsible for 
ensuring in-use compliance through periodic survey requirements. Thus, 
we cannot adopt the Annex VI certification and compliance requirements 
to implement the requirements of the Clean Air Act.
    We believe that adopting certification provisions similar to our 
existing Category 1 and 2 requirements would best meet the requirements 
of the Clean Air Act.
2. What Would Be the Most Significant Differences Between the Two 
Programs?
    There are a number of differences between the two programs. These 
differences are summarized below. They were also discussed in more 
detail in the earlier subsections of this section V.
    [sbull] Liability for in-use compliance--We require that the engine 
manufacturer be responsible for ensuring compliance with the emission 
standards for the full useful life of the engine, while the Annex VI 
program makes the ship operators fully responsible for ensuring in-use 
compliance. Both our regulations and Annex VI provisions would require 
ship operators to properly maintain their engines and to keep records 
of the maintenance and engine adjustment. Under Annex VI, these records 
are referred to as the Record Book of Engine Parameters.
    [sbull] Durability demonstration--We require that the engine 
manufacturer

[[Page 37583]]

demonstrate prior to production that they comply with the emission 
standards for the full useful life of the engine (see section V.B.5). 
The Annex VI program would only require that the manufacturer 
demonstrate that the engine meets the standards when it is installed in 
the vessel; there is no Annex VI durability demonstration.
    [sbull] Witness testing--We allow, but do not require witness 
testing for U.S. compliance. Some other countries require witness 
testing for marine engines. Manufacturers would need to take this into 
consideration if they plan to sell the same engines in the U.S. and 
those other countries.
    [sbull] Test procedures--We are proposing to certify Category 3 
marine engines using the Annex VI test procedures for diesel marine 
engines with modification. The modifications, which are described 
section V.C, are required to ensure that the test data used for 
certification are representative of in-use operation. We expect that 
manufacturers would be able to use data from certification tests 
conducted according to the modified EPA procedures for Annex VI 
certification.
    [sbull] Test fuel--As described in section V.C.2, we are proposing 
that the official test fuel specification for C3 engines be a residual 
fuel. Annex VI specifies using distillate test fuels and uses 
distillate testing as the basis of its standards. We are proposing to 
allow certification testing on marine distillate fuel to be consistent 
with Annex VI. However, we would correct the NOX emissions, 
based on fuel nitrogen content, before the test results are compared to 
our residual fuel based standards.
    [sbull] Compliance date for standards--As described in Section III, 
we are proposing to apply the standards based on the date of final 
assembly of the engine, while Annex VI generally applies the standards 
based on the start-date of the manufacture of the vessel (i.e., the 
date on which the keel is laid). Since the laying of the keel would 
almost always occur prior to the final assembly of the engine, this 
provides manufacturers with somewhat more lead time than is provided by 
the Annex VI provision. Note that this difference would not matter for 
Tier 1, since the effective date of the Annex VI limits has already 
passed (January 1, 2000).
    [sbull] Production testing--We are proposing a simple production 
testing program ensure that certification designs would be translated 
into production engines that meet applicable standards. We are not 
proposing a specific testing requirement, and would allow manufacturers 
flexibility in determining how to test the engines. Annex VI also 
requires verification that engines are properly installed, but allow 
this to be demonstrated by either a parameter check or by testing.
    [sbull] Technical file--Annex VI requires that engine manufacturers 
provide operators with a Technical File that contains maintenance 
instructions, test data, and other compliance information. We are 
proposing only to require the manufacturer to provide maintenance 
instructions necessary to ensure that the engine would continue to meet 
the emission standards in use.
    [sbull] In-use compliance--To ensure that an engine in-use 
continues to meet the standards, we are proposing that operators be 
required to perform a simple field measurement test to confirm 
emissions after a parameter adjustment or maintenance operation. The 
Annex VI program would require only periodic surveys of the engine, 
which can take the form of a simplified onboard test or, more 
frequently, a parameter check. The parameter check can be as simple as 
reviewing the record book of engine parameters to see if any 
adjustments were made to the engine that were outside the range of 
acceptable parameter adjustments specified by the engine manufacturer. 
Both of these would be carried out by representatives of the flagging 
state.
    [sbull] Parameter adjustment--We are proposing to allow 
manufacturers to specify in their applications for certification the 
range of adjustment across which the engine is certified to comply with 
the applicable emission standards. This would allow a manufacturer to 
specify different fuel injection timing calibrations for different 
conditions. These different calibrations would be designed to account 
for differences in fuel quality. Operators would then be prohibited by 
the anti-tampering provisions from adjusting engines to a calibration 
different from the calibration specified by the manufacturer when they 
are within 175 miles of the U.S. coast. We are also proposing to 
require all new Category 3 engines be equipped with emission 
measurement systems and with automatic electronic-logging equipment 
that automatically records all adjustments to the engine and the 
results of the required verification tests. (See sections V.B.3 and 
V.B.10 for more details.) Annex VI would prohibit operators from 
adjusting engines to a calibration different from the calibration 
specified by the manufacturer under any circumstances.
    [sbull] Onboard measurement--We are proposing that simplified 
onboard measurements be used to confirm proper adjustment of in-use 
engines as described in sections V.B.3 and V.B.10. Annex VI allows such 
systems, but does not require them.
3. Could a Manufacturer Comply With Both the EPA Requirements and the 
Annex VI requirements at the Same Time?
    A manufacturer that complied with the proposed EPA requirements 
would need to do very little additional work to meet the Annex VI 
requirements. First, the engine manufacturer would need to provide the 
operator with a Technical File that contains more information than 
would be required by EPA. The manufacturer may also need to ensure that 
the relevant emission testing is witnessed appropriately.
    For manufacturers that have already complied with the Annex VI, the 
amount of additional work that would required to comply with the 
proposed EPA requirements, would be dependent on how the manufacturer 
conducted its emission testing. Annex VI allows manufacturers more 
discretion in testing engines than would be allowed under our proposed 
regulations, and does not necessarily require that the engine be tested 
fully consistent with in-use operation. Under the proposed regulations, 
tests of engines that are not consistent with in-use operation would 
not be allowed, unless the manufacturer could demonstrate that the test 
results were equivalent to test results that would result form testing 
conducted in accordance with the proposed regulations. In these cases, 
manufacturers would need to repeat the tests according to the proposed 
test procedures. On the other hand, manufacturers that used their good 
engineering judgment to test their engines consistent with their in-use 
operation would generally be allowed to use the same test data for EPA 
certification. For future testing, manufacturers would be able to test 
their engines in compliance with both the Annex VI procedures and the 
proposed EPA procedures.
    With respect to the other proposed compliance requirements not 
related to certification testing, manufacturers would need to do the 
following things in addition to the Annex VI requirements:
    [sbull] Demonstrate prior to production that the engines would 
comply with the emission standards for the useful life of the engine.
    [sbull] Warrant to the purchasers that the engines would comply 
with the EPA requirements for the useful life of the engine.
    [sbull] Perform a simple production test after installation.

[[Page 37584]]

    [sbull] Install an onboard measurement system.
    [sbull] Specify how the operator should adjust the engine in use 
and how proper adjustment should be verified through testing.

VI. Projected Impacts

A. What Are the Anticipated Economic Impacts of the Proposed Standards?

    Our analysis of the projected impacts of the proposed standards 
consists primarily of estimating the costs, emission benefits, and cost 
per ton of pollutant reduced.
    With regard to the proposed Tier 1 standards, we expect the costs 
of the proposed Tier 1 standards to be negligible. We do not anticipate 
that there will be any engineering or design costs associated with the 
Tier 1 standards because manufacturers are already certifying engines 
to the Annex VI standards through our voluntary certification program 
(see Section E.2 of the preamble for this rule). While there will be 
certification and compliance costs, these costs will be negligible on a 
per-engine basis. The emission reductions from the proposed Tier 1 
standards will reflect only reductions from engines that are currently 
in noncompliance with the Annex VI NOX limits. For these 
reasons, the projected impacts of this rule are expected to be 
negligible.
    Additionally, because the total annualized costs associated with 
complying the proposed rule are a small percentage of total market 
revenues, it is unlikely that market prices or production will change 
as a result of the proposed rule. Furthermore, the total annualized 
costs associated with applying the reductions to all vessels is 
smaller; thus, we would still not anticipate appreciable changes in 
market prices or quantities to be associated with the proposed rule.
    The remainder of this section discusses the projected impacts of a 
second tier of standards currently under consideration that would 
reflect a 30 percent reduction from Tier 1.

B. What Are the Anticipated Economic Impacts of the Standards Under 
Consideration?

    As described below, aggregate annualized costs of adopting the Tier 
2 standards discussed above are estimated to be about $1.6 million per 
year. In assessing the economic impact of setting emission standards, 
we have made a best estimate of the combination of technologies that an 
engine manufacturer would most likely use to meet the new standards 
discussed in this Notice. The analysis presents estimated cost 
increases for new engines. These estimates include consideration of 
variable costs (for hardware and assembly time), fixed costs (for 
research and development, and retooling), and compliance costs (for 
certification testing and onboard emission measurements). The analysis 
also considers total operating costs, including maintenance and fuel 
consumption. Cost estimates based on these projected technology 
packages represent an expected change in the cost of engines as 
manufacturers begin to comply with new emission standards. All costs 
are presented in 2002 dollars. Full details of our cost analysis can be 
found in Chapter 5 of the Draft Regulatory Support Document.
    Table VI.B-1 summarizes the projected costs for meeting the Tier 2 
emission limits under consideration. Anticipated incremental new engine 
cost impacts of the Tier 2 emission limits discussed in this notice for 
the first years of production range from $94,000 to $153,000 per engine 
with an calculated composite cost of $115,000. Long-term impacts on 
engine costs are expected to be lower, ranging from $25,000 to $63,000 
per engine with a composite cost of $39,000. Most of this cost 
reduction is accounted for by the fact that research, testing, and 
other fixed costs dominate the cost analysis, but disappear after the 
projected ten-year amortization period. Some additional cost reduction 
is expected to result from learning in production. We believe that 
manufacturers would be able to combine emission-control technologies to 
meet the Tier 2 emission standards under consideration without 
increasing fuel consumption or other operating costs. The cost 
analysis, however, includes an estimated $5,000 of annual expenses to 
maintain equipment for onboard emission measurement, which corresponds 
with a net-present-value at the point of sale of $61,000. See Chapter 5 
of the Draft Regulatory Support Document for a more detailed discussion 
of the analysis to estimate the costs of emission-control technology 
for meeting a second tier of emission standards.

                               Table VI.B-1.--Summary of Projected Costs to Meet Tier 2 Emission Standards--U.S.-Flag Only
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Medium-speed engines                             Slow-speed engines
                       Time Frame                        -----------------------------------------------------------------------------------------------
                                                              6 cyl.          9 cyl.          12 cyl.         4 cyl.          8 cyl.          12 cyl.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total cost per engine (yr. 1)...........................         $93,587         $98,977        $104,368        $106,414        $129,723        $153,031
Total cost per engine (yr. 6 and later).................          25,452          28,902          32,352          33,661          48,579          63,496
Annual operating costs..................................           5,000           5,000           5,000           5,000           5,000           5,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table VI.B-2 shows the same cost estimates for the scenario of 
requiring engines on foreign-flag vessels to meet emission standards. 
Near-term costs are generally lower in this scenario because fixed 
costs can be amortized over substantially larger numbers of engines. 
The same manufacturers produce engine used in U.S. and foreign-flagged 
vessels. In addition, the majority of the vessels visiting the U.S. are 
foreign flagged. Therefore, we do not estimate separate costs for 
applying the Tier 2 standards to foreign flagged vessels only.

                           Table VI.B-2.--Summary of Projected Costs to Meet Tier 2 Emission Standards--Including Foreign-Flag
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Medium-speed engines                             Slow-speed engines
                       Time frame                        -----------------------------------------------------------------------------------------------
                                                              8 cyl.          12 cyl.         16 cyl.         4 cyl.          8 cyl.          12 cyl.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total cost per engine (yr. 1............................         $35,970         $41,360         $46,751         $48,797         $72,106         $95,414
Total cost per engine (yr. 6 and later).................          25,452          28,902          32,352          33,661          48,579          63,496
Annual operating costs..................................           5,000           5,000           5,000           5,000           5,000           5,000
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 37585]]

    The above analysis presents unit cost estimates for each power 
category. With current data for engine and vessel sales for each 
category and projections for the future, these costs can be translated 
into projected direct costs to the nation for the new emission 
standards in any year. Aggregate annualized costs (based on a 20-year 
stream) are estimated to be about $1.6 million per year. This is based 
on the present value of an annuity discounted at 7 percent over a 20-
year stream of costs. Aggregate annualized costs not including the 
NOX monitoring costs are estimated to be about $1 million. 
Applying the Tier 2 emission standards described in this notice also to 
engines on foreign-flag vessels would increase aggregate annualized 
costs to about $54 million. In both cases, estimated aggregate costs 
per year fall substantially after five years as manufacturers would no 
longer need to recover their amortized costs.
    The annualized aggregate cost (no operating costs) of $1 million 
represents 0.17 percent of total annual shipbuilding industry revenues 
based on the 1997 value of shipments. Because the total annualized 
costs associated with complying the Tier 2 standards under 
consideration are a small percentage of total market revenues, it is 
unlikely that market prices or production will change as a result of 
these proposed rules. Furthermore, the total annualized costs 
associated with applying the reductions to all vessels is smaller; 
thus, we would still not anticipate appreciable changes in market 
prices or quantities to be associated with the standards under 
consideration.

C. What Are The Anticipated Emission Reductions of the Standards Under 
Consideration?

    The following discussion gives a brief overview of the methodology 
we used to determine the emissions reductions from Category 3 marine 
diesel engines associated with this proposed rule and alternatives we 
are considering. Chapter 6 of the Draft Regulatory Support Document 
provides a detailed explanation of the methodology and results. Section 
II of this preamble and Chapter 2 of the Draft Regulatory Support 
Document contain information about the health and welfare concerns 
associated with Category 3 marine diesel engine pollution.
    To model the emission reductions of the standards discussed in this 
Notice we applied an engine replacement schedule and the emissions 
standards to the baseline inventory. We also accounted for the MARPOL 
Annex VI NOX limits. Although these standards are not yet 
effective, they are being largely complied with around the world, and 
we expect this trend to continue. Thus, we are using the Annex VI 
limits as the baseline for purposes of showing the expected emissions 
reductions from the Tier 2 standards. Thus, we are assuming that all 
U.S. and foreign flagged vessels built after 1999 will comply with the 
Annex VI limits, and show the benefits of the Tier 2 standards relative 
to this baseline. We are only considering that the Tier 2 standards 
apply to U.S. flagged vessels. Thus, we only applied the expected 
emissions reductions from the Tier 2 standards to the portion of the 
national inventory attributable to U.S. flagged vessels. Also, because 
the HC and CO standards are intended only to prevent future increases 
in HC and CO emissions, and because we are not considering PM 
standards, we are claiming no emissions reductions in HC, CO or PM. 
Table VI.C-1 shows our estimates of Category 3 vessel NOX 
emissions with and without the Tier 2 standards, as well as the impact 
of the MARPOL Annex VI NOX limits.
    It is important to note that we only modeled the emissions 
reductions within 175 nautical miles of the U.S. coast. However, 
reductions from the Annex VI standards and the Tier 2 standards would 
also likely occur outside of 175 nautical miles of the U.S. coast. To 
the extent that vessels in compliance with these limits visit foreign 
ports some emissions reductions would likely be seen in those areas as 
well.

     Table VI.C-1.--Category 3 Marine Vessel NOX National Emissions
                               Inventories
------------------------------------------------------------------------
                                        1996     2010     2020     2030
------------------------------------------------------------------------
No control baseline (thousand short       190      303      439      659
 tons)..............................
MARPOL Annex VI:
    (thousand short tons)...........      190      274      367      531
    Percent reduction (relative to    .......     9.6%    16.2%    19.5%
     no control)....................
-------------------------------------
Tier 2:
    Control (thousand short tons)...      190      269      343      475
    Percent reduction (relative to    .......     2.0%     6.8%    10.5%
     MARPOL Annex VI)...............
------------------------------------------------------------------------

    As discussed in Section III, we are only proposing to apply the 
emissions standards to U.S. flagged vessels. The effect of applying the 
Tier 2 standards to both U.S. and foreign flagged vessels is shown in 
Table VI.C-2. As can be seen from this table, the projected emissions 
reductions from applying a second tier of standards would be 
substantially greater in 2030 if foreign flagged vessels were also to 
comply with such limits. EPA believes this information provides support 
for pursuing an international agreement to limit emissions to such 
levels in the context of additional reductions under MARPOL.

  Table VI.C-2.--Effect of Application of Tier 2 Emissions Standards Based on Vessel Flag (U.S. Flagged Vessels
                                                vs. All Vessels)
----------------------------------------------------------------------------------------------------------------
                                                         2020                                2030
                Scenario                 -----------------------------------------------------------------------
                                            NOX (1000 tons)     % reduction     NOX (1000 tons)     % reduction
----------------------------------------------------------------------------------------------------------------
Baseline (Annex VI).....................                 367  ..............                 531  ..............
U.S. Flagged Only.......................                 343             6.8                 475            10.5
All Vessels.............................                 306            16.7                 392            26.1
----------------------------------------------------------------------------------------------------------------


[[Page 37586]]

D. What is the Estimated Cost Per Ton of Pollutant Reduced for This 
Proposal and Alternatives We are Considering?

    We estimated the cost per ton of NOX reduction of the 
NOX emission standards discussed in this Notice. Chapter 7 
of the Draft Regulatory Support Document contains a more detailed 
discussion of the cost per ton analysis. The calculated cost per ton of 
the proposed emission standard presented here includes all of the 
anticipated effects on costs and emission reductions.
1. Tier 1 Cost Per Ton
    The proposed Tier 1 standards are equivalent to the MARPOL Annex VI 
standards. Because engines already comply with the MARPOL Annex VI 
standards, we not claiming any benefits or costs to meet the EPA 
proposed Tier 1 standards.
2. Tier 2 Cost Per Ton
    To determine the cost per ton of NOX reduction 
associated with the Tier 2 emission standards discussed in section 
IV.A.3, we only considered emissions reductions beyond those achieved 
by the MARPOL Annex VI standards. Table VI.D-1 presents the cost per 
ton of the Tier 2 standards discussed in this notice for U.S. flagged 
Category 3 marine engines. By weighting the projected cost and emission 
benefit numbers presented above by the populations, we also calculated 
the aggregate cost per ton of NOX reduced for Category 3. 
The net present value (NPV) of the costs and emissions reductions shown 
here are discounted at a rate of 7 percent per year. For comparison, 
estimates are also presented here for applying these standards to 
foreign flagged vessels as well. These cost per ton estimates are 
higher because only emission reductions within 175 nautical miles of 
the U.S. coast are considered and foreign flagged vessels have less of 
their operation near the U.S. than U.S. flagged vessels.

                       Table VI.D-1.--Cost Per Ton of the Marine Tier 2 Standards for NOX
----------------------------------------------------------------------------------------------------------------
                                      NPV benefits per     NPV operating     Engine & vessel    Discounted cost
        Model year grouping          ship (short tons)     costs per ship     costs per ship        per ton
----------------------------------------------------------------------------------------------------------------
                                      U.S. Flagged Vessels Only (proposed)
----------------------------------------------------------------------------------------------------------------
1 to 5                                            1,149            $66,000           $115,000               $145
-----------------------------------                                        --------------------
6+                                  ...................  .................             39,000                 87
-----------------------------------
                                  Foreign Flagged Vessels Only (for comparison)
----------------------------------------------------------------------------------------------------------------
1 to 5                                               45            $66,000            $57,000             $2,590
-----------------------------------                                        =====================================
-----------------------------------
                                          All Vessels (for comparison)
----------------------------------------------------------------------------------------------------------------
1 to 5                                               73             66,000             57,000              1,585
-----------------------------------                                        =====================================
----------------------------------------------------------------------------------------------------------------

    The costs and reductions presented in the above table are based on 
an 11,000 kW engine which, as discussed in Chapter 7 of the draft RSD, 
we believe represents the average sized engine visiting U.S. ports. An 
engine of this size would cost about $2.5 to 3.0 million. It would be 
used in a vessel which would cost about $100 to $200 million to 
construct. Therefore, the $180,000 cost estimate of engine improvements 
represents about 0.1 percent of the total vessel cost. All costs are in 
2002 dollars.
3. Comparison to Other Programs
    In an effort to evaluate the cost per ton of the NOX 
controls discussed above for Category 3 marine engines, we looked at 
the cost per ton for other recent EPA mobile source rulemakings that 
required reductions in NOX (or NMHC+NOX) 
emissions. Our final standards for Category 1 and 2 marine engines 
yielded a cost per ton of $24-$180 per ton of HC+NOX reduced 
(in 1997 dollars). In contrast, the 2007 standards for highway heavy-
duty engines yielded a cost per ton of approximately $1600-$2100 per 
ton of NMHC+NOX (in 1999 dollars). The rulemaking proposed 
in this document has a low cost-per-ton value compared with other 
mobile source programs. Chapter 7 presents additional cost-per-ton 
estimates for comparison with the Draft Regulatory Support Document.
E. What Are the Estimated Health and Environmental Benefits for This 
proposal?
    In addition to the benefits of reducing ozone within and 
transported into urban ozone nonattainment areas, the NOX 
reductions from the new standards are expected to have beneficial 
impacts with respect to crop damage from ozone reductions, secondary 
particulate formation, acid deposition, eutrophication, visibility, and 
the viability and diversity of species in forests. These effects are 
described in more detail in Section II-B and in Chapter 2 of the Draft 
Regulatory Support Document.
    We are not able to quantify or monetize the benefits at this time 
due to a lack of emissions inventories that would locate the emissions 
in specific ports, lack of appropriate national air quality modeling 
systems that can be used in marine settings, and lack of time to 
develop such techniques. However, to the extent that U.S.-flag Category 
3 marine vessels operate in a given port area, that area would benefit 
from significantly reduced emissions.

F. What Would Be the Impacts of a Low Sulfur Fuel Requirement?

    As discussed above in section IV, we are requesting comment on low 
sulfur fuel requirements. This analysis looks at two approaches to 
meeting a cap of 15,000 ppm S beginning in 2007. The first approach is 
to use a low sulfur marine distillate oil which would likely be a blend 
of residual fuel and distillate fuel. The second approach would be to 
use number 2 diesel fuel (3000 ppm S) such as used in land-based 
applications today. These two approaches provide a range of costs and 
benefits that could be

[[Page 37587]]

achieved by requiring the use of low sulfur fuel. For the purpose of 
this analysis, we only include the operation of ships within 175 
nautical miles of the U.S. coast which is where we believe emissions 
will have the most significant impact on U.S. air quality.
1. Cost and Economic Impacts
    Many ships are already equipped to operate on either distillate or 
residual fuel. Using any sort of distillate fuel for all operation near 
the U.S. coast could result in additional hardware costs. These costs 
would be for modifications to the fuel plumbing and storage associated 
with longer periods of operation on distillate fuel. The cost of using 
marine diesel oil would be about 60 percent higher than for the higher 
sulfur residual fuel. The cost of the number 2 diesel would be about 
twice the cost of operating on residual fuel. Table VI.F-1 presents the 
discounted lifetime costs for either using 15,000 ppm S or 3,000 ppm S 
fuel on all ships operating within 175 nautical miles of the U.S. 
coast. Chapter 5 of the Draft Regulatory Support Document develops the 
analysis of these cost estimates.

     Table VI.F-1.--Estimated Average Per Engine Cost Increases for
                         Alternative Approaches
------------------------------------------------------------------------
                                         Increased         Increased
             Fuel Used                Hardware Costs    Operating Costs
------------------------------------------------------------------------
15,000 ppm S residual fuel.........           $50,000           $139,000
3,000 ppm S distillate fuel........            50,000            273,000
------------------------------------------------------------------------

2. Environmental impacts
    For the 1.5 percent sulfur residual fuel scenario, our estimates of 
SOX and PM reductions are based strictly on the reduction of 
sulfur in the fuel from 27,000 to 15,000 ppm. In this case by itself, 
no NOX reductions are anticipated. Table VI.F-2 presents the 
emission reductions due to using this low sulfur fuel for all operation 
of U.S. and foreign vessels within 175 nautical miles of the U.S. 
coast. However, as discussed in section IV.D, there are some issues 
regarding how we might enforce such a fuel requirement for all 
operation within 175 nautical miles of the U.S. coast.

 Table VI.F-2.--Projected Category 3 Emissions Inventories for Switching
                          to 15,000 ppm S Fuel
------------------------------------------------------------------------
                                           1996    2010    2020    2030
------------------------------------------------------------------------
PM:
Baseline case (thousand short tons)         17.1    26.0    36.7    54.2
Control case (thousand short tons)          17.1    21.3    30.1    44.5
Reduction (thousand short tons)           ......     4.7     6.6     9.7
Percent reduction from baseline           ......      18      18      18
SOX:
Baseline case (thousand short tons)        156.2   192.8   271.2   399.7
Control case (thousand short tons)         156.2   108.0   151.9   223.9
Reduction (thousand short tons)           ......    84.8   119.3   175.8
Percent reduction from baseline           ......      44      44      44
------------------------------------------------------------------------

    For the 3,000 ppm fuel case, our estimates of SOX 
reductions are based on a reduction of sulfur in the fuel from 2.7 to 
0.3 percent. Our estimates of PM reductions are based on changes in 
several fuel components. We estimate that PM from a marine engine 
operating on residual fuel is made up of 45 percent sulfate, 25 percent 
carbon soot, 20 percent ash, and 10 percent soluble organic 
hydrocarbons. Reducing sulfur in the fuel would reduce direct sulfate 
PM by about 90 percent. In addition, if distillate fuel is used, the 
ash content and the density of the fuel would be reduced. This analysis 
results in a total per vessel PM reduction of 63 percent. Using 
residual fuel can lead to NOX increases due to nitrogen in 
the fuel. For this analysis we use a per vessel NOX 
reduction of ten percent based on a reduction of nitrogen in the fuel. 
Table VI.F-3 presents the potential SOX, PM, and 
NOX reductions from using distillate fuel for all Category 3 
vessel operations.

[[Page 37588]]



 Table VI.E-3.--Projected Category 3 Emissions Inventories for Switching
                           to 3,000 ppm S Fuel
------------------------------------------------------------------------
                                           1996    2010    2020    2030
------------------------------------------------------------------------
NOX:
Baseline case (Annex VI--thousand short    190.0   274.1   367.5   530.8
 tons)
Control case (thousand short tons)         190.0   246.7   330.7   477.7
Reduction (thousand short tons)           ......    27.4    36.8    51.3
Percent reduction from Annex VI baseline  ......      10      10      10
PM:
Baseline case (thousand short tons)         17.1    26.0    36.7    54.2
Control case (thousand short tons)          17.1     9.6    13.6    20.1
Reduction (thousand short tons)           ......    16.4    23.1    34.1
Percent reduction from baseline           ......      63      63      63
SOX:
Baseline case (thousand short tons)        156.2   192.8   271.2   399.7
Control case (thousand short tons)         156.2    21.2    29.8    44.0
Reduction (thousand short tons)           ......   171.6   241.4   355.7
Percent reduction from baseline           ......      89      89      89
------------------------------------------------------------------------

    The reductions of SOX and fine PM emissions from this 
alternative both within port and transported into urban areas are 
expected to have beneficial impacts with respect to PM-related cancer 
and non-cancer health effects, acid deposition, eutrophication, 
visibility. These effects are described in more detail in Section IIB 
and in Chapter 2 of the Draft Regulatory Support Document.
    We are not able to quantify or monetize the benefits at this time 
due to a lack of emissions inventories that would locate the emissions 
in specific ports, lack of appropriate national air quality modeling 
systems that can be used in marine settings, and lack of time to 
develop such techniques. Nevertheless, certain ports with high traffic 
in U.S. flagged Category 3 marine vessels could experience significant 
benefits from SOX and PM reductions.
3. Cost per ton
    We estimated the cost per ton of both 15,000 ppm sulfur residual 
fuel and 3,000 ppm sulfur distillate fuel. For this analysis, we 
consider operation of all ships within 175 nautical miles of the U.S. 
coast. In determining the cost per ton, we apportion the costs between 
reductions in PM and SOX emissions.
    One approach would be to apply all of the costs to PM and consider 
the SOX reductions to come at no additional cost; however, 
we recognize that there is benefit to reducing both PM and 
SOX. Therefore, we apply 10 percent of the cost to 
SOX reductions. If all the costs were applied to PM, the 
estimated $/ton for PM control would be about 10 percent higher than 
shown below. No costs are applied to NOX control, so a cost 
per ton value is not presented. We request comment on this partition of 
costs.

                          Table VI.F-4.--Cost Per Ton of a Low Sulfur Fuel Requirement
----------------------------------------------------------------------------------------------------------------
                                               NPV of total lifetime      NPV of tons reduced       Discounted
                 Pollutant                         costs per ship               per ship           cost per ton
----------------------------------------------------------------------------------------------------------------
                                                15,000 ppm sulfur
----------------------------------------------------------------------------------------------------------------
PM.........................................                   $170,000                      4.3          $38,000
SOX........................................                     19,000                       61              302
--------------------------------------------
                                                3,000 ppm sulfur
----------------------------------------------------------------------------------------------------------------
PM.........................................                   $291,000                      8.7          $33,000
SOX........................................                    $32,000                      121              262
----------------------------------------------------------------------------------------------------------------

VII. Other Approaches We Considered

A. Standards Considered

    Earlier in this preamble we discuss two tiers of standards for new 
Category 3 marine engines. The first tier is equivalent to the MARPOL 
Annex VI NOX limits to which manufacturers have recently 
begun designing their engines. The second tier is 30 percent below this 
Tier 1 limit; we anticipate that this standard can be met relatively 
soon using in-cylinder controls. This section discusses two other 
approaches we considered when developing this proposal and presents our 
analysis of the feasibility and impacts of setting such standards. We 
considered alternative NOX emission standards 50 and 80 
percent below Annex VI levels. Under either of these scenarios, 
additional lead time beyond 2007 may be necessary; however, in this 
discussion, we consider a 2007 implementation date for our analysis of 
the alternative approaches so that a direct comparison can be made to 
the Tier 2 standard under consideration. Our analysis of alternative 
approaches applies equally to U.S. and foreign vessels. Also, if we 
were to adopt either of these alternative standards, all the provisions 
for certifying engines described in Section V would apply. However, as 
described below, we believe it is not appropriate to set standards for 
Category 3 marine engines based on these approaches at this time, due 
to remaining technological and operational issues. However, we may 
consider these approaches as the basis of new standards in the future.
1. NOX Level 50 Percent Below Tier 1
    One alternative that we are considering is an emission level one-
half of the MARPOL limits. We believe reductions on this order could be 
achieved by introducing water into the combustion process. Water can be 
used in the combustion process to lower

[[Page 37589]]

maximum combustion temperature, and therefore lower NOX 
formation, with an insignificant increase in fuel consumption. Water 
has a high heat capacity, which allows it to absorb enough of the 
energy in the cylinder to reduce peak combustion temperatures. Data 
presented below and in Chapter 8 of the Draft Regulatory Support 
Document suggest that a 30 to 80 percent NOX reduction can 
be achieved depending on ratio of water to fuel and on the method of 
introducing water into the combustion chamber. This data is primarily 
based on developmental engines; however, given enough lead time, we 
believe that introducing water into the combustion process may become 
an effective emission control strategy.
    Water may be introduced into the combustion process through 
emulsification with the fuel, direct injection into the combustion 
chamber, or saturating the intake air. Water emulsification refers to 
mixing the fuel and water prior to injection. This strategy is limited 
due to instability of suspending water in fuel. To increase the 
effective stability, a system can be used that emulsifies the water 
into the fuel just before injection. Another option is to stratify the 
fuel and water through a single injector. The Draft Regulatory Support 
Document presents data on these approaches showing a 30-40 percent 
reduction in NOX with water fuel ratios ranging from 0.3 to 
0.4.
    More effective control of the water injection process can be 
achieved through the use of an independent nozzle for water. Using a 
separate injector nozzle for the water allows larger amounts of water 
to be added to the combustion process because the water is injected 
simultaneously with the fuel, and larger injection pumps and nozzles 
can be used for the water injection. In addition, the fuel injection 
timing and the amount of water injected can be better optimized. Data 
presented in the Draft Regulatory Support Document show NOX 
reductions of 40 to 70 percent with water-to-fuel ratios ranging from 
0.5 to 0.9 if a separate nozzle is used for injecting water.
    Other strategies for introducing water into the combustion process 
are being developed that will allow much higher water to fuel ratios. 
These strategies include combustion air humidification and steam 
injection. With combustion air humidification, a water nozzle is placed 
in the engine intake and an air heater is used to offset condensation. 
With steam injection, waste heat is used to vaporize water which is 
then injected into the combustion chamber during the compression 
stroke. Data on initial testing, presented in the Draft Regulatory 
Support Document, show NOX reductions of more than 80 
percent with water to fuel ratios as high as 3.5.
    Fresh water is necessary for any of these water-based 
NOX-reduction strategies. Introducing salt water into the 
engine could result in serious deterioration due to corrosion and 
fouling. For this reason, a ship using water strategies would need to 
either produce fresh water through the use of a desalination or 
distillation system or store fresh water on board. Cruise ships may 
already have a source of fresh water that could be used to enable this 
technology. This water source is the ``gray'' water, such as drainage 
from showers, which could be filtered for use in the engine. However, 
the use of gray water would have to be tested on these engines, and 
systems would have to be devised to ensure proper filtering. For 
example, it would be necessary to ensure that no toxic wastes are 
introduced into the gray waste-water stream. One manufacturer stated 
that today's ships operating with direct water injection carry the 
amount needed to operate the system between ports (two to four days). 
Also, when and where a ship operates can have an effect on the 
available water. A ship operating in cold weather uses all of the 
available steam heated by the exhaust just to heat the fuel. Also, a 
ship operating in an area with low humidity would not be able to 
condense water out of the air using the jacket water aftercooler.
    Depending on the amount of water necessary, other vessels that use 
Category 3 marine engines may not be able to generate sufficient 
amounts of gray water for this technology. These ships would have to 
carry the water or be outfitted with new or larger distillation 
systems. Both of these options would displace cargo space. Finally, it 
should be noted that vessels that are currently equipped with water-
based NOX reduction technologies are four-stroke engines and 
include fast ferries, cruise ships and cargo ships. The specific 
vessels travel relatively short distances between stops and need a much 
smaller volume of fresh water for a trip than would be required for 
crossing an ocean. More information is needed regarding operation on 
ocean-going vessels before this technology could be used as the basis 
for a NOX emission standard. If the ships were only to use 
this technology traveling from 175 nautical miles of the U.S. coast to 
port, less water storage capacity would be needed than if the ship used 
this NOX reduction strategy at all times. However, ships 
operating primarily within 175 nautical miles of the U.S. coast would 
need to be able to carry a volume of water of about one-half the volume 
of fuel they carry if they wish to keep the same refueling schedule. 
Ships making long runs, such as from California to Alaska, would have 
to be able to store enough water for that trip even if they make it 
infrequently. Lastly, if this technology were applied to two-stroke 
engines there may be lubricity concerns with the cylinder liner. One 
manufacturer is developing a strategy to use DWI with EGR to minimize 
water requirements on such engines.
    Durability issues may be a concern with water emulsification or 
injection systems. For onboard water emulsifying units, cavitation is 
used to atomize the water and mix it into the fuel. Although this works 
well at emulsifying the fuel, the water can cause significant wear of 
the injection pump. For water injection systems, high pressure water is 
injected similar to in a fuel injector. However, water does not have 
the inherent lubrication properties found in fuel. Therefore, more 
research may be necessary on more durable materials.
    Another concern with the use of water in the combustion process is 
the effect on PM emissions. The water in the cylinder reduces 
NOX, which is formed at high temperatures, by reducing the 
temperature in the cylinder during combustion. However, PM oxidation is 
most efficient at high temperatures. At this time, we do not have 
sufficient information on the effect of water emulsification and 
injection strategies on PM emissions to quantify this effect. We 
request information on the effect of using water in the combustion 
process on PM emissions.
    For these reasons we believe it is premature to set a standard 
based on water-based technologies at this time. We request comment on 
this approach.
2. NOX Level 80 Percent Below Tier 1
    The other alternative we are considering for the Tier 2 standard is 
an emission level 80 percent below the MARPOL limits. We believe 
reductions of this order could be achieved through the use of selective 
catalytic reduction. Selective catalytic reduction (SCR) is one of the 
most effective means of reducing NOX from large diesel 
engines. In SCR systems, a reducing agent, such as ammonia, is injected 
into the exhaust and both are channeled through a catalyst where 
NOX emissions are reduced. As discussed in the draft RSD, 
SCR can be used to reduce NOX emissions by more than 90 
percent at exhaust temperatures above 300[deg]C. These systems are 
being successfully used for stationary source applications, which 
operate under constant, high load

[[Page 37590]]

conditions. These systems are also being used in Category 3 engines 
used on ferries and cruise ships where they operate largely at high 
loads and over short distances so exhaust temperature and urea storage 
are not primary issues.
    Several issues exist before application of this technology to all 
Category 3 engines can be deemed feasible. Issues include temperature 
at low load for SCR effectiveness, use of low sulfur fuel for system 
durability, space required for the SCR unit and urea storage, 
availability of regular down time for repair, availability of urea at 
ports, and application to slow-speed engines.
    SCR systems available today are effective only over a narrow range 
of exhaust temperatures (above 300[deg]C). To date, these systems have 
primarily been applied to four-stroke medium speed engines which have 
exhaust temperatures above 300[deg]C at least at high load. Two-stroke 
slow speed engines have lower exhaust temperatures and are discussed 
later. The effectiveness of the SCR system is decreased at reduced 
temperatures exhibited during engine operation at partial loads. Most 
of the engine operation in and near commercial ports and waterways 
close to shore is likely to be at these partial loads. In fact, reduced 
speed zones can be as large as 100 miles for some ports. Because of the 
cubic relationship between ship speed and engine power required, 
engines may operate at less than 25 percent power in a reduced speed 
zone. During this low load operation, no NOX reduction would 
be expected, therefore SCR would be less effective than the proposed 
Tier 2 standards during low load operation near ports. Some additional 
heat to the SCR unit can be gained by placing the reactor upstream of 
the turbocharger; however, this temperature increase would not be large 
at low loads and the volume of the reactor would diminish turbocharger 
response when the engine changes load. The engine could be calibrated 
to have higher exhaust temperatures; however this could affect 
durability (depending on the fuel used) if this calibration also 
increased temperatures at high loads. For an engine operating on 
residual fuel, vanadium in the fuel can react with the valves at higher 
temperatures and damage the valves.
    SCR systems traditionally have required a significant amount of 
space on a vessel; in some cases the SCR was as large as the engine 
itself. However, at least one manufacturer is developing a compact 
system which uses an oxidation catalyst upstream of the reactor to 
convert some NO to NO2 thus reducing the reactor size 
necessary. The reactor size is reduced because the NO2 can 
be reduced without slowing the reduction of NO. Therefore, the 
catalytic reaction is faster because NOX is being reduced 
through two mechanisms. This compact SCR unit is designed to fit into 
the space already used by the silencer in the exhaust system. If 
designed correctly, this could also be used to allow the SCR unit to 
operate effectively at somewhat lower exhaust temperatures. The 
oxidation catalyst and engine calibration would need to be optimized to 
convert NO to NO2 without significant conversion of S to 
direct sulfate PM. NOX reductions of 85 to 95 percent have 
been demonstrated with an extraordinary sound attenuation of 25 to 35 
dB(A).\56\
---------------------------------------------------------------------------

    \56\ Paro, D., ``Effective, Evolving, and Envisaged Emission 
Control Technologies for Marine Propulsion Engines,'' presentation 
from Wartsila to EPA on September 6, 2001.
---------------------------------------------------------------------------

    Information from one manufacturer who has 40 installations of SCR 
reveals that the engines using the technology are either using low 
sulfur residual fuel (0.5%-1% S) or distillate fuel. Low sulfur 
residual fuel is available in areas which provide incentives for using 
such fuel, including the Baltic Sea, however such fuel is not yet 
available at ports throughout the United States. However, distillate 
fuel is available. Low sulfur fuel is necessary to assure the 
durability of the SCR system because sulfur can become trapped in the 
active catalyst sites and reduce the effectiveness of the catalyst. 
This is known as sulfur poisoning which can require additional 
maintenance of the system. The operation characteristics of ocean going 
vessels may interfere with correct maintenance of the SCR system. 
Ferries which have incorporated this technology to date do not run 
continuously and therefore any maintenance necessary can be performed 
during regular down times. The availability of time for repair can be 
an issue for ocean going vessels for they do not have regular down 
times.
    Sulfur in fuel is also a concern with an oxidation catalyst 
because, under the right conditions, sulfur can also be oxidized to 
form direct sulfate PM. At higher temperatures, up to 20 percent of the 
sulfur could be converted to direct sulfate PM in an oxidation catalyst 
compared to about a 2 percent conversion rate for a typical diesel 
engine without aftertreatment. Depending on the precious metals used in 
the SCR unit, it could be possible to convert some sulfur to direct 
sulfate PM in the reactor as well. Manufacturers would have to design 
their exhaust system (and engine calibration) such that temperatures 
would be high enough to have good conversion of NO, but low enough to 
minimize conversion of S to direct sulfate PM. Direct sulfate PM 
emissions could be reduced by using lower sulfur fuel such as 
distillate.
    A vessel using a SCR system would also require an additional tank 
to store ammonia (or urea to form ammonia). This storage tank would be 
sized based on the vessel use, but could be large for a vessel that 
travels long distances in U.S. waters between refueling such as between 
California and Alaska. The urea consumption results in increased 
operating costs. Also, if lower sulfur diesel fuel were required to 
ensure the durability of the SCR system or to minimize direct sulfate 
PM emissions, this lower sulfur fuel would increase operating costs. 
For SCR to be effective, an infrastructure would be necessary to ensure 
that ships could refuel at ports they visit. We believe that it would 
take some time to set up a system for getting fuel to ships that fill 
up using barges, especially if the standard were only to apply to U.S. 
flagged ships due to the low production volume. In addition, a ship 
that operates outside the U.S. for several months (or years) would have 
to ensure that it has urea available for any visits to U.S. ports.
    Because SCR units are so easily adjustable, ship operators may 
choose to turn off the SCR unit when not operating near the U.S. coast. 
If they were to use this approach, they would need to construct a 
bypass in the exhaust to prevent deterioration of the SCR unit when not 
in use. To ensure that the SCR system is operating properly within 175 
nautical miles of the U.S. coast, we would need to consider continuous 
monitoring of NOX emissions for engines using SCR. 
Discussions of equipment and procedures for continuous monitoring are 
currently under discussion by IMO in the context of Annex VI.
    If the combustion is not carefully controlled, some of the ammonia 
can pass through the combustion process and be emitted as a pollutant. 
This is less of an issue for Category 3 marine engines, which generally 
operate under steady-state conditions, than for other mobile-source 
applications. In addition, in ships where banks of engines are used to 
drive power generators, such as cruise ships, the engines generally 
operate under steady-state conditions near full load. If ammonia slip 
still occurred, an oxidation could be used downstream of the reactor to 
burn off the excess ammonia.
    Slow-speed marine engines generally have even lower exhaust 
temperatures than medium speed engines due to their

[[Page 37591]]

two-stroke design. However, we are aware of four slow-speed Category 3 
marine engines that have been successfully equipped with SCR units. 
Because of the low exhaust temperatures, the SCR unit is placed 
upstream of the turbocharger to expose the catalyst to the maximum 
exhaust heat. Also, the catalyst design required to operate at low 
temperatures is very sensitive to sulfur. Especially at the lower 
loads, the catalyst is easily poisoned by ammonium sulfate that forms 
due to the sulfur in the fuel. To minimize this poisoning on these four 
in-service engines, highway diesel fuel (0.05% S) is required. In 
addition, these ships only operate with the exhaust routed through the 
SCR unit when they enter port in the U.S. which is about 12 hours of 
operation every 2 months. Therefore, the sulfur loading on the catalyst 
is much lower than it would be for a vessel that continuously used the 
SCR system. To prevent damage to the catalyst due to water 
condensation, this system needs to be warmed up and cooled down 
gradually using external heating. Another issue associated with the 
larger slow-speed engines and lower exhaust temperatures is that a much 
larger SCR system would be necessary than for a vessel using a smaller 
medium-speed engine. Size is an issue because of the limited space on 
most ships.
    We believe that more time is necessary to resolve the issues 
discussed above for the application of SCR to Category 3 marine 
engines. Therefore, we are not proposing to set a standard at this time 
that would require the use of a SCR system. However, given enough lead 
time, we believe that manufacturers will be able to refine their 
designs for efficiency, compactness, and cost. Therefore, we believe 
that SCR may be available for widespread application with Category 3 
marine engines in the future, and we intend to consider this technology 
if or when we propose additional standards in the future. We are also 
including this technology in our Blue Cruise program because of the 
potential large NOX reductions and because this technology 
may be an attractive NOX control strategy for cruise ship 
which use banks of engines generally operating at high load. Because 
cruise ships make frequent stops on regular routes, they should be able 
to coordinate a workable urea supply strategy. We request comment on 
using SCR technology on ocean-going vessels and on setting voluntary 
standards based on SCR technology.
    A second approach for meeting an 80 percent reduction in 
NOX emissions would be to use fuel cells to power the vessel 
in place of an internal combustion engine. A fuel cell is like a 
battery except where batteries store electricity, a fuel cell generates 
electricity. The electro-chemical reaction taking place between two 
gases, hydrogen and oxygen generate the electricity from the fuel cell. 
The key to the energy generated in a fuel cell is that the hydrogen-
oxygen reaction can be intercepted to capture small amounts of 
electricity. The byproduct of this reaction is the formation of water. 
Current challenges include the storage or formation of hydrogen for use 
in the fuel cell and cost of the catalyst used within the fuel cell.
    Over the past 5 years several efforts to apply fuel cells to marine 
applications have been conducted. These include grants from the Office 
of Naval Research and the U.S. Navy. The Office of Naval Research 
initiated a three-phase advanced development program to evaluate fuel 
cell technology for ship service power requirements for surface 
combatants in 1997. In early 2000, the U.S. Navy sponsored an effort to 
continue the development of the molten carbonate fuel cell for marine 
use. The Society of Naval Architects and Marine Engineers released the 
technical report ``An Evaluation of Fuel Cells for Commercial Ship 
Applications.'' The report examines fuel cells for application in 
commercial ships of all types for electricity generation for ship 
services and for propulsion.
    Fuel cell research is currently supported by several sources, 
including the U.S. Maritime Administration (MARAD) and the state of 
California's Fuel Cell Partnership. MARAD's Division of Advanced 
Technology has also included the topic of fuel cells as a low air 
emission technology that should be demonstrated. California's Fuel Cell 
Partnership seeks to achieve four main goals which include (1) 
Demonstrate vehicle technology by operating and testing the vehicles 
under real-world conditions in California; (2) Demonstrate the 
viability of alternative fuel infrastructure technology, including 
hydrogen and methanol stations; (3) Explore the path to 
commercialization, from identifying potential problems to developing 
solutions; and (4) Increase public awareness and enhance opinion about 
fuel cell electric vehicles, preparing the market for 
commercialization.
    At this time, we consider fuel cell technology still be in the 
early stages of development. We recognize that a mature fuel cell 
system could have significant environmental benefits and we will 
consider this technology in the future. We request comment on the 
feasibility of using fuel cells for power on marine vessels.

B. Potential Impacts of the Regulatory Alternatives

1. Costs
    The following analysis presents estimated cost increases for 
Category 3 marine engines and vessels that would be associated with the 
alternative standards (see Table VII.B-1). This cost analysis follows 
the same methodology outlined above (VI.B) and described in more detail 
in the Draft Regulatory Support Document. For the 50 percent below Tier 
1 case, hardware costs include water injectors, plumbing, and water 
storage. Operating costs include water and a small fuel oil consumption 
penalty. For the 80 percent below Tier 1 case, hardware costs include 
the cost of the SCR unit and operating costs include the cost of the 
urea. In the analysis of these two scenarios, we only include the 
operation of ships where we believe emissions will have the most 
significant impact on U.S. air quality. The entire increased production 
cost is therefore included, but the increased operating costs are only 
considered for operation within 175 nautical miles of the U.S. coast. 
These costs are based on year 1 (no learning curve adjustment) and are 
discounted at a rate of seven percent to present the net present value.
    Table VII.B-1 presents our cost estimates for applying the 
standards to U.S. flagged vessels only and for applying the standards 
to all vessels operating within 175 nautical miles of the U.S. coast. 
When applying the costs to all vessels, the production costs decrease 
because the development costs are spread among more engines; operating 
costs decrease because the average vessel spends less time operating 
near the U.S. coast than the average U.S. flagged vessel. For water 
injection, the operating costs include the effective cost of the water. 
For SCR, the operating costs include urea consumption as well as ship 
operation on 0.05 percent sulfur fuel. These costs are for an average 
sized Category 3 marine engine which would cost about 2.5 to 3.0 
million dollars. For the 50 percent below Tier 1 case, the increased 
production costs range from 3 to 6 percent of the cost of the engine. 
For the 80 percent below Tier 1 case, the increased production costs 
range from 20 to 25 percent of the cost of the engine.

[[Page 37592]]



             Table VII.B-1.--Estimated Average Cost Increase Per Ship for Alternative NOX Standards
----------------------------------------------------------------------------------------------------------------
                                                       Increased production costs     Increased operating costs
                Alternative standard                     per ship (thousand $)          per ship (thousand $)
----------------------------------------------------------------------------------------------------------------
                                             US Flagged Vessels Only
----------------------------------------------------------------------------------------------------------------
50% below Tier 1...................................                           $207                          $527
80% below Tier 1...................................                          1,014                         9,542
----------------------------------------------------
                                          Foreign Flagged Vessels Only
----------------------------------------------------------------------------------------------------------------
50% below Tier 1...................................                            137                            84
80% below Tier 1...................................                            972                           410
----------------------------------------------------
                                                   All Vessels
----------------------------------------------------------------------------------------------------------------
50% below Tier 1...................................                            137                            95
80% below Tier 1...................................                            972                           629
----------------------------------------------------------------------------------------------------------------

2. Reductions
    We use the same methodology to model emissions inventories for the 
alternative approaches as we used for the proposed Tier 2 standards. 
This is outlined earlier in the preamble (VI.B) and described in more 
detail in the Draft Regulatory Support Document. Table VII.B-2 presents 
our estimates of Category 3 vessel emission reductions possible through 
the alternative standards applied only to U.S. flagged vessels. Table 
VII.B-3 presents our estimates of Category 3 vessel emission reductions 
possible through the alternative standards applied to all Category 3 
vessels. As for the cost analysis, we only include operation within 175 
nautical miles of the U.S. coast, so only the emission reductions in 
that area are presented below.

   Table VII.B-2.--Projected Category 3 NOX Reductions for Alternative
               Approaches Applied to U.S. Flagged Vessels
------------------------------------------------------------------------
                                        1996     2010     2020     2030
------------------------------------------------------------------------
Tier 1
Control case (thousand short tons)..    190.0    274.1    367.5    530.8
50% below Tier 1:
    Control case (thousand short        190.0    265.6    326.8    439.1
     tons)..........................
    Percent reduction from Tier 1...  .......      3.1     11.1     17.3
80% below Tier 1:
    Control case (thousand short        190.0    260.4    301.9    382.9
     tons)..........................
    Percent reduction from Tier 1...  .......      5.0     17.8     27.9
------------------------------------------------------------------------


   Table VII.B-3.--Projected Category 3 NOX Reductions for Alternative
                    Approaches Applied to All Vessels
------------------------------------------------------------------------
                                        1996     2010     2020     2030
------------------------------------------------------------------------
Tier 1
Control case (thousand short tons)..    190.0    274.1    367.5    530.8
50% below Tier 1:
    Control case (thousand short        190.0    260.7    276.9    311.2
     tons)..........................
    Percent reduction from Tier 1...  .......      4.9     24.7     41.4
80% below Tier 1:
    Control case (thousand short        190.0    252.5    221.4    176.7
     tons)..........................
    Percent reduction from Tier 1...  .......      7.9     39.8     66.7
------------------------------------------------------------------------

3. Cost per ton
    To determine the cost per ton of NOX reduction of the 
Tier 2 emission standards described in this notice, we considered only 
benefits beyond those achieved by the Tier 1 standards (equivalent to 
the Annex VI standards). Although the Annex VI standards are not yet 
effective, manufacturers around the world are generally producing 
compliant engines and we expect this to continue. Thus, we are using 
the proposed Tier 1 standards as the baseline, and showing the benefits 
of the Tier 2 standards under consideration relative to this baseline. 
Table VII.B-4 presents the cost per ton of the alternative standards 
using the same methodology discussed for the potential Tier 2 standards 
above. For this analysis, we considered all costs incurred and emission 
reductions achieved within 175 nautical miles of the U.S. coast. The 
cost estimates presented here do not include future reductions in cost 
due to the learning curve. Both costs and benefits are discounted at a 
rate of seven percent.
    In addition, this analysis presents estimates both for applying the 
alternative standards just to U.S. flagged and for applying the 
alternative NOX standards to all vessels operating in U.S. 
waters. By including foreign flagged vessels under these alternative 
approaches, the cost per engine decreases because the development costs 
can be distributed across more engines. However, the cost per ton 
actually increases because U.S. flagged

[[Page 37593]]

vessels spend about 16 times more of their operating time within 175 
nautical miles of the U.S. coast than foreign flagged vessels. 
Therefore, the tons of NOX reduced per year in U.S. waters 
for an average foreign flagged vessel (which make up about 97 percent 
of the vessels) are lower. Operating costs included in this analysis 
would still be proportional to the amount of time the ship operates 
within 175 nautical miles of the U.S. coast.

 Table VII.B-4.--Cost Per Ton of the Alternative NOX Control Approaches
------------------------------------------------------------------------
                                   NPV of
                                   total
                                  lifetime   NPV of   Discounted
            Approach               costs    NOX tons   cost per
                                 (thousand   reduced      ton
                                   $) per   per ship
                                    ship
----------------------------------------------------------------
                     US Flagged Vessels Only
-----------------------------------------------------------------
50% below Tier 1...............       $734     1,915       $370
80% below Tier 1...............     10,557     3,064      3,405
--------------------------------
                  Foreign Flagged Vessels Only
-----------------------------------------------------------------
50% below Tier 1...............        220        75      2,737
80% below Tier 1...............      1,381       119     10,607
--------------------------------
                           All Vessels
-----------------------------------------------------------------
50% below Tier 1...............        232       122      1,768
80% below Tier 1...............      1,601       195      7,618
------------------------------------------------------------------------

C. Summary

    We considered two alternative approaches to a Tier 2 NOX 
standard, namely a 50 or 80 percent reduction below Tier 1.
    For a 50-percent reduction, we considered water injection with 0.5 
water to fuel ratio. At the present time, the cost per ton for the 
water injection system ranges from $370 to $1,768 depending on if it 
applies to U.S. flagged vessels only or all vessels operating within 
175 nautical miles of the U.S. coast. This analysis does not consider 
the lost space on a vessel due to water storage, nor does it consider 
the alternative of adding water distillation boilers which would add 
cost to the vessel, require space, and require additional fuel 
consumption. Water storage would either displace fuel storage and 
reduce the range of the vessel or reduce cargo space which would affect 
the money generated per cruise. In addition, more information is 
necessary on the effects of this technology on PM emissions. Because 
the water reduces the temperature in the combustion chamber, we are 
concerned that this could result in an increase in PM. Although this 
technology may be more attractive in the future, we are not focused on 
considering standards at this level at this time due to the water 
storage issues as well as the development time of advances in this 
technology to address lubricity concerns in the cylinder liners of two-
stroke engines.
    For the 80 percent NOX reduction case, we considered the 
use of selective catalytic reduction with a urea consumption rate of 
about 8 percent of the fuel consumption rate. Our estimated cost per 
ton for this approach ranges from $3,405 to $7,618 depending on if it 
applies to U.S. flagged vessels only or all vessels operating within 
175 nautical miles of the U.S. coast. This is considerably higher than 
the cost per ton figures for the recent mobile source programs 
presented in Chapter 7 of the Draft RSD. The cost per ton estimate for 
the use of SCR includes the cost of using lower sulfur fuel which we 
believe would be necessary for the durability of the system and to 
prevent increases in direct sulfate PM. In the future, however, 
technological advances increase the effectiveness of these units at 
lower temperatures and may reduce the cost of this system.
    For SCR to be effective, an infrastructure would be necessary to 
ensure that ships could refuel at ports they visit. We believe that it 
would take some time to set up a system for getting fuel to ships that 
fill up using barges, especially if the standard were only to apply to 
U.S. flagged ships due to the low production volume. SCR would require 
space for urea storage, but it would likely be much less than that for 
water storage in the above approach because the volume of urea needed 
is only 5-10 percent of the volume of water needed for the water 
injection case considered above. In addition, at least one manufacturer 
is developing a compact SCR unit that will minimize the space needed 
for this system. We also believe that there are technical issues that 
need to be resolved such as effectiveness at low loads and the effect 
of the catalyst in the exhaust on direct sulfate PM emissions. As with 
water injection, we believe SCR may be appropriate for certain 
applications, but also believe that the remaining technology 
development and system cost prevent us from expecting manufacturers to 
apply SCR to all Category 3 marine engines at this time. We are 
therefore proposing to designate 80-percent reductions as a target for 
recognition as voluntary low-emission engines, rather than considering 
mandatory standards based on this technology.

D. Speed-based vs. Displacement-based Emission Standards

    Annex VI specifies the NOX emission standard as a 
function of engine speed. The shape of this curve was established with 
a mathematical relationship based on available emission data showing 
uncontrolled NOX emission rates as a function of maximum 
engine speed. The numerical level of the standard was set based on a 
fixed percentage reduction relative to uncontrolled emission levels. 
The shape of the curve generally allows for higher emissions from 
larger engines, which tend to operate at slower speeds. On the other 
hand, a given percentage reduction for all engine sizes yields greater 
brake-specific emission reductions from larger engines, with greater 
percentage reductions flattening the curve.
    This speed-based approach to setting standards has several 
advantages. It reflects the inherent tendency of larger (and slower-
speed) engines to have higher NOX-formation rates. It 
correspondingly reflects the challenges facing the design engineer to 
apply technology to reduce emissions. While maximum engine speeds can 
vary somewhat for a given engine, this parameter provides an effective 
correlation to an engine's emissions behavior. This is borne out by the 
emission data showing the trend of emissions as a function of engine 
speed on which the Annex VI NOX curve is based. Also, 
defining the emission standard as a formula instead of setting 
different standards for discrete ranges prevents any complications 
related to step changes in the standard at any particular engine speed.
    While we believe it is appropriate for the emission standards to be 
consistent with the Annex VI formula, this approach raises two issues 
that may become significant in the future. First, maximum engine speed 
is a design variable that can be set by the manufacturer based on an 
engine's particular application or a shipowner's preference. Under the 
speed-based formula, a manufacturer selling two otherwise identical 
engines may install them in different vessels that call for differing 
engine-speed ratings, which would allow the manufacturer to produce the 
engines to operate at different emission levels. For a given engine, 
it's not clear that emission standards should allow a higher emission 
level for engine installations

[[Page 37594]]

that call for a lower speed rating. Table VII.D-1 shows the effect of 
speed rating on the applicable emission standard for selected engine 
models that are currently available. For some engines, varying engine 
speed causes a difference in the NOX standard of over 0.5 g/
kW-hr.

                Table VII.D-1.--Effect of Engine Speed on Emission Standards for Selected Engines
----------------------------------------------------------------------------------------------------------------
                                      Speed 1     Standard 1    Speed 2     Standard 2   Difference    Percent
              Engine                   (rpm)      (g/kW-hr)      (rpm)      (g/kW-hr)    (g/kW-hr)     increase
----------------------------------------------------------------------------------------------------------------
1.................................          111     /1/ 17.0          148         16.6          0.4          2.6
2.................................          132         16.9          176         16.0          0.9          5.9
3.................................          212         15.4          250         14.9          0.5          3.4
4.................................          330         14.1          360         13.9          0.2          1.8
5.................................          720         12.1         1000         11.3          0.8         6.8
----------------------------------------------------------------------------------------------------------------
\1\ The NOX formula would allow for emissions up to 17.5 g/kW-hr for an engine speed of 111 rpm, but Annex VI
  caps the NOX standard at 17 g/kW-hr for engines with rated speed below 130 rpm.

    The second concern with a speed-based emission standard is that 
future emission-control technologies may allow for more effective 
control of NOX emissions at slow engine speeds. This would 
allow for a ``flatter'' NOX curve, or even a single 
NOX standard that would apply for all Category 3 engines, 
regardless of speed rating. It would not be appropriate to allow for 
higher emissions on low-speed engines if an emission-control technology 
enables a flatter relationship between NOX emissions and 
engine speed. This will become especially important if or when there is 
a need to adopt PM emission standards, since PM emissions are unlikely 
to follow the same relationship to engine speed as NOX 
emissions.
    The alternative approach to defining emission standards would be to 
follow the approach in EPA's December 1999 rulemaking for Category 1 
and Category 2 marine engines. Defining emission standards based on an 
engine's specific displacement (in liters per cylinder) would provide a 
clear and discrete emission standard for each engine. Table VII.D-2 
shows a variety of typical engine sizes and engine-speed values 
correlated with the Tier 2 NOX standards discussed in 
section IV.A.3 that would apply to each engine. A straightforward 
regression of specific displacement values and the Tier 2 
NOX levels shows a good correlation using the following 
simple formula:

NOX = 0.0047 x (L/cyl) + 9.9

    The calculated value using this formula is within 0.1 g/kW-hr 
across the range of engines shown in Table IV.D-2. Most two-stroke 
engines operate at less than 130 rpm and are therefore subject to the 
capped standard that doesn't vary with engine speed. The table 
therefore includes no two-stroke engines. Many of these slow-speed 
engines, however, have specific displacements between 100 and 300 L/
cyl. To implement a displacement-based standard that parallels the 
Annex VI approach, we would need to apply a cap of 13.3 g/kW-hr on the 
Tier 2 emission standards under consideration for two-stroke (or slow-
speed) engines over 700 L/cyl, while using the above equation to define 
the emission standard for smaller engines. On the other hand, it may be 
more appropriate to adopt standards reflecting the relative power 
output of the slow-speed engines. Slow-speed engines generally produce 
about half as much power as medium-speed engines for a given 
displacement, so we could set comparable standards by using the 
displacement-based formula above, but dividing the displacement term by 
two for slow-speed engines. This would take into account the lower 
specific power from slow-speed engines, resulting in comparable 
standards for competing engines with similar total power output.

                        Table VII.D.-2 Values Related to Displacement-Based Standards \1\
----------------------------------------------------------------------------------------------------------------
                                                                                                      Tier 2
                                                                   Per-cylinder                      standard
                  Engine model                     Engine speed    displacement       Tier 2           using
                                                       (rpm)            (L)          standard      displacement
                                                                                                      formula
----------------------------------------------------------------------------------------------------------------
Niigata 34HX....................................             600              41            10.2            10.1
MAN B&W L48/60..................................             514             109            10.4            10.4
MAN B&W PC4.2B..................................             430             168            10.8            10.7
W[auml]rtsil[auml] 64...........................             400             225            10.9            11.0
W[auml]rtsil[auml] 64 (longer stroke)...........             330             290            11.3            11.3
                                                             130         \2\ 700            13.3       \2\ 13.2
----------------------------------------------------------------------------------------------------------------
\1\ Source: Diesel and Gas Turbine Worldwide Catalog, 2001.
\2\ Extrapolation.

    The near-term adoption of emission standards equivalent to the 
Annex VI standards would not allow for restructuring emission standards 
based on displacement. It is also not clear that the advantages of 
displacement-based standards would warrant departing from the approach 
established internationally in the near term. We request comment on the 
appropriateness of adopting a displacement-based NOX 
standard. We also request comment regarding the above formula and table 
of values and their use in establishing Tier 2 NOX 
standards. We specifically request comment on whether the projected 
Tier 2 emission-control technologies would be expected to follow the 
trends implicit in the Annex VI formula. Finally, we request comment on 
the appropriateness of basing emission standards for two-stroke engines 
on engine speed (with standards set at the maximum value) or whether 
they should be expected to achieve the same degree of emission control 
as counterpart four-stroke engines with comparable power ratings.

[[Page 37595]]

VIII. The Blue Cruise Program

A. What Is the Blue Cruise Program?

    As noted in previous sections, fleet turnover for marine vessels 
that use Category 3 marine diesel engines is very slow. The average 
life of these vessels is as high as 29 years, and many are scrapped 
only when their hulls can no longer be repaired. One consequence of the 
long lives of these vessels is that the full impact of an engine 
emission control program may not occur until well into the future.
    To address this issue, and to create a mechanism to encourage 
purchasers of new ships to use advanced technology emission controls, 
we are proposing to develop a Blue Cruise program. This would be a 
voluntary program to encourage ship owners and operators to reduce 
their air and waste emissions and in so doing reduce the adverse 
impacts of their vessels on the environment. Basically, participant 
ship owners would be awarded a number of stars based on the types of 
air and waste emission control programs they adopt. These technologies 
and/or systems would be different depending on whether it is a new or 
existing vessel. The stars can be used by the participants on 
advertising materials, and even on the ship itself, to educate 
consumers and encourage them to choose their vessel for their 
transportation needs. Although the program is perhaps best suited to 
cruise ships, parts of the program could be extended to other types of 
ships as well. These stars would be issued to an individual ship, not 
an entire fleet.
    The Blue Cruise program would be a cross-media program. This means 
that it would include the air and waste emissions of a vessel, 
including both solid and liquid waste. By choosing one option from each 
of the three categories, air, liquid waste, and solid waste, 
participants would reduce their overall impact on the marine 
environment.
    The program described below is focused on cruise ships. This is 
because their emissions on a per vessel basis can be very high, both in 
terms of engines used to generate power for passenger comfort and 
entertainment and in terms of waste streams, including gray and black 
water and solid waste. According to Bluewater Network, a typical cruise 
ships generates as much as 210,000 gallons of sewage and 1,000,000 
gallons of graywater, 130 gallons of hazardous wastes, and 8 tons of 
garbage during a one-week voyage.\57\ Disposal of these wastes is 
controversial, and a report issued by the General Accounting Office in 
2000 indicates that in the six-year period between 1993 and 1998, 
``cruise ships were responsible for 87 confirmed illegal discharge 
cases in U.S. waters.'' \58\ In August 2000, the Bluewater Network sent 
an addendum to that petition, requesting EPA to also examine air 
pollution from cruise ships.
---------------------------------------------------------------------------

    \57\ See Bluewater Network's Petition to EPA to Address Cruise 
Ship Pollution, March 17, 2000. A copy of this document can be found 
in Docket A-20011-11, Document No. II-B-02. The August 2, 2000 
Addendum to this Petition, regarding air emissions from cruise 
ships, can be found at A-20011-11, Document No. II-B-03.
    \58\ Marine Pollution: Progress Made to Reduce Marine Pollution 
by Cruise Ships, but Important Issues Remain. February 2000, GAO/
RCED-00-48. A copy of this report can be found in Docket A-2001-11, 
Document No. II-A-22.
---------------------------------------------------------------------------

    At the same time, cruise ship owners have taken steps to manage 
their waste streams more carefully. In June, 2001, the members of the 
International Council of Cruise Lines (ICCL), whose members include the 
major cruise lines that visit U.S. ports, adopted mandatory 
environmental standards that are to be integrated into each members's 
internationally mandated Safety Management Systems.\59\ These standards 
address the waste streams noted in the Bluewater Network petition. In 
addition, ICCL has entered into a Memorandum of Understanding with 
State of Florida regarding waste management.
---------------------------------------------------------------------------

    \59\ ICCL Industry Standard E-01-01 (Revision 1), Cruise 
Industry Waste Management Practices and Procedures (see http://www.iccl.org/policies/environmentalstandards.pdf). A copy of this 
document can be found in Docket A-2001-11, Document No. II-A-21.
---------------------------------------------------------------------------

    The Blue Cruise Program would expand on these recent pollution 
reduction activities by encouraging and rewarding cruise ship owners 
who take addition steps to reduce emissions and/or ensure that 
pollution reduction practices and measures are adhered to. While the 
focus in this discussion is on cruise ships, we request comment on 
whether this program should also apply to cargo and other commercial 
vessels and, if so, if the point system should be different for those 
vessels.

B. How Would the Program Work?

    The Blue Cruise Program would have two components. The first 
component consists of making a commitment to reduce emissions through 
the application of technologies and/or systems that would reduce air 
pollution, water discharges, and waste streams. The second step 
involves ensuring that the equipment and/or systems that a ship owner 
agreed to apply are operating and being maintained correctly.
    It should be noted that, due to the complexity of the program 
associated with its cross-media nature, the discussion of the Blue 
Cruise program in this section is not meant to be a comprehensive. 
Instead, it is a brief description of the overall concept that is meant 
to stimulate discussion of the value of such a program and the 
provisions it should include. We will continue to develop this program, 
soliciting comments from interested parties, as we prepare our final 
rule.
1. A Commitment To Reduce Emissions
    To participate in the Blue Cruise program, a ship owner would need 
to take steps to reduce air emissions, water discharges, and waste 
streams from the vessel. For air pollution, this could involve 
installing new emission control devices on the ship's engine. For 
liquid waste pollution, this could involve applying new water treatment 
technology. For solid waste, this could involve developing systems to 
reduce, reuse, and recycle solid waste, as evidenced by joining EPA's 
WasteWise Program.\60\ The exact choice of technologies and systems, of 
course, would depend on the technologies that are already in use on the 
vessel and the level of investment the ship owner desires to make. They 
key requirement is that the ship owner take steps to reduce three kinds 
of emissions: air, water, and solid waste.
---------------------------------------------------------------------------

    \60\ WasteWise is a free, voluntary partnership program that 
helps organizations reduce their solid waste streams. The program 
provides technical assistance, networking, and recognition for 
successful waste reduction. Members are required to assess their 
waste streams, identify and submit waste reduction goals, and 
measure and report progress annually. More information about the 
WasteWise program can be found at the Office of Solid Waste website 
www.epa.gov/wastewise.
---------------------------------------------------------------------------

    The first step toward obtaining Blue Cruise status would be to sign 
up to the program. Similarly to the WasteWise program, a participant 
would assess the ship's air and waste streams and current state of 
pollution reduction technology; identify and submit goals, including 
obtaining and using new technologies and/or procedures; and measure and 
report progress. Successful participants would be awarded a number of 
stars, with five stars being the maximum number of stars awarded, which 
could be used to inform consumers and the world at large that they are 
taking steps to reduce emission beyond what is legally required. Once a 
participant signs up for the program, the actions agreed to become 
mandatory. In other words, while opting into the program is voluntary, 
compliance with the provisions once they are opted into is not.
    We are proposing to develop a matrix of options that can be used by 
ship

[[Page 37596]]

owners to make their emission control decisions. An example of a matrix 
is shown in Table VIII.B-1. In general, each option would be assigned a 
number of points, and stars would be given out depending on the number 
of points across all categories. A ship owner will be required to take 
action in each category, however.

        Table VIII.B-1.--Draft Blue Cruise Program Options Matrix
------------------------------------------------------------------------
                Category                           Action            Pts
------------------------------------------------------------------------
Air....................................  Use low sulfur fuel while
                                          within 200 miles of U.S.
                                          coast (out 320 nautical
                                          miles).
                                         Use shore-side power for
                                          hotelling.
                                         Retrofit emission control
                                          devices when existing
                                          ships go in for
                                          refurbishing--Tier 1
                                          technologies.
                                         Retrofit emission control
                                          devices when existing
                                          ships go in for
                                          refurbishing--additional
                                          engine-based controls.
                                         Retrofit emission control
                                          devices when existing
                                          ships go in for
                                          refurbishing--Tier 1 and
                                          2 technologies.
                                         Use engines that meet
                                          Voluntary Low Emission
                                          Standards for new builds.
                                         Other.....................
Water..................................  Implement education
                                          programs for passengers
                                          on waste minimization.
                                         Use biodegradable and bio-
                                          enzymatic cleaning
                                          supplies, non-phosphate
                                          soaps, and materials
                                          (e.g., toiletries
                                          supplied to passengers,
                                          salon chemicals, photo
                                          processing chemicals,
                                          etc.).
                                         Ensure that all sinks,
                                          showers, toilets, hoses,
                                          etc. are low flow.
                                         Ensure that only shower,
                                          galley, and stateroom
                                          sink wastes enter the
                                          gray water system.
                                         Install gray water
                                          treatment systems that
                                          allow gray water to be
                                          used aboard the vessel
                                          for nonhuman consumption
                                          purposes.
                                         At a minimum meet the
                                          Alaska Standards for Gray
                                          and Black Water
                                          Discharges and
                                          incorporate this program
                                          into the ship
                                          Environmental Management
                                          System plan.
                                         Other.....................
Solid..................................  Recycle materials shore
Waste..................................   side (possibly set up a
                                          closed loop, where vessel
                                          waste is recycled and
                                          sold to the vessel as new
                                          products).
                                         Sign on to MOU with the
                                          States new approach to
                                          tracking RCRA waste and
                                          implement.
                                         Participate in WasteWise..
                                         Other.....................
------------------------------------------------------------------------

    We request comment on all aspects of this program, and especially 
on this approach to awarding stars under the program and the contents 
of the options table and point system. We also request comment on 
whether points should be weighted and, if so, how. For example, more 
weight could be assigned to air emissions for cruise ships since they 
are currently taking steps to reduce their waste emissions pursuant to 
the Cruise Industry Waste Management Practices and Procedures. Finally, 
we request comment on whether EPA should manage this program or whether 
it can be run by an independent organization.
2. Verification
    For the Blue Cruise program to be meaningful, it will be necessary 
to ensure that not only ship owners install emission control 
technologies and equipment, but also that they are operated and 
maintained correctly. There are at least two ways to do this: self 
certification and third party verification.
    With a self-certification system, a ship owner would certify to EPA 
annually that the emission control technologies and systems described 
in the application are functional and are being operated and maintained 
correctly. If a ship owner is unable to make this certification, then 
that ship's stars would be taken away and the ship would be 
disqualified from the program until ship can be brought back into 
compliance.
    With a third party verification program, an outside entity would 
ensure that the emission control technologies and systems are 
functional and are being operated and maintained correctly. This 
approach may be necessary, at least at the beginning of the program, 
until the industry gains experience with the program. A model for third 
party verification could be the Coast Guard procedures put in place to 
conduct waste management inspections on board cruise vessels.
    We request comment on these verification approaches, particularly 
on how a third party verification program can work.

IX. Public Participation

    We request comment on all aspects of this proposal. This section 
describes how you can participate in this process.

A. How Do I Submit Comments?

    We are opening a formal comment period by publishing this document. 
We will accept comments during the period indicated under DATES above. 
If you have an interest in the proposed emission control program 
described in this document, we encourage you to comment on any aspect 
of this rulemaking. We also request comment on specific topics 
identified throughout this proposal.
    Your comments will be most useful if you include appropriate and 
detailed supporting rationale, data, and analysis. If you disagree with 
parts of the proposed program, we encourage you to suggest and analyze 
alternate approaches that meet the air quality goals described in this 
proposal. You should send all comments, except those containing 
proprietary information, to our Air Docket (see ADDRESSES) before the 
end of the comment period.
    If you submit proprietary information for our consideration, you 
should clearly separate it from other comments by labeling it 
``Confidential Business Information.'' You should also send it directly 
to the contact person listed under FOR FURTHER INFORMATION CONTACT 
instead of to the public docket. This will help ensure that no one 
inadvertently places proprietary information in the docket. If you want 
us to use your confidential information as part of the basis for the 
final rule, you should send a nonconfidential version of the document 
summarizing the key data or information. We will disclose information 
covered by a claim of confidentiality only through the application of 
procedures described in 40 CFR part 2. If you don't identify 
information as confidential when we receive it, we may make it 
available to the public without notifying you.

B. Will There Be a Public Hearing?

    We will hold a public hearing on June 13, 2002 at the Hyatt Regency 
Long Beach, 200 South Pine Avenue, Long Beach, California, phone (562) 
491-1234. The hearing will start at 9:30 am and continue until everyone 
has had a chance to speak.

[[Page 37597]]

    If you would like to present testimony at the public hearing, we 
ask that you notify the contact person listed above at least ten days 
before the hearing. You should estimate the time you will need for your 
presentation and identify any needed audio/visual equipment. We suggest 
that you bring copies of your statement or other material for the EPA 
panel and the audience. It would also be helpful if you send us a copy 
of your statement or other materials before the hearing.
    We will make a tentative schedule for the order of testimony based 
on the notifications we receive. This schedule will be available on the 
morning of the hearing. In addition, we will reserve a block of time 
for anyone else in the audience who wants to give testimony.
    We will conduct the hearing informally, and technical rules of 
evidence won't apply. We will arrange for a written transcript of the 
hearing and keep the official record of the hearing open for 30 days to 
allow you to submit supplementary information. You may make 
arrangements for copies of the transcript directly with the court 
reporter.

X. Administrative Requirements

A. Administrative Designation and Regulatory Analysis (Executive Order 
12866)

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to review by the Office of Management and Budget 
(OMB) and the requirements of this Executive Order. The Executive Order 
defines a ``significant regulatory action'' as one that is likely to 
result in a rule that may:
    [sbull] 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;
    [sbull] Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
    [sbull] Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
    [sbull] Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    EPA has determined that this rule is a ``significant regulatory 
action'' under the terms of Executive Order 12866 because it raises 
novel legal or policy issues due to the international nature of the use 
of Category 3 marine diesel engines and is therefore subject to OMB 
review. The Agency believes that this proposed regulation would result 
in none of the economic effects set forth in Section 1 of the Order. A 
Draft Regulatory Support Document has been prepared and is available in 
the docket for this rulemaking and at the internet address listed under 
ADDRESSES above. Written comments from OMB and responses from EPA to 
OMB are in the public docket for this rulemaking.

B. Regulatory Flexibility Act (RFA), as Amended by the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et 
seq.

    The RFA generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to notice and comment 
rulemaking requirements under the Administrative Procedure Act or any 
other statute unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Small entities include small businesses, small organizations, and small 
governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business that meet 
the definition for business based on SBA size standards; (2) a small 
governmental jurisdiction that is a government of a city, county, town, 
school district or special district with a population of less than 
50,000; or (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field. The following table X.B-1 provides an overview 
of the primary SBA small business categories potentially affected by 
this regulation.

Table X.B-1.--Primary SBA Small Business Categories Potentially Affected
                  by This Proposed Regulation Industry
------------------------------------------------------------------------
                                    NAICS\a\      Defined by SBA  as a
            Industry                 codes      small  business if: \b\
------------------------------------------------------------------------
Internal combustion engines.....       333618  <1000 employees
Ship building...................       336611  <1000 employees
Water transportation, freight             483  <500 employees
 and passenger.
------------------------------------------------------------------------
NOTES:
\a\ North American Industry Classification System
\b\ According to SBA's regulations (13 CFR 121), businesses with no more
  than the listed number of employees or dollars in annual receipts are
  considered ``small entities'' for purposes of a regulatory flexibility
  analysis.

    After considering the economic impacts of today's proposed rule on 
small entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. Our review 
of the list of manufacturers of Category 3 marine diesel engines 
(marine diesel engines at or above 30 l/cyl) indicates that there are 
no U.S. manufacturers of these engines that qualify as small 
businesses. We are unaware of any foreign manufacturers of such engines 
with a U.S.-based facility that would qualify as a small business. In 
addition, the proposed rule will not impose significant economic 
impacts on engine manufacturers. Engine manufacturers are already 
achieving the proposed Tier 1 limits, and our program will impose only 
negligible compliance costs. With regard to potential Tier 2 standards, 
we estimate that engine-based requirements may increase the price of an 
engine by about 9 percent and increase the price of a vessel by about 
0.1 percent. Our review of the U.S. shipyards that build, or have 
built, ships that use Category 3 marine diesel engines indicates that 
there are no U.S. manufacturers of these ships that qualify as small 
businesses. Ship operators would have to perform field testing to 
periodically demonstrate the engine is performing within certified 
parameters. The testing devices that would be needed to perform field 
testing are expected to be incorporated in the engine system as 
delivered by the manufacturer. Operation of these systems is not 
expected to require significant crew resources since it can be done by 
crew currently responsible

[[Page 37598]]

for testing other engine parameters as normally required onboard a 
vessel to ensure efficient operation of the vessel. Ship operators 
would also be required to maintain the engine as specified by the 
engine manufacturer during the useful life of the engine. These costs 
are not expected to be greater than the costs of maintaining 
unregulated engines except to the extent that ship operators do not 
currently maintain engines as specified by the engine manufacturer. 
Maintenance costs are expected to be minimal given the overall costs of 
maintaining all of the vessel's systems and structures.

C. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been 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 No. 1897.03) has been prepared by 
EPA, and a copy may be obtained from Susan Auby, Collection Strategies 
Division; U.S. Environmental Protection Agency (2822); 1200 
Pennsylvania Ave., NW; Washington, DC 20460, by e-mail at 
[email protected], or by calling (202) 566-1672. A copy may 
also be downloaded from the internet at http://www.epa.gov/icr.
    The information being collected is to be used by EPA to ensure that 
new marine vessels and fuel systems comply with applicable emissions 
standards through certification requirements and various subsequent 
compliance provisions.
    The estimated annual public reporting and recordkeeping burden for 
this collection of information is 281 hours per response, with 
collection required annually. The estimated number of respondents is 6. 
The total annual cost for the first 3 years of the program is estimated 
to be $138,595 per year and includes no annualized capital costs, 
$67,000 in operating and maintenance costs, at a total of 1,685 hours 
per year.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, 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; adjusting 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 displayed in 40 CFR Part 9 and 48 CFR Chapter 15.
    Comments are requested on the Agency's need for this information, 
the accuracy of the provided burden estimates, and any suggested 
methods for minimizing respondent burden, including through the use of 
automated collection techniques. Send comments on the ICR to the 
Director, Collection Strategies Division; U.S. Environmental Protection 
Agency (2822); 1200 Pennsylvania Ave., NW; Washington, DC 20460; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, 725 17th St., NW, Washington, DC 20503, marked ``Attention: 
Desk Officer for EPA.'' Include the ICR number in any correspondence. 
Since OMB is required to make a decision concerning the ICR between 30 
and 60 days after May 29, 2002, a comment to OMB is best ensured of 
having its full effect if OMB receives it by June 28, 2002. The final 
rule will respond to any OMB or public comments on the information 
collection requirements contained in this proposal.

D. Intergovernmental Relations

1. Unfunded Mandates Reform Act
    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective, or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective, or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted.
    Before EPA establishes any regulatory requirements that may 
significantly or uniquely affect small governments, including tribal 
governments, it must have developed under section 203 of the UMRA a 
small government agency plan. The plan must provide for notifying 
potentially affected small governments, enabling officials of affected 
small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant Federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    EPA has determined that this rule does not contain a Federal 
mandate that may result in expenditures of $100 million or more for 
State, local, and tribal governments, in the aggregate, or the private 
sector in any one year. According to the cost estimates prepared for 
this proposal, we estimate the aggregate costs (annualized over 20 
years) of the proposed rule to engine manufacturers to be negligible.
    Thus, today's rule is not subject to the requirements of sections 
202 and 205 of the UMRA.
2. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)
    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 6, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.''
    This proposed rule does not have tribal implications as specified 
in Executive Order 13175. This rule will be implemented at the Federal 
level and impose compliance costs only on engine manufacturers and ship 
builders. Tribal governments will be affected only to the extent they 
purchase and use vessels having regulated engines. Thus, Executive 
Order 13175 does not apply to this rule. EPA specifically solicits 
additional comment on this proposed rule from tribal officials.

E. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 
272

[[Page 37599]]

note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do 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. NTTAA directs EPA to 
provide Congress, through OMB, explanations when the Agency decides not 
to use available and applicable voluntary consensus standards.
    This proposed rulemaking involves technical standards for testing 
emissions from marine diesel engines. EPA proposes to use test 
procedures contained in the MARPOL NOX Technical Code, with 
the proposed modifications contained in this rulemaking. The MARPOL 
NOX Technical Code includes the International Standards 
Organization (ISO) duty cycle for marine diesel engines (E2, E3, D2, 
C1) and the American Society for Testing and Materials (ASTM) fuel 
standards.\61\ These procedures are currently used by virtually all 
Category 3 engine manufacturers to demonstrate compliance with the 
Annex VI NOX limits and to obtain Statements of Voluntary 
Compliance to those standards.
---------------------------------------------------------------------------

    \61\ The Technical Code on Control of Emission of Nitrogen 
Oxides from Marine Diesel Engines in the Annex VI of MARPOL 73/78 
Regulations for the Prevention of Air Pollution from Ships and 
NOX Technical Code, International Maritime Organization. 
See footnote 1 regarding how to obtain copies of these documents.
---------------------------------------------------------------------------

    With regard to the proposed requirements for field NOX 
testing and post-installation testing, the Agency conducted a search to 
identify potentially applicable voluntary consensus standards. However, 
we identified no such standards. Therefore, EPA proposes to use the 
procedures contained in the draft regulations for this rulemaking (40 
CFR 94.110, 94.1103).
    EPA welcomes comments on this aspect of the proposed rulemaking 
and, specifically, invites the public to identify potentially-
applicable voluntary consensus standards and to explain why such 
standards should be used in this regulation.

F. Protection of Children (Executive Order 13045)

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies 
to any rule that (1) is determined to be ``economically significant'' 
as defined under Executive Order 12866, and (2) 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 both criteria, Section 5-501 of the Order directs the Agency to 
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 proposal is not subject to Executive Order 13045 because it is 
not economically significant under the terms of Executive Order 12866.

G. Federalism (Executive Order 13132)

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This proposed rule does not have federalism implications. It will 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. This proposed rule creates no 
mandates on State, local or tribal governments. The rule imposes no 
enforceable duties on these entities, because they do not manufacture 
any engines that are subject to this rule. This rule will be 
implemented at the Federal level and impose compliance obligations only 
on private industry. Thus, Executive Order 13132 does not apply to this 
rule.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicits comment on this proposed rule 
from State and local officials.

H. Energy Effects (Executive Order 13211)

    This rule is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355 
(May 22, 2001)) because it is not likely to have a significant adverse 
effect on the supply, distribution or use of energy. The proposed 
standards have for their aim the reduction of emission from certain 
marine diesel engines, and have no effect on fuel formulation, 
distribution, or use. Although the proposal solicits comment on 
regulating the sulfur content of marine distillate and residual fuel, 
EPA is not proposing to regulate such fuel at this time.

List of Subjects in 40 CFR Part 94

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Confidential business information, Imports, 
Penalties, Reporting and recordkeeping requirements, Vessels, 
Warranties.

    Dated: April 30, 2002.
Christine Todd Whitman,
Administrator.
    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 94--CONTROL OF AIR POLLUTION FROM MARINE COMPRESSION-IGNITION 
ENGINES

    1. The authority for part 94 continues to read as follows:

    Authority: 42 U.S.C. 7522, 7523, 7524, 7525, 7541, 7542, 7543, 
7545, 7547, 7549, 7550, and 7601(a).

Subpart A--[Amended]

    2. Section 94.1 is amended by revising paragraph (b) to read as 
follows:


[sect] 94.1  Applicability.

* * * * *
    (b) Notwithstanding the provision of paragraph (c) of this section, 
the requirements and prohibitions of this part do not apply with 
respect to the engines identified in paragraphs (a)(1) and (2) of this 
section where such engines are:
    (1) Marine engines with rated power below 37 kW; or
    (2) Marine engines on foreign vessels.
* * * * *
    3. Section 94.2 is amended in paragraph (b) by adding, in 
alphabetical order, definitions to paragraph (b) for ``Brake-specific 
fuel consumption'', ``Hydrocarbon standard'', ``MARPOL Technical 
Code'', ``Maximum test speed'', ``Residual fuel'', ``Tier 1'', ``Vessel 
operator'', and ``Vessel owner'', and revising the definitions for 
``Diesel fuel'' and ``New vessel'' to read as follows:

[[Page 37600]]

[sect] 94.2  Definitions.

* * * * *
    (b) * * *
    Brake-specific fuel consumption means the mass of fuel consumed by 
an engine during a test segment divided by the brake-power output of 
the engine during that same test segment.
* * * * *
    Diesel fuel means any fuel suitable for use in diesel engines which 
is commonly or commercially known or sold as diesel fuel or marine 
distillate fuel.
* * * * *
    Hydrocarbon standard means an emission standard for total 
hydrocarbons, nonmethane hydrocarbons, or total hydrocarbon equivalent; 
or a combined emission standard for NOX and total 
hydrocarbons, nonmethane hydrocarbons, or total hydrocarbon equivalent.
* * * * *
    MARPOL Technical Code means the ``Technical Code on Control of 
Emission of Nitrogen Oxides from Marine Diesel Engines'' in the ``Annex 
VI of MARPOL 73/78 Regulations for the Prevention of Air Pollution from 
Ships and NOX Technical Code'' from the International 
Maritime Organization (which is incorporated by reference at [sect] 
94.5).
* * * * *
    Maximum test speed means the engine speed defined by [sect] 94.107 
to be the maximum engine speed to use during testing.
* * * * *
    New vessel means:
    (1) (i) A vessel, the equitable or legal title to which has never 
been transferred to an ultimate purchaser; or
    (ii) A vessel that has been modified such that the value of the 
modifications exceeds 50 percent of the value of the modified vessel. 
The value of the modification is the difference in the assessed value 
of the vessel before the modification and the assessed value of the 
vessel after the modification. Use the following equation to determine 
if the fractional value of the modification exceeds 50 percent:

Percent of value = [(Value after modification)--(Value before 
modification)] x 100%


(Value after modification)

    (2) Where the equitable or legal title to a vessel is not 
transferred to an ultimate purchaser prior to its being placed into 
service, the vessel ceases to be new when it is placed into service.
* * * * *
    Residual fuel means a petroleum product containing the heavier 
compounds that remain after the distillate fuel oils (e.g., diesel fuel 
and marine distillate fuel) and lighter hydrocarbons are distilled away 
in refinery operations.
* * * * *
    Tier 1 means relating to an engine subject to the Tier 1 emission 
standards listed in [sect] 94.8.
* * * * *
    Vessel operator means any individual that physically operates or 
maintains a vessel, or exercises managerial control over the operation 
of the vessel.
    Vessel owner means the individual or company that holds legal title 
to a vessel.
* * * * *
    4. Section 94.5 is amended by revising paragraph (b) to read as 
follows:


[sect] 94.5  Reference materials.

* * * * *
    (b) The following paragraphs and tables set forth the material that 
has been incorporated by reference in this part:
    (1) ASTM material. The following table sets forth material from the 
American Society for Testing and Materials that has been incorporated 
by reference. The first column lists the number and name of the 
material. The second column lists the section(s) of the part, other 
than this section, in which the matter is referenced. The second column 
is presented for information only and may not be all-inclusive. More 
recent versions of these standards may be used with advance approval of 
the Administrator. Copies of these materials may be obtained from 
American Society for Testing and Materials, 100 Barr Harbor Dr., West 
Conshohocken, PA 19428. The table follows:

----------------------------------------------------------------------------------------------------------------
               Document number and name                                 40 CFR part 94 reference
----------------------------------------------------------------------------------------------------------------
ASTM D 86-97: ``Standard Test Method for Distillation   [sect] 94.108
 of Petroleum Products at Atmospheric Pressure''.
ASTM D 93-97: ``Standard Test Methods for Flash-Point   [sect] 94.108
 by Pensky-Martens Closed Cup Tester''.
ASTM D 129-95: ``Standard Test Method for Sulfur in     [sect] 94.108
 Petroleum Products (General Bomb Method)''.
ASTM D 287-92: ``Standard Test Method for API Gravity   [sect] 94.108
 of Crude Petroleum and Petroleum Products''
 (Hydrometer Method).
ASTM D 445-97: ``Standard Test Method for Kinematic     [sect] 94.108
 Viscosity of Transparent and Opaque Liquids (and the
 Calculation of Dynamic Viscosity)''.
ASTM D 613-95: ``Standard Test Method for Cetane        [sect] 94.108
 Number of Diesel Fuel Oil''.
ASTM D 1319-98: ``Standard Test Method for Hydrocarbon  [sect] 94.108
 Types in Liquid Petroleum Products by Fluorescent
 Indicator Adsorption''.
ASTM D 2069-91: ``Standard Specification for Marine     [sect][sect] 94.108, 94.109
 Fuels''.
ASTM D 2622-98: ``Standard Test Method for Sulfur in    [sect] 94.108
 Petroleum Products by Wavelength Dispersive X-ray
 Fluorescence Spectrometry''.
ASTM D 3228-92: ``Standard Test Method for Total        [sect][sect] 94.108, 94.109
 Nitrogen In Lubricating Oils and Fuel Oils By
 Modified Kjeldahl Method''.
ASTM D 5186-96: ``Standard Test Method for              [sect] 94.108
 ``Determination of the Aromatic Content and
 Polynuclear Aromatic Content of Diesel Fuels and
 Aviation Turbine Fuels By Supercritical Fluid
 Chromatography''.
ASTM E 29-93a: ``Standard Practice for Using            [sect][sect] 94.9, 94.218, 94.305, 94.508
 Significant Digits in Test Data to Determine
 Conformance with Specifications''.
----------------------------------------------------------------------------------------------------------------

    (2) ISO material. The following table sets forth material from the 
International Organization for Standardization that we have 
incorporated by reference. The first column lists the number and name 
of the material. The second column lists the section(s) of the part, 
other than this section, in which the matter is referenced. The second 
column is presented for information only and may not be all-inclusive. 
More recent versions of these standards may be used with advance 
approval of the Administrator.
    Copies of these materials may be obtained from International 
Organization for Standardization, Case Postale 56, CH-1211 Geneva 20, 
Switzerland. The table follows:

[[Page 37601]]



----------------------------------------------------------------------------------------------------------------
                  Document number and name                                 40 CFR part 94 reference
----------------------------------------------------------------------------------------------------------------
ISO 8178-1: ``Reciprocating internal combustion engines--    [sect] 94.109
 Exhaust emission measurement--Part 1: Test-bed measurement
 of gaseous and particulate emissions''.
----------------------------------------------------------------------------------------------------------------

    (3) MARPOL material. The ``Technical Code on Control of Emission of 
Nitrogen Oxides from Marine Diesel Engines'' in the ``Annex VI of 
MARPOL 73/78 Regulations for the Prevention of Air Pollution from Ships 
and NOX Technical Code'' from the International Maritime 
Organization has been incorporated by reference. Copies of this 
material may be obtained from International Maritime Organization, 4 
Albert Embankment, London SE1 7SR, United Kingdom.
    5. Section 94.8 is amended by revising paragraphs (a), (c), (d), 
(e), (f), and (g) to read as follows:


[sect] 94.8  Exhaust emission standards.

    (a) This paragaph (a) contains multiple tiers of emission 
standards. The Tier 1 standards of paragraph (a)(1) of this section are 
the earliest tier and apply as specified until the model year that the 
Tier 2 standards of paragraph (a)(2) of this section (or later 
standards) become applicable for a given category (or sub-category) of 
engines.
    (1) Tier 1 standards for engines with displacement of 2.5 or more 
liters per cylinder. (i) NOX emissions from model year 2004 
and later engines with a maximum test speed of 2000 rpm or less may not 
exceed 18.4 g/kW or the following engine speed-dependent value: 45.0 
xN-0.20 +1.4 where N = the maximum test speed of the engine 
in revolutions per minute. (Note: Speed-dependent standards are rounded 
to the nearest 0.1 g/kW-hr.)
    (ii) NOX emissions from model year 2004 and later 
engines with a maximum test speed greater than 2000 rpm may not exceed 
11.2 g/kW-hr.
    (2) Tier 2 standards. Exhaust emissions from marine compression-
ignition engines shall not exceed the applicable exhaust emission 
standards contained in Table A-1 as follows:

                         Table A-1.--Primary Tier 2 Exhaust Emission Standards (g/kW-hr)
----------------------------------------------------------------------------------------------------------------
                                                                         Model   THC+NOX g/ CO  g/kW-  PM  g/kW-
Engine size liters/cylinder, rated power            Category            year\1\    kW-hr        hr         hr
----------------------------------------------------------------------------------------------------------------
disp. < 0.9 and power [ge] 37 kW........  Category 1..................     2005        7.5        5.0       0.40
0.9 [le] disp. < 1.2 all power levels...  Category 1..................     2004        7.2        5.0       0.30
1.2 [le] disp. < 2.5 all power levels...  Category 1..................     2004        7.2        5.0       0.20
2.5 [le] disp. < 5.0 all power levels...  Category 1..................     2007        7.2        5.0       0.20
5.0 [le] disp. < 15.0 all power levels..  Category 2..................     2007        7.8        5.0       0.27
15.0 [le] disp. < 20.0 power < 3300 kW..  Category 2..................     2007        8.7        5.0       0.50
15.0 [le] disp. < 20.0 power [ge] 3300    Category 2..................     2007        9.8        5.0       0.50
 kW.
20.0 [le] disp. < 25.0 all power levels.  Category 2..................     2007        9.8        5.0       0.50
25.0 [le] disp. < 30.0 all power levels.  Category 2..................     2007       11.0        5.0      0.50
----------------------------------------------------------------------------------------------------------------
\1\ The model years listed indicate the model years for which the specified standards start.

* * * * *
    (c) In lieu of the THC+NOX standards, and PM standards 
specified in paragraph (a) of this section, manufacturers may elect to 
include engine families in the averaging, banking, and trading program, 
the provisions of which are specified in subpart D of this part. The 
manufacturer shall then set a family emission limit (FEL) which will 
serve as the standard for that engine family. The ABT provisions of 
Subpart D of this part do not apply for Category 3 engines.
    (d)(1) Naturally aspirated engines subject to the standards of this 
section shall not discharge crankcase emissions into the ambient 
atmosphere.
    (2) For engines using turbochargers, pumps, blowers, or 
superchargers for air induction, if the engine discharges crankcase 
emissions into the ambient atmosphere in use, these crankcase emissions 
shall be included in all exhaust emission measurements. This 
requirement applies only for engines subject to hydrocarbon standards 
(e.g., THC standards, NMHC standards, or THC+ NOX 
standards).
    (e)(1) For Category 1 and Category 2 engines, exhaust emissions 
from propulsion engines subject to the standards (or FELs) in paragraph 
(a), (c), or (f) of this section shall not exceed:
    (i) 1.20 times the applicable standards (or FELs) when tested in 
accordance with the supplemental test procedures specified in [sect] 
94.106 at loads greater than or equal to 45 percent of the maximum 
power at rated speed or 1.50 times the applicable standards (or FELs) 
at loads less than 45 percent of the maximum power at rated speed; or
    (ii) 1.25 times the applicable standards (or FELs) when tested over 
the whole power range in accordance with the supplemental test 
procedures specified in [sect] 94.106.
    (2) For Category 3 engines, engines must be designed to provide 
equivalent emission performance over all operating conditions, as 
specified in [sect] 94.205(f).
    (f) The following define the requirements for low-emitting Blue Sky 
Series engines:
    (1) Voluntary standards. (i) Category 1 and Category 2 engines may 
be designated ``Blue Sky Series'' engines by meeting the voluntary 
standards listed in Table A-2, which apply to all certification and in-
use testing:

           Table A-2.--Voluntary Emission Standards (g/kW-hr)
------------------------------------------------------------------------
               Rated brake power (kW)                  THC+NOX      PM
------------------------------------------------------------------------
power [ge] 37 kW, and displ.<0.9....................        4.0     0.24
0.9[le]displ.<1.2...................................        4.0     0.18
1.2[le]displ.<2.5...................................        4.0     0.12
2.5[le]displ.<5.....................................        5.0     0.12

[[Page 37602]]

 
5[le]displ.<15......................................        5.0     0.16
15 [le] disp. < 20, and power < 3300kW..............        5.2     0.30
15 [le] disp. < 20, and power [ge] 3300kW...........        5.9     0.30
20 [le] disp; <25...................................        5.9     0.30
25[le] disp. <30....................................        6.6     0.30
------------------------------------------------------------------------

    (ii) Category 3 engines may be designated ``Blue Sky Series'' 
engines by meeting a voluntary NOX standard of 9.0 
xN-0.20 +1.4 where N = the maximum test speed of the engine 
in revolutions per minute (or 4.8 g/kW for engines with maximum test 
speeds less than 130 rpm). (Note: Speed-dependent standards are rounded 
to the nearest 0.1 g/kW-hr.) This standard would apply to all 
certification and in-use testing.
    (2) Additional standards. Blue Sky Series engines are subject to 
all provisions that would otherwise apply under this part.
    (3) Test procedures. Manufacturers may use an alternate procedure 
to demonstrate the desired level of emission control if approved in 
advance by the Administrator.
    (g) Standards for alternative fuels. The standards described in 
this section apply to compression-ignition engines, irrespective of 
fuel, with the following two exceptions for Category 1 and Category 2 
engines:
    (1) Engines fueled with natural gas shall comply with 
NMHC+NOX standards that are numerically equivalent to the 
THC+NOX described in paragraph (a) of this section; and
    (2) Engines fueled with alcohol fuel shall comply with 
THCE+NOX standards that are numerically equivalent to the 
THC+NOX described in paragraph (a) of this section.
    6. Section 94.9 is amended by revising paragraphs (a)(1) and (b)(1) 
to read as follows:


[sect] 94.9  Compliance with emission standards.

    (a) * * *
    (1) The minimum useful life is 10 years or 10,000 hours of 
operation for Category 1, 10 years or 20,000 hours of operation for 
Category 2, and 3 years or 10,000 hours of operation for Category 3.
* * * * *
    (b) * * *
    (1) Compliance with the applicable emission standards by an engine 
family shall be demonstrated by the certifying manufacturer before a 
certificate of conformity may be issued under [sect] 94.208. 
Manufacturers shall demonstrate compliance using emission data, 
measured using the procedures specified in Subpart B of this part, from 
a low hour engine. A development engine that is equivalent in design to 
the marine engines being certified may be used for Category 2 or 
Category 3 certification.
* * * * *
    7. Section 94.10 is amended by revising paragraph (a) to read as 
follows:


[sect] 94.10  Warranty period.

    (a) (1) Warranties imposed by [sect] 94.1107 for Category 1 or 
Category 2 engines shall apply for a period of operating hours equal to 
at least 50 percent of the useful life in operating hours or a period 
of years equal to at least 50 percent of the useful life in years, 
whichever comes first.
    (2) Warranties imposed by [sect] 94.1107 for Category 3 engines 
shall apply for a period of operating hours equal to at least the full 
useful life in operating hours or a period of years equal to at least 
the full useful life in years, whichever comes first.
* * * * *
    8. Section 94.11 is amended by adding paragraph (g) to read as 
follows:


[sect] 94.11  Requirements for rebuilding certified engines.

* * * * *
    (g) For Tier 1 engines, and all Category 3 engines, the rebuilder 
and operator shall also comply with the recordkeeping requirements of 
MARPOL Technical Code (incorporated by reference at [sect] 94.5).
    9. Section 94.12 is amended by revising the introductory text to 
read as follows:


[sect] 94.12  Interim provisions.

    This section contains provisions that apply for a limited number of 
calendar years or model years. These provisions apply instead of other 
provisions of this part. The provisions of this section do not apply 
for Category 3 engines.
* * * * *

Subpart B--[Amended]

    10. Section 94.106 is amended by revising the section heading and 
introductory text to read as follows:


[sect] 94.106  Supplemental test procedures for Category 1 and Category 
2 marine engines.

    This section describes the test procedures for supplemental testing 
conducted to determine compliance with the exhaust emission 
requirements of [sect] 94.8(e)(1). In general, the supplemental test 
procedures are the same as those otherwise specified by this subpart, 
except that they cover any speeds, loads, ambient conditions, and 
operating parameters that may be experienced in use. The test 
procedures specified by other sections in this subpart also apply to 
these tests, except as specified in this section.
* * * * *
    11. Section 94.107 is amended by revising paragraph (a) to read as 
follows:


[sect] 94.107  Determination of maximum test speed.

    (a) Overview. This section specifies how to determine maximum test 
speed from a lug curve. This maximum test speed is used in [sect][sect] 
94.105, 94.106, and 94.109 (including the tolerances for engine speed 
specified in [sect] 94.105).
* * * * *
    12. Section 94.108 is amended by revising paragraphs (a)(1), (b), 
and (d)(1), and adding paragraph (e) to read as follows:


[sect] 94.108  Test fuels.

    (a) Distillate diesel test fuel. (1) The diesel fuels for testing 
Category 1 and Category 2 marine engines designed to operate on 
distillate diesel fuel shall be clean and bright, with pour and cloud 
points adequate for operability. The diesel fuel may contain 
nonmetallic additives as follows: cetane improver, metal deactivator, 
antioxidant, dehazer, antirust, pour depressant, dye, dispersant, and 
biocide. The diesel fuel shall also meet the specifications (as 
determined using methods incorporated by reference at [sect] 94.5) in 
Table B-5 of this section, or substantially equivalent specifications 
approved by the Administrator, as follows:

[[Page 37603]]



              Table B-5.--Federal Test Fuel Specifications
------------------------------------------------------------------------
                                          Procedure       Value  (Type 2-
                Item                      (ASTM)\1\             D)
------------------------------------------------------------------------
Cetane.............................  D 613-95...........           40-48
Distillation Range:
    IBP, [deg]C....................  D 86-97............         171-204
    10% point, [deg]C..............  D 86-97............         204-238
    50% point, [deg]C..............  D 86-97............         243-282
    90% point, [deg]C..............  D 86-97............         293-332
    EP, [deg]C.....................  D 86-97............         321-366
    Gravity, API...................  D 287-92...........           32-37
    Total Sulfur, weight%..........  D 129-95 or........      0.03--0.80
                                     D 2622-98..........
Hydrocarbon composition:
    Aromatics, %vol................  D 1319-98 or D 5186-         \2\ 10
                                      96.
    Paraffins, Naphthalenes,         D 1319-98..........             \3\
     Olefins.
    Flashpoint, [deg]C (minimum)...  D 93-97............              54
    Viscosity @ 38 [deg]C,           D 445-97...........        2.0-3.2
     Centistokes.
------------------------------------------------------------------------
\1\ All ASTM procedures in this table have been incorporated by
  reference. See [sect] 94.6.
\2\ Minimum.
\3\ Remainder.

* * * * *
    (b) Other fuel types. For Category 1 and Category 2 engines that 
are designed to be capable of using a type of fuel (or mixed fuel) 
instead of or in addition to distillate diesel fuel (e.g., natural gas, 
methanol, or nondistillate diesel), and that are expected to use that 
type of fuel (or mixed fuel) in service:
    (1) A commercially available fuel of that type shall be used for 
exhaust emission testing. The manufacturer shall propose for the 
Administrator's approval a set of test fuel specifications that take 
into account the engine design and the properties of commercially 
available fuels. The Administrator may require testing on each fuel if 
it is designed to operate on more than one fuel. These test fuel 
specifications shall be reported in the application for certification.
    (2) NOX emissions may be adjusted to account for the 
nitrogen concentration of the fuel (as measured by ASTM D 3228-92). The 
adjusted NOX emissions shall be calculated using the 
following equation:

 Adjusted NOX emissions [g/kW-hr] = NOX-[BSFC 
*3.25 *(FNF)]

Where:

NOX = measured weighted NOX level [g/KW-hr].

BSFC = measured brake specific fuel consumption [g/KW-hr].

FNF = fuel nitrogen weight fraction.

* * * * *
    (d) Correction for sulfur. (1) Particulate emission measurements 
from Category 1 or Category 2 engines without exhaust aftertreatment 
obtained using a diesel fuel containing more than 0.40 weight percent 
sulfur may be adjusted to a sulfur content of 0.40 weight percent.
* * * * *
    (e) Test Fuel for Category 3. (1) Except as specified in paragraph 
(e)(4) of this section, or allowed by paragraph (e)(2) of this section, 
the test fuel for Category 3 marine engines shall:
    (i) Be a residual fuel meeting the ASTM D 2069-91 specification for 
RMH-55 grade of fuel but not for RMC-10 grade of fuel.
    (ii) Have a nitrogen content of 0.6 percent by weight or less.
    (2) Marine distillate fuel may be used for certification testing.
    (3) NOX emissions shall be adjusted to account for the 
nitrogen concentration of the fuel (as measured by ASTM D 3228-92). The 
adjusted NOX emissions shall be calculated using the 
following equation:

Adjusted NOX emissions [g/kW-hr] = NOX-[BSFC 
*3.25 *(FNF-0.0040)]

Where:

NOX=measured weighted NOX level [g/KW-hr].

BSFC=measured brake specific fuel consumption [g/KW-hr].

FNF=fuel nitrogen weight fraction.

    (4) For engines that are designed to be capable of using a type of 
fuel (or mixed fuel) instead of or in addition to residual fuel (e.g., 
natural gas), and that are expected to use that type of fuel (or mixed 
fuel) in service, a commercially available fuel of that type shall be 
used for exhaust emission testing. The manufacturer shall propose for 
the Administrator's approval a set of test fuel specifications that 
take into account the engine design and the properties of commercially 
available fuels. The Administrator may require testing on each fuel if 
it is designed to operate on more than one fuel. These test fuel 
specifications shall be reported in the application for certification.
    13. A new [sect] 94.109 is added to subpart B to read as follows:


[sect] 94.109  Test procedures for Category 3 marine engines.

    (a) Gaseous emissions shall be measured using the test procedures 
specified by Section 5 of the MARPOL Technical Code (incorporated by 
reference at [sect] 94.5), except as otherwise specified in this 
paragraph (a).
    (1) The inlet air and exhaust restrictions shall be set at the 
average in-use levels.
    (2) Measurements are valid only for sampling periods in which the 
temperature of the charge air entering the engine is within 3[deg]C of 
the temperature that would occur in-use under ambient conditions 
(temperature, pressure, and humidity) identical to the test conditions. 
You may measure emissions within larger discrepancies, but you may not 
use those measurements to demonstrate compliance.
    (3) Engine coolant and engine oil temperatures shall be equivalent 
to the temperatures that would occur in-use under ambient conditions 
identical to the test conditions.
    (4) Exhaust flow rates shall be calculated using measured fuel flow 
rates.
    (5) Standards used for calibration shall be traceable to NIST 
standards. (Other national standards may be used if they have been 
shown to be equivalent to NIST standards.)
    (6) Tests may be performed at any representative pressure and 
humidity levels. Tests may be performed at any

[[Page 37604]]

ambient air temperature from 13[deg]C to 30[deg]C and any charge air 
cooling water temperature from 17[deg]C to 27[deg]C.
    (7) The test fuel shall be a residual fuel meeting the 
specifications of [sect] 94.108. Distillate fuel may be used for 
certification testing. Emissions shall be corrected for the nitrogen 
content of the fuel, according to [sect] 94.108(e)(3).
    (8) Test cycles shall be denormalized based on the maximum test 
speed described in [sect] 94.107.
    (b) Analyzers meeting the specifications of either 40 CFR part 86, 
subpart N, or ISO 8178-1 (incorporated by reference at [sect] 94.5) 
shall be used to measure THC and CO.
    (c) The Administrator may specify changes to the provisions of 
paragraph (a) of this section that are necessary to comply with the 
general provisions of [sect] 94.102.
    14. A new [sect] 94.110 is added to subpart B to read as follows:


[sect] 94.110  Test procedures for verifying emission performance of 
Category 3 marine engines installed in a vessel.

    The test procedures of this section are designed to verify 
emissions performance of engines that have been installed in a vessel 
(and thus cannot be tested using an engine dynamometer) These 
procedures shall be used by vessel operators to verify compliance with 
the requirements of [sect][sect] 94.1003 and 94.1004. EPA may allow the 
use of these test procedures for other compliance demonstrations. For 
example, we will allow a manufacturer to use these test procedures to 
meet the production testing requirements of subpart F of this part, as 
long as they have been demonstrated to provide an equivalent 
demonstration of compliance to testing conducted in accordance with the 
test procedures of [sect] 94.109.
    (a) General requirement. All test systems shall be designed 
according to good engineering judgment to ensure accurate verification 
that the engine is complying with the requirements of this part.
    (b) Equipment. The measurement system shall be permanently 
installed in the vessel, and shall include the following:
    (1) A NOX analyzer with an accuracy of [plusmn]2 percent 
of point or better, and a precision of [plusmn]5 percent of point or 
better, under steady-state laboratory conditions. The analyzer must 
reach at least 90 percent of its final response within 5.0 seconds 
after any step change to the input concentration greater than or equal 
80 percent of full scale.
    (2) An engine speed gauge with an accuracy and precision of 
[plusmn] 0.1 rpm or better under steady-state laboratory conditions.
    (3) An engine output shaft torque gauge with an accuracy and 
precision of [plusmn]2 percent of point or better under steady-state 
laboratory conditions.
    (4) Other sensors as necessary to determine the operational 
conditions of the engine, such as a thermocouple in the exhaust stream.
    (c) Data logging. The measurement system shall automatically log 
all test results and other test parameters. The data logger must also 
automatically log all adjustments to the engine that could affect 
emissions. The position of the vessel (e.g., longitude and latitude) 
must be recorded with all logs of test results and adjustments.
    (d) Calibration. The measurement system shall include ports for 
zero and span gases. The analyzers shall be zeroed and spanned prior to 
each test. Full calibration of the system must be conducted as needed, 
according to good engineering judgment.
    (e) Test run. The NOX concentration in the exhaust shall 
be measured under normal operating conditions. Engine speed, engine 
torque, and other test parameters shall be measured simultaneously.
    (f) Compliance. The measured NOX concentration shall be 
compared to a table or algorithm supplied by the engine manufacturer. 
If the NOX concentration is at or below the level specified 
by the engine manufacturer for the test conditions (e.g., engine speed, 
engine torque, seawater temperature, nitrogen content of the fuel, 
etc.), then the engine is in compliance with the manufacturer 
specifications. If the NOX concentration is above the level 
specified by the engine manufacturer for the test conditions, then the 
engine is not in compliance, and must be readjusted and retested.

Subpart C--[Amended]

    15. Section 94.203 is amended by revising paragraph (d)(14) to read 
as follows:


[sect] 94.203  Application for certification.

* * * * *
    (d) * * *
    (14) (i) For Category 1 and Category 2 engines, a statement that 
the all the engines included in the engine family comply with the Not 
To Exceed standards specified in [sect] 94.8(e) when operated under all 
conditions which may reasonably be expected to be encountered in normal 
operation and use; the manufacturer also must provide a detailed 
description of all testing, engineering analyses, and other information 
which provides the basis for this statement.
    (ii) For Category 3 engines, a statement that the all the engines 
included in the engine family comply with the requirements of [sect] 
94.8(e) when operated under all conditions which may reasonably be 
expected to be encountered in normal operation and use; the 
manufacturer must also provide a detailed description of all testing, 
engineering analyses, and other information which provides the basis 
for this statement.
* * * * *
    16. Section 94.204 is amended by adding paragraph (f) to read as 
follows:


[sect] 94.204  Designation of engine families.

* * * * *
    (f) Category 3 engines shall be grouped into engine families as 
specified in Section 4.3 of the MARPOL Technical Code (incorporated by 
reference at [sect] 94.5), except as allowed in paragraphs (d) and (e) 
of this section.
    17. Section 94.205 is amended by revising paragraph (b) and adding 
paragraphs (e) and (f) to read as follows:


[sect] 94.205  Prohibited controls, adjustable parameters.

* * * * *
    (b)(1) Category 1 and Category 2 marine engines equipped with 
adjustable parameters must comply with all requirements of this subpart 
for any adjustment in the physically adjustable range.
    (2) Category 3 marine engines equipped with adjustable parameters 
must comply with all requirements of this subpart for any adjustment 
specified in paragraph (e) of this section
* * * * *
    (e) The following provisions apply for Category 3 marine engines:
    (1) For certification testing, engines shall be adjusted according 
to the manufacturer's specifications.
    (2) Manufacturers shall determine NOX concentration 
targets for in-use testing, consistent with the provisions of paragraph 
(f) of this section, that enable the operator to ensure that the engine 
is properly adjusted in use.
    (3) For production line testing and in-use testing, the engine 
shall be adjusted so that measured NOX concentration in the 
exhaust is no higher than engine manufacturer's target described in 
paragraph (e)(2) of this section.
    (f) For Category 3 marine engines, manufacturers must specify in 
the maintenance instructions how to adjust the engines to achieve 
emission performance equivalent to the performance demonstrated under 
the certification test conditions. This must

[[Page 37605]]

address all necessary adjustments, including those required to address 
differences in fuel quality or ambient temperatures. (Note: The engine 
must comply with the applicable emission standards of [sect] 94.8 for 
all conditions allowed by the test procedures described in [sect] 
94.109.)
    (1) Equivalent emissions performance is measured relative to 
optimal engine performance that could be achieved in the absence of 
emission standards (i.e., the calibration that result in the lowest 
fuel consumption and/or maximum firing pressure). Except as allowed by 
paragraph (f)(2) or (f)(3) of this section, equivalent performance 
requires the same percent reduction in NOX emissions from 
the optimal calibration as is achieved under the test conditions.
    (2) The adjustments may achieve a smaller reduction in 
NOX emissions under some conditions if the engine is 
calibrated the same at the different conditions. For example, if the 
engine uses injection timing retard and EGR to reduce emissions, then 
the manufacturer would need to retard timing the same number of degrees 
and use the same rate of EGR at the different conditions in order to 
qualify for the allowance in this paragraph (f)(2).
    (3) Under extraordinary circumstances, the manufacturer may 
petition EPA during certification to allow calibrations not meeting 
requirements of paragraph (f)(1) or (f)(2) of this section if the 
manufacturer demonstrates that compliance with those requirements is 
not feasible. If the manufacturer can comply with those requirements by 
derating the engine, then compliance is considered to be feasible.
    (4) Adjustments must achieve equivalent performance for all engine 
speeds other than the speeds associated with the certification test 
points. For engine speeds between test point speeds, this means that 
NOX emissions should generally follow a linear interpolation 
between test points.
    (5) Example: If, for the test calibration, you retard the start of 
injection timing by 2.0 degrees for the maximum test speed to reduce 
NOX emissions by 18 percent, and you retard the start of 
injection timing by 3.0 degrees for all other speeds to reduce 
NOX emissions by 25 percent, then for all other operational 
conditions:
    (i) For maximum engine speed, you must either retard timing by 2.0 
degrees or reduce NOX emissions by 18 percent or more 
relative to the calibration that would be used in the absence of 
emissions standards; and
    (ii) For other speeds, you must either retard timing by 3.0 degrees 
or reduce NOX emissions by 25 percent or more relative to 
the calibration that would be used in the absence of emissions 
standards.
    18. Section 94.209 is amended by adding introductory text to the 
section to read as follows:


[sect] 94.209  Special provisions for post-manufacture marinizers.

    The provisions of this section apply for Category 1 and Category 2 
engines, but not for Category 3 engines.
* * * * *
    19. Section 94.211 is amended by adding paragraphs (a)(3) and 
(e)(2)(iii), and revising paragraphs (h) introductory text and (j)(2) 
introductory text to read as follows:


[sect] 94.211  Emission-related maintenance instructions for 
purchasers.

    (a) * * *
    (3) For Category 3 engines, the manufacturer must provide in 
boldface type on the first page of the written maintenance instructions 
notice that [sect] 94.1004 requires that the emissions-related 
maintenance be performed as specified in the instructions (or 
equivalent).
* * * * *
    (e) * * *
    (2) * * *
    (iii) The maintenance intervals listed in paragraphs (e)(3) and 
(e)(4) of this section do not apply for Category 3.
* * * * *
    (h) For Category 1 and Category 2 engines, equipment, instruments, 
or tools may not be used to identify malfunctioning, maladjusted, or 
defective engine components unless the same or equivalent equipment, 
instruments, or tools will be available to dealerships and other 
service outlets and are:
* * * * *
    (j) * * *
    (2) All critical emission-related scheduled maintenance must have a 
reasonable likelihood of being performed in use. For Category 1 and 
Category 2 engines, the manufacturer must show the reasonable 
likelihood of such maintenance being performed in-use. Critical 
emission-related scheduled maintenance items which satisfy one of the 
conditions defined in paragraphs (j)(2)(i) through (j)(2)(vi) of this 
section will be accepted as having a reasonable likelihood of being 
performed in use.
* * * * *
    20. Section 94.214 is revised to read as follows:


[sect] 94.214  Production engines.

    Any manufacturer obtaining certification under this part shall 
supply to the Administrator, upon his/her request, a reasonable number 
of production engines, as specified by the Administrator. The engines 
shall be representative of the engines, emission control systems, and 
fuel systems offered and typical of production engines available for 
sale or use under the certificate. These engines shall be supplied for 
testing at such time and place and for such reasonable periods as the 
Administrator may require. This requirement does not apply for Category 
3 engines. Manufacturers of Category 3 engines, however, must allow EPA 
access to test engines and development engines to the extent necessary 
to determine that the engine family is in full compliance with the 
applicable requirements of this part.
    21. Section 94.217 is amended by adding paragraph (f) to read as 
follows:


[sect] 94.217  Emission data engine selection.

* * * * *
    (f) A single cylinder test engine may be used for certification of 
Category 3 engine families.
    22. Section 94.218 is amended by revising paragraph (d)(1) to read 
as follows:


[sect] 94.218  Deterioration factor determination.

* * * * *
    (d)(1) Except as allowed by paragraph (d)(2) of this section, the 
manufacturer shall determine the deterioration factors for Category 1 
and Category 2 engines based on service accumulation and related 
testing, according to the manufacturer's procedures, and the provisions 
of [sect][sect] 94.219 and 94.220. The manufacturer shall determine the 
form and extent of this service accumulation, consistent with good 
engineering practice, and shall describe this process in the 
application for certification.
* * * * *
    23. Section 94.219 is amended by revising paragraph (a) to read as 
follows:


[sect] 94.219  Durability data engine selection.

    (a) For Category 1 and Category 2 engines, the manufacturer shall 
select for durability testing, from each engine family, the engine 
configuration which is expected to generate the highest level of 
exhaust emission deterioration on engines in use, considering all 
exhaust emission constituents and the range of installation options 
available to vessel builders. The manufacturer shall use good 
engineering judgment in making this selection.
* * * * *

[[Page 37606]]

Subpart E--[Amended]

    24. Section 94.403 is amended by revising paragraph (a) to read as 
follows:


[sect] 94.403  Emission defect information report.

    (a) A manufacturer must file a defect information report whenever 
it determines, in accordance with procedures it established to identify 
either safety-related or performance defects (or based on other 
information), that a specific emission-related defect exists in 25 or 
more Category 1 marine engines, or 10 or more Category 2 marine 
engines, or 2 or more Category 3 engines or cylinders. No report must 
be filed under this paragraph for any emission-related defect corrected 
prior to the sale of the affected engines to an ultimate purchaser. 
(Note: These limits apply to the occurrence of the same defect, and are 
not constrained by engine family or model year.)
* * * * *

Subpart F--[Amended]

    25. Section 94.503 is amended by revising paragraphs (a) and (b), 
and adding paragraph (d) to read as follows:


[sect] 94.503  General requirements.

    (a) For Category 1 and Category 2 engines, manufacturers shall test 
production line engines in accordance with sampling procedures 
specified in [sect] 94.505 and the test procedures specified in [sect] 
94.506.
    (b) Upon request, the Administrator may also allow manufacturers to 
conduct alternate production line testing programs for Category 1 and 
Category 2 engines, provided the Administrator determines that the 
alternate production line testing program provides equivalent assurance 
that the engines that are being produced conform to the provisions of 
this part. As part of this allowance or for other reasons, the 
Administrator may waive some or all of the requirements of this 
subpart.
* * * * *
    (d) For Category 3 engines, the manufacturer shall test each 
production engine after it is installed in the vessel. The manufacturer 
may used the test procedures specified in [sect] 94.109, or alternate 
test procedures that provide an equivalent demonstration of production 
quality. For example, a manufacturer may use the short test procedures 
of [sect] 94.110, as long as the procedures can be demonstrated to 
provide an equivalent demonstration of compliance to testing conducted 
in accordance with the test procedures of [sect] 94.109.
    26. Section 94.505 is amended by revising paragraph (a) 
introductory text to read as follows:


[sect] 94.505  Sample selection for testing.

    (a) At the start of each model year, the manufacturer will begin to 
select engines from each Category 1 and Category 2 engine family for 
production line testing. Each engine will be selected from the end of 
the production line. Testing shall be performed throughout the entire 
model year to the extent possible. Engines selected shall cover the 
broadest range of production possible. Note: Each Category 3 production 
engine must be tested.
* * * * *
    27. Section 94.507 is amended by revising paragraph (a) to read as 
follows:


[sect] 94.507  Sequence of testing.

    (a) If one or more Category 1 or Category 2 engines fail a 
production line test, then the manufacturer must test two additional 
engines for each engine that fails.
* * * * *
    28. Section 94.508 is amended by revising paragraphs (d) and (e) 
introductory text to read as follows:


[sect] 94.508  Calculation and reporting of test results.

* * * * *
    (d)(1) If, subsequent to an initial failure of a Category 1 or 
Category 2 production line test, the average of the test results for 
the failed engine and the two additional engines tested, is greater 
than any applicable emission standard or FEL, the engine family is 
deemed to be in non-compliance with applicable emission standards, and 
the manufacturer must notify the Administrator within 2 working days of 
such noncompliance.
    (2) If a Category 3 engine fails a production line test, the engine 
family is deemed to be in non-compliance with applicable emission 
standards, and the manufacturer must notify the Administrator within 2 
working days of such noncompliance.
    (e) Within 30 calendar days of the end of each quarter in which 
production line testing occurs, each manufacturer must submit to the 
Administrator a report which includes the following information:
* * * * *
    29. Section 94.510 is amended by revising paragraph (b) and adding 
paragraph (c) to read as follows:


[sect] 94.510  Compliance with criteria for production line testing.

* * * * *
    (b) A Category 1 or Category 2 engine family is deemed to be in 
noncompliance, for purposes of this subpart, if at any time throughout 
the model year, the average of an initial failed engine and the two 
additional engines tested, is greater than any applicable emission 
standard or FEL.
    (c) For Category 3 engines, the engine family is deemed to be in 
noncompliance, for purposes of this subpart, whenever the average 
emission rate of any regulated pollutant is greater than the applicable 
emission standard for any test engine.

Subpart I--[Amended]

    30. Section 94.801 is amended by revising paragraph (b) to read as 
follows:


[sect] 94.801  Applicability.

* * * * *
    (b) Regulations prescribing further procedures for the importation 
of engines into the Customs territory of the United States are set 
forth in U.S. Customs Service regulations (19 CFR Chapter I).

Subpart J--[Amended]


[sect] 94.904  [Amended]

    31. Section 94.904 is amended by removing paragraph (b)(7).
    32. Section 94.906 is amended by revising the section heading and 
removing paragraph (d) to read as follows:


[sect] 94.906  Manufacturer-owned exemption, display exemption, and 
competition exemption.

* * * * *
    33. Section 94.907 is amended by revising paragraph (d) 
introductory text to read as follows:


[sect] 94.907  Engine dressing exemption.

* * * * *
    (d) New Category 1 and Category 2 marine engines that meet all the 
following criteria are exempt under this section:
* * * * *
    34. Subpart K, consisting of [sect][sect] 94.1001, 94.1002, 
94.1003, and 94.1004, is added to read as follows:
Subpart K--Requirements Applicable to Vessel Manufacturers, Owners, and 
Operators
Sec.
94.1001 Applicability.
94.1002 Definitions.
94.1003 Production and in-use testing.
94.1004 Maintenance, repair, and adjustment.

[[Page 37607]]

Subpart K--Requirements Applicable to Vessel Manufacturers, Owners, 
and Operators.


[sect] 94.1001  Applicability.

    The requirements of this subpart are applicable to manufacturers, 
owners, and operators of marine vessels that contain Category 3 engines 
subject to the provisions of subpart A of this part, except as 
otherwise specified.


[sect] 94.1002  Definitions.

    The definitions of subpart A of this part apply to this subpart.


[sect] 94.1003  Production and in-use testing.

    (a) Production testing. Vessel manufacturers must allow engine 
manufacturers to conduct the production line testing required by 
subpart F of this part.
    (b) In-use adjustments. Operators of in-use engines may adjust 
certified engines as specified by the engine manufacturer, provided 
that after the adjustment the engine's exhaust emissions are measured 
to verify that the engine is operating within the specifications 
certified by the manufacturer. For the purposes of this section, 
maintenance is considered to be a form of adjustment.
    (1) Emissions shall be measured using the short-test procedures 
specified in [sect] 94.110, or other test procedures that provide an 
equivalent demonstration of compliance.
    (2)(i) This paragraph (b)(2)(i) applies for vessels adjusted within 
175 nautical miles of the United States coastline entering or leaving a 
port of the United States.
    Operators of vessels whose next port of call is a port of the 
United States, and operators of vessels that are leaving a port of the 
United States, must ensure that the engine is operating according to 
the certifying manufacturer's specification after any adjustments are 
made to its engine within 175 nautical miles of the coastline of the 
United States. Operators shall verify that the engine is operating 
within the specifications certified by the manufacturer by measuring 
the engine's exhaust emissions in accordance with paragraph (b)(1) of 
this section.
    (ii) This paragraph (b)(2)(ii) applies for vessels adjusted beyond 
175 nautical miles of the United States coastline that will enter a 
port of the United States. Operators of vessels whose next port of call 
is a port of the United States must ensure that the engine is operating 
according to the certifying manufacturer's specification before coming 
within 175 nautical miles of the coastline of the United States. 
Operators shall verify that the engine is operating within the 
specifications certified by the manufacturer by measuring the engine's 
exhaust emissions in accordance with paragraph (b)(1) of this section.
    (3) All adjustments and verification testing must be recorded. 
These records must be made available to EPA upon request.
    (4) The requirements of this paragraph (b) do not apply for 
adjustments that could not affect emissions.
    (5) For the purposes of this section the ``coastline of the United 
States'' is the baseline from which the territorial sea of the United 
States is measured.
    (c) Manufacturers, owners and operators must allow emission tests 
to be conducted by the U.S. government, and must provide reasonable 
assistance to perform such tests.


[sect] 94.1004  Maintenance, repair, and adjustment.

    (a) Unless otherwise approved by the Administrator, all owners and 
operators of Category 3 engines subject to the provisions of this part 
shall ensure that all emission-related maintenance is performed, as 
specified in the maintenance instructions provided by the certifying 
manufacturer in compliance with [sect] 94.211 (or maintenance that is 
equivalent to the maintenance specified by the certifying manufacturer 
in terms of maintaining emissions performance). Owners or operators 
performing equivalent maintenance must have a reasonable technical 
basis for believing that the maintenance is equivalent to that 
described in the application for certification.
    (b) Unless otherwise approved by the Administrator, all maintenance 
and repair of Category 3 engines subject to the provisions of this part 
performed by any owner, operator or other maintenance provider, 
including maintenance that is not covered by paragraph (a) of this 
section, shall be performed, using good engineering judgement, in such 
a manner that the engine continues (after the maintenance or repair) to 
meet the emission standards it was certified as meeting prior to the 
need for maintenance or repair.
    (c) All adjustments of certified engines shall be performed as 
specified by the engine manufacturer, unless the vessel is operating 
beyond 175 nautical miles of the United States coastline. As is 
described in [sect] 94.1003 (b), engines on vessels operating beyond 
175 nautical miles of the United States coastline that are adjusted 
outside of the manufacturer's specifications, and that will enter a 
port of the United States, must be adjusted according to the engine 
manufacturer's specification before coming within 175 nautical miles of 
the United States coastline. For the purposes of this paragraph, the 
``coastline of the United States'' is the baseline from which the 
territorial sea of the United States is measured.
    (d) The owner of the engine shall maintain records of all 
maintenance and repair that could reasonably affect the emission 
performance of any Category 3 engine subject to the provision of this 
part.

Subpart L--[Amended]

    35. Section 94.1103 is amended by revising paragraph (a)(3)(i), and 
adding paragraphs (a)(2)(v) and (a)(7) to read as follows:


[sect] 94.1103  Prohibited acts.

    (a) * * *
    (2) * * *
    (v) For an owner or operator of a vessel using a Category 3 to 
refuse to allow the in-use testing described in [sect] 94.1003 to be 
performed.
    (3)(i) For a person to remove or render inoperative a device or 
element of design installed on or in a engine in compliance with 
regulations under this part, or to set any adjustable parameter to a 
setting outside of the range specified by the manufacturer, as approved 
in the application for certification by the Administrator (except as 
allowed by [sect][sect] 94.1003 and 94.1004).
* * * * *
    (7)(i) For an owner or operator of a vessel using a Category 3 
engine to fail or refuse to ensure that an engine is in compliance and 
is properly adjusted as set forth in [sect][sect] 94.1003 and 94.1004, 
(including a failure or refusal to conduct the required verification 
testing or keep the required records).
    (ii) For an owner or operator of a vessel using a Category 3 to 
fail to maintain or repair an engine as set forth in [sect] 94.1004.
* * * * *
    36. Section 94.1106 is amended by revising paragraphs (a)(1), 
(a)(4), and (a)(5) to read as follows:


[sect] 94.1106  Penalties.

    (a) * * *
    (1) A person who violates [sect] 94.1103(a)(1), (a)(4), (a)(5), 
(a)(6), or (a)(7) or a manufacturer or dealer who violates [sect] 
94.1103(a)(3)(i) or (iii) is subject to a civil penalty of not more 
than $25,000 for each violation unless modified by the Debt Collection 
Improvement Act (31 U.S.C. chapter 37) and/or regulations issued there 
under.
* * * * *

[[Page 37608]]

    (4) A violation with respect to [sect] 94.1103(a)(3)(ii) 
constitutes a separate offense with respect to each part or component. 
Each day of a violation with respect to [sect] 94.1103(a)(5) or (a)(7) 
constitutes a separate offense.
    (5) A person who violates [sect] 94.1103(a)(2), (a)(5) or (a)(7) is 
subject to a civil penalty of not more than $25,000 per day of 
violation unless modified by the Debt Collection Improvement Act and/or 
regulations issued there under.
* * * * *
    37. Section 94.1108 is amended by adding paragraph (d) to read as 
follows:


[sect] 94.1108  In-use compliance provisions.

* * * * *
    (d) The U.S. Customs Service or the U.S. Coast Guard may require 
the operator of any vessel that is subject to the provisions of this 
part to certify in writing that all of the vessel's engines conform to 
the applicable provisions of this part.

[FR Doc. 02-11736 Filed 5-28-02; 8:45 am]
BILLING CODE 6560-50-P