[Federal Register Volume 68, Number 40 (Friday, February 28, 2003)]
[Rules and Regulations]
[Pages 9746-9789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3065]



[[Page 9745]]

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Part II





Environmental Protection Agency





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40 CFR Parts 9 and 94



Control of Emissions From New Marine Compression-Ignition Engines at or 
Above 30 Liters Per Cylinder; Final Rule

  Federal Register / Vol. 68, No. 40 / Friday, February 28, 2003 / 
Rules and Regulations  

[[Page 9746]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9 and 94

[AMS-FRL-7448-9]
RIN 2060-AJ98


Control of Emissions From New Marine Compression-Ignition Engines 
at or Above 30 Liters Per Cylinder

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: In this action, we are adopting emission standards for new 
marine diesel engines installed on vessels flagged or registered in the 
United States with displacement at or above 30 liters per cylinder. 
These standards are equivalent to the internationally negotiated 
standards for oxides of nitrogen and will be enforceable under U.S. law 
for new engines built on or after January 1, 2004. The certification 
and compliance program we are adopting is similar to the 
internationally negotiated program, but contains additional provisions 
reflecting certain Clean Air Act-specific compliance provisions and the 
related need to adopt test procedures designed to achieve the emission 
reductions called for under Clean Air Act section 213. These standards 
will apply until we adopt a second tier of standards in a future 
rulemaking. In developing that future rulemaking, which will be 
completed no later than April 27, 2007, we will consider the state of 
technology that may permit deeper emission reductions and the status of 
international action for more stringent standards. We will also 
consider the application of such a second tier of standards to engines 
on foreign vessels that enter U.S. ports.
    We are also adopting additional standards for new engines with 
displacement at or above 2.5 liters per cylinder but less than 30 
liters per cylinder. These standards, which are currently voluntary, 
are also equivalent to the internationally negotiated standards for 
oxides of nitrogen. The standards will apply through 2006. Beginning in 
2007, the Tier 2 standards we finalized for these engines in 1999 will 
go into effect (64 FR 73300, December 29, 1999; 40 CFR part 94).

DATES: This final rule is effective April 29, 2003.
    The incorporation by reference of certain publications listed in 
this regulation is approved by the Director of the Federal Register as 
of April 29, 2003.

ADDRESSES: Materials relevant to this rulemaking are contained in 
Public Docket Number A-2001-11 at the following address: EPA Docket 
Center (EPA/DC), Public Reading Room, Room B-102, EPA West Building, 
1301 Constitution Avenue, NW., Washington, DC. The EPA Docket Center 
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, except on government holidays. You can reach the Air Docket and 
Reading Room by telephone at (202) 566-1742 and by facsimile at (202) 
566-1741. You may be charged a reasonable fee for photocopying docket 
materials, as provided in 40 CFR part 2.
    For further information on electronic availability of this action, 
see SUPPLEMENTARY INFORMATION below.

FOR FURTHER INFORMATION CONTACT: U.S. EPA, Office of Transportation and 
Air Quality, Assessment and Standards Division hotline, (734) 214-4636, 
[email protected].

SUPPLEMENTARY INFORMATION: 

Affected Entities

    This action will affect companies and persons that manufacture, 
sell, or import into the 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 or operators of such U.S. vessels. Further requirements apply to 
companies and persons that rebuild or maintain these engines. Affected 
categories and entities include the following:

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               Category                        NAICS Code 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, 422720...........  Petroleum Bulk Stations and Terminals; Petroleum and Petroleum 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 regulations. You may direct questions 
regarding the applicability of this action as noted 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 marine compression-ignition 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 Web 
sites, http://www.epa.gov/otaq/marine.htm and http://www.epa.gov/otaq.marinesi.htm. In addition, we recently adopted emission standards 
for recreational marine diesel engines (67 FR 68242, November 8, 2003). 
This final rule relies in part on information obtained for those 
rulemakings, which can be found in Public Dockets A-92-28, A-97-50, and 
A-2000-01. 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, Final Regulatory Support 
Document, and other rulemaking documents are available electronically 
from the EPA Internet Web site. This service is free of charge, except 
for any cost incurred for

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internet connectivity. The electronic version of this final 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. Background
    B. How Is This Document Organized?
    C. What Requirements Are We Finalizing?
    1. Category 3 Marine Diesel Engines
    2. Category 1 and Category 2 Marine Diesel Engines
    3. Foreign-Trade Exemption
    4. Fuel Controls
    D. Why is EPA Taking This Action?
    1. What Are the Health and Welfare Effects of Category 3 Marine 
Diesel Engine Emissions?
    2. What Is the Inventory Contribution From the Marine Diesel 
Engines That Are Subject to This Rule?
    E. What Are the Internationally Negotiated Standards and What Is 
the Status of the U.S. Ratification of Annex VI?
    F. Recent European Union Action
    G. Statutory Authority
II. Which Engines Are Covered?
    A. What is a Marine Vessel?
    B. What are Category 1, 2, and 3 Marine Diesel Engines?
    C. What is a New Marine Diesel Engine?
    1. ``New'' Engines on Vessels Flagged or Registered in the 
United States
    2. ``New'' Engines on Vessels Flagged or Registered Elsewhere
    D. What is a New Marine Vessel?
    1. Newly Manufactured Vessel
    2. Modification of an Existing Vessel with Category 1 or 
Category 2 Main Propulsion Engines
    3. Modification of an Existing Vessel with Category 3 Main 
Propulsion Engines
    E. Is EPA Retaining the Foreign-Trade Exemption?
III. Standards and Technological Feasibility
    A. What are the new emission standards?
    B. When do the engine emission standards apply?
    C. What technologies will engine manufacturers use to meet the 
Tier 1 emission standards?
    D. Voluntary Low-Emission Standards
IV. Future Actions
    A. Future Rulemaking for Engine Standards
    1. What Is the Timetable for the Future Rule?
    2. What Standards Will EPA Consider in the Future Rule?
    3. What Technologies Will EPA Consider in the Future Rule?
    4. Will the International Community Also Consider More Stringent 
Standards?
    B. Fuel controls
    1. Is EPA Adopting Fuel Requirements?
    2. What Are the MARPOL Annex VI Fuel Provisions?
    3. How Will SOX Emission-Control Areas Be Designated 
in the United States?
    4. Are There Other Fuel-based Controls That May Be Considered?
V. Demonstrating Compliance
    A. Overview of Certification
    1. How do I certify my engines?
    2. How are these certification requirements different from those 
of the NOX Technical Code?
    3. How does a certificate of conformity relate to a Statement of 
Voluntary Compliance or an EIAPP?
    4. What are the roles of the engine manufacturer and ship owner 
after the engine is installed?
    B. Other Certification and Compliance Issues
    1. How are engine families defined?
    2. Which engines are selected for testing?
    3. How does EPA treat adjustable parameters?
    4. How must engines be labeled?
    5. How does EPA ensure durable emission controls?
    6. What are the manufacturer's responsibilities for the emission 
warranty and defect reporting?
    7. What are deterioration factors?
    8. What requirements apply to in-use maintenance?
    9.What requirements apply to rebuilding engines?
    10.What are the prohibited acts and related requirements?
    11.What general exemptions apply?
    12.What regulations apply for imported engines?
    13.What are a manufacturer's recall responsibilities?
    14.What responsibilities apply to ship owners and operators?
    C. Test Procedures for Category 3 Marine Engines
    1. What duty cycle do I use to test my engines?
    2. How do I account for variable test conditions?
    3. How does laboratory testing relate to actual in-use 
operation?
    D. Comparison to NOX Technical Code Compliance 
Requirements
    1. How are EPA's compliance requirements different from the 
NOX Technical Code requirements?
    2. Can a manufacturer comply with EPA requirements and Annex VI 
requirements at the same time?
    E. Technical Amendment to 40 CFR Part 94
    F. Compliance Issues To Be Considered for Future Rulemaking
    1. What are EPA's concerns about parameter adjustment?
    2. What are EPA's concerns about off-cycle emissions?
    3. What are EPA's concerns about the fuel used for emission 
testing?
    4. What are EPA's concerns about production variability?
VI. Projected Impacts
VII. The Blue Cruise Program
VIII. Public Participation
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Congressional Review Act

I. Introduction

A. Background

    Marine diesel engines can be significant contributors to local 
ozone, carbon monoxide (CO), and particulate matter (PM) levels, 
particularly in commercial ports and along coastal areas.1,2 
This rule addresses these air pollution concerns by adopting national 
emission standards for the first time for marine diesel engines with 
per-cylinder displacement at or above 30 liters or more that are 
installed on vessels flagged or registered in the United States.\3\ 
These engines, also known as Category 3 marine diesel engines, are very 
large marine engines used primarily for propulsion power on ocean-going 
vessels such as container ships, tankers, bulk carriers, and cruise 
ships. Category 3 marine diesel engines have not previously been 
regulated under our nonroad engine programs. This rule also adopts 
standards for marine diesel engines with per-cylinder displacement at 
or above 2.5 liters per cylinder but less than 30 liters per

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cylinder installed on vessels flagged or registered in the United 
States.
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    \1\ References to diesel-cycle engines, also referred to as 
``diesel engines'' in this document are intended to cover a 
particular kind of engine technology, i.e., compression-ignition 
combustion. Compression-ignition engines are typically operated on 
diesel fuel, though other fuels, such as compressed natural gas, may 
also be used. This contrasts with otto-cycle engines (also called 
spark-ignition or SI engines), which typically operate on gasoline. 
The requirements set out in this action apply only to compression-
ignition engines.
    \2\ Ground-level ozone, the main ingredient in smog, is formed 
by complex chemical reactions of volatile organic compounds (VOC) 
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 emission standards for 
hydrocarbons. VOCs can also be part of the secondary formation of 
PM.
    \3\ This final rule applies to ``new'' marine diesel engines and 
to ``new'' marine vessels that include marine diesel engines. In 
general, a ``new'' marine diesel engine or a ``new'' marine vessel 
is one that is produced for sale in the United States or that is 
imported into the United States (See section II, below). The 
emission standards established in this final rule, therefore, will 
typically apply to marine diesel engines that are installed on 
vessels flagged or registered in the United States.
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    The emission-control program we are adopting in this rule is a 
continuation of the process of establishing emission standards for 
nonroad engines and vehicles under Clean Air Action section 213(a).\4\
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    \4\ Section I of the preamble for our proposal contains an 
extensive description of the regulatory background for this 
rulemaking, which we are not repeating here (67 FR 37548, May 29, 
2002).
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    This is our third action for emission standards for marine diesel 
engines above 37 kW. In our first action, in 1999, we adopted emission 
standards for commercial marine engines above 37 kilowatts (kW) (64 FR 
73300, December 29, 1999; 40 CFR part 94). The standards adopted in 
that rule consist of mandatory standards, referred to as our Tier 2 
standards, that apply to engines above 37 kW with per-cylinder 
displacement up to 30 liters (also known as Category 1 and Category 2 
marine diesel engines).\5\ These Tier 2 standards apply to oxides of 
nitrogen (NOX), hydrocarbon (HC), PM and CO emissions and go 
into effect in 2004-2007, depending on engine size. Our Tier 2 marine 
diesel engine standards are expected to achieve a 32-percent reduction 
in NOX emissions for Category 1 and Category 2 marine diesel 
engines by 2030 relative to uncontrolled levels. The Tier 2 standards 
for Category 1 and Category 2 marine diesel engines also contain PM 
standards that are expected to achieve a 26-percent reduction in PM 
emissions by 2030. We did not adopt mandatory emission standards for 
Category 3 marine diesel engines in 1999. Manufacturers of those 
engines were expected to comply voluntarily with internationally 
negotiated NOX standards.
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    \5\ EPA treats voluntary standards equivalent to the 
internationally negotiated oxides of nitrogen standards as Tier 1 
standards. The internationally negotiated standards are contained in 
MARPOL Annex VI (see footnote 5 and associated text). When they go 
into force, the internationally negotiated standards will apply to 
new engines above 130 kW installed on vessels constructed on or 
after January 1, 2000 and engines that undergo a major conversion on 
or after January 1, 2000.
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    In our second action for marine diesel engines above 37 kW, we 
adopted standards for recreational marine diesel engines (67 FR 68242, 
November 8, 2002). These numerical standards are identical to those we 
finalized for commercial marine diesel engines in 1999. However, the 
engines are tested using a different duty cycle and the effective date 
for recreational marine diesel engines is 2006-2009, depending on 
engine size.
    This third action for marine diesel engines above 37 kW was 
proposed on May 29, 2002 (67 FR 37548). At a public hearing on June 13 
and during the public comment period, which ended on July 16, 2002, we 
heard from over 50 commenters. The emission-control program we are 
adopting in this action follows from the approach described in our 
proposal, though we have made numerous adjustments in response to the 
comments and other information received since the proposal.

B. How Is This Document Organized?

    After this introductory section, Section II describes the set of 
engines that will be required to comply with the standards. Section III 
contains the standards we are finalizing. Section IV describes the 
future rulemaking we are committing to pursue. Section V describes 
various compliance provisions. Section VI summarizes the projected 
impacts of the standards. Section VII gives an update on the Blue 
Cruise program we described in our proposal. Finally, Sections VIII and 
IX contain information about how we satisfied our administrative 
requirements and about the statutory provisions for this final rule.
    Additional information on many of these topics can be found in the 
Final Regulatory Support Document and the Summary and Analysis of 
Comments. These documents and all the comments we received are in 
Docket A-2001-11.
    The remainder of this section summarizes the new requirements and 
the air quality need for the rulemaking. We also provide an update on 
the status of U.S. ratification of MARPOL Annex VI.

C. What Requirements Are We Finalizing?

    We are adopting emission standards for new marine diesel engines 
installed on vessels flagged or registered in the United States. We are 
adopting standards for the first time for new Category 3 marine diesel 
engines, beginning in 2004. We are also adopting additional standards 
for some Category 1 and all Category 2 marine diesel engines, also 
beginning in 2004. This section presents a brief description of this 
emission-control program. More details can be found in Sections III and 
IV of this preamble and in the Final Regulatory Support Document.
1. Category 3 Marine Diesel Engines
    Clean Air Act section 213(a)(3) requires EPA to adopt regulations 
that contain standards concerning certain pollutants reflecting the 
greatest degree of emission reductions achievable through the 
application of technology that will be available, taking into 
consideration the availability and costs of the technology, and noise, 
energy, safety factors and existing motor vehicle standards. EPA is 
also to revise these standards from time to time. The emission-control 
program we are adopting in this rule meets these criteria through a 
two-part approach. First, we are adopting near-term Tier 1 standards 
that will go into effect immediately based on readily available 
emission-control technology. Second, we are adopting regulations that 
set a schedule for a future rulemaking to assess and adopt an 
appropriate second tier of standards. We recognize that manufacturers 
can achieve additional reductions with more lead time than is provided 
by the Tier 1 standards. They can do this by expanding the use and 
optimization of in-cylinder controls, combined with the significant 
emission reductions that may be achievable with advanced technologies 
such as selective catalytic reduction or water injection. We believe, 
however, that it is appropriate to defer a final decision on the 
longer-term Tier 2 standards to a future rulemaking. While there is a 
certain amount of information available about the advanced technologies 
at this time, there are several outstanding technical issues concerning 
the widespread commercial use of these technologies. Deferring the Tier 
2 standards to a second rulemaking will allow us to obtain important 
additional information on the use of the these advanced technologies 
that we expect to become available over the next few years. This new 
information may include (1) new developments as manufacturers continue 
to make various improvements to the technology and address any 
remaining concerns, (2) data or experience from recently initiated in-
use installations using the advanced technologies, and (3) information 
from longer-term in-use experience with the advanced technologies that 
will be especially helpful for evaluating the long-term durability of 
emission controls. We believe the projected time frame for the future 
rulemaking is appropriate to allow us to make the best use of 
information that will be available to have a sound technical basis for 
assessing the technological capabilities of emission-control systems 
that include

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advanced technologies. We will then be best situated to make a 
technology-based decision that maximizes emission reductions from these 
engines, taking into consideration cost and other appropriate factors.
    While deferring adoption of the Tier 2 standards to a future 
rulemaking is appropriate for the reasons described above, an 
additional reason supporting this approach is to pursue further 
negotiations in the international arena to achieve more stringent 
global emission standards for marine diesel engines. As discussed 
below, adopting appropriate international standards has the potential 
to maximize the control of emissions from U.S. and foreign vessels.
    The near-term Tier 1 standards we are adopting are equivalent to 
the internationally negotiated NOX standards established by 
the International Maritime Organization (IMO) in Annex VI to the 
International Convention on the Prevention of Pollution from Ships, 
1973, as Modified by the Protocol of 1978 Relating Thereto (more 
commonly referred to as MARPOL or MARPOL 73/78; the standards are 
referred to as the Annex VI NOX standards).\6\ As explained 
in Section III below and in the Final Regulatory Support Document, 
these standards are achievable almost immediately, with less than one 
year of lead time, because manufacturers are already achieving and 
certifying to these standards under our Voluntary Statement of 
Compliance program for Annex VI. These near-term standards are being 
achieved through the application of currently available technology, 
including optimized turbocharging, higher compression ratios, and 
optimized fuel injection. The certification and compliance program we 
are adopting is similar to the internationally negotiated program, but 
contains additional provisions reflecting certain Clean Air Act-
specific compliance provisions and the related need to adopt test 
procedures designed to achieve the emission reductions called for under 
Clean Air Act section 213. These certification requirements are 
described in Section V of this preamble. These Tier 1 standards are 
expected to result in negligible costs because engine manufacturers are 
already producing engines that meet the MARPOL Annex VI NOX 
limits. Engine manufacturers should not have to engage in additional 
research and development to achieve these standards. Recognizing that 
some additional lead time is needed for manufacturers in some cases, we 
are including an interim provision that will allow manufacturers to use 
their Annex VI test data to show compliance with the Tier 1 standards.
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    \6\ 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-97-50, 
Document II-B-01. Copies of updated versions can be obtained from 
the International Maritime Organization (http://www.imo.org).
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    We considered, but rejected, setting near-term Tier 1 standards 
that would require a level of emission control greater than that 
necessary to meet the MARPOL Annex VI NOX limits, for a 
combination of reasons. We concluded that setting more stringent near-
term Tier 1 standards would likely delay achieving greater 
environmental benefits in the longer term. The additional lead time 
that would be necessary to set a Tier 1 standard based on further use 
and optimization of in-cylinder control would lead to two separate--and 
possibly conflicting--design steps, one for Tier 1 and a second for 
Tier 2. Dividing manufacturers' resources this way has the potential to 
delay the Tier 2 standards. For example, manufacturers would 
potentially need to make initial changes to in-cylinder designs, then 
pursue an additional development program to optimize the in-cylinder 
technologies for controlling emissions in conjunction with advanced 
technologies. We believe the best route to achieving the maximum 
reductions from Category 3 marine engines is a near-term Tier 1 
standard based on the use of existing technologies, followed by a Tier 
2 rulemaking in the next few years that focuses on designing the 
optimum combination of in-cylinder and advanced technology to reduce 
emissions from these engines.
    The second phase of our emission-control program for Category 3 
marine diesel engines will consist of more stringent standards that 
reflect the application of advanced emission-control technologies and 
further optimization of in-cylinder controls. We understand that 
further use and optimization of in-cylinder control can achieve 
emission reductions beyond the levels needed to meet the Tier 1 
standards. As discussed in the Final Regulatory Support Document, we 
believe that manufacturers can, with additional lead time, make greater 
use and optimization of in-cylinder controls to reduce emissions at 
least 10 to 15 percent below Tier 1 levels. It is not clear at this 
time that in-cylinder controls alone could reduce emissions 30 percent 
below Tier 1 levels. However, in combination with advanced 
technologies, emission reductions should be greater than 30 percent 
below Tier 1 levels. In the Tier 2 rulemaking, we therefore expect to 
focus on standards that would be based on achieving greater emission 
reductions through optimizing in-cylinder controls and incorporating 
advanced technologies such as SCR or water. As discussed above, 
adopting Tier 2 standards at this time based only on in-cylinder 
controls could lead to two separate and possibly conflicting design 
steps, potentially delaying introduction of advanced emission-control 
technologies and their anticipated emission reductions.
    At this time, however, there are still several outstanding 
technical issues involving the use of these advanced emission-control 
technologies. For example, there are technical issues concerning the 
impacts of fuel sulfur levels on emissions, the ability of these 
technologies to achieve emission reductions at low engine loads, and 
their impacts on PM emissions. With regard to fuel-sulfur content, most 
of the demonstration engines that currently use these technologies are 
operated on fuel with a sulfur content ranging from 5,000 to 10,000 
ppm. However, the average sulfur content of fuel used by Category 3 
marine diesel engines is 27,000 ppm, and it can be as high as 45,000 
ppm. At this time, it is not clear how engines will perform with this 
higher sulfur fuel and what types of adjustments will need to be made 
to accommodate the higher sulfur. Also, it may be the case that this 
technology will perform well with fuel at 15,000 ppm, which is the 
maximum sulfur content allowable for ships operating in SOX 
Emission Control Areas pursuant to Annex VI. With regard to emissions 
at low load, some studies suggest that advanced technologies may not 
perform as well when the engine is not operating at its optimal fuel-
consumption rate. This is important because engines typically operate 
at low load in port. Once we understand this dynamic better we will be 
able to evaluate the extent to which it can be addressed technically. 
With regard to PM emissions, some concerns have been raised that using 
these advanced technologies to control NOX emissions may 
raise PM emissions. Again, once we understand this dynamic better we 
will be able to evaluate the extent to which it can be addressed 
technically. Part of this analysis will entail developing a method to 
measure PM emissions from these very large engines. Each of these 
issues is discussed in greater detail in Section IV and in the Final 
Regulatory Support Document.
    Engine manufacturers are currently working on many of these issues. 
Water emulsification has been applied for

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some time on the land-based counterparts of these engines, which are 
primarily used in stationary engines for power generation. Direct water 
injection and SCR have also been applied in recent years to several 
engines operating on vessels. These projects are discussed in Section 
IV and in Chapter 5 of the Final Regulatory Support Document; an 
Appendix to Chapter 5 provides a list of these vessels. Most of the 
engines using these technologies have been installed in the past five 
years. Many of them are on passenger ferries and most are on ships that 
operate in European waters, with many being delivered only since 1999. 
To date, the advanced technologies have only been applied in cases 
where the operating characteristics of the vessels are compatible with 
the technology. For instance, SCR has primarily been installed on 
vessels using medium-speed engines, which have higher exhaust 
temperatures than low-speed engines, and where very low-sulfur fuel is 
available. Through these projects, engine manufacturers are 
experimenting with different emission-control techniques and learning 
about the long-term operation and durability of these systems. These 
projects will also provide information about the emission levels that 
can be achieved through the application of these technologies.
    Based on these outstanding technical issues, we believe it is not 
appropriate at this time to attempt to project the engineering answers 
and solutions to these technical issues. By waiting a few years, we 
will be able to benefit from the manufacturers' experience as they 
continue to develop and apply these technologies on marine diesel 
engines. We can also develop methods to assess the impact of fuel 
sulfur on emissions, to assess the emission-control potential of these 
technologies on emissions at low loads, and to measure and address PM 
emissions. Consequently, we plan to evaluate more stringent Tier 2 
standards in a future rulemaking. In the 2004-2005 time frame, engine 
manufacturers will have five or more years of data on a significant 
number of vessels. During this period, we will work with manufacturers 
to learn more about the advanced technologies discussed above and the 
steps they are taking to resolve operational and technological issues. 
With this information, we should be in a significantly better position 
to determine the emission levels that are achievable and appropriate, 
given appropriate lead time for the use of these advanced technologies.
    We have concluded that the standards in this final rule (which are 
equivalent to the internationally negotiated NOX standards 
established under MARPOL Annex VI) are the appropriate controls for the 
near term. Requiring additional near-term reductions from further use 
and optimization of in-cylinder controls would potentially delay and 
disrupt the second tier of standards, which will focus on emission-
control systems that rely on optimized in-cylinder controls and 
advanced technologies to achieve significantly greater reductions. We 
have also concluded that it is appropriate to defer adoption of Tier 2 
standards to a future rulemaking to allow us to take into account 
several important outstanding technical issues concerning the use of 
these advanced technologies and address the potential to combine in-
cylinder controls with the advanced technologies.
    We expect additional information to become available in the next 
few years that will allow us to more reliably and appropriately 
determine the level of emission control that is achievable and 
appropriate for such technologies, given appropriate lead time.
    Based on this, we conclude that the near-term Tier 1 emission 
standards in this final rule satisfy the criteria of Clean Air Act 
section 213(a)(3) at this time. Section 213(a)(3) directs EPA to 
promulgate emission standards and from time to time review and revise 
those standards. This final rule adopts near-term standards and puts 
EPA on a schedule to review, and if appropriate, revise those standards 
in accordance with the criteria in section 213(a)(3). We believe this 
two-step approach is the most appropriate means to address emissions 
from Category 3 marine engines in the near-term in the face of 
incomplete information and the significant changes underway in applying 
emission-reduction technology to very large marine engines.
    We are including a regulatory provision in 40 CFR 94.8 that 
establishes a schedule for a future rulemaking to promulgate additional 
emission standards for Category 3 marine engines that we determine are 
appropriate under section 213(a)(3). This rulemaking will reassess the 
emission standards in light of the developments in and experience with 
applying emission-reduction technology to Category 3 marine engines. 
The standards in this final rule will remain in effect until we modify 
them in a future rulemaking. We are committing to take final action on 
appropriate standards for marine diesel engines by April 27, 2007, and 
to issue a proposal no later than approximately one year before. This 
future rulemaking will allow us to exercise the discretionary authority 
under Clean Air Act section 213(a)(3), which directs EPA to ``from time 
to time revise'' regulations under that provision. EPA considers this 
time as necessary and appropriate to properly take into consideration 
additional information expected to become available about emerging 
technologies, as well as any developments in the international 
negotiations for more stringent emission limits.
    In addition to allowing us to benefit from information that engine 
manufacturers continue to gather on these advanced technologies, 
delaying adoption of the Tier 2 until a future rule allows us to 
facilitate negotiations for appropriate consensus international 
standards. Adoption of international standards has the potential to 
maximize the level of emission reductions achieved from emission 
controls on U.S. and foreign vessels. For example, international 
standards set at an appropriate level would remove the objections to 
controlling emissions from engines on foreign vessels. Since engines on 
foreign-flag vessels account for the majority of emissions from 
Category 3 marine diesel engines impacting U.S. air quality, successful 
negotiation of international standards that achieve the greatest 
emission reduction feasible would result in the greatest improvement to 
air quality here in the U.S. and around the world. Addressing the long-
term standards in the future rulemaking could facilitate such 
international action, but will also allow us to proceed expeditiously 
on our own if appropriate international standards are not adopted in a 
timely way.
    The United States has already taken a leadership role for more 
stringent standards at the International Maritime Organization and has 
requested that organization to begin consideration of a second tier of 
international standards. Those discussions are likely to begin in 2004, 
after Annex VI goes into forces, or as part of a review process if 
enough countries have not ratified it by the end of 2003.
2. Category 1 and Category 2 Marine Diesel Engines
    We proposed to adopt a first tier of standards equivalent to the 
internationally negotiated NOX limits for marine diesel 
engines with per-cylinder displacement of 2.5 to 30 liters. We are 
adopting these standards in this action. By adopting these standards as 
Tier 1 standards, we are making them mandatory and enforceable for new 
engines on U.S. vessels. The Tier 1 standards will begin to apply in 
2004 and will continue to apply through 2006. Beginning in 2007, the 
Tier 2

[[Page 9751]]

standards we finalized in 1999 will go into effect.
    We proposed to apply all the Tier 2 certification and compliance 
requirements to the proposed Tier 1 standards as well. After 
considering the public comments, we are finalizing this approach with 
two exceptions. First, we allow manufacturers to use test data 
generated using the procedures in the NOX Technical Code on 
an interim basis. Second, we will not require manufacturers to perform 
production-line testing on their Tier 1 engines.
3. Foreign-Trade Exemption
    We are eliminating the foreign-trade exemption for all marine 
diesel engines, which was available for engines installed on U.S. 
vessels that spend less than 25 percent of total operating time within 
320 kilometers of U.S. territory.
4. Fuel Controls
    We are not setting standards for the fuel used by marine diesel 
engines in this final rule. With regard to the residual fuel used by 
Category 3 marine diesel engines, we remain concerned that regulating 
fuel sold in the United States would not necessarily ensure that lower-
sulfur fuel is used in U.S. waters, since ships could purchase their 
fuel in other countries. To obtain the benefits of lower-sulfur fuel, 
we plan to investigate designation of one or more areas in the United 
States as SOx Emission Control Areas pursuant to the 
international process for this purpose. This is described further in 
Section IV.B.
    With regard to the fuel used by Category 1 and Category 2 marine 
diesel engines, we are considering distillate marine diesel fuel 
controls as part of the nonroad diesel rule that is currently under 
development.

D. Why Is EPA Taking This Action?

    Category 3 marine diesel engines generate NOX, HC, PM 
and CO emissions that contribute to ozone and CO levels above the 
National Ambient Air Quality Standards (NAAQS) for ozone and CO (i.e., 
they contribute to ozone and CO nonattainment) as well as adverse 
health effects associated with ambient concentrations of PM. As 
described in more detail below and in the Final Regulatory Support 
Document, Category 3 marine diesel engines accounted for about 1.6 
percent of nationwide mobile source NOX emissions in 2000. 
They also accounted for about 2.8 percent of nationwide mobile source 
PM emissions in 2000. These percentages are expected to increase as a 
result of increased trade and decreases in emissions from other nonroad 
sources. The contribution of Category 3 marine diesel engines to 
nationwide mobile source HC and CO levels is small, at 0.1 and 0.02 
percent, respectively, in 2000.
    The inventory contribution of Category 3 marine diesel engines can 
be higher on a port-specific basis. We estimate that these engines 
contribute about 7 percent of mobile source NOX in Baton 
Rouge/New Orleans and Wilmington, NC, and about 5 percent in Miami/ 
Fort Lauderdale and Corpus Christi. These ships can also have a 
significant impact on inventories in areas without large commercial 
ports. For example, they contribute about 37 percent of total area 
NOX in the Santa Barbara area.
1. What Are the Health and Welfare Effects of Category 3 Marine Diesel 
Engine Emissions?
    There are important public health and welfare concerns related to 
Category 3 marine diesel engine emissions.\7\ This section contains a 
summary of the general health effects associated with exposure to 
ozone, PM, and CO. Further information can be found in Chapter 1 of the 
Final Regulatory Support Document.
---------------------------------------------------------------------------

    \7\ Sections II and VI of the preamble for our proposal contain 
an extensive description of the air quality problems we are 
addressing in this rulemaking, which we are not repeating here.
---------------------------------------------------------------------------

    a. Ozone. 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 are a large subset of VOC, and to 
reduce mobile-source VOC levels we set maximum emission limits for 
hydrocarbon and particulate emissions.
    Based on a large number of studies, we have identified several key 
health effects caused when people are exposed to levels of ozone found 
today in many areas of the country. 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.
    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 at low levels.\8\ 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.
---------------------------------------------------------------------------

    \8\ 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 II-A-55. This document is also available at http://www.epa.gov/otaq/diesel.htm#documents.
---------------------------------------------------------------------------

    The current primary and secondary ozone National Ambient Air 
Quality Standard (NAAQS) is 0.12 ppm daily maximum 1-hour 
concentration, not to be exceeded more than once per year on average. 
EPA is replacing the previous 1-hour ozone standard with a new 8-hour 
standard. The new standard is set at a concentration of 0.08 parts per 
million (ppm), and the measurement period is 8 hours. Areas are allowed 
to disregard their three worst measurements every year and average 
performance over three years to determine if they meet the standard.

[[Page 9752]]

That is, the standard is set by the 4th highest maximum 8-hour 
concentration.
    Ground level ozone today remains a pervasive pollution problem in 
the United States. About 51 million people live in areas with design 
values above the level of the 1-hour ozone standard based on three 
years of data (1999-2001). In addition, about 111 million people live 
in areas with design values above the 8-hour ozone standard based on 
those three years of data. Approximately 61 million of these people 
live in areas with design values above the 8-hour standard but are 
below the design standard for the 1-hour ozone standard (i.e., they are 
attaining the 1-hour standard). The remainder of these people live in 
areas with design values above the 8-hour ozone standards but are above 
the design value for the 1-hour ozone standard (i.e., they are not 
attaining the 1-hour standard).\9\ This represents 291 counties with 
design values above the level of the 8-hour standard.
---------------------------------------------------------------------------

    \9\ Memorandum to Docket A-2001-11 from Fred Dimmick, Group 
Leader, Air Trends Group, ``Summary of Currently Available Air 
Quality Data and Ambient Concentrations for Ozone and Particulate 
Matter,'' December 3, 2002, Air Docket A-2001-11, Document No. IV-B-
3.
---------------------------------------------------------------------------

    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.\10\ Regionally, 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.
    b. Particulate Matter. Category 3 marine engines contribute to 
ambient levels of particulate matter through direct emissions of 
particulate matter, especially sulfates.
---------------------------------------------------------------------------

    \10\ 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, (incorporated into Docket A-2001-11 at Document 
II-A-58).
---------------------------------------------------------------------------

    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.\11\ 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.
---------------------------------------------------------------------------

    \11\ EPA (1996) Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information OAQPS Staff Paper. EPA452-R-96-013. Docket 
No. A-2001-11, Document II-A-52. 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 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.
    There are two indicators related to PM NAAQS. The first indicator 
is PM10, and the second is PM2.5. Concentrations 
above the PM2.5 standard are much more widespread than are 
violations of the PM10 standard, and emission reductions 
needed to attain the PM2.5 standards will also lead to 
attainment of the PM10 standards. The NAAQS for 
PM10 was 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 indicates that there are 8 serious and 58 moderate 
PM10 nonattainment areas with about 30 million people in 63 
mainly western counties. The NAAQS for PM2.5 indicator was 
established in 1997. According to these standards, the short term (24-
hour) standard is set at 65 [mu]g/m\3\ based on the 98th percentile 
averaged over three years. The long-term standard specifies an expected 
annual arithmetic mean not to exceed 15 [mu]g/m\3\ over three years.
    Current PM2.5 monitored values for 1999-2001, which 
cover about a quarter of the nation's counties, indicate that at least 
65 million people in 129 counties live in areas where design values of 
ambient fine particulate matter levels are at or above the 
PM2.5 NAAQS. Three years of complete data are required to 
make regulatory determinations of attainment or nonattainment but, 
based on more limited available data, there are an additional 9 million 
people in 20 counties where levels exceeding the NAAQS are being 
measured, but there are insufficient data at this time to make an 
official estimate of the design value. In total, this represents 39 
percent of the population in the areas with monitors.\12\ To estimate 
the current 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 performed for the 
Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur 
Control rule (also called the ``HD07'' rule) described

[[Page 9753]]

elsewhere.\13\ At that time, we conducted 1996 base year modeling to 
reproduce the atmospheric processes resulting in formation and 
dispersion of PM2.5 across the U.S. This 1996 modeling 
included emissions subject to this final rule. According to our 
national model 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).\14\
---------------------------------------------------------------------------

    \12\ Memorandum to Docket A-2001-11 from Fred Dimmick, Group 
Leader, Air Trends Group, ``Summary of Currently Available Air 
Quality Data and Ambient Concentrations for Ozone and Particulate 
Matter,'' December 3, 2002, Air Docket A-2001-11, Document No. IV-B-
3.
    \13\ See the Final Regulatory Impact Analysis: Heavy-Duty Engine 
and Vehicle Standards and Highway Diesel Fuel Sulfur Control 
Requirements (EPA420-R-00-026, December 2000). Docket No. A-2001-11, 
Document II-A-55. This document is also available at http://www.epa.gov/otaq/diesel.htm#documents.
    \14\ 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; Docket No. A-2001-11, Document II-A-61.
---------------------------------------------------------------------------

    While the final implementation process for bringing the Nation's 
air into attainment with the PM2.5 NAAQS is still being 
completed, the basic framework is well defined. EPA's current plans 
call for designating PM2.5 nonattainment areas in late-2004. 
Following designation, section 172(b) of the Clean Air Act allows 
states up to three years to submit a revision to their state 
implementation plan (SIP) that provides for the attainment of the 
PM2.5 standards. We expect states to submit these SIPs in 
late-2007. Section 172(a)(2) of the Clean Air Act requires that these 
SIP revisions demonstrate that the nonattainment areas will attain the 
PM2.5 standards as expeditiously as practicable but no later 
than five years from the date that the area was designated 
nonattainment. However, based on the severity of the air quality 
problem and the availability and feasibility of control measures, the 
Administrator may extend the attainment date ``for a period of no 
greater than 10 years from the date of designation as nonattainment.'' 
Therefore, we expect that areas will be ultimately be required to 
attain the PM2.5 air quality standard in the 2009 to 2014 
time frame.
    c. Diesel Exhaust. Diesel emissions are of concern beyond their 
contribution to ambient PM. There have been health studies specific to 
diesel exhaust emissions indicating that potential hazards to human 
health are specific to this emission source. For chronic exposure, 
these hazards included respiratory system toxicity and carcinogenicity. 
Acute exposure also causes transient effects (a wide range of 
physiological symptoms stemming from irritation and inflammation mostly 
in the respiratory system) in humans though they are highly variable 
depending on individual human susceptibility. The chemical composition 
of diesel exhaust includes several hazardous air pollutants, or air 
toxics.
    EPA recently released its final ``Health Assessment Document for 
Diesel Engine Exhaust'' (the Diesel HAD).\15\ There, we concluded that 
diesel exhaust is likely to be carcinogenic to humans by inhalation and 
environmental exposures in accordance with the revised draft 1996/1999 
EPA cancer guidelines. A number of other agencies (e.g., National 
Institute for Occupational Safety and Health, the International Agency 
for Research on Cancer, the World Health Organization, California EPA, 
and the U.S. Department of Health and Human Services) have made similar 
determinations.
---------------------------------------------------------------------------

    \15\ U.S. EPA (2000) Health Assessment Document for Diesel 
Exhaust: SAB Review Draft. EPA/600/8-90-057E Office of Research and 
Development, Washington DC. This document is available 
electronically at http://cfpub.epa.gov/ncea/cfm/dieslexh.cfm.
---------------------------------------------------------------------------

    EPA concluded in the Diesel HAD that it is not possible to 
currently calculate a cancer unit risk for diesel particles due to a 
variety of factors that limit the current studies such as lack of 
adequate dose-response relations between exposure versus cancer 
incidence. Even though EPA does not have a carcinogenic potency with 
which to accurately estimate the carcinogenic impact of diesel exhaust, 
the likely hazard to humans together with the potential for significant 
environmental risks leads us to conclude that diesel exhaust emissions 
should be reduced from nonroad engines in order to protect public 
health.
    d. Carbon Monoxide. Carbon monoxide 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.\16\
---------------------------------------------------------------------------

    \16\ 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 II-A-59.
---------------------------------------------------------------------------

    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.\17\ 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).\18\ CO standards for passenger cars and 
other light-duty trucks and heavy-duty vehicles did not change as a 
result of other recent rulemakings.
---------------------------------------------------------------------------

    \17\ 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-2001-11, Document II-A-60. See also Air Quality Criteria for 
Carbon Monoxide, U.S. EPA, EPA 600/P-99/001F, June 2000, at page 3-
10; Docket No. A-2001-11, Document II-A-56. This document is also 
available at http://www.epa.gov/ncea/coabstract.htm.
    \18\ LDT2s are light light-duty trucks greater than 3750 pounds 
loaded vehicle weight, up through 6000 pounds gross vehicle weight 
rating.
---------------------------------------------------------------------------

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

[[Page 9754]]

be found in Chapter 1 of the Final Regulatory Support Document.
2. What Is the Inventory Contribution From the Marine Diesel Engines 
That Are Subject to This Rule?
    Category 3 marine diesel engines contribute to the health and 
welfare effects described above through their NOX, PM, HC, 
and CO emissions. These emissions are summarized in this section. To 
estimate these inventory impacts, we used baseline estimates developed 
under contract with E. H. Pechan and Associates, Inc.\19\ 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. Emission 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 
emission 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 emission inventories can be found in Chapter 6 of the 
Final Regulatory Support Document.
---------------------------------------------------------------------------

    \19\ ``Commercial Marine Emission Inventory Development.'' E. H. 
Pechan and Associates, Inc. and ENVIRON International Corporation. 
April 2002. Air Docket A-2001-11, item II-A-67.
---------------------------------------------------------------------------

    In our inventory estimates work for the proposal we included all 
Category 3 vessel emissions within 175 nautical miles of the U.S. 
coastline on the assumption that emission transport would bring these 
emissions on to shore and affect U.S. ambient air quality. We requested 
comment on the transport issue, including whether 175 nautical miles 
was the appropriate distance from shore to consider or whether we 
should consider a range different from 175 nautical miles as our 
primary scenario, and whether we should consider different distances 
from the coast for different areas of the country. We also asked if 
there was additional information available to help us assess the 
emission transport issue. In general, the comments received were 
supportive of including all emissions within 175 nautical miles of the 
coast in the national emission inventory. While some commenters 
questioned this distance, we received no substantial new data or 
information suggesting that a different distance would be more 
appropriate or that would help us determine what distance from shore we 
should use in our inventory analysis.
    For the purpose of this final rule, we are including all Category 3 
vessel emissions within 175 nautical miles of the U.S. coast in our 
emission inventory estimates. However, we acknowledge that this 
emission transport issue is complex and requires further investigation. 
For example, as we noted in the proposal for this rule, the U.S. 
Department of Defense (DoD) has presented some information to us that 
suggests 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 modeling work on the marine vessels issue in Southern California 
led them to conclude 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. They note that this distance seems to be confirmed 
by satellite data showing 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 that 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 a narrower (perhaps 30 nautical miles) 
region of ``coastal influence.'' Nevertheless, commenters from 
California support a 175 nautical-mile boundary.
    Because of the continued data and modeling uncertainties 
surrounding this issue, we intend to investigate this issue as part of 
our future rule. As part of this investigation, we will consider the 
special characteristics of emission transport in separate parts of the 
country. For example, we expect that the Gulf Coast and East Coast 
areas of the United States would have their own unique meteorological 
conditions that might call for different lines of demarcation between 
on-shore and off-shore effects due to different prevailing winds in 
those parts of the country.
    We also requested comment on both our future growth estimates and 
our analysis of emissions from U.S. versus foreign vessels. Commenters 
suggested that the overall growth that we projected was fine, but that 
the U.S. vessel contribution to future inventories would likely not 
change and that all of the future growth would be due to increased 
foreign vessel traffic. We have modified the future U.S. and foreign 
vessel emissions split accordingly. Further, in response to comments 
received and new port calls data we have modified our overall estimates 
of the relative contributions of U.S. and foreign vessels to be more 
heavily weighted toward foreign vessels. A complete discussion of these 
changes to the inventories can be found in the Regulatory Support 
Document and the Summary and Analysis of Comments.
    Baseline emission inventory estimates for Category 3 marine diesel 
engines in 2000 are summarized in Table I.D-1 in the context of other 
emission sources. This table shows the contributions of the different 
mobile-source categories to the overall national mobile-source 
inventory. Of the total emissions from mobile sources, Category 3 
marine diesel engines contributed about 1.6 percent of NOX 
and 2.8 percent of PM emissions in the year 2000.
    Our emission projections for Category 3 marine diesel engines in 
2030 show how emissions from these engines are expected to increase 
over time after implementation of Tier 1/MARPOL Annex VI NOX 
limits. The projections for 2030 are summarized in Table I.D-2 and 
indicate that Category 3 marine diesel engines are expected to 
contribute 8.9 percent NOX and 7.3 percent of PM emissions 
in the year 2030. Population growth and the effects of other regulatory 
control programs are factored into these projections. The relative 
contribution of Category 3 marine diesel engines increases between 2000 
and 2030 largely because we have adopted requirements that will 
substantially reduce emissions from most other categories of nonroad 
engines. Note that the effectiveness of all control programs is offset 
by the anticipated growth in engine populations.

[[Page 9755]]



                                    Table I.D-1.--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 new standards (U.S. flagged           28         0.2          1          0.0          2        0.0          2.5         0.4
 commercial marine--Category 3)...........................
                                                           ============
Commercial Marine CI--Category 3 (U.S. and foreign).......        214         1.6          9          0.1         19        0.02        19.7         2.8
Commercial Marine CI--Categories 1 and 2..................        703         5.2         22          0.3        103        0.1         20           2.9
Highway Motorcycles.......................................          8         0.1         84          1.1        331        0.4          0.4         0.1
Nonroad Industrial SI19 kW.....................        308         2.3        226          3.1      1,734        2.3          1.6         0.2
Recreational SI...........................................          5         0.0        418          5.7      1,120        1.5         12.0         1.7
Recreation Marine CI......................................         38         0.3          1          0.0          6        0.0          1           0.1
Marine SI Evap............................................          0         0.0        100          1.4          0        0.0          0           0.0
Marine SI Exhaust.........................................         32         0.2        708          9.6      2,144        2.8         38           5.4
Nonroad SI <19 kW.........................................        106         0.8      1,460         19.8     18,359       24.2         50           7.1
Nonroad CI................................................      2,625        19.6        316          4.3      1,217        1.6        253          35.9
Locomotive................................................      1,192         8.9         47          0.6        119        0.2         30           4.3
                                                           ------------
Total Nonroad.............................................      5,231        39        3,391         46       25,152       33          426          60
Total Highway.............................................      7,981        60        3,811         52       49,813       66          240          34
Aircraft..................................................        178         1          183          3        1,017        1           39           6
                                                           ------------
Total Mobile Sources......................................     13,389       100        7,385        100       75,982      100          705         100
                                                           ============
Total Man-Made Sources....................................     24,532  ..........     18,246   ..........     97,735  ..........     3,102    ..........
                                                           ------------
Mobile Source percent of Total Man-Made Sources...........         55  ..........         40   ..........         78  ..........        23    ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                    Table I.D-2.--Modeled Annual Emission Levels for Mobile-Source Categories in 2030
                                                                  [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 new standards (U.S. flagged            28         0.5          1         0.0          2        0.0          2.5         0.3
 commercial marine--Category 3)a...........................
                                                            ============
Commercial Marine CI--Category 3 (U.S. and foreign)........        531         8.9         26         0.5         57        0.05        54.0         7.3
Commercial Marine CI--Categories 1 and 2...................        680        11.4         26         0.5        137        0.1         20.0         2.7
Highway Motorcycles........................................         17         0.3        172         3.4        693        0.7          1.0         0.1
Nonroad Industrial SI  19 kW....................         44         0.7         17         0.3        265        0.3          2.0         0.3
Recreational SI............................................         20         0.3        294         5.8      1,843        1.9         10.5         1.4
Recreation Marine CI.......................................         52         0.9          2         0.0         11        0.0          1.4         0.2
Marine SI Evap.............................................          0         0.0        122         2.4          0        0.0          0           0.0
Marine SI Exhaust..........................................         64         1.1        269         5.3      2,083        2.1         29           3.9
Nonroad SI < 19 kW.........................................        126         2.1      1,200        23.7     32,310       33.3         93          12.6
Nonroad CI.................................................      1,994        33.4        158         3.1      1,727        1.8        306          41.6
Locomotive.................................................        531         8.9         30         0.6        119        0.1         18           2.4
                                                            ------------
Total Nonroad..............................................      4,059        68        2,316        46       39,245       40          535          73
Total Highway..............................................      1,648        28        2,496        49       56,303       58          158          22
Aircraft...................................................        262         4          262         5        1,502        2           43           6
                                                            ------------
Total Mobile Sources.......................................      5,969       100        5,074       100       97,050      100          736         100
                                                            ============
Total Man-Made Sources.....................................     16,177  ..........     16,094  ..........    121,428  ..........     3,297    ..........
                                                            ------------

[[Page 9756]]

 
Mobile Source percent of Total Man-Made Sources............         37  ..........         32  ..........         80  ..........        22    ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ These inventories are the same as for 2000 because, based on comments received, we assumed no future increase in U.S. domestic trade.

    Further analysis suggests that Category 3 marine diesel engines 
contribute more significantly in individual port areas. 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 even in areas without large commercial ports. For example, 
Santa Barbara estimates that engines on ocean-going marine vessels 
currently 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.'' \20\ By 2015 these emissions are 
expected to increase 67 percent, contributing 61 percent of Santa 
Barbara's total NOX emissions. This mix of emission sources 
led Santa Barbara to point out that they will be unable to meet air 
quality standards for ozone without significant emission reductions 
from these vessels, even if they completely eliminate all other sources 
of pollution.
---------------------------------------------------------------------------

    \20\ 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, Document No. II-A-47.
---------------------------------------------------------------------------

E. What Are the Internationally Negotiated Standards and What Is the 
Status of the U.S. Ratification of Annex VI?

    In response to growing international concern about air pollution 
and in recognition of the highly international nature of maritime 
transportation, the IMO initiated development of international 
standards for NOX, SOx, and a variety of other 
air emissions arising from marine vessel operations.\21,22\ As a result 
of these discussions, Annex VI was drafted between 1992 and 1997. The 
Annex VI engine emission standards 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 III.A-1. Originally, these standards were expected to 
reduce NOX emissions by 30 percent when fully phased in. 
More recent analysis by EPA, based on newly estimated emission factors 
for these engines, indicates an expected reduction on the order of only 
20 percent when compared to uncontrolled emissions by 2030 when the 
standards are fully phased-in. The EPA inventory analysis is described 
in more detail in the Final Regulatory Support Document.
---------------------------------------------------------------------------

    \21\ The Annex covers several aspects 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.
    \22\ To obtain copies of this document, see Footnote 5, above.
---------------------------------------------------------------------------

    The Annex VI NOX standards 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 are subject to the standards 
regardless of the type of vessel they are used on, and the standards 
apply to engines installed on vessels only in domestic service as well 
as to engines on vessels engaged in international voyages. The test 
procedures to demonstrate compliance are set out in the Annex VI 
NOX Technical Code.\23\ They are based on ISO 8178 and are 
performed using distillate fuel. Engines can be pre-certified or 
certified after they are installed on a vessel. 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 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 right after it is installed, 
every five years after installation, and at least once between five-
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 standards.
---------------------------------------------------------------------------

    \23\ To obtain copies of this document, see Footnote 5, 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, it will not enter into force until 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 about 26 
percent of the world's merchant shipping.\24\
---------------------------------------------------------------------------

    \24\ The countries that have ratified Annex VI are Sweden, 
Norway, Bahamas, Singapore, Marshall Islands, and Liberia. 
Information about Annex VI ratification can be found at http://www.imo.org (look under Conventions, Status of Conventions--Complete 
List).
---------------------------------------------------------------------------

    The Annex requires that engines installed on a ship constructed on 
or after January 1, 2000 must comply with the specifications set forth 
in Regulation 13 of the Annex and the NOX Technical Code. In 
addition, ship owners must bring existing engines into compliance if 
the engines undergo a major conversion on or after that date.\25\

[[Page 9757]]

Although the Annex has not yet entered into force and is not yet 
legally binding, it is widely recognized that the vast majority of 
marine diesel engines manufactured and installed after January 1, 2000 
meet the requirements of the Annex. 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 have set up 
a process for manufacturers to obtain a Statement of Voluntary 
Compliance.\26\ Once Annex VI goes into effect for the United States we 
will develop a process by which an EPA-issued Statement of Voluntary 
Compliance can be exchanged for an EIAPP. It should be noted that an 
engine certificate (EIAPP) or Statement of Voluntary Compliance for an 
engine installed on a U.S. vessel must be issued by the U.S. EPA. 
Marine classification or survey societies are not authorized to issue 
such certificates on behalf of the U.S. government for U.S. vessels.
---------------------------------------------------------------------------

    \25\ As defined in Regulation 13 of Annex VI, a major conversion 
means either (i) the engine is replaced by a new engine, (ii) it is 
substantially modified, or (iii) its maximum continuous rating is 
increased by more than 10 percent. Any existing engine that 
undergoes a major conversion on or after January 1, 2000 would be 
required to comply with the Annex VI NOX limits. Note 
that EPA's marine diesel engine emission control program does not 
have a similar provision for marine diesel engines.
    \26\ 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 Web site: 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 has prepared 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. The United States government also supports a 
new effort to revise the Annex VI standards to include a second tier of 
NOX standards taking into account the emission-reduction 
potential of new control technologies. Should the Senate provide its 
advice and consent to ratification of 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 IV.A.4, we have already requested the Marine 
Environment Protection Committee to begin consideration of more 
stringent NOX emission standards for marine diesel engines. 
In addition, once the Annex goes into force, amendment of 
NOX standards to include a second tier of standards will be 
made easier through the tacit amendment process that would then apply.

F. Recent European Union Action

    In November 2002, the European Union adopted a new strategy to 
address sulfur emissions from marine engines by reducing the sulfur 
content of marine fuels used in the European Union. The strategy 
consists of two documents: A Communication from the Commission to the 
European Parliament and the Council--A European Union strategy to 
reduce atmospheric emissions from seagoing ships; and a Proposal for a 
Directive of the European Parliament and of the Council--amending 
Directive 1999/32/EC as regards the sulphur content of marine fuel.\27\ 
The strategy contains provisions to push the IMO for more stringent 
NOX limits for marine diesel engines. It also encourages the 
development of a Clean Marine award scheme and market-based instruments 
to promote emission reductions.
---------------------------------------------------------------------------

    \27\ More information on the European Union strategy can be 
found at http:www.europa.eu.int/comm/environment/air/transport.htm#3.
---------------------------------------------------------------------------

    The proposal has two main provisions. The first is a 15,000 ppm 
sulfur content limit that would apply to the fuel used by all 
oceangoing vessels in the North Sea, English Channel, and Baltic Sea, 
and to all regular passenger vessels operating in the EU by 2007. This 
provision is consistent with the SOx Emission Control Areas 
designated under MARPOL Annex VI. The second provision would require 
ships to use fuel with a maximum sulfur content of 2,000 ppm (0.2%) 
while they are at berth in ports inside the European Union. This 
provision is intended to reduce sulfur and particulate matter emissions 
in populated areas. The analysis accompanying the fuel sulfur proposal 
estimates that the proposed standards will reduce SO2 
emissions by 507,000 metric tons and PM emissions by 8,000 metric tons, 
saving about 2,000 lives a year. These benefits are monetized at 2.7 
billion Euros. The costs, which they note are likely to be born by 
shipowners through increased fuel prices, is estimated to be 1.07 
billion euros per year.
    The strategy was finalized on November 20, 2002. The strategy and 
communication documents will be sent to the European Parliament and 
Council. The proposal will be discussed in these legislative bodies, 
and negotiations are anticipated to take about two years.

G. Statutory Authority

    We conducted a study of emissions from nonroad engines, vehicles, 
and equipment in 1991, as directed by section 213(a) of the Clean Air 
Act (42 U.S.C. 7547(a)). Based on the results of that study, we 
determined that emissions of NOX, volatile organic compounds 
(including HC), and CO from nonroad engines and equipment contribute 
significantly to ozone and CO concentrations in more than one 
nonattainment 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 marine diesel engines rated over 37 kW cause or contribute to such 
air pollution (see also the preamble to the proposed rule).
    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) of the Act 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 marine diesel engines 
rated over 37 kW cause or contribute to such air pollution. That 
finding, which covers PM, was made in our 1999 rulemaking (December 29, 
1999, 64 FR 73300; see also the preamble to that proposed rule, 
December 11, 1998, 63 FR 68508).
    Clean Air Act section 307(d) applies to this final rule, as 
provided by section 307(d)(1)(V) (42 U.S.C. 7607(d)(1)(V)).

II. Which Engines Are Covered?

    The standards we are adopting in this action will apply to new 
marine diesel engines installed on vessels flagged or registered in the 
United States. To clarify this scope of application, we are extending 
the definitions contained in 40 CFR 94.2 to apply to all sizes of 
marine diesel engines, no longer excluding those with per-cylinder 
displacement at or above 30 liters. According to those definitions, a 
marine diesel engine is subject to the standards if it is:

[[Page 9758]]

    [sbull] Manufactured after the emission standards become effective, 
whether it is made in the United States or is imported;
    [sbull] Installed for the first time in a marine vessel flagged or 
registered in the United States after having been used in another 
application subject to different emission standards (or exempt from 
emission standards); or
    [sbull] Installed on a new vessel flagged in the United States.
    The standards will apply to new marine diesel engines subject to 
this rule regardless of how they are used. In other words, engine 
manufacturers will no longer be able to obtain an exemption for engines 
used on vessels engaged in foreign trade (defined as vessels flagged or 
registered in the United States that would spend less than 25 percent 
of total operating time within 320 kilometers of U.S. territory). This 
exemption was generally targeted at auxiliary engines, which are 
invariably less than 30 liters per cylinder.
    In the remainder of this section we discuss the scope of 
application of this final 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 Are Category 1, 2, and 3 Marine Diesel Engines?

    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 those land-based engines 
are not all subject to the same numerical standards, test procedures, 
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 
per-cylinder displacement less than 5 liters, are similar to land-based 
nonroad engines used in construction and farm equipment. Category 2 
marine diesel engines, those with per-cylinder displacement at or above 
5 liters but less than 30 liters, 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 tugboats, 
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, powering 
winches, or handling anchors.
    Category 3 marine diesel engines, which are the primary focus of 
this final rule, are defined as having per-cylinder displacement at or 
above 30 liters. 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, though a few are found on ships in the Great Lakes. Category 3 
marine diesel engines have no land-based mobile-source counterpart, 
though they are similar to engines used to generate electricity in 
certain power-plant applications. 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 about 60 rpm (see Table II.B-1).

            Table II.B-1.--Marine Engine Category Definitions
------------------------------------------------------------------------
                     Displacement per
     Category            cylinder         hp range (kW)      rpm range
------------------------------------------------------------------------
1................  Disp. <5 liters (and  37-2,300         1,800-3,000
                    power =37 kW).
2................  5 <=disp. <30 liters  1,500-8,000      750-1,500
3................  Disp. =30  2,500-80,000       60-900
                    liters.
------------------------------------------------------------------------

C. What Is a New Marine Diesel Engine?

    In the proposal for this rule, we proposed that the emission 
standards would apply to new engines on vessels flagged or registered 
in the United States. We also requested comment on whether to modify 
the definition of a ``new marine engine'' to find that the engine 
emission standards apply to marine diesel engines that are built after 
the standards become effective and that are installed on foreign 
vessels that enter U.S. ports. We have decided to finalize the scope of 
application as proposed. However, we intend to revisit this issue in 
our future rule.
1. ``New'' Engines on Vessels Flagged or Registered in the United 
States
    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.
    This means that a marine engine is new and is subject to emission 
standards before its initial sale is completed or it is placed into 
service. Practically, it means that any engine must meet 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 for other 
nonroad or 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

[[Page 9759]]

used highway or land-based engine converted for marine installation 
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 emission standards applicable to such an engine (or which 
would be applicable to such an engine had it been manufactured for 
importation into the United States). According to this definition, the 
standards 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 United States. In one example, a person may 
want to import a vessel with an engine 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. ``New'' Engines on Vessels Flagged or Registered Elsewhere
    This final rule does not apply to Category 1, 2, and 3 marine 
diesel engines that are built after the standards become effective and 
that are installed on foreign vessels that enter U.S. ports and are not 
imported into the United States. Section 213 of the Clean Air Act (42 
U.S.C. 7547), 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.'' This was a 
reasonable exercise of the discretion provided to EPA by the Clean Air 
Act to interpret ``new nonroad engine'' or ``new nonroad vehicle.'' See 
Engine Manufacturers Assoc. v. EPA, 88 F.3d 1075, 1087 (D.C. Cir. 
1996).
    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 or registered 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 did not meet the definition of ``new'' adopted in 
that rule (64 FR 73300, Dec. 29, 1999).
    The May 29, 2002 proposed rule solicited comment on whether to 
exercise our discretion and modify the definition of a ``new marine 
engine'' to find that engine emission standards apply to foreign 
vessels that enter U.S. ports. As discussed earlier, the standards in 
this rulemaking will go into effect in 2004. We will also conduct a 
subsequent rulemaking that will address revisions to these standards 
for future model years. In this subsequent rulemaking, we will consider 
adopting more stringent standards that require a longer lead time than 
the standards adopted in this final rule. The issue of applying these 
more stringent standards to foreign vessels will also be considered in 
that subsequent rulemaking.
    We must therefore determine whether to revise the definition of 
``new'' to include foreign vessels for purposes of the near-term 
standards adopted in this final rule. EPA need not decide whether we 
have the discretion to interpret ``new'' nonroad engine or vessel in 
that manner; however, we believe it would be appropriate not to 
exercise such discretion at this time even assuming we had the 
discretion to interpret ``new'to include foreign vessels.
    As noted above, one of the reasons we intend to address a second 
phase of more stringent standards in a subsequent rulemaking is to 
facilitate the development of more stringent consensus international 
requirements. Adoption of international standards has the clear 
potential to maximize the level of emission reductions achieved from 
emission control on U.S. and foreign vessels. For example, consensus 
international standards of appropriate stringency would facilitate and 
effectively reduce or remove the legal and policy objections to 
controlling emissions from foreign vessels, and therefore would 
facilitate achieving the greatest emission reductions from Category 3 
vessels. This is one reason we determined to address the second phase 
of standards in a subsequent rulemaking timed to facilitate such 
international action, but also timed to allow us to proceed 
expeditiously on our own if appropriate international standards are not 
adopted.
    Applying the first phase of standards adopted in this final rule to 
foreign vessels would require us to determine that we have the 
discretion to interpret new nonroad engine or vessel in that manner, 
and that it is a reasonable exercise of discretion to do so. However 
even assuming we have the discretion to interpret ``new marine engine'' 
to include engines on foreign vessels, we believe it would be 
appropriate not to exercise such discretion at this time.
    The same reasons that counsel deferring adoption of more stringent 
standards to a subsequent rulemaking also counsel deferring a decision 
on applying Clean Air Act standards to foreign vessels to such a 
rulemaking. We believe that deferring this decision may help facilitate 
the adoption of more stringent consensus international standards. A new 
set of internationally negotiated marine diesel engine standards would 
apply to engines on all vessels, regardless of where they are flagged. 
Adoption of appropriate international consensus standards has the clear 
potential to maximize the level of emission reductions from domestic 
and international vessels.
    Our decision to defer application of the standards to engines on 
foreign flag vessels is not expected to lead to any significant loss in 
emission reductions. We fully expect that foreign vessels will comply 
with the MARPOL standards whether or not they are also subject to the 
equivalent Clean Air Act standards being adopted in this final rule. 
Consequently, no significant emission reductions would be achieved by 
treating foreign vessels as ``new'' for purposes of the near-term 
standards in this final rule and there is no significant loss in 
emission reductions by not including them.
    In conclusion, we are not including foreign engines and vessels in 
this rulemaking and are not revising the definition of ``new marine 
engine'' at this time. We do not need to decide now whether we have the 
discretion to include foreign vessels under the nonroad provisions of 
the Clean Air Act. In the subsequent rulemaking, we will be in a better 
position to resolve under what circumstances we may and should define 
new nonroad engine and vessel to include foreign engines and vessels. 
As part of that determination, we will also assess the progress made by 
the international community toward the adoption of new more stringent 
international consensus standards that reflect advanced emission-
control technologies.

[[Page 9760]]

D. What Is a New Marine Vessel?

1. Newly Manufactured 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 whose equitable or legal title 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.
2. Modification of an Existing Vessel With Category 1 or Category 2 
Main Propulsion Engines
    In addition, our definition in 40 CFR 94.2 specifies that a vessel 
is considered 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. This provision is based on a similar 
provision in our locomotive engine emission control program (see 40 CFR 
92.2 definition of ``freshly manufactured locomotive''). Since we 
finalized our 1999 commercial marine diesel engine rule we received 
several questions about how to apply this provision. The following is 
intended to clarify this provision.
    When applying this provision, the modifications must be completed 
prior to the effective date of the standards that would otherwise 
apply. For example, for the Tier 2 engine standards that go into effect 
in 2007 for Category 1 and Category 2 marine diesel engines, 
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. These figures must 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:

[assessed value after modifications]-[assessed value before 
modifications] = 0.5 [assessed value after modifications]
    If the value of the modifications exceeds 50 percent 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.
3. Modification of an Existing Vessel With Category 3 Main Propulsion 
Engines
    EPA is adopting a separate definition of ``new vessel'' for those 
vessels equipped with a Category 3 engine. A separate definition for 
these vessels is reasonable because large ocean-going vessels are 
already subject to a different definition of ``new vessel'' pursuant to 
the U.S. adoption of the requirements in MARPOL Annex I, Regulations 
for the Prevention of Pollution by Oil.\28\ The MARPOL Annex I criteria 
for determining when the modifications made to an existing vessel make 
that vessel ``new'' and thereby subject to MARPOL Annex I are contained 
in its definition for ``major conversion'' of a ship. The goal of the 
Annex I provision is similar to the goal of our provision: To require 
ships that have been so modified as to make them substantially new, to 
comply with the standards otherwise applicable to new vessels.
---------------------------------------------------------------------------

    \28\ Annex I to the International Convention on the Prevention 
of Pollution from Ships, 1973, as Modified by the Protocol of 1978 
Relating Thereto.
---------------------------------------------------------------------------

    Note that while the provisions of MARPOL Annex I apply to all 
vessels, Annex I distinguishes between vessels at or above 400 gross 
tonnage, which are subject to the specific MARPOL requirements, and 
those below 400 gross tonnage, which are subject to potentially 
different provisions, adopted by each Member State to ``ensure that it 
is equipped as far as practicable and reasonable with [relevant] 
installations.'' Vessels above 400 gross tonnage, which are likely to 
be ocean-going vessels equipped with Category 3 main propulsion 
engines, are therefore subject to the Annex I criteria for determining 
when an existing vessel is modified in such a way that it is considered 
``new'' and subject to MARPOL Annex VI's requirements.
    For the purpose of this Clean Air Act regulation, we are adopting a 
definition of ``new vessel'' for vessels with Category 3 main 
propulsion engines that is consistent with the way Annex I was adopted 
into U.S. law (see 40 U.S.C. 2101). According to this approach, an 
existing vessel with a Category 3 main propulsion engine will be 
considered a ``new vessel'' and will be subject to the requirements of 
using a new engine certified to the emissions standards adopted in this 
final rule if that vessel undergoes a modification that:
    [sbull] Substantially alters the dimensions or carrying capacity of 
the vessel;
    [sbull] Changes the type of the vessel; or
    [sbull] Substantially prolongs the life of a vessel.
    Under our provision, once a vessel with a Category 3 propulsion 
engine is determined to be ``new'' according to the above criteria, 
then all the engines on that vessel would have to comply with EPA's 
marine diesel engine emission limits. To the extent that any judgment 
is required in interpreting this provision, EPA intends to implement 
this definition consistently with the application of the MARPOL.

E. Is EPA Retaining the Foreign-Trade Exemption?

    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 United States 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 could obtain this exemption 
for Category 1 and Category 2 marine diesel engines if it was 
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)).
    We are eliminating the foreign-trade exemption because the 
conditions on

[[Page 9761]]

which it was based no longer apply. Specifically, we have learned that 
many spare engine 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 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.

III. Standards and Technological Feasibility

    The emission standards we are adopting reflect a two-step approach. 
The first step involves near-term standards designed to be achievable 
immediately without additional research and development. This section 
presents these Tier 1 standards and the technologies that will be used 
to achieve them. The second step consists of a set of long-term 
standards, discussed in Section IV.

A. What Are the New Emission Standards?

    We are adopting standards for marine diesel engines that are 
equivalent to the internationally negotiated NOX standards, 
beginning in 2004. These standards, which are presented in Table III.A-
1, apply to marine diesel engines with per-cylinder displacement over 
2.5 liters. By adopting these standards, we are making them enforceable 
under U.S. law for engines on vessels flagged or registered in the 
United States, regardless of whether Annex VI has entered into force or 
whether the United States has deposited its instrument of ratification 
to MARPOL Annex VI.

                 Table III.A-1.--NOX Emission Standards
                                [g/kW-hr]
------------------------------------------------------------------------
                            Engine Speed (n)
-------------------------------------------------------------------------
                          2000  n = 2000 rpm      thn-eq>= 130 rpm          n < 130 rpm
------------------------------------------------------------------------
             9.8              45.0 x n-0.2                    17.0
------------------------------------------------------------------------

    As described in Section V, we will accept emission data for 
certification to the near-term standards based on testing with either 
distillate or residual fuel. Because most or all manufacturers have 
been using distillate fuel to comply with Annex VI requirements, we 
expect manufacturers to meet the near-term standards generally by 
submitting their available emission data from testing with distillate 
fuels.
    For marine diesel engines with per-cylinder displacement between 
2.5 and 30 liters, these standards apply from 2004 to 2006, after which 
the EPA Tier 2 marine engine emission standards established in December 
1999 apply (64 FR 73300, December 29, 1999). Testing to show compliance 
for these engines is generally based on emission measurements with 
distillate fuels meeting the specifications in 40 CFR 94.108.
    We are not adopting the internationally negotiated standards for 
engines under 2.5 liters per cylinder. This is because our Tier 2 
standards for most of those engines are effective in 2004. Marine 
diesel engines below 0.9 liters per cylinder need not meet EPA emission 
standards until 2005, but most of those engines are under 130 kW and 
are therefore not subject to Annex VI standards.
    In the December 1999 final rule, we included a requirement to 
measure or prevent crankcase emissions. We have clarified in the final 
regulations that this applies only for engines subject to Tier 2 
standards. As a result, none of the emission standards in this final 
rule include requirements related to crankcase emissions.

B. When Do the Engine Emission Standards Apply?

    Adopting 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 generally 
already meeting the internationally negotiated standards, which apply 
to engines installed on vessels built on or after January 1, 2000. The 
near-term standards will require no additional development, design, or 
testing beyond what manufacturers are already doing to meet the 
internationally negotiated Annex VI NOX standards.
    Engine manufacturers will need to comply with emission standards 
for all engines produced after January 1, 2004. For Category 1 and 
Category 2 engines, the date of manufacture is 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. Therefore, for Category 3 engines, the date of 
manufacture is based on the first full assembly of the engine.
    Shipbuilders and owners are not required to certify their vessels 
under the program we are adopting in this action. However, shipbuilders 
are prohibited from selling vessels with noncompliant engines if they 
initiate construction of a vessel after the date that regulations begin 
to apply.

C. What Technologies Will Engine Manufacturers Use To Meet the Tier 1 
Emission Standards?

    The near-term Tier 1 standards are interim standards. They are 
intended to ensure that Category 3 engines achieve the greatest 
reductions achievable in this time frame, until the more stringent 
long-term standards we adopt go into effect. The short lead time 
associated with these interim standards means they call for the use of 
engine technologies that already have been or can be applied 
immediately, with little or no lead time.
    The Tier 1 standards are achievable immediately because engine 
manufacturers are already producing engines that meet these standards. 
The short lead time involved in meeting Tier 1 standards by January 
2004 allows manufacturers only enough time to work through this 
program's compliance requirements and do all the testing and paperwork 
required to complete the certification process.
    Setting Tier 1 standards that are more stringent than the 
internationally negotiated NOX standards (for example, one 
requiring further development and optimization of in-cylinder 
controls), would require more lead time to allow engine manufacturers 
to develop and to optimize existing in-cylinder technologies and apply 
them to these engines. Moreover, as discussed in Section I.C, adopting 
an emission standard now that is based only on in-cylinder control 
technologies would likely delay the adoption of future more stringent 
emission standards that may be based on optimized in-cylinder controls 
in combination with advanced technologies such as SCR or water 
injection.

[[Page 9762]]

    Similarly, we are not adopting Tier 1 emission standards for HC or 
CO emissions because the short lead time does not allow manufacturers 
sufficient time to do the testing and design work that would be 
necessary to ensure compliance with such standards. As described in the 
proposal, the focus of controlling emissions from Category 3 engines is 
on NOX. The standards we contemplated for HC and CO in the 
proposal would have achieved modest reductions from baseline levels or, 
more likely, merely prevented increases in these pollutants as 
manufacturers apply emission-control technologies to address 
NOX emissions. Manufacturers do not have a complete data set 
to characterize HC and CO emissions from their Category 3 engines, so 
some engines may well have emission rates above the level we would 
consider to be a cap that would merely prevent increasing emissions. 
The short lead time associated with the Tier 1 standards is too short 
to allow manufacturers in these cases to address this potential. As a 
result, we believe it is most appropriate to include appropriate 
emission standards for HC and CO emissions in the future rulemaking, as 
described below.
    Engine manufacturers are meeting the Annex VI standards today with 
a variety of emission-control technologies. These basic emission-
control technologies include a variety of in-cylinder technologies, 
generally including optimized turbocharging, higher compression ratio, 
and optimized fuel injection, which may include timing retard or 
changes to the number and size of injector holes to increase injection 
pressure.

D. Voluntary Low-Emission Standards

    Several state and environmental groups and manufacturers of 
emission controls have supported our efforts to develop incentive 
programs to encourage the use of engine technologies that go beyond 
federal emission standards. Some companies have already significantly 
developed these technologies. In the final rule for land-based nonroad 
diesel engines, we included a program of voluntary standards for low-
emitting engines, referring to these as ``Blue Sky Series'' engines (63 
FR 56967, October 23, 1998). We included similar programs in several of 
our other nonroad rules, including that for commercial marine diesel 
engines. The general purposes of such programs are to provide 
incentives to manufacturers to produce clean products as well as create 
market choices and opportunities for environmental information for 
consumers regarding such products. The voluntary aspects of these 
programs, which in part provides an incentive for manufacturers willing 
to certify their products to more stringent standards than necessary, 
is an important part of the overall application of ``Blue Sky Series'' 
programs. While these are voluntary standards, they become binding once 
a manufacturer chooses to participate. EPA certification will therefore 
provide protection against false claims of environmentally beneficial 
products. For the program to be most effective, however, incentives 
should be in place to motivate the production and sale of these 
engines. These incentive programs can be put in place by users and 
state and local governments.
    To be designated as a Blue Sky engine, an engine must have 
emissions at least 80 percent below Annex VI NOX levels. The 
specific voluntary low-emission NOX standard is expressed as 
9.0 x n-0.2 (in g/kW-hr), with a cap of 3.4 g/kW-hr for 
engines with rated speed over 130 rpm (no specific standard applies to 
engines over 2000 rpm, because Category 3 engines all have engine 
speeds well below 2000 rpm). Data suggest that engines utilizing 
selective catalytic reduction should be able to meet these emission 
levels. Establishing an objective qualifying level for voluntary low-
emission engines allows 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 must also 
meet HC and CO standards reflecting baseline emission levels for these 
pollutants. As described in the proposal, we believe the appropriate 
levels to cap emissions of these pollutants are 0.4 g/kW-hr for HC and 
3.0 g/kW-hr for CO.

IV. Future Actions

    The standards we are adopting in this action are equivalent to the 
internationally negotiated standards contained in MARPOL Annex VI and 
are expected to achieve a 20-percent reduction in the national Category 
3 NOX inventory by 2030. As noted in Section I, the 
inventory contribution of these engines to local NOX and PM 
inventories, particularly around commercial ports and coastal areas, 
can be significant. We recognize that manufacturers can achieve 
additional reductions with more lead time than is provided by the Tier 
1 standards. They can do this by expanding the use and optimization of 
in-cylinder controls and by incorporating advanced technologies, such 
as selective catalytic reduction or water injection, that may achieve 
much greater reductions. We believe, however, that it is appropriate 
not to make a final decision on setting the longer-term Tier 2 
standards in this final rule. This section describes how we plan to 
conduct a future rulemaking that will address a new tier of standards.
    Separately, we also intend to pursue additional action to set 
controls for the fuels used by these engines. The sulfur content of 
these fuels is considerably higher than the fuel used in land-based 
nonroad engines. This high sulfur content leads to high PM and 
SOX emissions. MARPOL Annex VI contains a provision that 
would require ships to use lower sulfur fuel when operating in 
specially designated SOX Emission Control Areas, or be 
equipped with an exhaust gas cleaning system or other system that 
reduces the total SOX emissions from the ship to 6.0 g/kW-hr 
or less. If the Annex goes into force, we will assist the other federal 
agencies in investigating and developing an application to the IMO by 
the United States for designating relevant coastal and port areas as 
SOX Emission Control Areas. If the Annex does not go into 
force, we may address this issue under our existing authority in a 
future rule. In addition, we are considering fuel controls as part of 
the nonroad diesel rule that is currently under development that could 
affect the distillate fuels used by marine vessels.

A. Future Rulemaking for Engine Standards

1. What Is the Timetable for the Future Rule?
    We are adopting a regulatory provision in 40 CFR 94.8 that 
establishes a schedule for a future rulemaking to promulgate additional 
engine controls that EPA determines are appropriate under section 
213(a)(3) of the Act. This future rulemaking will reassess the 
standards in place at the time using information about the feasibility 
of optimizing in-cylinder controls and applying advanced NOX 
and PM control technologies to these engines. We intend to consider an 
additional tier of standards for all marine diesel engines and will 
also consider application of these standards to engines on foreign 
vessels that enter U.S. ports. We will also include in our evaluation 
an assessment of the status of international action to set more 
stringent standards. The standards in this final rule will remain in 
effect unless modified by a future rulemaking. We are committing to 
take final action

[[Page 9763]]

on appropriate standards for marine diesel engines by April 27, 2007, 
and to issue a proposal no later than approximately one year before. 
This future rulemaking will allow us to exercise the discretionary 
authority under Clean Air Act section 213(a)(3), which directs EPA to 
``from time to time revise'' regulations under that provision.
    This schedule for our future rule will allow us to coordinate with 
future actions of the U.S. government with respect to negotiations for 
a future tier of standards under MARPOL. As described in Section IV.A.4 
below, in 2000 the United States requested the Marine Environment 
Protection Committee to consider more stringent emission controls for 
marine diesel engines. We are hopeful that the committee will begin 
these discussions in the next year or so. At the same time, while 
harmonizing with future, more stringent MARPOL emission limits is 
desirable, the standards contained in our future rule will be 
promulgated pursuant to the Clean Air Act, as described in the next 
section.
    EPA considers this time as necessary and appropriate to properly 
take into consideration additional information expected to become 
available about emerging technologies, as well as any developments in 
the international negotiations for more stringent emission limits.
2. What Standards Will EPA Consider in the Future Rule?
    a. Standards for Category 3 Marine Diesel Engines. For the future 
rule, we intend to set more stringent standards for Category 3 marine 
diesel engines based on the greatest degree of emission control 
achievable from technologies that will be available with appropriate 
lead time. In our proposal, we considered a 30-percent reduction below 
Annex VI levels to be the primary option for adopting long-term 
standards for Category 3 marine diesel engines. At the time we believed 
this could be achieved through the use of in-cylinder controls. 
However, further review of information on this technological approach 
shows that these technologies are already being used to meet the 
internationally negotiated standards. At this point we are not 
confident that in-cylinder controls alone would reduce emissions much 
more than 10 or 15 percent below the Tier 1 levels.
    We are concerned that, if we were to implement standards based on 
traditional in-cylinder controls to reduce emissions beyond Annex VI 
levels, either in this or a future rule, manufacturers would need to 
divert resources from their advanced technology development programs. 
In addition, manufacturers would need to optimize their use of in-
cylinder controls again when incorporating the advanced emission-
control technologies. As a result, the readiness of this technology 
could be delayed in return for a standard based on traditional in-
cylinder controls alone, which may not be capable of reducing 
NOX emissions by an additional 30 percent.
    We are therefore now considering Tier 2 standards that would focus 
on optimizing in-cylinder controls with the advanced technologies 
presented in the proposal, which together are projected to reduce 
NOX emissions by significantly more than 30 percent. This 
approach was supported by commenters representing environmental and 
state interests, who strongly objected to emission standards that rely 
on engine-based technologies because of the expectation that these 
other advanced technologies are available and appear to be cost-
effective.
    We are, however, not finalizing such Tier 2 standards in this final 
rule because we believe there are substantial outstanding issues 
associated with water technologies and selective catalytic reduction. 
These issues, which include fuel compatibility, low-load effectiveness, 
and PM impacts, are discussed below in Section IV.A.3.
    During the next few years we will have the opportunity to develop a 
better understanding of the issues that prevent us from adopting 
standards based on advanced technologies now. For example, several 
vessels have been equipped recently with selective catalytic reduction, 
as described in Chapter 5 of the Final Regulatory Support Document. 
Observing these installations will allow us to gain insight into the 
effectiveness and durability of these systems, while highlighting any 
potential technical constraints or problems. We would also have 
opportunity to learn with engine manufacturers and other industry 
contacts who are actively pursuing development and implementation of 
the advanced technologies.
    In the future rulemaking, we will also consider the need to adopt 
emission standards for HC and CO emissions. Although HC and CO 
emissions are generally low from diesel engines, HC emissions 
nevertheless combine with NOX emissions to form ozone; HC 
and CO can also have direct health impacts. Setting standards for HC 
and CO may achieve modest emission reductions, but more importantly, 
may be necessary to prevent HC and CO emission increases that might 
otherwise result from controlling NOX emissions alone.
    Regarding PM from Category 3 marine engines, the majority of 
emissions comes directly from the high concentration of sulfur in the 
residual fuel used by these engines. Short of changing in-use fuel 
quality, emission-control technologies only address the remaining 
portion of PM, because engine technologies are ineffective at reducing 
sulfur-related PM emissions. Furthermore, no acceptable procedure 
exists for measuring PM from Category 3 marine engines, because 
currently established PM test methods show unacceptable variability 
when sulfur levels exceed 0.8 weight percent. Both distillate and 
residual marine fuels used in these engines commonly exceed that level. 
No PM test method or calculation methodology has yet been developed to 
correct that variability. However, the additional time available to 
prepare the future rulemaking will allow us to take into account any 
developments related to regulation of in-use fuel quality and PM 
measurement equipment and procedures as we consider the appropriateness 
of adopting a PM standard for Category 3 marine diesel engines.
    We also intend to revisit various other issues raised in the 
proposal. For example, we continue to be concerned about controlling 
emissions at low-power test modes and at operating points between test 
modes. As described in the proposal, we would like to take steps to 
ensure that engines meet emission standards when operating on residual 
fuel, including an appropriate means to correct for the nitrogen 
content of the test fuel. We also believe that basing emission 
standards on engine displacement instead of rated speed warrants 
further consideration. We will also revisit several compliance issues 
such as onboard NOX monitoring, adjustable parameters, 
deterioration factors with advanced technologies, post-certification 
testing (PLT), broader test conditions, defect reporting, and test 
fuel. These compliance issues are discussed in Section V.
    b. Standards for Category 1 and Category 2 Marine Diesel Engines. 
For Category 1 and Category 2 marine diesel engines, we have already 
established Tier 2 emission standards based on in-cylinder controls. 
However, there are several differences between these engines and 
Category 3 engines, which made this possible. First, for Category 1 and 
Category 2 marine diesel engines, manufacturers are able to transfer 
emission-control technology already developed for the land-based 
counterparts to these engines. Second,

[[Page 9764]]

Category 1 and Category 2 engines are produced in much greater volumes 
than Category 3 engines which allows manufacturers to more easily 
amortize their research and development costs. Third, because Category 
3 engines generally operate on residual fuel, this provides an 
additional constraint on what can be achieved through in-cylinder 
control.
    While this final rule primarily addresses Category 3 engines, we 
intend to use the future rulemaking as an opportunity to reconsider 
Tier 3 emission standards for Category 1 and Category 2 standards. We 
proposed Tier 3 standards for these engines on December 11, 1998 (63 FR 
68508, December 11, 1998), but chose not to finalize the Tier 3 
standards at that time. Given the current and expected advances in 
emission-control technologies for land-based diesel engines and the 
need to coordinate standards for all categories of marine engines, we 
believe this will be the appropriate context to reopen the proposed 
Tier 3 standards. In the future rulemaking we would also be able to 
consider applying compliance provisions such as onboard NOX 
monitoring to Category 1 and Category 2 engines. This may be especially 
appropriate for certain applications, such as ferries and tugboats that 
operate closest to metropolitan areas.
3. What Technologies Will EPA Consider in the Future Rule?
    As discussed above, the future rulemaking will focus on 
technologies we believe can be used to reduce NOX emissions 
by significantly more than 30 percent below Tier 1 levels for Category 
3 marine diesel engines. These emission-control systems are expected to 
include a combination of optimized in-cylinder controls and advanced 
technologies such as selective catalytic reduction and water. These 
advanced technologies are discussed below. Although we do not believe 
it is appropriate to set standards for Category 3 marine engines based 
on these approaches at this time, we believe that remaining 
technological and operational issues can be addressed in the future. 
Technologies that could be used to achieve emission reductions beyond 
the Tier 2 standards for Category 1 and Category 2 marine diesel 
engines were discussed in an earlier proposal (63 FR 68508, December 
11, 1998).\29\
---------------------------------------------------------------------------

    \29\ Further analysis of potential Tier 3 standards for Category 
1 and Category 2 marine diesel engines may be found in the Draft 
Regulatory Impact Analysis associated with this proposal which is 
available in Air Docket A-97-50.
---------------------------------------------------------------------------

    a. Water-based technologies. We believe that significant 
NOX control of approximately a 50-percent reduction can be 
achieved in the future, once certain technical and practical challenges 
are overcome, by introducing water into the combustion process in 
combination with appropriate in-cylinder controls. Water can be used in 
the combustion process to lower 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 the Final 
Regulatory Support Document suggest that NOX reductions 
significantly more than 30 percent below the Tier 1 standards can be 
achieved, depending on the ratio of water to fuel and on the method of 
introducing water into the combustion chamber. These data are 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 
by the 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 Final 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 Final 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. Direct 
water injection has been installed on medium-speed Category 3 engines 
on more than a dozen vessels, and there are plans for using it on 
additional vessels. These vessels are primarily ferries and roll-on 
roll-off (ro-ro) vessels operating in European waters where there are 
economic incentives for reducing NOX emissions. In addition, 
they make relatively short trips, so water storage is not a significant 
issue.
    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 Final Regulatory 
Support Document, show NOX reductions of more than 80 
percent with water-to-fuel ratios as high as 3.5.
    We believe that the results from initial testing of water 
introduction strategies is encouraging. We will continue to evaluate 
this technology in the future. However, we believe there are still 
outstanding technical issues concerning the use of water-introduction 
technologies for widespread application on marine engines. These issues 
are discussed below.
    A primary 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.
    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 
either to produce fresh water through the use of a desalination or 
distillation system or to 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

[[Page 9765]]

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).
    Depending on the amount of water necessary, other vessels that use 
Category 3 marine engines may not be able to generate sufficient 
amounts of water for this technology, especially at low loads where 
less heat is available from the engine. These ships would have to carry 
the water or be outfitted with new or larger distillation systems. Both 
of these options could displace cargo space. Finally, it should be 
noted that vessels 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. 
If the ships were to use this technology only while 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 the ship travels that route infrequently. 
Because the standards would not be retroactive to existing vessels, 
ships could be designed to carry this water, however, this space would 
not be available to carry cargo or fuel. 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 
direct water injection with exhaust gas recirculation to minimize water 
requirements on such engines.
    b. Selective catalytic reduction. Selective catalytic reduction 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. The exhaust then goes through a catalyst 
where NOX emissions are reduced. As discussed in the Final 
Regulatory Support Document, SCR can be used to achieve NOX 
reductions of 90 percent or more below the Tier 1 limits, at exhaust 
temperatures above 300 [deg]C. Lower-cost SCR systems can also be 
designed for less effective control of NOX emissions by 
reducing the amount of reducing agent used in the SCR unit. These 
systems are being successfully used for stationary applications, which 
operate under constant, high-load conditions. These systems are also 
installed 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.
    As discussed in the Final Regulatory Support Document, 
manufacturers are demonstrating similar NOX reduction using 
SCR technology for marine applications. These SCR demonstrations 
include both test systems and in-use vessels. One manufacturer has 
demonstrated a standard SCR system on eight vessels and a compact SCR 
system, which uses an oxidation catalyst upstream of the SCR reactor to 
reduce reactor size, on four vessels. Combined, these twelve vessels 
are equipped with a total of 40 medium-speed Category 3 marine engines. 
Another manufacturer has installed systems on 56 Category 2 or Category 
3 marine engines. The majority of these engines were in ferries and ro-
ros operating in European waters where there are economic incentives to 
use SCR. In addition, these engines are four-stroke medium-speed 
engines, which have higher exhaust temperatures than two-stroke low-
speed engines which better enables the use of SCR. To prevent sulfur 
poisoning of the catalysts, the fuel used by these vessels ranges from 
0.1 to 1.0 percent sulfur. This fuel includes both residual fuel and 
marine distillate fuel. In addition, they make relatively short trips 
between European ports, so urea availability and storage are not 
significant issues. Also, the relatively short trips allow time for 
maintenance and provide better access to any needed parts compared with 
ocean-going trips.
    In one case, SCR was equipped on vessels with two-stroke low-speed 
engines. The goal of this program was to reduce the emissions emitted 
during the transportation of steel to a facility in Pittsburg, 
California. Because the vessels were equipped with two-stroke low-speed 
engines, the exhaust temperatures were low. In addition, the vessels 
operate at low load near the coast; therefore, certain modifications to 
the system were necessary. Primarily, the exhaust system was 
reconfigured to provide the maximum heat to the reactor, which had 
negative impacts on transient response and efficiency. Also, the 
catalyst was formulated to be effective at temperatures as low as 
270[deg]C. Because such a reactive catalyst is vulnerable to sulfur 
poisoning, the vessels operate only on 0.05 percent sulfur fuel when 
the SCR unit is active. These vessels make about 6 calls to California 
per year and the SCR unit is active for about 12 hours per call, when 
the vessel is within about 50 miles from the port.
    We believe that the results from initial applications of SCR 
systems are encouraging. We will continue to evaluate this technology 
in the future. However, we believe there are still outstanding 
technical issues concerning the use of SCR for widespread application 
on marine engines. These issues are discussed below.
    Lower-sulfur fuel is necessary to ensure the durability of the SCR 
system because sulfur can be trapped in the active catalyst sites and 
reduce the effectiveness of the catalyst. This sulfur poisoning can 
require additional maintenance of the system. We need more information 
on the impacts of fuel sulfur on SCR. As discussed above, SCR units in 
service today are operating on fuel ranging from 500 to 10,000 ppmS. 
Even if these systems can be made to operate on 15,000 ppmS fuel, an 
infrastructure would be necessary to ensure that ships could refuel 
with 15,000 ppmS fuel at ports they visit. Lower-sulfur residual fuel 
is available in areas that provide incentives for using such fuel, 
including the Baltic Sea; however, such fuel is not yet available at 
ports throughout the United States. During the next few years we expect 
to develop a better understanding of the availability of lower-sulfur 
fuels through the process related to designating SOX 
Emission Control Areas under Annex VI. We also intend to learn more 
about the sensitivity of SCR systems to fuel-sulfur concentrations.
    Another issue is the effectiveness of SCR during low-load engine 
operation. SCR systems available today are effective only over a narrow 
range of exhaust temperatures (generally above 300 [deg]C). The 
effectiveness of the SCR system is decreased at reduced temperatures 
that occur 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, 
so SCR would be less effective while operating near ports. Some

[[Page 9766]]

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 if this calibration also increased temperatures at 
high loads (depending on the fuel used). For an engine operating on 
residual fuel, vanadium in the fuel can cause damage by reacting with 
the valves at higher temperatures. In addition, a catalyst that is 
formulated to be more reactive at lower temperatures is also more 
sensitive to sulfur poisoning. Any information that becomes available 
over the next few years would help us understand the potential for SCR 
systems to control emissions at low engine loads and ensure proper 
operation in port areas, where emission reductions are most important. 
This will help ensure that we adopt requirements with an appropriate 
expectation regarding the effectiveness of the anticipated emission-
control technologies.
    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 sulfur to direct sulfate PM. Direct sulfate PM 
emissions could be reduced by using lower sulfur fuel such as 
distillate.
    SCR systems traditionally have required a significant amount of 
space on a vessel; in some cases the SCR unit is as large as the engine 
itself. However, at least one manufacturer is developing a compact 
system that 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. The catalytic reaction 
is faster by reducing NOX 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 sulfur 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).\30\
---------------------------------------------------------------------------

    \30\ Paro, D., ``Effective, Evolving, and Envisaged Emission 
Control Technologies for Marine Propulsion Engines,'' presentation 
from Wartsila to EPA on September 6, 2001 (Docket A-2001-11; 
document II-A-72).
---------------------------------------------------------------------------

    A vessel using an 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. Urea consumption increases operating 
costs. 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 also increase operating costs. 
The operational characteristics of ocean-going vessels may interfere 
with correct maintenance of the SCR system. Ferries that have 
incorporated this technology 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 
that operate continuously for long periods.
    Because SCR units are so easily adjustable, if allowed, 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 it is 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. This is discussed in more detail below.
    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 catalyst 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 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% sulfur) is required. In addition, these 
ships operate with the exhaust routed through the SCR unit only when 
they enter port in the United States, 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 an external system. 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.
    c. Fuel cells. A third advanced technology that may allow for 
significant reduction of NOX emissions involves the use of 
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.
    Recently, 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

[[Page 9767]]

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. Because a mature fuel cell 
system could have significant environmental benefits, we will consider 
fuel cells in the future rulemaking.
4. Will the International Community Also Consider More Stringent 
Standards?
    At the time the Annex VI NOX limits were adopted in 
September 1997, several Member States expressed concern that the 
NOX limits were not stringent enough and would not result in 
the emission 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, with amended 
NOX limits to reflect more stringent controls if 
appropriate.
    In March 2000, the United States requested the Marine Environment 
Protection Committee (MEPC) to begin consideration of more stringent 
emission limits for marine diesel engines.\31\ 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 catalytic reduction. Reflecting the 
potential emission reductions that could be obtained from applying 
these strategies to all marine diesel engines, the United States 
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 seven-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 discussed at the 44th 
session of the MEPC (London, March 3-16, 2000), but the committee took 
no action.
---------------------------------------------------------------------------

    \31\ 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.
---------------------------------------------------------------------------

    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. Technology has continued to 
advance since we made our request for review in 2000. EPA now believes 
that Member States of the IMO should consider further reductions of 
significantly more than 30 percent from the NOX limits 
currently stipulated under Regulation 13 of the Annex, to be applicable 
to engines installed on vessels constructed on or after a date to be 
determined. Consideration should be given to use of emission-control 
systems that include a combination of optimized in-cylinder controls 
and advanced technologies such as selective catalytic reduction and 
water-based control technologies.

B. Fuel Controls

    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 emissions of exhaust 
pollutants. Residual fuel 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 United States has sulfur levels somewhat above 
the average.\32\ Operating on fuels with such high sulfur contents 
results in high SOX and direct sulfate PM emissions.
---------------------------------------------------------------------------

    \32\ 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-2001-11, Document 
No. II-E-9.
---------------------------------------------------------------------------

    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. In general, engines that are designed to operate on 
residual fuel 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 using distillate fuel to reduce 
emissions. 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, 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 
lower-sulfur fuel.
1. Is EPA Adopting Fuel Requirements?
    In our proposal, we requested comment on whether we should set 
standards for the fuel that ships use and, if so, what form the 
standards should take. After reviewing the comments and

[[Page 9768]]

other information, we have decided not to set fuel-based regulations at 
this time. We remain concerned that regulating fuel sold in the United 
States would not necessarily ensure that distillate fuel was used in 
U.S. waters. It is not clear under the Clean Air Act whether we can set 
standards for more than the fuel sold in the United States. If so, then 
a fuel sulfur standard would be unlikely to have a significant impact 
on emissions because ships may choose to refuel before entering or 
after leaving the United States.
    However, as we noted in our proposal, Regulation 14 of MARPOL Annex 
VI allows areas in need of SOX emission reductions to 
petition to be designated as SOX Emission Control Areas. 
After the Annex goes into force, ships operating in these designated 
areas must use fuel with a sulfur content not to exceed 15,000 ppm or 
an exhaust gas cleaning system to reduce total vessel SOX 
emissions to 6.0 g/kW-hr or less. The United States may propose 
designation of one or more areas in the future pending a review of the 
relevant emissions, the potential benefits, and the associated costs. 
However, if the Annex does not go into effect, we will address this 
issue in the future to the extent appropriate under the Clean Air Act.
2. What Are the MARPOL Annex VI Fuel Provisions?
    MARPOL Annex VI contains requirements for fuels used onboard marine 
vessels. These requirements, which will be effective if and 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 and that the current sulfur level of marine bunker fuels 
ranges between 5,000 and 45,000 ppm with an average sulfur content of 
about 27,000 ppm. 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 or other technology to reduce total vessel 
SOX emissions (including both auxiliary and main propulsion 
engines) to 6.0 kW-hr or less. To date, two SOX Emission 
Control Areas have been designated: the North East Atlantic (North Sea, 
Irish Sea, and English Channel) and the Baltic Sea. After the Annex 
goes into forces, ships operating in these designated areas must use 
fuel with a sulfur content not to exceed 15,000 ppm or an exhaust gas 
cleaning system to reduce total vessel SOX emissions to 6.0 
g/kW-hr or less.
    Refiners can produce lower-sulfur residual fuel from a lower-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.
3. How Will SOx Emission-Control Areas Be Designated in the 
United States?
    Annex VI stipulates that any proposal for designation of a 
SOx Emission Control Area (SECA) must meet certain 
requirements before it will be taken under consideration by the Parties 
through IMO's Marine Environment Protection Committee (MEPC). The 
specific requirements, as set out in Appendix III to Annex VI, are:
    [sbull] A clear delineation of the area and its boundaries;
    [sbull] A description of the land and sea areas at risk from the 
impacts of maritime SOx emissions;
    [sbull] An assessment that describes the impact of SOx 
emissions on terrestrial and aquatic ecosystems, areas of natural 
productivity, critical habitats, water quality, human health, and areas 
of cultural and scientific significance, if applicable. The source of 
relevant data including methodologies used, shall be identified;
    [sbull] Relevant information pertaining to the meteorological 
conditions in the proposed area of application and the land and sea 
areas at risk, in particular prevailing wind patterns, or to 
topographical, geological, oceanographic, morphological, or other 
conditions that may lead to an increased probability of higher 
localized air pollution or levels of acidification;
    [sbull] The nature of the ship traffic in the proposed area, 
including the patterns and density of such traffic; and
    [sbull] A description of the control measures taken by the 
proposing Party or Parties addressing land-based sources of 
SOx emissions affecting the area at risk that are in place 
and operating concurrent with the consideration of the proposal.
    The Treaty does not establish arbitrary limits to the geographic 
extent of the area to be designated. Instead, it stipulates that the 
proposing Party or Parties support the size and extent of the proposed 
area by the relevant science. The two most important factors in 
determining the offshore boundaries of the area are meteorological 
conditions in the proposed area and how they influence emission 
transport to areas ashore and the volume and patterns of maritime 
traffic.
    We plan to begin investigating designation of one or more areas in 
the future, including a review of the relevant emissions, the potential 
benefits that could be attained and the associated costs. The first 
step will be to identify the areas we would like to be considered for 
SECA designation. Then, we will need to identify data necessary to 
support any such applications, and the organizations (other federal 
agencies, State agencies, ports, etc.) who are likely to have that 
data. Once we obtain the data, we will use it to develop any such 
applications. EPA will work with interested states to consider whether 
the designation of specific SOx Emission Control Areas under 
the Treaty would offer significant benefits to air quality (including 
PM), considering associated costs. Depending upon the outcome of these 
consultations and the analysis of the relevant vessel traffic and 
emissions, the United States may propose designation of one or more 
areas by amendment to Regulation 14(3) of Annex VI.
4. Are There Other Fuel-Based Controls That May Be Considered?
    Additional particulate matter emission benefits could be achieved 
from engines that use distillate marine diesel fuel by controlling the 
sulfur content of that fuel. Distillate marine diesel fuel is used in 
Category 1 and Category 2 marine diesel engines, and is used in 
Category 3 marine diesel engines for specific purposes such as engine 
maintenance and, sometimes, for maneuvering and in-port operations. 
Distillate marine diesel fuel is similar to land-based nonroad diesel 
fuel and currently has a sulfur content in the range of 2,000 to 3,000 
ppm (0.2-0.3 percent).
    As noted in Section I.F, above, the European Union is considering a 
requirement for ships to use fuel with a maximum sulfur content of 
2,000 ppm while at port. This generally means that these vessels would 
use distillate marine diesel fuel for those operations.
    In the United States, we recently set fuel standards applicable to 
distillate highway diesel fuel. Today, the sulfur content of this fuel 
is under 500 ppm; a 15-ppm cap will apply beginning in 2007. We are 
currently developing a separate rulemaking that will set limits for the 
sulfur content of distillate non-road diesel fuel. Among other things, 
this rule will address what level of sulfur content would be 
appropriate for distillate marine diesel fuel.

[[Page 9769]]

V. Demonstrating Compliance

    We are finalizing many, but not all of the compliance provisions 
that we proposed. As described earlier, we are only finalizing an 
initial tier of standards in this final rule. Given the nature of these 
standards, which are equivalent to the internationally negotiated 
NOX standards, we are adopting an interim compliance program 
for Category 3 engines that is harmonized with the international 
program to the maximum extent possible. This compliance program will 
apply only for the initial tier of standards in this final rule. 
Nevertheless, we continue to believe that additional compliance 
requirements, such as those that we proposed, may be appropriate for 
later tiers of standards. See Section V.F. for more information about 
the kinds of additional compliance provisions that we expect to include 
for later standards. The certification and compliance provisions for 
the internationally negotiated NOX standards contained in 
MARPOL Annex VI are set out in the Technical Code on Control of 
Emission of Nitrogen Oxides from Marine Diesel Engines (the 
NOX Technical Code).\33\
---------------------------------------------------------------------------

    \33\ A copy of the conference version of the NOX 
Technical Code can be found in Docket A-97-50, Document II-B-01. 
Copies of updated versions can be obtained from the International 
Maritime Organization (http://www.imo.org).
---------------------------------------------------------------------------

    For those Category 1 and Category 2 engines for which we proposed 
Tier 1 emission standards (i.e., engines over 2.5 liters per cylinder), 
we proposed to apply all the Tier 2 requirements for the proposed Tier 
1 standards. (Note that we established those Tier 2 requirements in a 
previous rulemaking, in which we set the Tier 2 standards.) After 
considering the public comments, we are finalizing this approach with 
two exceptions. First, we allow manufacturers to use test data 
generated using the procedures in the NOX Technical Code on 
an interim basis, as described below. Second, we will not require 
manufacturers to perform production-line testing on their Tier 1 
engines. Commenters expressed concerns about the lead time available to 
meet the Tier 1 requirements, and the burdens of deviating from the 
Annex VI requirements. We believe that these comments are particularly 
relevant to production-line testing. Given the nature of the Tier 1 
standards that are being finalized, we do not believe that the burdens 
associated with starting a production-line testing program with less 
than two years lead time would be appropriate. We do not believe that 
the remainder of the existing compliance program for these engines will 
be particularly burdensome or require additional lead time. The 
compliance program that was promulgated previously for Tier 2 engines 
is not being changed, and will remain in effect as specified in 40 CFR 
part 94.
    Except as noted, the remainder of this section addresses the 
compliance program for Category 3 engines.

A. Overview of Certification

1. How Do I Certify My Engines?
    We are adopting certification and compliance requirements for new 
Category 3 marine engines that are similar to those already in place 
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 final rule establishing 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 will 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 for new Category 3 engines are discussed 
more fully below, including discussions of the differences between the 
requirements the NOX Technical Code (NTC) and this final 
rule.
2. How Are These Certification Requirements Different From Those of the 
NOX Technical Code?
    Our certification process is similar to the NTC pre-certification 
process. However, the Clean Air Act specifies certain requirements for 
our certification program that are different from the NTC requirements. 
The EPA approach differs from NTC in three areas: (1) We allow, but do 
not require witness testing, (2) we include various provisions to hold 
the engine manufacturer responsible for the durability of emission 
controls (see Section V.B.5), and (3) we specify broader temperature 
ranges and allow manufacturers less discretion in setting engine 
parameters for testing, with the goal of adopting test procedures that 
represent a wide range of normal in-use operation. Note also, as 
described in Section III.B, that the timing of the new standards is 
based on the date of first full assembly of the engine, while NTC 
generally applies the standards based on the start-date of the 
manufacture of the vessel, which may occur before the engine is fully 
assembled.
    We believe the regulations in this final rule are sufficiently 
consistent with NTC that manufacturers can use a single harmonized 
compliance strategy to certify under both systems. If manufacturers 
have used good engineering judgment in exercising their discretion for 
test parameters under the TNC, there will be little or no difference 
between the two systems. However, we are aware that the short lead time 
may not allow manufacturers to take whatever steps may be necessary to 
address any potential differences. As a result, we are adopting an 
interim provision in 40 CFR 94.12 to allow manufacturers to rely on 
test data generated under NTC provisions in place of EPA provisions for 
certifying all categories of engines through the 2006 model year. 
Beginning with the 2007 model year, EPA may extend this waiver on a 
case-by-case basis, provided the manufacturer satisfies EPA that any 
differences between its application of the NOX Technical 
Code test procedures and the test procedures contained in this rule 
will not adversely affect NOX emission rates. For the 
Category 1 and Category 2 engines subject to this rule, manufacturers 
will start certifying to EPA's Tier 2 standards starting in 2007. For 
Category 3 engines, the standards don't change in 2007, but this marks 
an appropriate time to expect manufacturers to make any minor 
adjustments that might be necessary to fully comply with the EPA 
provisions for testing and certification.
    The relationship between our program and the NTC 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

[[Page 9770]]

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 near-term 
emission limits are the same as the Annex VI NOX limits.
    Note 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.\34\ 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, note that obtaining an EIAPP in this way 
requires a Statement of Voluntary Compliance from EPA. A shipowner with 
a Statement of Voluntary Compliance issued by another Administration or 
by a classification society will have to apply for EPA certification to 
obtain an EIAPP.
4. What Are the Roles of the Engine Manufacturer and Ship Owner After 
the Engine Is Installed?
---------------------------------------------------------------------------

    \34\ Information on how to obtain a Statement of Voluntary 
Compliance can be found on our Web site http://www.epa.gov/otaq/marine.htm.
---------------------------------------------------------------------------

    Unlike the provisions of MARPOL Annex VI, the Clean Air Act makes 
the engine manufacturer responsible for in-use compliance of properly 
maintained engines. Manufacturers must demonstrate that their engines 
can meet emission standards through the engine's ``useful life'' (as 
described below, the useful life generally refer to the first rebuild 
cycle). Manufacturers are responsible for correcting failures that 
occur during that period. The ship owner must ensure that all proper 
maintenance is performed during the entire ``service life'' of the 
engine (service life is the period during which the engine is in 
service, including the periods after it has been rebuilt). Under both 
Annex VI and the regulations adopted in this final rule for Category 3 
engines, the ship owner is also responsible for compliance with the 
recordkeeping provisions contained in the NOX Technical 
Code. EPA and Coast Guard will work together to develop procedures to 
verify onboard performance of Annex VI requirements, as Coast Guard has 
general authority to carry out such procedures on vessels.
    While this final rule does not require operators or owners of 
Category 1 or Category 2 engines to comply with the recordkeeping 
provisions contained in the NOX Technical Code, we believe 
operators will generally choose to comply with these Annex VI 
recordkeeping requirements anyway, for three reasons. Most importantly, 
once Annex VI is ratified, compliance with these recordkeeping 
provisions will be required for U.S. ships that go overseas. Also, full 
compliance with the maintenance logging requirements under Annex VI 
would be a simple way to show that an operator is not tampering with 
the engine. Finally, manufacturers often condition warranty coverage to 
some degree on proper maintenance of the engine. Thus, having the Annex 
VI log would facilitate warranty claims.

B. Other Certification and Compliance Issues

1. How Are Engine Families Defined?
    Engine grouping for the purpose of certification is accomplished 
through the application of an ``engine family'' definition. Engines 
expected to have similar emission characteristics throughout their 
useful life are classified in the same engine family. As a default, we 
are defining engine families consistent with Annex VI. However, to 
provide for administrative flexibility, we may separate engines 
normally grouped together or combine engines normally grouped 
separately, based upon a manufacturer's request, substantiated with an 
evaluation of emission characteristics over the engine's useful life. 
It is worth noting that we are not adopting the Annex VI definition of 
``engine groups''. Under Annex VI, manufacturers can choose to certify 
their engines under a more narrowly defined engine group than an engine 
family. Annex VI allows more in-use adjustment of these engine group-
certified engines.
2. Which Engines Are Selected for Testing?
    Manufacturers must select the highest-emitting engine (i.e., 
``worst-case'' engine) in a family for certification testing. This is 
consistent with the NTC requirements. In making that determination, the 
manufacturer must use good engineering judgment (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. For Category 3 
engines, certification tests may be performed on these engine mock-ups, 
as long as their configuration is the same as that of the production 
engines. In addition, manufacturers may conduct single-cylinder tests, 
since this 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.
    Manufacturers must 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 be impractical for Category 3 
engines because of their size and cost. Thus, confirmatory testing of 
Category 3 engines would most likely require the manufacturer to test a 
specific engine model according to our specifications. For example, we 
might require that an engine be retested in our presence or tested with 
specific settings for adjustable parameters.
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 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

[[Page 9771]]

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 will 
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 3 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. The operators have to maintain records 
onboard the vessel demonstrating compliance, and must submit these 
records to EPA upon request. NTC 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.
4. How Must Engines Be Labeled?
    Each new engine must have a permanent emission label on the engine 
block or on some other part of the engine that is not normally replaced 
during maintenance or rebuild. This label must include specific 
emission-related information such as engine family name, model year, 
and basic maintenance specifications. The inclusion of this information 
on the label is 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 emission 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 durability provisions described in the following 
sections are intended to help ensure that engines are still meeting 
applicable standards when operated in use. Most of these provisions are 
carried over from our program for smaller marine diesel engines.
    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, the useful life is 
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. Manufacturers must therefore 
specify the useful life for their engines at the time of certification. 
The specified useful life is subject to EPA approval and may not be 
less than 3 years or 10,000 hours of operation (based on total engine 
operation, not just operation in or near U.S. waters). This 
specification does not limit in-use operation. Rather it gives the 
manufacturer direction for addressing emission deterioration by 
defining the period during which the manufacturer must demonstrate to 
EPA that the engine will meet the standards. The useful life period may 
also 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.
6. What Are the Manufacturer's Responsibilities for the Emission 
Warranty and Defect Reporting?
    Tied to the useful life is the minimum period for the emission 
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 will comply with the emission 
standards throughout its useful life, as long as it is properly 
maintained. We therefore specify that the period for the emission 
warranty is equal to the useful life period (e.g., 10,000 hours or 3 
years). The engine manufacturer is responsible for any emission-related 
repairs to any properly maintained and properly used engine that fails 
to meets the standard in use during the warranty period. Engine 
operators are responsible to repair any engines that fail to meet the 
standards because of improper maintenance during the service life of 
the engine.
    We are also adopting defect-reporting requirements. These 
provisions require Category 3 engine manufacturers to report to us 
whenever a specific emission-related defect occurs in two or more 
engines (or two or more cylinders within the same engine). We generally 
expect manufacturers to identify defects as part of their normal 
warranty process. The manufacturer must, however, report all defects, 
without regard to how they were identified. Note that the defect 
reporting requirements do not expressly require the manufacturer to 
collect new information. However if their practice for safety and 
production defects is to collect new information or conduct 
investigations, then they must do so with respect to emission-related 
defects under this regulation. Manufacturers must also track and report 
information they obtain through normal business practice.
7. What Are Deterioration Factors?
    To further ensure that the emission standards are met in use, we 
require manufacturers to apply a deterioration factor (DF) to engines 
to evaluate emission-control performance throughout the useful life. 
The emissions from new engines are mathematically adjusted using the DF 
to account for potential deterioration in emissions 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 the 
effectiveness of some emission-control technologies, such as 
aftertreatment, sophisticated fuel-

[[Page 9772]]

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. This is 
more flexible than some more prescriptive approaches that are required 
for other program. The DFs, however, are subject to EPA approval and 
must be consistent with in-use test data. Manufacturers must calculate 
DF values based on 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 
applying the DF requirement to all engines so we can be sure that 
reasonable methods are being used to determine the capability of 
engines to meet standards throughout their useful lives. Consistent 
with other programs, we allow manufacturers the flexibility of using 
durability emission data from a single engine for other engine families 
that are being certified to the same standards.
    DFs are 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 are 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 near-term 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, manufacturers would not be allowed to use a 
negative DF, and would instead be required to use a DF of zero.
    One of the reasons we are adopting a very flexible DF program for 
this rulemaking is that 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 eventually 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 heavy-duty highway engines (40 CFR 86.004-
26).
8. What Requirements Apply to 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 emission deterioration can result. We 
therefore require operators of vessels with Category 3 to perform the 
emission-related maintenance specified by the manufacturer, which we 
approve as part of the application for certification. 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, we 
consider rebuilding engines and power assemblies to be a part of 
emission-related maintenance. We believe these requirements are 
generally consistent in practice with the provisions specified for ship 
operators in Technical File required by the NOX Technical 
Code.
    Unlike our regulation for smaller marine engines, we are not 
adopting minimum allowable maintenance intervals for Category 3 marine 
diesel engines. This is also consistent with our approach for 
locomotives. In both cases, we believe the engine manufacturers, 
allowing for input from the engine owner, can assess what should be the 
specific maintenance schedules before completing the sale of the 
engine. The engine manufacturer will then provide those specific 
maintenance instructions to the ship operator or owner as part of the 
required maintenance information.
9. What Requirements Apply to Rebuilding Engines?
    We are adopting in-use maintenance provisions that require 
operators to properly perform emission-related maintenance throughout 
the service life of the engine. This also applies whenever an engine or 
engine subsystem is rebuilt. In general, we require that all rebuilds 
return the engine to its original certified condition. We consider 
failure to rebuild an engine to its original certified condition to be 
tampering with the emission controls. We believe these maintenance and 
rebuild provisions address the vast majority of in-use servicing of 
these engines.
10. What Are the Prohibited Acts and Related Requirements?
    We are regulating Category 3 engines under 40 CFR part 94. This 
means that we are extending the general compliance provisions for 
smaller marine engines to Category 3 marine engines. These include the 
general prohibition against introducing an uncertified engine into 
commerce, as well as the tampering and defeat-device prohibitions. 
These prohibitions are listed in 40 CFR 94.1103. As discussed above, 
certain prohibitions applying to ship owners and ship operators are 
also described in this section.
11. What General Exemptions Apply?
    We are applying the exemptions 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 United States for export to other countries. These exemptions, 
described in 40 CFR part 94, subpart J, typically exempt the engines 
from emission standards and other requirements, but require the 
manufacturer to keep records and label exempted engines.
12. What Regulations Apply for Imported Engines?
    We are extending the current importation provisions found in 40 CFR 
part 94 for smaller marine engines to Category 3 marine engines. 
Imported engines are generally subject to the same requirements, based 
on their date of original manufacture. The existing provisions for 
smaller engines include permanent and temporary exemptions from this 
requirement.
13. What Are 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 40 CFR 
part 94, subpart H.

[[Page 9773]]

14. What Responsibilities Apply to Ship Owners and Operators?
    In this final rule we are requiring ship owners and operators to 
maintain all records of maintenance, repair, and adjustment of the 
ship's engines as it relates to emission-control performance. We 
believe these records currently are kept by most ship operators as part 
of normal recordkeeping associated with engines of this magnitude, 
initial investment, and cost of operation. These records would be 
essential for both the ship operator and the Administration to 
determine compliance with the applicable requirements. This is 
especially important for Category 3 marine engines, because operators 
need to be able to make adjustments that significantly affect the 
engine's ability to control emissions. These records must be maintained 
on-board the vessel and be provided to EPA upon request. It is a 
separate violation of the record keeping and submission requirements to 
fail to meet the requirements with respect to each required submission 
or record. Penalties are assessed for each day of each such violation.
    In order to maintain the proper emission-control performance of the 
engine, the ship owner and operator are responsible for maintaining all 
adjustable parameters within the certified ranges specified by the 
engine manufacturer, and for ensuring that the engine is rebuilt 
pursuant to the regulatory requirements. The regulations establish that 
any adjustment outside the range specified by the manufacturer for 
proper emission-control performance constitutes a violation of the 
regulations and the Clean Air Act. Additionally, the regulations 
require the ship owner and operator to correct any noncompliance within 
a two-hour period. Failure to correct the noncompliance within a two-
hour period is a violation of the regulations, with each two-hour 
period considered a separate violation. These provisions, like the 
other maintenance-related provisions, are intended to ensure that 
owners and operators perform adjustments properly to avoid the 
significant increase in emissions associated with improper adjustments. 
In effect, the timely correction of the improperly adjusted parameter 
is considered a required maintenance event, and failure to properly 
perform this required maintenance is considered tampering. Given the 
significant emission increases that can occur with improper 
adjustments, the reasonable time needed to correct an improper 
adjustment, and the need for an effective deterrent, the regulations 
establish a recurring two-hour period as the appropriate requirement.
    As a minimum measure of compliance, the ship owner is required to 
comply with certain basic recordkeeping, as described above, and to 
review those records periodically to ensure compliance. Specifically, 
owners must perform an end-of-year review of the applicable maintenance 
and repair records and send us an annual statement confirming that they 
have met the emission-related requirements of the regulations for the 
previous year, or acknowledging any noncompliance, as appropriate. If 
the ship is operated by a company not controlled by the ship owner, 
then both companies are responsible to meet this reporting requirement. 
If EPA receives a valid compliance statement regarding a particular 
vessel from either the owner or the operator of the vessel, EPA will 
consider both the owner and the operator to have complied with the 
reporting requirement.
    As described in Section I.E, the NOX Technical Code 
Section 2.1 will require each engine covered by the Annex VI 
NOX requirements to be surveyed to ensure that it complies 
with the NOX limits (this requirement will apply once Annex 
VI goes into force). Two of the surveys, the pre-certification survey 
and initial certification survey, are required as part of a ship's 
initial survey and the issuance of an International Air Pollution 
Prevention certificate for the vessel. Section 2.1 also contains a 
requirement for periodic and intermediate surveys ``to ensure the 
engine continues to fully comply with the provisions of the Code.'' The 
periodic and interim surveys are to occur every five and every 2\1/2\ 
years, respectively. Annex VI also requires additional unscheduled 
surveys unless the scheduled surveys are carried out on an annual 
basis. These surveys are required for engines installed on vessels of 
400 gross tonnage or above, as specified in Regulation 5 of the Annex. 
For smaller vessels, it is up to each country to establish appropriate 
programs.
    The periodic and interim surveys are somewhat similar to the annual 
compliance statement we are finalizing today. However, while the Annex 
VI surveys will be carried out by government surveyors, the annual 
compliance statement described in this section must be completed by the 
owner of the vessel and therefore creates a liability requirement for 
the vessel owner. In addition, it is not clear at this time whether the 
Annex VI survey will be designed only to inspect the engine to make 
sure it is in compliance at the time of the survey or if it will be 
designed to ascertain whether the engine has been taken out of 
compliance (i.e., if there has been tampering) during the interim 
period. This is because the U.S. Senate has not yet ratified Annex VI, 
so the implementing legislation and corresponding regulations for 
adopting the Annex VI and NOX Technical Code requirements 
into U.S. law have not yet been adopted. For both of these reasons, we 
believe it is necessary to include this annual compliance statement 
requirement in this rule. However, it is possible that the additional 
documentation required by Annex VI and the associated surveys may be 
sufficient to ensure compliance. Therefore, in light of this 
possibility, EPA will reconsider the need for this annual compliance 
statement in the context of the development of the implementing 
legislation and supporting regulations for U.S. implementation of 
MARPOL Annex VI. If such reconsideration leads EPA to rely in the 
future on the Annex survey in lieu of the annual statement of the 
compliance, the owner and operator of the vessel would remain liable 
for all other compliance provisions of the regulations adopted today. 
This would include maintaining all records of maintenance, repair and 
adjustment of the ship's engines as it relates to emission-control 
performance, and maintaining the proper emission-control performance of 
the engine. The annual compliance certification requirement will remain 
in effect unless it is specifically rescinded.

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 (hereafter referred to as 
``NOX Technical Code'').\35\ The new EPA standards are based 
on these Annex VI test procedures, with some modifications described 
below. These modifications are necessary to ensure that the test data 
used for certification are consistent with the requirements of the 
Clean Air Act.
---------------------------------------------------------------------------

    \35\ A copy of the conference version of the NOX 
Technical Code can be found in Docket A-97-50, Document II-B-01. 
Copies of updated versions can be obtained from the International 
Maritime Organization (http://www.imo.org).
---------------------------------------------------------------------------

1. What Duty Cycle Do 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

[[Page 9774]]

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 emission-control performance of 
engines designed to those standards.
    To address operational differences between engines, we are adopting 
two different duty cycles for different types of Category 3 marine 
engines. Engines that operate on a fixed-pitch propeller curve must be 
certified using the E3 duty cycle adopted by the International 
Organization for Standardization (ISO). 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 adopting 
the ISO E2 duty cycle for propulsion engines that operate at a constant 
speed. These are the same cycles specified by Annex VI.
2. How Do I Account for Variable Test Conditions?
    We are not limiting certification testing based on barometric 
pressure or ambient humidity. We limit the allowable ambient air 
temperature for laboratory testing to a range between 13[deg]C and 
30[deg]C and charge air cooling water between 17[deg]C and 27[deg]C. 
This is somewhat broader than is specified by the NTC. We are adopting 
the NTC correction factors for temperature and humidity for 
certification testing in this temperature range. These corrections 
adjust emission measurements to be equivalent to measurements taken at 
25[deg]C and a humidity of 10.71 g/kg. We will allow the use of the 
corrections for a broader range of test conditions, as long as the 
manufacturer verifies the accuracy of the correction factors outside of 
the range of test conditions for certification.
3. 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. We are therefore adopting regulatory provisions to 
ensure that laboratory measurements accurately reflect in-use 
operation. The regulations include a general requirement that 
manufacturers must use good engineering judgment in applying the 
NOX Technical Code test procedures to ensure that the 
emission measurements accurately represent emission-control performance 
from in-use engines. We are adding specific requirements for 
manufacturers to ensure that intake air and exhaust restrictions and 
coolant and oil temperatures are consistent with in-use operation. Most 
importantly, we require that manufacturers' simulation of charge-air 
cooling replicate the performance of in-use coolers within +/-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. Under the NOX Technical Code, 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 might 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 
may be certified. We are therefore applying the current definition of 
``maximum test speed'', which is already specified for Category and 
Category 2 engines 40 CFR 94.107, to Category 3 engines. We will also 
allow manufacturers to ask us to use the maximum in-use engine speed as 
the maximum test speed.

D. Comparison to NOX Technical Code Compliance Requirements

1. How Are EPA's Compliance Requirements Different From the 
NOX Technical Code Requirements?
    We have attempted to define compliance requirements that are 
sufficiently consistent with the NOX Technical Code (NTC) to 
allow manufacturers to use a single harmonized compliance strategy to 
certify under both systems. This has involved making several changes to 
proposal to align the certification and compliance program with that 
specified by NTC. For example, (1) the final rule specifies a test fuel 
based on engine operation with cleaner-burning distillate fuel; (2) we 
are not requiring engine manufacturers to test engine emissions to 
verify compliance after engines are installed in vessels; and (3) 
operators do not need to conduct onboard emission measurements after 
adjusting the engines (or before they enter U.S. territorial waters) to 
demonstrate that the engine continues to meet the standards after such 
adjustments. We intend to revisit these issues in our future 
rulemaking.
    We are adopting several provisions in our compliance program that 
are different from the NTC requirements. The differences are based on 
certain Clean Air Act-specific compliance provisions and the related 
need to adopt test procedures designed to achieve the emission 
reductions called for under Clean Air Act section 213. These 
differences are discussed in detail in Section V.A.2 above and are 
summarized as follows:
    [sbull] Liability for in-use compliance--We require that the engine 
manufacturer be responsible for designing and producing an engine that 
will comply with the emission standards for the full useful life of the 
engine, while the NTC program makes the ship operators solely 
responsible for ensuring in-use compliance. Both the EPA regulations 
and the NTC provisions require ship operators to properly maintain 
their engines and to keep records of the maintenance and engine 
adjustment throughout the service life of the engine. Under NTC, these 
records are referred to as the Record Book of Engine Parameters.
    [sbull] Durability demonstration--We require that the engine 
manufacturer demonstrate prior to production that a properly maintained 
and used engine will comply with the emission standards for the full 
useful life of the engine (see Section V.B.5). The NTC program only 
requires manufacturers to demonstrate that the engine meets the 
standards when it is installed in the vessel; there is no durability 
demonstration under NTC.
    [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 must take this into 
consideration if they plan to sell the same engines in the United 
States and those other countries.
    [sbull] Test conditions--We certify Category 3 marine engines using 
the NTC test procedures with certain modifications. Annex VI specifies 
narrow ranges for air and water temperature. This can make it easier 
for manufacturers to certify, because they might not design for the 
wide ranges of conditions that actually occur. We believe it is 
necessary to specify wider temperatures to achieve the level of 
emission reductions called for under the Act. Test procedures based on 
real operating parameters provide a robust method of measuring 
emissions. To address the concern for varying emission levels under 
extreme conditions, we correct emissions back to standard conditions 
using Annex VI correction factors.
    [sbull] Test parameters--NTC allows manufacturers full discretion 
to adjust certain engine parameters to appropriate

[[Page 9775]]

settings. For engine parameters such as aftercooler and backpressure 
simulation, these parameters may significantly affect emission levels. 
As with the test conditions for air and water temperatures, to avoid 
unrealistic parameter settings, we simply require good engineering 
judgment to select representative values for such engine parameters. 
Also, under NTC, manufacturers may specify a maximum test speed for 
engine testing that selectively includes lower-emission operation, even 
if those speeds do not represent an engine's actual operation when 
installed on a vessel. We instead define an objective way of 
identifying an engine's maximum test speed, based on the way the engine 
will operate in use.
    [sbull] Compliance date for standards--As described in Section III, 
we apply the new emission standards based on the date the engine is 
fully assembled for the first time, while Annex VI applies the 
standards based on the date that the vessel is manufactured. Note that 
this difference would not matter for the near-term standards, since the 
effective date of the Annex VI limits has already passed (January 1, 
2000).
    [sbull] Parameter adjustment--We are allowing 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. The NTC 
would also prohibit operators from adjusting engines to a calibration 
different from the calibration specified by the manufacturer.
    The durability requirements of the Clean Air Act represent the most 
fundamental differences between the NTC certification program and the 
program required by the Clean Air Act. The Act requires that a 
certificate of conformity be based on a demonstration of compliance 
with the engine standards, and the engine standards require that the 
engine manufacturer produces an engine that will comply with the 
emission standards for the specified useful life of the engine. The NTC 
certification provisions do not include this kind of requirement, 
instead making the ship operators solely responsible for ensuring in-
use compliance through periodic survey requirements. Nevertheless, 
since requiring compliance with both would be at least partially 
duplicative, this rule harmonizes the Act and NTC requirements as 
closely as possible.
    The requirements related to representative engine testing are 
important to ensure that engines are not designed with emission-control 
systems that operate well in the laboratory, with less effective 
control during in-use operation. However, based on our expectation that 
manufacturers are designing their engines properly today, we will allow 
manufacturers to rely on test data generated under NTC on an interim 
basis, as described in Section V.A.2,
2. Can a Manufacturer Comply With EPA Requirements and Annex VI 
Requirements at the Same Time?
    Manufacturers complying with EPA requirements will need to do very 
little additional work to meet the Annex VI requirements. Engine 
manufacturers must give the operator a Technical File that has more 
information than we require. The manufacturer may also need to ensure 
that the relevant emission testing is witnessed appropriately.
    For manufacturers already complying with the NTC, the amount of 
additional work necessary to satisfy the new EPA requirements depends 
on how they conducted emission testing. The NTC allows more discretion 
in testing engines than we allow under our regulations, and does not 
necessarily require that the engine be tested fully consistent with in-
use operation. Under the EPA 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 from testing conducted in accordance 
with the proposed regulations. In these cases, manufacturers would need 
to repeat the tests according to the proposed test procedures. However, 
we recognize that some additional lead time is needed for manufacturers 
that will be repeating tests. Therefore, we have included in 40 CFR 
94.12(f) of the final regulations an interim provision which will allow 
manufacturers to use their Annex VI test data to show compliance with 
Tier 1 standards. Manufacturers would not need prior approval to do 
this. We are limiting this allowance to the first three model years of 
the Tier 1 standards. Beginning with model year 2007, manufacturers 
would need to make a showing of equivalence before they could deviate 
from the EPA test procedures.
    On the other hand, manufacturers that used good engineering 
judgment to test their engines consistent with their in-use operation 
may generally use the same test data for EPA certification. For future 
testing, manufacturers may test their engines in a way that allows them 
to simultaneously meet the NTC and EPA requirements.
    With respect to other EPA compliance requirements not related to 
certification testing, manufacturers must do the following things in 
addition to the Annex VI requirements:
    [sbull] Demonstrate prior to production that the engines will 
comply with the emission standards for the useful life of the engine.
    [sbull] Warrant to the purchasers that the engines will comply with 
the EPA requirements for the useful life of the engine.
    [sbull] Specify how the operator should adjust the engine in use 
and how proper adjustment should be verified through testing.

E. Technical Amendment to 40 CFR Part 94

    The regulations in 40 CFR 94.7(d) require that a marine engine be 
equipped with a connection in the exhaust system for the temporary 
attachment of gaseous and/or particulate emission-sampling equipment. 
This provision is intended to facilitate in-use emission testing. Where 
the engine manufacturer does not add a sample port, for example when an 
inadequate amount of the exhaust system is supplied to make such an 
installation practical, the engine manufacturer would have to provide 
installation instructions for the sample port. If the engine 
manufacturer properly supplies such instructions, the engine would be 
covered by the applicable engine certificate when the engine 
manufacturer provides the engine to the vessel manufacturer for the 
purposes of installation. The vessel manufacturer would then have to 
follow these installation instructions or the vessel manufacturer's 
sale or placement of the vessel into service could be a violation of 
the prohibited acts. Manufacturers expressed concern that the wording 
of this requirement could be taken to mean that a failure to install 
the sample port by the vessel manufacturer could affect their engine 
certificate. This was clearly not the intent of this provision. To 
further clarify this issue, we are amending 40 CFR 94.7(d) by deleting 
the words ``invalidate a certificate and'' from the last sentence of 
that regulatory provision.

[[Page 9776]]

F. Compliance Issues To Be Considered for Future Rulemaking

    The compliance program being finalized in this final rule is 
appropriate to implement the Tier 1 standards. However, we continue to 
believe that additional compliance provisions will be necessary for 
later standards that require more advanced technology and more 
challenging calibrations. These include provisions related to (1) 
parameter adjustment, (2) off-cycle emissions, (3) test fuels, and (4) 
post-certification testing. These issues were discussed in detail in 
the proposal for this rule, along with potential compliance provisions 
that could address our concerns. We intend to assess the need for such 
compliance provisions in our future rulemaking.
1. What Are EPA's Concerns About Parameter Adjustment?
    Given the broad range of ignition properties for in-use residual 
fuels, we expect that our in-use adjustment 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 proposed 
that operators be required to perform a simple field measurement test 
to confirm emissions after a parameter adjustment or maintenance 
operation, using onboard emission measurement systems with electronic-
logging equipment. We expect that this issue will be equally important 
for more advanced engines that rely on water injection or after 
treatment for emission reductions. In addition, in most cases, these 
advanced technologies can be turned on and off by the operator. Thus, 
we expect there to be a need for an onboard verification system for 
these engines as well.
    We envision a simpler measurement system than the type specified in 
Chapter 6 of NOX Technical Code. As is described in the 
Final Regulatory Support Document, 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. Note that Annex VI includes 
specifications allowing operators to choose to verify emissions through 
onboard testing, which suggests that Annex VI also envisioned that 
onboard measurement systems could be of value to operators.
    We proposed to allow vessel operators to adjust an engine's 
operating parameters different from the manufacturer's specification 
when the vessel is sufficiently far from the U.S. coastline. This 
flexibility is not included in the NTC provisions. Under the proposed 
approach, engine adjustments different from engine manufacturer's 
specifications would have been 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 approaches the U.S. coastline. Failure to take 
these actions would have constituted tampering with the engine in 
violation of Clean Air Act section 203(a)(3)(A) and 40 CFR 
94.1103(a)(3)(i). While we are finalizing our Tier 1 program without 
this flexibility, we will continue to evaluate whether it is 
appropriate for more advanced standards.
    While we may revisit some of these issues in our future rulemaking, 
under this final rule ship operators may not adjust the parameters 
outside of the ranges specified by engine manufacturers in their 
application for certification. Any adjustment outside of the 
certification range would be considered tampering (see Sections V.B.3 
and V.B.14).
2. What Are EPA's Concerns About Off-Cycle Emissions?
    We are concerned about emission-control performance when the engine 
is not operating on the ISO E3 test cycle points. 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. 
Generally, Category 3 engines are intended to operate on a propeller 
curve matched with a propeller for custom installation on a specific 
vessel. However, we remain concerned that Category 3 engines may have 
higher emissions between test modes. While the defeat device provisions 
prohibit manufacturers from producing their engines to control 
emissions more effectively at established test points than at other 
points not included in the test, it can be a difficult prohibition to 
enforce. We expect to revisit this issue in our future rulemaking. For 
example we may require manufacturers to develop emission targets to 
allow the operator to ensure that the engine has been readjusted to 
have performance equivalent 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. In the 
proposal we defined equivalent control to be either the use of the same 
injection timing map for the tested and nontested engine speeds, or 
following a linear interpolation between test points for NOX 
emissions at nontest speeds.
    In addition, we remain concerned that Category 3 engines operate at 
relatively low 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 in the ISO E3 test cycle, 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 will consider 
several options in our future rulemaking 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, it is likely that Tier 2 engines will 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.
3. What Are EPA's Concerns About the Fuel Used for Emission Testing?
    Appropriate test procedures need to represent in-use operating 
conditions as much as possible, including specification of test fuels 
consistent with the fuels that compliant engines

[[Page 9777]]

will use over their lifetimes. For the standards we are adopting in 
this rule, we are allowing engine testing using distillate fuel, even 
though vessels with Category 3 marine engines primarily use the 
significantly less expensive residual fuel. This allowance is 
consistent with the specifications of the NTC. We proposed to base the 
standards on testing using residual fuel, but are not finalizing this 
requirement at this time due to concerns about the lead time needed by 
manufacturers to develop the necessary testing capabilities for 
residual fuels. Most manufacturers have test facilities designed to 
test engines using distillate fuel because it is easier to work with 
than residual fuel. Nevertheless, we believe that long-term standards 
should be based on actual in-use fuels. Thus, we will reconsider the 
issue of test fuel in a future rulemaking.
    In our proposal, we also included a correction factor to account 
for the emission-related effects of fuel quality, specifically fuel-
bound nitrogen. We are not finalizing the correction here. This 
correction would have been needed for residual fuel testing because of 
the high levels of nitrogen contained in those fuels. For all testing 
with Category 3 engines, we proposed to require measuring fuel-bound 
nitrogen and correcting measured values to what would occur with a 
nitrogen concentration of 0.4 weight percent. This corrected value 
would be used to determine whether the engine meets emission standards 
or not. This correction methodology would have applied equally to 
testing with distillate or residual fuels. While we are not adopting 
any correction for fuel effects in this rule, we will reconsider the 
need for such corrections in a future rulemaking.
4. What Are EPA's Concerns About Production Variability?
    To ensure compliance of production engines, we proposed 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 
proposed that each engine a manufacturer produces be tested. We are not 
including new production testing requirements in this final rule 
because of concerns about the amount of lead time needed to start such 
program. However, we will revisit the need to include this type of 
post-certification testing in our future rulemaking.

VI. Projected Impacts

    Our analysis of the projected impacts of new emission standards 
typically consists of estimating the costs, emission benefits, and cost 
per ton of pollutant reduced.
    We expect the costs of compliance to be negligible. We do not 
anticipate any engineering or design costs associated with the near-
term standards because manufacturers should already be certifying 
engines to the Annex VI standards to comply with the internationally 
negotiated program and new Category 3 marine diesel engines installed 
on ships since January 1, 2000 are widely understood to already comply 
with the standards set forth in both Annex VI and this rule. While 
there will be certification and compliance costs, these costs will be 
negligible, because manufacturers will be able to use the same test 
data for both programs. As detailed in the information collection 
request associated with this final rule (OMB 2060-0460), total 
annual reporting and recordkeeping costs for all affected entities is 
estimated to be $144,000.\36\ Consequently, this program does not 
impose significant additional costs.
---------------------------------------------------------------------------

    \36\ Note that manufacturers have already incurred most of these 
estimated compliance costs for meeting Annex VI standards. New costs 
related to the final rule will be much smaller.
---------------------------------------------------------------------------

    The emission reductions 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 (see Table VI-1). Accordingly, we have not 
calculated values to quantify the cost-effectiveness of the final rule.

                     Table VI-1.--Category 3 Marine Vessel NOX National Emission Inventories
----------------------------------------------------------------------------------------------------------------
                                                                  1996         2010         2020         2030
----------------------------------------------------------------------------------------------------------------
No control baseline (thousand short tons)...................          190          303          439          659
EPA/MARPOL Annex VI:
    (Thousand short tons)...................................          190          274          367          531
    Percent reduction (relative to no control)..............  ...........          9.6         16.2         19.5
----------------------------------------------------------------------------------------------------------------

VII. The Blue Cruise Program

    As described in Section VIII of the proposal, we are interested in 
developing a voluntary program to encourage ship owners and operators 
to reduce their air and waste emissions to minimize adverse 
environmental impacts. Under the envisioned program, a participant ship 
owner would be awarded a certain designation based on the combination 
of air and waste emission-control programs adopted. These technologies 
and systems could be different for new or existing vessels, but would 
be in addition to any equipment or systems they are already required to 
have. Qualifying ship owners could use the EPA designation on 
advertising materials (including the ship itself) to educate consumers 
and encourage them to choose their vessels.
    We will continue the development of the Blue Cruise program 
separate from the emission-control programs for marine diesel engines. 
We intend to interact extensively with interested parties through 
public workshops and a proposal that we intend to publish in mid-2003. 
After consideration of the public comments we receive on that proposal, 
we will publish a final program.

VIII. Public Participation

    A wide variety of interested parties participated in the rulemaking 
process that culminates with this final rule. This process provided 
opportunity for public comment following the proposal that we published 
May 29, 2002 (67 FR 37548). We considered these comments in developing 
the final rule.
    We have prepared a detailed Summary and Analysis of Comments 
document, which describes the comments we received on the proposal and 
our response to each of these comments. The Summary and Analysis of 
Comments is available in the docket for this rule and on the Office of 
Transportation and Air Quality Internet home page at http://www.epa.gov/otaq/marine.htm.

[[Page 9778]]

IX. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    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 this regulation will result in none of the 
economic effects set forth in Section 1 of the Order. A Final 
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. Paperwork Reduction Act

    The Paperwork Reduction Act, 44 U.S.C. 3501 et seq., requires 
agencies to submit for OMB review and approval any federal requirements 
and activities that result in the collection of information from ten or 
more persons. Information-collection requirements may include 
reporting, labeling, and recordkeeping requirements. Federal agencies 
may not impose penalties on persons who fail to comply with collections 
of information that do not display a currently valid OMB control 
number.
    The information collection requirements in this final rule have 
been approved by OMB under the Paperwork Reduction Act. The OMB control 
number for this information collection is 2060-0460, which we sent to 
OMB under the EPA ICR number 1897.04. The information being collected 
will be used by EPA to ensure that new marine vessels and fuel systems 
comply with emission standards through certification requirements and 
various subsequent compliance provisions.
    In addition, this notice announces OMB's approval of the 
information collection requirements for commercial marine diesel engine 
for which we adopted emission standards on December 29, 1999 (64 FR 
73300) and for recreational marine diesel engines for which we adopted 
emission standards on November 8, 2002 (67 FR 68242). The estimated 
annual public reporting and recordkeeping burden for collecting 
information from these engines is shown in Table IX.B-1.

            Table IX.B-1.--Burden Collecting Information for Marine Diesel Emission-Control Programs
----------------------------------------------------------------------------------------------------------------
                                                                          Capital     Operating and
                                               Hours per    Hours for    costs for     maintenance   Total costs
          Engine type            Respondents   respondent      all          all       costs for all    for all
                                                           respondents  respondents    respondents   respondents
----------------------------------------------------------------------------------------------------------------
Category 3.....................            6          302        1,812           $0         $67,104     $144,022
Commercial--Category 1 and 2...          232           93       21,520            0          40,000    2,494,272
Recreational...................           12          606        7,273            0         870,238    1,178,061
----------------------------------------------------------------------------------------------------------------

    The Information Collection Requests (ICR) were subject to public 
notice and comment prior to OMB approval and, as a result, EPA finds 
that there is ``good cause'' under section 553(b) of the Administrative 
Procedures Act (5 U.S.C. 553(b)) to include these information-
collection requirements in 40 CFR part 9 without additional notice and 
comment. EPA received various comments on the rulemaking provisions 
covered by the ICRs, but no comments on the paperwork burden or other 
information in the ICRs. All comments that were submitted to EPA are 
considered in the relevant Summary and Analysis of Comments, which can 
be found in the docket. A copy of any of the submitted ICR documents 
may be obtained from Susan Auby, Collection Strategies Division, U.S. 
Environmental Protection Agency (2822-T), 1200 Pennsylvania Ave., NW., 
Washington, DC 20460 or by e-mail at [email protected].

C. Regulatory Flexibility Act

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this final rule. EPA has also 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. For purposes of assessing 
the impacts of this rulemaking, ``small entity'' is defined as any one 
of the following: (1) A small business that meets the definition for 
businesses based on size standards adopted by the Small Business 
Administration; (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 that 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 that 
may be affected by this regulation.

Table X.B-1.--Primary SBA Small Business Categories Potentially Affected
                           by This Regulation
------------------------------------------------------------------------
                                               Defined by SBA as a small
          Industry                NAICS a           business if: b
------------------------------------------------------------------------
Internal Combustion Engines.          333618  < 1000 employees
Ship Building...............          336611  < 1000 employees

[[Page 9779]]

 
Water transportation,                    483  < 500 employees
 freight and passenger.
------------------------------------------------------------------------
a North American Industry Classification System.
b According to SBA's regulations (13 CFR part 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 this rule on small 
entities, EPA has concluded that this action will not have a 
significant economic impact on a substantial number of small entities. 
This final rule will not impose any requirements on small entities. Our 
review of the list of manufacturers of Category 3 marine diesel engines 
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 qualify 
as a small business. In addition, this rule will not impose significant 
economic impacts on engine manufacturers. Engine manufacturers are 
already achieving the Tier 1 standards and our program will impose only 
negligible compliance costs. Our review of the U.S. shipyards that 
build 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 must take minimal steps to comply with this final 
rule. This includes an obligation to do emission-related maintenance 
specified by the engine manufacturer. 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. In addition, operators must record certain 
information related to operating and servicing their engines. For 
example, maintaining the ``record book of engine parameters'' and 
detailing the ship's location when servicing engines is generally 
already required under MARPOL Annex VI or is readily available as a 
matter of routine recordkeeping. Finally, we require owners of marine 
vessels with Category 3 engines to send minimal annual notification to 
EPA to state whether engine maintenance and adjustments have caused 
engines to be noncompliant.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 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 our cost estimates, we estimate 
the aggregate costs (annualized over 20 years) of this rule to be 
negligible. This final rule is therefore not subject to the 
requirements of sections 202 and 205 of the UMRA.

E. Executive Order 13132: Federalism

    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 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 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. Executive Order 13132 therefore does not apply to this rule.
    Although Section 6 of Executive Order 13132 does not apply to this 
rule, EPA did consult with representatives of various State and local 
governments in developing this rule. EPA has also consulted 
representatives from STAPPA/ALAPCO, which represents state and local 
air pollution officials.

F. 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

[[Page 9780]]

ensure ``meaningful and timely input by tribal officials in the 
development of regulatory policies that have tribal implications.''
    This 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 
shipbuilders. Tribal governments will be affected only to the extent 
they purchase and use vessels having regulated engines. Executive Order 
13175 therefore does not apply to this rule.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    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 rule is not subject to Executive Order 13045 because it is not 
economically significant under the terms of Executive Order 12866.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    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 aim to reduce 
emissions from certain nonroad engines and have no effect on fuel 
formulation, distribution, or use.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Pub. L. 104-113, section 12(d) (15 U.S.C. 272 
note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless doing so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. NTTAA directs EPA to 
provide Congress, through OMB, explanations when the Agency decides not 
to use available and applicable voluntary consensus standards.
    This rule involves technical standards for testing emissions from 
marine diesel engines. EPA is adopting test procedures contained in the 
MARPOL NOX Technical Code, with the certain modifications as 
described in this document. 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.\37\ 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.
---------------------------------------------------------------------------

    \37\ 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.
---------------------------------------------------------------------------

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States 
before the rule is published in the Federal Register. This rule is not 
a ``major rule'' as defined by 5 U.S.C. 804(2).

List of Subjects

40 CFR Part 9

    Reporting and recordkeeping requirements.

40 CFR Part 94

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

    Dated: January 31, 2003.
Christine Todd Whitman,
Administrator.

    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as set forth below.

PART 9--[AMENDED]

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

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

    2. Section 9.1 is amended in the table by adding the center heading 
and the entries under that center heading in numerical order to read as 
follows:


Sec.  9.1  OMB approvals under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
                                                             OMB control
                      40 CFR citation                            No.
------------------------------------------------------------------------
 
                               * * * * *
  Control of Emissions From New and In-Use Marine Compression-Ignition
                                 Engines
------------------------------------------------------------------------
94.7-94.12.................................................   2060-0460.
94.101-94.109..............................................    2060-0460
94.203-94.222..............................................    2060-0460
94.303-94.310..............................................    2060-0460
94.403-94.408..............................................    2060-0460
94.508-94.509..............................................    2060-0460
94.804.....................................................    2060-0460
94.904-94.911..............................................    2060-0460
 
                                * * * * *
------------------------------------------------------------------------

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:


Sec.  94.1  Applicability.

* * * * *

[[Page 9781]]

    (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 by adding, in alphabetical order, 
definitions to paragraph (b) for ``Annex VI Technical Code'', ``Brake-
specific fuel consumption'', ``Hydrocarbon standard'', ``Maximum test 
speed'', ``Residual fuel'', ``Round'', ``Tier 1'', ``Vessel operator'', 
and ``Vessel owner'', and revising the definitions for ``Designated 
Officer'', ``Diesel fuel'', and ``New vessel'' to read as follows:


Sec.  94.2  Definitions.

* * * * *
    (b) As used in this part, all terms not defined in this section 
shall have the meaning given them in the Act:
    Annex VI Technical Code means the ``Technical Code on Control of 
Emission of Nitrogen Oxides from Marine Diesel Engines,'' adopted by 
the International Maritime Organization (incorporated by reference in 
Sec.  94.5).
* * * * *
    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.
* * * * *
    Designated Officer means the Manager of the Engine Programs Group 
(6405-J), U.S. Environmental Protection Agency, 1200 Pennsylvania Ave., 
Washington, DC 20460.
* * * * *
    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.
* * * * *
    Maximum test speed means the engine speed defined by Sec.  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) For vessels with no Category 3 engines, 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)

    (iii) For vessels with Category 3 engines, a vessel that has 
undergone a modification, which:
    (A) Substantially alters the dimensions or carrying capacity of the 
vessel; or
    (2) Changes the type of vessel; or
    (3) Substantially prolongs the vessel's life.
    (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.
    Round means to round numbers according to ASTM E29-02 (incorporated 
by reference in Sec.  94.5), unless otherwise specified.
* * * * *
    Tier 1 means relating to an engine subject to the Tier 1 emission 
standards listed in Sec.  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 revised to read as follows:


Sec.  94.5  Reference materials.

    We have incorporated by reference the documents listed in this 
section. The Director of the Federal Register approved the 
incorporation by reference as prescribed in 5 U.S.C. 552(a) and 1 CFR 
part 51. Anyone may inspect copies at the U.S. EPA, Air and Radiation 
Docket and Information Center, 1301 Constitution Ave., NW., Room B102, 
EPA West Building, Washington, DC 20460 or the Office of the Federal 
Register, 800 N. Capitol St., NW., 7th Floor, Suite 700, Washington, 
DC.
    (a) ASTM material. Table 1 of Sec.  94.5 lists material from the 
American Society for Testing and Materials that we have incorporated by 
reference. The first column lists the number and name of the material. 
The second column lists the sections of this part where we reference 
it. Anyone may purchase copies of these materials from the American 
Society for Testing and Materials, 100 Barr Harbor Dr., PO Box C700, 
West Conshohocken, PA 19428. Table 1 follows:

                 Table 1 of Sec.   94.5.--ASTM Materials
------------------------------------------------------------------------
           Document No. and name                  Part 94 reference
------------------------------------------------------------------------
ASTM D 86-01, Standard Test Method for       94.108
 Distillation of Petroleum Products at
 Atmospheric Pressure.
ASTM D 93-02, Standard Test Methods for      94.108
 Flash-Point by Pensky-Martens Closed Cup
 Tester.
ASTM D 129-00, Standard Test Method for      94.108
 Sulfur in Petroleum Products (General Bomb
 Method).
ASTM D 287-92 (Reapproved 2000), Standard    94.108
 Test Method for API Gravity of Crude
 Petroleum and Petroleum Products
 (Hydrometer Method).
ASTM D 445-01, Standard Test Method for      94.108
 Kinematic Viscosity of Transparent and
 Opaque Liquids (the Calculation of Dynamic
 Viscosity).
ASTM D 613-01, Standard Test Method for      94.108
 Cetane Number of Diesel Fuel Oil.
ASTM D 1319-02a, Standard Test Method for    94.108
 Hydrocarbon Types in Liquid Petroleum
 Products by Fluorescent Indicator
 Adsorption.

[[Page 9782]]

 
ASTM D 2622-98, Standard Test Method for     94.108
 Sulfur in Petroleum Products by Wavelength
 Dispersive X-ray Fluorescence Spectrometry.
ASTM D 5186-99, Standard Test Method for     94.108
 Determination of the Aromatic Content and
 Polynuclear Aromatic Content of Diesel
 Fuels and Aviation Turbine Fuels by
 Supercritical Fluid Chromatography.
ASTM E 29-02, Standard Practice for Using    94.2
 Significant Digits in Test Data to
 Determine Conformance with Specifications.
------------------------------------------------------------------------

    (b) ISO material. Table 2 of Sec.  94.5 lists 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 of this part where 
we reference it. Anyone may purchase copies of these materials from the 
International Organization for Standardization, Case Postale 56, CH-
1211 Geneva 20, Switzerland.
    Table 2 follows:

                 Table 2 of Sec.   94.5.--ISO Materials
------------------------------------------------------------------------
           Document No. and name               40 CFR part 94 reference
------------------------------------------------------------------------
ISO 8178-1, Reciprocating internal           94.109
 combustion engines--Exhaust emission
 measurement--Part 1: Test-bed measurement
 of gaseous and particulate exhaust
 emissions, 1996.
------------------------------------------------------------------------

    (c) IMO material. Table 3 of Sec.  94.5 lists material from the 
International Maritime Organization that we have incorporated by 
reference. The first column lists the number and name of the material. 
The second column lists the section of this part where we reference it. 
Anyone may purchase copies of these materials from the International 
Maritime Organization, 4 Albert Embankment, London SE1 7SR, United 
Kingdom.
    Table 3 follows:

                 Table 3 of Sec.   94.5.--IMO Materials
------------------------------------------------------------------------
           Document No. and name               40 CFR part 94 reference
------------------------------------------------------------------------
Resolution 2--Technical Code on Control of   94.2, 94.11, 94.108,
 Emission of Nitrogen Oxides from Marine      94.109, 94.204, 94.211,
 Diesel Engines, 1997.                        94.1004.
------------------------------------------------------------------------


    5. Section 94.7 is amended by revising paragraph (d) to read as 
follows:


Sec.  94.7  General standards and requirements.

* * * * *
    (d) Manufacturers shall ensure that all engines subject to the 
emission standards of this part are equipped with a connection in the 
engine exhaust system that is located downstream of the engine and 
before any point at which the exhaust contacts water (or any other 
cooling/scrubbing medium) for the temporary attachment of gaseous and/
or particulate emission sampling equipment. Use good engineering 
judgment to locate the connection. This connection shall be internally 
threaded with standard pipe threads of a size not larger than one-half 
inch, and shall be closed by a pipe-plug when not in use. Equivalent 
connections are allowed. Engine manufacturers may comply with this 
requirement by providing vessel manufacturers with clear instructions 
explaining how to meet this requirement, and noting in the instructions 
that failure to comply may subject the vessel manufacturer to federal 
penalties. Vessel manufacturers are required to comply with the engine 
manufacturer's instructions.
* * * * *

    6. Section 94.8 is amended by revising paragraphs (a), (c), (d), 
(e), (f), and (g) to read as follows:


Sec.  94.8  Exhaust emission standards.

    (a) The Tier 1 standards of paragraph (a)(1) of this section apply 
until replaced by the standards of paragraph (a)(2) of this section.
    (1) Tier 1 standards. NOX emissions from model year 2004 
and later engines with displacement of 2.5 or more liters per cylinder 
may not exceed the following values:
    (i) 17.0 g/kW-hr when maximum test speed is less than 130 rpm.
    (ii) 45.0 x N-0.20 when maximum test speed is at least 
130 but less than 2000 rpm, where N is the maximum test speed of the 
engine in revolutions per minute.


(Note: Round speed-dependent standards to the nearest 0.1 g/kW-hr.)

    (iii) 9.8 g/kW-hr when maximum test speed is 2000 rpm or more.
    (2) Tier 2 standards. (i) Exhaust emissions from marine 
compression-ignition engines shall not exceed the applicable Tier 2 
exhaust emission standards contained in Table A-1 as follows:

                                             Table A-1.--Primary Tier 2 Exhaust Emission Standards (G/kW-hr)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          THC+NOX  g/kW-
   Engine size liters/cylinder, rated power                     Category                  Model year \1\        hr          CO  g/kW-hr     PM  g/kW-hr
--------------------------------------------------------------------------------------------------------------------------------------------------------
disp. < 0.9 and power = 37 kW......  Category 1..............................            2005             7.5             5.0            0.40
0.9 <= disp. < 1.2, all power levels..........  Category 1..............................            2004             7.2             5.0            0.30
1.2 <= disp. < 2.5, all power levels..........  Category 1..............................            2004             7.2             5.0            0.20
2.5 <= disp. < 5.0, all power levels..........  Category 1..............................            2007             7.2             5.0            0.20

[[Page 9783]]

 
5.0 <= disp. < 15.0, all power levels.........  Category 2..............................            2007             7.8             5.0            0.27
15.0 <= disp. < 20.0 power, < 3300 kW.........  Category 2..............................            2007             8.7             5.0            0.50
15.0 <= disp. < 20.0, power = 3300   Category 2..............................            2007             9.8             5.0            0.50
 kW.
20.0 <= disp. < 25.0, all power levels........  Category 2..............................            2007             9.8             5.0            0.50
25.0 <= disp. < 30.0, all power levels........  Category 2..............................            2007            11.0             5.0            0.50
disp. = 30.0, all power levels.....  Category 3..............................            2007  See paragraph (a)(2)(ii) of this section.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The model years listed indicate the model years for which the specified standards start.

    (ii) EPA has not finalized Tier 2 standards for Category 3 engines. 
EPA will promulgate final Tier 2 standards for Category 3 engines on or 
before April 27, 2007.
* * * * *
    (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).
    (3) The crankcase requirements of this paragraph (d) do not apply 
for Tier 1 engines.
    (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 Sec.  
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 Sec.  94.106.
    (2) [Reserved]
    (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 = 37 kW, and displ. <               4.0            0.24
 0.9....................................
0.9 <= displ. < 1.2.....................             4.0            0.18
1.2 <= displ. < 2.5.....................             4.0            0.12
2.5 <= displ. < 5.......................             5.0            0.12
5 <= displ. < 15........................             5.0            0.16
15 <= disp. < 20, and power < 3300 kW...             5.2            0.30
15 <= disp. < 20, and power =             5.9            0.30
 3300 kW................................
20 <= disp. < 25........................             5.9            0.30
25 <= disp. < 30........................             6.6            0.30
------------------------------------------------------------------------

    (ii) Category 3 engines may be designated ``Blue Sky Series'' 
engines by meeting these voluntary standards that would apply to all 
certification and in-use testing:
    (A) A NOX standard of 9.0 x N-\0.20\ where N 
= the maximum test speed of the engine in revolutions per minute (or 
4.8 g/kW-hr for engines with maximum test speeds less than 130 rpm). 
(Note: Round speed-dependent standards to the nearest 0.1 g/kW-hr.)
    (B) An HC standard of 0.4 g/kW-hr.
    (C) A CO standard of 3.0 g/kW-hr.
    (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.

    7. Section 94.9 is amended by revising paragraphs (a)(1), (b)(1) 
and (b)(2) to read as follows:


Sec.  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

[[Page 9784]]

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 Sec.  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.
    (2) The emission values to compare with the standards shall be the 
emission values of a low hour engine, or a development engine, adjusted 
by the deterioration factors developed in accordance with the 
provisions of Sec.  94.219. Before comparing any emission value with 
the standard, round it to the same number of significant figures 
contained in the applicable standard.
* * * * *

    8. Section 94.10 is amended by revising paragraph (a) to read as 
follows:


Sec.  94.10  Warranty period.

    (a)(1) Warranties imposed by Sec.  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 Sec.  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.
* * * * *

    9. Section 94.11 is amended by adding paragraph (g) to read as 
follows:


Sec.  94.11  Requirements for rebuilding certified engines.

* * * * *
    (g) For Category 3 engines, the owner and operator shall also 
comply with the recordkeeping requirements in the Annex VI Technical 
Code (incorporated by reference at Sec.  94.5) regarding the Engine 
Book of Record Parameters.

    10. Section 94.12 is amended by revising the introductory text and 
adding paragraph (f) to read as follows:


Sec.  94.12  Interim provisions.

    This section contains provisions that apply for a limited number of 
calendar years or model years. These provisions supercede the other 
provisions of this part. The provisions of this section do not apply 
for Category 3 engines.
* * * * *
    (f) Manufacturers may submit test data collected using the Annex VI 
test procedures to show compliance with Tier 1 standards for model 
years before 2007. Note: Starting in 2007, EPA may approve a 
manufacturer's request to continue using alternate procedures under 
Sec.  94.102(c), as long as the manufacturer satisfies EPA that the 
differences in testing will not affect NOX emission rates.

Subpart B--[Amended]

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


Sec.  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 Sec.  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.
* * * * *

    12. Section 94.107 is amended by revising paragraph (a) and adding 
paragraph (f) to read as follows:


Sec.  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 Sec. Sec.  
94.105, 94.106, and Sec.  94.109 (including the tolerances for engine 
speed specified in Sec.  94.105).
* * * * *
    (f) For Category 3 engines, manufacturers may choose to set the 
maximum test speed at the maximum in-use engine speed instead of the 
speed specified in Sec.  94.107(d).

    13. Section 94.108 is amended by revising paragraphs (a)(1), (b), 
and (d)(1) and adding paragraph (e) to read as follows:


Sec.  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 Sec.  94.5) in 
Table B-5 of this section, or substantially equivalent specifications 
approved by the Administrator, as follows:

              Table B-5.--Federal Test Fuel Specifications
------------------------------------------------------------------------
              Item                 Procedure \1\            Value
------------------------------------------------------------------------
Cetane.........................  ASTM D 613-01....  40-48
Distillation Range:
    Initial boiling point,       ASTM D 86-01.....  171-204
     [deg]C.
    10% point, [deg]C..........  ASTM D 86-01.....  204-238
    50% point, [deg]C..........  ASTM D 86-01.....  243-282
    90% point, [deg]C..........  ASTM D 86-01.....  293-332
    End point, [deg]C..........  ASTM D 86-01.....  321-366
Flashpoint, [deg]C.............  ASTM D 93-02.....  54 minimum
Gravity, API...................  ASTM D 287-92....  32-37
Hydrocarbon composition:
    Aromatics, volume percent..  ASTM D 1319-02a    10 minimum
                                  or D 5186-99.
    Olefins and Saturates        ASTM D 1319-02a..  Remainder
     (paraffins and
     napththenes).
Total Sulfur, weight percent...  ASTM D 129-00 or   0.03--0.80
                                  D 2622-98.

[[Page 9785]]

 
Viscosity at 38 [deg]C,          ASTM D 445-01....  2.0-3.2
 centistokes.
------------------------------------------------------------------------
\1\ All ASTM standards are incorporated by reference in Sec.   94.5.

* * * * *
    (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) [Reserved]
* * * * *
    (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 engines. For testing Tier 1 engines, 
use test fuels meeting the specifications listed in the Annex VI 
Technical Code (incorporated by reference in Sec.  94.5).

    14. A new Sec.  94.109 is added to read as follows:


Sec.  94.109  Test procedures for Category 3 marine engines.

    (a) Gaseous emissions shall be measured using the test cycles and 
procedures specified by Section 5 of the Annex VI Technical Code 
(incorporated by reference in Sec.  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) Certification tests may be performed at any representative 
pressure and humidity levels. Certification tests may be performed at 
any 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. These limits 
apply instead of the limits specified in section 5.2.1 of the Annex VI 
Technical Code. Correct emissions for test conditions using the 
corrections specified in section 5.12.3 of the Annex VI Technical Code.
    (7) Test cycles shall be denormalized based on the maximum test 
speed described in Sec.  94.107.
    (b) Analyzers meeting the specifications of either 40 CFR part 86, 
subpart N, or ISO 8178-1 (incorporated by reference in Sec.  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 Sec.  94.102.

Subpart C--[Amended]

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


Sec.  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 Sec.  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) [Reserved]
* * * * *

    16. Section 94.204 is amended by adding paragraph (f) to read as 
follows:


Sec.  94.204  Designation of engine families.

* * * * *
    (f) Category 3 engines shall be grouped into engine families based 
on the criteria specified in Section 4.3 of the Annex VI Technical Code 
(incorporated by reference in Sec.  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:


Sec.  94.205  Prohibited controls, adjustable parameters.

* * * * *
    (b)(1) Category 1 marine engines equipped with adjustable 
parameters must comply with all requirements of this subpart for any 
adjustment in the physically adjustable range.
    (2) Category 2 and Category 3 marine engines equipped with 
adjustable parameters must comply with all requirements of this subpart 
for any adjustment in the approved adjustable range.
* * * * *
    (e) Tier 1 Category 3 marine engines shall be adjusted according to 
the manufacturer's specifications for testing.
    (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 address all necessary 
adjustments, including those required to address differences in fuel 
quality or ambient temperatures. For example, equivalent emissions 
performance can be 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). In this example, adjustments

[[Page 9786]]

that achieved the same percent reduction in NOX emissions 
from the optimal calibration would be considered to be equivalent. 
Alternatively, if the engine uses injection timing retard and EGR to 
reduce emissions, then retarding timing the same number of degrees 
(relative to optimal engine performance) and using the same rate of EGR 
at the different conditions would be considered to be equivalent.

    18. Section 94.209 is amended by adding introductory text to the 
section to read as follows:


Sec.  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), 
(e)(2)(iii), (k) and (l) and revising paragraphs (h) introductory text, 
and (j)(2) introductory text to read as follows:


Sec.  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 Sec.  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.
    (k) For engines with rated power greater than 130 kW, the 
manufacturer must provide the ultimate purchaser with a Technical File 
meeting the specifications of section 2.4 of the AnnexVI Technical Code 
(incorporated by reference in Sec.  94.5). The maintenance instructions 
required by this part to be provided by manufacturer may be included in 
this Technical File. The manufacturer must provide a copy of this 
Technical File to EPA upon request.
    (l) Owners and operators of Category 3 engines shall transfer the 
maintenance instructions to subsequent owners and operators of the 
engine upon sale or transfer of the engine or vessel.

    20. Section 94.214 is revised to read as follows:


Sec.  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:


Sec.  94.217  Emission data engine selection.

* * * * *
    (f) A single cylinder test engine may be used for certification of 
Tier 1 Category 3 engine families. If you use test data from a single 
cylinder test engine for certification, explain in your application how 
you have determined that such data show that the multiple cylinder 
production engines will comply with the applicable emission standards.

    22. Section 94.218 is amended by revising paragraphs (c) and (d)(1) 
to read as follows:


Sec.  94.218  Deterioration factor determination.

* * * * *
    (c) Rounding. (1) In the case of a multiplicative exhaust emission 
deterioration factor, round the factor to three places to the right of 
the decimal point.
    (2) In the case of an additive exhaust emission deterioration 
factor, round the factor shall to at least two places to the right of 
the decimal point.
    (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 Sec. Sec.  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:


Sec.  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.
* * * * *

Subpart D--[Amended]

    24. Section 94.305 is amended by revising paragraph (a) to read as 
follows:


Sec.  94.305  Credit generation and use calculation.

    (a) For each participating engine family, calculate 
THC+NOX and PM emission credits (positive or negative) 
according to the equation in paragraph (b) of this section and round 
emissions to the nearest one-hundredth of a megagram (Mg). Use 
consistent units throughout the calculation.
* * * * *

Subpart E--[Amended]

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


Sec.  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

[[Page 9787]]

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) to 
read as follows:


Sec.  94.503  General requirements.

    (a) For Tier 2 and later Category 1 and Category 2 engines, 
manufacturers shall test production line engines in accordance with 
sampling procedures specified in Sec.  94.505 and the test procedures 
specified in Sec.  94.506. The production-line testing requirements of 
this part do not apply for other engines.
    (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.
* * * * *

    26. Section 94.505 is amended by revising paragraph (a) 
introductory text to read as follows:


Sec.  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.
* * * * *

    27. Section 94.507 is amended by revising paragraph (a) to read as 
follows:


Sec.  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 (a), (b), (c), 
(d), and (e) introductory text to read as follows:


Sec.  94.508  Calculation and reporting of test results.

* * * * *
    (a) Manufacturers shall calculate initial test results using the 
applicable test procedure specified in Sec.  94.506(a). These results 
must also include the Green Engine Factor, if applicable. Round these 
results to the number of decimal places contained in the applicable 
emission standard expressed to one additional significant figure.
    (b) To calculate test results, sum the initial test results derived 
in paragraph (a) of this section for each test engine, divide by the 
number of tests conducted on the engine, and round to the same number 
of decimal places contained in the applicable standard expressed to one 
additional decimal place. (For example, if the applicable standard is 
7.8, then round the test results to two places to the right of the 
decimal.)
    (c) To calculate the final test results for each test engine, apply 
the appropriate deterioration factors, derived in the certification 
process for the engine family, to the test results described in 
paragraph (b) of this section; round to the same number of decimal 
places contained in the applicable standard expressed to one additional 
decimal place. (For example, if the applicable standard is 7.8, then 
round the test results to two places to the right of the decimal.)
    (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) [Reserved]
    (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) to read as 
follows:


Sec.  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.

Subpart I--[Amended]

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


Sec.  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]


Sec.  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:


Sec.  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:


Sec.  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 Sec. Sec.  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 testing, in-use testing, and inspections.
94.1004 Maintenance, repair adjustment, and recordkeeping.

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


Sec.  94.1001  Applicability.

    The requirements of this subpart are applicable to manufacturers, 
owners, and operators of marine vessels that

[[Page 9788]]

contain Category 3 engines subject to the provisions of subpart A of 
this part, except as otherwise specified.


Sec.  94.1002  Definitions.

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


Sec.  94.1003  Production testing, in-use testing, and inspections.

    (a) [Reserved]
    (b) [Reserved]
    (c) Manufacturers, owners and operators must allow emission tests 
and inspections to be conducted and must provide reasonable assistance 
to perform such tests or inspections.


Sec.  94.1004  Maintenance, repair, adjustment, and recordkeeping.

    (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 Sec.  94.211.
    (b) Unless otherwise approved by the Administrator, all 
maintenance, repair, adjustment, and alteration of engines subject to 
the provisions of this part performed by any owner, operator or other 
maintenance provider that is not covered by paragraph (a) of this 
section shall be performed, using good engineering judgment, in such a 
manner that the engine continues (after the maintenance, repair, 
adjustment or alteration) to meet the emission standards it was 
certified as meeting prior to the need for service. Adjustments are 
limited to the range specified by the engine manufacturer in the 
approved application for certification.
    (c) An engine may not be adjusted or altered contrary to the 
requirements of Sec.  94.11 or Sec.  94.1004(b), except as allowed by 
Sec.  94.1103(b)(2). If such an adjustment or alteration occurs, the 
engine must be returned to a configuration allowed by this part within 
two hours of operation. Each two-hour period during which there is 
noncompliance is a separate violation. The following provisions apply 
to adjustments or alterations made under Sec.  94.1103(b)(2):
    (1) In the case of an engine that is adjusted or altered under 
Sec.  94.1103(b)(2)(i), there is no violation under this paragraph (c) 
for engine operation before completion of the repair or replacement 
procedure. The provisions of paragraph (c) introductory text apply to 
all operation following completion of the repair or replacement 
procedure.
    (2) In the case of an engine that is adjusted or altered under 
Sec.  94.1103(b)(2)(ii), there is no violation under this paragraph (c) 
if the engine operates for less than two hours following the conclusion 
of the emergency that prompted the adjustment or alteration before the 
emission-control system is restored to proper functioning. The 
provisions of paragraph (c) introductory text apply to all operation 
that occurs after this two-hour period.
    (d) The owner and operator of the engine shall maintain on board 
the vessel records of all maintenance, repair, and adjustment that 
could reasonably affect the emission performance of any Category 3 
engine subject to the provision of this part. Owners and operators 
shall also maintain, on board the vessel, records regarding 
certification, parameter adjustment, and fuels used. For engines that 
are automatically adjusted electronically, all adjustments must be 
logged automatically. Owners and operators shall make these records 
available to EPA upon request. These records must include the 
following:
    (1) [Reserved]
    (2) The Technical File, Record Book of Engine Parameters, and 
bunker delivery notes that are required by the Annex VI Technical Code 
(incorporated by reference in Sec.  94.5).
    (3) Specific descriptions of engine maintenance, repair, 
adjustment, and alteration (including rebuilding). The descriptions 
must include at least the date, time, and nature of the maintenance, 
repair, adjustment, or alteration and the position of the vessel when 
the maintenance, repair, adjustment, or alteration was made.
    (4) Emission-related maintenance instructions provided by the 
manufacturer.
    (e) For each marine vessel containing a Category 3 engine, the 
owner shall annually review the vessel's records and submit to EPA a 
signed statement certifying compliance during the preceding year with 
the requirements of this part that are applicable to owners and 
operators of such vessels. Alternately, if review of the vessel's 
records indicates that there has been one or more violations of the 
requirements of this part, the owner shall submit to EPA a signed 
statement specifying the noncompliance, including the nature of the 
noncompliance, the time of the noncompliance, and any efforts made to 
remedy the noncompliance. The statement of compliance (or 
noncompliance) required by this paragraph shall be signed by the 
executive with responsibility for marine activities of the owner. If 
the vessel is operated by a different business entity than the vessel 
owner, the reporting requirements of this paragraph (e) apply to both 
the owner and the operator. Compliance with these review and 
certification requirements by either the vessel owner or the vessel 
operator with respect to a compliance statement will be considered 
compliance with these requirements by both of these parties for that 
compliance statement. The executive(s) may authorize a captain or other 
primary operator to conduct this review and submit the certification, 
provided that the certification statement is accompanied by written 
authorization for that individual to submit such statements. The 
Administrator may waive the requirements of this paragraph when 
equivalent assurance of compliance is otherwise available.

Subpart L--[Amended]

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


Sec.  94.1103  Prohibited acts.

    (a) * * *
    (2) * * *
    (v) For an owner or operator of a vessel using a Category 3 engine 
to refuse to allow the in-use testing described in Sec.  94.1003 to be 
performed.
    (vi) For a manufacturer, owner or operator of a Category 3 engine 
to fail to provide maintenance instructions as required by Sec.  
94.211.
    (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 Sec. Sec.  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 properly adjusted 
as set forth in Sec.  94.1004.
    (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 Sec.  94.1004.
    (iii) For an owner or operator of a vessel using a Category 3 
engine to operate an engine in violation of the requirements of Sec.  
94.1004(c).
    (iv) For an owner or operator of a vessel using a Category 3 engine 
to fail

[[Page 9789]]

to comply with any applicable provision in this part for recordkeeping, 
reporting, or submission of information to EPA, including the annual 
certification requirements of Sec.  94.1004.
* * * * *

    36. Section 94.1106 is amended by adding introductory text, 
revising paragraphs (a) and (c)(1), and adding paragraph (d) to read as 
follows:


Sec.  94.1106  Penalties.

    This section specifies actions that are prohibited and the maximum 
civil penalties that we can assess for each violation. The maximum 
penalty values listed in paragraphs (a) and (c) of this section are 
shown for calendar year 2002. As described in paragraph (d) of this 
section, maximum penalty limits for later years are set forth in 40 CFR 
part 19.
    (a) Violations. A violation of the requirements of this subpart is 
a violation of the applicable provisions of the Act, including sections 
213(d) and 203, and is subject to the penalty provisions thereunder.
    (1) A person who violates Sec.  94.1103(a)(1), (a)(4), (a)(5), 
(a)(6), or (a)(7)(iv) or a manufacturer or dealer who violates Sec.  
94.1103(a)(3) (i) or (iii) or Sec.  94.1103(a)(7) is subject to a civil 
penalty of not more than $31,500 for each violation.
    (2) A person other than a manufacturer or dealer who violates Sec.  
94.1103(a)(3) (i) or (iii) or Sec.  94.1103(a)(7) (i), (ii), or (iii) 
or any person who violates Sec.  94.1103(a)(3)(ii) is subject to a 
civil penalty of not more than $3,150 for each violation.
    (3) A violation with respect to Sec.  94.1103(a)(1), (a)(3)(i), 
(a)(3)(iii), (a)(4), or (a)(5), (a)(7) constitutes a separate offense 
with respect to each engine.
    (4) A violation with respect to Sec.  94.1103(a)(3)(ii) constitutes 
a separate offense with respect to each part or component. Each day of 
a violation with respect to Sec.  94.1103(a)(5) or (a)(7)(iv) 
constitutes a separate offense.
    (5) Each two hour period of a violation with respect to Sec.  
94.1103(a)(7)(iii) constitutes a separate offense. A violation of Sec.  
94.1103(a)(7)(iii) lasting less than two hours constitutes a single 
offense.
* * * * *
    (c) Administrative assessment of certain penalties. (1) 
Administrative penalty authority. Subject to 42 U.S.C. 7524(c), in lieu 
of commencing a civil action under paragraph (b) of this section, the 
Administrator may assess any civil penalty prescribed in paragraph (a) 
of this section, except that the maximum amount of penalty sought 
against each violator in a penalty assessment proceeding shall not 
exceed $250,000, unless the Administrator and the Attorney General 
jointly determine that a matter involving a larger penalty amount is 
appropriate for administrative penalty assessment. Any such 
determination by the Administrator and the Attorney General is not 
subject to judicial review. Assessment of a civil penalty shall be by 
an order made on the record after opportunity for a hearing held in 
accordance with the procedures found at part 22 of this chapter. The 
Administrator may compromise, or remit, with or without conditions, any 
administrative penalty which may be imposed under this section.
* * * * *
    (d) The maximum penalty values listed in paragraphs (a) and (c) of 
this section are shown for calendar year 2002. Maximum penalty limits 
for later years may be adjusted based on the Consumer Price Index. The 
specific regulatory provisions for changing the maximum penalties, 
published in 40 CFR part 19, reference the applicable U.S. Code 
citation on which the prohibited action is based.

[FR Doc. 03-3065 Filed 2-27-03; 8:45 am]
BILLING CODE 6560-50-P