[Federal Register Volume 69, Number 154 (Wednesday, August 11, 2004)]
[Proposed Rules]
[Pages 48827-48835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18380]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[OAR-2003-0217; FRL-7800-3]
RIN 2060-AK04


Regulation of Fuel and Fuel Additives: Extension of California 
Enforcement Exemptions for Reformulated Gasoline to California Phase 3 
Gasoline

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: We are proposing to exempt refiners, importers, and blenders 
of gasoline subject to the State of California's Phase 3 reformulated 
gasoline (CaRFG3) regulations from certain enforcement provisions in 
the Federal reformulated gasoline (RFG) regulations. We are proposing 
this action because we believe that gasoline complying with the CaRFG3 
regulations will provide emissions benefits equivalent to Federal Phase 
II RFG and because California's compliance and enforcement program will 
in practice be sufficiently rigorous to assure that the standards are 
met. Since the Federal RFG program began in 1995, California refiners, 
importers and blenders have been continuously exempted from certain 
enforcement-related requirements such as recordkeeping and reporting, 
and certain sampling and testing requirements. This proposal would 
extend those exemptions, which are applicable to California Phase 2 
gasoline, to CaRFG3. This proposal also restores the definition of 
``California gasoline'' which was erroneously deleted.

DATES: Comments or a request for a public hearing must be received by 
October 12, 2004.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2003-
0217, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the on-line instructions for submitting comments.
     Agency Web site: http://www.epa.gov/edocket. EDOCKET, 
EPA's electronic public docket and comment system, is EPA's preferred 
method for receiving comments. Follow the on-line instructions for 
submitting comments.
     E-mail: [email protected].
     Fax: (202) 566-1741.
     Mail: OAR-2003-0217, Environmental Protection Agency, 
Mailcode:6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
     Hand Delivery: EPA/DC, EPA West, Room B102, 1301 
Constitution Ave., NW., Washington, DC. Such deliveries are only 
accepted during the Docket's normal hours of operation, and special 
arrangements should be made for deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. OAR-2003-0217. 
EPA's policy is that all comments received will be included in the 
public docket without change and may be made available online at http://www.epa.gov/edocket, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through EDOCKET, regulations.gov, or e-
mail. The EPA EDOCKET and the Federal regulations.gov Web sites are 
``anonymous access'' systems, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through EDOCKET or regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses. For additional information about EPA's public 
docket visit EDOCKET on-line or see the Federal Register of May 31, 
2002 (67 FR 38102).
    Docket: All documents in the docket are listed in the EDOCKET index 
at http://www.epa.gov/edocket. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in EDOCKET or in hard 
copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution 
Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Anne Pastorkovich, Attorney/Advisor, 
Transportation and Regional Programs Division, Office of Transportation 
and Air Quality (6406J), Environmental Protection Agency, 1200 
Pennsylvania Ave., NW., Washington, DC 20460; telephone number: (202) 
343-9623; fax number: (202) 343-2801; e-mail address: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

    Regulated categories and entities potentially affected by this 
proposed action include:

[[Page 48828]]



----------------------------------------------------------------------------------------------------------------
                                     NAICSs     SIC  codes
            Category               codes \a\       \b\            Examples of potentially regulated parties
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Industry........................       324110         2911  Petroleum refiners.
Industry........................       422710         5171  Gasoline Marketers and Distributors.
                                       422720         5172
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\a\ North American Industry Classification System (NAICS).
\b\ Standard Industrial Classification (SIC) system code.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
proposed action. This table lists the types of entities that EPA is now 
aware could be potentially regulated by this action. Other types of 
entities not listed in the table could also be regulated. To determine 
whether an entity is regulated by this proposed action, one should 
carefully examine the RFG provisions at 40 CFR part 80, particularly 
Sec.  80.81 dealing specifically with California gasoline. If you have 
questions regarding the applicability of this proposed action to a 
particular entity, consult the person listed in the preceding FOR 
FURTHER INFORMATION CONTACT section.

B. What Should I Consider as I Prepare My Comments for EPA?

    1. Submitting CBI. Do not submit this information to EPA through 
EDOCKET, regulations.gov or e-mail. Clearly mark the part or all of the 
information that you claim to be CBI. For CBI information in a disk or 
CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as 
CBI and then identify electronically within the disk or CD ROM the 
specific information that is claimed as CBI). In addition to one 
complete version of the comment that includes information claimed as 
CBI, a copy of the comment that does not contain the information 
claimed as CBI must be submitted for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2.
    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
    i. Identify the rulemaking by docket number and other identifying 
information (subject heading, Federal Register date and page number).
    ii. Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
    iii. Explain why you agree or disagree; suggest alternatives and 
substitute language for your requested changes.
    iv. Describe any assumptions and provide any technical information 
and/or data that you used.
    v. If you estimate potential costs or burdens, explain how you 
arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
    vi. Provide specific examples to illustrate your concerns, and 
suggest alternatives.
    vii. Explain your views as clearly as possible, avoiding the use of 
profanity or personal threats.
    viii. Make sure to submit your comments by the comment period 
deadline identified.

II. Current Status and Basis for California Enforcement Exemptions

    Section 211(k) of the Federal Clean Air Act (the Act) directs the 
EPA to establish requirements for reformulated gasoline (RFG) to be 
used in specified ozone nonattainment areas, as well as ``anti-
dumping'' requirements for conventional gasoline used in the rest of 
the country. The areas covered by the Federal RFG program in California 
are San Joaquin Valley, Los Angeles, San Diego, and Sacramento.\1\ The 
RFG provisions of the Act require EPA to promulgate regulations to 
reduce the emissions of ozone forming volatile organic compounds (VOCs) 
and toxic air pollutants from gasoline-fueled motor vehicles. Such 
regulations must also require that there be no increase in the emission 
of oxides of nitrogen (NOX) over baseline levels. Finally, 
gasoline subject to the RFG requirements must meet certain content 
standards for oxygen, benzene and heavy metals.
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    \1\ See http://www.epa.gov/otaq/rfgmap.jpg for a map and listing 
of RFG covered areas and 40 CFR 80.70 for a listing of covered areas 
by state. A copy of the map has been placed in the docket for this 
rulemaking.
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    The RFG program was designed to be implemented in two phases. The 
Phase I program was in effect from January 1, 1995, through December 
31, 1999. The Phase II program, which began on January 1, 2000, and is 
currently in effect, is similar to the Phase I program, but requires 
even greater reductions in emissions of VOC, toxics and NOX. 
The regulations for RFG and conventional gasoline may be found at 40 
CFR part 80, subparts D, E, and F.
    On September 18, 1992, the California Air Resources Board (CARB) 
adopted regulations establishing California's state Phase 2 
reformulated gasoline program (``California Phase 2 RFG''), which 
became effective March 1, 1996. These regulations established a 
comprehensive set of gasoline specifications designed to achieve 
reductions in emissions of VOCs, NOX, carbon monoxide (CO), 
sulfur dioxide, and toxic air pollutants from gasoline-fueled motor 
vehicles.\2\ The California Phase 2 RFG regulations set standards for 
eight gasoline parameters--sulfur, benzene, olefins, aromatic 
hydrocarbons, oxygen, Reid vapor pressure (RVP), and distillation 
temperatures for the 50 percent and 90 percent evaporation points (T-50 
and T-90, respectively). These regulations also provide for the 
production and sale of alternative gasoline formulations, with 
certification under the CARB program based on a predictive model or on 
vehicle emission testing.
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    \2\ California's reformulated gasoline regulations, including 
California Phase 2 and Phase 3, are at Title 13, California Code of 
Regulations (CCR), section 2250 et seq. (May 1, 2003). A copy of 
these regulations have been placed in the docket.
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    EPA previously adopted enforcement exemptions for California Phase 
2 gasoline under the Federal Phase I RFG program.\3\ In doing so, we 
concluded: (1) That the emission reductions resulting from the 
California Phase 2 standards would be equal to or greater than the 
Federal Phase I RFG standards (i.e., the standards that were applicable 
from January 1, 1995, through December 31, 1999),
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    \3\ See 59 FR 7758 (February 16, 1994) and 63 FR 34818 (June 26, 
1998).
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    (2) That the content standard for benzene under California Phase 2 
would be equivalent in practice to the Federal Phase I content standard 
and that the oxygen content standard of 2.0 weight percent would be 
achieved in Federal RFG areas, and
    (3) That the CARB's compliance and enforcement program was designed 
to be sufficiently rigorous to ensure that Federal Phase I requirements 
would be met in practice.
    Consequently, while the Federal Phase I RFG standards continued to 
apply in California, EPA exempted

[[Page 48829]]

refiners, importers, and blenders of gasoline sold in California from 
many of the enforcement-related provisions of the Federal Phase I RFG 
regulations.
    The exemptions applied to the gasoline they sold for use in 
California and included the following provisions in 40 CFR part 80:

------------------------------------------------------------------------
         Requirement exempted              Citation at  40 CFR 80.xx
------------------------------------------------------------------------
Compliance Surveys \4\...............  80.68
Independent Sampling & Testing.......  80.65(f)
Designation of Gasoline..............  80.65(d)
Marking of Conventional Gasoline.....  80.65(g) and 80.82
Downstream Oxygenate Blending........  80.69
Recordkeeping........................  80.74 and 80.104
Reporting............................  80.75 and 80.105
Product Transfer Documents...........  80.77
Parameter Value Reconciliation         80.65(e)(2)
 Requirements.
Reformulated Gasoline and              80.65(c)
 Reformulated Gasoline Blendstock for
 Oygenate Blending (RBOB) Compliance
 Requirements.
Annual Compliance Audit Requirements.  80.65(h)
Compliance Attest Engagement           Subpart F
 Requirements.
------------------------------------------------------------------------
\4\ 40 CFR 80.81(e)(2) was amended to include a limited oxygen survey
  provision to ensure that the 2.0 weight percent standard would be
  achieved in Federal RFG areas. This is because some California Phase 2
  gasoline sold outside of Federal RFG areas might not contain the 2.0
  weight percent oxygen content. See 63 FR 34818, 34820-34822 (June 26,
  1998). Under this NPRM, the oxygen survey provisions would remain
  appropriately applied to CaRFG3.

    California refiners, importers, and blenders were not granted 
exemption from these Federal enforcement requirements with regard to 
gasoline delivered for use outside California, because the California 
Phase 2 standards and the CARB enforcement program do not apply to 
gasoline exported from California.
    The original California enforcement exemptions expired on December 
31, 1999 when the Federal Phase II RFG started. The exemptions expired 
because they were based on a comparison of California Phase 2 gasoline 
and Federal Phase I RFG. An appropriate equivalency determination 
comparing California Phase 2 and Federal Phase II gasolines would have 
been premature in 1994, when the final RFG regulations were issued. 
However, on September 15, 1999, we published a direct final rule 
continuing the California enforcement exemptions beyond December 31, 
1999.\5\ We took this action after comparing California Phase 2 
gasoline and Federal Phase II RFG. In brief, we concluded:
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    \5\ 64 FR 49992 (September 15, 1999).
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    (1) That the emissions reductions resulting from the California 
Phase 2 RFG standards would be equal to or greater than the reductions 
from the Federal Phase II RFG standards;
    (2) That the content standards for benzene under California Phase 2 
would be equivalent in practice to the Federal Phase II content 
standard and that the oxygen content standard of 2.0 weight percent 
would be achieved in Federal RFG areas, and
    (3) That the CARB's compliance and enforcement program was designed 
to be sufficiently rigorous to ensure that Federal Phase II 
requirements would be met in practice.

III. Description of Today's Proposed Action

A. California's Phase 3 Gasoline Rulemaking Activities

    On August 3, 2000, California first promulgated the new California 
Phase 3 RFG (``CaRFG3'') regulations, which included a prohibition on 
the use of methyl tertiary-butyl ether (MTBE) by December 31, 2002. On 
March 21, 2001, we received a written request from the California Air 
Resources Board (CARB) requesting extension of the California 
enforcement exemptions of 40 CFR 80.81 to CaRFG3. In that letter, CARB 
explains that its CaRFG3 regulations were adopted in response to 
Governor Gray Davis's issuance of Executive Order D-5-99, directing the 
phase-out of methyl tertiary-butyl ether (MTBE) as an additive in 
California gasoline by December 31, 2002.
    Since March 21, 2001, CARB has completed a series of rulemakings 
that amended their CaRFG3 regulations. Many of these amendments were 
made necessary by a postponement of the MTBE phase-out and to 
accommodate the use of ethanol. The MTBE phase-out was delayed until 
December 31, 2003 by Governor Gray Davis's issuance of a second 
Executive Order D-52-02.\6\ The CaRFG3 regulations and all standards 
discussed in this notice represent the May 1, 2003, version of the 
California Reformulated Gasoline Regulations, title 13, California Code 
of Regulations, section 2250 et seq.
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    \6\ A copy of the Executive Order has been placed in the docket.
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B. EPA's Analysis and Conclusions Regarding California's Phase 3 
Gasoline Regulations

    In order to determine whether to apply the Federal enforcement 
exemptions of 40 CFR 80.81 should be applied to CaRFG3, we considered:
    (1) Whether the emissions reductions resulting from CaRFG3 would be 
equal to or greater than the reductions from Federal Phase II RFG 
standards;
    (2) Whether the content standard for benzene under CaRFG3 would be 
equivalent in practice to the Federal Phase II content standard and 
whether the oxygen content standard of 2.0 weight percent would be met 
in Federal RFG areas; and
    (3) Whether CARB's compliance and enforcement program is designed 
to be sufficiently rigorous to ensure that the Federal Phase II 
requirements would be met in practice.
    Considering these factors is appropriate and consistent with the 
analyses we used when we previously granted enforcement exemptions to 
refiners, importers, and blenders of California Phase 2 gasoline under 
both the Federal Phase I and Phase II RFG programs.\7\
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    \7\ See 59 FR 7813 (February 16, 1994) as amended at 59 FR 36965 
(July 20, 1994), 59 FR 39289 (August 2, 1994), 59 FR 60715 (November 
28, 1994), 63 FR 34825 (June 26, 1998), 64 FR 49997 (September 15, 
1999), and 66 FR 17263 (March 29, 2001).
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    To determine whether CaRFG3 emissions reductions that are 
equivalent to or greater than Federal Phase II RFG, we have evaluated 
the CaRFG3 standards and the Federal Phase II complex model standards 
and considered whether possible CaRFG3 formulations to the Federal 
Phase II RFG

[[Page 48830]]

emissions reduction standards. Compliance with performance standards 
under the Federal RFG program is determined by using the Phase II 
Complex Model. The Complex Model predicts VOC, toxics and 
NOX emissions reductions in gasoline relative to the 
emissions of 1990 baseline gasoline.\8\ These reduction percentages are 
compared to RFG performance standards. The Federal performance 
standards applicable to VOC-controlled RFG designated for VOC control 
region 1 apply to California areas covered by the Federal RFG 
program.\9\
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    \8\ ``Baseline gasoline'' refers to a general set of properties 
representative of a refiner's fuel in 1990. The purpose of 
establishing a baseline is to prevent any degradation in the quality 
of gasoline in areas in which reformulated gasoline is not required. 
For a discussion of baselines, please refer to the RFG and anti-
dumping final rule, 59 FR 7798 (February 16, 1994).
    \9\ See 40 CFR 80.41 and 80.71.
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    California's Phase 2 RFG regulations established specifications for 
eight gasoline parameters: sulfur, benzene, olefins, aromatic 
hydrocarbons, oxygen, RVP, T50 and T90. These parameters are expressed 
as flat limits and, for some parameters, as averaging limits and caps. 
The CaRFG3 regulations revised certain of these specifications and 
incorporated an updated version of the California predictive model.\10\ 
Refiners may produce complying California gasoline using a ``recipe'' 
that meets these parameter specifications. Alternative specifications 
for complying gasoline can be established by using the California 
predictive model to demonstrate that emissions are equivalent to those 
of a gasoline meeting the established specifications. Six of the 
parameters are also input parameters for the EPA Complex Model. The 
remaining two, T50 and T90, are closely related to E200 and E300, the 
remaining two Complex Model inputs.\11\
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    \10\ The California predictive model, like the Complex Model, is 
used to predict emissions performance of gasoline.
    \11\ There is a strong correlation between T50 (the 50% 
distillation temperature) and E200 (the percent distilled at 200F). 
Likewise, there is a strong correlation between T90 (the 90% 
distillation temperature) and E300 (the percent distilled at 300F). 
For the analysis in table 1, E200 and E300 were estimated from the 
flat limit T50 and T90 specifications using conversions found in 
EPA's complex model spreadsheet.
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    If CaRFG3 provides emission benefits equivalent to Federal Phase II 
RFG, then a gasoline formulation meeting the CaRFG3 flat limit 
specifications should provide emission reductions, as calculated by the 
complex model, which meet Federal Phase II performance standards. The 
following table compares the emissions performance of the CaRFG3 
``recipe,'' evaluated using the Federal Complex Model, to the Federal 
Phase II RFG performance standards:\12\
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    \12\ Oxygen was assumed to be 2.0 wt%, the midpoint of the 1.8-
2.2 wt% specification and RVP was 6.90, the RVP used with the 
evaporative compliance option in the predictive model.

 Table 1.--Comparison of CaRFG3 Flat Limit Recipe Complex Model Performance With Federal Phase II RFG Standards
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                                                                   VOC  (%         Toxics  (%        NOX  (%
                                                                  reduction)       reduction)       reduction)
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CaRFG3 Flat Limits with ethanol..............................             27.7             30.0             14.5
CaRFG3 Flat Limits with MTBE.................................             27.7             32.2             14.5
Federal per gallon standards.................................           >=27.5           >=20.0            >=5.5
Federal averaged standards...................................           >=29.0           >=21.5            >=6.8
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Table 1 shows two sets of results; one where the oxygenate was assumed 
to be MTBE and the other where the oxygenate was assumed to be ethanol. 
The specific oxygenate affects the toxics performance estimate. Two 
sets of Federal standards are shown, the per gallon standards and the 
averaged standards. (These numerically more stringent averaged 
standards are applicable if a refiner chooses to comply on average, 
rather than on a per gallon basis.) The emissions performance of the 
flat limit recipe gasoline is better than the Federal RFG per gallon 
standards for VOC, toxics and NOX reductions, and better 
than the Federal RFG averaged standards for toxics and NOX 
reduction. Thus, gasoline produced in compliance with the CaRFG3 flat 
limits (which are somewhat analogous to Federal per-gallon standards) 
would achieve performance limits at least as stringent as the Federal 
Phase II RFG per-gallon standards for VOCs and at least as stringent as 
the averaged standards for toxics and NOX. Thus, CaRFG3 
would meet Federal standards if every gallon were produced according to 
this recipe.
    However, we anticipate that most refiners will use the CaRFG3 
predictive model to certify alternative specifications with emissions 
equivalent to or better than the flat limit recipe. While there are 
similarities between the California Phase 3 predictive model and the 
Federal Phase II Complex Model, there are also substantial differences. 
Consequently, two recipes found to have equal emissions with the 
California predictive model may not have equal emissions when evaluated 
by the Federal Complex Model. In other words, a finding that the 
Complex Model emissions performance of the flat limit recipe is equal 
to or better than the Federal standards does not guarantee that the 
Complex Model emissions performance of all gasoline blends that may be 
produced in compliance with CaRFG3 will meet or surpass the Federal 
standards.
    For purposes of determining whether or not CaRFG3 produced and 
certified under the predictive model would be equivalent to Federal 
Phase II RFG, we considered several reasonably likely ``real world'' 
CaRFG3 formulations. These formulations were developed in connection 
with California's recent request for a waiver from the Federal oxygen 
content requirement for reformulated gasoline.\13\ The CaRFG3 
formulations depicted in Tables 2 and 3 do not represent each and every 
possible gasoline formulation under the California's regulations, but 
we believe that they provide a representative sample of that universe 
of gasoline formulations that are likely to be produced under the 
CaRFG3 program. This analysis is discussed in more detail in the 
following paragraphs.
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    \13\ The California waiver analysis considered the effect of 
changes in gasoline composition on the entire on-road and off-road 
gasoline-power fleet. The analysis for this proposed rule considers 
only Complex Model performance, which considers a portion of the on-
road gasoline-powered fleet.
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    In April of 1999, California applied for a waiver of the Federal 
oxygen content requirement for reformulated gasoline. In order to 
complete an evaluation of the technical basis for this waiver request, 
we determined that

[[Page 48831]]

additional refinery modeling was needed to forecast the likely 
composition of CaRFG3, after California's phase-out of methyl-tertiary-
butyl-ether (MTBE), with and without an oxygen waiver.\14\ 
Consequently, EPA commissioned MathPro to conduct this modeling, which 
estimated the composition of ethanol-oxygenated and non-oxygenated 
CaRFG3 under various scenarios.\15\ These scenarios varied in terms of 
the continued or reduced use of MTBE outside of California, whether or 
not refiners avoid the patent held by Unocal on certain reformulated 
blends, and whether ethanol is used at 2.0 or 2.7 weight percent 
oxygen. Although these modeling results were intended for use in the 
waiver evaluation, they are also helpful when considering the 
appropriateness of extending the existing enforcement exemptions to 
CaRFG3. EPA believes that these modeling results are likely to be the 
most accurate and comprehensive forecasts of the likely properties of 
the CaRFG3 that will be sold in Federal RFG areas in California. For 
the purpose of this proposal, we have considered both oxygenated and 
non-oxygenated CaRFG3 blends.
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    \14\ One of the reasons for this determination was that earlier 
modeling was done before the CaRFG3 predictive model was finalized. 
This may have affected the estimates of CaRFG3 properties developed 
from these earlier studies. EPA's Technical Support Document for the 
waiver decision ``Analysis of California's Reformulated Gasoline 
Oxygen Content Requirement for California Covered Areas'' discusses 
this in greater depth. A copy of this document has been placed in 
the docket.
    \15\ See ``Analysis of the Production of California Phase 3 
Reformulated Gasoline With and Without an Oxygen Waiver'', MathPro, 
Inc. (January 19, 2001). A copy of this document has been placed in 
the docket.
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    Table 2, below, shows that oxygenated CaRFG3 produced under each of 
the scenarios that EPA evaluated meets Federal RFG performance 
standards. All of these fuels had better performance than the Federal 
RFG per gallon standards. With one exception (underlined in Table 2), 
these fuels also met or surpassed the Federal RFG averaged standards. 
The one exception is a fuel that was estimated to provide a VOC 
reduction of 28.9%. Since the Federal per gallon standard is >=27.5% 
and the averaged standard is >=29.0%, this fuel would meet the Federal 
per gallon but not the averaged standard. However, we believe for 
purposes of today's analysis, that the Federal per gallon standard is a 
more appropriate reference point.
    MathPro's modeling assumed that essentially all CaRFG3 is certified 
with the flat limit variant of the Predictive Model. Therefore, the 
formulations which they forecast have California predictive model 
emissions performance equivalent to, or better than, the flat limit 
recipe, but do not necessarily meet California predictive model 
averaged limit requirements. As previously noted, California's flat 
limit option requires refiners to meet parameter standards on an every-
gallon, rather than averaged basis. The California flat limits are 
analogous to the Federal RFG per-gallon standards. In both cases, 
refiners elect to meet less stringent standards on an every-gallon 
basis, rather than more stringent standards, on average. Consequently, 
it is appropriate to expect the complex model performance of these 
CaRFG3 formulations to meet the Federal Phase II per-gallon performance 
standards, but not necessarily to meet the Federal Phase II averaged 
standards.

                           Table 2.--Complex Model Performance of Oxygenated CaRFG3 Using MathPro Gasoline Property Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
   Ethanol       Sulfur                                                 Aromatics      Olefins       Benzene
(wt%) oxygen      (ppm)      RVP  (psi)     E200  (%)     E300  (%)      (vol%)        (vol%)         (vol%)       VOC  (%)     Toxics  (%)    NOX  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
        2.0            15          6.66         47.20         87.60         24.10          4.40          0.64           30.2          32.9         14.8
        2.0            10          6.74         46.40         88.70         23.30          3.90          0.57           29.6          34.1         15.4
        2.7            10          6.85         46.90         88.10         23.20          3.80          0.70           29.0          32.8         15.4
        2.7             9          6.84         46.60         88.00         23.30          3.80          0.68           29.0          32.9         15.4
        2.0            17          6.60         46.80         88.30         26.50          3.40          0.62           30.1          32.0         14.3
        2.0            17          6.60         45.20         90.60         19.10          4.60          0.77           30.8          33.8         16.4
        2.0            13          6.62         46.20         87.70         24.30          3.70          0.60           30.1          33.2         15.0
        2.0            12          6.60         46.10         88.20         28.60          2.90          0.51           29.6          32.1         14.2
        2.7            10          6.76         46.20         88.60         25.70          2.80          0.66           29.1          32.1         14.9
        2.7            12          6.60         44.90         87.70         22.40          2.80          0.71           30.2          32.9         15.7
        2.7             8          6.73         45.40         89.00         26.30          1.90          0.63           28.9          32.1         15.0
        2.7            10          6.69         45.40         88.30         25.30          2.80          0.65           29.4          32.3         15.1
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    Table 3 below, shows that non-oxygenated CaRFG3 produced under each 
of the scenarios that EPA evaluated meets Federal RFG performance 
standards. These fuels are not currently permissible, because they do 
not contain the equivalent of 2.0 weight % oxygen. All of the fuels 
shown in Table 3, which EPA believes to be reasonably representative of 
the fuel formulations that refiners would produce in California without 
an oxygen content requirement are predicted to perform better than the 
Federal RFG per gallon and averaged standards.

                         Table 3.--Complex Model Performance of Non-Oxygenated CaRFG3 Using MathPro Gasoline Property Estimates
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   Ethanol
    (wt%)        Sulfur      RVP  (psi)     E200  (%)     E300  (%)     Aromatics      Olefins       Benzene       VOC  (%)     Toxics  (%)    NOX  (%)
   oxygen         (ppm)                                                  (vol%)        (vol%)         (vol%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
        0.0             8          6.60          47.7          87.4          23.0           5.9          0.57           30.7          32.5         15.1
        0.0             7          6.60          48.7          87.6          28.6           4.7          0.51           30.0          30.4         14.0
        0.0             8          6.60          48.1          87.2          26.9           2.4          0.46           29.7          32.0         14.3
        0.0            10          6.60          47.7          88.0          24.3           3.9          0.49           30.3          32.9         14.8

[[Page 48832]]

 
        0.0            12          6.60          49.0          85.8          24.8           6.0          0.52           30.5          32.2         14.3
        0.0            10          6.60          49.2          87.4          28.6           4.1          0.53           30.0          30.2         13.8
        0.0            12          6.60          47.6          86.8          21.2           6.3          0.52           31.0          33.8         15.3
        0.0             9          6.60          47.9          87.6          25.7           3.9          0.49           30.1          32.2         14.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based upon a comparison of the CaRFG3 flat limit ``recipe'' and 
Federal Phase II Complex model standards, as well as a consideration of 
possible California fuel formulations certified using the California 
Phase 3 predictive model, we have concluded that the NOX, 
VOC and toxics emissions reductions resulting from the CaRFG3 standards 
would be equal to or greater than the Federal Phase II RFG standards.
    The content standard for benzene for CaRFG3 is equivalent to the 
Federal Phase II standards. The California flat limit benzene standard 
is 0.80 volume percent and the averaged standard is 0.70 volume percent 
with a 1.10 volume percent cap. By comparison, the Federal per gallon 
benzene standard is 1.00 volume percent and the averaged standard is 
0.95 volume percent with a 1.30 volume percent cap.
    The enforcement exemptions do not excuse California refiners from 
meeting the 2.0 weight % oxygen requirement or any other Federal 
standard in RFG covered areas. The limited oxygen compliance surveys in 
Sec.  80.81 would continue to apply to CaRFG3, since they are designed 
to ensure that gasoline in Federal RFG areas meets the Federal oxygen 
content standards. EPA retains its authority to sample and test 
California gasoline to make sure that it meets all applicable Federal 
standards, including the oxygen content standard.
    We have also considered the design and implementation of CARB's 
enforcement program, which includes enforcement at refineries, import 
facilities, terminals, and service stations. CARB's enforcement program 
is generally outlined in its regulations and includes requirements that 
refiners submit annual compliance plans,\16\ which outline how they 
will meet CaRFG3 requirements, and that refiners and importers conduct 
testing and maintain records of testing performed on batches of 
gasoline.\17\ CARB staff summarized information on its actual 
enforcement activities in fiscal years 1999-2000 and 2000-2001, 
indicating that 6.6% and 6.5% of gasoline sold in California was 
inspected, during each respective period. In 1999-2000, the violation 
rate was 1.9% (based on volumes sampled) and 0.5% (based on the number 
of samples). In 2000-2001, the violation rate was 0.16% (based on 
volumes sampled) and 1.06% (based on the number of samples). We believe 
that, considering the presence of adequate enforcement provisions in 
its regulations and CARB's actual enforcement activities, that the CARB 
enforcement program is sufficiently stringent to ensure that the 
California standards will be met. For all these reasons, we believe it 
is appropriate to apply the enforcement exemptions at 40 CFR 80.81 to 
refiners, importers, and blenders of CaRFG3.
---------------------------------------------------------------------------

    \16\ Title 13, CCR section 2269.
    \17\ Title 13, CCR section 2270.
---------------------------------------------------------------------------

C. Definition of California Gasoline

    This proposed rule also restores the definition of ``California 
gasoline,'' which was previously included in Sec.  80.81, but which was 
erroneously removed from the Code of Federal Regulations. Today's 
proposed rule would restore this definition, which describes the 
gasoline to which the enforcement exemptions may apply.

IV. Administrative Requirements

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 OMB review and the requirements of the 
Executive Order. The Order defines ``significant regulatory action'' as 
one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    It has been determined that this rule is not a ``significant 
regulatory action'' under the terms of Executive Order 12866 and is 
therefore not subject to OMB review.

B. Paperwork Reduction Act

    This proposed rule does not impose any new information collection 
burden. Today's proposed rule would extend enforcement exemptions to 
refiners of CaRFG3 and would reduce burdens associated with overlapping 
Federal and State requirements, including recordkeeping and reporting 
requirements. However, the Office of Management and Budget (OMB), under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., 
has previously approved the information collection requirements 
contained in the final reformulated gasoline (RFG) and anti-dumping 
rulemaking and gasoline sulfur control rulemaking, and has assigned OMB 
control number 2060-0277, EPA ICR number 1591.14. A copy of the OMB 
approved Information Collection Request (ICR) may be obtained from 
Susan Auby, Collection Strategies Division, U.S. Environmental 
Protection Agency (2822T), 1200 Pennsylvania Ave., NW., Washington, DC 
20460 or by calling (202) 566-1672.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and

[[Page 48833]]

requirements; train personnel to be able to respond to a collection of 
information; search data sources; complete and review the collection of 
information; and transmit or otherwise disclose the information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

C. Regulatory Flexibility Act

    The RFA generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to notice and comment 
rulemaking requirements under the Administrative Procedure Act or any 
other statute unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Small entities include small businesses, small organizations, and small 
governmental jurisdictions.
    For purposes of assessing the impacts of today's proposed rule on 
small entities, small entity is defined as: (1) A small business that 
has not more than 1,500 employees (13 CFR 121.201); (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; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.
    After considering the economic impacts of today's proposed rule on 
small entities, I certify that this action would not have a significant 
economic impact on a substantial number of small entities. In 
determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the proposed rule on small entities.'' 5 U.S.C. 603 
and 604. Thus, an agency may certify that a rule will not have a 
significant economic impact on a substantial number of small entities 
if the rule relieves regulatory burden, or otherwise has a positive 
economic effect on all of the small entities subject to the rule.
    We have therefore concluded that today's proposed rule will relieve 
regulatory burden for all small entities. Today's proposed rule would 
extend enforcement exemptions to refiners of CaRFG3 and would reduce 
burdens associated with overlapping Federal and State requirements, 
including recordkeeping and reporting requirements. We continue to be 
interested in the potential impacts of the proposed rule on small 
entities and welcome comments on issues related to such impacts.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    Today's proposed rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local or 
tribal governments or the private sector. The proposed rule would 
impose no enforceable duty on any State, local or tribal governments or 
the private sector.

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'' are defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government.''
    This proposed rule does not have federalism implications. It would 
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. Today's proposed rule would 
extend enforcement exemptions to refiners of CaRFG3 and would reduce 
burdens associated with overlapping Federal and State requirements, 
including recordkeeping and reporting requirements. Thus, Executive 
Order 13132 does not apply to this proposed rule.

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 ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' ``Policies that have tribal 
implications'' are defined in the Executive Order to include 
regulations that have ``substantial direct effects on one or more 
Indian tribes, on the relationship between the Federal government and 
the Indian tribes, or on the distribution of power and responsibilities 
between the Federal government and Indian tribes.''
    This proposed rule does not have tribal implications. It will not 
have substantial direct effects on tribal governments, on the 
relationship between the Federal government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
government and Indian tribes, as specified in Executive Order 13175. 
This proposed rule would apply to refiners, importers and blenders of

[[Page 48834]]

CaRFG3 and does not impose any enforceable duties on communities of 
Indian tribal governments. Thus, Executive Order 13175 does not apply 
to this rule.

G. Executive Order 13045: Protection of Children From Environmental 
Health & 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, the Agency must evaluate the environmental health or 
safety effects of the planned rule on children, and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency.
    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that are based on health or safety risks, such that 
the analysis required under section 5-501 of the Order has the 
potential to influence the regulation. This proposed rule is not 
subject to Executive Order 13045, entitled ``Protection of Children 
from Environmental Health Risks and Safety Risks'' (62 FR 19885, April 
23, 1997), because it does not involve decisions on environmental 
health risks or safety risks that may disproportionately affect 
children.

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

    This proposed rule is not an economically ``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 does not have a 
significant adverse effect on the supply, distribution, or use of 
energy.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. The NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards. Today's rule 
does not affect technical standards and raises no issues under the 
NTTAA.

J. Statutory Provisions and Legal Authority

    Statutory authority for today's proposed rule comes from sections 
211(c), 211(i) and 211(k) of the CAA (42 U.S.C. 7545(c) and (k)). 
Section 211(c) and 211(i) allows EPA to regulate fuels that contribute 
to air pollution which endangers public health or welfare, or which 
impairs emission control equipment. Section 211(k) prescribes 
requirements for RFG and conventional gasoline and requires EPA to 
promulgate regulations establishing these requirements. Additional 
support for the fuels controls in today's proposed rule comes from 
sections 114(a) and 301(a) of the CAA.

List of Subjects in 40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, Imports, Motor vehicle pollution, Reporting and recordkeeping 
requirements.

    Dated: August 5, 2004.
Michael O. Leavitt,
Administrator.

    For the reasons set forth in the preamble, part 80 of title 40 
chapter I of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    1. The authority citation for part 80 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7545 and 7601(a).

    2. Section 80.81 is amended as follows:
    a. Revising paragraph (a).
    b. Revising paragraph (c) introductory text.
    c. Revising paragraph (e)(2) introductory text.
    d. Revising paragraphs (h)(1) introductory text, (h)(1)(ii)(C) and 
(h)(2)(i).


Sec.  80.81  Enforcement exemptions for California gasoline.

    (a)(1) The requirements of subparts D, E, F, and J of this part are 
modified in accordance with the provisions contained in this section in 
the case of California gasoline.
    (2) For purposes of this section, ``California gasoline'' means any 
gasoline that is sold, intended for sale, or made available for sale as 
a motor vehicle fuel in the State of California and that:
    (i) Is manufactured within the State of California;
    (ii) Is imported in the State of California from outside the United 
States; or
    (iii) Is imported into the State of California from inside the 
United States and that is manufactured at a refinery that does not 
produce reformulated gasoline for sale in any covered area outside the 
State of California.
* * * * *
    (c) Any refiner, importer, or oxygenate blender of California 
gasoline that is manufactured or imported subsequent to March 1, 1996 
and that meets the requirements of the California Phase 2 or Phase 3 
reformulated gasoline regulations, as set forth in Title 13, California 
Code of Regulations, section 2250 et seq. (May 1, 2003), is with regard 
to such gasoline, exempt from the following requirements (in addition 
to the requirements specified in paragraph (b) of this section:
* * * * *
    (e) * * *
    (2) Such exemption provisions shall not apply to any refiner, 
importer, or oxygenate blender of California gasoline with regard to 
any gasoline formulation that it produces or imports and that is 
certified under Title 13, California Code of Regulations, section 2250 
et seq. (May 1, 2003), unless:
* * * * *
    (h)(1) For the purposes of the batch sampling and analysis 
requirements contained in Sec.  80.65(e)(1) and Sec.  
80.101(i)(1)(i)(A), any refiner, importer, or oxygenate blender of 
California gasoline may use a sampling and/or analysis methodology 
prescribed in Title 13, California Code of Regulations, section 2250 et 
seq. (May 1, 2003), in lieu of any applicable methodology specified in 
Sec.  80.46, with regard to:
* * * * *
    (ii) * * *
    (C) The refiner or importer must correlate the results from the 
applicable sampling and/or analysis methodology prescribed in Title 13, 
California Code of Regulations, section 2250 et seq. (May 1, 2003) with 
the method specified in Sec.  80.46, and such correlation must be 
adequately demonstrated to EPA upon request.
    (2) * * *
    (i) The samples are properly collected under the terms of a current 
and valid

[[Page 48835]]

protocol agreement between the refiner and the California Air Resources 
Board with regard to sampling at the off site tankage and consistent 
with the requirements prescribed in Title 13, California Code of 
Regulations, section 2250 et seq. (May 1, 2003); and
* * * * *
[FR Doc. 04-18380 Filed 8-10-04; 8:45 am]
BILLING CODE 6560-50-P