[Federal Register Volume 71, Number 60 (Wednesday, March 29, 2006)]
[Proposed Rules]
[Pages 15804-15963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2315]



[[Page 15803]]

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

Part II





Environmental Protection Agency





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



40 CFR Parts 59, 80, 85 and 86



Control of Hazardous Air Pollutants From Mobile Sources; Proposed Rule

  Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / 
Proposed Rules  

[[Page 15804]]


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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 59, 80, 85 and 86

[EPA-HQ-OAR-2005-0036; FRL-8041-2]
RIN 2060-AK70


Control of Hazardous Air Pollutants From Mobile Sources

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: Today EPA is proposing controls on gasoline, passenger 
vehicles, and portable gasoline containers (gas cans) that would 
significantly reduce emissions of benzene and other hazardous air 
pollutants (``mobile source air toxics''). Benzene is a known human 
carcinogen, and mobile sources are responsible for the majority of 
benzene emissions. The other mobile source air toxics are known or 
suspected to cause cancer or other serious health effects.
    We are proposing to limit the benzene content of gasoline to an 
annual average of 0.62% by volume, beginning in 2011. We are also 
proposing to limit exhaust emissions of hydrocarbons from passenger 
vehicles when they are operated at cold temperatures. This standard 
would be phased in from 2010 to 2015. For passenger vehicles we also 
propose evaporative emissions standards that are equivalent to those in 
California. Finally, we are proposing a hydrocarbon emissions standard 
for gas cans beginning in 2009, which would reduce evaporation and 
spillage of gasoline from these containers.
    These controls would significantly reduce emissions of benzene and 
other mobile source air toxics such as 1,3-butadiene, formaldehyde, 
acetaldehyde, acrolein, and naphthalene. This proposal would result in 
additional substantial benefits to public health and welfare by 
significantly reducing emissions of particulate matter from passenger 
vehicles.
    We project annual nationwide benzene reductions of 35,000 tons in 
2015, increasing to 65,000 tons by 2030. Total reductions in mobile 
source air toxics would be 147,000 tons in 2015 and over 350,000 tons 
in 2030. Passenger vehicles in 2030 would emit 45% less benzene. Gas 
cans meeting the new standards would emit almost 80% less benzene. 
Gasoline would have 37% less benzene overall. We estimate that these 
reductions would have an average cost of less than 1 cent per gallon of 
gasoline and less than $1 per vehicle. The average cost for gas cans 
would be less than $2 per can. The reduced evaporation from gas cans 
would result in significant fuel savings, which would more than offset 
the increased cost for the gas can.

DATES: Comments must be received on or before May 30, 2006. Under the 
Paperwork Reduction Act, comments on the information collection 
provisions must be received by OMB on or before April 28, 2006.
    Hearing: We will hold a public hearing on April 12, 2006. The 
hearing will start at 10 a.m. local time and continue until everyone 
has had a chance to speak. If you want to testify at the hearing, 
notify the contact person listed under FOR FURTHER INFORMATION CONTACT 
by April 3, 2006.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2005-0036, by one of the following methods:
     http://www.regulations.gov: Follow the on-line 
instructions for submitting comments.
     Fax your comments to: (202) 566-1741.
     Mail: Air Docket, Environmental Protection Agency, 
Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. In 
addition, please mail a copy of your comments on the information 
collection provisions to the Office of Information and Regulatory 
Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for 
EPA, 725 17th St. NW., Washington, DC 20503.
     Hand Delivery: EPA Docket Center, (EPA/DC) EPA West, Room 
B102, 1301 Constitution Ave., NW., Washington, DC 20004. 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. EPA-HQ-OAR-
2005-0036. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
www.regulations.gov, 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 www.regulations.gov or e-mail. 
The www.regulations.gov website is an ``anonymous access'' system, 
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 www.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 the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm. For additional 
instructions on submitting comments, go to section XI, Public 
Participation, of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in www.regulations.gov 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.
    Hearing: The public hearing will be held at Sheraton Crystal City 
Hotel, 1800 Jefferson Davis Highway, Arlington, Virginia 22202, 
Telephone: (703) 486-1111. See section XI, Public Participation, for 
more information about public hearings.

FOR FURTHER INFORMATION CONTACT: Mr. Chris Lieske, U.S. EPA, Office of 
Transportation and Air Quality, Assessment and Standards Division 
(ASD), Environmental Protection Agency, 2000 Traverwood Drive, Ann 
Arbor, MI 48105; telephone number: (734) 214-4584; fax number: (734) 
214-4816; email address: [email protected], or Assessment and 
Standards Division

[[Page 15805]]

Hotline; telephone number: (734) 214-4636; e-mail address: 
[email protected].

SUPPLEMENTARY INFORMATION:

General Information

A. Does this Action Apply to Me?

    Entities potentially affected by this action are those that produce 
new motor vehicles, alter individual imported motor vehicles to address 
U.S. regulation, or convert motor vehicles to use alternative fuels. It 
would also affect you if you produce gasoline motor fuel or manufacture 
portable gasoline containers. Regulated categories include:

----------------------------------------------------------------------------------------------------------------
                                   NAICS      SIC  codes
           Category              codes \a\       \b\             Examples of potentially affected entities
----------------------------------------------------------------------------------------------------------------
Industry......................       336111         3711  Motor vehicle manufacturers.
Industry......................       335312         3621  Alternative fuel vehicle converters.
                                     424720         5172
                                     811198         7539
                                ...........         7549  ......................................................
Industry......................       811111         7538  Independent commercial importers.
                                     811112         7533  ......................................................
                                     811198         7549  ......................................................
Industry......................       324110         2911  Gasoline fuel refiners.
Industry......................       326199         3089  Portable fuel container manufacturers.
                                     332431         3411  ......................................................
----------------------------------------------------------------------------------------------------------------
\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 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your activities are regulated by this action, you should carefully 
examine the applicability criteria in 40 CFR parts 59, 80, 85, and 86. 
If you have any questions regarding the applicability of this 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 www.regulations.gov 
or e-mail. Clearly mark the part or all of the information that you 
claim to be confidential business information (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:
     Explain your views as clearly as possible.
     Describe any assumptions that you used.
     Provide any technical information and/or data you used 
that support your views.
     If you estimate potential burden or costs, explain how you 
arrived at your estimate.
     Provide specific examples to illustrate your concerns.
     Offer alternatives.
     Make sure to submit your comments by the comment period 
deadline identified.
     To ensure proper receipt by EPA, identify the appropriate 
docket identification number in the subject line on the first page of 
your response. It would also be helpful if you provided the name, date, 
and Federal Register citation related to your comments.

Outline of This Preamble

I. Introduction
    A. Summary
    B. What Background Information is Helpful to Understand this 
Proposal?
    1. What Are Air Toxics and Related Health Effects?
    2. What is the Statutory Authority for Today's Proposal?
    a. Clean Air Act Section 202(l)
    b. Clean Air Act Section 183(e)
    c. Energy Policy Act
    3. What Other Actions Has EPA Taken Under Clean Air Act Section 
202(l)?
    a. 2001 Mobile Source Air Toxics Rule
    b. Technical Analysis Plan
II. Overview of Proposal
    A. Why Is EPA Making This Proposal?
    1. National Cancer Risk from Air Toxics
    2. Noncancer Health Effects
    3. Exposure Near Roads and From Attached Garages
    4. Ozone and Particulate Matter
    B. What Is EPA Proposing?
    1. Light-Duty Vehicle Emission Standards
    2. Gasoline Fuel Standards
    3. Portable Gasoline Container (Gas Can) Controls
III. What Are Mobile Source Air Toxics (MSATs) and Their Health 
Effects?
    A. What Are MSATs?
    B. Compounds Emitted by Mobile Sources and Identified in IRIS
    C. Which Mobile Source Emissions Pose the Greatest Health Risk 
at Current Levels?
    1. National and Regional Risk Drivers in 1999 National-Scale Air 
Toxics Assessment
    2. 1999 NATA Risk Drivers with Significant Mobile Source 
Contribution
    D. What Are the Health Effects of Air Toxics?
    1. Overview of Potential Cancer and Noncancer Health Effects
    2. Health Effects of Key MSATs
    a. Benzene
    b. 1,3-Butadiene
    c. Formaldehyde
    d. Acetaldehyde
    e. Acrolein
    f. Polycyclic Organic Matter (POM)
    g. Naphthalene
    h. Diesel Particulate Matter and Diesel Exhaust Organic Gases
    E. Gasoline PM
    F. Near-Roadway Health Effects
    G. How Would This Proposal Reduce Emissions of MSATs?
IV. What Are the Air Quality and Health Impacts of Air Toxics, and 
How do Mobile Sources Contribute?
    A. What Is the Health Risk to the U.S. Population from 
Inhalation Exposure to Ambient Sources of Air Toxics, and How Would 
It be Reduced by the Proposed Controls?

[[Page 15806]]

    B. What is the Distribution of Exposure and Risk?
    1. Distribution of National-Scale Estimates of Risk from Air 
Toxics
    2. Elevated Concentrations and Exposure in Mobile Source-
Impacted Areas
    a. Concentrations Near Major Roadways
    b. Exposures Near Major Roadways
    i. Vehicles
    ii. Homes and Schools
    iii. Pedestrians and Bicyclists
    c. Exposure and Concentrations in Homes with Attached Garages
    d. Occupational Exposure
    3. What Are the Size and Characteristics of Highly Exposed 
Populations?
    4. What Are the Implications for Distribution of Individual 
Risk?
    C. Ozone
    1. Background
    2. Health Effects of Ozone
    3. Current and Projected 8-hour Ozone Levels
    D. Particulate Matter
    1. Background
    2. Health Effects of PM
    3. Current and Projected PM2.5 Levels
    4. Current PM10 Levels
    E. Other Environmental Effects
    1. Visibility
    a. Background
    b. Current Visibility Impairment
    c. Future Visibility Impairment
    2. Plant Damage from Ozone
    3. Atmospheric Deposition
    4. Materials Damage and Soiling
V. What Are Mobile Source Emissions Over Time and How Would This 
Proposal Reduce Emissions, Exposure and Associated Health Effects?
    A. Mobile Source Contribution to Air Toxics Emissions
    B. VOC Emissions from Mobile Sources
    C. PM Emissions from Mobile Sources
    D. Description of Current Mobile Source Emissions Control 
Programs that Reduce MSATs
    1. Fuels Programs
    a. RFG
    b. Anti-dumping
    c. 2001 Mobile Source Air Toxics Rule (MSAT1)
    d. Gasoline Sulfur
    e. Gasoline Volatility
    f. Diesel Fuel
    g. Phase-Out of Lead in Gasoline
    2. Highway Vehicle and Engine Programs
    3. Nonroad Engine Programs
    4. Voluntary Programs
    E. Emission Reductions from Proposed Controls
    1. Proposed Vehicle Controls
    a. Volatile Organic Compounds (VOC)
    b. Toxics
    c. PM2.5
    2. Proposed Fuel Benzene Controls
    3. Proposed Gas Can Standards
    a. VOC
    b. Toxics
    4. Total Emission Reductions from Proposed Controls
    a. Toxics
    b. VOC
    c. PM2.5
    F. How Would This Proposal Reduce Exposure to Mobile Source Air 
Toxics and Associated Health Effects?
    G. Additional Programs Under Development That Will Reduce MSATs
    1. On-Board Diagnostics for Heavy-Duty Vehicles Over 14,000 
Pounds
    2. Standards for Small SI Engines
    3. Standards for Locomotive and Marine Engines
VI. Proposed New Light-duty Vehicle Standards
    A. Why are We Proposing New Standards?
    1. The Clean Air Act and Air Quality
    2. Technology Opportunities for Light-Duty Vehicles
    3. Cold Temperature Effects on Emission Levels
    a. How Does Temperature Affect Emissions?
    b. What Are the Current Emissions Control Requirements?
    c. Opportunities for Additional Control
    B. What Cold Temperature Requirements Are We Proposing?
    1. NMHC Exhaust Emissions Standards
    2. Feasibility of the Proposed Standards
    a. Currently Available Emission Control Technologies
    b. Feasibility Considering Current Certification Levels, 
Deterioration and Compliance Margin
    c. Feasibility and Test Programs for Higher Weight Vehicles
    3. Standards Timing and Phase-in
    a. Phase-In Schedule
    b. Alternative Phase-In Schedules
    4. Certification Levels
    5. Credit Program
    a. How Credits Are Calculated
    b. Credits Earned Prior to Primary Phase-In Schedule
    c. How Credits Can Be Used
    d. Discounting and Unlimited Life
    e. Deficits Could Be Carried Forward
    f. Voluntary Heavy-Duty Vehicle Credit Program
    6. Additional Vehicle Cold Temperature Standard Provisions
    a. Applicability
    b. Useful Life
    c. High Altitude
    d. In-Use Standards for Vehicles Produced During Phase-in
    7. Monitoring and Enforcement
    C. What Evaporative Emissions Standards Are We Proposing?
    1. Current Controls and Feasibility of the Proposed Standards
    2. Evaporative Standards Timing
    3. Timing for Multi-Fueled Vehicles
    4. In-Use Evaporative Emission Standards
    5. Existing Differences Between California and Federal 
Evaporative Emission Test Procedures
    D. Opportunities for Additional Exhaust Control Under Normal 
Conditions
    E. Vehicle Provisions for Small Volume Manufacturers
    1. Lead Time Transition Provisions
    2. Hardship Provisions
    3. Special Provisions for Independent Commercial Importers 
(ICIs)
VII. Proposed Gasoline Benzene Control Program
    A. Overview of Today's Proposed Fuel Control Program
    B. Description of the Proposed Fuel Control Program
    C. Development of the Proposed Gasoline Benzene Standard
    1. Why Are We Focusing on Controlling Benzene Emissions?
    a. Other MSAT Emissions
    b. MSAT Emission Reductions Through Lowering Gasoline Volatility 
or Sulfur Content
    i. Gasoline Sulfur Content
    ii. Gasoline Vapor Pressure
    c. Toxics Performance Standard
    d. Diesel Fuel Changes
    2. Why Are We Proposing To Control Benzene Emissions By 
Controlling Gasoline Benzene Content?
    a. Benzene Content Standard
    b. Gasoline Aromatics Content Standard
    c. Benzene Emission Standard
    3. How Did We Select the Level of the Proposed Gasoline Benzene 
Content Standard?
    a. Current Gasoline Benzene Levels
    b. The Need for an Average Benzene Standard
    c. Potential Levels for the Average Benzene Standard
    d. Comparison of Other Benzene Regulatory Programs
    4. How Do We Address Variations in Refinery Benzene Levels?
    a. Overall Reduction in Benzene Level and Variation
    b. Consideration of an Upper Limit Standard
    i. Per-Gallon Cap Standard
    ii. Maximum Average Standard
    5. How Would the Proposed Program Meet or Exceed Related 
Statutory and Regulatory Requirements?
    D. Description of the Proposed Averaging, Banking, and Trading 
(ABT) Program
    1. Overview
    2. Standard Credit Generation (2011 and Beyond)
    3. Credit Use
    a. Credit Trading Area
    b. Credit Life
    4. Early Credit Generation (2007-2010)
    a. Establishing Early Credit Baselines
    b. Early Credit Reduction Criteria (Trigger Points)
    c. Calculating Early Credits
    5. Additional Credit Provisions
    a. Credit Trading
    b. Pre-Compliance Reporting Requirements
    6. Special ABT Provisions for Small Refiners
    E. Regulatory Flexibility Provisions for Qualifying Refiners
    1. Hardship Provisions for Qualifying Small Refiners
    a. Qualifying Small Refiners
    i. Regulatory Flexibility for Small Refiners
    ii. Rationale for Small Refiner Provisions
    b. How Do We Propose to Define Small Refiners for the Purpose of 
the Hardship Provisions?
    c. What Options Would Be Available For Small Refiners?
    i. Delay in Standards
    ii. ABT Credit Generation Opportunities
    iii. Extended Credit Life
    iv. ABT Program Review
    d. How Would Refiners Apply for Small Refiner Status?

[[Page 15807]]

    e. The Effect of Financial and Other Transactions on Small 
Refiner Status and Small Refiner Relief Provisions
    2. General Hardship Provisions
    a. Temporary Waivers Based on Unforeseen Circumstances
    b. Temporary Waivers Based on Extreme Hardship Circumstances
    c. Early Compliance with the Proposed Benzene Standard
    F. Technological Feasibility of Gasoline Benzene Reduction
    1. Benzene Levels in Gasoline
    2. Technologies for Reducing Gasoline Benzene Levels
    a. Why is Benzene Found in Gasoline?
    b. Benzene Control Technologies Related to the Reformer
    i. Routing Around the Reformer
    ii. Routing to the Isomerization Unit
    iii. Benzene Saturation
    iv. Benzene Extraction
    c. Other Benzene Reduction Technologies
    d. Impacts on Octane and Strategies for Recovering Octane Loss
    e. Experience Using Benzene Control Technologies
    f. What Are the Potential Impacts of Benzene Control on Other 
Fuel Properties?
    3. Feasible Level of Benzene Control
    4. Lead time
    5. Issues
    a. Small Refiners
    b. Imported Gasoline
    G. How Does the Proposed Fuel Control Program Satisfy the 
Statutory Requirements?
    H. Effect on Energy Supply, Distribution, or Use
    I. How Would the Proposed Gasoline Benzene Standard Be 
Implemented?
    1. General provisions
    a. What Are the Implementation Dates for the Proposed Program?
    b. Which Regulated Parties Would Be Subject to the Proposed 
Benzene Standards?
    c. What Gasoline Would Be Subject to the Proposed Benzene 
Standards?
    d. How Would Compliance With the Benzene Standard Be Determined?
    2. Averaging, Banking and Trading Program
    a. Early Credit Generation
    b. How Would Refinery Benzene Baselines Be Determined?
    c. Credit Generation Beginning in 2011
    d. How Would Credits Be Used?
    3. Hardship and Small Refiner Provisions
    a. Hardship
    b. Small Refiners
    4. Administrative and Enforcement Related Provisions
    a. Sampling/Testing
    b. Recordkeeping/Reporting
    c. Attest Engagements, Violations, Penalties
    5. How Would Compliance With the Provisions of the Proposed 
Benzene Program Affect Compliance With Other Gasoline Toxics 
Programs?
VIII. Gas Cans
    A. Why Are We Proposing an Emissions Control Program for Gas 
Cans?
    1. VOC Emissions
    2. Technological Opportunities to Reduce Emissions from Gas Cans
    3. State Experiences Regulating Gas Cans
    B. What Emissions Standard is EPA Proposing, and Why?
    1. Description of Emissions Standard
    2. Determination of Best Available Control
    3. Emissions Performance vs. Design Standard
    4. Automatic Shut-Off
    5. Consideration of Retrofits of Existing Gas Cans
    6. Consideration of Diesel, Kerosene and Utility Containers
    C. Timing of Standard
    D. What Test Procedures Would Be Used?
    1. Diurnal Test
    2. Preconditioning to Ensure Durable In-Use Control
    a. Durability cycles
    b. Preconditioning Fuel Soak
    c. Spout Actuation
    E. What Certification and In-Use Compliance Provisions Is EPA 
Proposing?
    1. Certification
    2. Emissions Warranty and In-Use Compliance
    3. Labeling
    F. How Would State Programs Be Affected By EPA Standards?
    G. Provisions for Small Gas Can Manufacturers
    1. First Type of Hardship Provision
    2. Second Type of Hardship Provision
IX. What are the Estimated Impacts of the Proposal?
    A. Refinery Costs of Gasoline Benzene Reduction
    1. Tools and Methodology
    a. Linear Programming Cost Model
    b. Refiner-by-Refinery Cost Model
    c. Price of Chemical Grade Benzene
    d. Applying the Cost Model to Special Cases
    2. Summary of Costs
    a. Nationwide Costs of the Proposed Program
    b. Regional Distribution of Costs
    c. Cost Effects of Different Standards
    d. Effect on Cost Estimates of Higher Benzene Prices
    3. Economic Impacts of MSAT Control Through Gasoline Sulfur and 
RVP Control and a Total Toxics Standard
    B. What Are the Vehicle Cost Impacts?
    C. What Are The Gas Can Cost Impacts?
    D. Cost Per Ton of Emissions Reduced
    E. Benefits
    1. Unquantified Health and Environmental Benefits
    2. Quantified Human Health and Environmental Effects of the 
Proposed Cold Temperature Vehicle Standard
    3. Monetized Benefits
    4. What Are the Significant Limitations of the Benefit Analysis?
    5. How Do the Benefits Compare to the Costs of The Proposed 
Standards?
    F. Economic Impact Analysis
    1. What Is an Economic Impact Analysis?
    2. What Is the Economic Impact Model?
    3. What Economic Sectors Are Included in this Economic Impact 
Analysis?
    4. What Are the Key Features of the Economic Impact Model?
    5. What Are the Key Model Inputs?
    6. What Are the Results of the Economic Impact Modeling?
X. Alternative Program Options
    A. Fuels
    B. Vehicles
    C. Gas cans
XI. Public Participation
    A. How Do I Submit Comments?
    B. How Should I Submit CBI to the Agency?
    C. Will There Be a Public Hearing?
    D. Comment Period
    E. What Should I Consider as I Prepare My Comments for EPA?
XII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 
U.S.C. 601 et. seq
    1. Overview
    2. Background
    3. Summary of Regulated Small Entities
    a. Highway Light-Duty Vehicles
    b. Gasoline Refiners
    c. Portable Gasoline Container Manufacturers
    4. Potential Reporting, Record Keeping, and Compliance
    5. Relevant Federal Rules
    6. Summary of SBREFA Panel Process and Panel Outreach
    a. Significant Panel Findings
    b. Panel Process
    c. Small Business Flexibilities
    i. Highway Light-Duty Vehicles
    (a) Highway Light-Duty Vehicle Flexibilities
    (b) Highway Light-Duty Vehicle Hardships
    ii. Gasoline Refiners
    (a) Gasoline Refiner Flexibilities
    (b) Gasoline Refiner Hardships
    iii. Portable Gasoline Containers
    (a) Portable Gasoline Container Flexibilities
    (b) Portable Gasoline Container Hardships
    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 Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
XIII. Statutory Provisions and Legal Authority

I. Introduction

A. Summary

    Mobile sources emit air toxics that can cause cancer and other 
serious health effects. Section III of this preamble and Chapter 1 of 
the

[[Page 15808]]

Regulatory Impact Analysis (RIA) for this rule describe these compounds 
and their health effects. Mobile sources contribute significantly to 
the nationwide risk from breathing outdoor sources of air toxics. 
Mobile sources were responsible for about 44% of outdoor toxic 
emissions, almost 50% of the cancer risk, and 74% of the noncancer risk 
according to EPA's National-Scale Air Toxics Assessment (NATA) for 
1999. In addition, people who live or work near major roads or live in 
homes with attached garages are likely to have higher exposures and 
risk, which are not reflected in NATA. Sections II.A and IV of this 
preamble and Chapter 3 of the RIA provide more detail about NATA, as 
well as our analysis of exposures near roadways.
    According to NATA for 1999, there are a few mobile source air 
toxics that pose the greatest risk based on current information about 
ambient levels and exposure. These include benzene, 1,3-butadiene, 
formaldehyde, acrolein, naphthalene, and polycyclic organic matter 
(POM). All of these compounds are hydrocarbons except POM. Benzene is 
the most significant contributor to cancer risk from all outdoor air 
toxics, according to NATA for 1999. NATA does not include a 
quantitative estimate of cancer risk for diesel exhaust, but it 
concludes that diesel exhaust (specifically, diesel particulate matter 
and diesel exhaust organic gases) is one of the pollutants that pose 
the greatest relative cancer risk. Although we expect significant 
reductions in mobile source air toxics in the future, cancer and 
noncancer health risks will remain a public health concern, and 
exposure to benzene will remain the largest contributor to this risk.
    As discussed in detail in Section V of this preamble and Chapter 2 
of the RIA, this proposal would significantly reduce emissions of the 
many air toxics that are hydrocarbons, including benzene, 1,3-
butadiene, formaldehyde, acetaldehyde, acrolein, and naphthalene. The 
proposed fuel benzene standard and hydrocarbon standards for vehicles 
and gas cans would together reduce total emissions of mobile source air 
toxics by 350,000 tons in 2030, including 65,000 tons of benzene. 
Mobile sources were responsible for 68% of benzene emissions in 1999. 
As a result of this proposal, in 2030 passenger vehicles would emit 45% 
less benzene, gas cans would emit 78% less benzene, and the gasoline 
would have 37% less benzene overall.
    In addition, EPA has already taken significant steps to reduce 
diesel emissions from mobile sources, which will result in a 70% 
reduction between 1999 and 2020. We have adopted stringent standards 
for diesel trucks and buses, and nonroad diesel engines (engines used, 
for example, in construction, agricultural, and industrial 
applications). We also have additional programs underway to reduce 
diesel emissions, including voluntary programs and a proposal that is 
being developed to reduce emissions from diesel locomotives and marine 
engines.
    The proposed reductions in mobile source air toxics emissions would 
reduce exposure and predicted risk of cancer and noncancer health 
effects, including in environments where exposure and risk may be 
highest, such as near roads, in vehicles, and in homes with attached 
garages. In addition, the hydrocarbon reductions from the vehicle and 
gas can standards would reduce VOC emissions (which are a precursor to 
ozone and PM2.5) by over 1 million tons in 2030. The 
proposed vehicle standards would reduce direct PM2.5 
emissions by 20,000 tons in 2030 and would also reduce secondary 
formation of PM2.5. Although ozone and PM2.5 are 
considered criteria pollutants rather than ``air toxics,'' reductions 
in ozone and PM2.5 are important co-benefits of this 
proposal. More details on emissions, cancer risks, and adverse health 
and welfare effects associated with ozone and PM are found in sections 
II.A, IV and V of this preamble and Chapters 2 and 3 of the RIA.
    Section II.B of this preamble provides an overview of the 
regulatory program that EPA is proposing for passenger vehicles, 
gasoline, and gas cans. We are proposing standards to limit the exhaust 
hydrocarbons from passenger vehicles during cold temperature operation. 
We are also proposing evaporative hydrocarbon emissions standards for 
passenger vehicles. We are proposing to limit the average annual 
benzene content of gasoline. Finally, we are proposing hydrocarbon 
emissions standards for gas cans that would reduce evaporation, 
permeation, and spillage from these containers. Detailed discussion of 
each of these programs is in sections VI, VII, and VIII of the preamble 
and Chapters 5, 6, and 7 of the RIA.
    We estimate that the benefits of this proposal would be about $6 
billion in 2030, based on the direct PM2.5 reductions from 
the vehicle standards, plus unquantified benefits from reductions in 
mobile source air toxics and VOC. We estimate that the annual net 
social costs of this proposal would be about $200 million in 2030 
(expressed in 2003 dollars). These net social costs include the value 
of fuel savings from the proposed gas can standards, which would be 
worth $82 million in 2030.
    The proposed reductions would have an average cost of 0.13 cents 
per gallon of gasoline, less than $1 per vehicle, and less than $2 per 
gas can. The reduced evaporation from gas cans would result in fuel 
savings that would more than offset the increased cost for the gas can. 
In 2030, the long-term cost per ton of the proposed standards (in 
combination, and including fuel savings) would be $450 per ton of total 
mobile source air toxics reduced; $2,400 per ton of benzene reduced; 
and no cost for the hydrocarbon and PM reductions (because the vehicle 
standards would have no cost in 2020 and beyond). Section IX of the 
preamble and Chapters 8-13 of the RIA provide more details on the 
costs, benefits, and economic impacts of the proposed standards. The 
impacts on small entities and the flexibilities we are proposing are 
discussed in section XII.C of this preamble and Chapter 14 of the RIA.

B. What Background Information is Helpful to Understand this Proposal?

1. What Are Air Toxics and Related Health Effects?
    Air toxics, which are also known in the Clean Air Act as 
``hazardous air pollutants,'' are those pollutants known or suspected 
to cause cancer or other serious health or environmental effects. For 
example, some of these pollutants are known to have negative effects on 
people's respiratory, cardiovascular, neurological, immune, 
reproductive, or other organ systems, and they may also have 
developmental effects. They may pose particular hazards to more 
susceptible and sensitive populations, such as children, the elderly, 
or people with pre-existing illnesses.
    Mobile source air toxics (MSATs) are those toxics emitted by motor 
vehicles, nonroad engines (such as lawn and garden equipment, farming 
and construction equipment, aircraft, locomotives, and ships), and 
their fuels. Toxics are also emitted by stationary sources such as 
power plants, factories, oil refineries, dry cleaners, gas stations, 
and small manufacturers. They can also be produced by combustion of 
wood and other organic materials. There are also indoor sources of air 
toxics, such as solvent evaporation and outgassing from furniture and 
building materials.
    Some MSATs of particular concern include benzene, 1,3-butadiene, 
formaldehyde, acrolein, naphthalene, and diesel particulate matter and 
diesel exhaust organic gases. Benzene and 1,3-butadiene are both known 
human

[[Page 15809]]

carcinogens. Section III of this preamble provides more detail on the 
health effects of each of these pollutants.
    MSATs are emitted as a result of various processes. Some MSATs are 
present in fuel or fuel additives and are emitted to the air when the 
fuel evaporates or passes through the engine. Some MSATs are formed 
through engine combustion processes. Some compounds, like formaldehyde 
and acetaldehyde, are also formed through a secondary process when 
other mobile source pollutants undergo chemical reactions in the 
atmosphere. Finally, some air toxics, such as metals, result from 
engine wear or from impurities in oil or fuel.
2. What is the Statutory Authority for Today's Proposal?
a. Clean Air Act Section 202(l)
    Section 202(l)(2) of the Clean Air Act requires EPA to set 
standards to control hazardous air pollutants from motor vehicles, 
motor vehicle fuels, or both. These standards must reflect the greatest 
degree of emission reduction achievable through the application of 
technology which will be available, taking into consideration the motor 
vehicle standards established under section 202(a) of the Act, the 
availability and cost of the technology, and noise, energy and safety 
factors, and lead time. The standards are to be set under Clean Air Act 
sections 202(a)(1) or 211(c)(1), and they are to apply, at a minimum, 
to benzene and formaldehyde emissions.
    Section 202(a)(1) of the Clean Air Act directs EPA to set standards 
for new motor vehicles or new motor vehicle engines which EPA judges to 
cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. We are proposing a 
cold-temperature hydrocarbon emission standard for passenger vehicles 
under this authority.
    Section 211(c)(1)(A) of the Clean Air Act authorizes EPA (among 
other things) to control the manufacture of fuel if any emission 
product of such fuel causes or contributes to air pollution which may 
reasonably be anticipated to endanger public health or welfare. We are 
proposing a benzene standard for gasoline under this authority.
    Clean Air Act section 202(l)(2) requires EPA to ``from time to time 
revise'' its regulations controlling hazardous air pollutants from 
motor vehicles and fuels. As described in more detail in section I.F. 
below, EPA has previously set standards under section 202(l), and we 
committed in that rule to engage in further rulemaking to implement 
section 202(l). This proposal fulfills that commitment.
b. Clean Air Act Section 183(e)
    Clean Air Act section 183(e)(3) requires EPA to list categories of 
consumer or commercial products that the Administrator determines, 
based on an EPA study of VOC emissions from such products, contribute 
at least 80 percent of the VOC emissions from such products in areas 
violating the national ambient air quality standard for ozone. EPA 
promulgated this list at 60 FR 15264 (March 23, 1995). EPA plans to 
publish a Federal Register notice announcing that EPA has added 
portable gasoline containers to the list of consumer products to be 
regulated. This action must be taken by EPA prior to issuing a final 
rule for gas cans. EPA is required to develop rules reflecting ``best 
available controls'' to reduce VOC emissions from the listed products. 
``Best available controls'' are defined in section 183(e)(1)(A) as 
follows:

    The term ``best available controls'' means the degree of 
emissions reduction that the Administrator determines, on the basis 
of technological and economic feasibility, health, environmental, 
and energy impacts, is achievable through the application of the 
most effective equipment, measures, processes, methods, systems, or 
techniques, including chemical reformulation, product or feedstock 
substitution, repackaging, and directions for use, consumption, 
storage, or disposal.''

    Section 183(e)(4) also allows these standards to be implemented by 
means of ``any system or systems of regulation as the Administrator may 
deem appropriate, including requirements for registration and labeling, 
self-monitoring and reporting * * * concerning the manufacture, 
processing, distribution, use, consumption, or disposal of the 
product.'' We are proposing a hydrocarbon standard for gas cans under 
the authority of section 183(e).
c. Energy Policy Act
    Section 1504(b) of the Energy Policy Act of 2005 requires EPA to 
adjust the toxics emissions baselines for reformulated gasoline to 
reflect 2001-2002 fuel qualities. However, the Act provides that this 
action becomes unnecessary if EPA takes action which results in greater 
overall reductions of toxics emissions from vehicles in areas with 
reformulated gasoline. As described in section VII of this preamble, we 
believe today's proposed action would in fact result in greater 
reductions than would be achieved by adjusting the baselines under the 
Energy Policy Act. Accordingly, under the provisions of the Energy 
Policy Act, this proposed action would obviate the need for readjusting 
emissions baselines for reformulated gasoline.
3. What Other Actions Has EPA Taken Under Clean Air Act Section 202(l)?
a. 2001 Mobile Source Air Toxics Rule
    EPA published a final rule under Clean Air Act section 202(l) on 
March 29, 2001, entitled, ``Control of Emissions of Hazardous Air 
Pollutants from Mobile Sources'' (66 FR 17230). This rule established 
toxics emissions performance standards for gasoline refiners. These 
standards were designed to ensure that the over compliance to the 
standard seen in the in-use fuels produced in the years of 1998-2000 
would continue in the future.
    EPA adopted this anti-backsliding requirement as a near-term 
control that could be implemented and take effect within a year or two. 
We did not adopt long-term controls, those controls that require a 
longer lead time to implement, because we lacked information to address 
the costs and benefits of potential fuel controls in the context of the 
fuel sulfur controls that we had finalized in February 2000. However, 
the March 2001 rule did commit to additional rulemaking that would 
evaluate the need for and feasibility of additional controls.\1\ 
Today's proposal fulfills that commitment, and represents the second 
step of the two-step approach originally envisioned in the 2001 rule.
---------------------------------------------------------------------------

    \1\ See Sierra Club v. EPA, 325 F. 3d 374, 380 (D.C. Cir. 2003), 
which upholds this approach.
---------------------------------------------------------------------------

    The 2001 rule did not set additional air toxics controls for motor 
vehicles, because the technology-forcing Tier 2 light-duty vehicle 
standards and 2007 heavy-duty engine and vehicle standards had just 
been promulgated. We found that those standards represented the 
greatest degree of toxics control achievable at that time under section 
202(l).\2\
---------------------------------------------------------------------------

    \2\ 66 FR 17241-17245 (March 29, 2001).
---------------------------------------------------------------------------

b. Technical Analysis Plan
    The 2001 rulemaking also included a Technical Analysis Plan that 
described toxics-related research and activities that would inform our 
future rulemaking to evaluate the need for and appropriateness of 
additional mobile source air toxic controls. Specifically, we 
identified four critical areas where there were data gaps requiring 
long-term efforts:
     Developing better air toxics emission factors for nonroad 
sources;
     Improving estimation of air toxics exposures in 
microenvironments;

[[Page 15810]]

     Improving consideration of the range of total public 
exposures to air toxics; and
     Increasing our understanding of the effectiveness and 
costs of vehicle, fuel and nonroad controls for air toxics.
    EPA and other outside researchers have conducted significant 
research in these areas since 2001. The findings of this research are 
described in more detail in other sections of this preamble and in the 
regulatory impact analysis for this proposal. Following are some 
highlights of our activities.
    Nonroad emissions testing. EPA has tested emissions of nonroad 
diesel engines for a comprehensive suite of hydrocarbons and inorganic 
compounds. These emissions tests employed steady-state as well as 
transient test cycles, using typical nonroad diesel fuel and low-sulfur 
nonroad diesel fuel. In addition, EPA tested small gasoline-powered 
engines such as lawnmowers, leaf blowers, chainsaws and string 
trimmers.
    Improved estimation of exposures in microenvironments and 
consideration of the range of public exposures. EPA and other 
researchers have conducted a substantial amount of research and 
analysis in these areas, which is discussed in section IV of this 
preamble and in the regulatory impact analysis. This research has 
involved monitoring as well as the development and application of 
enhanced modeling tools. For example, personal exposure monitoring and 
ambient monitoring has been conducted at homes and schools near 
roadways; in vehicles; in homes with attached garages; and in 
occupational settings involving both diesel and gasoline nonroad 
equipment. We have also applied dispersion modeling techniques with 
greater spatial refinement to estimate gradients of toxic pollutants 
near roadways. A variety of improvements to our emissions, dispersion, 
and exposure modeling tools are improving our ability to consider the 
range of exposure people experience. These include the MOBILE6 
emissions model, improved spatial and temporal allocation of emissions, 
development of the Community Multiscale Air Quality (CMAQ) model, and 
updates to the HAPEM exposure model. Many of these improvements were 
applied in EPA's National-Scale Air Toxics Assessment for 1999 and 
other analyses EPA performed to support this proposal. In fact, EPA 
developed a modification of the HAPEM exposure model to account for 
higher pollutant concentrations near major roads.
    Research in these areas is continuing both inside and outside EPA, 
including work under the auspices of the Health Effects Institute and 
the Mickey Leland National Urban Air Toxics Research Center.
    Costs and effectiveness of vehicle, fuel, and nonroad controls for 
air toxics. EPA's analysis of the costs and effectiveness of vehicle 
and fuel controls is described in section IX of this preamble and in 
the regulatory impact analysis. In addition, as described in section V, 
EPA is currently developing rules that will examine controls of small 
gasoline engines and diesel locomotive and marine engines.

II. Overview of Proposal

A. Why Is EPA Making This Proposal?

    People experience elevated risk of cancer and other noncancer 
health effects from exposure to air toxics. Mobile sources are 
responsible for a significant portion of this risk. For example, 
benzene is the most significant contributor to cancer risk from all 
outdoor air toxics,\3\ and most of the nation's benzene emissions come 
from mobile sources. These risks vary depending on where people live 
and work and the kinds of activities in which they engage. People who 
live or work near major roads, or people that spend a large amount of 
time in vehicles, are likely to have higher exposures and higher risks. 
Although we expect significant reductions in mobile source air toxics 
in the future, predicted cancer and noncancer health risks will remain 
a public health concern. Benzene will remain the largest contributor to 
this risk. In addition, some mobile source air toxics contribute to the 
formation of ozone and PM2.5, which contribute to serious 
public health problems, which are discussed further in section II.A.4.
---------------------------------------------------------------------------

    \3\ Based on quantitative estimates of risk, which do not 
include diesel particular matter and diesel exhaust organic gases.
---------------------------------------------------------------------------

    Sections II.A.1-3 discuss the risks posed by outdoor toxics now and 
in the future, based on national-scale estimates such as EPA's 
National-Scale Air Toxics Assessment (NATA). EPA's NATA for 1999 
provides some perspective on the average risk of cancer and noncancer 
health effects resulting from breathing air toxics from outdoor 
sources, and the contribution of mobile sources to these 
risks.4 5 This assessment did not include indoor sources of 
air toxics. Also, it estimates average concentrations within a census 
tract, and therefore does not reflect elevated concentrations and 
exposures near roadways within a census tract. Nevertheless, its 
findings are useful in providing a perspective on the magnitude of 
risks posed by outdoor sources of air toxics generally, and in 
identifying what pollutants and sources are important contributors to 
these health risks.
---------------------------------------------------------------------------

    \4\ http://www.epa.gov/ttn/atw/nata 1999.
    \5\ NATA does not include a quantitative estimate of cancer risk 
for diesel particulate matter and diesel exhaust organic gases. EPA 
has concluded that while diesel exhaust is likely to be a human 
carcinogen, available data are not sufficient to develop a 
confidential estimate of cancer unit risk.
---------------------------------------------------------------------------

    EPA also performed a national-scale assessment for future years, 
using the same modeling tools and approach as the 1999 NATA. Finally, 
we also performed national-scale exposure modeling that accounts for 
the higher toxics concentrations near roads. This latter modeling 
provides a perspective on the mobile source contribution to risk from 
air toxics that is not reflected in our other national-scale 
assessments.
1. National Cancer Risk from Air Toxics
    According to NATA, the average national cancer risk in 1999 from 
all outdoor sources of air toxics was 42 in a million. That is, 42 out 
of one million people would be expected to contract cancer from a 
lifetime of breathing air toxics at 1999 levels. Mobile sources were 
responsible for 44% of outdoor toxic emissions and almost 50% of the 
cancer risk. Considering only the subset of compounds emitted by mobile 
sources (see Table IV.C-2), the national average cancer risk in 1999, 
including the stationary source contribution to these pollutants, was 
23 in a million.
    Benzene is the largest contributor to cancer risk of all 133 
pollutants quantitatively assessed in the 1999 NATA. The national 
average cancer risk from benzene alone was 11 in a million. Over 120 
million people in 1999 were exposed to a risk level above 10 in a 
million due to chronic inhalation exposure to benzene. Mobile sources 
were responsible for 68% of benzene emissions in 1999.
    Although air toxics emissions are projected to decline in the 
future as a result of standards EPA has previously adopted, cancer risk 
will continue to be a public health concern. The predicted national 
average cancer risk from MSATs in 2030 will be 18 in a million, 
according to EPA analysis (described in more detail in section IV of 
this preamble and Chapter 3 of the Regulatory Impact Analysis). In 
fact, in 2030 there will be more people exposed to the highest levels 
of risk. The number of Americans above the 10 in a million cancer risk 
level from exposure to MSATs is projected to increase from 214 million 
in 1999 to 240 million in 2030. Mobile sources will continue to be a 
significant contributor to risk in the future, accounting for 22% of 
total air

[[Page 15811]]

toxic emissions in 2020, and 44% of benzene emissions.
2. Noncancer Health Effects
    According to the NATA for 1999, nearly the entire U.S. population 
was exposed to an average level of air toxics that has the potential 
for adverse respiratory health effects (noncancer).\6\ This will 
continue to be the case in 2030, even though toxics levels will be 
lower.
---------------------------------------------------------------------------

    \6\ That is, the respiratory hazard index exceeded 1. See 
section III.D of this preamble for more information.
---------------------------------------------------------------------------

    Mobile sources were responsible for 74% of the noncancer 
(respiratory) risk from outdoor air toxics in 1999. The majority of 
this risk was from acrolein, and formaldehyde also contributed to the 
risk of respiratory health effects. Mobile sources will continue to be 
responsible for the majority of noncancer risk from outdoor air toxics 
in 2030.
    Although not included in NATA's estimates of noncancer risk, PM 
from gasoline and diesel mobile sources contribute significantly to the 
health effects associated with ambient PM, for which EPA has 
established a National Ambient Air Quality Standard. There is extensive 
human data showing a wide spectrum of adverse health effects associated 
with exposure to ambient PM.
3. Exposure Near Roads and From Attached Garages
    The national-scale risks described above do not account for higher 
exposures experienced by people who live near major roadways, or people 
who live in homes with attached garages. A substantial number of 
studies show elevated concentrations of multiple MSATs in close 
proximity to major roads. We also conducted an exposure modeling study 
for three geographically distinct states (Colorado, New York, and 
Georgia) and found that when the elevated concentrations near roadways 
are accounted for, the distribution of benzene exposure is broader, 
with a larger fraction of the population exposed to higher 
concentrations. The largest effect on personal exposure occurs for the 
population living near major roads. A U.S. Census survey of housing 
found that in 2003 12.6% of U.S. housing units were within 300 feet of 
a major transportation source.\7\ The potential population exposed to 
elevated concentrations near major roadways is therefore large. In 
addition, our analysis indicates that benzene exposure experienced by 
people living in homes with attached garages may be twice the national 
average benzene exposure estimated by NATA for 1999. More details on 
exposure near roads and from attached garages can be found in section 
IV of this preamble.
---------------------------------------------------------------------------

    \7\ United States Census Bureau. (2004) American Housing Survey 
web page. [Online at http://www.cenus.gov/hhes/www/housing/ahs/ahs03/ahs03.html] Table IA-6.
---------------------------------------------------------------------------

4. Ozone and Particulate Matter
    Many MSATs are part of a larger category of mobile source emissions 
known as volatile organic compounds (VOC), which contribute to the 
formation of ozone and particulate matter (PM). In addition, some MSATs 
are emitted directly as PM rather than being formed through secondary 
processes. Thus, MSATs contribute to adverse health effects both as 
individual pollutants, and as precursors to ozone and PM. Mobile 
sources contribute significantly to national emissions of VOC and PM. 
In addition, gas cans are a source of both VOC and benzene emissions.
    Both ozone and PM contribute to serious public health problems, 
including 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), changes in lung function and increased 
respiratory symptoms, changes to lung tissues and structures, altered 
respiratory defense mechanisms, chronic bronchitis, and decreased lung 
function.
    In addition, ozone and PM cause significant harm to public welfare. 
Specifically, ozone causes damage to vegetation, which leads to crop 
and forestry economic losses, as well as harm to national parks, 
wilderness areas, and other natural systems. PM contributes to the 
substantial impairment of visibility in many parts of the U.S., 
including national parks and wilderness areas. The deposition of 
airborne particles can also reduce the aesthetic appeal of buildings 
and culturally important articles through soiling, and can contribute 
directly (or in conjunction with other pollutants) to structural damage 
by means of corrosion or erosion.
    Finally, atmospheric deposition and runoff of polycyclic organic 
matter (POM), metals, and other mobile-source-related compounds 
contribute to the contamination of water bodies such as the Great Lakes 
and coastal waters (e.g., the Chesapeake Bay).

B. What Is EPA Proposing?

1. Light-Duty Vehicle Emission Standards
    As described in more detail in section VI, we are proposing new 
standards for both exhaust and evaporative emissions from passenger 
vehicles. The new exhaust emissions standards would significantly 
reduce non-methane hydrocarbon (NMHC) emissions from passenger vehicles 
at cold temperatures. These hydrocarbons include many mobile source air 
toxics (including benzene), as well as VOC.
    Current vehicle emission standards require that the certification 
testing of NMHC is performed at 75 [deg]F. Recent research and analysis 
indicates that these standards are not resulting in robust control of 
NMHC at lower temperatures. We believe that cold temperature NMHC 
control can be substantially improved using the same technological 
approaches that are generally already being used in the Tier 2 vehicle 
fleet to meet the stringent standards at 75 [deg]F. These cold-
temperature NMHC controls would also result in lower direct PM 
emissions at cold temperatures.
    Accordingly, we are proposing that light-duty vehicles, light-duty 
trucks, and medium-duty passenger vehicles would be subject to a new 
non-methane hydrocarbon (NMHC) exhaust emissions standard at 20 [deg]F. 
Vehicles at or below 6,000 pounds gross vehicle weight rating (GVWR) 
would be subject to a sales-weighted fleet average NMHC level of 0.3 
grams/mile. Vehicles between 6,000 and 8,500 pounds GVWR and medium-
duty passenger vehicles would be subject to a sales-weighted fleet 
average NMHC level of 0.5 grams/mile. For lighter vehicles, the 
standard would phase in between 2010 and 2013. For heavier vehicles, 
the new standards would phase in between 2012 and 2015. We are also 
proposing a credit program and other provisions designed to provide 
flexibility to manufacturers, especially during the phase-in periods. 
These provisions are designed to allow the earliest possible phase-in 
of standards and help minimize costs and ease the transition to new 
standards.
    We are also proposing a set of nominally more stringent evaporative 
emission standards for all light-duty vehicles, light-duty trucks, and 
medium-duty passenger vehicles. The proposed standards are equivalent 
to California's Low Emission Vehicle II (LEV II) standards, and they 
reflect the evaporative emissions levels that are already being 
achieved nationwide. The standards we are proposing today would codify 
the approach that most

[[Page 15812]]

manufacturers are already taking for 50-state evaporative systems, and 
the standards would thus prevent backsliding in the future. We are 
proposing to implement the evaporative emission standards in 2009 for 
lighter vehicles and in 2010 for the heavier vehicles.
    Section VI provides details on the proposed exhaust and evaporative 
standards and their implementation, and our rationale for proposing 
them.
2. Gasoline Fuel Standards
    As described in more detail in section VII, we are proposing to 
limit the benzene content of all gasoline, both reformulated and 
conventional. We propose that beginning January 1, 2011, refiners would 
meet an average gasoline benzene content standard of 0.62% by volume on 
all their gasoline. We are not proposing a standard for California, 
however, because it is already covered by a similar state program.
    This proposed fuel standard would result in air toxics emissions 
reductions that are greater than required under all existing gasoline 
toxics programs. As a result, EPA is proposing that upon full 
implementation in 2011, the regulatory provisions for the benzene 
control program would become the single regulatory mechanism used to 
implement the RFG and Anti-dumping annual average toxics requirements. 
The current RFG and Anti-dumping annual average provisions thus would 
be replaced by the proposed benzene control program. The MSAT2 benzene 
control program would also replace the MSAT1 requirements. In addition, 
the program would satisfy certain fuel MSAT conditions of the Energy 
Policy Act of 2005 and obviate the need to revise toxics baselines for 
reformulated gasoline otherwise required by the Energy Policy Act. In 
all of these ways, we would significantly consolidate and simplify the 
existing national fuel-related MSAT regulatory program.
    We also propose that refiners could generate benzene credits and 
use or transfer them as a part of a nationwide averaging, banking, and 
trading (ABT) program. From 2007-2010 refiners could generate benzene 
credits by taking early steps to reduce gasoline benzene levels. 
Beginning in 2011 and continuing indefinitely, refiners could generate 
credits by producing gasoline with benzene levels below the 0.62% 
average standard. Refiners could apply the credits towards company 
compliance, ``bank'' the credits for later use, or transfer (``trade'') 
them to other refiners nationwide (outside of California) under the 
proposed program. Under this program, refiners could use credits to 
achieve compliance with the benzene content standard.
    This proposed ABT program would allow us to set a more stringent 
benzene standard than would otherwise be possible, and it would allow 
implementation to occur earlier. Under this proposed benzene content 
standard and ABT program, gasoline in all areas of the country would 
have lower benzene levels than they have today. Overall benzene levels 
would be 37% lower. This would reduce benzene emissions and exposure 
nationwide.
    Finally, we propose hardship provisions. Refiners approved as 
``small refiners'' would be eligible for certain temporary relief 
provisions. In addition, any refiner facing extreme unforeseen 
circumstances or extreme hardship circumstances could apply for similar 
temporary relief.
    Section VII of this preamble provides a detailed explanation and 
rationale for the proposed fuel program and its implementation. It also 
discusses and seeks comment on a variety of alternatives that we 
considered.
3. Portable Gasoline Container (Gas Can) Controls
    Portable gasoline containers, or gas cans, are consumer products 
used to refuel a wide variety of gasoline-powered equipment, including 
lawn and garden equipment, recreational equipment, and passenger 
vehicles that have run out of gas. As described in section VIII, we are 
proposing standards that would reduce hydrocarbon emissions from 
evaporation, permeation, and spillage. These standards would 
significantly reduce benzene and other toxics, as well as VOC more 
generally. VOC is an ozone precursor.
    We propose a performance-based standard of 0.3 grams per gallon per 
day of hydrocarbons, based on the emissions from the can over a diurnal 
test cycle. The standard would apply to gas cans manufactured on or 
after January 1, 2009. We also propose test procedures and a 
certification and compliance program, in order to ensure that gas cans 
would meet the emission standard over a range of in-use conditions. The 
proposed standards would result in the use of best available control 
technologies, such as durable permeation barriers, automatically 
closing spouts, and cans that are well-sealed.
    California implemented an emissions control program for gas cans in 
2001, and since then, several other states have adopted the program. 
Last year, California adopted a revised program, which will take effect 
July 1, 2007. The revised California program is very similar to the 
program we are proposing. Although a few aspects of the program we are 
proposing are different, we believe manufacturers would be able to meet 
both EPA and California requirements with the same gas can designs.

III. What Are Mobile Source Air Toxics (MSATs) and Their Health 
Effects?

A. What Are MSATs?

    Section 202(l) refers to ``hazardous air pollutants from motor 
vehicles and motor vehicle fuels.'' We use the term ``mobile source air 
toxics (MSATs)'' to refer to compounds that are emitted by mobile 
sources and have the potential for serious adverse health effects. 
There are a variety of ways in which to identify compounds that have 
the potential for serious adverse health effects. For example, EPA's 
Integrated Risk Information System (IRIS) is EPA's database containing 
information on human health effects that may result from exposure to 
various chemicals in the environment. In addition, Clean Air Act 
section 112(b) contains a list of hazardous air pollutants that EPA is 
required to control through regulatory standards; other agencies or 
programs such as the Agency for Toxic Substances and Disease Registry 
and the California EPA have developed health benchmark values for 
various compounds; and the International Agency for Research on Cancer 
and the National Toxicology Program have assembled evidence of 
substances that cause cancer in humans and issue judgments on the 
strength of the evidence. Each source of information has its own 
strengths and limitations. For example, there are inherent limitations 
on the number of compounds that have been investigated sufficiently for 
EPA to conduct an IRIS assessment. There are some compounds that are 
not listed in IRIS but are considered to be hazardous air pollutants 
under Clean Air Act section 112(b) and are regulated by the Agency 
(e.g., propionaldehyde, 2,2,4-trimethylpentane).

B. Compounds Emitted by Mobile Sources and Identified in IRIS

    In its 2001 MSAT rule, EPA identified a list of 21 MSATs. We listed 
a compound as an MSAT if it was emitted from mobile sources, and if the 
Agency had concluded in IRIS that the compound posed a potential cancer 
hazard and/or if IRIS contained an inhalation reference concentration 
or ingestion reference dose for the compound. Since 2001, EPA has 
conducted an extensive review of the

[[Page 15813]]

literature to produce a list of the compounds identified in the exhaust 
or evaporative emissions from onroad and nonroad equipment, using 
baseline as well as alternative fuels (e.g., biodiesel, compressed 
natural gas). This list, the Master List of Compounds Emitted by Mobile 
Sources (``Master List''), currently includes approximately 1,000 
compounds. It is available in the public docket for this rule and on 
the web (www.epa.gov/otaq/toxics.htm). Table III.B-1 lists those 
compounds from the Master List that currently meet those 2001 MSAT 
criteria, based on the current IRIS.
    Table III.B-1 identifies all of the compounds from the Master List 
that are present in IRIS with (a) a cancer hazard identification of 
known, probable, or possible human carcinogens (under the 1986 EPA 
cancer guidelines) or carcinogenic to humans, likely to be carcinogenic 
to humans, or suggestive evidence of carcinogenic potential (under the 
2005 EPA cancer guidelines); and/or (b) an inhalation reference 
concentration or an ingestion reference dose. Although all these 
compounds have been detected in emissions from mobile sources, many are 
emitted in trace amounts and data are not adequate to develop an 
inventory. Those compounds for which we have developed an emissions 
inventory are summarized in Table IV.C-2. There are several compounds 
for which IRIS assessments are underway and therefore are not included 
in Table III.B-1. These compounds are: Cerium, copper, ethanol, ethyl 
tertiary butyl ether (ETBE), platinum, propionaldehyde, and 2,2,4-
trimethylpentane.
    The fact that a compound is listed in Table III.B-1 does not imply 
a risk to public health or welfare at current levels, or that it is 
appropriate to adopt controls to limit the emissions of such a compound 
from motor vehicles or their fuels. In conducting any such further 
evaluation, pursuant to sections 202(a) or 211(c) of the Act, EPA would 
consider whether emissions of the compound from motor vehicles cause or 
contribute to air pollution which may reasonably be anticipated to 
endanger public health or welfare.

 Table III.B-1.--Compounds Emitted by Mobile Sources That Are Listed in
                                  IRIS*
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1,1,1,2-Tetrafluoroethane...  Cadmium.............  Manganese.
1,1,1-Trichloroethane.......  Carbon disulfide....  Mercury, elemental.
1,1-Biphenyl................  Carbon tetrachloride  Methanol.
1,2-Dibromoethane...........  Chlorine............  Methyl chloride.
1,2-Dichlorobenzene.........  Chlorobenzene.......  Methyl ethyl ketone
                                                     (MEK).
1,3-Butadiene...............  Chloroform..........  Methyl isobutyl
                                                     ketone (MIBK).
2,4-Dinitrophenol...........  Chromium III........  Methyl tert-butyl
                                                     ether (MTBE).
2-Methylnaphthalene.........  Chromium VI.........  Molybdenum.
2-Methylphenol..............  Chrysene............  Naphthalene.
4-Methylphenol..............  Crotonaldehyde......  Nickel.
Acenaphthene................  Cumene (isopropyl     Nitrate.
                               benzene).
Acetaldehyde................  Cyclohexane.........  N-
                                                     Nitrosodiethylamine
                                                     .
Acetone.....................  Cyclohexanone.......  N-
                                                     Nitrosodimethylamin
                                                     e.
Acetophenone................  Di(2-                 N-Nitroso-di-n-
                               ethylhexyl)phthalat   butylamine.
                               e.
Acrolein (2-propenal).......  Dibenz[a,h]anthracen  N-Nitrosodi-N-
                               e.                    propylamine.
Ammonia.....................  Dibutyl phthalate...  N-
                                                     Nitrosopyrrolidine.
Anthracene..................  Dichloromethane.....  Pentachlorophenol.
Antimony....................  Diesel PM and Diesel  Phenol.
                               exhaust organic
                               gases.
Arsenic, inorganic..........  Diethyl phthalate...  Phosphorus.
Barium and compounds........  Ethylbenzene........  Phthalic anhydride.
Benz[a]anthracene...........  Ethylene glycol       Pyrene.
                               monobutyl ether.
Benzaldehyde................  Fluoranthene........  Selenium and
                                                     compounds.
Benzene.....................  Fluorene............  Silver.
Benzo[a]pyrene (BaP)........  Formaldehyde........  Strontium.
Benzo[b]fluoranthene........  Furfural............  Styrene.
Benzo[k]fluoranthene........  Hexachlorodibenzo-p-  Tetrachloroethylene.
                               dioxin, mixture
                               (dioxin/furans).
Benzoic acid................  n-Hexane............  Toluene.
Beryllium and compounds.....  Hydrogen cyanide....  Trichlorofluorometha
                                                     ne.
Boron (Boron and Borates      Hydrogen sulfide....  Vanadium.
 only).
Bromomethane................  Indeno[1,2,3-         Xylenes.
                               cd]pyrene.
Butyl benzyl phthalate......  Lead and compounds    Zinc and compounds.
                               (inorganic).
------------------------------------------------------------------------
* Compounds listed in IRIS as known, probable, or possible human
  carcinogens and/or pollutants for which the Agency has calculated a
  reference concentration or reference dose.

C. Which Mobile Source Emissions Pose the Greatest Health Risk at 
Current Levels?

    The 1999 National-Scale Air Toxics Assessment (NATA) provides some 
perspective on which mobile source emissions pose the greatest risk at 
current estimated ambient levels.\8\ We also conducted a national-scale 
assessment for future years, which is discussed more fully in section 
IV of this preamble and Chapters 2 and 3 of the RIA. Our understanding 
of what emissions pose the greatest risk will evolve over time, based 
on our understanding of the ambient levels and health effects 
associated with the compounds.\9\
---------------------------------------------------------------------------

    \8\ It is, of course, not necessary for EPA to show that a 
compound is a national or regional risk driver to show that its 
emission from motor vehicles may reasonably cause or contribute to 
endangerment of public health or welfare. A showing that motor 
vehicles contribute some non-trivial percentage of the inventory of 
a compound known to be associated with adverse health effects would 
normally be sufficient. Cf. Bluewater Network v. EPA, 370 F. 3d 1, 
15 (D.C. Cir. 2004).
    \9\ The discussion here considers risks other than those 
attributed to ambient levels of criteria pollutants.
---------------------------------------------------------------------------

1. National and Regional Risk Drivers in 1999 National-Scale Air Toxics 
Assessment
    The 1999 NATA evaluates 177 hazardous air pollutants currently 
listed under CAA section 112(b), as well as

[[Page 15814]]

diesel PM.\10\ NATA is described in greater detail in Chapters 2 and 3 
of the Regulatory Impact Analysis for this proposed rule. Additional 
information can also be obtained from the NATA website (http://www.epa.gov/ttn/atw/nata1999). Based on the assessment of inhalation 
exposures associated with outdoor sources of these hazardous air 
pollutants, NATA has identified cancer and noncancer risk drivers on a 
national and regional scale (Table III.C-1). A cancer risk driver on a 
national scale is a hazardous air pollutant for which at least 25 
million people are exposed to risk greater than ten in one million. 
Benzene is the only compound identified in the 1999 NATA as a national 
cancer risk driver. A cancer risk driver on a regional scale is a 
hazardous air pollutant for which at least one million people are 
exposed to risk greater than ten in one million or at least 10,000 
people are exposed to risk greater than 100 in one million. Twelve 
compounds (or groups of compounds in the case of POM) were identified 
as regional cancer risk drivers. The 1999 NATA concludes that diesel 
particulate matter is among the substances that pose the greatest 
relative risk, although the cancer risk cannot be quantified.
---------------------------------------------------------------------------

    \10\ NATA does not include a quantitative estimate of cancer 
risk for diesel particulate matter and diesel exhaust organic gases.
---------------------------------------------------------------------------

    A noncancer risk driver at the national scale is a hazardous air 
pollutant for which at least 25 million people are exposed at a 
concentration greater than the inhalation reference concentration. The 
RfC is an estimate (with uncertainty spanning perhaps an order of 
magnitude) of a daily exposure to the human population (including 
sensitive subgroups) that is likely to be without appreciable risk of 
deleterious effects during a lifetime. Acrolein is the only compound 
identified in the 1999 NATA as a national noncancer risk driver. A 
noncancer risk driver on a regional scale is defined as a hazardous air 
pollutant for which at least 10,000 people are exposed to an ambient 
concentration greater than the inhalation reference concentration. 
Sixteen regional-scale noncancer risk drivers were identified in the 
1999 NATA (see Table III.C-1.).

 Table III.C-1.--National and Regional Cancer and Noncancer Risk Drivers
                              in 1999 NATA
------------------------------------------------------------------------
                Cancer \1\                            Noncancer
------------------------------------------------------------------------
National drivers \2\......................  National drivers \4\
Benzene...................................  Acrolein
Regional drivers \3\......................  Regional drivers \5\
Arsenic compounds.........................  Antimony
Benzidine.................................  Arsenic compounds
1,3-Butadiene.............................  1,3-Butadiene
Cadmium compounds.........................  Cadmium compounds
Carbon tetrachloride......................  Chlorine
Chromium VI...............................  Chromium VI
Coke oven.................................  Diesel PM
Ethylene oxide............................  Formaldehyde
Hydrazine.................................  Hexamethylene 1-6-
                                             diisocyanate
Naphthalene...............................  Hydrazine
Perchloroethylene.........................  Hydrochloric acid
Polycyclic organic matter.................  Maleic anhydride
                                            Manganese compounds
                                            Nickel compounds
                                            2,4-Toluene diisocyanate
                                            Triethylamine
------------------------------------------------------------------------
\1\ The list of cancer risk drivers does not include diesel particulate
  matter. However, the 1999 NATA concluded that it was one of the
  pollutants that posed the greatest relative cancer risk.
\2\ At least 25 million people exposed to risk >10 in 1 million.
\3\ At least 1 million people exposed to risk >10 in 1 million or at
  least 10,000 people exposed to risk >100 in 1 million.
\4\ At least 25 million people exposed to a hazard quotient > 1.0.
\5\ At least 10,000 people exposed to a hazard quotient > 1.

2. 1999 NATA Risk Drivers with Significant Mobile Source Contribution

    Among the national and regional-scale cancer and noncancer risk 
drivers identified in the 1999 NATA, seven compounds have significant 
contributions from mobile sources: benzene, 1,3-butadiene, 
formaldehyde, acrolein, polycyclic organic matter (POM), naphthalene, 
and diesel particulate matter and diesel exhaust organic gases (Table 
III.C-2.). For example, mobile sources contribute 68% of the national 
benzene inventory, with 49% from on-road sources and 19% from nonroad 
sources.

  Table III.C-2.--Mobile Source Contribution to 1999 NATA Risk Drivers
------------------------------------------------------------------------
                                              Percent         Percent
                                           contribution    contribution
         1999 NATA risk drivers              from all      from on-road
                                          mobile sources  mobile sources
                                             (percent)       (percent)
------------------------------------------------------------------------
Benzene.................................              68              49
1,3-Butadiene...........................              58              41
Formaldehyde............................              47              27
Acrolein................................              25              14
Polycyclic organic matter *.............               6               3
Naphthalene.............................              27              21
Diesel PM and Diesel exhaust organic                 100             38
 gases..................................
------------------------------------------------------------------------
* This POM inventory includes the 15 POM compounds:
  benzo[b]fluoranthene, benz[a]anthracene, indeno(1,2,3-c,d)pyrene,
  benzo[k]fluoranthene, chrysene, benzo[a]pyrene, dibenz(a,h)anthracene,
  anthracene, pyrene, benzo(g,h,i)perylene, fluoranthene,
  acenaphthylene, phenanthrene, fluorene, and acenaphthene.


[[Page 15815]]

D. What Are the Health Effects of Air Toxics?

1. Overview of Potential Cancer and Noncancer Health Effects
    Air toxics can cause a variety of cancer and noncancer health 
effects. A number of the mobile source air toxic pollutants described 
in section III are known or likely to pose a cancer hazard in humans. 
Many of these compounds also cause adverse noncancer health effects 
resulting from chronic,\11\ subchronic,\12\ or acute \13\ inhalation 
exposures. These include neurological, cardiovascular, liver, kidney, 
and respiratory effects as well as effects on the immune and 
reproductive systems. Section III.D.2 discusses the health effects of 
air toxic compounds listed in Table III.C-2, as well as acetaldehyde. 
The compounds in Table III.C-2 were all identified as national and 
regional-scale cancer and noncancer risk drivers in the 1999 National-
Scale Air Toxics Assessment (NATA), and have significant inventory 
contributions from mobile sources. Acetaldehyde is included because it 
is a likely human carcinogen, has a significant inventory contribution 
from mobile sources, and was identified as a risk driver in the 1996 
NATA. We are also including diesel particulate matter and diesel 
exhaust organic gases in this discussion. Although 1999 NATA did not 
quantify cancer risks associated with exposure to this pollutant, EPA 
has concluded that diesel exhaust ranks with the other substances that 
the national-scale assessment suggests pose the greatest relative 
risk.\14\
---------------------------------------------------------------------------

    \11\ Chronic exposure is defined in the glossary of the 
Integrated Risk Information (IRIS) database (www.epa.gov/iris) as 
repeated exposure by the oral, dermal, or inhalation route for more 
than approximately 10 of the life span in humans (more than 
approximately 90 days to 2 years in typically used laboratory animal 
species).
    \12\ Defined in the IRIS database as exposure to a substance 
spanning approximately 10 of the lifetime of an organism.
    \13\ Defined in the IRIS database as exposure by the oral, 
dermal, or inhalation route for 24 hours or less.
    \14\ http://www.epa.gov/ttn/atw/nata1999.
---------------------------------------------------------------------------

    Inhalation cancer risks are usually estimated by EPA as ``unit 
risks,'' which represent the excess lifetime cancer risk estimated to 
result from continuous exposure to an agent at a concentration of 1 
[mu]g/m\3\ in air. Some air toxics are known to be carcinogenic in 
animals but lack data in humans. These have been assumed to be human 
carcinogens. Also, relationships between exposure and probability of 
cancer are assumed to be linear. In addition, these unit risks are 
typically upper bound estimates. Upper bound estimates are more likely 
to overestimate than underestimate risk. Where there are strong 
epidemiological data, a maximum likelihood (MLE) estimate may be 
developed. An MLE is a best scientific estimate of risk. The benzene 
unit risk is an MLE. A discussion of the confidence in a quantitative 
cancer risk estimate is provided in the IRIS file for each compound. 
The discussion of the confidence in the cancer risk estimate includes 
an assessment of the source of the data (human or animal), 
uncertainties in dose estimates, choice of the model used to fit the 
exposure and response data and how uncertainties and potential 
confounders are handled.
    Potential noncancer chronic inhalation health risks are quantified 
using reference concentrations (RfCs) and noncancer chronic ingestion 
health risks are quantified using reference doses (RfDs). The RfC is an 
estimate (with uncertainty spanning perhaps an order of magnitude) of a 
daily exposure to the human population (including sensitive subgroups) 
that is likely to be without appreciable risk of deleterious effects 
during a lifetime. Sources of uncertainty in the development of the 
RfCs and RfDs include intraspecies extrapolation (animal to human) and 
interspecies extrapolation (average human to sensitive human). 
Additional sources of uncertainty can be using a lowest observed 
adverse effect level in place of a no observed adverse effect level, 
and other data deficiencies. A statement regarding the confidence in 
the RfC and/or RfD is developed to reflect the confidence in the 
principal study or studies on which the RfC or RfD are based and the 
confidence in the underlying database. Factors that affect the 
confidence in the principal study include how well the study was 
designed, conducted and reported. Factors that affect the confidence in 
the database include an assessment of the availability of information 
regarding identification of the critical effect, potentially 
susceptible populations and exposure scenarios relevant to assessment 
of risk.
    The RfC may be used to estimate a hazard quotient, which is the 
environmental exposure to a substance divided by its RfC. A hazard 
quotient greater than one indicates adverse health effects are 
possible. The hazard quotient cannot be translated to a probability 
that adverse health effects will occur, and is unlikely to be 
proportional to risk. It is especially important to note that a hazard 
quotient exceeding one does not necessarily mean that adverse effects 
will occur. In NATA, hazard quotients for different respiratory 
irritants were also combined into a hazard index (HI). A hazard index 
is the sum of hazard quotients for substances that affect the same 
target organ or organ system. Because different pollutants may cause 
similar adverse health effects, it is often appropriate to combine 
hazard quotients associated with different substances. However, the HI 
is only an approximation of a combined effect because substances may 
affect a target organ in different ways.
2. Health Effects of Key MSATs
a. Benzene
    The EPA's IRIS database lists benzene, an aromatic hydrocarbon, as 
a known human carcinogen (causing leukemia) by all routes of 
exposure.\15\ A number of adverse noncancer health effects including 
blood disorders and immunotoxicity have also been associated with long-
term occupational exposure to benzene.
---------------------------------------------------------------------------

    \15\ U.S. EPA (2000). Integrated Risk Information System File 
for Benzene. This material is available electronically at http://www.epa.gov/iris/subst/0276.htm.
---------------------------------------------------------------------------

    Inhalation is the major source of human exposure to benzene in the 
occupational and non-occupational setting. Long-term inhalation 
occupational exposure to benzene has been shown to cause cancer of the 
hematopoetic (blood cell) system in adults. Among these are acute 
nonlymphocytic leukemia \16\ and chronic lymphocytic 
leukemia.17 18

[[Page 15816]]

Leukemias, lymphomas, and other tumor types have been observed in 
experimental animals exposed to benzene by inhalation or oral 
administration. Exposure to benzene and/or its metabolites has also 
been linked with chromosomal changes in humans and animals 
19 20 and increased proliferation of mouse bone marrow 
cells.21 22
---------------------------------------------------------------------------

    \16\ Leukemia is a blood disease in which the white blood cells 
are abnormal in type or number. Leukemia may be divided into 
nonlymphocytic (granulocytic) leukemias and lymphocytic leukemias. 
Nonlymphocytic leukemia generally involves the types of white blood 
cells (leukocytes) that are involved in engulfing, killing, and 
digesting bacteria and other parasites (phagocytosis) as well as 
releasing chemicals involved in allergic and immune responses. This 
type of leukemia may also involve erythroblastic cell types 
(immature red blood cells). Lymphocytic leukemia involves the 
lymphocyte type of white blood cells that are responsible for the 
immune responses. Both nonlymphocytic and lymphocytic leukemia may, 
in turn, be separated into acute (rapid and fatal) and chronic 
(lingering, lasting) forms. For example; in acute myeloid leukemia 
there is diminished production of normal red blood cells 
(erythrocytes), granulocytes, and platelets (control clotting), 
which leads to death by anemia, infection, or hemorrhage. These 
events can be rapid. In chronic myeloid leukemia (CML) the leukemic 
cells retain the ability to differentiate (i.e., be responsive to 
stimulatory factors) and perform function; later there is a loss of 
the ability to respond.
    \17\ U.S. EPA (1985) Environmental Protection Agency, Interim 
quantitative cancer unit risk estimates due to inhalation of 
benzene, prepared by the Office of Health and Environmental 
Assessment, Carcinogen Assessment Group, Washington, DC, for the 
Office of Air Quality Planning and Standards, Washington, DC, 1985.
    \18\ U.S. EPA. (1993). Motor Vehicle-Related Air Toxics Study. 
Office of Mobile Sources, Ann Arbor, MI. http://www.epa.gov/otaq/regs/toxics/tox_archive.htm.
    \19\ International Agency for Research on Cancer (IARC) (1982) 
IARC monographs on the evaluation of carcinogenic risk of chemicals 
to humans, Volume 29, Some industrial chemicals and dyestuffs, 
International Agency for Research on Cancer, World Health 
Organization, Lyon, France, p. 345-389.
    \20\ U.S. EPA (1998) Environmental Protection Agency, 
Carcinogenic Effects of Benzene: An Update, National Center for 
Environmental Assessment, Washington, DC. EPA600-P-97-001F. http://www.epa.gov/ncepihom/Catalog/EPA600P97001F.html.
    \21\ Irons, R.D., W.S. Stillman, D.B. Colagiovanni, and V.A. 
Henry (1992) Synergistic action of the benzene metabolite 
hydroquinone on myelopoietic stimulating activity of granulocyte/
macrophage colony-stimulating factor in vitro, Proc. Natl. Acad. 
Sci. 89:3691-3695.
    \22\ U.S. EPA (1998) Environmental Protection Agency, 
Carcinogenic Effects of Benzene: An Update, National Center for 
Environmental Assessment, Washington, DC. EPA600-P-97-001F. http://www.epa.gov/ncepihom/Catalog/EPA600P97001F.html.
---------------------------------------------------------------------------

    The latest assessment by EPA places the excess risk of developing 
acute nonlymphocytic leukemia from inhalation exposure to benzene at 
2.2 x 10-\6\ to 7.8 x 10-\6\ per [mu]g/m\3\. In 
other words, there is a risk of about two to eight excess leukemia 
cases in one million people exposed to 1 [mu]g/m\3\ of benzene over a 
lifetime.\23\ This range of unit risks are the MLEs calculated from 
different exposure assumptions and dose-response models that are linear 
at low doses. At present, the true cancer risk from exposure to benzene 
cannot be ascertained, even though dose-response data are used in the 
quantitative cancer risk analysis, because of uncertainties in the low-
dose exposure scenarios and lack of clear understanding of the mode of 
action. A range of estimates of risk is recommended, each having equal 
scientific plausibility. There are confidence intervals associated with 
the MLE range that reflect random variation of the observed data. For 
the upper end of the MLE range, the 5th and 95th percentile values are 
about a factor of 5 lower and higher than the best fit value. The upper 
end of the MLE range was used in NATA.
---------------------------------------------------------------------------

    \23\ U.S. EPA (1998). Environmental Protection Agency, 
Carcinogenic Effects of Benzene: An Update, National Center for 
Environmental Assessment, Washington, DC. EPA600-P-97-001F. http://www.epa.gov/ncepihom/Catalog/EPA600P97001F.html.
---------------------------------------------------------------------------

    It should be noted that not enough information is known to 
determine the slope of the dose-response curve at environmental levels 
of exposure and to provide a sound scientific basis to choose any 
particular extrapolation/exposure model to estimate human cancer risk 
at low doses. EPA risk assessment guidelines suggest using an 
assumption of linearity of dose response when (1) there is an absence 
of sufficient information on modes of action or (2) the mode of action 
information indicates that the dose-response curve at low dose is or is 
expected to be linear.\24\ Since the mode of action for benzene 
carcinogenicity is unknown, the current cancer unit risk estimate 
assumes linearity of the low-dose response. Data that were considered 
by EPA in its carcinogenic update suggested that the dose-response 
relationship at doses below those examined in the studies reviewed in 
EPA's most recent benzene assessment may be supralinear. They support 
the inference that cancer risks are as high or are higher than the 
estimates provided in the existing EPA assessment.\25\ Data discussed 
in the EPA IRIS assessment suggest that genetic abnormalities occur at 
low exposure in humans, and the formation of toxic metabolites plateaus 
above 25 ppm (80,000 [mu]g/m3).\26\ More recent data on 
benzene adducts in humans, published after the most recent IRIS 
assessment, suggest that the enzymes involved in benzene metabolism 
start to saturate at exposure levels as low as 1 ppm.\27\ Because there 
is a transition from linear to saturable metabolism below 1 ppm, the 
assumption of low-dose linearity extrapolated from much higher 
exposures could lead to substantial underestimation of leukemia risks. 
This is consistent with recent epidemiological data which also suggest 
a supralinear exposure-response relationship and which ``[extend] 
evidence for hematopoietic cancer risks to levels substantially lower 
than had previously been established.'' 28 29 These data are 
from the largest cohort study done to date with individual worker 
exposure estimates. However, these data have not yet been formally 
evaluated by EPA as part of the IRIS review process, and it is not 
clear whether these data provide sufficient evidence to reject a linear 
dose-response curve. A better understanding of the biological mechanism 
of benzene-induced leukemia is needed.
---------------------------------------------------------------------------

    \24\ U.S. EPA (2005) Guidelines for Carcinogen Risk Assessment. 
Report No. EPA/630/P-03/001F. http://cfpub.epa.gov/ncea/raf/recordisplay.cfm?deid=116283.
    \25\ U.S. EPA (1998) Carcinogenic Effects of Benzene: An Update. 
EPA/600/P-97/001F.
    \26\ Rothman, N; Li, GL; Dosemeci, M; et al. (1996) 
Hematotoxicity among Chinese workers heavily exposed to benzene. Am. 
J. Indust. Med. 29:236-246.
    \27\ Rappaport, S.M.; Waidyanatha, S.; Qu, Q.; Shore, R.; Jin, 
X.; Cohen, B.; Chen, L.; Melikian, A.; Li, G.; Yin, S.; Yan, H.; Xu, 
B.; Mu, R.; Li, Y.; Zhang, X.; and Li, K. (2002) Albumin adducts of 
benzene oxide and 1,4-benzoquinone as measures of human benzene 
metabolism. Cancer Research 62:1330-1337.
    \28\ Hayes, R.B.; Yin, S.; Dosemeci, M.; Li, G.; Wacholder, S.; 
Travis, L.B.; Li, C.; Rothman, N.; Hoover, R.N.; and Linet, M.S. 
(1997) Benzene and the dose-related incidence of hematologic 
neoplasms in China. J. Nat. Cancer Inst. 89:1065-1071.
    \29\ Hayes, R.B.; Songnian, Y.; Dosemeci, M.; and Linet, M. 
(2001) Benzene and lymphohematopoietic malignancies in humans. Am. 
J. Indust. Med. 40:117-126.
---------------------------------------------------------------------------

    Children may represent a subpopulation at increased risk from 
benzene exposure, due to factors that could increase their 
susceptibility. Children may have a higher unit body weight exposure 
because of their heightened activity patterns which can increase their 
exposures, as well as different ventilation tidal volumes and 
frequencies, factors that influence uptake. This could entail a greater 
risk of leukemia and other toxic effects to children if they are 
exposed to benzene at similar levels as adults. There is limited 
information from two studies regarding an increased risk to children 
whose parents have been occupationally exposed to 
benzene.30 31 Data from animal studies have shown benzene 
exposures result in damage to the hematopoietic (blood cell formation) 
system during development.32 33 34 Also, key changes related 
to the development of childhood leukemia occur in the developing 
fetus.\35\ Several studies have reported that genetic changes related 
to eventual leukemia development occur before birth. For example, there 
is one study of genetic changes in twins who developed T cell leukemia 
at 9 years of

[[Page 15817]]

age.\36\ An association between traffic volume, residential proximity 
to busy roads and occurrence of childhood leukemia has also been 
identified in some studies, although some studies show no association.
---------------------------------------------------------------------------

    \30\ Shu, X.O,; Gao, Y.T.; Brinton, L.A.; et al. (1988) A 
population-based case-control study of childhood leukemia in 
Shanghai. Cancer 62:635-644.
    \31\ McKinney, P.A.; Alexander, F.E.; Cartwright, R.A.; et al. 
(1991) Parental occupations of children with leukemia in west 
Cumbria, north Humberside, and Gateshead, Br. Med. J. 302:681-686.
    \32\ Keller, KA; Snyder, CA. (1986) Mice exposed in utero to low 
concentrations of benzene exhibit enduring changes in their colony 
forming hematopoietic cells. Toxicology 42:171-181.
    \33\ Keller, KA; Snyder, CA. (1988) Mice exposed in utero to 20 
ppm benzene exhibit altered numbers of recognizable hematopoietic 
cells up to seven weeks after exposure. Fundam. Appl. Toxicol. 
10:224-232.
    \34\ Corti, M; Snyder, CA. (1996) Influences of gender, 
development, pregnancy and ethanol consumption on the hematotoxicity 
of inhaled 10 ppm benzene. Arch. Toxicol. 70:209-217.
    \35\ U.S. EPA. (2002). Toxicological Review of Benzene 
(Noncancer Effects). National Center for Environmental Assessment, 
Washington, DC. Report No. EPA/635/R-02/001F. http://www.epa.gov/iris/toxreviews/0276-tr[1].pdf.
    \36\ Ford, AM; Pombo-de-Oliveira, MS; McCarthy, KP; MacLean, JM; 
Carrico, KC; Vincent, RF; Greaves, M. (1997) Monoclonal origin of 
concordant T-cell malignancy in identical twins. Blood 89:281-285.
---------------------------------------------------------------------------

    A number of adverse noncancer health effects, including blood 
disorders such as preleukemia and aplastic anemia, have also been 
associated with long-term exposure to benzene.37 38 People 
with long-term occupational exposure to benzene have experienced 
harmful effects on the blood-forming tissues, especially in bone 
marrow. These effects can disrupt normal blood production and suppress 
the production of important blood components, such as red and white 
blood cells and blood platelets, leading to anemia (a reduction in the 
number of red blood cells), leukopenia (a reduction in the number of 
white blood cells), or thrombocytopenia (a reduction in the number of 
blood platelets, thus reducing the ability of blood to clot). Chronic 
inhalation exposure to benzene in humans and animals results in 
pancytopenia,\39\ a condition characterized by decreased numbers of 
circulating erythrocytes (red blood cells), leukocytes (white blood 
cells), and thrombocytes (blood platelets).40 41 Individuals 
that develop pancytopenia and have continued exposure to benzene may 
develop aplastic anemia, whereas others exhibit both pancytopenia and 
bone marrow hyperplasia (excessive cell formation), a condition that 
may indicate a preleukemic state.42 43 The most sensitive 
noncancer effect observed in humans, based on current data, is the 
depression of the absolute lymphocyte count in blood.44 45
---------------------------------------------------------------------------

    \37\ Aksoy, M. (1989) Hematotoxicity and carcinogenicity of 
benzene. Environ. Health Perspect. 82:193-197.
    \38\ Goldstein, B.D. (1988) Benzene toxicity. Occupational 
medicine. State of the Art Reviews 3: 541-554.
    \39\ Pancytopenia is the reduction in the number of all three 
major types of blood cells (erythrocytes, or red blood cells, 
thrombocytes, or platelets, and leukocytes, or white blood cells). 
In adults, all three major types of blood cells are produced in the 
bone marrow of the vertebra, sternum, ribs, and pelvis. The bone 
marrow contains immature cells, known as multipotent myeloid stem 
cells, that later differentiate into the various mature blood cells. 
Pancytopenia results from a reduction in the ability of the red bone 
marrow to produce adequate numbers of these mature blood cells.
    \40\ Aksoy, M. (1991) Hematotoxicity, leukemogenicity and 
carcinogenicity of chronic exposure to benzene. In: Arinc, E.; 
Schenkman, J.B.; Hodgson, E., Eds. Molecular Aspects of 
Monooxygenases and Bioactivation of Toxic Compounds. New York: 
Plenum Press, pp. 415-434.
    \41\ Goldstein, B.D. (1988) Benzene toxicity. Occupational 
medicine. State of the Art Reviews 3: 541-554.
    \42\ Aksoy, M., S. Erdem, and G. Dincol. (1974) Leukemia in 
shoe-workers exposed chronically to benzene. Blood 44:837.
    \43\ Aksoy, M. and K. Erdem. (1978) A follow-up study on the 
mortality and the development of leukemia in 44 pancytopenic 
patients associated with long-term exposure to benzene. Blood 52: 
285-292.
    \44\ Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E. 
Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. Smith, N. Titenko-
Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996) 
Hematotoxicity among Chinese workers heavily exposed to benzene. Am. 
J. Ind. Med. 29: 236-246.
    \45\ EPA 2005 ``Full IRIS Summary for Benzene (CASRN 71-43-2)'' 
Environmental Protection Agency, Integrated Risk Information System 
(IRIS), Office of Health and Environmental Assessment, Environmental 
Criteria and Assessment Office, Cincinnati, OH http://www.epa.gov/iris/subst/0276.htm.
---------------------------------------------------------------------------

    EPA's inhalation reference concentration (RfC) for benzene is 30 
[mu]g/m3, based on suppressed absolute lymphocyte counts as 
seen in humans under occupational exposure conditions. The overall 
confidence in this RfC is medium. Since development of this RfC, there 
have appeared human reports of benzene's hematotoxic effects in the 
literature that provides data suggesting a wide range of hematological 
endpoints that are affected at occupational exposures of less than 5 
ppm (about 16 mg/m3) \46\ and even at air levels of 1 ppm 
(about 3 mg/m3) or less among genetically susceptible 
populations.\47\ One recent study found benzene metabolites in mouse 
liver and bone marrow at environmental doses, indicating that even 
concentrations in urban air can elicit a biochemical response in 
rodents that indicates toxicity.\48\ EPA has not formally evaluated 
these recent studies as part of the IRIS review process to determine 
whether or not they will lead to a change in the current RfC. EPA does 
not currently have an acute reference concentration for benzene. The 
Agency for Toxic Substances and Disease Registry Minimal Risk Level for 
acute exposure to benzene is 160 [mu]g/m3 for 1-14 days 
exposure.
---------------------------------------------------------------------------

    \46\ Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et 
al. (2002). Hematological changes among Chinese workers with a broad 
range of benzene exposures. Am. J. Industr. Med. 42: 275-285.
    \47\ Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et al. (2004). 
Hematotoxically in Workers Exposed to Low Levels of Benzene. Science 
306: 1774-1776.
    \48\ Turtletaub, K.W. and Mani, C. (2003). Benzene metabolism in 
rodents at doses relevant to human exposure from Urban Air. Res Rep 
Health Effect Inst 113.
---------------------------------------------------------------------------

b. 1,3-Butadiene
    EPA has characterized 1,3-butadiene, a hydrocarbon, as a 
leukemogen, carcinogenic to humans by inhalation.49 50 The 
specific mechanisms of 1,3-butadiene-induced carcinogenesis are 
unknown; however, it is virtually certain that the carcinogenic effects 
are mediated by genotoxic metabolites of 1,3-butadiene. Animal data 
suggest that females may be more sensitive than males for cancer 
effects; nevertheless, there are insufficient data from which to draw 
any conclusions on potentially sensitive subpopulations. The upper 
bound cancer unit risk estimate is 0.08 per ppm or 3x10-5 
per [mu]g/m3 (based primarily on linear modeling and 
extrapolation of human data). In other words, it is estimated that 
approximately 30 persons in one million exposed to 1 [mu]g/
m3 of 1,3-butadiene continuously for their lifetime would 
develop cancer as a result of this exposure. The human incremental 
lifetime unit cancer risk estimate is based on extrapolation from 
leukemias observed in an occupational epidemiologic study.\51\ This 
estimate includes a two-fold adjustment to the epidemiologic-based unit 
cancer risk applied to reflect evidence from the rodent bioassays 
suggesting that the epidemiologic-based estimate (from males) may 
underestimate total cancer risk from 1,3-butadiene exposure in the 
general population, particularly for breast cancer in females. 
Confidence in the excess cancer risk estimate of 0.08 per ppm is 
moderate.
---------------------------------------------------------------------------

    \49\ U.S. EPA. (2002). Health Assessment of 1,3-Butadiene. 
Office of Research and Development, National Center for 
Environmental Assessment, Washington Office, Washington, DC. Report 
No. EPA600-P-98-001F. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=54499.
    \50\ U.S. EPA (1998). A Science Advisory Board Report: Review of 
the Health Risk Assessment of 1,3-Butadiene. EPA-SAB-EHC-98.
    \51\ Delzell, E, N. Sathiakumar, M. Macaluso, et al. (1995). A 
follow-up study of synthetic rubber workers. Submitted to the 
International Institute of Synthetic Rubber Producers. University of 
Alabama at Birmingham. October 2, 1995.
---------------------------------------------------------------------------

    1,3-Butadiene also causes a variety of reproductive and 
developmental effects in mice; no human data on these effects are 
available. The most sensitive effect was ovarian atrophy observed in a 
lifetime bioassay of female mice.\52\ Based on this critical effect and 
the benchmark concentration methodology, an RfC was calculated. This 
RfC for chronic health effects is 0.9 ppb, or about 2 [mu]g/
m3. Confidence in the inhalation RfC is medium.
---------------------------------------------------------------------------

    \52\ Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996) 
Subchronic toxicity of 4-vinylcyclohexene in rats and mice by 
inhalation. Fundam. Appl. Toxicol. 32:1-10.
---------------------------------------------------------------------------

c. Formaldehyde
    Since 1987, EPA has classified formaldehyde, a hydrocarbon, as a

[[Page 15818]]

probable human carcinogen based on evidence in humans and in rats, 
mice, hamsters, and monkeys.\53\ Recently released research conducted 
by the National Cancer Institute (NCI) found an increased risk of 
nasopharyngeal cancer among workers exposed to 
formaldehyde.54 55 A recent National Institute of 
Occupational Safety and Health (NIOSH) study of garment workers also 
found increased risk of death due to leukemia among workers exposed to 
formaldehyde.\56\ In 2004, the working group of the International 
Agency for Research on Cancer concluded that formaldehyde is 
carcinogenic to humans (Group 1 classification), on the basis of 
sufficient evidence in humans and sufficient evidence in experimental 
animals--a higher classification than previous IARC evaluations. In 
addition, the National Institute of Environmental Health Sciences 
recently nominated formaldehyde for reconsideration as a known human 
carcinogen under the National Toxicology Program. Since 1981 it has 
been listed as a ``reasonably anticipated human carcinogen.''
---------------------------------------------------------------------------

    \53\ U.S. EPA (1987). Assessment of Health Risks to Garment 
Workers and Certain Home Residents from Exposure to Formaldehyde, 
Office of Pesticides and Toxic Substances, April 1987.
    \54\ Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; 
Blair, A. 2003. Mortality from lymphohematopoetic malignancies among 
workers in formaldehyde industries. Journal of the National Cancer 
Institute 95: 1615-1623.
    \55\ Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; 
Blair, A. 2004. Mortality from solid cancers among workers in 
formaldehyde industries. American Journal of Epidemiology 159: 1117-
1130.
    \56\ Pinkerton, L. E. 2004. Mortality among a cohort of garment 
workers exposed to formaldehyde: an update. Occup. Environ. Med. 61: 
193-200.
---------------------------------------------------------------------------

    In the past 15 years there has been substantial research on the 
inhalation dosimetry for formaldehyde in rodents and primates by the 
CIIT Centers for Health Research, with a focus on use of rodent data 
for refinement of the quantitative cancer dose-response 
assessment.57 58 59 CIIT's risk assessment of formaldehyde 
incorporated mechanistic and dosimetric information on formaldehyde. 
The risk assessment analyzed carcinogenic risk from inhaled 
formaldehyde using approaches that are consistent with EPA's draft 
guidelines for carcinogenic risk assessment. In 2001, Environment 
Canada relied on this cancer dose-response assessment in their 
assessment of formaldehyde.\60\ In 2004, EPA also relied on this cancer 
unit risk estimate during the development of the plywood and composite 
wood products national emissions standards for hazardous air pollutants 
(NESHAPs).\61\ In these rules, EPA concluded that the CIIT work 
represented the best available application of the available mechanistic 
and dosimetric science on the dose-response for portal of entry cancers 
due to formaldehyde exposures. EPA is reviewing the recent work cited 
above from the NCI and NIOSH, as well as the analysis by the CIIT 
Centers for Health Research and other studies, as part of a 
reassessment of the human hazard and dose-response associated with 
formaldehyde.
---------------------------------------------------------------------------

    \57\ Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D 
Kalisak, J Preston, and FJ Miller. 2003. Biologically motivated 
computational modeling of formaldehyde carcinogenicity in the F344 
rat. Tox. Sci. 75: 432-447.
    \58\ Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D 
Kalisak, J Preston, and FJ Miller. 2004. Human respiratory tract 
cancer risks of inhaled formaldehyde: Dose-response predictions 
derived from biologically-motivated computational modeling of a 
combined rodent and human dataset. Tox. Sci. 82: 279-296.
    \59\ Chemical Industry Institute of Toxicology (CIIT). 1999. 
Formaldehyde: Hazard characterization and dose-response assessment 
for carcinogenicity by the route of inhalation. CIIT, September 28, 
1999. Research Triangle Park, NC.
    \60\ Health Canada. 2001. Priority Substances List Assessment 
Report. Formaldehyde. Environment Canada, Health Canada, February 
2001.
    \61\ U.S. EPA. 2004. National Emission Standards for Hazardous 
Air Pollutants for Plywood and Composite Wood Products Manufacture: 
Final Rule. (69 FR 45943, 7/30/04).
---------------------------------------------------------------------------

    Noncancer effects of formaldehyde have been observed in humans and 
several animal species and include irritation to eye, nose and throat 
tissues in conjunction with increased mucous secretions.
d. Acetaldehyde
    Acetaldehyde, a hydrocarbon, is classified in EPA's IRIS database 
as a probable human carcinogen and is considered moderately toxic by 
inhalation.\62\ Based on nasal tumors in rodents, the upper confidence 
limit estimate of a lifetime extra cancer risk from continuous 
acetaldehyde exposure is about 2.2x10-\6\ per [mu]g/m\3\. In 
other words, it is estimated that about 2 persons in one million 
exposed to 1 [mu]g/m\3\ acetaldehyde continuously for their lifetime 
(70 years) would develop cancer as a result of their exposure, although 
the risk could be as low as zero. In short-term (4 week) rat studies, 
compound-related histopathological changes were observed only in the 
respiratory system at various concentration levels of 
exposure.63 64 Data from these studies showing degeneration 
of the olfactory epithelium were found to be sufficient for EPA to 
develop an RfC for acetaldehyde of 9 [mu]g/m\3\. Confidence in the 
principal study is medium and confidence in the database is low, due to 
the lack of chronic data establishing a no observed adverse effect 
level and due to the lack of reproductive and developmental toxicity 
data. Therefore, there is low confidence in the RfC. The agency is 
currently conducting a reassessment of risk from inhalation exposure to 
acetaldehyde.
---------------------------------------------------------------------------

    \62\ U.S. EPA. 1988. Integrated Risk Information System File of 
Acetaldehyde. This material is available electronically at http://www.epa.gov/iris/subst/0290.htm.
    \63\ Appleman, L. M., R. A. Woutersen, V. J. Feron, R. N. 
Hooftman, and W. R. F. Notten. (1986). Effects of the variable 
versus fixed exposure levels on the toxicity of acetaldehyde in 
rats. J. Appl. Toxicol. 6: 331-336.
    \64\ Appleman, L.M., R.A. Woutersen, and V.J. Feron. (1982). 
Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute 
studies. Toxicology. 23: 293-297.
---------------------------------------------------------------------------

    The primary acute effect of exposure to acetaldehyde vapors is 
irritation of the eyes, skin, and respiratory tract.\65\ Some 
asthmatics have been shown to be a sensitive subpopulation to 
decrements in functional expiratory volume (FEV1 test) and 
bronchoconstriction upon acetaldehyde inhalation.\66\
---------------------------------------------------------------------------

    \65\ U.S. EPA (1988). Integrated Risk Information System File of 
Acetaldehyde. This material is available electronically at http://www.epa.gov/iris/subst/0290.htm.
    \66\ Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda, T. 
(1993) Aerosolized acetaldehyde induces histamine-mediated 
bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 
940-3.
---------------------------------------------------------------------------

e. Acrolein
    Acrolein, a hydrocarbon, is intensely irritating to humans when 
inhaled, with acute exposure resulting in upper respiratory tract 
irritation and congestion. The Agency has developed an RfC for acrolein 
of 0.02 [mu]g/m\3\.\67\ The overall confidence in the RfC assessment is 
judged to be medium. The Agency is also currently in the process of 
conducting an assessment of acute health effects for acrolein. EPA 
determined in 2003 using the 1999 draft cancer guidelines that the 
human carcinogenic potential of acrolein could not be determined 
because the available data were inadequate. No information was 
available on the carcinogenic effects of acrolein in humans and the 
animal data provided inadequate evidence of carcinogenicity.
---------------------------------------------------------------------------

    \67\ U.S. Environmental Protection Agency (2003) Integrated Risk 
Information System (IRIS) on Acrolein. National Center for 
Environmental Assessment, Office of Research and Development, 
Washington, D.C. 2003. This material is available electronically at 
http://www.epa.gov/iris/subst/0364.htm.
---------------------------------------------------------------------------

f. Polycyclic Organic Matter (POM)
    POM is generally defined as a large class of organic compounds 
which have multiple benzene rings and a boiling point greater than 100 
degrees Celsius. Many of the compounds included in the class of 
compounds known as POM are classified by EPA as probable human 
carcinogens based on animal data. One

[[Page 15819]]

of these compounds, naphthalene, is discussed separately below.
    Polycyclic aromatic hydrocarbons (PAHs) are a chemical subset of 
POM. In particular, EPA frequently obtains data on 16 of these POM 
compounds. Recent studies have found that maternal exposures to PAHs in 
a population of pregnant women were associated with several adverse 
birth outcomes, including low birth weight and reduced length at 
birth.\68\ These studies are discussed in the Regulatory Impact 
Analysis.
---------------------------------------------------------------------------

    \68\ Perara, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect of 
transplacental exposure to environmental pollutants on birth 
outcomes in a multiethnic population. Environ Health Perspect. 111: 
201-205.
---------------------------------------------------------------------------

g. Naphthalene
    Naphthalene is a PAH compound consisting of two benzene rings fused 
together with two adjacent carbon atoms common to both rings. In 2004, 
EPA released an external review draft (External Review Draft, IRIS 
Reassessment of the Inhalation Carcinogenicity of Naphthalene, U.S. 
EPA. http://www.epa.gov/iris) of a reassessment of the inhalation 
carcinogenicity of naphthalene.\69\ The draft reassessment completed 
external peer review in 2004 by Oak Ridge Institute for Science and 
Education.\70\ Based on external comments, additional analyses are 
being considered. California EPA has also released a new risk 
assessment for naphthalene with a cancer unit risk estimate of 
3x10-\5\ per [mu]g/m\3\.\71\ The California EPA value was 
used in the 1999 NATA and in the analyses done for this rule. In 
addition, IARC has reevaluated naphthalene and re-classified it as 
Group 2B: possibly carcinogenic to humans.\72\ The cancer data form the 
basis of an inhalation RfC of 3 [mu]g/m\3\.\73\ A low to medium 
confidence rating was given to this RfC, in part because it cannot be 
said with certainty that this RfC will be protective for hemolytic 
anemia and cataracts, the more well-known human effects from 
naphthalene exposure.
---------------------------------------------------------------------------

    \69\ U.S. EPA. (2004) External Review Draft, IRIS Reassessment 
of the Inhalation Carcinogenicity of Naphthalene. http://
www.epa.gov/iris
    \70\ Oak Ridge Institute for Science and Education. (2004) 
External Peer Review for the IRIS Reassessment of the Inhalation 
Carcinogenicity of Naphthalene. August 2004. http://cfpub2.epa.gov/ncea/cfm/recordisplay.cfm?deid=86019
    \71\ California EPA. (2004) Long Term Health Effects of Exposure 
to Naphthalene. Office of Environmental Health Hazard Assessment. 
http://www.oehha.ca.gov/air/toxic_contaminants/draftnaphth.html
    \72\ International Agency for Research on Cancer (IARC). (2002) 
Monographs on the Evaluation of the Carcinogenic Risk of Chemicals 
for Humans. Vol. 82. Lyon, France.
    \73\ EPA 2005 ``Full IRIS Summary for Naphthalene (CASRN 91-20-
3)'' Environmental Protection Agency, Integrated Risk Information 
System (IRIS), Office of Health and Environmental Assessment, 
Environmental Criteria and Assessment Office, Cincinnati, OH http://www.epa.gov/iris/subst/0436.htm.
---------------------------------------------------------------------------

h. Diesel Particulate Matter and Diesel Exhaust Organic Gases
    In EPA's Diesel Health Assessment Document (HAD),\74\ diesel 
exhaust was classified as likely to be carcinogenic to humans by 
inhalation at environmental exposures, in accordance with the revised 
draft 1996/1999 EPA cancer guidelines. A number of other agencies 
(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 classifications. EPA concluded in the 
Diesel HAD that it is not possible currently to calculate a cancer unit 
risk for diesel exhaust due to a variety of factors that limit the 
current studies, such as limited quantitative exposure histories in 
occupational groups investigated for lung cancer.
---------------------------------------------------------------------------

    \74\ U.S. EPA (2002) Health Assessment Document for Diesel 
Engine Exhaust. EPA/600/8-90/057F Office of Research and 
Development, Washington DC. This document is available 
electronically at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060.
---------------------------------------------------------------------------

    However, in the absence of a cancer unit risk, the EPA Diesel HAD 
sought to provide additional insight into the significance of the 
cancer hazard by estimating possible ranges of risk that might be 
present in the population. The possible risk range analysis was 
developed by comparing a typical environmental exposure level for 
highway diesel sources to a selected range of occupational exposure 
levels. The occupationally observed risks were then proportionally 
scaled according to the exposure ratios to obtain an estimate of the 
possible environmental risk. A number of calculations are needed to 
accomplish this, and these can be seen in the EPA Diesel HAD. The 
outcome was that environmental risks from diesel exhaust exposure could 
range from a low of 10-\4\ to 10-\5\ to as high 
as 10-\3\, reflecting the range of occupational exposures 
that could be associated with the relative and absolute risk levels 
observed in the occupational studies. Because of uncertainties, the 
analysis acknowledged that the risks could be lower than 
10-\4\ or 10-\5\, and a zero risk from diesel 
exhaust exposure was not ruled out.
    The acute and chronic exposure-related effects of diesel exhaust 
emissions are also of concern to the Agency. EPA derived an RfC from 
consideration of four well-conducted chronic rat inhalation studies 
showing adverse pulmonary effects.75 76 77 78 The RfC is 5 
[mu]g/m\3\ for diesel exhaust as measured by diesel PM. This RfC does 
not consider allergenic effects such as those associated with asthma or 
immunologic effects. There is growing evidence, discussed in the Diesel 
HAD, that diesel exhaust can exacerbate these effects, but the 
exposure-response data are presently lacking to derive an RfC.
---------------------------------------------------------------------------

    \75\ Ishinishi, N; Kuwabara, N; Takaki, Y; et al. (1988) Long-
term inhalation experiments on diesel exhaust. In: Diesel exhaust 
and health risks. Results of the HERP studies. Ibaraki, Japan: 
Research Committee for HERP Studies; pp. 11-84.
    \76\ Heinrich, U; Fuhst, R; Rittinghausen, S; et al. (1995) 
Chronic inhalation exposure of Wistar rats and two different strains 
of mice to diesel engine exhaust, carbon black, and titanium 
dioxide. Inhal. Toxicol. 7:553-556.
    \77\ Mauderly, JL; Jones, RK; Griffith, WC; et al. (1987) Diesel 
exhaust is a pulmonary carcinogen in rats exposed chronically by 
inhalation. Fundam. Appl. Toxicol. 9:208-221.
    \78\ Nikula, KJ; Snipes, MB; Barr, EB; et al. (1995) Comparative 
pulmonary toxicities and carcinogenicities of chronically inhaled 
diesel exhaust and carbon black in F344 rats. Fundam. Appl. Toxicol. 
25:80-94.
---------------------------------------------------------------------------

    The Diesel HAD also briefly summarizes health effects associated 
with ambient PM and the EPA's annual National Ambient Air Quality 
Standard (NAAQS) of 15 [mu]g/m\3\. There is a much more extensive body 
of human data showing a wide spectrum of adverse health effects 
associated with exposure to ambient PM, of which diesel exhaust is an 
important component. The RfC is not meant to say that 5 [mu]g/m\3\ 
provides adequate public health protection for ambient 
PM2.5. In fact, there may be benefits to reducing diesel PM 
below 5 [mu]g/m\3\ since diesel PM is a major contributor to ambient 
PM2.5.

E. Gasoline PM

    Beyond the specific areas of quantifiable risk discussed above in 
section III.C, EPA is also currently investigating gasoline PM. 
Gasoline exhaust is a complex mixture that has not been evaluated in 
EPA's IRIS, in contrast to diesel exhaust, which has been evaluated in 
IRIS. However, there is evidence for the mutagenicity and cytotoxicity 
of gasoline exhaust and gasoline PM. Seagrave et al. investigated the 
combined particulate and semivolatile organic fractions of gasoline 
engine emissions.\79\ Their results demonstrate that emissions from 
gasoline engines are mutagenic and can induce inflammation and have 
cytotoxic effects. Gasoline exhaust is a ubiquitous

[[Page 15820]]

source of particulate matter, contributing to the health effects 
observed for ambient PM which is discussed extensively in the EPA 
Particulate Matter Criteria Document.\80\ The PM Criteria Document 
notes that the PM components of gasoline and diesel engine exhaust are 
hypothesized, important contributors to the observed increases in lung 
cancer incidence and mortality associated with ambient 
PM2.5.\81\ Gasoline PM is also a component of near-roadway 
emissions that may be contributing to the health effects observed in 
people who live near roadways (see section III.F).
---------------------------------------------------------------------------

    \79\ Seagrave, J.; McDonald, J.D.; Gigliotti, A.P.; Nikula, 
K.J.; Seilkop, S.K.; Gurevich, M. and Mauderly, J.L. (2002) 
Mutagenicity and in Vivo Toxicity of Combined Particulate and 
Semivolatile Organic Fractions of Gasoline and Diesel Engine 
Emissions. Toxicological Sciences 70:212-226.
    \80\ U.S. Environmental Protection Agency (2004) Air Quality 
Criteria for Particulate Matter. Research Triangle Park, NC: 
National Center for Environmental Assessment--RTP Office; Report No. 
EPA/600/P-99/002aF (PM Criteria Document).
    \81\ PM Criteria Document, p. 8-318.
---------------------------------------------------------------------------

    EPA is working to improve the understanding of PM emissions from 
gasoline engines, including the potential range of emissions and 
factors that influence emissions. EPA led a cooperative test program 
that recently completed testing approximately 500 randomly procured 
vehicles in the Kansas City metropolitan area. The purpose of this 
study was to determine the distribution of gasoline PM emissions from 
the in-use light-duty fleet. Results from this study are expected to be 
available in 2006. Some source apportionment studies show gasoline and 
diesel PM can result in larger contributions to ambient PM than 
predicted by EPA emission inventories.82 83 These source 
apportionment studies were one impetus behind the Kansas City study.
---------------------------------------------------------------------------

    \82\ Fujita, E.; Watson, M.J.; Chow, M.C.; et al. (1998) 
Northern Front Range Air Quality Study, Volume C: Source 
apportionment and simulation methods and evaluation. Prepared for 
Colorado State University, Cooperative Institute for Research in the 
Atmosphere, by Desert Research Institute, Reno, NV.
    \83\ Schauer, J.J.; Rogge, W.F.; Hildemann, L.M.; et al. (1996) 
Source apportionment of airborne particulate matter using organic 
compounds as tracers. Atmos. Environ. 30(22):3837-3855.
---------------------------------------------------------------------------

    Another issue related to gasoline PM is the effect of gasoline 
vehicles and engines on ambient PM, especially secondary PM. Ambient PM 
is composed of primary PM emitted directly into the atmosphere and 
secondary PM that is formed from chemical reactions in the atmosphere. 
The issue of secondary organic aerosol formation from aromatic 
precursors is an important one to which EPA and others are paying 
significant attention. This is discussed in more detail in Section 
1.4.1 of the RIA.

F. Near-Roadway Health Effects

    Over the years there have been a large number of studies that have 
examined associations between living near major roads and different 
adverse health endpoints. These studies generally examine people living 
near heavily-trafficked roadways, typically within several hundred 
meters, where fresh emissions from motor vehicles are not yet fully 
diluted with background air.
    Several studies have measured elevated concentrations of pollutants 
emitted directly by motor vehicles near road as compared to overall 
urban background levels. These elevated concentrations generally occur 
within approximately 200 meters of the road, although the distance may 
vary depending on traffic and environmental conditions. Pollutants 
measured with elevated concentrations include benzene, polycyclic 
aromatic hydrocarbons, carbon monoxide, nitrogen dioxide, black carbon, 
and coarse, fine, and ultrafine particulate matter. In addition, 
concentrations of road dust, and wear particles from tire and brake use 
also show concentration increases in proximity of major roadways.
    The near-roadway health studies provide stronger evidence for some 
health endpoints than others. Evidence of adverse responses to traffic-
related pollution is strongest for non-allergic respiratory symptoms, 
cardiovascular effects, premature adult mortality, and adverse birth 
outcomes, including low birth weight and size. Some evidence for new 
onset asthma is available, but not all studies have significant 
orrelations. Lastly, among studies of childhood cancer, in particular 
childhood leukemia, evidence is inconsistent. Several small studies 
report positive associations, though such effects have not been 
observed in two larger studies. As described above, benzene and 1,3-
butadiene are both known human leukemogens in adults. As previously 
mentioned, there is evidence of increased risk of leukemia among 
children whose parents have been occupationally exposed to benzene. 
Though the near-roadway studies are equivocal, taken together with the 
laboratory studies and other exposure environments, the data suggest a 
potentially serious children's health concern could exist. Additional 
research is needed to determine the significance of this potential 
concern.
    Significant scientific uncertainties remain in our understanding of 
the relationship between adverse health effects and near-road exposure, 
including the exposures of greatest concern, the importance of chronic 
versus acute exposures, the role of fuel type (e.g. diesel or gasoline) 
and composition (e.g., % aromatics), relevant traffic patterns, the 
role of co-stressors including noise and socioeconomic status, and the 
role of differential susceptibility within the ``exposed'' populations. 
For a more detailed discussion, see Chapter 3 of the Regulatory Impact 
Analysis.
    These studies provide qualitative evidence that reducing emissions 
from on-road mobile sources will provide public health benefits beyond 
those that can be quantified using currently available information.

G. How Would This Proposal Reduce Emissions of MSATs?

    The benzene and hydrocarbon standards proposed in this action would 
reduce benzene, 1,3-butadiene, formaldehyde, acrolein, polycyclic 
organic matter, and naphthalene, as well as many other hydrocarbon 
compounds that are emitted by motor vehicles, including those that are 
listed in Table III.B-1 and discussed in more detail in Chapter 1 of 
the RIA. The emission reductions expected from today's controls are 
reported in section V.E of this preamble and Chapter 2 of the RIA.
    EPA believes that the emission reductions from the standards 
proposed today for motor vehicles and their fuels, combined with the 
standards currently in place, represent the maximum achievable 
reductions of emissions from motor vehicles through the application of 
technology that will be available, considering costs and the other 
factors listed in section 202(l)(2). This conclusion applies whether 
you consider just the compounds listed in Table III.B-1, or consider 
all of the compounds on the Master List of emissions, given the breadth 
of EPA's current and proposed control programs and the broad groups of 
emissions that many of the control technologies reduce.
    EPA has already taken significant steps to reduce diesel emissions 
from mobile sources. We have adopted stringent standards for on-highway 
diesel trucks and buses, and nonroad diesel engines (engines used, for 
example, in construction, agricultural, and industrial applications). 
We also have additional programs underway to reduce diesel emissions, 
including voluntary programs and a proposal that is being developed to 
reduce emissions from diesel locomotives and marine engines.
    Emissions from motor vehicles can be chemically categorized as 
hydrocarbons, trace elements (including metals) and a

[[Page 15821]]

few additional compounds containing carbon, nitrogen and/or halogens 
(e.g., chlorine). For the hydrocarbons, which are the vast majority of 
these compounds, we believe that with the controls proposed today, we 
would control the emissions of these compounds from motor vehicles to 
the maximum amount currently feasible or currently identifiable with 
available information. Section VI of this preamble provides more 
details about why the proposed and existing standards represent maximum 
achievable reduction of hydrocarbons from motor vehicles. There are not 
motor vehicle controls to reduce individual hydrocarbons selectively; 
instead, the maximum emission reductions are achieved by controls on 
hydrocarbons as a group. There are fuel controls that could selectively 
reduce individual air toxics (e.g., formaldehyde, acetaldehyde, 1,3-
butadiene), as well as controls that reduce hydrocarbons more 
generally. Section VII of this preamble describes why the standards we 
are proposing today represent the maximum emission reductions 
achievable through fuel controls, considering the factors required by 
Clean Air Act section 202(l).
    Motor vehicle emissions also contain trace elements, including 
metals, which originate primarily from engine wear and impurities in 
engine oil and gasoline or diesel fuel. EPA does not have authority to 
regulate engine oil, and there are no feasible motor vehicle controls 
to directly prevent engine wear. Nevertheless, oil consumption and 
engine wear have decreased over the years, decreasing emission of 
metals from these sources. Metals associated with particulate matter 
will be captured in emission control systems employing a particulate 
matter trap, such as heavy-duty vehicles meeting the 2007 standards. We 
believe that currently, particulate matter traps, in combination with 
engine-out control, represent the maximum feasible reduction of both 
motor vehicle particulate matter and toxic metals present as a 
component of the particulate matter.
    The mobile source contribution to the national inventory for metal 
compounds is generally small. In fact, the emission rate for most 
metals from motor vehicles is small enough that quantitative 
measurement requires state-of-the art analytical techniques that are 
only recently being applied to this source category. We have efforts 
underway to gather information regarding trace metal emissions, 
including mercury emissions, from motor vehicles (see Chapter 1 of the 
RIA for more details).
    A few metals and other elements are used as fuel additives. These 
additives are designed to reduce the emission of regulated pollutants 
either in combination with or without an emission control device (e.g., 
a passive particulate matter trap). Clean Air Act section 211 provides 
EPA with various authorities to regulate fuel additives in order to 
reduce the risk to public health from exposure to their emissions. It 
is under this section that EPA requires manufacturers to register 
additives before their introduction into commerce. Registration 
involves certain data requirements that enable EPA to identify products 
whose emissions may pose an unreasonable risk to public health. In 
addition, section 211 provides EPA with authority to require health 
effects testing to fill any gaps in the data that would prevent a 
determination regarding the potential for risk to the public. Clean Air 
Act section 211(c) provides the primary mechanism by which EPA would 
take actions necessary to minimize exposure to metals or other 
additives to diesel and gasoline. It is under section 211 that EPA is 
currently generating the information needed to update an assessment of 
the potential human health risks related to having manganese in the 
national fuel supply.
    Existing regulations limit sulfur in gasoline and diesel fuel to 
the maximum amount feasible and will reduce emissions of all sulfur-
containing compounds (e.g., hydrogen sulfide, carbon disulfide) to the 
greatest degree achievable.84 85 86 For the remaining 
compounds (e.g., chlorinated compounds), we currently have very little 
information regarding emission rates and conditions that impact 
emissions. This information would be necessary in order to evaluate 
potential controls under section 202(l). Emissions of hydrocarbons 
containing chlorine (e.g., dioxins/furans) would likely be reduced with 
control measures that reduce total hydrocarbons, just as these 
emissions were reduced with the use of catalytic controls that lowered 
exhaust hydrocarbons.
---------------------------------------------------------------------------

    \84\ 65 FR 6697, February 10, 2000.
    \85\ 66 FR 5001, January 18, 2001.
    \86\ 69 FR 38958, June 29, 2004.
---------------------------------------------------------------------------

IV. What Are the Air Quality and Health Impacts of Air Toxics, and How 
Do Mobile Sources Contribute?

A. What Is the Health Risk to the U.S. Population from Inhalation 
Exposure to Ambient Sources of Air Toxics, and How Would It be Reduced 
by the Proposed Controls?

    EPA's National-Scale Air Toxics Assessment (NATA) assesses human 
health impacts from chronic inhalation exposures to outdoor sources of 
air toxics. It assesses lifetime risks assuming continuous exposure to 
levels of air toxics estimated for a particular point in time. The most 
recent NATA was done for the year 1999.\87\
---------------------------------------------------------------------------

    \87\ www.epa.gov/ttn/atw/nata1999.
---------------------------------------------------------------------------

    The NATA modeling framework has a number of limitations, but it 
remains very useful in identifying air toxic pollutants and sources of 
greatest concern. Among the significant limitations of the framework, 
which are discussed in more detail in the regulatory impact analysis, 
is that it cannot be used to reliably identify ``hot spots,'' such as 
areas in immediate proximity to major roads, where the air 
concentration, exposure and/or risk might be significantly higher 
within a census tract \88\ or county. These ``hot spots'' are discussed 
in more detail in section IV.B.2. The framework also does not account 
for risk from sources of air toxics originating indoors, such as 
stoves, out-gassing from building materials, or evaporative benzene 
emissions from cars in attached garages. There are also limitations 
associated with the dose-response values used to quantify risk; these 
are discussed in Section I of the preamble. Importantly, it should be 
noted that the 1999 NATA does not include default adjustments for early 
life exposures recently recommended in the Supplemental Guidance for 
Assessing Susceptibility from Early-Life Exposure to Carcinogens.\89\ 
These adjustments would be applied to compounds which act through a 
mutagenic mode of action. EPA will determine as part of the IRIS 
assessment process which substances meet the criteria for making 
adjustments, and future assessments will reflect them. If warranted, 
incorporation of such adjustments would lead to higher estimates of 
risk assuming constant lifetime exposure.
---------------------------------------------------------------------------

    \88\ A census tract is a subdivision of a county that typically 
contains roughly 4000 people. In urban areas, these tracts can be 
very small, on the order of a city block, whereas in rural areas, 
they can be large.
    \89\ U. S. EPA. (2005) Supplemental Guidance for Assessing 
Susceptibility from Early-Life Exposure to Carcinogens. Report No. 
EPA/630/R-03/003F. Available electronically at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=116283.
---------------------------------------------------------------------------

    Because of its limitations, EPA notes that the NATA assessment 
should not be used as the basis for developing risk reduction plans or 
regulations to control specific sources or pollutants. Additionally, 
this assessment should not be used for estimating risk at the local 
level, for quantifying benefits of reduced air toxic emissions, or for 
identifying localized hotspots. In this

[[Page 15822]]

rule, we have evaluated air quality, exposure, and risk impacts of 
mobile source air toxics using the 1999 NATA, as well as projections of 
risk to future years using the same tools as 1999 NATA. In addition, we 
also evaluate more refined local scale modeling, measured ambient 
concentrations, personal exposure measurements, and other data. This 
information is discussed below, as well as in Chapter 3 of the RIA. It 
serves as a perspective on the possible risk-related implications of 
the rule.
    Overall, the average nationwide lifetime population cancer risk in 
1999 NATA was 42 in a million, assuming continuous exposure to 1999 
levels. The average noncancer respiratory hazard index was 6.4.\90\ 
Highway vehicles and nonroad equipment account for almost 50% of the 
average population cancer risk, and 74% of the noncancer risk These 
estimates are based on the contribution of sources within 50 kilometers 
of a given emission point and do not include the contribution to 
ambient concentrations from transport beyond 50 kilometers. Ambient 
concentrations from transport beyond 50 kilometers, referred to as 
``background'' in NATA, are responsible for almost 50% of the average 
cancer risk in NATA.
---------------------------------------------------------------------------

    \90\ A hazard index above 1 indicates the potential for adverse 
health effects. It cannot be translated into a probability that an 
adverse effect will occur, and is not likely to be proportional to 
risk. A hazard index greater than one can be best described as only 
indicating that a potential may exist for adverse health effects.
---------------------------------------------------------------------------

    Section III.C.1 discusses the pollutants that the 1999 National-
Scale Air Toxics Assessment identifies as national and regional risk 
drivers. As summarized in Table III.C-1, benzene is the only pollutant 
described as a national cancer risk driver. Twenty-four percent of the 
total cancer risk in the 1999 National-Scale Air Toxics Assessment was 
due to benzene. In 1999, 68% of nationwide benzene emissions were 
attributable to mobile sources. 1,3-Butadiene and naphthalene are 
regional cancer risk drivers that have a large mobile source 
contribution. As presented in Table III.C-2, 58% of nationwide 1,3-
butadiene emissions in 1999 came from mobile sources. Twenty-seven 
percent of nationwide naphthalene emissions in 1999 came from mobile 
sources.
    One compound, acrolein, was identified as a national risk driver 
for noncancer health effects, and 25% of primary acrolein emissions 
were attributable to mobile sources. Over 70% of the average ambient 
concentration of acrolein is attributable to mobile sources. This is 
due to the large contribution from mobile source 1,3-butadiene, which 
is transformed to acrolein in the atmosphere.
    Table III.C-2 provides additional information on the mobile source 
contribution to emissions of national and regional risk drivers. The 
standards proposed in this rule will reduce emissions of all these 
pollutants.
    In addition to the 1999 NATA, we have estimated future-year risks 
for those pollutants included in the 1999 NATA whose emissions 
inventories include a mobile source contribution (see Table IV.B-1). 
This analysis indicates that cancer and noncancer risk will continue to 
be a public health concern due to exposure to mobile-source-related 
pollutants.
    Figure IV.A-1 summarizes changes in average population inhalation 
cancer risk for the MSATs in Table IV.A-1. Despite significant 
reductions in risk from these pollutants, average inhalation cancer 
risks are expected to remain well above 1 in 100,000. In addition, 
because of population growth (using projected populations from the U.S. 
Bureau of Census), the number of Americans above the 1 in 100,000 
cancer risk level from exposure to these mobile source air toxics is 
projected to increase from about 214 million in 1999 to 240 million in 
2030. Benzene continues to account for a large fraction of the total 
inhalation cancer risk from mobile source air toxics, decreasing 
slightly from 45% of the risk in 1999 to 37% in 2030. Similarly, 
although the average noncancer respiratory hazard index for MSATs 
decreases from over 6 in 1999 to 3.2 in 2030, the population with a 
hazard index above one increases from 250 million in 1999 to 273 
million in 2030. That is, in 2030 nearly the entire U.S. population 
will still be exposed to levels of these pollutants that have the 
potential to cause adverse respiratory health effects (other than 
cancer).
    These projected risks were estimated using the same tools and 
methods as the 1999 NATA, but with future-year projected inventories. 
More detailed information on the methods used to do these projections, 
and associated limitations and uncertainties, can be found in Chapter 3 
of the RIA for this rule. Projected risks assumed 1999 ``background'' 
levels. For MSATs, ``background'' accounts for slightly less than 20% 
of the average cancer risk in 1999, increasing to 24% in 2030. However, 
background levels should decrease along with emissions. A sensitivity 
analysis of this assumption is presented in Chapter 3 of the RIA. It 
should also be noted that the projected inventories used for this 
modeling do not include some more recent revisions, such as higher 
emissions of hydrocarbons, including gaseous air toxics, at cold 
temperatures. These revisions are discussed in section V and increase 
the overall magnitude of the inventory.

[[Page 15823]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.000


Table IV.A-1.--Pollutants Included in Risk Modeling for Projection Years
                                    *
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1,3-Butadiene.............................  Ethyl Benzene
2,2,4-Trimethylpentane....................  Fluoranthene **
Acenaphthene **...........................  Fluorene **
Acenaphthylene **.........................  Formaldehyde
Acetaldehyde..............................  Hexane
Acrolein..................................  Indeno(1,2,3,c,d)-pyrene **
Anthracene **.............................  Manganese
Benzene...................................  Methyl tert-butyl ether
                                             (MTBE)
Benz(a)anthracene **......................  Naphthalene
Benzo(a)pyrene **.........................  Nickel
Benzo(b)fluoranthene **...................  Phenanthrene **
Benzo(g,h,i)perylene **...................  Propionaldehyde
Benzo(k)fluoranthene **...................  Pyrene **
Chromium (includes Chromium III, Chromium   Styrene
 VI, and non-speciated Chromium).
Chrysene **...............................  Toluene
Dibenzo(a,h)anthracene **.................  Xylenes
------------------------------------------------------------------------
* This list includes compounds from the 1999 National-Scale Air Toxics
  Assessment with a mobile source emissions contribution, for which data
  were sufficient to develop an emissions inventory.
** POM compound as discussed in Section III.

B. What Is the Distribution of Exposure and Risk?

1. Distribution of National-Scale Estimates of Risk From Air Toxics
    National-scale modeling indicates that 95th percentile average 
cancer risk from exposure to mobile source air toxics is more than 
three times higher than median risk. In addition, the 95th percentile 
cancer risk is more than 10 times higher than the 5th percentile risk. 
This is true for all years modeled, from 1999 to 2030. Table IV.B-1 
gives the median and 5th and 95th percentile cancer risk distributions 
for mobile source air toxics. As previously mentioned, the tools used 
in this assessment are inadequate for identifying ``hot spots'' and do 
not account for significant sources of inhalation exposure, such as 
benzene emissions within attached garages from vehicles, equipment, and 
portable fuel containers. If these hot spots and additional sources of 
exposure were accounted for, a larger percentage of the population 
would be exposed to higher risk levels. (Sections IV.B.2-4 provides 
more details on ``hot spots'' and the implications for distribution of 
risk.) In addition, the modeling underestimates the contribution of 
hydrocarbon and particulate matter emissions at cold temperatures. 
These modeling results are discussed in more detail in Chapter 3 of the 
RIA.

[[Page 15824]]



 Table IV.B--1.--Median and 5th and 95th Percentile Lifetime Inhalation Cancer Risk Distributions for Inhalation
                             Exposure to Outdoor Sources of Mobile Source Air Toxics
                                  [Based on modeled average census tract risks]
----------------------------------------------------------------------------------------------------------------
                                                         1999                                2020
                Pollutant                -----------------------------------------------------------------------
                                              5th       Median       95th         5th       Median       95th
----------------------------------------------------------------------------------------------------------------
All MSATs...............................    4.0x10-6    1.9x10-5    5.9x10-5    3.6x10-6    1.3x10-5    4.4x10-5
Benzene.................................    2.4x10-6    8.9x10-6    2.5x10-5    2.1x10-6    5.6x10-6    1.4x10-5
1,3-Butadiene...........................    1.6x10-7    3.1x10-6    1.2x10-5    7.5x10-8    2.0x10-6    7.5x10-6
Acetaldehyde............................    1.0x10-6    2.5x10-6    6.9x10-6    9.3x10-7    1.6x10-6    3.6x10-6
Naphthalene.............................    1.1x10-7    1.4x10-6    7.6x10-6    1.0x10-7    1.4x10-6    8.5x10-6
----------------------------------------------------------------------------------------------------------------

2. Elevated Concentrations and Exposure in Mobile Source-Impacted Areas
    Air quality measurements near roads often identify elevated 
concentrations of air toxic pollutants at these locations. The 
concentrations of air toxic pollutants near heavily trafficked roads, 
as well as the pollutant composition and characteristics, differ from 
those measured distant from heavily trafficked roads. Exposures for 
populations residing, working, or going to school near major roads are 
likely higher than for other populations. The vehicle and fuel 
standards proposed in this rule will reduce those elevated exposures. 
Following is an overview of concentrations of air toxics and exposure 
to air toxics in areas heavily impacted by mobile source emissions.
a. Concentrations Near Major Roadways
    The 1999 NATA estimates average concentrations within a census 
tract, but it does not differentiate between locations near roadways 
and those further away (within the same tract). Local-scale modeling 
can better characterize distributions of concentrations, using more 
refined allocation of highway vehicle emissions. Urban-scale 
assessments done in Houston, TX and Portland, OR illustrated steep 
gradients of air toxic concentrations along major roadways, as well as 
better agreement with monitor data.91-92 93 Results of the 
Portland study show average concentrations of motor vehicle-related 
pollutants are ten times higher at 50 meters from a road than they are 
at greater than 400 meters a road. These findings are consistent with 
pollutant dispersion theory, which predicts that pollutants emitted 
along roadways will show highest concentrations nearest a road, and 
concentrations exponentially decrease with increasing distance 
downwind. These near-road pollutant gradients have been confirmed by 
measurements of both criteria pollutants and air toxics, and they are 
discussed in detail in Chapter 3 of the RIA.
---------------------------------------------------------------------------

    \91-92\ Kinnee, E.J.; Touma, J.S.; Mason, R.; Thurman, J.; 
Beidler, A., Bailey, C.; Cook, R. (2004) Allocation of onroad mobile 
emissions to road segments for air toxics modeling in an urban area. 
Transport. Res. Part D 9: 139-150.
    \93\ Cohen, J.; Cook, R.; Bailey, C.R.; Carr, E. (2005) 
Relationship between motor vehicle emissions of hazardous 
pollutants, roadway proximity, and ambient concentrations in 
Portland, Oregon. Environ. Modelling & Software 20: 7-12.
---------------------------------------------------------------------------

    Air quality monitoring is another means of evaluating pollutant 
concentrations at locations near sources such as roadways. It is also 
used to evaluate model performance at a given point and, given adequate 
data quality, can be statistically analyzed to determine associations 
with different source types. EPA has been deploying fixed-site ambient 
monitors that monitor concentrations of multiple air toxics, including 
benzene, over time. Several studies have found that concentrations of 
benzene and other mobile source air toxics are significantly elevated 
near busy roads compared to ``urban background'' concentrations 
measured at a fixed site. These studies are discussed in detail in 
Chapter 3 of the RIA.
    Ambient VOC concentrations were measured around residences in 
Elizabeth, NJ, as part of the Relationship among Indoor, Outdoor, and 
Personal Air (RIOPA) study. Data from that study was analyzed to assess 
how concentrations are influenced by proximity to known ambient 
emission sources.94 95 The ambient concentrations of 
benzene, toluene, ethylbenzene, and xylene isomers (BTEX) were found to 
be inversely associated with distances to interstate highways and major 
urban roads, and with distance to gasoline stations. The data indicate 
that BTEX concentrations around homes within 200 meters of roadways and 
gas stations are 1.5 to 4 times higher than urban background levels.
---------------------------------------------------------------------------

    \94\ Kwon, J. (2005) Development of a RIOPA database and 
evaluation of the effect of proximity on the potential residential 
exposure to VOCs from ambient sources. Rutgers, the State University 
of New Jersey and University of Medicine and Dentistry of New 
Jersey. PhD dissertation. This document is available in Docket EPA-
HQ-OAR-2005-0036.
    \95\ Weisel, C.P. (2004) Assessment of the contribution to 
personal exposures of air toxics from mobile sources. Final report. 
Submitted to EPA Office of Transportation and Air Quality. 
Environmental & Occupational Health Sciences Institute, Piscataway, 
NJ. This document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

b. Exposures Near Major Roadways
    The modeling assessments and air quality monitoring studies 
discussed above have increased our understanding of ambient 
concentrations of mobile source air toxics and potential population 
exposures. Results from the following exposure studies reveal that 
populations spending time near major roadways likely experience 
elevated personal exposures to motor vehicle related pollutants. In 
addition, these populations may experience exposures to differing 
physical and chemical compositions of certain air toxic pollutants 
depending on the amount of time spent in close proximity to motor 
vehicle emissions. Following is a detailed discussion on exposed 
populations near major roadways.
i. Vehicles
    Several studies suggest that significant exposures may be 
experienced while driving in vehicles. A recent in-vehicle monitoring 
study was conducted by EPA and consisted of in-vehicle air sampling 
throughout work shifts within ten police patrol cars used by the North 
Carolina State Highway Patrol (smoking not permitted inside the 
vehicles).\96\ Troopers operated their vehicles in typical patterns, 
including highway and city driving and refueling. In-vehicle benzene 
concentrations averaged 12.8 [mu]g/m3, while concentrations 
measured at an ``ambient'' site located outside a nearby state 
environmental office averaged 0.32 [mu]g/m3. The study also 
found that the benzene concentrations were closely

[[Page 15825]]

associated with other fuel-related VOCs measured.
---------------------------------------------------------------------------

    \96\ Riediker, M.; Williams, R.; Devlin, R.; et al. (2003) 
Exposure to particulate matter, volatile organic compounds, and 
other air pollutants inside patrol cars. Environ Sci. Technol. 37: 
2084-2093.
---------------------------------------------------------------------------

    In Boston, the exposure of commuters to VOCs during various 
commuting modes was examined.\97\ For commuters driving a car, the mean 
time-weighted concentrations of benzene, toluene, and xylenes in-
vehicle were measured at 17.0, 33.1, and 28.2 [mu]g/m3, 
respectively.
---------------------------------------------------------------------------

    \97\ Chan C.-C., Spengler J. D., Ozkaynak H., and Lefkopoulou M. 
(1991) Commuter Exposures to VOCs in Boston, Massachusetts. J. Air 
Waste Manage. Assoc. 41: 1594-1600.
---------------------------------------------------------------------------

    The American Petroleum Institute funded a screening study of high-
end exposure microenvironments as required by section 211(b) of the 
Clean Air Act.\98\ The study included vehicle chase measurements and 
measurements in several vehicle-related microenvironments in several 
cities for benzene and other air toxics. In-vehicle microenvironments 
(average benzene concentrations in parentheses) included the vehicle 
cabin tested on congested freeways (17.5 [mu]g/m\3\), in parking 
garages above-ground (155 [mu]g/m\3\) and below-ground (61.7 [mu]g/
m\3\), in urban street canyons (7.54 [mu]g/m\3\), and during refueling 
(46.0 [mu]g/m\3\).
---------------------------------------------------------------------------

    \98\ Zielinska, B.; Fujita, E.M.; Sagebiel, J.C.; et al. (2002) 
Interim data report for Section 211(B) Tier 2 high end exposure 
screening study of baseline and oxygenated gasoline. Prepared for 
American Petroleum Institute. November 19, 2002. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    In 1998, the California Air Resources Board published an extensive 
study of concentrations of in-vehicle air toxics in Los Angeles and 
Sacramento, CA.\99\ The data set is large and included a variety of 
sampling conditions. On urban freeways, benzene in-vehicle 
concentrations ranged from 3 to 15 [mu]g/m\3\ in Sacramento and 10 to 
22 [mu]g/m\3\ in Los Angeles. In comparison, ambient benzene 
concentrations ranged from 1 to 3 [mu]g/m\3\ in Sacramento and 3 to 7 
[mu]g/m\3\ in Los Angeles.
---------------------------------------------------------------------------

    \99\ Rodes, C.; Sheldon, L.; Whitaker, D.; et al. (1998) 
Measuring concentrations of selected air pollutants inside 
California vehicles. Final report to California Air Resources Board. 
Contract No. 95-339.
---------------------------------------------------------------------------

    Similar findings of elevated concentrations of pollutants have also 
been found in studies done in diesel buses.100 101 102
---------------------------------------------------------------------------

    \100\ Fitz, D.R.; Winer, A.M.; Colome, S.; et al. (2003) 
Characterizing the Range of Children's Pollutant Exposure During 
School Bus Commutes. Prepared for the California Resources Board.
    \101\ Sabin, L.D.; Behrentz, E.; Winer, A.M.; et al. (2005) 
Characterizing the range of children's air pollutant exposure during 
school bus commutes. J. Expos. Anal. Environ. Epidemiol. 15: 377-
387.
    \102\ Batterman, S.A.; Peng, C.Y.; and Braun, J. (2002) Levels 
and composition of volatile organic compounds on commuting routes in 
Detroit, Michigan. Atmos. Environ. 36: 6015-6030.
---------------------------------------------------------------------------

    Overall, these studies show that concentrations experienced by 
commuters and other roadway users are substantially higher than those 
measured in typical urban air. As a result, the time a person spends in 
a vehicle will significantly affect their overall exposure.
ii. Homes and Schools
    The proximity of schools to major roads may result in elevated 
exposures for children due to potentially increased concentrations 
indoors and increased exposures during outdoor activities. Here we 
discuss international studies in addition to the limited number of U.S. 
studies, because while fleets and fuels outside the U.S. can differ 
significantly, the spatial distribution of concentrations is relevant.
    In the Fresno Asthmatic Children's Environment Study (FACES), 
traffic-related pollutants were measured on selected days from July 
2002 to February 2003 at a central site, and inside and outside of 
homes and outdoors at schools of asthmatic children.\103\ Preliminary 
data indicate that PAH concentrations are higher at elementary schools 
located near primary roads than at elementary schools distant from 
primary roads (or located near primary roads with limited access). PAH 
concentrations also appear to increase with increase in annual average 
daily traffic on nearest major collector. Remaining results regarding 
the variance in traffic pollutant concentrations at schools in relation 
to proximity to roadways and traffic density will be available in 2006.
---------------------------------------------------------------------------

    \103\ Personal communication with FACES Investigators Fred 
Lurmann, Paul Roberts, and Katharine Hammond. Data is currently 
being prepared for publication.
---------------------------------------------------------------------------

    The East Bay Children's Respiratory Health Study studied traffic-
related air pollution outside of schools near busy roads in the San 
Francisco Bay Area in 2001.\104\ Concentrations of the traffic 
pollutants PM10, PM2.5, black carbon, total 
NOX, and NO2 were measured at 10 school sites in 
neighborhoods that spanned a busy traffic corridor during the spring 
and fall seasons. The school sites were selected to represent a range 
of locations upwind and downwind of major roads. Differences were 
observed in concentrations between schools nearby (< 300 m) versus 
those more distant (or upwind) from major roads. Investigators found 
spatial variability in exposure to black carbon, NOX, NO, 
and (to a lesser extent) NO2, due specifically to roads with 
heavy traffic within a relatively small geographic area.
---------------------------------------------------------------------------

    \104\ Kim J.J.; Smorodinsky S.; Lipsett M.; et al. (2004) 
Traffic-related air pollution near busy roads. Am. J. Respir. Crit. 
Care Med. 170: 520-526.
---------------------------------------------------------------------------

    A study to assess children's exposure to traffic-related air 
pollution while attending schools near motorways was performed in the 
Netherlands.\105\ Investigators measured PM2.5, 
NO2 and benzene inside and outside of 24 schools located 
within 400 m of motorways. The indoor average benzene concentration was 
3.2 [mu]g/m\3\ with a range of 0.6-8.1 [mu]g/m\3\. The outdoor average 
benzene concentration was 2.2 [mu]g/m\3\ with a range of 0.3-5.0 [mu]g/
m\3\. Overall results indicate that indoor pollutant concentrations are 
significantly correlated with traffic density and composition, 
percentage of time downwind, and distance from major roadways.
---------------------------------------------------------------------------

    \105\ Janssen, N.A.H.; van Vliet, P.H.N.; Aarts, F.; et al. 
(2001) Assessment of exposure to traffic related air pollution of 
children attending schools near motorways. Atmos. Environ. 35: 3875-
3884.
---------------------------------------------------------------------------

    The Toxic Exposure Assessment--Columbia/Harvard (TEACH) study 
measured the concentrations of VOCs, PM2.5, black carbon, 
and metals outside the homes of high school students in New York 
City.\106\ The study was conducted during winter and summer of 1999 on 
46 students and their homes. Average winter (and summer) indoor 
concentrations exceeded outdoor concentrations by a factor of 2.3 
(1.3). In addition, analyses of spatial and temporal patterns of MTBE 
concentrations were consistent with traffic patterns. MTBE is a tracer 
for motor vehicle pollution.
---------------------------------------------------------------------------

    \106\ Kinney, P.L.; Chillrud, S.N.; Ramstrom, S.; et al. (2002) 
Exposures to multiple air toxics in New York City. Environ Health 
Perspect. 110 (Suppl 4): 539-546.
---------------------------------------------------------------------------

    Children are exposed to elevated levels of air toxics not only in 
their homes, classrooms, and outside on school grounds, but also during 
their commute to school. See the discussion of in-vehicle 
concentrations of air toxics above and in Chapter 3 of the RIA.
iii. Pedestrians and Bicyclists
    Researchers have noted that pedestrians and cyclists along major 
roads experience elevated exposures to motor vehicle related 
pollutants. Although commuting near roadways leads to higher levels of 
exposure to traffic pollutants, the general consensus is that exposure 
levels of those commuting by walking or biking is lower than for those 
who travel by car or bus, (see discussion on in-vehicle exposure in 
previous section above). These studies are discussed in Chapter 3 of 
the RIA for this rule.

[[Page 15826]]

c. Exposure and Concentrations in Homes with Attached Garages
    People living in homes with attached garages are potentially 
exposed to substantially higher concentrations of benzene, toluene, and 
other VOCs indoors. Homes with attached garages present a special 
concern related to infiltration of components of fuel, exhaust, and 
other materials stored in garages (including gasoline in gas cans). A 
study from the early 1980's found that approximately 30% of an average 
nonsmoker's benzene exposure originated from sources in attached 
garages.\107\
---------------------------------------------------------------------------

    \107\ Wallace, L. (1996) Environmental exposure to benzene: an 
update. Environ Health Perspect. 104 (Suppl 6): 1129-1136.
---------------------------------------------------------------------------

    Concentrations within garages are often substantially higher than 
those found outdoors or indoors. A recently-completed study in Michigan 
found that average concentrations in residential garages were 36.6 
[mu]g/m\3\, compared to 0.4 [mu]g/m\3\ outdoors.\108\ A recent study in 
Alaska, where fuel benzene concentrations are higher, cold start 
emissions are higher, and homes are more tightly sealed than in most of 
the U.S., found average garage concentrations of 101 [mu]g/m\3\.\109\ 
Air passing from these high-benzene locations can cause increased 
concentrations indoors.
---------------------------------------------------------------------------

    \108\ Batterman, S.; Hatzivasilis, G.; Jia, C. (2006) 
Concentrations and emissions of gasoline and other vapors from 
residential vehicle garages. Atmos. Environ. 30: 1828-1844.
    \109\ George, M.; Kaluza, P.; Maxwell, B.; Moore, G.; Wisdom, S. 
(2002) Indoor air quality & ventilation strategies in new homes in 
Alaska. Alaska Building Science Network. www.cchrc.org. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    Measurement studies have found that homes with attached garages can 
have significantly higher concentrations of benzene and other VOCs. One 
study from Alaska found that in homes without attached garages, average 
benzene concentrations were 8.6 [mu]g/m\3\, while homes with attached 
garages had average concentrations of 70.8 [mu]g/m\3\.\110\ Another 
showed that indoor CO and total hydrocarbon (THC) concentrations rose 
sharply following a cold vehicle starting and pulling out of the 
attached garage, persisting for an hour or more.\111\ The study also 
showed that cold start emissions accounted for 13-85% of indoor non-
methane hydrocarbons (NMHC), while hot soak emissions accounted for 9-
71% of indoor NMHC. Numerous other studies have shown associations 
between VOCs in indoor air and the presence of attached garages. These 
studies are discussed in Chapter 3 of the RIA.
---------------------------------------------------------------------------

    \110\ Schlapia, A.; Morris, S. (1998) Architectural, behavioral, 
and environmental factors associated with VOCs in Anchorage homes. 
Proceedings of the Air & Waste Management Associations 94th Annual 
Conference. Paper 98-A504.
    \111\ Graham, L.A.; Noseworthy, L.; Fugler, D.; O'Leary, K.; 
Karman, D.; Grande, C. (2004) Contribution of vehicle emissions from 
an attached garage to residential indoor air pollution levels. J. 
Air & Waste Manage. Assoc. 54: 563-584.
---------------------------------------------------------------------------

    EPA has conducted a modeling analysis to examine the influence of 
attached garages on personal exposure to benzene.\112\ The analysis 
modeled the air flow between the outdoor environment, indoor 
environment, and the garage, and accounted for the fraction of home air 
intake from the garage. Compared to national average exposure 
concentrations of 1.36 [mu]g/m\3\ modeled for 1999 in the National-
Scale Air Toxics Assessment, which do not account for emissions 
originating in attached garages, average exposure concentrations for 
people with attached garages could more than double. For additional 
details, see Chapter 3 of the RIA.
---------------------------------------------------------------------------

    \112\ Bailey, C. (2005) Additional contribution to benzene 
exposure from attached garages. Memorandum to the Docket. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    Overall, emissions of VOCs within attached garages result in 
substantially higher concentrations of benzene and other pollutants 
indoors. Proposed reductions in fuel benzene content, new standards for 
cold temperature exhaust emissions during vehicle starts, and reduced 
emissions from gas cans are all expected to significantly reduce this 
major source of exposure.
d. Occupational Exposure
    Occupational settings can be considered a microenvironment in which 
exposure to benzene and other air toxics can occur. Occupational 
exposures to benzene from mobile sources or fuels can be several orders 
of magnitude greater than typical exposures in the non-occupationally 
exposed population. Several key occupational groups include workers in 
fuel distribution, storage, and tank remediation; handheld and non-
handheld equipment operators; and workers who operate gasoline-powered 
engines such as snowmobiles and ATV's. Exposures in these occupational 
settings are discussed in Chapter 3 of the RIA.
    In addition, some occupations require that workers spend 
considerable time in vehicles, which increases the time they spend in a 
higher-concentration microenvironment. In-vehicle concentrations are 
discussed in a previous section above.
3. What Are the Size and Characteristics of Highly Exposed Populations?
    A study of the populations in three states (Colorado, Georgia, and 
New York) indicated that more than half of the population lives within 
200 meters of a major road.\113\ In addition, analysis of data from the 
Census Bureau's American Housing Survey suggests that approximately 37 
million people live within 300 feet of a 4- or more lane highway, 
railroad, or airport. American Housing Survey statistics, as well as 
epidemiology studies, indicate that those houses sited near major 
transportation sources are more likely to be lower in income or have 
minority residents than houses not located near major transportation 
sources. These data are discussed in detail in Chapter 3 of the RIA.
---------------------------------------------------------------------------

    \113\ Major roads are defined as those roads defined by the U.S. 
Census as one of the following: ``limited access highway,'' 
``highway,'' ``major road,'' or ``ramp.''
---------------------------------------------------------------------------

    Other population studies also indicate that a significant fraction 
of the population resides in locations near major roads. At present, 
the available studies use different indicators of ``major road'' and of 
``proximity,'' but the estimates range from 12.4% of student enrollment 
in California attending schools within 150 meters of roads with 25,000 
vehicles per day or more, to 13% of Massachusetts veterans living 
within 50 meters of a road with at least 10,000 vehicles per 
day.114 115 Using a more general definition of a ``major 
road,'' between 22% and 51% of different study populations live near 
such roads.
---------------------------------------------------------------------------

    \114\ Green, R.S.; Smorodinsky, S.; Kim, J.J.; McLaughlin, R.; 
Ostro, B. (2004) Proximity of California public schools to busy 
roads. Environ. Health Perspect. 112: 61-66.
    \115\ Garshick, E.; Laden, F.; Hart, J.E.; Caron, A. (2003) 
Residence near a major road and respiratory symptoms in U.S. 
veterans. Epidemiol. 14: 728-736.
---------------------------------------------------------------------------

4. What Are the Implications for Distribution of Individual Risk?
    We have made revisions to HAPEM5, which is the exposure model used 
in our national-scale modeling, in order to account for near-road 
impacts. The effect of the updated model is best understood as widening 
the distribution of exposure, with a larger fraction of the population 
being exposed to higher benzene concentrations. Including the effects 
of residence locations near roads can result in exposures to some 
individuals that are up to 50% higher than those predicted by HAPEM5.
    The revised model, HAPEM6, was run for three states representing 
different parts of the country. These areas are intended to represent 
different

[[Page 15827]]

geographies, development patterns, and housing densities. The states 
modeled include Georgia, Colorado, and New York. Overall, these study 
results indicate that proximity to major roads can significantly 
increase personal exposure for populations living near major roads. 
These modeling tools will be extended to a national scale for the final 
rulemaking.
    For details on the modeling study with HAPEM6, refer to Chapter 3.2 
of the RIA. We used geographic information systems to estimate the 
population within each U.S. census tract living at various distances 
from a major road (within 75 meters; between 75 and 200 meters; or 
beyond 200 meters). An exposure gradient was determined for people 
living in each zone, based on dispersion modeling.\116\ These gradients 
were confirmed with monitoring studies funded by EPA.\117\ The HAPEM5 
model was updated to account for elevated concentrations within these 
defined distances from roadways and the population living in these 
areas.
---------------------------------------------------------------------------

    \116\ Cohen, J.; Cook, R.; Bailey, C.R.; Carr, E. (2005) 
Relationship between motor vehicle emissions of hazardous 
pollutants, roadway proximity, and ambient concentrations in 
Portland, Oregon. Environ Modelling & Software 20: 7-12.
    \117\ Kwon, J. (2005) Development of a RIOPA database and 
evaluation of the effect of proximity on the potential residential 
exposure to VOCs from ambient sources. PhD Dissertation. Rutgers, 
The State University of New Jersey and University of Medicine and 
Dentistry of New Jersey. Written under direction of Dr. Clifford 
Weisel. This document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

C. Ozone

    While the focus of this rule is on air toxics, the proposed vehicle 
and gas can standards will also help reduce volatile organic compounds 
(VOCs), which are precursors to ozone.
1. Background
    Ground-level ozone, the main ingredient in smog, is formed by the 
reaction of VOCs and nitrogen oxides (NOX) in the atmosphere 
in the presence of heat and sunlight. These pollutants, often referred 
to as ozone precursors, are emitted by many types of pollution sources, 
such as highway and nonroad motor vehicles and engines, power plants, 
chemical plants, refineries, makers of consumer and commercial 
products, industrial facilities, and smaller ``area'' sources. VOCs can 
also be emitted by natural sources such as vegetation. The gas can 
controls proposed in this action would help reduce VOC emissions by 
reducing evaporation, permeation and spillage from gas cans. The 
proposed vehicle controls will also reduce VOC emissions; however, 
because these reductions will occur at cold temperatures the ozone 
benefits will be limited.
    The science of ozone formation, transport, and accumulation is 
complex.\118\ Ground-level ozone is produced and destroyed in a 
cyclical set of chemical reactions, many of which are sensitive to 
temperature and sunlight. When ambient temperatures and sunlight levels 
remain high for several days and the air is relatively stagnant, ozone 
and its precursors can build up and result in more ozone than typically 
would occur on a single high-temperature day. Further complicating 
matters, ozone also can be transported into an area from pollution 
sources found hundreds of miles upwind, resulting in elevated ozone 
levels even in areas with low VOC or NOX emissions. As a 
result, differences in VOC and NOX emissions contribute to 
daily, seasonal, and yearly differences in ozone concentrations across 
different locations.
---------------------------------------------------------------------------

    \118\ U.S. EPA (1996). Air Quality Criteria for Ozone and 
Related Photochemical Oxidants, EPA600-P-93-004aF. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    The current ozone National Ambient Air Quality Standards (NAAQS) 
has an 8-hour averaging time. The 8-hour ozone NAAQS, established by 
EPA in 1997, is based on well-documented science demonstrating that 
more people were experiencing adverse health effects at lower levels of 
exertion, over longer periods, and at lower ozone concentrations than 
addressed by the previous one-hour ozone NAAQS. It addresses ozone 
exposures of concern for the general population and populations most at 
risk, including children active outdoors, outdoor workers, and 
individuals with pre-existing respiratory disease, such as asthma. The 
8-hour ozone NAAQS is met at an ambient air quality monitoring site 
when the average of the annual fourth-highest daily maximum 8-hour 
average ozone concentration over three years is less than or equal to 
0.084 ppm.
2. Health Effects of Ozone
    The health and welfare effects of ozone are well documented and are 
critically assessed in the EPA ozone criteria document (CD) and EPA 
staff paper.119 120 In August 2005, the EPA released the 
second external review draft of a new ozone CD which is scheduled to be 
released in final form in February 2006.\121\ This document summarizes 
the findings of the 1996 ozone criteria document and critically 
assesses relevant new scientific information which has emerged in the 
past decade. Additional information on health and welfare effects of 
ozone can also be found in the draft RIA for this proposal.
---------------------------------------------------------------------------

    \119\ U.S. EPA (1996). Air Quality Criteria for Ozone and 
Related Photochemical Oxidants, EPA600-P-93-004aF. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
    \120\ U.S. EPA (1996) Review of National Ambient Air Quality 
Standards for Ozone, Assessment of Scientific and Technical 
Information, OAQPS Staff Paper, EPA-452/R-96-007. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
    \121\ U.S. EPA (2005) Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Second External Review Draft). This document 
is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    Ozone can irritate the respiratory system, causing coughing, throat 
irritation, and/or uncomfortable sensation in the chest. Ozone can 
reduce lung function and make it more difficult to breathe deeply, and 
breathing may become more rapid and shallow than normal, thereby 
limiting a person's normal activity. Ozone can also aggravate asthma, 
leading to more asthma attacks that require a doctor's attention and/or 
the use of additional medication. In addition, ozone can inflame and 
damage the lining of the lungs, which may lead to permanent changes in 
lung tissue, irreversible reductions in lung function, and a lower 
quality of life if the inflammation occurs repeatedly over a long time 
period. People who are of particular concern with respect to ozone 
exposures include children and adults who are active outdoors. Those 
people particularly susceptible to ozone effects are people with 
respiratory disease (e.g., asthma), people with unusual sensitivity to 
ozone, and children.
    There has been new research that suggests additional serious health 
effects beyond those that had been known when the 1996 ozone CD was 
published. Since then, over 1,700 new ozone-related health and welfare 
studies have been published in peer-reviewed journals.\122\ Many of 
these studies have investigated the impact of ozone exposure on such 
health effects as changes in lung structure and biochemistry, 
inflammation of the lungs, exacerbation and causation of asthma, 
respiratory illness-related school absence, hospital and emergency room 
visits for asthma and other respiratory causes, and premature

[[Page 15828]]

mortality. EPA is currently in the process of evaluating these and 
other studies as part of the ongoing review of the air quality criteria 
document and NAAQS for ozone. Key new health information falls into 
four general areas: development of new-onset asthma, hospital 
admissions for young children, school absence rate, and premature 
mortality.
---------------------------------------------------------------------------

    \122\ New Ozone Health and Environmental Effects References, 
Published Since Completion of the Previous Ozone AQCD, National 
Center for Environmental Assessment, Office of Research and 
Development, U.S. Environmental Protection Agency, Research Triangle 
Park, NC 27711 (7/2002). This document is available in Docket EPA-
HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    Aggravation of existing asthma resulting from short-term ambient 
ozone exposure was reported prior to the 1997 NAAQS standard and has 
been observed in studies published subsequently.123 124 In 
addition, a relationship between long-term ambient ozone concentrations 
and the incidence of new-onset asthma in adult males (but not in 
females) was reported by McDonnell et al. (1999).\125\ Subsequently, an 
additional study suggests that incidence of new diagnoses of asthma in 
children is associated with heavy exercise in communities with high 
concentrations (i.e., mean 8-hour concentration of 59.6 parts per 
billion (ppb) or greater) of ozone.\126\ This relationship was 
documented in children who played 3 or more sports and thus spent more 
time outdoors. It was not documented in those children who played one 
or two sports.
---------------------------------------------------------------------------

    \123\ Thurston, G.D.; Lippman, M.L.; Scott, M.B.; Fine, J.M. 
(1997) Summertime Haze Air Pollution and Children with Asthma. 
American Journal of Respiratory Critical Care Medicine 155: 654-660.
    \124\ Ostro, B.; Lipsett, M.; Mann, J.; Braxton-Owens, H.; 
White, M. (2001) Air pollution and exacerbation of asthma in 
African-American children in Los Angeles. Epidemiology 12(2): 200-
208.
    \125\ McDonnell, W.F.; Abbey, D.E.; Nishino, N.; Lebowitz, M.D. 
(1999) ``Long-term ambient ozone concentration and the incidence of 
asthma in nonsmoking adults: the AHSMOG study.'' Environmental 
Research 80(2 Pt 1): 110-121.
    \126\ McConnell, R.; Berhane, K.; Gilliland, F.; London, S.J.; 
Islam, T.; Gauderman, W.J.; Avol, E.; Margolis, H.G.; Peters, J.M. 
(2002) Asthma in exercising children exposed to ozone: a cohort 
study. Lancet 359: 386-391.
---------------------------------------------------------------------------

    Previous studies have shown relationships between ozone and 
hospital admissions in the general population. A study in Toronto 
reported a significant relationship between 1-hour maximum ozone 
concentrations and respiratory hospital admissions in children under 
the age of two.\127\ Given the relative vulnerability of children in 
this age category, there is particular concern about these findings.
---------------------------------------------------------------------------

    \127\ Burnett, R.T.; Smith-Doiron, M.; Stieb, D.; Raizenne, 
M.E.; Brook, J.R.; Dales, R.E.; Leech, J.A.; Cakmak, S.; Krewski, D. 
(2001) Association between ozone and hospitalization for acute 
respiratory diseases in children less than 2 years of age. Am. J. 
Epidemiol. 153: 444-452.
---------------------------------------------------------------------------

    Increased rates of illness-related school absenteeism have been 
associated with 1-hour daily maximum and 8-hour average ozone 
concentrations in studies conducted in Nevada \128\ in kindergarten to 
6th grade and in Southern California in grades four through six.\129\ 
These studies suggest that higher ambient ozone levels may result in 
increased school absenteeism.
---------------------------------------------------------------------------

    \128\ Chen, L.; Jennison, B.L.; Yang, W.; Omaye, S.T. (2000) 
Elementary school absenteeism and air pollution. Inhalation Toxicol. 
12: 997-1016.
    \129\ Gilliland, F.D.; Berhane, K.; Rappaport, E.B.; Thomas, 
D.C.; Avol, E.; Gauderman, W.J.; London, S.J.; Margolis, H.G.; 
McConnell, R.; Islam, K.T.; Peters, J.M. (2001) The effects of 
ambient air pollution on school absenteeism due to respiratory 
illnesses. Epidemiology 12:43-54.
---------------------------------------------------------------------------

    The air pollutant most clearly associated with premature mortality 
is PM, with many studies reporting such an association. However, recent 
analyses provide evidence that short term ozone exposure is associated 
with increased premature mortality. Bell et al. (2004) published new 
analyses of the 95 cities in the National Morbidity, Mortality, and Air 
Pollution Study (NMMAPS) data sets, showing associations between daily 
mortality and the previous week's ozone concentrations which were 
robust to adjustment for particulate matter, weather, seasonality, and 
long-term trends.\130\ Although earlier analyses undertaken as part of 
the NMMAPS did not report an effect of ozone on total mortality across 
the full year, in those earlier studies the NMMAPS investigators did 
observe an effect after limiting the analysis to summer, when ozone 
levels are highest.131 132 Another recent study from 23 
cities throughout Europe (APHEA2) also found an association between 
ambient ozone and daily mortality.\133\ Similarly, other studies have 
shown associations between ozone and mortality.134 135 
Specifically, Toulomi et al. (1997) found that 1-hour maximum ozone 
levels were associated with daily numbers of deaths in four cities 
(London, Athens, Barcelona, and Paris), and a quantitatively similar 
effect was found in a group of four additional cities (Amsterdam, 
Basel, Geneva, and Zurich).
---------------------------------------------------------------------------

    \130\ Bell, M.L.; McDermott, A.; Zeger, S.L.; Samet, J.M.; 
Dominici, F. Ozone and short-term mortality in 95 U.S. urban 
communities, 1987-2000. JAMA 292(19): 2372-2378.
    \131\ Samet, J.M.; Zeger, S.L.; Dominici, F.; Curriero, F.; 
Coursac, I.; Dockery, D.W.; Schwartz, J.; Zanobetti, A. (2000) The 
National Morbidity, Mortality and Air Pollution Study: Part II: 
Morbidity, Mortality and Air Pollution in the United States. 
Research Report No. 94, Part II. Health Effects Institute, 
Cambridge, MA, June 2000. This document is available in Docket EPA-
HQ-OAR-2005-0036.
    \132\ Samet, J.M.; Zeger, S.L.; Dominici, F.; Curriero, F.; 
Coursac, I.; Zeger, S. (2000) Fine Particulate Air Pollution and 
Mortality in 20 U.S. Cities, 1987-1994. The New England Journal of 
Medicine 343(24): 1742-1749.
    \133\ Gryparis, A.; Forsberg, B.; Katsouyanni, K.; Analitis, A.; 
Touloumi, G.; Schwartz, J.; Samoli, E.; Medina, S.; Anderson, H.R.; 
Niciu, E.M.; Wichmann, H.E.; Kriz, B.; Kosnik, M.; Skorkovsky, J.; 
Vonk, J.M.; Dortbudak, Z. (2004) Acute effects of ozone on mortality 
from the ``Air Pollution and Health: A European Approach'' project. 
Am. J. Respir. Crit. Care Med. 170: 1080-1087.
    \134\ Thurston, G.D.; Ito, K. (2001) Epidemiological studies of 
acute ozone exposures and mortality. J. Exposure Anal. Environ. 
Epidemiol. 11: 286-294.
    \135\ Touloumi, G.; Katsouyanni, K.; Zmirou, D.; Schwartz, J.; 
Spix, C.; Ponce de Leon, A.; Tobias, A.; Quennel, P.; Rabczenko, D.; 
Bacharova, L.; Bisanti, L.; Vonk, J.M.; Ponka, A. (1997) Short-term 
effects of ambient oxidant exposure on mortality: A combined 
analysis within the APHEA project. Am. J. Epidemiol. 146: 177-185.
---------------------------------------------------------------------------

    In all, the new studies that have become available since the 8-hour 
ozone standard was adopted in 1997 continue to demonstrate the harmful 
effects of ozone on public health, and the need to attain and maintain 
the ozone NAAQS.
3. Current and Projected 8-Hour Ozone Levels
    Currently, ozone concentrations exceeding the level of the 8-hour 
ozone NAAQS occur over wide geographic areas, including most of the 
nation's major population centers.\136\ As of September 2005 there are 
approximately 159 million people living in 126 areas designated as not 
in attainment with the 8-hour ozone NAAQS. There are 474 full or 
partial counties that make up the 8-hour ozone nonattainment areas.
---------------------------------------------------------------------------

    \136\ A map of the 8-hour ozone nonattainment areas is included 
in the RIA for this proposed rule.
---------------------------------------------------------------------------

    EPA has already adopted many emission control programs that are 
expected to reduce ambient ozone levels. These control programs include 
the Clean Air Interstate Rule (70 FR 25162, May 12, 2005), as well as 
many mobile source rules (many of which are described in section V.D). 
As a result of these programs, the number of areas that fail to achieve 
the 8-hour ozone NAAQS is expected to decrease.
    Based on the recent ozone modeling performed for the CAIR analysis 
\137\, barring additional local ozone precursor controls, we estimate 
37 Eastern counties (where 24 million people are projected to live) 
will exceed the 8-hour ozone NAAQS in 2010. An additional 148 Eastern 
counties (where 61 million people are projected to live) are expected 
to be within 10 percent of violating the 8-hour ozone NAAQS in 2010.
---------------------------------------------------------------------------

    \137\ Technical Support Document for the Final Clean Air 
Interstate Rule Air Quality Modeling. This document is available in 
Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    States with 8-hour ozone nonattainment areas will be required to

[[Page 15829]]

take action to bring those areas into compliance in the future. Based 
on the final rule designating and classifying 8-hour ozone 
nonattainment areas (69 FR 23951, April 30, 2004), most 8-hour ozone 
nonattainment areas will be required to attain the 8-hour ozone NAAQS 
in the 2007 to 2013 time frame and then be required to maintain the 8-
hour ozone NAAQS thereafter.\138\ We also expect many of the 8-hour 
ozone nonattainment areas to adopt additional emission reduction 
programs, but we are unable to quantify or rely upon future reductions 
from additional state and local programs that have not yet been 
adopted. The expected ozone inventory reductions from the standards 
proposed in this action may be useful to states in attaining or 
maintaining the 8-hour ozone NAAQS.
---------------------------------------------------------------------------

    \138\ The Los Angeles South Coast Air Basin 8-hour ozone 
nonattainment area will have to attain before June 15, 2021.
---------------------------------------------------------------------------

    A metamodeling tool developed at EPA, the ozone response surface 
metamodel, was used to estimate the effects of the proposed emission 
reductions. The ozone response surface metamodel was created using 
multiple runs of the Comprehensive Air Quality Model with Extensions 
(CAMx). Base and proposed control CAMx metamodeling was completed for 
two future years (2020, 2030) over a modeling domain that includes all 
or part of 37 Eastern U.S. states. For more information on the response 
surface metamodel, please see the RIA for this proposal or the Air 
Quality Modeling Technical Support Document (TSD).
    We have made estimates using the ozone response surface metamodel 
to illustrate the types of change in future ozone levels that we would 
expect to result from this proposed rule, as described in Chapter 3 of 
the draft RIA. The proposed gas can controls are projected to result in 
a very small net improvement in future ozone, after weighting for 
population. Although the net future ozone improvement is small, some 
VOC-limited areas in the Eastern U.S. are projected to have non-
negligible improvements in projected 8-hour ozone design values due to 
the proposed gas can controls. As stated in Section VII.E.3, we view 
these improvements as useful in meeting the 8-hour ozone NAAQS. These 
net ozone improvements are in addition to reductions in levels of 
benzene due to the proposed gas can controls.

D. Particulate Matter

    The cold temperature vehicle controls proposed here will result in 
reductions of primary PM being emitted by vehicles. In addition, both 
the proposed vehicle controls and the proposed gas can controls will 
reduce VOCs that react in the atmosphere to form secondary 
PM2.5, namely organic carbonaceous PM2.5.
1. Background
    Particulate matter (PM) 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. PM is further described 
by breaking it down into size fractions. PM10 refers to 
particles with an aerodynamic diameter less than or equal to a nominal 
10 micrometers ([mu]m). PM2.5 refers to fine particles, 
those particles with an aerodynamic diameter less than or equal to a 
nominal 2.5 [mu]m. Coarse fraction particles refer to those particles 
with an aerodynamic diameter less than or equal to a nominal 10 [mu]m. 
Inhalable (or ``thoracic'') coarse particles refer to those particles 
with an aerodynamic diameter greater than 2.5 [mu]m but less than or 
equal to 10 [mu]m. Ultrafine PM refers to particles with diameters of 
less than 100 nanometers (0.1 [mu]m). Larger particles (>10 [mu]m) tend 
to be removed by the respiratory clearance mechanisms, whereas smaller 
particles are deposited deeper in the lungs. Ambient fine particles are 
a complex mixture including sulfates, nitrates, chlorides, organic 
carbonaceous material, elemental carbon, geological material, and 
metals. Fine particles can remain in the atmosphere for days to weeks 
and travel through the atmosphere hundreds to thousands of kilometers, 
while coarse particles generally tend to deposit to the earth within 
minutes to hours and within tens of kilometers from the emission 
source.
    EPA has NAAQS for both PM2.5 and PM10. Both 
the PM2.5 and PM10 NAAQS consist of a short-term 
(24-hour) and a long-term (annual) standard. The 24-hour 
PM2.5 NAAQS is set at a level of 65 [mu]g/m\3\ based on the 
98th percentile concentration averaged over three years. The annual 
PM2.5 NAAQS specifies an expected annual arithmetic mean not 
to exceed 15 [mu]g/m\3\ averaged over three years. The 24-hour 
PM10 NAAQS is set at a level of 150 [mu]g/m\3\ not to be 
exceeded more than once per year. The annual PM10 NAAQS 
specifies an expected annual arithmetic mean not to exceed 50 [mu]g/
m\3\.
    EPA has recently proposed to amend the PM NAAQS.\139\ The proposal 
includes lowering the level of the primary 24-hour fine particle 
standard from the current level of 65 micrograms per cubic meter 
([mu]g/m\3\) to 35 [mu]g/m\3\, retaining the level of the annual fine 
standard at 15 [mu]g/m\3\, and setting a new primary 24-hour standard 
for certain inhalable coarse particles (the indicator is qualified so 
as to include any ambient mix of PM10-2.5 that is dominated 
by resuspended dust from high-density traffic on paved roads and PM 
generated by industrial and construction sources, and excludes any 
ambient mix of PM10-2.5 dominated by rural windblown dust 
and soils and PM generated by agricultural and mining sources) at 70 
[mu]g/m\3\. The Agency is also requesting comment on various other 
standards for fine and inhalable coarse PM (71 FR 2620, Jan. 17, 2006).
---------------------------------------------------------------------------

    \139\ U.S. EPA, National Ambient Air Quality Standards for 
Particulate Matter (71 FR 2620, Jan. 17, 2006). This document is 
also available on the web at: http://www.epa.gov/air/particlepollution/actions.html
---------------------------------------------------------------------------

2. Health Effects of PM
    Scientific studies show ambient PM is associated with a series of 
adverse health effects. These health effects are discussed in detail in 
the 1997 PM criteria document, the recent 2004 EPA Criteria Document 
for PM as well as the 2005 PM Staff Paper.140 141 142 
Further discussion of health effects associated with PM can also be 
found in the draft RIA for this proposal.
---------------------------------------------------------------------------

    \140\ U.S.EPA (1996) Air Quality Criteria for Particulate 
Matter, EPA 600-P-95-001aF, EPA 600-P-95-001bF. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
    \141\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter (Oct 2004), Volume I Document No. EPA600/P-99/002aF and 
Volume II Document No. EPA600/P-99/002bF. This document is available 
in Docket EPA-HQ-OAR-2005-0036.
    \142\ U.S. EPA (2005) Review of the National Ambient Air Quality 
Standard for Particulate Matter: Policy Assessment of Scientific and 
Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    As described in the documents listed above, health effects 
associated with short-term variation (e.g. hours to days) in ambient 
PM2.5 include premature mortality, hospital admissions, 
heart and lung diseases, increased cough, lower-respiratory symptoms, 
decrements in lung function and changes in heart rate rhythm and other 
cardiac effects. Studies examining populations exposed to different 
levels of air pollution over a number of years, including the Harvard 
Six Cities Study and the American Cancer Society Study, show 
associations between long-term exposure to ambient PM2.5 and 
premature mortality, including deaths attributed to cardiovascular 
changes and lung cancer.

[[Page 15830]]

    Recently, several studies have highlighted the adverse effects of 
PM specifically from mobile sources.143 144 Studies have 
also focused on health effects due to PM exposures on or near 
roadways.\145\ Although these studies include all air pollution 
sources, including both spark-ignition (gasoline) and diesel powered 
vehicles, they indicate that exposure to PM emissions near roadways, 
thus dominated by mobile sources, are associated with health effects. 
The proposed vehicle controls may help to reduce exposures to mobile 
source related PM2.5. Additional information on near roadway 
health effects can be found in Section III of this preamble.
---------------------------------------------------------------------------

    \143\ Laden, F.; Neas, L.M.; Dockery, D.W.; Schwartz, J. (2000) 
Association of Fine Particulate Matter from Different Sources with 
Daily Mortality in Six U.S. Cities. Environmental Health 
Perspectives 108: 941-947.
    \144\ Janssen, N.A.H.; Schwartz, J.; Zanobetti, A.; Suh, H.H. 
(2002) Air Conditioning and Source-Specific Particles as Modifiers 
of the Effect of PM10 on Hospital Admissions for Heart 
and Lung Disease. Environmental Health Perspectives 110: 43-49.
    \145\ Riekider, M.; Cascio, W.E.; Griggs, T.R.; Herbst, M.C.; 
Bromberg, P.A.; Neas, L.; Williams, R.W.; Devlin, R.B. (2003) 
Particulate Matter Exposures in Cars is Associated with 
Cardiovascular Effects in Healthy Young Men. Am. J. Respir. Crit. 
Care Med. 169: 934-940.
---------------------------------------------------------------------------

3. Current and Projected PM2.5 Levels
    EPA has recently finalized PM2.5 nonattainment 
designations (70 FR 943, Jan 5. 2005).\146\ As can be seen from the 
designations, ambient PM2.5 levels exceeding the level of 
the PM2.5 NAAQS are widespread throughout the country. There 
are approximately 88 million people living in 39 areas (which include 
all or part of 208 counties) designated as not in attainment with the 
PM2.5 NAAQS.
---------------------------------------------------------------------------

    \146\ US EPA, Air Quality Designations and Classifications for 
the Fine Particles (PM2.5) National Ambient Air Quality 
Standards, December 17, 2004. (70 FR 943, Jan 5, 2005) This document 
is also available on the web at: http://www.epa.gov/pmdesignations/.
---------------------------------------------------------------------------

    EPA has already adopted many emission control programs that are 
expected to reduce ambient PM levels. These rules include the Clean Air 
Interstate Rule (70 FR 25162, May 12, 2005), as well as many mobile 
source rules. Section V.D details many of these mobile source 
rules.\147\ As a result of these programs, the number of areas that 
fail to achieve the 1997 PM2.5 NAAQS is expected to 
decrease. Based on modeling performed for the CAIR analysis, we 
estimate that 28 Eastern counties (where 19 million people are 
projected to live) will exceed the PM2.5 standard in 
2010.\148\ In addition, 56 Eastern counties (where 24 million people 
are projected to live) are expected to be within 10 percent of 
violating the PM2.5 in 2010.
---------------------------------------------------------------------------

    \147\ The Clean Air Interstate Rule (CAIR) will reduce emissions 
of SO2 and NOX from power plants in the 
Eastern 37 states, reducing interstate transport of nitrogen oxides 
and sulfur dioxide and helping cities and states in the East meet 
the ozone and PM NAAQS. (70 FR 25162) (May 12, 2005).
    \148\ Technical Support Document for the Final Clean Air 
Interstate Rule Air Quality Modeling. This document is available in 
Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    While the final implementation process for bringing the nation's 
air into attainment with the 1997 PM2.5 NAAQS is still being 
completed in a separate rulemaking action, we expect that most areas 
will need to attain the 1997 PM2.5 NAAQS in the 2009 to 2014 
time frame, and then be required to maintain the NAAQS thereafter. The 
expected PM and VOC inventory reductions from the standards proposed in 
this action will be useful to states in attaining or maintaining the 
PM2.5 NAAQS.
4. Current PM10 Levels
    Air quality monitoring data indicates that as of September 2005 
approximately 29 million people live in 55 designated PM10 
nonattainment areas, which include all or part of 54 counties. The RIA 
for this proposed rule lists the PM10 nonattainment areas 
and their populations.
    Based on section 188 of the Act, we expect that most areas will 
attain the PM10 NAAQS no later than December 31, 2006, 
depending on an area's classification and other factors, and then be 
required to maintain the PM10 NAAQS thereafter. The expected 
PM and VOC inventory reductions from the standards proposed in this 
action could be useful to states in maintaining the PM10 
NAAQS.\149\
---------------------------------------------------------------------------

    \149\ As mentioned above, the EPA has recently proposed to amend 
the PM NAAQS, by establishing a new indicator for certain inhalable 
coarse particles, and a new primary 24-hour standard for coarse 
particles described by that indicator. EPA also proposed to revoke 
the current 24-hour PM10 standard in all areas of the 
country except in those areas with a population of at least 100,000 
people and which contain at least one monitor violating the 24-hour 
PM10 standard, based on the most recent 3 years of air 
quality data. In addition, EPA proposed to revoke upon promulgation 
of this rule the current annual PM10 standard if EPA 
finalizes the proposed primary standard for PM10-2.5 (71 
FR 2620, Jan. 17, 2006).
---------------------------------------------------------------------------

E. Other Environmental Effects

1. Visibility
a. Background
    Visibility can be defined as the degree to which the atmosphere is 
transparent to visible light.\150\ Visibility is important because it 
has direct significance to people's enjoyment of daily activities in 
all parts of the country. Individuals value good visibility for the 
well-being it provides them directly, where they live and work, and in 
places where they enjoy recreational opportunities. Visibility is also 
highly valued in significant natural areas such as national parks and 
wilderness areas, because of the special emphasis given to protecting 
these lands now and for future generations. For more information on 
visibility see the recent 2004 EPA Criteria Document for PM as well as 
the 2005 PM Staff Paper.151 152
---------------------------------------------------------------------------

    \150\ National Research Council, 1993. Protecting Visibility in 
National Parks and Wilderness Areas. National Academy of Sciences 
Committee on Haze in National Parks and Wilderness Areas. National 
Academy Press, Washington, DC. This document is available in Docket 
EPA-HQ-OAR-2005-0036. This book can be viewed on the National 
Academy Press Website at http://www.nap.edu/books/0309048443/html/.
    \151\ U.S. EPA (2004) Air Quality Criteria for Particulate 
Matter (Oct 2004), Volume I Document No. EPA600/P-99/002aF and 
Volume II Document No. EPA600/P-99/002bF. This document is available 
in Docket EPA-HQ-OAR-2005-0036.
    \152\ U.S. EPA (2005) Review of the National Ambient Air Quality 
Standard for Particulate Matter: Policy Assessment of Scientific and 
Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This 
document is available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

    To address the welfare effects of PM on visibility, EPA set 
secondary PM2.5 standards in 1997 which would act in 
conjunction with the establishment of a regional haze program. EPA 
concluded that PM2.5 causes adverse effects on visibility in 
various locations, depending on PM concentrations and factors such as 
chemical composition and average relative humidity and the secondary 
(welfare-based) PM2.5 NAAQS was established as equal to the 
suite of primary (health-based) NAAQS (62 FR 38669, July 18, 1997). 
Furthermore, Section 169 of the Act provides additional authorities to 
remedy existing visibility impairment and prevent future visibility 
impairment in the 156 national parks, forests and wilderness areas 
categorized as mandatory Federal class I areas (62 FR 38680-81, July 
18, 1997).\153\ In July 1999 the regional haze rule (64 FR 35714) was 
put in place to protect the visibility in mandatory Federal class I 
areas. Visibility can be said to be impaired in both PM2.5 
nonattainment areas and mandatory Federal class I areas.\154\
---------------------------------------------------------------------------

    \153\ These areas are defined in section 162 of the Act as those 
national parks exceeding 6,000 acres, wilderness areas and memorial 
parks exceeding 5,000 acres, and all international parks which were 
in existence on August 7, 1977.
    \154\ As mentioned above, the EPA has recently proposed to amend 
the PM NAAQS (71 FR 2620, Jan. 17, 2006). The proposal would set the 
secondary NAAQS equal to the primary standards for both 
PM2.5 and PM10-2.5. EPA also is taking comment 
on whether to set a separate PM2.5 standard, designed to 
address visibility (principally in urban areas), on potential levels 
for that standard within a range of 20 to 30 [mu]g/m3, 
and on averaging times for the standard within a range of four to 
eight daylight hours.

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

[[Page 15831]]

b. Current Visibility Impairment
    Data showing PM2.5 nonattainment areas, and visibility 
levels above background at the Mandatory Class I Federal Areas 
demonstrate that unacceptable visibility impairment is experienced 
throughout the U.S., in multi-state regions, urban areas, and remote 
mandatory Federal class I areas.155 156 The mandatory 
federal class I areas are listed in Chapter 3 of the draft RIA for this 
action. The areas that have design values above the PM2.5 
NAAQS are also listed in Chapter 3 of the draft RIA for this action.
---------------------------------------------------------------------------

    \155\ US EPA, Air Quality Designations and Classifications for 
the Fine Particles (PM2.5) National Ambient Air Quality 
Standards, December 17, 2004. (70 FR 943, Jan 5. 2005) This document 
is also available on the web at: http://www.epa.gov/pmdesignations/.
    \156\ US EPA. Regional Haze Regulations, July 1, 1999. (64 FR 
35714, July 1, 1999).
---------------------------------------------------------------------------

c. Future Visibility Impairment
    Recent modeling for the Clean Air Interstate Rule (CAIR) was used 
to project visibility conditions in mandatory Federal class I areas 
across the country in 2015. The results for the mandatory Federal Class 
I areas suggest that these areas are predicted to continue to have 
annual average deciview levels above background in the future.\157\ 
Modeling done for the CAIR also projected PM2.5 levels in 
the Eastern U.S. in 2010. These projections include all sources of 
PM2.5, including the engines covered in this proposal, and 
suggest that PM2.5 levels above the 1997 NAAQS will persist 
into the future.\158\
    The vehicles that would be subject to the proposed standards 
contribute to visibility concerns in these areas through both their 
primary PM emissions and their VOC emissions, which contribute to the 
formation of secondary PM2.5. The gas cans that would be 
subject to the proposed standards also contribute to visibility 
concerns through their VOC emissions. Reductions in these direct PM and 
VOC emissions will help to improve visibility across the nation, 
including mandatory Federal class I areas.
---------------------------------------------------------------------------

    \157\ The deciview metric describes perceived visual changes in 
a linear fashion over its entire range, analogous to the decibel 
scale for sound. A deciview of 0 represents pristine conditions. The 
higher the deciview value, the worse the visibility, and an 
improvement in visibility is a decrease in deciview value.
    \158\ EPA recently proposed to revise the current secondary PM 
NAAQS standards by making them identical to the suite of proposed 
primary standards for fine and coarse particles (71 FR 2620, Jan. 
17, 2006).
---------------------------------------------------------------------------

2. Plant Damage From Ozone
    Ozone contributes to many environmental effects, with damage to 
plants and ecosystems being of most concern. Plant damage affects crop 
yields, forestry production, and ornamentals. The adverse effect of 
ozone on forests and other natural vegetation can in turn cause damage 
to associated ecosystems, with additional resulting economic losses. 
Prolonged ozone concentrations of 100 ppb can be phytotoxic to a large 
number of plant species, and can produce acute injury and reduced crop 
yield and biomass production. Ozone concentrations within the range of 
50 to 100 ppb have the potential over a longer duration to create 
chronic stress on vegetation that can result in reduced plant growth 
and yield, shifts in competitive advantages in mixed populations, 
decreased vigor, and injury. Ozone effects on vegetation are presented 
in more detail in the 1996 Criteria Document and the 2005 draft 
Criteria Document.
3. Atmospheric Deposition
    Wet and dry deposition of ambient particulate matter delivers a 
complex mixture of metals (e.g., mercury, zinc, lead, nickel, aluminum, 
cadmium), organic compounds (e.g., POM, dioxins, furans) and inorganic 
compounds (e.g., nitrate, sulfate) to terrestrial and aquatic 
ecosystems. EPA's Great Waters Program has identified 15 pollutants 
whose deposition to water bodies has contributed to the overall 
contamination loadings to these Great Waters. These 15 compounds 
include several heavy metals and a group known as polycyclic organic 
matter (POM). Within POM are the polycyclic aromatic hydrocarbons 
(PAHs). PAHs in the environment may be present in the gas or particle 
phase, although the bulk will be adsorbed onto airborne particulate 
matter. In most cases, human-made sources of PAHs account for the 
majority of PAHs released to the environment. The PAHs are usually the 
POMs of concern as many PAHs are probable human carcinogens.\159\ For 
some watersheds, atmospheric deposition represents a significant input 
to the total surface water PAH burden.160 161 Emissions from 
mobile sources have been found to account for a percentage of the 
atmospheric deposition of PAHs. For instance, recent studies have 
identified gasoline and diesel vehicles as the major contributors in 
the atmospheric deposition of PAHs to Chesapeake Bay, Massachusetts Bay 
and Casco Bay.162 163 The vehicle controls being proposed 
may help to reduce deposition of heavy metals and POM.
---------------------------------------------------------------------------

    \159\ Deposition of Air Pollutants to the Great Waters-Third 
Report to Congress, Office of Air Quality Planning and Standards, 
June 2000, EPA453-R-00-005. This document is available in Docket 
EPA-HQ-OAR-2005-0036.
    \160\ Simcik, M.F.; Eisenrich, S.J.; Golden, K.A.; Liu, S.; 
Lipiatou, E.; Swackhamer, D.L.; and Long, D.T. (1996) Atmospheric 
Loading of Polycyclic Aromatic Hydrocarbons to Lake Michigan as 
Recorded in the Sediments. Environ. Sci. Technol. 30:3039-3046.
    \161\ Simcik, M.F.; Eisenrich, S.J.; and Lioy, P.J. (1999) 
Source Apportionment and Source/Sink Relationships of PAHs in the 
Coastal Atmosphere of Chicago and Lake Michigan. Atmospheric 
Environment 33: 5071-5079.
    \162\ Dickhut, R.M.; Canuel, E.A.; Gustafson, K.E.; Liu, K.; 
Arzayus, K.M.; Walker, S.E.; Edgecombe, G.; Gaylor, M.O.; and 
McDonald, E.H. (2000) Automotive Sources of Carcinogenic Polycyclic 
Aromatic Hydrocarbons Associated with Particulate Matter in the 
Chesapeake Bay Region. Environ. Sci. Technol. 34: 4635-4640.
    \163\ Golomb, D.; Barry, E.; Fisher, G.; Varanusupakul, P.; 
Koleda, M.; amd Rooney, T. (2001) Atmospheric Deposition of 
Polycyclic Aromatic Hydrocarbons near New England Coastal Waters. 
Atmospheric Environment 35: 6245-6258.
---------------------------------------------------------------------------

4. Materials Damage and Soiling
    The deposition of airborne particles can also reduce the aesthetic 
appeal of buildings and culturally important articles through soiling, 
and can contribute directly (or in conjunction with other pollutants) 
to structural damage by means of corrosion or erosion.\164\ Particles 
affect materials principally by promoting and accelerating the 
corrosion of metals, by degrading paints, and by deteriorating building 
materials such as concrete and limestone. Particles contribute to these 
effects because of their electrolytic, hygroscopic, and acidic 
properties, and their ability to sorb corrosive gases (principally 
sulfur dioxide). The rate of metal corrosion depends on a number of 
factors, including the deposition rate and nature of the pollutant; the 
influence of the metal protective corrosion film; the amount of 
moisture present; variability in the electrochemical reactions; the 
presence and concentration of other surface electrolytes; and the 
orientation of the metal surface.
---------------------------------------------------------------------------

    \164\ U.S. EPA (2005) Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information, OAQPS Staff Paper. This document is 
available in Docket EPA-HQ-OAR-2005-0036.
---------------------------------------------------------------------------

V. What Are Mobile Source Emissions Over Time and How Would This 
Proposal Reduce Emissions, Exposure and Associated Health Effects?

A. Mobile Source Contribution to Air Toxics Emissions

    In 1999, based on the National Emissions Inventory (NEI), mobile 
sources accounted for 44% of total

[[Page 15832]]

emissions of 188 hazardous air pollutants (on the Clean Air Act section 
112(b) list of hazardous air pollutants). Diesel particulate matter 
(PM) is not included in this list of 188 pollutants. Sixty-five percent 
of the mobile source tons in this inventory were attributable to 
highway mobile sources, and the remainder to nonroad sources. 
Furthermore, over 90% of mobile source emissions of air toxics (not 
including diesel PM) are attributable to gasoline vehicles and 
equipment.
    Recently, EPA projected trends in air toxic emissions (not 
including diesel PM) to 2020, using the 1999 National Emissions 
Inventory (NEI) as a baseline.\165\ Overall, air toxic emissions are 
projected to decrease from 5,030,000 tons in 1999 to 4,010,000 tons in 
2020, as a result of emission controls on major, area, and mobile 
sources. In the absence of Clean Air Act emission controls currently in 
place, EPA estimates air toxic emissions would total 11,590,000 tons in 
2020.
---------------------------------------------------------------------------

    \165\ Strum, M., R. Cook, J. Thurman, D. Ensley, A. Pope, T. 
Palma, R. Mason, H. Michaels, and S. Shedd. 2005. Projection of 
Hazardous Air Pollutant Emissions to Future Years. Science of the 
Total Environment, in press.
---------------------------------------------------------------------------

    Figure V.A-1 depicts the contributions of source categories to air 
toxic emissions between 1990 and 2020.\166\ As indicated in Figure V.A-
1, mobile source air toxic emissions will be reduced 60% between 1999 
and 2020, from 2.2 million to 880,000 tons. This reduction will occur 
despite a projected 57% increase in vehicle miles traveled, and a 
projected 63% increase in nonroad activity, based on units of work 
called horsepower-hours. It should be noted, however, that EPA 
anticipates mobile source air toxic emissions will begin to increase 
after 2020, from about 880,000 tons in 2020 to 920,000 tons in 2030. 
This is because, after 2020, reductions from control programs will be 
outpaced by increases in activity.
---------------------------------------------------------------------------

    \166\ It should be noted that after 2010, stationary source 
emissions are based only on economic growth, and do not account for 
reductions from ongoing toxics programs such as the urban air toxics 
program, residual risk standards and area source program, which are 
expected to further reduce toxics.
---------------------------------------------------------------------------

    In 1999, 29% of air toxic emissions were from highway vehicles and 
15% from nonroad equipment. Moreover, 54% of air toxic emissions from 
highway vehicles were emitted by light-duty gasoline vehicles (LDGVs) 
and 37% by light-duty trucks (LDGTs) (see Table V.A-1). EPA projects 
that in 2020, only 27% of highway vehicle toxic emissions will be from 
LDGVs and 63% will be from LDGTs. Air toxic emissions from nonroad 
equipment are dominated by lawn and garden equipment, recreational 
equipment, and pleasure craft, which collectively accounted for almost 
80% of nonroad toxic emissions in 1999 and 2020 (see Table V.A-2).
    Figure V.A-1Contribution of Source Categories to Air Toxic 
Emissions, 1990 to 2020 (not including diesel particulate matter). 
Note: Dashed line represents projected emissions without Clean Air Act 
controls.

[[Page 15833]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.001

    If diesel PM emissions were added to the mobile source total, 
mobile sources would account for 48% of a total 5,398,000 tons in 1999. 
Figure V.A.-2 summarizes the trend in diesel PM between 1999 and 2020, 
by source category. Diesel PM emissions will be reduced from 368,000 
tons in 1999 to 114,000 tons in 2020, a decrease of 70%. As controls on 
highway diesel engines and nonroad diesel engines phase in, diesel-
powered locomotives and commercial marine vessels increase from 11% of 
the inventory in 1999 to 27% in 2020.
    Subsequent to the development of these projected inventories for 
mobile source air toxics, a number of inventory revisions have 
occurred. Data EPA has collected indicate that the MOBILE6.2 emission 
factor model is under predicting hydrocarbon emissions (including air 
toxics) and PM emissions at lower temperatures, from light-duty 
vehicles meeting National Low Emission Vehicle (NLEV) and Tier 2 
tailpipe standards. The inventories presented in sections V.B, V.C., 
and V.E. reflect these enhancements.

   Table V.A-1.--Percent Contribution of Vehicle Classes to Highway Vehicle Air Toxic Emissions, 1999 to 2020
                                    [Not including diesel particulate matter]
----------------------------------------------------------------------------------------------------------------
                    Vehicle                       1999  (%)    2007  (%)    2010  (%)    2015  (%)    2020  (%)
----------------------------------------------------------------------------------------------------------------
Light-Duty Gasoline Vehicles...................           54           41           37           31           27
Light-Duty Gasoline Trucks.....................           37           49           53           59           63
Heavy-Duty Gasoline Vehicles...................            6            5            4            4            3
Heavy-Duty Diesel Vehicles.....................            3            4            4            4            5
Other (motorcycles and light-duty diesel                   1            1            1            2            2
 vehicles and trucks)..........................
----------------------------------------------------------------------------------------------------------------


[[Page 15834]]


           Table V.A-2.--Contribution of Equipment Types to Nonroad Air Toxic Emissions, 1999 to 2020
----------------------------------------------------------------------------------------------------------------
                 Equipment type                   1999  (%)    2007  (%)    2010  (%)    2015  (%)    2020  (%)
----------------------------------------------------------------------------------------------------------------
Lawn and Garden................................           26           18           17           21           25
Pleasure Craft.................................           34           27           25           25           25
Recreational...................................           19           38           40           35           29
All Others.....................................           21           17           18           19           21
----------------------------------------------------------------------------------------------------------------

                                                                                                     [GRAPHIC] [TIFF OMITTED] TP29MR06.002
                                                                                                     
B. VOC Emissions From Mobile Sources

    Table V.B-1 presents 48-State VOC emissions from key mobile source 
sectors in 1999, 2010, 2015, and 2020, not including the effects of 
this proposed rule. The 1999 inventory estimates for nonroad equipment 
were obtained from the National Emissions Inventory, and the 2010 and 
later year estimates were obtained from the inventories developed for 
the Clean Air Interstate Air Quality Rule (CAIR). The table provides 
emissions for nonroad equipment such as commercial marine vessels, 
locomotives, aircraft, lawn and garden equipment, recreational vehicles 
and boats, industrial equipment, and construction equipment. The 
estimates for highway vehicle classes were developed for this rule. The 
estimates for light-duty gasoline vehicles reflect revised estimates of 
hydrocarbon emissions at low temperatures.

    Table V.B-1.--48-State VOC Emissions (Tons) From Key Mobile Source Sectors in 1999, 2010, 2015, and 2020
                                          [Without this proposed rule]
----------------------------------------------------------------------------------------------------------------
                    Category                           1999            2010            2015            2020
----------------------------------------------------------------------------------------------------------------
Light Duty Gasoline Vehicles and Trucks.........       4,873,000       2,896,000       2,566,000       2,486,000

[[Page 15835]]

 
Heavy Duty and Other Highway Vehicles...........         672,000         255,000         212,000         200,000
Nonroad Equipment...............................       2,785,000       1,739,000       1,500,000       1,387,000
----------------------------------------------------------------------------------------------------------------

    VOC emissions from highway vehicles are about twice those from 
nonroad equipment in 1999. Emissions from both highway vehicles and 
nonroad equipment decline substantially between 1999 and 2020 as a 
result of EPA control programs that are already adopted. The VOC 
emission reductions associated with this proposed rule are presented in 
section V.E, below.

C. PM Emissions From Mobile Sources

    Table V.C-1 presents 48-State PM2.5 \167\ emissions from 
key mobile source sectors in 1999, 2010, 2015, and 2020, not including 
the effects of this proposed rule. The estimates in Table V.C-1 come 
from the same sources as the VOC estimates in section V.B. EPA is 
considering revisions to estimates of the PM emissions inventory for 
motor vehicles. Recent data suggest PM emissions are significantly 
higher than currently estimated in the MOBILE6 emissions model. In 
addition, testing done for this rule demonstrates that PM emissions are 
elevated at cold temperatures. The estimates in Table V.C-1 do not 
account for the effects of cold temperature.
---------------------------------------------------------------------------

    \167\ PM2.5 is particulate matter under 2.5 microns 
in diameter. Over 85% of the mass of PM from mobile sources is 
PM2.5.

    Table V.C-1--48-State PM2.5 Emissions (Tons) from Key Mobile Source Sectors in 1999, 2010, 2015, and 2020
                                          [Without this proposed rule]
----------------------------------------------------------------------------------------------------------------
                    Category                           1999            2010            2015            2020
----------------------------------------------------------------------------------------------------------------
Light-Duty Gasoline Vehicles and Trucks.........          48,000          33,000          36,000          39,000
Heavy-Duty and Other Highway Vehicles...........         136,000          51,000          28,000          20,000
Nonroad Equipment...............................         332,000         232,000         201,000         178,000
----------------------------------------------------------------------------------------------------------------

    Section V.E, below, presents estimates of PM emission reductions 
associated with the proposed cold-temperature vehicle standards.

D. Description of Current Mobile Source Emissions Control Programs That 
Reduce MSATs

    As described in section V.A, existing mobile source control 
programs will reduce MSAT emissions (not including diesel PM) by 60% 
between 1999 and 2020. Diesel PM from mobile sources will be reduced by 
70% between 1999 and 2020. The mobile source programs include controls 
on fuels, highway vehicles, and nonroad equipment. These programs are 
also reducing hydrocarbons and PM more generally, as well as oxides of 
nitrogen. The sections immediately below provide general descriptions 
of these programs, as well as voluntary programs to reduce mobile 
source emissions, such as the National Clean Diesel Campaign and Best 
Workplaces for Commuters. A more detailed description of mobile source 
programs is provided in Chapter 2 of the RIA.
1. Fuels Programs
    Several federal fuel programs reduce MSAT emissions. Some of these 
programs directly control air toxics, such as the reformulated gasoline 
(RFG) program's benzene content limit and required reduction in total 
toxics emissions, and the anti-backsliding requirements of the anti-
dumping and current MSAT programs, which require that gasoline cannot 
get dirtier with respect to toxics emissions. Others, such as the 
gasoline sulfur program, control toxics indirectly by reducing 
hydrocarbon and related toxics emissions.
a. RFG
    The RFG program contains two direct toxics control requirements. 
The first is a fuel benzene standard, requiring RFG to average no 
greater than 0.95 volume percent benzene annually (on a refinery or 
importer basis). The RFG benzene requirement includes a per-gallon cap 
on fuel benzene level of 1.3 volume percent. In 1990, when the Clean 
Air Act was amended to require reformulated gasoline, fuel benzene 
averaged 1.60 volume percent. For a variety of reasons, including other 
regulations, chemical product prices and refining efficiencies, most 
refiners and importers have achieved significantly greater reductions 
in benzene than required by the program. In 2003, RFG benzene content 
averaged 0.62 percent. The RFG benzene requirement includes a per-
gallon cap on fuel benzene level of 1.3 volume percent.
    The second RFG toxics control requires that RFG achieve a specific 
level of toxics emissions reduction. The requirement has increased in 
stringency since the RFG program began in 1995, when the requirement 
was that RFG annually achieve a 16.5% reduction in total (exhaust plus 
evaporative) air toxics emissions. Currently, a 21.5% reduction is 
required. These reductions are determined using the Complex Model. As 
mentioned above, for a variety of reasons most regulated parties have 
overcomplied with the required toxics emissions reductions. During 
1998-2000, RFG achieved, on average, a 27.5% reduction in toxics 
emissions.
b. Anti-Dumping
    The anti-dumping regulations were intended to prevent the dumping 
of ``dirty'' gasoline components, which

[[Page 15836]]

were removed to produce RFG, into conventional gasoline (CG). Since the 
dumping of ``dirty'' gasoline components, for example, benzene or 
benzene-containing blending streams, would show up as increases in 
toxics emissions, the anti-dumping regulations require that a refiner's 
or importer's CG be no more polluting with respect to toxics emissions 
than the refiner's or importer's 1990 gasoline. The anti-dumping 
program considers only exhaust toxics emissions and does not include 
evaporative emissions.\168\ Refiners and importers have either a unique 
individual anti-dumping baseline or they have the statutory anti-
dumping baseline if they did not fulfill the minimum requirements for 
developing a unique individual baseline. In 1990, average exhaust 
toxics emissions (as estimated by the Complex Model) were 104.5 mg/
mile; \169\ in 2004, CG exhaust toxics emissions averaged 90.7 mg/mile. 
Although CG has no benzene limit, benzene levels have declined 
significantly from the 1990 level of 1.6 volume percent to 1.1 volume 
percent for CG in 2004.
---------------------------------------------------------------------------

    \168\ See RFG rule for why evaporative emissions are not 
included in the anti-dumping toxics determination.
    \169\ Phase II.
---------------------------------------------------------------------------

c. 2001 Mobile Source Air Toxics Rule (MSAT1)
    As discussed above, both RFG and CG have, on average, exceeded 
their respective toxics control requirements. In 2001, EPA issued a 
mobile source air toxics rule (MSAT1, for the purposes of this second 
proposal), as discussed in section I.D. The intent of MSAT1 is to 
prevent refiners and importers from backsliding from the toxics 
performance that was being achieved by RFG and CG. In order to lock in 
superior levels of control, the rule requires that the annual average 
toxics performance of gasoline must be at least as clean as the average 
performance of the gasoline produced or imported during the three-year 
period 1998-2000. The period 1998-2000 is called the baseline period. 
Toxics performance is determined separately for RFG and CG, in the same 
manner as the toxics determinations required by the RFG \170\ and anti-
dumping rules.
---------------------------------------------------------------------------

    \170\ 40 CFR Part 80, Subpart D.
---------------------------------------------------------------------------

    Like the anti-dumping provisions, MSAT1 utilizes an individual 
baseline against which compliance is determined. The average 1998-2000 
toxics performance level, or baseline, is determined separately for 
each refinery and importer.\171\ To establish a unique individual MSAT1 
baseline, EPA requires each refiner and importer to submit 
documentation supporting the determination of the baseline. Most 
refiners and many importers in business during the baseline period had 
sufficient data to establish an individual baseline. An MSAT1 baseline 
volume is associated with each unique individual baseline value. The 
MSAT1 baseline volume reflects the average annual volume of such 
gasoline produced or imported during the baseline period. Refiners and 
importers who did not have sufficient refinery production or imports 
during 1998-2000 to establish a unique individual MSAT1 baseline must 
use the default baseline provided in the rule.
---------------------------------------------------------------------------

    \171\ Except for those who comply with the anti-dumping 
requirements for conventional gasoline on an aggregate basis, in 
which case the MSAT1 requirements for conventional gasoline must be 
met on the same aggregate basis (40 CFR Part 80, Subpart E).
---------------------------------------------------------------------------

    The MSAT1 program began with the annual averaging period beginning 
January 1, 2002. Since then, the toxics performance for RFG has 
improved from a baseline period average of 27.5% reduction to 29.5% 
reduction in 2003. Likewise, CG toxics emissions have decreased from an 
average of 95 mg/mile during 1998-2000 to 90.7 mg/mile in 2003.
d. Gasoline Sulfur
    EPA's gasoline sulfur program \172\ requires, beginning in 2006, 
that sulfur levels in gasoline can be no higher in any one batch than 
80 ppm, and must average 30 ppm annually. When fully effective, 
gasoline will have 90 percent less sulfur than before the program. 
Reduced sulfur levels are necessary to ensure that vehicle emission 
control systems are not impaired. These systems effectively reduce non-
methane organic gas (NMOG) emissions, of which some are air toxics. 
With lower sulfur levels, emission control technologies can work longer 
and more efficiently. Both new and older vehicles benefit from reduced 
gasoline sulfur levels.
---------------------------------------------------------------------------

    \172\ 65 FR 6822 (February 10, 2000).
---------------------------------------------------------------------------

e. Gasoline Volatility
    A fuel's volatility defines its evaporation characteristics. A 
gasoline's volatility is commonly referred to as its Reid vapor 
pressure, or RVP. Gasoline summertime RVP ranges from about 6-9 psi, 
and wintertime RVP ranges from about 9-14 psi, when additional vapor is 
required for starting in cold temperatures. Gasoline vapors contain a 
subset of the liquid gasoline components, and thus can contain toxics 
compounds such as benzene. EPA has controlled summertime gasoline RVP 
since 1989 primarily as a VOC and ozone precursor control, which also 
results in some toxics pollutant reductions.
f. Diesel Fuel
    In early 2001, EPA issued rules requiring that diesel fuel for use 
in highway vehicles contain no more than 15 ppm sulfur beginning June 
1, 2006.\173\ This program contains averaging, banking and trading 
provisions, as well as other compliance flexibilities. In June 2004, 
EPA issued rules governing the sulfur content of diesel fuel used in 
nonroad diesel engines.\174\ In the nonroad rule, sulfur levels are 
limited to a maximum of 500 ppm sulfur beginning in 2007 (current 
levels are approximately 3000 ppm). In 2010, nonroad diesel sulfur 
levels must not exceed 15 ppm.
---------------------------------------------------------------------------

    \173\ 66 FR 5002 (January 18, 2001) http://www.epa.gov/otaq/diesel.html.
    \174\ 69 FR 38958 (June 29, 2004).
---------------------------------------------------------------------------

    EPA's diesel fuel requirements are part of a comprehensive program 
to combine engine and fuel controls to achieve the greatest emission 
reductions. The diesel fuel provisions enable the use of advanced 
emission-control technologies on diesel vehicles and engines. The 
diesel fuel requirements will also provide immediate public health 
benefits by reducing PM emissions from current diesel vehicles and 
engines.
g. Phase-Out of Lead in Gasoline
    One of the first programs to control toxic emissions from motor 
vehicles was the removal of lead from gasoline. Beginning in the mid-
1970s, unleaded gasoline was phased in to replace leaded gasoline. The 
phase-out of leaded gasoline was completed January 1, 1996, when lead 
was banned from motor vehicle gasoline. The removal of lead from 
gasoline has essentially eliminated on-highway mobile source emissions 
of this highly toxic substance.
2. Highway Vehicle and Engine Programs
    The 1990 Clean Air Act Amendments set specific emission standards 
for hydrocarbons and for PM. Air toxics are present in both of these 
pollutant categories. As vehicle manufacturers develop technologies to 
comply with the hydrocarbon (HC) and particulate standards (e.g., more 
efficient catalytic converters), air toxics are reduced as well. Since 
1990, we have developed a number of programs to address exhaust and 
evaporative hydrocarbon emissions and PM emissions.
    Two of our recent initiatives to control emissions from motor 
vehicles

[[Page 15837]]

and their fuels are the Tier 2 control program for light-duty vehicles 
and the 2007 heavy-duty engine rule. Together these two initiatives 
define a set of comprehensive standards for light-duty and heavy-duty 
motor vehicles and their fuels. In both of these initiatives, we treat 
vehicles and fuels as a system. The Tier 2 control program establishes 
stringent tailpipe and evaporative emission standards for light-duty 
vehicles and a reduction in sulfur levels in gasoline fuel beginning in 
2004.\175\ The 2007 heavy-duty engine rule establishes stringent 
exhaust emission standards for new heavy-duty engines and vehicles for 
the 2007 model year as well as reductions in diesel fuel sulfur levels 
starting in 2006.\176\ Both of these programs will provide substantial 
emissions reductions through the application of advanced technologies. 
We expect 90% reductions in PM from new diesel engines compared to 
engines under current standards.
---------------------------------------------------------------------------

    \175\ 65 FR 6697, February 10, 2000.
    \176\ 66 FR 5001, January 18, 2001.
---------------------------------------------------------------------------

    Some of the key earlier programs controlling highway vehicle and 
engine emissions are the Tier 1 and NLEV standards for light-duty 
vehicles and trucks; enhanced evaporative emissions standards; the 
supplemental federal test procedures (SFTP); urban bus standards; and 
heavy-duty diesel and gasoline standards for the 2004/2005 time frame.
3. Nonroad Engine Programs
    There are various categories of nonroad engines, including land-
based diesel engines (e.g., farm and construction equipment), small 
land-based spark-ignition (SI) engines (e.g., lawn and garden 
equipment, string trimmers), large land-based SI engines (e.g., 
forklifts, airport ground service equipment), marine engines (including 
diesel and SI, propulsion and auxiliary, commercial and recreational), 
locomotives, aircraft, and recreational vehicles (off-road motorcycles, 
``all terrain'' vehicles and snowmobiles). Chapter 2 of the RIA 
provides more information about these programs. As with highway 
vehicles, the VOC standards we have established for nonroad engines 
will also significantly reduce VOC-based toxics from nonroad engines. 
In addition, the standards for diesel engines (in combination with the 
stringent sulfur controls on nonroad diesel fuel) will significantly 
reduce diesel PM and exhaust organic gases, which are mobile source air 
toxics.
    In addition to the engine-based emission control programs described 
below, fuel controls will also reduce emissions of air toxics from 
nonroad engines. For example, restrictions on gasoline formulation (the 
removal of lead, limits on gasoline volatility and RFG) are projected 
to reduce nonroad MSAT emissions because most gasoline-fueled nonroad 
vehicles are fueled with the same gasoline used in on-highway vehicles. 
An exception to this is lead in aviation gasoline. Aviation gasoline, 
used in general (as opposed to commercial) aviation, is a high octane 
fuel used in a relatively small number of aircraft (those with piston 
engines). Such aircraft are generally used for personal transportation, 
sightseeing, crop dusting, and similar activities.
4. Voluntary Programs
    In addition to the fuel and engine control programs described 
above, we are actively promoting several voluntary programs to reduce 
emissions from mobile sources, such as the National Clean Diesel 
Campaign, anti-idling measures, and Best Workplaces for Commuters. 
While the stringent emissions standards described above apply to new 
highway and nonroad diesel engines, it is also important to reduce 
emissions from the existing fleet of about 11 million diesel engines. 
EPA has launched a comprehensive initiative called the National Clean 
Diesel Campaign, one component of which is to promote the reduction of 
emissions in the existing fleet of engines through a variety of cost-
effective and innovative strategies. The goal of the Campaign is to 
reduce emissions from the 11 million existing engines by 2014. Emission 
reduction strategies include switching to cleaner fuels, retrofitting 
engines through the addition of emission control devices, and engine 
replacement. For example, installing a diesel particulate filter 
achieves diesel particulate matter reductions of approximately 90 
percent (when combined with the use of ultra low sulfur diesel fuel). 
The Energy Policy Act of 2005 includes grant authorizations and other 
incentives to help facilitate voluntary clean diesel actions 
nationwide.
    The National Clean Diesel Campaign is focused on leveraging local, 
state, and federal resources to retrofit or replace diesel engines, 
adopt best practices, and track and report results. The Campaign 
targets five key sectors: School buses, ports, construction, freight, 
and agriculture.
    Reducing vehicle idling provides important environmental benefits. 
As a part of their daily routine, truck drivers often keep their 
vehicles at idle during stops to provide power, heat and air 
conditioning. EPA's SmartWay Transport Partnership is helping the 
freight industry to adopt innovative idle reduction technologies and 
take advantage of proven systems that provide drivers with basic 
necessities without using the engine. To date, there are 50 stationary 
anti-idling projects, and mobile technology has been installed on 
nearly 20,000 trucks. The SmartWay Transport Partnership also works 
with the freight industry to reduce fuel use (with a concomitant 
reduction in emissions) by promoting a wide range of new technologies 
such as advanced aerodynamics, single-wide tires, weight reduction 
speed control and intermodal shipping.
    Daily commuting represents another significant source of emissions 
from motor vehicles. EPA's Best Workplaces for CommutersSM 
program is working with employers across the country to reverse the 
trend of longer, single-occupancy vehicle commuting. OTAQ has created a 
national list of the Best Workplaces for Commuters to formally 
recognize employers that offer superior commuter benefits such as free 
transit passes, subsidized vanpools/carpools, and flexi-place, or work-
from-home, programs. More than 1,300 employers representing 2.8 million 
U.S. workers have been designated Best Workplaces for Commuters.
    Much of the growth in the Best Workplaces for Commuters program has 
been through metro area-wide campaigns. Since 2002, EPA has worked with 
coalitions in 14 major metropolitan areas to increase the penetration 
of commuter benefits in the marketplace and the visibility of the 
companies that have received the BWC designation. Another significant 
path by which the program has grown is through Commuter Districts 
including corporate and industrial business parks, shopping malls, 
business improvement districts and downtown commercial areas. To date 
EPA has granted the Best Workplaces for Commuters ``District'' 
designation to twenty locations across the country including downtown 
Denver, Houston, Minneapolis and Tampa.

E. Emission Reductions From Proposed Controls

1. Proposed Vehicle Controls
    We are proposing a hydrocarbon standard for gasoline passenger 
vehicles at cold temperatures. This standard will reduce VOC at 
temperatures below 75 [deg]F, including air toxics such as benzene, 
1,3-butadiene, formaldehyde, acetaldehyde, acrolein and naphthalene, 
and will also reduce emissions of direct and secondary PM. We are also 
proposing new evaporative emissions standards for Tier 2 vehicles 
starting in

[[Page 15838]]

2009. These new evaporative standards reflect the emissions levels 
already being achieved by manufacturers.
a. Volatile Organic Compounds (VOC)
    Table V.E-1 shows the VOC exhaust emission reductions from light-
duty gasoline vehicles and trucks that would result from our proposed 
standards. The proposed standards would reduce VOC emissions in 2030 by 
32%. Overall VOC exhaust emissions from these vehicles would be reduced 
by 81% between 1999 and 2030 (including the effects of the proposed 
standards as well as standards already in place, such as Tier 2).

   Table V.E-1.--Estimated National Reductions in Exhaust VOC Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                       1999            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons).........................       4,899,891       2,625,076       2,556,751       2,899,269
VOC With Proposed Vehicle Standards (tons)......             N.A       2,305,202       2,020,267       1,985,830
VOC Reductions from Proposed Vehicle Standards               N.A         319,874         536,484         913,439
 (tons).........................................
Percentage Reduction............................             N.A              12              21              32
----------------------------------------------------------------------------------------------------------------

b. Toxics
    In 2030, we estimate that the proposed vehicle standards would 
result in a 38% reduction in benzene emissions and 37% reduction in 
total emissions of the MSATs \177\ from light-duty vehicles and trucks 
(see Tables V.E-2 and V.E-3).
---------------------------------------------------------------------------

    \177\ Table IV.A-1 lists the MSATs included in this analysis.

 Table V.E-2.--Estimated National Reductions in Benzene Exhaust Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                       1999            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons).....................         171,154         101,355         106,071         124,897
Benzene With Proposed Vehicle Standards (tons)..            N.A.          84,496          77,966          77,208
Benzene Reductions from Proposed Vehicle                    N.A.          16,859          28,105          47,689
 Standards (tons)...............................
Percentage Reduction............................            N.A.              17              26              38
----------------------------------------------------------------------------------------------------------------


   Table V.E-3.--Estimated National Reductions in Exhaust MSAT Emissions From Light-Duty Gasoline Vehicles and
                                              Trucks, 1999 to 2030
----------------------------------------------------------------------------------------------------------------
                                                       1999            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
MSATs Without Rule (tons).......................       1,341,572         707,877         724,840         844,366
MSATs With Proposed Vehicle Standards (tons)....            N.A.         599,492         543,332         535,479
MSAT Reductions from Proposed Vehicle Standards             N.A.         108,385         181,509         308,887
 (tons).........................................
Percentage Reduction............................            N.A.              15              25              37
----------------------------------------------------------------------------------------------------------------

c. PM2.5
    EPA expects that the proposed cold-temperature vehicle standards 
would reduce exhaust emissions of direct PM2.5 by over 
20,000 tons in 2030 nationwide (see Table V.E-4 below). Our analysis of 
the data from vehicles meeting Tier 2 emission standards indicate that 
PM emissions follow a monotonic relationship with temperature, with 
lower temperatures corresponding to higher vehicle emissions. 
Additionally, the analysis shows the ratio of PM to total non-methane 
hydrocarbons (NMHC) to be independent of temperature.\178\ Our testing 
indicates that strategies which reduce NMHC start emissions at cold 
temperatures also reduce direct PM emissions. Based on these findings, 
direct PM emissions at cold temperatures were estimated using a 
constant PM to NMHC ratio. PM emission reductions were estimated by 
assuming that NMHC reductions will result in proportional reductions in 
PM. This assumption is supported by test data. For more detail, see 
Chapter 2.1 of the RIA.
---------------------------------------------------------------------------

    \178\ U.S. EPA. 2005. Cold-temperature exhaust particulate 
matter emissions. Memorandum from Chad Bailey to docket EPA-HQ-OAR-
2005-0036.

 Table V.E-4.--Estimated National Reductions in Direct PM2.5 Exhaust Emissions From Light-Duty Gasoline Vehicles
                                            and Trucks, 2015 to 2030
----------------------------------------------------------------------------------------------------------------
                                                                       2015            2020            2030
----------------------------------------------------------------------------------------------------------------
PM2.5 Reductions from Proposed Vehicle Standards (tons).........           7,037          11,803          20,096
----------------------------------------------------------------------------------------------------------------

2. Proposed Fuel Benzene Controls
    The proposed fuel benzene controls would reduce benzene exhaust and 
evaporative emissions from both on-road and nonroad mobile sources that 
are fueled by gasoline. In addition, the proposed fuel benzene standard 
would reduce evaporative emissions from gasoline distribution and gas 
cans.

[[Page 15839]]

Impacts on 1,3-butadiene, formaldehyde, and acetaldehyde emissions are 
not significant, but are presented in Chapter 2 of the RIA. We do not 
expect the fuel benzene standard to have quantifiable impacts on any 
other air toxics, total VOCs, or PM.
    Table V.E-5 shows national estimates of total benzene emissions 
from these source sectors with and without the proposed fuel benzene 
standard. These estimates do not include effects of the proposed 
vehicle or gas can standards (see section V.E.4 for the combined 
effects of the controls). The proposed fuel benzene standard would 
reduce total benzene emissions from on-road and nonroad gasoline mobile 
sources, gas cans, and gasoline distribution by 12% in 2015.

    Table V.E-5.--Estimated Reductions in Benzene Emissions From Proposed Gasoline Standard by Sector in 2015
----------------------------------------------------------------------------------------------------------------
                                   Gasoline on-      Gasoline
                                    road mobile   nonroad mobile     Gas cans        Gasoline          Total
                                      sources         sources                      distribution
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons).....         103,797          37,747           2,262           5,999         149,805
Benzene With Proposed Gasoline            92,513          33,247           1,359           4,054         131,173
 Standard (tons)................
Benzene Reductions from Proposed          11,284           4,500             903           1,945          18,632
 Gasoline Standard (tons).......
Percentage Reduction............              11              12              40              32              12
----------------------------------------------------------------------------------------------------------------

3. Proposed Gas Can Standards
a. VOC
    Table V.E-6 shows the reductions in VOC emissions that we expect 
from the proposed gas can standard. In 2015, VOC emissions from gas 
cans would be reduced by 60% because of reduced permeation, spillage, 
and evaporative losses. These estimates do not include the effects of a 
fuel benzene standard (see section V.E.4 for the combined effects of 
the proposed controls).

            Table V.E-6.--Estimated National Reductions in VOC Emissions From Gas Cans, 2010 to 2030
----------------------------------------------------------------------------------------------------------------
                                       1999            2010            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons).........         318,596         279,374         296,927         318,384         362,715
VOC With Proposed Gas Can                   N.A.         250,990         116,431         125,702         144,634
 Standard (tons)................
VOC Reductions from Proposed Gas            N.A.          28,384         180,496         192,683         218,080
 Can Standard (tons)............
Percentage Reduction............            N.A.              10              61              61              60
----------------------------------------------------------------------------------------------------------------

b. Toxics
    The proposed gas can standard would reduce emissions of benzene, 
naphthalene, toluene, xylenes, ethylbenzene, n-hexane, 2,2,4-
trimethylpentane, and MTBE. We estimate that benzene emissions from gas 
cans would be reduced by 65% (see Table V.E-7) and, more broadly, air 
toxic emissions by 61% (see Table V.E-8) in year 2015. These reductions 
do not include effects of the proposed fuel benzene standard (see 
section V.E.4 for the combined effects of the proposed controls). 
Chapter 2 of the RIA provides details on the emission reductions of the 
other toxics.

          Table V.E-7.--Estimated National Reductions in Benzene Emissions From Gas Cans, 2010 to 2030
----------------------------------------------------------------------------------------------------------------
                                       1999            2010            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
Benzene Without Rule (tons).....           2,229           2,118           2,262           2,423           2,757
Benzene With Proposed Gas Can               N.A.           1,885             794             856             985
 Standard (tons)................
Benzene Reductions from Proposed            N.A.             233           1,468           1,567           1,772
 Gas Can Standard (tons)........
Percentage Reduction............            N.A.              11              65              65              64
----------------------------------------------------------------------------------------------------------------


         Table V.E-8.--Estimated National Reductions in Total MSAT Emissions From Gas Cans, 2010 to 2030
----------------------------------------------------------------------------------------------------------------
                                       1999            2010            2015            2020            2030
----------------------------------------------------------------------------------------------------------------
MSATs Without Rule (tons).......          39,581          34,873          37,076          39,751          45,284
MSATs With Proposed Gas Can                 N.A.          31,312          14,445          15,593          17,942
 Standard (tons)................
MSAT Reductions from Proposed               N.A.           3,561          22,631          24,158          27,342
 Gas Can Standard (tons)........
Percentage Reduction............            N.A.              10              61              61              60
----------------------------------------------------------------------------------------------------------------

    Chapter 2 of the RIA describes how we estimated emissions from gas 
cans, including the key assumptions used and uncertainties in the 
analysis. We request comments on the emissions inventory methodology 
used by EPA and we encourage commenters to provide relevant data where 
possible.
4. Total Emission Reductions From Proposed Controls
    Sections V.E.1 through V.E.3 present the emissions impacts of each 
of the

[[Page 15840]]

proposed controls individually. This section presents the combined 
emissions impacts of the proposed controls.
a. Toxics
    Air toxic emissions from light-duty vehicles depend on both fuel 
benzene content and vehicle hydrocarbon emission controls. Similarly, 
the air toxic emissions from gas cans depend on both fuel benzene 
content and the gas can emission controls. Tables V.E-9 and V.E-10 
below summarize the expected reductions in benzene and MSAT emissions, 
respectively, from our proposed vehicle, fuel, and gas can controls. In 
2030, annual benzene emissions from gasoline on-road mobile sources 
would be 44% lower as a result of this proposal (see Figure V.E-1). 
Annual benzene emissions from gasoline light-duty vehicles would be 45% 
lower in 2030 as a result of this proposal. Likewise, this proposal 
would reduce annual emissions of benzene from gas cans by 78% in 2030 
(see Figure V.E-2). For MSATs from on-road mobile sources, Figure V.E-3 
below shows a 33% reduction in MSAT emissions in 2030.

                     Table V.E-9.--Estimated Reductions in Benzene Emissions From Proposed Control Measures by Sector, 2015 to 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2015                                2020                                2030
                                             -----------------------------------------------------------------------------------------------------------
             Benzene                 1999       Without                             Without                             Without
                                                 rule      With rule  Reductions     rule      With rule  Reductions     rule      With rule  Reductions
                                                (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline On-road Mobile Sources.     178,465     103,798      77,155      26,643     108,256      71,326      36,930     127,058      70,682      56,376
Gasoline Nonroad Mobile Sources.      58,710      37,747      33,247       4,500      36,440      32,018       4,422      39,162      34,400       4,762
Gas Cans........................       2,229       2,262         492       1,770       2,423         531       1,892       2,757         610       2,147
Gasoline Distribution...........       5,502       5,999       4,054       1,945       6,207       4,210       1,997       6,207       4,210       1,997
                                 -----------------------------------------------------------------------------------------------------------------------
    Total.......................     244,905     149,806     114,948      34,858     153,326     108,085      45,241     175,184     109,902      65,282
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 15841]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.003


                      Table V.E-10.--Estimated Reductions in MSAT Emissions From Proposed Control Measures by Sector, 2015 to 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2015                                2020                                2030
                                             -----------------------------------------------------------------------------------------------------------
              MSAT                   1999       Without                             Without                             Without
                                                 rule      With rule  Reductions     rule      With rule  Reductions     rule      With rule  Reductions
                                                (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)      (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline On-road Mobile Sources.   1,415,502     731,283     613,227     118,056     745,769     555,541     190,228     865,767     548,298     317,469
Gasoline Nonroad Mobile Sources.     673,922     432,953     428,506       4,447     390,468     386,095       4,373     405,119     400,408       4,711
Gas Cans........................      39,581      37,076      14,143      22,933      39,751      15,268      24,483      45,284      17,567      27,717
Gasoline Distribution...........      50,625      62,804      60,859       1,945      64,933      62,936       1,997      64,933      62,936       1,997
                                 -----------------------------------------------------------------------------------------------------------------------
    Total.......................   2,179,630   1,264,116   1,116,735     147,381   1,240,921   1,019,840     221,081   1,381,103   1,029,209     351,894
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 15842]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.004

b. VOC
    VOC emissions would be reduced by the hydrocarbon emission 
standards for both light-duty vehicles and gas cans. As seen in the 
table and accompanying figure below, annual VOC emission reductions 
from both of these sources would be 35% lower in 2030 because of 
proposed control measures.

  Table V.E-11.--Estimated Reductions in VOC Emissions from Light-Duty Gasoline Vehicles and Gas Cans, 2015 to
                                                      2030
----------------------------------------------------------------------------------------------------------------
                                                                       2015            2020            2030
----------------------------------------------------------------------------------------------------------------
VOC Without Rule (tons).........................................       2,922,003       2,875,135       3,261,984
VOC With Proposed Vehicle and Gas Can Standards (tons)..........       2,421,633       2,145,969       2,130,464
VOC Reduction (tons)............................................         500,370         729,168       1,131,520
----------------------------------------------------------------------------------------------------------------

                                                                                                  [GRAPHIC] [TIFF OMITTED] TP29MR06.005
                                                                                                  
c. PM2.5
    We expect that only the proposed vehicle control would reduce 
emissions of direct PM2.5. As shown in Table V.E-4, we 
expect this control to reduce direct PM2.5 emissions by 
about 20,000 tons in 2030. In addition, the VOC reductions from the 
proposed vehicle and gas can standards would also reduce secondary 
formation of PM2.5.

F. How Would This Proposal Reduce Exposure to Mobile Source Air Toxics 
and Associated Health Effects?

    The proposed benzene standard for gasoline would reduce both 
evaporative and exhaust emissions from motor vehicles and nonroad 
equipment. It would also reduce emissions from gas cans and stationary 
source emissions associated with gasoline distribution. Therefore, it 
would reduce exposure to benzene for the general population, and also 
for people near roadways, in

[[Page 15843]]

vehicles, in homes with attached garages, operating nonroad equipment, 
and living or working near sources of gasoline distribution emissions 
(such as bulk terminals, bulk plants, tankers, marine vessels, and 
service stations). Section IV.B.2 of this preamble provides more 
details on these types of exposures.
    We performed national-scale air quality, exposure, and risk 
modeling in order to quantitatively assess the impacts of the proposed 
fuel benzene standard. However, in addition to the limitations of the 
national-scale modeling tools (discussed in section IV.A), this 
modeling did not account for the elevated hydrocarbon emissions from 
motor vehicles at cold temperatures, which we recently discovered and 
are further described in section VI and the RIA. The modeling also 
examined the gasoline benzene standard alone, without the proposed 
vehicle or gas can standards. Nevertheless, the modeling is useful as a 
preliminary assessment of the impacts of the fuel standard.
    The fuel benzene standard being proposed in this rule would reduce 
both the number of people above the 1 in 100,000 increased cancer risk 
level, and the average population cancer risk, by reducing exposures to 
benzene from mobile sources. The number of people above the 1 in 
100,000 cancer risk level due to exposure to all mobile source air 
toxics from all sources would decrease by over 3 million in 2020 and by 
about 3.5 million in 2030, based on average census tract risks. The 
number of people above the 1 in 100,000 increased cancer risk level 
from exposure to benzene from all sources would decrease by over 4 
million in 2020 and 5 million in 2030. It should be noted that if it 
were possible to estimate impacts of the proposed standard on 
``background'' concentrations, the estimated overall risk reductions 
would be even larger. The proposed standard would have little impact on 
the number of people above various respiratory hazard index levels, 
since this potential non-cancer risk is dominated by exposure to 
acrolein.
    Table V.F-1 depicts the impact on the mobile source contribution to 
nationwide average population cancer risk from benzene in 2020. 
Nationwide, the cancer risk attributable to mobile source benzene would 
be reduced by over 8%. Reductions in areas not subject to reformulated 
gasoline controls are almost 13 percent relative to risks without the 
proposed control; and in some states with high fuel benzene levels, 
such as Minnesota and Washington, the risk reduction would exceed 17 
percent. In Alaska, which has the highest fuel benzene levels in the 
country, reductions would exceed 30%. Reductions for other modeled 
years are similar. The methods and assumptions used to model the impact 
of the proposed control are described in more detail in the Regulatory 
Impact Analysis. Although not quantified in the risk analyses for this 
rule, controls proposed for portable fuel containers will also reduce 
exposures and risk from benzene, and cold temperature hydrocarbon 
standards for exhaust emissions will reduce cancer and noncancer risks 
for all gaseous mobile source air toxics. These reductions will vary 
geographically since reductions from vehicle control are higher at 
colder temperatures, and reductions from gas can controls are higher at 
higher temperatures.

  Table V.F-1.--Impact of Proposed Fuel Benzene Control on the Mobile Source Contribution to Nationwide Average
                                         Population Cancer Risk in 2020
----------------------------------------------------------------------------------------------------------------
                                                                       U.S.          RFG areas     Non-RFG areas
----------------------------------------------------------------------------------------------------------------
 Without Proposal...............................................       2.57x10-6       3.64x10-6       1.96x10-6
0.62% Benzene Standard..........................................       2.35x10-6       3.51x10-6       1.72x10-6
 % Reduction....................................................             8.6             3.6            12.2
----------------------------------------------------------------------------------------------------------------

    Table V.F-2 summarizes the change in median and 95th percentile 
benzene inhalation cancer risk from all outdoor sources in 2015, 2020, 
and 2030, with the fuel benzene controls proposed in this rule. The 
reductions in risk would be larger if the modeling fully accounted for 
a number of factors, including: benzene emissions at cold temperature; 
exposure to benzene emissions from vehicles, equipment, and gas cans in 
attached garages; near-road exposures; and the impacts of the control 
program on ``background'' levels attributable to transport.

  Table V.F-2.--Change in Median and 95th Percentile Benzene Inhalation Cancer Risk From Outdoor Sources in 2015, 2020, and 2030 With the Fuel Benzene
                                                             Controls Proposed in this Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       2015                            2020                            2030
                                                         -----------------------------------------------------------------------------------------------
                                                              median           95th           median           95th           median           95th
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Controls........................................       5.73x10-6       1.38x10-5       5.61x10-6       1.35x10-5       5.75x10-6       1.41x10-5
Proposed Benzene Standard...............................       5.49x10-6       1.32x10-5       5.39x10-6       1.29x10-5       5.51x10-6       1.35x10-5
Percent Change..........................................             4.2             4.3             3.9             4.4             4.2             4.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We did not model the air quality, exposure, and risk impacts of the 
proposed vehicle and gas can standards. However, the proposed vehicle 
standards would reduce exposure to several MSATs, including benzene. 
Like the proposed fuel standard, the vehicle standards would reduce the 
general population's exposure to MSATs, as well as people near roadways 
and in vehicles. Since motor vehicle emissions are ubiquitous across 
the U.S. and widely dispersed, reductions in exposure and risk will be 
approximately proportional to reductions in emissions.
    The gas can standard will reduce evaporative emissions of several 
MSATs, including benzene. We expect that these standards would 
significantly reduce concentrations of benzene and other MSATs in 
attached garages and inside homes with attached garages. Accordingly, 
exposure to benzene and other MSATs would be significantly reduced. As 
discussed in section IV.B.2, exposures to emissions occurring in 
attached garages can be quite high.

[[Page 15844]]

    The proposed vehicle and gas can standards would also reduce 
precursors to ozone and PM. We have modeled the ozone impacts of the 
proposed gas can standard and the PM health benefits that would be 
associated with the direct PM reductions from the proposed vehicle 
standards. These results are discussed in sections IV.D and IX, 
respectively.

G. Additional Programs Under Development That Will Reduce MSATs

1. On-Board Diagnostics for Heavy-Duty Vehicles Over 14,000 Pounds
    We are planning to propose on-board diagnostics (OBD) requirements 
for heavy-duty vehicles over 14,000 pounds. In general, OBD systems 
monitor the operation of key emissions controls to detect major 
failures that would lead to emissions well above the standards during 
the life of the vehicle. Given the nature of the heavy-duty trucking 
industry, 50-state harmonization of emissions requirement is an 
important consideration. In order to work towards this goal, the Agency 
signed a Memorandum of Agreement in 2004 with the California Air 
Resources Board which expresses both agencies' interest in working 
towards a single, nationwide program for heavy-duty OBD. Since that 
time, California has established their heavy-duty OBD program, which 
will begin implementation in 2010. We expect the Agency's program will 
also begin in the 2010 time frame. These requirements would help ensure 
that the emission reductions we projected in the 2007 rulemaking for 
heavy-duty engines occur in-use.
2. Standards for Small SI Engines
    We are developing a proposal for Small SI engines (those typically 
used in lawn and garden equipment) and recreational marine engines. 
This proposal is being developed in response to Section 428 of the 
Omnibus Appropriations Bill for 2004, which requires EPA to propose 
regulations under Clean Air Act section 213 for new nonroad spark-
ignition engines under 50 horsepower. We plan to propose standards that 
would further reduce the emissions for these nonroad categories, and we 
anticipate that the new standards would provide significant further 
reductions in HC (and VOC-based toxics) emissions.
3. Standards for Locomotive and Marine Engines
    In addition, we are planning to propose more stringent standards 
for large diesel engines used in locomotive and marine applications, as 
discussed in a recent Advance Notice of Proposed Rulemaking.\179\ New 
standards for marine diesel engines would apply to engines less than 30 
liters per cylinder in displacement (all engine except for Category 3). 
We are considering standards modeled after our Tier 4 nonroad diesel 
engine program, which achieve substantial reductions in PM, HC, and 
NOX emissions. These standards would be based on the use of 
high efficiency catalyst aftertreatment and would also require fuel 
sulfur control. As discussed in our recent ANPRM, we are considering 
implementation as early as 2011.
---------------------------------------------------------------------------

    \179\ 69 FR 39276, June 29, 2004.
---------------------------------------------------------------------------

VI. Proposed New Light-Duty Vehicle Standards

A. Why Are We Proposing New Standards?

1. The Clean Air Act and Air Quality
    As described in section V of this preamble, the U.S. has made 
significant progress in reducing emissions from passenger cars and 
light trucks since the passage of the 1990 Clean Air Act Amendments. 
Many emission control programs adopted to implement the 1990 Clean Air 
Act Amendments are reducing and will continue to reduce air toxics from 
light-duty vehicles. These include our reformulated gasoline (RFG) 
program, our Supplemental Federal Test Procedure (SFTP) standards, our 
national low emission vehicle program (NLEV), and, most recently, our 
Tier 2 motor vehicle emissions standards and gasoline sulfur control 
requirements.\180\ While these vehicle programs were put in place 
primarily to reduce ambient concentrations of criteria pollutants and 
their precursors (NOX, VOC, CO, and PM), they have reduced 
and will continue to significantly reduce light-duty vehicle emissions 
of air toxics. For example, there are numerous chemicals that make up 
total VOC emissions, including several gaseous toxics (e.g., benzene, 
formaldehyde, 1,3-butadiene, and acetaldehyde). These toxics are all 
reduced by VOC emissions standards. It is the stringent control of 
hydrocarbons in particular that results in stringent control of gaseous 
toxics. There are no vehicle-based technologies of which we are aware 
that reduce these air toxics individually.
---------------------------------------------------------------------------

    \180\ Unless otherwise noted, we use ``light-duty vehicles'' or 
``vehicles'' to generally refer to passenger vehicles, light-duty 
trucks such as sport utility vehicles (SUVs) and pick-ups, and 
medium-duty passenger vehicles (MDPVs) which includes larger SUVs 
and passenger vans up to 10,000 pounds Gross Vehicle Weight Rating.
---------------------------------------------------------------------------

    At the time of our 2001 MSAT rule, we had recently finalized the 
Tier 2 emissions standards and gasoline sulfur control requirements 
(described in more detail below in section V.D). As explained earlier, 
we concluded then under section 202(l) that the Tier 2 standards 
represented the greatest degree of emissions control achievable for 
those vehicles. However, we also committed to continue to consider the 
feasibility of additional vehicle-based MSAT controls in the future.
2. Technology Opportunities for Light-Duty Vehicles
    Since the 2001 MSAT rule, we have identified potential situations 
where further reductions of light-duty vehicle hydrocarbon emissions--
and, therefore, mobile source air toxics--are technically feasible, 
cost-effective, and do not have adverse energy or safety implications. 
First, recent research and analytical work shows that the Tier 2 
exhaust emission standards for hydrocarbons (which are typically tested 
at 75[deg] F) do not, in the case of many vehicles, result in robust 
control of hydrocarbon emissions at lower temperatures. We believe that 
cold temperature hydrocarbon control can be substantially improved 
using the same technological approaches generally already in use in the 
Tier 2 vehicle fleet to meet the stringent standards at 75[deg] F. 
Second, we believe that harmonization of evaporative emission standards 
with California would prevent backsliding by codifying current industry 
practices. Sections VI.B.1 and VI.B.2, below, provide our rationale for 
proposing new cold temperature and evaporative controls and describe 
the detailed provisions of our proposal. We request comment on all 
aspects of these proposals and encourage commenters to provide detailed 
rationales and supporting data where possible.
    Aside from these proposed standards, we continue to believe that 
the remaining Tier 2 exhaust emission standards (i.e., those that apply 
over the standard Federal Test Procedure at temperatures between 
68[deg] F and 86[deg] F) represent the greatest emissions reductions 
achievable as required under Clean Air Act section 202(l). We therefore 
are not proposing further emission reductions from these vehicles. 
(Please see section VI.D for further discussion.)
3. Cold Temperature Effects on Emission Levels
a. How Does Temperature Affect Emissions?
    With the possible exception of high-load operation, Tier 2 
gasoline-powered vehicles emit the overwhelming

[[Page 15845]]

majority of hydrocarbon emissions in the first few minutes of operation 
following a cold start (i.e., starting the vehicles after the engine 
has stabilized to the ambient temperatures, such as overnight). This is 
true at all cold start temperatures, and the general trend is that 
hydrocarbon emissions progressively increase as engine start 
temperatures decrease. The level of hydrocarbon emissions produced by 
the engine will vary with start temperature, engine hardware design and 
most importantly, engine management control strategies. Furthermore, 
due to the heavy dependence on the aftertreatment system to perform the 
main emission reducing functions, any delayed or non-use of emission 
controls (hardware or software) will further increase the amount of 
hydrocarbon emissions emitted from the vehicle following the cold 
start.
    Elevated hydrocarbon levels at cold temperatures, specifically, the 
non-methane hydrocarbons (NMHC) portion of total hydrocarbons (THC), 
also indicate higher emissions of gaseous air toxics. A detailed 
description of the relationship between NMHC and air toxics can be 
found in Chapter 2 of the RIA. Recent EPA research studies \181\ on 
Tier 2 gasoline vehicles, and past EPA studies \182\ on older 
generation gasoline vehicles, demonstrate that many air toxics (e.g., 
benzene) are a relatively constant fraction of NMHC. This relationship 
is observed regardless of vehicle type, NMHC emissions level, or 
temperature. The relationship remains relatively constant for different 
vehicles with different levels of NMHC emissions, and for the same 
vehicle at colder temperatures. Therefore, it can be concluded that 
reductions in NMHC will result in proportional reductions in gaseous 
air toxics which are components of HC. These observations and findings 
indicate that controlling NMHC is an effective approach to reducing 
toxics which are a component of NMHC, including benzene emissions.
---------------------------------------------------------------------------

    \181\ ``VOC/PM Cold Temperature Characterization and Interior 
Climate Control Emissions/Fuel Economy Impact,'' Volume I and II, 
October 2005.
    \182\ ``Characterization of Emissions from Malfunctioning 
Vehicles fueled with Oxygenated Gasoline-Ethanol (E10) Fuel,'' Part 
I, II and III.
---------------------------------------------------------------------------

    In addition to control of air toxics, another benefit of regulating 
NMHC at cold temperatures is reductions in particulate matter (PM). PM 
is a criteria pollutant and for gasoline-fueled vehicles is an emerging 
area of interest on which we are continuing to collect data (see 
sections III.E and IV.F for more details on PM). We have limited data 
indicating that PM emissions can be significantly higher at cold 
temperatures compared to emissions at the 68-86[deg] F testing 
temperatures used in the FTP. Data also indicate that HC and direct PM 
emissions correlate fairly well as temperature changes and that some 
direct PM emissions reductions can be expected when VOCs are reduced. 
Also, from a technological standpoint, we can expect reductions in PM 
as manufacturers reduce over-fueling at cold temperatures for NMHC 
control. Although section 202(l) deals with control of air toxics, and 
not criteria pollutants like PM, this co-benefit of cold temperature 
control is significant.
b. What Are the Current Emissions Control Requirements?
    There are several requirements currently in place that have 
resulted in significant NMHC reductions and provided experience with 
control strategies that apply across a broad range of in-use driving 
conditions, including cold temperatures. These requirements include the 
Tier 2 standards, the Supplemental Federal Test Procedure (SFTP) 
standards, the cold temperature carbon monoxide (CO) standard, and the 
California 50[deg] F hydrocarbon standard.
    The Tier 2 program (and, before that, the NLEV program) contains 
stringent new standards for light-duty vehicles that have resulted in 
significant hydrocarbon reductions. To meet these standards, vehicle 
manufacturers have responded with emissions control hardware and 
control strategies that have very effectively minimized emissions, 
particularly immediately following the vehicle start-up. In addition, 
the SFTP rule (effective beginning in model year 2001) significantly 
expanded the area of operation where stringent emission control was 
required, by adding a high load/speed cycle (US06) and an air 
conditioning cycle (SC03). Vehicle manufacturers responded with 
additional control strategies across a broader range of in-use driving 
conditions to successfully meet SFTP requirements.
    We also have cold temperature carbon monoxide (CO) standards which 
began in model year 1994 for light-duty vehicles (LDVs) and light-duty 
trucks (LDTs).\183\ This program requires manufacturers to comply with 
a 20[deg] F CO standard. The 20[deg] F cold CO test replicates the 
75[deg] F FTP drive cycle, but at the colder temperature. While the 
recent Tier 2 program is primarily designed to reduce ozone, the cold 
CO requirement was enacted to address exceedances of the national 
ambient air quality standards (NAAQS) for CO, which were mostly 
occurring during the cold weather months. While the cold CO standard 
was considered challenging at its introduction, manufacturers quickly 
developed emission control strategies and today comply with the 
standard with generally large compliance margins. This indicates that 
manufacturers do in fact have experience with emission control 
strategies at colder temperatures.
---------------------------------------------------------------------------

    \183\ 57 FR 31888 ``Control of Air Pollution from New Motor 
Vehicles and New Motor Vehicle Engines: Cold Temperature Carbon 
Monoxide Emissions from 1994 and Later Model Year Gasoline-Fueled 
Light-Duty Vehicles and Light-Duty Trucks'', Final Rule, July 17, 
1992.
---------------------------------------------------------------------------

    Under the Low Emission Vehicle (LEV) programs, California 
implemented stringent emissions standards for a 50[deg] F FTP test 
condition in addition to stringent 75[deg] F standards. By creating a 
unique 50[deg] F standard, California ensures that emission control 
strategies successfully used at 75[deg] F are also utilized at the 
slightly cooler temperatures that encompass a larger range of 
California's expected climates. The 50[deg] F non-methane organic gases 
(NMOG) standards are directly proportional to the 75[deg] F 
certification standard; that is, they are two times the 75[deg] F 
standard. These standards have resulted in proportional emissions 
improvements at 50[deg] F for vehicles certified to the California 
standards, as observed in the manufacturer certification data. 
Manufacturers have met the standards and have successfully obtained 
these proportional improvements at 50[deg] F by implementing the same 
emission control strategies developed for 75[deg] F requirements.
c. Opportunities for Additional Control
    As emissions standards have become more stringent from Tier 1 to 
NLEV, and now to Tier 2, manufacturers have concentrated primarily on 
emissions performance just after the start of the engine in order to 
further reduce emissions. To comply with stringent hydrocarbon emission 
standards at 75[deg] F, manufacturers developed new emission control 
strategies and practices that resulted in significant emissions 
reductions at that start temperature. For California, the LEV II 
program contains a standard at 50[deg] F (as just explained), which 
essentially requires proportional control of hydrocarbon emissions down 
to that temperature. On the national level, even though there is no 
explicit requirement, we expected that proportional reductions in 
hydrocarbon emissions would occur at other colder start temperatures--
including the 20[deg] F Cold CO test point--as a result of the more 
stringent NLEV and Tier 2 standards. We believe that there is no

[[Page 15846]]

engineering reason why proportional control should not be occurring on 
a widespread basis.
    However, reported annual manufacturer certification results 
(discussed in the next paragraph) indicate that for many engine 
families, very little improvement in hydrocarbon emissions was realized 
at the colder 20[deg] F Cold CO test conditions, despite the improved 
emission control systems designed for the vehicle under normal 75[deg] 
F test conditions. Thus although all vehicle manufacturers have been 
highly successful at reducing emissions at the required FTP start 
temperature range, in general, they do not appear to be capitalizing on 
NMHC emission control strategies and technologies at lower 
temperatures.
    Certification reports submitted by manufacturers for recent model 
years of light duty vehicles in fact show a sharp rise in hydrocarbon 
\184\ emissions at 20[deg] F when compared to the reported 75[deg] F 
hydrocarbon emission levels. Any rise in hydrocarbon emissions, 
specifically NMHC, will result in proportional rise in VOC-based air 
toxics \185\. While some increase in NMHC emissions can be expected 
simply due to combustion limitations of gasoline engines at colder 
temperatures, the reported levels of hydrocarbon emissions seem to 
indicate a significantly diminished use of hydrocarbon emissions 
controls occurring at colder temperatures. For example, on recent Tier 
2 certified vehicles, the reported 20[deg] F hydrocarbon levels on 
average were 10 to 12 times higher than the equivalent vehicle's 
measured 75[deg] F hydrocarbon levels. Some vehicles which were 
certified to more stringent Tier 2 bins (bins 2, 3, and 4) demonstrated 
20[deg] F hydrocarbon levels no different than less stringent Tier 2 
bins (bins 5, 6, 7, and 8), likewise suggesting no discernable attempt 
to use the 75[deg] F hydrocarbon controls at the 20[deg] F temperature. 
On the other hand, in some select cases, individual vehicles did 
demonstrate proportional improvements in hydrocarbon emission results 
at 20[deg] F relative to their 75[deg] F results, confirming our belief 
that proportional control is feasible and indeed is occasionally 
practiced. One manufacturer's certification results reflected 
proportional improvements across almost its entire vehicle lines 
(including vehicles up to 5665 GVWR), further supporting that 
proportional control is feasible.
---------------------------------------------------------------------------

    \184\ Most certification 20[deg] F hydrocarbon levels are 
reported as THC, but NMHC accounts for approximately 95% of THC as 
seen in results with both THC and NMHC levels reported. This 
relationship also is confirmed in EPA test programs supporting this 
rule-making.
    \185\ ``VOC/PM Cold Temperature Characterization and Interior 
Climate Control Emissions/Fuel Economy Impact'', Volume I and II, 
October 2005.
---------------------------------------------------------------------------

B. What Cold Temperature Requirements Are We Proposing?

1. NMHC Exhaust Emissions Standards
    We are proposing a set of standards that will achieve proportional 
NMHC control from the 75[deg] F Tier 2 standards to the 20[deg] F test 
point. The proposed standard would achieve the greatest degree of 
hydrocarbon emissions reductions feasible by fully utilizing the 
substantial existing emission control hardware required to meet Tier 2 
standards. We believe these standards would be achievable through 
calibration and software control strategies on Tier 2 level vehicles 
without use of additional hardware. The proposed standards are shown in 
Table VI.B-1.

    Table VI.B-1.--Proposed 20[deg] F FTP Exhaust Emission Standards
------------------------------------------------------------------------
                                                             NMHC sales-
                                                               weighted
                                                                fleet
                 Vehicle GVWR and category                     average
                                                               standard
                                                               (grams/
                                                                mile)
------------------------------------------------------------------------
<= 6000 lbs: Light-duty vehicles (LDV) & Light light-duty            0.3
 trucks (LLDT).............................................
> 6000 lbs: Heavy light-duty trucks (HLDT) up to 8,500 lbs           0.5
 & Medium-duty passenger vehicles (MDPV) up to 10,000 lbs..
------------------------------------------------------------------------

    We are proposing two separate sales-weighted fleet average NMHC 
levels: (1) 0.3 g/mile for vehicles at or below 6,000 pounds GVWR and 
(2) 0.5 g/mile for vehicles over 6,000 pounds, including MDPVs.\186\ 
The new standard would not require additional certification testing 
beyond what is required today with ``worst case'' model selection of a 
durability test group.\187\ NMHC emissions would be measured during the 
Cold CO test, which already requires hydrocarbon measurement.\188\
---------------------------------------------------------------------------

    \186\ Tier 2 created the medium-duty passenger vehicle (MDPV) 
category to include larger complete passenger vehicles, such as SUVs 
and vans, with a GVWR of 8,501-10,000 pounds GVWR. Large pick-ups 
above 8,500 pounds are not included in the MDPV category but are 
included in the heavy-duty vehicle category.
    \187\ The existing cold FTP test procedures are specified in 40 
CFR Subpart C. In the proposed rule for fuel economy labeling, 
recently signed on January 10, 2006 (71, FR 5426, February 1, 2006), 
EPA is seeking comment on the issue of requiring manufacturers to 
run the heater and/or defroster while conducting the cold FTP test. 
As discussed in the fuel economy labeling proposed rule, we do not 
believe this requirement would have a significant impact on 
emissions.
    \188\ 40 CFR Subpart C, Sec.  86.244-94 requires the measurement 
of all pollutants measured over the FTP except NOX.
---------------------------------------------------------------------------

    The separate fleet average standards are proposed to address 
challenges related to vehicle weight. We examined the certification 
data from interim non-Tier 2 vehicles (i.e., vehicles not yet phased in 
to the final Tier 2 program, but meeting interim standards established 
by Tier 2), and we determined that there was a general trend of 
increasing hydrocarbon levels with heavier GVWR vehicles. Heavier 
vehicles generally produce higher levels of emissions for several 
reasons. First, added weight results in additional work required to 
accelerate the vehicle mass. This generally results in higher 
emissions, particularly early in the test right after engine start-up. 
Second, the design of these vehicle emission control systems may 
incorporate designs for heavy work (i.e., trailer towing) that may put 
them at some disadvantage at 20[deg] F cold starts. For example, the 
catalyst may be located further away from the engine so it is protected 
from high exhaust temperatures. This catalyst placement may delay the 
warm-up of the catalyst, especially at colder temperatures. Therefore, 
we believe a standard that is higher than the 0.3 g/mile level proposed 
for vehicles below 6,000 lbs GVWR, is what is technically feasible for 
heavier vehicles. The proposed 0.5 g/mile standard would apply for 
vehicles over 6000 lbs GVWR, which includes both HLDTs (6000 lbs to 
8500 lbs) and MDPVs.
    We are proposing the sales-weighted fleet average approach because 
it achieves the greatest degree of emission control feasible for Tier 2 
vehicles, while allowing manufacturers flexibility to certify different 
vehicle groups to different levels and thus providing both lower cost 
and feasible lead times. We believe this is an appropriate approach 
because the base Tier 2 program is also based on emissions averaging, 
and will result in a mix of emissions control strategies across the 
fleet that would have varying cold temperature capabilities. These 
capabilities won't be fully understood until manufacturers go through 
the process of evaluating each Tier 2 package for cold temperature 
emissions control potential. Also, Tier 2 is still being phased in and 
some Tier 2 vehicle emissions control packages are still being 
developed. A fleet average provides manufacturers with flexibility to 
balance challenging vehicle families with ones that more easily achieve 
the standards.

[[Page 15847]]

    There are several ways fleet averaging can work. In Tier 2, we 
established bins of standards to which individual vehicle families were 
certified. Each bin contains a NOX standard, and these 
NOX standards are then sales-weighted to demonstrate 
compliance with the corporate average NOX standard. In other 
emissions control programs, such as the highway motorcycle program and 
the highway and nonroad heavy-duty engine programs, we have established 
a Family Emissions Limit (FEL) structure. In this approach, 
manufacturers establish individual FELs for each group of vehicles 
certified. These FELs serve as the standard for each individual group, 
and the FELs are averaged together on a sales-weighted basis to 
demonstrate overall compliance with the standards. For the proposed new 
cold temperature NMHC standards, we are proposing to use the FEL-based 
approach. We believe the FEL approach adds flexibility and should lead 
to cost-effective improvements in vehicle emissions performance. The 
FEL approach is discussed further in Section VI.B.4 below.
    We are proposing to apply the new cold temperature NMHC standards 
to Tier 2 gasoline-fueled vehicles. We are not proposing to apply the 
standards to diesel vehicles, alternative-fueled vehicles, or heavy-
duty vehicles, in general, due to a lack of data on which to base 
standards. Section VI.B., below, provides a detailed discussion of 
applicability.
    As discussed above, we are expecting PM reductions at cold 
temperatures as a result of the control strategies we expect 
manufacturers to meet under the proposed cold temperature NMHC 
standards. We may consider the need for a separate PM standard under 
CAA section 202(a), as part of a future rulemaking, to further ensure 
that PM reductions occur under cold temperature conditions. We also 
request comments on what testing challenges exist for testing PM under 
cold conditions. We request that comments be supported by data where 
possible.
    We request comments on the level of the new standards and the 
averaging approach we are proposing, and we urge commenters to include 
supporting information and data where possible.
2. Feasibility of the Proposed Standards
    We believe the proposed standards are feasible, based on our 
analysis of the stringency of the standard provided below and the lead 
time and flexibilities described in section VI.B.3. We believe that the 
proposed standards could be achieved using a number of the technologies 
discussed in the following section, but that none of these potential 
technologies performs markedly better than any other. Moreover, as 
explained in section VI.D, we do not believe that additional reductions 
would be feasible without significant changes in Tier 2 technology, and 
we are not yet in a position to fully evaluate the achievability of 
standards based on such technologies. We thus are not considering more 
stringent cold temperature NMHC standards. We request comment on our 
analysis of the feasibility of the proposed standards.
a. Currently Available Emission Control Technologies
    We believe that the cold temperature NMHC standards being proposed 
today for gasoline-fueled vehicles are challenging but within the reach 
of Tier 2 level emission control technologies. Our proposed 
determination of feasibility is based on the emission control hardware 
and strategies that are already in use today on Tier 2 vehicles. These 
emission control technologies are successfully used to meet the 
stringent Tier 2 standards for HC at the FTP temperature range of 
68[deg] F to 86[deg] F, but generally are not fully used or activated 
at colder temperatures. As discussed in section VI.D, we are not 
proposing standards that would force changes to Tier 2 technology at 
this time. As discussed above, many current engine families are already 
achieving emissions levels at or below the proposed emission standards 
(see RIA Chapter 5), while other engine families are at levels greater 
than twice the proposed standard. The only apparent reason for the 
difference is the failure of some vehicles to use the Tier 2 control 
technologies at cold temperatures. While manufacturers could always 
choose to use additional hardware to facilitate compliance with the 
proposed standard, many of the engine families already at levels below 
the proposed standard do not necessarily contain any unique enabling 
hardware. These vehicles appear to achieve their results through mainly 
software and calibration control technologies. Thus, we believe our 
proposed standards can be met by the application of calibration and 
software approaches similar to those currently used at 50[deg] F and 
75[deg] F, and we have estimated cost of control based on use of 
calibration and software approaches. Estimated costs are provided in 
section IX below, and in Chapter 8 of the RIA. As described in section 
VI.B.2.c, our own feasibility testing of a vehicle over 6000 lbs GVWR 
achieved NMHC reductions consistent with the proposed standard without 
the use of new hardware.
    In addition, a 20[deg] F cold hydrocarbon requirement has been in 
place in Europe since approximately the 2002 model year.\189\ Many 
manufacturers currently have common vehicle models offered in Europe 
and the U.S. market. While the European standard is over a different 
drive cycle, unique strategies have been developed to comply with this 
standard. In fact, when the new European cold hydrocarbon standard was 
implemented in conjunction with a new 75[deg] F standard (Euro4), many 
manufacturers responded by implementing NLEV level hardware and 
supplementing this hardware with advanced cold start emission control 
strategies. Although we are proposing a sales-weighted fleet average 
standard, the European standard is a fixed standard that cannot be 
exceeded by any vehicle model. Like the standard we are proposing, 
Europe also has made distinctions in the level of the standard 
reflecting that heavier weight vehicles cannot achieve as stringent a 
standard. Those manufacturers with European models shared with the U.S. 
market have the opportunity to leverage their European models or 
divisions in an attempt to transfer the emission control technologies 
that are used today for 20[deg] F hydrocarbon control.
---------------------------------------------------------------------------

    \189\ European Union (EU) Type VI Test (-7[deg] C) required for 
new vehicle model certified as of 1/1/2002.
---------------------------------------------------------------------------

    There are several different approaches or strategies used in the 
vehicles that are achieving proportional improvements in NMHC emissions 
at 20[deg] F FTP. Several European models sold in the U.S. market that 
demonstrate excellent cold hydrocarbon performance are utilizing 
secondary air systems at the 20[deg] F start temperature. These 
secondary air systems, sometimes called air pumps, inject ambient air 
into the exhaust immediately after the cold start. This performs 
additional combustion of unburned hydrocarbons prior to the catalytic 
converter and also accelerates the necessary heating of the catalytic 
converter. In the past and even recently, these systems have been used 
extensively to improve hydrocarbon performance at 75[deg] F starts. As 
predicted in the Tier 2 Final Rule, a portion of the Tier 2 fleet is 
being equipped with secondary air systems in order to comply with Tier 
2 standards.
    Some manufacturers that currently have these systems available on 
their vehicles have indicated that they are simply not utilizing them 
at temperatures below freezing due to past engineering issues. The 
manufacturers that are using secondary air at 20[deg] F, mainly 
European manufacturers, have indicated that these engineering

[[Page 15848]]

challenges have been addressed through design changes. The robustness 
of these systems below freezing has also been confirmed with the 
manufacturers and with the suppliers of the secondary air 
components.\190\ While not necessarily producing 20[deg] F NMHC 
emission results better than other available technologies, vehicles 
equipped with this technology should be able to meet the proposed 
20[deg] F standard by capitalizing on this hardware.
---------------------------------------------------------------------------

    \190\ Memo to docket ``Discussions Regarding Secondary Air 
System Usage at 20[deg] F with European Automotive Manufacturers and 
Suppliers of Secondary Air Systems,'' December 2005.
---------------------------------------------------------------------------

    Manufacturers have also used several other strategies to 
successfully produce proportional improvements in hydrocarbon emissions 
at 20[deg] F. These include lean limit fuel strategies, elevated idle 
speeds, retarded spark timing, and accelerated closed loop times. Some 
software design strategies include fuel injection strategies detailed 
in past Society of Automotive Engineers (SAE) papers \191\ that 
synchronize fuel injection timing with engine intake valve position to 
provide optimal fuel preparation. Spark delivery strategies have also 
been entertained that include higher energy levels and even redundant 
spark delivery to possibly complete additional combustion of unburned 
hydrocarbons. We expect that software and/or calibration changes, such 
as previously described, will generally perform as well or better than 
added hardware. This is because critical hardware such as the catalyst 
may not be immediately usable directly following the cold start. See 
RIA Chapter 5 for further discussion.
---------------------------------------------------------------------------

    \191\ Meyer, Robert and John B. Heywood, ``Liquid Fuel Transport 
Mechanisms into the Cylinder of a Firing Port-Injected SI Engine 
During Start-up,'' SAE 970865, 1997.
---------------------------------------------------------------------------

b. Feasibility Considering Current Certification Levels, Deterioration 
and Compliance Margin
    Of the vehicles that were certified to Tier 2 and demonstrated 
proportional improvements in hydrocarbon emissions, approximately 20% 
of vehicles below 6,000 pounds GVWR had certification levels in the 
range of two to three times the 75[deg] F Tier 2 bin 5 full useful life 
standard (.18 g/mile to .27 g/mile). These reported hydrocarbon levels 
are from Cold CO test results for certification test vehicles with 
typically only 4,000 mile aged systems, without full useful life 
deterioration applied. Due to rapid advances in emission control 
hardware technology, deterioration factors used today by manufacturers 
to demonstrate full useful life compliance are very low and typically 
even indicate little or no deterioration over the life of the vehicle. 
The deterioration factors generated today by manufacturers are common 
across all required test cycles including cold temperature testing. The 
standards we are proposing will have a full useful life of 120,000 
miles, consistent with Tier 2 standards. Additionally, manufacturers 
typically target certification emission levels that incorporate a 20% 
to 30% compliance margin primarily to account for in-use issues that 
may cause emissions variability. The 0.3 g/mile FEL standard would 
leave adequate flexibility for compliance margins and any emissions 
deterioration concerns. See RIA Chapter 5 for further discussion and 
details regarding current certification levels.
    Given enough lead time, we believe manufacturers would be able to 
develop control strategies for each of their widely varying product 
lines utilizing the approaches outlined above without fundamentally 
changing the design of the vehicles.
c. Feasibility and Test Programs for Higher Weight Vehicles
    While a few of the heavier vehicles achieved a standard similar to 
the lighter weight class, there were limited certification results 
available for Tier 2 compliant vehicles over 6000 lbs GVWR (due to the 
later Tier 2 phase-in schedule for these vehicles). To further support 
the feasibility of the standard for heavier vehicles, we conducted a 
feasibility study for Tier 2 vehicles over 6000 lbs GVWR to assess 
their capabilities with typical Tier 2 hardware. We were able to reduce 
HC emissions for one vehicle with models above and below 6,000 pounds 
GVWR by between 60-70 percent, depending on control strategy, from a 
baseline level of about 1.0 g/mile. The results are well within the 0.5 
g/mile standard including compliance margin, and we even achieved a 0.3 
g/mile level on some tests. We achieved these reductions through 
recalibration without the use of new hardware. The findings from the 
study are provided in detail in the RIA.
    We believe the proposed standards are feasible while at the same 
time providing the greatest degree of emission reduction achievable 
through the application of available technology. Our feasibility 
assessment, provided above, is based on our analysis of the stringency 
of the standard given current emission levels at certification 
(considering deterioration, compliance margin, and vehicle weight); 
available emission control techniques; and our own feasibility testing. 
In addition, sections VI.B.3-6 describe the proposed lead time and 
flexibility within the program structure, which also contribute to the 
feasibility of the proposed standards. Chapter 8 of the RIA provides 
our cost estimations per vehicle and on a nationwide basis, including 
capital and development costs. We believe the estimated costs are 
reasonable and the proposal is cost effective, as provided in section 
IX, below. Given the emission control strategies we expect 
manufacturers to utilize, we expect feasible implementation of 
technologies without a significant impact on vehicle noise, energy 
consumption, or safety factors. Although manufacturers would need to 
employ new emissions control strategies at cold temperatures, 
fundamental Tier 2 vehicle hardware and designs are not expected to 
change. In addition, we are providing necessary lead time for 
manufacturers to identify and resolve any related issues as part of 
overall vehicle development. We request comment on our analysis of the 
feasibility of the proposed standards.
3. Standards Timing and Phase-in
a. Phase-In Schedule
    EPA must consider lead time in determining the greatest degree of 
emission reduction achievable under section 202(l) of the CAA. We are 
proposing to begin implementing the standard in the 2010 model year 
(MY) for LDVs/LLDTs and 2012 MY for HLDTs/MDPVs. The proposed 
implementation schedule, in Table VI.B-2, begins 3 model years after 
Tier 2 phase-in is complete for both vehicle classes. Manufacturers 
would demonstrate compliance with phase-in requirements through sales 
projections, similar to Tier 2. The 3-year period between completion of 
the Tier 2 phase-in and the start of the new cold NMHC standard should 
provide vehicle manufacturers sufficient lead time to design their 
compliance strategies and determine the product development plans 
necessary to meet the new standards. We believe that this phase-in 
schedule is needed to allow manufacturers to develop compliant vehicles 
without significant disruptions in the product development cycles. 
Also, for vehicles above 6,000 GVWR, section 202(a) of the Act requires 
that four years of lead time be provided to manufacturers.
    We recognize that the new cold temperature standards we are 
proposing could represent a significant new challenge for manufacturers 
and development time will be needed. The issue of NMHC control at cold 
temperatures was not anticipated by

[[Page 15849]]

many entities, and research and development to address the issue is 
consequently at a rudimentary stage. Lead time is therefore necessary 
before compliance can be demonstrated. While certification will only 
require one vehicle model of a durability group to be tested, 
manufacturers must do development on all vehicle combinations to ensure 
full compliance within the durability test group. We believe a phase-in 
allows the program to begin sooner than would otherwise be feasible.

               Table VI.B-2.--Proposed Phase-in Schedule for 20 [deg]F NMHC Standard by Model Year
----------------------------------------------------------------------------------------------------------------
      Vehicle GVWR (category)           2010         2011         2012         2013         2014         2015
----------------------------------------------------------------------------------------------------------------
<= 6000 lbs (LDV/LLDT)............          25%          50%          75%         100%  ...........  ...........
> 6000 lbs HLDT and MDPV..........  ...........  ...........          25%          50%          75%         100%
----------------------------------------------------------------------------------------------------------------

    In considering a phase-in period, manufacturers have raised 
concerns that a rapid phase-in schedule would lead to a significant 
increase in the demand for their cold testing facilities, which could 
necessitate substantial capital investment in new cold test facilities 
to meet development needs. This is because manufacturers would need to 
use their cold testing facilities not only for certification but also 
for vehicle development. If vehicle development is compressed into a 
narrow time window, significant numbers of new facilities would be 
needed. Manufacturers were further concerned that investment in new 
test facilities would be stranded at the completion of the initial 
development and phase-in period.
    As stated earlier, durability test groups may be large and diverse 
and therefore require significant development effort and cold test 
facility usage for each model. Our proposed phase-in period 
accommodates test facilities and work load concerns by distributing 
these fleet phase-in percentage requirements over a 4-year period for 
each vehicle weight category. The staggered start dates for the phase-
in schedule between the two weight categories should further alleviate 
manufacturers' concerns with needing to construct new test facilities. 
Some manufacturers may still determine that upgrades to their current 
cold facility are needed to handle increased workload. Some 
manufacturers have indicated that they would simply add additional 
shifts to their facility work schedules that are not in place today. 
Some manufacturers will already meet the first-year requirement based 
on current certification reporting, essentially providing an additional 
year for distributing the anticipated development test burden for the 
remaining fleet. The 4-year phase-in period provides ample time for 
vehicle manufacturers to develop a compliance schedule that is 
coordinated with their future product plans and projected product sales 
volumes of the different vehicle models.
    We request comments on the proposed start date and duration of the 
phase-in schedule. We also request comment on allowing a volume-based 
offset during the phase-in period for cases where manufacturers 
voluntarily certify heavy-duty vehicles above 8,500 pound GVWR to the 
proposed cold temperature standards. This may provide incentive for 
voluntary certification of these heavier vehicles.
b. Alternative Phase-In Schedules
    Alternative phase-in schedules essentially credit the manufacturer 
for its early or accelerated efforts and allow the manufacturer greater 
flexibility in subsequent years during the phase-in. By introducing 
vehicles earlier than required, manufacturers would earn the 
flexibility to make offsetting adjustments, on a vehicle-year basis, to 
the phase-in percentages in later years. Under these alternative 
schedules, manufacturers would have to introduce vehicles that meet or 
surpass the NHMC average standards before they are required to do so, 
or else introduce vehicles that meet or surpass the standard in greater 
quantities than required.
    We are proposing that manufacturers may apply for an alternative 
phase-in schedule that would still result in 100% phase-in by 2013 and 
2015, respectively, for the lighter and heavier weight categories. As 
with the primary phase-in, manufacturers would base an alternative 
phase-in on their projected sales estimates. An alternate phase-in 
schedule submitted by a manufacturer would be subject to EPA approval 
and would need to provide the same emissions reductions as the primary 
phase-in schedule. We propose that the alternative phase-in could not 
be used to delay full implementation past the last year of the primary 
phase-in schedule (2013 for LDVs/LDTs and 2015 for HLDTs/MDPVs).
    An alternative phase-in schedule would be acceptable if it passes a 
specific mathematical test. We have designed the test to provide 
manufacturers a benefit from certifying to the standards early, while 
ensuring that significant numbers of vehicles are introduced during 
each year of the alternative phase-in schedule. Manufacturers would 
multiply their percent phase-in by the number of years the vehicles are 
phased in prior to the second full phase-in year. The sum of the 
calculation would need to be greater than or equal to 500, which is the 
sum from the primary phase-in schedule (4*25 + 3*50 + 2*75 + 
1*100=500). For example, the equation for LDVs/LLDTs would be as 
follows:

(6xAPI2008) + (5xAPI 2009) + (4xAPI 
2010) + (3xAPI 2011) + (2xAPI 2012) + 
(1xAPI 2013) >= 500%,

Where:

API is the anticipated phase-in percentage for the referenced model 
year.

    California used this approach to an alternative phase-in for the 
LEVII program.\192\ It provides alternative phase-in credit for both 
the number of vehicles phased in early and the number of years the 
early phase-in occurs.
---------------------------------------------------------------------------

    \192\ Title 13, California Code of Regulations, Section 
1961(b)(2).
---------------------------------------------------------------------------

    As described above, the final sum of percentages for both LDVs/LDTs 
and HLDTs/MDPVs must equal or exceed 500--the sum that results from a 
25/50/75/100 percent phase-in. For example, a 10/25/50/55/100 percent 
phase-in for LDVs/LDTs that begins in 2009 will have a sum of 510 
percent and is acceptable. A 10/20/40/70/100 percent phase-in that 
begins the same year has a sum of 490 percent and is not acceptable.
    To ensure that significant numbers of LDVs/LDTs are introduced in 
the 2010 time frame (2012 for HLDTs/MDPVs), manufacturers would not be 
permitted to use alternative phase-in schedules that delay the 
implementation of the requirements, even if the sum of the phase-in 
percentages ultimately meets or exceeds 500. Such a situation could 
occur if a manufacturer delayed implementation of its compliant 
production until 2011 and began an 80/85/100 percent phase-in that year 
for

[[Page 15850]]

LDVs/LDTs. To protect against this possibility, we are proposing that 
for any alternative phase-in schedule, a manufacturer's phase-in 
percentages*years factor from the 2010 and earlier model years sum to 
at least 100 (2012 and earlier for HLDTs/MDPVs). The early phase-in 
also encourages the early introduction of vehicles meeting the new 
standard or the introduction of such vehicles in greater quantity than 
required. This would achieve early emissions reductions and provide an 
opportunity to gain experience in meeting the standards.
    Phase-in schedules, in general, add little flexibility for 
manufacturers with limited product offerings because a manufacturer 
with only one or two test groups cannot take full advantage of a 25/50/
75/100 percent or similar phase-in. Therefore, consistent with the 
recommendations of the Small Advocacy Review Panel (SBAR Panel), which 
we discuss in more detail later in section VI.E, manufacturers meeting 
EPA's definition of ``small volume manufacturer'' would be exempt from 
the phase-in schedules and would be required to simply comply with the 
final 100% compliance requirement. This provision would only apply to 
small volume manufacturers and not to small test groups of larger 
manufacturers.
4. Certification Levels
    Manufacturers typically certify groupings of vehicles called 
durability groups and test groups, and they have some discretion on 
what vehicle models are placed in each group. A durability group is the 
basic classification used by manufacturers to group vehicles to 
demonstrate durability and predict deterioration. A test group is a 
basic classification within a durability group used to demonstrate 
compliance with FTP 75[deg] F standards.\193\ For Cold CO, 
manufacturers certify on a durability group basis, whereas for 75[deg] 
F FTP testing, manufacturers certify on a test group basis. In keeping 
with the current cold CO standards, we are proposing to require testing 
on a durability group basis for the cold temperature NMHC standard. We 
also propose to allow manufacturers the option of certifying on the 
smaller test group basis, as is allowed under current cold CO 
standards. Testing on a test group basis would require more tests to be 
run by manufacturers but may provide them with more flexibility within 
the averaging program. In either case, the worst case vehicle within 
the group from an NMHC emissions standpoint would be tested for 
certification.
---------------------------------------------------------------------------

    \193\ 40 CFR 86.1803-01.
---------------------------------------------------------------------------

    For the new standard, manufacturers would declare a family emission 
limit (FEL) for each group either at, above, or below the fleet 
averaging standard. The FEL would be based on the certification NMHC 
level, including deterioration factor, plus the compliance margin 
manufacturers feel is needed to ensure in-use compliance. The FEL 
becomes the standard for each group, and each group could have a 
different FEL so long as the projected sales-weighted average level met 
the fleet average standard at time of certification. Like the standard, 
the certification resolution for the FEL would be one decimal point. 
This FEL approach would be similar to having bins in 0.1 g/mile 
intervals, with no upper limit. Similar to a bin approach, 
manufacturers would compute a sales-weighted average for the NMHC 
emissions at the end of the model year and then determine credits 
generated or needed based on how much the average is above or below the 
standard.
5. Credit Program
    As described above, we are proposing that manufacturers average the 
NMHC emissions of their vehicles and comply with a corporate average 
NMHC standard. In addition, we are proposing that when a manufacturer's 
average NMHC emissions of vehicles certified and sold falls below the 
corporate average standard, it could generate credits that it could 
save for later use (banking) or sell to another manufacturer (trading). 
Manufacturers would consume any credits if their corporate average NMHC 
emissions were above the applicable standard for the weight class.
    EPA views the proposed averaging, banking, and trading (ABT) 
provisions as an important element in setting emission standards 
reflecting the greatest degree of emission reduction achievable, 
considering factors including cost and lead time. If there are vehicles 
that will be particularly costly or have a particularly hard time 
coming into compliance with the standard, a manufacturer can adjust the 
compliance schedule accordingly, without special delays or exceptions 
having to be written into the rule. This is an important flexibility 
especially given the current uncertainty regarding optimal technology 
strategies for any given vehicle line. In addition, ABT allows us to 
consider a more stringent emission standard than might otherwise be 
achievable under the CAA, since ABT reduces the cost and improves the 
technological feasibility of achieving the standard. By enhancing the 
technological feasibility and cost effectiveness of the proposed 
standard, ABT allows the standard to be attainable earlier than might 
otherwise be possible.
    Credits may be generated prior to, during, and after the phase-in 
period. Manufacturers could certify LDVs/LLDTs to standards as early as 
the 2008 model year (2010 for HLDTs/MDPVs) and receive early NMHC 
credits for their efforts. They could use credits generated under these 
``early banking'' provisions after the phase-in begins in 2010 (2012 
for HLDTs/MDPVs).
a. How Credits Are Calculated
    The corporate average for each weight class would be calculated by 
computing a sales-weighted average of the NMHC levels to which each FEL 
was certified. As discussed above, manufacturers group vehicles into 
durability groups or test groups and establish an FEL for each group. 
This FEL becomes the standard for that group. Consistent with FEL 
practices in other programs, manufacturers may opt to select an FEL 
above the test level. The FEL would be used in calculating credits. The 
number of credits or debits would then be determined using the 
following equation:

Credits or Debits = (Standard - Sales weighted average of FELs to 
nearest tenth) x Actual Sales

    If a manufacturer's average was below the 0.3 g/mi corporate 
average standard for LDVs/LDTs, credits would be generated (below 0.5 
g/mi for HLDTs/MDPVs). These credits could then be used in a future 
model year when its average NMHC might exceed the 0.3 or the 0.5 
standard. Conversely, if the manufacturer's fleet average was above the 
corporate average standard, banked credits could offset the difference, 
or credits could be purchased from another manufacturer.
b. Credits Earned Prior to Primary Phase-in Schedule
    We propose that manufacturers could earn early emissions credits if 
they introduce vehicles that comply with the new standards early and 
the corporate average of those vehicles is below the applicable 
standard. Early credits could be earned starting in 2008 for vehicles 
meeting the 0.3 g/mile standard and in 2010 for vehicles meeting the 
0.5 g/mile standard. These emissions credits generated prior to the 
start of the phase-in could be used both during and after the phase-in 
period and have all the same properties as credits generated by 
vehicles subject to the primary phase-in schedule. As previously 
mentioned, we are also proposing that manufacturers

[[Page 15851]]

may apply for an alternative phase-in schedule for vehicles that are 
introduced early. The alternative phase-in and early credits provisions 
would operate independent of one another.
c. How Credits Can Be Used
    A manufacturer could use credits in any future year when its 
corporate average was above the standard, or it could trade (sell) the 
credits to other manufacturers. Because of separate sets of standards 
for the different weight categories, we are proposing that 
manufacturers compute their corporate NMHC averages separately for LDV/
LLDTs and HLDTs/MDPVs. Credit exchanges between LDVs/LLDTs and HLDTs/
MDPVs would be allowed. This will provide added flexibility for fuller-
line manufacturers who may have the greatest challenge in meeting the 
new standards due to their wide disparity of vehicle types/weights and 
emissions levels.
d. Discounting and Unlimited Life
    Credits would allow manufacturers a way to address unexpected 
shifts in their sales mix. The NMHC emission standards in this proposed 
program are quite stringent and do not present easy opportunities to 
generate credits. Therefore, we are not proposing to discount unused 
credits. Further, the degree to which manufacturers invest the 
resources to achieve extra NMHC reductions provides true value to the 
manufacturer and the environment. We do not want to take measures to 
reduce the incentive for manufacturers to bank credits, nor do we want 
to take measures to encourage unnecessary credit use. Consequently we 
are not proposing that the NMHC credits would have a credit life limit. 
However, we are proposing that they only be used to offset deficits 
accrued with respect to the proposed 0.3/0.5 g/mile cold temperature 
standards. We request comment on the need for discounting of credits or 
credit life limits and what those discount rates or limits, if any, 
should be.
e. Deficits Could Be Carried Forward
    When a manufacturer has an NMHC deficit at the end of a model 
year--that is, its corporate average NMHC level is above the required 
corporate average NMHC standard--we are proposing that the manufacturer 
be allowed to carry that deficit forward into the next model year. Such 
a carry-forward could only occur after the manufacturer used any banked 
credits. If the deficit still existed and the manufacturer chose not 
to, or was unable to, purchase credits, the deficit could be carried 
over. At the end of that next model year, the deficit would need to be 
covered with an appropriate number of credits that the manufacturer 
generated or purchased. Any remaining deficit would be subject to an 
enforcement action.
    To prevent deficits from being carried forward indefinitely, we 
propose that manufacturers would not be permitted to run a deficit for 
two years in a row. We believe that it is reasonable to provide this 
flexibility to carry a deficit for one year given the uncertainties 
that manufacturers face with changing market forces and consumer 
preferences, especially during the introduction of new technologies. 
These uncertainties can make it hard for manufacturers to accurately 
predict sales trends of different vehicle models.
f. Voluntary Heavy-Duty Vehicle Credit Program
    In addition to MDPV requirements in Tier 2, we also currently have 
chassis-based emissions standards for other complete heavy-duty 
vehicles (e.g., large pick-ups and cargo vans) above 8,500 pound GVWR. 
However, these standards do not include cold temperature CO standards. 
As noted below in section VI.B.6.a, we are not proposing to apply cold 
temperature NMHC standards to heavy-duty gasoline vehicles due to a 
current lack of emissions data on which to base such standards. We plan 
to revisit the need for and feasibility of standards as data become 
available.
    During discussions with manufacturers, we discussed a voluntary 
program for chassis-certified complete heavy-duty vehicles. We believe 
that there may be opportunities within the framework of a cold 
temperature NMHC program to allow for emissions credits from chassis-
certified heavy-duty vehicles above 8,500 pounds GVWR to be used to 
meet the proposed standards. It is possible that some control 
strategies developed for meeting cold NMHC emissions standards could 
also be applied to these vehicles above 8,500 pounds GVWR.
    One approach would be to allow manufacturers to certify heavy-duty 
vehicles voluntarily to the 0.5 g/mile cold NMHC standards proposed for 
HLDTs/MDPVs. To the extent that heavy-duty vehicles achieve FELs below 
the 0.5 g/mile standard, manufacturers could earn credits which could 
be applied to any vehicle subject to the proposed standard. It is 
unclear, however, if this approach would provide a meaningful 
opportunity for credit generation, given the stringency of the 
standard. We would expect that most heavy-duty vehicles would have 
emissions well above the 0.5 g/mile level, based on the additional 
weight of the vehicle. We request comment on this approach, as well as 
others for voluntary certification and credit generation.
    It may be possible to establish a voluntary standard above 0.5 g/
mile for purposes of generating credits, but we would need data on 
which to base this level of the standard. Suggestions on an appropriate 
level of a voluntary standard are welcomed, as well as any data that 
support such a recommendation. Comments on testing protocols, such as 
use of the vehicle's adjusted loaded vehicle weight (ALVW) or loaded 
vehicle weight (LVW), are also encouraged. We believe such a voluntary 
program could provide significant data that would help us evaluate the 
feasibility of a future standard for these vehicles.
6. Additional Vehicle Cold Temperature Standard Provisions
    We request comments on all of the following proposed provisions.
a. Applicability
    We are proposing to apply the new cold temperature standards to all 
gasoline-fueled light-duty vehicles and MDPVs sold nationwide. While we 
have significant amounts of data on which to base our proposals for 
gasoline-fueled light-duty vehicles, we have very little data for 
light-duty diesels. For 75[deg] F FTP standards, the same set of 
standards apply, but in the 20[deg] F context we know very little about 
diesel emissions due to a lack of data. Currently, diesel vehicles are 
not subject to the cold CO standard, so there are no requirements to 
test diesel vehicles at cold temperatures. There are sound engineering 
reasons, however, to expect cold NMHC emissions for diesel vehicles to 
be as low as or even lower than the proposed standards. This is because 
diesel engines operate under leaner air-fuel mixtures compared to 
gasoline engines, and therefore have fewer engine-out NMHC emissions 
due to the abundance of oxygen and more complete combustion. A very 
limited amount of confidential manufacturer-furnished information is 
consistent with this engineering hypothesis. A comprehensive assessment 
of appropriate standards for diesel vehicles would require a 
significant amount of investigation and analysis of issues such as 
feasibility and costs. This effort would be better suited to a future 
rulemaking. Therefore, at this time, we are not proposing to apply the 
cold NMHC standards to light-duty diesel vehicles. We will continue to 
evaluate

[[Page 15852]]

data for these vehicles as they enter the fleet and will reconsider the 
need for standards if data indicate that there may be instances of high 
NMHC emissions from diesels at cold temperatures. We have proposed cold 
temperature FTP testing for diesels as part of the Fuel Economy 
Labeling rulemaking, including NMHC measurement.\194\ This testing data 
would allow us to assess NMHC certification type data over time. 
However, this wouldn't include development testing manufacturers would 
need to do in order to meet a new diesel cold temperature standard.
---------------------------------------------------------------------------

    \194\ ``Fuel Economy Labeling of Motor Vehicles; Revisions to 
Improve Calculation of Fuel Economy Estimates,'' Proposed Rule, 71, 
FR 5426, February 1, 2006.
---------------------------------------------------------------------------

    In addition, there currently is no cold CO testing requirement for 
alternative fuel vehicles. There are little data upon which to evaluate 
NMHC emissions when operating on alternative fuels at cold 
temperatures. For fuels such as ethanol, it is difficult to develop a 
reasonable proposal due to a lack of fuel specifications, testing 
protocols, and current test data. Other fuels such as methanol and 
natural gas pose similar uncertainty. Therefore, we are not proposing a 
cold NMHC testing requirement for alternative fuel vehicles. We will 
continue to investigate these other technologies and request comment on 
standards for vehicles operating on fuels other than gasoline.
    We are proposing that flex-fuel vehicles would still require 
certification to the applicable cold NMHC standard, though only when 
operated on gasoline. For multi-fuel vehicles, manufacturers would need 
to submit a statement at the time of certification that either confirms 
the same control strategies used with gasoline would be used when 
operating on ethanol, or that identifies any differences as an 
Auxiliary Emission Control Device (AECD). Again, dedicated alternative-
fueled vehicles, including E-85 vehicles, would not be covered.
    For heavy-duty gasoline-fueled vehicles, we have no data, but we 
would expect a range of emissions performance similar to that of 
lighter gasoline-fueled trucks. Due to the lack of test data on which 
to base feasibility and cost analyses, we are not proposing cold 
temperature NMHC standards for these vehicles at this time. We request 
comments and data on these vehicles and plan to revisit this issue when 
sufficient data is available.
b. Useful Life
    The ``useful life'' of a vehicle means the period of use or time 
during which an emission standard applies to light-duty vehicles and 
light-duty trucks.\195\ Consistent with the current definition of 
useful life in the Tier 2 regulations, for all LDVs/LDTs and HLDTs/
MDPVs, we are proposing new full useful life standards for cold 
temperature NMHC standards. Given that we expect that manufacturers 
will make calibration or software changes to existing Tier 2 
technologies, it is reasonable for there to be the same useful life as 
for the Tier 2 standards themselves. For LDV/LLDT, the full useful life 
values would be 120,000 miles or 10 years, whichever comes first, and 
for HLDT/MDPV, full useful life is 120,000 miles or 11 years, whichever 
comes first.\196\
---------------------------------------------------------------------------

    \195\ 40 CFR 86.1803-01.
    \196\ 40 CFR 86.1805-04.
---------------------------------------------------------------------------

c. High Altitude
    We do not expect emissions to be significantly different at high 
altitude due to the use of common emissions control calibrations. 
Limited data submitted by a manufacturer suggest that FTP emissions 
performance at high altitude generally follows sea level performance. 
Furthermore, there are very limited cold temperature testing facilities 
at high altitudes. Therefore, under normal circumstances, manufacturers 
would not be required to submit vehicle test data for high altitude. 
Instead, manufacturers would be required to submit an engineering 
evaluation indicating that common calibration approaches are utilized 
at high altitude. Any deviation from sea level in emissions control 
practices would be required to be included in the auxiliary emission 
control device (AECD) descriptions submitted by manufacturers at 
certification. Additionally, any AECD specific to high altitude would 
require engineering emission data for EPA evaluation to quantify any 
emission impact and validity of the AECD.
d. In-Use Standards for Vehicles Produced During Phase-In
    As we have indicated, the standards we are proposing would be more 
challenging for some vehicles than for others. With any new technology, 
or even with new calibrations of existing technology, there are risks 
of in-use compliance problems that may not appear in the certification 
process. In-use compliance concerns may discourage manufacturers from 
applying new calibrations or technologies. Thus, it may be appropriate 
for the first few years, for those vehicles most likely to require the 
greatest applications of effort, to provide assurance to the 
manufacturers that they will not face recall if they exceed standards 
in use by a specified amount. Therefore, similar to the approach used 
in Tier 2, we are proposing an in-use standard that is 0.1 g/mile 
higher than the certification FEL for any given test group for a 
limited number of model years.\197\ For example, a test group with a 
0.2 g/mile FEL would have an in-use standard of 0.3 g/mile. This would 
not change the FEL or averaging approaches and would only apply in 
cases where EPA tests vehicles in-use to ensure emissions compliance.
---------------------------------------------------------------------------

    \197\ ``Control of Air Pollution from New Motor Vehicles: Tier 2 
Motor Vehicle Emissions Standards and Gasoline Sulfur Control 
Requirements'', Final Rule, 65 FR 6796, February 10, 2000.
---------------------------------------------------------------------------

    We propose that the in-use standards be available for the first few 
model years of sales after a test group meeting the new standards is 
introduced, according to a schedule that provides more years for test 
groups introduced earlier in the phase-in. This schedule provides 
manufacturers with time to determine the in-use performance of vehicles 
and learn from the earliest years of the program to help ensure that 
vehicles introduced after the phase-in period meet the final standards 
in-use. It also assumes that once a test group is certified to the new 
standards, it will be carried over to future model years. The tables 
below provide the proposed schedule for the availability of the in-use 
standards.

                           Table VI.B-3.--Schedule for In-Use Standards for LDVs/LLDTs
----------------------------------------------------------------------------------------------------------------
          Model year of introduction               2008       2009       2010       2011       2012       2013
----------------------------------------------------------------------------------------------------------------
Models years that the in-use standard is             2008       2009       2010       2011       2012       2013
 available for carry-over test groups.........       2009       2010       2011       2012       2013       2014
                                                     2010       2011       2012       2013       2014
                                                     2011       2012       2013
----------------------------------------------------------------------------------------------------------------


[[Page 15853]]


                          Table VI.B-4.--Schedule for In-Use Standards for HLDVs/MDPVs
----------------------------------------------------------------------------------------------------------------
          Model year of introduction               2010       2011       2012       2013       2014       2015
----------------------------------------------------------------------------------------------------------------
Models years that the in-use standard is             2010       2011       2012       2013       2014       2015
 available for carry-over test groups.........       2011       2012       2013       2014       2015       2016
                                                     2012       2013       2014       2015       2016
                                                     2013       2014       2015
----------------------------------------------------------------------------------------------------------------

7. Monitoring and Enforcement
    Under the proposed programs, manufacturers could either report that 
they met the relevant corporate average standard in their annual 
reports to the Agency, or they could show via the use of credits that 
they have offset any exceedance of the corporate average standard. 
Manufacturers would also report their credit balances or deficits. EPA 
would monitor the program.
    As in Tier 2, the averaging, banking and trading program would be 
enforced through the certificate of conformity that manufacturers must 
obtain in order to introduce any regulated vehicles into commerce.\198\ 
The certificate for each test group would require all vehicles to meet 
the emissions level to which the vehicles were certified, and would be 
conditioned upon the manufacturer meeting the corporate average 
standard within the required time frame. If a manufacturer failed to 
meet this condition, the vehicles causing the corporate average 
exceedance would be considered to be not covered by the certificate of 
conformity for that engine family. A manufacturer would be subject to 
penalties on an individual vehicle basis for sale of vehicles not 
covered by a certificate.
---------------------------------------------------------------------------

    \198\ ``Control of Air Pollution from New Motor Vehicles: Tier 2 
Motor Vehicle Emissions Standards and Gasoline Sulfur Control 
Requirements'', Final Rule, 65 FR 6797, February 10, 2000.
---------------------------------------------------------------------------

    EPA would review the manufacturer's sales to designate the vehicles 
that caused the exceedance of the corporate average standard. We would 
designate as nonconforming those vehicles in those test groups with the 
highest certification emission values first, continuing until a number 
of vehicles equal to the calculated number of noncomplying vehicles as 
determined above is reached. In a test group where only a portion of 
vehicles would be deemed nonconforming, we would determine the actual 
nonconforming vehicles by counting backwards from the last vehicle 
produced in that test group. Manufacturers would be liable for 
penalties for each vehicle sold that is not covered by a certificate.
    We are proposing to condition certificates to enforce the 
requirements that manufacturers not sell credits that they have not 
generated. A manufacturer that transferred credits it did not have 
would create an equivalent number of debits that it would be required 
to offset by the reporting deadline for the same model year. Failure to 
cover these debits with credits by the reporting deadline would be a 
violation of the conditions under which EPA issued the certificate of 
conformity, and nonconforming vehicles would not be covered by the 
certificate. EPA would identify the nonconforming vehicles in the same 
manner described above.
    In the case of a trade that resulted in a negative credit balance 
that a manufacturer could not cover by the reporting deadline for the 
model year in which the trade occurred, we propose to hold both the 
buyer and the seller liable. We believe that holding both parties 
liable will induce the buyer to exercise diligence in assuring that the 
seller has or will be able to generate appropriate credits and will 
help to ensure that inappropriate trades do not occur.
    We are not proposing any new compliance monitoring activities or 
programs for vehicles. These vehicles would be subject to the 
certification testing provisions of the CAP2000 rule. We are not 
proposing to require manufacturer in-use testing to verify compliance. 
There is no cold CO manufacturer in-use testing requirement today 
(similarly, we do not require manufacturer in-use testing for SCO3 
standards under the SFTP program). As noted earlier, manufacturers have 
limited cold temperature testing capabilities and we believe these 
facilities will be needed for product development and certification 
testing. However, we have the authority to conduct our own in-use 
testing program for exhaust emissions to ensure that vehicles meet 
standards over their full useful life. We will pursue remedial actions 
when substantial numbers of properly maintained and used vehicles fail 
any standard in-use. We also retain the right to conduct Selective 
Enforcement Auditing of new vehicles at manufacturers' facilities.
    The use of credits would not be permitted to address Selective 
Enforcement Auditing or in-use testing failures. The enforcement of the 
averaging standard would occur through the vehicle's certificate of 
conformity. A manufacturer's certificate of conformity would be 
conditioned upon compliance with the averaging provisions. The 
certificate would be void ab initio if a manufacturer failed to meet 
the corporate average standard and did not obtain appropriate credits 
to cover their shortfalls in that model year or in the subsequent model 
year (see proposed deficit carryforward provision in section 
VI.B.5.e.). Manufacturers would need to track their certification 
levels and sales unless they produced only vehicles certified to NMHC 
levels below the standard and did not plan to bank credits.
    We request comments on the above approach for compliance monitoring 
and enforcement.

C. What Evaporative Emissions Standards Are We Proposing?

    We are proposing to adopt a set of numerically more stringent 
evaporative emission standards for all light-duty vehicles, light-
trucks, and medium-duty passenger vehicles. The proposed standards are 
equivalent to California's LEV II standards, and these proposed 
standards are shown in Table VI.C-1. The proposed standards would 
represent about a 20 to 50 percent reduction (depending on vehicle 
weight class and type of test) in diurnal plus hot soak standards from 
the Tier 2 standards that will be in effect in the years immediately 
preceding the implementation of today's proposed standards.\199\ As 
with the current Tier 2 evaporative emission standards, the proposed 
standards vary by vehicle weight class. The increasingly higher 
standards for heavier weight class vehicles account for larger vehicle 
sizes

[[Page 15854]]

and fuel tanks (non-fuel and fuel emissions).\200\
---------------------------------------------------------------------------

    \199\ Diurnal emissions (or diurnal breathing losses) means 
evaporative emissions as a result of daily temperature cycles or 
fluctuations for successive days of parking in hot weather. Hot soak 
emissions (or hot soak losses) are the evaporative emissions from a 
parked vehicle immediately after turning off the hot engine. For the 
evaporative emissions test procedure, diurnal and hot soak emissions 
are measured in an enclosure commonly called the SHED (Sealed 
Housing for Evaporative Determination).
    \200\ Larger vehicles may have greater non-fuel evaporative 
emissions, probably due to an increased amount of interior trim, 
vehicle body surface area, and larger tires.

         Table VI.C-1.--Proposed Evaporative Emission Standards
                    [Grams of hydrocarbons per test]
------------------------------------------------------------------------
                                                         Supplemental 2-
             Vehicle class               3-day diurnal     day diurnal
                                         plus hot soak    plus hot soak
------------------------------------------------------------------------
LDVs..................................             0.50             0.65
LLDTs.................................             0.65             0.85
HLDTs.................................             0.90             1.15
MDPVs.................................             1.00             1.25
------------------------------------------------------------------------

1. Current Controls and Feasibility of the Proposed Standards
    Evaporative emissions from light-duty vehicles and trucks will 
represent about 35 percent of the light-duty VOC inventory and about 4 
percent of the benzene inventory in 2020. As described earlier, we are 
proposing to reduce the level of the evaporative emission standards 
applicable to diurnal and hot soak emissions from these vehicles by 
about 20 to 50 percent. These proposed standards are meant to be 
effectively the same as the evaporative emission standards in the 
California LEV II program. Although the California program contains 
evaporative emissions standards that appear more stringent than EPA 
Tier 2 standards if one looks only at the level of the standard, we 
believe they are essentially equivalent because of differences in 
testing requirements. For these same reasons, some manufacturers 
likewise view the programs as similar in stringency. (See section 
VI.C.5 below for further discussion of such test differences, e.g., 
test temperatures and fuel volatilities.) Thus, some manufacturers have 
indicated that they will produce 50-state evaporative systems that meet 
both sets of standards (manufacturers sent letters indicating this to 
EPA in 2000).201 202 203 In addition, a review of recent 
model year certification results indicates that essentially all 
manufacturers certify 50-state systems, except for a few limited cases 
where manufacturers have not yet needed to certify a LEVII vehicle in 
California due to the phase-in schedule. Also, in recent discussions, 
manufacturers have restated that they plan to continue producing 50-
state evaporative systems in the future. Based on this understanding, 
we do not project additional VOC or air toxics reductions from the 
evaporative standards we are proposing today.\204\ Also, we do not 
expect additional costs since we expect that manufacturers will 
continue to produce 50-state evaporative systems. Therefore, 
harmonizing with California's LEV-II evaporative emission standards 
would be an ``anti-backsliding'' measure--that is, it would prevent 
potential future backsliding as manufacturers pursue cost 
reductions.\205\ It would thus codify (i.e., lock in) the approach 
manufacturers have already indicated they are taking for 50-state 
evaporative systems.
---------------------------------------------------------------------------

    \201\ DaimlerChrysler, Letter from Reginald R. Modlin to Margo 
Oge of U.S. EPA, May 30, 2000. A copy of this letter can be found in 
Docket No. EPA-HQ-OAR-2005-0036.
    \202\ Ford, Letter from Kelly M. Brown to Margo Oge of U.S. EPA, 
May 26, 2000. A copy of this letter can be found in Docket No. EPA-
HQ-OAR-2005-0036.
    \203\ General Motors, Letter from Samuel A. Leonard to Margo Oge 
of U.S. EPA, May 30, 2000. A copy of this letter can be found in 
Docket No. EPA-HQ-OAR-2005-0036.
    \204\ U.S. EPA, Office of Air and Radiation, Update to the 
Accounting for the Tier 2 and Heavy-Duty 2005/2007 Requirements in 
MOBILE6, EPA420-R-03-012, September 2003.
    \205\ Anti-backsliding provisions can satisfy the requirement in 
section 202 (l) (2) that emission reductions of hazardous air 
pollutants be the greatest achievable. Sierra Club v. EPA, 325 F. 3d 
at 477.
---------------------------------------------------------------------------

    We believe this proposed action would be an important step to 
ensure that the federal standards reflect the lowest possible 
evaporative emissions, and it also would provide states with certainty 
that the emissions reductions we project to occur due to 50-state 
compliance strategies will in fact occur. In addition, the proposed 
standards will assure that manufacturers continue to capture the 
abilities of available fuel system materials to minimize evaporative 
emissions.
    We also considered the possibility of whether it is feasible to 
achieve further evaporative emission reductions from motor vehicles. In 
this regard, it is important to note that California's LEV II program 
includes partial zero-emission vehicle (ZEV) credits for vehicles that 
achieve near zero emissions (e.g., LDV evaporative emission standards 
for both the 2-day and 3-day diurnal plus hot soak tests are 0.35 
grams/test, which are more stringent than proposed standards).\206\ The 
credits would include full ZEV credit for a stored hydrogen fuel cell 
vehicle and 0.2 credits for (among other categories for partial credit) 
a partial zero emission vehicle (PZEV).\207\ Currently, only a fraction 
of California's certified vehicles (gasoline powered, hybrid, and 
compressed natural gas vehicles) meet California's optional PZEV 
standards, but this number is expected to increase in coming 
years.208 209 These limited PZEV vehicles require additional 
evaporative emissions technology or hardware (e.g., modifications to 
fuel tank and secondary canister) than we expect to be needed for 
vehicles meeting the proposed standards. At this time, we need to 
better understand the evaporative system modifications (i.e., 
technology, costs, lead time, etc.) potentially needed for other 
vehicles in the fleet to meet PZEV-level standards before we can 
rationally evaluate whether to adopt more stringent standards. For 
example, at this point we cannot even determine whether the PZEV 
technologies could be used fleetwide or on only a limited set of 
vehicles. Thus, in the near term, we lack any of the information 
necessary to determine if further reductions are feasible, and if they 
could be achievable considering cost, energy and safety issues. 
However, we intend to consider

[[Page 15855]]

more stringent evaporative emission standards in the future, and 
revisiting this issue in a future rulemaking will allow us time to 
obtain the important necessary additional information for such 
standards.
---------------------------------------------------------------------------

    \206\ California Air Resources Board, Fact Sheet, LEV-II 
Amendments to California's Low-Emission Vehicle Regulations, 
February 1999
    \207\ PZEV meets California super ultra low emission vehicle 
exhaust emission standards and have near zero evaporative emissions. 
California Air Resources Board, News Release, ARB Modifies Zero 
Emission Vehicle Regulation, April 24, 2003.
    \208\ California Air Resources Board, Fact Sheet, California 
Vehicle Emissions, April 8, 2004.
    \209\ California Air Resources Board, Consumer Information: 2006 
California Certified Vehicles, November 7, 2005.
---------------------------------------------------------------------------

2. Evaporative Standards Timing
    We are proposing to implement today's evaporative emission 
standards in model year 2009 for LDVs/LLDTs and model year 2010 for 
HLDTs/MDPVs. Today's proposed rule is not expected to be finalized 
until February 2007, at which time many manufacturers already will have 
begun or completed model year 2008 certification. Thus, model year 2009 
is the earliest practical start date of new standards for LDVs/LLDTs. 
For HLDTs/MDPVs, the phase-in of the existing Tier 2 evaporative 
emission standards ends in model year 2009. Thus, the model year 2010 
is the earliest start date possible for HLDTs/MDPVs. Since the proposed 
standards are an anti-backsliding measure and we believe that 
manufacturers already meet these standards, there is no need for 
additional lead time beyond the implementation dates proposed. We 
request comment on this proposed schedule.
3. Timing for Multi-Fueled Vehicles
    As discussed earlier in this section, manufacturers appear to view 
the Tier 2 and LEV II evaporative emission programs as similar in 
stringency, and thus, they have indicated that they will produce 50-
state evaporative systems that meet both sets of standards. For multi-
fueled vehicles capable of operating on alternative fuel (e.g., E85 
vehicles--fuel is 85% ethanol and 15% gasoline) and conventional fuel 
(e.g., gasoline),\210\ this commitment for 50-state systems would still 
apply. However, a few multi-fueled vehicles were certified only on the 
conventional fuel (gasoline) for the California LEV II program even 
though they had 50-state evaporative emission systems. For such cases, 
manufacturers did not intend to sell these vehicles for operation on 
the alternative fuel (e.g. E85) in California (only for operation on 
conventional fuel in California), but they did certify and plan to sell 
these vehicles in the federal Tier 2 program for operation on the 
alternative and conventional fuels.\211\ For these few types of multi-
fueled vehicles, manufacturers are potentially at risk of not complying 
with the proposed new evaporative emission certification standards 
(which are equivalent to California LEV II certification standards) 
when operating on the alternative fuel.
---------------------------------------------------------------------------

    \210\ 40 CFR 86.1803-01 defines multi-fuel as capable of 
operating on two or more different fuel types, either separately or 
simultaneously.
    \211\ For the Tier 2 program, multi-tier vehicles must meet the 
same standards on conventional and alternative fuel.
---------------------------------------------------------------------------

    For such multi-fueled vehicles or evaporative emission systems, 
manufacturers would need a few additional years of lead time to adjust 
their evaporative systems to comply with the proposed evaporative 
emission certification standards when operating on the alternative 
fuel. Thus, to reduce the compliance risk for these types of multi-
fueled vehicles (or evaporative families) when they first certify to 
the more stringent evaporative standards, the proposed evaporative 
emission certification standards would apply to the non-gasoline 
portion of multi-fueled vehicles beginning in the fourth year of the 
program--2012 for LDVs/LLDTs and 2013 for HLDTs/MDPVs. The proposed 
evaporative emission certification standards would be implemented in 
2009 for LDVs/LLDTs and 2010 for HLDTs/MDPVs for the gasoline portion 
of multi-fueled vehicles and vehicles that are not multi-fueled. We 
believe this additional three years of lead time would provide 
sufficient time for manufacturers to make adjustments to their new 
evaporative systems for multi-fueled vehicles, which are limited 
product lines.
    The provisions for in-use evaporative emission standards described 
below in section VI.C.4 would not change for multi-fueled vehicles. We 
believe that three additional years to prepare vehicles (or evaporative 
families) to meet the certification standards, and to simultaneously 
make vehicle adjustments from the federal in-use experience of other 
vehicles (other vehicles that are not multi-fueled) is sufficient to 
resolve any issues for multi-fueled vehicles. Therefore, the proposed 
evaporative emission standards would apply both for certification and 
in-use beginning in 2012 for LDVs/LLDTs and 2013 for HLDTs/MDPVs.
4. In-Use Evaporative Emission Standards
    As described earlier in this section, we are proposing to adopt 
evaporative emission standards that are equivalent to California's LEV 
II standards for all light duty vehicles, light trucks, and medium duty 
passenger vehicles. Currently, the Tier 2 evaporative emission 
standards are the same for certification and in-use vehicles. However, 
the California LEV II program permits manufacturers to meet less 
stringent standards in-use for a short time period in order to account 
for potential variability in-use during the initial years of the 
program when technical issues are most likely to arise.\212\ The LEV II 
program specifies that in-use evaporative emission standards of 1.75 
times the certification standards will apply for the first three model 
years after an evaporative family is first certified to the LEV II 
standards (only for vehicles introduced prior to model year 2007, the 
year after 100 percent phase-in).213 214 An interim three-
year period was considered sufficient to accommodate any technical 
issues that may arise.
---------------------------------------------------------------------------

    \212\ California Air Resources Board, ``LEV II'' and ``CAP 
2000'' Amendments to the California Exhaust and Evaporative Emission 
Standards and Test Procedures for Passenger Cars, Light-Duty Trucks 
and Medium-Duty Vehicles, and to the Evaporative Emission 
Requirements for Heavy-Duty Vehicles, Final Statement of Reasons, 
September 1999.
    \213\ 1.75 times the 3-day diurnal plus hot soak and 2-day 
diurnal plus hot soak standards.
    \214\ For example, evaporative families first certified to LEV 
II standards in the 2005 model year shall meet in-use standards of 
1.75 times the evaporative certification standards for 2005, 2006, 
and 2007 model year vehicles.
---------------------------------------------------------------------------

    Federal in-use conditions may raise unique issues (e.g., salt/ice 
exposure) for evaporative systems certified to the new proposed 
standards (which are equivalent to the LEV II standards), and thus, we 
propose to adopt a similar, interim in-use compliance provision for 
federal vehicles. As with the LEV II program, this provision would 
enable manufacturers to make adjustments for unforeseen problems that 
may occur in-use during the first three years of a new evaporative 
family. Like California, we believe that a three-year period is enough 
time to resolve these problems, because it allows manufacturers to gain 
real world experience and make adjustments to a vehicle within a 
typical product cycle.
    Depending on the vehicle weight class and type of test, the Tier 2 
certification standards are 1.3 to 1.9 times the LEV II certification 
standards. On average the Tier 2 standards are 1.51 times the LEV II 
certification standards. Thus, to maintain the same level of stringency 
for the in-use evaporative emission standards provided by the Tier 2 
program, we propose to apply the Tier 2 standards in-use for only the 
first three model years after an evaporative family is first certified 
under today's proposed standards instead of the 1.75 multiplier 
implemented in the California LEV II program. Since the proposed 
evaporative emission certification standards (equivalent to LEV II 
standards) would be implemented in model year 2009 for LDVs/LLDTs and 
model year 2010 for HLDTs/MDPVs, these same certification

[[Page 15856]]

standards would apply in-use beginning in model year 2012 for LDVs/
LLDTs and model year 2013 for HLDTs/MDPVs.\215\
---------------------------------------------------------------------------

    \215\ For example, evaporative families first certified to the 
proposed LDV/LLDT evaporative emission standards in the 2011 model 
year would be required to meet the Tier 2 LDV/LLDT evaporative 
emission standards in-use for 2011, 2012, and 2013 model year 
vehicles (applying Tier 2 standards in-use would be limited to the 
first three years after introduction of a vehicle), and 2014 and 
later model year vehicles of such evaporative families would be 
required to meet the proposed LDV/LLDT evaporative emission 
standards in-use.
---------------------------------------------------------------------------

5. Existing Differences Between California and Federal Evaporative 
Emission Test Procedures
    As described above, the California LEV II evaporative emission 
standards are numerically more stringent than EPA's Tier 2 standards, 
but due to differences in California and EPA evaporative test 
requirements, EPA and most manufacturers view the programs as similar 
in stringency. The Tier 2 evaporative program requires manufacturers to 
certify the durability of their evaporative emission systems using a 
fuel containing the maximum allowable concentration of alcohols 
(highest alcohol level allowed by EPA in the fuel on which the vehicle 
is intended to operate, i.e., a ``worst case'' test fuel). Under 
current requirements, this fuel would be about 10 percent ethanol by 
volume.\216\ (We are retaining these Tier 2 durability requirements for 
the proposed evaporative emissions program.) California does not 
require this provision. To compensate for the increased vulnerability 
of system components to alcohol fuel, manufacturers have indicated that 
they will produce a more durable evaporative emission system than the 
Tier 2 numerical standards would imply, using the same low permeability 
hoses and low loss connections and seals planned for California LEV II 
vehicles.
---------------------------------------------------------------------------

    \216\ Manufacturers are required to develop deterioration 
factors using a fuel that contains the highest legal quantity of 
ethanol available in the U.S.
---------------------------------------------------------------------------

    As shown in Table VI.C-2, combined with the maximum alcohol fuel 
content for durability testing, the other key differences between the 
federal and California test requirements are fuel volatilities, diurnal 
temperature cycles, and running loss test temperatures.\217\ The EPA 
fuel volatility requirement is 2 psi greater than that of California. 
The high end of EPA's diurnal temperature range, is 9[deg] F lower than 
that of California. Also, EPA's running loss temperature is 10[deg] F 
lower than California's.
---------------------------------------------------------------------------

    \217\ Running loss emissions means evaporative emissions as a 
result of sustained vehicle operation (average trip in an urban 
area) on a hot day. The running loss test requirement is part of the 
3-day diurnal plus hot soak test sequence.

  Table VI.C-2.--Differences in Tier 2 and LEV II Evaporative Emission
                            Test Requirements
------------------------------------------------------------------------
      Test requirement             EPA tier 2         California LEV II
------------------------------------------------------------------------
Fuel volatility (Reid Vapor   9...................  7.
 Pressure in psi).
Diurnal temperature cycle     72 to 96............  65 to 105.
 (degrees F).
Running loss test             95..................  105.
 temperature (degrees F).
------------------------------------------------------------------------

    Currently, California accepts evaporative emission results 
generated on the federal test procedure (using federal test fuel), 
because available data indicates the federal procedure to be a ``worst 
case'' procedure. In addition, manufacturers can obtain federal 
evaporative certification based upon California results (meeting LEV II 
standards under California fuels and test conditions), if they obtain 
advance approval from EPA.\218\
---------------------------------------------------------------------------

    \218\ EPA may require comparative data from both federal and 
California tests.
---------------------------------------------------------------------------

D. Opportunities for Additional Exhaust Control Under Normal Conditions

    In addition to the cold temperature NMHC and evaporative emission 
standards we are proposing, we evaluated an additional option for 
reducing hydrocarbons from light-duty vehicles. This option would 
further align the federal light-duty exhaust emissions control program 
with that of California. We are not proposing this option today for the 
reasons described below. It is possible that a future evaluation could 
result in EPA reconsidering the option of harmonizing the Tier 2 
program with California's LEV-II program or otherwise seeking emission 
reductions beyond those of the Tier 2 program and those being proposed 
today.\219\
---------------------------------------------------------------------------

    \219\ See Sierra Club v. EPA, 325 F.3d at 480 (EPA can 
reasonably determine that no further reductions in MSATs are 
presently achievable due to uncertainties created by other recently 
promulgated regulatory provisions applicable to the same vehicles).
---------------------------------------------------------------------------

    As explained earlier, section 202(l)(2) requires EPA to adopt 
regulations that contain standards which reflect the greatest degree of 
emissions reductions achievable through the application of technology 
that will be available, taking into consideration existing motor 
vehicle standards, the availability and costs of the technology, and 
noise, energy and safety factors. The cold temperature NMHC program 
proposed today is appropriate under section 202(l)(2) as a near-term 
control: That is, a control that can be implemented relatively soon and 
without disruption to other existing vehicle emissions control program. 
We are not proposing long-term (i.e., controls that require longer lead 
time to implement) at this time because we lack the information 
necessary to assess appropriate long-term controls. We believe it will 
be important to address the appropriateness of further MSAT controls in 
the context of compliance with other significant vehicle emissions 
regulations (discussed below).
    In the late 1990's both the EPA and the California Air Resources 
Board finalized new and technologically challenging light-duty vehicle/
truck emission control programs. The EPA program, known as Tier 2, 
focused on reducing NOX emissions from the light-duty fleet. 
The California program, which is the second generation of their low 
emission vehicle (LEV) program and is known as LEV-II, focuses 
primarily on reducing hydrocarbons by tightening the light-duty NMOG 
standards. Both programs are expected to present the manufacturers with 
significant challenges, and will require the use of hardware and 
emission control strategies not used in the fleet under previously 
existing programs. Both programs will achieve significant reductions in 
emissions. Taken as a whole, the Tier 2 program presents the 
manufacturers with significant challenges in the coming years. Bringing 
essentially all passenger vehicles under the same emission control 
program regardless of their size, weight, and application is a major 
engineering challenge. The Tier 2 program represents a comprehensive, 
integrated package of exhaust, evaporative, and fuel quality standards 
which will achieve significant reductions in

[[Page 15857]]

NMHC, NOX, and PM emissions from all light-duty vehicles in 
the program. These reductions will include significant reductions in 
MSATs. Emission control in the Tier 2 program will be based on the 
widespread implementation of advanced catalyst and related control 
system technology. The standards are very stringent and will require 
manufacturers to make full use of nearly all available emission control 
technologies.
    Today the Tier 2 program remains early in its phase-in. Cars and 
lighter trucks will be fully phased into the program with the 2007 
model year, and the heavier trucks won't be fully entered into the 
program until the 2009 model year. Even though the lighter vehicles 
will be fully phased in by 2007, we expect the characteristics of this 
segment of the fleet to remain in a state of transition at least 
through 2009, because manufacturers will be making adjustments to their 
fleets as the larger trucks phase in. The Tier 2 program is designed to 
enable vehicles certified to the LEV-II program to cross over to the 
federal Tier 2 program. At this point in time, however, it is difficult 
to predict the degree to which this will occur. The fleetwide NMOG 
levels of the Tier 2 program will ultimately be affected by the manner 
in which LEV-II vehicles are certified within the Tier 2 bin structure, 
and vice versa. We intend to carefully assess these two programs as 
they evolve and periodically evaluate the relative emission reductions 
and the integration of the two programs.
    Today's proposal addresses toxics emissions from vehicles operating 
at cold temperatures. The technology to achieve this is already 
available and we project that compliance will not be costly. However, 
we do not believe that we could reasonably propose further controls at 
this time. There is enough uncertainty regarding the interaction of the 
Tier 2 and LEV-II programs to make it difficult to evaluate today what 
might be achievable in the future. Depending on the assumptions one 
makes, the LEV-II and Tier 2 programs may or may not achieve very 
similar NMOG emission levels. Therefore, the eventual Tier 2 baseline 
technologies and emissions upon which new standards would necessarily 
be based are not known today. Additionally, we believe it is important 
for manufacturers to focus in the near term on developing and 
implementing robust technological responses to the Tier 2 program 
without the distraction or disruption that could result from changing 
the program in the midst of its phase-in. We believe that it may be 
feasible in the longer term to seek additional emission reductions from 
the base Tier 2 program, and the next several years will allow an 
evaluation based on facts rather than assumptions. For these reasons, 
we are deferring a decision on seeking additional NMOG reductions from 
the base Tier 2 program.

E. Vehicle Provisions for Small Volume Manufacturers

    Prior to issuing a proposal for this proposed rulemaking, we 
analyzed the potential impacts of these regulations on small entities. 
As a part of this analysis, we convened a Small Business Advocacy 
Review Panel (SBAR Panel, or the Panel). During the Panel process, we 
gathered information and recommendations from Small Entity 
Representatives (SERs) on how to reduce the impact of the rule on small 
entities, and those comments are detailed in the Final Panel Report 
which is located in the public record for this rulemaking (Docket EPA-
HQ-OAR-2005-0036). Based upon these comments, we propose to include 
lead time transition and hardship provisions that would be applicable 
to small volume manufacturers as described below in section VI.E.1 and 
VI.E.2. For further discussion of the Panel process, see section XII.C 
of this proposed rule and/or the Final Panel Report.
    As discussed in more detail in section XII.C in addition to the 
major vehicle manufacturers, three distinct categories of businesses 
relating to highway light-duty vehicles would be covered by the new 
vehicle standards: Small volume manufacturers (SVMs), independent 
commercial importers (ICIs),\220\ and alternative fuel vehicle 
converters.\221\ We define small volume manufacturers as those with 
total U.S. sales less than 15,000 vehicles per year, and this status 
allows vehicle models to be certified under a slightly simpler 
certification process. For certification purposes, SVMs include ICIs 
and alternative fuel vehicle converters since they sell less than 
15,000 vehicles per year.
---------------------------------------------------------------------------

    \220\ ICIs are companies that hold a Certificate (or 
certificates) of Conformity permitting them to import nonconforming 
vehicles and to modify these vehicles to meet U.S. emission 
standards.
    \221\ Alternative fuel vehicle converters are businesses that 
convert gasoline or diesel vehicles to operate on alternative fuel 
(e.g., compressed natural gas), and converters must seek a 
certificate for all of their vehicle models.
---------------------------------------------------------------------------

    About 34 out of 50 entities that certify vehicles are SVMs, and the 
Panel identified 21 of these 34 SVMs that are small businesses as 
defined by the Small Business Administration criteria (5 manufacturers, 
10 ICIs, and 6 converters). Since a majority of the SVMs are small 
businesses and all SVMs have similar characteristics as described below 
in section VI.E.1, the Panel recommended that we apply the lead time 
transition and hardship provisions to all SVMs. These manufacturers 
represent just a fraction of one percent of the light-duty vehicle and 
light-duty truck sales. Our proposal today is consistent with the 
Panel's recommendation.
1. Lead Time Transition Provisions
    In these types of vehicle businesses, predicting sales is difficult 
and it is often necessary to rely on other entities for technology (see 
earlier discussions in section VI on technology needed to meet the 
proposed standards).222 223 Moreover, percentage phase-in 
requirements pose a dilemma for an entity such as a SVM that has a 
limited product line. For example, it is challenging for a SVM to 
address percentage phase-in requirements if the manufacturer makes 
vehicles in only one or two test groups. Because of its very limited 
product lines, a SVM could be required to certify all their vehicles to 
the new standards in the first year of the phase-in period, whereas a 
full-line manufacturer (or major manufacturer) could utilize all four 
years of the phase-in. Thus, similar to the flexibility provisions 
implemented in the Tier 2 rule, the Panel recommended that we allow 
SVMs, manufacturers with sales less than 15,000 vehicles per year 
(includes all vehicle small entities that would be affected by this 
rule, which are the majority of SVMs) the following flexibility options 
for meeting cold temperature NMHC standards and evaporative emission 
standards as an element of determining appropriate lead time for these 
entities to comply with the standards.
---------------------------------------------------------------------------

    \222\ For example, as described later in section VI.E.3, ICIs 
may not be able to predict their sales because they are dependent 
upon vehicles brought to them by individuals attempting to import 
uncertified vehicles.
    \223\ SMVs (those with sales less than 15,000 vehicles per year) 
include ICIs, alternative fuel vehicle converters, companies that 
produce specialty vehicles by modifying vehicles produced by others, 
and companies that produce small quantities of their own vehicles, 
but rely on major manufacturers for engines and other vital emission 
related components.
---------------------------------------------------------------------------

    For cold NMHC standards, the Panel recommended that SVMs simply 
comply with the standards with 100 percent of their vehicles during the 
last year of the 4 year phase-in period. Since these entities could 
need additional lead time flexibility and proposed standards for light-
duty vehicles and light light-duty trucks would begin in model year 
2010 and would end in model year 2013 (25%, 50%, 75%, 100% phase-in 
over 4

[[Page 15858]]

years), we propose that the SVM provision would be 100 percent in model 
year 2013. Also, since the proposed standard for heavy light-duty 
trucks and medium-duty passenger vehicles would start in 2012 (25%, 
50%, 75%, 100% phase-in over 4 years), we propose that the SVM 
provision would be 100 percent in model year 2015.
    In regard to evaporative emission standards, the Panel recommended 
that since the proposed evaporative emissions standards would not have 
phase-in years, we allow SVMs to simply comply with standards during 
the third year of the program (we have implemented similar provisions 
in past rulemakings). Given the additional challenges that SVMs face, 
as noted above, we believe that this recommendation is reasonable. 
Therefore, for a 2009 model year start date for light-duty vehicles and 
light light-duty trucks, we propose that SVMs meet the evaporative 
emission standards in model year 2011. For a model year 2010 
implementation date for heavy light-duty trucks and medium-duty 
passenger vehicles, we propose that SVMs comply in model year 2012.
2. Hardship Provisions
    In addition, the Panel recommended that hardship provisions be 
extended to SVMs for the cold temperature NMHC and evaporative emission 
standards as an aspect of determining the greatest emission reductions 
feasible. These entities could, on a case-by-case basis, face hardship 
more than major manufacturers (manufacturers with sales of 15,000 
vehicles or more per year), and we are proposing this provision to 
provide what could prove to be a needed safety valve for these 
entities. SVMs would be allowed to apply for up to an additional 2 
years to meet the 100 percent phase-in requirements for cold NMHC and 
the delayed requirement for evaporative emissions. As with hardship 
provisions for the Tier 2 rule, we propose that appeals for such 
hardship relief must be made in writing, must be submitted before the 
earliest date of noncompliance, must include evidence that the 
noncompliance will occur despite the manufacturer's best efforts to 
comply, and must include evidence that severe economic hardship will be 
faced by the company if the relief is not granted.
    We would work with the applicant to ensure that all other remedies 
available under this rule are exhausted before granting additional 
relief. To avoid the very existence of the hardship provision prompting 
SVMs to delay development, acquisition and application of new 
technology, we want to make clear that we would expect this provision 
to be rarely used. Our proposed rule contains numerous flexibilities 
for all manufacturers and it delays implementation dates for SVMs, 
which effectively provides them more time. We would expect small volume 
manufacturers to prepare for the applicable implementation dates in 
today's proposed rule.
3. Special Provisions for Independent Commercial Importers (ICIs)
    Although the SBAR panel did not specifically recommend it, we are 
proposing to allow ICIs to participate in the averaging, banking, and 
trading program for cold temperature NMHC fleet average standards (as 
described in Table IV.B.-1), but with appropriate constraints to ensure 
that fleet averages will be met. The existing regulations for ICIs 
specifically bar ICIs from participating in emission related averaging, 
banking, and trading programs unless specific exceptions are provided 
(see 40 CFR 85.1515(d)). The concern is that they may not be able to 
predict their sales and control their fleet average emissions because 
they are dependent upon vehicles brought to them by individuals 
attempting to import uncertified vehicles. However, an exception for 
ICIs to participate in an averaging, banking, and trading program was 
made for the Tier 2 NOX fleet average standards, and today 
we propose to apply a similar exception for the cold temperature NMHC 
fleet average standards.
    If an ICI is able to purchase credits or to certify a test group to 
a family emission level (FEL) below the applicable cold temperature 
NMHC fleet average standard, we would permit the ICI to bank credits 
for future use. Where an ICI desires to certify a test group to a FEL 
above the applicable fleet average standard, we would permit them to do 
so if they have adequate and appropriate credits. Where an ICI desires 
to certify to an FEL above the fleet average standard and does not have 
adequate or appropriate credits to offset the vehicles, we would permit 
the manufacturer to obtain a certificate for vehicles using such a FEL, 
but would condition the certificate such that the manufacturer can only 
produce vehicles if it first obtains credits from other manufacturers 
or from other vehicles certified to a FEL lower than the fleet average 
standard during that model year.
    Our experience over the years through certification indicates that 
the nature of the ICI business is such that these companies cannot 
predict or estimate their sales of various vehicles well. Therefore, we 
do not have confidence in their ability to certify compliance under a 
program that would allow them leeway to produce some vehicles to a 
higher FEL now but sell vehicles with lower FELs later, such that they 
were able to comply with the fleet average standard. We also cannot 
reasonably assume that an ICI that certifies and produces vehicles one 
year, would certify or even be in business the next. Consequently, we 
propose that ICIs not be allowed to utilize the deficit carryforward 
provisions of the proposed ABT program.

VII. Proposed Gasoline Benzene Control Program

A. Overview of Today's Proposed Fuel Control Program

    As discussed in sections I, IV, and V above, people experience 
elevated risk of cancer and other health effects as a result of 
inhalation of air toxics. Mobile sources are responsible for a 
significant portion of this risk. As required by section 202(l) of the 
Clean Air Act, EPA has evaluated options to reduce MSAT emissions by 
setting standards for motor vehicle fuel. We have determined that there 
are fuel-related technologies available to feasibly reduce MSAT 
emissions and that these reductions are achievable, considering cost, 
energy, and other factors. These feasible reductions would be in 
addition to those resulting from actions taken by the industry in 
response to the earlier fuel-related MSAT programs described in section 
V above. Accordingly, we believe a fuel control program is necessary 
and appropriate to reduce air toxics emissions from motor vehicles to 
the greatest extent achievable (in addition to the programs proposed 
elsewhere in this notice to reduce MSAT emissions by changes to 
gasoline-powered motor vehicles and gas cans). This section of the 
preamble describes our proposed fuel control program.
    The section begins with a detailed description of today's proposed 
program. In summary, we propose that beginning January 1, 2011, 
refiners would meet an average gasoline benzene content standard of 
0.62% by volume on all their gasoline (reformulated and conventional) 
nationwide.\224\ We also propose that refiners could generate benzene 
credits and use or sell them as a part of a nationwide averaging, 
banking, and trading (ABT) program.

[[Page 15859]]

We believe that the proposed benzene standard, combined with the 
proposed ABT program, would result in the largest feasible overall 
reductions in benzene emissions of any potential fuel-based MSAT 
control program. Finally, as an aspect of achieving the greatest 
emission reductions, we also propose special compliance flexibility for 
approved small refiners.
---------------------------------------------------------------------------

    \224\ The State of California has a similar benzene standard and 
gasoline sold there is not covered by this proposal. For more 
information, see California Code of Regulations, Title 13 Section 
2262.
---------------------------------------------------------------------------

    This section then describes in detail how we arrived at the 
proposed program. We discuss a range of potential approaches to 
reducing MSATs through changes in fuel, concluding that benzene 
emissions would be significantly more responsive to fuel changes than 
emissions of any other fuel-related MSAT. This is followed by 
discussion of alternate methods of reducing benzene emissions, 
resulting in the proposed approach of directly controlling benzene 
content. We also discuss how we arrived at the proposed level of 0.62 
volume percent (vol%) for the benzene standard. We discuss why we 
believe that incorporating the proposed ABT program would be crucial 
for the effectiveness of the overall benzene control program and 
describe how the system would work. Finally, we review the 
recommendations of the special panel that was convened to assess the 
potential for disproportionate impacts of the proposed program on small 
refiners, and present our reasoning for the special small refiner 
provisions we are proposing today.
    Today's proposed action would fulfill several statutory and 
regulatory goals for gasoline-related MSAT emissions, which are 
discussed in more detail in this section. The program would meet our 
commitment in the MSAT1 program to consider further MSAT control. The 
program would also allow EPA to streamline the regulatory provisions 
for the air toxics performance requirements of the reformulated 
gasoline (RFG) and Anti-dumping programs. The expected levels of 
benzene control by individual refiners under this proposal, combined 
with other gasoline controls such as sulfur, RVP, and VOC controls, 
mean that compliance with these provisions is expected to lead to 
compliance with the annual average requirements for benzene and toxics 
performance for RFG and the annual average Anti-dumping toxics 
performance for conventional gasoline. EPA is therefore proposing that 
upon full implementation in 2011, the regulatory provisions for the 
benzene control program would become the single regulatory mechanism 
used to implement these RFG and Anti-dumping annual average toxics 
requirements, replacing the current RFG and Anti-dumping annual average 
provisions (although the 1.3 vol% benzene cap would still apply for 
RFG). The proposed benzene control program would also replace the MSAT1 
requirements. In addition, the program would satisfy certain fuel MSAT 
conditions of the Energy Policy Act of 2005. By consciously designing 
this proposed program to address these separate but related goals, we 
would significantly consolidate and simplify the existing national 
fuel-related MSAT regulatory program.
    Finally, this section concludes with a detailed summary of our 
assessment of the technological feasibility for different types of 
refineries, and the refining industry as a whole, to meet the program 
as proposed. We request general and specific comment on all aspects of 
the proposed program, and we request that comments include supporting 
data whenever possible.

B. Description of the Proposed Fuel Control Program

    Today's proposed program has three main components, the development 
of each of which is further described later in this section:

--A gasoline benzene content standard. We propose that an annual 
average gasoline benzene standard of 0.62 vol% be implemented beginning 
January 1, 2011. This single standard would apply to all gasoline, both 
reformulated (RFG) and conventional (CG) nationwide (except for 
gasoline sold in California, which is already covered by a similar 
state program).
--An averaging, banking, and trading (ABT) program. From 2007-2010 
refiners could generate benzene credits by taking early steps to reduce 
gasoline benzene levels. Beginning in 2011 and continuing indefinitely, 
refiners could generate credits by producing gasoline with benzene 
levels below the 0.62% average standard. Refiners could apply the 
credits towards company compliance, ``bank'' the credits for later use, 
or transfer (``trade'') them to other refiners nationwide (outside of 
California) under the proposed program. Under this program, refiners 
could use credits to achieve compliance with the benzene content 
standard, regardless of their actual gasoline benzene levels.\225\
---------------------------------------------------------------------------

    \225\ However, the per-gallon benzene cap (1.3 vol%) in the RFG 
program would continue to apply separately.
---------------------------------------------------------------------------

--Hardship provisions. Refiners approved as ``small refiners'' would 
have access to special temporary relief provisions. In addition, any 
refiner facing extreme unforeseen circumstances or extreme hardship 
circumstances could apply for similar temporary relief.

C. Development of the Proposed Gasoline Benzene Standard

    EPA believes that benzene control is by far the most effective 
fuel-based means of achieving MSAT emissions control, as described in 
this section. There are other options that can target individual MSATs 
or reduce overall VOCs and thereby reduce MSATs as well. We have 
evaluated these other options, as discussed below, and our analysis 
indicates that the potential MSAT reductions would be considerably 
smaller and more expensive.
1. Why Are We Focusing on Controlling Benzene Emissions?
    We considered controlling emissions of several MSATs through 
changes to fuel parameters. There are only a limited number of MSATs 
that are affected through fuel changes, each of which we discuss below. 
For several reasons, we have concluded that the most effective and 
appropriate means of reducing fuel-related MSATs is to reduce the 
benzene emissions attributable to gasoline.
    Benzene emissions can be reduced much more significantly through 
fuel changes than can emissions of other MSATs. Relatively small 
changes in gasoline can result in very significant reductions in 
benzene emissions. This relative responsiveness of benzene emissions to 
fuel controls (specifically to control of gasoline benzene content, as 
discussed in the next section) is coupled with little negative impact 
on other important characteristics of gasoline or refining processes. A 
related and critical advantage of fuel control of benzene emissions, as 
compared to fuel control of emissions of other MSATs as discussed 
below, is that controlling benzene emissions does not significantly 
increase emissions of other MSATs.\226\
---------------------------------------------------------------------------

    \226\ A key tool in evaluating the potential for fuel changes to 
affect MSAT emissions is EPA's Complex Model. This model relates 
changes in gasoline parameters with emissions of specific MSATs and 
was developed for refiners and EPA to assess compliance with the 
RFG, Anti-dumping, and MSAT1 programs. (See section V.D.1 above.) 
Given a set of gasoline parameters, it estimates the emissions of an 
average vehicle based on a large set of fuel effects data. We 
further discuss the Complex Model, as well as other sources of 
information the relationships between fuel changes and MSAT 
emissions, in chapter 6 of the RIA.
---------------------------------------------------------------------------

    In determining an appropriate approach to fuel-related MSAT 
control, a key consideration was octane value.

[[Page 15860]]

Among potential approaches to fuel-related MSAT emission reduction, 
only benzene emission reduction can avoid major losses in octane value 
and the negative cost and environmental consequences discussed below of 
replacing that lost octane value. Finished gasoline must meet minimum 
specifications for octane value; these specifications are tied to the 
operational needs of motor vehicles. Thus, refiners must be keenly 
aware of how any changes in gasoline production might reduce the octane 
value of their fuel, what approaches to restore the octane value might 
be available, and the costs in material and operational changes of any 
selected approach.
    There are a limited number of approaches refiners have at their 
disposal to restore gasoline octane value lost through control of MSAT 
emissions. These approaches vary in their economics and effectiveness, 
and their availability may be limited by the specific configuration of 
a given refinery. However, all methods of replacing octane value have 
cost implications, and as shown in the next paragraph, air toxics 
implications as well.
    In the case of changes in gasoline production that are intended to 
reduce MSAT emissions, it is also important to consider whether 
restoring any lost octane might itself significantly increase other 
MSAT emissions. Some methods of replacing octane value can increase 
other MSATs. For example, increasing aromatics would increase benzene 
emissions; adding MTBE would increase formaldehyde emissions; and 
adding ethanol would increase acetaldehyde emissions. Given the very 
large MSAT emission reduction associated with benzene control, these 
impacts on other MSATs are relatively insignificant. However, in the 
case of changes in other fuel qualities (e.g., aromatics control), the 
relative impacts on other MSATs would be greater.
    We encourage comment on our decision to propose a program that 
directly controls gasoline benzene content, including comments on each 
of the alternate approaches to MSAT control discussed in the following 
paragraphs.
a. Other MSAT Emissions
    As alternatives to the proposed program focusing on benzene 
emission reductions, we considered other MSATs that are responsive to 
fuel-based emission control. Each of these is discussed next.
    Polycyclic Organic Matter, or POM, is composed of a number of 
combustion products of gasoline. According to the Complex Model, POM 
emissions are a function of exhaust VOC. Several fuel parameters 
including volatility and sulfur content affect VOC emissions. As 
discussed below, little data exists about the potential impacts of 
changes in gasoline volatility and sulfur content on VOC, and thus POM, 
emissions from new Tier 2-compliant vehicles. In any event, because POM 
is only a tiny fraction of vehicle VOC emissions, we expect that 
further changes in these fuel parameters would have only small effects 
on POM. As a result, we are not proposing fuel controls to address POM 
emissions in today's action.
    Emissions of the compound 1,3-butadiene can be reduced by reducing 
the olefin content of gasoline. However, olefin reduction yields 
relatively small reductions in 1,3-butadiene and can increase VOC 
emissions. In addition, olefin reduction significantly affects octane, 
with the negative cost and MSAT emissions consequences of octane 
replacement. We are thus not proposing to address 1,3-butadiene 
emissions through fuel changes.
    Emissions of the compound formaldehyde can only be effectively 
reduced by reducing use of the octane enhancer methyl tertiary butyl 
ether (MTBE). This is because formaldehyde increases significantly as a 
combustion product when MTBE is added to gasoline. Formaldehyde also 
increases to a lesser extent when ethanol is added to gasoline, as 
described below. For a number of years, MTBE has been used as a cost-
effective way to meet mandated fuel oxygenate requirements and to boost 
octane. In recent years, many states have banned the use of MTBE 
because it has leaked from storage tanks and caused significant 
groundwater contamination. More recently, in the wake of the removal of 
the oxygenate requirement in the Energy Policy Act of 2005, many 
refiners are taking action to remove MTBE from their gasoline as soon 
as possible. As a result, MTBE use and the resulting formaldehyde 
emissions are expected to continue to decline, and no additional 
federal action appears warranted at this time.
    The compound acetaldehyde is a combustion product of gasoline when 
ethanol is added. Controlling acetaldehyde would require reductions in 
the use of ethanol as a gasoline additive. However, the Energy Policy 
Act of 2005 (section 1501) includes a renewable fuels program that will 
increase use of ethanol in gasoline nationwide. That Act requires a 
study of the Act's impacts on public health, air quality, and water 
resources. We accordingly intend to defer further evaluation of 
acetaldehyde emissions to the analyses associated with the Energy 
Policy Act.
b. MSAT Emission Reductions Through Lowering Gasoline Volatility or 
Sulfur Content
    We also considered two approaches to fuel-related MSAT control that 
would involve increasing the stringency of two existing emission 
control programs. Both were originally promulgated primarily to address 
ozone but also have the effect of reducing some MSAT emissions by 
virtue of their control of VOC emissions. As explained in section V, 
the Tier 2 program included the pairing of lower vehicle emissions 
standards with large reductions in gasoline sulfur levels. The low 
sulfur fuel helped enable development of more advanced catalytic 
aftertreatment systems needed to meet the stringent tailpipe standards. 
These actions will result in large reductions of VOC, NOX, 
and air toxics emissions. In development of today's proposal, we 
considered whether further reductions in fuel sulfur would bring 
significant additional reductions in MSAT emissions.
    The second program considered for additional stringency was the 
gasoline volatility program, which was implemented in 1989 to address 
evaporative VOC emissions from gasoline vehicles. Reducing the 
volatility of gasoline can reduce evaporative VOC emissions as well as 
exhaust emissions. Evaporative VOC emissions include benzene. As a 
result, in developing this proposal we have considered whether further 
reductions in gasoline volatility may be effective in further reducing 
MSAT emissions.
    In the cases of both further reductions in RVP and sulfur 
reductions below the current 30 ppm standard, the available data is not 
sufficient to conclude that additional control of either would be a 
valuable MSAT emission reduction strategy. Historic data suggest that 
reducing both RVP and sulfur content would reduce overall VOC emissions 
from vehicles, in turn reducing both MSATs and ozone formation. 
However, vehicles complying with the stringent new Tier 2 emission 
standards have dramatically lower VOC emissions than earlier vehicles. 
Furthermore, it is likely that VOC emissions for these vehicles would 
react differently to RVP and sulfur control than older vehicles, as new 
catalysts and control systems may have more or less sensitivity to 
these variables. Since the dominant effect on MSAT emissions of 
changing these fuel parameters is through their impact on total VOC 
mass, it is not possible to

[[Page 15861]]

properly assess the impact of changes in these fuel parameters on MSAT 
emissions without additional data. We have begun collecting data on 
some of these new vehicles, but more work will be required before we 
can draw conclusions about the effectiveness of these fuel controls in 
reducing MSAT emissions. Therefore, we are not proposing additional 
control of gasoline volatility or sulfur at this time, but will 
continue to evaluate them for possible future action. We request 
comments on these potential fuel controls as emission reduction 
strategies, in particular for MSAT emissions, including any data that 
does or does not support the effectiveness of such controls.
i. Gasoline Sulfur Content
    In general, reducing gasoline sulfur levels increases the 
effectiveness of the catalytic converter at destroying unburned fuel 
and other VOCs in vehicle exhaust. Catalytic converters contain a 
variety of physical and chemical structures that act as reaction sites 
for conversion of raw exhaust gases into less harmful ones before they 
are emitted into the atmosphere. Over time, sulfur compounds in the 
exhaust gases interfere with these processes, making the catalyst less 
effective under normal driving conditions.\227\ Since many air toxics 
are part of the exhaust VOCs, reduction of fuel sulfur would be 
expected to reduce air toxics emissions. As with the Tier 2 program, 
however, desulfurizing gasoline further would reduce gasoline octane. 
Most options for recovering this lost octane (e.g., increasing 
aromatics) would result in some offsetting MSAT emissions increases.
---------------------------------------------------------------------------

    \227\ For further discussion on sulfur effects on emissions, see 
the Tier 2 Regulatory Impact Analysis, EPA 420-R-99-023.
---------------------------------------------------------------------------

    EPA primarily uses two computer models for examining emissions 
impacts when considering changes in fuel properties: the Complex Model 
and the MOBILE model. The Complex Model (CM) was developed as a 
compliance tool that refiners use to ensure their gasoline meets its 
baseline requirements under the RFG, Anti-dumping, and MSAT1 programs. 
Given a set of fuel parameters, it estimates the emissions of an 
average vehicle using regression relationships drawn from a large set 
of fuel effects data. The CM contains data on test fuels with sulfur 
levels as low as 5 ppm, but is based on the Auto/Oil research programs 
of the early 1990s, and reflects performance of vehicles on the road 
during that time period. With a sulfur reduction from 30 ppm to 10 ppm 
applied to average 2003 conventional gasoline, the CM projects a 
decrease of approximately 1% for exhaust benzene, NOX and 
CO.
    MOBILE was developed to estimate aggregate emissions on a county, 
state, or national scale. It uses a fuel effects dataset that includes 
the CM dataset with some updates, along with driving data, to predict 
emissions inventories of pollutants for a specified time period and 
area of the country. MOBILE6.2 contains updates from a small number of 
LEV and ULEV vehicles in addition to the CM dataset, but applies a 
lower limit of 30 ppm to fuel sulfur content being modeled to avoid 
extrapolation beyond the range of available emissions data.
    Based primarily on the above models, the analyses done for the Tier 
2 rulemaking suggested benzene emission reductions on the order of 9% 
could be expected in 2020 as a result of the fuel sulfur reduction 
expected from that program alone (the final Tier 2 program included low 
sulfur gasoline as well as tightened vehicle standards).\228\ A recent 
study done on vehicles meeting LEV, TLEV, and ULEV standards indicates 
that sulfur reductions from 30 to 5 ppm may reduce NMHC by more than 
10%, bringing similar reductions in air toxics.\229\ Additional 
analyses done by EPA on sulfur reductions in this range suggest VOC 
emission reductions on the order of 5% may be expected, with refining 
costs estimated at about a half cent per gallon. Given these analyses 
using available data, using sulfur reductions as air toxics control 
alone would not be as cost-effective as other options in this proposal. 
Further discussion of the feasibility and costs are available in 
Chapters 6 and 9, respectively, of the RIA.
---------------------------------------------------------------------------

    \228\ Tier 2 Regulatory Impact Analysis, EPA 420-R-99-023
    \229\ AAM-Honda fuel effects study, 2000
---------------------------------------------------------------------------

    Since our models do not reflect the significant improvements in 
emissions control technology over the past decade, more fuel effects 
studies are necessary on newest-technology vehicles before going 
forward with sulfur control. A small cooperative test program is 
currently underway between EPA and the Alliance of Automobile 
Manufacturers to evaluate the effects of reducing sulfur below 10 ppm 
on Tier 2 Bin 5 compliant vehicles.
    In addition to potential air toxics reductions from adjustment of 
gasoline sulfur to 10 ppm, reducing sulfur may also provide significant 
VOC and NOX emission reductions. These emission reductions 
may be important for states in complying with the National Ambient Air 
Quality Standards (NAAQS) for ozone. Since the implementation of the 
RFG program, several states and localities have made their own unique 
fuel property requirements in an effort to further improve air 
quality.\230\ As a result, by summer 2004 the gasoline distribution and 
marketing system in the U.S. had to differentiate between more than 12 
different fuel specifications, when storing and shipping fuels between 
refineries, pipelines, terminals, and retail locations. These unique 
fuels decrease nationwide fungibility of gasoline, which can lead to 
local supply problems and amplify price 
fluctuations.231, 232 In addition to the existing state fuel 
programs, we are aware of a number of other states considering new 
programs (although in the context of the recently enacted Energy Policy 
Act it is unclear what will occur). While the timeline for state action 
on new fuel formulations could be prior to any nationwide ultra-low 
sulfur standard, implementation of such a standard could help diminish 
issues related to small-market fuel programs in the long term.
---------------------------------------------------------------------------

    \230\ These changes have focused almost exclusively on 
additional RVP control, with just one program also controlling 
sulfur to 30 ppm earlier than required by EPA.
    \231\ EPA, Study of Unique Gasoline Fuel Blends (``Boutique 
Fuels''), Effects on Fuel Supply and Distribution and Potential 
Improvements, EPA420-P-01-004
    \232\ GAO, Special Gasoline Blends Reduce Emissions and Improve 
Air Quality, but Complicate Supply and Contribute to Higher Prices, 
GAO-05-421
---------------------------------------------------------------------------

    From the perspective of gasoline production, reducing sulfur to 
ultra-low levels does not happen completely independently of other fuel 
parameters. The emissions benefits of further sulfur reduction gained 
in vehicle aftertreatment may be offset by unintended changes in other 
gasoline properties. The refining process modifications required to 
bring sulfur to ultra-low levels begin to have a stronger effect on 
other components of gasoline, such as olefins (the effect of which is 
discussed in the previous section). These impacts must be further 
evaluated before moving forward with a proposal of additional sulfur 
reductions for the purpose of air toxics reduction. These issues are 
also discussed in more detail in Chapter 6 of the RIA.
    Refiners with whom we have met have generally expressed disapproval 
of further sulfur control. The Tier 2 gasoline sulfur program requires 
refiners to meet an average standard of 30 ppm. In response many have 
invested in and brought online desulfurization units, which would not 
have the capacity to

[[Page 15862]]

reach a new, lower standard of 10 ppm in many cases. Modifications 
would have to be made to units that have recently been installed to 
comply with the current gasoline sulfur requirements. In some cases 
these units might have to be replaced with new units. EPA requests 
comments on the magnitude of the impact of a new, lower sulfur 
standard, including the potential effect on refiners that have recently 
installed desulfurization units.
    On the automotive side, sulfur reduction may encourage further 
development of lean-burn or direct-injection gasoline technology. 
Leaner combustion of gasoline results in greater fuel economy and less 
VOC and carbon dioxide emissions, but generally produces more engine-
out nitrogen oxides. Reducing fuel sulfur to 10 ppm would improve 
feasibility and reduce cost of next-generation aftertreatment designed 
to control these higher levels of nitrogen oxides. EPA will continue to 
evaluate further gasoline sulfur reductions, and seeks comment on it, 
especially with data supporting or opposing such action.
ii. Gasoline Vapor Pressure
    According to the Complex Model and the MOBILE model, reducing fuel 
vapor pressure reduces evaporative as well as exhaust VOC emissions. 
Reducing VOC emissions in turn reduces MSAT emissions. A portion of 
this MSAT emission decrease through VOC control would likely be offset 
through an increase in the relative concentration of MSAT emissions. As 
volatility is decreased, non-aromatic compounds are removed from the 
gasoline, increasing the concentration of aromatics. Furthermore, these 
non-aromatic compounds are higher in octane, which would have to be 
offset--perhaps with still further increases in aromatics. Such 
increases in aromatics would lead to an increase in the relative 
concentration of benzene in VOC emissions. However, since changing 
vapor pressure has an effect on evaporative emissions, reducing vapor 
pressure can also reduce evaporative benzene from stationary sources 
related to gasoline distribution and marketing. Moreover, reducing 
overall VOC emissions reduces ground level ozone in urban areas, which 
itself has a significant impact on health and welfare.
    Currently, in reformulated gasoline (RFG) areas, fuel is limited to 
roughly 7.0 psi Reid vapor pressure (RVP) in the summer season in order 
to meet the VOC performance standard. Additional vapor pressure 
controls considered for this proposal would regulate RVP levels to 7.0 
or 7.8 in some conventional gasoline (CG) ozone nonattainment areas, 
resulting in an impacted volume of gasoline equal to about 50% of that 
of current federal RFG. Further details of these analyses are covered 
in Chapter 6 of the RIA.
    As with the sulfur analyses above, EPA also uses the Complex Model 
and MOBILE to estimate emissions impacts of changes in gasoline vapor 
pressure. In terms of the fuel parameter itself, this process is 
somewhat simpler than modeling sulfur effects since the range of vapor 
pressures useful in conventional vehicles has been well-defined for a 
number of years and is not expected to change. However, parallel to the 
arguments made above for sulfur, data on the effects of RVP changes on 
air toxics in these models is dated and does not represent newest 
technology. Since our models do not reflect improvements in emissions 
control technology for the Tier 2 program, more fuel effects studies 
must be carried out before making decisions on further gasoline vapor 
pressure controls. The cooperative test program between EPA and the 
Alliance of Automobile Manufacturers described above is also examining 
some of the effects of changes in RVP.
    Looking beyond emissions benefits, more stringent national vapor 
pressure standards could also help avoid additional small market 
(``boutique'') fuels. Several states and localities have adopted their 
own seasonal requirements for vapor pressure in an effort to improve 
air quality, contributing to constraints on gasoline supply and 
potential for price volatility.233 234
---------------------------------------------------------------------------

    \233\ EPA, Study of Unique Gasoline Fuel Blends (``Boutique 
Fuels''), Effects on Fuel Supply and Distribution and Potential 
Improvement, EPA420-P-01-004.
    \234\ GAO, Special Gasoline Blends Reduce Emissions and Improve 
Air Quality, but Complicate Supply and Contribute to Higher Prices, 
GAO-05-421.
---------------------------------------------------------------------------

    Feedback from refiners on further volatility control has 
highlighted concerns with the summer-winter butane balance and 
resulting potentially adverse supply implications. Currently, refiners 
who produce large quantities of RFG must remove a significant amount of 
the light-end components from their fuel in the summer to meet the 
vapor pressure specifications. These light components, primarily 
butanes, are often stored and then blended back into gasoline in the 
winter when higher fuel vapor pressures are needed for drivability 
reasons. Several refiners have indicated that a new rule adding a 
number of reduced RVP areas would cause the amount of butanes removed 
in summer to exceed what is useable in winter, resulting in a net loss 
of volume from the annual pool and a need to make up supply at 
additional expense. EPA will continue to evaluate further gasoline 
volatility reductions, and seeks comment on it, especially with data 
supporting or opposing such action.
c. Toxics Performance Standard
    While we are not proposing it, we considered and are seeking 
comment on the merits of expressing the standard as an air toxics 
performance standard rather than as a benzene content standard. Such a 
standard would be analogous to the current MSAT1 standard, but more 
stringent and with an ABT component. In theory, a toxics performance 
standard could provide broader environmental benefits by addressing 
other toxics in addition to benzene. However, because controlling 
benzene is more cost-effective than controlling emissions of other 
MSATs, refiners are unlikely to reduce emissions of other MSATs whether 
or not the standard is in the form of a toxics performance standard or 
a benzene content standard. Setting a toxics performance standard at an 
appropriate level also requires us to predict future changes in fuel 
properties in addition to benzene, and to be able to establish as 
precisely as possible the effects of those fuel properties on emissions 
of several MSATs. In addition, a toxics emission performance standard 
is more complex to implement and enforce than a benzene content 
standard. For all of these reasons, as discussed more fully below, we 
believe a benzene content standard offers more certain environmental 
results and less complexity. However, we seek comment on the overall 
merits of an air toxics performance standard, including comments 
specifically on the tradeoff between the complexity of complying with a 
performance standard and the additional environmental benefits it could 
provide.
    Based on our analysis for this proposal, fuel benzene control is by 
far the most effective and cost-effective means of achieving MSAT 
emission reductions. This is consistent with our experience with the 
MSAT1 and other air toxics control programs, which have shown that even 
when refiners have the flexibility to choose among different fuel 
changes to achieve MSAT control, reduction in benzene content is the 
predominant choice. Only when other fuel changes that impact MSAT 
emission performance are mandated (e.g., sulfur control, oxygenate use) 
have refiners made fuel changes other than benzene content to control 
MSAT

[[Page 15863]]

emissions. As a result, even if we were to express the proposed 
standard as an air toxics performance standard rather than a benzene 
content standard, we would expect the outcome to be the same--benzene 
content control with corresponding benzene emission reductions and no 
changes in other MSAT emissions. Our analysis of the feasibility and 
cost of the program would be identical as well. If future fuel 
parameters are significantly different than we have projected in this 
analysis such that emissions of other MSATs decrease, then a toxic 
performance standard would result in less benzene control than would be 
achieved by the benzene content standard we propose today, with a 
corresponding overall reduction in cost. If future fuel parameters are 
significantly different such that emissions of other MSATs increase, 
then refiners would need to reduce benzene content to levels that are 
not feasible considering cost, but overall toxics performance would be 
maintained.
    If we were to set an air toxics performance standard, the accuracy 
of the model used in estimating the real world effects of the many 
different fuel parameters on MSAT emissions also becomes of critical 
importance. To the extent fuel changes are projected to result in air 
toxics emission reductions that are not in fact borne out in-use, then 
the standard will have less benefit. There was a great deal of work 
done in the early 1990's to develop the Complex Model for the 
reformulated gasoline program. It estimates VOC, NOX, and 
certain MSAT emissions (benzene, 1,3-butadiene, formaldehyde, 
acetaldehyde, and POM) as a function of eight fuel properties (RVP, 
oxygen, aromatics, benzene, olefins, sulfur, E200, and E300) for 1990 
technology vehicles. However, a similar set of comprehensive data does 
not yet exist for new Tier 2 vehicles. Some of the fuel effects that 
were found to be statistically significant in the Complex Model may not 
be significant for Tier 2 vehicles (e.g., distillation properties). 
Others that impacted MSAT emissions primarily through their impact on 
VOC emissions may be of much less importance, due to the much lower VOC 
emissions of Tier 2 vehicles.\235\ To the extent that the Complex Model 
gives air toxics credit for fuel changes that are later found to be 
much smaller or not valid at all, a toxics performance standard could 
result in less fuel benzene control and less in-use MSAT control. Of 
all the fuel changes from past modeling, we would have the greatest 
confidence that the benzene relationships are unlikely to change 
significantly. This is due to the direct relationship between benzene 
fuel content and benzene evaporative and exhaust emissions, and due to 
the magnitude of these impacts. Thus, we would have the greatest 
confidence that the MSAT emission reductions projected from a fuel 
benzene content standard will be realized in-use.
---------------------------------------------------------------------------

    \235\ This is one reason why the Energy Policy Act of 2005 
requires EPA to create an updated gasoline emissions model by 2009.
---------------------------------------------------------------------------

    In addition, if we were to set an air toxics performance standard, 
it would be important to have a clear understanding of the changes in 
fuel properties anticipated in the future independent of today's 
proposal. Significant changes in the composition of gasoline are 
anticipated over the next several years as a result of the Energy 
Policy Act of 2005 (EPAct). MTBE is being removed from gasoline, 
ethanol use is increasing dramatically, and the oxygenate mandate for 
RFG is being eliminated. To the extent that these changes would result 
in reductions in modeled MSAT emission performance automatically, then 
refiners could comply with an air toxics performance standard with less 
benzene control than would be achieved under today's proposed benzene 
standard, and with lower overall costs. Conversely, to the extent that 
these changes would result in increases in modeled MSAT emission 
performance, an air toxics performance standard would require refiners 
to take additional measures to maintain overall MSAT performance, but 
these measures may not be cost-effective.
    Although a toxics performance standard could theoretically give 
refiners more flexibility than a program focusing only on benzene 
emissions, we do not believe that such flexibility would be meaningful 
in actual practice. As discussed above, in order to comply with a new 
total MSAT standard, we expect that refiners would rely almost 
exclusively on benzene control. However, if their emission performance 
for other MSATs changed in the future (due to such factors as changes 
in oxygenate use, octane needs, or crude oil quality), refiners could 
find themselves unable to maintain overall MSAT performance using cost-
effective controls.
    For all these reasons, we are not proposing to address fuel-related 
MSAT emissions with a toxics performance standard, but we seek comment 
on this option.\236\ We also seek comment on the merits of applying an 
air toxics performance standard in addition to a fuel benzene content 
standard, and how such a dual standard could be implemented. From a 
theoretical standpoint, this dual standard might serve as a backstop to 
ensure overall toxics performance is maintained. However, it is not 
clear how such an approach could be realistically implemented, 
especially in the context of ABT programs that apply to both.
---------------------------------------------------------------------------

    \236\ As explained further in section VII.C.5 below, based on 
the use of the currently available models, the proposed rule would 
result in greater overall reduction of air toxics from all gasoline 
than the current MSAT 1 program, and (consistent with section 
1504(b)(2) of the EPact) greater overall reductions of air toxics 
from reformulated gasoline than would be obtained under amended 
section 211(k)(1)(B) as well.
---------------------------------------------------------------------------

d. Diesel Fuel Changes
    We are also not proposing today to reduce MSATs by changing diesel 
fuel. The existing major diesel fuel sulfur programs being implemented 
in the next few years for highway and nonroad diesel fuel will have a 
very large impact on reducing MSAT emissions `` specifically diesel 
particulate matter and exhaust organic gases. We have found in the on-
highway diesel engine rulemaking that these are the greatest reductions 
achievable and reiterate that finding here. (See also section V.D.1.f 
above.) We are not aware of other changes to diesel fuel that could 
have a significant effect on emissions of any other MSATs. We welcome 
comment on our decision to focus this proposed program exclusively on 
changes to gasoline.
2. Why Are We Proposing To Control Benzene Emissions By Controlling 
Gasoline Benzene Content?
    In the previous section, we describe how we decided to focus 
today's proposed fuel program on gasoline benzene emissions. This 
section describes our decision to propose to reduce benzene emissions 
through a gasoline benzene content standard. We also describe our 
consideration of two other potential approaches to reducing benzene 
emissions, both of which would indirectly reduce gasoline benzene 
content: a standard to control the gasoline content of all aromatic 
compounds; and a standard to control benzene emissions.
a. Benzene Content Standard
    For several reasons we have decided that a benzene content standard 
would be the most cost-effective and most certain way to reduce 
gasoline benzene emissions (and thereby MSAT emissions in general). 
First, a small change in gasoline benzene content results in large 
reductions in benzene emissions `` benzene typically

[[Page 15864]]

represents around 1 percent of gasoline, but this contributes about 25 
percent of benzene exhaust and evaporative emissions.\237\ Second, we 
have high confidence in the benzene emission reductions that would 
result from fuel benzene control. Historical data across a range of 
vehicles and engine types continues to support the relationship between 
fuel benzene content and benzene emissions. Even if Tier 2 vehicles 
react differently, the relationship is unlikely to change 
significantly. Third, because a relatively small change in gasoline 
properties is needed to achieve the desired result, reducing benzene 
content does not have a large impact on octane value. Benzene itself 
does contribute to the octane value of gasoline, but the small loss of 
octane from reducing benzene content is much less than the octane loss 
from reducing other aromatics for the same benzene emission effect, as 
discussed below, and the consequences of refiners having to replace 
that octane value are also much less. (This is why, as noted earlier, 
we anticipate that refiners would seek to comply with any toxics 
standard by reducing benzene levels in any case.) Fourth, we believe 
that a direct benzene content standard would best ensure real benzene 
emission reductions, including both exhaust and evaporative benzene 
emissions. We discuss this conclusion below, in the context of the 
potential alternative of a benzene emission standard.
---------------------------------------------------------------------------

    \237\ Based on the Complex Model.
---------------------------------------------------------------------------

b. Gasoline Aromatics Content Standard
    Because benzene emissions are formed from benzene and other 
aromatics that are present in gasoline, we considered a standard that 
would limit the aromatics content of gasoline. However, we believe that 
reducing benzene emissions through a more general reduction in gasoline 
aromatics content would be much less cost-effective than direct benzene 
reduction. Non-benzene aromatics account for on average about 30 
percent of gasoline (typically ranging between about 20 percent and 40 
percent), and this fraction contributes about 30 percent of benzene 
emissions. In contrast, benzene only makes up about 1 percent of 
gasoline but is responsible for about 25 percent of benzene emissions. 
The remaining benzene emissions are formed from other compounds. Based 
on the Complex Model, it would require about a 20 percent reduction in 
non-benzene aromatics to achieve the same benzene emission reductions 
as the proposed benzene content standard. As we discussed earlier, a 
major consequence of removing a significant amount of the aromatics in 
gasoline is the need to replace the large loss in octane value. As a 
result, it is much more costly for refiners to reduce benzene emissions 
through aromatics control than through benzene control. We have not 
evaluated the cost of aromatics control recently, but when we did so 
for the RFG rule in the early 1990s, the cost was about 5 times more to 
achieve the same benzene reduction through aromatics control than 
through benzene control.\238\ In recent years a variety of factors have 
reduced the use of MTBE as an octane booster; we expect that this trend 
will raise the relative cost of aromatics control even further.
---------------------------------------------------------------------------

    \238\ Final Regulatory Impact Analysis for Reformulated 
Gasoline, AEPA420-R-93-017, December 1993.
---------------------------------------------------------------------------

    In addition, aromatics reductions would have to be offset with 
other high-octane compounds, such as ethanol and ethers (e.g., ETBE and 
MTBE). Increasing other high-octane compounds tends to significantly 
increase other air toxics emissions (like acetaldehyde or 
formaldehyde). Consequently, the benzene emission reductions would be 
substantially offset by increases in other toxics. For these reasons, 
aromatics control has historically only been cost-effective for 
refiners when other requirements are placed on them, such as state or 
federal oxygenate mandates that also serve to boost octane value. For 
this same reason, we anticipate that further aromatics reductions will 
occur as a result of the near doubling of the use of ethanol in 
gasoline due to the renewable fuels standard contained in the EPAct. 
Given a mandate for ethanol use and the cost associated with it, 
refiners can reduce their refining costs by further reducing aromatics.
    Aromatics control would also affect other recent fuel control 
programs. For example, many refineries depend on the reforming process 
that produces aromatics to also supply much or all of the hydrogen 
needed for gasoline and diesel desulfurization processes. Reducing 
aromatics thus would indirectly reduce hydrogen supply, which would 
then likely require refiners to either purchase hydrogen or build 
hydrogen production facilities.
    At the same time, although it would not be constrained, we do not 
believe that in the absence of aromatics control, refiners would be 
likely to increase gasoline aromatics content in the future. Aromatics 
are a relatively valuable gasoline component, and refiners are 
generally careful not to make changes that would increase aromatics 
content more than is needed for octane purposes. In addition, as 
mentioned previously, the Renewable Fuel Standard that will be 
promulgated under the new Energy Policy Act will, by boosting ethanol 
use, increase the octane of the gasoline pool. We expect that this, in 
turn, will prompt refiners to reduce their use of aromatics for octane 
enhancement. Also, higher gasoline prices recently have reduced the 
demand for premium grade gasoline, which generally has higher aromatics 
levels. To the extent that this trend continues, we expect that it will 
tend to further reduce the levels of aromatics in the overall gasoline 
pool.
    For all of these reasons, we believe that reducing benzene 
emissions through a benzene content standard would be much superior to 
doing so through an aromatics content standard. However, there may be 
other benefits associated with aromatics control in addition to benzene 
emissions. EPA is working to improve its understanding of the effect of 
mobile source emissions on ambient PM, especially secondary PM. For 
example, there is limited data that suggest that aromatic compounds 
(toluene, xylene, and benzene) react photochemically in the atmosphere 
to form secondary particulate matter (in the form of secondary organic 
aerosol (SOA)), although our current modeling tools do not fully 
reflect this. One caveat regarding this work is that a large number of 
gaseous hydrocarbons emitted into the atmosphere having the potential 
to form SOA have not yet been studied in this way. It is possible that 
hydrocarbons which have not yet been studied produce some of the SOA 
species which are being used as tracers for other gaseous hydrocarbons. 
This means that the current interpretation of the available studies may 
over-estimate the amount of SOA formation in the atmosphere. We seek 
comment on the potential benefits, costs, and other implications of 
aromatics control for consideration in the future.
c. Benzene Emission Standard
    In addition to the benzene or aromatics fuel content standards 
discussed above, we have considered reducing benzene emissions through 
a benzene emission standard. The primary argument for such an approach 
is that it would focus on the environmental outcome we are interested 
in `` reduced benzene emissions `` while providing refiners some 
flexibility in how that goal was met.
    In order to fully discuss this option, it is useful to clarify how 
such a

[[Page 15865]]

benzene emission standard would be implemented. Instead of directly 
measuring gasoline content to determine compliance, as would be the 
case with a benzene (or aromatics) content standard, compliance would 
be determined using EPA's Complex Model or an updated version of it. 
Several parameters of a refiner's gasoline (including benzene and 
aromatics content) would be used as inputs into the model. Based on 
these and other assumed properties of the gasoline, the model would 
estimate the expected level of benzene emissions from that gasoline 
formulation.
    As compared to a program based on the direct measurement of benzene 
content in gasoline, we believe that one relying on modeled estimates 
of benzene emissions would be difficult to set today. As with the 
toxics performance standard we considered above, gasoline parameters 
and their effects on MSAT emissions will be changing in the future due 
to the Energy Policy Act, changes in crude oil supplies, and perhaps 
other unknown factors. In addition, the effects of fuel changes on MSAT 
emissions from the new Tier 2 vehicles now entering the light-duty 
fleet are poorly represented in our modeling. Thus, it would be 
difficult to accurately predict future gasoline parameters and set an 
appropriate benzene emission standard that ensured the greatest 
emission reduction achievable, especially a standard that could remain 
stable for a number of years. As benzene content has been and is sure 
to remain by far the most important fuel parameter in estimating 
benzene emissions, a benzene content standard provides greater 
assurance of actual benzene emission reduction in-use.
    Even if it were practical to set a long-term benzene emission 
standard, such an approach would be problematic for other reasons. As 
we have stated, the only significant option for reducing benzene 
emissions other than reducing benzene content is reducing aromatics 
content. Since we do not believe that requiring control of gasoline 
aromatics is appropriate at this time, a benzene emission standard 
would not result in appreciably different emission reductions than 
would result from a benzene content standard. However, given that 
aromatics control is a less effective means of reducing benzene 
emissions and has a more disruptive effect on octane values (as just 
discussed), requiring more aromatics control could dramatically 
increase the cost of compliance. Finally, although a benzene emission 
standard might be assumed to offer additional flexibility to refiners, 
we do not believe that such flexibility would actually exist. Faced 
with a dependence on aromatics to meet octane requirements, and in some 
cases to provide hydrogen supply for desulfurization of gasoline and 
diesel fuel, we believe that refiners would choose benzene content 
reduction over aromatics reductions even when they theoretically had 
the choice to do otherwise. Experience with the MSAT1 emissions 
performance standard has confirmed this. However, as mentioned 
previously, gasoline parameters do change, octane requirements can 
decrease, ethanol will supply additional octane, and therefore aromatic 
reductions may occur in the future regardless. Were this to occur, a 
benzene emission standard set today could allow benzene content to 
increase in the future. Given the additional complexity and uncertainty 
associated with a benzene emission standard, we have therefore elected 
to propose a benzene content standard exclusively. We request comment 
on this approach and on a benzene emission standard.
3. How Did We Select the Level of the Proposed Gasoline Benzene Content 
Standard?
a. Current Gasoline Benzene Levels
    In selecting an appropriate level for the proposed benzene content 
standard, we began by evaluating the current status of the industry 
regarding gasoline benzene. Benzene content varies widely among 
refineries, depending on such factors as refinery configuration and 
proximity to benzene markets. The national average benzene level was 
1.6 vol% in 1990. Due to the 0.95 vol% requirement of the 1995 RFG 
program, the introduction of gasoline oxygenate requirements, and other 
factors, benzene levels have since declined. By 2003, RFG averaged 0.62 
vol% benzene. (See section V.D.1 above.)
    Benzene levels have also declined for CG over the same period, to 
an average of 1.14 vol%. This is in part because when faced with 
investing in new processes to comply with the RFG benzene standard, 
some refiners found it economical to install more benzene extraction 
capacity than was needed to meet the standard. As a result, in many 
cases, these refiners have also controlled benzene from CG.
b. The Need for an Average Benzene Standard
    Even before considering the level of the benzene content standard, 
we first needed to consider the standard's potential form. A standard 
for this purpose could be expressed as a per-gallon benzene limit, 
which would ensure that no gasoline exceeded a specified benzene level. 
In contrast, a benzene content standard could be expressed as a 
flexible average level, allowing some of the existing variability in 
current benzene levels to remain while reducing overall benzene levels. 
For several reasons, it became clear that an average standard was the 
most appropriate for this program.
    As mentioned above, there is a great diversity in the benzene 
content of gasoline currently produced at refineries across the 
country. In 2003, the annual average benzene content of refineries 
ranged nationally from under 0.5 vol% to above 3.5 vol%. This variation 
among refineries is also reflected in large regional differences in 
average gasoline benzene content, as illustrated below (Tables VII.C-2 
and VII.F-1).
    In addition to average benzene levels varying widely across 
refineries and regions, per-gallon benzene levels for individual 
batches produced by a refinery also vary dramatically depending on the 
crude oil supply and the refinery streams used to produce a particular 
batch. This variation occurs as a result of a wide range of day-to-day 
decisions necessary in producing marketable gasoline within a refinery 
on a continuous basis. We reviewed actual batch data for a typical 
refinery producing both RFG and CG with an average benzene content of 
1.6 vol% for all its gasoline, and batch benzene levels ranged from 
under 0.1 to 3.0 vol% for CG. The range for RFG is typically narrower 
due to the existing 1.3 vol% per gallon cap, but still shows 
significant batch to batch fluctuations. Batches that refiners produce 
with benzene higher than 1.3 vol% are marketed as CG.
    We considered controlling benzene emissions with a fixed, per-
gallon benzene content standard to be met at all refineries. By capping 
gasoline benzene content in this way, the program would ensure that all 
gasoline nationwide would have benzene levels below the selected upper 
limit. However, as we developed the rule, it became clear that with the 
large variation in benzene levels among refineries and regions 
(reflecting the variation in the economics of reducing benzene), a per-
gallon standard would have to be so high (to account for maximum, 
legitimate potential variability) as to leave most refineries with 
little or no need to reduce benzene. Moreover, the burden of the 
national control program would fall almost entirely on the refineries 
where the challenges of control would be greatest, and where the most 
lead time would be

[[Page 15866]]

required for compliance. With many refineries able to comply without 
making any changes, we do not believe such a program would represent 
the greatest reduction feasible, as the Clean Air Act requires.
    The typical fluctuations in benzene content among batches at 
individual refineries, as discussed above, also indicate the need for 
refiners to have a degree of flexibility in producing gasoline, as 
would be provided by an average benzene standard. Restrictions on day-
to-day fluctuations would not significantly affect average benzene 
levels, but would certainly increase costs as refiners invested in 
avoiding occasionally higher benzene batches. We believe that allowing 
refiners to average batches with fluctuating benzene over a year's 
time, as we propose, would result in a more cost-effective program.
    Most importantly, it is clear that with the incorporation of a 
carefully-designed benzene credit averaging, banking, and trading (ABT) 
program, a more stringent benzene standard would be feasible, and 
implementation could occur earlier. Thus, we are proposing a 0.62 vol% 
annual average standard to begin in 2011. Under the proposed ABT 
program, refiners could generate early credits by making early 
reduction efforts prior to 2011. Refiners would have an incentive to do 
so, because the credits generated could be used to postpone more 
expensive final investments in benzene control technology. In this way, 
the ABT program would allow the economic burden of the benzene standard 
to be more efficiently distributed among refiners and over time. The 
proposed ABT program would result in lower benzene levels in all areas 
of the country compared to today's levels, as described in more detail 
below in section VII.D.
c. Potential Levels for the Average Benzene Standard
    We evaluated a range of potential standards on a national refinery 
annual average basis from 0.52 to 0.95 vol% benzene.\239\ Our refinery-
by-refinery model incorporates data on individual refineries whenever 
possible and estimates the likely technological approaches that 
refiners would choose for each refinery to comply with each potential 
standard at the least cost. The model chooses among several 
technological options that are the most common and effective methods 
available to refiners to reduce gasoline benzene content. (Section 
VII.F below and Chapter 6 of the RIA have more detailed discussions of 
benzene reduction technologies).
---------------------------------------------------------------------------

    \239\ For this evaluation we used both refinery linear 
programming (LP) models and a refinery-by-refinery model developed 
specifically for this rule.
---------------------------------------------------------------------------

    All of the methods that we considered focus on reducing benzene 
content in the reformate stream, which is the product of the reformer 
unit. The role of the reformer unit is to increase gasoline octane, 
which it does by generating aromatic compounds from simpler 
hydrocarbons. Benzene is one of the aromatic compounds produced by the 
reformer. Reformate accounts for 30-40% of gasoline volume and can 
contain as much as 12% benzene. As a result, reformate contributes the 
majority of the total benzene content of gasoline. For these reasons, 
treatment of reformate is usually the most effective and economical 
means of reducing benzene content. Several proven and commercially 
available technologies exist for reducing benzene creation in the 
reformer and removing it from the reformate product.
    The least stringent standard we evaluated, a national average of 
0.95 vol% benzene, would not require any changes at most refineries. 
For the refineries where action would be needed, we project that most 
could be brought into compliance by reducing creation of benzene in the 
reformer using the simplest and least costly of the technology options 
evaluated. We do not believe that a standard at this level would meet 
the statutory requirements of section 202(l) of the Clean Air Act to 
achieve the greatest reductions achievable considering cost and other 
factors since, as discussed below, greater reductions are feasible at 
reasonable cost, and without adverse energy or safety implications.
    As the most stringent case, we evaluated a national average benzene 
content standard of 0.52 vol%. Our analysis indicates that a standard 
at this level would require all refiners to invest in the most 
effective technologies used today that remove the benzene from their 
reformate product streams (benzene saturation and benzene extraction, 
as discussed below). If the ABT program were fully utilized (all 
credits generated were used), we believe all refiners might comply with 
this average standard. Because of the almost universal need for 
refineries to use the most expensive reformate-based benzene control 
technologies, we believe a standard of 0.52 vol% would be very 
challenging economically for many refineries, and we believe that such 
a standard would not be achievable taking costs into consideration, as 
we are required to do under section 202(l). In addition, if, as appears 
likely, ``perfect'' credit trading did not occur, some refiners would 
have to use additional, more extreme approaches that would be even more 
costly and would require more difficult compromises in the operation of 
the refineries. (We discuss these technological and operational 
approaches to benzene reduction in more detail in section VII.F below 
and in Chapter 6 of the RIA.)
    In 2003, the average benzene level in RFG was 0.62 vol%.\240\ We 
believe an annual average benzene standard of 0.62 vol% applied to all 
gasoline (both CG and RFG) would be feasible considering cost and other 
factors. Furthermore, implementing an average benzene standard of 0.62 
vol% would achieve several other important program goals. At this 
level, the same benzene standard could be applied to both RFG and CG 
nationwide, and our analysis shows that the RFG benzene reductions 
already achieved by the industry to date would not be lost. We expect 
that refiners currently producing RFG with benzene levels below 0.62 
vol% would continue to be committed to producing low-benzene gasoline 
based on prior investment in benzene extraction equipment or ABT credit 
incentives. Additionally, as discussed below in VII.C.5, a gasoline 
benzene standard of 0.62 vol% would achieve sufficient mobile source 
air toxic reductions allowing this program to supersede the additional 
MSAT requirements under EPAct. Finally, an average benzene standard 
applied to both CG and RFG, would allow for a uniform nationwide ABT 
program providing additional flexibility and reduced compliance costs 
to refiners, resulting in the greatest achievable reductions within the 
meaning of section 202(l).
---------------------------------------------------------------------------

    \240\ Volume-weighted average benzene level based on January 1, 
2003 to December 31, 2004 RFG batch reports.
---------------------------------------------------------------------------

    At a national average standard of 0.62 vol%, we estimate that a 
number of refiners would produce gasoline with significantly lower fuel 
benzene levels, creating enough benzene credits to allow refiners in 
less economically favorable positions to purchase these credits on an 
on-going basis and use them for compliance purposes. We project that 
further reductions would occur not only in CG, but also in RFG, despite 
the fact that RFG is already averaging 0.62 vol%. As discussed in 
section IX below and in Chapter 9 of the RIA, as the stringency is 
pushed below 0.62 vol%, the overall program costs would begin to rise 
more steeply. This is because in meeting a lower average standard, 
there would be fewer

[[Page 15867]]

refineries able to comply at low cost, resulting in fewer credits being 
generated. This in turn would require more investment among refiners 
with higher costs of compliance.
    We also considered a program that would apply separate benzene 
content standards to RFG and CG. In the context of any nationwide ABT 
program that allowed trading across both RFG and CG, separate standards 
for these two gasoline pools would not be fundamentally different from 
the proposed unified standard. The only impact would be to somewhat 
change which refiners generated credits and which used credits, and to 
what degree. For separate RFG and CG standards to have a meaningful 
impact in comparison to today's proposed program, separate trading 
programs for each of the two gasoline pools would be required. Our 
modeling shows that without the credits generated by RFG producers in a 
nationwide trading program, it would not be possible to set as 
stringent a standard for CG. The higher-benzene refineries that would 
most need credits to meet a stringent average standard are a subset of 
refineries that produce CG. As a result, in a program with separate RFG 
and CG pools, we would expect to set a slightly more stringent standard 
for RFG alone, but we would need to set a substantially relaxed 
standard for CG. The net result would be, at best, the same nationwide 
average benzene reductions in the RFG and CG pools that would be 
expected under a unified standard. However, there would be a clear risk 
that the reduced generation of credits by lower-cost refineries would 
lead to either a significant increase in the cost of the program 
(because higher-cost refineries would need to make refinery changes 
earlier) or the potential for fewer reductions through the process of 
setting the levels for the separate CG and RFG standards. Conversely, 
with a unified standard and nationwide ABT, we believe that the program 
would achieve the maximum economical reduction in all areas and greater 
overall benzene reduction over the CG and RFG pools.
    In addition, we considered a somewhat less stringent national 
average standard than the proposed 0.62 vol% (e.g., 0.65 or 0.70 vol%). 
Such standards would still achieve significant benzene emission 
reductions. However, we are concerned that a less stringent standard 
would not satisfy our statutory obligation for the most stringent 
standard feasible considering cost and other factors. Furthermore, such 
standards would not allow us to accomplish several important 
programmatic objectives. Given that the average benzene content of RFG 
in 2003 was already 0.62 vol%, such higher standards would not provide 
the certainty that the air toxics performance of RFG would decline in 
the future. This would then trigger the provisions in the 2005 EPAct to 
adjust the MSAT1 baseline for RFG. The only way of avoiding this 
situation would be to maintain separate standards for RFG and CG where 
the RFG standard was still more stringent than 0.62 vol% and credits 
could not be used from CG to comply. As discussed above, having 
separate standards with separate ABT programs raises additional cost 
and feasibility issues.
    For all of the above reasons, we believe that a refinery annual 
average benzene content standard of 0.62 vol% applying to all gasoline 
nationwide (excluding California), in conjunction with an 
appropriately-designed ABT system, would maximize benzene emission 
reductions considering cost and other factors.
    Section 202(l)(2) also requires that we consider lead time in 
determining the greatest reductions achievable. We are proposing that 
the standard of 0.62 vol% become effective on January 1, 2011. Because 
the final rule will be completed in early 2007, this would allow about 
4 years for refiners to plan and execute the necessary capital projects 
and operational changes needed to meet the program requirements. We 
discuss our assessment of necessary lead time in section VII.F below. 
We believe that this proposed level for the standard, the proposed ABT 
program, and the proposed implementation date together meet the 
statutory requirement that the program results in the greatest emission 
reduction achievable considering costs and other factors.
    We encourage comment on our selection of this level for the 
standard, especially with data and analysis that support the comments.
d. Comparison of Other Benzene Regulatory Programs
    In addition to the benzene content standard of the RFG program, 
California and several countries have regulatory limits on the benzene 
content of gasoline. Table VII.C-1 shows the basic provisions of each 
of these programs.
    Canada has limits similar to those covering U.S. RFG. In Canada, 
producers may either comply with a 1.0 vol% flat limit or an averaging 
standard of 0.95 vol%, with a per-gallon cap of 1.5 vol%. The European 
Union regulates fuel to the same level in all its member countries, 
currently a per-gallon cap of 1.0 vol%. Japan has the same limit as the 
E.U., while South Korea will be moving from a cap of 1.5 to 1.0 vol% in 
2006.
    California is the only state that has implemented a benzene 
standard, and it is similar to the standard we are proposing today. 
California's average standard is 0.7 vol%, with a per-gallon cap of 1.1 
vol%. Together, these standards result in an average 0.62 vol% in-use 
gasoline benzene level.

                                                 Table VII.C-1.--Other Gasoline Benzene Control Programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            California
                                                            Federal RFG     phase 3 RFG       Canada        South Korea        Japan      European Union
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average Std (vol%)......................................          0.95 a             0.7            0.95  ..............  ..............  ..............
Per-gallon Cap (vol%)...................................             1.3             1.1             1.5           1.5 b             1.0            1.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Producers may also comply with a per-gallon cap of 1.0.
b Limit to be lowered to 1.0 in 2006.

4. How Do We Address Variations in Refinery Benzene Levels?
a. Overall Reduction in Benzene Level and Variation
    As explained above, there is currently a wide variation in gasoline 
benzene levels across the country. According to summer 2003 batch data 
(proposed baseline \241\), average benzene content ranged from 0.41 to 
3.81 vol%, including both RFG and CG. The current

[[Page 15868]]

variation in benzene levels is primarily attributable to differences in 
crude oil quality, different refinery configurations, and differences 
in refinery operations. Our analysis of the proposed program, 
summarized below, concludes that average benzene levels would be 
reduced in all areas of the country (PADDs \242\) and variation among 
refineries would also be reduced. We believe that under the proposed 
rule, virtually all refineries would reduce their benzene levels and 
that no refineries would increase their benzene levels.
---------------------------------------------------------------------------

    \241\ For the purpose of our analyses, we selected 2003 to 
represent current (baseline) conditions because it reflected the 
most recent batch data available. The refinery-by-refinery model 
used to predict refinery behavior (discussed later in section IX) is 
based on inputs from the linear programming (LP) model, which is set 
up to only model the summer season. As a result, we have used summer 
2003 as our baseline period.
    \242\ The Department of Energy divides the United States into 
five Petroleum Administration for Defense Districts, or PADDs. The 
states included in each PADD are defined at 40 CFR 80.41.
---------------------------------------------------------------------------

    Upon implementation of the proposed 0.62 vol% benzene standard in 
2011, we believe that some refiners would reduce benzene levels to 
below the standard while others would reduce benzene levels but would 
need to rely partially or largely on credits generated and traded under 
the proposed ABT program, as described below. Refiners' compliance 
strategies would ultimately be driven by economics. For many it would 
be economical to reduce gasoline benzene levels to 0.62 vol% or below. 
For others it would be economical to make some reduction in gasoline 
benzene levels and rely partially upon credits. For some refineries 
already below the standard, no benzene reduction efforts would be 
necessary. For the limited number of remaining technologically-
challenged refineries it would be most economical to rely wholly upon 
credits. Regardless of the compliance strategies selected, under the 
proposed program, benzene levels and variation would be reduced 
nationwide.

                              Table VII.C-2.--Benzene Levels in Gasoline Produced Currently and Under the Proposed Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Number of refineries by gasoline benzene level (vol%)                 Benezene level (vol%) *
                                           -------------------------------------------------------------------------------------------------------------
                                               <0.5     0.5-<1.0   1.0-<1.5   1.5-<2.0   2.0-<2.5    >=2.5       Min        Max      Range **   Avg ***
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Starting Gasoline Benzene Levels***
--------------------------------------------------------------------------------------------------------------------------------------------------------
PADD 1....................................          4          3          3          0          2          0       0.41       2.19       1.77       0.62
PADD 2....................................          0          5          8         11          1          1       0.60       2.85       2.25       1.32
PADD 3....................................          4         18         10          7          0          2       0.41       3.10       2.69       0.86
PADD 4....................................          0          1          4          6          3          2       0.60       3.56       2.96       1.60
PADD 5 ****...............................          0          0          1          3          2          2       1.36       3.81       2.44       2.06
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................          8         27         26         27          8          7       0.41       3.81       3.39       0.97
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Benzene Levels After Program Implementation
--------------------------------------------------------------------------------------------------------------------------------------------------------
PADD 1....................................          4          5          1          2          0          0       0.41       1.96       1.54       0.51
PADD 2....................................          1         22          1          2          0          0       0.49       1.95       1.46       0.73
PADD 3....................................         10         27          3          0          1          0       0.36       2.07       1.71       0.55
PADD 4....................................          0          8          7          1          0          0       0.53       1.94       1.40       0.95
PADD 5 ***................................          0          4          2          2          0          0       0.54       1.84       1.30       1.04
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................         15         66         14          7          1          0       0.36       2.07       1.71      0.62
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Starting benzene levels based on summer 2003 batch data.
** Range in benzene level (MIN-MAX).
*** Average volume-weighted benzene level.
**** PADD 5 excluding California.

    As shown in Table VII.C-2, average benzene levels would be reduced 
by 36%, from 0.97 vol% (baseline) to 0.62 vol% once the program is 
fully implemented. Variation in benzene level, measured in terms of 
range, would be reduced by 50% (from 3.39 vol% to 1.71 vol%). In 
addition the areas with the highest starting benzene levels and 
variation (PADDs 2, 3, 4 and 5) would experience the greatest 
reductions.
    In conclusion, we project that under the proposed program all areas 
of the country would see reductions in average benzene level and 
variation among refineries would also be reduced. Refiners would have 
several motivations for making the benzene reductions projected by our 
analysis. First, reducing actual benzene levels could be the most 
economically-favorable compliance strategy. Secondly, reducing benzene 
levels would help reduce or eliminate the uncertainty associated with 
relying on credits. Finally, reducing benzene levels could generate 
credits that would be valuable to the refining industry.
b. Consideration of an Upper Limit Standard
    We believe that the proposed program would provide significant 
benefits in all areas of the nation. Nevertheless, we recognize that 
some commenters are likely to be concerned that under a flexible ABT 
program it is possible that some refiners could maintain their current 
benzene levels or even increase them and comply through the use of 
credits. If such a refinery dominated a particular market, then even 
though nationally there would be significant benzene reductions, they 
might not occur in that market. While our analysis does not lead us to 
believe that such an outcome would happen, we have nevertheless 
considered whether an upper limit on benzene (in addition to the 
average standard) would be valuable to prevent that outcome from 
happening.\243\ We considered two different forms of an upper benzene 
limit to complement the average standard: a per-gallon cap standard and 
a maximum average standard.
---------------------------------------------------------------------------

    \243\ Upper limits on benzene are a part of comparable programs 
in California and in other countries.
---------------------------------------------------------------------------

i. Per-Gallon Cap Standard
    A cap would require that each gallon (or batch) of gasoline 
produced or imported not contain more than a specified concentration of 
benzene. Such a standard would force those refineries with the highest 
benzene levels to make physical changes to their gasoline instead of 
having the option of relying exclusively on credits. In addition to 
formally limiting the maximum benzene content sold anywhere in the 
country, such a cap would also be straightforward to enforce

[[Page 15869]]

at any point in the distribution system. Note that we are proposing 
that the existing per-gallon cap of 1.3 vol% benzene would remain in 
effect for RFG under this rule. EPA invites comment on whether the RFG 
benzene cap should be retained.
    The primary disadvantage of adding a rigid cap is that it would not 
allow for occasional, short-term fluctuations in benzene content. 
Refiners are faced with a range of unexpected or planned circumstances 
that could cause temporary spikes in benzene content, including 
equipment malfunctions and periodic maintenance. Although the 1.3 vol% 
cap would remain for RFG, to apply a cap in this range to CG would 
eliminate a necessary market for higher benzene batches.\244\ With no 
ability to market the gasoline, the refiner would be forced to suspend 
gasoline production. This could in turn force the shutdown of the 
entire refinery, sacrificing supply of all products. To attempt to 
avoid this situation, refiners would need to invest more heavily in 
benzene control than needed to meet the average standard, simply to 
provide back-up control to protect against short-term fluctuations. For 
some higher-benzene refineries, a cap could make complying with the 
program prohibitively expensive.
---------------------------------------------------------------------------

    \244\ As explained in section VII.C.5 below, CG provides a 
limited safety valve for occasional batches of high-benzene RFG due 
to the Anti-dumping provisions.
---------------------------------------------------------------------------

    Consequently, we concluded that if we were to impose a per-gallon 
cap, it would have to be high enough to allow most refineries to 
continue to operate even in such upset situations (in order to account 
for legitimate maximum potential daily variability), thereby providing 
little overall benefit.\245\ Alternatively, we would have to allow 
exceptions to the per-gallon cap for such upset situations, which would 
be burdensome to implement and also result in little overall benefit.
---------------------------------------------------------------------------

    \245\ In California and other countries with benzene control 
programs, the refining industry tends to be more homogeneous than in 
the U.S. as a whole and face different market situations, resulting 
in different considerations regarding upper limits.
---------------------------------------------------------------------------

    If refiners with higher-benzene refineries need to invest in 
greater benzene control in order to protect against unpredictable 
upsets, their costs would be even higher relative to those of lower-
benzene refineries. As in the case of a program with no ABT at all, the 
statutory requirement to balance the degree of feasible emission 
reduction with cost (and other factors) would have the 
counterproductive effect of requiring a less stringent overall program.
    At the same time, the per-gallon cap would appear to provide no 
overall additional reduction in benzene levels. Despite the increased 
costs, particularly for higher-benzene refiners, our analysis indicates 
that little additional emission reduction would result (primarily 
because the higher-benzene refineries represent a relatively small 
fraction of nationwide gasoline production). Instead, as discussed 
below, emission reductions are expected to simply shift from one region 
of the country to another, with no change in the overall emission 
reductions. Because of this, and due to the potential deleterious cost 
impacts, we are not proposing a per-gallon cap benzene standard.
ii. Maximum Average Standard
    Another means of ensuring some reduction by those refiners with the 
highest benzene concentrations would be to impose a maximum average 
standard. An annual maximum average standard for each refinery would 
limit the average benzene content of its actual production over the 
course of the year, regardless of the extent to which credits may have 
been used for compliance. While slightly less restrictive than a per-
gallon cap standard in that some shorter-term fluctuations in benzene 
levels could occur, a maximum average standard would still limit the 
flexibility otherwise available through the ABT program. Our modeling 
shows that a number of refiners would need to invest substantially more 
to ensure compliance with both the average and maximum average 
standards. With the addition of a maximum average standard, we expect 
emission reductions to simply shift from one region of the country to 
another with no net change in overall emission reductions. For example, 
when analyzing a 1.3 vol% maximum average standard, benzene levels were 
lowered in two PADDs and raised in three PADDs compared to our proposed 
program yet the overall emission reductions remained the same.\246\ 
Since we believe that a maximum average standard would increase costs 
but not achieve any greater emission reduction, we are not proposing 
such a standard.
---------------------------------------------------------------------------

    \246\ This program comparison is discussed further in Chapter 9 
of the RIA (Table 9.6-7).
---------------------------------------------------------------------------

    We believe that the proposed ABT program, in combination with the 
proposed 0.62 vol% benzene standard without a cap or maximum average 
limit, would result in the maximum feasible reduction in benzene 
emissions, considering costs, energy, and safety issues. The proposed 
ABT program would provide refiners with compliance flexibility while 
ensuring that the national program achieves significant overall benzene 
emission reductions.
    We invite comment on our conclusions about having an upper limit in 
addition to an average standard.
5. How Would the Proposed Program Meet or Exceed Related Statutory and 
Regulatory Requirements?
    Three fuels programs (RFG, Anti-dumping and MSAT1) currently 
contain direct controls on the toxics performance of gasoline.\247\ 
Based on our analyses of the proposed program, including the proposed 
ABT program, we expect that meeting the proposed fuel benzene content 
standard combined with other fuel controls would also lead to 
compliance with the toxics requirements of all these programs.
---------------------------------------------------------------------------

    \247\ Other gasoline fuel controls, such as sulfur, RVP or VOC 
performance standards, indirectly control toxics performance by 
reducing overall emissions of VOCs.
---------------------------------------------------------------------------

    The RFG program, implemented in 1995, contains a fuel benzene 
standard that requires a refinery's or importer's RFG to average no 
greater than 0.95 vol% benzene annually.\248\ In addition, RFG has a 
per-gallon benzene cap of 1.3 vol%. Each refinery's or importer's RFG 
must also achieve at least a 21.5% annual average reduction in total 
toxics emissions compared to 1990 baseline gasoline.\249\ The Anti-
dumping regulations require that a refinery's or importer's CG produce 
no more exhaust toxics emissions on an annual average basis than its 
1990 gasoline.\250\ This program keeps refiners from shifting fuel 
components responsible for elevated toxic emissions into CG as a way to 
comply with the RFG standards. Section V.D.1 above describes these 
programs in more detail.
---------------------------------------------------------------------------

    \248\ 40 CFR 80 Subpart D. Refiners also have the option of 
meeting a per gallon limit of 1.0 vol%.
    \249\ Emissions determined using the Complex Model, as defined 
in 40 CFR 80.45.
    \250\ CFR 80 Subpart E, emissions determined using the Complex 
Model.
---------------------------------------------------------------------------

    The MSAT1 program, implemented in 2002, was overlaid on the RFG and 
Anti-dumping programs.\251\ As explained in section V.D above, it was 
not designed to further reduce MSAT emissions, but to lock in 
overcompliance on toxics performance that was being achieved in RFG and 
CG under the RFG and Anti-dumping programs. The MSAT1 rule requires the 
annual average toxics performance of a refinery's or importer's 
gasoline to be at least as clean as the average performance of its 
gasoline during the three-year baseline period 1998-

[[Page 15870]]

2000.\252\ Compliance with MSAT1 is determined separately for each 
refinery's or importer's RFG and CG.
---------------------------------------------------------------------------

    \251\ 40 CFR 80 Subpart J.
    \252\ Emissions determined using the Complex Model, as defined 
in 40 CFR 80.45.
---------------------------------------------------------------------------

    Today's proposed 0.62 vol% benzene content standard would apply to 
all of a refinery's or importer's gasoline `` that is, the total of its 
RFG and CG production or imports. This level of benzene control would 
far surpass the RFG standard of 0.95 vol%, and would put in place a 
benzene content standard for CG for the first time.\253\ As described 
further in Chapter 6 of the RIA, we analyzed the expected overall 
toxics performance under today's proposed program of benzene and 
vehicle standards using currently-available models and compared it to 
toxics performance under the pre-existing standards.\254\ When RFG and 
CG toxics emissions are evaluated at this new level of benzene control, 
it is clear that the benzene standard proposed today would result in 
the MSAT1 toxics emissions performance requirements being surpassed 
(i.e., bettered) not only on average nationwide, but for every 
PADD.\255\
---------------------------------------------------------------------------

    \253\ Proposed program retains the 1.3 vol% maximum benzene cap 
for RFG required by 40 CFR 80.41.
    \254\ As discussed previously, the existing models contain 
limited data on the impacts of fuel changes on 2004 and later 
technology vehicles, making such projections difficult. However, we 
do not believe the conclusions would change for these reasons: (1) 
The fuel effect changes modeled here related to benzene, for which 
we expect data for new technology vehicles to show similar trends as 
those for older vehicles; (2) much of the projected change in future 
emissions are due to changes in vehicles technology, not fuel 
changes; and (3) for this analysis we need only look at the relative 
changes, and given the magnitude of the projected effects we do not 
expect that the direction of the result would change even if 
significantly different values for absolute emissions were 
submitted.
    \255\ The analysis shows an even greater benefit in overall 
toxics reductions when the combined effect of the benzene standard 
and the vehicle standards are considered.
---------------------------------------------------------------------------

    To address compliance with statutory requirements currently in 
effect through the RFG and Anti-dumping programs, we carried out a 
refinery-by-refinery analysis of toxics emissions performance using the 
Complex Model (the same model used for determining compliance with 
these programs). We used 2003 exhaust toxics performance for CG and 
2003 total toxics performance for RFG as benchmarks, which are at least 
as stringent as the relevant toxics performance baselines. We applied 
changes to each refiner's fuel parameters for today's proposed 
standards and the gasoline sulfur standard phased in this year (30 ppm 
average, 80 ppm max). The results indicate that all refineries 
maintained or reduced their emissions of toxics over 2003. We expect 
large reductions in sulfur for almost all refineries under the gasoline 
sulfur program, and large reductions in CG benzene levels along with 
modest reductions in RFG benzene levels. We do not expect backsliding 
in sulfur levels by the few refiners previously below 30 ppm because 
they had been producing ultra-low sulfur gasoline for reasons related 
to refinery configuration. Furthermore, because of its petrochemical 
value and the credit market, we do not expect any refiners to increase 
benzene content in their gasoline.
    In addition, we expect significant changes in oxygenate blending 
over the next several years, but these are very difficult predict on a 
refinery-by-refinery basis. Regardless of how individual refineries 
choose to blend oxygenates in the future, we believe their gasoline 
will continue to comply with baseline requirements. This is because all 
RFG is currently overcomplying with the statutory requirement of 21.5% 
annual average toxics reductions by a significant margin. Similarly, 
most CG is overcomplying with its 1990 baselines by a significant 
margin. Furthermore, we believe most refiners currently blending 
oxygenates will continue to do so at the same or greater level into the 
future.
    EPA is thus proposing that upon full implementation in 2011 the 
regulatory provisions for the benzene control program would become the 
single regulatory mechanism used to implement these RFG and Anti-
dumping annual average toxics requirements, replacing the current RFG 
and Anti-dumping annual average provisions. However, the 1.3 vol% 
maximum benzene cap would remain in place for RFG under 40 CFR 80.41; 
we are requesting comment on the need to retain this requirement for 
RFG. The proposed benzene control program would also replace the MSAT1 
requirements.
    Section 1504(b) of the Energy Policy Act of 2005 (EPAct) requires 
that the MSAT1 toxics emissions baselines for RFG be adjusted to 
reflect 2001-2002 fuel qualities, which would make them slightly more 
stringent than the 1998-2000 baselines originally used in the MSAT1 
program. However, as provided for in the Act, this action becomes 
unnecessary and can be avoided if today's proposed program achieves 
greater overall reductions of toxics emissions from RFG (i.e., PADDs 1 
and 3) than would be achieved by this baseline year adjustment. 
Therefore, in addition to comparing the proposed standard to the 
current MSAT1 program, we also compared it to the program as the 
standards would be modified by the EPAct.
    We performed an analysis of aggregate toxics emissions for the 
relevant baseline periods as well as for future years with and without 
the proposed program. This analysis was carried out using MOBILE6.2 
because that model accounts for changes in the vehicle fleet, which is 
important when modeling future years. Results are shown in Table VII.C-
3. Since this modeling approach was intended to compare emissions from 
different fuels and fleet year mixes, the emissions figures generated 
here are different from those used for gasoline compliance 
determination.
    The first row shows mg/mi air toxics emissions in 2002 under the 
MSAT1 refinery-specific baseline requirements. The second row shows how 
these would change by updating the RFG baselines to 2001-02 as 
specified in EPAct. Since significant changes are expected in the 
gasoline pool between 2002 and the proposed implementation time of the 
fuel standard, such as gasoline sulfur reductions and oxygenate 
changes, we decided to model a ``future baseline'' to allow comparison 
with the proposed standard at the time it would become effective in 
2011. As a result, the third row shows the projected mg/mi emissions in 
2011 under the EPAct baseline adjustments, but without today's proposed 
program. The large reductions in air toxics emissions between the EPAct 
baseline and this 2011 baseline are primarily due to nationwide 
reduction in gasoline sulfur content to 30 ppm average and significant 
phase-in of Tier 2 vehicles into the national fleet.
    An important comparison is made between rows three and four, where 
the estimated toxics emissions under the proposed fuel standard only 
are compared to the projected emissions without the proposed standard. 
The fourth row shows small reductions for RFG and more significant 
reductions for CG with the introduction of the proposed benzene 
standard in 2011. We also evaluated the effects of the vehicle standard 
also proposed today on toxics emissions at two points in time, shown in 
the last two rows of the table.

[[Page 15871]]



         Table VII.C-3.--Estimated Annual Average Total Toxics Performance of Light Duty Vehicles in mg/mi Under Current and Proposed Programs a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Fleet              RFG by PADD                                  CG by PADD
                 Regulatory scenario                  --------------------------------------------------------------------------------------------------
                                                          Year        I          II        III         I          II        III         IV         V
--------------------------------------------------------------------------------------------------------------------------------------------------------
MSAT1 Baseline b (1998-2000).........................       2002        108        124         89        104        135         96        137        152
EPAct Baseline b (RFG: 2001-2002)....................       2002        103        121         85        104        135         96        137        152
EPAct Baseline, 2011 c...............................       2011         67         79         51         62         79         54         77         96
Proposed program, 2011 c (Fuel standard only)........       2011         66         78         50         59         74         51         71         85
Proposed program, 2011 c (Fuel + vehicle standards)..       2011         63         76         47         55         72         47         67         81
Proposed program, 2025 c (Fuel + vehicle standards)..       2025         39         46         30         35         44         31         42        50
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Total toxics performance for this analysis includes overall emissions of 1,3-butadiene, acetaldehyde, acrolein, benzene and formaldehyde as calculated
  by MOBILE6.2. Although POM appears in the Complex Model, it is not included here. However, it contributes a small and relatively constant mass to the
  total toxics figure (4%), and therefore doesn't make a significant difference in the comparisons.
b Baseline figures generated in this analysis were calculated differently from the regulatory baselines determined as part of the MSAT1 program, and are
  only intended to be a point of comparison for future year cases.
c Future year scenarios include (in addition to the controls proposed today, where stated) effects of the Tier 2 vehicle and gasoline sulfur standards
  and vehicle fleet turnover with time, as well as rough estimates of the renewable fuels standard and the phase-out of ether blending.

    Based on these analyses, we believe the fuel program proposed in 
this notice, as well as the combined fuel and vehicle program, would 
also achieve greater overall toxics reductions than would be achieved 
under the EPAct were the RFG baseline period updated to 2001-2002.
    In summary, today's proposed action for fuels would fulfill several 
statutory and regulatory goals related to control of gasoline mobile 
source air toxics emissions. The proposed program (in conjunction with 
the proposed vehicle standards) would meet our commitment in the MSAT1 
rulemaking to consider further MSAT control. It would also result in 
air toxics emission reductions greater than required under all pre-
existing gasoline toxics programs, as well as under the baseline 
adjustments specified by the Energy Policy Act. By designing this 
program to address these separate but related goals, we would be able 
to achieve a benefit in addition to the emissions reductions: A 
significant consolidation and simplification of regulation of gasoline 
MSATs.
    As part of today's action, in addition to the streamlining of 
toxics requirements, we propose that the gasoline sulfur program become 
the sole regulatory mechanism used to implement gasoline NOX 
requirements. Gasoline producers are required to show reductions from 
their RFG relative to the 1990 Clean Air Act baseline gasoline 
NOX emissions, as determined using the Complex Model. 
Conventional gasoline must comply with Anti-dumping individual 
NOX baselines for each refinery, similar to the Anti-dumping 
toxics standards. A refinery-by-refinery NOX analysis 
parallel to that described above indicated that with the final 
implementation of the gasoline sulfur program (January 1, 2006), all 
gasoline will continue to meet or exceed the NOX 
requirements of the RFG and Anti-dumping programs.
    As discussed elsewhere in this preamble, we believe that today's 
proposed nationwide program would achieve significant reductions in 
gasoline-related benzene emissions. The program would also have the 
effect of preempting states from regulating gasoline benzene content. 
The program is proposed under Clean Air Act section 211(c), which 
includes preemption of state fuel programs in section 211(c)(4).\256\ 
The existing RFG benzene program, also authorized under section 
211(c)(1), preempts states in RFG areas from regulating benzene. 
Today's nationwide program expands this preemption to all states except 
California, which is exempt from this preemption.
---------------------------------------------------------------------------

    \256\ See discussion of statutory authority in section I.C. of 
this preamble.
---------------------------------------------------------------------------

D. Description of the Proposed Averaging, Banking, and Trading (ABT) 
Program

1. Overview
    As mentioned earlier, we are proposing a specially-designed ABT 
program to allow EPA to set a more stringent nationwide gasoline 
benzene standard than otherwise possible. The proposed ABT program 
would allow refiners and importers to use benzene credits generated or 
obtained under the provisions of the ABT program to comply with the 
0.62 vol% refinery average standard in 2011 and indefinitely 
thereafter. Benzene credits could be generated by refineries that make 
qualifying early baseline reductions prior to 2011 and by refineries 
and importers that overcomply with the 0.62 vol% standard in 2011 and 
beyond. All credits generated could be used internally towards company 
compliance (``averaged''), ``banked'' for future use, and/or 
transferred (``traded'') to another refiner or importer.
    The majority of the ABT credit provisions we are proposing are 
similar to those offered in the gasoline sulfur program, with a few 
exceptions. The major difference is that in the proposed program, 
credit use would not be restricted by an upper limit (discussed in 
VII.C.4.b above) and in fact would be encouraged by extended credit 
life and nationwide credit trading provisions. We are able to propose a 
flexible ABT program and a gradual phase-in of the 0.62 vol% benzene 
because there is no corresponding vehicle standard being proposed that 
is dependent on gasoline benzene content. A program with fewer 
restrictions would help ensure that the overall proposed benzene 
control program would result in the greatest achievable benzene 
reductions, considering cost and other factors.
    Because of the wide variation in current benzene levels among 
refineries, we recognize that some refiners would be better situated 
than others, technologically and financially, to respond to the 
proposed benzene standard. As we discuss below, we believe that the 
credit trading provisions of the ABT program would be well suited to 
moderate the financial impacts that could otherwise occur with the 
proposed benzene control program.
    However, in other air quality programs, we have used other trading

[[Page 15872]]

mechanisms to address the varying impacts of such programs on different 
regulated entities. For example, in EPA's Acid Rain program a limited 
number of ``emissions allowances'' are allocated among entities, which 
can then be banked and traded. We invite comment on this and other 
alternative credit approaches that might be appropriate to gasoline 
benzene control.
    The following paragraphs provide more details on our proposed 
benzene ABT program. We encourage comments on the design elements we 
have proposed for the program. If you believe that alternative 
approaches would make the program more effective, please share your 
specific comments and recommendations with us.
2. Standard Credit Generation (2011 and Beyond)
    We are proposing that standard benzene credits could be generated 
by any refinery or importer that overcomplies with the 0.62 vol% 
gasoline benzene standard on an annual volume-weighted basis in 2011 
and beyond. For example, if in 2011 a refinery's annual average benzene 
level was 0.52, its standard benzene credits would be determined based 
on the margin of overcompliance with the standard (0.62-0.52 = 0.10 
vol%) divided by 100 and multiplied by the gallons of gasoline produced 
during the 2011 calendar year. The credits would be expressed as 
gallons of benzene. Likewise, if in 2012 the same refinery produced the 
same amount of gasoline with the same benzene content they would earn 
the same amount of credits. The standard credit generation 
opportunities for overcomplying with the standard would continue 
indefinitely.
    The refinery cost model discussed further in section IX.A, predicts 
which refineries would reduce benzene levels in an order of precedence 
based on cost until the 0.62 vol% refinery average standard is 
achieved. The model also predicts which refineries would overcomply 
with the standard in 2011 and beyond and in turn generate standard 
credits.\257\ Credits would be generated by two main sources.
---------------------------------------------------------------------------

    \257\ The refinery cost model assumes that all credits generated 
are used each year. To the extent that this does not occur, more 
refiners would have to invest in technology to comply, increasing 
the cost of the program.
---------------------------------------------------------------------------

    First, standard credits would be generated by refineries whose 
current gasoline benzene levels are already below the 0.62 vol% 
standard. According to the model, 19 refineries are predicted to 
maintain current gasoline benzene levels and overcomply with the 
standard without making any additional process improvements. These 
refineries would generate approximately 42 million gallons of benzene 
credits per year without making any investment in technology. 
Additionally, the model predicts that 5 other refineries would reduce 
gasoline benzene levels even further below 0.62 vol% resulting in 
deeper overcompliance and an additional 6 million gallons of benzene 
credits per year.
    Second, standard credits would be generated by refineries whose 
current gasoline benzene levels are above 0.62 vol% but are predicted 
by the model to overcomply with the standard based on existing refinery 
technology, access to capital markets, and/or proximity to the benzene 
chemical market. The model predicts that 34 refineries with gasoline 
benzene levels above 0.62 vol% would make process improvements to 
reduce benzene levels below the standard and in turn generate 
approximately 40 million gallons of benzene credits per year.
    For the refineries which the model predicts to make process changes 
to overcomply with the standard, the incremental cost to overcomply is 
relatively small or even profitable in some cases of benzene 
extraction.\258\ As expected, refineries with the lowest compliance 
costs would have the greatest incentive to overcomply based on the 
value of the credits to the refining industry.
---------------------------------------------------------------------------

    \258\ Despite the low costs of benzene extraction, without a 
benzene control standard refiners are reluctant to invest in 
capital-intensive processes such as extraction. This is because many 
other projects involving capital investments that they may be 
considering typically have a better or more certain payout (past 
price volatility in the benzene chemical market can discourage 
future investment). Thus, refiners tend to postpone capital projects 
such as extraction even if they may appear to be profitable today.
---------------------------------------------------------------------------

3. Credit Use
    We are proposing that refiners and importers could use benzene 
credits generated or obtained under the provisions of the ABT program 
to comply with the 0.62 vol% gasoline benzene standard in 2011 and 
indefinitely thereafter. Refineries and importers could use credits to 
comply on a one-for-one basis, applying each benzene gallon credit to 
offset the same volume of benzene produced in gasoline above the 
standard. For example, if in 2011 a refinery's annual average benzene 
level was 0.72, the number of benzene credits needed to comply would be 
determined based on the margin of under-compliance with the standard 
(0.72-0.62 = 0.10 vol%) divided by 100 and multiplied by the gallons of 
gasoline produced during the 2011 calendar year. The credits needed 
would be expressed in gallons of benzene.
    We believe that individual refineries would rely differently upon 
credits, depending on their unique refinery situations. As mentioned 
earlier, the current range in gasoline refinery technologies and 
starting benzene levels would make it significantly more expensive for 
some refineries to comply with the standard based on actual reduced 
benzene levels than others. As such, some technologically-challenged 
refiners may choose to rely largely or entirely upon credits because it 
would be much more economical than making process improvements to 
reduce benzene levels. Other refiners may choose to make incremental 
process improvements to reduce refinery benzene levels and then rely 
partially on credits to fully comply. Still others may choose to reduce 
benzene levels to at or around 0.62 vol% and maintain an ``emergency 
supply'' of credits to address short-term spikes in benzene levels due 
to refinery malfunctions. Overall, the proposed credit trading program 
would encourage low-cost refineries to comply or overcomply with the 
standard while allowing high-cost refineries to rely upon credits to 
comply. This would reduce the total economic burden to the refining 
industry.
a. Credit Trading Area
    We are proposing a nationwide credit trading program with no 
geographic restrictions on trading. In other words, a refiner or 
importer could obtain benzene credits and use them towards compliance 
regardless of where the credits were generated. We believe that 
restricting credit trading could reduce refiners' incentive to generate 
credits and hinder trading essential to this program. As explained in 
Chapter 6 of the RIA, if PADD restrictions were placed on credit 
trading, there would be an imbalance between the supply and demand of 
credits.
    In other fuel standard ABT programs (e.g., the highway diesel 
sulfur program), credit trading restrictions were necessary to ensure 
there was adequate low-sulfur fuel available in each geographic area to 
meet the corresponding vehicle standard. Since there is no vehicle 
emission standard being proposed that is dependent on gasoline benzene 
content, we do not believe there is a need for geographic trading 
restrictions. As mentioned above, we project that under the proposed 
ABT program, all areas of the country (i.e., all PADDs) would

[[Page 15873]]

experience a large reduction in gasoline benzene levels as a result of 
the standard.
    As discussed earlier, California gasoline would not be subject to 
the proposed benzene standards. However, California refiners that 
produce gasoline that is used outside of California would be able to 
generate credits on that gasoline (and use credits to achieve 
compliance on their non-California gasoline if necessary). Likewise, as 
proposed, refiners outside of California that produce gasoline that is 
used in California would not be allowed to use that gasoline as the 
basis for any credit generation, or compliance with the proposed 
benzene standard. However, we request comment on whether and how 
credits could be allowed to be generated on California gasoline benzene 
reductions and applied to the benzene compliance for non-California 
gasoline.
    EPA seeks comment on the proposed nationwide trading provision, its 
effect on incentives for refiners to generate credits, and 
environmental impacts.
b. Credit Life
    We are proposing limited credit life to enable proper enforcement 
of the program and to encourage trading of credits. Since the proposed 
standard is a refinery gate standard (i.e., enforced as the fuel leaves 
the refinery) with no enforceable downstream standard, it is critical 
that EPA be able to conduct enforcement at the refinery. A reasonable 
limitation on credit life would allow EPA to verify the validity of 
credits through record retention. Credit information must be 
independently verifiable such that, in the event of violations 
involving credits, the liable party is identifiable and accountable. 
EPA enforcement activities are limited by the five-year statute of 
limitations in the Clean Air Act. As a consequence, credit life greater 
than five years creates potentially serious enforcement difficulties. 
This is particularly important given the ongoing changes in business 
relationships, ownership, and merger practices that are characteristic 
of the refining industry. In addition, since credit trading plays an 
essential role in moderating program costs, it is important that 
refiners have an incentive to trade credits rather than hoard them. 
Instituting a credit expiration date would promote trading because 
refiners would be forced to ``use it or lose it.'' In summary, we 
believe the proposed credit life provisions, described in more detail 
below, are limited enough to satisfy enforcement and trading concerns 
yet sufficiently long to provide program flexibility.
    We are proposing that standard credits generated in 2011 and beyond 
would have to be used within five years of the year in which they were 
generated. For example, credits generated based on 2011 gasoline 
production would have to be used towards compliance with the 2016 
calendar year or earlier, otherwise they would expire. Standard credits 
traded to another party would still have to be used during the same 
five-year period because credit life is tied to the date of generation, 
not the date of transfer.
    We are proposing that early credits generated prior to 2011 
(discussed in the paragraphs to follow) would have a three-year credit 
life from the start of the program. In other words, early credits would 
have to be applied to the 2011, 2012, and/or 2013 compliance years or 
they would expire.
    These proposed credit life provisions are similar to those 
finalized in the gasoline sulfur program, except the early credit life 
is three years instead of two. We are proposing a three-year early 
credit life because it corresponds with the number of early credits 
projected to be generated according to our refinery cost model.\259\ 
Additionally, we predict that three years would be more than sufficient 
time for all early credits generated to be utilized. We believe that 
this certainty that all credits could be utilized would strengthen 
refiners' incentive to generate early credits and subsequently 
establish a more reliable credit market for trading.
---------------------------------------------------------------------------

    \259\ Derivation of three-year early credit lag is found in 
Chapter 6 of the RIA (section 6.5.3.1).
---------------------------------------------------------------------------

    In addition to the above-mentioned provisions, we are proposing 
that credit life may be extended by two years for early credits and/or 
standard credits generated by or traded to approved small refiners. We 
are offering this provision as a mechanism to encourage more credit 
trading to small refiners. Small refiners often face special 
technological challenges, so they would tend to have more of a need to 
rely on credits. At the same time, they often have fewer business 
affiliations than other refiners, so they could have difficulty 
obtaining credits. We believe this provision would be equally 
beneficial to refiners generating credits. This additional credit life 
for credits traded to small refiners would give refiners generating 
credits a greater opportunity to fully utilize the credits before they 
expire. For example, a refiner who was holding on to credits for 
emergency purposes or other reasons later found to be unnecessary, 
could trade these credits at the end of their life to small refiners 
who could utilize them for two more years. However, EPA is concerned 
that extending credit life beyond the five-year statute of limitations 
in the Clean Air Act (net 7-year credit life for standard credits 
generated by or traded to small refiners) could create significant 
enforceability problems. Consequently, EPA seeks comment on provisions 
that could be included in the regulations that would address this 
enforceability concern regarding the extended credit life for small 
refiner standard credits.
    As discussed in Section X.A, we are also seeking comment on 
different ways of structuring the program that may be able to allow for 
unlimited credit life since, unlike in the gasoline sulfur program, 
there is no vehicle standard being proposed that is dependent on fuel 
quality. We considered that unlimited credit life could further promote 
credit generation and allow refiners to maintain an ongoing supply of 
credits in the event of an emergency. However, for several reasons we 
have elected to propose a limited credit life based on the context of 
the rest of the proposed program. If unlimited credit life were to 
discourage trading of credits, this could force refineries with more 
expensive benzene control technologies to comply and thus increase the 
total cost of the program. In addition, unlimited credit life would 
make it more difficult to verify compliance with the standard. One way 
of addressing this concern would be to require refiners to retain 
credit records indefinitely. Even then, given the fluid nature of 
refiner and importer ownership in recent years, in many cases it would 
still be difficult to verify the validity of historical credit 
generation and use. Since the proposed benzene standard would be 
enforced solely at the refinery, it is critical that such enforcement 
be as simple and straightforward as possible. Nonetheless, as discussed 
in Section X.A, it may be possible to design the overall program in 
such a way to address these concerns and still allow for infinite 
credit life.
    In conclusion, we are proposing a reasonably limited credit life 
for both early and standard benzene credits. We seek comment on 
unlimited credit life. Please share with us any additional ideas you 
may have on how unlimited credit life could be beneficial to this 
program and/or how associated recordkeeping and enforcement issues 
could be mitigated.

[[Page 15874]]

4. Early Credit Generation (2007-2010)
    To encourage early application of and innovation in benzene control 
technology, we are proposing that refiners could generate early benzene 
credits from June 1, 2007 to December 31, 2010 by making qualifying 
reductions from their pre-determined refinery baselines. A discussion 
of how refinery baselines are established and what constitutes a 
qualifying benzene reduction is found in the subsections to follow. The 
early credits generated under this program would be interchangeable 
with the standard credits generated in 2011 and beyond and would follow 
the above-mentioned credit use provisions.
    The early reductions we are projecting to occur would be the 
initial steps of each refinery's ultimate benzene control strategy, but 
completed earlier than required. We project that from mid-2007 to 2010, 
refiners could implement operational changes and/or make small capital 
investments to reduce gasoline benzene. These actions would create a 
two-step phase down in gasoline benzene prior to 2011 as shown in 
Figure VII.D-1.

BILLING CODE 6560-50-P
[GRAPHIC] [TIFF OMITTED] TP29MR06.006


BILLING CODE 6560-50-C
    The credits generated under the early credit program could be used 
to provide refiners with additional lead time to make their 
investments. If properly implemented, we project that the delay could 
be as much as three years as described in Chapter 6 of the RIA. 
Accordingly, we are proposing a three-year early credit life, as 
discussed earlier. The additional lead time would allow the refining 
industry to spread out demand for design, engineering, construction and 
other related services, reducing overall compliance costs.
    Importers would not be permitted to generate early credits, for 
several reasons.\260\ First, unlike refineries, importers would not 
need additional lead time to comply with the standard, since they would 
not be investing in benzene control technology. Additionally, because 
importer operations are more variable than refinery operations, 
importers could potentially redistribute the importation of foreign 
gasoline based on benzene level to generate early credits without 
making a net reduction in gasoline benzene. This type of scheme could 
result in a large number of early credits being generated with no net 
benzene emission reduction value. This is not expected to occur for 
refineries because they are already operating at high capacity and do 
not have the flexibility

[[Page 15875]]

to quickly increase, decrease, or shift production volumes. 
Additionally, under the proposed program, refineries are prohibited 
from moving benzene-rich blendstocks around to generate early credits 
as described below.
---------------------------------------------------------------------------

    \260\ As discussed in section VII.I.1 below, foreign refiners 
may generate early credits under the proposed 40 CFR 80.1420 
provisions.
---------------------------------------------------------------------------

    We believe that refiners would have several motivations for making 
early benzene reductions. For refiners who have a series of technology 
improvements to make, early innovative improvements would help the 
refiner get one step closer to compliance. Early reductions would also 
generate credits which could be used to postpone subsequent 
investments. For refiners capable of making early advancements to 
reduce their benzene levels below 0.62 vol%, the early credits 
generated would not be needed for their own future use. For these 
refiners, trading early credits to other refiners may be a way to 
offset the cost of their early capital investment(s).
a. Establishing Early Credit Baselines
    We are proposing that any refiner planning on generating early 
credits would have to obtain an individual refinery benzene baseline in 
order to provide a starting point for calculating early credits.
    Refinery benzene baselines would be defined as the annualized 
volume-weighted benzene content of gasoline produced at a refinery from 
January 1, 2004 to December 31, 2005. We are proposing a two-year 
baseline period to account for normal operational fluctuations in 
benzene level. We propose using the 2004 and 2005 calendar years 
because we believe this would represent the most current batch gasoline 
data available prior to today's proposal.
    We would require refiners to submit individual baselines for each 
refinery that is planning to generate early benzene credits. Refinery 
benzene baselines would be calculated using the 2004-2005 batch data 
submitted to us under the RFG and Anti-dumping requirements.\261\ We 
propose that joint ventures, in which two or more refiners collectively 
own and operate one or more refineries, be treated as separate refining 
entities for early credit generation purposes.
---------------------------------------------------------------------------

    \261\ RFG, 40 CFR 80.75; Anti-dumping, 40 CFR 80.105.
---------------------------------------------------------------------------

    Refiners would be required to submit their refinery baselines in 
writing to EPA. We propose that refiners could begin applying for 2004-
05 benzene baselines as early as March 1, 2007. There would be no 
single cut-off date for applying for a baseline; however, a refiner 
planning on generating early credits would need to submit a baseline 
application at least 60 days prior to beginning credit generation. We 
are proposing a shorter notification period for this rule (past rules 
were 120 days) to accommodate our proposed early credit generation 
start date of June 1, 2007. EPA would review all baseline applications 
and notify the refiner of any discrepancies found with the data 
submitted. If we did not respond within 60 days, the baseline would be 
considered to be approved, subject to later review by EPA.
    Under the proposed program, refiners would be prohibited from 
moving gasoline and gasoline blendstock streams from one refinery to 
another in order to generate early credits. This type of transaction 
would result in artificial credits with no associated emission 
reduction value. If traded and used towards compliance, these 
artificial credits could negatively impact the benefits of the program. 
We considered basing credit generation for multi-refinery refiners on 
corporate benzene baselines instead of individual refinery baselines, 
but determined that this could hinder credit generation. If a valid 
reduction was made at one refinery and an unrelated expansion occurred 
at another facility during this time, the credits earned based on a 
corporate baseline could be reduced to zero. Instead, we propose to 
validate early credits based on existing reporting requirements (e.g., 
batch reports and pre-compliance reporting data). We seek comment on 
this approach.
b. Early Credit Reduction Criteria (Trigger Points)
    We are proposing that to generate early credits, refiners would 
first need to reduce gasoline benzene levels to 0.90 times their 
refinery benzene baseline during a given averaging period. The purpose 
of setting an early credit generation trigger point is to ensure that 
changes in benzene level are representative of real process 
improvements. Without a trigger point, refineries could generate 
``windfall'' early credits based on normal year to year fluctuations in 
benzene level associated with MSAT1. These artificial credits would 
compromise the environmental benefits of an ABT program because they 
would have no real associated benzene emission reduction value.
    In designing the early credit generation program, we considered a 
variety of different types of trigger points. We performed sensitivity 
analyses around absolute level trigger points (refineries must reduce 
gasoline benzene levels to a certain concentration), fixed reduction 
trigger points (refineries must reduce gasoline benzene levels by a 
certain concentration), and percent reduction trigger points 
(refineries must reduce gasoline benzene by a percentage). Based on our 
analysis found in Chapter 6 of the RIA, we found absolute level trigger 
points to be too restrictive for high benzene level refineries that 
could benefit from reductions the most. We also found fixed reduction 
trigger points to be too restrictive to low benzene level refineries 
which would be penalized for already being ``cleaner.'' Percent 
reduction trigger points were found to be consistently limiting towards 
all refineries, regardless of starting benzene level. As such, we 
propose to conclude that a percent reduction trigger point would be the 
most appropriate early credit validation tool to address the wide range 
in starting benzene levels.
    To determine an appropriate value for the percent reduction trigger 
point, we considered a range of reductions from 5-40% and examined the 
resulting early credit generation outcomes. We found that as the value 
of the percent reduction trigger point increased, the potential for 
windfall credit generation decreased, but unfortunately so did the 
number of early credits generated from legitimate refinery 
modifications. To address this competing relationship between windfall 
and early credit generation, we are proposing a 10% reduction trigger 
point. We believe that this trigger point is restrictive enough to 
prevent most windfall credit generation, but not too restrictive to 
discourage refineries from making early benzene reductions. The 
proposed 10% reduction trigger point roughly coincides with the average 
fluctuation in benzene level in 2004 as discussed in Chapter 6 of the 
RIA. A 10% reduction trigger point for early credits was also finalized 
in the gasoline sulfur rulemaking, which also affected the entire 
gasoline pool and had to encompass a variety of unique refinery 
situations.\262\ EPA requests comments on the proposed trigger point 
and seeks alternate recommendations for validating early credits.
---------------------------------------------------------------------------

    \262\ 40 CFR 80.305.
---------------------------------------------------------------------------

c. Calculating Early Credits
    We are proposing that once the 10% reduction trigger point was met, 
refineries could generate early credits based on the entire reduction. 
In terms of benzene levels, a refinery would first have to reduce its 
average benzene level to 0.90 times its original baseline benzene level 
during a given averaging period in order to generate credits. For

[[Page 15876]]

example, if in 2008 a refinery reduced its annual benzene level from a 
baseline of 2.00 vol% to 1.50 vol% (below the trigger of 0.90 x 2.00 = 
1.80 vol%), its benzene credits would be determined based on the 
difference in annual benzene content (2.00-1.50 = 0.50 vol%) divided by 
100 and multiplied by the gallons of gasoline produced in 2008. The 
credits would be expressed in gallons of benzene.
5. Additional Credit Provisions
a. Credit Trading
    The potential exists for credits to be generated by one party, 
subsequently transferred or used in good faith by another, and later 
found to have been calculated or created improperly or otherwise 
determined to be invalid. As in past programs, we propose that should 
this occur both the seller and purchaser would have to adjust their 
benzene calculations to reflect the proper credits and either party (or 
both) could be determined to be in violation of the standards and other 
requirements if the adjusted calculations demonstrate noncompliance 
with the 0.62 vol% standard. This would allow the credit market to 
properly allocate any such risk.
    As with ABT programs in other rules, we are proposing that credits 
should be transferred directly from the refiner or importer that 
generated them to the party that would use them for compliance 
purposes. This would ensure that the parties purchasing them would be 
better able to assess the likelihood that the credits were valid, and 
would aid in compliance monitoring. An exception would exist where a 
credit generator transferred credits to a refiner or importer who could 
not use all the credits, in which event that transferee could transfer 
the credits to another refiner or importer. However, based on the 
increased difficulty in assuring the validity of credits as the credits 
change hands more than once, we are proposing that credits could only 
be transferred a limited number of times. We are requesting comment on 
the maximum number of allowable trades, in the range of 2 to 4 trades. 
After the maximum number of trades, such credits would have be used or 
terminated.
    We propose no prohibitions against brokers facilitating the 
transfer of credits from one party to another. Any person could act as 
a credit broker, whether or not such person was a refiner or importer, 
so long as the title to the credits was transferred directly from the 
generator to the user. Further discussion of these credit trading 
provisions and alternative options is found in section X.A below.
b. Pre-Compliance Reporting Requirements
    In order to provide an early indication of the credit market for 
refiners planning on relying upon benzene credits as a compliance 
strategy in 2011 and beyond, we are requesting that refiners submit 
pre-compliance reports to us in 2008, 2009, and 2010. EPA would then 
summarize this information (in such a way as to protect confidential 
business information) in a report available to the industry. This is 
similar to the way pre-compliance reports are used for the ultra-low 
sulfur diesel program. In addition, we are proposing that refiners 
provide us with a final summary pre-compliance report in 2011, to allow 
for a complete account of early credit generation.\263\ The reports 
would be due annually by June 1st and would contain refiners' most up-
to-date implementation plans for complying with the 0.62 vol% benzene 
standard. More specifically, we would require refiners to annually 
submit to us engineering and construction plans and the following data:

    \263\ Based on their proposed January 1, 2015 compliance date, 
small refiners would be required to submit annual pre-compliance 
reports to us in 2008 through 2014 with a final summary pre-
compliance report in 2015.
---------------------------------------------------------------------------

--Actual/projected gasoline production volume and average benzene level 
for the June 1, 2007 through December 31, 2007 annual averaging period, 
and for the 2008-2015 annual averaging periods.
--Actual/projected early credits generated during the June 1, 2007 
through December 31, 2007 annual averaging period, and for the 2008-
2010 annual averaging periods (June 1 through December 31, 2007 and 
2008-2014 for small refiners).
--Standard credits projected to be generated during the 2011-2015 
annual averaging periods (2015 for small refiners).
--Credits projected to be needed for compliance during 2011-2015 annual 
averaging periods (2015 for small refiners).

    Pre-compliance reporting has proven to be an indispensable 
mechanism in implementing the gasoline and diesel sulfur programs, and 
we expect this to be the case in today's proposed program. A detailed 
understanding of how individual refiners and the industry at large are 
progressing toward final implementation of the proposed standards would 
help identify early concerns and allow timely action if necessary to 
prevent the development of major problems.
6. Special ABT Provisions for Small Refiners
    Approved small refiners would follow all the above-mentioned ABT 
provisions with the exception of special credit generation provisions 
which accommodate their 2015 compliance start date. Early credits could 
be generated by small refiners from June 1, 2007 to December 31, 2014 
for refineries that reduce their average gasoline benzene level to 0.90 
times their original 2004-2005 baseline level. Standard credits could 
also be generated by small refiners beginning January 1, 2015 and 
continuing indefinitely for refineries that overcomply with the 
standard by producing gasoline with an annual average benzene content 
below 0.62 vol%. Additionally, all credits generated by or traded to 
approved small refiners would have an additional two-year credit life 
as described above in VII.D.3.b.

E. Regulatory Flexibility Provisions for Qualifying Refiners

1. Hardship Provisions for Qualifying Small Refiners
    In developing our proposed MSAT program, we evaluated the need and 
the ability of refiners to meet the proposed benzene standards as 
expeditiously as possible. We believe it is feasible and necessary for 
the vast majority of the program to be implemented in the proposed time 
frame to achieve the air quality benefits as soon as possible. However, 
based on information available from small refiners, we believe that 
refineries owned by small businesses generally face unique hardship 
circumstances, compared to larger refiners. Thus, we are proposing 
several special provisions for refiners that qualify as ``small 
refiners'' to reduce the disproportionate burden that the proposed 
standards would have on these refiners. These provisions are discussed 
in detail below.
a. Qualifying Small Refiners
    EPA is proposing several special provisions that would be available 
to companies that are approved as small refiners. Small refiners 
generally lack the resources available to larger companies that help 
large companies, including those large companies that own small-
capacity refineries, to raise capital for investing in benzene control 
equipment. These resources include shifting internal funds, securing 
financing, or selling assets. Small refiners are also likely to have 
more

[[Page 15877]]

difficulty in competing for engineering resources and completing 
construction of the needed benzene control equipment (and any necessary 
octane recovery) equipment in time to meet the standards proposed 
today. Therefore, we are proposing small refiner relief provisions in 
today's action as an aspect of realizing the greatest emission 
reductions achievable.
    Since small refiners are more likely to face hardship circumstances 
than larger refiners, we are proposing temporary provisions that would 
provide additional time to meet the benzene standards for refineries 
owned by small businesses. This approach would allow the overall 
program to begin as early as possible, while still addressing the 
ability of small refiners to comply.
i. Regulatory Flexibility for Small Refiners
    As explained in the discussion of our compliance with the 
Regulatory Flexibility Act below in section XII.C and in the Initial 
Regulatory Flexibility Analysis in Chapter 14 of the RIA, we considered 
the impacts of today's proposed regulations on small businesses. Most 
of our analysis of small business impacts was performed as a part of 
the work of the Small Business Advocacy Review (SBAR) Panel convened by 
EPA, pursuant to the Regulatory Flexibility Act as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). The 
final report of the Panel is available in the docket for this proposed 
rule.
    For the SBREFA process, EPA conducted outreach, fact-finding, and 
analysis of the potential impacts of our regulations on small 
businesses. Based on these discussions and analyses by all Panel 
members, the Panel concluded that small refiners in general would 
likely experience a significant and disproportionate financial hardship 
in reaching the objectives of today's proposed program.
    One indication of this disproportionate hardship for small refiners 
is the higher per-gallon capital costs projected for the removal of 
benzene from gasoline under the proposed program. Refinery modeling of 
refineries owned by refiners likely to qualify as small refiners, and 
of non-small refineries, indicates that small refiners could have 
significantly higher costs to apply some technologies. For two of the 
technologies that we believe that refiners would use to reduce their 
benzene levels, routing the six carbon hydrocarbon compounds around the 
reformer and isomerizing these compounds, we anticipate that small 
refiners' costs would likely be similar to non-small refiners, as very 
little capital investment would need to be made for these technologies. 
However, for technologies such as benzene saturation and benzene 
extraction, we anticipate that the costs to small refiners would be 
higher. Due to the poorer economies of scale, benzene saturation is 
expected to cost small refiners about 2.2 cents per gallon (while it is 
projected that benzene saturation would cost a non-small refinery about 
1.3 cents per gallon).\264\ Likewise, benzene extraction is estimated 
to cost those refineries able to use this technology about 0.1 cents 
per gallon; however, for small refiners benzene extraction is expected 
to cost about 0.5 cents per gallon.
---------------------------------------------------------------------------

    \264\ Smaller refineries are less likely to be able to take 
advantage of economies of scale. For example, a portion of the 
capital costs invested for a benzene control unit is fixed (i.e., 
engineering design costs) resulting in similar costs for each 
investment project. However, when amortized over the volume of fuel 
processed by a small versus large unit, the per-gallon capital costs 
are higher for the smaller unit, resulting in poorer economies of 
scale.
---------------------------------------------------------------------------

    The Panel also noted that the burden imposed on the small refiners 
by the proposed benzene standard could vary from refiner to refiner. 
Thus, the Panel recommended that more than one type of burden reduction 
be offered so that most, if not all, small refiners could benefit. We 
have continued to consider the issues that were raised during the 
SBREFA process and have decided to propose the provisions recommended 
by the Panel.
ii. Rationale for Small Refiner Provisions
    Generally, we structured these proposed provisions to reduce the 
burden on small refiners while still achieving the air quality benefits 
that this program would provide. We believe that the proposed 
regulatory flexibility provisions for small refiners are a necessary 
aspect of standards reflecting the greatest achievable emission 
reductions considering costs and lead time, because they would 
appropriately adjust potential costs and lead time for the dissimilarly 
situated small refiner industry segment, and at the same time allow EPA 
to propose a uniform benzene standard for all refineries.
    First, the proposed compliance schedule for this program, combined 
with flexibility for small refiners, would achieve the air quality 
benefits of the program as soon as possible, while still ensuring that 
small refiners that choose to comply by raising capital for benzene 
reduction technologies would have adequate time to do so. As noted 
above, most small refiners have limited additional sources of income or 
capital beyond refinery earnings for financing and typically do not 
have the financial backing that larger and generally more integrated 
companies have. Therefore, they could benefit from additional time to 
accumulate capital internally or to secure capital financing from 
lenders.
    Second, providing small refiners more time to comply would increase 
the availability of engineering and construction resources to them. 
Some refiners would need to install additional processing equipment to 
meet the proposed benzene standard. We anticipate that there could be 
increased competition for technology services, engineering resources, 
and construction management and labor. In addition, vendors would be 
more likely to contract with the larger refiners first, as their 
projects would offer larger profits for the vendors. Temporarily 
delaying compliance for small refiners would spread out the demand for 
these resources and probably reduce any cost premiums caused by limited 
supply.
    Third, we are anticipating that many small refiners may choose to 
comply with the proposed benzene standard by purchasing credits. Having 
additional lead time (which could also result in additional time to 
generate credits for some small refiners) could help to ensure that 
there would be sufficient credits available and that there would be a 
robust credit trading market. Furthermore, offering two years of 
additional credit life for credits traded to small refiners, as 
discussed in section VII.D.3.b, would improve credit availability.
    Lastly, we recognize that while the proposed benzene standard may 
be achieved using the four technologies suggested above, new 
technologies may also be developed that may reduce the capital and/or 
operational costs. Thus, we believe that allowing small refiners some 
additional time for newer technologies to be proven out by other 
refiners would have the added benefit of reducing the risks faced by 
small refiners. The added time would likely allow for small refiners to 
benefit from the lower costs of these technologies. This would help to 
offset the potentially disproportionate financial burden facing small 
refiners.
    We discuss below the provisions that we are proposing to help 
mitigate the effects on small refiners. Small refiners that chose to 
make use of the small refiner delayed provision would also delay, to 
some extent, the benzene emission reductions that would otherwise have 
been achieved. However, the overall impact of these postponed 
reductions would be

[[Page 15878]]

reasonable, for several reasons. Small refiners represent a relatively 
small fraction of national gasoline production. Our current estimates 
(of refiners that we expect would qualify as small refiners) indicate 
that these refiners produce about 2.5 percent of the total gasoline 
pool. In addition, these small refiners are generally dispersed 
geographically across the country and the gasoline that they produce is 
sometimes transported to other areas, so the limited loss in benzene 
emissions reduction would also be dispersed. Finally, absent small 
refiner flexibility, EPA would likely have to consider setting a less 
stringent benzene standard or delaying the overall program (until the 
burden of the program on many small refiners was diminished), which 
would serve to reduce and delay the air quality benefits of the overall 
program. By providing temporary relief to small refiners, we are able 
to adopt a program that would reduce benzene emissions in a timely and 
feasible manner for the industry as a whole.
    The proposed small refiner provisions should be viewed as a subset 
of the hardship provisions described in section VII.E.2.b. Rather than 
dealing with many refineries on a case-by-case basis through the 
general hardship provisions (described later), we limit the number by 
proposing to provide predetermined types of relief to a subset of 
refineries based on criteria designed to identify refineries most 
likely to be in need of such automatic relief.
b. How Do We Propose To Define Small Refiners for the Purpose of the 
Hardship Provisions?
    The definition of small refiner for this proposed program is in 
most ways the same as our small refiner definitions in the Gasoline 
Sulfur and Highway and Nonroad Diesel rules. These definitions, in 
turn, were based on the criteria use by the Small Business 
Administration. However, we are proposing to clarify some ambiguities 
about the definition that have existed in the past.
    A small refiner would need to demonstrate that it met all of the 
following criteria:
    Produced gasoline from crude during calendar year 2005.
    Small refiner provisions would be limited to refiners of gasoline 
from crude because they would be the ones that bore the investment 
burden and therefore the inherent economic hardship. Therefore, 
blenders and importers would not be eligible, nor would be additive 
component producers.
    Small refiner status would be limited to refiners that owned and 
operated the refinery during the period from January 1, 2005 through 
December 31, 2005. New owners that purchased a refinery after that date 
would do so with full knowledge of the proposed regulations, and should 
have planned to comply along with their purchase decisions. As with the 
earlier fuel rules, we are proposing that a refiner that restarts a 
refinery in the future may be eligible for small refiner status. Thus, 
a refiner restarting a refinery that was shut down or non-operational 
between January 1, 2005 and January 1, 2006 could apply for small 
refiner status. In such cases, we would judge eligibility under the 
employment and crude oil capacity criteria based on the most recent 12 
consecutive months prior to the application, unless we conclude from 
data provided by the refiner that another period of time is more 
appropriate. However, unlike past fuel rules, we propose to limit this 
to a company that owned the refinery at the time that it was shut down. 
New purchasers would not be eligible for small refiner status for the 
same reasons described above. Companies with refineries built after 
January 1, 2005 would also not be eligible for the small refiner 
hardship provisions.

--Had no more than 1,500 employees, based on the average number of 
employees for all pay periods from January 1, 2005 to January 1, 2006; 
and,
--Had a crude oil capacity less than or equal to 155,000 barrels per 
calendar day (bpcd) for 2005.

    In determining its total number of employees and crude oil 
capacity, a refiner would need to include the number of employees and 
crude oil capacity of any subsidiary companies, any parent companies, 
any subsidiaries of the parent companies, and any joint venture 
partners. There has been some confusion in past rules regarding how 
these provisions were interpreted, and as a result, we are proposing to 
clarify (and, in some cases, modify) them here. For example, in 
previous rules we defined a subsidiary to be a company in which the 
refiner or its parent(s) has a 50 percent or greater interest. We 
realize that it is possible for a parent to have controlling ownership 
interest in a subsidiary despite having less than 50 percent ownership. 
Similarly, we realize that it is also possible for multiple parents to 
each have less than 50 percent ownership interest but still maintain a 
controlling ownership interest. Therefore, in order to clarify our 
rules, we are proposing to define a parent company as any company (or 
companies) with controlling interest, and to define a subsidiary of a 
company to mean any company in which the refiner or its parent(s) has a 
controlling ownership interest. In many cases, there are likely to be 
multiple layers of parent companies, with the ultimate parent being the 
one for which no one else has controlling interest. The employees and 
crude capacity of all parent companies, and all subsidiaries of all 
parent companies, would thus be taken into consideration when 
evaluating compliance with these criteria.
    As with our earlier fuel sulfur regulations, we are also proposing 
today that refiners owned and controlled by an Alaska Regional or 
Village Corporation organized under the Alaska Native Claims Settlement 
Act, would also be eligible for small refiner status, based only on the 
refiner's employees and crude oil capacity.\265\
---------------------------------------------------------------------------

    \265\ 43 U.S.C. 1626.
---------------------------------------------------------------------------

c. What Options Would Be Available For Small Refiners?
    We are proposing several provisions today to help reduce the 
burdens on small refiners, as discussed above. In addition, these 
provisions would also allow for incentives for small refiners that make 
reductions to their benzene levels.
i. Delay in Standards
    We propose that small refiners be allowed to postpone compliance 
with the proposed benzene standard until January 1, 2015, which is four 
years after the general program would begin. While all refiners would 
be allowed some lead time before the general proposed program began, we 
believe that in general small refiners would still face 
disproportionate challenges. The proposed four-year delay for small 
refiners would help mitigate these challenges. Further, previous EPA 
fuel programs have included two to four year delays in the start date 
of the effective standards for small refiners, consistent with the lead 
time we believe appropriate here.
    Small refiners have indicated to us that an extension of available 
lead time would allow them to more efficiently carry out necessary 
capital projects with less direct competition with non-small refiners 
for financing and for contractor to carry out capital improvements. 
There appears to be merit in this position, and we propose that 
approved small refiners have four years of additional lead time. This 
would provide three years after the 2012 review of the program, which 
we believe would be enough time for such

[[Page 15879]]

refiners to complete necessary capital projects if they chose to pursue 
them.
ii. ABT Credit Generation Opportunities
    While we have anticipated that many small refiners would likely 
find it more economical to purchase credits for compliance, some have 
indicated they would make reductions to their gasoline benzene levels 
to meet the proposed benzene standard. Further, a few small refiners 
indicated that they would likely do so earlier than would be required 
by the January 1, 2015 proposed small refiner start date. Therefore, we 
are proposing that early credit generation be allowed for small 
refiners that take steps to meet the benzene requirement prior to their 
effective date. Small refiner credit generation would be governed by 
the same rules as the general program, described above in section 
VII.D, the only difference being that small refiners would have an 
extended early credit generation period of up to seven years. Early 
credits could be generated by small refiners making qualifying 
reductions from June 1, 2007 to December 31, 2014, after which credits 
could be generated indefinitely for those that overcomplied with the 
standard.
iii. Extended Credit Life
    As discussed previously, in order to encourage the trading of 
credits to small refiners, we are proposing that the useful life of 
credits be extended by 2 years if they are generated by or traded to 
small refiners. This is meant to directly address concerns expressed by 
small refiners that they would be unable to rely on the credit market 
to avoid large capital costs for benzene control.
iv. ABT Program Review
    As previously stated, we are anticipating that it may be more 
economically sound for some refiners to purchase and use credits. 
During discussions with small refiners, all of the small refiners 
voiced their concerns about reliance on a credit market for compliance 
with the benzene standard. Specifically, small refiners feared that: 
(1) there could be a shortage of credits, (2) that larger refiners 
would not trade credits with smaller refiners, and (3) that the cost of 
credits could be so high that the option to purchase credits for 
compliance would not be a viable option. Due to these concerns it was 
suggested that EPA perform a review of the ABT program (and thus, the 
small refiner flexibility options) by 2012, one year after the general 
program begins.
    Such a review would take into account the number of early credits 
generated, as well as the number of credits generated and transferred 
during the first year of the overall benzene control program. Further, 
requiring the submission of pre-compliance reports from all refiners, 
similar to the highway and nonroad diesel programs, would aid in 
assessing the ABT program prior to performing the review. A small 
refiner delay option of four years after the compliance date for other 
refiners, coupled with a review after the first year of the overall 
program, would still provide small refiners with roughly three years 
that we believe would be needed to obtain financing and perform 
engineering and construction. We are proposing to perform a review 
within the first year of the overall program (i.e., by 2012). To aid 
the review, we are also proposing the requirement that all refiners 
submit refinery pre-compliance reports annually beginning June 1, 2008. 
Refiners' 2011 annual compliance reports will be similar to the pre-
compliance reports, but the annual compliance reports will also contain 
information such as credits generated, credits used, credits banked, 
credit balance, cost of credits purchased. EPA would aggregate the data 
(to protect individual refiners' confidentiality) and make the results 
available to the industry. When combined with the four-year delay 
option, this would provide small refiners (and others) with the 
knowledge of the credit trading market's status before they would need 
to make a decision to either purchase credits or to obtain financing to 
invest in capital equipment.
    Further, we are requesting comment on elements to be included in 
the ABT program review, and suggested actions that could be taken 
following such a review. Such elements could include:

--Revisiting the small refiner provisions if it is found that the 
credit trading market did not exist to a sufficient degree to allow 
them to purchase credits, or that credits were only available at a 
cost-prohibitive price.
--Options to either help the credit market, or help small refiners gain 
access to credits.

    With respect to the first element, the SBAR Panel recommended that 
EPA consider establishing an additional hardship provision to assist 
any small refiners that were unable to comply with the benzene standard 
even with a viable credit market. Such a hardship provision would 
address the case of a small refiner for which compliance would be 
feasible only through the purchase of credits, but it was not 
economically feasible for the refiner to do so. This hardship would be 
provided to a small refiner on a case-by-case basis following the 
review and based on a summary, by the refiner, of technical or 
financial infeasibility (or some other type of similar situation that 
would render its compliance with the standard difficult). This hardship 
provision might include further delays and/or a slightly relaxed 
standard on an individual refinery basis for up to two years. Following 
the two-year relief, a small refiner would be allowed to request 
multiple extensions of the hardship until the refinery's material 
situation changed. We are proposing the inclusion of such a hardship 
provision which could be applied for following, and based on the 
results of, the ABT program review.
    With respect to the second element, the Panel recommended that EPA 
develop options to help the credit market if it is found (following the 
review) that there is not an ample supply of credits or that small 
refiners are having difficulty obtaining credits. These options could 
include the ``creation'' of credits by EPA that would be introduced 
into the credit market to ensure that there are additional credits 
available for small refiners. Another option the Panel discussed to 
assist the credit market was to impose additional requirements to 
encourage trading with small refiners. These could include a 
requirement that a percentage of all credits sold be set aside and only 
made available for small refiners. Similarly, we could require that 
credits sold, or a certain percentage of credits sold, be made 
available to small refiners before they are allowed to be sold to any 
other refiners. Options such as these would help to ensure that small 
refiners were able to purchase credits. One such recommendation by the 
Panel, to extend credit life for small refiners, is included in today's 
proposal and described above.
    We welcome comment on additional measures that could be taken 
following the review if it was found that there was a shortage of 
credits or that credits were not available to small refiners.
d. How Would Refiners Apply for Small Refiner Status?
    A refiner applying for status as a small refiner would be required 
to apply and provide EPA with several types of information by December 
31, 2007. (The detailed application requirements are summarized below.) 
All refiners seeking small refiner status under this program would need 
to apply for small refiner status, regardless of whether or not the 
refiner had been approved for small refiner status under another fuel 
program. As with applications for relief under other rules, 
applications for small refiner status under this proposed rule

[[Page 15880]]

that were later found to contain false or inaccurate information would 
be void ab initio.

    Requirements for small refiner status applications:

--The total crude oil capacity as reported to the Energy Information 
Administration (EIA) of the U.S. Department of Energy (DOE) for the 
most recent 12 months of operation. This would include the capacity of 
all refineries controlled by a refiner and by all subsidiaries and 
parent companies and their subsidiaries. We would presume that the 
information submitted to EIA is correct. (In cases where a company 
disagreed with this information, the company could petition EPA with 
appropriate data to correct the record when the company submitted its 
application for small refiner status. EPA could accept such alternate 
data at its discretion.)
--The name and address of each location where employees worked during 
the 12 months preceding January 1, 2006; and the average number of 
employees at each location during this time period. This would include 
the employees of the refiner and all subsidiaries and parent companies 
and their subsidiaries.
--In the case of a refiner who reactivated a refinery that was shutdown 
or non-operational between January 1, 2005, and January 1, 2006, the 
name and address of each location where employees worked since the 
refiner reactivated the refinery and the average number of employees at 
each location for each calendar year since the refiner reactivated the 
refinery.
--The type of business activities carried out at each location.
--An indication of the small refiner option(s) the refiner intends to 
use (for each refinery).
--Contact information for a corporate contact person, including: name, 
mailing address, phone and fax numbers, e-mail address.
--A letter signed by the president, chief operating officer, or chief 
executive officer of the company (or a designee) stating that the 
information contained in the application was true to the best of his/
her knowledge and that the company owned the refinery as of January 1, 
2007.
e. The Effect of Financial and Other Transactions on Small Refiner 
Status and Small Refiner Relief Provisions
    In situations where a small refiner loses its small refiner status 
due to merger with a non-small refiner, acquisition of another refiner, 
or acquisition by another refiner, we are proposing provisions which 
are similar to those finalized in the nonroad diesel final rule to 
allow for an additional 30 months of lead time. A complete discussion 
of this provision is located in the preamble to the final nonroad 
diesel rule.
2. General Hardship Provisions
    Unlike previous fuel programs, today's program includes inherent 
flexibility because there is a nationwide credit trading program. 
Refiners would have the ability to avoid or minimize capital 
investments indefinitely by purchasing credits, and we expect that many 
refiners would utilize this option. We also expect that refiners and 
importers who normally would produce or import gasoline that met the 
proposed standard would periodically rely on credits in order to 
achieve compliance. As discussed in section VII.D, we expect that 
sufficient credits would be available on an annual basis to accommodate 
the needs of the regulated industry, and we expect that these credits 
would be available at prices that are comparable to the alternative 
cost of making the capital investment necessary to produce compliant 
gasoline. We are proposing to require that refiners submit pre-
compliance reports beginning in 2008. These reports would indicate how 
the refinery plans to achieve compliance with the 0.62 vol% standard as 
well as the amount of credits expected to be generated or expected to 
be needed. The information provided in these reports would enable an 
assessment of the robustness of the credit market and the ability of 
refiners to rely on credits as the program began.
    Although we expect credits to be available at competitive prices to 
those who need them, we are proposing hardship provisions to 
accommodate an inability to comply with the proposed standard at the 
start of the program, and to deal with unforeseen circumstances. These 
provisions would be available to all refiners, small and non-small, 
though relief would be granted on a case-by-case basis following a 
showing of certain requirements, primarily that compliance through the 
use of credits was not feasible. We are proposing that any hardship 
waiver would not be a total waiver of compliance. Rather, such a waiver 
would allow the refiner to have an extended period of deficit 
carryover. Under regular circumstances, our proposed deficit carryover 
provision would allow an entity to be in deficit with the proposed 
benzene standard for one year, provided that they made up the deficit 
and were in compliance the next year. The proposed hardship provisions 
would allow a deficit to be carried over for an extended, but limited, 
time period. EPA would determine an appropriate extended deficit 
carryover time period based on the nature and degree of the hardship, 
as presented by the refiner in their hardship application, and on our 
assessment of the credit market. Note that any waivers granted under 
this proposed rule would be separate and apart from EPA's authority 
under the Energy Policy Act to issue temporary waivers for extreme and 
unusual supply circumstances, under section 211(c)(4).
a. Temporary Waivers Based on Unforeseen Circumstances
    We are proposing a provision which, at our discretion, would permit 
any refiner to seek a temporary waiver from the MSAT benzene standard 
under certain rare circumstances. This waiver provision is similar to 
provisions in prior fuel regulations. It is intended to provide 
refiners relief in unanticipated circumstances--such as a refinery fire 
or a natural disaster--that cannot be reasonably foreseen now or in the 
near future.
    Under this provision, a refiner could seek permission to extend the 
deficit carryover provisions of the proposal for more than the one year 
already allowed if it could demonstrate that the magnitude of the 
impact was so severe as to require such an extension. We are proposing 
that the refiner would be required to show that: (1) The waiver would 
be in the public interest; (2) the refiner was not able to avoid the 
nonconformity; (3) it would meet the proposed benzene standard as 
expeditiously as possible; (4) it would make up the air quality 
detriment associated with the nonconforming gasoline, where 
practicable; and (5) it would pay to the U.S. Treasury an amount equal 
to the economic benefit of the nonconformity less the amount expended 
to make up the air quality detriment. These conditions are similar to 
those in the RFG, Tier 2 gasoline sulfur, and the highway and nonroad 
diesel regulations, and are necessary and appropriate to ensure that 
any waivers that were granted would be limited in scope.
    As discussed, such a request would be based on the refiner's 
inability to produce compliant gasoline at the affected facility due to 
extreme and unusual circumstances outside the refiner's control that 
could not have been avoided through the exercise of due diligence. The 
hardship request would also need to show that other avenues for 
mitigating the problem,

[[Page 15881]]

such as the purchase of credits toward compliance under the proposed 
credit provisions, had been pursued and yet were insufficient or 
unavailable. Especially in light of the credit flexibilities built into 
the proposed overall program, we expect that the need for additional 
relief would be rare.
b. Temporary Waivers Based on Extreme Hardship Circumstances
    In addition to the provision for short-term relief in extreme 
unforeseen circumstances, we are also proposing a hardship provision 
where a refiner could receive an extension of the deficit carryover 
provisions based on extreme hardship circumstances. Such hardship could 
exist based on severe economic or physical lead time limitations of the 
refinery to comply with the benzene standard at the start of the 
program, and if they were unable to procure sufficient credits. A 
refiner seeking such hardship relief under this proposed rule would 
have to demonstrate that these criteria were met. In addition to 
showing that unusual circumstances exist that impose extreme hardship 
in meeting the proposed standard, the refiner would have to show (1) 
best efforts to comply, including through the purchase of credits, (2) 
the relief granted under this provision would be in the public 
interest, (3) that the environmental impact would be acceptable, and 
(4) that it has active plans to meet the requirements as expeditiously 
as possible. Because such a demonstration could not be made prior to 
the development of the credit market, EPA would not begin to consider 
such hardship requests until August 1, 2010, that is, until after the 
final pre-compliance reports are submitted. Consequently, requests for 
such hardship relief would have to be received prior to January 1, 
2011.
    If hardship relief under these circumstances was approved, we would 
expect to impose appropriate conditions to ensure that the refiner was 
making best efforts to achieve compliance offsetting any loss of 
emission control from the program through the deficit carryforward 
provisions. We believe that providing short-term relief to those 
refiners that need additional time due to hardship circumstances would 
help to facilitate the adoption of the overall MSAT program for the 
majority of the industry. However, we do not intend for hardship waiver 
provisions to encourage refiners to delay planning and investments they 
would otherwise make. Again, because of the flexibilities of the 
proposed overall program, we expect that the need for additional relief 
would be rare.
c. Early Compliance With the Proposed Benzene Standard
    We are also requesting comment on a means for allowing refineries, 
under certain conditions, to meet the proposed benzene standard early 
in lieu of MSAT1. In order to meet the proposed benzene standard early, 
refiners would need to meet several criteria similar to those used in 
the past when EPA has adjusted refinery baselines under the MSAT1 
program. Specifically, the eligibility for such provisions would be 
limited to refiners that have historically had better than average 
toxics performance, lower than average benzene and sulfur levels, and a 
significant volume of gasoline impacted by the phase-out of MTBE as an 
oxygenate. The result of not allowing such early compliance could be 
less supply of their cleaner fuel and more supply of fuel with higher 
toxics emissions, with a worsening of overall environmental performance 
under MSAT1. A refiner opting into such provisions would not be allowed 
to generate benzene credits on the affected fuel prior to 2011, since 
an ability to reduce benzene further would presumably negate the need 
for an early compliance option.

F. Technological Feasibility of Gasoline Benzene Reduction

    This section summarizes our assessment of the feasibility for the 
refining industry to reduce benzene levels in gasoline to an average of 
0.62 vol% starting January 1, 2011. Based on this assessment, we 
believe that it is technologically feasible for refiners to meet the 
benzene standard by the start date using technologies that are 
currently available.
    We begin this section by describing where benzene comes from and 
the current levels found in gasoline. Next we discuss the benzene 
reduction technologies available to refiners today and how they are 
expected to be used to meet the proposed benzene standard. Then we 
provide our analysis of the lead time necessary for complying with the 
benzene standard. All of these issues are discussed in more detail in 
Chapters 6 and 9 of the Regulatory Impact Analysis.
1. Benzene Levels in Gasoline
    EPA receives information on gasoline quality, including benzene 
levels, from each refinery and importer in the U.S. under the reporting 
requirements of the RFG and CG programs. As discussed earlier in this 
section, benzene levels averaged 0.94 vol% for gasoline produced in and 
imported into the U.S. in 2003, which is the most recent year for which 
complete data is available. However, for individual refineries, daily 
batch gasoline benzene levels and annual average levels can vary 
significantly from the national average. As indicated earlier in 
describing our decision-making process for the type and level of 
gasoline benzene standard, it is very important to understand how 
current benzene levels vary by individual refinery, by region, as well 
as day-to-day by batch.
    The variability in 2003 average annual gasoline benzene levels by 
individual refinery is shown in Figure VII.F-1. This figure contains a 
summary of annual average gasoline benzene levels by individual 
refinery for CG and RFG versus the cumulative volume of gasoline 
produced.

[[Page 15882]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.007

    Figure VII.F-1 shows that the annual average benzene levels of CG 
as produced by individual refineries varies from 0.29 to 4.01 vol%. 
Based on the data in the figure, the volume-weighted average benzene 
content for U.S. CG is 1.10 vol%. As expected, the annual average 
benzene levels of RFG as produced by individual refineries are lower, 
ranging from 0.10 to 1.09 vol%. The volume-weighted average benzene 
content for U.S. RFG (not including California) is 0.62 vol%.
    The information presented for annual average gasoline benzene 
levels does not illustrate the very large day-to-day variability in 
gasoline batches produced by each refinery. We evaluated the batch-by-
batch gasoline benzene levels for several refineries that produce both 
RFG and CG, using information submitted to EPA as part of the reporting 
requirements for the RFG and CG Anti-dumping Programs. One refinery had 
no particular trend for its CG benzene levels, with benzene levels that 
varied from 0.1 to 3 vol%. That same refinery's RFG averaged around 
0.95 vol% benzene, ranging from 0.05 to 1.1 vol%. The second refinery 
had RFG benzene levels that averaged around 0.4 vol% ranging from 0.1 
to 1.0 vol%. Its CG benzene levels averaged about 0.6 vol% with batches 
that ranged from 0.1 to 1.2 vol%. The batches for both RFG and CG 
varied on a day-to-day basis and, overall, by over an order of 
magnitude. It is clear from our review of batch-by-batch data submitted 
to EPA that benzene variability is typical of refineries nationwide.
    There are several contributing factors to the variability in 
refinery gasoline benzene levels across all the refineries. We will 
review these factors and describe how each impacts batch-by-batch and 
annual average gasoline benzene levels.
    The first factor contributing to the variability in gasoline 
benzene levels is crude oil quality. Each refinery processes a 
particular crude oil slate, which tends to be fairly constant except 
for seasonal changes that reflect changes in product demand. Crude oil 
varies greatly in aromatics content. Since benzene is an aromatic 
compound, its level tends to vary with the aromatics content of crude 
oil. For example, Alaskan North Slope crude oil contains a high 
percentage of aromatics. Refiners processing this crude oil in their 
refineries shared with us that their straight run naphtha contains on 
the order of 3 vol% benzene (the production of naphtha is discussed 
further below). This is one reason why the gasoline in PADD 5 outside 
of California is high in benzene. Conversely, refiners that process 
very paraffinic crude oils (low in aromatics) usually have a low amount 
of benzene in their straight run naphtha. Because crude oil supplies 
tend to be constant over periods of months, crude oil quality is not a 
major contributor to day-to-day variations in benzene among gasoline 
batches. However, because crude oil supplies often vary from refinery 
to refinery, differences in crude quality are an important factor in 
the variability among refineries.
    The second factor contributing to the variability in benzene levels 
is differences in the types of processing units and gasoline 
blendstocks among refineries. If a refinery is operated to rely on its 
reformer for virtually all of

[[Page 15883]]

its octane needs--especially the type that operates at higher pressures 
and temperatures and thus tends to produce more benzene--it will likely 
have a high benzene level in its gasoline. Refineries with a reformer 
and without a fluidized catalytic cracking (FCC) unit are particularly 
prone to higher benzene levels, since they rely heavily on the product 
of the reformer (reformate) to meet octane needs. However, refineries 
that can rely on other means for boosting their gasoline octane can 
usually rely less on the reformer and can run this unit at a lower 
severity, resulting in less benzene in their gasoline pool. Examples of 
such other octane-boosting refinery units include the alkylation unit, 
the isomerization unit and units that produce oxygenates. Refiners may 
have these units in their refineries, or in many cases, they can 
purchase the gasoline blendstocks produced by these units from other 
refineries or third-party producers. The blending of the products of 
these processes--alkylate, isomerate, and oxygenates--into the gasoline 
pool provides a significant octane contribution, which can allow 
refiners to rely less on the octane from reformate. Since refiners make 
individual decisions about producing or purchasing different 
blendstocks for each refinery, this variation is another important 
contributor to differences in gasoline benzene content among 
refineries. In addition, the variation in gasoline blendstocks used to 
produce different batches of gasoline is by far the most important 
factor in the drastically differing benzene levels among batches of 
gasoline at any given refinery.
    This practice by refiners of producing or purchasing different 
blendstocks and blending them in different ways to produce gasoline is 
an integral and essential aspect of the refining business. Thus, in 
designing an effective benzene control program, it is critical that 
benzene levels be reduced while refiners retain the ability to change 
blendstocks (and crude supplies) as needed from batch to batch and 
refinery to refinery. We believe that the proposed program accomplishes 
these goals.
    A third important source of variability in existing benzene levels 
in gasoline is the fact that many refiners are already operating their 
refineries today to intentionally reduce benzene levels in their 
gasoline, while others are not. For example, refiners that are 
currently producing RFG must ensure their RFG averages 0.95 vol% or 
less and is always under the 1.3 vol% cap (see discussion of the 
current toxics program in section VII.C.5 above). Similarly, refiners 
producing gasoline to comply the California RFG program need to produce 
gasoline with reduced benzene. These refiners are generally using 
benzene control technologies to actively produce gasoline with lower 
benzene levels. If they are producing CG along with the RFG, their CG 
is usually lower in benzene as well compared with the CG produced by 
other refiners, since the benzene control technology often affects some 
of the streams used to blend CG. In addition, some refiners add 
specific refinery units such as benzene extraction to intentionally 
produce chemical-grade benzene. Benzene commands a much higher price on 
the chemical market compared to the price of gasoline. For these 
refiners, the profit from the sale of benzene pays for the equipment 
upgrades needed to greatly reduce the levels of benzene in their 
gasoline. In most cases, refineries with extraction units are marketing 
their low-benzene gasoline in the RFG areas.
    The use of these benzene control technologies by some refiners 
contributes to the variability in gasoline benzene levels among 
refineries. The use of these technologies can also contribute to the 
batch-to-batch variability in benzene levels. This is because, as with 
different blendstocks, refiners need to be able to change the operating 
characteristics of these technologies to meet varying needs in gasoline 
quality. In addition, planned or unexpected shut-downs of benzene 
control equipment may result in temporarily high batch benzene levels 
relative to the normally low gasoline levels when the unit is 
operating.
    The variations in gasoline benzene levels among refineries also 
lead to variations in benzene levels among regions of the country. 
Table VII.F-1 shows the average gasoline benzene levels for all 
gasoline produced in (and imported into) the U.S. by PADD for 2003. The 
information is presented for both CG and RFG.

         Table VII.F-1.--Benzene Levels by Gasoline Type Produced in or Imported Into Each PADD in 2003
----------------------------------------------------------------------------------------------------------------
                                                    PADD 1   PADD 2   PADD 3   PADD 4   PADD 5     CA      U.S.
----------------------------------------------------------------------------------------------------------------
Conventional Gasoline............................     0.84     1.39     0.94     1.54     1.79     0.63     1.11
Reformulated Gasoline............................     0.60     0.82     0.56      n/a      n/a     0.62     0.62
Gasoline Average.................................     0.70     1.28     0.87     1.54     1.79     0.62     0.94
----------------------------------------------------------------------------------------------------------------

    Table VII.F-1 shows that benzene levels vary fairly widely across 
different regions of the country. PADD 1 and 3 benzene levels are lower 
because the refineries in these regions produce a high percentage of 
RFG for both the Northeast and Gulf Coast. Also, a number of refineries 
in these two regions are extracting benzene for sale into the chemicals 
market, contributing to the much lower benzene level in these PADDs. It 
is interesting to note that, in addition to RFG, CG benzene levels are 
low in PADDs 1 and 3. There are two reasons for this. First, some RFG 
produced by refineries ends up being sold as CG. Second, as mentioned 
above, refiners that are reducing the benzene levels in their RFG 
generally also impact the benzene levels in their CG. In contrast, 
other parts of the U.S. with little to no RFG production and little 
extraction have much higher benzene levels.
2. Technologies for Reducing Gasoline Benzene Levels
a. Why Is Benzene Found in Gasoline?
    To discuss benzene reduction technologies, it is helpful to first 
review some of the basics of refinery operations. Refineries process 
crude oil into usable products such as gasoline, diesel fuel and jet 
fuel. For a typical crude oil, about 50 percent of the crude oil falls 
within the boiling range of gasoline, jet fuel and diesel fuel. The 
rest of crude oil boils at too high a temperature to be blended 
directly into these products and therefore must be cracked into lighter 
compounds. Material that boils within the gasoline boiling range is 
called naphtha. There are two principal sources of naphtha. The first 
is ``straight run'' naphtha, which comes directly off of the crude oil 
atmospheric distillation column. Another principle source of naphtha is 
that generated from the cracking reactions. Each type of naphtha 
contributes to benzene in gasoline.
    Typically, little of the benzene in gasoline comes from benzene 
naturally

[[Page 15884]]

occurring in crude oil. Straight run naphtha, which comes directly from 
the distillation of crude oil, thus tends to have a low benzene 
content, although it can contain anywhere from 0.3 to 3 vol% benzene. 
While straight run naphtha is in the correct distillation range to be 
usable as gasoline, its octane value is too low for blending directly 
into gasoline. Thus, the octane value of this material must be 
increased to enable it to be used as a gasoline blendstock.
    The primary means for increasing the octane value of naphtha 
(whether straight run or from cracking processes) is reforming. 
Reforming reacts the heavier portion of straight run naphtha (six-
carbon material and heavier) over a precious metal catalyst at a high 
temperature. The reforming process converts many of the naphtha 
compounds to aromatic compounds, which raises the octane of this 
reformate stream to over 90 octane numbers. (``Octane number'' is the 
unit of octane value.) Since benzene is an aromatic compound, it is 
produced along with toluene and xylene, the other primary aromatic 
compounds found in gasoline. The reforming process increases the 
benzene content of the straight run naphtha stream from 0.3 to 3 vol% 
to 3 to 11 vol%.
    There are two ways that benzene levels increase in the reformer 
above the benzene levels occurring naturally in crude oil--the 
conversion of non-aromatic six-carbon hydrocarbons into benzene, and 
the cracking of heavier aromatic hydrocarbon compounds into 
benzene.\266\ In the discussion below about how benzene in the 
reformate stream can be reduced, we elaborate further about the 
opportunities that refiners have to manage both of these benzene-
producing processes.
---------------------------------------------------------------------------

    \266\ In the process of converting the straight run naphtha into 
aromatics, a significant amount of hydrogen is produced that is 
critical for the various hydrotreating operations in refineries. As 
discussed later, the impact on hydrogen production is an important 
consideration in reducing benzene levels.
---------------------------------------------------------------------------

    Three factors contribute to the wide range in benzene levels in the 
reformate stream, and these factors are important in the decisions 
refiners would make in response to the proposed benzene control 
program. First, different feedstocks contain different amounts of 
benzene and different levels of benzene precursors that are more or 
less capable of being converted to benzene by the reformer. Second, the 
type of reformer being used affects how much benzene is produced during 
the reforming process. For example, refineries with the older, higher 
pressure reformers tend to form more benzene by cracking heavier 
aromatics than refineries with newer, lower pressure units. Third, the 
severity with which the reformer is being operated also affects benzene 
levels in reformate. The greater the severity at which the reformer is 
operated, the greater the conversion of feedstocks to aromatics (and 
the more hydrogen is produced). However, more severe operation shortens 
the time between the catalyst regeneration events that the reformer 
must periodically undergo. Greater severity also lowers the gasoline 
yield from this unit. Because refiners balance these operation and 
production factors individually at each refinery in deciding on how 
severely to operate the reformer, these decisions contribute to the 
range of benzene levels found in reformate from refinery to refinery.
    In addition to benzene occurring in the reformate stream, another 
source of benzene in gasoline is naphtha produced from cracking 
processes. There are three primary cracking processes in the refinery--
the FCC unit, the hydrocracker, and the coker. The naphthas produced by 
these cracking processes contain anywhere from 0.5 to 5 vol% benzene. 
The benzene in these streams is typically formed from the cracking of 
heavier aromatic compounds into lighter compounds that can then be 
blended into gasoline. The benzene content of cracked streams is 
therefore largely a function of the aromatics content of the crude oil 
feedstocks and the need of a particular refinery to produce gasoline 
from heavier feedstocks. As we discuss later, we do not expect that 
benzene reductions from these cracked naphthas would be a major avenue 
for compliance with the proposed benzene control program for most 
refiners.
    Finally, there are other intermediate streams that contribute to 
benzene in gasoline but that have such low benzene content or are found 
in such low volumes in gasoline that they are of very limited 
importance in reducing benzene levels. Examples of these are light 
straight run naphtha and the oxygenates MTBE and ethanol.
    Table VII.F-2 summarizes the typical ranges in benzene content and 
average percentages of gasoline of the various intermediate streams 
that are blended to produce gasoline.

Table VII.F-2.--Benzene Content and Typical Gasoline Fraction of Various
                          Gasoline Blendstocks
------------------------------------------------------------------------
                                                         Average  volume
     Process or blendstock name       Typical  benzene     in  gasoline
                                        level  (vol%)       (percent)
------------------------------------------------------------------------
Reformate..........................           3-11                    30
FCC Naphtha........................          0.5-2                    36
Alkylate...........................              0                    12
Isomerate..........................              0                     4
Hydrocrackate......................            1-5                     3
Butane.............................              0                     4
Light Straight Run.................          0.3-3                     4
 MTBE/Ethanol......................           0.05                     3
Natural Gasoline...................          0.3-3                     3
Coker Naphtha......................              3                     1
------------------------------------------------------------------------

    Table VII.F-2 shows that the principal contributor of benzene to 
gasoline is reformate. This is due both to its high benzene content and 
the relatively large gasoline fraction that reformate comprises of the 
gasoline pool. The product stream from the reformer, reformate, 
accounts for between 15 and 50 percent of the content of gasoline,

[[Page 15885]]

depending on the refinery (typically about 35 percent.) For this reason 
and as discussed below, reducing the benzene in reformate is the 
primary focus of the various benzene reduction technologies available 
to refiners. Control of benzene from the other streams quickly becomes 
cost prohibitive due to either the low concentration of benzene in the 
stream, the low volume of the stream, or both.
b. Benzene Control Technologies Related to the Reformer
    There are several technologies that reduce gasoline benzene by 
controlling the benzene in the feedstock to and the product stream from 
the reformer.\267\ One approach is to route the intermediate refiner 
streams that have the greatest tendency to form benzene in a way that 
bypasses the reformer. This approach is very important in benzene 
control, but it is limited in its effectiveness because it does not 
address any of the naturally-occurring benzene and some of the benzene 
formed in the reformer. For this reason, refiners often use a second 
category of technologies that remove or destroy benzene, including both 
the naturally occurring benzene as well as that formed in the reformer. 
These technologies are isomerization, benzene saturation, and benzene 
extraction. We discuss each of these approaches to benzene reduction 
below. The effectiveness of these technologies in reducing the benzene 
content of reformate varies from approximately 60% to 96%. The actual 
impact on an individual refinery's finished gasoline benzene content, 
however, will be a function of many different refinery-specific 
factors, including the extent to which they are already utilizing one 
of these technologies.
---------------------------------------------------------------------------

    \267\ The benzene reduction technologies are discussed here in 
the context of the feasibility for reducing the benzene levels of 
gasoline to meet a gasoline benzene content standard. However, this 
discussion applies equally to the feasibility of a total air toxics 
standard, since we believe that benzene control would be the only 
means that refiners would choose in order to comply with such a 
standard.
---------------------------------------------------------------------------

i. Routing Around the Reformer
    The primary compounds that are converted to benzene by the 
reforming unit are the six-carbon hydrocarbon compounds contained in 
the straight run naphtha fed to the reformer. These compounds, along 
with the naturally-occurring benzene in this straight run naphtha 
stream, can be removed from the feedstock to the reforming unit using 
the upstream distillation unit, bypassed around the reforming unit, and 
then blended directly into gasoline. Routing these compounds around the 
reformer prevents the formation of much of the benzene in the reformer, 
though it does not reduce the naturally-occurring benzene.
    For a typical refinery, the technology to route the six-carbon 
material around the reformer would likely require only a small capital 
investment. Compared with a scenario where all of this material goes to 
the reformer, the combined rerouted and reformate streams would overall 
have about 60 percent less benzene, and finished gasoline would have 
about 31 percent less benzene. However, in most cases this would not be 
sufficient to achieve a 0.62 vol% benzene standard, and some 
combination of the technologies discussed next would also be needed.
ii. Routing to the Isomerization Unit
    A variation of routing around the reformer involves the 
isomerization of the re-routed benzene precursors. Rather than directly 
blending the rerouted stream into gasoline, this stream can first be 
processed in the isomerization unit. This has two main advantages. 
First, it increases the effectiveness of benzene control, since the 
isomerization process converts the naturally-occurring benzene in this 
rerouted stream to another compound. Second, it recovers some of the 
octane otherwise lost by the conversion of benzene.
    The typical role of the isomerization unit is to convert five-
carbon hydrocarbons from straight-chain to branched-chain compounds, 
thus increasing the octane value of this stream. If the isomerization 
unit at a refinery has sufficient additional capacity to handle the 
rerouted six-carbon hydrocarbons, that stream can also be sent to this 
unit, where the benzene present in that stream would be saturated and 
converted into another compound (cyclohexane). (This benzene saturation 
process is similar to what occurs in a dedicated benzene saturation 
unit, as described below.) Compared to a scenario where all this 
material goes to the reformer, routing the six-carbon compounds to the 
isomerization unit in this manner can reduce the benzene levels in the 
combined rerouted and reformate streams by about 80 percent. The option 
of isomerization is currently available to those refineries with 
sufficient capacity in an existing isomerization unit to treat all of 
the six-carbon material.
iii. Benzene Saturation
    The function of a benzene saturation unit is to react hydrogen with 
the benzene in the reformate (that is, to saturate the benzene) in a 
dedicated reactor, converting the benzene to cyclohexane. Because 
hydrogen is used in this process, refiners that choose this technology 
need to ensure that they have a sufficient source of hydrogen. Refiners 
cannot afford to saturate other aromatic compounds present in their 
reformate as it would cause too great an octane loss. Thus, it is 
necessary to separate a six-carbon stream, which contains the benzene, 
from the rest of reformate, and only feed the six-carbon stream to the 
benzene saturation unit. This separation is done with a distillation 
unit called a reformate splitter placed just after the reformer.
    There are two vendors that produce benzene saturation units. UOP 
produces a technology named Bensat. There are at least six Bensat units 
operating in the U.S. today and many more around the world. CDTech 
licenses another, somewhat newer technology for this purpose called 
CDHydro. There are six CDHydro units operating today, mostly outside of 
the U.S. Benzene saturation can reduce benzene in the reformate by 
about 96 percent.
iv. Benzene Extraction
    Extraction is a technology that chemically removes benzene from 
reformate. The removed benzene can be sold as a high-value product in 
the chemicals market. To extract only benzene from the reformate, a 
reformate splitter is installed just after the reformer to separate a 
benzene-rich stream from the rest of the reformate. The benzene-rich 
stream is sent to an extraction unit which separates the benzene from 
the rest of the hydrocarbons. Since the benzene must be sufficiently 
concentrated before it can be sold on the chemicals market, a very 
thorough distillation step is incorporated with the extraction step to 
concentrate the benzene to the necessary purity. Where it is economical 
to use, benzene extraction can reduce benzene levels in the reformate 
by 96 percent.
    There are two important considerations refiners have with respect 
to using benzene extraction. The first is the price of chemical grade 
benzene. If the price of chemical grade benzene is sufficiently higher 
than the price of gasoline, benzene extraction can realize an 
attractive return on capital invested and is often chosen as a 
technology for achieving benzene reduction. The difference in price 
between benzene and gasoline has been significantly higher than its 
historic levels during the last few years. While we expect that this 
difference will return closer to the lower historic levels by the time 
the proposed program

[[Page 15886]]

would be implemented, the difference in prices should still be 
sufficient to make extraction a very cost-effective technology for 
reducing gasoline benzene levels. A more detailed discussion about 
benzene prices is contained later in this preamble (section IX) and in 
Chapter 9 of the RIA.
    The other consideration in using benzene extraction is the distance 
that a refinery is from the markets where benzene is used as a chemical 
feedstock. Transportation of chemical grade benzene requires special 
hazardous-materials precautions, including protection against leaks. 
Certain precautions are also necessary to preserve the purity of the 
benzene during shipment. These special precautions are costly for 
shipping benzene over long distances. Thus if a refinery were located 
far from the chemical benzene markets, the economics for using 
extraction would be much less attractive compared to that of refiners 
located near benzene markets.
    The result has been that chemical grade benzene production has been 
limited to those refineries located near the benzene markets. This 
includes refineries on the Gulf and on the East Coast and to a limited 
extent, several refineries in the Midwest. This could change if the 
very high benzene prices in 2004 and the beginning of 2005 were to 
continue, instead of returning to lower historical levels. However, 
even if benzene prices remain high by the time that a benzene control 
standard would take effect, refineries located away from the benzene 
markets may be concerned that the higher benzene prices may not be 
certain enough for the long term to warrant investment in extraction. 
Our analysis for today's proposal conservatively assumes that only 
refineries on the Gulf and East coasts would choose to use benzene 
extraction to lower their gasoline benzene levels. Despite some 
existing extraction units in the Midwest, the benzene market there is 
small and no additional benzene extraction is assumed to occur there.
c. Other Benzene Reduction Technologies
    We are aware of other, less attractive technologies capable of 
achieving benzene reductions in gasoline. These technologies tend to 
have more serious impacts on other important refinery processes or on 
fuel quality and are generally capable of only modest benzene 
reductions. We do not currently have sufficient information about how 
widely these approaches are or could be utilized or their potential 
costs, and in our modeling we have not assumed that refiners would use 
them. However, because they may be feasible in some unique situations, 
we mention these potential gasoline benzene reduction approaches here.
    One of these less attractive opportunities for additional benzene 
reduction would be for refiners to capture more of the reformate 
benzene in the reformate splitter and send this additional benzene to 
the saturation unit. Refiners attempt to minimize both the capital and 
operating costs when splitting a benzene-rich stream out of the 
reformate stream for treating in a benzene saturation unit. To do this, 
they optimize the distillation cut between benzene and toluene, thus 
achieving a benzene reduction of about 96 percent in the reformate 
while preserving all but about 1 percent of the high-octane toluene. 
However, if a refiner were to be faced with a dire need for additional 
benzene reductions, it could change its distillation cut to send the 
last 4 percent of the benzene to the saturation unit. Since this cut 
would also bring with it more toluene than the normal optimized 
scenario, this toluene would also be saturated, resulting in a larger 
loss in octane and greater hydrogen consumption.
    Some refineries with hydrocracking units may have another means of 
further reducing the gasoline benzene levels. They may be able to 
reduce the benzene content of one of the products of the hydrocracker, 
the light hydrocrackate stream. Today, light hydrocrackate is normally 
blended directly into gasoline. Light hydrocrackate contains a moderate 
level of benzene, although its contribution to the gasoline benzene 
levels is significant only in those refineries with hydrocrackers. 
Light hydrocrackate could be treated by routing this stream to an 
isomerization unit, similar to how refiners isomerize the six-carbon 
straight run naphtha as discussed above. Alternatively, refiners could 
use additional distillation equipment to cut the light hydrocrackate 
more finely. In this way, more of the benzene could be shifted to the 
``medium'' hydrocrackate stream, which in most refineries is sent to 
the reformer and thus would be treated along with the reformate.
    Another way that we believe some refiners could further reduce 
their benzene levels would be to treat the benzene in natural gasoline. 
Many refiners, especially in PADDs 3 and 4, blend some light gasoline-
like material, which is a by-product of natural gas wells, into their 
gasoline. In most cases, we believe that this material is blended 
directly into gasoline. Because the benzene concentration in this 
stream is not high, it would be costly to treat the stream to reduce 
benzene. However, there could be other reasons that refiners might find 
compelling for treating this stream. First, since its octane is fairly 
low to begin with, it could be fed to the reformer and its benzene 
would be treated in the reformate, along with the benefit of improving 
the octane quality of this stream. Second, refiners producing low-
sulfur gasoline under the gasoline sulfur program may not be able to 
easily tolerate the sulfur from this stream if it were blended directly 
into gasoline. Thus, if they treat this stream in the reformer, it 
would undergo the hydrotreating (desulfurization) that is necessary for 
all streams fed to the reformer. Overall, we do not have sufficient 
information to conclude whether treating natural gasoline might become 
more attractive in the future.
    Another approach to benzene reduction that we believe could be 
attractive in certain unique circumstances relates to the benzene 
content in naphtha from the fluidized catalytic cracker, or FCC unit. 
As shown in Table VII.F-2, FCC naphtha contains less than 1 percent 
benzene on average. Despite the very low concentration of benzene in 
FCC naphtha, the large volumetric contribution of this stream to 
gasoline results in this stream contributing a significant amount of 
benzene to gasoline as well. There are no proven processes which treat 
benzene in FCC naphtha. This is because its concentration is so low as 
well as because FCC naphtha contains a high concentration of olefins. 
Segregating a benzene-rich stream from FCC naphtha and sending it to a 
benzene saturation unit would saturate the olefins in the same boiling 
range, resulting in an unacceptable loss in octane value. Also, some 
refiners operate their FCC units today more severely to improve octane, 
an action that also increases benzene content. Conceivably, refiners 
could redesign their FCC process (change the catalyst and operating 
characteristics) to reduce the severity and produce slightly less 
benzene. We do not have sufficient information to know whether many 
refiners are already operating at high FCC severity and thus have the 
potential to reduce benzene by reducing that severity.
    We request comment on our assessment of benzene reduction 
approaches, including data related to the current or potential usage 
and potential effectiveness of each approach.

[[Page 15887]]

d. Impacts on Octane and Strategies for Recovering Octane Loss
    All these benzene reduction technologies affect the octane of the 
final gasoline. Regular grade gasoline must comply with a minimum 87 
octane (R+M)/2 rating (or a sub-octane rating of 86 for driving in 
altitude), while premium grade gasoline must comply with an octane 
rating which ranges from 91 to 93 (R+M)/2. Gasoline must meet these 
octane ratings to be sold as gasoline at retail. Routing the benzene 
precursors around the reformer reduces the octane of the six-carbon 
compound stream, which normally exits the reformer with the rest of the 
reformate. Without these compounds in the reformate, a loss of octane 
in the gasoline pool of about 0.14 octane numbers typically occurs. If 
this rerouted stream can be sent to an isomerization unit, a portion of 
this lost octane can be recovered, provided that sufficient capacity 
remains in that unit to continue treating the five-carbon naphtha 
compounds. Benzene saturation and benzene extraction both affect the 
octane of reformate and therefore the gasoline pool. Benzene saturation 
typically reduces the octane of gasoline by 0.24 octane numbers, and 
benzene extraction typically reduces the octane by 0.14 octane numbers.
    Refiners can recover the lost octane in a number of ways. First, 
the reformer severity can be increased. However, if the refiner is 
reducing benzene through precursor rerouting or saturation, this 
strategy can be somewhat counterproductive. This is because increased 
severity increases the amount of benzene in the reformate and thus 
increases the cost of saturation and offsets some of the benzene 
reduction of precursor rerouting. Increasing reformer severity would 
also decrease the operating cycle life of the reformer, requiring more 
frequent regeneration. However, where benzene extraction is used, 
increased reformer severity can improve the economics of extraction 
because not only is lost octane replaced but the amount of benzene 
extracted is increased. Again, operating the reformer more severely 
would have the negative impact of shortening the reformer's operating 
cycle between regeneration events.
    Lost octane can also be recovered by increasing the activity of 
other octane-producing units at the refinery. As discussed above, 
saturating benzene in the isomerization unit loses the octane value of 
that benzene, but octane is increased by the simultaneous formation of 
branch-chain compounds. Also, many refineries produce a high-octane 
blendstock called alkylate. Alkylate is produced by reacting normal 
butane and isobutane with isobutylene over an acid catalyst. Not only 
is this stream high in octane, but it converts compounds that are too 
volatile to be blended in large amounts into the gasoline pool into 
heavier compounds that can be readily blended into gasoline. If the 
refinery is short of feedstocks for alkylate, then the operations of 
the FCC unit, which is the principal producer of these feedstocks, can 
be adjusted to produce more of the feedstocks for the alkylate unit, 
increasing the availability of this high octane blendstock.
    Octane can also be increased by purchasing high-octane blendstocks 
and blending them into the gasoline pool. For example, some refiners 
with excess octane production capacity market high octane blendstocks 
such as alkylate or aromatics such as toluene. Oxygenates, such as 
ethanol, can also be blended into the gasoline pool. Other oxygenates 
such as methyl tertiary butyl ether (MTBE), ethyl tertiary butyl ether 
(ETBE), tertiary amyl methyl ether (TAME), and other ethers are 
sometimes used. The availability and cost of oxygenates for octane 
replacement vary according to material prices as well as state and 
federal policies that either encourage or discourage their use. (For 
example, the Energy Policy Act of 2005 requires an increase in the 
volume of renewable fuels, including ethanol, which are blended into 
gasoline).
e. Experience Using Benzene Control Technologies
    All of the benzene reduction technologies and octane generating 
technologies described above have been demonstrated in refineries in 
the U.S. and abroad. All four of these technologies have been used for 
compliance purposes for the federal RFG program, which has required 
that benzene levels be reduced to an average of 0.95 vol% or lower 
since 1995.
    According to the Oil and Gas Journal's worldwide refining capacity 
report for 2003, there were 27 refineries in the U.S. with extraction 
units. Those refineries that chose extraction often reduced their 
benzene to levels well below 0.95 vol% because of the value of benzene 
as a chemical feedstock, as discussed above. Once a refiner invests in 
extraction, they have a strong incentive to maximize benzene production 
and thus the availability of benzene to sell to the chemical market, 
often reducing gasoline benzene more than is required by regulation. 
The RFG program also led to the installation of a small number of 
benzene saturation units in the Midwest to produce RFG for the markets 
there. California has its own RFG program which also put into place a 
stringent benzene standard for the gasoline sold there. The Oil and Gas 
Journal's Worldwide Refining Report shows that four California 
refineries have benzene saturation units. If we assume that those RFG 
and California refineries that do not have extraction or saturation 
units are routing their precursors around their reformer, then there 
are 28 refineries using benzene precursor rerouting as their means to 
reduce benzene levels. Thus, these technologies have been demonstrated 
in many refineries since the mid-1990s in the U.S. and are considered 
by the refining community as commercially proven technologies.
    Worldwide experience provides further evidence of the commercial 
viability of these benzene control technologies. A vendor of benzene 
control technology has shared with us how the refining companies in 
other countries have controlled the benzene levels of their gasoline in 
response to the benzene standards put in place there. In Europe, 
benzene control is typically achieved by routing the benzene precursors 
around the reformer and feeding that rerouted stream to an 
isomerization unit. In Japan, much of the benzene is extracted from 
gasoline and sold to the chemicals market. Finally, in Australia and 
New Zealand, refiners tend to use benzene saturation to reduce the 
benzene levels in their gasoline.
f. What Are the Potential Impacts of Benzene Control on Other Fuel 
Properties?
    With the complex nature of modern refinery operations, most changes 
to fuel properties affect other fuel properties to some degree. In the 
case of benzene control, the ``ripple effects'' on other fuel 
properties tends to be limited. However, as discussed above, the 
reduction in benzene content that we are proposing in this rule, 
depending on how it is accomplished, would in most cases slightly 
reduce the overall octane of the resulting gasoline. Refiners would 
likely compensate by increasing the volume of reformate (other 
aromatics) blended into the gasoline, requiring a small increase in 
reformer severity and energy inputs. Some analysis of gasoline property 
survey data suggests that as benzene is reduced in gasoline, other 
aromatics may increase somewhat to help compensate.
    Another option refiners might consider in response to the proposed 
rule is match-blending ethanol to make up octane and increase supply 
volume.

[[Page 15888]]

This has been done for several years with MTBE as an economical way to 
meet toxics performance requirements and octane targets for RFG. Like 
MTBE, ethanol has a relatively high blending octane, and is already 
added in many markets to take advantage of tax benefits or to support 
local suppliers. Since the use of ethanol is being encouraged in the 
recently-enacted energy legislation, refiners will likely seek to 
capture the octane benefits as part of their process, which could help 
offset the octane loss some refiners will see as a result of benzene 
reduction processes. Furthermore, to the extent that current MTBE 
production is shifted to production of isooctene, isooctane, and 
alkylate, these compounds would be available as high-octane, low-
benzene gasoline blendstocks.
    Finally, refiners may blend in isomerate or alkylate, which are 
very ``clean'' gasoline blendstocks, thereby reducing the levels of 
``dirtier'' gasoline blendstocks, and reducing overall sulfur, olefins, 
and aromatics. We do not anticipate major changes in other fuel 
properties due to reductions in benzene. Our modeling of the emissions 
impacts of the proposed benzene standard does account for the modest 
changes in other fuel properties. As discussed in section V of this 
preamble and Chapter 2 of the RIA, this emissions modeling indicates 
that the proposed benzene standard has negligible impacts on the 
emissions of other mobile source air toxics.
3. Feasible Level of Benzene Control
    A key aspect of our selection of the level of the proposed average 
benzene standard of 0.62 vol% was our evaluation of the benzene levels 
achievable by individual refineries. Our modeling analyses, which 
combine our understanding of technological and economic factors, is 
summarized in section IX below and discussed in detail in Chapter 9 of 
the RIA. Later in this section we summarize our conclusions about the 
overall feasibility of the program in terms of the requirements of the 
Clean Air Act.
    We assessed the benzene levels achievable for each refinery, 
assuming that each refinery pursued the most stringent form of 
reformate benzene control available to it--installing either benzene 
saturation or extraction units. Based on this assessment, we project 
that the most stringent benzene level achievable on average for all 
U.S. gasoline would be 0.52 vol% benzene.\268\ As discussed above, 
however, a standard at this level would require significant investment 
at essentially all refineries--that is, near-universal installation of 
either benzene saturation or benzene extraction capability. As 
discussed in section IX below, this would be a very expensive result--
costing about three times more than the proposed program--that we do 
not believe would be reasonable when costs are taken into account.
---------------------------------------------------------------------------

    \268\ This analysis is within the constraints of our modeling 
and the refinery-specific information available to us at the time of 
this proposal.
---------------------------------------------------------------------------

    Furthermore, the model projects that all refineries would use 
optimal combinations of actual benzene reductions and/or credit 
purchases and would meet the average standard without going beyond the 
primary technologies of reformate benzene reduction discussed earlier 
in this section. To reach this conclusion, our model assumes a fully 
utilized credit trading program (that is, each refiner is assumed to 
minimize its average costs and to freely trade credits among companies 
so that all credits generated are used). Although the assumption of a 
fully utilized credit trading program is appropriate for our modeling 
purposes, it is very possible that this would not occur in practice. 
For example, some refiners might choose to hold onto credits that they 
generate, saving them for potential ``emergencies'' when unexpected 
events would otherwise cause noncompliance with the benzene standard.
    Given the high cost of control for some refineries and the 
potential that credit trading would be less-than-fully utilized, we 
have looked at standards less stringent than 0.52 vol% that might be 
feasible, considering cost. Based on our modeling, we believe that with 
the proposed ABT program all gasoline could be produced at the proposed 
average level of 0.62 vol% without extreme economic consequences. We 
believe that sufficient credits would be generated such that refineries 
facing the highest costs of benzene control would have sufficient 
access to credits and would not need to turn to cost prohibitive 
technologies.
    From a strict feasibility standpoint, we have also assessed whether 
all refineries could meet the proposed benzene level in cases where 
sufficient credits were not available to every refinery that might want 
them. We found that, despite the application of maximum reformate 
benzene control in the refinery model to all refineries, the analysis 
concluded that 13 refineries would still have benzene levels that 
exceeded a 0.62 benzene level, with one refinery as high as 0.77 vol% 
benzene. We have evaluated how these 13 refineries might use the other, 
less attractive benzene control technologies discussed above (assuming 
that an ABT option is not available to them).
    The approach of capturing more of the reformate benzene in the 
reformate splitter and sending this additional benzene to the 
saturation unit would allow 7 of the 13 challenged refineries to reach 
the 0.62 vol% level. Then, those refineries with a hydrocracker or a 
coker could reduce the benzene content of the light hydrocrackate or 
coker stream. This step would allow 5 more refineries to reach the 
target level. Finally, the treatment of benzene in natural gasoline 
would bring the remaining 1 refinery to the 0.62 vol% level or below. 
(Because of our lack of information about the potential for reducing 
the severity of the FCC unit, and because we do not believe that 
reducing the benzene level of FCC naphtha is feasible, we did not 
consider FCC options in this analysis.) Again, we expect that at the 
proposed standard level of 0.62 vol% in the context of the proposed ABT 
program, all refineries would be able to comply. This analysis 
demonstrates that there are options, although extreme and costly, for 
challenged refineries even if the ABT program does not fully function 
as projected.
4. Lead Time
    Our proposal for the gasoline benzene standard to begin on January 
1, 2011 would allow about four years after we expect the rulemaking to 
be finalized for refiners to comply with the program's requirements. As 
discussed below, we believe that four years of lead time would allow 
refiners sufficient time to install the capital equipment they would 
need to lower their benzene levels, and would also allow this program 
to avoid significant conflict with other fuel programs being 
implemented around the same time. In addition, the ABT program would 
allow the industry to phase in the program, through the early credit 
provisions, so that significant benzene reductions would occur earlier 
than the program start date. The credits earned could allow the 
investment in higher capital cost and less cost-effective technologies 
to be delayed relative to the program start date.
    In recent years, the implementation of the gasoline sulfur and 
highway diesel sulfur programs has provided an opportunity to observe 
the response of the refining industry to major fuel control 
requirements. Many refiners have demonstrated their ability to make 
very large, expensive sulfur control modifications to their refineries 
in less than four years, and in some cases significantly less. It is 
helpful to

[[Page 15889]]

compare this sulfur control experience with the types of technologies 
refiners would use to reduce benzene.
    Refiners could implement approaches to benzene control that require 
very little or no capital equipment, including routing of benzene 
precursors around the reformer and the use of an existing isomerization 
unit, with very little lead time requirements. We believe that 
approaches using moderately complex capital equipment, including 
improving the effectiveness of precursor rerouting and expanding 
existing extraction capacity, would generally require one to two years 
of lead time. Projects that involve the installation of new equipment, 
including benzene saturation and extraction units, require more time, 
generally two to three years. This includes time for the equipment 
installation as well as related offsite equipment and any necessary 
capital equipment for production of hydrogen or high-octane 
blendstocks. Of all the benzene control approaches, benzene extraction 
is closest in scope and complexity to the technologies the industry is 
using for fuel sulfur control. In addition to the time needed for 
planning and installing the extraction unit and related equipment, 
extraction also requires time to install additional facilities for 
storing extracted benzene and for loading it for transport. Thus, as 
with the earlier programs, we believe the refiners choosing to add a 
benzene extraction unit could in some cases need as much as four years 
to complete the project. Overall, we believe that four years of lead 
time would ensure that all refiners would have sufficient time to 
comply, regardless of the benzene control technology they select.
    Another factor in selecting an appropriate date to begin the 
program is the timing of the implementation of other large fuel control 
programs, especially the Nonroad Diesel rule.\269\ The 15 ppm sulfur 
standard mandated by the Nonroad Diesel Fuel program applies to nonroad 
diesel fuel in 2010 and to locomotive and marine diesel fuel in 2012. 
Refiners modifying their refineries to produce either ultra low sulfur 
nonroad or locomotive and marine diesel fuel will do so during the 
several years prior to 2010 and 2012. For each of those start dates, 
there is a progression of actions which includes planning, design, 
construction and start-up all during the four year run-up toward the 
start date of the program. For example, the engineering and 
construction (E&C) industry will be busy designing and constructing 
each of the units that will be installed. Different portions of the E&C 
industry will be engaged at specific periods of time leading up to the 
time that the unit is started up. For this reason, staggering the start 
year of this benzene fuel standard with the start years for the Nonroad 
Diesel program would help to avoid excessive demand on specific parts 
of the E&C industry. The staggering of today's proposed program's start 
date with those of the Nonroad Diesel program may also help refiners 
that might be seeking to acquire capital through banks or other lending 
institutions by spreading out the requests.
---------------------------------------------------------------------------

    \269\ The months leading up to January 2010 will also be when 
several small refiners and refiners that were granted hardship 
relief will be implementing their gasoline sulfur programs. We 
believe that any serious interference among implementation projects 
that individual refiners might demonstrate during this time period 
could be addressed under the small refiner or general hardship 
provisions of the proposed rule.
---------------------------------------------------------------------------

    We believe that the proposed implementation date of January 1, 2011 
would minimize overlap and possible interference with the 
implementation of the Nonroad Diesel rule. Implementation of the 
proposed benzene standard one year earlier or one year later would 
overlap directly with one of the two Nonroad Diesel implementation 
dates. We also believe that the additional year of lead time, compared 
to a 2010 start date, would make the program more effective. Because we 
expect that the proposed ABT program would encourage many refiners to 
reduce benzene levels early whenever possible, we believe that 
significant benzene reductions would occur prior to 2011. We discuss 
this expected early benzene reduction further as a part of the 
description of the proposed ABT program in section VII.D above.
    For these reasons, we are proposing that the gasoline benzene 
standard be implemented beginning January 1, 2011. We request comment 
on the issue of lead time, including data supporting four years or a 
different length of time.
5. Issues
a. Small Refiners
    Small refiners are technically capable of realizing a similar 
benzene reduction from their gasoline as large refiners. Because of 
economies of scale, however, some of the benzene control technologies 
which would be more affordable for larger refineries would be much more 
challenging and more expensive for small refiners. This is due to the 
poorer economies of scale that the small refiners are faced with 
installing capital into their refineries. Two of the benzene control 
technologies discussed above would be particularly attractive to small 
refiners for implementing into their refineries. These are benzene 
precursor rerouting, and, if the refinery has an isomerization unit, 
routing the benzene precursors to the isomerization unit. These 
technologies would be attractive to small refiners because they would 
require little or no capital investments to implement for reducing 
their gasoline benzene levels. Therefore, the per-gallon cost of these 
two technologies is about the same as that for large refineries.
    Smaller refineries tend to have fewer process units and blending 
streams, which generally also means that they will have fewer options 
for recovering lost octane. For example, these refineries are less 
likely to have an alkylation unit. An alkylation unit gives refiners 
short on octane the option to change the operations of their FCC unit 
to make more olefins and then send the appropriate olefins to their 
alkylation unit to produce more of that high octane blendstock. This is 
not an option for several of the small refiners that do not have an 
alkylation unit. Also, small refineries are more likely to have a 
higher pressure reforming unit. The higher pressure reformer units tend 
to produce more benzene from the cracking of heavier aromatic compounds 
and will tend to do this more as their severity is increased. A higher 
pressure reformer also has a more difficult regeneration cycle and 
shorter cycle lengths as it is operated more severely. Thus, while 
other refiners with lower pressure units may be able to increase the 
severity of their reformers to make more octane without producing much 
more benzene and greatly reducing the cycle lengths of their reformers, 
many of the small refiners may not have as much flexibility in this 
area. In any event, these greater technological challenges can be 
offset somewhat where it is economical to purchase high octane 
blendstocks or oxygenates from other refiners or from the petrochemical 
industry.
b. Imported Gasoline
    Although the majority of petroleum products in the U.S. are made 
from imported crude oil, only about five percent of the gasoline 
consumed in this country was imported as finished gasoline in 2003. 
This imported fuel is approximately half RFG and half CG, and had an 
average benzene content of 0.8% volume in 2003. No batches of imported 
gasoline had a benzene level above 2.4%. Over 90% of the imported 
gasoline was delivered into the East Coast and Florida, with about 5% 
arriving on the West Coast, and the

[[Page 15890]]

remainder being brought into other regions of the country. The origin 
of the majority of this gasoline was Canada (40%), Western Europe 
(31%), and South America (17%).
    Since imported finished gasoline is not processed in a domestic 
refinery, where refiners would be taking steps to meet the proposed 
benzene standard, importers would be affected in other ways. Importers 
would most likely either begin to purchase gasoline that is low enough 
in benzene to meet the standard, or they would continue to import 
gasoline with benzene at current levels but purchase credits to cover 
the fuel being above the standard. As shown above, over 70 percent of 
imported gasoline comes from countries that have already set benzene 
limits on their gasoline. As a result, we believe that gasoline with 
some degree of benzene control will be easily available for importers 
to market. In some cases, we also expect that some foreign refiners may 
produce for export some fraction of their gasoline to meet our proposed 
0.62 vol% average standard benzene. This would provide importers 
further options in the U.S. gasoline market.

G. How Does the Proposed Fuel Control Program Satisfy the Statutory 
Requirements?

    As discussed earlier in this section, we have concluded that the 
most effective and appropriate program for MSAT emission reduction from 
gasoline is a benzene control program. Today's action proposes such a 
program, with an average benzene content standard of 0.62 vol% and a 
specially-designed averaging, banking, and trading program. In section 
VII.F above, we summarize our evaluation of the feasibility of the 
proposed program, and in section IX.A we summarize our evaluation of 
the costs of the program. The analyses supporting our conclusions in 
these sections are discussed in detail in Chapters 6 and 9 of the RIA.
    Taking all of this information into account, we believe that a 
program more stringent than the proposed program would not be feasible, 
taking into consideration cost. As we have discussed, making the 
standard more stringent would require more refiners to install the more 
expensive benzene control equipment, with very little improvement in 
benzene emissions. Also, we have shown that related costs increase very 
rapidly as the level of the standard is made more stringent. 
Conversely, while it would provide significant benzene emission 
reductions, we are concerned that a somewhat less stringent national 
average standard than the proposed 0.62 vol% (e.g., 0.65 or 0.70 vol%) 
would not satisfy our statutory obligation for the most stringent 
standard feasible considering cost and other factors. Furthermore, such 
standards would not accomplish several important programmatic 
objectives as discussed in section VII.C.
    We have also considered energy implications of the proposed 
program, as well as noise and safety, and we believe the proposed 
program would have very little impact on any of these factors. Analyses 
supporting these conclusions are also found in Chapter 9 of the RIA. We 
carefully considered lead time in establishing the stringency and 
timing of the proposed program (see section VII.F above).
    Consequently, we believe that the proposed program would meet the 
requirements of section 202(l) of the Clean Air Act, reflecting ``the 
greatest degree of emission reduction achievable through the 
application of technology which is available, taking into consideration 
* * * the availability and costs of the technology, and noise, energy, 
and safety factors, and lead time.''

H. Effect on 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. If promulgated, 
the gasoline benzene provisions of the proposed rule would shift about 
22,000 barrels per day of benzene from the gasoline market to the 
petrochemical market. This volume represents about 0.2 percent of 
nationwide gasoline production. The actual impact of the rule on the 
gasoline market, however, is likely to be less due to offsetting 
changes in the production of petrochemicals, as well as expected growth 
in the petrochemical market absent this rule. The major sources of 
benzene for the petrochemical market other than reformate from gasoline 
production are also derived from gasoline components or gasoline 
feedstocks. Consequently, the expected shift toward more benzene 
production from reformate due to this proposed rule would be offset by 
less benzene produced from other gasoline feedstocks.
    The rule would require refiners to use a small additional amount of 
energy in processing gasoline to reduce benzene levels, primarily due 
to the increased energy used for benzene extraction. Our modeling of 
increased energy use indicates that the process energy used by refiners 
to produce gasoline would increase by about one percent. Overall, we 
believe that the proposed rule would result in no significant adverse 
energy impacts.
    The proposed gasoline benzene provisions would not affect the 
current gasoline distribution practices.
    We discuss our analysis of the energy and supply effects of the 
proposed gasoline benzene standard further in section IX of this 
preamble and in Chapter 9 of the Regulatory Impact Analysis.
    The fuel supply and energy effects described above would be offset 
substantially by the positive effects on gasoline supply and energy use 
of the proposed gas can standards also proposed in today's action. 
These proposed provisions would greatly reduce the gasoline lost to 
evaporation from gas cans. This would in turn reduce the demand for 
gasoline, increasing the gasoline supply and reducing the energy used 
in producing gasoline.

I. How Would the Proposed Gasoline Benzene Standard Be Implemented?

    This section discusses the details associated with meeting the 
proposed 0.62 vol% benzene standard.
1. General Provisions
a. What Are the Implementation Dates for the Proposed Program?
    We are proposing that refiners and importers would achieve 
compliance with the requirements of the proposed benzene program 
beginning with the annual averaging period beginning January 1, 2011. 
Refineries with approved benzene baselines could generate early credits 
from June 1, 2007, through December 31, 2010. Refineries and importers 
could generate standard credits beginning with the annual averaging 
period beginning January 1, 2011, provided that the average benzene 
content of the gasoline they produce or import during the year was less 
than 0.62 vol% benzene.
    Approved small refiners would be allowed to delay compliance with 
the 0.62 vol% standard until the annual averaging period beginning 
January 1, 2015. They could, however, generate early credits beginning 
June 1, 2007 through December 31, 2014, provided that they had an 
approved benzene baseline. They would be able to generate standard 
credits beginning January 1, 2015.

[[Page 15891]]

b. Which Regulated Parties Would Be Subject to the Proposed Benzene 
Standards?
    Domestic refiners and importers would be subject to the proposed 
standards. We are proposing that each refinery of a refiner must meet 
the standard, and all associated requirements, individually. Refinery 
grouping, or aggregation, as allowed in the Anti-dumping and MSAT1 
program for CG, would not be permitted for purposes of complying with 
the proposed benzene standard (although the ABT provisions provide 
similar flexibility, and the credit generation and transfer provisions 
would perform basically the same functions). For an importer, we are 
proposing that the requirements apply to the entire volume imported 
during the averaging period regardless of import locations or sources. 
In addition, where a company has both refinery and import operations, 
each operation would have to achieve its own compliance with the 0.62 
vol% benzene standard. We are proposing that those who only added 
oxygenate or butane to gasoline or gasoline blending stock would not be 
subject to the proposed standards for that gasoline unless they also 
added other blending components to the blend. This would be similar to 
the current treatment of these entities and their gasoline under the 
RFG, Anti-dumping and MSAT1 programs, where specialized accounting and 
calculation procedures are specified. In these cases, the refinery (or 
importer) that produces gasoline or gasoline blendstock includes the 
oxygenate in its own compliance determination. We are proposing that 
this practice would continue under today's program. Transmix processors 
would not be subject to the proposed requirements for gasoline produced 
from transmix, but gasoline produced from transmix to which other 
blendstocks were added would be subject to the proposed benzene 
standard.
    We are proposing that all gasoline produced by foreign refineries 
for use in the United States would be included in the compliance and 
credit calculation of the importer of record. Under the Anti-dumping 
and MSAT1 rules, as well as the gasoline sulfur requirements, 
additional requirements applicable to foreign refiners who chose to 
comply with those regulations separately from any importer were 
included to ensure that enforcement of the regulation at the foreign 
refinery would not be compromised. We are proposing similar provisions 
here. Specifically, we are proposing to allow foreign refiners to 
generate early credits and to apply for temporary hardship relief and 
small refiner status. See proposed 40 CFR 80.1420. However, under the 
earlier rules, few foreign refiners have chosen to undertake these 
additional requirements, and almost all gasoline produced at foreign 
refineries is included in an importer's compliance determination for 
the current EPA gasoline programs.\270\ We invite comment on the value 
of extending these provisions to this proposed benzene program.
---------------------------------------------------------------------------

    \270\ Often, the importer of record is the foreign reiner. In 
these instances, the importer/foreign refiner has simply opted to 
achieve compliance via the applicable importer provisions.
---------------------------------------------------------------------------

    As mentioned, we are proposing to extend the small refiner 
provisions to foreign refiners. Our experience in past rules is that 
they are not taken advantage of for various reasons. Most foreign 
refineries are state-owned or owned by large multinational companies, 
and would exceed the employee-count criterion. Others have typically 
not been interested in fulfilling the enforcement-related requirements 
that apply to foreign refineries. We request comment on extending the 
small refiner provisions to foreign refiners.
c. What Gasoline Would Be Subject to the Proposed Benzene Standards?
    All finished gasoline produced by a refinery or imported by an 
importer would be subject to the proposed benzene content standard. In 
addition, gasoline blending stock which becomes finished gasoline 
solely upon the addition of oxygenate would also be subject to the 
proposed standard.\271\ Other gasoline blendstocks which are shifted 
among refiners prior to turning them into finished gasoline would not 
be subject to the benzene standard. They would be included at the point 
they are converted or blended to produce finished gasoline.
---------------------------------------------------------------------------

    \271\ As stated earlier, both blending stock and oxygenate would 
be included in the refinery's or importer's compliance 
determination. Conventional gasoline refiners are required to have 
agreements with downstream oxygenate blenders to ensure that the 
appropriate type and amount of oxygenate is added to the gasoline 
blending stock, per 40 CFR 80.10(d). Absent such agreements, the 
refinery may only include the gasoline blending stock in its 
compliance determination and the oxygenate is not included in any 
compliance determination.
---------------------------------------------------------------------------

    We are proposing to exclude gasoline produced or imported for use 
in California from this benzene requirement. Although California's 
benzene averaging standard is greater than 0.62 vol%, California in-use 
benzene levels are currently below the level of the proposed 
standard.\272\ We expect this situation will continue. There would be 
no additional benefit to consumers of California gasoline or to the 
implementation and benefits of the proposed program by the inclusion of 
gasoline used in California.
---------------------------------------------------------------------------

    \272\ California Code of Regulations, Title 13 Section 2262.
---------------------------------------------------------------------------

    This proposal also would exclude those specialized gasoline 
applications that have been exempted from other EPA gasoline rules, 
such as gasoline used to fuel aircraft, or for sanctioned racing 
events, gasoline that is exported for sale and use outside of the U.S., 
and gasoline used for research, development or testing purposes, under 
certain circumstances.
d. How Would Compliance With the Benzene Standard Be Determined?
    Compliance with the proposed benzene standard would be on an 
annual, calendar year basis, similar to almost all other current 
gasoline controls. A refiner's or importer's compliance (or Compliance 
Benzene Value, as used in the proposed regulation) would be determined 
from the annual average benzene content of its gasoline (produced or 
imported), any credits used for compliance purposes, and any deficit 
carried over from the previous year, and would have to be 0.62 vol% or 
lower, on a benzene volume basis. The Compliance Benzene Value would 
differ from the refiner's or importer's actual annual average benzene 
concentration because the latter would be solely a volume weighted 
average of the benzene concentrations of the refinery's or importer's 
actual gasoline batches.
    Credits, in any amount, could be used to achieve compliance. As 
mentioned, we are also proposing to allow a deficit to be carried 
forward for one year. Under these circumstances, in the next compliance 
period, the refinery or importer would have to be in compliance, that 
is, the refinery or importer would have to, through production or 
import practices, and/or the use of credits, make up the deficit from 
the previous year and be in compliance with the proposed benzene 
standard. This provision could be especially helpful to refiners in the 
first year of the program, until the availability and need for credits 
was established.
    In the RFG and Anti-dumping programs, and MSAT1, by extension, 
refiners and importers generally include oxygenate added downstream 
from the refinery or the import facility in their compliance 
calculations.\273\ Refiners

[[Page 15892]]

and importers of RBOB are required to account for the oxygenate in 
their own compliance. As mentioned earlier, refiners and importers of 
conventional gasoline can include the oxygenate if they have met the 
Anti-dumping requirements for ensuring that the amount and type of 
oxygenate was indeed added. We are not proposing any changes to these 
provisions for the purposes of compliance with the proposed benzene 
program. However, average pool benzene levels are expected to decrease 
as a result of increased ethanol use due to requirements of the Energy 
Policy Act of 2005, and this would affect both early and standard 
credit generation, as will be discussed below. However, we request 
comment on how, if at all, additional oxygenate use should be 
considered, and perhaps limited, in compliance determinations for the 
proposed program.
---------------------------------------------------------------------------

    \273\ As a result, oxygenate blenders would not be subject to 
the RFG, Anti-dumping or MSAT1 regulations except for gasoline to 
which they add other blendstocks in addition to the oxygenate.
---------------------------------------------------------------------------

2. Averaging, Banking and Trading Program
a. Early Credit Generation
    As discussed, early credit generation could occur as early as the 
averaging period beginning June 1, 2007, through the averaging period 
ending December 31, 2010, or ending December 31, 2014, for small 
refiners. In order to generate early benzene credits, a refinery would 
first establish a benzene baseline which is its average benzene 
concentration over the period January 1, 2004, through December 31, 
2005. A refinery would be eligible to generate early credits when it 
reduced its annual average benzene concentration by at least 10% 
compared to its benzene baseline. Credits would then be calculated 
based on the entire reduction in benzene below the baseline. Generation 
of early credits for the first averaging period, June 1, 2007 through 
December 31, 2007, which is less than a calendar year, would be based 
on the average benzene level of the gasoline produced only during this 
period. Gasoline produced before June 1, 2007, would not be included in 
the credit generation determination.
    We are proposing to allow only refiners (and not importers) to 
generate early benzene credits because it is at the refinery, or 
production level, where real changes in the production of gasoline can 
be made. Importers would simply seek out blending streams or gasoline 
with lower benzene, but would not have to invest or take other action 
involving the production of the lower benzene gasoline. Furthermore, 
many importer operations grow in volume, shrink in volume, come into 
existence and go out of existence on a continual basis, making it 
difficult to assess the appropriateness of both the baseline and any 
early credits. Thus, even though an importer may have had regular, 
consistent import activity during the 2004-2005 baseline period, we are 
proposing that only refiners would be allowed to apply for a benzene 
baseline, and if approved, to generate early benzene credits based on 
reductions in future averaging period gasoline benzene levels.
    As discussed above, one of the purposes of allowing the early 
generation of benzene credits would be to promote reductions in benzene 
through refinery processing changes. We are concerned that benzene 
reductions due to increased oxygenate use would result in reduced 
benzene concentrations. Oxygenate use (in the form of ethanol) in CG is 
expected to increase as a result of the Energy Policy Act 
requirements.\274\ This additional oxygenate will dilute gasoline 
benzene levels as well as extend the gasoline pool. As a result, 
refinery average benzene levels would be likely to be lower during the 
early credit generation period than during the benzene baseline period 
(2004-2005) if there is an increase in the amount of CG refiners send 
for downstream blending with ethanol (CBOB). We are concerned that 
reductions in fuel benzene levels due to oxygenate addition 
significantly beyond the average levels of recent years could result in 
windfall early credit generation for some refineries. We request 
comment on the likelihood of windfall early credit generation, and if 
such a situation were to occur, whether it would warrant limiting early 
benzene credits by consideration of the average oxygenate use during 
the baseline period compared to the early credit generation period or 
by adjusting the early credit trigger point. We believe this would be 
less of an issue during the standard credit generation period beginning 
in 2011 (2015 for small refiners) because of the more stringent 
requirements for generating standard credits (getting below the 0.62 
vol% standard) compared to the early credit generation requirements 
(achieving a minimum 10% reduction in baseline benzene levels).
---------------------------------------------------------------------------

    \274\ Even though the Energy Policy Act of 2005 eliminated the 
oxygen mandate for RFG, oxygenate use (in the form of ethanol) in 
RFG is expected to continue.
---------------------------------------------------------------------------

b. How Would Refinery Benzene Baselines Be Determined?
    As mentioned above, a refiner would submit a benzene baseline 
application to EPA for any of its refineries which planned to generate 
early credits. The benzene baseline would be the volume-weighted 
average of the benzene levels of the gasoline produced by the refinery 
during 2004-2005. Note that the gasoline would be the combination of 
the refinery's RFG and CG, if applicable, and would exclude California 
gasoline and other fuels exempted from the proposed standard. The 
benzene values used in the benzene baseline calculation should be the 
same as used in the RFG, Anti-dumping and MSAT1 compliance 
determinations. We are not proposing provisions for adjusting these 
benzene baselines based on circumstances during the baseline years or 
otherwise.
    Though we expect that most refineries that apply for a benzene 
baseline would have data for both 2004 and 2005, if a refinery was shut 
down for part of the 2004-2005 period, it could still be able to 
establish a benzene baseline. Under these circumstances, the refiner 
would have to provide and justify, using refinery and engineering 
analyses, an appropriate adjusted value that reflects the likely 
average benzene concentration for the refinery, had it been fully 
operational. A refinery that was non-operational for the entire period 
January 1, 2004 through December 31, 2005 would not be able to 
establish a benzene baseline and therefore not allowed to generate 
early credits.
c. Credit Generation Beginning in 2011
    Credits could be generated in any annual averaging period beginning 
January 1, 2011, or for small refiners, beginning January 1, 2015. 
These credits, also called standard benzene credits, could be generated 
by a refinery or importer when the refinery's or importer's annual 
average benzene concentration was less than the proposed standard of 
0.62 vol%.
    While the proposed benzene standard is a 49-state standard due to 
the fact that California would maintain its existing benzene standard, 
we request comment on the appropriateness of allowing California 
refineries to generate credits that could be used to demonstrate 
compliance outside of California.
d. How Would Credits Be Used?
    We are proposing that all gasoline benzene credits that are 
properly created may be used equally and interchangeably. That is, once 
generated, there would be no difference

[[Page 15893]]

between early credits and standard credits, except for their credit 
life, as discussed below. Under this proposal, credits could be 
transferred to another refiner or importer, or they could be banked by 
the refinery or importer that created them for use or transfer in a 
later compliance period.
    As in past credit programs, we are proposing some limits on credit 
use. First, we are proposing to limit the number of times a credit 
could be transferred. At the end of the allowable number of transfers, 
the credit would have to be used by the last transferee before its 
expiration date. Second, we are proposing that credits would have a 
finite life whether or not transferred. We are proposing that early 
credits, those generated prior to 2011, would have a three-year credit 
life from the start of the program in 2011. These credits would have to 
be used to achieve compliance with the proposed benzene standard in 
2011, 2012, and/or 2013, or they would expire. In addition, we are 
proposing that credits generated in 2011 and beyond (or early credits 
generated by small refiners during this period) would have to be used 
within five years of the year in which they were generated. We had 
considered requiring credits be used in order of their generation date, 
that is, credits generated earlier would have to be used before credits 
generated later. However, the finite credit life is likely to ensure 
this usage, and thus we are not proposing to regulate credit use in 
this manner. We are also proposing that credit life could be extended 
by two years for any credits that are generated by or traded to 
approved small refiners.
    Under the proposed regulations, a refiner or importer would have to 
use all benzene credits in its possession before being allowed to have 
deficit carryover, and would have to meet its own compliance 
requirement before transferring any gasoline benzene credits. In the 
case of invalid credits, or credits improperly created, all parties 
would have to adjust their credit records, reports, and compliance 
calculations to reflect proper credit use. The transferor would first 
correct its own records and ensure its own compliance, and then apply 
any remaining properly created credits to the transferee before trading 
or banking those credits. See section X.A below for more discussion of 
these issues.
3. Hardship and Small Refiner Provisions
a. Hardship
    The hardship provisions and requirements are extensively discussed 
in section VII.E.2, and thus are only briefly addressed here. We are 
proposing that a refiner for any of its refineries could seek temporary 
relief from meeting the proposed benzene standard due to unusual 
circumstances, including those situations, such as a natural disaster, 
which would clearly be outside the control of the refiner. A refiner 
would have to apply to EPA for this temporary relief, and EPA could 
deny the application or approve it for an appropriate period of time. 
However, given the existence of a flexible ABT program, EPA expects 
that, prior to requesting hardship relief, the refiner would have made 
best efforts to obtain credits in order to comply with the proposed 
benzene standard. In past rulemakings, for example the gasoline sulfur 
rule, the hurdle for receiving a hardship was very high, with very few 
granted. While we are proposing these provisions again here, the 
expectation is that the hurdle would be even higher. Given the 
existence and flexibility afforded by the ABT program and the more 
limited cost of the benzene standard, it is our expectation that as 
long as a viable credit market existed, it would be difficult to 
justify granting a hardship. Furthermore, the form of any relief we are 
proposing is in the form of additional time to demonstrate compliance 
via credits as opposed to any waiver of the standards.
b. Small Refiners
    As discussed earlier, we are proposing to allow small refiners to 
meet the proposed benzene standard beginning with the 2015 averaging 
period, which is four years later than non-small refiners and 
importers. Small refiners could also generate both early and standard 
credits if they can meet the requirements of those programs. A refiner 
would have to apply to EPA by December 31, 2007 in order to be 
considered a small refiner under this proposed rule even if the entity 
was or had been considered a small refiner under other EPA rules. The 
requirements for small refiners under this rule are detailed in section 
VII.E.
4. Administrative and Enforcement Related Provisions
a. Sampling/Testing
    As under the Tier 2 program where a sulfur concentration must be 
determined for every batch of gasoline, we are proposing that a benzene 
concentration value also be determined for every batch of gasoline 
produced or imported. Thus, as gasoline samples are taken for sulfur 
measurement, they would also be taken for benzene measurement. The RFG 
program, which has both a toxics emissions requirement and a per-gallon 
benzene cap, already requires a benzene value to be determined for 
every batch of gasoline. The Anti-dumping program, which has only a 
toxics emissions requirement, allows benzene values to be determined 
from composite samples. See 40 CFR 80.101(i). Thus, the proposed 
sampling requirement would be a change from the current sampling 
methodology allowed under the Anti-dumping provisions but makes it 
consistent with the ongoing Tier 2 sulfur program. However, unlike the 
gasoline sulfur requirements, this every batch testing requirement for 
conventional gasoline benzene would not have to occur prior to the 
batch leaving the refinery. Additionally, the batch numbering system 
would be the same as that used for conventional gasoline sulfur.
    We are not proposing any changes to the benzene test methodology. 
See 40 CFR 80.46(e). We are proposing sample retention requirements 
similar to those in the gasoline sulfur provisions. See 40 CFR 80.335.
b. Recordkeeping/Reporting
    We are proposing to require that records be kept for each averaging 
period in order to accommodate the proposed benzene standard and the 
accompanying credit trading program. These records would include: the 
benzene baseline calculation, if applicable; the number of early 
credits generated, if applicable; the actual average benzene 
concentration of gasoline produced or imported; the compliance benzene 
value; any deficit; the number of credits generated; and records of any 
credit transfers to or from the refinery or importer, including price 
of the credits and dates of transactions. All of this information, and 
any other information that EPA may require, such as information similar 
to that proposed below for inclusion in the pre-compliance reports, 
would be submitted in a refiner's or importer's annual report to the 
Agency. Since we are proposing that the regulatory provisions for the 
benzene control program would become the single regulatory mechanism 
covering RFG and Anti-dumping annual average toxics requirements once 
the benzene standard is in effect, and would replace the MSAT1 
requirements, we expect to be able to streamline several of the current 
reporting forms once the proposed program is fully implemented in 2015.
    As mentioned, we are also proposing to require that refiners and 
importers submit pre-compliance reports in order to provide information 
as to the likely number of benzene credits needed and

[[Page 15894]]

available, and how the refiner or importer plans to achieve compliance 
with the proposed benzene requirements. These reports would be required 
annually each June 1 from 2001 through 2011 (or through 2015 for small 
refiners). In addition to information regarding gasoline production and 
the number of credits expected to be used or produced, the pre-
compliance reports would include information regarding the benzene 
reduction technology expected to be used, any capital commitments, and 
information on the progress of the installation of the technology. We 
are also proposing that these reports include price and quantity 
information for any credits bought or sold. The reports would include 
updates from the previous year's estimates, and comparison of previous 
year actual production to the projected values.
c. Attest Engagements, Violations, Penalties
    We are proposing to require attest engagements for generation of 
both early and other credits, credit use, and compliance with the 
proposed program, using the usual procedures for attest engagements. 
The violation and penalty provisions applicable to this proposed 
benzene program would be very similar to the provisions currently in 
effect in other gasoline programs. We request comment on the need for 
additional attest engagement, violation or penalty provisions specific 
to the proposed benzene program.
5. How Would Compliance With the Provisions of the Proposed Benzene 
Program Affect Compliance With Other Gasoline Toxics Programs?
    As discussed above, we expect that virtually all refineries will 
reduce benzene from their current levels, and no refineries will 
increase it. This impact on benzene levels, combined with the pre-
existing gasoline controls in sulfur, RVP, and VOC performance, means 
that compliance with the benzene content provisions is also expected to 
lead to compliance with the annual average requirements on benzene and 
toxics performance for reformulated gasoline and the annual average 
Anti-dumping toxics performance for conventional gasoline. EPA is 
therefore proposing that upon full implementation in 2011 the 
regulatory provisions for the benzene control program would become the 
single regulatory mechanism used to implement these RFG and Anti-
dumping annual average toxics requirements, replacing the current RFG 
and Anti-dumping annual average toxics standards as unnecessary. The 
proposed benzene control program would also replace the MSAT1 
requirements. However, we propose the RFG per gallon benzene cap of 1.3 
vol% remain in effect; we are requesting comment on the need to retain 
this requirement for RFG. Note that compliance with the proposed 
benzene standard would ensure compliance with the aforementioned RFG, 
Anti-dumping and MSAT1 requirements beginning with the 2011 averaging 
period, or the 2015 averaging period for small refiners. Thus, during 
the early credit generation period, 2007 through 2010, all entities 
would still be required to comply with their applicable RFG, Anti-
dumping and MSAT1 requirements. In addition, from 2011 through 2014, 
small refiners would have to continue to meet their applicable RFG, 
Anti-dumping and MSAT1 requirements. As discussed earlier in section 
VII.E.2, we are also requesting comment on the option of allowing some 
refineries to meet the proposed benzene standard early, thus replacing 
the current RFG and Anti-dumping annual average toxics provisions and 
replacing MSAT1 requirements for these refineries.

VIII. Gas Cans

    Gas cans are consumer products people use to refuel a wide variety 
of gasoline-powered equipment. Their most frequent use is for refueling 
lawn and garden equipment such as lawn mowers, trimmers, and chainsaws. 
They are also routinely used for recreational equipment such as all-
terrain vehicles and snowmobiles, and for passenger vehicles which have 
run out of gas. The gas cans are red, per ASTM specifications, and 
about 95 percent of them are made of plastic (high density polyethelene 
(HDPE)). There are approximately 20 million gas cans sold annually and 
about 80 million cans are in use nationwide. The average lifetime of a 
gas can is about 5 years.
    California has established an emissions control program for gas 
cans which began in 2001. Since then, some other states have adopted 
the California requirements. Last year, California adopted a revised 
program which is very similar to the one we are proposing in this 
rulemaking. Manufacturers are required to meet the new requirements in 
California by July 1, 2007 at the latest. State programs are discussed 
further in section VIII.A.3., below.

A. Why Are We Proposing an Emissions Control Program for Gas Cans?

1. VOC Emissions
    We are proposing standards to control VOCs as an ozone precursor 
and also to minimize exposure to VOC-based toxics such as benzene and 
toluene. Gasoline is highly volatile and evaporates easily from 
containers that are not sealed or closed properly. Although an 
individual gas can is a relatively modest emission source, the 
cumulative VOC emissions from gas cans are quite significant. We 
estimate that containers currently emit about 315,000 tons of VOC 
annually nationwide, which is equal to about 5 percent of the 
nationwide mobile source inventory (see section V.A.). Left 
uncontrolled, a gas can's evaporative emissions are up to 60 times the 
VOC of a new Tier 2 vehicle evaporative control system. Gas can 
emissions are primarily of three types: evaporative emissions from 
unsealed or open containers; permeation emissions from gasoline passing 
through the walls of the plastic containers; and evaporative emissions 
from gasoline spillage during use.
    As discussed in section IV. above, ozone continues to be a 
significant air quality concern, and gas cans are currently an 
uncontrolled source of VOC emissions in many areas of the country. 
Section 183(e) of the Clean Air Act directs EPA to study, list, and 
regulate consumer and commercial products that are significant sources 
of VOC emissions. In 1995, after conducting a study and submitting a 
Report to Congress on VOC emissions from consumer and commercial 
products, EPA published an initial list of product categories to be 
regulated under section 183(e). Based on criteria that we established 
pursuant to section 183(e)(2)(B), we listed for regulation those 
consumer and commercial products that we considered at the time to be 
significant contributors to the ozone nonattainment problem, but we did 
not include gas can emissions.\275\ After analyzing the emissions 
inventory impacts of gas cans, EPA plans to publish a Federal Register 
notice that would add portable gasoline containers to the list of 
consumer products to be regulated and explain the rationale for this 
action in detail. EPA will afford interested persons the opportunity to 
comment on the data underlying the listing before taking final action 
on today's proposal. In today's notice, EPA is proposing that the 
standards for

[[Page 15895]]

portable gasoline containers represent ``best available controls'' as 
required by section 183(e)(3)(A). Determination of the ``best available 
controls'' requires EPA to determine the degree of reduction achievable 
through use of the most effective control measures (which includes 
chemical reformulation, and other measures) after considering 
technological and economic feasibility, as well as health, energy, and 
environmental impacts.\276\
---------------------------------------------------------------------------

    \275\ 60 FR 15264 ``Consumer and Commercial Products: Schedule 
for Regulation,'' March 23, 1995.
    \276\ See section 183(e)(1); see also section 183(e)(4) 
providing broad authority to include ``systems of regulation'' in 
controlling VOC emissions from consumer products.
---------------------------------------------------------------------------

2. Technological Opportunities to Reduce Emissions From Gas Cans
    Gas can manufacturers have already developed and applied emissions 
controls in response to California requirements. Traditional gas cans 
typically have a spout for pouring fuel and a vent at the rear of the 
can to allow air to flow into the cans when in use. About 70 percent of 
emissions from gas cans are due to evaporative losses from caps being 
left off one or both of these openings. The primary way to reduce these 
emissions is to design cans that are not easily left open. To 
accomplish this, gas can manufacturers have developed spouts that 
incorporate a spring mechanism to close cans automatically when not in 
use. Many spout designs are opened by consumers pushing the spout 
against the equipment fuel tank. Some designs incorporate a button or 
trigger mechanism that the consumer pushes to start fuel flow and then 
releases when done refueling. Also, some cans are made without rear 
vents, incorporating venting into the spouts and thus eliminating one 
potential emission point. The consumer still must remove the spout to 
refill the cans but would replace the spout once the can is full in 
order to prevent spillage during transport.
    The auto-closing spouts reduce spillage by giving consumers greater 
control over the fuel flow. The spouts allow consumers to place the can 
in position before activating or opening the cans. Once the receiving 
fuel tank is full, consumers can easily release the mechanism to stop 
the fuel flow. This reduces spillage during the positioning and removal 
of the can and reduces overall spillage by about half. Consumers 
generally appreciate the greater control over the refueling event.
    Blow-molding is used to manufacture gas cans. Typically, blow-
molding is performed by creating a hollow tube, known as a parison, by 
pushing high-density polyethylene (HDPE) through an extruder with a 
screw. The parison is then pinched in a mold and inflated with an inert 
gas. The HDPE plastics used for gas cans allow gasoline molecules to 
permeate (i.e., pass through) the walls of the container. This 
contributes to overall emission losses from the containers. There are 
several effective permeation barriers that can be incorporated into the 
can walls. Gas can manufacturers have used several of these methods to 
meet California program requirements. The technologies were initially 
developed to meet automotive evaporative emissions standards and are 
now also being used for other types of fuel tanks. The barriers are 
either incorporated as part of the manufacturing process of the can 
(either as a layer or by mixing the barrier materials with the 
plastics) or are applied to the cans after they are manufactured. These 
barriers typically achieve reductions of 85 percent or better compared 
to untreated cans.
    Some gas can manufacturers have produced non-permeable plastic gas 
cans by blow molding a layer of ethylene vinyl alcohol (EVOH) or nylon 
between two layers of polyethylene. This process is called coextrusion 
and requires at least five layers: The barrier layer, adhesive layers 
on either side of the barrier layer, and HDPE as the outside layers 
which make up most of the thickness of the gas can walls. However, this 
blow-molding process requires two additional extruder screws, which 
significantly increases its cost.
    An alternative to coextrusion is to blend a low-permeability resin 
with the HDPE and extrude it with a single screw to create barrier 
platelets. The trade name typically used for this permeation control 
strategy is Selar. The low-permeability resin, typically EVOH or nylon, 
creates non-continuous platelets in the HDPE gas can which reduce 
permeation by creating long, tortuous pathways that the hydrocarbon 
molecules must navigate to pass through the gas can walls. Although the 
barrier is not continuous, this strategy can still achieve greater than 
a 90-percent reduction in permeation of gasoline. EVOH has much higher 
permeation resistance to alcohol than nylon; therefore, it would be the 
preferred material to use for meeting our proposed standard (described 
at Section B., below), which is based on testing with a 10-percent 
ethanol fuel.
    Another type of low permeation technology for HDPE gas cans is 
treating the surfaces of plastic gas cans with a barrier layer. Two 
ways of achieving this are known as fluorination and sulfonation. The 
fluorination process causes a chemical reaction where exposed hydrogen 
atoms are replaced by larger fluorine atoms, creating a barrier on the 
surface of the gas can. In this process, a batch of gas cans is 
generally processed post production by stacking them in a steel 
container. The container is then voided of air and flooded with 
fluorine gas. By pulling a vacuum in the container, the fluorine gas is 
forced into every crevice in the gas can. As a result of this process, 
both the inside and outside surfaces of the gas can would be treated. 
As an alternative, gas cans can be fluorinated on the manufacturing 
line by exposing the inside surface of the gas can to fluorine during 
the blow molding process. However, this method may not prove as 
effective as off-line fluorination, which treats the inside and outside 
surfaces.
    Sulfonation is another surface treatment technology. In this 
process, sulfur trioxide reacts with the exposed polyethylene to form 
sulfonic acid groups on the surface. Current practices for sulfonation 
are to place a gas can on a small assembly line and expose the inner 
surfaces to sulfur trioxide, then rinse with a neutralizing agent. 
However, sulfonation can also be performed using a batch method. Either 
of these processes can be used to reduce gasoline permeation by more 
than 95 percent.
3. State Experiences Regulating Gas Cans
    California established an emissions control program for gas cans 
that began in 2001.\277\ Twelve other states and the District of 
Columbia have adopted the California program in recent years. These 
states include Delaware, Maine, Maryland, Pennsylvania, New York, 
Connecticut, Massachusetts, New Jersey, Rhode Island, Vermont, 
Virginia, Washington, DC, and Texas.
---------------------------------------------------------------------------

    \277\ Portable Fuel Container Spillage Control Regulations, 
Final Statement of Reasons, State of California Environmental 
Protection Agency Air Resources Board, June 2000.
---------------------------------------------------------------------------

    Last year, California adopted a revised program that is very 
similar to the one we are proposing in this rulemaking.\278\ 
California's new program goes into effect on July 1, 2007. California 
addressed several deficiencies they observed in their first program by 
adding new enhanced diurnal standards, new testing requirements, and 
new certification requirements, and by removing automatic shut-off 
requirements that lead to designs that do not work well in the field.

[[Page 15896]]

California's original program contained several design specifications 
which limited manufacturer flexibility and resulted, in many cases, in 
products that were difficult for consumers to use. California has 
removed most of these design specifications from their revised program.
---------------------------------------------------------------------------

    \278\ Public Hearing to Consider Amendments to the Regulations 
for Portable Fuel Containers, Final Statement of Reasons, California 
Air Resources Board, October 2005.
---------------------------------------------------------------------------

    California's original program included an automatic shut-off 
requirement intended to reduce spillage caused by overfilling the 
receiving fuel tank. The spouts were required to be designed to stop 
fuel flow when the fuel reached the tip of the spout, similar to how 
gas pumps shut off when refueling a vehicle. California specified a 
test fixture, the height of the fuel in the receiving tank at which 
point the fuel flow must stop, and the minimum fuel flow rate. The gas 
cans were designed by manufacturers to work well with the test fixture, 
but the automatic shut-off failed in use a significant amount of the 
time. California found that the design of the equipment fuel tank had a 
big impact on the performance of the automatic shut-off. Due to the 
wide variety of fuel tank designs, the automatic shut-off worked on a 
relatively small percentage of equipment. In addition, many of the 
spout designs were not compatible with passenger vehicles. This is 
especially critical because the cans are customarily used by consumers 
when their vehicles run out of gas.
    These problems led to many consumer complaints to both the 
manufacturers and to the California Air Resources Board. It also led to 
increased spillage in many cases. It was also found that many consumers 
did not understand how the spouts were supposed to operate. Even in 
cases where the spouts would have stopped the flow of fuel in time, 
consumers did not use the cans properly. Consumers are used to actively 
controlling the flow of fuel. For these reasons, California removed the 
automatic shut-off requirements from their program for all cans.

B. What Emissions Standard Is EPA Proposing, and Why?

1. Description of Emissions Standard
    We are proposing a performance-based standard of 0.3 grams per 
gallon per day (g/gal/day) of HC to control evaporative and permeation 
losses. The standard would be measured based on the emissions from the 
can over a diurnal test cycle. The cans would be tested as a system 
with their spouts attached. Manufacturers would test the cans by 
placing them in an environmental chamber which simulates summertime 
ambient temperature conditions and cycling the cans through the 24-hour 
temperature profile (72-96[deg] F), as discussed below. The test 
procedures, which are described in more detail below, would ensure that 
gas cans meet the emission standard over a range of in-use conditions 
such as different temperatures, different fuels, and taking into 
consideration factors affecting durability.
2. Determination of Best Available Control
    The 0.3 g/gal/day emissions standard and associated test procedures 
reflect the performance of the best available control technologies 
discussed above, including durable permeation barriers, auto-closing 
spouts, and a can that is well-sealed to reduce evaporative losses. The 
standard is both economically and technologically feasible. As 
discussed above, to comply with California's program, gas can 
manufacturers have developed gas cans with low VOC emissions at a 
reasonable cost (see section IX. for costs). Testing of cans designed 
to meet CARB standards has shown the proposed standards to be 
technologically feasible. When tested over cycles very similar to those 
we are proposing, emissions from these cans have been in the range of 
0.2-0.3 g/gal/day.\279\ These cans have been produced with permeation 
barriers representing a high level of control (over 90 percent 
reductions) and with auto-closing spouts, which are technologies that 
represent best available controls for gas cans. Establishing the 
standard at 0.3 g/gal/day would require the use of best available 
technologies. We are proposing a level at the upper end of the tested 
performance range to account for product performance variability. In 
addition, we believe that any of the current best designs can achieve 
these levels, so we do not believe that the proposed standard 
forecloses use of any of the existing performing product designs. Our 
detailed feasibility analysis is provided in the Regulatory Impact 
Analysis. We request comment on the level of the standard and on its 
feasibility. We request that commenters provide detail and data where 
possible.
---------------------------------------------------------------------------

    \279\ ``Quantification of Permeation and Evaporative Emissions 
From Portable Fuel Container'', California Air Resources Board, June 
2004.
---------------------------------------------------------------------------

    In addition to considering technological and economic feasibility, 
section 183(e)(1)(A) requires us to consider ``health, environmental, 
and energy impacts'' in assessing best available controls. 
Environmental and health impacts are discussed in section IV. Moreover, 
control of spillage from gas cans may reduce fire hazards as well 
because cans would stay tightly closed if tipped over. We expect the 
energy impacts of gas can control to be positive, because the standards 
will reduce evaporative fuel losses.
3. Emissions Performance vs. Design Standard
    We are proposing an emissions performance standard rather than 
mandating that gas cans be of any specified design. Rather than 
proposing to require that gas cans only have one opening, or other 
design-based requirements, we believe that it is sufficient to require 
gas cans to meet an emissions performance standard. A performance 
standard allows flexibility in can design while ensuring the overall 
emissions performance of the cans. We are reluctant to specify design 
standards for consumer products in order not to limit manufacturer (and 
ultimately consumer) choice. The market will encourage manufacturers to 
offer products that work well for consumers, and design-based 
requirements could unnecessarily limit manufacturer design flexibility.
4. Automatic Shut-Off
    We are not requiring automatic shut-off as a design-based standard, 
or considering it to be a ``best available control.'' As described in 
section VIII.A.3. above, the automatic shut-off has been shown to be 
problematic for consumers for several reasons, and we believe that 
including requirements for automatic shut-off would be 
counterproductive. Automatic shut-off is supposed to stop the flow of 
fuel when the fuel reaches the top of the receiving tank in order to 
prevent over-filling. However, due to a wide variety of receiving fuel 
tank designs, the auto shut off spouts do not work well with a variety 
of equipment types. In California, this problem led to spillage and 
consumer dissatisfaction. We want to avoid cases where spills occur 
even when consumers are using the products properly due to a mismatch 
between the spout design and the design of the receiving fuel tank 
being filled. Excessive consumer difficulties in using new cans would 
likely lead to some consumers defeating the low emissions features of 
the cans by removing the spouts and using other means such as funnels 
to refuel equipment. Any additional emissions reductions provided by 
automatic shut-off in cases where it worked properly would likely be 
largely or completely offset by increased spillage due to cases where

[[Page 15897]]

consumers defeated the designs or the designs failed to work properly. 
We believe that the automatic closing cans, even without automatic 
shut-off requirements, will lead to reduced spillage. As discussed 
above, automatic closure keeps the cans closed when they are not in use 
and provides more control to the consumer during use.
    Some additional reduction in spillage is likely possible in some 
cases with automatic shut-off, but may not be feasible across the wide 
array of gas can usage. It is possible to design a spout that works 
well on some equipment but not for all equipment. It might also be 
possible to cover more uses by having multiple spouts, but we believe 
that having multiple spouts would lead to confusion and would also 
require consumers to have multiple cans depending on the types of 
equipment that they refuel. We request comment on automatic shut-off 
requirements and on ways to establish an automatic shut-off requirement 
that would reduce spillage, be feasible for manufacturers, and be 
practical for consumers.
5. Consideration of Retrofits of Existing Gas Cans
    Clean Air Act section 183(e) provides authority to consider 
retrofitting gasoline containers as an approach for controlling 
emissions. We do not believe, however, that requiring the retrofit of 
existing gas cans would be a feasible approach for controlling gas can 
emissions, either technically or economically. This would likely entail 
manufacturers first developing retrofit systems (including spouts for 
various previous gas can designs), testing them for emissions 
performance, and certifying them with EPA. Manufacturers would need 
time to develop and certify systems and also to develop an 
implementation strategy, considering that there are millions of cans in 
use. Manufacturers would then likely need to collect gas cans from 
consumers, recondition the cans, permanently close vents, incorporate 
permeation barriers, and incorporate new spouts. We believe that this 
process would lead to costs that far exceed the cost of newly 
manufactured gas cans. In addition, emissions reductions would depend 
on consumer participation, which would be highly uncertain given that 
gas cans are relatively low-cost consumer products. In fact, we believe 
that consumers who are concerned about emissions would be more likely 
to discard old gas cans and purchase new cans meeting emissions 
standards. For all these reasons, we do not believe that a retrofitting 
approach makes sense for gas cans.
6. Consideration of Diesel, Kerosene and Utility Containers
    We are requesting comment on but not proposing applying emissions 
control requirements to diesel, kerosene, and utility containers. Due 
to the low volatility of diesel and kerosene, the evaporative losses 
from diesel and kerosene cans would be minimal when used with the 
designated fuels. California has included diesel and kerosene cans in 
their regulations largely due to the concern that they would be 
purchased as substitutes for gasoline containers. California also 
included utility containers in their portable fuel container program 
due to concerns that these containers would be used for gasoline. We 
believe that manufacturers can minimize this incentive by designing 
gasoline cans and spouts that are easy to use and beneficial to the 
consumer. However, storing gasoline in diesel, kerosene, and utility 
containers would result in a loss of emissions reductions and therefore 
we are requesting comment on including them in the program. The costs 
for these containers would be similar to the costs estimated for 
gasoline containers. We request comment on the potential for diesel, 
kerosene, and utility containers to be used as a substitute for 
regulated gas cans, and the cost and other implications of including 
them in the program.

C. Timing of Standard

    As an aspect of considering the proposed standard's technological 
feasibility, we are proposing to require manufacturers to meet the 
standard beginning January 1, 2009. Manufacturers have developed the 
primary technologies to reduce emissions from gas cans but will need a 
few years of lead time to certify products and ramp up production to a 
national scale. The certification process would take at least six 
months due to the required durability demonstrations described below, 
and manufacturers would need time to procure and install the tooling 
needed to produce gas cans with permeation barriers for nationwide 
sales.
    The standards would apply to gas cans manufactured on or after the 
start date of the program and would not affect cans produced before the 
start date. We propose that as of July 1, 2009, manufacturers and 
importers must not enter into U.S. commerce any products not meeting 
the emissions standards. This provides manufacturers with a 6-month 
period to clear any stocks of gas cans manufactured prior to the 
January 1, 2009 start of the program, allowing the normal sell through 
of these cans to the retail level. Retailers would be able to sell 
their stocks of gas cans through the course of normal business without 
restriction. Gas cans are currently stamped with their production date, 
which would allow EPA to determine which cans are required to meet the 
new standards.
    We believe that the 2009 time frame is feasible, but recognize that 
it could be a challenge for manufacturers with high volume sales to 
ramp up production. We request comment on the economic feasibility of 
the proposed timing and also on whether or not a phase-in of the 
standards would ease the transition to a national program. We encourage 
commenters to provide detailed rationale and data where possible to 
support their comments.

D. What Test Procedures Would Be Used?

    As part of the proposed system of regulations for gas cans, we are 
proposing test conditions designed to assure that the intended emission 
reductions occur over a range of in-use conditions such as operating at 
different temperatures, with different fuels, and considering factors 
affecting durability. These proposed test procedures implement section 
183(e)(4), which authorizes EPA to develop appropriate standards 
relating to product use. Emission testing on all gas cans that 
manufacturers produce is not feasible due to the high volumes of gas 
cans produced every year and the cost and time involved with emissions 
testing. Instead, we are proposing that before the gas cans are 
introduced into commerce, EPA would need to certify gas cans to the 
emissions standards based on manufacturers' applications for 
certification. Manufacturers would submit test data on a sample of gas 
cans that are prototypes of the products manufacturers intend to 
produce. Manufacturers would also need to certify that their production 
cans would not deviate in materials or design from the prototype gas 
cans that are tested. Manufacturers would need to obtain approval of 
their certification from EPA prior to introducing their products into 
commerce. The proposed test procedures and certification requirements 
are described in detail below.
    We are proposing that manufacturers would test cans in their most 
likely storage configuration. The key to reducing evaporative losses 
from gas cans is to ensure that there are no openings on the cans that 
could be left open by the consumer. Traditional cans

[[Page 15898]]

have vent caps and spout caps that are easily lost or left off cans, 
which leads to very high evaporative emissions. We expect manufacturers 
to meet the evaporative standards by using automatic closing spouts and 
by removing other openings that consumers could leave open. However, if 
manufacturers choose to design cans with an opening that does not close 
automatically, we are proposing to require that containers be tested in 
their open condition. If the gas cans have any openings that consumers 
could leave open (for example, vents with caps), these openings thus 
would need to be left open during testing. This would apply to any 
opening other than where the spout attaches to the can. We believe it 
is important to take this approach because these openings could be a 
significant source of in-use emissions and there is a realistic 
possibility that these openings would be inadvertently left open in 
use.
    We propose that spouts would be in place during testing because 
this would be the most likely storage configuration for the emissions 
compliant cans. Spouts would still be removable so that consumers would 
be able to refill the cans, but we would expect the containers to be 
resealed by consumers after being refilled in order to prevent spillage 
during transport. We do not believe that consumers would routinely 
leave spouts off cans because spouts are integral to the cans' use and 
it is obvious that they need to be sealed.
1. Diurnal Test
    We are proposing a test procedure for diurnal emissions testing 
where manufacturers (or others conducting the testing) place gas cans 
in an environmental chamber or a Sealed Housing for Evaporative 
Determination (SHED), vary the temperature over a prescribed 
temperature and time profile, and measure the hydrocarbons escaping 
from the gas can. We are proposing that gas cans would be tested over 
the same 72-96 [deg]F (22.2-35.6 [deg]C) temperature profile used for 
automotive applications. This temperature profile represents a hot 
summer day when ground level ozone emissions (formed from hydrocarbons 
and oxides of nitrogen) would be highest. We propose that three 
containers would be tested, each over a three-day test. We are 
proposing that three cans would be tested for certification in order to 
address variability in products or test measurements. All three cans 
would have to individually meet the proposed standard. As noted above, 
gas cans would be tested in their most likely storage configuration.
    The final result would be reported in grams per gallon, where the 
grams are the mass of hydrocarbons escaping from the gas can over 24 
hours and the gallons are the nominal gas can capacity. The daily 
emissions would then be averaged for each can to demonstrate compliance 
with the standard. This test would capture hydrocarbons lost through 
permeation and any other evaporative losses from the gas can as a 
whole. We are proposing that the grams of hydrocarbons lost would be 
determined by either weighing the gas can before and after the diurnal 
test cycle or measuring emissions directly using the SHED 
instrumentation.
    Consistent with the automotive test procedures, we are proposing 
that the testing take place using 9 pounds per square inch (psi) Reid 
Vapor Pressure (RVP) certification gasoline, which is the same fuel 
required by EPA to be used in its other evaporative test programs. We 
are proposing for this testing to use E10 fuel (10% ethanol blended 
with the gasoline described above) in this testing to help ensure in-
use emission reductions on ethanol-gasoline blends, which tend to have 
increased evaporative emissions with certain permeation barrier 
materials. We believe including ethanol in the test fuel will lead to 
the selection of materials by manufacturers that are consistent with 
``best available control'' requirements for all likely contained 
gasolines, and is clearly appropriate given the expected increase over 
time of the use of ethanol blends of gasoline under the renewable fuel 
provisions of the Energy Policy Act of 2005. Diurnal emissions are not 
only a function of temperature and fuel volatility, but of the size of 
the vapor space in the container as well. We are proposing that the 
fill level at the start of the test be 50% of the nominal capacity of 
the gas can. This would likely be the average fuel level of the gas can 
in-use. Nominal capacity of the gas cans would be defined as the volume 
of fuel, specified by the manufacturer, to which the gas can could be 
filled when sitting on level ground. The vapor space that normally 
occurs in a gas can, even when ``full,'' would not be considered in the 
nominal capacity of the gas can. All of these test requirements are 
proposed to represent typical in-use storage conditions for gas cans, 
on which EPA can base its emissions standards. These provisions are 
proposed as a way to implement the standards effectively, which will 
lead to the use of best available technology at a reasonable cost.
    Before testing for certification, the gas cans would be run through 
the durability tests described below. Within 8 hours of the end of the 
soak period contained in the durability cycle, the gas cans would be 
drained and refilled to 50 percent nominal capacity with fresh fuel, 
and then the spouts re-attached. When the gas can is drained, it would 
have to be immediately refilled to prevent it from drying out. The 
timing of these steps is needed to ensure that the stabilized 
permeation emissions levels are retained. The can will then be weighed 
and placed in the environmental chamber for the diurnal test. After 
each diurnal, the can would be re-weighed. In lieu of weighing the gas 
cans, we propose that manufacturers could opt to measure emissions from 
the SHED directly. For any in-use testing of gas cans, the durability 
procedures would not be run prior to testing.
    California's test procedures are very similar to those described 
above. However, the California procedure contains a more severe 
temperature profile of 65-105 [deg]F. We propose to allow manufacturers 
to use this temperature profile to test gas cans as long as other parts 
of the EPA test procedures are followed, including the durability 
provisions below. We request comment on these test procedures, 
including ways the procedures may be further streamlined without 
impacting the overall emissions measurements and performance of the gas 
cans.
2. Preconditioning To Ensure Durable In-Use Control
a. Durability Cycles
    To determine permeation emission deterioration rates, we are 
specifying three durability aging cycles: Slosh, pressure-vacuum 
cycling, and ultraviolet exposure. They represent conditions that are 
likely to occur in-use for gas cans, especially for those cans used for 
commercial purposes and carried on truck beds or trailers. The purpose 
of these deterioration cycles is to help ensure that the technology 
chosen by manufacturers is durable in-use, representing best available 
control, and the measured emissions are representative of in-use 
permeation rates. Fuel slosh, pressure cycling, and ultraviolet (UV) 
exposure each impact the durability of certain permeation barriers, and 
we believe these cycles are needed to ensure long-term emissions 
control. Without these durability cycles, manufacturers could choose to 
use materials that meet the certification standard but have degraded 
performance in-use, leading to higher emissions. We do not expect these 
procedures to adversely impact the feasibility of the standards, 
because

[[Page 15899]]

there are permeation barriers available at a reasonable cost that do 
not deteriorate significantly under these conditions (which permeation 
barriers are examples of best available controls). As described above, 
we believe including these cycles as part of the certification test is 
preferable to a design-based requirement.
    For slosh and pressure cycling, we are proposing to use durability 
tests that are based on draft recommended SAE practice for evaluating 
permeation barriers.\280\ For slosh testing, the gas can would be 
filled to 40 percent capacity with E10 fuel and rocked for 1 million 
cycles. The pressure-vacuum testing contains 10,000 cycles from -0.5 to 
2.0 psi. The third durability test is intended to assess potential 
impacts of ultraviolet (UV) sunlight (0.2 [mu]m-0.4 [mu]m) on the 
durability of a surface treatment. In this test, the gas cans must be 
exposed to a UV light of at least 0.40 Watt-hour/meter\2\ /minute on 
the gas can surface for 15 hours per day for 30 days. Alternatively, 
gas cans could be exposed to direct natural sunlight for an equivalent 
period of time. We have also established these same durability 
requirements as part of our program to control permeation emissions 
from recreational vehicle fuel tanks.\281\ While there are obvious 
differences in the use of gas cans compared to the use of recreational 
vehicle fuel tanks, we believe the test procedures offer assurance that 
permeation controls used by manufacturers will be robust and will 
continue to perform as intended when in use. We request comments on the 
use of these procedures for gas cans to help ensure permeation control 
in-use.
---------------------------------------------------------------------------

    \280\ Draft SAE Information Report J1769, ``Test Protocol for 
Evaluation of Long Term Permeation Barrier Durability on Non-
Metallic Fuel Tanks,'' (Docket A-2000-01, document IV-A-24).
    \281\ Final Rule, ``Control of Emissions from Nonroad Large 
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    We also propose to allow manufacturers to do an engineering 
evaluation, based on data from testing on their permeation barrier, to 
demonstrate that one or more of these factors (slosh, UV exposure, and 
pressure cycle) do not impact the permeation rates of their gas cans 
and therefore that the durability cycles are not needed. Manufacturers 
would use data collected previously on gas cans or other similar 
containers made with the same materials and processes to demonstrate 
that the emissions performance of the materials does not degrade when 
exposed to slosh, UV, and/or pressure cycling. The test data would have 
to be collected under equivalent or more severe conditions as those 
noted above.
b. Preconditioning Fuel Soak
    It takes time for fuel to permeate through the walls of containers. 
Permeation emissions will increase over time as fuel slowly permeates 
through the container wall, until the permeation finally stabilizes 
when the saturation point is reached. We want to evaluate emissions 
performance once permeation emissions have stabilized, to ensure that 
the emissions standard is met in-use. Therefore, we are proposing that 
prior to testing the gas cans, the cans would need to be preconditioned 
by allowing the cans to sit with fuel in them until the hydrocarbon 
permeation rate has stabilized. Under this step, the gas can would be 
filled with a 10-percent ethanol blend in gasoline (E10), sealed, and 
soaked for 20 weeks at a temperature of 28  5[deg] C. As an 
alternative, we are proposing that the fuel soak could be performed for 
10 weeks at 43  5[deg]C to shorten the test time. During 
this fuel soak, the gas cans would be sealed with the spout attached. 
This is representative of how the gas cans would be stored in-use. We 
have established these soak temperatures and durations based on 
protocols EPA has established to measure permeation from fuel tanks 
made of HDPE.\282\ These soak times should be sufficient to achieve 
stabilized permeation emission rates. However, if a longer time period 
is necessary to achieve a stabilized rate for a given gas can, we would 
expect the manufacturer to use a longer soak period (and/or higher 
temperature) consistent with good engineering judgment.
---------------------------------------------------------------------------

    \282\ Final Rule, ``Control of Emissions from Nonroad Large 
Spark-ignition engines, and Recreational Engines (Marine and Land-
based)'', 67 FR 68287, November 8, 2002.
---------------------------------------------------------------------------

    Durability testing that is performed with fuel in the gas can may 
be considered part of the fuel soak provided that the gas can 
continuously has fuel in it. This approach would shorten the total test 
time. For example, the length of the UV and slosh tests could be 
considered as part of the fuel soak provided that the gas can is not 
drained between these tests and the beginning of the fuel soak.
c. Spout Actuation
    In its recently revised program for gas cans, California included a 
durability demonstration for spouts. We are proposing a durability 
demonstration consistent with California's procedures. Automatically 
closing spouts are a key part of the emissions controls expected to be 
used to meet the proposed standards. If these spouts stick or 
deteriorate, in-use emissions could remain very high (essentially 
uncontrolled). We are interested in ways to ensure during the 
certification procedures that the spouts also remain effective in use. 
California requires manufacturers to actuate the spouts 200 times prior 
to the soak period and 200 times near the conclusion of the soak period 
to simulate spout use. The spouts' internal components would be 
required to be exposed to fuel by tipping the can between each cycle. 
Spouts that stick open or leak during these cycles would be considered 
failed. The total of 400 spout actuations represents about 1.5 
actuations per week on average over the average container life of 5 
years. In the absence of data, we believe this number of actuations 
appears to reasonably replicate the number that can occur in-use for 
high end usage and will help ensure quality spout designs that do not 
fail in-use. We also believe that proposing requirements consistent 
with California will help manufacturers to avoid duplicate testing. We 
request comment on the above approach for demonstrating spout 
durability.

E. What Certification and In-Use Compliance Provisions Is EPA 
Proposing?

1. Certification
    Section 183(e)(4) authorizes EPA to adopt appropriate systems of 
regulations to implement the program, including requirements ranging 
from registration and self-monitoring of products, to prohibitions, 
limitations, economic incentives and restrictions on product use. We 
are proposing a certification mechanism pursuant to these authorities. 
Manufacturers would be required to go through the certification process 
specified in the proposed regulations before entering their containers 
into commerce. To certify products, manufacturers would first define 
their emission families. This is generally based on selecting groups of 
products that have similar emissions. For example, co-extruded gas cans 
of various geometries could be grouped together. The manufacturer would 
select a worst-case configuration for testing, such as the thinnest-
walled gas can. These determinations may be made using good engineering 
judgment and would be subject to EPA review. Testing with those 
products, as specified above, would need to show compliance with 
emission standards. The manufacturers would then send us an application 
for certification. We propose to define the

[[Page 15900]]

manufacturer as the entity that is in day-to-day control of the 
manufacturing process (either directly or through contracts with 
component suppliers) and responsible for ensuring that components meet 
emissions-related specifications. Importers would not be considered a 
manufacturer and thus would not be certifying entities; the 
manufacturers of the cans they import would have to certify the cans. 
Importers would only be able to import gas cans that are certified.
    After reviewing the information in the application, we would issue 
a certificate of conformity allowing manufacturers to introduce into 
commerce the gas cans from the certified emission family. EPA review 
would typically take about 90 days or less, but could be longer if we 
have questions regarding the application. The certificate of conformity 
would be for a production period of up to five years. Manufacturers 
could carry over certification test data if no changes are made to 
their products that would affect emissions performance. Changes to the 
certified products that would affect emissions would require 
reapplication for certification. Manufacturers wanting to make changes 
without doing testing would be required to present an engineering 
evaluation demonstrating that emissions are not affected by the change.
    The certifying manufacturer accepts the responsibility for meeting 
applicable emission standards. While we are proposing no requirement 
for manufacturers to conduct production-line testing, we may pursue EPA 
in-use testing of certified products to evaluate compliance with 
emission standards. If we find that gas cans do not meet emissions 
standards in use, we would consider the new information during future 
product certification. Also, we may require certification prior to the 
end of the five-year production period otherwise allowed between 
certifications. The details of the proposed certification process are 
provided in the proposed regulatory text. We request comments on the 
certification process we are proposing.
2. Emissions Warranty and In-Use Compliance
    We are proposing a warranty period of one year to be provided by 
the manufacturer of the gas can to the consumer. The warranty would 
cover emissions-related materials defects and breakage under normal 
use. For example, the warranty would cover failures related to the 
proper operation of the auto-closing spout or defects with the 
permeation barriers. We are also proposing to require that 
manufacturers submit a warranty and defect report documenting 
successful warranty claims and the reason for the claim to EPA annually 
so that EPA may monitor the program. Unsuccessful claims would not need 
to be submitted. We believe that this warranty will encourage designs 
that work well for consumer and are durable. Although it does not fully 
cover the average life of the product, it is not typical for very long 
warranties to be offered with products and therefore we believe a one 
year warranty is reasonable. Also, the warranty period is more similar 
to the expected life of gas cans when used in commercial operations, 
which would need to be considered by the manufacturers in their 
designs. We request comment on the warranty period.
    EPA views this aspect of the proposal as another part of the 
``system of regulation'' it is proposing to control VOC emissions from 
gas cans, which system may include ``requirements for registration and 
labeling * * * use, or consumption * * * of the product'' pursuant to 
section 183(e)(4) the Act. A warranty will promote the objective of the 
proposed rule by assuring that manufacturers will ``stand behind'' 
their product, thus improving product design and performance. 
Similarly, the proposed defect reporting requirement will promote 
product integrity by allowing EPA to readily monitor in-use performance 
by tracking successful warranty claims.
    Gas cans have a typical life of about five years on average before 
they are scrapped. We are proposing durability provisions as part of 
certification testing to help ensure containers perform well in use (a 
system of regulation for ``use'' of the product, pursuant to section 
183(e)(4)). Under the proposal, we could test gas cans within their 
five-year useful life period to monitor in-use performance and take 
steps to correct in-use failures, including denying certification, for 
container designs that are consistently failing to meet emissions 
standards. (This proposed provision thus would work in tandem with the 
warranty claim reporting provision proposed in the preceding 
paragraph.)
    We are not proposing any recall provisions for gas cans. 
Manufacturers do not have registration programs for gas cans and 
implementing such a program for a low-cost consumer product may be 
overly burdensome, and have a very low participation rate. Also, we 
would not expect a high participation rate from consumers in a recall, 
in any event, due to the nature of gas cans as a consumer product. We 
believe, however, that by having the authority to test products in use, 
along with the possible repercussions of in-use noncompliance, will 
encourage manufacturers to develop robust designs.
3. Labeling
    Since the requirements will be effective based on the date of 
manufacture of the gas can, we propose that the date of manufacture 
must be indelibly marked on the can. This is consistent with current 
industry practices. This is needed so that we and others can recognize 
whether a unit is regulated or not. In addition, we propose to require 
a label providing the manufacturer name and contact information, a 
statement that the can is EPA certified, citation of EPA regulations, 
and a statement that it is warranted for one year from the date of 
purchase. The manufacturer name and contact information is necessary to 
verify certification. Indicating that a 1 year warranty applies will 
ensure that consumers have knowledge of the warranty and a way to 
contact the manufacturer. Enforcement of the warranty is critical to 
the defect reporting system. In proposing this labeling requirement, we 
further believe, pursuant to section 183(e)(8), that these labeling 
requirements would be useful in meeting the NAAQS for ozone. They 
provide necessary means of implementing the various measures described 
above which help ensure that VOC emission reductions from the proposed 
standard will in fact occur in use.

F. How Would State Programs Be Affected by EPA Standards?

    As described in section VIII.A.3. above, several states have 
adopted emissions control programs for gas cans. California implemented 
an emissions control program for gas cans in 2001. Thirteen other 
states, mostly in the northeast, have adopted the California program in 
recent years.\283\ Last year, California adopted a revised program, 
which will go into effect on July 1, 2007. The revised California 
program is very similar to the program we are proposing. We believe 
that although a few aspects of the program we are proposing are 
different, manufacturers will be able to meet both EPA and CARB 
requirements with the same gas can designs and therefore sell a single 
product in all 50

[[Page 15901]]

states. In most cases, we believe manufacturers will take this 
approach. By closely aligning with California where possible, we will 
allow manufacturers to minimize research and development (R&D) and 
emissions testing, while potentially achieving better economies of 
scale. It may also reduce administrative burdens and market logistics 
from having to track the sale of multiple can designs. We consider 
these to be important factor under CAA section 183(e) which requires us 
to consider economic feasibility of controls.
---------------------------------------------------------------------------

    \283\ Delaware, Maine, Maryland, Pennsylvania, New York, 
Connecticut, Massachusetts, New Jersey, Rhode Island, Vermont, 
Virginia, Washington DC, and Texas.
---------------------------------------------------------------------------

    States that have adopted the original California program will 
likely choose to either adopt the new California program or eliminate 
their state program in favor of the federal program. Because the 
programs are similar, we expect that most states will eventually choose 
the EPA program rather than continue their own program. We expect very 
little difference in the emissions reductions provided by the EPA and 
California programs in the long term. In addition, if EPA's program 
starts in 2009, as discussed above, this would be the same timing 
states would likely target in their program revisions.

G. Provisions for Small Gas Can Manufacturers

    As discussed in previous sections, prior to issuing a proposal for 
this proposed rulemaking, we analyzed the potential impacts of these 
regulations on small entities. As a part of this analysis, we convened 
a Small Business Advocacy Review Panel (SBAR Panel, or ``the Panel''). 
During the Panel process, we gathered information and recommendations 
from Small Entity Representatives (SERs) on how to reduce the impact of 
the rule on small entities, and those comments are detailed in the 
Final Panel Report which is located in the public record for this 
rulemaking (Docket EPA-HQ-OAR-2005-0036). Based upon these comments, we 
propose to include flexibility and hardship provisions for gas can 
manufacturers. Since nearly all gas can manufacturers (3 of 5 
manufacturers as defined by SBA) are small entities and they account 
for about 60 percent of sales, the Panel recommended to extend the 
flexibility options and hardship provisions to all gas can 
manufacturers. (Our proposal today is consistent with that 
recommendation.) Moreover, implementation of the program would be much 
simpler by doing so. The flexibility provisions are incorporated into 
the program requirements described earlier in sections VIII.C through 
VIII.E. The hardship provisions are described below. For further 
discussion of the Panel process, see section XII.C of this proposed 
rule and/or the Final Panel Report.
    The Panel recommended that two types of hardship provisions be 
extended to gas can manufacturers. These entities could, on a case-by-
case basis, face hardship, and we are proposing these provisions to 
provide what could prove to be needed safety valves for these entities. 
Thus, the propose hardship provisions are as follows:
1. First Type of Hardship Provision
    Gas can manufacturers would be able to petition EPA for limited 
additional lead-time to comply with the standards. A manufacturer would 
have to demonstrate that it has taken all possible business, technical, 
and economic steps to comply but the burden of compliance costs or 
would have a significant adverse effect on the company's solvency. 
Hardship relief could include requirements for interim emission 
reductions.
2. Second Type of Hardship Provision
    Gas can manufacturers would be permitted to apply for hardship 
relief if circumstances outside their control cause the failure to 
comply (i.e. supply contract broken by parts supplier), and if failure 
to sell the subject containers would have a major impact on the 
company's solvency. The terms and timeframe of the relief would depend 
on the specific circumstances of the company and the situation 
involved.
    For both types of hardship provisions, the length of the hardship 
relief would be established during the initial review for not more than 
one year and would be reviewed annually thereafter as needed. As part 
of its application, a company would be required to provide a compliance 
plan detailing when and how it would achieve compliance with the 
standards.

IX. What Are the Estimated Impacts of the Proposal?

A. Refinery Costs of Gasoline Benzene Reduction

    The proposed 0.62 volume percent benzene standard would generally 
result in many refiners investing in benzene control hardware and 
changing the operations in their refineries to reduce their gasoline 
benzene levels. The proposed ABT program would allow refiners to 
optimize their investments, which we believe would maximize the benzene 
reductions at the lowest possible cost. We have estimated that the 
capital and operating costs that we believe would result from the 
proposed program would average 0.13 cents per gallon of gasoline.
    In this section we summarize the methodology used to estimate the 
costs of benzene control, the scenarios we evaluated, and our estimated 
costs for the program. We also summarize the results of our analyses of 
other potential MSAT control programs. A detailed discussion of all of 
these analyses is found in Chapter 9 of the RIA.
1. Tools and Methodology
a. Linear Programming Cost Model
    We considered performing our cost assessments for this proposed 
program using a linear programming (LP) cost model. LP cost models are 
based on a set of complex mathematical representations of refineries 
which, for national analyses, are usually conducted on a regional 
basis. This type of refining cost model has been used by the government 
and the refining industry for many years for estimating the cost and 
other implications of changes to fuel quality.
    The design of LP models lends itself to modeling situations where 
every refinery in a region is expected to use the same control strategy 
and/or has the same process capabilities. As we began to develop a 
gasoline benzene control program with an ABT program, it became clear 
that LP modeling was not well suited for evaluating such a program. 
Because refiners would be choosing a variety of technologies for 
controlling benzene, and because the program would be national and 
would include an ABT program, we initiated development of a more 
appropriate cost model, as described below. However, the LP model 
remained important for providing many of the inputs into the new model, 
and for performing analyses of other potential programs.
b. Refiner-by-Refinery Cost Model
    In contrast to LP models, refinery-by-refinery cost models are 
useful when individual refineries would respond to program requirements 
in different ways and/or have significantly different process 
capabilities. Thus, in the case of today's proposed gasoline benzene 
control program, we needed a model that would accurately simulate the 
variety of decisions refiners would make at different refineries, 
especially in the context of a nationwide ABT program. For this and 
other related reasons, we developed a refinery-by-refinery cost model 
specifically to evaluate the proposed benzene control program.
    Our benzene cost model incorporates the capacities of all the major 
units in

[[Page 15902]]

each refinery in the country, as reported by the Energy Information 
Administration and in the Oil and Gas Journal. Regarding operational 
information, we know less about how the various units are used to 
produce gasoline and such factors as octane and hydrogen costs for 
individual refineries. We used the LP model to estimate these factors 
on a regional basis, and we applied the average regional result to each 
refinery in that region (PADD). We calibrated the model for each 
individual refinery based on 2003 gasoline volumes and benzene levels, 
which was the most recent year for which data was available, and found 
that the model simulated the actual situation well. We also compared 
cost estimates of similar benzene control cases from both the refinery-
by-refinery model and the LP model, and the results were in close 
agreement.
    Refinery-by-refinery cost models have been used in the past by both 
EPA and the oil industry for such programs as the highway and nonroad 
diesel fuel sulfur standards, and they are a proven means for 
estimating the cost of compliance for fuel control programs. For the 
specific benzene cost model, we have initiated a peer review process, 
and have received some comments on the design of our model. Although we 
did not receive these comments in time to respond to them in this 
proposal, we plan to address all peer review comments in the 
development of the final rule. (Based on our initial assessment of 
these comments, we do not believe that the changes suggested would 
significantly affect the projected costs of the program. See Chapter 9 
of the RIA for our initial responses to these peer-review comments.)
    Based on our understanding of the primary benzene control 
technologies (see section VII.F above), the cost model assumes that 
four technologies would be used, as appropriate, for reducing benzene 
levels. All of these technologies focus on addressing benzene in the 
reformate stream. They are (1) routing the benzene precursors around 
the reformer; (2) routing benzene precursors to an existing 
isomerization unit, if available; (3) benzene extraction (extractive 
distillation); and (4) benzene saturation. There are several 
restrictions on the use of these various technologies (such as the 
assumption that benzene extraction would only be expanded in areas with 
strong benzene chemical markets) and these are incorporated into the 
model.
    For the proposed benzene control program, the associated nationwide 
ABT program is intended to optimize benzene reduction by allowing each 
refinery to individually choose the most cost-effective means of 
complying with the program. To model this phenomenon, we first 
establish an estimated cost for the set of technologies required for 
each refinery to meet the standard. We then rank the refineries in 
order from lowest to highest control cost per gallon of gasoline. The 
model then follows this ranking, starting with the lowest-cost 
refineries, and adds refineries and their associated control 
technologies one by one until the projected national average benzene 
level reaches 0.62 volume percent. This establishes which refineries we 
expect to apply control technologies to comply, as well as those that 
would generate credits and those that would use credits in lieu of 
investing in control. The sum of the costs of the refineries expected 
to invest in control provides the projected overall cost of the 
program.
c. Price of Chemical Grade Benzene
    The price of chemical grade benzene is critical to the proposed 
program because it defines the opportunity cost for benzene removed 
using benzene extraction and sold into the chemicals market. According 
to 2004 World Benzene Analysis produced by Chemical Market Associates 
Incorporated (CMAI), during the consecutive five year period ending 
with 2004, the price of benzene averaged 24 dollars per barrel higher 
than regular grade gasoline. During the three consecutive year period 
ending with 2004, the price of benzene averaged 28 dollars per barrel 
higher than regular grade gasoline. However, during the first part of 
2004, the price of benzene relative to gasoline rose steeply, primarily 
because of high energy prices adding to the cost of extracting benzene. 
The projected benzene price for 2004 indicated that the benzene price 
averaged 38 dollars per barrel higher than regular grade gasoline.
    For the future, CMAI projects that the price of benzene relative to 
gasoline will return to more historic levels or lower, in the range of 
$20 per barrel higher than regular grade gasoline. We have based our 
modeling on this value. However, we have also examined the sensitivity 
of the projected overall program costs for a case where the cost of 
benzene control remains at $38 higher than gasoline into the future.
d. Applying the Cost Model to Special Cases
    For the comparative cases we modeled that involve a maximum-average 
(max-avg) standard in addition to an average benzene standard, modeling 
the costs requires a different modeling methodology. Refineries that 
the model estimates would have benzene levels above the max-avg 
standard are assumed to apply the most cost-effective benzene reduction 
technologies that the model shows would reduce benzene levels to below 
the max-avg standard. The benzene reductions associated with meeting 
the max-avg standard may or may not be sufficient for also meeting the 
average standard, depending on how stringent the max-avg standard is 
relative to the average standard. If the model indicates that 
additional benzene reduction would be necessary, these additional 
benzene reductions are modeled in the same way as the case of an 
average standard only, as described above.
    We also evaluated a limited number of cases that did not include an 
ABT program. In such cases, the model assumes that all the refineries 
with benzene levels below the standard would maintain the same benzene 
level, while each refinery with benzene levels above the standard would 
take all the necessary steps to reduce their benzene levels down to the 
standard. If the model shows that capital investments are needed to 
achieve the necessary benzene reduction, we assume that the refiner 
installs a full sized unit to treat the entire stream and then operates 
the unit only to the extent necessary to meet the standard.
2. Summary of Costs
a. Nationwide Costs of the Proposed Program
    We have used the refinery-by-refinery cost model to estimate the 
costs of the proposed program, with an average gasoline benzene content 
standard of 0.62 volume percent and the proposed ABT program. In 
general, the cost model indicates that among the four primary 
reformate-based technologies, benzene extraction would be the most cost 
effective. The next most cost effective technologies are benzene 
precursor rerouting, and rerouting coupled with isomerization. The 
model indicates that benzene saturation would be the least cost-
effective, but only marginally so in the larger refineries.
    Our refinery-by-refinery model estimates that 92 refineries of the 
total 115 gasoline-producing refineries in the U.S. would have to put 
in new capital equipment or change their refining operations to reduce 
the benzene levels in their gasoline. Of these refineries 25 would use 
benzene precursor removal, 32 refineries would use benzene precursor 
removal coupled with isomerization, 24 would use extraction,

[[Page 15903]]

and 11 would use benzene saturation. The analysis projects that 43 
refineries would reduce their benzene levels to the proposed benzene 
standard or lower, while 49 refineries would reduce their benzene 
levels but still would need to purchase credits to comply with the 
average benzene standard. Including the refineries with benzene levels 
currently below 0.62, we project that there would be a total of 62 
refineries producing gasoline with benzene levels at 0.62 or lower. The 
model assumes that those with benzene levels lower than 0.62 volume 
percent would generate credits for sale to other refineries. Finally, 
the model projects that there would be 6 refineries that would take no 
benzene reduction action and comply with the proposed program solely 
through the use of benzene credits.
    The refinery model estimates that the proposed benzene standard 
would cost 0.13 cents per gallon, averaged over the entire U.S. 
gasoline pool. (When averaged only over those refineries which are 
assumed to take steps to reduce their benzene levels, the average cost 
would be 0.19 cents per gallon.) This per-gallon cost would result from 
an industry-wide investment in capital equipment of $500 million to 
reduce gasoline benzene levels. This would amount to an average of $5 
million in capital investment in each refinery that adds such 
equipment.\284\
---------------------------------------------------------------------------

    \284\ The modeling does not separate out capital costs for the 
recovery of lost octane and supplying additional hydrogen, but 
rather includes these in the operating cost estimates. Therefore, 
actual capital costs maybe somewhat greater.
---------------------------------------------------------------------------

    We also estimated annual aggregate costs associated with the 
proposed new fuel standard. As shown in Table IX.A-1, these costs are 
projected to begin at $186 million in 2011 and increase over time as 
fuel demand increases.

                                   Table IX.A-1.--Annual Aggregate Fuel Costs
----------------------------------------------------------------------------------------------------------------
              2011                     2013            2015            2017            2019            2020
----------------------------------------------------------------------------------------------------------------
$185,533,000....................    $191,873,000    $198,283,000    $204,212,000    $209,875,000    $212,606,000
----------------------------------------------------------------------------------------------------------------

    Several observations can be made from these results from our 
nationwide analysis. First, significantly reducing gasoline benzene 
levels to low levels, coupled with the flexibility of an ABT program, 
will incur fairly modest costs. This is primarily because we expect 
that refiners would optimize their benzene control strategies, 
resulting in large benzene reductions at a low overall program cost. 
With high benzene prices relative to those of gasoline projected to 
continue (even if they drop from the recent very high levels), 
extraction would be a very low cost technology--the primary reason why 
the cost of the overall program is very low. Also, precursor rerouting, 
either with or without isomerization in an existing unit, is a low-cost 
technology requiring little or no capital to realize. The model 
concludes that even the higher-cost benzene saturation technology would 
be fairly cost-effective overall because larger refineries that install 
this technology would take advantage of their economies of scale.
b. Regional Distribution of Costs
    The benzene reductions estimated by the cost model and associated 
costs vary significantly by region. Table IX.A-2 summarizes the initial 
benzene levels and the projected benzene levels after refiners take 
anticipated steps to reduce the benzene in their gasoline and the 
estimated per-gallon costs for complying with the proposed benzene 
standard.
    Table IX.A-2 shows that under the proposed program the largest 
benzene reductions occur in the areas with the highest benzene levels. 
This is expected as many of these refineries are not doing anything to 
reduce their gasoline benzene levels today and simple, low-cost 
technologies can be employed to realize large reductions in their 
benzene levels. In PADDs 1 and 3, which have significant benzene 
control today to meet the RFG requirements, a more modest benzene 
reduction would occur. Many of the refineries producing fuel for sale 
in PADDs 1 and 3 cannot reduce their benzene levels further because 
they are already extracting all the benzene that they can. Extraction 
is the technology most used in PADDs 1 and 3, resulting in a much lower 
average cost for reducing benzene in these regions.
    For comparison, we also modeled a program where the 0.62 vol% 
average standard was supplemented by a maximum average benzene cap 
standard, as described in section VII above. We did not propose such a 
maximum average standard because the main effect would simply be to 
shift emission reductions from one region of the country to another 
with no change in overall emission reductions. Table IX.A-2 shows that 
a maximum average standard would increase costs slightly nationwide, 
but that PADD 2 benzene levels, already above the standard, would rise 
while other areas improved.

                      Table IX.A-2.--Current and Projected Benzene Levels and Costs by PADD
                                          [$2002, 7% ROI before taxes]
----------------------------------------------------------------------------------------------------------------
                                                                         PADD
                                               -------------------------------------------------------
                                                                                             5  (w/o      U.S.
                                                    1          2          3          4         CA)
----------------------------------------------------------------------------------------------------------------
Current Benzene Level (vol%)..................       0.66       1.32       0.86       1.54       1.87       0.97
Projected Benzene Level (vol%)................       0.51       0.73       0.55       0.95       1.04       0.62
Cost (c/gal)..................................       0.05       0.25       0.05       0.40       0.72      0.125
Projected Benzene Level (vol%) (With 1.3 vol%        0.50       0.75       0.56       0.90       0.88       0.62
 Max-Avg Std).................................
Cost (c/gal)..................................       0.06       0.22       0.03       0.43       1.18      0.130
----------------------------------------------------------------------------------------------------------------

c. Cost Effects of Different Standards
    We also estimated the benzene reduction costs for other benzene 
reduction levels, as summarized in Table IX.A-3. The cost model 
estimates that a 0.52 volume percent benzene

[[Page 15904]]

standard with an ABT program \285\ is the maximum benzene reduction 
possible when each refinery employs the maximum appropriate reformate 
benzene control (that is, benzene extraction whenever possible, and 
benzene saturation otherwise).
---------------------------------------------------------------------------

    \285\ The cost model projects that this standard would require 
an ABT program because many of the refineries modeled would not be 
able to achieve this standard. These refineries would have to rely 
on the purchase of credits from other refineries which are already 
below this benzene level, or other refineries which could install 
benzene control technology to get their benzene levels below this 
standard. This scenario assumes a fully utilized credit program.

   Table IX.A-3.--Costs of Various Potential Benzene Control Standards
                      [$2002, 7% ROI before taxes]
------------------------------------------------------------------------
                                                           Cost  (cents/
                Average standard  (vol%)                      gallon)
------------------------------------------------------------------------
0.62 (Proposed Standard)................................            0.13
0.65....................................................            0.09
0.60....................................................            0.15
0.52....................................................            0.36
------------------------------------------------------------------------

    The results in Table IX.A-3 indicate that the cost for reducing 
benzene levels is not very sensitive to the benzene standard in the 
range from 0.60 to 0.65 volume percent benzene. This is because we 
project that standards in this range would not require many of the 
smaller or otherwise higher-cost refineries to employ benzene 
saturation, which is the highest cost technology. Also, in this range 
of potential standards, the ABT program would allow the refining 
industry to optimize the benzene control technologies they apply. The 
need for all refineries to use either benzene saturation or benzene 
extraction to comply with a 0.52 vol% standard explains the much higher 
cost for a program with a standard that range.
    We also examined the effect of the ABT program on cost. Without 
ABT, we assume that the standard would be met by all refineries. To 
achieve a national average level of 0.62 vol% benzene without an ABT 
program would require an absolute standard of 0.73 vol%. We estimate 
that such a program would result in a nationwide average cost of 0.25 
cents per gallon, about double the cost of the program with ABT.
d. Effect on Cost Estimates of Higher Benzene Prices
    As described above, we also performed a sensitivity analysis to 
estimate the costs of the proposed program if the recent very high 
prices for chemical grade benzene continue into the future. We estimate 
that at an average benzene price of $38 dollars above that for 
gasoline, the program would cost 0.08 cents per gallon less on average 
nationwide.
3. Economic Impacts of MSAT Control Through Gasoline Sulfur and RVP 
Control and a Total Toxics Standard
    As discussed above in section VII, we have considered two 
approaches to fuel-related MSAT control that would involve increasing 
the stringency of two existing emission control programs, the gasoline 
sulfur program and the gasoline volatility program. We estimated the 
cost of programs that would further reduce the sulfur content and Reid 
vapor pressure (RVP) of gasoline. For these costs estimates, the LP 
refinery model was used to estimate the costs for the year 2010, 
including the fuel economy impacts. We summarize these costs here and 
provide detailed analyses in Chapter 9 of the RIA.
    For sulfur control, we estimated the costs of reducing U.S. 
gasoline sulfur levels down to 10 ppm from the 30 ppm sulfur level 
required for Tier 2 sulfur control. The costs are based on revamping 
current hydrotreaters installed to meet the 30 ppm sulfur standard. We 
estimate that reducing gasoline sulfur down to 10 ppm would cost 0.51 
cents per gallon, taking into account the fuel economy effects. The 
analysis also estimates that U.S. refiners would invest $1.3 billion in 
new capital to achieve this sulfur reduction.
    We also estimated costs for lowering summertime gasoline RVP down 
to a maximum of 7.8 or 7.0 RVP from the current average for non-RVP 
controlled gasoline of 9.0 RVP. The estimated volume of gasoline 
required to meet an additional low RVP requirement was assumed to be 
equivalent to half of the volume of the reformulated gasoline sold 
within the PADD, applied to the conventional gasoline sold within the 
PADD. This simple means of estimating the volume of gasoline affected 
by future additional RVP control programs was used because the analysis 
of possible new low RVP programs established for complying with the 8 
hour ozone National Ambient Air Quality Standards (NAAQS) was not 
completed when the cost analysis was initiated. The per-gallon cost is 
not expected to vary much by the size of the program. The cost analysis 
estimates that reducing RVP down to 7.8 RVP would cost 0.23 cents per 
gallon. The analysis also estimates that U.S. refiners would invest 
$121 million in new capital to achieve this level of RVP control. The 
cost analysis estimates that reducing RVP down to 7.0 RVP would cost 
0.40 cents per gallon. Meeting a 7.0 RVP standard is projected to cause 
U.S. refiners to invest $184 million in new capital to achieve this 
level of RVP control.
    We have also evaluated the costs of programs that would control 
total air toxics. These programs, the analyses of which are also found 
in Chapter 9 of the RIA, would all be more costly than the proposed 
program.

B. What Are the Vehicle Cost Impacts?

    In assessing the economic impact of setting cold temperature 
emission standards, we have made a best estimate of the necessary 
vehicle modifications and their associated costs. In making our 
estimates we have relied on our own technology assessment, which 
includes information supplied by individual manufacturers and our own 
in-house testing. Estimated costs typically include variable costs (for 
hardware and assembly time) and fixed costs (for research and 
development, retooling, and certification). All costs are presented in 
2003 dollars. Full details of our cost analysis can be found in Chapter 
8 of the draft RIA.
    As described in section VI, we are not expecting hardware changes 
to Tier 2 vehicles in response to new cold temperature standards. Tier 
2 vehicles are already being equipped with very sophisticated emissions 
control systems. We expect manufacturers to use these systems to 
minimize emissions at cold temperatures. We were able to demonstrate 
significant emissions reductions from a Tier 2 vehicle through 
recalibration alone. In addition, a standard based on averaging allows 
some vehicles to be above the numeric standard as long as those excess 
emissions are offset by vehicles below the standard. Averaging would 
help manufacturers in cases where they are not able to achieve the 
numeric standard for a particular vehicle group, thus helping 
manufacturers avoid costly hardware changes. The phase-in of standards 
and emissions credits provisions also help manufacturers avoid 
situations where expensive vehicle modifications would be needed to 
meet a new cold temperature NMHC standard. Therefore, we are not 
projecting hardware costs or additional assembly costs associated with 
meeting new cold temperature NMHC emissions standards.
    Manufacturers would incur research and development (R&D) costs 
associated with a new cold temperature standard, and some likely would 
need to upgrade testing facilities to handle an increased number of 
cold tests during vehicle development. We have estimated the

[[Page 15905]]

fixed costs associated with R&D and test facilities. We project that 
manufacturers would recover R&D costs over a five-year period and their 
facilities costs over a ten-year period. Long-term impacts on engine 
costs are expected to decrease as manufacturers fully amortize their 
fixed costs. Because manufacturers recoup fixed costs over a large 
volume of vehicles, average per vehicle costs due to the new cold 
temperature NMHC standards are expected to be low. We project that the 
average incremental costs associated with the new cold temperature 
standards would be less than $1 per vehicle.
    We are not anticipating additional costs for the proposed new 
evaporative emissions standard. As discussed in section VI, we expect 
that manufacturers will continue to produce 50-state evaporative 
systems that meet LEV II standards. Therefore, harmonizing with 
California's LEV-II evaporative emission standards would streamline 
certification and be an ``anti-backsliding'' measure. It also would 
codify the approach manufacturers have already indicated they are 
taking for 50-state evaporative systems.
    We also estimated annual aggregate costs associated with the new 
cold temperature emissions standards. These costs are projected to 
increase with the phase-in of standards and peak in 2014 at about $13.4 
million per year, then decrease as the fixed costs are fully amortized. 
The projected aggregate costs are summarized below, with annual 
estimates provided in Chapter 8 of the RIA.

                                      Table IX.B-1.--Annual Aggregate Costs
----------------------------------------------------------------------------------------------------------------
              2010                     2012            2014            2016            2018            2020
----------------------------------------------------------------------------------------------------------------
$11,119,000.....................     $12,535,000     $13,406,000     $12,207,000     $10,682,000              $0
----------------------------------------------------------------------------------------------------------------

C. What Are the Gas Can Cost Impacts?

    For gas cans, we have made a best estimate of the necessary 
technologies and their associated costs. Estimated costs include 
variable costs (for hardware and assembly time) and fixed costs (for 
research and development, retooling, and certification). The analysis 
also considers fuels savings associated with low emissions gas cans. 
Cost estimates based on the projected technologies represent an 
expected change in the cost of gas cans as they begin to comply with 
new emission standards. All costs are presented in 2003 dollars. Full 
details of our cost analysis, including fuel savings, can be found in 
Chapter 10 of the Draft RIA.
    Table IX.C-1 summarizes the projected near-term and long-term per 
unit average costs to meet the new emission standards. Long-term 
impacts on gas cans are expected to decrease as manufacturers fully 
amortize their fixed costs. We project that manufacturers will 
generally recover their fixed costs over a five-year period, so these 
costs disappear from the analysis after the fifth year of production. 
These estimates are based on the manufacturing cost rather than 
predicted price increases.\286\ The table also shows our projections of 
average fuel savings over the life of the gas can. Fuel savings can be 
estimated based on the VOC emissions reductions due to gas can 
controls.
---------------------------------------------------------------------------

    \286\ These cost numbers may not necessarily reflect actual 
price increases as manufacturer production costs, perceived product 
enhancements, and other market impacts will affect actual prices to 
consumers.

Table IX.C-1.--Estimated Average Gas Can Costs and Lifetime Fuel Savings
------------------------------------------------------------------------
                                                                   Cost
------------------------------------------------------------------------
Near-Term Costs................................................    $2.69
Long-Term Costs................................................     1.52
Fuel Savings (NPV).............................................     4.24
------------------------------------------------------------------------

    With current and projected estimates of gas can sales, we translate 
these costs into projected direct costs to the nation for the new 
emission standards in any year. A summary of the annual aggregate costs 
to manufacturers is presented in Table IX.C-2. The annual cost savings 
due to fuel savings start slowly, then increase as greater numbers of 
compliant gas cans enter the market. Table IX.C-2 also presents a 
summary of the estimated annual fuel savings. Aggregate costs are 
projected to peak in 2013 at about $51 million and then drop to about 
$29 million once fixed costs are recovered. The change in numbers 
beyond 2015 occurs due to projected growth in gas can sales and 
population.

                             Table IX.C-2.--Total Annualized Costs and Fuel Savings
----------------------------------------------------------------------------------------------------------------
                                                       2009            2013            2015            2020
----------------------------------------------------------------------------------------------------------------
Costs...........................................     $49,112,000     $51,228,000     $28,772,000     $31,767,000
Fuel Saving.....................................      14,381,000      76,037,000      92,686,000      98,861,000
----------------------------------------------------------------------------------------------------------------

D. Cost Per Ton of Emissions Reduced

    We have calculated the cost per ton of HC, benzene, total MSATs, 
and PM emissions reductions associated with the proposed fuel, vehicle, 
and gas can programs using the costs described above and the emissions 
reductions described in section V. More detail on the costs, emissions 
reductions, and cost per ton estimates can be found in the draft RIA. 
We have calculated the costs per ton using the net present value of the 
annualized costs of the program, including gas can fuel savings, from 
2009 through 2030 and the net present value of the annual emission 
reductions through 2030. We have also calculated the cost per ton of 
emissions reduced in the year 2030 using the annual costs and emissions 
reductions in that year alone. This number represents the long-term 
cost per ton of emissions reduced. For fuels, the cost per ton 
estimates include costs and emission reductions that will occur from 
all motor vehicles and nonroad engines fueled with gasoline.\287\
---------------------------------------------------------------------------

    \287\ The proposed standards do not apply to nonroad engines, 
since section 202 (l) authorizes controls only for ``motor 
vehicles,'' which does not include nonroad vehicles. CAA section 216 
(2). However, we are reducing benzene in all gasoline, including 
that used in nonroad equipment. Therefore, we are including both the 
costs and the benzene emissions reductions associated with the fuel 
used in nonroad equipment.

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

[[Page 15906]]

    For vehicles and gas cans, we are proposing to establish NMHC and 
HC standards, respectively, which would also reduce benzene and other 
VOC-based toxics. For vehicles, we are also expecting direct PM 
reductions due to the proposed NMHC standard.\288\ Section V provides 
an overview of how we are estimating benzene and PM reductions 
resulting from the NMHC standards for vehicles and benzene reductions 
resulting from the HC standard for gas cans. We have not attempted to 
apportion costs across these various pollutants for purposes of the 
cost per ton calculations since there is no distinction in the 
technologies, or associated costs, used to control the pollutants. 
Instead, we have calculated costs per ton by assigning all costs to 
each individual pollutant. If we apportioned costs among the 
pollutants, the costs per ton presented here would be proportionally 
lowered depending on what portion of costs were assigned to the various 
pollutants.
---------------------------------------------------------------------------

    \288\ Again, although gasoline PM is not a mobile source air 
toxic, the rule will result in emission reductions of gasoline PM 
which reductions are accounted for in our analysis.
---------------------------------------------------------------------------

    The results for HC for vehicles and gas cans are provided in Table 
IX.D-1 using both a three percent and a seven percent social discount 
rate. Again, this analysis assumes that all costs are assigned to HC 
control. The discounted cost per ton of HC reduced for the proposal as 
a whole would be $0 because the fuel savings from gas cans offsets the 
costs of gas can and vehicle controls. The table presents these as $0 
per ton, rather than calculating a negative value that has no clear 
meaning. For vehicles in 2030, the cost per ton is $0 because by 2030 
all fixed costs have been recovered and there are no variable costs 
estimated for the proposed vehicle program.\289\
---------------------------------------------------------------------------

    \289\ We note that in determining whether the proposed vehicle 
controls represent the greatest emissions reductions achievable 
considering costs, we have considered the proposed cold-start 
standards separately from any other proposed control program. 
Similarly, in considering whether the proposed controls for gas cans 
represent the best available control considering economic 
feasibility, we considered the proposed gas can standards separately 
from any other proposed control program.
---------------------------------------------------------------------------

    The cost per ton estimates for each individual program are 
presented separately in the tables below, and are part of the 
justification for each of the programs. For informational purposes, we 
also present the cost per ton for the three programs combined.

                   Table IX.D-1.--HC Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................             $14             $18              $0
Gas Cans (without fuel savings).................................             230             250             180
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................               0               0               0
----------------------------------------------------------------------------------------------------------------

    The cost per ton of benzene reductions for fuels, vehicles, and gas 
cans are shown in Table IX.D-2 using the same methodology as noted 
above for HC. The results are calculated by assigning all costs to 
benzene control.

                 Table IX.D-2.--Benzene Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $10,900          11,100          11,400
Vehicles........................................................             260             340               0
Gas Cans (without fuels savings)................................          27,800          30,900          21,600
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................           3,400           3,600           2,400
----------------------------------------------------------------------------------------------------------------

    The cost per ton of overall MSAT reductions for fuels, vehicles, 
and gas cans are shown in Table IX.D-3 using the same methodology as 
noted above for HC and benzene. The results are calculated by assigning 
all costs to MSAT control.

                  Table IX.D-3.--MSAT Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     [$2003]
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Fuels...........................................................         $10,900         $11,100         $11,400
Vehicles........................................................              40              53               0
Gas Cans (without fuel savings).................................           1,800           2,000           1,400
Gas Cans (with fuel savings)....................................               0               0               0
Combined (with fuel savings)....................................             710             780             450
----------------------------------------------------------------------------------------------------------------


[[Page 15907]]

    We have also calculated a cost per ton for direct PM reductions for 
vehicles. Again, this analysis assigns all related costs to direct PM 
reductions.

                Table IX.D-4.--Direct PM Aggregate Cost Per Ton and Long-Term Annual Cost Per Ton
                                                     ($2003)
----------------------------------------------------------------------------------------------------------------
                                                                    Discounted      Discounted    Long-term cost
                                                                   lifetime cost   lifetime cost    per ton in
                                                                   per ton at 3%   per ton at 7%       2030
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................            $620            $820              $0
----------------------------------------------------------------------------------------------------------------

E. Benefits

    This section presents our analysis of the health and environmental 
benefits that can be expected to occur as a result of the proposed 
standards throughout the period from initial implementation through 
2030. In terms of emission benefits, we expect to see significant 
reductions in mobile source air toxics (MSATs) from the proposed 
vehicle, fuel and gas can standards, reductions in VOCs (an ozone 
precursor) from the proposed cold temperature vehicle and gas can 
standards, and reductions in direct PM2.5 from the proposed 
cold temperature vehicle standards. When translating emission benefits 
to health effects and monetized values, however, we only quantify the 
PM-related benefits associated with the proposed cold temperature 
vehicle standards.
    The reductions in PM from the proposed cold temperature vehicle 
standards would result in significant reductions in premature deaths 
and other serious human health effects, as well as other important 
public health and welfare effects. We estimate that in 2030, the 
benefits we are able to monetize are expected to be approximately $6.5 
billion using a 3 percent discount rate and $5.9 billion using a 7 
percent discount rate. Total social costs of the entire proposal for 
the same year (2030) are $205 million. Details on the costs of each of 
the proposed controls are in section IX.F. These estimates, and all 
monetized benefits presented in this section, are in year 2003 dollars.
    We demonstrate that the proposed standards would reduce cancer and 
noncancer risk from reduced exposure to MSATs (as described in Section 
IV of this preamble). However, we do not translate this risk reduction 
into benefits. We also do not quantify the benefits related to ambient 
reductions in ozone due to the VOC emission reductions expected to 
occur as a result of the proposed standards. The following section 
describes in more detail why these benefits are not quantified.
1. Unquantified Health and Environmental Benefits
    This benefit analysis estimates improvements in health and human 
welfare that can be expected as a result of the proposed standards, and 
monetizes those benefits. The benefits would come from reductions in 
emissions of air toxics (including benzene, 1,3-butadiene, 
formaldehyde, acetaldehyde, acrolein, naphthalene, and other air toxic 
pollutants discussed in Section III), ambient ozone (as a result of VOC 
controls), and direct PM2.5 emissions.
    While there will be benefits associated with air toxic pollutant 
reductions, notably with regard to reductions in exposure and risk (see 
Section IV, above), we do not attempt to monetize those benefits. This 
is primarily because available tools and methods to assess air toxics 
risk from mobile sources at the national scale are not adequate for 
extrapolation to incidence estimations or benefits assessment. The best 
suite of tools and methods currently available for assessment at the 
national scale are those used in the National Scale Air Toxics 
Assessment (NATA; these tools are discussed in Section IV.A). The EPA 
Science Advisory Board specifically commented in their review of the 
1996 National Air Toxics Assessment (NATA) that these tools were not 
yet ready for use in a national-scale benefits analysis, because they 
did not consider the full distribution of exposure and risk, or address 
sub-chronic health effects.\290\ While EPA has since improved the 
tools, there remain critical limitations for estimating incidence and 
assessing benefits of reducing mobile source air toxics. We continue to 
work to address these limitations, and we are exploring the feasibility 
of a quantitative benefits assessment for air toxics as part of a case 
study being done for benzene as part of the ongoing update to the 
Section 812 retrospective and prospective studies.\291\
---------------------------------------------------------------------------

    \290\ Science Advisory Board. 2001. NATA-Evaluating the 
National-Scale Air Toxics Assessment for 1996--an SAB Advisory. 
http://www.epa.gov/ttn/atw/sab/sabrev.html.
    \291\ The analytic blueprint for the Section 812 benzene case 
study can be found at http://www.epa.gov/air/sect812/appendixi51203.pdf.
---------------------------------------------------------------------------

    We also do not estimate the monetized benefits of VOC controls in 
this benefits analysis. Though VOCs would be demonstrably reduced as a 
result of the cold temperature vehicle standards, we assume that these 
emissions would not have a measurable impact on ozone formation since 
the standards seek to reduce VOC emissions at cold ambient temperatures 
and ozone formation is primarily a warm ambient temperature issue. The 
gas can controls would likely result in ozone benefits, though we do 
not attempt to monetize those benefits. This is primarily due to the 
magnitude of, and uncertainty associated with, the estimated changes in 
ambient ozone associated with the proposed standards. In Section IV.C., 
we discuss that the ozone modeling conducted for the proposed gas can 
standards results in a net reduction in the population weighted ozone 
design value metric measured within the modeled domain (37 Eastern 
states and the District of Columbia). The net improvement is very 
small, however, and would likely lead to negligible monetized benefits. 
Instead, we acknowledge that this analysis may underestimate the 
benefits associated with reductions in ozone precursor emissions 
achieved by the various proposed standards. We discuss these benefits 
qualitatively within the Regulatory Impact Analysis.
    Table IX.E-1 lists each of the MSAT and ozone health and welfare 
effects that remain unquantified because of current limitations in the 
methods or available data. This table also includes the PM-related 
health and welfare effects that also remain unquantified due to current 
method and data limitations. Chapter 12 of the Regulatory Impact 
Analysis for the proposed standards provides a qualitative description 
of the health and welfare effects not quantified in this analysis.

[[Page 15908]]



                                                  Table IX.E-1.--Unquantified and Non-Monetized Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Pollutant/effects                                          Effects not included in primary estimates--changes in:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ozone Health \a\.........................  Premature mortality: short term exposures \b\.
                                           Hospital admissions: respiratory.
                                           Emergency room visits for asthma.
                                           Minor restricted-activity days.
                                           School loss days.
                                           Asthma attacks.
                                           Cardiovascular emergency room visits.
                                           Acute respiratory symptoms.
                                           Chronic respiratory damage.
                                           Premature aging of the lungs.
                                           Non-asthma respiratory emergency room visits.
                                           Exposure to UVb (+/-) \e\.
Ozone Welfare............................  Decreased outdoor worker productivity.
                                           Agricultural yields for
                                           --commercial forests.
                                           --some fruits and vegetables.
                                           --non-commercial crops.
                                           Damage to urban ornamental plants.
                                           Impacts on recreational demand from damaged forest aesthetics.
                                           Ecosystem functions.
                                           Exposure to UVb (+/-) \e\.
PM Health \c\............................  Premature mortality--short term exposures \d\.
                                           Low birth weight.
                                           Pulmonary function.
                                           Chronic respiratory diseases other than chronic bronchitis.
                                           Non-asthma respiratory emergency room visits.
                                           Exposure to UVb (+/-) \e\.
PM Welfare...............................  Visibility in many Class I areas.
                                           Residential and recreational visibility in non-Class I areas.
                                           Soiling and materials damage.
                                           Damage to ecosystem functions.
                                           Exposure to UVb (+/-) \e\.
MSAT Health..............................  Cancer (benzene, 1,3-butadiene, formaldehyde, acetaldehyde, naphthalene).
                                           Anemia (benzene).
                                           Disruption of production of blood components (benzene).
                                           Reduction in the number of blood platelets (benzene).
                                           Excessive bone marrow formation (benzene).
                                           Depression of lymphocyte counts (benzene).
                                           Reproductive and developmental effects (1,3-butadiene).
                                           Irritation of eyes and mucus membranes (formaldehyde).
                                           Respiratory irritation (formaldehyde).
                                           Asthma attacks in asthmatics (formaldehyde).
                                           Asthma-like symptoms in non-asthmatics (formaldehyde).
                                           Irritation of the eyes, skin, and respiratory tract (acetaldehyde).
                                           Upper respiratory tract irritation and congestion (acrolein).
MSAT Welfare.............................  Direct toxic effects to animals.
                                           Bioaccumulation in the food chain.
                                           Damage to ecosystem function.
                                           Odor.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with ozone health effects including
  increased airway responsiveness to stimuli, inflammation in the lung, acute inflammation and respiratory cell damage, and increased susceptibility to
  respiratory infection.
\b\ EPA sponsored a series of meta-analyses of the ozone mortality epidemiology literature, published in the July 2005 volume of the journal
  Epidemiology, which found that short-term exposures to ozone may have a significant effect on daily mortality rates, independent of exposure to PM.
  EPA is currently considering how to include an estimate of ozone mortality in its primary benefits analyses.
\c\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with PM health effects including
  morphological changes and altered host defense mechanisms. The public health impact of these biological responses may be partly represented by our
  quantified endpoints.
\d\ While some of the effects of short term exposures are likely to be captured in the estimates, there may be premature mortality due to short term
  exposure to PM not captured in the cohort study upon which the primary analysis is based.
\e\ May result in benefits or disbenefits.

2. Quantified Human Health and Environmental Effects of the Proposed 
Cold Temperature Vehicle Standard
    In this section we discuss the PM2.5 benefits of the 
proposed cold temperature vehicle standard. To estimate 
PM2.5 benefits, we rely on a benefits transfer technique. 
The benefits transfer approach uses as its foundation the relationship 
between emission reductions and ambient PM2.5 concentrations 
modeled across the contiguous 48 states (and DC) for the Clean Air 
Nonroad Diesel (CAND) proposal.\292\ For a given future year, we first 
calculate the ratio between CAND direct PM2.5 emission 
reductions and direct PM2.5 emission reductions associated 
with the proposed cold temperature vehicle control standard

[[Page 15909]]

(proposed emission reductions/CAND emission reductions). We multiply 
this ratio by the percent that direct PM2.5 contributes 
towards population-weighted reductions in total PM2.5 due to 
the CAND standards. This calculation results in a ``benefits 
apportionment factor'' for the relationship between direct PM emissions 
and primary PM2.5, which is then applied to the BenMAP-based 
incidence and monetized benefits from the CAND proposal. In this way, 
we apportion the results of the proposed CAND analysis to its 
underlying direct PM emission reductions and scale the apportioned 
benefits to reflect differences in emission reductions between the 
modeled CAND control option and the proposed standards.\293\ This 
benefits transfer method is consistent with the approach used in other 
recent mobile and stationary source rules.\294\
---------------------------------------------------------------------------

    \292\ See 68 FR 28327, May 23, 2003.
    \293\ Note that while the proposed regulations also control 
VOCs, which contribute to PM formation, the benefits transfer 
scaling approach only scales benefits based on NOX, 
SO2, and direct PM emission reductions. PM benefits will 
likely be underestimated as a result, though we are unable to 
estimate the magnitude of the underestimation.
    \294\ See: Clean Air Nonroad Diesel final rule (69 FR 38958, 
June 29, 2004); Nonroad Large Spark-Ignition Engines and 
Recreational Engines standards (67 FR 68241, November 8, 2002); 
Final Industrial Boilers and Process Heaters NESHAP (69 FR 55217, 
September 13, 2004); Final Reciprocating Internal Combustion Engines 
NESHAP (69 FR 33473, June 15, 2004); Final Clean Air Visibility Rule 
(EPA-452/R-05-004, June 15, 2005); Ozone Implementation Rule 
(documentation forthcoming).
---------------------------------------------------------------------------

    Table IX.E-2 presents the primary estimates of reduced incidence of 
PM-related health effects for the years 2020 and 2030 for the proposed 
cold temperature vehicle control strategies.\295\ In 2030, we estimate 
that PM-related annual benefits would result in approximately 910 fewer 
premature fatalities, 590 fewer cases of chronic bronchitis, 1,600 
fewer non-fatal heart attacks, and 940 fewer hospitalizations (for 
respiratory and cardiovascular disease combined). In addition, we 
estimate that the emission controls would reduce days of restricted 
activity due to respiratory illness by about 620,000 days and reduce 
work-loss days by about 110,000 days. We also estimate substantial 
health improvements for children from reduced upper and lower 
respiratory illness, acute bronchitis, and asthma attacks.
---------------------------------------------------------------------------

    \295\ The ``primary estimate'' refers to the estimate of 
benefits that reflects the suite of endpoints and assumptions that 
EPA believes yields the expected value of air quality improvements 
related to the proposed standards. The impact that alternative 
endpoints and assumptions have on the benefit estimates are explored 
in appendixes to the RIA.

    TABLE IX.E-2.--Estimated Annual Reductions in Incidence of Health
   Effects Related to the Proposed Cold Temperature Vehicle Standard a
------------------------------------------------------------------------
                                            2020 Annual     2030 Annual
              Health effect                  incidence       incidence
                                             reduction       reduction
------------------------------------------------------------------------
PM-Related Endpoints:
    Premature Mortality b
    Adult, age 30+ and Infant, age <1                480             910
     year...............................
    Chronic bronchitis (adult, age 26                330             590
     and over)..........................
    Non-fatal myocardial infarction                  820           1,600
     (adult, age 18 and over)...........
    Hospital admissions--respiratory                 260             540
     (all ages) c.......................
    Hospital admissions--cardiovascular              220             400
     (adults, age >18) d................
    Emergency room visits for asthma                 360             630
     (age 18 years and younger).........
    Acute bronchitis, (children, age 8-              790           1,400
     12)................................
    Lower respiratory symptoms                     9,400          17,000
     (children, age 7-14)...............
    Upper respiratory symptoms                     7,100          13,000
     (asthmatic children, age 9-18).....
    Asthma exacerbation (asthmatic                12,000          21,000
     children, age 6-18)................
    Work Loss Days......................          63,000         110,000
    Minor restricted activity days               370,000        620,000
     (adults age 18-65).................
------------------------------------------------------------------------
a Incidence is rounded to two significant digits. Estimates represent
  benefits from the proposed rule nationwide, excluding Alaska and
  Hawaii.
b PM-related adult mortality based upon studies by Pope, et al 2002.296
  PM-related infant mortality based upon studies by Woodruff, Grillo,
  and Schoendorf,1997.297
c Respiratory hospital admissions for PM include admissions for chronic
  obstructive pulmonary disease (COPD), pneumonia and asthma.
d Cardiovascular hospital admissions for PM include total cardiovascular
  and subcategories for ischemic heart disease, dysrhythmias, and heart
  failure.

    PM also has numerous documented effects on environmental quality 
that affect human welfare. These welfare effects include direct damages 
to property, either through impacts on material structures or by 
soiling of surfaces, and indirect economic damages through the loss in 
value of recreational visibility or the existence value of important 
resources. Additional information about these welfare effects can be 
found in Chapter 12 of the Regulatory Impact Analysis prepared for this 
proposal.
---------------------------------------------------------------------------

    \296\ Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. 
Krewski, K. Ito, and G.D. Thurston. 2002. ``Lung Cancer, 
Cardiopulmonary Mortality, and Long-term Exposure to Fine 
Particulate Air Pollution.'' Journal of American Medical Association 
287:1132-1141.
    \297\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997. 
``The Relationship Between Selected Causes of Postneonatal Infant 
Mortality and Particulate Infant Mortality and Particulate Air 
Pollution in the United States.'' Environmental Health Perspectives 
105(6):608-612.
---------------------------------------------------------------------------

3. Monetized Benefits
    Table IX.E-3 presents the estimated monetary value of reductions in 
the incidence of those health effects we are able to monetize for the 
proposed cold temperature vehicle standard. Total annual PM-related 
health benefits are estimated to be approximately $6.5 or $5.9 billion 
in 2030 (3 percent and 7 percent discount rate, respectively). These 
estimates account for growth in real gross domestic product (GDP) per 
capita between the present and 2030.
    Table IX.E-3 indicates with a ``B'' those additional health and 
environmental benefits of the rule that we are unable to quantify or 
monetize. These effects are additive to the estimate of total benefits, 
and are related to the following sources:
     There are many human health and welfare effects associated 
with PM, ozone, and toxic air pollutant reductions that remain 
unquantified because of current limitations in the methods or available 
data. A listing of the benefit categories that could not be quantified 
or monetized in our benefit estimates are provided in Table IX.E-1.

[[Page 15910]]

     The PM benefits scaled transfer approach, derived from the 
Clean Air Nonroad Diesel rule, does not account for VOCs as precursors 
to ambient PM2.5 formation. To the extent that VOC emission 
reductions associated with the proposed regulations contribute to 
reductions in ambient PM2.5, this analysis does not capture 
the related health and environmental benefits of those changes.
     The PM air quality model only captures the benefits of air 
quality improvements in the 48 states and DC; PM benefits for Alaska 
and Hawaii are not reflected in the estimate of benefits.

 TABLE IX.E-3.--Estimated Annual Monetary Value of Reductions in Incidence of Health and Welfare Effects Related
                                to the Proposed Cold Temperature Vehicle Standard
                                             [Millions of 2003$] a b
----------------------------------------------------------------------------------------------------------------
                                                                            2030  Estimated    Estimated   Estimated
         Health effect                Pollutant        2020  Estimated         value of        value of    value of
                                                     value of reductions      reductions      reductions  reductions
-------------------------------------------------------------------------------------------- ------------------------
PM-Related Premature mortality
 c, d:
    Adult, 30+ years and
     Infant, <1 year.
        3 percent discount rate  PM2.5.............  $3,100               $6,000
        7 percent discount rate  ..................  2,800                5,400
Chronic bronchitis (adults, 26   PM2.5.............  150                  270
 and over).
Non-fatal acute myocardial
 infarctions:
        3 percent discount rate  ..................  80                   150
        7 percent discount rate  PM2.5.............  77                   150
Hospital admissions for          PM2.5.............  4.8                  10
 respiratory causes.
Hospital admissions for          PM2.5.............  5.1                  9.4
 cardiovascular causes.
Emergency room visits for        PM2.5.............  0.12                 0.21
 asthma.
Acute bronchitis (children, age  PM2.5.............  0.32                 0.58
 8-12).
Lower respiratory symptoms       PM2.5.............  0.17                 0.30
 (children, age 7-14).
Upper respiratory symptoms       PM2.5.............  0.20                 0.37
 (asthma, age 9-11).
Asthma exacerbations...........  PM2.5.............  0.57                 1.0
Work loss days.................  PM2.5.............  9.2                  14
Minor restricted activity days   PM2.5.............  21                   36
 (MRADs).
Monetized Total e:
    Base estimate..............
        3 percent discount rate  PM2.5.............  3,400+ B             6,500+ B
        7 percent discount rate  ..................  3,100+ B             5,900+ B
----------------------------------------------------------------------------------------------------------------
\a\ Dollars are rounded to two significant digits. The PM estimates represent benefits from the proposed rule
  across the contiguous United States.
\b\ Monetary benefits adjusted to account for growth in real GDP per capita between 1990 and the analysis year
  (2020 or 2030).
\c\ Valuation of premature mortality based on long-term PM exposure assumes discounting over the SAB recommended
  20 year segmented lag structure described in the Regulatory Impact Analysis for the Final Clean Air Interstate
  Rule (March 2005). Results show 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines
  for preparing economic analyses (US EPA, 2000 and OMB, 2003).\298\
\d\ Adult mortality based upon studies by Pope et al. 2002. Infant mortality based upon studies by Woodruff,
  Grillo, and Schoendorf, 1997.
\e\ B represents the monetary value of health and welfare benefits not monetized. A detailed listing is provided
  in Table IX.E-1.

4. What Are the Significant Limitations of the Benefit Analysis?
---------------------------------------------------------------------------

    \298\ U.S. Environmental Protection Agency, 2000. Guidelines for 
Preparing Economic Analyses. www.yosemite1.epa.gov/ee/epa/eed/hsf/pages/Guideline.html.
    Office of Management and Budget, The Executive Office of the 
President, 2003. Circular A-4. http://www.whitehouse.gov/omb/circulars.
---------------------------------------------------------------------------

    Perhaps the most significant limitation of this analysis is our 
inability to quantify a number of potentially significant benefit 
categories associated with improvements in air quality that would 
result from the proposed standards. Most notably, we are unable to 
estimate the benefits from reduced air toxics exposures because the 
available tools and methods to assess mobile source air toxics risk at 
the national scale are not adequate for extrapolation to incidence 
estimations or benefits assessment. We also do not quantify ozone 
benefits due to the magnitude of, and uncertainty associated with, the 
modeled changes in ambient ozone associated with the proposed gas can 
standards, despite net benefits, when population weighted, in the ozone 
design value metric observed across the modeled domain (see Section 
IV.C).
    More generally, every benefit-cost analysis examining the potential 
effects of a change in environmental protection requirements is limited 
to some extent by data gaps, limitations in model capabilities (such as 
geographic coverage), and uncertainties in the underlying scientific 
and economic studies used to configure the benefit and cost models. 
Deficiencies in the scientific literature often result in the inability 
to estimate quantitative changes in health and environmental effects, 
such as potential increases in premature mortality associated with 
increased exposure to carbon monoxide. Deficiencies in the economics 
literature often result in the inability to assign economic values even 
to those health and environmental outcomes which can be quantified. 
These general uncertainties in the underlying scientific and economics 
literature, which can cause the valuations to be higher or lower, are 
discussed in detail in the RIA and its supporting references. Key 
uncertainties that have a bearing on the results of the benefit-cost 
analysis of the proposed standards include the following:
     The exclusion of potentially significant and unquantified 
benefit categories (such as health, odor, and ecological benefits of 
reduction in air toxics, ozone, and PM);
     Errors in measurement and projection for variables such as 
population growth;
     Uncertainties in the estimation of future year emissions 
inventories and air quality;
     Uncertainties associated with the scaling of the PM 
results of the modeled

[[Page 15911]]

benefits analysis to the proposed standards, especially regarding the 
assumption of similarity in geographic distribution between emissions 
and human populations and years of analysis;
     Uncertainty in the estimated relationships of health and 
welfare effects to changes in pollutant concentrations including the 
shape of the C-R function, the size of the effect estimates, and the 
relative toxicity of the many components of the PM mixture;
     Uncertainties in exposure estimation; and
     Uncertainties associated with the effect of potential 
future actions to limit emissions.
    Despite these uncertainties, we believe this benefit-cost analysis 
provides a conservative estimate of the expected economic benefits of 
the proposed standards for cold temperature vehicle control in future 
years because of the exclusion of potentially significant benefit 
categories. Acknowledging benefits omissions and uncertainties, we 
present a best estimate of the total benefits based on our 
interpretation of the best available scientific literature and methods 
supported by EPA's technical peer review panel, the Science Advisory 
Board's Health Effects Subcommittee (SAB-HES). EPA has also worked to 
address many of the comments made by the National Academy of Sciences 
(NAS) in a September 26, 2002 report on its review of the Agency's 
methodology for analyzing the health benefits of measures taken to 
reduce air pollution. EPA addressed many of these comments in the 
analysis of the final CAIR rule.\299\ The analysis of the proposed rule 
incorporates this most recent work.
---------------------------------------------------------------------------

    \299\ See Chapter 4 of the Final Clean Air Interstate Rule RIA 
(www.epa.gov/cair) for a discussion of EPA's ongoing efforts to 
address the NAS recommendations in its regulatory analyses.
---------------------------------------------------------------------------

    There is one category where new studies suggest the possibility of 
significant additional economic benefits. Over the past several years, 
EPA's SAB has expressed the view that there were not sufficient data to 
show a separate ozone mortality effect, in essence saying that any 
ozone benefits are captured in the PM-related mortality benefit 
estimates. However, in their most recent advice, the SAB recommended 
that EPA reconsider the evidence on ozone-related mortality based on 
the publication of several recent analyses that found statistically 
significant associations between ozone and mortality. Based on these 
studies and the recommendations from the SAB, EPA sponsored three 
independent meta-analyses of the ozone-mortality epidemiology 
literature to inform a determination on including this important health 
endpoint. The studies were peer-reviewed and printed in the journal 
Epidemiology in July 2005.300 301 302
---------------------------------------------------------------------------

    \300\ Levy, J.I, Chemerynski, S.M., Sarnat, J.A. 2005. Ozone 
Exposure and Mortality: An Empirical Bayes Meta-Regression Analysis. 
Epidemiology. 16:458-468.
    \301\ Bell, M.L., Dominici, F., Samet, J.M. 2005. A Meta-
Analysis of Time-Series Studies of Ozone and Mortality with 
Comparison to the National Morbidity, Mortality, and Air Pollution 
Study. Epidemiology. 16:436-445.
    \302\ Ito, K., DeLeon, S.F., Lippmann, M. 2005. Associations 
Between Ozone and Daily Mortality: Analysis and Meta-Analysis. 
Epidemiology. 16:446-457.
---------------------------------------------------------------------------

    EPA is reviewing the body of literature available on the 
association of ozone exposure and premature mortality. EPA's second 
external review draft of the Criteria Document for ozone has concluded 
that there is strong evidence that exposure to ozone has been 
associated with premature mortality.\303\ We are exploring ways of 
appropriately characterizing the premature mortality benefits of 
reducing ozone and included an estimate in recent analyses of the Clear 
Skies legislation.\304\ We plan to include a quantification of ozone 
mortality benefits in future air pollution rulemakings.
---------------------------------------------------------------------------

    \303\ EPA, 2005. Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Second External Review Draft). August. 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=137307
    \304\ For technical details about Clear Skies multi-pollutant 
analysis, see http://www.epa.gov/airmarkets/mp/bmresults/health_benefits_method.pdf
---------------------------------------------------------------------------

    In contrast to the additional benefits of the proposed standards 
discussed above, it is also possible that this rule will result in 
disbenefits in some areas of the United States. The effects of ozone 
and PM on radiative transfer in the atmosphere can lead to effects of 
uncertain magnitude and direction on the penetration of ultraviolet 
light and climate. Ground level ozone makes up a small percentage of 
total atmospheric ozone (including the stratospheric layer) that 
attenuates penetration of ultraviolet-b (UVb) radiation to the ground. 
EPA's past evaluation of the information indicates that potential 
disbenefits would be small, variable, and with too many uncertainties 
to attempt quantification of relatively small changes in average ozone 
levels over the course of a year.\305\ EPA's most recent provisional 
assessment of the currently available information indicates that 
potential but unquantifiable benefits may also arise from ozone-related 
attenuation of UVb radiation.\306\ EPA believes that we are unable to 
quantify any net climate-related disbenefit or benefit associated with 
the combined ozone and PM reductions in this rule.
---------------------------------------------------------------------------

    \305\ EPA, 2005. Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (First External Review Draft). January. 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=114523
    \306\ EPA, 2005. Air Quality Criteria for Ozone and Related 
Photochemical Oxidants (Second External Review Draft). August. 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=137307
---------------------------------------------------------------------------

5. How Do the Benefits Compare to the Costs of the Proposed Standards?
    This proposed rule provides three separate provisions that reduce 
air toxics emissions from mobile sources: cold temperature vehicle 
controls, an emissions control program for gas cans, and a control 
program limiting benzene in gasoline. A full appreciation of the 
overall economic consequences of these provisions requires 
consideration of the benefits and costs expected to result from each 
standard, not just those that could be expressed here in dollar terms. 
As noted above, due to limitations in data availability and analytical 
methods, our benefits analysis only monetizes the PM2.5-
related benefits from direct PM emission reductions associated with the 
cold temperature standards. There are a number of health and 
environmental effects associated with the proposed standards that we 
were unable to quantify or monetize (see Table IX.E-1).
    Table IX.E-4 contains the estimates of monetized benefits of the 
proposed cold temperature vehicle standards and estimated social 
welfare costs for each of the proposed control programs.\307\ The 
annual social welfare costs of all provisions of this proposed rule are 
described more fully in Section IX.F. It should be noted that the 
estimated social welfare costs for the vehicle program contained in 
this table are for 2019. The 2019 vehicle program costs are included 
for comparison purposes only and are therefore not included in the 
total 2020 social costs. There are no compliance costs associated with 
the vehicle program after 2019; as explained elsewhere in this 
preamble, the vehicle compliance costs are primarily R&D and facilities 
costs that are expected to be recovered by manufacturers over the first 
ten years of the program.
---------------------------------------------------------------------------

    \307\ Social costs represent the welfare costs of the rule to 
society. These social costs do not consider transfer payments (such 
as taxes) that are simply redistributions of wealth.
---------------------------------------------------------------------------

    The results in Table IX.E-4 suggest that the 2020 monetized 
benefits of the cold temperature vehicle standards are greater than the 
expected social welfare costs of that program in 2019. Specifically, 
the annual benefits of the

[[Page 15912]]

program would be approximately $3,400 + B million or $3,100 + B million 
annually in 2020 (using a 3 percent and 7 percent discount rate in the 
benefits analysis, respectively), compared to estimated social welfare 
costs of approximately $11 million in the last year of the program 
(2019). These benefits are expected to increase to $6,500 + B million 
or $5,900 + B million annually in 2030 (using a 3 percent and 7 percent 
discount rate in the benefits analysis, respectively), even as the 
social welfare costs of that program fall to zero. Table IX.E-4 also 
presents the costs of the other proposed rule provisions: an emissions 
control program for gas cans and a control program limiting benzene in 
gasoline. Though we are unable to present the benefits associated with 
these two programs, we note for informational purposes that the 
benefits associated with the proposed cold temperature vehicle 
standards alone exceed the costs of all three proposed rule provisions 
combined.

     Table IX.E-4.--Summary of Annual Benefits of the Proposed Cold
    Temperature Vehicle Standards and Costs of All Provisions of the
                          Proposed Standards a
                       [Millions of 2003 dollars]
------------------------------------------------------------------------
          Description                    2020                2030
------------------------------------------------------------------------
Estimated Social Welfare Costs
 \b\:
    Proposed Cold Temperature    $11 \c\............  $0
     Vehicle Standards.
    Proposed Gasoline Container  32.................  39
     Standards.
    Proposed Fuel Standards \d\  210................  250
                                ----------------------------------------
        Total..................  240................  290
    Fuel Savings...............  -73................  -82
                                ----------------------------------------
        Total Social Welfare     170................  205
         Costs.
Total PM2.5-Related Health
 Benefits of the Proposed Cold
 Temperature Vehicle Standards
 \e\:
    3 percent discount rate....  3,400 + B \f\......  6,500 + B \f\
    7 percent discount rate....  3,100 + B \f\......  5,900 + B \f\
------------------------------------------------------------------------
\a\ All estimates are rounded to two significant digits and represent
  annualized benefits and costs anticipated for the years 2020 and 2030,
  except where noted. Totals may not sum due to rounding.
\b\ Note that costs are the annual total costs of reducing all
  pollutants associated with each provision of the proposed MSAT control
  package. Also note that while the cost analysis only utilizes a 7
  percent discount rate to calculate annual costs, the benefits analysis
  uses both a 3 percent and 7 percent discount rate to calculate annual
  benefits. Benefits reflect only direct PM reductions associated with
  the cold temperature vehicle standards.
\c\ These costs are for 2019; the vehicle program compliance costs
  terminate after 2019 and are included for illustrative purposes. They
  are not included in the total social welfare cost sum for 2020.
\d\ Our modeling for the total costs of the proposed gasoline benzene
  program included California gasoline, since it was completed before we
  decided to propose that California gasoline not be covered by the
  program. California refineries comprise approximately 1 percent of
  these 2projected costs. For the final rule, we expect to exclude
  California refineries from the analysis.
\e\ Valuation of premature mortality based on long-term PM exposure
  assumes discounting over the SAB recommended 20 year segmented lag
  structure described in the Regulatory Impact Analysis for the Final
  Clean Air Interstate Rule (March 2005). Annual benefits analysis
  results reflect the use of a 3 percent and 7 percent discount rate in
  the valuation of premature mortality and nonfatal myocardial
  infarctions, consistent with EPA and OMB guidelines for preparing
  economic analyses (US EPA, 2000 and OMB, 2003).\308\
\f\ Not all possible benefits or disbenefits are quantified and
  monetized in this analysis. B is the sum of all unquantified benefits
  and disbenefits. Potential benefit categories that have not been
  quantified and monetized are listed in Table IX.E-1.

F. Economic Impact Analysis

    We prepared a draft Economic Impact Analysis (EIA) to estimate the 
economic impacts of the proposed emission control program on the gas 
can, gasoline fuel, and light-duty vehicle markets. In this section we 
briefly describe the Economic Impact Model (EIM) we developed to 
estimate both the market-level changes in price and outputs for 
affected markets and the social costs of the program and their 
distribution across affected economic sectors. We also present the 
results of our analysis.
---------------------------------------------------------------------------

    \308\ U.S. Environmental Protection Agency, 2000. Guidelines for 
Preparing Economic Analyses. www.yosemite1.epa.gov/ee/epa/eed/hsf/pages/Guideline.html.
    Office of Management and Budget, The Executive Office of the 
President, 2003. Circular A-4. http://www.whitehouse.gov/omb/circulars.
---------------------------------------------------------------------------

    We estimate the net social costs of the proposed program to be 
about $171.5 million in 2020. This estimate reflects the estimated 
costs associated with the gasoline, gas can, and vehicle controls and 
the expected fuel savings from better evaporative controls on gas cans. 
The results of the economic impact modeling performed for the gasoline 
fuel and gas can control programs suggest that the social costs of 
those two programs are expected to be about $244.3 million in 2020 with 
consumers of these products expected to bear about 60 percent of these 
costs. We estimate fuel savings of about $72.8 million in 2020 that 
will accrue to consumers. There are no social costs associated with the 
vehicle program in 2020. These estimates, and all costs presented in 
this section, are in year 2003 dollars.
    With regard to market level impacts in 2020, the maximum price 
increase for gasoline fuel is expected to be about 0.1 percent (0.2 
cents per gallon) for PADD 5. The price of gas cans is expected to 
increase by about 1.8 percent ($0.20 per can) in areas that already 
have gas can requirements and about 32.5 percent ($1.52 per can) in 
areas that do not.
    Detailed descriptions of the EIM, the model inputs, modeling 
results, and several sensitivity analyses can be found in Chapter 13 of 
the Regulatory Impact Analysis prepared for this proposal.
1. What Is an Economic Impact Analysis?
    An Economic Impact Analysis (EIA) is prepared to inform decision 
makers about the potential economic consequences of a regulatory 
action. The analysis consists of estimating the social costs of a 
regulatory program and the distribution of these costs across 
stakeholders. These estimated social costs can then be compared with 
estimated social benefits (as presented in Section IX.E). As defined in 
EPA's Guidelines for Preparing Economic Analyses, social costs are the 
value of the goods and services lost by society resulting from (a) the 
use of resources to comply with and implement a regulation and (b) 
reductions in

[[Page 15913]]

output.\309\ In this analysis, social costs are explored in two steps. 
In the market analysis, we estimate how prices and quantities of goods 
affected by the proposed emission control program can be expected to 
change once the program goes into effect. In the economic welfare 
analysis, we look at the total social costs associated with the program 
and their distribution across stakeholders.
---------------------------------------------------------------------------

    \309\ EPA Guidelines for Preparing Economic Analyses, EPA 240-R-
00-003, September 2000, p 113. A copy of this document can be found 
at http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html#download
---------------------------------------------------------------------------

2. What Is the Economic Impact Model?
    The Economic Impact Model (EIM) is a behavioral model developed for 
this proposal to estimate price and quantity changes and total social 
costs associated with the emission controls under consideration. The 
EIM simulates how producers and consumers of affected products can be 
expected to respond to an increase in production costs as a result of 
the proposed emission control program. In this EIM, compliance costs 
are directly borne by producers of affected goods. Depending on the 
producers' and consumers' sensitivity to price changes, producers may 
be able to pass some or all of these compliance costs on to the 
consumers of these goods in the form of higher prices. Consumers adjust 
their consumption of affected goods in response to these price changes. 
This information is passed back to the producers in the form of 
purchasing decisions. The EIM takes these behavioral responses into 
account to estimate new market equilibrium quantities and prices for 
all modeled sectors and the resulting distribution of social costs 
across these stakeholders (producers and consumers).
3. What Economic Sectors Are Included in This Economic Impact Analysis?
    There are three economic sectors affected by the control programs 
described in this proposal: gas cans, gasoline fuel, and light-duty 
vehicles. In this Economic Impact Analysis we model only the impacts on 
the gas can and gasoline fuel markets. We did not model the impacts on 
the light-duty vehicle market. This is because the compliance costs for 
the proposed vehicle program are expected to be very small, less than 
$1 per vehicle and, even if passed on entirely, are unlikely to affect 
producer or consumer behavior. Therefore, we do not expect these 
proposed controls to affect the quantity of vehicles produced or their 
prices. At the same time, however, the light-duty vehicle compliance 
costs are a cost to society and should be included in the economic 
welfare analysis. We do this by adding the vehicle program engineering 
compliance cost estimates to the estimated social costs of the gasoline 
and gas can programs.
    With regard to the gasoline fuel and gas can markets, we consider 
only the impacts on residential users of these products. This means 
that we focus the analysis on the use of these products for personal 
transportation (gasoline fuel) or residential lawns and garden care or 
recreational uses (gas cans) and do not consider how the costs of 
complying with the proposed programs may affect the production of goods 
and services that use gasoline fuel or gas cans as production inputs. 
We believe this approach is reasonable because the commercial share of 
the end-user markets for both gasoline fuel and gas cans is relatively 
small.310 311 In addition, for most commercial users the 
share of the cost of these products to total production costs is also 
small (e.g., the cost of a gas can is only a very small part of the 
total production costs for an agricultural or construction firm). 
Therefore, a price increase of the magnitude anticipated for this 
control program is not expected to have a noticeable impact on prices 
or quantities of goods produced using these inputs (e.g., agricultural 
product or buildings).
---------------------------------------------------------------------------

    \310\ The U.S Department of Energy estimates that about 92 
percent of gasoline used in the United States for transportation is 
used in light-duty vehicles. About 6 percent is used for commercial 
or industrial transportation, and the remaining 2 percent is used in 
recreational marine vessels. See U.S Department of Energy, Energy 
Information Administration, 2004. ``Annual Energy Outlook 2004 with 
projections to 2025.'' Last updated June 2, 2004. Table A-2 and 
Supplemental Table 34. http://www.eia.doe.gov/oiaf/aeoref_tab.html.
    \311\ A recent study by CARB (1999) found that 94 percent of 
portable fuel containers in California were used by residential 
households California Environmental Protection Agency, Air Resources 
Board (CARB) 1999. See ``Hearing Notice and Staff Report, Initial 
Statement of Reasons for Proposed Rule Making Public Hearing to 
Consider the Adoption of Portable Fuel Container Spillage Control 
Regulation.'' Sacrament, CA: California Environmental Protection 
Agency, Air Resources Board (CARB). A copy of this document is 
available at http://www.arb.ca.gov/regact/spillcon/isor.pdf
---------------------------------------------------------------------------

    With regard to the gasoline fuel analysis, it should be noted that 
this Economic Impact Analysis does not include California fuels in the 
market analysis. California fuels are only included, as a separate line 
item, in the economic welfare analysis. California currently has state-
level controls that address air toxics from gasoline. Any actions that 
refiners may take to comply with the federal program are expected to be 
small and not affect market prices or quantities in that state. 
However, because the estimated fuel program compliance costs include a 
small compliance cost for California, and this cost would be a cost to 
society, it is necessary to include those costs in the total economic 
welfare costs of the proposal. This is done by including the estimated 
engineering compliance costs as a separate line item. Also, consistent 
with the cost analysis, the economic impact analysis does not 
distinguish between reformulated and conventional gasoline fuels.
    The EIM models the economic impacts on two gas can markets (states 
that currently have requirements for gas cans and those that do not), 
and four gasoline fuel markets (PADDs 1+3, PADD 2, PADD 4, PADD 5). The 
markets included in this EIA are described in more detail in Chapter 13 
of the RIA for this proposal.
    In the EIM, the gasoline fuel and gas can markets are not linked 
(there is no feedback mechanism between the gas can and gasoline fuel 
model segments). This is because these two sectors represent different 
aspects of fuel consumption (fuel storage and fuel production) and 
production and consumption of one product is not affected by the other. 
In other words, an increase in the price of gas cans is not expected to 
have an impact on the production and supply of gasoline, and vice 
versa. Production and consumption of each of these products are the 
result of other factors that have little cross-over impacts (the need 
for fuel storage; the need for personal transportation).
4. What Are the Key Features of the Economic Impact Model?
    A detailed description of the features of the EIM and the data used 
in the analysis is provided in Chapter 13 of the RIA prepared for this 
rule. The model methodology is firmly rooted in applied microeconomic 
theory and was developed following the methodology set out in the 
OAQPS's Economic Analysis Resource Document.\312\
---------------------------------------------------------------------------

    \312\ U.S. Environmental Protection Agency, Office of Air 
Quality Planning and Standards, Innovative Strategies and Economics 
Group, OAQPS Economic Analysis Resource Document, April 1999. A copy 
of this document can be found at http://www.epa.gov/ttn/ecas/econdata/Rmanual2/ Rmanual2/
---------------------------------------------------------------------------

    The EIM is a computer model comprised of a series of spreadsheet 
modules that simulate the supply and demand characteristics of the 
markets under consideration. The initial market equilibrium conditions 
are shocked by applying the compliance costs for the control program to 
the supply side of the markets (this is done by shifting the relevant 
supply curves by the amount of the compliance costs). The model 
equations can be analytically solved for

[[Page 15914]]

equilibrium prices and quantities for the markets with the regulatory 
program and these new prices and quantities are used to estimate the 
social costs of the model and how those costs are shared among affected 
markets.
    The EIM is a partial equilibrium, intermediate-run model that 
assumes perfect competition in the relevant markets. As explained in 
EPA's Guidelines for Preparing Economic Analyses, ``partial 
equilibrium'' means that the model considers markets in isolation and 
that conditions in other markets are assumed either to be unaffected by 
a policy or unimportant for social cost estimation.\313\ The use of the 
intermediate run means that some factors of production are fixed and 
some are variable. In very short analyses, all factors of production 
would be assumed to be fixed, leaving the producers with no means to 
respond to the increased production costs associated with the 
regulation (e.g., they cannot adjust labor or capital inputs). Under 
this time horizon, the costs of the regulation fall entirely on the 
producer. In the long run, all factors of production are variable and 
producers can adjust production in response to cost changes imposed by 
the regulation (e.g., using a different labor/capital mix). In the 
intermediate run there is some resource immobility which may cause 
producers to suffer producer surplus losses, but they can also pass 
some of the compliance costs to consumers.
---------------------------------------------------------------------------

    \313\ EPA Guidelines for Preparing Economic Analyses, EPA 240-R-
00-003, September 2000, p. 125-6.
---------------------------------------------------------------------------

    The perfect competition assumption is widely accepted economic 
practice for this type of analysis, and only in rare cases are other 
approaches used.\314\ It should be noted that the perfect competition 
assumption is not primarily about the number of firms in a market. It 
is about how the market operates: the nature of the competition among 
firms. Indicators that allow us to assume perfect competition include 
absence of barriers to entry, absence of strategic behavior among firms 
in the market, and product differentiation.
---------------------------------------------------------------------------

    \314\ See, for example, EPA Guidelines for Preparing Economic 
Analyses, EPA 240-R-00-003, September 2000, p 126.
---------------------------------------------------------------------------

    With regard to the gasoline fuel market, the Federal Trade 
Commission (FTC) has developed an approach to ensure competitiveness in 
gasoline fuel markets. It reviews oil company mergers and frequently 
requires divestiture of refineries, terminals, and gas stations to 
maintain a minimum level of competition. This is discussed in more 
detail in the industry profile prepared for this proposal.\315\
---------------------------------------------------------------------------

    \315\ Section 3 Industry Organization, ``Characterizing Gasoline 
Markets: a Profile,'' Final Report, prepared for EPA by RTI, August 
2005.
---------------------------------------------------------------------------

    With regard to the gas can market, the small number of firms in the 
market is offset by several features of this market. Because gas cans 
are compact and lightweight, they are easy to transport far from their 
place of manufacture. This means that production is not limited to 
local producers. Although they vary by size and material, consumers are 
likely to view all gas cans as good substitutes for one another. 
Because the products are similar enough to be considered homogeneous 
(e.g., perfectly substitutable), consumers can shift their purchases 
from one manufacturer to another. There are only minimal technical 
barriers to entry that would prevent new firms from freely entering the 
market, since manufacturing is based on well-known plastic processing 
methods. In addition, there is significant excess capacity, enabling 
competitors to respond quickly to changes in price. Excess production 
capacity in the general container manufacturing market also means that 
manufacturers could potentially switch their product lines to compete 
in this segment of the market, often without a significant investment. 
In addition, there is no evidence of high levels of strategic behavior 
in the price and quantity decisions of the firms. Finally, it should be 
noted that contestable market theory asserts that oligopolies and even 
monopolies will behave very much like firms in a competitive market if 
manufacturers have extra production capacity and this capacity could 
allow them to enter the market costlessly (i.e., there are no sunk 
costs associated with this kind of market entry or exit).\316\ As a 
result of these conditions, producers and consumers in the gas can 
market take the market price as given when making their production and 
consumption choices. For all these reasons, the market can be modeled 
as a competitive market even though the number of producers is small.
---------------------------------------------------------------------------

    \316\ A monopoly or firms in oligopoly may not behave as 
neoclassical economic theories of the firm predict because they may 
be concerned about new entrants to the market. If super-normal 
profits are earned, potential competitors may enter the market. To 
respond to this treat, existing firm(s) in the market will keep 
prices and output at a level where only normal profits are made, 
setting price and output levels at or close to the competitive price 
and output. See Chapter 13 of the RIA for more information, Section 
13.2.3.
---------------------------------------------------------------------------

5. What Are the Key Model Inputs?
    Key model inputs for the EIM are the behavioral parameters, 
compliance costs estimates, and market equilibrium quantities and 
prices.
    The EIM is a behavioral model. The estimated social costs of this 
emission control program are a function of the ways in which producers 
and consumers of the gas cans and gasoline fuel affected by the 
standards change their behavior in response to the costs incurred in 
complying with the standards. These behavioral responses are 
incorporated in the EIM through the price elasticity of supply and 
demand (reflected in the slope of the supply and demand curves), which 
measure the price sensitivity of consumers and producers. The price 
elasticites used in this analysis are described in Chapter 13 of the 
RIA. The gasoline elasticites were obtained from the literature and are 
-0.2 for demand and 0.2 for supply. This means that both the quantity 
supplied and demanded are expected to be fairly insensitive to price 
changes and that increases in prices are not expected to cause sales to 
fall or production to increase by very much. Because we were unable to 
find published supply and demand elasticities for the gas can market, 
we estimated these parameters using the procedures described in Chapter 
13 of the RIA. This approach yielded a demand elasticity of -0.01 and a 
supply elasticity of 1.5. The estimated demand elasticity is nearly 
perfectly inelastic (equal to zero), which means that changes in price 
are expected to have very little effect on the quantity of gas cans 
demanded. However, supply is fairly elastic, meaning producers are 
expected to respond to a change in price. Therefore, consumers are 
expected to bear more of the burden of gas can regulatory control costs 
than producers.
    Initial market equilibrium conditions are simulated using the same 
current year sales quantities and growth rates used in the engineering 
cost analysis. The initial equilibrium prices for gas can and gasoline 
fuel were obtained from industry sources and published government data. 
The initial equilibrium market conditions are shocked by applying the 
engineering compliance cost estimates described in earlier in this 
section. Although both the gas can and gasoline fuel markets are 
competitive markets, the model is shocked by applying the sum of 
variable and fixed costs. Two sets of compliance costs are used in the 
gas can market analysis, reflecting states with existing controls and 
states without existing controls. The compliance costs used to shock 
the gasoline fuel market are based on an average total cost (variable + 
fixed) analysis. An explanation for this

[[Page 15915]]

approach can be found in Section 13.2.4.1 of the RIA prepared for this 
proposal. These gasoline fuel compliance costs differ across PADDs but 
are the same across years. Because California already has existing 
gasoline fuel controls, fuel volumes for that state are not included in 
the market analysis. However, because it may be necessary for refiners 
to adjust their production to comply with the new federal standards, 
California fuel controls are included in the economic welfare analysis.
    Additional costs that need to be considered in the EIM are the 
savings associated with the gas can controls and the costs of the 
light-duty vehicle controls. The proposed gas can controls are expected 
to reduce evaporative emissions from fuel storage, leading to fuel 
savings for users of these containers. These fuel savings are not 
included in the market analysis for this economic impact analysis 
because these savings are not expected to affect consumer decisions 
with respect to the purchase of new containers. Fuel savings are 
included in the social cost analysis, however, because they are a 
savings that accrues to society. The estimated fuel savings are added 
to the estimated social costs as a separate line item. As noted above, 
the economic impacts of the light-duty vehicle controls are not modeled 
in the EIM. Instead, the estimated engineering compliance costs are 
used as a proxy, and are also added into the estimated social costs as 
a separate line item.
    The EIM relies on the estimated compliance costs for the gas can 
and gasoline fuel programs described elsewhere in this preamble. Thus, 
the EIM reflects cost savings associated with ABT or other flexibility 
programs to the extent they are included in the estimated compliance 
costs.
6. What Are the Results of the Economic Impact Modeling?
    Using the model and data described above, we estimated the economic 
impacts of the proposed emission control program. The results of our 
analysis are summarized in this section. Detailed results for all years 
are included in the appendices to Chapter 13 of the RIA. Also included 
as an appendix to that chapter are sensitivity analyses for several key 
inputs.
    Market Impact Analysis. Market impacts are the estimated changes in 
the quantity of affected goods produced and their prices. As explained 
above, we estimated market impacts for only gasoline fuel and gas cans, 
and California fuel is not included in the market analysis for PADD 5. 
The estimated market impacts are presented in Table IX.F-1. In this 
table the market results for gasoline are presented for only 2015 
because the compliance costs for the gasoline fuel program are constant 
for all years and therefore the results of the market analysis are the 
same for all years.\317\ The market results for gas cans are presented 
for 2009 and 2015, reflecting the changes in estimated compliance costs 
due to amortization of fixed costs over the first five years of the 
program. After 2013 the compliance costs remain constant for all future 
years.\318\
---------------------------------------------------------------------------

    \317\ The number of gallons of gasoline fuel produced is 
expected to decrease in future years, but the percent decrease is 
expected to remain the same; this is due to the growth in fuel 
consumption generally.
    \318\ The number of gas cans produced is expected to decrease in 
future years, but the percent decrease is expected to remain the 
same; this is due to the growth in gas can production generally.
---------------------------------------------------------------------------

    With regard to the gasoline fuel program, the market impacts are 
expected to be small, on average. The price of gasoline fuel is 
expected to increase by about 0.15 percent or less, depending on PADD. 
The expected reduction in quantity of fuel produced is expected to be 
less than 0.03 percent. The market impacts for the gas can program are 
expected to be more significant. In 2009, the first year of the gas can 
program, the model predicts a price increase of about 7 percent for gas 
cans in states that are currently have regulations for gas cans and 
about 57 percent for those that do not. Even with these larger price 
increases, however, the quantity produced is not expected to decrease 
by very much, less than 0.6 percent. These percent price increases and 
quantity decreases much smaller after the first five years. In 2015, 
the estimated gas can price increase is expected to be less than 2 
percent for states that currently regulate gas cans and about 32.5 
percent for states without such regulations. The quantity produced is 
expected to decrease by less than 0.4 percent. These changes are 
expected to remain constant for future years, even though the absolute 
quantities produced are expected to increase somewhat.

                                                        Table IX.F-1.--Summary of Market Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Change in price                              Change in quantity
              Market                 Engineering cost per  ---------------------------------------------------------------------------------------------
                                             unit                  Absolute                 Percent                Absolute               Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3....................
    PADD 2........................                                   N/A (gasoline fuel control program begins in 2011)
    PADD 4........................
    PADD 5 (w/out CA).............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     $/can
                                                     Thousand Cans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas Cans:
    States with existing programs.  $0.77.................  $0.76.................  6.9%..................  -6.8.................  -0.07%
    States without existing         $2.70.................  $2.68.................  57.4%.................  -88.5................  -0.57%
     programs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 [cent]/gallon
                                                    Million Gallons
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline Fuel:
    PADD 1 & 3....................  0.049[cent]...........  0.03[cent]............  0.02%.................  -3.1.................  -0.004%
    PADD 2........................  0.202[cent]...........  0.11[cent]............  0.07%.................  -6.9.................  -0.015%

[[Page 15916]]

 
    PADD 4........................  0.358[cent]...........  0.19[cent]............  0.12%.................  -1.4.................  -0.025%
    PADD 5 (w/out CA).............  0.391[cent]...........  0.21[cent]............  0.13%.................  -2.5.................  -0.026%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     $/can
                                                     Thousand Cans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas Cans:
    States with existing programs.  $0.21.................  $0.20.................  1.9%..................  -2.1.................  -0.02%
    States without existing         $1.53.................  $1.52.................  32.5%.................  -56.4................  -0.32%
     programs.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Economic Welfare Analysis. In the economic welfare analysis we look 
at the costs to society of the proposed program in terms of losses to 
consumer and producer surplus. These surplus losses are combined with 
the estimated vehicle compliance costs, fuel savings, and government 
revenue losses to estimate the net economic welfare impacts of the 
proposed program. Estimated annual net social costs for selected years 
are presented in Table IX-F-2. Initially, the estimated social costs of 
the program are relatively small and are attributable to the gas can 
program, which begins in 2009, and the vehicle program, which begins in 
2010. For 2009 and 2010 the estimated social costs are less than $40 
million. In 2011 the estimated social costs increase to $215 million, 
reflecting the beginning of the gasoline fuel program. In subsequent 
years, estimated social costs increase due to growth. However, they 
decrease in 2014, to $169 million, when the gas can fixed costs are 
fully recovered and in 2020, to $171.5 million, when the vehicle 
program compliance costs are terminated.

   Table IX.F-2.--Net Social Costs Estimates for the Proposed Program
                     [2009 to 2035--2003$, $million]
------------------------------------------------------------------------
                                                           Total social
                                                               costs
                          Year                            (includes fuel
                                                             savings)
------------------------------------------------------------------------
2009....................................................           $38.4
2010....................................................            39.2
2011....................................................           215.0
2012....................................................           208.6
2013....................................................           202.2
2014....................................................           169.3
2015....................................................           171.6
2016....................................................           173.6
2017....................................................           175.5
2018....................................................           177.3
2019....................................................           179.7
2020....................................................           171.5
2021....................................................           174.2
2022....................................................           176.9
2023....................................................           179.9
2024....................................................           183.3
2025....................................................           186.8
2026....................................................           190.3
2027....................................................           193.9
2028....................................................           197.6
2029....................................................           201.3
2030....................................................           205.2
2031....................................................           209.1
2032....................................................           213.1
2033....................................................           217.2
2034....................................................           221.4
2035....................................................           225.7
NPV at 3%...............................................         2,937.3
NPV at 7%...............................................         1,633.0
------------------------------------------------------------------------

    Table IX.F-3 contains more detailed estimated social costs for 
2009, when the gas can program begins, 2011, when the gasoline fuel 
program begins, and 2015, when the gas can fixed costs are fully 
recovered. The vehicle program applies from 2010 through 2019. 
According to these results, consumers are expected to bear 
approximately 99 percent of the cost of the gas can program. This 
reflects the inelastic price elasticity on the demand side of the 
market and the elastic price elasticity on the supply side. The burden 
of the gasoline fuel program is expected to be shared more evenly, with 
54.5 percent expected to be borne by consumers and 45.5 percent 
expected to be borne by producers. In all years, the estimated loss to 
consumer welfare will be offset somewhat by the fuel savings associated 
with gas cans. Beginning at about $11 million per year, these savings 
increase to about $70 million by 2015 as compliant gas cans are phased 
in. These savings accrue for the life of the gas cans.

              Table IX.F-3.--Summary of Net Social Costs Estimates Associated With Primary Program
                                     [2009, 2011, and 2015--2003$, $million]
----------------------------------------------------------------------------------------------------------------
                                         Change in consumer        Change in producer
               Market                          surplus                  surplus                   Total
----------------------------------------------------------------------------------------------------------------
                                                      2009
----------------------------------------------------------------------------------------------------------------
Gasoline U.S.:
    PADD 1 & 3
    PADD 2                                         N/A (gasoline fuel control program begins in 2011)
    PADD 4..........................
    PADD 5 (w/out CA)...............
Gas Cans U.S........................  -$48.7..................  -$0.3..................  -$49.0
                                      (99.3%).................  (0.7%)
States with existing programs.......  -$7.5...................  -$0.1..................

[[Page 15917]]

 
States without existing programs....  -$41.2..................  -$0.3..................
                                     ---------------------------------------------------------------------------
        Subtotal....................  -48.7...................  -0.3...................  -$49.0
                                      (99.3%).................  (1%)...................
----------------------------------------------------------------------------------------------------------------
Fuel Savings........................  ........................  .......................  $10.6
Vehicle Program.....................  ........................  .......................  $0
California fuel \a\.................  ........................  .......................  $0
                                     ---------------------------------------------------------------------------
            Total...................  ........................  .......................  -$38.4
----------------------------------------------------------------------------------------------------------------
                                                      2011
----------------------------------------------------------------------------------------------------------------
Gasoline U.S........................  -$100.3.................  -$83.6.................  -$183.9
PADD 1 & 3..........................  -$21.6..................  -$18.0                   .......................
PADD 2..............................  -$49.1..................  -$40.9                   .......................
PADD 4..............................  -$10.2..................  -$8.5                    .......................
PADD 5 9w/out CA)...................  -$19.4..................  -$16.2                   .......................
Gas Cans U.S........................  -$50.7..................  -$0.3..................  -$51.0
                                      (99.4%).................  (0.7%)
States with existing programs.......  -$7.8...................  -$0.1                    .......................
States without existing programs....  -$42.9..................  -$0.3..................
                                     ---------------------------------------------------------------------------
        Subtotal....................  -$150.9.................  -$83.9.................  -$234.8
                                      (64.3%).................  (35.7%)................
----------------------------------------------------------------------------------------------------------------
Fuel Savings........................  ........................  .......................  $33.3
Vehicle Program.....................  ........................  .......................  -$11.8
California fuel \a\.................  ........................  .......................  -$1.7
            Total...................  ........................  .......................  $215.0
----------------------------------------------------------------------------------------------------------------
                                                      2015
----------------------------------------------------------------------------------------------------------------
Gasoline U.S........................  -$107.1.................  -$89.4.................  -$196.5
                                      (54.5%).................  (45.5%)
PADD 1 & 3..........................  -$23.1..................  -$19.3                   .......................
PADD 2..............................  -$52.4..................  -$43.7                   .......................
PADD 4..............................  -$10.9..................  -$9.1                    .......................
PADD 5 (w/out CA)...................  -$20.7..................  -$17.3                   .......................
Gas Cans U.S........................  -$28.5..................  -$0.2..................  -$28.7
                                      (99.3%).................  (0.7%)
States with existing programs.......  -$2.3...................  $0.0                     .......................
States without existing programs....  -$26.3..................  -$0.2                    .......................
        Subtotal....................  -$135.7.................  -$89.5.................  -$225.2
                                      (60.3%).................  (39.7%)
Fuel Savings........................  ........................  .......................  $68.3
Vehicle Program.....................  ........................  .......................  $12.9
California fuel \a\.................  ........................  .......................  -$1.8
            Total...................  ........................  .......................  $171.6
----------------------------------------------------------------------------------------------------------------
\a\ California fuel costs are considered separately. See Section 13.1.3 of the RIA.

    The present value of net social costs (discounted back to 2005) of 
the proposed standards through 2035, contained in Table IX-F-2, is 
estimated to be $2.9 billion (2003$). This present value is calculated 
using a social discount rate of 3 percent and the stream of economic 
welfare costs from 2009 through 2035. We also performed an analysis 
using a 7 percent social discount rate.\319\ Using that discount rate, 
the present value of the net social costs through 2035 is estimated to 
be $1.6 billion (2003$).
---------------------------------------------------------------------------

    \319\ EPA has historically presented the present value of cost 
and benefits estimates using both a 3 percent and a 7 percent social 
discount. The 3 percent rate represents a demand-side approach and 
reflects the time preference of consumption (the rate at which 
society is willing to trade current consumption for future 
consumption). The 7 percent rate is a cost-side approach and 
reflects the shadow price of capital.
---------------------------------------------------------------------------

X. Alternative Program Options

    We considered several options for fuels, vehicles, and gas cans in 
developing this proposal.

A. Fuels

    We considered a wide range of control strategies for gasoline to 
reduce toxic emissions. Among the options considered are a toxics 
performance standard, varying levels of benzene control, approaches for 
controlling other MSATs in addition to benzene, and lower sulfur and 
RVP for VOC control. The discussion of these options is provided in 
section VII.
    In addition, we request comment on the following specific concepts 
relating

[[Page 15918]]

to the proposed ABT and compliance assurance provisions.
1. Alternative Compliance Assurance Provisions
    The design of the proposed ABT program is based on other recent 
fuel programs (primarily gasoline and diesel sulfur), but with fewer 
restrictions. The proposed program includes nationwide trading, does 
not include an upper limit on benzene, and combines all fuel into a 
single pool for credit accounting purposes. The compliance assurance 
mechanisms for the proposed ABT program are also based on previous 
recent fuel programs (including reformulated gasoline and gasoline and 
diesel sulfur) which in turn were developed based on the experiences in 
enforcing past fuel programs. At the same time there are other programs 
with different ABT and corresponding compliance assurance provisions 
that could serve as models for this benzene proposal, such as the Acid 
Rain Program.
    An overarching concern that today's proposal attempts to address, 
and that any alternative program also would have to address, is that 
EPA does not have the resources to audit a substantial number of 
refineries each year, and certainly not every refinery. Thus, we must 
devise a credit program whose enforcement integrity does not depend on 
EPA conducting annual audits of many or most refiners to determine the 
validity of credits generated, transferred, banked and used.
    The program as proposed would provide a great deal of flexibility 
to refiners in complying with the standards, but balances this 
flexibility with provisions to ensure the standard's enforceability. 
This program would also provide incentives for refiners and importers 
to ensure the validity of any credits they obtain, through the 
provisions that hold the buyer of invalid credits liable for any 
resulting violation of the standard. We summarize the most important of 
these provisions here:
     Credit life would be limited to 5 years. This is intended 
to provide reasonable assurance that EPA will have the opportunity to 
review the appropriate records to verify compliance, regardless of 
personnel changes, whether existing refiners and importers are bought, 
sold, merged, or go out of business, and whether new refiners and 
importers are created;
     Records would be required to be retained for the life of 
the credits to allow for EPA to enforce the benzene content standard 
through random audits;
     We propose that credits be limited in the number of trades 
that would be allowed and are requesting comment on the range from 2 to 
4 trades. (We will establish an appropriate number of permissible 
trades in the final rule.) Such a limitation would be intended to allow 
EPA to have a reasonable chance of verifying the validity of credits 
that are traded;
     Both the buyer and seller of the credits would be 
potentially liable should credits be found to be invalid, in order to 
allow EPA to maintain the environmental benefits of the program should 
the credit seller no longer be in business; and
     Purchasers of credits would need to be potential credit 
users, and so would be refiners or importers. Our experiences during 
the gasoline lead phase-down program in the 1980s, where brokers and 
others were allowed to take title to lead credits, raised enforcement 
problems severe enough to call the program's validity into question. 
These problems have not arisen for more recent programs, where credit 
purchasers must be credit users.
    We request comment on these provisions as a whole and individually. 
In addition, we note that the proposed benzene program is different 
from the other recent fuel programs in several key respects that may 
provide opportunities to design the ABT program and corresponding 
compliance assurance mechanisms differently. For example, the proposed 
program would not have an upper limit on the per-gallon benzene 
concentration that would otherwise force all refiners to ultimately 
comply with the standard through actual physical refinery changes. 
Since this proposed program would allow some degree of variation in 
benzene levels to continue indefinitely, additional flexibility in how 
credits are handled may be desirable. Thus, we specifically request 
comment on the following alternate ABT program elements.
    As mentioned above, EPA could not, with its limited resources, 
conduct annual audits of all refiners (and possibly other parties, as 
discussed below). With regard to any potential alternative ABT program 
elements, including those discussed below, we request detailed ideas 
about a potential auditing process that would be sufficiently robust to 
assure the validity of credits generated, used, banked or traded, 
including how such audits might be self-funded.
Credit Life
    EPA notes that a system that limits credit life may, under certain 
circumstances, depress the market price of credits and create less 
incentive for benzene reductions early in the program. EPA therefore 
requests comment on whether the credit life should be limited or 
whether unlimited banking should be encouraged through having credits 
with unlimited life or longer life. We also seek comment on how a 
program with unlimited credit life could be successfully enforced. For 
example, EPA audits for refinery compliance with fuel standard and 
credit requirements normally include review of refinery production, 
testing and business records. EPA seeks comment on whether these audits 
could be effectively conducted to review the validity of credits that 
were generated more than five years previously and whether audits could 
be effectively concluded during the first five years of a credit's 
life.
    EPA also seeks comment on the appropriate consequences if EPA was 
unable to verify credit validity, the criteria for identifying credits 
as being invalid, and whether EPA should have the burden of proving 
credits were invalid or whether the credit generator (or the credit 
user) should have the burden of proving that credits were valid. See 
Hazardous Waste Treatment Council v. EPA, 886 F. 2d 355, 367-68 (D.C. 
Cir. 1990) ( relating to circumstances when the burden of proof may 
permissibly shift to a regulated entity). EPA also seeks comment on 
mechanisms that would allow companies to verify the validity of credits 
they generate without the need for EPA audits. Thus, EPA seeks comment 
on whether audits conducted by independent auditors could be a reliable 
indicator of credit validity, and if so, the necessary qualifications 
of the auditor, the criteria for auditor independence, how these 
qualifications and independence should be established, whether the 
audit should review records of all company fuels activities related to 
credit creation or only a random portion of these records, the 
appropriate timing requirements for these audits, and the nature and 
timing of reports. EPA seeks comment on the enforcement implications of 
the Clean Air Act's five-year statute of limitations if credits with a 
life longer than five years were allowed.
Record Retention
    We also seek comment on whether a program with unlimited credit 
life would need to require that the associated records be retained 
indefinitely until a credit was used. (The use of credits for which no 
records exist could result in their being declared

[[Page 15919]]

null and void since credit validity could not be established.) We seek 
comment as to whether record-keeping and EPA audits involving 
activities occurring more than five years in the past could create any 
issues regarding statutes of limitations. Also, in general, we request 
comment on provisions that could address the fact that the farther back 
in time an event occurred, the more difficult it becomes for EPA to 
conduct an effective audit (due to factors such as mergers, 
acquisitions, and turnover of personnel). EPA seeks comment on whether 
the Clean Air Act's five-year statute of limitations would adversely 
impact EPA's ability to enforce a requirement to keep records longer 
than five years.
Number of Times Credits May Be Traded
    As described earlier in this preamble, EPA is requesting comment on 
allowing credits to be traded between 2 and 4 times. In particular, EPA 
seeks comment on any specific benefits to regulated parties or to the 
credit market generally if a number of trades in this range were 
allowed; on requirements that should be included to ensure the validity 
of credits that have been transferred multiple times; on procedures for 
identifying which credits have been transferred if the credit 
transferor is found to have had in its possession both valid and 
invalid credits; and on appropriate consequences to the generator and/
or transferor of invalid credits. In addition, EPA seeks comment on 
mechanisms that would allow companies to establish the validity of 
credits they have purchased without the need for EPA audits. Thus, EPA 
requests comment on whether companies that obtain credits that have 
previously been purchased should be required to establish their 
validity through reports of independent audits of the credit-creation 
activities of the company that created the credits and of the credit 
activities of any intermediary entities to which the credits had been 
transferred.
Case-By-Case Relaxation of Compliance Restrictions
    In addition to seeking comment on general modifications discussed 
above to the proposed provisions, we also request comment on allowing 
regulated entities to petition for case-by-case relaxation of specific 
provisions in special cases. For example, such a provision might allow 
a refiner to petition EPA to allow a specific group of credits to be 
traded one or more additional times than the final rule ultimately 
allows. Petitioners might also be allowed to request an extension of 
the five year limit on credit life. EPA seeks comment on whether and 
how such an extension might affect the ability to enforce the benzene 
content standard, including impacts from the statute of limitations. 
Such an exception might have important implications for enforcement, 
record-keeping, and emissions, which would have to be adequately 
addressed. EPA seeks comment on the nature of documentation that would 
be required in such a petition and criteria that might be used to make 
a determination regarding approval of such a petition. EPA also seeks 
comment on the extent to which any such ABT flexibility provisions 
would be used, and what the benzene content, enforcement, liquidity, 
and other implications might be.
Ownership of Benzene Credits
    The potential modifications of the proposed program on which we 
request comment may be able to be accomplished relatively easily within 
the bounds of the proposed program. Another concept, allowing traders 
and other entities to take title to credits, might best be accomplished 
by moving to an entirely different type of credit program, since it 
might require a set of other related changes in order to function 
effectively. For example, it may be possible to design the benzene 
trading program and related compliance assurance provisions in a manner 
that would allow benzene credits to be traded on the open market like 
many other commodities and not unlike the way SO2 credits 
are traded under the Acid Rain Program, or how carbon credits are 
traded through the voluntary trading program established by the Chicago 
Climate Exchange. We next discuss such an alternate credit program.
    The proposed restriction of benzene credit use to refiners and 
importers does not provide an opportunity for other entities to 
participate in this credit market by taking title to credits.\320\ The 
inability of traders to take actual title to credits may reduce the 
ability of the market to function in certain ways including, for 
example, to hedge against risk effectively or to aggregate small 
holdings into larger blocks for sale. This might be avoided if the 
program provided for benzene credits to be owned, and for entities 
other than refiners and importers to obtain, hold, and transfer them.
---------------------------------------------------------------------------

    \320\ In the proposed program non-refiners would be allowed to 
facilitate, or broker, credit transactions between refiners or 
importers. Thus, a refiner (or importer) that needed to purchase 
credits could contract with a broker to identify refiners or 
importers that have credits to sell.
---------------------------------------------------------------------------

    EPA requests comment on any specific benefits to regulated parties 
or to the credit market generally if non-refiners were allowed to take 
title to credits. EPA also requests comments on any situations that 
occurred under other motor vehicle fuels credit programs where the 
absence of non-refiner credit owners created difficulties or problems 
in regulated parties being able to transfer or obtain credits. EPA 
seeks comment on how the benzene credit program could be reliably 
enforced if non-refiners were allowed to own credits. Thus, EPA seeks 
comment on the qualifications that should be required for a company to 
be a non-refiner credit owner, and how these qualifications should be 
established; on any registration, record keeping, reporting, 
independent audit and independent attestation requirements that should 
be imposed on non-refiner owners of credits; and on the nature of 
liability that should attach to non-refiner owners of credits that were 
found to have transferred invalid credits.
    We expect that such a program would require that all refiners and 
importers have their credits (and therefore compliance) verified each 
year. Given the resource needs for EPA to undertake such verifications, 
we would expect to require refiners to utilize independent auditors, 
sufficient for the auditor to make a verified audit finding that the 
company's assertions regarding credit creation are correct. We believe 
that verification of credits in this manner would require a complete 
audit of the gasoline production and testing records related to the 
benzene content and volume of gasoline produced or imported, including 
reviews and reconciliation of all batch information. The audit also 
would also have to include sufficient review of records of product 
sales to verify the completeness of the gasoline production records. 
The independent auditor performing such an audit would have to be 
qualified to understand and review the records of gasoline production 
and testing generated at a refinery, or the importation and testing 
records associated with imported gasoline. To the extent that gasoline 
testing was conducted by independent laboratories, the credit audit 
would have to include the activities of the independent laboratory to 
make an audit finding of the validity of the laboratory test results. 
EPA would then continue to have the ability to perform spot audits.
    EPA seeks comment on whether the regulations should require that 
these

[[Page 15920]]

independent audits must be conducted by an independent audit 
organization that is funded by an industry consortium, rather than by 
audit firms individually retained by refiners/importers. The industry 
consortium would submit to EPA for approval: the consortium 
organization; the qualifications of the individual auditors; the 
general audit plans, and any audit plans that are specific to an 
individual company. The audit organization would submit audit reports 
to EPA and to the companies that were the subject of their audits.
    The refiners and importers would then assign a unique serial number 
to each credit containing key information including the entity's 
registration number, the year, and the credit number. These entities 
would then report this information to EPA as a part of their annual 
compliance report. Credits properly generated under such a program 
could then be traded freely until they were used. If an audit 
determined that some credits were improperly generated, a mechanism 
would be required to decide which credits were considered to be valid 
and which invalid.
    Given EPA's resource constraints, EPA seeks comment on a mechanism 
that would allow refiners and importers, and non-refiner owners of 
credits (if allowed) to conduct this detailed tracking of individual 
credits, with reconciliation of the reports of all parties 
transferring, obtaining, or holding credits. Thus, EPA seeks comment on 
whether the regulations should include an option whereby companies that 
wish to sell, purchase or hold verified credits would fund an 
independent organization that would function as the clearinghouse of 
benzene credits. EPA also seeks comment on how such an independent 
organization option should be structured: What would be the 
qualifications of the organization and how would they be established; 
how would the method of operations of the organization be established 
and approved by EPA; what reporting by companies to the organization 
would be required, and what reporting to EPA by the organization would 
be required; and how would the organization establish the validity of 
credits that are the subject of reports from companies.
    In addition, as in past programs, if credits were later found to be 
improperly created, the party that generated the invalid credits and 
the party that used the invalid credits would be subject to EPA 
enforcement. The party using the invalid credits would be required to 
remove the invalid credits from its compliance calculations. If this 
recalculation resulted in a violation of the benzene standard, the 
party would be subject to an enforcement action for this violation, 
regardless of whether the invalid credits were purchased in good faith 
(although the party may be permitted to remedy such violations through 
the subsequent purchase of valid credits). This is intended to maintain 
the environmental benefits of the program and to encourage self-
policing by the industry of the validity of the credits they use for 
compliance. However, in this situation EPA would look first to the 
generator of the invalid credits to remedy the shortfall. If this 
generator could make up any credit deficit, EPA normally would defer 
enforcement against the user or intermediary transferor of invalid 
credits.
2. Alternative ABT Options
    EPA seeks comment on whether the regulations should create two 
options for benzene credits: one that is based on the credit 
enforcement provisions contained in the proposed fuels program, 
resulting in credits with more limited credit life that must be 
transferred from the credit generator to the credit user; and 
``verified'' benzene credits that have a longer credit life and that 
can be owned by companies other than refiners/importers. Under this 
approach, benzene credits could be ``verified'' if certain conditions 
are met. First, the credit generator would need to participate in an 
audit consortium (as described above) and the credits would need to be 
verified through an audit conducted by this organization. Second, the 
credit generator and any other company that took title to or used these 
credits would need to participate in a benzene credit clearing house 
(as described above). In this way, companies that wished to generate 
benzene credits with longer life and broader ownership options could do 
so, but also would bear at least part of the expense associated with 
establishing the validity and tracking the movements of this class of 
credits. At the same time, companies that wished to generate and 
transfer credits in the traditional manner, would not bear these extra 
expenses.
    EPA also seeks comment on an approach that would allow refiners and 
importers, and non-refiner owners of credits (if allowed), to establish 
a private clearing house to conduct the detailed tracking of individual 
credits, with reconciliation of the reports of all parties 
transferring, obtaining, or holding credits. The Chicago Climate 
Exchange provides an example of a privately established trading 
program. The Chicago Climate Exchange provides a trading platform with 
a registry for credits and clearing facility. The NASD provides market 
surveillance and verification of emission credits. EPA seeks comment on 
how such an independent organization could be established; what 
requirements should EPA establish for the organization; what reporting 
would be required by companies to the organization; and what reporting 
would be required by the organization to EPA.
    We request comment on the appropriateness of such an alternative 
ABT program for the proposed benzene control program and how it might 
work and be enforced.

B. Vehicles

    For vehicles, we considered normal temperature standards more 
stringent than Tier 2 standards, which would likely entail hardware 
changes to Tier 2 vehicles. This option is discussed in section VI. We 
did not consider a less stringent standard for cold temperature NMHC 
control because CAA sections 202(a) and 202(l) require us to establish 
the most stringent standards achievable considering cost and other 
factors. We believe that the proposed cold NMHC standards and phase-in 
for Tier 2 vehicles satisfy these CAA requirements, and a less 
stringent standard would not.

C. Gas Cans

    For gas cans, as discussed in section VIII, we are proposing an 
emissions performance standard we believe reflects the performance of 
the best available control technologies. We considered but are not 
proposing options for design-based requirements, including requirements 
for automatic shut-off spouts. We also considered but are not proposing 
retrofit requirements for gas cans. These options are discussed in 
sections VIII.B.3-VIII.B.5.

XI. Public Participation

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

A. How Do I Submit Comments?

    We are opening a formal comment period by publishing this document. 
We will accept comments during the period indicated under DATES above. 
If you have an interest in the proposed emission control program 
described in this document, we encourage you to comment on any aspect 
of this rulemaking. We also request comment on specific topics 
identified throughout this proposal.

[[Page 15921]]

    Your comments will be most useful if you include appropriate and 
detailed supporting rationale, data, and analysis. Commenters are 
especially encouraged to provide specific suggestions for any changes 
to any aspect of the regulations that they believe need to be modified 
or improved. You should send all comments, except those containing 
proprietary information, to our Air Docket (see ADDRESSES) before the 
end of the comment period.
    You may submit comments electronically, by mail, or through hand 
delivery/courier. To ensure proper receipt by EPA, identify the 
appropriate docket identification number in the subject line on the 
first page of your comment. Please ensure that your comments are 
submitted within the specified comment period. Comments received after 
the close of the comment period will be marked ``late.'' EPA is not 
required to consider these late comments. If you wish to submit CBI or 
information that is otherwise protected by statute, please follow the 
instructions in section XI.B.

B. How Should I Submit CBI to the Agency?

    Do not submit information that you consider to be CBI 
electronically through the electronic public docket, 
www.regulations.gov, or by e-mail. Send or deliver information 
identified as CBI only to the following address: U.S. Environmental 
Protection Agency, Assessment and Standards Division, 2000 Traverwood 
Drive, Ann Arbor, MI 48105, Attention Docket ID EPA-HQ-OAR-2005-0036. 
You may claim information that you submit to EPA as CBI by marking any 
part or all of that information as CBI (if you submit CBI on disk or CD 
ROM, 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 CBI). Information so marked will not be disclosed except in 
accordance with procedures set forth in 40 CFR part 2.
    In addition to one complete version of the comment that includes 
any 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. If you submit the copy that does not contain CBI 
on disk or CD ROM, mark the outside of the disk or CD ROM clearly that 
it does not contain CBI. Information not marked as CBI will be included 
in the public docket without prior notice. If you have any questions 
about CBI or the procedures for claiming CBI, please consult the person 
identified in the FOR FURTHER INFORMATION CONTACT section.

C. Will There Be a Public Hearing?

    We will hold a public hearing on April 12, 2006 at the Sheraton 
Crystal City Hotel, 1800 Jefferson Davis Highway, Arlington, Virginia 
22202, Telephone: (703) 486-1111. The hearing will start at 10 a.m. 
local time and continue until everyone has had a chance to speak.
    If you would like to present testimony at the public hearing, we 
ask that you notify the contact person listed under FOR FURTHER 
INFORMATION CONTACT at least ten days before the hearing. You should 
estimate the time you will need for your presentation and identify any 
needed audio/visual equipment. We suggest that you bring copies of your 
statement or other material for the EPA panel and the audience. It 
would also be helpful if you send us a copy of your statement or other 
materials before the hearing.
    We will make a tentative schedule for the order of testimony based 
on the notifications we receive. This schedule will be available on the 
morning of the hearing. In addition, we will reserve a block of time 
for anyone else in the audience who wants to give testimony.
    We will conduct the hearing informally, and technical rules of 
evidence won't apply. We will arrange for a written transcript of the 
hearing and keep the official record of the hearing open for 30 days to 
allow you to submit supplementary information. You may make 
arrangements for copies of the transcript directly with the court 
reporter.

D. Comment Period

    The comment period for this rule will end on May 30, 2006.

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

    You may find the following suggestions helpful for preparing your 
comments:
     Explain your views as clearly as possible.
     Describe any assumptions that you used.
     Provide any technical information and/or data you used 
that support your views.
     If you estimate potential burden or costs, explain how you 
arrived at your estimate.
     Provide specific examples to illustrate your concerns.
     Offer alternatives.
     Make sure to submit your comments by the comment period 
deadline identified.
     To ensure proper receipt by EPA, identify the appropriate 
docket identification number in the subject line on the first page of 
your response. It would also be helpful if you provided the name, date, 
and Federal Register citation related to your comments.

XII. 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 Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The Executive Order 
defines a ``significant regulatory action'' as one that is likely to 
result in a rule that may:
     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;
     Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
     Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
     Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action'' 
because estimated annual costs of this rulemaking are estimated to be 
over $100 million per year and it raises novel legal or policy issues. 
A draft Regulatory Impact Analysis has been prepared and is available 
in the docket for this rulemaking and at the docket internet address 
listed under ADDRESSES above. This action was submitted to the Office 
of Management and Budget for review under Executive Order 12866. 
Written comments from OMB and responses from EPA to OMB comments are in 
the public docket for this rulemaking.

B. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The 
Agency proposes to collect information to ensure compliance with the 
provisions in this rule. This includes a variety of

[[Page 15922]]

requirements, both for vehicle manufacturers, fuel producers, and 
portable gasoline container manufacturers. Information-collection 
requirements related to vehicle manufacturers are in EPA ICR 
0783.50 (OMB Control Number 2060-0104); requirements related 
to fuel producers are in EPA ICR 1591.20 (OMB Control Number 
2060-0277); requirements related to portable gasoline container 
manufacturers are in EPA ICR 2213.01. For vehicle and fuel 
standards, section 208(a) of the Clean Air Act requires that 
manufacturers provide information the Administrator may reasonably 
require to determine compliance with the regulations; submission of the 
information is therefore mandatory. We will consider confidential all 
information meeting the requirements of section 208(c) of the Clean Air 
Act. For portable gasoline container standards, recordkeeping and 
reporting requirements for manufacturers would be pursuant to the 
authority of sections 183(e) and 111 of the Clean Air Act.
    As shown in Table XII.B-1, the total annual burden associated with 
this proposal is about 24,696 hours and $2,771,309, based on a 
projection of 225 respondents. The estimated burden for vehicle 
manufacturers and fuel producers is a total estimate for both new and 
existing reporting requirements. The portable gasoline container 
requirements represent our first regulation of gas cans, so those 
burden estimates reflect only new reporting requirements. Burden means 
the total time, effort, or financial resources expended by persons to 
generate, maintain, retain, or disclose or provide information to or 
for a Federal agency. This includes the time needed to review 
instructions; develop, acquire, install, and utilize technology and 
systems for the purposes of collecting, validating, and verifying 
information, processing and maintaining information, and disclosing and 
providing information; adjust the existing ways to comply with any 
previously applicable instructions and requirements; train personnel to 
be able to respond to a collection of information; search data sources; 
complete and review the collection of information; and transmit or 
otherwise disclose the information.

                  Table XII.B-1.--Estimated Burden for Reporting and Recordkeeping Requirements
----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Annual burden
                         Industry sector                            respondents        hours       Annual costs
----------------------------------------------------------------------------------------------------------------
Vehicles........................................................              35             770         $80,900
Fuels...........................................................             185          23,710       2,677,410
Gas Cans........................................................               5             216          12,999
                                                                 -----------------------------------------------
    Total.......................................................             225          24,696       2,771,309
----------------------------------------------------------------------------------------------------------------

    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.
    To comment on the Agency's need for this information, the accuracy 
of the provided burden estimates, and any suggested methods for 
minimizing respondent burden, including the use of automated collection 
techniques, EPA has established a public docket for this rule, which 
includes this ICR, under Docket ID number EPA-HQ-OAR-2005-0036. Submit 
any comments related to the ICR for this proposed rule to EPA and OMB. 
See ADDRESSES section at the beginning of this notice for where to 
submit comments to EPA. Send comments to OMB at the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
725 17th Street, NW., Washington, DC 20503, ``Attention: Desk Office 
for EPA.'' Include the ICR number in any correspondence. Since OMB is 
required to make a decision concerning the ICR between 30 and 60 days 
after March 29, 2006, a comment to OMB is best assured of having its 
full effect if OMB receives it by April 28, 2006. The final rule will 
respond to any OMB or public comments on the information collection 
requirements contained in this proposal.

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

1. Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201 (see table below); (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. The 
following table provides an overview of the primary SBA small business 
categories potentially affected by this regulation:

------------------------------------------------------------------------
                                 Defined as small entity
            Industry              by SBA if less than or    NAICS codes
                                         equal to               \a\
------------------------------------------------------------------------
Light-duty vehicles:
    --Vehicle manufacturers      1,000 employees........          336111
     (including small volume
     manufacturers).
    --Independent commercial     $6 million annual sales         811111,
     importers.                                           811112, 811198
     --Alternative fuel vehicle  100 employees..........          424720
     converters.
                                 1,000 employees........          335312
                                 $6 million annual sales          811198
Gasoline fuel refiners.........  1500 employees \b\.....          324110

[[Page 15923]]

 
Portable fuel container
 manufacturers:
    --Plastic container          500 employees..........          326199
     manufacturers.
    --Metal gas can              1,000 employees........         332431
     manufacturers.
------------------------------------------------------------------------
Notes:
\a\ North American Industrial Classification System.
\b\ EPA has included in past fuels rulemakings a provision that, in
  order to qualify for EPA's small refiner flexibilities, a refiner must
  also produce no greater than 155,000 bpcd crude capacity.

2. Background
    Mobile sources emit air toxics that can cause cancer and other 
serious health effects (Section III of this preamble and Chapter 1 of 
the Regulatory Impact Analysis (RIA) for this rule describe these 
compounds and their health effects). Mobile sources contribute 
significantly to the nationwide risk from breathing outdoor sources of 
air toxics. In today's action we are proposing: standards to limit the 
exhaust hydrocarbons from passenger vehicles during cold temperature 
operation; evaporative hydrocarbon emissions standards for passenger 
vehicles; limiting the average annual benzene content of gasoline; and 
hydrocarbon emissions standards for gas cans that would reduce 
evaporation, permeation, and spillage from these containers. (Detailed 
discussion of each of these programs is in sections VI, VII, and VIII 
of the preamble and Chapters 5, 6, and 7 of the RIA). We are proposing 
the standards for vehicles and gasoline under section 202(l)(2) of the 
Clean Air Act (CAA), which directs EPA to establish requirements to 
control emissions of mobile source air toxics (MSATs) from new motor 
vehicles and fuels. Controls for gas cans are being pursued under CAA 
section 183(e), the provisions applying to consumer and commercial 
products.
    Pursuant to section 603 of the RFA, EPA prepared an initial 
regulatory flexibility analysis (IRFA) that examines the impact of the 
proposed rule on small entities along with regulatory alternatives that 
could reduce that impact. The IRFA, as summarized below, is available 
for review in the docket and Chapter 14 of the RIA.
    As required by section 609(b) of the RFA, as amended by SBREFA, EPA 
also conducted outreach to small entities and convened a Small Business 
Advocacy Review Panel to obtain advice and recommendations of 
representatives of the small entities that potentially would be subject 
to the rule's requirements.
    Consistent with the RFA/SBREFA requirements, the Panel evaluated 
the assembled materials and small-entity comments on issues related to 
elements of the IRFA. A copy of the Panel report is included in the 
docket for this proposed rule, and a summary of the Panel process, and 
subsequent Panel recommendations, is summarized below.
3. Summary of Regulated Small Entities
    The following section discusses the small entities directly 
regulated by this proposed rule.
a. Highway Light-Duty Vehicles
    In addition to the major vehicle manufacturers, three distinct 
categories of businesses relating to highway light-duty vehicles would 
be covered by the new vehicle standards: small volume manufacturers 
(SVMs), independent commercial importers (ICIs), and alternative fuel 
vehicle converters. SVMs are companies that sell less than 15,000 
vehicles per year, as defined in past EPA regulations, and this status 
allows vehicle models to be certified under a slightly simpler 
certification process. Independent commercial importers are companies 
that hold a Certificate (or certificates) of Conformity permitting them 
to alter imported vehicles to meet U.S emission standards. Alternative 
fuel vehicle converters are businesses that convert gasoline or diesel 
vehicles to operate on alternative fuel, and converters must seek a 
certificate for all of their vehicle models. Based on a preliminary 
assessment, EPA identified about 14 SVMs, 10 alternative fuel vehicle 
converters, and 10 ICIs. Of these, EPA believes 5 SVMs, 6 converters, 
and all 10 ICIs would meet the small-entity criteria as defined by SBA 
(no major vehicle manufacturers meet the small-entity criteria). EPA 
estimates that these small entities comprise about 0.02 percent of the 
total light-duty vehicle sales in the U.S. for the year 2004.
b. Gasoline Refiners
    EPA's current assessment is that 15 refiners meet SBA's criterion 
of having 1,500 employees or less. It should be noted that because of 
the dynamics in the refining industry (i.e., mergers and acquisitions) 
and decisions by some refiners to enter or leave the gasoline market, 
the actual number of refiners that ultimately qualify for small refiner 
status under an MSAT program could be much different than these initial 
estimates. Current data further indicates that these refiners produce 
about 2.5 percent of the total gasoline pool.
c. Portable Gasoline Container Manufacturers
    EPA conducted a preliminary industry profile to identify the 
manufacturers of portable gasoline containers (gas cans)--98 percent 
are plastic containers and 2 percent are metal gas cans. Using this 
industry profile, EPA identified 4 domestic manufacturers and 1 foreign 
manufacturer. Of these 4 U.S. manufacturers, 3 meet the SBA definition 
of a small entity. One small business accounted for over 50 percent of 
the U.S. sales in 2002, and the other small entities comprised about 10 
percent of U.S. sales.
4. Potential Reporting, Record Keeping, and Compliance
    For highway light-duty vehicles, EPA is proposing to continue the 
reporting, recordkeeping, and compliance requirements prescribed for 
this category in 40 CFR 86. Key among these requirements are 
certification requirements and provisions related to reporting of 
production, emissions information, flexibility use, etc.
    For any fuel control program, EPA must have assurance that fuel 
produced by refiners meets the applicable standard, and that the fuel 
continues to meet the standard as it passes downstream through the 
distribution system to the ultimate end user. EPA expects that 
recordkeeping, reporting and compliance provisions of the proposed rule 
will be fairly consistent with those in place today for other fuel 
programs. For example, reporting would likely involve requiring that 
refiners submit pre-compliance reports updating EPA on their plans to 
meet the MSAT standards.
    For gas cans, there currently are not federal emission control 
requirements, and thus, EPA is proposing new reporting and record 
keeping requirements for gas can manufacturers that would be subject to 
the proposed standards. EPA is proposing

[[Page 15924]]

requirements that would be similar to those in the California program, 
such as submitting emissions testing information, reporting of 
certification families, and use of transition provisions.
5. Relevant Federal Rules
    We are aware of a few other current or proposed Federal rules that 
are related to the upcoming proposed rule. The primary federal rules 
that are related to the proposed MSAT rule under consideration are the 
first MSAT rule (Federal Register Vol. 66, p. 17230, March 29, 2001), 
the Tier 2 Vehicle/Gasoline Sulfur rulemaking (Federal Register Vol. 
65, p. 6698, February 10, 2000), the fuel sulfur rules for highway 
diesel (Federal Register Vol. 66, p. 5002, January 18, 2001) and 
nonroad diesel (Federal Register Vol. 69, p. 38958, June 29, 2004), and 
the Cold Temperature Carbon Monoxide Rulemaking (Federal Register Vol. 
57, p. 31888, July 17, 1992).
    In addition, the Evaporative Emissions Streamlining Direct Final 
Rulemaking was issued on December 8, 2005 (Federal Register Vol. 70, p. 
72917). For gas cans, OSHA has safety regulations for gasoline 
containers used in workplace settings. Cans meeting OSHA requirements, 
commonly called safety cans, are exempt from the California program, 
and we are planning to exempt them from the EPA program.
    Section 1501 of the Energy Policy Act of 2005 requires the Agency 
to implement a Renewable Fuels Standard (RFS) program. Beginning in 
2006, this program will require increasing volumes of renewable fuel to 
be used in gasoline, until a total of 7.5 billion gallons is required 
in 2012. The most prevalent renewable fuel is expected to be ethanol. 
There are a wide variety of potential impacts of ethanol blending on 
MSAT emissions that will be evaluated as part of the RFS rulemaking 
process. In general, as ethanol use increases, other sources of octane 
in gasoline can decrease. Depending on these changes, the impact on 
benzene emissions will vary. The specific effects of ethanol on benzene 
will be addressed in the Regulatory Impact Analysis (RIA) to this rule 
and in future rulemakings, such as the RFS rule.
6. Summary of SBREFA Panel Process and Panel Outreach
a. Significant Panel Findings
    The Small Business Advocacy Review Panel (SBAR Panel, or the Panel) 
considered many regulatory options and flexibilities that would help 
mitigate potential adverse effects on small businesses as a result of 
this rule. During the SBREFA Panel process, the Panel sought out and 
received comments on the regulatory options and flexibilities that were 
presented to SERs and Panel members. The major flexibilities and 
hardship relief provisions that were recommended by the Panel are 
described below and are also located in Section 9 of the SBREFA Final 
Panel Report which is available in the public docket.
b. Panel Process
    As required by section 609(b) of the RFA, as amended by SBREFA, we 
also conducted outreach to small entities and convened an SBAR Panel to 
obtain advice and recommendations of representatives of the small 
entities that potentially would be subject to the rule's requirements.
    On September 7, 2005, EPA's Small Business Advocacy Chairperson 
convened a Panel under Section 609(b) of the RFA. In addition to the 
Chair, the Panel consisted of the Division Director of the Assessment 
and Standards Division of EPA's Office of Transportation and Air 
Quality, the Chief Counsel for Advocacy of the Small Business 
Administration, and the Administrator of the Office of Information and 
Regulatory Affairs within the Office of Management and Budget. As part 
of the SBAR Panel process, we conducted outreach with representatives 
from the various small entities that would be affected by the proposed 
rulemaking. We met with these Small Entity Representatives (SERs) to 
discuss the potential rulemaking approaches and potential options to 
decrease the impact of the rulemaking on their industries. We 
distributed outreach materials to the SERs; these materials included 
background on the rulemaking, possible regulatory approaches, and 
possible rulemaking alternatives. The Panel met with SERs from the 
industries that will be directly affected by the MSAT rule on September 
27, 2005 (gasoline refiners) and September 29, 2005 (light-duty 
vehicles and portable gasoline containers) to discuss the outreach 
materials and receive feedback on the approaches and alternatives 
detailed in the outreach packet (the Panel also met with SERs on July 
19, 2005 for an initial outreach meeting). The Panel received written 
comments from the SERs following the meeting in response to discussions 
had at the meeting and the questions posed to the SERs by the Agency. 
The SERs were specifically asked to provide comment on regulatory 
alternatives that could help to minimize the rule's impact on small 
businesses.
    In general, SERs representing the gas can manufacturers industry 
raised concerns on how the MSAT rule's requirements would be 
coordinated with the California program and other requirements, and 
that there should be adequate opportunity for sell through at the start 
of the program. The small volume manufacturer, ICI, and vehicle 
converter SERs that participated had questions about the form of the 
new standards for light-duty vehicles, specifically testing and 
certification requirements. The gasoline refiner SERs generally stated 
that they believed that small refiners would face challenges in meeting 
a new standard. More specifically, they raised the concern that the 
rule could be very costly and dependence on credits may not be a 
comfortable situation; they were also concerned about the timing of the 
standards for this rule, given other upcoming fuel standards.
    The Panel's findings and discussions were based on the information 
that was available during the term of the Panel and issues that were 
raised by the SERs during the outreach meetings and in their comments. 
It was agreed that EPA should consider the issues raised by the SERs 
(and discussions had by the Panel itself) and that EPA should consider 
comments on flexibility alternatives that would help to mitigate any 
negative impacts on small businesses. Alternatives discussed throughout 
the Panel process included those offered in previous or current EPA 
rulemakings, as well as alternatives suggested by SERs and Panel 
members, and the Panel recommended that all be considered in the 
development of the rule. Though some of the flexibilities suggested may 
be appropriate to apply to all entities affected by the rulemaking, the 
Panel's discussions and recommendations were focused mainly on the 
impacts, and ways to mitigate adverse impacts, on small businesses. A 
summary of these recommendations is detailed below, and a full 
discussion of the regulatory alternatives and hardship provisions 
discussed and recommended by the Panel can be found in the SBREFA Final 
Panel Report. A complete discussion of the transition and hardship 
provisions that we are proposing in today's action can be found in 
Sections VI.E, VII.E, and VIII (vehicle, fuels, and gas can sections) 
of this preamble. Also, the Panel Report includes all comments received 
from SERs (Appendices D and E of the Report) and summaries of the two 
outreach meetings that were held with the SERs (Appendices B and C). In 
accordance with the RFA/SBREFA requirements, the Panel evaluated the

[[Page 15925]]

aforementioned materials and SER comments on issues related to the 
Initial Regulatory Flexibility Analysis (IRFA). The following sections 
describe the Panel recommendations from the SBAR Panel Report.
c. Small Business Flexibilities
    The Panel recommended that EPA consider and seek comment on a wide 
range of regulatory alternatives to mitigate the impacts of the 
rulemaking on small businesses, including those flexibility options 
described below. As previously stated, the following discussion is a 
summary of the SBAR Panel recommendations; our proposals regarding 
these recommendations are located in earlier sections of this rule 
preamble.
i. Highway Light-Duty Vehicles
(a) Highway Light-Duty Vehicle Flexibilities
    For certification purposes (and for the sake of simplicity for 
Panel discussions regarding flexibility options), SVMs include ICIs and 
alternative fuel vehicle converters since they sell less than 15,000 
vehicles per year. Similar to the flexibility provisions implemented in 
the Tier 2 rule, the Panel recommended that we allow SVMs (includes all 
vehicle small entities that would be affected by this rule, which are 
the majority of SVMs) the following flexibility options for meeting 
cold temperature VOC standards and evaporative emission standards:
    For cold VOC standards, the Panel recommended that SVMs simply 
comply with the standards with 100 percent of their vehicles during the 
last year of the 4 year phase-in period. For example, if the standard 
for light-duty vehicles and light light-duty trucks (0 to 6,000 pounds 
GVWR) were to begin in 2010 and end in 2013 (25%, 50%, 75%, 100% phase-
in over 4 years), the SVM provision would be 100 percent in 2013. If 
the standard for heavy light-duty trucks and medium-duty passenger 
vehicles (greater than 6,000 pounds GVWR) were to start in 2012 (25%, 
50%, 75%, 100% phase-in over 4 years), the SVM provision would be 100 
percent in 2015.
    In regard to evaporative emission standards, the Panel recommended 
that since the evaporative emissions standards will not have phase-in 
years, we allow SVMs to simply comply with standards during the third 
year of the program (we have implemented similar provisions in past 
rulemakings). For a 2009 start date for light-duty vehicles and light 
light-duty trucks, SVMs would need to meet the evaporative emission 
standards in 2011. For a 2010 implementation date for heavy light-duty 
trucks and medium-duty passenger vehicles, SVMs would need to comply in 
2012.
(b) Highway Light-Duty Vehicle Hardships
    In addition, the Panel recommended that hardship flexibility 
provisions be extended to SVMs for the cold temperature VOC and 
evaporative emission standards. The provisions that the Panel 
recommended are:
    SVMs would be allowed to apply (EPA would need to review and 
approve application) for up to an additional 2 years to meet the 100 
percent phase-in requirements for cold VOC and the delayed requirement 
for evaporative emissions. Appeals for such hardship relief must be 
made in writing, must be submitted before the earliest date of 
noncompliance, must include evidence that the noncompliance will occur 
despite the manufacturer's best efforts to comply, and must include 
evidence that severe economic hardship will be faced by the company if 
the relief is not granted.
ii. Gasoline Refiners
(a) Gasoline Refiner Flexibilities
    The Panel recommended that EPA propose certain provisions to 
encourage early compliance with lower benzene standards. The Panel 
recommended that EPA propose that small refiners be afforded the 
following flexibility options to help mitigate the impacts on small 
refiners:
    Delay in Standards--The Panel recommended that a four-year delay 
period be proposed for small refiners. A four-year delay would be 
needed in order to allow for a review of the ABT program, as discussed 
below, to occur one year after implementation but still three years 
prior to the small refiner compliance deadline. It was noted by the 
small refiners that three years are generally needed for small refiners 
to obtain financing and perform engineering and construction. The Panel 
was also in support of allowing for refinery expansion within the delay 
option, and recommended that refinery expansion be provided for in the 
rule.
    Early ABT Credits--The Panel recommended that early credit 
generation be afforded to small refiners that take some steps to meet 
the benzene requirement prior to the effective date of the standard. 
Depending on the start date of the program, and coupled with the four-
year delay option, a small refiner could have a total credit generation 
period of five to seven years. The Panel was also in support of 
allowing refiners (small, as well as non-small, refiners) to generate 
credits for reductions to their benzene emissions levels, rather than 
credits only for meeting the benzene standard that is set by the rule.
    The Panel recommended a review of the credit trading program and 
small refiner flexibility options one year after the general program 
starts. Such a review could take into account the number of early 
credits generated, as well as the number of credits generated and sold 
during the first year of the program. Further, a review after the first 
year of the program would still provide small refiners with the three 
years that it was suggested would be needed for these refiners to 
obtain financing and perform engineering and construction for benzene 
reduction equipment. Should the review conclude that changes to either 
the program or the small refiner provisions are necessary, the Panel 
recommended that EPA also consider some of the suggestions provided by 
the small refiners (their comments are located in Appendix E of the 
Final Panel Report), such as:
     The general MSAT program should require pre-compliance 
reporting (similar to EPA's highway and nonroad diesel rules);
     Following the review, EPA should revisit the small refiner 
provisions if it is found that the credit trading market does not 
exist, or if credits are only available at a cost that would not allow 
small refiners to purchase credits for compliance;
     The review should offer ways either to help the credit 
market, or help small refiners gain access to credits (e.g., EPA could 
``create'' credits to introduce to the market, EPA could impose 
additional requirements to encourage trading with small refiners, 
etc.).
    In addition, the Panel recommended that EPA consider in this 
rulemaking establishing an additional hardship provision to assist 
those small refiners that cannot comply with the MSAT with a viable 
credit market. (This suggested hardship provision was also suggested by 
the small refiners in their comments, located in Appendix E of the 
Final Panel Report). This hardship provision could address concerns 
that, for some small refineries, compliance may be technically feasible 
only through the purchase of credits and it may not be economically 
feasible to purchase those credits. This flexibility could be provided 
to a small refiner on a case-by-case basis following the review and 
based on a summary, by the refiner, of technical or financial 
infeasibility (or some other type of similar situation that

[[Page 15926]]

would render its compliance with the standard difficult). This hardship 
provision might include further delays and/or a slightly relaxed 
standard on an individual refinery basis for a duration of two years; 
in addition, provision might allow the refinery to request, and EPA 
grant, multiple extensions of the flexibility until the refinery's 
material situation changes. The Panel also stated that it understood 
that EPA may need to modify or rescind this provision, should it be 
implemented, based on the results of the program review.
(b) Gasoline Refiner Hardships
    During the Panel process, we stated that we intended to propose the 
extreme unforeseen circumstances hardship and extreme hardship 
provisions (for all gasoline refiners and importers), similar to those 
in prior fuels programs. A hardship based on extreme unforeseen 
circumstances is intended to provide short term relief due to 
unanticipated circumstances beyond the control of the refiner, such as 
a natural disaster or a refinery fire; an extreme hardship is intended 
to provide short-term relief based on extreme circumstances (e.g., 
extreme financial problems, extreme operational or technical problems, 
etc.) that impose extreme hardship and thus significantly affect a 
refiner's ability to comply with the program requirements by the 
applicable dates. The Panel agreed with the proposal of such provisions 
and recommended that we include them in the MSAT rulemaking.
iii. Portable Gasoline Containers
(a) Portable Gasoline Container Flexibilities
    Since nearly all gas can manufacturers are small entities and they 
account for about 60 percent of sales, the Panel planned to extend the 
flexibility options to all gas can manufacturers. Moreover, 
implementation of the program would be much simpler by doing so. The 
recommended flexibilities are the following:
    Design Certification--The Panel recommended that we propose to 
permit gas can manufacturers to use design certification in lieu of 
running any or all of the durability aging cycles. Manufacturers could 
demonstrate the durability of their gas cans based in part on emissions 
test data from designs using the same permeation barriers and 
materials. Under a design-based certification program a manufacturer 
would provide evidence in the application for certification that their 
container would meet the applicable standards based on its design 
(e.g., use of a particular permeation barrier). The manufacturer would 
submit adequate engineering and other information about its individual 
design such that EPA could determine that the emissions performance of 
their individual design would not be negatively impacted by slosh, UV 
exposure, and/or pressure cycling (whichever tests the manufacturer is 
proposing to not run prior to emissions testing).
    Broaden Certification Families--This approach would relax the 
criteria used to determine what constitutes a certification family. It 
would allow small businesses to limit their certification families (and 
therefore their certification testing burden), rather than testing all 
of the various size containers in a manufacturer's product line. Some 
small entities may be able to put all of their various size containers 
into a single certification family. Manufacturers would then certify 
their containers using the ``worst case'' configuration within the 
family. To be grouped together, containers would need to be 
manufactured using the same materials and processes even though they 
are of different sizes.
    Additional Lead-time--Since it may take additional time for the gas 
can SERs to gather information to fully evaluate whether or not 
additional lead-time is needed beyond the 2009 start date, the Panel 
recommended that we discuss lead-time in the proposal and request 
comments on the need for additional lead-time to allow manufacturers to 
ramp up to a nationwide program.
    Product Sell-through--As with past rulemakings for other source 
sectors, the Panel recommended that EPA propose to allow normal sell 
through of gas cans as long as manufacturers do not create stockpiles 
of noncomplying gas cans prior to the start of the program.
(b) Portable Gasoline Container Hardships
    The Panel recommended that EPA propose two types of hardship 
programs for small gas can manufacturers. These provisions are:
    Allow small manufacturers to petition EPA for limited additional 
lead-time to comply with the standards. A manufacturer would have to 
make the case that it has taken all possible business, technical, and 
economic steps to comply but the burden of compliance costs would have 
a significant adverse effect on the company's solvency. Hardship relief 
could include requirements for interim emission reductions. The length 
of the hardship relief would be established during the initial review 
and would likely need to be reviewed annually thereafter.
    Permit small manufacturers to apply for hardship relief if 
circumstances outside their control cause the failure to comply (i.e. 
supply contract broken by parts supplier) and if failure to sell the 
subject containers would have a major impact on the company's solvency. 
The terms and timeframe of the relief would depend on the specific 
circumstances of the company and the situation involved. As part of its 
application, a company would be required to provide a compliance plan 
detailing when and how it would achieve compliance with the standards 
under both types of hardship relief.
    We invite comments on all aspects of the proposal and its impacts 
on small entities.

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 of 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

[[Page 15927]]

small governments on compliance with the regulatory requirements.
    This rule contains no federal mandates for state, local, or tribal 
governments as defined by the provisions of Title II of the UMRA. The 
rule imposes no enforceable duties on any of these governmental 
entities. Nothing in the rule would significantly or uniquely affect 
small governments. EPA has determined that this rule contains federal 
mandates that may result in expenditures of more than $100 million to 
the private sector in any single year. EPA believes that the proposal 
represents the least costly, most cost-effective approach to achieve 
the statutory requirements of the rule. The costs and benefits 
associated with the proposal are discussed above and in the Draft 
Regulatory Impact Analysis, as required by 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 proposed rule does not have federalism implications. It will 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132.
    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.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicits comment on this proposed rule 
from State and local officials.

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 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.''
    This proposed rule does not have tribal implications as specified 
in Executive Order 13175. This rule will be implemented at the Federal 
level and impose compliance costs only on vehicle manufacturers 
(includes alternative fuel vehicle converters and ICIs), fuel 
producers, and portable gasoline container manufacturers. Tribal 
governments will be affected only to the extent they purchase and use 
regulated vehicles, fuels, and portable gasoline containers. Thus, 
Executive Order 13175 does not apply to this rule. EPA specifically 
solicits additional comment on this proposed rule from tribal 
officials.

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 proposed rule is subject to the Executive Order because it is 
an economically significant regulatory action as defined by Executive 
Order 12866, and we believe that by addressing the environmental health 
or safety risk, this action may have a disproportionate beneficial 
effect on children. Accordingly, we have evaluated the potential 
environmental health or safety effects of VOC and toxics emissions from 
gasoline-fueled mobile sources and gas cans on children. The results of 
this evaluation are described below and contained in section IV.
    Exposure to a number of the compounds addressed in this rule may 
have a disproportionate effect on children. First, exposure to 
carcinogens that cause cancer through a mutagenic mode of action during 
childhood development may have an incrementally disproportionate 
impact. Because of their small size, increased activity, and increased 
ventilation rates compared to adults, children may have greater 
exposure to these compounds in the ambient air, on a unit body weight 
basis. Moreover, for PM, because children's breathing rates are higher, 
their exposures may be higher and because their respiratory systems are 
still developing, children may be more susceptible to problems from 
exposure to respiratory irritants. The public is invited to submit or 
identify peer-reviewed studies and data, of which EPA may not be aware, 
that assessed results of early life exposure to the pollutants 
addressed by this rule.

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. If promulgated, 
the gasoline benzene provisions of the proposed rule would shift about 
22,000 barrels per day of benzene from the gasoline market to the 
petrochemical market. This volume represents about 0.2 percent of 
nationwide gasoline production. The actual impact of the rule on the 
gasoline market, however, is likely to be less due to offsetting 
changes in the production of petrochemicals, as well as expected growth 
in the petrochemical market absent this rule. The major sources of 
benzene for the petrochemical market other than reformate from gasoline 
production are also derived from gasoline components or gasoline 
feedstocks. Consequently, the expected shift toward more benzene 
production from reformate due to this proposed rule would be offset by 
less benzene produced from other gasoline feedstocks.
    The rule would require refiners to use a small additional amount of 
energy in processing gasoline to reduce benzene levels, primarily due 
to the increased energy used for benzene extraction. Our modeling of 
increased energy use indicates that the process energy used by refiners 
to produce gasoline would increase by about one percent. Overall,

[[Page 15928]]

we believe that the proposed rule would result in no significant 
adverse energy impacts.
    The proposed gasoline benzene provisions would not affect the 
current gasoline distribution practices.
    We discuss our analysis of the energy and supply effects of the 
proposed gasoline benzene standard further in section IX of this 
preamble and in Chapter 9 of the Regulatory Impact Analysis.
    The fuel supply and energy effects described above would be offset 
substantially by the positive effects on gasoline supply and energy use 
of the proposed gas can standards also proposed in today's action. 
These proposed provisions would greatly reduce the gasoline lost to 
evaporation from gas cans. This would in turn reduce the demand for 
gasoline, increasing the gasoline supply and reducing the energy used 
in producing gasoline.

I. National Technology Transfer 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.
    The proposed rulemaking involves technical standards. Therefore, 
the Agency conducted a search to identify potentially applicable 
voluntary consensus standards. However, we identified no such 
standards. Therefore, for the cold temperature NMHC standards, EPA 
proposes to use the existing EPA cold temperature CO test procedures 
(manufacturers currently measure hydrocarbon emissions with current 
cold CO test procedures), which were adopted in a previous EPA 
rulemaking (1992). The fuel standards referenced in today's proposed 
rule involve the measurement of gasoline fuel parameters. The 
measurement standards for gasoline fuel parameters referenced in 
today's proposal are government-unique standards that were developed by 
the Agency through previous rulemakings. Both the cold temperature CO 
test procedures and the measurement standards for gasoline fuel 
parameters have served the Agency's emissions control goals well since 
their implementation and have been well accepted by industry. For gas 
cans, EPA is proposing new procedures for measuring hydrocarbon 
emissions.
    EPA welcomes comments on this aspect of the proposed rulemaking 
and, specifically, invites the public to identify potentially-
applicable voluntary consensus standards and to explain why such 
standards should be used in this regulation.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 directs Federal agencies to ``determine 
whether their programs, policies, and activities have 
disproportionately high adverse human health or environmental effects 
on minority populations' (sections 3-301 and 3-302). In developing this 
proposed rule, EPA assessed environmental justice issues that may be 
relevant to this proposal (see section IV of this proposed rule and 
chapter 3 of the Draft Regulatory Impact Analysis).
    The proposed rule would reduce VOC and toxics emissions from 
gasoline-fueled mobile sources (particularly highway light-duty 
vehicles) and gas cans, and thus, it would decrease the amount of air 
pollution to which the entire population is exposed. EPA evaluated the 
population residing close to high traffic density (near roadways), and 
we found that this population has demographic differences from the 
general population, including a greater fraction of lower income and 
minority residents. Since the proposed rule would reduce emissions from 
roadways, those living nearby (more likely to be lower income and 
minority residents) are likely to have a disproportionate benefit from 
the proposed rule. Thus, this proposed rule does not have a 
disproportionately high adverse human health or environmental effect on 
minority populations.

XIII. Statutory Provisions and Legal Authority

    Statutory authority for the fuels controls proposed in today's 
document can be found in sections 202 and 211(c) of the Clean Air Act 
(CAA), as amended, 42 U.S.C. sections 7521 and 7545(c). Additional 
support for the procedural and enforcement-related aspects of the fuel 
controls in today's proposal, including the proposed recordkeeping 
requirements, come from sections 114(a) and 301(a) of the CAA, 42 
U.S.C. sections 7414(a) and 7601(a).
    Statutory authority for the vehicle controls proposed in this 
document can be found in sections 202, 206, 207, 208, and 301 of the 
CAA, 42 U.S.C. sections 7521, 7525, 7541, 7542 and 7601.
    Statutory authority for the portable gasoline container controls 
proposed in today's document can be found in sections 183(e) and 111, 
42 U.S.C. sections 7511b(e) and 7411.

List of Subjects

40 CFR Part 59

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Incorporation by reference, 
Labeling, Consumer or Commercial Products pollution, Penalties, 
Reporting and recordkeeping requirements.

40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, Imports, Incorporation by reference, Labeling, Motor vehicle 
pollution, Penalties, Reporting and recordkeeping requirements.

40 CFR Part 85

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Imports, Labeling, Motor vehicle 
pollution, Penalties, Reporting and recordkeeping requirements, 
Research, Warranties.

40 CFR Part 86

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Incorporation by reference, 
Labeling, Motor vehicle pollution, Penalties, Reporting and 
recordkeeping requirements.

    Dated: February 28, 2006.
Stephen L. Johnson,
Administrator.
    For the reasons set forth in the preamble, parts 59, 80, 85 and 86 
of title 40 of the Code of Federal Regulations are proposed to be 
amended as follows:

PART 59--NATIONAL VOLATILE ORGANIC COMPOUND EMISSION STANDARDS FOR 
CONSUMER AND COMMERCIAL PRODUCTS

    1. The authority citation for part 59 continues to read as follows:

    Authority: 42 U.S.C. 7414 and 7511b(e).

    2. Subpart F is added to part 59 to read as follows:

[[Page 15929]]

Subpart F--Control of Evaporative Emissions From New and In-Use 
Portable Gasoline Containers

Sec.

Overview and Applicability

59.600 Does this subpart apply for my products?
59.601 Do the requirements of this subpart apply to me?
59.602 What are the general prohibitions and requirements of this 
subpart?
59.603 How must manufacturers apply good engineering judgment?
59.605 What portable gasoline containers are excluded from this 
subpart's requirements?
59.607 Submission of information.

Emission Standards and Related Requirements

59.611 What evaporative emission requirements apply under this 
subpart?
59.612 What emission-related warranty requirements apply to me?
59.613 What operation and maintenance instructions must I give to 
buyers?
59.615 How must I label and identify the portable gasoline 
containers I produce?

Certifying Emission Families

59.621 Who may apply for a certificate of conformity?
59.622 What are the general requirements for obtaining a certificate 
of conformity and producing portable gasoline containers under it?
59.623 What must I include in my application?
59.624 How do I amend my application for certification?
59.625 How do I select emission families?
59.626 What emission testing must I perform for my application for a 
certificate of conformity?
59.627 How do I demonstrate that my emission family complies with 
evaporative emission standards?
59.628 What records must I keep and what reports must I send to EPA?
59.629 What decisions may EPA make regarding my certificate of 
conformity?
59.630 EPA testing.
59.650 General testing provisions.
59.652 Other procedures.
59.653 How do I test portable gasoline containers?

Special Compliance Provisions

59.660 Exemption from the standards.
59.662 What temporary provisions address hardship due to unusual 
circumstances?
59.663 What are the provisions for extending compliance deadlines 
for manufacturers under hardship?
59.664 What are the requirements for importing portable gasoline 
containers into the United States?

Definitions and Other Reference Information

59.680 What definitions apply to this subpart?
59.685 What symbols, acronyms, and abbreviations does this subpart 
use?
59.695 What provisions apply to confidential information?
59.697 State actions.
59.698 May EPA enter my facilities for inspections?
59.699 How do I request a hearing?

Subpart F--Control of Evaporative Emissions From New and In-Use 
Portable Gasoline Containers

Overview and Applicability


Sec.  59.600  Does this subpart apply for my products?

    (a) Except as provided in Sec.  59.605 and paragraph (b) and (c) of 
this section, the regulations in this subpart F apply for all portable 
gasoline containers (defined in Sec.  59.680) beginning January 1, 
2009.
    (b) See Sec.  59.602(a) and (b) to determine how to apply the 
provisions of this subpart for containers that were manufactured before 
January 1, 2009.


Sec.  59.601  Do the requirements of this subpart apply to me?

    (a) Unless specified otherwise in this subpart, the requirements 
and prohibitions of this subpart apply to all manufacturers and 
importers of portable gasoline containers. Certain prohibitions in 
Sec.  59.602 apply to all other persons.
    (b) New portable gasoline containers that are subject to the 
emissions standards of this part must be covered by a certificate of 
conformity that is issued to the manufacturer of the container. If more 
than one person meets the definition of manufacturer for a portable 
gasoline container, see Sec.  59.621 to determine if you are the 
manufacturer who may apply for and receive a certificate of conformity.
    (c) Unless specifically noted otherwise, the term ``you'' means 
manufacturers, as defined in Sec.  59.680.


Sec.  59.602  What are the general prohibitions and requirements of 
this subpart?

    (a) General prohibition for manufacturers and importers. No 
manufacturer or importer may sell, offer for sale, introduce or deliver 
for introduction into commerce in the United States, or import any new 
portable gasoline container that is subject to the emissions standards 
of this subpart and is manufactured after December 31, 2008 unless it 
is covered by a valid certificate of conformity, it is labeled as 
required, and it complies with all of the applicable requirements of 
this subpart, including complies with the emissions standards for its 
useful life. After June 30, 2009, no manufacturer or importer may sell, 
offer for sale, introduce into commerce in the United States, or import 
any new portable gasoline container that was manufactured prior to 
January 1, 2009.
    (b) General prohibition for wholesale distributors. No wholesale 
distributor may sell, offer for sale, or distribute any portable 
gasoline container that is subject to the emissions standards of this 
subpart and is manufactured after December 31, 2008 unless it is 
covered by a valid certificate of conformity and is labeled as 
required. After December 31, 2009, no wholesale distributor may sell, 
offer for sale, or distribute any portable gasoline container that was 
manufactured prior to January 1, 2009. After December 31, 2009, all new 
portable gasoline containers shall be deemed to be manufactured after 
December 31, 2008 unless they are in retail inventory.
    (c) Reporting and recordkeeping. (1) You must keep the records and 
submit the reports specified in Sec.  59.628. Records must be retained 
for at least 5 years from the date of manufacture or importation and 
must be supplied to EPA upon request.
    (2) No person may alter, destroy, or falsify any record or report 
required by this subpart.
    (d) Testing and access to facilities. You may not keep us from 
entering your facility to test inspect if we are authorized to do so. 
Also, you must perform the tests we require (or have the tests done for 
you). Failure to perform this testing is prohibited.
    (e) Warranty. You may not fail to offer, provide notice of, or 
honor the emissions warranty required under this subpart.
    (f) Replacement components. No person may sell, offer for sale, 
introduce or deliver for introduction into commerce in the United 
States, import, or install any replacement component for portable 
gasoline containers subject to the standards of this subpart where the 
component has the effect of disabling, bypassing, or rendering 
inoperative the emissions controls of the containers.
    (g) Violations. If a person violates any prohibition or requirement 
of this subpart or the Act concerning portable gasoline containers, it 
shall be considered a separate violation for each portable gasoline 
container.
    (h) Assessment of penalties and injunctions. We may assess 
administrative penalties, bring a civil action to assess and recover 
civil penalties, bring a civil action to enjoin and restrain 
violations, or bring criminal action as provided by the Clean Air Act.


Sec.  59.603  How must manufacturers apply good engineering judgment?

    (a) In addition to other requirements and prohibitions set forth in 
this subpart, you must use good engineering judgment for decisions 
related to any requirements under this subpart. This

[[Page 15930]]

includes your applications for certification, any testing you do to 
show that your portable gasoline containers comply with requirements 
that apply to them, and how you select, categorize, determine, and 
apply these requirements.
    (b) Upon request, you must provide EPA a written description of the 
engineering judgment in question. Such information must be provided 
within 15 working days unless EPA specifies a different period of time 
to respond.
    (c) We may reject your decision if it is not based on good 
engineering judgment or is otherwise inconsistent with the requirements 
that apply, and we may:
    (1) Suspend, revoke, or void a certificate of conformity if we 
determine you used incorrect or incomplete information or failed to 
consider relevant information, or that your decision was not based on 
good engineering judgment; or
    (2) Notify you that we believe any aspect of your application or 
other information submission may be incorrect or invalid due to lack of 
good engineering judgment or other cause. Unless a different period of 
time is specified, you will have 30 days to respond to our notice and 
specifically address our concerns. After considering your information, 
we will notify regarding our finding, which may include the actions 
provided in paragraph (c)(1) of this section.
    (d) If you disagree with our conclusions under paragraph (c) of 
this section, you may file a request for a hearing with the Designated 
Compliance Officer as described in Sec.  59.699. In your request, you 
must specifically state your objections, and include relevant data or 
supporting analysis. The request must be signed by your authorized 
representative. If we agree that your request raises a substantial 
factual issue, we will hold the hearing according to Sec.  59.699.


Sec.  59.605  What portable gasoline containers are excluded from this 
subpart's requirements?

    This section describes exclusions that apply to certain portable 
gasoline containers. The prohibitions and requirements of this subpart 
do not apply for containers excluded under this section. Exclusions 
under this section are based on inherent characteristics of the 
containers. See Sec.  59.660 for exemptions that apply based on special 
circumstances.
    (a) Containers approved as safety cans consistent with the 
requirements of Title 29, part 1926, subpart F, of the Code of Federal 
Regulations (29 CFR 1926.150 through 1926.152) are excluded. Such cans 
generally have a flash-arresting screens, spring-closing lids and spout 
covers and have been approved by a nationally recognized testing 
laboratory such as Factory Mutual Engineering Corp., Underwriters' 
Laboratories, Inc., or Federal agencies such as Bureau of Mines, or 
U.S. Coast Guard.
    (b) Containers with a nominal capacity of less than 0.25 gallons or 
more than 10.0 gallons are excluded.
    (c) Containers designed and marketed solely to deliver fuel 
directly to nonroad engines during engine operation, such as containers 
with a connection for a fuel line and a reserve fuel area, are 
considered to be nonroad fuel tanks, and are thus excluded.


Sec.  59.607  Submission of information.

    (a) You are responsible for all statements you make to us related 
to this subpart F, including information not required during 
certification. You are required to provide truthful and complete 
information. This subpart describes the consequences of failing to meet 
this obligation. The consequences also may include prosecution under 18 
U.S.C. 1001 and 42 U.S.C. 7431(c)(2).
    (b) We may require an officer or authorized representative of your 
company with knowledge of the other information contained in the 
submittal to approve and sign any submission of information to us, and 
to certify that all of the information submitted is accurate and 
complete.

Emission Standards and Related Requirements


Sec.  59.611  What evaporative emission requirements apply under this 
subpart?

    (a) Emissions from portable gasoline containers may not exceed 0.30 
grams per gallon per day when measured with the test procedures in 
Sec. Sec.  59.650 through 59.653. This procedure measures diurnal 
venting emissions and permeation emissions.
    (b) For the purpose of this section, portable gasoline containers 
include spouts, caps, gaskets, and other parts provided with the 
container.
    (c) The following general requirements also apply for all portable 
gasoline containers subject to the standards of this subpart:
    (1) Prohibited controls. You may not design your emission-control 
systems so that they cause or contribute to an unreasonable risk to 
public health, welfare, or safety while operating. You may not design 
your portable gasoline containers to have adjustable parameters unless 
the containers will meet all the requirements of this subpart when 
adjusted anywhere within the physically adjustable range. You may not 
equip your portable gasoline containers with a defeat device, or 
intentionally produce your containers to enable the use of a defeat 
device. A defeat device is an element of design (either original or 
replacement) that is not approved in advance by EPA and that reduces 
the effectiveness of emission controls under conditions that the 
portable gasoline containers may reasonably be expected to encounter 
during normal use.
    (2) Leaks. You must design and manufacture your containers to be 
free of leaks. This requirement applies when your container is upright, 
partially inverted, or completely inverted.
    (3) Refueling. You are required to design your portable gasoline 
containers to minimize spillage during refueling to the extent 
practical. This requires that you use good engineering judgment to 
avoid designs that will make it difficult to refuel typical vehicle and 
equipment designs without spillage.
    (d) Portable gasoline containers must meet the standards and 
requirements specified in this subpart throughout the useful life of 
the container. The useful life of the container is five years beginning 
on the date of sale to the ultimate purchaser.


Sec.  59.612  What emission-related warranty requirements apply to me?

    (a) General requirements. You must warrant to the ultimate 
purchaser that the new portable gasoline container, including all parts 
of its evaporative emission-control system, is:
    (1) Designed, built, and equipped so it conforms at the time of 
sale to the ultimate purchaser with the requirements of this subpart.
    (2) Is free from defects in materials and workmanship that may keep 
it from meeting these requirements.
    (b) Warranty notice and period. Your emission-related warranty must 
be valid for a minimum of one year from the date of sale to the 
ultimate purchaser.
    (c) Notice. You must provide a warranty notice with each container.


Sec.  59.613  What operation and maintenance instructions must I give 
to buyers?

    You must provide the ultimate purchaser of the new portable 
gasoline container written instructions for properly maintaining and 
using the emission-control system.


Sec.  59.615  How must I label and identify the portable gasoline 
containers I produce?

    This section describes how you must label your portable gasoline 
containers.

[[Page 15931]]

    (a) At the time of manufacture, indelibly mark the month and year 
of manufacture on each container.
    (b) Mold into or affix a legible label identifying each portable 
gasoline container. The label must be:
    (1) Attached so it is not easily removable.
    (2) Secured to a part of the container that can be easily viewed 
when the can is in use, not on the bottom of the container.
    (3) Written in English.
    (c) The label must include:
    (1) The heading ``EMISSION CONTROL INFORMATION''.
    (2) Your full corporate name and trademark.
    (3) A standardized identifier such as EPA's standardized 
designation for the emission families, the model number, or the part 
number.
    (4) This statement: ``THIS CONTAINER COMPLIES WITH U.S. EPA 
EMISSION REGULATIONS FOR PORTABLE GASOLINE CONTAINERS.''.
    (d) You may add information to the emission control information 
label to identify other emission standards that the container meets or 
does not meet (such as California standards). You may also add other 
information to ensure that the portable gasoline container will be 
properly maintained and used.
    (e) You may request EPA to approve modified labeling requirements 
in this subpart F if you show that it is necessary or appropriate. We 
will approve your request if your alternate label is consistent with 
the requirements of this subpart.
    (f) You may identify the name and trademark of another company 
instead of their own on your emission control information label, 
subject to the following provisions:
    (1) You must have a contractual agreement with the other company 
that obligates that company to take the following steps:
    (i) Meet the emission warranty requirements that apply under Sec.  
59.612. This may involve a separate agreement involving reimbursement 
of warranty-related expenses.
    (ii) Report all warranty-related information to the certificate 
holder.
    (2) In your application for certification, identify the company 
whose trademark you will use and describe the arrangements you have 
made to meet your requirements under this section.
    (3) You remain responsible for meeting all the requirements of this 
subpart.

Certifying Emission Families


Sec.  59.621  Who may apply for a certificate of conformity?

    A certificate of conformity may only be issued to the manufacturer 
that completes the construction of the portable gasoline container. In 
unusual circumstances, upon a petition by a manufacturer, we may allow 
another manufacturer of the container to hold the certificate of 
conformity. However, in order to hold the certificate, the manufacturer 
must demonstrate day-to-day ability to ensure that containers produced 
under the certificate will comply with the requirements of this 
subpart.


Sec.  59.622  What are the general requirements for obtaining a 
certificate of conformity and producing portable gasoline containers 
under it?

    (a) You must send us a separate application for a certificate of 
conformity for each emission family. A certificate of conformity for 
containers is valid from the indicated effective date until the end of 
the production period for which it is issued. EPA may require new 
certification prior to the end of the production period if EPA finds 
that containers are not meeting the standards in use during their 
useful life.
    (b) The application must be written in English and contain all the 
information required by this subpart and must not include false or 
incomplete statements or information (see Sec.  59.629).
    (c) We may ask you to include less information than we specify in 
this subpart, as long as you maintain all the information required by 
Sec.  59.628.
    (d) You must use good engineering judgment for all decisions 
related to your application (see Sec.  59.603).
    (e) An authorized representative of your company must approve and 
sign the application.
    (f) See Sec.  59.629 for provisions describing how we will process 
your application.
    (g) You may ask us to modify specific provisions for demonstrating 
compliance with the requirements of this subpart if they cannot be met 
for your portable gasoline container. We may approve your request if we 
determine that such a change is consistent with the intent of this 
subpart. We will not approve your request if it might lead to less 
effective emission control or prevent us from ensuring compliance with 
the requirements of this subpart. To make a request, describe in 
writing which provision you are unable to meet, why you are unable to 
meet it, and how the provision should be modified to address your 
concern.
    (h) If we approve your application, we will issue a certificate 
that will allow you to produce the containers that you described in 
your application for a specified production period. Certificates do not 
allow you to produce containers that were not described in your 
application, unless we approve the additional containers under Sec.  
59.624.


Sec.  59.623  What must I include in my application?

    This section specifies the information that must be in your 
application, unless we ask you to include less information under Sec.  
59.622(c). We may require you to provide additional information to 
evaluate your application.
    (a) Describe the emission family's specifications and other basic 
parameters of the emission controls. List each distinguishable 
configuration in the emission family. Include descriptions and part 
numbers for all detachable components such as spouts and caps.
    (b) Describe and explain the method of emission control.
    (c) Describe the products you selected for testing and the reasons 
for selecting them.
    (d) Describe the test equipment and procedures that you used, 
including any special or alternate test procedures you used (see Sec.  
59.650).
    (e) List the specifications of the test fuel to show that it falls 
within the required ranges specified in Sec.  59.650 of this subpart.
    (f) Include the maintenance and use instructions and warranty 
information you will give to the ultimate purchaser of each new 
portable gasoline container (see Sec.  59.613).
    (g) Describe your emission control information label (see Sec.  
59.615).
    (h) State that your product was tested as described in the 
application (including the test procedures, test parameters, and test 
fuels) to show you meet the requirements of this subpart.
    (i) Present emission data to show your products meet the applicable 
emission standards. Where applicable, Sec. Sec.  59.626 and 59.627 may 
allow you to submit an application in certain cases without new 
emission data.
    (j) Report all test results, including those from invalid tests or 
from any other tests, whether or not they were conducted according to 
the test procedures of Sec. Sec.  59.650 through 59.653. We may ask you 
to send other information to confirm that your tests were valid under 
the requirements of this subpart.
    (k) Unconditionally certify that all the products in the emission 
family comply with the requirements of this subpart,

[[Page 15932]]

other referenced parts of the CFR, and the Clean Air Act.
    (l) Include estimates of U.S.-directed production volumes.
    (m) Include the information required by other sections of this 
subpart.
    (n) Include other relevant information, including any additional 
information requested by EPA.
    (o) Name an agent for service of process located in the United 
States. Service on this agent constitutes service on you or any of your 
officers or employees for any action by EPA or otherwise by the United 
States related to the requirements of this subpart.


Sec.  59.624  How do I amend my application for certification?

    Before we issue you a certificate of conformity, you may amend your 
application to include new or modified configurations, subject to the 
provisions of this section. After we have issued your certificate of 
conformity, you may send us an amended application requesting that we 
include new or modified configurations within the scope of the 
certificate, subject to the provisions of this section. You must amend 
your application if any changes occur with respect to any information 
included in your application.
    (a) You must amend your application before you take either of the 
following actions:
    (1) Add a configuration to an emission family. In this case, the 
configuration added must be consistent with other configurations in the 
emission family with respect to the criteria listed in Sec.  59.625.
    (2) Change a configuration already included in an emission family 
in a way that may affect emissions, or change any of the components you 
described in your application for certification. This includes 
production and design changes that may affect emissions any time during 
the portable gasoline containers' lifetime.
    (b) To amend your application for certification, send the 
Designated Compliance Officer the following information:
    (1) Describe in detail the addition or change in the configuration 
you intend to make.
    (2) Include engineering evaluations or data showing that the 
amended emission family complies with all applicable requirements. You 
may do this by showing that the original emission data are still 
appropriate with respect to showing compliance of the amended family 
with all applicable requirements.
    (3) If the original emission data for the emission family are not 
appropriate to show compliance for the new or modified configuration, 
include new test data showing that the new or modified configuration 
meets the requirements of this subpart.
    (c) We may ask for more test data or engineering evaluations. You 
must give us these within 30 days after we request them.
    (d) For emission families already covered by a certificate of 
conformity, we will determine whether the existing certificate of 
conformity covers your new or modified configuration. You may ask for a 
hearing if we deny your request (see Sec.  59.699).
    (e) For emission families already covered by a certificate of 
conformity and you send us a request to amend your application, you may 
sell and distribute the new or modified configuration before we make a 
decision under paragraph (d) of this section, subject to the provisions 
of this paragraph. If we determine that the affected configurations do 
not meet applicable requirements, we will notify you to cease 
production of the configurations and any containers from the new or 
modified configuration will not be considered covered by the 
certificate. In addition, we may require you to recall any affected 
containers that you have already distributed, including those sold to 
the ultimate purchasers. Choosing to produce containers under this 
paragraph (e) is deemed to be consent to recall all containers that we 
determine do not meet applicable emission standards or other 
requirements and to remedy the nonconformity at no expense to the 
owner. If you do not provide information required under paragraph (c) 
of this section within 30 days, you must stop producing the new or 
modified containers.


Sec.  59.625  How do I select emission families?

    (a) Divide your product line into families of portable gasoline 
containers that are expected to have similar emission characteristics 
throughout the useful life.
    (b) Group containers in the same emission family if they are the 
same in all the following aspects:
    (1) Type of material (including pigments, plasticizers, UV 
inhibitors, or other additives).
    (2) Production method.
    (3) Spout design.
    (4) Gasket material/design.
    (5) Emission control strategy.
    (c) You may subdivide a group of containers that is identical under 
paragraph (b) of this section into different emission families if you 
show the expected emission characteristics are different.
    (d) You may group containers that are not identical with respect to 
the things listed in paragraph (b) of this section in the same emission 
family if you show that their emission characteristics will be similar 
throughout their useful life.


Sec.  59.626  What emission testing must I perform for my application 
for a certificate of conformity?

    This section describes the emission testing you must perform to 
show compliance with the emission standards in Sec.  59.611.
    (a) Test your products using the procedures and equipment specified 
in Sec. Sec.  59.650 through 59.653.
    (b) Select an emission-data unit from each emission family for 
testing. You must test a production sample or a preproduction product 
that will represent actual production. Select the configuration that is 
most likely to exceed (or have emissions nearest to) the applicable 
emission standard. For example, for a family of multilayer portable 
gasoline containers, test the container with the thinnest barrier 
layer. Test 3 identical containers.
    (c) We may measure emissions from any of your products from the 
emission family. You must supply your products to us if we choose to 
perform confirmatory testing.
    (d) You may ask to use emission data from a previous production 
period (carryover) instead of doing new tests, but only if the 
emission-data from the previous production period remains the 
appropriate emission-data unit under paragraph (b) of this section. For 
example, you may not carryover emission data for your family of 
containers if you have added a thinner-walled container than was tested 
previously.
    (e) We may require you to test a second unit of the same or 
different configuration in addition to the unit tested under paragraph 
(b) of this section.
    (f) If you use an alternate test procedure under Sec.  59.652 and 
later testing shows that such testing does not produce results that are 
equivalent to the procedures specified in this subpart, we may reject 
data you generated using the alternate procedure and base our 
compliance determination on the later testing.


Sec.  59.627  How do I demonstrate that my emission family complies 
with evaporative emission standards?

    (a) For purposes of certification, your emission family is 
considered in compliance with an evaporative

[[Page 15933]]

emission standard in Sec.  59.611(a) if the test results from all 
portable gasoline containers in the family that have been tested show 
measured emissions levels that are at or below the applicable standard.
    (b) Your emissions family is deemed not to comply if any container 
representing that family has test results showing an official emission 
level above the standard.
    (c) Round the measured emission level to the same number of decimal 
places as the emission standard. Compare the rounded emission levels to 
the emission standard.


Sec.  59.628  What records must I keep and what reports must I send to 
EPA?

    (a) Organize and maintain the following records:
    (1) A copy of all applications and any summary information you send 
us.
    (2) Any of the information we specify in Sec.  59.623 that you were 
not required to include in your application.
    (3) A detailed history of each emission-data unit. For each 
emission data unit, include all of the following:
    (i) The emission-data unit's construction, including its origin and 
buildup, steps you took to ensure that it represents production 
containers, any components you built specially for it, and all the 
components you include in your application for certification.
    (ii) All your emission tests, including documentation on routine 
and standard tests, as specified in Sec. Sec.  59.650 through 59.653, 
and the date and purpose of each test.
    (iii) All tests to diagnose emission-control performance, giving 
the date and time of each and the reasons for the test.
    (iv) Any other relevant events or information.
    (4) Production figures for each emission family divided by assembly 
plant.
    (5) If you identify your portable gasoline containers by lot number 
or other identification numbers, keep a record of these numbers for all 
the containers you produce under each certificate of conformity.
    (b) Keep data from routine emission tests (such as test cell 
temperatures and relative humidity readings) for one year after we 
issue the associated certificate of conformity. Keep all other 
information specified in paragraph (a) of this section for five years 
after we issue your certificate.
    (c) Store these records in any format and on any media, as long as 
you can promptly send us organized, written records in English if we 
ask for them. You must keep these records readily available. We may 
review them at any time.
    (d) Send us copies of any maintenance instructions or explanations 
if we ask for them.
    (e) Send us an annual warranty report summarizing by emissions 
family successful warranty claims under Sec.  59.612, including the 
reason for the claim. You must submit the report by July 1 for the 
preceding calendar year.


Sec.  59.629  What decisions may EPA make regarding my certificate of 
conformity?

    (a) If we determine your application is complete and shows that the 
emission family meets all the requirements of this subpart and the Act, 
we will issue a certificate of conformity for your emission family for 
the specified production period. We may make the approval subject to 
additional conditions.
    (b) We may deny your application for certification if we determine 
that your emission family fails to comply with emission standards or 
other requirements of this subpart or the Act. Our decision may be 
based on a review of all information available to us. If we deny your 
application, we will explain why in writing.
    (c) In addition, we may deny your application or suspend, revoke, 
or void your certificate if you do any of the following:
    (1) Refuse to comply with any testing or reporting requirements.
    (2) Submit false or incomplete information.
    (3) Render inaccurate any test data.
    (4) Deny us from completing authorized activities despite our 
presenting a warrant or court order (see Sec.  59.698). This includes a 
failure to provide reasonable assistance.
    (5) Produce portable gasoline containers for importation into the 
United States at a location where local law prohibits us from carrying 
out authorized activities.
    (6) Fail to supply requested information or amend your application 
to include all portable gasoline containers being produced.
    (7) Take any action that otherwise circumvents the intent of the 
Act or this subpart.
    (d) If we deny your application or suspend, revoke, or void your 
certificate, you may ask for a hearing (see Sec.  59.699).


Sec.  59.630  EPA testing.

    We may test any portable gasoline container subject to the 
standards of this subpart.
    (a) Certification and production sample testing. Upon our request, 
a manufacturer must supply a prototype container or a reasonable number 
of production samples to us for verification testing. These samples 
will generally be tested using the full test procedure of Sec.  59.653.
    (b) In-use testing. We may test in-use containers using the test 
procedure of Sec.  59.653 without preconditioning.


Sec.  59.650  General testing provisions.

    (a) The test procedures of this subpart are addressed to you as a 
manufacturer, but they apply equally to anyone who does testing for 
you.
    (b) Unless we specify otherwise, the terms ``procedures'' and 
``test procedures'' in this subpart include all aspects of testing, 
including the equipment specifications, calibrations, calculations, and 
other protocols and procedural specifications needed to measure 
emissions.
    (c) The specification for gasoline to be used for testing is given 
in 40 CFR 1065.210. Use the grade of gasoline specified for general 
testing. Blend this grade of gasoline with reagent grade ethanol in a 
volumetric ratio of 90.0 percent gasoline to 10.0 percent ethanol. You 
may use ethanol that is less pure if you can demonstrate that it will 
not affect your ability to demonstrate compliance with the applicable 
emission standards.
    (d) Accuracy and precision of all temperature measurements must be 
2.2 [deg]C or better.
    (e) Accuracy and precision of mass balances must be sufficient to 
ensure accuracy and precision of two percent or better for emission 
measurements for products at the maximum level allowed by the standard. 
The readability of the display may not be coarser than half of the 
required accuracy and precision.


Sec.  59.652  Other procedures.

    (a) Your testing. The procedures in this subpart apply for all 
testing you do to show compliance with emission standards, with certain 
exceptions listed in this section.
    (b) Our testing. These procedures generally apply for testing that 
we do to determine if your portable gasoline containers complies with 
applicable emission standards. We may perform other testing as allowed 
by the Act.
    (c) Exceptions. We may allow or require you to use procedures other 
than those specified in this subpart in the following cases.
    (1) You may request to use special procedures if your portable 
gasoline containers cannot be tested using the specified procedures. We 
will approve your request if we determine that it would produce 
emission measurements that represent in-use operation and we determine 
that it can be used to show

[[Page 15934]]

compliance with the requirements of the standard-setting section.
    (2) You may ask to use emission data collected using other 
procedures, such as those of the California Air Resources Board. We 
will approve this only if you show us that using these other procedures 
do not affect your ability to show compliance with the applicable 
emission standards. This generally requires emission levels to be far 
enough below the applicable emission standards so that any test 
differences do not affect your ability to state unconditionally that 
your containers will meet all applicable emission standards when tested 
using the specified test procedures.
    (3) You may request to use alternate procedures that are equivalent 
to allowed procedures, or more accurate or more precise than allowed 
procedures.
    (d) You may not use other procedures under paragraph (c) of this 
section until we approve your request.


Sec.  59.653  How do I test portable gasoline containers?

    You must test the portable gasoline container as described in your 
application, with the applicable spout and cap attached. Tighten 
fittings in a manner representative of how they would be tightened by a 
typical user.
    (a) Preconditioning for durability. Complete the following steps at 
the start of testing, unless we determine that omission of one or more 
of these durability steps will not affect the emissions from your 
container.
    (1) Pressure cycling. Perform a pressure test by sealing the 
container and cycling it between +13.8 and -1.7 kPa (+2.0 and -0.5 
psig) and back to +13.8 kPa for 10,000 cycles at a rate of 60 seconds 
per cycle.
    (2) UV exposure. Perform a sunlight-exposure test by exposing the 
container to an ultraviolet light of at least 24 W/m2 (0.40 
W-hr/m2/min) on the container surface for at least 450 
hours. Alternatively, the container may be exposed to direct natural 
sunlight for an equivalent period of time, as long as you ensure that 
the container is exposed to at least 450 daylight hours.
    (3) Slosh testing. Perform a slosh test by filling the portable 
gasoline container to 40 percent of its capacity with the fuel 
specified in paragraph (e) of this section and rocking it at a rate of 
15 cycles per minute until you reach one million total cycles. Use an 
angle deviation of +15[deg] to -15[deg] from level. This test must be 
performed at a temperature of 28 [deg]C  5[deg]C.
    (4) Spout actuation. Perform the following spout actuation and 
inversion steps at the end on the slosh testing, and at the end of the 
preconditioning soak.
    (i) Perform one complete actuation/inversion cycle per day for ten 
days.
    (ii) One actuation/inversion cycle consists of the following steps:
    (A) Remove and replace the spout to simulate filling the container.
    (B) Slowly invert the container and keep it inverted for at least 5 
seconds to ensure that the spout and mechanisms become saturated with 
fuel. Any fuel leaking from any part of the container will denote a 
leak and will be reported as part of certification. Once completed, 
place the container on a flat surface in the upright position.
    (C) Actuate the spout by fully opening and closing without 
dispensing fuel. The spout must return to the closed position without 
the aid of the operator (e.g., pushing or pulling the spout closed). 
Repeat for a total of 10 actuations. If at any point the spout fails to 
return to the closed position, the container fails the test.
    (D) Repeat the step contained in paragraph (a)(4)(ii)(B) of this 
section (i.e., the inversion step).
    (E) Repeat the steps contained in paragraph (a)(4)(ii)(C) of this 
section (i.e., ten actuations).
    (b) Preconditioning fuel soak. Complete the following steps before 
a diurnal emission test: (1) Fill the portable gasoline container with 
the specified fuel to its nominal capacity, seal it using the spout, 
and allow it to soak at 28 5 [deg]C for at least 20 weeks. 
You are not required to soak the container for more than 20 weeks 
unless it has been determined that a longer soak period is needed to 
achieve a stabilized emissions rate. Alternatively, the container may 
be soaked for a shorter period of time at a higher temperature if you 
can show that the hydrocarbon permeation rate has stabilized. You may 
count the time of the slosh testing as part of the 20 weeks.
    (2) Pour the fuel out of the container and immediately refill to 50 
percent of nominal capacity. Be careful to not spill any fuel on the 
container. Wipe the outside of the container as needed to remove any 
liquid fuel that may have spilled on it.
    (3) Seal the container using the spout and cap assemblies that will 
used to seal the openings in a production container. Leave other 
openings on the container (such as vents) open unless they are 
automatically closing and unlikely for the user to leave open during 
typical storage.
    (c) Reference container. A reference tank is required to correct 
for buoyancy effects that may occur during testing. Prepare the 
reference tank as follows:
    (1) Obtain a second tank that is identical to the test tank. You 
may not use a tank that has previously contained fuel or any other 
contents that might affect the stability of its mass.
    (2) Fill the reference tank with enough dry sand (or other inert 
material) so that the mass of the reference tank is approximately the 
same as the test tank when filled with fuel. Use good engineering 
judgment to determine how similar the mass of the reference tank needs 
to be to the mass of the test tank considering the performance 
characteristics of your balance.
    (3) Ensure that the sand (or other inert material) is dry. This may 
require heating the tank or applying a vacuum to it.
    (4) Seal the tank.
    (d) Diurnal test run. To run the test, take the steps specified in 
this paragraph (d) for a portable gasoline container that was 
preconditioned as specified in paragraph (a) of this section.
    (1) Stabilize the fuel temperature within the portable gasoline 
container at 22.2 [deg]C. Vent the container at this point to relieve 
any positive or negative pressure that may have developed during 
stabilization.
    (2) Weigh the sealed reference container and record the weight. 
Place the reference on the balance and tare it so that it reads zero. 
Place the sealed test portable gasoline container on the balance and 
record the difference between the test container and the reference 
container. This value is Minitial Take this measurement 
within 8 hours of filling the test container with fuel as specified in 
paragraph (b)(2) of this section.
    (2) Immediately place the portable gasoline container within a well 
ventilated, temperature-controlled room or enclosure. Do not spill or 
add any fuel.
    (3) Close the room or enclosure.
    (4) Follow the temperature profile in the following table for all 
portable gasoline containers. Use good engineering judgment to follow 
this profile as closely as possible. You may use linearly interpolated 
temperatures or a spline fit for temperatures between the hourly 
setpoints.

[[Page 15935]]



   Table 1 of Sec.   59.653.--Diurnal Temperature Profile for Portable
                           Gasoline Containers
------------------------------------------------------------------------
                                                              Ambient
                                                            Temperature
                                                            (C) Profile
                      Time (hours)                         for Portable
                                                             Gasoline
                                                            Containers
------------------------------------------------------------------------
0.......................................................            22.2
1.......................................................            22.5
2.......................................................            24.2
3.......................................................            26.8
4.......................................................            29.6
5.......................................................            31.9
6.......................................................            33.9
7.......................................................            35.1
8.......................................................            35.4
9.......................................................            35.6
10......................................................            35.3
11......................................................            34.5
12......................................................            33.2
13......................................................            31.4
14......................................................            29.7
15......................................................            28.2
16......................................................            27.2
17......................................................            26.1
18......................................................            25.1
19......................................................            24.3
20......................................................            23.7
21......................................................            23.3
22......................................................            22.9
23......................................................            22.6
24......................................................            22.2
------------------------------------------------------------------------

    (5) At the end of the diurnal period, retare the balance using the 
reference container and weigh the portable gasoline container. Record 
the difference in mass between the reference container and the test. 
This value is Mfinal
    (6) Subtract Mfinal from Minitial; and divide 
the difference by the nominal capacity of the container (using at least 
three significant figures) to calculate the g/gallon/day emission rate:

Emission rate = (Minitial-Mfinal)/(nominal 
capacity)/(one day)

    (7) Round your result to the same number of decimal places as the 
emission standard.
    (8) Instead of determining emissions by weighing the container 
before and after the diurnal temperature cycle, you may place the 
container in a SHED meeting the specifications of 40 CFR 86.107-
96(a)(1) and measure emissions directly. Immediately following the 
stabilization in paragraph (d)(1) of this section, purge the SHED and 
follow the temperature profile from paragraph (d)(4) of this section. 
Start measuring emissions when you start the temperature profile.
    (e) For metal containers, you may demonstrate for certification 
that your portable gasoline containers comply with the evaporative 
emission standards without performing the pre-soak or container 
durability cycles (i.e., the pressure cycling, UV exposure, and slosh 
testing) specified in this section. For other containers, you may 
demonstrate compliance without performing the durability cycles 
specified in this section only if we approve it after you have 
presented data clearly demonstrating that the cycle or cycles do not 
negatively impact the permeation rate of the materials used in the 
containers.

Special Compliance Provisions


Sec.  59.660  Exemption from the standards.

    In certain circumstances, we may exempt portable gasoline 
containers from the evaporative emission standards and requirements of 
Sec.  59.611 and the prohibitions and requirements of Sec.  59.602. You 
do not need an exemption for any containers that you own but do not 
sell, offer for sale, introduce or deliver for introduction into U.S. 
commerce, or import into the United States. Submit your request for an 
exemption to the Designated Compliance Officer.
    (a) Portable gasoline containers that are intended for export only 
and are in fact exported are exempt provided they are clearly labeled 
as being for export only. Keep records for five years of all portable 
gasoline containers that you manufacture for export. Any introduction 
into U.S. commerce for any purpose other than export is considered to 
be a violation of Sec.  59.602 by the manufacturer. You do not need to 
request this exemption.
    (b) You may ask us to exempt portable gasoline containers that you 
will purchase, sell, or distribute for the sole purpose of testing 
them.
    (c) You may ask us to exempt portable gasoline containers for the 
purpose of national security, as long as your request is endorsed by an 
agency of the federal government responsible for national defense. In 
your request, explain why you need the exemption.
    (d) You may ask us to exempt containers that are designed and 
marketed solely for rapidly refueling racing applications which are 
designed to create a leak proof seal with the target tank or are 
designed to connect with a receiver installed on the target tank. This 
exemption is generally intended for containers used to rapidly refuel a 
race car during a pit stop and similar containers. In your request, 
explain how why these containers are unlikely to be used for nonracing 
applications. We may limit these exemptions to those applications that 
are allowed to use gasoline exempted under 40 CFR 80.200.
    (e) EPA may impose reasonable conditions on any exemption, 
including a limit on the number of containers that are covered by an 
exemption.


Sec.  59.662  What temporary provisions address hardship due to unusual 
circumstances?

    (a) After considering the circumstances, we may permit you to 
introduce into commerce exempt you from the evaporative emission 
standards and requirements of Sec.  59.611 of this subpart and the 
prohibitions and requirements of Sec.  59.602 for specified portable 
gasoline containers that do not comply with emission standards if all 
the following conditions apply:
    (1) Unusual circumstances that are clearly outside your control and 
that could not have been avoided with reasonable discretion prevent you 
from meeting requirements from this subpart.
    (2) You exercised prudent planning and were not able to avoid the 
violation; you have taken all reasonable steps to minimize the extent 
of the nonconformity.
    (3) Not having the exemption will jeopardize the solvency of your 
company.
    (4) No other allowances are available under the regulations in this 
chapter to avoid the impending violation.
    (b) To apply for an exemption, you must send the Designated Officer 
a written request as soon as possible before you are in violation. In 
your request, show that you meet all the conditions and requirements in 
paragraph (a) of this section.
    (c) Include in your request a plan showing how you will meet all 
the applicable requirements as quickly as possible.
    (d) You must give us other relevant information if we ask for it.
    (e) We may include reasonable additional conditions on an approval 
granted under this section, including provisions to recover or 
otherwise address the lost environmental benefit or paying fees to 
offset any economic gain resulting from the exemption.
    (f) We may approve extensions of up to one year. We may review and 
revise an extension as reasonable under the circumstances.
    (g) Add a legible label, written in block letters in English, to a 
readily visible part of each container exempted under this section. 
This label must prominently include at least the following items:
    (1) Your corporate name and trademark.
    (2) The statement ``EXEMPT UNDER 40 CFR 59.662.''.

[[Page 15936]]

Sec.  59.663  What are the provisions for extending compliance 
deadlines for manufacturers under hardship?

    (a) After considering the circumstances, we may extend the 
compliance deadline for you to meet new emission standards, as long as 
you meet all the conditions and requirements in this section.
    (b) To apply for an extension, you must send the Designated 
Compliance Officer a written request. In your request, show that all 
the following conditions and requirements apply:
    (1) You have taken all possible business, technical, and economic 
steps to comply.
    (2) Show that the burden of compliance costs prevents you from 
meeting the requirements of this subpart by the required compliance 
date.
    (3) Not having the exemption will jeopardize the solvency of your 
company.
    (4) No other allowances are available under the regulations in this 
subpart to avoid the impending violation.
    (c) In describing the steps you have taken to comply under 
paragraph (b)(1) of this section, include at least the following 
information:
    (1) Describe your business plan, showing the range of projects 
active or under consideration.
    (2) Describe your current and projected financial standing, with 
and without the burden of complying in full with the applicable 
regulations in this subpart by the required compliance date.
    (3) Describe your efforts to raise capital to comply with 
regulations in this subpart.
    (4) Identify the engineering and technical steps you have taken or 
plan to take to comply with regulations in this subpart.
    (5) Identify the level of compliance you can achieve. For example, 
you may be able to produce containers that meet a somewhat less 
stringent emission standard than the regulations in this subpart 
require.
    (d) Include in your request a plan showing how you will meet all 
the applicable requirements as quickly as possible.
    (e) You must give us other relevant information if we ask for it.
    (f) An authorized representative of your company must sign the 
request and include the statement: ``All the information in this 
request is true and accurate, to the best of my knowledge.''.
    (g) Send your request for this extension at least nine months 
before the relevant deadline.
    (h) We may include reasonable requirements on an approval granted 
under this section, including provisions to recover or otherwise 
address the lost environmental benefit. For example, we may require 
that you meet a less stringent emission standard.
    (i) We may approve extensions of up to one year. We may review and 
revise an extension as reasonable under the circumstances.
    (j) Add a permanent, legible label, written in block letters in 
English, to a readily visible part of each container exempted under 
this section. This label must prominently include at least the 
following items:
    (1) Your corporate name and trademark.
    (2) The statement ``EXEMPT UNDER 40 CFR 59.663.''.


Sec.  59.664  What are the requirements for importing portable gasoline 
containers into the United States?

    As specified in this section, we may require you to post a bond if 
you import into the U.S. containers that are subject to the standards 
of this subpart. See paragraph (f) of this section for the requirements 
related to importing containers that have been certified by someone 
else.
    (a) Prior to importing containers into the U.S., we may require you 
to post a bond to cover any potential enforcement actions under the 
Clean Air Act if you cannot demonstrate to us that you have assets of 
an appropriate liquidity readily available in the United States with a 
value equal to the retail value of the containers that you will import 
during the calendar year.
    (b) We may set the value of the bond up to five dollars per 
container.
    (c) You may meet the bond requirements of this section by obtaining 
a bond from a third-party surety that is cited in the U.S. Department 
of Treasury Circular 570, ``Companies Holding Certificates of Authority 
as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring 
Companies'' (http://www.fms.treas.gov/c570/c570.html#certified).
    (d) If you forfeit some or all of your bond in an enforcement 
action, you must post any appropriate bond for continuing importation 
within 90 days after you forfeit the bond amount.
    (e) You will forfeit the proceeds of the bond posted under this 
section if you need to satisfy any United States administrative final 
order or judicial judgment against you arising from your conduct in 
violation of this subpart.
    (f) This paragraph (f) applies if you import for resale containers 
that have been certified by someone else. You and the certificate 
holder are each responsible for compliance with the requirements of 
this subpart and the Clean Air Act. No bond is required under this 
section if either you or the certificate holder meet the conditions in 
paragraph (a) of this section. Otherwise, the importer must comply with 
the bond requirements of this section.

Definitions and Other Reference Information


Sec.  59.680  What definitions apply to this subpart?

    The following definitions apply to this subpart. The definitions 
apply to all subparts unless we note otherwise. All undefined terms 
have the meaning the Act gives to them. The definitions follow:
    Act means the Clean Air Act, as amended, 42 U.S.C. 7401--7671q.
    Adjustable parameter means any device, system, or element of design 
that someone can adjust and that, if adjusted, may affect emissions. 
You may ask us to exclude a parameter if you show us that it will not 
be adjusted in use in a way that affects emissions.
    Certification means the process of obtaining a certificate of 
conformity for an emission family that complies with the emission 
standards and requirements in this subpart.
    Certified emission level means the highest official emission level 
in an emission family.
    Configuration means a unique combination of hardware (material, 
geometry, and size) and calibration within an emission family. Units 
within a single configuration differ only with respect to normal 
production variability.
    Container means portable gasoline container.
    Designated Compliance Officer means the Manager, Engine Programs 
Group (6405-J), U.S. Environmental Protection Agency, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460.
    Designated Enforcement Officer means the Director, Air Enforcement 
Division (2242A), U.S. Environmental Protection Agency, 1200 
Pennsylvania Ave., NW.,Washington, DC 20460.
    Emission-control system means any device, system, or element of 
design that controls or reduces the regulated evaporative emissions 
from.
    Emission-data unit means a portable gasoline container that is 
tested for certification. This includes components tested by EPA.
    Emission-related maintenance means maintenance that substantially 
affects emissions or is likely to substantially affect emission 
deterioration.
    Emission family has the meaning given in Sec.  59.625.

[[Page 15937]]

    Evaporative means relating to fuel emissions that result from 
permeation of fuel through the portable gasoline container materials 
and from ventilation of the container.
    Good engineering judgment means judgments made consistent with 
generally accepted scientific and engineering principles and all 
available relevant information. See Sec.  59.603 for the administrative 
process we use to evaluate good engineering judgment.
    Hydrocarbon (HC) means total hydrocarbon (THC).
    Manufacture means the physical and engineering process of designing 
and/or constructing a portable gasoline container.
    Manufacturer means any person who manufactures a portable gasoline 
container for sale in the United States.
    Nominal capacity means the expected volumetric working capacity of 
a container.
    Official emission result means the measured emission rate for an 
emission-data unit.
    Portable gasoline container means any reusable container designed 
and marketed (or otherwise intended) for use by consumers for 
receiving, transporting, storing, and dispensing gasoline. For the 
purpose of this subpart, all portable fuel containers that are red in 
color are deemed to be portable gasoline containers, regardless of how 
they are labeled or marketed. Portable fuel containers that are not red 
in color and are clearly and permanently labeled for diesel fuel or 
kerosene only and not for use with gasoline are not portable gasoline 
containers.
    Production period means the period in which a portable gasoline 
container will be produced under a certificate of conformity. The 
maximum production period is five years.
    Revoke means to terminate the certificate or an exemption for an 
emission family. If we revoke a certificate or exemption, you must 
apply for a new certificate or exemption before continuing to introduce 
the affected containers into commerce. This does not apply to 
containers you no longer possess.
    Round has the meaning given in 40 CFR 1065.1001.
    Sealed means lacking openings that would allow liquid or vapor to 
escape to the atmosphere under normal operating pressures.
    Suspend means to temporarily discontinue the certificate or an 
exemption for an emission family. If we suspend a certificate, you may 
not introduce into commerce portable gasoline containers from that 
emission family unless we reinstate the certificate or approve a new 
one. If we suspend an exemption, you may not introduce into commerce 
containers that were previously covered by the exemption unless we 
reinstate the exemption.
    Test sample means the collection of portable gasoline containers 
selected from the population of an emission family for emission 
testing. This may include testing for certification, production-line 
testing, or in-use testing.
    Test unit means a portable gasoline container in a test sample.
    Total hydrocarbon means the combined mass of organic compounds 
measured by the specified procedure for measuring total hydrocarbon, 
expressed as a hydrocarbon with a hydrogen-to-carbon mass ratio of 
1.85:1.
    Ultimate purchaser means, with respect to any portable gasoline 
container, the first person who in good faith purchases such a 
container for purposes other than resale.
    Ultraviolet light means electromagnetic radiation with a wavelength 
between 300 and 400 nanometers.
    United States means the States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana 
Islands, Guam, American Samoa, and the U.S. Virgin Islands.
    U.S.-directed production volume means the amount of portable 
gasoline containers, subject to the requirements of this subpart, 
produced by a manufacturer for which the manufacturer has a reasonable 
assurance that sale was or will be made to ultimate purchasers in the 
United States.
    Useful life means the period during which a portable gasoline 
container is required to comply with all applicable emission standards. 
See Sec.  59.611.
    Void means to invalidate a certificate or an exemption ab initio 
(i.e. retroactively). Portable gasoline containers introduced into U.S. 
commerce under the voided certificate or exemption is a violation of 
this subpart, whether or not they were introduced before the 
certificate or exemption was voided.
    We (us, our) means the Administrator of the Environmental 
Protection Agency and any authorized representatives.


Sec.  59.685  What symbols, acronyms, and abbreviations does this 
subpart use?

    The following symbols, acronyms, and abbreviations apply to this 
subpart:

    CFR Code of Federal Regulations.
    EPA Environmental Protection Agency.
    HC hydrocarbon.
    NIST National Institute of Standards and Technology.
    THC total hydrocarbon.
    U.S.C. United States Code.

Sec.  59.695  What provisions apply to confidential information?

    (a) Clearly show what you consider confidential by marking, 
circling, bracketing, stamping, or some other method.
    (b) We will store your confidential information as described in 40 
CFR part 2. Also, we will disclose it only as specified in 40 CFR part 
2. This applies both to any information you send us and to any 
information we collect from inspections, audits, or other site visits.
    (c) If you send us a second copy without the confidential 
information, we will assume it contains nothing confidential whenever 
we need to release information from it.
    (d) If you send us information without claiming it is confidential, 
we may make it available to the public without further notice to you, 
as described in 40 CFR 2.204.


Sec.  59.697  State actions.

    The provisions in this subpart do not preclude any State or any 
political subdivision of a State from:
    (a) Adopting and enforcing any emission standard or limitation 
applicable to anyone subject to the provisions of this part; or
    (b) Requiring the regulated entity to obtain permits, licenses, or 
approvals prior to initiating construction, modification, or operation 
of a facility for manufacturing a consumer product.


Sec.  59.698  May EPA enter my facilities for inspections?

    (a) We may inspect your portable gasoline containers, testing, 
manufacturing processes, storage facilities (including port facilities 
for imported containers or other relevant facilities), or records, as 
authorized by the Act, to enforce the provisions of this subpart. 
Inspectors will have authorizing credentials and will limit inspections 
to reasonable times--usually, normal operating hours.
    (b) If we come to inspect, we may or may not have a warrant or 
court order.
    (1) If we do not have a warrant or court order, you may deny us 
entry.
    (2) If we have a warrant or court order, you must allow us to enter 
the facility and carry out the activities it describes.
    (c) We may seek a warrant or court order authorizing an inspection 
described in this section, whether or not we first tried to get your 
permission to inspect.

[[Page 15938]]

    (d) We may select any facility to do any of the following:
    (1) Inspect and monitor any aspect of portable gasoline container 
manufacturing, assembly, storage, or other procedures, and any 
facilities where you do them.
    (2) Inspect and monitor any aspect of test procedures or test-
related activities, including test container selection, preparation, 
durability cycles, and maintenance and verification of your test 
equipment's calibration.
    (3) Inspect and copy records or documents related to assembling, 
storing, selecting, and testing a container.
    (4) Inspect and photograph any part or aspect of containers or 
components use for assembly.
    (e) You must give us reasonable help without charge during an 
inspection authorized by the Act. For example, you may need to help us 
arrange an inspection with the facility's managers, including clerical 
support, copying, and translation. You may also need to show us how the 
facility operates and answer other questions. If we ask in writing to 
see a particular employee at the inspection, you must ensure that he or 
she is present (legal counsel may accompany the employee).
    (f) If you have facilities in other countries, we expect you to 
locate them in places where local law does not keep us from inspecting 
as described in this section. We will not try to inspect if we learn 
that local law prohibits it, but we may suspend your certificate if we 
are not allowed to inspect.


Sec.  59.699  How do I request a hearing?

    (a) You may request a hearing under certain circumstances, as 
described elsewhere in this subpart. To do this, you must file a 
written request with the Designated Compliance Officer, including a 
description of your objection and any supporting data, within 30 days 
after we make a decision.
    (b) For a hearing you request under the provisions of this subpart, 
we will approve your request if we find that your request raises a 
substantial factual issue.
    (c) If we agree to hold a hearing, we will use the procedures 
specified in 40 CFR part 1068, subpart G.

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    3. The authority citation for part 80 is revised to read as 
follows:

    Authority: 42 U.S.C. 7414, 7521(1), 7545 and 7601(a).

Subpart D--[Amended]

    4. Section 80.41 is amended by redesignating paragraph (e) as 
paragraph (e)(1), redesignating paragraph (f) as paragraph (f)(1), and 
adding paragraphs (e)(2) and (f)(2) to read as follows:


Sec.  80.41  Standards and requirements for compliance.

* * * * *
    (e) * * *
    (2) Beginning January 1, 2011, or January 1, 2015 for approved 
small refiners under Sec.  80.1340, the toxic air pollutants emissions 
performance reduction and benzene content specified in paragraph (e)(1) 
of this section shall apply only to reformulated gasoline that is not 
subject to the benzene standard of Sec.  80.1230, pursuant to the 
provisions of Sec.  80.1235. Beginning January 1, 2007, or January 1, 
2008 for approved small refiners under Sec.  80.235, the NOX 
emissions performance reduction specified in paragraph (e)(1) of this 
section shall no longer apply.
    (f) * * *
    (2) Beginning January 1, 2011, or January 1, 2015 for approved 
small refiners under Sec.  80.1340, the toxic air pollutants emissions 
performance reduction and benzene content specified in paragraph (f)(1) 
of this section shall apply only to reformulated gasoline that is not 
subject to the benzene standard of Sec.  80.1230, pursuant to the 
provisions of Sec.  80.1235. Beginning January 1, 2007, or January 1, 
2008 for approved small refiners under Sec.  80.235, the NOX 
emissions performance reduction specified in paragraph (f)(1) of this 
section shall no longer apply.
* * * * *

Subpart E--[Amended]

    5. Section 80.101 is amended by revising paragraph (c)(2) to read 
as follows:


Sec.  80.101  Standards applicable to refiners and importers.

* * * * *
    (c) * * *
    (2) Beginning January 1, 1998, each refiner and importer shall be 
subject to the Complex Model standards for each averaging period. 
However beginning January 1, 2011, or January 1, 2015 for approved 
small refiners under Sec.  80.1340, such annual average exhaust toxics 
standard shall apply only to conventional gasoline that is not subject 
to the benzene standard of Sec.  80.1230, pursuant to the provisions of 
Sec.  80.1235. Beginning January 1, 2007, or January 1, 2008 for 
approved small refiners under Sec.  80.235, the annual average 
NOX emissions standard section shall no longer apply.
* * * * *

Subpart F--[Amended]

    6. Section 80.128 is amended by revising paragraph (a) to read as 
follows:


Sec.  80.128  Agreed upon procedures for refiners and importers.

* * * * *
    (a) Read the refiner's or importer's reports filed with EPA for the 
previous year as required by Sec. Sec.  80.75, 80.83(g), 80.105, 80.990 
and 80.1354.
* * * * *

Subpart J--[Amended]

    7. Section 80.815 is amended by redesignating paragraph (d)(1) as 
paragraph (d)(1)(i) and adding paragraph (d)(1)(ii) to read as follows:


Sec.  80.815  What are the gasoline toxics performance requirements for 
refiners and importers?

* * * * *
    (d) * * *
    (1) * * *
    (ii) Beginning January 1, 2011, or January 1, 2015 for approved 
small refiners under Sec.  80.1340, the gasoline toxics performance 
requirements of this subpart shall apply only to gasoline that is not 
subject to the benzene standard of Sec.  80.1230, pursuant to the 
provisions of Sec.  80.1235.
* * * * *
    8. Section 80.1035 is amended by adding paragraph (h) to read as 
follows:


Sec.  80.1035  What are the attest engagement requirements for gasoline 
toxics compliance applicable to refiners and importers?

* * * * *
    (h) Beginning January 1, 2011, or January 1, 2015 for approved 
small refiners per Sec.  80.1340, the requirements of this section 
shall apply only to gasoline that is not subject to the benzene 
standard of Sec.  80.1230, pursuant to the provisions of Sec.  80.1235.
    9. Subpart L is added to read as follows:
Subpart L--Gasoline Benzene
Sec.
80.1200--80.1219 [Reserved]

General Information

80.1220 What are the implementation dates for the gasoline benzene 
program?
80.1225 Who must register with EPA under the gasoline benzene 
program?

Gasoline Benzene Requirements

80.1230 What are the gasoline benzene requirements for refiners and 
importers?
80.1235 What gasoline is subject to the benzene requirements of this 
subpart?

[[Page 15939]]

80.1236 What requirements apply to California gasoline?
80.1238 How is a refinery's or importer's annual average benzene 
concentration determined?
80.1240 How is a refinery's or importer's compliance with the 
gasoline benzene requirements of this subpart determined?

Averaging, Banking and Trading (ABT) Program

80.1270 Who may generate benzene credits under the ABT program?
80.1275 How are early benzene credits generated?
80.1280 How are refinery benzene baselines calculated?
80.1285 How does a refiner apply for a benzene baseline?
80.1290 How are benzene credits generated in 2011 and beyond?
80.1295 How are gasoline benzene credits used?

Hardship Provisions

80.1335 Can a refiner seek temporary relief from the requirements of 
this subpart?
80.1336 What if a refiner or importer cannot produce gasoline 
conforming to the requirements of this subpart?

Small Refiner Provisions

80.1338 What is the definition of a small refiner for the purpose of 
the gasoline benzene requirements of this subpart?
80.1339 Who is not eligible for the provisions for small refiners?
80.1340 How does a refiner obtain approval as a small refiner?
80.1342 What compliance options are available to small refiners 
under this subpart?
80.1344 What provisions are available to a large refiner that 
acquires one or more of a small refiner's refineries?

Sampling, Testing and Retention Requirements

80.1347 What are the sampling and testing requirements for refiners 
and importers?
80.1348 What gasoline sample retention requirements apply to 
refiners and importers?

Recordkeeping and Reporting Requirements

80.1350 What records must be kept?
80.1352 What are the pre-compliance reporting requirements for the 
gasoline benzene program?
80.1354 What are the reporting requirements for the gasoline benzene 
program?

Attest Engagements

80.1375 What are the attest engagement requirements for gasoline 
benzene compliance?

Violations and Penalties

80.1400 What acts are prohibited under the gasoline benzene program?
80.1405 What evidence may be used to determine compliance with the 
prohibitions and requirements of this subpart and liability for 
violations of this subpart?
80.1410 Who is liable for violations under the gasoline benzene 
program?
80.1415 What penalties apply under the gasoline benzene program?

Foreign Refiners

80.1420 What are the additional requirements under this subpart for 
gasoline produced at foreign refineries?

Subpart L--Gasoline Benzene


Sec. Sec.  80.1200-80.1219  [Reserved]

General Information


Sec.  80.1220  What are the implementation dates for the gasoline 
benzene program?

    (a) Benzene standard. (1) Effective with the annual averaging 
period beginning January 1, 2011, gasoline produced by a refiner at 
each refinery, or imported into an import facility, must meet the 
benzene standard specified in Sec.  80.1230, except as otherwise 
specifically provided for in this subpart.
    (2) Approved small refiners under Sec.  80.1340 may defer meeting 
the benzene standard specified in Sec.  80.1230 until January 1, 2015 
as described in Sec.  80.1342.
    (b) Early credit generation. (1) Beginning June 1, 2007, each 
refinery which has an approved benzene baseline per Sec.  80.1285 may 
generate early benzene credits in accordance with the provisions of 
Sec.  80.1275.
    (2) Early benzene credits may be generated through the end of the 
averaging period ending December 31, 2010.
    (3) Early benzene credits may be generated through the end of the 
averaging period ending December 31, 2014 for approved small refiners 
under Sec.  80.1340.
    (c) Standard credit generation. (1) Effective with the annual 
averaging period beginning January 1, 2011, a refiner for any of its 
refineries or an importer for its imported gasoline, may generate 
benzene credits in accordance with the provisions of Sec.  80.1290.
    (2) Effective with the annual averaging period beginning January 1, 
2015, an approved small refiner under Sec.  80.1340, for any of its 
refineries, may generate benzene credits in accordance with the 
provisions of Sec.  80.1290.


Sec.  80.1225  Who must register with EPA under the gasoline benzene 
program?

    (a) Refiners and importers that are registered by EPA under Sec.  
80.76, Sec.  80.103, Sec.  80.190, or Sec.  80.810 are deemed to be 
registered for purposes of this subpart.
    (b) Refiners and importers subject to the requirements in Sec.  
80.1230 that are not registered by EPA under Sec.  80.76, Sec.  80.103, 
Sec.  80.190 or Sec.  80.810 shall provide to EPA the information 
required in Sec.  80.76 by September 30, 2010, or not later than three 
months in advance of the first date that such person produces or 
imports gasoline, whichever is later.
    (c) Refiners that plan to generate early credits under Sec.  
80.1275 and that are not registered by EPA under Sec.  80.76, Sec.  
80.103, Sec.  80.190, or Sec.  80.810 must provide to EPA the 
information required in Sec.  80.76 not later than 60 days prior to the 
end of the first year of credit generation.

Gasoline Benzene Requirements


Sec.  80.1230  What are the gasoline benzene requirements for refiners 
and importers?

    (a)(1) Except as specified in paragraph (b) of this section, a 
refinery's or importer's average gasoline benzene concentration in any 
averaging period shall not exceed 0.62 percent by volume using 
conventional rounding methodology.
    (2) Compliance with the standard specified in paragraph (a)(1) of 
this section, or creation of a deficit in accordance with paragraph (b) 
of this section, is determined in accordance with Sec.  80.1240.
    (3) The averaging period for achieving compliance with the 
requirement of paragraph (a)(1) of this section is January 1 through 
December 31 of each calendar year, beginning January 1, 2011, or 
beginning January 1, 2015 for approved small refiners under Sec.  
80.1340.
    (4) Refinery grouping per Sec.  80.101(h) does not apply to 
compliance with the gasoline benzene requirement specified in this 
paragraph (a).
    (5) Gasoline produced at foreign refineries that is subject to the 
gasoline benzene requirements per Sec.  80.1235 shall be included in 
the importer's compliance determination, except as provided in Sec.  
80.1420.
    (b) Deficit carry-forward. (1) A refinery or importer creates a 
benzene deficit for a given averaging period when its compliance 
benzene value, per Sec.  80.1240, is greater than the benzene standard 
specified in paragraph (a) of this section.
    (2) A refinery or importer may carry the benzene deficit forward to 
the calendar year following the year the benzene deficit is created but 
only if no deficit had been previously carried forward a deficit to the 
year the deficit is created. If a refinery or importer carries forward, 
the following provisions apply in the second year:
    (i) The refinery or importer must achieve compliance with the 
benzene standard specified in paragraph (a) of this section.
    (ii) The refinery or importer must achieve further reductions in 
its

[[Page 15940]]

gasoline benzene concentrations sufficient to offset the benzene 
deficit of the previous year.
    (iii) Benzene credits may be used, per Sec.  80.1295, to meet the 
requirements of paragraphs (b)(2)(i) and (ii) of this section.
    (3) In the case of an approved hardship under Sec.  80.1335 or 
Sec.  80.1336, EPA may allow a briefly extended period of deficit 
carry-forward.
    (c) Oxygenate blenders, butane blenders and refiners that produce 
gasoline from transmix. (1)(i) Refiners and oxygenate blenders that 
only blend butane or oxygenate into gasoline downstream of the refinery 
that produced the gasoline or the import facility where the gasoline 
was imported, are not subject to the requirements of Sec.  80.1230 for 
such gasoline.
    (ii) Refiners that produce gasoline by separating gasoline from 
transmix are not subject to the requirements of Sec.  80.1230 for this 
gasoline.
    (2) Any refiner under paragraph (c)(1) of this section that adds 
any blendstock or feedstock other than, or in addition to, oxygenate 
and/or butane into gasoline downstream of the refinery that produced 
the gasoline or the import facility where the gasoline was imported, or 
into transmix, or into gasoline produced from transmix, is subject to 
the requirements of Sec.  80.1230 for this blendstock or feedstock.


Sec.  80.1235  What gasoline is subject to the benzene requirements of 
this subpart?

    For the purposes of determining compliance with the requirements of 
Sec.  80.1230, all reformulated gasoline, RBOB, and conventional 
gasoline or gasoline blending stock per Sec.  80.101(d) are 
collectively ``gasoline.'' Unless otherwise specified, all of a 
refinery's or importer's gasoline is subject to the standards and 
requirements of Sec.  80.1230, with the following exceptions:
    (a) Gasoline that is used to fuel aircraft, racing vehicles or 
racing boats that are used only in sanctioned racing events, provided 
that:
    (1) Product transfer documents associated with such gasoline, and 
any pump stand from which such gasoline is dispensed, identify the 
gasoline either as gasoline that is restricted for use in aircraft, or 
as gasoline that is restricted for use in racing motor vehicles or 
racing boats that are used only in sanctioned events;
    (2) The gasoline is completely segregated from all other gasoline 
throughout production, distribution and sale to the ultimate consumer; 
and
    (3) The gasoline is not made available for use as motor vehicle 
gasoline, or dispensed for use in motor vehicles, except for motor 
vehicles used only in sanctioned racing events.
    (b) California gasoline, as defined in Sec.  80.1236.
    (c) Gasoline that is exported for sale outside the U.S.
    (d) Gasoline used for research, development or testing purposes if 
it is exempted for these purposes under the reformulated gasoline and 
anti-dumping programs, as applicable.
    (e) Gasoline produced pursuant to Sec.  80.1230(c)(1).


Sec.  80.1236  What requirements apply to California gasoline?

    (a) Definition. For purposes of this subpart, California gasoline 
means any gasoline designated by the refiner or importer as for use 
only in California and that is actually used in California.
    (b) California gasoline exemption. California gasoline that 
complies with all the requirements of this section is exempt from the 
requirements in Sec.  80.1230.
    (c) Requirements for California gasoline. The following 
requirements apply to California gasoline:
    (1) Each batch of California gasoline must be designated as such by 
its refiner or importer.
    (2) Designated California gasoline must be kept segregated from 
gasoline that is not California gasoline at all points in the 
distribution system.
    (3) Designated California gasoline must ultimately be used in the 
State of California and not used elsewhere in the United States.
    (4) In the case of California gasoline produced outside the State 
of California, the transferors and transferees must meet the product 
transfer document requirements under Sec.  80.81(g).
    (5) Gasoline that is ultimately used in any part of the United 
States outside of the State of California must comply with the 
requirements specified in Sec.  80.1230, regardless of any designation 
as California gasoline.


Sec.  80.1238  How is a refinery's or importer's annual average benzene 
concentration determined?

    (a) The annual average benzene concentration of gasoline produced 
at a refinery or imported by an importer for the applicable averaging 
period is calculated according to the following equation:
[GRAPHIC] [TIFF OMITTED] TP29MR06.008


Where:

Bavg = Annual average benzene concentration (volume percent 
benzene).
i = Individual batch of gasoline produced at the refinery or imported.
n = Total number of batches of gasoline produced at the refinery or 
imported during the applicable annual averaging period.
Vi = Volume of gasoline in batch i (gallons).
Bi = Benzene concentration of batch i (volume percent 
benzene), per Sec.  80.46(e).

    (b) All input batch benzene concentration values used in paragraph 
(a) of this section shall be expressed to two decimal places.
    (c) Annual average benzene concentration values calculated under 
paragraph (a) of this section shall be expressed to two decimal places 
using conventional rounding methodology.
    (d) A refiner or importer may include the volume of oxygenate added 
downstream from the refinery or import facility in the calculation 
specified in paragraph (a) of this section, provided the following 
requirements are met:
    (1) For oxygenate added to conventional gasoline, the refiner or 
importer must comply with the requirements of Sec.  80.101(d)(4)(ii) 
and (g)(3).
    (2) For oxygenate added to RBOB, the refiner or importer must 
comply with the requirements of Sec.  80.69(a).
    (e) Refiners and importers must exclude from the calculation 
specified in paragraph (a) of this section all of the following:
    (1) Gasoline that was not produced at the refinery or imported by 
the importer.
    (2) Except as provided in paragraph (c) of this section, any 
blendstocks or unfinished gasoline transferred to others.
    (3) Gasoline that has been included in the compliance calculations 
for another refinery or importer.
    (4) Gasoline exempted from the standards under Sec.  80.1235.


Sec.  80.1240  How is a refinery's or importer's compliance with the 
gasoline benzene requirements of this subpart determined?

    (a)(1) The compliance benzene value for a refinery or importer is:

[[Page 15941]]

[GRAPHIC] [TIFF OMITTED] TP29MR06.009


Where:

CBVy = Compliance benzene value (gallons benzene) for year 
y.
Vy = Gasoline volume produced or imported in year y 
(gallons).
Bavg = Annual average benzene concentration (volume percent 
benzene), per Sec.  80.1238.
Dy-1 = Benzene deficit from the previous reporting period, 
per Sec.  80.1230(b) (gallons benzene).
BC = Banked benzene credits used to show compliance (gallons benzene).
RC = Benzene credits received by the refinery or importer, per Sec.  
80.1295(c), used to show compliance (gallons benzene).

    (2) If CBVy <= Vy x (0.62)/100, then 
compliance is achieved for calendar year y.
    (b)(1) A deficit is created when CBVy > Vy x 
(0.62)/100.
    (2) The deficit value to be included in the following year's 
compliance calculation per paragraph (a) of this section, is calculated 
as follows:
[GRAPHIC] [TIFF OMITTED] TP29MR06.010

Averaging, Banking and Trading (ABT) Program


Sec.  80.1270  Who may generate benzene credits under the ABT program?

    (a) Early credits. (1) Early credits may be generated under Sec.  
80.1275 by a refiner for a refinery with an approved benzene baseline 
under Sec.  80.1285.
    (2) Early credits may be generated under Sec.  80.1275 only by 
refiners that produce gasoline by processing crude oil through refinery 
processing units.
    (3)(i) A refinery that was shut down during the entire 2004-2005 
benzene baseline period is not eligible to generate early credits under 
Sec.  80.1275.
    (ii) A refinery not in full production, excluding normal refinery 
downtime, or not showing consistent or regular gasoline production 
activity during 2004-2005 may be eligible to generate early benzene 
credits under Sec.  80.1275 upon petition to and approval by EPA, under 
Sec.  80.1285.
    (b) Standard Credits. (1) Standard credits may be generated under 
Sec.  80.1290 by refineries and importers for gasoline produced or 
imported for use in the U.S., excluding gasoline exempt from the 
benzene standard under the provisions of Sec.  80.1235.
    (2) Oxygenate blenders, butane blenders, and transmix producers are 
not eligible to generate standard credits under Sec.  80.1290.


Sec.  80.1275  How are early benzene credits generated?

    (a) Early benzene credits may be generated only if a refinery's 
annual average gasoline benzene concentration is at least 10% lower 
than the refinery's approved baseline benzene concentration per Sec.  
80.1280.
    (b) [Reserved]
    (c) The early credit annual averaging periods are as follows:
    (1) For 2007, the seven-month period from June 1, 2007, through 
December 31, 2007, inclusive.
    (2) For 2008, 2009 and 2010, the 12-month calendar year.
    (3) For 2011, 2012, 2013, and 2014, which apply only to approved 
small refiners per Sec.  80.1340, the 12-month calendar year.
    (d) The number of early benzene credits shall be calculated 
annually for each applicable averaging period as follows:
    (1) Proceed to paragraph (d)(2) of this section under the following 
condition. Bavg <= BBase x 0.90


Where:

Bavg = Annual average benzene concentration (volume percent 
benzene) of gasoline produced at the refinery, per Sec.  80.1238.
BBase = Baseline benzene concentration (volume percent 
benzene) of the refinery, per Sec.  80.1280(b).

    (2) Calculate the number of early credits generated by the refinery 
for the averaging period as follows:
[GRAPHIC] [TIFF OMITTED] TP29MR06.011


Where:

ECy = Early credits generated in year y (gallons benzene).
Bavg = Annual average benzene concentration (volume percent 
benzene) of gasoline produced at the refinery, per Sec.  80.1238 that 
satisfies the condition of paragraph (d)(1) of this section.
Ve = Total volume of gasoline (gallons) produced during the 
annual averaging period at the refinery.

    (e) All input benzene concentration values used in paragraph (d) of 
this section shall be expressed to two decimal places.
    (f) Early benzene credits calculated under paragraph (d) of this 
section shall be expressed to the nearest gallon using conventional 
rounding methodology.
    (g)(1) Early benzene credits shall be calculated separately for 
each refinery.
    (2) Refiners shall not move gasoline or gasoline blending stocks 
from one refinery to another for the purpose of generating early 
credits.
    (h) An importer may not generate early credits.
    (i) A foreign refiner with an approved baseline may generate early 
credits subject to the provisions of Sec.  80.1420.


Sec.  80.1280  How are refinery benzene baselines calculated?

    (a) A refinery's benzene baseline is based on the refinery's 2004-
2005 average gasoline benzene concentration, calculated according to 
the following equation:
[GRAPHIC] [TIFF OMITTED] TP29MR06.012


Where:

BBase = Benzene baseline concentration (volume percent 
benzene).
i = Individual batch of gasoline produced at the refinery from January 
1, 2004 through December 31, 2005.
n = Total number of batches of gasoline produced at the refinery from 
January 1, 2004 through December 31, 2005 (or the total number of 
batches of gasoline pursuant to Sec.  80.1285(d)).
Vi = Volume of gasoline in batch i (gallons).
Bi = Benzene content of batch i (volume percent benzene).

    (b) All input batch benzene concentration values used in paragraph 
(a) of this section shall be expressed to two decimal places.
    (c) Baseline benzene concentration values calculated under 
paragraph (a) of this section shall be expressed to two decimal places 
using conventional rounding methodology.
    (d) Any refiner that, under Sec.  80.69 or Sec.  80.101(d)(4), 
included oxygenate blended downstream in compliance calculations for 
RFG or conventional gasoline for calendar years 2004 or 2005 for a 
refinery must include the volume and benzene concentration of this 
oxygenate in the baseline calculations for gasoline benzene content for 
that refinery under paragraph (a) of this section.


Sec.  80.1285  How does a refiner apply for a benzene baseline?

    (a) A refiner must submit an application to EPA which includes the 
information specified in paragraph (c) of this section at least 60 days 
before the refinery plans to begin generating early credits.

[[Page 15942]]

    (b) The benzene baseline application shall be sent to: U.S. EPA, 
Attn: Early Gasoline Benzene Credits (6406J), 1200 Pennsylvania Ave., 
NW., Washington, DC 20460. For commercial delivery: U.S. EPA Attn: 
Early Gasoline Benzene Credits (6406J), 501 3rd Street, NW., 
Washington, DC 20001.
    (c) A benzene baseline application must be submitted for each 
refinery that plans to generate early credits under Sec.  80.1275 and 
must include the following information:
    (1) A listing of the names and addresses of all refineries owned by 
the company.
    (2) The benzene baseline for gasoline produced in 2004-2005 at the 
refinery, calculated in accordance with Sec.  80.1280(b).
    (3) Copies of the annual reports required under Sec.  80.75 for RFG 
and Sec.  80.105 for conventional gasoline.
    (4) A letter signed by the president, chief operating officer, or 
chief executive officer, of the company, or his/her designee, stating 
that the information contained in the benzene baseline determination is 
true to the best of his/her knowledge.
    (5) Name, address, phone number, facsimile number and e-mail 
address of a corporate contact person.
    (d) A refiner, for a refinery that qualifies for generating early 
credits under Sec.  80.1270(a)(3)(ii) may submit to EPA a benzene 
baseline application per the requirements of this section. The refiner 
must also submit information regarding the nature and cause of the 
inconsistent production, how it affects the baseline and benzene 
concentration, and whether an alternative calculation to the 
calculation specified in Sec.  80.1280 produces a more representative 
benzene baseline value. EPA, upon consideration of the submitted 
information, may approve a benzene baseline for such a refinery.
    (e) Within 60 days of receipt of an application under this section, 
except for applications submitted in accordance with paragraph (d) of 
this section, EPA will notify the refiner of approval of the refinery's 
baseline or any deficiencies in the application.
    (f) If at any time the baseline submitted in accordance with the 
requirements of this section is determined to be incorrect, EPA will 
notify the refiner of the corrected baseline.


Sec.  80.1290  How are benzene credits generated in 2011 and beyond?

    (a) Gasoline benzene standard credits may be generated by the 
following parties during any applicable averaging period specified in 
paragraph (b) of this section:
    (1) A refiner, at any of its refineries that produce gasoline for 
use in the U.S. (excluding gasoline under Sec.  80.1235 that is exempt 
from the requirements of this subpart). Credits are generated 
separately by each refinery;
    (2) Importers, for all of their imported gasoline (excluding 
gasoline under Sec.  80.1235 that is exempt from the requirements of 
this subpart);
    (b) The standard credit averaging periods are the calendar years 
beginning with 2011, or beginning with 2015 for approved small 
refiners.
    (c) [Reserved]
    (d)(1) The number of standard credits generated by a refinery or 
importer shall be calculated annually according to the following 
equation:
[GRAPHIC] [TIFF OMITTED] TP29MR06.013


Where:

SCy = Standard credits generated in year y (gallons 
benzene).
Bavg = Annual average benzene concentration for year y 
(volume percent benzene), per Sec.  80.1238.
Vy = Total volume of gasoline produced or imported in year y 
(gallons).

    (2) No credits shall be generated unless the value SCy is positive.
    (e) All input benzene concentration values used in paragraph (d) of 
this section shall be expressed to two decimal places.
    (f) Standard benzene credits calculated under paragraph (d) of this 
section shall be expressed to the nearest gallon using conventional 
rounding methodology.
    (g) Foreign refiners may not generate credits under this section.


Sec.  80.1295  How are gasoline benzene credits used?

    (a) Credit use. (1) Gasoline benzene credits generated under 
Sec. Sec.  80.1275 and 80.1290 may be used to comply with the gasoline 
benzene content requirement of Sec.  80.1230 provided that:
    (i) The gasoline benzene credits were generated and reported 
according to the requirements of this subpart; and
    (ii) The conditions of this section Sec.  80.1295 are met.
    (2) Gasoline benzene credits generated under Sec. Sec.  80.1275 and 
80.1290 may be used by a refiner or importer to comply with the 
gasoline benzene content standard of Sec.  80.1230, may be banked by a 
refiner or importer for future use or transfer, may be transferred to 
another refinery or importer within a company (intracompany), or may be 
transferred to another refinery or importer outside of the company.
    (b) Credit banking. Gasoline benzene credits generated by a 
refinery or importer may be banked for use in a later compliance 
period, or may be transferred to another refiner, refinery, or importer 
for use as provided in paragraph (c) of this section.
    (c) Credit transfers. (1) Gasoline benzene credits obtained from 
another refinery or importer may be used to comply with the gasoline 
benzene content requirement of Sec.  80.1230 provided the following 
conditions are met:
    (i) The credits are generated and reported according to the 
requirements of this subpart, and the transferred credit has not 
expired, per paragraph (d) of this section.
    (ii) Any credit transfer takes place no later than the last day of 
February following the calendar year averaging period when the credits 
are used.
    (iii) The credit has not been transferred more than twice. The 
first transfer by the refinery or importer that generated the credit 
may only be made to a refiner or importer that intends to use the 
credit; if the transferee cannot use the credit, it may make the 
second, and final, transfer only to a refinery or importer that intends 
to use or terminate the credit. In no case may a credit be transferred 
more than twice before being used or terminated.
    (iv) The credit transferor has applied any gasoline benzene credits 
necessary to meet its own annual compliance requirements (and any 
deficit carry-forward, if applicable) before transferring any gasoline 
benzene credits to any other refiner or importer.
    (v) The credit transferor would not create a deficit as a result of 
a credit transfer.
    (vi) The transferor supplies to the transferee records indicating 
the year the gasoline benzene credits were generated, the identity of 
the refiner (and refinery) or importer that generated the gasoline 
benzene credits and the identity of the transferring entity if not the 
same entity that generated the gasoline benzene credits.
    (2) In the case of gasoline benzene credits that have been 
calculated or created improperly, or have otherwise been determined to 
be invalid, the following provisions apply:
    (i) Invalid gasoline benzene credits cannot be used to achieve 
compliance with the gasoline benzene content requirement of Sec.  
80.1230 regardless of the transferee's good faith belief that the 
gasoline benzene credits were valid.
    (ii) The refiner or importer that used the gasoline benzene credits 
and any

[[Page 15943]]

transferor of the gasoline benzene credits must adjust their credit 
records, reports, and compliance calculations as necessary to reflect 
the proper gasoline benzene credits.
    (iii) Any properly created gasoline benzene credits existing in the 
transferor's credit balance following the corrections and adjustments 
specified in paragraph (c)(2)(ii) of this section and after the 
transferor applies gasoline benzene credits as needed to meet its own 
compliance requirements at the end of the compliance period, must first 
be applied to correct the invalid transfers to the transferee, before 
the transferor uses, trades or banks the gasoline benzene credits.
    (d) Credit life. (1) Early credits, per Sec.  80.1275, may be used 
for compliance purposes under Sec.  80.1240 for any calendar year 
averaging period prior to the 2014 averaging period.
    (2) Standard credits, per Sec.  80.1290, shall have a credit life 
of 5 calendar year averaging periods after the year in which they were 
generated. Example: Standard credits generated during 2014 may be used 
to achieve compliance under Sec.  80.1240 for any calendar year 
averaging period prior to the 2020 averaging period.
    (3) Notwithstanding paragraphs (d)(1) and (d)(2) of this section, 
credits traded to or used by approved small refiners per Sec.  80.1340, 
have an additional credit life of two calendar year averaging periods.
    (e) General limitations on credit use. A refiner or importer 
possessing gasoline benzene credits must use all gasoline benzene 
credits in its possession prior to applying the credit deficit 
provisions of Sec.  80.1230(b).

Hardship Provisions


Sec.  80.1335  Can a refiner seek temporary relief from the 
requirements of this subpart?

    (a) EPA may permit a refinery to have an extended period of deficit 
carry-forward, for the shortest period practicable, per Sec.  
80.1230(b), if the refiner demonstrates that:
    (1) Unusual circumstances exist that impose extreme hardship and 
significantly affect the ability to comply by the applicable date; and
    (2) It has made best efforts to comply with the requirements of 
this subpart, including making all possible efforts to obtain 
sufficient credits to meet the standard.
    (b) Applications must be submitted to EPA by September 1, 2009.
    (1) Approval of a hardship under this section shall be in the form 
an extended period of deficit carry-forward, per Sec.  80.1230(b), for 
such period of time as EPA determines is appropriate, but shall not 
extend beyond December 31, 2014.
    (2) EPA reserves the right to deny applications for appropriate 
reasons, including unacceptable environmental impact.
    (c)(1) Applications must include a plan demonstrating how the 
refiner will comply with the requirements of this subpart as 
expeditiously as possible. The plan shall include a showing that 
contracts are or will be in place for engineering and construction of 
benzene reduction technology, a plan for applying for and obtaining any 
permits necessary for construction, a description of plans to obtain 
necessary capital, and a detailed estimate of when the requirements of 
this subpart will be met.
    (2) Applications must include a detailed description of the 
refinery configuration and operations including, at minimum, the 
following information:
    (i) The refinery's total reformer unit throughput capacity;
    (ii) The refinery's total crude capacity;
    (iii) Total crude capacity of any other refineries owned by the 
same entity;
    (iv) Total volume of gasoline production at the refinery;
    (v) Total volume of other refinery products; and
    (vi) Geographic location(s) where the refinery's gasoline will be 
sold.
    (3) Applications must include, at a minimum, the following 
information:
    (i) Detailed descriptions of efforts to obtain capital for refinery 
investments;
    (ii) Detailed descriptions of efforts to obtain credits;
    (iii) Bond rating of entity that owns the refinery; and
    (iv) Estimated capital investment needed to comply with the 
requirements of this subpart
    (4) Applicants must also provide any other relevant information 
requested by EPA.
    (d) EPA may impose any reasonable conditions on waivers granted 
under this section, including the condition that if more credits are 
available than was anticipated at the time of the hardship approval, 
the extended period of deficit carry-forward may be shortened.


Sec.  80.1336  What if a refiner or importer cannot produce gasoline 
conforming to the requirements of this subpart?

    In extreme and unusual circumstances (e.g., natural disaster or Act 
of God) which are clearly outside the control of the refiner or 
importer and which could not have been avoided by the exercise of 
prudence, diligence, and due care, EPA may permit a refinery or 
importer to extend the deadline for meeting the deficit carry-forward 
requirements under Sec.  80.1230(b) for a brief period (e.g., where 
appropriate, EPA may allow one or more additional weeks after the last 
day of February to purchase credits), provided the refinery or importer 
meets all the criteria, requirements and conditions contained in Sec.  
80.73(a) through (e).

Small Refiner Provisions


Sec.  80.1338  What is the definition of a small refiner for the 
purpose of the gasoline benzene requirements of this subpart?

    (a) A small refiner is defined as any person, as defined by 42 
U.S.C. 7602(e), that--
    (1) Produced gasoline at a refinery by processing crude oil through 
refinery processing units from January 1, 2005, through December 31, 
2005; and
    (2) Employed an average of no more than 1,500 people, based on the 
average number of employees for all pay periods from January 1, 2005 
through December 31, 2005; and
    (3) Had a corporate average crude oil capacity less than or equal 
to 155,000 barrels per calendar day (bpcd) for 2005; or
    (4) Has been approved by EPA as a small refiner under Sec.  
80.1340.
    (b) For the purpose of determining the number of employees and the 
crude oil capacity under paragraph (a) of this section, the following 
determinations shall be observed:
    (1) The refiner shall include the employees and crude oil capacity 
of any subsidiary companies, any parent company and subsidiaries of the 
parent company in which the parent has a controlling interest, and any 
joint venture partners.
    (2) For any refiner owned by a governmental entity, the number of 
employees and total crude oil capacity as specified in paragraph (a) of 
this section shall include all employees and crude oil production of 
the government to which the governmental entity is a part.
    (3) Any refiner owned and controlled by an Alaska Regional or 
Village Corporation organized pursuant to the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601) is not considered an affiliate of such 
entity, or with other concerns owned by such entity, solely because of 
their common ownership.
    (c) Notwithstanding the provisions of paragraph (a) of this 
section, a refiner that reactivates a refinery, which it previously 
operated, and that was shut down or non-operational for the entire 
period between January 1, 2005, and December 31, 2005, may apply for 
small refiner status in accordance with the provisions of Sec.  
80.1340.

[[Page 15944]]

Sec.  80.1339  Who is not eligible for the provisions for small 
refiners?

    (a) The following are not eligible for the hardship provisions for 
small refiners:
    (1) Refiners with refineries built after December 31, 2005;
    (2) Refiners that exceed the employee or crude oil capacity 
criteria under Sec.  80.1338 but that meet these criteria after 
December 31, 2005, regardless of whether the reduction in employees or 
crude capacity is due to operational changes at the refinery or a 
company sale or reorganization.
    (3) Importers.
    (4) Refiners that produce gasoline other than by processing crude 
oil through refinery processing units.
    (b)(1)(i) Refiners that qualify as small under Sec.  80.1338 and 
subsequently cease production of gasoline from processing crude oil 
through refinery processing units, employ more than 1,500 people or 
exceed the 155,000 bpcd crude oil capacity limit after December 31, 
2005, as a result of merger with or acquisition of or by another 
entity, are disqualified as small refiners, except this shall not apply 
in the case of a merger between two previously approved small refiners. 
If disqualification occurs, the refiner shall notify EPA in writing no 
later than 20 days following this disqualifying event.
    (ii) Except as provided under paragraph (b)(1)(iii) of this 
section, any refiner whose status changes under this paragraph (b) 
shall meet the applicable standards of Sec.  80.1230 within a period of 
up to 30 months of the disqualifying event for all of its refineries. 
However, such period shall not extend beyond December 31, 2014.
    (iii) A refiner may apply to EPA for an additional six months to 
comply with the standards of Sec.  80.1230 if more than 30 months will 
be required for the necessary engineering, permitting, construction, 
and start-up work to be completed. Such applications must include 
detailed technical information supporting the need for additional time. 
EPA will base its decision to approve additional time on the 
information provided by the refiner and on other relevant information. 
In no case will EPA extend the compliance date beyond December 31, 
2014.
    (iv) During the period of time of up to 30 months provided under 
paragraph (b)(1)(ii) of this section, and any extension provided under 
paragraph (b)(1)(iii) of this section, the refiner may not generate 
gasoline benzene credits under Sec.  80.1275 or Sec.  80.1290.
    (2) An approved small refiner per Sec.  80.1340 may elect to meet 
the requirements of Sec.  80.1230 applicable to non-small refiners by 
notifying EPA in writing no later than November 15 prior to the year 
that the change will occur. Any refiner whose status changes under this 
paragraph (b)(2) shall meet the requirements for non-small refiners 
under Sec.  80.1230 beginning with the first averaging period 
subsequent to the status change.


Sec.  80.1340  How does a refiner obtain approval as a small refiner?

    (a) Applications for small refiner status must be submitted to EPA 
by December 31, 2007.
    (b) Applications for small refiner status must be sent to: U.S. 
EPA, Attn: MSAT2 Benzene (6406J), 1200 Pennsylvania Ave., NW., 
Washington, DC 20460. For commercial delivery: U.S. EPA Attn: MSAT2 
Benzene (6406J), 501 3rd Street, NW., Washington, DC 20001.
    (c) The small refiner status application must contain the following 
information for the company seeking small refiner status, and for all 
subsidiary companies, all parent companies, all subsidiaries of the 
parent companies, and all joint venture partners:
    (1) Employees. (i) A listing of the names and addresses of each 
location where any employee worked during the 12 months preceding 
January 1, 2006;
    (ii) The average number of employees at each location based upon 
the number of employees for each pay period for the 12 months preceding 
January 1, 2006; and
    (iii) The type of business activities carried out at each location.
    (iv) In the case of a refiner that reactivates a refinery that it 
previously owned and operated and that was shut down or non-operational 
between January 1, 2005, and January 1, 2006, include the following:
    (A) A listing of the name and address of each location where any 
employee of the refiner worked since the refiner acquired or 
reactivated the refinery;
    (B) The average number of employees at any such reactivated 
refinery during each calendar year since the refiner reactivated the 
refinery; and
    (C) The type of business activities carried out at each location.
    (vi) For joint ventures, the total number of employees includes the 
combined employee count of all corporate entities in the venture.
    (vii) For government-owned refiners, the total employee count 
includes all government employees.
    (2) Crude oil capacity. (i) The total corporate crude oil capacity 
of each refinery as reported to the Energy Information Administration 
(EIA) of the U.S. Department of Energy (DOE), for the period January 1, 
2005, through December 31, 2005.
    (ii) The information submitted to EIA is presumed to be correct. In 
cases where a company disagrees with this information, the company may 
petition EPA with appropriate data to correct the record when the 
company submits its application for small refiner status.
    (3) The type of business activity carried out at each location.
    (4) For each refinery, an indication of the small refiner option(s) 
intended to be utilized at the refinery.
    (5) A letter signed by the president, chief operating or chief 
executive officer of the company, or his/her designee, stating that the 
information contained in the application is true to the best of his/her 
knowledge, and that the company owned the refinery as of January 1, 
2006.
    (6) Name, address, phone number, facsimile number, and E-mail 
address of a corporate contact person.
    (d) Approval of a small refiner status application will be based on 
all information submitted under paragraph (c) of this section and any 
other relevant information.
    (e) EPA will notify a refiner of approval or disapproval of small 
refiner status by letter.
    (1) If approved, all refineries of the refiner may defer meeting 
the standard specified in Sec.  80.1230 until the annual averaging 
period beginning January 1, 2015.
    (2) If disapproved, all refineries of the refiner must meet the 
standard specified in Sec.  80.1230 beginning with the annual averaging 
period beginning January 1, 2011.
    (f) If EPA finds that a refiner provided false or inaccurate 
information on its application for small refiner status, upon notice 
from EPA, the refiner's small refiner status will be void ab initio.
    (g) Prior to January 1, 2014, and upon notification to EPA, an 
approved small refiner per this section may withdraw its status as a 
small refiner. Effective on January 1 of the year following such 
notification, the small refiner will become subject to the standards at 
Sec.  80.1230.


Sec.  80.1342  What compliance options are available to small refiners 
under this subpart?

    (a) A refiner that has been approved as a small refiner under Sec.  
80.1340 may--
    (1) Defer meeting the standard specified in section Sec.  80.1230 
until the annual averaging period January 1, 2015; or
    (2) Meet the standard specified in Sec.  80.1230 beginning January 
1 of any of

[[Page 15945]]

the following annual averaging periods: 2007, 2008, 2009, 2010, 2011, 
2012, 2013, and 2014.
    (b) The provisions of paragraph (a) of this section shall apply 
separately for each of an approved small refiner's refineries.


Sec.  80.1344  What provisions are available to a large refiner that 
acquires one or more of a small refiner's refineries?

    (a) In the case of a refiner without approved small refiner status 
that acquires a refinery from an approved small refiner per Sec.  
80.1340, the small refiner provisions of the gasoline benzene program 
of this subpart may continue to apply to the acquired refinery for a 
period of up to 30 months from the date of acquisition of the refinery. 
In no case shall this period extend beyond December 31, 2014.
    (b) A refiner may apply to EPA for up to an additional six months 
to comply with the standards of Sec.  80.1230 for the acquired refinery 
if more than 30 months would be required for the necessary engineering, 
permitting, construction, and start-up work to be completed. Such 
applications must include detailed technical information supporting the 
need for additional time. EPA will base a decision to approve 
additional time on information provided by the refiner and on other 
relevant information. In no case shall this period extend beyond 
December 31, 2014.
    (c) A refiner that acquires a refinery from an approved small 
refiner per Sec.  80.1340 shall notify EPA in writing no later than 20 
days following the acquisition.

Sampling, Testing and Retention Requirements


Sec.  80.1347  What are the sampling and testing requirements for 
refiners and importers?

    (a) Sample and test each batch of gasoline. Refiners and importers 
shall collect a representative sample from each batch of gasoline 
produced or imported. Each sample shall be tested in accordance the 
methodology specified at Sec.  80.46(e) to determine its benzene 
concentration for compliance with the requirements of this subpart.
    (b) Batch numbering. The batch numbering convention of Sec.  
80.365(b)(2) shall apply to batches of conventional gasoline.
    (c) The requirements of this section apply to any refiner or 
importer subject to the requirements of this subpart, including those 
generating early credits per Sec.  80.1275, all non-small refiners and 
importers beginning January 1, 2011, and small refiners beginning 
January 1, 2015.


Sec.  80.1348  What gasoline sample retention requirements apply to 
refiners and importers?

    The gasoline sample retention requirements specified in subpart H 
of this part for the gasoline sulfur provisions apply for the purpose 
of complying with the requirements of this subpart, except that in 
addition to including the sulfur test result as provided by Sec.  
80.335(a)(4)(ii), the refiner, importer, or independent laboratory 
shall also include with the retained sample the test result for benzene 
as conducted pursuant to Sec.  80.46(e).

Recordkeeping and Reporting Requirements


Sec.  80.1350  What records must be kept?

    (a) General requirements. The recordkeeping requirements specified 
in Sec.  80.74 and Sec.  80.104, as applicable, apply for the purpose 
of complying with the requirements of this subpart, however, duplicate 
records are not required.
    (b) Additional records that refiners and importers shall keep. 
Beginning January 1, 2007, any refiner for each of its refineries, and 
any importer for the gasoline it imports, shall keep records that 
include the following information (including any supporting 
calculations as applicable):
    (1) Its compliance benzene value per Sec.  80.1240, and the 
calculations used to obtain that value.
    (2) Its benzene baseline value, per Sec.  80.1280, if the refinery 
or importer submitted a benzene baseline application to EPA per Sec.  
80.1285;
    (3) The number of early benzene credits generated under Sec.  
80.1275, separately by year of generation;
    (4) The number of early benzene credits obtained, separately by 
generating refinery and year of generation;
    (5) The number of valid credits in possession of the refinery or 
importer at the beginning of each averaging period, separately by 
generating facility and year of generation;
    (6) The number of standard credits generated by the refinery or 
importer under Sec.  80.1290, separately by transferor (if applicable), 
and by year of generation;
    (7) The number of credits used, separately by generating facility 
and year of generation;
    (8) If any credits were obtained from, or transferred to, other 
parties, for each other party, its name, its EPA refinery or importer 
registration number, and the number of credits obtained from, or 
transferred to, the other party;
    (9) The number of credits that expired at the end of the averaging 
period, separately by generating facility and year of generation;
    (10) The number of credits that will be carried over into the 
subsequent averaging period, separately by generating facility and year 
of generation;
    (11) Contracts or other commercial documents that establish each 
transfer of credits from the transferor to the transferee; and
    (12) A copy of all reports submitted to EPA under Sec. Sec.  
80.1352 and 80.1354, however, duplicate records are not required.
    (c) Length of time records shall be kept. The records required by 
this section shall be kept for five years from the end of the annual 
averaging period during which they were created, or seven years for 
records pertaining to credits traded to a small refiner in accordance 
with Sec.  80.1295(d)(3), except where longer record retention is 
required elsewhere in this subpart.
    (d) Make records available to EPA. On request by EPA, the records 
specified in this section shall be provided to the Administrator. For 
records that are electronically generated or maintained, the equipment 
and software necessary to read the records shall be made available, or 
upon approval by EPA, electronic records shall be converted to paper 
documents which shall be provided to the Administrator.


Sec.  80.1352  What are the pre-compliance reporting requirements for 
the gasoline benzene program?

    (a) Except as provided in paragraph (c) of this section, a refiner 
for each of its refineries shall submit the following information to 
EPA beginning June 1, 2008, and annually thereafter through June 1, 
2011, or through June 1, 2015, for small refiners:
    (1) Changes to the information submitted in the company's 
registration;
    (2) Changes to the information submitted for any refinery or import 
facility registration;
    (3) Gasoline production. (i) An estimate of the average daily 
volume (in gallons) of gasoline produced at each refinery. This 
estimate shall include RFG, RBOB, conventional gasoline and 
conventional gasoline blendstock that becomes finished gasoline solely 
upon the addition of oxygenate but shall exclude gasoline exempted 
pursuant to Sec.  80.1235;
    (ii) These volume estimates must be provided for the periods of 
June 1, 2007, through December 31, 2007, and calendar years 2008, 2009 
and 2010.
    (4) Benzene concentration. An estimate of the average gasoline 
benzene

[[Page 15946]]

concentration corresponding to the time periods specified in paragraph 
(a)(3) of this section.
    (5) ABT Participation. If the refinery is expecting to participate 
in the credit trading program under Sec.  80.1275 and/or Sec.  80.1290, 
the actual or estimated, as applicable, numbers of early credits and 
standard credits expected to be generated and/or used each year through 
2015.
    (6) Information on any project schedule by quarter of known or 
projected completion date by the stage of the project, for example, 
following the five project phases described in EPA's June 2002 Highway 
Diesel Progress Review report (EPA420-R-02-016, http://www.epa.gov/otaq/regs/hd2007/420r02016.pdf): Strategic planning, Planning and 
front-end engineering, Detailed engineering and permitting, Procurement 
and Construction, and Commissioning and startup;
    (7) Basic information regarding the selected technology pathway for 
compliance (e.g., precursor re-routing or other technologies, revamp 
vs. grassroots, etc.);
    (8) Whether capital commitments have been made or are projected to 
be made.
    (b) The pre-compliance reports due in 2008 and succeeding years 
must provide an update of the progress in each of these areas and 
actual values where available.
    (c) The pre-compliance reporting requirements of this section do 
not apply to refineries exempted under the provisions of Sec.  
80.1230(c)(1).


Sec.  80.1354  What are the reporting requirements for the gasoline 
benzene program?

    (a) Beginning with the 2011 annual averaging period, or the 2015 
annual averaging period for small refiners, and continuing for each 
averaging period thereafter, every refiner, for each of its refineries, 
and every importer shall submit to EPA the information required in this 
section, and such other information as EPA may require.
    (b) Beginning with the 2007 annual averaging period for refiners 
generating early credits pursuant to Sec.  80.1275 or Sec.  80.1290(b) 
for approved small refiners, every refiner for each of its refineries 
shall submit to EPA the information required in this section, and such 
other information as EPA may require.
    (c) Refiner and importer annual reports. Any refiner, for each of 
its refineries, and any importer for the gasoline it imports, shall 
submit a Gasoline Benzene Report containing the following information:
    (1) Benzene volume percent and volume of any RFG, RBOB, and 
conventional gasoline, separately by batch, produced by the refinery or 
imported, and the sum of the volumes and the volume-weighted benzene 
concentration, in volume percent;
    (2) The annual average benzene concentration, per Sec.  80.1240, 
Sec.  80.1275 or Sec.  80.1290, as applicable;
    (3) Any benzene deficit from the previous reporting period, per 
Sec.  80.1230(b);
    (4) The number of banked benzene credits from the previous 
reporting period;
    (5) The number of benzene credits generated under Sec.  80.1275, if 
applicable;
    (6) The number of benzene credits generated under Sec.  80.1290, if 
applicable;
    (7) The number of benzene credits transferred to the refinery or 
importer, per Sec.  80.1295(c), and the cost of the credits, if 
applicable;
    (8) The number of benzene credits transferred from the refinery or 
importer, per Sec.  80.1295(c), and the price of the credits, if 
applicable;
    (9) The number of benzene credits terminated or expired;
    (10) The compliance benzene value specified in Sec.  80.1240;
    (11) The number of banked benzene credits;
    (12) Projected credit generation through compliance year 2015; and
    (13) Projected credit use through compliance year 2015.
    (d) EPA may require submission of additional information to verify 
compliance with the requirements of this subpart.
    (e) The report required by paragraph (a) of this section shall be:
    (1) Submitted on forms and following procedures specified by the 
Administrator of EPA;
    (2) Submitted to EPA by the last day of February each year for the 
prior calendar year averaging period; and
    (3) Signed and certified as correct by the owner or a responsible 
corporate officer of the refiner or importer.

Attest Engagements


Sec.  80.1375  What are the attest engagement requirements for gasoline 
benzene compliance?

    In addition to the requirements for attest engagements that apply 
to refiners and importers under Sec. Sec.  80.125 through 80.130, 
80.410, and 80.1030, the attest engagements for refiners and importers 
must include the following procedures and requirements each year.
    (a) EPA early credit generation baseline years' reports.
    (1) Obtain and read a copy of the refinery's or importer's annual 
reports and batch reports filed with EPA for 2004 and 2005 which 
contain gasoline benzene and gasoline volume information.
    (2) Agree the yearly volumes of gasoline and benzene concentration, 
in volume percent and benzene gallons, reported to EPA in the reports 
specified in paragraph (a)(1) of this section with the inventory 
reconciliation analysis under Sec.  80.128.
    (3) Verify that the information in the refinery's or importer's 
batch reports filed with EPA under Sec. Sec.  80.75 and 80.105, and any 
laboratory test results, agree with the information contained in the 
reports specified in paragraph (a)(1) of this section.
    (4) Calculate the average benzene concentration for all of the 
refinery's or importer's gasoline volume over 2004 and 2005 and verify 
that those values agree with the values reported to EPA per Sec.  
80.1285.
    (b) Baseline for early credit generation. For the first attest 
reporting period following approval of a benzene baseline:
    (1) Obtain the EPA benzene baseline approval letter for the 
refinery to determine the refinery's applicable benzene baseline under 
Sec.  80.1285.
    (2) Obtain a written representation from the company representative 
stating the benzene value used as the refinery's baseline and agree 
that number to paragraph (b)(1) of this section and to the reports to 
EPA.
    (c) Early credit generation. The following procedures shall be 
completed for a refinery or importer that generates early benzene 
credits per Sec.  80.1275:
    (1) Obtain the baseline benzene concentration and gasoline volume 
from paragraph (a)(4) of this section.
    (2) Obtain the annual benzene report per Sec.  80.1354.
    (3) If the benzene value under paragraph (c)(2) of this section is 
at least 10 percent less than value in paragraph (c)(1) of this 
section, compute and report as a finding the difference according to 
Sec.  80.1275.
    (4) Compute and report as a finding the total number of benzene 
credits generated by multiplying the value calculated in paragraph 
(c)(3) of this section by the volume of gasoline listed in the report 
specified in paragraph (c)(2) of this section, and agree this number 
with the number reported to EPA.
    (d) Standard credit generation. The following procedures shall be 
completed for a refinery or importer that generates benzene credits per 
Sec.  80.1290:

[[Page 15947]]

    (1) Obtain the annual average benzene value from the annual benzene 
report per Sec.  80.1285.
    (2) If the annual average benzene value under paragraph (d)(1) of 
this section is less than 0.62 percent by volume, compute and report as 
a finding the difference according to Sec.  80.1290.
    (3) Compute and report as a finding the total number of benzene 
credits generated by multiplying the value calculated in paragraph 
(d)(2) of this section by the volume of gasoline listed in the report 
specified in paragraph (d)(1) of this section, and agree this number 
with the number reported to EPA.
    (e) Credits required. The following attest procedures shall be 
completed for refineries and importers:
    (1) Obtain the annual average benzene concentration and volume from 
the annual benzene report per Sec.  80.1285.
    (2) If the value in paragraph (e)(1) of this section is greater 
than 0.62 percent by volume, compute and report as a finding the 
difference between 0.62 percent by volume and the value in paragraph 
(e)(1) of this section.
    (3) Compute and report as a finding the total benzene credits 
required by multiplying the value in paragraph (e)(2) of this section 
times the volume of gasoline in paragraph (e)(1) of this section, and 
agree with the report to EPA.
    (4) Obtain the refiner's or importer's representation as to the 
portion of the deficit under paragraph (e)(3) of this section that was 
resolved with credits, or that was carried forward as a deficit under 
Sec.  80.1230(b), and agree with the report to EPA.
    (f) Credit purchases and sales. The following attest procedures 
shall be completed for a refinery or importer that is a transferor or 
transferee of credits during an averaging period:
    (1) Obtain contracts or other documents for all credits transferred 
to another refinery or importer during the year being reviewed; compute 
and report as a finding the number and year of creation of credits 
represented in these documents as being transferred; and agree with the 
report to EPA.
    (2) Obtain contracts or other documents for all credits received 
during the year being reviewed; compute and report as a finding the 
number and year of creation of credits represented in these documents 
as being received; and agree with the report to EPA.
    (g) Credit reconciliation. The following attest procedures shall be 
completed each year credits were in the refiner's or importer's 
possession at any time during the year:
    (1) Obtain the credits remaining or the credit deficit from the 
previous year from the refiner's or importer's report to EPA for the 
previous year.

    (2) Compute and report as a finding the net credits remaining at 
the conclusion of the year being reviewed by totaling:
    (i) Credits remaining from the previous year; plus
    (ii) Credits generated under paragraphs (c) and (d) of this 
section; plus
    (iii) Credits purchased under paragraph (f) of this section; minus
    (iv) Credits sold under paragraph (f) of this section; minus
    (v) Credits used under paragraphs (e) of this section; minus
    (vi) Credits expired; minus
    (vii) Credit deficit from the previous year.
    (3) Agree the credits remaining or the credit deficit at the 
conclusion of the year being reviewed with the report to EPA.
    (4) If the refinery or importer had a credit deficit for both the 
previous year and the year being reviewed, report this fact as a 
finding.

Violations and Penalties


Sec.  80.1400  What acts are prohibited under the gasoline benzene 
program?

    No person shall:
    (a) Averaging violation. Produce or import gasoline subject to this 
subpart that does not comply with the applicable benzene average 
standard requirement under Sec.  80.1230.
    (b) Causing an averaging violation. Cause another person to commit 
an act in violation of paragraph (a) of this section.
    (c) Fail to meet the recordkeeping and reporting requirements, or 
any other requirements of this subpart.


Sec.  80.1405  What evidence may be used to determine compliance with 
the prohibitions and requirements of this subpart and liability for 
violations of this subpart?

    (a) Compliance with the benzene standard of this subpart shall be 
determined based on the benzene concentration of the gasoline, measured 
using the methodologies specified in Sec.  80.46(e). Any evidence or 
information, including the exclusive use of such evidence or 
information, may be used to establish the benzene concentration of the 
gasoline if the evidence or information is relevant to whether the 
benzene concentration of the gasoline would have been in compliance 
with the standard if the appropriate sampling and testing methodologies 
had been correctly performed. Such evidence may be obtained from any 
source or location and may include, but is not limited to, test results 
using methods other than those specified in Sec.  80.46(e), business 
records and commercial documents.
    (b) Determinations of compliance with the requirements of this 
subpart other than the benzene standard, and determinations of 
liability for any violation of this subpart, may be based on 
information from any source or location. Such information may include, 
but is not limited to, business records and commercial documents.


Sec.  80.1410  Who is liable for violations under the gasoline benzene 
program?

    (a) Persons liable for violations of prohibited acts.
    (1) Averaging violation. Any refiner or importer that violates 
Sec.  80.1400(a) is liable for a violation of Sec.  80.1400(a).
    (2) Causing an averaging violation. Any person that causes another 
party to violate Sec.  80.1400(a) is liable for a violation of Sec.  
80.1400(b).
    (3) Parent corporation liability. Any parent corporation is liable 
for any violations of this subpart that are committed by any of its 
wholly-owned subsidiaries.
    (4) Joint venture and joint owner liability. Each partner to a 
joint venture, or each owner of a facility owned by two or more owners, 
is jointly and severally liable for any violation of this subpart that 
occurs at the joint venture facility or facility that is owned by the 
joint owners, or that is committed by the joint venture operation or 
any of the joint owners of the facility.
    (b) Persons liable for failure to meet other provisions of this 
subpart.
    (1) Any person that fails to meet a provision of this subpart not 
addressed in paragraph (a) of this section is liable for a violation of 
that provision.
    (2) Any person that caused another person to fail to meet a 
requirement of this subpart not addressed in paragraph (a) of this 
section, is liable for causing a violation of that provision.


Sec.  80.1415  What penalties apply under the gasoline benzene program?

    (a) Any person liable for a violation under Sec.  80.1410 is 
subject to civil penalties as specified in sections 205 and 211(d) of 
the Clean Air Act for every day of each such violation and the amount 
of economic benefit or savings resulting from each violation.
    (b) Any person liable under Sec.  80.1400(a) for a violation of the 
applicable benzene average standard or causing another person to 
violate the requirement during any averaging period, is subject to a 
separate day of violation for each and every day in the averaging 
period. Any person liable

[[Page 15948]]

under Sec.  80.1410(b) for a failure to fulfill any requirement of 
credit generation, transfer, use, banking, or deficit carry-forward 
correction is subject to a separate violation for each and every day in 
the averaging period in which invalid credits are generated, banked, 
transferred or used.
    (c) Any person liable under Sec.  80.1410(b) for failure to meet, 
or causing a failure to meet, a provision of this subpart is liable for 
a separate day of violation for each and every day such provision 
remains unfulfilled.

Foreign Refiners


Sec.  80.1420  What are the additional requirements under this subpart 
for gasoline produced at foreign refineries?

    (a) Definitions. (1) A foreign refinery is a refinery that is 
located outside the United States, the Commonwealth of Puerto Rico, the 
Virgin Islands, Guam, American Samoa, and the Commonwealth of the 
Northern Mariana Islands (collectively referred to in this section as 
``the United States'').
    (2) A foreign refiner is a person that meets the definition of 
refiner under Sec.  80.2(i) for a foreign refinery.
    (3) Benzene-FRGAS means gasoline produced at a foreign refinery 
that has been assigned an individual refinery benzene baseline under 
Sec.  80.1285, has been approved as a small refiner under Sec.  
80.1340, or has been granted temporary relief under Sec.  80.1335, and 
that is imported into the United States.
    (4) Non-Benzene-FRGAS means
    (i) Gasoline meeting any of the conditions specified in paragraph 
(a)(3) of this section that is not imported into the United States.
    (ii) Gasoline meeting any of the conditions specified in paragraph 
(a)(3) of this section during a year when the foreign refiner has opted 
to not participate in the Benzene-FRGAS program under paragraph (c)(3) 
of this section.
    (iii) Gasoline produced at a foreign refinery that has not been 
assigned an individual refinery benzene baseline under Sec.  80.1285, 
or that has not been approved as a small refiner under Sec.  80.1340, 
or that has not been granted temporary relief under Sec.  80.1335.
    (5) Certified Benzene-FRGAS means Benzene-FRGAS the foreign refiner 
intends to include in the foreign refinery's benzene compliance 
calculations under Sec.  80.1240 or credit calculations under Sec.  
80.1275 and does include in these calculations when reported to EPA.
    (7) Non-Certified Benzene-FRGAS means Benzene-FRGAS that is not 
Certified Benzene-FRGAS.
    (b) Baseline for early credits. For any foreign refiner to obtain 
approval under the benzene foreign refiner program of this subpart for 
any refinery in order to generate early credits under Sec.  80.1275, it 
must apply for approval under the applicable provisions of this 
subpart.
    (1) The refiner shall follow the procedures, applicable to volume 
baselines in Sec. Sec.  80.91 through 80.93 to establish the volume of 
gasoline that was produced at the refinery and imported into the United 
States during the applicable years for purposes of establishing a 
baseline under Sec.  80.1280 for applicable fuels produced for use in 
the United States.
    (2) In making determinations for foreign refinery baselines EPA 
will consider all information supplied by a foreign refiner, and in 
addition may rely on any and all appropriate assumptions necessary to 
make such determinations.
    (3) Where a foreign refiner submits a petition that is incomplete 
or inadequate to establish an accurate baseline, and the refiner fails 
to correct this deficiency after a request for more information, EPA 
will not assign an individual refinery baseline.
    (c) General requirements for Benzene-FRGAS foreign refiners. A 
foreign refiner of a refinery that is approved under the benzene 
foreign refiner program of this subpart must designate each batch of 
gasoline produced at the foreign refinery that is exported to the 
United States as either Certified Benzene-FRGAS or as Non-Certified 
Benzene-FRGAS, except as provided in paragraph (c)(3) of this section.
    (1) In the case of Certified Benzene-FRGAS, the foreign refiner 
must meet all requirements that apply to refiners under this subpart.
    (2) In the case of Non-Certified Benzene-FRGAS, the foreign refiner 
shall meet all the following requirements:
    (i) The designation requirements in this section;
    (ii) The recordkeeping requirements in this section and in Sec.  
80.1350;
    (iii) The reporting requirements in this section and in Sec. Sec.  
80.1352 and 80.1354;
    (iv) The product transfer document requirements in this section;
    (v) The prohibitions in this section and in Sec.  80.1400; and
    (vi) The independent audit requirements in this section and in 
Sec.  80.1375.
    (3)(i) Any foreign refiner that generates early benzene credits 
under Sec.  80.1275 shall designate all Benzene-FRGAS as Certified 
Benzene-FRGAS for any year that such credits are generated.
    (ii) Any foreign refiner that has been approved to produce gasoline 
subject to the benzene foreign refiner program for a foreign refinery 
under this subpart may elect to classify no gasoline imported into the 
United States as Benzene-FRGAS provided the foreign refiner notifies 
EPA of the election no later than November 1 preceding the beginning of 
the next compliance period.
    (iii) An election under paragraph (c)(3)(ii) of this section shall 
be for a 12 month compliance period and apply to all gasoline that is 
produced by the foreign refinery that is imported into the United 
States, and shall remain in effect for each succeeding year unless and 
until the foreign refiner notifies EPA of the termination of the 
election. The change in election shall take effect at the beginning of 
the next annual compliance period.
    (d) Designation, product transfer documents, and foreign refiner 
certification. (1) Any foreign refiner of a foreign refinery that has 
been approved by EPA to produce gasoline subject to the benzene foreign 
refiner program must designate each batch of Benzene-FRGAS as such at 
the time the gasoline is produced, unless the refiner has elected to 
classify no gasoline exported to the United States as Benzene-FRGAS 
under paragraph (c)(3) of this section.
    (2) On each occasion when any person transfers custody or title to 
any Benzene-FRGAS prior to its being imported into the United States, 
it must include the following information as part of the product 
transfer document information:
    (i) Designation of the gasoline as Certified Benzene-FRGAS or as 
Non-Certified Benzene-FRGAS; and
    (ii) The name and EPA refinery registration number of the refinery 
where the Benzene-FRGAS was produced.
    (3) On each occasion when Benzene-FRGAS is loaded onto a vessel or 
other transportation mode for transport to the United States, the 
foreign refiner shall prepare a certification for each batch of the 
Benzene-FRGAS that meets the following requirements.
    (i) The certification shall include the report of the independent 
third party under paragraph (f) of this section, and the following 
additional information:
    (A) The name and EPA registration number of the refinery that 
produced the Benzene-FRGAS;
    (B) The identification of the gasoline as Certified Benzene-FRGAS 
or Non-Certified Benzene-FRGAS;
    (C) The volume of Benzene-FRGAS being transported, in gallons;

[[Page 15949]]

    (D) In the case of Certified Benzene-FRGAS:
    (1) The benzene content as determined under paragraph (f) of this 
section, and the applicable designations stated in paragraph (d)(2)(i) 
of this section; and
    (2) A declaration that the Benzene-FRGAS is being included in the 
applicable compliance calculations required by EPA under this subpart.
    (ii) The certification shall be made part of the product transfer 
documents for the Benzene-FRGAS.
    (e) Transfers of Benzene-FRGAS to non-United States markets. The 
foreign refiner is responsible to ensure that all gasoline classified 
as Benzene-FRGAS is imported into the United States. A foreign refiner 
may remove the Benzene-FRGAS classification, and the gasoline need not 
be imported into the United States, but only if:
    (1) The foreign refiner excludes:
    (i) The volume of gasoline from the refinery's compliance report 
under Sec.  80.1354; and
    (ii) In the case of Certified Benzene-FRGAS, the volume of the 
gasoline from the compliance report under Sec.  80.1354.
    (2) The foreign refiner obtains sufficient evidence in the form of 
documentation that the gasoline was not imported into the United 
States.
    (f) Load port independent sampling, testing and refinery 
identification. (1) On each occasion that Benzene-FRGAS is loaded onto 
a vessel for transport to the United States a foreign refiner shall 
have an independent third party:
    (i) Inspect the vessel prior to loading and determine the volume of 
any tank bottoms;
    (ii) Determine the volume of Benzene-FRGAS loaded onto the vessel 
(exclusive of any tank bottoms before loading);
    (iii) Obtain the EPA-assigned registration number of the foreign 
refinery;
    (iv) Determine the name and country of registration of the vessel 
used to transport the Benzene-FRGAS to the United States; and
    (v) Determine the date and time the vessel departs the port serving 
the foreign refinery.
    (2) On each occasion that Certified Benzene-FRGAS is loaded onto a 
vessel for transport to the United States a foreign refiner shall have 
an independent third party:
    (i) Collect a representative sample of the Certified Benzene-FRGAS 
from each vessel compartment subsequent to loading on the vessel and 
prior to departure of the vessel from the port serving the foreign 
refinery;
    (ii) Determine the benzene content value for each compartment using 
the methodology as specified in Sec.  80.46(e) by one of the following:
    (A) The third party analyzing each sample; or
    (B) The third party observing the foreign refiner analyze the 
sample;
    (iii) Review original documents that reflect movement and storage 
of the Certified Benzene-FRGAS from the refinery to the load port, and 
from this review determine:
    (A) The refinery at which the Benzene-FRGAS was produced; and
    (B) That the Benzene-FRGAS remained segregated from:
    (1) Non-Benzene-FRGAS and Non-Certified Benzene-FRGAS; and
    (2) Other Certified Benzene-FRGAS produced at a different refinery.
    (3) The independent third party shall submit a report:
    (i) To the foreign refiner containing the information required 
under paragraphs (f)(1) and (f)(2) of this section, to accompany the 
product transfer documents for the vessel; and
    (ii) To the Administrator containing the information required under 
paragraphs (f)(1) and (f)(2) of this section, within thirty days 
following the date of the independent third party's inspection. This 
report shall include a description of the method used to determine the 
identity of the refinery at which the gasoline was produced, assurance 
that the gasoline remained segregated as specified in paragraph (n)(1) 
of this section, and a description of the gasoline's movement and 
storage between production at the source refinery and vessel loading.
    (4) The independent third party must:
    (i) Be approved in advance by EPA, based on a demonstration of 
ability to perform the procedures required in this paragraph (f);
    (ii) Be independent under the criteria specified in Sec.  
80.65(e)(2)(iii); and
    (iii) Sign a commitment that contains the provisions specified in 
paragraph (i) of this section with regard to activities, facilities and 
documents relevant to compliance with the requirements of this 
paragraph (f).
    (g) Comparison of load port and port of entry testing. (1)(i) Any 
foreign refiner and any United States importer of Certified Benzene-
FRGAS shall compare the results from the load port testing under 
paragraph (f) of this section, with the port of entry testing as 
reported under paragraph (o) of this section, for the volume of 
gasoline and the benzene content value; except as specified in 
paragraph (g)(1)(ii) of this section.
    (ii) Where a vessel transporting Certified Benzene-FRGAS off loads 
this gasoline at more than one United States port of entry, and the 
conditions of paragraph (g)(2)(i) of this section are met at the first 
United States port of entry, the requirements of paragraph (g)(2) of 
this section do not apply at subsequent ports of entry if the United 
States importer obtains a certification from the vessel owner that 
meets the requirements of paragraph(s) of this section, that the vessel 
has not loaded any gasoline or blendstock between the first United 
States port of entry and the subsequent port of entry.
    (2)(i) The requirements of this paragraph (g)(2) apply if--
    (A) The temperature-corrected volumes determined at the port of 
entry and at the load port differ by more than one percent; or
    (B) The benzene content value determined at the port of entry is 
higher than the benzene content value determined at the load port, and 
the amount of this difference is greater than the reproducibility 
amount specified for the port of entry test result by the American 
Society of Testing and Materials (ASTM) for the test method specified 
at Sec.  80.46(e).
    (ii) The United States importer and the foreign refiner shall treat 
the gasoline as Non-Certified Benzene-FRGAS, and the foreign refiner 
shall exclude the gasoline volume from its gasoline volumes 
calculations and benzene standard designations under this subpart.
    (h) Attest requirements. Refiners, for each annual compliance 
period, must arrange to have an attest engagement performed of the 
underlying documentation that forms the basis of any report required 
under this subpart. The attest engagement must comply with the 
procedures and requirements that apply to refiners under Sec. Sec.  
80.125 through 80.130, or other applicable attest engagement 
provisions, and must be submitted to the Administrator of EPA by August 
31 of each year for the prior annual compliance period. The following 
additional procedures shall be carried out for any foreign refiner of 
Benzene-FRGAS.
    (1) The inventory reconciliation analysis under Sec.  80.128(b) and 
the tender analysis under Sec.  80.128(c) shall include Non-Benzene-
FRGAS.
    (2) Obtain separate listings of all tenders of Certified Benzene-
FRGAS and of Non-Certified Benzene-FRGAS, and obtain separate listings 
of Certified Benzene-FRGAS based on whether it is small refiner 
gasoline, gasoline produced through the use of credits, or other 
applicable designation under this subpart. Agree the total volume of 
tenders from the listings to the gasoline inventory reconciliation 
analysis in Sec.  80.128(b), and to the volumes

[[Page 15950]]

determined by the third party under paragraph (f)(1) of this section.
    (3) For each tender under paragraph (h)(2) of this section, where 
the gasoline is loaded onto a marine vessel, report as a finding the 
name and country of registration of each vessel, and the volumes of 
Benzene-FRGAS loaded onto each vessel.
    (4) Select a sample from the list of vessels identified in 
paragraph (h)(3) of this section used to transport Certified Benzene-
FRGAS, in accordance with the guidelines in Sec.  80.127, and for each 
vessel selected perform the following:
    (i) Obtain the report of the independent third party, under 
paragraph (f) of this section, and of the United States importer under 
paragraph (o) of this section.
    (A) Agree the information in these reports with regard to vessel 
identification, gasoline volumes and benzene content test results.
    (B) Identify, and report as a finding, each occasion the load port 
and port of entry benzene content and volume results differ by more 
than the amounts allowed in paragraph (g) of this section, and 
determine whether the foreign refiner adjusted its refinery 
calculations as required in paragraph (g) of this section.
    (ii) Obtain the documents used by the independent third party to 
determine transportation and storage of the Certified Benzene-FRGAS 
from the refinery to the load port, under paragraph (f) of this 
section. Obtain tank activity records for any storage tank where the 
Certified Benzene-FRGAS is stored, and pipeline activity records for 
any pipeline used to transport the Certified Benzene-FRGAS, prior to 
being loaded onto the vessel. Use these records to determine whether 
the Certified Benzene-FRGAS was produced at the refinery that is the 
subject of the attest engagement, and whether the Certified Benzene-
FRGAS was mixed with any Non-Certified Benzene-FRGAS, Non-Benzene-
FRGAS, or any Certified Benzene-FRGAS produced at a different refinery.
    (5) Select a sample from the list of vessels identified in 
paragraph (h)(3) of this section used to transport Certified and Non-
Certified Benzene-FRGAS, in accordance with the guidelines in Sec.  
80.127, and for each vessel selected perform the following:
    (i) Obtain a commercial document of general circulation that lists 
vessel arrivals and departures, and that includes the port and date of 
departure of the vessel, and the port of entry and date of arrival of 
the vessel.
    (ii) Agree the vessel's departure and arrival locations and dates 
from the independent third party and United States importer reports to 
the information contained in the commercial document.
    (6) Obtain separate listings of all tenders of Non-Benzene-FRGAS, 
and perform the following:
    (i) Agree the total volume and benzene content of tenders from the 
listings to the gasoline inventory reconciliation analysis in Sec.  
80.128(b).
    (ii) Obtain a separate listing of the tenders under this paragraph 
(h)(6) where the gasoline is loaded onto a marine vessel. Select a 
sample from this listing in accordance with the guidelines in Sec.  
80.127, and obtain a commercial document of general circulation that 
lists vessel arrivals and departures, and that includes the port and 
date of departure and the ports and dates where the gasoline was off 
loaded for the selected vessels. Determine and report as a finding the 
country where the gasoline was off loaded for each vessel selected.
    (7) In order to complete the requirements of this paragraph (h) an 
auditor shall:
    (i) Be independent of the foreign refiner;
    (ii) Be licensed as a Certified Public Accountant in the United 
States and a citizen of the United States, or be approved in advance by 
EPA based on a demonstration of ability to perform the procedures 
required in Sec. Sec.  80.125 through 80.130 and this paragraph (h); 
and
    (iii) Sign a commitment that contains the provisions specified in 
paragraph (i) of this section with regard to activities and documents 
relevant to compliance with the requirements of Sec. Sec.  80.125 
through 80.130 and this paragraph (h).
    (i) Foreign refiner commitments. Any foreign refiner shall commit 
to and comply with the provisions contained in this paragraph (i) as a 
condition to being approved for as a foreign refiner under this 
subpart.
    (1) Any United States Environmental Protection Agency inspector or 
auditor must be given full, complete and immediate access to conduct 
inspections and audits of the foreign refinery.
    (i) Inspections and audits may be either announced in advance by 
EPA, or unannounced.
    (ii) Access will be provided to any location where:
    (A) Gasoline is produced;
    (B) Documents related to refinery operations are kept;
    (C) Gasoline or blendstock samples are tested or stored; and
    (D) Benzene-FRGAS is stored or transported between the foreign 
refinery and the United States, including storage tanks, vessels and 
pipelines.
    (iii) Inspections and audits may be by EPA employees or contractors 
to EPA.
    (iv) Any documents requested that are related to matters covered by 
inspections and audits must be provided to an EPA inspector or auditor 
on request.
    (v) Inspections and audits by EPA may include review and copying of 
any documents related to:
    (A) Refinery baseline establishment, if applicable, including the 
volume and benzene content of gasoline; transfers of title or custody 
of any gasoline or blendstocks whether Benzene-FRGAS or Non-Benzene-
FRGAS, produced at the foreign refinery during the period January 1, 
2004 through December 31, 2005, and any work papers related to refinery 
baseline establishment;
    (B) The volume and benzene content of Benzene-FRGAS;
    (C) The proper classification of gasoline as being Benzene-FRGAS or 
as not being Benzene-FRGAS, or as Certified Benzene-FRGAS or as Non-
Certified Benzene-FRGAS, and all other relevant designations under this 
subpart;
    (D) Transfers of title or custody to Benzene-FRGAS;
    (E) Sampling and testing of Benzene-FRGAS;
    (F) Work performed and reports prepared by independent third 
parties and by independent auditors under the requirements of this 
section, including work papers; and
    (G) Reports prepared for submission to EPA, and any work papers 
related to such reports.
    (vi) Inspections and audits by EPA may include taking samples of 
gasoline, gasoline additives or blendstock, and interviewing employees.
    (vii) Any employee of the foreign refiner must be made available 
for interview by the EPA inspector or auditor, on request, within a 
reasonable time period.
    (viii) English language translations of any documents must be 
provided to an EPA inspector or auditor, on request, within 10 working 
days.
    (ix) English language interpreters must be provided to accompany 
EPA inspectors and auditors, on request.
    (2) An agent for service of process located in the District of 
Columbia shall be named, and service on this agent constitutes service 
on the foreign refiner or any employee of the foreign refiner for any 
action by EPA or otherwise by the United States related to the 
requirements of this subpart.
    (3) The forum for any civil or criminal enforcement action related 
to the

[[Page 15951]]

provisions of this section for violations of the Clean Air Act or 
regulations promulgated thereunder shall be governed by the Clean Air 
Act, including the EPA administrative forum where allowed under the 
Clean Air Act.
    (4) United States substantive and procedural laws shall apply to 
any civil or criminal enforcement action against the foreign refiner or 
any employee of the foreign refiner related to the provisions of this 
section.
    (5) Submitting a petition for participation in the benzene foreign 
refiner program or producing and exporting gasoline under any such 
program, and all other actions to comply with the requirements of this 
subpart relating to participation in any benzene foreign refiner 
program, or to establish an individual refinery gasoline benzene 
baseline under this subpart constitute actions or activities covered by 
and within the meaning of the provisions of 28 U.S.C. 1605(a)(2), but 
solely with respect to actions instituted against the foreign refiner, 
its agents and employees in any court or other tribunal in the United 
States for conduct that violates the requirements applicable to the 
foreign refiner under this subpart, including conduct that violates the 
False Statements Accountability Act of 1996 (18 U.S.C. 1001) and 
section 113(c)(2) of the Clean Air Act (42 U.S.C. 7413).
    (6) The foreign refiner, or its agents or employees, will not seek 
to detain or to impose civil or criminal remedies against EPA 
inspectors or auditors, whether EPA employees or EPA contractors, for 
actions performed within the scope of EPA employment related to the 
provisions of this section.
    (7) The commitment required by this paragraph (i) shall be signed 
by the owner or president of the foreign refiner business.
    (8) In any case where Benzene-FRGAS produced at a foreign refinery 
is stored or transported by another company between the refinery and 
the vessel that transports the Benzene-FRGAS to the United States, the 
foreign refiner shall obtain from each such other company a commitment 
that meets the requirements specified in paragraphs (i)(1) through (7) 
of this section, and these commitments shall be included in the foreign 
refiner's petition to participate in any benzene foreign refiner 
program.
    (j) Sovereign immunity. By submitting a petition for participation 
in any benzene foreign refiner program under this subpart (and 
baseline, if applicable) under this section, or by producing and 
exporting gasoline to the United States under any such program, the 
foreign refiner, and its agents and employees, without exception, 
become subject to the full operation of the administrative and judicial 
enforcement powers and provisions of the United States without 
limitation based on sovereign immunity, with respect to actions 
instituted against the foreign refiner, its agents and employees in any 
court or other tribunal in the United States for conduct that violates 
the requirements applicable to the foreign refiner under this subpart, 
including conduct that violates the False Statements Accountability Act 
of 1996 (18 U.S.C. 1001) and section 113(c)(2) of the Clean Air Act (42 
U.S.C. 7413).
    (k) Bond posting. Any foreign refiner shall meet the requirements 
of this paragraph (k) as a condition to approval as benzene foreign 
refiner under this subpart.
    (1) The foreign refiner shall post a bond of the amount calculated 
using the following equation:

Bond = G x $ 0.01


Where:

Bond = amount of the bond in U.S. dollars
G = the largest volume of gasoline produced at the foreign refinery and 
exported to the United States, in gallons, during a single calendar 
year among the most recent of the following calendar years, up to a 
maximum of five calendar years: the calendar year immediately preceding 
the date the refinery's baseline petition is submitted, the calendar 
year the baseline petition is submitted, and each succeeding calendar 
year.

    (2) Bonds shall be posted by:
    (i) Paying the amount of the bond to the Treasurer of the United 
States;
    (ii) Obtaining a bond in the proper amount from a third party 
surety agent that is payable to satisfy United States administrative or 
judicial judgments against the foreign refiner, provided EPA agrees in 
advance as to the third party and the nature of the surety agreement; 
or
    (iii) An alternative commitment that results in assets of an 
appropriate liquidity and value being readily available to the United 
States, provided EPA agrees in advance as to the alternative 
commitment.
    (3) Bonds posted under this paragraph (k) shall--
    (i) Be used to satisfy any judicial judgment that results from an 
administrative or judicial enforcement action for conduct in violation 
of this subpart, including where such conduct violates the False 
Statements Accountability Act of 1996 (18 U.S.C. 1001) and section 
113(c)(2) of the Clean Air Act (42 U.S.C. 7413);
    (ii) Be provided by a corporate surety that is listed in the United 
States Department of Treasury Circular 570 ``Companies Holding 
Certificates of Authority as Acceptable Sureties on Federal Bonds''; 
and
    (iii) Include a commitment that the bond will remain in effect for 
at least five years following the end of latest annual reporting period 
that the foreign refiner produces gasoline pursuant to the requirements 
of this subpart.
    (4) On any occasion a foreign refiner bond is used to satisfy any 
judgment, the foreign refiner shall increase the bond to cover the 
amount used within 90 days of the date the bond is used.
    (5) If the bond amount for a foreign refiner increases, the foreign 
refiner shall increase the bond to cover the shortfall within 90 days 
of the date the bond amount changes. If the bond amount decreases, the 
foreign refiner may reduce the amount of the bond beginning 90 days 
after the date the bond amount changes.
    (l) [Reserved]
    (m) English language reports. Any report or other document 
submitted to EPA by a foreign refiner shall be in English language, or 
shall include an English language translation.
    (n) Prohibitions. (1) No person may combine Certified Benzene-FRGAS 
with any Non-Certified Benzene-FRGAS or Non-Benzene-FRGAS, and no 
person may combine Certified Benzene-FRGAS with any Certified Benzene-
FRGAS produced at a different refinery, until the importer has met all 
the requirements of paragraph (o) of this section, except as provided 
in paragraph (e) of this section.
    (2) No foreign refiner or other person may cause another person to 
commit an action prohibited in paragraph (n)(1) of this section, or 
that otherwise violates the requirements of this section.
    (o) United States importer requirements. Any United States importer 
shall meet the following requirements:
    (1) Each batch of imported gasoline shall be classified by the 
importer as being Benzene-FRGAS or as Non-Benzene-FRGAS, and each batch 
classified as Benzene-FRGAS shall be further classified as Certified 
Benzene-FRGAS or as Non-Certified Benzene-FRGAS.
    (2) Gasoline shall be classified as Certified Benzene-FRGAS or as 
Non-Certified Benzene-FRGAS according to the designation by the foreign 
refiner if this designation is supported by product transfer documents 
prepared by the foreign refiner as required in paragraph

[[Page 15952]]

(d) of this section, unless the gasoline is classified as Non-Certified 
Benzene-FRGAS under paragraph (g) of this section. Additionally, the 
importer shall comply with all requirements of this subpart applicable 
to importers.
    (3) For each gasoline batch classified as Benzene-FRGAS, any United 
States importer shall perform the following procedures.
    (i) In the case of both Certified and Non-Certified Benzene-FRGAS, 
have an independent third party:
    (A) Determine the volume of gasoline in the vessel;
    (B) Use the foreign refiner's Benzene-FRGAS certification to 
determine the name and EPA-assigned registration number of the foreign 
refinery that produced the Benzene-FRGAS;
    (C) Determine the name and country of registration of the vessel 
used to transport the Benzene-FRGAS to the United States; and
    (D) Determine the date and time the vessel arrives at the United 
States port of entry.
    (ii) In the case of Certified Benzene-FRGAS, have an independent 
third party:
    (A) Collect a representative sample from each vessel compartment 
subsequent to the vessel's arrival at the United States port of entry 
and prior to off loading any gasoline from the vessel;
    (B) Obtain the compartment samples; and
    (C) Determine the benzene content value of each compartment sample 
using the methodology specified at 80.46(e) by the third party 
analyzing the sample or by the third party observing the importer 
analyze the sample.
    (4) Any importer shall submit reports within 30 days following the 
date any vessel transporting Benzene-FRGAS arrives at the United States 
port of entry:
    (i) To the Administrator containing the information determined 
under paragraph (o)(3) of this section; and
    (ii) To the foreign refiner containing the information determined 
under paragraph (o)(3)(ii) of this section, and including 
identification of the port at which the product was offloaded.
    (5) Any United States importer shall meet all other requirements of 
this subpart, for any imported gasoline that is not classified as 
Certified Benzene-FRGAS under paragraph (o)(2) of this section.
    (p) Truck imports of Certified Benzene-FRGAS produced at a foreign 
refinery. (1) Any refiner whose Certified Benzene-FRGAS is transported 
into the United States by truck may petition EPA to use alternative 
procedures to meet the following requirements:
    (i) Certification under paragraph (d)(5) of this section;
    (ii) Load port and port of entry sampling and testing under 
paragraphs (f) and (g) of this section;
    (iii) Attest under paragraph (h) of this section; and
    (iv) Importer testing under paragraph (o)(3) of this section.
    (2) These alternative procedures must ensure Certified Benzene-
FRGAS remains segregated from Non-Certified Benzene-FRGAS and from Non-
Benzene-FRGAS until it is imported into the United States. The petition 
will be evaluated based on whether it adequately addresses the 
following:
    (i) Provisions for monitoring pipeline shipments, if applicable, 
from the refinery, that ensure segregation of Certified Benzene-FRGAS 
from that refinery from all other gasoline;
    (ii) Contracts with any terminals and/or pipelines that receive 
and/or transport Certified Benzene-FRGAS, that prohibit the commingling 
of Certified Benzene-FRGAS with any of the following:
    (A) Other Certified Benzene-FRGAS from other refineries.
    (B) All Non-Certified Benzene-FRGAS.
    (C) All Non-Benzene-FRGAS;
    (iii) Procedures for obtaining and reviewing truck loading records 
and United States import documents for Certified Benzene-FRGAS to 
ensure that such gasoline is only loaded into trucks making deliveries 
to the United States;
    (iv) Attest procedures to be conducted annually by an independent 
third party that review loading records and import documents based on 
volume reconciliation, or other criteria, to confirm that all Certified 
Benzene-FRGAS remains segregated throughout the distribution system and 
is only loaded into trucks for import into the United States.
    (3) The petition required by this section must be submitted to EPA 
along with the application for temporary refiner relief individual 
refinery benzene standard under this subpart.
    (q) Withdrawal or suspension of foreign refiner status. EPA may 
withdraw or suspend a foreign refiner's benzene baseline or standard 
approval for a foreign refinery where--
    (1) A foreign refiner fails to meet any requirement of this 
section;
    (2) A foreign government fails to allow EPA inspections as provided 
in paragraph (i)(1) of this section;
    (3) A foreign refiner asserts a claim of, or a right to claim, 
sovereign immunity in an action to enforce the requirements in this 
subpart; or
    (4) A foreign refiner fails to pay a civil or criminal penalty that 
is not satisfied using the foreign refiner bond specified in paragraph 
(k) of this section.
    (r) Early use of a foreign refiner benzene baseline. (1) A foreign 
refiner may begin using an individual refinery benzene baseline under 
this subpart before EPA has approved the baseline, provided that:
    (i) A baseline petition has been submitted as required in paragraph 
(b) of this section;
    (ii) EPA has made a provisional finding that the baseline petition 
is complete;
    (iii) The foreign refiner has made the commitments required in 
paragraph (i) of this section;
    (iv) The persons that will meet the independent third party and 
independent attest requirements for the foreign refinery have made the 
commitments required in paragraphs (f)(3)(iii) and (h)(7)(iii) of this 
section; and
    (v) The foreign refiner has met the bond requirements of paragraph 
(k) of this section.
    (2) In any case where a foreign refiner uses an individual refinery 
baseline before final approval under paragraph (r)(1) of this section, 
and the foreign refinery baseline values that ultimately are approved 
by EPA are more stringent than the early baseline values used by the 
foreign refiner, the foreign refiner shall recalculate its compliance, 
ab initio, using the baseline values approved by the EPA, and the 
foreign refiner shall be liable for any resulting violation of the 
requirements of this subpart.
    (s) Additional requirements for petitions, reports and 
certificates. Any petition for approval to produce gasoline subject to 
the benzene foreign refiner program, any alternative procedures under 
paragraph (p) of this section, any report or other submission required 
by paragraph (c), (f)(2), or (i) of this section, and any certification 
under paragraph (d)(3) of this section shall be--
    (1) Submitted in accordance with procedures specified by the 
Administrator, including use of any forms that may be specified by the 
Administrator.
    (2) Be signed by the president or owner of the foreign refiner 
company, or by that person's immediate designee, and shall contain the 
following declaration:

    I hereby certify: (1) That I have actual authority to sign on 
behalf of and to bind [insert name of foreign refiner] with regard 
to all statements contained herein; (2) that I am aware that the 
information contained herein is being Certified, or submitted to the 
United States Environmental Protection Agency, under the 
requirements of 40 CFR part 80, subpart L, and that the information 
is

[[Page 15953]]

material for determining compliance under these regulations; and (3) 
that I have read and understand the information being Certified or 
submitted, and this information is true, complete and correct to the 
best of my knowledge and belief after I have taken reasonable and 
appropriate steps to verify the accuracy thereof. I affirm that I 
have read and understand the provisions of 40 CFR part 80, subpart 
L, including 40 CFR 80.1420 apply to [insert name of foreign 
refiner]. Pursuant to Clean Air Act section 113(c) and 18 U.S.C. 
1001, the penalty for furnishing false, incomplete or misleading 
information in this certification or submission is a fine of up to 
$10,000 U.S., and/or imprisonment for up to five years.

PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES

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

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

Subpart P--[Amended]

    11. Section 85.1515 is amended by adding paragraphs (c)(2)(vii), 
(c)(2)(viii), and (c)(8) to read as follows.


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

* * * * *
    (c) * * *
    (2) * * *
    (vii) Nonconforming LDV/LLDTs originally manufactured in OP years 
2009 and later must meet the evaporative emission standards in Table 
S09-1 in 40 CFR 86.1811-09(e). However, LDV/LLDTs originally 
manufactured in OP years 2009 and 2010 and imported by ICIs who qualify 
as small volume manufacturers as defined in 40 CFR 86.1838-01 are 
exempt from the LDV/LLDT evaporative emission standards in Table S09-1 
in 40 CFR 86.1811-09(e), but must comply with the Tier 2 evaporative 
emission standards in Table S04-3 in 40 CFR 86.1811-04(e).
    (viii) Nonconforming HLDTs and MDPVs originally manufactured in OP 
years 2010 and later must meet the evaporative emission standards in 
Table S09-1 in 40 CFR 86.1811-09(e). However, HLDTs and MDPVs 
originally manufactured in OP years 2010 and 2011 and imported by ICIs, 
who qualify as small volume manufacturers as defined in 40 CFR 86.1838-
01, are exempt from the HLDTs and MDPVs evaporative emission standards 
in Table S09-1 in 40 CFR 86.1811-09(e), but must comply with the Tier 2 
evaporative emission standards in Table S04-3 in 40 CFR 86.1811-04(e).
* * * * *
    (8)(i) Nonconforming LDV/LLDTs originally manufactured in OP years 
2010 and later must meet the cold temperature NHMC emission standards 
in Table S10-1 in 40 CFR 86.1811-10(g).
    (ii) Nonconforming HLDTs and MDPVs originally manufactured in OP 
years 2012 and later must meet the cold temperature NHMC emission 
standards in Table S10-1 in 40 CFR 86.1811-10(g).
    (iii) ICIs, which qualify as small volume manufacturers, are exempt 
from the cold temperature NMHC phase-in intermediate percentage 
requirements described in 40 CFR 86.1811-10(g)(3). See 40 CFR 86.1811-
04(k)(5)(vi) and (vii).
    (iv) As an alternative to the requirements of paragraphs (c)(8)(i) 
and (ii) of this section, ICIs may elect to meet a cold temperature 
NMHC family emission level below the cold temperature NMHC fleet 
average standards specified in Table S10-1 of 40 CFR 86.1811-10 and 
bank or sell credits as permitted in 40 CFR 86.1864-10. An ICI may not 
meet a higher cold temperature NMHC family emission level than the 
fleet average standards in Table S10-1 of 40 CFR 86.1811-10 as 
specified in paragraphs (c)(8)(i) and (ii) of this section, unless it 
demonstrates to the Administrator at the time of certification that it 
has obtained appropriate and sufficient NMHC credits from another 
manufacturer, or has generated them in a previous model year or in the 
current model year and not traded them to another manufacturer or used 
them to address other vehicles as permitted in 40 CFR 86.1864-10.
    (v) Where an ICI desires to obtain a certificate of conformity 
using a higher cold temperature NMHC family emission level than 
specified in paragraphs (c)(8)(i) and (ii) of this section, but does 
not have sufficient credits to cover vehicles imported under such 
certificate, the Administrator may issue such certificate if the ICI 
has also obtained a certificate of conformity for vehicles certified 
using a cold temperature NMHC family emission level lower than that 
required under paragraphs (c)(8)(i) and (ii) of this section. The ICI 
may then import vehicles to the higher cold temperature NMHC family 
emission level only to the extent that it has generated sufficient 
credits from vehicles certified to a family emission level lower than 
the cold temperature NMHC fleet average standard during the same model 
year.
    (vi) ICIs using cold temperature NMHC family emission levels higher 
than the cold temperature NMHC fleet average standards specified in 
paragraphs (c)(8)(i) and (ii) of this section must monitor their 
imports so that they do not import more vehicles certified to such 
family emission levels than their available credits can cover. ICIs 
must not have a credit deficit at the end of a model year and are not 
permitted to use the deficit carryforward provisions provided in 40 CFR 
86.1864-10.
    (vii) The Administrator may condition the certificates of 
conformity issued to ICIs as necessary to ensure that vehicles subject 
to this paragraph (c)(8) comply with the applicable cold temperature 
NMHC fleet average standard for each model year.
* * * * *

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES 
AND ENGINES

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

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

Subpart H--[Amended]

    13. Section 86.701-94 is amended by revising paragraph (a) to read 
as follows:


Sec.  86.701-94  General applicability.

    (a) The provisions of this subpart apply to: 1994 through 2003 
model year Otto-cycle and diesel light-duty vehicles; 1994 through 2003 
model year Otto-cycle and diesel light-duty trucks; and 1994 and later 
model year Otto-cycle and diesel heavy-duty engines; and 2001 and later 
model year Otto-cycle heavy-duty vehicles and engines certified under 
the provisions of subpart S of this part. The provisions of subpart B 
of this part apply to this subpart. The provisions of Sec.  86.1811-
04(a)(5) and (p) apply to 2004 and later model year light-duty 
vehicles, light-duty trucks, and medium duty passenger vehicles.
* * * * *

Subpart S--[Amended]

    14. Section 86.1803-01 is amended by revising the definition of 
``Banking'' and adding the definition for ``Fleet average cold 
temperature NMHC standard'' to read as follows:


Sec.  86.1803-01  Definitions.

* * * * *
    Banking means one of the following:
    (1) The retention of NOX emission credits for complete 
heavy-duty vehicles by the manufacturer generating the emission 
credits, for use in future model year certification programs as 
permitted by regulation.

[[Page 15954]]

    (2) The retention of cold temperature non-methane hydrocarbon 
(NMHC) emission credits for light-duty vehicles, light-duty trucks, and 
medium-duty passenger vehicles by the manufacturer generating the 
emission credits, for use in future model year certification programs 
as permitted by regulation.
* * * * *
    Fleet average cold temperature NMHC standard means, for light-duty 
vehicles, light-duty trucks and medium-duty passenger vehicles, an NMHC 
cold temperature standard imposed over an individual manufacturer's 
total 50-State U.S. sales (or a fraction of total U.S. sales during 
phase-in years), as ``U.S. sales'' is defined to include all national 
sales, including points-of-first sale in California, of a given model 
year. Manufacturers determine their compliance with such a standard by 
averaging, on a sales-weighted basis, the individual NMHC ``Family 
Emission Limits'' (FEL--as defined in this subpart) to which light-duty 
vehicles, light-duty trucks and medium-duty passenger vehicles were 
certified and sold for that model year.
* * * * *
    15. Section 86.1805-04 is amended by adding paragraph (g) to read 
as follows:


Sec.  86.1805-04  Useful life.

* * * * *
    (g) Where cold temperature NMHC standards are applicable, the 
useful life requirement for compliance with the cold temperature NMHC 
standard only is as follows:
    (1) For LDV/LLDTs, 10 years or 120,000 miles, whichever occurs 
first.
    (2) For HLDT/MDPVs, 11 years or 120,000 miles, whichever occurs 
first.
    16. A new Sec.  86.1809-10 is added to Subpart S to read as 
follows:


Sec.  86.1809-10  Prohibition of defeat devices.

    (a) No new light-duty vehicle, light-duty truck, medium-duty 
passenger vehicle, or complete heavy-duty vehicle shall be equipped 
with a defeat device.
    (b) The Administrator may test or require testing on any vehicle at 
a designated location, using driving cycles and conditions which may 
reasonably be expected to be encountered in normal operation and use, 
for the purposes of investigating a potential defeat device.
    (c) For cold temperature CO and cold temperature NMHC emission 
control, the Administrator will use a guideline to determine the 
appropriateness of the CO and NMHC emission control at ambient 
temperatures between 25 [deg]F (4 [deg]C) (the upper bound of the cold 
test range) and 68 [deg]F (20 [deg]C) (the lower bound of the FTP 
range). The guideline for CO emission congruity across the intermediate 
temperature range is the linear interpolation between the CO standard 
applicable at 25 [deg]F (4 [deg]C) and the CO standard applicable at 68 
[deg]F (20 [deg]C). The guideline for NMHC emission congruity across 
the intermediate temperature range is the linear interpolation between 
the NMHC FEL applicable at 25 [deg]F (4 [deg]C) and the Tier 2 NMOG 
standard to which the vehicle was certified at 68 [deg]F (20 [deg]C), 
where the intermediate temperature NMHC level is rounded to the nearest 
hundredth for comparison to the interpolated line. For vehicles that 
exceed this CO emissions guideline or this NMHC emissions guideline 
upon intermediate temperature cold testing:
    (1) If the CO emission level is greater than the 20 [deg]F (7 
[deg]C) emission standard, the vehicle will automatically be considered 
to be equipped with a defeat device without further investigation. If 
the intermediate temperature NMHC emission level, rounded to the 
nearest hundredth, is greater than the 20 [deg]F (7 [deg]C) FEL, the 
vehicle will automatically be considered to be equipped with a defeat 
device without further investigation.
    (2) If the CO emission level does not exceed the 20 [deg]F emission 
standard, the Administrator may investigate the vehicle design for the 
presence of a defeat device under paragraph (d) of this section. If the 
intermediate temperature NMHC emission level, rounded to the nearest 
hundredth, does not exceed the 20 [deg]F FEL, the Administrator may 
investigate the vehicle design for the presence of a defeat device 
under paragraph (d) of this section.
    (d) For vehicle designs designated by the Administrator to be 
investigated for possible defeat devices:
    (1) The manufacturer must show to the satisfaction of the 
Administrator that the vehicle design does not incorporate strategies 
that unnecessarily reduce emission control effectiveness exhibited 
during the Federal or Supplemental Federal emissions test procedures 
(FTP or SFTP) when the vehicle is operated under conditions which may 
reasonably be expected to be encountered in normal operation and use.
    (2) The following information requirements apply:
    (i) Upon request by the Administrator, the manufacturer will 
provide an explanation containing detailed information regarding test 
programs, engineering evaluations, design specifications, calibrations, 
on-board computer algorithms, and design strategies incorporated for 
operation both during and outside of the Federal emission test 
procedure.
    (ii) For purposes of investigations of possible cold temperature CO 
or cold temperature NMHC defeat devices under this paragraph (d), the 
manufacturer shall provide an explanation which must show, to the 
satisfaction of the Administrator, that CO emissions and NMHC emissions 
are reasonably controlled in reference to the linear guideline across 
the intermediate temperature range.
    (e) For each test group of Tier 2 LDV/LLDTs and HLDT/MDPVs and 
interim non-Tier 2 LDV/LLDTs and HLDT/MDPVs the manufacturer must 
submit, with the Part II certification application, an engineering 
evaluation demonstrating to the satisfaction of the Administrator that 
a discontinuity in emissions of non-methane organic gases, carbon 
monoxide, oxides of nitrogen and formaldehyde measured on the Federal 
Test Procedure (subpart B of this part) does not occur in the 
temperature range of 20 to 86 degrees F. For diesel vehicles, the 
engineering evaluation must also include particulate emissions.
    17. A new Sec.  86.1810-09 is added to Subpart S to read as 
follows:


Sec.  86.1810-09  General standards; increase in emissions; unsafe 
condition; waivers.

    Section 86.1810-09 includes text that specifies requirements that 
differ from Sec.  86.1810-01. Where a paragraph in Sec.  86.1810-01 is 
identical and applicable to Sec.  86.1810-09, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1810-01.'' Where a corresponding paragraph of 
Sec.  86.1810-01 is not applicable, this is indicated by the statement 
``[Reserved].'' This section applies to model year 2009 and later 
light-duty vehicles and light-duty trucks fueled by gasoline, diesel, 
methanol, ethanol, natural gas and liquefied petroleum gas fuels. This 
section also applies to MDPVs and complete heavy-duty vehicles 
certified according to the provisions of this subpart. Multi-fueled 
vehicles (including dual-fueled and flexible-fueled vehicles) shall 
comply with all requirements established for each consumed fuel (or 
blend of fuels in the case of flexible fueled vehicles). The standards 
of this subpart apply to both certification and in-use vehicles unless 
otherwise indicated. This section also applies to hybrid electric 
vehicles and zero emission vehicles. Unless otherwise specified, 
requirements and provisions of this subpart applicable to methanol 
fueled vehicles are also applicable to Tier 2 and interim non-Tier 2 
ethanol fueled vehicles.

[[Page 15955]]

    (a) through (e) [Reserved]. For guidance see Sec.  86.1810-01.
    (f) Altitude requirements. (1) All emission standards apply at low 
altitude conditions and at high altitude conditions, except for 
supplemental exhaust emission standards, cold temperature NMHC emission 
standards, and the evaporative emission standards as described in Sec.  
86.1811-09(e). Supplemental exhaust emission standards, as described in 
Sec.  86.1811-04(f), apply only at low altitude conditions. Cold 
temperature NMHC emission standards, as described in Sec.  86.1811-
10(g), apply only at low altitude conditions. Tier 2 evaporative 
emission standards apply at high altitude conditions as specified in 
Sec.  86.1810-01(f) and (j), and Sec.  86.1811-04(e).
    (2) For vehicles that comply with the cold temperature NMHC 
standards, manufacturers shall submit an engineering evaluation 
indicating that common calibration approaches are utilized at high 
altitudes. Any deviation from low altitude emission control practices 
shall be included in the auxiliary emission control device (AECD) 
descriptions submitted at certification. Any AECD specific to high 
altitude shall require engineering emission data for EPA evaluation to 
quantify any emission impact and validity of the AECD.
    (g) through (p) [Reserved]. For guidance see Sec.  86.1810-01.
    18. Section 86.1811-04 is amended by adding paragraphs (k)(5)(iv) 
through (vii) and (q)(1)(vi) through (ix) to read as follows:


Sec.  86.1811-04  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

* * * * *
    (k) * * *
    (5) * * *
    (iv) Vehicles produced by small volume manufacturers, as defined in 
Sec.  86.1838-01, are exempt from the LDV/LLDT evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) for model years 2009 
and 2010, but must comply with the Tier 2 evaporative emission 
standards in Table S04-3 in paragraph (e)(1) of this section for model 
years 2009 and 2010.
    (v) Vehicles produced by small volume manufacturers, as defined in 
Sec.  86.1838-01, are exempt from the HLDT/MDPV evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) for model years 2010 
and 2011, but must comply with the Tier 2 evaporative emission 
standards in Table S04-3 in paragraph (e)(1) of this section for model 
years 2010 and 2011.
    (vi) Small volume manufacturers, as defined in Sec.  86.1838-01, 
are exempt from the LDV/LLDT cold temperature NMHC phase-in 
requirements in Table S10-1 of Sec.  86.1811-10(g) for model years 
2010, 2011, and 2012, but must comply with the 100% requirement for 
2013 and later model years for cold temperature NMHC standards
    (vii) Small volume manufacturers, as defined in Sec.  86.1838-01, 
are exempt from the HLDT/MDPV cold temperature NMHC phase-in 
requirements in Table S10-1 of Sec.  86.1811-10(g) for model years 
2012, 2013, and 2014, but must comply with the 100% requirement for 
2015 and later model years for cold temperature NMHC standards.
* * * * *
    (q) * * *
    (1) * * *
    (vi) Defer compliance with the LDV/LLDT evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) until 2013, and defer 
compliance with the LDV/LLDT evaporative emissions standards in Table 
S09-2 of Sec.  86.1811-09(e) until 2014. (The hardship relief may be 
extended one additional model year--2 model years total.)
    (vii) Defer compliance with the HLDT/MDPV evaporative emissions 
standards in Table S09-1 of Sec.  86.1811-09(e) until 2014, and defer 
compliance with the HLDT/MDPV evaporative emissions standards in Table 
S09-2 of Sec.  86.1811-09(e) until 2015. (The hardship relief may be 
extended one additional model year--2 model years total.)
    (viii) Defer 100% compliance with the LDV/LLDT cold temperature 
NMHC standards in Table S10-X of Sec.  86.1811-10(g) until 2015. (The 
hardship relief may be extended one additional model year--2 model 
years total.)
    (ix) Defer 100% compliance with the HLDT/MDPV cold temperature NMHC 
standards in Table S10-X of Sec.  86.1811-10(g) until 2017. (The 
hardship relief may be extended one additional model year--2 model 
years total.)
* * * * *
    19. A new Sec.  86.1811-09 is added to Subpart S to read as 
follows:


Sec.  86.1811-09  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

    Section 86.1811-09 includes text that specifies requirements that 
differ from Sec.  86.1811-04. Where a paragraph in Sec.  86.1811-04 is 
identical and applicable to Sec.  86.1811-09, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1811-04.'' Where a corresponding paragraph of 
Sec.  86.1811-04 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) Applicability. (1) This section contains regulations 
implementing emission standards for all LDVs, LDTs and MDPVs. This 
section applies to 2009 and later model year LDVs, LDTs and MDPVs 
fueled by gasoline, diesel, methanol, ethanol, natural gas and 
liquefied petroleum gas fuels, except as noted. Additionally, this 
section applies to hybrid electric vehicles (HEVs) and zero emission 
vehicles (ZEVs). Unless otherwise specified, multi-fueled vehicles must 
comply with all requirements established for each consumed fuel.
    (2) through (4) [Reserved]. For guidance see Sec.  86.1811-04.
    (5) The exhaust emission standards and evaporative emission 
standards of this section apply equally to certification and in-use 
LDVs, LDTs and MDPVs, unless otherwise specified. See paragraph (t) of 
this section for interim evaporative emission in-use standards that are 
different than the certification evaporative emission standards 
specified in paragraph (e) of this section.
    (b) through (d) [Reserved]. For guidance see Sec.  86.1811-04.
    (e) Evaporative emission standards. Evaporative emissions from 
gasoline-fueled, natural gas-fueled, liquefied petroleum gas-fueled, 
ethanol-fueled and methanol-fueled vehicles must not exceed the 
standards in this paragraph (e). The standards apply equally to 
certification and in-use vehicles.
    (1) Diurnal-plus-hot soak evaporative hydrocarbon standards. (i) 
Hydrocarbons for LDV/LLDTs, HLDTs and MDPVs that are gasoline-fueled, 
dedicated natural gas-fueled, dedicated liquefied petroleum gas-fueled, 
dedicated ethanol-fueled, dedicated methanol-fueled and multi-fueled 
vehicles when operating on gasoline must not exceed the diurnal plus 
hot soak standards shown in Table S09-1 for the full three diurnal test 
sequence and for the supplemental two diurnal test sequence. The 
standards apply equally to certification and in-use vehicles, except as 
otherwise specified in paragraph (t) of this section. Table S09-1 
follows:

[[Page 15956]]



                  Table S09-1.--Light-Duty Diurnal Plus Hot Soak Evaporative Emission Standards
                                                [Grams per test]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Supplemental 2
                                                                                       3 day            day
                         Vehicle category                           Model year      diurnal+hot     diurnal+hot
                                                                                       soak            soak
----------------------------------------------------------------------------------------------------------------
LDVs............................................................            2009            0.50            0.65
LLDTs...........................................................            2009            0.65            0.85
HLDTs...........................................................            2010            0.90            1.15
MDPVs...........................................................            2010            1.00            1.25
----------------------------------------------------------------------------------------------------------------

    (ii) Hydrocarbons for LDV/LLDTs, HLDTs and MDPVs that are multi-
fueled vehicles operating on non-gasoline fuel must not exceed the 
diurnal plus hot soak standards shown in Table S09-2 for the full three 
diurnal test sequence and for the supplemental two diurnal test 
sequence. The standards apply equally to certification and in-use 
vehicles except as otherwise specified in paragraph (t) of this 
section. Table S09-2 follows:

  Table S09-2.--Light-Duty Diurnal Plus Hot Soak Evaporative Emission Standards: Non-Gasoline Portion of Multi-
                                                 Fueled Vehicles
                                                [Grams per test]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Supplemental 2
                                                                                       3 day            day
                         Vehicle category                           Model year      diurnal+hot     diurnal+hot
                                                                                       soak            soak
----------------------------------------------------------------------------------------------------------------
LDVs............................................................            2012            0.50            0.65
LLDTs...........................................................            2012            0.65            0.85
HLDTs...........................................................            2013            0.90            1.15
MDPVs...........................................................            2013            1.00            1.25
----------------------------------------------------------------------------------------------------------------

    (2) through (6) [Reserved]. For guidance see Sec.  86.1811-04.
    (f) through (s) [Reserved]. For guidance see Sec.  86.1811-04.
    (t) Evaporative emission in-use standards. (1) For LDVs and LLDTs 
certified prior to the 2012 model year, the Tier 2 LDV/LLDT evaporative 
emissions standards in Table S04-3 of Sec.  86.1811-04(e) shall apply 
to in-use vehicles for only the first three model years after an 
evaporative family is first certified to the LDV/LLDT evaporative 
emission standards in Table S09-1 of paragraph (e) of this section. For 
example, evaporative families first certified to the LDV/LLDT standards 
in Table S09-1 in the 2011 model year shall meet the Tier 2 LDV/LLDT 
evaporative emission standards (Table S04-3) in-use for 2011, 2012, and 
2013 model year vehicles (applying Tier 2 standards in-use is limited 
to the first three years after introduction of a vehicle).
    (2) For HLDTs and MDPVs certified prior to the 2013 model year, the 
Tier 2 HLDT/MDPV evaporative emissions standards in Table S04-3 of 
Sec.  86.1811-04(e) shall apply to in-use vehicles for only the first 
three model years after an evaporative family is first certified to the 
HLDT/MDPV evaporative emission standards in Table S09-1 of paragraph 
(e) of this section. For example, evaporative families first certified 
to the HLDT/MDPV standards in Table S09-1 in the 2012 model year shall 
meet the Tier 2 HLDT/MDPV evaporative emission standards (Table S04-3) 
in-use for 2012, 2013, and 2014 model year vehicles (applying Tier 2 
standards in-use is limited to the first three years after introduction 
of a vehicle).
    20. A new Sec.  86.1811-10 is added to Subpart S to read as 
follows:


Sec.  86.1811-10  Emission standards for light-duty vehicles, light-
duty trucks and medium-duty passenger vehicles.

    Section 86.1811-10 includes text that specifies requirements that 
differ from Sec.  86.1811-04 and Sec.  86.1811-09. Where a paragraph in 
Sec.  86.1811-04 or Sec.  86.1811-09 is identical and applicable to 
Sec.  86.1811-10, this may be indicated by specifying the corresponding 
paragraph and the statement ``[Reserved]. For guidance see Sec.  
86.1811-04'' or ``[Reserved]. For guidance see Sec.  86.1811-09.'' 
Where a corresponding paragraph of Sec.  86.1811-04 or Sec.  86.1811-09 
is not applicable, this is indicated by the statement ``[Reserved].''
    (a) [Reserved]. For guidance see Sec.  86.1811-09.
    (b) through (d) [Reserved]. For guidance see Sec.  86.1811-04.
    (e) [Reserved]. For guidance see Sec.  86.1811-09.
    (f) [Reserved]. For guidance see Sec.  86.1811-04.
    (g) Cold temperature exhaust emission standards. (1) Cold 
temperature CO standards. These cold temperature CO standards are 
applicable only to gasoline fueled LDV/Ts and MDPVs. For the following 
cold temperature CO exhaust emission standards, a useful life of 50,000 
miles or 5 years (whichever occurs first) applies:
    (i) For LDVs and LDT1s, the standard is 10.0 grams per mile CO.
    (ii) For LDT2s, LDT3s and LDT4s, and MDPVs the standard is 12.5 
grams per mile CO.
    (iii) These standards do not apply to interim non-Tier 2 MDPVs.
    (2) Cold temperature NMHC standards. Full useful life fleet average 
cold temperature NMHC standards are applicable only to gasoline fueled 
LDV/LLDTs and HLDT/MDPVs, and apply equally to certification and in-use 
except as otherwise specified in paragraph (u) of this section for in-
use standards for applicable phase-in models. Testing with other fuels 
such as E85, or testing on diesel vehicles, is not required. Multi-
fuel, bi-fuel or dual-fuel vehicles must comply with requirements using 
gasoline only. For LDV/LLDTs, the useful life is 120,000 miles or 10 
years, whichever comes first. For HLDT/MDPVs, the useful life is 
120,000 miles or 11 years, whichever comes first. There is not an 
intermediate

[[Page 15957]]

useful life standard for cold temperature NMHC standards.
    (i) The standards are shown in Table S10-1, which follows:

   Table S10-1.--Fleet Average Cold Temperature NMHC Full Useful Life
                       Exhaust Emission Standards
------------------------------------------------------------------------
                                                        Cold temperature
                                                           NMHC sales-
                Vehicle weight category                  weighted fleet
                                                        average standard
                                                          (grams/mile)
------------------------------------------------------------------------
LDVs & LLDTs (<= 6,000 lbs GVWR)......................               0.3
HLDTs (>6,000-8,500 lbs GVWR) &.......................               0.5
MDPVs (>8,500 10,000 lbs GVWR)........................  ................
------------------------------------------------------------------------

    (ii) The manufacturer must calculate its fleet average cold 
temperature NMHC emission level(s) as described in Sec.  86.1864-10(m).
    (iii) During a phase-in year, the manufacturer must comply with the 
fleet average standards for the required phase-in percentage for that 
year as specified in paragraph (g)(3) of this section, or for the 
alternate phase-in percentage as permitted under paragraph (g)(4) of 
this section.
    (iv) For model years prior to 2010 (LDV/LLDTs) and 2012 (HLDT/
MDPVs), where the manufacturer desires to bank early NMHC credits as 
permitted under Sec.  86.1864-10(o)(5), the manufacturer must achieve a 
fleet average standard below 0.3 grams per mile for LDV/LLDTs and below 
0.5 grams per mile for HLDT/MDPVs. Manufacturers must determine 
compliance with the cold temperature NMHC fleet average standard 
according to Sec.  86.1864-10(o).
    (3) Phase-in of the cold temperature NMHC standards. Except as 
permitted in Sec.  86.1811-04(k)(5)(vi) and (vii) regarding small 
volume manufacturers, manufacturers must comply with the phase-in 
requirements in Tables S10-2 and S10-3 of this paragraph. Separate 
phase-in schedules are provided for LDV/LLDTs and for HLDT/MDPVs. These 
requirements specify the minimum percentage of the manufacturer's LDV/
LLDT and HLDT/MDPV 50-State sales, by model year, that must meet the 
fleet average cold temperature NMHC standard for their full useful 
lives. LDVs and LLDTs must be grouped together to determine compliance 
with these phase-in requirements, and HLDTs and MDPVs must also be 
grouped together to determine compliance with these phase-in 
requirements. Tables S10-2 and S10-3 follow:

  Table S10-2.--Phase-in Percentages for LDV/LLDT Cold Temperature NMHC
                              Requirements
------------------------------------------------------------------------
                                                          Percentage of
                                                         LDV/LLDTs  that
                      Model year                            must meet
                                                           requirement
------------------------------------------------------------------------
2010..................................................                25
2011..................................................                50
2012..................................................                75
2013 and subsequent...................................               100
------------------------------------------------------------------------


 Table S10-3.--Phase-in Percentages for HLDT/MDPV Cold Temperature NMHC
                              Requirements
------------------------------------------------------------------------
                                                           Percentage of
                                                            HLDT/MDPVs
                       Model year                         that must meet
                                                            requirement
------------------------------------------------------------------------
2012....................................................              25
2013....................................................              50
2014....................................................              75
2015 and subsequent.....................................             100
------------------------------------------------------------------------

    (4) Alternate phase-in schedules for cold temperature NMHC 
standards. (i) Manufacturers may apply for alternative phase-in 
schedules that would still result in 100% phase-in by 2013 and 2015, 
respectively, for LDV/LLDTs and HLDT/MDPVs. An alternate phase-in 
schedule submitted by a manufacturer is subject to EPA approval. The 
alternative phase-in will not be used to delay full implementation past 
the last year of the primary phase-in schedule (2013 for LDV/LLDTs, 
2015 for HLDT/MDPVs). An alternative phase-in schedule will be 
acceptable if it satisfies the following equations:


LDV/LLDTs:

(6xAPI2008) + (5xAPI2009) + 
(4xAPI2010) + (3xAPI2011) + 
(2xAPI2012) + (1xAPI2013) >=500%


HLDT/MDPVs:

(6xAPI2010) + (5xAPI2011) + 
(4xAPI2012) + (3xAPI2013) + 
(2xAPI2014) + (1xAPI2015) >=500%


Where:

API = anticipated phase-in percentage for the referenced model year

    (ii) If the sum of products is greater than or equal to 500%, which 
is the sum of products from the primary phase-in schedule (4 x 25% + 3 
x 50% + 2 x 75% + 1 x 100% = 500%), then the alternative phase-in 
schedule is acceptable, except as prohibited in paragraphs (g)(4)(i) 
and (iii) of this section. In addition, manufacturers electing to use 
an alternate phase-in schedule for compliance with the cold temperature 
NMHC exhaust emission standards must ensure that the sum of products is 
at least 100% for model years 2010 and earlier for LDV/LLDTs, and 2012 
and earlier for HLDT/MDPVs. For example, a phase-in schedule for LDV/
LLDTs of 5/10/10/45/80/100 that begins in 2008 would calculate as (6 x 
5%) + (5 x 10%) + (4 x 10%) = 120% and would be acceptable for 2008-
2010. The full phase-in would calculate as (6 x 5%) + (5 x 10%) + (4 x 
10%) + (3 x 45%) + (2 x 80%) + (1 x 100%) = 515% and would be 
acceptable for 2008-2013.
    (iii) Under an alternate phase-in schedule, the projected phase-in 
percentage is not binding for a given model year, provided the sums of 
the actual phase-in percentages that occur meet the appropriate total 
sums as required in the equations of paragraph (g)(4)(i) of this 
section, and provided that 100% actual compliance is reached for the 
appropriate model year, either 2013 for LDV/LLDTs or 2015 for HLDT/
MDPVs.
    (5) Manufacturers must determine compliance with required phase-in 
schedules as follows:
    (i) Manufacturers must submit information showing compliance with 
all phase-in requirements of this section with their Part I 
applications as required by Sec.  86.1844(d)(13).
    (ii) A manufacturer electing to use any alternate phase-in schedule 
permitted under this section must provide in its Application for 
Certification for the first year in which it intends to use such a 
schedule, and in each succeeding year during the phase-in, the intended 
phase-in percentages for that model year and the remaining phase-in 
years along with the intended final sum of those percentages as 
described in paragraph (g)(4)(i) of this section. This information may 
be included with the information required under Sec.  86.1844-
01(d)(13). In its year end annual reports, as required under Sec.  
86.1844-01(e)(4), the manufacturer must include sufficient information 
so that the Administrator can verify compliance with the alternative 
phase-in schedule established under paragraph (g)(4)(i) of this 
section.
    (6)(i) Sales percentages for the purpose of determining compliance 
with the phase-in of the cold temperature NMHC requirements must be 
based upon projected 50-State sales of LDV/LLDTs and HLDT/MDPVs of the 
applicable model year by the manufacturer to the point of first sale. 
Such sales percentages must be rounded to the nearest one tenth of a 
percent.
    (ii) Alternatively, the manufacturer may petition the Administrator 
to allow actual volume produced for U.S. sales to be used in lieu of 
projected U.S. sales for purposes of determining compliance

[[Page 15958]]

with the phase-in percentage requirements under this section. The 
manufacturer must submit its petition within 30 days of the end of the 
model year to the Compliance and Innovative Strategies Division. For 
EPA to approve the use of actual volume produced for U.S. sales, the 
manufacturer must establish to the satisfaction of the Administrator, 
that actual production volume is functionally equivalent to actual 
sales volume of LDV/LLDTs and HLDT/MDPVs sold in all 50 U.S. States.
    (f) through (s) [Reserved]. For guidance see Sec.  86.1811-04.
    (t) [Reserved]. For guidance see Sec.  86.1811-09.
    (u) Cold temperature NMHC exhaust emission in-use standards for 
applicable phase-in models. An interim full useful life in-use 
compliance standard is calculated by adding 0.1 g/mi to the FEL to 
which each test group is newly certified, and applies to that test 
group only for the model years shown in Tables S10-4 and S10-5. 
Otherwise, the in-use standard is the certification standard from 
paragraph (g)(2) of this section. The standards apply for purposes of 
in-use testing only and does not apply to certification or Selective 
Enforcement Auditing. Tables S10-4 and S10-5 follow:

                         Table S10-4.--In-Use Standard For Applicable Phase-In LDV/LLDTs
----------------------------------------------------------------------------------------------------------------
                Model year of introduction                    2008     2009     2010     2011     2012     2013
----------------------------------------------------------------------------------------------------------------
Models years that the interim in-use standard is available     2008     2009     2010     2011     2012     2013
                                                               2009     2010     2011     2012     2013     2014
                                                               2010     2011     2012     2013     2014
                                                               2011     2012     2013
----------------------------------------------------------------------------------------------------------------


                        Table S10-5.--In-Use Standards For Applicable Phase-In HLDT/MDPVs
----------------------------------------------------------------------------------------------------------------
                Model year of introduction                    2010     2011     2012     2013     2014     2015
----------------------------------------------------------------------------------------------------------------
Models years that the interim in-use standard is available     2010     2011     2012     2013     2014     2015
                                                               2011     2012     2013     2014     2015     2016
                                                               2012     2013     2014     2015     2016
                                                               2013     2014     2015
----------------------------------------------------------------------------------------------------------------

    21. Section 86.1823-01 is amended by revising paragraph 
(a)(3)(i)(C) to read as follows:


Sec.  86.1823-01  Durability demonstration procedures for exhaust 
emissions.

* * * * *
    (a) * * *
    (3) * * *
    (i) * * *
    (C) The DF calculated by these procedures will be used for 
determining compliance with FTP exhaust emission standards, SFTP 
exhaust emission standards, cold temperature NMHC emission standards, 
and cold CO emission standards. At the manufacturer's option and using 
procedures approved by the Administrator, a separate DF may be 
calculated exclusively using cold CO test data to determine compliance 
with cold CO emission standards. Similarly, at the manufacturer's 
option and using procedures approved by the Administrator, a separate 
DF may be calculated exclusively using cold temperature NMHC test data 
to determine compliance with cold temperature NMHC emission standards. 
For determining compliance with full useful life cold NMHC emission 
standards, the 68-86 degree F 120,000 mile full useful life NMOG DF may 
be used. Also at the manufacturer's option and using procedures 
approved by the Administrator, a separate DF may be calculated 
exclusively using US06 and/or air conditioning (SC03) test data to 
determine compliance with the SFTP emission standards.
* * * * *
    22. Section 86.1827-01 is amended by revising paragraph (a)(5) to 
read as follows:


Sec.  86.1827-01  Test group determination.

* * * * *
    (a) * * *
    (5) Subject to the same emission standards (or FEL in the case of 
cold temperature NMHC standards), except that a manufacturer may 
request to group vehicles into the same test group as vehicles subject 
to more stringent standards, so long as all the vehicles within the 
test group are certified to the most stringent standards applicable to 
any vehicle within that test group. Light-duty trucks which are subject 
to the same emission standards as light-duty vehicles with the 
exception of the light-duty truck idle CO standard and/or total HC 
standard may be included in the same test group.
* * * * *
    23. A new Sec.  86.1828-10 is added to Subpart S to read as 
follows:


Sec.  86.1828-10  Emission data vehicle selection.

    Section 86.1828-10 includes text that specifies requirements that 
differ from Sec.  86.1828-01. Where a paragraph in Sec.  86.1828-01 is 
identical and applicable to Sec.  86.1828-10, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1828-01.'' Where a corresponding paragraph of 
Sec.  86.1828-01 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) through (f) [Reserved]. For guidance see Sec.  86.1828-01.
    (g) Cold temperature NMHC testing. For cold temperature NMHC 
exhaust emission compliance for each durability group, the vehicle 
expected to emit the highest NMHC emissions at 20 degrees F on 
candidate in-use vehicles shall be selected from the test vehicles 
specified in Sec.  86.1828-01(a). When the expected worst-case cold 
temperature NMHC vehicle is also the expected worst-case cold CO 
vehicle as selected in paragraph (c) of this section, then cold testing 
is required only for that vehicle; otherwise, testing is required for 
both the worst-case cold CO vehicle and the worst-case cold temperature 
NMHC vehicle.
    24. Section 86.1829-01 is amended by revising paragraph (b)(3) to 
read as follows:


Sec.  86.1829-01  Durability and emission testing requirements; 
waivers.

* * * * *
    (b) * * *
    (3) Cold temperature CO and cold temperature NMHC Testing. One EDV 
in each durability group shall be tested for cold temperature CO and 
cold

[[Page 15959]]

temperature NMHC exhaust emission compliance in accordance with the 
test procedures in subpart C of this part or with alternative 
procedures requested by the manufacturer and approved in advance by the 
Administrator. The selection of which EDV and test group within the 
durability group will be tested for cold temperature CO and cold 
temperature NMHC compliance will be determined under the provisions of 
Sec.  86.1828-10(c) and (g).
* * * * *
    25. Section 86.1844-01 is amended by revising paragraph (d)(11) to 
read as follows:


Sec.  86.1844-01  Information requirements: Application for 
certification and submittal of information upon request.

* * * * *
    (d) * * *
    (11) A list of all auxiliary emission control devices (AECD) 
installed on any applicable vehicles, including a justification for 
each AECD, the parameters they sense and control, a detailed 
justification of each AECD which results in a reduction in 
effectiveness of the emission control system, and rationale for why the 
AECD is not a defeat device as defined under Sec. Sec.  86.1809-01 and 
86.1809-10. For any AECD uniquely used at high altitudes, EPA may 
request engineering emission data to quantify any emission impact and 
validity of the AECD. For any AECD uniquely used on multi-fuel vehicles 
when operated on fuels other than gasoline, EPA may request engineering 
emission data to quantify any emission impact and validity of the AECD.
* * * * *
    26. A new Sec.  86.1848-10 is added to Subpart S to read as 
follows:


Sec.  86.1848-10  Certification.

    Section 86.1848-10 includes text that specifies requirements that 
differ from Sec.  86.1848-01. Where a paragraph in Sec.  86.1848-01 is 
identical and applicable to Sec.  86.1848-10, this may be indicated by 
specifying the corresponding paragraph and the statement ``[Reserved]. 
For guidance see Sec.  86.1848-01.'' Where a corresponding paragraph of 
Sec.  86.1848-01 is not applicable, this is indicated by the statement 
``[Reserved].''
    (a) through (b) [Reserved]. For guidance see Sec.  86.1848-01.
    (c) All certificates are conditional upon the following conditions 
being met:
    (1) The manufacturer must supply all required information according 
to the provisions of Sec. Sec.  86.1843-01 and 86.1844-01.
    (2) The manufacturer must comply with all certification and in-use 
emission standards contained in subparts S and H of this part both 
during and after model year production.
    (3) The manufacturer must comply with all implementation schedules 
sales percentages as required in Sec.  86.1810 or elsewhere in this 
part. Failure to meet a required implementation schedule sales 
percentage will be considered to be a failure to satisfy a condition 
upon which the certificate was issued and any vehicles or trucks sold 
in violation of the implementation schedule shall not be covered by the 
certificate.
    (4) For incomplete light-duty trucks and incomplete heavy-duty 
vehicles, a certificate covers only those new motor vehicles which, 
when completed by having the primary load-carrying device or container 
attached, conform to the maximum curb weight and frontal area 
limitations described in the application for certification as required 
in Sec.  86.1844-01.
    (5) The manufacturer must meet the in-use testing and reporting 
requirements contained in Sec. Sec.  86.1845-01, 86.1846-01, and 
86.1847-01, as applicable. Failure to meet the in-use testing or 
reporting requirements shall be considered a failure to satisfy a 
condition upon which the certificate was issued. A vehicle or truck 
will be considered to be covered by the certificate only if the 
manufacturer fulfills this condition upon which the certificate was 
issued.
    (6) Vehicles are covered by a certificate of conformity only if 
they are in all material respects as described in the manufacturer's 
application for certification (Part I and Part II).
    (7) For Tier 2 and interim non-Tier 2 vehicles, all certificates of 
conformity issued are conditional upon compliance with all provisions 
of Sec. Sec.  86.1811-04, 86.1860-04, 86.1861-04 and 86.1862-04 both 
during and after model year production.
    (i) Failure to meet the fleet average NOX requirements 
of 0.07g/mi, 0.30 g/mi or 0.20 g/mi, as applicable, will be considered 
to be a failure to satisfy the terms and conditions upon which the 
certificate(s) was (were) issued and the vehicles sold in violation of 
the fleet average NOX standard will not be covered by the 
certificate(s).
    (ii) Failure to comply fully with the prohibition against selling 
credits that it has not generated or that are not available, as 
specified in Sec.  86.1861-04, will be considered to be a failure to 
satisfy the terms and conditions upon which the certificate(s) was 
(were) issued and the vehicles sold in violation of this prohibition 
will not be covered by the certificate(s).
    (iii) Failure to comply fully with the phase-in requirements of 
Sec.  86.1811-04, will be considered to be a failure to satisfy the 
terms and conditions upon which the certificate(s) was (were) issued 
and the vehicles sold which do not comply with Tier 2 or interim non-
Tier 2 requirements, up to the number needed to comply, will not be 
covered by the certificate(s).
    (iv) For paragraphs (c)(7)(i) through (iii) of this section:
    (A) The manufacturer must bear the burden of establishing to the 
satisfaction of the Administrator that the terms and conditions upon 
which the certificate(s) was (were) issued were satisfied.
    (B) For recall and warranty purposes, vehicles not covered by a 
certificate of conformity will continue to be held to the standards 
stated or referenced in the certificate that otherwise would have 
applied to the vehicles.
    (8) For LDV/LLDTs and HLDT/MDPVs, all certificates of conformity 
issued are conditional upon compliance with all provisions of 
Sec. Sec.  86.1811-10 and 86.1864-10 both during and after model year 
production.
    (i) Failure to meet the fleet average cold temperature NMHC 
requirements will be considered a failure to satisfy the terms and 
conditions upon which the certificate(s) was (were) issued and the 
vehicles sold in violation of the fleet average NMHC standard will not 
be covered by the certificate(s).
    (ii) Failure to comply fully with the prohibition against selling 
credits that are not generated or that are not available, as specified 
in Sec.  86.1864-10, will be considered a failure to satisfy the terms 
and conditions upon which the certificate(s) was (were) issued and the 
vehicles sold in violation of this prohibition will not be covered by 
the certificate(s).
    (iii) Failure to comply fully with the phase-in requirements of 
Sec.  86.1811-10 will be considered a failure to satisfy the terms and 
conditions upon which the certificate(s) was (were) issued and the 
vehicles sold that do not comply with cold temperature NMHC 
requirements, up to the number needed to comply, will not be covered by 
the certificate(s).
    (iv) For paragraphs (c)(8)(i) through (iii) of this section:
    (A) The manufacturer bears the burden of establishing to the 
satisfaction of the Administrator that the terms and conditions upon 
which the certificate(s) was (were) issued were satisfied.
    (B) For recall and warranty purposes, vehicles not covered by a 
certificate of conformity will continue to be held to the standards 
stated or referenced in the

[[Page 15960]]

certificate that otherwise would have applied to the vehicles.
    (d) through (i) [Reserved]. For guidance see Sec.  86.1848-01.
    27. A new Sec.  86.1864-10 is added to Subpart S to read as 
follows:


Sec.  86.1864-10   How to comply with the fleet average cold 
temperature NMHC standards.

    (a) Applicability. Cold temperature NMHC exhaust emission standards 
apply to the following vehicles, subject to the phase-in requirements 
in Sec.  86.1811-10(g)(3) and (4):
    (1) 2010 and later model year LDV/LLDTs.
    (2) 2012 and later model year HLDT/MDPVs.
    (3) Aftermarket conversion systems as defined in 40 CFR 85.502, 
including conversion of MDPVs.
    (4) Vehicles imported by ICIs as defined in 40 CFR 85.1502.
    (b) Useful life requirements. Full useful life requirements for 
cold temperature NMHC standards are defined in Sec.  86.1805-04(g). 
There is not an intermediate useful life standard for cold temperature 
NMHC standards.
    (c) Altitude. Altitude requirements for cold temperature NMHC 
standards are provided in Sec.  86.1810-09(f).
    (d) Small volume manufacturer certification procedures. 
Certification procedures for small volume manufacturers are provided in 
Sec.  86.1838-01.
    (e) Cold temperature NMHC standards. Fleet average cold temperature 
NMHC standards are provided in Sec.  86.1811-10(g)(2).
    (f) Phase-in. Phase-in of the cold temperature NMHC standards are 
provided in Sec.  86.1811-10(g)(3) and (4).
    (g) Phase-in flexibilities for small volume manufacturers. Phase-in 
flexibilities for small volume manufacturer compliance with the cold 
temperature NMHC standards are provided in Sec.  86.1811-04(k)(5).
    (h) Hardship provisions for small volume manufacturers. Hardship 
provisions for small volume manufacturers related to the cold 
temperature NMHC standards are provided in Sec.  86.1811-04(q)(1).
    (i) In-use standards for applicable phase-in models. In-use cold 
temperature NMHC standards for applicable phase-in models are provided 
in Sec.  86.1811-10(u).
    (j) Durability procedures and method of determining deterioration 
factors (DFs). The durability data vehicle selection procedures of 
Sec.  86.1822-01 and the durability demonstration procedures of Sec.  
86.1823-06 apply for cold NMHC standards. For determining compliance 
with full useful life cold temperature NMHC emission standards, the 68-
86 degree F, 120,000 mile full useful life NMOG DF may be used.
    (k) Vehicle test procedure. (1) The test procedure for 
demonstrating compliance with cold temperature NMHC standards is 
contained in subpart C of this part. With prior EPA approval, 
alternative testing procedures may be used, as specified in Sec.  
86.106-96(a), provided cold temperature NMHC emissions do not decrease 
as a result of an alternative testing procedure.
    (2) Testing of all LDVs, LDTs and MDPVs to determine compliance 
with cold temperature NMHC exhaust emission standards set forth in this 
section must be on a loaded vehicle weight (LVW) basis, as defined in 
Sec.  86.1803-01.
    (3) Testing for the purpose of providing certification data is 
required only at low altitude conditions and only for vehicles that can 
operate on gasoline, except as requested in Sec. Sec.  86.1810-09(f) 
and 86.1844-01(d)(11). If hardware and software emission control 
strategies used during low altitude condition testing are not used 
similarly in-use across all altitudes, the manufacturer will include a 
statement in the application for certification, in accordance with 
Sec. Sec.  86.1844-01(d)(11) and Sec.  86.1810-09(f), stating what the 
different strategies are and why they are used. If hardware and 
software emission control strategies used during testing with gasoline 
are not used similarly with all fuels that can be used in multi-fuel 
vehicles, the manufacturer will include a statement in the application 
for certification, in accordance with Sec. Sec.  86.1844-01(d)(11) and 
86.1810-09(f), stating what the different strategies are and why they 
are used. For example, unless a manufacturer states otherwise, air 
pumps used to control emissions on dedicated gasoline vehicles or 
multi-fuel vehicles during low altitude conditions must also be used to 
control emissions at high altitude conditions, and software used to 
control emissions or closed loop operation must also operate similarly 
at low and high altitude conditions and similarly when multi-fueled 
vehicles are operated on gasoline and alternate fuels. These examples 
are for illustrative purposes only; similar strategies would apply to 
other currently used emission control technologies and/or emerging or 
future technologies.
    (l) Emission data vehicle (EDV) selection. Provisions for selecting 
the appropriate EDV for the cold temperature NMHC standards are 
provided in Sec. Sec.  86.1828-10(g) and 86.1829-01(b)(3).
    (m) Calculating the fleet average cold temperature NMHC standard. 
Manufacturers will compute separate sales-weighted fleet average cold 
temperature NMHC emissions at the end of the model year for LDV/LLDTs 
and HLDT/MDPVs, using actual sales, and certifying test groups to FELs, 
as defined in Sec.  86.1803-01. The FEL becomes the standard for each 
test group, and every test group can have a different FEL. The 
certification resolution for the FEL will be one decimal point. LDVs 
and LLDTs must be grouped together when calculating the fleet average, 
and HLDTs and MDPVs must also be grouped together to determine the 
fleet average. Manufacturers must compute the sales-weighted cold 
temperature NMHC fleet averages using the following equation, rounded 
to the nearest tenth:


Fleet average cold temperature NMHC exhaust emissions =

[Sigma](N x FEL) / Total number of vehicles sold of the applicable 
weight category (i.e., either LDV + LLDTs, or HLDT + MDPVs)


Where:

N = The number of LDVs and LLDTs, or HLDTs and MDPVs, sold within the 
applicable FEL, based on vehicles counted to the point of first sale.

FEL = Family Emission Limit.

    (n) Certification compliance and enforcement requirements for cold 
temperature NMHC standards. (1) In addition to the compliance and 
enforcement requirements provided throughout Sec.  86.1864-10, 
additional conditions are included in the provisions of Sec.  86.1848-
10(c)(8).
    (2) The certificate issued for each test group requires all 
vehicles within that test group to meet the emission standard or FEL to 
which the vehicles were certified.
    (3) Each manufacturer must comply with the applicable cold 
temperature NMHC fleet average standard on a sales-weighted average 
basis, at the end of each model year, using the procedure described in 
paragraph (m) of this section.
    (4) During a phase-in year, the manufacturer must comply with the 
applicable cold temperature NMHC fleet average standard for the 
required phase-in percentage for that year as specified in Sec.  
86.1811-10(g)(3) or (4).
    (5) Manufacturers must compute separate cold temperature NMHC fleet 
averages for LDV/LLDTs and HLDT/MDPVs. The sales-weighted cold 
temperature NMHC fleet averages must be compared with the applicable 
fleet average standard.

[[Page 15961]]

    (6) Each manufacturer must comply on an annual basis with the fleet 
average standards as follows:
    (i) Manufacturers must report in their annual reports to the Agency 
that they met the relevant corporate average standard by showing that 
their sales-weighted average cold temperature NMHC emissions of LDV/
LLDTs and HLDT/MDPVs, as applicable, are at or below the applicable 
fleet average standard;
    (ii) If the sales-weighted average is above the applicable fleet 
average standard, manufacturers must obtain and apply sufficient NMHC 
credits, as appropriate, and as permitted under paragraph (o)(8) of 
this section. A manufacturer must show via the use of credits that they 
have offset any exceedence of the corporate average standard. 
Manufacturers shall also report their credit balances or deficits.
    (iii) If a manufacturer fails to meet the corporate average cold 
temperature NMHC standard for two consecutive years, as required in 
paragraph (o)(8) of this section, the vehicles causing the corporate 
average exceedence will be considered not covered by the certificate of 
conformity. A manufacturer will be subject to penalties on an 
individual-vehicle basis for sale of vehicles not covered by a 
certificate.
    (iv) EPA will review each manufacturer's sales to designate the 
vehicles that caused the exceedence of the corporate average standard. 
EPA will designate as nonconforming those vehicles in test groups with 
the highest certification emission values first, continuing until a 
number of vehicles equal to the calculated number of noncomplying 
vehicles as determined above is reached. In a group where only a 
portion of vehicles would be deemed nonconforming, EPA will determine 
the actual nonconforming vehicles by counting backwards from the last 
vehicle produced in that test group. Manufacturers will be liable for 
penalties for each vehicle sold that is not covered by a certificate.
    (o) How does the cold temperature NMHC averaging, banking and 
trading (ABT) program work? (1) Manufacturers shall average the cold 
temperature NMHC emissions of their vehicles and comply with the cold 
temperature NMHC fleet average corporate standard. Credits may be 
generated during and after the phase-in period. Credits may also be 
generated prior to the phase-in periods as described in paragraph (5) 
of this section. A manufacturer whose cold temperature NMHC fleet 
average emissions exceed the 0.3 g/mile standard for LDV/LLDTs, or 0.5 
g/mi for HLDT/MDPVs, must complete the calculation in paragraph (o)(4) 
of this section to determine the size of its NMHC credit deficit. A 
manufacturer whose cold temperature NMHC fleet average emissions are 
less than the 0.3 g/mile standard for LDV/LLDTs, or less than 0.5 g/mi 
for HLDT/MDPVs, must complete the calculation in paragraph (o)(4) of 
this section if it desires to generate NMHC credits.
    (2) There are no property rights associated with NMHC credits 
generated under this subpart. Credits are a limited authorization to 
emit the designated amount of emissions. Nothing in this part or any 
other provision of law should be construed to limit EPA's authority to 
terminate or limit this authorization through a rulemaking.
    (3) Each manufacturer must comply with the reporting and 
recordkeeping requirements of paragraph (p) of this section for NMHC 
credits, including early credits. The averaging, banking and trading 
program shall be enforced through the certificate of conformity that 
allows the manufacturer to introduce any regulated vehicles into 
commerce.
    (4) Credits are earned on the last day of the model year. 
Manufacturers must calculate, for a given model year, the number of 
credits or debits it has generated according to the following equation, 
rounded to the nearest tenth:

NMHC Credits or Debits = (Cold Temperature NMHC Standard-Manufacturer's 
Sales-Weighted Fleet Average Cold Temperature NMHC Emissions) x (Total 
Number of Vehicles Sold)


Where:

Cold Temperature NMHC Standard = 0.3 g/mi for LDV/LLDTs or 0.5 g/mi for 
HLDT/MDPV, per Sec.  86.1811-10(g)(2).

Manufacturer's Sales-Weighted Fleet Average Cold Temperature NMHC 
Emissions = average calculated according to paragraph (m) of this 
section.
Total Number of Vehicles Sold = Total 50-State sales based on the point 
of first sale.

    (5) The following provisions apply for early banking:
    (i) Manufacturers may certify LDV/LLDTs to the cold temperature 
NMHC exhaust standards in Sec.  86.1811-10(g)(2) for model years 2008-
2009 in order to bank credits for use in the 2010 and later model 
years. Manufacturers may certify HLDT/MDPVs to the cold temperature 
NMHC exhaust standards in Sec.  86.1811-10(g)(2) for model years 2010-
2011 in order to bank credits for use in the 2012 and later model 
years.
    (ii) This process is referred to as ``early banking'' and the 
resultant credits are referred to as ``early credits.'' In order to 
bank early credits, a manufacturer must comply with all exhaust 
emission standards and requirements applicable to LDV/LLDTs and/or 
HLDT/MDPVs. To generate early credits, a manufacturer must separately 
compute the sales-weighted cold temperature NMHC average of the LDV/
LLDTs and HLDT/MDPVs it certifies to the exhaust requirements and 
separately compute credits using the calculations in paragraph (o)(4) 
of this section. Early HLDT/MDPV credits may not be applied to LDV/
LLDTs before the 2010 model year. Early LDV/LLDT credits may not be 
applied to HLDT/ MDPV before the 2012 model year.
    (6) NMHC credits are not subject to any discount or expiration date 
except as required under the deficit carryforward provisions of 
paragraph (o)(8) of this section. There shall be no discounting of 
unused credits. NMHC credits shall have unlimited lives, subject to the 
limitations of paragraph (o)(2) of this section.
    (7) Credits may be used as follows:
    (i) Credits generated and calculated according to the method in 
paragraph (o)(4) of this section may only be used to offset deficits 
accrued with respect to the standard in Sec.  86.1811-10(g)(2). Credits 
may be banked and used in a future model year in which a manufacturer's 
average cold temperature NMHC level exceeds the 0.3 or 0.5 g/mi 
standard for LDV/LLDTs and HLDT/MDPVs, respectively. Credits may be 
exchanged between the LDT/LLDT and HLDT/MDPV fleets of a given 
manufacturer. Credits may also be traded to another manufacturer 
according to the provisions in paragraph (o)(9) of this section. Before 
trading or carrying over credits to the next model year, a manufacturer 
must apply available credits to offset any credit deficit, where the 
deadline to offset that credit deficit has not yet passed.
    (ii) The use of credits shall not be permitted to address Selective 
Enforcement Auditing or in-use testing failures. The enforcement of the 
averaging standard shall occur through the vehicle's certificate of 
conformity. A manufacturer's certificate of conformity shall be 
conditioned upon compliance with the averaging provisions. The 
certificate shall be void ab initio if a manufacturer fails to meet the 
corporate average standard and does not obtain appropriate credits to 
cover its shortfalls in that model year or in the subsequent model year 
(see deficit carryforward provision in paragraph (o)(8) of this 
section). Manufacturers shall track their

[[Page 15962]]

certification levels and sales unless they produce only vehicles 
certified to cold temperature NMHC levels below the standard and do not 
plan to bank credits.
    (8) The following provisions apply if debits are accrued:
    (i) If a manufacturer calculates that it has negative credits (also 
called ``debits'' or a ``credit deficit'') for a given model year, it 
shall be allowed to carry that deficit forward into the next model 
year. Such a carry-forward may only occur after the manufacturer 
exhausts any supply of banked credits. At the end of that next model 
year, the deficit must be covered with an appropriate number of credits 
that the manufacturer generates or purchases. Any remaining deficit 
shall be subject to an enforcement action, as described in this 
paragraph (o)(8). Manufacturers are not permitted to run a deficit for 
two consecutive years.
    (ii) If debits are not offset within the specified time period, the 
number of vehicles not meeting the fleet average cold temperature NMHC 
standards and not covered by the certificate must be calculated by 
dividing the total amount of debits for the model year by the fleet 
average cold temperature NMHC standard applicable for the model year in 
which the debits were first incurred.
    (iii) EPA will determine the number of vehicles for which the 
condition on the certificate was not satisfied by designating vehicles 
in those test groups with the highest certification cold temperature 
NMHC emission values first and continuing until a number of vehicles 
equal to the calculated number of noncomplying vehicles as determined 
above is reached. If this calculation determines that only a portion of 
vehicles in a test group contribute to the debit situation, then EPA 
will designate actual vehicles in that test group as not covered by the 
certificate, starting with the last vehicle produced and counting 
backwards.
    (iv)(A) If a manufacturer ceases production of LDV/LLDTs and HLDT/
MDPVs, the manufacturer continues to be responsible for offsetting any 
debits outstanding within the required time period. Any failure to 
offset the debits will be considered a violation of paragraph (o)(8)(i) 
of this section and may subject the manufacturer to an enforcement 
action for sale of vehicles not covered by a certificate, pursuant to 
paragraphs (o)(8)(ii) and (iii) of this section.
    (B) If a manufacturer is purchased by, merges with, or otherwise 
combines with another manufacturer, the controlling entity is 
responsible for offsetting any debits outstanding within the required 
time period. Any failure to offset the debits will be considered a 
violation of paragraph (o)(8)(i) of this section and may subject the 
manufacturer to an enforcement action for sale of vehicles not covered 
by a certificate, pursuant to paragraphs (o)(8)(ii) and (iii) of this 
section.
    (v) For purposes of calculating the statute of limitations, a 
violation of the requirements of paragraph (o)(8)(i) of this section, a 
failure to satisfy the conditions upon which a certificate(s) was 
issued and hence a sale of vehicles not covered by the certificate, all 
occur upon the expiration of the deadline for offsetting debits 
specified in paragraph (o)(8)(i) of this section.
    (9) The following provisions apply to NMHC credit trading:
    (i) EPA may reject NMHC credit trades if the involved manufacturers 
fail to submit the credit trade notification in the annual report. A 
manufacturer may not sell credits that are not available for sale 
pursuant to the provisions in paragraphs (o)(7)(i) of this section.
    (ii) In the event of a negative credit balance resulting from a 
transaction that a manufacturer could not cover by the reporting 
deadline for the model year in which the trade occurred, both the buyer 
and seller are liable, except in cases involving fraud. EPA may void ab 
initio the certificates of conformity of all engine families 
participating in such a trade.
    (iii) A manufacturer may only trade credits that it has generated 
pursuant to paragraph (o)(4) of this section or acquired from another 
party.
    (p) Maintenance of records and submittal of information relevant to 
compliance with fleet average cold temperature NMHC standards--(1) 
Maintenance of records. (i) Manufacturers producing any light-duty 
vehicles, light-duty trucks, or medium-duty passenger vehicles subject 
to the provisions in this subpart must establish, maintain, and retain 
all the following information in adequately organized and indexed 
records for each model year:
    (A) Model year.
    (B) Applicable fleet average cold temperature NMHC standard: 0.3g/
mi for LDV/LLDTs; 0.5 g/mi for HLDT/MDPVs.
    (C) Fleet average cold temperature NMHC value achieved.
    (D) All values used in calculating the fleet average cold 
temperature NMHC value achieved.
    (ii) Manufacturers producing any light-duty vehicles, light-duty 
trucks, or medium-duty passenger vehicles subject to the provisions in 
this subpart must establish, maintain, and retain all the following 
information in adequately organized and indexed records for each LDV/T 
or MDPV subject to this subpart:
    (A) Model year.
    (B) Applicable fleet average cold temperature NMHC standard.
    (C) EPA test group.
    (D) Assembly plant.
    (E) Vehicle identification number.
    (F) Cold temperature NMHC FEL to which the LDV/T or MDPV is 
certified.
    (G) Information on the point of first sale, including the 
purchaser, city, and state.
    (iii) Manufacturers must retain all records required to be 
maintained under this section for a period of eight years from the due 
date for the annual report. Records may be stored in any format and on 
any media, as long as manufacturers can promptly send EPA organized, 
written records in English if we ask for them. Manufacturers must keep 
records readily available as EPA may review them at any time.
    (iv) Nothing in this section limits the Administrator's discretion 
to require the manufacturer to retain additional records or submit 
information not specifically required by this section.
    (v) Pursuant to a request made by the Administrator, the 
manufacturer must submit to the Administrator the information that the 
manufacturer is required to retain.
    (vi) EPA may void ab initio a certificate of conformity for 
vehicles certified to emission standards as set forth or otherwise 
referenced in this subpart for which the manufacturer fails to retain 
the records required in this section or to provide such information to 
the Administrator upon request.
    (2) Reporting. (i) Each covered manufacturer must submit an annual 
report. The annual report must contain for each applicable cold 
temperature NMHC standard, the fleet average cold temperature NMHC 
value achieved, all values required to calculate the cold temperature 
NMHC emissions value, the number of credits generated or debits 
incurred, all the values required to calculate the credits or debits, 
the resulting balance of credits or debits, and sufficient information 
to show compliance with all phase-in or alternative phase-in 
requirements.
    (ii) For each applicable fleet average cold temperature NMHC 
standard, the annual report must also include documentation on all 
credit transactions the manufacturer has engaged in since those 
included in the last report. Information for each transaction must 
include all of the following:
    (A) Name of credit provider.
    (B) Name of credit recipient.
    (C) Date the trade occurred.

[[Page 15963]]

    (D) Quantity of credits traded.
    (E) Model year in which the credits were earned.
    (iii) Unless a manufacturer reports the data required by this 
section in the annual production report required under Sec.  86.1844-
01(e), a manufacturer must submit an annual report for each model year 
after production ends for all affected vehicles produced by the 
manufacturer subject to the provisions of this subpart and no later 
than May 1 of the calendar year following the given model year. Annual 
reports must be submitted to: Director, Compliance and Innovative 
Strategies Division, U.S. Environmental Protection Agency, 2000 
Traverwood, Ann Arbor, Michigan 48105.
    (iv) Failure by a manufacturer to submit the annual report in the 
specified time period for all vehicles subject to the provisions in 
this section is a violation of section 203(a)(1) of the Clean Air Act 
(42 U.S.C. 7522) for each applicable vehicle produced by that 
manufacturer.
    (v) If EPA or the manufacturer determines that a reporting error 
occurred on an annual report previously submitted to EPA, the 
manufacturer's credit or debit calculations will be recalculated. EPA 
may void erroneous credits, unless traded, and must adjust erroneous 
debits. In the case of traded erroneous credits, EPA must adjust the 
selling manufacturer's credit or debit balance to reflect the sale of 
such credits and any resulting generation of debits.
    (3) Notice of opportunity for hearing. Any voiding of the 
certificate under paragraph (p)(1)(vi) of this section will be made 
only after EPA has offered the affected manufacturer an opportunity for 
a hearing conducted in accordance with Sec.  86.614-84 for light-duty 
vehicles or Sec.  86.1014-84 for light-duty trucks and, if a 
manufacturer requests such a hearing, will be made only after an 
initial decision by the Presiding Officer.

[FR Doc. 06-2315 Filed 3-28-06; 8:45 am]
BILLING CODE 6560-50-P