Tier 3 Key Program Issues

Briefing for Interagency Reviewers

January 28, 2014

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Briefing Overview

 Lead-time/Start Date

 Vehicle Program

 Fuel Program

 Refinery Gate Sulfur Cap

 Certification Fuel

 PM Vehicle Standards for Supplemental Federal Test

Procedure

 Small Volume Manufacturers (SVMs)

 Schedule and Next Steps

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Lead Time Background

 Timing of the proposed Tier 3 start dates was driven by the

desire to:

 Harmonize the vehicle provisions with the California Low 

Emission Vehicle III (LEVIII) program

 Phase-in the Tier 3 vehicle standards along with the 2017+ 

light-duty GHG standards

 Reduce gasoline sulfur to achieve immediate emission

reductions and health benefits from the existing fleet, and in

time to support NAAQS attainment and maintenance

 Proposed

 10 ppm sulfur beginning 1/1/2017

 Light-duty vehicle standards beginning with MY2017

 Light-duty truck and heavy-duty vehicle standards beginning 

with MY2018

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Tier 3 Vehicle

Lead Time and Start Date

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Vehicle Lead Time

 Vehicle OEMs need lead time to address practical and 

technical issues

 Design and develop new vehicles including durability tests

 Develop product plans to support fleet average standards

 Engage suppliers and develop tooling for new hardware

 Clean Air Act provisions

 For vehicles >6,000 lbs, CAA requires a minimum of 4 years

lead time and 3 years stability of standards

 For vehicles <6,000 lbs, CAA does not specify minimum lead 

time

 Requires lead time as Administrator finds necessary to permit

development and application of requisite technology, considering 

compliance costs

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Vehicle Regulatory Classes

• Passenger cars 

(all)

• Light trucks and 

SUVs (Escape)

• Minivans and 

crossovers 

(Caravan)

0-6k 

lbs.

• LD Pick-ups 

(F150)

• Large SUVs (Jeep 

GC)

• Medium Duty 

Passenger 

Vehicles (MDPVs) 

– large passenger 

vans

6k-8.5k 

lbs.

• HD pickups 

(F250/350)

• Large vans 

(Sprinter, E250)

8.5k-14k 

lbs.

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Light-duty Vehicles Heavy-duty Vehicles

6

CAA Requirements for Minimum Lead Time

and Stability Timeframes
Vehicle Start Date in Proposal

 <6,000 lbs: 

 MY2017 program start; full phase-in by MY 2025

 Early credits can be earned in MY’s 2015 and 2016

 For >6,000 lbs, manufacturers could choose from two 

options: 

 Harmonized LEV III Option: MY 2018 program start

 Alternative Option: MY 2019 program start

 Directly goes to final standards, with % fleet phase-in

 Provides CAA-required 4-year lead time

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Comments on Vehicle Program 

Start Date/Lead Time

 Majority of auto industry commenters stress the

importance of harmonizing program with LEV III and 

finalizing it ASAP to support LEV III and 

LDGHG/CAFE product planning

 State/NGO commenters also emphasized importance 

of implementation beginning in 2017
EPA Approach for Final Rule

 The program as proposed, with declining standards and 

phase-ins and very flexible averaging, provides sufficient

lead time

 OEMs are already developing products to meet the California

requirements, so technological feasibility is not in question

 The first years are not so stringent that OEMs have to produce 

any of cleanest vehicles immediately

 Tier 3 includes a 9-year phase-in of the fleetwide NMOG+NOx

standard

 Companies can generate early credits or allowances from 2015 

to 2017 for use during the early years of the program

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EPA Approach for Final Rule

 Retain MY 2017 start date for vehicles < 6,000 lbs

 Retain MY 2018 start date for Harmonized California Option for

vehicles >6,000 lbs

 Adjust the MY 2019 start date for Alternative Option in order to 

provide the required 4 years of lead time

 Use a “split model year” provision (as was done in Tier 2) to preserve 

most of MY 2019

 The model year for an individual vehicle line begins when

production commences, not when the calendar year begins

 Based on typical certification patterns, we expect vast majority of 

vehicle models will begin production after the 4-year anniversary of 

rule signature, and thus Alternative Option would typically apply in 

MY2019

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Tier 3 Fuels

Lead Time/Start Date

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Proposed Lead Time for Fuel Standards

 1/1/2017 start date, but the program provides up to 6 

years of lead time through a flexible early credit

program with nationwide averaging, banking, and 

trading

 Early credit program allows refiners to phase-in investments

as necessary

 Smooth transition from Tier 2 credit program – can generate 

credits relative to 30 ppm (Tier 2) in 2014-16, use them to help

comply with Tier 3 in 2017-19

 Refiners have a range of means to generate early credits even 

with their existing units

 3-year delay for ~30 small refiners & small volume

refineries

 Technical and economic hardship provisions as a failsafe

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Comments on Fuel Program Lead Time

 Most fuel industry commenters requested 5 years of 

lead time

 State/NGO commenters emphasized importance of 

implementation beginning in 2017 because of the

significant, immediate health and air quality benefits

 Auto manufacturers also want the fuel program to

start in 2017

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EPA View on Lead Time Issues 

 Lead time isn’t needed to develop new technology –

hydrotreating is proven and well established

 Lead time isn’t needed to identify contractors –

refineries will use the contractors servicing their

existing units

 1/1/2017 provides sufficient lead time to install new

equipment (capital acquisition, permitting, project

planning, site preparation, construction, startup, etc.), 

even without the flexibility of ABT

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EPA View on Lead Time Issues

 Key lead time issue is phasing in/staggering refinery changes

 Refineries are on a 3-5 year cycle for major maintenance when 

they shut down or “turnaround” the refinery

 Due to cost, this is when any major Tier 3 changes would be made

 This is the main reason the fuel industry requested at least 5 years of 

lead time

 Lead time also helps ensure that the entire industry is not

competing for the same construction & engineering resources at 

the same time

 Driving up costs

 Creating unnecessary implementation issues if/when things don’t go 

quite as planned

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EPA Approach for Final Rule

 1/1/2017 start date provides ample lead time

 However, we are finalizing some additional flexibilities to 

further increase confidence in the appropriateness of a 

1/1/2017 start date

 Carryover of Tier 2 “banked” credits

 Longer deficit carry-forward in the case of hardship

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Additional Flexibility: Tier 2 Credits

 Tier 3 will not be a separate credit program, but just a

continuation of the Tier 2 credit program

 Allows for a seamless transition

 We will be allowing carryover of Tier 2 credits generated in 2012 

& 2013 into Tier 3

 Supported by commenters

 Under the existing Tier 2 program, Tier 2 credits have a five-year life

 Per the Tier 3 NPRM, credits generated in 2012 & 2013 that were not used 

before 1/1/17 (the start of the Tier 3 program) would have expired before

the end of their full five-year life

 Provides added assurance of a smooth transition to Tier 3 with a 

1/1/2017 start date

 Encouragement to trade 2012/13 credits to those that might need them in

2017 before they expire

 The program will still be fully phased in by 2020 as proposed

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Additional Flexibility:

Longer Deficit Carryforward

 As a hardship relief option only, we also are

allowing an extended deficit carryforward period 

for up to 3 years

 Gives a refinery a better chance of making up their

own deficit without the need to purchase credits

 Enforcement concerns require that this allowance be

limited to hardship situations only

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Sulfur Cap

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Tier 3 Sulfur Cap Proposal

 Proposed two main options for the refinery gate sulfur cap

 Maintaining current 80 ppm refinery gate cap

 Lowering to 50 ppm refinery gate beginning January 1, 2020

 Also took comment on 20 ppm refinery gate cap

 Fuels industry supported maintaining the current 80 ppm cap

 Provided a study showing significantly increased costs for lower caps

 States, environmental groups, and most automakers supported 

lowering the cap

 A higher cap permits both individual batches of fuel, as well as some

refineries, to remain at higher levels in-use

 Vehicle manufacturers cited concerns with vehicle technology

 States/NGOs cited concerns with higher localized emissions resulting 

from higher sulfur fuel remaining in local markets

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EPA Approach for Final Rule

 Maintain the current 80 ppm cap

 Provides flexibility in refinery operations

 Reduces potential for local supply disruption

 Reduces cost

 A lower cap would likely result in higher costs (~10%)

 Currently difficult to predict if in-use sulfur levels would 

warrant a lower cap

 Once Tier 3 is implemented, we will be able to better 

assess the need for a lower cap

 EPA commits in the FRM to further study in-use sulfur

levels after implementation

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Certification Fuel

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Certification Fuel

 We proposed to change the certification test fuel to better reflect

in-use fuel

 Current certification test fuel is E0 and has fuel parameters

representative of conventional gasoline in the 1980’s

 In-use fuel today is E10 with different aromatic levels and 

distillation ranges

 We proposed E15 certification fuel to be “forward looking” and 

sought comment on E10

 EPA intends to finalize E10 for cert fuel

 E15 is not materializing and still faces significant hurdles

 All commenters except ethanol industry opposed E15

 Commit to monitor for future

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Other Issues

 PM Vehicle Standards for Supplemental Federal Test

Procedure

 Small Volume Manufacturers (SVMs)

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Vehicle Tailpipe PM Standards

 PM vehicle emissions standards on supplemental 

federal test procedure (aggressive driving)

 Standards are intended to prevent backsliding and 

eliminate poor performers

 Final rule adopts standards lower than we proposed, 

based on test data and comments received

 Proposal sought comment on lower standards

 States (including California) and NGOs supported lower 

standards

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Small Volume Manufacturers

 Small Volume Manufacturer (SVM) relief

 Applies to manufacturers of <5000 units

 Lotus, McLaren, Aston-Martin, Ferrari

 Based on comments and meetings with SVMs, we are

allowing three more years to meet the final standard and 

adjusting the proposed interim phase-in

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Next Steps

 Feb. 5 briefing on updated analysis

 Cost, emissions, air quality, benefits

 EPA requesting 30-day OMB review

 Clearance Feb. 24

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