Office of Transportation EPA420-S-05-901 

and Air Quality November 2005 

Small Business Advocacy 

Review Panel (SBRFA) Letter 

from Panel to the EPA 

Administrator 

Summary Report 
EPA420-S-05-901

 November 2005

Small Business Advocacy Review Panel (SBRFA) 

Letter from Panel to the EPA Administrator

Summary Report

Office of Policy, Economics and Innovation 

U.S. Environmental Protection Agency

Office of Transportation and Air Quality

U.S. Environmental Protection Agency

U.S. Office of Management and Budget

U.S. Small Business Administration
The Honorable Stephen L. Johnson

Administrator

U.S. Environmental Protection Agency

Ariel Rios Building

1200 Pennsylvania Avenue, N. W.

Washington, D.C. 20460

Dear Mr. Johnson:

Enclosed for your consideration is the Report of the Small Business Advocacy Review

Panel (SBARPanel or the Panel) convened for the proposed rulemaking on the Control of

Hazardous Air Pollutants from Mobile Sources (or Mobile Source Air Toxics (MSAT) proposed

rulemaking) that the U.S. Environmental Protection Agency (EP A or the Agency) is currently

developing.

On September 7, 2005, EPA's Small Business Advocacy Chairperson (SBAC) convened

this Panel under Section 609(b) of the Regulatory Flexibility Act (RF A) as amended by the Small

Business Regulatory Enforcement Fairness Act (SBREFA) of 1996. In addition to the Chair, the

Panel consisted of the Director ofEPA's Assessment and Standards Division within the 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.

The Panel's findings and discussion are based on the infomlation available during the

teml of the Panel. EP A is continuing to conduct analyses relevant to the proposed rule, and

additional infomlation may be developed or obtained during the remainder of the rule

development process and from public comment on the proposed rule. Any options the Panel

identifies for reducing the rule's regulatory impact on small entities may require further analysis

and/or data collection to ensure that the options are practicable, enforceable, environmentally

sound, and consistent with the Clean Air Act, primarily sections 202(1) and 183(e).

Small Entities That May Be Subiect to the ProDosed Regulation

Highway Li2:ht-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 EP A 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, EP A 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). EP A 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.

Gasoline Fuel Industry

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 MSA T

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 and their contribution to

mobile source benzene emissions is roughly 5 percent.

Portable Gasoline Containers

EP A 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, EP A 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.

Summ~ of Small Entity Outreach

Before beginning the fomlal SBREF A process, EP A actively engaged in talking to

entities that would potentially be affected by the upcoming rulemaking. EP A was able to identify

the small entities within the highway light-duty vehicles SVM, ICI, and converter sectors, using

infomlation from EP A certification databases and non-governmental sales and employment

databases. After identifying these entities for the vehicle sector, EP A then began talking to these

businesses to locate potential SERs to participate in SBREF A. For portable gasoline container

manufacturers, EP A participated in a series of workshops held by the California Air Resources

Board and established initial industry contacts. EP A then held several meetings and conference

calls with individual manufacturers and with the manufacturers as a group to discuss their

products and EPA's upcoming proposal. For gasoline refiners, based on infomlation from past

rulemakings, EP A began well in advance of the SBREF A process conducting phone conferences

and face-to-face meetings with small fuel refiners that produce gasoline. This led to the selection

of a set of potential SERs that represent a cross-section of small refiners.

EP A provided each business with EP A/SBAC fact sheets on the SBREF A process and

background infonnation on and the rulemaking process and the upcoming MSA T rule itself.

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Once potential SERs were identified, EP A began having more discussions to better understand

the needs of the small entities in more detail.

Outreach meetings were held with the potential SERs on July 19, 2005 and September 27,

2005 (gasoline refiners) and September 29,2005 (light-duty vehicles and portable gasoline

containers). On July 19, 2005 EPA held three separate 1.5 hour meetings with groups of

potential SERs representing the highway light-duty vehicle industry, gasoline refiners, and

portable gasoline container manufacturing' industry. Eleven potential SERs participated in the

meetings in total. These outreach meetings were held to provide the industry representatives

with information on the SBREF A process and the role of a SER, and to solicit feedback from the

potential SERs on the upcoming rulemaking. EP A held additional outreach meetings on

September 27, 2005 with the gasoline refining SERs and on September 29, 2005 with the lightduty vehicles and portable gasoline container SERs. A total of 11 SERs participated in the

meetings either in person or by telephone, providing their input to the Panel on the material

presented in the SERoutreach packet. Following each of the outreach meetings, comments were

received from the SERs. A summary and full text of these comments can be found in the Panel

report.

Regylatory ADDfOaches

For VOC and toxics control from light-duty vehicles (beyond the Tier 2 requirements),

EPA is exploring the alignment ofEPA evaporative emission standards with California

low-emission vehicle (LEV) II standards and new cold temperature exhaust (VOC) emission

standards. Despite numerical differences in evaporative emission standards, EP A and California

programs essentially result in a comparable level of stringency today, due to differences in test

requirements. Thus, harmonizing with California's LEV-ll evaporative emission standards

would streamline certification requirements and would be an anti-backsliding measure, which

would add certainty that manufacturers would retain their current approach for producing the

same level of evaporative system hardware nationwide. In addition, data suggests that VOC

exhaust emissions (which include toxic organics) from vehicles are significantly higher under

cold temperatures (20°F) than under normal testing temperatures (75°F). EP A is currently

contemplating a cold temperature VOC standard in the range of2 to 3 times the 75°F VOC "bin

5" exhaust standard (or a potential proposed standard of 0.2 to 0.3 grams/mile). This emission

level can be achieved through calibration alone, and it would not force new emissions control

hardware beyond that which manufacturers would be installing normally to reach full Tier 2

compliance. EP A is currently evaluating a program for highway light-duty vehicles that could

become effective in 2009 for the evaporative emissions standards and 2010 for the cold VOC

standards (with a possible 4-year phase-in period for the cold VOC standards).

From a fuel standpoint EP A is focused on controlling benzene emissions. Benzene

emissions can be addressed through both the fuel benzene content and the fuel aromatics content.

Exhaust benzene emissions are linked more strongly to fuel benzene content than any other fuel

parameter. Fuel aromatics are also a significant precursor to benzene emissions, however, the

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reduction of aromatics to achieve the same effect as a fuel benzene reduction is much more costly

because of the deep impact on octane and volume. Therefore, EPA believes that fuel benzene

control is the most effective approach. A detailed approach for timing and stringency of the fuel

requirements has not yet been decided, however, EPA is considering implementation dates in the

2010 to 2012 timeframe.

For gas cans, there are currently not federal emission control requirements. California

has a program for controlling fuel container emissions. EP A is considering performance-based

requirements, which are similar to those of California, that lead to the sale of redesigned fuel

containers nationwide. The bulk of evaporative emissions come from consumers not properly

closing containers. Also, fuel will permeate through the walls of the container, contributing to

overall evaporative emissions losses. Based on the use of automatically closing cans and

permeation control, EP A is considering proposing a diurnal evaporative emissions standard of

0.3 grams/gallon/day. EPA expects that the manufacturers will need a few years of lead time

after the standards are finalized in order to finalize their designs, certify products, and ramp up

production to a national scale, and therefore EP A is considering a start date of 2009.

Panel Findings and Discussion

The Panel assessed each of the issues raised in the outreach meetings and in written

comments by the SERs. For small entities within the light-duty vehicle sector, the Panel's key

discussions centered on the identification of flexibilities which would reduce the burden on small

entities to comply with the new standards. For small gasoline refiners, the discussions focused

on the level of a benzene standard and the compliance costs associated with the standard, and

how to mitigate its impact on small refiners. For small portable gasoline container

manufacturers, the Panel discussion focused on current state programs and finding flexibility

options that would help gas can manufacturers in their transition to eventual compliance with a

new national program. The Panel also discussed regulatory approaches and agreed to request

comment in the proposed rulemaking on such issues.

~

At this point in the process, EP A has not yet fully defined a program of reporting, record

keeping requirements, or compliance assurance for the engine and equipment entities that may be

subject to the proposed rule. For highway light-duty vehicles, EP A expects to propose to

continue the reporting, recordkeeping, and compliance requirements prescribed for this category

in 40 CFR 86. Key among these are certification requirements and provisions related to

reporting of production, emissions information, flexibility use, etc. For any fuel control program,

EP A 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. EP A 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

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updating EP A on their plans to meet the MSA T standards. For gas cans, there currently are not

federal emission control requirements, and thus, EP A is still developing reporting and record

keeping requirements for gas can manufacturers that would be subject to the proposed standards.

EP A is considering requirements that would be similar to those in the California program (e.g.,

emissions testing, data submittal).

~

The Panel is 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 MSA T 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 is expected

to be published by the end of this year. 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 EPAprogram.

Section 1501 of the Energy Policy Act of2005 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 MSA T 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.

Regylatory Alternatives

The Panel considered a wide range of options and regulatory alternatives for providing

small businesses with flexibility in complying with the MSA T standards. As part of this process,

the Panel requested and received comment on many ideas that were suggested by both the Panel

members and the SERs. Taking into consideration the comments received on these ideas, as well

as additional business and technical information gathered from and about potentially affected

small entities, the Panel summarizes the major options below. The complete set of

recommendations can be found in section 9 of the full Panel Report.

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Ma_lor Panel Recommendations

Small Light-Duty Vehicle Manufacturers

Regylato{X Flexibility Qntions for Small Light-Duty Vehicle Manufacturers

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 recommends 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 recommends 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) begins in 2010 and ends 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)

starts 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 recommends 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.

Hardshi Provisions for Small Li Vehicle Manufacturers

In addition, the Panel recommends that hardship flexibility provisions be extended to SVMs

for the cold temperature VOC and evaporative emission standards. These provisions are:

SVMs would be allowed to apply (EP A 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.

{}
Small Gasoline Refiners

Regulatory Flexibility Ootions for Small Gasoline Refiners

The Panel recommends that EP A propose certain provisions to encourage early compliance

with lower sulfur standards. The Panel recommends that EP A propose that small refiners be

afforded the following flexibility options to help mitigate the impacts on small rermers:

Delav in Standards- The Panel recommends 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 is

also in support of allowing for refinery expansion within the delay option, and

recommends that refinery expansion be provided for in the rule.

Early ART Credits- The Panel recommends 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 is also in support of allowing

refiners (small, as well as non-small, refiners) to generate credits for m reductions

to their benzene emissions levels, rather than credits only for meeting the benzene

standard that is set by the rule.

The Panel supports and recommends 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 recommends that EP A 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, EP A 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;

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» the review should offer ways either to help the credit market, or help small

refiners gain access to credits (e.g., EP A could 'create' credits to introduce to

the market, EP A could impose additional requirements to encourage trading

with small refiners, etc.).

In addition, the Panel recommends that EP A 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,

below). This hardship provision would 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 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 a duration of two years;

in addition, provision might allow the refinery to request, and EP A grant, multiple

extensions of the flexibility until the refinery's material situation changes. The panel

understands that EP A may need to modify or rescind this provision, should it be

implemented, based on the results of the program review.

HardshiD Flexibilitv Provisions for Small Gasoline Refiners

EP A has stated that it does intend to propose the extreme unforeseen circumstances hardship

and extreme hardship provisions (for all gasoline refiners and importers), similar to those in prior

EP A 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 agrees with the proposal

of such provisions and recommends that EP A include them in the MSA T rulemaking.

Small Portable Gasoline Container Manufacturers

Regulatory Flexibility ODtions for Small Portable Gasoline Container Manufacturers

Since nearly all gas can manufacturers are small entities and they account for about 60

percent of sales, the Panel plans 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:

8
DesiJ!n Certification- The Panel recommends that EP A propose to pennit 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 penneation 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 penneation barrier). The manufacturer would submit adequate

engineering and other infonnation about its individual design such that EP A could detennine

that the emissions perfonnance 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

infonnation to fully evaluate whether or not additional lead-time is needed beyond the 2009

start date, the Panel recommends that EP A 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

recommends that EP A 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.

Small Portable Gasoline Container Manufacturers Hardshiu FlexibilitY Provisions

The Panel recommends that EP A propose two types of hardship programs for small gas can

manufacturers. These provisions are:

Allow small manufacturers to petition EP A 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 or

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

9
thereafter.

Pennit 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 tenns

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.

Sincerely,

..t! /1')---1 

~ /

p

Innovation

Affairs

U.S. Office of Management and Budget

/) Nav -8 2005

1 4 2005

Chief Counsel for Advocacy

Office of Advocacy

U.S. Small Business Administration

Clfester J. France

Director

Assessment and Standards Division

Office of Air and Radiation

U.S. Environmental Protection Agency

Enclosure

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