Tier 3 Key Program Issues

December 3, 2013

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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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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

 Seamless 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 ~31 small refiners & small volume refineries

 Technical and economic hardship provisions as a failsafe

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EPA Response to Fuel Industry Comments on 

Lead Time

 Most fuel industry commenters requested 5 years of 

lead time

 However...

 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.), 

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What ARE the Lead Time 

Considerations?

 It is all about 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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Our Current Thinking for Final Rule

 The proposal provides ample lead time

 However, some additional flexibility would increase

confidence in the appropriateness of a 1/1/2017 start date

 We are considering for the final rule two additional 

flexibilities:

 Carryover of Tier 2 “banked” credits

 Longer deficit carryforward

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Additional Flexibility: Tier 2 Credits

 We are considering allowing carryover of Tier 2 

credits from 2012 and 2013 into Tier 3

 Tier 2 credits have a five-year life from the point of 

generation

 However, credits generated in 2012 and 2013 that were not

used before January 1, 2017 would expire before the end of

their full lifetime

 Commenters suggested that we allow these credits to

receive their full five-year life, for use in Tier 3

 Provides added assurance of a smooth transition to Tier

3 with a 1/1/2017 start date

 May encourage trading to those that might need credits

 Program will still be fully phased in by 2020

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Additional Flexibility:

Longer Deficit Carryforward

 As a hardship relief option only, we also are

considering 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

 10 ppm average with a high cap

 Provides flexibility in refinery operations

 Reduces cost; refiners provided a study estimating the costs of lower 

caps

 Reduces potential for local supply disruptions

 But a high cap also 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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Final Rule Sulfur Cap

 For the FRM we intend to maintain the current 80 

ppm cap

 A lower cap would reduce flexibility and likely result in

higher costs (~10%)

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

warrant a lower cap

 Once implemented we will be able to better assess the

need for a lower cap

 EPA will commit 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

 We intend to strengthen proposed standards, based on

test data and comments received

 Proposal sought comment on 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 numerous meetings with

SVMs, we intend to allow three more years to meet the

final standard and adjust the proposed interim phase-in

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Next Steps

 Briefing for interagency reviewers on updated analysis

 Cost, emissions, air quality, benefits

 Submission to OMB in late January

 EPA signature in late February

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