**CLEA N**  **AI R**  **AC T § 209(e)(2) A**  **UTHORIZA TION**  **SUPPORT DOCUMENT SUBMITTED BY THE**  **CA LIFORNI**  **A AI**  **R RESOURCES BOA RD**  **20 08**  **AMENDMENT S**  **TO CA**  **LIFORNI A** **’S SMA**  **LL OFF -**  **RO AD E**  **NGINES REGULA** **TION**

**December 2, 2013**1

**l. INTRODUCTION**  **AN D SUMMA**  **RY OF REQU EST**  T he California Air Resources Board ( CARB or Board) requests , p ursuant to Clean Air Act (CAA) section 209(e)(2), that the Administrator of the U.S. Environmental Protection Agency ( EPA ) confirm that CARB’s 20 08 a mendments to its spark- ignited (SI) Smal l Off- Road Engines regulation ( 2008 Amendments ) 1 are within the scope of the authorization previously granted for CARB’s SORE regulation s , or alternative ly , grant a new authorization . Section II of this document describes the 2008 Amendments in detail, an d Section III describes the basis for California’s request . Small off- road engines and equipment 2 are rated at or below 19 kilowatts (k W ) (25 horsepower (hp) ) . The vast majority of engines covered by the SORE SI regulation are gasoline -fueled SI 3 engine s that are used to power a broad range of equipment , including lawn mowers, leaf blowers, generators , and small industrial equipment . Exhaust and evaporative emissions from small off- road e ngines are a significant source of hydrocarbon (HC) and oxides of nitrogen (NO x ) emissions , which contribute to California ’s continuing ozone problem . The SORE SI regulation also includes provisions for electric equipment. **A. Background and History**  **of Pre** **viously A dopted and A**  **uthorized Small Off** **** **Road Emission Standards and Test Procedures**  **4 1.**  **Initial SORE Regulation and 1994, 1995, and 1996 A mendments**  CARB first adopted standards and test procedures applicable to utility and lawn and garden engines (ULGE Rule, subsequently renamed in a later rulemaking as the “ Smal l Off- Road Engine (SORE) Regulation” ) 5 on March 20, 1992, which California’s Office of Administrative Law ( OAL ) approved on May 1, 1992 . In April 1993, in response to a petition from industry, CARB amended these regulations to delay initial implementation until January 1, 1995 . CARB requested that EPA grant authorization for the SORE regulation as required by section 209(e)(2) of the federal CAA. 6 The Administrator 1 The specific regulatory text enacted by the 20 0 8 Am endm ents is set forth in California Code of Regulations (CCR), title 13 , section s 2401, 2403, 2404, 2405, 2406, 2408, 2408.1 and 2409 (Enclosure 6) . Unless otherwise noted, all section references are to title 13, CCR. 2 In this request, the federal term “nonroad” and the California term “off- road” are used interchangeably. 3 As further detailed below, CARB ’s regulation for small off- road SI engines , which includes electric engines and equipment, and off- road com pression ignition (CI) engines at or b elow 19 kW are now lo c ated in separate articles of CCR t itle 13 . The 2008 Amendments are to the SORE SI regulation and affect SI and electric engines and equipment only. 4 The 2008 Staff Report: Initial Statement of Reasons (Staff Report) , at pages 4 - 7 (Enclosure 2) provides a summary

of the key

requirements of the previously authorized SORE regulations. 5 For purposes of clarity and consistenc y , the ULGE Rule is referred to as the SORE regulation . 6 Section 209(e) provides in pertinent part: (1) No state o r any political subdivision thereof shall adopt or attempt to enforce any standard or other requirement relating to the control of emissions from either of the following new nonroad engines or nonroad vehicles subject to regulation under this Act– (A) New en gines that are used in construction equipment or vehicles or used in farm equipment or vehicles and which are smaller than 175 hp.2

granted authorization to CARB on July 5, 1995. 7 The authorized SORE regulation establishe d two tiers of exhaust emission standards for new SI and compression ignition (CI) engines . Tier I standards applied to 1995 through 1998 model -year engines, while the Tier II standards applied to 1999 and newer engines . EPA adopted similar regulations i n 1995, using the term “Phase” instead of “ Tier” to describe the exhaust emission standards categories . 8 CARB amended the initially adopted and authorized SORE regulation in 1994, 1995, and 1996 to clarify certification and implementation procedures, exem pt military tactical equipment, and relax emission s standard s for certain engines . CARB requested and received EPA’s confirmation that these amendments fell within the scope of the initially granted SORE authorization on November 9, 2000. 9 **2. 1998 SORE**  **Am endments**  In 1998, CARB amended the initially adopted SORE regulation to apply to all engines rated less than 25 h p used in off- road applications, revised the regulation to be based on engine displacement instead of whether the engine is used in a handh eld or non handheld application , and delayed implementation of the 1999 Tier 2 standards . For CI engines, the Board extended application of the authorized Tier 1 emission standards one year and adopted new emission standards for new engines under 19 k W, consistent with the “Compression - Ignition Engine Statement of Principles” jointly entered into by CARB, EPA, and engine manufacturers in August 1996 . The adopted emissio n standards were phased in, beginning with the 2000 model year. 10 Finally, CARB adopted new durability requirements that were also phased in for new engines starting in the 2000 model year. The 1998 SORE Amendments established an averaging, banking, and trading (ABT) provision that provided manufacturers flexibility in complying with applic able hydrocarbons and oxides of nitrogen ( HC+NOx ) standard for 2000 and subsequent model year engine families . For each engine family, a manufacturer would determine a Family Emission Limit (FEL) ; the FEL would serve as the "emissions standard" for compl iance purposes . Individual FELs could be set above the standard, provided that the average of all a manufacturer’s FEL ( as weighted by power, load factor, sales and durability period) met the standard . Averaging was carried out by Emission Credits . The emission credit program wa s similar to that proposed by the EPA for small nonroad (B) New locomotives or new engines used in locomotives * * * * * (2) (A) In the case of any nonroad vehicles or engines othe r than those referred to in subparagraph [(e)(1)], the Administrator shall, after notice and public hearing, authorize California to adopt and enforce standards and other requirements relating to the control of emissions from such vehicles and engines if [ certain specified conditions are met] . See infra. 7 60 Fed.Reg . 37440 (July 20, 1995). 8 60 Fed. Reg. 34582 (July 3, 1995) 9 65 Fed.Reg . 69763 (November 20, 2000). 10 These emission standards aligned with emission standards adopted by EPA in its final r ule for “Control of Emissions of Air Pollution from Nonroad Diesel Engines,” 62 Fed.Reg . 200 (January 2, 1997).3

engines 11 and wa s designed to provide industry the flexibility to deal efficiently with issues such as low sales volume engines that can be particularly costly to control . Th e a veraging provision also allowed manufacturers to focus their efforts on the ir higher sales volume families first. The 1998 SORE Amendments also created a provision allowing manufacturers to generate Production Emission Reduction Credits . 12 A manufacturer would generate Production Emission Reduction Credits if the final HC+NOx sample mean (from production line testing) of an engine family wa s below the FEL . This provision was intended to allow manufacturers to receive consideration for the "headroom" or compliance margin they designed into their engines . The production emission reduction credits, based on actual production engines, could be used for certification and as a remedy for noncompliance of another engine family if needed . T his introduce d an other degree of flexibility that d id not previously exist in the program . EPA considered , but never adopted, a similar Production Emission Reduction Credits program. EPA subsequently determined that, except for the above - mentioned durability requirements , California’s 1998 amendments to the SORE regulation were within the scope of the previously granted 1995 authorization. 13 EPA issued CARB a new authorization for the durability requirements on November 21, 2003. 14 **3 .**  **2000 and 2004 Off -**  **Road CI A mendment** **s** In 2000, CARB amended the SORE regulation by recodifying the requirements applicable to new CI engines less than 19 kWfrom the SORE regulation ( CCR title 13 , division 3, chapter 9 , article 1 section 2400 et seq.) to a different regulatory article (CCR title 13 division 3, chapter 9, article 4 section 24 2 0 et seq . ). Wi th this change, all off- road CI engine categories are contained in the same regulatory article , which conforms to the federal regulatory program . 15 In 2004 , CARB amended its off- road CI regulations to harmonize CARB’s standards and test procedures with the federal standards and test procedures specified in its Tier 4 rulemaking 16 and the subsequent Omnibus Technical Amendments , 17 while still maintaining the emission benefits of the curre nt California program. EPA confirmed that the 2000 amendments to the off- road CI engine regulation were within the scope of the previously granted SORE authorization and granted a new
11 EPA adopted Phase 2 regulations for small spark - ignition engines used in nonhandheld equipment in 1999 that also included provisions for a ce rtification ABT program. 64 Fed. Reg. 15208 (March 30, 1999 ). The certification credits generated under EPA’s ABT program had unlimited credit life, which this document will refer to as “enduring credits,” as opposed to the “expiring credits” discussed l ater. 12 1988 and later mo del ye ar engine families were eligible to participate in this provision. 13 65 Fed.Reg . 69767 (November 20, 2000). 14 68 Fed.Reg . 65702 (November 21, 2003). 15 Hereafter , section 2400 et seq . is known as the SORE SI regulation. 16 69 Fed.Reg. 38958 (June 29, 2004) 17 70 Fed.Reg. 40240 (July 13, 2005)4

authorization for the 2004 amendments to the standards and test proce dures for nonroad CI engines rated less than 19 kW . 18 **4. 2004 SORE**  **SI Am**  **endments** In 2004, CARB amended the exhaust emission standards and associated test procedures and adopted evaporative emission standards and associated test procedures for SI small of f- road engines rated at or below 19 kW and equipment utilizing such engines. EPA issued CARB a new authorization for the 2004 SORE SI amendments on December 15, 2006. 19 **B. Overview of 2008 A** **mendments to California’s SORE SI**  **Regulation** At its November 2 1 , 2008 public hearing, the Board approved the 2008 Amendments by Resolution 08 -41 (Enclosure 4) . After making modifications to the proposed amendments available for supplemental public comment , CARB filed t he Fin al Rulemaking Package with the Office of Administrative Law ( OAL ) on September 8, 2009 . OAL approved the rulemaking and filed it with the California Secretary of State on April 5, 2010 . The 2008 Amendments became effective on May 5, 2010. The 20 08 S ORE SI Amendments primarily address ed issues a rising from the excessive accumulation of credits generated under the existing emission credits program in the SI SORE regulation , and include d other amendments to streamline the regulation and enhance harmonization of requirements with the federal nonroad engine regulations . As detailed in Section ll below, CARB requests confirmation that the following elements of the 2008 Amendments are within the scope of the authoriz ed SORE regulation :

 Modification of Certification Emission Credits
 Modification of P roduction E mission C redits
 Ethanol Blend Certification Fuel Option **ll. SUMMA**  **RY OF 20**  **08 AMENDMENTS**  **THA T**  **ARE WITHIN THE SCOPE**  **OF PREVIOUSLY**  **GRA NTED A**  **UTHORIZA TIO**  **NS** A summary of the 20 08 Amendments that fall within the scope of the authorized SORE regulation follows . A more detailed description of these provisions is provided in the Staff Report (Enclosure 2) and 15 - Day Notice of Modified Text (Enclosure 3 ). **A. Modification of Certification Emission Credits**  CARB initially established t he certification emissi on credits program in 1998 to provide manufacturers additional flexibility in certifying their engines . In concept, qualifying
18 75 F ed . R eg. 8056 (Feb ruary 23, 2010) . The new authorization extended to all engine power categories of off- road CI engines affected by the regulation. 19 71 Fed.Reg. 75536 (December 15 , 2006).5

manufacturers would earn certification emission credits by introducing some engine families with cleaner technologies (e.g., cat alysts) earlier than necessary, which they could then use to provide more time to certify more challenging engine families . CARB expected that the ABT provisions would provide manufacturers with another tool to manage compliance, while also encouraging th e early introduction of clean er engines. Wh ile the certification emission credits program did provide manufacturers flexibility, it ha s also produced mixed results regarding the use of advanced technolog ies . Instead of using catalysts and other advanced technologies on the more challengin g engine families , a small number of manufacturers have often been able to use banked credits to certify “dirtier” engines and delay implementation of cleaner technology . Furthermore, manufacturers have been able to accu mulate a large amount of certification emission credits , 20 which indicate s that the emission s standards were not as stringent as they needed to be, in that many more credits were generated than were needed to manage compliance . To exacerbate the situation further, the certification emission credits were available for use indefinitely. A llowing the credits to be banked for an indefinite period of time led to large credit banks that slowed progress towards cleaner engines . To address th e s e issues , as disc ussed below and in the Staff Report , page s 8 - 1 1 (Enclosure 2) , CARB adopted the following amendments .

**1. Emission**  **C redits**  **L imited to**  **F ive**  **Y ears**  The 2008 Amendments limit the lifetime of certification emission credits to five years , which coincides with the useful lifetime of SORE equipment and/or the time the equipment remains in emissions compliance . One of the issues arising from the unlimited life of the certification emission credits was that such credits continued in existence even after the engines t hat had generated the emission credits had been taken out of service . L imiting the credit life to five years strikes a n appropriate balance between not allowing credits at all and preventing credits from accumulating indefinitely . In limit ing the lifet ime of certification emission credits , CARB neither modified the Tier 3 hydrocarbon plus oxides of nitrogen (HC+NO x ) emission standards for engines less than 50 cubic centimeters (cc) ( that went into effect with the 2005 model year) n or the catalyst- based standards for engines above 80 cc. This limitation has not pose d a challenge to manufacturers , as technology has been available ( e.g., catalysts) that is both a technically feasible and cost effective means of complying with the Ti er 3 standards . A num ber of manufacturers currently produce CARB certified engines without the use of banked emission credits. Currently there are 68 CARB manufacturers that produce CARB certified SORE engines. Only five manufacturers use banked emission credits to certify for exhaust emissions and only one relies on buying emission credits.

20 Current emission credits exceed 5 billion.6

See section 2408 (Enclosure 6) and the Staff Report, pages 8 - 10 (Enclosure 2).

**2. Emission**  **C redit** **s G**  **eneration for A** **dv anced**  **T echnology**  The existing regulation did not allow e lectric eq uipment to participate in the emission credits program . Advances in electric- powered SORE equipment and advances in battery development led CARB to amend the SORE regulation to encourage the develop ment of professional grade zero - emission equipment (ZEE) . 21 CARB modified the program to allow advanced technology ZEE to generate emission credits provided they are able to meet the following requirements :

 The equipment must be able to perform at a level equivalent to that of currently available, professio nal level SORE equipment.
 The equipment must not be equipped with an electric cord . Corded equipment already exists and is generally not conducive to professional usage, and so awarding emission credits for it would not advance technology.
 Each recharge o r refueling must allow the equipment to perform at a professional performance level for the same duration as typical professional equipment of the same type . T he time to repower (e.g., time to replace battery pack) the ZEE should be equivalent to the time of refueling typical spark- ignition equipment.
 The equipment must be as durable as the equivalent professional SORE equipment . I t should be cap able of operat ion over the appropriate SORE test cycle repeatedly for the maximum durability period for that eq uipment. To obtain certification, a manufacturer need s to provide a description of the equipment , performance data showing that it meets the ZEE criteria, a description of the power source, an energy density or specific energy test , and a ll other applicab le certification requirements . The manufacturer will receive credits upon certifying an advanced technology ZEE. ZEE credits can be averaged, banked, and traded as normal certification emission credits, and are subject to the same five -year credit life . However, because ZEE emission credits can be generated by manufacturers not currently in the SORE category (e.g., those who produce electric equipment, but not engines), CARB established additional limitations to ensure that any potential influx of emi ssion credits does not result in the delay of improvements to engine - powered equipment . To this end, manufacturers cannot use ZEE credits to certify engines that exceed the standard by more than 40 percent . Rather , to certify an engine family with emissi ons that exceed 40 percent above the standard manufacturers need to use other types of certification credits to cover the difference . CARB believes that the addition of ZEE credits will promote advanced technology and allow manufacturers additional flexib ility . See sections 2401, 2404, 2405, 2408(g), and 2408.1 (Enclosure 6) . These modifications are discussed in the Staff Report, page s 1 2 - 13 (Enclosure 2). 21 In addition to providing reductions in criteria pollutants, increased use of ZEE will provide greenhouse gas reductions.7

**B. Modification of Production Emission Credits**  The emission credits program originally adopted by CARB also included both the generation and accrual of production emission credits . Production emission credits were initially adopted to provide manufacturers with additional flexibility in meeting emission standards on production engines . M anufacturers design their engines such that during production line testing the engines will perform “comfortably” below the emission standard. I n general, any emissions margin observed during production testing is used by manufacturers as an emissions “cushion” to ens ure compliance. CARB intended that the production emission credits provisions would be used by manufacturers to certify engine families as well as to offset production line testing exceedances of another engine family. The adoption of production emission credits was unique, in that no other existing mobile source category was allowed to generate and use production line credits for compliance purposes . At the time the 1998 proposal was drafted, EPA was considering the use of production emission credits an d staff’s proposal was intended to harmonize with the anticipated, future EPA rulemaking . Ultimately, EPA decided against offering production emission credits as an option for these engines and equipment in its final rule. 22 Termination of production emis sion credits enhances harmonization with the federal program. Production emission credits were generated when a manufacturer produce d an engine whose production line test result was below the applicable engine family emission limit . Manufacturers were al so allowed to convert production emission credits to certification emission credits at a rate of 1.1 production emission credits to 1.0 certification emission credit, and some m anufacturers that accumulate d large amounts of productio n emission credit then conve rted those production emission credits to certification emission credits, which allowed them to continue producing and certifying engines that d id not comply with the otherwise applicable emission standards. Wi th the 2008 A mendments, CARB eliminate d further generation of production emission credits starting in 2009, but allowed manufacturers an additional year to use or convert production emission credits to certification emission credits. As previously stated, CARB originally envisioned that ma nufacturers would use these generated/banked credits to offset compliance problems, but as of 2008 , no manufacturer needed to use production emission credits for that purpose, and manufacturers , in certain cases, generated large amounts of production emiss ion credit balances .

22 EPA’s decision was influenced by the fact that ma nufacturers of small engin es were able to comply with federal phase 2 emission standards without the use of production emission credits . 64 Fed. Reg. 152 08 (March 30, 1999) and 73 Fed. Reg. 59034 (October 8, 2008). Despite not adopting the credit provision as part of the federal re gulations , EPA continued to find that California’s new off- road engine program to be mo re protective of public health and welfare than applicable federal standards . 75 F ed. R eg. 8056 (February 23, 2010).8

P roduction emission credits effectively provide d manufacturers with a double benefit for having low compliance margins . First, t hey benefitted because the compliance margin ensure d that their production engines d id not exceed the em ission standards and were not out of compliance with the regulation . The c redits provided manufacturers with a second benefit by rewarding them, even though the production compliance margin was essentially part of the ir design strategy to meet the emissio n s standards, not an additional effort to go beyond the requirements by using cleaner technologies . The fact that production emission credits could be converted to certification emission credits raised a second concern . As production emission credits were converted to certification emission credits, the emission credit banks grew even larger . B y the end of the 2007 model year, over 85 percent of the production emission credits had been converted to certification emission credits , which indicated that m anufacturers did not actually need production credits to comply with the production line requirements . Instead , manufacturers could use the converted credits simply to further delay compliance with the Tier 3 standards for certain engine families , even th ough costeffective technology wa s available to comply . To date, this change has not raised any compliance issues. See section 2409 (Enclosure 6) . The se modifications are discussed in the Staff Report , pages 4 - 5, and 10 - 11 (Enclosure 2) . **C. Ethanol Bl**  **end Certification Fuel Option** The 2008 Amendments provide manufacturers the option to use a certification fuel with up to ten percent ethanol content, if they use the same fuel for certification with EPA . This option enhance s the harmonization of Califor nia ’s SORE certification procedures with EPA ’s nonroad engine certification procedures , and could reduce testing costs for some manufacturers . See California Exhaust Emission Standards and Test Procedures for 2005 and Later Small Off- Road Engines, as amen ded February 24, 2010, Subpart D, Section 90.308 (Enclosure 10 ) and the Staff Report at page 13 (Enclosure 2). **II I**  **. AU**  **THORIZA TION**  **AN AL** **YSIS A.**  **Criteria for Granting New A**  **uthorizations Under CAA Section 209(e) or**  **Confirming that A mendments are Within the Sc**  **ope of Previous Au**  **thorizations** Section 209(e)(2) of the CAA sets forth the protocol that the Administrator must follow in granting California an authorization to adopt and enforce standards and other requirements relating to controlling emissions from new and in - use nonroad engines that are not otherwise specifically preempted by section 209(e)(1) – new engines less than 175 hp used in farm and construction equipment and vehicles and new engines used in new locomotives and locomotive engines . Section 209( e)(2) directs the Administrator to grant California an authorization for standards and requirements for all other nonroad engines if California determines that the state’s standards will be, in the9

aggregate, at least as protective of public health and wel fare as applicable federal standards, unless she finds that: (1) the protectiveness finding of the state is arbitrary and capricious; (2) California does not need separate state standards to meet compelling and extraordinary conditions; or (3) the state s tandards and accompanying enforcement procedures are not consistent with CAA section 209. In its 209(e) Final Rule, EPA interpreted “not consistent with section 209” to mean that those challenging a California authorization request must show that the Stat e’s standards and accompanying enforcement provisions are not consistent with sections 209(a), 209(b)(1)(C) – that the standards are not consistent with CAA section 202(a) – and 209(e)(1). 23 In con sidering whether to grant waivers (authorizations) for acco mpanying enforcement procedures tied to standards for which a waiver has already been granted, Administrators have long held that they will only address questions as to (1) whether the enforcement procedures are so lax that they threaten the validity of Ca lifornia’s determination that its standards are as protective of public health and welfare as applicable federal standards and, (2) whether the enforcement procedures are consistent with section 202(a). 24 The Administrator has applied a similar analysis i n confirming that amendments to a CARB standard or regulation are within the scope of a previously granted authorization . EPA can make such a confirmation if certain conditions are present . Specifically, if California acts to amend a previously authorized standard or accompanying enforcement procedure, the amendments may be considered within the scope of a previously granted authorization if such amendments:

 D o not undermine California's determination that its standards in the aggregate are as protective of public health and welfare as applicable Federal standards,
 D o not affect consistency with section 209 of the Act, and
 Raise no new issues affecting EPA's previous authorization determination. 25 It is also well established that EPA may only consider th e aforementioned criteria set forth in section 209(e)(2), that EPA shall give substantial deference to California's policy judgments, and that the burden is on those who oppose the granting of the authorization to show why it should not be granted. 26

23 59 Fed.Reg . 36969, 36983 (July 20, 1994). 24 Motor and Equipment Manufacturers Association v. EPA (MEMA) (D.C. Cir. 1979) 627 F.2d 1095, 1111, 1113 . EPA applies this standard in CAA section 209 requests on both on road waivers (209 (b) ) and off road authorization (209 (e) ) , see 77 F ed. R eg. 72851, 72853 (Dec. 6, 2012). 25 65 Fed.Reg . 69767, 69768 - 769 (November 20, 2000) ; 71 F ed. R eg. 44027 at 44028 (August 3, 2006) . 26 MEMA , supra , 627 F.2d 1095, 1121; 40 Fed.Reg . 23102, 23103 - 23104 ( January 7, 1993 ).10

**B. The**  **20 08**  **Am endments**  **Fall Within the**  **S cope**  **of the**  **Previously Granted**  **Au thorization**  The following 20 08 Amendments ( detailed in Section ll above ) fall within the scope of the previously granted authorization for the Small Off- Road Engine Regulation :

 Modifica tion of Certification Emission Credits
 Modification of Production Emission Credits
 Ethanol Blend Certification Fuel Option **1. Protectiveness Determination**  In adopting the 20 08 Amendments, the Board approved Resolution 08 -4 1 (Enclosure 4 ) , in which it dec lared: BE IT FURTHER RESOLVED that the Board hereby determines that the regulations adopted herein will not cause California small off- road engine emission standards, in the aggregate, to be less protective of public health and welfare than applicable fed eral standards. BE IT FURTHER RESOLVED that the Board hereby finds that separate California emission standards and test procedures are necessary to meet compelling and extraordinary conditions. BE IT FURTHER RESOLVED that the Board finds that the Californi a emission standards and test procedures as adopted herein will not cause the California requirements to be inconsistent with section 202(a) of the Clean Air Act and raise no new issues affecting previous waiver determinations of the Administrator of the E nvironmental Protection Agency pursuant to section 209(b) of the Clean Air Act . The s e fi nding s were reaffirmed by CARB ’s Executive Officer. 27 The Administrator has no basis to find that the Board’s protectiveness determination is arbitrary or capricious . The Administrator has previously determined that CARB’s SORE emission s standards and related test procedures are at least as protective of public health and welfare as the federal nonroad emission s standards and test procedures , 28 and the 2008 Amendments d o not affect that previous determination, as they do not modify the applicable emission s standards.

27 Executive Order R- 10 - 004 (Enclosure 5 ). 28 60 Fed.Reg . 37440 (July 20, 1995) ; 71 Fed.Reg. 75536 (December 15, 2006); 75 Fed.Reg. 8056 (February 23, 2010 ) .11

In 1999, EPA adopted regulations for small spark- ignition engines used in nonhandheld equipment that included enduring (i.e., non - expiring) credit provisio ns. 29 In 2008, EPA adopted additional transitional credit provisions (i.e., expiring) as part of its Phase 3 emissions standards in 2008. 30 By capping its certification emission credit provisions at five years and eliminating the future accrual of producti on emission credits , CARB’s SORE regulations continue to be , in the aggregate, at least as protective of public health and welfare as applicable federal standards. The addition of the ZEE credits provision does not undermine this determination in that suc h credits will encourage development and production of cleaner, advanced technologies. **2 .**  **Consisten cy**  **with Section 209 of the CAA a.**  **Consistent with CAA**  **sections 209(a) and 209(e)(1)** In granting California the authorization for the 200 4 Amendments to the SORE regulation , EPA found tha t those amendments were not inconsistent with CAA section 209(a), because they did not regulate emissions from new motor vehicles or new motor vehicle engines. 31 EPA also found that th e amendments were not inconsistent with CAA section 209(e)(1) because they did not apply to new nonroad engines less than 175 hp used in farm and construction equipment and vehicles, new locomotives, or engines used in new locomotives. 32 The 2008 A mendments similarly do not apply to the ab ove - mentioned preempted categories of mobile sources, and consequently, EPA cannot find that the amendments are inconsistent with CAA sections 209(a) or 209(e)(1). **b. C**  **onsistent with CAA section**  **209(b)(1)(C) and 202(a)**  EPA determines if California standards are consistent with section 202(a) of the CAA by considering if they provide sufficient lead time to permit the development of technology needed to meet the standards and other requirements, giving appropriate consideration to the cost of complia nce in the time frame provided, and if the California and federal test procedures are sufficiently compatible to permit manufacturers to meet both the state and federal test requirements with one test vehicle or engine. 33 The reference to “cost of complianc e” in CAA section 202(a) refers to the economic costs of emission standards and accompanying enforcement procedures and the timing of a particular emission control regulation rather than to its social implications. 34

29 64 Fed.Reg. 15208 (March 30, 1999). 30 73 Fed. Reg. 59034 (October 8, 2008). 31 71 Fed . Reg. 75,536, 75, 537 (Dec. 15, 2006) 32 Ibid. 33 See 61 Fed.Reg . 53371, 53372 (October 11, 1996); Decision Document at p.2 ( OBD II Waiver Decision ). 34 Id. , referencing See S. Rep. No. 192, 89th Cong., 1st Sess. 5 - 8 (1965); H.R. Rep. No. 728, 90th Cong., 1st Sess. 23 (1967), U.S. Code Cong. & Admin.News 1967, p. 1938 ; se e also 74 Fed.Reg . 3030 (January 16, 2009), Decision Document at p. 49 .12

As demonstrated below, each of the co mpliance options associated with the amendments described in S ection II of this document are technically feasible within the lead time provided for compliance and presents no issue of incompatibility between California and federal test procedures.

**i. T**  **echnological F**  **easibility and**  **L ead**  **T ime**  The 2008 A mendments do not raise any issue that disturbs EPA’s prior finding that the SORE emission standards are technologically feasible within the lead time provided for compliance or that inconsistent test proce dures do not exist. 35 None of these issues were raised in the comments on the amendments . See comments and CARB responses in the Final Statement of Reasons for Rulemaking, (Enclosure 7 ). Th e limitation on emission credits did not pose a challenge for man ufacturers, as technology was available (catalysts) that was both a technically feasible and cost effective means of complying ). As stated, most manufacturers have been able to comply fully with the standards without relying on the use of credits. Production emission credits were originally intended for a manufacturer to use to offset compliance problems, but no manufacturer has needed to use production emission credits for that purpose since the adoption of the 2008 Amendments . Therefore, the eliminatio n of these credits does not affect the EPA’s prior finding of feasibility . The amendment allowing manufacturers to generate advanced technology ZEE emission credits is clearly feasible as it only provides manufacturers additional flexibility to comply wit h previously waived standards . See Staff Report , page s 8 - 11 (Enclosure 2 ) . The amendments allowing the use of an alternate certification test fuel likewise present no issue regarding technical feasibility.

**ii. T est**  **P rocedure**  **C onsistency**  Th e amendments present no issue of incompatibility between California and federal test procedures . Instead, the amendment allowing the use of federal certification fuel containing up to ten percent ethanol content only serves to enhance the consistency between California and federal test procedures. **3 .**  **No New Issues Exist** The 2008 SORE Amendments do not change any emissions requirements, design or performance standards, impose new means of enforcing emission limits nor do they expand the scope of what engi nes are included in the previously authorized regulations. The changes made to the emissions and production credit programs do not fundamentally alter the standards that previously received authorization, Therefore the 35 71 Fed . Reg. 75,536, 75, 537 (Dec. 15, 2006)13

Amendments do no impose new standard s for which new authorization must be sought. 36 CARB is not aware of any new issues affecting the previously granted authorization determination for the SORE regulation . The amendments do not force any change in technology to warrant revisiting conclusion s rea che d in grantin g the existing authorization s . It is therefore entirely appropriate for EPA to approve the within the scope request. **C. Al**  **ternatively, a New Au**  **thorization Must Be Granted**  **for the 2008**  **Am endments**  Should the Administrator determine that a w ithin the s cope d etermination cannot be g ranted for any of the above - identified 20 08 Amendments, she must grant CARB a n ew a uthorization for those amendments based on the same record CARB has provided . As discussed above, no issue regarding protective ness or consistency with CAA sections 209(a), 209(e)(1) , or 209(b)(1)(C) exists , and as demonstrated below, California satisfies the compelling and extraordinary criterion . **1. Compelling and Extraordinary**  **Circumstances** In adopting Resolution 08 -41 ( Enclos ure 4 ), the Board confirmed CARB’s longstanding position that California continues to need its own nonroad engine program to meet serious air pollution problems . The relevant inquiry under section 209(e)(2)(A)(ii) is whether California needs its own emiss ion control program to meet compelling and extraordinary conditions, not whether any given standard is necessary to meet such conditions. 37 “[C]ompelling and extraordinary conditions” [do] not refer to levels of pollution directly, but primarily to the fa ctors that tend to produce them: geographical and climatic conditions that, when combined with large numbers and high concentrations of automobiles, create serious air pollution problems. 38 California , and particularly the South Coast and San Joaquin Vall ey Air Basins , continue to experience some of the worst air quality in the nation and continue to be in non attainment with national ambient air quality standards for PM 2.5 and ozone. 39 The unique geographical and climatic conditions, and the tremendous g rowth in on and offroad vehicle population and use that moved Congress to authorize California to

36 77 Fed.Reg. 9916, at 9920 (Feb. 21, 2012) 37 Final 209(e) Rule , 59 Fed.Reg . at 36982 . The Administrator has recognized that even if s uch a standard by standard test were applied to California, it "would not be applicable to its fullest stringenc y due to the degree of discretion given to California in dealing with its mobile source pollution problems . ” (41 Fed.Reg . 44209, 44213, (Octobe r 7, 1976); 49 Fed.Reg . 18887, 18892 (May 3, 1984).) 38 49 Fed.Reg . 18887, 18892 (May 3, 1984). 39 76 Fed.Reg . 40652, 40654 (July 11, 2011).14

establish separate on - road motor vehicle standards in 1967 and off- road engine standards in 1990, still exist today. 40 In the California Clean Air Act of 198 8, the California Legislature found that: [D]espite the significant reductions in vehicle emissions which have been achieved in recent years, continued growth in population and vehicle miles traveled throughout California have the potential not only to p revent attainment of the state standards, but in some cases, to result in worsening of air quality. 41 **2. The Importance of Regul**  **a ting Off** **- Road Engines**  By adding federal and state authority to regulate off- road engines, Congress and California’s Legislature, respectively, acknowledged the increasing importance of reducing emissions from all mobile sources, including new and in - use off- road engines . The Administrator has repeatedly agreed with CARB that California’s continuing extraordinary conditions justif y California’s mobile source emission programs. 42 Nothing in these conditions has changed to warrant a change in this determination . Accordingly, for all the aforementioned reasons, there can be no doubt of the continuing existence of compelling and extra ordinary conditions justifying California’s need for its own mobile source emissions program. 43 **I V**  **. CONCLUSION**  Based on the foregoing, CARB respectfully requests that the Administrator grant California’s request for the authorization action as described i n this document pursuant to CAA section 209(e) . To assist you in reviewing the requests, CARB is enclosing a CD - ROM, containing the following referenced documents to be included in the record of this proceeding. **Reference Materials from t**  **he 20**  **08 Am**  **endmen ts to its**  **Small Off -**  **Road Engines**  **and Equipment**  **R egulations**  **(as titled on the**  **encl o** **sed CD)**  1. Public Hearing Notice dated November 20 , 2008 (Enclosure 1 Notice of Public Hearing ) . 2. CARB Staff Report: Initial Statement of Reasons for Proposed Rulemaking , dated October 3, 2008 (Enclosure 2 Staff Report )

40 See 74 Fed.Reg . 32744, 32762 - 32763 (July 8, 2009); 76 Fed.Reg. 77515, 77518 (December 13, 2011). 41 California Heal th and Safety Code section 43000.5. 42 60 Fed.Reg 37440 (July 2, 1995) utility engine authorization Decision Document, at p. 33; 76 Fed . Reg. 77515, 77518 (December 13, 2011). 43 76 Fed.Reg . 77515, 77518 (December 13, 2011); 76 Fed.Reg . 77521, 77525 (December 13, 2011) .15

3. 15 Day Notice of Modified Text dated February 4, 2010 (Enclosure 3 15 Day Notice ) , Attachment 1 (Enclosure 3 (A) Attachment to 15 Day Notice ) 4. Resolution 08 -41 (Enclosure 4 CARB Resolution 08 -41 ) 5 . Executive Order R- 1 0 - 00 4 dated February 24, 2010 (Enclosure 5 Executive Order R- 1 0 - 00 4 ) 6 . Final Regulation Order as approved by OAL (Enclosure 6 Final Regulation) 7. Final Statement of Reasons for Rulemaking (Enclosure 7 FSOR) 8. Addendum to the Final Statement of Reasons (Enclosure 8 Addendum FSOR) 9. Transcript of September 23, 2008 , p ublic hearing in the rulemaking (Enclosure 9 Transcript 09 - 2 3 - 08 ) 10. California Exhaust Emission Standards and Test Procedures for 2005 and Later Small Off- Road Engines, as amended February 24, 2010, Subpart D, Section 90.308 (Enclosure 10 Test Procedures) 1 1 . Fully endorsed STD 400 face sheet and Final R egulation Order as approved by OAL and filed with the Secretary of State April 5, 2010 ( Enclosure 1 1 STD 400 ) 1 2 . Office of Administrative Law Approval Notice, April 5, 2010 (Enclosure 1 2 OAL Notice) **CA RB Contacts**  Technical questions or requests for additional technical information on this item should be directed to Ron Haste, Emission Research an d Regulation Development Branch, Off- Road Control Section, at (626) 575 - 6676 or rhaste@arb.ca.gov . Legal questions should be directed to Lisa B rown , Senior Attorney , at (916) 32 4 - 2132 or lbrown@arb.ca.gov .