[Federal Register Volume 62, Number 59 (Thursday, March 27, 1997)]
[Proposed Rules]
[Pages 14740-14754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7626]



[[Page 14739]]

_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 90



Statements of Principles for Nonroad Phase 2 Small Spark-Ignited 
Engines; Proposed Rule

Federal Register / Vol. 62, No. 59 / Thursday, March 27, 1997 / 
Proposed Rules

[[Page 14740]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 90

[FRL-5802-5]


Statements of Principles for Nonroad Phase 2 Small Spark-Ignited 
Engines

AGENCY: Environmental Protection Agency (EPA).

ACTION: Advance Notice of Proposed Rulemaking (ANPRM).

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SUMMARY: EPA is developing a second phase of national air emission 
regulations that affect small spark-ignited (SI) engines used primarily 
in lawn and garden equipment. EPA expects the program to reduce 
combined emissions of hydrocarbon (HC) and oxides of nitrogen 
(NO<INF>X) from these engines by an additional 30 to 40 percent beyond 
Phase 1 levels, in excess of 100,000 tons of HC per year with minimal 
changes in NO<INF>X. These emission reductions will result in a 
decrease in summertime ozone and a corresponding health and welfare 
benefit. In 1996 EPA and certain other interested parties signed two 
different Statements of Principles (SOPs) that describe various aspects 
of the Phase 2 program that EPA will propose. One SOP focuses on 
provisions that would affect engines used in handheld equipment such as 
leaf blowers, chain saws, and trimmers. The second SOP addresses 
provisions that would affect engines used in nonhandheld equipment such 
as lawnmowers and generator sets. EPA is issuing this ANPRM to: notify 
the public about the availability of the two small SI nonroad engine 
SOPs; request comment on the SOPs, and; inform interested parties about 
the forthcoming Phase 2 small SI engine Notice of Proposed Rulemaking 
(NPRM) which will be based in part on the two SOPs.

DATES: EPA requests comment on this ANPRM no later than April 28, 1997. 
Should a commenter miss the requested deadline, EPA will try to 
consider any comments that it receives prior to publication of the 
NPRM. There will also be an opportunity for oral and written comment 
after publication of the NPRM.

ADDRESSES: Materials relevant to this Notice are contained in EPA Air 
and Radiation Docket No. A-96-55 and Docket No. A-93-29, located at 
room M-1500, Waterside Mall (ground floor), U.S. Environmental 
Protection Agency, 401 M Street, SW., Washington, DC 20460. The docket 
may be inspected from 8:00 a.m. until 5:30 p.m., Monday through Friday. 
The docket may also be reached by telephone at (202) 260-7548.
    As provided in 40 CFR part 2, a reasonable fee may be charged by 
EPA for copying docket materials.
    Comments on this document should be sent to Public Docket A-96-55 
at the above address. EPA requests that a copy of comments also be sent 
to Betsy McCabe, U.S. EPA, Engine Programs and Compliance Division, 
2565 Plymouth Road, Ann Arbor, MI 48105.

FOR FURTHER INFORMATION CONTACT: Betsy McCabe, U.S. EPA, Engine 
Programs and Compliance Division, 2565 Plymouth Road, Ann Arbor, MI 
48105. Telephone: (313) 668-4344. Electronic mail: 
<a href="/cdn-cgi/l/email-protection#137e70707271763d717667606a537663727e727a7f3d7663723d747c65"><span class="__cf_email__" data-cfemail="5b3638383a393e75393e2f28221b3e2b3a363a3237753e2b3a753c342d">[email protected]</span></a>

SUPPLEMENTARY INFORMATION:

I. Background and Purpose for this Advance Notice

    With this document EPA announces the signing of two Statements of 
Principles (SOPs). One SOP, signed in May, 1996, focuses on provisions 
to be proposed in a future Notice of Proposed Rulemaking (NPRM) that 
would affect new spark-ignited (SI) engines at or below 19 kilowatts 
(25 horsepower) used in handheld applications such as trimmers, edgers, 
brush cutters, leaf blowers, leaf vacuums, chain saws, augers, and 
tillers. In developing this handheld SOP, EPA, state, and industry 
representatives reached agreement on several elements of a Phase 2 
program to be proposed for these small handheld SI engines. The second 
SOP, signed in December, 1996, describes areas of agreement between EPA 
and certain industry representatives for a Phase 2 program to be 
proposed for small SI engines used in nonhandheld equipment such as 
lawnmowers, generator sets, and riding mowers.
    EPA anticipates issuing an NPRM, based in part on these two SOPs, 
by the Fall of 1997. The NPRM will be subject to the full public 
process required by section 307(d) of the Clean Air Act, as amended, 42 
U.S.C. 7607(d). By announcing the availability of the handheld and 
nonhandheld SOPs in this Advance Notice, EPA hopes to receive early 
comments and suggestions which can inform the development of the 
proposal and, ultimately, the final regulations for Phase 2. Today's 
Advance Notice includes the text of the handheld and nonhandheld SOPs 
as appendices to this preamble.

II. Brief Background on Small SI Engine Rulemakings

    In July 1995, EPA issued the first national program to reduce 
emissions from small SI engines (60 FR 34582, July 3, 1995, codified at 
40 CFR part 90). This program, called ``Phase 1,'' takes effect with 
model year 1997 and sets emissions standards for ``new'' small SI 
engines. The Phase 1 standards are expected to result in a 32 percent 
reduction in HC emissions from small SI engines. The Phase 1 program 
was developed through the notice and comment rulemaking process, and 
the regulations are similar in many respects to California's Tier I 
Regulation for 1995 and Later Utility and Lawn and Garden Equipment 
Engines.<SUP>1 While EPA was developing the Phase 1 regulations, EPA 
began working with certain interested parties in a consultative process 
to develop a comprehensive Phase 2 program that focusses on ensuring 
that emissions reductions from small SI engines are achieved ``in-
use.''
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    \1\ The California Regulations for 1995 and Later Utility and 
Lawn and Garden Equipment Engines were initially approved in 
December 1990, and formally adopted in March 1992.
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    In September 1993, a Negotiated Rulemaking Advisory Committee was 
formed to support EPA in developing a practical approach to a 
comprehensive regulatory program for Phase 2. This committee, 
consisting of representatives from industry, small business, state, 
public health and environmental groups, and EPA, met until February 
1996, but did not reach consensus on an Agreement in Principle or draft 
regulatory language. However, the regulatory negotiation process (Reg 
Neg) produced substantial useful information and provided EPA with 
input from numerous key stakeholders which will help the Agency develop 
the Phase 2 small SI engine regulatory program. Subsequent to the 
conclusion of the Reg Neg process, EPA continued working with some of 
the parties to reach agreement on how certain aspects of a Phase 2 
program would be addressed in a future NPRM. As these discussions 
proceeded, the involved parties worked together to develop written 
documents, Statements of Principles, which will partly form the basis 
of the Phase 2 NPRM. The handheld SOP addresses issues affecting 
engines used in handheld equipment, and the nonhandheld SOP addresses 
issues affecting engines used in nonhandheld equipment. Key features of 
the SOPs are described briefly below. However, the reader is advised to 
refer to the actual SOP documents that follow for details (see also 
section VII, ``Obtaining Copies of Documents''). Issues not discussed 
in the SOPs will be addressed in the Phase 2 NPRM.

[[Page 14741]]

III. Brief Summary of the Handheld SOP for Small SI Engines

    Parties to the handheld SOP, signed in May, 1996, include EPA; the 
Auger and Power Equipment Manufacturers Association (APEMA); the North 
American Equipment Dealers Association (NAEDA); the Portable Power 
Equipment Manufacturers Association (PPEMA); the State and Territorial 
Air Pollution Program Administrators/Association of Local Air Pollution 
Control Officials (STAPPA/ALAPCO); and the Wisconsin Department of 
Natural Resources.
    This SOP outlines elements for a Phase 2 program to be proposed by 
EPA for Class 3, 4, and 5 handheld small SI engines at or below 19 
kilowatts. Handheld engines generally use 2-stroke technology due to 
its high power to weight ratio and its allowance for multi-positional 
use. Because of these characteristics, handheld engines are used in 
equipment typically carried by the operator, such as chainsaws, 
trimmers, and blowers.
    As described in the SOP, EPA plans to propose Phase 2 emission 
standards for emissions of HC+NO<INF>X and for carbon monoxide (CO) 
from handheld engines that are to be met over the lifetime of the 
engine. These standards, if adopted, would represent an estimated 30 
percent reduction in HC+NO<INF>X exhaust levels from these engines 
below Phase 1 levels.
    The involved parties also agreed that EPA would propose a provision 
for phased-in effective dates based on a percentage of production from 
model year 2002 through model year 2005.
    As described in the SOP, the signatories agreed that a particulate 
matter and toxics test program will be conducted to collect and 
evaluate information on emissions of these pollutants from handheld 
sources.
    The signatories also agreed that the NPRM would include a voluntary 
program that would allow manufacturers to display a label or symbol 
identifying handheld engines that have HC+NO<INF>X certification levels 
substantially below the Phase 2 standards.
    The following elements of a compliance program are reflected in the 
SOP and will be described in the NPRM: a certification program; a 
production line testing program; and an in-use testing program. The 
provisions in the compliance program that EPA will propose will help 
ensure that handheld engines continue meeting the standards for the 
life of the engine.
    In addition, the SOP provides that EPA intends to conduct a 
technology review to assess whether any further revisions to the 
emissions standards for handheld engines would be appropriate.

IV. Brief Summary of the Nonhandheld SOP for Small SI Engines

    Parties to the nonhandheld SOP, signed in December 1996, include 
EPA; Briggs & Stratton Corporation; Kawasaki Motors Corporation, 
U.S.A.; Kohler Company; Kubota; Mitsubishi Engine North America, Inc.; 
Onan Corporation; Suzuki Motor Corporation; Tecumseh Products Company; 
The Toro Company; and Wis-Con Total Power Corporation.
    This SOP outlines elements of a Phase 2 program to be proposed by 
EPA for Class 1 and 2 nonhandheld small SI engines at or below 19 
kilowatts. Class 1 engines have displacements of less than 225 cc and 
are typically used in relatively inexpensive residential applications 
such as walk-behind lawnmowers and tillers. Most Class 1 engines use 
side-valve (SV) technology. Class 2 engines have displacements greater 
than or equal to 225 cc, and are typically used in more expensive 
commercial applications such as lawn tractors, riding mowers and 
generator sets.
    As described in the nonhandheld SOP, EPA plans to propose in the 
Phase 2 NPRM standards for HC + NO<INF>X and CO emissions from 
nonhandheld engines that are to be met over the lifetime of the engine. 
These standards, if adopted, would represent a 30 to 40 percent 
reduction in HC + NO<INF>X exhaust emissions from these engines below 
Phase 1 levels.
    The signatories also agreed that EPA would propose a provision for 
an effective date of 2001 for Class 1 engines, and a phase-in between 
2001 and 2005 for Class 2 engines. The signatories expect that the 
emission standards and effective dates contained in the SOP would cause 
manufacturers to shift their Class 2 engines to cleaner, more durable 
technology, such as over-head valve (OHV) technology by 2005.
    To help determine the consumer acceptance and feasibility of 
applying OHV technology to Class 1 engines, EPA and certain 
manufacturers have entered into separate Memoranda of Understanding 
calling for an OHV Demonstration Program to be implemented by those 
manufacturers. Readers who are interested in learning more about the 
OHV Demonstration Program should refer directly to the Memoranda of 
Understanding (MOUs), available electronically (see Obtaining Copies of 
Documents section) and in the public docket for this rulemaking.
    As described in detail in the nonhandheld SOP, EPA plans to propose 
a comprehensive compliance program for nonhandheld engines in the Phase 
2 NPRM. This program will be designed to ensure that emission benefits 
are achieved over the lifetime of the engines while minimizing 
manufacturers' compliance burdens. The Phase 2 compliance provisions in 
the NPRM for nonhandheld engines will include certification and 
production line testing programs. In addition, the proposed program 
will call for manufacturers to conduct a field durability and in-use 
emission performance demonstration program for OHV engines every four 
years.
    The signatories also agreed to work together to develop a voluntary 
Fuel Spillage Reduction Program aimed at educating consumers about the 
significant contribution to air pollution from spillage, and 
encouraging the development and use of technology that will reduce or 
eliminate spills by users.

V. Environmental Benefit Assessment

    National Ambient Air Quality Standards (NAAQS) have been set for 
criteria pollutants which adversely affect human health, vegetation, 
materials, and visibility. The primary criteria pollutant affected by 
this rule is ozone. EPA has determined the standards contained in this 
NPRM will reduce HC emissions from spark-ignition small engines with 
minimal changes in NO<INF>X levels and help areas come into compliance 
with the ozone NAAQS. The following sections contain a brief 
description of some of the health effects associated with ozone, and 
the importance of continuing to reduce HC emissions. The NPRM for this 
rule will contain a more detailed discussion of the health and welfare 
benefits which can be expected from this program.

A. Health Effects of Tropospheric Ozone

    Ozone is a highly reactive chemical compound which can affect both 
biological tissues and man-made materials. Ozone can affect human 
pulmonary and respiratory health--symptoms include chest pain, 
coughing, and shortness of breath.<SUP>2 Elevated ozone levels can 
cause aggravation of pre-existing respiratory conditions such as 
asthma. Ozone can cause a reduction in performance during exercise even 
in healthy persons. In addition, ozone can also cause alterations in 
pulmonary and extrapulmonary (nervous system, blood, liver, endocrine) 
function. The oxidizing effect of ozone can irritate the

[[Page 14742]]

nose, mouth, and throat causing coughing, choking, and eye irritation.
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    \2\ Air Quality Criteria Document for Ozone and Related 
Photochemical Oxidants (External Review Draft), EPA-600/AP-93/004a-
c, February, 1995 (NTIS #: PB94-17-3127, -3135, -3143).
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    The presence of elevated levels of ozone is of concern in rural 
areas as well. Because of its high chemical reactivity, ozone causes 
damage to vegetation. Estimates based on experimental studies of the 
major commercial crops in the U.S. suggest that ozone may be 
responsible for significant agricultural crop yield losses. In 
addition, ozone causes noticeable leaf damage in many crops, which 
reduces marketability and value. Finally, there is evidence that 
exposures to ambient levels of ozone which exist in many parts of the 
country are also responsible for forest and ecosystem damage. Such 
damage may be exhibited as leaf damage, reduced growth rate, and 
increased susceptibility to insects, disease, and other environmental 
stresses and has been reported to occur in areas that attain the 
current standard. There are complexities associated with evaluating 
such effects due to the wide range of species and biological systems 
introduce significant uncertainties.

B. Need for NO<INF>X and VOC Control

    Photochemical modeling highlights the fact that ozone pollution is 
a regional problem, not simply a local or state problem. Ozone itself 
and its precursors are transported long distances by winds and 
meteorological events. Thus, achieving ozone attainment for an area and 
thereby protecting its citizens from ozone-related health effects often 
depends on the ozone and/or precursor emission levels of upwind areas. 
Local stationary source NO<INF>X and VOC controls will assist 
nonattainment areas toward their ozone reduction goals, but for many 
areas with persistent ozone problems, attainment of the ozone NAAQS 
will require broader control strategies for both NO<INF>X and VOC. As a 
result, effective national ozone control requires an integrated 
strategy which combines cost-effective approaches in both the mobile 
and stationary source arenas at both the local and national levels.
    Small spark-ignited engines represent an important portion of the 
national HC inventories. The program contained in todays notice will 
result in important reductions in HC (in excess of 100,000 tons HC/
year) with little change in NO<INF>X levels from small spark-ignited 
nonroad engines. These meaningful HC reductions will help to alleviate 
the problems associated with ozone formation in many nonattainment 
areas throughout the country.

VI. Discussion of Issues

    EPA seeks comments on the provisions described in the handheld and 
nonhandheld SOPs that are summarized above and published in their 
entirety along with this ANPRM. In particular, the Agency requests 
comment on some areas for which the SOPs do not contain detailed 
provisions, as discussed below.

A. Definitions of Commercial and Residential

    As discussed in the handheld SOP, at the time of certification 
handheld engine manufacturers would declare an engine family to be 
``commercial'' or ``residential'' based on the expected useful life and 
intended application of the engine. Comment is solicited on the 
appropriate definitions of ``commercial'' and ``residential.''

B. Bench Aging Correlation Program

    Both SOPs contain provisions for bench aging programs as part of 
the compliance programs that EPA will propose for the Phase 2 NPRM. EPA 
solicits suggestions on the ability of bench aging to adequately 
demonstrate deterioration of engines in the field. The Agency also 
seeks comment on methods for correlating bench-aged and field-aged 
results. In addition, EPA requests comment on whether there are certain 
engine technologies that are more suitable to bench aging than others. 
In particular the Agency seeks information on whether the bench aging 
certification program for side valve engines is the appropriate method 
for estimating deterioration.

C. Deterioration Factors

    The nonhandheld SOP signatories agree to the goal of designing and 
building engines that are emissions durable over their actual useful 
lives. Consequently, under the program envisioned in the SOP the test 
results from any of the new engine compliance programs would be 
adjusted by deterioration factors to estimate emissions at the end of 
the engine's life. The nonhandheld SOP describes several program 
elements that involve establishment of deterioration factors (DFs). As 
EPA further develops its Phase 2 program to propose in the NPRM, the 
Agency requests comment on various aspects of developing appropriate 
deterioration factors. EPA seeks additional data on which to base 
assigned DFs in the Phase 2 proposal. In addition, EPA seeks comment on 
the types of data required for both assigned and manufacturer-
determined DFs for the 500 and 1000 hour useful life categories for 
Class 2 engines. The Agency also seeks suggestions on the 
appropriateness of establishing optional assigned DFs for the 250 and 
500 hour useful life categories for Class 1. EPA encourages interested 
parties to provide comment, regarding Class 2 engines, on the kind of 
data required to determine the DFs, the methodology required to 
determine the DFs, the amount of in-use testing required to verify the 
DFs, and the appropriateness of reserving certification credits pending 
verification of the DFs through in-use testing.

D. Averaging, Banking and Trading (ABT)

    The Signatories to the nonhandheld SOP agree that an ABT program 
would help ensure that the standards and phase-in structure that EPA 
will propose in the Phase 2 NPRM will be cost-effective and 
technologically feasible. Signatories to the handheld SOP did not reach 
agreement on an ABT program. EPA seeks comment on the appropriateness 
of the ABT program described in the nonhandheld SOP and also on whether 
or not an ABT program would be appropriate for the handheld segment of 
the small SI industry. In addition, EPA solicits comment on the 
appropriateness of the provision described in the nonhandheld SOP of 
unlimited life for credits generated under the Phase 2 program when 
used for purposes of compliance with the SOP nonhandheld standards that 
EPA will propose in the Phase 2 NPRM.

E. Fuel Spillage Reduction Program

    The nonhandheld SOP includes a provision for the signatories to 
work collaboratively and with other affected parties to develop a 
voluntary fuel spillage reduction program. It is anticipated that this 
voluntary partnership program would involve EPA; engine manufacturers 
and equipment manufacturers; and potentially regional, state, and local 
air pollution agencies; health and environmental organizations; and 
other interested parties. The strategies involved in reducing fuel 
spillage would include, but not be limited to:
    <bullet> providing information and reminders at public places where 
refueling frequently occurs, where equipment or fuel supplies are sold, 
and similar places;
    <bullet> providing education and training to commercial operators 
of equipment, to those persons who influence individuals doing the 
refueling (such as equipment sales staff or small engine course 
instructors), and similar target audiences;
    <bullet> providing educational materials for use in environmental 
education courses

[[Page 14743]]

or related programs targeting children and youth;
    <bullet> encouraging the development of technology that will assist 
equipment users in reducing spills and providing recognition for 
implementing technology developments that will assist equipment users 
in reducing spills.
    EPA will develop this program in greater detail as the proposed 
rule is developed and finalized and encourages those parties interested 
in participating to contact the Agency.
    The Agency believes it is appropriate to develop and implement a 
program unique to the small SI industry to encourage public awareness 
and act as an incentive for technology investments. Every year, 
millions of gallons of gasoline are lost during refueling. It is 
estimated that the few ounces spilled during refueling lawn and garden 
equipment alone total about 17 million gallons of gasoline, most of 
which evaporates into the air to contribute to the air pollution 
problem. To reduce and prevent this pollution a variety of measures 
will be needed, most involving increased public awareness and 
education.
    The Agency seeks comment on this possible voluntary partnership 
program, appropriate strategies, appropriate target audiences, and 
other matters pertinent to establishing this program. EPA also solicits 
comment on the feasibility and appropriateness of expanding such a 
program to the handheld side of the industry.

F. Environmental Labeling Program

    EPA will be developing an incentive and recognition program to 
identify for consumers those handheld engines which emit HC+NO<INF>X 
levels substantially below the Phase 2 levels. This program would be 
voluntary. Manufacturers who meet the program qualifications and choose 
to participate would be recognized for their efforts and allowed to 
display a symbol (as yet unidentified) on qualifying products 
identifying them as cleaner engines.
    As part of the public recognition program, EPA will establish 
criteria for the standards and the procedure required to qualify for 
public recognition. The specific details of the incentive and 
recognition program will be determined as the proposed rule is 
developed and finalized. Some of the matters which need to be 
considered include, but are not limited to:
    <bullet> emission level at which recognition will be granted;
    <bullet> single or multiple levels of recognition provided (that 
is, recognizing in a different manner or with a different symbol, those 
who comply at the minimum level of the requirement from those products 
who go beyond the minimum level);
    <bullet> period of recognition;
    <bullet> type of recognition;
    <bullet> appropriate symbol and identifier for this program;
    <bullet> criteria for use of the symbol on the product, packaging, 
or advertisements for the engine;
    <bullet> administrator and/or manager of the program--EPA, 
independent third party, combination, or some other option;
    <bullet> process for administration of the program on ongoing 
basis.
    EPA will propose an initial framework for this program as part of 
the NPRM.
    The Agency believes it is appropriate to develop and implement a 
program unique to this industry as an incentive for advanced technology 
investments. EPA solicits comment on this possible incentive and 
recognition program, the applicable criteria, the type of recognition 
accorded, the period of recognition, and any other matters pertinent to 
establishing this program.
    While EPA is initially developing this program for handheld engines 
which emit below the Phase 2 levels, the Agency solicits comment on the 
feasibility and appropriateness of such a program for nonhandheld 
engines, including the applicable criteria, the type of recognition 
accorded, and the period of recognition. In addition, EPA also solicits 
comments on the feasibility and appropriateness of expanding such a 
program to include similar equipment not subject to the small SI engine 
regulations (such as electric string trimmers and mowers).

G. PM and Toxics Testing Program

    The handheld SOP describes a particulate matter (PM) and toxics 
test program that EPA will propose as part of the Phase 2 NPRM. The 
Agency requests comment on the scope of the program, the number of test 
engines, and the types of pollutants to be tested. In addition EPA 
seeks suggestions as to who might best administer the test program, how 
the program might be administered, and the level of funding needed to 
conduct such a program. EPA also seeks comment on the time frame for 
such a program, given the consideration that such a program could begin 
prior to implementation of the Phase 2 program, since there are 
handheld engines now available which meet the standards described in 
the handheld SOP which the Agency will propose in the Phase 2 NPRM.

H. Cost Information on Field Ageing

    EPA solicits information as to the costs for manufacturers to field 
age engines used in handheld and nonhandheld equipment out to the end 
of their regulatory useful lives as described in the SOPs.

I. Impact on Equipment Manufacturers

    As it works on developing the Phase 2 NPRM, EPA is trying to gain a 
better understanding of various aspects of the small SI equipment 
industry, and the impacts that the Phase 2 program EPA will propose 
would have on the equipment industry. Consequently, the Agency seeks 
any detailed information regarding the impact of the program on the 
equipment manufacturers. In particular, the Agency seeks specific 
information from nonhandheld equipment manufacturers on the number of 
production lines per equipment type that will need to be changed in 
order to incorporate engines changing to OHV technology.

J. Fuel Consumption Data

    In order to fully discuss the effects of the Phase 2 program it 
will propose, EPA seeks detailed data regarding fuel consumption for 
both handheld and nonhandheld Phase 1 and Phase 2 engines and the 
effects of various technological changes and emission reduction 
strategies on fuel consumption.

VII. Public Participation

    By September 30, 1997, EPA will issue a Notice of Proposed 
Rulemaking based in part on the SOPs for Phase 2 nonroad small SI 
engines. The Agency is committed to a full and open regulatory process 
and looks forward to input from a wide range of interested parties as 
the rulemaking process develops. Opportunities for input will include a 
formal public comment period and a public hearing. EPA encourages all 
interested parties to become involved in this process as it develops.
    With publication of this ANPRM, EPA opens a 30 day comment period 
regarding the content of this ANPRM and the handheld and nonhandheld 
SOPs (see DATES section above for close of comment period). The Agency 
strongly encourages comment on all aspects of the SOPs. The most useful 
comments are those supported by appropriate and detailed rationales, 
data, and analyses. In particular, EPA requests comment on those issues 
described in the Discussion of Issues section. All comments, with the 
exception of proprietary information, should be submitted to the EPA 
Air Docket No. A-96-55 by the date

[[Page 14744]]

specified above. The Agency will consider all comments, and use them in 
developing the NPRM.
    Commenters who wish to submit proprietary information for 
consideration should clearly separate such information from other 
comments by (1) labeling proprietary information ``Confidential 
Business Information'' and (2) sending proprietary directly to the 
contact person listed (see FOR FURTHER INFORMATION CONTACT) and not to 
the public docket. This will help ensure that proprietary information 
is not inadvertently placed in the docket. If a commenter wants EPA to 
use a submission of confidential information as part of the basis for 
the NPRM or for the final rule, then a nonconfidential version of the 
document that summarizes the key information or data should be sent to 
the docket.
    Information covered by a claim of confidentiality will be disclosed 
by EPA only to the extent allowed and in accordance with the procedures 
set forth in 40 CFR part 2. If no claim of confidentiality accompanies 
the submission when it is received by EPA, it will be made available to 
the public without further notice to the commenter.

VIII. Obtaining Copies of Documents

    This Advance Notice, both the handheld and nonhandheld SOPs, and 
the MOUs are available in hard copy from the public docket. These 
documents are also available electronically from the EPA Internet site 
and the Technology Transfer Network (TTN).

A. Hard Copies From the Docket

    Hard copies of this ANPRM, the SOPs, and the MOUs may be obtained 
from the EPA Air and Radiation public docket as described in the 
ADDRESSES section above.

B. Electronic Copies From Internet and TTN

    Electronic copies of this ANPRM, the handheld and nonhandheld SOPs, 
and the MOUs are available electronically from the EPA internet site 
and via dial-up modem on the Technology Transfer Network (TTN), which 
is an electronic bulletin board system (BBS) operated by EPA's Office 
of Air Quality Planning and Standards. Both services are free of 
charge, except for your existing cost of internet connectivity or the 
cost of the phone call to TTN. Users are able to access and download 
files on their first call using a personal computer and modem per the 
following information.
Internet
    World Wide Web: http://www.epa.gov/OMSWWW
    Gopher: gopher.epa.gov Follow menus for: Offices/Air/OMS FTP: 
ftp.epa.gov Change Directory to pub/gopher/OMS
Technology Transfer Network (TTN)
    TTN BBS: 919-541-5742 (1200-14400 bps, no parity, 8 data bits, 1 
stop bit) Also accessible via Internet: TELNET ttnbbs.rtpnc.epa.gov 
Voice Helpline: 919-541-5384.
    Off-line: Mondays from 8:00 AM to 12:00 noon EST.
    A user who has not called TTN previously will be required to answer 
some basic informational questions for registration purposes. After 
completing the registration process, proceed through the following menu 
choices from the Top Menu to access information on this rulemaking.

<T> GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards)
<M> OMS--Mobile Sources Information
<K> Rulemaking and Reporting
<6> Non-Road
<2> Non-road Engines

    At this point, the system will list all available files in the 
chosen category in reverse chronological order with brief descriptions. 
To download a file, select a transfer protocol that is supported by the 
terminal software on your own computer, then set your own software to 
receive the file using that same protocol.
    If unfamiliar with handling compressed (i.e. ZIP'ed) files, go to 
the TTN top menu, System Utilities (Command: 1) for information and the 
necessary program to download in order to unZIP the files of interest 
after downloading to your computer. After getting the files you want 
onto your computer, you can quit the TTN BBS with the <G>oodbye 
command.
    Please note that due to differences between the software used to 
develop the document and the software into which the document may be 
downloaded, changes in format, page length, etc. may occur.

IX. Legal Authority

    Authority to develop the small SI program is granted to EPA by 
sections 213 and 301(a) of the Clean Air Act, as amended (42 U.S.C. 
7547, 7601(a)).

X. Unfunded Mandates Reform Act

    Under Section 202 of the Unfunded Mandates Reform Act of 1995 
(''UMRA''), P.L. 104-4, EPA must prepare a budgetary impact statement 
to accompany any general notice of proposed rulemaking or final rule 
that includes a Federal mandate which may result in estimated costs to 
State, local, or tribal governments in the aggregate, or to the private 
sector, of $100 million or more. Under Section 205, for any rule 
subject to Section 202 EPA generally must select the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule and is consistent with statutory requirements. 
Under Section 203, before establishing any regulatory requirements that 
may significantly or uniquely affect small governments, EPA must take 
steps to inform and advise small governments of the requirements and 
enable them to provide input.
    EPA has determined that the requirements of UMRA do not extend to 
advance notices of proposed rulemaking such as this ANPRM.

XI. Regulatory Flexibility

    The Regulatory Flexibility Act (RFA) is intended to assure that 
concerns about small entities are adequately considered during the 
development of new regulations which affect them. While the Regulatory 
Flexibility Act does not require a formal analysis of ANPRMs, pursuant 
to section 609(a) of the RFA EPA has begun to consider how small 
entities would be affected by the potential new standards discussed in 
the SOPs.
    The nonroad small SI industry is made up of a large number of 
engine manufacturers, and a still larger number of equipment 
manufacturers, many of which do business internationally. Some of these 
manufacturers may be small businesses as defined by the RFA and 
applicable regulations and thus may be impacted by the Phase 2 
standards for handheld and nonhandheld engines.
    EPA plans to minimize any adverse impact on smaller nonroad small 
SI engine and equipment manufacturers to the extent possible consistent 
with the law, and will work with representatives of such entities as 
the formal proposal is developed. EPA requests comment on the impacts 
of the program outlined in the SOPs on small entities. In particular, 
EPA solicits advice and recommendations on the following issues:
    (a) The number of small entities to which the proposed rule as 
based on the SOPs would apply;
    (b) Projected reporting, record keeping, and other compliance 
requirements of the proposed rule as based on the SOPs, including the 
classes of small entities which would be subject to the Phase 2 
requirements and the type of professional skills necessary for 
preparation of the report or record;

[[Page 14745]]

    (c) Other relevant Federal rules which may duplicate, overlap or 
conflict with the proposed rule as based on the SOPs; and,
    (d) Any significant alternatives to the proposed rule as based on 
the SOPs which would accomplish the stated objectives of applicable 
statutes and which would minimize any significant economic impact of 
Phase 2 rules on small entities.

XII. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866 (58 FR 51735 (Oct. 4, 1993)), the 
Agency must determine whether this regulatory action is ``significant'' 
and therefore subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The order defines 
``significant regulatory action'' as any regulatory action (including 
an advanced notice of proposed rulemaking) that is likely to result in 
a rule that may:
    (1) have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or,
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Although the Agency is uncertain at this time of what the annual 
monetary or material effect of a future Phase 2 rulemaking might be, 
EPA has reason to estimate that such regulatory action might result in 
an annual effect on the economy of $100 million or more, or adversely 
affect in a material way a sector of the economy. EPA will further 
address the requirements of Executive Order 12886 in developing the 
proposed and final Phase 2 rule.
    This Advance Notice was submitted to OMB for review as required by 
Executive Order 12866. Any written comments from OMB or other federal 
agencies and any EPA written response to OMB or other federal agency 
comments are in the public docket for this document.

List of Subjects in 40 CFR Part 90

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Motor vehicle pollution, Reporting and 
recordkeeping requirements.

    Dated: March 19, 1997.
Carol M. Browner,
Administrator.

Appendix A to the Preamble--Handheld Engines Statement of Principles

Statement of Principles for the Regulation of Exhaust Emissions From 
Handheld Spark-Ignited Engines at or Below 19 Kilowatts

Preface
    The Environmental Protection Agency (EPA) agrees to draft a 
preamble and proposed rule that will include, to the maximum extent 
possible, consistent with EPAs legal obligations, the agreements 
contained in this statement of principles (SOP). This SOP applies to 
new spark ignited engines at or below 19 kW for use in handheld 
applications. The draft preamble and proposed rule will form the basis 
of a notice of proposed rulemaking (NPRM) for Phase 2 emission 
standards for all new nonroad spark-ignition engines at or below 19 
kilowatts subject to the exclusion and exemption provisions contained 
herein. The signatories have reached agreement on many of the basic 
issues that will apply to handheld engines in Phase 2, such as the 
pollutants to be regulated, the emission standards, phased in effective 
dates, and a test program for certain non-regulated pollutants. The 
signatories agree to support a program that promotes technological 
advancement of durable engine and emission control technology. The 
signatories agree that the program should strive to produce verifiable 
reductions in engine emissions over the useful lives of the engines and 
that the responsibility for verification testing is most appropriately 
placed with the manufacturers. Consequently, the signatories have 
reached conceptual agreement on issues such as production line and in-
use testing, and the implementation of a technology review designed to 
assess the appropriateness of Phase 3 emission standards. However, a 
significant number of important, unresolved issues remain. To the 
extent possible in the time remaining prior to publication of the NPRM, 
the parties will continue their efforts to reach agreement on these 
unresolved issues. All outstanding issues will be addressed during the 
rulemaking process. Each party to this SOP, other than EPA, agrees not 
to file negative comments on the NPRM as to the agreed upon provisions 
included in this SOP. If the NPRM includes the agreements contained in 
this SOP, each party to the SOP other than EPA agrees to file a 
memorandum in the docket to that effect and to acknowledge that it 
participated in negotiating the SOP. Each party, other than EPA, agrees 
not to take any action to inhibit the adoption in the final rule of the 
agreed-upon provisions included in this SOP. Each party, other than 
EPA, agrees not to challenge in court the agreements in this SOP which 
are included in a final rule. If the final rule is challenged in court, 
and if the final rule and preamble include the agreements contained in 
this SOP, each party, other than EPA, agrees to file a memorandum 
informing the court that it participated in negotiating the agreements 
contained in this SOP.
Statement of Principles
    The signatories agree to the proposal of a single Notice of 
Proposed Rulemaking to regulate the exhaust emissions of small spark 
ignited engines at or below 19 kW. The emission standard related 
provisions applicable to small handheld engines (Effective Dates, 
Engine Classifications, Emission Standards, PM and Toxics Test Program, 
Test Procedures, Voluntary Incentive and Recognition Program, 
Certification: Averaging, Banking and Trading) will be based upon the 
items listed below. The non-emission standard related provisions of the 
proposed rule (Definitions, Applicability, Certification Program, 
Production Line Testing, In-Use Program, Imports, Dealer 
Responsibility, Technology Review/Phase 3, and Tampering) shall be 
identical for all engines subject to the rule, to the extent possible 
and provided modifications are not necessary due to differences in 
emission standard related provisions. Where such provisions are 
proposed that will not be identical for all engines, the signatories 
will be consulted during development of any such proposal and will have 
full opportunity to comment after proposal. Items not addressed in this 
SOP will be developed during the rulemaking process.
A. Definitions
    The signatories agree that, to the greatest extent possible, terms 
defined in the Phase 1 rule shall have the same meanings in the Phase 2 
rule. Additionally, the signatories agree to define the following terms 
necessary to implement provisions described in this SOP.
    In-use credit: An emission credit derived from the difference 
between the mean in-use emission results of a

[[Page 14746]]

regulated pollutant, or pair of pollutants in the case of HC+NO<INF>X, 
and the applicable emission standard.
    Technology subgroup: A group of engine families from one or more 
manufacturers having similar size, application, useful life and 
emission control equipment; e.g., Class III, residential, non-catalyst, 
two stroke, engine used in generator set applications.
B. Applicability
    1. This statement of principles is applicable to handheld equipment 
and spark ignited engines used in handheld products subject to the 
following exclusions. These exclusions, to the extent described in the 
Phase 1 rule, apply as described in that rule.
    a. Engines used to propel marine vessels.
    b. Engines used to propel any motor vehicle as defined in section 
216 of the Clean Air Act including motorcycles.
    c. Engines used to propel aircraft.
    d. Engines used to propel recreational vehicles.
    e. Engines used solely for competition.
    f. Engines used exclusively in emergency and rescue equipment where 
no certified engines are available to power the equipment safely and 
practically.
    g. Engines used to power stationary sources regulated by a federal 
New Source Performance Standard promulgated under section 111 of the 
Act.
    h. Engines that are both: Used in underground mining or in 
underground mining equipment; AND are regulated by the Mining Safety 
and Health Administration (MSHA) in 30 CFR parts 7, 31, 32, 36, 56, 57, 
70 and 75.
    i. Engines produced for export.
    2. Exemptions will be provided as in the Phase 1 rule for 
uncertified engines used for purposes of research, investigations, 
demonstrations or training.
    3. Exemptions will also be provided as appropriate for reasons of 
national security. An automatic national security exemption will be 
proposed, similar to that in the marine SNPRM (61 FR 4618) for nonroad 
engines and equipment that exhibit combat features, i.e. armor and or 
weaponry.
C. Effective Dates
    The standards will be phased in on a percentage of production basis 
as shown below. The percentages listed below represent the minimum 
percentage of an individual manufacturer s total production of 
nonexempt, nonexcluded handheld engines (not percentage of engine 
families) destined for U.S. use that must be certified to all 
applicable standards and comply with all applicable related emission 
requirements; e.g. labeling, warranty, production line and in-use 
testing, etc.

        Table 1.--Phase in Percentages for all Handheld Standards       
------------------------------------------------------------------------
                                                              Production
                         Model year                           (percent) 
------------------------------------------------------------------------
2002.......................................................           20
2003.......................................................           40
2004.......................................................           70
2005.......................................................          100
------------------------------------------------------------------------

D. Engine Classifications
    Engine classification will be based upon engine displacement as in 
the Phase 1 rule with Classes I and II being reserved for nonhandheld 
engines.

                Table 2.--Handheld Engine Classifications               
------------------------------------------------------------------------
    Engine class            Application         Displacement in cubic CM
------------------------------------------------------------------------
III................  Handheld................  Less than 20.            
IV.................  Handheld................  Greater than or = 20,    
                                                less than 50.           
V..................  Handheld................  Greater than 50.         
------------------------------------------------------------------------

E. Emission Standards
    1. The percentages of engines listed in Table 1 must meet the 
standards listed in Table 3 for their useful lives. These standards are 
predicated upon a multiplicative deterioration factor (df) of 1.0 and 
useful lives of 50 hours for residential handheld engines and 300 hours 
for commercial handheld engines. Manufacturers will declare at the time 
of certification whether an engine family is ``commercial'' or 
``residential''. The definitions of ``commercial'' and ``residential'' 
will be determined in the rulemaking process.

         Table 3.--HC+NO<INF>X and CO Standards for Handheld Engines         
------------------------------------------------------------------------
                                                     HC + NO<INF>X  CO  (g/kW/
                   Engine class                     (g/kW/hr)     hr)   
------------------------------------------------------------------------
III...............................................        210        805
IV................................................        172        805
V.................................................        116        603
------------------------------------------------------------------------

    2. Two-stroke engines used to power snowthrowers will be subject to 
the handheld standards at the manufacturer's option.
    3. Engines used exclusively in wintertime-only applications, such 
as snowthrowers or ice augers, need not certify to or comply with the 
HC+NO<INF>X standard at the option of the manufacturer.
    4. A provision will be included to provide relief to small volume 
equipment manufacturers to permit the use of Phase 1 engines for a 
certain period of time when they can make a showing that no certified 
Phase 2 engine is available with suitable physical or performance 
characteristics to power a piece of equipment in production prior to 
2002.
F. PM and Toxics Test Program for Class III, IV, and V Engines
    The Phase 2 regulations adopted for handheld engines pursuant to 
this SOP will not establish small engine emission standards for 
particulate matter or toxic air contaminants listed under section 
112(b) of the Clean Air Act. To evaluate the levels of these pollutants 
from Phase 2 handheld engines, the signatories agree that a particulate 
matter and toxics test program will be conducted. Elements of a PM and 
Toxics Test Program for Class III, IV, and V engines include:
    (1) PPEMA, in cooperation with EPA, commits to a test program to 
evaluate and quantify emissions of particulate matter and toxics 
including, but not limited to: formaldehyde, acetaldehyde, benzene, 
toluene, and 1,3 butadiene.
    (2) Testing under this program will be conducted on Phase 2 
technology handheld engines.
    (3) Testing under this program will be of sufficient magnitude to 
represent the range of new basic technologies used to comply with the 
Phase 2 small engine standards. CARB test data may be used where 
appropriate.
    (4) No enforcement will be tied to this testing program.
    (5) Test data will be made available promptly to EPA for 
distribution to other interested parties.
    (6) Testing will be conducted at EPA, industry, and/or independent 
facilities.
G. Test Procedures
    The 2-mode steady state Cycle C test procedure will apply to all 
Class III, IV, and V engines as it did in the Phase 1 rule except that 
the modal weighting factors for the Phase 2 rule, will be 0.85 for Mode 
1 (100% max. power) and 0.15 for Mode 2 (idle mode).
    A large number of unresolved issues regarding the Phase 2 test 
procedure still exist. The issues include: testing precision, 
calibration requirements, data sampling requirements, long term data 
storage, requirements for natural gas and liquefied petroleum gas, and 
requirements for ambient test cell conditions. The signatories agree 
these

[[Page 14747]]

could be resolved during the rulemaking process.
H. Certification Program
    A simplified version of the Phase 1 Certification Program will be 
provided to the extent possible and appropriate. The following outlines 
the elements of the program:
    (1) Streamlined annual certification application.
    (2) Coordination with the California Air Resources Board (CARB).
    (3) Possible automation of submittal.
I. Production Line Testing
    The signatories agree that an efficient, flexible Production Line 
Testing (PLT) program, designed to verify production of complying 
engines is appropriate. At the same time, the signatories recognize 
that when clear compliance is shown for a family, it is reasonable to 
reduce or curtail testing. The basic components of a PLT program are 
listed below. Additional specific details of the PLT program will be 
developed through the rulemaking process.
    (1) Self-auditing plan, covering all engine families each model 
year in a statistically valid manner.
    (2) The Cumulative Sum (CumSum) procedure will be proposed in the 
NPRM. Alternate test schemes may be proposed by industry. The 
signatories agree it is desirable to avoid a multiplicity of 
individual, diverse test schemes, but recognize that there may be 
situations where a single test scheme is not appropriate for specific 
engine families or companies.
    (3) Manufacturers will randomly select engines from each engine 
family from the production line without regard to engine configuration.
    (4) California audit test data is acceptable to be used as input 
into the statistical scheme to determine compliance for 50-state engine 
families.
    (5) Production line testing will employ the full Federal Test 
Procedure (FTP). EPA will seek comments in the NPRM on the 
appropriateness of alternative test procedures that preserve the 
enforceability of the PLT program.
    (6) All exhaust pollutants for which standards are promulgated in 
the Phase 2 rule will be tested and resultant test data will be 
reported to EPA quarterly.
    (7) If an engine family exceeds the test program determinant of 
exceedance, the manufacturer will provide appropriate data to EPA 
within a certain number of days. EPA will review the data and other 
pertinent information and may notify the manufacturer that it intends 
to suspend or revoke the manufacturer's certificate of conformity in 
whole or in part for that engine family.
    (8) The suspension or revocation of a certificate of conformity 
shall not occur before thirty (30) days after notification from EPA of 
its intent to suspend or revoke. Hearing procedures by which a 
manufacturer may contest the suspension or revocation of a certificate 
will be provided similar to those in the Phase 1 Selective Enforcement 
Auditing (SEA) regulations. The certificate is automatically suspended 
with respect to any individual engine that fails to comply with 
applicable standards during this testing process.
    (9) During this thirty (30) day period described in paragraph I 8 
above, EPA will maintain a dialogue and coordinate with the 
manufacturer to facilitate the approval of the required production line 
change in order to eliminate the need to halt production, if possible.
    (10) EPA will approve or disapprove the manufacturer's production 
line change within fifteen (15) days of receipt. Disapproval of the 
manufacturer's production line change could result in certificate 
suspension or revocation, with hearing procedures as described above. 
If EPA does not respond to the manufacturer's proposed change within 
fifteen (15) days of receipt, the proposed change will be deemed 
acceptable to EPA.
    (11) The manufacturer, in concert with EPA, will then determine the 
number of non-complying engines which have been introduced into 
commerce.
    (12) EPA may conduct Selective Enforcement Audits as a backstop ; 
for example, when it receives evidence of improper testing procedures 
or evidence of a non-conformity that was not being addressed in the 
normal Production Line Testing process. Routine or random SEAs shall 
not be a part of the final program.
J. In-Use Program
1. In-Use Testing
    The signatories agree that an efficient, flexible testing program 
designed to ensure and verify compliance of in-use engines with 
applicable emission standards is appropriate. The signatories agree to 
establish an in-use testing program with basic components as follows. 
Additional specific details of the program will be developed through 
the rulemaking process:
    (a) In-use testing will employ the full Federal Test 
Procedure(FTP).
    (b) All exhaust pollutants for which standards are promulgated in 
the Phase 2 rule will be tested.
    (c) EPA will select a portion of each manufacturer's engine 
families to be in-use tested each year (up to 25% of families). 
Manufacturers may elect to conduct testing of additional families, and 
to test more frequently. Additional in-use credits may be generated or 
required from such testing.
    (d) The in-use testing scheme will employ a method to increase the 
number of engines to be tested when individual engine failures occur, 
up to a maximum of ten engines per family per year. Except for small 
volume families, the minimum number(n) of engines tested will be four.
    (e) All in-use test results will be reported electronically each 
quarter to EPA. Reporting of data which suggests an emission exceedance 
(mean <ls-thn-eq> standard) will occur within a certain number of days 
of the last test.
    (f) EPA will have the right to spot check a manufacturer to 
evaluate testing practices. EPA will provide reasonable notice of such 
checks unless it has evidence of improper test practices.
    (g) EPA may conduct its own in-use testing, including testing of 
properly maintained consumer owned engines, through the full useful 
life of the engines for enforcement purposes.
    (h) Bench aging of in-use engines will be permitted only for 
technology subgroups where correlation between field aged and bench 
aged engines can be shown (see J2).
2. Bench Aging Correlation
    The signatories agree that bench aging is an appropriate way to 
obtain in-use emission data from small spark ignited gasoline engines, 
provided that the bench aging process can be shown initially and 
periodically to correlate with field aging. Consequently the 
signatories agree to the basics of a bench aging correlation strategy 
as follows. Additional specific details will be developed in the 
rulemaking.:
    (a) An initial bench-aging/field-aging correlation program will be 
conducted by manufacturers under EPA guidance. A portion of the field 
engines will be aged in individual usage or fleets where the 
manufacturer does not carry out or exercise control over the engines 
maintenance, or limit their usage such that the engines are no longer 
used in a way that is representative of typical in-use engines.
    (b) Emission testing will employ the full Federal Test Procedure 
(FTP).
    (c) All exhaust pollutants for which standards are promulgated in 
the phase 2 rule will be measured for correlation purposes.
    (d) Engines will be aged to the full regulatory useful life on the 
bench and in the field except that commercial engines may be aged to 
75% of the full

[[Page 14748]]

regulatory useful life for correlation testing purposes only.
    (e) Correlation and sample sizes will be determined as appropriate.
    (f) Engine manufacturers will conduct a correlation spot check 
program periodically of each technology subgroup to verify that 
emissions from bench-aged engines correlate with emissions from field-
aged engines.
3. In-Use Credit Program
    The signatories agree that reasonable means must exist to address 
emission exceedances of in-use engines, including those exceedances of 
in-use engines identified by Production Line Testing, that: (1) provide 
an incentive to manufacturers to build emission-durable engines; (2) 
can be implemented practically; (3) provide an incentive to perform 
additional in-use testing; (4) offset additional emissions that occur 
as a result of the exceedance of the standard; and (5) are not unduly 
burdensome to the manufacturers. The signatories agree that a mandatory 
recall program does not meet these five criteria, although a 
manufacturer may conduct a voluntary recall in lieu of remedying 
emission exceedances through the in-use credit program or alternative 
methods provided in this SOP. The signatories believe that successful 
implementation of the in-use credit program and the other alternatives 
described herein will provide a comprehensive remedy to address in-use 
emission exceedances so that EPA will not, in practice, order mandatory 
recall of Phase 2 certified engines. Additional specific details of the 
in-use credit program will be developed during the rulemaking process:
    (a) In-use credits generated or required will be based on an engine 
family's in-use emission level relative to its applicable standard, as 
determined from the In-use Testing Program.
    (b) A multiplicative factor will be used to adjust credits earned 
based on sample size.
    (c) In-use credits will be used at a higher rate than the in-use 
credits were generated.
    (d) In-use credits will have an unlimited life during the Phase 2 
program.
    (e) For credit computational purposes, U.S. sales figures will be 
used.
    (f) In-use credit banking and trading is allowed, but trading may 
be limited between categories of engines.
    (g) All credit calculations indicating surpluses and deficits will 
be reported electronically at the conclusion of in-use testing for that 
model year.
    (h) An appropriate in-use credit formula will be developed in the 
rulemaking to account for the different power ratings of engines and 
the different regulatory useful lives of residential and commercial 
engines.
    (i) In the case of in-use testing of carry-over engine families, 
and in the absence of other applicable test data, the test results from 
one model year will be assumed to apply to four years worth of 
production: the model year tested, the next model year and the two 
previous model years. In-use credits will be generated or required, as 
appropriate.
4. Alternative Methods to Address In-Use Exceedances of Standards
    The signatories agree that the primary method for manufacturers to 
address in-use exceedances of standards will be applying credits 
generated through the in-use credit program. If the manufacturer has 
insufficient in-use credits, it should first investigate the 
possibility of purchasing credits through available sources. However, 
appropriate alternative methods will be considered. Manufacturers will 
be allowed to implement all appropriate alternative methods prior to 
EPA making a determination of substantial nonconformity. EPA will make 
a determination of substantial nonconformity only when use of in-use 
credits and/or appropriate alternative methods do not adequately 
address the exceedance. Alternatives should meet the following 
criteria:
    (a) Alternatives must have a nexus to the emission problem caused 
by the subject engine family.
    (b) The alternative must cost substantially more than foregone 
compliance costs and consider the time value of foregone costs.
    (c) Alternatives must offset at least 100% of the exceedance of the 
standard, subject to the other listed criteria.
    (d) Alternatives must consider the degree of environmental harm 
caused by the exceedance.
    (e) Alternatives must consider the time value of the foregone 
environmental benefit resulting from the exceedance.
    (f) Alternatives will be subject to a cost cap that will be 
established in the rulemaking process.
    (g) Alternatives may not include measures the manufacturer planned 
to undertake irrespective of the need to address the exceedance.
    (h) Alternatives must be able to be implemented expeditiously and 
completed in a reasonable time.
    (i) Alternatives must not force the manufacturer out of business.
    (j) The implementation potential of an alternative must be 
considered.
K. Imports
    The Imports program will be similar to the program for Phase 1. 
Essentially, this program bars the importation of uncertified, 
regulated small engines except that a one-time personal use exemption 
will permit the importation of three non-conforming small engines (or 
pieces of equipment containing such engines) for personal use but not 
for purposes of resale.
    L. Voluntary Incentive and Recognition Program for Handheld Engines
    A voluntary program will be created to identify handheld engines 
that have HC+NO<INF>X certification levels substantially below the 
Phase 2 standards. Manufacturers who participate in this program will 
be allowed to display a symbol (yet to be determined) on their 
products, packaging, or advertisements indicating that the engine 
qualifies for the program. The signatories recognize that further 
specific details of the program need to be formulated, but they agree 
on certain basic concepts of the program. To qualify for the program, 
certified engine emission levels must be a certain percentage below the 
Phase 2 HC+NO<INF>X standard. EPA and industry will agree on the 
administration of the program. In addition, manufacturers will receive 
a waiver on production line testing if an engine family achieves a 
certification level a certain percentage or more below the HC+NO<INF>X 
standard. The two percentages referenced in this paragraph may be 
different.
M. Certification: Averaging, Banking and Trading (ABT)
    No certification ABT program will be created for handheld engines. 
In-use credits generated in the in-use ABT program are not applicable 
for use in certification.
N. Dealer Responsibility
    The signatories agree that, except as noted in this paragraph, 
these regulations will not impose any obligation on the dealers or 
repair facilities to bring into compliance any products found to have 
been tampered, nor will dealers or repair facilities be required to 
report defects to EPA. Dealers and repair facilities will be prohibited 
from tampering or causing tampering, but, are not prohibited from 
working on tampered products. Dealers and repair facilities will not be 
required to restore products submitted to them with tampered emission 
controls to certified configurations unless the repair

[[Page 14749]]

involves the component or system that has been tampered. In that case, 
dealers and repair facilities will be required to restore the system to 
a certified and properly functioning configuration but will not be 
required to demonstrate that the products comply with applicable 
emission standards. In repairing or replacing emission control parts 
and systems, dealers and repair facilities may use parts represented by 
their manufacturers to be functionally equivalent to original equipment 
(OE) parts.
O. Technology Review/Phase 3
    The signatories recognize that technological advances and/or cost 
reductions may occur after promulgation of the Phase 2 rule that could 
make greater, but still cost-effective reductions feasible in handheld 
emission levels. At the same time, the signatories agree that industry 
requires certainty and stability for its business planning. Without 
such certainty, industry would not commit to the investment that these 
standards will require, and without such certainty and stability these 
investments might never be recouped. EPA will commit to conducting a 
technology review and publishing a Notice of Proposed Rulemaking in 
2001 announcing any intended amendments to the standard levels or other 
program elements or EPAs desire to maintain the existing standards or 
program. The final rulemaking will be completed by 2002 and, if Phase 3 
standards are adopted, they will be phased in on a percentage basis and 
over a period of time similar to Phase 2, beginning no earlier than 
model year 2007. This schedule is intended to provide a minimum five 
year period between the implementation of Phase 2 standards and the 
implementation of any Phase 3 standards to aid manufacturers in 
recouping their investments in Phase 2 technology.
P. Tampering
    The signatories agree that the tampering prohibitions from Phase 1 
shall be adopted in Phase 2 except that a provision will be added to 
permit the removal, subject to approval by EPA, of emission control 
devices or elements of design that interfere with the safe and/or 
practical use of emergency and rescue equipment.

Appendix B to the Preamble--Nonhandheld Engines Statement of 
Principles

Small Nonhandheld Spark-Ignited Nonroad Engine Statement of Principles

    Members of the small (19 kilowatt and below) nonhandheld spark-
ignited (SI) nonroad engine industry and the U.S. Environmental 
Protection Agency (EPA) (collectively, the Signatories) recognize the 
significant contribution made by small nonhandheld SI nonroad engines 
to the emissions inventory that leads to ozone concentrations in 
nonattainment areas. This recognition prompted the Signatories, along 
with State and environmental organization representatives, to work 
together to quickly put into place a first phase of regulations taking 
effect with the 1997 model year. The Phase 1 regulations achieve 
significant reductions in ozone-forming pollutants from these engines 
by setting emissions standards to control hydrocarbons (HC) and oxides 
of nitrogen (NO<INF>X).
    Nevertheless, the Signatories recognize that further control of HC 
and NO<INF>X from these sources beyond the Phase 1 levels is achievable 
through technology that will be cost-effective and feasible in future 
model years. They also recognize the need for stability and 
predictability to be designed into a regulatory program that achieves 
these additional reductions.
    The Signatories also recognize that it is important to maintain a 
strong and competitive industrial base as EPA implements its 
responsibilities to protect public health and welfare and the 
environment.
    This Statement of Principles (``SOP'') accomplishes both 
environmental and business objectives, ensuring cleaner air in a manner 
which is both realistic for industry and responds to environmental 
needs. The Signatories agree that the aggressive package of emission 
standards and implementation schedules contained in this SOP 
accomplishes the environmental benefit of further significantly 
reducing in-use emissions of ozone forming pollutants from nonhandheld 
small SI nonroad engines. The Signatories further agree that the 
package of provisions contained in this SOP reflects a clear, stable, 
long-term control program for this source which will encourage industry 
to more effectively incorporate environmental objectives into their 
business planning.
    With this SOP, the small nonhandheld SI nonroad engine industry has 
stepped forward to work as a partner with EPA to bring about cleaner 
air. States will see significant additional reductions in the emission 
inventory from these sources beyond those achieved by the Phase 1 rule 
that they can rely upon in meeting their responsibilities to attain and 
maintain the national ambient air quality standard (NAAQS) for ozone. 
Consumers will benefit from improved engine technology, which in 
addition to improving air quality will likely also burn less fuel, 
require less maintenance, be more reliable, and last longer.
    This SOP outlines the joint understanding of all Signatories that 
will provide the basis for issuance by EPA of an Advanced Notice of 
Proposed Rulemaking (``ANPRM'') and a Notice of Proposed Rulemaking 
(``NPRM'') which would be consistent with the points outlined in this 
document. EPA intends to issue the ANPRM in early 1997, the NPRM in the 
Fall of 1997, and to promulgate a final rule by the Fall of 1998.<SUP>1 
Based on the currently available information, the Signatories believe 
that the standards contained in this SOP represent the most stringent 
standards achievable considering cost and other appropriate factors in 
the time frame of this Phase 2 program. However, this SOP does not 
change the importance of EPA demonstrating the need for the standards 
described below and EPA's obligations to meet the criteria of the Clean 
Air Act in finalizing any rule, including complying with all applicable 
rulemaking procedures.
---------------------------------------------------------------------------

    \1\ EPA is currently seeking appropriate changes to a court 
order to conform to this SOP.
---------------------------------------------------------------------------

1. Scope
    This SOP addresses a Phase 2 program that will apply to Class 1 and 
Class 2 nonhandheld SI nonroad engines at or below 19 kilowatts (25 
horsepower). These classes are distinguished from each other primarily 
in terms of engine size (displacement), cost, and the applications in 
which they are used.
    Class 1 engines, which have displacements of less than 225 cc, are 
typically used in relatively inexpensive applications such as walk-
behind lawnmowers, edgers and trimmers, and other lawn care equipment. 
The vast majority of Class 1 engines produced for use in the United 
States use side-valve (SV) technology.
    Class 2 engines, which have displacements greater than or equal to 
225 cc, are typically used in more expensive applications such as 
riding mowers, lawn tractors, tillers, generator sets, and many other 
applications. Class 2 engines are often used in commercial applications 
and, as a result, tend to have much higher hours of use annually than 
Class 1 engines. Approximately

[[Page 14750]]

one third of the Class 2 engines sold in the United States today 
utilize over-head valve (OHV) engine technology.
2. Technology Forcing and In-Use Goals
    The two primary goals for the Phase 2 program for small nonhandheld 
SI nonroad engines reflected in this SOP are 1) a shift to cleaner, 
more emissions durable technology as quickly as feasible, considering 
cost and lead time factors, and 2) assurance that emission reductions 
are achieved in-use.
    The Signatories acknowledge that the program described here is 
intended to meet the clean technology goal and reflect a shift to clean 
more durable technology on an aggressive schedule by: 1) ensuring that 
manufacturers shift their production of larger (Class 2) nonhandheld 
engines completely to over-head valve engine or comparably clean and 
durable technology (referred to herein as ``OHV emissions 
performance'') by model year 2005, and in the interim attain a 50 
percent shift to OHV emissions performance by model year 2001, 2) 
establishing standards for Class 1 engines that reflect cost-effective 
controls on SV engine technology, and 3) assessing the environmental, 
marketplace and other economic factors associated with high-volume OHV 
technology for smaller (Class 1) nonhandheld engines through an OHV 
demonstration program.
    The Signatories further agree on the principle that the emission 
benefits of the program must be realized in-use. As a result, this SOP 
contains provisions to ensure that the engines produced by 
manufacturers are emissions durable over their useful lives while at 
the same time using compliance mechanisms that are not unduly 
burdensome.
3. Standards and Effective Dates
    In order to achieve the goals described in section 2 above, the 
Signatories agree to the following provisions.
a. HC+NO<INF>X
    The Signatories believe that the standards and effective dates 
shown in Table 1 below will achieve the technology forcing goal 
described in section 2 above.

                                                 Table 1.--HC+NO<INF>X Standards and Model Year Effect Dates                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 NMHC+ NO<INF>X (optional                                                                    
                                           HC+NO<INF>X             standard for natural gas       2001         2002         2003         2004         2005   
                                                                fueled engines only)                                                                    
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
(1)g/kw-hr (g/bhp-hr)                                                                                                                                   
(4)Assumed % of Sales                                                                                                                                   
Class 1.......................  25.0 (18.7)................  23.0 (17.2)...............          100                                                    
Class 2.......................  24.0 (18.0)................  22.1 (16.5)...............           50         37.5           25         12.5            0
                                12.1 (9.0).................  11.3 (8.4)................           50         62.5           75         87.5         100 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note to table: The actual corporate average emission standards for Class 2 engines, based on the standards applicable at the 250 hour useful life       
  category are, in g/kw-hr:                                                                                                                             


------------------------------------------------------------------------
     2001           2002           2003           2004          2005    
------------------------------------------------------------------------
18.0.........          16.6           15.0           13.6         12.1  
------------------------------------------------------------------------
A manufacturer's actual corporate average could be different depending  
  on its mix of 250, 500, and 1000 hour useful life engines.            

    The Class 1 level of 25 g/kw-hr is expected to achieve meaningful 
emission reductions from these engines beyond what is required for the 
Phase 1 rule, while at the same time allowing the continued use of SV 
engines in the market for this class. The Signatories agree to the 
importance of the OHV Demonstration Program for Class 1 to investigate 
the potential for increasing penetration of OHV technology in Class 1 
(see section 3(g) below).
    For Class 2 engines there is a dual standard: one based on SV 
technology (which is expected to be phased-out), and one based on OHV 
technology. The OHV technology based standard (12.1 g/kw-hr for 250 
hour engines) would be phased-in on a percentage of production basis as 
shown in Table 1. The standard is based on the projected capabilities 
of emissions-optimized durable OHV engines. The standard assumes an 
assigned multiplicative deterioration factor (DF) of 1.3 at 250 hours 
for OHV engines. EPA will propose that manufacturers would be allowed 
to establish their own DFs for their full product line within a useful 
life category for the 500 and 1000 hour useful life categories. The 
proposal will address in a reasonable and practical manner the kind of 
data required to determine the DFs, the amount of in-use testing 
required to verify the DFs, and the appropriateness of reserving 
certification credits pending verification of the DFs through in-use 
testing. During the rulemaking process EPA will consider the 
appropriateness of allowing manufacturers to establish their own DFs 
for their full product line within the first useful life category (250 
hours).
    Recognizing that manufacturers' testing capacities may be 
substantially constrained during the transition to fully phased in 
standards, manufacturers choosing to establish their own DFs for the 
500 and 1000 hour Class 2 useful life categories may base the DF on 
good engineering judgment, demonstrated to the satisfaction of the 
Administrator, provided that, in a reasonable period after model year 
2005, the manufacturer shall verify their good engineering judgement 
using appropriate data. The proposal will address in a reasonable and 
practical manner the kind of data required to verify the DFs. In the 
event that a DF must be adjusted, the manufacturers shall offset any 
emission shortfalls resulting from a previous low DF. The use of 
credits from either Class 1 or Class 2 engines would be one means to 
offset any such shortfalls.
    The Signatories agree that one goal of the SOP is to encourage 
manufacturers to design and build engines that are emissions durable 
over their actual useful lives, and to encourage manufacturers to 
voluntarily certify their engines to longer useful life categories when 
they are intended for longer hours of operation in-use (See section 
3.b.). The Signatories recognize that, depending on the emission 
characteristics of an engine, at longer useful life hours the emission 
standard may be more difficult to meet. In addition, it is the 
Signatories' goal to make sure the emission standards encourage 
manufacturers to voluntarily certify to longer useful lives those 
engine designed to be operated and durable for longer useful lives.

[[Page 14751]]

    EPA will propose, based on available data, optional assigned DFs 
for the 500 and 1000 hour useful life categories. The proposed assigned 
DFs at the longer useful life categories would not be lower than 1.3. 
Furthermore, it is anticipated that longer useful life engines would 
not have an assigned DF greater than 1.5 at 1000 hours. Consequently, 
the Signatories expect that the proposed assigned DFs for longer useful 
life engines would be between 1.3 and 1.5 at 1000 hours.
    Finally, the Signatories agree that EPA will propose HC+NO<INF>X 
standards associated with longer useful hours to reflect the proposed 
assigned DFs discussed above.<SUP>2 However, in no case will the 
proposed standard be lower than that associated with an assigned DF of 
1.3 or higher than that associated with an assigned DF of 1.5.
---------------------------------------------------------------------------

    \2\  The proposed standards will be based on the ratio of the 
assigned DFs for these longer useful life engines at the longer time 
periods compared to the 1.3 assigned DF at the 250 hour useful life 
category (e.g., 1.5/1.3 x 12.1=14.0).
---------------------------------------------------------------------------

    If as a result of the field durability demonstration program 
described under section 4(d), EPA later determines that the assigned 
DFs need to be adjusted, then EPA would initiate a rulemaking to adjust 
the DFs and the standards accordingly.<SUP>3 Any such rulemaking would 
only apply prospectively and would be undertaken only if data suggest 
that measured DFs are significantly different from the assigned DFs as 
set forth in this SOP.
---------------------------------------------------------------------------

    \3\ For example, the standard would be 14.0 g/kw-hr if the DF 
was adjusted to be 1.5, whereas the standard would be 11.2 g/kw-hr 
if the DF was adjusted to be 1.2.
---------------------------------------------------------------------------

    The engines for which the manufacturer determines its own DFs would 
be included in the field durability demonstration program. However, 
data from those engines would not be included in determining whether 
the assigned DFs need to be adjusted under the field durability 
program.
    The Signatories acknowledge that it may be appropriate to create a 
separate engine class with different HC+NO<INF>X standards for very 
small displacement nonhandheld engines. To that end, EPA will consider 
the need for such a class as part of the rulemaking process.
b. Useful Life
    The Signatories recognize that small nonhandheld SI nonroad engines 
are used in a wide range of applications with annual and seasonal 
hourly use varying from low in some residential applications to high in 
some commercial applications. The Signatories further recognize that 
the greater the use during the ozone season of an engine the greater 
its importance in terms of air quality impacts.
    The Signatories agree to the desirability of a mechanism that 
allows manufacturers to select the useful life category for a given 
engine application. Selection of the useful life category would be 
solely at the manufacturer's discretion, and the engine's label and 
averaging, banking and trading (ABT) credit calculation would reflect 
the manufacturer's choice.
    For the Phase 2 program, the useful life categories for Class 1 and 
Class 2 engines would be as follows:

                Table 2.--Useful Life Categories (Hours)                
------------------------------------------------------------------------
                                            Category  Category  Category
                                                C         B         A   
------------------------------------------------------------------------
Class 1...................................        66       250       500
Class 2...................................       250       500      1000
------------------------------------------------------------------------

    The useful life category corresponds to the hours of operation to 
which the engine is subject to applicable emissions standards. For 
purposes of the engine label, the useful life will be referred to as 
the emissions compliance period. The engine label will indicate that 
the engine is built to conform with EPA emissions regulations for the 
emissions compliance period, in hours, selected by the manufacturer 
(e.g., 250 hours).
    As an option, the engine label will indicate that the engine is 
built to conform with EPA emissions regulations for the emissions 
compliance period, by category, selected by the manufacturer (e.g., 
Category C). The label will refer to the appropriate owner's manual for 
a description of the emissions compliance period. As part of this 
option, EPA will propose that engine manufacturers demonstrate during 
the certification process that information explaining the meaning of 
the category designation will be provided to the ultimate purchaser.
c. CO
    The Phase 1 carbon monoxide (CO) standard for Class 1 and Class 2 
engines will remain in place for the Phase 2 program, but will be 
adjusted to 610 g/kw-hr to reflect engine deterioration. In addition, 
EPA will have authority to waive the reporting requirement for CO at 
the Administrator's discretion.
d. Wintertime Products
    The exemptions from the HC+NO<INF>X standards contained in Phase 1 
for engines used only in wintertime products would continue for Phase 
2.
e. Certification Test Fuel
    The Signatories agree that no changes in the certification test 
fuel specifications will be proposed from the current Phase 1 
requirements.
f. Averaging, Banking, and Trading (ABT)
    Compliance with the HC+NO<INF>X standards above would be based upon 
a corporate average with manufacturers also having the ability to bank 
and trade emission credits. The Signatories agree that such an ABT 
program will help assure that the aggressive schedule set out above 
will be cost-effective and technologically feasible.
    Credit calculations would be based upon sales weighted corporate 
average emissions from a manufacturer's engines on an annual basis, 
using family emission limits (FELs) and useful life hours selected by 
the manufacturer. While the Signatories believe that the phase-in for 
percentage of production shown in Table 1 for Class 2 engines will 
occur, the flexibility provided under the ABT program will allow some 
variation from the expected percentage of production phase-in. 
Regardless of this variation, manufacturers of Class 2 engines 
certified to the 250 hour useful life category would be required to 
achieve a standard of 18.0 g/kw-hr, 16.6 g/kw-hr, 15.0 g/kw-hr, and 
13.6 g/kw-hr in model years 2001, 2002, 2003, and 2004, respectively, 
on a sales weighted average across their Class 2 production,<SUP>4 
recognizing that through the ABT program credits may be used to meet 
the standard. EPA will propose rules addressing the procedures and 
requirements for determining the number of engines that correspond to 
an engine family and model year for purposes of credit calculations. 
The procedures and requirements will take into account the unique 
characteristics of the small nonhandheld SI nonroad engine industry, 
and will be designed to limit the burden of tracking engine production 
and sales to no more than the minimum needed to establish fair and 
accurate credit accounting. In addition, EPA will consider during the 
rulemaking process the appropriateness of using production-based 
instead of sales-based accounting for credit accounting purposes.
---------------------------------------------------------------------------

    \4\ A manufacturer's actual corporate average could be different 
depending on its mix of 250, 500, and 1000 hour useful life engines.
---------------------------------------------------------------------------

    In order to assure that the ABT program adequately encourages the 
transition to cleaner, more durable technology and that the ABT program 
fulfills its intended function, cross class averaging, banking, and 
trading will

[[Page 14752]]

only be allowed under two scenarios; provided that the affected 
manufacturer's Class 2 engine production is either all OHV technology 
or it meets or exceeds the assumed OHV emissions performance production 
phase-in schedule for Class 2 engines in Table 1. One scenario where 
cross class ABT would be allowed is for credit exchanges from credit 
generating Class 2 engines to credit using Class 1 engines. The other 
allowable scenario is credit exchanges between Class 1 and Class 2 
engines to offset emission shortfalls identified in to the programs 
outlined in Section 4(c) below or as a result of an adjustment to 
manufacturer determined DFs as discussed in section 3(a).
    In order to provide an incentive to accelerate the introduction of 
cleaner technologies, the Signatories agree that the proposal will 
contain provisions for generation of credits prior to the 2001 model 
year (i.e., early banking). Manufacturers may begin to generate such 
early credits two model years before the standards set forth in this 
SOP take effect. Early banking credits may only be generated for 
engines certified below the 12.1 g/kw-hr HC+NO<INF>X emission level at 
the 250 hour useful life category for Class 2 engines (or the 
applicable standard for the 500 and 1000 hour useful life categories), 
and below 16.0 g/kw-hr HC+NO<INF>X for Class 1 engines. In addition, 
such early credits could only be banked where a manufacturer certifies 
and complies with the 2001 standard for it's entire product line in a 
given class. Early banking credits cannot be used to defer the assumed 
OHV emissions performance production phase-in schedule for Class 2 
engines in Table 1.
    The Signatories further agree that credits generated under the 
Phase 2 program will have an unlimited life when used for purposes of 
compliance with the standards specified in this SOP. EPA will consider 
the appropriate life of Phase 2 program credits in connection with 
other regulatory programs in which those credits could be used.
g. Class 1 OHV Demonstration Program
    The Signatories recognize the important role SV engines currently 
play in the Class 1 market and the significant economic impediments to 
the widespread introduction of higher cost, cleaner technologies such 
as OHV in this class. Nevertheless, the Signatories also recognize the 
desirability of investigating the potential to reduce the cost and 
increase the penetration of such technology in this class in order to 
maximize achievable emissions reductions from this industry.
    As a result, in order to determine in a meaningful way the 
potential for increasing the penetration of cleaner, more durable 
technology in Class 1, EPA and certain manufacturers have entered into 
Memoranda of Understanding (MOUs) calling for an OHV demonstration 
program. The Class 1 OHV demonstration program is designed as an 
experiment to explore the consumer acceptance and feasibility of 
applying OHV technology to mass production Class 1 engines. The program 
would include a series of reports to EPA on the level of success, 
impediments encountered, market response, costs, emission rates, etc.
4. Compliance Assurance
    The Signatories agree on the principle that the emission benefits 
of the Phase 2 program must be achieved over the lifetime of the 
engines. However, the Signatories also recognize the importance of 
minimizing to the extent possible the compliance burden associated with 
this program.
    The Signatories agree that reasonable means must exist to address 
emission exceedences identified in selective enforcement audits (SEA) 
or production line testing (PLT). These means should: (1) provide an 
incentive to manufacturers to build emission-durable engines; (2) be 
practical to implement; (3) provide an incentive to perform accurate 
testing; (4) offset additional emissions that occur as a result of the 
exceedence of the standards; and (5) not be unduly burdensome to 
manufacturers. The Signatories agree that a mandatory recall program 
for Class 1 and 2 engines, modeled on traditional on-highway recall 
procedures, does not meet these five criteria, given the non-integrated 
nature of the nonhandheld outdoor power equipment industry and the 
consumer markets in which most of that equipment is sold. The 
Signatories agree that there are other, better means to encourage 
compliance with emission standards for these engines than mandatory 
product recalls (as discussed in section 4(c) below), and that the 
efforts of the industry and EPA should be devoted to assuring that 
engines will comply with applicable standards in-use before they leave 
the production facility and to taking any necessary actions as quickly 
as possible to assure good emission performance. Consequently, the 
proposal will not contain provisions for making compliance 
determinations on the basis of in-use testing or emission performance.
    The Signatories agree that the combined package of provisions 
contained in this SOP strikes the appropriate balance between providing 
assurance of in-use emission performance and minimizing the burden to 
industry.
a. Class 1 Certification
    Certification for Class 1 engines with SV technology or 
aftertreatment would continue as under Phase 1, except that 
certification engines would first be bench-aged to the number of hours 
selected as useful life (66, 250, or 500) to determine compliance with 
the FEL.
    A manufacturer could propose a bench-aging schedule up to 48 months 
prior to the start of a model year for the engine family as projected 
by the manufacturer. EPA would accept or reject the proposed schedule 
within 90 days of submission. If EPA did not reject the schedule within 
90 days, the manufacturer's proposed schedule would automatically be 
accepted.
    Periodic correlation of bench-to-field testing would be 
demonstrated by the manufacturer. Such correlation would be established 
by a simple method such as determining the ratio of the calculated mean 
emission levels of bench-aged engines and field-aged engines. During 
the first five years the program correlation would be demonstrated 
every two model years, and every five model years thereafter (e.g., 
2001, 2003, 2005, 2010, etc.). Any changes to the correlation ratio 
would apply prospectively only with appropriate lead time for the 
manufacturers.
    As an option, instead of testing engines on the bench and 
demonstrating correlation, manufacturers could choose to test engines 
from the field with accumulated hours corresponding to the useful life 
category selected by the manufacturer (``field-aged certification'').
    Certification for Class 1 OHV engines would continue as under Phase 
1, except that a multiplicative assigned DF would be applied to new 
engine levels to determine compliance with the FEL for the 66 hour 
useful life category shown in Table 2. The Signatories agree that the 
assigned DF for Class 1 OHV engines will be 1.3 at 66 hours. 
Manufacturers would be allowed to establish their own DFs for their 
full product line within a useful life category for the 250 and 500 
hour useful life categories. The proposal will address in a reasonable 
and practical manner the kind of data required to determine the DF, the 
amount of in-use testing required to verify the DF, and the 
appropriateness of reserving

[[Page 14753]]

certification credits pending verification of the DF through in-use 
testing. During the rulemaking process EPA will consider the 
appropriateness of allowing manufacturers to establish their own DF for 
their full product line within the first useful life category (66 
hours). EPA will also consider the appropriateness of establishing 
optional assigned DFs for the 250 and 500 hour useful life categories. 
Any adjustment to the assigned DF would be made as set forth in Section 
3(a) above, however, in the case of Class 1 engines the standard would 
not be adjusted.
b. Class 2 Certification
    Certification for Class 2 engines with SV technology or 
aftertreatment would continue as under Phase 1, except that 
certification engines would first be bench-aged to the number of hours 
selected as the useful life (250, 500, or 1000) to determine compliance 
for certification purposes. During the transition to OHV emissions 
performance engines, some flexibilities to relieve testing burden would 
apply (see section 5).
    A manufacturer could propose a bench-aging schedule up to 48 months 
prior to the start of a model year for the engine family as projected 
by the manufacturer. EPA would accept or reject the proposed schedule 
within 90 days of submission. If EPA did not reject the schedule within 
90 days, the manufacturer's proposed schedule would automatically be 
accepted.
    Periodic correlation of bench-to-field testing would be 
demonstrated by the manufacturer. Such correlation would be established 
by a simple method such as determining the ratio of the calculated mean 
emission levels of bench-aged engines and field-aged engines. During 
the first five years the program correlation would be demonstrated 
every two model years, and every five model years thereafter (e.g., 
2001, 2003, 2005, 2010, etc.). Any changes to the correlation ratio 
would apply prospectively only with appropriate lead time for the 
manufacturers.
    As an option, instead of testing engines on the bench and 
demonstrating correlation, manufacturers could choose to test engines 
from the field with accumulated hours corresponding to the useful life 
category selected by the manufacturer (``field-aged certification'').
    Certification for Class 2 OHV engines would continue as under Phase 
1, except that a multiplicative assigned DF would be applied to new 
engine levels to determine compliance with the FEL for the 250 hour 
useful life category shown in Table 2. The Signatories agree that the 
assigned DF for Class 2 OHV engines will be 1.3 at 250 hours. 
Manufacturers would be allowed to establish their own DFs for their 
full product line within a useful life category for the 500 and 1000 
hour useful life categories. The proposal will address in a reasonable 
and practical manner the kind of data required to determine the DFs, 
the amount of in-use testing required to verify the DFs, and the 
appropriateness of reserving certification credits pending verification 
of the DFs through in-use testing. During the rulemaking process EPA 
will consider the appropriateness of allowing manufacturers to 
establish their own DFs for their full product line within the first 
useful life category (250 hours). EPA will propose based on available 
data optional assigned DFs for the 500 and 1000 hour useful life 
categories, as discussed in Section 3(a) above. Any adjustment to the 
DF and standard would be made as set forth in Section 3(a) above.
c. Production Line Compliance
    The Signatories agree that reasonable testing to assure that 
production engines meet standards is appropriate and that two different 
approaches would be used to monitor production line compliance.
    Under the first approach, a manufacturer would opt to conduct a 
manufacturer run Production Line Testing (PLT) program (including but 
not necessarily limited to CumSum) for all of their engine families. In 
this case, the Signatories agree that the SEA program would exist only 
for backstop purposes where evidence of improper testing or 
nonconformities not being addressed by the manufacturer's testing 
program was obtained by EPA. The Signatories agree that for 
manufacturers who conduct a PLT program under this approach, if an 
engine family fails its production audit by exceeding its FEL, the FEL 
for that family would be adjusted to the new FEL indicated by the 
production audit results for both past and future production where 
applicable. Similarly, if an engine family passes its production audit 
by achieving emissions below its FEL, the FEL for that family can be 
adjusted to the new FEL indicated by the production audit results for 
future production where applicable. Any deficit in corporate-wide 
emissions performance resulting from the FEL change would need to be 
retired by the end of the model year following the model year in which 
the production audit failure occurred on a one-for-one basis. Any 
deficit in corporate-wide emissions performance resulting from the FEL 
change that is not retired by that time can be retired in the following 
two model years on a 1.2 to one basis.
    This PLT program will permit the manufacturer to perform additional 
testing beyond the minimum required by regulation. Any such additional 
test data can be used to limit the number of engines for which a 
manufacturer is liable if there is a failure in the PLT program.
    A manufacturer must implement the PLT approach for a minimum of 
three consecutive model years and must notify EPA a minimum of one 
complete model year prior to the model year for which they are 
requesting to opt out. This timing restriction would not preclude a 
manufacturer from implementing appropriate changes to the design or 
scope of the PLT program from model year to model year. Furthermore, 
they cannot be carrying a negative credit balance at the time of opting 
out. Where a manufacturer fails the PLT audit for more than one engine 
family in a model year and the number of engines that are recertified 
to a new FEL as a result of the failed PLT audit exceeds 10 percent of 
the manufacturer's annual production, then the remedies for 
noncompliance under this option are no longer valid. Instead, the 
provisions under the SEA approach described below would apply.
    Under the second approach, engines in the Phase 2 program would be 
subject to SEA as under the Phase 1 program. This approach would apply 
to manufacturers who do not conduct a PLT program under the first 
approach. The Signatories agree that appropriate remedies need to be 
implemented for failures of SEA resulting from testing new (e.g. zero-
hour) engines. Such appropriate remedies must meet the criteria set 
forth in the second paragraph of Section 4 above. EPA is committed to 
designing remedies that will both preserve the environmental benefits 
of this program and minimize the burden on the industry. The proposal 
will therefore preserve for EPA adequate flexibility to address such 
failures on a case-by-case basis, so that EPA and the manufacturer may 
develop a response that achieves the goals noted above. Such a response 
might include, for example, a combination of measures such as mandatory 
PLT for appropriate time periods and portions of production, 
recertification of all or part of an engine family, and generation of 
credits to remedy the exceedences over an appropriate period of time. 
As discussed above in section 4, the Signatories agree that a mandatory 
recall program for Class 1 and 2 engines, modeled on traditional on-
highway

[[Page 14754]]

recall procedures, does not meet the criteria for reasonable means to 
address emission exceedences identified in SEA or PLT programs, given 
the non-integrated nature of the nonhandheld outdoor power equipment 
industry and the consumer markets in which most of that equipment is 
sold. EPA will not revoke or suspend a certificate where a response 
that meets the goals noted above is designed and implemented in a 
timely manner (except in cases where a manufacturer desires to obtain a 
new certificate in which case the old certificate would be suspended to 
avoid the existence of two certificates for the same family).
d. Field Durability and In-use Emission Performance Demonstration 
Program for OHV Engines
    The Signatories agree to the necessity of a Field Durability and 
In-use Emission Performance Demonstration Program to produce reliable 
data that verifies that the conclusions in this program with respect to 
the durability of OHV engines are accurate. The data collected under 
this program would be designed to provide a representative picture of 
actual in-use emissions, including representative age (hours), 
maintenance, and sales mix of engines in the field. Manufacturers would 
test a sufficient number of engines to be statistically meaningful. 
Individual manufacturers would supply test data to EPA. However, the 
test program could be jointly run on an industry-wide basis.
    To the extent practical, engines will be selected from residential 
customers or professional users; however, the Signatories recognize 
that engines also will be selected from manufacturers fleets, as long 
as the engines represent typical in-use engines.
    The Field Durability and In-use Emission Performance Demonstration 
Program would be conducted every four years. The data from this program 
are neither designed nor intended to be used for compliance purposes.
    The Signatories recognize that the test programs covered under 
sections 4(a), 4(b) and 4(d) should be designed in a way to minimize 
the overall burden on the manufacturer while meeting the goals of these 
provisions including a reasonable cap where appropriate on the overall 
level of testing required. The Signatories further recognize that while 
the maximum testing may be required in the initial years of testing, 
EPA will reduce the testing burden as appropriate in subsequent years 
as the overall database grows. To that end, the total field engine test 
burden for the largest manufacturers by sales volume for tests required 
for these programs will not exceed 96 field-aged engines in a four year 
period or 24 field-aged engines in a one year period. EPA will propose 
an appropriate scaling of the field engine test burden for smaller 
volume manufacturers. It is intended that only a representative sample 
of engine families will be tested in the program set forth in Section 
4(d). EPA will have the discretion to proportion the test engines among 
the test programs covered under Sections 4(a), 4(b) and 4(d). The 
Signatories also agree to permit the Field Durability test program to 
run over multiple years and to provide for appropriate delays or 
waivers from the requirements of the bench correlation program in years 
when a manufacturer also runs the field durability program.
5. Manufacturer Flexibilities During the Transition to OHV Emissions 
Performance Engines
    Recognizing that old technology will be phased-out during the 
transition period to clean durable OHV emissions performance technology 
for Class 2, the Signatories agree to certain flexibilities to 
accommodate an orderly transition. Manufacturers would be allowed to 
bench-age Class 2 SV or aftertreatment engines and to demonstrate 
compliance with the FEL based on 120 hours of testing during the 
transition period. However, manufacturers would certify to and use 250 
hours for credit calculation purposes.
6. Small Volume Provisions
    The Signatories agree that for SV Class 2 engine families with less 
than 1000 units produced for sale in the U.S. can continue to meet the 
24.0 g/kw-hr standard in 2005 and subsequent model years. With the 2005 
model year, however, this standard will become a cap and these engines 
will be excluded from the ABT credit calculations.
7. Fuel Spillage Reduction Program
    The Signatories recognize the contribution to air pollution from 
fuel spillage and agree to work collaboratively and with other affected 
parties to develop a voluntary Fuel Spillage Reduction Program which 
provides information and education to a variety of audiences and 
encourages the development and use of technology that will reduce 
spills by users.
8. Test Procedures and Other Requirements
    The signatories agree that the model year definition will be the 
same as for the Phase 1 rule, and the interpretation of the model year 
definition for the start-up of the Phase 1 program will also exist for 
the start-up of the Phase 2 program in order to provide maximum 
flexibility in the transition to Phase 2 standards.
    The Signatories acknowledge that this SOP does not address such 
issues as test procedure or certain other issues included in the 
existing Phase 1 Rule. The Signatories acknowledge that any changes not 
specifically set forth above could adversely affect the manufacturers 
ability to meet the standards and effective dates in this SOP. EPA will 
continue to review all aspects of the Phase 1 regulatory program to 
determine what areas, if any, need to be updated to reflect experience 
gained during Phase 1 or to implement the provisions contained in this 
SOP. EPA does not plan on proposing any changes in the areas not 
addressed herein, or any additional programs not consistent with this 
SOP, such as evaporative emissions standards, that would materially 
change the stringency or cost of the Phase 2 regulatory program.
9. Stability
    One of the key principles of this SOP is to design a regulatory 
program that provides industry with stability and predictability, 
allowing it to make and recoup the investments that will be needed to 
achieve the emissions reductions called for under this SOP. EPA 
recognizes this level of investment, and acknowledges the need for a 
corresponding period of stability and certainty.
10. Harmonization
    The Signatories recognize the value that harmonizing standards 
within the United States would have on the cost of producing engines 
and equipment and support the goal of harmonization as long as it does 
not undercut achieving the air quality needs the standards are designed 
to achieve, and the Signatories will work with the California Air 
Resources Board (ARB) to this end. The Signatories will also coordinate 
and consult with ARB in order to achieve the maximum appropriate 
harmonization of the elements of their respective small SI engine 
regulatory programs, including, for example, test procedures, 
certification, and compliance assurance, recognizing the value for EPA, 
manufacturers and users associated with harmonizing these programs.

[FR Doc. 97-7626 Filed 3-26-97; 8:45 am]
BILLING CODE 6560-50-P


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