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Federal Register / Vol. 58, No. 37 / Friday, February 26, 1993 / Proposed Rules

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 80

[AMS-FRL-4556-71

RIN 2060-AD27

Regulation of Fuels and Fuel

Additives: Standards for Reformulated

Gasoline; Proposed Rule

AGENCY: Environmental Protection

Agency.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document proposes

revisions to the simple model and the

contents of a complex model to be used

in the certification of reformulated

gasoline, and associated procedures to

assure compliance with the

reformulated gasoline and antidumping

programs. This notice additionally

proposes "Phase II" reformulated

gasoline emission performance

standards which will take effect in the

year 2000, as prescribed by section

211(k)(3) and authorized by section

211(c) of the Clean Air Act (CAA). The

detailed proposed regulations described

herein may be obtained from Public

Docket No. A-92-12 or from the

contacts listed in the ADDRESSES section.

DATES: The comment period will close

April 27, 1993. EPA will issue a

subsequent notice indicating when and

where the public hearing will be held.

ADDRESSES: Comments may be

submitted to U.S. EPA (RDSD-12) 2565

Plymouth Road, Ann Arbor, MI 48105.

Materials relevant to this NPRM are'

contained in Public Docket No. A-92-

12, located at room M-1500, Waterside

Mall (ground floor), U.S. Environmental

Protection Agency, 401 M Street SW.,

Washington, DC, 20460. Additional

materials relevant to earlier related

proposals are contained in Public

Docket No. A-91-02 at the same

location. The docket may be inspected

from 8 a.m. until 12 noon and from 1:30

p.m. until 3 p.m. Monday through

Friday. A reasonable fee may be charged

by EPA for copying docket materials.

EPA will provide a copy of the proposed

regulations for this NPRM upon request.

FOR FURTHER INFORMATION CONTACT:

Michael Sklar (complex model), U.S.

EPA (RDSD-12), 2565 Plymouth

Road, Ann Arbor, M! 48105, Fuel

Studies and Standards Branch,

Telephone: (313) 741-7817.

Christine Brunner (Phase II performance

standards), U.S. EPA (RDSD-12), 2565

Plymouth Road, Ann Arbor, Mi

48105, Fuel Studies and Standards

Branch, Telephone: (313) 668-4287.

George Lawrence (enforcement'and

certification), U.S. EPA (6406J), 401 M

Street, Washington, DC 20460, Eastern

Field Office I, Telephone: (202) 233-

9307.

To Request Copies of This Notice or

the Proposed Regulations Contact: Marie

Tolonen, U.S. EPA (RDSD-12). 2565

Plymouth Road, Ann Arbor, M 48105,

Fuel Studies and Standards Branch,

Telephone: (313) 668-4295.

SUPPLEMENTARY INFORMATION:

I. Background

The purpose of these proposed

regulations is to improve air quality by

requiring that gasoline be reformulated

to reduce motor vehicle emissions of

toxic and tropospheric ozone-forming

compounds, as prescribed by section

211(k) of the Clean Air Act (CAA or the

Act). This section of the Act mandates

that reformulated gasoline be sold in the

nine largest metropolitan areas with the

most severe summertime ozone levels

and other ozone nonattainment areas

that opt into the program. It also

prohibits conventional gasoline sold in

the rest of the country from becoming

any more polluting than it was in 1990,

to ensure that refiners do not "dump"

into conventional gasoline what they

can no longer use in reformulated

gasoline.

Shortly after passage of the Clean Air

Act Amendments of 1990, EPA entered

into a regulatory negotiation with

interested parties to develop specific

proposals for implementing both the

reformulated gasoline and related antidumping programs. These parties

included representatives of the oil and

automobile industries, vehicle owners,

state air pollution control officials,

oxygenate suppliers, gasoline retailers,

environmental organizations, and

citizens' groups. During the regulatory

negotiation, EPA agreed to propose a

two-step approach to reformulated

gasoline. The first step would take effect

in 1995 and utilize a "simple model" to

certify that a gasoline meets applicable

emission reduction standards.

Under the second step, EPA would

propose a "complex model" to supplant

the simple model for certifying

compliance with these standards, which

would take effect on March 1, 1997 or

4 years after it is promulgated,

whichever is later. EPA also agreed to

propose the more stringent emission

performance standards that the Act

provides to take effect in the year 2000.

Regulations to implement this first

step were initially proposed on July 9,

1991 in a notice of proposed rulemaking

(NPRM) (56 FR 13416). Today's notice

includes approaches different from the

previously proposed regulations related

to the simple model as well as to the

anti-dumping provisions. This proposal

is supplemental to the previous

proposals and is not intended to

withdraw from consideration the

various elements previously proposed,

but provides additional proposals for

public review and comment. (The

reader may refer to the NPRM and

SNPRM mentioned above, the Draft

Regulatory Impact Analysis (DRIA), and

Public Docket Numbers A-91-02 and

A-92-12 for a thorough description of

the goals and regulatory development of

the reformulated and anti-dumping

programs and discussions of a number

of associated technical issues.) In this

notice, the Agency Is also proposing the

complex model and associated revised

enforcement provisions, as well as the

year 2000 performance standards.

In addition, EPA is proposing a range

of NOx performance standards under

section 211(c) of the Act as a

complement to the VOC and toxics

performance standards proposed under

section 211(k). In a recent report on the

chemistry of tropospheric ozone

formation, the National Academy of

Sciences emphasized the Importance of

NOx reductions in addressing this

problem.

The remainder of this preamble is

organized into the following sections:

1I. Proposed Revisions to the Simple Model

Proposal

Ill. Complex Model

IV. Vehicle Testing

V. Phase I Performance Standards Using the

Complex Model

VI. Phase II Reformulated Gasoline

Performance Standards

VII. Enforcement Provisions

VIII. Anti-Dumping Compliance and

Enforcement Requirements for

Conventional Gasoline

IX. Anti-Dumping Requirements for

Conventional Gasoline

X. Environmental and Economic Impacts

XI. Public Participation

XI1. Compliance With the Regulatory

Flexibility Act

XIII. Statutory Authority

XIV. Administrative Designation and

Regulatory Analysis

XV. Reporting and Recordkeeping

Requirements

H. Proposed Revisions to the Simple

Model Proposal

A. Background

1. SNPRM

As noted above, The Agency's

SNPRM reflected the agreement reached

in the regulatory negotiation that had

been conducted to develop reformulated

gasoline regulations under section

211(k) (as well as oxygenated fuels

guidelines under section 211(m)).

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Added by the 1990 Clean Air Act

Amendments, section 211(k)(1) directs

EPA to Issue regulations that, beginning

in 1995, require the greatest reduction

in emissions of ozone-forming [VOCs]

and toxic pollutants achievable through

the reformulation of conventional

gasoline, taking into consideration the

cost of achieving such emission

reductions, any non air-quality and

other air-quality related health and

environmental impacts and energy

requirements. Section 211(k)(3)

specifies that the performance standards

for 1995 to 2000 must require emission

reductions, measured on a mass basis,

equal to that achieved by a specified

formula fuel or 15 percent of baseline

emissions (the emissions of 1990 model

ear vehicles operated on a specified

aseline gasoline), whichever is more

stringent. For 2000 and beyond, the

standard must be no less than the

formula fuel or a 25 percent reduction

from baseline emissions, whichever is

more stringent. EPA can adjust this

standard taking into account feasibility

and cost, but in no case can it be less

than 20 percent. Taken together,

sections 211(k)(1) and 211(k)(3) call for

the Agency to set standards that achieve

the most stringent level of control,

taking into account the specified factors,

but no less stringent than those

described by section 211(k)(3).

For purposes of today's notice, it Is

useful to review the background of the

SNPRM's proposed VOC and toxic

standards. Given the short amount of

time provided by the statute for

promulgation of the reformulated

gasoline standards, the regulatory

negotiation committee agreed on the

twostep approach noted above. The first

step would utilize then-available

information to construct a model that

would determine a fuel's VOC and toxic

emissions. Because the available

information for quantifying the effects of

fuel parameters on VOC emissions was

limited in large part to the effects of

Reid Vapor Pressure (RVP) and oxygen

content, the so-called "simple model"

took those fuel parameters into account

in predicting a fuel's VOC emissions for

purposes of compliance under the VOC

performance-standard. At the same time,

it was understood that certain other fuel

parameters affected a fuel's emissions,

and that directionally higher levels of

these other parameters were likely to

increase VOC emissions. Until the

effects of these parameters could be

accurately quantified, the committee

agreed that the average level of these

parameters in each refiner's fuel should

remain capped at 1990 levels.

The second step was intended to take

advantage of data then being developed

to characterize the emissions effects of

other fuel parameters. That data would

be used to construct a "complex model"

that would better predict a specific

fuel's emissions based on these

parameters. The complex model would

thus also provide refiners with more

options for reducing those emissions by

hanging the levels of these parameters

in their gasoline formulations.

The simple model would be available

for at least the first two years of the

program and would be replaced by the

complex model four years after the

complex model's promulgation. The

Agency agreed to propose the four-year

period to allow refiners lead-time in

order to recoup investments made to

comply with the simple model and to

make any refinery changes necessary to

comply with the standards under the

complex model. However, under the

agreement, the complex model could be

used on a voluntary basis as soon as it

was promulgated, so long as any fuel

certifled using the complex model

achieved emission reductions as great as

those it would have to achieve to be

certified using the simple model.

In developing the proposed VOC

standards, it became clear that the

formula fuel specified by section

211(k)(3) did not yield emissions

reductions greater than the statutory

minimum of 15 percent. To achieve the

statutory minimum under the simple

model, the regulatory negotiation

committee members agreed that a fuel's

RVP (measure of volatility) could not be

greater than 8.1 pounds per square inch

(psi) and its oxygen content had to

comply with the 2.0 weight percent

requirement prescribed by section

211(k)(2)(B). The more volatile a fuel,

the more VOCs it emits, mostly through

evaporation. The more oxygen in the

fuel the lower the exhaust VOC

emissions (up to a maximum of 2.7

weiht percent oxygen per the simple model).

Committee members considered the

need for further emission reductions

and the cost of obtaining them in

deciding whether and to what extent

VOC performance standards more

stringent than the statutory minimum

were achievable. For the reasons laid

out in the SNPRM, EPA and the other

committee members concluded that

reformulated gasoline with 2.0 weight

percent oxygen, 8.1 psi RVP in northern

cities, and 7.2 psi RVP in southern cities

represented the greatest emission

reductions that could be achieved by

reformulating gasoline, taking into

account the specified factors.

The committee sought the more

stringent VOC reduction requirement for

the South in order to assure that

southern nonattainment areas obtained

emission reductions beyond what those

cities would obtain from the volatility

reduction requirements separately

required by section 211(h). (Due to

higher tern peratures in the South,

emissions from a gasoline with a

specified RVP are greater in the South

than in the North. Under section 211(h),

the volatility limits for southern areas

were set lower than those applicable in

northern areas in order to achieve

comparable per vehicle emissions levels

in the two regions). As explained in the

SNPRM, however, the additional cost of

achieving the more stringent standard in

the South would be significant and

made it difficult to Impose a more

stringent standard in the North, as well.

In effect, the committee decided to

allocate the greatest reductions from the

8.7 RVP baseline gasoline that

reformulating gasoline could reasonably

achieve in such a way as to roughly

equalize the actual emission benefits of

the program between northern and

southern nonattainment areas.

2. Ethanol Issues

Following the release of the SNPRM,

supporters of ethanol, an agriculturally

derived oxygenate added to gasoline in

some parts of the country. again raised

the concern that the simple model's

RVP requirement would effectively

preclude ethanol from the RFG market

during the summer months (VOC

control season). Ethanol, when added to

gasoline in the amount needed to satisfy

the oxygen content requirement of the

Act raises the volatility of the resulting

blend by about I psi. Consequently, for

the ethanol to be blended with the RFG

under the simple model, a blendstock

gasoline with an RVP low enough to

offset the increase resulting from adding

ethanol would have to be obtained.

Ethanol representatives commented

that obtaining such blendstocks would

be both difficult and expensive, because "sub-RVP" blendstocks would be more

costly to refine and because blendstock

production would be controlled by

petroleum refiners. Methyl tertiary butyl

ether (MTBE). an oxygenate which does

not boost a fuel's RVP, which is derived

from natural gas and the petroleum

product isobutylene and can readily be

put through petroleum pipelines, was

thought to be the oxygenate of choice for

most refiners. Ethanol's representatives

theorized that the oil industry would

have a desire to use MTBE over ethanol

and thus little incentive to make the

sub-RVP blendstock necessary for

ethanol blending. The ethanol industry'

contended that a reformulated gasoline

program which they argued would

effectively preclude ethanol was

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Federid Register / Vol. 58, No. 37 / Friday, February 26, 1993 / Proposed Rules

contrary to Congress' intent that ethanol

have a role in the program. They argued

that the oxygen content requirement of

section 211(k)(2) was motivated in large

part by a desire to expand maikets for

ethanol. They noted the strong support

afforded the RFG legislative initiative by

Members of Congress from agricultural

states. They also cited statements in the

legislative history indicating some

members' expectation that the RFG

program would provide an increasing

market for ethanol.

Ethanol representatives contended

that the benefits of ethanol use justify its

inclusion in the RFG program.

Specifically, they explained that ethanol

Is currently made in the United States

from domestically-grown grains,

primarily corn, and thus represents an

important domestic and renewable

source of energy. They further explained

that to the extent ethanol is used in

place of imported petroleum products, it

promotes the nation's energy

independence and improves its balance

of trade, and that ethanol use also

strengthens the market for corn,

consequently reducing the need for

price supports. Moreover, as a biomassbased product, ethanol is potentially a

renewable fuel to the extent the energy

derived exceeds any fossil fuel energy

consumed in producing the ethanol.

In view of ethanol's importance to the

nation's energy security and agricultural

economy, ethanol representatives urged

that the simple model proposal be

revised to allow ethanol to effectively

participate in the RFG market. They

suggested several possible revisions. For

example, they argued that the 1 psi

waiver granted to certain ethanol blends

by section 211(h) of the CAA be applied

to ethanol-blended RFG under section

211(k). They reasoned that since

Congress recognized in the provision

requiring nationwide reductions in fuel

RVP that ethanol required such a

waiver, ethanol should receive a similar

waiver if the VOC performance standard

for RFG sold in the smoggiest cities

were defined in terms of a required

reduction in RVP.

If the section 211(h) waiver were not

available to RFG ethanol blends, the

ethanol industry suggested that the VOC

reduction requirement take into account

that the variety of VOCs from gasoline

differ in their ozone formation potential.

While ethanol raises a fuel's volatility

and thus its VOC emissions, they argued

that the resulting VOCs are less ozoneforming than those that would

otherwise occur. They urged that the 15

percent reduction requirement should

thus be interpreted to require a 15

percent reduction in ozone-forming

potential, not simply ozone-forming

VOCs. Ethanol supporters suggested

additional ways of encouraging or even

requiring ethanol use in RFG. The

Governors Ethanol Coalition, for

instance, suggested that EPA require the

RFG market to satisfy its oxygenate

requirements through a minimum

percentage of domestically produced

renewable fuel.

3. October 1st Announcement

EPA, the Department of Agriculture,

the Department of Energy and other

parts of federal government engaged in

an extensive dialogue with all interested

groups to address the ethanol industry's

concerns with the RFG program. In

response to the ethanol industry's

suggestion, the applicability of the

section 211(h) waiver to the RFG

program under 211(k) was closely

considered. For the reasons set forth in

a memorandum available in the docket,

the Acting General Counsel of EPA

determined that it did not apply.

Also explored was the ability to take

reactivity into account in determining

compliance with the requirement that "ozone-forming VOCs" be reduced by

15 percent. Section 211(k)(3), however,

explicitly requires that reductions in

ozone-forming VOCs be measured on a "mass basis." Although any reactivity

benefits of emissions from ethanol

blends, should they exist, could be

taken into account in defining which

VOCs are "ozone-forming," the statute

does not appear to permit ozoneforming VOCs to be weighted on the

basis of their ozone formation potential

for purposes of determining compliance

with the 15 percent reduction

requirement.

Based on ethanol's importance to the

nation's energy and agricultural policy,

President Bush on October 1, 1992

announced a plan to allow ethanol to

effectively compete in the RFG program,

with the expectation that, with barriers

removed, ethanol use would grow. This

plan is based upon provisions of section

211(k)(1) allowing the Administrator to

take Into consideration cost, energy

requirements, and other specified

factors in setting RFG performance

standards. The most significant part of

this plan called for EPA to "establish

rules for reformulated gasoline in all

northern cities that will have the effect

of granting a one-pound waiver for the

first 30 percent market share of ethanol

blends, while achieving environmental

benefits comparable to those provided

for in EPA's proposed rule and

regulatory negotiation." The

environmental benefits of the proposed

RFG program would be maintained by

offsetting any increase in volatility of

RFG containing ethanol with reductions

in the volatility of the rest of the

reformulated gasoline pool. - Also pursuant of the plan, EPA is

proposing to propose to establish rules

allowing governors of southern states to

extend the provisions made for ethanol

in northern RFG-covered cities to

covered southern cities as well. Other

aspects of the plan include the

establishment of an RVP trading

program, the unrestricted optional early

use of the complex model and

oxygenate neutral NOx and toxics

performance standards. Through today's

notice the Administrator proposes these

as well as a variety of other provisions

relevant to his determination of section

211(k) factors.

B. Reid Vapor Pressure Allowance

1. Overview

EPA proposes that the RVP

performance standard under the simple

model provisions of the SNPRM and

VOC performance requirements under

the complex model be based upon the

extent of use of renewable oxygenates

such as ethanol. For northern areas

under the simple model, EPA proposes

that the RVP performance standard as

proposed in the SNPRM of 8.1 psi (8.0

psi under the averaging provisions of

the SNPRM) be reduced to 7.8 psi (7.7

psi under averaging) when no renewable

oxygenates are used in reformulated

gasoline, but be permitted to increase to

8.1 psi (8.0 psi under averaging) through

the use of renewable oxygenates in 30%

of the reformulated gasoline produced.

For example, taking advantage of the

proposal's averaging provisions, this

would allow ethanol to be splash

blended into 30% of reformulated

gasoline and have a 1.0 psi greater RVP

than other reformulated gasoline blends

while still maintaining the in-use

volatility and, thus, comparable

environmental benefits proposed in the

SNPRM. EPA is also proposing to

permit a governor of a southern state to

have applied In that state's ozone

nonattainment areas provisions similar

to those described above for northern

areas. Specifically, under the simple

model, EPA proposes that the 7.2 psi

RVP standard proposed in the SNPRM

for southern areas be reduced to 7.0 psi,

but that refiners may meet an RVP

standard of up to 7.2 psi if they use

ethanol or other renewable oxygenates

in up to 20 percent of the market

covered in those areas. In addition, the

Agency proposes a similar approach to

standard setting under the complex

model.

It should be noted that this program

in no way limits the ability of a refiner

to use ethanol or any other renewable

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Federal Register / Vol. 58, No. 37 / Friday, February 26, 1993 / Proposed Rules

oxygenate in its gasoline to only 30

percent of its production (20 percent in

the South). A refiner may blend as much

ethanol into its gasoline as it desires,

provided It meets its RVP (VOC)

performance standards. It should also be

noted that the ability of refiners to

average RVP performance under the

provisions of the SNPRM is not changed

as a result of this program. RVP

averaging can still be used to meet a

refiner's RVP (VOC) performance

requirements. In fact, as discussed

below. EPA is proposing to expand the

RVP averaging provisions of the SNPRM

to include RVP trading as well.

In order to provide greater flexibility

for the use of renewable oxygenates.

EPA proposes that refiners be permitted

to either blend the renewable oxygenate

themselves to raise their performance

standard, or obtain commitments from

other refiners to do so. This flexibility

in connection with the RVP trading

provisions will allow greater renewable

oxygenate use by the refiners who can

benefit from their use, and allow its use

in those areas where it is most

economical to do so.

Today's action does not mandate the

use of ethanol. Taking into account the

statutorily specified factors, EPA is

proposing these provisions for ethanol

on the theory that allowing ethanol to

effectively participate in the RFG market

is important to the nation's energy

security. While EPA is continuing to

gather the relevant data and perform the

requisite analyses, it appears that the

use of renewable oxygenates such as

ethanol as a motor vehicle fuel may

reduce the nation's dependence on

foreign oil. improve our balance of trade

with other nations, and enhance our

energy security,' At 2.7 wt% oxygen.

use of ethanol (or ethanol in the form of

ETBE) in 30 percent of RFG) would

displace 2.3 percent of the volume of

reformulated gasoline with ethanol.

This is the equivalent of 360 million

gallons of ethanol used (gasoline

displaced) during the summer months

alone in the areas currently covered by

the reformulated gasoline program

(including those areas that have already

opted in). and could rise to as much as

510 million gallons if all eligible areas

'The Final Report of the Interagency Commission

on Alternative Fuels written for DOE and published

in September. 1992 estimates that the displacement

.of crude oil with all oxygenate us under the

reformulated gasoline and oxygenated fuels

provisions of the CAA could reach roughly 200.000

barrels per day. In a private conversation on I1/a

92. Margaret Singh of Argonne National laboratory.

one of the authors of the Interagency Commission

report stated that roughly 10 percent of the crude

oil displacement in that analysis was due to ethanol

alone (this estimate does not take into account any

chaoges which may result from today's proposal}.

opted into the program. In addition to

energy related benefits, the use of

oxygenates made from renewable

sources provides the potential for

reducing emissions which contribute to

global warming.

As explained above, the statute

prescribes for the near term a minimum

15 percent reduction in VOCs, and in

the SNPRM EPA proposed RVP and

oxygen requirements that it believed

achieved this requirement. Under

today's proposal, the simple model RVP

standards for refiners or importers that

use 30% renewable oxygenate is 8.1 psi.

if compliance is met on a per gallon

basis. Both the renewable and

nonrenewable blends produced by those

refiners or importers would have to

meet this per gallon standard. If

compliance is met on average, however.

the RVP standard would be 8.0 psi. This

could be met. for example, by two-thirds

of a refiner's or importer's gasoline

meeting 7.7 psi (nonrenewable blends)

and one-third meeting 8.7 psi

(renewable blend such as ethanol splash

blended into a 7.7 psi blendstock).

The effect of today's proposal on the

cost of reformulated gasoline is

expected to be small. The cost of

reducing the RVP of gasoline by 0.3 psi

in northern (VOC control region 2 as

defined in the SNPRM) areas to offset

the allowance for splash blended

ethanol in 30% of the fuel is

approximately 0.3 to 0.5 cents per

gallon. However, the overall cost of the

RVP performance allowance of 0.3 psi

for the use of ethanol is expected to be

less than 0.3 cents per gallon since

ethanol is likely to be less costly than

MTBE per gallon of reformulated

gasoline produced.2

In addition, the cost of ethanol may

decrease beginning in 1995 as a result

of the proposed provisions. Under a

program like that set forth in the

SNPRM, ethanol would be expected to

capture a sizeable portion of the RFG

and oxygenated fuels markets during the

winter months. (The oxygenated fuels

program established by section 211(m)

requires that gasoline sold in many

carbon monoxide ponattainment areas

include 2.7 percent oxygen during the

winter months, beginning in 1992.)

However, since the market during the

summer was potentially small, ethanol

production facilities could not operate

year-round at a steady production level

without storing vast quantities of

ethanol during the summer for use

during the winter. To the extent ethanol

was also used during the summer

2 "Evaluation of the Use of Ethanol and M'BE in

Reformulated Gasoline." by Sobotka & Co., Inc.. for

USEPA. September 30. 1992,

months, more steady production could

be achieved, with reduced capital

expenditures for storage and peak production equipment. This would

ikely result in a reduction in the cost

of producing ethanol.

Year-round and increased use of

ethanol may also increase the incentives

to develop an established infrastructure

for ethanol distribution and use, making

it even more feasible and cost effective.

In addition, expanded use of renewable

oxygenates may encourage further

research and development associated

with their production and use. which

could further reduce their cost and

expand their market both as blends with

gasoline and separately as alternative

fuels. Expanded use of renewable

oxygenates would further result in

economic growth not only in the

ethanol industry, but also in agriculture

and related industries. Finally, since the

consumption of grain to produce

ethanol may raise the prices farmers

receive for their crops additional

ethanol use may reduce the amount the

government must pay in agricultural

price supports.

While the cost per gallon of

reformulated gasoline of the RVP

adjustment for the use of renewable

oxygenates is small, the incentive per

gallon of ethanol is substantial. An

economic incentive for renewable

oxygenate containing blends such as

ethanol blends of 0.3 cents per gallon

adds roughly 13.7 cents per gallon to the

value of ethanol (assuming a base

requirement of 2.7 wt% oxygen as

described in section 4).3

In sum. section 211(k)(1) requires that

gasoline be reformulated to achieve the

greatest reductions in VOC emissions

considering cost, energy, and the other

specified factors, but not less than a

15% reduction during Phase I of the

program and 25% (20%) during Phase I1

of the program. In determining how

these statutory requirements can be met.

EPA must balance the cost of RVP

reductions in non-ethanol blended

gasoline and the extent to which energy

or other considerations warrant that the

volatility associated with ethanol use be

offset. Today. EPA is proposing that the

volatility associated with a potential

ethanol market share as high as 30

percent be offset through reductions for

nonrenewable oxygenate blended

gasoline such that the reformulated

gasoline market achieve overall

reductions meeting the minimum 15%

reduction requirement. EPA requests

comment on whether this proposal

represents the proper balance. EPA

3The derivation of the value of the incentive is

shown in Section VII1 of the DRIA.

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believes that, in addition to the factors

described previously concerning the

energy and other benefits of renewable

oxygenate use, the following are

relevant to the issue: The cost to reduce

the RVP of nonrenewable oxygenate

blends below the previously proposed

levels; the leadtime available for such

reductions; and the market share

ethanol and other renewable oxygenates

could expect absent any such

provisions. The expected market share

absent these provisions is hard to

predict, and at best 30% would allow

ethanol and other renewable oxygenates

to effectively participate in the

reformulated gasoline program,

including the opportunity to expand

that participation beyond what would

otherwise be possible.

2. Performance Standard Setting Process

The RVP performance standards

proposed today are intended to-provide

the same level of RVP and comparable

environmental control as would be

achieved by the SNPRM, while allowing

ethanol and other renewable oxygenates

to effectively participate in the

reformulated gasoline program. This can

be accomplished by adjusting the RVP

performance standard with the use of

renewable oxygenates while preventing

the standard from going any higher than

that proposed in the SNPRM. As such,

EPA proposes to establish a

performance standard for RFG not

containing renewable oxygenates that is

more stringent than that which was

proposed in the SNPRM. EPA further

proposes that if refiners commit to the

use of renewable oxygenates in their

fuel or purchase commitments from.

other refiners for the use of renewable

oxygenates (ifthat proves mhore cost

effective) their RVP performance

standard would be relaxed accordingly

(up to 8.1 psi). Finally, a refiner's

performance standard couldbe relaxed

even further through a process by which

EPA provides RVP performance

standard adjustments based on the

refiner's commitment to use renewable

oxygenate that other refiners might have

used to take advantage of a less stringent

RVP (VOC) performance standard, but

chose not to. This RVP (and VOC)

performance standard setting process is

described in the following sections and

shown in figure 1I.1.

ott CODE "46--M

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Federal Register IVol. 58, No. 37 1 Friday, February 26, 1993 I Proposed ules 1

Figure 11.1

RVP PERFORMANCE STANDARD SETTING PROCESS

Start: 7.8 RVP

Refiners commit to the use of renewable oxygenate units (ROUs)

and on that basis are given the right to raise their performance

standards as high, as 8.1 RVR unless capped.

RVP = BASE + ROUs* 0.01

Refiners unwilling to commit to using ROUs forfeit the right to raise their

RVP performance standard through ROU usage to area-specific EPA

alloaction pools to the extent ROUs were not used for one year,

Were hNO

f r i

EPA allocates renewable oxygenate volume for one year to other

refiners willing to commit to additional ROU use and raises their

RVP performance standard. RVP = BASE + ROUs * 0.01

NO Did anyone . use les s R O Us tha n

EommiSted

YES

lUJIG cOE 90,-40-C

Forfeit all unused ROUs to EPA allocation pool. Recalculate

RVP Cap ROU usage at level of resultant ROU usage

level until the equivalent renewable oxygenate from the

forfeited ROUs is used without the RVP incentive.

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a. Southern Performance Standards.

The proposed approach taken in the

North would not be required for

southern areas covered by the RFG

program. There are several reasons for

this distinction. First, most of the RFG

areas are in the North. so that removing

barriers to ethanol use in the North will

have a larger impact than removing

these barriers in the South on the

policies associated with ethanol use.

Second, production of grain feedstocks

and ethanol production are

concentrated in the North. The higher

tax benefits these northern areas offer

ethanol together with lower

transportation costs account for

ethanol's greater use in the North. For

these same reasons, EPA expects that

the potential for growth in ethanol use

is expected to be greater in the North.

Third, the lower RVP standards

applicable under the simple model in

the South are likely to make additional

RVP reductions to offset volatility

increases associated with ethanol use

more expensive for southern RFG areas.

In sum, in striking the balance between

achievable RVP reductions and the

policy benefits associated with ethanol,

EPA has reason to believe that for the

South generally, the RVP costs may be

higher and the resulting ethanol policy

benefits may be lower.

Thus, striking the balance somewhat

differently for southern areas, President

Bush's announcement did provide,

nonetheless, that a modified version of

the northern approach be available to

governors of southern states to have

applied at their discretion. A governor

who believes that ethanol has a

potentially strong market in his or her

state could request that this modified

approach, explained In more detail

below, be applied in the state's RFGcovered areas. As summarized above

while EPA believes that ethanol

participation in southern RFG areas

would advance the same policy

concerns as ethanol participation in

northern areas, EPA is not certain that

ethanol would participate sufficiently

even if the barriers are removed to .

justify the higher costs of offsetting the

volatility increase in southern areas.

However, southern governors may be in

a good position to judge on a case-bycase basis the likely participation of

ethanol in the market and the cost of

removing the barriers.

The modification of the northern

approach for optional application in the

South is as follows. EPA is proposing

that the RVP standard for RFG not

containing renewable oxygenates be

reduced from 7.2 psi to 7.0 psi (6.9 psi

under the averaging provisions of the

SNPRM). The 0.2 psi reduction would

permit 20 percent of the RFG market in

an area to be splash-blended with

ethanol without raising the average RVP

of the RFG in the area.

EPA further proposes as one option

that the effective date for inclusion of a

southern covered area be the beginning

of the first VOC control season three

years following receipt of the governor's

etter requesting applcation of this

approach in his or her state. EPA

believes three years Is the appropriate

amount of time to provide adequate

lead-time for refiners to prepare to make

the necessary additional RVP

reductions, and requests comment on

the validity of this belief.

While having the program

automatically take effect three years

after the request from the governor Is a

relatively straightforward approach, it

does raise serious questions about

whether section 211(k) authorizes a

state to determine which federal

standard applies in its area. At the same

time, EPA is concerned whether receipt

or non-receipt of a request from a

governor is an adequate basis to support

a different performance standard in that

area.

In light of these concerns, EPA is

proposing a second option whereby the

ethanol provisions described above

would be implemented in a southern

area through a rulemaking conducted

subsequent to receipt of a request from

the Governor. Upon receipt of any such

request from a governor, EPA would

promptly prepare a notice proposing

extension of the ethanol-related

provisions to the area or areas covered

by the request. This would allow for full

exploration of all the relevant issues,

and would avoid the legal concerns

mentioned above. This option is similar

to the approach taken in the federal RVP

regulations under section 211 (c) and

(h), where RVP standards were set on a

national basis with allowance for

subsequent rulemaking to fine tune the

regulations for specific localities. EPA

requests comment on the relative merits

of these two options.

The energy related benefits of

renewable oxygenates are not unique to

the use of the simple model. Under the

SNPRM, refiners will have the option of

using the complex model in the first

years of the program when the simple

model is also available. After a specified

period of time following the complex

model's promulgation, only the complex

model will be available for certification.

In keeping with the proposal under the

simple model, EPA proposes that the

VOC performance standard stringency

under the complex model be increased

by the equivalent of 0.3 psi RVP. For

Phase I of the reformulated gasoline

program EPA proposes to determine the

VOC equivalent of 0.3 psi RVP using as

a baseline a fuel meeting the

performance standards of the simple

model (8.0 RVP, 2.1 wt% oxygen, 0.95

volume percent benzene, 26.3 percent

aromatics, and CAA baseline values for

all other fuel parameters), and under

Phase II of the reformulated gasoline

program one baseline fuel consistent

with the VOC performance standard

described in section VI of this notice

(for purposes here, 2.0% oxygen, 105

ppm sulfur, 6.9 RVP, 202OF T50, 316 0

F

TO0, 23.0% aromatics, 6.5% olefins, and

1.0% benzene). As calculated from the

complex model, EPA thus proposes that

the Phase I and Phase II VOC

performance standards be increased by'

7.1 and 2.8 percentage points,

respectively, in northern areas. If any

southern areas are included in the

program, the Phase I and Phase H VOC

performance standards would be

increased by 5.9, and 2.0 percentage

points, respectively (for Phase I. the

equivalent of 0.2 RVP determined using

a baseline fuel of 7.1 RVP, 2.1 wt%

oxygen, 0.95 volume percent benzene,

26.2 percent aromatics, and CAA

baseline values for all other fuel

parameters and, for Phase II, the

equivalent of 0.2 RVP using as a

baseline fuel a fuel with 2.0 wt%

oxygen, 143 ppm sulfur, 6.5 RVP, 202*F

T50, 316OF T9o, 23.0% aromatics, 6.5%

olefins, and 1.0% benzene). EPA

requests comment on this methodology

for setting the performance standards

under the complex model, on the fuel

assumptions used, on whether and to

what extent the methodology unfairly

disadvantages any refiner relative to

another, and on whether there are any

other methodologies or fuel

assumptions which might be more

appropriate.

b. Performance Standard Adjustment

Through Commitments for Renewable

Oxygenate Use. EPA's proposed RVP

and VOC standards are based on its

estimate of the greatest reductions the

market as a whole can achieve, taking

into account the statutory factors.

However, the ability and desire of

refiners to take full advantage of today's

proposed standards varies from refiner

to refiner. To ensure that the policy

objectives related to this proposal are

fully served, it is important that the

market be permitted to work as

efficiently as possible. EPA is therefore

proposing that a system of commitments

be created to allow the greatest

flexibility for the use of ethanol and

other renewable oxygenates consistent

with the. applicable performance

standards.

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In fulfilling their commitments,

refiners could either blend renewable

oxygenate themselves during the

forthcoming VOC control season or, if

meeting the VOC standards on average,

also purchase commitments from other

refiners. As long as refiners meet their

RVP (VOC) performance standards in

each area covered by the RFG program,

the use of renewable oxygenate could

easily be shifted from a refiner serving

one area to a refiner serving another area

where it is more economically

advantageous to do so (based on state

tax subsidies, distribution costs, etc.).

Whether or not a refiner chose to fulfill

its commitment through its own use of

renewable oxygenate or through

contracting for its use with another

refiner, however, the refiner would

nevertheless be liable for its

commitment. Since various refiners

produce vastly different amounts of

gasoline, in order to maintain the same

level of renewable oxygenate use under

this program, trading of renewable

oxygenates from one refiner to another

must be performed on a volume basis.

Under the simple model, refiners

could elect to meet an RVP performance

standard as high as 8.1 psi (8.0 under

averaging) in the North and 7.2 psi (7.0

under averaging) in the South in

proportion to their commitment to use

renewable oxygenate in 30 percent and

20 percent of their fuel, respectively.

Under the complex model refiners could

lower the otherwise applicable VOC

performance standard by as much as 7.1

percentage points in the N6rth and 5.9

in the South under Phase I of the

reformulated gasoline program, and 2.8

percentage points in the North and 2.0

percentage points in the South under

Phase II, through the use of renewable

oxygenates in 30 and 20 percent of their

fuel, respectively. It is entirely up to

each refiner to decide what amount of

renewable oxygenate to use and, thus,

which performance standard would be

applicable to it. Refiners could utilize as

much renewable oxygenates in

producing their reformulated gasoline as

they desire, but the ability to adjust the

applicable performance standard in

proportion to the amount used would be

limited to 30 percent of their production

in the North and 20 percent in the

South.

In order to provide refiners with the

necessary flexibility to blend renewable

oxygenates, EPA proposes to raise the

maximum RVP allowed under the

averaging provisions of the SNPRM to

8.7 psi for renewable oxygenate blends

in the North and 7.9 in the South.

Similarly, the minimum VOC

performance standard under the

complex model is proposed to be

relaxed by 21.2 percentage points in the

North and 24.6 percentage points in the

South below the averaging standard

under Phase I of the reformulated

gasoline program. Under Phase H, EPA

proposes that the minimum

performance level be set at 8.5 and 8.3

percentage points in the North and

South, respectively, below the

performance standard described in

section VI (taking into account a 1.5%

increase in the standard under

averaging). These levels are sufficient to

provide a 1.0 psi margin for splash

blending ethanol into 30 percent of

reformulated gasoline downstream of

the refiner. EPA proposes, however, that

for reformulated gasoline not containing

renewable oxygenates the maximum

RVP remain at the already proposed

level for the simple model of 8.3 RVP

in the North and 7.4 in the South, and

that the minimum VOC performance

under the complex model remain at the

levels proposed later in today's notice.

The performance standard adjustment

for blending renewable oxygenates has

value only if the RVP or other

parameters of gasoline are adjusted.

Since these are determined by the

refiner, EPA proposes that the refiners

continue to be the party responsible for

meeting the RVP performance standard,

which is now a function of the amount

of renewable oxygenate used. Since this

is fully consistent with the provisions of

the SNPRM, changes to the enforcement

provisions proposed in the SNPRM are

minimized. EPA considered various

other options which would also place

requirements on terminal operators

(ethanol blenders), but considered such

options as being too restrictive and

burdensome.

At the same time, unless refiners

chose to comply with the per gallon

performance standards, some blends

(e.g., those splash blended with ethanol)

would be likely to have an RVP that is

higher than that of other blends by as

much as 1.0 psi. (Under the per gallon

standards, all of a refiner's fuel must

meet its per gallon standard (e.g., 8.1

RVP if renewable oxygenate is used in

30 percent of its fuel) including any

ethanol splash blends.) Therefore, in

order to ensure that the RVP (and VOC)

standard is met in each area covered by

the reformulated gasoline program, it

would be essential for the refiner to

track and control the fraction of fuel

with a higher RVP which is distributed

to each area. Similarly, it would be

essential for refiners to maintain a

constant fraction of fuel with a higher

RVP (lower VOC performance) over the

course of the VOC control season.

Otherwise, there could be temporal

increases and decreases in the average

emission performance of in-use fuels.

As under the averaging provisions of the

SNPRM, should temporal increases

occur, the refiners run the risk of in-use

compliance survey violations and thus,

a more stringent performance standard

the following year.

c. Performance Standard Adjustment

Through EPA Allocation of

Uncommitted Renewable Oxygenate

Use. Some refiners may decide not to

use renewable oxygenates and forego

the opportunity to meet a less stringent

RVP (VOC) performance standard. So

that other refiners might take advantage

of that opportunity and thereby further

advance the policy goals of today's

notice, EPA proposes that a refiner's

opportunity to elect a less stringent RVP

(VOC) performance standard be forfeited

for the following ozone control season if

it does not commit to the use of

renewable oxygenates (by themselves or

through the purchase of commitments

from other refiners). EPA would then

adjust the RVP performance standard of

other refiners in exchange for their

commitment to use the amount of

renewable oxygenate which had been

left uncommitted. For example, a refiner

which commits to use renewable

oxygenate in 60 percent of its fuel and

receives the associated RVP

performance standard adjustment could

raise its average RVP performance

standard in the North under the simple

model from 8.0 to 8.3 psi. This allocation system would also

provide the means of effectively

combining offsetting fuels in slates for

the purpose of certifying them as RFG.

Section 211(k)(4) permits gasoline to be

certified as RFG as part of a "slate" of

fuels that on average meet RFG

requirements. While the proposed

system of allocating RVP performance

standard incentives would result in one

refiner's fuel having an average RNV

above the minimum 8.1 psi standard, by

effectively combining in a slate that

refiner's fuel with another refiner's fuel

having an average RVP sufficiently

below the standard, both refiner's fuels

could still be certified as reformulated

gasoline.

In order to permit EPA to adjust the

RVP (VOC) performance standards,

information on reformulated gasoline

and renewable oxygenate use must be

made available on an area-specific basis.

If RVP performance standard

adjustments for renewable oxygenate

use were forfeited by a refiner in one

covered area and subsequently allocated

to refiners serving another covered area,

greater environmental control would be

achieved in one area and less in

another. To avoid such an outcome,

EPA proposes that by November I prior

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to each ozone control season each

refiner (and importer) report to EPA its

commitment to use renewable

oxygenates (and in what form), the

amount of renewable oxygenate other

refiners have committed to use for it, the

amount of renewable oxygenate it has

committed to use for other refiners, the

amount of renewable oxygenate use

eligible for making performance

standard adjustments which is not

committed to be used in each area

covered by the reformulated gasoline

program, its total reformulated gasoline

production which was distributed for

use in each covered area for the

previous year, and the VOC

performance characteristics (RVP under

the simple model, all fuel parameters

that affects VOC under the complex

model) of the fuel which it distributes

for use in each covered area. If and only

if a refiner chooses to meet the VOC

performance standards on a per gallon

basis, commits to the use of a minimum

of 30 percent of renewable oxygenate in

the North and 20 percent in the South

(if applicable), and is not committing to

use renewable oxygenates for any other

refiner, would its reporting

requirements be simplified. In such a

case the refiner would be required to

report only its commitment to use at

minimum 30 percent, and the volume of

reformulated gasoline produced and

renewable oxygenate used each year

nationwide. By January I prior to each

ozone control season, any uncommitted

RVP (VOC) performance standard

adjustments would be provided at no

cost to other refiners for use in the same

covered area for their commitment to

use additional renewable oxygenate,

and their performance standard would

be adjusted accordingly. EPA proposes

to allocate these adjustments among the

refiners wishing to use them in the

covered area where the adjustments are

forfeited prorated based on the volume

of reformulated gasoline produced by

the various refiners requesting

additional adjustments, and beginning

with the category of refiners who

fulfilled their commitment to use

renewable oxygenates in previous years.

The final RVP performance standard

applicable for these refiners for the

coming season would then be

recalculated based upon the total

amount of renewable oxygenate

committed to be used.

EPA's adjustment of RVP (VOC)

performance standards, as proposed,

would be specific to each area covered

by the reformulated gasoline program in

order to maintain each area's

environmental benefits from the

reformulated gasoline program. As such

it would require that refiners track their

fuel from the point of production to the

point of its ultimate use and report to

EPA the amount of reformulated

gasoline and renewable oxygenates

distributed for consumption in each

area (except as described above under

certain conditions for per gallon

compliance). EPA recognizes that such

a requirement changes current industry

operating practices and as such may

impose additional costs. However, EPA

is unaware of any alternatives which

would provide comparable

environmental neutrality. EPA requests

comment on any alternative means by

which the environmental neutrality of

the program can be maintained while

minimizing the cost and burden on

refiners. EPA also requests comment on

the ability of the in-use compliance

surveys to be revised to provide

adequate certainty that the full

environmental control is achieved in

each area without requiring refiners to

track their fuel.

Despite the precautions described

above, EPA is still seeking design

improvements to fully assure that the

program proposed today preserves the

environmental control that would be

achieved under the program proposed in the SNPRM. The program described

above does not fully protect

environmental neutrality if changes

occur in the amount of fuel distributed

to a given city by various refiners over

time. Since the standards adjustment

process is based on fuel volumes for the

previous year, increases in the

performance standard granted to some

refiners following EPA adjustments

would only be only offset if the refiners

forfeiting RVP performance standard

adjustments distribute the same or

greater volume of reformulated gasoline

to a given area as the year before. It is

not until the following year that the

adjustment would be made to offset this

disparity. Despite this concern, EPA

does not expect that there will be

significant increases in RVP (decreases

in VOC performance) in-use since

decreases are just as likely as increases

and not all refiners that opted to forfeit

the performance standard adjustments

would be expected to dramatically

reduce the amount of fuel they

distributed to a given area in the same

year. Nevertheless, EPA requests

comment on the this issue and on any

means by which the environmental

neutrality of the program can be more futl ensured.

I during the course of the ensuing

VOC control season a refiner uses less

renewable oxygenates than it had

committed to EPA, no enforcement

action would be taken as long as that

refiner achieves an RVP or VOC

performance standard commensurate

with its actual renewable oxygenate use.

However, if a refiner uses less

renewable oxygenates than it has

committed to use, EPA requests

comment on what remedy would be

appropriate. One possible remedy

would be that the refiner forfeit the

ability to raise its performance standard

through renewable oxygenate use in the

future (to the extent the commitment

was not reached). EPA would make

these RVP (VOC) performance standard

adjustments available to other refiners

willing to commit to use the

corresponding amount of renewable

oxygenate as described above. If such a

forfeiting refiner wanted to raise its

performance standard through

renewable oxygenate use in the future,

it could do so only if unallocated RVP

VOC) performance standard

adjustments were still available for the

covered area(s) in question. Such

refiners would have their RVP (VOC)

performance standard adjusted only

after all refiners who fulfilled their

commitments the previous year have

received any desired adjustments.

EPA is concerned that the

performance standard adjustment

process described above does not grant

refiners desiring to use additional

renewable oxygenate adequate certainty

of the availability of additional RVP

(VOC) performance standard

adjustments to fully take advantage of

them. Furthermore, EPA is concerned

that the refiners described in the

previous paragraph who forfeited their

opportunity to take advantage of RVP

(VOC) performance standard

adjustments for future years would be

limited to receiving year to year

adjustments from EPA if any are

available and would never have any

certainty of using any performance

standard adjustments. As a result, EPA

is also considering an approach

whereby performance standard

adjustments which are either given to

EPA for subsequent distribution be

permanent (instead of year to year) and

whereby adjustments distributed by

EPA would be permanent. Under such

an approach, refiners would have the

necessary certainty of being able to

utilize the performance standard

adjustments and be permitted to make

refinery changes in accordance with

such performance standard adjustments.

Such an approach, however, prevents

the year-to-year adjustments in

reformulated gasoline volume necessary

to ensure that any loss in environmental

neutrality described above is limited to

only one year. Another approach might

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be to maintain the year to year

allocation but allow refiners who fell

short of their commitments in previous

years to regain their original

opportunity to use renewable

oxygenates for RVP (VOC) performance

standard adjustments by making up

their earlier shortfall without any RVP

(VOC) adjustment. EPA requests

comments on the above approaches, on

the need for an allocation program given

its potential limitations, and on any

other approaches that would provide

refiners with the necessary certainty

while still preserving the environmental

neutrality of the program.

3. RVP Trading Program

Based on the performance standard

adjustment process described above, if a

refiner wishes to blend more than 30%

of its production with renewable

oxygenate, it would still be required to

meet an 8.1 RVP standard. With regard

to ethanol, this would require producing

an ever lower RVP gasoline blendstock.

In order to provide greater flexibility to

refiners desiring to blend additional

renewable oxygenates, EPA proposes to

establish an RVP credit trading program

(in addition to the averaging program

proposed in the SNPRM) whereby refiners could obtain RVP credits from

other refiners in lieu of reducing the

RVP of their fuel. Under this program a

refiner in Chicago could commit to use

renewable oxygenate on behalf of a

refiner in New York and then obtain

RVP credits (from other refiners

distributing fuel in Chicago) sufficient

to compensate for any increase in RVP

caused by increasing its use of

renewable oxygenates. For the program

to remain environmentally neutral the

RVP credits could only be traded within

a given area covered by the reformulated

gasoline program. Otherwise, one area

would have an average in-use RVP of

less than 8.1 RVP, while the other area

would have an average RVP of greater

than 8.1 RVP. Such an RVP trading

program could be conducted totally

separate from any exchange in

commitments for renewable oxygenate

use or in conjunction with it. An

example of the latter would be the sale

of renewable oxygenate usage

commitments and the purchase of RVP

credits by a refiner wishing to use more

than 30% renewable oxygenates and

vice versa by a refiner wishing to use

less than 30% renewable oxygenates.

The former could potentially adjust its

average RVP standard to as high as 8.7,

while the average RVP standard of the

latter refiner would be lower than 8.0.

The fuels being marketed by both

refiners would have to be In the same

area, as mentioned above.

Furthermore, if the program is to be

environmentally neutral, RVP credits

must be traded based on the relative

volume of reformulated gasoline

produced at any given RVP. Since RVP

trading is a means by which refiners can

choose to meet their RVP performance

standard and is not used to determine

the performance standard, EPA

proposes that RVP trading be permitted

to take place throughout the course of

the control period and as such be based

on the actual gallons of reformulated

gasoline produced. EPA proposes that to

the extent refiners take advantage of

RVP trading, they be required to report

to EPA at the end of the ozone control

season the average RVP of the

reformulated gasoline they produced

and the number of RVP credits traded to

and received from other refiners for

each of the reformulated gasoline areas.

EPA does not believe that the added

flexibility resulting from a trading

program allows for a more stringent

performance standard, but requests

comment on the Agency's legal

authority it implement RVP trading

absent a tighter performance standard

for those refiners who trade. A more

stringent performance standard was

proposed in the SNPRM in connection

with averaging, and this is merely an

extension of that program. Furthermore,

this trading program is intended to

provide greater flexibility to refiners for

the purpose of making it easier to blend

renewable oxygenates. If the

performance standard were made more

stringent, it could eliminate any

incentive for blending renewable

oxygenates provided by a trading

program. Since there is no RVP performance

standard under the complex model, the

RVP trading program described above

cannot be used directly. However, the

same motivation exists under the

complex model as under the simple

model to provide a trading program.

Thus, under the complex model EPA

proposes that refiners be permitted to

trade VOC performance. EPA requests

comment on this provision.

As discussed above in regard to EPA's

allocation process for performance

standard adjustments with renewable

oxygenate use, EPA is concerned that

the requirement that refiners track and

report to EPA the volume of

reformulated gasoline and its RVP (VOC

performance) on a covered area specific

asis may represent a significant

additional burden. In the interest of

minimizing the cost and burden on

refiners of the reformulated gasoline

program, EPA would prefer to avoid, if

possible, requiring refiners to track their

fuel from the refinery to its ultimate use.

However, to ensure the environmental

neutrality of the RVP (VOC) trading

program knowledge of the actual

distribution to each area is needed. EPA

requests comment on any methods other

than tracking of fuel by which the

environmental neutrality of the program

can be ensured in all covered areas and

on whether the cost of tracking would

be greater than any economic incentive

created by the flexibility of the trading

program.

4. Definition of Renewable Oxygenate

Use

While the performance standards

described above are adjustable based

upon the amount of renewable

oxygenates used in the reformulated

gasoline produced, some constraints

need to be placed on what constitutes

the use of renewable oxygenates if both

the environmental and other policy

benefits of today's proposal are to be

achieved. EPA proposes that renewable

oxygenate be defined for the purposes of

this program as those oxygenates that

are derived from renewable resources

such as agricultural products and waste

products such as sewage sludge or waste

cellulose and does not include

oxygenates produced from nonrenewable resources such as petroleum,

natural gas, coal, or peat. Furthermore,

since some oxygenates such as ethers

are currently made from both renewable

and non-renewable resources, EPA

proposes that only the portion of

oxygenates derived from renewable

resources be considered as renewable

oxygenate. At the present time, the only

oxygenate EPA is aware of that is

produced in significant quantities that

meets the-definition of renewable

oxygenate is ethanol. However, the

definition is not meant to be restricted

to ethanol, and is intended to

encompass numerous other oxygenates,

particularly the ethanol portion of

ethers such as ETBE and ETAE which

in the future may be produced in

significant quantities. EPA further

proposes that the use of renewable

oxygenates to meet the 30 percent

market share described above for

northern areas and 20 percent for

southern areas be based upon an

assumed base oxygen content in the

reformulated gasoline of 2.7 wt%. A 30

percent market share would, thus,

represent 0.81 wt% oxygen in the form

of renewable oxygenates in a refiner's

reformulated gasoline production in the

North, and 0.54 wt% oxygen in the

South. In order to allow the greatest

degree of flexibility for refiners, EPA

proposes that the use of any renewable

oxygenate in any concentration be

prorated on the basis of weight percent

I I III

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oxygen for credit toward the 0.81 wt%

oxygen base.

The reformulated gasoline provisions

require only 2.0 wt% oxygen in

reformulated gasoline, but a base oxygen

content of 2.7 wt% would better

* advance the energy related policies of

today's proposal, and is still consistent

with the maximum oxygen content for

which no NOx emission increase is

assumed under the simple model in

section D below (as welN as under both

the negotiated agreement and SNPRM).

Going beyond 2.7 wt% to as high as 3.5

wt% would provide a disincentive for

the use of renewable oxygenates other

than ethanol since they are currently

limited to a maximum of 2.7 wt% and,

thus, would be required to be used in

more than 30 percent of the market to

achieve the same level of renewable

oxygenate use. Furthermore, setting a

base oxygen content greater than 2.7

wt% oxygen would require the use of

the complex model pursuant to the

provisions of section D. This would

represent a disincentive for certain

refiners to use renewable oxygenates

and, thus could potentially result in less

renewable oxygenate use than setting

the baseline at 2.7 wt%. EPA invites

comment on setting the baseline

oxygenate content at 2.7 wt% and on

what level would best ensure that the

energy related goals of today's proposal

are achieved in a manner consistent

with section 211(k) of the CAA.

If oxygenates are used that are derived

from both renewable and nonrenewable

resources, EPA proposes as one option

that such oxygenates be prorated in

direct proportion to the amount of their

oxygen content derived from renewable

resources (e.g., ETBE derived from

ethanol which is produced from

biomass would achieve the same credit

as the amount of ethanol used to make

it). Not all renewable oxygenates,

however, are identical with respect to

their environmental benefits. One

significant difference between

oxygenates is their potential to cause

vapor pressure increases when mixed

with other fuels in the distribution

system and vehicle fuel tanks, a

phenomenon referred to as

commingling. ETBE does not exhibit a

commingling effect, nor does it produce

the dramatic rise in blend vapor

pressure above 100°F that ethanol does.

As a result, from an environmental

standpoint, the use of ethanol in the

form of ETBE is preferable to direct

ethanol blending. The value added per

gallon of ethanol from the RVP

incentive proposed in this section

would be roughly 13.7 cents, assuming

an RVP control cost of one cent per

RVP-gallon. This economic incentive

would be constant regardless of the

concentration of ethanol added or the

form (splash blended ethanol or ETBE)

since it is based on RVP. However,

independent from today's proposal

there is an inherent added incentive for

blending ethanol at 3.5 wt% instead of

2.7 wt% oxygen since the former causes

less of an RVP increase per gallon of

ethanol used (ethanol blended to both

2.7 wt% and 3.5 wt% oxygen cause

roughly a 1.0 psi RVP increase). Because

of this inherent incentive EPA expects

most ethanol blends would be at 3.5

wt% oxygen through'the use of the

complex model and oxygen credit

trading. As a result, ETBE would always

be forced to compete with ethanol at 3.5

wt% oxygen instead of ethanol at 2.7

wt% oxygen where ETBE would be at

less of a disadvantage. In order to offset

this disadvantage, EPA is also

requesting comment on an option that

renewable oxygenates such as ETBE that

do not exhibit commingling effects be

given the same credit at 2.0 wt% oxygen

that is given to ethanol (or other

renewable oxygenates which exhibit

commingling effects) at 2.7 wt% oxygen.

ETBE use in 30 percent of the market

would, under this option, represent 0.60

wt% oxygen in the form of renewable

oxygenates in a refiner's reformulated

gasoline production. This approach

would provide ETBE blends with an

additional incentive of roughly the same

magnitude as exists for blending ethanol

at 3.5 wt% oxygen relative to 2.7 wt%

oxygen.

Commingling itself is an issue which

is not unique to this proposal. It was not

addressed in the context of the SNPRM

but, nevertheless, represents an

environmental impact whenever

oxygenates such as ethanol which

exhibit commingling effects are blended

into gasoline. Today's proposal is not

expected to dramatically change the

magnitude of any commingling effects

inherent under the SNPRM. While

today's proposal may increase the

market share of ethanol, it also contains

incentives for ETBE and other ethers

.which do not exhibit commingling

effects. As such there could be no

increase or even a decrease in the

amount of ethanol used to meet the

reformulated gasoline program

requirements resulting from today's

proposal. Furthermore, even if there

were an increase In the use of ethanol

blends, today's proposal allows for its

use to be shifted to those areas where it

is most economical. As a result, it is

possible that some areas would have

virtually 100 percent ethanol blended

reformulated gasoline while others may

have virtually no ethanol blended

reformulated gasoline. Such a scenario

would reduce concerns over

commingling. Finally, even if both

ethanol use and commingling do rise,

the increase may be small. At present

EPA has not been able to adequately

quantify the commingling effects

resulting from the use of ethanol blends,

but requests comment on how

significant such effects may be both

under the provisions of the SNPRM and

under the provisions of today's

proposal.

C. NOx Neutrality

A second element of President Bush's

announcement was for EPA to establish

a NOx performance standard which was

neutral with respect to the type of

oxygenate being used. Under the simple

model proposed in the SNPRM, and in

keeping with the agreement reached

through regulatory negotiation, EPA

proposed that "MTBE in concentrations

up to 2.7 weight percent oxygen and

other oxygenates in concentrations up to

2.1 weight percent oxygen be assumed

not to increase NOx emissions." While

"based on data available during the

regulatory negotiations, It appeared that

fuel oxygen content and the type of

oxygenate used may have an impact on

NOx emissions," the data did "not

allow for quantifying relationships

between oxygenate type and

concentration and NOx emissions."

Thus, based on the available

information, caps were placed on

oxygen content in order to permit the

sale of reformulated gasoline and limit

any potential NOx emission increase

until the complex model could be

developed and implemented. Since the

time the SNPRM was developed a great

deal of additional data has become

available which has gone into the

development of the complex model (to

be discussed later).

Under the complex model, all

oxygenates are treated the same, i.e.,

based on oxygen content. There does

not appear to be a significant difference

between various oxygenates in their

NOx forming tendency. Also, under the

complex model, other fuel changes that

accompany the blending of oxygenates

into the fuel (reductions in the

concentrations of aromatics, olefins,

sulfur, etc.) have been found to offset

the NOx increases caused by increasing

the oxygen concentration. The results,

which are described in the DRIA, show

that on average 4-5 percent reductions

in NOx emissions are expected. Thus,

the complex model is directionally

consistent with the data used for the

simple model. However, refiners would

not be prohibited from adjusting their

base gasoline in anticipation of dilution

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so that a NOx increase could occur. EPA

does not anticipate that refiners will

have an economic incentive to do this.

At most, as described in section V.C.

below, a one percent increase in NOx

emissions from certain fuels might

occur. Given the much larger reductions

projected on average, it is highly

unlikely that a net NOx increase could

result under the simple model with

oxygenate up to 2.7 wt% oxygen. As a

result, EPA proposes that in keeping

with the provisions of the SNPRM and

the more recent data, all oxygenates be

assumed to yield a no NOx emission

increase up to 2.7 wt% oxygen under

the simple model. EPA requests

comment on this view and the resulting

proposal, and on the legal adequacy of

relying on this expectation that no NOx

increase will occur. EPA also requests

comment on.whether any NOx increase

associated with oxygenates at or below

2.7 weight percent oxygen (should one

be found to occur) may be considered de

minimis and on whether EPA has legal

authority to disregard such a NOx

increase as de minimis.

The one option available to prevent a

NOx increase from every batch of fuel

would be to require refiners to use the

complex model in 1995 (under the early

use provisions described in section E.

below) solely to certify that their fuels

did not increase NOx emissions. Given

the effect of oxygenate on the other

parameters of gasoline and the lack of

economic incentive to worsen fuel

Suality via other means, this option

sould not pose a leadtime concern.

EPA requests comment on this

additional option as well.

D. Toxics Neutrality

In addition to NOx neutrality,

President Bush also requested that the

toxics standards be set in such a manner

as to be neutral with respect to the type

of oxygenate used. EPA based the toxics

performance standard in the SNPRM on

the use of MTBE as the oxygenate in the

fuel on the assumption that this would

be the predominant oxygenate used to

produce reformulated gasoline. Due to a

characteristic of MTBE unique among

oxygenates, evaporative benzene

emissions are suppressed, and MTBE

achieves a greater toxics performance on

a weight percent oxygen basis than the

other oxygenates. As a result, the toxics

performance standard was proposed in

the SNPRM in a manner which

disadvantaged the other oxygenates by

making it more costly for them to be

utilized in reformulated gasoline. As is

discussed in section VI, control of toxics

emissions in reformulated gasoline is a

very costly means of reducing cancer

incidences. For this reason, basing the

toxics standard on the sole oxygenate

which achieves the greatest toxics

control is not appropriate. Thus, EPA

proposes that the toxics emission

performance standard under the simple

model be based upon the non-MTBE

oxygenates. Applying this approach, the

toxics performance standard required by

the act is the greater of a 15 percent

reduction or the performance of the

formula fuel containing 2.0 wt% oxygen

in the form of a non-MTBE oxygenate.

Since a formula fuel containing nonMTBE oxygenates does not achieve the

15 percent minimum, EPA proposes that

the air toxics performance standard

under the simple model be 15 percent.

In accordance with the provisions

proposed in the SNPRM, EPA also

proposes that the year-round averaging

standard be 16.5 percent.

E. Unrestricted Early Use of the

Complex Model

The CAA requires all refiners to

reduce the VOC and air toxics emission

forming tendency of their fuels by a

minimum 15 percent below that of the

1990 average in-use fuel as defined in

section 211(k)(10)(B) (referred to here as

the CAA baseline). Due to the limited

data available at the time of the

regulatory negotiation (and SNPRM

development), however, few of the

effects of fuel parameters on emissions

could be quantified and placed in the

simple model even though they were

known qualitatively to exist. As a result,

EPA proposed in the SNPRM that all

refiners hold such fuel parameters

(sulfur, olefins, and T90) at or below

their 1990 baseline levels. Because

different refiners have significantly

different 1990 baselines of sulfur,

olefins, and T90, this proposal required

some refiners to produce reformulated

gasoline which was significantly less

polluting than that produced by other

refiners.

In order to maintain the same overall

level of environmental control if refiners

opted to use the complex model prior to

its required use in 1997, EPA further

proposed In the SNPRM that refiners

who opted to use the complex model

early would be required to maintain

whatever emission performance they

would otherwise have achieved using

the simple model through the use of

their own 1990 baselines. This was

viewed by some refiners, however, as an

impediment to early use of the complex

model since they could be required to

achieve greater environmental control in

1995-96 than in 1997. In response, EPA

also proposed that since in the southern

areas covered by a reformulated gasoline

program, refiners would be required

under the proposal to achieve greater

than the minimum VOC control

required by the Act, they be permitted

the option to use the CAA baseline

instead of their own individual

baselines. In northern areas covered by

the reformulated gasoline program

refiners would still be required to use

their own 1990 baselines.

In President Bush's announcement, he

requested EPA to provide refiners with

the broadest range of options possible in "meeting the pollution reduction

requirements of the Act," and called for

the "unrestricted" early use of the

complex model. EPA today proposes

that all refiners be permitted to utilize

the complex model before its required

use in 1997 to certify reformulated

gasoline to be sold in all parts of the

country with their performance

measured against either their own 1990

baseline or the CAA baseline. Not only

does this proposal grant refiners greater

flexibility, but it also makes it easier for

refiners to use renewable oxygenates

such as ethanol ii producing their fuel.

Ill. Complex Model

A. Baseline Emissions Under the

Complex Model

In the SNPRM, EPA proposed that the

emission baseline for the simple model

would be based on light-duty vehicle

emissions using a July 11, 1991 version

of MOBILE4.1 with an assumption for

enhanced I/M that is now more

representative of EPA's requirements for

basic I/M (57 FR 52950). This proposal

was based on the best information

available at the time. Since that time, a

new version of the MOBILE model,

MOBILE5.0, has been developed and

both the basic and enhanced I/M

requirements have been promulgated.

These changes affect the baseline

calculations and raise the issue.as to

whether and when to require the revised

baseline.

The choice of MOBILE model and

I/M program determines the level of

baseline emissions established for

baseline vehicles. The primary impact

of this choice on baseline emissions is

through changes in the ratio of baseline

exhaust to non-exhaust VOC emissions.

Since various reformulations will

reduce exhaust and non-exhaust VOC

emissions to varying degrees, changing

the ratio of baseline exhaust and nonexhaust VOC emissions can affect the

overall VOC emission reduction

expected from a specific fuel

reformulation. NOx emission

performance is unaffected since NOx is

,only emitted via the exhaust. Toxics

performance is only slightly affected

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exhaust toxics comprise only a small

fraction of total toxics emissions.

As described in section V.C., the

proposed complex model projects that

typical simple model fuels will

substantially reduce both exhaust and

nonexhaust VOC emissions. The result

is that the overall effectiveness of

various Phase I reformulations is

expected to be relatively insensitive to

the baseline exhaust to non-exhaust

VOC ratio. Also, given the no NOx

increase requirement and the effect of

oxygenate on other fuel parameters, EPA

expects fuels produced under the

complex model to produce even greater reductions in exhaust VOC than those

shown In section V.C., making their

performance even less sensitive to the

choice of MOBILE model. Thus, EPA Is

confident that fuels certified using a

MOBILE4.1 baseline would meet at least

the minimum 15 percent VOC reduction

requirement even with a MOBILES.0

baseline. Thus, there would appear to be

little or no air quality or other impact

of delaying implementation of a revised

baseline based on MOBILE5.0.

The assumptions made in the SNPRM

with respect to the appropriate

enhanced I/M program to assume for

Phase I may also be reasonable through

the end Phase L While enhanced I/M

is required in many ozone

nonattainment areas starting January 1,

1995, its full implementation may be

later than this in several important ways including a phase-in of emission cut

points and a phase-in of the percentage

of the fleet being tested. It is therefore

possible that areas will not realize the

full in use benefits of those programs

until near the end of the Phase I period. The complex model, however, will be

available as an option as early as 1995,

and as proposed would not be mandated

for use In certifying VOC controlled fuel

until the 1997 ozone season at the

earliest.

At the same time, changing the

baseline in 1997 could potentially

change the overall stringency of e

VOC performance standard for some

refiners and require them to-invest

additional capital to further control RVP

or other fuel parameters. The statutory

structure established by Congress

creates a two-phase program (beginning

in 1995 and 2000, respectively), and

maintaining a consistent level of

emission performance through the first

five years of the program is consistent

with this structure. . Therefore, EPA proposes to retain the

baseline proposed in the SNPRM for use

with the complex model prior to 2000.

This is based on the lack of adverse air

quality impact, EPA's confidence that

the required statutory minimum

reductions are not at risk, and the

potential disruption in the latter years of

Phase I for at least some refiners. EPA

requests comment on all of these points,

including comment on utilizing an

emissions baseline based on either the

official version of MOBILE4.1 or

MOBILE5.0 beginning in 1997. EPA also

requests comment on the

appropriateness of the I/M program

assumptions discussed above and the

appropriatenes of other I/M program

assumptions. The Agency specifically

requests comment from the States on the

type of enhanced IM program they plan

on implementing (e.g.. annual, biennial,

emission cut-points, etc.). their

projected schedules for implementation,

and the timetable for any expected

phase-ins. EPA invites comment on the

degree of change in fuel formulation

which might occur and their

environmental, energy, cost and

leadtime consequences. Changes in the

baseline modeling assumptions, if

appropriate, would also lead tocorresponding changes in the Phase I

complex model standards.

With the onset of the Phase BI

performance standards in 2000, the

overall stringency of the standards is

already changing and a new baseline

based on MOBILES.0 will not, by itself,

be the cause of new investment by

refiners. Also, by this time, enhanced

I/M programs should be fully

operational in nearly all reformulated

gasoline areas. Therefore, for Phase II

EPA proposes that the baseline for the

complex model be based on light-duty

vehicle and light-duty truck emissions

using MOBILE5.0 with enhanced I/M.

B. Complex Model for Exhaust

Emissions

1. Data Sources

The relationship between fuel

properties and exhaust emissions is

complex and the theory behind such

relationships continues to be developed.

As a result, EPA has asked industry,

state regulatory agencies, and other

organizations with relevant test data to

make their data available to the Agency

to ensure that this rule is based on as

much relevant information as possible.

The complex model described in the

following section is based on data

generated from a number of exhaust

emissions testing programs. These

programs, their design intent, and their

limitations am discussed in the Draft

RIA. Data from these programs were

excluded from EPA's analysis if the data,

were not based on a valid FTP

measurement cycle, if the vehicle in

question did not employ 1990-

equivalent emission control technology,

or if nonmethane hydrocarbon

measurements were not taken. The

Agency believes its analysis considered

all available, valid, and relevant data on

the exhaust emissions effect of fuel

modifications when used in 1990 model

year and equivalent vehicles. Since

these test programs generally involved

different vehicles, different fuels, and in

some cases different test procedures, the

analysis required to determine the

relationship between fuel properties and

emissions is complex. However, EPA

believes that the model proposed below

appropriately considers and addresses

these complexities.

2. Analysis Method

Exhaust emissions are affected by

both vehicle and fuel characteristics,

which makes identification of fuel

effects on emissions difficult. EPA has

considered and in some cases tested a

number of analysis methods, many of

which were presented during a series of

public workshops held by EPA over the

past year. Information regarding these

methods can be found in Docket A-92-

12. The approach chosen by EPA to

analyze the data described in section

I.B.1 is summarized below and is

discussed more fully in the Draft RIA.

EPA utilized statistical analysis

techniques to determine the effects of

fuel modifications on exhaust emissions

of VOC, NOx, and toxics. At a series of

five public workshops held over the

past year, the Agency has presented its

data sources, proposed analysis

methods, and preliminary emissions

models for public review and comment.

The Agency has also requested other

organizations to share their data,

analysis expertise, and emissions

models at these workshops. The Agency

believes that today's proposal

appropriately incorporates the

comments and suggestions regarding the

analysis process received at the

workshops and during the course of the

past year from industry, state and

federal government authorities, and

other interested parties. The resulting

exhaust emission models have been

validated through confirmatory testing

and analysis.

EPA's analysis separated exhaust

emissions into fuel components and

vehicle components. In all test programs

analyzed by EPA, the single most

significant determinant of the level of

emissions from a given vehicle on a

given fuel was the vehicle itself. Fuel

properties exert a much smaller

influence on exhaust emissions than do

vehicle characteristics such as emission

control system technology, vehicle

mileage, catalyst efficiency, oxygen

sensor efficiency, engine size, engine

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design, vehicle size, fuel efficiency, and

vehicle maintenance. To identify the

effects of fuel property modifications on

emissions, EPA found it necessary to

identify the effect of each vehicle on

emissions and separate this effect from

the fuel effects.

The fuel components of exhaust

emissions were separated into two main

categories. The first category consisted

of the effects of individual fuel

parameters. For example, the effect of

sulfur on hydrocarbon emissions was

best modeled by a relationship

containing a linear sulfur term and a

second-order sulfur term (a term of the

form cIS 2, where cl is a constant and S

is the sulfur level). The second category

of fuel terms consisted of interactive

effects between two fuel parameters.

EPA's analysis of NOx emissions, for

example, found that oxygen's effect on

NOx is related to the aromatics level of

the fuel. This effect cannot be

represented as an oxygen or aromatics

effect alone but must be represented as

an interactive term of the form c2XA,

where c2 is a constant, X is the oxygen

level, and A is the aromatics level.

The effect of each fuel term was

determined separately for each

technology group within each emitter

class for NOx and VOC emissions.

Technology groups and emitter classes,

their importance in determining the

effects of fuel modifications on

emissions, and their definitions are

discussed more fully in the Draft RIA

and simple model SNPRM. The linear

terms for all fuel parameters were

retained, while only those second-order

and interactive terms that were

statistically significant at the 85 percent

level were retained. Retention of nonsignificant linear terms reflects the

general consensus of public workshop

participants regarding appropriate

analysis and modeling methods and a

desire to keep this potentially very

complex model as simple, yet as

accurate, as possible. EPA requests

comment on the appropriateness of the

significance level used to exclude terms

from the model and the inclusion of

non-significant linear terms. Because

vehicles can have different emission

control systems, the Agency anticipated

that fuel modifications would have

different emission effects on different

types of cars. EPA has found it

necessary to develop terms unique to

technology groups to assure the

predictive power of the complex model.

EPA also has found that vehicles

classified as "high emitters" respond

very differently to fuel modifications

than do normal emitting vehicles. Hence

the terms described above were defined

and determined separately for each

technology group within each emitter

class for VOC and NOx emissions.

EPA chose a different approach when

modeling emissions of exhaust toxics.

Many of the studies available to EPA

did not measure exhaust toxics, so the

data on exhaust toxics emissions is less

complete than the data on exhaust VOC

and NOx emissions. This problem is

particularly acute for high emitters. In

addition, baseline estimates of toxics

emissions are not available from the

MOBILE models, so a different source of

baseline toxics estimates had to be

found. To overcome the limited amount

of data on high emitters, the Agency

chose to combine normal and high

emitters into a single emitter class while

retaining the technology group

distinction. To overcome the absence of

baseline toxics data from the MOBILE

models, the resulting toxics model was

then adjusted to compensate for

'differences between the average VOC

exhaust emission levels for those

vehicles for which toxics data were

available and the 1990 model year, inuse emission levels projected by the

MOBILE models. This process is

discussed in more detail in the DRIA.

Since the proposed models for normal

and high emitter VOC emissions differ

substantially, and since the compounds

classified as toxic in section 211(k) are

VOCs, the Agency is concerned that this

approach based on absolute mass

emissions may not accurately represent

the effects of fuel changes on toxics

emissions from high emitters. The

Agency has considered modeling toxics

emissions as mass fractions of total VOC

emissions (as was proposed in the

simple model NPRM and SNPRM) but

has found models of toxics in terms of

absolute mass to have very high

predictive power. However, this

conclusion could be the result of limited

high emitter toxics data. In addition, the

mass fraction approach can be more

readily extrapolated to winter

conditions than can the absolute mass

emissions approach. EPA requests

comment on the appropriateness of the

mass fraction and absolute mass

emissions approaches.

EPA focused its modeling efforts on

those fuel parameters thought to affect

vehicle emissions based on available

test results. Oxygen, RVP, aromatics,

olefins, T90, sulfur, and benzene were

identified as relevant fuel parameters in

the negotiated agreement. T50 was

identified as a potentially significant

parameter by a number of testing

programs and at several public

workshops. EPA anticipates that further

refinements to the model will be made

prior to finalization of this rule. First,

the Agency expects to convert its fuel

distillation curve data to a percent

evaporated basis, thereby replacing T50

and T90 with terms such as E200 and

E300 (the volume percentage of the fuel

evaporated at 200 OF and 300 OF,

respectively). The percent evaporated

terms are thought to be more directly

relevant to the generation of exhaust

emissions than the distillation

parameters. In addition, the percent

evaporated values for a mixture of fuels

can be calculated directly from the

percent evaporated values of each

component of the mixture, while the

distillation values for a mixture must be

measured separately. This characteristic

has important implications for

certification and enforcement. Second,

the Agency will attempt to determine

the influence of the type of aromatic

compounds in fuels, specifically heavy

aromatics, on exhaust emissions, since

preliminary test data suggests that both

the level and type of aromatic

compounds may affect emissions. Third,

EPA expects to include additional

emission testing data as they become

available, and such data may affect the

results of the modeling process

discussed above. Specific test programs

expected to provide additional data

include the second half of Auto/Oil's

T501T90 study and EPA's Phase U

reformulated gasoline test program.

EPA's Phase II test program data is

available and has been used to confirm

the validity of the model presented in

§ 80.45. After using either the EPA

Phase H or Auto/Oil T50/T90 studies to

confirm the revised model, EPA expects

to include the data used in this

confirmation in its database to develop

a final model. Fourth, EPA anticipates

changing the confidence level required

to allow additional terms into the model

to 90 percent, in keeping with past EPA

practice.

Finally, EPA expects to complete its

analysis of the importance of technology

group and emitter class distinctions

prior to finalization of this rule.

Preliminary analyses confirm that the

original classification scheme does

capture significant differences in the

emissions performance of fuels, as can

be seen by examining the differences in

the exhaust emission equations for

specific technology group/emitter class

categories as presented in the Draft RIA.

These distinctions may be changed if

further analysis indicates that changes

are necessary to adequately estimate the

effects of fuel modifications on vehicle

emissions. At the present time, EPA is

considering reducing the number of

technology group categories for normal

emitters by eliminating technology

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groups which contribute a very small

proportion of total mobile source

emissions or combining such groups

with other, similar technology groups.

EPA is also considering subdividing

high emitters by their emission

characteristics, particularly their

exhaust hydrocarbon to NOx ratio,

rather than by vehicle technology. This

modification reflects EPA's belief,

supported by preliminary field

information, that one or more emission

control components on high emitters

tend to be malfunctioning, which

renders a classification scheme based on

vehicle equipment potentially suspect.

EPA requests comment on these

potential changes in its technology

group definitions and on the other

potential changes in its analysis

approach discussed above. EPA will

place its revised version of the complex

model for exhaust emissions (referred to

as "Iteration 4" of the model), which

incorporates the changes discussed

above, and its supporting materials in

the docket for review and comment as

soon as it is completed. The American

Petroleum Institute (API) has also

developed its own version of a complex

model, which has been placed in the

docket for this rulemaking. EPA

requests comment on the various

aspects of API's statistical and

engineering approach and on its overall

suitability for use in EPA's complex

exhaust emission model.

3. Complex Exhaust Emissions Model

Equations

As was discussed in the SNPRM, EPA

believes that the exhaust emission

effects of fuel modifications are different

when applied to vehicles with different

emission control and fuel distribution

technologies. In addition, EPA believes

that the emissions effects of fuel

modifications also depends on.the level

of emissions from the vehicle. During

development of the complex model,

preliminary investigation of these

assumptions have supported the

approach described above. The'complex

model incorporates these effects on an

emissions-weighted basis, i.e., fuel

effects on each technology group/

emitter class category were weighted

according to the contribution to in-use

emissions of 1990 vehicles from that

category. To determine the contribution

of each technology group to in-use

emissions, EPA calculated the fraction

of 1990 model year sales of light duty

vehicles and trucks from each

technology group. EPA used nonCalifornia sales figures for this analysis

since vehicles certified as "Californiaonly" vehicles are required to meet a

different set of emission standards than

other cars sold in the US., and since

California will have established Its own

reformulated gasoline program by 1996

that is expected to exceed the stringency

of the federal program. EPA requests

comment on the exclusion of California

vehicles from its calculation of 1990

sales fractions. EPA then adjusted this

fraction to reflect the differences in

average emissions among technology

groups where such information was

available. This adjusted fraction is

represented by the "W" constants in the

model proposed in § 80.45.

Because the equations are in the form

of exponential equations, it is necessary

to normalize each equation to a known

emission value on a known fuel for each

technology group. The resulting

proportionality constant is represented

by the -k" constants in the model

proposed in § 80.45. In effect, the "k"

constant transforms a percentage

increase or decrease into a gram per

mile figure corresponding to that

percentage change from baseline

emissions. The rationale for and

derivation of the "k" and "W" constants

are discussed in more detail in the

DRIA.

Since the effects of fuel modifications

on emissions differ across technology

groups and emitter classes, EPA has

developed separate models for each

technology group-emitter class

combination for which sufficient data

were availahle. The emissions

performance of a given fuel

reformulation for a specific pollutant

can be determined by taking the

following steps. First, each technology

group-emitter class model for the

pollutant in question would be

evaluated for the specific fuel

formulation being evaluated. Second,

the resulting predicted emissions for

each technology group-emitter class

combination would be weighted by the

estimated contribution of that

combination to total miles traveled and

these weighted emissions would be

added together. Third, the total

predicted emissions would be compared

to the baseline emissions level for the

pollutant in question. The emissions

performance of the fuel reformulation

would be defined as the percentage

change in total emissions from baseline

emission levels, which are discussed

below in section B.

The specific equations that comprise

the complex model can be found in

§ 80.45 of the regulations proposed for

this rule. For the most part, their

derivation is straightforward and can be

found in the Draft RIA. In some cases,

available data were insufficient to

develop models for every technology

group-emitter class category. In such

cases, the weighting factors for the

categories which could be modeled

were renormalized to adjust for the

absence of data. This process is

discussed more fully in the Draft RIA.

The Draft RIA and the proposed

regulations also discusses the range of

parameter values for which these

equations are valid. As discussed in the

SNPRM, refiners are required to submit

data to augment the model if they wish

to certify fuels with properties that fall

outside this range. EPA requests

comment on deviations between the

model's predictions and the data used to

develop the model, on the model

equations themselves, on their

derivation, and on the ranges over

which these equations are considered

valid.

The model presented in S 80.45 is

based on emissions data generated

under summer conditions. While the

VOC performance standard for

reformulated fuels applies only in the

summer, the toxics and NOx

requirements apply year-round. Hence,

the complex model must cover typical

winter, as well as summer, fuels.

However, the model presented in

§ 80.45 is based on data generated under

summer conditions and cannot be used

directly for fuels with typical winter

RVP levels. EPA proposes to use a

modified version of the complex model

as presented in § 80.45 to evaluate

winter fuels. This modified version

would assign an RVP value equal to that

of summer baseline gasoline, i.e., 8.7

psi, for all non-VOC controlled fuels

when evaluating the toxics and NOx

emissions performance of such fuels

(including winter baseline fuels). RVP's

impact on canister loading and

subsequent purging is thought to be the

primary cause of its effects on exhaust

emissions. Since data do not exist on

the effects of winter fuels on canister

loading under winter conditions, the

Agency believes it is not appropriate to

attempt to model the effects of winter

RVP levels on emissions. Fixing the

RVP value of winter fuels at baseline

levels for modeling purposes effectively

removes the influence of RVP on winter

exhaust toxics and NOx emissions. EPA

requests comment on this approach,

particularly on the ability of the nonRVP factors in the complex model to

accurately predict winter toxic and NOx

emissions.

C. Complex Model for Nonexhaust

Emissions

The model for nonexhaust emissions

is based on data generated by EPA to

develop its MOBILE emission inventory

models. The Agency believes that the

relationship between fuel properties and

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nonexhaust emissions is less complex

and better understood than for exhaust

emissions. Data from EPA's ongoing

evaporative emis#ions testing has been

used to develop MOBILE4.1 and

MOBILE5.0. EPA believes this data to be

sufficient to model the relationship

between fuel properties and nonexhaust

emissions. Additional information about

MOBILE4.1 and MOBILE5.0 can be

found in Dockets A-91-02 and A--92-

12.

Non-exhaust emissions are less

affected by vehicle design and are

influenced by fewer fuel characteristics

than are exhaust emissions. In addition,

the theoretical principles involved in

evaporative emissions are better

understood, and evaporative emission

control technologies are more consistent

across vehicles than are exhaust

emission controls. EPA is in the process

of developing an evaporative emissions

model based on fundamental theoretical

principles and actual test data that are

expected to be more accurate and more

widely applicable to oxygenated fuels

than MOBILE4.1. A preliminary version

of this model was discussed at a public

workshop held on August 25, 1992, and

materials related to this model have

been placed in the docket for this

rulemaking. At this time, however, the

enhanced evaporative emissions model

is not complete and is not expected to

be completed prior to publication of the

final rule.

As a result, the Agency is proposing

correlations relating RVP to nonexhaust

emissions derived from the MOBILE4.1

emissions model issued November

1991. To develop the correlations

shown below, MOBILE4.1 was used

with temperatures of 69 to 94 degrees

Fahrenheit for Class B areas and 72 to

92 degrees Fahrenheit for Class C areas,

assuming the existence of an enhanced

inspection and maintenance program. In

addition, the presence of Stage II

evaporative emissions recovery systems

with an overall vapor recovery

efficiency of 86 percent was assumed (as

discussed inlhe SNPRM and NPRM).

Should the enhanced evaporative

emissions model not be developed In

time for inclusion in the final

rulemaking, EPA proposes to utilize the

July 11, 1991 version of MOBILE4.1 to

determine the effect of RVP on

nonexhaust VOC emissions under the

Phase I performance standards (i.e.,

1995-1999) and to utilize MOBILE5.0 to

do the same under the Phase II

performance standards (i.e., 2000 and

beyond). This would be in keeping with

the proposed baseline emissions

described in section A above and, again,

minimize the changes refiners have to

undergo in the transition from the

simple to the complex model. The

Agency requests comment on this

proposed basis for determining nonexhaust VOC emissions, including

comment on the appropriate MOBILE

model and I/M assumption. As discussed in the SNPRM, the

Agency's correlation between fuel

benzene content and non-exhaust

benzene emissions is based on General

Motors' proprietary model of tank

vapors, and its independent

confirmation by data generated by EPA

using a number of fuels. Both the

derivation and verification of the nonexhaust benzene emissions model is

discussed more fully in the Draft RIA.

EPA requests comment on the use of the

correlation between fuel benzene

content and non-exhaust benzene

emissions derived from the General

Motors model and the sufficiency of

EPA's independent confirmation of its

results.

As was also discussed in the SNPRM,

EPA believes that nonexhaust VOC and

toxics emissions (including running

loss, hot soak, diurnal, and refueling

emissions) depend primarily on the RVP

of the fuel. The Agency proposes that

the nonexhaust VOC and toxics

equations found in § 80.45 of the

proposed regulations be used to

determine nonexhaust VOC and toxics

emissions, respectively. These equations

relate VOC emissions to the RVP of the

fuel. Nonexhaust benzene emissions are

determined by the level of benzene in

the fuel and the level of nonexhaust

VOC emissions. EPA requests comment

on this approach and on the equations

proposed in § 80.45, the derivation of

which is discussed more fully in the

Draft RIA.

IV. Vehicle Testing

As was discussed in the simple model

SNPRM, the complex model may be

augmented based on the results of

vehicle testing. EPA considers the

testing program discussed in the

SNPRM to be appropriate in terms of the

fuels, number of vehicles, and test

procedures specified. However, the

Agency now believes the analysis

process described in the SNPRM to be

inconsistent with the process used to

develop the complex model and may be

overly complex.

As a resu t, EPA proposes that the

data generated during vehicle testing be

analyzed statistically as described in

§ 80.48. This analysis would fit a

stepwise regression model to the data

that includes the following terms: A

vehicle term, a linear term for the

parameter being tested, and squared and

interactive terms involving the

parameter being tested if significant at

the 90 percent confidence level. The

analysis would treat normal emitters

and high emitters as separate

populations but would not subdivide

the emitter categories into technology

groups for analysis purposes, since the

test fleet compositions specified in

§ 80.60 assure that the normal and high

emitter test fleets include technology

groups that reflect their contribution to

in-use emissions. In addition, the

statistical power of the test program

would be compromised by subdividing

each emitter class test fleet into

technology groups since the number of

vehicles in each technology group

would be small. EPA believes that this

approach is more consistent with the

process used to develop the complex

model, is less susceptible to

manipulation and gaming by testing

organizations, and is capable of

extracting the maximum amount of

information from the test data.

In today's proposal, EPA has deleted

§ 80.57 and § 80.58 from its proposed

regulations. These sections specified

procedures for determining the presence

and significance of nonlinear and

interactive emission effects of fuel

parameters being tested. EPA believes

the regression-based analysis approach

described in § 80.48 to be more accurate

and less complex than the procedures

described in § 80.57 and § 80.58 of the

April 16, 1992 proposal. Since the

regression-based approach explicitly

determines nonlinear and interactive

effects, the Agency considers the

deleted sections to be unnecessary and

burdensome. EPA requests comment on

these proposed deletions and on the

proposed modification to the testing

proposal outlined in the SNPRM.

V. Phase I Performance Standards

Using the Complex Model

A. Baseline Emission Estimates

The following table summarizes the

Agency's proposed estimates of VOC

and NOx emissions from in-use, 1990

technology vehicles when fueled with

Clean Air Act baseline gasoline. All

VOC emission estimates are given in

terms of non-methane, non-ethane

hydrocarbon emissions. In today's

notice, EPA further proposes to redefine "ozone forming VOCs" as used in

section 211(k) to exclude ethane. This

redefinition is consistent with the

Agency's most recent definition of VOC as "any compound of carbon * * *

which participates in atmospheric

photochemical reactions * * * other

than the following, which have been

determined to have negligible

photochemical reactivity: Methane,

ethane, * * *." (See 40 CFR 51.100(s)

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February 3, 1992), which excludes both

ethane and methane from its definition

of ozone forming VOCs (57 FR 3941).

Ethane comprises approximately three

percent of total hydrocarbon emissions

but, like methane, is far less reactive in

the atmosphere than other

hydrocarbons.

TABLE V-I.--BASEUNE VOC AND NOx

Emissions (MOBILE4.1 with SNPRM

I/M), g/mi

ClassB ClasaC

Summer.

Exhaust VOC emissions ..... 0.446 0.446

Hot soak VOC emissions .265 .230

Diurnal VOC emissions ....... .125 .109

Running Ios VOC ems

sions ................................ .431 .390

Refueling VOC emissions ... .040 .040

Total summer VOC

emissions .................. 1.307 1.215

Winter exhaust VOC emlssions .................................... .660 .660

NOx emissions ...................... .66 .66

The following table summarizes the

Agency's estimates of toxics emissions

from in-use, 1990 technology vehicles

when fueled with Clean Air Act

baseline gasoline. These estimates were

derived from the complex emission

models described in section III and were

based on the July 11, 1991 pre-release

version of MOBILE4.1 emission

inventory model with the I/M program

assumptions described in the SNPRM.

As discussed in the SNPRM, separate

estimates were made for nonexhaust

toxics emissions from Class B and C

areas and for summer and winter

emissions.

TABLE V-2.-BASELINE Toxics EMISSIONS

(MOBILE4.1 WiTH SNPRM I/M), MG/

MI

Summer Winter

Class Class Class a IC B&C

Exhaust benzene

emissions ................ Formaldehyde emlssi ................. Acetaldehyde emisston ........................

22.04

3.79

1.81

TABLE V-2.--BASEUNE TOXiCS EMISSIONS

(MOBILE4.1 WITH SNPRM I/M), MG/

MI-Continued

Summer Wn- for 1

Class Class __ar

B C B&C

1,3-butadlene emlsslons ........................ 3.28 3.28 3.00

POM erissions .......... A50 1.50 1.45

Diurnal benzene emlsslons ....................... 1.30 1.13 ............

Hot soak benzene

emissions .............. 3.02 2.63 ............

Running loss benzene

emissions .............. 4.92 4.46 ............

Refueling benzene

emissions ............... . 0.42 0.42 ............

Total baseline

toxics emissions 45.67 44.64 32.05

'Based on EPA's proposed complex model

evaluated for winter baseline gasoline and assuming

that wintertime evaporative emissions are negligible, as is discussed In the SNPRM (57 FR 13416).

B. Complex Model Performance of the

"Formula Fuel"

The proposed complex model

equations predict that the formula fuel

would produce a reduction in exhaust

VOC emissions of 12.3 percent and no

reduction in nonexhaust VOC emissions

when measured relative to the Clean Air

Act baseline fuel. The resulting overall

VOC emissions reduction of the formula

fuel is 6.1 percent in Class B areas and

6.5 percent in Class C areas. The

proposed complex model further

indicates that the annual average toxics

performance of an MTBE-based formula

fuel would be an 11.7 percent reduction

in Class B areas and an 11.2 percent

reduction in Class C areas. The annual

average toxics performance of the

ethanol-based formula fuel would be an

11.5 percent reduction in Class B areas

and an 11.0 percent reduction in Class

C areas. These are lower reductions than

those discussed in the SNPRM. The

current estimate are believed to be more

accurate given they are based on the

proposed complex model rather than on

the simple model. The Agency estimates

that formula fuels using other

oxygenates, such as ETBE or TAME,

would result in VOC and toxics

performance similar to that of ethanolbased formula fuels.

C. Complex Model Performance of

Simple Model Fuels -

The simple model specifies a number

of fuel parameters to assure satisfactory

emissions performance under the simple model. Many of the complex

model relationships between these fuel

parameters and emissions performance

are different than the corresponding

relationships in the simple model. As a

result, the complex model predicts

different emission performance levels

than does the simple model for a given

fuel formulation. The following tables

summarize the predicted simple model

and complex model performance levels

for four different fuels relative to two

specified baseline fuels. The first

baseline fuel is the CAA baseline fuel as

specified in the Act. The second

baseline fuel is identical to CAA

baseline fuel except for its RVP, which

is set at the level required by Phase II

volatility controls in Class B areas. This

second baseline fuel is referred to as

"Class B baseline fuel."

The four summer fuels described in

Table V-3 would meet the proposed

VOC requirements for Class C and Class

B areas, respectively, under averaging

standards, and assuming that winter

fuels are reformulated to a similar

extent, would meet the toxics

requirements. Under the simple model,

the toxic emission effects of different

oxygenates vary, so two different fuels

with aromatics levels sufficient to

assure compliance with the simple

model toxic emission performance.

standards are shown for each area.

Tables V-4 and V-5 summarize the

summer performance of the fuels

described in Table V-3 relative to the

CAA baseline fuel according to both the

simple and complex emission models.

Table V-6 summarizes the emissions

performance of Fuels 3 and 4 relative

the Class B baseline fuel using both

models. Tables V-4, V-5, and V-6 use

baseline emissions derived using the

July 11, 1991 pre-release version of

MOBILE4.1 with essentially a basic I/M

program.

TABLE V-3.--SAMPLE FUEL COMPOSITIONS

Class C Class B

Fuel I Fuel 2 Fuel 3 Fuel 4

Fuel characterstics:

Oxygenate ............................................................................ ............................................................

Oxygen. weight percent ....................................................................................... ................

Aromatics, volume pe rent ..............................................................................................................

Olefins, volume pement ................................................................................ ... .................

Benzene, volume percent ................................................................................................................

Sulfur, parts per million weight .........................................................................................................

MTBE

2.1

26.3

9.2

0.95

339

EtOH

2.1

24.3

9.2

0.95

339

MTBE

2.1

26.2

9.2

0.95

339

EtOH

2.1

23.9

9.2

0.95

339

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TABLE V-3.-SAMPLE FUEL COMPOSmONS-Cotinued

ClassC Clan B

Fuel Fue2 Fue3 Fuel4

T50. degres F eit ............................................................................................... 218 218 218 218

T90, degrs Farenhell ....... ............................... ..................... 330 330 330 330

RVP. pounds per sqiare Inch .......... . . .......................... ........................................ 8.0 8.0 7.1 7.1

TABLE V-4.---SIMPLE AND PHASE I COMPLEX MODEL SUMMER EMISSIONS REDUCTIONS OF FUELS 1 AND 2 IN CLASS

C AREAS RELATIVE TO CAA BASELINE GASOLINE

[In percentI

Fuel I1: Fuel 2 Fuell 1 Fue12

Exhaust VOC ...... Nonexhaust VOC

Total VOC ......

NOx ....................

Toxics.

23.9 9.9

18.8

.0.0

22.4

13.0 23.9

19.9

-0.8

22A

15.4

23.9

20.8

0.1

23.1

TABLE V-5.-SIMPLE AND PHASE I COMPLEX MODEL SUMMER EMISSIONS REDUCTIONS OF FUELS 3 AND 4 IN CLASS

B AREAS RELATIVE TO CAA BASEUNE GASOLINE

[1 pecMA

Simple Model reductions Complex model reductions

Fuel3 Fuel4 Fuel3 Fue4

Exhaust VOC .............. .................. . ........ . ...... ....................................... . ................. . .. .. 9.9 9.9 14.3 17.0

Nonexhaust VOC ............ . ... .................. ....................................... ................................. 51.4 51.4 51.4 51.4

Total VOC .................. .. ................................................................. 37.2 37.2 38.7 39.6 NO x ................................................................................................................ ............................ 0.0 0.0 - 2.5 - 2.0

Toxics ............................................................................................................................................ 25.7 27.1 26.7 27.9

TABLE V-6.--SIMPLE AND PHASE I COMPLEX MODEL SUMMER EMISSIONS REDUCTIONS OF FUELS 3 AND 4 IN CLASS

B AREAS RELATIVE TO CLASS B BASELINE GASOLINE

(In percent]

Simple model reductions Complex model redcions

Fue13 Fue14 Fue3 Fue14

Exhaust VOC ............................................................................................................... ......... 9.9 9.9 13.2 15.9

Nonexhaust VOC .......................................................................................... ............... . ...... 29.8 29.8 29.8 29.8

Total VOC . ................ 21.3 21.3 22.7 23.8

m,-nAAf n _ C- 3

It should be noted that the above fuels

show slight NOx emission increases

when using the complex model. This

occurs because Fuels 1-4 assume no

effect of oxygenate on fuel sulfur, T50,

and T90, and a minimal effect on fuel

aromatics. As discussed in the Draft

RIA, when oxygenates typical effect on

these fuel parameters are taken into

account, which EPA expects will

happen on average under the simple

model, these NOx emission increases

disappear and NOx emissions should

actually decrease slightly at both 2.1

and 2.7 weight percent oxygen,

regardless of the oxygenate used. The

same holds true for the results shown in

Tables V-7 through V-10 below.

For comparison, Tables V-7 through

V-10 summarize the summer

performance of the fuels described in

Table V-3 relative to the CAA baseline

fuel according to two alternative Phase

I complex models, The complex model

used to derive the results in Tables V7 and V-8 utilized baseline emissions

from MOBILE5.0, while the complex

model used to derive the results in

Tables V-9 and V-10 utilized baseline

emissions from the official version of

MOBILE4.1. Both alternative Phase I

complex models assumed basic I/M. A

discussion of both of these alternative

models can be found in the Draft RIA.

TABLE V-7.--SUMMER EMISSIONS REDUCTIONS OF FUELS 1 AND 2 IN CLASS

C AREAS RELATIVE TO CAA BASELINE

GASOUNE USING A COMPLEX MODEL

BASED ON THE OFFICIAL VERSION OF

MOBILE5.0

(In percent]

Complex model re- ductions

Fuel I Fuel2

Exhaust VOC .............. 13.1 1&4

Nonexhaust VOC ............ 24.8

Total VOC ........... 17.8 19.1

NOx .......... ........... -0.8 0.1

ToxIcS ........... 23.2 23.8

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TABLE V-8.--SUMMER EMISSIONS REDUCTIONS OF FUELS 3 AND 4 IN CLASS

B AREAS RELATIVE TO CAA BASELINE

GASOLINE USING A COMPLEX MODEL

BASED ON THE OFFICIAL VERSION OF

MOBILE5.0

[In percent)

Complex model re- ductlons

Fuel 3 Fuel 4

Exhaust VOC .......................... 14.3 17.0

Nonexhaust VOC .................... 49.2 49.2

Total VOC ............................... 28.9 30.5

NOx ......................................... -2.5 -2.0

Toxcs ...................................... 27.4 28.5

TABLE V-9.-SUMMER EMISSIONS REDUCTIONS OF FUELS 1 AND 2 IN CLASS

C AREAS RELATIVE TO CAA BASELINE

GASOLINE USING A COMPLEX MODEL

BASED ON THE OFFICIAL VERSION OF

MOBILE4.1

[In percent]

Complex model reductIons

Fuel1 Fuel2

Exhaust VOC .......................... 13.0 15.4

Nonexhaust VOC .................... 25.8 25.8

Total VOC ............................... 21.3 22.1

NOx ......................................... -0.8 0.1

Toxis ...................................... 22.9 23.6

TABLE V-10.--SUMMER EMISSIONS REDUCTIONS OF FUELS 3 AND 4 IN CLASS

B AREAS RELATIVE TO CAA BASELINE

GASOLINE USING A COMPLEX MODEL

BASED ON THE OFFICIAL VERSION OF

MOBILE4.1

[In percent]

Complex model re- ductlons

Fuel 3 Fuel 4

Exhaust VOC .......................... 14.3 17.0

Nonexhaust VOC .................... 51.3 51.3

Total VOC ............................... 39.1 40.0

NOx ........................................ -2.5 -2.

ToxIcs ..................................... 27.0 28.3

D. Phase I Complex Model Performance

Standards

1. Phase I Complex Model Toxics

Standards

Under CAA section 211(k)(3), during

1995 through 1999, a reformulated

gasoline's toxic emissions performance

must meet or exceed that of a specified

formula fuel or a 15 percent reduction

from that of baseline gasoline,

whichever is greater. As discussed in

the SNPRM, the simple model predicts

that the formula fuel achieves an

average annual toxic emissions

reduction of 16.5 percent, thus setting

the toxic emissions standard for refiners

certifying their reformulated gasolines

under the simple model. The complex

model for toxics emissions proposed

above, however, predicts a different

toxics emissions performance for the

formula fuel. The complex model

indicates that the annual average toxics

performance of an MTBE-based formula

fuel would be an 11.7 percent reduction

in Class B areas and an 11.2 percent

reduction in Class C areas. The annual

average toxics performance of the

ethanol-based formula fuel would be an

11.5 percent reduction in Class B areas

and an 11.0 percent reduction in Class

C areas. The Agency estimates that

formula fuels using other oxygenates,

such as ETBE or TAME, would result in

VOC and toxics performance similar to

that of ethanol-based formula fuels.

Since these emission reductions are

smaller than the 15 percent minimum

reduction specified in the Act, EPA

proposes that the toxics performance

standard under the complex model be

set 15 percent below the toxics emission

level of baseline gasoline.

EPA has considered basing its toxics

performance standard on the

performance of simple model fuels

rather than the statutory requirements.

The Agency is not proposing such an

approach in today's notice for the

reasons outlined in the SNPRM. In

particular, the Agency is concerned that

such standards would have an adverse

impact on refiners whose 1990 baseline

levels of sulfur, aromatics, T50, and T90

are higher than CAA baseline levels of

these parameters. Since the simple

model does not include these

parameters while the complex model

does, such refiners may face additional

expenditures in 1997 to comply with

the statutory requirements. A more

stringent set of standards in 1997 would

raise the cost of the program

substantially. As discussed in the Draft

RIA, EPA does not believe that more

stringent controls are cost effective in

the case of toxics. EPA requests

comment on the proposed toxics

standards.

2. Phase I Complex Model VOC

Standards

Both the simple model and the

complex model predict that the VOC

emission performance of the formula

fuel would be less stringent than the 15

percent standard specified in the Act.

As a result, Phase I VOC performance

standards will not be determined by the

performance of the formula fuel.

As discussed in the NPRM and

SNPRM, the Agency believes that Fuels

3 and 4 are producible, with Fuel 3

considered more representative of

typical Class B simple model fuels.

Since such fuels (which will be required

in Class B under the simple model)

would achieve VOC emissions

reductions of 38.7 to 39.6 percent

relative to the CAA baseline fuel under

the complex model, EPA proposes that

the Phase I performance standard for

VOC emissions in Class B areas be set

by the performance of Fuel 3, as

predicted by the complex model. This

performance standard amounts to a 38.7

percent reduction in VOC emissions

relative to CAA baseline levels and a

22.7 percent reduction from the VOC

emission level of Class B baseline

gasoline.

The above VOC reductions were

based on fuels just complying with the

0.95 volume percent benzene standard

(with averaging) and aromatic content

adjusted accordingly. Simple model

fuels with lower benzene levels could

have higher levels of aromatics. Due to

beneficial effect of reduced aromatics on

VOC emissions, Fuels 3 and 4 described

above produce slightly greater VOC

reductions than simple model fuels with

lower benzene and higher aromatic

levels. For example, with benzene levels

at 0.80 volume percent, the VOC

reduction decreases to 37.5-38.4

percent relative to CAA baseline

gasoline and 21.1-22.3 percent relative

to Class B baseline gasoline (see DRIA).

EPA requests comment on setting the

Class B VOC performance standard

based on the performance of simple

model fuels. EPA also requests comment

on utilizing Fuel 3 to set this

performance and, if Fuel 3 was not

used, which particular simple model

fuel should be used to set the

performance standard.

EPA is also considering setting the

Class C VOC standard on the

performance of simple model fuels. As

shown above, Fuels 1 and 2 achieve

greater than the 15 percent minimum

statutory requirement. However, with a

lower benzene level of 0.8 volume

percent is considered, the VOC

performance of Class C fuels decrease

slightly to 18.3-19.1 percent (see DRIA).

EPA requests comments on setting the

VOC performance standard based on the

performance of simple model fuels and

on where in the range of this

performance. In both cases, the Agency

invites comment on the air quality and

cost impacts which would result.

E. Dilution and Interactive Effects

In the SNPRM and at a number of

public workshops, EPA has indicated its

concern over the possibility that

mixtures of reformulated fuels may not

achieve the emissions reductions of

either fuel in isolation. The Agency has

investigated the possibility of

unfavorable dilution or interactive

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effects occurring between reformulated

fuels. Since EPA has not been able to

resolve these concerns, today's notice

does not propose any measures to

control such effects. EPA requests

comment on whether and how it should

account for and control such effects and

refers the reader to Docket A-92-12 for

additional information on this issue.

VI. Phase U Reformulated Gasoline

Performance Standards

A. Legislative Requirements

Section 211(k)(3)(B) of the Clean Air

Act requires, in the year 2000 and

beyond, that aggregate emissions of

ozone forming volatile organic

compounds (VOCs) and toxic air

pollutants from baseline vehicles using

reformulated gasoline be 25 percent

below emissions from baseline vehicles

using baseline gasoline during the high

ozone season. The Act also specifies

that the 25 percent reduction level may

be adjusted to provide for a greater or

lesser reduction based on technological

feasibility, including consideration of

the cost of achieving the reductions.

However, in no case can the required

reductions be less than 20 percent. The

required emission reductions are called,

hereafter, the Phase I1 standards.

The Phase I1 requirements would

apply to gasoline which is sold in those

ozone nonattainment areas required to

receive reformulated gasoline and in

those areas which have already opted

into the program or which opt in at a

later date. However, EPA is considering

and requesting comment on an option

that would permit states to opt-in to

only Phase I and maintain the Phase I

requirements beyond the year 2000.

Compliance with the Phase H standards

(and all reformulated gasoline

certification) would not change relative

to that with the Phase I standards for

1997 and beyond.

Section 211(k)(1) of the Act specifies

that the Administrator shall consider, in

addition to cost, non-air quality and

other air quality-related health and

environmental impacts, and energy

requirements associated with achieving

the required emissions reductions.

Summaries of the cost, health and

environmental impacts of achieving the

proposed emissions reductions are

presented below and are more

thoroughly discussed in the Draft RIA

associated with this proposal.

In addition to the VOC and toxic

emissions reductions, section

211(k)(2)(A) of the Act specifies that

there be no net increase in NOx

emissions (over baseline NOx levels)

resulting from the use of reformulated

gasoline. The Act further specifies that

if increases in NOx emissions are

unavoidable due to the control of other

fuel components, other requirements

may be waived or adjusted. As will be

shown below, NOx emission increases

due to the use of reformulated gasoline

are unlikely, and are definitely

avoidable. Furthermore, the Agency

believes that NOx emission control va

-reformulated gasoline may be a

technologically feasible and costeffective option. EPA 4 has reviewed a

National Research Council study 5 and

other ambient ozone analyses and found

that additional NOx reductions would

significantly reduce ozone formation in

some areas. Section 211(c) of the Act

gives the Agency broad regulatory

authority to regulate fuel quality if the

emission products of such fuels

contributes to air pollution.

Under section 211(c), the Agency

must consider the effects of the

emissions on public health, considering

scientific data and other factors,

including technological feasibility.

Additionally, the fuels which may be

used as substitutes may not endanger

the public health or welfare more than

the original fuel. Because any fuel

producing a net reduction in NOx

emissions would also have to meet the

above performance standards for VOC

and toxics emissions (i.e., will qualify as

a reformulated gasoline), EPA does not

expect that a reformulated fuel subject

to NOx control could endanger the

public health more than a fuel which is

not subject to NOx control. Therefore,

EPA is proposing a NOx emission

reduction standard of 0 to 15.3 percent

in connection with the Phase H

standards to further reduce ozone

formation during the high ozone season.

EPA requests comments on the need for

NOx emissions control in reformulated

gasoline areas and on the use of its

authority under section 211(c) to add

NOx control to the reformulated

gasoline program.

B. Determination of Proposed Standards

The proposed emission reduction

standards and their development are

discussed below. The proposed

standards are based on EPA analyses of

the costs and emission reductions,

particularly the cost effectiveness,

associated with changes in different fuel

components.

1. Methodology

The methodology for determining the

cost effectiveness of fuel component

4 Lindhjeam, C. TBA, 1992.

5 "Rethinking the Ozone Problem in Urban and

Regional Air Pollution," National Research Council.

December 18, 1991.

changes is described in the Draft

Regulatory Impact Analysis (RIA).

Individual fuel component control costs

and the effects of changes in one fuel

component on the other fuel

components are integral parts in the

determination of the cost effectiveness

of an emission control strategy. In this

analysis, these two integral parts were

estimated. from the results of refinery

modeling performed by Turner, Mason

and Company (for the Auto-Oil

Economics group) and Bonner & Moore

Management Science (for EPA) and on

survey results presented by the

California Air Resources Board (CARB).

Comments on the use of these studies

for estimating individual fuel

component control costs and coincident

fuel component effects are requested.

Individual fuel component control

costs include operating costs and

annualized capital costs. EPA believes it

is reasonable to base the proposed Phase

H standards on cost effectiveness, which

EPA defines here as the ratio of the

incremental cost of a control measure to

the incremental benefit, e.g., tons of

VOC or NOx emissions reduced or

number of cancer Incidences avoided.

The use of cost effectiveness allows for

the relative ranking of various control

strategies so that a specified

environmental goal can be achieved at

minimum cost. EPA also evaluated the

overall cost of the proposed standards to

ensure they would be reasonable.

All emission reductions for Class C

area are calculated relative to the

statutory baseline per the requirements

of the Act and all emission reductions

for Class B areas are calculated relative

to a fuel with an RVP of 7.8 psi and

statutory baseline levels for all other

parameters. As for Phase I reformulated

gasoline, all Phase H reformulated

gasoline must have at least 2.0 weight

percent oxygen and maximum 1.0

volume percent benzene. The cost of

these requirements is not accounted for

in the determination of the incremental

cost effectiveness of the Phase II

standards (though the Draft RIA does

contain updated costs for each of these

two mandated controls). The cost

effectiveness of incremental changes in

fuel components is, thus, determined

relative to the statutory baseline and the

mandated reformulated gasoline

requirements. EPA requests comments

on the methodology used in

determining the cost effectiveness of

fuel component changes and on the

individual fuel component control

costs. Additional fuel component

control cost data is also welcome.

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2. VOC and NOx Control

a. Control Costs. The total cost (or

manufacturing cost) of producing a

reformulated gasoline is the sum of the

capital recovery cost and the operating

cost. In determining the cost of fuel

changes for VOC and NOx control, EPA

assumed that, because VOC control is

mandated only during the high ozone

season, the length of which was

described in the NPRM and SNPRM,

operating costs of changes made to

produce reformulated gasoline would

only occur in the summer and not in the

winter, in effect, idling any process

units built especially for the purpose of

meeting the reformulated gasoline

program emission requirements.

However, capital costs would have to be

fully recovered regardless of whether

the equipment was used seasonally or

not. EPA adjusted the capital costs

accordingly, and used the sum of the

adjusted capital cost and the original

operating cost as the individual fuel.

component control cost in the VOC and

NOx cost-effective analyses. An

example of the individual fuel

component costs and the associated

incremental percent reduction in VOC

emissions are shown for Class C areas in

Table VI-1.

Complete information on the

development of the individual

component costs for both Class B and C

areas is provided in the Draft RIA. As

will be discussed under the section on

toxics control, in its estimate of the cost

effectiveness of toxics control, EPA did

not adjust the capital cost portion of the

individual fuel component control costs

as described above because toxics

reductions are required year-round.

Comments on the costs presented in

Table VI-1 and on their derivation are

requested, as well as additional fuel

component control cost data and

supporting description.

TABLE VI-1.--CASS C COMPONENT CONTROL COSTS AND VOC EMISSioN REDUCTIONS

Cumu- led"

Cornponent Central level Irc,, - al) VOC

cost (c/gal reduc-

_______(%)

oxygen ....... 2.0 wt% .... '1.87-3.36 9.0

Benzene 1.0 vel% 0.60 9.0

RVP ............ 8.1 Pei ........ 0.57 17.6

RVP .-.... 7.4 psi ........ 1.67 .25.3

Sufur .......... 180 ppm 0.35-0.57 26.4

Oxygen ....... 2.7,w% '... 0.10--1.18 28.5

Olefins ......... .o % ..... 1.81-2.44 '30.2

Sulfur .......... 50 p ...... 1.45-1.88 31.2

Aromatios .... 29 % ...... 0.61-0.96 M 31.4

Based on MTBE. Etanol use b e cted to be

less expensive under the pro0svae of ectlon I.

b. Cost Effectiveness. In this analysis,

the incremental cost effectiveness of an

emission control obtained through fuel

modifications is the ratio of the cost of

a fuel component change to the

additional reduction in emissions that

occurs because of that fuel change. In

determining the emission reductions

and the associated cost effectiveness of

VOC and NOx standards, EPA employed

a convention typically used in

estimating the benefit of both mobile

and stationary source VOC controls.

This convention requires the

determination of cost effectiveness on

the basis of annual tons of VOC

reduced. Thus even though VOC

emission reductions reduce ozone

formation only during the high ozone

season, the convention is to calculate

the cost of the fuel component control

per ton of VOC removed as if the high

ozone season emissior reductions were

obtained over the whole year.

EPA is proposing a range of VOC

standards and NOx standards based on

particular combinations of uel

comipnent tontrols which reduce VOC

(and VOC Plus NOx emissions at a cost

of less than $5,000 and less than

$10,00o per ten, respectively. EPA

believes the thesernges represert the

upper limit of costs which will be

incurred by many ozone nonattainment

areas in achieving attainment. EPA

requests comments on the . appropriateness of these limits. The

combination of fuel components on

which the proposed standards are based

are, however, just one of many fuel

formulations which could be used to

achieve the standards. It must be

stressed that the proposed standards are

performance standards which may be

met by the refiner's choice of fuel

component controls.

Normally, use of these cost per ton

limits would determine the depth of

RVP controls projected for Class B and

C fuels. However, limited RVP control

cost data below 7.2 psi prevented the

determination of RVP levels which

exceeded the cost-effectiveness limits.

Instead, EPA based the proposed Phase

II standards for Class B areas on a range

of RVP levels of 6.5-7.2 psi. For Class

C areas, the proposed standards are

based on RVPs of 6.5-7.4 psi which

result in the same nonexhaust VOC

emissions in Class C areas as the range

of Class B RVPs do in Class B areas.

Comments are requested on the level

of RVP control in each class which is

reasonable for use in setting the Phase

11 standards.

c. VOC and NOx Standards. Based on

the complex model and the refinery

modeling studies described above, EPA

has found that the VOC performance

standards listed in row A of table VI-2

could be met under the various RVP and

cost per ton limits.

TABLE VI-2.---PROPOSED STANDARDS FOR PHIASE II REFORMULATED GASOLINE

[Percent reduction in emissions)

Cost effectiveness <$5,000 per Cow efectveness 410,000

ton 4Wlon

ClamB' ClaM C Clms CloseC

A. VOC standard ............................................................................................................................ 1 .5-26.6 25.3-25.3 22.1-30.1 28.5-,8 2

B. NOx Standar ............................................................................................................................. 6.3- 7.5 "6.3- 7.8 14.0.-15;0 14.0-16.3

C. VOC standard fWNOx std ..................................................................................................... 19.7-27.7 28.4-34.0 25.5-33.0 31.2-38.

D. Toxlcs standard from VOC s ............................................................................. ... 16.9-21.5 28.4-28.4 23.9-26.3 30.4-32.7

1 Class B stswdarde mtiveto e Clean Air Act base fuel with RVP at 7.8 psi.

EPA is also proposing a Tange of NOx

standards for-comment. The lower end

of this range Is a year-round zero NOx

increase, as required by section

211(k)(2)(A) of the Act. n addition,

under itsauthority provided by section

211(c) of the Act, the Agency is

proposing a 7ange efNOx reduction

standards to further reduce ozone

formation. The range under

consideration for the stringency of the

NOx standards (i.e., NOx emission

reduction requirements) is zero up to

those shown in jmw B of table VI-,2. As

for VOC, the NOxemission controls

would apply onlyduring the high ozone

season.

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These NOx reductions are possible for

a cost ranging from less than $1,000 per

ton of NOx, to as high as $5,500 per ton

of VOC plus NOx. EPA has found that

the costs of other NOx control programs

range from $300 to $6,000 per ton of

NOx. Comments are requested on the

cost-effectiveness limit to be used in

determining the appropriate level of

NOx control here.

The additional fuel component

changes which yielded the proposed

NOx standards also further decreased

VOC emissions. While these fuel

component changes were not cost

effective when based solely on VOC

control, they are cost effective using the

$5,000 and $10,000 per ton of VOC plus

NOx targets. The VOC standards

achievable within these costeffectiveness limits when both VOC and

NOx control are considered are shown

in row C of table VI-2. Comments are

requested regarding whether EPA

should promulgate the more stringent

VOC standards of row C if it also

implements the NOx standards of row B

or whether the slightly more relaxed

standards contained in row A should be required.

Regardless of whether the VOC

standards are based on those of Rows A

or C, the addition of a NOx performance

standard would further restrict refiners'

flexibility in producing qualifying fuels.

EPA therefore requests comments on an

option whereby the VOC performance

standards shown in row A of table VI2 would be relaxed even further if a

NOx reduction standard was

promulgated. This decision would be

ased on the premise that NOx

emissions reductions were more

important for ozone control than VOC

reductions and that the acceptable cost

of VOC reductions should be lower than

those considered in table VI-2.

Comments are also requested on

granting refiners the option to trade off

VOC and NOx control within fixed

limits on either standard and on

whether the trade-off should be one for

one (in percentage reduction terms) or

on some other basis.

As an additional alternative to EPA

setting a single NO. reduction standard

for all reformulated gasoline, EPA

requests comments on an option

whereby areas covered by the

reformulated gasoline program would be

permitted to choose between a VOCreducing and a VOC and NO-reducing

reformulated gasoline. This decision

could be made by each state based on

detailed air quality analyses of their

individual ozone nonattainment

problems. A potential problem with this

option is that it would require the

production of another type of gasoline

in one or more grades. Distribution

problems and complications already

expected with implementation of the

reformulated gasoline requirements

could increase. Comments are requested

regarding benefits or drawbacks to

providing optional NO. emission

reduction standards.

3. Toxics Control

a. Control Costs. As discussed above,

in determining the cost of fuel changes

for VOC and NO. control, EPA adjusted

the capital cost portion of the individual

fuel component control costs to account

for the fact that VOC and NO. control

are necessary only during the high

ozone season. Toxics emissions,

however, must be controlled year-round

and, thus, no adjustment is needed for

capital costs already amortized on an

annual basis. The individual fuel

component costs shown in table VI-1

for VOC and NO, control are, thus,

higher than those used in the

determination of the cost effectiveness

of toxics emissions control.

b. Proposed Toxics Standard. Fuel

controls for the sole purpose of reducing

toxic emissions are not very costeffective. Acceptable costs are typically

between $1 and $10 million per cancer

incidence reduced. However, based on

the fuel component control costs used

In this analysis, EPA estimates that fuel

modifications for the control of toxics

emissions would cost over $100 million

per cancer incidence reduced.

At the same time, the control of fuel

components to reduce VOC emissions

also results in average reductions of

toxics emissions of 17-33 percent, as

shown in row D of table VI-2. However,

EPA believes that Congress intended

this program to provide fuel producers

flexibility to produce a variety of

complying fuel reformulations. While

these toxics reductions would

presumably be free since they would

result from VOC and NO. controls, in

this case, they would also automatically

occur with or without a regulatory

standard. If it were more economical for

a particular refiner to use fuel

modifications to meet the VOC and NO.

standards which did not produce this

degree of toxics reduction, then that

refiner would be faced with controlling

toxics explicitly, which appears to not

be cost-effective. Thus, while a toxics

performance standard greater than the

25 percent level specified in section

211(k)(3)(B)(ii) of the CAA is feasible, it

would not be cost effective and EPA

proposes setting the standard at 25

percent. Section 211(k)(3)(B)(il) of the

CAA also permits EPA to reduce the

toxics performance standard below 25

percent to as low as 20 percent

considering the cost of achieving such

reductions in toxic emissions. The same

arguments expressed above for not

requiring greater than a 25 percent

reduction are equally applicable below

25 percent. Thus, EPA also proposes as

a second option that the toxics

performance standard be set at the 20

percent minimum level specified by

section 211(k)(3)(B)(ii) of the CAA.

Comments are requested on this

standard and the decision to not require

a greater toxics performance standard of

the magnitude shown in row D of table

VI-2.

4. Technological Feasibility

Per the requirements of the Act, the

technological feasibility of producing

fuels which would meet the proposed

standards must be considered in

establishing the standards. EPA believes

that the refinery modeling results, from

which the fuel component control costs

were estimated, provide the justification

for the feasibility of the proposed fuel

component changes. The refinery

models utilized only well-developed,

demonstrated, commercially available

technologies, and hence will only

produce fuels within the limits of these

technologies. In all likelihood new

technologies will be developed between

now and the year 2000 which will

reduce the costs for certain types of fuel

component changes. Thus, EPA believes

that the determination of fuel

component control costs using the

results of such models is reasonable and

that the feasibility of producing such

emission-reducing fuels Is justifiable.

A key exception to this is the

production of fuel with RVP below 7.2.

EPA is in the process of conducting

refinery modeling to assess this. Upon

completion, the results will be placed in

the docket to this rule.

Because the standards proposed today

will not take effect until the year 2000,

EPA does not believe that lead time

issues should present problems to

reformulated gasoline producers in

achieving the proposed reductions, as

all the processes needed to produce

complying fuels are already

commercially available.

EPA has evaluated both driveability

and safety concerns associated with the

use of low RVP fuels and found no

significant negative impacts. These

issues are addressed in the Draft RIA.

Comments are requested on potential

technological barriers to achieving the

proposed VOC, NO. and toxics

emissions reductions.

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VII. Enfkrcement Provisions

A. Introduction

This section of today's proposal

addresses enforcement topics that result

from inclusion of the complex model in

the reformulated gasoline program. In

addition, it addresses several

enforcement topics that were the subject

of the April 16, 1992 SNPRM (57 FR

13416), but that EPA now believes merit

re-proposal as a result of comments

received on the SNPRM. EPA's

approach has changed as a result of

these comments and EPA believes an

additional opportunity for comments on

its current approach is warranted. The

regulatory text being placed in the

docket to accompany today's proposal

includes new regulatory language for

these re-proposed topics.

These topics include: Changes to the

gasoline quality survey necessitated by

the possibility of gasolines that were

certified under the simple model and

under the complex model being present

in a covered area at the same time; the

inclusion of a ratchet of the minimum

oxygen content standard based upon

gasoline quality survey results;

provisions for waiving certain

enforcement mechanisms for gasoline

produced under the State of California's

reformulated gasoline program; and

modification of the attest engagement

requirements to allow use of internal

auditors under certain circumstances.

EPA intends to respond in the final

rule to other comments made on the

SNPRM, and in many cases EPA intends

to make the change suggested by the

commentor. Where EPA intends to make

such other changes, EPA does not

believe the changes are so different from

the SNPRM that reproposal is necessary.

These changes therefore are excluded

from today's proposal, including the

accompanying regulatory text. As a

result, commentors to the SNPRM

should not view omission from today's

proposal or accompanying regulatory

text of an EPA reaction to a particular

SNPRM comment to be indicative of

EPA's intentions regarding that

comment.

B. VOC Emissions Performance and

Oxygen Standards Under the Simple

Model

Section 211(k)(2)(B) of the Clean Air

Act requires that, with certain

exceptions, reformulated gasoline must

contain at least 2.0 weight percent

oxygen. Section 211(k)(7) allows for

oxygen credits for reformulated gasoline

containing greater than 2.0 weight

percent oxygen, and for the transfer and

use of oxygen credits within the same

nonattainment area to the extent such

credits would not result in a lower

average oxygen content than would

occur in the absence of any credit use.

Section 211(k)(3) sets a performance

standard for VOC emissions.

As a result of comments received in

response to the simple model SNPRM,

EPA is proposing certain changes to the

approach proposed under the simple

model for ensuring that the averaged

standards for VOC emissions

performance and oxygen content are

met. These changes include a direct

survey measure for VOC emissions

performance, and an annual oxygen

survey with adjustments for the oxygen

minimum. These proposed changes are

unrelated to the complex model.

In the simple model SNPRM, EPA

proposed a gasoline quality survey

mechanism for ensuring that the average

VOC emissions performance of

reformulated gasoline in each covered

area would at least equal the per-gallon

standard. The purpose of compliance

surveys is to ensure that refinery/

importer averaging achieves the same

compliance on average with the

reformulated gasoline standards as

covered area averaging, and thus does

not result in poorer air quality than

would have otherwise occurred with

covered area-based averaging or with

straight per-gallon standards. See

SNPRM at 57 FR 13462. The gasoline

quality survey is described in the simple

model SNPRM at 57 FR 13459-13464,

and certain changes to the survey are

discussed later in this section of the

preamble. EPA seeks comment on the

burden this area-by-area averaging

scheme would impose on the regulated

community. At the time of the SNPRM, there was

no appropriate equation for measuring

VOC emissions performance directly. As

a result, under the simple model survey

proposal, surveys conducted during the

high ozone season would monitor

average levels of RVP and oxygen

content, the parameters through which

compliance with the VOC emissions is

based.6 Under this simple model

proposal, if a survey result showed an

average RVP level above (or worse than)

the per-gallon standard for RVP, the

averaged RVP standard and the

maximum per-gallon RVP standard

would each be adjusted to be more

stringent. In the case of oxygen under

6 Although under the simple model sulfur. T90,

and olefins also were known to affect VOC

emissions performance, the average standards for

these parameters are each refiner's or importers

1990 average levels. As a result. compliance with

these parameters would be based upon the total

reformulated gasoline produced by each refiner or

imported by each importer (or, in some cases,

produced at each.reflnery). and could not be the

subject of the gesoline quality surveys.

the simple model proposal, however,

there would be no adjustments to the

averaged oxygen standard. Instead, in

the event the survey results showed an

average oxygen content of less than 2.0

weight percent, the average and

maximum RVP standards would become

more stringent. See discussion at 57 FR

13458-13459.

Several commenters to the simple rule

SNPRM stated that it would be more

appropriate to apply survey measures of

RVP and oxygen to a VOC emissions

performance equation, rather than to

survey for RVP and oxygen separately.

If the results of this equation indicate

inadequate VOC emissions performance,

according to these commenters, it would

be appropriate to adjust the averaged

and maximum simple model standards

for RVP. Because a suitable equation for

measuring VOC emissions performance

is available now, EPA agrees that this

suggestion would more directly ensure

compliance with the VOC performance

standard.

For these reasons, EPA is proposing

that each survey conducted during the

high ozone season would include

measurement of RVP and oxygen, and

that these two parameters would be

applied to a VOC emissions reduction

equation for each sample collected. The

average VOC emissions reduction would

then be calculated for all samples

collected during the survey. The

standard against which this result

would be measured would be calculated

by applying to the same VOC emissions

reduction equation. In the event the

survey result is less than the calculated

standard, the averaged and maximum

standards for RVP would be adjusted to

be more stringent for the city. This proposal for monitoring the

average VOC emissions reduction

standard creates the possibility that the

VOC standard could be satisfied for a

particular survey, with an oxygen

content below 2.0 weight percent. One

commenter suggested an approach to

address this concern that compliance

with the statutory minimum oxygen

content be ensured. Under this

suggestion, compliance with the

statutory requirement for 2.0 weight

percent oxygen would be evaluated by

determining the average oxygen content

of all samples collected during all

surveys during a calendar year. If this

average falls below 2.0 weight percent, 

the minimum oxygen content standard

would be adjusted to be more stringent.

EPA agrees with this suggestion, and

is proposing that the average oxygen

content of all survey samples collected

in each covered area during each

calendar year would be calculated. If

this average oxygen content falls below

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2.0 weight percent for any covered area,

the minimum oxygen standard for that

covered area would be adjusted to be

more stringent.7

C. Compliance Survey Under the

Complex Mode

EPA is proposing certain changes to

the compliance survey requirements

that were proposed in the SNPRM,

These changes are necessary to enable

the compliance surveys to function

during the period prior to the date the

complex model becomes mandatory,

when regulated parties have the option

of certifying reformulated gasoline

under the simple model or the complex

model.

During the period that begins on

January 1, 1995, and lasting until the

date the complex model becomes

mandatory, refiners and importers

would be able to certify reformulated

gasoline using either the simple model

or the complex model. This results in

the potential for both "simple model

reformulated gasoline" and "complex

model reformulated gasoline" to be

present in any covered area at any time,

up until the date that only use of the

complex model will be allowed. This

potential mixture of simple and

complex model reformulated gasolines

creates difficulties for the gasoline

quality surveys.

For example, under the simple model,

reformulated gasoline meets the VOC

emissions performance requirements

based upon a VOC emissions

performance equation that requires

input of values for RVP and oxygen.

Under the complex model on the other

hand. reformulated gasoline meets the

VOC emissions performance

requirements based upon the results of

a more complex equation that requires

inputs of several additional parameters,

including sulfur, aromatics, olefins, T50, and T-90. As a result, any particular

reformulated gasoline certified under

the complex model conceivably could

meet the VOC emissions performance

7 The general standards adjustment approach

proposed in the simple model SNPRM. for making

standards more and less string'et 15? FR 13462).

would be followed for adjumtmnts to the oxygen

minimum standard. Failure of the oxygen survey in

any year would result in an increase in the oxygen

standard of 0.1 percent. Acer five years of survey

failurs. the adjustadoxygen suaWard would be

equivalent to the per-galon oxygen standard

(2.0%). Note thal an uea say accomplish a one- time readjustnent (decreasing the standard by

0.1%) under theoxygen standard by passing all

oxygen content an'veys during two consecutive

years,

IThe compliance surveys ass discussed in the

SNPRM at 57 FR 13458-13464. Facept to the extent

described in today's proposal, the compliance

survey requirements that are proposed for the

SNPRM would apply under today's proposal.

standard of the complex model, yet fail

the requirements of the simple model.

Conversely., any particular reformulated

gasoline certified under the simple

model could have RVP and oxygen

levels that satisfy the simple VOC

equation, yet as a result of the levels of

other parameters included in the

complex model VOC equation violate

the VOC emissions performance

standard when using the complex

model.

Similarly, toxics emissions

performance under the simple model

would be a function of a gasoline's

oxygenate type and content, and its

benzene content, while under the

complex model toxics emissions

performance would be a function of

benzene, oxygen, sulfur, aromatics,

olefins, T-50, T-90, and RVP. Based

upon the same logic described above for

VOC emissions performance, a sample

of reformulated gasoline that meets the

toxics standard under the simple model

may not meet the toxics standard under

the complex model, and vice versa.

In order to avoid being confounded,

therefore, for the gasoline quality

surveys, EPA must use the simple

model to evaluate reformulated gasoline

certified under the simple model and

must use the complex model to evaluate

reformulated gasoline certified under

the complex model. Moreover, mixtures

of reformulated gasolines that are

certified using the simple model and

those that are certified using the

complex model would not be

susceptible to a survey analysis based

upon either the simple or the complex

models.

For the foregoing reasons, EPA is

proposing a mechanism that would

allow the collection of samples of

gasoline that are comprised only of

either simple model-certified gasoline or

complex model-certified gasoline. This

proposed mechanism would include the

designation by refiners or importers of

all reformulated gasoline as being

certified using either the simple or the

complex model; the mandatory

segregation of these two categories of

reformulated gasoline at all points in the

gasoline distribution system from the

refinery or import facility through the.

terminal from which gasoline is

transported to retail outlets; and the

retention at retail outlets of product

transfer documents for the most recent

deliveries of gasoline, to enable survey

-sample-takers to know if the gasoline

being sampled is simple model,

complex model, or a mixture of the two.

EPA seeks comment on whether the

above-described proposed tracking

requirements would obviate the need for

surveys because refiners or importers

would be creating an adequate paper

trail for gasoline. Under EPA's proposal, the survey

requirement would be satisfied if

complete representative surveys are

conducted of each category of

reformulated gasoline being sold in each

city subject to survey. That is, if both

simple and complex model-certified

gasoline is being sold in a city that is

subject to the survey requirement, a set

of representative samples must be

collected of the simple model-certified

gasoline, and a set of representative

samples of the complex model-certified

gasoline. If only simple or only complex

model-certified gasoline is being sold in

a city, however, a single set of

representative samples would satisfy the

survey requirement for that city. EPA be 'eves that in the case of a city

in which both simple and complex

model-certified gasoline is being used

the portion of gasoline in one of these

categories may be so small that, in spite

of good faith efforts to collect gasoline

in both categories, collection of a set of

representative samples of gasoline in

that category would be infeasible. In

such a case, EPA is considering whether

it would be adequate to permit a

regulated party (or group of parties) that

is conducting the survey would be able

to petition the Administrator to accept

the survey as complete, even though a

set of representative samples was

collected only of one category of

gasoline. EPA seeks comment on this

issue.

In the SNPRM (57 FR 13459) EPA

proposed that the consequence of failure

to submit a survey plan to the

Administrator would be that only pergallon standards would be allowed for

all gasoline sold within the covered area

for which the survey requirements were

not met, and that the consequence of

failure to properly carry out a survey

plan would be that the surveys not

properly carried out would be deemed

to have been failed. These consequences

also would apply for failure to submit

or properly carry out the survey

requirements regarding mixtures of

simple and complex-model certified

gasoline.

D. California Enforcement Exemption

On September 18, 1992, the California

Air Resources Board ("CARD") adopted

regulations for its Phase 2 reformulated

gasoline program. 9 These regulations

establish a comprehensive set of

gasoline specifications designed to

achieve maximum reductions in

0

New sections 2260 through 2272 and 2298, and

amended sections 2250, 2251.5, 2252 and 2296, of

Title 13, California Code of Regulations.

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emissions of VOCs, NOx, CO. sulfur

dioxide, and toxic air pollutants from

gasoline-fueled vehicles.

The California Phase 2 reformulated

asoline regulations establish standards

or eight gasoline characteristics--

sulfur, benzene, olefin, aromatic

hydrocarbons, oxygen, RVP, T-90 and

T-50--applicable starting March 1,

1996. The regulations also provide for

the certification of alternative gasoline

formulations based on vehicle emission

testing. The standards for the six

characteristics other than RVP and

oxygen content include two tiers--an

absolute limit ("cap") that will apply to

gasoline throughout the distribution

system (including alternative

formulations), and a more stringent

standard that will apply to gasoline

when it is initially suppliedfrom the

producer or importer (gasoline

qualifying as an alternative formulation

will be exempt from this more stringent

standard). For these six characteristics,

producers and importers will have two

options for complying with the

standards applicable to their gasoline

when it is first supplied--they can

choose either a "flat limit" or a more

stringent limit that can be met on

average through a "designated

alternative limit" process. The RVP standard of 7.0 psi applies

during summertime control periods 10 to

all gasoline throughout the distribution

system, including gasoline certified as

an alternative formulation. The oxygen

content standards consist of a cap

applicable to all gasoline (1.8%

minimum and 2.7% maximum) and a

flat limit for producers and importers

(1.8% minimum and 2.2% maximum).

The designated alternative limit option

does not apply to the oxygen standards.

Other standards apply on a year-round

basis.

In enforcing the Phase 2 reformulated

gasoline program, CARB has stated that

it intends to

1

0

1n the federal reformulated gasoline areas, San

Diego and Los Angeles (the San Diego and South

Coast Air Basins), the RVP control period is April

I through October 31.

maintain the strong enforcement presence we have developed over the more than 20-year

period we have been enforcing ARB motor

vehicle fuels regulations. The ARB's

Compliance Division currently uses four full

time persons to inspect fuel facilities,

including service stations, terminals, and

refineries. They presently take roughly 2300

samples a year, on a year-round inspection

schedule."

CARB tests most of its fuel samples in

a mobile fuels/toxics laboratory, which

can be set up anywhere in the State

within 12 hours, resulting in "a

substantial increase in the number of

gasoline samples taken by ARB

inspectors and the number of analyses

that have been performed."

Section 43016 of the California Health

and Safety Code provides a penalty of

$500 per vehicle for violations of CARB

reformulated gasoline and other fuels

regulations by parties in the gasoline

distribution network. To help assure the

applicability of these "per vehicle"

penalties to upstream parties, the Phase

2 reformulated gasoline regulations

provide that each retail sale of gasoline

for use in a motor vehicle, and each

supply of gasoline into a motor vehicle

fuel tank, is also deemed a sale by any

person who previously sold the fuel in

violation of the reformulated gasoline

standards.

EPA is proposing that the producers

of certain gasoline that is produced and

sold in the State of California under the

California Phase 2 reformulated gasoline

rogram ("California gasoline") would

e exempt from certain enforcement

provisions proposed in today's notice

and in the SNPRM. EPA is including

this exemption proposal because EPA

believes that the standards for California

gasoline are as stringent as, or more

stringent than, the proposed content and

performance standards for federal

reformulated gasoline. EPA also believes

that the enforcement mechanisms that

will be employed by the State of

California are sufficient to ensure that

producers of California gasoline will in

I IJanuary 14, 1993, letter from James B. Boyd.

Executive Officer of CARB, to Mary T. Smith, EPA

Office of Mobile Sources.

fact meet the California reformulated

gasoline standards. As a result, EPA

believes it is appropriate to rely on the

California reformulated gasoline

program to ensure compliance with the

federal reformulated gasoline standards

by producers of California gasoline.

EPA is not proposing that producers

of California gasoline would be exempt

from the federal reformulated gasoline

standards, only that these producers

would be exempt from certain

enforcement requirements designed to

demonstrate compliance with the

federal reformulated gasoline standards.

Although, for purposes of brevity, the

discussion in this section is couched in

terms of "refiners" that produce

gasoline in the State of California for

sale in that State, the discussion applies

equally to importers that import

gasoline produced outside the United

States into the State of California, and

to oxygenate blenders in the State of

California. As discussed more fully

below, refiners who produce gasoline in

other states and ship it into California

would not be covered by the proposed

exemption. California refiners who

produce gasoline for sale outside the

State would also not be covered by the

proposed exemption for such "nonCalifornia" gasoline.

1. Comparison of California and Federal

Reformulated Gasoline Standards

EPA has compared the properties of

California gasoline to the properties of

federal reformulated gasoline, and the

VOC, toxic, and NOx emissions that

result from both the California and

federal reformulated gasoline. Table

VI.1 contains estimates of the emissions

that are expected to result from

California and federal reformulated

gasoline (on both a per gallon and

averaged basis), and a comparison of

estimated emissions changes from Clean

Air Act base fuel. Because some of the

California standards are at, or outside,

the range of the EPA model, the

estimates for California gasoline are not

as reliable as those for gasoline meeting

federal standards.

TABLE VII-1.--COMPARISON OF CAUFORNIA GASOLINE WITH FEDERAL REFORMULATED GASOLINE (VOC-CONTROL REGION 1)

Fuel paentmer 'CAA base k I Cal.phase2 1 CalphMse2 1 Fedphasel I Fedphasel Fuel parameters (per-galior) (averaged) (per-gallon) ] (aveged)

Oxygen (wt %) Sulfur (ppmw).

RVP (psi) .......

T50 (F) ............ T90 (F) ............

0

339

8.7

218

330

2

30

7

200

290

.....................................................................................................

....................................................................................................

........................................................................... .........................

....................................................................................................

............................................................................. .......................

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TABLE VV-1.--CODMuPON OF CALFORNIA GASOLINE WMH wEDIm REFORmulATED GASOLINE JVOC-OONTnOL REGION I)-

FV oresse- A ba iue

Arornatts (vol)

Oleflns vo -

Absolute EmleosWlo.. of.

Ehasmg VOC ............. 418.8 324.9 31.3 384.5 383.3

Eva# VOC (Clan 8) ........................................... .. A 304.7 394.7 441.8 4183

TOW VOC 1277.3 719.6 711.0 826.3 101.3

Exhaust Benzene ............. . ......... . ................ ................................................ 25.4 14.1 111 8.7 18.8

Evap ientue e (Ceas O) ............................................ ...................................... 9.7 3.2 2.5 3.5 3.1

Total Bawma.m ...... .................................... w ----- 35,0 17.3 13.7 22 21.7

Exhaust ACET .................. ................. .... . ................ ......... 2.1 2.0 1.6 1.8 1.7

Exhaust FORM .................................. 3.8 4.6 4.5 4.3 4.4

Exhaust 1.3 BUT .......... .............. . . ........ . 3 3.1 2.8 4.2 4.3

ExhaustPOM .................................................................................................. 1.4 1.1 1.1 1.2 1.3

Total Tomtcs ... .................................................................................... 458 28.1 23.4 33.7 33.5

Percent change (A) In Emssons from CAA Fuel (VOC-Cont l Region 1)

Percenl A In Ejdiul .. .VC . . ... .......................................... -27.3 -29.3 -44.0 -14.3

Perest A In EAp VOC ......................................................... ..................... -54.1 -54.1 -48.7 -51.4

Percent. A in Total VOC .................... ...................... -45.0 -45A -36.8 -38.7

Percent In Exhaus Benzen t e .................................................................. ..... ; .................. -44.3 -56.1 -26.3 -26.9

Percent A In Evap Benzene ............................................................................ ...................... -87.2 -73.8 -64.0 -67.5 Pement A in TOW.Bon T.a. s .... . .................................................................. .....- 50.8 -81. -38.2 -38.1 PercentAinTtal To .. .... . . . ....... .... .. -38.5 -48.8 -211. -26.7

Prcnt N........ . . -13.9 -18.8 -2.2 -2.5 1 The California Phase 2 mm n oxygen n "flat imit c 1.8% to 2.2%, whidh fas explained in the teX) Is " In practice to be equvalent to per .. galon" anl "avee" e~I of 2i0%. Thee Is no designated alternative for oxygen.

This analysis compares Califonia

gasoline to the federal reformulated

gasoline that would be sold in VOCControl Region 1, because California is

located within this VOC-control region.

In the case of VOC. toic and NOx

enUssions performance. the California

gasoline has a greater emissions

perfornmooe reduction, as compared to

Clean Air Act base gasaiie, than the

federal reformulated gasoline. Ths

analysis thas sipports the enforcement

exemption that is being proposed today.

In theicase of the oxygen content

standards, ,he Agency has received

assurances from CARB that the oxygen

"flat lnit" of 1.8 to 2.2% will in.

practice be equivalent to the 2.0%

minimum oxygen content required by

section 211{k)(2)(B) of the Clean Air

Act. In a January 14, 1993, letter to EPA,

the Executive Officer of CARB sets forth

several masons why CARB expects

refiners to target an oxygen level of

2.0% and to produce gasoline that on

average will have an oxygen content at

least equal to this percentage, including:

9 The reproducibility of te test

method used for CARB enforcement is

larger than the oxygen -content tange.

meki* that effectively the CARB

standard represents "a 2.0%

requirement with a testing tolerance of

0.2 weight percent;"

* New limits on other gasoline

characteristics will require fundamental

changes in gasoline formulations and

reliance on oxygenates to maintain

current octane levels, likely resulting in

refiners "blending oxygenates near the

maximum end of the range to maximize

the octane benefits of oxygenates;" and

9 Some refiners may use the vehicle

testing for predictive model, when

adopted) compliance alternative in the

CARB regulations "to develop gasoline

formulations which may contain oxygen

levels up to 2.7 weight percent oxygen."

The Agency agrees with CARB's

assessment concerning the likely effects

of the oxygen content range in its Phase

2 regulations. In any case, EPA will still

have the authority to sample and test

California gasoline to assure that it

meets the federal reformulaled gasoline

minimum standard of 2.0%. as well as

the right to review company records to

ensure that the federal standard has

been met. The enforcement exemptions

proposed in today's notice would not

impact these basic EPA enforcement

capabiities.

The Agency also belies that

California's Phase 2 program will assure

"that the federal reformulated gasoline

standards are met in each of the two

cities (Los Angeles and San Diego)3 2

subject to those standards, as required

by section 211(k) of the Act. Both the

"flat limit" and "designated alternative

limit" standards in the California

program are substantially more stringent

than the faderai standards, as shown in

Table VI1. In addition, the RVP "cap"

of 7.0 psi that applies throughout the

distribution network is more stringent

than the federal standard, and averagifg

is not allowed to meet the Calfornia

oxygen standard. For all of these

reasons, it is very unlikely that one of

the two cities will not meet the federal

standards.1 3 The Agency requests

comments on this issme.

2. Applicability of California

Enforcement Exemption Provisions

EPA is proposing that the California

enforcement exemption provisions

12 In Ibi Jaary 44. 1993. leter, the CARB

Executive Officer stated dat the Stae does net plan

to opt Into the lederi reformulated gasoline

pro ftaor any other nonattainment ares in the

State.

'2Jn addition, f the ".vf California "caps"

sesult igasollnehat istat least a clean asolne

that meets the federal standards. the would not

be concerns about either or te two cities meeting federal requirements. EPA has not mod" te

emissIons effects-of die rp, howeve.

........ ........... ........................... I .................... ........... .........

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would apply only to gasoline that is

sold or dispensed within the State of

California, and that is either produced

in the State of California or is produced

outside the United States and imported

at an import facility located in the State

of California. Gasoline that is produced

at a refinery located within the United

States outside California would not

receive the proposed exemption, even if

such gasoline is sold in the State of

California.

EPA believes gasoline sold in

California but produced domestically

outside the State of California should

meet all of the proposed federal

enforcement requirements because the

producer of such gasoline would be

required to implement all of the federal

enforcement provisions for the

refinery's non-California gasoline. The

incremental cost of including the

California-market gasoline in the

refinery's compliance program would

not justify excluding this gasoline from

the federal enforcement mechanisms.

Additional reasons for this distinction

are: The ultimate market for gasoline

may not be apparent when gasoline is

produced, making an exclusion for only

California-market gasoline difficult to

apply in practice; and the California

state enforcement mechanism includes

refinery inspections, which may not be

possible in the case of refineries located

outside the California state boundary.

Gasoline produced in California but

shipped outside the State (e.g., to

Nevada) would not be subject to the

proposed enforcement exemption

ecause it is not covered by the

California reformulated gasoline

program. 14 The Agency understands

that California producers have

developed means to differentiate

between fuel that is subject to existing

California fuels regulations and fuel that

is not, for-purposes of assuring

compliance with the State's regulations.

EPA is concerned about whether these

practices are adequate to allow an

enforcement exemption in regard to

California gasoline produced at the

same facility, and requests comments on

this issue.

EPA is also concerned that a refiner

that operates a refinery located outside

the State of California that produces

gasoline both for California and nonCalifornia markets could average very

clean California gasoline with nonCalifornia gasoline, and produce nonCalifornia gasoline that is at the low-end

of the average range of the federal

14 Section 2260(a)(4) of the California Phase U

reformulated gasoline regulations defines

"California gasoline" as "gasoline sold. intended for

sale, or made available for sale as a motor vehicle

fuel In California."

standards. The non-California gasoline

thus could easily be below the average

federal standards, yet the refinery would

be in compliance on average. In order to

protect against this possibility, EPA is

proposing that a refiner that operates a

refinery outside the State of California

would be required to separately exclude

the gasoline that it sells in California

from the refinery's compliance

demonstration for federal reformulated

gasoline and anti-dumping

requirements. This would be in addition

to demonstrating the overall compliance

of all its gasoline with federal.

requirements. Under today's proposal, record

keeping and reporting requirements of

the proposed federal anti-dumping

requirements would not apply in the

case of California gasoline. EPA believes

that an exemption from these provisions

intended to demonstrate compliance

with the proposed standards or

conventional gasoline is appropriate

because all gasoline sold in California is

included in the California reformulated

gasoline rule. In other words, there is no

California corollary to the federal antidumping requirements. As a result,

gasoline that will be sold in portions of

California that are outside the federal

covered areas-and that would be

subject to the federal anti-dumping

requirements-will be required to meet

the full California reformulated gasoline

requirements. This feature of the

California program provides certainty

that gasoline sold in California that is

subject to the federal anti-dumping

standards will exceed these federal

standards. In addition, the proposed

federal anti-dumping requirements

would apply to California producers

shipping conventional gasoline outside

the State.

There are several conditions under

which the proposed California

exemption would not apply, either in

toto or in regard to specific parties.

First, EPA believes that the exemption

being proposed today should apply only

so long as the California reformulated

gasoline standards are at least as

stringent as the federal standards for

reformulated gasoline. EPA notes that

the California regulations contain

provisions that would allow the

certification of additional, undefined

gasoline formulations using a predictive

model (§ 2265 of the California Phase I1

reformulated gasoline regulations) or

vehicle testing (S 2266 of the California

regulations). EPA is concerned because

it is possible that a gasoline formulation

certified by the State of California under

one of these alternative methods could

be less stringent than the federal

reformulated gasoline standards, in

which case the exemption being

proposed today would not be

appropriate.

in order to protect against this

possibility, EPA is proposing that the

California exemption provisions would

apply only so long as each gasoline

formulation that could possibly be

certified under the California program is

at least as stringent as the federal

reformulated gasoline standards. In the

event that any formulation that is less

stringent than the federal reformulated

gasoline standards becomes certifiable,

the entire California exemption would

become null and void. If at any time

EPA believes a less stringent

formulation has been approved by the

State of California, EPA intends to

publish a notice of this conclusion and

the date that the California exemption

would no longer be applical e. This

notice would give regulated parties a

reasonable opportunity to take steps to

implement the federal enforcement

mechanisms that had been waived. This

procedure would also be followed if the

State revises its regulations to otherwise

provide for less stringent standards than

the federal program. Second, the Agency is concerned that

the variance provision contained in the

California regulations (§ 2271 of the

California Phase 2 reformulated gasoline

regulations) is not entirely consistent

with the federal provision dealing with

the inability to produce conforming

gasoline in extraordinary circumstances

(§ 80.73 of the proposed federal

regulations). In particular, the proposed

federal provision is limited primarily to

Acts of God, while the California

provision is not so limited. In addition,

the federal provision would require a

party to make payment to the U.S.

Treasury of the amount of economic

benefit derived from the nonconformity,

while the California provision does not

require such a payment. As a result, the

frnia exemption being proposed

today does not include relief from the

proposed extraordinary circumstances

provision in the federal regulations. A

party that, due to extraordinary

circumstances, intends to pro uce

gasoline that does not meet the federal

reformulated gasoline standards thus

would be required to comply with the

federal extraordinary circumstances

provisions, regardless of any variance

obtained from the State of California. If

a party obtains a variance from the

State, EPA proposes that the

enforcement exemption would cease to

apply to that party unless or until EPA

grants relief for extraordinary

circumstances under § 80.73.

Third, EPA believes that the proposed

California exemption provisions should

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apply only for parties that are in fact In

substantial compliance with both the

California and the federal reformulated

gasoline requirements. The presumption

that a refiner subject to the California

requirements is also in compliance with

the federal standards would not be

appropriate in the case of a party that

has violated the California or federal

requirements. As a result, the Agency is

proposing that a regulated party that is

assessed a penalty for a violation of

either the California or federal

reformulated gasoline requirements

would automatically be subject to the

loss of its California exemption. Under

the proposal, the exemption would be

lost no matter whether the penalty

assessment was the result of a judicial

or administrative adjudication, consent

agreement, or settlement agreement. A

party subject to the loss of its exemption

could petition the Administrator for

relief, in whole or in part, for good

cause. The Agency could also grant such

relief on its own initiative. Good cause

could include a showing that the

violation for which a penalty was

assessed was not a substantial violation

of the reformulated gasoline regulations.

The Agency requests comments on

whether it should base the loss of the

California enforcement exemption for an

individual refiner or importer on the

basis of a judicial or administrative

determination of violation rather than

on the basis of a penalty assessment.

EPA also requests comments on an

appropriate date (e.g., 30 days after a

final penalty assessment) on which the

loss of the exemption would become

effective, and on whether such a loss

should be stayed during the pendency

of a petition for relief.

Fourth, the California Phase 2

regulations allow small refiners (as

defined in the California regulations) to

obtain a two-year extension until March

1, 1998, to meet the specifications for

sulfur, olefins, T-50, and T-90, under

certain conditions. Small refiners will

be subject to the same RVP, oxygen,

aromatic hydrocarbon, and benzene

requirements as other refiners under the

California program. Because small

refiners that obtain such an extension

will not be required to produce gasoline

that meets all the federal reformulated

gasoline standards, EPA does not

believe that it is appropriate to exempt

such refiners from any of the federal

enforcement provisions. Thus, the

California gasoline exemption proposed

in today's notice would not apply to

gasoline produced under any small

refiner extension granted by CARB.

Finally, EPA believes that the

proposed California exemption should

apply only during the time the federal

Phase I reformulated gasoline program

is in effect, i.e., until the year 2000. EPA

intends to reevaluate the California

reformulated gasoline program before

the year 2000, and to engage in a

separate rulemaking If it believes that

the California enforcement exemption

should be extended beyond the year

2000. That rulemaking would allow the

Agency the opportunity to structure any

future enforcement exemption to be

consistent with both the federal and the

California rules that will be in effect at

that time

3. Enforcement Provisions to Which

Exemption Would Apply -

EPA is proposing that subsequent to

the date the California'Phase 2

reformulated gasoline standards become

effective, regulated parties that produce

or import California gasoline and that

meet the other criteria described in the

preceding section would be exempt

from meeting the proposed enforcement

requirements dealing with compliance

surveys (§ 80.69), independent sampling

and testing (§ 80.70(c)), designation of

gasoline (§ 80.70(d)), marking of

conventional gasoline (§ 80.70(g)).

downstream oxygenate blending

(§ 80.72), record keeping (§ 80.74),

reporting (§ 80.75), product transfer

documents (§ 80.77), and antidumping

record keeping (§ 80.105) and reporting

(580.106).

The Agency specifically requests

comments on whether California

gasoline should be exempt from

enforcement provisions related to the

renewable oxygenate program in the

proposed federal record keeping and

reporting regulations (§§ 80.74 and

80.75), should this program become

applicable to the Los Angeles and/or

San Diego areas. Such an exemption

may not allow the Agency to adequately

enforce this program if regulated parties

are allowed to freely transfer renewable

oxygenate units among areas subject to

this program, as proposed elsewhere in

today's notice.

EPA believes that it is appropriate to

exempt producers of California gasoline

from the independent sampling and

testing, record keeping, and reporting

provisions in the proposed federal

regulations because these provisions

deal solely with demonstrating

compliance with the federal

reformulated gasoline standards.

Because the proposed exemption is

predicated upon reliance on the

California reformulated gasoline

program to ensure compliance with the

federal standards, these provisions are

duplicative and therefore unnecessary.

It is appropriate to include the survey

provisions in the exemption because the

purpose of the surveys is to adjust the - federal averaged standards if surveys

reveal unequal distribution of averaged

federal reformulated gasoline. As

discussed above, the need for such

federal standards adjustments is

believed unnecessary in California

because it is highly unlikely that either

of the two California cities in the federal

reformulated gasoline program will

exceed federal standards. The gasoline

designation, conventional gasoline

marking and product transfer document

provisions are appropriate for

exemption because they deal only with

informing other regulated parties of the

time and place of use restrictions of

federal reformulated gasoline,

considerations that are inapplicable

within California because only

reformulated gasoline may be sold for

use within that State under its program.

4. Enforcement Exemption During 1995

The State of California's regulations

provide that the California gasoline

requirements become effective starting

on March 1, 1996, fourteen months after

the proposed January 1, 1995, effective

date for the federal reformulated

gasoline requirements. As a result, the

enforcement exemption proposal

described above would apply only

beginning on the effective date of the

California regulations. For the period

prior to this date, EPA is proposing an

exemption only from a more limited set

of federal enforcement requirements,

I.e., the proposed compliance survey

and independent sampling and testing

requirements (§§ 80.69 and 80.70(c),

respectively). EPA believes that it would be

appropriate to exempt producers of

California gasoline from the survey

requirements in 1995 because the

consequence of any survey failure in

California--an adjusted averaged

standard-would apply only in 1996,

after the California program would be in

effect. The Agency is concerned,

however, that there would be no

regulatory mechanism to assure that

federal standards are met in 1995 in

each of the California areas subject to

the federal program since, unlike 1996

and later years, the State's program will

not be in place. EPA requests comments

on whether area-by-area averaging by

refiners and importers, or some other

tracking mechanism, should be required

in lieu of compliance surveys in 1995.

In the case of the proposed

independent sampling and testing

requirements, EPA believes the costs

associated with establishing the

mechanisms and laboratory capabilities

that would be necessary to Implement

these provisions outweigh the benefits

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of having these requirements in place

for only one year. In addition, in 1995

California refiners and importers would

still be subject to the record keeping and

reporting requirements of §§ 80.74 and

80.75, the latter of which requires batchby-batch reporting of gasoline properties

and characteristics. These properties

and characteristics will have to be

determined by in-house sampling and

testing, and false reporting of these test

results will make the reporting entity

liable for both civil and criminal

penalties. The Agency requests

comments on the adequacy of these

regulatory and statutory requirements as

a substitute for independent sampling

and testing during 1995.

E. Attestation Engagements

EPA is reproposing regulations

governing the conduct of attestation

engagements.15 At the time of

publication of the SNPRM, EPA's

discussion of this topic with the

regulated community and with the

American Institute of Certified Public

Accountants (AICPA) was not complete.

There, EPA proposed several alternative

methods for conducting attestation

engagements.' 8 Today, EPA proposes to

adopt one of those alternatives and to

expand upon the SNPRM by allowing

the regulated comminity to use internal

auditors in appropriate circumstances.

The regulation proposed today would

apply to refiners, importers and

oxygenate blenders. For purposes of

simplicity, these parties are referred to

collectively as refiners in this portion of

the preamble.

Concurrent with the gasoline

production reporting requirements

proposed in §§ 80.75 and 80.108 of the

proposed regulations, EPA proposes

today that each refiner would be

required to annually engage a certified

public accountant or a firm of certified

public accountants, or to commission an

internal auditor to perform an agreedupon procedures attestation engagement

of the information which forms the basis

of the reports required by these sections.

1s Provisions pertaining to attestation

engagements were originally proposed in the

Supplemental Notice of Proposed Rulemaking, 57

FR 13415, at 13492 (April 16, 1992). 16An attestation engagement is to be

distinguished from an audit An audit refers to a review of financial records. An attestation

engagement refers to a review of other than

financial records to determine whether a representation by a company is supported by internal company records. An attestation

engagement is "one in which a practitioner is

engaged to Issue or does issue a written

communication that expresses a conclusion about

the reliability of a written assertion that is the

responsibility of another party." Statement on Standards for Attestation Engagements, S 1O0.Ol

(footnotes omitted).

The purpose of the engagement is to

corroborate the reports submitted by the

regulated party to EPA. The scope of the

engagement would cover the activities

of the refiner relative to the

reformulated gasoline and anti-dumping

requirements for the previous calendar

year and which are the subject of the

required reports to EPA. Further, the

scope of the engagement procedures

would be designed not to overlap with

proposed independent sampling and

testing requirements. The engagements

would not verify the tested properties of

specific batches of gasoline. Rather, the

engagements would account for the

accuracy of the designation of gasoline

(i.e., reformulated or conventional,

VOC-controlled or not VOC-controlled,

etc.) and verify that the proposed

reporting requirements for downstream

oxygenate blenders are being met. The

engagements would also verify that the

proposed reporting requirements for the

renewable oxygenate program are met.

EPA proposes that each refiner be

required to commission such an

engagement at the conclusion of each

calendar year, and that reports of the

engagement be filed with EPA by May

30 of the following year. Under EPA's

proposal, submission of the attestor's

report would be required and failure to

do so would constitute a reporting

violation by the refiner.

The proposed attestation engagements

are an outgrowth of EPA's experience

with the lead phasedown program,

which included averaging, banking,

credits, and periodic reports, and for

which EPA-conducted audits were an

essential part. Because the reformulated

gasoline program is significantly more

complex than the lead phasedown

program, EPA believes that attest

engagements are correspondingly more

important than in lead phasedown. These engagements are not intended

as substitutes for enforcement audits

conducted by EPA, but are intended to

serve as a means of improving

compliance with the reformulated

gasoline program by identifying

problem areas to the regulated parties. Such engagements would: Assure

parties that the records .on which they

base periodic reports would be reviewed

and cross-checked for accuracy by a

disinterested third party, including an

appropriate internal attestor (as well as

possibly by EPA); lead to correction of

simple arithmetic errors; aid in

correcting misconceptions about

regulatory requirements; and generally

deter making false reports.

In addition to the attestation

provisions described above, EPA is

today proposing additional regulations

applicable to refiners and importers

subject to the proposed renewable

oxygenate program. Such refiners would

be required to include compliance with

the additional requirements as part of

their annual attestation engagement.

The purpose of these additional

proposed requirements is to corroborate

the reports submitted by the regulated

party to EPA pertaining to the proposed

renewable oxygenate requirements. The

scope of these additional requirements

would cover the activities of the refiner

relative to all transactions involving the

use of renewable oxygenates in

reformulated gasoline and which are

subject to the proposed required reports

to EPA. The engagements would

account for the accuracy of records

reporting renewable oxygenate use and

verify that the proposed requirements

for such use are met.

The proposed attestation

requirements regarding the renewable

oxygenate program would require the

attestor to identify all batches of

renewable oxygenate program

reformulated gasoline supplied to each

covered area. The attestor would be

required to review a representative

sample of records pertaining to those

batches and verify that those products

were properly transported to their point

of dispensation for use; identify any

changes in ownership or destination;

compare laboratory analyses of the

product before and after transportation

for consistency; agree to the types and

classifications of oxygenates used; and

trace volumes of the product from

refinery gate to the point of dispensation

for use. The proposed requirements

would culminate with the attestor

including the results of inquiry in the

agreed-upon procedures report

described above.

As with the reformulated gasoline

program, the attestor would continue to

be obligated to exercise independent

judgment in collecting information not

specified in the regulations that would

otherwise form a basis for the agreedupon procedures report. Because the renewable oxygenate

program would be significantly new to

the regulated community, EPA invites

comment on all aspects of the proposed

attest engagement requirements for this

program.

1. Standards for Attest Engagements

a. Third Party or Internal Attestation

Engagements. In the SNPRM, 57 FR

13492, EPA proposed that "each refiner,

importer and oxygenate blender

commission an attestation

engagement 17 of the information which

12 While the SNPRM discussed this proposed

requirement in terms of an "audit" or "attestation

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forms the basis of the reports" required

by §§ 80.75 and 80.108. The SNPRM

proposed that the engagements be

conducted by a certified public

accountant ("CPA") and proposed the

standards for conducting the

engagement. The SNPRM contemplated

that the CPA would be independent of

the refiner commissioning the

engagement.

The proposed attestation standards

pertained to the need for technical

competence, independence of mental

attitude from the regulated party's

influence, due professional care,

adequate planning and supervision,

sufficient evidence, and appropriate

reporting. The proposed standards

contain a detailed description of the

specific engagement requirements for

each of the elements of the reformulated

and anti-dumping programs which are

subject to engagement review, and the

records and procedures which must be

included in the engagement. The

records and engagement procedures

which are specified are the minimum

necessary for an engagement, however,

and an attestor is expected to use

professional judgment to devise

engagement procedures to correspond

with the facts of each individual

engagement in light of the internal

company's accounting, operating and

administrative controls. The proposed

regulations also provide that in the

event that the specified engagement

procedures are not followed for any

reason, the deviation and the reason

therefore must be included in the

attestor's report% EPA received significant comments

objecting to the proposal that regulated

parties be required to engage

independent CPAs. Commentors

expressed concern that to require a third

party CPA would impose undue costs

on regulated parties which already had

in-house attestation capability. Further,

commentors desired to avoid such a

precedent-setting requirement.

Commentors were concerned lest they

be subjected to the expense of engaging

third party CPAs to attest to the gamut

of federal, state and local regulatory

activity engaged in by the commentors.

Commentors asserted that EPA's

interest in maintaining the integrity of

reports would be adequately served by

allowing appropriately qualified

internal attestors to conduct the

engagements. Commentors stated that

because only larger regulated parties

would be likely to employ internal

attestors, such attestors would be

sufficiently segregated from petroleum

engagement" interchangeably, the correct term for

this procedure is an "attestation engagement."

product manufacturing operations so as

to avoid biasing influences from the

subjects of the engagement. By contrast,

smaller regulated parties in which there

may be greater integration of company

operations are less likely to employ inhouse attestors and will need to

commission independent CPAs to

perform audits.

EPA accepts the rationale of allowing

qualified internal attestors to conduct

attestation engagements. EPA's concerns

with the integrity of the reformulated

gasoline and anti-dumping program are

well-served by the propose

requirement that an in-house attestor be

a member in good standing of the

Institute of Internal Auditors, Inc., and

completes each engagement in

accordance with the Codification of

Standards for the Professional Practice

of Internal Auditing, which are

proposed to be incorporated into the

regulations by reference.

[Note: The Federal Register Document

Drafting Handbook requires that each agency

must submit a written request for

incorporation by reference for approval from

the Director of the Federal Register at least

20 days before the final rule document is

submitted to the Federal Register for

publication].

In recognition of the eventuality that

the Codification of Standards may

eventually be modified, the regulations

propose that parties may petition the

Agency to implement procedures

through future rulemaking which are

consistent with those modifications.

Internal engagements are subject to

EPA compliance verification review.

The sampling and testing requirements

assure that the data underlying the

engagement will be preserved

sufficiently to allow EPA to verify any

internal engagement. In addition, there

are numerous checks and balances

throughout the program (including the

potential presumptive liability of

downstream purchasers) to assure that

internal engagements will be accurate.

Finally, internal attestors are subject to

civil and criminal liability under federal

statutes proscribing the filing of false

reports.

Accordingly, EPA proposes that the

regulations permit the use of two types

of attestors:

(1) Internal auditors may be used in

certain situations. Many large

companies have internal auditors on

staff who may perform the attestation

engagements required under these

guidelines. Internal auditors may

perform these duties provided they are

Certified Internal Auditors (CIAs) or

members in good standing of the

Institute of Internal Auditors, Inc. (hA).

As such, the internal auditors will be

required to act in accordance with the

HA's Standards for the Professional

Practice of Internal Auditing, This

requirement is intended to guarantee a

number of things: That the internal

auditor is independent of the activities

being audited under these regulations;

that the internal auditor is objective and

proficient in his or her profession; and

that the internal auditor is bound by a

code of professional ethics.

(2) When internal attestors meeting

the criteria discussed above are not

available within the refiner's

organization, an independent CPA or

firm of independent CPAs must be used

to perform the attestation engagement

proposed with these regulations.

Whether an internal attestor or a CPA

is engaged by a refiner, attestation

engagements would have to be

conducted in accordance with the

applicable professional standards

following agreed upon procedures

contained in the proposed regulations.

These regulations would cover a

different range of services than an audit

of historical financial statements.

Rather, the proposed regulations Involve

review of non-financial records. EPA

has worked closely with the AICPA and

industry in establishing procedures

which will accurately and efficiently

provide the intended compliance

information in the most cost-effective

manner.

The proposed regulations would

require that an attestation engagement

conducted by a certified public

accountant must be done in accordance

with the Statement on Standards for

Attestation Engagements (Am. Inst. of

Certified Pub. Accountants 1991) [note:

The Federal Register Document Drafting

Handbook requires that each agency

must submit a written request for

incorporation by reference for approval

from the Director of the Federal Register

at least 20 days before the final rule

document is submitted to the Federal

Register for publication], or by an

internal auditor in accordance with the

Standards for the Professional Practice

of Internal Auditing. The proposed

regulations also include specific

instructions relating to the subject areas

which must be included in each

attestation engagement, and the

minimum records and engagement procedures which are appropriate for

each subject area. Nothing in the

proposed regulations would preclude a

CPA from requesting assistance from a

refiner's internal auditors in accordance

with the Statement on Standards for

Attestation Engagements. In recognition

of the eventuality that the Statement on

Standards may eventually be modified,

the regulations propose that parties may

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petition the Agency to implement

procedures which are consistent with

those modifications.

b. Definitions. EPA has amended the

proposed rule by adding a new

proposed section defining terms for the

purpose of attest engagements. The

definitions are intended to clarify the

scope and content of engagement

analysis. These definitions provide the

minimum scope of documents to be

analyzed. EPA recognizes that many

engagements may need to be adjusted

on a case-by-case basis depending on

the specific nature of the regulated

facility. EPA anticipates that attestors

will exercise their professional

judgment in expanding the scope of

engagement inquiry to assure the

integrity of the engagement.

c. Attestation Guidelines. The

proposed rule includes a brief section

describing the method of selection of

sample size required of attestors relative

to the population of inquiry. The sample

size is prescribed so as to provide a

statistical confidence level of 95% in

the representative character of the

sample.

d. Agreed Upon Procedures for

Refiners, Importers and Oxygenate

Blenders. The new rule includes a

specification of the minimum data to be

analyzed by an attestor to comply with

the attest engagement requirements.

EPA recognizes that many engagements

may need to be adjusted on a case-bycase basis depending on the specific

nature of the regulated facility. EPA

anticipates that attestors will exercise

their professional judgment in

expanding the scope of engagement

inquiry to assure the Integrity of the

engagement.

. e. Agreed Upon Procedures Reports.

The proposed rule provides that the

attestor will issue to the regulated party

a certified report summarizing the

procedures performed and findings in

accordance with the Statement on

Standards for Attestation Engagements

or the Standards for the Professional

Practice of Internal Auditing. In turn,

the proposed rule provides that the

regulated party shall provide a copy of

the attestor's certified report to EPA

within a specified time. EPA intends to

develop standardized refiner-reporting

forms as a means of enhancing

uniformity and consistency in the

attestation engagement and agreed-upon

procedures.

VIII. Anti-Dumping Compliance and

Enforcement Requirements for

Conventional Gasoline

A. Introduction

Today's proposal for the antidumping program represents significant

changes from the Supplemental Notice

of Proposed Rulemaking published on

April 16, 1992 (57 FR 13415) -

(hereinafter "SNPRM 92"). This

proposal contains a dramatically

different solution to the problem of

accounting for blendstocks, as well as

other minor changes to the SNPRM 92.

To aid EPA in its consideration of the

various options proposed in today's

notice, as well as in prior proposals for

this rulemaking, EPA invites comments

on today's proposal (hereinafter

"SNPRM 93"). The following is a brief

summary of those changes with respect

to the major provisions of SNPRM 92

and how they have remained the same

or been changed in SNPRM 93:

9 Regulated Parties. Under SNPRM 92

regulated parties include refiners, blenders

and importers. Under SNPRM 93, the

regulated parties remain the same, except for

the exclusion of oxygenate blenders.

* 1990 Baseline. Under the SNPRM 92

refiners and Importers were required to

account for all gasoline and gasoline

blendstocks in determining their 1990

baseline. Under the SNPRM 93, these parties are no longer required to account for

blendstocks in their 1990 baseline except as

provided under Methods 2 and 3.

* Averaging Period. Under the SNPRM 92

refiners and importers would be required to

demonstrate compliance by averaging certain

properties of conventional gasoline over a

year long period and demonstrating

compliance with prescribed standards to be

discussed more fully below. Under the

SNPRM 93, the averaging period is the same,

except for the year that the Complex Model

becomes mandatory in which two separate

averaging periods would apply.

9 Compliance Standards. Under the

Simple Model standards in the SNPRM 92,

refiners and importers would be required to

demonstrate on an annual basis that average

exhaust benzene emissions of conventional

gasoline do not exceed the refiner's or Importer's 1990 baseline for exhaust benzene

emissions, and that sulfur, olefins and T90

do not exceed 125% of their average 1990

baseline levels. Under the SNPRM 93, the

Simple Model standards remain the same;

under the optional use of the Complex Model

(see further discussion below), annual

average levels of exhaust benzene emissions

would not be allowed to exceed the refiner's

or importer's 1990 average exhaust benzene

emissions; and under the Mandatory

Complex Model standards, annual average

levels of exhaust toxic emissions and NOx

emissions would not be allowed to exceed

the refiner's or importer's 1990 average levels

for exhaust toxic emissions and NOx

emissions. Under SNPRM 93, recipients of

blendstocks under certain circumstances

would have to adjust their compliance

baseline based on the volume of such

blendstocks. Under both the SNPRM 92 and

SNPRM 93, refiners with more than one refinery have the option of demonstrating

compliance for each individual refinery or

for all their refineries in the aggregate.

* Blendstocks. Under the SNPRM 92, all

gasoline blendstocks would be included in

line determination and in subsequent

compliance calculations. Under the SNPRM

93, blendstocks are accounted for in

compliance calculations if the blendstock to

gasoline ratio in a certain year exceeds the

combined ratio for 1990 through 1994 by more than 10% and certain circumstances are met to be discussed more fully below. For the

purposes of establishing the blendstock to

gasoline ratio only, the SNPRM 93 provides

that refiners and importers will account for

nine (9) specified blendstocks. o Other Provisions. The SNPRM 93

includes a new provision which requires that

parties account for all blendstocks that are transferred for the purpose of evading a more stringent baseline.

9 Registration of Regulated Parties. The

SNPRM 93 remains the same as the SNPRM

92, except that refiners and Importers are required to supply a statement of intent as to

whether compliance will be achieved on the

basis of individual or aggregate refineries;

and whether they will be using the Simple

Model or optional Complex Model standards

prior to the date that the Complex Model

omes mandatory.

* Record Keeping. The SNPRM 93 remains

the same as the SNPRM 92, except the

provisions have been expanded to reflect the

data necessary for determining compliance

under the Simple model, Optional Complex

Model, Mandatory Complex Model and

blendstock accounting requirements as

applicable.

o Reports. The SNPRM 93 remains the same as the SNPRM 92, excipt for the

additional requirement for refiners and

importers to report the blendstock to gasoline

ratio for each averaging period, and for the

years 1990 through 1994 on a one-time basis.

* Company Audits. The SNPRM 93

remains the same as the SNPRM 92, except

for the additional requirement of attest

engagements specific to this new proposal.

Generally, the SNPRM 93 would

prohibit a refiner or importer from

producing or importing conventional

gasoline that on average exceeds the

applicable compliance standards for any

\ averaging period. Compliance standards

'would be based on the properties of the

refiner's or importer's 1990 gasoline. In

r~sponse to the numerous comments

received on the issue of blendstocks as

provided in SNPRM 92, EPA has

eliminated the requirement for refiners

and importers to account for

blendstocks in their compliance

calculations except in those cases where

a refiner or importer has significantly

increased its production or importation

of blendstocks as evidenced by an

increased blendstock to gasoline ratio.

This is discussed more fully in a later

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section of the preamble. Refiners with

more than one refinery would retain the

option of demonstrating compliance for

each individual refinery or for all their

refineries in the aggregate. Here, as in

the regulations, EPA will refer to

refiners and importers with respect to

the anti-dumping requirements;

however, the requirements will apply

similarly to individual refineries in

those cases where a refiner has opted to

determine compliance based on each

refinery separately or a refinery with

limited gasoline distribution based on

certain geographic considerations as

provided for in the regulations.

The SNPRM 93 has three separate

standards of compliance for refiners and

importers based on the Simple Model

standards, Optional Complex Model

standards or the Mandatory Complex

Model standards. All three model

standards would require refiners and

importers to average certain properties

of conventional gasoline and

demonstrate compliance with

prescribed standards which in some

cases are actual fuel properties and for

others are emissions characteristics

calculated from specific fuel

properties.18

under the Simple Model standards,

refiners and importers would be

required to demonstrate on an annual

basis, that average exhaust benzene

emissions of conventional gasoline do

not exceed the refiner's or importer's

1990 compliance baseline for exhaust

benzene emissions, and that average

sulfur, olefins and T90 do not exceed

125% of their average 1990 baseline

levels. Under the Optional Complex

Model standards, annual average levels

of exhaust benzene emissions, as

calculated under the Complex Model,

would not be allowed to exceed the

refiner's or importer's 1990 average

exhaust benzene emissions. Under the

Mandatory Complex Model standards,

annual average levels of exhaust toxic

emissions and NOx emissions would

not be allowed to exceed the refiner's or

importer's 1990 average levels for

exhaust toxic emissions and NOx

emissions, respectively. These standards

implement the applicable requirements

regarding the use ef the Simple and

Complex Models as agreed to during the

negotiated rulemaking for compliance

under the anti-dumping provisions. EPA is proposing that the year long

averaging period be retained since it

would provide maximum flexibility for

refiners and importers in meeting the

"

8 For a dis, of' issues concerning which.

properties or polluumtas a covered in the federal

anti-dumping program. see the Notice of Proposed

Rulemaking, published July 9. 1991, (56 FR 31219.-

31222).

anti-dumping requirements. EPA is also

proposing this time period because NOx

and toxics are-not a short term spiking

problem that would require a short

control period. Although NOx emissions

contribute to ozone, which is a seasonal

problem, the anti-dumping

requirements do not apply in the major

ozone nonattainment ares. In addition,

Phase II RVP standards provide

substantial ozone reductions where

required, thus mitigating any potential

seasonal problem associated with a year

long averaging period. Therefore, there

is no significant benefit that would

offset the additional compliance and

reporting requirements associated with

a shorter compliance period.

The proposal provides that beginning

in 1995 and continuing up through the

date that the Complex Model becomes

mandatory, refiners and importers could

determine compliance based on either

the Simple Model anti-dumping

standards or the Optional Complex

Model anti-dumping standards, at their

option. However, a refiner that produces

and certifies reformulated gasoline

under the Simple Model would have to

comply with the Simple Model antidumping standards, and a refiner that

certifies reformulated gasoline under the

complex model would have to comply

with the Optional Complex Model

standards. For the period beginning

with the date the Complex Model

standards becomes mandatory through

December 31 of that year, and for each

subsequent averaging period,

compliance will be based on the

Mandatory Complex Model, Standards.

This will, therefore, create two shorter

averaging periods during the year that

the Complex Modal becomes mandatory

with different compliance standards,

which will consequently reduce the

flexibility of refiners and importers for

meeting the applicable requirements for

those periods. Although the proposal

presently provides for two separate

compliance periods, there are two

options that exist for determining

compliance during the calendar year in

which there is a transition to the

Complex Model. The options are as

follows:

1. Two separate averaging periods with

different compliance standards, (i.e.

determine compliance for the period before

the complex model becomes mandatory

under the simple model or optional complex model; and determine compliance for the

period after that date under the final complex

model).

2. Average that portion of the year before

the complex model becomes mandatory with

the prior full year. and average that portion

of the year after the complex model becomes

mandatory with the subsequent full year (i.e.

include early 1997 with 1996 and includelater 1997 with 1998),

EPA is concerned about the serious

nature of air toxics and, therefore,

proposes regulation of this problem over

a period no longer than a year. EPA is

aware that this option reduces the

flexibility of regulated parties, but

believes there is sufficient lead time to

achieve compliance within these time

periods. We request comments on other

options as well.

The SNPRM 93 provides that the antidumping enforcement program, would

consist of a combination of the

following enforcement mechanisms to

monitor compliance with the

regulations, including: (1) Reistration

of regulated parties, (2) record keeping,

(3) reporting, (4) company

commissioned audits, and (5) Agency

audits. This program remains

unchanged from the SNPRM 92 except

for the changes mentioned above. The

Agency believes that all the mechanisms

proposed are necessary because they

enable the Agency to collect and review

data from regulated parties to ensure

compliance with the anti-dumping

requirements. This belief is based, in

large part, on the Agency's experience

in enforcing the lead phasedown

program. In that program, compliance

improved dramatically when the

Agency shifted from an enforcement

program based merely on the review of

periodic reports to one that included

compliance audits, The reports

submitted under lead phasedown

provided the agency the data necessary

to monitor refiner and importer

compliance and often provided clues to

potential problems. The records

retained by regulated parties provided

the means for agency auditors to look

behind the reports submitted and

ultimately identify violations. EPA

audits under lead phasedown also

identified more honest mistakes or

oversights by regulated parties, which

would likely be uncovered through

company commissioned audits.

Therefore, the agency believes all theabove mechanisms serve a useful

purpose in assuring compliance with

these requirements.

B. Regulated Parties

The basic anti-dumping requirement

that gasoline and gasoline blendstocks

must meet standards for exhaust

benzene emissions, sulfur,. T90, olefins,

exhaust toxic: emissions and/or NOx

emissions, as applicable, would apply to

refiners and importers. The terms

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"refiner" 19 and "importer" 20 have been

defined and applied in earlier

environmentaregulatory programs

involving gasoline 2 1 . EPA proposes that

these definitions continue to apply for

purposes of the anti-dumping

requirements.

The new anti-dumping requirement

regarding the volume ratio of

blendstocks produced or imported and

transferred to others, would also apply

to any producers or importers of

blendstocks. In addition, any party that

adds gasoline blendstock to gasoline 2 2

or who combines gasoline blendstocks

to produce gasoline (i.e., a "blender") is

already encompassed in the definition

of a refiner, because it is producing

gasoline. EPA's proposal would not

reach a person who is not a refiner (i.e.

a person who does not own, lease,

operate, control or supervise any facility

that produces gasoline) or importers of

products not. produced at a gasoline

refinery, such as a natural gas liquid

plant. Similarly, chemical products

produced at a refinery or imported but

not sold for gasoline blending purposes,

would not be subject to these

requirements.

The SNPRM 93 proposes exclusion of

parties that operate only as oxygenate

blenders. The SNPRM 92 also proposed

that oxygenate blenders not be required

to comply with the antidumping

requirements. In the case of downstream

oxygenate blending, both proposals

require that producers or importers of.

the base gasoline account for the

applicable properties under the antidumping program. The addition of

oxygenates will only improve the final

blended properties of gasoline under the

Simple Model. Although the addition of

certain oxygenates will increase exhaust

NOx emissions under the Complex

Model, these emissions will be offset by

reductions in VOC, toxics and CO on a

mass basis. EPA believes that the net

emissions impact is not of sufficient

magnitude to justify the significant

disruption and complexity that would

be required for oxygenate blenders to

comply with these anti-dumping

19 "Reflner" is defined as any person who owns,

leases, operates, controls or supervises a refinery,"

40 CFR 80.2(1), and "refinery" is defined as "a plant

at which gasoline is produced," 40 CFR 80.2(h). 2oimporter" is defined as "a person who imports

gasoline or gasoline blending stocks or components

from a foreign country into the United States * ," 40 CFR 80.2(r). 1

current regulatory programs that involve

gasoline include the lead phasedown program. 40

CFR 80.20, and the gasoline volatility program, 40

CFR 80.27-28.

2

2 "Gasoline" is defined as "any fuel sold in any

state for use in motor vehicles and motor vehicle

engines, and commonly or commercially known or sold as gasoline" (footnote omitted). 40 CFR 80.2(c).

requirements.2 3 Therefore, under

today's proposal such parties would not

be subject to the requirements of this

subpart.

C. Accounting for Gasoline Blendstocks

The preamble to the SNPRM 92

discussed at great length the anticipated

problem of blendstocks being

"dumped" in conventional gasoline as a

result of the stringent requirements

placed on reformulated gasoline (57 FR

13484). The preamble set forth the

economic incentives created by the

differences in baselines between

different refiners including those for

whom the default baseline applies, and

gave an example of how the goal of

preventing "dumping" could be

frustrated. These differences in baseline

provide a mechanism for a refiner or

importer to circumvent the

requirements by shipping blendstocks to

be used in the production of

conventional gasoline to a party that

was not in operation in 1990 and for

whom the less stringent 1990 Clean Air

Act default baseline would apply.

During the negotiated rulemaking

process it was recognized that certain

segments of industry, such as

downstream blenders or new refiners,

could gain significant competitive

advantage from the less stringent default

baseline, however, there was no clear

proposal to address this problem.

Refiners will likely remover such

components as benzene, aromatics, etc.

from typical 1990 gasoline in order to

meet the reformulated gasoline

requirements. This will result in the

extensive availability of such

components in the marketplace which

will then have a high potential of being

"dumped" into conventional gasoline. If

the cost of these components is less than

the cost of gasoline, as it is likely to be,

they will almost assuredly be used to

produce conventional gasoline if there

is no mechanism to prevent It. EPA's

prior experience with both the lead

phasedown and fuel switching programs

indicates that a few cents wholesale

price differential provides sufficient

incentive to violate and would certainly

encourage dumping without appropriate

controls. Several parties have brought

this to EPA's attention. In light of the

above, EPA believes that appropriate

controls are necessary. Today's proposal

is an attempt to develop a program that

effectively addresses this problem

without imposing unnecessary costs and

burdens on the regulated community.

2The preamble to the NPRM discussed how NOx

increases from oxygenates are more than offset by

decreases in VOC. toxics, and CO. See 56 FR 31220-31222.

As contrasted to the SNPRM 92, the

SNPRM 93 would not require that

refiners or importers account for all

gasoline blendstocks that are produced

or imported, and would also remove the

prohibition and defenses associated

with transporting, storing or containing

the chemical marker required for certain

blendstocks under the earlier proposal.

After further review of this issue, EPA

believes that accounting for all

blendstocks for antidumping

compliance and requiring the addition

of a chemical marker for monitoring

blendstocks use may be more

burdensome and disruptive than

necessary, without a clear indication of

the need for such regulatory

requirements at this time. Therefore,

EPA believes that it may be more

appropriate to identify a mechanism to

monitor the transfer, sale and

production of blendstocks as an

indicator of possible dumping of

blendstocks and to trigger further

controls as necessary. EPA also believes

that it is appropriate to propose a

regulatory program now, rather than

waiting until after a problem with the

dumping of blendstocks is discovered.

EPA also believes that it is more

appropriate to limit the controls to

circumstances where it is likely to be an

environmental problem.

The SNPRM 93 is intended to identify

potential "dumping" by a refiner or

importer, and to provide a mechanism

to mitigate any adverse environmental

effect in such a case. Under EPA's

proposal, refiners and importers would

be required to determine for each

averaging period: (1) The total volume

of certain specified blendstocks, as

defined by the proposal, produced or

imported and transferred to others; (2)

the total volume of conventional

gasoline produced or imported; and (3)

the ratio of these blendstocks to gasoline

(ratio). If this blendstock to gasoline

ratio for any averaging period exceeds

the blendstock to gasoline ratio for the

overall average of calendar years 1990 to

1994 by more than 10%, the refiner or

importer would be required to exercise

one of two options. The refiner or

importer would be required to either: (1)

Inform any blendstock recipient that

they are required to adjust their

compliance baseline in the subsequent

averaging period based on the refiner's

or importer's compliance baseline for

the volume of blendstock received, or

(2) account for the properties of any

blendstock in its own compliance

calculations for the averaging period in

which the blendstocks were transferred.

The recipient of blendstocks under this

provision may not have notice until late

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in the averaging period that the supplier

has exceeded the 10% trigger, and,

therefore, it would be unreasonable to

require the recipient to make

adjustments until the subsequent

averaging period. On the other hand, the

supplier should be monitoring its own

blendstock transfers continuously and

should be able to make the necessary

adjustments to achieve compliance

during the same averaging period.

Additional reporting and transfbr

documentation requirements associated

with each option are discussed more

fully below* Blendstocks transferred

between refineries with a common

baseline would be exempt from

accounting under this requirement.

in order to further limit the

application of these additional controls

to only those circumstances where it is

likely to be an environmental problem,

the regulations exempt those refiners

and importers from further controls

regarding applicable blendstocks where:

(1) Their blendatock production or

importation is less than 3% of

conventional gasoline produced or

imported during the averaging period,

or (2) their 1990 baseline is less

stringent than the default-baseline for all

regulated fuel properties. EPA believes

that the burden should be eased on low

volume producers of blendstock where

their blendstock production is not likely

to adversely impact air quality. EPA

believes that 3% of production is

insignificant for any refiner or importer

and, therefore, it would be unnecessary

to even monitor changes in the

blendstock to gasoline ratio at this low

level. EPA seeks comments on the

appropriateness of 3% as the trigger for

this exemption. In addition, where a

refiner's 1990 baseline is less stringent

than the default baseline, there is no

economic incentive to "dump"

blendstocks. Therefore, EPA believes it

would not be necessary to monitor

blendstocks in that situation either.

Under EPA's proposal, a comparison

is made between the ratio for each

averaging period and the aggregate four

year ratio. EPA believes that the

aggregate blendstock to gasoline ratio for

calendar years 1990 through 1994

would more comprehensively

ciaracterize the general use of

blendstocks by a particular refiner or

importer prior to the implementation of

the reformulated gasoline requirements

The alternative of looking at the

blendstock to gasoline ratio for any

individual, calendar year or, I.

particular, a peak ratio year, may not

take into account legitimate fluctuations

in the market. EPA is concerned that the.

use of a single peak year baseline would

provide refiners and Importers the

opportunity to increase blendstocks in

1993 or 1994 so as to inflate the

"baseline" ratio. Nevertheless, EPA

invites comments on whether it is more

appropriate to use an aggregate 1990

through 1994 ratio or the ratio for a

single year for this purpose,

Under EPA's proposal, a 10% increase

in the blendstock to gasoline ratio

would trigger the additional blendtock

compliance requirements. EPA is

currently analyzing a substantial

amount of historical data regarding

blendstock production, salesand

transfers to determine whether this

threshold is appropriate and will make

this information available for review

when complete. EPA may adjust the

blendstock to gasoline ratio figure

accordingly, based on the analysis

results. EPA believes that until that

process is completed., it is appropriate to

take a relatively conservative approach,

in order to identify refiners or importers

that attempt to circumvent the antidumping requirements. At present, EPA

believes that the 10% figure is a

sufficient threshold to allow for

expected or normal fluctuations in

blendstock production from year to year

due to implementation of the

reformulated gasoline requirements.

EPA also believes this amount is small

enough to reasonably identify any

refiner or importer that may be

"dumping" dirty gasoline blendstocks.

However, we are requesting the

submittal of appropriate data in this

area and comments on other figures that

might be more appropriate for this

requirement.

n addition, EPA is proposing

inclusion under this, provision of only

those refinery products that may have

an adverse effect on the regulated

parameters under the anti-dumping

program. This should minimize the

burden on industry by limiting this

provision to monitoring those products

where there is. an adequate

environmental justification. This

represents a significant reduction from

the extensive list of blendstocks

provided in the SNPRM 92. However,

for purposes of determining 1990

baselines under Methods 2 and 3, it is

more appropriate to include a complete

list of allrefinery products used as

gasoline blendstocks in order to

properly characterize 1990 gasoline in

accordance with the intent of theantidumping program.. EA recognizes that blendstocks may

be transferred to differentr parties in the

distribution system, including: brokers,

and that there needs to be affirmative

obligation to ensure proper notification,

of the applicable requirements-to parties

downstream. We have. therefore,

required refiners or importers whose

ratioexceeds the 10% threshold, and

who follow the first option, to notify

recipient parties by written notice,

either stated on the transfer documents

or by separate communication, that the

blendstock recipient must adjust its

compliance baseline for this blendtock.

In addition, the refiner or importer must

provide the necessary baseline data for

making the adjustment. Alternatively, if

the refiner or importer follows the

second option, it is required to provide

written notice that such blendstocks

have already been accounted for in its

compliance baseline and are to be

excluded from the compliance

calculations of any subsequent

recipient. Thus, the appropriate transfer

documents must convey with each

transfer of blendstocks subject to these

requirements. In the case of fungibly

mixed products, EPA will leave it up to

the parties involved to ensure that the

proper notification takes place rather

than prescribing detailed product

accounting and notification procedures.

As stated in the SNPRM 92, the

inclusion of oxygenate volume for antidumping compliance calculations by

refiners and importers would be

optional, except as required in the

calculation of other exhaust emission

products under the applicable model.

Any refiner or importer that elects to

include oxygenate volume in its

compliance calculations, however,

would be requfired to include

oxygenates in its 1990 baseline

determination as well.

Under EPA's proposal, gasoline and

other petroleum products would be

included in the anti-dumping

compliance calculations only once, in

order to avoid double counting of

products. Thus, a refiner or importer

would not include in its compliance

calculations gasoline it did not produce

or import or gasoline blendstocks

accounted for by others. A refiner that

uses blendstock accounted-for by

another, would have to "back out" the

foperties and volume of such

lendstock from the volunre and

properties of the final product. EPA believes the SNPRM 93'will

address the environmental implications

of increased blendstock production by

requiring additional controls for

specified refinery products only when it

appears that a significant deviation from,

past practices has occurred, as

evidenced by a 10% increase in

blendstck to gasoline ratio. In addition,

under the SNPRM 93 we are including

only those blendstocks that have an

adverse environmental effect onthe*

regulated parameters. The Agency seeks

comments on: all aspects of the above'

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scheme to prevent dumping and

mitigate its effect as it relates to the

requirements and intent of the antidumping program. EPA has included an additional

requirement to address situations where

it is clear that a refiner or importer Is

transferring dirty blendstocks to a party with a less stringent baseline in order to

evade the anti-dumping requirements.

Under proposed § 80.102(i), a refiner or

importer would be required to include

in their determination of compliance

any applicable blendstocks that were

transferred in whole or in part to evade

a baseline requirement. The 3% and 10% blendstock to

gasoline ratio thresholds discussed

earlier are intended to address the

majority of potential anti-dumping

problems. However, EPA believes that

some refiners and importers may engage

in blendstock transfers contrary to the

intent of the anti-dumping regulations.

As a deterrent to this practice, EPA will

monitor such blendstock transfers to

determine if they are occurring with this

motivation. In making this

determination regarding the transfer of

blendstocks between parties, EPA will

look at such factors as: The magnitude

of differences in baselines; the nature of

any prior business relationship; the

extent of financial incentives for

transferring blendstocks; the refiner's

process for the production of

reformulated gasoline, I.e. which

blendstocks are removed to meet the

reformulated gasoline requirements; the

historical corporate relationship, If any,

that existed between the parties; and

whether this transfer represents a

departure from any prior business

practices. EPA will also look to see if

other means were available to the

blendstock producer to achieve

compliance with the anti-dumping

requirements without such transactions.

EPA would consider enforcement under

this provision when there is compelling

evidence that a regulated party is

dumping "dirty" blendstocks withoutaccounting for the blendstocks in its

own compliance determination.

D. Compliance Calculations

1. Compliance Baseline Calculation

The compliance baseline calculation

as discussed in the SNPRM 92 is based

on the 1990 "equivalent" conventional

gasoline volume (57 FR 13488). The

SNPRM 93 would change the

compliance baseline to reflect the

receipt of blendstock from a refiner or

importer that has exceeded the specified

10% blendstock to gasoline ratio, as

discussed previously. The refiner or

importer would be required to provide

the recipient with the appropriate

baseline values for making the

adjustment. The blendstock recipient

that must adjust its compliance baseline

is required to make the adjustment in

the subsequent averaging period

because the producing refiner would not

have notice that it activated the 10%

trigger until the present averaging

period was over. The producing refiner,

on the other hand, has control over its

gasoline and blendstock production

during the year and, with proper

planning, should be able to achieve

compliance with such blendstocks

included during the current averaging

period.

2. Compliance Determination

The SNPRM 93 would expand the

SNPRM 92 to include exhaust benzene

emissions under the Optional Complex Model and exhaust toxics emissions and

NOx emissions under the Mandatory

Complex Model. In addition, refiners

that produce reformulated gasoline

during 1995, 1996 and early 1997 would

have to use the same compliance model

for their conventional gasoline during

those averaging periods. Compliance

levels would be determined on average

for that averaging period and compared

against the applicable 1990 baseline for

those parameters as calculated in a

similar manner. Individual refinery

compliance, composite sampling and

compliance based on combining the

properties of individual blendstock

batches would be unchanged from the

SNPRM 92.

E. Registration

The SNPRM 93 expands the

registration proposal in the SNPRM 92

(57 FR 13488) to require refiners and

importers to submit a statement of

intent as to whether compliance will be

achieved on the basis of individual or

aggregate refineries, and whether

compliance will be based on the Simple

or Optional Complex Model for 1995,

1996, and the period prior to the date

the Complex Model becomes

mandatory.

F. Record Keeping

The SNPRM 93 expands the record

keeping proposal in the SNPRM 92 (57

FR 13488) to include the results of tests

performed to determine compliance

under the newly proposed Optional Complex Model and Mandatory

Complex Model standards. EPA's

proposal would require refiners and

importers to retain documents

pertaining to any adjustment of

compliance baseline required and

documents which demonstrate the

transfer of blendstocks.

G. Reporting

All refiners or importers of

conventional gasoline would be

required to submit to EPA a report

within thirty (30) days following the

conclusion of each averaging period

which contains the following

information: Total gallons of

conventional gasoline produced or

imported during the averaging period;

average exhaust benzene emissions,

sulfur, olefins and T0 if using the

Complex Model, exhaust benzene

emissions if using the Optional

Complex Model, or exhaust toxics and

NOx emissions if using the Mandatory

Complex Model, and the calculations

used to derive such averages for the

total volume of conventional gasoline

produced or imported during the

averaging period; the total gallons of

blendstocks produced or imported and

transferred to others for use in gasoline

blending. These requirements would

apply for refiners that produce

conventional gasoline through the

combining of blendstocks as well. The

above reporting requirements would not

apply in the case of any conventional

gasoline or gasoline blendstock that is

excluded from a refiner's or importer's

compliance calculation.

In addition, EPA is proposing a onetime reporting requirement in order to

establish the "baseline" blendstock to

gasoline ratio. Any refiner or importer of

conventional gasoline would be

required to submit to EPA, by January

31, 1995, a report containing the total

volume of gasoline produced and

imported for each calendar year 1990

through 1994 for which such data are

available, the total volume of gasoline

blendstocks produced and Imported,

and transferred to others for each

calendar year 1990 to 1994 for which

such data are available, and the ratio of

total blendstock volumes to total

gasoline volumes. Refiners and

importers would be required to follow

the same protocols for determining the

availability of data that are being

proposed for establishing 1990

aselines.

H. Additional Procedures for Refiners

and Importers of Conventional Gasoline

and Blendstock

The Notice of Proposed Rulemaking

included attest engagement procedures

for the production of reformulated and

conventional gasoline. This

supplemental notice includes additional

procedures as a result of the changes

made in the scheme for accounting for

gasoline blendstockr. These procedures

would require the review of a refiner's

or importer's records for compliance

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with the requirements of this subpart, to

include review of. (1) The relevant

documents to deterr~le the blendstock

to gasoline ratio; (2) any adjustment to

compliance baseline calculations; (3)

application of the adjusted baseline; and

(4) the refiner's or importer's quality

assurance program for determining the

applicable values of regulated fuel

properties. This review would follow

the same general criteria for sample

selection and testing as outlined under

the reformulated gasoline requirements.

EPA is proposing attest engagement

procedures for the same reasons set

forth in the preamble to the

reformulated gasoline requirements.

IX. Anti-Dumping Requirements for

Conventional Gasoline

A. Introduction

Section 211(k)(8) of the Act requires

that average per gallon emissions of

specified pollutants from nonreformulated, or conventional, gasoline

use must not deteriorate relative to

emissions from 1990 gasoline, on a

refiner or importer basis. Compliance is

measured by comparing emissions of a

refiner's or importer's conventional

gasoline against a baseline gasoline. An

individual baseline is developed for

each refiner or importer based on the

quality of their 1990 gasoline, although

under certain circumstances the

individual baseline is set at the statutory

baseline. To implement this

requirement, EPA has proposed

requirements known as the antidumping provisions for conventional

gasoline producers and importers.

Today's proposal describes additional

anti-dumping provisions as well as

modifications to previously proposed

provisions applicable to conventional

gasoline. These are detailed in the

accompanying proposed regulations,

and comments are requested on any or

all of today's proposal. Further

background information can be found in

EPA's prior proposals.

B. Proposed Requirements for

Individual Baselines

1. Baseline Determination

In the SNPRM, EPA proposed a

requirement for "sufficient" sampling of

finished gasoline or blendstock streams,

as appropriate by the methods proposed

in the SNPRM. At this time, EPA

believes that a minimum data

requirement must be specified to ensure

that enough samples are taken from

which to develop a representative

baseline and to minimize the picking

and choosing of data. For a Method I

determination, EPA is proposing to

require that at least half of the

shipments in a calendar month shall

have been tested for a particular

parameter. For Methods 2 and 3, EPA is

proposing to require at least weekly

sampling of continuous blendstock

streams and, if blendstocks are

produced on a batch basis, sampling of

at least half of the batches of each

blendstock produced in a month. EPA

realizes that this proposal differs

significantly from the SNPRM, but

believes that such a requirement may be

necessary to insure a sufficiently

accurate baseline. Comments are

requested as to the necessity of such a

requirement, and on the minimum

sampling requirements discussed above

for each Method.

In the SNPRM, EPA proposed that at

least three months of summer and three

months of winter data must be available

for the determination of a parameter

value by a particular method.

Insufficient data would require use of

the next method down (e.g., Method 2

instead of Method 1) or collection of

additional data which would necessitate

a Method 3 determination. If, following

promulgation of the final rule,

additional data needs to be collected

because the minimum data

requirements specified for using Method

1, 2 or 3 for determining a fuel

component baseline value (per the

proposed regulations) have not been

met, EPA proposes that data shall be

collected through the end of the third

month of the first three full months

during which summer gasoline is

produced by the refiner following

promulgation of the final rule. The

requirement to collect at least three

months of data on a refiner's winter

gasoline and at least three months of

data on a refiner's summer gasoline

would still have to be met.

In the case of a Method 1

determination, where actual 1990

gasoline shipment data is used,

inconsistent sampling may have

occurred causing a lackof data on one

grade and abundant data on another. For

example, if a refinery produced a

special grade of gasoline, it may have

tested each shipment of that gasoline for

several fuel properties. In comparison, it

may have only tested every other

shipment of its typical gasoline for these

same properties. Combination of all of

the available data for a parameter would

result in a baseline value which was,

skewed to the specially-produced

gasoline. To minimize such skewing,

and to thus get a more representative

baseline, EPA proposes that average fuel

parameter values be determined first for

each grade of gasoline produced, and

the resulting values weighted by the

fraction of each grade sold in the period

over which the value is determined.

EPA proposes that "grade" mean each

individual octane number of gasoline

produced in the refinery (rounded to the

nearest whole number). Comments are

requested on this proposal, specifically

on the ability of the proposal to

minimize skewing of data, and as to

whether each octane number of gasoline

produced should be considered a

separate grade. Comments on other

"definitions" of grade for use under this

proposal are requested. EPA also requests comments on

allowing a refinery's own production

volumes of summer and winter gasoline

(based on RVP) to be used in the

weighting of data on a summer and

winter basis. EPA had proposed that a

national average summer/winter

percentage split of 46.8/53.2 be used,

which was based on gasoline

consumption during the summer and

winter periods. Because fuel production

can lead fuel consumption by up to 2

months, EPA believes that use of

refinery-specific production volumes

and time periods in the baseline

determination will result in more

representative baselines. Comments are

requested on this proposal and as to

how transitions in fuel production

between seasons will affect this

proposal and individual baseline

determination.

Testing of a refinery stream for one or

more of the fuel properties for which a

baseline value must be determined

would be an unnecessary expense if a

refiner can show that the refinery stream

contains negligible amounts of one or

more of certain fuel properties for which

a baseline value must be determined.

The properties that EPA proposes would

not have to be determined under these

circumstances are benzene, aromatics,

olefins, saturates and sulfur. EPA

proposes that the first four listed

parameters would be deemed to exist in

negligible amounts if they exist at less

than 1.0 volume percent in a refinery

stream. Sulfur would be deemed to exist

in a negligible amount if it exists at less

than 10 ppm in a refinery stream. Any

properties shown to exist in a refinery

stream in negligible amounts shall be

assigned a value of 0.0. For example,

EPA believes it would be generally easy

for a refiner to show that MTBE and

alkylate streams have negligible

aromatic, sulfur and benzene contents.

Comments are requested on this

proposal, particularly on the levels of

each parameter which would be

considered negligible. Comments are

also requested as to whether EPA

should require criteria, and what those

criteria should be, to show that

negligible quantities of a parameter

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exist. For example, one way to prove

that one or more fuel parameters exist

in negligible quantities may be to show

that a stream consists of a single

chemical compound (i.e., the criteria

would be that the stream Is 99 percent

by volume pure component). Or, it may

be possible to demonstrate using

-chemical reaction theory or general

refinering practice supported by

industry survey results that an alkylate

stream, for example, which is a very

complex mixture, still has aromatic and

benzene contents of less than I volume

percent without measuring the benzene

content of the stream.

EPA previously proposed that post1990 finished gasoline could be used in a Method 3 determination if the

volumetric fraction of each blendstock

in post-1990 finished gasoline was

within five (5) percent of the volumetric

fraction of the same blendstock in 1990

finished gasoline. However, based on

comments that typical year-to-year

fluctuations would cause the blendstock

volumetric fractions to exceed the

proposed 5 percent requirement, EPA

proposes to allow post-1990 finished

gasoline data to be used if each of the

post-1990 blendstock fractions is within

10 percent of the respective 1990

blendstock volumetric fraction.

Comments are requested as to whether

the 10 percent criteria is appropriate.

In a slight change from the SNPRM,

EPA proposes that the Director of the

Office of Mobile Sources approve

baselines and grant petitions under

circumstances where petitions are

allowed.

Establishment of Baselines by Foreign

Refineries

EPA has received comments

pertaining to the establishment of 1990

baselines by foreign refiners. The 1990

baseline is relevant in the early years of

the reformulated gasoline program for

purposes of certifying reformulated

gasoline under the Simple Model, 4 and

it is relevant from 1995 onward for

purposes of measuring compliance with

the anti-dumping provisions of this

program.

In the SNPRM (April 1992), EPA

proposed that domestic refiners

establish their individual baseline using

one of three proposed methods to

calculate their 1990 average fuel

parameters. Method I would be used if

sufficient data was available; if not, then

Method 2; or Method 3, if insufficient

data was available for Method 2. EPA

proposed that importers of foreign

The proposed Simple Model would apply from

January 1, 1995 until the Complex Model becomes

mandatory during 1997.

gasoline establish their baselines using

the first proposed method, and that

importers "default" to the statutory

baseline if sufficient data was not

available for that method.

EPA did not propose any

methodology for foreign refiners to

establish individual baselines. Rather,

the quality of gasoline imported from

foreign refiners was to be controlled by

regulation of domestic importers.

However, EPA proposed an exception to

this scheme for refiners that were also

domestic importers and that imported

75% of the gasoline produced at the

refinery. EPA proposed that these

importers be permitted to use the three

methodologies for establishing an

individual baseline.

The proposed approach regarding the

establishment of individual baselines by

foreign refineries arose from three

principle concerns by EPA:

1. EPA was concerned that foreign

refiners that imported less than a

significant portion of their total

production into the United States would

be unable to produce verifiable data

adequate to justify use of the three

proposed methodologies. EPA did not

believe that foreign refiners had records

of the relevant fuel parameters

necessary to accurately establish a 1990

baseline for that fraction of their total

1990 gasoline production exported to

the United States.

2. EPA was concerned with its ability

to conduct verification and compliance

audits on foreign soil to verify the

calculation of individual baselines for

foreign refiners. Domestic refiners and

importers are subject to regulation by

the Agency, whereas regulation of

foreign refiners raises significant

questions on legal authority and

regulatory jurisdiction. EPA's concern

also extended to the effect product

fungibility and mixing during shipment

would have on the Agency's ability to

correlate imported product with

individual foreign refinery baselines.

3. EPA was concerned that permitting

foreign refiners to establish individual

baselines would lead to "gaming" of the

system. Specifically, EPA was

concerned that foreign refiners that had

exported gasoline to the U.S. in 1990

that was cleaner than the statutory

baseline would have economic

incentives to default to the less stringent

statutory standard. As a result, foreign refiners could use EPA's limited ability

to auditor-verify a foreign refiner's

records and intentionally default to the

I;X stringent baseline. Such "gaming"

might have the effect of skewing the

anticipated average quality of gasoline characteristics within the United States,

especially in areas where imported

gasoline is a significant percentage of

the total gasoline consumption.

Petroleos de Venezuela S.A. (PDVSA)

claims that EPA's first concern would be

satisfied if a foreign refiner's data was

sufficiently detailed such that the

qualities of the 1990 gasoline exported

to the United States could be

determined, as compared to the

qualities of the refiner's overall 1990

gasoline production. In such a situation,

PDVSA claims that a foreign refiner

should not be precluded from using the

three methods to establish individual

baselines for its refineries.

With respect to EPA's second

concern, PDVSA claims that foreign

refiners and their governments would be

amenable to EPA conducting

verification and compliance audits. This

could be arranged through diplomatic

instruments if necessary. With respect

to EPA's concerns on reliably tracking

the origin of gasoline to specific refiners

and refineries, PDVSA believes that EPA

could continue, if necessary, to regulate

importers of foreign gasoline. A refiner's

or refinery's individual baseline would

follow its gasoline as long as its gasoline

could be fairly tracked at the point of

importation. For example, a foreign

refiner could segregate its product from

others, or the point of origin could be

clearly traceable from the

documentation accompanying the

gasoline. If the point of origin could be

clearly identified, then the importer

would use the foreign refiner's baseline

for that product's baseline. If the point

of origin could not be clearly identified,

then the importer would use the

statutory baseline for that gasoline. In

effect, the burden of clearly identifying

the point of origin would be on the

importer, and through them on the

foreign refiner.

Finally, with respect to the gaming

concern, PDVSA believes there is no

significant economic incentive for such

gaming as it would be economic

incentive for such gaming as it would

not be economic for a refiner to

intentionally degrade the quality of the

gasoline it exports to the United States

to the statutory baseline. In addition,

PDVSA claims there is no realistic

chance of an adverse air quality impact

from this gaming potential. PDVSA also

claimed that failing to allow foreign

refiners to establish individual baselines

could distort the export market in a way

that potentially could disrupt the

supply of gasoline in certain areas of the

country.

EPA invites comment on all of the

above issues, including EPA's concerns

and the suggestions of PDVSA. EPA also

invites comments on alternatives to the

approaches proposed today, including

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allowing foreign refiners to establish

individual baselines under reasonably

limited circumstances based on the

concerns noted above, for use in the

reformulated gasoline program under

the Simple Model and/or for use in the

anti-dumping program.

2. Baseline Adjustment for Work-inProgress

In the SNPRM, EPA proposed that a

work-in-progress (WIP) adjustment to a

refiner's baseline would be allowed if

certain criteria were met. One of the

criteria presented in the SNPRM

addressed the situation where a refiner's

exhaust benzene emission value differed

significantly when calculated with and

without the WIP adjustment. EPA

believes that the WIP adjustment should

also apply to the fuel components

which are capped when the simple

model is used, and, per the regulatory

negotiation's Agreement-in-Principle, to

exhaust toxics and NOx emissions in

the years when the complex model is

required. EPA proposes that this

adjustment apply when one or more of

the following situations occur: (1) At

least a 25.0 percent difference exists

between sulfur, olefin and/or T90 values

calculated with and without the WIP

adjustment; (2) at least a 5.0 percent

difference exists between the refiner's

baseline exhaust benzene emissions

calculated with and without the WIP

adjustment; (3) at least a 5.0 percent

difference exists between the refiner's

baseline exhaust toxics emissions

calculated with and without the WIP

adjustment; (4) at least a 5.0 percent

difference exists between the refiner's

baseline NOx emissions calculated with

and without the WIP adjustment.

Comments are requested on the

extension of the WIP adjustment to

sulfur, T90 and olefins. Comments are

also requested as to whether the

proposed 25.0 percent difference

requirement is an appropriate value.

Another of the criteria proposed in

the SNPRM required that a refiner show

that failure to allow a WIP adjustment

would result in a substantial portion of

the capital associated with the WIP to be

at risk. "Substantial" was proposed to

be capital involved with the WIP which

exceeded 10 percent of the refinery's

depreciated plant and equipment value.

Comments were received which stated

that it is possible that this requirement

could be biased against recently built or

recently upgraded refineries because the

depreciated value would be higher for

these facilities than for older refineries

of the same size. The commenter also

claimed that newer facilities tend to be

benefit the environment more than

similar, older facilities, and thus could

be unfairly penalized, compared to

older facilities, by the proposal. Based

on these comments. EPA proposes an

alternative criteria which could be met

in lieu of the "10 percent" criteria. EPA

proposes and requests comments on the

allowing either the "10 percent" criteria

or minimum cost of the WIP to satisfy

the capital-at-risk criteria. Comments

are requested as to whether $10 million

is an appropriate minimum cost.

Because WIP was not previously

clearly defined, EPA proposes that WIP

include both projects actually under

construction in 1990 and projects for

which contracts were signed in 1990

such that construction would be

completed in time to comply with the

regulatory requirement motivating the

WIP (per the discussion of this

requirement in the SNPRM). Comments

are requested as to whether this

proposal is appropriate. Detailed

comments are also requested which

address the type of contracts that would

qualify.

3. Baseline Adjustment for Multiple

Modes of Operation

EPA proposed that separate

individual baselines be developed for

each of the different modes of refinery

operation (as discussed in the SNPRM)

to minimize anticompetitive effects

which could hurt smaller refiners,

blenders and importers. However, some

refineries may be sufficiently integrated

with a blending operation such that the

blending operation would not exist

without the refinery, or such that

negligible blendstocks or gasoline are

brought into the blending operation

other than those which come from the

associated refinery. In such a situation,

the concern about anticompetitive

effects is greatly reduced. EPA proposes

that a refiner which is involved in both

of the regulated modes of operation may

petition EPA to develop a single

baseline for the combined operation, if

it can show to the Administrator's

satisfaction that a closely integrated

relationship exists. EPA does not expect "closely integrated" to apply broadly to

refiners who happen to also have

blending operations. Comments are

requested on this proposal, particularly

on the proof required to show "close

integration".

4. Ability to Petition for Extraordinary

Individual Circumstance

EPA requests comments on the use of

an adjusted baseline if, due to the

occurrence of extenuating or

extraordinary circumstances in 1990, or

due to its unique individual situation, a

refinery's baseline is unrepresentative of

the gasoline it would have produced in

1990. EPA also requests comment on

what criteria would have to be met, or

proof given, to demonstrate that 1990

refinery operations were indeed

different than if the special

circumstance had not existed. EPA

expects that a refiner would have to

petition EPA, and would have to show

the baseline values calculated without

and without the adjustment.

To limit petitions, EPA proposes that

petitions may be granted only if certain

proof is presented in the petition, in

addition to the baseline parameters

calculated with and without the

adjustment. Such proof may include a

showing that significant financial

burden will exist or that the viability of

the refinery is at stake. EPA could also

require a showing that 1990 operations

were significantly different than 1988-

89 and 1991-92 operations. Comments

are requested as to the degree of

financial hardship that might be

required to be shown and on additional

criteria which might have to be met in

order to restrict any such petition to

situations falling within the agency's

authority under Alabama Power, as

discussed in the SNPRM.

Examples of extenuating

circumstances could include the

following two examples, and EPA

requests comments as to whether such

circumstances should be deemed

extenuating: (1) Downtime which occurs

every 4-5 years and which happened to

occur in 1990 (nonannual turnaround);

and (2) disasters which took out a

gasoline blendstock producing unit for

30 days or more (and whether 30 days

is appropriate). EPA requests comments

as to whether, and what type of, other

extenuating circumstances may exist.

EPA also requests comment on

whether it should consider allowing a

baseline adjustment for the situation

where (1) a fuel produced in 1990 under

contract to the federal government (e.g.,

the military) will be phased out of

production by 1995 due to changes in

fuel requirements by the federal

government, and (2) production of that

fuel constituted at least 30 percent of a

refiner's total production in 1990. For

example, JP-4 jet fuel use is being

eliminated by the Department of

Defense. Because JP-4 is a naphtha/

kerosene blend, feedstock previously

used to produce it will in the future be

used in gasoline. However, that

feedstock cannot be used in gasoline

without first going through a reformer to

increase its octane to suitable gasoline

levels. This will naturally increase the

average aromatic content of a refiner's

gasoline. Refiners for whom JP-4

production constituted a large portion of

their total production will have low

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baseline aromatics and benzene values

relative to the values of the gasoline that

will be produced in lieu of JP-4. Under

certain individual circumstances, a

refinery may have to close if it cannot

comply with the anti-dumping

provisions because its baseline

parameter values were determined

while it was under contract to the

federal government to produce a nongasoline fuel. EPA requests comments

on this situation, and if adjustments to

a baseline determination are granted,

how much of a refinery's 1990

production must have constituted the

soon-to-be-eliminated fuel for the

circumstance to be extenuating.

For all of the above situations, EPA

requests comments as to whether such

a petitioner should get an individual

adjusted baseline, the statutory baseline,

or the statutory baseline on an

individual parameter basis if only

certain parameters were affected by the

circumstance, and whether volume

adjustments should be allowed.

C. Auditor"5 Requirements and

Certification

1. Introduction

In the SNPRM, EPA proposed that an

Agency-certified auditor be utilized to

verify a refiner's or importer's 1990

individual baseline (i.e., the parameter

determination) prior to submission of

the baseline to EPA for approval. EPA

also proposed that the auditor be

independent of the refiner or importer

and that EPA would certify the auditor

based on criteria developed in

consultation with persons

knowledgeable in the technical aspects

of gasoline refining. EPA recently held

a public workshop on this topic and,

considering the discussion at that

workshop, EPA is proposing additional

regulations concerning the certification

of auditors and the submission of the

individual baseline to EPA.

2. Requirements for Auditors

For the attached regulations, EPA

proposes that the term auditor mean an

individual or an organization although

various persons involved with the

auditor may also have to meet certain requirements.

EPA proposes that auditors (and

where applicable, the auditor's

organization and/or other persons) meet

criteria in two areas in order to be

;1 EPA recognizes that the term "auditor" usually

refers to a person who evaluates financial data.

However. in the context of the baseline

development discussed in this proposed

ndemaking. "auditor" shall refer to a person who

technically evaluates the baseline determination of

a refiner or importer for correctness, as defined in

this proposal.

certified by EPA to audit refiner and

importer baselines. These proposed

areas are (1) indepondence from the

refiner or importer, and (2) technical

capability to evaluate the process used

to develop the baseline parameters.

Although these general areas were

proposed in the SNPRM, they are being

reproposed today in more detail.

Concerning independence, EPA

proposes that auditors and any other

individuals or organizations, including

contracting and subcontracting

personnel, who are involved in

substantive aspects of baseline

verification be independent of the

submitter. For example, EPA proposes

that all persons involved in the

substantive aspects of baseline

verification could not have worked in

the past five years as an employee of the

refiner or importer whose baseline is

being verified. EPA expects such criteria

to mitigate potential conflict-of-interest

concerns that could arise concerning the

verification process if the auditor were

to have an intimate relationship with

the refiner or importer. Additionally,

EPA is proposing that the auditor and

its contractors and subcontractors be

financially independent of the

submitter. Specific criteria are listed In

the accompanyin$ proposed regulations.

However, WA is proposing to allow

a person to audit the baseline

parameters for a particular refiner or

importer even if that person also

developed the baseline parameters for

the same refiner or importer, as long as

the person (and his/her contractors, etc.)

meet all the requirements for an auditor.

While larger refiners are likely to

develop their baselines using in-house

expertise, this proposal would most

likely benefit smaller refiners and

importers which are more likely to have

their baselines determined for them by

an outside company.

EPA requests comments on how to

ensure that the independence

requirements remain intact throughout

the duration of the relationship between

the auditor and the refiner, and as to

whether the independence requirements

should be continued for a time period

after the baseline is approved, and what

this time period should be.

EPA is also proposing that auditors be

technically experienced and

knowledgeable in refinery operations.

This criterion is important because of

the complexity of refinery operations

and because refiners may have made

substantial changes in feedstocks or

refinery operating conditions between

1990 and year(s) when data was

collected. Such changes would have to

be accounted for in the individual 1990

baseline determinations. Auditing the

accounting for such changes and

confirming that the necessary

adjustments were made is expected to

be technically challenging and only

those persons with sufficient knowledge

and experience would be capable. EPA is also proposing regulations

which describe the technical role EPA

expects auditors to fulfill in the

verification process. Under these

proposed regulations, the auditor would

ave to perform several tasks to verify

certain aspects of the data collection

and baseline calculations. Additionally,

the auditor would have to describe a

minimal amount of its verification

process to EPA. As a part of this

p rocess, EPA would expect an auditor to

ow te relevant details and

assumptions that went into the baseline

determination it verified. Through the

fulfillment of these requirements, EPA

expects to gain sufficient confidence to

approve many of the baseline parameter

submissions. For baseline submissions

where EPA has some uncertainty, EPA

would follow up with the refiner or

importer and its auditor to gain this

certainty.

EPA requests comment on its

Srposed criteria requiring that auditors

independent and technically capable

of evaluating the baseline parameters.

EPA also requests comment on what

technical role and reporting role the

auditor should play in the verification

process, and if EPA should approve

persons as auditors who were also

involved in developing the baseline

parameters for the refiner or importer.

3. Auditor Certification

Because regulations under section

211(k) of the Act are aimed at refiners

and importers, EPA believes that the

refiner or importer should be

responsible for choosing an auditor who

meets the proposed requirements. EPA

is considering two options for certifying

auditors, and requests comments on

each of these options.

Under the first option, the refiner or

importer would be required to ensure

that the auditor meets the criteria, and

provide such proof with the baseline

submission. The auditor would not be

pre-certified by EPA. If an auditor who

does not meet the criteria is used by the

refiner or importer, the baseline

submission would not be approved.

This option allows the refiner or

importer to begin working with an

auditor immediately, if it believes it can

prove that the auditor will meet the

criteria promulgated in the final rule.

Under the second option, the

qualifications of potential auditors

would be submitted (by a potential

auditor or by a refiner or importer) to

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