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[Federal Register Volume 61, Number 126 (Friday, June 28, 1996)]
[Proposed Rules]
[Pages 33703-33705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16541]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80

[FRL-5528-2]

World Trade Organization (WTO) Decision on Gasoline Rule 
(Reformulated and Conventional Gasoline)

AGENCY: Environmental Protection Agency.

ACTION: Invitation for Public Comment.

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SUMMARY: EPA is initiating a process to identify and evaluate any and 
all options available to meet U.S. international obligations, in 
response to a recent decision by the World Trade Organization (WTO). 
The WTO decision concerns one aspect of rules issued under the Clean 
Air Act for conventional and reformulated gasoline. In particular it 
relates to the baseline used in these programs to determine the 
requirements for imported gasoline. EPA's goal is to identify any and 
all feasible options consistent with EPA's commitment to fully protect 
public health and the environment. Comments are invited from all 
interested parties on these matters.

DATES: Comments must be received on or before September 26, 1996.

ADDRESSES: Interested parties may submit written comments (in 
triplicate if possible) for EPA consideration. The comments are to be 
addressed to: EPA Air and Radiation Docket, Attention: Docket No. A-96-
33, Room M-1500, Mailcode 6102, U.S. EPA, 401 M Street, S.W., 
Washington, D.C. 20460. The docket is open for public inspection from 
8:00 a.m. until 5:30 p.m. Monday through Friday, except on governmental 
holidays. As provided in 40 CFR Part 2, a reasonable fee may be charged 
for copying docket materials. Should a commenter wish to provide 
confidential business information to EPA, such information should not 
be included with the information sent to the docket. Materials sent to 
the docket should, however, indicate that confidential business 
information was provided to EPA.

FOR FURTHER INFORMATION CONTACT: Karen Smith, U.S. EPA, 401 M Street, 
S.W. (Mailcode 6406J), Washington, D.C. 20460, telephone (202) 233-
9674.

[[Page 33704]]

SUPPLEMENTARY INFORMATION: The World Trade Organization recently 
adopted the report of its Appellate Body concerning one aspect of rules 
issued under the Clean Air Act for conventional and reformulated 
gasoline. The dispute initiated by Venezuela and Brazil involves the 
baseline used to set the emissions requirements in these programs for 
imported gasoline. The WTO concluded that EPA's rules in this matter 
were inconsistent with U.S. obligations under the General Agreement on 
Tariffs and Trade (GATT) because they unjustifiably discriminated 
against imported gasoline. It is important to note that the Clean Air 
Act was not at issue in this dispute.
    The U.S Government is disappointed with the results of this 
decision, but is gratified that it fully recognized a country's right 
to adopt appropriate measures to protect public health and the 
environment. In addition, the WTO decision clearly recognizes that 
clean air is an exhaustible natural resource, and that conservation of 
this resource is covered by the provisions of Article XX(g) of the 
GATT.
    EPA is initiating a process to identify and evaluate all options 
available to the agency in responding to this decision. EPA's goal is 
to identify any and all feasible options consistent with EPA's 
commitment to fully protect public health and the environment, and at 
the same time consistent with the obligations of the United States 
under the WTO. Before deciding what course to take, EPA intends to 
fully evaluate all options identified in this public process. This 
invitation for public comment is designed to inform EPA's evaluation of 
the options.
    The following description of the relevant regulatory provisions and 
related issues is provided to help the public in preparing comments. As 
noted above, the conventional gasoline program contains emissions 
requirements designed to ensure that gasoline does not degrade in 
quality from 1990 levels in ways that would adversely affect the levels 
of air pollution from motor vehicles. The Clean Air Act calls for 
conventional gasoline produced or imported by a refiner or importer to 
stay as clean as it was in 1990. See section 211(k)(8) of the Act. To 
meet this requirement, EPA regulations require that domestic refiners 
establish a baseline that reflects the quality of the gasoline they 
produced in 1990. The emission requirements for conventional gasoline 
are keyed to these individual baselines. For the conventional gasoline 
program, see 40 CFR 80.90 -93, 80.101(b). Individual baselines play a 
limited role in the reformulated gasoline program. From 1995 through 
1997, certain of the emission requirements for reformulated gasoline 
are expressed in terms of individual baselines. After that date, 
individual baselines are not used in the RFG program. See 40 CFR 
80.41(h), (j).
    Based on the limited ability of importers and domestic blenders to 
determine the quality of the gasoline they produced or imported in 
1990, in almost all cases they are assigned the statutory baseline 
instead of an individual baseline. The statutory baseline was designed 
to approximate the national average for 1990 gasoline quality. There is 
no provision in the regulations under which a foreign refiner may 
establish an individual baseline, nor are they assigned the statutory 
baseline. Imported gasoline is regulated through the importer, not the 
foreign refiner, and foreign refinery modelling information/data may 
not be used by an importer to establish an importer baseline.
    The rulemaking record for the conventional and reformulated 
gasoline program contains information regarding the environmental, 
cost, verification and enforcement issues associated with setting the 
baseline rules for domestic and imported gasoline. For further 
discussion of these matters, see 59 FR 7716 (February 16, 1994); 59 FR 
22800 (May 3, 1994).
    One baseline issue considered during the rulemakings noted above 
involves allowing foreign refiners to petition EPA for approval of an 
individual baseline for a foreign refinery. This issue was also raised 
during the WTO dispute settlement proceedings. In this respect, the 
Appellate Body identified two omissions of the United States: (1) the 
United States had not sufficiently explored ways of overcoming its 
administrative concerns with respect to imported gasoline and (2) the 
United States had considered the costs of compliance with the statutory 
baseline for domestic refiners but had not adequately considered them 
for foreign refiners. It is important to note that EPA is inviting 
comment on all feasible options that the agency should consider. 
Commenters should not limit themselves to consideration of individual 
baselines for foreign refiners. EPA is interested in evaluating any 
alternative approach that would achieve the environmental benefits 
associated with these gasoline programs while treating domestic and 
imported gasoline in a manner consistent with U.S. obligations under 
the WTO.
    Some of the issues that are relevant to individual baselines and 
may also be relevant to other options include the following:
    How would EPA be able to accurately establish a reliable and 
verifiable individual baseline for a foreign refiner? This would 
include consideration of the technical problems associated with 
determining the quality and volume for gasoline imported into the U.S. 
from a foreign refinery in 1990, determining the refinery of origin for 
gasoline imported in 1990, and consideration of the role of independent 
verification in establishing an accurate baseline.
    How would EPA be able to adequately monitor compliance and enforce 
any baseline requirements? This would include consideration of the 
ability to audit and inspect both foreign and domestic facilities, and 
the ability to enforce against foreign refiners and importers.
    How would EPA be able to effectively determine the refinery of 
origin of imported gasoline, so as to determine the appropriate 
baseline to apply to the imported product? This would include 
consideration of the kind of tracking and segregation needed to ensure 
effective determination of refinery of origin.
    Commenters should address these issues to the extent relevant to 
the option(s) they are addressing.
    Commenters should identify the potential environmental impacts from 
implementation of any suggested option. For example, for those 
commenters that might propose individual baselines, this would include 
consideration of the number of foreign refiners that could seek and be 
able to establish an individual baseline, the individual baseline 
levels that could be established, the volume of imported gasoline that 
could be subject to such a baseline, the areas of the country in which 
this gasoline would be used, the length of time that a foreign refiner 
could use an individual baseline, and the regulatory programs in which 
such a baseline was allowed, e.g. conventional or reformulated 
gasoline.1
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    \1\ Commenters should be aware that EPA is currently prohibited 
by law from taking any further action on its May 1994 proposed rule 
that would have allowed the establishment of individual baselines 
for foreign refiners for use in the federal reformulated gasoline 
program. Omnibus Consolidated Recissions and Appropriations Act of 
1996, Pub. L. No. 104-134, Sec. 101(e), 142 Cong. Rec. H3922 (daily 
ed. April 25, 1996); 59 Fed. Reg. 22800 (May 3, 1994).
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    In addition, EPA invites any other comments relevant to the two 
issues raised by the appellate body in its report as omissions on the 
part of the United States--exploring adequately the means of mitigating 
the administrative problems identified in EPA's earlier

[[Page 33705]]

rulemaking, and considering the costs for foreign refiners that might 
result from the use of the statutory baseline for imports.
    A key criterion in evaluating any options presented in response to 
this notice will be fully protecting the public health and the 
environment. The reformulated and conventional gasoline programs are 
important components in the strategy for achieving that goal. EPA 
invites comment that would allow EPA to better quantify or characterize 
potential environmental impacts of any options proposed by commenters, 
as well as feasible options to address any such potential impacts.
    As noted above, EPA's goal in inviting public comment is to obtain 
information that will help the agency identify any and all feasible 
options consistent with EPA's commitment to fully protect public health 
and the environment, and at the same time consistent with the 
obligations of the United States under the WTO. EPA requests that 
commenters provide information and analysis on the public health and 
environmental impact associated with any option presented for 
consideration. Commenters should also identify the economic and other 
impacts associated with any suggested option, and discuss the 
relationship of the option to the United States' obligations under the 
WTO.

    Dated: June 20, 1996.
Mary D. Nichols,
Assistant Administrator for Air and Radiation.
[FR Doc. 96-16541 Filed 6-27-96; 8:45 am]
BILLING CODE 6560-50-P
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