Document ID: EPA-HQ-OAR-2005-0153-0001
Agency: epa
Document Type: Proposed Rule
Title: Control of Air Pollution from New Motor Vehicles; Revisions to Motor Vehicle Diesel Fuel Sulfur Transition Provisions and Technical Amendments to the Highway Diesel, Nonroad Diesel , and Tier 2 Gasoline Programs
Posted Date: 2005-11-22T19:02:42Z

[Federal Register: November 22, 2005 (Volume 70, Number 224)]
[Rules and Regulations]               
[Page 70498-70513]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no05-11]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[OAR-2005-0153; FRL-7996-9]
RIN 2060-AJ71

 
Control of Air Pollution From New Motor Vehicles; Revisions to 
Motor Vehicle Diesel Fuel Sulfur Transition Provisions; and Technical 
Amendments to the Highway Diesel, Nonroad Diesel, and Tier 2 Gasoline 
Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: The highway diesel fuel sulfur program, finalized in 2001, is 
resulting in the nationwide transition in 2006 of most diesel fuel from 
low-sulfur diesel (LSD) to ultra-low sulfur diesel (ULSD). Some in the 
diesel fuel production and distribution industries indicated that they 
may be unable to complete the transition to ULSD by the current 
deadlines at the very furthest reaches of the distribution system. In 
response, today's action makes limited changes to the transition 
provisions for entities in the highway diesel distribution system. 
These changes finely balance the concerns of the fuel industry and the 
critical need for ULSD to be available for 2007 diesel vehicles and 
engines. The impacts of the recent hurricanes along the Gulf Coast of 
the U.S. are not a contributing factor in taking today's action, and 
there is no change in the June 1, 2006 start date for refiners to be 
producing ULSD (15 ppm sulfur).
    In today's action, we extend the ULSD implementation dates for 
terminals and retail outlets by 45 days. Thus, terminals will have 
until September 1, 2006 (vs. July 15) and retailers will have until 
October 15, 2006 (vs. September 1) to complete their transitions to 
ULSD. We also provide that downstream of the refinery fuel with a 
sulfur content slightly higher than 15 ppm may temporarily be sold as 
ULSD. In addition, we extend the beginning of the restriction on how 
much ULSD can be downgraded to higher sulfur fuel by 15 days, to 
October 15, 2006 to be consistent with the end of the new transition 
dates. The rule also includes corrections to the recordkeeping and 
reporting requirements under the highway diesel program and also 
includes several minor amendments to the highway diesel sulfur, nonroad 
diesel sulfur, and gasoline sulfur programs to correct errors or 
omissions in the regulations.

DATES: This direct final rule is effective on January 6, 2006 without 
further notice, unless we receive adverse comments by December 22, 2005 
or receive a request for a public hearing by December 7, 2005.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. OAR-2005-0153. All documents in the docket are listed in the 
EDOCKET index at http://www.epa.gov/edocket. Although listed in the 

index, some information is not publicly available, i.e., Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Certain other material, such as copyrighted 
material, is not placed on the Internet and will be publicly available 
only in hard copy form. Publicly available docket materials are 
available either electronically in EDOCKET or in hard copy at the Air 
Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., 
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 
p.m., Monday through Friday, excluding legal holidays. The telephone 
number for the Public Reading Room is (202) 566-1744, and the telephone 
number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Tad Wysor, Assessment and Standards 
Division, U.S. EPA, National Vehicle and Fuels Emission Laboratory, 
2000 Traverwood, Ann Arbor, MI 48105; telephone (734) 214-4332, fax 
(734) 214-4816, e-mail wysor.tad@epa.gov.

SUPPLEMENTARY INFORMATION: We do not expect to hold a public hearing, 
however, if we receive such request we will publish information related 
to the timing and location of the hearing and the timing of a new 
deadline for public comments. If we receive adverse comment or a 
request for a hearing, we will withdraw the amendment, paragraph or 
section of the direct final rule receiving such comment or hearing 
request, and such withdrawn amendment, paragraph or section will

[[Page 70499]]

not take effect. Any distinct amendment, paragraph, or section of 
today's rulemaking for which we do not receive adverse comment or 
request for hearing will become effective on the date set out in the 
``DATES'' section of today's preamble.

Does This Action Apply to Me?

    This action will affect you if you produce or distribute motor 
vehicle diesel fuel or gasoline. The table below gives an example of 
entities that may have to comply with the regulations. However, since 
this is only an example, you should carefully examine these and other 
existing regulations in 40 CFR part 80. If you have any questions, 
please call the person listed in the FOR FURTHER INFORMATION CONTACT 
section above.

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                                  NAICS codes
            Category                   a        SIC codes b                          Examples of potentially regulated industries
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Industry.......................        324110          2911  Petroleum refiners.
Industry.......................        422710          5171  Diesel and gasoline fuel marketers and distributors.
                                       422720          5172
Industry.......................        484220          4212  Diesel and gasoline fuel carriers.
                                       484230         4213
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Notes:
a North American Industry Classification System (NAICS).
b Standard Industrial Classification (SIC) system code.

How Can I Obtain Copies of This Document and Other Related Information?

    Docket: EPA has established an official public docket for this 
action under Docket ID No. OAR-2500-0153 at http://www.epa.gov/edocket. 

The official public docket consists of the documents specifically 
referenced in this action, any public comments received, and other 
information related to this action. Although a part of the official 
docket, the public docket does not include Confidential Business 
Information (CBI) or other information whose disclosure is restricted 
by statute. The official public docket is the collection of materials 
that is available for public viewing at the Air Docket in the EPA 
Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave., 
NW., Washington, DC. The EPA Docket Center Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Reading Room is (202) 566-1742, 
and the telephone number for the Air Docket is (202) 566-1742.
    Electronic Access: You may access this Federal Register document 
electronically through the EPA Internet under the ``Federal Register'' 
listings at http://www.epa.gov/fedrgstr/.

    An electronic version of the public docket is available through 
EPA's electronic public docket and comment system, EPA Dockets. You may 
use EPA Dockets at http://www.epa.gov/edocket/ to view public comments, 

access the index listing of the contents of the official public docket, 
and to access those documents in the public docket that are available 
electronically. Although not all docket materials may be available 
electronically, you may still access any of the publicly available 
docket materials through the docket facility identified above. Once in 
the system, select ``search,'' then key in the appropriate docket 
identification number.

I. Amendments to the Highway ULSD Transition Provisions

    In 2001, EPA published the final rule for the Heavy-Duty Engine and 
Diesel Fuel program. 66 FR 5002 (January 18, 2001). This rule, 
developed through extensive interaction with the diesel engine 
industry, refiners producing diesel fuel, diesel fuel distributors, 
states, and non-governmental organizations, will result in very large 
reductions in emissions from on-road trucks and buses. The health 
benefits of the program will far exceed the economic costs. All major 
stakeholders are supportive of the overall program.
    Key to the success of the program will be the near-total removal of 
sulfur from all diesel fuel used in highway diesel engines. Ultra-Low 
Sulfur Diesel (ULSD) fuel is a critical complement to the stringent new 
emission standards coming into effect for these engines during the same 
time period. These engine emission standards will require diesel engine 
manufacturers to introduce new emission control systems which will rely 
on the exclusive use of ULSD to maintain operability and effectiveness.
    The highway diesel fuel sulfur program will result in the 
nationwide production and distribution of ULSD fuel, diesel fuel that 
is subject to a sulfur level of 15 parts per million (ppm) or less. 
This fuel will replace current Low Sulfur Diesel (LSD) fuel used in 
highway vehicles, which is subject to a 500 ppm sulfur standard. 
Together, the stringent engine emission standards and the stringent 
diesel fuel sulfur standards combine to represent a major step toward 
reducing the major public health concerns associated with emissions 
from on-highway diesel trucks and buses.\1\
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    \1\ The highway diesel sulfur program will be followed by the 
nonroad diesel sulfur program, issued in 2004. 69 FR 38958 (June 29, 
2004). The nonroad program will require LSD to be produced for use 
in nonroad diesel engines beginning in 2007. ULSD will be produced 
for use in nonroad diesel engines beginning in 2000, during the same 
time period when new stringent emissions standards will go into 
effect for new nonroad engines.
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    The nationwide system that produces and distributes diesel fuel is 
complex and efficient, and these characteristics are reflected in the 
diesel sulfur program. The major segments of the industry are the 
producers (refiners and importers); companies operating fuel pipelines 
and other means of transporting fuel, and distribution terminals; fuel 
wholesalers and tank truck operators; and retailers and ``wholesale 
purchaser-consumers'' (WPCs). All segments of the system are involved 
in the transition from current diesel fuel to the widespread 
availability of ULSD fuel, and each of the entities involved is 
affected by provisions of the rule.
     Refining companies have been upgrading their refineries in 
order to remove most of the sulfur from diesel fuel and be ready to 
introduce ULSD highway fuel into the distribution system no later than 
June 1, 2006.
     Pipeline and terminal operators are in the process of 
adding, upgrading, or making operational changes for equipment that 
handles diesel fuel, including piping, valves, and storage tanks. As 
ULSD begins to flow through the downstream distribution system, 
pipelines and terminals will either completely transition from LSD to 
ULSD, use separate capability to distribute ULSD to their downstream 
customers, or carefully manage sequential shipments of these products.

[[Page 70500]]

     Retail and WPC facilities represent the final segment of 
the distribution system. These entities will also need to turn over 
their higher sulfur diesel fuel supplies and make operational 
adjustments to be able to supply ULSD to the ultimate consumers.
    The next sections of this preamble describe the technical and 
logistical issues facing the diesel fuel industry during the 2006 
transition to ULSD highway fuel, including some concerns raised 
recently as we near the beginning of the implementation of the program. 
In today's action, we implement limited revisions to the transition 
provisions of the highway diesel sulfur rule. These changes are 
designed to address transition issues concerning various segments of 
the diesel fuel industry and help facilitate the successful nationwide 
transition to ULSD fuel.
    Although the recent hurricanes along the Gulf Coast of the U.S. 
caused serious damage to a number of refineries, and the aftermath of 
the storms has continued to affect the petroleum industry, these events 
are not a contributing factor in taking today's action. Based on the 
confidential information provided to us, as well as conversations with 
the affected refiners, the impacts of the hurricanes on the refineries 
appear to be temporary, and we do not expect to see any general 
impediments to the successful widespread production of ULSD by June 1, 
2006. To the extent that individual refineries may have experienced 
temporary delays that might impact their ULSD start-up schedules (due 
to direct impacts of the hurricanes or indirect impacts on their 
contractors and suppliers), there are provisions in the existing 
highway diesel program that allow EPA to consider cases of ``extreme, 
unusual, and unforeseen circumstances'' (40 CFR 80.561). We will 
address these cases under these provisions on a refinery-by-refinery 
basis.
    As described below, this rule focuses on providing a limited amount 
of additional time for entities in the diesel fuel distribution system 
to flush higher sulfur fuel out of the system during the transition to 
ULSD. This rule does not affect the start date by which refiners need 
to be producing ULSD under the highway diesel program--June 1, 2006. In 
fact, although EPA has taken several actions in response to the 
hurricanes, none of these actions affects the start date of the 
program.

A. The Existing ULSD Transition Provisions

    In developing the highway diesel sulfur program, EPA recognized 
several practical considerations inherent in successfully changing over 
most of the nation's highway diesel fuel from LSD to ULSD before the 
introduction of new highway diesel engines designed to operate 
exclusively on ULSD fuel. The overall program, finalized in early 2001, 
provided long lead times for the diesel fuel refining and distribution 
industries to prepare for compliance in 2006. Incorporated in the 
program was a set of provisions carefully designed, with extensive 
input from industry and others, to ensure the smooth nationwide 
completion of the transition to ULSD.
    After the formal beginning of the program on June 1, 2006 and 
during the next few years, the opportunity for refiners and importers 
to produce and market 500 ppm highway diesel fuel will be significantly 
limited. As of June 1, 2006, at least 80 percent of the highway diesel 
fuel that refiners produce or importers introduce must meet the 15 ppm 
sulfur standard. The remaining 20 percent can continue to be produced 
to a 500 ppm sulfur standard.\2\ The 2005 refiner pre-compliance report 
data provided by refiners indicate that about 90 percent of the highway 
diesel fuel produced or imported will meet the 15 ppm sulfur standard 
beginning June 1, 2006, well above the 80 percent requirement. Thus, 
the vast majority of all highway diesel fuel produced by refiners or 
introduced by importers will have reached ULSD levels by that date. 
Even before the June 1, 2006 refinery gate deadline for the ULSD 
requirement, we expect that several refiners will have begun 
introducing some volumes of ULSD into the distribution system. Starting 
June 1, 2006, if fuel is designated and marketed as ULSD, it must meet 
the ULSD standards.
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    \2\ Such 500 ppm fuel can only be used in model year 2006 and 
earlier highway diesel engines.
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    As very low sulfur diesel fuel begins to enter the distribution 
system, pipelines and terminals, and in some cases retailers and WPCs, 
will start to turn over their existing supplies of LSD fuel to ULSD. 
The transition will accelerate after June 1, 2006 as large volumes of 
ULSD enter the system. During this transition, all parts of the 
downstream distribution system, from pipelines through terminals, 
retailers, and wholesale purchaser consumers (WPCs), must designate 
their fuel for sulfur content. This will start to affect downstream 
entities as soon as refiners designate their fuel at the refinery gate 
as ULSD. If a downstream entity receives ULSD and designates it as 
ULSD, it is subject to the 15 ppm sulfur standard. If the downstream 
entity re-designates it as LSD, it is subject to the 500 ppm sulfur 
standard. Under the existing diesel sulfur program, the downstream 
compliance dates in the regulations are based on the expectation that 
the transition to ULSD will be completed at the terminal stage by July 
15, 2006, and at the retail and WPC stage by September 1, 2006.
    These July 15 and September 1 downstream transition dates for the 
terminal and retail levels do not themselves restrict the relative 
volumes of LSD and ULSD present in the distribution system downstream 
of the refiner and importer. Another provision of the regulations, the 
``anti-downgrading'' provision, provides the assurance that downstream 
entities in the system will begin providing the vast majority of the 
highway diesel fuel as ULSD. This provision establishes the date after 
which no more than 20 percent of the ULSD highway fuel received by a 
downstream entity can be re-designated, or downgraded, to 500 ppm 
highway diesel fuel.\3\
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    \3\ There are no restrictions on the volume of ULSD highway fuel 
that may be downgraded to heating oil, or nonroad, locomotive, and 
marine diesel fuel.
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    By limiting the volume of 15 ppm highway diesel fuel that can be 
downgraded to 500 ppm highway fuel, the program helps to ensure that 
the vast majority of highway diesel fuel that is marketed after that 
date will be ULSD and that ULSD will be available in all parts of the 
country for the engines that need it. Without the anti-downgrading 
limitation, terminals, retailers, and others in the distribution system 
could continue to blend 15 ppm highway fuel with 500 ppm highway fuel 
and simply market the fuel as 500 ppm highway fuel. This would have the 
potential to interfere with the successful implementation of the ULSD 
highway program by slowing the transition and reducing the volumes of 
ULSD available at the retail level. In the highway diesel rule, the 
anti-downgrading requirements were to take effect on June 1, 2006. 
However, this date was extended to October 1, 2006 in the recent 
Nonroad Diesel final rule in recognition of the need for mixing of the 
15 ppm and 500 ppm fuel as the distribution system is flushed out.\4\ 
The 20 percent downgrading limitation continues until May 31, 2010, 
after which downgrading is no longer a concern given that all highway 
diesel fuel must be ULSD.
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    \4\ In the nonroad diesel rule, EPA concluded that it would be 
appropriate to have a single anti-downgrading date for all entities 
in the distribution system rather than set separate dates for 
terminals and retailers. Furthermore, the date was extended beyond 
the September 1 retail date in response to industry concerns that in 
some cases the final transition may take longer.

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[[Page 70501]]

    Although the July 15 and September 1 downstream transition dates 
for the terminal and retail levels do not themselves restrict the 
relative volumes of LSD and ULSD, we expect that ULSD will become the 
predominant highway diesel fuel in most parts of the fuel distribution 
system well before the implementation of the anti-downgrading 
requirement. First, the pre-compliance reports compiled to date 
indicate that beginning June 1, 2006 most distributors will only be 
able to obtain ULSD or fuel being blended down to ULSD. Second, we 
expect that refiners will be motivated to bring ULSD to retail as soon 
as possible so that they can begin to recoup their capital investments 
through the sale of ULSD. Finally, fuel distributors will need to begin 
blending down much of their highway diesel fuel to ULSD specifications 
before the implementation date for the anti-downgrading requirements in 
order to be in compliance with the anti-downgrading specifications once 
they become effective. As a result, terminals and retail facilities 
will begin insisting on delivery of ULSD from their suppliers as soon 
as possible. Therefore, while the anti-downgrading provision ensures a 
date-certain for the final completion of the transition, the July 15 
and September 1 implementation dates for terminals and retailers/WPCs 
are important milestones in the transition to ULSD.

B. Recent Concerns About the Transition

    All segments of the diesel fuel production and distribution system 
have been actively taking steps to prepare for the nationwide 
transition to ULSD fuel. The primary elements of the program are 
designed to work together to result in a relatively quick and efficient 
large scale shift from LSD to ULSD throughout the system. These 
elements include:
     The leadtime provided since the rule was published in 
2001,
     The requirement that refiners produce the vast majority of 
fuel as ULSD by June 1, 2006,
     The sequential implementation dates for refiners/
importers, terminals, and retailers, and
     The beginning of the anti-downgrading requirements.
    In developing the highway diesel rule, each of these elements was 
evaluated individually and in combination, and the program was designed 
to maximize the efficiency and effectiveness of the transition to ULSD 
fuel. All information available to us continues to indicate that these 
elements will combine to result in a smooth transition to ULSD in most 
if not all cases, and no one has expressed concerns about completing 
the transition for the large bulk of diesel fuel.
    However, in recent months, some in the industry have expressed a 
degree of uncertainty in their ability to complete the transition by 
the current deadlines in the very farthest reaches of some of the more 
complex parts of the distribution system. These parts of the system can 
involve long pipelines, secondary pipeline systems, and several points 
where the flow of fuel is interrupted by temporary storage in break-out 
tanks. For these parts of the system, the process of completely 
blending down the fuel to 15 ppm levels in all the intermediate tanks 
presents somewhat greater challenges than do less complex systems.
    At the same time, the amount of time available to complete the ULSD 
transition and ensure the widespread availability of the fuel has been 
balanced with the absolute need for ULSD to be available for use in 
model year 2007 diesel engines and vehicles. Over the past four years, 
the engine and vehicle manufacturers have worked hard and have made 
substantial financial investments to develop sophisticated emission 
control systems to meet the 2007 emission standards, with the 
expectation that these systems would only be exposed to ULSD sulfur 
levels. Thus, the success of the new emission control standards for 
these engines hinges on the widespread availability of ULSD in time for 
the coordinated launch of 2007 model year engines and vehicles. 
Recognizing that transition times that are too long would interfere 
with the introduction of the new model year 2007 diesel engines 
designed to operate on ULSD, EPA incorporated this balance in the 
design of the highway diesel program. The appropriate transition time 
was the subject of many substantial comments on the proposed rule.
    EPA has re-evaluated this balance in light of the uncertainties 
that have been expressed. We are aware of no information that 
definitively shows that problems in the distribution system will in 
fact develop during the transition. In fact, the broad consensus is 
that for the vast majority of the country, the existing provision of 
the program should be sufficient. Still, we believe that limited 
additional flexibility for entities downstream of the refineries would 
help to address the potential problems that might be faced by certain 
limited portions of the distribution system. Today's action will 
facilitate the thorough changeover of diesel fuel and increase the 
certainty that ULSD will be available on time for use in 2007 engines 
and vehicles in all parts of the country.
    In considering an appropriate degree of additional flexibility for 
the distribution system as described in the next section, we held 
extensive consultations with the associations representing the heavy-
duty and light-duty engine manufacturing industries, as well as 
meetings with individual companies. Based on these meetings, we have 
concluded that it is critical that the end of any additional downstream 
transition flexibility occur no later than October 15, 2006. We know of 
several instances in which extending the transition period until 
October 15 will indeed impact scheduled launch dates for Model Year 
2007 engines. It is our understanding that, given the strong assurance 
that 15 ppm fuel will be broadly available by October 15, these 
companies are willing to delay their vehicle or engine introductions. 
However, any further delays would have significant impacts on their 
ability to launch their 2007 model year product lines and would be 
considered unacceptable. The actions we are taking today, as discussed 
next, balance the needs of both the fuel distribution and diesel engine 
manufacturing entities.

C. Actions EPA Is Taking to Ease the Transition to ULSD

    EPA is taking three actions to address the transition concerns that 
have been raised and to facilitate the smooth transition across the 
country to ULSD highway fuel. First, in response to concerns raised by 
the diesel fuel production and distribution industries, EPA is 
extending by 45 days the dates in the regulations that identify when 
the transition is expected to be completed by downstream entities. This 
would now be September 1, 2006 for terminals and all entities upstream 
of terminals (and downstream of refiner and importer origination 
facilities), and October 15 for retailers and WPCs.\5\ Second, for 
consistency with this change of dates, EPA is also extending the 
deadline for meeting the anti-downgrading requirements until October 
15, 2006. This will mean that prior to that date entities can 
redesignate the ULSD highway fuel received from the refinery to LSD 
highway fuel without restriction, but after that date the ability to 
redesignate

[[Page 70502]]

ULSD as 500 ppm highway fuel will be significantly restricted.
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    \5\ The change in the implementation date applies only to the 
sulfur standard of 40 CFR 80.520(a), not the dye requirements of 40 
CFR 80.520(b). We do not believe that a similar delay in the 
implementation date for the dye requirements is needed or would be 
of value to entities in the distribution system.
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    Together, we expect that these changes will ensure that even the 
most remote parts of the distribution system will have sufficient time 
to transition to ULSD in an orderly way. With this additional time, all 
entities in the distribution system will be better able to learn how 
the system is responding as large volumes of very low sulfur fuel begin 
to flow, while still having sufficient time to react as necessary based 
on what they and others learn. Thus, they will be in a better position 
to complete the flushing of LSD from the system while minimizing 
capital expenditures for temporary measures otherwise needed only 
during the transition. Based on confidential conversations with engine 
and vehicle manufacturers, any extension beyond October 25 would have a 
serious impact on the introduction of new MY 2007 highway diesel 
engines.
    With these changes, the expected end of the transition for retail 
outlets and the anti-downgrading date are now aligned. Thus, the date 
established in today's action for the end of the additional retail 
transition flexibility (October 15, 2006) is now supported by the 
beginning of the anti-downgrading restriction on the same date. This 
alignment will help encourage retail entities to plan the transition of 
their diesel fuel so that not only will all ULSD they sell by October 
15, 2006 be 15 ppm, but also the vast majority of all highway fuel they 
sell will be ULSD under the anti-downgrading provision.\6\ \7\
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    \6\ Under the existing program, these aspects of the program 
were not aligned. After the end of the retail transition period, 
September 1, 2006, and before the anti-downgrading date of October 
1, 2006, retailers that wished to sell 15 ppm fuel as ULSD would 
have been able to downgrade as much of that fuel as they wished, 
which might have unnecessarily slowed the overall transition.
    \7\ Some entities have indicated that their recordkeeping 
systems may not readily allow for a mid-month start to a compliance 
period. Therefore, we would allow them to maintain the original 
October 1, 2006 date at their option.
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    Finally, the third action EPA is taking to facilitate the 
transition to ULSD is to temporarily allow diesel fuel at a sulfur 
level of 22 ppm to be distributed downstream of the refinery as ULSD 
during this extended transition period.\8\ The existing program 
provides for a 2 ppm adjustment for sulfur test results of downstream 
diesel fuel, to account for testing variability. Today's revision 
temporarily allows an additional downstream adjustment of 7 ppm--to 
account for downstream sulfur contamination that may occur as the 
system transitions to ULSD--for a total adjustment of 9 ppm. This 
temporary increase applies for the same additional 45 days noted above, 
expiring before the expected introduction of new 2007 model year 
highway diesel engines.
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    \8\ Currently, a downstream batch of ULSD with test results of 
17 ppm is treated as in compliance with the 15 ppm sulfur standard. 
Under this temporary revision, a downstream batch of ULSD with test 
results of 24 ppm would be in compliance with the sulfur standard 
for ULSD. In both cases, this downstream adjustment only applies to 
testing of diesel fuel after it leaves the refinery, it does not 
apply to a refiner's or importer's fuel.
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    This additional adjustment factor is designed to help the 
transition by making it more likely that fuel will be classified by 
downstream entities as ULSD as early as possible, and that it will stay 
classified as ULSD throughout the distribution system. This will make 
it easier for the points near the end of the distribution system to 
keep the ULSD classification for the diesel fuel they receive as ULSD. 
During the transition to ULSD fuel, entities in the distribution system 
may find themselves in possession of fuel with test results slightly 
above 15 ppm sulfur, and we believe it will be beneficial if they are 
temporarily able to continue treating this fuel as ULSD during this 
transition period. This will reduce the perceived need for entities 
near the end of the distribution system to downgrade ULSD to 500 ppm 
LSD because of concern over liability from low level contamination 
remaining in the system. Reducing the need to downgrade will maximize 
the volume of highway fuel distributed as ULSD, which will help to 
ensure a timely transition to ULSD.

II. Amendments To Ensure the Enforceability of the Highway Diesel 
Program

    As discussed in the previous section on the amendments to the ULSD 
transition provisions, the benefits of the highway diesel program 
depend on ensuring that beginning October 15, 2006 the predominant fuel 
available at retail for use in highway diesel engines meets a 15 ppm 
sulfur standard. The highway diesel program's Temporary Compliance 
Option (TCO) provides that up to 20 percent of highway diesel fuel 
produced by a refiner or introduced by an importer may continue to meet 
a 500 ppm sulfur standard until June 1, 2010.\9\ Beginning December 1, 
2010, all fuel used in any highway diesel engine must meet a 15 ppm 
sulfur standard.
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    \9\ Such 500 ppm fuel can only be used in model year 2006 and 
earlier highway diesel engines.
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    The nonroad diesel program requires that beginning June 1, 2007, 
diesel fuel produced for use in nonroad, locomotive, and marine diesel 
engines (NRLM diesel fuel) must meet a 500 ppm sulfur standard.\10\ The 
nonroad program also provides for the generation of early credits for 
the production of 500 ppm NRLM diesel fuel beginning June 1, 2006. 
Thus, from June 1, 2006 through December 1, 2010, we expect that there 
will be both 500 ppm NRLM and 500 ppm highway diesel fuel in the diesel 
fuel distribution system. While 500 ppm highway diesel fuel may be used 
in highway or nonroad engines or other suitable distillate fuel 
applications without restriction, the nonroad rule closely controls how 
much 500 ppm diesel fuel that is designated as NRLM may be shifted for 
use in highway vehicles, in order to maintain the integrity of the 
highway program (by ensuring the production of 15 ppm diesel fuel).
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    \10\ The nonroad program includes small refiner and credit 
provisions that provide for the limited production of high sulfur 
(>500 ppm) NRLM diesel fuel until June 1, 2010.
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    In the 1993 highway diesel rule, EPA generally required that any 
diesel fuel that does not show visible evidence of red dye would be 
subject to all of the requirements applicable to highway diesel fuel. 
To comply with this requirement, refiners add a visible trace of red 
dye to non-highway diesel fuel prior to it leaving the refinery gate. 
If this requirement were maintained, there would be no difficulty in 
differentiating 500 ppm highway diesel fuel from other diesel fuel. 
During the development of the nonroad diesel rule, fuel distributors 
requested that EPA provide that 500 ppm NRLM fuel not be subject to the 
refinery gate red dye requirement. This would allow for the fungible 
shipment of 500 ppm NRLM and 500 ppm highway diesel until the point in 
the distribution system where NRLM diesel fuel must be dyed red to 
indicate its non-tax status (that is, prior to leaving the 
terminal).\11\ Commenters stated that there would be a substantial 
savings in fuel distribution costs if the two grades of 500 ppm diesel 
fuel could be fungibly mixed until they leave the terminal.\12\
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    \11\ Pursuant to Internal Revenue Service Requirements (26 
U.S.C. 4082).
    \12\ This is primarily due to the reduced need for segregated 
storage tanks prior to leaving the terminal.
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    In considering this request from distributors in the nonroad diesel 
rule, EPA recognized that in the absence of the refinery gate red dye 
provisions, 500 ppm sulfur highway diesel fuel allowed under the 
highway diesel fuel program's TCO and 500 ppm NRLM diesel fuel would be 
physically the same up to the point where the NRLM leaves the terminal 
and is dyed for tax purposes. Therefore, maintaining the benefits and 
integrity of the highway diesel fuel

[[Page 70503]]

program required some means of differentiating highway diesel fuel from 
NRLM diesel fuel throughout the distribution system. For example, if a 
refiner produced all 500 ppm sulfur fuel and designated it as NRLM 
diesel fuel, that refiner would have no obligation to produce any 15 
ppm sulfur highway diesel fuel. Without an effective way of limiting 
the use in the highway market of 500 ppm sulfur diesel fuel produced as 
NRLM diesel fuel, much more 500 ppm sulfur fuel could find its way into 
the highway market than would otherwise happen under the highway 
program. This in turn could displace 15 ppm sulfur diesel fuel that 
would have otherwise been produced. This series of events would 
circumvent the intent of the highway program's TCO and sacrifice some 
of the resulting particulate matter (PM) and sulfur dioxide 
(SO2) emission benefits of the overall highway diesel 
program. If this occurred to any significant degree, it could also 
undermine the integrity of the highway program by threatening the 
widespread availability of 15 ppm sulfur diesel fuel nationwide for the 
vehicles that will need it.
    In lieu of the refinery gate red dye requirement, commenters 
suggested that EPA adopt accounting provisions to ensure that 500 ppm 
NRLM diesel fuel is not inappropriately shifted into the highway diesel 
market downstream of the refinery. Working cooperatively with industry, 
we developed provisions that require the designation of fuel and the 
tracking and balancing of fuel volumes, as well as related 
recordkeeping and reporting concerning the fuels received and 
delivered. Among other things, this allows for the fungible shipment of 
500 ppm highway and 500 ppm NRLM diesel fuel up to the point where such 
fuel leaves the terminal, while controlling the shift of NRLM fuel into 
the highway market. In the nonroad diesel final rule, we promulgated 
such accounting provisions allowing for the removal of the dye 
requirement and fungible distribution of 500 ppm diesel fuel. These 
provisions are part of the designation and tracking requirements 
adopted in the nonroad diesel rule.
    We intended that the removal of the dye requirement for 500 ppm 
NRLM diesel fuel coincide with the implementation date for the 
downstream limitations on redesignating 500 ppm NRLM as 500 ppm highway 
fuel. By linking these dates, the integrity of the highway diesel 
program would be protected by the dye requirement for 500 ppm NRLM 
until its removal, and by the related designate and track requirements 
thereafter. However, the date specified in the regulatory text for the 
removal of the dye requirement for 500 ppm diesel fuel designated as 
NRLM was set earlier than the effective date for the requirements that 
restrict the ability to redesignate 500 ppm NRLM as 500 ppm highway 
diesel fuel. The effective date for the removal of the refinery gate 
red dye requirement for 500 ppm NRLM is June 1, 2006, whereas the 
effective date for the requirements that restrict the ability to 
redesignate 500 ppm NRLM as 500 ppm highway diesel fuel is June 1, 
2007. Thus, for the period of June 1, 2006 through June 1, 2007, when 
refiners can produce 500 ppm NRLM for early credit, there is a ``gap'' 
in the designate and track regulations, resulting in the lack of 
effective regulatory requirements to prevent the misdirection of non-
highway 500 ppm diesel fuel into the highway diesel market.

A. Description of Today's Action

    Today's action amends the diesel fuel program to require that 
beginning June 1, 2006, any entity that receives and/or distributes 15 
ppm or 500 ppm highway diesel fuel must demonstrate compliance with the 
requirements limiting the redesignation of 500 ppm NRLM to 500 ppm 
highway fuel. Each entity that distributes and/or receives 15 ppm and/
or 500 ppm highway diesel fuel after that date will be required to 
demonstrate compliance with these requirements during each quarterly 
compliance period beginning June 1, 2006. Each such entity will also 
have to report to EPA on the volume of 15 ppm and 500 ppm highway 
diesel fuel that they receive and distribute, broken down by exchange 
partner.
    As discussed in the next section, we believe that the approach we 
are establishing today will be effective in closing the unintended gap 
in the designate and track regulations. In addition, it has advantages 
over several other approaches that we evaluated. The next section 
describes each of the options we evaluated and also describes 
provisions we are including to mitigate any negative impact of this 
change on entities that distribute diesel fuel.

B. Evaluation of Options

    In evaluating how best to resolve this regulatory gap in the 
designate and track regulations, EPA evaluated three options. One 
option we evaluated would require that all undyed 500 ppm diesel fuel 
be designated as motor vehicle (highway) diesel fuel from June 1, 2006 
through May 31, 2007. Since all undyed 500 ppm fuel would be considered 
highway diesel fuel, there would be no way for refiners to direct 500 
ppm NRLM fuel into the highway market, thus helping to maintain the 
integrity of the highway diesel program. However, this approach would 
need to include the elimination of the NRLM program provisions that 
allow the generation of early credits via the sale of 500 ppm NRLM fuel 
before June 1, 2007.
    The elimination of the early NRLM credit provisions could 
significantly impact refiners planning to generate and/or use early 500 
ppm NRLM credits. In addition, such an approach might result in the 
shifting of more 500 ppm fuel production to the highway market than 
would have otherwise occurred, interfering with the flexibility offered 
by the temporary compliance option (TCO) in the highway diesel program. 
It is very late in the planning process for any refiners planning to 
use any of these flexibilities in the NRLM and highway diesel programs. 
Consequently, we do not believe it would be appropriate to pursue this 
option.
    Another option we evaluated would address the timing problem by 
moving the effective date of the removal of the red dye requirement for 
500 ppm NRLM diesel fuel from June 1, 2006 to June 1, 2007. By 
requiring that 500 ppm NRLM fuel continue to be dyed at the refinery 
gate, the integrity of the highway diesel program would be maintained, 
since the dye would prevent NRLM from being diverted into the highway 
diesel pool during that period. The serious problem with this approach, 
however, is that refiners or importers, as well as pipelines and 
terminals, that are planning to ship 500 ppm fuel for the highway and 
NRLM markets together would be prevented from doing so. Again, 
especially because of the late date, we believe it would be 
inappropriate to change the program in ways that may significantly 
change diesel fuel production and distribution plans.
    The third option that that we evaluated, and, as described above, 
the one we are adopting today, would amend the diesel fuel program to 
begin certain designate and track provisions on June 1, 2006. Thus, any 
downstream entity that receives and/or distributes 15 ppm or 500 ppm 
highway diesel fuel after that date would need to demonstrate, for 
these fuels, compliance with the limitations on redesignating 500 ppm 
NRLM as 500 ppm highway fuel. We believe that this approach is most 
consistent with the express purpose of the provisions of the nonroad 
rule--to allow refiners and importers to freely mix 500 ppm highway and 
NRLM diesel fuel in the absence of the red dye requirement

[[Page 70504]]

while maintaining the integrity of the highway diesel fuel program. We 
also believe that this approach will result in the least number of 
substantive changes to the existing program.
    Members of the fuel industry have noted that some fuel distributors 
may have to establish reporting systems earlier than they had planned. 
However, we have assessed the additional reporting and recordkeeping 
requirements of this action and we have concluded that the additional 
resources some entities may need to expend in response to today's 
action will be relatively modest and the available lead time should be 
sufficient. However, in response to industry concerns expressed about 
these unanticipated requirements, today's action contains two 
provisions to help mitigate these concerns. First, as mentioned above, 
the new, earlier hand-off reporting requirements will be limited to 15 
ppm and 500 ppm highway diesel fuel transfers for the first four 
quarterly compliance periods (i.e., no new reporting will be required 
for NRLM fuel.) Second, today's action allows entities to partially 
consolidate their designate and track requirements during the first 
year of the highway diesel program. Thus, the highway diesel volume 
balance and hand-off reporting requirements for the first two quarterly 
compliance periods may be combined, as may those of the third and 
fourth compliance periods. Although some entities may need to establish 
reporting systems earlier than they had anticipated, this provision 
reduces the reporting burden considerably for the first year.
    Finally, EPA received four additional suggestions that, on further 
consideration, we believe would be unworkable. One of these was to make 
use of the existing anti-downgrade provisions to restrict the shifting 
of 500 ppm NRLM into the highway diesel pool during the first year of 
the program until the D&T requirement originally intended for this 
purpose becomes effective. However, in order for the anti-downgrade 
provision to conceivably accomplish the purpose of closing the gap in 
the highway diesel fuel program, the intended purposes of the 
provisions would be largely lost. For example, the most straightforward 
of four options that refiners and importers have to demonstrate that 
they are meeting the downgrading restrictions would need to be 
eliminated during the first year, since it could allow significant 
shifting of 500 ppm fuel into the highway diesel pool. In addition, as 
described above, the issues of inconsistent dates (June 1, 2006 vs. 
October 15, 2006 \13\) and lack of reporting requirements would also 
need to be addressed in any revision of the anti-downgrading 
provisions. Overall, we believe that using the anti-downgrading 
provisions to resolve the problem is unworkable. In any event, to 
modify the anti-downgrade provisions to correct the shortcomings would 
have no advantage over the approach being finalized today.
---------------------------------------------------------------------------

    \13\ Today's action moves the compliance date with the anti-
downgrade requirements forward from October 1, 2006 to October 15, 
2006. See section I in today's preamble.
---------------------------------------------------------------------------

    The second concept suggested to us would have some characteristics 
of the approach we are adopting in this rule. However, instead of 
requiring that the highway fuel volume balance and hand-off reporting 
begin on June 1, 2006, this concept would introduce a new provision 
that would require a balance of NRLM fuel and associated reporting 
during that first year of the program. While this concept would have 
the possible benefit of limiting attention to the pool of fuel most 
likely to create problems for the program--that is 500 ppm NRLM 
produced for early credit purposes, it has other major problems.
    For example, downgrades or losses from the 500 NRLM pool would 
result in noncompliance. More importantly, 500 ppm from other pools 
(e.g., jet fuel) would not be prevented from entering the highway pool. 
Further, a volume balance is not otherwise required for NRLM fuel under 
the designate and track regulations. Thus, this approach would 
represent a significant and yet temporary change to the program; 
requiring the establishment of recordkeeping and reporting requirements 
now that would have no use later. We do not believe the concept 
represents a workable alternative to the approach we are adopting.
    A third suggestion was that perhaps the approach we are finalizing 
could be limited only to those facilities that handle 500 ppm NRLM. 
However, we have concluded that such a concept would not be adequately 
enforceable. This is because without highway fuel balance requirements 
and hand-off reports, it would not always be possible to trace the 
complete line of hand-offs and demonstrate whether any 500 ppm NRLM 
fuel entered the highway market. Further, it would likely suffer from 
confusion caused by new facilities that entered into the 500 ppm NRLM 
market as the June 1, 2007 start date for the NRLM diesel program 
neared and thus began to be subject to the balance and reporting 
requirements. We believe that this concept would be an unworkable 
substitute for the approach we have finalized.
    A final suggestion was to avoid specific new designate and track 
requirements by simply introducing a clear prohibition against 
inappropriate shifts of undyed 500 ppm NRLM fuel into the highway 
diesel pool. However, without associated tracking and reporting, EPA 
would have difficulty identifying where instances of non-compliance 
might be occurring. Although it was suggested that violations would 
likely be few and that EPA could depend on entities informing EPA of 
potential violations by their competitors, we believe that this would 
create too much uncertainty for all parties, including EPA. Further, we 
are concerned that this uncertainty might embolden some entities to 
stretch the boundaries of the program requirements. For example, an 
entity might sell substantial amounts of 500 ppm nonroad as highway 
fuel or other inappropriate actions. Without a clear highway diesel 
fuel balance requirement and reporting, we would have limited ability 
to demonstrate that such actions were ``inappropriate.'' On balance, we 
believe that the addition of modest new volume balance and reporting 
requirements between June 1, 2006 and June 1, 2007 represent a 
necessary component of the program.
    We are making several changes to the regulations in order to 
implement the actions discussed above. In general, this is accomplished 
by adding 4 earlier quarterly reporting periods and one

[[Page 70505]]

earlier annual reporting period covering the period June 1, 2006 to 
June 1, 2007, as well as allowing some of the reports to be combined. 
The volume balance and hand-off compliance and reporting requirements 
for non-highway designated diesel fuels are not affected by today's 
action.
    The following table II-1 lists each of the regulatory provisions 
that are revised in today's action relating to the actions discussed 
above.

 Table II-1.--Summary of Amendments To Ensure the Enforceability of the
                         Highway Diesel Program
------------------------------------------------------------------------
         Section                            Description
------------------------------------------------------------------------
80.597...................  Amended to require registration if an entity
                            intends to deliver or receive custody of any
                            designated fuels by June 1, 2006. In
                            addition to supporting the implementation of
                            the highway volume balance and hand-off
                            requirements in 2006, this amendment is also
                            needed to support compliance with current
                            product transfer document requirements under
                            section 80.590.
80.599...................  Amended to add 4 quarterly compliance periods
                            covering June 1, 2006-September 30, 2007,
                            October 1, 2006-December 31, 2006, January
                            1, 2007-March 31, 2007, and April 1, 2007-
                            May 31, 2007, and one annual compliance
                            period covering June 1, 2006-May 31, 2007.
                            Amended to define MV500BINV as the volume of
                            fuel designated as 500 ppm motor vehicle
                            diesel fuel at the beginning of the program
                            (June 1, 2006).
80.600...................  Amended to require recordkeeping by each
                            facility that receives or distributes 15 ppm
                            or 500 ppm highway diesel fuel beginning
                            June 1, 2006.
80.601...................  Amended to require reporting regarding
                            demonstration of the new compliance periods
                            added to section 80.599 and to limit
                            reporting to the highway volume balance and
                            highway hand-off requirements for the period
                            of June 1, 2006-May 31, 2007. Provides dates
                            by which reports must be submitted.
------------------------------------------------------------------------

III. Amendments to the Registration Requirements for Mobile Facilities

    Parties throughout the fuel production and distribution system use 
mobile components (or mobile vessels- i.e., ships/barges, trucks, rail 
cars, etc.) to transfer product from one point to another. These are 
referred to as mobile facilities by EPA for purposes of registration 
and compliance with the designate and track requirements. Questions 
have arisen regarding how individual mobile facilities can be 
aggregated for registration purposes. To provide clarification on how 
such aggregation might take place, today's action amends the provisions 
pertaining to the registration of mobile facilities.
    Mobile facilities are sometimes owned by an entity in the fuel 
industry who also owns a stationary facility (e.g. terminal) that would 
be required to be registered with EPA. However, in most cases, the use 
of a mobile facility is obtained through a contract with another party 
or entity. Such contracts are often of short duration, and the make-up 
of the fleet of individual mobile facilities serving a given fuel 
distributor is continually in flux. Given this situation, fuel 
distributors stated that requiring every individual mobile facility or 
entity owning a fleet of individual mobile facilities to register would 
be unworkable. We agree, and therefore, we believe that it is 
appropriate to modify the regulations to allow a registered entity to 
register the mobile facilities that distribute its fuel. Under the 
current regulations, an entity has to register facilities where they 
have custody of fuel. For mobile facilities we are allowing an entity 
to register a mobile facility where the entity has title to the fuel, 
even if it does not have custody. The registration would, however, only 
cover the mobile facility for the fuel to which the entity has title.
    A registered entity may register one mobile facility, or multiple 
mobile facilities defined by area or component type. Any number of 
individual mobile components (i.e. ships/barges, trucks, rail cars) 
could be aggregated under a given mobile facility registration. 
Specifics regarding the make up of the fleet (e.g. number and identity 
of ships/barges) comprising a mobile facility would not need to be 
provided to EPA at the time of registration.\14\
---------------------------------------------------------------------------

    \14\ The registration of mobile facilities is also discussed in 
the Mobile Facilities Guidance Document, whish can be found on the 
Clean Diesel Compliance Help page at (http://www.epa.gov/cleandiesel/comphelp
).

---------------------------------------------------------------------------

    Compliance with the designate and track regulations would be the 
responsibility of the entity that registered the mobile facility. In 
the event of a designate and track violation, the registered entity 
would be still presumed liable. However, compliance with the applicable 
fuel sulfur standard would still be the responsibility of both the 
registered entity and the owner/operator of the individual mobile 
component in which the fuel is located. Further, in the event of the 
discovery of non-compliant product, EPA may apply presumptive liability 
to the owner of the individual mobile component in which the product is 
found, the registered entity, and all parties upstream.
    The allowance of mobile facilities has resulted in changes to the 
definition of a facility and the registration and recordkeeping 
requirements. We have amended the definition of a facility to include 
the situation of a mobile facility, where a registered entity may not 
have custody of fuel while it is being transported in a component, but 
the entity retains title to the product. This change to the definition 
allows an entity to register a mobile component that is transporting 
its product as part of the entity's facility. The changes to the 
regulations allow for this registration of mobile facilities (Sec.  
80.597) and state specifications for additional records that need to be 
kept for registered mobile facilities (Sec. Sec.  80.600 and 80.602). 
These changes are all noted below in Table III-1.
    As noted above, the registered entity would be presumed liable in 
the case of a designate and track violation. We have not made changes 
to any of the provisions that deal with standards violations, so all 
requirements for meeting the applicable sulfur, dye, and marker 
standards remain in place. Thus, any person that could be considered 
liable for a prohibited act under Sec.  80.613 (any refiner, importer, 
distributor, reseller, carrier, retailer, wholesale purchaser consumer) 
who owned, leased, leased, operated, controlled, or supervised a 
facility where a violation occurred can be presumed liable if a non-
compliant product is found in a mobile facility.
    With the exception of the changes discussed above and in Table III-
1, there are no additional requirements. Mobile facilities will be 
treated similar to all other registered facilities in the designate and 
track system.

[[Page 70506]]

Table III-1.--Summary of Amendments to the Registration Requirements for
                            Mobile Facilities
------------------------------------------------------------------------
         Section                            Description
------------------------------------------------------------------------
80.502...................  Added additional language to the definitions
                            in paragraph (b) to allow for mobile
                            facilities.
80.597...................  Added paragraph (d)(3)--registration of
                            mobile facilities.
80.600...................  Added additional language on recordkeeping
                            requirements for mobile facilities, and
                            renumbered some paragraphs.
80.602...................  Added additional language on recordkeeping
                            requirements for mobile facilities, and
                            renumbered some paragraphs.
------------------------------------------------------------------------

IV. Miscellaneous Other Technical Amendments to the Highway and Nonroad 
Diesel Programs and the Tier 2 Gasoline Program

    After promulgation of the highway diesel, nonroad diesel, and Tier 
2 gasoline programs, and subsequent technical amendments, we discovered 
several typographical errors. It also became evident that several 
additions/deletions were necessary to clarify portions of the 
regulations. The amendments contained in today's rule to remedy these 
problems are summarized in the following Table IV-1.

    Table IV-1.--Summary of Miscellaneous Technical Amendments to the
   Highway and Nonroad Diesel Programs and the Tier 2 Gasoline Program
------------------------------------------------------------------------
         Section                            Description
------------------------------------------------------------------------
80.215...................  Revised to add Klickitat County to the list
                            of Geographic Phase-In Areas.
80.531...................  Removed and reserved paragraph (c)(2)(ii).
                            This change was inadvertently left out of
                            the regulatory text of the Direct Final Rule
                            published on July 15, 2005 (40 FR 40889)
                            which was intended to allow refiners and
                            importers to generate early credits (June 1,
                            2005 through May 31, 2006) for the entire
                            volume of ULSD delivered into the
                            distribution system rather than the volume
                            delivered to the end user.
80.533...................  Corrected the language in (e)(2) to state
                            ``BNRLM'' instead of ``NRLM''.
80.590...................  Revised to clarify what parties will be
                            affected by the requirement that transferee
                            ID numbers appear on product transfer
                            documents; revised to clarify how parties
                            shall denote the level of the standard on
                            product transfer documents.
80.592...................  Revised to change the cite in (a)(2)(iii)
                            from ``80.580(a)(4)'' to ``80.580(d)''
80.593...................  Revised to correct the section number that is
                            cited in 80.593(a)(7)(i) from ``80.523'' to
                            ``80.598.''
80.599...................  Paragraphs 80.599(b)(4), (b)(5), (e)(2), and
                            (e)(3) were revised to maintain consistency
                            with the symbol conventions in the formulas
                            found in this section.
80.601...................  Revised paragraph (d)(3) to clarify reporting
                            requirements.
80.602...................  Revised paragraph (a)(2)(iii) to correct the
                            cite ``80.580(a)(4)'' to ``80.580(d)''; and
                            revised paragraph (b) to correct the cite
                            ``80.660'' to ``80.560.''
------------------------------------------------------------------------

V. Public Participation

    Because EPA views the provisions of the action as noncontroversial 
and does not expect adverse comment, we are proceeding by direct final 
rulemaking. If we receive adverse comment on one or more distinct 
amendments, paragraphs, or sections of this rulemaking, or receive a 
request for hearing within the time frame described above, we will 
publish a timely withdrawal in the Federal Register indicating which 
provisions will become effective and which provisions are being 
withdrawn due to adverse comment. Any distinct amendment, paragraph, or 
section of today's rulemaking for which we do not receive adverse 
comment will become effective on the date set out above, 
notwithstanding any adverse comment on any other distinct amendment, 
paragraph, or section of today's rule.

VI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency is required to determine whether this regulatory action would be 
``significant'' and therefore subject to review by the Office of 
Management and Budget (OMB) and the requirements of the Executive 
Order. The order defines a ``significant regulatory action'' as any 
regulatory action that is likely to result in a rule that may:
     Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
     Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
     Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or,
     Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, EPA has determined 
that this final rule is not a ``significant regulatory action''. 
Today's action moves the implementation date for certain recordkeeping 
and reporting requirements under the highway diesel program from June 
1, 2007 to June 1, 2006 for an additional one time cost of $11,570,000 
(see sections II and IV.B. in today's preamble). Today's final rule 
extends the terminal and retail ULSD implementation dates, and the 
effective date of the anti-downgrading requirement, and increases the 
downstream sulfur adjustment factor during the transition period to 
ULSD (see section I in today's preamble). There are no new costs 
associated with these provisions. There are also no new costs 
associated with the other miscellaneous technical amendments to the 
highway diesel, nonroad diesel, and Tier 2 gasoline programs contained 
in today's notice (see section III in today's preamble). Therefore, 
this final rule is not subject to the requirements of Executive Order 
12866. Final Regulatory Support Documents were prepared in connection 
with the original regulations for the Highway Diesel Rule, Nonroad 
Diesel Rule, and Tier 2 gasoline rule as promulgated on January 18, 
2001, June 29, 2004, and February 10, 2000

[[Page 70507]]

respectively, and we have no reason to believe that our analyses in the 
original rulemakings were inadequate. The relevant analyses are 
available in the docket for the January 18, 2001 rulemaking (A-99-061), 
the June 29, 2004 rulemaking (OAR-2003-0012 and A-2001-28) \1\, and the 
February 10, 2000 rulemaking (A-97-10), and at the following Internet 
addresses: http://www.epa.gov/cleandiesel and http://www.epa.gov/tier2. 
The original actions were submitted to the Office of Management and 
Budget for review under Executive Order 12866.
---------------------------------------------------------------------------

    \1\ During the course of the Nonroad Rule, the Agency converted 
from the legacy docket system to the current electronic docket 
system (EDOCKET).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    The annual information collection burden associated with this 
action was accounted for in previously approved ICRs. The provisions of 
this direct final rule provide limited additional flexibility to 
entities in the highway diesel distribution system during the 
transition to ultra-low sulfur diesel fuel in 2006. The other 
miscellaneous amendments in today's notice contain technical 
corrections and clarifications which do not include any new information 
collection requirements. The amendments to the designate and track 
provisions under the highway and nonroad diesel programs contained in 
section II of today's direct final rule require compliance with these 
provisions beginning June 1, 2006. Compliance with these provisions was 
previously required beginning June 1, 2007. The annual compliance 
burden associated with these provisions is not affected by advancing 
the implementation date by one year. This annual burden was accounted 
for in the current information collection request for the highway and 
nonroad diesel fuel programs. The Office of Management and Budget (OMB) 
has previously approved the information collection requirements 
contained in the existing highway rule (66 FR 5002, January 18, 2001), 
the existing Nonroad Rule (69 FR 38958, June 29, 2004), and the 
existing Tier 2 gasoline rule (65 FR 6698, February 10, 2000), under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
The ICRs contained in the highway diesel and nonroad diesel rules were 
assigned OMB control number 2060-0308, and EPA ICR number 1718.06. This 
ICR is currently being revised to reflect the change in the 
implementation date for the pertinent designate and track requirements 
from June 1, 2007 to June 1, 2006. The annual compliance burden for the 
full designate and track requirement beginning in June 1, 2007 was 
estimated at $11,570,000 and 178,000 hours. The designate and track 
requirements that today's rule make effective June 1, 2006, are for a 
limited subset of designated fuels (highway diesel only), and the 
reporting requirements for the initial year (June 1, 2006-May 31, 2007) 
were abbreviated by today's rule. Therefore, the annual burden for the 
initial year is expected to be somewhat less than that estimated for 
following years.
    The ICRs contained in the Tier 2 gasoline rule were assigned OMB 
control number 2060-0437, and EPA ICR number 1907.02. A copy of the OMB 
approved Information Collection Requests (ICRs) may be obtained from 
Susan Auby, Collection Strategies Division; U.S. Environmental 
Protection Agency (2822T); 1200 Pennsylvania Ave., NW., Washington, DC 
20460 or by calling (202) 566-1672.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this direct final rule. EPA has 
also determined that this rule will not have a significant economic 
impact on a substantial number of small entities. For purposes of 
assessing the impacts of this final rule on small entities, a small 
entity is defined as: (1) A small business that meets the definition 
for a small business based on Small Business Administration (SBA) size 
standards; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field. The ULSD transition provisions in 
today's direct final rule provide limited, temporary flexibility to 
entities in the highway diesel distribution system downstream of the 
refineries and import facilities. Advancing the implementation date for 
certain recordkeeping and reporting requirements under the highway 
diesel program as described in section II of today's preamble will 
result in additional one year of cost of compliance with these 
provisions for all affected fuel distributors, including those that are 
small entities. During the rulemaking that resulted in the promulgation 
of these provisions, we determined that they would not have a 
significant impact on a substantial number of small entities. The other 
miscellaneous technical amendments to the highway diesel, nonroad 
diesel, and Tier 2 gasoline programs do not impose a significant new 
burden to any regulated party.
    Prior to proposing the Highway Rule on June 2, 2000, the Nonroad 
Rule on May 23, 2003, and the Tier 2 Gasoline Rule on May 13, 1999 EPA 
conducted outreach to small entities and convened Small Business 
Advocacy Review (SBAR) panels to obtain the advice and recommendations 
of representatives of the small entities that potentially would be 
subject to the requirements of the rules (66 FR at 5130, 69 FR at 
39155-6, and 69 FR 39155-39162 respectively). For a full description of 
the Panel process, the SBAR report, and the initial Regulatory 
Flexibility Analyses (in Chapters 8, 11, and 8 respectively) of each 
rule's Regulatory Impact Analysis (RIA), refer to the docket for the 
Highway Diesel Rule (Public Docket A-99-061), the Nonroad Diesel Rule 
(Public Docket OAR-2003-0012 and A-2001-28), and the Tier 2 Gasoline 
Rule (Public Docket A-97-10), and the following Internet addresses: 
http://www.epa.gov/cleandiesel/ and http://www.epa.gov/tier2/

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``federal mandates'' that 
may result

[[Page 70508]]

in expenditures to state, local, and tribal governments, in the 
aggregate, or to the private sector, of $100 million or more in any one 
year. Before promulgating an EPA rule for which a written statement is 
needed, section 205 of the UMRA generally requires EPA to identify and 
consider a reasonable number of regulatory alternatives and to adopt 
the least costly, most cost-effective, or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective, or least burdensome alternative if the 
Administrator publishes with the final rule an explanation of why such 
an alternative was adopted.
    Before EPA establishes any regulatory requirements that may 
significantly or uniquely affect small governments, including tribal 
governments, it must have developed a small government agency plan 
under section 203 of the UMRA. The plan must provide for the following: 
notifying potentially affected small governments, enabling officials of 
affected small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    This rule contains no federal mandates for state, local, or tribal 
governments as defined by the provisions of Title II of the UMRA. The 
rule imposes no enforceable duties on any of these governmental 
entities. Nothing in the rule would significantly or uniquely affect 
small governments. EPA has determined that this rule contains no 
federal mandates that may result in expenditures of more than $100 
million to the private sector in any single year. The requirements of 
UMRA therefore do not apply to this action.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' are defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Under Section 6 of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, imposes substantial direct 
compliance costs, and is not required by statute. However, if the 
Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing the regulation, these restrictions do not apply. EPA also 
may not issue a regulation that has federalism implications and that 
preempts State law, unless the Agency consults with State and local 
officials early in the process of developing the regulation.
    Section 4 of the Executive Order contains additional requirements 
for rules that preempt State or local law, even if those rules do not 
have federalism implications (i.e., the rules will not have substantial 
direct effects on the States, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government). Those 
requirements include providing all affected State and local officials 
notice and an opportunity for appropriate participation in the 
development of the regulation. If the preemption is not based on 
express or implied statutory authority, EPA also must consult, to the 
extent practicable, with appropriate State and local officials 
regarding the conflict between State law and Federally protected 
interests within the agency's area of regulatory responsibility.
    This rule does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. Although Section 6 of Executive 
Order 13132 did not apply to the Highway Rule (66 FR 5002) or the 
Nonroad Rule (69 FR 38958), EPA did consult with representatives from 
STAPPA/ALAPCO, which represents state and local air pollution 
officials.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (59 FR 22951, November 6, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' ``Policies that have tribal 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on one or more Indian tribes, on 
the relationship between the Federal government and the Indian tribes, 
or on the distribution of power and responsibilities between the 
Federal government and Indian tribes.''
    This rule does not have tribal implications. It will not have 
substantial direct effects on tribal governments, on the relationship 
between the Federal government and Indian tribes, or on the 
distribution of power and responsibilities between the Federal 
government and Indian tribes, as specified in Executive Order 13175. 
This rule does not uniquely affect the communities of Indian Tribal 
Governments. This rule does not have tribal implications and does not 
impose substantial direct compliance costs on Indian tribal 
governments. Thus, Executive Order 13175 does not apply to this rule.

G. Executive Order 13045: Children's Health Protection

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies 
to any rule that (1) is determined to be ``economically significant'' 
as defined under Executive Order 12866, and (2) concerns an 
environmental health or safety risk that EPA has reason to believe may 
have a disproportionate effect on children. If the regulatory action 
meets both criteria, Section 5-501 of the Order directs the Agency to 
evaluate the environmental health or safety effects of the planned rule 
on children, and explain why the planned regulation is preferable to 
other potentially effective and reasonably feasible alternatives 
considered by the Agency.
    This rule is not subject to the Executive Order because it is not 
economically significant, and does not involve decisions on 
environmental health or safety risks that may disproportionately affect 
children.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This rule is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001) because it is not likely to have a significant 
adverse effect on the

[[Page 70509]]

supply, distribution or use of energy. This direct final rule provides 
limited, temporary flexibility to entities in the highway diesel 
distribution system downstream of the refineries and import facilities. 
Other amendments contained in today's action pertain to ensuring the 
enforceability of the highway diesel program. The remaining amendments 
in today's final rule provide technical correction and clarification to 
the requirements under the highway diesel, the nonroad diesel, and the 
Tier 2 gasoline programs.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 
272 note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless doing so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (such as materials specifications, test 
methods, sampling procedures, and business practices) that are 
developed or adopted by voluntary consensus standards bodies. NTTAA 
directs EPA to provide Congress, through OMB, explanations when the 
Agency decides not to use available and applicable voluntary consensus 
standards.
    This direct final rule does not involve technical standards. Thus, 
we have determined that the requirements of the NTTAA do not apply.

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801, et seq., as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to Congress and the Comptroller General of the United 
States. We will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States before publication of the 
rule in the Federal Register. A major rule cannot take effect until 60 
days after it is published in the Federal Register. This action is not 
a ``major rule'' as defined by 5 U.S.C. 804(2) and will become 
effective consistent with the DATES section above.

VII. Statutory Provisions and Legal Requirements

    The statutory authority for this action comes from sections 211(c) 
and (i) of the Clean Air Act as amended 42 U.S.C. 7545(c) and (i). This 
action is a rulemaking subject to the provisions of Clean Air Act 
section 307(d). See 42 U.S.C. 7606(d)(1). Additional support for the 
procedural and enforcement related aspects of the rule comes from 
sections 144(a) and 301(a) of the Clean Air Act. 42 U.S.C. 7414(a) and 
7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protections, Diesel fuel, Fuel additives, Gasoline, 
Motor vehicle Pollution, Penalties, Recordkeeping and reporting 
requirements.

    Dated: November 8, 2005.
Stephen L. Johnson,
Administrator.

0
For the reasons set out in the preamble, title 40, chapter I, of the 
Code of Federal Regulations is amended and set forth below.

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority: 42 U.S.C. 7414, 7545, and 7601(a).

0
2. Section 80.215 is amended in paragraph (a)(2)(i) under the heading 
for ``Washington'' by adding a new entry for ``Klickitat'' in 
alphabetical order to read as follows:

Sec.  80.215  What is the scope of the geographic phase-in program?

    (a) * * *
    (2) * * *
    (i) * * *
* * * * *
    Washington
* * * * *
    Klickitat
* * * * *

0
3. Section 80.500 is amended by revising paragraphs (b) and (c) to read 
as follows:

Sec.  80.500  What are the implementation dates for the motor vehicle 
diesel fuel sulfur control program?

* * * * *
    (b) Implementation date for standards applicable to motor vehicle 
diesel fuel downstream of the refinery or importer. Except as provided 
in paragraphs (c) and (d) of this section, beginning September 1, 2006, 
the standards and requirements under Sec.  80.520(a) shall apply to any 
motor vehicle diesel fuel at any downstream location.
    (c) Implementation date for standards applicable to motor vehicle 
diesel fuel at retail outlets and wholesale purchaser-consumer 
facilities. Except as provided in paragraph (d) of this section, 
beginning October 15, 2006, the standards and requirements under Sec.  
80.520(a) shall apply to any motor vehicle diesel fuel at any retail 
outlet or wholesale purchaser-consumer facility.
* * * * *

0
4. Section 80.502 is amended by revising paragraphs (b)(2), and (b)(4) 
to read as follows:

Sec.  80.502  What definitions apply for purposes of this subpart?

* * * * *
    (b) * * *
* * * * *
    (2) A refinery or import facility may not be aggregated with 
facilities that receive fuel from other refineries or import 
facilities, either directly or indirectly. For example, a refinery may 
not be aggregated with a terminal that receives any fuel from a common 
carrier pipeline. However, a refinery may be aggregated with a pipeline 
and terminal that are owned by the same entity and which receive no 
fuel from any source other than the refinery. Likewise, a refinery may 
not be aggregated with a mobile facility that is also carrying another 
entity's fuel; it may however be aggregated with a mobile facility that 
does not receive fuel from any source other than the refinery. If a 
refinery or import facility is aggregated with other facilities, then 
the aggregated facility is treated as a refinery or import facility.
* * * * *
    (4) Mobile components and mobile facilities. (i) Where an entity 
maintains custody of diesel fuel in one or more mobile components 
(e.g., rail, barge, shipping, or trucking operations), the mobile 
components may be aggregated as a single facility. Mobile components 
may also be aggregated with a facility from which they receive fuel or 
a facility to which they deliver fuel. However, mobile components may 
not be aggregated with both a facility from which they receive fuel and 
a facility to which they deliver fuel.
    (ii) When an entity maintains title to, but not custody of, diesel 
fuel in one or more mobile components, the entity may treat the mobile 
component(s) as a facility under this paragraph (b), but only for the 
fuel to which the entity has title. In the event that title changes 
while a mobile component is in transport (but the fuel physically 
remains in the same mobile facility), the original entity that had 
title to the fuel continues to be responsible for the

[[Page 70510]]

designate and track requirements until custody of the fuel is 
transferred from the mobile facility.
* * * * *

Sec.  80.531  [Amended]

0
5. Section 80.531 is amended by removing and reserving paragraph 
(c)(2)(ii).

0
6. Section 80.533 is amended by revising paragraph (e)(2) to read as 
follows:

Sec.  80.533  How does a refiner or importer apply for a motor vehicle 
or non-highway baseline?

* * * * *
    (e) * * *
    (2) Under paragraph (c)(2)(ii) of this section, BNRLM 
equals the average annual volume of MVNRLM produced or imported from 
January 1, 2006 through December 31, 2008, less BMV as 
determined in paragraph (d)(2) of this section.
* * * * *

0
7. Section 80.580 is amended by revising paragraph (d) to read as 
follows:

Sec.  80.580  What are the sampling and testing methods for sulfur?

* * * * *
    (d) Adjustment factor for downstream test results. (1) An 
adjustment factor of negative two ppm sulfur shall be applied to the 
test results from any testing of motor vehicle diesel fuel or NRLM 
diesel fuel downstream of the refinery or import facility, to account 
for test variability, but only for testing of motor vehicle diesel fuel 
or NRLM diesel fuel identified as subject to the 15 ppm sulfur standard 
of Sec.  80.510(b) or Sec.  80.520(a)(1).
    (2) In addition to the adjustment factor provided in paragraph 
(d)(1) of this section, prior to September 1, 2006, an adjustment 
factor of negative 7 ppm shall be applied to the test results from any 
testing of motor vehicle diesel fuel downstream of the refinery or 
import facility, to facilitate the transition to ULSD fuel, but only 
for testing of motor vehicle diesel fuel identified as subject to the 
15 ppm sulfur standard of Sec.  80.520(a)(1).
    (3) In addition to the adjustment factor provided in paragraph 
(d)(1) of this section, prior to October 15, 2006, an adjustment factor 
of negative 7 ppm shall be applied to the test results from any testing 
of motor vehicle diesel fuel at any retail outlet or wholesale 
purchaser-consumer facility, to facilitate the transition to ULSD fuel, 
but only for testing of motor vehicle diesel fuel identified as subject 
to the 15 ppm sulfur standard of Sec.  80.520(a)(1).
* * * * *

0
8. Section 80.590 is amended by revising paragraphs (a)(6)(i) and (d) 
to read as follows:

Sec.  80.590  What are the product transfer document requirements for 
motor vehicle diesel fuel, NRLM diesel fuel, heating oil and other 
distillates?

    (a) * * *
    (6) * * *
    (i) The facility registration number of the transferor and 
transferee, for terminals and all parties upstream, under Sec.  80.597, 
if any.
* * * * *
    (d) Except for transfers to truck carriers, retailers or wholesale 
purchaser-consumers, product codes may be used to convey the 
information required under this section if such codes are clearly 
understood by each transferee. ``15'', ``500'', or ``greater than 500'' 
or ``>500'' must appear clearly on the product transfer document, and 
may be contained in the product code. If the designation is included in 
the code: codes used to convey the statement in paragraphs (a)(7)(i) 
and (a)(7)(ii) of this section must contain the number ``15'', codes 
used to convey the statement in paragraphs (a)(7)(iii) and (a)(7)(iv) 
of this section must contain the number ``500''; codes used to convey 
the statement in paragraph (a)(7)(v) of this section must contain the 
statement ``greater than 500'' or ``>500''. If another letter, number, 
or symbol is being used to convey any of the statements in paragraphs 
(a)(7)(i), (a)(7)(ii), (a)(7)(iii), (a)(7)(iv), and/or (a)(7)(v) of 
this section, it must be clearly defined and denoted on the product 
transfer document.
* * * * *

0
9. Section 80.592 is amended by revising paragraph (a)(2)(iii) to read 
as follows:

Sec.  80.592  What records must be kept by entities in the motor 
vehicle diesel fuel and diesel fuel additive distribution systems?

    (a) * * *
    (2) * * *
    (iii) The results of the tests for sulfur content (including, where 
applicable, the test results with and without application of the 
adjustment factor under Sec.  80.580(d)) and for cetane index or 
aromatics content (as applicable), and the volume of product in the 
storage tank or container from which the sample was taken.
* * * * *

0
10. Section 80.593 is amended by revising paragraph (a)(7)(i) to read 
as follows:

Sec.  80.593  What are the reporting requirements for refiners and 
importers of motor vehicle diesel fuel subject to temporary refiner 
relief standards?

* * * * *
    (a) * * *
    (7) * * *
    (i) The batch number assigned using the batch numbering conventions 
under Sec.  80.65(d)(3) and the appropriate designation under Sec.  
80.598.
* * * * *

0
11. Section 80.597 is amended by revising paragraph (c) and adding 
paragraph (d)(3) to read as follows:

Sec.  80.597  What are the registration requirements?

* * * * *
    (c) Entity registration. (1) Each entity as defined in Sec.  80.502 
that intends to deliver or receive custody of any of the following 
fuels from June 1, 2006 through May 31, 2010 must register with EPA by 
December 31, 2005 or six months prior to commencement of producing, 
importing, or distributing any distillate subject to designation under 
Sec.  80.598:
    (i) Fuel designated as 500 ppm sulfur MVNRLM diesel fuel under 
Sec.  80.598 on which taxes have not been assessed pursuant to IRS code 
(26 CFR part 48).
    (ii) Fuel designated as 15 ppm sulfur MVNRLM diesel fuel under 
Sec.  80.598 on which taxes have not been assessed pursuant to IRS code 
(26 CFR part 48).
    (iii) Fuel designated as NRLM diesel fuel under Sec.  80.598 that 
is undyed pursuant to Sec.  80.520.
    (2) Each entity as defined in Sec.  80.502 that intends to deliver 
or receive custody of any of the following fuels from June 1, 2007 
through May 31, 2014 must register with EPA by December 31, 2005 or six 
months prior to commencement of producing, importing, or distributing 
any distillate subject to designation under Sec.  80.598:
    (i) Fuel designated as 500 ppm sulfur MVNRLM diesel fuel under 
Sec.  80.598 on which taxes have not been assessed pursuant to IRS code 
(26 CFR part 48).
    (ii) Fuel designated as NRLM diesel fuel under Sec.  80.598 that is 
undyed pursuant to Sec.  80.520.
    (iii) Fuel designated as heating oil under Sec.  80.598 that is 
unmarked pursuant to Sec.  80.510(d) through (f).
    (iv) Fuel designated as LM diesel fuel under Sec.  
80.598(a)(2)(iii) that is unmarked pursuant to Sec.  80.510(e).
    (3) Registration shall be on forms prescribed by the Administrator, 
and shall include the name, business address, contact name, telephone 
number, e-mail address, and type of production, importation, or 
distribution activity or activities engaged in by the entity.

[[Page 70511]]

    (4) Registration shall include the information required under 
paragraph (d) of this section for each facility owned or operated by 
the entity that delivers or receives custody of a fuel described in 
paragraphs (c)(1) and (c)(2) of this section.
    (d) * * *
    (3) Mobile facilities:
    (i) A description shall be provided in the registration detailing 
the types of mobile vessels that will likely be included and the nature 
of the operations.
    (ii) Entities may combine all mobile operations into one facility; 
or may split the operations by vessel, region, route, waterway, etc. 
and register separate mobile facilities for each.
    (iii) The specific vessels need not be identified in the 
registration, however information regarding specific vessel contracts 
shall be maintained by each registered entity for its mobile 
facilities, pursuant to Sec.  80.602(d).
* * * * *

0
12. Section 80.598 is amended by revising paragraph (b)(9)(vi) to read 
as follows:

Sec.  80.598  What are the designation requirements for refiners, 
importers, and distributors?

    (b) * * *
    (9) * * *
    (vi) Batches or portions of batches received designated as 500 ppm 
sulfur NRLM diesel fuel may be re-designated as 500 ppm sulfur motor 
vehicle diesel fuel by a truck loading terminal only if the terminal 
maintains a neutral or positive balance at the end of each quarterly 
compliance period on their motor vehicle diesel fuel volume from June 
1, 2006 as calculated in Sec.  80.599(b)(4).
* * * * *

0
13. Section 80.599 is amended by revising the table in the introductory 
text in paragraph (a), the table in paragraph (a)(1), and by revising 
paragraphs (b)(4), (e)(2), and (e)(3) to read as follows:

Sec.  80.599  How do I calculate volume balances for designation 
purposes?

    (a) * * *

------------------------------------------------------------------------
  Beginning date of quarterly compliance      Ending date of  quarterly
                  period                          compliance period
------------------------------------------------------------------------
June 1, 2006..............................  September 30, 2006.
October 1, 2006...........................  December 31, 2006.
January 1, 2007...........................  March 31, 2007.
April 1, 2007.............................  May 31, 2007.
June 1, 2007..............................  September 30, 2007.
October 1, 2007...........................  December 31, 2007.
January 1, 2008...........................  March 31, 2008.
April 1, 2008.............................  June 30, 2008.
July 1, 2008..............................  September 30, 2008.
October 1, 2008...........................  December 31, 2008.
January 1, 2009...........................  March 31, 2009.
April 1, 2009.............................  June 30, 2009.
July 1, 2009..............................  September 30, 2009.
October 1, 2009...........................  December 31, 2009.
January 1, 2010...........................  March 31, 2010.
April 1, 2010.............................  May 31, 2010.
June 1, 2010..............................  September 30, 2010.
------------------------------------------------------------------------

    (1) * * *

------------------------------------------------------------------------
   Beginning date of  annual compliance         Ending date of annual
                  period                          compliance period
------------------------------------------------------------------------
June 1, 2006..............................  May 31, 2007.
June 1, 2007..............................  June 30, 2008.
July 1, 2008..............................  June 30, 2009.
July 1, 2009..............................  May 31, 2010.
June 1, 2010..............................  June 30, 2011.
July 1, 2011..............................  May 31, 2012.
June 1, 2012..............................  June 30, 2013.
July 1, 2013..............................  May 31, 2014.
June 1, 2014..............................  June 30, 2015.
------------------------------------------------------------------------

* * * * *
    (b) * * *
    (4) The neutral or positive volume balance required for purposes of 
compliance with Sec.  80.598(b)(9)(vi) and (b)(9)(vii)(A) means that 
the net balance of motor vehicle diesel fuel in inventory as of the end 
of the last day of the compliance period (MVNBE) must be 
greater than or equal to zero. MVNBE is defined by the following 
equation:

MVNBE = MV15BINV + MV500BINV + 
[Sigma]MVB

Where:

MV15BINV = the total volume of fuel designated as 15 ppm 
sulfur motor vehicle diesel fuel in inventory at the beginning of the 
program on June 1, 2006.
MV500BINV = the total volume of fuel designated as 500 ppm 
sulfur motor vehicle diesel fuel in inventory at the beginning of the 
program on June 1, 2006. Any 2D 500 ppm sulfur MVNRLM in 
inventory at the beginning of the program on June 1, 2006 may be 
designated as motor vehicle diesel fuel.
[Sigma]MVB = the sum of the balances for motor vehicle diesel fuel for 
the current compliance period and previous compliance periods.
* * * * *
    (e) * * *
    (2) The volume of 2D 15 ppm sulfur motor vehicle delivered 
must meet the following requirement:

(2MV15O + 2MV15INVCHG) >= 0.8 * 
2MV15I

Where:

2MV15O = the total volume of fuel delivered during 
the compliance period that is designated as 2D 15 ppm sulfur 
motor vehicle diesel fuel.
2MV15INVCHG = the total volume of diesel fuel 
designated as 2D 15 ppm sulfur motor vehicle diesel fuel in 
inventory at the end of the compliance period minus the total volume of 
2D 15 ppm sulfur motor vehicle diesel fuel in inventory at the 
beginning of the compliance period, and accounting for any corrections 
in inventory due to volume swell or shrinkage, difference in 
measurement calibration between receiving and delivering meters, and 
similar matters, where corrections that increase inventory are defined 
as positive.
2MV15I = the total volume of fuel received during 
the compliance period that is designated as 2D 15 ppm sulfur 
motor vehicle diesel fuel.

    (3) The volume of 2D 500 ppm sulfur motor vehicle diesel 
fuel delivered must meet the following requirement:

2MV500O <= 2MV500I - 
2MV500INVCHG + 0.2 * 2MV15I

Where:

2MV500O = the total volume of fuel delivered during 
the compliance period that is designated as 2D 500 ppm sulfur 
motor vehicle diesel fuel.
2MV500I = the total volume of fuel received during 
the compliance period that is designated as 2D 500 ppm sulfur 
motor vehicle diesel fuel.
2MV500INVCHG = the total volume of diesel fuel 
designated as 2D 500 ppm sulfur motor vehicle diesel fuel in 
inventory at the end of the compliance period minus the total volume of 
2D 500 ppm sulfur motor vehicle diesel fuel in inventory at 
the beginning of the compliance period, and accounting for any 
corrections in inventory due to volume swell or shrinkage, difference 
in measurement calibration between receiving and delivering meters, and 
similar matters, where corrections that increase inventory are defined 
as positive.
* * * * *

0
14. Section 80.600 is amended by revising paragraphs (b)(1)(i) 
introductory text, (b)(1)(i)(C), (b)(1)(i)(D), (b)(3), (i), (j), (k), 
and (l), and adding paragraph (m) to read as follows:

[[Page 70512]]

Sec.  80.600  What records must be kept for purposes of the designate 
and track provisions?

* * * * *
    (b) * * *
    (1) * * *
    (i) For each facility that receives or distributes 2D 15 
ppm sulfur motor vehicle diesel fuel or 2D 500 ppm sulfur 
motor vehicle diesel fuel, records for each batch of diesel fuel with 
the following designations for which custody is received or delivered 
during the time period from June 1, 2006 through May 31, 2007:
* * * * *
    (C) 1D 500 ppm sulfur motor vehicle diesel fuel;
    (D) 2D 500 ppm sulfur motor vehicle diesel fuel; or
* * * * *
    (3) Records that clearly and accurately identify the total volume 
in gallons of each designated fuel identified under paragraph (b)(1) of 
this section transferred over each of the compliance periods, and over 
the periods from June 1, 2006 to the end of each compliance period. The 
records shall be maintained separately for each fuel designated under 
paragraph (b)(1) of this section, and for each EPA entity and facility 
registration number from whom the fuel was received or to whom it was 
delivered. For batches of fuel received from facilities without an EPA 
facility registration number, any batches of fuel received marked 
pursuant to Sec.  80.510(d) or (f) shall be deemed designated as 
heating oil, any batches of fuel received marked pursuant to Sec.  
80.510(e) shall be deemed designated as heating oil or LM diesel fuel, 
any batches of fuel received on which taxes have been paid pursuant to 
Section 4082 of the Internal Revenue Code (26 U.S.C. 4082) shall be 
deemed designated as motor vehicle diesel fuel, any 500 ppm sulfur 
diesel fuel dyed pursuant to Sec.  80.520(b) and not marked pursuant to 
Sec.  80.510(d) or (f) shall be deemed designated as NRLM diesel fuel, 
and any diesel fuel with less than or equal to 500 ppm sulfur which is 
dyed pursuant to Sec.  80.520(b) and not marked pursuant to Sec.  
80.510(e) shall be deemed to be NR diesel fuel.
* * * * *
    (i) Additional records that must be kept by mobile facilities. 
Additional records that must be kept by mobile facilities. Any 
registered mobile facility must keep records of all contracts from any 
contracted components (e.g. tank truck, barge, marine tanker, rail car, 
etc.) in each of its registered mobile facilities.
    (j) The records required in this section must be made available to 
the Administrator or the Administrator's designated representative upon 
request.
    (k) Notwithstanding the provisions of this section, product 
transfer documents must be maintained under the provisions of 
Sec. Sec.  80.590, 80.592, and 80.602.
    (l) The records required in this section must be kept for five 
years after they are required to be collected.
    (m) Identifications of fuel designations can be limited to a sub-
designation that accurately identifies the fuel and do not need to also 
include the broader designation. For example, NR diesel fuel does not 
also need to be designated as NRLM or MVNRLM diesel fuel.

0
15. Section 80.601 is amended as follows:
0
a. By revising paragraphs (a) introductory text, (a)(1), (a)(2), and 
(a)(4)(v).
0
b. By revising paragraph (b) introductory text.
0
c. And by revising paragraph (d) introductory text, (d)(1)(i) through 
(iv), adding paragraphs (d)(1)(v), (d)(1)(vi), and (d)(1)(vii), and 
revising paragraph (d)(3) to read as follows.

Sec.  80.601  What are the reporting requirements for purposes of the 
designate and track provisions?

    (a) Quarterly compliance period reports. Beginning February 28, 
2007 and continuing through August 31, 2010, each entity required to 
maintain records under Sec.  80.600 must report the following 
information separately for each of its facilities to the Administrator 
as specified in paragraph (d)(1) of this section except as provided in 
paragraph (e) of this section.
    (l) Separately for each fuel designation category specified in 
paragraphs (a)(1)(i) and (a)(1)(ii) of this section and separately for 
each transferee facility, the total volume in gallons of distillate 
fuel designated under Sec.  80.598 for which custody was delivered by 
the reporting facility to any other entity or facility, and the EPA 
entity and facility registration number(s), as applicable, of the 
transferee.
    (i) Beginning with the first compliance period and continuing up to 
and including the compliance period that starts April 1, 2007, fuel 
designated as 15 ppm or 500 ppm motor vehicle diesel fuel.
    (ii) Beginning with the compliance period that starts June 1, 2007 
and continuing up to and including the final reporting period, all fuel 
designation categories.
    (2) Separately for each designation category specified in 
paragraphs (a)(2)(i) and (a)(2)(ii) of this section and separately for 
each transferor facility, the total volume in gallons of distillate 
fuel designated under Sec.  80.598 for which custody was received by 
the reporting facility, and the EPA entity and facility registration 
number(s), as applicable, of the transferor.
    (i) Beginning with the first compliance period and continuing up to 
and including the compliance period that starts April 1, 2007, fuel 
designated as 15 ppm or 500 ppm motor vehicle diesel fuel.
    (ii) Beginning with the compliance period that starts June 1, 2007 
and continuing up to and including the final reporting period, all fuel 
designation categories.
* * * * *
    (4) * * *
    (v) Beginning with the compliance period starting June 1, 2007, the 
volume balance under Sec.  80.599(c)(2) and Sec.  
80.598(b)(9)(viii)(A).
* * * * *
    (b) Annual reports. Beginning August 31, 2007, all entities 
required to maintain records for batches of fuel under Sec.  80.600 
must report the following information separately for each of its 
facilities to the Administrator on an annual basis, as specified in 
paragraph (d)(2) of this section except as provided in paragraph (e) of 
this section.
* * * * *
    (d) Submission of reports for quarterly and annual compliance 
periods.
    (1) * * *
    (i) The reports for the first and second quarterly compliance 
periods covering June 1, 2006 to September 30, 2006 and October 1, 2006 
to December 31, 2006 respectively shall be submitted by February 28, 
2007.
    (ii) The reports for the third and fourth quarterly compliance 
periods covering January 1, 2007 to March 31, 2007 and April 1, 2007 to 
May 31, 2007 respectively shall be submitted by August 31, 2007.
    (iii) The report for the fifth quarterly compliance period covering 
June 1, 2007 to September 30, 2007 shall be submitted by November 30, 
2007.
    (iv) The report for the sixth quarterly compliance period covering 
October 1, 2007 to December 31, 2007 shall be submitted by February 28, 
2008.
    (v) The reports for the quarterly compliance periods beginning with 
the first period in 2008 up to and including the first period in 2010 
shall be submitted as follows:
    (A) The report for the period covering January 1 to March 31 shall 
be submitted by the following May 31.

[[Page 70513]]

    (B) The report covering the period covering April 1 to June 30 
shall be submitted by the following August 31.
    (C) The report for the period from July 1 to September 30 shall be 
submitted by the following November 30.
    (D) The report for the quarterly compliance period from October 1 
to December 31 shall be submitted by the following February 28.
    (vi) The report for the quarterly compliance period from April 1, 
2010 to May 31, 2010 shall be submitted by August 31, 2010.
    (vii) The report for the last quarterly compliance period from June 
1, 2010 to September 30, 2010 shall be submitted by November 30, 2010.
* * * * *
    (3) All reports shall be submitted on forms and following 
procedures specified by the Administrator, shall include a statement 
that volumes reported to the Administrator under this section are in 
substantial agreement to volumes reported to the Internal Revenue 
Service (and if these volumes are not in substantial agreement, an 
explanation must be included) and shall be signed and certified by a 
responsible corporate officer of the reporting entity.
* * * * *

0
16. Section 80.602 is amended by revising paragraphs (a)(2)(iii), (b) 
introductory text, (d), and (e), and adding paragraph (f) to read as 
follows:

Sec.  80.602  What records must be kept by entities in the NRLM diesel 
fuel and diesel fuel additive production, importation, and distribution 
systems?

    (a) * * *
    (2) * * *
    (iii) The results of the tests for sulfur content (including, where 
applicable, the test results with and without application of the 
adjustment factor under Sec.  80.580(d)), for cetane index or aromatics 
content, dye solvent red 164, marker solvent yellow 124 (as 
applicable), and the volume of product in the storage tank or container 
from which the sample was taken.
* * * * *
    (b) Additional records to be kept by refiners and importers of NRLM 
diesel fuel. Beginning June 1, 2007, or June 1, 2006, pursuant to the 
provisions of Sec.  80.535 or Sec.  80.554(d), any refiner producing 
diesel fuel subject to a sulfur standard under Sec.  80.510, Sec.  
80.513, Sec.  80.536, Sec.  80.554, Sec.  80.560, or Sec.  80.561, for 
each of its refineries, and any importer importing such diesel fuel 
separately for each facility, shall keep records that include the 
following information for each batch of NRLM diesel fuel or heating oil 
produced or imported:
* * * * *
    (d) Additional records that must be kept by mobile facilities. Any 
registered mobile facility must keep records of all contracts from any 
contracted components (e.g. tank truck, barge, marine tanker, rail car, 
etc.) of each of its registered mobile facilities.
    (e) Length of time records must be kept. The records required in 
this section shall be kept for five years from the date they were 
created, except that records relating to credit transfers shall be kept 
by the transferor for five years from the date the credits were 
transferred, and shall be kept by the transferee for five years from 
the date the credits were transferred, used or terminated, whichever is 
later.
    (f) Make records available to EPA. On request by EPA, the records 
required in this section must be made available to the Administrator or 
the Administrator's representative. For records that are electronically 
generated or maintained, the equipment and software necessary to read 
the records shall be made available, or if requested by EPA, electronic 
records shall be converted to paper documents which shall be provided 
to the Administrator's authorized representative.

[FR Doc. 05-22807 Filed 11-21-05; 8:45 am]

BILLING CODE 6560-50-P