Control of Air Pollution From New Motor Vehicles and New Motor Vehicle Engines; Nonconformance Penalties for 1996 and 1998 Model Year Emission Standards for Heavy-Duty Vehicles and Engines

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 86

[A-94-13; FRL-5030-1]

Control of Air Pollution From New Motor Vehicles and New Motor

Vehicle Engines; Nonconformance Penalties for 1996 and 1998 Model Year

Emission Standards for Heavy-Duty Vehicles and Engines

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: EPA is proposing that nonconformance penalties (NCPs) be made

available for specific emission standards taking effect in the 1996 and

1998 model years. In general, the availability of NCPs allows a

manufacturer of heavy-duty engines (HDEs) or heavy-duty vehicles (HDVs)

(which include heavy light-duty trucks) whose engines or vehicles fail

to conform with certain applicable emission standards, but do not

exceed a designated upper limit, to be issued a certificate of

conformity upon payment of a monetary penalty. The specific emission

standards for which NCPs have been considered in this rulemaking are

the 1996 and later model year Tier 1 standards for heavy light-duty

trucks, the 1996 and later model year Particulate Matter (PM) standard

for urban bus applications, and the 1998 and later model year heavy-

duty diesel engine oxides of nitrogen (NOX) standard.

EPA is proposing to offer NCPs for the 1996 and later model year

particulate matter (PM) standard of 0.10 g/mile for Light Duty Trucks 3

(LDT3) at full useful life. EPA has considered, but is not proposing to

offer NCPs for the other standards. The proposed upper limit associated

with the LDT3 PM standard is the previous diesel-fueled LDT3 vehicle

standard of 0.13 g/mi.

DATES: Public comment: All comments should be received on or before

September 21, 1994 or within 30 days following the conclusion of the

public hearing, if one is held.

Public hearing: If requested, EPA will hold a public hearing

regarding this proposed rule on September 21, 1994, beginning at 10:00

a.m. Any person desiring to present oral testimony must request the

hearing by noon, EDT, September 6, 1994. Pursuant to section 307 of the

Clean Air Act, the record of the hearing, if held, will be kept open

for 30 days following its conclusion to provide an opportunity for

submission of rebuttal or other information.

ADDRESSES: Public comment: Send written comments to: Public Docket A-

94-13 at the Air Docket (LE-131), US Environmental Protection Agency,

401 M Street, SW., Washington, DC 20460. If possible, an additional

copy of the written comments should be submitted to the EPA contact

person listed below.

Public hearing: The hearing, if requested, will take place at a

location to be determined. Any person wishing to attend should call the

EPA contact person, listed below, to determine if the hearing will be

held.

Requests for, or questions about the hearing should be directed to

the EPA contact person listed below. To the extent possible, any person

desiring to participate in a hearing should, prior to the hearing,

notify the EPA contact person of his or her intention and submit an

outline of the points to be discussed and the time needed to discuss

these points.

Public docket: Copies of materials relevant to this rulemaking

proceeding are contained in Public Docket A-94-13 at the Air Docket of

the US Environmental Protection Agency, 401 M Street, SW., Washington,

DC, 20460, and are available for review in room M-1500 between the

hours of 8 a.m. and 4 p.m. on weekdays. As provided in 40 CFR part 2, a

reasonable fee may be charged for copying services.

FOR FURTHER INFORMATION CONTACT: Mr. Leo Breton, Manufacturers

Operations Division (6405-J), US Environmental Protection Agency, 401 M

Street, SW., Washington, DC 20460, telephone (202) 233-9245.

SUPPLEMENTARY INFORMATION:

I. Statutory Authority

Section 206(g) of the Clean Air Act (the Act), 42 U.S.C. 7525(g),

requires EPA to issue a certificate of conformity for HDEs or HDVs

which exceed an applicable section 202(a) emissions standard, but do

not exceed an upper limit associated with that standard, if the

manufacturer pays an NCP established by rulemaking. Congress adopted

section 206(g) in the Clean Air Act Amendments of 1977 as a response to

perceived problems with technology-forcing heavy-duty emissions

standards. (It should be noted, however, that the existence of NCPs

does not change the criteria under which the standards have been and

will be set under section 202.) Following International Harvester v.

Ruckelshaus, 478 F.2d 615 (D.C. Cir. 1973), Congress realized the

dilemma that technology-forcing standards were likely to cause. If

strict standards were maintained, then some manufacturers,

``technological laggards,'' might be unable to comply initially and

would be forced out of the marketplace. NCPs were intended to remedy

this potential problem. The laggards would have a temporary alternative

that would permit them to sell their engines or vehicles by payment of

a penalty. At the same time, conforming manufacturers would not suffer

an economic disadvantage compared to nonconforming manufacturers,

because the NCP would be based, in part, on money saved by the

technological laggard and its customer from the nonconforming engine or

vehicle.

Under section 206(g)(1), NCPs may be offered for HDVs or HDEs. The

penalty may vary by pollutant and by class or category of vehicle or

engine.

HDVs are defined by section 202(b)(3)(C) as vehicles in excess of

6,000 pounds gross vehicle weight rating (GVWR). The light-duty truck

(LDT) classification includes trucks that have a GVWR of 8500 lbs or

less. Therefore, certain LDTs may be classified as HDVs. Historically,

LDTs up through 6000 lbs GVWR have been considered ``light light-duty

trucks'' (LLDTs) and LDTs between 6,001 and 8,500 pounds GVWR have been

considered ``heavy light-duty trucks'' (HLDTs). Based on various new

requirements established by the Clean Air Act Amendments of 1990, each

of these two light truck categories has been further subdivided into

groups by weight.

The LLDTs are classified by weight based on ``loaded vehicle

weight,'' or LVW, which maintains its current definition: curb weight

plus 300 lbs. The trucks up through 3750 lbs LVW make up a subclass

called light-duty-trucks-1, or LDT1. Those greater than 3750 lbs LVW

but less than or equal to 6000 lbs GVWR are the subclass light-duty-

trucks-2, or LDT2.

The HLDTs are divided at 5750 lbs ``adjusted loaded vehicle

weight,'' or ALVW. Adjusted loaded vehicle weight is the average of the

curb weight and the GVWR. The HLDTs that are up through 5750 lbs ALVW

are called light-duty trucks-3, or LDT3. Those above 5750 lbs ALVW but

less than or equal to 8500 lbs GVWR are light-duty-trucks-4, or LDT4.

The LDT3 and LDT4 subclasses make up the HLDT vehicle class. Since NCPs

are only offered for heavy duty vehicles or engines, this notice

addresses only emission standards for light duty trucks of the LDT3 and

LDT4 categories.

Section 206(g)(3) requires that NCPs:

Account for the degree of emission nonconformity;

Increase periodically to provide incentive for

nonconforming manufacturers to achieve the emission standards; and

Remove the competitive disadvantage to conforming

manufacturers.

Section 206(g) authorizes EPA to require testing of production

vehicles or engines in order to determine the emission level on which

the penalty is based. If the emission level of a vehicle or engine

exceeds an upper limit of nonconformity established by EPA through

regulation, the vehicle or engine would not qualify for an NCP under

section 206(g) and no certificate of conformity could be issued to the

manufacturer. If the emission level is below the upper limit but above

the standard, that emission level becomes the ``compliance level,''

which is also the benchmark for warranty and recall liability; the

manufacturer who elects to pay the NCP is liable for vehicles or

engines that exceed the compliance level in-use, unless, for the case

of HLDTs, the compliance level is below the in-use standard. The

manufacturer does not have in-use warranty or recall liability for

emissions levels above the standard but below the compliance level.

II. Availability of Nonconformance Penalties

A. Review of NCP Eligibility Criteria

The generic NCP rule (Phase I) established three basic criteria for

determining the eligibility of emission standards for nonconformance

penalties in any given model year. See 40 CFR 1103-87. First, the

emission standard in question must become more difficult to meet. This

can occur in two ways, either by the emission standard itself becoming

more stringent, or due to its interaction with another emission

standard that has become more stringent.

Second, substantial work must be required in order to meet the

emission standard. EPA considers ``substantial work'' to mean the

application of technology not previously used in that vehicle or engine

class/subclass, or a significant modification of existing technology,

in order to bring that vehicle/engine into compliance. EPA does not

consider minor modifications or calibration changes to be classified as

substantial work.

Third, a technological laggard must be likely to develop. A

technological laggard is defined as a manufacturer who cannot meet a

particular emission standard due to technological (not economic)

difficulties and who, in the absence of NCPs, might be forced from the

marketplace. EPA will make the determination that a technological

laggard is likely to develop, based in large part on the above two

criteria. However, these criteria are not always sufficient to

determine the likelihood of the development of a technological laggard.

An emission standard may become more difficult to meet and substantial

work may be required for compliance, but if that work merely involves

transfer of well-developed technology from another vehicle class, it is

unlikely that a technological laggard would develop.

B. Phase II NCPs

The above criteria were used to determine eligibility for NCPs

during Phase II of the NCP rulemaking (50 FR 53454, December 31, 1985).

NCPs were offered for the following 1987 and 1988 model year standards:

the particulate matter (PM) standard for 1987 diesel-fueled light-duty

trucks with loaded vehicle weight in excess of 3750 pounds (LDDT2s),

the 1987 gasoline-fueled light HDE (LHDGE) HC and CO emission

standards, the 1988 diesel-fueled HDE (HDDE) PM standard, and the 1988

HDDE NOX standard. As discussed in the Phase II preamble, NCPs

were considered, but not offered, for the 1987 HLDT NOX standard

and the 1988 (later, the 1990) gasoline-fueled HDE (HDGE) NOX

standard.

C. Phase III NCPs

The availability of NCPs for 1991 model year HDE standards was

addressed during Phase III of the NCP rulemaking (55 FR 46622, November

5, 1990). NCPs were offered for the following: the 1991 HDDE PM

standard for petroleum-fueled urban buses, the 1991 HDDE PM standard

for petroleum-fueled vehicles other than urban buses, the 1991

petroleum-fueled HDDE NOX standard, and the PM emission standard

for 1991 and later model year petroleum-fueled light-duty diesel trucks

greater than 3750 lbs loaded vehicle weight (LDDT2s). As discussed in

the Phase III preamble, NCPs were also considered but not offered for

the methanol-fueled heavy-duty diesel engine and heavy-duty gasoline

engine standards as it was concluded that those standards did not meet

the eligibility criteria established in the generic rule.

In addition, Phase III of the NCP rulemaking described how NCPs

would be integrated into the HDE NOX and PM averaging program.

D. Phase IV NCPs

The availability of NCPs for HDVs and HDEs subject to the 1994 and

later model year emission standards for particulate matter (PM) was

addressed by Phase IV of the NCP rulemaking (58 FR 68532, December 28,

1993). NCPs were offered for the following: the 1994 and later model

year PM standard for heavy-duty diesel engines (HDDEs) used in urban

buses, and the 1994 and later model year PM standard for HDDEs used in

vehicles other than urban buses. NCPs were also considered, but not

offered for the 1994 and later model year methanol-fueled HDE PM

standard and the 1994 and later model year cold carbon monoxide (CO)

standard for heavy light-duty gasoline fueled trucks.

E. NCP Eligibility for 1996 Tier 1 HLDT, 1996 Urban Bus PM, and 1998

HDE NOX, and Later Emission Standards for Petroleum-Fueled HDEs

and HDVs

NCPs were not considered for the Tier 1 ``in-use'' standards since

NCPs are a mechanism to allow manufacturers to certify engine families,

not to assist manufacturers in complying with ``in-use'' standards. The

remainder of this proposal addresses whether NCPs should be made

available for the 1996 Urban Bus PM standard of 0.05 g/BHP-hr, the 1998

HDE NOX standard of 4.0 g/BHP-hr, and the following Tier 1

standards applicable to 1996 HLDTs at the intermediate\1\ useful life

and at the full\2\ useful life:

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\1\Intermediate useful life is 5 years or 50,000 miles.

\2\Full useful life is 11 years or 120,000 miles.

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A. LDT3

1. Non-methane hydrocarbon (NMHC) standard.

a. 0.32 g/mi at intermediate useful life;

b. 0.46 g/mi at full useful life;

2. Carbon Monoxide (CO) standard.

a. 4.4 g/mi at intermediate useful life;

b. 6.4 g/mi at full useful life;

3. Oxides of Nitrogen (NOX) standard.

a. 0.70\3\ g/mi at intermediate useful life;

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\3\There is no intermediate useful life standard for diesel-

fueled vehicles.

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b. 0.98 g/mi at full useful life;

4. Particulate Matter (PM) standard of 0.10 g/mi at full useful

life;

B. LDT4

1. NMHC standard.

a. 0.39 g/mi at intermediate useful life;

b. 0.56 g/mi at full useful life;

2. CO standard.

a. 5.0 g/mi at intermediate useful life;

b. 7.3 g/mi at full useful life;

3. NOX standard.

a. 1.1\4\ g/mi at intermediate useful life;

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\4\There is no intermediate useful life standard for diesel-

fueled vehicles.

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b. 1.53 g/mi at full useful life;

4. PM standard of 0.12 g/mi at full useful life;

EPA's consideration of NCPs for each of these standards is discussed

below.

a. 1996 Tier 1 Non-Methane Hydrocarbon (NMHC) Standard for LDT3

Since there is no NMHC standard for earlier model year LDT3s, the

new NMHC standard represents an increase in stringency over the THC

standard for previous model years, satisfying the first eligibility

criterion. EPA acknowledges that one manufacturer has indicated that it

may have difficulty complying with this standard. Based on the

manufacturer's planned strategy, however, EPA does not believe that

substantial work, as described above, will be necessary to meet the new

standard for either the intermediate useful-life level of 0.32 g/mi or

the full useful-life level of 0.46 g/mi, since it does not represent a

major modification of existing technology. EPA also does not believe

that a technological laggard is likely to develop, based on discussions

with vehicle manufacturers. For these reasons, EPA is not proposing to

offer NCPs for this standard.

b. 1996 Tier 1 CO Standard for LDT3

EPA recognizes that the new CO standard of 6.4 g/mi at full useful

life represents an increase in stringency over the prior standard of 10

g/mi at full useful life for LDT3s, satisfying the first eligibility

criterion. Based on 1993 model year certification levels, only one

manufacturer is currently producing LDT3 vehicles which would not meet

the new standard at full useful life. Since this manufacturer does not

anticipate difficulty in meeting the new CO standards, EPA does not

believe that a technological laggard is likely to develop. The half

useful-life standard of 4.4 g/mi is considered by EPA and manufacturers

to be less difficult to meet compared with the full useful life

standard. For these reasons, EPA is not proposing to offer NCPs for

these standards.

c. 1996 Tier 1 NOx Standard for LDT3

EPA recognizes that the new NOX standard of 0.98 g/mi at full

useful life represents an increase in stringency over the prior

standard of 1.7 g/mi at full useful life for LDT3s, satisfying the

first eligibility criterion. Based on discussions with current

manufacturers of vehicles which, if not modified, would exceed the new

NOX standard at full useful life, EPA believes those manufacturers

possess the desirable technology to meet the new standard, and EPA does

not believe that a technological laggard is likely to develop among

manufacturers of that group. The half useful-life standard for non-

diesel vehicles of 0.70 g/mi is considered by EPA and manufacturers to

be less difficult to meet compared with the full useful life standard.

For the case of diesel-fueled LDT3s, however, EPA believes the

increased stringency is likely to require substantial work to comply

with the PM standard because most conventional means of reducing

NOX emissions from diesel-fueled engines result in increased PM

emissions from such engines. Since EPA believes that NOX emissions

of diesel-fueled vehicles will be lowered by adjusting engine operating

and design parameters, not requiring significant work, EPA is not

proposing to offer NCPs for the new NOX standards for either

gasoline fueled LDT3s or diesel-fueled LDT3s. However, significant work

may be required to reduce any resulting increase in PM emissions or

reduced decrease in PM emissions for diesel-fueled vehicles. The

interrelationship between NOX emissions and PM emissions for

diesel-fueled vehicles will be taken into account when considering NCPs

for the new PM standard, as discussed below.

d. 1996 Tier 1 PM Standard for LDT3

There is no previous PM standard for non-diesel-fueled LDT3s. Since

it is well-recognized in the industry that non- diesel fueled vehicles

emit very low levels of particulate matter, no work should be required

by manufacturers to meet this new standard and no technological laggard

should develop. Therefore, EPA is not proposing to offer NCPs for those

vehicles.

EPA recognizes that the new PM standard of 0.10 g/mi at full useful

life represents an increase in stringency over the prior standard of

0.13 g/mi at full useful life for diesel-fueled LDT3s, satisfying the

first eligibility criterion. Based on discussions with current

manufacturers, at least one manufacturer is adapting technology from

similar engines, but having different service requirements. Significant

work will probably be required for the technology adaptation specified

by that manufacturer, especially when considering the interrelationship

of the NOX and PM emissions of diesel-fueled engines, as stated

above. EPA also believes that a technological laggard may develop

because of the amount of work involved. For these reasons, EPA is

proposing to offer NCPs for diesel-fueled LDT3s at the full useful

life. The proposed penalty rates are discussed below.

e. 1996 Tier 1 Non-Methane Hydrocarbon (NMHC) Standard for LDT4

There is no NMHC standard for earlier model year LDT4s. Both EPA

and vehicle manufacturers believe that the NMHC standard represents an

increase in stringency over the THC standard for previous model year

LDT4s, satisfying the first eligibility criterion. The same

manufacturer that expressed concern in meeting the NMHC standard for

LDT3 has similar concerns in meeting this standard and will use a

similar strategy to lower the emissions. For the same reasons stated in

the above discussion of the NMHC standard for LDT3s, EPA does not

propose to offer NCPs for the NMHC standard at either the intermediate

or the full useful life.

f. 1996 Tier 1 CO Standard for LDT4

EPA recognizes that the new CO standard of 7.3 g/mi at full useful

life represents an increase in stringency over the prior standard of 10

g/mi at full useful life for LDT4s, satisfying the first eligibility

criterion. Based on discussions with current manufacturers of affected

vehicles, EPA believes that manufacturers will not have difficulty in

meeting the new standard. Since there are no 1993 model year LDT4s with

CO certification levels higher than the new standard at full useful

life, EPA does not believe that a technological laggard is likely to

develop. The half useful-life standard of 5.0 g/mi is generally

considered by EPA and manufacturers to be less difficult to meet

compared with the full useful life standard of 7.3 g/mi. For these

reasons, EPA is not proposing to offer NCPs for these standards.

g. 1996 Tier 1 NOX Standard for LDT4

EPA recognizes that the new NOX standard of 1.53 g/mi at full

useful life represents some increase in stringency over the prior

standard of 1.7 g/mi at full useful life for LDT4s, satisfying the

first eligibility criterion. Based on discussions with current

manufacturers of affected vehicles, and based on the fact that there

were no model year 1993 LDT4s certified which would exceed the new

standard at full useful life, EPA believes that substantial work, as

described above, will not be required of manufacturers and that a

technological laggard is not likely to develop. The half useful-life

standard for non-diesel vehicles of 1.10 g/mi is generally considered

by EPA and manufacturers to be less difficult to meet compared with the

full useful life standard. For these reasons, EPA does not propose to

offer NCPs for the new LDT4 NOX standards.

h. 1996 Tier 1 PM Standard for LDT4

EPA recognizes that the new PM standard of 0.12 g/mi at full useful

life represents an increase in stringency over the prior standard of

0.13 g/mi at full useful life for LDT4s, satisfying the first

eligibility criterion. As in the case of non-diesel LDT3s, no work

should be required to meet the new PM standard for non-diesel LDT4s.

And based on discussions with current manufacturers of diesel-fueled

LDT4 vehicles and on 1993 model year certification levels, EPA does not

believe that a technological laggard is likely to develop or that

substantial work, as described above, will be required to meet the new

PM standard. For these reasons, EPA is not proposing to offer NCPs for

the new LDT4 PM standard.

i. 1996 HDDE Urban Bus PM Standard

The 1996 HDDE urban bus PM standard of 0.05 g/BHP-hr is more

stringent than the previous 1994 0.07 g/BHP-hr PM standard it is

superseding. EPA recognizes that some work may be necessary for the

urban bus engine manufacturers to comply with the new standard. Based

on discussions with those manufacturers, EPA does not believe that a

technological laggard is likely to exist. Reinforcing that belief is

the fact that the 0.05 g/BHP-hr standard was originally proposed as a

1994 standard. Detroit Diesel Corporation successfully argued that they

could not effectively comply by 1994, and that if the 0.05 g/BHP-hr

standard was delayed until 1996, and a standard of 0.07 g/BHP-hr was

adopted in 1994, compliance could be achieved more efficiently.

Furthermore, compliance with the 0.05 g/BHP-hr standard has been

demonstrated in certification using a particulate trap system. And a

catalyst equipped 1994 urban bus engine tested as low as 0.05 g/bhp-hr,

although it certified to 0.07 g/bhp-hr. For these reasons, EPA is not

proposing to offer NCPs for the 1996 0.05 g/BHP-hr PM standard for HDDE

used for urban buses.

j. 1998 HDE NOX Standard

EPA acknowledges that the 1998 HDE NOX standard of 4.0 g/BHP-

hr is an increase in stringency over the present 5.0 g/BHP-hr standard.

EPA also believes, based on discussions with current manufacturers of

HDEs, that additional work will be required to comply with the new

standard. Improvements to turbochargers, conversion of remaining

mechanical fuel injection systems to electronic control, and, in some

cases, the use of exhaust gas catalytic converters will be necessary.

But, based on those same discussions with manufacturers, and

considering the fact that the standard does not become effective for an

additional four years from this time, EPA believes that a technological

laggard is not likely to develop. Therefore, EPA does not propose to

offer NCPs for the 1998 HDE NOX standard.

III. Penalty Rates

This proposed rule is the most recent in a series of NCP

rulemakings. The discussion of penalty rates in the Phase IV rulemaking

(58 FR 68532, December 28, 1993), Phase III rulemaking (55 FR 46622,

November 5, 1990), the Phase II rulemaking (50 FR 53454, December 31,

1985) as well as the Phase I rulemaking (50 FR 35374, August 30, 1985)

are incorporated by reference. This section briefly reviews the penalty

rate formula and discusses how EPA arrived at the penalty rates in this

proposed rule. Emphasis will be placed on procedures different from

those used to derive penalty rates during Phase II, Phase III, or Phase

IV.

A. Parameters

As in the previous NCP rules, EPA is specifying values for the

following parameters in the NCP formula for each standard: COC50,

COC90, MC50, and F. The NCP formula is the same as that

promulgated in the Phase I rule.

COC50 is an estimate of the industrywide average incremental

cost per engine (references to engines are intended to include vehicles

as well) associated with meeting the standard for which an NCP is

offered, compared with meeting the upper limit. COC50 is based on

typical engine technology, as nearly as EPA can identify it. As in the

previous NCP rules, costs include additional manufacturer costs and

additional owner costs. The other NCP rules did not include

certification costs in the calculation of COC50, and none will be

allowed in this proposed rule because both complying and noncomplying

manufacturers must incur certification costs.

COC90 is EPA's best estimate of the 90th percentile

incremental cost per-engine associated with meeting the standard for

which an NCP is offered, compared with meeting the associated upper

limit. COC90 is based on a near worst case technology, as nearly

as EPA can identify it. COC90, like COC50, includes both

manufacturer and owner costs, but not certification costs.

MC50 is an estimate of the industrywide average marginal cost

of compliance per unit of reduced pollutant associated with the least

cost effective emission control technology installed to meet the new

standard. MC50 is measured in dollars per g/BHP-hr for HDEs and in

dollars per gram per mile (g/mi) for LDTs.

F is a factor used to derive MC90, the 90th percentile

marginal cost of compliance with the NCP standard for engines in the

NCP category. MC90 is defined as being the slope of the penalty

rate curve near the standard and is equal to MC50 multiplied by F.

For this rulemaking, as was the case in the previous NCP rules, EPA has

determined that no reasonable estimate of MC90 can be made based

on existing marginal cost data and has thus set F at a presumptive

value of 1.2. This approach was generally supported by commenters on

the past NCP rulemakings.

B. Parameter Values and Upper Limit

The derivation of the proposed cost parameters is described in a

support document entitled ``Calculation of Nonconformance Penalty Rates

for 1996 and Later Model Year LDT3 Particulate Matter (PM) Standards,''

which is available in the public docket for this rulemaking. The upper

limits applicable to a pollutant emission standard shall be determined

as per 86.1104-91.

1996 Tier 1 Particulate Matter (PM) Standard of 0.10 g/mi for LDT3 at

Full Useful Life

EPA proposes that the following values (in July, 1993 dollars) be

used in the NCP formula for the 1996 and later model year Tier 1 0.10

g/mi PM standard for LDT3 at full useful life.

COC50 = $557

COC90 = $1178

MC50 = 557/(.13-.10) = $18,567

F = 1.2

The values of the compliance parameters are based on the cost of

projected engine modifications and the use of an oxidation catalyst for

PM reduction as outlined in ``Calculation of Nonconformance Penalty

Rates for 1996 and Later Model Year LDT3 Particulate Matter (PM)

Standards''. While the possibility of complying with the PM standard

using a particulate trap exists, it is not considered by EPA or

industry to be a likely solution.

Since a previous PM standard of 0.13 g/mi exists, EPA is proposing

that the upper limit which cannot be exceeded by LDT3 vehicles shall be

0.13 g/mi.

IV. Administrative Designation and Regulatory Analysis

Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA

must determine whether the regulatory action is ``significant'' and

therefore subject to OMB review and the requirements of the Executive

Order. The order defines ``significant regulatory action'' as one that

is likely to result in a rule that may: (1) Have an annual effect on

the economy of $100 million or more or adversely affect in a material

way the economy, a sector of the economy, productivity, competition,

jobs, the environment, public health or safety, or state, local, or

tribal governments or communities; (2) create a serious inconsistency

or otherwise interfere with an action taken or planned by another

agency; (3) materially alter the budgetary impact of entitlements,

grants, user fees, or loan programs or the rights and obligations of

recipients thereof; or (4) raise novel legal or policy issues arising

out of legal mandates, the President's priorities, or the principles

set forth in the Executive Order.

Pursuant to the terms of Executive Order 12866, it has been

determined that this rule is not a ``significant regulatory action''

and is therefore not subject to OMB review. This regulation will not

have an annual effect on the economy in excess of $100 million and will

not cause a major increase in the price of HDEs above those that would

otherwise occur from compliance with the emission standards themselves.

This regulation is intended to assist manufacturers that are having

difficulty developing and marketing vehicles which comply with the 1996

Tier 1 PM standard for LDT3s. Without this proposed rule, a

manufacturer experiencing difficulty in complying with this new

emission standard (after the use of credits) has only two alternatives:

fix the nonconforming engines for the associated model years or not

sell them at all. NCPs provide manufacturers with additional time to

bring their engines into conformity.

In addition, NCPs are calculated to deprive nonconforming

manufacturers of any cost savings and competitive advantages stemming

from marketing a nonconforming engine. Thus, NCPs will not have

significant adverse effects on competition, employment, investment,

productivity, innovation or on the ability of United States-based

enterprises to compete with foreign-based enterprises in domestic or

export markets.

V. Economic Impact

Because the use of NCPs is optional, manufacturers have the

flexibility and will likely choose whether or not to use NCPs based on

their ability to comply with emissions standards. If no HDE

manufacturer elects to use NCPs, these manufacturers and the users of

their products will not incur any additional costs related to NCPs.

NCPs remedy the potential problem of having a manufacturer forced

out of the marketplace due to that manufacturer's inability to conform

to new, strict emission standards in a timely manner. Without NCPs, a

manufacturer which has difficulty certifying HDEs in conformance with

emission standards or whose engines fail a SEA has only two

alternatives: fix the nonconforming engines, perhaps at a prohibitive

cost, or prevent their introduction into commerce. The availability of

NCPs provides manufacturers with a third alternative: continue

production and introduce into commerce upon payment of a penalty for an

engine that exceeds the standard until an emission conformance

technique is developed.

Therefore, NCPs represent a regulatory mechanism that allows

affected manufacturers to have increased flexibility. A decision to use

NCPs may be a manufacturer's only way to continue to introduce HDEs

into commerce. Hence, NCPs may be considered to have no adverse

economic impact.

VI. Environmental Impact

When evaluating the environmental impact of this proposed rule, one

must keep in mind that, under the Act, NCPs are a consequence of

enacting new, more stringent emissions requirements for heavy duty

engines. Emission standards are set at a level that most, but not

necessarily all, manufacturers can achieve by the model year in which

the standard becomes effective. Following International Harvester v.

Ruckelshaus, 478 F.2d 615 (D.C. Cir. 1973), Congress realized the

dilemma that technology-forcing standards were likely to cause, and

allowed manufacturers of heavy-duty engines to certify nonconforming

vehicles/engines upon the payment of an NCP, under certain conditions.

This mechanism would allow manufacturer(s) who cannot meet technology-

forcing standards immediately to continue to manufacture these

nonconforming engines while they tackle the technological problems

associated with meeting new emission standard(s). Thus, as part of the

statutory structure to force technological improvements without driving

manufacturers out of the market, NCPs provide flexibility that fosters

long-term emissions improvement through the setting of lower emission

standards at an earlier date than could otherwise be possible. By

design, NCPs encourage the technological laggard that is using NCPs to

reduce emission levels to the more stringent standard as quickly as

possible.

VII. Compliance With Regulatory Flexibility Act

Under section 605 of the Regulatory Flexibility Act, 5 U.S.C.

605(b), the Administrator certifies that this rule will not have a

significant economic impact on a substantial number of small entities.

None of the affected manufacturers could be classified as small.

Moreover, as already discussed, the NCP program can be expected to

benefit manufacturers.

Some small entities do exist as manufacturers' contractors for the

testing of engines for Production Compliance Audits (PCAs). It is EPA's

practice to conduct PCA scheduling (namely, tests per day limitations)

in such a way as to consider the staff and manpower capabilities of

such contractors and avoid any problems. The result is that these

entities are not adversely affected. Thus, I certify that this proposed

rule will not have any adverse economic impact on a substantial number

of small entities.

VIII. Information Collection Requirements

This proposed rule requires that manufacturers perform certain

record keeping and submit certain reports to EPA. The Paperwork

Reduction Act of 1980, 44 USC 3501, et seq., provides that reporting

and record keeping requirements be approved by OMB before they can be

enforced by EPA. The information collection requirements in this

proposed rule have been addressed in previous rulemaking and approved

by OMB (OMB control no. 2060-0132). At the time of the final rulemaking

the Agency will submit an Inventory Correction Worksheet to OMB

amending the approved burden hours to reflect the additional reports

required by this rulemaking. However, any person wishing to comment on

these requirements is invited to do so. Comments on these requirements

should be submitted to Chief, Information Policy Branch, 2136, U.S.

Environmental Protection Agency, 401 M St., SW., Washington, DC 20460

and to OMB, Office of Information and Regulatory Affairs, 726 Jackson

Place, NW, Washington, DC 20503, marked ``Attention: Desk Officer for

EPA.'' The final rule will respond to any OMB or public comments on the

information collection requirements.

List of Subjects in 40 CFR Part 86

Administrative practice and procedure, Air pollution control,

Gasoline, Motor vehicles, Labeling, Motor vehicle pollution, Reporting

and recordkeeping requirements.

Dated: August 4, 1994.

Carol M. Browner,

Administrator.

For the reasons set forth in the preamble, 40 CFR part 86, is

proposed to be amended as follows:

PART 86--CONTROL OF AIR POLLUTION FROM NEW AND IN-USE MOTOR

VEHICLES AND NEW AND IN-USE MOTOR VEHICLE ENGINES: CERTIFICATION

AND TEST PROCEDURES

1. The authority citation for part 86 continues to read as follows:

Authority: Secs. 202, 203, 206, 207, 208, 215, 301(a), Clean Air

Act as amended ( 42 U.S.C. 7521, 7522, 7524, 7525, 7541, 7542, 7549,

7550, and 7601(a)).

2. Section 86.1105-87 of subpart L is proposed to be amended by

revising paragraph (e) and adding paragraph (g) to read as follows:

Sec. 86.1105-87 Emission standards for which nonconformance penalties

are available.

* * * * *

(e) The values of COC50, COC90, and MC50 in

paragraphs (a) and (b) of this section are expressed in December 1984

dollars. The values of COC50, COC90, and MC50 in

paragraphs (c) and (d) of this section are expressed in December 1989

dollars. The values of COC50, COC90, and MC50 in

paragraph (f) of this section are expressed in December 1991 dollars.

The values of COC50, COC90, and MC50 in paragraph (g) of

this section are expressed in July 1993 dollars. These values shall be

adjusted for inflation to dollars as of January of the calendar year

preceding the model year in which the NCP is first available by using

the change in the overall Consumer Price Index, and rounded to the

nearest whole dollar in accordance with ASTM E29-67 (reapproved 1980),

Standard Recommended Practice for Indicating Which Places of Figures

are to be Considered Significant in Specified Limiting Values. The

method was approved by the director of the Federal Register in

accordance with 5 U.S.C. 552(a) and 1 CFR part 51. This document is

available from ASTM, 1916 Race Street, Philadelphia, PA 19103, and is

also available for inspection as part of Docket A-91-06, located at the

Central Docket Section, EPA, 401 M Street, SW, Washington, DC or at the

Office of the Federal Register, 800 North Capitol Street, NW., suite

700, Washington, DC. This incorporation by reference was approved by

the Director of the Federal Register on January 13, 1992. These

materials are incorporated as they exist on the date of the approval

and a notice of any change in these materials will be published in the

Federal Register.

* * * * *

(g) Effective in the 1996 model year, NCPs will be available for

the following emission standard:

(1) Light-duty truck 3 diesel-fueled vehicle at full useful life

(as defined in Sec. 86.094-2) particulate matter emission standard of

0.10 g/mi.

(i) The following values shall be used to calculate an NCP for the

standard set forth in Sec. 86.094-9(a)(1)(ii) in accordance with

Sec. 86.1113-87(a):

(A) COC50: $557.

(B) COC90: $1178.

(C) MC50: $18,567 per gram per mile;

(D) F: 1.2.

(ii) The following factor shall be used to calculate the

engineering and development component of the NCP for the standard set

forth in Sec. 86.094-9(a)(1)(ii) in accordance with Sec. 86.1113-87(h):

0.011.

(2) [Reserved]

[FR Doc. 94-19769 Filed 8-19-94; 8:45 am]

BILLING CODE 6560-50-P