Amended Heavy-Duty Averaging, Banking, and Trading Credit Accounting Regulations

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9 and 86

[AMS-FRL-4854-6]

Amended Heavy-Duty Averaging, Banking, and Trading Credit

Accounting Regulations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: This final rule makes two changes to the existing Averaging,

Banking, and Trading (ABT) regulations for manufacturers of heavy-duty

engines, under EPA's motor vehicle emission control program. Beginning

with the final reports due in 1993 for the 1992 model year engines,

heavy-duty engine manufacturers participating in the ABT program are

required to use credits scheduled to expire in the earliest model year

before using credits that would expire in later model years. EPA has

concluded that the benefits intended to be derived from the ABT program

are more likely to be realized by this credit accounting method than by

the credit accounting method in the existing regulations. Therefore,

the intent of this change is to correct an unintended effect in the

existing regulations. This action also extends the reporting period for

final reports from 180 days to 270 days after the end of the model

year. This extension of reporting time will provide manufacturers

additional time to collect sales data for calculating ABT credits and

thus improve the accuracy of the credit information submitted to EPA.

EFFECTIVE DATE: This final rule is effective on April 25, 1994.

ADDRESSES: Materials relevant to this rule are contained in Public

Docket No. A-92-30 at the following address: U.S. Environmental

Protection Agency, 401 M Street SW., Washington DC 20460. The docket is

available for public inspection from 8:30 a.m. until 12 noon and from

1:30 p.m. until 3:30 p.m. Monday through Friday. A reasonable fee may

be charged for copying docket materials.

FOR FURTHER INFORMATION CONTACT: Ms. Paulina Chen, U.S. EPA,

Manufacturers Operations Division (6405J), 401 M Street SW., Washington

DC, 20460, Telephone: (202) 233-9249.

SUPPLEMENTARY INFORMATION:

I. Introduction

The ABT program was developed to provide flexibility for

manufacturers to use a mix of emission control technology and minimize

the costs associated with meeting increasingly stringent emission

standards. This flexibility in turn creates environmental benefit by

providing incentive in the form of credits for the earlier introduction

of cleaner engines into the market. In addition, environmental benefits

are derived from a 20 percent discount on all banked and traded

credits. As an additional environmental safeguard, credit life is

limited to assure adequate in-use overlap between credit-generating and

credit-using vehicles.

The Averaging, Banking, and Trading (ABT) program regulations

promulgated on July 26, 1990 prohibit heavy-duty engine manufacturers

from banking and withdrawing emission credits from the same averaging

set in the same model year. See 40 CFR 86.091-15(a)(2)(iii). According

to the credit accounting method in the regulations, a manufacturer must

first combine all transactions for an averaging set in a given model

year. The manufacturer could then bank any excess credits or withdraw

credits if there is a credit shortfall. This is similar to the last-in-

first-out inventory accounting system (LIFO), because the most recently

generated credits must be used first to average before older credits

can be withdrawn from the bank. This provision has been a source of

confusion for some members of the regulated industry. On May 29, 1992,

the Engine Manufacturers Association (EMA) met with EPA to explain why

its members thought that Sec. 86.091-15(a)(2)(iii) allowed them to both

withdraw previously banked credits and deposit new credits in the same

model year and averaging set. In addition, EMA suggested that LIFO

credit accounting removed a certain amount of expected flexibility from

the ABT program and reduced the incentives for earlier introduction of

cleaner engine technology. EPA subsequently informed EMA that

Sec. 86.091-15(a)(2)(iii) clearly provided for LIFO credit accounting,

but that the Agency would review its previous decision and consider

implementing a first-in-first-out (FIFO) credit accounting method as

suggested by EMA.

After comparing the two credit accounting methods, EPA has

concluded that the benefits intended to be derived from the ABT program

are more likely to be realized under the FIFO credit accounting method,

and that LIFO credit accounting may reduce the program's effectiveness

in providing these benefits.

Today's action amends the credit accounting method used in the ABT

program such that manufacturers must utilize the credits generated in

the earliest model years before using later credits to cover credit

needs. EPA believes that this accounting procedure is more likely to

produce the benefits intended from the ABT program and will avoid the

unintended reduction in program effectiveness that could occur under

the current LIFO credit accounting procedure. Forcing manufacturers to

average first with new credits from cleaner technology engines may

actually encourage a manufacturer to continue using dirtier technology

in the years when previously banked credits are still available, to

avoid the loss of these banked credits through expiration. The current

LIFO procedures could therefore have the unintended and adverse impact

of delaying the introduction of cleaner technology until manufacturers

have depleted their bank of credits. That result would be contrary to

the goals of the ABT program.

In addition, today's action extends the time period for submitting

corrections to end-of-year reports from 180 days after the end of the

model year to 270 days after the end of the model year. This extension

will provide manufacturers a more equitable and reasonable time period

than previously allowed for collecting first delivery information on

their engines.

The reasons for these changes to the ABT program are explained in

greater detail in the preamble to the notice of proposed rulemaking

(NPRM) published on June 10, 1993 (58 FR 32498).

EPA proposed these changes to the ABT program in conjunction with

the NPRM of June 10, 1993 for the Clean Fuels Fleet Emissions

Standards, Conversions, and General Provisions (CFF). EPA published a

second notice on July 1, 1993 which indicated that a public hearing on

that rule would not address the ABT portion of the NPRM, unless

otherwise requested. No request for a hearing was made, and the comment

period for the ABT portion closed on August 2, 1993. Finally, EPA also

split off the ABT portion from the CFF rulemaking in order to expedite

a final ABT rule. EPA will issue a separate final rulemaking for the

CFF program.

This preamble provides a description of today's action and includes

a summary of the major comments received on relevant portions of the

NPRM and EPA's responses to those comments.

II. Public Participation

No public hearing was requested on the proposed ABT changes, and no

hearing was held. EPA received written comments from the Detroit Diesel

Corporation (DDC), Engine Manufacturers Association (EMA),

Manufacturers of Emission Controls Association (MECA), the Natural

Resources Defense Council (NRDC), the American Lung Association (ALA),

and Michael Walsh. Comments have been placed in Docket No. A-92-30 (see

ADDRESSES above). EPA has carefully reviewed all comments, and the

following discussion addresses all major comments.

III. Analysis of Comments

A. Meaning of 40 CFR 86.091-15(a)(2)(iii)

40 CFR 86.092-15(a)(2)(iii) states that: Engine families within a

given averaging set may not both generate and use like emission credits

in the same model year.

EMA commented that changes to this provision may not be necessary,

because, as DDC also noted, Sec. 86.091-15(a)(2)(iii) does not specify

that LIFO credit accounting must be used. However, EPA believes that

Sec. 86.091-15(a)(2)(iii) clearly requires LIFO credit accounting. This

is based on the text of the provision, as well as the preamble

discussion of this provision in 55 FR 30599 on July 26, 1990. The

discussion addresses the background and context of the provision and

very clearly states that credits should not be both withdrawn and used

from a given averaging set in a given model year. Both EMA and DDC

noted that the preamble used the term ``rolling banking'' to refer to

FIFO credit accounting. Although the term ``rolling banking'' does not

appear in the preamble to the final rule for the ABT program, the term

``rolling program'' is addressed in the preamble and refers not to FIFO

credit accounting, but to the three-year credit life, which is entirely

independent of credit accounting. In any case, both EMA and DDC oppose

imposition of LIFO accounting procedures. DDC rejected the LIFO

interpretation on the basis that LIFO is ``illogical and inconsistent

with the purposes of the ABT program.'' EPA is in agreement with this

statement and highlights this point as the main reason for this

rulemaking.

B. Environmental Impact of the Credit Accounting Change Need for

Further Study

NRDC, MECA and ALA raised concerns on the environmental impact of

the proposed credit accounting change, suggesting that EPA withhold

making any such change until the agency completed a more thorough

analysis of environmental consequences, including a comprehensive

evaluation of the impact of the whole ABT program.

This rulemaking only addresses two aspects of the ABT program--the

credit accounting procedures and the timing of annual reports. Given

the limited nature of this rulemaking, EPA does not believe a

comprehensive evaluation of the entire program is necessary to

determine the appropriate accounting and reporting requirements.

In addition, EPA believes that it has adequate information at this

time to determine the appropriate credit accounting procedure. As

described above, EPA has sufficient information now to make these

determinations. Implementation of LIFO credit accounting has

demonstrated to EPA's satisfaction that LIFO credit accounting does not

fulfill the intention of the ABT program to provide engine

manufacturers the flexibility and incentives needed to generate

environmental benefits. Manufacturers generated credits in MY 1990

which they anticipated being able to use in MYs 1991-1993. At the same

time, they have generated credits in MYs 1991 and 1992, which are valid

to be used through MY 1996. However, because any credit usage that

occurs in MYs 1991 and 1992 must, according to LIFO credit accounting,

be offset first by the credits generated in MYs 1991 and 1992, the

result is that the credits which are valid until 1996 are being

withdrawn, while older credits, which are scheduled to expire in MY

1993, are sitting in the bank. Under LIFO credit accounting, if a

manufacturer wanted to utilize the credits generated in MY 1990, they

would be required to withdraw all the 1990 credits before generating

new credits. Thus, there is little incentive to introduce cleaner

technology until all the credits have been withdrawn. In addition, the

PM standards are tightening after three model years, and manufacturers

have little opportunity under LIFO credit accounting to both adjust to

the 1990 standard and generate credits for the 1994 standard change.

Finally, a delay in this rulemaking would prolong the disincentives

associated with LIFO credit accounting.

Environmental Impact

NRDC and MECA raised various concerns about the environmental

impact of these changes, many of which were based on serious

reservations about ABT programs in general. They were concerned that

credits did not reflect real innovations in pollution control, but

merely reflected the difference between certification levels and the

level of the standard. Increased credits therefore provided no net

benefit to the environment. In that context, they were concerned that

application of these changes to the 1993 reports on the 1992 model year

engines would significantly increase the number of credits available to

engine manufacturers, and therefore ease the burden in complying with

more stringent emissions standards applicable in model years 1994

through 1996. This artificial extension of credit life would worsen air

quality by allowing continued production of older, dirtier engines

beyond that allowed without the credit accounting change. NRDC claimed

that the proposal's theoretical arguments for the credit change have a

weak analytical support, and do not support the suggested rule change.

As noted earlier, this rulemaking has a limited scope and EPA is

therefore not revisiting many of the policy and other issues resolved

in the rulemakings establishing the ABT program. This rulemaking is

focused on the narrow issue of determining what credit accounting

procedure best implements the intended goals of the ABT program, with

the existence of an ABT program as a given. In that context, EPA

believes that the regulatory changes in this rule are appropriate. A

FIFO credit accounting provision will better serve the intended goals

of the ABT program than the current LIFO accounting provision. In

addition, EPA does not expect an adverse environmental impact from

these changes, and over time believes the changes should benefit the

environment.

First, as was explained in the preamble to the notice of proposed

rulemaking (58 FR 32498, June 10, 1993), FIFO is preferred over LIFO,

because LIFO may induce manufacturers to use any credits in the bank

before generating new credits, for fear of having the previously banked

credits expire. Thus, LIFO may reduce the incentive for manufacturers

to pull ahead new technology. On the other hand, FIFO encourages

manufacturers to put into production new technology in order to

generate new credits and gain experience on the overall effect of the

technology on emissions before it is required by standards. This

experience may lead to improved reliability when new technology is

implemented on a wider scale. In addition, FIFO has the added

environmental benefit of having more credits discounted, because

credits are banked first rather than averaged first, as under LIFO.

(Averaged credits are not discounted, while banked or traded credits

are.)

Second, while MECA, NRDC, and ALA claim that the increase in

availability of credits in the 1994-1996 model years resulting from the

switch to FIFO credit accounting is an environmental detriment, EPA

emphasizes that the credits in question are credits that manufacturers

have previously generated and therefore represent an emission reduction

that has already taken place. Furthermore, under FIFO, credits are

banked more frequently than under LIFO, because LIFO requires averaging

first. Therefore, FIFO provides the additional environmental benefit of

a 20% discount to more credits.

One final commenter, Michael Walsh, questioned EPA's rationale for

``relaxing'' the ABT requirements when a stated goal of the program was

to not undercut the purpose of the Clean Air Act to promote the

achievement of the greatest degree of emissions reductions available

now and in the future. In support of his argument, Mr. Walsh states

that the ABT program has actually been used by manufacturers to employ

engine modifications to meet emission standards rather than employing

more significant pollution controls (presumably particulate traps). Mr.

Walsh further bolsters his argument with studies showing the health

hazards associated with oxides of nitrogen and particulate matter.

Finally, Mr. Walsh comments that EPA has withheld data from the public

which has denied the public a reasonable opportunity to comment on the

proposed rule change.

EPA has, through rulemaking, set the emission standards for heavy-

duty engines at levels which reflect the greatest degree of emissions

reductions available now and in the future. The Agency will work hard

to ensure that overall emissions will not exceed the levels set by

those standards. Indeed, the environmental safeguards built into the

ABT program, safeguards which remain in effect today, are intended to

ensure that overall emissions will not exceed the standards. EPA does

not believe, however, that it is appropriate to dictate which emission

control technologies manufacturers must use to meet those standards. A

principal goal of the ABT program is to provide flexibility to the

manufacturers to choose the most economically efficient means of

meeting the emission standards. If manufacturers do employ less

expensive emission control options to meet the standards, that is their

prerogative. The overall emission levels set by the standards are not

exceeded and, theoretically, resources have been allocated more

efficiently. Until data is provided that overall emissions levels are

being exceeded, EPA will assume that the ABT program is achieving its

goals.

As for Mr. Walsh's claim that EPA is withholding data, EPA asserts

that it has placed in the docket all accurate data on which it has

relied to make this decision. The only data which has been withheld is

confidential business information (CBI) which EPA is statutorily

prohibited from releasing; even that information, if it was considered

by EPA in making this decision, has been recharacterized to avoid

revealing CBI and placed in the docket.

C. Not Allowing Manufacturers To Use Both LIFO and FIFO Credit

Accounting

In the NPRM, EPA requested comments on whether or not the Agency

should consider implementing alternative credit accounting schemes

which incorporate combinations of both LIFO and FIFO. Both EMA and DDC

supported the alternative of allowing manufacturers to choose freely

between LIFO and FIFO (referred to hereafter as LIFO/FIFO).

First, EMA and DDC claimed that LIFO/FIFO provides the maximum

credit accounting flexibility, and therefore the engine manufacturers

prefer this credit accounting system. EPA believes that FIFO, in

contrast with LIFO, provides the flexibility needed to encourage

manufacturers to participate fully in the program. In addition, EPA

believes that LIFO/FIFO would provide marginal additional flexibility

over FIFO, and this additional flexibility would not be warranted in

light of the concerns that the Agency has regarding use of this

accounting system. These concerns are discussed later in this section.

Second, EMA and DDC commented that the ABT program has a built-in

discount that is incurred when credits are calculated. Some engine

families have more than one transient cycle conversion factor, and only

one, the most environmentally-safe, conversion factor may be used

during credit calculations. EMA and DDC indicated that this calculation

results in an estimated 10-20% credit ``discount.'' EPA points out that

this fact applies to all credit accounting systems and therefore should

not be considered as a reason to choose a particular accounting system.

Furthermore, this ``discount'' applies only to those engine families

containing multiple horsepower ratings.

Third, EMA and DDC were also concerned that the averaging program

would no longer exist under FIFO. On the contrary, the averaging

program could still be used by manufacturers when there are no

previously banked credits available, such as when a manufacturer either

has no banked credits going into a model year, or in cases where the

previously banked credits do not adequately cover credit needs for that

model year. Under such circumstances, manufacturers may use the credits

generated in the current model year in averaging and would not be

required to take a discount on these credits. Credit surpluses

remaining after averaging has occurred could be banked for future use,

with the discount taken.

Fourth, EMA and DDC commented that under LIFO/FIFO, credit life

cannot be extended, as EPA fears. Although credit life cannot be

extended without the generation of new credits, EPA believes that the

credit accounting system used should not allow manufacturers to

circumvent the environmental safeguards that have been put into the

program. LIFO and FIFO separately maximize the effects of different

safeguards, and under LIFO/FIFO a manufacturer can use LIFO in some

years to avoid credit discounting and FIFO in others to avoid credit

expiration.\1\

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\1\See ``Calculating Credits Using LIFO and FIFO Credit

Accounting Methods,'' Memorandum from Paulina Chen to the docket for

this rulemaking (May 14, 1993).

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NRDC, MECA, and ALA commented that EPA should not adopt the other

proposed credit accounting alternatives and echoed concerns similar to

those of EPA's regarding the problems associated with allowing

manufacturers to use both LIFO and FIFO credit accounting. These

concerns are: (1) The loophole created by LIFO/FIFO which could shield

the manufacturers from the full impact, and subsequently diminish the

overall effectiveness, of the environmental safeguards of the ABT

program, and (2) the substantial increase in the complexity of the ABT

program, which could also increase the potential for errors in credit

tracking and affect the ultimate compliance findings.

In conclusion, EPA does not believe that LIFO/FIFO is more suitable

than FIFO, because the apparent disadvantages of LIFO/FIFO outweigh any

potential advantages that have been claimed by commenters.

D. Retroactivity

The revised regulation changes the credit accounting provision for

the 1992 model year reports. End-of-year reports are due within 90 days

after the end of the 1992 model year. Manufacturers can correct these

90 day reports within 180 days after their submission. Presumably all

manufacturers submitted their 90 day reports prior to the publication

of the NPRM. Publication of the NPRM on June 10, 1993 and delays and

uncertainty about the outcome of this final rule led most manufacturers

to hold off in submitting their corrections report. EPA believes that

this is not a retroactive change as it applies to a report that has not

yet been submitted. Given the questions raised on EPA's authority to

promulgate a retroactive change to the ABT regulations, and the lack of

any compelling reason to revise earlier reports, EPA has decided to not

make any revisions to regulations applicable to 1991 and earlier model

years.

E. Other Comments Related to Credit Accounting Change

DDC and EMA requested that EPA expedite this rulemaking to allow

the use of FIFO for the final report due in 1993 on the 1992 model

year, because engine manufacturers claim that they had planned their

production based on the assumption that the system in effect was

essentially FIFO-based. On the other hand, NRDC commented that changing

the credit accounting system ``midstream'' for the 1992 model year,

when some of the 1994 model year engines are already being produced, is

not acceptable because of the impact on air quality. EPA does not want

to penalize those manufacturers who pulled ahead technology for the

purposes of generating credits for the 1994-1996 model years and has

decided to apply this change of credit accounting at the earliest

possible time. In addition, these credits represent emission reductions

that have already occurred and are subject to the environmental

safeguards of discounting and limited credit life.

Several comments by NRDC and MECA relate to the ABT program in

general rather than to the specifics of this rulemaking. For example,

the concern was raised that credits do not necessarily represent real

emission reductions, but may reflect the shaving of safety margins.

Responses to such comments are in the preamble to the final rule for

ABT (55 FR 30584, 7/26/90).

MECA also commented on the effects of this credit accounting change

on the emission control manufacturers, specifically manufacturers of

oxidation catalysts. MECA summarized the environmental benefits of

using this particular emission control device and pointed out that lost

revenues from decreased sales will negatively impact the amount of

research and development that can be performed by these manufacturers.

Manufacturers assert that switching to FIFO removes the disincentive to

pull ahead new technology. Pull ahead provides opportunities to gain

experience with new technology before having to use the technology more

widely.

F. Extension for Corrections to End-of-Year Reports

Although other commenters did not indicate any concerns with the

reporting period extension for corrections to end-of-year reports, NRDC

commented that this extension may cause complications when rectifying

compliance problems, because any problems presumably would not be

detected until nine months after the end of the model year. However,

engine manufacturers still must submit their initial end-of-year

reports within 90 days after the end of the model year, and the

possibilities of any compliance problems would be most evident in this

particular report. These compliance problems may be mitigated later

when all the credit-generating engines have been tracked to points of

first retail sale by the submittal of this report. EPA will have the

opportunity to initiate investigations if problems appear in end-of-

year reports. The change here affects only the secondary reports, which

are due after manufacturers have had more time to track engines to the

point of first retail sale. Finally, because of the uncertainty for the

manufacturers of the content and timing of this final rule, EPA will

permit manufacturers to submit their revisions to the 1992 model year

end-of-year reports within 15 days after the effective date of this

rule.

IV. Final Rule Requirements

As a result of today's action, manufacturers of heavy-duty engines

participating in the ABT program will be required to use credits

scheduled to expire in the earliest model year before using credits

that would expire in later model years, beginning with reports due in

1993 for the 1992 model year. Furthermore, manufacturers will have an

additional 90 days beyond the original deadline for submitting

corrections to their end-of-year reports, totalling to 270 days after

the end of the year to submit the final reports.

Display of OMB Control Numbers

EPA is also amending the table of currently approved information

collection request (ICR) control numbers issued by OMB for various

regulations. This amendment updates the table to accurately display

those information requirements contained in this final rule. This

display of the OMB control number and its subsequent codification in

the Code of Federal Regulations satisfies the requirements of the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.) and OMB's implementing

regulations at 5 CFR 1320.

The ICR was previously subject to public notice and comment prior

to OMB approval. As a result, EPA finds that there is ``good cause''

under section 553(b)(B) of the Administrative Procedure Act (5 U.S.C.

553(b)(B)) to amend this table without prior notice and comment. Due to

the technical nature of the table, further notice and comment would be

unnecessary. For the same reasons, EPA also finds that there is good

cause under 5 U.S.C. 553(d)(3).

V. Changes to the Proposed Rule

No changes were made to the proposed rule.

VI. Environmental Impact

EPA believes that the ABT program changes implemented today will

not interfere with the program safeguards which are designed to ensure

that overall emissions do not increase with the existence of the ABT

program. These environmental safeguards are: the limit on credit life,

the restrictions on averaging sets, and the discounting of banked or

traded credits. This change in credit accounting will result in having

more credits available for use in MY 1994-1996 than previously

anticipated under the LIFO credit accounting system.\2\ However, these

credits represent emission reductions that have in fact occurred, and

the credits themselves cannot exist longer than their limited credit

life.

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\2\For a preliminary estimate of the number of credits affected,

see ``Industry Aggregate of Credit Availabilities When Comparing the

Use of LIFO vs. FIFO in MY 1992,'' Memorandum from Paulina Chen to

the docket for this rulemaking (September 13, 1993).

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Due to the connection between credit information and confidential

sales information, EPA regulations on the release of confidential

business information have restricted the public's opportunity to review

manufacturers' submissions of credit generation and usage. EPA is

currently discussing with participating manufacturers the possibility

of finding and implementing a means of allowing the public to access

enough information to make general assessments of the effectiveness of

the program on a regular basis. The Engine Manufacturers Association

concurs that it is important to provide an ongoing opportunity for the

public to evaluate the overall progress of the program. EPA and EMA

expect to finalize an agreement in the near future on the periodic

release of credit data in a format that would be useful to the public.

VII. Economic Impact

The changes made today are minor adjustments to the ABT program to

remove an unintended disincentive that may inhibit manufacturers from

participating fully in the ABT program. The ABT program is intended to

provide the flexibility necessary for heavy-duty engine manufacturers

to use a mix of emission controls in such a way that will minimize the

cost of meeting the established standards. These changes should help

manufacturers reduce their costs of compliance with emission standards.

VIII. Administrative Designation and Regulatory Analysis

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

Agency 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.

OMB has exempted this regulatory action from Executive Order 12866

review.

IX. Impact on Small Entities

The Regulatory Flexibility Act of 1980 requires federal agencies to

consider potentially adverse impacts of federal regulations upon small

entities. In instances where significant impacts are possible on a

substantial number of these entities, agencies are required to perform

a Regulatory Flexibility Analysis.

There will not be a significant adverse impact on a substantial

number of small business entities due to the changes made to the

Averaging, Banking, and Trading program, because the heavy-duty engine

manufacturers affected by these regulations are not small business

entities.

Therefore, as required under section 605 of the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq., I certify that this regulation

does not have a significant adverse impact on a substantial number of

small entities.

X. Reporting and Recordkeeping Requirements

The information collection requirements make no changes to those

currently approved by the Office of Management and Budget (OMB) under

the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and have been

assigned control number 2060-0104.

XI. Statutory Authority

Authority for actions promulgated in this final rule are granted to

EPA by sections 202, 206(a)(1), 207, 208, and 301 of the Clean Air Act

as amended.

XII. Judicial Review

Under section 307(b) of the Clean Air Act, EPA hereby finds that

these regulations are of national applicability. Accordingly, judicial

review of this action is available only by filing a petition for review

in the United States Court of Appeals for the District of Columbia

Circuit within 60 days of publication. Under section 307(b)(2) of the

Act, the requirements which are the subject of today's notice may not

be challenged later in judicial proceedings brought by EPA to enforce

these requirements.

List of Subjects in 40 CFR Part 86

Administrative practice and procedure, Air pollution control, Motor

vehicle pollution, Reporting and recordkeeping requirements.

Dated: March 17, 1994.

Carol M. Browner,

Administrator.

Appendix.--Table of Changes

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Section Change Reason

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1a. Part 9 Authority. None................. ..........................

1b. Section 9.1...... Addition of new Incorporate OMB control

entries to table. numbers.

2. Part 86 Authority. None................. ..........................

3. Sec. 86.092-15.... Addition of new Change credit accounting

section Sec. 86.092- method and period for

15. correcting end-of-year

reports.

4. Sec. 86.092-23.... Addition of new Change period for

section Sec. 86.092- correcting end-of-year

23. reports.

5. Sec. 86.094-15.... Amend paragraphs Change credit accounting

(a)(2)(iii) and method and period for

(b)(6)(ii). correcting end-of-year

reports.

6. Sec. 86.094-23.... Amend paragraph Change period for

(h)(3)(iv). correcting end-of-year

reports.

7. Sec. 86.095-23.... Amend paragraph Change period for

(h)(3)(iv). correcting end-of-year

reports

8. Sec. 86.096-23.... Amend paragraph Change period for

(h)(3)(iv). correcting end-of-year

reports.

9. Sec. 86.098-23.... Amend paragraph Change period for

(h)(3)(iv). correcting end-of-year

reports.

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For the reasons set out in the preamble, title 40, chapter I of the

Code of Federal Regulations is amended as follows:

1. In Part 9:

a. The authority citation for part 9 continues to read as follows:

Authority: 7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001, 2003,

2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C. 9701; 33

U.S.C. 1251 et seq., 1311, 1313d, 1314, 1321, 1326, 1330, 1344, 1345

(d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR, 1971-1975 Comp.

p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 300g-1, 300g-2,

300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2, 300j-3, 300j-4,

300j-9, 1857 et seq., 6901-6992k, 7401-7671q, 7542, 9601-9657,

11023, 11048.

b. Section 9.1 is amended by adding the new entries under the

indicated heading to the table to read as follows:

Sec. 9.1 OMB approvals under the Paperwork Reduction Act.

* * * * *

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

OMB control

40 CFR citation No.

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

*****

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

*****

86.092-15.................................................. 2060-0104

*****

86.092-23.................................................. 2060-0104

*****

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

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

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

Authority: Secs. 202, 203, 205, 206, 207, 208, 215, 216, 301(a),

Clean Air Act as amended (42 U.S.C. 7521, 7522, 7524, 7525, 7541,

7542, 7549, 7550, and 7601(a)).

Subpart A--[Amended]

3. A new Sec. 86.092-15 is added to Subpart A to read as follows:

Sec. 86.092-15 NOX and particulate averaging, trading, and

banking for heavy-duty engines.

(a)(1) Heavy-duty engines eligible for the NOX and particulate

averaging, trading, and banking programs are described in the

applicable emission standards sections in this subpart. Participation

in these programs is voluntary.

(2)(i) Engine families with FELs exceeding the applicable standard

shall obtain emission credits in a mass amount sufficient to address

the shortfall. Credits may be obtained from averaging, trading, or

banking, within the averaging set restrictions described in this

section.

(ii) Engine families with FELs below the applicable standard will

have emission credits available to average, trade, bank or a

combination thereof. Credits may not be used to offset emissions that

exceed an FEL. Credits may not be used to remedy an in-use

nonconformity determined by a Selective Enforcement Audit or by recall

testing. However, credits may be used to allow subsequent production of

engines for the family in question if the manufacturer elects to

recertify to a higher FEL.

(iii) Credits scheduled to expire in the earliest model year shall

be used, prior to using other available credits, to offset emissions of

engine families with FELS exceeding the applicable standard.

(b) Participation in the NOX and/or particulate averaging,

trading, and banking programs shall be done as follows.

(1) During certification, the manufacturer shall:

(i) Declare its intent to include specific engine families in the

averaging, trading and/or banking programs. Separate declarations are

required for each program and for each pollutant (i.e., NOX and

particulate).

(ii) Declare an FEL for each engine family participating in one or

more of these three programs.

(A) The FEL must be to the same level of significant digits as the

emission standard (one-tenth of a gram per brake horsepower for

NOX emissions and one-hundredth of a gram per brake horsepower-

hour for particulate emissions).

(B) In no case may the FEL exceed the upper limit prescribed in the

section concerning the applicable heavy-duty engine NOX and

particulate emission standards.

(iii) Calculate the projected emission credits (+/) based on

quarterly production projections for each participating family and for

each pollutant (NOX and particulate), using the equation in

paragraph (c) of this section and the applicable factors for the

specific engine family.

(iv)(A) Determine and state the source of the needed credits

according to quarterly projected production for engine families

requiring credits for certification.

(B) State where the quarterly projected credits will be applied for

engine families generating credits.

(C) Credits may be obtained from or applied to only engine families

within the same averaging set as described in paragraphs (d) and (e) of

this section. Credits available for averaging, trading, or banking as

defined in Sec. 86.090-2, may be applied to a given engine famil(y)

(ies), or reserved as defined in Sec. 86.091-2.

(2) Based on this information each manufacturer's certification

application must demonstrate:

(i) That at the end of model year production, each engine family

has a net emissions credit balance of zero or more using the

methodology in paragraph (c) of this section with any credits obtained

from averaging, trading or banking.

(ii) The source of the credits to be used to comply with the

emission standard if the FEL exceeds the standard, or where credits

will be applied if the FEL is less than the emission standard. In cases

where credits are being obtained, each engine family involved must

state specifically the source (manufacturer/engine family) of the

credits being used. In cases where credits are being generated/

supplied, each engine family involved must state specifically the

designated use (manufacturer/engine family or reserved) of the credits

involved. All such reports shall include all credits involved in

averaging, trading or banking.

(3) During the model year manufacturers must:

(i) Monitor projected versus actual production to be certain that

compliance with the emission standards is achieved at the end of the

model year.

(ii) Provide the end of-model year reports required under

Sec. 86.091-23.

(iii) Maintain the quarterly records required under Sec. 86.091-

7(c)(8).

(4) Projected credits based on information supplied in the

certification application may be used to obtain a certificate of

conformity. However, any such credits may be revoked based on review of

end-of-model year reports, follow-up audits, and any other verification

steps deemed appropriate by the Administrator.

(5) Compliance under averaging, banking, and trading will be

determined at the end of the model year. Engine families without an

adequate amount of actual NOX and/or particulate emission credits

will violate the conditions of the certificate of conformity. The

certificates of conformity may be voided ab initio for those engine

families.

(6) If EPA or the manufacturer determines that a reporting error

occurred on an end-of-year report previously submitted to EPA under

this section, the manufacturer's credits and credit calculations will

be recalculated. Erroneous positive credits will be void. Erroneous

negative credit balances may be adjusted by EPA.

(i) If EPA review of a manufacturer's end-of-year report indicates

an inadvertent credit shortfall, the manufacturer will be permitted to

purchase the necessary credits to bring the credit balance for that

engine family to zero, at the ratio of 1.2 credits purchased for every

credit needed to bring the balance to zero. If sufficient credits are

not available to bring the credit balance for the engine family in

question to zero, EPA may void the certificate for that engine family

ab initio.

(ii) If within 180 days of receipt of the manufacturer's end-of-

year report, EPA review determines a reporting error in the

manufacturer's favor (i.e., resulting in a positive credit balance) or

if the manufacturer discovers such an error within 180 days of EPA

receipt of the end-of-year report, the credits will be restored for use

by the manufacturer. For the 1992 model year, corrections to the end-

of-year reports may be submitted until May 9, 1994.

(c)(1) For each participating engine family, NOX and

particulate emission credits (positive or negative) are to be

calculated according to one of the following equations and rounded, in

accordance with ASTM E29-67, to the nearest one-tenth of a Megagram

(Mg). Consistent units are to be used throughout the equation.

For determining credit need for all engine families and credit

availability for engine families generating credits for averaging

programs only:

Emission credits=(StdFEL) x (CF) x (UL) x (Production) x (106)

For determining credit availability for engine families generating

credits for trading or banking programs:

Emission credits=(StdFEL) x (CF) x (UL) x (Production) x (106) x (0.8)

Where:

Std=the current and applicable heavy-duty engine NOX or

particulate emission standard in grams per brake horsepower hour or

grams per Megajoule.

FEL=the NOX or particulate family emission limit for the

engine family in grams per brake horsepower-hour or grams per

Megajoule.

CF=a transient cycle conversion factor in BHP-hr/mi or MJ/mi, as

given in paragraph (c)(2) of this section.

UL=the useful life, or alternative life as described in paragraph

(f) of Sec. 86.090-21, for the given engine family in miles.

Production=the number of engines produced for U.S. sales within the

given engine family during the model year. Quarterly production

projections are used for initial certification. Actual production is

used for end-of-year compliance determination.

0.8=a one-time discount applied to all credits to be banked or

traded within the model year generated. Banked credits traded in a

subsequent model year will not be subject to an additional discount.

Banked credits used in a subsequent model year's averaging program will

not have the discount restored.

(2) The transient cycle conversion factor is the total (integrated)

cycle brake horsepower-hour or Megajoules, divided by the equivalent

mileage of the applicable transient cycle. For Otto-cycle heavy-duty

engines, the equivalent mileage is 6.3 miles. For diesel heavy-duty

engines, the equivalent mileage is 6.5 miles. When more than one

configuration is chosen by EPA to be tested in the certification of an

engine family (as described in Sec. 86.085-24), the conversion factor

used is to be based upon the configuration generating the highest

conversion factor when determining credit need and the lowest

conversion factor when determining credit availability for banking,

trading or averaging.

(d) Averaging sets for NOX emission credits: The averaging and

trading of NOX emission credits will only be allowed between

heavy-duty engine families in the same averaging set and in the same

regional category. Engines produced for sale in California constitute a

separate regional category than engines produced for sale in the other

49 states. Banking and trading are not applicable to engines sold in

California. The averaging sets for the averaging and trading of

NOX emission credits for heavy-duty engines are defined as

follows:

(1) For Otto-cycle heavy-duty engines:

(i) Otto-cycle heavy-duty engines constitute an averaging set.

Averaging and trading among all Otto-cycle heavy-duty engine families

is allowed. There are no subclass restrictions.

(ii) Gasoline-fueled heavy-duty vehicles certified under the

provisions of Sec. 86.085-1(b) may not average or trade credits with

gasoline-fueled heavy-duty Otto-cycle engines, but may average or trade

credits with light-duty trucks.

(2) For diesel cycle heavy-duty engines:

(i) Each of the three primary intended service classes for heavy-

duty diesel engines, as defined in Sec. 86.090-2, constitute an

averaging set. Averaging and trading among all diesel cycle engine

families within the same primary service class is allowed.

(ii) Urban buses are treated as members of the primary intended

service class where they would otherwise fall.

(e) Averaging sets for particulate emission credits. The averaging

and trading of particulate emission credits will only be allowed

between diesel cycle heavy-duty engine families in the same averaging

set and in the same regional category. Engines produced for sale in

California constitute a separate regional category than engines

produced for sale in the other 49 states. Banking and trading are not

applicable to engines sold in California. The averaging sets for the

averaging and trading of particulate emission credits for diesel cycle

heavy-duty engines are defined as follows:

(1) Engines intended for use in urban buses constitute a separate

averaging set from all other heavy-duty engines. Averaging and trading

among all diesel cycle bus engine families is allowed.

(2) For heavy-duty engines, exclusive of urban bus engines, each of

the three primary intended service classes for heavy-duty diesel cycle

engines, as defined in Sec. 86.090-2, constitute an averaging set.

Averaging and trading between diesel cycle engine families within the

same primary service class is allowed.

(3) Otto-cycle engines may not participate in particulate

averaging, trading, or banking.

(f) Banking of NOX and particulate emission credits:

(1) Credit deposits. (i) Under this phase of the banking program,

emission credits may be banked from engine families produced during the

three model years prior to the effective model year of the new HDE

NOX or particulate emission standard. Credits may not be banked

from engine families made during any other model years.

(ii) Manufacturers may bank credits only after the end of the model

year and after EPA has reviewed their end-of-year report. During the

model year and before submittal of the end-of-year report, credits

originally designated in the certification process for banking will be

considered reserved and may be redesignated for trading or averaging.

(2) Credit withdrawals. (i) After being generated, banked/reserved

credits shall be available for use three model years prior to, through

three model years immediately after the effective date of the new HDE

NOX or particulate emission standard, as applicable. However,

credits not used within the period specified above shall be forfeited.

(ii) Manufacturers withdrawing banked emission credits shall

indicate so during certification and in their credit reports, as

described in Sec. 86.091-23.

(3) Use of banked emission credits. The use of banked credits shall

be within the averaging set and other restrictions described in

paragraphs (d) and (e) of this section, and only for the following

purposes:

(i) Banked credits may be used in averaging, trading, or in any

combination thereof, during the certification period. Credits declared

for banking from the previous model year but unreviewed by EPA may also

be used. However, they may be revoked at a later time following EPA

review of the end-of-year report or any subsequent audit actions.

(ii) Banked credits may not be used for NOX or particulate

averaging and trading to offset emissions that exceed an FEL. Banked

credits may not be used to remedy an in-use nonconformity determined by

a Selective Enforcement Audit or by recall testing. However, banked

credits may be used for subsequent production of the engine family if

the manufacturer elects to recertify to a higher FEL.

(g) (1) For purposes of this paragraph (g), assume NOX and

particulate nonconformance penalties (NCPs) will be available for the

1991 and later model year HDEs.

(2) Engine families paying an NCP for noncompliance of any emission

standard may not:

(i) Participate in the averaging program,

(ii) Generate emission credits for any pollutant under banking and

trading, and

(iii) Use emission credits for any pollutant from banking and

trading.

(3) If a manufacturer has any engine family to which application of

NCPs and averaging, banking, and trading credits is desired, that

family must be separated into two distinct families. One family, whose

FEL equals the standard, must use NCPs only, while the other, whose FEL

does not equal the standard, must use emission credits only.

(4) If a manufacturer has any engine family in a given averaging

set which is using NOX and/or particulate NCPs, none of that

manufacturer's engine families in that averaging set may generate

credits for banking and trading.

(h) In the event of a negative credit balance in a trading

situation, both the buyer and the seller would be liable.

(i) Certification fuel used for credit generation must be of a type

that is both available in use and expected to be used by the engine

purchaser. Therefore, upon request by the Administrator, the engine

manufacturer must provide information acceptable to the Administrator

that the designated fuel is readily available commercially and would be

used in customer service.

4. Section 86.092-23 is added to subpart A to read as follows:

Sec. 86.092-23 Required data.

(a) The manufacturer shall perform the tests required by the

applicable test procedures, and submit to the Administrator the

following information: Provided, however, That if requested by the

manufacturer, the Administrator may waive any requirement of this

section for testing of vehicle (or engine) for which emission data are

available or will be made available under the provisions of

Sec. 86.091-29.

(b)(1)(i) Exhaust emission durability data on such light-duty

vehicles tested in accordance with applicable test procedures and in

such numbers as specified, which will show the performance of the

systems installed on or incorporated in the vehicle for extended

mileage, as well as a record of all pertinent maintenance performed on

the test vehicles.

(ii) Exhaust emission deterioration factors for light-duty trucks

and heavy-duty engines, and all test data that are derived from the

testing described under Sec. 86.091-21(b)(4)(iii)(A), as well as a

record of all pertinent maintenance. Such testing shall be designed and

conducted in accordance with good engineering practice to assure that

the engines covered by a certificate issued under Sec. 86.091-30 will

meet the emission standards (or family emission limits, as appropriate)

in Sec. 86.091-9, Sec. 86.091-10, or Sec. 86.091-11 as appropriate, in

actual use for the useful life of the engine.

(2) For light-duty vehicles and light-duty trucks, evaporative

emission deterioration factors for each evaporative emission family-

evaporative emission control system combination and all test data that

are derived from testing described under Sec. 86.091-21(b)(4)(i)

designed and conducted in accordance with good engineering practice to

assure that the vehicles covered by a certificate issued under

Sec. 86.091-30 will meet the evaporative emission standards in

Sec. 86.091-8 or Sec. 86.091-9, as appropriate, for the useful life of

the vehicle.

(3) For heavy-duty vehicles equipped with gasoline-fueled or

methanol-fueled engines, evaporative emission deterioration factors for

each evaporative emission family-evaporative emission control system

combination identified in accordance with Sec. 86.091-21(b)(4)(ii).

Furthermore, a statement that the test procedure(s) used to derive the

deterioration factors includes, but need not be limited to, a

consideration of the ambient effects of ozone and temperature

fluctuations, and the service accumulation effects of vibration, time,

and vapor saturation and purge cycling. The deterioration factor test

procedure shall be designed and conducted in accordance with good

engineering practice to assure that the vehicles covered by a

certificate issued under Sec. 86.091-30 will meet the evaporative

emission standards in Sec. 86.091-10 and Sec. 86.091-11 in actual use

for the useful life of the engine. Furthermore, a statement that a

description of the test procedure, as well as all data, analyses and

evaluations, is available to the Administrator upon request.

(4) (i) For heavy-duty vehicles with a Gross Vehicle Weight Rating

of up to 26,000 lbs and equipped with gasoline-fueled or methanol-

fueled engines, a written statement to the Administrator certifying

that the manufacturer's vehicles meet the standards of Sec. 86.091-10

or Sec. 86.091-11 (as applicable) as determined by the provisions of

Sec. 86.091-28. Furthermore, a written statement to the Administrator

that all data, analyses, test procedures, evaluations, and other

documents, on which the above statement is based, are available to the

Administrator upon request.

(ii) For heavy-duty vehicles with a Gross Vehicle Weight Rating of

greater than 26,000 lbs and equipped with gasoline-fueled or methanol-

fueled engines, a written statement to the Administrator certifying

that the manufacturer's evaporative emission control systems are

designed, using good engineering practice, to meet the standards of

Sec. 86.091-10 or Sec. 86.091-11 (as applicable) as determined by the

provisions of Sec. 86.091-28. Furthermore, a written statement to the

Administrator that all data, analyses, test procedures, evaluations,

and other documents, on which the above statement is based, are

available to the Administrator upon request.

(c) Emission data. (1) Emission data, including in the case of

methanol fuel, methanol, formaldehyde and organic material hydrocarbon

equivalent on such vehicles tested in accordance with applicable test

procedures and in such numbers as specified. These data shall include

zero-mile data, if generated and emission data generated for

certification as required under Sec. 86.090-26(a)(3)(i) or Sec. 86.090-

26(a)(3)(ii). In lieu of providing emission data on idle CO emissions,

smoke emissions or particulate emissions from methanol-fueled diesel

certification vehicles the Administrator may, on request of the

manufacturer, allow the manufacturer to demonstrate (on the basis of

previous emission tests, development tests, or other information) that

the engine will conform with the applicable emission standards of

Sec. 86.090-8 or Sec. 86.090-9.

(2) Certification engines. Emission data on such engines tested in

accordance with applicable emission test procedures of this subpart and

in such numbers as specified. These data shall include zero-hour data,

if generated, and emission data generated for certification as required

under Sec. 86.090-26(c)(4). In lieu of providing emission data on idle

CO emissions or particulate emissions from methanol-fueled diesel

certification engines, or on CO emissions from petroleum-fueled or

methanol-fueled diesel certification engines the Administrator may, on

request of the manufacturer, allow the manufacturer to demonstrate (on

the basis of previous emission tests, development tests, or other

information) that the engine will conform with the applicable emission

standards of Sec. 86.091-11.

(d) A statement that the vehicles (or engines) for which

certification is requested conform to the requirements in Sec. 86.084-

5(b), and that the descriptions of tests performed to ascertain

compliance with the general standards in Sec. 86.084-5(b), and the data

derived from such tests, are available to the Administrator upon

request.

(e) (1) A statement that the test vehicles (or test engines) with

respect to which data are submitted to demonstrate compliance with the

applicable standards (or family emission limits, as appropriate) of

this subpart are in all material respects as described in the

manufacturer's application for certification, have been tested in

accordance with the applicable test procedures utilizing the fuels and

equipment described in the application for certification and that on

the basis of such tests the vehicles (or engines) conform to the

requirements of this part. If such statements cannot be made with

respect to any vehicle (or engine) tested, the vehicle (or engine)

shall be identified, and all pertinent data relating thereto shall be

supplied to the Administrator. If, on the basis of the data supplied

and any additional data as required by the Administrator, the

Administrator determines that the test vehicles (or test engine) was

not as described in the application for certification or was not tested

in accordance with the applicable test procedures utilizing the fuels

and equipment as described in the application for certification, the

Administrator may make the determination that the vehicle (or engine)

does not meet the applicable standards (or family emission limits, as

appropriate). The provisions of Sec. 86.091-30(b) shall then be

followed.

(2) For evaporative emission durability, or light-duty truck or

heavy-duty engine exhaust emission durability, a statement of

compliance with paragraph (b)(1)(ii), (b)(2), or (b)(3) of this

section, as applicable.

(f) Additionally, manufacturers participating in the particulate

averaging program for diesel light-duty vehicles and diesel light-duty

trucks shall submit:

(1) In the application for certification, a statement that the

vehicles for which certification is requested will not, to the best of

the manufacturer's belief, when included in the manufacturer's

production-weighted average emission level, cause the applicable

particulate standard(s) to be exceeded.

(2) No longer than 90 days after the end of a given model year of

production of engine families included in one of the diesel particulate

averaging programs, the number of vehicles produced in each engine

family at each certified particulate FEL, along with the resulting

production-weighted average particulate emission level.

(g) Additionally, manufacturers participating in the NOX

averaging program for light-duty trucks shall submit:

(1) In the application for certification, a statement that the

vehicles for which certification is required will not, to the best of

the manufacturer's belief, when included in the manufacturer's

production-weighted average emission level, cause the applicable

NOX standard(s) to be exceeded.

(2) No longer than 90 days after the end of a given model year of

production of engine families included in the NOX averaging

program, the number of vehicles produced in each engine family at each

certified NOX emission level.

(h) Additionally, manufacturers participating in any of the

NOX and/or particulate averaging, trading, or banking programs for

heavy-duty engines shall submit for each participating family:

(1) In the application for certification:

(i) A statement that the engines for which certification is

requested will not, to the best of the manufacturer's belief, when

included in any of the averaging, trading, or banking programs cause

the applicable NOX or particulate standard(s) to be exceeded.

(ii) The type (NOX or particulate) and the projected number of

credits generated/needed for this family, the applicable averaging set,

the projected U.S. (49-state) production volumes, by quarter, NCPs in

use on a similar family and the values required to calculate credits as

given in Sec. 86.091-15. Manufacturers shall also submit how and where

credit surpluses are to be dispersed and how and through what means

credit deficits are to be met, as explained in Sec. 86.091-15. The

application must project that each engine family will be in compliance

with the applicable NOX and/or particulate emission standards

based on the engine mass emissions, and credits from averaging, trading

and banking.

(2) End-of-year reports for each engine family participating in any

of the averaging, trading, or banking programs.

(i) These reports shall be submitted within 90 days of the end of

the model year to: Director, Manufacturers Operations Division (EN-

6405J), U.S. Environmental Protection Agency, 401 M Street SW.,

Washington, DC 20460.

(ii) These reports shall indicate the engine family, the averaging

set, the actual U.S. (49-state) production volume, the values required

to calculate credits as given in Sec. 86.091-15, the resulting type

(NOX or particulate) and number of credits generated/required, and

the NCPs in use on a similar NCP family. Manufacturers shall also

submit how and where credit surpluses were dispersed (or are to be

banked) and how and through what means credit deficits were met. Copies

of contracts related to credit trading must also be included or

supplied by the broker if applicable. The report shall also include a

calculation of credit balances to show that net mass emissions balances

are within those allowed by the emission standards (equal to or greater

than a zero credit balance). The credit discount factor described in

Sec. 86.091-15 must be included as required.

(iii) The 49-state production counts for end-of-year reports shall

be based on the location of the first point of retail sale (e.g.,

customer, dealer, secondary manufacturer) by the manufacturer.

(iv) Errors discovered by EPA or the manufacturer in the end-of-

year report, including changes in the 49 state production counts, may

be corrected up to 180 days subsequent to submission of the end-of-year

report. Errors discovered by EPA after 180 days shall be corrected if

credits are reduced. Errors in the manufacturer's favor will not be

corrected if discovered after the 180 day correction period allowed.

(i) Failure by a manufacturer participating in the averaging,

trading, or banking programs to submit any quarterly or end-of-year

report (as applicable) in the specified time for all vehicles and

engines that are part of an averaging set is a violation of section

203(a)(1) of the Clean Air Act for each such vehicle and engine.

(j) Failure by a manufacturer generating credits for deposit only

in either the HDE NOX or particulate banking programs to submit

their end-of-year reports in the applicable specified time period

(i.e., 90 days after the end of the model year) shall result in the

credits not being available for use until such reports are received and

reviewed by EPA. Use of projected credits pending EPA review will not

be permitted in these circumstances.

(k) Engine families certified using NCPs are not required to meet

the requirements outlined above.

5. Section 86.094-15 of subpart A is amended by revising paragraphs

(a)(2)(iii) and (b)(6)(ii) to read as follows:

Sec. 86.094-15 NOX and particulate averaging, trading, and

banking for heavy-duty engines.

(a) * * *

(2) * * *

(iii) Credits scheduled to expire in the earliest model year shall

be used, prior to using other available credits, to offset emissions of

engine families with FELs exceeding the applicable standard.

* * * * *

(b) * * *

(6) * * *

(ii) If within 180 days of receipt of the manufacturer's end-of-

year report, EPA review determines a reporting error in the

manufacturer's favor (i.e. resulting in a positive credit balance) or

if the manufacturer discovers such an error within 180 days of EPA

receipt of the end-of-year report, the credits will be restored for use

by the manufacturer.

* * * * *

6. Section 86.094-23 of subpart A is amended by revising paragraph

(h)(3)(iv) to read as follows:

Sec. 86.094-23 Required data.

* * * * *

(h) * * *

(3) * * *

(iv) Errors discovered by EPA or the manufacturer in the end-of-

year report, including changes in the 49 state production counts, may

be corrected up to 180 days subsequent to submission of the end-of-year

report. Errors discovered by EPA after 180 days shall be corrected if

credits are reduced. Errors in the manufacturer's favor will not be

corrected if discovered after the 180 day correction period allowed.

* * * * *

7. Section 86.095-23 of subpart A is amended by revising paragraph

'(h)(3)(iv) to read as follows:

Sec. 86.095-23 Required data.

* * * * *

(h) * * *

(3) * * *

(iv) Errors discovered by EPA or the manufacturer in the end-of-

year report, including changes in the 49 state production counts, may

be corrected up to 180 days subsequent to submission of the end-of-year

report. Errors discovered by EPA after 180 days shall be corrected if

credits are reduced. Errors in the manufacturer's favor will not be

corrected if discovered after the 180 day correction period allowed.

* * * * *

[FR Doc. 94-6951 Filed 3-24-94; 8:45 am]

BILLING CODE 6560-50-P

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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[IL 12-26-5785; FRL-4854-5]

Approval and Promulgation of Implementation Plan; Illinois

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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

SUMMARY: On July 17, 1992, the United States Environmental Protection

Agency (US EPA) proposed to promulgate Volatile Organic Compound (VOC)

emission limits for coating operations at the General Motors (GM)

Electro-Motive Division (EMD) facility in LaGrange (Cook County,

Illinois), as representing Reasonably Available Control Technology

(RACT) for EMD's ``topcoat'' and ``final repair coating'' operations.

At that time, the USEPA also proposed a compliance date of one year

from the date of final promulgation. In this rule USEPA is promulgating

the emission limits and compliance date.

EFFECTIVE DATE: This rule is effective April 25, 1994.

ADDRESSES: The docket for this action (Docket No. 5-AR-91-2), which

contains the public comments, is located for public inspection and

copying at the following address. We recommend that you contact

Randolph O. Cano before visiting the Chicago location and Jacqueline

Brown before visiting the Washington, DC location. A reasonable fee may

be charged for copying.

U.S. Environmental Protection Agency, Region 5, Regulation

Development Branch, Eighteenth Floor, Southeast, 77 West Jackson

Street, Chicago, Illinois 60604, (312) 886-6036.

U.S. Environmental Protection Agency, Docket No. 5-AR-91-2, Air

Docket (LE-131), room M1500, Waterside Mall, 401 M Street, SW,

Washington, DC 20460, (202) 245-3639.

FOR FURTHER INFORMATION CONTACT: Steve Rosenthal, Regulation

Development Branch, U.S. Environmental Protection Agency, Region 5,

(312) 886-6052, at the Chicago address indicated above.

SUPPLEMENTARY INFORMATION:

Background

On June 29, 1990, the USEPA promulgated Federal stationary source

VOC control measures representing RACT for emission sources located in

six northeastern Illinois (Chicago area) counties: Cook, DuPage, Kane,

Lake, McHenry and Will. 55 FR 26814. The USEPA also took final

rulemaking action on certain VOC rules previously adopted and submitted

by the State of Illinois for inclusion in its State Implementation Plan

(SIP).

Among the State rules that the USEPA disapproved was title 35 of

the Illinois Administrative Code (35 IAC) subpart F, Sec. 215.204(m),

which established VOC limits for ``Existing Diesel-Electric Locomotive

Coating Lines in Cook County.'' The USEPA based this disapproval on its

determination that the emission limits prescribed by the State did not

represent RACT for EMD's locomotive coating operations. In lieu of this

State rule, the USEPA promulgated more stringent emission limits for

diesel-electric locomotive coating operations, codified at 40 CFR

52.741(e)(1)(i)(M). The only source affected by this rule is GM's EMD

facility in LaGrange, Illinois.

In response to the USEPA's actions, pursuant to section 307(d)(7)

of the Clean Air Act (ACT), GM filed a petition for administrative

reconsideration with the USEPA Regional Administrator for Region

5.1 GM requested that the USEPA reconsider its decision to subject

GM to a VOC limit of 3.5 pounds per gallon (lb/gal.) for its topcoat

and final repair coating operations.2

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\1\GM also filed a petition for review of the Agency's June 29,

1990, action in the United States Court of Appeals for the Seventh

Circuit. General Motors Corporation v. EPA, No. 90-2889. That action

has been held in abeyance by the Court, pending USEPA action on GM's

petition for reconsideration.

\2\ In its petition for reconsideration, GM also requested that

the USEPA reconsider the rules applicable to EMD's silicone rubber

priming and electrical insulating varnish operations. These two

issues are not being addressed in this rulemaking action.

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

On January 4, 1991 (56 FR 480), and May 31, 1991 (56 FR 24722), the

USEPA announced a stay of the emission limitations and compliance date

for EMD's topcoat and final repair coating operations until the USEPA

completed its reconsideration. The USEPA also stated in those rules

that the stay was to remain in effect until withdrawn by a subsequent

rule, but only if and as necessary to complete reconsideration. The

USEPA further indicated that, upon taking final rulemaking, it would

publish a rule in the Federal Register notifying the public of the

withdrawal of the stay.

The USEPA also stated in the May 31, 1991, notice that if the

reconsideration resulted in emissions limitations and standards that

were stricter than the applicable (on May 31, 1991) Illinois rules, the

USEPA would propose a compliance period of one year from the date of

final action on the reconsideration.

On July 17, 1992, (57 FR 31678), the USEPA proposed VOC RACT limits

for EMD topcoat and repair coating operations of 3.5 lb/gal. The

USEPA's analysis was based in large part on the fact that this limit

was consistent with both the Control Technique Guidelines (CTG) for

miscellaneous metal parts and products; and that coatings meeting this

limit were being used successfully at the General Electric Company's

(GE) Erie, Pennsylvania locomotive coating operations. For more

information about the background and substance of these proposed

limits, please see the July 17, 1992, proposed rule.

Because the 3.5 lbs./gal. limit is more stringent than the Illinois

rule in effect on May 31, 1991, the USEPA also proposed on July 17 to

provide a compliance date of one year from the date of final action on

reconsideration. This one-year compliance period was the general

compliance period provided in the June 29, 1990, Federal RACT rules.

Finally, the USEPA proposed to withdraw the stay pending

reconsideration.

In the July 17 notice, the USEPA established an August 17, 1992

deadline for public comment. At the request of GM, USEPA extended the

comment period to September 16, 1992, (57 FR 42536).

Comments by General Motors

On September 15, 1992, GM submitted comments to the USEPA on the

proposal. In its comments, GM objected to the USEPA's reliance on the

information concerning the GE facility as ``data which is to a critical

degree secret and completely beyond scrutiny or verification.'' GM

further stated that this information was the USEPA's sole basis for its

proposal. GM added, however, that if the USEPA decides to promulgate

the 3.5 lb/gallon limits, then it should adopt the proposed compliance

date of one year from promulgation date. GM stated that this was the

``minimum period which can reasonably be provided for compliance.'' In

response to these comments, the USEPA maintains that its reliance on

the GE data is entirely appropriate. The data relied upon by the USEPA,

and available in the August 1991 RACT analysis for this rule (which is

included in the rulemaking docket), include ``Specification and

Properties'' sheets that indicate coating type and use, and the maximum

applied VOC content at the GE facilities (3.5 lb/gal. for all primers,

topcoats and final repair coats). Information in the RACT analysis also

shows that those coatings are required to pass GE's tests for adhesion,

gloss, color and other critical properties. While the suppliers of the

complying coatings used by GE are not identified (because of claims of

business confidentiality asserted by GE), the availability of these

coatings is clearly established.

Although the GE data is compelling, the USEPA also rejects GM's

claim that this was the USEPA's sole basis of its proposal. The July

17, 1992 rulemaking notice also cites the following factors as support:

(1) The CTG for miscellaneous metal parts specifies a VOC limit of 3.5

lb/gal. as a presumptive RACT level, (2) the

USEPA Region III issued a SIP deficiency letter to Pennsylvania finding

that its 4.3 lb/gal. limit for locomotive coatings was deficient, and

needed to be changed to 3.5 lb/gal., (3) Pennsylvania has lowered its

locomotive and heavy-duty truck topcoat limit to 3.5 lb/gal. based on a

finding that such coatings are available to the industries involved;

and (4) GM did not adequately support its technical arguments.

Final Rulemaking Action

The USEPA has reviewed GM's comments, as well as the information

identified in the July 17, 1992 proposed rule, and determined that the

proposed emission limits of 3.5 lb/gal. for EMD's topcoat and final

repair coating operations constitute RACT. As stated in the USEPA's

proposed rule, compliance with these limits is required no later than

one year from the date of today's promulgation. Also as proposed, the

USEPA is withdrawing the May 31, 1991, stay pending reconsideration.

Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., the

USEPA must prepare a regulatory flexibility analysis assessing the

impact of any proposed or final rule on small entities. 5 U.S.C. 603

and 604. Alternatively, the USEPA may certify that the rule will not

have a significant impact on a substantial number of small entities.

Small entities include small businesses, small not-for-profit

enterprises and government entities with jurisdictions over populations

of less than 50,000.

This action involves only one source, EMD. EMD is not a small

entity. Therefore, the USEPA certifies that this disapproval action

does not have a significant impact on a substantial number of small

entities.

Under Executive Order 12866, this action is not ``Major.'' It has

been submitted to the Office of Management and Budget for review.

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Hydrocarbons,

Incorporation by reference, Intergovernmental relations, Ozone.

Dated: March 17, 1994.

Carol M. Browner,

Administrator.

For the reasons set out in the preamble, part 52, chapter I, title

40 of the Code of Federal Regulations is amended as follows:

PART 52--[AMENDED]

1. The authority citation for part 52 continues to read as follows:

Authority: 42 U.S.C. 7401-7671q.

Subpart O--Illinois

2. Section 52.741 is amended by revising paragraphs (e)(5) and

(z)(1) and adding paragraph (e)(7) to read as follows:

Sec. 52.741 Control strategy: Ozone control measures for Cook, DuPage,

Kane, Lake, McHenry and Will Counties.

* * * * *

(e) * * *

(5) Compliance schedule. Except as specified in paragraph (e)(7) of

this section, every owner or operator of a coating line (of a type

included within paragraph (e)(1)(i) of this section) shall comply with

the requirements of paragraph (e)(1),(e)(2) or (e)(3) of this section

and paragraph (e)(6) of this section in accordance with the appropriate

compliance schedule as specified in paragraph (e)(5)(i),(ii),(iii) or

(iv) of this section.

(i) No owner or operator of a coating line which is exempt from the

limitations of paragraph (e)(1) of this section because of the criteria

in paragraph (e)(3)(i) of this section shall operate said coating line

on or after July 1, 1991, unless the owner or operator has complied

with, and continues to comply with, paragraph (e)(6)(i) of this

section. Wood furniture coating lines are not subject to paragraph

(e)(6)(i) of this section.

(ii) No owner or operator of a coating line complying by means of

paragraph (e)(1)(i) of this section shall operate said coating line on

or after July 1, 1991, unless the owner or operator has complied with,

and continues to comply with, paragraphs (e)(1)(i) and (e)(6)(ii) of

this section.

(iii) No owner or operator of a coating line complying by means of

paragraph (e)(1)(ii) of this section shall operate said coating line on

or after July 1, 1991, unless the owner or operator has complied with,

and continues to comply with, paragraphs (e)(1)(ii) and (e)(6)(iii) of

this section.

(iv) No owner or operator of a coating line complying by means of

paragraph (e)(2) of this section shall operate said coating line on or

after July 1, 1991, unless the owner or operator has complied with, and

continues to comply with, paragraphs (e)(2) and (e)(6)(iv) of this

section.

* * * * *

(7) Compliance schedule for diesel electric locomotive coatings.

Notwithstanding any other provision of this subpart, the compliance

date for the emission limitations and standards for ``topcoat'' and

``final repair coat'' operations only as applied to General Motors

Corporation at their diesel electric locomotive coating lines in Cook

County, Illinois, codified at 40 CFR 52.741(e)(1)(i)(M) (2) and (3) is

specified in this paragraph (e)(7). Compliance with the requirements of

paragraph (e)(1), (e)(2) or (e)(3) of this section and paragraph (e)(6)

of this section must be in accordance with the appropriate compliance

schedule as specified in paragraph (e)(7)(i),(ii),(iii), or (iv) of

this section.

(i) No owner or operator of a coating line which is exempt from the

limitations of paragraph (e)(1) of this section because of the criteria

in paragraph (e)(3)(i) of this section shall operate said coating line

on or after March 25, 1995, unless the owner or operator has complied

with, and continues to comply with, paragraph (e)(6)(i) of this

section.

(ii) No owner or operator of a coating line complying by means of

paragraph (e)(1)(i) of this section shall operate said coating line on

or after March 25, 1995, unless the owner or operator has complied

with, and continues to comply with, paragraph (e)(1)(i) and (e)(6)(ii)

of this section.

(iii) No owner or operator of a coating line complying by means of

paragraph (e)(1)(ii) of this section shall operate said coating line on

or after March 25, 1995, unless the owner or operator has complied

with, and continues to comply with, paragraphs (e)(1)(ii) and

(e)(6)(iii) of this section.

(iv) No owner or operator of a coating line complying by means of

paragraph (e)(2) of this section shall operate said coating line on or

after March 25, 1995, unless the owner or operator has complied with,

and continues to comply with, paragraphs (e)(2) and (e)(6)(iv) of this

section.

* * * * *

(z) Rules stayed. Not withstanding any other provision of this

subpart, the effectiveness of the following rules is stayed as

indicated below.

(1) The following rules are stayed from July 1, 1991, until USEPA

completes its reconsideration as indicated: (i) 40 CFR 52.741 (u) and

(v), including 40 CFR 52.741 (u)(4) and (v)(4) only as applied to

Viskase Corporation's cellulose food casing manufacturing facility in

Bedford Park, Illinois; and (ii) 40 CFR 54.741(u), including 40 CFR

52.741(u)(4), only as applied to Allsteel, Incorporated's adhesive

lines at its metal furniture manufacturing operations in Kane County,

Illinois.

* * * * *

[FR Doc. 94-7057 Filed 3-24-94; 8:45 am]

BILLING CODE 6560-50-P