Regulation of Fuels and Fuel Additives: Revision to the Oxygen Maximum Standard for Reformulated Gasoline

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[AMS-FRL-5444-7]

RIN 2060-AG17

Regulation of Fuels and Fuel Additives: Revision to the Oxygen

Maximum Standard for Reformulated Gasoline

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA or the Agency) today

revises the regulations for reformulated gasoline in two ways. These

changes only apply to reformulated gasoline certified using the Simple

Model, which applies until January 1, 1998. First, the maximum allowed

level of oxygen in reformulated gasoline is set at 3.2 percent by

weight (``wt%''), where a state notifies the Administrator that a limit

is needed for various air quality concerns. Second, absent such a state

notification, the maximum limit on oxygen content for reformulated

gasoline certified using the Simple Model would be that set by the

valid range limits of the Simple Model. In addition, the provisions of

section 211(f) of the Clean Air Act (``CAA'' or ``the Act'') continue

to apply to reformulated as well as other gasolines. These provisions

independently set a maximum oxygen content for motor vehicle gasoline.

EFFECTIVE DATE: This rule will be effective on March 18, 1996.

ADDRESSES: Materials relevant to this FRM are contained in Public

Docket No. A-95-29. Materials relevant to the reformulated gasoline

final rule are contained in Public Dockets A-91-02

[[Page 12031]]

and A-92-12. Public Docket A-93-49 contains materials relevant to the

renewable oxygenate requirement for reformulated gasoline; some of

these materials may also be relevant to today's action. These dockets

are located at Room M-1500, Waterside Mall (ground floor), U.S.

Environmental Protection Agency, 401 M Street SW., Washington, D.C.

20460. The docket may be inspected from 8:00 a.m. until 5:00 p.m.

Monday through Friday. A reasonable fee may be charged by EPA for

copying docket materials.

FOR FURTHER INFORMATION CONTACT: Christine M. Brunner, U.S. EPA, Fuels

and Energy Division, 2565 Plymouth Road, Ann Arbor, MI 48105.

Telephone: (313) 668-4287. To request copies of this document, contact

Delores Frank, U.S. EPA, Fuels and Energy Division, 2565 Plymouth Road,

Ann Arbor, MI 48105. Telephone: (313) 668-4295.

SUPPLEMENTARY INFORMATION:

I. Electronic Copies of Rulemaking Documents Through the Technology

Transfer Network Bulletin Board System (TTNBBS)

A copy of this notice is also available electronically on the EPA's

Office of Air Quality Planning and Standards (OAQPS) Technology

Transfer Network Bulletin Board System (TTNBBS). The service is free of

charge, except for the cost of the phone call. The TTNBBS can be

accessed with a dial-in phone line and a high-speed modem per the

following information:

TTN BBS: 919-541-5742

(1200-14400 bps, no parity, 8 data bits, 1 stop bit)

Voice Help-line: 919-541-5384

Accessible via Internet: TELNET ttnbbs.rtpnc.epa.gov

Off-line: Mondays from 8:00 AM to 12:00 Noon ET

A user who has not called TTN previously will first be required to

answer some basic informational questions for registration purposes.

After completing the registration process, proceed through the

following menu choices from the Top Menu to access information on this

rulemaking.

GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards)

OMS--Mobile Sources Information

Rulemaking and Reporting

Fuels

File Area #9 * * * Reformulated gasoline

At this point, the system will list all available files in the

chosen category in reverse chronological order with brief descriptions.

These files are compressed (i.e., ZIPed). Today's notice can be

identified by the following title: OXCPFRM.ZIP. To download this file,

type the instructions below and transfer according to the appropriate

software on your computer:

ownload, rotocol, xamine, ew, ist, or elp Selection

or to exit: D filename.zip

You will be given a list of transfer protocols from which you must

choose one that matches with the terminal software on your own

computer. The software should then be opened and directed to receive

the file using the same protocol. Programs and instructions for de-

archiving compressed files can be found via ystems Utilities from

the top menu, under rchivers/de-archivers. After getting the files

you want onto your computer, you can quit the TTNBBS with the oodbye

command. Please note that due to differences between the software used

to develop the document and the software into which the document may be

downloaded, changes in format, page length, etc., may occur.

II. Introduction

A. Background

As stated in the proposal (NPRM) to this rule (60 FR 52135, October

5, 1995), 40 CFR 80.41 contains the standards for certification under

the reformulated gasoline program. Paragraph (g) of section 80.41

specified that reformulated gasoline designated as VOC-controlled (i.e.

for sale during the summertime ozone season) must have no more than 2.7

wt% oxygen per gallon. The regulations further specified that if a

state notifies the Administrator that it wishes to have the oxygen

standard increased for VOC-controlled reformulated gasoline, a higher

cap of 3.5 wt% would be approved by the Administrator, provided that

there have been no occasions within the three preceding years when the

ozone ambient air quality standard was exceeded within any covered area

within the state. The requirements of this paragraph (g) apply to

reformulated gasoline certified under the Simple Model, which is

applicable until January 1, 1998.

In reexamining this reformulated gasoline provision, EPA determined

that the maximum oxygen content for VOC-controlled reformulated

gasoline generally was an unnecessary regulatory burden on gasoline and

oxygenate producers, and that the requirements for a state to choose a

higher oxygen level were also too rigid.

Therefore, EPA proposed to raise the maximum oxygen content of VOC-

controlled reformulated gasoline to a higher oxygen level than was

allowed by the regulation. Additionally, EPA proposed that upon request

of the Governor to the Administrator, the maximum oxygen content of

reformulated gasoline sold in that state would be capped at a lower

level on the basis of air quality concerns. These two changes would

make the maximum oxygen content provisions for VOC-controlled

reformulated gasoline similar to those for non-VOC-controlled

reformulated gasoline.

Today's action promulgates the provisions contained in the NPRM,

with the exception that the references to the maximum oxygen content

allowed under section 211(f) of the Act are deleted as unnecessary.

This deletion does not change the substantive effect of the regulation.

The maximum oxygen content allowed under section 211(f) continues to

apply to reformulated gasoline and does not need to be referenced in

this regulatory provision. There are a number of benefits to be gained

by these changes to the regulation. These benefits include the

potential for reduced burden on the states and industry, reduced cost

of compliance with the reformulated gasoline requirements, and reduced

costs to consumers. Discussion of the changes promulgated today,

comments received on the proposal, and EPA's responses to these

comments are presented below.

B. Final Rule

The maximum cap on oxygen content is deleted from section 80.41(g),

so that the maximum amount of oxygen allowed in reformulated as well as

other gasolines would be that allowed under section 211(f) of the Act

subject to the limits of the valid range for use of the Simple

Model.1 There is an exception to this general rule. Where a state

notifies the Administrator that the use of an oxygenate will interfere

with attainment or maintenance of an ambient air quality standard or

will contribute to an air quality problem, then the maximum amount of

oxygen shall not exceed 3.2 wt% oxygen from ethanol.2 The state

[[Page 12032]]

may request this maximum for either VOC-controlled or non-VOC-

controlled reformulated gasoline.

\1\ The maximum amount allowed under section 211(f) of the Act

is the amount that is substantially similar to gasoline used in the

motor vehicle certification process, or allowed under a waiver

granted under section 211(f)(4). In 1991, EPA issued an interpretive

rule increasing the maximum amount of oxygen that EPA believes is

allowed under the substantially similar criteria of section 211(f)--

from 2.0 to 2.7 wt% oxygen. See 56 FR 5352 (February 11, 1991). In

addition, the valid range of the Simple Model sets a maximum of 4.0

wt% oxygen. See 40 CFR 80.42(c).

\2\ The maximum content is phrased as a limit on the amount of

oxygen from ethanol because that is the only oxygenate that

currently may be blended lawfully above approximately 2.7 wt%

oxygen, under section 211(f) of the Act.

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This is in effect the same revision that EPA proposed. It revises

the current regulation in the following ways: (1) It treats VOC-

controlled and non-VOC-controlled reformulated gasoline the same, under

the Simple Model, as far as the maximum oxygen standard, (2) it deletes

the oxygen cap in the regulation except where a state notifies EPA of

air quality problems, (3) it revises the criteria for imposing an

oxygen cap on request from a state, and (4) it changes the oxygen cap

to 3.2 wt% oxygen from ethanol where a state requests a cap.

III. Summary of and Response to Comments

A. General

EPA received over 50 comments on this proposal. Over half of the

comments were from individual citizens supporting the proposal and

thanking EPA and the Administration for their continued efforts to

enhance ethanol's usage in the reformulated gasoline program. EPA

agrees that the use of ethanol in reformulated gasoline is an important

issue of public policy. From the remaining comments, the substantive

remarks applicable to this rulemaking are addressed here. Several

commenters also remarked on issues not related to this rulemaking, for

example, suggestions for other rules and other aspects of the

reformulated gasoline program they would like modified. These remarks

are not addressed here.

Several commenters that supported the rule indicated that EPA had

not addressed many of the benefits of higher oxygenate and/or

specifically ethanol use, such as reducing U.S. dependence on imported

oil; stabilizing greenhouse gas emissions; benefits if the oxygenate is

from a renewable feedstock; benefits to the rural economy; and

development of alternative energy sources.

EPA had proposed that today's rule would be effective 60 days after

publication in the Federal Register. However, commenters suggested

making the rule effective immediately since VOC-controlled reformulated

gasoline can be certified/used anytime prior to the beginning of the

ozone season and a delay in the effective date would disrupt marketing

plans and perpetuate the burden which EPA was attempting to reduce. EPA

agrees with the commenter and thus is making today's action effective

immediately upon signature of the Administrator.

B. Reformulated Gasoline Regulatory Negotiation

In developing the reformulated gasoline rulemaking, EPA

participated in a regulatory negotiation (RegNeg) with interested

parties. The result of this process was an agreement in principle (AIP)

which contained an outline of the proposed reformulated gasoline rules.

As a signatory to the AIP, EPA agreed to draft proposed rules

consistent with the AIP outline and to give serious consideration to

the outline in developing the final rule.

The AIP states that reformulated gasoline under the Simple Model

would be deemed to result in no increase in NOX emissions if it

contained no more than 2.1 wt% oxygen or 2.7 wt% oxygen solely from

MTBE. The AIP also states that other oxygenates may be approved at 2.7

wt% if no adverse NOX impacts can be shown. As discussed in the

NPRM, in the February 26, 1993 proposal (58 FR 11722) EPA proposed to

allow all oxygenates to be used up to a 2.7 wt% oxygen contribution. At

that point, EPA believed that increasing oxygen content to 3.5 wt%

might increase NOX emissions, so it limited use of the higher

oxygen content to those states which requested a higher oxygen content

and could provide supportive test data. In the December 1993 final rule

(59 FR 7716, February 16, 1994), EPA maintained the 2.7 wt% cap, but

allowed a state to request a higher cap of 3.5 wt% if it had had no

ozone exceedances for the previous three years.

Only a few commenters addressed this issue. One commenter stated

that during RegNeg, 2.7 wt% oxygen was deemed to not increase NOX

emissions. The commenter stated that that conclusion was subject to

reassessment, and thus it was appropriate to consider modifying that

portion of the rule at this time. Two other commenters, however, stated

that the proposal was a breach of RegNeg which specifically limited the

maximum summertime oxygen content. One commenter indicated they could

only support this change if all RegNeg participants approved.

EPA does not believe that today's rulemaking to increase the

maximum oxygen content of summertime reformulated gasoline is a breach

of the RegNeg agreement. EPA did follow the AIP by drafting proposed

rules consistent with the AIP outline and seriously considering the

outline when developing the final reformulated gasoline rule. In fact,

the 2.7 wt% summertime oxygen cap was part of that rule. In any case,

EPA's regulatory actions at this time, several years after the AIP,

must be based on a current exercise of discretion, taking into account

present facts and circumstances. For example, EPA's Complex Model, one

of the models used to certify reformulated gasoline, shows no increase

in NOX emissions with increased fuel oxygen content. Second, EPA

believes that other factors (such as increasing base gasoline levels

for sulfur and other fuel parameters in anticipation of lower levels in

the final gasoline blend due to dilution when oxygenate is added) will

not occur and thus will not increase NOX emissions when higher

oxygen contents are allowed. Additionally, today's rule simply modifies

the final reformulated gasoline rule which contained provisions (which

were not part of the AIP) allowing the higher oxygen content under

certain circumstances.

C. Substantially Similar

Today's rule allows all oxygenates to be used in summertime

reformulated gasoline (which is certified under the Simple Model) up to

the limits in oxygen and/or oxygenate content specified for that

oxygenate or combination of oxygenates under the substantially similar

requirements of section 211(f) of the Act, or up to the limits which

have been granted a waiver under that section, subject to the valid

range limits of the Simple Model. Realistically, because of compliance

requirements and oxygenate/gasoline economics, EPA expects only a few

oxygenates to be used in reformulated gasoline.

A few commenters expressed concern that raising the maximum oxygen

cap for all oxygenates to the highest allowable levels could

potentially have negative effects on vehicles. One commenter stated

that EPA should consider the American Automobile Manufacturer's

Association's (AAMA's) recommended oxygenate limits. AAMA's fuel

specifications (which also address other fuel components) are based on

automotive requirements for optimum performance and maximum durability.

In some cases, as with ethanol, the AAMA limits agree with the limits

specified or waivered under section 211(f), but for other oxygenates,

like isopropyl alcohol, they do not. Additionally, the commenter stated

that under AAMA's fuel specification, use of certain oxygenates, e.g.,

methanol, at waivered or substantially similar levels is undesirable.

Finally, one commenter stated that EPA should clarify specific

oxygenate/maximum oxygen content values.

Although EPA understands the intent of the AAMA fuel specification,

and the

[[Page 12033]]

desire to have the most optimum fuel for automotive use, today's rule

will not result in a fuel which is significantly different from fuels

already in the marketplace or which could be in the marketplace. This

rulemaking simply allows summertime reformulated gasoline to have a

slightly higher maximum oxygen content, under the Simple Model, than it

did last summer. Currently, all conventional gasoline and wintertime

reformulated gasoline, with the exception of California gasoline, could

contain oxygenates up to those levels specified or waivered under

section 211(f). The ``substantially similar'' or waivered limits of

section 211(f) apply to all gasoline in the country, conventional and

reformulated gasoline. Additionally, it would not be technically sound,

and could result in anti-competitive effects, to allow the

``substantially similar'' definitions to be valid for one fuel but not

for another. For these reasons, EPA is retaining the intent of its

proposal language on this aspect, namely that for summertime

reformulated gasoline the maximum oxygen content shall be the maximum

allowed under the provisions of section 211(f). This includes fuels

with oxygen/oxygenate contents deemed ``substantially similar'' under

211(f) and fuels which contain oxygen/oxygenates at levels which have

been waivered under 211(f).

EPA also proposed to increase the maximum oxygen content of non-

VOC-controlled reformulated gasoline from the current 3.5 wt% oxygen

(which was meant to be akin to 10 vol% ethanol) to the maximum allowed

under the section 211(f) ``substantially similar'' provision and any

waivers granted under that section. All comments received on this issue

supported this change.

Today's rulemaking does not change the maximum oxygen and/or

oxygenate contents allowed for the various oxygenates under the

``substantially similar'' and waiver provisions, and as a result these

provisions are not addressed here.

D. Environmental Impacts

Some comments supported the proposal as having no significant

environmental impact. One commenter stated that, assuming that this

proposal results primarily in increased ethanol use, ethanol production

is both energy-efficient and environmentally sound. Several other

commenters opposed the proposal based on expected environmental harm,

and questioned EPA's environmental assessment. One commenter stated

that it opposes the rule until EPA can demonstrate, with more

appropriate analyses, that no detrimental environmental impacts result.

These commenters were particularly concerned with increases in NOX

and VOC emissions. Their comments are discussed in more detail below.

One commenter questioned the use of models to estimate environmental

impact, asserting that it is scientifically dishonest to draw

conclusions from a scientific model, since model output is a

mathematical reflection of model input. This commenter felt that EPA

should draw its conclusions solely from measured data. One commenter

said that concerns about water and soil implications of increased corn

farming for ethanol production do not reflect the increasing use of

sustainable agricultural practices which save money and better protect

the environment.

EPA has examined the environmental impacts of modifying the oxygen

cap requirements under the Simple Model, and those impacts are expected

to be minimal. As will be discussed (section E), EPA stands by its use

of the Simple and Complex Models to estimate environmental impact, as

they are the basis of the reformulated gasoline program.

1. NOX Emissions Impacts

As stated in the NPRM, EPA has clearly determined that changing the

oxygen content of reformulated gasoline is unlikely to have any

negative impact on NOX emissions, regardless of the type of

oxygenate under consideration, for purposes of compliance with the no

NOX increase requirements for reformulated gasoline 3. In

addition, an increase in the maximum oxygen content is not expected to

increase NOX emissions from reformulated gasoline compared to a

gasoline with a lesser oxygen content when viewed from the perspective

of the entire in-use fleet.

\3\ Under section 211(k)(2), reformulated gasoline is not

allowed to increase NOX emissions from baseline vehicles when

compared to the statutory baseline gasoline.

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Some commenters disagree with EPA's determination that an increase

in the maximum oxygen content would not be expected to increase

NOX emissions. These commenters feel that EPA has not provided

adequate justification that environmental detriment will not occur, and

that EPA does not adequately justify the expected impact on NOX

emissions. One commenter pointed out that the Auto-Oil research studies

show increased NOX with increased oxygenate use, and even that all

data sets show the same or increased NOX emissions. Theoretically,

oxygenated fuels are used to reduce CO by enleaning the air/fuel

mixture and should therefore increase NOX emissions. Further, this

commenter pointed to EPA's 1989 Guidance, and other Agency studies,

which conclude that ethanol blends increase NOX.

The MOBILE model is EPA's best model available for predicting

emissions from the in-use fleet because it accounts for the current in-

use technology distribution as well as the mix of normal and high-

emitting vehicles, i.e., vehicles of different ages. EPA believes that

accounting for both normal-emitters and high-emitters is crucial in the

estimation of in-use emissions. The current MOBILE model shows no

increase in NOX emissions with increased fuel oxygen content.

EPA recognizes that much of the currently available data suggests

that increases in oxygen content will increase NOX emissions.

However, most of this data was collected on normal-emitting, properly

maintained vehicles representing a subset of the technologies available

in-use. EPA has concluded that robust conclusions concerning the in-use

fleet cannot be drawn from such data. Both the MOBILE model and the

Complex Model, which is essentially a major subset of the MOBILE model

because it represents 1990 technology, include emission estimates for

both normal-emitting and high-emitting vehicles, and thus may provide

more accurate estimates of the effects of oxygen on NOX. For

example, the high-emitter portion of the Complex Model indicates that

increases in oxygen content decrease NOX emissions. Such an effect

might be due to the cooler burn that oxygenates effect on combustion,

or a suppression of preignition by the high octane value of the

oxygenate. Regardless, a weighted representation of normal-emitter and

high-emitter effects in the Complex Model results in oxygen having

essentially no effect on NOX overall. The MOBILE model, which is

designed to represent the in-use distribution of vehicle technologies

and emission levels, concurs with the Complex Model in this respect.

Conversely, other commenters agreed that increased oxygenate use

would not result in increased NOX emissions. Assuming that ethanol

use would increase, one commenter stated that ethanol displaces other

gasoline components which have greater NOX impacts. Additionally,

as noted in the NPRM, increased E200 does increase NOX, but the

overall effect is decreased NOX. This commenter included data

which showed no statistically significant NOX emissions increase

from splash-blending ethanol to get 3.5 wt% oxygen. Another commenter

pointed out that preliminary data show that the

[[Page 12034]]

summer 1995 reformulated gasoline program reduced NOX emissions

somewhat. In general, this commenter believed that NOX emissions

will be lower and sulfur, olefins and aromatics will not increase

(supported by the 1995 data), but stated that this cannot be concluded

for all batches.

EPA has concluded, on the basis of results generated by the Complex

Model, that the use of greater levels of oxygen would not by itself

increase NOX emissions (although the associated higher levels of

oxygenates could theoretically increase emissions due to the

unpredictable impacts of dilution--as discussed below). As will be

discussed, use of the Complex Model in determining the emissions

impacts of reformulated gasoline is appropriate and correct. However,

EPA recognizes that, in-use, individual states may still have some

concerns about the impact of increased oxygen levels on NOX

emissions from the in-use fleet. EPA is retaining an option whereby

states could elect to maintain the currently promulgated lower maximum

oxygen content.

One commenter pointed out that a no NOX increase is specified

in the Clean Air Act. This commenter believes that oxygen use in

gasoline leads to increased NOX emissions and that this regulation

is in violation of the Act by allowing any oxygenation of reformulated

gasoline. This commenter feels that allowing 10% ethanol, which results

in the highest NOX increases, would seem to compound the

``marginally legal'' interpretation of the Act.

As stated above, EPA has determined that increased oxygen does not

result in increased NOX emissions when evaluated with the Complex

Model. Therefore this action in no way violates section 211(f) of the

Act.

2. VOC Emissions Impacts

Several commenters were opposed to the proposal to increase the

maximum oxygen content because it would result in increased summertime

VOCs, at a time when those emissions present the greatest problem. One

commenter pointed out that a result of this proposal could be to

displace MTBE with ethanol, increasing the market-share of ethanol-

containing reformulated gasoline and increasing VOC emissions in those

areas. Another commenter felt that EPA's argument that most of the VOC

reductions are due to RVP incorrectly suggests that the reactivity of

the VOC emissions has little to do with ozone formation. However, other

commenters agreed that, as long as there is no RVP allowance for 10%

ethanol blends, increases in evaporative VOC emissions should be

minimal. A final commenter felt that the proposal would result in

beneficial VOC impacts.

EPA continues to believe that increased maximum oxygen content is

unlikely to negatively affect VOC emissions, and could have slightly

positive impacts. Although ethanol does slightly increase the RVP of

gasoline to which it is added, there is no potential for an increase in

RVP in a VOC-controlled reformulated gasoline under the Simple Model

because the RVP specifications are not being changed. A fuel producer

would have to use other means to reduce RVP when ethanol is added.

Two commenters noted apparent inconsistencies in the assumption of

ethanol use and potential increases in evaporative emissions.

Specifically, commenters pointed out that in the December 1993 final

rule, EPA had stated that a 1 psi RVP allowance for ethanol blends

could forfeit all VOC emissions reductions of the reformulated gasoline

program. Yet, they say, in this proposal, EPA stated that ethanol

``slightly'' increases the RVP of gasoline to which it is added. They

suggest that EPA should correctly characterize the RVP impact.

The statements are not inconsistent. As stated above, while ethanol

does increase RVP if RVP is not otherwise controlled, the reformulated

gasoline standards limit RVP for all reformulated gasolines.

E. Complex Model

Several commenters thought EPA had inappropriately used the Complex

Model to estimate the impact of higher oxygen content on NOX

emissions from reformulated gasoline. They stated that the Complex

Model was designed for reformulated gasoline certification and that it

was not an air quality or emissions inventory model. Most of these

commenters stated that EPA's MOBILE model is the most appropriate tool

for forecasting emissions and demonstrating air quality impacts. Other

commenters said that the MOBILE model, the Complex Model and the CARB

Predictive Model should all be used in any evaluation of NOX

emissions impacts. One commenter said that neither the Complex Model

nor the CARB model is directly applicable to EPA's analysis regarding

this rulemaking.

The Complex Model is not an air quality or emissions inventory

model, and EPA did not propose using the Complex Model for such

purposes. Improved air quality is the purpose of the reformulated

gasoline program, and significant reductions in ozone-forming VOC

emissions and toxics emissions will be realized because of the program.

The MOBILE model is a valuable tool for estimating the air quality

impacts of fuels for an in-use fleet, as it includes a wide variety of

vehicle ages and technologies. The impact of Federal reformulated

gasoline (but not California Phase 2 reformulated gasoline at this

point) on in-use emissions can be estimated using the MOBILE model.

However, for certification purposes, the effects of the reformulated

gasoline program must be determined relative to 1990 technology

vehicles run on 1990 baseline gasoline. This rulemaking is aimed at

establishing the requirements for certification of gasoline as meeting

the reformulation requirements established under the CAA, including

compliance with the oxygen content and no NOX increase

requirements. For this reason and the reasons discussed in section D,

EPA believes that the Complex Model is the most appropriate tool for

estimating changes in NOX emissions due to this rulemaking, for

purposes of compliance with the no NOX increase requirement for

reformulated gasoline under section 211(k)(2) of the Act. EPA did

evaluate the air quality impacts of this rulemaking, which are

addressed in section D. As indicated there, both the Complex Model and

the MOBILE model show no increase in NOX emissions with increased

oxygen content.

EPA certifies fuels as meeting the reformulated gasoline

requirements on the basis of a comparison to 1990 technology vehicles.

Both the Simple and Complex Models are tools through which this

certification is carried out. There are no oxygen caps under the

Complex Model other than the upper limits for the valid range of the

model, set at 4.0 wt% oxygen. For reformulated gasoline, the Complex

Model results must show no increase in NOX emissions over

statutory baseline levels. As discussed, the Complex Model shows no

increase in NOX emissions when oxygen content is increased. EPA

has made and continues to make a variety of decisions, including

setting the Phase II reformulated gasoline standards, based on the

Complex Model, again, because that it is the basis for reformulated

gasoline certification.

Several commenters indicated that EPA's finding that increased

oxygen will not increase NOX emissions is due to statutory

constraints placed on the model and certain key assumptions. EPA agrees

that certain statutory requirements and certain assumptions have

affected the emission effects estimated by the Complex Model.

[[Page 12035]]

Commenters expressed concern about the size of the high-emitter

database and the fact that the Complex Model represents only a portion

of the in-use fleet, which could make it an inappropriate tool for

estimating emissions impacts of the overall fleet. EPA's conclusions

regarding oxygen effects on NOX are based on test data from 1986

and later closed-loop, adaptive-learning vehicles with 3-way or 2-way

plus oxidation catalysts (i.e., 1990 technology), and would apply to

much of the fleet. EPA acknowledges that the results of the Complex

Model do not automatically apply to the entire in-use fleet, but

nonetheless believes that it is not inappropriate, especially given the

agreement between the Complex Model and the MOBILE model with regard to

the impact of oxygen content on NOX emissions.

Several commenters indicated that, theoretically, due to air/fuel

enleanment and combustion theory, NOX emissions should increase

with increased oxygen content. EPA believes however, that NOX

emissions increases due to increased oxygen content would not

necessarily occur. The fundamental science behind closed-loop,

adaptive-learning designs (i.e., the 1990 technology contained in the

Complex Model) argues that enleanment due to oxygenate addition would

be offset by reduced air intake. Because of the offset enleanment

effects, NOX emissions will not necessarily increase with

increased oxygen content. The test data on which the Complex Model is

based supports this.

One commenter stated that numerous studies, including Auto-Oil

studies, have shown increased NOX emissions with increased fuel

oxygen content. EPA does not refute these studies--vehicle technologies

and ages certainly affect emissions results, and EPA recognizes that in

these instances, NOX increases were observed. However, as

discussed earlier in section D, the Complex Model, which is the basis

of EPA's analysis for this rulemaking, has both a normal-emitter

portion and a high-emitter portion. The effect of oxygen on NOX

emissions for these two emitter groups, when weighted, yields

essentially no negative change in NOX emissions with increased

oxygen content.

One commenter stated that the normal emitter part of the Complex

Model is consistent with theory but the high emitter part is not, and

therefore, overall, the model is incorrect. EPA does not believe that

simply because one part of the model ``disagrees'' with theory and

another part of the model ``agrees'' with theory that the model is

incorrect. Many factors affect the emission results predicted by the

Complex Model, and it is inappropriate to discount those results simply

because they do not agree with theory. The Complex Model was adopted

after rigorously analyzing a broad spectrum of empirical test data. The

commenters objections fail to show the invalidity of this test data or

the analysis leading to the Complex Model.

Unlike the Complex Model, the CARB Predictive Model, also a fuel

certification model, shows that NOX emissions increase with

increased fuel oxygen content. According to most commenters on this

issue, the difference in NOX predictions between the models is due

to differences in approach to model development. Commenters mentioned

that the CARB model contains more data, represents more of the in-use

fleet and differs in its treatment of high emitters. For these reasons,

commenters say, the CARB model is more appropriate for estimating

emissions impacts in California associated with oxygen changes. EPA

agrees that the difference in NOX predictions between the two

models is due to different approaches to model development. Factors

such as vehicle technologies, vehicle age, and quality control during

testing all affect predicted emissions results. Because of the manner

in which normal-emitting and high-emitting vehicles are included in the

Complex Model, EPA believes that the Complex Model is the more

appropriate tool for estimating NOX impacts due to fuel changes,

for certification of reformulated gasoline. Together with the MOBILE

model, the Complex Model is also appropriate for in-use evaluation

purposes, from a national perspective.

In contrast with most of the comments on this issue, one commenter

stated that EPA's suggestion that the Complex Model was not

representative of the in-use fleet is unfounded. The reformulated

gasoline program is meant to reduce ozone through VOC (and NOX)

emissions reductions. Based on the Complex Model, these reductions

should occur. EPA believes that the Complex Model and the MOBILE model

are sound tools for predicting the impact on in-use NOX emissions

from the regulatory change adopted today from the perspective of the

fleet nationwide. It may not be the most appropriate tool for

predicting local in-use emissions, however, given differences in local

fleets versus the fleet on which the Complex Model is based. That is

one of the reasons EPA is providing states with an option that would

lower the oxygen maximum to 3.2 wt % oxygen from ethanol.

F. Dilution

In the proposal, EPA stated that it expected no NOX increases

due to this rulemaking because (1) the Complex Model shows no increase

in NOX emissions with increased oxygen content, (2) the addition

of oxygenate to a base gasoline dilutes other fuel parameters which

overall should yield a net reduction in NOX emissions, and (3) EPA

does not expect fuel producers to offset the dilution effects, i.e., to

purposely take fuel parameters back toward their original value in the

base gasoline. Several commenters agreed with EPA. In fact one

commenter stated that the argument that dilution effects should result

in net decrease in NOX can be strengthened by reviewing California

data and the outstanding performance of reformulated gasoline during

the summer of 1995.

One commenter stated that the proposal relies heavily on

``expected'' fuel changes. Because these changes are not guaranteed,

the commenter stated that they should not be counted in estimating

NOX emissions. This commenter also stated that EPA does not allow

such latitude (i.e., the use of ``expected'' fuel changes) with state

implementation plans (SIPs) and should not take advantage of it in this

case. The focus of this rulemaking is determining what regulatory

controls, if any, are appropriate to implement the Act's requirement

that reformulated gasoline not increase NOX emissions compared to

baseline gasoline. In that context, expected fuel changes are quite

relevant. Fuel producers must determine for themselves the most cost-

effective means for complying with the reformulated gasoline

requirements. When complying under the Simple Model, which is all that

is affected by today's rulemaking, refiners must meet the Simple Model

RVP and toxics requirements, oxygen and benzene content requirements

and ensure that the finished gasoline and reformulated gasoline

blendstock for oxygenate blending, or RBOB, (plus oxygenate) they

produce will not exceed their baseline values for sulfur, olefins and

T90. The values of these latter three fuel parameters then, on average,

should be less than or equal to the baseline values, and reductions in

these values have been shown to reduce NOX emissions. It is

possible but highly unlikely that E200 could increase (aside from the

increase due to dilution), and no data to refute EPA's assumption on

this matter has been submitted. Thus EPA is highly confident that the

expected fuel changes will occur, on average, and that there will be no

net increase in NOX

[[Page 12036]]

emissions. An additional maximum cap on oxygen is not reasonably needed

to achieve this result.

It is not possible, nor necessary, for EPA to know exactly what

fuel changes each refiner will make, as long as the requirements of the

reformulated gasoline program are met. The overall premise of this rule

is that the Complex Model shows--even without the effects of other fuel

changes--no increase in NOX emissions with increased oxygen. Any

other fuel changes will either increase or decrease NOX emissions,

and EPA is simply saying that it believes, given the other requirements

of the program, that the net effect of these other fuel changes will be

to further reduce NOX. EPA's discussion of ``expected'' fuel

changes are based on refinery studies as well as discussions with the

industry, have been discussed in other works and rules related to the

reformulated gasoline program and have not been significantly refuted.

G. Ethanol Market Share

Several comments were received regarding how this change to the

reformulated gasoline regulation would impact ethanol use. Several felt

that this change would result in increased ethanol use. However, one

commenter felt that since EPA is not changing RVP standards for

reformulated gasoline, summer 10 vol % ethanol blends would be produced

only by using sub-RVP blendstock, which is in short supply.

Assuming that ethanol use would increase, commenters cited many

benefits that would be realized by this change. One commenter stated

that even a modest increase in the use of ethanol would provide

associated energy gains and environmental benefits. Another commenter

felt a potential effect of the change may be to shift ethanol use from

conventional areas, and most likely would reduce ethanol exports. Other

commenters noted that increased ethanol use would benefit rural America

by increasing grain production.

One commenter felt that an expanded market opportunity for ethanol

would not necessarily harm the domestic MTBE/methanol market. This

commenter pointed out that domestic MTBE is not able to meet

reformulated gasoline demand. As much as 895 million gallons of MTBE

could be imported to satisfy reformulated gasoline demand, and this

deficit is 30 times the potential demand this change will create for

ethanol. This commenter also pointed out that this change creates a

demand for ethanol which is only a fraction of that which would have

been created by the renewable oxygenate standard.

EPA recognizes that this change in the maximum oxygen content

allowed in reformulated gasoline may result in slightly increased

ethanol use. This increase in the ethanol market could well result in

the benefits these commenters have mentioned. However, today's action

does not guarantee an increase or decrease in marketshare for any

oxygenate. EPA today is simply removing a regulatory burden, the

current oxygen content cap. Ultimate use of any oxygenate, including

ethanol, will depend on the economic situation of each fuel producer.

H. Commingling

One commenter stated that the commingling concern discussed in the

proposal was exaggerated. However, many commenters on this issue

disagreed with EPA's comment that there may be a slight commingling

benefit due to this rule if (under an assumption of constant ethanol

volume) there are fewer gallons of reformulated gasoline at the 10 vol%

ethanol rather than more gallons at 7.8 vol%. Most believed that

summertime VOC emissions in nonattainment areas would increase, due to

commingling, as a result of this rule. Commenters said that if ethanol

use increases (or MTBE market share decreases) during the summer, there

will be more gallons of ethanol-containing reformulated gasoline, and

more instances of commingling. One commenter stated that commingling

effects are complex and dependent on a number of factors--oxygenate

market share, consumer purchase patterns, etc. This commenter stated

that EPA's analysis cannot justify a conclusion that commingling

impacts are improved or worsened by the proposed rule. Another

commenter stated that EPA should evaluate the persistence of the

commingling RVP boost. This commenter stated that the persistence will

be increased since there will be a higher concentration of ethanol in

the tank.

EPA agrees with the commenter's statement that a reduction or

increase in commingling impacts cannot be concluded. In the proposal,

EPA discussed some scenarios under which the impact of today's rule

could increase or decrease the commingling effects. However, as

indicated in the Regulatory Impact Analysis (RIA) to the December 1993

final rule, commingling is affected by several factors including

ethanol marketshare and ethanol content. This rulemaking may result in

changes in ethanol marketshare in reformulated gasoline and/or

conventional gasoline areas, or in changes in the ethanol content of

reformulated gasoline and/or conventional gasoline, compared to last

year. Depending on whether such changes occur, and their magnitude, it

is possible that VOC emissions could increase or decrease, due to

commingling, as a result of this rule. EPA believes, however, that it

would be difficult to quantify or compare the commingling impact of

ethanol at 7.8 vol% (as in 1995) to the 10 vol% which is allowed by

today's action.

Several commenters indicated that EPA appeared to be contradicting

itself not only in the proposal, but in conflict with earlier work not

directly related to this rulemaking. For instance, one commenter stated

that EPA was inconsistent with its expected change (or no change) in

ethanol use--``should contribute to ethanol increase'' and ``* * *

total ethanol volume remains the same''. EPA does not agree with

commenters in this regard. EPA cannot be assured of any one outcome,

e.g., whether ethanol marketshare increases or decreases, whether more

ethanol is used in fewer gallons of reformulated gasoline compared to

last year, or whether ethanol volumes will shift from conventional to

reformulated gasoline areas or from one reformulated gasoline area to

another. These factors will be resolved in the marketplace after

promulgation of this rule. The language contained in the proposal

represented EPA's thoughts about possible outcomes for given scenarios.

One commenter mentioned that in the Renewable Oxygenate proposal,

EPA excluded ethanol as a renewable oxygenate when used in VOC-

controlled reformulated gasoline because the commingling VOC increase

were unacceptable. In that proposal, commingling VOC increases were

deemed unacceptable because the increased use of ethanol could approach

a 30% marketshare. An ethanol marketshare of that magnitude would

certainly have unacceptable increases in VOC emissions due to

commingling. However, although the effect of today's action on

oxygenate marketshare cannot be definitively determined, it almost

certainly will not approach the 30% level (for ethanol) discussed in

the Renewable Oxygenate proposal. For this reason, EPA's commingling

concerns regarding that proposal are not applicable to today's

rulemaking.

A few commenters were concerned that any commingling benefits would

occur in attainment areas--where it's not needed. Again, as stated

above, EPA can only estimate the commingling impact of today's rule.

Marketplace dynamics will determine, among other things, whether more

ethanol is produced, whether it is used in

[[Page 12037]]

conventional or reformulated gasoline areas, and whether ethanol

volumes shift geographically. One commenter expressed concern that by

referring to a national basis, EPA has lost sight of the specificity of

reformulated gasoline to nonattainment areas. EPA has not lost sight of

the area specificity of the reformulated gasoline program but again was

attempting to estimate potential impacts of today's rule.

I. Energy Impacts

One commenter stated that EPA was underestimating the potential

energy benefits, including benefits for increased displacement of

gasoline and imported MTBE (energy security, trade balance). A few

commenters questioned the DOE study mentioned in the proposal--one

mentioned that the cited study was draft--and provided a copy of the

final report which had a more positive energy balance attributable to

ethanol production. It showed that ethanol production is 25% more

energy efficient than gasoline. Another commenter indicated that recent

USDA studies have shown a positive energy balance for the production of

ethanol.

EPA agrees that use of ethanol has some positive energy

implications, depending on various circumstances, including whether it

is used in VOC-controlled or non-VOC-controlled reformulated gasoline.

However, because the additional ethanol use allowed by today's rule

will be only be roughly 2.2 vol% (per gallon) over 1995 levels, EPA

does not expect the energy impacts of the overall reformulated gasoline

program to change significantly due to this rulemaking.

J. Economic Impacts

As stated in the NPRM, the largest part of the cost associated with

Phase I reformulated gasoline is the oxygen content required by the

Act. Lifting the oxygen cap may provide an economic advantage by

allowing some refiners to use ethanol during the ozone season when they

would not otherwise be able to do so. However, as discussed in the

NPRM, refiners must consider a variety of factors when selecting an

oxygenate for reformulated gasoline (or any other fuel).

Several commenters supported EPA's economic assessment of the

impact of today's action. Some suggested that further economic benefit

may occur due to an expanded industrial base and additional jobs from

increased domestic oxygenate production. Additional positive economic

impacts suggested by commenters include reduced consumer reformulated

gasoline cost and increased farm income. One commenter felt the higher

oxygen cap would allow refiners to maximize the displacement value of

ethanol, reducing the cost of RBOB and ethanol-containing reformulated

gasoline. This commenter also stated that since ethanol costs are lower

than MTBE costs, additional use of ethanol would increase market

penetration of ethanol and provide greater savings for consumers. One

commenter explained that the current cap denies refiners the dilution

benefits of higher ethanol blends to meet the reformulated gasoline

toxics requirements cost-effectively. This commenter indicated that to

use ethanol now, refiners must produce a blendstock lower in RVP and

aromatics.

One commenter was concerned that EPA's economic assessment ignored

the effect of this rule on alkylates. This commenter stated that both

alkylates and oxygenates (ethers) use olefins as a feedstock, are high

octane blending components, and can contribute to emissions reductions.

If olefin feedstocks are limited, by maximizing oxygenates, alkylate

feedstocks will also be limited, therefore limiting the emissions

benefits of alkylates. A refiner's lowest cost option will likely be to

substitute oxygenates for alkylates, leaving olefins and aromatics in

gasoline. According to this commenter, the California reformulated

gasoline program regulates out olefins and aromatics by increasing

alkylates and oxygenates while the Federal reformulated gasoline

program has shifted gasoline from alkylates to oxygenates with

questionable improvement in emissions. Further, this commenter states

that by replacing alkylates with oxygenates, consumers will be paying

substantially more per mile driven, since alkylates increase fuel

economy. This commenter concludes that EPA neglected these issues in

its economic analysis and only superficially addressed economic burden,

without regard for actual impact on consumers. This commenter suggests

that the Agency review what has actually occurred in the marketplace,

and consider the economic burden on consumers.

EPA did not intend to evaluate the impact of oxygenate as a whole,

but merely the impact of slightly increased oxygenate use, as this

rulemaking seeks only to increase the maximum allowable oxygen content,

one limited aspect of the oxygen content requirements in the

reformulated gasoline program. EPA believes increasing the maximum

allowable oxygen content increases flexibility in oxygenate choice for

refiners, which can only be economically beneficial for fuel producers

and consumers. As most of this increased oxygenate use is likely to be

ethanol, this provision will have little impact on the refinery trade-

off between alkylate and oxygenate production.

K. Compliance Burden

As stated in the NPRM, EPA expects today's action will reduce the

regulatory burden on gasoline and oxygenate producers, and will

simplify the requirements for a state to choose a different maximum

oxygen level. Several commenters agreed that this change in the

regulation would reduce the burden on fuel producers and on the states.

This change would provide increased flexibility in meeting the

reformulated gasoline requirements and maximize the efficiency of

oxygenate use. One commenter pointed out that it would also reduce the

burden for blenders, simplifying logistics and inventory management by

eliminating the need to change ethanol blending volumes on a seasonal

basis. However, some commenters felt that this change could increase

the burden on the states by requiring them to request a lower cap.

These commenters felt that estimating a reduced burden on the states

assumes that the states want to increase oxygenates. Finally, one

commenter felt that when proposing these changes, EPA must address

actual or potential regulatory conflicts between technical changes and

fuel changes, and not focus solely on attempts to reduce administrative

burden.

EPA continues to believe that this regulatory change in the maximum

oxygen content of reformulated gasoline will reduce the regulatory

burden on gasoline and oxygenate producers and blenders, and on the

states. Even if the majority of states prefer to keep the lower oxygen

cap, the requirements for doing so are minimal. The Complex Model has

revealed that there is no technical reason to limit the oxygen content

of gasoline certified as reformulated gasoline, hence the reduction in

burden is justified.

L. California

Several commenters felt that California should be exempt from the

requirements of this regulation for a variety of environmental and

regulatory reasons. First, California has unique air quality problems.

One commenter stated that the higher maximum oxygen content allowed

under today's action could have a detrimental effect on California's

ability to meet the National Ambient Air Quality Standards (NAAQS).

Additionally, California retains its authority to regulate fuels.

[[Page 12038]]

See section 211(c)(4)(B) of the CAA. Under this authority, California

has limited the oxygen content of gasoline sold in the state to 2.7

wt%. Commenters felt that, for these reasons, California should not be

required to go through the bureaucratic opt-out hurdle and should be

specifically exempted from the rule.

EPA recognizes California's unique environmental problems and

regulatory authority. While the Federal standards for reformulated and

conventional gasoline do apply in California, if California has imposed

its own more stringent regulations, as it has regarding oxygen content,

then fuel producers must abide by California's more stringent

standards. Thus, because California's oxygen maximum is more stringent

than EPA's, that maximum would be the controlling maximum in the state,

and the Governor of California would not be required to request a lower

oxygen maximum.

M. State Requests for Lower Oxygen Maximum (Cap)

In the NPRM, EPA proposed that the maximum oxygen content of

reformulated gasoline sold in a state will be limited to a lower level

upon the request of the state on the basis of local air quality

concerns. EPA expects that such a request would come from the Governor

of the state or their authorized representative. To obtain the lower

maximum oxygen content, the state must notify the Administrator that

the use of an oxygenate at higher levels would interfere with

attainment or maintenance of an ambient air quality standard, or will

contribute to an air quality problem. EPA proposed that the lower

oxygen cap would become effective 30 days after the Administrator

announced the lower standard in the Federal Register.

Some commenters had concerns regarding the procedures and

requirements for the lowering of the maximum oxygen content by the

Governor. One commenter stated that the EPA must include notice and

comment rulemaking procedures for any change to an reformulated

gasoline rule, per section 307(d)(1), including states requesting a

lower cap. EPA disagrees with this comment. EPA does not agree that a

separate rulemaking must be conducted in response to each state's

request for a lower oxygen maximum. Through this rulemaking, EPA is

establishing a petition-based process that will address, on a case-by-

case basis, future individual state requests for a lower oxygen maximum

standard under the Simple Model. The regulations establish a clear and

objective criteria for EPA to apply in these future non-rulemaking,

adjudication actions. These criteria specify that a state's

notification to the Administrator must include a notification that the

use of an oxygenate will interfere with attainment or maintenance of an

ambient air quality standard or will contribute to an air quality

problem. This application of regulatory criteria on a case-by-case

basis to future individual situations does not require notice and

comment rulemaking, either under section 307(d) of the Clean Air Act or

the Administrative Procedure Act.

It is not uncommon for the Agency to establish such a petition-

based process within its regulations as a way to apply the criteria

established in a regulation to a wide variety of individual cases. The

reformulated gasoline regulations, for example, include a petition

process for approval of individual baseline, augmentations of the

Complex Model, exemptions, alternative test procedures, and the like.

EPA believes that approach is most appropriate here as well, as it will

allow for expeditious and consistent Agency action on the individual

request presented by states.

The provision allowing a Governor to request a lower maximum oxygen

content is the same as allowed for non-VOC-controlled reformulated

gasoline in the December 1993 rule. No notice and comment procedures

were specified in that situation, and similarly, none are required

under today's rulemaking. This commenter also objected to the proposed

30 days from publication (in the Federal Register) effective date for

the lower cap. This commenter felt that refiners would need at least 90

days to sell off stocks of 10 vol% ethanol reformulated gasoline.

Another commenter supported the states rights to have a lower cap, but

suggested that it become effective in 60 days rather than 30 days. A

third commenter felt that as much as 6 months would be needed before a

new, lower oxygen maximum took effect. A final commenter suggested that

if a request would take effect 30 days after publication, the

announcement should be published within 15 days of EPA's receipt of the

request. These timing concerns were supported by another commenter who

could not support allowing states to impose different oxygen caps,

suggesting that this could strain gasoline distribution bulk storage

capacity.

EPA agrees with commenters that 30 days may be too short a

transition for fuel producers. Therefore the period has been extended

to 60 days. A longer extension would not be practical, since this

change only applies to the Simple Model during the summer seasons of

1996 and 1997. Based upon information previously supplied to the

Agency,4 EPA believes that 60 days will be sufficient to use the

higher-oxygen content reformulated gasoline, thus minimizing storage

and distribution problems. While this provision could potentially add

another layer of fuel distinction to the reformulated gasoline program,

the impact is expected to be small, primarily because the use of

specific oxygenates tends to occur in geographic pockets. Use of

ethanol (in reformulated gasoline) for instance, is prevalent in

certain areas of the country and is very limited in other areas. Those

states where it is widely used are not likely to request a lower oxygen

maximum, because in those states, ethanol likely provides significant

economic benefits. In states which request a lower maximum, it is

likely that ethanol use in that state has always been minimal. For

clarification purposes, states are not allowed to choose any lower

maximum oxygen content. The lower oxygen maximum would be 3.2 wt%

oxygen for ethanol for all cases where a lower maximum is requested by

a state.

\4\ U.S. EPA, ``Final Regulatory Impact Analysis and Summary and

Analysis of Comment For: Renewable Oxygenate Requirement for

Reformulated Gasoline,'' June 29, 1994.

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

Comments were mixed regarding the requirements which states must

fulfill when requesting the lower oxygen maximum. One commenter stated

that EPA needed to verify in the final rule that a state would merely

have to notify EPA of its intent to have a lower cap. Those commenters

opposed to allowing states to request a lower maximum oxygen cap felt

that a state should be required to demonstrate ``to the satisfaction of

the Administrator'' that unique localized circumstances exist which

require the lower oxygen. According to these commenters, states should

be required to include specific modeling and test data.

Another commenter felt that states should be allowed to use models

more appropriate to their region (than the Complex Model) to make

demonstrations for the lower oxygen maximum.

EPA believes that each state should retain the greatest flexibility

in addressing local concerns over increased oxygenate use. This will

minimize the risk that increased oxygenate use will interfere with

local air quality problems. Thus, EPA is retaining its proposed

language on this issue. This provisions will maintain

[[Page 12039]]

EPA's intent of increased flexibility and reduced burden for the

states, as well as other parties which may benefit by today's action.

Several commenters questioned the need for a lower cap at all.

These commenters felt that EPA's technical findings on the air quality

effects of higher ethanol reformulated gasoline blends shows no adverse

impact and are technically sound. Additionally, these commenters felt

that many stakeholders have participated in the research, and the

conclusions should therefore be difficult to challenge. While EPA is

confident of its technical findings, it recognizes that general

modelling will not apply to all regions of the country, and that there

may exist unique regions that may be negatively impacted by the

increased oxygen content. Therefore the option of requesting the lower

standard is appropriate.

Finally, some commenters were concerned that a state's request for

a lower maximum oxygen content be to control average oxygen content,

and not to discriminate against a particular oxygenate. They did not

want the lower cap to be a marketplace barrier to ethanol. States must

request a lower maximum oxygen content based on air quality concerns.

Regardless of which oxygen maximum a state has, the reformulated

gasoline program is neutral with respect to the type of oxygenate used

to satisfy the oxygen requirement.

N. Performance

In the proposal, EPA did not address potential engine or vehicle

performance problems that might occur as a result of this rulemaking,

primarily because none attributable solely to this rulemaking are

expected. Although this rule will essentially allow a slightly higher

ethanol content in summertime reformulated gasoline than was allowed

last summer, the increase will not result in gasoline ethanol contents

which are greater than those currently in the marketplace in

conventional gasoline and wintertime reformulated gasoline.

Additionally, if a refiner was determining compliance based on the

Complex Model, he could have produced reformulated gasoline containing

10 vol% ethanol last summer. Thus, since this rulemaking does not allow

a significantly different fuel into the marketplace, no performance

problems are expected, and thus the issue was not addressed in the

proposal. A few comments were, however, received on this issue.

One commenter expressed concern that an increase in allowable

ethanol content will increase compatibility problems for consumer

vehicles, resulting in higher maintenance costs. This commenter also

stated that truck mixing, typically how ethanol blends are produced,

can be insufficient--stratification can occur with one layer having a

higher (than 10 vol%) alcohol content. Although it is possible that

fuels containing greater than 10 vol% ethanol could result in vehicle

or engine performance problems, and that truck mixing could result in a

non-complying fuel, such concerns are not directly or solely applicable

to this rulemaking. As discussed above, the maximum oxygen content of

summertime reformulated gasoline allowed by today's rule is limited to

the maximum ethanol content allowed under section 211(f), namely 10

vol%. The potential performance and mixing problems cited could occur

with any gasoline containing up to the maximum amount of ethanol

allowed under section 211(f).

Another commenter expressed concern about the impact of this

regulation on small engines, particularly nonroad engines. This

commenter stated that EPA had not considered the effects of this

rulemaking on small engines. The commenter was concerned that increased

oxygenates would lead to deterioration in the condition and performance

of small two-cycle engines, and cited several potential performance

problems. The performance problems included vapor lock; warm start;

increased fuel consumption; deposition problems; separation of mixing

oil; swelling of rubber parts; corrosion; extraction of rubber material

and deposition at other locations. Although the commenter claimed that

some of these problems had occurred recently in tests with 10 vol%

ethanol blends, no data was provided to support this claim. The

commenter noted that with present levels of allowable oxygenates, some

performance problems have been noted and was concerned that increasing

the allowed level would cause more serious performance problems. Of

particular concern were enleanment-related problems which can occur

with oxygenated fuels. As stated by the commenter, small engines

without oxygen sensors cannot compensate for changing oxygen levels.

EPA understands the concerns expressed by this commenter regarding

oxygenated fuels and small, particularly nonroad, engines. EPA

evaluated the impact of oxygenated fuels with regard to potential

performance and other related problems in its April 1995 ``Technical

Overview of the Effects of Reformulated Gasoline on Automotive and Non-

Automotive Engine Performance'' (EPA420-R-95-001) and concluded that

``Reformulated gasolines are expected to have little or no influence on

the incidence of many engine performance concerns * * *.'' Regarding

enleanment-related problems, EPA did state that, as with any oxygenated

fuel, minor adjustments to the fuel intake system may be required to

compensate for an enleanment effect. Nonetheless, as stated before,

since today's rulemaking does not result in a fuel which is

significantly different than other oxygenated fuels currently

available, EPA does not expect new or unique performance problems, for

either automotive or non-automotive engines, due to the higher oxygen

content allowed by today's action.

This same commenter also stated that EPA had not considered the

impact of increased oxygenate levels on other EPA rulemakings involving

small engine technology and emission levels. The commenter stated that

several regulatory programs for small nonroad engines were in the

development process, e.g., Phase 2 exhaust emission regulations for

small gasoline engines. These programs may require significant changes

in technology, and today's rulemaking may undermine the purpose and

effect of those regulatory programs and create regulatory conflict

between fuel and technology changes.

As stated earlier, EPA did not address potential performance

problems in the proposal to today's FRM because none were expected. The

fuel changes that might occur as a result of today's rule will not

create a significantly different fuel than is already in commerce. In

any case, today's regulatory changes only apply under the Simple Model

which may not be used to certify reformulated gasoline after December

31, 1997. EPA has reviewed the upcoming nonroad engine regulations.

Phase 1 of the nonroad regulatory program was promulgated on July 3,

1995 (60 FR 34582), and the program takes effect in 1997. Engine

certification began about January 1996. Because the fuels allowed under

today's rule are not significantly different than current fuels, EPA

does not believe that engine design changes would have occurred for

engines designed to meet the Phase 1 nonroad regulations. Additionally,

the final Phase 2 nonroad regulations will not take effect until some

model years after 1997. Today's rulemaking is therefore not expected to

affect compliance under either Phase 1 or 2 of this nonroad program.

The commenter also expressed concern about the possible increased

use of methanol, particularly with regard to material deterioration and

phase separation. Methanol use in

[[Page 12040]]

reformulated gasoline or any other gasoline is limited to those

methanol blends which have received a waiver under section 211(f).

Today's rulemaking does not change this requirement in any way.

O. Alternatives

In the notice of proposed rulemaking, EPA requested comment on two

alternatives to the proposal. The first alternative was to remove the

oxygen cap entirely, allowing up to the maximum oxygen content

permitted under section 211(f), (including up to 10 vol% ethanol,

roughly 3.5-4.0 wt% oxygen, or 15 vol% MTBE, roughly 2.7--3.2 wt%

oxygen), year-round for both VOC- and non-VOC-controlled reformulated

gasoline. Under this option, the regulations would not limit the oxygen

content of reformulated gasoline even if a state notifies EPA of the

environmental reasons for such a limit.

The comments received on this first alternative were mixed. One

commenter opposed the alternative because they felt it eliminated

flexibility for the states in meeting their air quality needs. In

addition, the commenter stated that this alternative plan could create

uncertainty in the marketplace for areas with programs which currently

limit reformulated gasoline's oxygen content. Two other commenters

supported this alternative to remove the oxygen cap entirely, and not

allow states to restore the cap simply by notifying the Agency. They

felt this approach would provide incentives to use ethanol in non-

traditional markets, such as the East Coast. A final commenter stated

that the proposal was preferable to either of the alternatives

suggested by EPA.

The second alternative presented by EPA in the NPRM would maintain

the oxygen cap at 2.7 wt% in the summertime, but allow states to

request a higher maximum oxygen content, up to the maximum allowed

under section 211(f). Currently states may request a higher cap, but

must show that no ozone exceedances had occurred in a covered area

during the previous three years. This alternative would remove the ``no

ozone exceedances'' requirement.

This alternative was not opposed by commenters, though it was felt

that the proposal was the better option. Those supporting this second

alternative felt it would be far less disruptive to the reformulated

gasoline program than the first alternative would be.

EPA is proceeding with the original proposal, and did not choose to

implement either of these alternatives. EPA believes it is important to

maintain flexibility for the states in meeting their air quality goals,

and thus does not desire to implement the first alternative. Since

there was little support for the second alternative, and since it does

less to accomplish the goals of the proposal, EPA has also rejected the

second alternative.

IV. Compliance With the Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 requires federal agencies to

examine the effects of their regulations and to identify any

significant adverse impacts of those regulations on a substantial

number of small entities. Pursuant to section 605(b) 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. In fact, today's proposals are designed to

remove overly burdensome regulations and make it easier for refiners to

use ethanol in reformulated gasoline, and thus to ensure market access

for ethanol in reformulated gasoline.

V. Administrative Designation

Pursuant to 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 entitlement,

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 notice of proposed rulemaking is not a

``significant regulatory action''.

VI. Paperwork Reduction Act

The Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq., and

implementing regulations, 5 CFR Part 1320, do not apply to this action

as it does not involve the collection of information as defined

therein.

VII. Unfunded Mandates Act

Under section 202 of the Unfunded Mandates Reform Act of 1995

(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA

must prepare a budgetary impact statement to accompany any proposed or

final rule that includes a Federal mandate that may result in

expenditure by state, local, and tribal governments, in the aggregate;

or by the private sector, of $100 million or more. Under Section 205,

EPA must select the most cost-effective and least burdensome

alternative that achieves the objectives of the rule and is consistent

with statutory requirements. Section 203 requires EPA to establish a

plan for informing and advising any small governments that may be

significantly or uniquely impacted by the rule.

EPA has determined that the action proposed today does not include

a Federal mandate that may result in estimated costs of $100 million or

more to either state, local or tribal governments in the aggregate, or

to the private sector. This action has the net effect of reducing

burden of the reformulated gasoline program on regulated entities, as

well as the states. Therefore, the requirements of the Unfunded

Mandates Act do not apply to this action.

VIII. Statutory Authority

The statutory authority for the actions proposed today is granted

to EPA by Sections 211(c), (k) and 301 of the Clean Air Act, as

amended; 42 U.S.C. 7545(c),(k), and 7601.

List of Subjects in 40 CFR Part 80

Environmental protection, Air pollution control, Fuel additives,

Gasoline, Motor vehicle pollution, Reporting and recordkeeping

requirements.

Dated: March 18, 1996.

Carol M. Browner,

Administrator.

For the reasons set out in the preamble, part 80 of title 40 of the

Code of Federal Regulations is amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

Authority: Sections 114, 211, and 301(a) of the Clean Air Act as

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

2. Section 80.41 is amended by revising paragraph (g) to read as

follows:

[[Page 12041]]

Sec. 80.41 Standards and requirements for compliance.

* * * * *

(g) Oxygen maximum standard.

(1) The per-gallon standard for maximum oxygen content, which

applies to reformulated gasoline subject to the simple model per-gallon

or average standards, is as follows:

(i) Oxygen content shall not exceed 3.2 percent by weight from

ethanol within the boundaries of any state if the state notifies the

Administrator that the use of an oxygenate will interfere with

attainment or maintenance of an ambient air quality standard or will

contribute to an air quality problem.

(ii) A state may request the standard specified in paragraph

(g)(1)(i) of this section separately for reformulated gasoline

designated as VOC-controlled and reformulated gasoline not designated

as VOC-controlled.

(2) The standard in paragraph (g)(1)(i) of this section shall apply

60 days after the Administrator publishes a notice in the Federal

Register announcing such a standard.

* * * * *

[FR Doc. 96-7162 Filed 3-22-96; 8:45 am]

BILLING CODE 6560-50-P