Control of Emissions of Air Pollution From Highway Heavy-Duty Engines

SUMMARY: The new standards and related provisions contained in this

final rule will result in significant progress throughout the country

in protecting public health and the environment. In this action, EPA is

adopting a new emission standard and related provisions for diesel

heavy-duty engines (HDEs) intended for highway operation, beginning

with the 2004 model year. The new standard represents a large reduction

(approximately 50 percent) in emission of oxides of nitrogen

(NOx), as well as reductions in hydrocarbons (HC) from

diesel trucks and buses. The reduction in NOx will also

result in significant reductions in secondary nitrate particulate

matter (PM) in areas where levels of nitrate PM are high. For diesel

HDEs, EPA is also finalizing changes to the existing averaging,

banking, and trading program that provide additional flexibility for

manufacturers in complying with the stringent new standards. EPA is

also adopting several provisions to increase the durability of emission

controls, help ensure proper levels of maintenance, and prevent

tampering, including during engine rebuilding. The resulting emission

reductions will translate into significant, long-term improvements in

air quality in many areas of the U.S. This will provide much-needed

assistance to states and regions facing ozone and particulate air

quality problems that are causing a range of adverse health effects for

their citizens, especially in terms of respiratory impairment and

related illnesses.

Although EPA proposed new standards and related averaging, banking,

and trading provisions for otto-cycle HDEs (e.g., gasoline-fueled

engines), EPA is not taking final action for that category of engines

at this time. EPA received several comments urging the Agency to adopt

more stringent control measures for these engines than those proposed

in the NPRM (June 27, 1996). EPA continues to evaluate the comments

received regarding otto-cycle engines and plans to issue a Supplemental

Notice of Proposed Rulemaking to address otto-cycle engines

specifically.

DATES: This regulation is effective December 22, 1997. The

incorporation by reference of a certain publication listed in the

regulations is approved by the Director of the Federal Register as of

December 22, 1997.

ADDRESSES: Materials relevant to this final rule have been placed in

Public Docket No. A-95-26. The docket is located at the Air Docket

Section, U.S. Environmental Protection Agency, 401 M Street SW,

Washington, DC 20460 (Telephone 202-260-7548; Fax 202-260-4400) in Room

M-1500, Waterside Mall, and may be inspected weekdays between 8:00 a.m.

and 5:30 p.m. A reasonable fee may be charged by EPA for copying docket

materials.

FOR FURTHER INFORMATION CONTACT: Chris Lieske, U.S. EPA, Engine

Programs and Compliance Division, 2565 Plymouth Rd., Ann Arbor,

Michigan 48105. Telephone: (313) 668-4584. Fax: (313) 741-7816.

SUPPLEMENTARY INFORMATION:

Regulated Entities

Entities potentially regulated by this action are those that sell

new motor vehicles heavy-duty engines in the United States and entities

who rebuild/remanufacture such engines. Regulated categories and

entities include:

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Category Examples of regulated entities

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Industry.............................. New motor vehicle heavy-duty

engine manufacturers.

Industry.............................. Heavy-duty engine rebuilders/

remanufacturers.

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This table is not intended to be exhaustive, but rather provides a

guide for readers regarding entities likely to be regulated by this

action. This table lists the types of entities that EPA is now aware

could potentially be regulated by this action. Other types of entities

not listed in the table could also be regulated. To determine whether

your activities are regulated by this action, you should carefully

examine the applicability criteria in 40 CFR 86.094-1 and, for engine

rebuilders/remanufacturers, Sec. 86.004-40 of the rule. If you have

questions regarding the applicability of this action to a particular

entity, consult the person listed in the preceding FOR FURTHER

INFORMATION CONTACT section.

Obtaining Electronic Copies of the Regulatory Documents

The preamble, Summary and Analysis of Comments, regulatory language

and Regulatory Impact Analysis are also available electronically from

the EPA Internet Web site. This service is free of charge, except for

any cost you already incur for internet connectivity. The electronic

Federal Register version is made available on the day of publication on

the primary Web site listed below. The EPA Office of Mobile Sources

also publishes these notices on the secondary Web site listed below.

Internet (Web)

http://www.epa.gov/docs/fedrgstr/EPA-AIR/

(either select desired date or use Search feature)

http://www.epa.gov/OMSWWW/

(look in What's New or under the specific rulemaking topic)

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.

Outline and List of Acronyms

The Supplementary Information section of this final rule is

organized as follows:

I. Introduction/Summary of Proposal

II. Need for Control and Air Quality Benefits of This Rule

A. Ozone

B. Particulate Matter

III. Content of the Final Rule

A. Emission Standards

1. Standard Levels

2. 1999 Review

3. NMHC Measurement

4. Non-Conformance Penalties

B. In-Use Emissions Control Elements

1. Useful life

2. Emissions Related Maintenance

3. Emissions Defect and Performance Warranties

4. Additional Manufacturer Requirements

5. Engine Rebuilding Provisions

C. Revised Averaging, Banking, and Trading Provisions

D. Display of OMB Control Numbers

IV. Public Participation

A. EPA's Air Quality Justification for the Proposed Program

1. Modeling

2. Possible Ozone Increases from NOX Reduction

3. Trends in Ozone Levels

B. Level of Standards

1. Diesel Engines--NOX Plus NMHC

2. Highway Diesel Engine--PM

3. Otto-Cycle Engines

C. In-Use Emissions Control and Compliance

1. In-Use Emissions Control Regulatory Elements

[[Page 54695]]

2. State Inspection and Maintenance Programs

3. In-Use Compliance Issues

D. Averaging, Banking, and Trading

1. Applicability

2. The Modified ABT Program (1998-2003)

3. The Modified ABT Program 2004 and Later

4. Other Changes for the Modified ABT Program

V. Economic Impact and Cost-Effectiveness

A. Engine Costs

B. Aggregate Costs to Society

C. Cost-Effectiveness

VI. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

B. Compliance With Regulatory Flexibility Act

C. Compliance With Paperwork Reduction Act

D. Unfunded Mandates Reform Act

E. Submission to Congress and the General Accounting Office

VII. Statutory Authority

VIII. Judicial Review

IX. Copies of Rulemaking Documents

List of Acronyms and Abbreviations

ABT Averaging, banking, and trading

ANPRM Advance Notice of Proposed Rulemaking

ARB Air Resources Board

ATA American Trucking Association

CAA or Act Clean Air Act as amended in 1990

CFR Code of Federal Regulations

DDC Detroit Diesel Corporation

EGR Exhaust gas recirculation

EPA United States Environmental Protection Agency

FRM Final Rulemaking

GVWR Gross vehicle weight rating

HC Hydrocarbons

HDDEs Heavy-duty diesel engines

HDEs Heavy-duty engines

HDVs Heavy-duty vehicles

HHDDEs Heavy heavy-duty diesel engines

HHDVs Heavy heavy-duty vehicles

ICR Information Collection Request

I/M Inspection and Maintenance

LEV Low emissions vehicle

LHDDEs Light heavy-duty diesel engines

LHDVs Light heavy-duty vehicles

MHDDEs Medium heavy-duty diesel engines

MOU Memorandum of Understanding

NAAQS National Ambient Air Quality Standard

NESCAUM Northeast States for Coordinated Air Use Management

NLEV National Low Emissions Vehicle

NMHC Nonmethane hydrocarbons

NOX Oxides of nitrogen

NPRM Notice of Proposed Rulemaking

NRDC Natural Resources Defense Council

OBD On-bourd diagnotics

OMB Office of Management and Budget

OTAG Ozone Transport Assessment Group

PM Particulate matter

R&D Research and development

RIA Regulatory Impact Analysis

ROM Regional Oxidant Model

SAE Society of Automotive Engineers

SEA Selective Enforcement Audit

SOP Statement of Principles

UAM Urban Airshed Model

VOC Volatile organic compounds

I. Introduction/Summary of Proposal

Air pollution continues to represent a serious threat to the health

and well-being of millions of Americans and a large burden to the U.S.

economy. This threat exists despite the fact that, over the past two

decades, great progress has been made at the local, state and national

levels in controlling emissions from many sources of air pollution. As

a result of this progress, many individual emission sources, both

stationary and mobile, pollute at only a fraction of their pre-control

rates. However, continued industrial growth and expansion of motor

vehicle usage threaten to reverse these past achievements. Today, many

states are finding it difficult to meet the current ozone and PM

National Ambient Air Quality Standards (NAAQSs) by the deadlines

established in the Act.1 Furthermore, other states which are

approaching or have reached attainment of the current ozone and PM

NAAQSs will likely see those gains lost if current trends persist.

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\1\ See 42 U.S.C. 7401 et seq.

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In recent years, significant efforts have been made on both a

national and state level to reduce air quality problems associated with

ground-level ozone, with a focus on its main precursors, oxides of

nitrogen (NOX) and volatile organic compounds

(VOCs).2 In addition, airborne particulate matter (PM) has

been a major air quality concern in many regions. As discussed below,

ozone and PM have been linked to a range of serious respiratory health

problems and a variety of adverse environmental effects.

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\2\ VOCs consist mostly of hydrocarbons (HC).

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The states have jurisdiction to implement a variety of stationary

source emission controls. In most regions of the country, states are

implementing significant stationary source NOX controls (as

well as stationary source VOC controls) for controlling acid rain,

ozone, or both. In many areas, however, these controls will not be

sufficient to reach and maintain the current ozone standard without

significant additional NOX reductions from mobile sources.

Generally, the Clean Air Act specifies that standards for controlling

NOX, HC, and PM emissions from new motor vehicles must be

established at the federal level.3 Thus, the states look to

the national mobile source emission control program as a complement to

their efforts to meet air quality goals. The concept of common emission

standards for mobile sources across the nation is strongly supported by

manufacturers, which often face serious production inefficiencies when

different requirements apply to engines or vehicles sold in different

states or areas.

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\3\ The CAA limits the role states may play in regulating

emissions from new motor vehicles. California is permitted to

establish emission control standards for new motor vehicles, and

other states may adopt California's programs (Sections 209 and 177

of the Act).

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Motor vehicle emission control programs have a history of

technological success that, in the past, has largely offset the

pressure from constantly growing numbers of vehicles and miles traveled

in the U.S. The per-vehicle rate of emissions from new passenger cars

and light trucks has been reduced to very low levels. As a result,

increasing attention is now focused on heavy-duty trucks (ranging from

large pickups to tractor-trailers), buses, and nonroad equipment.

Since the 1970s, manufacturers of heavy-duty engines for highway

use have developed new technological approaches in response to periodic

increases in the stringency of emission standards.4 However,

the technological characteristics of heavy-duty engines, particularly

diesel engines, have thus far prevented achievement of emission levels

comparable to today's light-duty gasoline vehicles. While diesel

engines provide advantages in terms of fuel efficiency, reliability,

and durability, controlling NOX emissions is a greater

challenge for diesel engines than for gasoline engines. Similarly,

control of PM emissions, which are very low for gasoline engines,

represents a substantial challenge for diesel engines. Part of this

challenge is that most traditional NOX control approaches

tend to increase PM, and vice versa.

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\4\ Highway heavy-duty engines, sometimes referred to as highway

HDEs, are used in heavy-duty vehicles, which EPA defines as highway

vehicles with a gross vehicle weight rating over 8,500 pounds.

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Despite these technological challenges, there is substantial

evidence of the ability for heavy-duty highway engines to achieve

significant additional emission reductions. In their successful efforts

to reach lower NOX and PM levels over the past 20 years,

heavy-duty highway diesel engine manufacturers have identified new

technologies and approaches that offer promise for significant new

reductions. The emerging technological potential for much cleaner

diesel heavy-duty engines is discussed elsewhere in this preamble and

in the Regulatory Impact Analysis (RIA) associated with this final

rule.

Recognizing the need for additional NOX and PM control

measures to address air quality concerns in several

[[Page 54696]]

parts of the country and the growing contribution of the heavy-duty

engine sector to ozone and PM problems, EPA, the California Air

Resources Board, and engine manufacturers representing over 90 percent

of annual nationwide engine sales signed a Statement of Principles

(SOP) in July of 1995. The SOP established a framework for a proposed

rulemaking, setting out goals and conditions supported by the

signatories. EPA sought early comment on the general regulatory

framework laid out in the SOP in an Advance Notice of Proposed

Rulemaking (ANPRM) on August 31, 1995 (60 FR 45580) and issued a Notice

of Proposed Rulemaking (NPRM) on June 27, 1996 (61 FR 33421).

The centerpiece of EPA's proposal was a new NOX plus

nonmethane hydrocarbon standard (NMHC) of 2.4 g/bhp-hr (or 2.5 g with a

0.5 g NMHC cap) for 2004 and later model years, which represents over a

50 percent reduction from the 1998 NOX and HC standard of

4.0 g/bhp-hr and 1.3 g/bhp-hr, respectively. EPA proposed the standard

for both diesel and otto-cycle (primarily gasoline-fueled) engines. EPA

requested comment on options for more stringent control of emissions

from otto-cycle engine in response to comments received by the Agency

on the ANPRM. Because the standards would require the use of

technologies not yet fully developed and proven, EPA also proposed to

reopen the rulemaking in 1999 and review the appropriateness of the

standards.

In addition, EPA proposed several other provisions. To provide

critical flexibility to the manufacturers and help ease their

transition to the new standards, EPA proposed a modified averaging,

banking, and trading (ABT) program. The proposed program was viewed to

be tied directly to the stringency of the standard. In the NPRM, the

Agency stressed that the program changes would allow manufacturers to

reasonably achieve a more stringent standard earlier than without the

changes. EPA proposed a modified program for model years 1998 through

2006, with the current ABT program resuming in 2007. Under the proposed

modified program, engine manufacturers could earn undiscounted,

unlimited life NOX and PM credits for use in meeting the

2004 standards. The current program requires a one-time 20 percent

discount on any credits traded or banked for future use and limits

credit life to 3 years. For the modified program, EPA also proposed

that manufacturers maintain at least a 5 percent compliance margin,

unless they had data to support the use of a smaller margin.

EPA also proposed several provisions to help ensure adequate

durability of emissions controls and proper maintenance and repair of

emissions controls during the life of the engine, including during

engine rebuilding. EPA viewed the proposals as necessary because the

proposed standards would likely prompt manufacturers to add emissions

control technologies, such as exhaust gas recirculation and exhaust

aftertreatment. The failure of such systems would not necessarily cause

decreased engine performance. Thus, EPA could not be certain that

failure of emissions control systems would prompt the owner to perform

repairs. Additionally, the proposed changes were intended to update

existing requirements to consider recent increases in engine life.

The primary proposals for updating existing regulations included a

proposed increase in the useful life mileage interval for heavy heavy-

duty engines from 290,000 miles to 435,000 miles, an increase in the

minimum allowable maintenance intervals for several emissions related

components, and changes in the emissions defect and performance

warranties. EPA also proposed provisions to help ensure that emission

controls are properly addressed during the process of engine rebuilding

and not removed or otherwise dismantled.

This preamble is organized as follows: Section II. describes the

need for control and air quality benefits associated with the final

rule, Section III. describes in detail the standards and all other

provisions being finalized; Section IV. describes each of the

proposals, key comments received by EPA, and any changes to the

proposals as a result of those comments; Section V. reviews the results

of EPA's economic analyses; The remaining preamble sections pertain to

administrative requirements, statutory authority, judicial review, and

more information on how to obtain copies of rulemaking documents. The

actual regulatory language follows the preamble.

II. Need for Control and Air Quality Benefits of This Rule

The new emission standards for highway HDEs that EPA is issuing

today represent a major step in reducing the human health and

environmental impacts of ground-level ozone and a significant

contribution to reducing secondary nitrate particulate matter (PM).

This section summarizes the air quality rationale for these new

standards and their anticipated impact on heavy-duty vehicle emissions.

A. Ozone

There is a large body of evidence showing that ozone (which is

caused by the photochemical reaction of NOX and VOCs) causes

harmful respiratory effects including chest pain, coughing, and

shortness of breath, affecting people with compromised respiratory

systems and children most severely. In addition, NOX itself

can directly harm human health. Beyond their human health effects,

other negative environmental effects are also associated with ozone and

NOX. Ozone has been shown to injure plants and materials;

NOX contributes to the secondary formation of PM (nitrates),

acid deposition, and the overgrowth of algae in coastal estuaries.

These environmental effects, as well as the health effects noted above,

are described in the Regulatory Impact Analysis. (Additional

information may be found in EPA's ``staff papers'' and ``air quality

criteria'' documents for ozone and nitrogen oxides 5

6 7 8).

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\5\ U.S. EPA, 1996, Review of National Ambient Air Quality

Standards for Ozone, Assessment of Scientific and Technical

Information, OAQPS Staff Paper, EPA-452/R-96-007.

\6\ U.S.EPA, 1996, Air Quality Criteria for Ozone and Related

Photochemical Oxidants, EPA/600/P-93/004aF.

\7\ U.S. EPA, 1995, Review of National Ambient Air Quality

Standards for Nitrogen Dioxide, Assessment of Scientific and

Technical Information, OAQPS Staff Paper, EPA-452/R-95-005.

\8\ U.S.EPA, 1993, Air Quality Criteria for Oxides of Nitrogen,

EPA/600/8-91/049aF.

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Today, many states are finding it difficult to show how they can

meet or maintain compliance with the current National Ambient Air

Quality Standard (NAAQS) for ozone by the deadlines established in the

Act. 9 There are 66 areas currently designated

``nonattainment'' for ozone.

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\ 9\ See 42 U.S.C. 7401 et seq.

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Local, state and federal organizations charged with delivering

cleaner air have mounted significant efforts in recent years to reduce

air quality problems associated with ground-level ozone, and there are

signs of partial success. The main precursors of ozone, oxides of

nitrogen (NOX) and volatile organic compounds (VOCs)

10 appear to have been reduced, and average levels of ozone

seem to have begun gradually decreasing. However, this progress is in

jeopardy. EPA projects that reductions in ozone precursors that will

result from the full implementation of current emission control

programs will fall far short of what would be needed to offset the

normal emission increases that accompany economic expansion. By the

middle of the next decade, the Agency expects that the downward trends

will have reversed, primarily due to

[[Page 54697]]

increasing numbers of emission sources. By around 2020, EPA expects

that NOX levels will have returned to current levels in the

absence of significant new reductions.11 To the extent that

some areas are seeing a gradual decrease in ozone levels in recent

years, EPA believes that the expected increase in NOX will

likely result in an increase in ozone problems in the future.

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\10\ VOCs consist mostly of hydrocarbons (HC).

\11\ See Chapter 2 of the Regulatory Impact Analysis associated

with this rule.

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NOX controls are an effective strategy for reducing

ozone where its levels are relatively high over a large region (as in

the Northeast and much of the Midwest, Southeast, and California). EPA

and states see control of NOX emissions as a key to

improving regional-scale air quality in many parts of the country, in

addition to local-scale VOC and NOX controls. Specifically,

EPA believes that regional-scale reductions in NOX emissions

will be necessary for many areas to attain and maintain compliance with

the current ozone NAAQS. For the regions listed above, the

NOX reductions needed are very large (greater than 50

percent from base 1990 emissions in many cases). New programs to

control emissions from both stationary and mobile sources will be

necessary in most of these areas, since it is unlikely that cost

effective controls of this magnitude can be achieved with either source

category alone. Although in some locations and circumstances moderate

reductions in local NOX emissions may be associated with

localized increases in ozone, the Agency is convinced that the ultimate

attainment goal of all nonattainment areas necessitates continued

reduction of regional-scale NOX emissions.

The new emission standards for highway HDEs issued in today's rule

are intended to address the effects of ozone (and also PM, as discussed

below) through substantial regional-scale reductions in NOX

throughout the country. EPA projects that the nationwide NOX

reduction by 2020 will be approximately 1.1 million tons per year, or

about 9.5 percent of projected 2020 mobile source NOX

emissions and 4.5 percent of all 2020 NOX emissions. This is

shown in Figure 1 and is discussed in detail in the RIA for this rule.

The Agency also expects that small NMHC reductions will also result

from this program. EPA has designed this program to play a significant

role in reducing ozone levels in many areas of the country in concert

with other mobile source and stationary source ozone reduction programs

at the federal, state, and local levels.

BILLING CODE 6560-50-P

[[Page 54698]]

[GRAPHIC] [TIFF OMITTED] TR21OC97.000

BILLING CODE 6560-50-C

[[Page 54699]]

B. Particulate Matter

Particulate matter, like ozone, has been linked to a range of

serious respiratory health problems. Particles are deposited deep in

the lungs and result in effects including premature death, increased

hospital admissions and emergency room visits, increased respiratory

symptoms and disease, decreased lung function (particularly in children

and individuals with asthma), and alterations in lung tissue and

structure and in respiratory tract defense mechanisms. These effects

are discussed further in the RIA for this rule. (Additional information

may be found in EPA's ``staff paper'' and ``air quality criteria

document'' for particulate matter.12 13)

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\12\ U.S. EPA, 1996, Review of National Ambient Air Quality

Standards for Particulate Matter, Assessment of Scientific and

Technical Information, OAQPS Staff Paper, EPA-452/R-96-013.

\13\ U.S.EPA, 1996, Air Quality Criteria for Particulate Matter,

EPA/600/P-95/001aF.

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Currently, there are 80 PM-10 nonattainment areas across the U.S.

(PM-10 refers to particles smaller than 10 microns in diameter). As is

the case with NOX, levels of PM caused by mobile sources are

also expected to rise in the future. EPA believes that this projected

increase will occur both because of the expected increase in numbers of

PM sources, including diesel engines, and because NOX from

heavy-duty diesels and other sources is transformed in the atmosphere

into fine secondary nitrate particles.

Secondary nitrate PM accounts for a substantial fraction of the

airborne particulate in some areas of the country, especially in the

West. Measurements of ambient PM in some western U.S. urban areas that

are having difficulty meeting the current NAAQS for PM-10 have

indicated that secondary PM is a very important component of the

problem. Secondary nitrate PM (consisting mostly ammonium nitrate) is

the major constituent of this secondary PM. For example, in Denver, on

days when PM levels are high, about 25 percent of the measured PM-2.5

is ammonium nitrate. In the Provo/Salt Lake City area, secondary PM

comprises about 40 percent of the measured PM-10. Similarly, in the Los

Angeles Basin, secondary nitrate PM levels represent about 25 percent

of measured PM-10.14 Nitrate PM constitutes a smaller, but

often important, fraction of PM in other areas of the country.

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\14\ Summary of Local-Scale Source Characterization Studies,

EPA-230-S-95-002, July, 1994.

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Because the atmospheric chemistry of secondary PM formation has

common attributes to that of ozone, secondary PM also tends to be a

regional, rather than a strictly local phenomenon. For this reason, EPA

believes that regional-scale NOX controls, including control

of mobile NOX sources, are very effective in reducing

secondary PM over a significant area. For example, California's PM SIPs

for serious areas conclude that secondary formation of nitrate

particulate due to regional-scale NOX emissions contributes

to the particulate problem in the South Coast Air Basin, Coachella

Area, and the San Joaquin Valley.15 EPA and the State of

California believe that reduction of this fraction of the total PM will

require additional regional-scale reductions in NOX

emissions.

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\15\ Memorandum to the docket from Carol Bohnenkamp, EPA Region

9, regarding regional nature of secondary nitrate PM in California,

July 30, 1997. Docket A-95-27.

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The primary effect of the standards promulgated in this Notice on

ambient PM levels will occur as a result of the large anticipated

reductions in NOX. EPA expects that the resulting reductions

in secondary PM will be significant, especially in areas of the West

where nitrate PM is a major contributor to overall PM levels. In the

proposal, EPA estimated on the basis of existing information that 100

tons of NOX will on average result in the formation of about

4 tons of nitrate PM. EPA recently evaluated this effect in more

detail.16 The report's conclusions confirmed EPA's earlier

estimate, also concluding that 100 tons of NOX reduction

will on average result in about 4 tons of secondary PM reduction. (The

conversion rate varies from region to region, and is greatest in the

West.). Based on the average conversion rate, EPA estimates that the

approximately 1.1 million tons per year of NOX reduction

from today's rule by 2020 will result in a national average reduction

in secondary PM of about 44,000 tons per year. This estimated average

nitrate PM reduction is similar in magnitude to that which would result

from reducing the diesel PM emission standard by half.17

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\16\ Benefits of Mobile Source NOX Related

Particulate Matter Reductions, October 1996, EPA Contract No. 68-C5-

0010.

\17\ Based on the following calculation: The difference between

the 1998 and 2004 HDE NOX standards is nominally 2.0 g/

bhp-hr (4.0 vs. 2.0 g/bhp-hr). Using the above estimated average

factor of 4% of NOX being converted to secondary PM, an

equivalent reduction in secondary PM of 0.08 g/bhp-hr can be

estimated. This reduction in secondary PM compares to the roughly

0.05 g/bhp-hr that potentially would result from a reduction in the

HDE PM standard from 0.1 to 0.05 g/bhp-hr.

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III. Content of the Final Rule

The following is a concise description of the regulations being

adopted in this final rule, with any changes from the proposal also

noted. A summary of the proposal is contained in preamble Section I.,

above. A full description of the proposals, supporting rationale for

these actions, and response to comments are contained in the Summary

and Analysis of Comments for the rule. Preamble section IV., Public

Participation, also provides additional information.

A. Emission Standards

1. Standard Levels

EPA is adopting the proposed NMHC+NOX emission standards

for on-highway heavy-duty diesel-cycle engines fueled by diesel,

methanol, and gaseous fuels and their blends. These standards apply to

model year 2004 and later. Engine manufacturers will have the choice of

certifying heavy-duty diesel engines to either of two optional sets of

standards:

2.4 g/bhp-hr NMHC+NOx, or

2.5 g/bhp-hr NMHC+NOX with a limit of 0.5 g/bhp-hr on NMHC.

All emissions standards other than NMHC and NOX applying to

1998 and later model year heavy-duty engines continue at their 1998

levels. No new standards are being finalized for on-highway heavy-duty

otto-cycle engines.

2. 1999 Review

EPA is also finalizing today a regulatory provision providing for

1999 review of the standard levels finalized in this rule. As proposed,

this review will reassess the appropriateness of the standards under

the Clean Air Act including the need for and technical and economical

feasibility of the standards based on information available in 1999. If

during the review EPA concludes that a revision is appropriate, a

rulemaking will be conducted to determine the appropriate level for the

model year 2004 and later standards. The standards finalized today will

stay in effect unless revised by this subsequent rulemaking procedure.

In addition, EPA, together with the oil and engine industries, is

engaged in assessing the potential impact of fuel changes on emissions

from 2004 and later model year diesel engine technology.

The 1999 review process has the potential of either tightening or

relaxing the standards finalized today. If due to new information in

1999 EPA finds the standards to not be technologically feasible for

model year 2004 or otherwise not in accordance with the Act, then EPA

expects to propose adjusted standards which do not exceed the

following:

[[Page 54700]]

2.9 g/bhp-hr NMHC+NOx or

3.0 g/bhp-hr NMHC+NOx with a limit of 0.6 g/bhp-hr NMHC

EPA believes that the 2004 model year standards being finalized

today are technologically feasible without any changes to diesel fuel.

As part of the 1999 review, EPA will evaluate in light of any new

information whether diesel fuel improvements are needed for the

standards to be appropriate for 2004. If EPA finds that diesel fuel

changes are needed to meet the standards finalized here and if EPA

believes such changes would be a cost-effective method for reducing

emissions and appropriate under section 211 of the Clean Air Act, then

EPA will address the potential for fuel improvements through a separate

rulemaking which will include a separate cost-effectiveness analysis

and opportunity for public comment. However, if EPA were to determine

in the 1999 review that the feasibility of the standards requires

diesel fuel changes and EPA does not engage in a rulemaking to require

such changes, EPA expects to propose adjusted standards which do not

exceed the following:

3.4 g/bhp-hr NMHC+NOx or

3.5 g/bhp-hr NMHC+NOx with a limit of 0.7 g/bhp-hr on NMHC

Based on the technical analysis in the RIA, the levels described

above represent upper limits for any potential revisions. Because EPA

does not at this point predict further breakthroughs in innovative

emission reduction technology for mass production in the 2004 time

frame which would allow for a standard lower than that being finalized,

a lower limit is not predicted at this time. However, if EPA determines

that lower standards are technologically feasible and appropriate under

the Clean Air Act, EPA expects to propose those lower standards.

3. NMHC Measurement

For heavy-duty diesel engines, EPA is allowing three options to the

measurement procedures currently in place for alternative fueled

engines. They are as follows: (1) Use a THC measurement in place of an

NMHC measurement; (2) use a measurement procedure specified by the

manufacturer with prior approval of the Administrator; or (3) subtract

two percent from the measured THC value to obtain an NMHC value. The

methodology must be specified at time of certification and will remain

the same for the engine family throughout the engines' useful life.

For natural gas vehicles, EPA is allowing the option of measuring

NMHC through direct quantification of individual species by gas

chromatography.

4. Non-Conformance Penalties

Section 206(g) of the Clean Air Act requires EPA to allow a HDE

manufacturer to receive a certificate of compliance for an engine

family which exceeds the applicable standard (but does not exceed an

upper limit) if the manufacturer pays a non-conformance penalty

established by EPA through rulemaking. The NCP program established

through rulemaking is codified in Subpart L of 40 CFR Part 86. EPA

plans to address provisions related to NCPs for the 2004 model year

standards in conjunction with the 1999 review discussed above.

B. In-Use Emissions Control Elements

EPA is finalizing provisions to enhance the control of emissions

from in-use vehicles subject to the new model year 2004 standards.

Where noted, some of the provisions below also apply to 2004 and later

model year otto-cycle engines. The in-use provisions include both: (1)

Revisions of existing regulations, including useful life, emissions-

related maintenance, and emissions defect and performance warranties,

and (2) new provisions regarding maintenance and repair of emissions

controls after the end of the useful life, including manufacturer

requirements and engine rebuild provisions. All of the following

changes to the regulations are effective beginning with the 2004 model

year.

1. Useful Life

EPA is finalizing a revised useful life for the heavy heavy-duty

diesel engine service class of 435,000 miles, 22,000 hours, or 10

years, whichever occurs first, for all pollutants beginning in model

year 2004.18 In response to comments, EPA has modified the

useful life for heavy heavy-duty engines from the proposal by

increasing the hours interval and removing a minimum mileage interval.

EPA proposed a useful life of 435,000 miles, 13,000 hours, or ten years

whichever occurred first, but in no case less than 290,000 miles. As

proposed, EPA is also establishing a useful life years interval of 10

years for all heavy-duty engine service classes, otto-cycle and diesel-

cycle, and all pollutants.

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

\18\ Note that for an individual engine, if the useful life

hours interval is reached before the engine reaches 10 year or

100,000 miles, the useful life shall become 10 years/100,000 miles,

whichever occurs first, as required under Clean Air Act section

202(d). EPA believes that this provision will be used only very

rarely, if ever, given the usage patterns of affected vehicles.

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

2. Emissions Related Maintenance

EPA is finalizing the changes to emission related maintenance

intervals shown in Table 1, with compliance beginning in 2004. The

intervals are in miles or hours, whichever occurs first. The term

``Add-on emissions-related component'' is being defined as a component

whose sole or primary purpose is to reduce emissions or whose failure

will significantly degrade emissions control and whose function is not

integral to the design and performance of the engine. EPA is not

changing the interval for EGR filters and coolers from its current

interval of 50,000 miles (1,500 hours). The maintenance interval

changes are being finalized as proposed.

Table 1--Changes to Minimum Emission-Related Maintenance Intervals

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

Intended service class Component or system Change to minimum maintenance interval

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

Otto-cycle engines................. EGR system (except filters Increase from 50,000 miles (1,500 hours) to

and coolers). 100,000 miles (3,000 hours).

Light HDDEs........................ EGR system (except filters Increase from 50,000 miles (1,500 hours) to

and coolers). 100,000 miles (3,000 hours).

--Add-on emission-related Establish 100,000 mile (3,000 hour) interval.

components.

--Catalytic converter

Medium and heavy HDDEs............. EGR system (except filters Increase from 50,000 miles (1,500 hours) to

and coolers). 150,000 miles (4,500 hours).

[[Page 54701]]

--Add-on emission-related Establish 150,000 mile (4,500 hour) interval.

components.

--Catalytic converter

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

3. Emissions Defect and Performance Warranties

Currently, the emissions defect and emissions performance warranty

periods are specified in hours and miles intervals. The regulations

also provide that the warranty periods for highway HDEs may in no case

be less than the manufacturer's basic mechanical warranty period for

the engine family.19 However, manufacturers often provide

extended warranties for individual engines. EPA proposed that the

warranty period be at least as long as the basic mechanical warranty of

the engine, whether it be the published warranty for the engine family

or a longer warranty provided to the engine purchaser. In response to

comments, EPA is revising the regulations regarding the warranty period

as follows. The warranty period shall not be less than the basic

mechanical warranty of the particular engine as provided to the

purchaser. Thus, the warranty shall be longer than that published for

the engine family in cases where a manufacturer provides to the

customer a longer basic mechanical warranty for a particular engine.

Extended warranties on select parts do not extend the emissions

warranty requirements for the entire engine but only for those parts.

Also, in cases where responsibility for an extended mechanical warranty

is shared between the owner and the manufacturer, the manufacturer is

responsible only for their share of the emissions warranty per the

warranty agreement. These changes to the warranty provisions apply to

both diesel and otto-cycle engines.

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

\19\ 40 CFR 86.094-2(f).

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

4. Additional Manufacturer Requirements

EPA proposed modest new manufacturer requirements which may

increase the likelihood of emissions related maintenance being

performed when needed after the end of the engine's useful life by

providing information to the vehicle owner. EPA received only

supportive comments on these proposals. Therefore, all of the following

manufacturer requirements are being finalized as proposed for both

diesel and otto-cycle engines.

Engine manufacturers provide owners with manuals specifying

maintenance needed to ensure proper engine operation. Starting in 2004,

EPA is requiring that manufacturers include in the engine service

manual, maintenance which may be needed for emissions related

components after the end of the engine's regulatory useful life,

including mileage/hours intervals and procedures for determining

whether or not maintenance or repair is needed. The recommended

practices must also include instructions for accessing and responding

to any emissions-related diagnostic codes that may be stored in on-

board monitoring systems. The recommended maintenance practices may be

based on engineering analysis or other sound technical rationale. In

the event that an emission-related component is designed not to need

maintenance during the full life of the vehicle, the manual would need

to contain, at a minimum, a description of the component, noting its

purpose, and a statement that the component is expected to last the

life of the vehicle without maintenance or repair. In addition,

manufacturers are required to include in the manual the rebuild

provisions being adopted by the Agency, as described below, to ensure

that owners and rebuilders are aware of the requirements.

Under existing regulations, manufacturers must ensure that critical

emissions-related scheduled maintenance has a reasonable likelihood of

being performed in-use. Manufacturers may elect to provide such

assurance by using some form of on-board driver notification when

maintenance is needed on a critical emission related

component.20 The signal may be triggered either based on

mileage intervals or component failure. It is currently considered a

violation of the Clean Air Act's prohibition on tampering (Section

203(a)(3)) to disable or reset the signal without also performing the

indicated maintenance procedure.21

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\20\ 40 CFR 86.094-25(b)(6)(ii)(C).

\21\ 40 CFR 86.094-25(b)(6)(iii).

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

EPA is finalizing a requirement that manufacturers of 2004 and

later model year engines electing to use such signal systems to ensure

that critical emissions-related maintenance has a reasonable likelihood

of being performed must design the systems so that they do not cease to

function at or beyond the end of the regulatory useful life. For

example, if the signal is designed to be actuated based on mileage

intervals, it must be designed to continue to signal the driver at the

same intervals after the end of the useful life. EPA will not, however,

hold the manufacturer responsible or liable for recall due to signal

failure in instances where the signal fails to function as designed

beyond the end of the useful life. Manufacturer recall liability is

limited to failures during the regulatory useful life under section 207

of the Clean Air Act. (The manufacturer is also not responsible for

repairs when the signal does function after the end of the useful life

unless such repairs are covered by the emission warranty.)

5. Engine Rebuilding Provisions

Clean Air Act section 203(a)(3) states that it is prohibited for

``any person to remove or render inoperative any device or element of

design installed on or in a motor vehicle or motor vehicle engine'' in

compliance with regulations, either before or after its sale and

delivery to the ultimate purchaser. 42 U.S.C. 7522 (a)(3)(A). EPA

commonly refers to violations of this provision of the Clean Air Act as

tampering. Engine rebuilding practices are currently addressed in

general terms under EPA policies established under Clean Air Act

section 203(a)(3) regarding tampering. The Agency has established a

policy that when switching heavy-duty engines the new engine must be

``identical to a certified configuration of a heavy-duty engine of the

same or newer model year''.22 EPA has also established

policies regarding the use of aftermarket parts during

rebuild.23 EPA is codifying these policies as they apply to

engine rebuilding, and also finalizing new measures, as follows, for

both diesel and otto-cycle engines.

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

\22\ Engine Switching Fact Sheet, April 2, 1991. Docket A-95-27,

II-B-6.

\23\ ``Interim Tampering Enforcement Policy'', Mobile Source

Enforcement Memorandum No. 1A., June 25, 1974. Docket A-95-27, II-B-

5.

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

[[Page 54702]]

Under the regulatory provisions finalized today, parties involved

in the process of rebuilding or remanufacturing model year 2004 and

later engines (which may include the removal of the engine, rebuilding,

assembly, reinstallation and other acts associated with engine

rebuilding) must follow the provisions described below to avoid the

actions being characterized as tampering with the engine and its

emissions controls:

(1) During engine rebuilding, parties involved must have a

reasonable technical basis for knowing that the rebuilt engine is

equivalent, from an emissions standpoint, to a certified configuration

(i.e., tolerances, calibrations, specifications) and the model year(s)

of the engine configuration must be identified. A reasonable basis

would exist if:

(a) Parts used when rebuilding an engine, whether the part is new,

used, or rebuilt, is such that a person familiar with the design and

function of motor vehicle engines would reasonably believe that the

part performs the same function with respect to emissions control as

the original part, and

(b) Any parameter adjustment or design element change is made only

(i) in accordance with the original engine manufacturer's instructions

or (ii) where data or other reasonable technical basis exists that such

parameter adjustment or design element change, when performed on the

engine or similar engines, is not expected to adversely affect in-use

emissions.

(2) When an engine is being rebuilt and remains installed or is

reinstalled in the same vehicle, it must be rebuilt to a configuration

of the same or later model year as the original engine. When an engine

is being replaced, the replacement engine must be an engine of (or

rebuilt to) a configuration of the same or later model year as the

original engine.

(3) At the time of rebuild, emissions-related codes or signals from

on-board monitoring systems may not be erased or reset without

diagnosing and responding appropriately to the diagnostic codes,

regardless of whether the systems are installed to satisfy EPA

requirements under 40 CFR 86.094-25 or for other reasons and regardless

of form or interface. Diagnostic systems must be free of all such codes

when the rebuilt engines are returned to service. Further, such signals

may not be rendered inoperative during the rebuilding process.

(4) When conducting an in-frame rebuild or the installation of a

rebuilt engine, all emissions-related components not otherwise

addressed by the above provisions must be checked and cleaned,

repaired, or replaced where necessary, following manufacturer

recommended practices.

Any person or entity engaged in the process, in whole or in part,

of rebuilding engines who fails to comply with the above provisions

shall be liable for tampering in violation of CAA section 203(a)(3).

Parties are responsible for the activities over which they have control

and as such there may be more than one responsible party for a single

engine in cases where different parties perform different tasks during

the engine rebuilding process (e.g., engine rebuild, full engine

assembly, installation). EPA is not finalizing any certification or in-

use emissions requirements for the rebuilder or engine owner.

In response to comments, EPA has removed proposed provisions

requiring that the rebuilder or remanufacturer rebuild engines to the

same or newer model year configuration when the engine is not going to

be placed back into the original vehicle. EPA has also modified rebuild

provision (2) which, in the proposal, read ``A replacement engine must

be of (or rebuilt to) a configuration of the same or later model year

engine. Thus, in addition, under the proposed regulations a party

supplying a rebuilt engine would be prohibited from supplying a

replacement engine that is not rebuilt to a configuration of the same

or later model year as the trade-in engine.'' Provision (2) was

modified because the language regarding ``a party supplying a rebuilt

engine'' could be construed to mean an engine remanufacturer or other

party not working directly with the vehicle. EPA believes that parties

not working directly with the vehicle should not have an obligation to

ensure that the correct engine is placed in the vehicle.

EPA is adopting minor recordkeeping requirements which EPA believes

are in-line with customary business practices and which will assist EPA

in assessing compliance with the new rebuild provisions. The records

shall be kept by persons involved in the process of heavy-duty engine

rebuilding or remanufacturing and shall include the mileage and/or

hours at time of rebuild and a list of the work performed on the engine

and related emission control systems including a list of replacement

parts used, engine parameter adjustments, design element changes,

emissions related codes and signals that are responded to and reset and

the response to the signals and codes, and work performed as described

in item (4) of the rebuild provisions above. EPA is requiring such

records to be kept for two years after the engine is rebuilt.

Parties may keep the information in whatever format or system they

choose, provided that the information can be understood by an EPA

enforcement officer. Parties are not required to keep information that

they do not have access to as part of normal business practices.

If it is customary practice to keep records for engine families

rather than specific engines, where the engines within that family are

being rebuilt or remanufactured to an identical configuration, such

recordkeeping practices would satisfy these requirements. Rebuilders

can use records such as build lists, parts lists, and engineering

parameters that they keep for the engine families being rebuilt rather

than on individual engines, provided each engine is rebuilt in the same

way to those specifications. In addition, rebuilders are not required

to keep information on each individual emissions related diagnostic

code that might be reset if the codes are always addressed through a

set of uniform procedures that are followed during the rebuilding

process. For example, if an engine is equipped with a sensor that

monitors the EGR flow rate, the rebuilder may keep on record the

specifications and procedures used to rebuild the EGR system in all

instances. EPA expects that engine remanufacturers currently keep these

types of records in order to control the quality of their products.

In the NPRM, EPA explained that it was considering adopting minor

recordkeeping requirements in the final rule. In response to comments,

EPA has modified the contemplated recordkeeping requirements to: (1)

Further clarify that records may be kept on an engine family basis, (2)

allow parties to keep information in whatever format or system they

choose, provided that the information can be understood by an EPA

enforcement officer, and (3) not require parties to keep information

that they do not have access to as part of normal business practices.

C. Revised Averaging, Banking, and Trading Provisions

EPA is finalizing with revisions various modifications to the ABT

program. EPA believes this program is an important element in making

the stringent emissions standards adopted today appropriate with regard

to technological feasibility, lead time, and cost. The ABT program

provides important flexibility to manufacturers, helping them to

transition their entire product lines to the new standards. The ABT

program also encourages the early

[[Page 54703]]

introduction of cleaner engines, thus securing earlier emissions

benefits. The modified ABT program being implemented by EPA for 1998

and later model year engines applies only to diesel cycle engines. EPA

proposed but is not finalizing the modified ABT program for otto-cycle

engines. (The ABT program implemented in 1990 remains in effect for

otto-cycle engines). The provisions being finalized for the modified

ABT program are described below. As proposed, the modified program and

current program are separate and engines cannot participate in both

programs. Credits generated under the modified program may be used only

in 2004 and later model years. As was proposed, credits generated

between 1998 and 2003 are based on NOX only, not

NMHC+NOX, and are calculated against the 4.0 g/BHP-hr

NOX emission standard. Diesel PM credits are based on

reductions beyond the 0.10 g/BHP-hr emission standard for truck engines

and the 0.05 g/BHP-hr emission standard for urban buses. Credits earned

under the modified program may be transferred to the current program

but would then be subject to the current program's credit life limit of

three years from model year of generation and a one-time 20 percent

discount.

For the modified program between 1998 and 2003, for engine families

certified at NOX levels 3.5 g/BHP-hr, no discount

will be applied to any NOX or PM credits generated for

banking or trading. For engine families certified at NOX

levels above 3.5 g/BHP-hr, a one-time 10 percent discount will be

applied to all credits generated for banking and trading against the

model year 2004 standards, both NOX and PM. For example, if

an engine family is certified to a NOX level of 3.7 in the

modified program, the manufacturer will earn only 0.27 g/bhp-hr

(0.3x.9) credit for use in meeting the 2004 standard. The credit life

for credits under the modified program is unlimited.

Beginning in 2004, the form of the standard changes from separate

HC and NOX standards to a combined NMHC+NOX

standard. Therefore, starting in 2004, credits will be based on

combined NMHC+NOX values. NMHC+NOX credits will

be generated against the 2.4 g/BHP-hr standard. Diesel PM credits will

continue to be generated against the 0.10 g/BHP-hr emission standard

for truck engines and the 0.05 g/BHP-hr emission standard for urban

buses. For engine families certified with NMHC+NOX levels at

or below 1.9 g/BHP-hr, credits will not be discounted. Credits for

banking and trading will be discounted by 10 percent for engines with

certification levels above 1.9 g/bhp-hr NMHC+NOX with the

following exception: carry-over engine families certified prior to 2004

with NOX+NMHC certification levels below the 2004 standards

may earn undiscounted credits through model year 2006. For model year

2007 and thereafter, the 10 percent discount applies. As with credits

generated in the modified program prior to 2004, there will be no limit

on credit life for credits generated after 2004 under the modified

program. As proposed, the upper limits for NMHC+NOX and PM

certification will be 4.5 g/BHP-hr and 0.25 g/BHP-hr, respectively.

That is, no engine family may use credits to establish FELs above

either of these levels.

For reasons discussed later in this document, as well as in the

Summary and Analysis of Comments, the provisions regarding credit life

and discounting differ somewhat from those proposed. EPA proposed no

discounting or credit life limits for the modified program. EPA also

proposed that the modified program end in 2007 and that all credits

thereafter would be generated under the current program which includes

a one-time discount of 20 percent and a three year credit life limit.

Under the final rule, the modified program does not end in 2007, but

continues indefinitely. In addition, as noted above, credits for engine

families certified above the appropriate trigger level will have a 10

percent discount.

There are several other provisions which apply to the modified

program beginning in model year 1998. First, as proposed, EPA is

eliminating the ``buy high-sell low'' conversion factor provision of

86.094-(c)(2) and replacing it with the production-weighted average

value. Under the current buy high-sell low provision, families

generating credits use the lowest horsepower configuration factor and

those using credits use the highest horsepower configuration factor in

the formula to establish the number of credits generated or used. In

the modified program, the production-weighted average value will be

used in both cases. Second, because the 2004 standards apply in all

fifty states, beginning in 2004, the California and federal programs

will harmonize and ABT will be applicable to all federal

certifications. Third, EPA is finalizing provisions to allow

manufacturers the option to make the NOX and PM credits

generated by their engines available to other persons for use outside

the ABT program instead of limiting credits to only manufacturers.

Based on comments received EPA is not finalizing two provisions

which had been proposed. First, EPA is not finalizing its proposal for

pre-2004 model years to allow NOX credits to be generated

based on a useful life of 435,000 miles while retaining the actual

useful life for the engine family at 290,000 mile interval for all

other program purposes. EPA proposed to allow manufacturers to

establish an FEL based on simple extrapolation of the deterioration

factor for NOX from 290,000 miles to 435,000 miles and earn

credits up to 435,000 miles without incurring any additional in-use

liability for the mileage between 290,000 mile and 435,000 miles.

Because EPA is not finalizing the proposed change, all credits must be

based on the useful life of the engine family, which is the current

Agency requirement. Manufacturers wanting to generate credits up to

435,000 miles will be required to establish the 435,000 mile interval

as the official useful life for the engine family. Second, EPA is not

finalizing its proposal to require a compliance margin (i.e., the

difference between the engine certification level and the FEL) of at

least 5 percent under the modified ABT program. All of the above

changes to the modified ABT program are being made for the reasons

explained in the Summary and Analysis of Comment document for this

rule.

D. 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 numbers and their 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.

IV. Public Participation

Following the NPRM, EPA held a public hearing on August 12, 1996,

and accepted written comments on the proposals. This preamble section

provides an overview of certain key issues raised in the NPRM, a

summary of comments on these issues, and EPA's response to the

comments, including

[[Page 54704]]

any significant changes to the rulemaking as a result of the comments.

For EPA's detailed analysis of the comments received on the NPRM, the

reader is directed to the Summary and Analysis of Comments document for

the rulemaking. For information on how to obtain copies of the public

hearing transcript, written comments, and the Summary and Analysis of

Comments document, please see the ADDRESSES section above.

A. EPA's Air Quality Justification for the Proposed Program

In the NPRM, EPA expressed its belief that improvements in air

quality in many parts of the country will continue to be necessary in

the future. Specifically, the Agency presented the results of analyses

indicating that the emissions of key pollutants can be expected to

increase without further controls and that air quality (in the case of

both ozone and particulate matter) is likely to worsen as a result. In

proposing new standards for highway HDEs, the Agency relied on these

projections in concluding that it should proceed with regulatory action

as soon as possible.

Some commenters questioned this conclusion, disputing whether the

available information in fact justifies establishing new standards for

highway HDEs. Others argued the opposite--that immediate action is

indeed justified. Those questioning EPA's analysis raised several

issues. First, some commenters argued that currently available computer

modeling is not of sufficient quality to draw conclusions about the

future need for NOX control. Second, several commenters had

differing opinions about how much EPA national ozone reduction policy

should be affected by the fact that NOX reductions can cause

increases in ozone under localized conditions. EPA stated its belief in

the proposal that the large expected benefits of NOX control

over broad areas within and surrounding nonattainment areas should be

pursued even if these NOX reductions have a neutral or

negative effect in localized portions of some nonattainment areas.

Third, one commenter presented an analysis of ozone monitors concluding

that the number of national ozone exceedances has been steadily

decreasing over time (when adjusted for ambient temperatures). These

issues are discussed below.

1. Modeling

The emissions and air quality modeling to which the commenters

refer falls into two related categories that are generally performed

sequentially. The first major step is to develop emission inventories

simulating the atmospheric loading of ozone precursors in future years.

These inventories are useful for projecting trends in emissions over

time and for understanding the relative importance of various emission

sources. The second major step is to input specially prepared

inventories into a complex grid-based air quality model which simulates

the photochemistry of ozone formation over a geographic area for the

same future years. Modelers have been able to gradually improve the

quality of both of these types of modeling over many years, and

improvements continue.

As discussed more fully in the Summary and Analysis of Comments

document, EPA believes that the available computer modeling of

emissions and air quality, while of necessity complex and continually

undergoing improvement, clearly provides a legitimate basis for today's

rule. The Agency believes that its modeling projects with reasonable

accuracy that, absent new control programs, NOX emissions

would increase in the future and that the expected result would be

increased ozone problems for many areas.

2. Possible Ozone Increases From NOX Reduction

In the ANPRM and NPRM, EPA discussed the well known phenomenon that

reducing NOX emissions in a local area may in certain

circumstances result in an increase in ozone in limited parts of the

area. Some commenters suggested that, as a result of this phenomenon,

any proposed action to reduce NOX emission would be unwise

or premature. After consideration of all comments received on this

subject, EPA believes that nothing in the comments warrants a different

course of action than that proposed by the Agency. In fact, air quality

modeling work done since the analysis presented in the NPRM shows that

the Agency's justification for pursuing the proposed program is

appropriate.

The OTAG addressed the complex issue of regional impacts due to

transport of NOX and VOC emissions. The OTAG modeling

results indicate that urban NOX reductions produce

widespread decreases in ozone concentrations on high ozone days. In

addition, urban NOX reductions also produce limited

increases in ozone concentrations locally, but the magnitude, time, and

location of these increases generally do not cause or contribute to

high ozone concentrations. Most urban ozone increases modeled in OTAG

occur in areas already below the ozone standard and, thus, in most

cases, urban ozone increases resulting from NOX reductions

do not cause exceedance of the ozone standard. There are a few days in

a few urban areas where NOX reductions are predicted to

produce ozone increases in portions of an urban area with high ozone

concentrations. In these circumstances, additional VOC control measures

may be needed to offset associated ozone increases due to

NOX emissions decreases in local areas.

Nonetheless, modeling analyses conducted as part of the OTAG

process indicated that, in general, NOX reduction

disbenefits are inversely related to ozone concentration. On the low

ozone days leading up to an ozone episode (and sometimes the last day

or so) the increases are greatest, and on the high ozone days, the

increases are least (or nonexistent); the ozone increases occur on days

when ozone is low and the ozone decreases occur on days when ozone is

high. This indicates that, in most cases, urban ozone increases may not

produce detrimental effects. Overall, OTAG modeling thus demonstrates

that the ozone reduction benefits of NOX control outweigh

the disbenefits of urban ozone increases in both magnitude of ozone

reduction and geographic scope.

The Agency has concluded that the overall benefit of large regional

reductions in NOX, like those that would occur with the HDE

standards finalized today, warrant such controls even where localized

ozone increases may occur.24 25

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\24\ ``EPA Staff Observations from Recent Air Quality

Modeling,'' Memorandum from Norm Possiel to Tad Wysor, August, 1997.

\25\ Also see EPA's notice of denial of API petition for

reconsideration of the Phase II reformulated gasoline NOX

standard. (62 FR 11346 (March 12 1997)).

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

3. Trends in Ozone Levels

EPA is aware of data indicating gradual improvements in ozone

levels over the past several years. The Agency attributes this apparent

trend to the success of past NOX and VOC control programs.

Since the Agency has concluded that NOX levels will continue

downward for several years but then level off and begin to rise, the

welcome downward trend in ozone cannot, unfortunately, be expected to

continue without new emission reductions. EPA does not agree with the

commenter that the current trends indicate that new NOX

control programs are not necessary. Rather, these data help show that

NOX control can be very effective in reducing ozone.

Moreover, the data reinforce EPA's belief (as discussed in Section II.

above) that there will likely be an

[[Page 54705]]

upward trend in NOX emissions and ozone in the future if

further NOX controls are not implemented. The Agency

believes, therefore, that further NOX controls, including

the HDE standards issued today, must be vigorously pursued.

B. Level of Standards

1. Diesel Engines--NOX Plus NMHC

EPA proposed a combined NMHC+NOX standard of 2.4 g/bhp-

hr with an option to manufacturers of 2.5 g/bhp-hr with a NMHC cap of

0.5 g/bhp-hr. The emission standards proposed in the NPRM for diesel-

cycle engines were based on what EPA considered to be the greatest

achievable reductions from technology expected to be available in 2004,

giving appropriate consideration to cost, energy, and safety.

Commenters showed general support for the alternative

NMHC+NOX standards proposed by EPA. The manufacturers

commented that the proposed NMHC+NOX standards will be

feasible for most highway heavy-duty diesel engines in 2004, provided

that PM standards do not change. Manufacturers expressed specific

support for the standards as they were proposed, including the optional

2.5 g/bhp-hr standard with 0.5 g/bhp-hr NMHC cap. EPA did not receive

comment recommending another level for the standard for diesel engines.

Based on current information, EPA has determined that the proposed

revision of NOX and NMHC standards is appropriate for 2004.

The assessment of feasibility in the NPRM remains unchanged. An

overview of the engine changes manufacturers are expected to make to

meet the standards can be found in the Economic Impact discussion later

in the preamble and in the Regulatory Impact Analysis.

2. Highway Diesel Engine--PM

In the NPRM, EPA proposed to leave the diesel engine PM standards

at their current levels: 0.10 g/bhp-hr for truck engines and 0.05 g/

bhp-hr (0.07 in-use) for urban buses. State, health, and environmental

groups were unanimous in their comments exhorting EPA to move forward

with additional control of diesel PM from on-highway heavy-duty diesel

engines. These commenters focused on the need for control of diesel PM

in the context of health effects from PM exposure and EPA's recent

proposal to revise the National Ambient Air Quality Standard for PM.

The groups also noted that the urban bus standard for PM was 0.05 g/

bhp-hr and argued that all diesel HDEs could meet that level. In

contrast, the manufacturers commented that even meeting the current

diesel PM standards while reducing NOX emissions by 50

percent presents a significant technical challenge. The manufacturers

commented that further reduction in the PM standard would threaten the

overall feasibility and cost-effectiveness of the 2004 NMHC plus

NOX standards. In the case of urban buses, manufacturers

asked for a relaxation in the level of the PM standard to be able to

meet the new levels for NMHC+NOX emissions.

EPA understands the concerns that have been raised by the state,

environmental, and health commenters and has an interest in pursuing

further control of PM emissions if appropriate. As discussed in more

detail above and in the Regulatory Impact Analysis, PM emissions can

cause risks to public health and welfare, including a range of

respiratory illnesses and aggravation of cardiovascular disease. EPA is

reviewing and will continue to review many strategies for reducing

harmful emissions of PM, including reduction of emissions from internal

combustion engines. In fact, the reductions in NOX emissions

resulting from this rule will significantly lower secondary formation

of nitrate PM. 26

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

\26\ Benefits of Mobile Source NOX Related

Particulate Matter Reductions, October 1996, EPA Contract No. 68-C5-

0010.

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

However, based on the information available today and the statutory

factors set forth in section 202(a)(3)(A) of the Clean Air Act, EPA has

determined that the current diesel PM standards are the lowest

appropriate levels in 2004 in the context of an approximate 50 percent

reduction in NOX. Because of the trade-off between

NOX and PM emissions, manufacturers will have to undertake

considerable effort to keep PM emissions below the current standard

while essentially halving NOX emissions. EPA cannot be

certain at this time that any further reductions in PM emissions can be

realized in manner that is durable, reliable for the majority of the

fleet, and cost-effective. As discussed below and in the Summary and

Analysis of Comments, the ability of urban buses to meet a more

stringent standard for PM does not necessarily mean that such a

standard is feasible and appropriate for all heavy duty diesel engines.

Open issues regarding control technology and strategy have

contributed to EPA's decision not to lower PM standards at this time.

To date, most medium heavy-duty and all heavy heavy-duty diesel engine

families have been successful in meeting the 0.10 g/bhp-hr diesel PM

standard using in-cylinder or engine-based control strategies. However,

most of the light heavy-duty diesel engines have employed the use of

aftertreatment devices such as oxidation catalysts to reach this level.

All urban bus engines have used aftertreatment to achieve the

applicable 0.05 g/bhp-hr diesel PM standard, albeit at somewhat higher

cost and cost effectiveness values than for truck engines. While there

are clearly different emission control strategy philosophies among the

manufacturers and differences among engines technologies that lead to

these variations in technological approach, further work is needed to

identify and evaluate what set of control strategies have the greatest

potential to achieve full life emission control at diesel PM levels

less than 0.10 g/bhp-hr while also reducing NOX to

approximately 2 g/bhp-hr. This ultimate set of strategies may involve

aftertreatment techniques similar to those currently used on light

heavy-duty diesel engines and urban buses or could be a technology

still in research and development. However, at this time, it is

uncertain whether potential methods for reduction of PM and

NOX from heavy-duty engines are capable of reducing emission

levels for the great majority of the heavy-duty engine fleet below the

standards promulgated today in a manner that is reliable for the full

useful life of the engines. Further discussion regarding technological

feasibility can be found in the Summary and Analysis of Comments and

the Regulatory Impact Analysis.

Closely related are the issues of cost and cost effectiveness. The

purchase and operating cost implications of any additional control

technology must be considered as part of further evaluation, as should

the cost-effectiveness of further reductions in new engine emission

standards. This is best evaluated in the context of the possible

control technologies as discussed above.

There are other open scientific and technical issues that EPA plans

to consider prior to the 1999 review. One issue is related to the form

of the diesel particulate standard. Current EPA diesel particulate

standards are based on mass per unit work (g/BHP-hr), and EPA continues

to believe that this is the appropriate form for setting standards.

Recently, an issue of a potential impact of technology on particle size

distribution has arisen. Virtually all diesel particulate matter has a

diameter less than 1.0 micron and is thus fully respirable by humans. A

recent study sponsored by the Health Effects Institute on two similar

and recent engine models (one of a later technology)

[[Page 54706]]

indicated that while the total mass of PM emissions was lower in the

newer technology engine, the remaining particles from the new engine

were smaller in diameter and more numerous. 27 The

implications of this information are not clear either with regard to

technology or health effects. While EPA continues to believe that mass-

based emission standards for PM are the most appropriate form, more

information on the impact of any advanced engine and emission control

technology on diesel PM size, particle count, and chemical constituents

as well as the health effects of any changes in these particle

characteristics would be helpful.

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

\27\ K.J. Baumgard, J.H. Johnson, ``The Effect of Fuel and

Engine Design on Diesel Exhaust Particle Size Distributions,''

Society of Automotive Engineers, 960131, 1996.

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

Another issue is related to the magnitude of the directly-emitted

diesel PM inventory and its relative air quality impact. Unlike nonroad

diesel engines PM emissions, highway diesel engine PM emissions have

been controlled since 1988, and current standards require an 80 to 90

percent reduction over uncontrolled levels. Nonetheless, it is clear

that control of diesel PM emissions is important, and more data on the

percentage of highway engine diesel PM in the various urban areas and

nonattainment area inventories and the in-use performance of controlled

highway diesels would be helpful in guiding the Agency's future

initiatives with regard to potential highway diesel engine PM control

strategies. In any case, tightening NOx standards alone

results in lower levels of ambient PM due to the accompanying reduction

in secondary formation of nitrate PM, as discussed elsewhere in this

preamble.

EPA considers further control of highway diesel engine PM emissions

to be an important air quality goal and plans to further study these

issues and others over the next two years, and to reassess the diesel

PM standard in the 1999 review. In that context, EPA encourages

continued research and development on PM control technology and seeks

input in all of the areas described above.

Urban bus engines are and will continue to be a special case

because they have unique operating characteristics, are used in only a

limited range of vehicle applications, and are treated differently than

other heavy duty engines under the Clean Air Act. Urban buses

experience a typical duty cycle for which engines can relatively easily

be designed; other heavy duty engines, in contrast, can be applied to

several different types of truck applications and can experience a much

wider range of duty cycles. The duty cycle that engines will see is

important because manufacturers must design engines to meet the

standards over their full useful lives. Moreover, the particular

emphasis on PM reductions in section 219 of the Act indicates that

Congress was especially interested in such reductions from urban bus

engines and considered more stringent standards appropriate for such

engines, even if costs are higher relative to other HDEs. For these

reasons, EPA believes that the new NMHC+NOx standard along

with the more stringent urban bus PM standard will be feasible and

appropriate for urban buses. As part of the 1999 review, EPA will

reevaluate the appropriateness of the urban bus standards.

3. Otto-Cycle Engines

In response to the ANPRM, environmental groups provided comments

highlighting manufacturers' certification data for the 1996 model year,

which included some engine families with emission levels considerably

below the standards proposed for the 2004 model year. While EPA

proposed to adopt more stringent emission standards applicable to both

diesel and otto-cycle (which are primarily gasoline-fueled) heavy-duty

engines, EPA also requested comment on the possibility of adopting more

stringent emission standards for heavy-duty gasoline engines.

Certification data for 1997 showed a larger number of engine families

emitting at or below the 2004 levels, with some engines certified at

emission levels only ten to twenty percent of the 2004 emission

standards.

At this point, EPA is not yet ready to take final action on the

issues associated with otto-cycle HDEs and is not finalizing any

revised standards for heavy-duty otto-cycle engines. EPA intends to

issue a Supplemental Notice of Proposed Rulemaking to address these

engines specifically. A variety of options are under consideration for

inclusion in the supplemental proposal. First, as described in the

initial proposal, EPA may pursue a more stringent numerical standard

using the existing test on an engine dynamometer. Second, EPA will

evaluate the appropriateness of adopting emission standards for some

otto-cycle heavy-duty vehicles based on testing with a chassis

dynamometer. Chassis testing, and associated standards, could be

patterned after the program adopted by the California Air Resources

Board for medium-duty vehicles. Alternatively, EPA could develop a test

and standard using the chassis test cycle specified in 40 CFR Part 86,

subpart M for heavy-duty gasoline vehicles.

C. In-Use Emissions Control and Compliance

1. In-Use Emissions Control Regulatory Elements

The NPRM contained several proposals which involved modifications

to existing regulations, including regulations for the useful life of

the engine, emissions performance and defect warranties, and

maintenance requirements. These proposals would update the existing

requirements, which were established several years ago, to better align

them with current industry experience of longer lasting engines. EPA

also proposed some elementary provisions regarding engine rebuilding to

help ensure that rebuilding does not result in the removal of emissions

control equipment or the reconfiguring of the engine in a way that

would result in a significant increase in emissions. EPA's final

actions on these items are described in section III.B. of this

preamble. The reader is directed to the Summary and Analysis of

Comments for a full discussion of comments received by EPA on its in-

use emissions related proposals and EPA analysis and response to those

comments.

2. State Inspection and Maintenance Programs

EPA noted in the preamble to the NPRM its intention to develop a

guidance document for states to follow in designing inspection and

maintenance programs for heavy-duty trucks and buses. Several

commenters urged EPA to issue guidance to states quickly regarding how

to conduct in-use inspection and maintenance programs. Commenters noted

that several states and regions are working on in-use emissions

programs and EPA guidance is critical to help ensure consistent

programs from state-to-state. Commenters requested that EPA evaluate

the Society of Automotive Engineers (SAE) test procedure J-1667 and

move rapidly to endorse its use in road-side smoke inspection programs.

State organizations recommended, further, that EPA move to adopt the J-

1667 procedure or other short test procedures as certification short

test procedures and develop correlations between the short tests and

the full certification tests. This would allow states and EPA to

determine vehicle compliance in the field. NESCAUM noted that research

is needed on the relationship between smoke opacity and particulate

emissions. NRDC

[[Page 54707]]

commented that the smoke test will be inadequate for verifying

compliance with the standard proposed in the rule.

EPA recognizes the importance of providing guidance to states in

these matters. EPA has been working informally with stakeholders

including representatives from States, the trucking industry, engine

manufacturers, and EPA Regions, among others, in its development of

such guidance. As a result of this effort, EPA has recently issued

guidance to states recommending the SAE J-1667 test procedure for their

I/M programs.\28\ EPA plans to continue working with stakeholders to

address other concerns related to the smoke test procedure such as the

establishment of appropriate cut-points. The correlation of test

cycles, establishment of certification short tests, and short tests for

emissions other than smoke emissions, are complex in nature and must be

studied further. For these reasons and also because I/M was not a

subject of any proposals in the NPRM, the Agency is not adopting such

programs or requirements in this rule.

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

\28\ ``Guidance to States on In-use Smoke Test Procedure For

Highway Heavy-duty Diesel Vehicles'', United States Environmental

Protection Agency, April 3, 1997. Docket A-95-27.

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

3. In-use Compliance Issues

EPA received comments in several areas related to in-use emissions

control, but not related to any specific proposals contained in the

NPRM. Several commenters expressed substantial concern over what they

believe to be EPA's lack of a practical in-use compliance program for

heavy-duty engines. They contend that EPA relies entirely on self

certification and selective enforcement audits for heavy-duty

compliance due to the impracticality and high cost of in-use engine

testing. Commenters expressed concern that a number of HDEs have failed

the SEA testing in recent years. The commenters urged EPA to develop an

effective in-use compliance testing program including a viable recall

program to ensure that engines comply with applicable standards over

their useful lives. One commenter noted that the threat of in-use

deterioration will increase as the standards are lowered. Commenters

recommended that the Agency develop a supplemental certification test,

such as a loaded chassis test, which could be used for in-use

compliance and one commenter urged the Agency commit to a schedule for

development and implementation.

EPA received comments urging the Agency to adopt requirements for

manufacturers to install on-board diagnostics (OBD) systems in heavy-

duty vehicles. Commenters believe that OBD could be a valuable tool in

improving maintenance practices and assessing the in-use performance of

heavy-duty engines. State organizations who commented are interested in

having OBD systems available as a tool for inspection and maintenance

programs.

EPA also received comment that a more representative test cycle is

a key to controlling excess emissions associated with high speeds and

loads typical of real world conditions not currently represented in the

federal test procedure (i.e., off cycle emissions). The commenter also

believes that the increasing use of onboard computers to control the

operation of engines further exacerbates the need for different and

more variable test cycles. The commenter notes that onboard computers

can be used to change the engine operating conditions to optimize fuel

economy at the expense of emissions in modes of operation that are not

well represented in the EPA test procedure. The commenter urged EPA to

evaluate its current heavy-duty engine test procedure and consider such

options as a random test cycle to minimize the impact of off-cycle

emissions.

While EPA believes that the new standards will achieve the

emissions reductions estimated in section II of this preamble, EPA also

recognizes that improvements in the understanding of in-use emissions

and the need to establish a viable in-use compliance presence are

essential. To address these concerns EPA has recently engaged in a

number of activities to address in-use emissions. EPA has signed a

Memorandum of Understanding (MOU) with the California Air Resources

Board (ARB) and the Northeast States for Coordinated Air Use Management

(NESCAUM) to develop a better understanding of in-use emissions from

heavy-duty vehicles.\29\

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

\29\ ``Developing an Understanding of In-use Emissions from

Heavy-duty Diesel Engines'', Memorandum of Understanding, United

States Environmental Protection Agency, Northeast States for

Coordinated Air Use Management, California Air Resources Board,

March 1997, Docket A-95-27.

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

Under the context of this MOU, EPA has recently implemented a

small-scale chassis-based screening program for in-use HDV's that will

establish a viable in-use compliance presence. The screening program

seeks to identify high emitting engines or technologies, and the causes

of high emissions. The screening program is initially focused on light

heavy-duty gasoline engines, although EPA plans to work with ARB and

NESCAUM to expand the program to all sectors of the on-highway heavy-

duty industry in the next several months and include on-road emissions

measurements. Such a screening program will allow EPA to identify high-

emitting engine families, potentially signaling the need for recall

action under section 207 of the Clean Air Act. In addition, the in-use

screening program will allow EPA to enforce certain provisions of

section 203 of the Act, including the prohibition against manufacturer-

designed strategies or devices that defeat the operation of the

emissions control system, and the prohibition against tampering with

the emissions control system. Lastly, the screening program will allow

EPA to assess in-use deterioration of HDE's by testing trucks at

various mileages. Although the screening program will also provide

important information regarding off-cycle emissions, EPA understands

that further work in this area may be necessary to fully address the

off-cycle concern.

In addition to the screening program and engine testing conducted

under the MOU, EPA will continue to work with state groups and others

to develop tools for states to reduce in-use HDV emissions. Many states

are implementing, or are considering implementing, inspection and

maintenance (I/M) programs for HDV's. As noted above, EPA has recently

issued guidance regarding an in-use I/M smoke test procedure, and plans

to follow-up that guidance with recommended pass/fail cut-points. In

addition, the EPA plans to study the benefits and feasibility of on-

board diagnostics (OBD) and other concepts that may prove to be useful

I/M tools.

EPA is also committed to working with states and industry to

implement a voluntary retrofit program aimed at reducing emissions from

older in-use vehicles that would be modeled after EPA's Urban Bus

Retrofit/Rebuild Program. Such a program could lead to emission

reductions from the in-use fleet beyond those required by the

applicable standards through the retrofit of advanced emission control

technologies.

In response to EPA and commenter concerns about the growing number

of engines which fail SEA testing, EPA believes that a viable long-term

in-use recall presence will provide the necessary assurances that new

production engines will comply with applicable standards. In the near-

term, EPA plans to engage the industry in constructive dialogue aimed

at better understanding production processes and variability,

manufacturer-based

[[Page 54708]]

production line testing programs, and methodologies used determine

deterioration factors. Through these discussions, EPA believes that

incremental improvements in SEA performance can be achieved. EPA is

committed to further review of its compliance programs, and revisions

to its regulatory programs if needed.

EPA believes that these near-term actions will begin to address

many of the concerns raised by commenters with respect to in-use

emissions, and that changes in the HDV compliance program could result

from these near-term actions. In addition, continued long-term study of

in-use HDV emissions will further enhance our understanding and will

provide a basis for future programmatic, regulatory, or other changes

to ensure the emissions reductions from more stringent standards are

reflected in the in-use emissions from HDV's.

D. Averaging, Banking, and Trading

As discussed above, EPA proposed a modified ABT program as part of

the transition to more stringent emissions standards for NOx and NMHC

in 2004. Many comments were received on the ABT provisions of the NPRM.

As discussed in the Summary and Analysis of Comments supporting this

final rule, EPA has considered the comments received on the proposal

and revised the provisions as appropriate. The ABT program EPA is

implementing is consistent with the goals of the ABT concept as

discussed in the NPRM. The modified ABT program being implemented in

this rule provides the manufacturers the incentive to achieve

improvements on current technology and pull ahead 2004-era technology

to generate early emission reductions. These early reductions provide a

near-term benefit to the environment and the emission credits generated

provide the manufacturers significant compliance flexibility. As stated

by the manufacturers, this compliance flexibility is a significant

factor in the manufacturers' ability to certify a full line of engines

in 2004 and helps to allow implementation of the new more stringent

standard as soon as permissible under the Clean Air Act.

1. Applicability

The NPRM proposed a modified ABT program for both diesel and otto-

cycle engines. However, as noted above, EPA received comment regarding

whether EPA's proposed otto-cycle standards and ABT provisions were

appropriate. As a result of EPA's evaluation of these comments, EPA is

not promulgating final standards for otto-cycle HDEs in this rule. EPA

is also not finalizing a modified ABT program for otto-cycle HDEs. EPA

will address such standards and ABT provisions in a Supplemental Notice

of Proposed Rulemaking in the future. The modified ABT program being

implemented by EPA for 1998 through 2003 and the modified program

finalized for 2004 and later apply only to diesel-cycle engines.

2. The Modified ABT Program Diesel-Cycle Engines (1998-2003)

As will be discussed further below, the current ABT program will be

retained for credit generation and use by production otto-cycle engines

and credit use by diesel-cycle engines during the 1998-2003 model

years. Effective for the 1998 model year, EPA is implementing a

modified certification ABT program designed to help ensure compliance

with the NMHC+NOX and PM standards beginning in 2004. The

provisions of this program are described below.

Credits generated under the modified program may be used only in

2004 and later model years. Manufacturers may not use credits generated

in the current program on engines generating credits under the modified

program. However, credits generated under the modified program may be

used before 2004, subject to the regulatory provisions of the current

ABT program. As was proposed, credits generated between 1998 and 2003

under this modified program are based on NOX only and are

calculated against the 4.0 g/bhp-hr NOX emission standard.

The NMHC levels of most heavy-duty engines are well below the present

standard and would result in windfall credits if the credit calculation

included NMHC. Diesel PM credits are based on reductions beyond the

model year 0.10 g/bhp-hr emission standard for truck engines and the

0.05 g/bhp-hr emission standard for urban buses.

In the NPRM, EPA proposed that there be no discounts for credits

banked under the modified program. However, in response to comments and

further consideration by EPA on the best way to align this program with

the general goals of the ABT program and other EPA market incentive

programs, EPA is finalizing somewhat different provisions. To better

align the ABT program with the goal of pull-ahead technology, EPA has

decided to implement a trigger concept as a mechanism to distinguish

engine families eligible for no discount. For engine families certified

at NOX levels less than 3.5 g/bhp-hr NOX, no

discount will be applied to any NOX or PM credits generated

for banking. The 3.5 g/bhp-hr cut-point was suggested by commenters and

EPA judges this level to be a reasonable discriminator for pull-ahead

technology. It is similar in stringency to the California LEV standard

for these engines and only three federal 1997 heavy-duty diesel

families are certified below this level. For engine families certified

at NOX levels above 3.5 g/bhp-hr, a 10 percent discount will

be applied to all credits generated, both NOX and PM. EPA

has decided to retain a discount for this portion of the program

because smaller incremental reductions such as this are less likely to

represent the pull-ahead technology which ABT is designed to encourage.

These smaller credits nonetheless represent early reductions and are

appropriate given the stringency of the model year 2004 standard,

consistent with the ABT concept.

As was mentioned above, the modified program includes a 10 percent

discount for engines certified above the trigger. This level of

discount was selected based on a combination of factors. Several

commenters stated that a discount should be retained, some suggesting

10 percent, some implying the current 20 percent level. Other

commenters supported the Agency's proposal to eliminate all credit

discounts. In attempting to design a program which meets all of the

goals of ABT, the Agency selected 10 percent. The manufacturers

comments indicated that a 20 percent discount was far too large and

created a significant disincentive for the introduction of new or

improved technology. Conversely, EPA believes that eliminating the

discount for all credits as was proposed would have reduced the

incentive to develop and implement significantly cleaner technology. A

10 percent discount for credits generated at FELs above 3.5 g/bhp-hr,

strikes a balance between these views, and aligns the discount in the

heavy-duty engine ABT program with others in the mobile source program

such as the National Low Emission Vehicle program.

Some commenters opposed allowing PM credits to be generated and

used in the modified program because the PM standard is not changing.

In response, EPA believes that it is appropriate to include PM in the

modified ABT program. For most in-cylinder control technologies, there

is a strong inverse relationship between NOX and PM which

makes it difficult to control both pollutants at the same time. The

control technologies expected to be used to reduce NOX to

model year 2004 levels are likely to increase PM. Therefore, EPA

believes that applying the ABT modifications to PM as well as

NOX allows the manufacturer more flexibility

[[Page 54709]]

in addressing the technology issues involved with reducing

NOX emissions to the NOX plus NMHC standard being

finalized in this rule, while maintaining PM emissions at 0.10 g/bhp-

hr. The Agency has decided to apply the NOX trigger to PM

emissions because engines generating PM credits at NOX

levels below the trigger in this time frame are likely to employ new,

or at least significantly improved, PM control technology, because of

the natural trade-off between NOX and PM emissions.

EPA proposed that the 3 year credit life restriction in the current

ABT program not apply in the modified program. After considering

comments, EPA is finalizing this provision as proposed. Even though

several commenters believed that the credit life limit should be

retained, EPA believes that an unlimited credit life is consistent with

the emission reduction goal of ABT, not only because of the increased

manufacturer flexibility in meeting the new standards but also because

it eliminates the ``use or lose'' aspect of the current program's limit

on credit life, which creates the perverse incentive for manufacturers

to use credits as quickly as possible. Unused credits are extra

emission reductions beyond what the EPA regulations require. The only

concern with unlimited credit life is that a manufacturer could

stockpile a large number of credits and delay the effectiveness of a

new standard in the future. This certainly would be a concern in a

situation where standards are less stringent and not technology-

forcing. However, 2.4 g/bhp-hr NMHC+NOX and 0.10 g/bhp-hr PM

(0.05 g/bhp-hr for buses) are quite challenging for diesel engines; EPA

expects most pre-2004 credits will be needed in the first few years of

the new standard.

3. The Modified ABT Program 2004 and Later

EPA proposed that the current program be reinstated for 2007 and

later models years, including the 20 percent discount and 3 year credit

life. Some commenters who opposed the modified program urged the Agency

to reinstate the current program beginning in 2004. Manufacturers

argued that the current program should not be reinstated because the

current program would remove much of the incentive to pull-ahead

technology in the post 2004 time-frame.

EPA considered the comments carefully and decided to implement,

beginning in 2004, a modified program which will fully and permanently

replace the current ABT program for diesel-cycle engines, though with

significant changes from the proposal. Many of the same concepts that

appear in the 1998-2003 ABT program will be employed beginning in 2004,

but modifications have been made as appropriate. Beginning in 2004, the

form of the standard changes from separate HC and NOX

standards to a combined NMHC+NOX standard. Therefore in

2004, credits will be based on combined NMHC+NOX values. For

diesel engines, NMHC+NOX credits will be generated against

the 2.4 g/bhp-hr standard. Diesel PM credits will continue to be

generated against the 0.10 g/bhp-hr emission standard for truck engines

and the 0.05 g/bhp-hr emission standard for urban buses. For the same

basic reasons as laid out above, the trigger concept will continue to

be applied to the discount for NMHC+NOX and PM credits. This

trigger will be set at 1.9 g/bhp-hr NMHC+NOX. There are

currently no diesel-fueled engines certified even close to this level.

As above, there will be no limit on credit life. Removing discounts

and credit life limits for the cleaner engines will provide maximum

incentive for the development and introduction of petroleum- and

alternative-fueled diesel-cycle engines with emission levels

approaching the 1.0 g/bhp-hr NOX and 0.05 g/bhp-hr PM

research objectives of the 1995 SOP.

Credit use in 2004 and later years will follow the same pattern as

under the current program. As proposed, the upper limits for

NMHC+NOX and PM certification will be 4.5 g/bhp-hr and 0.25

g/bhp-hr, respectively. That is, no engine family may be certified

above either of these levels using credits. These limits provide the

manufacturers adequate compliance flexibility while protecting against

the introduction of unnecessarily high emitting engines.

4. Other Changes for the Modified ABT Program

Five other provisions were proposed or were discussed with requests

for comment which impact the modified ABT program. EPA is implementing

three of these and not finalizing two of the proposed modifications.

Of the three being finalized, first, EPA proposed to eliminate the

``buy high--sell low'' provision of Sec. 86.094-15(c)(2) and to replace

it with the production-weighted average value. Under this existing

provision, families generating credits use the lowest horsepower

configuration factor and those needing credits use the highest

horsepower configuration factor. In the modified program the

production-weighted average value will be used in both cases, as

proposed. There was no adverse comment on this change. The second area

relates to geographical applicability. The 2004 standards apply in all

fifty states. California is not included in the current ABT program

because they have a separate control program. Beginning in 2004 the

California and federal programs will harmonize and ABT will be

applicable for all federally certified HDEs without restrictions based

on geographical limitations on the certificate. Prior to 2004, the

current ABT program remains limited to HDEs certified for sale outside

California. There was no adverse comment on this issue.

The third change EPA is finalizing is related to the ownership of

credits. EPA requested comment on the concept that manufacturers be

given the option to make the NOX and PM credits generated by

their engines available parties other than the manufacturers for use in

other programs. This provision was supported by those who commented, so

the regulatory language accompanying the rule includes provisions to

permit credits to be excluded from the ABT program by the manufacturer

in order to be used by engine purchasers or other parties, while

preventing double counting. The ability to transfer credits out of this

program does not of course imply that these credits can be used without

restriction in other programs. Credits purchased for use in other

programs must meet the use requirements of the emission programs for

which they are purchased. For example, local emission programs will

likely have limits on their geographic scope which may limit the use of

emission credits that are used to trade out of local emission

requirements.

One provision not being finalized is related to the impact of the

change in useful life for heavy heavy-duty diesel engines in 2004 on

credit generation and use. The useful life value is a factor in

determining the amount of credits earned or used by an engine family.

Beginning in 2004 for these engines, the minimum useful life increases

50 percent from 290,000 miles to 435,000 miles. If a manufacturer uses

the minimum useful life value of 290,000 miles to calculate credits

generated prior to 2004, 50 percent more credits will be needed in 2004

to cover an engine certified with a useful life of 435,000 miles. EPA

sought comments on two options to address this issue for NOX

and PM. These included for NOX allowing manufacturers to

base their FEL on an emission level determined from a simple

extrapolation of the deterioration factor for NOX from

290,000 miles to 435,000 miles and to

[[Page 54710]]

earn credits up to 435,000 miles. Under such an approach, engine

families would continue to have a useful life of 290,000 miles and

manufacturers would be liable for emissions only up to the end of the

useful life. EPA also sought comment on requiring manufacturers to

apply for a longer useful life under the provisions of Sec. 86.094-

21(f) if they wanted to earn NOX credits based on a useful

life of more than 290,000 miles. This second option is allowed under

the current regulations. For PM, EPA did not propose the use of the

former approach proposed for NOX credits, only the latter

approach, due to concerns about the potential for deterioration of PM

emissions.

EPA received comments from manufacturers supporting the simple

extrapolation of the NOX deterioration factor for

calculating credits and comments arguing that PM deterioration in in-

use vehicles was negligible and predictable and that the extrapolation

proposed for NOX should be extended to PM. EPA also received

comments that the Agency should not allow credits to be generated over

a period where the manufacturer is not liable for emissions control.

As discussed in the Summary and Analysis of Comments, EPA has

decided not to finalize the simple deterioration factor extrapolation

method for either NOX or PM. In general, it would be

inconsistent with current EPA credit program policy to allow credits

without accompanying liability, even if the program is transitional.

Furthermore, for both NOX and PM there is some concern that

deterioration after the useful life may not be linear, especially for

engines using EGR or aftertreatment. Therefore, manufacturers desiring

credits for the longer useful life will have to certify to the longer

life for those pollutants as allowed under Sec. 86.094-21(f) of the

current regulations.

Finally, EPA is not finalizing the mandatory compliance margin

provisions proposed in the NPRM. EPA had proposed these provisions as a

means to address concerns that compliance margins (the difference

between the family emission limit and the certification level) had been

shrinking over time, and that the modified ABT program could provide an

incentive to shave margins inappropriately to gather additional

credits. One commenter provided examples where margins were reduced by

manufacturers in order to earn additional credits. Commenters

recommended margins of 10-15 percent due to concerns over margin

shaving. Other commenters believed that the best way to ensure that

manufacturers set appropriate margins would be through the use of EPA's

audit and compliance programs to target suspect engine families.

Manufacturers noted that they can improve their manufacturing processes

to allow for small margins while still complying with the FEL and

should not be penalized with a mandatory compliance margin.

Valid comments were presented on both sides of this issue, but the

Agency has concluded that the issue of the size of the compliance

margin is not solely an ABT issue. Indeed, compliance margins are

important in non-ABT families as well. Thus, the Agency has concluded

that any actions to address this issue are better implemented as part

of improvements in the overall compliance program, discussed above,

rather than as a regulatory fix in the context of a modified ABT

program. Moreover, EPA's final regulations, which implement a discount

on credits earned by engine families that are less than 0.5 g/bhp-hr

below the applicable NOX or NMHC+NOX standard

should reduce the concern evidenced in the comments regarding the

possibility that the modified program will further erode compliance

margins.

V. Economic Impact and Cost-effectiveness

The engine manufacturers, by signing the Statement of Principles,

have committed themselves to challenging, long-term design targets.

This provides manufacturers fully eight years to allocate resources and

conduct planning for a very thorough long-term R&D program.

Manufacturers have expressed a confidence that several years of

research will provide them opportunity to develop a complying engine

that they can market with full confidence. EPA's analysis of the costs

of complying with the new standards anticipates a significant degree of

technological development during this period.

The technologies described in the RIA together show a good deal of

promise for controlling emissions, but also make clear that much effort

remains to optimize for maximum emission-control effectiveness with

minimum negative impacts on engine performance, durability, and fuel

consumption. On the other hand, it has become clear that manufacturers

have a great potential to advance beyond the current state of

understanding by identifying aspects of the key technologies that

contribute most to hardware or operational costs or other drawbacks and

pursuing improvements, simplifications, or alternatives to limit those

burdens. To reflect this improvement and long-term cost saving

potential, the cost analysis includes an estimated $270 million (net

present value in 1995) in R&D outlays for heavy-duty engine emission

control over several years. The cost analysis accordingly presumes

extensive improvements on the current state of technology from these

future developments. The 1999 program review provides an opportunity to

reassess EPA's projected costs in light of new information. EPA will

revisit the analysis of the full life-cycle costs as part of the 1999

review. EPA and manufacturers will then confirm whether or not

technology development is progressing as needed to meet the 2004 model

year emission standards.

In assessing the economic impact of changing the emission

standards, EPA has used a current best judgement of the combination of

technologies that an engine manufacturer might use to meet the new

standards at an acceptable cost. Full details of EPA's cost and cost-

effectiveness analyses, including information not presented here, can

be found in the Regulatory Impact Analysis in the public docket. EPA

received a variety of comments on the cost analysis, either stating

generally that the estimated costs were too low or recommending changes

to specific details of the analysis. EPA made several minor changes to

the analysis in response to comments received on the proposal. The most

significant change was to include a broader use of EGR cooling. Further

investigation of the EGR and EGR cooling led to revised cost estimates

for those technologies. All the comments related to the cost

projections and the associated changes are described in the Summary and

Analysis of Comments.

Estimated cost increases are broken into purchase price and total

life-cycle operating costs. The incremental purchase price for new

engines is comprised of variable costs (for hardware and assembly time)

and fixed costs (for R&D, retooling, and certification). Total

operating costs include any expected increases in maintenance or fuel

consumption. Cost estimates based on these projected technology

packages represent an expected incremental cost of engines in the 2004

model year. Costs in subsequent years would be reduced by several

factors, as described below. Separate projected costs were derived for

engines used in three service classes of heavy-duty diesel engines. All

costs are presented in 1995 dollars. Life-cycle costs have been

discounted to the year of sale.

[[Page 54711]]

A. Engine Costs

It is difficult to make a distinction between technologies that are

needed to reduce NOX emissions for compliance with 2004

model year standards and those technologies that offer other benefits

for improved fuel economy and engine performance or for better control

of particulate emissions. This is because several NOX

control methods such as the use of EGR can have negative impacts on

these items for which the manufacturer must then compensate. EPA

believes that manufacturers, in the absence of 2004 model year

standards, would continue research on and eventually deploy numerous

technological upgrades to improve engine performance or more cost-

effectively control emissions. EPA therefore believes that a small set

of technologies represent the primary changes manufacturers must make

to meet the 2004 model year standards. Other technologies applied to

heavy-duty engines, before or after implementation of new emission

standards, will make relatively minor positive contributions to

controlling NOX emissions and are therefore considered

secondary improvements for this analysis. In this category are design

changes such as improved oil control, variable-geometry turbochargers,

optimized catalyst designs, and variable-valve timing. Lean

NOX catalysts are also considered here to be secondary

technologies, not because NOX control is an incidental

benefit, but rather because it is not clear at this time that they will

be part of 2004 model year technology packages. Modifications to fuel

injection systems will also continue independently of new standards,

though some further development with a focus on reducing NOX

emissions would be evaluated.

Several technological improvements are projected for complying with

the 2004 model year emission standards. The fact that manufacturers

have several years before implementation of the new standards virtually

ensures that the technologies used to comply with the standards will

develop significantly before reaching production. This ongoing

development will lead to reduced costs in three ways. First, research

will lead to enhanced effectiveness for individual technologies,

allowing manufacturers to use simpler packages of emission control

technologies than we would predict given the current state of

development. Similarly, the continuing effort to improve the emission

control technologies will include innovations that allow lower-cost

production. Finally, manufacturers will focus research efforts on any

drawbacks, such as increased fuel consumption or maintenance costs, in

an effort to minimize or overcome any potential negative effects.

A combination of primary technology upgrades are anticipated for

the 2004 model year. Achieving very low NOX emissions will

require basic research on reducing in-cylinder NOX and HC

while at least holding PM levels below 0.10 g/bhp-hr. Modifications to

basic engine design features can be used to improve intake air

characteristics and distribution during combustion. Manufacturers are

also expected to utilize upgraded electronics and advanced fuel-

injection techniques and hardware to modify various fuel injection

parameters, including injection pressure, further rate shaping and some

split injection. EPA also expects that many engines will incorporate

cool EGR that is carefully tailored to an engine's different operating

modes.

If not developed and implemented properly, EGR has the potential to

increase operating costs, either by increasing fuel consumption or

requiring additional maintenance to avoid accelerated engine or

component wear. While it is possible to develop scenarios and estimate

the impact on operating costs of current diesel EGR concepts, this is

of minimal value due to the expected continuing development of these

technologies. Nevertheless, EPA has assessed the potential for

increased operating costs for EGR-related maintenance and for fuel

economy. EPA understands that manufacturers will make a great effort to

minimize any potential new maintenance burden for the end user,

investing in research to design an engine acceptable to users. The cost

to address the durability concern is therefore included both as a

maintenance item and as a fixed cost. An additional maintenance cost is

anticipated for EGR systems--EPA expects engine rebuilding will include

preventive maintenance to clean or replace EGR components.

With respect to fuel economy, several of the secondary technologies

described below may lead to cost savings, while EGR has the potential

to incur a fuel economy penalty. As with potential new maintenance cost

burdens, EPA believes manufacturers will focus their research efforts

on overcoming any negative impact on fuel economy caused by EGR. An EGR

cooler, which EPA expects to be commonly used, would alone mitigate

much of the potential increase in fuel consumption caused by

recirculating exhaust gases. In light of the potential fuel economy

improvements from some technologies and the anticipated use of cooled

EGR systems, it would not be appropriate to include a penalty for

increased fuel consumption as part of the cost analysis at this time.

EPA will reexamine this issue as part of the 1999 review analysis.

Meeting the new NOX+NMHC standard will somewhat increase

the challenge to control particulate emissions from diesel engines.

Manufacturers might use a variety of technologies to maintain control

of particulate emissions; however, EPA believes that the fuel system

improvements described above will be sufficient to prevent any

potential particulate-emission increase while meeting the target levels

for NOX and NMHC. In fact, manufacturers are attempting to

lessen the cost of meeting current particulate emission standards over

the next several years by decreasing their reliance on catalysts. This

underscores EPA's belief that 2004 model year engines will be able to

control particulate emissions without major technological innovation.

The costs of these new technologies for meeting the 2004 model year

standards are itemized in the Regulatory Impact Analysis and summarized

in Table 2. For light heavy-duty vehicles, the cost of a new 2004 model

year engine is estimated to increase by $258; operating costs over a

full life-cycle increase by about $7. For medium heavy duty vehicles

the purchase price of a new engine is estimated to increase by $397,

with life-cycle operating costs increasing $62. Similarly, for heavy

heavy-duty engines, the initial purchase price is expected to increase

by $467, while estimated additional life-cycle operating costs are

$131.

For the long term, EPA has identified various factors that would

cause cost impacts to decrease over time. First, the analysis

incorporates the expectation that manufacturers will apply ongoing

research to making emission controls more effective and less costly

over time. This expectation is similar to manufacturers' stated goal of

decreasing their reliance on catalysts to meet emission standards in

the future. Research in the costs of manufacturing has consistently

shown that as manufacturers gain experience in production, they are

able to apply innovations to simplify machining and assembly

operations, use lower cost materials, and reduce the number or

[[Page 54712]]

complexity of component parts.30 The analysis incorporates

the effects of this learning curve by projecting that the variable

costs of producing the low-emitting engines decreases by 20 percent

starting with the third year of production (2006 model year) and by

reducing variable costs again by 20 percent starting with the sixth

year of production. Finally, since fixed costs are assumed to be

recovered over a five-year period, these costs are not included in the

analysis after the first five model years. Table 2 lists the projected

schedule of costs for each category of vehicle over time.

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

\30\ ``Learning Curves in Manufacturing,'' Linda Argote and

Dennis Epple, Science, February 23, 1990, Vol. 247, pp. 920-924.

Table 2--Projected Diesel Engine Cost and Price Increases

[1995 dollars discounted to year of sale]

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

Purchase Life-cycle

Vehicle class Model year price operating cost

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

Light heavy-duty.......................... 2004................................... 258 7

2009 and later......................... 109 7

Medium heavy-duty......................... 2004................................... 397 62

2009 and later......................... 136 62

Heavy heavy-duty.......................... 2004................................... 467 131

2009 and later......................... 180 131

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

B. Aggregate Costs to Society

The above analysis develops per-vehicle cost estimates for each

vehicle class. Using current data for the size and characteristics of

the heavy-duty vehicle fleet and making projections for the future,

these costs can be used to estimate the total cost to the nation for

the new emission standards in any year. The result of this analysis is

a projected total cost starting at $270 million in 2004. Per-vehicle

costs savings over time reduce projected costs to a minimum value of

$140 million in 2009, after which the growth in truck population leads

to an increase in costs to $205 million in 2020. Total costs for these

years are presented by vehicle class in Table 3. The calculated total

costs represent a combined estimate of fixed costs as they are

allocated over fleet sales, variable costs assessed at the point of

sale, and operating costs as they are incurred in each calendar year.

Table 3--Estimated Annual Costs for Improved Heavy-Duty Vehicles

[Millions of dollars]

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

Category 2004 2009 2020

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

Light heavy-duty................. 71 41 49

Medium heavy-duty................ 64 26 38

Heavy heavy-duty................. 107 56 93

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

Total........................ 242 123 180

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

C. Cost-effectiveness

EPA has estimated the per-vehicle cost-effectiveness (i.e., the

cost per ton of emission reduction) of the NOX plus NMHC

standard over the typical lifetime of heavy-duty diesel vehicles

covered by today's rule. The RIA contains a more detailed discussion of

the cost-effectiveness analyses. No significant comments were received

on the cost-effectiveness analysis presented in the proposal and the

methodology for estimating the cost-effectiveness remains the same as

used in the proposal.

EPA has examined the cost-effectiveness by two different

methodologies. The first methodology yields a nationwide cost-

effectiveness in which the total cost of compliance is divided by the

nationwide emission benefits. The second methodology yields a regional

ozone strategy cost-effectiveness in which the total cost of compliance

is divided by the emission benefits attributable to the regions that

impact ozone levels in ozone nonattainment areas.31

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

\31\ The RIA contains a detailed description of areas included

in the regional control strategy.

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

In addition to the benefits of reducing ozone within and

transported into urban ozone nonattainment areas, the NOX

reductions from the new engine standards are expected to have

beneficial impacts with respect to crop damage, secondary particulate,

acid deposition, eutrophication, visibility, and forests.32

Due to the difficulty in accurately quantifying the monetary value of

these societal benefits, the cost-effectiveness values presented do not

assign any numerical value to these additional benefits. However, based

on an analysis of existing studies that have estimated the value of

such benefits in the past, the Agency believes that the actual monetary

value of the multiple environmental and public health benefits produced

by the large NOX reductions under this action will likely be

greater than the estimated compliance costs.33

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

\32\ For further discussion of these benefits, the reader is

directed to Chapter 2 of the RIA.

\33\ ``Benefits of Reducing Mobile Source NOX

Emissions,'' prepared by ICF Incorporated for Office of Mobile

Sources, U.S. EPA, Draft Final, September 30, 1996.

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

As described above in the cost section, the cost of complying with

the standards will vary by model year. Therefore, the cost-

effectiveness will also vary from model year to model year. For

comparison purposes, the discounted costs, emission reductions and

cost-effectiveness of the standards are shown in Table 4 for the same

model years discussed above in the cost section. The cost-effectiveness

results contained in Table 4 present the range in cost-effectiveness

resulting from the two cost-effectiveness scenarios described above.

[[Page 54713]]

Table 4--Discounted Per-Vehicle Costs, Emission Reductions and Cost-Effectiveness of the NOX Plus NMHC Standard

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

Discounted lifetime

Discounted reductions (tons) Discounted cost-

Vehicle class Model year lifecycle ---------------------- effectiveness

costs NOX NMHC ($/ton)

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

Light--Heavy-Duty Diesel 2004...................... $265 0.242 0.003 $1,100-$1,200

Vehicles.

2009 and later............ 117 500

Medium--Heavy-Duty Diesel 2004...................... 459 1.002 0.014 500

Vehicles.

2009 and later............ 198 200

Heavy--Heavy-Duty Diesel 2004...................... 598 3.059 0.043 200

Vehicles.

2009 and later............ 311 100

All--Heavy-Duty Diesel Vehicles 2004...................... 422 1.377 0.019 300

2009 and later............ 202 100-200

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

VI. Administrative Requirements

A. Administrative Designation and Regulatory Analysis

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

Agency must determine whether this regulatory action is ``significant''

and therefore subject to OMB review and the requirements of the

Executive Order. The order defines ``significant regulatory action'' as

any regulatory action that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities;

(2) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants,

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

thereof; or

(4) Raise novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

the Executive Order.

Pursuant to the terms of Executive Order 12866, EPA has determined

that this rule is a ``significant regulatory action'' because the

standards and other regulatory provisions have an annual effect on the

economy in excess of $100 million. A Regulatory Impact Analysis has

been prepared and is available in the docket associated with this

rulemaking. This action was submitted to the Office of Management and

Budget (OMB) for review as required by Executive Order 12866. Any

written comments from OMB and any EPA response to OMB comments are in

the public docket for this rule.

B. Compliance With Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 requires federal agencies to

identify 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.

The Agency has determined that it is not necessary to prepare a

regulatory flexibility analysis in connection with this final rule. The

Agency has also determined that the new emission standards and related

provisions will not have a significant impact on a substantial number

of small entities, since none of the engine manufacturers affected by

these regulations is a small business entity (see Chapter 3 of the

Final Regulatory Impact Analysis for the rule).

This action also contains provisions clarifying what would and

would not be considered a prohibited act (tampering) under CAA Section

203 during the heavy-duty engine rebuilding processes. Also, the rule

contains basic recordkeeping requirements for rebuilders which are

consistent with current customary rebuilding practices. Small

businesses are integral to the heavy-duty engine rebuilding industry as

noted in comments provided by the Automotive Engine Rebuilders

Association.34 However, EPA does not believe that the

requirements related to engine rebuilding will have a significant

impact on a substantial number of these small entities for the

following reasons. EPA is defining how a broad existing requirement

(CAA Section 203) applies specifically to the process of rebuilding/

remanufacturing engines, but EPA is not creating a new program. These

requirements are consistent with current customary practices in this

industry. During the development of the proposal, EPA consulted with

the Engine Manufacturers Association, the Automotive Engine Rebuilders

Association, and the Production Engine Rebuilders Association,

associations which together represent a substantial portion of the

engine rebuilding and related businesses. These organizations did not

raise concerns that the proposal may have a significant impact on small

businesses. Furthermore, organizations representing small rebuilders

submitted only supportive comments during the public comment period for

the rulemaking. Finally, an EPA contractor conducted an industry

characterization which further supports that engine rebuilding

practices are consistent with the requirements and would not be changed

as a result of the requirements 35.

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

\34\ EPA Docket A-95-27, II-D-41.

\35\ ``Industry Characterization: On-road Heavy-duty Diesel

Engine Rebuilders'', ICF Incorporated, Contract number 68-C5-0010,

Work assignment 102, January 3, 1997, Docket A-95-27.

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

C. Compliance With Paperwork Reduction Act

The Office of Management and Budget (OMB) has approved the

information collection requirements contained in this rule under the

provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and

has assigned OMB control number 2060-0104.

EPA is finalizing requirements to collect certification results,

durability, maintenance, and averaging, banking and trading

information, and is formalizing recordkeeping procedures for engine

rebuilding companies which are consistent with current industry

practices. This information will be used to ensure compliance with and

enforce the provisions in this rule. Section 208 (a) of the CAA

requires that manufacturers provide information the Administrator may

reasonably require to determine compliance with the regulations,

therefore submission of the

[[Page 54714]]

information is mandatory. The confidentiality of any information

submitted to EPA will be protected to the full extent provided in 40

CFR Part 2.

EPA estimates the average first year hours burden per response to

be 4,670, the frequency of response to be annual, and the estimated

number of likely respondents to be twenty. EPA estimates the aggregate

first year hours burden to be 93,410. EPA estimates the annual first

year cost to be $5,603,280, including the annualized capital and start-

up costs. Subsequent year burdens are estimated to be one-tenth of the

first year estimates due to the practice of engine family carry-over

from model year-to-model year. Burden means the total time, effort, or

financial resources expended by persons to generate, maintain, retain,

or disclose or provide information to or for a Federal agency. This

includes the time needed to review instructions; develop, acquire,

install, and utilize technology and systems for the purposes of

collecting, validating, and verifying information, processing and

maintaining information, and disclosing and providing information;

adjust the existing ways to comply with any previously applicable

instructions and requirements; train personnel to be able to respond to

a collection of information; and transmit or otherwise disclose the

information.

An Agency may not conduct or sponsor, and a person is not required

to respond to a collection of information unless it displays a

currently valid OMB control number. The OMB control numbers for EPA's

regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15. EPA is

amending the table in 40 CFR Part 9 of currently approved ICR control

numbers issued by OMB for various regulations to list the information

requirements contained in this final rule.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L.

104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. Under section 202 of the UMRA, EPA

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with ``Federal mandates'' that

may result in expenditures to state, local, and tribal governments, in

the aggregate, or to the private sector, of $100 million or more for

any one year. Before promulgating an EPA rule for which a written

statement is needed, section 205 of the UMRA generally requires EPA to

identify and consider a reasonable number of regulatory alternatives

and adopt the least costly, most cost effective, or least burdensome

alternative that achieves the objectives of the rule. The provisions of

section 205 do not apply when they are inconsistent with applicable

law. Moreover, section 205 allows EPA to adopt an alternative other

than the least costly, most cost effective, or least burdensome

alternative if the Administrator publishes with the final rule an

explanation of why that alternative was not adopted. Before EPA

establishes any regulatory requirements that may significantly or

uniquely affect small governments, including tribal governments, it

must have developed under section 203 of the UMRA a small government

agency plan. The plan must provide for notifying potentially affected

small governments, enabling officials of affected small governments to

have meaningful and timely input in the development of EPA regulatory

proposals with significant federal intergovernmental mandates, and

informing, educating, and advising small governments on compliance with

the regulatory requirements.

Today's rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, or tribal

governments. The rule imposes no enforceable duties on any of these

governmental entities. Nothing in the program would significantly or

uniquely affect small governments. EPA has determined that this rule

contains federal mandates that may result in expenditures of $100

million or more in any one year for the private sector. EPA believes

that the program represents the least costly, most cost-effective

approach to achieving the air quality goals of the rule. EPA has

performed the required analyses. The reader is directed to the

Regulatory Impact Analysis for further information regarding these

analyses.

E. Submission to Congress and the General Accounting Office

Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business

Regulatory Enforcement Reform Act of 1996, EPA submitted a report

containing this rule and other required information to the U.S. Senate,

the U.S. House of Representatives, and the Comptroller General of the

General Accounting Office prior to publication of the rule in today's

Federal Register. OMB has designated this a ``major rule'' as defined

in 5 U.S.C. 804(2).

VII. Statutory Authority

Section 202(a)(3) authorizes EPA to establish emissions standards

for new heavy-duty motor vehicle engines. See 42 U.S.C. 7521(a)(3).

These standards are to reflect the greatest reduction achievable

through the application of technology which the Administrator

determines will be available, giving appropriate consideration to cost,

energy, and safety factors associated with the application of such

technology. This provision also establishes the lead time and stability

requirements for these standards. Pursuant to Sections 202(a)(1) and

202(d), these emissions standards apply for the useful life period

established by the Agency. See 42 U.S.C. 7521(a)(1), 7521(d). Other

provisions of Title II of the Act, along with Section 301, are

additional authority for the measures finalized in this action.

VIII. Judicial Review

Under section 307(b)(1) of the Act, EPA hereby finds that these

regulations are of national applicability. Accordingly, judicial review

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

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

within 60 days of publication in the Federal Register. 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. This rulemaking and any petitions

for review are subject to the provisions of section 307(d) of the Clean

Air Act.

IX. Copies of Rulemaking Documents

Copies of documents related to this rulemaking are available in the

public docket for the rule and over the internet as described in the

ADDRESSES section above.

List of Subjects

40 CFR Part 9

Environmental protection, Reporting and recordkeeping requirements.

40 CFR Part 86

Administrative practice and procedure, Confidential business

information, Incorporation by reference, Labeling, Motor vehicle

pollution, Reporting and recordkeeping requirements.

Dated: October 6, 1997.

Carol M. Browner,

Administrator.

[[Page 54715]]

Appendix to the Preamble--Table of Changes Made to Part 9 and Subparts A and N of Part 86

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

Section Change Reason

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

1. Sec. 9.1..................... Revised to add OMB approval numbers........... New OMB approval numbers.

1. Authority..................... None..........................................

2. Sec. 86.1.................... Revised to add document reference............. Updated ASTM methodology for

significant digits.

3. Sec. 86.098-3................ Revised to include new abbreviations.......... Add abbreviations for terms

averaging, banking and

trading and heavy-duty

engines.

4. Sec. 86.098-10............... Revision of references........................ Revise references to

averaging, banking, and

trading programs.

5. Sec. 86.098-11............... Revision of references........................ Revise references to

averaging, banking, and

trading programs.

6. Sec. 86.098-15............... Add Sec. 86.098-15........................... Incorporation of revisions to

NOX and particulate

averaging, banking and

trading programs.

7. Sec. 86.098-23............... Revise Sec. 86.098-23........................ Incorporate changes due to

new standards and ABT

programs.

8. Sec. 86.098-30............... Revise Sec. 86.098-30........................ Incorporate changes due to

new ABT programs.

9. Sec. 86.099-11............... Revise Sec. 86.099-11........................ Revise references to

averaging, banking, and

trading programs.

10. Sec. 86.001-23.............. Revise Sec. 86.001-23........................ Incorporate references to

Sec. 98.098-23.

11. Sec. 86.001-30.............. Revise Sec. 86.001-30........................ Incorporate references to

Sec. 98.098-30.

12. Sec. 86.004-2............... Add Sec. 86.004-2............................ Incorporation of new useful

life for heavy heavy-duty

diesel engines.

13. Sec. 86.004-11.............. Add Sec. 86.004-11........................... Incorporation of new NOX plus

NMHC standards for diesel

heavy-duty engines.

14. Sec. 86.004-15.............. Add Sec. 86.004-15........................... Incorporation of revisions to

NOX and particulate

averaging, banking and

trading program.

15. Sec. 86.004-21.............. Add Sec. 86.004-21........................... Incorporate changes due to

new standards and ABT

programs.

16. Sec. 86.004-25.............. Add Sec. 86.004-25........................... Incorporation of revisions to

maintenance requirements.

17. Sec. 86.004-28.............. Revise Sec. 86.004-28........................ Incorporate changes in

deterioration factors due to

new standards and allow

options to NMHC measurement

for diesel engines.

18. Sec. 86.004-30.............. Revise Sec. 86.004-30........................ Incorporate changes due to

new standards and ABT

programs.

19. Sec. 86.004-38.............. Add Sec. 86.004-38........................... Incorporation of maintenance

instruction requirements.

20. Sec. 86.004-40.............. Add Sec. 86.004-40........................... Incorporation of engine

rebuild practices

provisions.

21. Sec. 86.1311-94............. Revise Section 86.004-40(3)................... Incorporate allowance for

direct NMHC measurement

using a GC for NGVs.

22. Sec. 86.1344-94............. Revise Section 86.1344-94(e)(22).............. Incorporation of NMHC test

data requirement.

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

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

amended as follows:

Part 9 [Amended]

1. 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, 1318, 1321, 1326, 1330,

1342, 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.

2. Section 9.1 is amended by adding the new entries in numerical

order under the indicated heading to the table to read as follows:

Sec. 9.1 OMB approvals under the Paperwork Reduction Act.

* * * * *

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

40 CFR citation OMB control No.

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

* * * *

* * *

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

Control of Air Pollution From New and In-Use Motor Vehicles and New and

In-Use Motor Vehicle Engines: Certification and Test Procedures

86.004.38.....................................................2060-0104

86.004.40.....................................................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

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

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

2. In Sec. 86.1 the table in paragraph (b)(1) is amended by adding

a new entry to the end of the table to read as follows:

Sec. 86.1 Reference materials.

* * * * *

(b) * * *

(1) * * *

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

Document No. and name 40 CFR part 86 reference

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

* * * *

* * *

ASTM E29-93a, Standard Practice for Using

Significant Digits in Test Data to Determine

Conformance with Specifications............. 86.098-15, 86.004-15

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

[[Page 54716]]

* * * * *

3. Section 86.098-3 is revised to read as follows:

Sec. 86.098-3 Abbreviations.

(a) The abbreviations in Sec. 86.096-3 continue to apply. The

abbreviations in this section apply beginning with the 1998 model year.

(b) The abbreviations of this section apply to this subpart, and

also to subparts B, E, F, G, K, M, N, and P of this part, and have the

following meanings:

TD--Dispensed fuel temperature

ABT--Averaging, banking, and trading

HDE--Heavy-duty engine

4. Section 86.098-10 is amended by revising the first sentence in

paragraphs (a)(1)(i)(C)(2), (a)(1)(i)(C)(3), (a)(1)(ii)(C)(2),

(a)(1)(ii)(C)(3), (a)(1)(iii)(C)(2), (a)(1)(iv)(C)(2), (a)(1)(v)(C)(2),

(a)(1)(vi)(C)(2) to read as follows:

Sec. 86.098-10 Emission standards for 1998 and later model year Otto-

cycle heavy-duty engines and vehicles.

* * * * *

(a)(1) * * *

(i) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its gasoline-

fueled Otto-cycle HDE families in any or all of the NOX or

NOX plus NMHC ABT programs for HDEs, within the restrictions

described in Sec. 86.098-15 as applicable. * * *

(3) A manufacturer may elect to include any or all of its liquified

petroleum gas-fueled Otto-cycle HDE families in any or all of the

NOX or NOX plus NMHC ABT programs for HDEs,

within the restrictions described in Sec. 86.098-15 as applicable. * *

*

* * * * *

(ii) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its gasoline-

fueled Otto-cycle HDE families in any or all of the NOX or

NOX plus NMHC ABT programs for HDEs, within the restrictions

described in Sec. 86.098-15 as applicable. * * *

(3) A manufacturer may elect to include any or all of its liquified

petroleum gas-fueled Otto-cycle HDE families in any or all of the

NOX or NOX plus NMHC ABT programs for HDEs,

within the restrictions described in Sec. 86.098-15 as applicable. * *

*

* * * * *

(iii) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its methanol-

fueled Otto-cycle HDE families in any or all of the NOX or

NOX plus NMHC ABT programs for HDEs, within the restrictions

described in Sec. 86.098-15 as applicable. * * *

* * * * *

(iv) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its methanol-

fueled Otto-cycle HDE families in any or all of the NOX or

NOX plus NMHC ABT programs for HDEs, within the restrictions

described in Sec. 86.098-15 as applicable. * * *

* * * * *

(v) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its natural

gas-fueled Otto-cycle HDE families in any or all of the NOX

or NOX plus NMHC ABT programs for HDEs, within the

restrictions described in Sec. 86.098-15 as applicable. * * *

* * * * *

(vi) * * *

(C) * * *

(2) A manufacturer may elect to include any or all of its natural

gas-fueled Otto-cycle HDE families in any or all of the NOX

or NOX plus NMHC ABT programs for HDEs, within the

restrictions described in Sec. 86.098-15 as applicable. * * *

* * * * *

5. Section 86.098-11 is amended by revising the first sentence in

paragraphs (a)(3)(ii) and (a)(4)(iii) introductory text to read as

follows:

Sec. 86.098-11 Emission standards for 1998 and later model year diesel

heavy-duty engines and vehicles.

(a) * * *

(3) * * *

(ii) A manufacturer may elect to include any or all of its diesel

HDE families in any or all of the NOX or NOX plus

NMHC ABT programs for HDEs, within the restrictions described in

Sec. 86.098-15 as applicable. * * *

* * * * *

(4) * * *

(iii) A manufacturer may elect to include any or all of its diesel

HDE families in any or all of the particulate ABT programs for HDEs,

within the restrictions described in Sec. 86.098-15 as applicable. * *

*

* * * * *

6. A new Sec. 86.098-15 is added to subpart A to read as follows:

Sec. 86.098-15 NOX and particulate averaging, trading, and

banking for heavy-duty engines.

Section 86.098-15 includes text that specifies requirements that

differ from Sec. 86.094-15. Where a paragraph in Sec. 86.094-15 is

identical and applicable to Sec. 86.098-15, this may be indicated by

specifying the corresponding paragraph and the statement ``[Reserved].

For guidance see Sec. 86.094-15.''

(a) through (b) [Reserved] For guidance see Sec. 86.094-15.

(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 E29-93a, to the nearest one-tenth of a Megagram

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

(i) For determining credit need for all engine families and credit

availability for engine families generating credits for averaging

programs only:

Emission credits = (Std-FEL) x (CF) x (UL) x (Production) x

(10-6)

(ii) For determining credit availability for engine families

generating credits for trading or banking programs:

Emission credits = (Std-FEL) x (CF) x (UL) x (Production) x

(10-6) x (Discount)

(iii) For purposes of the equations in paragraphs (c)(1)(i) and

(ii) of this section:

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. 86.094-21, 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.

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

or traded within the model year generated. The discount applied here

is 0.8. 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)(i) 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 e

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