Fuels and Fuel Additives; Elimination of Oxygenated Gasoline Program Reformulated Gasoline (OPRG) Category From the Reformulated Gasoline Regulations

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-5710-6]

Fuels and Fuel Additives; Elimination of Oxygenated Gasoline

Program Reformulated Gasoline (OPRG) Category From the Reformulated

Gasoline Regulations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: In this action, EPA is proposing to amend the reformulated

gasoline (RFG) regulations to eliminate the separate treatment for a

category of gasoline used in oxygen averaging. This category,

oxygenated gasoline program reformulated gasoline (OPRG), includes

gasoline intended for use in a state oxygenated gasoline program

control area during the winter time. Under the current RFG regulations,

a refiner must meet the oxygen content standards for the entire pool of

gasoline they produce, and for the pool of gasoline they produce that

is non-OPRG. EPA is proposing this action because it no longer believes

a distinction between OPRG and non-OPRG is necessary and because

removal of the OPRG category would add flexibility and reduce

compliance costs for regulated parties, without producing a negative

environmental impact.

DATES: Comments on this proposed rule must be received by April 16,

1997. EPA does not plan to hold a public hearing on this proposed rule,

unless one is requested. If a request is received by April 1, 1997, a

public hearing will be held. If such a hearing is held, comments must

be received within 30 days of the date of such hearing.

ADDRESSES: Written comments on this proposed action should be addressed

to Public Docket # A-97-01, Air Docket Section (Room M-1500, Waterside

Mall), Environmental Protection Agency, 401 M Street, SW., Washington,

DC 20460. Documents related to this proposed rule have been placed in

the public docket and may be inspected between the hours of 8:00 a.m.

to 5:30 p.m., Monday through Friday. A reasonable fee may be charged

for copying docket material. Those wishing to notify EPA of their

intent to request an opportunity for a public hearing on this action

should contact Anne-Marie

[[Page 12587]]

Pastorkovich, U.S. Environmental Protection Agency, Office of Air and

Radiation, (202) 233-9013.

FOR FURTHER INFORMATION CONTACT: Anne-Marie Pastorkovich, U.S.

Environmental Protection Agency, Office of Air and Radiation, (202)

233-9013.

SUPPLEMENTARY INFORMATION:

I. Regulatory Entities

Regulatory categories and entities potentially affected by this

action include:

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Category Examples of regulated entities

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Industry.............................. Refiners, importers, oxygenate

blenders of reformulated

gasoline.

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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 be potentially regulated by this action. Other types of entities

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

your entity is regulated by this action, you should carefully examine

the existing provisions at 40 CFR sections 80.2, 80.65, 80.67, 80.69,

80.75, 80.77, 80.78, and 80.128, dealing specifically with OPRG. 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.

II. Background

A. The Oxygen Standard Under the RFG Program

The federal RFG program is designed for the control of harmful

ground level ozone and toxic air pollutants through reformulation of

gasoline in ways that reduce emissions of air pollutants from motor

vehicles. Federal RFG is required by section 211(k) of the Clean Air

Act (``the Act'') in the nine largest cities with the worst ozone

problems beginning in January, 1995. In addition, other ozone

nonattainment areas are permitted to join the program (i.e., to ``opt

in'') at the request of the Governor of the state wherein the

nonattainment area(s) are located. EPA published final regulations for

the RFG program in the Federal Register on February 16, 1994.1 The

covered areas for the RFG regulations are specified at 40 CFR section

80.70.

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\1\ 59 FR 7812 (February 16, 1994).

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Section 211(k) of the Act requires that RFG must contain at least

2.0 weight percent oxygen and further requires that the RFG regulations

issued by EPA allow for oxygen credit trading. These oxygen credit

provisions must ensure that each RFG area does not receive RFG with

less oxygen than it would without such averaging.2 Consistent with

the requirements of the Act, the final RFG regulations issued by EPA

allow refiners the option of electing to meet the oxygen standard on

average, and allow the generation, sale, purchase, and use of oxygen

credits.

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\2\ See section 211(k)(2)(B) of the Act (2.0 percent oxygen by

weight standard) and section 211(k)(7) of the Act (provisions

dealing with averaging/credits).

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Compliance with the RFG standards, including the oxygen standard,

is met on a refinery basis. A refiner who elects to meet the oxygen

standard on an averaging basis must meet an average oxygen content of

2.1 weight percent across all of the RFG he produces in an

averaging period,3 and the minimum oxygen content for an

individual gallon of gasoline is 1.5 weight percent oxygen,

for each of its refineries. In short, the average is met on a refinery-

by-refinery basis rather than on an RFG covered area-by-area basis.

This type of averaging permits maximum operational flexibility for

refiners. However, this type of averaging by a number of refiners also

means that a substantial amount of RFG may be produced with an oxygen

content that is higher than the standard, and a substantial amount that

is lower than the standard. Although the fungible distribution system

for gasoline means that the higher and lower oxygen content gasoline

should generally produce the same average oxygen content throughout the

covered areas where RFG is required, a general risk exists that one or

more areas might end up receiving RFG that has a lower oxygen content

on average than would occur if no averaging were allowed. To address

this concern, the requirements for averaging also require that refiners

who average must conduct gasoline quality surveys in each area where

their gasoline is distributed. If a survey is failed (i.e., the average

oxygen content in the area is less than 2.0 weight percent), the

minimum oxygen standard is made more stringent. The combination of a

survey requirement and tightening of the minimum standard upon a survey

failure provides an incentive for refiners to avoid conduct that could

lead to a survey failure, and reduces the likelihood of a problem

continuing once a survey is failed.4

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\3\ The averaging period for oxygen credits corresponds with the

calendar year of January 1-December 31. See 40 CFR section

80.67(f)(1).

\4\ See 40 CFR 80.68 for gasoline quality survey requirements.

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The gasoline quality survey provisions require refiners who elect

to meet RFG standards on average, including the oxygen standard, to

either conduct surveys themselves or to participate in a consortium

with other refiners. The consortium sponsors a series of gasoline

quality surveys in each RFG area each year. If a survey shows that the

average oxygen content for an area is 5 Based

upon preliminary survey data received for 1996, EPA is aware that

several RFG cities are reasonably expected to experience survey

failures for oxygen and, therefore, would experience a required

``ratcheting'' of the minimum oxygen standard for averaging from 1.5

weight% to 1.6 weight%.

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\5\ The regulations provide that the standard would be changed

to be more stringent, based on minimum oxygen survey failures. The

standard would subsequently be made less stringent, based on a

pattern of successful surveys.

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The Agency acknowledges that, if the separate averaging category

for OPRG is dropped, there is some marginal increase in the risk that

an area might receive RFG with too low oxygen content. This is because

oxygen credits generated in an oxygenated gasoline program area could

now be transferred to a non-oxygenated gasoline program area, resulting

in a lower ``actual'' oxygen content for the RFG used in that non-

oxygenated gasoline program area. However, the Agency believes that the

oxygen surveys are adequately designed to address this type of concern

and ``ratcheting'' of the minimum oxygen standard will be implemented

in failing areas as appropriate. The ratcheting of the minimum oxygen

standard should provide a strong incentive, over time, against conduct

leading to survey failures. Given this incentive, the marginal increase

in risk noted above does not warrant the regulatory burden from

retraining OPRG as a separate RFG category.

[[Page 12588]]

B. State Oxygenated Gasoline Programs and the Purpose of the OPRG

Category for RFG

Section 211(m) of the Act required that certain states implement

oxygenated gasoline programs by not later than November 1, 1992. The

control period for these oxygenated gasoline programs are based upon

the time period during which each area is prone to high ambient

concentrations of carbon monoxide (CO) and must be at least four months

in length. The oxygen content for gasoline in these areas is 2.7 weight

percent minimum, higher than the levels required for RFG. Because CO

tends to be a cold weather problem, the control periods tended to fall

during the winter months. Control periods are adopted by each

individual state as part of its oxygenated gasoline regulations. Four

of the original East coast oxygenated gasoline program Consolidated

Metropolitan Statistical Areas (CMSAs)/Metropolitan Statistical Areas

(MSAs) were also RFG covered areas. The Baltimore, Maryland MSA

(including areas within Maryland), the Washington DC-MD-VA CMSA

(including areas within the District of Columbia, Maryland, and

Virginia), and the Philadelphia, Pennsylvania, DE-MD-NJ-PA CMSA

(including areas within Pennsylvania, Maryland, and Southern New Jersey

6) have redesignated to attainment for CO and are no longer

required to implement oxygenated gasoline programs. The New York/New

Jersey/ Connecticut CMSA (which includes the several New York City and

State counties, Northern New Jersey, and Southern Connecticut areas) is

the only oxygenated gasoline/RFG overlap area that still exists. 7

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\6\ Delaware did not contain any CO nonattainment areas and was

not required to implement an oxygenated gasoline program.

\7\ The OPRG distinction does not apply in California areas

required to implement both the federal RFG and state oxygenated

gasoline programs.

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Although the survey requirements, discussed above, were designed to

reduce a risk that some areas might receive relatively low oxygen RFG,

EPA believed, at the time it issued the final RFG regulation, that the

overlap of these several winter oxygenated gasoline programs and the

RFG program presented an additional risk that allowing averaging for

oxygen might lead to certain RFG areas receiving, on average, RFG with

lower oxygen content than they would if averaging were not allowed.

Specifically, in developing the RFG regulations, EPA was concerned that

the requirement that refiners supply RFG with 2.7 weight percent oxygen

to oxygenated gasoline/RFG areas would lead, through the use of

transferable credits and averaging, to the use of RFG in non-oxygenated

gasoline/RFG areas with oxygen content significantly lower than would

occur without such averaging. To prevent this, the final RFG

regulations require refiners to designate all RFG as either OPRG

(intended for use in an oxygenated gasoline/RFG area during an

oxygenated gasoline control period), or as non-OPRG (gasoline other

than OPRG, e.g., non-oxygenated gasoline program reformulated

gasoline). Refiners are required to meet the oxygen standard separately

for non-OPRG, as well as for all RFG.8 In addition, OPRG and non-

OPRG oxygen credits must be identified and kept separate. OPRG and non-

OPRG also have physical segregation requirements and must be used

consistently with their designations.9

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\8\ Under the simple model, the oxygen average must be met

separately for VOC-controlled RFG.

\9\ See 59 FR 7772, footnote 56.

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C. Why the OPRG Category May Be Eliminated Now

Between 1993, when the final RFG rule was issued, and 1995, when

the RFG program was implemented, the number of overlapping oxygenated

gasoline program and RFG areas significantly decreased. Several areas

were redesignated to attainment with the National Ambient Air Quality

Standards (NAAQS) for CO and were no longer required to comply with the

winter oxygenated gasoline program requirements. There is now only one

area outside of California (see note 7), the New York/New Jersey/

Connecticut CMSA, that is still an oxygenated gasoline program/RFG

overlapping program area.

Although EPA is concerned that the statutory mandate for 2.0 weight

percent oxygen for RFG is met, the Agency feels that the specific risk

of uneven RFG quality due to overlapping oxygenated gasoline/RFG

program areas is significantly less than was expected when the RFG

regulations were promulgated. There is still some risk that an area

might receive relatively low oxygen RFG because of averaging, but the

risk is no longer as likely to be specifically caused by program

overlap.

There is only one oxygenated gasoline overlap area left outside of

California and the volume of gasoline expected to fall under the OPRG

category has been greatly reduced. Based upon EPA estimates made prior

to the beginning of the first year of the RFG program, approximately

one-third (33%) of all gasoline nationwide was predicted to be RFG.

Oxygenated gasoline program overlap areas outside of California

accounted for approximately one-third (33%) of the total RFG pool, with

approximately 19% going to the New York CMSA.10 EPA believes that

any risk that an area might receive low oxygen RFG is significantly

less than it appeared in 1993 or 1994. In 1994, roughly one-third of

RFG was expected to be destined for several oxygenated gasoline overlap

cities outside of California. In 1996, there is only one of these

oxygenated gasoline overlap areas left (i.e. the New York City CMSA).

Clearly, the New York CMSA consumes a large volume of RFG--based on

1994 estimates, 19% of the total RFG was expected to be destined for

New York--but this is still a significantly lower volume of gasoline

than the 33% that was originally estimated to be destined for all non-

California oxygenated gasoline overlap areas. Under these

circumstances, EPA believes that the risk that an area might receive

low oxygen RFG can be adequately addressed through another existing

compliance mechanism--the RFG surveys, discussed above, and the

additional restrictions based on the OPRG category do not provide

enough additional protection to warrant the burden they place on the

regulated community.

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\10\ It should be noted that, since these estimates were made in

1994, some areas have opted out of the RFG program and Sacramento,

California joined the program as a required covered area, and

comparative volume totals will have changed somewhat as a result.

These estimates are not based upon the comparative volume of OPRG to

RFG. Rather, they are ``straight'' estimates of program area's share

of the total RFG ``pool'' and are not broken down into compliance

categories. The reader should be aware that OPRG gasoline likely

represents a smaller, subset of the total volume represented for

each area. The document from which the volume estimates were taken

has been placed in the public docket at the location indicated in

the ADDRESSES section of this notice.

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III. Description of Today's Proposed Rule

EPA is proposing today to amend the Federal RFG regulations to

remove the use of a separate OPRG category and to eliminate the

distinction between OPRG and non-OPRG. The following sections would be

affected by today's proposal. In most cases, the changes are minor and

would remove references to, and distinctions between, the eliminated

OPRG category and RFG which is non-OPRG.

[[Page 12589]]

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40 CFR part 80, section Description of change

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Section 80.2--Definitions. 80.2(nn).... Definition of ``Oxygenated

gasoline program reformulated

gasoline,'' or OPRG'' is

proposed to be deleted.

Section 80.65--General requirements for Requirements for designation of

refiners, importers, and oxygenate gasoline as OPRG or non-OPRG

blenders. 80.65(d)(2)(iii) (A) and (B). are proposed to be deleted.

Section 80.67--Compliance on average. Propose to delete requirements

80.67(f)(2)(ii), 80.67(h)(v) (A) and to meet oxygen average

(B). separately and to segregate

credits for non-OPRG, since

the OPRG versus non-OPRG

distinction would be

eliminated.

Section 80.69--Requirements for Propose to delete these sub-

downstream oxygen blending. 80.69(f) sections, as there would no

(1) and (2). longer be a category known as

``OPRG.''

Section 80.75--Reporting requirements. For 80.75 (f)(2)(ii)(A) (1)

80.75(f)(2)(ii)(A) (1) through (4) and through (4), propose to

(B) (1) and (2); 80.75 (f)(2)(iii)(B); eliminate the OPRG and non-

80.75(h)(2) (i) and (ii). OPRG distinction. Thus, the

only categories remaining

would be VOC-controlled

(divided into subcategories 1

and 2) and non-VOC-controlled

RFG. Propose to delete 80.75

(f)(2)(ii)(B) (1) and (2) and

to eliminate to OPRG and non-

OPRG distinction. Propose to

delete 80.75(f)(2)(iii)(B),

which refers to gasoline

designated as non-OPRG.

Section 80.77--Product transfer Propose to delete requirement

documentation. 80.77 (g)(1)(ii). to identify gasoline as OPRG

or non-OPRG.

Section 80.78--Controls and The existing section prohibits

prohibitions on reformulated gasoline. addition of oxygen to finished

80.78(a)(6). RFG, unless such RFG is

designated as OPRG used in an

oxygenated gasoline control

area during the oxygenated

gasoline control period.

Propose to amend this OPRG

``exception'' to allow for

elimination of the OPRG/non-

OPRG categories. Specifically,

the proposed amended section

would allow for addition of

oxygenate to RFG intended for

and used in an oxygenate

gasoline program area.

Sections 80.128 and 80.129-- Agreed Propose to remove requirement

upon procedures for refiners and to compare PTD designation

importers and Agreed upon procedures consistency for OPRG versus

for oxygenate blenders. 80.128(d)(2) non-OPRG. Propose to remove

and 80.129 (d)(3)(iv). similar requirement for

downstream oxygenate blenders.

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IV. Statutory Authority

Section 114, 211, and 301(a) of the Clean Air Act as amended (42

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

V. Environmental Impact

This rule is expected to have no environmental impact. The original

reason for the OPRG category was concern that RFG quality might suffer

in areas that were not both oxygenated gasoline program and RFG areas.

There were several such areas when the RFG rules were promulgated.

However, there is only one area, the New York/New Jersey/Connecticut

CMSA, which has overlapping programs during the winter months.

VI. Economic Impact

Today's proposed regulation would have a positive economic impact

on parties covered by the RFG regulation. The elimination of the OPRG/

non-OPRG distinction would result in increased flexibility for

regulated parties. Specifically, elimination of this distinction from

the RFG regulations would alleviate the burden and cost associated with

maintenance of separate recordkeeping, reporting, and product transfer

documentation category for OPRG and non-OPRG gasoline. Elimination of

the OPRG/non-OPRG distinction may also be expected to result in a

general reduction of compliance costs associated with the need to meet

the oxygen average separately for two classes of RFG.

VII. Regulatory Flexibility

The Regulatory Flexibility Act (RFA) generally requires an agency

to conduct a regulatory flexibility analysis of any rule subject to

notice and comment rulemaking requirements unless the agency certifies

that the rule will not have a significant economic impact on a

substantial number of small entities. Small entities include small

businesses, small not-for-profit enterprises, and small governmental

jurisdictions. This proposed rule would not have a significant economic

impact on a substantial number of small entities because it is not

expected to result in any additional compliance costs to regulated

parties. It should instead reduce costs and increase flexibility

allowed under the regulations by removing one category of gasoline for

oxygen averaging, the OPRG category, and eliminating in large part the

distinction between OPRG and non-OPRG gasoline. Therefore, I certify

that this action will not have a significant economic impact on a

substantial number of small entities.

VIII. Executive Order 12866

Under Executive Order 12866,11 the Agency must determine

whether a regulation is ``significant'' and therefore subject to

interagency review under the Executive Order. The Order defines

``significant regulatory action'' as one that is likely to result in a

rule that may:

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\11\ 58 FR 51735 (October 4, 1993).

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(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 of 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

this Executive Order.12

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\12\ Id. at section 3(f) (1)-(4).

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It has been determined that this rule is not a ``significant

regulatory action'' under the terms of Executive Order 12866 and is

therefore not subject to interagency review under the Order.

IX. Unfunded Mandates

Under Section 202 of the Unfunded Mandates Reform Act of 1995

(''UMRA''), P.L. 104-4, EPA must prepare a budgetary impact statement

to accompany any general notice of proposed rulemaking or final rule

that includes a Federal mandate which may result in estimated costs to

State, local, or tribal governments in the aggregate,

[[Page 12590]]

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

for any rule subject to Section 202 EPA generally must select the least

costly, most cost-effective, or least burdensome alternative that

achieves the objectives of the rule and is consistent with statutory

requirements. Under Section 203, before establishing any regulatory

requirements that may significantly or uniquely affect small

governments, EPA must take steps to inform and advise small governments

of the requirements and enable them to provide input.

EPA has determined that the rule proposed today does not include a

federal mandate as defined in UMRA. The rule does not include a Federal

mandate that may result in estimated annual costs to State, local or

tribal governments in the aggregate, or to the private sector, of $100

million or more, and it does not establish regulatory requirements that

may significantly or uniquely affect small governments.

List of Subjects in 40 CFR Part 80

Environmental protection, Fuel additives, Gasoline, Imports,

Labeling, Motor vehicle pollution, Penalties, Reporting and

recordkeeping requirements.

Dated: March 10, 1997.

Carol M. Browner,

Administrator.

For the reasons set out in the preamble, 40 CFR part 80 is proposed

to be amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

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

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

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

Sec. 80.2 [Amended]

2. Section 80.2 is proposed to be amended by removing and reserving

paragraph (nn).

Sec. 80.65 [Amended]

3. Section 80.65 is proposed to be amended by removing and

reserving paragraph (d)(2)(iii).

4. Section 80.67 is proposed to be amended by removing and

reserving paragraph (f)(2)(ii) and by revising paragraphs

(h)(1)(v)(A)(1) and (h)(1)(v)(A)(2) and by removing and reserving

paragraph (h)(1)(v)(B) to read as follows:

Sec. 80.67 Compliance on average.

* * * * *

(f) * * *

(2) * * *

(ii) [Reserved]

* * * * *

(h) * * *

(1) * * *

(v) * * *

(A) * * *

(1) VOC controlled; and

(2) Non-VOC controlled.

(B) [Reserved]

* * * * *

Sec. 80.69 [Amended]

5. Section 80.69 is proposed to be amended by removing paragraph

(f).

6. Section 80.75 is proposed to be amended by revising paragraphs

(f)(2)(ii)(A)(1), (f)(2)(ii)(A)(2), (h)(2)(i)(A) and (h)(2)(i)(B) and

by removing paragraphs (f)(2)(ii)(A)(3), (f)(2)(ii)(A)(4),

(h)(2)(i)(C), (h)(2)(i)(D), and removing and reserving (h)(2)(ii) to

read as follows:

Sec. 80.75 Reporting requirements.

* * * * *

(f) * * *

(2) * * *

(ii) * * *

(A) * * *

(1) Gasoline designated as VOC-controlled; and

(2) Gasoline designated as non-VOC-controlled.

* * * * *

(h) * * *

(2) * * *

(i) * * *

(A) VOC-controlled; and

(B) Non-VOC-controlled.

* * * * *

Sec. 80.77 [Amended]

7. Section 80.77 is proposed to be amended by removing and

reserving paragraph (g)(1)(ii).

8. Section 80.78 is proposed to be amended by revising paragraph

(a)(6) to read as follows:

Sec. 80.78 Controls and prohibitions on reformulated gasoline.

(a) * * *

(6) No person may add any oxygenate to reformulated gasoline,

except that such oxygenate may be added to reformulated gasoline

provided that such gasoline is used in an oxygenated fuels program

control area during an oxygenated fuels control period.

* * * * *

9. Section 80.128 is proposed to be amended by revising paragraph

(d)(2) to read as follows:

Sec. 80.128 Agreed upon procedures for refiners and importers.

* * * * *

(d) * * *

(2) Compare the product transfer documents designation for

consistency with the time and place, and compliance model designations

for the tender (VOC-controlled or non-VOC-controlled, VOC region for

VOC-controlled, summer or winter gasoline, and simple or complex model

certified); and

* * * * *

10. Section 80.129 is proposed to be amended by revising paragraph

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

Sec. 80.129 Agreed upon procedures for downstream oxygenate blenders.

* * * * *

(d) * * *

(3) * * *

(iv) Review the time and place designations in the product transfer

documents prepared for the batch by the blender, for consistency with

the time and place designations in the product transfer documents for

the RBOB (e.g. VOC-controlled or non-VOC-controlled, VOC region for

VOC-controlled, and simple or complex model).

* * * * *

[FR Doc. 97-6647 Filed 3-14-97; 8:45 am]

BILLING CODE: 6560-50-P