[Federal Register Volume 64, Number 122 (Friday, June 25, 1999)]
[Rules and Regulations]
[Pages 34126-34133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16228]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 69
[FRL-6367-1]
State of Alaska Petition for Exemption From Diesel Fuel Sulfur
Requirements
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: In this action, the Environmental Protection Agency (EPA) is
granting areas of Alaska served by the Federal Aid Highway System a
temporary exemption from EPA's sulfur and dye requirements for highway
diesel fuel until January 1, 2004. EPA is not making a final decision
at this time
[[Page 34127]]
on Alaska's request for a permanent exemption. Additional time is
needed to consider Alaska's request for a permanent exemption because
of the need to coordinate the decision with an upcoming nationwide rule
on diesel fuel quality, lead-time considerations, and fuel dyeing
requirements of another federal agency.
This decision is not expected to have a significant impact on the
ability of Alaska's communities to attain the National Ambient Air
Quality Standards for carbon monoxide or particulate matter, due to the
limited contribution of emissions from diesel highway vehicles in those
areas and the sulfur level currently found in highway vehicle diesel
fuel used in Alaska.
DATES: This final rule is effective on July 1, 1999.
ADDRESSES: Copies of information relevant to this final rule are
available for inspection in public docket A-96-26 at the Air Docket of
the EPA, first floor, Waterside Mall, room M-1500, 401 M Street SW.,
Washington, D.C. 20460, (202) 260-7548, between the hours of 8:00 a.m.
to 5:30 p.m. Monday through Friday. A duplicate public docket has been
established at EPA Alaska Operations Office-Anchorage, Federal
Building, Room 537, 222 W. Seventh Avenue, #19, Anchorage, AK 99513-
7588, and is available from 8:00 a.m. to 5:00 p.m. Monday through
Friday. A reasonable fee may be charged for copying docket materials.
FOR FURTHER INFORMATION CONTACT: Mr. Richard Babst, Environmental
Engineer, Fuels Implementation Group, Fuels and Energy Division (6406-
J), 401 M Street SW., Washington, D.C. 20460, Telephone (202) 564-9473,
Telefax 202-565-2085, Internet address babst.richard@epa.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Regulated Entities
II. Electronic Copies of Rulemaking Documents
III. Statutory Background for Alaska Exemption
IV. Petition by Alaska for Exemption
V. Decision to Grant Alaska Temporary Exemption
A. Description of Temporary Exemption
B. Justification for Temporary Exemption
C. Guidance Regarding Compliance Under Temporary Exemption
D. Impact of Exemption on Engine Warranty, Recall and Tampering
VI. Judicial Review of Today's Decision
VII. Public Participation in Today's Decision
VIII. Statutory Authority for Today's Decision
IX. Administrative Requirements for Today's Decision
A. Executive Order 12866: Administrative Designation and
Regulatory Analysis
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Congressional Review Act
E. Unfunded Mandates Act
F. Executive Order 12875: Enhancing Intergovernmental
Partnerships
G. Executive Order 13084: Consultation and Coordination with
Indian Tribal Governments
H. Executive Order 13045: Children's Health Protection
I. National Technology Transfer and Advancement Act of 1995
(NTTAA)
I. Regulated Entities
Entities potentially regulated by this action are refiners,
marketers, distributors, retailers and wholesale purchaser-consumers of
diesel fuel for use in the state of Alaska. Regulated categories and
entities include:
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Examples of potentially regulated
Category NAICS codes SIC codes entities
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Industry...................................... 32411 2911 Petroleum distributors, marketers,
48691 4613 retailers (service station owners and
42271 5171 operators), wholesale purchaser
42272 5172 consumers (fleet managers who operate
48422 4212 a refueling facility to refuel
48423 4213 highway vehicles).
44711 5541
44719
Individuals................................... ........... ........... Any owner or operator of a diesel
highway vehicle.
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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 facility, company, business organization, etc., is regulated by
this action, you should carefully examine the criteria contained in
Sec. 69.51, Sec. 80.29 and Sec. 80.30 of title 40 of the Code of
Federal Regulations as modified by today's action. 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. Electronic Copies of Rulemaking Documents
The preamble and regulatory language are also available
electronically from the Government Printing Office Web sites. 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 Web site listed below.
http://www.access.gpo.gov/nara/cfr/
(either select desired date or use Search feature)
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.
III. Statutory Background for Alaska Exemption
Section 211(i)(1) of the Clean Air Act prohibits the manufacture,
sale, supply, offering for sale or supply, dispensing, transport, or
introduction into commerce of motor (highway) vehicle diesel fuel which
contains a concentration of sulfur in excess of 0.05 percent by weight,
or which fails to meet a cetane index minimum of 40, beginning October
1, 1993. Section 211(i)(2) requires the Administrator to promulgate
regulations to implement and enforce the requirements of paragraph (1),
and authorizes the Administrator to require that diesel fuel not
intended for highway vehicles be dyed in order to segregate that fuel
from highway vehicle diesel fuel. Section 211(i)(4) provides that the
states of Alaska and Hawaii may seek an exemption from the requirements
of subsection 211(i) in the same manner as provided in section 325
1 of the Act, and
[[Page 34128]]
requires the Administrator to take final action on any petition filed
under this subsection, which seeks exemption from the requirements of
section 211(i), within 12 months of the date of such petition.
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\1\ Section 211(i)(4) mistakenly refers to exemptions under
Section 324 of the Act (``Vapor Recovery for Small Business
Marketers of Petroleum Products''). The proper reference is to
section 325, and Congress clearly intended to refer to section 325,
as shown by the language used in section 211(i)(4), and the United
States Code citation used in Sec. 806 of the Clean Air Act
Amendments of 1990, Public Law No. 101-549. Section 806 of the
Amendments, which added paragraph (i) to section 211 of the Act,
used 42 U.S.C. 7625-1 as the United States Code designation, the
proper designation for section 325 of the Act. Also see 136 Cong.
Rec. S17236 (daily ed. October 26, 1990) (statement of Sen.
Murkowski).
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Section 325 of the Act provides that upon application by the
Governor of Guam, American Samoa, the Virgin Islands, or the
Commonwealth of the Northern Mariana Islands, the Administrator may
exempt any person or source, or class of persons or sources, in such
territory from any requirement of the Act, with some specific
exceptions. Such exemption may be granted if the Administrator finds
that compliance with such requirement is not feasible or is
unreasonable due to unique geographical, meteorological, or economic
factors of such territory, or such other local factors as the
Administrator deems significant.
IV. Petition by Alaska for Exemption
On February 12, 1993, the Honorable Walter J. Hickel, then Governor
of the State of Alaska, submitted a petition to exempt highway vehicle
diesel fuel in Alaska from paragraphs (1) and (2) of section 211(i),
except the minimum cetane index requirement of 40. Paragraph (1)
prohibits highway vehicle diesel fuel from having a sulfur
concentration greater than 0.05 percent by weight, or failing to meet a
minimum cetane index of 40. Paragraph (2) requires the Administrator to
promulgate regulations to implement and enforce the requirements of
paragraph (1), and authorizes the Administrator to require that diesel
fuel not intended for highway vehicles be dyed in order to segregate
that diesel fuel from highway vehicle diesel fuel. The petition
requested that the Environmental Protection Agency (EPA) temporarily
exempt highway vehicle diesel fuel manufactured for sale, sold,
supplied, or transported within the Federal Aid Highway System from
meeting the sulfur content requirement specified in section 211(i)
until October 1, 1996. The petition also requested a permanent
exemption from such requirements for those areas of Alaska not
reachable by the Federal Aid Highway System. The petition was based on
geographical, meteorological, air quality, and economic factors unique
to the State of Alaska.
EPA's decision on the petition was published on March 22, 1994 (59
FR 13610), and applied to all persons in Alaska subject to section
211(i) and related provisions in section 211(g) of the Act and EPA's
low-sulfur requirement for highway vehicle diesel fuel in 40 CFR 80.29.
Persons in communities served by the Federal Aid Highway System were
exempted from compliance with the diesel fuel sulfur content
requirement until October 1, 1996. Persons in communities that are not
served by the Federal Aid Highway System were permanently exempted from
compliance with the diesel fuel sulfur content requirement. Both the
permanent and temporary exemptions apply to all persons who
manufacture, sell, supply, offer for sale or supply, dispense,
transport, or introduce into commerce, in the State of Alaska, highway
vehicle diesel fuel. Alaska's exemptions do not apply to the minimum
cetane requirement for highway vehicle diesel fuel.
On December 12, 1995, the Honorable Governor Tony Knowles, Governor
of the State of Alaska, petitioned the Administrator for a permanent
exemption (Petition) for all areas of the state served by the Federal
Aid Highway System, that is, those areas covered only by the temporary
exemption. On August 19, 1996, EPA published an extension to the
temporary exemption until October 1, 1998 (61 FR 42812), to give ample
time for EPA to consider comments to that petition that were
subsequently submitted. On April 28, 1998 (63 FR 23241) EPA published a
proposal to grant the Petition for a permanent exemption for all areas
of the state served by the Federal Aid Highway System. Substantial
public comments and substantive new information was submitted in
response to the proposal. On September 16, 1998 (63 FR 49459) EPA
extended the temporary exemption for another nine months until July 1,
1999, to give ample time for EPA to consider and evaluate that new
information and to promulgate a final decision.
V. Decision To Grant Alaska Temporary Exemption
A. Description of Temporary Exemption
In this action, the Agency is granting a temporary exemption until
January 1, 2004 from the diesel fuel sulfur content requirement of 0.05
percent by weight to those areas in Alaska served by the Federal Aid
Highway System. For the same reasons, the Agency also is granting a
temporary exemption until January 1, 2004 from those provisions of
section 211(g)(2) 2 of the Act that prohibit the fueling of
highway vehicles with high-sulfur diesel fuel. Sections 211(g) and
211(i) restrict the use of high-sulfur diesel fuel in highway vehicles.
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\2\ This subsection makes it unlawful for any person to
introduce or cause or allow the introduction into any highway
vehicle of diesel fuel which they know or should know contains a
concentration of sulfur in excess of 0.05 percent (by weight). It
would clearly be impossible to hold persons liable for misfueling
with diesel fuel with a sulfur content higher than 0.05 percent by
weight when such fuel is permitted to be sold or dispensed for use
in highway vehicles. The final action of this document includes an
exemption from this prohibition, but does not include an exemption
from the prohibitions in Section 211(g)(2) relating to the minimum
cetane index or alternative aromatic level.
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Further, consistent with the March 22, 1994 Notice of Final
Decision (59 FR 13610), and September 15, 1998 Notice of Final Decision
(63 FR 49459), dyeing diesel fuel to be used in applications other than
highway vehicles will be unnecessary in Alaska during the exemption
period as long as that diesel fuel has a minimum cetane index of 40.
The highway vehicle diesel fuel regulations, codified at 40 CFR 80.29,
specifies that any diesel fuel that does not show visible evidence of
the dye solvent red 164 is considered to be available for use in
highway vehicles and subject to the sulfur and cetane index
requirements. The Alaska Department of Environmental Conservation and
refiners in Alaska have indicated to EPA that all diesel fuel produced
for sale and marketed in Alaska meets the minimum cetane requirement
for highway vehicle diesel fuel.
B. Justification for Temporary Exemption
Section 325 of the Clean Air Act provides that an exemption from
the requirements of the Act may be granted upon petition of a governor
of the territories if the Administrator determines that compliance with
such requirement is ``not feasible or is unreasonable, due to unique
geographical, meteorological, or economic factors of such territory, or
such other local factors as the Administrator deems significant.''
Section 211(i) of the Act extends this authority to Alaska for purposes
of exemption from the low-sulfur diesel fuel requirements of that
provision.
Parts of Alaska have operated under temporary exemptions from the
low-sulfur diesel fuel requirements since 1993, and the current
exemption expires on July 1, 1999. For the reasons described later in
this section, EPA will not make a final decision on a
[[Page 34129]]
permanent exemption prior to the expiration of the current temporary
exemption. EPA believes that it would be unreasonable to require
compliance in Alaska with the low-sulfur diesel fuel requirements as of
July 1, 1999. The prior history of temporary exemptions for Alaska, the
need to coordinate the decision on Alaska's petition for a permanent
exemption with an upcoming nationwide rule on diesel fuel quality,
lead-time considerations, and fuel dyeing requirements are significant
local factors that are the basis for granting Alaska this extension to
the current temporary exemption.
Prior History of Temporary Exemptions
On February 12, 1993, the Governor of Alaska petitioned EPA under
sections 211(i) and 325 for a temporary exemption from diesel fuel
sulfur requirements for areas served by the FAHS. EPA granted Alaska
the temporary exemption until October 1, 1996. Because the State of
Alaska planned to establish a Task Force (in which an EPA
representative participated) to evaluate the need for a permanent
exemption, EPA provided Alaska with ``adequate time to prepare and
submit another exemption request.'' 59 FR 13613 (March 22, 1994). ``If
a new exemption request is submitted, EPA will publish another notice
in the Federal Register and re-examine the issue of an exemption.'' Id.
On December 12, 1995, the Governor petitioned EPA for a permanent
exemption from the diesel sulfur requirements for the areas served by
the FAHS. EPA ``reserv[ed] the decision on the state's request for a
permanent exemption, so the agency may consider possible alternatives
for a longer period'' than the two years granted. 61 FR 42814 (August
19, 1996). EPA extended the exemption for another period of 24 months
``or until such time as a decision is made on the permanent exemption,
whichever is shorter.'' (61 FR 42816, August 19, 1996). EPA also stated
that ``areas in Alaska served by the Federal Aid Highway System are
also exempt from the related 211(g)(2) provisions until such time as a
decision has been made on the state's petition for a permanent
exemption.'' Id. The Agency stated it would propose a decision on
Alaska's request for a permanent waiver. Id.
On April 28, 1998, EPA published a proposed decision to grant
Alaska a permanent exemption. 63 FR 23241 (April 28, 1998.) On
September 16, 1998, EPA granted another temporary extension until July
1, 1999 to provide EPA and the State of Alaska more time to evaluate
the public comments submitted in response to the proposal, specifically
regarding the use of high-sulfur diesel fuel in engines manufactured to
meet future more stringent emissions standards. 63 FR 49459 (September
16, 1998).
Subsequent to granting the last temporary exemption, EPA issued an
Advance Notice of Proposed Rulemaking summarizing the issues and
inviting comment on whether EPA should set new nationwide requirements
for fuel used in diesel engines under section 211(c) of the Clean Air
Act, in order to bring about large environmental benefits through the
enabling of a new generation of diesel emission control technologies.
64 FR 26142, May 13, 1999. EPA expects that the section 211(c)
rulemaking will also address the issue of the appropriate level of
diesel sulfur in Alaska in the context of the proposed Tier 2 emission
standards for light-duty vehicles and possible future more stringent
emission standards for heavy-duty vehicles and non-road equipment.
Lead-Time Considerations
EPA believes that in this situation lead-time considerations are
also a significant local factor as provided under section 325.
Requiring Alaska to comply with low-sulfur diesel fuel requirements as
of July 1, 1999 when the current temporary exemption expires, is
unreasonable due to lead-time considerations. Because of the temporary
status of the previous and current exemptions, EPA did not intend that
Alaska would be required to comply prior to a final decision on a
permanent exemption. Therefore, the affected parties in Alaska are not
in a position to reasonably comply as of July 1, 1999, as EPA has not
made a decision on a permanent exemption. Alaska has recently indicated
to EPA that at least three years would be needed to implement any new
requirements once a final decision has been reached by EPA.
Need To Coordinate Decision With Upcoming Nationwide Rule
The need to coordinate a decision on a permanent exemption with the
upcoming section 211(c) rulemaking presents a significant local factor.
In effect, there are two rulemakings involving almost the same question
of the appropriate level of diesel sulfur in Alaska. EPA believes that
coordination between the final decision on the exemption and the
section 211(c) rulemaking is important, and EPA plans to make a final
decision on Alaska's petition for a permanent exemption in the section
211(c) rulemaking.
Failure to coordinate the petition for exemption from the section
211(i) requirements with the section 211(c) rulemaking could
potentially cause significantly increased costs for regulated parties
in Alaska. For example, if EPA were to deny Alaska's petition for a
permanent exemption, fuel in Alaska would have to meet the 0.05 percent
sulfur requirement. EPA would provide necessary lead-time as part of
setting the termination date for an exemption, and regulated parties in
Alaska would have to make investments to refine, distribute and sell
the low-sulfur diesel fuel. If EPA were to promulgate even lower sulfur
standards in the section 211(c) rulemaking, the regulated parties in
Alaska would be subject to a two-tiered implementation. Because EPA has
not determined what, if any, lower sulfur level would be required,
parties in Alaska are not able to prepare in advance for a possible
second tier. The costs associated with a two-tiered implementation
could be substantially higher than the cost of a single implementation,
based on a single coordinated decision in the section 211(c) rulemaking
about the level of sulfur for diesel fuel in Alaska.
Fuel Dyeing Requirements
Any expiration of the low-sulfur exemption has implications under
the Internal Revenue Code. Section 4081 of the Internal Revenue Code
(26 U.S.C. 4081) imposes a tax on the removal of diesel fuel from a
terminal at the terminal rack. However, a tax is not imposed if, among
other conditions, the diesel fuel is indelibly dyed in accordance with
Treasury regulations. Dyed diesel fuel can be used legally (for tax
purposes) in nontaxable uses such as for heating oil, fuel in
stationary engines, or fuel in non-highway vehicles. A substantial
penalty applies if dyed diesel fuel is used for taxable purposes such
as in registered highway vehicles.
In 1996, Congress enacted an exception to the dyeing requirement so
that undyed diesel fuel could be removed from a terminal tax free if,
among other requirements, the fuel is removed for ultimate sale or use
in an area of Alaska during the period the area is exempt from EPA's
sulfur content requirements under section 211(i)(4) of the Clean Air
Act. Treasury regulations (26 CFR 46.4082-5) generally establish a
system for collecting the federal diesel fuel tax at the wholesale
level in Alaska. This system is similar to the system used by the State
of Alaska for state fuel tax. The person liable for the federal tax
generally is the person who is licensed by Alaska as a qualified dealer
or a
[[Page 34130]]
retailer that has been registered by the Internal Revenue Service
(IRS).
If EPA's temporary exemption for the FAHS areas of Alaska were to
expire on July 1, 1999, then under Treasury regulations, the federal
fuel tax would be imposed on all undyed diesel fuel that is removed
from any terminal in the FAHS areas, regardless of the use that is
later made of the fuel. Removals from these terminals would be exempt
from the tax only if the fuel contains a dye of a prescribed color and
composition. Consequently, Alaska would be required by the Treasury
regulations to either dye the non-road tax-exempt fuel or pay the on-
road tax at the current rate of 24.4 cents per gallon.
According to an attachment to the comments submitted by the
Trustees for Alaska, Alaska used approximately 600 million gallons of
distillate each year (excluding fuel used for aviation) for the fiscal
years ending June 30, 1996 and June 30, 1997. If none of that fuel were
dyed and the sulfur exemption were to expire, the tax liability for
Alaska (at 24.4 cents per gallon) would be approximately $146.4 million
per year, compared to only $19.4 million per year if only that fuel
used for highway purposes were taxed. The taxed parties could later
file for refunds for the fuel they could show was not used in highway
vehicles. Alternatively, Alaska could comply with the Treasury
regulations by dyeing the approximately 86 percent of that fuel
intended for non-highway use. However, to implement such capacity by
July 1, 1999 would be a significant and unreasonable burden for
refiners, distributors and consumers of diesel fuel. Comments received
in response to the proposal indicated that each additional storage tank
needed to segregate the dyed and undyed fuels with supporting
infrastructure may cost $600,000, and there are over 80 tank farms in
Alaska that would require additional tankage. Similarly each additional
tanker truck required to avoid cross-contamination of dyed and undyed
fuels costs approximately $250,000. Finally, those comments indicated
that significant lead-time would be needed.
Conclusion That EPA Should Grant Temporary Exemption Until 2004
Based on all of these significant local factors, it is unreasonable
to mandate that low-sulfur highway vehicle diesel fuel be available for
use in Alaska for areas served by the Federal Aid Highway System after
the current temporary exemption expires on July 1, 1999. Instead, EPA
is extending the temporary exemption until January 1, 2004.
The section 211(c) rulemaking discussed above will make a
coordinated and final decision on the level of motor vehicle diesel
sulfur that will be required in Alaska. EPA therefore does not expect
that there would be any further extensions of the temporary exemption.
EPA expects final action in the upcoming section 211(c) rulemaking to
be in 2000.
The January 1, 2004 date in today's final rule would provide Alaska
approximately four years lead time, and approximately three years lead
time from the section 211(c) rulemaking. If appropriate, EPA will re-
evaluate the January 1, 2004 date for expiration of the exemption
during the section 211(c) rulemaking, for example when considering in
detail the impacts of any two-tiered implementation for Alaska. EPA
will also evaluate whether it is appropriate to shorten the timeframe
of the exemption, as part of the process of coordinating a final
decision on these matters in that rulemaking.
C. Guidance Regarding Compliance Under Temporary Exemption
Since today's rule exempts diesel fuel in Alaska from the sulfur
requirement until January 1, 2004, dyeing diesel fuel under EPA's
regulations to be used in applications other than highway vehicles will
be unnecessary in Alaska until January 1, 2004. However, in the event
high-sulfur diesel fuel is shipped from Alaska to the lower-48 states,
it would be necessary for the producer or shipping facility to add dye
to the noncomplying fuel before it is introduced into commerce in the
lower-48 states. In addition, supporting documentation (e.g., product
transfer documents) must clearly indicate the fuel may not comply with
the sulfur standard for highway vehicle diesel fuel and is not to be
used as a highway vehicle fuel. Conversely, EPA will not require high-
sulfur diesel fuel to be dyed if it is being shipped from the lower-48
states to Alaska, but supporting documentation must substantiate that
the fuel is only for shipment to Alaska and that it may not comply with
the sulfur standard for highway vehicle diesel fuel.
EPA will assume that all undyed diesel fuel found in any state,
except in the state of Alaska, is intended for sale in any state and
subject to the diesel fuel standards, unless the supporting
documentation clearly specifies the fuel is to be shipped only to
Alaska. The documentation should further clearly state that the fuel
may not comply with the Federal diesel fuel standards. If such product
enters the market of any state, other than Alaska, (e.g., is on route
to or at a dispensing facility in a state other than Alaska) and is
found to exceed the applicable sulfur content standard, all parties
will be presumed liable, as set forth in the regulations. However, EPA
will consider the appropriate evidence in determining whether a party
caused the violation.
With regard to the storage of diesel fuel in any state other than
Alaska, a refiner or transporter will not be held liable for diesel
fuel that does not comply with the applicable sulfur content standard
and dye requirement if it can show that the diesel fuel is truly being
stored and is not being sold, offered for sale, supplied, offered for
supply, transported or dispensed. However, once diesel fuel leaves a
refinery or transporter facility, a party can no longer escape
liability by claiming that the diesel fuel was simply in storage.
Although diesel fuel may temporarily come to rest at some point after
leaving a refinery or transporter facility, the intent of the
regulations is to cover all diesel fuel being distributed in the
marketplace. Once diesel fuel leaves a refinery or shipping facility it
is in the marketplace and as such is in the process of being sold,
supplied, offered for sale or supply, or transported.
D. Impact of Exemption on Engine Warranty, Recall and Tampering
EPA previously addressed the impact of an exemption from the low-
sulfur diesel fuel requirements on engine recall liability, warranty
and tampering issues in the American Samoa decision,3 Guam
decision,4 and initial Alaska decision.5 For this
final rule, EPA is addressing the recall liability and warranty issues
in a manner consistent with those earlier decisions. The tampering
issue is treated in a somewhat different manner.
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\3\ The Agency granted American Samoa's petition for a permanent
exemption from the diesel sulfur requirements on July 20, 1992, 57
FR 32010.
\4\ The Agency granted Guam's petition for a permanent exemption
from the diesel sulfur requirements on September 21, 1993, 58 FR
48968.
\5\ The Agency granted the State of Alaska's petition for a
temporary exemption from the diesel sulfur requirements on March 22,
1994, 59 FR 13610.
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Impact of Exemption on Recall Liability
If EPA determines that a substantial number of any class or
category of heavy-duty engines do not comply with the federal emission
requirements, although properly used and maintained, the engine
manufacturer is responsible for recalling and repairing the engines.
EPA typically determines whether engines comply with applicable federal
emission standards by testing in-use
[[Page 34131]]
engines which have been properly maintained and used. If an engine
fueled with exempted diesel fuel (such as the high-sulfur fuel supplied
in Alaska) was included in such testing, and the testing showed
exceedance of the applicable emission standards, EPA will determine, on
a case-by-case basis, if the exceedance is the result of the use of
exempted fuel. If EPA determines that the use of exempted diesel fuel
is the sole cause why a substantial number of the class or category of
heavy-duty engines fails to meet the applicable emission standards, EPA
would not seek a recall of the class or category of engines based on
these data.
For Alaska, as in the Guam and American Samoa decisions, EPA does
not intend to use test results (emissions levels) from engines used and
operated in Alaska that utilize high-sulfur diesel fuel (over 0.05
percent by weight) to show noncompliance by those engines for the
purpose of recalling an engine class. However, in cases in which it is
determined that the overall class is subject to recall for reasons
other than the use of exempted fuel in Alaska, individual engines will
not be excluded from repair on the basis of the fuel used.
Manufacturers are responsible for repairing any engine in the recalled
class regardless of its history of tampering or improper maintenance.
Impact of Exemption on the Manufacturers' Emission Warranty and on the
Durability of New Technology Engines
The Agency acknowledges that engines that were certified to meet
the federal emission standards using low-sulfur diesel fuel may in some
cases be unable to meet those federal emissions standards if they use
high-sulfur diesel fuel. However, EPA believes an exemption from the
general warranty provisions of section 207 of the Act is unnecessary to
protect manufacturers from unreasonable warranty recoveries by
purchasers. The emission defect warranty requirements under section
207(a) require an engine manufacturer to warrant that the engine shall
conform at the time of sale to applicable emission regulations and that
the engine is free from defects that cause the engine to fail to
conform with applicable regulations for its useful life. In practice,
this warranty is applicable to a specific list of emissions and
emissions-related engine components.
It has been consistent EPA policy that misuse or improper
maintenance of a vehicle or engine by the purchaser, including
misfueling, may create a reasonable basis for denying warranty coverage
for the specific emissions and emissions-related engine components
affected by the misuse. In Alaska, while use of fuel exempted from the
sulfur content limitation cannot be considered ``misfueling,'' it will
have the same adverse effect on emissions control components. Thus, EPA
believes that where the use of exempted diesel fuel in fact has an
adverse impact on the emissions durability of specific engine parts or
systems, such as a catalyst, the manufacturer has a reasonable basis
for denying warranty coverage on that part or other related parts. As
has consistently been EPA's policy, those components not adversely
affected by the use of exempted diesel fuel should continue to receive
full emissions warranty coverage.
EPA anticipates that many on-highway, heavy-duty diesel engines
will utilize some form of cooled EGR technology in order to meet the
2004 emission standards. Further, the Agency recognizes that under the
recent Consent Decrees entered into by the majority of diesel engine
manufacturers, diesel engines will have to meet the 2004 emission
standards beginning in October of 2002. Finally, the Agency recognizes
that the use of cooled EGR systems with high-sulfur fuel may contribute
to engine durability problems, requiring owners to overhaul their
engines more frequently than the intervals for which they were
designed. EPA believes, however, that within the time frame of this
temporary exemption, engine durability problems will not likely be a
significant problem for heavy-duty engine owners.
Because the new engine technology is not expected to be marketed
until late 2002, and because of the slow turnover rate of new heavy-
duty diesel vehicles in Alaska, EPA estimates that during the temporary
exemption less then five percent of the total Alaska diesel fleet will
incorporate the new engine technology, and only during the last 15
months of the exemption. Additionally, the State of Alaska expects that
during the temporary exemption adequate low-sulfur fuel will be
supplied to the Alaska market to meet the market demands created by
operators of the new technology diesel engines. EPA and the State of
Alaska have been informed that diesel fuel with sulfur levels near or
below the low sulfur limit of 500 ppm currently is being produced at
one refinery in Alaska. Further, the State of Alaska has committed to
work with the petroleum industry in Alaska to make low sulfur fuel
available to truck owners with new technology heavy-duty diesel
engines.
EPA will address the durability issue when making the final
decision on Alaska's section 211(i) petition for permanent exemption as
part of the upcoming nationwide rule on diesel fuel quality. However,
if subsequent to today's document, the Administrator determines that
supplies of low sulfur diesel fuel are inadequate to meet the
requirements of new technology diesel engines and that significant
environmental harm is resulting from adverse impacts of high sulfur
diesel fuel on these vehicles, this exemption may be reconsidered.
Impact of Exemption on Tampering Liability
Subsequent to the 1995 petition for a permanent exemption from the
diesel fuel sulfur requirements, the Engine Manufacturers Association
(EMA) requested enforcement discretion regarding the removal of
catalytic converters because of an indicated plugging problem caused by
the high-sulfur diesel fuel in Alaska. However, information
subsequently collected by EPA from several heavy-duty engine
manufacturers demonstrates that catalyst plugging is mainly a cold
weather problem and not a high-sulfur fuel issue. EPA is also aware
that the majority of the plugged catalysts have been eliminated. In a
letter to EPA of September 19, 1997, the EMA indicated that the
immediate problems that led to EMA's earlier request have been
resolved. Accordingly, EPA sees no need for an exemption that allows
the removal of catalysts in the field, or that permits manufacturers to
introduce into commerce catalyzed-engines without catalysts.
VI. Judicial Review of Today's Decision
Under section 307(b)(1) of the Clean Air Act, EPA hereby finds that
these regulations are of local or regional applicability. Accordingly,
judicial review of this action is available only in the United States
Court of Appeals for the circuit applicable to Alaska within 60 days of
publication.
VII. Public Participation in Today's Decision
The Agency received Alaska's request for a permanent exemption for
the Federal Aid Highway System areas in December of 1995. Soon
afterwards, the Agency received comments on the petition from the
Alaska Center for the Environment, the Alaska Clean Air Coalition, and
the Engine Manufacturers of America. EPA believed the issues raised by
those comments and possible tightening of heavy-duty highway vehicle
engine standards in 2004 necessitated further consideration before the
Agency made a decision on
[[Page 34132]]
Alaska's request for a permanent exemption.
The Agency published a proposed rule for a permanent exemption to
allow interested parties an additional opportunity to request a hearing
or to submit comments. EPA subsequently received a request for a public
hearing, but that request was soon withdrawn. EPA extended the comment
period until June 12, 1998, and received comments before and after that
date.
EPA's decision to extend the exemption until January 1, 2004 is not
a decision based on the merits of those comments. Instead, EPA's
decision is based on the unreasonableness of imposing the low-sulfur
diesel fuel requirement as of July 1, 1999, based on the significant
local factors supporting this decision are described herein.
VIII. Statutory Authority For Today's Decision
Authority for the action in this final rule is in sections 211 (42
U.S.C. 7545) and 325(a)(1) (42 U.S.C. 7625-1(a)(1)) of the Clean Air
Act, as amended.
The effective date of this rule is July 1, 1999. If the effective
date of this rule were any later, there would be some period of time
when Alaska would lose its current exemption from low-sulfur diesel
fuel and dye requirements because the current exemption expires on July
1, 1999. ``EPA did not intend that parties in Alaska would be required
to comply with low sulfur diesel fuel or dye requirements prior to the
effective date of this final rule. EPA therefore finds that there is
good cause under 5 U.S.C. 553(d) to make this rule effective on July 1,
1999.''
IX. Administrative Requirements for Today's Decision
A. Executive Order 12866: Administrative Designation and Regulatory
Analysis
Under Executive Order 12866 6, the Agency must determine
whether a regulation is ``significant'' and therefore subject to OMB
review and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
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\6\ 58 FR 51736 (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.7
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\7\ 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 OMB review.
B. Regulatory Flexibility Act
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 final rule will not have a significant impact on a substantial
number of small entities because today's action to continue the current
temporary exemption of the low-sulfur diesel fuel requirements in the
State of Alaska for four and a half more years, will not result in any
additional economic burden on any of the affected parties, including
small entities involved in the oil industry, the automotive industry
and the automotive service industry. EPA is not imposing any new
requirements on regulated entities, but instead is continuing an
exemption from a requirement, which makes it less restrictive and less
burdensome. Therefore, EPA has determined that this action will not
have a significant economic impact on a substantial number of small
entities.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1980, 544 U.S.C. 3501 et seq., and
implementing regulations, 5 CFR Part 1320, do not apply to this action
as it does not involve the collection of information as defined
therein.
D. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit 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 United States prior
to publication of the rule in the Federal Register. A Major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective July 1, 1999.
E. Unfunded Mandates Act
Under section 202 of the Unfunded Mandates Reform Act of 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a federal mandate with estimated costs to the
private sector of $100 million or more, or to state, local, or tribal
governments of $100 million or more in the aggregate. Under section
205, EPA must select the most cost-effective and least burdensome
alternative that achieves the objectives of the rule and is consistent
with statutory requirements. Section 203 requires EPA to establish a
plan for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that this final rule imposes no new federal
requirements and does not include any federal mandate with costs to the
private sector or to state, local, or tribal governments. Therefore,
the Administrator certifies that this rule does not require a budgetary
impact statement.
F. Executive Order 12875: Enhancing the Intergovernmental Partnership
Under Executive Order 12875, EPA may not issue a regulation that is
not required by statute and that creates a mandate upon a State, local
or tribal government, unless the Federal government provides the funds
necessary to pay the direct compliance costs incurred by those
governments, or EPA consults with those governments. If EPA complies by
consulting, Executive Order 12875 requires EPA to provide to the Office
of Management and Budget a description of the extent of EPA's prior
consultation with representatives of affected State, local and tribal
governments, the nature of their concerns, copies of any written
communications from the governments, and a statement supporting the
need to issue the regulation. In addition, Executive Order 12875
requires EPA to develop an effective process permitting
[[Page 34133]]
elected officials and other representatives of State, local and tribal
governments ``to provide meaningful and timely input in the development
of regulatory proposals containing significant unfunded mandates.''
Today's rule does not create a mandate on State, local or tribal
governments. The rule does not impose any enforceable duties on these
entities. It only extends an existing temporary exemption of the low-
sulfur diesel fuel requirements in the State of Alaska. Accordingly,
the requirements of section 1(a) of Executive Order 12875 do not apply
to this rule.
G. Executive Order 13084: Consultation and Coordination With Indian
Tribal Governments
Under Executive Order 13084, EPA may not issue a regulation that is
not required by statute, that significantly or uniquely affects the
communities of Indian tribal governments, and that imposes substantial
direct compliance costs on those communities, unless the Federal
government provides the funds necessary to pay the direct compliance
costs incurred by the tribal governments, or EPA consults with those
governments. If EPA complies by consulting, Executive Order 13084
requires EPA to provide to the Office of Management and Budget, in a
separately identified section of the preamble to the rule, a
description of the extent of EPA's prior consultation with
representatives of affected tribal governments, a summary of the nature
of their concerns, and a statement supporting the need to issue the
regulation. In addition, Executive Order 13084 requires EPA to develop
an effective process permitting elected officials and other
representatives of Indian tribal governments ``to provide meaningful
and timely input in the development of regulatory policies on matters
that significantly or uniquely affect their communities.''
Today's rule does not significantly or uniquely affect the
communities of Indian tribal governments. EPA has determined that this
final rule imposes no new federal requirements, but rather extends an
existing temporary exemption of the low-sulfur diesel fuel requirements
in the State of Alaska. Accordingly, the requirements of section 3(b)
of Executive Order 13084 do not apply to this rule.
H. Executive Order 13045: Children's Health Protection
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997) applies to any rule that: (1) Is
determined to be ``economically significant'' as defined under E.O.
12866, and (2) concerns an environmental health or safety risk that EPA
has reason to believe may have a disproportionate effect on children.
If the regulatory action meets both criteria, the Agency must evaluate
the environmental health or safety effects of the planned rule on
children, and explain why the planned regulation is preferable to other
potentially effective and reasonably feasible alternatives considered
by the Agency.
This State of Alaska Petition from Exemption from Diesel Fuel
Sulfur Requirements rule is not subject to the Executive Order because
it is not economically significant as defined in E.O. 12866, and
because in the circumstances present in this rulemaking, the analysis
required under section 5-501 of the Order would not have the potential
to influence the regulation. The decision to extend the exemption in
this rulemaking is based primarily on factors other than health and
safety, because those factors will be addressed separately in a related
national rulemaking that will address the appropriate level of sulfur
in diesel fuel. EPA has issued an Advanced Notice of Proposed
Rulemaking (64 FR 26142, May 13, 1999) involving the appropriate level
of diesel sulfur nationwide. This national rulemaking will include any
analysis that is required under Executive Order 13045.
I. National Technology Transfer and Advancement Act of 1995 (NTTAA)
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Pub L. No. 104-113, section 12(d) (15 U.S.C. 272
note) directs EPA to use voluntary consensus standards in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. The NTTAA directs EPA
to provide Congress, through OMB, explanations when the Agency decides
not to use available and applicable voluntary consensus standards.
This action does not involve technical standards. Therefore, EPA
did not consider the use of any voluntary consensus standards.
List of Subjects in 40 CFR Part 69
Environmental protection, Air pollution control, Alaska.
Dated: June 18, 1999.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, title 40 chapter I of the
Code of Federal Regulations is amended as follows:
PART 69--SPECIAL EXEMPTIONS FROM REQUIREMENTS OF THE CLEAN AIR ACT
1. The authority citation for part 69 continues to read as follows:
Authority: 42 U.S.C. 7545(1) and (g), 7625-1.
Subpart E--[Amended]
2. Section 69.51 is amended by revising paragraph (c) to read as
follows:
Sec. 69.51 Exemptions.
* * * * *
(c) Beginning January 1, 2004, the exemptions provided in
paragraphs (a) and (b) of this section are applicable only to fuel used
in those areas of Alaska that are not served by the Federal Aid Highway
System.
[FR Doc. 99-16228 Filed 6-24-99; 8:45 am]
BILLING CODE 6560-50-P
