96-16330. Control of Emissions of Air Pollution from Highway Heavy-Duty Engines

[Federal Register Volume 61, Number 125 (Thursday, June 27, 1996)]
[Proposed Rules]
[Pages 33421-33469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16330]


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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 86

[AMS-FRL-5526-9]


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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this action, EPA proposes new emission standards and 
related provisions for heavy-duty engines intended for highway 
operation, beginning in the 2004 model year. The proposed provisions 
represent a large reduction (approximately 50 percent) in emission of 
oxides of nitrogen (NOX), as well as reductions in hydrocarbons 
(HC) and nitrate particulate matter (PM) from trucks and buses. If the 
proposed standards are implemented, the resulting emission reductions 
would translate into significant, long-term improvements in air quality 
in many areas of the U.S. This would provide much-needed assistance to 
a range of 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.
    EPA is also proposing several provisions to increase the durability 
of emission controls and to provide flexibility for manufacturers in 
complying with the stringent new standards. The Agency previously 
published an Advance Notice of Proposed Rulemaking relating to this 
action and addresses here a number of the comments received on the 
Advance Notice. EPA believes the proposed program would result in 
significant progress throughout the country in protecting public health 
and the environment.

DATES: EPA requests comment on the proposal rulemaking no later than 
August 26, 1996.
    EPA will hold a public hearing on this proposal on July 25, 1996.
    EPA will also hold a public meeting on July 19, 1996, to discuss 
the proposed HDE regulations and receive informal public input on them, 
and to discuss other potential mobile source controls identified in the 
California Ozone State Implementation Plan for the South Coast (the 
greater Los Angeles area).
    More information about commenting on this action and on the public 
hearing and meeting may be found under Public Participation, in Section 
II of SUPPLEMENARY INFORMATION.

ADDRESSES: Materials relevant to this proposal including the draft 
regulatory text and Regulatory Impact Analysis (RIA) are contained in 
Public Docket A-95-27, located at room M-1500, Waterside Mall (ground 
floor), U.S. Environmental Protection Agency, 401 M Street, S.W., 
Washington, DC 20460. The docket may be inspected from 8:00 a.m. until 
5:30 p.m., Monday through Friday. A reasonable fee may be charged by 
EPA for copying docket materials.
    Comments on this proposal should be sent to Public Docket A-95-27 
at the above address. EPA requests that a copy of comments also be sent 
to Chris Lieske, U.S. EPA, Engine Programs and Compliance Division, 
2565 Plymouth Road, Ann Arbor, MI 48105.
    The hearing on this proposal will be held at the Marriott Hotel and

[[Page 33422]]

Conference Center, 1275 South Huron Street, Ypsilanti, MI, (313) 487-
2000, from 9:00 am until all testimony has been presented.
    The public meeting to discuss the proposed HDE regulations will be 
held Downtown Los Angeles Hyatt Regency, 711 South Hope Street, Los 
Angeles, California. The public meeting will be conducted in two 
sessions beginning at 2:00 p.m. and 7:00 p.m., with a dinner recess 
before the 7:00 p.m. sessions.
    This proposal, the draft regulatory text, and the draft Regulatory 
Impact Analysis (RIA) are available electronically and can be obtained 
on the Technology Transfer Network (TTN), which is an electronic 
bulletin board system (BBS) operated by EPA's Office of Air Quality 
Planning and Standards and via the internet. Details on how to access 
TTNBBS and the internet are included in Section XIII of SUPPLEMENTARY 
INFORMATION.

FOR FURTHER INFORMATION CONTACT: Chris Lieske, U.S. EPA, Engine 
Programs and Compliance Division, [phone].

SUPPLEMENTARY INFORMATION:

I. Introduction

    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 precontrol 
rates. However, continued industrial growth and expansion of motor 
vehicle usage threaten to reverse these past achievements. Today, more 
than five years after passage of major amendments to the Clean Air Act 
(CAA or the Act), many states are still finding it difficult to meet 
the 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 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, NOX, ozone, and PM 
have all 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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    NOX control is now seen as a critical strategy to control 
ozone levels, which remain unacceptably high in many areas across the 
country. For many years, control of VOCs was the main strategy employed 
in efforts to reduce ground-level ozone. VOC reductions were deemed 
more cost effective (on a per-ton basis) and more readily achievable 
than NOX reductions. In addition, it was generally believed that 
greater ozone benefits could be achieved through VOC reductions. More 
recently, it has become clear that NOX controls are often an 
effective strategy for reducing ozone where its levels are high over a 
large region (as in the Midwest and Northeast). As a result, attention 
has turned to controlling NOX emissions as a key to improving air 
quality in many areas of the country.
    Current projections show total NOX emissions decreasing 
slightly during the next few years as stationary and mobile source 
control programs promulgated under the 1990 CAA amendments are phased 
in. However, the downward trends in NOX pollution will begin to 
reverse and NOX emission inventories will begin to rise by the 
early or middle part of the next decade due to growth in stationary and 
mobile source activity. In this timeframe, emissions from mobile 
sources will account for about half of all NOX emissions and 
heavy-duty vehicles are projected to represent about one quarter of 
mobile source NOX emissions. In most areas, a significant increase 
in ground-level ozone is expected to accompany the rise in NOX 
emissions. Levels of PM are also expected to rise, both because of the 
expected increase in numbers of PM sources and because NOX is 
transformed in the atmosphere into fine nitrate particles that account 
for a substantial fraction of the airborne particulate in some areas of 
the country (a process called ``secondary particulate formation''). 
Given these expected trends and the absence of new emission control 
initiatives, the Agency believes that some of the nation's hard-won air 
quality improvements will begin to be seriously threatened early in the 
next decade.
    Over the past decade, ambient air measurements and computer 
modeling studies have repeatedly demonstrated that ozone is a regional-
scale issue, not just a local issue, in part because ozone and its 
precursors, NOX and VOC, are often transported across large 
distances. Thus, there is a role for all levels of government to 
address these issues. EPA's state and local partners generally agree 
that only with new initiatives at the regional and national level can 
long-term clean air goals be achieved.
    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 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 so far prevented achievement of emission levels 
comparable to today's light-duty

[[Page 33423]]

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 in this proposal, 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. New technological options are available to manufacturers of 
heavy-duty gasoline engines as well. The emerging technological 
potential for much cleaner heavy-duty vehicles is discussed further in 
Section IV of this proposal and in the associated Regulatory Impact 
Analysis (RIA).
    Recognizing the need for additional NOX and PM control 
measures to address air quality concerns in several parts of the 
country and the growing contribution of the heavy-duty engine sector to 
ozone and PM problems, EPA issued an Advance Notice of Proposed 
Rulemaking (ANPRM) on August 31, 1995. In the ANPRM, the Agency sought 
early comment on the general framework of a program to reduce emissions 
from the heavy-duty engine category. The Agency has been pleased that a 
broad range of interested parties have responded to the ANPRM with 
their comments. To the extent possible, EPA has considered and 
addressed these comments in the preparation of this Notice of Proposed 
Rulemaking (NPRM). EPA continues to encourage comment on all aspects of 
the proposed program; where ANPRM commenters may believe that this 
action fails to address their comments, EPA encourages them to resubmit 
those comments in the context of this formal proposal.
    This preamble is organized as follows: Section II.A. summarizes the 
public health and environmental concerns from ozone, PM and their 
precursors; Section II.B. discusses the connection of these emissions 
to air quality trends and the regional nature of the ozone and PM 
problems; Section II.C. presents trends in overall nationwide NOX, 
VOC, and PM emissions; Section II.D. presents the current and projected 
future contribution of heavy-duty vehicles to overall emissions; 
Section II.E. summarizes the overall rationale for the action being 
proposed; Section III. then describes in detail the standards and other 
provisions being proposed as well as background on the regulation of 
highway heavy-duty engines; Section IV. summarizes the technological 
feasibility of the proposed program; Section V. reviews the results of 
EPA's economic and environmental analyses; Section VI. discusses the 
potential role of several incentive-based programs; and Section VII. 
provides information about the formal public comment process, including 
a public hearing. The actual proposed regulatory language is available 
in the public docket and electronically (see ADDRESSES above and 
Section XIII. for further information).

II. Need for New NOX and VOC Emission Control

A. Health and Environmental Impacts of Ambient NOX and VOC: Ozone, 
Particulate Matter, and Other Effects

    Oxides of nitrogen (NOX) comprise a family of highly reactive 
gaseous compounds that contribute to air pollution in both urban and 
rural environments. NOX emissions are produced during the 
combustion of fuels at high temperatures. The primary sources of 
atmospheric NOX include both stationary sources (such as power 
plants and industrial boilers), highway sources (such as light-duty and 
heavy-duty vehicles) and nonroad sources (such as construction and 
agricultural equipment). Ambient levels of NOX can be directly 
harmful to human health and the environment. More importantly from an 
overall health and welfare perspective, NOX contributes to the 
production of secondary chemical products that in turn cause additional 
health and welfare effects. Prominent among these are ozone and 
secondary PM formation. Each of these phenomena is briefly discussed in 
this proposal and in more detail in the Regulatory Impact Analysis.
    Much of the evaluation of the health and environmental effects 
related to NOX found in this section and in the Regulatory Impact 
Analysis (RIA) were also discussed in the August 31, 1995 ANPRM.5 
EPA encourages comment on the Agency beliefs expressed in this proposal 
and in the RIA.
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    \5\ Information cited in this section and other related 
information on health and environmental effects related to NOX 
and VOC are available from the Regulatory Impact Analysis and other 
documents found in Docket A-95-27.
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1. Direct Health Effects of NOX
    The component of NOX that is of most concern from a health 
standpoint is nitrogen dioxide, NO2. EPA has set a primary 
(health-related) NAAQS for NO2 of 100 micrograms per cubic meter, 
or 0.053 parts per million. Direct exposure to NO2 can reduce 
breathing efficiency and increase lung and airway irritation in healthy 
people, as well as in the elderly and in people with pre-existing 
pulmonary conditions. Exposure to NO2 at or near the level of the 
ambient standard appears to increase symptoms of respiratory illness, 
lung congestion, wheeze, and increased bronchitis in children.6
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    \6\ Air Quality Criteria Document for Oxides of Nitrogen, EPA-
600/8-91/049aF-cF, August 1993 (NTIS #: PB92-17-6361/REB, -6379/REB, 
-6387/REB).
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2. Indirect Health and Welfare Effects of NOX and VOC
    In addition to the direct effects of NOX, the chemical 
transformation products of NOX also contribute to adverse health 
and environmental impacts. These secondary impacts of NOX include 
ground-level ozone, nitrate particulate matter, acid deposition, 
eutrophication (plant overgrowth) of coastal waters, and transformation 
of other pollutants into more dangerous chemical forms. Each of these 
is discussed below and in the Regulatory Impact Analysis. Also, 
volatile organic compounds (VOCs), composed of a very large number of 
different hydrocarbons (HC) and other organic compounds, are primary 
precursors to ozone. The health and environmental effects of these 
compounds as a class are generally considered in terms of their effect 
on ozone and are discussed below and in the RIA. Health or other 
effects of individual toxic compounds are not separately addressed in 
this proposal.
a. Ozone
    NOX and VOCs are primary precursors to ground level ozone 
(O3). As discussed later in this proposal, ozone tends to be a 
regional phenomenon in which elevated levels of ozone can develop over 
wide areas.
    Ozone is a highly reactive chemical compound that can affect both 
biological tissues and man-made materials. Ozone exposure causes a 
range of human pulmonary and respiratory health effects. While ozone's 
effects on the pulmonary function of sensitive individuals or 
populations (e.g., asthmatics) are of primary concern, evidence 
indicates that high ambient levels of ozone can cause respiratory 
symptoms in healthy adults and

[[Page 33424]]

children as well. For example, exposure to ozone for several hours at 
moderate concentrations, especially during outdoor work and exercise, 
has been found to decrease lung function, increase airway inflammation, 
increase sensitivity to other irritants, and impair lung defenses 
against infections in otherwise healthy adults and children. Other 
symptoms include chest pain, coughing, and shortness of breath.7
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    \7\ Air Quality Criteria Document for Ozone and Related 
Photochemical Oxidants (External Review Draft), EPA/600/P-93/004aF-
cF, 1996.
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    Recent studies focusing on chronic lung effects are also being 
evaluated as part of EPA's review of the current ozone NAAQS. Repeated 
exposures in laboratory animals suggest a cumulative impact, 
potentially causing permanent structural changes to respiratory 
tissues.8 Extrapolation of these results to humans raises concern 
that individuals who have been exposed to ambient air containing high 
levels of ozone each summer of their lives may experience a reduced 
quality of life in their later years.9
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    \8\ Gross, K.B., White, H.J. (1987) ``Functional and pathologic 
consequences of a 52-week exposure to 0.5 PPM ozone followed by a 
clean air recovery period,'' Lung 165:283-295.; Huang, Y, Chang, L.-
Y, Miller, F.J., Crapo, J.D. (1988) ``Lung injury caused by ambient 
levels of ozone,'' J. Aerosol Med. 1:180-183; Tyler, W.S., Tyler, 
N.K., Last, J.A., Gillespie, M.J., Barstow, T.J. (1988) ``Comparison 
of daily and seasonal exposures of young monkeys to ozone,'' 
Toxicology 50:131-144.
    \9\ See, for example, Euler, G.L.; Abbey, D.E.; Hodgkin, J.E.; 
Magie, A.R. (1988) ``COPD symptom effects of long-term cumulative 
exposure to ambient levels of total oxidants and nitrogen dioxide in 
California Seventh-Day Adventist residents,'' Arch. Environ. Health 
43:279-285.
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    As described in more detail in the RIA, the presence of elevated 
levels of ozone is of concern in rural areas as well. Because of its 
high chemical reactivity, ozone causes injury to vegetation. This 
injury has been observed at ozone levels above and also below the 
current ozone NAAQS; EPA in is the process of reconsidering the 
appropriate level of the ozone NAAQS in light of such evidence. 
Although the action proposed is not being proposed for the purpose of 
reducing crop damage from ozone, it is of interest to note that 
estimates based on experimental studies of the major commercial crops 
in the U.S. suggest that ozone may be responsible for significant 
agricultural crop yield losses. In addition, ozone causes noticeable 
leaf injury in many crops, which reduces their marketability and value. 
Finally, there is evidence that exposure to ambient levels of ozone 
existing in many parts of the country may be responsible for forest and 
ecosystem damage. Such damage may be exhibited as leaf damage, reduced 
growth rate, and increased susceptibility to insects, disease, and 
other environmental stresses.
b. Nitrate Particulate Matter
    The conversion of NOX into fine particulate matter (such as 
ammonium nitrate) is of significant human health and environmental 
concern. In general, air pollutants collectively called particulate 
matter (PM) are divided into primary and secondary sources. Primary 
sources include dust, dirt, soot, smoke, and liquid droplets directly 
emitted into the air by sources such as factories, power plants, cars, 
trucks, woodstoves/fireplaces, construction activity, forest fires, 
agricultural activities such as tillage, and natural windblown dust. 
Particles formed secondarily in the atmosphere by condensation or the 
transformation of emitted gases such as SO2, NOX, and VOCs 
are also considered particulate matter. Ambient PM is related to 
several adverse health and environmental effects.
    At the present time, data is not available to precisely partition 
PM-10 into its primary and secondary PM components. Most of the well 
developed nationwide PM-10 inventories are based only on primary 
sources, but inventories for some PM-10 nonattainment areas have 
identified the primary and secondary PM. From the available data, it is 
clear that the roles of primary and secondary PM vary geographically. 
For example, ammonium nitrate is a significant portion of the PM-10 
inventory in cities in the western states (e.g., Denver, Salt Lake 
City, Los Angeles) and a smaller portion of total PM in cities in the 
eastern states (e.g., Philadelphia, New York). As discussed in the RIA, 
EPA estimates that the NOX to Nitrate conversion rate varies from 
near zero to about 20 percent, with a U.S. average in the order of 
about 5 percent. While there is not data available on this at the 
present time, it is reasonable to assume that NOX emissions from 
heavy-duty engines are converted to nitrate at the same rate as 
NOX from other sources.
    The existing NAAQS for particulate matter were set in 1987. The 
primary standards, intended to protect human health, are an average 
concentration of 150 micrograms per cubic meter (g/m3) 
over a 24-hour period and an average concentration of 50 g/
m3 annually. PM-10 was selected as the indicator for particle 
pollution based on lung deposition studies. PM-10 includes all 
particles in the size range of 10 micrometers or less. Particles 
smaller than 2.5 micrometers are capable of penetrating deeper into the 
lungs and air sacs. The secondary standards, intended to protect 
against damage to the environment, were set identical to the primary 
standards.
    Since the last review of the PM-10 NAAQS in 1987, many 
epidemiological studies of PM-10 exposure at levels below the existing 
24-hour and annual standards have associated higher levels of particle 
pollution with increased occurrence of illness and death (e.g., 
increased hospital admissions, aggravation of bronchitis and asthma, 
and premature deaths). Based on studies of human populations exposed to 
high concentrations of particles and on laboratory studies of animals 
and humans, there are major human health concerns associated with PM. 
These include deleterious effects on breathing and the respiratory 
system, aggravation of existing respiratory and cardiovascular disease, 
alterations in the body's defense mechanisms against foreign materials, 
direct and indirect damage to lung tissue resulting in fibrosis, 
carcinogenesis, and premature death. The major subgroups of the 
population that appear to be most sensitive to the effects of 
particulate matter include individuals with emphysema-like conditions 
or cardiovascular diseases, chronic obstructive pulmonary disease, 
those with influenza, asthmatics, the elderly, and children. PM-10 also 
soils and damages materials, and fine particles are a major cause of 
visibility impairment in the United States.10
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    \10\ Air Quality Criteria for Particulate Matter (External 
Review Draft), EPA-600/AP-95/001a-a, April 1995.
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    All particles in the atmosphere scatter light and, hence, reduce 
visibility. However, light is scattered most efficiently by particles 
with a diameter of 0.5-1.0 micrometers. Secondary particles such as 
nitrates are in this size range. As discussed in the RIA, in locations 
such as the western U.S., where the ambient levels of SO2 tend to 
be low, EPA believes nitrate particles are major contributors to 
visibility attenuation.
c. Other Secondary Effects of NOX
    NOX is a major contributor to acid deposition. The damage 
caused by acid deposition continues to be documented and includes 
acidification of surface waters and soil, reduction in fish 
populations, damage to forests and associated wildlife, soil 
degradation, damage to materials, monuments, buildings, etc., and 
reduced visibility.11

[[Page 33425]]

Effects of acid deposition are most pronounced during springtime 
snowmelts, when ``pulses'' of highly acidic water, often containing 
high concentrations of toxic aluminum, enter lakes and streams. In 
addition, nitrogen compounds deposited on ecosystems can transport 
acids already contained in the soils and thus contribute to the 
acidification of those ecosystems. Although one commenter on the ANPRM, 
API, challenged the importance of NOX control in reducing acid 
deposition, EPA believes that geographically broad controls like those 
proposed in this action represent a cost-effective method of reducing 
overall levels of deposited acid.12
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    \11\ ``Acid Deposition Standard Feasibility Study, A Report to 
Congress,'' prepared for the U.S. Environmental Protection Agency by 
the Cadmus Group, Inc., under Contract Number 68-D2-0168, February 
1995.
    \12\ More information about EPA's position on the relationship 
between NOX and acid deposition may be found as item II-A-13 in 
Docket A-95-28, titled Draft Report: Adverse Effects of Nitrogen 
Oxides and Benefits of Reductions.
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    Another secondary effect of NOX emissions is their role in the 
overgrowth of algae and other plants and oxygen depletion 
(eutrophication) in coastal estuaries in the eastern part of the 
country, including the Chesapeake Bay, as well as other estuaries and 
coastal waters.13 Airborne nitrogen compounds act as fertilizers 
for plant growth, contributing an estimated 25 percent of nitrogen 
loading in some coastal waters. In waters where nitrogen compounds are 
the limiting factor, eutrophication is resulting in the reduction or 
loss of commercially valuable aquatic/marine species as well as 
diminution of water-related recreational activities. EPA addressed this 
effect on estuaries in the ANPRM and received no comments counter to 
the Agency's assessment; comment on this issue is encouraged.
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    \13\ Deposition of Air Pollutants Into the Great Waters: First 
Report to Congress, EPA-453/r-93-055, May 1994.
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    EPA encourages comment on all aspects of its review of the human 
health and environmental impacts of ozone, NOX, and PM (especially 
secondary nitrate PM), both in this preamble and in the Regulatory 
Impact Analysis.

B. Need for NOX and VOC Control To Address Ozone and PM Issues

1. Regional NOX Control as a Strategy for Addressing Regional 
Ozone Problems
    The precursors to ozone and ozone itself are transported long 
distances under some commonly occurring meteorological conditions. 
Specifically, concentrations of ozone and its precursors in a region 
and the transport of ozone and precursor pollutants into, out of, and 
within a region are very significant factors in the accumulation of 
ozone in any given area. Regional-scale transport, as it is discussed 
in this proposal, may occur within a state or across one or more state 
boundaries. Local source NOX and VOC controls are key parts of the 
overall attainment strategy for nonattainment areas. However, the 
ability of an area to achieve ozone attainment and thereby reduce 
ozone-related health and environmental effects is often heavily 
influenced by the ozone and precursor emission levels of upwind areas. 
Thus, for many of these areas, EPA believes that attainment of the 
ozone NAAQS will require control programs much broader than strictly 
locally focused controls to take into account the effect of emissions 
and ozone far beyond the boundaries of any individual nonattainment 
area.
    EPA therefore believes that effective ozone control requires an 
integrated strategy that combines cost-effective reductions in 
emissions from both mobile and stationary sources. EPA's current 
initiatives, including the national highway heavy-duty engine standards 
proposed in this action, are components of the Agency's integrated 
ozone reduction strategy.
    By the time the 1990 amendments to the Clean Air Act were passed, 
the understanding that many areas face regional-scale ozone problems 
was well established. Before 1990, the Act required states to address 
the contribution of their pollution to other areas' attainment of the 
ozone standard. Then, in the 1990 amendments, Congress included 
additional provisions for states to address regional ozone transport in 
their efforts to reach attainment by the statutory deadlines (the 
Northeast Ozone Transport Region and Commission resulted from these 
provisions). Since 1990, the understanding of regional transport of 
ozone precursors and ozone itself has continued to expand.
    The problem of regional transport of ozone and its precursors is 
widely recognized by the states. In response to concerns about this 
problem raised by state environmental commissioners comprising the 
Environmental Council of the States (ECOS), EPA has worked closely with 
states in the Ozone Transport Assessment Group (OTAG) to develop 
various recommended control measures intended to address the regional 
nature of ozone. Similarly, state and local air administrators, under 
the auspices of STAPPA and ALAPCO, recently passed a unanimous 
resolution endorsing national NOX emission regulations.14
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    \14\ See comments from STAPPA/ALAPCO in Docket A-95-27.
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    As the understanding of the photochemical phenomena related to 
ozone has developed, NOX control options have received increasing 
attention. Especially in addressing regional-scale ozone problems, 
control of NOX has emerged as the primary strategy. VOC control, 
by comparison, is seen as most effective in addressing localized ozone 
peak concentrations found in or near major urban areas. As discussed 
further below, EPA has conducted modeling studies in recent years 
covering the eastern half of the U.S., which have reinforced the 
understanding that regional-scale control of NOX emissions will be 
essential to reducing the levels of transported ozone in large areas of 
the Northeast, Southeast, and Midwest. EPA believes that ozone problems 
in California also represent regional problems that would be 
susceptible to regional NOX control. Thus, the extent of local 
controls that will be needed to attain and maintain the ozone NAAQS in 
and near seriously polluted cities is sensitive both to the amount of 
ozone and precursors transported into the local area and to the 
specific photochemistry of the area. In some cases (e.g., portions of 
the Northeast Corridor, the Lake Michigan area, Atlanta, and 
California) preliminary local modeling performed by the states 
indicates that it will likely not be feasible to find sufficient local 
control measures for individual nonattainment areas unless transport 
into the areas is reduced in some manner. EPA has carefully considered 
this important relationship between local and regional NOX 
controls for individual areas and regions and for the country as a 
whole, as summarized in the next sections. EPA requests comment on 
these issues as well as general comments on the need for regional-scale 
NOX controls.
a. Action by States and EPA To Achieve CAA Air Quality Goals
    Title I of the 1990 Clean Air Act amendments (Sections 181-185(b), 
generally) established an aggressive strategy for ozone nonattainment 
areas to come into compliance with the ozone NAAQS. (The case of 
attainment of the PM NAAQS is discussed in section B.3. below.) The 
Act's strategy provides the framework for action by states and EPA for 
national, regional, and local controls. Under these provisions, states 
are expected to submit State Implementation Plans (SIPs)

[[Page 33426]]

demonstrating how each nonattainment area will reach attainment of the 
ozone NAAQS. Based on the degree that ozone concentrations in an area 
exceed the standard, the Act spells out specific requirements that 
states must incorporate into their attainment plans and sets specific 
dates by which nonattainment areas must reach attainment.
    For nonattainment areas designated as serious, severe, or extreme, 
state attainment demonstrations involve the use of photochemical grid 
modeling (e.g., Urban Airshed Modeling, or UAM) for each nonattainment 
area. Although these attainment demonstrations were due November 15, 
1994, the magnitude of this modeling task, especially for areas that 
are significantly affected by transport of ozone and precursors 
generated outside of the nonattainment area, has delayed many states in 
submitting complete modeling results.
    Recognizing these challenges, EPA recently issued guidance on ozone 
demonstrations, based on a two-phase approach for the submittal of 
ozone SIP attainment demonstrations.15 Under Phase I, the state is 
required to conduct limited UAM modeling and submit a plan implementing 
a set of specific local control measures to achieve major reductions in 
ozone precursors. Phase II involves a two-year process during which 
EPA, the states, regional associations, and other interested parties 
can improve emission inventories and modeling and identify regional 
measures that may be needed to supplement the local controls of Phase 
I. These improved analyses are then to be considered by states in 
identifying additional local control measures that may be needed to 
attain the NAAQS by the statutory dates. Currently, under Phase I of 
the process, states are submitting plans and EPA is taking action to 
approve or disapprove them.
---------------------------------------------------------------------------

    \15\ Memorandum from Mary D. Nichols, Assistant Administrator 
for Air and Radiation, to EPA Regional Administrators, re Ozone 
Attainment Demonstrations, March 2, 1995.
---------------------------------------------------------------------------

    As part of these Phase I submittals, some states have indicated 
that on the basis of preliminary information, locally based stationary 
source NOX controls in those nonattainment areas would not be 
helpful--or, in a few cases, would be detrimental--to attainment of the 
ozone NAAQS. These states have petitioned EPA under Section 182(f) of 
the Act for exemptions from local NOX stationary source controls 
they would otherwise be required to implement under Reasonably 
Available Control Technology (RACT) and New Source Review (NSR) 
regulations. In general, Section 182(f) provides that waivers must be 
granted if states show that reducing NOX within a nonattainment 
area would not contribute to attainment of the ozone NAAQS within the 
same nonattainment area.\16\ This section of the Act was added in 1990 
in recognition of the fact that NOX reductions within some 
nonattainment areas can increase ozone concentrations.
---------------------------------------------------------------------------

    \16\ ``Section 182(f) Nitrogen Oxides (NOX) Exemptions--
Revised Process and Criteria,'' EPA Memo from John S. Seitz, 
Director, OAQPS, to Regional Air Directors, February 8, 1995.
---------------------------------------------------------------------------

    Section 182(f) of the Act also requires EPA to limit the assessment 
of state petitions to the effect that NOX reductions within a 
nonattainment area are likely to have on that local area's ability to 
meet the NAAQS (i.e., this section of the Act does not permit an 
assessment of pollutant transport into and out of the area). However, 
in their modeling supporting their overall attainment demonstrations 
under Phase II, states will need to project the levels of ozone and 
precursors that are transported into the area (these assumptions are 
called ``boundary conditions''). In many areas, the boundary conditions 
used in Phase II modeling will need to assume that significant 
reductions in ozone and NOX will be accomplished upwind. Thus, in 
Phase II of the current process, it will be necessary for states and 
EPA to consider the impacts of NOX controls at both the local and 
regional levels in assessing how attainment can be achieved. As 
described below, in most cases, EPA believes that broad, regional ozone 
and NOX control in upwind areas will be necessary for Phase II 
demonstrations even where Phase I modeling results currently indicate 
that local NOX controls may be unnecessary or detrimental.
b. Local NOX Exemptions' Relation to Regional NOX Control 
Needs
    The state petitions for exemption from local RACT and NSR 
requirements so far granted by EPA fall into three categories: (1) EPA 
approved four state petitions for areas (Dallas and El Paso, TX, 
Birmingham, AL, and northern Maine) for which Phase I modeling shows 
that the areas will attain the ozone NAAQS without additional NOX 
controls (there is no analysis for these areas showing NOX 
controls are either beneficial or detrimental); (2) EPA granted 
exemptions for five areas (Baton Rouge, LA, Beaumont, TX, Houston, TX, 
the Lake Michigan area, and Phoenix, AZ) after Phase I modeling showed 
that local NOX controls could worsen peak ozone concentrations in 
the nonattainment areas; (3) EPA approved ten other petitions based on 
monitoring data that shows the areas attained the ozone NAAQS without 
additional NOX controls (there is no analysis for these areas 
showing NOX controls are either beneficial or detrimental). It is 
important to note that only five exemptions that have been granted 
assert that NOX controls would be detrimental to attainment plans.
    It is very important to view EPA's granting of exemptions from 
local NOX controls in some areas under Phase I of the attainment 
process in the broader context of the ultimate Phase II determinations. 
Although EPA believes that it is reasonable to initiate new control 
programs to address regional ozone problems on the strength of 
information already available (see Section II.E. below), a better 
overall picture of regional and local air quality phenomena for each 
area will exist once Phase II demonstrations are completed. Some 
commenters on the ANPRM have argued that EPA's granting of local 
NOX exemptions for some areas during Phase I of the process should 
be interpreted as a conclusion by the Agency that no further NOX 
controls--local, regional, or national--will be necessary for these 
areas to reach and maintain attainment or that such controls would be 
harmful. API commented that EPA ``has failed to reconcile [the] two 
incongruous policies,'' referring to the initiation of new regionally 
based controls in a period when local NOX exemptions are being 
granted in some areas. Similarly, the National Petroleum Refiners 
Association (NPRA) stated that they view such simultaneous action to be 
``contradictory and arbitrary.'' For several reasons, EPA believes that 
such characterizations fail to recognize the limited role of local 
NOX exemptions within the broader Phase II attainment 
demonstration process.
    First, because most of the NOX waiver petitions contain no 
modeling analyses and many of those that contain modeling analyses are 
being supplemented with improved Phase II modeling, EPA's approval of 
each NOX exemption has been granted on a contingent basis.\17\ 
That is, a monitoring-based exemption lasts for only as long as the 
area's monitoring data continue to demonstrate attainment. Thus, if a 
violation is monitored (prior to the area being redesignated as being 
in attainment) the exemption would be revoked and the

[[Page 33427]]

requirement to adopt NOX controls would again apply. Similarly, 
any modeling-based exemption may need to be withdrawn if updated 
modeling analyses for Phase II reach a different conclusion than the 
Phase I modeling on which the exemption was based.\18\
---------------------------------------------------------------------------

    \17\ ``Section 182(f) Nitrogen Oxides (NOX) Exemptions--
Revised Process and Criteria,'' EPA Memo from John S. Seitz, 
Director, OAQPS, to Regional Air Directors, May 27, 1994.
    \18\ NOX Supplement to the General Preamble, 57 FR 55628 
(Nov. 25, 1992).
---------------------------------------------------------------------------

    Second, as discussed above, Section 182(f) of the Act does not 
permit EPA to consider regional-scale NOX issues when acting on 
state petitions for exemptions from local NOX controls. Because 
NOX has been shown to be effective in reducing regionally 
transported ozone, the broader modeling under Phase II is expected to 
show that many areas will need regional NOX controls to counter 
expected growth and maintain or reach attainment. Where this occurs, it 
might also lead to withdrawal of exemptions from local NOX 
controls.
    Third, EPA has separate authority under the CAA (Section 
110(a)(2)(D)) to require a state to reduce emissions from sources where 
there is evidence showing that transport of such emissions would 
contribute significantly to nonattainment or interfere with maintenance 
of attainment in other states. For example, local NOX controls may 
need to be reinstated if Phase II modeling shows that additional 
reductions in that area are needed for attainment and maintenance in 
downwind areas, superseding any NOX exemption that may have been 
granted under Phase I. If this need arises, Section 110(a)(2)(D) would 
provide EPA the authority to require such additional reductions.
    EPA therefore believes that decisions about initiating new NOX 
control programs that have a regional-scale effect are appropriately 
made based on the best understanding available at that time of the 
broad attainment needs of all areas. As is discussed below for several 
regions of the country, there is strong evidence that regional-scale 
controls will be needed to achieve and maintain attainment. As a part 
of the Phase II assessments, the impact of and need for NOX 
control and the continuation or withdrawal of local NOX exemptions 
would be taken fully into account. Thus, in assessing EPA's overall 
NOX policy, it is important to understand the limited and perhaps 
temporary nature of exemptions from NOX controls in some areas 
within the context of the anticipated implementation of broader, 
regional NOX control strategies upon completion of the Phase II 
modeling.
    An important issue that states and EPA will consider during the 
Phase II process is the interaction between prospective regional 
control programs and local air quality conditions. For nonattainment 
areas that are granted local NOX exemptions based on the lack of 
need for additional NOX controls (this covers the great majority 
of current and pending exemptions, as shown above), introducing 
regional controls that have an effect both inside and outside the 
nonattainment area is generally not expected to harm air quality within 
the area. In the few areas where Phase I modeling indicates that 
reduction of NOX in the area could increase ozone in some 
locations, a balancing of all relevant factors will be necessary if 
Phase II modeling reinforces that a significant potential problem 
exists. For example, if ozone and NOX transported into the area 
would be significantly reduced by regional-scale controls, the absolute 
level of ozone within the area would drop, changing the photochemistry 
of the area and potentially offsetting any localized detriment to air 
quality that might still be introduced by the regional controls (e.g., 
cleaner trucks within the area).
    In its comments on the ANPRM, API referred to recent modeling 
studies performed by the Modeling Ozone Cooperative, which API says 
challenge EPA's earlier conclusions about the need for NOX control 
in the Northeast. EPA is aware of and is reviewing the results of these 
modeling studies. Based on EPA's evaluation of these studies to date, 
the Agency finds that these studies in fact support EPA's previous 
conclusions that broad regional-scale controls will be necessary for 
the Northeast and other areas to attain and maintain the ozone NAAQS. 
As API observes, these studies also predict that NOX reductions 
may increase ozone levels in several areas. API also cites modeling 
performed by the Lake Michigan Air Directors Consortium (LADCO), which 
appears to predict similar results for the Lake Michigan area. As 
described below, the LADCO studies do however, suggest that reductions 
in regional ozone at the boundary of their modeling domain will likely 
play a key role in determining whether the NAAQS can be attained with 
local VOC-oriented control measures.
    EPA is concerned about these results and is interested in 
additional modeling to further explore the degree to which NOX 
control programs may increase ozone in some areas. Questions not 
answered by current modeling include (1) how the results change if 
additional stationary and mobile source NOX and VOC control 
programs are assumed to be implemented by the time the heavy-duty 
engine emission standards proposed in this action would be in place and 
(2) whether urban-scale modeling of higher resolution can shed more 
light on how widespread potential areas of increased ozone might be.
    EPA expects that on balance it will continue to be preferable to 
achieve regional-scale NOX and ozone reductions whenever possible, 
even where current modeling indicates that increases in ozone may occur 
in parts of some areas. EPA requests comments on this general 
assessment, as well as on the discussions of individual regions below; 
comments including additional data and modeling results that challenge 
or reinforce EPA's views will be particularly valuable.
2. Role of Regional-Scale NOX Control in Addressing Ozone Problems 
in Several Regions of the U.S.
    EPA believes that the best data and modeling available show that 
NOX in several large geographic areas of the country will continue 
to contribute greatly to ozone problems in nonattainment areas well 
into the future. Together, these areas account for about 87 percent of 
nationwide NOX emissions from heavy-duty vehicles (see Chapter 7 
of the RIA). Several of these regions are discussed individually below. 
Where there are existing or pending exemptions from local NOX 
controls in the region, their relationship to regional-scale NOX 
controls is also discussed.
a. Eastern United States
    There is a growing body of evidence that reducing regional ozone 
levels holds the key to the ability of a number of the most seriously 
polluted nonattainment areas in the Eastern United States, in both the 
Southeast and the Northeast, to attain and maintain the ozone NAAQS. 
Regional Oxidant Modeling (ROM) studies conducted by EPA (called the 
ROMNET and Matrix studies) reinforce that reducing NOX emissions 
in large geographical regions is the most effective approach for 
reducing ozone levels in those large regions.19 At the same time, 
these studies, as well as ongoing UAM modeling by states, suggest that 
reductions in VOC emissions may be

[[Page 33428]]

key to reducing locally generated peak ozone concentrations.20
---------------------------------------------------------------------------

    \19\ See Regional Ozone Modeling for Northeast Transport 
(ROMNET), EPA Doc. EPA-450/4-91-002a (June 1991), and Chu, S.H., 
E.L. Meyer, W.M. Cox, R.D. Scheffe, ``The Response of Regional Ozone 
to VOC and NOX Emissions Reductions: An Analysis for the 
Eastern United States Based on Regional Oxidant Modeling,'' 
Proceedings of U.S. EPA/AWMA International Specialty Conference on 
Tropospheric Ozone: Nonattainment and Design Value Issues, AWMA TR-
23, 1993.
    \20\ Because of the significant role that NOX plays in 
atmospheric chemistry, additional regional NOX control can also 
be very helpful in addressing the problems of year-round NOX 
deposition in the Chesapeake Bay and other nitrogen-limited lakes 
and estuaries and acid deposition and visibility degradation in the 
eastern U.S. (as well as parts of the West).
---------------------------------------------------------------------------

    In its analysis supporting the approval of a Low Emission Vehicle 
program in the mid-Atlantic and Northeast states comprising the Ozone 
Transport Region (OTR), EPA reviewed existing work and performed new 
analyses to evaluate in detail the degree to which NOX controls 
are needed.21 22 These studies showed that NOX emissions must 
be reduced by 50 to 75 percent from 1990 levels throughout the OTR. 
These studies showed that VOC emissions must also be reduced by 50 to 
75 percent in and near the Northeast urban corridor. The studies also 
concluded that transport of ozone and precursors from upwind areas both 
inside and outside the OTR contributes significantly to ozone 
predictions in much of the OTR.
---------------------------------------------------------------------------

    \21\ The Northeast Ozone Transport Region (OTR) is comprised of 
the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode 
Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, 
Maryland, and the Consolidated Metropolitan Statistical Area that 
includes the District of Columbia and northern Virginia.
    \22\ Environmental Protection Agency, Low Emission Vehicle 
Program for Northeast Ozone Transport Region; Final Rule, 60 FR 
48673, January 24, 1995.
---------------------------------------------------------------------------

    More recently, three studies have become available confirming the 
conclusions of the earlier studies. In one of these, the Agency 
performed new ROM analyses evaluating the eastern third of the U.S. and 
southern Canada.23 Taken together, these studies strongly support 
the view that NOX emissions must be reduced in the range of 50 to 
75 percent throughout the OTR and that VOC emissions must be reduced by 
the same amount in and near the Northeast urban corridor to reach and 
maintain attainment.
---------------------------------------------------------------------------

    \23\ Environmental Protection Agency, ``Summary of EPA Regional 
Oxidant Model Analyses of Various Regional Ozone Control 
Strategies,'' November 28, 1994; Kuruville, John et al., ``Modeling 
Analyses of Ozone Problem in the Northeast,'' prepared for EPA, EPA 
Document No. EPA-230-R-94-108, 1994; Cox, William M. and Chu, Shao-
Hung, ``Meteorologically Adjusted Ozone Trends in Urban Areas: A 
Probabilistic Approach,'' Atmospheric Environment, Vol. 27B, No. 4, 
pp 425-434, 1993.
---------------------------------------------------------------------------

    Among the Northeast states, only Maine, based on unique air 
trajectory patterns, has sought an exemption from local NOX 
control; this exemption is granted for the northern part of the state.
b. The Southeast
    A recent Southern Oxidant Study report describes the results of 
research showing that, in the South, relatively high concentrations of 
ozone are measured in both rural and urban areas.24 These 
pervasive levels of ozone, while for the most part not in excess of the 
current ozone NAAQS, form a background into which individual urban 
plumes are interspersed. Preliminary modeling analyses performed by the 
State of Georgia Department of Natural Resources suggests that it will 
be very difficult to meet the NAAQS in Atlanta during episodes similar 
to those modeled episodes, given the high background levels of ozone 
that appear to prevail in the South. Further analyses of monitored data 
by Southern Oxidant Study investigators suggest that the background 
ozone levels are likely to be more responsive to reductions in NOX 
emissions than in VOC emissions. There are no petitions at this time 
for local NOX exemptions in this region.
---------------------------------------------------------------------------

    \24\ ``The State of the Southern Oxidant Study (SOS): Policy-
Relevant Findings in Ozone Pollution Research,'' 1988-1994. North 
Carolina State University, April 1995. See this reference for all 
statements in this paragraph.
---------------------------------------------------------------------------

c. The Lake Michigan Area
    Modeling studies performed to date for the states surrounding Lake 
Michigan (Wisconsin, Illinois, Indiana, and Michigan) under Phase I of 
their attainment demonstrations clearly indicate that reducing ozone 
and precursors transported into the nonattainment areas would have a 
significant effect on the number and stringency of local control 
measures needed to meet the ozone NAAQS.\25\ These studies suggest that 
without such region-wide reductions, the necessary degree of local 
control will be very difficult to achieve, even with very stringent 
local controls. The EPA Matrix study referenced above reinforces that 
regional NOX control will be effective in reducing ozone across 
the Midwest region. Taken together, the information available to date 
suggests that additional reductions in regional NOX emissions will 
probably be necessary in meeting the NAAQS in the Chicago/Gary/
Milwaukee area and downwind (including western Michigan), even though 
currently available modeling shows that there may be a detrimental 
effect from applying NOX controls locally in and near the major 
nonattainment areas, in the absence of regional controls.
---------------------------------------------------------------------------

    \25\ Lake Michigan Ozone Study; Lake Michigan Ozone Control 
Program: Project Report, December 1995.
---------------------------------------------------------------------------

    EPA has granted an exemption from local NOX controls for 
several areas in the Lake Michigan region based on Phase I modeling. 
Phase II modeling is underway by these states, which the Agency is 
hopeful will clarify the conditions under which NOX controls might 
cause an increase in ozone in the future, the magnitude of such an 
increase, and the parts of the nonattainment areas in this region in 
which this may occur.
d. Eastern Texas
    There has been only limited modeling work focusing on the air 
quality characteristics of the eastern Texas region to date. The State 
of Texas has requested and been granted exemptions for the Houston and 
Beaumont/Port Arthur nonattainment areas, based on Phase I modeling 
that predicted that additional local NOX controls could worsen the 
ozone problem. New modeling is underway by the state, but there is not 
yet enough data to draw conclusions about the potential effect of 
transport of ozone and its precursors on these areas. This uncertainty 
has led the state to request that the exemptions from local NOX 
controls in these areas be granted on a temporary basis while more 
sophisticated modeling is conducted.
e. California
    The State of California has submitted their ozone SIP to EPA for 
approval, relying on both NOX and VOC reductions for most 
California nonattainment areas, comprising most of the populated 
portion of the state, to demonstrate compliance with the NAAQS. 
Specifically, the revised SIP projects that the following NOX 
reductions are as follows: South Coast, 59 percent; Sacramento, 40 
percent; Ventura, 51 percent; San Diego, 26 percent; and San Joaquin 
Valley, 49 percent. For VOC, the required reductions will be the 
following: South Coast, 79 percent; Sacramento, 38 percent; Ventura, 48 
percent; San Diego, 26 percent; and San Joaquin Valley, 40 percent.
    EPA has granted exemptions from local NOX controls within 
three California nonattainment areas; EPA believes that these actions 
do not affect the broader need for regional NOX controls in large 
parts of the state for ozone and PM NAAQS attainment and maintenance.
3. Secondary PM Formation as a Regional Issue
    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. Nitrates

[[Page 33429]]

(e.g., ammonium nitrate) are a primary constituent of this secondary 
PM. For example, on days when PM-10 is high in Denver, about 25 percent 
of the measured particulate is ammonium nitrate. In the Provo/Salt Lake 
City area, secondary PM accounts for approximately 50 percent of the 
measured PM, with nitrates being an important component of the 
secondary particulate. Secondary nitrate PM levels as high as 40 
percent of the 24-hour PM-10 NAAQS standard have been measured in the 
Los Angeles Basin and concentrations of nitrate PM about one third of 
the NAAQS have been measured in the San Joaquin Valley.\26\
---------------------------------------------------------------------------

    \26\ Summary of Local-Scale Source Characterization Studies, 
EPA-230-F-95-002, July, 1994.
---------------------------------------------------------------------------

    NOX is a critical reactant in the complex chemical reactions 
which eventually result in the formation of atmospheric nitrates. Thus, 
control of NOX emissions from heavy-duty vehicles will have a 
positive effect in reducing atmospheric ammonium nitrate. 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, as is 
the case for ozone, regional NOX controls can be very effective in 
reducing secondary PM over a significant area. For example, 
California's revised SIP concludes that secondary formation of nitrate 
particulate (primarily ammonium nitrate) contributes to the particulate 
problem in the South Coast Air Basin and the San Joaquin Valley. The 
Agency requests comment on the role of secondary particulate in PM-10 
nonattainment in specific areas and the effect of regional NOX 
controls on such emission; comments that include additional data will 
be particularly valuable.
    The sources that contribute to PM levels can vary significantly 
from area to area. In many areas in the western U.S., re-entrained 
fugitive dust emissions dominate the overall PM emissions inventory. In 
large urban areas, however, direct PM emissions from heavy-duty diesel 
vehicles, as well as the secondary PM from NOX produced by all 
heavy-duty vehicles, are believed to contribute significantly to 
elevated PM levels.
    As can be seen from the discussion above, NOX emissions have a 
number of different fates in the atmosphere. In some situations, such 
as the formation of atmospheric ozone, NOX is used as a catalyst 
but not consumed. A single NOX molecule can potentially be 
involved in many photochemical reactions producing several ozone 
molecules. In other cases, such as the formation of nitrate particulate 
and acid precipitation, NOX is consumed. All NOX eventually 
leaves the atmosphere in dry gas, particulate deposition, or in wet 
deposition. NOX has a mean residence time in the atmosphere on the 
order of several days.
    It is clear that heavy-duty vehicle NOX emissions have a role 
in the formation of ozone, nitrate particulates, and acid 
precipitation. The relative partitioning varies across the country 
depending on factors such as geography, meteorology, and the 
concentration of other atmospheric pollutants. This preamble and the 
RIA contain information and analyses describing the positive impact of 
this proposal on ozone, PM, and other environmental effects, which EPA 
believes form a strong basis for this proposal. EPA is conducting 
additional studies to further refine our understanding of the role of 
NOX in the formation of ozone and nitrate PM. EPA requests comment 
and data regarding the relative partitioning of NOX emissions.

C. National Emission Trends Related to Ozone and PM

1. National NOX and VOC Emissions Trends
    Figure 1 displays projected total NOX emissions over the time 
period 1990 to 2020, including a breakdown between stationary and 
mobile source components over the same period.\27\ Figure 2 presents 
similar data for VOC emissions for the period 1990 to 2010 (later-year 
projections for VOC are under development).\28\ As the figures show, a 
similar pattern is projected for both of these ozone precursor 
emissions. Initially, the projections indicate that national 
inventories will decrease over the next few years as a result of 
continued implementation of finalized CAA stationary and mobile source 
NOX control programs. After the year 2000, however, when 
implementation of these CAA programs is largely completed and the 
pressure of growth continues, these downward trends are expected to 
reverse, resulting in rising national VOC and NOX emissions.
---------------------------------------------------------------------------

    \27\ A discussion of the data used for projecting emissions from 
various sources is found in the Regulatory Impact Analysis.
    \28\ The data in these and the succeeding figures in this 
proposal are discussed in the RIA, and take into account the 
expected effects of various CAA control programs that have been 
promulgated at the time of the modeling. These include Tier I 
tailpipe standards, new evaporative emission test procedures, 
enhanced inspection and maintenance requirements, reformulated 
gasoline, oxygenated fuels, and California LEV (Low Emission 
Vehicle) requirements. Nonroad NOX emission projections also 
reflect the future effects of existing nonroad emission regulations. 
The potential effects of contemplated National LEV requirements or 
other programs are not reflected in the data. In these figures, 
nonroad emission data includes emissions from a broad range of 
nonroad sources including locomotives, aircraft, and marine vessels.

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[[Page 33432]]

    In its comments on the ANPRM, API observed that monitoring data 
from some areas show progress in reducing ozone. EPA agrees that this 
progress appears to be occurring and the Agency believes that this 
progress may continue for the next few years in many areas as current 
NOX and VOC programs are implemented. As shown in Figures 1 and 2 
above, however, EPA believes that, in the absence of significant new 
control efforts, the current downward trends in ozone precursor 
emissions will be reversed in the middle of the next decade. The Agency 
also believes that the projected increase in emissions will again 
increase ozone levels in urban areas. EPA continues to examine this 
issue and welcomes new modeling analyses that relate NOX and VOC 
emission trends to ozone levels.
2. PM Air Quality Issues and Emission Trends
    The overwhelming proportion of PM-10 emissions is created by wind 
erosion, accidental fires, fugitive dust emissions (from road surfaces, 
agricultural tilling, construction sites, etc.), and other 
miscellaneous sources. As much as 85 percent of PM-10 in nonattainment 
areas can be composed of these ``crustal'' and miscellaneous materials. 
Since these sources are not readily amenable to regulatory standards 
and controls, it is appropriate to focus on the ``controllable'' 
portion of the particulate pollution problem when considering the need 
for PM controls. The result is shown in Figure 3, which displays 
national trends in PM-10 levels from stationary and mobile sources, 
including secondary nitrate PM, projected for the twenty-year period 
1990 to 2010. Similar to the pattern discussed above for VOC and 
NOX emissions, the figure shows that total PM from these sources 
will decline slightly as the beneficial effects of the 1990 CAA 
Amendments continue to be felt. However, in the absence of additional 
controls, including NOX controls, mobile source and industrial 
source PM emissions are expected to rise after 2000.

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[[Page 33434]]

    Currently, there are 82 PM-10 nonattainment areas across the U.S. 
As discussed in section II.B.3. above, in some areas of the West, 
nitrate particulate represents between 15 and 40 percent of total 
particulate matter. The level of nitrate PM is a function of the 
availability of NOX. It is appropriate to expect that the relative 
proportions of nitrate particulate caused by stationary and mobile 
sources are similar to the relative contributions of NOX by these 
source categories. Thus, based on the NOX projections of Figure 1, 
which EPA believes are generally typical of NOX projections in the 
West, EPA estimates that about half of total nitrate PM is caused by 
mobile sources, or about one tenth of total PM-10 in the western part 
of the country. In the eastern part of the country, peak fine 
particulate matter levels occur in the summer, primarily because 
photochemical processes involving SO2 and NOX driven by 
strong sunshine accelerate the formation of sulfate and nitrate 
particulate matter. Thus, reducing NOX over a broad area is one 
strategy for reducing the net fine particle formation in the East. EPA 
requests comment, including applicable data whenever possible, on its 
assessment of the relationship of NOX to ambient nitrate PM.

D. Contribution of Heavy-Duty Vehicles to Mobile Source Emissions

    Heavy-duty vehicles represent about 12 percent of nationwide 
NOX emissions and are also an important source of VOC (as a result 
of HC emissions) and PM throughout the country. This section reviews 
EPA's current estimates of the contribution of heavy-duty vehicles to 
the nation's ozone, PM, and NOX air pollution problems now and 
into the future. The projections presented here incorporate the 
emission reductions from all national mobile source emission control 
programs for which final regulations were in place at the time of the 
modeling and are discussed further in the RIA.
1. National Mobile Source NOX Emissions Trends
    Figure 4 shows the total mobile source NOX inventory by 
emission source (light-duty vehicles, heavy-duty vehicles, and nonroad 
engines) projected over the next 25 years. For light- and heavy-duty 
vehicles, the figure shows a decline in emissions over the next decade 
as current programs phase in. The figure also shows, however, that this 
current downward trend is projected to end, resulting in a return to 
current NOX levels in the absence of further controls. Nonroad 
emissions are projected to rise throughout the period.

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[[Page 33436]]

2. National Mobile Source VOC Emissions Trends
    Figure 5 shows the total national mobile source VOC inventory by 
emission source. As with the NOX emission projections in Figure 4, 
this figure shows that light-duty vehicle emissions can be expected to 
decline for some years, but then begin rising in the 2005 time frame. 
VOC emissions from heavy-duty vehicles and nonroad engines are 
projected to rise gradually throughout this period.

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[[Page 33438]]

3. National Mobile Source PM Emissions Trends
    EPA's latest projected trends for directly emitted mobile source 
emissions of PM-10 are shown in Figure 6. The figure shows that over 
the next 15 years the contribution of heavy-duty vehicles and other 
highway sources to PM-10 pollution are expected to decrease 
significantly and then remain relatively constant well into the next 
decade.

[[Page 33439]]

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[[Page 33440]]

    The emission data on which Figure 6 is based do not include 
secondary nitrate PM-10 produced by the transformation of NOX in 
the atmosphere. EPA believes that for those areas where secondary PM 
formed from NOX is a problem, the proportions of total secondary 
PM that may be attributed to different emission source categories 
mirror the proportions of total NOX emissions from those sources 
in those areas. Thus, based on the trends for NOX emissions shown 
in Figures 1 and 4 above and assuming that the availability of ammonia 
in the atmosphere remains roughly constant, the contribution of heavy-
duty vehicles to secondary PM problems can be expected to decline 
slightly in the next few years and then to begin to increase again, 
likely reaching and exceeding current levels after about 2020. Also 
based on Figures 1 and 4, EPA believes that on average the proportion 
of total nitrate PM that may be attributed to heavy-duty vehicles is in 
the same range as the proportion of total NOX contributed by these 
vehicles, or roughly 10 percent.
    As discussed earlier in this proposal, EPA has not completed its 
assessment of the relative importance of fine PM to health and welfare 
concerns as compared with PM-10. As a result, EPA has not yet developed 
specific projections showing the contribution of heavy-duty vehicles to 
total fine particulate emissions. However, since nearly all mobile 
source related PM, both directly emitted PM and secondary nitrate PM 
formed from NOX emissions, falls in the fine particulate category, 
it follows that the relative contribution of heavy-duty vehicles to 
total fine particulate is greater than their contribution to total PM-
10.

E. Conclusions

1. The Rationale for Controlling Heavy-Duty Vehicle Emissions
    EPA believes that immediate proposal of new emission standards for 
highway heavy-duty engines is appropriate. The decision to issue this 
NPRM is based on thorough consideration of a range of relevant factors, 
as described above. Section II.A. presented the serious effects to 
human health and the environment of elevated levels of ozone and other 
chemical products of NOX emissions, including secondary PM . That 
section describes a range of serious respiratory health effects that 
have been closely connected to exposure to ozone levels exceeding the 
NAAQS, which exist in many areas of the country. In light of the many 
years of research by many parties into the health effects of ozone, the 
Agency believes that a clear picture has emerged that, not only those 
with existing respiratory conditions, but also healthy adults and 
children are in danger of experiencing medical problems and a reduced 
quality of life when exposed to elevated levels of ozone. Also 
discussed were the variety of health concerns that have been associated 
with exposure to PM at levels above the current NAAQS. Beyond these and 
other serious health concerns, Section II.A. also discussed major 
impacts on vegetation, crops, coastal estuaries, visibility, and other 
effects that result from the transformation of NOX into ozone, 
acid deposition, and nitrate PM formed from NOX. The current NAAQS 
levels reflect the need to address exposure to ozone and PM wherever 
the NAAQS standards are exceeded.
    Section II.B. discussed EPA's belief that the widespread exposure 
of people to elevated ozone levels will continue and worsen in the 
absence of major regional-scale reductions in NOX. This section 
discussed the regional characteristic of the ozone problem and how 
various large areas of the country are projected to require regional-
scale NOX controls to reach and maintain attainment of the ozone 
standard. EPA believes this remains true even where local NOX 
control waivers must be granted under the CAA. This section also noted 
that regional-scale control of NOX would be beneficial in reducing 
the formation of secondary PM in some areas of the western U.S. and 
would thereby assist these areas in reaching and attaining the PM 
NAAQS.
    Section II.B. also presented projections of emissions over the next 
20 to 30 years to help assess the likelihood of continued air quality 
problems in the future. In general, EPA's most recently developed 
emission inventories show that national levels of ozone precursors will 
tend to drop slightly, but only temporarily, after which they will 
return to current levels. The link of these projected future emissions 
to the formation of ozone was reinforced by recent air quality modeling 
projecting continued ozone problems in major areas of the country in 
the absence of new controls. The information assembled in this section 
leads EPA to believe that a strong need exists for new regional-scale 
NOX control programs over large areas of the country if the 
negative trends are to be arrested and reversed. Similarly, the data on 
PM suggests that secondary PM reductions will be helpful in reversing a 
national trend of increasing PM emissions, especially in the western 
states.
    Section II.C. presented national mobile source emission inventories 
over the next 20 to 30 years, divided into the key mobile source 
categories. These presentations showed that heavy-duty vehicles 
contribute significantly to mobile source NOX , VOC, and PM 
emissions and to the overall trends in mobile source emissions into the 
future. In its comments on the ANPRM, API gave several reasons why 
projections of future emission inventories may be in error and 
questioned the future contribution of heavy-duty vehicle emissions. 
Although EPA believes that the projections presented in this proposal 
can be improved and will continue to take actions to improve them, the 
Agency believes that they represent the highest quality estimates 
available today. As such, they clearly indicate that heavy-duty 
vehicles will remain significant contributors to these emissions well 
into the future.
    After consideration of all the available information, including 
comments received on the ANPRM, EPA believes that heavy-duty vehicles 
contribute significantly to air pollution, which has a serious impact 
on health and the environment. The Agency believes that this body of 
information on balance supports taking action to revise heavy-duty 
engine emission standards, which will reduce NOX, HC, and 
secondary PM from this segment of mobile sources.
2. Appropriateness of a National Heavy-Duty Vehicle Program
    EPA further believes that the mobile source emission control 
program proposed in this action is most appropriately national in 
scope, for several reasons. First, as summarized above, the regional 
character of both ozone and secondary PM formation leads EPA to believe 
that major new NOX controls over large regions of the country are 
needed to achieve the regional-scale ozone and PM reduction many areas 
require. Control of NOX from heavy-duty vehicles and other mobile 
sources are effective approaches to such regional control since the 
resulting control covers a wide area. Second, heavy-duty vehicles, like 
other mobile sources, represent an emissions source that itself crosses 
boundaries of nonattainment areas, states, and regions. A mobile source 
control program that covers only certain parts of the country has the 
disadvantage of allowing high-emitting vehicles to travel regularly 
into areas with more stringent requirements, compromising the 
effectiveness of the program. Finally, the structure and marketing 
patterns of the engine and vehicle manufacturing industries would make 
it impractical and inefficient for a

[[Page 33441]]

patchwork of different emission standards to be enacted in various 
parts of the country. Rather, for engine manufacturers to achieve 
economies of scale and to concentrate research and development 
resources most effectively, EPA believes it is most practical to 
establish a single set of emission requirements applying to engines in 
trucks and buses used anywhere in the country. A key reason why EPA, 
CARB, and engine manufacturers agreed to a Statement of Principles was 
the potential for nationally harmonized requirements for heavy-duty 
vehicles.
3. Issues of Timing
    EPA also believes that for the anticipated benefits of new highway 
heavy-duty engine emission standards to be available when they are 
needed, it is best to finalize such a program in the near future. There 
are several reasons for and positive consequences of expeditious 
promulgation of new emission requirements for heavy-duty engines. The 
primary reason to begin the process now is that the current emission 
and air quality projections discussed above project a need in many 
areas of the country for significant additional emission reductions in 
the post-2000 period to reach and maintain attainment.
    In addition, the highway heavy-duty engine manufacturers have 
communicated to EPA that to meet the stringent standards proposed in 
this action for model year 2004 and later, they need to have the 
precise emission requirements affecting them in place and begin work 
toward those goals very soon. The industry's perspective is based on 
its expectation that the standards proposed here would represent a very 
significant technological challenge requiring large investments by the 
members of the industry. EPA's technology assessment is consistent with 
the industry view. If new standards are established by approximately 
the end of 1996, about two years will be available before the proposed 
1999 technology review for manufacturers to marshall appropriate 
resources to achieve significant technological progress. Then, if such 
progress is confirmed at that time, about four years will remain for 
additional resources to be assembled and the new technologies to be 
developed and incorporated into 2004 model year engines. Based on the 
Agency's technology assessment as of the time of this proposal, EPA 
agrees that it is best to set the process in motion now to achieve the 
full benefits of cleaner heavy-duty vehicles beginning in 2004.
    Another compelling reason to initiate the process of enacting new 
heavy-duty engine emission requirements soon is that the Agency is 
proposing to encourage voluntary marketing of cleaner engines, 
especially engines that incorporate new technologies, earlier than 2004 
(see Section III.B. below for proposed changes to the Averaging, 
Banking, and Trading program). An expeditious completion of the 
rulemaking process would encourage manufacturers to consider such 
options in the earliest possible model year.
    State air quality planners will also benefit if the program 
proposed in this action can be formally established soon. States must 
soon finalize ozone SIPs demonstrating attainment in the years ahead, 
and expeditious EPA action on additional heavy-duty vehicle emission 
reductions will allow states to know whether to incorporate expected 
reductions from heavy-duty vehicle controls into their SIPs. At the 
same time, any significant delay in promulgation might also require a 
delay in the year of implementation past 2004, postponing the full 
benefit of the program as an air quality strategy. For this and the 
other reasons given in this section, EPA plans to finalize the proposed 
requirements as soon as possible should the Agency reach a final 
determination that such a program is warranted.

III. Proposed Program for Reducing Highway HDE Emissions

A. Background on Highway HDE Standards

    Under EPA's classification system, vehicles with a gross vehicle 
weight rating (GVWR) over 8,500 pounds are considered heavy-duty 
vehicles. (The State of California classifies the lighter end of EPA's 
heavy-duty class as ``medium-duty vehicles.'') Heavy-duty engines 
(HDEs) are used in a wide range of heavy-duty vehicle categories, from 
small utility vans to large trucks. Because one type of HDE may be used 
in many different applications, EPA emission standards for heavy-duty 
vehicles are based on the emissions performance of the engine (and any 
associated aftertreatment devices) separate from the vehicle chassis. 
Testing of an HDE consists of exercising it over a prescribed duty 
cycle of engine speeds and loads using an engine dynamometer.
    Highway HDEs are categorized into diesel and otto-cycle 
(predominantly gasoline-fueled) engines with each, in some cases, 
having different standards and program requirements. EPA has further 
subdivided heavy-duty diesel engines (HDDEs) into three 
subclassifications or ``primary intended service classes''; light, 
medium, and heavy HDDEs. HDDEs are categorized into one of the three 
subclasses depending on the GVWR of the vehicles for which they are 
intended, the usage of the vehicles, the engine horsepower rating, and 
other factors 29. The subclassifications allow EPA to more 
effectively set requirements that are appropriate for the wide range of 
sizes and uses of HDDEs. With one exception, emission standards are the 
same for HDDE in all of the subclasses but other programmatic 
requirements differ as appropriate. Engines used in ``urban buses'' 
(large transit buses)30, which fall mostly in the heavy HDDE 
subclass, have somewhat different standards and program requirements. 
The standards and program requirements for the various categories and 
types of engines are discussed below and in following sections, as 
appropriate.
---------------------------------------------------------------------------

    \29\ 40 CFR Part 86.090-2.
    \30\ 40 CFR Part 86.093-2.
---------------------------------------------------------------------------

    Emissions from HDEs are measured in grams of pollutant per brake 
horsepower-hour (g/bhp-hr) or, in more recent regulations, in grams per 
kilowatt hour (g/kw-hr). These units for emission rates recognize that 
the primary purpose of HDEs is to perform work and that there is a 
large variation in work output among the engines used in heavy-duty 
applications. This system allows EPA to apply the same standards to a 
very wide range of engines.
    Emission standards have been in place for highway diesel and 
gasoline-fueled HDEs since the early 1970s. The first regulations 
focused on control of emissions of smoke. Subsequent regulations 
broadened emission control requirements to include gaseous and 
particulate emissions. The 1990 amendments to the Clean Air Act 
required EPA to set more stringent standards for NOX emissions 
from all heavy-duty highway HDEs and for PM from urban buses. 42 U.S.C. 
7521(a)(3), 7521(f), and 7554(b).
    The current exhaust emission standards for highway heavy-duty 
diesel and gasoline engines are presented in Table 1. Standards for 
urban buses, which specify more stringent PM levels than those applying 
to other HDEs, are displayed separately in the table.

[[Page 33442]]



                                 Table 1.--Highway Heavy-Duty Emission Standards                                
----------------------------------------------------------------------------------------------------------------
                                                                                                        Diesel  
                            Year                               HC (g/bhp-   CO (g/bhp-  NOX (g/bhp-  particulate
                                                                  hr)          hr)          hr)       (g/bhp-hr)
----------------------------------------------------------------------------------------------------------------
Diesel:                                                                                                         
    1991-93.................................................          1.3         15.5          5.0         0.25
    1994-97.................................................          1.3         15.5          5.0         0.10
    1998....................................................          1.3         15.5          4.0         0.10
Urban Buses:                                                                                                    
    1991-92.................................................          1.3         15.5          5.0         0.25
    1993....................................................          1.3         15.5          5.0         0.10
    1994-95.................................................          1.3         15.5          5.0         0.07
    1996-97.................................................          1.3         15.5          5.0        *0.05
    1998....................................................          1.3         15.5          4.0        *0.05
Otto-cycle                                                         HC                                           
                                                               (g/bhp-hr)       CO                              
                                                                            (g/bhp-hr)      NOX                 
                                                                                         (g/bhp-hr)  Evaporative
                                                                                                              HC
                                                                                                        (g/test)
    1991-97:                                                                                                    
    (A).....................................................          1.1         14.4          5.0          3.0
    (B).....................................................          1.9         37.1          5.0          4.0
    1998 (A)................................................          1.1         14.4          4.0          3.0
    (B).....................................................          1.9         37.1          4.0          4.0
----------------------------------------------------------------------------------------------------------------
Note:                                                                                                           
``(A)'' denotes the standard for engines in trucks 14,000 lbs. Gross Vehicle Weight Rating (GVWR).   
``(B)'' denotes the standard for engines in trucks 14,000 lbs. GVWR.                                 
*.07 g/bhp-hr in-use.                                                                                           
This table does not contain all applicable standards. A complete set of standards may be found in 40 CFR Part   
  86.                                                                                                           

    Under section 202(a)(3), emission standards for highway HDEs are 
set at the ``greatest degree of emission reduction achievable through 
the application of technology which the Administrator determines will 
be available for the model year to which such standards apply, giving 
appropriate consideration to cost, energy, and safety factors 
associated with the application of such technology'' (42 U.S.C. 
7521(a)(3)(A)). In addition, section 202(a)(3) provides that highway 
HDE manufacturers will have four model years of lead time before any 
new emission standards may be implemented (42 U.S.C. 7521(a)(3)(C)). 
The Act also provides that standards for HDEs apply for at least three 
model years to provide stability to any heavy-duty standards. Id. 
Finally, the Act precludes new NOX emission standards for highway 
HDEs before the model year 2004. 42 U.S.C. 7521(b)(1)(C).

B. Description of Today's Proposal

    In this action, EPA proposes a comprehensive program to address the 
significant contribution of highway HDEs to ambient pollutant 
concentrations and the resultant air quality problems around the 
country. The proposed program consists of stringent new emission 
standards, changes to maintain the durability of HDE emissions in use, 
and changes to the current Averaging, Banking, and Trading regulations 
to encourage the early introduction of cleaner engines and new 
technology.
1. Emission Standards
    a. Standards Proposed in Today's Action. EPA proposes new emission 
standards for model years 2004 and later. These standards are in the 
form of combined non-methane hydrocarbons plus nitrogen oxides (NMHC + 
NOX) and are presented in units of g/bhp-hr. They would apply to 
otto and diesel cycle engines fueled by gasoline, diesel, methanol, and 
gaseous fuels and their blends. Manufacturers would have the choice of 
certifying their 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

EPA proposes that all other emission standards and other requirements 
applying to model year 1998 and later model years remain unchanged.
    For the most part, EPA expects that either of these standards will 
result in the essentially the same NOX and NMHC emission rates in-
use. As is discussed elsewhere in the proposal and in the supporting 
RIA, EPA expects that the proposed standards will generally result in 
NMHC levels of about 0.4 g/bhp-hr and NOX levels of about 2.0 g/
bhp-hr. Most, but not all, HDEs now have HC certification levels of 0.5 
g/bhp-hr or less. The standards will result in modest NMHC reductions 
for the HDE class taken as a whole and will serve as a cap against 
increases in NMHC emissions as manufacturers implement NOX control 
strategies. The expected NOX levels would result in reductions of 
50 percent as compared to the 1998 standard. For administrative 
simplicity, EPA would prefer only one standard and based on current HC 
certification levels the 2.4 g/bhp-hr standard seems most appropriate. 
However, the manufacturers would prefer the flexibility of the 
alternate standard and EPA sees no environmental harm from offering 
this option. EPA asks comment on whether two standards are appropriate 
and why.
    The form of the proposed standards differs in some aspects from the 
current and 1998 model year standards for HDEs presented in Table 1. 
First, EPA is proposing a combined standard (NMHC+NOX) instead of 
separate standards. EPA is using this approach because for in-cylinder 
control strategies there is a tradeoff between HC and NOX control. 
Thus, expressing the requirements as a combined standard provides the 
manufacturers some small amount of additional flexibility. Further, EPA 
sees no environmental harm from providing this flexibility. While there 
is not a direct one to one trade-off in every area of the country, both 
pollutants are generally considered key ingredients in the formation of 
ozone. Thus a little more control of one pollutant at the expense of 
the other should provide essentially the same air quality benefits as 
if the engines were meeting separate standards for NOX and NMHC at 
comparable levels (nominally 2.0 g/bhp-hr NOX and 0.4 g/bhp-hr 
NMHC). Second, EPA is proposing an NMHC standard instead of a total HC

[[Page 33443]]

standard. This approach is being proposed primarily because methane is 
largely unreactive in the formation of ozone and thus its control would 
not help to achieve the ozone air quality objectives of this proposal. 
This is not intended to suggest that the control of methane is not 
valuable in the context of other environmental objectives EPA may 
consider in the future, but methane emissions from these engines are 
only a small fraction of their total HC and thus foregoing control at 
this time is reasonable. Both the use of an NMHC standard and the use 
of a combined standard is also consistent with the current California 
LEV program requirements for medium-duty vehicles and the requirements 
for HDEs prescribed in section 245 of the 1990 amendments to the Clean 
Air Act.
    The proposed standards (rooted in the California Federal 
Implementation Plan and identified in the SOP) represent a reduction of 
more than 50 percent in NOX and NMHC/HC over current requirements. 
Reductions of this magnitude are a significant challenge, especially 
for diesel HDEs, and will require a major research and development 
effort to achieve. At this time there is not one firm set of 
technologies to be applied to all diesel HDEs to achieve the proposed 
standards. Diesel HDEs will need to consider approaches from a number 
of different technological strategies and control hardware which have 
been identified and assessed in a few laboratory programs and then 
apply their choices to their 2004 models. In many cases these 
strategies and hardware have not been used on production diesel engines 
and there are substantial development challenges ahead to apply this 
technology cost effectively with due consideration to impacts on 
operating and maintenance costs as well as engine durability. 
Regulatory enhancements such as the proposed revisions to the 
Averaging, Banking, and Trading program (as discussed below) will also 
help to enhance overall feasibility of the standards for all engine 
models. As is discussed elsewhere in proposal and in the supporting 
RIA, EPA believes the proposed standards while very challenging are 
technically feasible and otherwise appropriate in the context of 
section 202(a)(3). With about eight years remaining before the 2004 
model year, manufacturers have an unprecedented amount of leadtime to 
fully assess, develop, and optimize the various control approaches and 
to integrate them into their 2004 model year products in a manner which 
minimizes engine costs and fuel impacts and does not raise safety 
concerns. Indeed the widespread support of the HDE industry for the SOP 
tends to support EPA's conclusion.
    While there are promising technologies and aftertreatment control 
strategies which otto cycle (gasoline) HDEs may employ to achieve the 
proposed standards, these still require development if they are to be 
applied to all different otto-cycle engine models and the standards are 
to be met in use. EPA believes it will be easier technologically for 
otto-cycle (gasoline) HDEs to achieve the proposed standards but 
proposes the same standards for otto and diesel cycle HDEs for two 
reasons. First, work is required to apply these technologies/
aftertreatment control strategies to all otto cycle engines. EPA 
expects that much of this progress will be made in response to the 1998 
HDE NOX standard and others in response to market competitive 
pressures. Nonetheless, EPA still expects that some models will need to 
develop and employ technology/aftertreatment control upgrades to meet a 
2.4 g/bhp-hr NMHC + NOX standard. This may especially be the case 
for the few otto-cycle HDE families which may not employ closed loop 
control, fuel injection systems with catalysts before 2004. Second, 
because otto and diesel cycle HDEs compete in the market place, there 
is a degree to which for market equity reasons it is appropriate to 
apply standards of equivalent stringency to both classes of engines. 
This approach reduces the possibility that emission standards could 
have disruptive effect on the HDE market. Both EPA and the California 
Air Resources Board have set HC and NOX standards of equivalent 
stringency for otto-cycle and diesel HDEs in the past.
b. 1999 Rulemaking Review
    EPA proposes to conduct a special review in 1999 to reassess the 
appropriateness of the standards under the CAA including the need for 
and the technological and economic feasibility of the standards at that 
time. Before making a final decision in this review regarding the 
appropriateness of these standards under the CAA, EPA intends to issue 
a proposal regarding this issue and offer an opportunity for public 
comment on whether the standards continue to be technologically 
feasible for implementation in 2004 and consistent with the CAA. 
Following the close of the comment period, EPA would issue a final 
agency decision under section 307 of the CAA.
    If in 1999 EPA finds the standards to not be feasible for model 
year 2004 or otherwise not in accordance with the Act, EPA will propose 
adjusted standards which do not exceed the following:

2.9 g/bhp-hr NMHC + NOX
      or
3.0 g/bhp-hr NMHC + NOX with a limit of 0.6 g/bhp-hr on NMHC.

    However, if EPA determines that the feasibility of the standards 
requires diesel fuel changes and EPA does not engage in rulemaking to 
require such changes, EPA will 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.

    The standards finalized in the rulemaking initiated by today's 
proposal would stay in effect unless revised by this subsequent 
rulemaking procedure. EPA has included language in the proposed 
regulatory text regarding the 1999 review.
    Over the next several years EPA will be actively engaged in 
programs to evaluate technology (engine/fuel quality) interactions/
developments and progress toward meeting the proposed standards through 
in-house programs and coordination with the involved industries. To aid 
in this process EPA has established a working group under its Mobile 
Sources Technical Advisory Sub-Committee to the CAA Advisory Committee 
to solicit technical advice and input from engine, fuel, and related 
experts from around the country. If as a result of this evaluation, EPA 
reaches the view that the available information is sufficient to 
indicate that the feasibility of the standards may depend on 
modifications to diesel fuel, any potential for diesel fuel changes 
could then be considered within the context of the 1999 Review. EPA 
recognizes that any consideration of potential fuel diesel 
modifications must be appropriate under section 211(c) of the CAA 
(including considerations of cost, cost effectiveness, and other 
relevant cost considerations), and is especially sensitive to the 
substantial leadtime requirements that may be associated with fuel 
modifications.
    Based on the information presented in the RIA and in section IV of 
this proposal, EPA believes the proposed standards are technologically 
feasible and otherwise appropriate under the CAA. Nonetheless, 
especially for diesel engines, it is clear that a significant amount of 
research and development will be needed to comply. The alternate 
standards discussed above are designed to serve as a backstop in the 
event that

[[Page 33444]]

the 1999 review leads to the conclusion that a revision is appropriate. 
Based on the technical analysis in the RIA, these levels represent 
upper limits for these potential revisions. If during the course of 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.
    c. Other Issues Related to HDE Emission Standards. Several 
commenters to the ANPRM expressed concern with the levels of the 
emission standards EPA is proposing today. Representatives of 
environmental organizations and several states argued that EPA should 
propose more stringent standards for one or more pollutants. While EPA 
believes at this time that today's proposed program represents the best 
combination of standards that are achievable given our current 
understanding of technological constraints, as explained below, and the 
other criteria set forth in CAA section 202(a)(3), EPA remains open to 
additional information and will consider finalizing more stringent 
standards in this action or proposing more stringent standards by 
separate action if such standards are warranted.
    In comments the Agency has received thus far, commenters generally 
address potential standards for NOX and PM separately and somewhat 
independently. These comments urge the Agency to propose an NMHC + 
NOX standard low enough to assure that NOX levels of 2.0 g/
bhp-hr are reached by all diesels, expressing concern that a 2.4 or 2.5 
g/bhp-hr NMHC + NOX standard will actually translate into 2.2-2.3 
g/bhp-hr NOX, not the 2.0 g/bhp-hr level applied in the California 
Federal Implementation Plan (FIP) to model year 2002 engines. These 
commenters also suggest that a PM standard of 0.05 g/bhp-hr be 
proposed, equal to the level which currently applies to urban buses.
    The Agency believes that because of the close interaction among 
NOX, NMHC, and PM emissions from diesel engines, decisions about 
proposed emission standards cannot be made independently from one 
another. As described below in section IV, EPA believes that reaching 
all the standards proposed today simultaneously will require a very 
large technological effort on the part of diesel HDE manufacturers. 
Based on the information available today, the Agency believes that the 
scale of the effort which will be required is such that if NOX, 
NMHC, or PM standards lower than those proposed here were to be 
required, the feasibility of implementing the program for the 2004 
model year would be threatened. That is, while manufacturers may be 
able to achieve lower emission levels for some engine models, at this 
time EPA does not believe that this would be feasible, on average, for 
the full line of engines manufacturers will likely be offering in 2004. 
(The technological assessment on which EPA based a 2.0 g/bhp-hr 
NOX emission standard in the California Federal Implementation 
Plans assumed that only engines sold in California, not all engines 
nationally, would be affected.) Regarding a specific comment that a 
combined NOX + NMHC standard allows NOX emissions 
significantly higher than the 2.0 g/bhp-hr NOX goal, the Agency 
accepts the intention of the engine industry to reach levels very close 
to 2.0 g/bhp-hr. This also seems likely from a technical perspective 
since at best modest NMHC reductions can be achieved over current 
levels. By combining the NOX standard with NMHC, EPA proposes to 
allow a small degree of flexibility to manufacturers which succeed in 
achieving very low NMHC levels in conjunction with the proposed 
NOX and PM standards. However, the Agency does not expect that the 
opportunity to take advantage of that flexibility will be frequently 
used and expects that on average in-use NOX levels would be 
approximately 2 g/BHP-hr.
    As is the case for NMHC, for many in-cylinder control strategies 
there is a trade-off between NOX and PM emission rates. In-
cylinder techniques which reduce NOX may increase PM and vice-
versa. For HDDEs, EPA expects that most manufacturers will rely on in-
cylinder NOX control techniques as opposed to aftertreatment 
devices. Some of these techniques are likely to put upward pressure on 
PM levels, and thus will require special optimization to ensure that PM 
levels are not increased. A simultaneous reduction in the PM standard 
could have an adverse effect on the feasibility of the NMHC + NOX 
standard. Nonetheless, EPA recognizes the need for and value of 
additional reductions in PM emission rates and asks for comments on 
this matter.
    EPA encourages further, detailed comment on the appropriateness of 
the proposed levels for NMHC + NOX and PM in light of the 
technological interactions of their formation and control. EPA will 
consider finalizing standards different than those proposed today to 
the degree that comments and analysis support such action. However, the 
interactions among the pollutants would require a reassessment of all 
pollutants if a more stringent standard is to be considered for any one 
pollutant.
    One commenter requested that EPA propose voluntary low emission 
standards for NOX and PM which would apply between 1998 and 2003 
at levels below the 4.0 g/bhp-hr NOX and 0.10 g/bhp-hr PM which 
would be required in 2004. The ultimate purchasers of HDEs certified to 
meet the voluntary low emission standards would be able to market the 
emission credits generated. EPA asks for comment on the need for and 
desirability of lower voluntary NOX and PM standards as a means to 
encourage technological innovation and the value of such a program 
given that manufacturers can already elect to certify to lower 
standards (family emission limits) under the Averaging, Banking, and 
Trading (A,B,&T) program. These extra emission reductions from these 
HDEs could be sold for marketable credits provided there is not double 
counting between the A,B,&T program and a user program.
    Commenters also raised the issue of whether standards for otto-
cycle HDEs (gasoline-fueled) should be different, and more stringent, 
than those for diesel-cycle HDEs. As commenters observe, the 
technological challenge of achieving lower NOX levels 
simultaneously with low NMHC levels has been less for otto- than 
diesel-cycle HDEs in the past and current data suggests this may be the 
case for the proposed 2004 standards. In 1996 there were seven otto-
cycle HDE families that certified to the existing standards with 
combined NMHC+NOX levels below the level of the proposed 
NMHC+NOX standard. However, of these seven, only about half had 
actual test data to demonstrate emission levels which could allow them 
to certify to the level of the proposed standards. Durability test data 
on others indicates that they would be unable to meet a 2.4 g/BHP-hr 
NMHC+NOX standard at the end of their useful life period.
    Lower certification levels for some families does not necessarily 
lead to the conclusion that levels significantly less than the proposed 
standards are achievable by all families in the near term. Indeed, the 
industry has raised concern that even if the level of the proposed 
standard can be achieved on laboratory prototypes in the near term, 
some engine models will require additional work to gain the additional 
emission reductions needed to account for the effects of production and 
test variability and the deterioration in the efficiency of emission 
controls in use. Industry has suggested that a prototype engine 
emission rate about 1 g/BHP-hr less than the proposed standard is 
needed to be assured of compliance by production engines.

[[Page 33445]]

    Nonetheless, the recent engine and emission control system 
improvements and the resultant reduction in the NMHC+NOX emission 
levels of many of the current otto-cycle families clearly indicate that 
the proposed standards are feasible by the 2004 model year. Some 
concern has been expressed that the proposed standard may be more 
difficult for otto-cycle engines used in heavier vehicles (>14,000 lbs 
GVWR). If not formulated properly, the efficiency of their catalysts 
may be reduced by heat stress which occurs during the longer periods of 
high load operation which are characteristic of some of these vehicles. 
However, the fact that otto-cycle HDEs with these lower emission rates 
are used in vehicles of all weight classes suggests that vehicle design 
and use patterns do not govern the feasibility of low NOX catalyst 
technology. EPA believes that any technological feasibility concerns 
for otto-cycle HDE families required to meet the proposed standard can 
be resolved within the next eight years.
    Given the relatively low NMHC+NOX certification levels of some 
current otto-cycle engines and the available leadtime, EPA requests 
comment on setting the NMHC+NOX standard for otto-cycle engines in 
the range of 1.5-2.0 g/BHP-hr. In addition to comments on technological 
feasibility, EPA requests comment on the appropriateness of a lower 
standard in the context of emission inventory benefits, environmental 
need, costs of compliance (purchase and operating), energy impact, 
safety, and market equity concerns. Comments regarding market equity 
should address how different levels of NMHC+NOX standards for 
otto- and diesel-cycle engines would affect the market relationship 
between these technologies. EPA also requests comment on whether 
implementing a separate standard for otto-cycle engines (which are 
largely gasoline-fueled engines) would be an appropriate change from 
the historical ``fuel neutral'' nature of EPA's emission standards for 
NMHC and NOX emissions from HDEs, and whether such a change could 
adversely affect the development of and use of clean alternative fuels.
    EPA also requests comment on another alternative approach for otto-
cycle engines. Under this approach, manufacturers could voluntarily 
elect to certify these engines to the proposed standard significantly 
earlier (i.e., model year 1999, 2000, or 2001 instead of 2004) as an 
alternative to meeting the more stringent standard discussed above 
(1.5-2.0 g/bhp-hr) in 2004. In this concept, the more stringent 2004 
standard for otto-cycle engines either would not apply or would apply 
to a model year after 2004 to a manufacturer that elected to meet the 
proposed standard early. This approach would have the benefit of 
providing early emission reductions and, to the extent that 
manufacturers choose the proposed standard early, would help reduce the 
potential market equity impacts mentioned above since the same standard 
would apply to both otto- and diesel-cycle engines. While EPA may not 
impose on highway heavy-duty engines NOX standards more stringent 
than 4.0 g/bhp-hr for any model year before 2004 (CAA sections 
202(b)(1)(C) and (a)(3)(B)(ii)), EPA believes it retains authority to 
offer manufacturers the voluntary option of complying with a NOX 
plus NMHC standard of 2.4 g/bhp-hr beginning before model year 2004. 
EPA requests comment on the appropriateness of finalizing this concept. 
Should a commenter favor this concept, they should specify the version 
they prefer (i.e., implementation date of the 2.4 g/BHP-hr standard or 
implementation date and numerical value of a later more stringent 
standard. EPA seeks comment on the technical feasibility and 
appropriateness in the context of environmental need, costs of 
compliance, energy impact, safety and market equity for the option 
supported. The public docket contains a memo further discussing each of 
the alternative approaches to otto-cycle HDE standards as laid out 
above.
    Finally, several commenters encouraged EPA to reconsider the role 
of alternative fuel technologies in reaching low emission levels. EPA 
believes HDE technologies using alternative fuels can reach or exceed 
the emission standards proposed today. For this reason, EPA has for 
many years supported, and continues to support, expanded use of 
optimized alternative fuel engines. The Agency is pleased that 
development of HDEs which use alternative fuels is continuing and that 
some of these engines have been marketed, usually for specialized 
purposes. However, it does not appear that a major shift in the market 
toward alternative fuel HDEs is underway, and EPA does not believe at 
this time that the HDE manufacturing industry is in a position to shift 
a significant amount of its production toward non-petroleum fuels by 
the year 2004. Thus, EPA believes it is likely that petroleum-fueled 
HDEs will continue to dominate the HDE industry well into the next 
century, and the Agency does not believe that EPA action that could 
theoretically force a faster shift toward alternative fuel technologies 
(e.g., extremely low emission requirements for all engines) would be 
effective in the absence of a strong market demand for such engines.
    Therefore, the Agency believes that it is appropriate to base new 
proposed HDE emission standards on the projected capabilities of 
petroleum-fueled engines rather than on the current or projected 
capabilities of alternative fuel engine technologies. If the stringent 
standards proposed today, while achievable by petroleum-fueled engines, 
are indeed relatively easy for some alternative fueled engines to meet, 
the result may be the introduction of alternative fueled HDEs that are 
both acceptable to the market and priced competitively. From the 
Agency's perspective, such a market-based promotion of alternative fuel 
technologies would be a positive result of today's proposed action.
    d. Non-conformance Penalties. Section 206(g) of the Clean Air Act 
requires EPA to allow an 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 86. EPA plans to address provisions related to NCPs for the 
proposed 2004 model year standards in conjunction with the 1999 review 
discussed above.
2. In-use Emissions Control Elements
    a. Introduction. Historically, EPA has viewed in-use emissions 
deterioration as a problem associated more with gasoline engines than 
with diesel engines. For NOX emissions, EPA has tended to be less 
concerned with diesel engine emissions deterioration because diesels 
are currently equipped with fewer aftertreatment or other emission 
control devices susceptible to in-use degradation. Diesel engine 
emissions standards have historically been met mainly through overall 
improvements to the engine and fuel system. These improvements have 
resulted in improved performance, fuel economy, and durability as well.
    As described below in Section IV. A., as standards are reduced 
diesel HDE manufacturers will likely continue to strive to meet the 
standards through engine, air intake, and fuel systems redesign. 
However, they may find it necessary to introduce new technologies, such 
as exhaust gas recirculation (EGR), which function solely to reduce 
emissions. Long-term emissions performance becomes a

[[Page 33446]]

greater concern with the addition of such emissions control 
technologies. The controls may not function as long as the engines and 
there may be little incentive for vehicle owners to conduct the repairs 
on these items needed to ensure emissions control during the very long 
life of the engines. This is of particular concern because the heavy-
duty engine market has demanded longer-lasting engines, and 
manufacturers have been successful in increasing engine life. It is 
EPA's understanding that some current large engines accumulate in 
excess of 500,000 miles before being rebuilt and are used for several 
hundred thousand more miles after rebuild. Thus, failure of emissions 
controls early in the engine's life could offset a significant portion 
of the expected benefit associated with the more stringent standards 
proposed today.
    As described below, EPA is proposing revisions to its current 
regulations regarding in-use emissions control including changes to 
useful life, emissions related maintenance and warranty provisions. 
These changes are intended as updates to current requirements which 
will further encourage engine manufacturers to use emissions controls 
that will have a high degree of durability, and that perform well in 
use without an unreasonable degree of owner involvement. EPA is also 
proposing other basic provisions to help encourage the maintenance and 
repair of emissions controls after the regulatory useful life is 
reached, and especially during engine rebuild. The proposals would be 
effective beginning with 2004 model year engines. EPA believes that the 
industry is fully capable of responding to the challenge of achieving 
the benefits of low emissions standards, not just in the early years of 
engine life, but throughout the time that the engine is in-use. EPA 
requests detailed comments, with as much supporting rationale as 
possible, on all of the following proposals.
b. Revisions to Current Regulations
    To help ensure the durability of new emissions related technology 
used to meet the new standards, EPA is proposing revisions to its 
current regulations in the areas of ``useful life'', ``emissions 
related maintenance'', and ``emission defect and performance 
warranties''.
i. Useful life
    As provided in section 202 of the Clean Air Act, EPA specifies the 
``useful life'' periods for the various heavy-duty engine types. The 
regulatory useful life is the period of time or operation during which 
manufacturers are liable for emissions compliance. Manufacturers are 
responsible for making sure their engines meet emissions standards not 
just at the time of certification and production but also for the 
regulatory useful life of the engines. EPA has the authority to test 
engines selected from the production line and from the in-use fleet to 
determine compliance with this requirement. EPA can require 
manufacturers to recall and repair engines in an engine family if 
testing of properly maintained and used engines or other information 
indicates that a substantial number of engines in the engine family do 
not meet emissions standards during the useful life. EPA's ongoing 
programs for production-line auditing (Selective Enforcement Auditing) 
and in-use recall are two primary EPA enforcement mechanisms for engine 
emissions standards. The statutory authority for these programs is 
found in Sections 206 and 207 of the Clean Air Act.
    Currently for heavy-duty on-highway engines, the useful life is 
generally defined as eight years or 110,000 miles for light heavy-duty 
diesel engines (HDDEs) and gasoline heavy-duty engines, eight years or 
185,000 miles for medium HDDEs, and eight years or 290,000 miles for 
heavy HDDEs, whichever comes first.31 These mileage values were 
originally chosen to roughly correspond to the prevailing average 
engine lives before retirement (for smaller engines) or major engine 
rebuilds (for larger engines). Since the middle 1980s, manufacturers 
have increased very significantly the mechanical durability of heavy-
duty diesel engines, allowing the engines to go many more miles before 
rebuild. Also, the annual vehicle miles travelled (VMT) for newer line-
haul trucks has increased which results in the trucks reaching the end 
of their defined useful life more quickly. It is not uncommon for line 
haul trucks to reach their current maximum useful life of 290,000 miles 
well before the years useful life interval.
---------------------------------------------------------------------------

    \31\ 40 CFR 86.096-2. The Clean Air Act Amendments of 1990 
specify a minimum useful life years limit of ten years for heavy-
duty engines with respect to any standard that first becomes 
applicable after the 1990 amendments were enacted. 42 U.S.C. 7521 
(d)(2). Standards adopted after the Amendments such as the urban bus 
particulate standard and the 1998 and later model year NOX 
standard have a useful life years limit of ten years (e.g., 40 CFR 
86.098-2). Standards adopted before the Clean Air Act Amendments of 
1990 have a useful life years limit of eight years.
---------------------------------------------------------------------------

    The first part of the following discussion concerns the mileage 
portion of the useful life. The years useful life interval is much less 
critical because it is not generally the limiting interval. EPA is 
proposing to make the years portion consistent at ten years for all 
heavy-duty engines and standards beginning with the 2004 model year. 
The discussion of the years interval proposal follows the proposals and 
discussion regarding mileage.
    The engines of greatest concern to EPA are those in the heavy 
heavy-duty diesel engine category because they, for the most part, are 
the engines that tend to reach the end of the useful life quickly and 
then continue to accumulate many more miles than the current useful 
life before needing to be rebuilt. Published warranty information 
indicates that the major engine components of heavy HDDEs are warranted 
for 500,000 miles in most cases and extended base engine coverage is 
often available for up to 5 years/500,000 miles. Since the repair or 
replacement of some of the components covered by the warranties due to 
wear is fundamental to rebuilding, the warranties are one good 
indication that some engines greatly exceed EPA's current useful life 
miles limit of 290,000 miles. Also, it is commonly accepted in the 
trucking industry that, with sound maintenance practices, today's heavy 
HDDEs last much longer than 290,000 miles before rebuild.32
---------------------------------------------------------------------------

    \32\ Comments of American Trucking Association, Inc., October 
17, 1995, Docket A-95-27, II-D-40.
---------------------------------------------------------------------------

    Although EPA could perhaps justify proposing an increase of the 
heavy HDDE useful life requirement to 500,000 miles or more based on 
how long engines are lasting today before rebuild, EPA believes that a 
somewhat lower value is appropriate. Engine manufacturers have stated 
that they will be challenged to meet the proposed new standards and an 
extremely long useful life could affect the feasibility of the 2004 
standards. EPA acknowledges that the length of the useful life can 
affect the feasibility of the standards. EPA believes that the program 
goal of ensuring durable emissions control designs would be achieved 
through a 50 percent increase in the useful life up to 435,000 miles. 
This value represents a meaningful increase in the useful life without 
potentially compromising the feasibility or cost effectiveness of the 
2004 standards. Additionally, other programs, as described below, can 
help ensure emissions controls continue to operate properly after the 
end of the useful life. The end of the useful life does not necessarily 
mean the end of good in-use emissions performance.
    Not all heavy HDDEs are used in line-haul trucks which accumulate 
miles very quickly. A small minority of heavy

[[Page 33447]]

HDDEs are used in urban (transit) buses and other urban vehicles that 
accumulate miles much more slowly. For example, urban buses average 
about 13 miles per hour (including idle time) 33 and about 40,000 
miles per year.34 For urban vehicles such as urban buses, a useful 
life of 435,000 miles would be excessive because of their slow mileage 
accumulation rates. EPA has addressed such concerns in other 
regulations by adopting an hours limit that is equivalent to a miles 
limit which is set to reflect typical operation of heavy-duty engines. 
Vehicles that accumulate mileage more slowly than typical for heavy-
duty vehicles would reach the hours interval before the mileage 
interval. In keeping with this approach, EPA proposes to add an hours 
limit of 13,000 hours to the useful life for heavy HDDEs. The 13,000 
hours limit is based on other hours and miles equivalents used in 
existing EPA regulations regarding heavy-duty engines.35
---------------------------------------------------------------------------

    \33\ ``National Transit Summaries and Trends For the 1993 
National Transit Database Section 15 Report'', Federal Transit 
Administration, May 1995.
    \34\ ``Data Tables For the National Transit Database Section 15 
Report Year'', Federal Transit Administration, December 1994.
    \35\ 40 CFR 86.094-25 (b)(4) contains several hours and miles 
equivalents for HDDEs all of which are based on the ratio of one 
hour to 33.3 miles of operation.
---------------------------------------------------------------------------

    EPA, however, is concerned that the hours interval being proposed 
could, in effect, relax the useful life from its current level, as 
would be the case in instances when vehicles would reach 13,000 hours 
before reaching 290,000 miles. Given the average speed for urban buses 
of 13 miles per hour, this would be likely to occur frequently. To 
ensure that the addition of an hours limit does not result in a useful 
life less than the current useful life in any instance, EPA proposes 
not to allow the hours limit to be effective until after an engine 
reaches 290,000 miles. In summary, EPA proposes a useful life for heavy 
HDDEs of 435,000 miles, 13,000 hours, or ten years, whichever occurs 
first, but in no case less than 290,000 miles.
    EPA requests comments on two alternative approaches to adopting an 
hours limit of 13,000 hours. The first option is to not have an hours 
interval and retain the useful life mileage interval of 290,000 miles 
for urban bus engines with an increase of the mileage interval to 
435,000 miles for all other heavy HDDEs. This would simplify 
regulations but could disadvantage engine manufacturers where engines 
are used in slow moving urban vehicles other than urban buses, such as 
solid waste haulers. The second option is to set the hours interval to 
be equivalent to the number of hours it takes an urban bus, on average, 
to accumulate 290,000 miles. Using the 13 miles per hour estimate from 
above, the hours interval would be 22,300 hours. With this second 
option, EPA also requests comments on whether or not a minimum useful 
life of 290,000 miles is appropriate. These two alternatives may work 
well for urban buses but may not be as appropriate for other urban 
heavy-duty vehicles.
    Currently the years component of the useful life is eight years for 
some standards and ten years for others depending on whether the 
standards were adopted before or after the Clean Air Act Amendments of 
1990. Standards promulgated after the Clean Air Act Amendments, such as 
the 1998 4.0 g/bhp-hr NOX standard, are required to have a useful 
life years limit of 10 years. EPA proposes to make the useful life 
years limits consistent for all pollutants and for all heavy-duty 
engines by raising the years component of the useful life so that it is 
ten years in all cases. The change affects the carbon monoxide and 
particulate matter standards (except the urban bus particulate 
standards which are already at ten years). EPA regards this change as a 
simplification of the regulations with very little or no impact on the 
stringency of the standards because EPA believes that vehicles will 
reach the mileage limits before the years limits in almost all cases.
    EPA requests comments on the appropriateness of the useful life 
proposals described above. In particular, EPA seeks comments on the 
appropriateness of the 435,000 mileage limit, the appropriateness of 
treating engines used in urban vehicles differently from other heavy 
HDDEs, and the appropriateness of the proposed 13,000 hour limit.
ii. Emissions-Related Maintenance
    The frequency of emission-related maintenance actions that 
manufacturers require owners to perform as a condition of their 
emissions warranties is another issue that affects the actual in-use 
emission performance of engines. If such required maintenance is more 
than the vehicle owner is likely to perform due to cost or 
inconvenience, then in-use emissions deterioration can result. 
Therefore, EPA currently imposes limits on the frequency of maintenance 
that can be required of HDE owners for emissions related items. These 
limits also apply to the engine manufacturer during engine 
certification and durability testing. The requirements currently apply 
for the useful life of the engine. Table 2 summarizes current 
regulations regarding the mileage interval limitations for the 
maintenance manufacturers may specify on certain emissions-related 
items for heavy-duty diesel engines (HDDEs). Engine manufacturers 
cannot require maintenance to be performed any more often than is noted 
in the table but may specify longer periods. The intervals are in miles 
or hours, whichever occurs first.

                        Table 2.--Current Intervals for Emission-related Maintenance \1\                        
----------------------------------------------------------------------------------------------------------------
                                                                                                                
----------------------------------------------------------------------------------------------------------------
50,000 miles or 1,500 hours     100,000 miles or       150,000 miles or       None listed.                      
 for all heavy duty diesel       3,000 hours for        4,500 hours for                                         
 engines (HDDEs).                Light HDDEs.           Medium and Heavy                                        
                                                        HDDEs.                                                  
EGR systems including all       Turbocharger.........  Turbocharger.........  Catalytic converter.\2\           
 related filters and control                                                                                    
 valves \2\.                                                                                                    
PCV valve \2\.................  Fuel injectors.......  Fuel injectors.......                                    
Fuel injector tip cleaning....  Electronic engine      Electronic engine                                        
                                 control unit,          control unit,                                           
                                 sensors, and           sensors, and                                            
                                 actuators \2\.         actuators \2\.                                          
                                Particulate trap \2\.  Particulate trap \2\.                                    
----------------------------------------------------------------------------------------------------------------
\1\ Source 40 CFR 86.094-25.                                                                                    
\2\ Critical emissions-related components.                                                                      

    Table 2 notes components that EPA considers ``critical emissions-
related components'' and EPA has additional requirements for these 
components (see 40 CFR 86.094-25 (b) (6)). Specifically, manufacturers 
must show that

[[Page 33448]]

maintenance which the manufacturer requires for a critical emission-
related component has a reasonable likelihood of being performed by the 
operator in use. The engine manufacturer has a variety of options for 
making such a demonstration such as showing that component degradation 
will also cause vehicle performance to degrade or by using visual 
displays to notify the driver that maintenance is needed.
    EPA believes that revising the maintenance intervals for certain 
technologies is appropriate in order to adequately cover the 
technologies which manufacturers may use to meet the proposed 2004 and 
later model year standards. The new standards may prompt the use of EGR 
on heavy-duty diesel engines and an increased interval for EGR valves 
and tubing will help ensure adequate system durability. Similarly, EPA 
believes that catalytic converters should be added to the list of 
emission-related components for HDDEs for which a minimum interval is 
specified, also to ensure adequate durability. Except for the recent 
use of catalytic converters for particulate control, neither technology 
has been used significantly for HDDEs in the past. Accordingly, EPA 
proposes for EGR valves and tubing and catalytic converters that 
manufacturers specify maintenance no more often than the intervals 
shown in Table 2 for other technologies; 100,000 miles or 3,000 hours, 
whichever occurs first, for light HDDEs and 150,000 miles or 4,500 
hours for medium and heavy HDDEs. For EGR system filters and coolers, 
EPA proposes that the maintenance interval would remain 50,000 miles/
1,500 hours due to manufacturer concerns that a longer interval for 
these components may not be feasible.
    In addition, there is the possibility that new technologies not 
listed in Table 2 could be used to meet the proposed standards. 
Therefore, EPA proposes to apply the same maintenance intervals as 
listed above for most components, 100,000 miles or 3,000 hours, 
whichever occurs first, for light HDDEs and 150,000 miles or 4,500 
hours for medium and heavy HDDE, to any additional add-on emissions-
related components that manufacturers introduce in the future. EPA 
proposes to define add-on emission-related components for this purpose 
as components 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 or performance of the engine. 
EPA would also consider such components critical emission-related 
components for purposes of 40 CFR 86.094-25(b)(6). EPA believes that 
this proposal is necessary to provide the same minimum level of 
durability for all emissions-related components (except EGR filters and 
coolers) used to meet the standards. The minimum requirement will also 
be helpful in the development of future technologies as it will provide 
a clear minimum design target for technology development.
    Maintenance requirements for gasoline-fueled heavy-duty engines and 
light heavy-duty diesel engines are currently the same for EGR and 
several other components due to the similarity in their duty cycles. 
EPA believes that it is appropriate for the maintenance intervals for 
EGR for light heavy-duty diesel engines and heavy-duty gasoline engine 
to remain consistent with each other given this similarity. Therefore, 
for otto-cycle (i.e., gasoline-fueled) heavy-duty engines, EPA proposes 
that the maintenance interval for EGR valves and tubing be increased to 
100,000 miles or 3,000 hours from the current 50,000 mile or 1,500 hour 
interval. Because gasoline-fueled engines emit less particulate (which 
can cause deterioration of the EGR system) than do diesel engines, EPA 
does not believe that the change represents a particular challenge for 
gasoline-fueled engines.
    EPA requests comments on the proposed changes to the maintenance 
intervals described above including comments on the length of the 
intervals and the technologies for which intervals are being proposed. 
Also, EPA requests comment on the definition of ``add-on emission-
related component'' offered here.
iii. Emissions Defect and Performance Warranties
    Emissions warranties are provided by manufacturers as required 
under Section 207 of the Clean Air Act. The performance warranty 
provides that if a properly maintained vehicle or engine fails to 
conform to EPA emissions requirements at anytime during the warranty 
period, and such nonconformity causes the owner to have to bear a 
penalty or other sanction, then the engine manufacturer is responsible 
for remedying the nonconformity at its own cost.\36\ The defect 
warranty provides that manufacturers are responsible for defects in 
materials and workmanship which cause an engine not to conform with 
applicable regulations. EPA currently requires that the emission defect 
and emission performance warranties for heavy-duty gasoline engines and 
light HDDEs last 5 years/50,000 miles and for medium and heavy HDDEs 
last 5 years/100,000 miles, whichever occurs first, but in no case may 
the warranty period be less than the manufacturer's basic mechanical 
warranty period for the engine family.\37\
---------------------------------------------------------------------------

    \36\ While EPA is proposing to revise the performance warranty 
period as discussed below, in accordance with Section 207(i) of the 
Clean Air Act, EPA has not prescribed regulations under Section 
207(b)(2) of the Act which require heavy-duty engine manufacturers 
to provide performance warranties.
    \37\ Useful life definition paragraph (6), 40 CFR Part 86.096-2.
---------------------------------------------------------------------------

    EPA proposes to clarify that the period of the warranty is to be in 
no case less than the basic mechanical warranty period that the 
manufacturer provides to the purchaser with the engine rather than the 
general warranty period for the engine family. It is common for 
manufacturers to provide negotiated mechanical warranties that are 
longer than the published base warranties for the engine family. EPA 
believes that this modification is appropriate because negotiated 
warranties are prevalent and therefore the published warranty is not 
reflective of the true mechanical warranty period in many cases. EPA 
requests comments on this proposal.
c. Maintenance and Repair of Emissions Controls After the End of the 
Useful Life
    As discussed above, EPA regulates maintenance and repairs of 
emissions control components that manufacturers may specify during the 
useful life of the engines. However, these provisions will not ensure 
emissions control for the full operating life of all heavy-duty 
engines. Large diesel engines have an extremely long life that is 
extended through rebuilding. If the vehicle owner and engine rebuilder 
were to not properly maintain or repair emissions control components, 
the controls could degrade and cause an unacceptable increase in 
emissions. Because there may be no effect on engine performance, the 
degraded components may otherwise go unnoticed for a significant 
portion of the total life of the engine. Since HDEs are typically 
rebuilt, EPA also believes it is appropriate to take steps to ensure 
that emissions-related components used to meet the new standards 
receive all needed maintenance and repair beyond the useful life 
period. The proposals described below fall into two categories: 
manufacturer requirements and engine rebuilding requirements. The 
proposals are intended to help enhance the focus on emissions-related 
components and the Agency does not believe that the proposals will 
result in significant costs above those that would be incurred for

[[Page 33449]]

the proper maintenance/repair of emissions-related components. As with 
the related provisions proposed above, EPA believes that these basic 
provisions are necessary beginning with the 2004 model year because new 
add-on emissions-related components which may require occasional 
maintenance and repair may be used to meet the 2004 and later model 
year standards.
i. Provisions Affecting Manufacturers
    Manufacturers currently provide owners with comprehensive service/
maintenance manuals covering the maintenance necessary to keep engines 
operating properly. If a manufacturer required maintenance on any 
emissions-related components during the useful life, as described above 
in 2.b.ii. of this section, maintenance procedures would be detailed in 
this manual. EPA proposes to require that manufacturers, in addition, 
include in the manual maintenance needed for emissions related 
components after the end of the regulatory useful life, including 
mileage/hours intervals and procedures to determine whether 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 would 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 would 
be required to highlight in the manual any rebuild provisions adopted 
by the Agency, as described in 2.c.ii. below, to ensure that owners and 
rebuilders are aware of the requirements.
    As described above in 2.b.ii. of this section, 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.\38\ 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.\39\
---------------------------------------------------------------------------

    \38\ 40 CFR 86.094-25(b)(6)(ii)(C)
    \39\ 40 CFR 86.094-25(b)(6)(iii)
---------------------------------------------------------------------------

    EPA proposes to require that manufacturers 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 would have to be designed to 
continue to signal the driver at the same intervals after the end of 
the useful life. EPA does not propose, however, to 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 provided as described 
above in 2.b.ii.)
    EPA believes these proposals will help ensure that information 
necessary to care for critical emission related components through the 
engines' entire life on the road will be widely available to owners, 
rebuilders and others maintaining and repairing heavy-duty engines. EPA 
requests comments on the proposals.
ii. Provisions Pertaining to Engine Rebuilding Practices
    EPA has two concerns regarding the rebuilding of 2004 and later 
model year engines, both related to new emissions related components 
that may be added to the engine to meet the new standards. First, EPA 
is concerned that during engine rebuilding, there may not be an 
incentive to check and repair emissions controls that do not affect 
engine performance. Second, EPA is concerned that there may be an 
incentive to rebuild engines to a pre-2004 model year configuration due 
to real or perceived performance penalties associated with 2004 and 
later model year technologies. Such practices would likely result in a 
loss of emissions control.
    EPA currently does not have regulations concerning engine 
rebuilding practices for heavy-duty engines other than requirements for 
engines used in 1993 and earlier model year urban buses.\40\ Clean Air 
Act Section 202(a)(3)(D) directed EPA to study heavy-duty engine 
rebuild practices and the impact rebuilding has on engine emissions. 
Based on the study and other information, EPA may prescribe 
requirements to control rebuilding practices (whether or not the engine 
is past its useful life), which in the Administrator's judgement cause, 
or contribute to, air pollution which may reasonably be anticipated to 
endanger public health or welfare taking costs into account. 42 U.S.C. 
7521 (a)(3)(D). EPA conducted a study of engine rebuilding and 
determined that current-technology engines, when rebuilt, generally 
emit at levels near or below the certification standards that applied 
to the engine when new and that regulations to control rebuild 
practices did not appear to be warranted at that time.\41\
---------------------------------------------------------------------------

    \40\ 40 CFR Part 85, Subpart O, Urban Bus Rebuild Requirements.
    \41\ ``Heavy-duty Engine Rebuilding Practices,'' EPA Final 
Report by Tom Stricker and Karl Simon, March 21, 1995.
---------------------------------------------------------------------------

    In the ANPRM, EPA requested comments on establishing rebuild 
requirements to promote continued in-use compliance for 2004 and later 
model year engines. The Automotive Engine Rebuilders Association (AERA) 
and other related associations stated in their comments on the ANPRM 
that it is extremely unlikely that engine rebuilders would rebuild to 
non-original specifications because such a product would not be 
acceptable to the purchaser.\42\ AERA further commented that a rebuild 
program where the rebuilder would be required to conduct certification 
testing and be held liable for emissions performance in-use would be 
unreasonable for the many rebuilders that are small businesses. AERA 
commented that, given what is known about the rebuilding industry, EPA 
has no basis for rebuild regulations.
---------------------------------------------------------------------------

    \42\ EPA Docket A-95-27, Docket II-D-41.
---------------------------------------------------------------------------

    EPA does not believe that a major program placing substantial new 
requirements on the rebuilding industry needs to be proposed at this 
time to adequately address the Agency's concerns described above, based 
on comments received and EPA's findings regarding current industry 
practices. Therefore, EPA does not propose regulations at this time 
under the authority of Clean Air Act Section 202(a)(3)(D). However, EPA 
does believe that establishing basic regulatory provisions regarding 
engine rebuilding under Section 203 of the Clean Air Act (``Prohibited 
Acts'') would help the rebuilding industry understand what is needed to 
ensure that rebuilt 2004 and

[[Page 33450]]

later model year engines closely approximate original emissions 
performance when they are rebuilt.
    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''.\43\ EPA has also established policies 
regarding the use of aftermarket parts during rebuild.\44\
---------------------------------------------------------------------------

    \43\ Engine Switching Fact Sheet, April 2, 1991. Docket A-95-27, 
II-B-6.
    \44\ ``Interim Tampering Enforcement Policy'', Mobile Source 
Enforcement Memorandum No. 1A., June 25, 1974. Docket A-95-27, II-B-
5.
---------------------------------------------------------------------------

    EPA is proposing to codify these policies as they apply to 
rebuilding and to propose new measures. The Agency believes that 
rebuilding is currently a time when emissions control is restored, 
along with the engine itself, and that the proposed provisions 
described below will help ensure that this continues for the 2004 and 
later model year engines. Currently, the engine and all emissions 
related components are treated as a package for purposes of engine 
certification and other programs and EPA believes it is important to 
maintain this view at time of engine rebuild. The provisions proposed 
below would specify what minimum action is necessary at time of rebuild 
under Clean Air Act Section 203(a)(3) to ensure continued emissions 
control.\45\ These provisions reflect what EPA believes will be common 
practice for rebuilding engines, but also will help to focus attention 
on new emission-related components used to meet the 2004 standards.
---------------------------------------------------------------------------

    \45\ Note that other actions not specified may also be 
prohibited under Clean Air Act Section 203.
---------------------------------------------------------------------------

    EPA proposes that parties involved in the process of rebuilding or 
remanufacturing 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 
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) of the same or newer 
model year as the engine being rebuilt. 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) A replacement engine must be of (or rebuilt to) a configuration 
of the same or later model year as the original 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.
    (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.
    EPA proposes that any person or entity engaged in the process, in 
whole or in part, of rebuilding engines who fails to comply with the 
above provisions may be liable for tampering in violation of CAA 
Section 203(a)(3). Parties would be 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 proposing 
no certification, recordkeeping, or other requirements of the rebuilder 
or engine owner and there would be no in-use emissions requirements.
    Because the above proposal represents what EPA believes would be 
sound rebuilding practices for 2004 and later model year engines, EPA 
does not believe that there are costs associated with the above 
proposed requirements. Items 1 and 2 of the proposal closely reflect 
established EPA policy regarding tampering (discussed above). Any 
changes to rebuild practices will be due to the industry adjusting to 
the use of new technologies. EPA believes that any added cost to the 
rebuilding of the engines will be due to the technology used to meet 
the standards and not due to the rebuilding provisions being proposed. 
Additionally, EPA continues to have the authority to regulate 
rebuilding if future studies or other information were to provide the 
basis for such regulations. EPA views the proposal above as 
preventative, in that it will help ensure that the rebuild industry is 
aware of the new technologies and that rebuilding of engines with 2004 
and later technology will not impact emissions negatively. EPA requests 
comments on all aspects of the above proposal.
    To ensure that engine rebuilders and others involved in engine 
rebuilding are complying with the requirements and to maintain a level 
playing field between those who follow the rules and those who do not, 
EPA's enforcement office intends to take action against violations of 
the rebuild provisions. EPA is concerned, however, that proving 
violations will be difficult without some form of records available for 
inspection.
    EPA is considering the adoption of minor recordkeeping requirements 
which EPA believes would be in line with customary business practices. 
The Agency would then be able to inspect such records to determine 
compliance with the rebuild provisions. The records would be required 
to be kept by persons involved in the process of heavy-duty engine 
rebuilding or remanufacturing and would have to 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

[[Page 33451]]

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. If it is customary practice to keep records for groups of 
engines where the engines are being rebuilt or remanufactured to an 
identical configuration, such recordkeeping practices would satisfy 
these requirements. EPA would require such records to be kept for two 
years after the engine is rebuilt.
    EPA's intention with such record keeping requirements would be to 
make basic records available to the Agency such that enforcement 
officials would be able to understand what work was performed on an 
engine during the rebuild process. EPA believes that those in the 
rebuilding industry already keep detailed records on work performed on 
engines as part of good business practices and therefore, EPA believes 
that the above recordkeeping requirements would impose no additional 
burden on affected businesses. Moreover, EPA has always had the 
authority to request such records pursuant to section 208 of the Clean 
Air Act and the above requirements would only standardize the records 
available for EPA inspection. EPA requests comments on the above record 
keeping requirements.
d. State Inspection/Maintenance Programs
    Many states are currently in various stages of planning or 
implementing inspection/maintenance (I/M) programs for trucks. The 
programs are mostly focused on identifying trucks with high smoke 
emissions, which usually result from tampering or poor maintenance, and 
requiring their repair. EPA has received requests from several sources 
including the American Trucking Association, the Engine Manufacturers 
Association, and state organizations to become involved in the 
development of truck I/M programs, with the hope that state programs 
can be standardized under EPA guidance. Currently, programs may differ 
widely from state-to-state causing a variety of problems for the 
parties affected.
    In response, EPA has begun an effort in this area with the goal of 
developing a guidance document that states can use to establish 
programs. EPA intends to address issues regarding testing procedures 
and standards or pass/fail cut points for heavy-duty engine I/M 
programs in coordination with interested parties. Although the guidance 
document would not preclude states from designing programs differently, 
it should help decrease program differences from state-to-state.
3. Revised Averaging, Banking, and Trading Provisions
    Today's proposal makes changes to the heavy-duty engine averaging, 
banking and trading (ABT) provisions. They are intended to enhance the 
flexibility offered to manufacturers in meeting the stringent standards 
being proposed and to encourage the early introduction of cleaner 
engines, thus securing emissions benefits earlier than would otherwise 
be the case. Further, the proposed ABT changes also allow EPA to 
propose more stringent emission standards than it otherwise might, 
since the flexibility provided by ABT lowers the costs to manufacturers 
and makes it easier to meet the technical challenges of lower 
standards.
    Under a modified program proposed to be available to manufacturers 
between 1998 and 2006 inclusive, credits could be earned without the 
current ABT credit discounting or limited life provisions. These 
credits could be used beginning in model year 2004 to ease the impact 
of the new standards in their initial years of applicability. With the 
exception of a minor adjustment in how credit exchanges are conducted 
between families, other provisions of the existing ABT program would 
remain essentially unchanged, including prohibitions on cross subclass 
and cross combustion cycle ABT. A further description of the proposed 
changes, including provisions designed to safeguard against any 
potential adverse air quality impacts, is provided later in this 
section.
a. Overview of the Current Averaging, Banking and Trading Program
    The proposed changes come in the context of the existing ABT 
program, the bulk of which was adopted in 1990. The existing program 
includes otto and diesel cycle HDEs fueled by petroleum (gasoline and 
diesel), gaseous fuels, and methanol (see 55 FR 30584, July 28, 1990 
and 59 FR 43472, September 21, 1994), and is available for meeting 
applicable NOX and particulate matter (PM) standards. The three 
aspects of ABT: averaging, banking and trading, are briefly described 
in the following paragraphs.
    Within a given manufacturer's product line, averaging allows 
certification of one or more engine families at levels above the 
applicable emission standard (but below a set upper limit), provided 
their increased emissions are offset by those from one or more families 
certified below the same emission standard, such that the average 
emissions from all the manufacturer's families (weighted by horsepower 
and production) are at or below the level of the emission standard. 
Averaging results are calculated for each specific model year. The 
mechanism by which this is accomplished is certification of the engine 
family to a ``family emission limit'' (FEL) set by the manufacturer, 
which may be above or below the standard (an FEL above the standard may 
not exceed a prescribed upper limit specified in the ABT regulations). 
Once an engine family is certified to an FEL, that FEL becomes the 
enforceable limit used to determine compliance during assembly line and 
in-use compliance testing.
    The second element of the current ABT program is banking. Banking 
gives the manufacturer generating the credits in one model year the 
option to defer their use until a later model year for averaging or 
trading. Under the current program, credits are discounted by 20 
percent when banked and have a three year life. EPA believes banking 
promotes the development and early introduction of advanced emission 
control technology, which provides emission reduction benefits to the 
environment sooner than would otherwise occur. An incentive for early 
introduction arises because the banked credits can subsequently be used 
by the manufacturer to ease the compliance burden of new, more 
stringent, standards. For the same reasons, banking can promote the 
introduction and use of clean alternative-fueled engines.
    The final element of the ABT program is trading. Since averaging is 
limited to a given manufacturer's own product line, the manufacturer 
must have two or more engine families within a given averaging set to 
participate in the program. This could limit the opportunities for 
smaller HDE manufacturers with more limited product lines to optimize 
their costs. Trading resolves this concern by allowing credit exchanges 
between manufacturers. Thus, averaging benefits can be extended to 
manufacturers who might not otherwise be able to participate due to 
their limited product lines. Trading can also be advantageous to larger 
manufacturers because extending the effective averaging set through 
trading can allow for overall optimization of cost across 
manufacturers.
    Due to manufacturer equity and environmental impact concerns there 
are some limitations on credit exchanges in the existing ABT program. 
First, for diesel cycle engines, NOX and PM credit exchanges are 
prohibited across the various subclasses (LHDDE,

[[Page 33452]]

MHDDE, HHDDE). Second, no credit exchanges are permitted between 
diesel-cycle and otto-cycle engines. Finally, cross fuel credit 
exchanges are permitted only within engines of the same basic 
combustion cycle and subclass. Details on these credit exchange 
restrictions, including the reasons for their existence, are discussed 
in the previously cited Federal Register notices.
b. Description of Proposed ABT Program Changes
    As noted at the outset of this section, EPA is proposing two 
principal changes to the existing ABT program designed to temporarily 
remove the discounting and limited life of credits generated under 
current provisions. Behind these changes is the recognition that the 
proposed standards represent a major technological challenge to the 
industry. ABT provisions can ease the need to bring all engines into 
compliance in MY 2004 by allowing accumulated credits to be used, for 
example, to temporarily offset emissions from some particularly 
difficult to control engine line. Thus, the Agency can adopt new 
standards without the need to show that they can be met by all engines 
when first implemented. While the current ABT provisions were designed 
with these same general goals in mind, EPA believes that the nature of 
the challenge presented by today's proposed standards justifies efforts 
to increase the flexibility of the ABT program. The Agency wishes to 
maximize the flexibility and incentives for early introduction of 
technology which ABT offers. This will help insure that the proposed 
new standards will, in fact, be attainable for the manufacturers, and 
will be met at the lowest cost. It is also the case that the Agency has 
gained experience with the operation of its ABT program which gives it 
more confidence in being able to successfully modify the program in the 
face of this need.
    The proposal being made today would establish a second, parallel, 
ABT program targeted specifically at helping manufacturers meet the 
proposed more stringent standards in MY 2004 through 2006, the first 
three model years to which the new standards would apply. Credits could 
be earned under this program beginning in 1998 and would not be 
discounted, nor would they expire after 3 years as do current ABT 
credits. These credits could only be used to comply with the 2004 
standards. If a manufacturer wished to apply them to its compliance 
program for earlier model years they could be transferred into the 
original ABT program, but would at the same time become subject to the 
20 percent discount and three year life of the original program. EPA is 
also proposing that this alternate program would be in effect only for 
the years immediately surrounding the transition to the new standards. 
The ability to generate credits under the proposed new program would be 
eliminated in 2007 (the current ABT program would be available for 2007 
and later model years). EPA thinks the need for unlimited life and no 
credit discounting to enhance the technological feasibility of the 
standards would be greatly diminished after the first three years of 
the model year 2004 standards. EPA believes it is appropriate to remove 
the discounting and limited life restrictions in the modified ABT 
program and still keep them in the current ABT program because these 
modifications have been considered in developing the proposed 
standards, but not prior standards subject to the ABT program. The 
Agency seeks comment on what expiration date, if any, would be 
appropriate for the proposed program modifications and why.
    As in the current ABT program, only NOX and PM credits could 
be earned under the modified program. NMHC credits would not be 
included because of the potential for windfall credit generation from 
the very low NMHC levels of many current engines. NOX-only credit 
generation also allows the credits to be transferred back to the 
current program if deemed necessary by the manufacturer. The NOX 
credits would be applied against the NOX + NMHC standards 
beginning in 2004 (but not the NMHC cap associated with the 2.5 g/bhp-
hr optional standard).
    EPA proposes that the upper limits for engine families certified 
above the 2004 standard and using offsetting ABT credits would be 4.5 
g/bhp-hr, NOX + NMHC and 0.25 g/bhp-hr for PM. The 0.25 g/bhp-hr 
upper limit proposed here for PM is a reduction from the 0.60 g/bhp-hr 
which now applies. EPA believes a reduction in this value is 
appropriate even though the stringency of the PM standard is not being 
changed. Unless other factors dictate, normal practice has been to set 
the upper limit for FELs at the level of the previous standard. An 
exception to this practice was made in 1990 when the full current ABT 
program was promulgated. At that time engines were only meeting a 0.60 
g/bhp-hr PM standard, and it was not clear that a 0.25 g/bhp-hr upper 
limit would provide adequate flexibility for 1994 and later model 
years. At that time the PM standard was set to drop from 0.60 g/bhp-hr 
to 0.25 g/bhp-hr in 1991. The 0.25 g/bhp-hr standard was to be in place 
for only three model years (1991-1993) before dropping to 0.10 g/bhp-hr 
and as part of their compliance strategy some manufacturers indicated 
plans to use credits to meet the 0.25 g/bhp-hr standard and desired 
that flexibility to continue after the standard dropped to 0.10 g/bhp-
hr. By 2004, the 0.10 g/bhp-hr standard will have been in place for ten 
years, and the need for flexibility to certify above 0.25 g/bhp-hr 
should have disappeared by that time. In fact, in 1996 only three 
diesel engine families out of about 90 certified above the 0.25 g/bhp-
hr level.
    One of the potential problems with ABT programs is the possibility 
that manufacturers will reduce their compliance margins relative to the 
standards, or associated FELs, in order to maximize the generation of 
credits for low emitting engines and minimize the need for credit use 
for high emitting engines. Compliance margins are used to protect 
against unexpected failure of emission standards due to the variability 
inherent in both producing and emission testing of engines. To avoid 
having engines exceed their FEL, the manufacturer includes a safety 
factor and certifies with emission levels somewhat below the FEL. As 
the manufacturer reduces these compliance margins, it increases its 
odds of experiencing an unexpected failure of the FEL, either during 
assembly line testing or in-use. However, the ability to generate and 
use credits encourages the manufacturer to set its FELs as low as 
possible. To the extent that a manufacturer reduces its compliance 
margins under the proposed new ABT provisions, there is a risk that 
such a manufacturer's engines would not meet the FELs.
    The Agency is unsure to what extent such ``margin shaving'' might 
occur as a result of the modified ABT program being proposed today. 
However, to protect against such a possibility, EPA is proposing to 
require a minimum margin in order to participate in the modified ABT 
program. Based on current certification data, compliance margins vary 
from essentially zero to about 18 percent, with the average being about 
10 percent. To help ensure that a manufacturer's engines do in fact 
meet their FELs without unduly constraining how margins are used, 
today's proposal requires a minimum margin of at least five percent to 
participate in the modified ABT program. Even though some manufacturers 
have higher margins, EPA believes that a five percent value provides 
reasonable protection against margin shaving. The larger margins found 
in some engine families may exist for other reasons. To

[[Page 33453]]

provide reasonable flexibility, it is also proposed that manufacturers 
be permitted to use a margin of less than five percent if they have 
test data which demonstrates that a lower margin is sufficient. 
Comments are requested on the validity of the Agency's concern as well 
as on the proposed use of a minimum required margin. Commenters 
supporting this approach should also comment on the appropriate size of 
the margin.
    Since the useful life for heavy heavy-duty diesels (HHDDEs) is 
being proposed to increase in 2004 along with the change in emission 
standards, the question arises of how to determine appropriate credits 
under the modified ABT program for those HHDDEs engines being certified 
to the shorter useful life provisions prior to 2004. In-use emissions 
generally increase, or ``deteriorate,'' with increasing mileage. Thus, 
if those engines had been certified to the longer useful life, they 
normally would have had to account for more deterioration than for the 
shorter life. This would have produced a higher FEL, and less credit, 
than would the shorter life.
    For NOX, dealing with the issue of the amount of credits is 
fairly straightforward. NOX emissions from HHDDEs show little 
deterioration, and in some cases can actually decline with age. 
Therefore, the Agency believes an appropriate adjustment for useful 
life can be made by simply extending the NOX deterioration factor 
used in certifying the engine family to the proposed 435,000 mile life. 
This should give a conservative estimate of likely deterioration over 
the longer life period. Under this approach the extension would be 
performed only for the purposes of calculating credits for the modified 
ABT program, and would not impose added certification durability 
requirements or extended recall testing limits as the useful life (and 
corresponding obligation to comply with the emission standards) would 
not be extended. If a manufacturer felt that a projection of its 
deterioration factor was inappropriate, it could exercise the existing 
option under 40 CFR 86.090-21(f) to petition the administrator for a 
longer useful life for its engine, and determine a new deterioration 
factor for that new useful life.
    Under the approach just described for extending NOX 
deterioration factors, the manufacturer incurs no added liability for 
the mileage extension from 290,000 miles to 435,000 miles. The above 
approach seems appropriate to the Agency for purposes of quantifying 
the amount of credits given the transitional nature of the useful life 
issue and the general stability and predictability of NOX 
emissions. However, in various credit and trading programs EPA has set 
policy that credit generation should be based on an enforceable 
obligation to achieve the expected emission reductions. See, e.g., 
Interim Guidelines on the Generation of Mobile Source Emission 
Reduction Credits, 58 FR 11134 (February 23, 1993). If deemed 
appropriate, this could be accomplished by requiring the manufacturer 
to certify using the same extended NOX deterioration factor it 
used for credit calculations. This would establish in-use liability for 
the extended mileage period. If this were done, it would apply only for 
the NOX standard. EPA believes this extended useful life could be 
accomplished without imposing additional certification burdens or 
requirements, given the current flexibility in certification 
regulations and the expected deterioration associated with NOX 
emissions over time. EPA invites comments on this alternate approach as 
well as the proposal to calculate the amount of NOX credits 
without extending the useful life. Comments should address which of 
these approaches should be adopted in the final rule.
    In the case of particulate matter (PM) emissions, the Agency has 
much less confidence in the reliability of projections from the current 
290,000 mile life. In this case there is a greater possibility of 
unexpected changes in emissions later in the engine life which would 
not be consistently captured with such an approach. Therefore, EPA is 
proposing to allow credits to be generated only for the applicable 
engine family's certified useful life period. In most cases this would 
be 290,000 miles. However, as with NOX, if a manufacturer wished 
to generate credits for a longer period, it could petition the 
Administrator under the provisions of 40 CFR 86.090-21(f) for a longer 
useful life for its engine. It would then be able to generate credits 
for that entire useful life period.
    Finally, it should be noted that EPA is proposing to revise the 
technique used to calculate credit exchange (generation and use) 
amounts. In the current ABT system, credits are generated based on the 
lowest horsepower configuration in a family and credit use is 
calculated based on the highest horsepower configuration. Credit 
generation is calculated based on the configuration which generates the 
least benefit within the family while credit use is based on the 
configuration which requires the most credits to comply. In some cases 
this can result in large offsets (i.e., credits are generated at the 
lowest rate and credits required at the highest rate). Based on EPA's 
experience with ABT programs, we find this offset to be unnecessary. 
Over the past five years the ABT program has been implemented smoothly, 
leaving less need for the safeguards this provision brought to the 
original program. Furthermore, this provision tends to introduce a 
penalty for credit generating engines, thus reducing the incentive to 
introduce clean technology. Therefore, EPA proposes to base such 
calculations on sales-weighted average horsepower values within each 
family. EPA believes use of an average horsepower for generating and 
using engines is sufficient to ensure no environmental loss from the 
credit transaction.
    EPA received comments on the ANPRM requesting clarification on 
whether or not, and if so, how credits from engines certified below the 
applicable standard can be used by entities other than the engine 
manufacturers (e.g., engine purchasers). EPA believes that in some 
circumstances this could well be appropriate and consistent with the 
intent of the ABT regulations. EPA asks comment on what revisions or 
clarifications may be needed to the ABT program to facilitate this 
possibility. For example, EPA is interested in comment on how we can 
assure that credits not be counted by both the engine manufacturer and 
the vehicle/engine user (double counted).
    The interim modifications to relax the credit discounting and 
lifetime restrictions for model years 1998-2006 are being included 
primarily to assist in compliance with the proposed standards beginning 
in 2004. As was discussed earlier in this section, the technological 
challenge of meeting the proposed standards is much less for otto-cycle 
engines as compared to diesel cycle engines. In fact many models 
already have certification levels near or below the level of the 
proposed standard. While the revised ABT program could provide an 
incentive to produce even cleaner otto-cycle engines before 2004, EPA 
is concerned that the discount and lifetime revisions would provide 
``windfall credits'' to the otto-cycle industry. A similar concern does 
not exist for diesel cycle engines, because their current NMHC+NOX 
emission rates are well above the level of the proposed standard. EPA 
asks comment on this issue including whether or not and why these two 
program changes should be extended to otto-cycle engines or just the 
current A, B,& T program should be available.

[[Page 33454]]

    In its comments on the ANPRM submitted on behalf of a consortium of 
environmental groups, NRDC raised several objections to the possible 
ABT program changes discussed in that document and in the SOP. Among 
these, NRDC opposed removal of the discounting and limited life 
provisions of the current program. NRDC argued that these changes could 
lead to unnecessary delays in compliance with the proposed new 
standards and could result in increased emissions. Commenting 
specifically on the removal of discounting, NRDC argued that in the 
absence of discounting, the public ``relinquishes all of the benefits 
of unanticipated advances in technology.'' The Agency does not agree 
with these comments. As described above, existence of the ABT program 
allows the Agency to propose and finalize a standard that might not be 
otherwise appropriate under the CAA, since ABT reduces the cost and 
improves the technological feasibility of achieving the standard. 
Furthermore, the generation of credits means that emission reductions 
have been realized earlier than required by the standards, which EPA 
believes is a benefit to the public. The fact that the use of credits 
would allow some specific engine families to delay compliance with the 
proposed new standards has no inherent air quality impact since the 
credits represent offsetting emission reductions below the applicable 
standard from other engines. EPA encourages further comment on the 
appropriateness of the Agency's proposal to impose no discount or life 
limit on credits generated and used under the modified ABT program.
    In their comments NRDC also opposed expansion of the trading 
provisions to include cross-cycle, cross sub-class or cross-source 
trading. None of those changes are included in today's proposal. 
Comments are invited on the appropriateness of EPA at some later date 
proposing to allow cross-cycle, cross-cycle with the same fuel, cross-
subclass or cross-category (e.g., highway and non-road) credit 
exchanges as part of the modified ABT program.
    In their comments on the ANPRM, NRDC stated that only engines 
meeting the proposed standards early should be able to get the benefits 
of the temporary changes to discount and lifetime provisions. EPA 
explored this concept, but for two reasons chose not to include it in 
the NPRM. First, such a restriction would reduce the value of ABT 
programs in assisting transition to the 2004 standards. A manufacturer 
would have no incentive to introduce improved technology early unless 
the engine made it all the way to the level of the proposed standards. 
Second, since early additional emission reductions have equal value 
whether the engine is above or below the proposed standards it would be 
inconsistent with air quality goals to create a disincentive for early 
additional emission reductions. However, this view is premised on the 
design criterion discussed above, i.e., no cross-cycle credit 
exchanges. If cross-cycle exchanges are permitted without some form of 
a trigger level for eligibility, an unusual situation could be created 
where gasoline-fueled otto cycle engines could generate credits for use 
by petroleum-fueled diesel cycle engines. This in turn would create a 
disincentive for technology innovation for diesels which is one of the 
key goals for the ABT program.
    Readers are encouraged to review the draft regulations for a fuller 
understanding of how the proposed ABT program would operate. The Agency 
solicits comments on all aspects of the ABT changes being proposed, 
including comments on the benefit of these changes to manufacturers in 
meeting the proposed emission standards and any potential air quality 
impacts which might be associated with them.

IV. Technological Feasibility

    This section discusses the emission control technologies that EPA 
believes would be available for engine manufacturers to meet the 
proposed 2004 standards. Included in this discussion are estimates of 
emission reductions associated with these technologies and their 
potential to impact performance. Because of the significant differences 
between the operation, emissions, and likely control strategies for 
diesel and gasoline heavy-duty engines, each engine type will be 
treated separately. Further information on the basic characteristics of 
diesel and gasoline heavy-duty engines may be found in Docket A-95-
27.46
---------------------------------------------------------------------------

    \46\ Memo from Tad Wysor (EPA) to Air Docket A-95-27, ``Summary 
of Heavy-Duty Engine Emission Control Technologies,'' II-B-4, August 
24, 1995.
---------------------------------------------------------------------------

    Following is a summary of the key technologies discussed in the 
Regulatory Impact Analysis (RIA). For more detail on the emission 
control technology described in this section, see Chapter 4 of the RIA. 
This chapter of the RIA also describes many of the technologies that 
are still under development that could allow heavy-duty highway engines 
to meet or exceed the reduced emission standards proposed in this 
action. Several technologies described in the RIA are not included in 
this section because EPA believes they are less likely to be used by 
engine manufacturers in 2004 than those strategies, techniques, and 
technologies described here.47
---------------------------------------------------------------------------

    \47\ The technological feasibility of meeting the proposed 
standards using alternative fuels is discussed in Chapter 4 of the 
RIA.
---------------------------------------------------------------------------

    The following discussion of technologies includes a wide range of 
alternatives from which manufacturers may choose to comply with the 
proposed emission standards. Not all of these technologies will be 
needed to reduce NOX or HC emissions to comply with the proposed 
emission standards. Manufacturers may develop and use technologies to 
improve fuel economy or performance or to control particulate emissions 
at a lower cost. The analysis of economic impacts in Section V.B. 
reflects this by assessing the incremental cost of adopting a limited 
package of technological changes to heavy-duty engines.
    As will be discussed further below, EPA believes that the goals set 
by this proposal are challenging but feasible. They clearly represent 
major reductions compared to current engine emission levels. At the 
same time, heavy-duty engine technology is in a period of rapid 
development, and EPA does not see any reason to expect that such 
development will be slowed in the foreseeable future. Published work 
shows that research engines are already beginning to approach the 
levels required by the new standards. There are certainly many 
significant technical challenges to translating research work into 
acceptable products for the marketplace. However, the emission targets 
are set in the framework of a long lead time, substantially longer than 
has been the case in many previous heavy-duty engine rules. Also, 
except for the use of EGR on heavy-duty diesel engines, each of the 
technologies anticipated for complying with the proposed emission 
standards, as described below, have already been applied to and proven 
on recent model year heavy-duty engines. Thus, on balance, the Agency 
believes that the proposed standards are feasible for the heavy-duty 
industry.
    Through comments on the ANPRM, some concern has been expressed to 
EPA that lower standards may be more appropriate for heavy-duty 
engines. One suggestion was that heavy-duty diesel engines should be 
required to meet a 0.05 g/bhp-hr PM standard since urban buses are now 
held to this level. In addition, commenters recommended that separate, 
lower HC plus NOX and CO standards should be set into place for 
heavy-duty gasoline engines. Based on the information discussed further

[[Page 33455]]

below and in the RIA, EPA believes that the proposed standards 
represent the lowest levels consistent with the constraints of section 
202 (a)(3)(A)(i) of the Clean Air Act. That section requires EPA to 
establish the ``greatest degree of emission reduction achievable 
through the application of technology which the Administrator 
determines will be available for the model year to which such standards 
apply, giving appropriate consideration to cost, energy, and safety 
factors associated with the application of such technology.''
    Given the uncertainty associated with the long lead time, this 
analysis would be re-evaluated in the proposed 1999 review of the 
feasibility of the standards discussed in section III.B above. EPA 
requests comment on the availability and effectiveness of emission 
control technologies that may be applied to heavy-duty on-highway 
engines to meet the proposed standards. EPA also requests specific 
comment on the appropriateness of a separate, lower standard for heavy-
duty gasoline engines.

A. Diesel Engines

    Highway heavy-duty diesel engine manufacturers have historically 
been very successful in lowering both NOX and PM levels to meet 
EPA emission standards. EPA standards have required a reduction in 
NOX emissions of over 50 percent and PM reduction of over 80 
percent largely within the past 5 years. Engine manufacturers have been 
able to achieve the majority of these reductions using changes in 
engine hardware with minimal reliance on exhaust aftertreatment 
devices. Today's heavy-duty diesel engines are also well below the 
standards for HC and CO. Over this same period, engine manufacturers 
have been able to provide their customers with increased power, 
improved fuel economy and improved engine durability.
    Indications are that HC, NOX and PM control technologies have 
not yet reached their full potential. A broad range of current 
published research, referenced in the RIA, shows that HC + NOX 
levels of 2.5 g/bhp-hr with a PM level of 0.10 are already being 
approached in laboratory diesel engines. One example, discussed in the 
RIA, is a turbocharged and aftercooled engine that uses optimized swirl 
and cooled EGR to achieve emission levels of 2.0 g/bhp-hr HC + NOX 
and 0.13 g/bhp-hr PM (average of three operating modes). Engine 
manufacturers and other companies have conducted extensive research 
that is still confidential or is not yet published for other reasons. 
EPA believes that the unpublished work in the field of diesel engine 
emission control represents progress in research and development that 
goes well beyond that described in the published literature. The Agency 
recognizes that such results do not, of themselves, demonstrate the 
feasibility of reaching such levels in production engines. However, as 
discussed below, EPA believes that for the 2004 time frame, 
technologies will be optimized to meetand in some cases possibly 
exceedfuture emission-control targets.
    Under the proposal, the engine manufacturers will have an effective 
leadtime of eight years. This is twice that available in previous 
heavy-duty engine rules. This long leadtime is valuable to heavy-duty 
diesel engine manufacturers for several reasons. Due to the stringency 
of the proposed standards, it is likely that manufacturers will need to 
make fundamental changes in engine technology. History has shown that 
emissions can be reduced more cost-effectively when the engine 
manufacturers are given a reasonable amount of time for research and 
development (R&D). The relatively long lead time available for this 
rule provides adequate time for a strong, orderly, and comprehensive 
R&D program which focuses not only on emission reduction, but also on 
addressing fuel consumption, durability and maintenance concerns. EPA 
anticipates that heavy-duty diesel engine manufacturers would focus 
primarily on NOX control strategies to meet the proposed 2004 
standards rather than NMHC control. EPA also expects that manufacturers 
will focus on in-cylinder control strategies as opposed to 
aftertreatment approaches. Combustion optimization through improved air 
and fuel controls are expected to be at the center of the strategy for 
reducing NOX emissions (and HC where possible), while holding the 
line on PM emission rates. Such strategies also hold promise for 
positive impacts on fuel consumption. Combustion optimization can be 
achieved through a combination of strategies related to combustion 
chamber design improvements, upgrades in fuel system controls, and 
modifications of intake air distribution approaches and 
characteristics. The R&D associated with the assessment and 
optimization of such strategies and the application of the results of 
this work to the various heavy-duty diesel engine models will need to 
be conducted during the available leadtime.
    Individual technologies may have different effects on NOX, PM, 
and HC emissions, though manufacturers can balance these to produce an 
engine that effectively controls all emissions. NOX emissions are 
controlled primarily by lowering peak combustion chamber temperatures. 
However, simply lowering combustion temperatures can lead to an 
increase in PM or HC formation because PM and HC are more likely to 
form at lower temperatures. NOX control strategies such as 
retarding fuel injection timing by themselves are limited because they 
cause an increase in PM or HC. Engine manufacturers have had to devise 
more sophisticated emission control strategies that allow them to 
simultaneously control NOX, and PM, and HC. Manufacturers have 
used a variety of technologies, often balancing their effects and 
optimizing among them to comply with the emission standards. EPA 
therefore believes that manufacturers will need some, but certainly not 
all, of the technologies that are primarily for controlling PM or HC 
emissions to meet the standards proposed in this action.
    Combustion chamber design is a key area for improvements to reduce 
emissions and increase performance. Manufacturers are continuously 
working to improve the combustion chamber geometries of their engines 
to maximize efficiency and reduce emissions. Design variables include 
such things as the shape of the combustion chamber, the location of the 
fuel injector, valve timing, and air intake geometry. Efforts to 
redesign the shape of the combustion chamber and the location of the 
fuel injector have been directed primarily at optimizing the relative 
motion of the air and injected fuel. Increasing the turbulence of the 
intake air (such as through inducing swirl) can reduce NOX and PM 
emissions from diesel engines by improving the mixing of air and fuel 
in the combustion chamber. Increasing the compression ratio of the 
engine will generally reduce fuel consumption and PM, but tends to 
increase NOX emissions. Moving from 2 to 4 valves per cylinder can 
be used to improve engine breathing and will allow the fuel injector to 
be placed in the center of the cylinder bore, improving combustion. 
Finally, higher precision in the bore honing and the matching of the 
piston and rings can reduce the amount of oil that passes from the 
crankcase into the cylinder. This will result in a reduction in PM.
    Emission control and diesel engine performance may also be improved 
through advances in fuel injector design. Design variables for fuel 
injectors include injection pressure, spray pattern, and control of the 
rate of fuel injection over the course of the injection event. The 
combination of

[[Page 33456]]

reduced droplet size and improved mixing leads to decreased HC and PM. 
This improved fuel injection can simultaneously lower NOX 
emissions by reducing the time between the initial injection and 
ensuing ignition of the fuel, which minimizes the level of premixed 
combustion.
    Varying the rate at which fuel is injected into the cylinder is 
another strategy that may be used to reduce HC, NOX, and PM 
emissions. This ``rate shaping'' is especially effective when combined 
with electronic controls. A low rate pilot injection may be used at the 
beginning of combustion to shorten the ignition delay, therefore 
shortening the pre-mixed burning phase of combustion, which is most 
conducive to NOX formation. At low loads, improved fuel injection 
can reduce NOX, the soluble organic fraction of PM, and fuel 
consumption, with some possible penalty in smoke. One experimental 
study, referenced in the RIA, showed that rate shaping and fuel 
injection parameters could be used to achieve 3.5 g/bhp-hr NOX and 
0.10 g/bhp-hr PM from a diesel engine operating at 75 percent load, 
without the use of EGR (HC levels were not reported).
    Engine manufacturers may reduce emissions from their engines 
through optimization of charge air pressures and response rates for all 
types of engine operation (speed and load). Charge air compression is 
used in almost all current heavy-duty diesel engines. For four-stroke 
diesels, turbocharging is the most common method of increasing boost 
air pressure into the cylinder. With an increase of air moved into the 
cylinder, more fuel may be injected resulting in higher power. One 
limitation of a turbocharger is that it has an inertial lag time 
associated with its response to changing operating conditions. As a 
result, during transient operation, too little intake air compression 
may occur at the beginning of an acceleration, while an excessive boost 
may remain at the start of the next steady-state operation. In 
addition, a given turbocharger optimized for high loads may have 
compromised efficiency at low loads. A variable geometry turbocharger 
may be used to increase the boost response rate and provide appropriate 
air/fuel ratios for varying loads and speeds. This control of the air/
fuel ratio can often lead to decreased emissions. In one study, 
referenced in the RIA, electronic controls combined with a variable 
geometry turbocharger achieved a 37 percent reduction in HC and a 34 
percent reduction in NOX without an increase in PM over a portion 
of the HD-FTP.
    Exhaust gas recirculation (EGR) is probably the most important in-
cylinder diesel engine control technology for obtaining significant 
NOX reductions to meet the 2004 proposed standard. Under this 
approach, a portion of the exhaust gas is routed back into the intake 
manifold. This has the effect of reducing peak temperatures, and thus 
reducing NOX formation in the cylinder. This strategy will be 
focused on low and medium load conditions due to possible PM and fuel 
consumption increases at high loads. EPA expects that the effectiveness 
of the EGR system will be optimized and its potential adverse affects 
minimized by integrating its control into the overall electronic 
controls used for other engine systems. One method for controlling the 
PM emissions attributed to EGR, which may be used on some designs, is 
to cool the exhaust gas recirculated to the intake manifold. By cooling 
the recirculated gas, more exhaust gas can be added to the intake 
charge without reducing the supply of fresh air into the cylinder. 
Another concern associated with EGR is that, by being recirculated, the 
particulate or other contaminants in the exhaust may find its way into 
the oil and degrade the oil's performance, resulting in a durability 
concern. This durability concern may be alleviated by keeping the EGR 
fraction of the intake charge below 10 or 15 percent, modifying 
lubricating oil additive packages, improving oil filtration, and/or 
more frequent oil changes. In the worst case, some manufacturers may 
consider some form of an in-line particulate removal device such as a 
filter in the stream of recirculated exhaust gas.
    Engine manufacturers have started to use oxidation catalysts in 
some cases where engines have needed help meeting particulate 
standards. Efforts are also being made to develop a durable and cost 
effective NOX reduction catalyst that will operate on the lean 
exhaust which is produced by diesel engines. However, due to projected 
engine design improvements, EPA expects the engine manufacturers to 
focus on meeting the proposed standard without the use of 
aftertreatment. Alternatives to aftertreatment are generally preferable 
because of high costs, space requirements, backpressure effects, and 
possible durability concerns (with respect to long life of diesel 
engines) associated with aftertreatment devices.
    In summary, EPA believes that combustion optimization through 
strategies such as air and fuel control and EGR would be the primary 
NOX control strategy for meeting the proposed standards. However, 
as NOX emissions are reduced through engine controls, there is 
often a tradeoff resulting in an increase in PM emissions. Strategies 
that would be expected to be used to control PM emissions include 
further optimization of combustion chamber geometry, advances in fuel 
injection, fuel rate shaping, and advances in turbocharger design. 
These PM control technologies may also be used to increase power from 
the engine and reduce fuel consumption. EPA believes that manufacturers 
would make use of the PM control technologies, regardless of further 
emission control, to achieve benefits in power and fuel consumption. 
All of the technologies described in this section have been applied to 
and proven in on-highway diesel engine applications. Further, all of 
the technologies, with the exception of EGR, have been proven in heavy-
duty diesel applications. Even EGR is used on at least one 1996 light 
heavy-duty diesel engine model. By combining these strategies in 
various ways, EPA believes it is technologically feasible to meet the 
proposed standards for model year 2004. Together these strategies 
should allow heavy-duty diesel engines to achieve the proposed NOX 
+ NMHC reductions without increasing PM or other emissions.
    Most of the results discussed above are based on research using 
conventional on-highway diesel fuel. Another parameter which affects 
emissions from diesel engines is the composition of the fuel being 
used. While much can be said about the effect of current fuels on 
current engines, the degree of sensitivity of future, low emitting, 
engines to fuel parameters is not as well understood. The Agency's 
current view is that fuel changes could reduce the amount of emission 
control necessary for the engine, but fuel changes are probably not 
necessary to meet the proposed standards. However, this remains an area 
of uncertainty and is one of the issues which would be addressed 
further in the proposed 1999 review of the feasibility of the standard, 
as discussed in section III.B above.

B. Gasoline Engines

    Gasoline engine manufacturers are producing heavy-duty engines that 
exceed the level of emission control required by current standards. 
Some 1996 model year heavy-duty gasoline engine families have certified 
emission levels below the standards proposed for 2004. Thus, the Agency 
believes that complying with the proposed standards will be fairly 
straightforward for gasoline engines. EPA requests

[[Page 33457]]

comment on the appropriateness and effectiveness of the technologies 
described below.
    Current heavy-duty gasoline engine emission levels are achieved 
mainly through the use of EGR and either air-assisted oxidation 
catalysts or three-way catalysts. Many of these engines have used open-
loop engine controls and electronic fuel injection for years. However, 
the three-way catalysts require precise control of the exhaust air-fuel 
ratio for maximum performance. By including a feedback loop in the 
control system, the precision of the air-fuel ratio in the exhaust is 
greatly increased, especially during transient operation. Therefore, 
EPA believes that, through the use of closed-loop electronic control 
and the upgrades to system management available with that approach, 
manufacturers can significantly improve their emission-control 
capability. These reductions may be further assisted by improvements in 
fuel injection technology or EGR.
    Improving fuel injection has been proven to be an effective and 
durable strategy for controlling emissions and reducing fuel 
consumption from gasoline engines. Improved fuel injection will result 
in better fuel atomization and a more homogeneous charge with less 
cylinder-to-cylinder and cycle-to-cycle variation of the air-fuel 
ratio. These engine performance benefits will increase as technology 
advances allow fuel to be injected with better atomization. Increased 
atomization of fuel promotes more rapid evaporation by increasing the 
surface area to mass ratio of the injected fuel. This results in a more 
homogeneous charge to the combustion chamber and more complete 
combustion. EPA believes that multi-port fuel injection will be used in 
most, if not all, applications under the proposed standards because of 
its proven effectiveness. Because of the performance and fuel 
consumption improvements associated with multi-port fuel injection, it 
is likely that most engine models would incorporate this technology by 
2004 anyway.
    Exhaust gas recirculation is currently used on heavy-duty gasoline 
engines as a NOX control strategy. Recirculated gases reduce the 
peak flame temperature, thus reducing NOX. Because the 
recirculated gases limit the amount of oxygen available for combustion, 
there can be some penalty in fuel economy if too much gas is 
recirculated. One method of increasing the engine's tolerance for EGR 
is to stratify the recirculated gases in the cylinder. This 
stratification allows high amounts of dilution near the spark plug for 
NOX reduction while making undiluted air available to the 
crevices, oil films, and deposit areas so that HC emissions may be 
reduced. Stratification may be induced radially or laterally through 
control of air and mixture motion determined by the geometry of the 
inlet ports. One study of this strategy is referenced in the RIA.
    EPA believes that the most promising overall emission control 
strategy for heavy-duty gasoline engines is the combination of a three-
way catalyst and closed loop electronic control of the air-fuel ratio. 
Control of the air-fuel ratio is important because the three-way 
catalyst is only effective if the air-fuel ratio is at a narrow band 
near stoichiometry. For example, for an 80 percent conversion 
efficiency of HC, CO, and NOX with a typical three-way catalyst, 
the air-fuel ratio must be maintained within a fraction of one percent 
of stoichiometry. During transient operation, this minimal variation 
cannot be maintained with open-loop control. For closed-loop control, 
the air-fuel ratio in the exhaust is measured by an oxygen sensor and 
used in a feedback loop. The throttle position, fuel injection, and 
spark timing can then be adjusted for given operating conditions to 
result in the proper air-fuel ratio in the exhaust. In addition, 
electronic control can be used to adjust the air-fuel ratio and spark 
timing to adapt to lower engine temperatures, therefore controlling HC 
emissions during cold start operation.
    A three-way catalyst may be a single converter or have two 
converters in series. A converter is constructed of a substrate, 
washcoat, and catalytic material. The substrate may be metallic or 
ceramic with a flow-through design similar to a honeycomb. A high 
surface area coating, or washcoat, is used to provide a suitable 
surface for the catalytic material. Under high temperatures, the 
catalytic material will increase the rate of chemical reaction of the 
exhaust gas constituents. In a typical three-way catalyst design with 
two converters, the first converter will be a reduction catalyst which 
converts NOX to nitrogen and water. Palladium is often used as the 
NOX reduction catalytic material with rhodium added to control 
ammonia formation. Ammonia, which may be converted back to NOX in 
the second converter, can also be controlled through the use of tight 
air-fuel ratio control. The second converter is an oxidation catalyst 
and typically uses platinum and rhodium to convert HC and CO to 
CO2 and water. Three-way catalytic converters using a single 
monolith generally use one or more of the metals mentioned above 
(platinum, rhodium, and palladium) to catalyze the desired reactions. 
These designs may be preferable since less materials are used and less 
space is required.
    In summary, EPA believes that gasoline engine manufacturers, to the 
extent they need to make improvements, can meet the proposed standards 
by refining those technologies already employed on their engines. The 
use of more powerful electronics to better control combustion and 
aftertreatment will likely be the most important focus of technology 
upgrades enabling manufacturers to reduce emissions. EPA therefore 
believes it is technologically feasible for heavy-duty gasoline engines 
to meet the proposed standards for model year 2004.

C. Safety and Energy

    One of the factors considered by EPA in assessing the feasibility 
of its proposed standards is safety. Section 202(a)(3) of the Clean Air 
Act requires that EPA set emission standards for heavy-duty engines 
that reflect the ``greatest degree of emission reduction achievable 
through the application of technology which the Administrator 
determines will be available for the model year to which such standards 
apply, giving appropriate consideration to cost, energy, and safety 
factors associated with the application of such technology.'' \48\ EPA 
has considered the safety implications of the standards in today's 
proposal. In the course of this consideration, the Agency has consulted 
with the Department of Transportation, to make use of that Department's 
expertise in assessing vehicle safety.
---------------------------------------------------------------------------

    \48\ 42 U.S.C. 7521(a)(3)(A)(i).
---------------------------------------------------------------------------

    EPA does not believe that there are any significant safety concerns 
associated with the technologies described in this section. In general, 
they all represent the progressive development of technology already in 
use. Except for the use of EGR on heavy-duty diesel engines, all of the 
technologies anticipated for use in 2004 have already been applied to 
and proven on recent model year heavy-duty engines. As for the use of 
EGR, EPA is not aware of any safety problems where EGR has been used on 
light-duty diesel vehicles or on heavy-duty gasoline engines. EPA sees 
no reason why the use of EGR on heavy-duty diesels would create any new 
safety problems. EPA welcomes comment on any safety issues that 
commenters believe might be associated with today's proposal.
    EPA believes that there will not be significant energy concerns 
associated

[[Page 33458]]

with the control strategies which would be available to meet the 
proposed standards. EPA expects that manufacturers will focus on 
maintaining or decreasing the fuel consumption of their engines in the 
development of engines that will meet the proposed standards. For 
heavy-duty diesel engines, many of the technologies that would likely 
be used to control PM emissions would also be used to offset the 
negative effects of EGR on fuel economy. For heavy-duty gasoline 
engines, the combination of fuel injection advances and closed-loop 
control used to control emissions could actually result in a fuel 
economy benefit.

V. Impacts of Proposed Program

A. Environmental Impacts

1. Heavy-Duty NOX Emissions Impacts
    The NOX inventories used for this rulemaking were based on a 
detailed analysis of NOX emissions that was prepared for EPA by 
E.H. Pechan and Associates, as described in Section II. To calculate 
the impact of this proposal, it is necessary to estimate average 
NOX and average NMHC emission levels resulting from the combined 
NOX + NMHC standard. The NOX emission level was determined by 
analyzing the relative cost effectiveness of NOX and NMHC 
emissions reduction technologies; NOX-reduction technologies are 
expected to be much more cost-effective than NMHC-reduction 
technologies, which are only practical for a small number of engine 
families that have relatively high NMHC emissions. As a result, NMHC 
emissions are expected to be only slightly less than current levels, 
(see following section for additional discussion), and NOX 
emissions are expected to be reduced to below 2.0 g/BHP-hr to provide a 
sufficient compliance margin. Thus, the effect of the combined 
standards on NOX was modeled as being equivalent to a 2.0 g/BHP-hr 
NOX-only standard. Full details of the air quality impacts can be 
found in the RIA. The following paragraphs summarize the key results. 
The public is encouraged to read the full analysis, and to comment on 
all aspects of the work.
    Figure 7 shows projections of total NOX emissions, with and 
without the proposed controls, for the entire nation. The emissions are 
projected to decline over the next several years, due to the 
implementation of previously promulgated controls, but then begin to 
increase due to growth in the number of vehicles and other sources. By 
the year 2020, without additional control, total national NOX 
emissions are projected to actually exceed current levels. Even with 
the implementation of the proposed standards, total NOX emissions 
are expected to grow in the future. Figure 8, which presents the 
projections of NOX emissions from heavy-duty engines, with and 
without the proposed controls, shows that the proposed standards are 
expected to prevent the contribution of heavy-duty engines from 
increasing before the year 2020.

BILLING CODE 6560-50-P

[[Page 33459]]

[GRAPHIC] [TIFF OMITTED] TP27JN96.029



[[Page 33460]]

[GRAPHIC] [TIFF OMITTED] TP27JN96.030


BILLING CODE 6560-50-C

[[Page 33461]]

    The estimates of the total NOX reductions are shown in Table 
3. Almost half of the reductions would occur in nonattainment areas, 
and nearly 90 percent of the reductions would occur in regions where 
NOX emissions are reasonably expected to have a significant effect 
on nonattainment areas.49
---------------------------------------------------------------------------

    \49\ These regions include all counties in ozone nonattainment, 
as well as all counties in attainment in: California, Texas, all 
states east of the Mississippi River, and all states on the western 
border of the Mississippi River.

   Table 3.--Estimated National NOX Emissions Reductions From Proposed  
                    Standards for Heavy-Duty Engines                    
                        [Thousand Tons per Year]                        
------------------------------------------------------------------------
                                        Diesel     Gasoline      Total  
                Year                   emissions   emissions   emissions
                                      reductions  reductions  reductions
------------------------------------------------------------------------
2005................................         106          12         118
2010................................         518          59         577
2015................................         832         102         934
2020................................       1,066         149       1,215
------------------------------------------------------------------------

2. Heavy-Duty NMHC Emissions Impacts
    Estimates of the impact of this action on NMHC emissions were 
developed by assuming that the combined NMHC plus NOX standards 
are equivalent to that of 0.4 g/BHP-hr NMHC-only standards; this 
discussion briefly summarizes the detailed analysis in the RIA. This is 
consistent with the previous assumption that the combined standards are 
equivalent to that of 2.0 g/BHP-hr NOX-only standards It was also 
assumed that, without the proposed NMHC control, average NMHC emissions 
from 2004 and later model year heavy-duty engines would be the same as 
1994 model year heavy-duty engines (based on certification data), since 
there are no new PM or HC standards after 1994. Using these 
assumptions, the expected exhaust NMHC reductions for 2004 and later 
model year engines would be 9 percent for diesels and 24 percent for 
gasoline. The effect of these reductions on nationwide emissions was 
modeled using MOBILE5a, using the VMT estimates from Pechan. The 
results are shown in Table 4. The reason why these reductions are small 
relative to the decrease in the numerical level of the standards is 
that many heavy-duty engines are currently being certified well below 
their applicable hydrocarbon standards. As is discussed in the RIA, 
however, the lowering of the NOX standard in 1998 may cause some 
increases in NMHC emissions from diesel engines (even if the emissions 
remained below the current HC standard), such that the actual benefit 
of this standard may be greater. Moreover, it is worth noting that the 
inclusion of NMHC emissions in the proposed standards also serves to 
prevent increases in NMHC emissions that may otherwise have occurred as 
a result of lowering the NOX standard, given the tradeoff between 
NOX reductions and HC/PM reductions that is often observed with 
diesel engines.

  Table 4.--Estimated National NMHC Emissions Reductions From Proposed  
                    Standards for Heavy-Duty Engines                    
                        [Thousand Tons per Year]                        
------------------------------------------------------------------------
                                        Diesel     Gasoline      Total  
                Year                   emissions   emissions   emissions
                                      reductions  reductions  reductions
------------------------------------------------------------------------
2005................................         2.2         0.5         2.7
2010................................         6.8         2.9         9.7
2015................................        12.1         5.2        17.3
2020................................        16.4         8.4        24.8
------------------------------------------------------------------------

3. Particulate Emissions Impacts
    The action being proposed should not have any effect on direct 
particulate emissions from heavy-duty engines, since it does not change 
the particulate standard. Manufacturers are expected to continue to 
produce engines with particulate levels slightly below the standard. 
The NOX reductions discussed above, however, are expected to 
reduce the concentrations of secondary nitrate particulates. As 
discussed previously, NOX can react with ammonia in the atmosphere 
to form ammonium nitrate particulates. In some areas in the western 
states, ammonium nitrate particulates can represent more than one 
quarter of the fine particulate in the air. The California Air 
Resources Board has preliminarily estimated that, in California, there 
are typically 4 to 19 (with an average of about 7) tons of nitrate 
particulate in the air for every 100 tons of NOX in the 
air.50 Unfortunately, such information is not available for the 
rest of the nation. As was described in the RIA, the national average 
for the years of interest was estimated as 4.3:100, assuming that the 
ratio would be 7.0 for the western part of the nation, and 3.5 for the 
eastern part. This estimate was used to determine the equivalent fine 
particulate emissions reductions caused by the NOX emissions 
reductions, as is shown in Table 5. Future year estimates are 
extrapolations based on the NOX reduction estimates for those 
years. The Agency recognizes the limited precision of these estimates, 
and requests comments on the potential for developing better estimates 
of the expected relationship between NOX emissions and nitrate 
particulate formation during and after the year 2004.
---------------------------------------------------------------------------

    \50\ ``Conversion Factors for Secondary Formation of PM Nitrate 
from NOX Emissions for California'', Draft, June 6, 1996, Leon 
J. Dolislager, Nehzat Motallebi, Bart E. Croes, California Air 
Resources Board.

Table 5.--Estimated Equivalent National Particulate Emissions Reductions
             From Proposed Standards for Heavy-Duty Engines             
                        [Thousand Tons per Year]                        
------------------------------------------------------------------------
                                                              Equivalent
                                                  Total NOX  particulate
                      Year                        emissions   emissions 
                                                 reductions   reductions
------------------------------------------------------------------------
2005...........................................         118           5 
2010...........................................         577          25 
2015...........................................         934          40 
2020...........................................        1215          52 
------------------------------------------------------------------------

4. Effect on Ozone
    The effect of these NOX emissions reductions on ozone 
concentrations is expected to vary geographically. In general, when 
fully phased-in, the effect of this action in most nonattainment areas 
should be a reduction in ozone concentrations on the order of a few 
percent. It should be noted, however, that the potential exists for a 
few localized areas to actually experience slight increases in ozone 
concentrations as a result of NOX emissions reductions. The Agency 
is attempting to develop a more precise analysis of the effect of these 
reductions on ozone, including an analysis of the extent to which 
potential localized ozone increases could be mitigated through other 
emissions control programs.
5. Other Effects
    Reducing NOX emissions has a positive effect on visibility, 
since both NO2 and nitrate particulates absorb visible light. As 
noted in the RIA, NO2 and nitrate particulates can be responsible 
for 20 to 40 percent of the visible haze in some urban areas. The 
effect of this action on visibility should be small but potentially 
significant, given that it is expected to reduce overall NOX 
emissions by several percent. For example, the proposed controls are 
expected to result in about 5 percent less total NOX in the year 
2020, and therefore would be expected

[[Page 33462]]

to result in a decrease in haze of about 1 percent in an area where 
NO2 and nitrate particulates cause 20 percent of the haze. 
NO2 and nitrate particulates also contribute to decreased 
visibility in scenic rural areas in southern California, so these areas 
would similarly benefit from reduced NOX emissions.
    The standards being proposed here are also expected to provide 
benefits with respect to nitrogen deposition. The 1.2 million-ton per 
year reduction in NOX emissions expected in 2020 as a result of 
this action is greater than the 400,000-ton per year reduction expected 
from Phase I of the Agency's acid rain NOX control rule (59 FR 
13538), which was considered to be a significant step toward 
controlling the ecological damage caused by acid deposition. This 
action should also lead to a reduction in the nitrogen loading of 
estuaries. This is significant since high nitrogen loadings can lead to 
eutrophication of the estuary, which causes disruption in the 
ecological balance. The effect should be most significant in areas 
heavily affected by atmospheric NOX emissions. One such estuary is 
Chesapeake Bay, where as much as 40 percent of the nitrogen loading may 
be caused by atmospheric deposition. In addition to these benefits, the 
NOX reductions from the proposed new engine standards are expected 
to have beneficial impacts with respect to crop and forest damage.

B. Economic Impact and Cost-Effectiveness

    This rulemaking does not follow the normal pattern of allowing four 
years following the conclusion of the rule before requiring production 
of the new low-emitting engines. 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.
    The above presentation of the range of technologies shows a good 
deal of promise for controlling emissions, but also makes clear that 
much effort remains to optimize the technologies 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 $230 million (net present value in 1996) 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 technology 
review provides a check on EPA's projected costs. EPA will revisit the 
analysis of the full life-cycle costs as part of the 1999 technology 
review. EPA and manufacturers will at that time confirm whether or not 
technology development is progressing as needed to meet the proposed 
emission standards.
    In assessing the economic impact of changing the emission 
standards, EPA has made a best estimate of the combination of 
technologies that an engine manufacturer might use to meet the proposed 
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. The 
Agency invites comments on all aspects of these analyses.
    Estimated cost increases are broken into purchase price and total 
life-cycle 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 life-cycle costs 
factor in an additional estimate for operating costs attributable to 
any increased 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. Cost estimates are presented for all gasoline 
heavy-duty vehicles as a single group. All costs are presented in 1996 
dollars. Life-cycle costs have been discounted to the year of sale. 
Diesel engine costs are considered first, followed by gasoline engines.
1. Costs for Diesel Engines
    The following discussion provides a description and estimated costs 
for those technologies EPA believes will be needed to comply with the 
proposed emission standards. 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. 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 
proposed 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 appears unlikely 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 proposed 2004 model year emission standards. Selecting this package 
of technologies requires extensive engineering judgment. The fact that 
manufacturers have nearly a full decade before implementation of the 
proposed standards virtually ensures that the technologies used to 
comply with the proposed emission 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

[[Page 33463]]

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. 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 
light-load EGR.
    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, as described below, first for EGR-related 
maintenance, then 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 not as a maintenance item, but as a fixed cost. The 
analysis includes a separate maintenance cost 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. In any 
case, it is not clear at this stage of development that the set of 
changes resulting from the proposed emission standards will have any 
net negative impact on fuel economy; additional fuel costs are 
therefore not included in the cost analysis.
    Meeting the proposed NOX+NMHC standard will somewhat increase 
the challenge to control particulate emissions. Manufacturers might use 
a number of different 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. 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 proposed 
standards are itemized in the Regulatory Impact Analysis and summarized 
in Table 6. For light heavy-duty vehicles, the incremental cost of a 
new 2004 model year engine is estimated to be $185, with no additional 
operating costs. For medium heavy duty vehicles the new engine purchase 
price is estimated to increase by $327, with total life-cycle costs of 
$371. Similarly, for heavy heavy-duty engines, initial purchase price 
is expected to increase by $403, while total life-cycle cost estimates 
reach $499.
    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 
complexity of component parts.\51\ 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 disappear from the analysis after the 
first five model years. Table 6 lists the projected schedule of costs 
for each category of vehicle over time.

                                     Table 6.--Projected Diesel Engine Costs                                    
                                    [1995 dollars discounted to year of sale]                                   
----------------------------------------------------------------------------------------------------------------
                                                                                         Life-cycle             
               Vehicle class                          Model year             Purchase    operating   Total life-
                                                                              price         cost      cycle cost
----------------------------------------------------------------------------------------------------------------
Light heavy-duty..........................  2004.........................          185            0          185
                                            2009 and later...............           68            0           68
Medium heavy-duty.........................  2004.........................          327           44          371
                                            2009 and later...............          101           44          145
Heavy heavy-duty..........................  2004.........................          403           96          499
                                            2009 and later...............          148           96          243
----------------------------------------------------------------------------------------------------------------

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

    \51\ ``Learning Curves in Manufacturing,'' Linda Argote and 
Dennis Epple, Science, February 23, 1990, Vol. 247, pp. 920-924.
---------------------------------------------------------------------------

2. Costs for Gasoline Engines
    The cost analysis for gasoline engines follows the same methodology 
as for diesel engines, though with significantly less complexity due to 
the expectation that the technological development needed to meet the 
proposed standards will not be so far-reaching as for diesel engines. 
The same kinds of costs are considered for gasoline engines. Because 
the technologies require changes to existing technologies without 
affecting the assembly time, no increase in assembly costs are 
anticipated. Also, the improvements to gasoline engine technologies 
will not affect fuel economy or in-use maintenance; therefore, no 
incremental fuel or maintenance costs are anticipated.
    Gasoline engines and vehicles need a much different set of changes 
to meet the proposed emission standards than do diesel engines. Much of 
the very extensive development work done for

[[Page 33464]]

passenger cars can, with appropriate adaptations, be applied to heavy-
duty engines. The technology projections for heavy-duty gasoline 
engines therefore depend in part on the experience with light-duty 
trucks, as well as on the current view of technology developments for 
the heavy-duty applications themselves.
    More sophisticated control of EGR flow rates over the various 
operating modes may allow more aggressive use of EGR to better control 
NOX emissions. Ongoing developments show that three-way catalysts 
can be made with modified washcoats and configured in the vehicle in 
ways that significantly improve their effectiveness at controlling both 
NOX and HC emissions. Some basic engine modifications may also be 
needed to fine-tune emission control and operating performance.
    Since no operating costs for fuel economy or maintenance are 
expected for gasoline engines, all the costs translate into an 
increased purchase price of the engine or vehicle. The 2004 model year 
cost estimate for an average heavy-duty gasoline vehicle is $162. Costs 
can be reduced with continuing production experience, as described for 
diesel engines; variable costs are reduced by 20 percent only one time 
though, because the changes to gasoline engines are considered to be of 
a smaller magnitude. The resulting cost calculation for 2009 and later 
model year heavy-duty gasoline vehicles is $101 (Table 7).

                Table 7.--Projected Gasoline Engine Costs               
                [1995 dollars discounted to year of sale]               
------------------------------------------------------------------------
                                                      Life-      Total  
                                          Purchase    cycle      life-  
               Model year                  price    operating    cycle  
                                                       cost       cost  
------------------------------------------------------------------------
2004...................................        162          0        162
2009 and later.........................        101          0        101
------------------------------------------------------------------------

3. 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 proposed emission standards in any year. The result of this 
analysis is a projected total cost starting at $300 million in 2004. 
Per-vehicle costs savings over time reduce projected costs to a minimum 
value of $136 million in 2009, after which the growth in truck 
population leads to increasing costs that reach $186 million in 2020. 
Total costs for these years are presented by vehicle class in Table 8. 
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 8.--Estimated Annual Costs for Improved Heavy-Duty Vehicles   
                          [millions of dollars]                         
------------------------------------------------------------------------
                Category                    2004       2009       2020  
------------------------------------------------------------------------
Light Heavy-Duty Diesel................         51         23         26
Medium Heavy-Duty Diesel...............         71         22         34
Heavy Heavy-Duty Diesel................         97         37         62
Gasoline...............................         81         55         64
                                        ------------                    
Total..................................        300        136        186
------------------------------------------------------------------------

    As described in Section X below, EPA expects that complying with 
the proposed emission standards will not result in a significant impact 
on a substantial number of small entities.
4. Cost-effectiveness
    EPA has estimated the per-vehicle cost-effectiveness (i.e., the 
cost per ton of emission reduction) of the proposed NOX plus NMHC 
standard over the typical lifetime of heavy-duty diesel and heavy-duty 
gasoline vehicles. The RIA contains a more detailed discussion of the 
cost-effectiveness analyses. EPA requests comments on all aspects of 
the cost-effectiveness analyses, including, for example, the 
appropriateness of the scope of benefits and costs which EPA 
considered.
    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.52 EPA requests 
comments on the methodologies used to determine cost-effectiveness in 
this analysis.
---------------------------------------------------------------------------

    \52\ 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 proposed new engine standards are expected to have 
beneficial impacts with respect to crop damage, secondary particulate, 
acid deposition, eutrophication, visibility, and forests, as described 
above. Due to the difficulty in estimating the monetary value of these 
societal benefits, the cost-effectiveness analysis does not assign any 
numerical value to these additional benefits. It should be emphasized 
that the Agency believes that the actual monetary value of the multiple 
environmental and public health benefits produced by the large NOX 
reductions under this proposal is likely to be much higher than the 
estimated regulatory costs. To the extent possible, EPA plans to take 
into consideration the value of these additional benefits in analyzing 
the cost-effectiveness of the standards for the final rulemaking. EPA 
requests comment on including these benefits in an estimate of the 
cost-effectiveness of the proposed standards.
    As described above in the cost section, the cost of complying with 
the proposed 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 proposed standards are shown in Table 9 for 
the same model years discussed above in the cost section. The cost-
effectiveness results contained in Table 9 present the range in cost-
effectiveness resulting from the two cost-effectiveness scenarios 
described above.

[[Page 33465]]



 Table 9.--Discounted Per-Vehicle Costs, Emission Reductions and Cost-Effectiveness of the Proposed NOX and NMHC
                                                    Standards                                                   
----------------------------------------------------------------------------------------------------------------
                                                                           Discounted lifetime      Discounted  
                                                            Discounted      reductions (tons)          cost-    
                Vehicle class                  Model year   lifecycle  --------------------------  effectiveness
                                                               cost         NOX          NMH          ($/ton)   
----------------------------------------------------------------------------------------------------------------
Heavy-duty diesel vehicles..................         2004         $333        1.321        0.019       $200-$300
                                                    2009+          143  ...........  ...........             100
Heavy-duty gasoline vehicles................         2004          162        0.190        0.011         800-900
                                                    2009+          101  ...........  ...........         500-600
----------------------------------------------------------------------------------------------------------------

VI. Potential for Use of Additional Incentive-based Approaches

    When considering how to achieve the greatest emission reductions 
possible, a broad variety of options must be evaluated. On one end of 
the continuum are mandatory standards, which generally provide the 
strongest mechanism to produce cleaner engines. At the other end of the 
continuum are voluntary programs, where engine manufacturers and users 
are not required to make or use cleaner engines, but are strongly 
encouraged to do so. The proposed actions described in Section IV above 
include elements of both mandatory programs (emissions standards and 
durability-related requirements), as well as voluntary provisions 
(enhancements to the averaging banking and trading program). Voluntary 
programs can also be used to allow manufacturers and users maximum 
flexibility in finding the most cost effective ways to adopt new 
standards.
    In the following sections, EPA describes additional voluntary 
programs that might facilitate the introduction of cleaner heavy-duty 
engines. These are voluntary labeling (``green star'') programs, and 
emission reduction credit generation under various state-run credit 
programs (including scrappage buy-back and open market trading). While 
EPA is not proposing these programs in today's NPRM, EPA is soliciting 
comments on their applicability and potential usefulness.

A. Voluntary Labeling

    One type of economic incentive program is environmental labeling, 
or ``green'' labeling. While ``green'' labeling is very closely linked 
to environmental marketing, it most often involves setting voluntary 
standards and encouraging industry to adopt them based on their 
intrinsic value to the common good, as well as individual companies. In 
a voluntary labeling program benefits can be direct or indirect. Some 
voluntary labeling programs may confer direct economic benefits 
(savings), for example, in the form of reduced energy costs. An example 
of this is EPA's Green Lights and Energy Star programs. Other voluntary 
labeling programs may confer only indirect benefits on companies that 
offset emission control costs by providing some other intangible 
benefit, such as positive publicity, public goodwill, or improved 
efficiency.
    Although EPA is not proposing a voluntary environmental labeling 
program in this document, EPA is requesting comments on a three-
component labeling concept called the Green Star Engines Program. The 
program would seek to identify cleaner engines and classify products 
that could be marketed as ``green.'' This would provide positive 
publicity and, potentially, economic incentives. These, in turn, could 
help encourage engine manufacturers to market cleaner engines and 
encourage truckers and other users to purchase those cleaner engines.
    The first part of the program would focus on identifying engines 
that meet the emission standards contained in today's proposal earlier 
than required. The second would also focus on early compliance, but 
with intermediate standards which are between pre-2004 levels and those 
being proposed today. The third part of the program would concentrate 
on identifying engines that can meet or exceed the emissions standard 
with the use of alternative fuels. Engine manufacturers benefit from 
the public good will created as they demonstrate a commitment to work 
cooperatively with other stakeholders to improve air quality. In 
addition, producers of alternative fuels would have additional 
opportunities to enter the transportation energy market.
    As described further below, engines falling under any of the three 
parts of the program would be identified with an appropriate engine 
label. Trucks equipped with such engines would also be labeled. In the 
case of the truck labels, it might be desirable to include a commitment 
to advanced maintenance practices on the part of the truck owner as a 
condition of displaying the label. EPA envisions that this could be a 
cooperative program between the federal or state government and truck 
owners/operators. Participants would sign a letter of commitment to 
establish specified maintenance programs and maintenance technician 
training programs. They would then be recognized as members of the 
program and provided with labels to affix to their trucks. The 
supervising agency, either EPA or some other entity, would be 
responsible for ascertaining that truck owner/operators have the 
systems in place to comply with the maintenance requirements. Also, the 
commitment would have to be renewed periodically to insure that the 
relevant trucks are performing as required.
    EPA solicits comment as to the practicality and potential 
effectiveness of all aspects of this program, as well as whether and 
how the three aspects of the program could be used simultaneously, as 
further discussed below.
    EPA anticipates that a broad range of interested stakeholders would 
wish to participate in the Green Star Programs described in more detail 
below. Interested stakeholders would participate as either a Partner or 
Supporter. A Partner would be defined as an individual or entity that 
either manufactures or uses the Green Star Product and thus has a 
greater stake in the program outcome. A Supporter would assist in 
making the program successful through public education efforts and by 
providing positive publicity.
1. Green Star Engine Program: Early Compliance with Certification 
Standards
    The first labeling program about which EPA is requesting comment 
would identify those heavy-duty engines which meet the federal heavy-
duty certification standards prior to the required implementation date. 
All such engines would be identified with the Green Star Engine Label. 
Trucks that are equipped with Green Star engines would also be 
identified with the Green Star Engine Label.

[[Page 33466]]

    The identification of heavy-duty engines, trucks, and equipment 
that meet a more protective standard would serve to visually inform 
users, states, interested parties, and the general public of the 
specific heavy-duty engines, and consequently the trucks and other 
heavy-duty equipment, which meet more protective emission standards. 
For example, heavy-duty engines which meet the 1998 NOX standard 
before 1998 could be labeled with a Green Star Engine label, until 
those standards become mandatory. After those standards are mandatory, 
but prior to the implementation to the 2004 heavy-duty standard, heavy-
duty engines that meet the 2004 standards could be labeled with the 
Green Star Engine label. This program would be intended to encourage 
the early introduction of cleaner heavy-duty engines, the idea being 
that early users would draw some publicity benefits from using these 
engines. Engine manufacturers would benefit from being able to use the 
Green Star Engine label as a sales tool. Comments are invited on 
whether EPA should propose the early compliance labeling program, and 
if it should, how the program should be structured.
2. Green Star Engine: Intermediate Standards Program
    Engines which might meet a more stringent intermediate standard 
than what would be required by regulation could be identified with the 
Green Star Engine intermediate label. The intermediate label would 
identify engines (and trucks equipped with those engines) as cleaner 
than the current standard but not as clean as the future standard. For 
example, such an engine might meet a 2.5-3.0 g/bhp-hr NOX standard 
between 1998 and 2004 or meet a 1-1.5 gram NOX standard after 
2004. For the 2004 case, it may be desirable to have a somewhat higher 
cut point initially, and then lower it over time. Engines certified to 
meet an intermediate standard would be demonstrating more advanced 
technology options than other engines.
    The Agency would expect that advantages similar to the early 
certification program would accrue for any potential participants. Of 
course, the intermediate standards component of the Green Star Engine 
labeling program would not accrue the same level of potential air 
quality benefit as the early certification component described above 
because the emission standards would not be as stringent. EPA requests 
comments on the feasibility of developing an intermediate standard 
labeling program. Commenters supporting a proposal are also asked to 
comment on the appropriateness of using a 3g/bhp-hr NOX level as a 
cut-point for the 1998 to 2004 time period, as well as an appropriate 
cut point, or points, for 2004 and later.
3. Green Star Alternative Fuel Engines
    Under this component of the program, all engines which meet or 
exceed the 1998 or 2004 standards by using alternative fuels would be 
identified with a Green Star Alternative fuel engine label. Trucks 
using those engines would also be labeled. The primary purpose would be 
to encourage the use of alternative fuels by identifying the engines/
trucks which meet or exceed the proposed emission standards by 
utilizing alternative fuels (such as CNG, methanol, or LPG) as their 
energy source. The use of alternative fuels can bring additional 
benefits, such as reduced green house gas emissions, not available with 
conventional fuels. Alternative fuels could be included in the labeling 
program in conjunction with either of the other two components of the 
Green Star Engine program. EPA requests that comments be submitted 
regarding the usefulness and practicality of an alternative fuel engine 
labeling program. The Agency also asks that comments be submitted on 
the logistical aspects of a labeling program for such an approach.

B. Emission Reduction Credit Programs

    A third type of economic incentive program involves generating and 
trading emission reduction credits. This type of incentive could be 
used by those states that have adopted economic incentive programs in 
their State Implementation Plan, and would be subject to the details of 
those programs. Where they are available, these programs could provide 
an incentive for engine manufacturers and truck operators to undertake 
emission reduction efforts beyond those required since states may allow 
such emission sources to generate and sell emission reduction credits 
to other entities such as stationary sources. Alternatively, the 
generator of the credits could retain them for use or sale in the 
future. The purchaser of the credits would typically use the credits to 
offset their own emission reduction requirements and therefore the 
credits may not of themselves reduce overall emissions. Another option 
available in credit programs is for the purchaser to retire the credits 
to benefit the environment instead of using them to offset emission 
reduction requirements. Retiring credits would result in an overall 
reduction in emissions. Credits programs could lower the overall cost 
of emission reductions by allowing for more cost effective emissions 
controls to be used on some emissions sources instead of less cost 
effective controls on other sources. Additionally, credits programs may 
encourage technology advances that may have broad applications, which 
could help lower overall emissions in the future.
    There are two important credit trading programs of this kind: the 
Economic Incentive Program (EIP) and the proposed Open Market Trading 
Rule (OMTR) (60 FR 39668, August 3, 1995). Generally, the EIP is more 
stringent than the proposed OMTR in that it requires state approval for 
trades before they occur. However, these programs are similar in that 
they require credits to be surplus (beyond required emissions 
reductions), quantifiable, and enforceable.
    Because credits must be surplus, engines generating credits for use 
in EPA's averaging, banking, and trading (ABT) program cannot also 
generate marketable emission reduction credits, based on those same 
emission reductions, to be used in the credit trading programs. That 
is, a truck operator cannot generate emission reduction credits based 
on the difference between the emissions level of the engine and the 
standard if that engine is generating credits for use by the 
manufacturer in the ABT program. EPA believes that some manufacturers 
may choose to pass credit ownership to purchasers of clean engines 
rather than using the credits themselves under the ABT program. EPA 
believes that in some circumstances this could well be appropriate and 
consistent with the intent of the ABT regulations. Further discussion 
is provided in section III.B.3. above.
    Depending on the state program, truck operators may be able to 
generate credits in ways other than purchasing cleaner-than-required 
engines. For example, credits might be able to be generated through 
operational changes, maintenance changes, or changes in activity 
levels. Credits might also be earned through buy-back programs, 
commonly known as scrappage programs. Buy-back programs typically 
involve giving financial incentives to vehicle owners in exchange for 
the voluntary scrapping of their older-technology, higher-emitting 
engines or vehicles. Buy-back programs might also be used for helping 
an area achieve an air quality goal rather than to generate emission 
reduction credits to be sold in an emission trading program (for 
example, in the proposed Open Market Trading Rule). Typically, any 
credits earned in buy-back programs are earned

[[Page 33467]]

by those purchasing and retiring the old vehicles or engines. As long 
as the emission benefits that result can be reliably quantified and 
meet the requirements of the relevant state credit program, such 
activities could be used to generate emission reduction credits.

VII. Public Participation

    As mentioned above, EPA issued an Advance Notice of Proposed 
Rulemaking (ANPRM) announcing EPA's intent to formally propose 
regulatory action relating to HDE emissions, including today's action 
on highway HDEs. During the development of the ANPRM and after its 
publication, EPA received a wide range of early comments on the basic 
framework of such a program. By the time of the close of the comment 
period, the Agency had received more than 60 communications relating to 
this program and the ANPRM. These comments have been very valuable in 
developing today's proposal, and the Agency looks forward to additional 
comment as the formal rulemaking process now begins.
    As described in part in the discussions above, comments ranged from 
those strongly opposing new highway HDE emission standards like those 
proposed today to those strongly supportive of such new standards or of 
standards even more stringent. Commenters offered widely varying 
rationales for their suggestions, including the availability or 
nonavailability of cost effective engine technology or the degree of 
need for new NOX and PM control. To the extent possible, EPA has 
considered each of the comments relevant to highway HDE emissions and 
has accommodated them in this proposal. (Comments relating to other 
potential parts of an overall program that are not proposed today, 
including regulations affecting fuels or nonroad engines, are under 
consideration by the Agency as it contemplates what action it may 
pursue in these areas in the future.) To the extent commenters on the 
ANPRM believe EPA failed to address their ANPRM comments adequately in 
this proposal, they should offer them again as comments to this NPRM 
for consideration in this rulemaking.

A. Comments and the Public Docket

    EPA today opens a formal comment period for this NPRM and will 
accept comments through August 26, 1996. The Agency encourages all 
parties that have an interest in the program proposed today to offer 
comment on all aspects of this action. Throughout this proposal are 
requests for specific comment on various topics. Of particular interest 
to the Agency are detailed comments in the following areas: The air 
quality need for national or regional NOX, PM, and VOC control; 
the need for control of emissions from highway HDEs; EPA's proposed 
approaches to encouraging durability and revising the Averaging, 
Banking, and Trading program; the technological feasibility of the 
proposed standards; EPA's projections of the environmental and economic 
impacts of the proposed program; and non-regulatory methods of 
encouraging early compliance or cleaner-than-required engines.
    The most useful comments are those supported by appropriate and 
detailed rationales, data, and analyses. The Agency also encourages 
commenters that disagree with the proposed program to suggest and 
analyze alternate approaches to meeting the air quality goals of this 
proposed program. All comments, with the exception of proprietary 
information, should be directed to the EPA Air Docket Section, Docket 
No. A-95-27 before the date specified above.
    Commenters who wish to submit proprietary information for 
consideration should clearly separate such information from other 
comments by (1) labeling proprietary information ``Confidential 
Business Information'' and (2) sending proprietary information directly 
to the contact person listed (see FOR FURTHER INFORMATION CONTACT) and 
not to the public docket. This will help ensure that proprietary 
information is not inadvertently placed in the docket. If a commenter 
wants EPA to use a submission of confidential information as part of 
the basis for the final rule, then a nonconfidential version of the 
document that summarizes the key data or information should be sent to 
the docket.
    Information covered by a claim of confidentiality will be disclosed 
by EPA only to the extent allowed and in accordance with the procedures 
set forth in 40 CFR part 2. If no claim of confidentiality accompanies 
the submission when it is received by EPA, it will be made available to 
the public without further notice to the commenter.

B. Public Hearing

    The Agency will hold a public hearing as noted in the DATES section 
above. Any person desiring to present testimony at the public hearing 
is asked to notify the contact person listed above at least five 
business days prior to the date of the hearing. This notification 
should include an estimate of the time required for the presentation of 
the testimony and any need for audio/visual equipment. EPA suggests 
that sufficient copies of the statement or material to be presented be 
available to the audience. In addition, it is helpful if the contact 
person receives a copy of the testimony or material prior to the 
hearing.
    The hearing will be conducted informally, and technical rules of 
evidence will not apply. A sign-up sheet will be available at the 
hearing for scheduling the order of testimony. A written transcript of 
the hearing will be prepared. The official record of the hearing will 
be kept open for 30 days after the hearing to allow submittal of 
supplementary information.
    In addition to the public hearing, EPA will hold a public meeting 
in Los Angeles to discuss the proposed EPA regulations for HDEs, and 
receive informal public input on them. Other potential mobile source 
controls identified in the California Ozone State Implementation Plan 
for the South Coast (the greater Los Angeles area) will also be 
discussed.\53\ Further details on the public meeting may be found in 
the DATES section at the beginning of this document. Because this 
public meeting is intended to be an informal exchange of information, a 
transcript of the meeting will not be prepared and members of the 
public who wish to present comments at the Los Angeles meeting should 
be aware that, in order to be considered for the final promulgation, 
their comments must also be made either in writing to the rulemaking 
docket or at the public hearing.
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    \53\ The 1994 California Ozone SIP includes both the proposed 
national HDE measure and 3 proposed State measures for HDEs. The 
California Ozone SIP also includes other national mobile source 
measures for nonroad engines, ships, aircraft, and pleasure craft as 
components of the attainment demonstration for the South Coast 
nonattainment area. For further details on the California Ozone SIP, 
see 61 FR 10920-10962 (March 18, 1996).
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VIII. 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, and in addition authorizes EPA to 
establish requirements to control rebuilding practices for heavy-duty 
engines. Pursuant to Sections 202(a)(1) and 202(d), these emissions 
standards

[[Page 33468]]

apply for the useful life period established by the Agency. See 42 
U.S.C. 7521(a)(1), 7521(d). EPA's authority to issue a certificate of 
conformity upon payment of a non-compliance penalty established by 
regulations is found in Section 206(g) of the Act. See 42.U.S.C. 
7525(g). Other provisions of Title II of the Act, along with Section 
301, are additional authority for the measures proposed in this action.

IX. 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 proposal is a ``significant regulatory action'' because the 
proposed standards and other regulatory provisions, if implemented, 
would 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 proposal.

X. Impact on Small Entities and 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.
    EPA certifies that the new emission standards and other related 
provisions proposed in this action 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.
    This action also proposes provisions clarifying what would and 
would not be considered a prohibited act (tampering) under CAA Section 
203 during the heavy-duty engine rebuilding process. Small businesses 
are integral to the heavy-duty engine rebuilding industry as noted in 
comments provided by the Automotive Engine Rebuilders 
Association.54 However, EPA does not believe that the proposals 
related to engine rebuilding will have a significant impact on a 
substantial number of these small entities. EPA is proposing to define 
how a broad existing requirement (CAA Section 203) applies specifically 
to the process of rebuilding engines, but EPA is not creating a new 
program. Second, 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. EPA requests comments on the 
proposals regarding engine rebuilding, any significant effect that the 
proposals would have on small businesses, and the reasons why such 
effects might occur.
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    \54\ EPA Docket A-95-27, II-D-41.
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XI. Compliance With Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request (ICR) document has been prepared by EPA 
(ICR No. 783.35) and a copy may be obtained from Sandy Farmer, 
Regulatory Information Division' U.S. Environmental Protection Agency 
(2136); 401 M St., SW., Washington, DC 20460 or by calling (202) 260-
2740.
    The information we propose to collect includes certification 
results, durability, maintenance, and averaging, banking and trading 
information. 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 information is mandatory. EPA will consider 
confidential all information which meets the requirements of Sec. 208 
(c) of the CAA.
    EPA estimates the average first year hours burden per response to 
be 4,670, the proposed 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.
    Comments are requested on the Agency's need for this information, 
the accuracy of the provided burden estimates, and any suggested 
methods for minimizing respondent burden, including through the use of 
automated collection techniques. Send comments on the ICR to the 
Director, OPPE Regulatory Information Division; U.S. Environmental 
Protection Agency (2136); 401 M St., S.W.; Washington, DC 20460; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, 725 17th St., NW., Washington, DC 20503, marked 
``Attention: Desk Officer for EPA.''

[[Page 33469]]

Include the ICR number in any correspondence. Since OMB is required to 
make a decision concerning the ICR between 30 and 60 days after June 
27, 1996, a comment to OMB is best assured of having its full effect if 
OMB receives it by July 29, 1996. The final rule will respond to any 
OMB or public comments on the information collection requirements 
contained in this proposal.

XII. 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 proposed 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 proposed program represents the least 
costly, most cost-effective approach to achieving the air quality goals 
of the proposed rule. EPA has performed the required analyses under 
Executive Order 12866 which contains identical analytical requirements. 
The reader is directed to section IX, Administrative Designation and 
Regulatory Analysis, for further information regarding these analyses.

XIII. Copies of Rulemaking Documents

    The preamble, draft regulatory language and draft Regulatory Impact 
Analysis (RIA) are available in the public docket as described under 
ADDRESSES above and is also available electronically on the Technology 
Transfer Network (TTN), which is an electronic bulletin board system 
(BBS) operated by EPA's Office of Air Quality Planning and Standards 
and via the internet. The service is free of charge, except for the 
cost of the phone call.

A. Technology Transfer Network (TTN)

    Users are able to access and download TTN files on their first call 
using a personal computer and modem per the following information.

TTN BBS: 919-541-5742 (1200-14400 bps, no parity, 8 data bits, 1 stop 
bit) Voice Helpline: 919-541-5384
Also accessible via Internet: TELNET ttnbbs.rtpnc.epa.gov Off-line: 
Mondays from 8:00 AM to 12:00 Noon ET

    A user who has not called TTN previously will first be required to 
answer some basic informational questions for registration purposes. 
After completing the registration process, proceed through the 
following menu choices from the Top Menu to access information on this 
rulemaking.

 GATEWAY TO TTN TECHNICAL AREAS (Bulletin Boards)
 OMS--Mobile Sources Information
 Rulemaking & Reporting
<5> Heavy-duty/Diesel
<1> File area #1...Heavy-duty Truck and Bus Standards

    At this point, the system will list all available files in the 
chosen category in reverse chronological order with brief descriptions. 
To download a file, select a transfer protocol that is supported by the 
terminal software on your own computer, then set your own software to 
receive the file using that same protocol.
    If unfamiliar with handling compressed (i.e. ZIP'ed) files, go to 
the TTN top menu, System Utilities (Command: 1) for information and the 
necessary program to download in order to unZIP the files of interest 
after downloading to your computer. After getting the files you want 
onto your computer, you can quit the TTN BBS with the oodbye 
command.
    Please note that due to differences between the software used to 
develop the document and the software into which the document may be 
downloaded, changes in format, page length, etc. may occur.

B. Internet

    Rulemaking documents may be found on the internet as follow:

World Wide Web

http://www.epa.gov/omswww

FTP

ftp://ftp.epa.gov Then CD to the /pub/gopher/OMS/ directory

Gopher

gopher://gopher.epa.gov:70/11/Offices/Air/OMS
Alternatively, go to the main EPA gopher, and follow the menus:
gopher.epa.gov

EPA Offices and Regions
Office of Air and Radiation
Office of Mobile Sources

List of Subjects in 40 CFR Part 86

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Motor vehicles, Motor vehicles pollution, 
Reporting and recordkeeping requirements, Research.

    Dated: June 19, 1996.
Carol M. Browner,
Administrator.
[FR Doc. 96-16330 Filed 6-26-96; 8:45 am]
BILLING CODE 6560-50-P