ŁEPA
Air and Radiation                     EPA420-B-05-010
                           September 2005
  United States
  Environmental Protection
  Agency
           Questions and Answers on the
           Clean Diesel Fuel Rules

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                                      EPA420-B-05-010
                                        September 2005
Questions and Answers on then
    Clean Diesel Fuel RulesD
      Assessment and Standards Division D
    Office of Transportation and Air Quality D
     U. S. Environmental Protection Agency D

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Introduction

The following are responses to questions received by the Environmental Protection Agency
(EPA) concerning the manner in which the EPA intends to implement and assure compliance
with the diesel fuel sulfur regulations at 40 CFR Part 80.  This document was prepared by EPA's
Office of Air and Radiation, Office of Transportation and Air Quality, and the Office of
Enforcement and Compliance Assurance, Office of Regulatory Enforcement.

Regulated parties may use this document to aid in achieving compliance with the diesel fuel
sulfur regulations.  However, this document does not in any way alter the requirements of these
regulations.  While the answers provided in this document represent the Agency's interpretation
and general plans for implementation of the regulations at this time, some of the responses may
change as additional information becomes available or as the Agency further considers certain
issues.

This guidance document does not establish or change legal rights or obligations. It does not
establish binding rules or requirements and is not fully determinative  of the issues addressed.
Agency decisions in any particular case will be made applying the law and regulations on the
basis of specific facts and actual action.

While we have attempted to include answers to all questions received to date, the necessity for
policy decisions and/or resource constraints may have prevented the inclusion of certain
questions. Questions not answered in this document may be answered in a subsequent
document. The Agency intends to provide any additional responses as expeditiously as possible.
Questions that merely require a justification of the regulations, or that have previously been
answered or discussed in the preamble to the regulations have been omitted.

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                        **New and Revised Questions**
The following questions have been revised and/or added since the March 2005 version:

      Revised
      •   3.2, 3.3, 3.23, (also, the second 3.23 that appeared in the original QAs is now 3.24,
          3.24 is now 3.25, and 3.25 is now 3.26)
      •   4.18, 4.35
      •   9.5
      •   10.7,10.10,10.14

      Added
      •   1.29-1.50
      •   3.27
      .   4.36-4.41
      •   7.6-7.11
      •   9.9
      •   11.16,  11.17
      •   12.26,  12.27
      •   14.5-14.7
      •   15.9
                                         11

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                                Table of Contents D







List of Acronyms	vD




1.  Designate and Track (D&T) Issues	ID




2.  Handling/Downgrading Issues	26 D




3.  Analytics R&D Issues/Test Methods	40D




4.  Regulatory Clarification and Thoughts/Questions for EPA 	48 D




5.  Cetane Index/Aromatics Requirements	61D




6.  Sulfur Standards	62D




7.  Additives  	64D




8.  Credits  	67D




9.  Product Transfer Documents (PTDs)/Bills of Lading (BOLs) 	73 D




10. Documentation	76 D




11. Testing	83 D




12. Enforcement	88D




13. GPA/Small Refiners	105D




14. Transmix/Interface Fuel	109D




15. General/Miscellaneous	113 D
                                        in

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ivD

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List of Acronyms
ASTM
BOL
bpcd
CAA
CBI
CDX
CFR
CI
CTA
D&T
DTAB
EPA
FTC
GPA
HS
HW
IRS
ISO
kbpd
LDDV
LM, L&M
LSD
mmBTU
MV
MVNRLM
MY
NE/MA
NIST
NOV
NR
NRLM
American Society for Testing and Materials
Bill of Lading
Barrels per Calendar Day
Clean Air Act
Confidential Business Information
Central Data Exchange
Code of Federal Regulations
Cetane Index
Credit Trading Area
Designate and Track
Diesel (Fuel) Treated As Blendstock
Environmental Protection Agency
Federal Trade Commission
Geographic Phase-In Area
High Sulfur (generally refers to sulfur levels greater than 500 ppm)
Highway
Internal Revenue Service
International Organization for Standardization
Thousand Barrels Per Day
Light-Duty Diesel Vehicle
Locomotive and Marine Diesel
Low Sulfur Diesel (500 ppm sulfur)
Million British Thermal Units
Motor Vehicle (also, HW or highway)
Motor Vehicle Nonroad, Locomotive, and Marine Fuel
Model Year
Northeast/Mid Atlantic
National Institute of Standards and Technology
Notice of Violation
Nonroad Diesel
Nonroad, Locomotive, and Marine

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OECA
OMB
OTAQ
PADD
PBMS
ppm
FDD
PTD
SBA
SRM
RFG
SR
TCO
ULSD
VAR
Office of Enforcement and Compliance Assurance
Office of Management and Budget
Office of Transportation and Air Quality
Petroleum Administration Districts for Defense
Performance Based Measurement System
Parts Per Million
Previously Designated Distillate
Product Transfer Document
Small Business Administration
Standard Reference Materials
Reformulated Gasoline
Small Refiner
Temporary Compliance Option
Ultra-Low Sulfur Diesel (15 ppm sulfur)
Volume Accounting Reconciliation
VI

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l.D    Designate and Track (D&T) Issues

1.1: D  When is EPA's Designate and Track (D&T) reporting mechanism expected to be
       completed?

       A: D   D& T reporting will be an electronic reporting system, similar to the existing Tier
             2 Gasoline Sulfur reporting program.  Reports will be a flat file format based on
             spreadsheet templates. Additionally, we are working with EPA 's Office of
             Environmental Information on a pilot project for accepting Confidential Business
             Information (CBI) through EPA 's Central Data Exchange (CDX). CDXwill
             enable us to utilize digital signatures and eliminate our dependency on a hybrid
             reporting system where electronic data must be accompanied by a hardcopy
             printout and certification with a  "wet ink" signature. The CDX pilot is scheduled
             for completion February 2006. Reporting parties for RFG & Anti-dumping and
             Tier 2 Gasoline Sulfur will be the first users of this system.

1.2: D  We understand that many ULSD designated "facilities" are currently unregistered with
       EPA. They must apply for a registration or permit number by December 2005 in order to
       get a registration number by the  NRLM rule's effective date. There is currently no
       application mechanism.

       A: D   The RFG & Anti-dumping registration system will be the basis for ULSD
             registration and similar procedures will apply. Companies that have an existing
             Company ID with RFG & Anti-dumping may add ULSD facilities, while
             companies not registered with RFG & Anti-dumping will need to request
             Company and Facility IDs. Registration will be done using forms posted on
             OTAQ 's Fuel and Fuel Additives Reporting Forms web page
             ^ttp://www.epa.gov/otaq/regs/fuels/dieselfms.htm|

1.3: D  Section 80.535 of the NRLM rule allows refiners to produce early credit NRLM low-
       sulfur (500 ppm) diesel. If undyed, this low-sulfur NRLM diesel is considered on-road
       fuel UNLESS it is designated as NRLM or LM diesel fuel. The NRLM early credit rule
       takes effect June of 2006. We will therefore need a registration number by June 1, 2006
       in order to move early credit NR low-sulfur diesel fungibly with on-road. Is this correct?

       A: D   Yes.  Refinery designation requirements begin June 1, 2006, as well as several
             other provisions, including Product Transfer Documents (PTDs).  Therefore,
             facility registration would be required prior to June 1, 2006. This is not limited
             to the NRLM early credit fuel.

1.4: D  In addition, company software professionals will need at least 6 months to incorporate
       any external reporting system into the company software.  What is the anticipated process
       and timing for developing the D&T reporting software? When will D&T software, or
       standards, be available to develop systems to feed them?


                                           ID

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      A: D   EPA is not developing reporting software.  The reporting process will be similar
             to the Tier 2 Gasoline Sulfur system -flatfile, text or spreadsheet submission.
             Common practice is for EPA to share draft versions of forms with third party
             software vendors and industry representatives (AOPL, API, NPRA, etc.) for
             review and comment.  Report Form instructions and templates for D& T are
             available on the OTAQ Fuel and Fuel Additives Reporting Forms web page
             ^ttp://www.epa.gov/otaq/regs/fuels/dieselfms.htm|

1.5: D Most of the receipt and delivery facilities that pipelines operate do not have EPA
      registration numbers required to implement D&T.  If a terminal receives product from
      several pipelines, each one will require a registration number for that custody transfer. Is
      EPA ready to process the volume of applications required? When will the registration
      applications be available?

      A: D   EPA will process ULSD facility registration applications in a timely manner and
             anticipates no difficulty in doing so.  Registration will be done using the forms
             posted on OTAQ's Fuel and Fuel Additives Reporting Forms web page..

1.6: D If a pipeline does not handle 500 ppm highway fuel, it appears that they are still required
      to file D&T reports, is this correct?  Systems cannot opt out  of D&T by handling only
      certain products?

      A: D   All facilities are required to compile and file D&T reports if they handle any
             designated fuel upstream of the point where taxes are assessed, and dye and/or
             marker is added if required.  This includes a pipeline that does not handle any
             500 ppm highway die sel fuel.  In that case, the D&T reports would confirm that
             the pipeline did not handle this highway fuel, and did not violate any of the
             restrictions on redesignating off-road fuel as highway fuel.  The D& T reports
             from this pipeline would also be used in evaluating compliance by the parties
             before and after this pipeline in the distribution system. This pipeline is only one
             step in a chain  of fuel hand-off s, and the D&T system is designed to use
             information from each party to a hand-off to ensure compliance by all of the
             parties in the chain of distribution.

1.7: D Will refiners be required to provide data sheets, or other types of testing data to insure
      pipelines receive the correct product?

      A: D   Refiners are required to maintain batch testing records which demonstrate
             compliance with the applicable sulfur standard. The PTD that accompanies the
             transfer of a batch of designated fuel from a refiner to a pipeline operator must
             correctly identify the sulfur standard to which the fuel complies. However, there
             is no EPA requirement that testing records accompany the batch of fuel when it is
             transferred to the custody of a pipeline operator.  Any private requirements
                                           2D

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             established between refiners and pipelines, would be business decisions that are
             separate from EPA 's regulations.

1.8: D What is the plain English clarification of § 80.598(b)(9)(vii)(B) and § 80.599(b)(5)?

      A: D   The regulations limit the volume of 500 ppm NRLM that may be redesignated as
             highway 500 ppm by fuel distributors. Section 80.598(b)(9)(vii)(B) applies to
             distributors other than truck loading terminals.  To ensure that there are no
             significant redesignations over the annual compliance period for these facilities,
             the volume of 500 ppm sulfur highway dieselfuel that a facility discharges from
             it's custody must be no greater than 102 percent of the volume of 500 ppm sulfur
             highway fuel that the facility received during the annual compliance period,
             taking into account inventory change. This provides pipelines and other parties
             upstream of truck loading terminals a tolerance of 2% during the annual
             compliance period to account for metering differences, volume swell, and the like.
              See 69 Fed. Reg. 39070 (June 29, 2004).  Section 80.599(b)(5) requires that
             dieselfuel greater than 500 ppm sulfur must be designated as a fuel other than 15
             ppm or 500 ppm highway or NRLM.  For example, it can be designated as
             heating oil or another dieselfuel that can lawfully be above 500 ppm. Requiring
             a proper designation for high sulfur dieselfuel is the first step in ensuring that it
             stays segregated from fuel that is supposed to meet the 15 ppm or 500 ppm sulfur
             level.

1.9: D  What are the Designate & Track Quarterly and Annual start and finish  dates? The
      Quarterly Compliance Periods listed in § 80.599 begin June 1, 2007 and end September
      30, 2010,  but the Quarterly Reporting listed in § 80.601 begins November 30, 2007 and
      ends August 31, 2010. Why would the report period end before the compliance period?
      There is a similar issue with the Annual report versus compliance dates.

      A: D   The dates for the quarterly and annual compliance periods and reporting dates
             were incorrect in the Final Nonroad Rule regulations but were correct in the
             preamble (69 FR 39100, June 29, 2004).  This error was corrected in a technical
             amendment to the regulations (which can be found on EPA 's web site at:
             http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htm#regs. July 7, 2005).  The
             correct preamble dates for the compliance periods and reporting dates are as
             follows:
                                           3D

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Quarterly Compliance Periods and Reporting Dates
Quarterly Compliance Period*:
July 1 through September 30
October 1 through December 31
January 1 through March 31
April 1 through June 30
Report Due Date:
November 30
February 28
May 31
August 31
* The first quarterly reporting period will be from June 1, 2007 through September 30, 2007 and the last quarterly
compliance period will be from April 1, 2010 throughMay 31, 2010.
Annual Compliance Periods and Reporting Dates
Annual Compliance Period:
June 1, 2007 -
July 1, 2008 -
July 1, 2009 -
June 1, 2010 -
July 1, 2011 -
June 1, 2012 -
July 1, 2013 -
June 1, 2014 -
July 1, 2015 -
June 30, 2008
June 30, 2009
May 31, 2010
June 30, 2011
May 31, 2012
June 30, 2013
May 31, 2014
June 30, 2015
June 30, 2016
Report Due Date:
August 31
August 31
August 31
August 31
August 31
August 31
August 31
August 31
August 31
1.10:D Is downstream D&T no longer required in 2010 or in 2015 or ever?

       A: D    The downstream D&T provisions change over time, as the standards change and
              more of the highway and off-highway dieselfuel becomes subject to the 15 ppm
              refinery gate standard. In general, downstream parties will always have to
              designate the dieselfuel they transfer, as part of the PTD requirements. However
              over time there will be less need to track various kinds of die sel fuels and fewer
              volume balances that will apply. After May 2014 the only tracking and related
              volume balances that will apply downstream involve heating oil and 500 ppm LM,
              to avoid improper transfer of low sulfur heating oil into the LM market.

1.11: D If only credit fuel is sold into the heating oil market, does a marker need to be added?
       Does a pipeline need to track if not receiving heating oil into its system?  Same for the
                                            4D

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      marker in L&M, if only credit 500 ppm NR is received and no 500 ppm L&M, does it
      need to mark and does it need to track?

      A: D   First, the requirement to mark heating oil is limited to heating oil used in certain
             parts of the country. In general, the marker does not need to be added to diesel
             fuel distributed from a terminal within the northeast and mid-Atlantic area and
             Alaska, for use in those areas.  That means the great bulk of the heating oil
             market is not subject to a marking requirement. For heating oil produced or
             distributed outside those areas, the  terminal is required to mark heating oil prior
             to distribution from the truck loading terminal. If the fuel is designated as
             something other than heating oil, then it does not need to be marked, and will be
             subject to the sulfur level applicable to its designation. Outside the areas noted
             above, any diesel fuel that is not marked is presumed to not be heating oil, and
             typically will be considered motor vehicle or NRLMfuel and subject to the
             appropriate sulfur standard.

             Therefore, if it is designated as NRLM, it is not treated as heating fuel, but rather
             NRLM and it does not need to have  the marker added.  NRLM can always be used
             as heating oil or LM diesel fuel, without any change in its designation, however
             it remains subject to the sulfur standard that applies to its NRLM or LM
             designation. If the NRLM is redesignated as heating oil, it would need to be
             marked at the terminal. Similarly, if it is designated as NRfuel, and not L&M,
             then no marker needs to be added unless it is redesignated as LM.

             Any pipeline that receives designated fuels (including high sulfur NRLM,  and
             credit 500 ppm NRfuel) must comply with the designate and track requirements.
             This information is essential for downstream parties to be able to demonstrate
             their compliance with the marker requirements for heating oil and 5 00 ppm LM
             fuel (from 2010-2012).  It will also be used by EPA to verify the compliance of
             parties who receive fuel from the subject pipeline by allowing us to compare the
             volumes of designated fuels reported as received from the pipeline with the
             volumes reported delivered by the pipeline.

1.12: D Do pipelines without truck loading  terminals  need to submit quarterly D&T reports or
      just annual D&T  reports?

      A: D   Pipelines without truck terminals must submit both annual and quarterly reports
             prior to July 1, 2010. The quarterly reports will contain the information on
             receipts and deliveries of designated fuel volumes.  The annual reports will
             contain information to show compliance with volume balance requirements over
             the annual compliance period.  Beginning, July 1, 2011, only annual reports need
             to be submitted (see chart on quarterly and annual compliance dates, in question
             1.9), and compliance with volume balance requirements continues to be on an
             annual basis.
                                           5D

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1.13: D In the definition of facility, can a common carrier pipeline be aggregated with any other
       non-common carrier terminals if they are all owned by the same parent company?

       A:U    Yes, if certain conditions are met. First, a single entity, in this case, the parent
              company must maintain custody of the fuel at all times in the aggregated facility
              (i.e. the parent company must maintain custody at all subsidiary/leased terminals
              defined as part of that aggregated facility). If the parent company/entity fails to
              maintain custody of the fuel at any point, that point cannot be considered part of
              the aggregated facility. In addition, the choice to treat places as aggregated or
              separate facilities may not be changed by the entity during any applicable
              compliance period.  If a refinery is part of the aggregated facility, the common
              carrier pipeline may not be included as part  of the aggregated facility.

1.14:D If an entity, for & facility (as those terms are defined  in 40 C.F.R. § 80.502), chooses a
       single registration number for its refinery, pipeline, and terminal (thus creating an
       'aggregated facility'), does this mean that in the event of finding product in violation of
       the diesel fuel regulations, only the registered entity  will be subject to civil penalty, and
       not all 3 portions of the system separately?

       A: D    It is dependent on the type of violation.  For volume  balances, liability falls on the
              entity in relation to its facility.  The volume balance  is calculated over the entire
              aggregated facility that is registered, and the entity that registered the facility will
              be subject to the penalty.  For other violations (such as violations of the
              applicable sulfur level of a batch of fuel), the liability is not limited.  The fact that
              the terminal is aggregated with a pipeline and refinery for volume balance
             purposes is only relevant to this violation because it means, by the definition of an
              aggregated facility, that the entity has custody of the fuel at all locations.
              However any other entity or person who takes custody of the fuel may also be
              subject to presumptive liability.

1.15: D At the terminal, if a pour point depressant, conductivity improver, lubricity improver
       which is compliant to the 15 ppm standard is injected, must the terminal operator register
       as a refiner?

       A: D    Injecting such additives to a batch of fuel would not make a terminal operator a
              refiner.

1.16: D Some pipeline and marine  terminals receive fuel from multiple refineries. Will they need
       separate facility ID numbers?

       A: D    The terminal owner must obtain a facility ID for its facility,  subject to any ability
              to lawfully aggregate into a larger facility.   The fact that the terminal facility
              receives fuel from various refineries does not change the fact that it is a still a
              single place in the distribution system that is owned by a single entity. Similarly,


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             a pipeline receives a single ID for a single facility notwithstanding how many
             refineries supply fuel to that facility.  Consequently, the terminal in this situation
             would need only one facility ID number for its terminal operations.  However, if
             fuel is imported into the terminal, or the terminal acts as a refiner, the terminal
             will need to state such activity, in addition to the other quarterly reporting
             requirements of§ 80.601, and additionally will have annual reporting
             requirements of§ 80.604.  The party will also need to register as a refiner or
             importer, and meet all applicable refiner or importer requirements, but that
             would not change the facility ID that goes with the terminal facility.

1.17: D If a company has two (or more) refineries and transfers highway diesel blendstocks
      between refineries, are they precluded from aggregating?

      A: D   Refineries are precluded from aggregating with other refineries.

1.18:D If a terminal has 15 ppmNo. 2 and 500 ppm kerosene (No. 1), can a truck blend the two
      (winter blending) and take 500 ppm to the pump at retail?  Who is responsible for the
      downgrading accounting?

      A: D   The two fuels can be blended as long as the appropriate volume balances are met.
             When the terminal received the 15 ppm No. 2, it would have been designated as
             highway  or NRLM.  The limit on downgrading applies to No. 2 15 ppm highway
             diesel fuel that the terminal receives, and restricts the ability of the terminal to
             redesignate it as 500 ppm highway. Both the terminal and the truck transporter
             would have to meet the anti-downgrading and any other applicable volume
             balances, based on comparing the volumes and designations of fuel they received
             to fuel delivered.  Since accounting responsibility is keyed to what you received
             and delivered, it will make a difference whether the blending occurred before or
             after custody was transferred. For example, if the blending occurs before the
             terminal transfers custody, then the terminal has to account for the blended fuel
             in its delivery accounting.  If blending occurred after the transfer of custody, then
             the truck transporter will have to account for the blended fuel in its delivery
             accounting.

1.19: D In attempting to  balance reporting requirements, if a pipeline ticket is generated for a
      particular amount of barrels/gallons, a terminal will have a natural gain or loss.  Do you
      have a tolerance or must it match exactly?

      A: D   The reported hand-off volumes must match - there is no tolerance. However, to
             account for gains and losses in the system, the D&T provisions allow for a 2%
             gain/loss over the course of the annual compliance period for pipelines.  See
             answer to question 1.8, above. For terminals, there is no such specific tolerance,
             however, they have the ability to adjust by redesignating volumes accordingly.
                                           7D

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1.20: D Who is responsible for the product if it comes in to the terminal (from a pipeline) over 15
       ppm?

       A: D   Presumptive liability under 40 C.F.R. § 80.612 applies to the party in possession
             of the contaminated fuel (in this case, the terminal after it has taken custody) and
             to all parties upstream of the facility where the violation is found (including, in
             this case, the pipeline). Each party has an opportunity to establish a defense to
             liability. Until it is proven which party is at fault, all parties involved in the
             production and distribution of the product will be presumed liable.

1.21: D Please confirm that a terminal operator selling 500 ppm nonroad diesel outside the
       (Northeast/Mid-Atlantic) NE/MA Area does not have to add the  marker because that fuel
       need not be differentiated from higher sulfur (greater than 500 ppm) nonroad diesel fuel
       generated by credits.

       A: D   Only diesel fuel designated as heating oil need be marked if it is distributed from
             either a terminal outside of the NE/MA Area  or a terminal inside the NE/MA Area
             for delivery outside of the Area.

             Beginning in 2007, all heating oil must contain the marker outside the NE/MA
             area. From 2010 to 2012, fuel designated as 500 ppm LMfuel also must contain
             the marker.  In this instance the terminal selling the 500 ppm fuel does not have
             to add a marker unless it is either heating oil or, during 2010 to 2012, LMfuel. If
             it is not marked, then it will be treated as subject to the appropriate sulfur
             standard.  The terminal selling the high sulfur fuel would need to mark  the fuel if
             it is heating oil.  The high sulfur fuel could not be designated as 500 ppm LM, so
             the LM marking requirement should not apply.

1.22: D A company owns a refinery and ships its product via a common carrier pipeline it owns
       (and now exclusively uses) to a terminal that it owns. Can these facilities be aggregated,
       or does the fact that the company's pipeline is a common carrier  pipeline preclude
       aggregation?

       A:U   As stated in the regulation (§ 80.502(b)(l)), facilities may be aggregated if
             custody is maintained by one  entity that owns those specific facilities. Per §
             80.502(b)(2), refineries may only be aggregated with facilities that do not receive
             fuel from other refineries or import facilities. In the case stated here, the
              "common carrier" status of the pipeline does not matter if the pipeline  is not
             receiving fuel from other entities. The common carrier pipeline example that was
             used in the regulations was only meant to refer to the typical case where an entity
             receives fuel from various sources, and thus would not meet the criteria for
             facility aggregation.
                                            8D

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1.23: D If a company redesignates, please explain how to restore volumes so that required
      volume balances are met.

      A: D   The volume balance requirements limit certain types ofredesignations, unless the
             volume balance is met over the compliance period. For example, during a
             compliance period a terminal may redesignate NRLM as highway fuel as long as
             over the compliance period the terminal meets the required volume balance. If a
             terminal has been receiving fuel designated as NRLM and delivering some of it as
             highway and some as NRLM, the volume balance on highway fuel could go
             negative during that compliance period.  To offset this, the terminal would have
             to take delivery of the fuel designated as highway and redesignate enough of it as
             NRLM to satisfy the volume balance.

1.24: D How will a terminal designate a mixture of transmix and "off-spec" fuel that might be  a
      combination of 15 ppm, all grades of 500 ppm, heating oil, and jet fuel? Will this
      designation(s) limit the marketing options of a transmix handler beyond the limits that
      would be imposed strictly by the sulfur content of the mixture alone?

      A: D   The designation is left to the terminal.  The designation must be clear and
             accurate, therefore the sulfur level of the mixture will limit the designation
             options. Beyond that, the designate and track compliance calculations have been
             designed to minimize, if not eliminate, any unintended marketing limitations.

1.25: D According to the preamble (page 39067), "EPA intends to work with industry subsequent
      to this final rule to provide guidance regarding facility boundary and aggregation
      decisions that will address the many unique situations." It appears from the discussion in
      the preamble that such "unique situations" are present when the same entity owns and
      operates a series of locations in the distribution system. Under the rule, the entity may
      choose whether to aggregate or to treat the separate locations as separate facilities.  It
      would appear that such guidance might not be necessary, because an entity has the
      flexibility under the rule to determine where to draw lines around its facilities, so long as
      each facility meets the definition of "facility" under the rule.  What is EPA's intent with
      regard to such guidance?  When can industry expect to become part of these discussions?
      Has EPA developed a working list of the "unique situations"? Is EPA's intent with the
      guidance to address the definition of a "facility" and to help the regulated community
      understand the parameters of a facility?

      A:U   In addition to this Question/Answer document, EPA has released Small Entity
             Compliance Guides (see http://www.epa.gov/cleandiesel/comphelp.htm) to assist
             small entities in complying with the requirements of the rulemaking. It was our
             intention that the presentations and discussions that occurred at the Clean Diesel
             Fuel Workshop in November 2004 would help to clarify and address questions
             and/or concerns that industry had regarding the definition of "facility. " We will
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             also answer any other questions as they arise and will continue to work with the
             fuel industry to ensure a smooth transition to ultra low sulfur diesel fuels.

1.26: D When will the new technology vehicles start being sold (i.e. what is the absolute target
       date for ULSD at the pump)?

       A: D   Heavy-duty vehicle model years typically start on January 1. However, they
             could start several months earlier and medium-duty vehicles often do.  Light-duty
             vehicle model years typically start even earlier.  We designed the program with a
             retail target date of September 1, 2006.  The regulations set out the dates when
             fuel must meet the sulfur standards at various points in the distribution system.
             The regulations also prohibit selling anything other than 15 ppm sulfur diesel fuel
             to 2007 or later model year highway vehicles.

1.27: D My company is co-owner of a single physical pipeline that is operated as if it were two
       separate pipelines. Each of the co-owners has a set fraction of the pipeline's capacity and
       has established its own tariff rates which it charges to its customers.  May each of the co-
       owners obtain a separate facility registration under the designate and track system with
       respect to its operations on this pipeline?

       A: D   Section 80.502(b)(5) of the diesel fuel regulations states  that a contiguous
             pipeline may not be subdivided into more than one facility. Based on this, your
             pipeline could not be subdivided into two facilities with separate facility
             registrations. EPA adopted this requirement because we believe that allowing an
             individual pipeline to be subdivided for D&Tfacility registration purposes would
             severely impact EPA's ability to evaluate compliance and assign liability for
             potential violations.

1.28: D My company imports diesel fuel into storage tanks that we lease at a terminal in New
       England. Please explain the responsibilities of the importer and the terminal owner with
       respect to the designate and track requirements related to the importation of diesel fuel.

       A: D   The importer must register separately for each terminal facility into which it
             imports fuels. EPA will issue an import facility registration number for the
             importer that is composed of a numerical entity code and a numerical location
             code  (the location being the terminal).  The terminal owner will be provided with
             a terminal facility registration number composed of a location number (same as
             that supplied to the importer) and an entity registration number. Alternately, if
             the imported fuel is certified before delivery  to a U.S. terminal,  then the importer
             may obtain a registration for a  "virtual" off-shore import facility. In such cases,
             the importer will be given an import facility registration  number applicable to the
             importation of fuel into any terminal located in a single PADD. It has been the
             practice for EPA to issue these  types of "virtual" import facility registrations for
             imported gasoline.


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              The importer must appropriately designate all imported fuels. For each of its
              registered facilities, the importer must also fulfill all of the record-keeping and
              reporting obligations applicable to an importer. For example, the importer must
              demonstrate compliance with the requirement that 80% of all highway dieselfuel
              it imports meets a 15ppm sulfur standard (2006-2010).

              The terminal owner must account for the volumes of designated fuels that are
              imported into its terminal in demonstrating compliance with the volume balance
              and anti-downgrading requirements.

1.29: D The regulations state that a contiguous pipeline may not be broken down into more than
       one facility for the purposes of complying with the designate and track reporting
       requirements. There is a break-out tank facility in our pipeline system where all of the
       fuel in the trunk line feeding the facility (trunk line #1) typically enters break-out tankage
       before being passed further down our system through another segment of our trunk line
       (trunk line #2) or to several stub-lines. However, it is possible for some or all of the fuel
       in trunk line #1 to bypass the subject break-out tank  facility and to be fed directly  into
       trunk line #2. Could trunk lines #1 and #2 be considered separate facilities?

       A: D    The facilities described in the question could be registered separately. The
             provisions in § 80.502(b)(5) are only intended to prevent the subdivision of a
             pipeline for reasons not sufficiently related to a  true physical division in a section
              of a pipeline owned by one entity,  such as the presence of a booster pump station
              in the line. Break-out tank facilities are necessary at locations in a pipeline
              system where pipelines of different diameters and flow rates are connected, and
              where branching in the pipeline system takes place.  Therefore, a break-out
             facility is an appropriate location at which to draw a distinction between different
             parts of the pipeline system with respect to compliance with the designate and
              track requirements.

1.30: D My company owns certain distinct physical parts of  a terminal (pipeline manifold,
       several storage tanks, and the truck loading rack), whereas other parts of the same
       terminal (several storage tanks) are owned by another company. Would EPA consider
       allowing such a terminal to be subdivided for registration purposes under the designate
       and track (D&T) provisions of the diesel sulfur regulations? Under such an approach,
       each party would register, keep records, and demonstrate compliance for those physical
       assets at the terminal which it owns.  It would be inappropriate to force these parties to
       become jointly responsible for the terminal as a whole.

       A: D    A facility is  defined as the place or series of places at which an entity produces,
              imports, or maintains custody of the fuel,  extending from the point of initial
              custody to the point that custody is transferred (§ 80.502(b)). Under this
              definition, there would be two facilities at the terminal described in the question-
              one associated with each owner/entity.  Each facility would cover the part of the


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             terminal where the owner/entity had custody of the fuel.  This is also consistent
             with § 80.502(b)(5), which provides that an individual terminal can not be
             subdivided into more than one facility (without approval by EPA).  That provision
             applies to the process of voluntarily subdividing a facility after the physical extent
             of the facility has been initially determined under § 80.502(b). This terminal
             subdivision provision does not determine the physical extent of the location that
             initially meets the definition of facility under § 80.502(b). It restricts the
             voluntary subdivision of the facility once the extent of the facility has been
             determined under § 80.502 (b). In this case, the definition of facility would lead to
             the existence of two separate facilities.  Section 80.502(b)(5) then means that
             neither of these two facilities may be subdivided without approval by EPA.

             It is important to note that this does not mean that joint ownership or an
             owner/tenant relationship in a terminal would result in the terminal having more
             than one facility. In such cases, the definition of facility leads to the initial
             determination that the  entire individual terminal is a single facility for the
             owner/entity. In that case, approval of the Administrator would be required to
             voluntarily subdivide the terminal into more than one facility, under §
             80.502(b)(5).

1.31: D Will EPA please explain the registration and other requirements for marine vessel
       owners?

       A: D   EPA will release a separate QA/guidance information  on D&T for marine
             vessels and other mobile operations.

1.32: D Can you please describe the requirements for a diesel marketer picking up fuel at a
       terminal and making a delivery to a retail or wholesale purchaser-consumer site?

       A: D   If the fuel has already been dyed, taxed, and/or marked, there are no D&T
             requirements for the marketer.  The diesel marketer does not need to register with
             EPA and meet the D&T requirements unless they intend to distribute MVNRLM
             500 ppm diesel fuel on which taxes have not been assessed, NRLMfuel that is
             undyed, or heating oil or LMfuel that is not marked (in those areas of the country
             where the marker is required, per § 80.597(c)(l)). In either case, the marketer
             has PTD requirements and would still need to maintain the integrity of the fuel
             and, for defense purposes, should have an adequate quality control and sampling
             and testing programs.  The marketer is also still subject to the anti-downgrading
             provisions of § 80.527.
1.33: D Is it possible to receive fuel from/deliver fuel to someone who is not registered?  The
       regulations state that everyone has to register, however what would happen in the case of
       an importer who has never imported fuel to the U.S., and does not plan to do so, but just


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       so happens to import a small batch of fuel.  Such a party will not likely be registered with
       EPA prior to importing the fuel.

       A: D   Per the regulations of § 80.597 (c), all parties in the die sel fuel production and
             distribution system, up to the point where the fuel leaves the D&T boundaries
             (i.e., dyed or taxed) are required to register.  However, it is possible to receive
             fuel from an unregistered entity or facility, as per the requirements and
             limitations of§ 80.601 (a) (3). For this case only, the entity/facility ID 8888-88888
             must be used.

             There is no provision to transfer fuel to an unregistered entity or facility in the
             D&T system (i.e., up to and including the truck loading terminal).  In this case,
             the unregistered entity/facility must contact EPA to request ID numbers. In the
             case of the hypothetical importer in the question, it may transfer fuel into the
             D&T system without immediately registering (subject to the previously mentioned
             requirements and limitations of § 80.601(a) (3) on the recipient), but the importer
             must also comply with recordkeeping and reporting requirements, such as annual
             batch reports.  This activity will require obtaining entity and facility IDs from
             EPA.

1.34: D Please consider the following questions regarding situations where D&T may no longer
       be applicable:

       a)D   How should deliveries across truck racks be reported? The trucking company or
             retail locations are not registered, so there will be no entity or facility ID.  Should
             special codes be used to identify these?

             A: D   Designate and track ends at the point that fuel is dyed or marked (for
                    those areas of the country where the fuel is subject  to the marking
                    requirement), or taxed- generally just before the fuel is given to a trucking
                    company. Thus, they will not be registered, nor will they have ID
                    numbers.  There are still PTD requirements for these parties, and the
                    PTDs associated with such hand-offs will denote both the transferor and
                    transferee of the fuel, so special codes are not necessary.  For reporting,
                    truck racks must still track total fuel volumes dyed,  taxed, and/or marked
                    by grade.  Truck terminals will also still be required to report deliveries
                    by volume, sulfur level, designation, etc. (§ 80.600(b)).

       b) D   D&T does not cover barrels of fuel after they leave the truck terminal before
             delivery to retail and does not deal with retail stations, correct?

       A: D   Designate and track ends at the point that fuel is dyed, marked, or taxes are
             assessed (for those areas of the country where the fuel is subject to the marking
             requirement). The dye and marker can then be used to ensure that fuels are  not


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             inappropriately shifted to other markets, and thus D&Tis not necessary at that
             point.  The addition of the dye and/or marker will generally occur at a point
             before the fuel exits the terminal, so D&Twill not cover fuel after it leaves the
             terminal as long as it has been dyed, marked, or taxes assessed. Please note that
             the fuel will still be subject to the anti-downgrading provisions of§ 80.527.

1.35: D Can a truck terminal and the pipeline that brings product to the truck terminal be
       aggregated if that same truck terminal  receives product from another common carrier
       pipeline?

       A: D   Yes, the truck terminal and pipeline may be considered an aggregated facility if
             they are both owned by the same party and if that party maintains custody of the
             fuel while it is within the boundaries of the aggregated facility.  (Only refineries
             are precluded from aggregation in the case of a common-carrier pipeline.) For
             reporting, the aggregated facility would need to report volumes received into the
             pipeline as well as volumes received into the truck terminal from the common-
             carrier pipeline.

1.36: D For a system with multiple truck loading terminals, terminal operators do not necessarily
       know which volumes are highway diesel and which volumes are nonroad diesel until the
       fuel is loaded. How can volumes be accurately reported at the truck loading terminal
       level?

       A: D   The terminal operator is responsible for maintaining appropriate volume
             balances.  A recordkeeping system that captures individual batch data is required
             for batches received into, as well as batches delivered out of, the terminal.
             Reports submitted to EPA summarize, by product type,  receipt and delivery
             activities and results of compliance calculations for the applicable compliance
             period. A terminal operator would report subsequent to the
             loading/taxing/dyeing for that compliance period, so the fact that the designation
             is unknown until the point that it is loaded does not pose a problem (though,  the
             individual deliveries must be tracked so that the terminal operator can accurately
             report at the end of the reporting period).

1.37: D Can an entity register multiple facilities initially until a history or track record is
       established and then in a subsequent compliance period register fewer facilities by
       combining some?

       A: D   Yes, facilities may change their facility boundaries and register some aggregated
             facilities in a subsequent compliance period (compliance periods are yearly), as
             long as the aggregated facilities do not violate the facility/aggregated facility
             provisions set forth in the regulations. However, a party's facility definition or
             boundary may not change within a given compliance period.
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1.38: D Do facilities for RFG and ULSD have to be the same? Will EPA assign new ID numbers
      for facilities that already have a facility ID under RFG? Will those existing facilities
      have to register again?

      A: D   Facilities for RFG and ULSD can be the same, however they do not have to be the
             same. EPA may issue a new number if the facility definition changes.  Entities
             should still contact EPA to update their registrations, even if you plan to use the
             same facility and facility definition that was used for RFG.

1.39: D Can non-contiguous "terminals for hire" that are owned and operated by the same party
      be aggregated? Also, can such terminals be  aggregated if they receive product from
      common-carrier pipelines?

      A: D   No.  These terminals can only be aggregated if they are contiguous and if custody
             is maintained by the terminal at all times throughout the aggregated facility.

1.40: D a)     If a pipeline system does not transport 500 ppm HW diesel fuel and all NRLM is
             dyed before  entering the system, would this pipeline be required to comply with
             the D&T requirements?

             A: D   D& T ends completely at the point that fuel is dyed/taxes are assessed
                    when fuel is being sold or sent off to retail for sale, the pipeline system
                    would not have to comply with the actual designation and tracking of such
                   fuels. However, in this case, the pipeline system would still have some of
                    the D&T requirements, though the requirements are somewhat less.  The
                    pipeline would still need to follow the registration, reporting, and
                    recordkeeping requirements associated with D& T, and it would still need
                    to comply with the volume balance requirements.

                    While the limited fuels you noted would mean there are perhaps fewer
                    D&T requirements that apply, the pipeline system would still need to meet
                    several designation requirements depending on the type of fuel that is
                    delivered.  For example, all 15 ppm highway or MVNRLMfuel has to be
                    designated (§§ 80.598(b)(2) and (3)); and certain high sulfur fuel has to
                    be designated (§§ 80.598(b)(5) and (6)). The pipeline is still subject to the
                    volume balance requirements (e.g., anti-downgrading restrictions would
                    apply if any 15 ppm highway  needed to be downgraded to 500 ppm
                    highway at the point of delivery).  The fuel limitation noted above removes
                    some, but not all, of the D&T requirements for the pipeline.

      b)D   Similarly, if terminals along this pipeline system do not receive, store, or terminal
             any 500 ppm HW diesel fuel and all NRLM is  already dyed when received, do
             these terminals have to comply with the D&T requirements?
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             A: D   Similar to part (a), above, there are fewer D&T requirements but the
                    terminal would still need to meet some designation and volume balance
                    requirements. For example, 15 ppm MVNRLM received and delivered by
                    the terminal would still need to be designated, would be subject to the
                    anti-downgradingprovisions, and would still be subject to volume balance
                    requirements.

1.41: D What is the D&T responsibility of a truck carrier that hauls off-spec product that has
      been neither taxed nor dyed back to a refinery or a transmix facility?

      A:U   The presumption in this case is that if the fuel is no longer classified as dieseIfuel
             (and the PTD should reflect that), the fuel is no longer in the designate and track
             system.

1.42: D A refinery produces a batch of diesel containing 10 ppm sulfur, and hands the batch off to
      a common-carrier pipeline at 10 ppm.  The refinery wants to include the batch in its 15
      ppm production volume, but the pipeline tells the refinery that the batch must be
      designated as  500 ppm diesel because the batch does not meet the pipeline's inlet sulfur
      specification.  May the refinery include the batch as part of its 15 ppm production volume
      to demonstrate compliance with the 80/20 requirement for refiners and importers, but
      designate the batch as 500 ppm when it is handed off to the pipeline? If so,  does the
      refinery or pipeline need to account for the batch in any downgrading calculations?

      A: D   Compliance with the  80/20 highway provisions is based on the designation of fuel
             received.  In the nonroadrule,  'production' refers to a volume of fuel delivered
             rather than received. Thus, the pipeline's requirement that the fuel be designated
             as 500 ppm highway  diesel (and the refiner's designation of the fuel as such) at
             the point of delivery to the pipeline means that this batch of fuel would be treated
             as 500 ppm fuel for purposes of compliance with the refiner's 80/20
             requirements;  and downgrading, in this situation, would be the responsibility of
             the refiner.

1.43: D Our company owns a  refinery linked to company-owned terminal tanks outside the
      refinery via a  pipeline that is also owned by the refinery. What are the requirements to be
      able to register the refinery and terminal separately, knowing that on a routine basis,
      refinery production is sent directly (actively) to the terminal tanks? Only fuel
      manufactured at our refinery is shipped on the pipeline. If the terminal and refinery
      could be registered separately,  what would be the requirements to meet in terms of
      metering and analysis between the two facilities?

      A: D   The definition  of facility starts with the assumption that a series of contiguous
             places where an entity maintains custody over diesel fuel is treated as a single
             aggregated facility. There are certain exceptions to this, for example a refinery
             may not be aggregated with a pipeline or terminal that receives fuel from other


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refineries.  In addition, the entity generally can voluntarily subdivide this
aggregated facility and register multiple facilities. In this case, assuming fuel
from another refinery is not brought into either the pipeline or the terminal, then
the combination of refinery, pipeline and terminal tanks could start off as one
aggregated facility.  The owner could also subdivide this and separately register
more than one facility. For example, each component could be a separate
facility, the refinery and pipeline could aggregate as one facility and the terminal
as another, or the terminal could aggregate with the pipeline as one facility with
the refinery as another.  While an entity can change its choice in subdivision of
facilities, this choice cannot be changed during a compliance period.  Therefore,
the owner does have the option to treat their terminal as a separate facility.  (See
§ 80.502.)

It is important to note that once the facility has been registered, it is treated as a
separate part of the distribution  system for purpose ofD&T. All of the D&T
requirements apply for any dieselfuel received or discharged from the separate
facility, just as if it was owned and registered by another entity. It is also
important to  note that if apart of the system is aggregated with the terminal, such
as the pipeline, then that entire aggregated facility is subject to the D&T
requirements that apply to terminals. Likewise, if the pipeline is aggregated with
the refinery,  then that entire aggregated facility is subject to the refiner
requirements. (See § 80.502(b)(l).)

In this case, the hand-off point for purposes of D&T would depend on the facility
subdivision decided by the owner at registration. The decision on subdivision
will then dictate the metering and analysis requirements that apply under D&T.
For example, if the terminal is a separate facility, then the hand-off of custody
from the pipeline to the terminal would be the point at which volumes and
designations would be determined for purposes of D&T, for both  the pipeline and
the terminal.   If the refinery and the pipeline are separate facilities, then the
point at which custody is handed off from the refinery to the pipeline (the point of
delivery) is the point at which volumes and designations would apply for purposes
of D&T for both the refinery and the pipeline.

The refiner is responsible for certifying that the fuel meets EPA specifications and
would need to conduct tests to support this certification.  Facilities downstream of
the refinery are not required to conduct tests to verify that the fuel meets EPA
specifications.  However, as one element in establishing a defense to presumptive
liability should a violation be discovered, the regulations provide that
downstream parties must have a quality assurance program that includes
sampling and testing. If the refinery is aggregated with a downstream location,
(e.g., in this case, if the refinery and pipeline are registered as one facility) then
the aggregated facility is subject to the refinery requirements, and not to
downstream D&T requirements. (See § 80.502(b)(l)(i).)
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1.44: D § 80.520(b)(2) states "UntilJime 1, 2010, any #1D or #2D distillate fuel that does not
       show visible evidence of dye solvent red 164 shall be considered to be motor vehicle
       diesel...except for distillate fuel designated or classifiedas any of the follow ing:... (vi)
       Diesel fuel that is produced beginning June 1, 2006, with a sulfur level less than or equal
       to 500 ppm, and designated as NRLM or LM that has not yet been distributed from a
       truck loading terminal or bulk terminal...".  Does this mean that after June 1,2010
       refineries must start dying the 500 LM,  small refinery 500 ppm NRLM, and Credit 500
       ppm NRLM?  Will transmix processors be required to dye 500 ppm transmix derived
       NRLM/heating oil? Will parties upstream of the terminal be required to dye segregated
       interface derived 500 ppm NRLM/heating oil? Pipelines may be moving these products
       until 2014 and in-use generated LM 500 ppm indefinitely. Does the  15 ppm NRLM need
       to be dyed at the refinery at some point in the future or can it always be dyed at the
       terminal? Please clarify the June 1, 2010 date in the dye requirements section.

       A: D   The dye provisions in § 80.520(b) do not directly require that dye be added at the
             refinery gate.  The dye provision establishes a presumption that fuel is highway
             fuel if it is not dyed. As a result, in the past refiners have added visible evidence
             of the dye to all fuel that did not meet the highway standard, so that it would not
             be treated as subject to the highway standard. In the 2004 nonroadrule, EPA
             dramatically limited the role that dyeing plays under  the regulations, to allow for
             more fungible distribution of diesel fuel. After June 1, 2010,  there is no longer
             any presumption that undyedfuel is highway fuel. Therefore after that date there
             is no need for refiners to dye fuel to make sure it is not considered highway fuel
             subject to the highway standards. At  that point, EPA will rely on the designation
             provisions to identify what the fuel is and what sulfur standard applies.

             Prior to June 1, 2010,  only a limited subset of diesel fuel must be dyed (in the
             distribution system above the truck rack; fuel must still be dyed when leaving the
             truck rack to meet IRS requirements)  to avoid the presumption that it is highway
             fuel. From the effective date of the nonroad diesel final rule  (August 30, 2004)
             until June 1, 2010, only heating oil and high sulfur NRLM must be dyed red at the
             refinery gate to avoid being subject to the highway and nonroad sulfur standards.
             Prior to August 30, 2004, all diesel fuel which did not meet the applicable
             requirements for highway diesel fuel was required to be dyed red at the refinery
             gate to avoid being subject to the highway standard.  After June 1, 2010, there
             are no EPA requirements to dye any diesel fuel at the refinery gate.  Similarly,
             there are no EPA requirements for diesel fuel produced downstream of the
             refinery such as transmix or segregated interface-derived diesel fuel to be dyed
             upstream of the terminal. In all cases, highway fuel is required to be free of
             visible evidence of red dye.

             Any diesel fuel which is required to contain the fuel marker solvent yellow 124
             (heating oil beginning 6/1/2006 and LM diesel fuel 6/1/2010  - 5/31/2012; see §
             80.510) is also required to contain visible evidence of dye solvent red 124. The
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             fuel marker and associated red dye requirements apply prior to the distribution
             from a truck loading terminal.  The Internal Revenue Service requires that
             untaxed dieselfuel (nonroad, locomotive, & marine, & heating oil) be dyed
             before leaving the terminal. Thus, 15 ppm NRLM can be dyed just prior to
             leaving the terminal.

1.45: D How will EPA deal with truck terminals located at a refinery? Are there any reporting
      obligations under D&T (i.e., quarterly balances, etc.)? Current Q&A question 2.39
      addresses the sale of another refiner's product over its own truck rack, but what about the
      sale of a refiner's own product over that same truck rack?

      A: D   The manner in which the facility is registered will dictate reporting obligations of
             the truck terminal.

             If the truck terminal is registered separately from the refinery, then the refinery
             must meet all of the requirements applicable to a refinery, and the truck terminal
             must meet all of the D&T requirements applicable to a downstream truck
             terminal.  The requirements of D&T- including hand-ojfs and balance
             calculations- must be reported, as appropriate, by the refinery and truck terminal.

             If the truck terminal is aggregated with the refinery, then this single aggregated
             facility is treated as a refinery, and must meet all of the requirements applicable
             to a refinery.  In this case,  there would be no separate truck terminal D&T
             requirement for the portion of fuel being delivered over the rack, so long as
             requirements for dye/marker/taxes are satisfied.  The hand-off from the truck rack
             would be treated in the same way as a hand-off from a refinery.  The refinery's
             batch volumes and designations would be based on the hand-offs of fuel at the
             point it is released from the truck terminal, as that is the point at which the
             aggregated "refinery" would hand-off custody of the fuel.  (See definition of
             "batch " at § 80.502'(d).) In this special case, the refinery will have to provide
             batch reports showing volume of marked, dyed, and/or taxed product that was
             sold over the  truck rack, as well as batch reports reflecting designation and
             delivery volumes for any diesel fuel handed off to a downstream party separate
             from the truck terminal, such as a pipeline. This will enable EPA to differentiate
             between fuel that was sold over the truck rack versus fuel that was sent through
             the D&T system.

1.46: D Consider the following scenario- fuel enters a pipeline at, or below, 15 ppm. At some
      point in the pipeline, the fuel becomes off-spec. If this fuel is then delivered to a terminal
      at that off-spec level, but is then put into a tank with fuel that is below 15 ppm, and thus
      becomes 15 ppm (or less) again, how is this  handled in D&T? Specifically, what do the
      pipeline and terminal have to report?
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      A: D   In this situation, the pipeline needs to redesignate the fuel at the point it is
             delivered to the next facility in the distribution system- the terminal, in this case.
             The designation of the fuel by the pipeline at the point of delivery needs to
             accurately reflect the sulfur level, therefore it will need to be redesignated as
             something other than 15 ppm.  The volume and designation of the delivered fuel
             will need to be accounted for by the pipeline under its D&T requirements. For
             example, if the fuel is redesignated from 15 ppm highway to 500 ppm highway,
             this would need to be accounted for by the pipeline in showing compliance with
             the anti-downgrading requirements. The terminal would then report a receipt of
             500 ppm fuel.  The terminal may redesignate that volume as 15 ppm once it
             becomes 15 ppm fuel again. If the terminal 'upgrades' the fuel from 500 ppm NR
             to 15 ppm HW, and delivers it as 15 ppm fuel, then the terminal will need to
             account for this volume of 15 ppm fuel in showing compliance with its D&T
             requirements and volume balances.

1.47: D Is there anything in the regulatory requirements that would prevent a downstream blender
      from producing a batch of 15 ppm highway diesel  fuel by mixing a batch of fuel
      designated as 500 ppm diesel fuel (but with an actual sulfur level only slightly over 15
      ppm) with a batch  of fuel designated as 15 ppm (but with an actual  sulfur level
      considerably below 15 ppm)? Am I correct in that since no previously uncertified /
      undesignated blendstocks were used by the blender, that they would not be required to
      report as a refiner to EPA?

      A: D   There is nothing in the regulatory requirements to prevent a downstream party
            from producing 15 ppm diesel fuel in the manner described.  Since no previously
             uncertified/undesignated blendstocks were used, the party commingling/mixing
             the two fuel batches would not be required to report as a refiner to EPA.
             However, the sulfur level of the resulting fuel would need to be measured, and the
            fuel would need to be accurately designated based on its sulfur level.  The
             designation and volume of the fuel as delivered would need to be reflected in the
            party's D&T requirements and volume balance calculations. If the 15 ppm and
             500 ppm fuel used in  the mixing operation described were both designated as
             highway diesel fuel when they were received, and the resulting fuel was
             designated as 15 ppm highway, there would be a neutral impact with respect to
             demonstrating compliance with the motor vehicle volume balance requirements
             (see section 80.599(b)). If the 500 ppm fuel used was designated as NRLM diesel
            fuel, there would be a negative impact with respect to demonstrating compliance
             with the motor vehicle volume balance requirements which would need to be
             accounted for by the party to show compliance during the same compliance
            period.

1.48: D If a parent company has wholly owned pipeline and terminal subsidiaries, can the
      facilities be aggregated and reported by the parent if the facilities meet the contiguous
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       facilities requirement? Can a parent report all facilities for its wholly owned subsidiaries
       or must facilities be reported by legal entity?

       A: D   Each registered entity reports to EPA. If the parent company is the registered
             entity for each of its facilities, then the parent company will report. If each
             subsidiary facility is its own registered entity, then each of those entities must
             report.

             If the facilities are contiguous and custody is maintained by one entity (the parent
             owner in this case), they may be aggregated. In that case the owner must register
             as an entity, and the aggregated facility must also be registered (§ 80.597 (c) and
             (d)).

1.49: D Will EPA require terminals to include language/provisions on compliance with the ULSD
       rules in their contracts with tenants? (i.e., provisions that would have tenants confirm
       that they understand their obligations as custodians and that they will not change the
       designation of fuel stored in leased tanks.) Also, when terminals lease tanks, it would
       appear that the fuel would be entirely under the control of the tenants of the leased tanks.
       In enforcement,  will EPA  only look at the actions of the tenants, or will EPA take action
       against the parent terminals?

       A: D   The diesel sulfur regulations do not require that terminals include language in
             contracts to lessees, however terminal owners may find it useful to include such
             language to ensure that lessees fully understand their obligations as tenants.
             Whether or not a terminal owner includes such language in its leases, as stated in
             the preamble, the terminal owner  has full responsibility over  leased tanks and
             must ensure that its total volume balance- of all tanks within the terminal- meets
             the required balance at the end of a reporting period (see § 80.601).  Since the
             terminal owner is the responsible party, EPA reserves the right to take any
             appropriate enforcement action against the terminal owner. In addition, where
             the lessees have committed a prohibited act, for example by causing the  terminal
             operator to commit a volume balance violation, or by distributing fuel that
             violates the sulfur standard, then EPA reserves the right to take any appropriate
             action against the lessees as well.  As in all cases, EPA will evaluate each case
             individually to determine the appropriate enforcement response.

1.50: D a)     Would EPA consider allowing a terminal to be subdivided into more than one
             facility for the purposes of registration under the D&T reporting and
             recordkeeping requirements when the terminal  owner leases some of its  assets to
             another entity? Under such an approach, the terminal owner and lessee(s) would
             have the  option of obtaining separate registrations for the respective parts of the
             terminal  that they control.  Allowing industry this flexibility would be most
             consistent with the business relationship between terminal owners and their
             lessees.  Unless the terminal owner and the lessee jointly agree that the lessee be


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       covered under the terminal owner's registration, the terminal owner's
       responsibility should end once the fuel is delivered to the lessee's storage tank.
       There are currently no mechanisms by which terminal owners could receive the
       necessary information from their lessees or control their lessees actions.

       A: D   Due to concerns that allowing multiple registrations for a single  terminal
             would greatly complicate EPA enforcement and compliance assurance
             activities, we specified that terminals may not be subdivided for
             registration purposes under the D&T system except under unique
             circumstances as approved by EPA (§  80.502(b)(5)). In most cases the
             fuel goes through common piping/manifolds that are owned and operated
             by the terminal owner prior to entering the leased tankage and/or after
             exiting.  Therefore, the terminal owner would still take custody of the fuel
             and be required to report. The leased assets are typically operated by
             employees of the terminal owner.  Thus, it should not be unduly
             burdensome for terminal owners to obtain the necessary information from
             their lessees to comply with the reporting requirements under the D&T
             system.  The terminal owner could use contractual means to ensure that it
             receives the necessary information from its lessees, and to ensure that its
             lessees do not cause a violation of EPA requirements (and to recoup
             potential damages should a violation occur).

             Based on the above discussion, we continue to believe that it is
             appropriate to preclude a terminal from being subdivided except under
             unique circumstances as approved/defined by EPA. One such unique
             circumstance where EPA believes it is appropriate to allow a terminal to
             be subdivided is when refining activities are occurring within the terminal
             by lessees, as discussed below. EPA will consider applications for the
             subdivision  of a terminal, or other unique circumstances, on a case-by-
             case basis.

b)D    Who should report in the following scenario?  A terminal operator leases tankage
       to another company. The lessee uses the tankage for blending purposes.  The
       lessee provides instructions to the terminal operator regarding tank blending, but
       has the tank certified independently and  does not provide the operator information
       regarding the final product specification. Therefore, the terminal operator may
       not have the information necessary for accurate reporting. Would EPA allow for
       the subdivision of a terminal in this case?

       A: D   If the blending of previously undesignated blendstocks occurs in a
             terminal, such blending operations are considered to be refining
             activities. In such a case, one party must satisfy the refiner recordkeeping
             and reporting responsibilities. If neither party met the refiner
                                    22 D

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requirements, then both the lessee and the terminal could be liable under
the regulations for any refiner-related violation.

Where a lessee of terminal assets performs fuel blending operations that
make it a refiner, there are three different options that EPA believes
would be appropriate for addressing both the refiner and distributor D&T
responsibilities under the regulations.  We have described these situations
below.

In the first option, the entity responsible for the terminal would state in its
registration form that it is also performing blending/refining activities and
would take on refiner responsibilities for the lessee's blending operations,
including the refiner responsibilities under designate and track. The
terminal entity/facility would satisfy the obligations of compliance,
reporting, and other D&T obligations for both its distribution activities
and the refining activities of the lessee. The terminal entity/facility would
then use contractual means to ensure compliance with the regulations.
While the terminal entity/facility is taking on more burden in this option,
EPA anticipates that there are a number of situations where this might be
the preferred option.

In the second option, the lessee would register as a separate facility only
for its refining operations (production of fuel from the blending of
blendstocks), and would receive a facility identification for its refining
facility.  The entity responsible for the terminal would still be registered
as a distributor and would still be treated as one single entity and facility
for any volumes of previously designated fuel that the lessee merely
receives and distributes as a distributor, for purposes of downstream D&T
provisions (as in part (a),  above).

The lessee, in its capacity as a refiner, would need to comply with the
D&T requirements applicable to refiners,  including appropriately
designating all volumes of fuel that it produces by blending.  The volume
produced would only include the volumes produced from previously
undesignated blendstocks.  The lessee/refiner would be subject to all of the
refiner requirements for the fuel it produces, including batch sampling
and testing, and the 80/20 provision for highway dieselfuel.  The lessee
would also have to report to EPA on the volumes of fuel that it produces
and distributes, including reporting the designation, volume, and the
recipient of the fuel.  In most cases the recipient would be the terminal
entity/facility (whose manifolds and piping the fuel would go into).  The
terminal entity/facility would then report volumes received from the
internal lessee/refiner (just as it would report volumes received from any
other external facility).  The lessee/refiner would have to maintain
                       23 D

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accurate PTDsfor its deliveries of finished fuel to the terminal
entity/facility.

Where a lessee/refiner blends previously designated diesel with
undesignated blendstocks, the volume that is considered produced will just
be the additional volume added by the blendstock.  Further, the properties
of the fuel (i.e., sulfur content) will be the sulfur content of the finished
blend. If the finished blend changes the sulfur content of the previously
designated fuel, this change would need to be reflected in the terminal
entity/facility's D&T volume balance calculations and documentation.
For example- if 1000 barrels of previously designated 15 ppm highway
diesel were blended with 1000 barrels of higher sulfur fuel that was not
previously certified (and the resultant volume of fuel now exceeds the 15
ppm standard), the entire 2000 barrels of blended fuel must now be
classified as 500 ppm highway diesel fuel. The lessee/refiner would only
count the newly produced fuel as 1000 barrels of 500 ppm highway diesel
fuel in its refiner D&T documents, and this volume would be reported as
fuel produced and delivered to the terminal entity/facility.  The terminal
entity/facility would then report a receipt, from the lessee/refiner, of 1000
barrels of 500 ppm highway diesel fuel. Since the remaining 1000 barrels
of the blended volume was previously designated as 15 ppm highway
diesel fuel, the terminal entity/facility would treat it as a downgrade from
15 ppm highway diesel fuel to 500 ppm highway diesel fuel (and there
would be no hand-off from the lessee/refiner to the terminal entity/facility
of this portion of the resultant fuel since it was previously designated
before it was blended).   The terminal entity/facility would need to account
for this downgraded volume in showing compliance with the 20%
downgrade limitation, assuming it was delivered from the terminal to
another downstream party as 5 00 ppm highway diesel fuel.

The added complexity in situations such as this may prompt the desire to
use the  third option, discussed below, instead.  However, this second
option may be preferred in situations where  the ability to measure hand-
off volumes of previously designated diesel fuel between the terminal
entity/facility and the lessee is difficult or impossible.

In the third option, the lessee would register as a completely separate
facility.  The lessee would check both "refining" and "distributing" on its
registration form, and would be responsible for both its refining
(production of fuel from blendstocks) and distribution (receiving and
distributing previously designated fuels) operations.  The terminal
entity/facility would also be registered as its own facility. Assuming
common manifolds and piping (owned by the terminal entity/facility) are
coming into and out of the lessee's tankage,  the lessee would report
                       24 D

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              volumes received from and delivered to the terminal entity/facility under
              the designate and track regulations. As with the second option, the new
              lessee facility would be responsible for compliance with the fuel standards
              and reporting to EPA as a refiner for the fuel it produces from
              blendstocks.  Unlike the second option, however, the lessee is also fully
              responsible for compliance with the D&T volume balance requirements
              and the anti-downgrading requirements as a distributor.

              Anyone choosing options two or three must apply for approval. The most
              appropriate way to apply is at the time of registration.  For option three, a
              letter should accompany the registration form,  and should state the intent
              to register as a separate facility within another party's terminal/on
              another party's property. For EPA to allow  the use of option two, a letter
             from each party involved will need to accompany the registration form
              indicating agreement to the responsibilities under option two.  If
              registration is issued, it will also be considered approval for subdivision
              of a terminal (under § 80.502(b)(5)).  Following registration, the lessee
              will be issued an ID number that consists of the lessee's entity ID and the
              terminal owner's facility ID.

              As the details of situations where a lessee is performing blending
              operations may differ for each case, and are  often complicated, we
              encourage anyone with this situation to talk with EPA prior to seeking
              approval for subdivision of a terminal.

c) D    Who should report if a terminal is owned by one company but operated by
       another?  The operator may not provide the owner detail needed to meet the
       reporting requirements?

       A: D    The terminal owner could contract with the operator to report to EPA or
              could obtain the necessary information from  the operator to report
              directly to EPA. In either case, the terminal  owner would be the
              registered entity, and is the party responsible for compliance. However,
              in a situation where a terminal is completely operated by a lessee for the
              lessee 's benefit only, we would allow the lessee to register the facility (or
             facilities) and it would be responsible for all associated recordkeeping
              and reporting.
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2.D    Handling/Downgrading Issues

2.1: D  As we understand it, the rule provides that interface/transmix may be sold as heating oil
       or high-sulfur NRLM from June 1, 2007 through May 31, 2010. During at least a portion
       of that time period, the sulfur standard for NRLM will be 500 ppm.  Can the above-500
       ppm transmix be blended into NRLM that has a sulfur content of 500 ppm or less? If so,
       what happens if the blending causes the sulfur content of the entire tank to exceed 500
       ppm?

       A: D   Blending of greater than 500 ppm NRLM fuel with 500 ppm NRLM fuel is
             allowed. However, the entity performing the blending takes on the liability for
             the blend meeting its designation.  If the resulting blend is greater than 500 ppm,
             then the entire batch of fuel must be designated as high sulfur die sel fuel. This
             option is limited in certain cases by the volume balance requirements, which is
             based on a comparison of the amount of high sulfur NRLM received to the
             amount of high sulfur NRLM delivered.

2.2: D  If the two products mentioned in question 2.1, above, cannot be blended,  do the
       regulations require the high-sulfur transmix to be loaded across a separate rack line and
       to be labeled differently on the bill of lading?

       A: D   As discussed in 2.1, in many cases they can be blended. However, if they are not,
             they would have different designations and require distinct product transfer
             documents.

2.3: D  How will Minnesota B2 (2% biodiesel)  be treated under D&T?

       A: D   Minnesota B2 is die sel fuel, and is therefore subject to all of the requirements of
             dieselfuel. Biodiesel must comply with the same sulfur specification applicable
             to die sel fuel from any other source. If sold as ULSD or blended with ULSDfor
             later sale as ULSD, the biodiesel would be required to meet the 15 ppm sulfur
             specification applicable to ULSD.  The terminal would be subject to presumptive
             liability if their addition of biodiesel to ULSD caused the 15 ppm sulfur standard
             to be exceeded.

2.4: D  What is the terminal compliance date?  August 1,  2006?

       A: D   The terminal compliance date for highway dieselfuel is July 15, 2006 for all fuel
             they designate as 15 ppm dieselfuel.

2.5: D  When do downgrade limitation dates start for pipelines?
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       A: D   Anti-downgrade limitations begin Oct 1, 2006for all entities in the distribution
             system.

2.6: D  What requirements are there for clean trucks?  Will trucks be dedicated to ULSD service?
       This will have major impact on where testing occurs.

       A: D   There are no EPA requirements to use dedicated tank trucks to transport ULSD.
             It is the responsibility of the tank truck operator to ensure that whatever
             contamination that might take place while the ULSD is in the operator's custody
             does not cause the 15 ppm cap on sulfur content to be exceeded. Additional
             quality control measures may be needed to limit sulfur contamination if an
             operator chooses to use a tank truck compartment to alternately transport ULSD
             and high sulfur products.

2.7: D  What limitations, if any, are there on the marketing of transmix that has jet or exempted
       product?

       A: D   The special provisions applicable to the sale of products produced by a transmix
             processor using transmix as the feedstock are applicable regardless of the
             composition of the transmix.  As a result of common pipeline batch sequencing,
             we anticipate that most transmix will contain some jet fuel and in certain areas
             heating oil.  From June 1,  2006 through May 31, 2010, 500 ppm dieselfuel
             produced by processing transmix may be designated as highway dieselfuel and
             sold into the highway diesel market (40 CFR 80.513(a)).  This flexibility applies
             to facilities that produce dieselfuel by processing transmix by distillation or
             other refining processes, but do not produce dieselfuel by processing crude oil.
             This flexibility only applies to the volume of diesel fuel produced by a transmix
             processor by processing transmix, and does not apply to any diesel fuel produced
             by the  blending of blendstocks.

2.8: D  Can a transmix processor produce 500 ppm diesel fuel for sale into the highway diesel
       market after June 1, 2006?  May the transmix processor blend the fuel produced through
       the processing of transmix with a finished diesel  fuel produced by a refiner (meeting a 15
       ppm or 500 ppm sulfur cap) in order to ensure production of a final fuel blend that  meets
       a 500 ppm sulfur cap for sale into the highway diesel pool?  Without the ability to
       conduct  such blending, the diesel fuel that transmix processors produce from transmix
       may not always meet a 500 ppm sulfur specification. This may limit the market for
       transmix-derived diesel fuel.

       A:U   In the case described in the question, the  transmix processor could designate and
             sell all of the 500 ppm fuel volume produced by blending processed transmix and
             500 ppm dieselfuel into the highway diesel market, provided that the finished 500
             ppm dieselfuel used for blending had already been certified by another refiner
             and designated as highway dieselfuel. If the finished dieselfuel used for


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             blending was designated as No. 1 or No. 2 15 ppm highway dieselfuel, then all of
             the resulting 500 ppm dieselfuel could also be sold into the highway diesel
             market. However, the anti-downgrading requirements would apply to any No. 2
             15 ppm highway dieselfuel used for blending.  If the finished fuel used for
             blending was designated as something other than 500 ppm or 15 ppm highway
             dieselfuel, then the special provisions described above only apply to that fraction
             of the volume of the final fuel blend derived from transmix. For example: If
             80,000 gallons of transmix was blended with 20,000 gallons of previously
             certified 500 ppm diesel fuel designated as nonroad, locomotive, and marine
             (NRLM) dieselfuel, then only 80,000 gallons of the finished fuel blend could be
             designated as 500 ppm highway dieselfuel.  The  remaining 20,000 gallons could
             be redesignated as NRLM diesel fuel (or heating oil). If the transmix was blended
             with a blendstock, and not previously  designated fuel, then that fraction of the
             finished blend attributable to the blendstock would be subject to the standards
             applicable to refiners (e.g. 80/20).

             We believe that the above discussion addresses the questioner's concern about
             the ability to manufacture 500 ppm diesel fuel from transmix.  Furthermore, there
             will be outlets for diesel fuel produced by transmix processors that does not meet
             a 500 ppm sulfur specification during the time period when the highway diesel
             produced by transmix processors is subject to a 500 ppm sulfur specification.
             Such fuel may be sold into the NRLM market or into the heating oil market.

2.9: D  Will a terminal have to wait for lab results before it can ship product to the rack or
       another pipeline?

       A: D   A  terminal acting merely as a distributor or carrier is not required to wait for lab
             results before shipping dieselfuel. The regulations provide that, like other
             downstream parties, to establish a defense to presumptive liability a terminal
             must have a quality assurance program that includes sampling and testing, as one
             element of its defense to presumptive liability.

2.10: D Very few truckstop operators have the ability to carry two grades of diesel fuel. The
       industry is not likely to install new tanks/lines/pumps for a four year phase-in period. Is
       there a minimum amount of each product that a marketer must carry and sell to qualify
       for the 20% downgrade exemption?

       A: D   If a retailer makes 15 ppm dieselfuel available to its customers in a manner
             consistent with the way it markets other fuels, then the retailer is not subject to
             the anti-downgrading requirements for highway dieselfuel. Typically, this would
             mean that the retailer would need to provide a fuel pump (or, pumps) and have
             sufficient volumes of 15 ppm highway dieselfuel available so that end-users
             wishing to purchase 15 ppm dieselfuel do not find it significantly more difficult to
             refuel than customers who wish to refuel with 500 ppm dieselfuel.


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2.11: D At retail locations, will the diesel dispenser have a different size nozzle to prevent a
       customer from misfueling?

       A: D   EPA did not require unique dispenser nozzles for 15 ppm diesel fuel. This is
             something we considered on several occasions, but concluded, after discussions
             with the relevant stakeholders that misfueling would not likely be significant
             enough to justify the cost and burden of the vehicle and fuel pump changes. The
             nonroad diesel rule includes labeling requirements for fuel dispensers and
             vehicles to help prevent misfueling. The fuel dispenser labeling requirements
             finalized in the highway diesel rule were super ceded by those in the nonroad
             diesel rule (see 40 CFR 80.570,  80.571, 80.572, 80.573, & 80.574).

2.12:   From an end-user viewpoint (trucking company):
       a)    What is the liability in the event of misfueling by a driver?
       b)    What effect does running ULSD in older equipment have on the engine?
       c)    What is the impact of running 500 ppm fuel in a new (2007+) engine?
       d)    Will companies with bulk fuel for use in their own equipment be  subject to
             testing?
       e)    Will existing tanks currently containing 500 ppm fuel be suitable  for storage of
             ULSD?
                    will tanks need to be purged and cleaned
                    will company need to install new tanks to segregate fuels until 500 ppm is
                    gone?

       A: D   a)     See question 12.1.  The trucking company is liable for misfueling but will
                    be able to meet defense if it can demonstrate that the violation was not
                    caused by the fleet operator or its employees (e.g., fueled from a retail
                    pump labeled as containing the appropriate fuel for the vehicle) and, if it
                    is from the company's own pump, it also needs to show PTDs account for
                    the fuel and show it was  compliant.
             b) D   Generally,  ULSD will be beneficial to engine operation and durability.
                    The only known concern is with the lubricity of ULSD, which will be
                    ensured through the use  of lubricity additives to the fuel. ASTMhas
                    adopted a lubricity spec for diesel fuel to assure proper fuel lubricity.
             c) D   If a new (MY 200 7 or later) truck is misfueled once, it will have
                    significantly higher PM  emissions during operation on that fuel, but there
                    should not be any significant long-term emissions or engine durability
                    concerns as long as the vehicle is then fueled with the proper fuel.
                    Constant misfueling would damage the after treatment/emission controls
                    on these newer vehicles.
             d) D   EPA will inspect wholesale purchaser-consumer facilities and take
                    samples from fuel pump  stands and from vehicle fuel propulsion tanks.
             e)     ULSD can be stored in tanks currently storing other fuels, including 500
                    ppm fuel and high sulfur fuel.  However, care must be  taken when


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                    transitioning the tank to avoid contamination of the ULSD. If a rapid
                    turnover is desired, purging and cleaning the tank is an option, however it
                    is not required.

2.13: D It could take several loads of 15 ppm to flush out a retail tank, and this could take several
       weeks. Is there  a provision for downgrading the product during this transition?

       A: D    Yes. During the start of the program, the anti-downgrading provisions do not
              start until October 1, 2006 (see § 80.527(c)(3)), allowing for a normal orderly
              transition.  Even after October 1, there is an allowance for 20% to be
              downgraded. Since contamination at retail after the transition is expected to be
              minimal, 20% over the course of the entire compliance period should be
              sufficient.

2.14: D Regarding the 2 ppm adjustment factor- this applies downstream of the refinery and the
       import location. Assuming a terminal  has a single ULSD storage tank that receives
       product from a refinery and also receives ULSD imports, both receipts would be
       designated as 15 ppm on-highway diesel and would otherwise be fungible. Would this
       tank be a downstream tank or an import tank? Would the 2 ppm adjustment factor apply
       to this tank or not?

       A:U    As in other fuels programs, tanks downstream from the certification tank will
              generally be considered "downstream " tanks and will be eligible for the 2 ppm
              test result adjustment, per § 80.580(d).  However, this would not be the case if a
              company uses a tank as a downstream tank for refinery purposes and also uses it
              as a certification tank for its imports. In such a case the tank would not be
              eligible for the 2 ppm adjustment.

2.15: D What are the recordkeeping issues related to biodiesel used as lubricity additives for
       ULSD?

       A: D    Recordkeeping in this case will be the same as any other blending component. If
              the biodiesel provider designates the fuel as MVNRLM, then he serves  as the
              refiner.  If the provider does not designate, then  the blender serves as the refiner.

2.16: D In order to be in compliance with the lubricity requirements of the ASTM D 975 diesel
       fuel specification,  refineries will have  to use lubricity additives, some of which may
       contain sulfur.  Most, if not all, pipelines will likely prohibit the use of these additives in
       product that they transport. Therefore, these additives will be added to diesel fuel
       downstream of the pipelines (either into tanks at the terminal or at the rack). Can
       volumetric calculations be used to account for the sulfur content of these additives?

       A: D    No,  volumetric calculations cannot be used to account for the  sulfur content of
              these additives.
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2.17: D During the initial phase, I deliver 15 ppm fuel to a customer. The product is
       contaminated (and, as a result, no longer meets the 15 ppm standard) while in his
       custody. The customer then ships the fuel back to me due to its contamination.  Upon
       receipt of the fuel, I reclassify it as 500 ppm- does this count against my 20%
       downgrade?

       A: D    The owner of the facility where the contamination occurs is responsible for
              redesignating off-spec fuel, and for accounting for it in its compliance
              calculations.  The product that is shipped back to your facility must be
              appropriately designated and the product transfer document must reflect this
              designation.  When the product is returned to you, it should already be designated
              as 500 ppm (since the party that caused the contamination is responsible for
              redesignating fuel that no longer meets the applicable standard), so you would
              not have to reclassify/redesignate the fuel and the downgrade would not count
              against your balance.

2.18: D 50,000 bbls of 15 ppm is discharged from an on-spec vessel. On the way to the  tank, it
       became contaminated via pipeline.  The receiving tank had 20,000 bbls in it, and the
       50,000 bbls of contaminated fuel is put on top of the 20,000 bbls. What is charged
       against the terminal's 20% rule if it is redesignated as 500 ppm highway fuel?

       A: D    Volumes are calculated based on receipts and deliveries for each custody holder.
              In this hypothetical situation, there would be  70,000 bbls of fuel designated as 15
             ppm highway fuel received by the terminal, but 70,000 bbls of 500 ppm highway
             fuel delivered.  (See 40 C.F.R. § 80.527(d).)  This assumes that the 50,000 bbls of
             fuel was in the custody of the terminal when the contamination occurred in
             piping.

2.19: D Must diesel fuel treated as blendstock (DTAB) be off-spec,  or can it be on-spec  and
       "treated" as blendstock?

       A: D    The DTAB provisions of § 80.512 may be used regardless of whether the diesel
             fuel is "off-spec."

2.20: D The 20 percent downgrade restriction in the highway rule is going to be extremely tight
       the second half of 2006 in large part due to refining production only being required 3
       months in advance of retail  sales and the first year being a partial year for the downgrade
       standard and, most critically, this is the first year for tank transition with a lot of higher
       sulfur distillate in the system. Many are planning on just in time delivery of ULSD from
       the refineries which means transportation will be faced with considerable downgrade
       during the transition period that limit downgrade to the on-road market to 20 percent.
       While no retailer is required to sell ULSD, anyone that handles ULSD may not
       downgrade more than 20%  of the net volume received in any year into the on-road pool.
       This is likely to be a problem, especially for those moving small batch volumes. EPA


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       needs to delay the start date of the downgrade limit period or get rid of it all together for
       this first year. Alternative, if all else fails, they should group the period with 2007.

       A:U   As finalized in the nonroadrule, the start of the first compliance period for anti-
             downgradingwas delayed to Oct 1, 2006 to allow for the expected downgrade
             during the initial transition to ULSD.  The compliance period was also
             lengthened to end on May 31, 2007, allowing a longer period over which
             compliance can be averaged.

2.21: D If a pipeline does not have sufficient storage capacity for all grades of ULSD and
       exempted product, will the pipeline be allowed to blend at the terminal to prevent
       outages?

       A: D   Yes, pipelines/terminals may blend different grades of fuel subject to the anti-
             downgrading limitations on highway ULSD and volume balance requirements for
             highway diesel fuel, nonroad diesel fuel, and high sulfur NRLM as applicable (see
             section 80.599).

2.22: D Please comment on the possibility of elimination of the red dye requirement for off-road
       diesel with the introduction of 15 ppm highway fuel and allowing 500 ppm "non-road"
       diesel to be shipped undyed as it leaves refining gate (to  allow the distributors system to
       accommodate 3 grades of diesel)- please confirm that off-road diesel meeting the 500
       ppm requirements may be commingled with 500 ppm on-road diesel? Dye removal, and
       the ability to commingle will greatly reduce the strains on limited tankage and will add
       needed flexibility, thereby reducing potential distribution and supply disruptions. Dyeing
       of "non-road" diesel would take place at terminal rack. A terminal could then handle 15
       ppm highway, 500 ppm highway, and 500 ppm nonroad with two tanks common in
       terminals today. It would also help pipeline companies.  Also, can 500 ppm off-road
       diesel be redesignated as 500 ppm on-road diesel?  If so, are there any limits or special
       testing or documentation requirements?

       A: D   While it does not eliminate the red dye requirement for nonroad diesel fuel, the
             nonroad diesel rule's designate and track provisions (D&T) allow diesel fuel with
             similar sulfur levels to be commingled and fungibly shipped up to the point of
             distribution from a terminal,  where NRLM must then be dyed. 500 ppm diesel
             fuel designated as NRLM can be re-designated as 500 ppm highway diesel, but it
             is subject to the limitations stated in §§ 80.598 and 80.599.

2.23: D Could a fleet operator that owns and uses only pre-model year 2007 motor vehicles
       indefinitely use 500 ppm highway diesel fuel? Even after 2010?  What if the fleet
       operator also produces his own motor vehicle diesel fuel?

       A: D   The regulations at § 80.500(d)(4) state that beginning December 1, 2010 the
             sulfur content standard of § 80.520(c) (i.e., the 500 ppm sulfur standard) shall no


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             longer apply to any motor vehicle dieselfuel. After, December 1, 2010 all motor
             vehicle dieselfuel must be 15 ppm or less.  The regulations at § 80.530(b) state
             that after May 31, 2010, no refiner or importer may produce or import motor
             vehicle diesel fuel subject to the 500 ppm sulfur content standard.

2.24: D A refiner certifies all of its kerosene as dual Jet/No. 1 diesel at 15 ppm, and counts that
       volume as 15 ppm motor vehicle diesel fuel and accounts for it in the 80/20 TCO. If all
       the kerosene is then "downgraded"  to Jet fuel, so none of it is available as 15 ppm motor
       vehicle diesel fuel, is the refiner still complying with the 80/20 rule even though none of
       the fuel is available as onroad diesel?

       A: D   If a refinery designates kerosene as motor vehicle dieselfuel, then sells the
             kerosene as commercial jet fuel, then the reclassified volume of kerosene is not
             subject to any downgrading limitation, and does not impact compliance with the
             80% 15 ppm diesel fuel production requirement for the Temporary Compliance
             Option.

2.25: D Terminal operators who import product from abroad are in most instances responsible for
       compliance with the highway diesel fuel rule.  These importers understand that if a cargo
       of on-highway diesel fuel enters the U.S. and does not comply with the 15 ppm standard,
       they can choose to blend the product to specification if it is possible. These importers
       would then designate the product as compliant when it leaves the terminal gate.  Would
       EPA please confirm this interpretation.

       A: D   The nonroad diesel rule does contain a provision allowing importers to blend
             near-compliant dieselfuel containing slightly more than 15 ppm sulfur with diesel
             fuel containing less than 15 ppm sulfur to produce a compliant blend containing
             less than 15 ppm sulfur- this fuel may then  be designated as "dieselfuel treated
             as blendstock", or DTAB (see § 80.512).

2.26: D If a terminal imports off-spec kerosene (higher than 15 ppm), terminal operators are
       planning to blend the kerosene with diesel fuel so that the ultimate diesel fuel leaving the
       terminal gate and entering into commerce meets the 15 ppm standard.  Would EPA
       please confirm that this process is permissible for an importer?

       A: D   The regulations at § 80.525 (d) state that kerosene that a kerosene blender adds,
             or intends to add, to motor vehicle dieselfuel subject to the 15 ppm sulfur
             standard must meet the 15 ppm sulfur standard. However, under § 80.521 (b),
             kerosene containing more than 15 ppm sulfur may be blended into motor vehicle
             dieselfuel at concentrations of one volume percent or less, provided the sulfur
             concentration of the resulting blend does not exceed the 15 ppm sulfur standard.
             The accompanying PTD must also accurately reflect this.
                                           33D

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2.27: D Refinery shipments by pipeline often occur with the producing company retaining title to
       a volume of product in the pipeline, while the pipeline actually has custody of the
       product. In this instance, do both the title holder and the custody holder have separate
       20% downgrading potentials, or do they share a common 20% downgrading potential?
       How does one determine who accepts responsibility and reporting for a downgrade that
       may occur,  such as pipeline interface, when the producing company may have title to the
       product, but the pipeline has custody?

       A: D   As clarified in the nonroadrule regulations, the 20percent downgrade limitation
             applies separately to each facility that has custody of the fuel when it is
             downgraded.  The downgrade provision allows each party in the distribution
             system that is subject to it to downgrade a maximum of 20 percent of the highway
             diesel fuel for which it has custody on an annual basis. The downgrade limitation
             was incorporated to protect the availability of 15 ppm diesel fuel at the beginning
             of the highway diesel program.  Actual contamination and downgrade is expected
             to be far less than 20%. However, 20% was selected to cover even the worst case
             scenario.

2.28: D In situations where custody changes to/from related entities (such as Company A refinery
       to Company A Pipeline to Company A Marketing), are these related entities each entitled
       to a 20% downgrade? Or, since they  are related, are they viewed as one entity and
       therefore entitled to one overall 20%  downgrade?

       A: D   As defined in the regulations with the nonroad rule, a downgrade is accounted for
             on a facility-by-facility basis.  Flexibility was included in the rule to allow
             aggregation of facilities at industry's discretion subject to certain restrictions
             (see § 80.502 (b).

2.29: D A downgrade occurs only when the designation of a motor vehicle diesel fuel is changed
       from 15 ppm to  500 ppm.  A change in designation to any  other product, such as jet fuel,
       home heating oil, No. 4 diesel, is not  a downgrade?

       A:U   Correct.  For the purposes of these requirements, "downgrade" refers to
             redesignating 15 ppm motor vehicle diesel fuel to 500 ppm motor vehicle diesel
             fuel.  (See § 80.527(a)). Changing the designation of 15ppm motor vehicle diesel
             fuel to any fuel that is not motor vehicle diesel fuel is not a downgrade, and is not
             volume limited.

2.30: D A "retailer" is limited to a single 20% downgrade of 15 ppm highway diesel fuel to 500
       ppm highway diesel fuel unless the "retailer" offers for sale both 15 ppm and 500 ppm
       highway diesel fuels? Is the term "retailer" intended to apply on the individual service
       station or truck stop level, or does "retailer" potentially apply to a grouping of related
       retail outlets, such that if any one of the outlets offers 15 ppm diesel fuel, all outlets could
       freely  downgrade 15 ppm highway diesel fuel to 500 ppm  highway diesel  fuel?


                                           34D

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       A: D   Since the downgrade provision was intended to protect availability of 15 ppm
             highway dieselfuel, a retailer or wholesale purchaser-consumer who sells, offers
             for sale, or dispenses either only 15 ppm motor vehicle dieselfuel or 15 ppm and
             500 ppm simultaneously throughout the calender year is exempt from the 20
             percent downgrading limit. A retailer or wholesale purchaser-consumer who
             does not sell, offer for sale, or dispense 15 ppm motor vehicle dieselfuel can
             downgrade 15 ppm diesel in an amount no greater than 20 percent of the total
             volume of motor vehicle dieselfuel it sells, offers for sale or dispenses annually.
             The limitation applies separately at each facility.  Only contiguous facilities can
             be aggregated.

2.31: D We understand that during the period the temporary compliance option is in effect, a
       party will base compliance with the 20% downgrade requirement on the incoming and
       outgoing PTD records. Is the "incoming PTD record" reflective of the bbls input onto a
       pipeline or the bbls received at a terminal?

       A: D   These provisions were clarified in the regulations finalized with the nonroad rule.
             Specific answers can be found at § 80.599 (e).  Calculations are based in all
             cases on volumes received into the facility and volumes delivered.

2.32: D In the situation where a refiner owns and operates a proprietary pipeline,  can 20% of the
       pipeline movements be downgraded as provided by § 80.527 (c)? If a third party
       operates the pipeline, can 20% of the pipeline movements be downgraded as provided in
       § 80.527(c)?

       A: D   As  long as the pipeline is registered as a separate facility, the anti-downgrading
             limitation applies to it regardless of ownership. If the proprietary pipeline were
             aggregated into the same facility as the refinery, then the anti-downgrading
             regulations would not longer apply. Rather, the refiner's production would be
             based on the volumes delivered from the pipeline.

2.33:D If a refiner annually ships 100 units of diesel  (20 units of 500 ppm diesel, 80 units of 15
       ppm diesel) and the pipeline moves 3  units to 500 ppm diesel as interface, the terminal
       receives 23 units  of 500 ppm diesel and 77 units of 15 ppm diesel fuel. Is the terminal
       now allowed to downgrade 16 units (20% of  80 units) or  15.4 units (20% of 77 units)?

       A: D   Each party in the distribution system is subject to  the 20percent downgrade
             limitation based on the amount of 15 ppm fuel for which  it has custody on an
             annual basis. Therefore, if the terminal only receives 77 units of 15 ppm sulfur
             fuel. It may downgrade up to 20 percent of the 77 units of 15 ppm fuel for which
             it has received custody to 500 ppm highway dieselfuel.

2.34: D Is there some limitation for how long or when a retailer must sell the 15 ppm highway
       diesel before they would fall under § 80.527(e)(2) as opposed to § 80.527(e)(l)?


                                           35D

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      A: D   Retailers or wholesale purchaser-consumers who sell only 500 ppm motor vehicle
             dieselfuel are subject to a downgrade limitation such that a maximum of 20
             percent of the total volume of motor vehicle dieselfuel that they sell on an annual
             basis can be composed of downgraded 15 ppm fuel.  Under § 80.527(e)(l),
             retailers or wholesale purchaser-consumers who sell, offer for sale, or dispense
             15 ppm motor vehicle dieselfuel are exempt from the 20 percent downgrade
             restriction. This includes parties who sell only 15 ppm, or sell both 15 ppm and
             500 ppm simultaneously.

             To best promote the purpose of the downgrade requirements, which is to account
             for contamination without interfering with widespread availability of 15 ppm
             highway dieselfuel, the exemption only applies to retailers  or wholesale
             purchase-consumers that sell, offer for sale, or dispense 15 ppm fuel continuously
             throughout the year beginning January 1 (or for 2006, September 1).
             "Continuously" here is meant to include normal business practices, including
             short shut downs for repairs, or delays in sales based on delivery problems.  If at
             any time during an annual compliance period (calendar year) a retailer or
             wholesale purchaser-consumer ceases to sell 15 ppm, he/she would be subject to
             the 20 percent downgrade restriction of § 80.527 (c) over the remaining portion of
             the compliance period.

2.35: D § 80.527 restricts the flexibility of all parties in the 15 ppm highway diesel fuel
       distribution system to downgrade 15 ppm highway diesel fuel to other classifications. Is
       it correct that retailers can choose to downgrade all, or a portion, of the 15 ppm diesel
       fuel delivered, provided it is properly labeled and sold?

      A: D   The downgrade limitation was incorporated into the highway diesel program to
             protect the availability of 15 ppm highway dieselfuel at the beginning of the
             program. If distributors and retailers purchased 15 ppm highway dieselfuel in
             large quantities and sold it as, or mixed it with 500 ppm fuel, assurance of the
             availability of 15 ppm highway dieselfuel would be compromised.  If retailers are
             selling only 15 ppm highway dieselfuel, they are by definition not selling 500
             ppm fuel and the provisions do not apply. If retailers are simultaneously selling
             both 15 ppm and 500 ppm highway diesel, they are still satisfying the need for 15
             ppm availability and thus, we chose not to apply the downgrade limitation to them
             as well. Only retailers who are not selling any 15 ppm highway dieselfuel (that
             is they are only selling 500 ppm fuel) are subject to the downgrade provisions
             such that of the total volume of motor vehicle dieselfuel that they sell in a year,
             only 20 percent of it may come from 15 ppm supplies.

2.36: D The rule states that 15 ppm highway diesel fuel found in violation of the 15 ppm standard
       will be credited toward the 20% downgrade volume allowance. Could this fuel be
       downgraded to off-road usage and not count toward the 20% downgrade allowance?
                                          36D

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      A: D   If fuel originally designated as 15 ppm motor vehicle dieselfuel subsequently
             does not meet the 15 ppm standard, it can be either: 1) redesignated as 500 ppm
             and counted toward the 20 percent downgrade limit for 500 ppm motor vehicle
             dieselfuel, or 2) redesignated as NRLM dieselfuel (in unlimited amounts).

2.37: D Could 500 ppm highway diesel fuel in excess of the 20% allowable 15 ppm highway
      diesel fuel downgrade be shipped back to a refiner and avoid a determination that the
      downgrading entity is out of compliance?

      A: D   Compliance is on a facility-by-facility basis. The regulated parties must have
             redesignated the excess downgraded 15 ppm highway dieselfuel as something
             other than 500ppm highway dieselfuel to avoid exceeding the 20% downgrading
             limit. If it is downgraded and redesignated as 5 00 ppm highway dieselfuel, then it
             is a downgrade, even if it is shipped back to the refiner. If it is not re-designated
             as 500 ppm highway fuel, then it would not count against the downgrade limit.
             Compliance with the downgrading requirements is on an annual calendar year
             basis. Any regulated party downstream of the refinery gate may downgrade more
             or less than 20% of any batch as long as compliance with the 20% downgrade
             limit is met at the end of the year.

2.38: D To allow for the learning curve necessary in a period of transition, would EPA consider a
      delay in  implementing the 20% downgrade rule for pipelines and terminals during the
      time the  distribution system is being converted to 15 ppm diesel fuel, perhaps up until
      October  1, 2006, recognizing that distributors will have every incentive to minimize the
      downgrade of 15 ppm diesel fuel given the anticipated product price differential?

      A: D   As amended in the nonroad diesel regulations, §80.52 7(c) (3) states that the anti-
             downgradingprovisions begin on October 1, 2006.

2.39: D Can a small refiner who must produce 100% 15 ppm motor vehicle diesel fuel sell
      downgraded 500 ppm fuel at its refining truck loading rack?

      A: D   The nonroad rule modified these provisions to define a refiner's production as the
             volume delivered to the next entity.  To allow for downgrade in the  handoff, the
             production requirement was modified to 95 percent.  (This is discussed in the
             preamble, but was inadvertently left out of the regulations.  This error was
             corrected in a technical amendment to the regulations (which can be found on
             EPA 's web site at: http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htmitregs.
             July 7, 2005).) Any fuel produced and certified by another refiner can always be
             brought in and sold over a refiner's rack. The refiner in this situation must also
             report and maintain records as a fuel distributor under the designate  and track
             regulations.
                                          37D

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2.40: D There has been discussion on the "downgrading" provisions. What about upgrading? For
       example can a terminal operator, marketer or third party earn and sell credits for
       "upgrading" V500 to VI5? We assume that these do not employ any fractionators, and
       are not "refiners".

       A: D   Only refiners and importers can generate credits per the regulations at § 80.531.

2.41: D If both 15 ppm and 500 ppm on-road diesel are both available at a terminal [facility
       selling wholesale by the transport] is the terminal  restricted to downgrading no more than
       20% of its 15 ppm onroad diesel to 500 ppm onroad diesel?

       A: D   Yes. The regulations at § 80.527 (c) state that per sons who sell, offer for sale,
             dispense, supply, store or transport diesel fuel may not downgrade a total of more
             than 20% of the motor vehicle diesel fuel (by volume) that is subject to the  15 ppm
             sulfur standard of § 80.520(a)(l) while such person has custody of such fuel.
             Calculations to demonstrate compliance are found in § 80.599 (e).

2.42: D In doing my quality assurance check, I find that my supplier has given me 15 ppm
       because he was out of 500 ppm. Can I upgrade the product that the PTD's say is 500 to
       15?

       A: D   Yes.

2.43: D Consider the following issue - as a batch of fuel moves down the pipeline, volumes are
       stripped off of the heart of the batch, since the interface at best stays the same or more
       likely will grow in length as the batch moves down the pipeline, the volume of material
       that must be downgraded at the end of the pipeline as a percent of the remaining batch
       volume will be much larger than at facilities upstream  on the pipeline. The concern is that
       facilities at the end of the pipeline may have more difficulty in coping with the 20% limit
       on down grading, on a facility-by-facility basis.

       A: D   The 20% downgrade limitation applies separately to each facility in the
             distribution system. Facilities at the end of the distribution system only need to
             comply based on the volumes of 15 ppm fuel that they receive.  Any downgrade
             that occurs upstream does not enter into their compliance calculations.

2.44: D Terminals have no financial incentive to downgrade product from 15 ppm to 500 ppm.
       However, there is concern about contamination and the 20 percent downgrade limitation,
       particularly within the first several months following implementation. Will EPA issue a
       technical amendment that would allow the industry to downgrade the 15 ppm product
       without limitation, or at least remove the limitation for the first six months of the
       program.
                                          38D

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      A: D   EPA believes we have allowed terminals adequate lead time to identify and
             correct potential sources of contamination for 15 ppm diesel. The 20%
             downgrade limitation is on an annual basis, so if a terminal has to downgrade
             more than 20% of its 15 ppm diesel at the beginning of the program, it has the
             opportunity to compensate for downgrades greater than 20% by downgrading
             less of its 15 ppm highway diesel later in the year. Further, the anti-downgrading
             provisions do not begin until October 1, 2006, in order to allow for a normal
             transition at the start of the program.

2.45: D Question 2.35 deals with restrictions on the flexibility of all parties to downgrade 15 ppm
      motor vehicle diesel fuel to other classifications.  If a small terminal has its supply of 15
      ppm fuel contaminated with 500 ppm fuel, how much can the marketer use of that
      contaminated fuel that the terminal has downgraded to 500 ppm? Our interpretation of
      the rule is that the marketer handling 500 ppm can get only 20% of his 500 ppm supply
      from downgraded 15 ppm.  Is this correct?

      A: D   The regulations at § 80.527(c)(3) state that the 20% downgrading limitation shall
             be on an annual or  compliance period basis.  The terminal may sell all of the
             contaminated batch as 500 ppm fuel provided that the terminal's total annual
             downgrade percentage for the compliance period does not exceed 20%.  This fuel
             would now be designated a 500 ppm by the terminal.  As such, anti-downgrading
             provisions would no longer apply to it for any marketers that received it.
                                          39D

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3.D    Analytics R&D Issues/Test Methods

3.1:          What rounding convention will be used for sulfur content tested by EPA?

       A:U   The sulfur specification is 15 ppm.  Standard rounding conventions apply. For
             example, a measurement of 15.49 would be rounded down to 15 ppm.

3.2: D  The regulations at section 80.580(c)(l) include the following: "...is correlated with the
       appropriate method specified in paragraph (a)(2) of this section.'" Is "(a)(2)" incorrect?
       Should it be "(b)(l)" which references ASTM D 6428-99?

       A: D   Yes, the current citation in the regulations is incorrect. It should be  "(b)(l). "
             This error was corrected in a technical amendment to the regulations (which can
             be found on EPA 's web site at:
             http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htm#regs, July 7, 2005).

3.3: D  The regulations at section 80.580(c)(l) include the following: "...is correlated with the
       appropriate method specified in paragraph (a)(2)(ii) of this section." Is "(a)(2)(ii)"
       incorrect? Should it be "(b)(2)" which references ASTM D 2622-03?

       A: D   Yes, the current citation in the regulations is incorrect. It should be  "(b)(2). "
             This error was corrected in a technical amendment to the regulations (which can
             be found on EPA 's web site at:
             http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htm#regs, July 7, 2005).

3.4: D  ASTM and ISO frequently update their test methods; must an EPA approved method be
       resubmitted to the EPA for approval if the modifications to the test methods (that are
       made by ASTM and ISO) are minor and have no significant impact on the accuracy and
       precision of the method?

       A. D   All EPA approvals are specific not only to a given test method and laboratory,
             but also to a particular version of that test method.  Thus, if ASTM or ISO
             released a revised version of a test method, any EPA approvals for previous
             versions of that same test method would remain valid and laboratories could
             continue to use the previous version.  If the laboratory intended to use the revised
             version of the  test method, formal approval must be sought from EPA. EPA is
             exploring procedures in the context of the current regulations under which a
             revision to a specific test method could be deemed inconsequential to its accuracy
             and precision. If such a procedure can be developed, EPA may be able  to permit
             the qualification for the old version of a test method to apply also to  the new
             version of that test method.
                                           40 D

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3.5: D  Must a third party independent lab be "registered" with the EPA to get test methods
       approved?

       A: D   Under §§ 80.584 and 80.585, each lab that will be testing fuel for compliance
             with the diesel regulations must obtain EPA approval on a laboratory-specific
             basis.  The information required for approval is somewhat different depending on
             whether the test method is one that has been approved by a voluntary consensus-
             based standards body. However, there is no independent laboratory registration
             per se, as there is under the RFG program under § 80.65.

3.6: D  Are the EPA approved test methods for diesel automatically approved for use on
       kerosene or heating oils, or must the test method be approved for each product?

       A: D   EPA does not require testing on heating oil. Consequently, there is no need to
             seek approval from EPA regarding the method used for the testing of heating oil
             properties. Any testing on#l diesel fuel (kerosene) used in highway diesel or
             diesel nonroad, locomotive, or marine engines required by EPA must be
             conducted using an approved test method.  The test methods approved by EPA for
             testing of the properties of #2 diesel fuel are also applicable for the testing of#l
             diesel fuel.

3.7: D  Under the performance-based test method approach adopted in the non-road diesel sulfur
       rule, there is no designated sulfur test method as has been specified in previous
       regulations. Methods developed by consensus bodies, as well as  methods not yet
       approved by a consensus body, qualify for approval provided they meet the specified
       performance criteria, as well as the recordkeeping and reporting requirements for quality
       control purposes. The rule specifies the precision and accuracy criteria that a laboratory
       must demonstrate in order to qualify its particular method of choice.  API believes that
       the EPA enforcement lab should be  required to meet or exceed the precision and
       accuracy criteria imposed on industry and that this should be a prerequisite to pursuing
       any enforcement action on a fuel parameter.  Does the EPA Ann Arbor laboratory also
       need to demonstrate that its sulfur method(s)  of choice meets the  precision and accuracy
       criteria in the rule and maintain records for quality control purposes?

       A: D   The EPA lab in Ann Arbor currently performs testing of fuel samples for
             enforcement purposes.  EPA fully anticipates that its laboratory will have the
             capability to run several different test methods meeting the precision and
             accuracy criteria specified in the rule. However, whether we  meet these criteria
             or not, is not a "prerequisite " to pursuing any enforcement action.  Per § 80.611,
             evidence can be used in assessing whether a violation has occurred. Uncertainty
             in our own test results is just one of the factors that would go  into any decision to
             take enforcement action.

3.8: D  Will EPA test terminals or retail  outlets?


                                           41D

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       A: D   EPA conducts sampling and testing of fuel at all points in the distribution system.

3.9: D  A batch of diesel is produced, sampled and tested on the last day of the reporting period
       but it is not shipped for several days until the next reporting period. With gasoline, the
       production date is used as the reporting basis. Should the diesel batch be reported as part
       of the earlier compliance period or alternatively as the "production" date which is the
       date of shipment from the refinery?

       A:U    Under the ULSD regulations as finalized in the nonroadrule, a batch of diesel
             fuel is defined as homogenous product that has been transferred to the next
             facility in the distribution system.  Consequently, the only batches of fuel that
             should be reported are those that are transferred during the compliance period to
             another facility.

3.10: D Can early release ULSD (prior to June 2006) be certified using  designated or alternative
       methods, or must a PBMS qualified method be used?

       A: D   If the refiner wishes to certify it as 15 ppmfuel and obtain early credits, it must
             follow the PBMS requirements. For  ULSD, the use of the designated and
             alternative test methods expired on 12/27/2004, so the only way to measure 15
             ppm sulfur diesel fuel is by using a method that meets the accuracy and precision
             criteria at 40 C.F.R. 80.584 and is approved under the procedures set forth at 40
             C.F.R. 80.585.

3.11: D Performance-based laboratory qualification misses the sampling piece of the equation.
       D4057 allows several methods for manual sampling of tanks, if the method is not
       specified then the results can be unrepeatable. Will the sampling method be specified by
       the analytical methods?

       A:    No.  The sampling method used under D4057 will  be at  the user's discretion.

3.12: D Will EPA consider allowing the volume accounting reconciliation (VAR) approach with
       lubricity additives greater than 15 ppm sulfur?

       A: D    We have no intent to do so. The VAR approach was developed for the specific
             situation of conductivity improver additives where no  additive option existed with
             less than 15 ppm sulfur and the additive was required to be added at the terminal.

3.13:D The nonroad rule does not explicitly exclude on-line sulfur analyzers for certification
       purposes; and industry plans to utilize on-line analysis that meets EPA's rule for precision
       and accuracy. Can on-line sulfur analyzers be approved for certification purposes if they
       meet the precision and accuracy criteria stated in the regulatory requirements, and if not,
       why not? Section § 80.581 (c)(l) allows the use of on-line analyzer test methods that
       have been approved per section 80.580. However, sections §§ 80.580 and 80.585 do not


                                           42 D

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       reference on-line analyzers; do these sections apply to on-line analyzer approval as well,
       or does EPA plan on issuing separate procedures for on-line analyzer approval?

       A: D    The intent of § 80.581(c)(l) was not to imply that on-line analyzers could be used
              to certify a batch of dieselfuel.  § 80.581(c)(l) states that the dieselfuel batch's
              composite sample must be tested with a test method as described under the
             provisions of § 80.580.  The purpose of the provision is to provide the flexibility
              to refiners to release a batch of diesel fuel prior to that batch's composited
              sample being tested with a  test method that: 1) is described under § 80.580, 2)
              meets the accuracy and precision criteria described under § 80.584, and 3) is
              approved under § 80.585.  The  test method that meets these three criteria on the
              composited sample of the batch is the official test result. In order to allow for the
              release of the batch of fuel prior to the composited sample being tested, we
              believe it is necessary to require that on-line analyzers meet the  accuracy and
             precision requirements of§ 80.584 and are qualified under the process of§
              80.585 (see also § 80.58l(c)(l)).

              The Agency believes a regulation change would be required to allow on-line
              blending systems (including on-line analyzers) to certify batches of diesel fuel.
              However, before this issue  could be addressed in a rulemaking, the Agency
              believes that, at the very least, the following concerns would need to be
              addressed:  1) Acceptable extent ofintra-batch variability during the course of a
              blend; 2) Appropriate statistical demonstration of blending system's ability to
              closely track results from bench analyses of composite samples;  3) Nature of on-
              going statistical quality control of blending process needed to ensure that
              measurement quality is maintained; 4) Nature ofrecordkeeping  and EPA access
              needed to permit audit oversight; and, 5) Size limits on batches.

3.14:D Section 80.581(c)(l) appears to require composite sampling/testing even though an
       approved on-line analyzer method is used during blending. If this is true, why must the
       on-line analyzer method be approved if the analyzer results are not used for compliance
       purposes? Will the composite testing and reporting requirement be waived if the on-line
       analyzers are approved? Will EPA consider on-line analyzer results as evidence in
       establishing a defense in enforcement actions?

       A: D    Yes, § 80.581(c)(l) does require that a composite sample of a diesel batch be
              taken, and the composite sample is required to be  tested with a test method
              described under § 80.580, which meets the accuracy and precision criteria under
              §80.584 and is approved under the process at § 80.585. But the intent of§
              80.581(c)(l) was only to provide flexibility to refiners that utilize on-line analyzer
              equipment so they could release a batch of diesel fuel prior to its composited
              sample being tested by a test method described under § 80.580.  In order for a
              refinery to have the flexibility to release a batch of diesel fuel prior to its
              composited sample being tested with a test method described under § 80.580, §


                                           43 D

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             80.581(c)(l) does require that the on-line analyzer must meet the applicable
             accuracy and precision under § 80.584 and be approved under the process at §
             80.585.  This is to help ensure that the dieselfuel leaving the refinery is compliant
             with the applicable standard. Thus, on-line analyzer approval is required if a
             refinery wishes the flexibility of releasing a batch of die sel fuel prior to that batch
             of dieselfuel's composited sample being tested by an approved test method under
             § 80.585. Thus, EPA will not consider on-line analyzer test results as meeting the
             requirement for refiners to test each batch of dieselfuel designated as 15 ppm
             fuel.

3.15: D Given the results of the recent ASTM round robin testing comparing the repeatability and
       reproducibility of the designated ASTM 6428 sulfur test and the alternative ASTM 5453
       test, will EPA reconsider the issue and define the more precise ASTM 5453 test method
       as the designated sulfur test method?

       A: D   The regulations finalized with the nonroad rule modified the sulfur test method
             requirements. Instead of a designated method, there are now simply
             performance-based requirements that must be met, allowing the use of multiple
             test methods (see § 80.580 and 69 FR 39184).

3.16:D Given the reproducibility of even the most precise sulfur test method is no better than 6
       ppm, will EPA revise the 2 ppm enforcement test tolerance?

       A: D   We believe that a small minority of the labs which have not yet taken steps to
             improve their measurement procedures are the cause of continuing poor
             reproducibility results. Once these labs take the steps to meet the accuracy and
             precision criteria required in the regulations, their result should improve
             considerably.  We have asked API andNPRA to actively work with these labs and
             offer our lab to anyone seeking assistance or wishing to compare test results.

3.17: D If in general pipelines can demonstrate that the percentage of sulfur tracks with gravity,
       or sound velocity, or color, will that be a sufficient defense that the pipeline did  not
       contaminate a batch (assuming the pipeline can show what readings were when the valve
       change were made)? Or will the pipeline need to have a lab analysis, go/no go test, or
       on-line sulfur analyzer to defend? The treatment of pipeline interface will be important
       to pipeline operations and the impact of 15 ppm diesel fuel implementation on fuel
       supplies.

       A: D   The rule does not specifically require that pipelines use on-line sulfur analyzers
             for quality assurance purposes.  However, use of on-line analyzers may be
             appropriate at certain locations on the pipeline.  To ensure that the dieselfuel
             meets the 15 ppm standard, the quality assurance program must include  testing,
             and at this time EPA believes such testing must measure the actual sulfur content
             of the fuel. However, other relevant procedures that, for example, help a pipeline


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             to locate an interface, could also be an important part of the quality assurance
             program for a pipeline.

             The rate of sampling and testing, and where product should be sampled, are a
             function of the circumstances attendant to a particular distribution system. The
             pipeline should use its knowledge of the system and exercise its best professional
             judgment in determining the rate of sampling and testing and where samples
             should be taken. Also, pipelines may act cooperatively with upstream and
             downstream parties to share their testing information as part of the pipeline's
             quality assurance program.

3.18: D Due to the known reproducibility problems in testing at a 15 ppm level, would EPA
       consider letting downstream entities "average" the sulfur level tests within a range - say
       no more than 20 ppm maximum and 15 ppm average - to avoid supply disruptions?

       A: D   No. As stated in the preamble to the final rule, the sulfur sensitivity of emission
             controls that will be used on model year 2007 and later motor vehicles requires
             that the sulfur content of highway die sel fuel dispensed into 2007 and later heavy-
             duty vehicles not exceed 15 ppm. Consequently, under the rule, the 15 ppm sulfur
             standard is a cap that must be met on a per-gallon basis.

             To account for test variability downstream of the refinery gate  or import facility,
             the rule allows a downstream test adjustment of negative 2 ppm.  The purpose of
             taking testing variability into account in compliance determinations for fuel
             sampled downstream of the refinery or import facility is merely to ensure that fuel
             actually meeting the 15 ppm cap is not rejected and treated as noncompliant due
             to concerns about testing variability.  It is not expected to result in any increase
             in the actual sulfur content of highway dieselfuel above 15 ppm at any point in
             the distribution system.  Note, however, that the rule does not limit the ability of
             the fuel distribution industry to set a commercial pipeline sulfur content
             specification. We acknowledge that pipelines may elect to set sulfur
             specifications

3.19:D If a pipeline  or terminal has test results indicating that motor vehicle diesel fuel sulfur
       content is 15 ppm and EPA tests show the sulfur content is greater than 17 ppm, would
       the pipeline's tests be an acceptable defense, or would the EPA's test results prevail?
       This is of concern given the variability in test tolerance experienced during the round
       robin.

       A: D   EPA would treat this as a violation.

3.20: D Pipelines require durable, easy-to-use test equipment that can quickly give test results.
       We have been fortunate to find  equipment that meets our needs in time for past rule
       implementations.  The EPA's field testing practice has been to use the same equipment


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       pipelines use to conduct oversight.  What are EPA's plans on field oversight in
       implementation of this rule, and has the EPA made any selection of equipment that will
       be used in the field?

       A: D   EPA does plan to conduct field screening of diesel fuel as well as testing diesel
             fuel using the designated method for enforcement purposes.  We have not yet
             selected afield test instrument.

3.21: D ASTM updates test methods every five years. Will EPA issue a ruling that will allow the
       latest (most up to date) version?

       A: D   The recent rule for non-road diesel contains a performance-based provision
             specifically for diesel sulfur that allows the use of any diesel sulfur test method
             that meets certain criteria for accuracy and precision.  Under this approach,
             industry would be able to determine on their own whether updated ASTM test
             methods would be acceptable for compliance  testing purposes.

3.22: D Accuracy can be compared to a gravimetric standard? Are NIST standards available?

       A: D   Several highly accurate standard reference materials (SRMs) are now available
             from NIST.

3.23: D Is sulfur measurement at 15 ppm level practical at the pump? Do any of these methods
       work for portable/field testing?

       A: D   Currently only for sampling at the pump and testing in the lab. However, a
             portable MDWXRF instrument (ASTM method D 7039) is being considered for
             field testing use.

3.24: D Low sulfur gasoline test method is D-2622 [WDXRF], low sulfur diesel will be tested by
       D-6428 [5453 alternate]. Is there a chance that both test methods could be merged so that
       one test method for both low sulfur gasoline and diesel would be permitted?

       A: D   The Agency has adopted a performance based test method approach which would
             set forth criteria to determine the acceptability of use of voluntary consensus
             standard based analytical test methods. Under this approach, industry would be
             able to determine whether test methods allowed under the low sulfur gasoline rule
             may also be utilized under the low  sulfur diesel rule.

3.25: D If 15 ppm is required in  the retail market, what will be the pipeline requirement for sulfur
       at the refinery gate?

       A: D   EPA estimated that,  on average, 7-8ppm sulfur would be needed the refinery gate
             in order to produce 15 ppm sulfur at the pipeline 's end (see the highway diesel


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             rule Regulatory Impact Analysis, chapter V, section C.I.a (this chapter can be
             viewed on the web at http://www.epa.gov/otaq/regs/hd2007/frm/ria-v.pdf) for
             additional discussion). Sulfur contamination during pipeline transport will vary
             between distribution networks, and therefore refinery production sulfur levels can
             vary as well.

3.26: D Terminal operators currently marketing ultra low-sulfur diesel fuel (15 ppm) are
       concerned about the accuracy of the equipment available today in the field for testing.
       Will EPA recommend which equipment industry should use for testing?  What equipment
       has the Agency decided to use to determine compliance?

       A: D   Presently we are utilizing several different instruments in our lab. We will use
             whatever instruments over time we believe provide the best result.

3.27: D Is the Agency going to publish a list of sulfur analytical methods that had been deemed
       equivalent under the rule?

       A: D   There is no designated method or equivalent methods for sulfur.  We now have a
             performance based system where labs have to meet precision and accuracy
             criteria for whatever method they choose to use. A number of methods should be
             able to be used to meet the precision and accuracy criteria, but this will be done
             on a lab-specific basis.
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4.D    Regulatory Clarification and Thoughts/Questions for EPA

4.1: D  What, if any, grace or discretion will be afforded during start up of the enforcement
       process?

       A: D    There are several provisions in the rule that provide flexibility during the
              transition period. For example, the 20% downgrade limitation is an annual
              compliance period requirement, such that any start up difficulties can be offset
              later in the year.  We also allow a 2 ppm downstream test adjustment on top of
              the 15 ppm cap. Moreover,  the rule provides substantial time periods for parties
              at each stage of the distribution system to come into compliance during the initial
              transition into the sulfur programs.  Hardship provisions that are available to
              qualifying refiners and importers address cases of extreme hardship or
              unforeseen circumstances outside the control of the refiner or importer.
              However, under the  "hardship" provisions of the regulations, under no
              circumstance may fuel having a sulfur content exceeding 15 ppm be sold or
              dispensed for use in engines requiring 15 ppm fuel.

4.2: D  The regulations talk about the requirements for PTDs for both the diesel fuel and the
       additive, but it is unclear at what point an additive PTD is tied to a fuel PTD; i.e. you
       would never know in which batch a high sulfur additive was used.  Are we required to
       re-certify 15 ppm diesel fuel downstream if an additive with more than 15 ppm sulfur is
       used downstream of the refinery certification?  Are we required to modify the diesel PTD
       to include language stating that an additive with more than  15 ppm sulfur was used in the
       product?

       A: D    There is no specific requirement to tie additive PTDs to diesel fuel PTDs.
              Sections 80.521 and 80.591  set forth requirements for additives and additive
              PTDs.  The regulations also set forth prohibitions against selling diesel fuel
              represented to meet the 15 ppm sulfur standard unless it does meet that standard.
              The additive blender will be liable if it causes fuel it represents to meet the 15
              ppm standard to exceed that standard. For an additive  blender who uses an
              additive having a sulfur content exceeding 15 ppm to meet its defense elements it
              must, among other things, show that: it did not cause the violation,  that product
              transfer documents account for the product (both the diesel fuel and the additive),
              and indicate the fuel and additive were in compliance while under the party's
              control. Also note that §80.613(d)(2) will require,  in most cases, that the blender
              show that it tested every batch of fuel it blends such additive into. To establish
              these defenses,  the additive blender would likely need to have records that do tie
              the additive blending to particular transfers of fuel. In the case of static
              dissipater additives,  a blender may use a volume reconciliation approach in lieu
              of every batch testing.
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4.3: D  Is there any economic hardship requirement escape clause for the distribution chain?
       Given no field testing equipment available, insufficient tankage, commingled manifolds.

       A:    The economic hardship provisions in the regulations only apply to refiners.

4.4: D  What recourse does a pipeline have that has received an off-spec batch of ULSD from
       another pipeline?

       A: D   The PTDfor any given batch of fuel in the distribution system must accurately
             reflect the sulfur content of that batch.  If a pipeline accepts a batch of ULSD into
             its system and later finds that the batch no longer complies with the sulfur
             specification for ULSD, then that pipeline must ensure that the PTD that
             accompanies the fuel as it leaves the subject pipeline's custody is accurate. If the
             pipeline finds that the sulfur content of the subject fuel batch is less than 500
             ppm, then the pipeline may redesignate that fuel batch as 500 ppm highway diesel
             fuel (until 6/1/2010) provided that the pipeline remains in compliance with the 20
             % downgrade requirements for 15 ppm highway diesel fuel and highway diesel
             fuel volume balance requirements.  The fuel batch may also be redesignated as
             NRLM, LM, or heating oil provided that sulfur content of the fuel batch  is
             consistent with the applicable sulfur specification. There are no limitations on a
             downstream pipeline's ability to receive such a batch of fuel.

4.5: D  What are the provisions from the non-road rule that have been expanded to the highway
       diesel rule, or that amend the highway diesel rule?

       A: D   The nonroad rule final regulations (69 FR 38958, June 29, 2004) identify all the
             provisions  that were amended from the highway diesel rule.  Provisions that were
             changed are specifically noted at the beginning of the applicable section.
             However, please feel free to contact EPA staff if you have questions on a specific
             section.

4.6: D  The regulations require batch reports for small refiners for each compliance period from
       June 1, 2007 through May 31, 2010 per § 80.604(d).  For each batch, this includes "the
       sulfur content andcetane andaromatics content of the fuel" (§ 80.604(d)(5)). This is not
       consistent with the Agency's response to comments, May 2004, p. 10-32, 10.3.3.3
       Aromatics Reporting Requirements.

       A: D   The regulations require batch reports for all refiners.  This provision was
             erroneously copied into the reporting provisions in the regulations. We agree
             that the batch reporting ofcetane index or aromatics levels for off-highway diesel
             fuel is not necessary.  The regulations regarding a minimum cetane index of 40 or
             a maximum aromatics content of 35 volume percent for highway diesel fuel do not
             include any batch reporting requirements.  This is also the case for sulfur content
             where only the designation is required. We see no need to impose such  batch


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             reporting requirements on NRLMdieselfuel at this time.  However, records
             retained must contain this information.  EPA does intend to correct this provision
             in a subsequent action.

4.7: D  What provisions exist in the ULSD rules for importing nonroad and highway diesel fuel
       from Canada by truck?

       A: D   Provisions for diesel fuel transported into the U.S. by truck or rail car are found
             in § 80.583.  They are similar to the gasoline sulfur rule provisions for importing
             gasoline into the U.S.  by truck.

4.8: D  How would distillate not used as fuel (i.e. for freeze protection) be accounted for?

       A: D   The possible designations for # 1 and #2 distillate are detailed in §80.598.  An
             entity would have the option to designate it as heating oil or blendstock if it did
             not want to comply with the highway and NRLM standards.

4.9: D  For terminal reporting, is it: quarterly reporting with quarterly compliance with 20%
       downgrade limitation, or quarterly reporting with annual compliance with 20%
       downgrade limitation?

       A: D   Quarterly reporting and downgrading compliance are separate issues. All
             facilities in the D&T system have quarterly reporting requirements.  Truck
             Loading Terminals also need to provide required compliance calculations.
             Downgrading calculations are a recordkeeping requirement, not a reporting
             requirement. The downgrading compliance periods are listed in §80.52 7(c) (3).

4.10: D Current <500 pm kerosene blending into 500 highway diesel is an increase in the
       highway diesel pool. Is EPA revising § 80.525 to allow for this increase?

       A: D   Section 80.525 contains the requirements  applicable to kerosene blenders.  The
             provisions regarding the determination of compliance with the volume balance
             for motor vehicle (highway) diesel fuel are contained in 40 CFR 80.599 (b). Each
             facility must maintain a positive or neutral highway diesel balance during any
             compliance period.  The questioner is correct in that the addition of#l 500 ppm
             diesel fuel not designated as highway diesel fuel (such as  500 ppm kerosene) to
             500 ppm highway diesel could result in an increase in the highway diesel pool.
             This is possible,  but would have to be accounted for in calculating compliance
             with the facility's highway diesel volume balance.  We anticipate that 15 ppm #1
             diesel fuel will be available for wintertime blending.  The use of such 15 ppm fuel
             for wintertime blending into highway diesel fuel will not adversely impact the
             facility's ability  to comply with the  highway diesel volume balance requirements.
                                           son

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4.11: D For consumers with a 2007 vehicle how will they be educated to look for sulfur content
       at a station to prevent inadvertent use of 500 ppm?

       A: D    The fuel regulations require that all fuel pumps be labeled to inform the user
              which fuel they are dispensing into their vehicle.  These labels will state which
              engines/vehicles that the specific fuel is suitable for use in. There will also be
              labels on the 2007 engines, per § 86.007-35, stating which fuel should be used.

4.12: D Will it be legal for an Alaska refiner to dye its highway ULSD?

       A: D    The highway and diesel fuel regulations include no dye requirements or
              restrictions for Alaskan fuel, provided the requirements of 40 C.F.R. §§ 69.51 and
              69.52 are met. IRS has its own fuel tax requirements.

4.13: D Has EPA defined the quantitative amount of dye that is visibly dyed? And what does that
       mean in a lower limit of dye?

       A: D    There is no set amount of red dye that must be added to fuel, EPA regulations do
              not specify what concentration is required.  The regulations only require that
              "visible evidence" of red dye be present (§§ 80.510(d)(5),(e)(5), and (f)(5)), and
              this amount may vary for different parties.  This is the same visible evidence
              criteria that was first implemented for non-highway dieselfuel in 1995 (§
              80.520(b)).

4.14: D In an effort to maintain balance between nonroad and highway diesel fuel, EPA has
       established rules pertaining to "shifts" in volume (anti-downgrading). Does this hinder
       the establishment of new product distributors?

       A: D    We do not believe that the volume balance requirements will inhibit the
              establishment of new product distributors. Any new fuel distributor need only
              register and then comply for the portion of the compliance period in which they
              were in business. New distributors would begin with a clean slate with respect to
              demonstrating compliance with the volume balance requirements. In cases where
              certain product distribution assets are sold to a new party in the middle of a
              compliance period, EPA will provide guidance regarding how the previous and
              new owners will work together to demonstrate compliance for the compliance
             period in which the sale takes place. One option would be for the original owner
              to be responsible for demonstrating compliance during the portion of the
              compliance period during which it maintained ownership.  The new owner would
              then be responsible for demonstrating compliance during the portion of the
              compliance period over which it exercised ownership.  This would be EPA 's
              default assumption regarding how the applicable requirements would be applied.
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4.15: D What is EPA's response to the distribution complexities outlined at the November 2004
       workshop?  Specifically, if the refiners are not producing ULSD until May 2006, what is
       EPA's belief that 15 ppm ULSD can be supplied at the pump by September 2006?

       A:U   We believe that the rule provides ample time for transition. In most cases, retail
             stations should have sufficient time to make the transition.  However, there is no
             requirement that retailers must sell 15 ppm ULSD. If their transition takes
             longer, then they may continue selling 500 ppm fuel longer.

4.16: D When may importers begin classifying distillate product as DTAB?

       A:U   On the effective date of the regulation.

4.17: D Will annual attestation be required for ULSD like it is for RFG today?

       A:     There is currently no attestation requirement in the dieselfuel regulations.

4.18: D If the 80/20 provision allows for a 20% downgrade, can we assume that 100,000 bbl
       ULSD can result in:
             80,000 bbl to the pipeline,
             64,000 bbl at the terminal, and,
             46,000 bbl at retail?

       A:0   The 80/20 (§80.530(a)(3)(i)(A)) and anti-downgrading (§ 80.527) are two
             separate provisions. The 80/20 provision is the requirement that at least 80% of
             a refiner's highway fuel produced is required to meet the 15 ppm standard. The
             anti-downgrading provision, which does not apply to refiners, allows for up to
             20% of an entity/facility's 15 ppm highway dieselfuel to be downgraded to 500
             ppm highway dieselfuel (QA 4.20 also discusses anti-downgrading).

             A refiner's production is defined as the amount of fuel that is actually delivered to
             the next party. The volume of 15 ppm highway dieselfuel delivered by a refiner
             to a pipeline will be reported to EPA based on the measured volume as received
             by the pipeline operator.  In  such a case, there would be no downgrade reported
             in moving the fuel from the refiner to the pipeline, as downgrading does not apply
             to refiners. Each custody holder of 15 ppm highway dieselfuel may downgrade
             up to 20% of the volume it receives to 500 ppm highway dieselfuel. There is no
             restriction on the volume of 15 ppm highway diesel which can be downgraded to
             products other than 500 ppm highway dieselfuel (e.g. heating oil, or 500ppm
             NRLM diesel fuel).  The 20% figure was set because we believed this would be the
             greatest percentage any one custody holder would need to downgrade due to the
             procedures necessary to limit sulfur contamination during the transportation of
             15 ppm dieselfuel.  We expect that most custody holders in the distribution chain
             will downgrade a much lower percentage of the 15 ppm highway dieselfuel they


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             receive.  In most cases economic factors will limit downgrading to the bare
             minimum. As a result, while the example is hypothetically possible, it is not a
             realistic scenario.

4.19: D Has anyone given any thought as to what the other parameters will look like once ULSD
       is fully produced (i.e. aromatics, cetane number, nitrogen, etc.)?  Are there any issues
       with respect to the energy content of diesel with the increased hydrotreating potential
       "lightening" of diesel going down to 15 pm?

       A: D   There is a projected change in density and energy content per gallon, thus
             leading to a small change in fuel economy. In most cases it should be
             imperceptible- since the change still falls within the range of normal variations in
             diesel fuel.  While fuel economy decreases slightly, there is not an overall energy
             loss, since refinery production volume increases to offset the energy density
             change.  There is also expected to be a slight improvement in the cetane number
             of the diesel fuel resulting from a small decrease in aromatic content due to
             hydrotreating.

4.20: D Please explain 20% downgrade provision in detail and specificity- how does it work at
       each stage in the distribution  system, especially if one company plays many roles?

       A: D   The anti-downgradingprovision is to prevent the intentional commingling of 15
             ppm highway diesel fuel and 500 ppm highway diesel fuel that would result in no
             availability of 15 ppm highway diesel fuel. The 20% limit is there to allow for
             unintentional mixing/normal contamination during the compliance period. It
             works the same throughout the distribution system, with the only exceptions being
             the unique provisions for retail outlets found in §80.527 (e). Compliance is
             facility-based, so the fact that a company serves multiple roles does not matter.

4.21: D Define "distributor" and "end user" from a reporting and recordkeeping standpoint.

       A:D   A "distributor" is any entity in the distribution system — they may or may not be
             named specifically as a pipeline, terminal, barge, rail system, etc. The activity
             that the distributor is  engaged in will dictate appropriate reporting and
             recordkeeping requirements.

             An "end user " as addressed in the presentation, "Recordkeeping and Reporting
             for NonroadDiesel Fuel", was specifically aimed at recordkeeping requirements
             for ultimate consumers in Alaska (§§ 80.600(f) & (g) and80.554(a)(4) & (b)(5)).

4.22: D EPA's 2004 refiners' pre-compliance report concludes that there will be an adequate
       supply of ULSD (at the refinery gates); however, the report does not address the
       distribution of ULSD. Will ULSD be available in all parts of the country?
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             A: D   Based on the information that refiners provided in the pre-compliance
                    reports, as well as other discussions, we are confident that ULSD will be
                    available in all areas of the country.  Unfortunately, to respect
                    confidential business information, we cannot provide more specific
                    information could not be given in the summary and analysis of the pre-
                    compliance reports on the exact locations that refiners would be
                    producing ULSD.  We are currently working on a proposal for a plan for
                    Alaska that will address the unique situation found there.

4.23: D Will refiners produce No. 1  diesel fuel at 15 ppm sulfur? What other cold
       weather-gelling strategies are available to the end-user?

       A: D  Yes, some refiners will produce No.  1 diesel fuel. There are also various other
             cold-flow improver additives currently on the market  as well.

4.24: D Section 80.592 specifies the data which must be kept and maintained for all diesel
       batches but does not require submission to EPA unless requested.  Section 80.604
       requires annual  submission of each batch of NRLM diesel  or heating oil.  However, the
       June 29, 2004 Preamble, section V(G)(5)(b) requires batch reports to be submitted, but
       does not specify between Highway  or NRLM diesel. Please confirm that there are not
       any additional quarterly or annual reporting requirements for individual batch data of
       Highway diesel (15 or 500 ppm). In addition, does EPA plan on requesting this data?

       A: D  There are no additional requirements, and EPA does  not plan to request
             additional data at this time; the only requirements are volume and designation
             information plus identification information.

4.25: D If a refinery receives a previously designated distillate (PDD), what options does the
       refinery have for blending the PDD and how are any changes in fuel designation
       handled? In other words, is there a provision similar to the gasoline rule where a
       previously designated material may be debited from a compliance pool using  a negative
       volume?  Does a similar provision exist in the distillate rule? Alternatively, is the
       refinery to handle PDD as a terminal and be subject to the  same downgrade rules as the
       terminal?

       A: D  There is no similar provision to the RFG/anti-dumping regulations that would
             treat previously designated distillate fuel as a negative batch when it is blended
             with blendstock at a terminal blending facility or other refinery. A facility that
             receives previously designated distillate must be registered as a downstream
             facility and make appropriate records and reports regarding designation and
             tracking of the previously designated distillate, including any downgrading or
             other change in designation of that fuel volume. In addition, if the refiner blends
             blendstock to the previously designated distillate, it must, in its capacity as a
             refiner, properly designate that additional volume and is responsible for all


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             refiner requirements for that added volume. For example, if 100 gallons of high
             sulfur blendstock is added to 100 gallons of 15 ppm highway fuel, and the
             resulting 200 gallons of product is sold as 500 ppm highway fuel, in its capacity
             as a downstream facility, the facility would have to account for the downgrade of
             the 100 gallons of 15 ppm fuel to 500 ppm highway fuel. In its capacity as a
             refiner, it would be responsible for producing 100 gallons of 500 ppm fuel. If the
             example above is changed such that the product blended is 100 gallons of
             previously designated high sulfur fuel to 100 gallons of 15 ppm highway fuel,  then
             there is no refining activity; there is just a change in designation and downstream
             downgrade of the 15 ppm fuel that is used for the blending to 500 ppm highway
             fuel.

4.26: D Do the Credit Trading Area (CTA) regulations as defined in section 80.531 apply only to
       importers?

       A: D   No, CTAs apply to both importers and refiners.

4.27: D Section 80.532(d) implies that credits cannot be traded from one CTA to another- does
       this restriction apply only to imported fuel or can credits generated by a refinery located
       in PADD 1 (CTA 1) trade credits with a refinery in PADD 2 (CTA 2)?

       A: D   This applies to both refiners and importers, and highway credits can only be
             traded within a CTA.

4.28: D In earlier Q&As for gasoline, EPA designated that the Virgin Islands and Puerto Rico are
       in PADD 6; Guam, American Samoa and the Northern Mariana Islands are in PADD  7.
       Since CTAs are nearly identical to the corresponding PADDs why has EPA chosen CTAs
       6 and 7 for Alaska and Hawaii, and will EPA reconsider these designations?

       A: D   EPA does not intend to modify the credit trading area designations, we believe
             the current designations are clear and understandable.

4.29: D What value are the non-highway baselines that are discussed in § 80.533 since they are
       not used in any credit generation equations or other compliances?

       A: D   § 80.533 explains that non-highway baselines are generated and used by small
             refiners to comply with any of the options available to small refiners under §
             80.554; and other refiners for the purposes of early credit generation.

4.30: D The preamble states (page 39061), " [the] rule allows terminal operators and others to
       switch the designation of 500ppm  sulfur NRLMdiesel fuel to highway dieselfuel on a
       temporary but not a cumulative basis over time."
       a)     What "others" is EPA referring to?
       b)     What is temporary?


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       c)D   What if a party has not switched 500 ppm highway diesel back into the 500 ppm
             NRLM market by 2012 when there is no longer a market for 500 ppm NRLM
             (when NRLM must be at 15 ppm)?

       A:U   a)     The word "others" in the sentence refers to pipeline operators.
             b)     "Temporary " is within the compliance period.
             c)     The party will be subject to quarterly compliance until 2010, and annual
                    compliance thereafter. Any noncompliance will be detected at the end of
                    each compliance period.

4.31: D Considering the likely contamination of large amounts of ULSD and the permissive
       downgrading provisions, will  ULSD continue to be the dominant fuel at the pump in
       2006?

       A:U   Yes. Anti-downgrading allowances for each facility are 20%. However most
             facilities will try to limit downgrading.  For even the likely worst case facility,
             downgrade through normal contamination is expected to be less than 10%, and
             typically only a few percent or less. In total, downgrade due to contamination is
             expected to average less than 5%.  Consequently, it should not significantly
             impact the availability of 15 ppm fuel.

4.32: D How will the end-user know whether they are refueling with fuel in excess of 15 ppm
       sulfur?

       A: D   The regulations require that all fuel pumps be labeled to inform the user which
             fuel they are dispensing into their vehicle.  These labels will state which
             engines/vehicles that the specific fuel is suitable for use in.  These labels will
             match comparable labels on 2007 and later highway vehicles. Distributors will
             likely have tested fuel batches at retail to ensure that the fuel meets the applicable
             standard that is on its pump label.

4.33: D If a retailer or wholesale purchaser-consumer does not dispense early credit 15 ppm
       sulfur cap motor vehicle diesel fuel, is June 1, 2006 the effective date for the pump
       labeling standards at § 80.570 per  § 80.500(e)?

       A: D   Pumps which dispense on-roaddiesel containing 15ppm sulfur or less are
             required to be labeled as such starting June 1, 2006.

4.34: D Under 40 CFR § 80.592(b) what is meant by a batch of diesel fuel and designating a
       batch number? 15 ppm  sulfur content highway fuel will typically be produced
       continuously as the output from a distillate hydrotreater and is not blended like gasoline.
       The concept of batch numbering and batch volumes does not seem to make sense based
       on the production of this product.  Please provide clarification.
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       A: D    Under 40 CFR § 80.2(nn), a batch of motor vehicle dieselfuel "means a quantity
              of die sel fuel which is homogeneous with regard to those properties which are
              specified for motor vehicle dieselfuel under subpart I of this part. " A batch of
              motor vehicle dieselfuel is thus a discreet and identifiable quantity of such
              homogenous dieselfuel. Thus, under the regulations,  the volume and properties
              of even continuous streams are only measured periodically and it would be best
              to apply the measurements to the volume produced most closely to the time of the
              measurement.  In other words, a refiner should break up a continuous stream into
              discrete batches to assure that the batch is a homogeneous mixture, and for
             purposes of record keeping and reporting under §§ 80.592 and 80.593.  It is our
              understanding that dieselfuel is not generally produced by in-line blending
             processes but is blended into a tank, where the volume and properties can be
              measured. As with the RFG/anti-dumping rule, the refiner would have to be
              consistent when calculating the volumes and properties of batches,  consistently
              basing them on either shipped volumes or produced volumes.  Otherwise double
              counting of volumes and properties could occur.

             Assignment of batch numbers will be done  the same way under the highway diesel
              sulfur rule as is done under the RFG and anti-dumping regulations.  See §§
              80.592(b)(2) and80.65(d)(3).

4.35: D Diesel fuel retailers will not be making 15 ppm motor vehicle diesel fuel; we will only
       be selling it to customers for use in their diesel-powered vehicles. What are a diesel
       retailer's primary regulatory responsibilities under the 15 ppm highway diesel fuel
       program?

       A: D   Responsibilities are similar to those under other fuels rules.  While the
              responsibility for producing or importing compliant 15 ppm sulfur content
              highway dieselfuel resides with refiners and importers, retailers and all other
             parties in the distribution system share responsibility for assuring that dieselfuel
              subject to the 15 ppm standard is not contaminated or commingled with other
             products, such as distillates having a sulfur content greater than 15 ppm. At the
              retail dispenser, if the fuel subject to the 15 ppm sulfur standard does not meet the
              standard, it is in violation, subject to a 2 ppm  test result adjustment applied to test
              results at downstream facilities. All parties in the distribution system are
             presumed liable for such violations,  including the retailer (§ 80.612). Each party
              may establish a defense  to the violation under § 80.613.  A retailer may establish
              a defense by showing it did not cause the violation and that product transfer
              documents account for the fuel in violation and indicate the violating product was
              in compliance when it was under the retailer's control.

             In addition, retailers and wholesale purchaser-consumers are required under the
              regulations to post labels on each diesel fuel pump stand, notifying customers of
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             the type of fuel dispensed by each dispenser.  The required language for these
             labels is prescribed by § 80.570.

             Per §80.610, retailers are prohibited from introducing, or permitting, the
             introduction of noncomplyingfuel into motor vehicles.  Per § 86.007-35, model
             year 2007 and later diesel powered vehicles, which will require fuel meeting the
             15 ppm sulfur standard, will have a label on the filler inlet and on the dashboard
             stating  "Use Ultra Low-Sulfur Diesel Fuel Only" or "Ultra Low-Sulfur Diesel
             Fuel Only. " A retailer would clearly be liable for the action of a retail employee
             introducing 500 ppm diesel fuel into a vehicle equipped with such a label.
             Misfueling is addressed in more detail below.

             Retailers must retain all product transfer documents, which identify the
             applicable standard of the fuel, and must assure that this fuel is delivered into the
             proper storage tank for sale to customers (see §§ 80.590,  80.591 and 80.59 2). If
             a misdelivery does occur, retailers must immediately cease sales from the
             dispensers served by the impacted storage tank and assure that the product in the
             tank is brought back into compliance before resuming sales.

             Retailers should train their employees, and work closely with distributors and
             carriers who supply product to their outlets, so that the tank truck drivers will
             have needed information about what types of product are  sold at each outlet and
             which storage tank corresponds to each type of product.

             The truck distributors themselves should in turn work closely with the retail
             operations, and ensure drivers know which product should be delivered to each
             station,  and what storage tank each type of product should be delivered to.
             Truckers should ensure that high sulfur products previously carried in truck
             compartments have been completely drained from the truck compartments and
             hoses before 15 ppm product is loaded into those compartments.

             Retailers are also subject to downgrading limitations of the regulations (§
             80.52 7). This is addressed in more detail elsewhere.  Retailers who downgrade
             15 ppm highway fuel to 500 ppm highway fuel must keep records  that
             demonstrate compliance with the limitations and requirements of the
             downgrading provisions (see § 80.527 (g)).

4.36: D How do you indicate whether a batch of fuel is marked or unmarked?

       A: D   The product's accompanying PTD should state if the product is marked or not.
             Section 80.590(a) details the information that must be included on the product
             transfer document that accompanies any transfer in custody or title ofMVNRLM
             diesel fuel or heating oil. Section 80.590(a)(6)(ii) states that the PTD must
             contain "an accurate and clear statement of the applicable designation and/or
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             classification under section 80.598...and whether the fuel is dyed or undyed, and
             for heating oil, whether the fuel is marked or unmarked."

             Further, § 80.590(a)(7) contains additional requirements regarding the PTD
             language for the transfer of fuel batches of a given fuel designation/classification
             from one facility to another in the fuel distribution system where dieselfuel is
             taxed, dyed or marked. These requirements  also apply for any subsequent
             transfers except for when the fuel is dispensed into an end-user's equipment.

4.37: D Can you clarify the PTD product code recommendation/requirements? Is there a specific
       product code standard that EPA would like us to use in reporting?  Also, must the
       specific fuel designation be in the  actual  product code, or can it just be on the PTD
       somewhere?

       A: D   We will no longer be requiring the fuel sulfur level (15, 500, or >500) to be in the
             code of a PTD as long as the sulfur level is noted on the PTD somewhere.  We
             will be issuing a technical  amendment to correct this.  Please note that for
             transfers to truck carriers,  retailers, or wholesale purchaser-consumers, product
             codes may not be used (§ 80.590  (d)).

4.38: D My company currently sells distillate blendstocks. Can we continue to sell blendstocks
       given the new regulations?

       A:    Yes, you may continue to sell blendstocks. In addition, it would also be in your
             best interest, for defense purposes, to identify any product that you ship.

4.39: D Has EPA developed a program that allows EPA to check balances between parties on
       hand-offs?  If so, could you provide the same tool to industry to enable companies to run
       the tool to reduce errors before submission?

       A: D   No, EPA is not developing software to check hand-off balances.  We will rely on
             database reports to identify potential hand-off reporting problems. Specifically,
             we will be looking at summaries of transactions, for a given quarter, between
             individual hand-off partners (shipper and receiver) to verify that the product
             volume shipped equals the product volume received, with zero tolerance.

4.40: D The Interstate Commerce Act requires shipper and volume confidentiality. Do the diesel
       fuel rules protect these requirements?

       A: D   While the EPA rules regarding confidential business information were not written
             for the Interstate Commerce Act,  we do protect the confidentiality of submissions
             to EPA and do not give confidential company information out to others. If a
             company is concerned about the protection of its information,  it may mark all
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             reports and other submissions to EPA as "CBI" (Confidential Business
             Information).

4.41: D Biodiesel manufactured from palm oil has a red tint. Would this be problematic with
       respect to compliance with EPA red dye requirements (significant quantities of palm oil
       are available and the price is attractive)?

       A: D   EPA requires that fuel marketed as highway dieselfuel contain no visible
             evidence of dye solvent red 164.  There is no regulatory requirement that would
             preclude that use of palm oil-derived biodiesel as a highway dieselfuel
             blendstock.  EPA and other interested parties could use spectrographic analysis
             in the field to determine whether the source of a red tint to dieselfuel resulted
             from contamination with red dye 164 or from another source. Furthermore, we
             do not believe that this will be an issue, as biodiesel will not go through pipelines.
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5.D    Cetane Index/Aromatics Requirements

5.1: D  In § 80.510(h), does EPA really mean that the cetane index (CI) doesn't have to be met if
       sulfur is met with credits?

       A: D   The cetane or aromatics requirement only applies to NRLM fuel that is required
             to meet either the 15 ppm or SOOppm std. If fuel is produced to uncontrolled
             sulfur levels through, for example, credits or hardship provisions, that fuel does
             not have to be controlled to meet EPA 's cetane or aromatics standards either.
             However, industry standards will still apply.

5.2: D  How can heating oil be used as NRLM when heating oil does not necessarily meet cetane
       and aromatics requirements?

       A: D   The rule allows distillate designated as heating oil to be redesignated as high
             sulfur NRLM provided that during any compliance period there was no net shift
             of heating oil into the NRLM market (per § 80.598(b)(9)(viii)).  Please refer to the
             volume balance requirements for high sulfur NRLM and heating oil contained in
             40 CFR 80.599(c).  To meet these volume balance requirements, for any volume
             of heating oil redesignated as high sulfur NRLM during a compliance period, an
             equal volume of high sulfur NRLM would typically need to be redesignated as
             heating oil during that same compliance period.  Any volume of heating oil
             redesignated as high sulfur NRLM would be required to meet the applicable
             cetane and aromatics requirements.
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6.D    Sulfur Standards

6.1: D  In § 80.510(h), should it be "or" rather than "and".  As currently written, only get
       exemption if credits, SR, hardship, and temporary relief?

       A: D   Yes, it should say "or ".  This was corrected in a technical amendment to the
             regulations (which can be found on EPA 's web site at:
             http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htm#regs. July 7, 2005).

6.2: D  Have refiners based their production forecasts on 15 ppm ULSD, or some much lower
       pipeline spec?

       A: D   Our understanding is that production is set  based on a range of factors and as
             such, different refineries have different targets.

6.3: D  If 15 ppm kerosene may be blended with 15  ppm ULSD, does the kerosene also have to
       be certified as #1 ULSD?

       A: D   No, although 15 ppm kerosene not previously certified as #1 ULSD will count
             against the party, provided that its highway volumes do not increase.
             Consequently, we expect that most #115 ppm will be designated as motor vehicle
             dieselfuel.

6.4: D  Should 15 ppm max  sulfur No. 1 diesel or dual certified Jet/No. 1 diesel that is
       designated as 15 ppm diesel fuel when leaving the refinery be counted as 15 ppm diesel
       fuel in determining compliance with the 80% 15 ppm diesel fuel refinery production
       requirement for the Temporary Compliance Option?

       A: D   Yes, if a refinery designates either No. 1 diesel or dual certified Jet/No.  1 diesel
             under as motor vehicle dieselfuel meeting the 15 ppm sulfur standard under §
             80.520(a)(l), it is counted as 15ppm dieselfuel in determining compliance with
             the Temporary Compliance Option.

6.5: D  Subsequent sale of the  15 ppm max sulfur dual certified kerosene as commercial jet fuel
       is permitted, is not subject to any downgrading limitation, and does not impact
       compliance with the  80% 15 ppm diesel fuel production requirement for the Temporary
       Compliance Option?

       A: D   Correct, if a refinery designates kerosene as motor vehicle dieselfuel, then sells
             the kerosene as commercial jet fuel, then the reclassified volume of kerosene is
             not subject to any downgrading limitation, and does not impact compliance with
             the 80% 15 ppm diesel fuel production requirement for the Temporary
             Compliance Option.


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6.6: D  Many refiners currently make a jet fuel meeting <500 ppm requirements. If refiners
       make a jet fuel meeting 15 ppm requirements, there may be compatibility (safety or
       performance) issues for jet engine manufacturers. Have these manufacturers been
       consulted in this rulemaking process?  If so, what is their position on use of 15 ppm jet
       fuel?

       A: D   The highway and nonroad dieselprograms do not require that refiners produce
             15 ppm sulfur jet fuel and do not set sulfur limits for jet fuel that is not designated
             as motor vehicle diesel fuel.  This would be their decision. EPA believes
             compatibility issues raised by 15 ppm jet fuel would be addressed by the refiners
             and customers involved.
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7.D    Additives

7.1: D  Will there be an allowance for other additives - like cetane enhancer?

       A: D   New provisions were adopted in the nonroadfinal rule for anti-static additives
             downstream at the terminal.  These provisions were adopted because all known
             anti-static additives were found to contain elevated levels of sulfur, and they
             needed to be added downstream at the terminal.  The provision allows the
             addition of additives that exceed 15 ppm sulfur, but only if certain conditions are
             met, as specified in § 80.521. We are not aware of any similar situation with any
             other types of additives that would warrant similar consideration.

7.2. D  Subsequent use of No. 1 Diesel or dual  certified kerosene for winter blending in 15 ppm
       diesel fuel is not an issue, but is winter blending into  500 ppm motor vehicle diesel fuel
       subject to the 20% downgrading limitation by each custody or title holder on an annual
       basis?

       A: D   Per § 80.527, the anti-downgrading limitations, as modified in the nonroad rule,
             only apply to #2 15 ppm diesel fuel.

7.3: D  Some refiners, and some distributors, blend additives into diesel fuel to improve
       performance. Is EPA taking any steps  to assure that these diesel fuel additives do not
       contain sulfur at levels in excess of 15  ppm?

       A: D   The highway diesel fuel rule requires diesel additive manufacturers to label their
             additives, both on the container (in the case of additives sold to consumers- see §
             80.59l(d)(l) and (2)), and on the PTD (see § 80.59l(b)(2)),  with information as
             to the sulfur level in the additive. If the additive contains more than 15 ppm
             sulfur, then it is the blenders' responsibility to assure that the use of the additive
             does not result in diesel that exceeds the 15 ppm standard (see § 80.521).
             Additives sold for consumer use in model year 2007 and later vehicles may not
             contain more than 15ppm sulfur (see § 80.591(d)(2)).

7.4: D  It is a common practice for diesel fuel to be blended with kerosene to improve
       performance characteristics (particularly during cold weather), or other substances, such
       as used oil to dispose of waste products.  Can such practices be continued under the 15
       ppm diesel fuel program?

       A: D   Under §80.522, used motor oil, or used motor oil blended into diesel fuel, may
             only  be used in the fuel system of model 2007  or later diesel motor vehicles if the
             vehicle or engine manufacturer has received a Certificate of Conformity under 40
             CFR Part 86, that certification  is explicitly based on emissions data, and the
             motor oil is added at a rate consistent with the Certificate of Conformity. Under §


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             80.525, kerosene that a kerosene blender adds (or intends to add) to 15 ppm
             sulfur diesel must meet the 15ppm sulfur content standard, as indicated by
             product transfer documents or test results.

7.5: D  Kerosene is used for residential heaters, city bus fleets, and jet fuel among other uses. It
       is also used to winterize diesel fuel and home heating fuel. Today, kerosene comes in
       two grades, < 500 ppm sulfur and < .3% (3000 ppm) sulfur. It may or may not be dual
       purpose, i.e. suitable for jet fuel use. To minimize grades, refiners will likely produce
       only one grade of winterizing fuel, 15  ppm nominal maximum. Will 15 ppm kerosene
       that is used to winterize 500 ppm diesel fuel be considered a downgrade and count
       toward the 20%?

       A: D   No, 15 ppm kerosene that is used for wintertime blending will not be considered
             downgrading.

7.6: D  The anti-static additive sulfur contribution to ULSD will be resolved and  tracked through
       VAR. All  other non-complying additives will require analysis. We have been asked by
       some customers to acquire the anti-stat additive and blend it into packages they already
       purchase. The packages will be less than 15 ppm but of course addition of the additive
       can make them exceed the 15 ppm limit. Thus the question becomes, will EPA allow this
       combination package to be resolved via the VAR methods or will testing  be required?

       A: D   Multi-functional additive packages that contain a>15 ppm anti-static additive
             may use the VAR method.  However, the other components in the additive
             package must be < 15 ppm. If any component of a multi-functional additive
             package other than an anti-stat is > 15 ppm, then the VAR method may not be
             used (§ 80.614). However, if the entire package is under 15 ppm,  then the VAR
             method is not required.

7.7: D  There are no restrictions on blending 15 ppm kerosene with ULSD. Is this statement
       modified depending on how the 15 ppm kerosene is designated?

       A: D   Yes. Unless the 15 ppm kerosene was designated as #1MV diesel fuel, it would
             count against the blender in meeting their highway volume balance requirement
             under the D&T regulations.  We expect that most refiners will choose to designate
             15 ppm kerosene as No. 1 MV diesel fuel.

7.8: D  Kerosene with a sulfur level in excess  of 15 ppm can be blended with ULSD up to a max
       of 1% volume provided it does not alter the quality specs of the ULSD (and sulfur level
       of the ULSD does not exceed 15 ppm). I assume because of the 1% volume limitation
       that it doesn't matter what the designation of the plus-15 ppm  sulfur kerosene is.  True?

       A: D   No, this is not correct. Kerosene that is blended with ULSD must  meet the 15
             ppm standard, as stated in § 80.525.


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             Kerosene is not an additive ((per § 80.2(xx)), nor is it considered as such with
             respect to the 1% additive blending provisions. § 80.525 states that kerosene
             blended with MVNRLMmust meet the applicable standard of the MVNRLM. The
             accompanying PTD must also state that the kerosene meets the applicable
             standard, and the kerosene blender must have test results indicating that the
             kerosene complies with that standard. (See also QA 7.4.)

7.9: D  There are no restrictions on blending 500 ppm kerosene into LSD.  Is this statement
       modified depending on how the 500 ppm kerosene is designated?

       A: D   The only restriction is on a party's volume balance- the volume of 500 ppm
             highway dieselfuel cannot go up, so blending 500 ppm kerosene will count
             against a party's volume balance requirement under the D&T regulations.

7.10: D Are there any rules regarding the blending of plus-500 ppm kerosene into LSD similar to
       the 1% volume rule for ULSD?

       A: D   As stated in 7.8, above, § 80.525 restricts the blending of plus-500 ppm kerosene
             into LSD. Further, the 1% volume rule does not apply, as kerosene is not an
             additive. Blending kerosene that exceeds the applicable fuel's standard would
             result in the need to redesignate the finished fuel. Such blending could also
             impact the blending party's highway diesel volume balance.

7.11: D The title of 40 CFR 80.614 is, "What are the alternative defense requirements in lieu of§
       80.613(a)(l)(vi)for static dissipater additives exceeding the 15ppm sulfur standard but
       that contribute less than 0.05 ppm sulfur when added to MVNRLM diesel fuel?" The way
       I interpret this is that if your static dissipater additive contributes less than 0.05 ppm
       sulfur you can use the calculation method to prove compliance. If the static dissipater
       additive would contribute more than 0.05 ppm sulfur, this additive could still be used but
       would have to prove compliance through testing as outlined in § 80.613(a)(l)(vi).  Is this
       correct?

       A: D   Yes, this is correct- static dissipater additives that contribute more than 0.05ppm
             to the sulfur level of the finished fuel could still be used. However, one would
             need to follow the provisions in § 80.613 to establish affirmative defense to
             presumptive liability.  The alternate provisions in § 80.614 only apply to static
             dissipater additives that contribute less than 0.05 ppm to the sulfur level of the
             finishedfuel.
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8.D    Credits

8.1: D  § 80.599(b)(6) states "Calculations in paragraphs (b)(4) and (b)(5) of this section may be
       combined for all facilities wholly owned by an entity.'"  May this combination include
       facilities in different Credit Trading Areas?  [§ 80.599(b)(6)]

       A: D    Yes.  The Credit Trading Area restriction on highway dieselfuel credit generation
              and use only applies to refinery production and not to subsequent movement of
              the fuel through the distribution system or downstream compliance under the
              designate and track provisions.

8.2: D  In § 80.535, the  regulatory language covers generation of high sulfur credits for early
       production of 500 ppm NRLM and generation of 500 ppm credits for early (2009)
       production of 15 ppm NRLM. Can a refiner with some facilities that will be producing
       15 ppm NRLM starting in 2006 generate high sulfur credits for early production of 15
       ppm NRLM  in 2006, as long as it does not double count these credits?

       A: D    No- in order to receive NRLM credit,  the fuel must be designated as NRLM.
              Further,  to receive high sulfur credits, the fuel must at least meet the 500 ppm
              sulfur standard. Per §80.598 (a)(3)(iv), any fuel designated as 15 ppm untilJune
              2009  must be designated as motor vehicle dieselfuel in order to maintain the
              intended benefits and integrity of the highway program. Such fuel can always be
              used for NRLM purposes. However, in order to receive NRLM credit in the
              situation described in  the question, the fuel would have to be designated as 500
             ppm NRLM by the refiner even though it met the 15 ppm standard.

8.3 :D  For each of the four compliance periods between 6/1/2006 and 12/31/2009, an
       interpretation of § 80.530(a)(3)(i)(A) is the following:
       VSQO  < [0-2  x (V15  + V500)] + credits from the same Credit Trading Area, where the units
       are gallons.

       Is this algebraic  interpretation correct?

       A:U    Yes. For each compliance period between 6/1/2006 and 12/31/2009, inclusive,
              the volume of diesel produced or imported at 500 ppm is limited to the sum of any
              credits properly generated and used by the refiner or importer, or properly
              transferred to and used by the refiner or importer from within the same Credit
              Trading Area, plus 20 percent of the total volume of VI5 and V500 diesel
             produced or imported.  There are also certain additional requirements on the
              generation and use of credits. See §§ 80.531 and 80.532.

8.4: D  For the compliance period from 1/1/2010 through 5/31/2010, an interpretation of §
       80.530(a)(3)(i)(B) is the following:


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        V5oo — credits from the same Credit Trading Area, where the units are gallons
       Is this interpretation correct?

       A:U   Yes. For the period 1/1/2010 through 5/31/2010, the volume of diesel produced
             or imported at 500 ppm is limited to the sum of any credits properly generated
             and used by the refiner or importer or properly transferred to and used by the
             refiner or importer, from within the same Credit Trading Area. There are also
             certain additional requirements on the generation and use of credits. See §§
             80.531 and 80.532.

8.5: D  Carryover of a small deficit is permitted, if two conditions are met in the immediately
       following compliance period. There is a limit on the size of this deficit. § 80.530(a)(6):
       "...  However, for any compliance period prior to and including 2009, a refiner and
       importer may exceed the volume limit in paragraph (a)(3) of this section by no more than
       5 percent of the volume of Vt of diesel fuel produced or imported during the compliance
       period, . .  ."  An interpretation of this 5 percent limit is the following:
                           V5op  > [0.2 x (V15 + V500)] + credits,
       if two conditions  are met in the immediately following compliance period and if V500 -
       ([0.2 x (V15 + V500)] + credits) < 0.05 x (V15 + V500), where the units are gallons and the
       credits must be generated in the same Credit Trading Area that they are used.
       Is this algebraic interpretation correct?

       A: D   This algebraic formula correctly calculates the volume of deficit that can be
             carried over under § 80.530(a) (6).  The volume of 500 ppm diesel produced or
             imported in any compliance period may exceed the volume limit of 500 ppm
             diesel allowed in that compliance period provided that  1) the volume of 500 ppm
             diesel does not exceed 5 percent of the total volume  of VI5 and V500 diesel
             produced or imported during the compliance period, and 2) in the succeeding
             compliance period, the refiner or importer meets the volume limit for that year on
             V500, and produces or imports 15 ppm diesel, or uses credits, equal to the
             volume of the exceedance in the preceding compliance period.

8.6: D  The definition of V500 is included in § 80.53 l(a)(2): "V500  =  the total volume in gallons
       of diesel fuel produced or imported that is designated under § 80.598(a) as motor vehicle
       diesel fuel and subject to the 500 ppm sulfur standard under § 80.520(c) plus the total
       volume of any other diesel fuel (not including V15, diesel fuel  that is dyed in accordance
       with § 80.520(b) at the refinery or import facility where the diesel fuel is produced or
       imported, or diesel fuel that is designated as NRLM under § 80.598(aY) represented as
       having a sulfur content less than or equal to 500 ppm." (emphasis added) Please explain
       the underlined text above. What is this "other diesel fuel"?

       A: D    "Other diesel fuel" means any distillate products that meet the definition of diesel
             fuel, such as kerosene, that is represented to have a sulfur content less than or
             equal to 500 ppm. Any volume of refined distillate products containing less than


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            500 ppm sulfur that is not designated as motor vehicle dieselfuel, should not be
            included in the total volume of motor vehicle dieselfuel.

.7: D The federal temporary compliance option (TCO) includes a credit trading program with a
     relevant restriction: if a refinery produces diesel fuel for a state 15 ppm sulfur cap
     program for a greater volume than the federal requirement, then that fuel is excluded
     from the federal credit program. See § 80.53 l(a)(5)(iv).  This restriction applies to both
     motor vehicle diesel fuel produced in that state or imported directly into that state.

     8.7a: D The Texas Low Emissions Diesel (TX LED) rule (with its 15 ppm sulfur cap for
            highway and non-road diesel in three ozone nonattainment areas and 95
            eastern/central counties beginning on June 1, 2006) possibly excludes a
            significant volume of ULSD from the federal TCO credit generation program
            beginning on June  1,  2006.  On October 15, 2001, EPA Region 6 approved the
            TX LED program as necessary for Houston-Galveston ozone attainment; this
            approval was published in the Federal Register on November 14, 2001 (66 FR
            57196). If it meets the requirements in § 80.531, will 15 ppm TXLED be
            included in the federal TCO credit program beginning on June 1, 2006 because,
            although the 15 ppm TX LED  rule includes non-road diesel fuel and excludes the
            federal temporary compliance  option, the 15 ppm TX LED volume is not
            expected to be greater than the federal 15 ppm diesel fuel requirement in the
            state? Will early 15 ppm sulfur cap TX LED produced before June 1, 2006
            qualify as an early federal TCO credit if it meets the requirements in § 80.531?
            Or will § 80.53 l(a)(5)(iv) exclude all motor vehicle diesel (TX LED and other
            diesel) produced in or imported into Texas beginning on June 1, 2006 from the
            federal TCO credit program because "no motor vehicle diesel fuel produced in
            that state or imported directly into that state may generate credits under this
            subpart, . . ." even though this  Texas diesel sulfur regulation will only apply to
            part of the state?

            A: D    The highway diesel program limits the ability to generate credits for fuel
                   produced or imported directly into a State with its own dieselfuel
                   requirement that requires a greater volume of 15 ppm or lower fuel than
                   the Federal program. Upon evaluating the Texas LED program in the
                   context of § 80.531(a)(5)(iv), we have concluded that, while the Texas
                   program is more stringent for a portion of Texas,  it does not appear to
                   require a greater volume of fuel on a statewide basis to be 15 ppm than
                   will be required under  the Federal program.  As a result, in this specific
                   instance, the limit on credit generation in § 80.531(a)(5)(iv) does not
                   apply to the Texas program.

     8.7b: D On February 24, 2000, CARB  approved the Public Transit Bus Fleet Rule and
            Emissions Standards  for New Urban Buses. This includes a diesel fuel sulfur cap
            of 15 ppm for transit agencies effective July 1, 2002. Does this CARB 15 ppm

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           diesel fuel for public transit bus fleets qualify for the federal TCO credit program,
           if the conditions in § 80.531 are met, because California is not subject to the
           waiver of federal preemption provisions in the Clean Air Act? Or does §
           80.53 l(a)(5)(iv) exclude all motor vehicle diesel fuel produced in California from
           the federal TCO credit program because "no motor vehicle diesel fuel produced in
           that state or imported directly into that state may generate credits under this
           subpart,  . . ." even though this CARB diesel sulfur regulation only applies to
           public transit bus fleets?

           A: D   The § 80.531(a)(5)(iv) restriction does not apply to fuel produced prior to
                 June 1, 2006.  Credit for fuel produced prior to then is subject to the
                 provisions in § 80.531(b) and (c). Given that this program covers less
                 than half of the diesel fuel sold in California, it would also not be
                 considered to require a greater volume of 15 ppm diesel fuel than the
                 Federal program under the provisions of§ 80.531(a)(5)(iv).

    8.7c: D On September 15, 2000, the South Coast Air Quality Management District
           (SCAQMD) adopted a diesel sulfur content cap  of 15 ppm effective on October 1,
           2005.  Will this SCAQMD 15 ppm diesel fuel qualify for the federal TCO credit
           program, if the conditions in § 80.531 are met, because California is not subject to
           the waiver of federal preemption provisions in the Clean Air Act? Or will §
           80.531(a)(5)(iv) exclude all motor vehicle diesel fuel produced in California
           beginning on October 1, 2005 from the federal TCO credit program because "no
           motor vehicle diesel fuel produced in that state or imported directly into that state
           may generate credits under this subpart,  . . ." even though this SCAQMD diesel
           sulfur regulation will only apply to part of the state?

           A: D   Please refer to responses a and b, above. The SCAQMD issue is similar
                 to the Texas LED issue.  Given that this program covers less than half of
                 the diesel fuel sold in  California, it would also not be  considered to
                 require a greater volume of 15 ppm diesel fuel than the Federal program
                 under the provisions of§ 80.531(a)(5)(iv).  However, since CARB has
                 subsequently adopted a similar state-wide program for 15 ppm diesel fuel
                 (for highway and off-highway use), it requires a greater volume of 15ppm
                 diesel fuel than the Federal program and the restrictions in §
                 80.531(a)(5)(iv) apply.

: D  Credits must be designated by refinery or importer-port of import, year of generation, and
    Credit Trading Area (1-7) of generation.  In 2005 and 2006, is it necessary to further
    designate credits generated before June 1 versus after May 31 because § 80.531(c) has an
    early credit period from June 1, 2005 through May 31, 2006?

    A: D    For reporting purposes, it is not necessary to distinguish between credits
           generated before June 1, 2006 (early credits) versus credits generated after June


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              1, 2006. Specifically, § 80.593 states that annual compliance reports must
              contain information regarding credits for each refinery or, in the case of
              importers, by Credit Trading Area. For record keeping purposes, refiners and
              importers must keep information on credits separately for each calendar year
              compliance period and separately for each refinery (or in the case of importers,
             for each Credit Trading Area). However, § 80.592 (b) also specifies that refiners
              and importers must keep documentation on the calculations used to determine the
              number of credits generated.  Since there are three ways to generate credits
              under the program, credit calculations must be appropriate for the given time
             period in which the credits are generated.'

8.9: D  For reporting the percentage of motor vehicle diesel fuel produced meeting the 15 ppm
       sulfur standard after the inclusion of any credits, an interpretation of § 80.593(a)(4) is the
       following:
              % =  100x[(V15 + credits)/(V15 + V50o)]
       where the credits must be generated in the same Credit Trading Area that they are used.
       Is this algebraic interpretation  correct?

       A: D   Yes, this algebraic formula correctly calculates the percentage of fuel that must
              be reported under § 80.593(a)(4), where VI5 and V500 have the meanings
             provided in § 80.531(a)(2), and "credits" means credits that are properly
              generated and used under the regulations.

8.10: D Adequate volume of 15 ppm highway diesel fuel produced today for the testing of the
       distribution system is key to resolving uncertainty in a timely manner and working out
       implementation issues. What is EPA doing to encourage refiners to produce test batches
       of 15 ppm highway diesel fuel so that downstream parties can test models and
       assumptions while there is still time to modify systems prior to 2006? Is it possible to
       credit current production?

       A: D   To ensure a smooth transition to large-scale production and distribution of 15
             ppm highway diesel fuel beginning June 1, 2006, the program allows for refiners
              to generate early credits. From June 1, 2001 through May 31, 2005 refineries
              and importers may generate credits based on the volume of 15 ppm sulfur
              highway diesel fuel that is used in vehicles with engines that are certified to meet
              1. From June 1, 2001 through May 31, 2005 refineries and importers may generate credits based
              on the volume of 15 ppm sulfur highway diesel fuel that is used in vehicles with engines that are
              certified to meet the model year 2007 heavy-duty engine PM standard under 40 CFR 86.007-11.
              2. From June 1, 2005 through May 31, 2006 refineries and importers may generate credits based
              on the volume of 15 ppm sulfur highway diesel fuel that is dispensed at retail outlets or wholesale
              purchaser-consumer facilities.
              3. From June 1, 2006 through December 31, 2009 refineries and importers may generate credits
              based on the volume of 15 ppm sulfur highway diesel fuel produced above the 80 percent
              threshold.

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            the model year 2007 heavy-duty engine PM standard under 40 CFR 86.007-11.
            From June 1, 2005 through May 31, 2006 refineries and importers may generate
            credits based on the volume of 15 ppm sulfur diesel fuel that is dispensed at retail
            outlets or wholesale purchaser-consumer facilities (i.e., the volume of 15 ppm fuel
            that is kept segregated and uncontaminated all the way through the distribution
            system and to the end user).

            Under the existing regulations, diesel fuel used to test the distribution system does
            not generate early credits unless it meets the above criteria.  However, based on
            recent discussions with interested stakeholders, the Agency is also investigating
            whether it would be appropriate to allow early credits for test batches of 15 ppm
            sulfur diesel fuel which, while starting out as 15 ppm may end up at a higher
            sulfur level prior to sale to the end user. The Agency is in the process of
            developing a proposal to allow this.

. 11: D Can credits generated by meeting the 15 ppm highway diesel sulfur standard early be
     used in the gasoline program?

     A: D   No. However, the regulations at § 80.540 allow a GPA refiner to extend its sulfur
            standards for gasoline from December 31, 2006 to December 31, 2008 if the GPA
            refiner produces 95% of its on-road diesel as 15 ppm diesel (at a volume that is at
            least 85% of its baseline volume) by June 1, 2006. Also, the regulations at §
            80.553 allow a small refiner to extend its sulfur standards for gasoline to
            December 31, 2010 if the small refiner produces 95% of its on-road diesel as 15
            ppm diesel by June 1, 2006 (at a volume that is at least 85% of its baseline
            volume).
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9.D    Product Transfer Documents (PTDsVBills of Lading (BOLs)

9.1: D  Please verify that the "product document requirements" of §80.590 do not apply to
       transfers where an entity maintains custody of a batch of diesel fuel from one place in the
       distribution system to another place (e.g., from a refinery to a pipeline or a pipeline to a
       terminal), all owned by the same entity. It is understood that records must be retained
       under §80.600(a)(7).

       A: D   Product transfer documents must be exchanged when a product changes custody.
             A facility is defined as a location or series of location where custody does not
             change, therefore product transfer documents do not need to be exchanged
             between locations within a single facility.

9.2: D  Must BOL's contain the exact words of this section? (§§ 80.590, 80.598)

       A: D   For parties upstream of the retail outlet or wholesale purchaser-consumer, the
             PTDs required under the regulation may use product codes, except that the sulfur
             content standard must appear in numeric form (15, 500 or >500). For PTDs to
             retail outlets or wholesale purchaser-consumers, the exact language must be
             used.

9.3: D  Can codes be used to designate facility IDs on PTDs, or does the entire facility ID need
       to be on the PTD?

       A: D   To ensure accurate handoff accounting under D&T, PTDs require the disclosure
             of the full 9 character Facility ID (EPA assigned 4 character Company ID plus
             EPA assigned 5 character Facility/Activity ID).

9.4: D  Are separate PTD documents required for diesel or will general procedures currently in
       place to meet gasoline PTD requirements be sufficient to meet PTD requirements for all
       grades of diesel?

       A: D   While there is substantial overlap in PTD requirements for gasoline and diesel,
             the requirements are not identical.

9.5: D  What data points will EPA want/need to allow pipelines to develop necessary PTD
       language?

       A: D   The information required on commercial PTDs includes identification of the
             transferee and transferor (including names and addresses of the parties, and
             registration number of transferor and transferee (as amended in the July 7, 2005
             technical amendment to the regulations), the volume of product, the date and
             location of the transfer, and identification of diesel fuel distributed by use


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              designation (for use in motor vehicles, NR equipment, LM equipment, or NRLM
              equipment) and the sulfur standard to which the fuel is subject. PTDs must
              indicate the type of fuel- whether dieselfuel, heating oil, kerosene, exempt fuel, or
              other. PTDs must also state if fuel is No. 1 or No. 2; dyed or undyedfuel; and
              marked heating oil, marked LM, or unmarked fuel. Where a party delivers or
              receives fuel that has two different designations (but a uniform sulfur content),
             parties must use separate PTDs for each usage designation. At the point where
             fuel is taxed or dyed/marked, and for subsequent transfers, the PTD must indicate
              the applicable fuel uses as well as the standard.  This is not an exhaustive list of
              the requirements, a complete and detailed description of the specific requirements
              is located in §80.590.

9.6: D  On the designate and track approach, is any specific information required to be written on
       the Bill of Lading (BOL) at the truckload rack?

       A: D    Section 80.590(d) provides that product codes may be used if such codes are
              clearly understood by each transferee (so long as the sulfur content standard,
              stated numerically in parts per million,  is included), except that the information
              required by § 80.590 to be conveyed to truck carriers, retailers, wholesale
             purchaser-consumers and mobile refuelers must be stated verbatim.  See also §
              80.590(g).

9.7: D  If a retailer or wholesale purchaser-consumer does not dispense early credit  15 ppm
       sulfur cap motor vehicle diesel fuel, is  June 1, 2006 the effective date for the product
       transfer document (PTD) requirements at § 80.590 per §  80.500(e) or § 80.592(a)(l) or §
       80.530(a)(2)?

       A: D    The PTD requirements apply to all motor vehicle dieselfuel under the highway
              diesel rule (both 15 ppm and 500 ppm)  as of June 1, 2006. Prior to June  1, 2006,
              the PTD requirements apply only to transfers involving early credit fuel.  Under §
              80.590(h) and (i), starting June 1, 2001, any highway dieselfuel transfers that are
              subject to the early credits provisions of§ 80.531(b) or (c) are subject to  the PTD
              requirements.  The 5 year retention period under § 80.592(a) applies to all
              required PTDs under the rule, including PTDs required under the additive
             provisions (see § 80.591).

9.8: D  Some pipelines operate a fungible batch system and some operate a segregated batch
       system.  A shipper on a segregated batch system receives the batch that it tendered at the
       origin point. The  pipeline has the responsibility to maintain batch quality while the batch
       is in its custody. If the pipeline delivers to third party tankage, the terminal operator is
       responsible for segregating interface and delivering to tankage. It is unclear where the
       pipeline's responsibility begins and where  it ends, which could drastically  affect the
       pipeline's sampling and testing program. (How is responsibility divided under the current
       500 ppm program?)


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       A: D   Pipelines are carriers under the regulations and as such have responsibility to
             ensure the product meets the standards while the pipeline has custody or title, and
             to provide appropriate product transfer documents to any downstream parties to
             whom it transfers custody. The responsibility to account for downgrade is a
             function of the point at which custody of the fuel is deemed to  take place. This
             point is a function of contracts between the different entities. Each entity is
             responsible for all downgrading that occurs when it has custody.

9.9: D  At truck loading terminals what additional information needs to be provided to
       implement ULSD?  Specifically, what information needs to be printed on the tickets and
       what information needs to be included in the quarterly report?

       A: D   The information detailed in §§ 80.590 and 80.591 needs to be included on all
             PTDs.  The information that must be included in quarterly reports is stated in
             detail in § 80.601 (a).  PTDs can serve as commercial documents (such as
              "tickets "), as long as they contain all of the information that is required by EPA.
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10. D   Documentation

10.1: D Section 80.600(a)(10) says, "Any refiner or importer shall maintain copies of all product
       transfer documents required under §80.590.  If all information required in paragraph
       (a) (6) of this section is on the product transfer document for a batch, then the provisions
       of this paragraph (a) (10) shall satisfy the requirements of paragraph (a) (6) of this
       section for that batch."  Does that mean that if a refiner or importer has a PTD containing
       the information no other record is required? That seems unneeded.  Does that paragraph
       mean something else?

       A:    Section 80.600(a)( 10) first requires that product transfer documents under §
             80.590 be maintained by refiners and importers. It then states that if such
             product transfer documents contain all the information required under paragraph
             (a) (6) of § 80.600 for each batch, then no other separate recordkeeping is
             required for that batch in order to satisfy the requirements of paragraph (a) (6).

10.2: D Must records be retained if only #2D 15 PPM is received? In general, are requirements
       of § 80.600(b) applicable if the  distributor only receives #2D 15 PPM? [§§
       80.600(b)(l)(ii) and 80.600(b)(2)]

       A: D   Yes, records must be retained for this fuel (unless the fuel is dyed, marked, and/or
             taxed or in the Northeast/Mid-Atlantic Area or Alaska) for at least five years. In
             this case, the D&Treports would confirm that the distributor did not handle any
             other fuel and did not violate any of the restrictions on redesignating fuel.  The
             D&T reports from this distributor would also be used in evaluating compliance
             by the parties before and after this party in the distribution system.  This
             distributor is only one step in a chain of fuel hand-offs, and the D&T system is
             designed to  use information from each party to a hand-off to ensure compliance
             by all of the parties in the chain of distribution. Further, parties should retain
             records for defense purposes.

10.3: D a)     Are diesel batch numbers kept separate from gasoline batch numbers?
       b)     Must numbers be chronological and contiguous?
       c)     Are zero volumes allowed? [§ 80.602(b)(2)]

       A:U   a)     Yes.  §§ 80.592, 80.593, 80.602(b)(2) and80.604 require that the batch
                    numbering conventions set forth in § 80.65 (d) (3) be used for diesel fuel.
                    The regulations require batch numbering for  diesel fuel to be separate
                    from batch numbering for purposes of the gasoline rules (RFG/anti-
                    dumping, gasoline sulfur), using the same batch numbering conventions
                    for diesel as are  used for gasoline.
             b) D   Numbers must be chronological and contiguous- under § 80.65(d)(3), the
                    1st batch for the year is number 1, with ". . . each subsequent batch during


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                    the calendar year being assigned the next sequential number. " Each
                    batch number also includes the EPA company and facility registration
                    number and the last 2 digits of the year in which the batch was produced.
             c) D    Yes, zero volumes are allowed. For example this would be appropriate
                    where a batch is tested, then re-blended and retested before any of it is
                    transferred. Back-up records should be kept so that an adequate
                    explanation exists regarding why there was a zero volume.

10.4: D A tank truck common carrier picks up a load of ULSD at a Shell terminal and delivers it
      to a Flying J truckstop.  The carrier only provides a transportation service, does that
      carrier have any registration or reporting duties?

      A: D   No, the carrier does not have registration or reporting duties as long as taxes
             were assessed (in the case of highway fuel) or dye was added (in the case of
             NRLM) at the terminal.  There are recordkeeping andPTD requirements,
             however. These requirements are listed in detail in §§ 80.590 and 80.592 of the
             regulations.

10.5: D A trucking company stores ULSD at its terminal for use in its own truck fleet. Does it
      have any registration or reporting requirements?

      A: D   No, but there are recordkeeping requirements; and such an arrangement may be
             considered, by definition, a "Wholesale Purchaser-Consumer ".

10.6: D Is it correct that below the rack, the primary recordkeeping mandate is production and
      retention of PTDs with no reporting obligations?

      A:U   Yes, if requisite dye/marker has been  added and/or taxes were paid (see QA 10.4,
             above).

10.7: D Do product codes have to contain the sulfur amount if a  description accompanies the
      code?  Will EPA provide examples of code structure?

      A: D   The numeric designation of 15, 500, or >500 must appear on all product transfer
             documents for MVNRLM.  The rule (at § 80.590(d)) currently requires that the
             numeric designations appear in the PTD 's code,  however, we intend to revise that
             provision in a subsequent  technical amendment to allow the designation to be
             stated anywhere on the PTD, not just in the code (but the numeric designation
             must be clearly marked on the PTD somewhere). We will also allow product
             codes on PTDs to contain  another  'symbol' in place of the numeric designation if
             that symbol is defined somewhere on  the PTD (e.g., to denote that a fuel meets the
             15 ppm standard, "X" can be included in the code in place of "15", as long as it
             is clearly noted on the PTD somewhere that "X = 15 ppm ").
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10.8: D What compliance and reporting requirements are there if a company throughputs
      highway diesel at a 3rd party's terminal?

      A:U   Under the D&T regulations, the custody holder is the responsible party, and must
             comply with all recordkeeping and reporting requirements. In this example, it
             would in most cases be the terminal owner. However, in order to ensure
             compliance for the terminal as a whole, they may need to place their own
             compliance requirement(s) on the lessee.

10.9: D Must individual batch reports be submitted for highway diesel (15 or 500 ppm)? Is this
      requirement for NRLM diesel only?

      A: D   With respect to highway diesel, batch reports are required for participants in
             early credit generation and/or refiners covered under a Temporary Compliance
             Option, per §80.581.

10.10: Is registration for an EPA number at a terminal required, and is it in addition to present
      TCN#?

      A: D   Yes, registration is required.  The TCN # is used for the IRS system; the EPA
             D&T system is not based on the IRS model, but rather on our existing gasoline
             reporting programs. Facility ID numbers are assigned by facility, however, an
             aggregated facility or a single facility that serves many roles would need to state
             those activities (such as: refinery, importer, breakout (passthrough) terminal
             and/or pipeline, and truck loading terminal) in its reporting documentation.

             Please see the "Diesel Fuel Reporting Forms" page for registration forms and
             information, at:
             http://www.epa.gov/otaq/regs/fuels/dieselfms.htm

10.11: a)     What is the difference in reporting requirements for additives containing greater
             than 15 ppm,  as well as those containing less than 15  ppm, sulfur? D
      b)     Will batch recertification change based on additive sulfur content? D

      A: D   a)     There is no reporting requirement for additives, onlyMVNRLM.
             b) D   Redesignation of a batch due to downgrading is limited to 20% of volume
                    by facility.  Additives having a sulfur content greater than 15 ppm that are
                    used in ULSD must meet the standards and identification requirements of
                    § 80.521(b).

10.12: What registration and reporting requirements exist for 3rd party terminals and other
      service providers  that never actually  own the product with regard to ULSD?
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      A: D   Under the designate and track regulations, custody holders are the responsible
             party for registration, recordkeeping, and reporting.

10.13: Since all entities in the distribution system will be required to report data, this creates
      double reporting as both the transferor and transferee would be reporting the same
      volume.  Are there any plans or safeguards to be in place to allow a reporting entity to
      check and/or verify volumes that other entities have assigned to their entity or facility?

      A: D   There are no plans/requirements being put in place by EPA. Businesses may
             handle such a program themselves, as they see fit, as part of a quality assurance
             program.

10.14: Has EPA defined the reporting application or process for the designated volumes reports?
      Will alternate methods, such as EDI or spreadsheet be allowed for submissions?

      A: D   Please see the "Diesel Fuel Reporting Forms " page for applications, and all
             other reporting forms, at:
             http://www.epa.gov/otaq/regs/fuels/dieselfms.htm
             Alternate methods- spreadsheets or flat files- may be used for submissions.

10.15: Will paper (bubble) reports continue to be required for individual batch submissions or
      will alternate methods, such as EDI or spreadsheet be allowed for submissions?

      A: D   No, as stated above in question 10.14, paper/bubble reports will no longer be
             required.  Submissions will be in spreadsheet/flat file format.

10.16: Will EPA want electronic copies of quality control testing charts?

      A: D   EPA will want the original records (including test records). The original charts
             can be provided electronically, or we will accept paper printouts of electronic
             copies (or other hard copies).

10.17: In the preamble, EPA states, "the reporting forms can be standardized and the review
      process automated in such a fashion as to minimize  the Agency resource requirements"
      (page 39062). What is EPA's intent with regard to such standardization? According to
      EPA, commenters stated that the information needed for D & T is already kept as part of
      normal business practices (pages 39061, 39069).  What is EPA's understanding of
      "normal business practices" and the way this information is already kept? How does this
      mesh with EPA's statement on standardization? What are EPA's expectations of D & T
      documentation? How will EPA address the different ways that facilities "already keep"
      the documentation? What is EPA's expectation with regard to PTDs? Is EPA looking to
      create or require a standard PTD? Will EPA request electronic copies of PTDs?
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      A: D   We are proposing a flexible reporting system which historically has been well
             received by industry because of its ease of use. No special software will be
             required (reports should be submitted in spreadsheet or flat file format).

10.18: What kind of local record keeping (at the terminal) will be required versus a centralized
      record keeping process?

      A: D   Sections 80.592(e) and 80.602(e) require that the required records be made
             available  "on request by EPA. "  The location where the records must be kept is
             not specified by the regulations. EPA interprets this requirement to require that
             records should normally be made available the same day they are requested.  If
             they are stored off-site, EPA may request photocopies or facsimile copies be
             supplied pending receipt of original records,  or EPA may visit the off-site facility
             to obtain the  records.  If voluminous records are requested by EPA, they must be
             provided within a reasonable time, which will generally be specified in the
             information request.

10.19: Will the terminals or pipelines have to provide consignees to interconnecting pipelines
      any documentation, or can they  forward documentation from the source, or is no
      documentation an option?

      A. D   When a party transfers custody of designated fuels in the distribution system the
             transferor must provide  a PTD to the new custodian. PTDs contain a variety of
             information, some of which will not be included in information generated by prior
             sources of the fuel. No documentation is not an option in cases where a PTD is
             required.

10.20: Where (specific certified and  express mailing addresses at EPA) should refiners and
      importers send the 2003, 2004 and 2005  pre-compliance information required in §
      80.594?

      A: D   Certified mailing address for pre-compliance reports is,

             Attn: Diesel Sulfur (6406J)D
             1200 Pennsylvania Avenue NWD
             Washington,  DC 20460 D

             Express (overnight/commercial carrier) mailing address for pre-compliance
             reports is,

             Attn: Diesel Sulfur Pre-compliance ReportD
             c/o: Chris McKenna (202-343-9037)0
             1310 L St. NWD
             Washington,  DC 20005 D


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      Also, please send electronic copies of all documents, if possible, particularly the
      spreadsheet template that EPA developed for reporting estimates of 15 ppm production,
      500 ppm production and credit generation and usage.  Electronic copies can be
      submitted on a disk or e-mailed to mckenna. chris@epa.gov.

10.21: Not all on-road diesel fuel must be 15 ppm starting in 2006. tte phase-in, small refiner,
      and geographic provisions of the final rule seem to assure that at least some 500 ppm
      diesel fuel will be in the market post-2006. But, for retailers and wholesale purchaser
      consumers, whether 500 ppm will be available in substantial quantities in their marketing
      areas is an important factor in deciding whether to invest in additional tankage in order to
      be able to offer customers both 15 ppm and 500 ppm diesel fuel. How can retailers and
      wholesale purchaser consumers gain information on the amount of 500 ppm that will be
      produced in their PADD post-2006?

      A: D   Refiners and importers are required to annually update EPA on their progress
             toward producing 15 ppm sulfur diesel fuel through the pre-compliance reports.
             We will produce a summary and analysis document of the pre-compliance reports
             submitted each year (the Summary and Analysis of both the 2003 and 2004 pre-
             compliance reports can be found at: http ://www. epa. gov/otaq/diesel .html  The
             annual summary and analysis reports will provide information, summarized and
             aggregated on a PADD basis, describing the volumes of 15 ppm and 500 ppm
             highway diesel planned to be produced, and estimates of the number of credits
             that refineries expect to generate or use. Further information on the business
             plans for individual parties in individual markets would need to be pur sued
             directly by retailers and whole sale purchaser consumers.

10.22: EPA released its status report on the on-road diesel sulfur rule earlier this year (2002).
      From a retailer's  point of view, there wasn't much helpful information in this status report
      in terms of which refiners are going to make 500 ppm in 2006 and beyond and in what
      qualities. Will these reports by refiners to EPA provide estimates of 15 ppm diesel fuel
      production? Or of 500 ppm diesel fuel production?

      A: D   Refiners and importers are required to submit annual pre-compliance reports
             under the highway rule from 2003 through 2005, and under the nonroadrule as
             late as 2011.  These reports must contain estimates of the volumes of 15 ppm
             sulfur fuel and 500 ppm sulfur fuel that will be produced at each refinery, and, for
             those refineries planning to participate in the trading program, a projection of
             how many credits will be generated or must be used by each refinery.  These pre-
             compliance reports must also contain information outlining each refinery's
             timeline for compliance and provide information regarding engineering plans
             (e.g., design and construction), the status of obtaining any necessary permits, and
             capital commitments for making the necessary modifications to produce low
             sulfur highway diesel fuel. Much of this information will be claimed as
             confidential business information (CBI). As a result, we will be unable to release


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             individual refiner plans unless they give permission to do so. However, we do
             report the information in an aggregated, non-confidential format. Refiner-
             specific information will have to be pursued through individual business
             relationships.

10.23: What is the purpose of requiring record keeping and reporting for early compliance. If
      EPA is seeking to encourage early compliance these requirements may be burdensome
      for certain marketers?

      A: D   Record keeping and reporting for early compliance is required to ensure that 15
             ppm credits are valid, as per § 80.531.
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11. D   Testing

11.1: D Per § 80.604(d)(5), must aromatics be reported (and run) if compliance is based on cetane
       index?

       A: D   No.  Under §§ 80.510 and 80.520, MVNRLMdieselfuel may comply with either
             the cetane index or the aromatics standard.

11.2: D For testing purposes at a terminal level, must each tank that is filled be tested or is it
       sufficient to test just the incoming pipeline shipment?

       A: D   There are no testing requirements downstream of the refiner and importer to
             verify that the sulfur content fuels received by a distributor is consistent with that
             reported on the PTD.  However, every party in the fuel distribution chain  that has
             had custody of a fuel batch with a sulfur content found to be excess of the  sulfur
             standard reported on the PTD could be held presumptively liable for the resulting
             violation if they lack sufficient affirmative defenses. The issue  of whether testing
             the sulfur content of the incoming pipeline shipment rather than that of each
             storage tank into which the fuel is delivered to establish the sampling and testing
             element of a terminal owner's affirmative defenses will be evaluated by EPA  on a
             case by case basis. In instances where the tanks being filled with 15 ppm  diesel
             fuel have been dedicated to 15 ppm diesel use, it will be more likely that pipeline
             receipt testing would be sufficient and that a test on the tank after the
             introduction of the fuel would not be necessary. In cases where the tank is
             alternately used to store higher sulfur fuel as well as 15 ppm diesel fuel, a test on
             the tank after the introduction of the fuel may be needed.

11.3: D Do terminals need to test every batch?

       A: D   Terminals are not required to test terminal tanks after every receipt of product.
             However, to establish a defense to presumptive liability to a violation, a terminal
             must establish each defense element. One such defense element is that the
             terminal had a quality assurance program, including a periodic sampling and
             testing program.  Since  terminals receive very large volumes of product in each
             receipt, an appropriate quality assurance program might require sampling and
             testing after each receipt of 15 ppm product. Note that terminals would have to
             test every batch in order to establish a defense if it is adding greater than 15 ppm
             sulfur content additives (or conduct the VAR approach under § 80.614,  if the
             additive is a static dissipater additive).

11.4: D Should testing at a terminal be done at the rack after injection of any additives?
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      A: D    There are no sulfur testing requirements downstream of the refiner/importer.
             However, to meet their affirmative defense to presumptive liability, parties that
              blend > 15 ppm sulfur additives into diesel fuel subject to the 15 ppm sulfur
             standard must conduct aperiodic sampling and sulfur testing program after the
             additive is added to the fuel (see 40 CFR 80.613(d).  Alternative affirmative
             defense requirements exist for blenders of > 15 ppm anti-static additives that are
              based on a volume accounting reconciliation system (see 40 CFR 80.614).

11.5: D Will EPA be testing diesel for compliance at the retail/vehicle level?

      A:     Yes, EPA will be testing diesel for compliance at the retail/vehicle level.

11.6: D Please elaborate on fuel tests at retail- what frequency would be recommended?

      A: D   Retailers are not required to perform testing in order to have a defense to
             presumptive liability. However, to establish  a defense to a violation distributors
             must, among other things, conduct aperiodic sampling and testing program. For
             a truck distributor, the best place to take samples may often be the tanks of retail
             outlets it delivers to. Retailers should probably sample and test after tank
              transition from a higher sulfur product to 15 ppm product,  to confirm that the fuel
             in the tank is meeting the 15 ppm standard.  Otherwise, if a violation is detected
             for some time subsequent to a tank transition, it may be difficult for the retailer to
             demonstrate that it did not cause the violation.

11.7: D When does the 2 ppm tolerance apply?

      A: D    The 2ppm downstream sulfur test tolerance (§ 80.580(d)) applies at all locations
             downstream of the re finer/importer.

11.8: D If XYZ Refining has a branded retailer who independently owns his/her XYZ Gas
      Station, does XYZ Refining have a duty to test ULSD at XYZ Gas Station?

      A: D   A branded refiner is not required to test gasoline at its branded retail outlets
             whether or not the retail businesses are owned by independent third persons.
             However, under § 80.612, branded refiners are liable for violations at branded
             retail outlets.  Under § 80.613, for branded refiners to establish a defense to such
             violations, it must, among other things, show that it has aperiodic sampling and
              testing program at the branded retail outlets.

11.9: D At what point in the distribution/receipt of ULSD will terminals need to sample/test for
      sulfur?  If terminals do not test for sulfur content at the rack will they be able to assert an
      affirmative defense in the event that contaminated fuel is discovered at the retail level?
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      A: D   Under the diesel sulfur program, there is no one time or physical location that a
             distributor must utilize for sampling.  The party must use its knowledge of the
             distribution system, and information regarding each receipt of product (e.g.,
             whether the shipment may include fuel that is very close to an interface with
             higher sulfur product) to determine when and where to sample. However, as a
             general matter, we believe that a terminal should take samples during and/or
             after receipt of new product into the tank so that if there is a problem, it can be
             discovered and remedied before the product is distributed further downstream. If
             there is reason to believe  that piping or a tank may contain high sulfur product
             then that may affect both sampling strategy and actions to prevent a potential
             violation. This is but one example of many possible situations. In regards to
             terminals not testing for sulfur content at the rack, if a terminal does not conduct
             a sampling and testing program, it will likely be difficult to be able to establish a
             defense to presumptive liability.

11.10: If tests are done upon receipt from the pipeline, how will PTDs reflect sulfur
      contamination added by the terminal through common piping, manifolds or at the rack?

      A: D   These tests would not address contamination by the terminal. Also, PTDs do not
             need to specify the precise sulfur content of the fuel, only that the fuel is
             compliant with the applicable sulfur standard. If minor contamination occurs,
             but the fuel still meets the applicable standard, it is not considered a violation,
             nor does EPA require it to be reported on a PTD.

11.11: With regard to test methods, would EPA consider the following two approaches to be
      equally sound in terms of a defense to presumptive liability? (1) qualify the test method
      chosen for downstream oversight purposes per the precision and accuracy criteria in the
      rule; or, (2) correlate the test method chosen for downstream oversight purposes to  a test
      method qualified per the performance based test method criteria? The methods appear to
      be equivalent and acceptable approaches.

      A: D   No, for the testing of fuel for compliance with the 15 ppm sulfur standard, we do
             not consider the two approaches to be equivalent. The second approach listed is
             not an option for approval of a test method under the diesel fuel regulations, and
             therefore testing with methods not approved under § 80.581 and § 80.585 would
             not be considered an adequate defense to presumptive liability.  Test results from
             test methods that have not been approved under the regulations might be
             considered as evidence of compliance or noncompliance with the standard,  but
             use of the unapproved method would not be considered as meeting the periodic
             sampling and testing requirement for defense purposes; nor would use of an
             unapproved method be considered to have fulfilled the requirement for refiners
             and importers to test every batch.  Testing for 500 ppm fuel has a different
             situation.
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11.12: Is there a process, or a need, to certify a tank of 15 ppm sulfur content highway fuel that
      is not located in a refinery? Is it a single sample or Top-Middle-Bottom samples? Must
      it be by lab analysis?

      A: D   Parties in the distribution chain downstream of the refiner or importer are not
             required to test motor vehicle dieselfuel. However, in order to establish a
             defense to any violation, downstream parties must conduct a quality assurance
             program, including sampling and testing.  The fuel must meet the standard on a
             per-gallon basis. An appropriate field method may be used for downstream
             quality assurance testing.  The regulations do not specify which testing method
             must be used for downstream quality assurance testing. The sampling methods
             prescribed by the rule in § 80.580 would be appropriate for purposes of quality
             assurance sampling under § 80.613(d)(l).

11.13: Terminal operators believe it is appropriate for them, even when acting as a "downstream
      facility," to ensure that the diesel fuel leaving the terminal gate complies with the 15 ppm
      sulfur standard. Terminal operators recommend that EPA determine compliance when
      the product leaves the facility, not when the product is still in tank before distribution.
      However, if such testing and determination is to be conducted on product in storage, the
      EPA should use an "average" of the  sulfur content of the tank to determine compliance.

      A: D   Fuel represented to meet the  15ppm standard that is stored, transported,
             dispensed, sold, offered for sale, supplied or offered for supply at a terminal must
             meet the 15ppm sulfur standard on aper-gallon basis (not on an average basis).
             Terminals are not required to perform sampling and testing except as a defense to
             liability, but we strongly concur that responsible terminal operators will conduct
             regular sampling and testing - and that the appropriate frequency will probably
             be after each receipt of product.

11.14: Will EPA have an oversight testing program for 15 ppm motor vehicle diesel fuel similar
      to the RFG gasoline survey program?

      A: D   The RFG survey program is a statistically valid sampling and testing program
             that is performed by an independent contractor who is paid for by participating
             refiners. Its purpose is to show whether the RFG in each control area meets
             standards on average. No such program exists under the highway or nonroad
             diesel regulations.  However, as with other fuels programs, EPA plans to conduct
             its own sampling and testing  at all levels of the distribution system to monitor
             compliance with the dieselfuel standards.

11.15: As EPA is aware, terminals often serve in two different capacities - (1) as an import
      facility; and (2) a downstream facility when product is received from a U.S. refiner or
      importer. As such, terminal operators believe that the 2 ppm testing tolerance would only
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      apply to those operations of the terminal when it is acting as a "downstream facility."
      Would EPA please confirm this interpretation.

      A: D   The 2 ppm test result adjustment of§ 80.580 (d) does not apply for fuel at a
            facility that is acting in the capacity of an import facility. However, fuel that is in
             a terminal tank downstream from the refinery or import facility is eligible for the
             2 ppm test result adjustment.

11.16: Does other testing need to be done to ship No. 1 diesel and redesignate it as jet to get
      ULSD credit?

      A: D   No other testing would need to be done.  However, the anti-downgrading
             provisions would apply if a downgrade (to 500 ppm highway diesel) were to
             occur.  The situation that the question is asking about would not affect the
             person's volume  balance; if the reverse were to occur-jet fuel was redesignated
             as No.  1 diesel fuel- the volume balance would be affected.

11.17: Are there regulations that require sampling and testing by each facility, or do you just
      need a sampling and testing program to establish a defense?

      A: D   In general, the only parties that must sample and test are refiners and importers;
             under § 80.581, they must sample and test each batch of motor vehicle or NRLM
            fuel subject to the 15 ppm sulfur standard that is produced or imported.
             However, a downstream party redesignating kerosene fuel for use as 15 ppm
             motor vehicle or NRLM fuel when such fuel is not accompanied by a PTD stating
             that it meets the 15 ppm standard, must have test results (see § 80.525).  Likewise,
             any party remedying a contamination of fuel originally designated as 15 ppm
            fuel,  or upgrading fuel not designated as 15 ppm fuel to fuel that meets the 15
             ppm  standard must sample and test before distributing the fuel as fuel that meets
             the 15 ppm standard.
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12. D   Enforcement

12.1: D What will happen if you refuel a 2007 truck with contaminated fuel?  Are there any
       engine or aftertreatment issues?  If a 2007 truck is misfueled, is there any legal liability
       for the end-user?

       A: D   If a MY 2007 or later truck is misfueled once, it will have significantly higher PM
             emissions during operation on that fuel, but there should not be any significant
             long-term emissions or engine durability concerns as long as the truck is then
             fueled with the proper fuel. A wholesale purchaser-consumer or end user faces
             presumptive liability if it misfuels vehicles or equipment with fuel not meeting
             applicable standards. However, a vehicle operator fueling at a retail outlet from
             an appropriately marked pump is not liable for the misfueling caused by the
             retailer or other party.  A wholesale purchaser-consumer (fleet operator with its
             own fueling facility- see definition at 40 C.F.R. § 80.2) may be able to establish a
             defense if the fuel was contaminated by an upstream party and the wholesale
             purchaser-consumer can otherwise establish in its defense elements that it did not
             cause the violation and that product transfer documents account for the product
             and demonstrate the product was compliant.

12.2: D EPA appears to focus enforcement on the custodian of the fuel, even though a
       compliance violation may well have occurred further upstream. Will EPA automatically
       require custodians to raise a defense and overcome  a presumption of liability for simply
       possessing off-spec fuel?

       A: D   The facility where the violation is found and all parties in the distribution system
             upstream of that facility will be presumed liable.  However, each party has the
             opportunity to establish a defense to the presumptive liability. For example, an
             upstream distributor who takes custody of a fuel would be presumed liable, and
             would need to demonstrate that it did not cause the violation- that product
             transfer documents  account for the fuel and show that the fuel was apparently in
             compliance when it was in its custody and that it has an adequate periodic
             sampling and testing program  (regardless of whether or not it tested that specific
             batch of fuel). However, if the fuel custodian is a retailer or wholesale
             purchaser-consumer, they would not be required to have aperiodic sampling and
             testing program in order to establish a defense.

12.3: D The regulation  requires an entity to conduct an investigation into the cause of a quality
       control testing violation.  What evidence will EPA require for purposes of establishing
       that an adequate investigation was conducted?

       A: D   EPA is not in a position to discuss what may constitute an adequate investigation
             in every conceivable scenario.  An adequate investigation is whatever  is required


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             to correct the cause of the deviation and to assure that the method performance
             has been restored to statistical control.

12.4: D The rule states that a party that is initially deemed liable for a violation of the rule will
       not be deemed liable if the party demonstrates:  (1) the violation was not caused by the
       party; (2) product transfer documents show that the violating product was in compliance
       when it was under the party's control; (3) the party conducted a quality assurance
       sampling and testing program. The regulations, at § 80.613, do  not specifically require a
       party to prove all three factors (there is no "and"). However, the preamble (page 39104)
       says that a party must show 1, 2 "AND" 3. It should be enough  to show that the party did
       not cause the violation (first prong). How will EPA apply this test?

       A: D   The preamble is correct- a party that is presumed liable  must establish all three
             elements (except for retailers and wholesale purchaser-consumers, which are not
             required to have aperiodic sampling and testing program).  This is consistent
             with all of the fuels rules in Part 80, and was corrected in a recent technical
             amendment (July 7,  2005).  For example, where a truck distributor drops 500
             ppm sulfur content fuel into a retailer storage tank that supplies a 15 ppmpump
             stand, both parties will be presumed liable. However, the retailer may establish a
             defense- even if it subsequently sold the fuel as 15 ppm fuel- if it can demonstrate
             that it did not cause the violation and that the PTDs account for the fuel as being
             15 ppm fuel, and thus show the fuel to be in violation.  (In this example, if the
             party in question was not a retailer, it would also need to demonstrate- regardless
             of whether or not it tested that specific batch of fuel- that it has an adequate
             sampling and testing program in place). If the product transfer document stated
             that the fuel was 500 ppm fuel,  then the retailer cannot establish a defense unless
             it immediately stopped sale and took actions (probably in association with the
             distributor) to remedy the violation.  If the retailer sells the product as 15 ppm
             fuel even though the product transfer document shows 500 ppm fuel was dropped,
             then it cannot meet the second element of its defense.

12.5: D Under the rule, sampling and testing is voluntary  for downstream parties, however, to
       establish a defense to presumptive liability, they will engage in periodic testing. If a
       downstream party  is not in the midst of periodic testing and is found in possession of an
       off-spec batch, then the party will not be able to meet all of the three elements required
       for establishing a defense (see question 12.4, above). It would appear  that it might be
       impossible to rebut the presumption if a party is not in the midst of scheduled QC
       sampling and testing. Is this correct?

       A: D   If a party conducts no quality assurance/sampling and testing,  it cannot establish
             a defense.  However, a party can satisfy the periodic sampling  and testing
             element of its defense by demonstrating that its periodic  sampling is done at a
             frequency that is appropriate given all of the circumstances.  It is not necessarily
             required that the product EPA finds to be  in violation was actually sampled and


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             tested. However, for parties such as terminals, an adequate sampling frequency
             may require sampling after each receipt of product.  EPA will investigate whether
             other parties may be liable, but each party must be able to establish a defense.

12.6: D The end user has no way of knowing whether they are refueling with diesel in excess of
       the 15 ppm sulfur regulatory limit. Is there a way to introduce some flexibility in the
       enforcement of the requirement that no fuel in excess of 15 ppm sulfur be introduced into
       a 2007 (or later model year) truck?

       A: D   Flexibility inherently exists in the fact that everyone involved in the production
             and distribution chain of each batch of fuel is presumptively liable, which will
             help to limit the  occurrence of fuel that does not meet the 15 ppm standard (or
             other applicable designation).

             A person fueling a vehicle at a retail outlet self-serve pump will not be liable for
             misfueling if the person does not cause the violation.  For example, if the
             misfueling occurs because the retail outlet has mislabeled the pump stand or
             because  the retailer or its distributor have contaminated the fuel with high sulfur
             product,  the retailer and parties upstream may be liable, but the self-serve
             customer will not be liable unless it played some part in causing the violation.
             However, if, for  example, a person fuels a 2007MYtruck at a self'serve pump
             labeled as dispensing 500 ppm fuel, the end user is liable.

12.7: D Will testing documentation from a receiving pipeline be sufficient evidence of
       compliance with the sulfur standard to continue delivery?  Will this document track
       through to a truck load without additional testing and be sufficient to establish a defense
       to liability for a  violation of the sulfur standard?

       A: D   EPA will sample and test diesel fuel at all levels of the distribution system. If, for
             example, the sulfur test result for a particular sample downstream of the refinery
             exceeds the 15 ppm sulfur standard (after the adjustment under 40 C.F.R. §
             80.580(d)), that fuel will be in violation regardless of any prior test result
             demonstrating compliance. Note  that fuel from each refiner and each pipeline is
             frequently commingled in the fungible distribution system. Fuel may be
             contaminated in the pipeline or in storage tanks during shipment.

             Where a violation is found, the party having custody of the fuel that is found in
             violation, and any party upstream of the facility where the violation is found is
             presumptively liable. However, each party may establish a defense by meeting
             each of its defense elements. For example, a distributor may establish a defense
             to a violation found at a retail outlet if it can show that: it did not cause the
             violation; product transfer documents account for the fuel and indicate that the
             violating product was in compliance with applicable requirements when it was
             under the party's control;  and the party  conducted a periodic sampling and


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             testing program and other quality assurance efforts.  Under § 80.613(d)(4), truck
             carriers can rely on sampling and testing conducted by another party, but must
             make other appropriate quality assurance efforts to meet this defense element.
             Parties other than tank truck carriers will need to conduct their own periodic
             sampling and testing, and will not be able to rely in whole on testing by parties
             upstream in the distribution system.

12.8: D Will appropriate processes and QA/QC oversight be acceptable defenses against
       enforcement for off-spec product?  Testing shows that the pipeline does not add sulfur
       from the steel.  If base testing is done to identify protection volumes, and operational
       records support no accidental contamination, will this be sufficient? Could this preclude
       many proprietary and batched pipelines from needing on-line analyzers and extensive
       sampling process?

       A: D   Parties are presumed liable for a violation if a noncompliant fuel is found to be in
             their control, or if they are  in the distribution system upstream of the facility
             where the violation is found. Downstream parties have a defense to presumptive
             liability if: (1) the party did not cause the violation; (2) PTDs establish that the
             fuel was in compliance while the fuel was under the party's control; and (3) the
             party conducted an adequate QA program, including sampling and testing.

             While refiners, importers and transmix processors are required to test each batch
             of product represented to meet the 15 ppm sulfur content standard, most
             downstream parties are not required to test every batch.  Testing for downstream
             parties  is voluntary. Downstream parties may conduct periodic sampling and
             testing for quality assurance purposes in order to establish a defense to liability
             for alleged violations.

             Each company should consider its distribution system and its own operations in
             determining the appropriate sampling and testing frequency. Factors that EPA
             believes are relevant include: the results of previous sampling; the volume of fuel
             in a particular shipment (the larger the volume,  the greater the justification for
             testing); the degree of confidence  in the quality of the product when it was
             received; and the opportunity for violations while the fuel was  in possession of
             the party (e.g., the opportunity for commingling with higher sulfur product).  For
             example, the volume of shipments into terminals are normally relatively large. A
             terminal that samples and tests after each receipt of 15 ppm sulfur content
             product will likely be able to meet its periodic sampling and testing defense
             element, and will have significant evidence regarding the "didn 't cause " defense
             element as well.  However,  it should be noted that a terminal could demonstrate
             that all product received meets the applicable  specifications, and still cause a
             violation to occur subsequent to receipt. Also note that there are variations to the
             defense elements for certain parties, such as parties who blend additives having a
             sulfur content exceeding 15 ppm to fuel subject to the  15 ppm standard.
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             Note that the rule requires QCfor sulfur measurement instrumentation.  If
             instruments are out of control requirements, then all samples taken since the
             instrument was last in control must be retested.  QC records must be retained for
             5 years.

12.9: D Will pipelines have an exempt refiner defense if higher than standard sulfur is located in
       their systems?

       A: D   The fuel sulfur level of a batch of fuel must conform to the way it is designated.  If
             a pipeline has fuel that is designated as 500 ppm or 15 ppm sulfur, and it does not
             meet the designated level, then it is noncomplying.  It is not a defense to claim the
             fuel should have been designated otherwise by an upstream party.

12.10:  What steps must a retailer/distributor take to assure that it is not liable for the sale of
       off-spec motor vehicle diesel fuel subject to the 15 ppm standard?

       A: D   As discussed in questions 4.35 and 12.18, retailers have certain affirmative
             requirements, including properly labeling pump stands, maintaining product
             transfer documents and records regarding downgrading of 15 ppm diesel fuel.
             Retailers must not cause the 15 ppm fuel to be contaminated by misdelivery of
             high sulfur product into a storage tank for 15 ppm sulfur content product.
             Retailers should carefully inspect product transfer documents at the time of
             delivery to assure that the proper product is being delivered into each storage
             tank.

             We believe that retailers and distributors should work closely together to assure
             that misdeliveries do not occur.

             The liability and defense provisions of the 15 ppm motor vehicle diesel rule are
             similar to those of previous fuels rules. Under § 80.613(a), a retailer and any
             distributor or carrier in the distribution chain are deemed liable for a violation
             found at the retail outlet (see § 80.612). A retailer will not be deemed in violation
             if it can show that it did not cause the violation,  and product transfer documents
             account for the fuel found to be in violation and indicate the violating product
             was in compliance with the 15 ppm sulfur standard when it was under the
             retailer's control.

             A distributor must also show  that it did not cause the violation, that the product
             transfer documents account for the product, and show that the product was in
             compliance when it was under the distributor's control. A  distributor could cause
             a violation by various actions, including by misdelivery of high sulfur product or
             commingling high sulfur product with 15 ppm product in a storage tank or
             transport truck.  To establish a defense, a distributor must also demonstrate that
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             it has conducted a quality assurance program, including periodic sampling and
             testing of the fuel it transports and delivers (see § 80.613(d)).

12.11:  Many retailer/distributors use common carriers, rather than their own trucks, to transport
       and deliver diesel. Under the diesel rule, what potential liability and defenses to liability
       are in place for common carriers?  If a common carrier does not follow the supplier's or
       the retailer's location and/or delivery instructions, is the common carrier liable for the
       misdelivery or the retailer?

       A: D   As with other EPA fuels programs, the highway and nonroad diesel sulfur
             regulations utilize a presumptive liability structure.  When a violation is found,
             the party who owns, leases, operates, supervises or controls the facility where the
             violation is found, and every party upstream of that facility,  who supplied the fuel
             to the facility where the violation is found, is presumed liable, absent a complete
             defense to the violation.

             Under the hypothetical, initially both the carrier and the retailer would be
             deemed in violation.  The carrier who delivers 500 ppm product to a retail outlet
             tank when 15 ppm product has been ordered would not be able to establish it did
             not cause the violation, and thus would remain liable.

             The distributor who hired the common carrier would be liable if the product
             transfer documents and other paperwork demonstrated that 15 ppm product was
             ordered and 500 ppm product was delivered, and the distributor failed to take
             reasonable steps to address the situation.

             A retailer may establish its defense by 1) demonstrating it did not cause the
             violation; and 2) and demonstrating that product transfer documents account for
             the fuel found to be in violation and indicate that the violating product was in
             compliance with the standards. A retailer does not have to conduct a quality
             assurance sampling and  testing program to meet its defense requirements.
             However, a retailer must check the product transfer documents and properly
             direct deliveries to the proper storage tank. In this hypothetical, the retailer may
             have been able to detect  the misdelivery at the time of delivery if it had checked
             the PTD provided by the  carrier.  If the retailer does not check the PTD at the
             time the misdelivery occurs (and if doing so would have shown that a misdelivery
             had occurred), and sells  the product as 15 ppm fuel, the retailer would not be
             able to establish a defense.

12.12:  How about after-hours deliveries? CMany retailers also are not open 24 hours a day and
       received diesel deliveries  during the night while its stores are closed. If a misdelivery is
       made, what are the retailer's defenses?
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      A: D   As discussed above, regardless of when the delivery occurs, the retailer must
             properly direct deliveries, and it must check the product transfer documents.
             Where the retailer's employees will not be present during deliveries, both the
             retailer and the trucker should take special care to prevent misdeliveries.  A
             product transfer document must be provided to the retailer with every transfer of
             custody or title of the dieselfuel.  The retailer has the responsibility to check the
             transfer document to determine that fuel meeting the appropriate standards was
             delivered to the appropriate tank.  Therefore, if a misdelivery is made after-hours,
             the retailer's employee should discover this misdelivery upon opening the outlet
             the following day through an inspection of the product transfer document left by
             the carrier (or possibly earlier if a transfer documents were received earlier).  If
             the retailer did not cause the misdelivery, and it discovers the misdelivery
             through inspection of product transfer documents, and locks the pumps before
             any dieselfuel is sold,  then it will not be held liable for the violation.

             Assuming the retailer properly instructed the distributor or carrier to deliver 15
             ppm fuel to the appropriate storage tank, the carrier would not be able to
             establish a defense. The distributor would also be liable for a violation if the
             paperwork shows that  a misdelivery was taking place (e.g., that 15 ppm fuel was
             ordered but 500 ppm fuel was being delivered).

12.13: Refiners will produce diesel fuel that meets the 15 ppm standard at the refinery gate.
      However, the rule mandates that the sulfur content remain at 15 ppm or below throughout
      the distribution system until it is dispensed into a vehicle's fuel tank. Assume the PTDs
      of the product are in order and properly identify the diesel as 15 ppm fuel, what potential
      liability could a retailer have if the batch has been contaminated — in the pipeline, at the
      terminal,  or in the transport truck — so that the diesel received by the retailer exceeds the
       15 ppm spec?

      A: D   In this case, a retailer would initially be presumed liable for the violation, but
             could establish a complete defense to liability if the PTDs account for the fuel in
             violation and show that the product was in compliance with the 15 ppm sulfur
             standard; and the retailer did not cause the contamination.  There may be cases
             where an unscrupulous retailer purposely receives violating product delivered by
              "midnight drops. " In some  cases no product transfer documents cover the
             product.  The retailer in such cases would not be able to establish a defense, since
             it  would have caused the violations, and since not all product would be covered
             by its product transfer  documents.

             Once the retailer becomes aware that the sulfur content of diesel product subject
             to the 15 ppm standard exceeds the standard, it has an obligation to shut down its
             retail pumps affected by the  contaminated product until the violation can be
             corrected. If the retailer did not shut it off, it would be liable for selling or
             dispensing noncomplying dieselfuel.
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12.14:  There is no field testing equipment commercially available to measure accurately sulfur
       at these low levels and almost no retailers or wholesale purchaser consumers have the
       type of on-site laboratories to conduct the testing.  Thus, a distributor conducting a
       quality assurance plan (QAP) would be forced to send a sample to an outside laboratory
       for analysis and may not receive the test results for 24 to 48 hours. By this point, most if
       not all of the off-spec fuel would have been sold by the retail outlets, making it
       impossible to correct the non-compliance. Shouldn't a retailers or wholesale purchaser
       consumers QAP under the  15 ppm motor vehicle diesel program be limited to examining
       PTDs? If not, how does EPA expect distributors to comply with this defense
       requirement?

       A: D   Retailers are not required to show an appropriate sampling and testing program
             to establish a defense to liability.  See § 80.613(a)(1)(Hi). However, distributors,
             including truck distributors,  who take title to the gasoline and deliver product to
             their retail outlets, must conduct a quality assurance sampling and testing
             program. These requirements are the same as in other fuels rules. A truck
             distributor could rely, in part, on a proper quality assurance sampling and testing
             program conducted by the terminal. But since there may be opportunities for the
             trucker to obtain improper product (e.g., 500 ppm fuel instead of the 15 ppm fuel
             that was ordered), or commingle high sulfur products with 15 ppm product, or
             otherwise cause violations, sampling at locations downstream from the truck
             loading terminal would be appropriate.

             If a distributor must utilize an outside laboratory to obtain test results, and if it is
             impossible for the distributor to obtain results  quickly, the periodic sampling and
             testing quality assurance program would still be useful in as much as it would
             show if any violations are occurring and based on those findings the distributor
             and retailer should act immediately to prevent future violations, and to remedy
             the present violation if it still possible to do so by shutting down the affected
             pump stands until the product meets standards. In this situation, if a violation
             occurred and is discovered through the quality assurance testing, the distributor
             and retailer may not be able to establish a defense to the violation based on the
             delayed test results. However, EPA may take any such unavoidable delay into
             account  in its evaluation of the case.  Moreover, the distributor could, as stated
             above, limit its exposure, by obtaining as many terminal test results as possible.
             Whether the distributor and retailer could meet the causation element andPTD
             element would depend on the specific facts.

12.15:  What responsibility, if any, does a retailer have to "police" its customers to assure that
       they do not misfuel their vehicles — e.g., dispense 500 ppm diesel, if offered at the retail
       outlet, into a 2007 or newer heavy duty truck?  In many cases, diesel retail outlets are
       large with  multiple fueling locations and are staffed by entry level employees earning just
       over the minimum wage. Does EPA expect these employees to "police" customers at the
       retail outlet to assure that these customers are fueling properly? Also, please provide


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       further clarification of the term "permit." at § 80.610(d)(l). For example, if a marketer
       tells a self service customer that he can't fuel with 500 ppm but the customer continues, is
       the marketer "permitting" the introduction of 500 ppm into a 2007 or newer model year
       vehicle requiring 15 ppm?  When exactly is a marketer "permitting" misfueling?

       A:U   Under the regulations, no per son shall "[ijntroduce, or permit the introduction
             of, dieselfuel into model year 2007 or later diesel motor vehicles, and beginning
             December 1, 2010 into any diesel motor vehicle, which does not comply with the
             standards and dye requirements of§ 80.520(a)and (b). " Nor shall any person
             "introduce or permit the introduction into model year 2007 vehicles, motor
             vehicle dieselfuel that is identified as other than dieselfuel complying with the 15
             ppm sulfur standard.... "  Nor shall any person cause another person to commit
             an act in violation of these prohibitions.  40 CFR § 80.610(d) and (e).

             Therefore, a retailer will be liable if it, or its employees, introduce noncomplying
             fuel into vehicles, or permit such introduction of noncomplying fuel into vehicles
             or cause another person to violate the stated prohibitions. A retailer must
             properly label pump stands and assure that product represented byproduct
             transfer documents as meeting the 15ppm standard is delivered to the
             appropriate storage tanks, and that product subject to the 500 ppm sulfur
             standard is not delivered to such storage tanks. Moreover, a retailer should train
             its employees that may fuel diesel vehicles regarding these prohibitions and the
             pump stand labels and the corresponding labeling of filler inlets and dashboards
             on model year 2007 and later diesel vehicles. Because there may be many
             scenarios regarding how  misfueling violations occur at retail facilities, a
             retailer's liability for misfueling that occurs at its facilities will be evaluated on a
             case-by-case basis.

             Where a retailer has made reasonable efforts to prevent self-service customers
             from misfueling (e.g., by cutting power to the pump as soon as the misfueling is
             perceived) and has not in any way caused the misfueling (e.g., through
             mislabelingpumps) the retailer would not be liable for "permitting" misfueling by
             a self-service customer.

12.16:  What about intentional misfueling by a customer? Cm the past, as new fuels have been
       introduced in different parts of the country (CARB II Diesel in California; RFG in
       Milwaukee), negative reactions by customers has been significant.  Given the fact that
       truckers may believe that use of 15 ppm diesel fuel will result in lower fuel economy, less
       power, or mechanical problems with engine seals, some portion of customers might
       refuse to purchase 15 ppm fuel for their new trucks. How can EPA expect a retailer to
       stop a customer from intentionally misfueling his or her 2007 truck?

       A: D   A  retailer is not responsible for misfueling by the customer unless the retailer or
             its employees have introduced the fuel, or permitted or caused the violation.


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              While intentional misfueling by a customer normally does not meet this criteria,
              there may be scenarios where retail outlet employees' actions or failure to act
              may permit or cause violations, even though the vehicle operator may actually
              dispense the fuel into the vehicle.

              We believe that responsible retailers will take reasonable actions to make
              misfueling less likely to occur at their retail outlets.  For example, a retail
              employee could remotely shut off the fuel supply to a customer that it does see
              misfueling, and explain to the customer that the retailer cannot permit misfueling
              of vehicles at its stations since the retailer is potentially liable for such violations.

12.17:  What about intentional misfueling by a fleet customer? CFor example, if a distributor's
       fleet customer orders a load of 500 ppm on-road diesel fuel, which the distributor
       delivers, and then the fleet customer intentionally fuels MY 2007 vehicles with the 500
       ppm diesel, what is the distributor's potential liability?  Does the distributor have the
       responsibility to "police" its fleet customers to assure there  is no intentional misfueling?

       A: D    A distributor is not responsible for misfueling by fleet customers unless the
              retailer or its employees have introduced the fuel, or permitted or caused the
              violation. Intentional misfueling by a fleet customer normally does not meet this
              criteria.  However, there may be scenarios where a  distributor could be liable for
              permitting or causing misfueling violations by a fleet operator. For example a
              distributor who knows a fleet customer only has one diesel fuel storage tank, and
              knows that the fleet operator has model year 2007 or later vehicles, may be liable
             for permitting or causing misfueling if it delivers 500 ppm product to that
              customer's storage tank, even if the customer ordered the 500 ppm product.  We
              believe distributors and carriers should work with retail and fleet customers to
              ensure that fuel is delivered to the appropriate storage tank.

              By "permitting" we mean that a retail station does not take reasonable actions to
              stop the intentional misfueling that it witnesses a customer perform.

12.18:  With the  15 ppm maximum  sulfur requirement (with the 2 ppm downstream testing
       adjustment under § 80.580(d)) applying at all levels of the distribution system, from
       refinery to retail outlets, how much service station, delivery truck, terminal testing and
       other quality assurance testing does EPA view as necessary to constitute a presumptive
       liability defense?

       A: D    A quality assurance program, including a sampling  and testing program, is one of
              the defense elements under the presumptive liability scheme (see § 80.613(a)(l)
              and (d)).  The liability and defense provisions under this rule are like those of
              other fuels rules.   What constitutes a valid sampling and testing program varies
              depending on the type of party, as discussed below, and also varies depending on
              the particular circumstances involved. Factors that EPA believes are relevant in


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designing any sampling and testing program include: the results of previous
sampling and testing; the volume of fuel being handled by a facility and the
volume of individual batches being processed by a facility (the greater the volume
of a batch the greater the justification for sampling and testing that batch);  the
degree of confidence in the quality of the fuel received based on all
circumstances; the opportunity for violations to occur while the fuel is in
possession of the party (e.g., the opportunity for commingling of 15 ppm fuel with
500 ppm or high sulfur distillates); and the opportunity for misdeliveries of
product.

Retailers and wholesale pur chaser-consumers-
Retailers and wholesale purchaser-consumers are not required to conduct
sampling and testing programs. See § 80.613(a)(l)(iii). However, during the
period when storage tanks are being turned over from 500 ppm fuel to 15 ppm
fuel, retailers should take steps to assure the product in the tanks meets the  15
ppm standard before making the fuel available for sale as 15 ppm fuel.

Terminals and Pipelines-
An acceptable periodic sampling and testing program for terminals will probably
require sampling and testing after every receipt of product into a terminal storage
tank, given the stringent sulfur standard, the potential substantial emissions
consequences of violations, and the potential for contamination of product with
high sulfur distillates (and especially in the early years of the program, high
sulfur gasoline). Appropriate pipeline testing will depend on many factors,
including the length of the pipeline, the nature of the product in the pipeline cycle
on either side of the 15 ppm motor vehicle dieselfuel, the opportunities for
contamination as product enters the pipeline or offloaded to terminals, etc.
Carriers such as pipelines may, in addition to appropriate testing of their own,
rely on testing by other parties, such as the refiners who deliver product to the
pipeline.

Distributor s-
Distributors of motor vehicle dieselfuel who take title to the fuel must conduct a
periodic sampling and testing program as part of the quality assurance element of
their defense to presumptive liability.  The appropriate frequency of sampling
would depend on the circumstances, as noted above.  A truck distributor who
delivers fuel to retail outlets may be able to rely on tests conducted by the
terminal it loaded product from, if the sampling and testing program is properly
performed, in order to show fuel picked up from the truck loading terminal met
standards.  However,  if for example, the distributor delivers both 500 ppm
product and 15 ppm product, periodic sampling at the distributor's facility
(especially if the distributor has storage tanks) and at retail outlets it delivers to
would be important.  In addition, a truck distributor should employee procedures
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to prevent misdelivery of 500 ppm product into 15 ppm product storage tanks,
and to prevent contamination in delivery tanks.

Truck Carriers-
Under § 80.613(d)(4), a tank truck carrier may conduct certain other oversight
activities in lieu of sampling and testing. Truckers should develop procedures to
assure that 15 ppm sulfur content product they handle is not contaminated by
higher sulfur products and to assure that 500 ppm fuel, or other high sulfur
product, is not misdelivered into a storage tank for 15 ppm fuel.  Truckers should
have procedures to assure that high sulfur product is completely drained from a
truck compartment and hoses before that truck compartment is used to carry 15
ppm motor vehicle fuel.  Alternative oversight  activities in lieu of testing include
driver training; periodic review of records; providing drivers  with specific
information regarding which customers, and which storage  tanks at customer's
facilities, require fuel meeting the 15 ppm standard and which have 500 ppm fuel
storage tanks (or nonroad storage tanks),  etc.  Truck carriers  may also rely on
the sampling and testing programs of other parties as part of their quality
assurance program (e.g., sampling and testing conducted by their immediate
supplier).

Branded Refiners-
A branded refiner must conduct a quality assurance sampling and testing
program at branded retail outlets as one aspect of the quality  assurance program
defense element to branded refiner liability under § 80.612(a)(3). The branded
refiner must assess the specific factors that apply to its branded retail outlets and
the distribution systems  that supply them in determining the appropriate sampling
and testing rate.

In addition to the factors listed above, branded refiners should also consider the
historical compliance of branded facilities in a marketing area, and whether there
is reason to believe  that particular downstream facilities do not comply with
contractually imposed requirements designed to prevent violations. Moreover, in
the first year the 15 ppm standard is in effect, a relatively high sampling rate
would probably be necessary to assure that retail tanks are successfully
transitioned to 15 ppm fuel by September 1, 2006. In subsequent years, it may be
appropriate to raise or lower this sampling rate, depending on the extent of
compliance demonstrated by the program. In areas where problems are found,
the sampling rate should be increased, and efforts should be made to discover the
causes of the problems and correct those problems.  The specific facilities where
violations were found should be reinspected frequently.

Refiners and Imyorters-
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             Under § 80.613(a)(l)(iv), a refiner or importer must conduct testing of every
             batch to meet the quality assurance periodic sampling and testing element of its
             defense to presumptive liability.

             See § 80.613(a)(l)(iv) and (v), and § 80.613(d)(2)for special situations.

12.19: Marketers frequently have disagreed with EPA actions regarding waivers or enforcement
      discretion with respect to the RFG program. Some have predicted on-road diesel supply
      shortages when this rule takes effect in 2006. If such supply disruptions — whether
      caused by underproduction; refinery, terminal, or pipeline problems; or, weather — do
      occur, what will EPA's reaction be?

      A: D   It is difficult to discuss possible enforcement discretion issues that may occur.
             However, we note that, especially after 2010, when all highway diesel fuel must
             meet the 15 ppm sulfur standard, we do not foresee any practical way to
             distribute motor vehicle diesel fuel having a sulfur content greater than 15 ppm
             into the motor vehicle diesel fuel market.

             Of course, we realize that temporary supply disruptions may occur due to an Act
             of God, or other unforeseeable event. The regulation, and the Agency's inherent
             discretion, provide mechanisms for EPA  to consider whether a supply disruption
             is one for which relief is appropriate. However, we believe it would be very
             difficult now to address a variety of crises that may or may not occur in the
             future.

12.20: There will likely be significant adjustments for the diesel fuel distribution system to
      make to assure that 15 ppm highway diesel is available on-spec for truckers and other
      customers. The rule mandates that this fuel be distributed in mid-2006 despite the fact
      that the demand for this fuel will be sparse prior to 2007.  Would EPA consider providing
      a period of enforcement discretion after mid-2006 for companies in the distribution chain
      if good faith efforts to meet the 15 ppm standard are made?

      A: D   The regulations created a 3-step  implementation process that is expected to give
             all levels of the distribution system, including the retail outlet and wholesale
             purchaser-consumer level, enough time to bring storage tanks into compliance in
             time to meet the regulatory deadlines. Refiners and importers must be in
             compliance with the 15 ppm standard by June 1, 2006.  All facilities downstream
             of the refiner or importer, except retail and wholesale purchaser-consumer
             facilities, must be in compliance by July 15, 2006, if they choose to market 15
             ppm fuel. Similarly, retailers and wholesale purchaser-consumers must be in
             compliance by September 1, 2006, if they choose to market 15 ppm fuel.  These
             entities downstream of the refinery have built-in flexibility in that they can
             continue to market 500 ppm fuel if they so choose until 2010.
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12.21:  With the recent buying and selling of refining and marketing assets, branded retail outlets
       may no longer be supplied by refineries with the same name. E.g., Refiner A may now
       have retail outlets with Refiner B's brand and Refiner A may not supply the outlets.
       Given this situation, EPA's branded retail defense requirements no longer seem
       appropriate.

       A: D   Branded refiner/importer liability under the regulations is not based on whether
             the branded refiner actually supplies the fuel to the retail outlet.  Under § 80.612,
             any refiner or importer whose corporate, trade or brand name, or whose
             marketing subsidiary's corporate, trade or brand name appears at a facility
             where a violation occurs, is deemed liable for the violation and must establish its
             defense to branded refiner liability to avoid liability.

12.22:  In the fuel marketing industry  "branded" means an exclusive supply contract between the
       brand and the retail outlet. In this sense some stations are branded for gasoline but not
       for diesel even though the "brand sign" flies above the property.  Does branded refinery
       liability apply to diesel fuel sold at such a station?

       A: D   Under § 80.612, if the brand name "appeared at a facility " where a violation
             occurred, the branded refiner would be liable under the branded refiner liability
             provisions.  Where gasoline and diesel fuel are sold at a retail outlet on the same
             premises, and the facility is branded as defined by the regulation, the gasoline
             and diesel operations would generally be considered branded since they would
             usually be part of the same facility.

12.23:  Where a branded jobber owns  & supplies its branded retail outlet, who is potentially
       liable for violations found at the retail outlet and what quality assurance sampling and
       testing is the branded refiner and jobber/retailer responsible for?

       A: D   The branded refiner would be liable for any violation that occurs at the branded
             facility. To establish a branded refiner defense,  the branded refiner must, among
             other things, establish that  it had an appropriate quality assurance sampling and
             testing program.  See questions 12.18 and 4.35 for liability and defense
             provisions for retailers and distributors.

12.24:  For an owner of a retail outlet or a  fleet fueling facility (a wholesale purchaser-consumer
       facility), if the product transfer documents account for all product in the storage tanks
       and show that the product is in compliance with the 15 ppm standard, am I still at risk for
       penalties?

       A: D   Where PTDs account for all product and show the product is in compliance with
             the diesel standards,  and where the pumps are properly labeled,  and the retailer
             or wholesale purchaser-consumer has not caused the violation, (e.g., has not
             misdirected noncomplying product into the 15 ppm diesel fuel storage tank or


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             otherwise caused the contamination or misdelivery to occur) it will generally be
             able to establish its defense to liability. However, if for example, a retailer or
             wholesale purchaser-consumer were to purchase fuel that it has reason to believe
             does not comply with the 15 ppm sulfur standard, even though the PTDs account
             for all product and state that the product does meet the standard, the retailer
             would be liable since it would have caused the violation.

12.25: During the lead phasedown in gasoline, EPA mandated that larger nozzles be installed on
      gasoline dispensers with leaded fuel and that restrictor plates be installed on the fill pipes
      of vehicles' fuel tanks, preventing the fueling of cars designed for unleaded gasoline with
      unleaded gasoline.  Is EPA considering a similar alteration in nozzle sizes to prevent
      accidental or intentional misfueling under the 15 ppm diesel fuel program?

      A: D   We did not finalize any provisions beyond fuel pump labeling requirements. We
             recognized that some potential for misfueling would still exist and continued to
             discuss options in meetings and workshops with industry to explore simple, cost-
             effective approaches that could further minimize misfueling potential.  Through
             these discussions, however, no consensus was developed such that the magnitude
             of the potential misfueling problem would justify the cost and burden associated
             with additional regulatory controls.

12.26: For presumptive liability it has been indicated that EPA will look along the chain of
      hand-offs; however, in the case of misfueling, will pipeline PTDs be required to establish
      liability, or for upstream parties to establish a defense?

      A: D   Where a retailer's or wholesale purchaser-consumer's fuel pump is properly
             labeled as dispensing 500 ppm product, but the fuel is dispensed into a vehicle
             requiring 15 ppm fuel, EPA would not take enforcement action against any
             person upstream of the retail outlet or wholesale purchaser-consumer unless such
             party caused the violation.  Therefore, EPA could establish liability for the
             appropriate parties without inspecting pipeline PTDs.

             If the misfueling was caused because a fuel pump labeled as dispensing 15 ppm
             fuel actually dispensed fuel with a sulfur content exceeding that standard, then
             presumptive liability would apply to the retailer or wholesale purchaser-
             consumer and to all upstream parties (and to the branded refiner,  if applicable).
             For each of these parties, one of its defense elements is that it demonstrate that it
             has PTDs that account for the product and show it was in  compliance when in the
             possession of that party.

12.27: Assume  a terminal tank contains diesel fuel meeting the 15 ppm sulfur standard and that
      fuel is contaminated by a delivery of off-spec diesel fuel represented to meet the 15 ppm
      standard such that the terminal's test results after receipt show that the sulfur content of
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diesel fuel in the terminal tank is now greater than 17 ppm.  What are the consequences
and what options are available to the terminal?

A: D   Finding that fuel represented to meet the 15 ppm standard exceeds 17 ppm at a
       downstream location such as a terminal has consequences regarding compliance
       with both the standards and with the "designate and track"provisions.

       Liability and Remedial Action
       Under the presumptive liability scheme the facility where violating product is
       found, and all facilities upstream, are presumed liable for a violation of the diesel
       fuel standards. In this scenario, the truck loading terminal, the pipeline, and the
       facility of any other entity that distributed fuel in the terminal tank is liable.  Each
       party, including the party owning the facility where  the violation was discovered,
       has an opportunity to establish a defense to liability by meeting each of its
       defense elements.  For most parties, to establish a defense the party must
       demonstrate that it did not cause the violation, that it had an appropriate quality
       assurance program (including periodic sampling and testing), and that product
       transfer documents account for the product and demonstrate that the fuel in
       question was apparently in compliance while in its custody. In addition, once the
       party discovers that the product is out of spec it must take appropriate actions to
       either redesignate the product to an appropriate  designation or remedy the
       violation by blending in lower sulfur content fuel such that the resulting mixture
       meets the standard.

       A terminal that discovers it has noncompliant product should immediately lock
       out the tank until it takes appropriate action. While the product is in violation
       until remedial action or downgrade, such action  does allow the product to be
       transferred without additional violations.  As in all of our other fuel programs, if
       you discover off-spec product and are taking some sort of remedial action, EPA
       will not issue a notice of violation (NOV). The product transfer documents and
       designation records must be changed to reflect the appropriate designation (if a
       change in designation is appropriate) and records should be kept to document the
       circumstances that gave rise to the violation and to document the remedial action
       or change in designation. If product is blended with other diesel fuel to bring it
       back within compliance with the 15 ppm sulfur standard,  the product must be
       tested before it is transferred, to assure that such blending was successful.

       Designate and Track Issues
       For "designate and track" purposes, if a pipeline transfers product designated as
       15 ppm to a terminal but it is subsequently discovered that the product did not
       meet the 15 ppm standard, then in addition to the standard violation there is also
       a designate and track violation.  To remedy this violation, the parties must
       indicate in their records and on product transfer documents the appropriate
       revised designation at the time of transfer. In this example,  the pipeline and
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terminal must revise the designation of the fuel as it was transferred from the
pipeline to the terminal. If the terminal elects to classify the product as 500 ppm
highway fuel then, in this scenario, the pipeline must revise the designation for its
hand-off to 500 ppm highway product and count the product against its anti-
downgrade accounting.

The terminal may elect to upgrade the violating product (by blending it with
product having a sulfur content less than 15 ppm) to meet the 15ppm standard
rather than downgrading the entire tank to 500 ppm fuel. If it does so, it may
designate the resulting product as 15 ppm highway or nonroadfuel (but the
designation of the product for the transfer from the pipeline to the terminal would
be 500 ppm product).

If a terminal causes 15 ppm product to fail to meet the 15 ppm standard, and it
conducts remedial action before shipment to bring the product to 15 ppm, for
designate and track purposes, the product would still be counted as 15 ppm
product when transferred to the terminal and 15 ppm product when transferred to
the next facility.  This is the case because designations are based on the product
at the time that custody transfers from one facility to another, and not on the
fuel's status while in storage. However, there would be a standard violation
unless the terminal immediately changed classification of the product as soon as
the contamination occurred (or immediately locked out  the tank pending test
results, then changed the classification or remedied the  violation by blending in
lower sulfur fuel).
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13. D   GPA/Small Refiners

13.1: D EPA expanded the GPA (66 FR 19296). The GPA map on 66 FR 19300 is not consistent
       with the list of individual counties in Washington at 66 FR 19306. The map includes
       Klickitat County in the shaded area in Washington. However, the list of individual
       counties in Washington at § 80.215(a)(2)(i) does not include Klickitat County. Would
       you  confirm that Klickitat County is in the GPA and your intention to include Klickitat
       County in a revised § 80.215(a)(2)(i)?

       A: D   In a direct final rule published on April 13, 2001 (66 FR 19296), we amended the
             Geographic Phase-in Area (GPA) to include counties and tribal lands in states
             adjacent to eight original GPA states. While Klickitat County appeared on the
             map on page 19300, it was inadvertently omitted from § 80.215(a)(2)(i) and
             should be included in the list of GPA counties.  This inconsistency will be
             corrected in a future Federal Register notice.

13.2: D A refinery approved by EPA to produce gasoline subject to the interim GPA standards in
       2007 and 2008 must demonstrate that by June 1, 2006 it will produce enough 15 ppm
       highway diesel fuel to meet the minimum 85 percent of its baseline volume requirement.
       See  § 80.594(c). When is this demonstration due for GPA refineries? Is this
       demonstration part of another  report (i.e., the 2003, 2004 and 2005 pre-compliance
       reports) or is it a separate, stand-alone submission?

       A: D   Under §80.594(c), a refiner or importer approved to produce gasoline in the
             GPA subject to the gasoline sulfur standards under § 80.540 must demonstrate
             that by June 1, 2006 it will be producing a  volume ofon-road diesel fuel
             containing 15 ppm sulfur or less that is equal to or greater than 85% of its
             baseline volume (see § 80.540(e)).  Under § 80.540(b) the demonstration of future
             production volume required under § 80.594(c) was due December 31, 2001, with
             the application under § 80.540 for approval of the gasoline sulfur extension.
             Under § 80.594(d), refiners and importers have untilJuly 1, 2006 to submit a
             report stating that production or importation of 15 ppm sulfur motor vehicle
             diesel fuel will be started by June 1, 2006.  The demonstration required by §
             80.594(d) must be reported in  a stand-alone report submitted by the refiner or
             importer.

13.3: D 40 CFR 80.540(e) requires "The total  volume of motor vehicle diesel fuel produced for
       use in the United States and designated as meeting the 15 ppm sulfur content standard
       under paragraph (d) of this section must meet or exceed 85% of the baseline volume
       established under paragraph (c) of this section, except that for the first compliance period
       from June 1, 2006 through June  30, 2007, the total volume must meet or exceed 92
       percent of the baseline volume."  Is it correct to assume that  "produced" means available
       for sale at the refinery gate as  an on-road fuel meeting 15 ppm diesel fuel standards?


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      A: D    "Produced" should be interpreted as a refiner manufactured the motor vehicle
             diesel fuel from crude oil and the dieselfuel met all of the standards under §
             80.520 and was designated as motor vehicle dieselfuel when it was delivered to
             the next facility in the distribution system.

13.4: D What records must be kept to demonstrate that an adequate volume has been produced?

      A: D   Under §80.540(1), the record keeping requirements specified under §80.592
             must be met for GPA  gasoline.  This includes records indicating the volumes of
             each batch of diesel produced during the compliance period (§ 80.592'(b)).

13.5: D How would a refinery with a loading rack account for 15 ppm diesel fuel that is sold into
      the offroad market? If production is interpreted in any other way, a refinery could be
      penalized if, due to logistical and production constraints, customers elect to purchase 15
      ppm diesel fuel as an offroad diesel fuel.

      A: D   Per the requirements of § 80.598, promulgated in the nonroad diesel rule in June
             2004, a refiner is responsible for designating the fuel appropriately when
             delivered to the next facility in the distribution system. UntilJune 2009, all 15
             ppm dieselfuel must  be designated as motor vehicle dieselfuel.

13.6: D Who are the small refiners in the ULSD program? Are they the same as the "small
      refiners" in the Tier 2 gasoline program?

      A: D   We have received 18  applications for small refiner status, and many of these
             refiners are currently approved small refiners for the gasoline sulfur and highway
             diesel programs. However, they may not all be approved for NRLM small refiner
             status. Specific information can be  obtained upon request from Larry Haslett of
             EPA.

13.7: D If a large refinery spins off a small refinery how long does the small refiner have to apply
      for the small refiner status?

      A:     The dates to apply for small refiner  status were specified in both rulemakings,
             and the deadlines have passed for both highway and nonroad diesel.

13.8: D Is there an opportunity for a blender who is presently classified as a refiner to apply for
      small "refiner" status?

      A: D   The deadline to apply for small refiner status for both the highway and nonroad
             dieselfuel rules has passed.  Furthermore, to be considered for small refiner
             status, a refiner must process diesel fuel from  crude (see § 80.550 (a) and (b)).
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13.9: D EPA indicated that the deadline for applying for small refiner status has already passed.
      However, should the marketer decide to blend e-diesel or biodiesel, it may want the
      option to be a "small refiner" under the diesel regulations.

      A: D   As stated in § 80.550 (a) and (b),  the marketer would have to produce diesel fuel
             from crude.

13.10: How do you establish a baseline for a small refiner, who has never produced on road
      diesel but wants to delay low sulfur gasoline equipment and build low sulfur diesel
      equipment first?

      A: D   It was discussed in the preamble to the final highway rule to allow case-by-case
             looking at a variety of factors (see pages 5073 and 5077, foot note).
             Unfortunately the provisions never made it into the regulations.  We will be doing
             minor rule changes on this to mirror the preamble language.

13.11: Is the decision to use Small Refiner Options 1, 2, or 3 irrevocable?

      A: D   Under §80.551(c) (3), we ask for  "an indication " of which kind of relief small
             refiners expect to use. The regulations do not prevent a refiner from using a
             different option later. However, section 80.55'3(h) voids the gasoline extension if
             small refiners fail to meet the 15 ppm volume  requirements.

13.12: Is an independent auditor required in order to establish a diesel baseline?C(See §§
      80.595(c)(2)  and 80.92.)

      A: D   Yes an independent auditor is required to establish a diesel baseline.

13.13: A company owns 58.75% of our refinery. The refinery is rated at 260,000 Barrels/day of
      which the company owns 152,750 B/D (260 * 0.5875). Would this qualify our refinery
      for the small  refiner hardship provisions?

      A: D   That ownership percentage makes the refinery a subsidiary under our definition
             (see § 80.550) and all of a subsidiary's crude  capacity must be used in
             determining the total crude capacity. There is no prorating.

13.14: Can an approved highway  diesel small refiner stay in business just by producing only 500
      ppm diesel fuel and supply to the off road market.

      A: D   Yes. An approved highway diesel small refiner that currently produces highway
             diesel can produce no highway diesel and use all of its diesel fuel production to
             supply the nonroad market.
                                          107D

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13.15: Our company is a small business refiner under the Small Business Administration (SBA)
      regulations. Our company would similarly meet the definition of a "small refiner" under
      the highway ULSD regulations, if not for the regulations' requirement that, for the
      purpose of determining qualification as a small refiner, a refiner must "include the
      employees and crude capacity of any subsidiary companies, any parent company and
      subsidiaries of the parent company in which the parent has 50 percent or greater
      ownership, and any joint venture partners." The distinction is attributable to the fact that,
      unlike the highway ULSD regulations, the SBA regulations do not affiliate our company
      with its owner.

      Under the SBA regulations, our company's size is determined by counting the total
      capacity of all of our refineries, and the employees of all of our refineries and subsidiary
      distribution businesses.  However, Section 121.103(b)(2) of SBA's regulations exempts
      subsidiaries of our parent from affiliation, so that our company is not considered
      affiliated with the parent itself or other, unrelated subsidiaries of the parent. Our
      company believes that this definition is consistent with the purpose of the U.S.
      Environmental Protection Agency's affiliation rule, and is concerned that the provisions
      on affiliation in the highway ULSD regulations would inadvertently exclude our
      company.

      A: D   Under EPA 's gasoline and diesel sulfur regulations, we include all employees
             and crude capacity of all parent companies and subsidiaries where the parent
             company maintains 50 percent (or greater) ownership (§ 80.550(a) and (c)).
                                          108D

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14. D   Transmix/Interface Fuel

14.1: D In the case where a terminal processes transmix with an on-site fractionator, is the
       on-road production volume subject to the requirements of § 80.520?

       A: D    The regulations finalized with the nonroad rule modified the requirements for
              transmix processors who do not also produce fuel from crude.  These provisions,
              contained in § 80.513, allow for 100 percent of a  transmix processor's highway
             production to remain at the 500 ppm sulfur level untilJune 1, 2010.

14.2: D Interfaces between jet fuel and other distillates are cut into the other distillate to protect
       the jet fuel, thereby increasing the volume of the other distillate. Kerosene/15 ppm diesel
       fuel and high sulfur diesel/15 ppm diesel fuel interfaces could be cut into separate
       tankage to create 500 ppm on-road diesel (assuming no dye in the high sulfur diesel).  Is
       there any limit as to the amount of 500 ppm on-road diesel that could be created through
       these interface cuts?  Are there any special downstream requirements for the testing or
       documentation of on-road diesel created from  interface?

       A: D    Under § 80.527 (c), the maximum allowable amount of #2 15 ppm on-road diesel
              that can be downgraded to 500 ppm on-road diesel is 20%, otherwise there are
              no downgrade restrictions.  However, on-road diesel created from interface must
              meet the standards under § 80.520.

14.3: D How will EPA treat transmix, which does not fit into any category? It is not on-road and
       it is not off-road gas or fuel. Transmix is not intended for final use by any consumer but
       it can be re-refined or re-processed.
       a)      For EPA purposes, will it need to be tracked after its creation?
       b)      If it is sold to a refinery  for re-refining, will EPA treat it differently than if it is
              sold to a reprocessor?
       c)      Does it make a difference if it is sold to another refiner or the original refiner?

       A:
       a)      Transmix would merely  be designated as such and would not be tracked for EPA
             purposes unless (and until) it is redesignatedfor fuel use.
       b) D    It would not be treated any differently.  However,  transmix processors who are
              also refiners are held to different standards for the fuel that they produce from
              transmix.
       c) D    No, there is no difference if it is sold to another, or the original, refiner.

14.4: D Can a terminal tank meet the 15 ppm diesel fuel sulfur standard on average,  or must the
       diesel fuel meet the 15 ppm sulfur standard on a per-gallon basis?  For example, if a
       pipeline or terminal accidentally cut some of an interface, consisting of 500  ppm diesel
       fuel and 15 ppm diesel fuel, into the 15 ppm diesel fuel, causing a certain strata of a 15


                                          109D

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      ppm diesel fuel storage tank to exceed the 15 ppm standard, the rest of the tank may still
      contain product that continues to meet the 15 ppm standard. In the alternative, it may be
      possible to remedy a violation by blending diesel fuel exceeding 15 ppm sulfur content
      by blending sufficient quantity of very low sulfur product to make the tank or batch meet
      the 15 ppm standard. Would EPA allow such remedial action?

      A: D   Diesel fuel subject to the 15 ppm sulfur standard must meet that standard on a
             per-gallon basis and not on average. The pipeline or terminal must handle the
             interface in a manner that ensures that product distributed as subject to the  15
             ppm cap is in compliance with that cap.  If any portion of a tank that is offered for
             sale or supply as fuel subject to the 15 ppm sulfur  cap is out of compliance with
             the 15 ppm cap, then that volume of fuel would be  in violation. However, if a
             pipeline or terminal accidentally cuts part of an interface having a sulfur content
             greater than 15 ppm into a tank containing fuel subject to the 15 ppm sulfur
             standard, it may be possible to remedy the violation. We would not pur sue an
             enforcement action where a terminal determines that product exceeding the  15
             ppm standard has been added to a tank if the terminal: discovers the
             commingling of higher sulfur product with 15 ppm product through its quality
             assurance program and not by an EPA inspection; immediately locks down the
             tank before any of the product is released; transfers product exceeding the 15
             ppm standard to some appropriate high sulfur product distribution; retests the 15
             ppm product tank to assure that  the entire remaining volume of the tank meets the
             15 ppm standard before releasing the product as 15 ppm product; and maintains
             records demonstrating the occurrence, the actions taken to remedy the violation,
             sampling and test results, and actions to prevent future violations.

             Such situations may also be remedied by blending the contaminated product with
             low sulfur product in order to bring the sulfur level of all the product in the tank
             to the 15 ppm sulfur standard. Again, before releasing product the sulfur level
             should be re tested, and records of the occurrence,  remedial actions, sampling and
             test results, and of actions to prevent future violations should be maintained.

             Finally, such situations could be remedied by downgrading the entire volume of
             product affected by the  commingling with the higher sulfur interface.   When 15
             ppm product is downgraded,  the party should document the circumstances that
             gave rise to the downgrading. The diesel fuel in question should be segregated
             from diesel fuel subject to the 15 ppm standard, the product transfer documents
             must reflect the downgraded classification, and the diesel fuel must not be sold,
             dispensed or transported in a manner that is inconsistent with the downgraded
             classification.

14.5: D The facilities that my company owns include a pipeline, terminal, and refinery. We wish
      to blend the transmix generated due to normal pipeline operations into a barge containing
      crude oil at our terminal facility.  This crude oil and transmix mixture would then be
                                          HOD

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      taken to our refinery for processing.  Is there anything in the clean diesel regulations that
      places restrictions on this practice?

      A: D    There is nothing in the highway or nonroad diesel fuel regulations to prevent this
             practice from continuing. The losses to transmix would merely be reflected in the
             pipeline/terminal aggregated facility's report.

14.6: D Could the < 500 ppm sulfur diesel fuel that a transmix processor manufactures from
      reprocessing transmix obtained from a refinery be sold into the highway diesel market
      until 2010?  Could a transmix processor sell <500 ppm sulfur diesel fuel it manufactures
      from tank bottoms into the 500 ppm highway diesel market?

      A: D    40 CFR 80.513, the provisions that apply to transmix processing facilities states
              that the term transmix applies to a mixture of finished fuels that no longer meets
              the specifications for a fuel that can be used or sold without further processing.
             For the mixture to be considered transmix under section § 80.513, the component
             finished fuels that make up this mixture must have been previously certified as
              compliant with the applicable compositional requirements and the mixing must
              have been non-intentional. The volume of '< 500 ppm diesel that a transmix
             processor manufactures from reprocessing this transmix could be sold into the
              500 ppm highway diesel market until May 31, 2010. Any volume of<  500 ppm
              sulfur diesel fuel that a transmix processor manufactures from feedstock (e.g. a
              diesel blendstock such as light cycle oil) that does not meet the definition of
              transmix contained in section § 80.513 would have to meet the 80/20
              requirements.  Tank bottoms are the remains of previously certified finished fuels
              and as such would meet the definition of transmix under section § 80.513.  Thus,
              < 500 ppm diesel fuel manufactured using tank bottoms by a transmix processor
              could be  sold into the 500 ppm highway diesel market until May 31,  2010.

14.7: D My company operates a pipeline. We currently blend small quantities of transmix into
      diesel  fuel subject to a 500 ppm sulfur standard during shipment.  The quantities blended
      have a negligible impact on the sulfur content of the fuel. Is there anything in the new
      highway and nonroad diesel sulfur programs that would prevent us from continuing to
      blend transmix into diesel fuel subject to a 500 ppm standard in the manner we do today?
      The blending of transmix into the 500 ppm diesel would result in an increase in the total
      highway diesel volume. How would this be accounted for in determining compliance
      with the highway diesel volume balance requirements?

      A: D   EPA has not previously considered the blending of transmix into diesel fuel
              subject to a 500 ppm sulfur standard during shipment by pipeline. The diesel
              sulfur regulations do not specifically address blending transmix into diesel fuel.
              We believe  that it would be appropriate to provide this flexibility, provided the
             pipeline operator met the following conditions:
                                          inn

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       The transmix blended into 500 ppm diesel fuel would need to result from
      factors associated with normal pipeline operations.
       The pipeline would need to conduct periodic tests of the 500 ppm diesel
      fuel into which transmix was blended which show that the transmix
       blending would not cause the 500 ppm sulfur cap to be exceeded, and that
       the diesel fuel still met all the applicable ASTM standards for diesel fuel
       such as flashpoint or distillation points.
       The pipeline would need to retain documents that reflect the rate of
       transmix blending and make these documents available to EPA upon
       request.

The volume oftransmix blended into 500 ppm highway diesel fuel would need to
be accounted for in demonstrating compliance with the highway diesel volume
balance calculations. The pipeline would have to account for the volume of
transmix blended into highway diesel fuel by including the transmix volume as
500 ppm diesel production in the compliance calculations in sections § 80.599, §
80.600 (except for the refiner batch reports, new volumes should simply be
accounted for in the D&T calculations) and § 80.601 of the diesel sulfur
regulations.
                             112D

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15. D   General/Miscellaneous

15.1: D Why is heating oil exempt from the sulfur content regulations? If it's bad for cars, why
       not for people's homes?

       A:      The Clean Air Act does not give EPA specific authority to regulate heating oil.

15.2: D Will there be any significant quantities of kerosene that get hydrotreated to  15 ppm (or
       lower) sulfur for making ULSD?

       A: D    We did not require early reporting of this information in the pre-compliance
             reports, and as such do not have specific data to address it. Nevertheless, we are
             currently aware that at least two refiners plan on manufacturing 15 ppm #1 diesel
             fuel for wintertime blending purposes.

15.3: D What does EPA intend to do with all of these reporting requirements and paperwork to
       justify their cost to the consumer and taxpayer?

       A: D    The D& T and recordkeeping provisions were put in place as a means of reducing
             the capital and operating costs otherwise necessary to segregate fuels.  The costs
             of these provisions were estimated in the draft Information Collection Request
             (ICR) submitted to OMB, and are small in comparison to the overall costs and
             benefits of the program.

15.4: D Cetane index does not work for alternative diesel formulations- diesel with  10% ethanol
       must be tested by Cetane number. Do you plan to make a technical correction?

       A: D   Only the highway diesel rule contains a cetane index standard.  We  will make a
             technical amendment to the regulations, if necessary, to address this issue.

15.5: D Does "other sources of volume" refer to diesel desulfurizers? What do you  mean by
       "produced  from crude oil"?

       A: D    "Other diesel fuel" means any distillate products that meet the definition of diesel
             fuel, such  as kerosene, that is represented to have a sulfur content less than or
             equal to 500ppm.  "Producedfrom crude oil" means that the refiner
             manufactured the diesel fuel from crude oil, typically through distillation and
             hydroprocessing.

15.6: D If terminals opt to wash barges, tanks, equipment and trucks before running 15 ppm
       diesel  fuel  through their systems, the flushing process will  generate substantial volumes
       of oily-water waste.  Has the EPA given thought to assisting the industry in dealing with
       this waste?
                                          113D

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      A: D   The highway diesel rulemaking did not specifically address this issue.  The
             rulemaking allowed terminals untilJuly 15, 2006 (approximately 6 weeks after
             the June 1, 2006 compliance date for refiners and importers), before any 15 ppm
             highway diesel fuel they distribute must meet the 15 ppm standard, and this
             additional time should help to minimize waste.

15.7: D Public reaction to new fuels in the past has been mixed (i.e., RFG in Milwaukee, CARB
      II Diesel in California). What steps does EPA intend to take to educate and inform
      owners of diesel-powered motor vehicles of the changes to fuel specifications,
      performance issues, and/or air quality benefits?

      A: D   EPA currently has all documents associated with  the diesel fuel rules available on
             its website (http://www.epa.gov/cleandiesel/) and will be periodically providing
             additional updates to the website to provide summary descriptions for the public
             of the benefits and impacts of the rules.  Additional steps will be determined over
             the course of the remaining months leading up to June 2006.

15.8: D In the past, EPA has, with the assistance of industry trade associations, produced fuels
      brochures for use at retail outlets explaining new fuel programs and addressing
      performance and air quality issues. Is EPA planning a similar effort with respect to the
      diesel fuel programs?

      A: D   Actions such as these were discussed with industry during the rule development.
             We have been, and will continue to, work with industry trade associations over
             the next several years on such actions.

15.9: D How will the highway diesel rule affect mobile refuelers?

      A: D   Mobile  refuelers will be subject to the prohibitions against misfueling like a
             retailer. However, we do not require them to label their truck storage tanks since
             the product may change. They would also be liable for contaminating any 15
             ppm fuel such that it no longer met the standard.  They are required to deliver an
             accurate product transfer document to the customer.
                                          114D

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