3  -
                                      Mai! code 3201
                                  1200 Pennsylvania Avenue MW
                 Final Report

                     of the

SBREFA Small Business Advocacy Review Panel
                      for
      Control of Emissions of Air Pollution
                     from
           Nonroad Diesel Engines
                 May 23, 1997

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1
        Ms. Carol M. Browner
        Administrator
        United States Environmental Protection Agency
        401M. Street S.W.
        Washington, D.C. 20460
        Dear Administrator Browner:

               As you know, a Small Business Advocacy Review Panel was established in accordance
        with section 609(b) of the Regulatory Flexibility Act (RFA) as added by the Small Business
        Regulatory Enforcement Fairness Act of 1996 (SBREFA) for EPA's planned rulemaking setting
        emission standards for certain nonroad diesel engines. This was the first SBREFA panel
        established for an EPA proposal.  Members of the Panel include Thomas E. Kelly (Chair), Small
        Business Advocacy Chairperson/EPA; Jere Glover, Chief Counsel for Advocacy, OA/SBA; Chet
        France, Office of Air and Radiation/EPA; and Sally Katzen, Administrator, OIRA/OMB. The
        Panel hereby transmits its report for your consideration. The report includes a summary of the
        comments received from representatives of the small businesses that will be subject to the
        nonroad diesel engine rule and the Panel's findings with regard to certain regulatory flexibility
        issues.  The full Panel report is enclosed; this letter summarizes its main points.

               It is important to note that the Panel's findings and discussion are based on the
        information available at the time this report was drafted. EPA is continuing to conduct analyses
        relevant to the proposed rule, and additional information may be developed or obtained during
        the remainder of the rule development process and from public comment on the proposed rule.
        Any options the Panel identifies for reducing the rule's regulatory impact on small entities may
        require further analysis and/or data collection to ensure that the options are practicable,
        enforceable, environmentally sound and consistent with the statute authorizing the rule.

        Summary of Small Entity OutTCflCh            •        '

               The types of small entities to which the nonroad diesel rule will apply include small
        manufacturers of diesel engines, small manufacturers of equipment that uses those engines, small
        businesses that modify engines for marine use (called "marinizers") and, potentially, engine
        rebuilders or remanufacturers. Beginning before SBREFA's enactment, EPA conducted
        extensive outreach to members of the affected industries and their representatives, including
        small entities. This outreach increased the Agency's understanding of the nature of their
        business and the challenges these businesses face.

               In January  of 1997, EPA published a Supplemental Advance Notice of Proposed
        Rulemaking (Supplemental ANPRM), which in part requested comment on small business
        concerns.  During  the comment period for the Supplemental ANPRM, EPA  held a workshop in
        Chicago attended by representatives of potentially  affected industries, several of which
        represented small businesses. The workshop devoted a significant period of time to discussing
        small entity issues. In addition to the comments made at the workshop, EPA received additional

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written comments, including comments on small entity concerns, during the comment period on
the Supplemental ANPRM. .The comments EPA received during this period included several
new ideas suggesting how EPA might provide flexibility to affected industries, especially those
that are small entities.

       On November 13, 1996, EPA notified the SBA Chief Counsel for Advocacy that a small
business advocacy review panel would likely be required and provided the Chief Counsel with a
list of suggested small-entity representatives developed during EPA's previous outreach.  The
Chief Counsel and EPA subsequently agreed on a final set of representatives, a list of whom is
included in the enclosed Panel report. EPA then conducted further outreach to these
representatives, resulting in development often concepts that had the potential to significantly
reduce the impact on their businesses.  A list of these ten concepts with EPA staff comments on
"pros" and "cons" for each concept, entitled 'Preliminary EPA Staff Assessment of Alternative
Equipment Manufacturer Flexibility Concepts," is appended to the enclosed Panel report.

       In March 1997, the Panel for the nonroad diesel rule was convened. The Panel
distributed a summary of the ten flexibility concepts to the small entity representatives for further
comment.  The Panel then held a teleconference on May 2 which included most of the small
entity representatives and allowed for broad interactive discussion and further clarification of
potential regulatory options. The Panel men accepted further written comment from the
representatives on these concepts.
                                                                       •»
       The full Panel report summarizes the comments, oral and written, received from each of
the small entity representatives and appends their written comments. In light of these comments,
the Panel considered the regulatory flexibility issues specified by RFA/ SBREFA and developed
the findings and discussion summarized below.
Panel Findins and
       Under RFA/SBREFA, the Panel is charged with addressing four regulatory flexibility
issues related to the potential impact of the rule on small entities: the type and number qf small
entities to which the rule will apply; recordkeeping and reporting requirements applicable to
those small entities; the rule's interaction with other Federal rules; and regulatory alternatives
that would minimize the impact on small entities consistent with the stated objectives of the
statute authorizing the rule. The Panel's findings and discussion with respect to each of these
issues are summarized below.  A full discussion of Panel activities is presented in the  enclosed
Panel report.           t       •                                          v

       Type and Number of Affected Small Entities. As indicated above, the types of small
entities to which the rule will apply include small engine manufacturers, small equipment
manufacturers, small engine marinizers and potentially engine rebuilders or remanufacturers.
The number of these small entities is not yet known.  The small entity representatives had little
or no information on this point. The Panel supports EPA's ongoing efforts to work with the
affected industries to develop information on the number of small entities that will be subject to
the rule.       .           '

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        Recordkeeping aqd reporting requirements- The bulk of the recordkeeping and reporting
  requirements under this rule arise from the requirement that engine manufacturers must certify
  that their engines meet the emission standards set by the rule. These certification requirements
  are likely to be modeled on analogous requirements already applicable to other classes of
  nonroad engines. Previous EPA efforts have already served to streamline the certification
  process.  Marinizers' suggestions (included in the  report) for further streamlining certification
  procedures for marinized engines are worthy of Agency consideration. Any recordkeeping or
  reporting requirements associated with providing small equipment manufacturers and others with
  additional flexibility have not been developed; the Panel urges EPA to keep any such
  requirements to a minimum.  There is little sense in providing small businesses with flexibility
  only to bog them down with excessive paperwork.

        Interaction with Other Federal Rules. The Panel did not receive any information
  indicating that any other Federal rules would duplicate, overlap or conflict with the proposed
  rule, with the possible exception of an Occupational Health and Safety Administration (OSHA)
  ambient carbon monoxide regulation. The Panel encourages EPA to consider the potential
  interaction of the Nonroad Diesel rule with this OSHA regulation.

        Regulatory Alternatives. The Panel considered the ten flexibility concepts suggested by
 the small entity representatives  and listed in the  Panel report. The Panel considered each of
 these alternatives in light of several criteria including whether the alternative is consistent with
 the Clean Air Act; whether it would achieve emission reductions comparable to those the basic
 proposed program would achieve; whether it is reasonably practicable and enforceable; and
 whether some concepts may complement each other to maximize the overall flexibility for small
 entities.

        The Panel believes that  five of the ten suggested concepts, considered as an integrated
 package, would provide significant flexibility and burden reduction for small entities subject to
 the Nonroad Diesel regulations  that EPA plans to propose.  Further, incorporation of these five
 concepts would allow EPA to meet the emission-reduction goals of the program while
 maximizing the compliance flexibility for small manufacturers of nonroad equipment and small
 marinizers. The Panel believes  that EPA should consider conducting further analysis on the
' following five concepts and proposing or soliciting comment on them in its planned Notice of
 Proposed Rulemaking:1             .

        Concept!    Allow Respreading of OEM Exemption Allowances
        Concept 4    Equity between <50 hp and >50 hp Categories
 -  "   Concept?    Allow OEMs to buy Engine Program Credits
1 •      Concept 8    Expand Small Volume Allowance to More Than One Model
        Concept 10   Relief for Hardship Cases
        SB A recommends the inclusion of these five concepts as part of the proposal.

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       In addition to the above package of flexibility concepts, the Panel believes EPA should
carefully consider all comments received during this outreach process, as well as comments
which will be received as the rulemaking proceeds, on these and other issues of concern to small
entities.

                                 Sincerely,   •       .                                .
                                                                                            r
Thomas E. Kelly, Chair
Small Business Advocacy
U.S. Environmental Protection Agency
    Sally Katzen, Administrator
    Office of Information and Regulatory Affairs
    Office of Management and Budget
                                                          Z.
Jere"W. Glover
Chief Counsel for Advocacy
U.S. Small Business Administration
f  • f ^*W
fa Chester J. France, Director
    Engine Programs and Compliance Division
    U.S. Environmental Protection Agency
Enclosure

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          Report of the Small Business Advocacy Review Panel
                                        on
                       EPA's Planned Proposed Rule
                                        for
 Control of Emissions of Air Pollution from  Nonroad Diesel Engines
INTRODUCTION

       This report is presented by the Small Business Advocacy Review Panel convened for the
rulemaking entitled "Control of Emissions of Air Pollution from Nonroad Diesel Engines"
(hereinafter called the "Nonroad Diesel Engine rule") that the Environmental Protection Agency
(EPA) is currently developing. The Panel was convened by EPA's Small Business Advocacy
Chairperson under section 609(b) of the Regulatory Flexibility Act (RFA) as added by the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). This was the first such
panel to be established under RFA/SBREFA for an EPA rulemaking. In addition to its  .    .
chairperson, the Panel consists of representatives of EPA's Office of Air and Radiation (the EPA
program office responsible for developing the rule), the Office of Information and Regulatory
Affairs within the Office of Management and Budget, and the Chief Counsel for Advocacy of the
Small Business Administration.

       The purpose of the Panel is to collect the advice and recommendations of representatives
of small entities that will be affected by the rule and to, report on those comments and the panel's
findings as to issues related to the key elements of an initial regulatory flexibility analysis
(IRFA) under section 603 of the RFA.  Those elements of an IRFA are:

       The number of small entities to which the proposed rule will apply.
       Projected reporting, record keeping, and other compliance requirements of the proposed
       rule, including the classes of small entities which will be subject to the requirements and
       the type of professional skills necessary for preparation of the report or record.
       Other relevant Federal rules which may duplicate, overlap, or conflict with the proposed
       rule.
       Any significant alternatives to the proposed rule which accomplish the stated objectives
       of applicable statutes and which minimize any significant economic impact of the
       proposed rule on small entities.                 ,

Once completed, the Panel report is provided to the agency issuing the proposed rule and
included in the rulemaking record.  In light of the Panel report, the'agency is to make changes to
the proposed rule or the IRFA for the proposed rule, where appropriate.

       This report by the Panel for the Nonroad Diesel rule includes a summary of the advice
and recommendations received from each of the small entity representatives identified for

       "   -        .                      1                       .   '   '

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purposes of the panel process.  Written comments submitted by the representatives are provided
in an appendix to the report.  The report also presents the Panel's findings and discussion on  "
issues related to the elements of an IRF A identified above.    .   .
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       It is important to note that the Panel's findings and discussion are based on the
information available at the time this report was drafted. EPA is continuing to conduct analyses
relevant to' the proposed rule, and additional information may be developed or obtained during
the remainder of the rule development process and from-public comment on the proposed rule.
The Panel makes its report at an early stage of the process of promulgating a rule and its report
should be considered in that light.  At the same time, the report provides the Panel and the
Agency with a timely opportunity to identify and explore potential ways of shaping the .proposed
rule to minimize the burden of the rule on small entities while achieving the rule's statutory
purposes. Any options the Panel identifies for reducing the rule's regulatory impact on small
entities may require further analysis and/or data collection to ensure that the options are
practicable, enforceable, environmentally sound and consistent with the statute authorizing the
rule.                         ,

       This report begins with a background section that describes the purpose of the rule, any
relevant regulatory history and the types of businesses or other entities to which the proposed
rule will apply. It then identifies the applicable definitions of small entities for the rule.  The
next section describes the small entity outreach conducted by EPA and the Panel. The core of
the report summarizes the comments and recommendations received from the small entity
representatives, including those related to the key elements of an IRF A.  Separate summaries are
provided for each type of small entity affected by the rule. In the course of reviewing the ,
•representatives' comments and recommendations, the Panel makes relevant observations or
recommendations.  Following these summaries, the Panel presents the rest of its findings and
discussion  on the rule.
BACKGROUND

       EPA issued its first tier of regulations covering most land-based diesel engines (and other
compression-ignition engines) used in nonroad applications in 1994, based on a mandate in the
Clean Air Act.  A more stringent second tier of standards was planned for the future. In 1995,
this plan was merged with a larger initiative to significantly reduce NOx and PM emissions from
both nonroad diesel engines and highway heavy-duty engines.

       As a part of the initiative to reduce NOx and PM emissions, highway engine
manufacturers,  EPA, and the State of California agreed on a framework for the proposal of
stringent new standards for highway heavy-duty engines in a historic Statement of Principles in
September of 1996. In the "Highway Statement of Principles," EPA also announced the
beginning of efforts to reach a similar Statement of Principles covering nonroad engines. These
efforts were successful, and another government/industry Statement of Principles, the "Nonroad
Statement of Principles" was recently signed by members of the nonroad diesel engine industry,

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the State of California and EPA. The Agency published the Nonroad Statement of Principles in a
Supplemental Advance Notice of Proposed Rulemaking in the. Federal Register on January 2,
1997 which announces EPA's intent to issue a formal proposal in 1997.

       EPA intends to propose emission standards covering all nonroad diesel engines except for
those used to power locomotives, underground mining equipment, and larger marine vessels.
(The latter categories are to be regulated separately). Consistent with the Statement of '
Principles, EPA plans to propose standards which parallel the degree of control anticipated from
existing and proposed standards covering highway heavy-duty engines.  The standards for land-
based nonroad engines rated at over 37 kW(50 hp) would become effective in the 2001 -2006
time frame (Tier 2) and 2006-2008 (Tier 3). The standards EPA intends to propose for diesel
engines rated at under 37 kW, both land-based and marine, would represent the first emission
standards for these nonroad diesels (Tier 1), beginning in 1999 and 2000, as well as Tier 2
standards beginning in 2004 and 2005. EPA does not plan to propose Tier 3 standards for these
engines in this rule.

       EPA also intends to propose provisions relating to test procedures, emission control
system durability, emissions averaging for each of the covered nonroad diesel engine categories,
and voluntary standards for low-emitting engines.
                                                J     '       '            «
       The nonroad diesel engine manufacturing industry and "marinizers" of small (under 37
kW) nonroad diesel engines for marine applications would be responsible for meeting the new
standards. The engine manufacturers consist of several large- and medium-sized companies and
one company that meets SBA small business criteria. There are  12 companies that adapt diesel
engines under  37 kW for marine applications,  10 of which meet small business criteria.

       In addition, there are many companies that manufacture the equipment into which
nonroad diesel engines are installed (some large companies manufacture both engines and
equipment). These nonroad equipment manufacturers would be prohibited from introducing into
commerce any equipment that contains an engine that does not comply with the new standards
(subject to the  flexibility provisions discussed below). As discussed below, a change in the
engine as a result of the new standards may require a redesign of the equipment to accommodate
new engine characteristics such as size or power.

       Marinizers generally purchase complete or partially complete engines and add parts to
adapt them to marine use (propulsion or auxiliary electrical generation).  In  some ways the
challenge of any new standards for these "post-manufacture marinizers " would mirror that of
nonroad equipment manufacturers in that changes made by the original engine manufacturers
might require changes in the parts and process involved in marinization.  Unlike equipment
manufacturers, however,  the marinizers generally complete the final stages of engine
production and thus would typically be responsible for obtaining  an EPA Certificate of
Conformity with the standards and would bear liability for the emissions of these engines in
use.

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      'Finally, companies that rebuild or remanufacture nonroad diesel engines, many of which
are small companies, would potentially be subject to the rule if EPA were to propose and
implement provisions covering the end of the life of original engines. Such provisions were not
discussed specifically in the Statement of Principles.

      Each of these industries is discussed in more detail below.

      Because there is a degree of uncertainty at this early date about how engine changes
might impact equipment manufacturers, the engine manufacturer and government participants
developing the Nonroad Statement of Principles met with equipment manufacturers during the
course of the Statement of Principles discussions.  Based on these discussions, the participants
included flexibility provisions in the Statement of Principles designed to ease the burden on
equipment makers in the  event such changes are necessary. These provisions would allow
equipment makers to install older-design engines in a fraction of their production for several
years. A similar program with higher percent allowances would apply to agricultural and
logging equipment. Further, to avoid disadvantaging smaller companies and companies with
limited product offerings, equipment manufacturers would be allowed to exceed the older-design
production allowances for one model line with an annual production volume of 100 pieces or
less.                 .                                     •   '.
APPLICABLE "SMALL BUSINESS" DEFINITIONS

       This report considers four separate but related industries that will be subject to the
nonroad diesel rule and that contain small businesses as defined by regulations of the Small
Business Administration (SBA): Nonroad diesel engine manufacturing, manufacturing of
nonroad equipment, post-manufacture marinizing of diesel engines, and the rebuilding or
remanufacturing of diesel nonroad engines.
     \   '                        ...
       According to SBA's regulations (13 CFR 121), businesses with no more than the
following numbers of employees or dollars of annual receipts are considered "small entities" for
purposes of a regulatory flexibility analysis:
Manufacturers of engines (includes marinizers)
                                 r

Equipment manufacturers                 .
       Manufacturers of construction equipment
       Manufacturers of industrial trucks (forklifts)
       Manufacturers of other nonroad equipment
        ;
Rebuilders/Remanufacturers of engines
                                                            1000 employees
                                                             750 employees
                                                             750 employees
                                                             500 employees

                                                              $5 million

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SUMMARY OF SMALL-ENTITY OUTREACH
                      r      .
       Beginning before SBREFA's enactment, EPA conducted outreach to members of the
above industries and their representatives, including small entities, several times and in several
ways. The "Statement of Principles" process provided an early opportunity to spread awareness '
of potential nonrpad diesel emission standards among a number of stakeholders. During the.
development of the Statement of Principles, EPA staff initiated visits with several members of
the equipment manufacturing industry. These visits provided mutually beneficial opportunities
to develop relationships with engineers and executives in these companies and to increase the
Agency's understanding of the nature of their business and the challenges that members of this
industry face. In addition, EPA staff organized briefings for equipment manufacturers on the
progress of the Statement of Principles process.'

       During the fall of 1996, EPA staff began contacting representatives of small businesses
who had participated in the briefings during the Statement of Principles process or had been
involved in the Tier 1 rulemaking process. These contacts were generally familiar with the
potential regulations and were able to provide early comments from a small business perspective.
They also  suggested names of others for EPA to contact.  EPA then assembled the comments
from these representatives and  sent a summary to them and to several new contacts. As a result,
the Agency received several  sets of written comments during this process.

       In January of 1997, EPA published the Statement of Principles with a Supplemental
Advance Notice of Proposed Rulemaking (Supplemental ANPRM), which in part requested  .
comment on small business concerns. During the comment period for the Supplemental
ANPRM, EPA held a workshop in Chicago attended by nonroad equipment manufacturers,
including several small equipment manufacturers and marinizers. The workshop devoted a
significant period of time to discussing equipment manufacturer flexibilities and small entity
issues.  In  addition to the comments made at the workshop, EPA received additional written
comments on the provisions  of the Statement of Principles and small entity concerns during the
comment period on the Supplemental  ANPRM. The comments EPA received during this period.
included several new ideas for how the program envisioned in the Statement of Principles might
provide flexibility to equipment manufacturers, especially those that are small entities.
                      )                                         •    -
       In March 1997, the Panel for the Nonroad Diesel rule was convened.  The panel
distributed a summary of the flexibility concepts to the small entity representatives identified for
the panel process (see list below) for further comment. The panel then held a teleconference on
May 2 which included most  of the small entity representatives and allowed for broad interactive
discussion and further clarification of potential regulatory options.  The panel then accepted
further written comment from the representatives on these concepts.

       This report and its appendices summarize the comments EPA and the Panel received over
the course of the small entity outreach effort.      .    :  ,
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SMALL-ENTITY REPRESENTATIVES

       EPA and the SBREFA Panel have been in contact to date with the following small
businesses and organizations that represent the interests of small-business members:

Nonroad Diesel Engine Manufacturers

       WisCon Total Power (Jerome Berti)

Nonroad Equipment Manufacturers
     »                                                        .
       Long Manufacturing NC, Inc. (Alton Cobb, Edward Vincek)
       Outdoor Power Equipment Institute (OPEI) (John Liskey, Bill Guerry)
       Industrial Truck Association (ITA) (Bill Montweiler, Gary Cross, Matthew Hall)
       Equipment Manufacturers Institute (EMI) (John Crowley)
       Construction Industry Manufacturers Association (CIMA) (Edward Roszkowski)

Post-Manufacture Engine Marinizers

       Westerbeke (John Westerbeke, JerTNg)            '
       Alaska Diesel Electric (Dick Gee)(also produce land-based diesel generator sets)
       Entec West (Dave Oostmann)
                              1
Nonroad Engine Rebuilders/Remanufacturers    .

       Automotive Engine Rebuilders Association (AERA) (Michael Duebner, Michael
       Conlon)
       Production Engine Manufacturers' Association (PERA) (Joe Polich)
SUMMARY OF INPUT FROM SMALL-ENTITY REPRESENTATIVES

      As noted earlier, each of the small entity representatives identified for the panel process
for Nonroad Diesel rule was asked to address issues related to the key elements of an IRF A
(listed above). For each of the industry sectors subject to the rule, the points made by their small
entity representatives are summarized below.
Nonroad Engine Manufacturers

      There is one domestic nonroad engine manufacturer that meets SB A small business
criteria, WisCon Total Power. WisCon's representative stated that the impact of new standards
will be relatively greater for a small company as compared to a larger one, because outfitting of
engine test cells is just as expensive as for larger companies but there are fewer sales across

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which to recoup this cost.  Similarly, costs for R&D. tooling, etc. will also represent a relatively.
large fraction of a small company's assets. WisCon has not to date raised issues relating to
reporting or record keeping (EPA does not have plans to propose any significant changes from
the reporting and record keeping requirements of the Tier 1 program) or to potential overlap with
other federal rules, and they have not suggested regulatory alternatives.  WisCon is a signatory to
the Nonroad Statement of Principles.
Nonroad Equipment Manufacturers
                                                    \      i
       General Comments

       In general, most concerns raised by nonroad equipment manufacturers are independent of
company size. That is, there do not appear to.be fundamental differences between the interests of
large and small manufacturers of equipment as they relate to new standards for nonroad engines.
The potential impacts tend to be more severe for small companies, but the fundamental nature of
the concerns is the same.  Because of this similarity in basic interests, this report includes some .
.general concerns raised by both large and small manufacturers of nonroad equipment and their
representatives as well as special concerns raised by small companies.

       Members and representatives of this industry stated that manufacturers of nonroad
equipment may face new challenges, depending on the choices engine manufacturers make in
response to new emission standards. If new standards are proposed, engine manufacturers will
be considering several kinds of changes that could affect equipment manufacturers, including
decisions about the following:  Changes in the physical and operational characteristics of
engines;  changes in the pricing of engines; and whether to continue to produce certain engine
models.  Physical or operational changes in engines may require equipment manufacturers to
change their physical designs or adapt to different operational characteristics (such as power or
torque),.adding to their costs. Also, if engine manufacturers decide to discontinue some engine
lines without introducing substitute models, equipment manufacturers could face significant
adjustments in their designs and offerings. Further, the Equipment Manufacturers Institute stated
the following:

    •   Increased engine price, possible discontinuance of engine models, increased
       equipment costs, possible increased operating costs, and possible impairment of
       machine function may result in protracted decline in demand for new equipment
       after regulation and therefore may shift equipment sales patterns and/or delay the
       turnover that both industry and EPA desire;  Therefore it cannot be assumed for
       the cost Impact analysis and small entity evaluation that engine and equipment
       manufacturers will be able to pass through.to consumers the added costs.
       attributable to Tier 2/3 regulation, or that sales of new equipment will not decline
    .  appreciably after Tier 2/3 regulation.                                                .
                                            7

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       Similar concerns were raised by a small manufacturer of equipment.  This commeriter
expressed the concern that engine compliance costs may cause purchasers to;delay replacement
of older engines (especially for smaller engines, which the cornmenter believes would have
higher compliance costs as a fraction of total engine cost as compared to larger engines),
i
       Contacts also expressed the concern that for the Statement of Principles's equipment
manufacturer flexibility provisions to have value, at least some engine manufacturers would have
to continue to produce the older-type engines that equipment manufacturers would be allowed to
install in limited numbers.

       In addition, some representatives commented that non-vertically integrated equipment
manufacturers (i.e., those that do not produce their own engines) may have difficulty in getting
information about engine changes and availability from their engine suppliers in order to
comment knowledgeably on new proposed standards. Commenters have also requested that EPA
urge engine manufacturers to provide more information to their customers about their product
plans and specifications.  Equipment manufacturers requested that, if such information is not
forthcoming from the engine manufacturers, EPA provide small entity equipment manufacturers
with a set of hypothetical scenarios (e.g., with respect to engine availability, cost increase, engine
"envelope" size, additional cooling requirements, performance changes) that could result from
the new standards in order to permit more thorough comments on a future NPRM. Also, EPA
was asked to delay proposal of new standards until  an industry-funded cost study is complete.  '

       Some commenters have also stated that small equipment dealers/distributors and ultimate .
users (farmers, contractors, loggers, etc.), as well as small suppliers supplying parts to the engine
manufacturers, should be included in small entity outreach for the rule. EPA notes that the
outreach requirements of the RF A  pertain only to the small entities that will be subject to the
rule, and the entities mentioned by the commenters would not be subject to the rule.  However,
the Agency will fully consider during the rulemaking these and other comments about the effects
of the proposed rule on any and all parties.1

       One small manufacturer of nonroad equipment stated that they were not aware of.
"independent third-party studies" of the pollution contribution of various nonroad applications
and horsepower levels or of the financial impact on small businesses.  This commenter also
stated that while efforts are underway to achieve international harmonization of nonroad
emission standards, they are concerned that uncertainties about harmonization, significant
compliance costs, and lead-time difficulties may result in non-U.S. engine suppliers deciding not
to supply engines to some U.S. equipment manufacturers. This commenter stated that they   ,
requested information from their supplier about costs and the time frame for engine availability,
but was told that such information is not yet available.                        .              *•
       !SB A does not agree with EPA's legal interpretation under SBREFA.. However, the concerns of the suppliers in
this case should be similar to the concerns raised by small equipment manufacturers who are represented here.

                                            8

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               of Small Entities Affected

•   "   ,  The small manufacturers of nonroad equipment and representatives that EPA and the
 Panel contacted did not have information about the total number of small entities that would be
 subject to the Nonroad Diesel rule. EPA is working with the industry and through an EPA
 contractor to develop information on the numbers of equipment manufacturers that use nonroad
 diesel engines and how many of these are small entities.

        Interaction With Other Federal Rules
                   ?
        A representative of the diesel forklift industry indicated that OSHA ambient carbon
 monoxide limits, especially as applied in the state of Minnesota, need to be assessed for any
 overlap with the engine-based standards proposed in the Statement of Principles.  No other
 potential overlaps with other federal rules were noted by equipment manufacturer
 representatives.

        Reporting and Record keeping

        Equipment manufacturers stated that under the flexibility provisions in the Statement of
 Principles, they should only be required to maintain accurate records of the engine types installed
 in equipment. These records would not be routinely submitted to EPA but would be available
 upon request. The commenters believe this approach would minimize the administrative burden
 on equipment manufacturers while providing for market-driven "self-policing" among competing
 companies (due to the likelihood that competitors would alert EPA to abuses of the flexibility
 provisions). It should be noted that no recordkeeping requirements would be proposed for
 manufacturers which choose not to take advantage of the voluntary flexibility provisions.

        Suggested Regulatory Alternatives             .

       Small manufacturers of nonroad equipment and their representatives suggested several
 alternative ways in which the provisions of the Statement of Principles might be changed or
 improved in order to achieve emission reductions in a more cost-effective manner. These
 alternative concepts are summarized in the appended document titled "Preliminary EPA Staff
 Assessment of Alternative Equipment Manufacturer Flexibility Concepts," dated 5/14/97, along
 with potentially positive and negative characteristics of each concept.
Post-Manufacture Engine Marinizers

       Most companies in this industry are not represented by an organization. EPA and the
Panel have contacted several of them individually and received comments from two of them.
These contacts stated that if engine suppliers do not provide new engines with sufficient lead
time, their production would be stopped, at great cost. The marinizers need time to redesign the

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parts they add to an engine if engines change or if a different company's engine must be
substituted.                         -                                             •

       A marinizer which has two years experience with EPA certification and compliance
stated that they spent an average of 2.5 percent of their revenue on certification and compliance
tasks.  This was characterized as a large burden which larger companies can better absorb. Also,
it was stated that small diesel engines such as the ones they produce contribute very little to total
emissions because of their small size and small number.

       One  marinizer stated that the financial impact on small marinizers could be reduced if the
proposed regulations accomplished the following:  •

       The regulations should be fair to all the regulated entities.
       The regulations should be written in plain English without gray areas subject to
       interpretation.
       The regulations should be organized to have broad coverage and avoid different rules for
       different markets or product segments.
       The regulations should provide small businesses "consideration" regarding certification
       and reporting, including allowing a marinizer to use the engine maker's certificate of
       conformity if the marinizer demonstrates that they have not altered the performance or
       combustion parameters ("streamlining").

The Panel observes that some or all of the  equipment manufacturer flexibility provisions
discussed above may also have application to engine marinizers.

       Members of this industry have not provided comments about the number of small entities
that would be covered by the standards discussed in the Statement of Principles. (As stated
above, EPA  believes that 12 companies would be subject to the rule, 10 of which meet SB A
small-entity  criteria). No comments have been received from this industry about reporting and
record keeping or about overlap with other government regulations.
Engine Rebuilders/Remanufacturers

       EPA staff have also consulted representatives of companies which rebuild or
remanufacture engines. EPA has discussed plans to propose provisions relating to rebuilding and
remanufacturing nonroad diesel engines which are very similar, if not identical, to the
corresponding provisions being considered for highway heavy-duty engines. In both cases, these
provisions are aimed at ensuring no loss of emission control at the time of rebuild or
remanufacture. Representatives of the rebuilding and remanufacturing industry have stated that
they are comfortable with such an approach and they do not believe it would raise new issues for
members of this industry. They have not to date raised issues relating to reporting and record
keeping or overlap with other federal rules, and they have not suggested regulatory alternatives.
                                           10 .

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  ADDITIONAL PANEL FINDINGS AND DISCUSSION

         As indicated above, the types of small entities to which the Nonroad Diesel rule will
  apply include small engine manufacturers, small equipment manufacturers, small engine
  marinizers and potentially engine rebuilders or remanufacturers. The number of these small
  entities is still uncertain. The small entity representatives contacted for the rule were unable to
  provide additional information about this issue. The Panel supports EPA's efforts to seek
  additional information about the number of small entities that will be affected by the rule.
  to be modeled on analogous requirements already applicable to some nonroad engines. The
  requirements have benefited from previous EPA efforts to simplify the certification process.
            '
requirements have benefited from previous EPA efforts to simplify the certification process.
Marinizers' suggestions for further streamlining certification procedures for marinized engines
     rinizers' suggestions for further streamlining certication procedures for marinized engine
     worthy of Agency consideration. Any recordkeeping or reporting requirements associated
      potential means for providing small businesses with additional flexibility have yet to be
w   poena means or prov                                                    o  e
developed, but the Panel urges EPA to keep any such requirements to a minimum.  There is little
sense in providing small businesses with flexibility only to bog them down with excessive
 aerwork.
  paperwork.

        The Panel is unaware of any other relevant Federal rules which may duplicate, overlap or
  conflict with the proposed rule, with the possible exception of the OSHA ambient carbon
  monoxide regulations.  The Panel encourages EPA to consider the potential interaction of the
  Nonroad Diesel rule with those OSHA regulations.

        Regarding regulatory alternatives, the Panel considered the 10 concepts suggested by
1  small entity representatives and others. The Panel considered each of the alternatives in light of
  several criteria including whether the alternative is consistent with the Clean Air Act; whether it
  would achieve emission reductions comparable to those the basic proposed program would
  achieve; whether it is reasonably practicable and enforceable; and whether some concepts may
  complement each other to maximize the overall flexibility for small entities.

        The Panel believes that a  set of five of the ten suggested concepts (see first appendix for a
  list of all 10 concepts), considered as an integrated package, would provide significant flexibility
  and burden reduction tor small entities subject to the Nonroad Diesel regulations that EPA plans
  to propose. Together, these five provisions appear to the Panel to essentially address the full
  range of concerns raised by small entity representatives.  Further, this set of provisions would
  allow EPA to meet the goals of the program envisioned in the Statement of Principles while
  maximizing the compliance flexibility for small manufacturers of nonroad equipment and small
  marinizers and achieving emission reductions comparable to those of the original Statement of
  Principles plan. The Panel believes that EPA should consider conducting further analysis on the
  following five concepts and proposing or soliciting comment on them in its planned Notice of
                                            11

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Proposed Rulemaking:2 '
                                                                            s
    '  Concepts    Allow Respreading of OEM Exemption Allowances
      Concept 4    Equity between <50 hp and >50 hp Categories
      Concept?    Allow OEMs to buy Engine Program Credits
      Concept 8    Expand Small Volume Allowance to More Than One Model
      Concept 10   Relie'f for Hardship Cases       '                           •

      In addition to the above package of flexibility concepts, the Panel believes EPA should
carefully consider all comments received during this outreach process, as well as comments
which will be received as the rulemaking proceeds, on other issues of concern to small entities.
Appendices:   Document: "Preliminary EPA Staff Assessment of Alternative Equipment
             Manufacturer. Flexibility Concepts"

             Document: "Summary of Comments, Nonroad Diesel Engine Rule, SBREFA
             Panel Request for Comments"

Attachments:  Long Manufacturing N.C. Inc. Comments
             Westerbeke Corporation Comments (Three sets of comments)
           .  Alaska Diesel Electric (Two sets of comments)
             OPEI (Two sets of comments)   '   '     ,
             ITA (Three sets of comments)
             EMI (Two sets of comments)
             AERA (Two sets of comments)
       2SBA recommends the inclusion of these five concepts as part of the proposal.

             '             -              12

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                                                                 Appendix I
                                                  •         -   Updated 5/14/97

                Preliminary EPA Staff Assessment
 of Alternative Equipment Manufacturer Flexibility Concepts


Concept 1:  Extra Time for Equipment Redesign

Description of Concept
Westerbeke Version:                                     .       .
   Give OEMs a one year allowance before must use complying engines. Give small
 .  businesses an additional two years.

Ingersoll-Rand/Melroe (Hunton & Williams) Version:          .   .
   Give OEMs at least two years of leadtime after the new engine's "made available"
   date.  "Made available" means final design specs, drawings and prototypes.  Prohibit
   significant engine design changes after this date.

Charles Machine Works (Ditch Witch) Version:
   Similar to IngersoH-Rand Version but phase in requirement 20% per year after "made
   available" date, unless a new equipment model is being introduced anyway.

Pro's                                                               '
•   Provides more time for OEMs to redesign equipment to accommodate redesigned
   engines.
-   Westerbeke version helps level the playing  field for small businesses, which need
   more time due to small staffs.                           "
-   Helps match redesign for emissions with normal product update cycle.

Con's
-   Mandated 1-2 years with no return on investment disruptive to engine suppliers;
   engines will not be made available unless market exists.                  ,
-   Cost of engines (and pass through to ultimate purchaser) likely to increase.
-   Prohibition on designvchanges unenforceable.
-   Many design changes occur because of product improvements unrelated to
   emissions; these would be hampered by prohibition.
-   Large loss of environmental benefit due to delayed implementation.
Concept 2:  Renew Flexibilities With Each New Tier of Standards
                                  *-     '         •
Description of Concept
The SOP concept provides OEM's with an allowance of exempted equipment for
several years after aTier 2 (Tier 1 for <50 hp engines) standard kicks in. Concept 2
would repeat the same allowances for Tier 3 (Tier 2 for <50 hp engines).
                                                          s*

                                     1

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Pro's                                                               ...    .
- Gives more flexibility to OEMs (almost double the exemptions).
- Allows OEMs more time between tiers to recoup investment.

Con's                                                          .
- Not needed at this time. SOP envisions no significant equipment design impacts due
  to Tier 3 standards (Tier 2 for <50 hp).  EPA is committed to reassessing this issue in
  2001 and proposing relief (perhaps including this concept and more) if significant
  adverse impacts to the OEMs are identified.
• Loss of environmental benefit, possibly large.
Concept 3:  Allow Respreading of OEM Exemption Allowances

Description pf Concept
instead of a fixed exemption allowance in each year, provide OEMs an equivalent
"lump sum" of exemptions, to be spread over the same years as they see fit.

Pro's
- Allows OEMs to tailor implementation to their product design rollout plan.
- Maximizes availability of all exemption allowances.

Con's                              .      -
- Some loss in environmental benefit, though likely small.
Concept 4:  Equity between <50 hp and >50 hp Categories

Description of Concept
SOP limits flexibilities for OEMs using <50 hp engines to 4 years, in contrast to 7-8
years .for OEMs using >50 hp engines. This concept would expand the former to match
the latter.                                      .        .   .
                                   *                    ,--''-
Pro's
-  Gives more flexibility to OEMs trying to meet early (1999/2000) start dates for <50 hp
   engine standards.     .                                                  .
-  Provides a consistent system of flexibilities for all engines.
                            j                                 •
Con's
-  Some loss in environmental benefit from small engines, though likely small.

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 Concept S: Allow Transfer of Exemptions Between HP Categories and Between
            Application Categories.

 Description of Concept
 The SOP concept provides an allowance of exemptions for equipment using engines in
 each regulated hp category, it also allows more exemptions for farm and logging
 equipment Concept 5 allows an OEM that builds equipment in multiple categories to
 transfer unused exemptions for use in another hp category or application category.
 Another version of this concept expresses the exemptions on a per hp basis, rather
 than a per machine basis (as a way of accounting for the different emission rates of
 different sized engines).

 Pro's
 -  Gives more flexibility to OEMs with diverse product offerings.

 Con's
 -  Larger OEMs with diverse product offerings can gain advantage over small
   competitors by stacking their exemptions to delay implementation for years for some
   models.          •  " -
-  Difficult to establish appropriate weightings: large and small engines differ not just in
   hp but in such aspects as annual usage, emissions levels, and useful life.
-  Some loss in environmental benefit, though likely small if transferred exemptions
   could be properly or conservatively weighted.
-  Air quality impact may.be geographically skewed to the.extent that equipment mix
   varies from place to place.
•  Adds to reporting/recordkeeping burden and makes enforcement more difficult.
Concepts:  Drop Special Exemptions for Farm and Logging Equipment

Description of Concept                .      .
Drop the larger exemption allowances for farm and logging equipment and respread
them over the whole range of applications.

Pro's
-,  Increases flexibility for non-farm/logging machine manufacturers.

Con's       _ .        .             »                 ,
-  Reduces flexibility for farm and logging machine manufacturers.
-  Reduces environmental benefit in nonattainment areas (typically urban), by
   increasing number of exempted, higher-emitting machines used in these areas.

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Concept 7   Allow OEMs to buy Engine Program Credits

Description of Concept
Allow OEMs to purchase.credits earned by engine manufacturers in the Averaging,
Banking, and Trading (ABT) program to offset the sale of additional equipment built with
noncomplying engines (beyond that allowed under other flexibility provisions).

Pro's
- Has potential to provide additional flexibility to OEMs.
- May provide incentive for engine makers to make clean engines early.
                                                                   i
Con's                              .
- No guarantee that credits will be available for sale.
- Increases complexity of ABT program and EPA enforcement; high administrative
  burden on all parties to track "ownership"  of credits.
- Reduces environmental benefit if it creates new market for otherwise unused credits.
- Creates enforceability concern with respect to potential double-counting of credits.
- Needs to ensure consistency with statutory standard-setting criteria
Concept 8:  Expand Small Volume Allowance to More Than One Model

Description of Concept
The SOP concept allows OEMs to annually exempt up to 100 machines of a single
model, in recognition of the fact that exempting a certain percentage of production does
not help small OEMs with very limited product offerings. Concept 8 would drop the
single model restriction, allowing the combined annual production of more than one
model to be exempted, up to the combined total of 100 machines in each regulated
power band.

Pro's
-  Provides more flexibility to small volume OEMs with more than one model.

Con's                                   ,
-  Moves away from the philosophy behind this allowance, which is meant to help small
   companies with very limited product offerings.
-  May be  some undetermined loss in environmental benefit, due to the expanded
   number of companies that could make use1 of the small volume allowance.
Concept 9:  Drop or Relax Standards For Equipment On Which Controls Are Not
            Cost-Effactive
                                         i
Description of Concept
                                      4 '

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Establish a cost-effectiveness threshold, above which specific equipment types will not
be regulated or will be regulated under relaxed standards. Each equipment type would
be evaluated considering cost of compliance, annual usage, hp size, and other factors.

Pro's
-  Puts emphasis on equipment with highest environmental impact and easiest
   redesign effort.                                       .
-  Eases implementation by reducing number of models needing redesign.

Con's
-  Clean Air Act may preclude this approach.
- ' Evaluation results, would depend on how types are defined:  Many niche markets
   may have very low individual environmental impacts, but large impacts in the
   aggregate.
-  Many engine models go into multiple applications, possibly leading to more than one
  version of each model and higher costs.
-  Creates international deharmonization:
- Restrictions on engines allowed to be used in a machine difficult to enforce.
- Accurate cost-effectiveness comparisons would be very difficult to determine; for
  example,  annual usage may vary widely (e.g., commercial harvesting vs. harvesting
  by farm owner).
Concept 10:    Relief for Hardship Cases

Description of Concept
Small OEMs have stated that they are sometimes at the mercy of engine suppliers who
are not responsive to the major disruptions that last minute changes or delays-cause.
This concept would provide a last resort opportunity for small OEMs, after exhausting
all other flexibilities, to gain additional relief from EPA on a case-by-case basis.

Pro's
-  Protects small OEMs from serious disruptions occurring through no fault of their owrr.
-  Formalizing a process in regulations allows public.input (during the rulemaking) into
   development of criteria for relief.

Con's
-  Difficult to define appropriate and fair criteria for relief, .especially with respect to
   OEM's burden of showing no fault.
-  Raises concerns about inappropriate Agency intervention in marketplace and in
   individual companies' confidential financial situation.
-  Loss in environmental benefit, though likely small if objective criteria can be defined
   and appropriate safeguards can be put in place.

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                                                                          Appendix 2

                              Summary of Comments
                            Nonroad Diesel Engine Rule
                      SBREFA Panel Request for Comments

                                     May 12,1997

Commenters (written comments and participants in 5/2/97 teleconference):
   Westerbeke (engine marinizer)--Jeff Ng*         .
   Alaska Diesel Electric (engine marinizer) — Dick Gee*
   Outdoor Power Equipment Institute (OPEI) - Bill Guerry
   Equipment Manufacturers Institute (EMI) - John Crowley
   Industrial Truck Association (ITA) - Matthew Hall*
   Construction Industry Manufacturers Association (CIMA) - Ed Roszkowski
   Automotive Engine'Rebuilders Association (AERA) — M. Duebner and M. Conlpn*

* also submitted written comments

  . Several commenters expressed appreciation to the panel in its approach to conducting this
process, and to EPA in its continuing efforts in seeking out the concerns of small businesses,
early in the rulemaking process. Special appreciation was expressed regarding the consideration
of real concepts for meaningful relief, and for the use of the teleconference to cost-effectively
solicit input. The following summarizes the detailed comments received in response to the
panel's April 24th request, both in writing and in the May 2 teleconference.
Specific Comments on Flexibility Concepts                                    '

Concept 1— Extra Time for Equipment Redesign

   OPEI: To the extent that leaner-burning, hotter-running engines are required to meet the new
   standards, equipment manufacturers may need more tune to retool. Especially for makers of
   seasonal equipment (mowers, etc), a delay of just a few months because of engine
   unavailability could mean loss of all sales that year. In general, market-based incentives (like
   ABT) are better, than mandating practices in contracts between engine and equipment
   manufacturers. Instead of prohibiting engine design changes after the "made available" date,
   EPA might consider providing benefits to engine manufacturers within the ABT program for
   making final engine designs available on time.

   EMI: Additional "pro" of this concept: delaying compliance for small equipment
   manufacturers "levels the playing field" between them and their larger competitors.

   Alaska Diesel: Supports the version of this concept suggested by Charles Machine Works..
   Does not support prohibiting engine makers from changing engines after a "made available"
   date.             '   .                .      •                                  ^
     \                  "                           j          .                >
                                          1


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   Westerbeke: Continues to support a one year delay for OEMs and marinizers, and two years
   for small businesses. They believe this would be useful even though they do not support a
   policy of prohibiting engine manufacturers from changing engines after a certain date. They
   need more leadtime after they get a new engine prototype from the supplier; experience has
   been that they often don't get engines in time. Also, time needed is longer for small
   companies because very few staff are available to complete the conversion of their product
   line into compliance.       --.'..'.
Concept 2 - Renew Flexibilities With Each New Tier of Standards

   OPEL Supports the concept.

   Alaska Diesel: Supports this concept.  Believes that there will indeed be significant engine
   redesign with significant equipment design impact due to the Tier 3 (Tier 2 for 50 hp Categories

   OPEI: The SOP appears to discriminate against manufacturers of small (under 50 hp)
   equipment. Under 50 hp engines will be newly regulated and equipment makers face .tough
   issues; they need the same flexibility as makers of equipment using over-50 hp engines.

   EMI: Supports the concept.

   Alaska Diesel: Supports the concept as fair. They produce a broad range of marine engines
   above and below the hp delineation.

   ITA: Supports concept.  Inequity in SOP is counterintuitive, considering equipment with.
   small engines»has shorter leadtime, smaller emissions impact, and tougher redesign
   challenges.

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 Concept 5 — Allow Transfer of Exemptions Between HP Categories and Between
 Application Categories

   No comments in response to EPA solicitation of ideas for how to weight exemptions.

   Alaska Diesel: Supports the concept. Because they have 79 different model/rating
   combinations, they could well use such transferability.    .                        -   .  «

   ITA: Considers it essential to allow equipment manufacturers to use their allowances as they
   see most appropriate, so long as the total allowance for the entire flexibility period is not
   exceeded.                            ,
 Concept 6 — Drop Special Exemptions for Farm and Logging Equipment

   Alaska Diesel: Supports the dropping of the special exemption or adding diesel marine
   engines to the special exemption, since diesel marine engines are similar to fanning and
   logging equipment in that they are not significant contributors to emissions in urban areas
   (disputing a statement made by EPA staff).

   ITA: Supports the concept. Rationale"for the special exemptions not well made: air quality
   argument is speculative; flexibility for small volume models is better addressed through
   SOP's small volume allowance. Consider applying the exemption only to equipment using
   above-50 hp engines.

   Westerbeke: Supports dropping the special exemptions. No basis for it in terms of need
   (same engines used in both types of applications) or environmental impact.
 Concept 7 - Allow OEMs to Buy Engine Program Credits

   Alaska Diesel: Supports the concept, but not likely that engine makers would sell their
   credits, and if so, that small equipment makers could afford them.
 Concept 8 — Expand Small Volume Allowance to More Than One Model

   Alaska Diesel: Supports the concept; believe they could use it.

   ITA: This is an additional option that should be available.

"  EMI: Supports the concept. Disagrees that there may be a loss, in benefit.

   Westerbeke: Supports the concept. Would be appropriate alternative to Concept 1.

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Concept 9 — Drop or Relax Standards For Equipment On Which Controls Are Not Cost*
Effective

   Alaska Diesel: Does not support this concept.
Concept 10 - Relief for Hardship Cases

   EMI and OPEI: This concept is imperative if Concept #1 is not pursued.

   ITA: Supportive of the concept. Support for this concept is widespread among regulated
   equipment manufacturers.

   Alaska Diesel: This concept or spmething similar is an "absolute necessity".

   Westerbeke: Supports the concept.  Envisions EPA evaluating petitions for waivers on case-
   by-case basis. May not be needed if other flexibility is in place, but should be available as
   safety net.
General Comments                                ,        '

Alaska Diesel:
   1. Wants to avoid separate certification if their marinization can be shown to not affect
     emissions.
              "i                  •           •
Westerbeke:
   1. Supports Alaska Diesel suggestion about certification, and offers some possible technical
     parameters that might be used to show that emissions are not affected.
   2. EPA concern about windfall credits for cleaner indirect injection engines is misplaced;
     Agency should not discourage shift from direct to indirect injection designs.
               s      ,       •
OPEI:
   1. Discontinuance of an engine model could be disastrous to a small equipment maker.
   2. Enhanced flexibility for engine manufacturers could translate into a benefit for equipment
     manufacturers if the flexibility made it more likely that engines would be available. This
     includes broadening the engine maker ABT program as much as possible (including cross-
     horsepower trading) and minimizing the durability testing burden.
   3. EPA should consider allowing equipment manufacturers additional flexibility if they take
     additional measures, such as voluntarily using cleaner engines in some of their product.

EMI:
    1. Problem of discontinuance of engine models by engine makers. Members have been

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     unable to get sufficient information from engine makers to evaluate the impact on them.
   2. EPA should include equipment distributors and ultimate users in small business outreach
     and in the rule analyses.
   3. Concern about impact of equipment cost rises on demand for new equipment.

CIMA:
   1. Concerned about discontinuance of engines by engine manufacturers.
   2. Concerned about significant engine changes that change the "envelope" size.
   3. Need to get specs for engines ahead of time and be assured they won't change.
   4. Need to consider impact on end users.

AERA:
   1. Asked that the description of their position in the draft report be changed to clarify that
     , adopting an approach to the rebuilding of nonroad engines that is similar (if not identical)
     to that taken in the heavy-duty highway engine rule would be acceptable to AERA,

ITA:
   1. Forklift manufacturer generally needs at least 18 months after obtaining a new, durability-
     proven engine to put its product on the market.                                 .
   2. SOP's current allowance formula unlikely to be of meaningful assistance because it may
     not match equipment maker production schedules.

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                                                                     Attachment
Written Comments from Small Entity Representatives:

      Westerbeke Corporation
      Alaska Diesel Electric (engine marinizer)
      Outdoor Power Equipment Institute (OPEI)
      Equipment Manufacturers Institute (EMI)
      Industrial Truck Association (ITA)
      Construction Industry Manufacturers Association (CIMA)
      Automotive Engine Rebuilders Association (AERA)*
      Long Manufacturing N.C. Inc

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 Date:  5 May 1997
 Fax:   97S-0425
       U.S. Environmental Protection Agency
To:
Attn:
Re:
       Stuart Miles-Mclean
       a) Non-road Diesel Teleconference
       b) Comments regarding "Flexibility Concepts"
 1)  Thank you for allowing us to attend the teleconference. We found it to be informative,
    interesting, and most of all, cost effective.  Please do plan to continue this method and include,
    us,

 2}  Regarding the various flexibility concepts, we would like to comment as follows:

       Concept 1
       We favor, the Charles machine works plan.  We do apj believe it is reasonable to prohibit the
     s  engine maker from future change as suggested in the I-R version.
                                                                                 . J *
       Concept 2       -
       We support.the Concept 2. We believe it is naive to suggest that there will be "no
       significant equipment design impacf. We dQ expect significant engine development to
       achieve the "next" tier. .

       Concept3                     ,  •            .  -        '-.
       We support Concept 3.

     1  Concept 4
       We support Concept 4. Since we produce a broad range of marine engines 7.5-1300 BHP,
       this naturally seems fair to us.

       Concept 5                                -                   •    »-
       We support Concept 5. We currently have. 10 different marine propulsion-engine models,
       from 70-1300 BHP, each with 3 different Hp ratings. We currently have 20 different marine
       generator set models, each with two ratings (50 and 60 Hz) from 3.5 to 708 kW of electrical
   ..    output In addition, we have 9 different 1200 RPM marine generator set models from 22-
       200 KWE. All together we have 79 different model/rating.combinations  and we could well
       use the benefits of Concept 5."         .   ..  •                        ""•''.
                                                                                  Paqe 1
                                Alaska Diesel Electric, inc.                             *
4420 14tn Ave. NW • P.O. Box 70543 • Seattle WA 93107-0543 «~Tel: (206) 789-3880 • Fax: (206) 782-5455 ».71x 32-0145

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      Concepts
      We support Concept 6. If EPA cannot support Concept 6 then we suggest EPA consider
      adding marine to Concept 6.  We believe the EPA comment about marine being a
      significant contributor to the emissions in urban areas, might be correct for SI engines byj
      we do not agree this to be true for Gl engines.  30% of our product is exported outside the
      USA and of the'remaining 70%, 50% will be used well away from any conceivably "urban"
      areas.

      Concept 7                                                         .
      We support Concept 7. We believe however, it is unlikely any engine company would part
      with such credits for any price. We also believe it is unlikely any small OEM could afford to
      buy such credits.                       .     .
      Concept 8
      We support Concept 8. As you can see from our comments for Concept 5 we could
      from Concept 8.                .             ;      .

      Concept 9  .
      We do Q2i support Concept 9.

      Concept 10                                            .  "
      We support Concept 10 and believe it or something similar is an absolute necessity.
Best Regards,

Dick Gee

'DG:lb

cc: Sheri Dunatchik, 313-741-7816
                               Alaska Diesel Electric, Inc.
4420 1.2m Avs NW • P.O. Box "/0543 • Seattle. WA 98107-0543 • Tel: (206) 789-3880 • Fax; (206) 782-5453
                                                                                Page 2

                                                                                32-0145

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                                      WESTERBEKE
                                     Engines & Generators


                                                                .   8 May 1997
 Stuart Miles-McLean, USE?A
 401M Street, SW
 Mail Code 2136
 Washington, DC 20460

 Subject: Comments on Small Business Flexibility for Non-road CI Engines

 Dear Mr. Mies-McLean:
       These commentsare in response to the Small Business Advocacy Panel Teleconference,
on May 2, 1997V regarding Small Business Relief and Flexibility for Non-road CI engine exhaust
emission regulations. Westerbeke would like to thank the EPA and the Panel for the opportunity
to comment and to participate in the formulation of the new regulations. Westerbeke firmly
befieves that it is necessary to provide small business relief in these regulations, otherwise all small
businesses in this industry wut be adversely affected.  Westerbeke applauds the EPA for their
continuing efforts in seeking out small businesses and working with them so that the new .
regulations will not devastate and destroy small companies, the backbone of the American Dream.

     •  Westerbeke is a small marinizer, about 85 employees total  Westerbeke produces
approximately 4000  engines a year, about 2000 of which are diesd. The majority of our
production is in the 8 to 10 kilowatt range. Westerbeke1 s small quantity of engines contribute
very little to air pollution as compared to a large engine or equipment manufacturer.  Our engines
are used primarily on pleasure boats and are operated only a few hundred hours a year, opposed
to other equipment which is used year round.

Concent 1;       '•',...         -            -

       Westerbeke still befieves that EPA should allow OEMs and marinizers a one-year
allowance as each step of the regulation comes into effect. This will provide OEMs and
marinizers sufficient  time to convert their engines into end products.  Westerbeke agrees with
EPA that they cannot prohibit or prevent engine manufacturers from making changes to their
engines after a certain date. This is a normal part of the relationship between a company like ours
and its base engine suppliers.  This policy would be difficult, if not impossible to enforce. By
allowing OEMs and marinizers the one year exemption, engine manufacturers will be able to
continue to make changes to their engines and their customers will not have to scramble as much
to redesign their product and place it into production. It has been Westerbeke's experience that
engine manufacturers will not deliver prototype engines with sufficient lead time to all of their
customers; therefore, the time allowance will provide a window of time for OEMs and marinizers
to convert the engine into their specific end products.  This allowance will prevent OEMs and

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 marinizers from having to suddenly stop shipping product and prevents fh^ir livelihood from being
 threatened.  Another major benefit of the time allowance is that it will provide the extra time
 necessary for the finished end product to be certified with other agencies, such as the USCG, and
 CE compliance testing. "This will also allow OEMs and marinizers to more naturally and
 traditionally perform product line conversions.

       Westerbeke is also asking EPA to gram small businesses a two year allowance to convert
 their engines into end products.  Small entities require the extra year due to their much more
 limited work force and limited resources that are needed to complete the conversion of then-
 product line into compliance. This extra year will provide the necessary relief lor small businesses
 because they are sure to receive their prototype engines last from their suppliers.  It has been
 Westerbeke's experience that the prototype engines will not be delivered until the effective date of
 the regulation or later.  Small business will receive the engines last due to their lack of contractual
 pull to force their suppliers to deliver the engines sooner.

 Westerbeke's proposal is simple and fair.
       1. Grant OEMs and marinizers a one year exemption.
       2. Grant small businesses a two year exemption.

 The environment may not receive the full benefit of the regulations up front, but in the end all of
 the engines in the US market will be certified and emitting less emissions. For any given product,
 the engine cannot be simply substituted for a differert erigme whiiom adverse effects. EPA must
 remember that these products are custom designed around a specific engine, and it would be very
 costly and very time consuming to redesign the product around another engine.

 Concept >;                    •       • '       .       ,                •

      Westerbeke feels that the concept of exempting multiple models, whose production is less
 than 100 engines per year, would be an appropriate ahernatrve to Concept  1.  By expanding the
 exemption to more than one model in a given product line, small businesses with multiple models
 can continue selling product with fode fear of having to suddenly discontinue one or more models,
 thus preventing  many small businesses from going out of business.  This will protect OEMs and
 marinizers from any significant changes in the engines from their suppliers.  EPA may wish to
 provide incentives for these models to be certified at a later date, such as reducing or eliminating
 the testing requirements for that engine family. This method will provide the environment with
 some benefits, as well as allowing small companies to stay in business.

 Use of Engine Manufacturer's Certificate!:

      Westerbeke supports Dick Gee's proposal to  allow marinizers to use their engine
 suppliers' certificates as their own. This will provide all sorts of relief for marinizers by
 eliminating additional testing and record keeping burdens.  The major task will be proving to EPA
that the marinizer did not worsen the engine's emissions during the marinization process. This
 could possibly be done by demonstrating that the exhaust backpressure specification has not been
 exceeded,  thai the inlet pressure  drop specification has not been exceeded,  and that aQ other
epa9703.doc
Page 2 of 4

-------
 pertinent engine, settings have not been altered beyond the specifications set by the engine
 manufacturer. The most sure way of proving that the emissions did not become worse would be
 to run an identical emissions test as the engine manufacturer and compare the results. Provided
 that the results are within +/-5% EPA would allow the marinlzers to use the engine
 manufacturer's certificate for that particular engine. The environment will still receive the full
 benefit of these regulations while reducing the burden on marinirm, who traditionally cannot
 control any of the major exhaust emissions characteristics of their engines.
       EPA is worried that there maybe a "windfair of credits generated by indirect injected
 (101) engines that direct injected (DI) engines cannot make. The "windfall" is predicted to occur
 because EDI engines are inherently cleaner than DI. EPA should be glad that IDI technology is
 being used, and its credit generation ability should encourage die conversion of more DI engines
 to IDI. The whole purpose of the regulations is to reduce pollution, EPA should be encouraging
 industry to use the best available and affordable technology.

         md Logging
The farming and logging exemption should not exist.  These OEMs purchase their engines from
the same suppliers as other OEMs, and they use the same engines that are used in other regulated
applications.  This means these engines would already be certified , or would be capable of being
certified, by the engine manufacturer. Many times these engines are used in more environmentally
sensmve area than other regulated applications.  The environment and industry would gain no
significant benefit from this exemption.

Concept 10;
                                V

       Special relief for hardship cases should be in the regulations to prevent extreme
circumstances in which some small businesses will not be able to cope and survive unless EPA
grants them special aid. This method of relief should only be used as a last resort. EPA would
allow an entity to petition EPA for a hardship waiver. EPA would evaluate each petition on a
case by case basis, and then would work with the particular entity to determine what relief and
flexibility are required. This method of relief may never be needed if, the aforementioned flexibility
proposals are adopted. However, this will provide small businesses with one last safety net.

TeleconferenHppt

       Westerbeke applauds EPA for using teleconferencing technology for meetings such as
these. Westerbeke believes that teleconferencing is a more efficient use of everyone's time for
short  1-3 hour meetings. They are less expensive and less time consuming than organizing a
central meeting place for everyone to gather to meet face to face. For larger and/or longer
meetings the face to face method is still better.  The use of teleconferencing is a much more
productive use of everyone's time; this will allow everyone to spend less time and less money
traveling, and spend more time working on making their engines cleaner and less polluting.
epa9703.doc
Page 3 of 4

-------
Conclusion:

       Westerbeke would Hke to encourage EPA to continue to seek out small entities as this and
future regulations are being developed to prevent small businesses from being unnecessarily
damaged. Small entities need relief and flexibility in this new rule, otherwise several companies
will be put out of business. Westerbeke believes that either Concept 1, or Concept 8, or a
combination of the two will provide the best relief.  These concepts will provide a means for
everyone to stay in business, ensuring a healthy competitive market and a cleaner environment for
both present and future generations.  Westerbeke looks forward to continuing to work with EPA
on the development of this regulation, especially on issues regarding small business flexibility and
relief.

Sincerely,                 ;
Westerbeke Corporation
Jeffrey L. Ng
Mechanical Engineer
epa9703.doc
Page 4 of 4
                                                                                     TOTfiL P.04

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                            WASHINGTON, D.C. 2OO36

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                               e-mail: cr0Kp9aoi. com
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   Of S9w*»9C>.
F. JOSCP«
                                                                  VIRGINIA orriCE
                                                             420 SOUTH WASHINGTON S'BtCT
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  •rot
            Mr.  Stuart Miles-McLean
                    States Bay lT
                                           1 Protection
PAX HO:

DATE :

PROM i

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              /2021  260*5478
              Mav 6*  1997
              Michael J. Conlon. Bsouire
              SBREFA Review
  SENDING OPERATORS

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                                            (202) 331-7O5O.  TBAUC TOO.
  ADDITIONAL COMMENTS;

-------
OAVIO J.

BRIAN P.
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MARY JEAN PASSCTT-*
• •V.SO AbMITTCO IM VA.

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CONLON, FRANTZ, PHELAN & PIRES
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        WASHINGTON, 0. C. SOO3S
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                               May 6,  1997
   or
   S*
CAWBCNCC
                                                           SOUTH WASHINGTON sracct
                                               VTA. FAX 12021 260.5478
   Mr. Stuart Miles-McLean
   United States Environmental
     Protection Agency
   401 M Street, S.W.
   Mail Code 2136
   Washington, D.C.  20460
             Re:  SBREFA Review of Proposed Emission
                  Standards  for Nonroad Diesel
   Dear Mr. Miles-McLean:

        I  represent  the Automotive' Engine  Rebuilders  Association
   (AERA), the  largest trade association for those bueineseeB which
   rebuild or remanufacture motor vehicle engines.  AERA's membership
   includes  larger production  rebuilders,  but  the majority  of its
   members are smaller machine shops which rebuild a limited number of
   engines per year.   Besides rebuilding onroad automotive and heavy
   duty engines,  a substantial number of AERA's members rebuild and
   resell the nonroad  diesel  engines which will be covered  by the
   proposed rule.       .

        AERA  has  been actively  consulting with EPA regarding the
   effect of its latest emissions standards  on the rebuilding of motor
   vehicle  engines.   Discussions  prior to the publication  of the
   proposed and final rules for heavy duty diesel engines resulted in
   a practical and flexible set of rules  for rebuilt engines which met
   the  goals  desired  by EPA  without  unduly  burdening the small
   rebuilder.                                             .

        He  have   also  had  preliminary  discussions  with  the  EPA
   officials responsible  for preparing the proposed nonroad rule.  To
   date these discussions have been satisfactory, and we are confident
   that, as with the heavy duty rule, we should be able to work out
   acceptable conditions  for nonroad engine rebuilding.

        However,  in our opinion, the March 20,  1997 Draft Report to
   the  Small  Business Advisory Review  Panel  does not accurately
   reflect  those  discussions  and may be misleading absent  further
   elaboration.   In its short paragraph on rebuilding on page 10 of
   the raport EPA states:      .   .

-------
Mr. Stuart Miles-McLean
May 6,  1997
Page 2
           "EPA has discussed plans to propose provisions,
          relating  to  rebuilding  and remanufacturing
          nonroad diesel  engines  which would ensure no
          loss  of  emission  contra

          rebuild or remanufacture.  Representatives of
          the  rebuilding and  remanufacturing industry
          have  stated that  they are  comfortable with
          such  an approach and they do  not believe it
          would raise new  issues  for members  of this
          industry. [Emphasis added]"

     While r in  the context o£ the overall .discussions between EPA
and AERA, the  above statement may be correct,  it is  too broad a
description of  the  understanding between the two parties,  taken
out of context, it could be construed to mean that AERA will accept
any  controls  and  procedures  regardless  of their  complexity,
practicality or cost:.  This is not the case.

     AERA's  understanding is  that EPA  will propose procedures
relating to  the rebuilding  of  nonroad diesel  engines  which are
similar (if not identical) to those for onroad heavy duty engines.
If so, such procedures would be acceptable to AERA.  Both AERA and
EPA believe  that these procedures  will  not  result  in emissions1
degradation, and therefore meet EPA's desire to control emissions
for rebuilt engines.

     However, if EPA decides to adopt a different set of procedures
for  nonroad engine  rebuilding, AERA  would  have to review the
overall effect  of these procedures  on  the industry and its small,
business members before it could agree with them.  It is for this
reason that we believe that the draft, report language is too broad
and  should  not  be: accepted  as  representing  the  rebuilding
industry's position.

     Please feel free to call me if you have any questions.

                                   Very truly yours,
                                   Michael' J. Conlon
MJC/ks

ccs  Barry SoIta
     Tod Wysor, EPA
     Mike Smalsky, EPA

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To-  Stuart Miles-MeLeanu

Fai#:  202-260-5478

From:  Matthew Hall
Date:   Way 9,  1997

Pages: 7~       (Including cover sheet)
 COMMENTS:
           Please find attached the comments of  the Industrial
      Truck Association to.jtte^SaaU Business  Advocacy Review
            regarding the nonroad diesel Statement of Principles.
  NOTICE: Tha facsimile coottiw CONFIDENTIAL INFORMATION which is intended ONLY for the use of
  the individual or entity named above, V the reader of the facsimile is act the intended recipient or the employee
  or agent responsible for delivering it to the intended recipient, you ire hereby oa notice that you are ia
  possession of CONFIDENTIAL INFORMATION. Any dissemination, distribution or copying of this facsimile
  to strictly prohibited. If you have received this facsimile in error, please immediately notify the sender by
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  20036 via the U.S. Postal Service.

-------
                               COMMENTS OF THE


                       INDUSTRIAL TRUCK ASSOCIATION


                                      TO THE


        FEDERAL SMALL BUSINESS ADVOCACY REVIEW PANEL ON THE


         STATEMENT OF PRINCIPLES FOR NONROAD DIESEL ENGINES


	      _•	May 9,1997	._	.



       Pursuant to the April 24,1997 tetter from Thomas E. Kelly. Small Business Advocacy


Chair for the U.S. Environmental Protection Agency ("EPA"), the Industrial Truck Association


("ITA") respectfully submits these comments to the Small Business Advocacy Review Panel ("the


Panel") regarding the Statement of Principles for nonroad diesel engine emissions regulations


("SOP" or "nonroad diesel SOP"). IT A is the national, not-for-profit trade association that


represents the manufacturers of industrial trucks, primarily forklifts, and the suppliers of industrial


truck components and attachments. Industrial trucks are powered by either internal-combustion
                                                  • \

engines, including diesel engines, or by battery-driven electric motors, and are used in a variety of


indoor and outdoor workplace locations for material handling purposes.


       The SOP is an agreement among EPA, the California Air Resources Board, and engine


manufacturers to establish a blueprint for long-term regulation of nonroad diesel engine emissions.


Among other provisions, the SOP provides equipment manufacturers with certain "flexibility


allowances" that permit use of a limited number of pre-standard engines when a given standard or


"Tier", of emissions limits otherwise becomes effective. These allowances are intended to address


the fact that equipment manufacturers require significant lead time to accommodate new


emissions-controlled engines into their products. This concern is particularly acute for forklift


manufacturers, who must consider such design factors  as product compactness, stability, lifting

-------
 capacity, visibility, and maneuverability. Due to these complex considerations, a forklift


 manufacturer generally needs at least IS months after obtaining a new, durability-proven engine to
'                               .              r                               -  .

 perform the tasks necessary to put its product on the market.


       The SOP's flexibility allowances vary by equipment category. For equipment powered by


 engines SO horsepower ("hp") and larger, a manufacturer may use Tier 1 engines in 15% of its
                                                     \

 production in the first year Tier 2 standards are effective and in 5% of such equipment in each of


 the next six years. For equipment powered by engines less than 50 hp, the manufacturer may use


 pre-standard engines in 15% of its production in th&first year Tter.l standards are effective and in


 5% of such equipment in each of the next three years. Manufacturers of farm and logging


 equipment receive a special 30% allowance in the first year new emissions standards are effective


 and a 15% allowance in each of the next seven years.  Finally, small volume manufacturers may


 use pre-standard engines in up to 100 units of a single engine model.  -


       In response to EPA's January 2,1997 Supplemental Advanced Notice of Proposed


 rulemaking ("Supplemental ANPRM"), ITA's written comments expressed concern that the SOP


 approach did not adequately address engine availability and lead time issues and offered several


 suggestions for enhancing the SOP's flexibility allowances without sacrificing air quality benefits.


 IT A also participated in the Panel's May 2,1997 conference call to discuss the SOP's effect on


 small business and EPA's preliminary written assessment of possible modifications to the SOP's


 equipment flexibility plan. Based upon EPA's preliminary written assessment, as well as the


 conference cattrITA is encouraged that several of hs suggestions are under strong consideration


 for inclusion in EPA's forthcoming Notice of Proposed Rulemaking ("NPRM"). These comments


 highlight those flexibility measures that IT A considers most necessary for equipment


 manufacturers while at the same time remaining consistent with the SOP's air quality goals.

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A. EPA Should Permit Equipment Manufacturers to Use Allowance to Meet Individual Needs

       As currently structured, the SOP's 15%/5% allowance formula is unlikely to be of

meaningful assistance to many equipment manufacturers because there is no reason to believe that.

it will match their production schedules.  For example, if a manufacturer cannot timely obtain
           '                                        "•       '
certified engines in the first year a new standard takes effect for an important equipment model

that constitutes only 20% of its annual production, the SOP's approach offers no relief for that

model Similarly, a manufacturer that cannot timely obtain certified engines for two equipment

models, which together constitute 10% of its annual production, will face serious problems in the

second year when the allowance is capped at only 5%. Instances such as these would put the  .

equipment manufacturer; in the position of having to undertake costly, resource-intensive crash

programs in an attempt to accommodate new emissions-controlled engines, assuming that such
                               1   i         .                      '
engines are available in the first place.
                                                                                      . t
       To avoid such disruption to normal production cycles, ITA considers it essential to allow

equipment manufacturers to use their allowance as they see most appropriate, so long as the total

allowance for the entire flexibility period is not exceeded. Equipment manufacturers could then

use their allowances to conform with their production schedules, rather than attempting to fit their

most challenging models into a pre-set allowance percentage.  EPA's preliminary assessment

supports ITA's suggested option, stating that it "allows OEM's to tailor implementation to their

product design rollout plan" and "maximizes availability of all exemption allowances."

Furthermore, although EPA's preliminary assessment noted that this option might cause a small

loss to environmental benefits, EPA acknowledged during the May 2 conference call that it does

not pose any long-term costs to air quality.  Given the significant benefits and the absence of any

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long-term environmental costs, this option deserves the Panel's recommendation for inclusion in




EP A's forthcoming NPRM.              .



B. Flexibility Allowances for Equipment Less Than SO hp Should be Coextensive With Those for


    Larger Equipment



        Another aspect of the SOP's equipment flexibility program of particular concern to IT A is




the disparate treatment of .equipment using engines below SO hp and that of equipment powered
                                                                                      i



by engines SO hp and above. Whereas 50 hp-and-larger equipment receive a 45% flexibility



 allowance over seven years, equipment using the smaller engines receive only a 30% allowance
                                           s


 over four years. This disparity is certainly counterintuitive, considering that Tier 1 regulations for



 engines 25-50 hp take effect in 1999, two years earlier than Tier 2 regulations apply to any



 category of SO hp-and-above engines,1 and that, on a per unit basis, the total emissions of a small




 engine are inherently less than those of a larger engine if other factors are equal.  Moreover,




 equipment using smaller engines often have significant size limitations and compactness



  requirements, and thus present greater redesign challenges than larger equipment.  Each of these



  factors suggests that the flexibility allowances for under 50 hp equipment should at least be




  coextensive with those of SO hp and larger units.



         For these reasons, ITA concurs with EPA's preliminary written determination that equal




   flexibility allowances for equipment using engines less than SO hp and equipment using engines SO



   hp and above win provide a consistent flexibility system and give additional flexibility to



   equipment manufacturers that will be using engines with near-term regulatory effective dates, with




   little, if any, loss in environmental benefits.
    1       As indicated above, the 1999 effective date means that forklift manufacturers need 10 obtain certified

    engines now in order to incorporate iVtcm into their products without disruption to normal production.

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C.  Reallocate Specif Allowance for Farm and Logging Eguiom&nt


       ITA continues to believe that reallocating the special 30%/15% eight-year allowance for


farm and logging equipment across all equipment categories would provide significant benefits to


the majority of equipment manufacturers. It would also avoid a host of problems associated with


developing and applying a fair and accurate definition of farm and logging equipment.


Accordingly, ITA hopes that its suggested modification will receive a second look.


       According to EPA's preliminary written analysis, the principal objections to this concept


are that it would (i) reduce flexibility for farm and logging equipment manufacturers, and (ii)   .


cause .some environmental loss. It was suggested during the May 2 conference call that the


special allowance for farm and logging equipment also was necessitated by small volume


concerns. In IT A's view, these assertions do not outweigh the benefit to numerous equipment


manufacturers that would result from such a reallocation.  While it is true that reaHocation would


reduce the allowances of farm and logging equipment manufacturers from what the SOP


proposes, this modification would still improve upon the current regulatory situation of no


flexibility and would distribute a new benefit more fairly. Moreover, given the effects of ozone


transport and the fact that that some farm and logging equipment is used in nonattamment areas,


any prediction that the suggested modification would reduce environmental benefits is speculative.


As for small volume concerns, these issues may be addressed by the SOP's small volume


allowance.


       For all these reasons, ITA requests that the Panel give serious consideration to the


concept of reallocating the special farm and logging allowance across the entire equipment


manufacturing sector.  This measure's potential benefit to small business should not be
                               i               '                 '                 .     .

overlooked.

-------
D.  Hardship Relief



       ITA remains concerned that, even with its suggested modifications, situations will arise



where an equipment manufacturer, through no fault of its own, has been unable to timely obtain



certified engines for one or more equipment models whose annual production percentages exceed



the manufacturer's available allowance. In such instances, a mechanism should be available for



the equipment manufacturer to petition for hardship relief in order to avoid disruption to its



operations.,



       As discussed during the May 2 conference call, support for some form of hardship relief is



widespread among regulated equipment manufacturers. Notably, EPA staff did not voice any



special concern that environmental losses would result from hardship relief but instead indicated a



willingness to consider such a program, if objective criteria could be developed to assess whether



a manufacturer qualified for hardship relief.  ITA is encouraged by EPA's open-minded approach,



and looks forward to continuing discussions on this topic.
       ITA appreciates this opportunity to provide its comments to the Smalt Business Advocacy



Review Panel regarding the equipment flexibility provisions of the nbnroad diesel SOP. As



discussed herein and in comments on EPA's Supplemental ANPRM, ITA's suggested



modifications would significantly improve the effectiveness of the SOP's equipment flexibility



provisions without causing detriment to air quality. Consequently, ITA's suggestions deserve the



Panel's endorsement and should be included in EPA's forthcoming NPRM for nonroad diesel



engine emissions regulations.

-------
TELEPHONE:
(919) 823-4151
           February 3, 1997
PAX NO.
(919) I23-4S7*
           Mr. Donald Kopinski
           Office of Mobile Sources
           EPA Motor Vehicle Emission Laboratory
           2565 Plymouth Road
           Ann Arbor, MI 48105                           tt.

           Public Docket A-96-40                           .     ,
           Waterside Mall  Room Ml500     	
           U.S. EPA
           40lM.Sireet,S.W.
           Washington, DC 20460                                            •  \     "   ''

                    Re: EPA Supplemental Advance Notice of Proposed Rulemaking, Control of Emissions of Air
                       Pollution from Nonroad Diesel Engines (refc Federal Register, Volume 62, No* I January 2,
                       1997)

           We would like to preface this letter by stating Long Mfg. N. C. Inc. is in support of me comments
           submitted by the Equipment Manufacturers Institute (EMI) on February 3,1997, however, we feel more
           flexibility of implementation is warranted, specifically as it applies to small business and smaller diesel and
           agricultural engines (less than 65 tup.).         ,

           Long Manufacturing N.C., Inc. located in Tarboro, N.C. Is a manufacturer of agricultural and related
           equipment We also distribute several models of tractors (28-64 h.p.) whose drivelines (engines, etc.) are
           manufactured overseas. We also qualify as t small business under the guidelines set forth in the Standard
           Industrial Classifications System ("SICT). Following are our comments relating to the proposed nonroad
           diesel emission regulations.

             -While we all recognize and agree cleaner air is a must, not only in the U.S. but worldwide, it should
             also be recognized mat contribution levels to the emissions problem varies with engine horsepower,
              engine manufacturer, engine application, type of fuel and hours of use. We should also recognize that
              there are other maior contributors of problem emissions. i.e.
                    I)   Coal and oil fired electric generators (utilities)
                    2)   Marine applications
                    3)   Locomotive applications
                    4)   Mining applications
                    5)  ~AViation applications
                    6)  .Third world emissions

           We are concerned about several issues in the formulation of this proposed nilemaking: i) validity of the
           fact base from which EPA is making its determination of pollution and contributor levels, ii) fact base on
           which EPA is determining the impact on small business, iii) no final harmonization with Europeans
           standards,  iv) the target group of this regulation and v) compliance determination and record keeping
           requirements.  Following is a comment regarding each of these concerns.
      LONG MFG. N.C. INC. /P. 0. BOX 1139 / 111 FAIR VIEW STREET / TARBORO, N.C. 27886 / U.S.A.

-------
    4)   Passing this magnitude of cost increase along to a customer will potentially devastate sales of these
        units, not oniy for the manufacturers but for the dealers and distributors as well.
    5)   We can not begin to estimate compliance and record keeping cost strictly because we don't know.
        what is going to be required.
    6)   More time is needed to analyze and evaluate.    .                       '
    7)   The only alternatives or suggestions we can offer to this proposed regulation are:
           •provisions for appeal or petition process on a case by. case basis          ,   •
           •target high emission / high usage machines • evaluate on a cost / emission benefit basis  '
           •specific exemptions for certain applications / horsepower ranges
           •government funding in fornrof tax credits
           -^uick closure on European harmonization.                   •
           -conduct a study od the impact on small business.  •                               '
Respectfully submitted,

LONG MFC. N.C.. INC.
Alton R Cobb, Jr.
Vice President & C.F.O.

-------
                                     Engines A Generators
              '              •            •                            29'January- iv^'
 Public Docket A-96-40                                                      '         .
 Room M-l 500                                              ,
 Waterside Mall                                          _
 U S  Environmental Protection Agency
•401 M Street, S.W                    ,   .  '                -
 Washington, DC. 20460

 Subject: Comments on SANPRM of Control of Emissions of Air Pollution From Nonroad Diesel
 Engines.

 These comments are in response to the Supplemental Advanced Notice of Proposed Rule Making
 (SANPRM) of Control of Emissions of Air Pollution From Nonroad Diesel Engines, and in
 response to the meeting EPA had with industry ott January 17,1997 in Chicago.

 Westerbeke Corporation (Westerbeke) is a small manufacturer of marine engines, approximately
 80 employees total. Westerbeke produces approximately 4000 engines a year, about 2000 of
 which are diesd.  The majority of our production is in the 8 to 10 kilowatt range. Westerbeke's
 small quantity of small engines contribute very little to air pollution as compared with a large
 engine or equipment manufacturer.  Our engines are used primarily on sailboats and are operated
 only a few hundred hours a year, opposed to other equipment which is used year round.

 Based on our experience with the implementation of the California Air Resources Board's
 (CARB) Utility and Lawn and Garden Equipment (ULGE) Exhaust Emission Standards, original
. equipment manufacturers (OEMs) did not receive certified engines from their engine
 manufacturers until either a few weeks before or after the regulations became effective, the
 OEM either had period of time in which they could not ship product or they had to  scramble to
 redesign their product due to changes to the engine.  Westerbeke's experience was that our
 engine suppliers did not deliver certified engines until alter the regulations took effect. We had to
 certify some of our engine suppliers' engines because our engine supplier could'not deliver
 certified engines to us on time. Ehher way Westerbeke was at the mercy of it engine suppliers
 and our livelihood was threatened.

 The percent of sales technique does not provide sufficient relief to OEMs from their engine
 suppliers.. Westerbeke's products, much like other OEMs, are specifically designed around a
 specific engine.  Therefore, if one of our engine suppliers cannot supply a certified engine to us
 with sufficient lead time Westerbeke will be forced to stop production, and suffer incredible
 losses. Substituting another engine supplier's engine in the place of the uncertified  engine is
 infeasible because many thousands hours of engineering are required to design a product around
 an engine.   The parts from one product are not interchangeable with another engine from a
 different supplier because the original pans were designed specifically for the original engine.
 OEMs need more protection from their engine suppliers.
 epa9702.doc       .                                        '               Page I. of 2


                    *vON INDUSTRIAL ?*«« AVON. MA 02322 U S * • TEC .5061 386-"Op *f*« 
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 It is from these experiences that Westerbeke proposes thai OEMs be given a one year allowance
 to produce equipment with non-certified engines.  This additional year will give OEMs time to
 perform any necessary redesigning of their product as dictated by.the changes to the engine, and i
 will give the OEMs time to certify their product with other governing agencies throughout the
 world or to redesign components of their products as dictated by the changes to the engine.
 Allowing more time is a way to provide OEMs relief from their engine suppliers' timetable, and
 will reduce the possibility of OEMs being unable to ship production because they lack certified
 engines from their engine supplier.
                                     *                                      '    (
 Small manufacturers need more-time to get their product line to conform with the regulations.
 Small manufacturers do not have the resources, both financially and manpower, to ensure that all
 of their product line complies within the proposed timeline. Westerbeke proposes that small
 businesses be given an additional two years before their product line has to comply with the
 regulations. The extra two yean wifl allow the rnanuracturer to bring their product line into
 compliance on a time schedule that will not penalize the aiam&cturer for not having the finances
 and die manpower of a large manuftcturer. Westerbeke proposes to use the definition of a smalt
        as defined in the Size Standards by SIC industry as published in the Federal Register
3 289 on January 31, 1996.

If OEMs and small manufacturers are not given this time allowance their welfare will be severely
threatened;. These allowances prevent OEMs from being at the mercy of their engine suppliers for
a delivery of certified engines with a sufficiently lead time to prevent any production problems.
The time allowances, also, allow small manufacturers the necessary lead time to produce
compliant products without jeopardizing their business because of a lack of financial resources
and manpower.
                                                           "v-
Sincerely,
Westerbeke Corporation
Jeffrey L, Ng
Mechanical Engineer
 epa9702.doc
Page 2 of 2

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                                     J Engines A Generators        28 February 1997
  Mr. Tad Wysor
  Ms. Sheri Dunatchik
  United States Environmental Protection Agency
  National Vehicle and Fuel Emissions Laboratory
  2565 Plymouth Road                                                                .
  Ann Arbor, MI 48105

 *Subject:C«imwtoonLett«DattrfFebn;^19,1997       •  ^"-  '•'":  «*:;           -

  Dear Mr. Wysor and Ms. DunatebJk:

  Westerbeke Corporation (Westerbeke) appreciates the opporturaty to comment on the new
  regulations you are formulating for the marme diesd mdustry. Tnis industry has several small
  manufacturers and inarimzers that will be affected by this raw regulation.  The EPA must be
  sensitive to how its regulations wiB unpact small entities, otherwise several companies will be
  forced out of business. The EPA must build m small entity relief to protect these business, all the
  while protecting the environment to the best of its ability.

  Westerbeke feds that EPA has summarized many of the problems that small companies wfll
  encounter whh exhaust emissions regulations for marine diesel engines. Westerbeke would fike to
  comment on how the new regulations would unpact us and how EPA can provide the proper
  relief to small manufacturers and inarinteers, so that compliance wifl not have as a dtsproportional
  impact and effect on the industry.

  Westerbeke is a small manu&crurer of marine engines, apprc«n3ately 80 employees total.
  Westerbeke produces approximately 4000 engines a year, about 2000 of which are dieseL  Asa
  small entity who has two years of experience with cenification and compliance with EPA and
  CARB, Westerbeke believes that h has valuable insight on how this new rule wfll potomaSy
  impact such companies.

  The first area of concern that Westerbeke has is the disproportiorial cost tb^ is mfficted on small
  entities by mis new rule. The amount of money that small entities must spend to comply with the
  EPA's regulations is amuch greater percentage of their total sales than larger companies.
  Westerbeke has spent an avenge of 2.5% of its revenue Over the past two years oo certifying
  engines and compliance tasks. This number is outrageously high, and Westerbeke cannot
  continue spending at this rate. Large manufacturers and maririzen can absorb these high costs
  easier because the costs are a much smaller percentage of sales and they can spread the cost of
  compliance over a greater number of units and products. The large entities may have a greater
  number of ramifies,  but the big ticket items, such as dynamometers and gaa analyzers, are the
  same for everyone.            "

  One way to provide small manufacturers relief from these costs is to increase the time between the
  tiers. This will allow all manufacturers, both large  and small, to earn back the money they
  invested in achieving the Tier I standards and to earn money to invest in the engineering of Tier II

  epa9703.doc                                                           Pagel of 3

  WHSTERBEKE CORPOAXnON. AVON MOUSTMUU. PAW. AVON. MA 00322 US.A. • TH. $M) M4-TWO • FAX: (M«) SM4VD • CAM; WISTCORP

„                   '   '                    '    508  559 33Z3         '03-03-9T 08:19AM  ?

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      standards. If the time period between the tiers is too short and manufacturers cannot make back
      the money they spent in achieving the Tier I standards, there will be no way for manufacturers to
      have the money to spend to achieve Tier H standards. Presently in the Nonroad CI SOP h is
      proposed that there be a four year, gap between tier levels.  This is not enough time. A period of
      six years between tier levels will give manufacturers, but most importantly small manufacturers,
      the necessary time to earn back the money they have invested in achieving Tier I standards and
      enough time to make a profit on its investment.

      In the marine industry h is almost impossible to eoflducttrK^oroHaetestmgofeagm(other
      thaac«tboflnfaaadpersoflal^erenft)fbremiasio&i. Marine engines are typically buried deep
      within a boat It requro a vut aiDourt of mooejy, one, aad la^
      boat  TTwtypcal cost rfreniovii^ and reinstalling in engro
      easily accessible engine and it does not include other costs, such as shipping and testing. No
      owner would allow this to be done to his boat just to conduct an in-use emissions test on an
      engine. The ability to recall an engine from the field or to obtain an engine from the field fbrin-
      use testing will not be economical and maaufecturen-an gomgjo-fcave a very difficult time
      locating customers who will be willing to allow their engines to be mnoVed from their boat

      Based on our experience with the implementation of the CARB's Utility and Lawn and Garden
      Equipment (ULGE) Exhaust Emission Standards, original equipment manufacturers (OEMs) did
      not receive certified engines from their engine manufacturers untaehlier a few weeks before or
      after the regulations became effective. The OEMs either had a period of time in which they could
      not ship product or they had to scramble to redesign their product due to changes to the engine.
      Westerbeke's experience was mat our engine suppliers did not deliver certified engines until after
      the regulations took effect. We had to certify some of our engine suppliers' engines because our
      engine supplier could not deliver certified engines to us on time. Either way Westerbeke was at
      the mercy of its engine suppliers and our livelihood was threatened.

      The percent of sales technique does not provide fnfficimt relief to OEMs from their engine
      suppliers. Westerbeke's products, much like other OEMs, are custom designed around a specific
      engine. Therefore, if one of crtff engine supptienomnttsup^
      sufficient lead time Westerbeke will be forced to stop production, art suffe incredible losses.
      Substituting another engine supplier's engine in the place of the uncertified engine is infeasfole
      because many thousands hours of engineering are required to design a product around an engine.
      The parts from one product an not interchangeable with another engine from a different supplier
      because the original pans were designed specifically for the original engine.  OEMs need mote
      protection from their engine suppliers.
      It is from these e
:es that Westerbeke proposes that OEMs be given a one year allowance
      to produce equipment with non-certified engines. This additional year will give OEMs time to
      perform any necessary redesigning of their product as dictated by the changes to the engine, and it
      will give the OEMs time to certify their product with other governing agencies throughout the
      world or to redesign components of their products as dictated by the changes to the engine.
      Allowing more time is a way to provide OEMs relief from their engine suppliers' timetable, and
      epa9703.doc
                                                Page2of3
R-997S
                                                    509  559 9323
                                                                          03-03-97 Ofl:19AM   ?---

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  \viii reduce -the possibility of OEMs being unable to ship production because they lack certified
  engines from their engine supplier:

  Small manufacturers need more tune to get their product line to conform with the regulations.
  Small manufacturers do not have the resources, both financially and manpower, to ensure that all
  of their product lint complies within the proposed timeline.  Westerbeke proposes that
 businesses be given as additional two yean before their product line has to comply with the
 regulation*.  The extra two yean wifl allow the mamftctimr to bring th«r pmAi^ HiVft tap
 compliance on a time schedule that wQI not penalize the manufacturer for not having the finances
 and the manprwer of a Urge manufacturer. Westerteto proposes to use ttedefim^on of a small
 business as defined in the Size Standards by SIC Industry at published m the Federal Register
 3239 on January 31. 1996.

 If OEMs and small mam ifhcniren are Mrtgrventiastm^
 threatened. These allowances prevent OEMs from being at the mercy of their engine supptien for
 addivctyofcertniedengrnerwrthasuffiaewlylead
 The time allowances, also, allow small manufacturers the necessary lead time to produos
 compliant products without jeopardizing their business because of alack of financial resources
 and manpower.

 Due to small entities lack of resources, both in manpower and is finances, they should be exempt
 from recalls,  in-use testing; and production line testing.  Small entities can only afford to puichase
 the necessary equipment for one emissions test cell.  This means that at any given moment the test
 cell is being used for either product development or official emission testing. It is too expensive
 and time consuming to break down a product development project in a test cell to set up and
 conduct an emissions test, whether it is for production tiitetestmg, or m^ise testing. To force
 small entities to perform these tests would increase the time ta market of mm pmd»en and
 significantly increase the costs of compliance. While the test cell is used for compliance testing,
 time is lost to product development slowing the progress to market of cleaner engines.  This time
 lost will be very significant during the time period between tiers, and k will give the large
 companies in the industry an unfair advantage in the marketplace.

 The small entity relief Westerbeke has proposed will greatly aid small manufacturers in their
 ability to produce cleaner engines sooner without constantly fighting just to stay in business.
 Westerbeke looks forward to working with EPA on developing a marine rule that wifl meet the
 environments needs, while providing the necessary exemptions and allowances thai will not
 threaten the livelihood of the small entities in the industry.

 Sincerely,
 Westerbeke Corporation                                                          .
 refircyL.Ng
 Mechanical Engineer


.epa9703.doc          .                                             N  Page3 of 3
                                                 •  "                              TOTAL. F?. 83
                                             503 559  9323          03-03-97 08:19AM

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     Fax:         97K-0053
     # of Pages:   1 of 1
     To:         U.S. FPA
     Attn:        Shell Dunatchik
     From:       Dick Gee
     Date:        21 February, 1997
     Re:         Your letter of 19-Fcb-97
     1)    Thank you for allowing us an opportunity to comment.

     2)    We agree with all the comments on page 3 of your letter, except the
           one about "segmenting the non-road market*. This may cause much
           confusion and bickering about which segment and particular machine
           lain.

     2.1)   We believe the new regulations should be;
           a)     Fair to all those regulated by it    >
           b)     Ciearlv written in plane English without "gray" areas
                 which could be 'subject to interpretation".
           c)     A single rule with broad coverage not individual specific
                 rules for many markets or product segments,

     3)    We do believe that small business should be given some consideration
           with regard to:
           a)     reporting
           b)     certification process         .

     4)    We believeiit is possible to use the engine maker's certificate of
           compliance as our own providing we can demonstrate mat we
           have not altered the performance or combustion perimeters.

     4,1)   If the above can be accepted by BPA the small marinizer could
           reduce the cost impact of emission regulations,
                              4
     Best regards,	
     Dick Gee
                             Alosko Dt«s*l Electric, Inc.
Xi Ull i Av«. NW - P.O. ton 705*3 • **nWn WA 98107^543 • Tel: (206) 769-3880 • Fox; (206) 782-5455 • Tfc 32-0145
      I
                                              782 5455
                                                               02-21-97 07:Q2PM  P.-:;

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                  Collier, Shannon, Rifl & Scott, PLLC
                                  Attorneys- at- LAV
                               3050 K Street, X.W.
                                     Suite 400
                             Washington, D.C.  20007
                                                                        10 Bomck Street
                                    (202) 342-8158

                                   January 13, 1997
Mr. Don Kophiib
NOTffOed EnfffiC PTOffa01 Manager
U.S. Efwtroomental Protection Agency
2565 Plymouth Road
Ann Arbor, MI  41105
             Res
DMT Dan:
      On behalf of the Outdoor Power Equipment Institute ("OPEI'X I am writing to outline several
issue* tint we would Ukt EPA to addnei it next week's meX4)  The only limifrion on this provision is that
                                                                   un-i

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Mr. Den Kopuiski
January 13, 1997
Pag* 2
                                                            Collier, Shannon, Rill
                                  3COCI, ?LLC
engines manufactured prior to the rule's effective date against aa equipment manufacturer's limit that no
more than 15% of his annual production contain uncertified  engines. Without such clarification, die
"percent of sales" exemption could act as an added rtstriction on equipment manufacturer's ability to use
inventoried, uncertified enginei instead of providing the intended regulatory flexibility.  To address this
problem, EPA should clarify mat (1) equipment nwnuftctureri are not subject to any separate effective
dace or limitation with regard to the use of enginei manufactured prior to the rate's effective date; and
(2) uncertified engines produced prior to the rule's effective date are not subject to regulation and will not
be included or counted under any "percent of sales" exemption.

       The second isswihBt OPQ would like EPA to address is whether equipment manufacturers will
be provided the same type of regulatory flexibilities provided under the Tier I program (for less than SOhp
diesel engines) when the Tier H regulation become effective in 2004, or 2005. Under the SOP, it appears
that the "percent of sales" exemption could only apply when these Tier I regulations become effective in
1999, or the  year  2000.  It is even more critical that EPA provide regulatory relief to equipment
manufacturers when  implementing die Tier II standards which wiD likely cause a  more dramatic
transformation in the costs  and design of diesd engine models than.will the Tier I standards.

       The third issue that OPEI would like EPA to address 'is hew any compliance demonstration
associated with the  "percent of sales" exemption will be implemented. An equipment manufacturer, that
is not  otherwise subject to regulation, will be reluctant to claim aa exemption that triggers onerous
aanunastfative burdens and  potential liabilities.  Conscqaentiy. any compliance demonstttion associated
with the "percent of sales* exemption must be sample to implement with mi
equipment i
                         burdens  on the
       The fourth issue that OPEL would like EPA to address is whether mere will be an adequate supply
of older design, uncertified engines so that an equipment matniracturcr will actually  benefit from the
proposed "pcmotcfsato* approach, This concern is based on the fact that an engine manufacturer will
typically hive to  decide whether to continue to produce an older design engine model in advance of
receiving any specHfe orden from ha equipment customers.  Toe teed time considentions of ihe engi&e
manufacturer could preclude that manufacturer from  taking die substantial riak associated with the
contmuedprodvictinafaattoklvdeeianamtun^                     This riak is based on die fact
that, under the SOP, the lepl ability of Ihe engine manunicixnw » conthiun to pn^uce swch older design
engines after the ruie's eflacttvi dast is entirely dependent on i proposed exemption that is based on bis
customer's production plans. Engine maaufacturm will probably be very reluctant to continue to make
oldei design, uncertified eagjnea because of the substantial risk that those engines could be rendered
        •Ufa* •*< «gntp»~^ mSiVltaff"""* """"» •ttnekpita" uneflftified COttiflea. Id.  U is OUT
        undemanding that EPA appropriately inlands to include similar provisions in the Phase
        !1 regulations that will  implement the diesel engine SOP.
        We .have requested tnput  from OPEI members on  how  ftjr m advance equipment
        manufacturers typically place a diesd engine order as well la how far in advance an
        engine manu&ctunr must decide whether or not to continue to produce a specific engine
        model.                                          .
          o>:to 'o
sosms mmoo

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                                                         Collier, Shannon, RUl Sc 5coo,
Mr. Don Kopinila
January 13, 1997
Page 3


unsalable if then at inadequate orders for exempt engines by his equipment manufacturing customers.
Moreover, because the proposed exemption is based on the "percent of sale" of equipment, not engines,
it would be virtually impossible for an engine manufacturer to predict with any precision how many older
design engines he could legally produce under Che equipment-based exemption.
       The fifth issue OPE would like for EPA to address is identifying alternative exemption* or
regulatory flexibilities such as: ( 1 ) allowing engine raamifacuiren. under the avenge banking and trading
program, to  ran  a credit defeat m at lejHT ft* <*••• y*^.*** a new standard become* effective;
(2) r«~m*g -Mttonal fleadbilhka in tarns of reduced noocompliance """"Mri "*<*> craattag additional
equipment-based exanptioni. particularly far engines used to power certain typea of products (such a»
commercial turf cam equipment) mat represent only a very small portion of EPA's inventory analysis and
which an typically nuouBCtund by small businesses/

       OPH looks fcrwmrd to working with die Agency to meet the obligations imposed under the Small
Business Regulatory Enforcement Fairness Act ("SBREF A") and to implement the regulatory flexibilities
set forth in the SOP.
         j        •      •?•
       Please call us if you have any questions.

                                         Sincerely,
                                         WILLIAM M. GUERRY, OL
                                         JEFFREY S. LONGSWORTH
 WMG JSL/mdl

 cc:     Derniia C. Dbi.
        TadWyaw
        Bryan Mammg
        la the meant final raiemaking on marine engine emistioni, EPA's concern ferjmall
        bosmess impacts eventually led the agency to decide not to regulate one major category
        of engmee (slam drive/in board engines) and to create flexible testing and administrative
t/>  -i    ows                                  "HOMES "niuoo

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               Collier, Sliaunon, Rill & Scott,
                              Attomeys-at-Law
                            3050 K Street, N.W.
                                  Suite 400 .
                          Washington, DC

                               Tel: CWB) 842-8400
                                                       10 Bunck Svmtt
                                                          Uvclia
                                                   Sydney, NSW 8000, Anneal**
                                  (202) 342-8858

                                 February 3,1997
Docket Clerk            .    .^^
U.S. Environmental Protection Agency
RoomM-1500
Waterside Mall
401 M Street, S.W.
Washington, D.C. 20460
ii .
                    Pin III i iVTfi 11TT IftnT - ^"""1 M™' Fmrt" K«"M™
 Dear Sir/Madam:
                                                    '
        The Outdoor Power Equipment Institute ("OPE1") submits these comments in response
 to the Supplemental Advance Notice of Proposed Rulemaking ("SANPR") to control emissions
 of air pollution from oonzoad diesei engines.  62 Fed. Reg. 200 (January 2,1997).  OPEI is the
 national  trade association mat represents the manufacturers of outdoor power  equipment,
  including lawnmowers, riding mowers, and larger commercial turf care equipment  OPEI
  members use dieaei engines (typically less than SOhp) tn power commercial turf care equipment
  that is used to manage golf courses, parks, grass corridors adjacent to highways, 'and other
  commercial applications. These OPEI members include many "small businesses."

         OPEI  members mat rely on diesei engines will be adversely impacted by the nooroad
  diesei engine" regulations in the following respects.  First, the regulations will result in OPEI
  members having to purchase more expensive, certified diesei engines. Second, certain older
  design  engine  models,  on which OPEI members depend, likely will  be eliminated from
   production.  Third, equipment manufacturers will have to incur significant additional costs
   tetooliag existing equipment models to accommodate the new certified engine configurations.
    For example, equipment manufacturers may have to  add heat shields or baffles to reduce the
    increased exhaust heat from the  new certified engines.  It is critical that the final  regulation*

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                                                       Collier, Sliannon. Rill & Scon.
U S. Environmental Protection Agency
February 5. 1997              '     .
Paac I
                                                          nett
        Under the SOP. engine* less than 25 horsepower ("bp") will become subject to Tier 1
  standards in 2000 and to more stringent Tier 2 standards in 2005. Engines between 25hp and
  SOhp will become subject to Tier 1 standards in 1999 and Tier 2  standards in 2004.

        Under an existing Phase  I rule, engines greater than SOhp are already subject to Tier I
  standards. The SOP establishes  a staggered timefrarne under which different categories of the
  above-50hp engines become subject to Tier 2 and ultimately to Tier 3 standards. These emission
  standards are appropriately based solely on die date- an engine is manufactured.  Equipment
  manufacturers can continue to use up existing inventories of uncertified engines manufactured
  prior to the rule's effective date as long as there is no stockpiling of engines.

         The  SOP contains several equipment-based flexibility provisions. The first flexibility
   approach is referred to as the "percehfrof-sales" or the "production allowance" approach.  Under
   this approach, each original equipment manufacturer ("OEM") can continue to use (and an engine
   manufacturer can continue to produce) older design, uncertified engines after the effective date
   of the rule as long as the use of non
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                                                        Collier, Shannon. Rill &, Scott,
U.S. Environmental Protection Agency
February 3.
Page 3
applied by a conpany to more than one equipment product line, as long as the total number of
units in all product lines subject to the exemption does not exceed 100 .units.
                                     COMMENTS
COUNTED ACAJNST
                                           MAUFACTURER'S  PHO
                     tOQStP
       The nonroad diesel engine SOP specifically states that:

             Homing set form above [in the SOP's flexibility provisions] would
             change die rules established in the Tier 1 standards which allow •
             equipment manufacturers to use up existing stocks of noncomplying
             engines at the time a new standard takes effect

See Section  5. a. of the Nonroad Diesel SOP,  62  Fed.  Reg. at 207; stt also, 40 C.F.R.
§ S9.1003(bX4)  that clarifies that the existing Phase i, oonroad-diesel engine regulations only
apply to engines, and not to equipment, Manufactured after a standard's effective date.

       OPEI strongly supports the Agency's continued recognition mat emission standards should.
only apply to engines manufactured after that standard's effective date.  Obviously, a substantial
portion of older  design or uncertified engines manufactured just prior to an applicable effective
date will not be incorporated into equipment until several months (and in certain exceptional
cases even a y«ar) after that engine is produced.  Fairness demands that these older design or
uncertified engines (that equipment manufacturers have  purchased at considerable  expense)
proceed unrestricted through normal inventory and distribution processes,

       The proposed regulatory flexibilities should incorporate mis same principle. EPA should
recognize explicitly that uncertified or older design engines manufactured prior to the effective
date  of aa applicable emission standard do not count against an equipment manufacturer' s
production, allowances under the proposed flexibility provisions, including the exemption for
equipment model lines  with leas than  100  units per year.   If EPA counted older design,
inventoried engines in this allowance calculation, it would moot any benefit associated with the
intended flexibilities. This is because an equipment manufacturer could "use up" its production
allowance within (he first few months after a standard's effective date merely by incorporating
inventoried engines it bad already purchased.
                                             2222S34400
                                                             02-04-9.1  02

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                                                         Gollier, Shannon. Rill & Scott. ?•_:
•Lf.S. Environmental Protection Ageacy
Ftbnar/  3, 1997
Page. 4
 n.
      '  The SOP provides only for the creation of equipment-based regulatory flexibilities after
 the effective date of the next group of emission standards, but not after the subsequent, and more
 stringent final  emission  standards.  With regard to engines greater than SOhp, the proposed
 regulatory flexibilities only allows a limited percent of Tier 1 certified engine to be used by an
 equipment manufacturer after the Tier 2 standards become effective, but apparently would not
 allow  any Tier 2 certified engine  to be used after the more stringent Tier 3 standards become

 effective.
         Similarly,  with regard to engines  less than SOhp,  the SOP only allows equipment
 manufacturers to use a limited percent of unregulated engines after the Tier I standards become
  effective, but apparently would fail to provide any flexibility after the Tier 2 standards become
  effective.  It is critical that EPA provide regulatory flexibilities to equipment manufactures to
  ease the transition associated with (he Tier 2 standards (for below SOhp engines). This is because
  the Tier 2 standards will likely cause even a more dramatic transformation in both the cost and
  design of diesel engines than will the Tier 1 standards.  Consequently, EPA should allow an
  equipment manufacturer to use a certain portion of Tier 1 certified engines (less than SOhp} after
  the Tier 2 standards becomes effective.  (One possible means of solving this problem is set forth
  in the following section.)

          EPA should also apply the regulatory flexibility  for equipment models with  an annual
   production of 100 pieces or less in horn the next group of emission standards as well as the
   subsequent and final group of more stringent emission standards.

   m.
                              YT.A1
effective
The
iln
                                                    flodbility of an
                                                                                          to
                                                                     needs.  For example, an
                                                                          02-04-9

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                  '                        Collier, Shannon, Rill & Scott,

U.S. Environmental Protection Agency                         ,
February 3, 1997               .   '                       ,
Page 5                  .              '


allowances.  For example, the SOP grants equipment manufacturers using above 50hp engines
with a total 45 pcrcem of production allowance (15V» +• 5% x 6). A percent allowance based on
a total "lump sum" of 45 percent of production would provide additional flexibility with ao
adverse impact on total emission levels.  To the extent aa equipment manufacturer used its
allowances in '"•~ "—* "•**** than earlier yeaxs of the program, the environment would actually
receive more •                                                   	""
 of the Tier
 IV.
      The  SOP should apply the same regulatory  flexibilities  granted to  equipment
 manufacturers using 'larger engines" (greater than SOhp) to similarly situated equipment
 manufacturers using "smaller engines*  (less than SOhp).  The SOP discriminates against
 equipment manufacturers using engines less than SOhp in the following respects: (I) equipment
 manufacturers using the smaller engines' only are provided with the production allowances for a
 total of four years, rather than the seven yean proposed for equipment manufacturers using the
 larger engines; and (2) a delay of the effective date for die Tier 2 .standards for the smaller
  engines does not result in a continuation of the flexibilities (as is the case with the Tier 3
  standards applicable to the larger engines).

       EP A's unfair aUocafi'on of fle^bUityaltowances appears aibrtrar^           Because
        less than SOhp engines have not been, previously regulated, equipment manufacturers that
                will suffer an even greater and more dramatic advene impact' At the very
                                  "   "u——— 1—« *v«« 
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Collier. Shannon, Rill & Scott,
                                                                                                ?uc
          U.S. Environmental Protection Agency
          Februarys, 199?
          Page 6
          EPA has projected for those provision*. OPEI also understands that EPA based its total "leakage"
          estimates in the SOP on "worst case" scenarios (U., ail engines less.than SOhp have 49hp and
          all engines SOhp to lOOhp have 99hp).  Thus, the emission limits on maximizing regulatory
          flexibilities should be baaed on EPA's "worst case" projection, which establish, the caps on
          "leakages" or emission'
                Consequently, an OEM ought to be able to calculate its production allowances based on
          the same wont case scenarios to determine total horsepower credits. The OEM could then apply
          these horsepower credits to any of its engines. For example, assume a 45 percent lump sum
          allowance applied to a total annual production of 200 pieces of equipment using engines ranging
          between 2Shp and SOhp. Under this hypothetical, the equipment manufactorer would be eligible
          for a total allowance of 4410hp credits (45% x 200 units x 49hp). The equipment manufacturer
          could then apply those horsepower-based credits in the most efficient way possible acnm its
          product line with engines of varying horsepowers. This approach would not only more closely
          align with EPA's "leakage* caps, but it would reflect the fact that smaller horsepower
          emit less pollution than larger horsepower engines.               .

          VI.    ANY COMfUAHCK PlMONSTEATlON ASSOCIATE!* Wmi  TTO
                              AuiywANCT Mugr  BK  SIMPLE  TO iMFyflujfr WITH  MINIMUM
                         '*
                An equipment mnnnfaauter that is not otherwise subject to regulation will be extremely
          reluctant  to cliim an  exemption that triggers onerous  administrative burdens or potential
          liabilities. OPEI recommends that EPA adopt the following program with regard to equipment
          manufacturers that select to take  advantage of the regulatory flexibility  provisions.  Such
          equipment manufacturers should simply be required to "•JP*B'" accurate records regarding their
         total  annual  production of older design or uncertified engines as a portion, of their total
         production, Affected equipineol manufacturers should not be required to submit such records but
         should make those records jvailable to EPA upon request. OPEI is confident that individual
         equipment manufacturers wiU raise concerns to EPA  if they believe that other competing
         manufacturers are «*"^*"g their production allowance.  Consequently, this market-based, self-
         policing factor and the duett of random records inspections will act as sufficient deterrents,
         ensuring that equipment manufacturers will not exceed the applicable production allowances.
                                                                             *
         VTf.   ADDITIONAL ENGIM-BASID j^ypitjffpq NEEP TO BI' PROPOSED TO ENSURE THE
                AVAILABILITY  flF Til  AliLQ^TP SUPPLY  of QLPH DESIGN 01. UNCERTIFIED
                Under the SOP, the legal ability of the engine manufacturer to continue to produce older
          design engines after the role' i effective date is dependent entirely upon a proposed exemption that
          is based on its customers production plans. Engine manufacturers probably will be very reluctant
•»-.*. a v.
                                                     20225:4400
           02-04-37 02:3C?Vt

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                                                       Collier, Shannon, Rill 8t Scott.
U.S. Environmental Protection Agency
February 3, 199?
Page 1
to continue to make older design, uncertified engines because of the substantial risk that those
engines could be rendered "unsalable" if there are inadequate orders for exempt engines by its
equipment manufacturing customers. Moreover, because the proposed exemption is based OQ the
percent of sales of equipment, and not on numbers of engines, it would be virtually impossible
for an engine manufacturer to predict with any precision how many older design engines it could
legally produce under the equipment-baaed exemption.1

       One regulatory flexibility that would help alleviate this problem would be to allow engine
manufacturers to run a negative annual balance in their cotpoiate average or emissions credit
account at least in the first few yean after a new standard becomes effective. Allowing such a
negative balance would at least provide engine manufacturers with an additional margin of error
removing some of the risks associated with continuing to produce a limited number of older
design engines.  For  example,  assume engine rnanutaccurer number I reasonably expects a
particular equipment customer to order a hundred older design or uncertified engines pursuant
to the  regulatory  flexibility allowances  discussed above.   Unexpectedly, thai equipment
manufacturer decides to place the order for the exempt older design engines with competing
engine manufacturer number 2, thereby resulting in engine rnanufscturer number 1  being "stuck"
with a hundred "older design" engines. If engine manufacturer number I «IU those 100 engines
(without the expected benefit of the equipment-based allowance) it would unexpectedly exceed
its corporate average emission level for wet year.

       The end result is that engine manufacturer* will not take liability risks amriated with >
producing "allowed" older design engines because they will not be able to predict how many -
potentially exempt engines they can produce and stUl meet their corporate average.  If an engine
manufacturer is allowed to run a negative balance in  Us emission credit account in the first year
a new standard becomes effective, it will be able to assume a reasonable amount of risk in terms
of producing older design or uncertified engines.  Of course, under the averaging, banking, and
trading (" ABT) program, the engine omufacturer would ultimately have to make up any deficit
by producing cleaner engine* in subsequent production yean to offset the negative balance.
Consequently, EPA. should allow ad engine  manufiaccurer to run a negative emission credit
balance to remove some of me obstacles mat will otherwise undermine the regulatory flexibility
program becauae the "allowed" older design or uncertified engines will simply riot be produced
by engine manufacturers..
       OPE1 is still in the process of collecting inventory and lead time information from
       iis  members with regard to how far in  advance an equipment manufacftirer
       typically orders an engine, and how far in advance an engine manufacturer needs
       to know whether or not to continue  to produce an otherwise unsalable product
       line.
                                                                    02-04-97  02  j;?M

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                                                     Collier, Shannon, Kill 8c Scott.
U.S. Environmental Protection Agency
February 3, 199"
Page 8
 VUL  £PA 5H(
 In the SOP, the signatories agreed that if they decide to continue the pnx
i or uncertified engines (under the equipment-based flexibility provisions),
ivailable for sale at a reasonable price to all interested buyers.  Sw Section,
                   '  J—'•—-"•* *~ •»•<»•«*• jxniinment manufautmcis from
                                                                   i production of older
 design or uncertified engines vunuw u» ^my»»»~~ - — -  exunuiy pcwvta»ons), they will make
 them available for sale at a reasonable price to all interested buyers.  5«« Section, 5(a) of the SOP
 at page 11. This provision is designed tn protect equipment manufaoaren firom being subjected
 to unreasonably high engine prices. OPEI would appreciate clarification on how EPA intends
 to implement this requirement in a manner that will achieve the express goal of the SOP.

                                    CONCLUSION

        OPEI appreciates .the opportunity to submit these comments on the noaromi dlesd engine
 SANPR.  OPEI will supplement these  comments with additional wfonaatton and data as il
 becomes available.  OPEI sad its members, many of whom are small businesses, look forward
 to working with EPA in meeting die Agency's obligations undo the Small Business Regulatory
 Enforcement Fairness Act of 1996.
        Please contact me if you have any questions or concerns.
                                         Sincerely,
                                                    M. GUERRY, JR.

                                          Counsel to the Outdoor Power Equipment Institute
   WMGjr/mdl
   Enclosure

   cc:    Don Kcipinski
          TadWysor
                                                2022-604400
                                                                      02-04-9?  as  :•:

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                            DUN"AWAY & CROSS
   •- •    •                           3<-i-S *00

                               • •*6 3T" S'^EE". "x <*

**,,'.-":"aiss      "   .        ...  WASHINGTON. D. C- 2OO3S

;s:a'3E - :~»'"-" '               ' ..
„—i.- a «r^-.rs     • '                  2C*'!
                                    R -202
                              October 22, 1996
     Tad Wysor
     Bryan Manning
     U.S. Environaantal Protection Agency
     2565 -Plymouth  Road
     Ann Arbor,  MI  48105

          Re:   OSHA reau^atiQn of CO

     Gentlemen:
           In our telephone conversation last week, I offered to
      provide information concerning federal OSHA's and Minnesota
      OSHA 's carbon monoxide requirements.  Enclosed are excerpts  from
      two memoranda discussing the requirements.  Manufacturers of
      industrial trucks have for some time controlled their  CO
      emissions in response to these requirements.  Although OSHA's
      mandate is worker safety and health and  its enforcement  is
      specifically directed at employers, as compared to EPA's  interest
      in ambient air levels with enforcement against product sellers,
      OSHA and EPA together effectively require industrial truck
      manufacturers to -take overlapping and .potentially conflicting
      approaches to the carbon monoxide emitted by their products .  I
      believe this merits  scrutiny in your  analysis.

            I  look  forward  to  working with you both on the important
      issues  you are  addressing.
                                     Very truly yours,     ,,  '
                                     DUNAWAY & CROSS
                              •       Gary


       Enclosures

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                            sA^Ar Sc
            .'           M i M C R A N 2 u .M

TO:     INDUSTRIAL TRCCC ASS.CCIATICN.

F3GM:   3UNAWA2 x  CROSS

DATS:   OCTOBER 25,. 1995               -

RE:     MINNESOTA  OSHA CO REQUIREMENTS  FOR LITT TRUC3S
     We   recently  became  aware  that  Minnesota  OSHA  requires
employers to  (i) ensure that ambient carbon monoxide ("CO1*)  levels
remain  below  33  ppm in  indoor areas  where internal  combustion
industrial trucks are used, (ii). monitor ambient CO levels in such
areas  on a  quarterly -basis,  and -(iii)  'ensure  that CO  exhaust
concentration,  as measured during engine, tuning as part of regular
maintenance,  does not exceed 2% for gasoline industrial trucks and
1%  for  L?G industrial trucks.   In contrast, federal OSHA limits
ambient  CO  concentrations from industrial truck  operations to 50
ppm and does not require general air monitoring for CO or emissions
testing.  See 29  C5H $ 1910.173(i) and 5 1900.1000 Table 2-1.

     Federal. OSHA  informs us  that  Minnesota OSHA adopted  its
requirements  in 1987 and  submitted them to federal OSHA in 1988 as
a supplement to its state plan.   Federal OSHA also tells us that it
has not  located any official action  regarding  Minnesota OSHA's CO
requirements  for industrial trucks, although staff is continuing to
search.   In  the absence of  official  disapproval,'federal  QSHA
considers -Minnesota's requirements enforceable.

     Although Minnesota  OSHA contends that  ambient  CO  levels may
not exceed 35 ppm, the state regulation literally requires chat CO
levels  not  exceed  that  listed,  in'.Table  2-1  of  the  federal
regulation. -  Table 2-1,   however,  limits ambient CO  levels  to 50
ppm, not  35 ppm.  The discrepancy results from federal OSHA's 1989
revision, of Table 2-1 chat limited ambient CO to 33 ppm.  That rule
was challenged  successfully, in1 judicial review.proceedings and the
federal  standard reverted  to  50 ppm.   Federal  OSHA is , checking
whether  Minnesota provided any  notification chat it  intended to
enforce  the 35  ppm  standard after  federal OSHA returned to .Che 50
ppm level.
          ITTH: STSET. .s.w, WASHINGTON, a- c. :oo36 • (202) sdi^rtw ?AX (2«) sai-

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tC:     INDUSTRIAL T
73CM:'  3CNAH3L2 i  CSCS5
           L 1,  139S
                \  CSHA CO
                         M £ M I ;

                         ASSOCIAT
    GS.CSS
i A N I L: .VI
:cw
     In response ta a recant inquiry, tnis samorandum updates  cur
Cc-ccar ."5,  1995  neacrajidun -q  na. raqariin? Mianaaora-CSEA' s
carton  aonoxida C*G3N1  rscuirsaen-ca far lii^t tr
        raportad praviously, Xianaao-ca-OSHA has as^ahlis&.«d its awn
restrictions for ambiant and axhaust CO cancantrations and for CO
aonitoring far wortalacas tiiat usa industrial tracks.  Subpart l of
Minnesota's rola rnfftziras aaployars  tiiat  use angina-cowarad  lift
trucics to  (i) ansura tiat ambiant CS Lavais r amain balow 25 apm and
(ii) monitor ambiant CO  lavals on a cuartarl'/ basis.  'Subpart 2 of
Minnasota'S ruia. ramiiras  assloyars to  ansura tnat  CO axhaust
cancantrations ,  as aaasurad  during part of raguiar maintananca, do
not  excaad  2%  far gasoiina rricica  and  1%  far L?G  trucics.   In
contrast,  fadarai-OSHA  limits ambiant  CO  ta  30' pom and doas not
iaposa any monitoring raquiraaants .  It is  unclaar'vbatnar fadaral-
OSHA racaivad notics tb.at Mincasota-OSHA intandad to anforca tia 35
ppm ambiant CO standard, but staff has agraad ta prayida as viti:  a
copy of any suca notica.
     Finally,  v«  nota  tnat  fadaral-OSHA intands  to  proposa  a
ravisad fadaral peraissibla  axposura Limit for ambiant CO and atiiar
siibstancas  'lata'r  tiis'  year"    Wa  will  cantinua  to
ievelcpments  vitri tiis crcpcsal.
      11*6
                                 , 3. C ;

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                                   & CROSS
                              3 5 ~s»fc. * £ si *»c ° * " ~ *•

                               3- ~* *GO  .

                              9r- i'^ES" N *

                               "N. -3 c  2CC36
                         February  3,  1997
VIA OVUUIIGHT MAIL

Mr. Tad  wysor
U.S.  Environmental Protection Agency -
Engine Programs  and Compliance Division
2565  Plymouth Road
Ann Arbor, Michigan  48105                   .

    '  Re:  Nonroad Diesel SOP? EPA Docket A.-96-4Q

'Dear  Mr. wysor:.

      Please  find enclosed a copy of the Industrial Truck
Association's comments regarding the Nonroad Diesel statement of
Principles.   These comments were filed today with EPA's Air
Docket,Office.

                               Very truly yours,

                              - DUNAWAY & CROSS -

                                        r,
cc:  EPA Air Docket
                               Matthew F.  Hall

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      '   ,  .               CGXXEN7S  OF. THE

  (                 INDUSTRIAL TRUCK ASSOCIATION   .             '.
             i       *                                   *"
               " '              TO  THE

           U.S.  ENVIRONMENTAL PROTECTION AGENCY  ON  THE

        STATEMENT OF PRINCIPLES FOR NONROAD DIESEL ENGINES

                      ".  February 3,  1997
                         ' Docket A-96-40


                         I.  INTRODUCTION

     Pursuant  to * the Supplemental.-  Advanced Notice  of Proposed

Rulemaking published  in  the January  2,  1997  Federal Register, the

Industrial Truck Association  ("ITA")  respectfully  submits' these

comments  to  the  U.S..  Environmental  Protection "Agency  ("EPA")

regarding  the Nonroad  Compression-Ignition  Engine Statement of

Principles ("diesel SOP" or "SOP"').  ITA is the national, not-for-

profit  trade  association.of  manufacturers of industrial  trucks,
                                                              1'
primarily  fbrklifts,   and  of  suppliers 'of   industrial  truck
         i
components and attachments.    ITA  members  produce  engine-powered
      V                   i
industrial  trucks  that  run   on diesel  fuel,   gasoline,   liquid-

petroleum gas, and compressed natural gas, as well as  industrial

trucks  powered by electric motors.   As'EPA is  aware,  industrial

truck manufacturers are significant purchasers  of  nonroad  diesel

engines.   ITA~, therefore welcomes this opportunity  to  provide its

views regarding certain aspects of the diesel SOP, particularly its

equipment-f legibility provisions.    •     -. .  '             •
                             I          ' ' ">
     It is . important at the outset  to note that  the SOP. is an

agreement  among  EPA,  the California  Air Resources Board ("CARS"),

and  engine  manufacturers.    It  does  not  encompass  equipment

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 rar.ur azv-rars,  sue.-.  2.3  I7A r.er.cers,- as  s irr.a-Dries  rr as nzui.
                                                               . ~ ~ i
 cariiss to . tlis r.egctiaticr.s.   Al-r.cugr. ITA  ar.i  ether squip-er.t

 zanufac'turer grsucs gar.eraily" foilcved  the  negotiations leading'ts

 the SC?,  ar.d consulted at tires with the,engine manufacturers and

 E?A,  equipment  manufacturers did not participate .in developing the'
         /                  -                  ,

 SOP's equipment flexibility provisions.  This is not to criticize

 the process of  negotiating the SOP, but only to emphasize that it*

 does not reflect full consideration of/ITA's  views and concerns,

 and > makes " it  critical   that   EPA   approach   the-  equipment.

 manufacturers'  concerns with an open mind.
       i
    '  Pursuant  to  the diesel  SOP,  EPA will  propose- a  series af

 increasingly stringent emissions regulations for several horsepower

 ("hp1')  categories  of nonroad  diesel engines.   Building  on its

 existing  regulations for nonroad diesel engines 50 hp and larger,

 SPA will propose emissions limits for non-methane hydrocarbons plus

 oxides  of  nitrogen  ("NMHONOx"),  carbon  monoxide   ("CO")," and

 parti'culate matter ("PM").1  EPA's. proposal will include, fsr the

 first time,  Tier  1 and Tier '2 emissions limits'for nonroad diesei

 engines less than 50 hp.'  EPA will also propose Tier 2 and Tier 3

 emissions  limits  for engines  50" hp and larger.   The emissions

 standards  take  effect in different years -for different horsepower

 categories,   with diesel  engines  25-50  hp  facing  the earlies-
      1   - EPA previously issued  regulations for  nonroad diesel
 engines 50-175 hp, establishing Tier 1 emissions limits for NOx, ?M
'and smoke.    The Tier  1  limits  for engines  50-100  hp tecoae
 effective  on January 1,  1998.  Engines over  175 hp are  subject to
 the same standards as the smaller engines, as well as to  HC. Units.

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effective -ate
                 The 30?'s- Tiar 1 effective iate fs- these smaller
         is  January l,  1999,  less  than tvc years away, s
             •                       '                 '
  •  . The diesel SOP's equipment-f lexibility prsvisior.s are ir.rar.ded
no  address the  disruption  in ' equipment manufacturers-'  business
operations that occurs when redesigned engines must be incorporated
into  equipment. •   Such  disruptions .can  be  crippling  if   new
emissions-controlled  engines are not  available sufficiently  in
advance  of  an  effective date to permit  equipneht manufacturers  to
redesign their equipment to accommodate new engines.  Late receipt
of  final .engineering  drawings and  prototypes, and last minute
changes  in  engine  configuration,  performance parameters,   and
availability,  create chaos in the equipment manufacturer's design
effort.,   Such  problems  translate  directly  to  disruptions  in
production, marketing  and distribution.   '.
     Adequate' lead time  is  especially critical,  to ITA  members
because  of  the we11-recognized design  constraints  of  forklifts;
Material  handling  operations generally'  place  a  premium en  the
rapid, safe movement of materials in  the  midst  of  pedestrians  and
other   vehicles.      Compactness,  maneuverability,  visibility,-
vibration,  noise,, and  a host   of  ergonomic  concerns  are   all
essential considerations in  forJclift design,  so that virtually any
change in the. engine's dimensions carries significant implications
for the'forJclift designer in maintaining the forlclift's  stability,
lifting  capacity,' turning  radius,  visibility,  and  so forth.   Lead
time is  required  for  equipment  redesign,  prototyping, testing and
development,  design, modification after  testing,  production-line

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         ar.i oistriiuti:.-. arri.-r3r.en-3.  Conservatively 3pea.
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=ar.u.f assurers ara being heard la-a in the game 'coapared -= er.c.r.s

manufacturers., '.-ITA believes.-that these issues can be addressed sc

as  10  provide genuine flexibility  t'o  chose  who aust  redesign

equipment to accommodate new engines.   Without important changes in

the current scheme, however, flexibility will be more illusory than

real, with substantial costs to equipment manufacturers unaccounted
  \
for in  the regulatory process.3

   .                   •*•*                              t           '

                          II.  DISCUSSTQM    "          .      .

A. '  Tha  Diesel sop's Equipment  rlexibilitv Progrram is Too'Rigid

     The  SOP's  basic approach to equipment  flexibility allows an

equipment • manufacturer to use engines not certified  to  the  most

recent   emissions   limits  . in   a  limited  percentage  of  -the

manufacturer's U.S. production units.   For engines  50 hp and-above,
                                                               s

an equipment  manufacturer may use Tier 1  engines in 15%  of  its

production during the  first  year  that  Tier 2 standards are  in

effect  and  in 5%  of its production  during  each  of the  next  six

years.  The same  15%/5% approach applies regarding the continued

use''of  Tier  2 engines  once Tier 3 standards take effect (except

that the flexibility period may be extended if Tier 3 standards are

delayed) .               '          •••  •
     3    During the January 16 meeting, several attendees stressed
the importance of understanding the air-quality impacts anticipated
by. EPA in connection with the current SOP proposal.  ITA joins that
chorus because full evaluation of the program and of suggestions to
modify  it  require such  an  understanding.    Equally  important,
however,  is  some  accounting of  the  cost  impact  to  equipment
manufacturers   and  their  .customers  under  various   equipment-
flexibility schemes."-            '

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fir -ar.uf acturers  cf
      Taf"2i~  *'.<3ap~ icr.s zcclfy ~.~e 5C?''s
 the  5C?_ provides  greatly r.ora'  fia'xi = ^li-
 agricultural  and legging, equipment, who er.jcy a  :o%  allowance ..-.
 the  first  year a  new engine  standard is  effective  and -a  15%
 allowance  in' each" of  the next  seven years.    Second,  the  SC?
 provides . substantially -less  flexibility  for  manufacturers  cf
 equipment using under-50 hp engines, giving them the 15% allowance'
 the first year,  but eliminating  the .5%  allowance  after only 'three
 more  years.     Finally,  small  volume manufacturers  receive  a
 permanent allowance to use pre-standard engines in up to 100 units
 of a given model.                       .     •
     ITA's  fear is that'  the  SOP's basic  approach will yield no
meaningful flexibility  in more cases than  hot.   On« major  problem
 is that  the SOP's  basic flexibility percentages are  too  low,  as
                                               t
they apply to only 6.45% of a  manufacturer's production over seven
years  and  only  5.6%  of production over  eight  years.4   Another
major problem  is that most equipment manufacturers will be unatle
to align their problematic engine  models  within th*  SOP's rig-id
percentages, particularly after the first year when flexibility is
 limited to 5% of production.  If a manufacturer's toughest redesign
problem in the first  year is  an equipment model  that constitutes
anything ov«r  15%  of  the manufacturer's unit 'sales,  an allowance
for only a part of that model's  production is  of .little or no
   .  4 •   The allowance  for  agricultural and logging equipment is
nearly 17% of production over eight years, while th« allowance f=r
equipment using  engines  below. 50 hp is  7.5%  for only four years,
which amounts to only  3.75%  over eight  years..   •          .

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value.  The  situation wcrse.-.s after" the  first /ear, v.-.ere tr.ars '.s
no effective relief fcr any model that accounts for r.cre than 5% rf •
annual production.   ?ut si-ply,  and as  EPA recognised during  the
January 16 meeting, an allowance for some  fraction of a particular
model's production does little to address the equipment-redesign
problem.            ...
     The SOP's low percentages also make  it unlikely that .engine
manufacturers will continue'to produce needed ore-standard engines
in  such small quantities,  especially given the  trend  away  from
proliferation of nonroad engine designs.   If the standard engine
for a' range of nonroad equipment  applications  has  already  been
redesigned  to meet a  new  emissions  limit,  the  impetus toward
greater  production  efficiency  makes  it  unlikely   that engine
manufacturers will  also produce small - quantities of a  previous
version to satisfy-an equipment manufacturer's desire'to  obtain the
intended flexibility.5   This might be seen superficially as an air
quality benefit, but it would hardly accomplish  the  intent of the
SOP.                                      '
      For all  these reasons, ITA believes  that''the SCP's  equipment
flexibility   provisions,  as  currently' structured,   are largely
ephemeral.   The suggestions below  are  intended  to build upon, and
supplement  the  SOP's basic  program in ways that  will not lose air
quality  benefits  or-  impose   additional  burdens  on engine
           ITA members might be especially vulnerable  in this regard
          ''.s5Z  -rs - s?«3E«ft
 needs.
                                                                    0
                                                                    'J

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 :sar.uz2-_urars,  while . ir.-raas:..-.?  zr.e  ' likelir.scd  -r.a-  *qui=-er.t
 manufacturers  receive  scr.a. real .r.easura' of consideration.   These
 suggestions provide iTA.'s preliminary thoughts after reflecting en
 the recent  January 15 meeting  and are consistent'with, the  ideas.
 discussed far the first tine during the meeting.  ITA looks farvard.
 to refining its ideas in further consultation with EPA and industry
 'as this rulemaking" continues.
 B.   Modifications  to  the  SOP's  Basic-  Approach   to  Equipment
      Flexibility        "           • .                    '
      I.    EPA  Should   Permit  Equipment  Manufacturers  to  Use
           Allowance in Manner Best-Suited to Meat Individual Needs
      Rather than strictly limiting equipment manufacturers to  fixed
 percentages of their production in the  prescribed year, EPA should
 permit them  to take an  overall emissions  allowance  in whatever
                                                  t-
 years  present the greatest  need.   Although it should  be combined
 with, other  changes,  this   refinement  alone  would   substantially
 increase, the flexibility of- 'the program.
      For example,  'the  SOP's  basic approach permits equipment
\                                     .     \             '    •      '
 manufacturers to use  pre-standard  engines  in up. to 6.45  of its
 seven-year  production,  but only i£ the manufacturer's  model array
 and equipment redesign constraints align perfectly within the SOP's
 15%/5%  allowance 'scheme.   - This . surely  will not  b«  the  case.
 Instead,  different -equipment  manufacturers will 'need different
 allowances  in different years:  Manufacturer A may need to use pre-
 standard -engines in 45% of  its  first-year- production,  but be able
 to use   new  engines  in   100%  of  its  production  thereafter;.
 Manufacturer B  "may need to delay introduction of new engines  in

-------
 33%' si  /its  .:~irst-year  pr = i-ucii3r.  ar.i'  15% --of  .i-s  'secsr.d-y^ar
 production,, but trier,  se ails  to  use r.ew  engines  in • ail  cf  its
 equipment;   -Mar.ui acturers  C,   0,   et=.   will  face  different
 circuns-ances.-5    The  variety,  and  unpredictability .of  design
 considerations, -individual csmpanies' product cycling programs,  ,and
 innumerable other, company-specific business considerations sake a
 one-size-fits-all  approach far  too  crude  to  be effective—true
 flexibility .demands  that equipment manufacturers be permitted to
 i
 adjust  to conditions  as they arise.   So  long, as  the  equipment
manufacturer stays within its overall flexibility  allowance,  the
SOP's benefit to air quality  is  substantially  unaffected.7
    . EPA  may also consider  implementing  averaging  and  trading
concepts-that would enable an equipment'manufacturer to exceed its
calculated  allowance  under  certain  conditions.    The  equipment
manufacturer could offset excess production of old-engine equipment
by  using lower horsepower  or ultra-clean  engines  in new-engine
equipment,  trading between horsepower ranges,  obtaining  allowance
credits  from .another  equipment manufacturer,  or utilizing some
other method to ensure that the SOP's air quality  benefits are  not
diminished.       •
     s    -Indeed, the lS%/5% program strikes us as among the least
likely to accommodate most manufacturers.
     7    ITA is not privy to how EPA may discount future emissions
reductions.  Overall," however, we'believe that adopting all of our
suggestions, perhaps with .some modification,  would be air-quality
neutral compared  to the  current  program.               .  -  _

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2-.
           The   £xira  Allsvance " izr  Agrir-l-ural  'ar.i   i;^cr_-r
           "Equipr.er.t  Should ce  Elir.ir.i~ei  and Transferred ~-.c~v~a
         •  ' £r.tira  £quisraer.t  Industry
      EPA  can iminediately  increase  acst equipment manufacturers'
 •allowance without increasing emissions  by eliminating the  S.OP's
 special   allowance,   for   agricultural  and   logging  equipment
 manufacturers  and applying  the emissions  sayings to  the  basic
                                                   V.
• program.  This would, remove  an unwarranted and unfair provision
 from the SOP and  at  the same time provide greater flexibility to
 equipment manufacturers across  the board. ,
     • The SOP's special allowance for  manufacturers of agricultural
.and logging equipment creates a lesser compliance burden  for one
 industry,  which means, by  definition,- a greater  burden  for all
 others. This smacks  of favoritism or special advantage in  light of
 the. nebulous air  quality  rationale,  which is based on the notion
 that some  equipment is used primarily in rural areas where  ambient.
 ozone levels are  less troublesome.  We do not believe, however,
 that this  alleged benefit  has  been or can be quantified, especially
.because of the phenomenon of ozone  transport, whereby emissions
 from more  rural sources are transported  to other areas where they
 £a contribute to ozone nonattainment.  More broadly (as discussed
 during .the meeting) ,  EPA has' -not seen fit to apply a source-by-
         i
 source -approach to the need for regulation of  the nonroad  sector.
 The  favorable   treatment  of  agricultural  and  logging equipment
 simply invites every manufacturer to make  a case for a particular
 product or products,  which fairness vould require EPA to entertain.
                                 10

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      ErA's  special  allowance, also suffers  frsa  tr.e arser.ca ;f  a
 consensus definition of "'farm or, logging equipment"  -or of, "farr.ir.g
 and logging operations," portending difficult E?A determinations of
 what equipment types qualify  for the greater allowance. 'Indeed/ it
 was  clear  from  the January  16 "meeting, that  SPA  staff  has not
 decided upon an exclusive-use' test, a 51%-use test  (which governs
 preemption of state  emissions regulations for nonroad engines used
 in farm and construction equipment), or  some other test. .Whatever
 test SPA  might  adopt will,  only bring  additional questions  of
 fairness and rationality to an already uncomfortable situation.
      Rather  than maintaining,  this preferential treatment,  SPA
 should  apply whatever allowance it had set aside for agricultural
 and logging equipment to the program available to all manufacturers
 of diesel engine equipment.   This  emissions-neutral change would
 increase the  flexibility allowance for  most manufacturers of diesel'
 engine,   equipment,   avoid   subjective   determinations  concerning
 agricultural  and  logging   equipment,   and  put  all  equipment
 manufacturers on an  equal  footing.8
      3.   SPA Should Eliminate the SOP's Less  Favorable Treatment
          for Under-50 hq  Equipment
      In contrast to  the 15*/5% seven-year flexibility program for
 engines SO  hp  and  above and the 30%/15* eight-year  program for
     8    .Although the  additional allowance  to  the  sop's  basic
program remains to be determined,  ITA expects, based upon estimated
equipment populations,  that  it would be substantial.  According to
SPA's  1991  Nonroad  Engine  and  Vehicle  Emissions  Study-Report,
Inventory  B estimated  that  the  agricultural and  logging sectors
accounted  for  2,934,763 diesel units,  nearly .5 million more than
•all  other  sectors combined,      •    •
                                   M
                                11

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           agricultural  a.-.'d Iccgi.-.g equi?r.er.t.  the SCP's i;%,;%  accrca—. f:-
.0                  '         •                                        .   .
           under-50  h?  aquip-er.t  _is. limited 'to  a -ere  fcur years.   ZPA's

           Fadera1 Seaistar notice did net explain'this  disparity, ncr did EPA

           staff"'provide a clear rationale for this treataent at the January

           16  meeting.9   ITA opposes this exception  on both  air-quality and

         -  fairness  grounds.

               It is  difficult to  imagine that equal treatment for equipment

           manufacturers using  small,  less  polluting engines will  pose any

           threat to the air-quality benefits of the SOP as a whole.  Cnder-50
                                  . -• .    '             _.: -• • i pi-- . -  •:
           hp  equipment would remain subject to  the  confines of EPA's final
                                       """                '          -
           flexibility allowances,  under which the vast majority of under-50

         '  hp  equipment  will  use emissions-controlled engines.  To the extent

           that  under-50  hp   equipment  manufacturers  continue   to . use

           uncontrolled engines, emissions  from such  equipment  may be less
              '                                                .
           than from equipment  using larger, certified  engines' because of the

           horsepower   differences.    Thus,:  «ven if   the' braJce-horsepower

           emissions rate for "an uncontrolled  45  hp engine was double that of

           Tier l 100.hp  engine,  the  smaller  engine would contribute  fewer

           emissions because of its smaller power  rating.10  '_,, '
                9    Someone  at the  meeting  suggested that: the  four-year
           cutoff addressed  the fact that engines  less than 50 hp have  not
           been regulated.   As  discussed in the text,  this  distinction does
           not  justify the  SOP's discriminatory  treatment  of  under-50  hp
           equipment.            '     •         .                         .

                10 ~ We  are  aware that numbers of  -units,   emissions  rates,
           hours of- use,  useful life, and load factors are  also  relevant to
           calculation of the respective emissions  contribution of different
           horsepower-category  engines,  we would welcome any information E?A
           may have developed on these factors.          .     .  '•
                                           12

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      rairr.ess dictate's  tr.at  -ar.uf acturers if under-50 hp ecuip-er.-
receive -the  same flexibility_allowance.as other manufacturers,  if
•'anything,  SPA should- provide more flexibility for manufacturers sf
under-50  hp  equipment than  for' manufacturers  of  larger equipment
because  the  former  have  not had  experience  in  accommodating
emissions-controlled  engines.   Whereas 'EPA's May 1994  final rale
provided manufacturers  of equipment  using engines 50 hp and above
with several years to obtain and accommodate emissions-controlled
'engines,  the  current regulatory  schedule• gives manufacturers  of
under-50  hp  diesel equipment - less than-a year*after EPA's final
rule to accomplish the numerous tasKs incident to using redesigned
engines.  Moreover, accommodating smaller engines is generally more
challenging  and time, consuming because of  equipment  compactness
requirements and-size  limitations.   These factors  highlight the
need  for  reasonable   flexibility  allowances  for  under  50-hp
equipment.
      4.    EPA Should Consider Engine  Horsepower in  Calculating
           Flexibility Allowances    •_'..-
      As suggested above, SPA's equipment flexibility program should
directly account for th* fact that smaller engines contribute fewer
emissions  than  larger  engines,  all other  factors being  equal.
Therefore, ITA believes that engine  horsepower should be factored
into an equipment manufacturer's  flexibility allowance.
      A 50  hp engine that  is  otherwise identical to a 200 hp engine
in terms  of  emissions  rate, hours of  use, ^s££±' will contribute
one-quarter  of the  emissions produced  by  the larger  engine.   A
manufacturer  of   50.  hp   equipment  could  .obviously  produce
                                13'

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 substa-tidily  ---era  units  -s:-? cre-star.dari ,( snqir.es u.-iar  1-5.
 flexibility ailcwar.ce-tr.ar. a manufacturer  of 200 hp equipment vitr.
.less  less  of air-quality 'benefits.-  Under  the program" announced by
 the SOP,  however, a manufacturer of  50  hp equipment receives the
 same  allowance as a manufacturer of  200 hp equipment even though
 the emissions  contribution of the 50  hp equipment  is  far less.
-This  is unnecessary from an air quality perspective.  Recognizing
 that  our example  is simplistic, we nonetheless believe that further
 examination - of horsepower and other factors is necessary and we
 would be happy'to work with EPA in this area.
 C.  •  Additional Caaa—bv-Case Relief for Equipment Manufacturers
      Even with the  modifications  suggested by ITA  to  the SOP's
 basic approach, to  equipment flexibility,  instances  may  arise in
 which equipment manufacturers, through no fault of their own,, are
 unable to  obtain  certified  engines  in  time  to .avoid  serious
 production disruptions.   Consequently,  EPA's  proposed regulation
 should include a mechanism whereby an equipment manufacturer may
 obtain  needed  flexibility,   on .  a   cas«-by-cas«  basis,   by
 demonstrating hardship conditions.  This would accomplish directly
 what  the*SpP's .equipment  flexibility  provisions  ar* intended to
 accomplish only indirectly.and crudely.  Although th« details would
 need  to  b«  worked  out,  including what  constitutes an  adequate
 demonstration of a hardship situation,  ITA is prepared to worfc with
 SPA stafi to develop a  reasonable  means by which  to  address  these
 circumstances, while at the same time minimizing any impact on air
.quality.     ~                                '
                                 14

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     Such a case-by-case aec.~ar.isa aay s& especially necessary fcr
                                              V
equipment using diesel; engines 25-50 hp,  considering the prsxirity
of the January I,  1999 Tier 1 effective date and the constraints cf
accommodating these engines in compact equipment.  Because 25-50 hp
nonroad  diesel  engines  have  not  previously  been  subject  to
emissions regulations .and equipment manufacturers cannot predict
when new emissions-controlled  engines  will be  available,  it is
probable that  equipment manufacturers  will not be able,to obtain
new emissions-controlled  engines  in  sufficient to time  to design,
test and produce equipment using certified engines in 1999. If so,
even a  liberalization of the SOP's  equipment-flexibility .program
would  likely be  inadequate to prevent  severe  disruption  of an
       *                                                        *
equipment manufacturer's  business  operations.   We urge  EPA to
consider, the-individual 'plight of  equipment manufacturers who find
themselves in these hardship situations.
                         III.   CONCLUSION
   •  ITA appreciates the opportunity to comment on the diesel SOP's
equipment flexibility provisions.   Our suggestions are  intended to
be'a starting point for further discussion  with  EPA in  developing
a meaningful flexibility  program  for equipment manufacturers, one
that leaves  the SOP's anticipated air quality benefits generally
intact.  ITA ioofcs forward to  further discussion on these and-other
issues as this  rulemaXing proceeds.
                                 15
                                                                    if,

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u
                     •: Scutn
EQUIPMENT MANUFACTURERS INSTITUTE "
="aza -Chicago. 'Hinos 5C6C6-37'0 • 312 321-1*?C • =AX 312 22--430
                                                                Februarv 3. 1997
           Docket Officer •
           U.S. Environmental Protection Agency
           Waterside Mall - Room M-1500
           401 M Street, S.W.
           Washington. DC 20460       .  -
                             Mr. Donald Kopinski
                             Office of Mobile Sources
                             U.S.EPA Motor Vehicle
                                Emissions Laboratory
                             2565 Plymouth Road
                             Ann Arbor. MI 48105
            Re:  Docket A-96-40 Supplemental Advance Notice of Proposed Rulemaking OB Control of
                Emissions of Air Pollution from Nonroad Diesel Engines
            Dear Sirs:

            Enclosed herewith are the comments of the Equipment Manufacturers Institute on the subject
            ANPRM. Please take them into account when developing the NPRM and make them pan of the
            official rulemaking record.                      •

            In addition to submitting these comments EMI requests, on behalf of its small and mid-size member
            companies, almost all of which purchase their nonroad diesel engines on the open market, a 10-day
            extension in the time available to comment on the Supplemental ANPRM. Thank you for your .
            consideration of this request.

                                                         -        Yours truly,
                                                                 Emmett Barker
                                                                 EMI President
            enclosure
             $«rveremidaik\Public PolicyOean AirEPA-Emiiiion Sundarts-.Anpnn-Traiw EMI Commeno.doc
              Serv,ng Manufacturers of Agricultural. Construction. Forestry. Materials Handling and Utility

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                     Comments of theEsuiDrr.em Manufa'aurers Institute

                  EPA  Supplemental Advance Notice of Proposed Rulemaking
               Control of Emissions of Air Pollution from N'onroad Diesel Engines
                 (Ref:  Federal Register. Vol 62. No 1. January 2. 1997, p. 200)

                                EPA Public Docket A-96-40
Equipment Manufacturers Institute (EMI), the principal association in the U.S. representing
manufacturers of agricultural, construction, forestry, personnel lifting, materials handling and utility
equipment, respectfully submits the following comments:                     .   -

1.  Inasmuch as the Statement of Principles, in itself, constitutes neither a necessary nor a sufficient
   condition for EPA to meet its responsibilities for its planned Tier 1 and Tier 2 (under 50 hp) and

   equipment manufacturers' lead times with respect to engine availability, additional work is
   ned      rvie a valid factual basis for EPA's Notice of Proposed Rulemaking
   Recognizing that the EPA must, among other things, make an affirmative determination
   regarding the technological feasibility of its proposed standards for the classes and categories of
   nonroad vehicles (equipment) it will propose to regulate, taking into account the cost of
   compliance, lead time, noise, energy, safety, etc.. EMI has encouraged its member equipment
   manufacturers to attempt to obtain information and data from their nonroad diesel engine
   suppliers that will enable them to develop equipment-related information of the kind needed by
   EPA and to submit that information to EPA. See Attachments A and 3 to these comments.

   Several EMI member small and mid-size equipment manufacturers, particularly those who
   purchase the engines they use from independent suppliers, have stated that they have been
   unable to obtain trie necessary information in a timely fashion, or at all, from the engine
   manufacturer. The SOP, which does not address engine suppliers' responsibilities to equipment
   manufacturers in the ambit of the Clean Air Act. will only achieve meaning and significance in a
   regulatory context if and when EPA obtains assurances - based on real-world specific data -
   from the small and mid-size equipment manufacturer that the proposed emission standards..
   effective dates and other featurts of the SOP are valid for its products and its business. In
   reference to Attachment &, EPA should itself request of equipment manufacturers the kind of
   information described in the ten questions contained therein.:

   Equipment manufacturers believe that, based upon the limited research being done by EPA
   regarding manufacturers' costs, downstream costs and small entity impacts.it is impossible for
   EPA to make a supportable finding regarding these costs and impacts on equipment
   .manufacturers.  This is especially disturbing in- view  of EPA's express acknowledgments that -.:
   underestimated  the Tier 1 regulatory impacts (50 hp and above) on equipment manufacturers
   and only now is going to equipment manufacturers to find out what those Tier 1 impacts are.

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    EMI strongly urges EPA to await the results of the study National Economic Research
    Associates (NERA) is conducting tor EMA. funded in pan by EMI. which should provide
    valuable cost information for some engine-equipment models, before proceeding with its
    NPRM: therefore. EMI believes it is imperative that EPA develop a comprehensive data base
    and report for the record regarding the costs and impacts to date of the Tier 1 rule. This Tier i
    data will be helpful to EPA and EMI members in developing flexibility provisions to
    accommodate the issues raised by Tier 2.   .
                                                                               t

 2.  The EPJL-for this rulemaking. must adhere to the requirements of the Small Business
    Regulatory. Enforcement Fairness Act ofJ996:

    The EPA has acknowledged that new emissions standards could have an impact on the engine
    and equipment manufacturing industry, particularly the industry's small businesses, in the
    Statement of Principles for the Nonroad Diesel Engine Industry which was printed in the
    Federal Register on January 2,  1997:                   .

       "The Signatories (of the SOP] recognize that new emission standards may create challenges
       for engine and equipment manufacturers beyond simply developing low-emission
       technologies. The nonroad industry is characterized by a diversity in engine models and
       equipment applications, many of which have small markets, making it difficult to rapidly
       and frequently implement design changes across wide product lines.  Even small changes in
       engine designs can create major difficulties for equipment makers with low volume models.
       diverse product lines, or inadequate leadtime to respond to the changes. If engine makers
       were to discontinue engine models made in small volumes, this could cause  market
       disruptions, especially for small manufacturers of equipment who buy these  engines, and
       their customers."  ,                                           •'           •
                              f  *                                        *           !
    [t is EMI's understanding that, as part of this rulemaking process, the EPA is required to fulfill
'.    the procedures which are set forth in the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA). EMI believes that the EPA, at a minimum, must meet the obligations set
    forth below while preparing the rules and. regulations. If EPA disagrees with EMI regarding
    EPA's obligations or EMI's interpretation of these obligations pursuant to SBREFA. EMI
    requests that it be informed regarding EPA' s disagreement as quickly as possible.

    A. EMI believes EPA is required to conduct an initial regulatory flexibility analysis or a final
       regulatory flexibility analysis, and the agency therefore must provide the Small Business
       Administration (SB A) with information about the potential impact of the proposed rule on
       small entities and the type of small entities that might be affected. Then the SB A will use
       this information to identify people who are representative of potentially impacted small
       businesses. These people will then be asked to provide the SBA with advice and
        recommendations about how the proposed rule might affect their businesses.

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                                                                                              v
3.  The next step is tor EPA to establish a review panel composed of aaency emplos ees.-
    mernbers of the Office of Information and Regulatory Affairs within the Office of
    Management and'Budget (OMB) and the SBA's Chief Counsel.  The panel's purpose is to
    review material which the agency has prepared, and the recommendations of the smalUntity
    representatives.          ^  ,

C.  If the panel is convened prior to conducting an initial analysis, the panel has 60 days to
    report on its findings and the comments of the small business representatives.  If the panel is
    convened prior to conducting a final analysis, the panel has only  15 days to issue a report.
    In both cases, the reports are to be entered into the public record.

0.  The EPA may use the information which it has gathered through the review panel to modify
    the proposed or final rule, the initial or final regulatory flexibility analysis, or the decision
    on whether such an analysis is necessary.

E,  The SB A has the option of waiving the requirements of establishing a review panel and
    reviewing material if, after consulting with the small business representatives and the OMB.
    it is determined that the requirements would not advance effective participation of small
    entities.  This written finding must be submitted for the record and must address whether or
    not the EPA had consulted with potentially impacted small business representatives and had
    taken their concerns into consideration when developing either the proposed or final rule, ..-

F.  Because the EPA is required to publish a notice of proposed ruiemaking, the agency must
    publish a final regulatory flexibility analysis when the final rule is promulgated.

G.  The analysis must contain the following:
    •     statement about the need for and  objectives of the rule;
    •     summary of''significant issues" raised by any public comments which had been
          submitted in response to the initial regulatory flexibility analysis, summary of
          agency's assessment of the issues, and statement of any changes which were made to
          the rule as a result of the comments;
    •     description and estimate of the number of small entities to which this rule would
          apply; if no estimate is given, an explanation of why no estimate is available.
    •     projected reporting, record keeping, and other compliance requirements which the
          rule creates; this is to include an  estimate  of the classes of small entities which the
          rule will impact and the professional skills which will be necessary to prepare the
          reports or records; and
    •     description of the steps taken by  me.agency to minimize significant economic impact
          on small entities; this is to include a statement of reasons why this alternative was
          chosen while other options were  rejected.                                  J

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    H. The analysis described above is not required if ;he Administrator publishes a certif:ca::jr.  -.
       :he federal Register that the rule will noj have a significant economic impact on a  •
       substantive number of small entities. .The certification is to be accompanied by a'statement
       or" legal and factual reasons for any such decision.

    EMI, in its letter of December 2,  1996 to EPA's Tad Wysor and Bryan Manning
    (appended as Attachment C) in response to EPA's request regarding EPA's "Summary of
    EPA Outreach: Impacts on Small Entities of Nonroad Diesel Regulations (as of 11/15/96),"
    advised EPA that it needed to add categories of potentially-impacted entities for suppliers.
    equipment dealers/distributors, and the ultimate purchasers and users of new nonroad
    vehicles, in order to determine the full impact of its proposal on small entities.  EMI also
    recommended that, to capture the full scope of its impact analysis, EPA reword its first
    bullet point as follows:                                                       .

       "Increased engine price, possible discontinuance of engine models, increased
       equipment costs, possible increased operating costs, and possible impairment of
       machine function may result in protracted decline in demand for new equipment after
       regulation and therefore may shift equipment sales patterns and/or delay the turnover
       that both industry and EPA desire. These effects would be most severe for small
       manufacturers of equipment Therefore, it cannot be assumed for the cost impact
       analysis and small entity evaluation that engine and equipment manufacturers will be
       able to pass through to consumers the  added costs attributable to Tier 2/3 regulation,
       or that sales of new equipment will not decline appreciably after Tier 2/3 regulation."

   As EMI offered in its letter of December 2,1996 cited above, EMI stands ready to provide
   information and assistance, as appropriate, which may be of value to EPA in meeting its
   obligations with respect to impacts on small entities.  The meeting held on January 16.
   1997 was'a start, but only a start, in that it appeared that many questfom w*re raised at
   that meeting regarding impacts on small entities which apparently had not been given
   sufficient consideration, and for which satisfactory answers apparently do not vet exist.

   EMI will work with EPA to help it meet its obligations under SBREFA. EMI believes the
   information and data will help all parties~to contribute toward development of a better
   regulation.                 .

3.  Comments and recommendations concerning Section 5fa) of the SOP.  "Equipment  ~
   Nfanufacturer Phase-in":                   -

   Some of the foregoing concerns can be ameliorated, but  not entirely eliminated,  if EPA includes
:   the following recommendations in.its proposed rulemaking;

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                    -
                      :sc::on
    A. For nonroad equipment using all size diesel engines, the equipment manufacturer flexibility
       provisions should be no less than those which are provided by the existing Tier I  rule for
       nonroad engines of 50 horsepower and greater. This requires that products using  eneines
       built before a particular effective date - which, of course, are limited by the stockpiling
       prohibition - not be included in the percent-of-production allowances of this section,

    B. For equipment using engines of SO hp or igreater equipment manufacturers (except farminz
       or logging equipment) should be allowed to install previous-tier engines in a total of at  least
       45% of one year's next-tier production (15% plus 6 times 5%) regardless of the year of
       equipment manufacture. Similarly, manufacturers of fanning or logging equipment should
       be allowed to install previous-tier engines in a total of at least 135% of one year's next-tier
       production (30% plus 7 times 15%) regardless of the year of equipment manufacture.

       The same flexibility should be afforded manufacturers of equipment using engines of.-less
       than SO hp as is given to manufacturers of equipment with engines of 50 hp or greater.  See
       the recommendation of the preceding paragraph, i.e., 45% and 135%. Reason:
       manufacturers of small equipment face the same concerns as those of large equipment.

       EMI supports the * 100-per-year' exemption to avoid disadvantaging smaller companies with
       limited product offerings, however, this exemption should be made more .flexible by
       allowing a small-volume manufacturer to apply the 100-per-year feature to more than one
       equipment model.
   C.
   D.
In addition to the above, provisions should be made to allow the equipment manufacturer to
distribute its percent-of production allowances within and between the stratified engine
horsepower bands which define the framework for the proposed emission control limits and
effective dates. This will allow each equipment manufacturer to best utilize the flexibility
provisions to meet its own unique needs, without compromising the environmental benefits
of the program.         .   .             "

Consistent with the Paperwork Reduction Act, equipment manufacturers should only be
required to maintain accurate production records with respect to types of engines installed in
equipment and to only make specific records available to EPA upon request on a case-by-
case basis.                                                .                 .  .
G'Public Pohc>.CUan Atr EPA-£mi$sion Sundardi\Anpim-EMI Comments doc

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      Januarv21. 1997
      TO:     EMI Active Member Key Contacts - Companies which use "non-road" diesel engines

      FROM:  JohnCrowley

      Last Thursday, January 16, in a meeting of industry representatives with EPA, it was learned that EPA
      is very interested in hearing immediately from companies who use nonroad diesel engines of ail sizes
      in their equipment They wish to know how EPA can expand section 5 of the "Statement of
      Principles1* (SOP) to better accommodate the needs of equipment manufacturers before issuing the
      "early warning" edition of the SOP. Their purpose is to successfully address as many concerns as
      possible now on the basis that once it gets into print as a proposed rule, changes will become more
      difficult

      EPA has published the SOP as an uAdvance Notice of Proposed Rukmaking" (Federal Register of
      January 2,1997 - copies available from EMI). EPA requests comments from equipment
      manufacturer* xnA ftthgr interested fytrrie« fry FtfrT'arv 3. 19f7.  EMI St&t VOW letters OQ the SOP
      dated December 18,1996 and (by request) January 3,1997.       ^.
      What You Should Do. Drawing from your own experiences as yom
                                        wfefc your engine supplier
     to comply with the Tier 1 regulations that went into effect January t» I99tv-1997, or at you prepare for
      1998, please inform EPA of your proposed options to provide the best fluibflifr fir your company to
      irrnmmndntr'jmir nrrdi for rnrnpHnnrr iwitli ttir plinnrrl Tirr T mri Thr 1 irgiriarinni •• niillini il in
     the SOP. For example, how much time do you need between recoving a new eaa^ne prototype and
     being able to go into prc^uetlcBwimyow product? How much lead time do you aecd from your
     engine supplier with bfonnatiaD oncosts, engine design and perfbraaaee changes * jf your current
     supplier plans to continue production of the size and class of engines yov caamHf purchase1?
      If your company
      the SOP's
      legislative
      impact on a
      distributors/!
      all EMI mem
      A major reason EPA is soliciting the information is that, by their mlimialiii, At eoeto and difBculties
      for equipment manufacturers to meet the Tier 1 regulations significantly rrcfertrd EPA's projections.
      Accordingly, they are very sensitive to how the Tier 2 and 3 standards will impact you! All parties.
      including EPA, expect Tier 2 and Tier 3 to impact both engine and equipmenfmafcers much more
      severely than Tier 1!                ...                 .                  .
            *      .               .    .                         ,   .                 Continued...
     to be classified as a "small DusJBesC'joudrfiBtery should include
feojomic impacts. The Congress has provided • new, powerful
   EPA to adequately justify any regulation which will have a significant
  of small business entities.  EMI members-aad their small business
        -can use this framework toassist n developing better rules for
          serve.
EQUIPMENT MANUFACTURERS INSTITUTE • 1.0 South Hiv»r*de Plaza • Chicago, illinoii 606O8-3710 - 312 32l-i*7Q'• FAX 3'

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                                                                      •v-
Recommer.ded.Action: Taking into account all of the above, propose to EPA an.opuonai equipment
manufacturer's flexibility scheme, or a relief provision such as a waiver.if you cannot obtain the
necessary irtformation/prototype engines from your engine supplier in time to meet the SOP Section 5
requirements.  Include projected small business impacts, if appropriate.  Send your comments jn.
duplicate - bv February 3 if at all possible - to:
     Public Docket A-96-40
     Waterside Mall - Room M-1500'
     U.S. EPA
     401 M Street, S.W.
     Washington, DC 20460
                                              Mr. Donald Kopinski
                                              Office of Mobile Sources
                                              EPA Motor Vehicle Emissions Laboratory
                                              2565 Plymouth Road
                                              Ann Arbor, Ml 48105
Please send a copy of your comments to EMI.  Contact the writer if your require die Advance Notice of
Proposed Rulemaking, SOP, or additional information about this EPA initiative.  Contact EPA's Tad
Wysor (tel: 313-668-4332) regarding EPA's safeguard policy for confidential information.


                  r cflu
                              rflaiHjJKtUrers to respond to EPA. If you

              t* \jf\u An ttttt ft/fit* nttRptftit ivtfnfitmtinn tmitt FPA tm
                                                                            eatA ttll thftit «v
I.  What are the specific impacts of the EPA Tier 1 regulations on your company?
2.  How many people were involved in the effort to comply with Tier 1 ?
   staff spend on this effort.
                                                                                   of hours all
3.  Describe the changes the engine rr
   model(s).
                                         «Ks) executed which in turn afieaed vow equipment
4 .   Estimate the total number of dollars expanded for complying with the Tier I regulation, based on the
    changes executed by the engine manufacturers.

5 .   What was the percent increase m cost in each piece of equipment due to the Tier 1 regulation?

6.   What percentage of the increased cost did your company pass on to the dealer and cuMomer?
7.
   of the Tier 1
                                             ^
                               what they would have paid without the Tiar t

8.  What is yowflNPV'* «0eation(s) to EPA to minimize the effccurof EPAfs proposed Tier 2 & 3
    rule? 11 Jinhi iWssi* if filial MIII  TPA i inU  fi	I In il	iMliiu hu» ii T>ai minimi mlilM IIII|IIK i
    of the propose^fdlei on smttfenthies.)

9.  What additional small businesses does your company .believe will be impacted by the SOP Tier 2 & 3
.   standards, and why?

 10. Estimate the costs and personnel for projected reporting record-keeping and other compliance
    requirements such as new personnel with a professional skill necessary to keep die records required by
    the proposed new rules.
  5erven«mid«i\Pubiic PolieyClcm Air\EPA*Emistion SUndardsvOT-l Key lssue.doc

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                                   Equipment Manufacturers Institute      Re-.-.sei v.-.  ..   .--

                     Sarr.cie Questions for Engine and Equipment Manufacturers
                                                               !
      Tichnoioeical. Cost and Economic Impacts of Nonroad Engine Emission Controls after :nofl

     Expected EPA "Tier 2 •?" Rulemaking and New European Tier 2 Standards for New Heaw.Dim
          '                           Nonroad Diesel Engines
                                i
^        .                .             INTRODUCTION                                    ,

 This list of questions is provided to assist equipment manufacturers in determining the technological
 feasibility, cost, lead time requirements and other impacts, if any. on their products (equipment, not
 engines) and their end markets of expected future EPA Tier 2 and Tier 3 and European Tier 2 emission
 standards for new heavy-duty nonroad diesel engines. EMI members should understand that these
 probable new regulations, as presently conceived, could have a significant impact on the design.
 manufacturing, cost, distribution, and possibly market acceptance of new agricultural, construction.
 industrial and related nonroad equipment - impacts possibly far greater than to meet the Tier I standards
 which go into effect in 1996-2000.  See EMI's Kev Issue Bulletin of July 29.1996 for more information
 on the new EPA Tier 2/3 and European initiatives and their challenges for equipment manufacturers.

 Equipment manufacturers need to assess these impacts, not only for product/market planning reasons.
 but also to be able to comment to EPA toward the goal'of effecting reasonable regulations early in the
 regulatory rulemaking process beginning (est.) in late*1996 and extending into. 1997. They also need to
 assess future regulatory impacts to be in a position to aid their dealers and customers in representing
 their interests in the rulemaking process.                                 .

 Equipment manufacturers" ability to determine equipment impacts of the expected Tier 2 and Tier 3
 engine emission standards will be highly dependent on their success in obtaining projected engine
 impact information from their engine  suppliers. Pans I. II and III of this sample questionnaire contain
 typical questions to ask your engine suppliers for the engine models you purchase from them.  Pan III is
 meant to be addressed by the engine and equipment manufacturer jointly, and Pan IV by the equipment
 manufacturer alone. These questions should .be viewed only as a starting point, or example.
 Specific impacts, if any, should be determined separately for each engine and each equipment
 model.

 It is recommended that you carefully document both the information you obtain from your engine
 suppliers and what you develop yourself related to the likely impacts of proposed regulations. Use this
 information for yjiur own business planning purposes, for preparing your company's comments to EPA.
 and .for helping your equipment dealers/distributors and end customers to effectively represent their
 interests in the process.  If an engine manufacturer states that there will be no effects of regulation, such
 as higher costs, lower performance, or discontinuing some engine models, ask for written confirmation..
 Also be sure to document any refusal  to supply sufficiently detailed information.  Keep a^record ot ail
 correspondence.  Please do  not send any information of this kind to EMI.

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               M                              SAMPLE QUESTIONS
                              i     .                             .                           —,
          The following questions are suggested for each impacted equipment/engine.model combination :h^:...
          expect to have in production on the probable effective date of the new standards. •
                                                             t

          Part I:  Engine Feasibility    .        .

          1.     Does the engine manufacturer now have the technological capability of meeting the Tier 2 and
                 Tier 3 standards EPA is expected to propose for engine models which you plan to use in your
                 equipment, and (if applicable) the new European standards, at the time the standards are likely to
                 go into force?                       -                                                   .

          2.     If the answer to #1 is "yes." will the engine manufacturer assure you that it will implement that
                 technology for the particular engine models you are currently using, i.e.. these models will not be
                 discontinued as a result of regulation?

          3.     If the answers to  * 1 and #2 are "yes."  what, if any, changes to each engine model will be
                 necessary and what will the engine impacts be?  Will different engine configurations be required
                 for the U.S. and Europe?  (See.Pans II and III.)

          4.     If the answer to # 1 is "no," can the engine manufacturer give assurances that the expected
                 standards will be met for each model engine and that the required certifications will be achieved(
                 by the applicable effective date?.

          5.     If the answer to -2 is "no." can the engine manufacturer supply a different model engine which
                 will meet all EPA requirements? Will it also meet European requirements?

          6.,     When will the first emission-controlled prototype engine be available, and when will production
                 engines be available?  This question is critical for determining the lead time equipment
                 manufacturers will need.

          7.     Will the engine manufacturer warrant to you. its customer, that the emission control system will
                 remain effective  for the "useful life" of the engine as prescribed by regulation? This is a very
                 important question because:
          t                            .                   .
                 (a)    the equipment manufacturer may be  responsible to "pass through" the engine
                        manufacturer's warranty to the dealer/distributor and ultimate purchaser, and

                 (b)    the equipment manufacturer or dealer may have the responsibility to help locate machines
                        in the field for recall purposes if EPA finds that in-use engines no longer meet the
                        standards and orders a recall.       •.
.

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      H: Means of Compliance.- Engine

 For engine models you use or plan to use which the supplier says can be brought into compliance inj  '
 will continue to be available, it is suggested that you discuss, in detail, the technologies that will be
 employed and obtain information on them you will, need for your own equipment technolocical
 feasibility, cost and lead time evaluations. Examples:               •
                                                                                         1
       	   Different .type of fuel injection pump/system, such as hydraulic-actuated injection

       	   Use of electronics for fuel injection control

       _.	   Addition of a rurbocharger                                             .

       	   Addition of a turbocharaer with air-to-air aftercooling

        -   •   Addition of a rurbocharger with water-to-air aftercooling

       	    Different engine displacement (smaller or larger)
                                          /
       	   -Different compression ratio                     .                         •    •

       	    Addition of smoke-limiting device-(to suppress smoke, formation during engine      '
              acceleration)           ,,

       	    Exhaust  gas recirculation    N   -

       	    Addition of a paniculate trap     _    .

       •  •     Addition of a catalytic convener
                                                     •-> '•
       	    Necessity to use an alternate fxtel. such as methanol or compressed natural gas (CNG i
              (Tier 3 only)  .                                                       .
     ' ,  ,  i           •                           •**        '        '
       	    Others (identify)

Important Note: Be sure to determine whether the same engine model you now use, but with emission
controls, will be available after regulation, or whether a different model engine will be required.  Also be
sure to ask  if the engine manufacturer intends to use "averaging, banking and trading" (ABT), and if so.
when  your company will be asked to begin accepting emission-controlled engines.  With ABT the
engine supplier may want to ship emission-controlled engines before the effective date of the applicacL-
standard, or after the effective date. The effective date may differ depending on the type of equipment
you manufacture and your sales volumes. Also, obtain the engine manufacturer's estimate of any unit
cost or operating cost increases due to regulation. Ask about the "emission defect warranty." the pus-
through engine maintenance and use instructions expected to be required by the proposed rule, and :?.-*
possibility of an engine recall order and how it would be handled. '

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Part III; Impacts on Equipment Manufacturers' Products
                    »                                                                i
The effects of engine emission regulations on equipment, if any, are expected to be highly dependent
the "mix" of technologies the engine manufacturer will use (Part II) to meet the standards. Some of the
possible impacts you may wish to discuss with your engine supplier follow. Wherever possible, develop
a quantitative measure of the impact so that you can relate it to any required equipment design changes.
changes in machine performance, cost, lead time needs, and ultimately, user acceptance. To avoid
unnecessary engineering R&D and capital costs, consider timing future equipment model changes and
new-product introductions around the dates when engine manufacturers are likely to change their   .   /
product offerings because of the tighter emission rules.
   f

Possible jmpacts:

       	   engine availability - same engine, or different model, from same supplier? Need to
             change to another supplier?-       .    .                 .

       	   engine cost increase                                .                    •        .

       	   lead time for (a) prototype engines (b) production engines

       	   . engine power, rated speed and torque curve characteristics, esp. low-end torque

       	   torque converter/transmission match         .          .

       	,_   machine hydraulics

       	   engine envelope size                                   .

      , A	   addition of heat exchanger for air-to-air aftercooling

       	   engine weight  .                                                        .

       	  engine heat rejection to coolant (affects radiator size), for air-cooled engines, engine air
              flow requirements       .   .

       	  . engine electronic system control requirements for the equipment

       	  exhaust system requirements          '       ,  .'                     .

       	   starting characteristics

       	   fuel consumption (energy)

              noise (need to look at total machine noise - e.g.. larger fans create more machine noise

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       	   durability-reliability

     "•  !_    serviceability

       	   prescribed engine labeling requirement (to ensure visibility)

       	   engine manufacturer's warranty pass through

       	   engine maintenance and use requirements                             .

       	.  equipment cost increase                            •                       .      -


Part IV:  Impacts on Equipment Users

It is suggested that when you evaluate the impacts on your company's equipment you bear in mind the .
possible consequences of regulation for equipment dealers, customers and the industries you serve.
Possible consequences of engine emission regulations include:        .              .          .

       (1)    increased base prices of equipment due to possible engine cost increases, equipment
              redesign, and discontinuance of some model engines:                       '

       (2)    decreased equipment workload capability;

       (3)    increased operation, maintenance, and fuel expenses;

       (4)    decreased reliability;.

       (5}    increases in capital and operating costs to dealers and owners;

       (6)    lower resale value; and

              decreases in retail sales of new equipment after regulation.
The net effects of these impacts, if severe, could be several years of sharply lower new equipment
(if owners decide to keep plder, "pre-regulation" machines longer to avoid the cost or performance
penalties they may-believe would result from regulation), and consequently, a general decline in the
productivity and competitiveness of the nation's major industries, agriculture and construction. This, ot
course, would have implications to all parties involved - equipment manufacturers, engine
manufacturers, other industry suppliers, equipment dealers, farmers, contractors, consumers, regulator-
and environmental interest groups.                  .                          .       .
                                          end -        d publiepolic> cieantirEPACotresp'LEVZQTNN joe

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                  EQUIPMENT MANUFACTURERS INSTITUTE
    •C South Riverside ^'aza • Chicago .iimois 50606-3710 • 3i2'32M47Q . p
                                                                   313 2
 December:. 1996
 To:    Tad Wysor. EPA Nonroad Diesel Team
       Bryan Manning. EPA Nonroad Diesel Team

 From: JohnCrowley
    .   EMI Director of Engineering Programs
Re:
Development of the Notice of Proposed Rulemaking for the planned Tier 2/3 nonroad diesel
rule - Response to your request of November 18. 1996 re impacts on small businesses (small
entities)
As you have requested. I have reviewed the EPA-prepared '•Summary .of EPA Outreach: Impacts
on Small Entities of Nonroad Diesel Regulations (as of 11/15/96)." This letter and the four-page
enclosure entitled "Notes for Telephone Interview on the Nonroad Diesel SOP (11/7 96)" constitute
the EMI aaff response to your request and are provided for "perspective" and are not official EMI
positions. As you have indicated, EPA will call a meeting in December, 1996 or January. 1997 to
enable EMI member equipment manufacturers, particularly the many smaller companies which have
not been "in the loop" for the SOP or this initiative, to learn about it from EPA first-hand and
provide their own constructive suggestions. As I have mentioned to you EMI welcomes this
outreach, including the planned meeting, which we view as an important and necessary element of
the regulatory development process. Therefore, EMI has offered to provide logistical assistance
with the meeting arrangements and an announcement of it to our members.

In preface to my comments on the subject EPA request regarding potential  impacts on small
entities, please be aware that the relatively few EMI member companies which are familiar with the
Statement of Principles (SOP) have voiced a variety of viewpoints on it These viewpoints are set
forth without attribution in the enclosure to this letter. EMI  does not have.a "position" on the SOP.
but we thought it-would be useful for EPA to be aware of some of the contrasting views our various
members have voiced concerning it.  .
EMI staff comments on "Summary of EPA Outreach:
Regulations (as of 11/15/96V  •
                                          Imoacts on Small Entities of Nonroad Diesel
Background: We welcome EPA's suggestion that the flexibility options the SOP provides might be
expanded to better account for small entities, and look forward to discussing this aspect at EPA's
meetine mentioned above.    .                 •                       '
  Serving Manufacturers of Agricultural. Construction. Forestry. Materials Handling anti Utility

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(i        industries  ^.:'fecied.  Th:s listing needs to be completed by adding ".he follc'A-.r.i r-res ::" 5—1..
          entities:
             •  Equipment distributors.dealers (i.e.. wholesalers.)
             •  Farmers, ranchers, construction contractors! loggers, mining companies, rentals, etc. - the
                ultimate purchasers and users of nonroad vehicles (equipment).
             *  Suppliers of pans, components and sen. ices to engine manufacturers and equipment
                manufacturers.         '                               '-                          •

         For even-thi largest engine manufacturers and equipment manufacturers, many of their
         (downstream) wholesale sellers and end customers are small businesses, as are many of their
         (upstream) suppliers. EPA has rightly identified the potential concern that the
         Tier 2/3 regulation may cause equipment sales patterns to shift and/or delay the turnover that both
         industry and EPA desire ("Summary of Input from Small Entity Advisors," p. 2). When the
         economic impacts of this regulation on all entities in the chain of commerce due to increased costs
         and a possible protracted decline in the demand for new products are taken into account, and the
         potential impacts of such a decline in new equipment sales on the vital agricultural, construction and
         related sectors of the nation's economy are considered, the cost of this regulation could be far in
         excess of SI00 million. It would indeed be disingenuous, to say the least, if EPA intentionally
         omitted evaluating the cost/economic impacts on the above-listed small entities to avoid reaching a
         conclusion that the planned regulation  would have an economic impact exceeding this amount.

         EPA and its study contractor, IPF, Inc., are urged to review the  parts of the legislative history of the
         Clean Air Act Amendments of 1990 and the Tier 1 nonroad diesel rulemaking record which
         enunciate the differences between the nonroad engine/equipment industry* and the motor vehicle
         industry, with respect to the comparatively very low sales volumes, long product lives, etc. of the
         former, and to evaluate the significance of these differences for costs, economic impacts; and the
         ability of small  entities to bear these costs and impacts. Additional cost information is expected to
         be forthcoming from the National Economic Research Associates study now being done under
         contract with the Engine Manufacturers Association.

         Small Entity Advisors': EMI will provide EPA with a list of several national organizations
         representing equipment distributors, dealers, and purchasers which, as we have indicated above.
         must be included in the Agency's cost analysis and small entity impact study.                    .

         We question why engine rebuilders/remanufacturers are included, unless EPA anticipates that one
         or more of the states will seek to impose a retrofit requirement for "not-new" nonroad diesel engine*
         to augment the effectiveness of the EPA rule covering new engines.  Indeed, rebuilders/
         remanufacrurers-would stand to gain from a state retrofit requirement for "not-new" nonroad
         engines, but at the expense of the owners of nonroad equipment.  Therefore, if a state-imposed
         retrofit requirement is planned, it will be even more important for EPA and IPF, Inc. to  estimate the
         economic impacts of this regulatory approach on equipment dealers/distributors and end
         purchasers/users. Please explain.

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 As r.o's- icc'-e. -*.e •• :evv-:r.e "equipment manufacturer f:ex:bi:iv." rrcvs-.cn :: '.r.e SO? i>''  -  - -
:o possible-•..T.rrc'.err.ir.:. and look forward :o disc'~ss;r.g-:he '.ar.ous options a: E?.Y j-:.ir_-=u     >
meeting for equipment manufacturers.         •               -            .

Summary of Input from Small Entity Advisors:              •

Equipment Manufacturers:  Reword the first buileted item to read: "Increased engine price, possibk
discontinuance of engine models, increased equipment cost, possible increased operating costs,  and
possible impairment of machine function mav result in protracted decline in demand for new
equipment after regulation and therefore may shift equipment sales patterns and/or delay the
turnover that both industry and EPA desire.  These effects would be most severe for small
manufacturers of equipment. Therefore, it cannot be assumed for the cost impact analysis and small
entity evaluation that engine and equipment manufacturers will be able to pass  through to
consumers the added costs attributable to Tier 2/3 regulation, or that sales of new equipment will
not decline appreciably after Tier 2/3 regulation." (Suggested new wording underscored.)

EPA should also list as an "issue" the fact that EMI's non-vertically integrated equipment
manufacturers have indicated difficulty in obtaining from their engine suppliers the information
they will need to evaluate the impacts of regulation on themselves.  In that the determination of
impacts on  small entity equipment manufacturers is of necessity dependent on complete and honest
(albeit confidential) disclosure on the pain of the engine supplier to its customer -  including any
intentions of dropping engine models - EPA must place a very high priority on persuading engine
manufacturers to provide this information to their customers. If EPA's efforts in this regard are
unsuccessful, then the Agency should, at a minimum, provide small entity equipment manufacturers
with a.set of hypothetical scenarios with respect to engine availability, cost increase, envelope size.
additional cooling requirements, performance changes, etc.. so that they will be in a position to
assist the Agency with its rulemaking and be sufficiently informed to comment on the NPRM.

Others:  Add categories for suppliers, equipment dealers/distributors, and the ultimate purchasers
and users of new nonroad vehicles, as recommended above.

We recognize that EPA is only in the early stages of its cost/small entity impact analysis, and we
hope that these comments are helpful.  EMI stands ready to  address any questions you may have
concerning this letter and the enclosure, to promote attendance at EPA's planned meeting in
December or January, and upon request to provide any additional information, as appropriate.

JHC enclosure

 ServeremidawFuWte Polic^Cle'm AMEPA-EmiMion SumUris>Tier20 NPfLvil doc
                                                                                               V,.

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                 ..--" Cro-.s :«:•'. £\H Dirsc:or of cngir.esr-.r.g ir.d Safety Prcgrirr.s
Introduction
    Equipment Manufacturers Institute .(EMI) represents manufacturers of off-road equipment, r.c;
    engines.                                                       .          .

    Most EMI members purchase engines from independent suppliers. So they depend on their
    engine manufacturers for information and assistance when it comes to engine technology •
    matters, including emissions controls.
1.  What are the costs likely to be to equipment purchasers and dealers?

•   Equipment manufacturers don't really know yet what their own costs will be. much less the
    costs to equipment purchasers and dealers.                                  .
•   EMI members are looking to their engine suppliers now to tell them what wilt happen to the
    engine when the Tier 2 and Tier 3 rules go into effect. Will some engine models be
    discontinued? Will equipment manufacturers have to change engines because a new emission-
    controlled engine won't fit in the machine, or an engine becomes non-competitively priced?
•   Equipment manufacturers are just now finding out what the true costs are of meeting the Tier 1
    standards which take  effect in 1996-2000 - and the costs are higher than anyone knew when the
    Tier I rule was proposed back in 1993. .
•   There undoubtedly will be some passing through of costs to equipment purchasers and dealers.
    Market competitive forces will determine how much.                                   ,

2.  What are the costs likely to be to those who me the equipment, like farmers and
    construction workers?  Are there likely to  be detrimental  effects?

•   None of these costs, or their economic effects, have been determined yet
•   There may be cost increases to farmers and construction contractors for equipment built to the
    new standards, but any detrimental effects are likely to be minimal. Apart from cost increases.
    perhaps the greatest detrimental effect that could occur would be fewer new equipment models
    to choose from. It is  very unlikely there will be detrimental effects such as lower performance
    or less reliable equipment. EPA would have to relax or loosen its engine emission standards to
    prevent such things from happening. Let me explain why.
•   For any product such as a car, or a VCR. or a washing machine, the seller of the new product is
    always competing with what the consumer is using now for the customer's dollar.  If fanners
    and contractors didn't think they were getting good value in buying new equipment with
    emission-controlled engines, they could hold on to their older machines for years - even
    decades - and just keep repairing and rebuilding them. Anticipating such a possibility, some
    equipment manufacturers might drop out of the market rather than take the risk of offering a
    product that wouldn't sell. "Raise the meat high enough and the dogs won't jump."
    The Congress would probably be very unhappy with EPA if its regulations caused farmers and
    contractors to keep their old equipment for any prolonged length of time, because in that case
                        .              /                  •
                                             1                  .        •

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                                                                                               \
3-  Do vou favor the statement of principles overall? Was it necessary? What specific   .
    concerns do vou have with it?                 ..
                  *                                 ,
•   EPA wanted it. so they must-have thought it was necessary.  EMI was not directly imohed. bJ:
    we were kept informed and given the .opportunity to comment throughout the nonroad SOP
    negotiations; We understand that engine manufacturers still question some of EPA's and
    California's assumptions, such as how much off-road equipment really contributes to total
    emissions inventory - particularly the growth assumption. (See response to.Question 6).  -

A.  Positive features of the Statement of Principles for equipment manufacturers     .

•   The process was sound. There was give and take on all sides, and agreement was reached. This
    alone is very promising.

•   In concept; it takes away some of the uncertainty and unpredictability that you often have w ith a
    new regulation.  We are going into uncharted waters with this new rule. This makes it very
    important for equipment manufacturers to have some assurance of stability for their long range
    planning. The Statement of Principles is a positive step in this direction.
•   It provides phase-in flexibility, which should make compliance easier and less expensive  for
    both large and small equipment manufacturers, with no significant clean air penalties. There is
    also an opportunity for additional flexibility features to aid smaller manufacturers. EPA wants
    to explore this aspect further with equipment manufacturers, and EMI will certainly cooperate.'
•   California has agreed to accept uniform national standards. This is especially important for an
    industry which builds a lot of low sales volume equipment, such as farm and construction
    equipment.  Costs skyrocket when you have to meet two or more different standards. The SOP
    also is a positive move, from the U.S. side toward harmonizing engine emission standards with
    ihe European Union. Japan and other nations.'         ,                       •    . -
•   I believe that equipment manufacturers as a whole are pleased to leam that their engine suppliers
    have taken a positive step toward avoiding a costly and contentious battle with EPA and
    California over these future standards, with uncertain outcome, and at the same time are
    committed to maintaining the high level of engine quality, reliability and performance we're
  ,  seeing in today'sdiesel engines.
8.  Concerns about the SOP voiced bv some equipment manufacturers

•   EPA could tighten the standards for ozone and paniculate matter in the atmosphere (N AAQS'j.
    Raise the barr- EM! does not know whether the possibility that the ozone standard will be
    tightened from 0.12 to 0.08 parts per million is reflected in the SOP.  This would be a good
    question for EPA.
•   Europe may not adopt the same levels and dates.
•   Short period of stability between Tier 2 and Tier 3.  Lead  time, particularly for equipment
    manufacturers which don't make their own engines. The  SOP's technology review provision :
    200! for Tier 3 is encouraging, however.                 . (

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    Tarter \r. the i:.T.osrhers aior.e. -'-vuhoui regard to other .mporar.t factors. There ;s a r.e-c •
    tike i r.::!i::^ ••:•;••«• engine emissions, equipment'noise, energy, saie-.y. greenhouse iiies
   ' •pr-.r.c-a.:;. :dr?onu:oxide!. energy usage, peribrrnar.ee. reliability, cost, iead nrr.e. aii hi\- -.;
    be considered together.  The SOP doesn't do this--- it may be giving us zsuboptimci soiutior. .-'
    which ozone and paniculates have been looked at in isolation. If I spend ail my money on a
    new car and then can't pay the rent or my children's medical bills. I've subopnmned. There :?
    some concern that the SOP reflects a suboptimal imposition on equipment manufacturers and
    the industries they serve. This could translate into real problems later at the consumer level.
    Suboptimal solutions of environmental .issues can be avoided if industry, government and other
    stakeholders  in the U.S., Europe and Japan sit down together and work through the trade-offs ••
    such as when engine emission standards go down equipment, noise levels may go up - and agree
    on a reasonable balance between  the various environmental, energy, and economic concerns.
    including international trade.  EMI is willing to participate in any such approach.  Some
    compromises will have to be made.

    Equipment technological feasibility hasn't been demonstrated yet. If these engine standards
    result in equipment being produced that is not salable, the regulation will have failed. This
    would be everyone's nightmare -engine manufacturers, equipment manufacturers, dealers.
    farmers, contractors, consumers, and clean air. (See response to Question 2).
    impacts on small businesses - see Question 5.
    Fate - the unknown: the unforeseen: the unexpected. For example, no one knows whether the
    U.S. economy in 2001 jpr 2004 or 2008 will be strong enough to support this new regulation and
   the cost challenges it will bring.
«  In summary on the SOP. equipment manufacturers hope that the engine industry, EPA and
   California view this SOP more as a mutual understanding to "date" for awhile and see if the
   relationship works out - that it's not a commitment to marriage. If new information becomes
   available - such as EPA raising the bar by tightening the National Ambient Air Quality
   Standards - or the downstream costs and economic impacts are much higher than anyone can /
   know today - any of the parties that signed the pact can ask that it be renegotiated. It wouldn't
   make much sense to be locked into an agreement when you know the ground rules might
   change.    •

4. What are vour specific concerns about the continued availability of certain engines?

   Equipment manufacturers who purchase engines from engine suppliers are very concerned about
   this added uncertainty. "Availability" may not be the real issue; engines of some kind will   \
   always be available. The issue for equipment manufacturers is how much the machine would
   have to be changed to use a new, and perhaps different, engine. If the engine manufacturer can
   focus its limited research and development dollars and capital outlays on fewer models, its
   resources  will stretch further. This may help the engine maker, but would not be good for
   equipment manufacturers and their customers. If as a result of the Tier 2/3 regulation the engine
 '  industry pares back its model offerings, equipment manufacturers' costs would go up
   substantially  more, and lead time requirements would be significantly greater, than would be
   predicted  if there were no reduction in the universe of nonroad diesel engines now available in
   the marketplace.  The forced switching from an existing engjne model to a different one. from.

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:r.a:
        .c er.sue
                                           0.!-ii cause* :;;-•. u.s;c~i .r. vr.s i~-.rr.e--'  -;_.--
      -.:;r, ••«o-;:: —or. :er.a;r.iy be'feli at the equipment isaier disir.ruv:: ir.c er.i :.::;-;-  -  :
                                                                                    "  "
5.  What are the potential impacts on small businesses?
                   i     '                                            '
Ref: Regulatory Flexibility Act
Ref: Small Business Regulatory Enforcement Fairness Act of 1.996.
                         i
•   Margins will be squeezed.

•   Affordability - availability and cost of capital constraints could stress smaller manufacturers.
    equipment dealers, fanners and contractors to the point where they might not survive.
*   Congress has given EPA a particular responsibility to make sure that its regulations do not harm
    small businesses excessively. Only now is EPA beginning to look at the possible impacts on
    small businesses. We don't believe they did that before the SOP was signed. IPF. Inc. is doing
    a small business impact study for EPA, and EMI is assisting EPA in understanding the industry
    better than it does ' now.                                                    .
                 i                                 •

6.  How much of a pollution problem do vou think these engines pose? la it significant?
    Should the engine emissions have been regulated?

*   California and EPA say they do.  We question their growth assumptions for the farm and
    construction equipment markets, which may result in overstatement of the emissions
    contribution from this sector to total emissions inventory.
*   Some EMI members believe that Tier 1  is an appropriate stopping point for regulation.
•   Off-road farm, construction and industrial equipment supports industries which are the
    backbone of the nation's economy • agriculture, construction, mining, forestry and infrastructure
    * highways, roads, bridges, railways, water resource management, waste processing and
    landfills, and our vital utilities: electricity, telephone, gas. water and sewer.  This is a high risk
    rulemaking for EPA. The Agency has to avoid doing anything that would mess up these
    important industries, as consumers nationwide would suffer the consequences and our nation's
    goods and services would become less competitive in the international marketplace.
   , Construction and agricultural equipment are the second largest contributor to U.S.
    manufacturing exports, after commercial aircraft.                .
7.  Please discuss the NERA study and the information it will provide.

    The National Economic Research Associates (NERA) study, sponsored by the Engine
    Manufacturers Association with EMI co-funding, focuses on engine and equipment
    manufacturers' costs to meet new emission control requirements.
    NERA is looking at different levels of emission controls, and seeking to find that point where
    manufacturers' costs begin to skyrocket and any more stringent regulation just wouldn't make
    sense. The NERA study results are needed before impacts on equipment dealers and users can
    be determined. Visit with EMA for more information on the NERA study.

G Pusiic Poitc>
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                     UNITED STATES ENVIRONMENTAL PRCTtC"CN AGENCY


                           .  '     A\,\A? = C=  MICHIGAN Ac1:;   '  -
 November 18, 1996
 Mr. John Crowley               •                   .            '                   -    .
 EMI                            .  -   '
 10 S. Riverside Plaza
 Suite 1220                                                              .
 Chicago, IL 60606

 Dear Mr. Crowley:

 We are writing you and several others to follow up on the valuable conversations we have had
 recently relating to the potential impact on small entities that might result from the new emission
 standards EPA is considering for diesel engines used in a wide range of nonroad equipment.
 These conversations have increased our understanding of how such a program might affect small
 businesses and have given us a chance to discuss specific provisions the Agency is considering to
 minimize the effects of the program.

 As we discussed with you before, we are early in the rulemaking process. There is still time for
 ideas about how the program should be structured to be incorporated into the Notice of Proposed
Rulemaking (NPRM) we are developing. After the proposal is published, there will be the
normal opportunity for parties .to comment on the program. However, the more ideas, options.
and concerns that we can include now in the proposal itself, the better the opportunity for
 interested panics to participate.    ',''•'

 We are grateful for the time and effort you have already, given to this process.  To assist you in
contributing further on behalf of yourself and those you represent, we have enclosed our
summary of what we have heard so far from you and other industry representatives. We would
very much appreciate your reviewing the enclosed outline for accuracy and completeness from
your perspective.  We would also welcome any additional concerns and possible solutions that
you think the Agency should include in the proposal for comment.

As we discussed earlier, EPA also needs to continue assembling general information to
understand industry characteristics and the ways in which such a regulation would affect
individual companies, especially small ones. Thus, we would value any information you can
assemble about a) the numbers, sizes, and tines of business of small entities that might be
affected (not necessarily limited to those you represent), b) information relating to potential costs
that might be attributable to the program, c) new reporting or recordkeeping which might result
 from the program, and d) any federal regulations that duplicate, overlap, or, conflict with this
 program. Our contractor assisting us in characterizing the affected industry, ICF, may also be in
 touch with you on some of these questions.

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vVe will call you in die next few days to set up a time-to talk about the enclosed outline and any
other issues you may have. You can of course call' us any time.  Thanks for your help in  '
improving the quality of EPA's decisions in'this important area.

Sincerely,          "                          .  Sincerely.
Tad Wysor (313) 668-4332                       Bryan Manning (313)741 -7826
Nonroad Diesel Team   *                        Nonroad Diesel Team

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   Summary of EPA Outreach: Impacts on Small Entities of Nonroad Diesel Regulations
      ;                              (as of 11/15/96)

.Background  ...                                               .

The signatories to the Nonroad Diesel SOP specified a set of new emission standards for most
nonroad diesel engines that EPA is expected to propose  in order to provide much-needed
emission reductions.  SOP provisions that aim to address impact on small entities include:

       Provisions intended to ease the transition to new engines by manufacturers of equipment
       that uses diesel nonroad engines.    >
       Special provision for production lines of less than 100 pieces per year.

 Industries Affected
                          * '                   '-                  •
 Three separate industries that are potentially affected by the new program contain small entities
 (according to Small Business Administration (SBA) guidelines): Nonroad diesel engine
 manufacturing, manufacturing of nonroad equipment, and the rebuilding or remanufacturing of
 diesel nonroad engines.           ,

 According to SBA, businesses with less than the following numbers of employees or dollars of
 net worth are considered "small entities" for purposes of EPA's analysis.           '

       Manufacturers of engines                       1000 employees

       Manufacturers of construction equipment            750 employees
       Manufacturers of industrial trucks                  750 employees
       Manufacturers of other nonroad equipment          500 employees  "

       Rebuilders/Remanufacturers of engines            $5 million

 Small Entity Advisors

 EPA has been in contact with the following businesses and organizations to date: -

        Nonroad Diesel Engine Manufacturers
              Engine Manufacturers Association (EMA) (Michael Block)
              WisCon Total  Power (Dee Lloid)

        Nonroad Equipment Manufacturers
              Equipment Manufacturers Institute (EMI) (John Crowley)
              Outdoor Power Equipment Institute (OPEI)  (John Liskey, Bill Guerry)
              Industrial Truck Association (ITA) (Bill Montweiler, Gary Cross)
              Construction Industry Manufacturers Association (CIMA) (Edward RoszkowskH

        Nonroad Engine Rebuilders/Remanufacturers         '
               Automotive Engine Rebuilders Association (AERA) (Michael Duebner)

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Sum mar- or''r.r-jt.from Small Entity Advisors

All contacts have 1914 EPA that they were either involved in the SOP or are generally aware 01"
the SOP and its equipment manufacturer flexibility provisions. EPA.was able to have
conversations with each of.these contacts prior to. official release of the,'SOP in the Federal
Register.

Representatives of small entities have not completed their discussions/assessments with
individual companies., However; the following issues have already been raised for EPA
consideration:    "'..'';

       Engine Manufacturers
              Impact of new standards will be relatively greater for a small company because
              outfitting of engine test cells is just as expensive as for larger companies, but there
              are fewer sales across which to recoup this cost
       -       Costs for R&D, tooling, etc. will also represent a relatively large fraction of a
              small company's assets.

       Equipment Manufacturers
              Increased engine price may shift equipment sales patterns and/or delay the
              turnover that both industry and EPA desire.  These effects would be most severe
              for small manufacturers of equipment.
              Equipment manufacturer flexibility provisions in the SOP are welcome.
              However, to have value, at least some manufacturers will have continue to   .
           .   produce older-type  engines.
              For diesel forkJifts, OSriA ambient carbon monoxide limits (especially as applied
              in MN and other states?) need to be assessed for possible overlap.

       Engine Rebuilders/Remanufacturers      •                      .
              EPA plans to propose provisions relating to rebuilding and ^manufacturing of
              nonroad engines that are.identical to the provisions the Agency proposed for
              highway heavy-duty engines, in close consultation with the rebuilding/
              remanufacturing industry.
              Introducing the same provisions for nonroad engine rebuilding/remanufacruring
              does not appear to raise new issues for this industry.               •    , ,

Next Steps                         -           • .'         '        -

EPA will add issues to this list as they come to our attention. Discussions wilt continue to
explore potential options EPA could incorporate into the proposal which might address these and
other issues.                                                        .

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