United States        Air and Radiation      EPA420-R-01-048
          Environmental Protection                September 2001
          Agency
&EPA    Report of the Small
          Business Advocacy
          Review Panel On Emissions
          Standards for New
          Compression-ignition and
          Spark-ignition Recreational
          Marine Engines
                              y£u Printed on Recycled
                              Paper

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                                                    EPA420-R-01-048
                                                      September 2001
   Report of the Small Business Advocacy Review
        Panel On Emissions Standards for New
       Compression-ignition and Spark-ignition
              Recreational Marine Engines

                      August 25, 1999
                   Assessment and Standards Division
                  Office of Transportation and Air Quality
                  U.S. Environmental Protection Agency
                            NOTICE

  This technical report does not necessarily represent final EPA decisions or positions.
It is intended to present technical analysis of issues using data that are currently available.
       The purpose in the release of such reports is to facilitate the exchange of
    technical information and to inform the public of technical developments which
      may form the basis for a final EPA decision, position, or regulatory action.

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                                 Table of Contents
1.     Introduction	1

2.     Background  	2
      2.1 Nonroad Study	2
      2.2 Emission Control Program for Compression-ignition Marine Engines	3
      2.3 History of SD/I Regulation	3
      2.4 Cost	5
      2.5 Emissions Levels for Other Mobile Source Categories  	7

3.    Overview of Proposed Program Under Consideration  	9
      3.1 Program Likely to be Proposed  	9
             3.1.1   Compression-Ignition Engines	9
             3.1.2   Spark-Ignition Engines	10
      3.2 Other Recreational Marine  Standards Considered by EPA	11
      3.3 Overview of Burden Reduction Approaches Designed for Small Marinizers
              	13
             3.3.1   Broaden Engine  Families	13
             3.3.2   Minimize Compliance Related Requirements  	13
             3.3.3   Expand Engine Dresser Flexibility	14
             3.3.4   Design Based Certification	14
             3.3.5   Delay Standards for Small Businesses for Five Years	14
             3.3.6   Hardship Provisions	14
             3.3.7   Averaging, Banking, & Trading of Emission Credits	14
             3.3.8   Exemption of Small Diesel Engines for Small Marinizers	15
             3.3.9     Adoption of EU or Other  International  Standards for  Small
                   Marinizers	15
             3.3.10  No Standard for Small Marinizers  	15
      3.4 Overview of Burden Reduction Approaches Designed for Small Boat Builders
              	15

4.     Industries that May be Subject to the Proposed Regulation	16
      4.1 Small Diesel Engine Manufacturers	17
      4.2 Small Gasoline Engine Manufacturers  	17
      4.3 Small Recreational Boat Builders	17

5.     Summary of Small Entity Outreach	18
      5.1 Pre-Panel Outreach	18
      5.2 Small Entity Representative Conference Calls and Meetings	18

6.    Small-Entity Representatives	19

7.     Summary of Comments from SERs	19

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      7.1  Number and Types of Entities Affected	20
      7.2  Potential Reporting, Record Keeping and Compliance Requirements	20
      7.3  Related Federal Rules  	20
      7.4  Regulatory Alternatives	20
             7.4.1  Burden Reduction Approaches for Small Marinizers  	20
                   7.4.1.1  Broaden Engine Families	20
                   7.4.1.2  Minimize Compliance Related Requirements  	21
                   7.4.1.3  Expand Engine Dresser Definition 	21
                   7.4.1.4  Design Based Certification	21
                   7.4.1.5  Delay Standards for Small Businesses for Five Years	21
                   7.4.1.6  Hardship Provisions	22
                   7.4.1.7  Averaging, Banking, and Trading	22
                   7.4.1.8  Exemption of Small Diesel Engines for Small Marinizers
                          	22
                   7.4.1.9  Adoption of EU or Other International Standards for Small
                         Marinizers	22
                   7.4.1.10  No Standard for Small Marinizers	22
             7.4.2  Burden Reduction Approaches for Small Boat Builders	23
      7.5    Other Issues 	23
             7.5.1    Recreational Marine Test Data	23
             7.5.2    Effects of Transient Operations on Emissions from Inboard Engines
                    	24
                   7.5.3.1  Draft Hardware Cost Estimates for SD/I Marine Engines
                          	24
                   7.5.3.2    Incremental  Cost  Estimates  for  Marine  Diesel Engine
                         Technology Improvements 	25
                   7.5.3.3  Recreational Marine Diesel Costs	25
             7.5.4    Catalyst Safety, Durability, and Performance Issues  	25
             7.5.5    Recreational Marine Emission Reductions per Engine	28
             7.5.6    Other Recreational Marine Rules Considered by EPA	29
             7.5.7    Certification Costs for Varying Engine Family Size	29
             7.5.8    Additional Comments Received	30

8.     Panel Findings and Discussion	30
      8.1  Number and Types of Small Entities	30
      8.2  Potential Reporting, Record Keeping, and Compliance Requirements	30
      8.3  Relevance of Other Federal Rules 	31
      8.4  Other Regulatory Alternatives	31
             8.4.1  Burden Reduction Approaches Designed for Small Marinizers	31
                   8.4.1.1  Broaden Engine Families  	31
                   8.4.1.3  Expand Engine Dresser Flexibility	32
                   8.4.1.4  Design Based Certification  	32
                   8.4.1.5  Small Volume Exemptions	33
                   8.4.1.6  Delay Standards for Small Business for Five Years  	33
                   8.4.1.7  Hardship Provisions	34

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                   8.4.1.8   Averaging, Banking and Trading of Emission Credits .... 34
                   8.4.1.9   Level of the Standard for Small Diesel Engines for  Small
                         Marinizers	36
                   8.4.1.10  Adoption of  EU or Other International Standards For Small
                         Marinizers 	36
                   8.4.1.11  No Standard for Small Marinizers  	36
             8.4.2  Burden Reduction Approaches Designed for Small Boat Builders .. 37
      8.5    Additional Recommendations	37
             8.5.1 Safety, Durability, and Performance  	37

9.     Appendices	38

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    Report of the Small Business Advocacy Review Panel on Emissions Standards for New
            Compression-ignition and Spark-ignition Recreational Marine Engines
1.     Introduction

       This report is presented by the Small Business Advocacy Review Panel (SBAR Panel or
Panel) convened for the proposed rulemaking on emissions standards for new compression-ignition
and  spark-ignition  recreational  marine engines  that is currently  being developed  by  the
Environmental Protection Agency (EPA).  On June 7, 1999, EPA's  Small  Business Advocacy
Chairperson convened the Panel under section 609(b) of the Regulatory Flexibility Act (RFA) as
amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). Section
609(b) requires convening a review Panel prior to publication of the initial regulatory flexibility
analysis that an agency may be required to prepare under the RFA.  In addition to the chairperson,
the Panel consists of the Director of the Engine Programs and Compliance Division of the Office of
Mobile Sources, the Administrator of 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.

       This report provides background information on the proposed rule being developed and the
types of small entities that would be subject to the proposed rule, describes the efforts to obtain the
advice and recommendations of representatives of those small entities, summarizes the comments
that  have  been received to date from  those representatives,  and presents  the  findings and
recommendations of the Panel.  The complete written comments of the small entity representatives
(SERs) are attached to this report.

       Section 609(b) of the RFA directs the review Panel to report on the comments of small entity
representatives and make findings as to issues related to identified elements of an initial regulatory
flexibility  analysis (TRFA) under section 603 of the RFA. Those  elements of an IRFA are:

•      A description  of, and where feasible, an estimate of the number of small entities to which the
       proposed rule will apply;

•      A description  of projected reporting,  record keeping, and other compliance requirements of
       the proposed rule, including an estimate of 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;

•      An identification, to the extent practicable, of all relevant Federal rules which may duplicate,
       overlap, or conflict with the proposed rule; and

•      A description of any significant alternative to the proposed rule which accomplishes the
SBAR Panel Report on
Recreational Marine Engines                 1                August 25, 1999

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       stated obj ectives of applicable statutes and which minimizes 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, and where appropriate, the agency
is to make changes to the draft proposed rule, the IRFA for the proposed rule, or the decision on
whether an IRFA is required.

       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. The Panel makes its report at a preliminary stage of rule development and
its report should be considered in that light. At the same  time, the report provides the Panel and the
Agency with an 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 purposes. Any options
identified by the Panel 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 proposal.
2.     Background

       2.1  Nonroad Study

       Section 213(a) of the Clean Air Act (CAA) directs EPA to: (1) conduct a study of emissions
from nonroad engines and vehicles; (2) determine whether emissions of carbon monoxide (CO),
oxides of nitrogen (NOX), and volatile organic compounds (VOCs, including hydrocarbons (HC))
from nonroad engines and vehicles are significant contributors to ozone or CO in more than one area
which has failed to attain the national ambient air quality standards (NAAQS) for ozone or CO; and
(3) if nonroad emissions are determined to be significant,  set appropriate emissions standards for
those categories or classes of new nonroad engines and vehicles determined to cause or contribute
to such air pollution.

       The Nonroad Engine and Vehicle  Emission Study required  by section  213(a)(l) was
completed in November 1991.  The determination of the significance of emissions from nonroad
engines and vehicles in more than one NAAQS nonattainment area was published on June  17,1994.
At the same time, the first set of regulations for new land-based nonroad compression-ignition (CI)
engines at or above  37 kW was promulgated.  These are  often referred to as  the nonroad Tier 1
standards for large CI engines. EPA has also issued proposed or final rules for other categories of
SB AR Panel Report on
Recreational Marine Engines                 2                 August 25, 1999

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nonroad engines, including spark-ignition1 (SI) engines less than 19 kW, spark-ignition marine
engines (outboards and personal watercraft), land based and marine compression-ignition engines
less than 37kW, and locomotives.

       2.2  Emission Control Program for Compression-ignition Marine Engines

       On  December 11,  1998 (63 FR 68508), the Agency published a  notice of proposed
rulemaking for an  emission control program for new commercial compression-ignition marine
engines at or above 37kW.  Emission standards for CI marine engines were initially proposed in
1994 as part of the proposed rule for control of emissions from new spark-ignition and compression-
ignition marine engines.  In 1994, EPA had a limited understanding of the CI marine industry and,
relying on the similarities between land based and marine CI engines, proposed to apply the same
emission levels as those in the then just-developed land-based rule. As EPA learned more about the
industry, it decided to separate commercial marine from this rulemaking .  In the  1998 proposal,
EPA stated that it was deferring setting emissions standards for recreational CI marine engines until
a later rulemaking.

       The engines covered by the December 11, 1998 commercial marine CI proposal are very
diverse, in terms of engine  size, emission technology,  control hardware, and costs  associated with
reducing emissions so EPA did not propose one set of emission levels for all CI marine engines.
Because of the differences among engines, emissions standards that are reasonable  and feasible for
a 37 kW engine used on  an 18-foot boat may not be reasonable or feasible for a 1500 kW engine
installed on a tug or a 20,000 kW engine installed on an ocean-going container ship.   Similarly,
emission limits that are appropriate for very large engines may be too lenient for smaller engines,
leaving them virtually unregulated. Therefore, the EPA proposal includes different standards for
different sizes of CI marine engines. EPA plans to finalize this regulation later in  1999.

       2.3  History of SD/I Regulation

       In November 1994, EPA proposed emission  standards for all marine SI engines.  EPA
proposed to regulate all marine spark-ignition engines as one "class or category"of new nonroad
engines, covering outboard, personal watercraft, and jetboat (OB/PWC) engines  as well as SD/I
engines.  This  proposal included SD/I engine emission limits of 8 g/kW-hr HC and 6.5 g/kW-hr
NOX. These standards were intended to be met with engine calibration only, and EPA expected that
the standards would reduce NOX about 10%.  EPA also asked for comment on reducing the NOX
standard to 3.9 g/kW-hr.  EPA stated that it considered  SD/I engines to be a cleaner technology than
       ^park-ignition (SI) engines, also known as Otto-cycle engines, use a spark plug to
initiate combustion. The vast majority of marine SI engines are gasoline fueled.
Compression-ignition (CI) engines, also known as Diesel-cycle engines, use the heat generated
from compression of the air in the cylinder to ignite the fuel. The vast majority of marine CI
engines are diesel fueled.

SB AR Panel Report on
Recreational Marine Engines                 3                August 25, 1999

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controlled OB/PWC engines and encouraged their use for applications where they could be used in
place of OB/PWC engines. However, EPA recognized that such substitution could only be possible
for limited applications.

       After receiving comment from the SD/I industry, EPA published a supplemental proposal
in February, 1996. EPA proposed a HC+NOX cap for SD/I engines equal to 2/3 of the standard for
OB/PWC (about 30 g/kW-hr). This would have reduced costs for SD/I manufacturers as compared
with the 1994 proposal since they would not have needed to apply new technology. EPA was also
concerned that, because of the number  of small businesses involved in marinizing SD/I engines,
compliance testing would be very burdensome. Because baseline emissions were believed to be 14-
16 g/kW-hr HC+NOX, EPA believed that it would be safe for SD/I manufacturers to certify their
engines without having to perform any emission testing.  Therefore, EPA proposed that SD/I
manufacturers would only have to send in a one-page submittal and EPA would issue an expedient
issuance of a Certificate of Conformity.

       EPA issued a final rule for OB/PWC on October 4, 1996 (61 FR 52087).  The standards
require a very large reduction in HC emissions on a brake-specific basis with only a slight increase
in NOX emissions.  The standards require increasingly stringent HC control over the course of a
nine-year  phase-in period beginning in model  year  1998.   By the end of the phase-in, each
manufacturer must meet an HC+NOX emission standard on a corporate average basis that represents
a 75 percent reduction in HC compared to unregulated levels.  SD/I engine standards were not set
in this rule. At the time, even without emission standards, EPA believed that emission reductions
would be gained from limited substitution of OB/PWC with lower cost SD/Is. EPA also believed
that emissions from SD/I engines were going to be reduced in the future, without regulation, through
the use of electronic fuel injection.

       EPA is now developing a proposal that would include standards for SD/I engines. This
proposal is motivated by many factors:

       - CAA §213(a) requires greatest degree of emission reduction, achievable through technology
       which EPA determines will be available, considering costs, lead time,  noise, energy, and
       safety.

       - EPA believes that SD/I engines have high per engine emissions compared to levels they
       could achieve using technology demonstrated in other sectors and which can be applied to
       this sector.

       - EPA understands thatbaseline SD/INOX emissions have increased in some instances when
       electronic fuel injection was applied because EFI systems have been calibrated for lean
       operation.

       -EPA  does not believe there will be significant substitution of  outboard engines for
SB AR Panel Report on
Recreational Marine Engines                 4                August 25, 1999

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       sterndrive engines as a result of the 1996 rule.

       - EPAbelieves meaningful and cost-effective emission reductions can be achieved from SD/I
       engines.

       - EPA believes that technology has advanced since the 1996 final rule; catalysts are more
       feasible and electronic control is widely available.

       - EPA understands that there would be possible inequity between diesel and gasoline engine
       manufacturers if diesels are regulated alone.

       - EPA is concerned that boat builders utilizing either gasoline or diesel engines should be
impacted similarly by EPA emission regulations.

       - The California Air Resources Board is also in the process of developing technology-forcing
standards for SD/I.

       In  developing the  1994  proposal, EPA  considered large  catalysts that could  achieve
reductions of 65-75%. A large catalyst would be difficult to package in an SD/I engine because of
its size and because  it must be upstream of where the water and exhaust mix.  For the current
proposal, EPA is considering small catalysts that could be packaged in the exhaust manifolds. EPA
believes this design  would achieve 35-45% reductions while significantly reducing the costs
compared with the systems previously considered. Also, in the earlier proposal, EPA was concerned
that operation at wide open throttle would result in high temperatures that could quickly thermally
degrade the catalyst.  Since that time, EPA believes catalysts have been designed that operate well
at sustained temperatures above  1100°C.  EPA's understanding is that marine engine  exhaust
generally has a maximum temperature of 750-850°C at the exhaust ports.

       Also, in  the  June 1996 Regulatory Impact Analysis,  EPA did not consider the NOX
reductions that could be achieved through exhaust gas recirculation. EPA's current estimates are that
NOX could be  reduced 40-50% over the marine E4 duty cycle by using EGR. Also, the wide spread
use of electronic fuel inj ection offers manufacturers greater flexibility in calibrating their engines for
low emissions.

              2.4  Cost

       Section 213(a)(3) of the Clean Air Act (CAA) requires EPA to "achieve the greatest degree
of emission reduction achievable through the application of technology...giving appropriate
consideration to the  cost of applying such technology within the period of time available to
manufacturers  and to noise, energy, and  safety factors associated  with  the application  of such
technology."
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Recreational Marine Engines                  5                 August 25, 1999

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       The Panel received information about costs of compliance with emission standards from a
variety of sources. The Panel provided SERs with preliminary estimates of the cost of implementing
various emissions reduction technologies, and SERs commented that these estimates underestimated
the expected costs of applying the technologies to their engines. The Panel also received comments
about other compliance costs, such as testing of engines. In addition, SERs expressed concern that
the emission reductions likely to be achieved by the rule would be small.

       Because SERs had raised the issue of cost, the Panel felt motivated to consider this issue
carefully in its deliberations.   Accordingly, one Panel  member, with consultation,  prepared
preliminary analyses of cost effectiveness and cost per  engine.  That analysis is  presented in
Appendix H of this report. The reader should note that the estimates in Appendix H are preliminary
and that EPA has not independently confirmed the information underlying those estimates.  The
Panel expects that EPA will produce more refined cost and related estimates, which will supersede
the preliminary estimates in Appendix H, as EPA develops more robust information during the
course of its rulemaking.

       The Panel recognizes that cost is an important factor for EPA to consider in setting standards
under section 213 (a), and carefully considered all of the information presented to it on the question
of cost. Although the information and analysis presented in Appendix H was considered by the
Panel, the Panel members did not reach a common view on the usefulness and appropriateness of
that information as a way to determine and address this issue for small marinizers. (Nevertheless,
in the interest of transparency and full disclosure, the Panel agreed to present this information in
Appendix H.)

       Also, based upon the preliminary information used in these analyses and other information
before the Panel, particular concern was raised within the Panel with respect to small diesel engine
marinizers in the lowest power grouping (37 to 225 kW). Cost per engine provides a measure of the
differential impact of recreational marine engine regulations of small and large entities.  The small
firms could spend from approximately two to five times more per engine than large firms. Although
the cost estimates and other factors impacting these analyses are preliminary, the Panel agrees that,
in particular, it is important for EPA to evaluate, as it develops its proposed rule, whether small
marinizers in this engine grouping would have inappropriately high cost impacts under the regulatory
alternatives EPA plans to consider.

       The Panel recognizes that EPA has not decided what technology will be an appropriate basis
for an emissions standard  for each engine  grouping.  In  addition, the various burden reduction
measures discussed in the report would affect the cost impact on small marinizers of any proposed
emission standard.  The Panel agrees that in evaluating these and other issues relevant to setting a
standard for this rule, it is important that EPA consider, for each engine grouping, whether small
marinizers would be subject to inappropriately high cost impacts.
SB AR Panel Report on
Recreational Marine Engines                 6                 August 25, 1999

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2.5  Emissions Levels for Other Mobile Source Categories

       Table 1 presents EPA estimates of NOX, HC, and PM mobile source inventories in calendar
year 2000.  According to these EPA figures, recreational CI marine and SD/I SI marine combined
make up about 0.5% of the HC+NOX and 0.1% of thePM emissions from mobile sources nationally.
Note that these estimates for recreational marine engines (as well as for other sources) may be
updated as EPA receives new information or improves on its analyses of existing information. Also
note that EPA believes that these recreational marine engines could represent more significant
portions of the inventory in specific geographic areas where they tend to operate such as port cities.
SB AR Panel Report on
Recreational Marine Engines                 7                August 25, 1999

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                      Table 1:  2000 Annual Emissions Levels for
                    Mobile Source Categories (thousand short tons)
Category

Nonroad SI > 19 kW
Recreational Equipment
Nonroad SI< 19 kW
Marine SI OB/PWC
Marine SI SD/I
Nonroad CI
Marine CI commercial
Marine CI recreational
Locomotive
Aircraft
Total Nonroad
Total Highway
Mobile Source
NOX
thousand
short tons percent
227 1.7%
25 0.2%
82 0.7%
7 0.1%
41 0.3%
2,900 24%
975 8%
30 0.2%
1,190 10%
178 1.5%
5,655 47%
6,397 53%
12,052 100%
HC
thousand
short tons
57
1,100
623
559
26
350
30
1
47
183
2,975
4,482
7,457

percent
0.8%
15%
8%
7%
0.3%
5%
0.4%
0.0%
0.6%
2%
40%
60%
100%
PM
thousand
short tons
3
16
14
not
reported
292
41
1
30
39
436
238
674

percent
0.4%
2%
2%
~
43%
6%
0.1%
4%
6%
65%
35%
100%
Source

a
a
a
b
b
c
d
d
e
f
-
f
-
       a. Notice of Proposed Finding, "Control of Emissions From New Nonroad Spark-Ignition
       Engines Rated Above 19 Kilowatts and New Land-Based Recreational  Spark-Ignition
       Engines," Federal Register, p. 6008, February 8, 1999.
       b.  Regulatory Impact Analysis, "Control of Air Pollution Emission Standards for New
       Nonroad Spark-Ignition Marine Engines," June 1996.
       c.  Regulatory Impact Analysis, "Control of Emissions from Nonroad Diesel Engines,"
       August 1998.
       d.  Draft Regulatory Impact Analysis, "Control of Emissions from Compression-Ignition
       Marine Engines," November 1998.
       e. Regulatory Support Document, "Locomotive Emission Standards," April 1998.
       f. "National Air Pollutant Emission Trends, 1900-1996," December 1997.
3.     Overview of Proposed Program Under Consideration

SB AR Panel Report on
Recreational Marine Engines                 8
August 25, 1999

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       3.1  Program Likely to be Proposed

       EPA intends to propose emission standards for new recreational compression-ignition marine
engines > 37 kW and new sterndrive/inboard spark-ignition marine engines. In developing these
standards, EPA is considering not only the potential emission reductions which are technologically
feasible, but also the effects that these standards would have on cost, safety, noise, and energy.
Because of the important role of small businesses in the recreational marine industry, EPA believes
that it is critical that small business concerns be addressed in this rulemaking.

       3.1.1     Compression-Ignition Engines

       EPA plans to propose emissions standards for recreational compression-ignition engines by
November 23, 1999 and to finalize the requirements by October 31, 2000. The following is a list
of emission control technology that EPA believes  can be used to  control  emissions from
compression-ignition marine engines. EPA believes that at least three of these technologies are used
on many recreational diesel marine engines today.  Therefore, at the time this information was
supplied to the Panel, EPA considered the costs of electronic fuel management and high pressure fuel
injection as the only incremental technology costs attributable to this anticipated rulemaking.

       - timing retard
       - turbocharging
       - raw-water/separate circuit aftercooling
       - electronic fuel management
       - high pressure fuel injection

       EPA recognizes that recreational marine engines are used differently from commercial
marine  engines.    This is especially true  for planing versus displacement  hull applications.
Recreational  marine engines are generally designed  for  a high  power-to-weight  ratio while
commercial marine engines sacrifice power to gain longevity. Based on the differences in use, EPA
estimates that brake-specific HC+NOX  from  a recreational marine engine is generally 10-15%
higher than from a commercial marine  engine.  This will likely  be reflected  in the proposed
standards.

       In considering emission standards for recreational CI marine engines, EPA also estimatedthe
baseline emission levels.  These baseline emission levels were developed from the data that EPA
presented to the SERs. EPA used data on several marine engines (almost all  commercial) tested on
both the E3 (commercial) and E5 (recreational) test cycles to determine the recreational CI marine
engine HC+NOX baseline.  Using the data on  each of these two test cycles, EPA determined that
engines on the recreational test cycles would on  average produce emissions that are 14% higher than
those when tested on the commercial engine test cycle.  Therefore, EPA adjusted the commercial
engine HC+NOX baseline up 14% to reflect recreational applications. These data include engines
mostly built from 1994 to 1999, and do not necessarily reflect the baseline emission levels at the time
SB AR Panel Report on
Recreational Marine Engines                 9                 August 25, 1999

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that the proposed rule would go into effect.  These test engines may or may not represent engines
typical of those currently produced by the industry.
                                                  Figure 1:  Marine Catalyst Concept
       3.1.2    Spark-Ignition Engines

       EPA also plans to include  sterndrive  and
inboard SI marine engines in this rulemaking.  SD/I
engine marinizers are beginning to make widespread
use  of  electronic  fuel  injection  to  optimize
performance and fuel consumption. This technology
can also be used to reduce emissions.  In addition,
EPA believes that exhaust gas recirculation   can
reduce NOX emissions by about 50% in SD/I engines.
EPA is also considering the benefits of placing a
small three-way catalyst into the exhaust manifold
prior to where the water and exhaust mix (Figure 1).
Catalyst manufacturers have indicated that a catalyst
could be provided for this application which would
withstand the thermal and mechanical stresses and would result in a 30-50% reduction in HC, NOX,
and CO. EPA will be working with C ARB, engine manufacturers, catalyst manufacturers, and other
stakeholders to evaluate  the emissions performance of potential emission control equipment
including catalysts. This analysis will consider impacts on performance, safety, and related issues.

       In considering emission standards for SD/I marine engines EPA also looked at emission data.
These estimates of baseline emission levels were developed from the data on 8 engines built from
1992 to 1995 that EPA  presented to the SERs.  This data was consistent with test data submitted
confidentially to EPA on several other SD/I engines.  The test engines covered a wide range of
technology including carburetion, throttle-body fuel inj ection, multi-port fuel inj ection, and included
baseline and low HC/CO calibrations for the BSO standards.  The test engines may or may not
represent engines typical of those currently produced by the industry.

       Some manufacturers have stated that baseline emissions have increased since this information
was collected because they have been designing for low CO emissions. If engines are calibrated for
low CO without consideration of NOx, then NOx emissions are likely to increase.  Based on data
that EPA has presented to the SERs, HC+NOx levels range from 13 to 22 g/kW-hr with an average
of 16 g/kW-hr, with CO levels that ranged from 44 to 247 g/kW-hr. The engine with the lowest CO
had an HC+NOx level of less than 16 g/kW-hr. Data presented by one SER showed even lower CO
with an HC+NOx level under 12 g/kW-hr.  EPA's primary goal in developing  this rule is the
reduction of the ozone precursors HC and NOx. However, through the use of EGR and catalytic
control, EPA believes that manufacturers will have more flexibility in how CO  is addressed in
combination with HC+NOx control if they wish to reduce CO below the baseline cap that EPA is
considering. EPA will consider any other available emissions test data in determining baseline and
SB AR Panel Report on
Recreational Marine Engines
                                           10
August 25, 1999

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potential emission levels.

       The intent of the catalyst packaging design described in Figure 1 is to minimize costs by not
requiring the manufacturer to rework the entire exhaust system and, for sterndrives, rework the lower
power unit as well. While fitting a catalyst into a marine exhaust system is a relatively new idea,
EPA believes it can be accomplished in  a way that avoids adverse effects on engine safety,
durability, and performance characteristics.  EPA recognizes the importance of these factors,
especially safety. A more detailed discussion of the Agency's current position on safety, durability,
and performance issues can be found in Appendix A. The Panel held a technical meeting to discuss
these issues in greater detail with the industry as a whole on June 30, 1999. This meeting included
representatives of the catalyst manufacturers, the U.S. Coast Guard, EPA, and the marine industry.
The Agency intends to continue its dialogue and data collection from interested parties including the
recreational marine industry, the Coast Guard and catalyst manufacturers as it develops its proposed
and final rulemakings.

       Through a joint effort with CARB, Southwest Research Institute (SwRI), General Motors,
Mercruiser and MECA, EPA is preparing to test a marine engine in a test cell with both EGR and
catalyst technology. The goal of this testing is proof of concept. As part of this testing, temperatures
and pressures relevant to safety, durability, and performance will also be measured; other testing may
also be necessary to support the rule. Because of the uncertainties in applying catalyst technology
to recreational marine engines, EPA has stated it plans to include in the proposal as a regulatory
alternative a set of standards that  do not anticipate use of catalysts.

       EPA will carefully consider the impacts of its regulations on the safety, durability, and
performance of marine engines.

       3.2 Other Recreational Marine Standards Considered by EPA

       EPA is aware of other recreational marine emission standards either in place or being
developed world wide. EPA recognizes the value of harmonization of emission control programs
where the standards meet the Clean Air Act requirements.  The other emissions limits (shown for
a 300 kW, 4-stroke engine) are described in Table 2:
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Recreational Marine Engines                 11                August 25, 1999

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      Table 2: Status of Other Exhaust Emission Standards for Recreational Marine
Organization
European Union
International Bodensee
Shipping Commission
California Air
Resources Board
Status
Proposed
Stage 2
Pre-
proposal
Type
CI
SI
CI
SI
both
SI
HC
g/kW-hr
1.5
6.4
1.2
1.2
95g/hr
NOx
g/kW-hr
9.8
15
10
5.0
360 g/hr
CO
g/kW-hr
5.0
152
20
20
1500 g/hr
PM
g/kW-hr
1.0
smoke*
not yet proposed
 * Bosch blackening number of 3.5/2.5 for naturally aspirated/turbocharged engines

       EPA understands that, for a manufacturer marketing the same basic engine design of engine
in both the United States and in Europe, complying only with the EU level of stringency would likely
allow for an engine and emission control system that is easier to design and less expensive to build
compared to an engine and emission control system  designed and constructed to meet the more
stringent level  of standards being considered  by EPA.    Furthermore,  while such  engine
manufacturers could choose to build one version of the engine designed to meet U. S. standards and
then market it in both the U.S. and Europe, if the U.S. version is most costly, this could adversely
affect the competitive market position of the manufacturer when selling the engine in Europe and
competing against engine designs only satisfying the EU performance requirements. Conversely,
if the  manufacturer chose to design a separate version targeted to EU standards, this would likely
represent an increase in design cost (perhaps significant) to provide two versions of the same engine.
Thus, the small engine manufacturer marketing in both areas might be reduced costs if U. S.  and EU
standards were harmonized.

       In considering the standards proposed by the European Union, EPA is concerned that no
significant emissions reduction would be achieved.  These data are presented in Figures 2 and 3 for
fourteen diesel (almost all commercial) marine engines tested on the recreational duty cycle and for
eight gasoline SD/I marine engines. However, EPA also recognizes that the baseline estimates are
subject to uncertainty because the available information from older engines is limited and will
reevaluate its views if additional  data becomes available. EPA believes it is unlikely that these
proposed standards would attain the appropriate reductions from this category required to meet the
Clean Air Act's mandate to set standards that achieve the greatest degree of emission reduction
achievable considering cost, availability of technology, noise, energy, and safety.
SB AR Panel Report on
Recreational Marine Engines
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August 25, 1999

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 Figure 2:  Diesel Marine Engine Emissions
   Tested on the ISOE5 Compared to the
          Proposed EU Standard
   Figure 3:  Gasoline SD/I Engine Emissions
     Tested on the ISOE4 Compared to the
            Proposed EU Standard
20
F 15
^ 10
o
o
x 5
0

o

o
O ' o
o
o
°o *
«o Average = 8.6 g/kW-hr


0 Data
-EU

9 200 400 600 800 1000
100 300 500 700 900
Rated Power [kW]
23
22
21
F20
S 18
8 17
^

1 15
14
13
12
1




Average = 15.7 g/kW-hr
o
o
o
o
o


0 Data
— EU


90 120 140 160 180 200 220 240
Rated Power [kW]
       The Bodensee emissions limits are focused on preserving water quality by achieving low
hydrocarbon levels from boats operated on Lake Constance in Europe. EPA's goal is to reduce the
ozone precursors HC and NOx with a focus on NOx.  If EPA were to adopted the Bodensee limits,
the very low HC limits would likely drive SI engines from the market while the relaxed NOx levels
would not achieve the maximum achievable reductions in ozone formation. Also, the g/hr standards
would essentially limit the size of engines permitted to be sold in the U.S.

       EPA is working with CARB in developing this proposal for recreational marine exhaust
emissions.  EPA's goal is to harmonize  with California to the extent practicable and appropriate
under the CAA.

       3.3  Overview of Burden Reduction Approaches Designed for Small Marinizers

       On June  16, 1999, the EPA provided the Small Entity Representatives with an overview of
some potential approaches for small marinizers and boat builders (see Appendix B).  The following
is a brief discussion of those approaches. Additional burden reduction approaches are also discussed
below (3.3.8-3.3.10).

       3.3.1    Broaden Engine Families

       This approach would allow small  marinizers to put all of their models into one engine family
(or more) for certification purposes.

       3.3.2    Minimize Compliance Related Requirements
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Recreational Marine Engines
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August 25, 1999

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              This  approach would waive production line and deterioration testing for small
marinizers.  EPA would assign a deterioration factor for use in calculating end of life emission
factors for certification.

       3.3.3    Expand Engine Dresser Flexibility

              This approach would allow marinized versions of certified nonroad engines to be
considered "dressed" engines that would not have to be recertified provided the marinization process
does not change engine emissions (e.g., adding water-cooled exhaust, but matching manufacturer
specifications for cooling and restriction pressure).  This possibly could be expanded to include
water-cooled turbochargers where the goal of the design is to  match the original turbocharger
performance.

       3.3.4    Design Based Certification

              This approach would allow small marinizers to certify to a performance standard by
showing their engines meet design criteria rather than by certification testing.

       3.3.5    Delay  Standards for  Small Businesses for Five Years

       This approach would exempt small marinizers from complying with the standards for five
years beyond the initial compliance date. After this time period, the proposed standards would apply.
       3.3.6    Hardship Provisions

       There are two parts to this approach.  The first part of this approach would allow small
marinizers to petition EPA for additional time to comply with the standards. These marinizers would
have to make the case that the burden of compliance  costs would have a major impact on the
company. If a certified base engine were available, the marinizer would have to use this engine. The
second  part of this  approach would allow small marinizers to  apply for  hardship relief if
circumstances outside their control cause the failure to comply (e.g., if a supply contract was broken
by a parts supplier) and if failure to sell the subject engines would have a major impact on the
company's solvency.

       3.3.7    Averaging, Banking, & Trading of Emission Credits

       This approach would allow the use of credits by some engines to be offset by the generation
of credits by other engines in the same regulatory program. Averaging would allow manufacturers
to use positive credits from engine families below the  standard to offset negative credits from engine
families above the standard. Banking would allow manufacturers to save emission credits for use
in the future.  Trading would allow manufacturers to purchase credits from other manufacturers of
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Recreational Marine Engines                 14                August 25, 1999

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similar engines to cover their own shortfalls. ABT would be allowed among gasoline SD/I engines
and among recreational diesel engines, but would not be allowed between gasoline and diesel
engines.

       3.3.8   Exemption of Small Diesel Engines for Small Marinizers

       This approach was suggested by SB A after the June 16 overview distributed to SERs for their
comment. This approach would exempt small marinizers who produce the smallest class of diesel
engines (37 - 225 kW diesel engines) from the proposed standards.

       3.3.9    Adoption of EU or Other International Standards for Small Marinizers

       This approach was suggested by SB A after the June 16 overview distributed to SERs for their
comment. Under this approach, small marinizers would be subj ect to the EU or other international
standards, as a means of harmonizing the EPA approach with other international standards.  This
approach would allow engine marinizers to design to both US and other international standards for
one or both categories.

       3.3.10   No Standard for Small Marinizers

       This approach was suggested by SB A after the June 16 overview distributed to SERs for their
comment. SBA suggested that, if EPA finds that there are no additional emission reductions that
can reasonably be required from recreational marine engines or makes a new finding that  these
engines do not "cause or contribute to air pollution," he Agency could elect not to propose or
promulgate regulations for one or both of these categories.

       3.4  Overview of Burden Reduction Approaches Designed for Small Boat Builders

       Four burden reduction approaches are being considered by the Agency for small boat
builders.

        1) Percentage of Production Exemption:  Over a period of 5-7 years, small boat builders
would be able to sell uncertified engines in boats for an amount equal to 80 percent of engine sales
for one year.  For example, if the small boat builder sells 100 engines per year,  a total of 80
uncertified engines may be sold over the 5-7 year period.

       2) Small Volume Allowance: For small boat builders with annual sales much less than those
covered by example in the approach discussed above, the 80% allowance described above could be
exceeded provided that the sales do not exceed the following limits in their size range:
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Recreational Marine Engines                15                August 25, 1999

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       engine type               engine size range       maximum engines exempted

       spark-ignition             < 400 kW               70 in 5-7 years/20 per year
                                >400 kW               70 in 5-7 years/20 per year
       compression-ignition      < 1.2 liters/cylinder      20 in 5-7 years/10 per year
                                1.2-2.5 liters/cylinder     20 in 5-7 years/10 per year
                                > 2.5 liters/cylinder      no small volume exemption

       3) Existing Inventory and Replacement Engine Allowance:  Small boat builders would be
able to sell existing inventory after the implementation date of the new standards and would be able
to sell replacement engines comparable to the original engine. However, no purposeful stockpiling
of uncertified engines would be permitted.

       4) Hardship Relief Provision:   Small  boat builders  could apply  for hardship relief if
circumstances outside their control caused the failure to comply (i.e., supply contract broken by
engine supplier) and if failure to sell  the  subject vessels would  have a  major impact on the
company's solvency. This relief would allow the boat builder to use an uncertified engine and would
be considered a mechanism of last resort.

4.     Industries that May be Subject to the Proposed Regulation

       Persons  or companies potentially regulated by this action are those that manufacture or
introduce into  commerce  new  sterndrive  and inboard  SI  marine engines  and recreational
compression-ignition marine engines and those that make vessels using such engines.

       In general, the companies that manufacture recreational vessels would only be responsible
for ensuring that the engines they install have been certified  as  meeting the proposed emission
control requirements. They are potentially affected by the proposed rule to the extent that physical
changes to the engines require changes to their vessel designs. However, by relaxing the recreational
compression ignition standards compared to the proposed commercial marine engine standards,
EPA believes that no significant decrease in power-to-weight ratio will result from new emission
standards. Also, the technology itself should have no significant effects on the packaging of the
engine in the boat.  For spark-ignition engines, EPA does not believe that the technology under
consideration will significantly affect the engine size, power, or weight. EPA expects to propose a
rule that  would not significantly affect engine size, power, or weight,  although EPA is still in the
process of developing the proposal.

       The Agency is in the process of developing the industry characterization of the impacted
entities.  Identification of every small engine manufacturer and boat builder is difficult due to the
complex  nature of the marine industry. Mergers and buy-outs are fairly  common in this industry,
and many smaller engine manufacturers move in and out of the recreational segment of the market.
The Agency believes that it has identified all of the large companies and most or all of the smaller
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companies that manufacture or marinize marine engines.
                    Table 3: Primary SBA Small Business Categories
                    Potentially Impacted by this Proposed Regulation
SIC Code
3519
3732
Description
Internal Combustion Engines
Boat Building and Repairing
Size Standard
1000 employees
500 employees
       4.1  Small Diesel Engine Manufacturers

       The Agency has determined that there are at least 14 companies that manufacture CI diesel
engines for recreational vessels. Six of the identified companies are considered small businesses as
defined by SBA SIC code 3519.  Nearly 75 percent of diesel engines sales for recreational vessels
in 1997 can be attributed  to three large companies.  Based on sales data  for 1997, these  six
companies represent approximately 4 percent of recreational marine diesel engine sales.  The
remaining 21 percent of sales is spread across five companies, each which comprises between two
and seven percent of sales for 1997.

       4.2  Small Gasoline Engine Manufacturers

       The Agency has determined that there are at least 17 companies that manufacture SD/I
gasoline engines for recreational vessels. Fifteen of the identified companies are considered small
businesses as defined by SBA SIC code  3519. These 15 companies represent approximately 6
percent of recreational gasoline marine engines sales for 1998. Nearly 78 percent of gasoline SD/I
engines manufactured in 1998 can be attributed to one company.  The  next largest company is
responsible for the remaining 16  percent of 1998 sales.

       4.3  Small Recreational Boat Builders

       The Agency has less precise information about recreational boat builders than is available
about engine manufacturers. The Agency has utilized several sources, including trade associations
and Internet sites when identifying entities that build and/or sell recreational boats.  The Agency is
also working with an independent contractor to assist in the characterization of this  segment of the
industry.  To date, our research indicates that there are at least 165 boat  builders that may install
recreational gasoline and diesel engines that would be subj ect to the proposed requirements outlined
above.  Approximately  98 % of the companies identified so far would be considered small
businesses as defined by SBA SIC code 3732. The Agency continues to develop a more complete
picture of this segment of the industry and will  provide additional information  as it becomes
SB AR Panel Report on
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available.

       Based on information supplied by a variety of recreational boat builders, recreational marine
engines are usually purchased from factory authorized distribution centers. The boat builder provides
the specifications to the distributor who helps match an engine for a particular application. It is the
boat builder's responsibility to fit the engine into their vessel design. The reason for this is that sales
to boat builders are a very small part of engine manufacturers' total engine sales. These engines are
not generally interchangeable from one design to the next. Recreational boat builder have their own
designs. In general, a boat builder will design one or two molds that are intended to last 5-8 years.
Very few changes are tolerated in the molds because of the costs of building and retooling them.

 5.     Summary of Small Entity Outreach

       5.1  Pre-Panel Outreach

       Prior to convening the Panel, the Agency conducted several meetings and conference calls
with entities potentially impacted by this regulation. Fact sheets and other handouts were also
distributed in March of 1999 to entities potentially impacted by the regulations. Some meetings and
conference calls were held in the summer of 1998 when the Agency was considering whether to
include recreational marine engines in its marine CI rulemaking. During the development of the CI
marine engine rulemaking, the Agency became aware of the potential small business implications
for recreational boat builders and engine manufacturers and decided to address recreational marine
engine emissions standards in a separate rulemaking. A briefing for Small Entity Representatives
was held on May 11, 1999 at EPA's Office of Mobile Sources in Washington, DC. A summary of
this meeting and the written comments received as a result of this meeting can be found in Appendix
C.

       5.2  Small Entity Representative Conference Calls and Meetings

       On June 16,1999, EPA distributed a package of information to the SERs for their review and
comment.  A list of these documents can be found in Appendix D. The SERs were asked to review
the information package and to provide any additional comments to the Panel during the follow-up
conference call and by submitting written comment by July 9, 1999. Written SER comments were
also received after this date and are listed in Table 4. These SER written comments are summarized
in section 7. The first Panel outreach meeting was held on June 29, 1999 and the second follow-up
SER conference call was held on July 6, 1999. A summary of the June 29 meeting can be found in
Appendix E  and  the  summary of the July  6  conference  call  can be  found in Appendix  F.
Additionally,  a site visit for the Panel was conducted on July 27, 1999 at Indmar Products, Inc. in
Memphis, TN.
6.     Small-Entity Representatives
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      EPA, in consultation with SB A, invited the following 16 SERs to participate in its SBREFA
consultation process.
Bill Lawson
Daytona Marine
Ormond Beach, FL

Dick Wlezien
Volvo Penta
Chesapeake, VA

Greg Kirkland
KEM Equipment, Inc
Tualatin, OR

Dennis Corbett
Orca Yachts
Chessapeake, VA

Randy Gills
Regal Marine Industries
Orlando, FL
Paolo Vidoli
FDGM
Chesapeake, VA

JeffNg
Westerbeke
Avon, MA

Bishop Jordan
Panther Marine Engines
Cocoa, FL

John Brooks and Buck Peg
Chaparral Boats
Nashville, GA
      Dick Rowe
      Indmar Products
      Millington, TN

      Tom Fileman
      Flagship Marine
      Punta Gorda, FL

      Tony Martens and Jim Viestanz
      KCS International Inc.
      Oconto, WI

      Stan Blair
      Viking Yachts
      New Gretna, NJ
Doug McElroy
Alaska Diesel
Seattle, WA
Dan Springer
       Tiara Yachts
       Holland, MI
John McKnight
National Marine Manufacturers Association
Washington, DC
7.     Summary of Comments from SERs

       The Panel received six sets of written comments in response to the June 29, 1999 and July
6, 1999 SER outreach meetings. Table 4 provides a record of the comments and is followed by a
summary of the main issues raised by the SERs in their written submittals.  The complete written
comments are provided in Appendix G. Also summarized are the oral comments from the two SER
outreach meetings held on June 29, 1999 and July 6, 1999.  Complete summaries of these meetings
can be found in Appendices E and F.
SB AR Panel Report on
Recreational Marine Engines
               19
             August 25, 1999

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                        Table 4: List of SER Written Comments
Name
Greg H. Kirkland
Doug McElroy
Richard C. Rowe
John W. Brooks
John McKnight
John McKnight
Doug McElroy
John McKnight
Organization
KEM Equipment, Inc
Alaska Diesel Electric
Indmar Products, Inc
Chaparral Boats, Inc
National Marine Manufacturers Association
National Marine Manufacturers Association
Alaska Diesel
National Marine Manufacturers Association
Date
Received
7/7/99
7/9/99
7/9/99
7/12/99
7/12/99
7/21/99
8/3/99
8/5/99
Number
of Pages
1
5
26
1
41
2
2
2
       7.1  Number and Types of Entities Affected

       No SER comments were received on this issue, either in writing or from the SER outreach
meetings.

       7.2  Potential Reporting, Record Keeping and Compliance Requirements

       No SER comments were received on this issue, either in writing or from the SER outreach
meetings.

       7.3  Related Federal Rules

       No SER comments were received on this issue, either in writing or from the SER outreach
meetings.

       7.4  Regulatory Alternatives

       7.4.1  Burden Reduction Approaches for Small Marinizers

       Sections 7.4.1.1 through 7.4.1.7 are SER responses to conceptual approaches presented to
them by the Panel. Sections 7.4.1.8 through 7.4.1.10 present approaches developed in response to
SER comments, although these approaches were not presented to SERs.

             7.4.1.1  Broaden Engine Families
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       Two written SER comments were received on this issue. Neither comment expressed support
for this approach.  One SER commented that broadening engine families provides little or no
flexibility for small marinizers. Under this approach, engine manufacturers or boat builders would
have to choose a "worst case emitter" which cannot accurately be based on fuel throughput or on an
accurate fail-safe test design protocol. Engine manufacturers would be certifying that their engines
meet an emission standard and would face liability of unknowingly selling an engine that does not
meet the standard.  This is a risk that few manufacturers would be willing to take. Another SER
commented that broadening engine families based on small business status would put them at a
competitive disadvantage. Similar comments were received from the SERs at the outreach meetings.

             7.4.1.2   Minimize Compliance Related Requirements

       Three written SER comments were received on this issue. One SER comment expressed
support for minimizing compliance requirements. The other two SER comments were not in support
of this approach.   One of these SERs commented that eliminating  some of the steps in  the
compliance process may reduce or eliminate cost, but may also increase the liability of being out of
compliance.  The other SER that did not support this approach commented that minimizing
compliance requirements for small  businesses would put them  at a competitive disadvantage.
Therefore, minimizing compliance requirements may offer  little or no benefit to small engine
marinizers according to these two SERs. At the SER outreach meetings, no opposition was expressed
to this approach.

             7.4.1.3   Expand Engine Dresser Definition

       Two written SER comments were received on this issue. One SER expressed support for the
additional allowance of adding turbocharging.  This commenter also expressed interest in discussing
additional engine  changes that  could be made without requiring certification.   The  other SER
commented that expanding engine dresser flexibilities based on small business status would put them
at a competitive disadvantage. No opposition was expressed on this approach at the SER outreach
meetings.

             7.4.1.4   Design  Based Certification

       There were three written SER comments in support of design based certification which would
eliminate certification testing of engine families by the small  business. One SER commented that
any regulation requiring certification, production line or in-use testing would place undue economic
burden on small gasoline and diesel recreational marine marinizers because of smaller number of
units over which to spread the costs of these tests.

             7.4.1.5   Delay Standards for Small Businesses for Five Years

       There were two written  SER comments on this issues.  Neither comment supported this
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approach. Both of these SERs commented that this approach could create a marketing disadvantage
for small businesses. Larger businesses could market their engines as "clean" engines, which may
be appealing to some customers.  Similar concerns on this approach were also raised by two SERs
at the SER outreach meetings.  However, one SER indicated that although boat manufacturers
wanted to be able to advertise their boats as equipped with "clean" engines, consumers would likely
not be willing to pay extra for a so-called clean engine. In contrast, two other SERs suggested that
a five year delay would not necessarily put their businesses at a competitive disadvantage. These
two SERs specialize in high performance engines and there is currently little competition in this
segment of the marine market.

              7.4.1.6  Hardship Provisions

       There were two written SER comments received on this issue. Both commenters expressed
support for this approach for small businesses that may have difficulty complying  with  the
regulation.  Support for this approach was also expressed at the SER outreach meetings

              7.4.1.7  Averaging, Banking, and Trading

       One SER written comment was received on this approach. This comment stated that ABT
offers little benefit to small marine engine manufacturers and will create a competitive disadvantage
as they compete against larger businesses. The one written SER comment received on this approach
was not in support of ABT. The commenter expressed concern that large businesses would be able
to average or trade credits among engines, possibly without having to make any improvements to
a family of engines.  For small businesses, the amount of engine testing that would be required to
effectively account for credits would be cost prohibitive, particularly for diesel engine manufacturers.

              7.4.1.8  Exemption of Small Diesel Engines for Small Marinizers

       No SER comments were received on this issue, either in writing or from the SER outreach
meetings.  This option was not presented to SERs for discussion.

              7.4.1.9  Adoption of EU or Other International Standards for Small Marinizers

       This option was not presented to SERs for discussion. However, SERs stated that they would
prefer that EPA adopt EU standards than something more stringent. They commented that having
to meet more stringent standards in the U.S. would put them  at  a competitive disadvantage with
foreign firms in foreign markets.  They were also concerned that if unregulated foreign boats were
less expensive, they would be sold illegally in the  U.S which would also result in a competitive
disadvantage.

              7.4.1.10  No Standard for  Small Marinizers
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       This option was not presented to SERs for discussion.  SERs commented that the fraction
of the pollution in the U.S. is small from their engines so they should not be regulated.  However,
some SERs were concerned that this would put them at a competitive disadvantage with large
manufacturers who could advertize their engines as cleaner than the engines that are not designed
for emission standards.

       7.4.2  Burden Reduction Approaches for Small Boat Builders

       Two general written SER comments were received on the burden reduction approaches for
small boat  builders.   Both of these comments expressed  support for regulations that would be
transparent to boat builders due to the high cost of retooling of hull molds that may be needed to
accommodate changes in engine design or size. One of these SER comments goes on to state that
boat builders will soon have to meet other requirements under the Clean Air Act (e.g. resin, gel coat
and application equipment) and to impose additional burden on this sector of the industry would pose
an undue burden on small businesses.  In addition, this SER also commented that manufacturers
must be able to continue to use old engine inventories until they are depleted. The position that EPA
regulations be transparent to boat builders was supported by the SERs at the outreach meetings.

       Discussion of the flexibilities for small boat builders was conducted at a meeting held for the
SERs on July 6, 1999.  SERs were given the opportunity to comment on the potential boat builder
flexibilities presented to them. There was no SER opposition to the flexibilities, although several
SERs reiterated their concern that any regulations promulgated by EPA should be transparent to boat
builders.

       7.5    Other Issues

       7.5.1    Recreational Marine Test Data

       Two written SER comments were received on this issue.  One of the comments stated that
some of the data shown for gasoline engines are from engines that are outdated or no longer exist.
This commenter suggested that the baseline for gasoline engines is close to 20 g/kW-hr HC + NOx.
This comment stated that if EPA intends to use these data, it needs to consider that lowering CO
levels elevates NOx levels.  The commenter stated that the industry as  a whole has lowered HC
levels to  address  customer  complaints of soot.  This causes NOx to  increase, but the visible
environmental concerns of soot have already been addressed. This commenter recommended that
EPA establish a new baseline with more current data. Additionally, this commenter stated that EPA
needs to consider the effect that the current trend of lowering HC and CO levels has had on NOx.

        Regarding the data  provided to the SERs on diesel marine engines tested on the E5 test
cycle, this commenter expressed concern with EPA's endorsement of the attributes of seawater
cooling and EPA's failure to consider any of the negative attributes. Both commenters stated that
diesel engine manufacturers use jacket water aftercooling to cool the charge air at high load and to
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warm it during light load periods.  This process reduces white smoke, and low load  carbon
deposition, and lengthens overall engine and component life expectancy. Commenters contended
that  regulations  requiring manufacturers to change to  seawater aftercooling to  address NOx
emissions will result in a tradeoff in quality and visible pollution; no data were provided or offered.

       7.5.2    Effects of Transient Operations on Emissions from Inboard Engines

       Two written SER comments were received on this issue.  One commenter stated that
transient testing  for marine engines is not necessary, beneficial or economically feasible.  This
comment stated that the test cycle will not be  duplicated in the real world, thereby making transient
testing unnecessary. The other commenter stated that transient operation can affect diesel emissions
as well because of changing temperatures.  Both SERs  commented that transient  emissions are
sensitive to the aftercooler design.

       7.5.3.   Cost Issues

              7.5.3.1   Draft Hardware Cost Estimates for SD/I Marine Engines

       Two written SER comments were received on this issue. One commenter stated that any cost
estimates are hypothetical until further testing can be done on the performance of catalysts in the
marine environment. The burden for R&D, retooling, custom catalysts, and marinizing all associated
support equipment will fall on each individual small business, which has fewer engines over which
to spread these costs.

       This commenter also stated that the port fuel inj ection estimates need to be adjusted to reflect
the General Motors price list,  which supplies 98% of the marine engines and  the majority of
electronic fuel injection components used for sterndrive and inboard applications.  The commenter
stated that using these numbers, the contract  cost data are underestimated by approximately 40%.

       This commenter also stated that there were parts that were omitted from the contractor cost
estimates (e.g., TBI adapters, TBI linkages, cool fuel systems on fuel injected engines to prevent
vapor lock, ignition control modules for carbureted engines).

       This commenter also stated that the contractor has underestimated  the costs of R&D and
retooling incurred by GM. The commenter also stated that these costs are underestimated by a factor
of 7 for engine marinizers.

       The  other SER comment  received  on this issue  states that the contractor costs are
underestimated for EGR, catalysts, retooling and validation testing for small businesses.

       This issue was discussed at the SER outreach meeting. One commenter stated that any cost
analyses  conducted for this regulation are  premature  until impacts of safety,  durability, and
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performance are fully considered. Another commenter echoed the written comments with regards
to the hardware  numbers being incorrect or underestimated.  Comments at the SER outreach
meetings also stated that the cost numbers presented in the information provided to the SERs only
take into account larger sales volume engine families.

             7.5.3.2    Incremental Cost Estimates for Marine Diesel Engine Technology
                    Improvements

       One written SER comment was received on this issue. This commenter stated that requiring
seawater aftercooling to engines that are already using j acket water aftercooling would involve very
high retooling and R&D costs to be spread across very low engine volumes. The commenter stated
that consideration must be given  to  the cost of applying these technologies compared to the
environmental benefit that may be gained.  The commenter provided an example of one small diesel
engine marinizer that would incur tooling and R&D costs of between $584 - $795 per engine to
apply seawater after cooling. SER comments provided on this issue at the SER outreach meetings
were similar to the written comments received.

             7.5.3.3   Recreational Marine Diesel Costs

       Three written SER  comments were received on this issue.  Two commenters stated that
electronic fuel inj ection systems used in high speed marine diesels are a result of technology transfer
from on-highway applications.  Small marine diesel engine marinizers have not developed this
technology and would face large research costs and would be at a technical disadvantage if EPA
were to force this technology on the marine diesel industry. One of the commenters stated that  small
businesses do not have patents or rights to electronic fuel injection technology and recommend that
EPA carefully consider electronics as a solution for NOx reductions from diesel marine engines. The
third commenter  stated that they could not predict the engine costs for this upcoming rule, but they
believed that the  commercial marine engine NPRM underestimated costs for those engines.

       7.5.4    Catalyst Safety, Durability, and Performance Issues

       Both industry representatives and catalyst manufacturers stated that many  engineering
challenges will arise in the  development of a design for a safe, effective, and durable  catalyst in a
marine engine. SER comments focused on specific design concerns. These comments are arranged
by design concern below.

       Because tests have not been conducted in the marine environment, commenters suggested
that EPA conduct this type of testing before moving forward with a catalyst-based emission standard.
One commenter stated that segments of the industry are developing testing programs to test catalyst
technology in the marine environment. This testing cannot be completed prior to the publication of
the proposal and this commenter stated that putting forth a proposal that included catalyst-based
technologies would be inappropriate given the lack of data.
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Heat Exposure

       Marinizers commented that they will not be able to control the temperature of a catalyst by
varying the distance of the catalyst from the engine as in automotive applications.  Under this
scenario, EPA estimates that the catalyst would have to be near the exhaust ports and thus exposed
to temperatures as high as 850°C.  Marinizers were concerned that catalysts would deteriorate at
these temperatures. The catalyst manufacturers replied that new catalyst designs remain effective
at temperatures above 1100°C.

Heat Added to Engine Compartment

       Vapor-Lock

       Some industry representatives indicated that for SD/I engines using electronic fuel inj ection,
designing to avoid vapor-lock is already a problem. They commented that this problem stems from
fuel lines being heated to a temperature where the fuel begins to vaporize. As a result, the engine
will not start. The primary source of this heat is from the engine, especially after shut-down when
the cooling water is no longer flowing. Manufacturers indicated that this is made worse by the
engines operating in small, poorly ventilated compartments. Some manufacturers have indicated that
they  use small  coolers  to keep the fuel line temperatures  down.  One industry representative
suggested that vapor lock is really more an issue of what fuel the customer uses than it is of engine
temperature.  Industry representatives have stated that a hot catalyst can add to this problem since
the exhaust system in which it is installed would not be water-cooled after the engine was turned off,
thereby introducing more heat to the engine compartment.

       Manufacturers stated that many engine designs already have border line borderline vapor-lock
problems. Therefore, they are concerned that any heat added to the engine compartment from a
catalyst would increase vapor-lock.  Catalyst manufacturers stated that, even for a perfect catalyst
with 100% conversion efficiency, the exhaust temperatures at full power would not increase more
that 100°C, and they stated that for the low efficiency designs considered by EPA, the exhaust stream
temperature increase would be much  less.  They implied that any increase in  exhaust system
operating temperature would be slight, adding little to the thermal loading  after  engine shut off.
Catalyst manufacturers stated that the actual heat load could be calculated.  Marinizers indicated that
testing would need to be performed on prototype engines to assess the magnitude of the vapor lock
problem.

       Surface Temperature

       Marinizers also stated that they must meet surface temperature requirements on the engine
and in  the engine compartment. They expressed concern  that large  temperature increases, either
during operation or right after engine shut down, could result in users being burned if they touch the
engine or even in a risk of fire. They commented that they are especially concerned that if a catalyst
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were to melt down due to misfire or other some mechanism, that this would pose a safety risk.  The
commenters noted that the U.S. Coast Guard also stated that they would not accept a design that
resulted in these sort of safety risks.

Exhaust Leaks

       The commenters noted that the US Coast Guard has also expressed concern that if additional
equipment and connections were needed to install catalysts, then more areas for potential exhaust
leaks would be introduced. If such leaks  were to develop, they would lead to increased carbon
monoxide emissions aboard the vessel, and could pose potential harm to passengers.  Although the
catalyst design considered for the proposal does not require additional connections, manufacturers
commented on one area of potential leaks. They stated that the two pieces of the manifold are j oined
where the catalyst would be placed.  They commented that if the catalyst were not insulated well
enough, the high temperatures could melt the seal between the manifold sections which could result
in an exhaust leak.

Back Pressure

       Manufacturers also expressed concern that placing a catalyst in the exhaust manifold would
increase the back pressure in the exhaust. They stated that a back pressure increase would decrease
engine power. Also they commented that they are limited by the size of their exhaust manifolds.
They commented that they could not increase the size of the manifolds to accommodate larger
catalysts and flow areas without causing changes in at least some boat designs. Specifically, they
stated that some engine compartments would have to be made larger because some current designs
allow just enough space to fit the engines.  Manufacturers stated that an engine should be fit with a
catalyst and the impacts of the catalyst on back pressure and power should be observed.

Vibration

       Industry representatives have stated that in the marine environment, the catalyst cannot be
isolated from engine vibration because they would be mounted in the exhaust manifold. Industry
representatives expressed concern that modern catalysts may not be able to  withstand the large
g-forces found in the exhaust manifold. The catalyst manufacturers stated that vibration would not
be an issue for catalyst durability because the catalyst can be mounted in such a way as to separate
it from engine vibration.  The catalyst  manufacturers cited successes with similar situations in
motorcycles and chainsaws. Also, in-manifold catalysts are used in some automotive applications.

Water Ingestion to the Catalyst

       Marinizers commented that a  catalyst in the exhaust manifold would be  subject to water
ingestion, usually in the form of a mist. As described by the marinizers, this would occur since
pressure pulses in the exhaust system would draw some water back towards the engine. They
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indicated that this is most severe when the engine is brought back to idle after operating at full power
or when it is shut down.  Marinizers stated that they have had designs where water has actually
flowed back to the exhaust valves, but too much water flowing back through the exhaust manifold
would have severe engine durability impacts. Also, they commented that water can back flow into
the manifold due to user error such as immersing the lower end of the unit while putting the boat in
the water.

       Thermal Shock

       Industry representatives questioned whether modern catalysts experience thermal shock as
a result of cooling water coming into contact with a hot catalyst.  Catalyst manufacturers indicated
that there would be no long-term effects upon catalyst effectiveness due to thermal shock.   One
catalyst manufacturer described a test in which a ceramic catalyst heated to over 900°C was dropped
into a bucket of water and there were no adverse effects on the catalyst's durability. The catalyst
manufacturers indicated that even though the catalyst would not be active if it was cooled to far from
quenching, that it would heat up quickly and would not be damaged when it was reactivated. Marine
industry representatives commented that testing should be performed to determine the impact of
thermal shock upon catalyst efficiency, and to  develop a design whereby such impacts  are
minimized.

       Salt Deposition

       Industry representatives  questioned whether modern  catalysts and oxygen sensors could
withstand salt contamination by seawater coming into contact with the catalyst.  Both industry
representatives and catalyst manufacturers agree that modern catalysts cannot be effective if they are
subject to an accumulation of salt, which can be caused by contact with salt water. Manufacturers
cited SAE paper 951814, where researchers who immersed a catalyst in salt water found that the
conversion efficiency dropped from 74% to 22% conversion efficiency.  When a catalyst was
immersed in fresh water, the efficiency did not suffer.

       The catalyst manufacturers stated that salt deposition is worrisome to catalyst performance,
but that salt could be washed off a catalyst.  Industry representatives indicated that there would be
no continuous washing of the catalyst with water but there would instead be a light trickle or spray
of salt water. They commented that this would be enough salt water contacting the catalyst to lead
to an accumulation of salt deposits but not a large enough volume of water to wash the salt off of the
catalyst.  Industry representatives  indicated that they believe  that only  marine testing  could
determine the extent to which catalysts are adversely affected by salt deposition.

       7.5.5    Recreational Marine Emission Reductions per Engine

       Two written SER comments were received on this issue. One of the commenters stated that
many recreational diesel  engines  are  already using  the EPA proposed technology  to  meet
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performance requirements. This commenter also stated that the emissions inventory used by EPA
is flawed with regards to the hours of operation assumed for recreational marine diesel engines. The
commenter stated that EPA's assumption that recreational marine diesel boats are operated between
175 and 500 hours is an overestimate. The commenter stated that  recreational marine engines
consumed approximately 4.0% of the fuel being consumed by all high speed CI marine engines in
1991. No SER comments were provided on this issue at the SER outreach meetings.

        SERs also provided comment on the use of EGR in the  marine environment.   They
commented that they did not think that large NOx reductions could be achieved over the E4 test
procedure by using EGR technology because of the weight of idle and wide open throttle on the  E4
cycle heavily influences the total emissions, but the EGR is not very effective during these modes.
Also, one SER commented on the  durability of EGR stating that if  a boat sits unused for a long
period of time, water could condense on the EGR valve causing it to  corrode.

       7.5.6    Other Recreational Marine Rules Considered by EPA

       One written  SER comment was received on this issue. This commenter stated that it has
worked closely with EPA, the European Union (EU), the International Maritime Organization
(EVIO), and the Department of Commerce's Trans Atlantic Business Dialogue (TABD). The purpose
of the commenter's involvement with these entities is to ensure a level playing  field for U.S.
manufacturers and to work with these entities to set reasonable emissions standards. The commenter
stated that international trade harmonization is necessary for efficient regulation of private industry.
In the era of transnational corporations and global economic integration, nation-based regulations
are no longer rational or efficient and can create trade barriers.

       This commenter also stated that, through the TABD process, the US has worked with the EU
to adopt the functional equivalent of the EPA  emissions standards for outboards and personal
watercraft (OB/PWC). For recreational marine diesel emissions standards, the EU has adopted the
functional  equivalent  of  EVIO  standards.   The commenter  stated  that, in  order for the U.S.
recreational marine industry to remain a world leader, it must be  able to manufacturer, test, and
certify an engine under one emission standard and be able to sell it anywhere in the world. Without
this ability, U.S. boat builders and engine manufacturers will be at a competitive disadvantage and
small businesses with limited resources will also be in jeopardy. Similar comments on this issue
were also raised by several SERs at the SER outreach meetings.

       7.5.7    Certification Costs for Varying Engine Family Size

       One written SER comment was received on this issue.  This commenter stated that the cost
estimates need to be adjusted to better reflect actual costs incurred by marinizers. For example, the
commenter states that EPA's estimate of the cost of the test needs to be adjusted to reflect the actual
cost of the test described in the information provided to the SERs. Because there are changes made
to the calibration during dynamometer testing, the engine also would need to be reevaluated in a
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boat.  The commenter states that this is not accounted for in EPA's cost estimates.  Additional
examples are provided by the commenter of other costs it believed to be erroneous. The commenter
also provided a table, which the commenter developed, of certification costs that the commenter
believes more accurately represent the costs that would be incurred by small businesses.  The
commenter pointed out that certification costs for small engine families would be spread out across
fewer engine sales and would therefore result in higher costs per engine.

       7.5.8    Additional Comments Received

       One  written SER comment was received on the issue of efforts of the California Air
Resources Board to accelerate the implementation of the EPA's onboard and personal watercraft
(OB/PWC) emission requirements through a three-tiered program. The commenter stated that the
third tier of  the CARB  standards require OB/PWC manufacturers to meet  a very low emission
requirement in 2008 that will require OB/PWC manufacturers to develop a marine emission capture
technology, which at present appears to be catalyst technology. The commenter states that the EPA
is considering a proposal that will require catalyst technology on SD/Is in 2005, well before CARB's
requirements. The commenter stated EPA would be placing undue burden on small manufacturers,
dependent on technology transfer, if they are forced to bear the brunt of developing technology to
meet  SD/I standards now being considered  when larger companies in the OB/PWC market will
eventually have to develop such technology .
8.     Panel Findings and Discussion

       8.1  Number and Types of Small Entities

       For a complete description and estimate of the small entities to which the proposed rule will
likely apply, see Section 4.  Marine engine manufacturers will be directly regulated under this
proposal. It is unclear at this time whether or not boat builders will be directly regulated under this
program. For this reason,  the Panel recommends that flexibility concepts aimed at both engine
marinizers and boat builders be considered.

       8.2  Potential Reporting, Record Keeping, and Compliance Requirements

       For any emission control program, EPA must have assurances that the regulated engines will
meet the standards. Historically, EPA programs have included provisions placing manufacturers
responsible for providing these assurances. The program that EPA is  considering for marinizers
would likely include testing, reporting, and record keeping requirements. Testing requirements for
marinizers would likely include certification, production line, and deterioration testing. Reporting
requirements would likely include test data and technical data on the engines including defect
reporting.  Manufacturers would have to keep records of this information.
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       8.3 Relevance of Other Federal Rules

       The Panel is not aware of any other Federal rules that may duplicate, overlap, or conflict with
the proposed rule.

       8.4 Other Regulatory Alternatives

       8.4.1   Burden Reduction Approaches Designed for Small Marinizers

              8.4.1.1  Broaden Engine Families

       This approach would allow small marinizers to put all of their models into one engine family
(or more) for certification purposes. Marinizers would then certify their engines using the "worst
case" configuration.  Several SERs expressed concern at a meeting held on June 29, 1999 and in
writing regarding this approach. SERs were concerned that, while this would reduce some of the
certification testing,  it would require manufacturers to identify and test a "worst case" engine
configuration.  The manufacturers would still have to perform some testing and would be responsible
if they chose the "wrong" engine, which is a risk that most small manufacturers would not be willing
to take.

       The Panel believes that this approach has historically reduced the burden in other regulated
industries, but  agrees that it might not be as useful in the marine industry due to the cost that would
be incurred for testing even one engine and the potential liability faced by manufacturers. The Panel
appreciates the concerns of the SERs that this approach provides limited value for this industry.
However, EPA believes that this approach could help small marinizers that were not involved in this
process.  The Panel recommends that EPA request comment on this approach  to allow for more
wide spread public comment.

              8.4.1.2 Minimize Compliance Requirements

       This approach would waive deterioration testing during certification and production line
testing for small marinizers.   Deterioration testing could be replaced with either engineering
judgment or an assigned deterioration factor by EPA.  This issue was also discussed and written
comments were received. One SER expressed written support for this approach.  The two other
written comments received on this issue were opposed to this approach. Commenters stated that
eliminating some of the steps in the compliance process may reduce or eliminate cost, but may also
increase the risk of being out of compliance. Therefore, minimizing compliance requirements offers
little or no benefit to small engine marinizers.  The other SER commented that minimizing
compliance requirements for small businesses would put them at a competitive disadvantage.

       The Panel believes the SER comments indicate that the manufacturer would be using
certification testing  (and perhaps production line testing) as an important part of its internal
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development and emissions performance assessment program. SERs commented that eliminating
a requirement that manufacturers collect emission performance confirmatory data for this compliance
program would also mean that the manufacturer would, for its own purposes, have insufficient data
to allow it to determine the emission performance of its production. EPA generally believes that a
manufacturer would fully develop its engines and emission control program prior to certification and
thus would have already established for itself the expected emission performance of its engines. The
subsequent compliance testing during certification and at the end of the production line then serves
the purpose  of demonstrating to EPA's satisfaction the emission performance of these engines.
Reducing the amount of compliance demonstration testing should not substantially impact the
manufacturer's own expectations for satisfactory emissions performance of these engines.  At the
same time, reducing these testing requirements should reduce cost to the manufacturer. For these
reasons, the Panel recommends EPA propose reduced compliance testing requirements for small
manufacturers.

              8.4.1.3  Expand Engine Dresser Flexibility

       The engine dresser approach allows marinized versions of certified nonroad engines to be
considered "dressed" engines and does not require further certification provided that the marinization
process does not include changes expected to increase emissions. This concept would expand the
definition of engine dressing used in the commercial marine NPRM  to include other marinization
changes,  such as water-cooled turbocharging, provided that the goal is to match the original engine
performance. This issue was discussed at the June 29,  1999  and several written comments were
received. SERs provided support for this  approach and stated that other marine technology may
appropriately be included.  The Panel recommends that this approach be proposed by the Agency
with the approach expanded to include water-cooled turbochargers because, while we believe there
is a risk of increased emissions, the benefit of this approach  for small business outweighs this risk.
The Panel also recommends that the Agency consider other recommendations that it may receive to
expand this approach as appropriate during the rulemaking process.

              8.4.1.4  Design Based Certification

       This  approach would  allow small marinizers to certify to a performance  standard by
demonstrating that their engines meet design criteria rather than by emission testing.  This issue was
discussed at the June 29, 1999 meeting and written comments were also received. SERs expressed
general support for this approach. Written comments stated  that this approach addressed a primary
concern of small businesses which would otherwise have  to conduct costly  certification and
deterioration testing  programs.  However, written comments also stated that a design based
certification requirement requiring catalyst technology concerns SERs because of the lack of data
of catalyst durability and performance in the marine environment. EPA recognizes that a  design
based certification requirement has the potential to substantially reduce the fixed  costs for small
businesses.
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       For SD/Is, an example of a design-based certification requirement would be that the engine
employs  electronic fuel  injection, EGR, and a catalyst in the exhaust manifold.  It would be
important that the A/F ratio and spark-timing were calibrated to ensure proper catalyst operation.
Certain flow rates of EGR would be required at different engine speeds. Also catalyst specifications
would have to be included such as, catalyst volume, cell density, washcoat formulation,  and overall
efficiency. The Panel recommends that EPA work with engine and catalyst manufacturers and with
small gasoline engine marine marinizers to define these specifications and include them in the
proposal for comment.

       For recreational diesel engines, design-based certification requirements are less clear. The
emission reduction strategies rely heavily on in-cylinder calibrations. Timing retard and charge air
cooling are the primary NOx reduction strategies. Fuel injection strategy and turbocharging are the
primary HC and PM reduction tools. It may not be feasible to specify criteria for ignition timing,
charge air temperatures, and injection pressures that would ensure emission reductions  from  every
engine. However, the Panel recommends that EPA work with small diesel engine marinizers to try
to develop meaningful design criteria for diesel engines and include them in the proposal, if possible.

              8.4.1.5  Small Volume Exemptions

       The Panel recommends that EPA request comment on the need for a 10 year exemption for
a portion of the  product line produced by small manufacturers of recreational marine  engines
considering that the approach discussed in section 8.4.1.6. may also be an option. This exemption
would allow any small manufacturer to exempt 250 SD/I engines per year of their choice from
having to comply with this rule for a period of up to 10 years. The Panel recognizes the difficulty
the smallest manufacturers may have in redesigning their engines to meet these standards. Further,
this delay in standards implementation will allow them additional time to redesign engines for niche
market applications.  The Panel points out that the total number of engines  exempted via this
provision would be less than an estimated 5% of gasoline recreational engines. One Panel member
also notes that recreational marine engines eligible for this exemption contribute an estimated 0.02%
of national NOx and HC emissions . Similarly, for small manufacturers of CI marine engines, the
Panel recommends this exemption would be for 50 engines. However, the Panel recommends that
these small volume exemptions would only be permitted if consistent with the requirements of
section 213(a) to achieve the maximum emissions reductions consistent with costs and other relevant
factors.

              8.4.1.6  Delay Standards for Small Business for Five Years

       This approach would exempt small marinizers from complying with the standards for a
significant period of time, e.g. 5 years beyond the initial compliance date. After this time period, the
standards would apply. This issue was discussed at the June 29,1999 SER meeting. Atthismeeting
two SERs expressed support for this approach. For these two SERs this approach makes sense for
them because they would be able to delay development expenditures and spread this work out over
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a longer period of time.  It was noted that these companies specialize in high performance engines,
which is a segment of the marine engine market that would not be highly competitive with regards
to emissions. Several other SERs expressed concern about this approach at the June 29 meeting and
in their written comments. These SERs commented that it would create a marketing advantage for
larger or more competitive segments of the industry by allowing them to market "clean" engines
which may alter the purchasing decisions of consumers. However, SERs also have indicated that
the potential cost increases required to meet stringent emission standards would also hurt sales.
Presumably, during a five year delay these costs would be forgone, and therefore, during this time,
putting the small volume manufacturer using this provision would avoid being placed at a cost and
pricing advantage compared with other engine manufacturers. Also, the small engine manufacturer
would likely benefit from technology advances adopted by other manufacturers, lowering their
research and development and warranty costs.

       Under this approach, manufacturers would be able to apply this delay to all or just a portion
of their production. This way, they could still sell "clean" engines when possible on some product
lines while delaying introduction of emission control technology on other product lines if necessary.

       NMMA commented that OB/PWC manufacturers will need to develop catalyst technology
for marine applications for 2008 to meet CARB requirements.  They commented that if the standards
were delayed beyond this date, the small businesses would benefit from the R&D work performed
by the larger engine manufacturers. The 5-year delay for small businesses would have the advantage
of fulfilling this request.

       Given the difference in opinion regarding this approach, and the uncertainty surrounding its
sales impact,  the Panel recommends that EPA propose this approach in order to benefit from
additional comments that may be submitted by the entire marine industry, including additional small
businesses that were not directly involved in the SBAR Panel process.

             8.4.1.7   Hardship Provisions

       There  are two parts to this  approach.  The first part of this approach would allow small
marinizers to petition EPA for additional time to comply with the standards. These marinizers would
have to make the case that the burden of compliance costs would have a significant impact on the
company's solvency.  Also, if a certified base engine were available, the marinizer would have to
use this engine. The second part of this approach would allow small marinizers to apply for hardship
relief if circumstances outside their control cause the failure to comply (i.e. supply contract broken
by parts supplier) and if failure to sell the subject engines would have a major impact on the
company's solvency. There was no SER opposition to this approach, either in writing or at the June
29, 1999 meeting. The Panel recommends that the Agency propose this approach.

             8.4.1.8   Averaging, Banking and Trading of Emission Credits
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       This approach would allow the use of credits by some engines to be offset by the generation
of credits by other engines in the same regulatory program. Averaging would allow manufacturers
to use positive credits from engine families below the standard to offset negative credits from engine
families performing above the standard. Banking would allow manufacturers to save emission
credits for use in the future.  Trading would allow manufacturers to purchase credits from other
manufacturers of similar engines to cover their own shortfalls.  ABT would be allowed among
gasoline SD/I engines  and among recreational diesel  engines, but would not be allowed between
gasoline and diesel engines. EPA believes that trading between gasoline and diesel could provide
manufacturers who produce both a competitive advantage over those who produce only gasoline or
only diesel  engines. There were no SER responses to this approach at the June 29 meeting. The
one written SER comment received on this approach was not in support of ABT.  The commenter
expressed concern that large businesses would be able to average or trade credits among engines,
possibly without having to make any improvements to a family of engines. According to this SER,
for small businesses, the amount of engine testing that would be required to account effectively for
credits would be cost prohibitive, particularly  for diesel engine manufacturers,  but less so for
gasoline engine manufacturers.

       Although commenters were not  interested in  a full ABT program for this rule,  the Panel
believes that it would be useful for small businesses to be able to purchase credits under the design
based  certification approach.   Normally,  with a design based certification requirement, the
manufacturer's emission performance for purposes of certification is determined  on the basis of
design features rather  than  emission  test results.   Thus the emission performance  of the
manufacturer's product would not be quantified, rather certification would be a "pass/fail" decision
based upon predetermined design criteria. However, without quantified emission performance it
would not be possible for a manufacturer to participate in a traditional  Averaging,  Banking and
Trading (ABT) certification program.  The Panel recognizes the technical  difficulty in trying to
quantify individual engine family emission performance solely on the basis of design specifications.
Nevertheless, the  Panel believes there is potential benefit from ABT programs for small
manufacturers in allowing them the same opportunity to minimize cost and maximize production
flexibility through averaging.  Therefore, the Panel recommends EPA propose  a limited ABT
program for  small manufacturers taking advantage  of the potential design based certification
requirement.  The purchasing manufacturer could use these credits to offset higher emissions in an
engine family. The level of credits necessary to offset would be conservatively based to maximize
assurance of compliance. For example, if the design based certification requirement required the use
of a catalyst with a minimum conversion efficiency  of 35%, the manufacturer could instead of
installing a catalyst certify using credits substantially greater than 3 5 % of the standard, for example,
45%. EPA would have to assign a conservative family emission limit (FEL) to this engine.

       The Panel also discussed the question of whether recreational marine marinizers  should be
able to purchase credits from other sectors such as land based nonroad engines. One panel member
argued that they should.  Another Panel member argued that, under this limited ABT program, the
participating manufacturer should only be able to buy credits offered for sale by recreational marine
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engine manufacturers certifying on the basis of emission tests (i.e., not certifying using the design
based certification requirement). That Panel member is concerned among other reasons that cross
trading would be inappropriate outside of SI marine because it could prevent emission reductions
from being achieved in areas where boats are primarily operated. In light of the points raised on both
sides of this issue, the Panel recommends that EPA take comment on this approach in the proposal.

             8.4.1.9  Level of the Standard for Small Diesel Engines for Small Marinizers

       SERs are concerned that the level of the standard currently under consideration would have
inappropriately high cost impacts on small marinizers in light of the emissions reductions. In order
to be responsive to these comments, EPA agreed to consider less stringent requirements for small
marinizers of 37-225kW engines if appropriate and if meeting the requirements of the CAA.  While
one Panel member suggested that the preliminary information could support a proposal  for no
emission reductions for these engines, the Panel recognizes that, at this time, EPA has not completed
its analysis of technology and costs.  However, the Panel further understands that EPA believes the
facts currently available support the level of the standard under consideration and would not result
in a proposal  for  no emission reductions for these engines produced by small  marinizers.
Nevertheless, as new information comes available, EPA will consider its impact in determining the
appropriate level of standards for this  category of engines.  The Panel recommends that EPA
continue to evaluate the emissions control technologies potentially feasible for these engines and
their cost impacts for small marinizers in this engine grouping.

             8.4.1.10  Adoption of   EU  or Other International  Standards  For  Small
Marinizers
       One Panel member recommends that, if upon further analysis, EPA finds that the baseline
emissions for either diesel or gasoline engines are higher than the current data suggests, EPA should
consider the appropriateness of other international standards as an option,  as long as it is consistent
with the requirements of CAA section 213(a).

       That Panel member expressed concern that the baseline emissions levels provided by EPA
may be too low based on manufacturer comments that today's engine designs have higher emissions
than a few years ago when the EPA data was collected.  However, another Panel member suggested
that the potential increasing baseline emissions would add to the benefits of the rule. That Panel
member further argued that if lower emissions have been achieved in the past without the use of new
emission control technology, then these same lower emission levels can be achieved in the future
at minimal cost.  Finally, that Panel member believes that EPA has sufficient  information to
determine that the EU  standards are not consistent with the requirements of CAA section 213(a).
The Panel recommends that EPA consider any further data that it receives germane to this issue.

             8.4.1.11 No Standard  for Small Marinizers

       One Panel member recommends that, if upon further analysis, EPA finds that there  are no
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additional emissions reductions that can reasonably be required from recreational marine engines,
or makes a new finding that these engines do not "cause or contribute" to air pollution, then EPA
should consider the appropriateness of no standards as an option, as long as it is consistent with the
requirements of CAA section 213(a).

       The Panel recognizes that EPA may adopt a no standard approach for small marinizers only
if it is consistent with the requirements of the Clean Air Act, including the obligations associated
with the cause or contribute determination and the standard setting criteria under CAA section
213(a)(3). At this time, however, one Panel member believes EPA does not have a basis either to
reconsider its prior final determination that new marine SI engines do meet the cause or contribute
threshold, or to revise its prior proposal that new marine CI engines also meet this threshold.  That
Panel member also does not believe it is appropriate to consider recreational marine engines as a
separate category for purposes of this determination. That Panel member also does not believe that
EPA has a basis at this time to find that setting no standard would satisfy section 213's standard
setting criteria  for recreational marine  engines  as  a group, the  underlying premise of this
recommendation. As such, EPA could not rely on this premise as a basis to set no standard for small
marinizers of recreational  marine engines.  The Panel  recommends that EPA consider new
information that becomes available that is relevant to these issues.

       8.4.2  Burden Reduction Approaches Designed for Small Boat Builders

       EPA outlined a series of potential flexibilities for small boat builders. It is EPA's intent that
these regulations will not affect boat design in ways that could add significant  cost or impact the
performance of the boat. The Panel is concerned that significant changes in external dimensions or
performance of an engine could require some boat builders to make  significant design changes to
their boats at great expense. Such a high cost would be especially burdensome for  small builders.
The Panel believes it is appropriate to consider small business flexibilities for boat builders at this
time. (EPA is still developing the proposal.) These concepts would allow engine marinizers to sell
small boat builders a limited number of uncertified engines for 5-7 years if boat builders determine
that  no satisfactory, complying engine is available  (more  detail  on these  burden reduction
approaches can be found in Appendix B).

       The Panel recommends EPA propose approaches for an engine manufacturer to continue
producing uncertified engines if a small boat builder provides information to EPA  demonstrating that
no complying engine is available which reasonably satisfies the needs of a boat builder.   This
approach should extend for a sufficient period of time to allow the boat builder to incorporate design
changes necessary to accommodate complying engines. One Panel member further recommends that
EPA develop a proposal with full transparency to boat builders.

       8.5   Additional Recommendations

             8.5.1 Safety, Durability, and Performance
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       The engineering challenges that may be encountered in the development of a design for a
safe, effective, and durable catalyst in a marine engine has been a point of discussion throughout the
Panel process.  EPA intends to carefully consider the impacts of its  regulations on the safety,
durability, and performance of marine engines during the development of this rulemaking. This will
include but not be limited to evaluation of salt on emission performance and durability, which may
or may not be performed in the marine environment. EPA is considering its testing options.

       One Panel member expressed concern that EPA not propose standards until such time that
sufficient data has been gathered to support its position that safety, durability, and performance will
not be adversely impacted as  a result of this regulation. Additionally, the Panel recommends that
EPA have sufficient consultation with the Coast Guard regarding safety issues such that these issues
can be properly identified and addressed in the preamble to the proposed regulations.  EPA has
indicated that it plans to propose two sets of standards- a set of standards  that would not require
the use of catalysts and an alternative set of more stringent standards that anticipate the use of
catalysts.  The Panel agrees.

9.     Appendices

       Appendix A - Summary of EPA's Position on Safety, Durability, and Performance Issues.

       Appendix B - Overview of Burden Reduction Approaches for Small Marinizers and Small
Boat Builders

       Appendix C - Summary of Small Entity Representative Conference Call on Recreational
Marine Engines - May 11, 1999

       Appendix D - List of Items Distributed to Small Entity Representatives  on June 16, 1999

       Appendix E - Summary of Small Entity Representative Conference Call on Recreational
Marine Engines - June 29, 1999

       Appendix F - Summary of Small Entity Representative Conference Call on Recreational
Marine Engines - July 6, 1999

       Appendix G - Written Comments Received from Small Entity Representatives

       Appendix H - Cost Effectiveness and  Cost per Engine Analyses
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