United States        Air and Radiation        EPA420-B-03-005
          Environmental Protection                 April 2003
          Agency
&EPA    Small Entity Compliance
          Guide for the Tier 2/Gasoline
          Sulfur Final Rule

          Control of Emission of Air
          Pollution from New Motor
          Vehicles:  Tier 2 Motor Vehicle
          Emission Standards and
          Gasoline  Sulfur Control
          Requirements 65 FR 6698,
          February 10, 2000
                                 > Printed on Recycled Paper

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                                                     EPA420-B-03-005
                                                          April 2003
         Small Entity Compliance Guide for the
            Tier 2/Gasoline Sulfur Final  Rule

 Control of Air Pollution from New Motor Vehicles: Tier 2
 Motor Vehicle Emission Standards and Gasoline Sulfur
 Control Requirements 65 FR 6698, February 10, 2003
                    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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                                       NOTICE

       This guide was prepared pursuant to section 212 of the Small Business Regulatory
Enforcement Fairness Act of 1996 ("SBREFA"), Pub. L. 104-121. The statements in this
document are intended solely as guidance to aid you in complying with Control of Emission of
Air Pollution from New Motor Vehicles: Tier 2 Motor Vehicle Emission Standards and
Gasoline Sulfur Control Requirements (65 FR 6698, February 10, 2000). In any civil or
administrative action against a small business, small government or small non-profit organization
for a violation of the Tier 2 Motor Vehicle Emission Standards and Gasoline Sulfur Control
Requirements, the content of this guide may be considered as evidence of the reasonableness or
appropriateness of proposed fines, penalties or damages. EPA may decide to revise this guide
without public notice to reflect changes in EPA's approach to implementing this rule or to clarify
and update text. To determine whether EPA has revised this guide and/or to obtain copies,
contact EPA's Small Business Ombudsman Office at www.epa.gov/sbo or 800-368-5888 or the
Office of Transportation and Air Quality at www.epa.gov/otaq or c/o Mr. Tad Wysor, 734-214-
4332.

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Introduction

       This document is intended to assist small businesses in complying with the
Environmental Protection Agency (EPA) rule commonly known as the "Tier 2 and Gasoline
Sulfur" program.  The complete name of the rule is "Control of Emission of Air Pollution from
New Motor Vehicles:  Tier 2 Motor Vehicle Emission Standards and Gasoline Sulfur Control
Requirements" and it can be found in the Federal Register for February 10, 2000 beginning on
page 6698 (65 FR 6698).  Since the final rule was published, EPA has issued technical
amendments to correct and clarify several aspects of the rule. (See
http://www.epa.gov/otaq/tr2home.htm and click on "Final Rulemaking Documents" for the rule,
the technical amendments, and related information.)

       This program establishes more protective tailpipe emissions standards  for all passenger
vehicles, including sport utility vehicles (SUVs), minivans, vans and  pick-up trucks.  The new
standards are required beginning with the 2004 model year.  This regulation marks the first time
that SUVs and other light-duty trucks—even the largest passenger vehicles—are subject to the
same set of national pollution standards as cars.

       In the same program,  EPA established much more stringent requirements for sulfur in
gasoline that will ensure the effectiveness of the highly-efficient emission-control systems that
the new vehicles will use. Most refiners will respond to these sulfur standards by adding new
equipment to remove sulfur from their gasoline production.

       When the new tailpipe and gasoline sulfur standards are implemented,  Americans will
benefit from the clean-air equivalent of removing 164 million cars from the road.  New passenger
vehicles will be 77 to 95 percent cleaner than those on the road today and gasoline sulfur content
will be 90 percent lower than gasoline today.

What Does the Tier 2 and Gasoline Sulfur Program Require?

       For Vehicles...

       For companies that produce new vehicles (or convert vehicles to meet  new-vehicle
emission standards), EPA administers a large program that assures that these vehicles are
certified to  meet the appropriate emission standards in effect at the time they are sold and
continue to meet the standards on the road for the useful life of the vehicle.  In general, the new
Tier 2 program will not affect the overall vehicle emission compliance program. What will
change is the emission levels themselves, which are significantly more stringent than today's
standards.

       While establishing more stringent emission requirements, the Tier 2 program also
includes  several provisions to provide flexibility and ease compliance. An averaging system will
allow vehicle makers to certify vehicles at more than one emission level so long as their overall
production  meets a low average emission level (including 0.07 gram per mile for nitrogen
oxides).  Also, during the early years of the program, a phase-in program will allow higher

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corporate average emissions while manufacturers move toward the final standards.

       Small companies that certify vehicles tend not to mass produce new vehicles but rather
convert existing vehicles to meet current standards or to meet current standards on a different
fuel. This market segment includes, for example, the companies that convert a vehicle purchased
in another country to meet U.S. standards or that convert a vehicle to run on alternative fuels.
The table below lists the small business criteria for vehicle manufacturers and converters. The
overall compliance program for vehicles has special provisions for small volume manufacturers
(regardless of whether or not they are small businesses according to the criteria below).

       In addition, the new Tier 2 program includes a requirement that manufacturers begin to
phase in the production of Tier 2 compliant vehicles in 2004. However, the Tier 2 program also
allows small entities that certify vehicles to postpone any production of Tier 2 compliant vehicles
until the end of the phase-in period. This provision will allow these  small entities the maximum
time to prepare for certification to the new stringent standards.

       There are currently about 40-50 companies that have received Certificates of Conformity
or are likely to seek certification that we believe meet the small business criteria below. Our
compliance staff have been working individually and collectively with these businesses on issues
relating to the Tier 2 standards and broader compliance issues.  If your business is considering
certifying new or newly-converted vehicles and has not already contacted EPA, please do so  as
soon as possible at the contact number listed below.

       For Gasoline Producers...

       The new Gasoline Sulfur program will require refiners to produce gasoline at a much
lower sulfur level than today's gasoline.  After a short phase-in beginning January 1, 2004,
refiners will meet an average sulfur standard of 30 parts per million of sulfur and a per-gallon
sulfur cap of 80 parts per million.

       For this program, refiners are defined as "small" if they have less than  1500 employees
company-wide and a total crude oil capacity of less than 155,000 barrels per calendar day (see the
table below).  Refiners that meet these criteria will have a temporary gasoline sulfur requirement
that is less stringent, depending on its gasoline 1997-98 sulfur level.  In order that low sulfur
gasoline reach the vehicles that need it, refiners and others in the distribution system have
gasoline testing, reporting, and record-keeping requirements, most of which is very similar to
those in the existing fuel programs.

       EPA has approved "small refiner" status for 10 refiners and has been in contact routinely
with these companies individually and as a group during the development of the rule and since
the  final rule was issued.  In addition to using the materials in this  Guide, we encourage these and
any other refiners, importers, and businesses that distribute and market gasoline to continue to
contact EPA with any questions or concerns (see the contact information below).

Who should use this Guide?

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       The table below gives some examples of entities that may have to comply with the
regulations and the criteria for deciding whether they qualify as "small."

               Industries Containing Small Businesses Potentially Affected by Today's Rule
Industry
Motor Vehicle Manufacturers
Alternative Fuel Vehicle
Converters
Independent Commercial
Importers of Vehicles and
Vehicle Components
Petroleum Refiners
Petroleum Marketers and
Distributors
NAICS3
Codes
336111
336112
336120
336311
541690
336312
422720
454312
811198
541514
811112
811198
541514
324110
422710
422720
SIC"
Codes
3711
3592
8931
3714
5172
5984 7549
8742
7533 7549
8742
2911
5171 5172
Defined by SBA as a
Small Business If:c
< 1000 employees
< 500 employees
< 750 employees
< 100 employees
< $5 million annual sales
< $5 million annual sales
< 1500 employees'1
< 100 employees
NOTES
a. North American Industry Classification System
b. Standard Industrial Classification system
c. According to SBA's regulations (13 CFR 121), businesses with no more than the listed number of employees or
dollars in annual receipts are considered "small entities" for purposes of a regulatory flexibility analysis.
d. For purposes of the Tier 2 and Gasoline Sulfur rule, the "small refiner"  criteria also require that the refiner have a
crude capacity of less than 155,000 barrels per calendar day.
How do I obtain a copy of the rule?

       You will find the complete requirements and flexibility provisions that apply to vehicle
manufacturers and converters and to refiners, distributors, and marketers of gasoline under the
Tier 2 and Gasoline Sulfur rule, as well as the more recent technical amendments to this rule, are
available electronically at the following web site:
http://www.epa.gov/otaq/tr2home.htm under Final Rulemaking Documents. We encourage
companies involved in any of these businesses to use these documents as the ultimate guide to
compliance.  See the contacts listed below for any  questions or concerns.

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Where do I go for help?

       A wide range of information about the Tier 2 and Gasoline Sulfur rule may be found at
the following web sites:  http://www.epa.gov/otaq/tr2home.htm and
http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm. You can reach staff in EPA's Office of
Transportation and Air Quality by telephone or email:

       For questions about compliance with the Tier 2 vehicle program: Mr. Russ Banush at
       734-214-4925 or banush.russell@epa.gov.
       For questions about compliance with the Gasoline Sulfur program: Mr. Tad Wysor at
       734-214 4332 orwysor.tad@epa.gov.

What does this Guide include?

       Since the time the final rule was issued in early 2000, EPA has held several workshops,
published Question-and-Answer documents, and issued formal guidance letters relating to
compliance with this rule. In each of these presentations and documents, information of
particular interest to small businesses was highlighted and placed in the larger context of the
overall requirements that these entities are responsible for meeting. In a number of cases, EPA
formally addressed the issues in technical amendments to the rule (see web site reference above).
All of these materials are available at the web  site listed above under

       This Small Entity Compliance Guide compiles information from these workshops,
Question and Answer documents, and guidance letters. The material is organized into two main
categories reflecting the two main types of business that are subject to the Tier 2 and Gasoline
Sulfur rule: 1) small businesses that seek a Certificate of Compliance for newly manufactured or
converted light-duty vehicles or light-duty trucks, and 2) small refiners producing gasoline.

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Appendix A. Materials Relating to Compliance by Small Entities with the Tier 2 Vehicle
             Emission Standards

       Tier 2 Exhaust and Evaporative Emission Standards, Industry/EPA Workshop, March 21,
       2001

       Announcement of Independent Commercial Importer Workshop on March 27, 2002 1-4
       pm at EPA and Guidelines for Certification, Fuel Economy and Final Entry of ICI
       Vehicles (EPA Guidance Letter CCD-02-04, February 6, 2002)
       See http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm

       Information from March 27, 2002 Independent Commercial Importer Workshop (EPA
       Guidance Letter CCD-02-07, April 29, 2002)
       See http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm

       Workshop Announcement for Alternate Fuel Converters (EPA Guidance Letter CCD-02-
       02, January 11,2002)
       See http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm

       Certification Guidance for Alternative Fuel Converters (EPA Guidance Letter CCD-02-
       12, August 29, 2002)
       See http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm

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   Tier 2 Exhaust and Evaporative Emission
                     Standards
                Industry/EPA Workshop
         EPA Certification & Compliance Division

                March 21, 2001 1-4 PM
                 Ann Arbor, Michigan
             Tier 2 Quick Overview
Final rule published Feb 10, 2000 (65 FR 6698).
Technical Amendment signed Jan 19, 2001.
   • Text available on EPA web site
Takes effect 2004-2009.
Focus:  exhaust NOx.
 - Provides large, early NOx reductions.
Views vehicles and fuels as a system.
Cuts gasoline sulfur from 300 to 30 ppm.
Cuts evaporative standards roughly in half.

              Tier 2 Fundamentals
Apply same set of standards to all LDV & LDTs.
 - Requires SUVs (<10,000 GVWR) meet light-duty standards

Spread burden across vehicles and fuels.

Provide significant & early NOx benefits to states.

Harmonize with Calif where possible.

                 Sulfur Standards
     Phase In and Average NOx Standards

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         Full Life Exhaust Emission Bins
              Footnotes to Bins Chart
 Bin 11 applies only to qualifying MDPVs.
 Higher NMOG,CO and HCHO values in bins 8, 9 and 10 apply
 only to HLDT/MDPVs.
 For bin 10, an optional NMOG of 0.280 applies only to
 qualifying LDT4s and MDPVs
 For bin 9, an optional NMOG of 0.130 applies only to qualifying
 LDT2s.
 Higher NMOG standard in bin 8 deleted after 2008.
 "Qualifying" refers to manufacturers who bring in their HLDTs
 and MDPVs in 2004 MY.
 NMOG means NMHC for diesel vehicles.
       Intermediate Life Exhaust Standards
1 Full life PM standards apply at intermediate life.
• Bin 10 standards optional for diesels.
• Intermediate standards optional for 150K certified test groups.
1 Temporary Bins 9,10 and 11 expire along with full life bins.

Interim Program Means End of NLEV and Tier
                            1
• 2004/2005 Leadtime issue for HLDTs and MDPVs
• Diesel MDPVs can meet HDE standards through 2007.

         MDPV: New Vehicle  Category
              86.1803-01; preamble pg  6749-51
• Medium-Duty Passenger Vehicles (MDPVs)
  - Includes most Sport Utility Vehicles (SUVs)
  - Excludes work trucks.
• MDPV = Heavy-Duty Vehicle w/GVWR < 10,000
  - Designed mostly for transportation of persons, exclude
    • incomplete trucks

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     • vehicles seating more than 12 people
     • vehicles designed to seat >9 people rearward of driver
     • vehicles with cargo bed or box of 72.0" or more
  Includes conversion vans
           MDPV: New Vehicle Category
               86.1803-01; preamble pg 6749-51
  Get averaged with HLDTs in interim program
   - Qualifying MDPVdiesels may be engine certified through 2007; ref
  Cold CO, Evap, ORVR, CST, OBDII apply.
   - SFTP does not apply.
  In-use testing:
   - Sustained severe use MDPVs may be excluded from in-use testing
    (Preamble 6751).
   - MDPVs which see less frequent towing & severe use are not exempt
    from in-use testing.
          MDPV:  Engine-Certified Diesels
          86.1811-04(l)(2)(xiii); 86.004-ll(e); pre 6750
• About 5% of MDPVs are diesel
• Qualifying MDPVs can be engine certified through 2007 under
  existing HDDE standards
   - If the manufacturer meets the 25% phase-in requirement for
    HLDT/MDPVs in 2004.
• If they are engine certified:
   - Diesel MDPVs are excluded from HLDT/MDPV fleet average NOx
    calculations.


                     Full Useful Life
Notes:
A. Cold CO standards apply only for 5yrs/50K.
B. Extra Tier 2 NOx credits available for vehicles certified to
  15yr/150K if they meet applicable intermediate life standards.
C. Optionally lOyr/lOOK for early Tier 2 LDV/LLDTs; ref 1805-04(e); 86.1861-

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  04(c)(4) and Tier 2 Final Rule preamble, page 6745 .


                Intermediate Useful Life
Notes:
A. No 50K standards for lowest bins (1-4).
B. 50K standards optional for Tier 2 vehicles certified to 15yr/150K
  useful life.
C. 50K standards optional for diesels in bin 10.


             Carryover/across Flexibilities
• Avoid spending resources on phase-out vehicles.
   - Test fuel Pre 6792; 86.113, 213, 86.1844-01(e)(6)(i)
      •  Manufacturers may perform certification and in-use exhaust test results
       on California Phase II fuel.
      •  EPA must use California Phase II fuel for certification and in-use exhaust
       testing on interim vehicles carried over or across from NLEV or Calif
       LEV-I vehicles
   - Altitude provisions.  86.1810-01(f)
      • All interim vehicles can meet Tier 1 stds at altitude.
      • Altitude requirements optional for interim MDPVs.
   - Test weight provisions. Pre 6792
      • LVW or ALVW testing allowed for interim HLDTs.

              Phase-ins:   How to Comply
                86.1811-04(d),(k)(7);1848-01(c);
                     1860-04(b)(2);pre6742


• Initially, submit phase-in plan to EPA prior to certification of
  first test group
      • Include projected sales in Part I Application
      • Omit sales to Calif and 177 States

• Final phase-in plan:
      • Include in Final Part I/Part II Application
      • Based on actual sales or alternatively actual production volume (with prior
       EPA approval)
      • Omit sales to Calif and 177 States

     Phase-ins:  How to Comply (pg 2)  86.1811-
                               ; 86.1860-04(b)(2)

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Interim vehicles can't be used to comply with Tier 2 phase-in,
and vice-versa.
Vehicles from a Tier 2 test group may be divided and used to
comply with Tier 2 and Interim non-Tier 2 programs; ref
Don't have to use the same vehicles to comply with Tier 2
exhaust & evaporative phase-in.

  Phase-ins:  2004 Issue for HLDT/MDPVs
               86.1811-04(1), pre 6747, 6751
Statutory lead time requirements make 2004 optional for HLDTs
and MDPVs.
Regulations encourage voluntary compliance for 2004
 - Only mfrs who bring all their HLDTs into the interim program in 2004
  can:
   • Use optional 0.130 NMOG value for LDT2s in bin 9.
   • Use optional 0.280 NMOG value for LDT4s in bin 10.
 - Only mfrs who bring all their MDPVs into the interim program in 2004
  can:
   • Use bin 11 through 2008 for its MDPVs
   • Engine certify diesel MDPVs through 2007
   • Use optional 0.280 NMOG value for MDPVs in bin 10.
        Phase Ins:  Alternative Schedules
            86.1811-04(k)(6), preamble pg 6742
Rule has 25/50/75/100, 50/100 phase-ins.
 - 25+50+75+100 = 250; 50+100=150
Alternate phase-ins acceptable that:
 - Start as early as 2001
 - Conclude in same or earlier year; and
 - Percentages add up to at least 250% (or 150%)
 - 2001-2004 percentages must sum to at least 25%
Special LDV/LLDT provision for 2004
 - Can miss the 25% requirement, if at least 20%
 - Add double the shortfall to the 2005 requirement
 -See86.1811-04(k)(6)(vii).

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         Fleet Average NOx Standard:
                 How to Comply
Calculating NOx Credits & Deficits  86.1861-04,
                 preamble pg 6744-47
          NOx Averaging:  Overview
How to calculate NOx average    (Like NMOG)
How to calculate credits       (Like NLEV)
Limits on averaging sets   (None after phase-in)
Credit Life      (Only limited for interim credits)
Deficit Carryforward          (Three years max)
Early Banking          (Only for Tier 2 credits)
Extra credits for 15OK cert
Extra credits for lowest bins  (through 2005 only)
Discounting     (Only under deficit carryforward)
Reporting requirements
       NOx Average:  How to Calculate
      86.1860-04(f), 86.1837-01(b), Preamble pg 6743
Separate calculations for each averaging set
Separate LDV/LLDTs & HLDT/MDPVs until 2009
  E(n* NOx standard for bin)
total vehicles in category
  where n = number of vehicles in each bin
Applies to interim and Tier 2 NOx averages.
Round to same significant figures as the denominator (not less
than O.XXX)

    NOx Avging:  Limits on Averaging Sets
          NOx Averaging:  Credit Life
         86.1861-04, preamble pg 6738, 6745, 6747
Interim credits can be used only for interim average standard
- Effectively expire at end of interim standard
Tier 2 credits have unlimited life

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 - Including early Tier 2 credits.


    NOx Averaging: Deficit Carryforward
             86.1860-04(e), preamble pg 6747
For any NOx averaging standard, three year deficit carryforward
is allowed.
 - Pay back rate of 1:1 in years 1 and 2; 1.2:1 in year 3.  No deficit may
  be carried into year 4.
 - If carrying over a deficit, must apply all credits to deficit before
  banking or trading.
 - Manufacturers may pay back interim deficits with Tier 2 credits after
  end of interim program.
 - Limitation for Small Volume Manufacturers.


        NOx Averaging: Early Banking
            86.1861-04(c), preamble pg 6744-45
Tier 2 vehicles only.
 - Not for interim vehicles.
Begins in 2001 model year for all categories
Mfrs can earn early credits for vehicles <0.07.
Can also  count these vehicles toward alternate phase-in schedule.
But can't count toward interim NOx avg.
However, low Sulfur in-use fuel will not be available until 2004-
06.


 NOx Averaging:    150,000 Mile Useful Life
       86.1805-04, 86.1860-04(g), Preamble pg 6789


For Tier 2 vehicles only—on a test group basis.
 - Not for interim vehicles.
Mfr certifies to full life standards, but for 150K.
 - For exhaust & evaporative emissions (not Cold CO)
Adjusting NOx standard yields extra credits.
 - Multiply NOx bin value by 0.85 when computing the NOx fleet
  average.

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No extra credits if opting out of required 50K standards.

 NOx Averaging: Extra Credits for Cleanest
         Vehicles  86.1860(h), preamble 6746
Only applies to bins 1 and 2.
Only applies 2001-2005.
Extra credits when computing the year end Tier 2 NOx average.
Multipliers:  Bin 1=2.0; Bin 2 =1.5.
     NOx Averaging:  Credit Discounting
        86.1860-04(e), 1861-04, pre 6738, 6745, 6747
No official discounts except in credit deficit carryforward.
 - Credits must be used at rate of 1.2:1 if deficit carried into third year.
Interim credits essentially discounted by 100% at end of each
interim program.
 - They expire.
Different from CARB and NLEV.
           NOx Averaging:   Reporting
          1861-04(d), (g);  1862-04; preamble 6734
Interim credits must be "generated, calculated, tracked,
averaged, banked, traded, accounted for and reported separately
from Tier 2 credits."
Annual reporting requirement.
 - Fleet NOx average.
 - Number of credits generated or used.
 - Credit balance.
 - All values used in calculations.
 - Details on all credit trades.
 - Report due by May 1 of next model year.
                 NMOG Standards
       86.1810(p); 86.1811-04(m), preamble pg 6738
For diesel vehicles, NMOG means NMHC.
Flex fuel and dual fuel must measure NMOG except when

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operating on gasoline or diesel.
When measuring NMHC in lieu of NMOG:
 - Must multiply NMHC results by 1.04 before comparing with NMOG
  standard.
 - Currently allowed for gasoline vehicles only.
 - EPA may approve other adjustment factors.


           NMOG Standards:  Page 2
              86.1811-01(0); 86.1841-01(e)
Alternative fuel vehicles must measure NMOG using CARB
procedures
Do not use NMOG Reactivity Factors (RAFs).
 - Regardless of fuel used in the vehicle.
No NMOG averaging. (Unlike CARB).
 - No NMOG credits
 - NMOG of early Tier 2 vehicles can be used for NLEV fleet average
  compliance through 2003.
   • RAFs apply under NLEV program


          HCHO Emission Standards
For gasoline and diesel vehicles, a compliance statement is
allowed in lieu of actual test data.
        Evaporative Emission Standards
    (grams/test  on 3 day diurnal+hot soak)
          86.1811-04(e), Preamble pg 6748, 6751
        Evaporative Emission Standards
        (grams/test on 2 day diurnal test)
          86.1811-04(e), Preamble pg 6748, 6751
               SFTP:  Background
SFTP: Background -Weighting in Calculation

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                86.164-00; preamble 6789-92
        SFTP:  Tier 2 Overview 86.i8ii-04(f)
•  Generally, manufacturers must meet 4K standards from NLEV
  & full life stds derived from Tier 1.
  - 4K standards are not weighted (composite) standards
  - full life standards are weighted (composite) standards

•  Applicable to gasoline and diesel LDV/Ts.
  - Not MDPVs
  - Not alternative-fueled vehicles
  - Not flexible-fuel vehicles, except on gasoline & diesel.
 SFTP:  Tier 2  4000 Mile Standards 86.181 i-04(f);
                   preamble page 6790
•  Applicable to gasoline and  diesel vehicles
         SFTP: Tier 2 Full Life Standards
             86.1811-04(f); preamble pg 6789-92
•  For interim and Tier 2 LDVs and LDTs, the full life
  NMHC+NOx, CO and PM standards are calculated as follows:

•  Tier 2 SFTP Standard = Tier 1  SFTP Std - 0.35 x (Tier 1 Std-
  Tier 2 FTP Std)

SFTP:  Interim non-Tier 2 Standards 86.i8ii(f)(3) &
                      (4); pre 6790
•  LDV/LLDTs must meet Tier 2 SFTP (4K/120K) standards,
  except:
  - Interim LDV/LLDTs using bin 10 may meet Federal (non-NLEV) Tier
    1 SFTP stds.

•  Interim HLDTs may meet Tier 2  SFTP (4K/120K) standards or
  Tier 1 (50K/120K) SFTP standards.

     SFTP Standards - Exceptions for Diesels
            86.1811(f)(5) & (6); preamble pg 6791

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• Diesel LDVs and LLDTs may use 50K SFTP standards in lieu of
  4K standards through 2006.
   - Derived from Tier 1 standards by adjusting FTP component for new
    Tier 2 FTP standards.
   - Mfr must declare which option in cert application.
• No PM  SFTP standard for interim LDV/Ts.
• 4000 mile PM SFTP standard = Full life (composite) PM std for
  Tier 2 LDV/Ts.
                       Test Weights
            preamble 6791; 86.181 l-04(b); 86.129-00
ALVW = Curb weight + Half payload
LVW = Curb weight + 300 pounds

        Test Fuels  86.113-04; 86.213-04; pre. 6792
• 2004 Federal Sulfur specification:  15-80 ppm
   - EPA must use 15-45 ppm
• Mfrs may use Phase II  fuel for exhaust testing:
   - 50 state vehicles
   - vehicles where certification is carried over from NLEV
   - vehicles where certification is carried across from Cal LEV I
• EPA must use California Phase II fuel only for exhaust testing of
  Interim  non-Tier 2 vehicles:
   - vehicles where certification is carried over from NLEV
   - vehicles where certification is carried across from Cal LEV I
• EPA may use Tier 2 Indolene (15-45 ppm Sulfur) for all other
  certification & in-use testing.
          Test Fuels: Evaporative Emissions
                   pre 6792; 86.181 l-04(e)(6)
• Currently, manufacturers use the Federal fuel / Federal
  evaporative test procedure.
   - California & Federal evap standards currently equal
   - California accepts Federal results as worst case.
• Cal LEV II evaporative standards are more stringent than Tier 2
  evaporative standards.
• Manufacturers may use passing California LEV-II Evaporative
  data to meet Tier  1 & 2 standards.

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  - EPA may require comparative data from both tests


            Alternate Fuels  86.i8ii-04(c)(2)
• Tier 2 exhaust/evap requirements are "fuel neutral"
  - Generally, same standards apply regardless of fuel.

• For flex-, bi- and dual-fuel vehicles:
  - Must meet the same standards on conventional and alternative fuel.
  - May meet NMOG standard from next higher bin when operating on
    gasoline or diesel.
  - See 86.181 l-04(c)(3) for Bin 8 & 10 NMOG standards when operating
    on gasoline or diesel fuel.


      Test Fuel - Interim non- Tier 2 Vehicles
                86.113-04; 86.213-04; pre. 6792


             Test Fuel - Tier 2 Vehicles
                86.113-04; 86.213-04; pre.  6792
  Same as Interim table, except EPA may use Tier 2 Indolene test fuel for in-use testing for Tier 2 test groups
  certified via NLEV carryover and California LEV-I carry-across.
           Alcohols  and Evap Emissions:

                         Problem
• Numerous studies confirm impact of alcohols on permeability of
  fuel systems & materials.
  - Impacts are time-dependant.
• Ethanol  in approx 10%  of gasoline, nationwide.
• Evaporative emission impacts of ethanol not currently
  represented in EPA certification process.


       Alcohols and Evaporative Emissions:

      Tier 2 Certification 86.1824-0 i(a)(2), pre 6792
For vehicles certified to Tier 2 evap standards:
• Manufacturer's durability procedure must use ethanol in service
  accumulation for gasoline vehicles.

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     • Not just for flexible-fueled vehicles
     • Expose components to maximum ethanol concentration used in any
      state (currently 10%).
  Alternatively with prior EPA approval, manufacturers may use
  good engineering judgement to show compliance with sustained
  alcohol exposure.
                    In-use Standards
           86.1811-04(a)(5) & (p); Preamble pg 6795
• Same exhaust & evaporative standards apply to certification and
  in-use vehicles
  - except temporary in-use standards in 86.1811-04(p)
  Relaxed In-Use Standards 86.181 i-04(p);

 - Apply through 2008MY (2010 for HLDT/MDPVs)
 - For diesels in bin 10, multiply NOx and PM               certification
stds by 1.2 and 1.35, respectively
 - Special in-use standards for Bins 2-5 apply only to first two  years a test
group is certified to a new bin, as follows:


                      In-use Testing
             86.1845-04, 86.1846-01, preamble 6795
• Manufacturer & EPA in-use testing essentially unchanged from
  CAP 2000 rule.
  - Manufacturers must perform in-use testing on MDPVs (which do not
    see sustained severe service).

• Mfrs may request additional preconditioning to remove the
  effects of high Sulfur in-use fuel.
     • If it is solely to remove effects of high sulfur
     • Only for vehicles of 2007 model year or earlier
     • Case by case (similar to NLEV)
     • Applies to manufacturer and EPA in-use testing.

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     OBD Requirements  86.1806-01; pre 6751
MDPVs must have OBD-II, except Diesels
 - Diesel MDPVs must have OBD if carried across from a California
  vehicle with OBD-II.
 - Other MDPV Diesel requirements are contained in 65 FR 59896,
  October 6, 2000.

Evaporative leakage requirement: .040 inch.

HEVs must have MIL monitoring battery components.
            OBD Requirements - page 2
            86.1806-01(d); Preamble page 6751

HEVs capable of off-vehicle charging must have useful life
indicator on battery system.

In-Use Sulfur Considerations, through 2007:
 - EPA may approve OBD systems that function properly on low sulfur
  fuel, but yield sulfur-induced "passes" on high sulfur fuel.
 - EPA may approve modifications to eliminate the sulfur-induced MIL.
    New Requirement: Leak Free Exhaust
            86.1844-01(d)(16), preamble pg 6798
Applies to all interim and Tier 2 vehicles.
 - But not carryover/across from NLEV or Calif LEV-I
Manufacturers must provide statement  in certification
application that:
 - Engineering analysis conducted of whole system
 - System designed for leak free assembly, installation and operation for useful
  life of vehicle
 - Repairs can  be made to maintain leak free nature with commonly available

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  tools.
"Leak Free" means that leakage is controlled so it won't lead to
an emission failure.
   NMOG Adjustment for Ozone Reduction
            Devices 86.1811-04(r), pre6797
Devices like PremAir. (e.g. on radiators)
Mfr can meet a higher NMOG standard to the extent it can show
ozone reduction
Must determine ozone reducing potential of the device,ozone
reduction potential of lower NMOG, and the ratio of the two.
 - Show by airshed modeling for four cities.

   NMOG Adjustment for Ozone Reduction
                  Devices   pg. 2
Mfr must determine and submit:
 - Air flow rate through device as function of speed.
 - Ozone reduction efficiency for vehicle useful life.
 - How OBD system will determine malfunction.
Compute NMOG allowance per 86.1811-04(r).

EPA in-use testing requirements to be determined.
         Hybrids and Electric Vehicles
       86.1811-04(n); 1860-04(e)(4); preamble 6793
Mfrs must measure emissions from Hybrid Electric Vehicles
(HEVs) and Zero Emission Vehicles (ZEVs) using CARB
procedures.
 - EPA can approve other procedures.
When computing fleet average NOx:
   • ZEVs go into bin 1.
   • For HEVs, the numerator in manufacturer's fleet average equation
    may be lowered by HEV NOx contribution factor.
   • Determine on a case-by-case basis.

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Small Volume Manufacturer Provisions 86.1811
                04(k)(5); Preamble 6794
 Small Volume Manufacturers (SVMs) are expected to opt into
 NLEV in 2002 model year (instead of meeting Tier 1 SFTP
 standards).

 Generally, SVMs are exempt from phase-in requirements until
 the final year of the phase-in.

 Hardship provision provides extra lead time.
  LDV/LLDT Small Volume Mfr Provisions
            86.1811-04(k)(5)(i); Preamble 6794
Must normally comply with 100% interim standards in 2004,
2005, 2006 model years.
   • Meeting the 0.30 NOx fleet average standard.
   • Which will mean certifying to Bin 9 or lower
Exempt from 2004, 2005, and 2006 Tier 2 phase-in
requirements.
Must comply 100% with Tier 2 in 2007.
   • For exhaust and evaporative emissions
 HLDT/MDPV Small Volume Mfr Provisions
             86.1811-04(k)(5)(ii); Pre 6794-95
 Must normally certify to bins 1-11 in 2004-2006.
 - Exempt from 0.20 NOx interim fleet average 2004-06
 Must normally meet .020 NOx fleet average in 2007 and 2008
 model years.
 - Which will mean certifying to Bin 8 or lower
 - Exempt from 50% Tier 2 phase-in in 2008.
 Must normally comply 100% with Tier 2 in 2009 and later

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  model years.
     • For exhaust and evaporative emissions


 Small Volume Mfr Hardship Provisions 86.1811-
                      04(q), pre 6795
• Small Volume Manufacturers can apply for one year relief from
  any final phase-in year for exhaust or evaporative emissions.
• Written applications must:
  - Be submitted before noncompliance occurs.
  - Show severe economic hardship will occur
  - Show best efforts to comply
  - Show efforts made to purchase credits


Small Volume Mfr Hardship Provisions - Page 2
                  86.1811-04(q),pre6795
• Mfr can defer for one year:
  - 100% compliance with Bins standards and interim requirements for
    LDV/LLDTs in 2004.
  - 100% compliance with Tier 2 requirements for LDV/LLDTs in 2007.

  - 100% compliance with Bin standards and interim requirements for
    HLDT/MDPVs in 2004.
  - 100% compliance with 0.20 NOx average standard for HLDT/MDPVs
    in 2007.
  - 100% compliance with Tier 2 requirements for HLDT/MDPVs in
    2009.
            Small Volume Mfr Hardship

     Provisions - Page 3 86.1861-04(a)(5), pre 6795
  Small Volume Manufacturers must meet fleet average NOx
  standards for one model year before running a credit deficit.
  - LDV/LLDT .30 NOx fleet average standard in 2004-2006 model years.
  - HLDV/MDPV .20 NOx fleet average standard in 2007-2008 model
    years
  - Tier 2 0.07 NOx fleet average in 2007-on for LDV/LLDTs or in 2009-

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  on for HLDV/MDPVs.


    Provisions for Independent Commercial

     Importers (ICIs)  85.1515, Preamble pg 6794
NLEV is optional for ICIs; Tier 2 is mandatory.
ICIs are exempt from phase-in requirements, similar to small
volume manufacturers.
Small Volume Hardship provisions apply to ICIs.
ICIs must meet bin < to average NOx standard.
Can use averaging, banking & trading program.
 - But must have credits in advance.
 - Or monitor production and obtain credits during the year; must not
  have a deficit at the end of the year.
        Tier 2 - EPA  Computer Changes
Some minor changes will be implemented in 2001:
 - ESI: Add Bins, RAFs, MDPV vehicle class, error flags
 - EvSI: Add new evaporative standards
 - VI: Add input codes for Electric Vehicles
 - MTDS: Add Tier 2 fuel type, PM for US06 & SC03
 - General Label:  Add some fields for Electric Vehicles
 - SS: Report RAFs; a,b,c coefficients, new standards

See EPA guidance letter CCD-01-24; Decl4, 2001

        Tier 2 - EPA Certificate Changes
Tier 2 Certificates will show compliance with:
 - Tier 2 or Interim non-Tier 2 standards; and
 - Clean Fuel Vehicle standards (if applicable)

Early Tier 2 certificates will show compliance with:
 - Tier 2 and NLEV standards; and
 - Clean Fuel Vehicle standards (if applicable)

Certificates will be conditional on the manufacturer:
 - performing in-use testing,
 - meeting fleet average NOx standards, etc.

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              For More Information:

Visit our Internet sites
 - www.epa.gov/otaq; or
 - www.epa.gov/autoemissions

See Code of Federal Regulations, 40CFR Part 86
See Federal Register 65 FR 6698, Feb 10, 2000

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Appendix B.  Materials Relating to Compliance by Small Entities with the Gasoline Sulfur
             Standards
      Workshop Presentation, March 14, 2000

      Gasoline Sulfur Rule Questions and Answers, May, 2000

      Gasoline Sulfur Rule Questions and Answers, December, 2000

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          r in
           in
   Tier 2/Gasoline Sulfur
  Rulemaking
       Man;
Manners U.S. EPA
Office of Transportation and Air Quality

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        cs re
iscussion
         n^^T^^^^
         nc.
j
j
ssment
            fur Program
 Nex

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                          und
j Tier
j
rr)TT Priner o
_i ^*J J J  J ^J |—/ —J J —X
asoline Sulfur Issues,
                 Congress, July 1998
  TIE
   ulemaking, May 1999
  Public hearings & stakeholder meetings
  Final rule promulgated 12/21/99, published in
  the Federal Register 2/10/00

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   tons  wth
        NOx Emissions
         2/Sulfur
                    without Tier 2
                      with Tier 2
2000
2010
2020
2030
               Year

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   ppli
   ^ ^
     es same set
 sirs and Jignt t
j Includes a
        rfi
                    fehicle Program
.rds to passenger
                   chedule for vehicle
manura
 'ermits choice of emission standards ("bins")
 or vehicle manufacturers.
Designed to provide significant NOx benefits
to states.
Includes new "MDPV" category

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   icjnc-ciuty yen
  car
J I lent innr-r i|ry
	1 __|J ^-* J J -J J J ^> I J J _l S«#J ^>J ,J /
   «-/"—/      y
  Ford
                   passenger car or passenger
                .ing 12 passengers or less
              truck: <. 6000 Ibs GVWR, e.g.,
               ^ota RAV4, Dodge Dakota
           "ty truck:  between 6000 and 8500
   GVWR, e.g., Ford F-150, GM 1500
Medium-duty passenger vehicle:  < 10,000 Ibs
GVWR and is designed to transport people, e.g.,
Ford Excursion

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r
Cy
                   s
 st Standards
  t 77%-95%
                              Current Standards
                              Final Standards
        GVWR 	> 8500 Ibs
   cars &
 small trucks
 large SUVs,
vans & trucks

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           Veh
  gram Issues
LDV/LLDT Proeram
  PM reduced
  Useful life =
  120,000 miles
  SFTP upgraded
MDV/HLDT Proeram
  wg. NOx Std =
  0.07 g/mi
  NMOG « Tier 1;
  evap cut 50%;
  PM reduced
- Useful life =
  120,000 miles
• SFTP upgraded

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             trr
OfJ b'D
-.^x j j *~-^r -j-
ful  Life  Exhaust
lards (g/mi)
Bin#
11
10
9
NOx
0.9
0.6
0.3
NMOG
0.280
0.156/0.230
0.090/0.180
CO
7.3
4.2/6.4
4.2
HCHO
0.032
0.018/0.027
0.018
PM
0.12
0.08
0.06
[The above temporary bins expire in 2006 (for LDVs and LLDTs) and 2008 (for HLDTs and MDPVs}]
8
7
6
5
4
3
2
1
0.20
0.15
0.10
0.07
0.04
0.03
0.02
0.00
0.125/0.156
0.090
0.090
0.090
0.070
0.055
0.010
0.000
4.2
4.2
4.2
4.2
2.1
2.1
2.1
0.0
0.018
0.018
0.018
0.018
0.011
0.011
0.004
0.000
0.02
0.02
0.01
0.01
0.01
0.01
0.01
0.00

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                                                                                      NOx
                                                                                      Std.
                                                                                      (g/mi)
LDV/LLDT
(inte rim )
LDV/LLDT
(Tier 2)
 HLDT
(Tier 2)
HLDT
(inte rim )
MDPVs
(inte rim )
MDPVs
(Tier 2)

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Phase-In or me
 Fleer Averane ffiSI?
 J  J -~~*t - _i-J *~t J \ J ^ _r* J ^> J >—* I ^ _^ - _X •—J ,-> J J .
 ^^^^^^™^B
 Cars, Trucks < 6000 Ib GVWR
                       dards
         Tier 2 Final
         Interim
         Interim Cap
0.3
             Tier 2
             Final
            J3.07 gpm <
                        Light Trucks > 6000 Ib GVWR
      LO vo
   CM CM CM  CM CM  CM
CM CM  CM CM  CM CM

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                       fur  Proa ram
j Reduces i\
  nsjrjQnwJde,
                        \e sulfur levels
j Includes EJ
              nef:
                       edule for gasoline
                       importers.
   rovides temporary, less stringent standards for
  small refiners and gasoline sold in the West.
  Includes an averaging, banking, and trading
  program to encourage early sulfur reductions.
  Contains several implementation provisions.

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        nanges rrorn  tr:
                             Proposal
j Establish sd i\ Csograph
         d the ay
               in,  JJH
           e 30 ppm refinery avg in 2004.
                " ing cap in 2005.
                    1 ic Phase-in Area.
Enhanced the averaging, banking, and trading
(AB&T) program, including elimination of 150 ppm
"trigger" for generating credits.
Expanded the flexibility for small refiners.
Introduced a hardship relief provision for qualifying
refiners.

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                Prograrr:
Standards
       soline Sulfur Standards for Refiners, Importers,
               and Individual Refineries
            (Excluding Small Refiners and GPA Gasoline)
Compliance as of:
Refinery Average, ppm
Corporate Poo 1 Average, ppm
| Per-Galbn Cap, ppm
2004
—
120
300
^^^^^^^^^^^^^^^^^^^^m
2005
30
90
300
^^^^^^^^^^^^^^^^^^^M
200frf
30
— —
80
• Effective January 1, 2004 at the refinery gate.
• Cap exceedances up to 50 ppm are allowed in 2004 but must be
made up in 2005.

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                         r
ic  Phase-in Area
                  ne Sulfur Standards for the
              Geographic Phase-In Area*
                (Excluding Small Refiners)
Compliance as of:
Refinery Average, ppm
Corporate Poo 1 Average, ppm
| Per-Galbn Cap, ppm
2004
150
120
300
2005
150
90
300
2006
150
—
300
* Alaska, Colorado, Idaho, Montana, New Mexico, North Dakota,
Utah, & Wyoming, plus counties/tribal lands in adjacent states.

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rien TI
dards:

Standard is < 150 ppm
                     standard is the
       irjri
       Pprr
         iery s 1997-98 sulfur baseline + 30


   ppmBl  •
   sulfur level from which early (2000-03)

   credits were generated + 30 ppm

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          GPA b^nor-
          ^ _^ J J  a - -^ >«INM>J J J >^

When trie Corporate AyJSw
             ards:
             e Standard Applies
50% <
      < 50%
              50% <
                     Non-GPA gasoline

                     GPA gasoline

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tandards
1997-98 Refinery
Baseline Sulfur Level
(ppm)
OtoSO
31 to 200
201 to 400
401 to 600
| 601 and above
Temporar
Average
30
baseline level
200
50% of baseline
300
y Sulfur Standards (ppm)
2004 - 2007
Cap
300
300
300
1 . 5 times the average standard
450

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        rrici     efner
                          tandards
j Definition
     :evver than 150C
    A corporate crude o
                           >rporate-wide and
                    capacity^ 155,000 bpcd.
        VoJurne   rn
- 105% of bassJins vo
                      Station
    Volume of gasoline produced from crude oil during

    Excess volume is subject to the corporate average
    standards that apply to all other refiners.

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j j-jardshlp Relief Provision
   - Temporary waiver cl
     circumstances, e.ci
   - Temporary war
      ircumsta
                     je to extreme unforeseen
                    ., refinery fire, natural disaster.
                    1 "sed on extreme hardship
                  g., refinery configuration, severe
         Preemption
State L
                      fur rule clearly preempts future state
   actions to prescribe or enforce gasoline sulfur controls.
 - States seeking a gasoline sulfur control program that is
   different than our national program must obtain a waiver
   from  us.                                       r^l

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Participation in implementation workshops for the small
refiner and GPA programs in mid-April
Development of a guidance document for gasoline sulfur
implementation
Establishment of a database for the gasoline sulfur AB&T
program   ^
Identification of counties to be included in the Geographic
Phase-in Area
Formation of a process for resolving turnaround/upset
issues.
Assistance in the development of State Implementation Plan
(SIP) credits for the Tier 2/Gasoline Sulfur program       F

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          or   ore
                    rmation
j On th

           2 vehicle prog
                   m contact:
       Guy
rJ'"/l r\n-/r"
. — i r— \ -^ '. . ' - 1 y f~l
         4-92
f~ "~\r~*r
' r ->(
             l
       ,e suitur proaram contact:
On the
  , ,ary Manners
  - 734-214-4873
  - manners.mary@epa.gov
  Tier 2 home page:
  http://www.epa.gov/oms/tr2home.htm

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                                                                      EPA420-F-00-018
                                                                              May 2000
                  Gasoline Sulfur Rule Questions and Answers

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

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

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

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

1.      Question: Were some words left out of § 80.195(a)(l) in the final rule published in the
Federal Register^

       Answer: Yes. Some words were inadvertently left out of § 80.195(a)(l) when the final
rule was published in the Federal Register on February 10, 2000. The correct introductory
language of § 80.195(a)(l) is:  "The gasoline sulfur standards for refiners and importers,
excluding gasoline produced by small refiners subject to the standards at § 80.240, and gasoline
designated as GPA gasoline under § 80.219(a), are as follows:"  On February 28, 2000, the

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Federal Register Office published a notice to correct this error.

2.      Question: The preamble at 65 FR 6819 states: "Many of the requirements do not become
applicable until the beginning of the sulfur control program on October 1, 2003, when all refiners
are required to meet the sulfur standards."  Is this date correct? Although the proposal listed
October 1, 2003, as the effective date for the sulfur cap at the refinery, doesn't the final rule
specify January 1, 2004?

       Answer:  The effective date of the sulfur standards was changed from the date proposed
in the Notice of Proposed Rulemaking (NPRM).  In the final rule, the corporate pool annual
average standards and the refinery and importer per-gallon cap standards are effective beginning
January 1, 2004. (The refinery and importer annual average standards are effective beginning
January 1, 2005.)  The reference in the preamble at 65 FR 6819 regarding the date that refiners
are required to meet the sulfur standards should be January 1, 2004, instead of October 1, 2003.
3.      Question: In the NPRM, the sulfur standards were expressed without decimal places, but
the final rule provides that the standards are expressed with two decimal places (§§ 80.195, 205).
Why did EPA include this change?

       Answer:  EPA included the decimal places to ensure that the sulfur standards are not
exceeded by rounding down actual average sulfur levels.  We do not believe reporting the
average sulfur level to two decimals creates any additional burden as the averaging calculation
will yield this result to any number of decimal places. Although the decimals were not included
in  § 80.216(a)(l)(i) for the geographic phase-in area (GPA) standard, EPA intends to revise this
provision to include the decimals in a future rulemaking.

4.      Question: Section 80.205(e) (2) of the final rule states: "No refiner or importer may have
a compliance deficit in any year after 2010. Any deficit that exists in 2010 must
made up in 2011". We could interpret the end of the credit program as being the 2011
compliance year. There could be many expensive decisions made affecting gasoline supply in
the U.S. in the 4th quarter of each year in 2012 and beyond for the  sake of several ppm sulfur.
Why is the refiner flexibility for compliance with the 30 ppm average using credits eliminated
beyond 2011?

       Answer: The provisions in § 80.205(e) which allow a deficit to be carried over to the
following year are included in the regulations to provide additional flexibility for parties in the
early years of the sulfur program in the event of an unexpected shutdown or inability to obtain
credits.  See 65 FR 6764.  Refiners and importers will continue to  be able to purchase credits to
achieve compliance with the 30 ppm average in 2011 and beyond in the event that unexpected
exceedences of the standards occur. However, after the 2010 averaging period, refiners and
importers must demonstrate compliance with the standard for each averaging period (i.e., if the
refiner's or importer's actual annual average exceeds the standard in the 2011 averaging period,

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or any averaging period thereafter, the refiner or importer must obtain sufficient credits to
demonstrate compliance for that averaging period).  The refiner or importer will have until the
last day of February of the following year (when the annual averaging report is due) to obtain the
necessary credits.

5.     Question: Please verify that if a refiner is also a gasoline importer, the refiner's corporate
pool must include the imported gasoline for compliance with the corporate pool average standard
for 2004 & 2005.

       Answer:  For purposes of calculating compliance with the corporate pool annual
average standards at § 80.195(a)(l), a refiner who is also an importer must include in its pool the
volume of gasoline production from all refineries and the volume of gasoline imported during the
averaging period. See §  80.195(c)(l).

6.     Question: If a company that qualifies as a small refiner is also an importer, would the
company only comply with the corporate pool average standards for its volume of imported
gasoline?

       Answer: The company's small refinery would not be subject to the corporate pool
average standards.  See § 80.195(c)(4).  As a result, the company would only need to demonstrate
compliance with the corporate pool average standards for its imported gasoline.

7.     Question: The preamble states that, in 2005, each refinery may only use credits to
achieve the 30 ppm standard after the refiner has demonstrated compliance with the 90 ppm
corporate pool average for all refineries. The refiner must meet the corporate pool average
standard on actual sulfur levels or through a trade  for allotments.  At this point, each of the
refiner's refineries must  obtain sulfur credits to bring the refinery's sulfur average down to 30
ppm. Please explain how this works, particularly where a refiner has one or more refineries that
have an average of 30 ppm or less.

       Answer: The regulations require a refiner or importer, in 2005, to demonstrate
compliance with the 90 ppm corporate pool average standard by calculating its actual corporate
average sulfur level using the actual sulfur levels of each batch of gasoline and then applying
allotments, as necessary, to meet the 90 ppm standard. Credits may not be used to achieve
compliance with the corporate pool average standard. See § 80.315(c)(4).  The regulations also
require a refiner for each refinery, or an importer, to demonstrate compliance with the refinery or
importer average standard by calculating the actual refinery or importer sulfur level using the
actual sulfur levels of each batch of its gasoline, and applying credits and/or allotments, as
necessary, to meet the 30 ppm standard. The regulations identify the corporate average and
refinery average standards as two separate standards, and do not require refiners to demonstrate
compliance with one or the other standard first.

       In 2005  only, refiners and importers may use credits and/or allotments to demonstrate

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compliance with the refinery or importer average standard. See § 80.195(b)(4).  These credits or
allotments may be obtained from any source.   A refiner with more than one refinery may use
credits generated by a refinery with an average sulfur level below 30 ppm towards meeting the
refinery average standard at one of its other refineries.  Alternatively, the refinery may choose to
bank or sell the credits, as permitted by the regulations. In 2005, the same pool of allotments
used to demonstrate compliance with the corporate pool standard may be used by a refinery in the
pool toward its demonstration of compliance with the refinery average standard, or some of the
allotments may be used by one refinery and the remainder used by another refinery or refineries
in the pool. For example, a refiner with two refineries  who obtains 30 allotments to achieve
compliance with the corporate pool standard may apply all 30 allotments to one refinery, or some
of the allotments to each of the two refineries (for example: 15 allotments to each refinery; 20
allotments to one refinery and 10 to the other; etc.). We intend clarify the requirements regarding
how allotments may be used to demonstrate compliance with the corporate pool average standard
and the refinery average standard in 2005 in a future rulemaking.

       As indicated in the Question, the preamble states that, in 2005,  a refiner first must
demonstrate compliance with the corporate pool average standard of 90 ppm, and then
demonstrate compliance with the refinery average standard using a maximum of 90 ppm as the
average sulfur level for each refinery, and applying credits to bring each refinery's average down
to 30 ppm.  See 65 FR 6760.  However, this discussion in the preamble is not consistent with the
manner in which compliance is demonstrated under the regulations; i.e., compliance with the
corporate pool average standards and with the refinery  average standards is demonstrated
separately, and refiners are required to use actual sulfur levels in computing the refinery average,
as compared to using presumed levels of 90 ppm for each refinery after demonstrating
compliance with the corporate pool average standard.  Therefore, we are withdrawing this
preamble discussion as guidance for interpreting the regulations on this particular issue.  The
regulations do not impose any particular priority on compliance with the corporate average and
the refinery average standards in 2005.  Contrary to the statements in the preamble referenced
above, refiners need not first demonstrate compliance with the corporate pool average standard;
rather, each standard is independent of the other and must be met as such.

8.     Question: Please clarify how § 80.205(f) is to  be applied.

       Answer:  The regulations provide that a refiner or importer must meet the corporate pool
average standards under § 80.195 if their gasoline production or volume of imported gasoline is
comprised of less than 50 percent of gasoline designated as GPA gasoline See § 80.216(f).  As
discussed in the preamble, we intended refiners and importers subject to the corporate pool
average standard who produce some GPA gasoline to use the  same compliance process as other
refiners and importers  subject to the corporate pool  average standards in 2004-2005.  See 65 FR
6763. However, as described in the answer to Question 7 above, the preamble discussion
regarding compliance with the refinery average and corporate pool average standards in 2005 is
inconsistent with the manner in which compliance with these standards is demonstrated in the
regulations. Therefore, we are also withdrawing as guidance the statements in the preamble

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specifically describing compliance with the corporate pool average and refinery average
standards for such refiners and importers. Thus, as for all other refiners and importers, such
refiners and importers must demonstrate compliance with both average standards (as calculated
under 80.205), but are not required to demonstrate compliance with the corporate pool average
standard first. We intend to revise the regulations at 80.205(f) to be consistent with the manner
with which the standards are described in 80.195 and with other relevant provisions of the final
rule.

9.     Question: Do refiners have to include in their calculations of compliance with the
corporate pool average standard all refineries owned by subsidiaries and refineries owned by
joint venture  partners?

       Answer: The regulations state that the corporate pool average standards apply to the
refiner's gasoline production from all of its refineries in a calendar year. See § 80.195(c)(l).
Joint ventures, where two or more parties collectively own and operate a refinery, are treated as a
separate refiner subject to a separate corporate pool average standard.  However, the regulations
allow one partner in a joint venture to include the joint venture's refineries in its corporate pool
for purposes of calculating compliance with the corporate pool average standard.  If one partner
does this, the joint venture will be considered to be in compliance with the corporate average
standard, where the partner that counts the joint venture refineries meets the corporate average
standard.  See § 80.195(c)(5). For any joint venture refineries not included in a partner's
compliance calculations, the joint venture must demonstrate compliance with the corporate pool
average standard. Thus, partners in a joint venture have the flexibility under the regulations to
comply with the corporate pool average as a joint venture, or to count the joint venture refineries
in either partner's compliance calculations.

       The corporate pool average standard applies to all refineries owned by a refiner, which
EPA interprets to include refineries owned by the refiner's wholly-owned subsidiaries. See 65
FR at 6755. Where a refiner partially owns a refinery, that refinery is not considered part of the
refiner's corporate pool average.  Where two or more parties collectively own and operate a
refinery, that  is considered a joint venture, and as discussed above, one partner of the joint
venture may include the refinery in its corporate pool average.  See § 80.195(c)(5).

10.    Question: What types of business arrangements  does EPA consider to be joint ventures
under § 80.195 and other provisions of the sulfur program? How  are other types of shared refiner
ownership to be treated under the regulations?

       Answer: EPA considers  a joint venture to be a situation in which two or more parties
collectively own and operate one or more refineries.  See 65 FR at 6755. This definition is
intended to encompass a broad range of business arrangements where two or more entities share
ownership of a refinery. Thus, EPA expects that most cases of shared refinery ownership will be
considered joint ventures under the regulations.  For situations where a refinery is owned by
more than one party,  but not all parties participate in the refinery's operation, the refinery is
considered a  separate entity,  and the refiner of that refinery is the business entity consisting of the

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multiple owners.  However,  we believe that, in this case, one of the owners should be allowed
to include the refinery in its corporate pool as the regulations allow in joint venture situations.
As a result, we intend to make this change in a future rulemaking.

11.     Question: May a limited liability company be considered a joint venture for purposes of
the provisions under § 80.195(c)(5)?

       Answer: Under § 80.195(c)(5), a joint venture is one in which two or more parties
collectively own and  operate one or more refineries. Any joint ownership arrangement that
meets this criteria, including  a limited liability arrangement, will be considered a joint venture for
purposes of compliance with the corporate pool standards.

12.     Question: Please clarify whether oxygenates blended into either conventional gasoline or
Reformulated Blendstock for Oxygenate Blending (RBOB) downstream of the refinery need to
be included in sulfur compliance calculations.

       Answer: Section 80.205(c) provides that a refiner or importer may include oxygenates
added downstream from the refinery or import facility if the requirements under §  80.69(a) or §
80.101(d)(4)(ii) of the RFG/CG regulations are met. Therefore, a refiner or importer may
include, but is not required to include, oxygenates blended downstream in sulfur compliance
calculations.
                           GEOGRAPHIC PHASE-IN AREA

1.      Question: It is our understanding that, if a portion of the gasoline produced by a refinery
located within the GPA is sold outside of the United States, that gasoline is not subject to the
sulfur standards and it only has to meet the standards of the country to which it is exported. Is
this correct?

       Answer:  Gasoline that is exported for sale outside the United States is not subject to the
requirements of the gasoline sulfur rule, including gasoline produced by a refiner located within
the GPA.  See § 80.200(c).

2.      Question: Footnote b of Table IV.C.-2 of the preamble is inconsistent with the
regulations at § 80.216(f).  The regulations clearly state that the corporate pool average standards
do not apply if a refiner's production volume is mostly GPA gasoline. If the refiner/importer
volume is less than 50 percent GPA gasoline, then the corporate pool average standard applies.

       Answer:  The regulations at § 80.216(f) are correct. There was an error in footnote b of
Table IV.C-2 of the preamble released on 12/21/00, which subsequently was corrected in the
final rule published in the Federal Register on February 10, 2000.

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3.      Question: Please clarify how GPA gasoline should be treated for purposes of complying
with the corporate pool annual average standards. The preamble to the final rule says that
refiners and importers who market most of their gasoline outside of the GPA (and, therefore, the
corporate pool average standard applies) must then include GPA gasoline in the calculation of
the corporate pool average. The regulations at § 80.216(f)(2) say that if the refiner's or
importer's volume is less than 50 percent GPA gasoline, then the corporate pool average standard
applies and all volume must be included (presumably including GPA gasoline).

       Answer:  If a refiner's or importer's gasoline volume is comprised of less than 50
percent GPA gasoline, the corporate pool average standards apply, and all of the refiner's
gasoline production and/or all of the importer's gasoline imports, including GPA gasoline, must
be included for purposes of calculating compliance with the corporate pool annual average
standards. We intend to  add language to § 80.216(f)(2) in a future rulemaking to clarify the
gasoline production that is subject to the corporate pool annual average standards under this
provision. See 65 FR 6757.

4.      Question: In determining whether the corporate pool average standard applies to a
refiner who produces GPA gasoline under  § 80.216(f), may the refiner include gasoline
production from refineries owned by its subsidiaries or by joint ventures in which it is a partner?

       Answer: In calculating the percentage of a refiner's production that is designated as
GPA gasoline, EPA interprets the regulations to require the refiner to count gasoline produced by
refineries owned by wholly owned subsidiaries.  These are the entities that must be included in
the calculations of compliance with the corporate pool average.  Refineries that the refiner
partially owns, including refineries owned  by joint ventures and other business arrangements
through which it shares ownership of a refinery, are considered separate entities under the
regulations, owned by the business entity comprised of the multiple owners. Therefore, EPA will
consider such business entities as separate  refiners for purposes of determining whether
compliance with the corporate pool standards applies under § 80.216(f).  EPA will not consider
these entities to be part of the production of one of the owners. However, once it is determined
under § 80.216(f) that a GPA refiner is required to comply with the corporate pool standards, the
party may include a joint venture refinery in its pool for purposes of demonstrating compliance
with the corporate pool standards (assuming the joint venture refinery is also required to  comply
with the corporate pool standards).

5.      Question: What specification standard does a GPA refinery use to ship outside a
designated GPA area?

       Answer: Gasoline produced by a refinery located within the GPA, but intended for use
outside the GPA, must meet the standards and requirements under the sulfur regulations for non-
GPA gasoline. Gasoline intended for use within the GPA must be designated as GPA gasoline
by the refiner or importer, and it is prohibited from being distributed for use outside the GPA.
Product transfer documents accompanying GPA gasoline must identify the gasoline as being

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GPA gasoline and include a statement that the gasoline may not be distributed or sold for use
outside the GPA.

6.      Question: Under the GPA program, a refiner must submit an application for GPA
standards by 12/31/2000. If a refiner who has not historically supplied the GPA wishes to supply
gasoline to the GPA area some time after 12/31/2000, can the GPA application be submitted at
that time?

       Answer: The GPA provisions provide for less stringent standards during the early years
of the sulfur program for gasoline intended for sale in the GPA. As discussed in the preamble,
the GPA provisions are intended to provide relief for those refiners who are located in or near the
GPA and who supply that area.  See 65 FR 6756-57'.  We believe that those refiners will have
sufficient time under the application deadline in the regulations to apply for GPA gasoline
standards. As a result, refiners may not apply for GPA standards after that date. Note, however,
that a refiner who does not have an approved GPA standard may supply gasoline to the GPA at
any time, since non-GPA gasoline is not prohibited from being sold in the GPA.
                                  SMALL REFINERS

1.      Question: Section 80.225(a)(3) says that, to qualify for small refiner status, the average
crude capacity of the refiner must be less than or equal to 155,000 bpcd for 1998.  However, the
preamble says "for 1999."  Is there is an inconsistency here?

       Answer: Yes.  There was an inconsistency between in the preamble and § 80.225(a)(3)
regarding the crude oil capacity criteria for small refiners.  This inconsistency was corrected in
the final rule published in the Federal Register on February 10, 2000.  The correct criteria is an
average crude capacity less than or equal to 155,000 bpcd for 1998.

2.      Question: Section 80.230(a)(l) says "Refiners of refineries built after January 1, 1999."
This section should read, "Refiners with refineries built after January 1, 1999."

       Answer: The regulatory language is clear that refiners who own refineries built after
January 1, 1999, are not eligible for the small refiner hardship provisions.  However, we agree
that the suggested change would clarify the provision, and intend to make this clarification in a
future rulemaking.

3.      Question: Assume that a small refiner has a baseline of 100 ppm, its standard under §
80.240(a) would be 100 ppm.  However, the corporate pool average for 2004 is 120 ppm and
there is no individual refinery standard. As a result, the small refiner would be better off not to
elect small refiner status until the year 2005. Is this possible?

       Answer: The regulations provide that any refiner who wishes to participate in the small

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refiner program must apply by December 31, 2000.  Upon approval of the application, EPA will
notify the refiner of each small refinery's applicable standard, baseline volume, and per-gallon
cap standard.  See § 80.235.  EPA interprets the regulations to require approved small refinery
standards to apply from the beginning of the small refiner program in 2004, and to be in effect
until the end of the small refinery program in 2008, unless the refiner notifies EPA under §
80.230(b)(2) of an election to comply with the standards in § 80.195.  As a result, a refiner who
obtains small refiner status may not elect to have the small refinery standards become effective  in
2005 rather than 2004.  EPA also interprets the election under § 80.230(b)(2) to be a one time
election.  If a small refiner chooses to opt out of the small refiner program pursuant to §
80.230(b)(2) and comply with the standards in § 80.195, the refiner may not elect to have its
small refinery standards apply in a subsequent  averaging period.

4.      Question:  For purposes of establishing small refiner status, do refiners have to include in
their calculation of number of employees and corporate crude capacity all refineries owned by
subsidiaries  and all refineries owned by joint venture partners?

       Answer:  The sulfur regulations define "small refiner" as a refiner who produces gasoline
at a refinery by processing crude oil through refinery processing units, employed no more than
1,500 people in calendar year 1998, and had an average crude capacity for 1998 less than or
equal to 155,000 barrels per calendar day (bpcd).  See § 80.225(a)(l). The regulations state that,
for purposes of determining the number of employees and corporate crude capacity, the refiner
must include the employees and crude capacity of any subsidiary companies, any parent
company, subsidiaries of the  parent company, and any joint venture partners. EPA interprets this
regulation to require refiners  to include employees and crude capacity at any and  all subsidiaries,
as well as employees and crude capacity of any joint venture partners. See § 80.225(a)(2).  EPA
interprets a subsidiary of a company to mean any subsidiary in which the company has a 50
percent or greater ownership  interest.

5.      Question:  In applying for small refiner status, does  a refiner have to include in its
average crude capacity in 1998 any capacity used under a leasing agreement at a refinery it does
not own?

       Answer:  The regulations require a refiner applying for small refiner status to provide its
total corporate crude capacity in its application. The definition of small refiner is limited to those
refiners with average crude capacity in 1998 less than or equal to 155,000 barrels per calendar
day (bpcd), and no more than 1,500 employees in 1998.  In determining crude capacity, the
regulations require refiners to include the crude capacity of any subsidiary companies, any parent
company and subsidiaries of the parent company, and any joint venture partners.  Other than
these specific entities, the regulations do not specify which refineries must be included in the
crude capacity calculation  for small refiner  status. See §§ 80.225 and 80.235.(a)(2)

       The crude capacity limit was adopted to ensure that only truly small companies who need
additional time to comply can qualify for small refiner status. Refiners who have relatively large
crude capacity will likely be in a better position to finance and install desulfurization equipment

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to meet the national standards in 2004, even if they employ less than 1,500 people.  In addition,
the crude capacity limit is intended to limit the potential environmental impacts of the small
refiner standards, by ensuring that the volume of gasoline subject to such standards is not
significant. See 65 FR 6767.

       EPA interprets its regulations to require refiners applying for small refiner status to
include only the crude capacity in 1998 at refineries it owned, including refineries owned by
subsidiaries, parent companies and subsidiaries of the parent company, and partners in joint
ventures.  Thus, refiners are not required to include crude capacity used in 1998 pursuant to a
lease agreement with another refiner in which it has no ownership stake. This approach is
consistent with the purposes of the capacity limit. First, an agreement to lease crude capacity is
not likely to significantly impact a refiner's ability to finance and install desulfurization
equipment at its refineries. While such an agreement will have some value, we do not expect it
will be sufficient to assist a refiner in generating capital to make refinery investments to reduce
sulfur in time to meet the national standards in 2004.

       In addition, this interpretation will not increase the volume of gasoline potentially subject
to the small refiner standards. Small refiner standards apply based on the small refiner's baseline
sulfur level and baseline volume.  These values are calculated for each of the small refiner's
refineries. See §§ 80.245 and 80.250.  As described above, the crude capacity at a facility leased
by a small refiner is not considered part of the refiner's capacity for purposes of small refiner
status.  Therefore, that facility is not considered one of the small refiner's refineries, and is not
assigned a baseline sulfur level or volume under § 80.250.  Thus, production at that refinery is
subject to the national sulfur standards.

6.     Question: The sulfur rule says that a small refiner must produce gasoline by processing
crude oil through a refinery processing unit. Does our refinery meet that requirement if we
produce gasoline by processing  crude oil through a processing unit, but we sometimes finish
creating our batches through the later addition of other blendstocks at the refinery?  We add
components such as ethanol or raffmate to create the qualities we want in the finished batch.

       Answer:  Under § 80.225(a), a small refiner is a refiner who processes crude oil through
refinery processing units, employed an average of no more than 1,500 people during 1998, and
had an average crude capacity less than or equal to 155,000 barrels per calendar day for 1998.  In
the situation described in this question, the refiner fits that part of the small refiner definition that
requires the refiner to be one who processes crude oil through refinery processing units, since the
refiner produces gasoline by processing crude oil. The fact that the refiner may also finish a
batch through the later addition  of other blendstocks does not affect its  small refiner status.
However,  the volume of blendstocks used by the refiner should be excluded from the
determination  of crude capacity, unless the blendstocks have undergone substantial
transformation through the refining process.
                            ALLOTMENTS AND CREDITS

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1.      Question:  Should California gasoline be excluded from baseline calculations for
purposes of generating early credits?

       Answer: Yes. California gasoline as defined in § 80.375 should be excluded from 1997-
1998 baseline calculations for purposes of generating early credits, and also for purposes of
submitting a baseline under the small refiner, GPA or temporary hardship relief provisions.  The
sulfur regulations provide that California gasoline is not subject to any of the provisions of the
sulfur program. See  § 80.200.  This includes the baseline application provisions at §§ 80.245 and
80.290, as well as the provisions for determining annual sulfur levels at § 80.205.  The sulfur
regulations also provide that the 1997-1998 sulfur baselines are based on the refiner's RFG/anti-
dumping compliance data, as submitted to EPA in the RFG/anti-dumping reports.  California
gasoline is generally  required to be excluded from these reports. See also EPA's "Guidance to
Parties Submitting Gasoline Sulfur Baseline Applications" (EPA420-S-00-001, March 2000),
which is posted on the Office of Transportation and Air Quality web site at:
http://www.epa.gov/otaq/tr2home.htm.

2.      Question:  The baseline submission guidance is silent on the impact of refinery
acquisitions and sales on a gasoline sulfur baseline.  Please provide guidance on how a refinery
sale or acquisition during 1997/1998 should be handled with regard to baseline establishment,
and how a refinery sale/acquisition should be handled after 1998 and prior to submitting a
baseline application (i.e, sale or acquisition during 1998-2000). If a refiner did not produce
gasoline in 1997-1998 (for example, a recent start-up), how would that refiner establish a sulfur
baseline for credit generation? Is there a process for resubmitting a baseline if a refinery is
sold/acquired after a  baseline has been approved?

       Answer: We interpret the regulations to require a refinery's sulfur baseline to be
calculated based on all of the gasoline produced by the refinery during 1997-1998, without regard
to ownership.  In the case of a refinery that changed ownership during 1997-1998,  or after 1998,
we expect that any data required to establish the sulfur baseline generated prior to the new
owner's acquisition of the refinery will be available to the new owner for purposes of submitting
a baseline application. If a refinery changes ownership after its baseline is approved, the new
owner would need to submit a baseline application for the refinery under § 80.290. The new
owner would indicate in the application that the refinery had received an approved baseline under
prior ownership.

       For a refinery that was not in operation in 1997-1998, we believe that sulfur data for at
least 12 consecutive months should be required to establish a sulfur baseline for early credit
generation. The baseline application for such a refinery should include data for the gasoline
produced during each year the refinery was in operation after the refinery was reactivated. Where
appropriate, the baseline for such refineries will be determined based on the annual average
sulfur content for the most recent year of operation. We intend to modify the regulations to
provide for this situation in a future rulemaking.
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3.      Question: If a refiner believes that certain data submitted in the 1997-1998 RFG/anti-
dumping batch reports contains some inaccuracies (which would not have resulted in non-
compliance), can or should such data be excluded from the data submitted to EPA for purposes
of establishing a 1997-1998 sulfur baseline?

       Answer: We believe that such a determination would depend on the refiner's specific
concerns. We suggest that any refiner who has concerns about data quality consult with EPA
before submitting a sulfur baseline application.

4.      Question: Recently issued guidance specifies that GTAB must be excluded from the
volume of gasoline for determining a sulfur baseline.  Please explain why GTAB is to be
excluded. Does this exclusion apply to both  domestic importer-refiners and foreign refiners?

       Answer: The recent EPA guidance on baseline submissions specifies that GTAB
("gasoline treated as blendstock") batch report data should not be included in baseline
determinations for sulfur. See "Guidance to Parties Submitting Gasoline Sulfur Baseline
Applications," March 2000. This guidance was intended primarily for domestic importer-
refiners who use GTAB. The GTAB approach under the RFG program is designed to allow
domestic importer-refiners to correct off-spec imported gasoline by conducting remedial
blending before it leaves the importer-refiner's facility. In this situation, the GTAB is used by
the party as a blendstock and blended with other components to bring the product to
specifications. The regulations provide that only finished gasoline is to be included in the
baseline determination. Therefore, GTAB batches should be excluded from baseline calculations
by importer-refiners, as described above.

       In the case of a foreign refiner, baselines are determined based on the volume and sulfur
content of all of the finished gasoline produced at the foreign refinery that is imported into the
U.S. See §§ 80.94(b) and 80.410(b). Gasoline is not designated as GTAB when it leaves the
foreign refinery. It is not until the gasoline is imported into the U.S. that the product is
designated as GTAB by the importer-refiner.  As a result, a foreign refiner would not have any
basis upon which to exclude from its baseline determination any gasoline produced by the
foreign refinery that was imported into the U.S. in 1997-1998, including gasoline that was
subsequently used by the importer-refiner as  GTAB. Therefore, a foreign refiner should include
in its baseline calculations all gasoline that was imported into the U.S. in 1997-1998, regardless
of whether any of the gasoline was subsequently used by the importer-refiner as GTAB.

5.      Question: If a foreign refiner registers and submits its sulfur baseline for purposes of
generating credits in 2000, when can the foreign refiner begin to designate cargoes for credit
generation?

       Answer: Early credits generated by a foreign refiner who has an approved sulfur baseline
will be based on all of the gasoline produced by the foreign refinery that is imported into the U.S.
during the annual averaging period. Therefore, for the purpose of determining credits for the
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2000 annual averaging period, all shipments of gasoline produced at a foreign refinery and
exported to the U.S. from January 1, 2000, through December 31, 2000, may be included in
calculating the refinery's annual average sulfur level. For credits generated in 2000, the foreign
refiner will be required to submit a sulfur report by February 28, 2001, which includes data
relating to the refinery's sulfur baseline, the sulfur content and volume of the gasoline exported
to the U.S. by the refinery during the averaging period, and credits generated.
6.      Question: The allotment program is very complex.  The calculation of allotments and/or
credits may be a critical factor in a refiner's compliance.  What mechanisms will be adopted by
EPA to avoid problems of refiner compliance due to misinterpretation and errors in calculations?

       Answer: Although the allotment program appears complex, we believe that the
equations provided in § 80.275 are straightforward and relatively easy to apply.  We will,
however, provide assistance to any company that is having difficulty applying these provisions.
7.      Question: Why are credits and allotments expressed in ppm-gallons and not in ppm-
barrels, since barrels or thousand barrels are the commercial units used by refiners?

       Answer: Consistent with the requirements under the RFG program, § 80.195(a)(2)
provides that, for purposes of sulfur compliance and reporting, volumes are expressed in gallons.
Accordingly, credits and allotments are required to be calculated and reported in units of ppm-
gallons. Although barrels may be the commercial units used by refiners, the conversion from
barrels to gallons requires a simple calculation which should not impose an undue burden on
regulated parties.

8.      Question: The regulations at § 80.275(a)(2)(i) discount Type A sulfur allotments by 20
percent when the average sulfur content is < 30 ppm, whereas the preamble states that allotments
retain full value if the annual average sulfur level is < 30 ppm. Similarly, § 80.275(a)(2)(ii)
includes a 20 percent discount for Type A sulfur allotments. Which is correct, the regulations or
the preamble?

       Answer:  There is an inconsistency between the regulations and the preamble regarding
whether Type A sulfur allotments should be discounted when the refiner's average sulfur content
is <30 ppm. The approach we intended to adopt is the one stated in the preamble, in which
allotments retain full value if the annual average sulfur level is <30 ppm.  See 65 FR 6759. We
intend to correct the equations at § 80.275 in a future rulemaking.

9.      Question:  In the preamble, an example is given of a refinery generating allotments based
on a 2003  average of 50 ppm and 20 ppm. Please demonstrate the credits and allotments
generated for each refinery and under each scenario for 2003 in the table shown below to help
clarify how credits and  allotments are generated under various conditions.
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                             Baseline        2003a        2003b        2003c
Refinery A                       25            35           25           20
Refinery B                       50            50           25           40
Refinery C                       100            50           25           80
Refinery D                       300            50           25          240

       Answer:  The allotments and credits that would be generated in 2003 in the scenarios
described are as follows (assume 1 gallon volume).  (Note that we intend to modify §§
80.274(a)(2)(i) and (ii) to delete the  discount factor of 0.8 in these provisions - See Question 9
above.)

Refinery A (Baseline - 25 ppm):

a) Average 35 ppm (§ 80.275(a)(2)(v)):  ((25 - 35) x  1) x 0.8 = 0 allotments
b) Average 25 ppm (§ 80.275(a)(2)(iii)): (25 - 25) x 1 = 0 allotments
c) Average 20 ppm (§ 80.275(a)(2)(iii)): (25 - 20) x 1 = 5 Type B allotments

Refinery B (Baseline - 50 ppm):

a) Average 50 ppm (§ 80.275(a)(2)(v)):  ((50 - 50) x 1) x 0.8 = 0 allotments
b) Average 25 ppm (§ 80.275(a)(2)(ii)):  (50 - 30) x 1 = 20 Type A allotments
                                     (30 - 25) x 1  =  5 Type B allotments
c) Average 40 ppm (§ 80.275(a)(2)(v)):  ((50 - 40) x 1) x 0.8 = 8 Type A allotments

Refinery C (Baseline - 100 ppm):

a) Average 50 ppm (§ 80.275(a)(2)(v)):  ((100 - 50) x 1) x 0.8 = 40 Type A allotments
b) Average 25 ppm (§ 80.275(a)(2)(ii)): (100 - 30) x 1 = 70 Type A allotments
                                     (30 - 25) x 1  =  5 Type B allotments
c) Average 80 ppm (allotments/credits may not be generated under § 80.275(a)(2) if the refinery
average is greater than 60 ppm; however, in this example, credits may be generated under §
80.305):                            Ix (100-80) = 20 credits.

Refinery D (Baseline - 300 ppm):

a) Average 50 ppm (§ 80.275(a)(2)(iv)): (300 -  120) x 1 = 180 credits
                                     ((120 - 50) x 1) x 0.8 = 56 Type A allotments
b) Average 25 ppm (§ 80.275(a)(2)(i)):  (300 - 120) x 1 = 180 credits
                                     1 x 90 = 90 Type A allotments
                                     (30 - 25) x 1 = 5 Type B allotments
c) Average 240 ppm (allotments/credits may not be generated under § 80.275(a)(2) if the
refinery average is greater than 60 ppm; however, in this example, credits may be generated
under § 80.305):                       1 x (300 - 240) = 60 credits
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10.    Question: Between 2000 and 2003, a refinery can generate early sulfur credits, which
would be reported to EPA, but the refinery would not report any deficit (i.e., if the refinery
produced higher sulfur gasoline than its 1997-1998 baseline during 2000-2003). If the refinery's
annual average sulfur level in 2000-2003  exceeds the refinery baseline, there is no violation of
EPA regulations as long as all RFG and anti-dumping regulations are met.  Are these statements
correct?

       Answer:  These statements are correct since there is no sulfur standard prior to 2004.
However, parties would be liable for any  improper credits that are claimed.

11.    Question: The preamble says: "Beginning July 1, 2000, certain requirements apply to
parties that voluntarily opt for early sulfur reduction under the average banking and trading
(ABT) provisions."  Specifically, what begins on July 1, 2000? Is this date correct?

       Answer: The NPRM proposed to require refiners who wish to generate credits during
2000-2003 to submit a sulfur baseline application to EPA by July 1, 2000.  However, the date for
submission of a sulfur baseline application for early credit generation was changed in the final
rule to September 30 of the year in which the refiner plans to begin generating credits.  See §
80.290(a). Beginning  in 2000, refiners who wish to generate early credits are also required retain
records of the sulfur content of each batch produced by the refinery for any year in which the
refinery generates credits. In addition, refiners who are not already registered under the RFG/CG
program must register with EPA by September 30 of the year prior to the first year of credit
generation, or by May 10, 2000,  for credits generated in 2000.

12.    Question: In a scenario where two refineries  are owned by the same parent company, is
there any situation in which one  refinery (GPA refinery) could not use allotments and/or credits
that were generated by the other  refinery (non-GPA refinery)?

       Answer: Credits generated by the non-GPA refinery (or any other refinery) may be used
by the GPA refinery for demonstrating compliance with the refinery's GPA gasoline standard, if
used in accordance with the provisions for credit use in  § 80.315.  Although allotments may not
be used to achieve compliance with the refinery or importer annual average standards at § 80.195
(except in 2005), allotments may be used to demonstrate compliance with the GPA gasoline
standards. See § 80.216(d). Therefore, allotments generated by the non-GPA refinery may also
be used by the GPA refinery for  demonstrating compliance with the refinery's GPA standard, if
used in accordance with the provisions for allotment use in § 80.275(c).  However, in the
scenario described above, allotments would only be generated if the company is subject to the
corporate pool average standards under § 80.216(f)(i.e., less than  50 percent of the company's
gasoline production  is GPA gasoline.)

13.    Question: It is our understanding that blender terminals are not able to establish a
baseline or generate early credits under the sulfur regulations.  Is this correct? If not, how would
a sulfur baseline be determined for that party?  For example, if a downstream terminal  is
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registered as a refiner and produces gasoline by blending a naturally produced material such as
natural gasoline or condensate with other gasoline blending components, how would that facility
be treated under the sulfur regulations?

       Answer:  Under the sulfur regulations, any person who produces gasoline by blending
blendstocks is a refiner subject to all of the standards and requirements of the sulfur rule.  See §§
80.2(h) and (i). However, the sulfur regulations specify that early credit generation is limited to
refiners who produce gasoline from crude oil. See § 80.285(a). As a result, a refiner who only
produces gasoline by blending blendstocks, such as blending natural gasoline or condensate with
other blending components, would not be able to generate early credits, and therefore, would not
need to establish a sulfur baseline. However, a blender refiner may participate in the credit
program in 2004 and thereafter based on reductions from the 30 ppm sulfur standard. See §
80.285(b). A blender refiner may generate early credits at any of its refineries that produce
gasoline from crude oil.

14.    Question:  During the period of early credit generation (2000-2003), would a foreign
refiner be able to earn credits for gasoline components exported to the U.S. for blending into
finished gasoline?

       Answer: Under the regulations, early credits are generated based on finished gasoline
produced during the averaging period. See § 80.305.  As a result, a refiner would not be able to
generate early credits based on gasoline components.  As discussed in Question 13 above, the
blender refiner who blends the components into finished gasoline also would not be able to
generate early credits, since the regulations only allow refiners who produce gasoline from crude
oil to generate early credits.

15.    Question:  Can allotments be generated by blender refiners who combine blendstocks
with finished gasoline downstream from the refinery?

       Answer: EPA intended for generation of early allotments, like early ABT credits, to be
limited to refiners who produce gasoline from crude oil.  We intend to  revise the regulations in
accordance with this approach in a future rulemaking.  Like ABT credits, blender refiners may
generate allotments in 2004 and 2005.

16.    Question:  Section 80.315 states that the credit transferor must apply any credits
necessary to meet the transferor's applicable average standard before transferring credits to any
other refiner or importer, and that no credits may be transferred that would result in the transferor
having a negative balance. It is not clear why a refiner can carry over a negative balance under §
80.205(e) because he blended high sulfur gasoline, but not because the refiner sold credits.

       Answer: Section 80.205(e) is included in the  regulations to provide  additional flexibility
in the early years of the sulfur program for those refiners who have difficulty meeting the sulfur
standard due to circumstances such as an unexpected shutdown or an inability to obtain sufficient
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credits.  Under this provision, such refiners are not required to purchase credits before utilizing
the deficit carry-over provisions.  However, EPA believes that a refiner who has generated or
otherwise obtained credits should use those credits to achieve compliance in the event of a deficit
rather than transferring the credits and carrying the deficit over to the next averaging period.  As
a result, the regulations provide that a refiner may not transfer credits if doing so would create a
deficit for that refiner for that averaging period.

17.    Question:  There is significant difference between "refiner" and "refinery".  Portions of
the regulations use "refiner" where "refinery" is the appropriate term. While it may be clear from
the context that "refinery" is meant, text should be changed to avoid any possible
mi sunderstandings.

       Answer: We agree with the comment and intend to make these clarifications in a future
rulemaking.  These clarifications would not affect the regulatory requirements in the current final
rule.
                              SAMPLING AND TESTING

1.      Question: Can a refiner or importer use gasoline sulfur test methods other than ASTM D
2622-98, especially for sulfur levels of 10 ppm and less?

       Answer:  The rule designates ASTM D 2622 as the benchmark test method by which
compliance will be determined, and that is the test that the Agency typically will use in
establishing compliance. However, the rule does permit alternative test methods to be used for
affirmative defense purposes, but only if the alternative test method has been appropriately
correlated to the regulatory method, and the alternative test protocols have been followed.  See §
80.330(c). EPA hopes to publish a proposal for a performance based measurements systems rule
(PBMS), which would ultimately codify standardized procedures by which a party may qualify
alternative test methods.

2.      Question: If a refiner produces a gasoline batch less than 10 ppm sulfur by ASTM D-
2622, how can an average be obtained with this test method without losing the lower sulfur level
batch in the average? For example:
              Batch 1  100,000 BBLs at 32 ppm S.
              Batch 2  20,000 BBLs at  1 ppm S.
              Average using Ippm actual S would be 29.33 ppm
              Average using 10 ppm S D-2622 (lower detectable level) would be 30.83 ppm

       Can EPA specify a method that actually measures less than 10 ppm to determine
measurements below 10 ppm sulfur?  Industry needs some additional clarification on use of
method D- 2622 for determining values less than 10-20 ppm.
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       Answer: The test method D-2622 was originally selected because the technique of
Wavelength Dispersive X-ray Fluorescence has been widely demonstrated to exhibit excellent
linearity with little or no bias across the range of sulfur concentrations present in commercial
motor fuel mixtures.  This absence of bias is central to the concerns regarding variability at very
low levels of sulfur in motor fuels.

       In general, EPA believes that the method selected, D-2622, has demonstrated sufficient
linearity that results may be entered for their actual reading, not truncated to the limit of
quantification (LOQ) when the actual reading is lower. For example, if the laboratory in
question believes that their LOQ is 10 ppm, and a particular sample actually reads as containing
5 ppm, the answer does not have to be  changed to 10 ppm for reporting.

       In the example presented in the question, the result for the 1 ppm sample is either
truncated to the method's LOQ, or assumed to be read at the upper limit of its statistical
boundary (in other words, the  reading was as bad as it could acceptably be).  While this may
yield a non-complying average in this case, in fact the case is not representative of what is
realistically expected in commerce. According to the regulation, the reporting period for the
averaging of sulfur results is one year.  EPA is not aware of refineries that can afford to produce
only two batches in a year.

       Because the selected method is assumed to be linear and without bias, it is reasonable to
assume that over the one year  reporting period, the randomness that occurs in sulfur
measurement will average to zero. That is, high results will have offsetting low results.  This is
the definition of zero bias.

       In fact, EPA believes that this sample problem can be contrived for any commonly
available test method, as all test methods demonstrate some degree of randomness in their use.
In addition, this randomness is not confined to the lower end of the concentration scale.
Typically, ASTM variability rates are expressed as a function of concentration.  This means that
in most cases, the variability in results  from samples containing higher concentrations  are greater
in absolute terms than the variability of samples of lower concentrations.  For example, if a
method has a variability rate that is expressed as variability = cone.  * 10 percent, a sample
containing 500 ppm could be read as off by as much as 50 ppm, while a sample containing 20
ppm could be read as off by only up to  2 ppm.  Since the actual averaging scheme is a  linear one,
the 50 ppm error will clearly dominate.

       As in the example in the question, this is a contrived situation, unlikely to be seen in
commerce. In fact, most ASTM test methods have variability that is expressed as a combination
of a proportional part and a linear part.  This example does serve to demonstrate that within the
averaging scheme in the regulation, smaller individual results have much less impact on the
overall averaged result that larger ones.

       EPA believes that if test method D-2622 is calibrated carefully, with particular attention
paid to the origin by the inclusion of blanks in the calibration standard  set, the variability that

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results from samples of lower concentration will be averaged out over the reporting period. The
outcome of this will be that inappropriately noncompliant averages will not be observed.

3.      Question: What test requirements exist for determination of the sulfur content of
denatured ethanol? What test method must be used to determine the sulfur content of ethanol?
In the absence of an approved test method, what guidance can the Agency provide fuel ethanol
producers to avoid a violation? Will the Agency consider postponing enforcement of the ethanol
sulfur specification until an ASTM test method for sulfur in ethanol is established?

       Answer: The regulations do not require an ethanol blender, producer or supplier to test
ethanol for sulfur content.  The regulations do prohibit blending denatured ethanol into gasoline
if the sulfur content of the denatured ethanol exceeds 30 ppm. See § 80.385(e). We expect the
sulfur content of denatured ethanol would seldom approach 30 ppm under current ethanol
production industry practices. To address ethanol blender concerns about the possible receipt of
high sulfur ethanol, however, these blenders might choose to establish commercial (e.g.,
contractual) arrangements with their suppliers to only supply ethanol whose sulfur content does
not exceed 30 ppm.  Further, the ethanol blenders could create quality assurance programs which
periodically test received ethanol for compliance of sulfur content.

       We believe that ASTM D 2622-98, the designated method for testing for sulfur content of
gasoline, will be useable for this testing purpose, as long as the calibration of the instrument is
performed with an ethanol blend that is representative of the samples that are expected to be
tested. Since we believe this ASTM method is sufficiently precise to determine if the sulfur
content of the denatured ethanol exceeds 30 ppm,  we do not believe there is a need to postpone
enforcement.

4.      Question:  Section 80.46(a) was amended by the rule to require the use of ASTM D-
3246 to determine the sulfur  content of butane.  Many refiners and butane suppliers do not
currently use that method.  Requiring a new method prior to the 2004 effective date of the
gasoline sulfur standards would be costly for these companies. What is the effective date for the
use of ASTM D 3246-96 for testing butane for sulfur content?

       Answer: The final gasoline sulfur rulemaking amended 40 CFR § 80.46(a) to require the
use of ASTM D 3246-96 to determine the sulfur content of butane. We did not intend to require
the use of this new test method to be effective immediately. We intended that it should take
effect January 1, 2004, when a butane sulfur content standard becomes effective for refiners who
produce gasoline by blending butane to previously certified gasoline. Until January 1, 2004, any
appropriate ASTM method may be used for testing the sulfur content of butane. We intend to
take regulatory action to clarify the effective  date of the regulatory butane test method.

5.      Question: Under § 80.330(a), a refiner or importer must sample and test each batch of
gasoline for sulfur content prior to shipping the gasoline from the refinery or import facility,
effective January 1, 2004, or January 1 of the  first year of credit generation, whichever comes
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first. Paragraph (a)(3) provides an exception to the requirement to test before the gasoline leaves
the facility for parties who test composited samples.  Is a refinery that tests every batch of
conventional gasoline produced (i.e., does not test composite samples) exempt from the
requirement to test prior to the gasoline leaving the refinery, prior to 2004?

       Answer: Under the provisions of § 80.330(a), all refiners and importers who participate
in early credits or allotments generation would be required to test each batch of gasoline they
produce or import for sulfur content prior to the gasoline leaving the facility, except that: (1)
parties who collect and test composited samples of conventional gasoline would be allowed to
continue that practice until January 1, 2004; and (2) parties who have approved in-line blending
waivers are exempt from the requirement to test before the gasoline leaves the refinery even after
standards go into effect starting January 1, 2004.  The rule did not address whether parties who
currently test each batch of gasoline by testing a representative sample taken from the
certification tank (i.e., who do not test composite  samples) would be exempt from testing each
batch prior to the gasoline leaving the facility prior to January 1, 2004.  We did not intend to
make refiners who test every batch of CG to have more severe requirements than refiners who
test composite samples.  Until January 1, 2004, refiners who test each batch of gasoline may
release the gasoline prior to obtaining a test result. We intend to clarify this in a technical
amendment to the regulation.

6.     Question:  Is a conventional gasoline refinery, participating in  early credits generation,
and using in-line blending, required to have an in-line blending waiver in order to participate in
the early credit generation program (i.e.,prior to 2004)?

       Answer: Section 80.330  requires that a refinery must determine the sulfur content each
batch of conventional gasoline or RFG produced prior to the gasoline leaving the refinery unless
the refinery has an approved in-line blending waiver under § 80.65(f)(4). A refinery that
currently produces conventional gasoline by in-line blending but has no in-line blending waiver
cannot participate in the early credits program unless it obtains an in-line blending waiver.
However, the in-line blending waiver for conventional gasoline is only required to address sulfur
sampling and analysis.  We will make every effort to review in-line blending waivers promptly.
Where appropriate, EPA may determine that the in-line blending waiver may apply retroactively
to the date that the refinery first met all requirements for an in-line blending waiver.

7.     Question:  If a refinery that is participating in the early credits  program is testing
composite samples of conventional gasoline prior to 2004, must it nevertheless retain samples
from each batch of gasoline produced?

       Answer: Section 80.335(a) provides that  beginning January 1, 2004, or January 1  of the
first year allotments or credits are generated under §§ 80.275 and 80.305, whichever is earlier, a
refiner must retain representative samples of the gasoline batch samples analyzed under the
requirements of this subpart. Composited samples are treated as representative of a single batch
of gasoline.  See §  80.330(a)(3).  Compositing of  samples for sulfur testing purposes is allowed
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until January 1, 2004.  Hence, prior to January 1, 2004, those refiners who analyze composited
samples of conventional gasoline are required only to retain portions of the composited samples
pursuant to §§ 80.330(a)(3) and 80.335(a)(l).

8.      Question: Section 80.335(a)(2) requires refiners to retain sample portions for the most
recent 20 samples collected, or for each sample collected during the most recent 21 day period,
whichever is greater. Is a refinery that produces only one or two batches of gasoline per year
required to retain samples for up to 10 or 20 years?

       Answer:  The cited section of the regulation specifies the minimum number of batch
samples from a refinery, which once created, must be maintained (twenty). The regulation does
not specifically address the maximum amount of time that any particular sample must be
maintained.  This was not considered to be an issue since the Agency assumed that refineries and
importers produce or import a substantial amount of batches each year. Such parties would
accrue the twenty batch minimum in relatively short order,  so that they would effectively be able
to dispose of any additional, older samples quickly. This question indicates, however, that at
least one refiner or importer handles less than a handful of batches each year, so that its batch
samples might have to be retained for an extensive amount of time, such as between ten and
twenty years.  The Agency did not intend for refiners to be required to maintain sulfur samples
for an excessive amount of time.  We will address this issue through a future rulemaking.

9.      Question: Several denaturants are used for fuel ethanol, including conventional gasoline,
raffmate, LSR gasoline and natural gasoline. The predominant denaturant used is natural
gasoline, which could be described as a "gasoline blendstock."  Does EPA intend to treat an
oxygenate blender using ethanol denatured with denaturants other than unleaded gasoline as a
"refiner" for the purposes Tier 2 compliance?

       Answer:  The gasoline sulfur rule states that oxygenate blenders who blend oxygenate
into gasoline downstream of the refinery are not subject to the rule's refiner requirements, but
are, instead, subject to downstream standards and prohibitions.  See  § 80.212.  The Agency
interprets the term oxygenate blenders under the gasoline sulfur rule to include those ethanol
blenders who blend  ethanol into gasoline, even though the ethanol  may contain gasoline
denaturants, in a manner consistent with ASTM specifications, which are not unleaded gasoline.
This inclusive interpretation makes the gasoline sulfur rule's treatment of ethanol blenders
consistent with that found under the JAFG/CG and oxygenate blender programs.  Under these
programs,  ethanol blenders, regardless of the denaturant involved, are exempted from those
provisions of the programs under 40 CFR Part 80 which are applicable only to refiners and
importers of gasoline.  The rationale for this inclusion under these programs is that the blending
of only denatured ethanol (up to 10 percent by volume) should not cause the gasoline to violate
the RFG/CG volatility standards,  where the ethanol is added in compliance with regulatory
requirements and where the blended oxygenate does not otherwise affect the quantity or quality
of gasoline.

       The Agency  believes that  the same rationale applies under the sulfur program, provided

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that the ethanol blender does not blend into the gasoline ethanol containing more than 30 ppm
sulfur. Compliance with this sulfur content prohibition should ensure compliance of the blended
gasoline with the low sulfur requirements of the rule. Due to this prohibition, the Agency
believes that market forces will ensure the use of low sulfur denaturants in ethanol to be sold to
ethanol blenders.

10.    Question: A refiner produces a batch of gasoline at its refinery. It collects a sample of
the gasoline and conducts certification testing. The sulfur content test result is less than the 80
ppm refinery level standard.  The gasoline is then moved to another tank within the refinery,
where it is commingled with several other certified batches whose certification test results were
also less than 80 ppm. The gasoline is sampled and tested subsequent to being moved. Does the
95 ppm downstream sulfur standard apply to this subsequent test result?

       Answer:  The downstream standard applies to samples of gasoline subsequent to
movement of the gasoline from the tank in which certification sampling is conducted, even when
these subsequent samples are collected within the refinery or import facility where the gasoline is
produced or imported. Thus, a refiner or importer may conduct a quality assurance program of
the gasoline located at the refinery or import facility that previously has been certified, and apply
the downstream cap standard when evaluating the quality assurance samples.

11.    Question: A refiner or importer produces or imports a batch of gasoline and collects a
sample of that gasoline for certification testing.  The refiner's or importer's certification test
result for the gasoline is less than 80 ppm. EPA takes a sample of the same batch of gasoline
from the certification tank. (Or a refiner or importer submits a retained sample of certified
gasoline to EPA.) The EPA test result for the gasoline is greater than the 80  ppm refinery level
standard.  Would EPA consider the sample to be in violation of the refinery  level cap standard?
Under the same scenario, but where the EPA test result is also under  80 ppm, but is greater than
the refiner's test result, would EPA consider the refiner's test result invalid for purposes of
calculating the average annual sulfur level of the refiner's gasoline?

       Answer:  EPA would determine whether the batch is in violation of the cap standard
based on whether it exceeds the 80 ppm refinery level standard. If the EPA test result is greater
than 95 ppm,  the batch would be in violation,  since any test result over 95 ppm exceeds ASTM
reproducibility for gasoline whose true sulfur value is less than 80 ppm. If the EPA test result is
greater than 80 ppm but less than 95 ppm, EPA would reserve the right to determine whether the
true sulfur value of the sample is greater than the 80 ppm refinery level cap.  EPA could make
this determination by conducting multiple analyses on the sample, by submitting the sample to
other laboratories for testing, by testing other samples collected from the same batch of gasoline,
or by any other means that would give EPA sufficient confidence that the sulfur level of the
sample exceeds 80 ppm.

       In the second scenario, EPA would consider the refiner's annual average calculations to
be incorrect if we determine that the refiner's test results demonstrate a bias in favor of batch
certification testing for sulfur content that is less than the true value.  EPA might determine such

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a bias, for example, based on testing a series of retains or other samples, and comparing EPA's
sulfur results with those of the refiner. It is possible for such a bias to exist even though all
samples tested are under the cap standard, and even if EPA test results do not necessarily differ
from the refiner's by greater than ASTM reproducibility.
                       DOWNSTREAM TESTING FOR S-RGAS

1.      Question: When we transfer gasoline from our terminals we generate two PTDs for each
transfer: (l)a bill of lading (BOL) from the terminal for custody transfer, and (2) an invoice
generated by the accounting staff for title transfer.  These two PTDs are generated not only at
different locations, but also by different programs. We cannot realistically guarantee that the
accounting department's invoice PTD will have the same information on it as to S-RGAS status
as will the terminal's BOL.  This is because the S-RGAS status information must be generated
based on testing which will only be performed at the terminal.  We do not have an automated
process to transfer this changing status information from the terminal to the accounting
department.  Therefore, to  ensure consistancy between the two PTDs, we will have to rely on the
prompt, accurate transmittal of this information 100 percent of the time.  Such foolproof, 100
percent successful, manual transmittal of varying S-RGAS status information cannot be assumed.
How can we prevent PTD violations from occurring due to the varying manner in which we
create our two PTDs?

       Answer: The regulation requires that on each occasion when downstream parties transfer
title or custody to S- RGAS  or mixtures of this gas, the transferor must provide the transferee
product transfer documentation identifying the S-RGAS status and  standard applicable to such
gasoline.  See § 80.210(e)(2).   Whether the gasoline is classified  as S-RGAS on the PTD
depends upon the gasoline being comprised in whole or in part of S-RGAS, the receipt of a PTD
stating that the product is  S-RGAS, and a test result confirming that the sulfur  content exceeds
the regulatory threshold under § 80.210(d)(3). The intent of these PTD identification
requirements is to provide the transferee with accurate S-RGAS information about the gasoline
being received.  If a downtream party transferring custody of gasoline provides accurate
information  as to S-RGAS status and sulfur standard, as applicable, on its BOL to its transferee,
the Agency believes that this goal of accurate SR-GAS information transmission is effectively
satisfied. Therefore, in situations in which both a custody PTD and a separate  title PTD are
generated by a downstream party for the same gasoline, the Agency will consider the requirement
of S-RGAS status and standard transmission satisfied if the custody transfer PTD accurately
provides the required information, and the title transfer PTD also provides that same information,
or it indicates that the S-RGAS information is contained on the custody PTD.

2.      Question: Truckers may obtain both premium gasoline and regular gasoline from a
terminal in order to supply a retail outlet with midgrade gasoline. In such cases, if a truck obtains
a load of gasoline from a terminal that consists of a mixture of gasoline from a terminal tank that
is properly designated as S-RGAS, and gasoline from another tank that is not S-RGAS, how
must the terminal and trucker classify the gasoline, and must an additional sample be obtained

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and tested of the combined product from the 2 storage tanks?

       Answer: The regulation specifically exempts gasoline in trucks from the testing
requirement for S-RGAS, and instead allows truckers to rely on the test result of the terminal
supplying the truck carrier. See § 80.210(d)(4).  Where a tanker truck receives a load of
midgrade gasoline that is comprised of S-RGAS and non-S-RGAS dispensed into the same
compartment for the purpose of making midgrade gasoline, whether through in-line blending or
otherwise, the transferred gasoline could properly be classified on the PTD as S-RGAS, provided
that the intent was to create mid-grade gasoline.  However, If a relatively small volume of S-
RGAS were to be blended with non-S-RGAS, the gasoline in the tanker truck could not be
classified as S-RGAS, since such blending is not consistent with the need to make midgrade
gasoline from premium and regular gasoline.

3.      Question:  A terminal provides gasoline to a truck at the terminal's truck rack at the
same time the terminal is receiving gasoline into the same storage tank that is supplying the
truck.  The gasoline already in the terminal's storage tank is properly classified as containing S-
RGAS before the new delivery of gasoline into the tank.  The new delivery of gasoline into the
terminal's tank is not classified by the pipeline as S-RGAS.  How should the gasoline being
supplied to the truck be classified on the terminal's PTDs, and at what point does  the
classification change?

       Answer: Under the regulation, the terminal must obtain a representative sample of
gasoline from the storage tank and test it for sulfur content after receipt of the new load of
gasoline into the terminal tank in order to continue to qualify the gasoline in the tank as S-RGAS
(§  80.210(d)(3)). Assuming the new receipt of gasoline is loaded into the terminal storage tank
as  per normal practices, the terminal would not be required to retest the tank to determine if it
still qualifies as S-RGAS until the new load is fully received into the storage tank. Until that
time, in the above scenario, the truck carrier could be given a PTD designating the gasoline as S-
RGAS. Subsequent to the full receipt of the gasoline into the storage tank, however, a new
sample must be obtained from the tank and be tested to determine if continuing to classify
gasoline in the tank as S-RGAS (on PTDs), is still appropriate.

4.      Question: Assume that the gasoline contained in the storage tank is not classified as S-
RGAS when the truck begins to receive product, but gasoline classified by the pipeline as S-
RGAS is being loaded into the terminal storage tank from a pipeline as the truck is being loaded.
The gasoline going into the terminal storage tank is being bottom-loaded, and the  gasoline going
to  the truck rack is also  drawn from near the bottom of the terminal storage tank.  May the
terminal classify the gasoline being loaded to the truck as S-RGAS even though the gasoline in
the terminal  storage tank is currently classified as non-S-RGAS and may ultimately be classified
as  non-S-RGAS after sampling and testing subsequent  to full receipt of the new load of gasoline
from the pipeline?

       Answer: Under the regulation the terminal  must sample and test its gasoline subsequent
to  the receipt of the transferred gasoline into the terminal storage tank in order to qualify the

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gasoline in the tank as S-RGAS. However, it is a common industry practice for terminals to
supply gasoline from a storage tank at the same time the tank is also receiving product from a
pipeline.  Where a load of gasoline that is classified by the pipeline as S-RGAS is being received
into the terminal storage tank, until full receipt of the load, a sample that meets the requirements
of the regulation cannot be obtained from the tank. Even when a sample is ultimately taken and
tested subsequent to full receipt of the load from the pipeline, the sample may not actually be
representative of the gasoline that had previously been loaded into the truck, because in many
situations the gasoline is being bottom-loaded into the terminal storage tank and is also being
supplied to the truck rack from the bottom. Therefore, the truck may have received gasoline that
would not have the same sulfur test result as would a sample that was obtained from the
completed mixture.  Since parties will not encounter this issue until January, 2004, we are
studying the situation, and will address it through appropriate later guidance, either through a
Q&A response or through regulatory action prior to that time.
                        CALIFORNIA GASOLINE EXEMPTION

1.      Question:  Certain metropolitan areas in the western U.S. (but outside of California) may
obtain fuel program waivers and adopt programs that require the use of gasoline meeting
California requirements on at least a seasonal basis. Section 80.375(c) specifies that designated
California gasoline must ultimately be used in the state of California and not elsewhere, and that
designated California gasoline must be kept segregated from gasoline that is not California
gasoline at all points in the distribution system.  The segregation requirement could impose a
burden on supplying California gasoline to a non-California area subject to a state program
requiring California gasoline.  Do federal rules preempt these states from making a requirement
for California gasoline use? If not, would EPA consider removal of the segregation requirement?

       Answer:  EPA's  adoption of gasoline sulfur standards preempts state actions to prescribe
or enforce fuel sulfur controls.  States desiring to have gasoline sulfur control programs approved
in their SIPs need to obtain a waiver of EPA's preemption under § 21 l(c)(4)(C) of the Clean Air
Act.  See 65 FR at 6765.  It is possible that a state fuel program would require the sale of gasoline
meeting CARB standards within the state's jurisdiction as a means of compliance with the state
program.  The current regulations require California gasoline to ultimately be used in California
to be exempt from the sulfur standards.  We are reviewing issues related to the application of this
limitation in the situation where gasoline meeting CARB standards may be required under a state
program that has received a § 21 l(c)(4)(C) waiver from EPA. We will address these issues in a
future guidance or rulemaking.

2.      Question:  Must a refinery that produces both California gasoline and federal RFG
designate each batch produced as either federal  RFG or California gasoline, and maintain
segregation of both products, even though the gasoline meets the requirements of both programs?

       Answer:  Section 80.375(c) requires that each batch of California gasoline be designated
as such by the refiner or importer, and that California gasoline be segregated from gasoline that is
not California gasoline at all points in the distribution system. The designation and segregation

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requirements for California gasoline are necessary to assure the enforceability of the federal
gasoline sulfur rule and RFG rule. Because the federal sulfur rule refinery standard is an annual
average standard, there would be no way to ensure that a refinery producing both California
gasoline and federal gasoline is in compliance with the average standard unless gasoline
designated for California use is actually used in California and gasoline designated for 49 state
use is actually used in the 49 states.
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                                                   Office of Transportation and Air Quality
                                                                      EPA420-F-00-056
                                                                        December 2000
                  Gasoline Sulfur Rule Questions and Answers

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

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

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

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

1.      Question: Is a parent company responsible for complying with the corporate pool
average standards in 2004 and 2005 for all of the refineries owned by its subsidiaries in addition
to all of its own refineries?

       Answer: Section 80.195(c) provides that the corporate pool average standards in 2004
and 2005 are the maximum average sulfur levels allowed for a refiner's or importer's gasoline
production from all of the refiner's refineries or all gasoline imported by an importer in a

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calendar year.  The preamble to the final rule states that, for purposes of compliance with the
corporate pool average standards, a parent company is considered to be the refiner of any refinery
facilities owned by wholly-owned subsidiaries of the parent company. As such, the parent
company must comply with the corporate pool average standards for these facilities. In its
compliance calculations, the parent company must include the gasoline produced at any refineries
it owns, plus the gasoline produced at any refineries owned by its wholly-owned subsidiaries.
See 65 FR 6698, 6755 (February 10, 2000).  We believe, however, that parties should have the
option to comply with the corporate pool average standards on a corporate parent level or a
subsidiary level.  As a result, a parent company may demonstrate compliance with the corporate
pool average standards based on all of the gasoline produced at all refineries owned by the parent
company and the parent company's wholly-owned subsidiaries, or, the parent company may be
deemed in compliance if it demonstrates compliance for the gasoline produced at all of its own
refineries and each of the parent company's subsidiaries demonstrates compliance for the
gasoline produced at all of its own refineries. The  environmental benefits of the sulfur rule
would not be compromised by allowing this option, since compliance on the level of each
subsidiary would result in the corporate pool average standard being met by a greater number of
pools with fewer refineries in each pool over which to average the sulfur content.  We intend to
modify the regulations to clarify this option in a future rulemaking. In any case, the parent
company would remain liable for any violations by the subsidiary. See § 80.395(a)(l 1).

       Similarly, where refineries are owned by subsidiaries of a foreign parent company, the
foreign parent company may demonstrate compliance with the corporate pool standards for all of
the gasoline produced at refineries owned by the foreign parent company's wholly-owned U.S.
subsidiaries, or each U.S. subsidiary owned by the  foreign parent company may demonstrate
compliance with the corporate pool standards for its own refineries.  As indicated above, in any
case, the foreign parent company would remain liable for any violations by the subsidiary.
Where the foreign parent company demonstrates compliance with the corporate pool standards
for its U.S. subsidiaries, any gasoline imported into the U.S. that was produced at the foreign
parent company's foreign refineries, or at refineries owned by foreign subsidiaries of the foreign
parent company, would not be included in the parent company's compliance calculations, since
the regulations provide that the sulfur standards, including the corporate pool average standards,
are met by the importer for all imported gasoline. See § 80.195(a)(4).

2.      Question:  The regulations state that a partner to a joint venture may include the joint
venture  refinery in its corporate pool. If a foreign corporation is a partner in a U.S. refinery joint
venture, and also owns a U.S. subsidiary which has several refineries, can the U.S.  subsidiary
establish a corporate pool composed of its refineries and the foreign parent's U.S. joint venture
refinery?

      Answer:   Section 80.195(c) provides that a partner to a j oint venture may include one or
more of the joint venture refineries in its corporate pool. As discussed in Question 1 above, a
parent company, domestic or foreign, may demonstrate compliance with the corporate pool
average standards for the refineries owned by its wholly-owned subsidiaries, or each subsidiary

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can individually demonstrate compliance with the corporate pool average standards for its own
refineries. As a result, in the scenario described above, if the parent company demonstrates
compliance with the corporate pool standards for its subsidiary, the parent company may include
its joint venture refinery in its corporate pool. However, if the parent company's subsidiary
individually demonstrates compliance with the corporate pool average standards for its refineries,
rather than the parent company demonstrating compliance for the subsidiary's refineries, then the
subsidiary may  only include in its pool a refinery or refineries owned by a joint venture to which
the  subsidiary itself is a partner. Such subsidiary may not include refineries owned by a joint
venture to which the parent, but not the subsidiary, is a partner.

3.      Question:  The sulfur regulations allow refiners and importers to include ethanol added
downstream in compliance calculations. The denaturants used in ethanol usually contain some
amount of sulfur.  Should the sulfur content of the denatured ethanol be included in calculations
for purposes of compliance and credit generation?

       Answer: Section 80.205(c) provides that a refiner or importer may include oxygenates
added downstream from the refinery or import facility when calculating the refinery's or
importer's annual average sulfur content, provided that the refiner or importer complies with the
requirements under § 80.69(a) or § 80.101(d)(4)(ii) of the RFG/anti-dumping regulations, as
applicable, for including such oxygenates.  These sections of the RFG/anti-dumping regulations
do not require refiners to include in compliance calculations the properties of the denaturant
added to the ethanol downstream.  Therefore, for purposes of demonstrating compliance with the
sulfur standards or generating credits or allotments, the sulfur content of the denaturant in ethanol
is not required to be included in the calculations under § 80.205.  As indicated in the preamble to
the  final sulfur rule, where ethanol is included in the refinery compliance calculations, refiners
assume this ethanol has no sulfur content. See 65 FR at 6800. Section 80.385(e) prohibits any
party from blending into gasoline denatured ethanol with a sulfur content higher than 30 ppm. In
amounts of 30 ppm or below, we believe that the sulfur in the denatured ethanol will not have a
measurable impact on the sulfur level of the gasoline to which the ethanol is added.

4.      Question:  In the preamble to the final sulfur rule, EPA stated that an oxygenate blender
who uses blendstock as a denaturant, instead of gasoline, is a refiner under the regulations. Does
this mean that such an oxygenate blender is subject to all of the requirements for refiners under
the  sulfur rule?

       Answer: The preamble to the final rule states that an oxygenate blender who uses
blendstock instead of finished gasoline as a denaturant for ethanol is a "refiner" under the
regulations.  As such, the oxygenate blender is required to demonstrate compliance with the
sulfur standards for the denatured ethanol added to the gasoline. 65 FR at 6800.

       The preamble discussion cited above reflects a concern that a blendstock used as a
denaturant could have a much higher sulfur content than finished gasoline, which is subject to the
30 ppm average sulfur standard. The final rule, however, contains a provision which prohibits an

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ethanol blender from blending into gasoline denatured ethanol with a sulfur content higher than
30 ppm.  § 80.385(e). This prohibition applies regardless of whether the denaturant used is
finished gasoline or a blendstock.

       We believe that the prohibition in § 80.385(e) adequately addresses the concern raised in
the preamble regarding the use of a blendstock as a denaturant rather than finished gasoline.  As
a result, we do not believe there is a necessity for such oxygenate blenders to demonstrate
compliance with the sulfur standards for the blendstock used as a denaturant, or to fulfill the
requirements for refiners under the regulations. Therefore, we are withdrawing the preamble
discussion as guidance for interpreting the regulations on this particular issue. However, all
oxygenate blenders, regardless of the type of denaturant used, are subject to the requirements and
prohibitions applicable to downstream parties, as well as the prohibition specified in § 80.385(e).
See § 80.212. If a blendstock used as a denaturant causes a violation, the oxygenate blender
would be liable for that violation.  Oxygenate blenders, therefore, may wish to obtain information
regarding the sulfur content of any blendstock used as a denaturant to avoid liability under §
80.385(e).
                                   SMALL REFINERS

1.      Question:  The sulfur regulations require small refiners to include in their small refiner
application the crude oil capacity of their refineries as reported to the Energy Information
Administration (EIA). Foreign refiners, however, do not report to the EIA.  What should these
refiners include in their applications regarding crude oil capacity?

       Answer: As indicated in the question, § 80.235(c)(2) provides that a refiner's small
refiner status application must contain the total corporate crude oil capacity of each refinery as
reported to the EIA. Since foreign refiners do not report their crude oil capacity to the EIA, the
small refiner status application for a foreign refiner must contain the total crude capacity of each
refinery as documented by a comparable reputable source, such as a professional publication or
trade journal. We intend to clarify this in a future rulemaking.

2.      Question:  Section 80.250 provides the equations to be used in determining small refiner
sulfur baselines and baseline volumes. This section, however, does  not address whether
oxygenates added downstream from the refinery are to be included in the calculations.  Section
80.295 requires such oxygenates to be included in calculations for a baseline for early credit
generation.  Should oxygenates added downstream also be included  in calculations for a small
refinery baseline?

       Answer:  We intended the provisions of § 80.250 for determining a baseline under the
small refiner program to be consistent with the provisions of § 80.295, since both baselines are
intended to represent current sulfur levels,  and they are based on the same calculation.  As
indicated in the question, under §  80.295, any refiner who included oxygenates blended

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downstream in compliance calculations for 1997-1998 under the RFG and anti-dumping
regulations must include this oxygenate in the calculations for sulfur content under § 80.295 for
purposes of establishing a baseline for early credit generation. Consistent with this requirement,
small refiners who included oxygenates blended downstream in compliance calculations for
1997-1998 under the RFG/anti-dumping regulations must include this oxygenate in the baseline
calculations under § 80.250.  We intend to clarify this requirement in a future rulemaking.
                            ALLOTMENTS AND CREDITS

1.     Question: In 2003, a refiner has the ability to generate Type A allotments if his
individual refinery sulfur content is 60 ppm or lower. For a refinery with a baseline under 120
ppm, a 0.8 factor is applied to calculate allotments. For 2003, can the refiner specify a portion of
the eligible sulfur reduction as credits instead of allotments? If so, would the calculation for the
credit portion be the same as the credit calculation in 2000-2002; i.e., without the 0.8 factor used
to calculate allotments?

       Answer: The regulations provide refiners, in 2003, with the option to generate credits in
accordance with the provisions of § 80.305, or generate allotments (and credits where applicable)
in accordance with the provisions of § 80.275. See § 80.275(a).  The regulations do not allow a
refiner to generate some credits using the provisions of § 80.305 and some allotments/credits
using the provisions of § 80.275 in 2003. Under § 80.305, credits are generated based on the
total volume of gasoline produced at the refinery during the annual averaging period. Similarly,
under § 80.275, allotments are generated based on the total volume of gasoline produced at the
refinery during the annual averaging period.  These sections do not provide for credits or
allotments to be calculated based on a portion of a refinery's gasoline production.

2.     Question: Foreign refiners who have an approved anti-dumping refinery baseline under
§ 80.94, like domestic refiners, are required to fulfill the requirements for applying for a sulfur
baseline under § 80.245 or § 80.290, including the submission of 1997-1998 batch information as
reported to EPA under the RFG/anti-dumping regulations.  However, in some cases, a foreign
refiner may have an approved baseline under § 80.94, but this baseline may not have been in
effect until after 1998. As  a result,  such foreign refiner would not have submitted batch reports
to EPA in 1997-1998. How should this  foreign  refiner comply with the requirements of § 80.245
or § 80.290?

       Answer: To establish a sulfur baseline for purposes of the small refinery standards or
generating early sulfur credits, the regulations require refiners to submit to EPA sulfur baseline
data for 1997-1998,  including information on each batch of gasoline produced and the batch
number assigned to the batch for purposes of compliance with the RFG/anti-dumping
regulations.  See §§  80.245(a) and 80.290(c). The data in the refiner's sulfur baseline submission
may then be verified by EPA by comparing it with the data submitted to EPA in the refiner's
1997-1998 annual reports.  Foreign refiners who do not have an approved individual baseline for

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purposes of compliance with the anti-dumping regulations are required to follow the procedures
under §§ 80.91 through 80.93 (provisions for establishing an individual anti-dumping baseline)
to establish the volume and sulfur content of gasoline that was produced at the foreign refinery
and imported into the United States during 1997-1998, for purposes of calculating a sulfur
baseline under § 80.250 or §  80.295. See §§ 80.250(b), 80.290(d) and 80.410(b)(l). This is in
addition to the other baseline establishment requirements under § 80.245 and § 80.290.

       However, as indicated in the question, a foreign refiner who has an approved individual
anti-dumping baseline, but one that did not apply for purposes of compliance with the anti-
dumping regulations until after 1998, also would not have submitted annual reports to EPA in
1997-1998. In such a case, we believe that the foreign refinery's baseline may be based on the
gasoline produced at the foreign refinery and imported into the United States during the period of
time that the refinery was subject to its individual anti-dumping baseline. As a result, the foreign
refiner should submit in the sulfur baseline application under § 80.245  or § 80.290 information
and data for the gasoline produced at the refinery and imported into the United States during each
annual averaging period that the refinery was subject to its individual anti-dumping baseline.
EPA will evaluate all of the data submitted by the foreign refiner in determining the appropriate
sulfur baseline for the refinery. Where we conclude that the data submitted reasonably reflects
current sulfur levels, the refinery's baseline will be determined based on the average sulfur
content of gasoline produced by the foreign refinery and imported into the United States during
the most recent annual averaging period in which the foreign refinery was subject to its
individual anti-dumping baseline. We intend to clarify this requirement in a future rulemaking.

4.     Question: Accumulated Type A allotments generated in 2003 and 2004 would only have
50% of their value as allotments if they are consumed in 2005. Type A allotments can be
converted to credits in 2005 and 2006. What value do the Type A allotments that were generated
in 2003 and 2004 have as credits in 2005 and 2006? Can they be converted on a 1 to 1 basis, or
do they have to be converted to 2005 allotments first (at 50% value) and then be converted to
credits?

       Answer: The preamble to the final rule states that allotments generated in 2003 or 2004
which are carried over to 2005 are discounted by 50%.  The discounted allotments may then be
used to achieve compliance with the corporate pool average standard in 2005 or converted into
credits for compliance with the refinery average standard in 2005 (or beyond).  As a result, where
allotments generated in 2003 or 2004 are carried over to 2005 and then converted into credits,
such credits would retain only 50% of the value of the original allotments generated in 2003 or
2004. However, if the allotments are converted into credits before being carried over to 2005,
such credits would not be discounted when they are carried over, and, therefore, would retain
100% of the value of the original allotments. An allotment that is converted into a credit before
being carried over to 2005 may be reconverted into an allotment for use in achieving compliance
with the corporate pool average in 2005, but the allotment will be discounted 50%. See 65 FR at
6765. We intend to clarify these requirements in § 80.275 in a future rulemaking.

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5.     Question: Under the GPA provisions, a refiner's annual average GPA standard is the
lesser of 150 ppm, the refinery's 1997-1998 sulfur baseline plus 30 ppm, or the lowest average
sulfur content for any year in which the refinery generated early credits or allotments plus 30
ppm.  Section 80.310 provides an equation for determining credit generation in 2004 and
thereafter based on the refinery's sulfur standard. However, this section does not include the
term "plus 30 ppm" in the GPA standard.  Is this an error in § 80.310?

       Answer: The term "plus 30 ppm" in the GPA standard was inadvertently omitted in §
80.310. Under § 80.310, for GPA gasoline, the Sstd value in the equation should be the applicable
refinery or importer standard for GPA gasoline established under § 80.216(a).  Under §
80.216(a), the refinery or importer annual average sulfur standard for gasoline produced or
imported for use in the GPA is the lesser of 150 ppm or the refinery's or importer's 1997-1998
average sulfur level, calculated in accordance with § 80.295, plus 30 ppm (§ 80.216(a)(l)); or, in
the case of any refinery whose actual annual sulfur average decreases to a level lower than the
refinery's annual average  sulfur standard for GPA gasoline established under § 80.216(a)(l)
during the period 2000 through 2003, the lowest average sulfur content for any year in which the
refinery generated allotments or credits,  plus 30 ppm, not to exceed 150 ppm (§ 80.216(a)(2)).
We intend to correct this in a future rulemaking.

6.     Question: The regulations at § 80.205 require the annual refinery or importer average or
corporate pool average calculations to be conducted to two decimal places.  However, the
regulations at §§ 80.250 and 80.295 for calculating a sulfur baseline for purposes of determining
small refinery standards and generating early credits do  not have a similar requirement.  Should
the sulfur baseline submissions be rounded to the nearest ppm or conducted to two decimal
places  as required for calculating the annual average sulfur level under § 80.205?

       Answer: We intended the provisions for calculating a sulfur baseline under §§  80.250
and 80.295 to be consistent with the provisions for calculating the refinery or importer annual
average sulfur level under § 80.205, including the requirement to conduct the calculations to two
decimal places.  As a result, we intend to modify §§ 80.250 and 80.295 in a future rulemaking to
require baseline calculations to be conducted to two decimal places. Note, however, that credits
under the sulfur program are in "ppm-gallons."  § 80.305(c).  We interpret § 80.305(c) to require
credits to be rounded to the nearest ppm-gallon.  Therefore, in calculating sulfur credits using the
equation in § 80.305(a), the refiner should use the refinery's sulfur baseline value established
under § 80.250 or § 80.295, conducted to two decimal places, and the refinery's actual annual
average sulfur level calculated under § 80.205, conducted to two decimal places.  Once the sulfur
credits are calculated, the refiner should round the credits to the nearest ppm-gallon.
                              SAMPLING AND TESTING

1.     Question: In a recent Questions and Answers document, EPA indicated that, under the
sulfur regulations at § 80.330, a refiner who produces conventional gasoline using in-line

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blending equipment cannot participate in the early credit program unless the refiner obtains an in-
line blending waiver under § 80.65(f)(4) to address sulfur sampling and analysis. See "Gasoline
Sulfur Rule Questions and Answers,"  EPA420-F-00-018 (May 2000) (Sampling and Testing
Question 6).  We believe this requirement is unjustified, since there are no downstream sulfur
standards prior to January  1, 2004, and early  credits are based on an annual sulfur average. Will
EPA consider modifying the regulations to allow in-line blenders to generate early credits
without obtaining an in-line blending waiver?

       Answer: The current regulations at § 80.330(a)(l) require a refiner to collect a
representative sample from each batch of gasoline produced and test each sample to determine its
sulfur content prior to the gasoline leaving the refinery. The requirements in § 80.330(a)(l)
apply beginning on January 1, 2004, or January 1 of the first year of credit or allotment
generation, whichever is earlier.  Section 80.330(a)(4) provides an exception to the requirement
in § 80.330(a)(l) that gasoline be tested prior to leaving the refinery for parties who use
computer-controlled in-line blending equipment and are unable to obtain test results prior to the
gasoline leaving the refinery. Such refiners may meet the testing requirement under the terms of
an in-line blending waiver granted under § 80.65(f)(4).  Therefore, as discussed in the May 2000
Questions and Answers document, under the current sulfur regulations, refiners who produce
gasoline using in-line blending equipment and who are unable to obtain test results prior to the
gasoline leaving the refinery must have an in-line blending waiver under § 80.65(f)(4) in order to
generate early credits in 2000-2003. This also applies to early allotment generation in 2003.
Under the JAFG regulations, refiners who produce JAFG by in-line blending are required to obtain
a waiver under § 80.65(f)(4). However, refiners who produce conventional gasoline by in-line
blending are not required to obtain a waiver under § 80.65(f)(4). The current sulfur regulations
would require these conventional gasoline refiners to apply for and receive a waiver under §
80.65(f)(4) in order to generate early credits or allotments.

       Upon consideration of the comments  we have received, we believe that the requirement
under § 80.330(a)(4) to obtain an in-blending waiver, in regard to both RFG and conventional
gasoline, is unnecessary for purposes of generating early credits or allotments.  The waiver
requirement was intended to ensure that batches produced using in-line blending equipment have
known sulfur levels at the time of shipment.  Since early credit or allotment generation is based
on the refinery's annual average sulfur level,  credits and allotments are not calculated until the
end of the annual averaging period, after the test results for all batches produced during the
averaging period are obtained.  Therefore, it is unnecessary for refiners to obtain test data prior to
the gasoline leaving the refinery. Moreover,  as indicated in the question, there are no per-gallon
sulfur standards  prior to January 1, 2004, which would necessitate knowing the sulfur content of
the gasoline prior to its leaving the refinery.  As a result, we intend to modify § 80.330 in a future
rulemaking to provide that refiners, including those who produce gasoline using computer-
controlled in-line blending  equipment, are not required to obtain test results prior to the gasoline
leaving the refinery in order to generate early credits in 2000-2003 or early allotments in 2003.
In-line blenders, therefore, would not be required to obtain an in-line blending waiver under §
80.65(f)(4) for purposes of generating early credits or early allotments. However, this does not

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relieve refiners from meeting the requirements under § 80.330 to obtain a representative sample
of each batch of gasoline produced. In the case of in-line blenders who do not obtain a sample of
each batch from a storage tank, the sampling method must conform to the methodology set forth
in ASTM D 4177-95, as required in § 80.330(b)(2). In the case of in-line blenders who do obtain
their batch samples from a storage tank, the sampling for such samples must conform to the
appropriate methodology specified in § 80.330(b)(l).  We also intend to clarify the requirements
for in-line blenders beginning in January 2004 in a future rulemaking.

2.     Question: Do the provisions of § 80.330(a)(3) apply to refiners who produce
conventional gasoline using in-line blending equipment?

       Answer:  Yes.  Section 80.330(a)(3) provides that, prior to January 1, 2004, for purposes
of meeting the sampling and testing requirements of the sulfur rule, any refiner may, prior to
analysis, combine samples of gasoline from more than one batch of gasoline or blendstock and
treat such composite sample as one batch of gasoline or blendstock pursuant to the requirements
of § 80.101(i)(2).  The provisions of § 80.330(a)(3) apply to all refiners of conventional gasoline,
including those  who produce gasoline using in-line blending equipment.

3.     Question: Are refiners of conventional gasoline who composite samples under §
80.330(a)(3) required to use the sampling methods in § 80.330(b)?

       Answer:  Yes.  Section 80.330(b), which requires the use of the sampling methods
provided in §§ 80.330(b)(l) and (b)(2), applies to all samples taken for purposes of complying
with the provisions of § 80.330(a), including § 80.330(a)(3).

4.     Question: Section 80.335 describes the  sample retention requirements for refiners or
importers. However, this section does not indicate how reformulated gasoline blendstock for
oxygenate blending (RBOB) samples should be considered.  Should a refiner retain neat RBOB
samples or handblend samples (RBOB blended with ethanol)?

       Answer: Section  80.69(a)(2) of the RFG regulations requires refiners to conduct testing
on RBOB by adding the specified type and amount of oxygenate to a representative sample of the
RBOB and  determining the properties and characteristics of the resulting gasoline (i.e., a
"handblend").  Section 80.335(a) requires refiners to collect a representative portion of each
sample analyzed and retain sample portions as specified in § 80.335(a)(2).

       We  interpret § 80.335(a) to require refiners to retain samples of the RBOB batches and
samples of the ethanol used to conduct the handblend testing, rather than samples of the actual
handblend.  Refiners, therefore, are not required to create additional volumes of the handblend
samples for purposes of fulfilling the sample retention requirements of § 80.335. We believe that
having the RBOB and accompanying ethanol samples available to EPA will allow EPA to
determine whether the refiner's handblend testing was properly conducted. We intend to clarify
this sampling and retention requirement for RBOB in a future rulemaking.

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