Office of Transportation and Air Quality
                                                                     EPA-420-F-00-056
                                                                        December 2000
                  Gasoline Sulfur Rule Questions and Answers
                   Received Between May and December 2000
       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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