Office of Transportation                                 EPA420-F-06-039
"                and Air Quality                                       May 2006
Environmental Protection


                   The U.S. Environmental Protection Agency (EPA) has published a Direct
                   Final Rule that addresses: (1) requirements for parties that handle
                   pipeline interface; and (2) downstream quality assurance requirements
                   for refiners of reformulated gasoline blendstock for oxygenate blending
                   With respect to parties that handle pipeline interface, the Direct Final
                   Rule largely codifies existing guidance for compliance with reformulated
                   gasoline (RFG) and anti-dumping regulations. It also establishes gasoline
                   sulfur standards for transmix processors and blenders that are consistent
                   with the sulfur standards for other entities—such as pipelines and termi-
                   nals—that are downstream of refineries in the gasoline distribution sys-
                   tem. Further, the Direct Final Rule clarifies the requirements for transmix
                   processors under the Mobile Source Air Toxics program.

                   With respect to refiners and importers of RBOB, this Direct Final Rule
                   amends the  RFG regulations to allow for the option of an alternative

method for fulfilling a regulatory requirement to conduct quality assur-
ance sampling and testing at downstream oxygenate blending facilities.
This alternative consists of a comprehensive program of quality as-
surance sampling and testing that would cover all terminals that blend
oxygenate with RBOB in a specified RFG-covered area. The program
would be carried out by an independent surveyor funded by industry. The
program would be conducted pursuant to a survey plan, approved by EPA
on an annual basis that is calculated to achieve the same objectives as the
current regulatory quality assurance requirement.

The clean air benefits of the RFG, antidumping, and gasoline sulfur
programs will continue to be realized. The goal of these programs is to
reduce motor vehicle emissions of the pollutants that contribute to ozone,
or smog, and toxic pollutants, such as benzene. The RFG, antidumping,
and gasoline sulfur programs control gasoline properties to reduce emis-
sions of these pollutants.

The clean air benefits of these three programs are significant. Smog
threatens millions of Americans each year with respiratory problems,
and is particularly dangerous to children, who are increasingly at risk to
asthma attacks. The reformulated gasoline program alone reduces smog-
forming pollutants by  105,000 tons and toxic pollutants by 24,000 tons
annually. This is equivalent to eliminating the pollution from 16 million
cars every year.

Although we do not anticipate any adverse comments on this direct final
rule, we are also concurrently publishing a Notice of Proposed Rulemak-
ing in order to be able  to address any comments we may receive without
withdrawing this direct final rule in its entirety.
Refined petroleum products that are transported by pipeline normally are
pumped sequentially, as a continuous flow through the pipeline. As a re-
sult, some amount of mixing of adjacent product types normally occurs.
The product in a pipeline between two adjacent volumes of petroleum
product consists of a mixture of the two adjacent volumes and is called
"interface." Generally, interface mixture is blended into the two adjoining
products that created the interface. Transmix is an interface consisting of
two adjacent dissimilar petroleum products, such as gasoline and distil-
late fuel, which cannot be blended into either of the two adjacent prod-
ucts without causing either of them to violate commercial standards.

Since transmix cannot be blended into either of the two adjacent products
transported by the pipeline, it is diverted by the pipeline into a separate
storage tank. Transmix is generally transported via tank truck, pipeline or
barge to a facility designed to separate the transmix into its fuel compo-
nents. For example, where the transmix consists of gasoline and distillate
fuel, the transmix may be transported to a "transmix processing" facility
where the gasoline portion is separated from the distillate fuel. At loca-
tions where it is either relatively expensive or inconvenient to transport
transmix to a transmix processing facility for separation, the transmix is
sometimes blended into gasoline  in very small amounts, typically around
0.25 volume percent of the gasoline.

The RFG and anti-dumping requirements apply at any facility where
gasoline is produced. Gasoline most commonly is produced by process-
ing crude oil at refineries, but it is also produced by other processes, such
as combining blendstocks or adding blendstocks to finished gasoline.
Gasoline is also produced when transmix is blended into gasoline, or
when transmix is separated into gasoline and distillate fuel. Transmix
blending is similar to adding blendstock to gasoline where the addition of
the transmix, like blendstock, may change the properties of the gasoline.
Similarly, the process of separating gasoline and distillate fuel may result
in gasoline with different properties than the gasoline originally certified
by the refinery.

Transmix processors and transmix blenders are refiners under the RFG/
anti-dumping regulations, but EPA has historically provided transmix
processors and transmix blenders with flexibility in complying with the
refiner requirements. Parties have been processing and blending transmix
in accordance with EPA guidance (See Reformulated Gasoline and Anti-
dumping Questions and Answers  (November 12, 1996)). This Direct Fi-
nal Rule would incorporate most  of the existing guidance, and would also
include modifications reflecting EPA experience. Our experience since
the guidance was issued indicates that the approach taken in the guidance
is mostly appropriate, but that some revisions are warranted.

Lastly, in the preamble to the gasoline sulfur regulations, EPA indicated
that the Agency would establish requirements for transmix processors in
a future rulemaking (65 FR 6800, February 10, 2000). Therefore, as part
of this rulemaking, EPA is  including requirements for transmix proces-
sors and transmix blenders under the gasoline sulfur regulations at 40
CFR Part 80, subpart H.

Alternative Quality Assurance at Downstream
Blending Facilities
The RFG regulations currently require RFG to contain a minimum of
2.0 weight percent oxygen (40 CFR § 80.41). To fulfill this requirement,
oxygenate is either added at the refinery before the gasoline is certified
by the refiner as meeting RFG requirements, or it is added downstream
from the refinery at an oxygenate blending facility. As discussed in more
detail below, refiners often wish to require that more than the minimum
amount of oxygenate be added downstream in order to include the addi-
tional oxygenate in their emissions performance compliance calculations
Although the Energy policy Act mandated the removal of the oxygen
requirement for RFG, we believe many refiners and importers may wish
to continue to include oxygenate added downstream in their emissions
compliance calculations. Under the current regulations, refiners must
conduct a program of quality assurance (QA) testing at the downstream
oxygenate blending facility in order to include the oxygenate in their
compliance calculations. This Direct Final Rule provides an alternative
QA requirement for these refiners and importers.

Under the current regulations, when oxygenate is to be added to produce
RFG at a downstream oxygenate blending facility, refiners produce a
product called reformulated gasoline blendstock for oxygenate blending,
or RBOB. RBOB is certified by the refiner, or by an importer who im-
ports RBOB, as complying with all of the RFG requirements  except the
minimum 2.0 weight percent oxygen requirement. The oxygenate blender
is responsible for complying with the oxygen requirement when the oxy-
genate  is added to the RBOB to produce RFG at the oxygenate blending

Various oxygenates may be used to fulfill the oxygen requirement. Some
oxygenates, such as ethanol, have a propensity to attract water. As a re-
sult, these oxygenates cannot be added at the refinery, particularly where
the finished gasoline will be traveling through a pipeline on its way to
terminals and retail gasoline stations. Thus, RFG containing ethanol is
typically produced by blending the ethanol with RBOB at a blending
facility downstream from the refinery that produced the RBOB.

Refiners and importers of RBOB  are required to calculate compliance
with the RFG emissions performance standards for volatile organic
compounds (VOC), nitrogen oxides (NOx) and toxics by sampling and
testing  a hand-blended mixture of the RBOB and the type and amount of
oxygenate that  the refiner or importer of the RBOB designates must be

added downstream. If the refiner or importer does not meet certain con-
tractual and quality assurance requirements, the refiner or importer must
assume for purposes of its handblend that 4.0 volume percent ethanol
will be added to the RBOB downstream.

The states of New York and Connecticut passed laws banning the use
of the oxygenate methyl tertiary butyl ether (MTBE) in gasoline sold
in these states. As  a result, many refiners and importers that historically
produced or imported RFG containing MTBE for the NY/CT RFG area
currently produce  or import RBOB for ethanol blending. Refiners in that
area have indicated that, due to the complex gasoline marketplace in New
York and Connecticut, it is extremely difficult, if not impossible, to track
RBOB from  the refinery where it is produced to the terminal where it is
blended with ethanol in order the fulfill the downstream QA sampling
and testing requirement. As a result, under the current regulations, refin-
ers in the NY/CT RFG area are effectively precluded from producing an
RBOB which requires a specific type and amount of oxygenate, such as
10 volume percent ethanol, and instead must produce a generic any-oxy-
genate RBOB, which does not require the refiner to conduct downstream
QA testing at the ethanol blender facility.

This rulemaking provides RBOB refiners and importers the option to
comply with an  alternative QA requirement which consists of a program
of sampling and testing designed to provide oversight of all terminals
that blend ethanol  with RBOB for use in a specified RFG covered area.
Under this option,  a refiner or importer must either arrange to have an in-
dependent surveyor conduct a program of compliance  surveys, or partici-
pate in the funding of an organization which arranges to have an indepen-
dent surveyor conduct a program of compliance surveys. In either event,
compliance surveys must be carried out by  an independent surveyor
pursuant to a survey plan calculated to achieve the same  QA objectives
as the current regulatory requirement. A detailed survey plan must be
submitted to EPA for approval by September 1st of the year preceding
the annual averaging period in which the alternative QA sampling and
testing program  would be implemented. The survey plan must include a
methodology for determining when the survey samples will be collected,
the location of the retail outlets where the samples will be collected, the
number of samples to be included in the survey, and any other elements
that EPA determines are necessary to achieve the same level of quality
assurance as  the current QA requirement.

We believe that use of this QA compliance alternative will result in over-
sight sampling and testing that is equivalent to the current regulatory QA
requirement, and may, in fact, result in significantly superior QA over-
sight, since the sampling and testing will be conducted by an independent
surveyor in accordance with a comprehensive plan approved by EPA,
rather than by individual refiners and importers. This rule will not have
any adverse environmental impact, and will provide refiners and import-
ers with additional flexibility in complying with the regulations. As a
result, while this rulemaking was initiated in response to the compliance
issues raised by refiners in the New York / Connecticut area, we believe
it is appropriate to provide this compliance alternative to refiners and
importers supplying any RFG covered area. The rule, therefore, provides
this QA compliance alternative to any RBOB refiner or importer in any
RFG area who either arranges to have an independent surveyor conduct
a program of compliance surveys, or who participates in the funding of
an organization that arranges to have an independent surveyor conduct a
program of compliance  surveys, in accordance with the provisions in this
Direct Final Rule.

Compliance with this QA alternative is optional. Refiners and importers
may choose to comply with the existing QA requirement and not partici-
pate in the survey program. Refiners and importers who supply more than
one RFG area may choose to participate in the survey program for one
RFG area and comply with the existing QA requirement for another RFG
Health and Environmental Impacts
The clean air benefits of these programs will continue to be realized.
There will be no adverse health or environmental impacts as a result of
this rulemaking.
Flexibility to Industry
EPA believes the flexibilities provided for transmix operations by this
Direct Final Rule are appropriate, given the unique roles that transmix
processors and transmix blenders fill in the petroleum products distribu-
tion system. Although these parties are refiners under EPAs regulations,
almost all of the gasoline and distillate fuel they produce is derived from
fuel which has already been produced and certified by an upstream refin-
ery or importer. Thus, this Direct Final Rule allows transmix processors
the flexibility to exclude conventional gasoline that they recover directly

from transmix from their antidumping compliance calculations, since the
conventional gasoline has already been accounted for in the compliance
calculations of an upstream producer. Similarly, this Direct Final Rule
allows transmix processors to only have to meet the downstream sulfur
standards (as opposed to the more stringent refinery standards) for gaso-
line they recover directly from transmix, since the gasoline has already
been accounted for in the compliance calculations of an upstream refin-
ery. However, transmix processors must comply with all refiner stan-
dards at each of their transmix processing facilities  for any blendstocks
they add to gasoline.  Lastly, this Direct Final Rule allows transmix
blenders to blend transmix into gasoline without restriction on location
or rate, provided the distillation endpoint of the  transmix-blended gaso-
line does not exceed 437 degrees Fahrenheit, and that the gasoline meets
all applicable downstream standards.

This Direct Final Rule also provides significant  additional flexibility
to refiners supplying RBOB to be blended with ethanol, especially at
distant locations. The survey plan described above will allow refin-
ers greater flexibility  in making RFG by adding the most cost-effective
amount  of oxygenate to their reformulated blendstocks for oxygenate
For Further Information
You can access the Direct Final Rule and concurrent Notice of Proposed
Rulemaking from EPA's Office of Transportation and Air Quality Web
site at:

    www. epa. gov/otaq/rfg_regs. htm

For further information about the Direct Final Rule, contact Chris McK-
enna at (202) 343-9037 (E-mail: regarding
the transmix portion of the rule and Marilyn Bennett at (202) 343-9624
(E-mail: regarding the alternative quality as-
surance procedure.