EPA420-S-01-008
                                                                     June 2001
                ANALYSIS OF AND ACTION ON CALIFORNIA'S
                       REQUEST FOR A WAIVER OF THE
                       OXYGEN CONTENT IN GASOLINE
1.    INTRODUCTION

a. The Clean Air Act requirements

      Section 211(k)(2)(B)of the Act, 42 U.S.C.  7545(k)(2)(B), establishes an oxygen
content requirement for federal reformulated gasoline (RFC), and allows EPA to waive
compliance with the requirement under certain circumstances. Section 211 (k)(2)(B)
reads:

      The oxygen content of the gasoline shall equal or exceed 2.0 percent by
      weight (subject to a testing tolerance established by the Administrator)
      except as otherwise required by this Act. The Administrator may waive, in
      whole or in part, the application of this subparagraph for any ozone
      nonattainment area upon a determination by the Administrator that
      compliance with such requirement would prevent or interfere with
      attainment by the area of a national primary ambient air quality standard.

      EPA has the discretion under this section to waive the oxygen content
requirement, to the extent reasonably necessary, where EPA determines that
compliance with the oxygen content  requirement would interfere with attainment of the
primary National Ambient Air Quality Standard (NAAQS) in an ozone nonattainment
area.  In evaluating California's request for waiver of the oxygen requirement,  EPA has
analyzed the likely composition of gasoline in the relevant  nonattainment area(s) with
and without a waiver of the oxygen content requirement and the resulting impact of
oxygen content on emissions. This analysis is needed so  EPA can assess the potential
effect that a waiver would have on California's efforts to attain the ozone and particulate
matter NAAQS.

b. California's waiver request

      In  a letter dated April 12, 1999 from California Governor Gray Davis to
Administrator Browner, California officially requested a waiver from the federal oxygen
requirement for reformulated gasoline, under Section 211 (k)(2)(B).1 The April 12,  1999
submittal stated that "the ARB will be revising its CaRFG program this year, and
            (Filed in docket A-2000-10, document number II.D.-1; also available at
            http://vwvw.arb.ca.qov/cbq/Oxy/wav/041299.pdf)

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continuing the oxygen mandate will make it more difficult to maintain the emission
reductions benefits needed for California's SIP." The submittal did not, however,
contain the technical analysis to support the statement that the oxygen requirement
might actually prevent or interfere with the attainment of the NAAQS  in California.  As
such, the Agency believed that the request submitted by California on April 12, 1999 did
not provide enough detail about the underlying analyses upon which  the request was
premised to allow EPA to make a careful and fully informed decision  on the request.

       Subsequent submittals from the California Air Resources Board (GARB)
provided additional information necessary to evaluate Calfiornia's request for a waiver
from the oxygen requirement. In order to evaluate whether compliance with the oxygen
content requirement prevents or interferes with a NAAQS, the Agency then began an
independent evaluation of the data, modeling, and other information  submitted by
California in support of its request for a waiver from the federal RFC  oxygen
requirement.
c. California's argument for a waiver

      California's waiver request rests first on CARB's assertion that additional NOx
reductions are needed in California.  GARB claims that the South Coast Air Quality
Management District (SCAQMD) and Sacramento Metropolitan Air Quality
Management District (SMAQMD) need additional NOx reductions beyond the
commitments made in their recently approved State Implementation Plans (SIPs) for
these areas to attain the National Ambient Air Quality Standards (NAAQS) for ozone
and particulate matter.

      GARB then claims that without the oxygen requirement, California RFC Phase 3
(CaRFG) would achieve greater NOx reductions. CARB's assertion regarding the
benefits achievable under CaRFGS without the oxygen requirement is based primarily
on the relationship between fuel oxygen and NOx formation.  GARB claims that
increases in gasoline oxygen content increase NOx emissions and therefore the
requirement for oxygen in RFC prevents the State from  achieving the maximum amount
of NOx reduction from CaRFGS.2  In light of the additional NOx reductions needed in
the SCAMQD and Sacramento RFC regions, GARB argues that NOx emissions
             Specifically, CARS varied the values of the aromatics, olefins, sulfur, T50, T90, and benzene fuel
             parameters of each of the two sets of complying fuels (i.e., 2 weight percent oxygen fuels and zero
             percent oxygen fuels) between the lower and upper bound limits that it defined for each parameter.
             CARS then generated over 10 million combinations of fuel properties within the bounds it defined,
             and using its Predictive Model for CaRFGS (PM3) identified the subset of these hypothetical fuels
             which would comply with CARB's standards for its CaRFGS. CARB's simulation analysis showed
             that on average among the large number of complying formulations, the additional reduction in
             NOx associated with going from a 2 weight percent oxygen fuel to a zero oxygen fuel is about 1.5
             percent. On the basis of this simulation analysis CARS claimed that the reduction of NOx is
             greater without oxygen independent of which fuel properties are varied.

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resulting from compliance with the oxygen content requirement would interfere with the
attainment of the ozone and PM NAAQS.

      GARB acknowledges that reducing oxygen content would increase carbon
monoxide (CO) emissions. GARB claims, however, that with a waiver there would be a
reduction in oxygenated fuels (i.e., reduction of ethanol) which would lead to a decrease
in the emissions associated with permeation of VOC through vehicle fuel system
components such as hoses and seals that occurs with the use of ethanol as an
oxygenate.  Based on the use of reactivity factors, GARB argues that the VOC emission
decrease from reduction in permeation losses offsets the increase in CO,  resulting in an
ozone neutral effect. (This is discussed in further detail in Section 4 below).

      GARB also acknowledges that with a waiver, both oxygenated and  non-
oxygenated gasolines would be used, resulting in commingling of ethanol  and non-
ethanol gasolines in automobile gas tanks.  Since ethanol acts to boost the Reid Vapor
Pressure (RVP) of gasoline, such commingling would result in a VOC increase. GARB
estimates that commingling would increase VOC emissions by an amount equivalent to
an overall increase in RVP of 0.1  psi.  GARB has set the flat limit of RVP in CaRFGS
0.1 psi lower than it otherwise would have been (i.e., 6.9 rather than 7.0) and asserts
that the lower RVP offsets the VOC increase due to commingling.


d.  Criteria for acting on California's request

      As previously stated, the Clean Air Act requires that,  in order to waive the federal
RFC oxygen requirement, EPA must determine that the requirement will prevent or
interfere with the State's ability to attain a NAAQS. The key question before the agency
therefore involves the air quality impacts of a waiver for the  relevant NAAQS.

      To address the air quality impact, it is critical to consider both the potential
changes in gasoline quality which could occur if a waiver were granted and the potential
emissions impacts of these changes.  All relevant categories of emissions should
reasonably be considered. This information is needed  to evaluate the impacts of a
waiver on each applicable NAAQS.

      EPA believes it should not make a determination of interference or prevention
and should not grant a waiver unless  the impacts of a waiver are clearly demonstrated
for each applicable NAAQS.  Absent such a clear demonstration, EPA is not able to
determine whether a waiver would aid, hinder, or have  no effect on attainment of a
NAAQS.  It is important that the impacts of a waiver be clearly demonstrated for each
applicable NAAQS, because EPA believes it should not grant a waiver unless, at a
minimum, it has been clearly demonstrated that granting a waiver would aid in attaining
at least one NAAQS, and would not hinder attainment for any other NAAQS.

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2.  ERA'S ANALYSIS OF THE EMISSIONS IMPACTS OF A WAIVER

a.  Background

      EPA performed a complex analysis to evaluate the effect of a waiver on NOx,
VOC, and CO inventories. In order to perform this analysis it was necessary to
estimate both how emissions were likely to change as a result of fuel property changes,
and how California Phase 3 RFC (CaRFGS) fuel properties were likely to differ with and
without a waiver. EPA considered various pre-existing models and estimates relating
fuel properties to emissions and, where warranted and feasible, produced new models
to relate fuel properties and emissions for evaluation of the waiver.  EPA also reviewed
existing refinery modeling results which predicted the composition of CaRFGS with and
without a waiver.  EPA ultimately concluded that additional refinery modeling was
needed and, through its contractor MathPro,  performed such modeling.  EPA used
these emission models in conjunction with refinery modeling results in order to estimate
factors, generally as percent changes, which could then be applied to emissions
inventory estimates to predict the tons/day emission changes in year 2005 resulting
from a waiver.  The analysis included both on-road and non-road emissions, and
addressed emissions of NOx, CO, and VOC.

       The following brief description of the process highlights some of EPA's major
decisions and assumptions.  EPA's analysis is described in detail in our Technical
Support Document (TSD), Docket Number A-2000-10, Document ll-B-2.

b.  Refinery modeling

      EPA's initial waiver analysis included use of certain fuel property estimates from
a December 9, 1999 MathPro refinery modeling analysis for the California Energy
Commission. EPA concluded that this modeling, for reasons discussed in the technical
support document, did not provide a  sufficient basis for evaluation of California's waiver
request.  Consequently, EPA commissioned MathPro to do additional modeling.

      The EPA MathPro modeling provided property estimates for oxygenated
CaRFGS if no waiver were granted, and property and market share estimates for non-
oxygenated and oxygenated CaRFGS if a waiver were granted. The refinery modeling
investigated a number of cases in which refiners blended CaRFGS with and without a
waiver using the phase 3 predictive model, the flat limit reference specifications,  and
the exhaust plus evaporative VOC compliance option.  In these cases the impact of
various factors was considered. Specifically, this modeling evaluated the properties of
CaRFGS where oxygen was used at  2.0 percent or 2.7 percent by weight, the
constraints of the Unocal patent were imposed (requiring refiners to avoid the
parameter ranges established by the patent) or eliminated  (assuming, for whatever
reasons,  refiners did not need to avoid the patent), and where MTBE use outside of
California was assumed to be reduced (e.g.,  because of MTBE bans or refiner liability
concerns) or assumed to continue at current levels.

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      The modeling predicted non-oxygenated CaRFGS shares ranging from 35
percent to 74 percent if a waiver were granted, with six of the eight cases being greater
than the 40 percent non-oxygenated share EPA had assumed based on earlier
modeling.  With an increase in oxygen content from 2.0 percent to 2.7 percent by
weight, all else being constant, the analysis predicts a decrease in non-oxygenated
market share. Also, it predicts that a reduction of MTBE use outside of California would
result in an  increase in the non-oxygenated market share of the CaRFGS pool. The
Unocal Patent may also affect the non-oxygenated/oxygenated market split.
Specifically, avoidance of T50 less than 210 F could limit the use of alkylate for
premium CaRFGS, possibly increasing the use of oxygen. Based on the refinery
modeling,  we concluded that under a number of sets of foreseeable "waiver"
circumstances, there would be substantial quantities of both oxygenated and non-
oxygenated CaRFGS produced.  EPA's refinery modeling provides a number of
alternative cases, incorporating the finalized version of the Phase 3 predictive model
and CaRFGS flat limit reference specifications. This allowed EPA to examine potential
waiver emissions impacts under various alternative scenarios which incorporate a
variety of potential conditions. EPA evaluated emission impacts for the eight basic
cases from the modeling and for four cases where the "no waiver" oxygen level was 2.7
weight percent, and the "waiver" oxygen level for the oxygenated  portion of the pool
was 2.0 percent.
c. Emissions modeling

      At the time that EPA began its analysis of the California waiver request, there
were several available emission models which related fuel properties to emissions of
on-road light duty vehicles.  These were the complex model (the compliance model for
federal RFC), the Phase 2 predictive model (the compliance model for phase 2
California RFC), and the PM3 (the compliance model for phase 3 California RFC which
had not yet been officially adopted). Each of these models was based on statistical
regression analysis of thousands of emission test results.  The Phase 3 predictive
model was developed using statistical procedures  and software not available for use in
developing the complex model or the Phase 2 predictive model.  Although additional
data were used to develop the Phase 3 model, much of the same data were used in the
development of all three models.

      EPA was concerned that considerable disparity existed among the models in the
estimated direction  and magnitude of the NOx response to changes in oxygen content,
all else being constant.  The Phase 2 and Phase 3 models both indicate a NOx
increase with increasing oxygen, however the Phase 3 model shows a much steeper
response. The Complex Model, by contrast,  predicts that NOx will  decrease slightly as
oxygen increases.  It should be noted that the magnitude of the NOx response to
oxygen, even as predicted by the Phase 3 model,  is not large when compared to  NOx
emission differences between vehicles, or test-to-test variability in emissions. The

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small size of the oxygen effect on NOx emissions indicated in all of these models
makes it difficult to detect statistically and to quantify precisely.  In an attempt to
resolve the uncertainty about the NOx/oxygen relationship, EPA staff and a consultant
audited the process that GARB staff used to develop the Phase 3 predictive model.3
Additionally, EPA independently developed alternative models for NOx as a function of
fuel properties for the Tech 4 vehicles.4

      EPA's audit of CARB's model included a review of the decisions for inclusion and
exclusion of data from the data set, the statistical approach, treatment of "high emitters"
and selection of a final model. EPA also reviewed the sufficiency of data and the
approach taken in CARB's representation of Tech 5 emissions  in the predictive model.
EPA's review raised  a number of concerns about CARB's model development process.
These concerns included CARBs decision not to consider high  emitter terms for
potential inclusion in the model, its decision to discard the primary results of the Phase
3 model-building process and return to the terms from the earlier Phase 2 effort, and
modeling of emissions from Tech 5 vehicles.  These concerns contributed to EPA's
decision to pursue its development of alternative Tech 4 models for both NOx and
exhaust VOCs (modeling non-methane hydrocarbons), for evaluation  of the waiver
request. EPA additionally concluded that there was considerable uncertainty about the
accuracy of CARB's  Tech 5 models, given the small amount of Tech 5 data and
CARB's modeling approach which relied heavily on Tech 4 data to develop the Tech 5
models. Consequently, based on engineering judgment, EPA concluded that the best
approach for waiver evaluation was to assume that Tech 5 NOx, VOC and CO exhaust
emissions would not be affected  by fuel property differences. EPA elected to use the
Tech 3 portion of the phase 3 predictive model, and the allocations of exhaust VOCs
and NOx emissions that would occur with a waiver (based on the use  of CARB's
emission inventory model EMFAC7g) among the three technology groups assumed in
the predictive model.

      While the Phase 3 predictive model contains an equation to calculate a CO
credit as a function of oxygen content it does not explicitly calculate CO  mass
emissions as a function of fuel properties. EPA used CARB's assumptions regarding
oxygen effect on CO (contained in Appendix G -"Estimation of a CO Credit" of its staff
report for the CaRFGS rule) in calculating CO changes.  However,  EPA did not assume
that the CO would change due to changes in sulfur or T50. EPA split  the CO change
among the Tech 3, Tech 4 and Tech 5 categories as GARB did, assuming that there
      3 EPA utilized the consulting expertise of Southwest Research Institute (SwRI) which had
previously been involved in emissions modeling efforts such as development of EPA's complex model.

      4 For modeling purposes, GARB separated vehicles into technology classes 3, 4, and 5. Tech 3
vehicles represent the oldest technology vehicles, Tech 4 represents "middle-aged" vehicles which
make up the majority of the fleet and its emissions, and Tech 5 represents the newest technology
vehicles. For a more complete description, see the TSD.

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would be no change in CO as a result of oxygen reduction in Tech 5 vehicles (which
GARB assumed as well).

      When EPA developed its alternative Tech 4 models, a number of possible
candidate models resulted.  Certain of these models did not show substantially different
predictive utility based on statistical criteria. Therefore, EPA had to use engineering
judgment of the likely effect on emissions as well as statistical measures to select the
models it would use for evaluating California's waiver petition.  Ultimately, EPA selected
six different NOx models and decided to average results in order to determine
applicable percent change factors for the waiver analysis. Similarly, EPA selected three
models from among the candidate  NMHC exhaust models.  Two of these NMHC
models contained terms which indicated that "high emitters" and "normal emitters"
would respond differently to  certain fuel property changes.  EPA requested information,
based on EMFAC7G, from GARB in order to properly weight normal and high emitter
contributions.

      EPA also included non-exhaust VOC emission effects in its analysis. Such
effects could arise from differences in RVP in as-blended gasoline under a waiver
compared to no waiver, and  from in-vehicle commingling of ethanol-oxygenated and
non-oxygenated gasoline. Additionally,  permeation VOC emissions through non-
metallic fuel system components are expected to be higher with ethanol-oxygenated
gasolines than with non-oxygenated gasolines.

      To quantify RVP-related changes in evaporative emissions, EPA used an
equation, based on EMFAC7G, published in a report prepared by Sierra Research for
the American Methanol Institute.5 This equation expresses evaporative emissions, in
tons per day, as a function of RVP.  Rather than use the tons per day estimates
directly, EPA calculated percent change factors, and applied them to evaporative VOC
emission inventory estimates.  GARB estimated, in its  February 7, 2000 submittal, that
the difference in VOC emissions due to permeation losses when comparing non-
oxygenated gasoline to gasoline/ethanol blends with 2.0 weight percent oxygen is about
13 tons/day for all federal RFC areas, assuming 100 percent penetration of non-
oxygenated fuels. EPA quantified permeation effects by adjusting proportionally for
various non-oxygenated penetrations and oxygen contents different than 2.0 weight
percent, assuming that 60 percent of these permeation losses would represent
SCAQMD.

      The MathPro modeling indicated that the as-blended RVP of the CaRFGS pool
with a waiver would be lower than the RVP without a waiver for all scenarios. This
results in a net reduction in VOC emissions for all scenarios with a waiver when
exhaust, as-blended evaporative and permeation emission changes are considered. If
            Report No. SROO-0101 "Potential Evaporative Emission Impacts Associated with the Introduction
            of Ethanol-Gasoline Blends in California" January 11, 2000.

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EPA were to grant a waiver, however, in-vehicle commingling of ethanol blended
oxygenated gasoline and non-oxygenated CaRFGS would cause additional RVP
increases to occur. California has estimated the likely magnitude of this increase to be
about 0.1 psi (basically the lower of several RVP increases produced by CARB's
analysis). EPA reviewed CARB's evaluation of the commingling effect.  EPA also
evaluated the possible commingling effect under various potential conditions. This
analysis used a pre-existing EPA commingling model to help assess the average in-
vehicle RVP increases that could occur if ethanol-oxygenated gasoline were
commingled with non-oxygenated gasoline during vehicle refueling. Since EPA's model
assumes that ethanol would be blended at 10 volume percent, EPA multiplied the
model's RVP increase estimates by 0.8 (as GARB did) to evaluate potential RVP
increases when ethanol is blended at 5.7 volume percent (2.0 weight percent oxygen).
EPA also considered the analysis contained in the Sierra Research report cited earlier.
EPA found that an RVP increase close to 0.2 psi is as likely to occur under a fairly
broad set of conditions as a 0.1  psi increase.  Since  EPA recognized that there is
considerable uncertainty about the magnitude of the commingling RVP increase, EPA
evaluated net VOC (exhaust + as-blended evaporative + commingling evaporative +
permeation) changes at various levels of RVP boost from 0 psi to 0.3 psi. For this
analysis, EPA assumed that commingling  RVP increases apply to non-road as well as
on-road vehicles.  EPA concluded that, depending on the scenario and the magnitude
of the RVP  increase, the net VOC benefit with the waiver would change and
significantly could be reversed by the commingling component of VOC emissions.
These results are discussed below.

      EPA expected that non-road exhaust emission changes would be a function of
oxygen content.   We used information in an EPA document, Report No. NR-003, in
conjunction with statewide California non-road inventory data to determine percent
change factors for the waiver analysis.6 Non-road RVP-related evaporative emissions
were modeled using the on-road percent change factors. EPA recognized that the
extremely limited amount of data available to estimate non-road effects added
considerable uncertainty to the analysis.  Furthermore, EPA had to  make a number of
assumptions to derive baseline non-road gasoline emission inventory estimates for the
SCAQMD, and to separate the VOC estimate into exhaust and evaporative
components.7
3. EMISSIONS CHANGES EXPECTED TO RESULT FROM A WAIVER

      EPA's evaluation of the emissions impacts of a waiver, as discussed below,
shows a likely decrease of NOx under all scenarios examined, an increase in CO under
            Exhaust Emission Effects of Fuel Sulfur and Oxygen on Gasoline Nonroad Engines", Report No.
            NR-003, November 24, 1997, Christian E. Lindhjem, U.S. EPA

            Inventory assumptions are described in a memo in the Document ll-B-1 in Docket A-2000-10.

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these scenarios, and significant uncertainty about the change in VOC emissions.  The
VOC emissions impact ranges from a decrease in VOC to an increase, largely
depending on the level of commingling emissions and whether they are or are not
accounted for.

      NOx Emissions Effects. The changes that refiners would make to the
composition of California gasoline in response to a waiver, when evaluated with EPA's
NOx emissions model, would likely reduce NOx emissions under every scenario that we
evaluated (see Table 1). This finding, which is unique to California's regulatory
structure and  specific to California refineries' technical configurations, is directionally in
agreement with GARB  predictions, though the two analyses have important
differences.

      CO Emissions Effects. With a waiver, CO emissions would increase in all
scenarios, as  indicated in Table 1. This is because oxygenated gasoline generally
produces lower CO emissions and a mixed pool of gasoline with significant quantities of
non-oxygenated gasoline would result in poorer CO emissions performance. The
refinery modeling, under various scenarios, estimates the proportion of the gasoline
that would be  oxygenated with a waiver and thus drives the inventory effects. CARB's
model was used to determine the CO effects brought about by changes in oxygen
content.

      VOC Emissions Effects.  Our analysis shows that the impact of a waiver on VOC
emissions would be mixed.  Exhaust VOC emissions would be higher with a waiver, as
indicated when EPA's VOC emissions model is used to predict exhaust VOC emissions
from the fuels that our refinery analysis indicates are likely to be produced with and
without a waiver.  But the refinery modeling also indicates that the RVP of both
oxygenated and non-oxygenated fuels produced under a waiver would be lower than
without a waiver, with a consequent reduction in "as-blended" evaporative emissions.
Additionally, the smaller proportion of gasoline containing ethanol in the waiver case
would also tend to reduce permeation emissions.  (Permeation is the escape of
gasoline components through the material used in soft fuel system  components.  Such
losses are increased by the presence of ethanol in gasoline.) In the absence of any
commingling considerations (discussed below), the net result of these opposite exhaust
and non-exhaust effects would be a reduction in VOC emissions with a waiver, though
the magnitude of the reduction varies across scenarios. As with NOx, the conclusion
that the RVP of fuels produced with a waiver would be lower than without a waiver is
based on the  specific circumstances of California regulations and the fuel formulation
decisions likely to be made by refineries supplying the California market.

      Commingling effects on VOC emissions occur when ethanol-oxygenated
gasolines and gasolines without ethanol are mixed in vehicle fuel tanks.  This is due to
the volatility boost caused when ethanol is added to all-hydrocarbon gasoline. This
boost in volatility occurs even when a small amount of ethanol is added to gasoline.
Therefore, in order to produce an ethanol-containing RFC meeting  evaporative

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emissions requirements, the hydrocarbon blendstock to which the ethanol is added
must have very low volatility to accommodate increased volatility produced by the
ethanol.  If the non-oxygenated RFGs are "commingled" in vehicle fuel tanks with
ethanol RFC, the ethanol will similarly increase the volatility of these non-oxygenated
RFGs resulting in an overall volatility of the "commingled" blends greater than that of
either the ethanol RFC or the non-oxygenated RFC prior to commingling. In other
words, when a vehicle with  a partially full tank is refueled with a different type of
gasoline  (i.e., ethanol-oxygenated in the tank and non-oxygenated added or vice
versa), the presence of ethanol will cause the resulting mixture to have an overall RVP
greater than the original RVP of either of the gasolines prior to refueling.

      Without a waiver it is reasonable to believe that there would be no appreciable
commingling effects, since all of the gasoline in the RFC areas would contain ethanol.8
With a waiver, commingling would certainly occur and would exert an upward pressure
on VOC emissions.  While  the directional impact on emissions from commingling is
clear, its  magnitude is very  difficult to forecast as it depends upon estimates of the
oxygenated/non-oxygenated market share, the oxygen content used in  ethanol-
oxygenated  RFC, and vehicle owners' refueling behavior (including  brand loyalty and
full versus partial fill-ups), among other  variables.

      GARB estimated that commingling would have the effect of raising the RVP of
gasoline  by about 0.1 psi. CARB's analysis assumed ethanol use in 100 percent of
premium gasoline and 46 percent of regular gasoline, no grade  switching (thus
restricting the occurrence of commingling only vehicles using  regular (i.e., non-
premium) gasoline), a gasoline pool comprising 75 percent regular gasoline and 25
percent premium, and 63 percent of regular grade  customers switching brands,
potentially resulting in commingling. Using a "simplified" analysis GARB calculated the
RVP boost for each possible outcome under two scenarios (three refills with initial tank
volume at the quarter tank level and 4 refills at the half tank level) and averaged the
results for each scenario. GARB estimated the RVP increase of the gasoline pool by
multiplying the average result by the commingling probability (63 percent) and the
regular grade market share (75 percent).  Average increases (above 7 psi)  were 0.12
psi for the quarter tank scenario and 0.16 psi for the  half tank scenario. These
calculations  were based on ethanol content of 10 volume percent (about 3.5 weight
percent oxygen) in ethanol oxygenated  gasoline.  GARB determined, based on the
University of California, Davis commingling model,  that the boost with 5.7 volume
percent ethanol content RFC (about 2.0 weight percent oxygen) would be about 80
            There is actually always some commingling where one of two adjacent areas has ethanol in its
            gasoline owing to travel across area boundaries and the resulting fuel mixing. Some of this will
            occur in California with or without a waiver. We considered the difference in the magnitude of this
            cross-border commingling between waiver and non-waiver situations to be small enough to ignore
            for the purposes of this analysis.

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percent of the boost with 10 volume percent. 9 Consequently, GARB applied an 80
percent adjustment factor to its 10 volume percent RVP boost estimates to estimate the
boost if 5.7 volume percent ethanol content oxygenated RFC were used. Resultant
estimates were 0.10 psi for the quarter tank scenario and 0.13 psi for the half tank
scenario.

      We believe that a 0.2 psi estimate of the commingling effect (as seen in Table 1
and further explained in the Technical Support Document) is at least as likely to be the
case as CAREI's 0.1 psi estimate.  GARB estimated the commingling effect by
calculating  a small number of refueling iterations under a set of assumptions that would
tend to produce an RVP boost estimate at the lower end of the range of likely RVP
increases (i.e., 100 percent ethanol use in premium gasoline,  no grade switching, and
ethanol content at 5.7 volume percent). Furthermore, EPA's analysis indicates that
even with these assumptions concerning ethanol use, content and grade switching, the
commingling effect is still likely to be about 0.17 psi which is closer to 0.2 psi than 0.1
psi.

      In finalizing version 3 of the California RFC regulations, GARB adopted a 0.1 psi
reduction in allowable RVP to compensate for the expected increase in VOC
associated with commingling if a waiver were granted.  If we credit CARB's 0.1 psi
reduction in allowable RVP against the additional 0.2 psi equivalent increase in VOC
emissions from commingling, the net increase in VOC emissions expected from a
commingling effect would be 0.1 psi.  If this figure is used in estimating the effect of a
waiver on the VOC inventory, all but two of our modeled scenarios show overall VOC
reductions with a waiver, but considerably smaller reductions than are predicted using
CARB's approach (assumption of a commingling effect of 0.1  psi, with the entire effect
offset by the 0.1  psi RVP reduction).  See the Table 1 column labeled "VOC 0.1 psi
boost"10

      The  columns for VOC emissions reflect the estimated impact of a waiver on
actual VOC emissions (in tons/day), considering exhaust and evaporative emissions,
including commingling and permeation, from on-road and non-road vehicles.  The
columns differ based on the estimates  of average increase in  RVP associated with
commingling. For example, "VOC 0.1 psi boost" would reflect the impact of a waiver on
the VOC inventory if commingling increases the average RVP by 0.2 psi, but this
increase is treated as partially offset by CARB's adoption of a 0.1  psi reduction in
            A commingling model developed by Dr. D.M. Rocke, University of California at Davis.


            For purposes of this decision EPA does not need to decide whether it is appropriate to offset the
            expected increase in emissions from commingling with the 0.1 psi RVP  reduction adopted by
            CARS, as even if the 0.1 psi offset is applied , as discussed below, VOC reductions are too
            uncertain to resolve what the effect of a waiver on ozone would be.

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RVP.11 The column "VOC no boost" would reflect the impact on the VOC inventory if
commingling increases RVP by 0.1 psi, and this increase is treated as fully offset by
GARB'S adoption of a 0.1 psi reduction.
      The impact of a waiver on the VOC inventory differs considerably depending on
the estimates of commingling (comparing the VOC columns of Table 1). This highlights
the importance of commingling emissions in assessing the overall VOC impact of a
waiver.  Using the 0.2 psi commingling effect (based on the discussion above), and
crediting CARB's 0.1 psi RVP adjustment, results in substantially less overall VOC
reduction than otherwise, and we still have reasonably likely scenarios where there is a
net VOC increase.  Not only is commingling a quantitatively important factor in VOC
emissions, it is also a component that is very sensitive to variables such as brand
loyalty whose values have been only crudely estimated.  As a result of this sensitivity, a
plausible case can be made for commingling effects ranging all the way from 0.1 psi to
0.3 psi (see the Technical Support Document).

      Our analysis indicates a waiver would likely result in a decrease in emissions of
NOx, an increase in exhaust VOC, a decrease in evaporative VOC (as-blended), and
an increase in CO. However, we are less confident about on-road permeation effects
and off-road emissions of CO,  NOx and VOC. The consistent decreases in NOx
emissions shown by our analysis also indicate that there would likely also be an overall
decrease in nitrogen-containing PM  emissions. There is much uncertainty about the
estimation of permeation and other emissions on off-road vehicles/engines as
discussed in detail in the Technical Support Document.  Finally, there is significant
uncertainty regarding commingling effects. In summary, the impact of a waiver on VOC
emissions is considerably more complex to model than the impact of a waiver on either
NOx or CO emissions, and there is significant uncertainty as to the overall VOC effect
of a waiver-in both the amount and the direction of the effect.
            This column would also reflect the impact of a waiver on the VOC inventory if commingling
            increases the average RVP of the gasoline by 0.1 psi and the impact is not offset.

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                                                                 13
Table 1: Waiver Impacts at Various Commingling-Related RVP Boosts

No Waiver
Oxy Level
2.0
2.7
2.7
2.0
2.7
2.7
2.0
2.7
2.7
2.0
2.7
2.7
Waiver
Oxy
Level
2.0
2.7
2.0
2.0
2.7
2.0
2.0
2.7
2.0
2.0
2.7
2.0
Nationwide
MTBE Use
Reduced
Reduced
Reduced
Continues
Continues
Continues
Reduced
Reduced
Reduced
Continues
Continues
Continues
Unocal Patent
Patent not avoided
Patent not avoided
Patent not avoided
Patent not avoided
Patent not avoided
Patent not avoided
Patent avoided
Patent avoided
Patent avoided
Patent avoided
Patent avoided
Patent avoided
Waiver Case Oxygen Market Shares and
Oxy Levels
% Oxyfuel
35
40
35
50
60
50
26
46
26
50
65
50
% Non-
Oxyfuel
65
60
65
50
40
50
74
54
74
50
35
50
Year-round
Oxygen Avg
1.0
1.5
1.0
1.3
1.9
1.3
0.9
1.6
0.9
1.3
2.0
1.3
Emission Inventory Changes (tons/day) (On-road, off-road
and all exhaust and evaporative VOC such as permeation and
commingling)
NOx
-6.60
-7.53
-9.61
-5.08
-4.68
-8.21
-7.20
-7.08
-10.89
-4.84
-4.78
-8.73
VOC
no boost12
-4.02
-15.24
-16.23
-4.10
-9.72
-16.35
-9.05
-12.12
-15.55
-8.17
-9.35
-14.73
VOC 0.1
psi boost13
2.54
-9.15
-10.14
2.46
-3.51
-10.26
-2.69
-5.96
-9.44
-1.80
-3.13
-8.61
VOC 0.2
psi
boost14
9.23
-2.94
-3.93
9.15
2.81
-4.05
3.79
0.33
-3.20
4.69
3.20
-2.36
CO
173.13
225.19
274.24
133.18
150.12
230.93
197.11
202.67
300.23
133.18
131.36
230.93
12


13



14
This scenario is equivalent to a 0.1 psi RVP boost from commingling completely offset by California's 0.1 psi adjustment to its standards.

Equivalent to a 0.2 psi RVP boost from commingling offset by California's 0.1 psi adjustment to its standards resulting in a net commingling
effect of 0.1  psi.

Equivalent to a 0.3 psi RVP boost from commingling offset by California's 0.1 psi adjustment to its standards resulting in a net commingling
effect of 0.2 psi.

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                                       14

4. EFFECTS ON OZONE OF EMISSION CHANGES FROM A WAIVER

      Given an expected reduction in NOx, an increase in CO, and significant
uncertainty about the overall change in VOCs, the evidence is  not clear what impact
the emissions changes from a waiver would have on ozone.

      All three of the pollutants discussed above influence ozone formation. The
atmospheric chemistry is complex, but directionally we would expect NOx reductions to
reduce ozone formation, CO increases to contribute to ozone formation, and VOC
emissions to either increase or reduce ozone, depending on whether VOC emissions
increase or decrease.  In order to determine the direction of the overall  impact on ozone
from the changes in these three pollutants, we must consider the expected change in
each of them and the overall balance that results from the directionally different impacts
on ozone.

      EPA does not believe that the evidence provided by California and developed
through its own analyses clearly demonstrates what effect a waiver would have an on
ozone.  This is because: 1) there are three pollutants whose emission rates would be
altered by a waiver, and all three affect ozone formation, 2) these pollutants are not
equivalent, on a ton-for-ton basis, in their effects on ozone formation, and 3) while NOx
will go down with a waiver, CO is expected to go up and VOC may go up or down
resulting in an uncertain impact on ozone.  (The uncertainties regarding the combined
effect on ozone are more thoroughly discussed in the TSD.)
5. CONCLUSION

      EPA has carefully evaluated all of the information in front of it, including
information submitted by GARB, other interested parties, and developed by EPA.  After
considering what effect a waiver might have on the properties of California reformulated
gasoline, and the effect this change in fuel properties would have on emissions from
highway and off-road vehicles and equipment, EPA concludes that there has been no
clear demonstration as to what effect a waiver would have on ozone.  There is
significant uncertainty associated with determining the expected emissions impact of a
waiver, largely based on uncertainty regarding the expected impact on VOCs produced
when gasoline containing ethanol is mixed with other gasolines in the marketplace. As
a result, there is significant uncertainty in balancing  the emissions impacts of the three
different pollutants  involved, each of which affect ozone, and determining their overall
effect on ozone. This uncertainty has not been resolved, even using the approach
suggested by GARB. Since there has been no clear demonstration of what effect a
waiver would  have  on ozone, it is appropriate to deny California's request for a waiver.15
            Since we are denying California's request based upon uncertainty associated with the effect of a
            waiver on ozone, we need not decide whether the expected reduction in NOx from a waiver and
            the associated reduction in PM would support a determination of interference with the PM NAAQS.

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