Summary and Analysis of Comments:
   Control of Emissions from New Marine
   Compression-Ignition Engines at or
   Above 30 Liters per Cylinder
United States
Environmental Protection
Agency

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              Summary and Analysis of Comments:
              Control of Emissions from New Marine
               Compression-Ignition Engines at or
                  Above 30 Liters per Cylinder
                         Assessment and Standards Division
                        Office of Transportation and Air Quality
                        U.S. Environmental Protection Agency
SER&
United States
Environmental Protection
Agency
EPA-420-R-09-015
December 2009

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                                    Table of Contents


Introduction
List of Acronyms
CHAPTER 1: NEED FOR EMISSION CONTROLS; FORM OF CONTROLS
1.1 Public Health Need for a Domestic Emission Control Program for Category 3 Marine
Diesel Engines
  1.1.1 Emissions from Category 3 marine diesel engines pose a serious health threat.
  1.1.2 Diesel Exhaust Emissions pose a serious health threat
  1.1.3 Cancer Risk Associated with Diesel Exhaust Emissions
  1.1.4 Health Effects and Need for Reduction of Emissions Locally
  1.1.5 Environmental Justice
  1.1.6 Benefits Associated with Reducing Nickel
1.2 Form of Emission Controls
1.3 Issues Related to Rulemaking Process
1.4 Other General Comments
CHAPTER 2: SCOPE AND APPLICABILITY
2.1 Applicability to Foreign Flag Vessels
2.2 Emission Control Area
  2.2.1 Support the North American EC A
  2.2.2 Inclusion of Alaska and Hawaii
  2.2.3 Other Areas
2.3 Greenhouse Gases
CHAPTER 3: ENGINE STANDARDS
3.1 Tier 2 Duty-Cycle NOX Standards
3.2 Tier 3 Duty-Cycle NOX Standard
  3.2.1 Feasibility and Lead Time of the Tier 3 NOx Standard
  3.2.2 Alternative NOX Controls
3.3 Other Standards
  3.3.1 HC and CO Standards
  3.3.2 Mode Caps

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  3.3.3 Particulate Matter (PM) Standard
CHAPTER 4: FUEL STANDARD AND SO2 CONTROLS
4.1 Amendments to the Diesel Fuel Sulfur Program
  4.1.1 1,000 ppm Fuel Sulfur Standard
  4.1.2 Compliance and Implementation
4.2 Proposed Alternative Options
4.3 Other
  4.3.1 Category 1 and 2 Engines on C3 Vessels
  4.3.2 Fuel Quality
  4.3.3 Further Reductions in Fuel Sulfur
4.4 Technical Feasibility of Fuel Switching
4.5 Fuel Availability
4.6 Fuel Equivalency Standard
  4.6.1 Exhaust Gas Cleaning Systems
  4.6.2 Other Approaches to Equivalency
4.7 Technical Feasibility of SOx Exhaust Gas Cleaning Systems
  4.7.1 SOX Emission Reduction Capability
  4.7.2 Washwater
4.8 Impact of Fuel/Equivalency Standards on PM
4.9 Lead Time for Fuel Use Requirements
CHAPTER 5: CERTIFICATION AND COMPLIANCE
5.1 General Comments
  5.1.1 Comments on Harmonization with IMO Compliance Requirements
  5.1.2 Clarity of the Regulations
5.2 On-Off NOX Controls
5.3 NOx Monitoring and Diagnostics
5.4 Authority Issues Related  to APPS
  5.4.1 The APPS Does Not  Give EPA Legal Authority to Implement ECAs or to Regulate
  Fuel Use in Internal Waters
5.5 Compliance Issues Related to Implementation of APPS
  5.5.1 EIAPP Certification
  5.5.2 Applicability of International Emission Standards to Nonparty Vessels
  5.5.3 In which U.S. waters are Annex VI and its ECA requirements being implemented
  through APPS?

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  5.5.4 EPA's extension of an ECA to the Great Lakes violates bilateral treaties between
  the U.S. and Canada
5.6 Comments on Testing Requirements
  5.6.1 1065 Test Procedures
  5.6.2 Certification Fuel
  5.6.3 Production-Line Testing
  5.6.4 PM Measurement
5.7 Exclusions and Exemptions
5.8 Provisions for Category 1 and 2 Engines
5.9 Applicability to Gas Turbine Engines
5.10 Applicability to Boilers
5.11 Coordination with Coast Guard
5.12 Other Marine Certification and Compliance Issues
5.13 Miscellaneous modifications to the proposed regulatory language
CHAPTER 6: ESTIMATED COSTS
6.1 Cost of Engine Technology
6.2 Cost of Lower Sulfur Fuel
CHAPTER 7: EXPECTED ECONOMIC IMPACTS
7.1 General Economic Impacts of Coordinated Strategy
7.2 Economic Impacts on Cruise Industry
7.3 Other Economic Impacts in  Alaska
CHAPTER 8: ENVIRONMENTAL IMPACTS
8.1 Emissions Inventory
  8.1.1 Category 3 Vessel Inventory Contributions
  8.1.2 Contribution  of U.S. vs. Foreign-Flag Ships
  8.1.3 Growth Rates
  8.1.4 Modeling Scenarios
  8.1.5 Fleet  Size and Turnover
8.2 Air Quality Modeling
  8.2.1 Emissions Impacts by Distance from Shore
  8.2.2 Air Quality in Alaska and Hawaii
  8.2.3 Pollution Transport in the Air Quality Modeling
8.3 Other Environmental Impacts
  8.3.1 Ecosystem Impacts in Alaska

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   8.3.2 Reduction of Ozone and PM Pollution or Protection of Public Health and NAAQS
   Attainment
   8.1.3   Air Quality Impacts from Ocean-going Vessels also Occur Away from Ports
   8.1.4   Environmental Impacts Associated with Emissions from Ocean-going Vessels
8.4 Benefits Analysis
   8.4.1 Citation of Existing Health Impacts Literature and Data
   8.4.2 Related Estimates of Health Impacts
   8.4.3 PM-related Premature Mortality
   8.4.4 Value of a Statistical Life
CHAPTER 9: ALTERNATIVE PROGRAM OPTIONS
9.1 Land-Side Controls
9.2 Program for Existing Engines
   9.2.1 Voluntary Program
   9.2.2 Regulatory Program
CHAPTER 10: APPLICATION OF ECA REQUIREMENTS IN THE GREAT LAKES
10.1 General Comments Supporting or Opposing Application of ECA requirements within
the Great Lakes
   10.1.1 General Support for Application of ECA to the Great Lakes
   10.1.2 General Opposition of Application of ECA to the Great Lakes
10.2 EPA does not have legal authority to extend the ECA requirements within the Great
Lakes
10.3 EPA has not justified extending the ECA requirements within the Great Lakes
   10.3.1 Extending the ECA requirements within the Great Lakes is not supported by
   EPA's analysis
   10.3.2 Specific comments on inventory inputs and assumptions for the Great Lakes
   10.3.3 Specific comments on the inventory contributions of Great Lakes vessels
   10.3.4 Specific comments on air quality modeling inputs and assumptions for the Great
   Lakes
   10.3.5 Specific comments on benefits for the Great Lakes
10.4 The economic impacts of applying the ECA requirements on the Lakes will be severe
   10.4.1 The Great Lakes are an efficient transportation mode
   10.4.2 The economic impacts of applying the ECA requirements within the Great Lakes
   will be substantial
   10.4.3 Our Response
10.5 Comments on EPA's Economic Impact Analysis regarding the Great Lakes

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10.6 Comments Requesting Extended Comment Period, Separate Rule
   10.6.1 EPA Should Extend the Comment Period for this Rule
   10.6.2 EPA Should Establish a Separate Action for the Great Lakes
10.7 Other Comments on EPA's Analysis for the Great Lakes Region
   10.7.1 EPA must consider National Security impacts and energy impacts
   10.7.2 EPA must consider the Impacts on the Canadian Economy
   10.7.3 EPA must consider the impacts on small businesses that operate on the Great
   Lakes
   10.7.4 EPA Must Consider Alternative Approaches for the Great Lakes
   10.7.5 Vessels that Operate on the Great Lakes Already Participate in a Program to
   Reduce Emissions.
   10.7.6 Low-Speed 2-stroke engines are designed to operate on heavy fuel
CHAPTER 11: TECHNICAL AMENDMENTS
11.1 General Compliance Provisions (40 Part 1068) and Other Broadly Applicable
Comments
11.2 Land-based Nonroad Spark-ignition Engines above 19 kW (40 Part 1048)
11.3 Locomotives (40 Parts 92 and 1033)
11.4 Land-based Nonroad Diesel Engines (40 Parts 89 and 1039)
11.5 Evaporative Emission Standards for Nonroad Spark-ignition Engines and Equipment
(40 Part 1060)
11.6 Heavy-Duty Highway Engines
11.7 Marine Spark-ignition Engines (40 Part 1045)

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Introduction

       On December 7, 2007, EPA released an Advance Notice of Proposed Rulemaking
(ANPRM) to encourage full participation in the development process of a rulemaking for new
marine compression-ignition engines with per cylinder displacement at or above 30 liters (called
Category 3 marine diesel engines).  The comment period officially remained open through
March 6, 2008. Many comments were received during that period, and others were received
beyond that, through stakeholder outreach.

       On June 26, 2009, the Administrator signed a Notice of Proposed Rulemaking (NPRM)
for proposed emission standards for new Category 3 marine diesel engines installed on U.S.
vessels, under section 213 of the Clean Air Act (CAA or "the Act"). In that notice, we also
proposed a change to our diesel fuel program.  On July 1, 2009, this NPRM and supporting
documentation was posted on EPA's web site.  On that day a message was sent to interested
stakeholders notifying them of the availability of this material for review and comment. On
August 28, 2009, the NPRM was published in the Federal Register.   This rule is part of a
coordinated strategy to ensure that all ships that affect U.S. air quality meet stringent NOx and
fuel sulfur requirements.

       We held two public hearings on the NPRM; one in New York, New York on August 4,
2009 and one in Long Beach, California on August 6, 2009.  At those hearings, oral comments
on the NPRM were received and recorded. A written comment period remained open until
September 28, 2009. A complete list of organizations and individuals that provided comments
on the NPRM is contained in the following table. Abbreviations  for the organization names are
also included.

       This Summary and Analysis of Comments contains a detailed summary of all comments
we received on the NPRM as well as our analysis of each comment and our response. The
reader should also refer to the final rulemaking notice in the Federal Register as well as the Final
Regulatory Impact Analysis.

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List of Commenters
 Commenter
 Agri-Fine
 American Association of Port Authorities
Abbreviation
AAPA
Docket ID Number
OAR-2007-0121-0315
OAR-2007-0121-0232
 American Great Lakes Ports Association
 American Iron and Steel Institute
 American Lung Association with
 Environmental Defense Fund
 American Maritime Officer Services
 American Maritime Officers of the Great Lakes
 American Thoracic Society
 American Petroleum Institute
 American Waterways Operators
ALA/EDF
API
AWO
OAR-2007-0121-0262
OAR-2007-0121-0295
OAR-2007-0121-0366 and
-0227
OAR-2007-0121-0364
OAR-2007-0121-0318
OAR-2007-0121-0227
OAR-2007-0121-0354
OAR-2007-0121-0272
 ArcelorMittel USA
 Association of American Railroads
 AutoCar
 Begich, Mark, United States Senator (AK)
 Belco
 Calumet Area Industrial Commission
 Canadian Shipowners' Association
 Canadian Steel Producers Association
 Carbon War Room
 Central Marine Logistics, Capt. Tom Wiater

 Central Marine Logistics, Employees of

 Chamber of Marine Commerce
 Chamber of Shipping of America

 City of Juneau, AK
AAR
CML
CMLEmp
CMC
CSA
 City of Ketchikan, AK
 City of New York, NY
 City of Sarnia, ON, CAN
 City of Superior, WI
 Clean Air Task Force
 Cleveland Port Authority
CATF
OAR-2007-0121-0280
OAR-2007-0121-0358
OAR-2007-0121-0254
OAR-2007-0121-0322
OAR-2007-0121-0362
OAR-2007-0121-0332
OAR-2007-0121-0227,
0245 and 0297 (dup)
OAR-2007-0121-0359
OAR-2007-0121-0267
OAR-2007-0121-0276 and
0304 (dup)
OAR-2007-0121-0234,
0236, 0237, 0238, 0239,
0240, 0260, 0293,and 0371
OAR-2007-0121-0353
OAR-2007-0121-0256 and
-0227
OAR-2007-0121-0298 and
0372 (dup)
_____________
0375 (dup)
OAR-2007-0121-0227
OAR-2007-0121-0306
OAR-2007-0121-0352
OAR-2007-0121-0264,
0227 and 0335 (dup)
OAR-2007-0121-0310

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Cliffs Natural Resources Inc., ArcelorMittel
USA, US Steel Corp.
Coalition for a Safe Environment
Coalition for Clean Air
Communities for Clean Ports
Council of Great Lakes Industries
Cruise Lines International Association
CSX Transportation

CCA
CLIA
OAR-2007-0121-0376
OAR-2007-0 12 1-0232
OAR-2007-0 12 1-0220 and
-0232
OAR-2007-0 12 1-0232
OAR-2007-0 12 1-0296,
0312(dup)and0363(dup)
OAR-2007-0 12 1-0278
OAR-2007-0121-0300
Great Lakes Metro Chambers Coalition
Greater Cleveland Partnership
IMPCO Technologies
Independent Fuel Terminal Operators
Association
Industrial Truck Association
Cummins
Daimler Trucks
Detroit Regional Chamber
The Development Association
DTE Energy
Duluth Chamber of Commerce
Duluth Propeller Club
Duluth Seaway Port Authority
Egan, Dennis, State Senator (AK)
Electro-Motive Diesel, Inc
~

Engine Manufacturers' Association
Euromot
Exhaust Gas Cleaning Systems Association
Friends of the Earth, Center for Biological
Diversity, and Earth Justice
Gas Turbine Association
General Electric Transportation
Great Lakes Maritime Task Force











EMA

EGCSA
FOE

GE
GLMTF
OAR-2007-0 12 1-0277
OAR-2007-0 12 1-0284,
0286 (dup) and 0303 (dup)
OAR-2007-0121-0248 and
0274 (dup)
OAR-2007-0 12 1-0279 and
0290 (dup)
OAR-2007-0 12 1-0328
OAR-2007-0 12 1-0282
OAR-2007-0 12 1-0292,
03 13 (dup) and 03 99 (dup)
OAR-2007-0 12 1-0283
OAR-2007-0 12 1-0323
OAR-2007-0 12 1-0250 and
0378 (dup)
OAR-2007-0 12 1-0265 and
0377
OAR-2007-0 12 1-0243
OAR-2007-0121-0305
OAR-2007-0 12 1-0320
OAR-2007-0121-0253
OAR-2007-0 12 1-0271
OAR-2007-0 12 1-0269 and
mon
OAR-2007-0121-025 8
OAR-2007-0121-0330
OAR-2007-0121-0379
OAR-2007-0121-0333
OAR-2007-0121-0228 and
0337 (dup)

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Interlake Steamship
International Association of Drilling
Contractors
International Council on Clean Transportation
Johnson Matthey
Kanjorski, FN, Congressman (PA)
Keystone Shipping Company
Kinder Morgan
Kindra Lake Towing
Krystallon, Ltd.
Lafarge North America
Lake Carriers' Association
Liberty Maritime Corporation
Long Beach Alliance for Children with Asthma
Lower Lakes Towing
Maersk
Manufacturers of Emission Control Association
Marine Engineers Beneficial Association
Maritime AFL-CIO
Matson Navigation
Midwest Energy Resources Co.
OAR-2007-0121-0268 and
-0357 (dup)
OAR-2007-0 12 1-0247
ICCT OAR-2007-0 12 1-0227
OAR-2007-0 12 1-0227
OAR-2007-0 12 1-0327
OAR-2007-0121-0273,
1 03 11 (dup), and 0349
OAR-2007-0 12 1-0326
OAR-2007-0 12 1-0291
OAR-2007-0 12 1-0229
OAR-2007-0 12 1-03 83
TrA OAR-2007-0 12 1-0233 and
0345
OAR-2007-0 12 1-0347
T 0 A „ A * OAR-2007-0 12 1-0232 (8
LBACA , s v
speakers)
OAR-2007-0121-0230
OAR-2007-0 12 1-0227 and
0261
MECA OAR-2007-0 12 1-0227 and
0319
OAR-2007-0121-0259
OAR-2007-0 12 1-0321
OAR-2007-0121-0281 and
0346 (dup)
OAR-2007-0 12 1-0342
Minnesota Chamber of Commerce
Munoz, Cathy, Representative, AK House of
Rep.
Murkowski, Lisa, United States Senator (AK)
Murphy Oil

National Association of Clean Air Agencies

National Marine Manufacturers Association

Natural Resources Defense Council

Navistar

Northeast States for Coordinated Air Use
Management
NMMA
ATOT^
NRDC
                 OAR-2007-0121-0317,
                 0331 (dup), 0373 (dup)
                 OAR-2007-0121-03 84
                 OAR-2007-0121-0301
                 ______________
OAR-2007-0 12 1-0242
OAR-2007-0 12 1-0227 and
ATT,C/-ATTA/T
NESCAUM
                 OAR-2007-0 12 1-0263 and
                 -0308 (dup)
                 OAR-2007-0 12 1-0227 and

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Ohio Environmental Council, Earth Day
Coalition, Marsh Area Regional Council, Ohio
League of Conservation Voters
Outdoor Power Equipment Institute
Ozinga Materials
Ozone Transport Commission

Pacific Merchant Shipping Association

Parnell, Sean, Governor, State of Alaska

Port of Anchorage

Port of Long Beach
Ohio
Environmental
Council et al
OPEI


OTC

PMSA
 OAR-2007-0121-0314
 OAR-2007
_________

 OAR-2007
 OAR-2007
 0275
-0121-0235
-0121-0343	
-0121-0227
-0121-0232 and
                         -0121-0287,
                          and 0374 (dup)
                         -0121-0299 and
 OAR-2007
 0316 (dup)
 OAR-2007
 0360 (dup)
 OAR-2007-0121-0232 and
 0365
Port of Los Angeles and American Association
of Port Authorities
Raffin Construction Co.
Resource Development Council
River Adventures
Robertson, Paul, Economic Minister,
Government of Canada
Santa Barbara Air Pollution Control District SBAPCD
Seaworthy Systems
Shipping Federation of Canada
Sitka Chamber of Commerce
Solar Turbines j
Soo Marine Supply Inc.
South Coast Air Quality Management District SCAQMD
Southwest Research Institute SwRI
Stupak, Bart, Representative, US Congress (MI)
Texas Commission on Environmental Quality TCEQ
Texas Legislative Air Quality Caucus
Totem Ocean Trailer Express TOTE
Transportation Institute
Two Harbors Area Chamber of Commerce
United States Navy
OAR-2007-0121-0232
OAR-2007-0121-0288
OAR-2007-0 12 1-0244
OAR-2007-0 12 1-0252
OAR-2007-0 12 1-0231
OAR-2007-0 12 1-0266
OAR-2007-0 12 1-0270
OAR-2007-0121-0307
OAR-2007-0 12 1-0249
OAR-2007-0121-0351
OAR-2007-0 12 1-0309 and
-0232
OAR-2007-0 12 1-0255 and
0285 (dup)
OAR-2007-0121-0338
OAR-2007-0121-0334,
0340 (dup) and 0341 (dup)
OAR-2007-0121-0367
OAR-2007-0121-0289 and
0361 (dup)
OAR-2007-0 12 1-0302 and
0355 (dup)
OAR-2007-0 12 1-0324
OAR-2007-0 12 1-0241
                                            10

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 Volvo / Mack

 Warner Petroleum Corporation
 Wisconsin Commercial Ports Association
 Young, Don, Representative, United States
 Congress (AK)

 General comments from unaffiliated individuals
                                  OAR-2007-0121-0336 and
                                  0348 (dup)
                                  OAR-2007-0121-0251
                                  OAR-2007-0121-0368
Worksafe, Inc.
World Shipping Council
wsc
OAR-2007-0121-0369
OAR-2007-0 12 1-0227 and
0325
                                  OAR-2007-0121-03 82

                                  OAR-2007-0121-0224,
                                  0226,0227,0232, 0257,
                                  0370 (dup of 0257), 0339,
                                  0380, and 0381
      We also received comments after the close of the comment period. These comments are
also included in the docket and discussed in this document.
List of Late Commenters
Commenter
Samuel (no surname)
Ryan (no surname)
K. Bernhard-Ihde
Senator Murkowski on
behalf of Totem Ocean
Trailer Express
Governor of Hawaii

Canadian Shipowners'
Association
Robynn Andracsek on
behalf of the SS. Jeremiah
O'Brien
Date
October 17, 2009
October 23, 2009

October 26, 2009
November 10, 2009
Subject
Fuel standards
Coordinated
strategy
Great Lakes
Coordinated
strategy
November 25, 2009 \  Coordinated
                  :  strategy
November 30, 2009   Addendum to
                    earlier comments
December 11,2009
Docket ID Number
OAR-2007-0121-0397
OAR-2007-0121-0396

OAR-2007-0121-0398
                    OAR-2007-0121-0400
                                             11

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List of Acronyms

um             Micrometers
bext             Light-Extinction Coefficient
ug              Microgram
ug/m3          Microgram per Cubic Meter
ABT            Average Banking and Trading
ACS            American Cancer Society
AE             Alaska Southeast Region
AE             Auxiliary Engine
AEO            Annual Energy Outlook (an EIA publication)
AESS           Automatic Engine Stop/Start System
AFC            Average Daily Fuel Consumption
AIM            Aerosol Inorganics Model
AIRS           Aerometric Information Retrieval System
AMVER        Automated Mutual-Assistance Vessel Rescue
APHEA         Air Pollution and Health: A European Approach
APU            Auxiliary Power Unit
AQ             Air Quality
AQCD          Air Quality Criteria Document
AQMTSD       Air Quality Modeling Technical Support Document
ARE            Air Resources Board (California)
ASPEN         Assessment System for Population Exposure Nationwide
AT AC          Average Total Cost
avg             Average
AW             Alaska West Region
BAF            Bunker Adjustment Factor; a surcharge reflecting the fluctuation in fuel cost
BenMAP        Benefits Mapping and Analysis Program
bhp             Brake Horsepower
BNSF           Burlington Northern Santa Fe
BSFC           Brake Specific Fuel Consumption
BTS            Bureau of Transportation
C               Celsius
Cl              Category 1 (marine diesel engines with capacity of 7 liters per cylinder or less; used to power
                vessels such as tugboats, fishing vessels, and other commercial vessels in and around U.S. ports,
                or as stand-alone generators for auxiliary electrical power on many types of vessels)
C2              Category 2 (marine diesel engines with an engine capacity over 7 liters per cylinder but less than
                30 liters per cylinder; used to power vessels such as tugboats, fishing vessels, and other
                commercial vessels in and around U.S. ports, or as stand-alone generators for auxiliary electrical
                power on many types of vessels)
C3              Category 3 (marine diesel engines with per-cylinder displacement at or above 30 liters; very large
                marine diesel engines used on ships such as container ships, oil tankers, and cruise ships); also
                called "ocean-going vessels"
CA             California
CAA            Clean Air Act
CAIR           Clean Air Interstate Rule (CAIR) (70 FR 25162, May 12, 2005)
CAMR          Clean Air Mercury Rule
CAND          Clean Air Nonroad Diesel rule (69 FR 38957, June 29, 2004)
CARB          California Air Resources Board
CASAC         Clean Air Scientific Advisory Committee
CAVR          Clean Air Visibility Rule
CB             Chronic Bronchitis
CCV            Closed Crankcase Ventilation
CDC            Centers for Disease Control
CDPF           Catalyzed Diesel Paniculate Filter
CEA            Cost Effective Analysis
                                                     12

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CES           Constant Elasticity of Substitution
CFR           Code of Federal Regulations
CI             Compression Ignition (i.e., diesel engines)
CI             Confidence Interval
CIMT          Carotid Intima-Media Thickness
CITT          Chemical Industry Institute of Toxicology
CMAQ         Community Multiscale Air Quality
CMB          Chemical Mass Balance
CMV          Commercial Marine Vessel
CO            Carbon Monoxide
CO2           Carbon Dioxide
COI           Cost of Illness
COPD          Chronic Obstructive Pulmonary Disease
CPI-U          Consumer Price Index - All Urban Consumers
C-R           Concentration Response
CSS           Coastal Sage Scrub
CUA          Cost Utility Analysis
cyl            Cylinder
D              Demand
DE            Diesel Exhaust
DEM          Domestic Engine Manufacturer
DDHS          Diesel Driven Heating System
diff            Difference
disp           Displacement
DM           Distillate Marine  Grade
DOC          Diesel Oxidation  Catalyst
DOE          Department of Energy
DOT          Department of Transportation
DPF           Diesel Paniculate Filter
DPM          Diesel Paniculate Matter
DR            Discount Rate
DRIA          Draft Regulatory Impact Analysis
DSP           Deep Sea Port
DV            Design Values
DWT          Dead Weight Tonnage
EAC          Early Action Component
EC            East Coast Region
EC            Elemental Carbon
EGA          Emission Control Area
EDHS          Electric Driven Heating System
EEZ           Exclusive Economic Zone
EF            Emission Factor
EGR          Exhaust Gas Recirculation
EIA           Energy Information Administration (part of the U.S. Department of Energy)
EIA           Economic Impact Analysis
EIM           Economic Impact Model
EMD          Electromotive Diesel
EMS-HAP      Emissions Modeling System for Hazardous Air Pollution
EO            Executive Order
EPA           Environmental Protection Agency
EPAct          Energy Policy Act of 2005
ESPN          EPA speciation network
F              Fahrenheit
FEM          Foreign Engine Manufacturer
FEV           Functional Expiratory Volume
FR            Federal Register
FRM          Final Rulemaking
FRP           Fiberglass-Reinforced Plastic
                                                    13

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g              Gram
g/bhp-hr        Grams per Brake Horsepower Hour
g/kW-hr        Grams per Kilowatt Hour
gal            Gallon
GAO           Government Accountability Office
GC            Gulf Coast Region
GDP           Gross Domestic Product
GEOS          Goddard Earth Observing System
GETS          General Electric Transportation Systems
GI             Global Insight
GIS            Geographic Information System
GL            Great Lakes Region
GRT           Gross Registered Tonnage
GT            Gas Turbine
H2             Hydrogen Gas
HAD           Diesel Health Assessment Document
HAP           Hazardous Air Pollutant
HC            Hydrocarbon
HD            Heavy-Duty
HE            Hawaii East Region
HEI            Health Effects Institute
HEP           Head End Power
HES           Health Effects Subcommittee
HFO           Heavy Fuel Oil
hp             Horsepower
hp-hrs          Horsepower Hours
hrs            Hours
HW            Hawaii West Region
IACS           International Association of Classification Societies
IARC          International Agency for Research on Cancer
ICD            International Classification of Diseases
ICOADS       International Comprehensive Ocean-Atmospheric Data Set
IFO            Intermediate Fuel Oil
IMO           International Maritime Organization
IMPROVE      Interagency Monitoring of Protected Visual Environments
IRIS           Integrated Risk Information System
ISCST3        Industrial Source Complex Short Term Model
ISO            International Standardization Organization
ISORROPIA    Inorganic Aerosol Thermodynamic Model
ITB            Integrated Tug Barge
JAMA          Journal of the American Medical Association
K              Kelvin
k              Thousand
km            Kilometer
kts            Knots
kW            Kilowatt
kWH           Kilowatt Hour
L              Liter
L/cyl           Liters Per Cylinder
Ib              Pound
LCO           Light Cycle Oil
LF            Load Factor
LGC           Large Gas Carrier
LNG           Liquefied Natural Gas
LPG           Liquefied Petroleum Gas
LRS           Lower Respiratory Symptoms
LSD           Low Sulfur Diesel fuel
m3            Cubic Meters
                                                    14

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MARAD       U.S. Maritime Administration
MARPOL      The International Convention for the Prevention of Pollution of Ships
MC            Marginal Cost
MCIP          Meteorology-Chemistry Interface Processor
MDO          Marine Diesel Oil
ME            Main Engine
MECA         Manufacturers of Emission Controls Association
mg            Milligram
MGO          Marine Gas Oil
MDO          Marine Diesel Oil
MI            Myocardial Infarction
MILY          Morbidity Inclusive Life Years
min            Minute
MM           Million
MM-1          Inverse Megameter
MOBILE6      Vehicle Emission Modeling Software
MRAD         Minor Restricted Activity Days
MSAT         Mobile Source Air Toxic
MS AT 1        2001 Mobile Source Air Toxics Rule
MSB           Major Shipbuilding Base
MSD           Medium Speed Diesel
MSDS         Material Safety Data Sheet
MVUS         Merchant Vessels of the U. S.
MW           Megawatt
MW-hrs        Megawatt Hours
N              Nitrogen
N2             Nitrogen Molecule
NA            Not Applicable
NAAQS        National Ambient Air Quality Standards
NAICS         North American Industry Classification System
NAS           National Academy of Sciences
NASA         National Aeronautics and Space  Administration
NASSCO       National Steel and Shipbuilding  Company
NATA         National Air Toxic Assessment
NBER         National Bureau of Economic Research
NCAR         National Center for Atmospheric Research
NCDC         National Clean Diesel Campaign
NCI           National Cancer Institute
NCLAN        National Crop Loss Assessment  Network
NEI           National Emissions Inventory
NESCAUM     Northeast States for Coordinated Air Use Management
NESHAP       National Emissions Standards for Hazardous Air Pollutants
NH3           Ammonia
NIOSH         National Institute of Occupational Safety and Health
NLEV         National Low Emission Vehicle
NM            Nautical Mile
NMHC         Nonmethane Hydrocarbons
NMIM         National Mobile Inventory Model (EPA software tool)
NMIM2005     National Mobile Inventory Model Released in 2005
NMMA        National Marine Manufacturers Association
NMMAPS      National Morbidity, Mortality, and Air Pollution Study
NO            Nitrogen Oxide
NO2           Nitrogen Dioxide
NOAA         National Oceanic and Atmospheric Administration
NONROAD     EPA's Non-road Engine Emission Model
NONROAD2005 EPA's Non-road Engine Emission Model Released in 2005
NOx           Oxides of Nitrogen
NP            North Pacific Region
                                                    15

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NPRM         Notice of Proposed Rulemaking
NPV           Net Present Value
NRC           National Research Council
NRLM         Nonroad, Locomotive and Marine diesel fuel
NRT           Net Registered Tonnage
NRT4          Nonroad Tier 4 Rule
NSTC          National Science and Technology Council
NTE           Not To Exceed
NWN          National Waterway Network
O&M          Operating and maintenance
O3             Ozone
OAQPS        Office of Air Quality Planning and Standards
OC            Organic Carbon
°CA           Degree Crank  Angle
OEHHA        Office of Environmental Health Hazard Assessment
OEM          Original Equipment Manufacturer
OGV          Ocean-Going Vessel
OMB          Office of Management and Budget
OTAQ         Office of Transportation and Air Quality
P              Price
PAH           Polycyclic Aromatic Hydrocarbons
PCB           Fob/chlorinated Biphenyls
PGM          Platinum Metals Group
PM            Paniculate Matter
PM AQCD      EPA Particulate Matter Air Quality Criteria Document
PM/NMHC     Particulate Matter to Non-Methane Hydrocarbon Ratio
PM10          Coarse Paniculate Matter (diameter of 10 um or less)
PM2.5          Fine Paniculate Matter (diameter of 2.5 um or less)
PMM          Post-Manufacturer Marinizer
PMNAAQS     Paniculate Matter National Ambient Air Quality Standards
POM          Polycyclic Organic Matter
POL A/LB      Ports of Los Angeles, Long Beach
ppb            Parts per Billion
PPI            Producer Price Index
ppm           Parts per Million
psi             Pounds per Square Inch
PSR           Power Systems Research
Q              Quantity
QALY         Quality Adjusted Life Years
R&D          Research and Development
RfC           Reference Concentration
RFA           Regulatory Flexibility Analysis
RFS           Renewable Fuels Standard
RIA           Regulatory Impact Analysis
RM            Residual Marine
rpm           Revolutions per Minute
RPO           Regional Planning Organization
RRF           Relative Reduction Factors
RSZ           Reduced Speed Zone
RV            Revision
RVP           Reid Vapor Pressure
S              Sulfur
S              Supply
SAB           Science Advisory Board
SAB-HES      Science Advisory Board - Health Effects Subcommittee
S AE           Society of Automotive Engineers
SAPS          Sulfated-Ash,  Phosphorus, and Sulfur Content
SBA           Small Business Administration
                                                    16

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SBREFA       Small Business Regulatory Enforcement Fairness Act
SCC           Source Classification Code
SCR           Selective Catalyst Reduction
SFC           Specific Fuel Consumption
SI             Spark Ignition
SIC            Standard Industrial Classification
SiC            Silicon Carbide
SMAT         Speciated Modeled Attainment Test
SO2            Sulfur Dioxide
SOx           Oxides of Sulfur
SOA           Secondary Organic Carbon Aerosols
SOF           Soluble Organic Fraction
SP             South Pacific Region
SSD           Slow Speed Diesel
ST             Steam Turbine
STB           Surface Transportation Board
STEEM        Waterway Network Ship Traffic, Energy and Environment Model
SVOC         Semi-Volatile Organic Compound
SwRI          Southwest Research Institute
TEN           Total Base Number
TCC           Total Compliance Cost
TCM          Total Carbon Mass
TDC           Top Dead Center
TEU           Twenty-foot Equivalent Unit; basic container measurement used in the shipping industry
THC           Total Hydrocarbon
TSD           Technical Support Document
TVCC         Total Variable Compliance Cost
ULCC         Ultra Large Crude Carrier
ULSD         Ultra Low  Sulfur Diesel fuel
URS           Upper Respiratory Symptoms
US ACE        United States Army Corps of Engineers
USDA         United States Department of Agriculture
UV            Ultraviolet
UV-b          Ultraviolet-b
VLCC         Very Large Crude Carrier
VLGC         Very Large Gas Carrier
VOC          Volatile Organic Compound
VOF           Volatile Organic Fraction
VOS           Voluntary Observing Ships
VSL           Value of Statistical Life
WLD          Work Loss Days
WTP          Willingness-to-Pay
$2006          U.S. Dollars in calendar year 2006
                                                    17

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CHAPTER 1: Need for Emission Controls; Form of Controls

       What We Proposed:

       The comments in this section generally correspond to Sections I, II and VIII of the
preamble to the proposed rule, where we describe the need for controls from ships, the various
legal authorities under which we are taking action, and the air quality and health impacts of the
proposed rule.  Some comments discussed below also correspond to Sections X and XI of the
preamble, where we describe administrative aspects of this rulemaking process. The Regulatory
Impact Analysis (RIA) describes the health and air quality benefits in Chapters 2 and 6.

1.1 Public Health Need for a Domestic Emission Control Program for
    Category 3 Marine Diesel Engines

1.1.1 Emissions from Category 3 marine diesel engines pose a serious health threat.

       What Commenters Said:

       NACAA commented that emissions from C3 marine engines lead to adverse health
impacts and that an array of studies confirms that exposure to these pollutants can increase
mortality, cancer risk and respiratory illnesses, and substantially raise healthcare costs.

       ALA/EDF commented that the pollutants addressed in this rule are associated with
significant health problems, including premature mortality, aggravation of respiratory  and
cardiovascular disease, changes in lung function and increased respiratory symptoms,  chronic
bronchitis, altered respiratory defense mechanisms, altered lung development, adverse
reproductive outcomes, and altered fetal development.

       ALA commented at the hearing that "the emissions from these pollutants cause coughing
and wheezing,  triggering asthma attacks, heart attacks and strokes,  cause cancer and can kill.
Breathing these pollutants increases the likelihood that someone will have to rush to the
emergency  room or enter the hospital. Children who grow up breathing these pollutants may face
an increased life-long risk of lung disease because of the impact on the growth of their lung
function.  People who breathe these pollutants may also face higher risk of lung infections,
including influenza. People that are most at risk include children and teens, older adults, and
people with chronic lung disease such as asthma and chronic obstructive pulmonary disease, also
called COPD, people with cardiovascular disease and diabetes. In addition, people who work or
exercise outdoors also face higher risk."  In addition ALA testified that "Pollution from these
vessels can trigger heart attacks and strokes and can even shorten life.  As a thirty year volunteer
with the lung association, I have seen firsthand the impact of air pollution on people with lung
disease. I know that pollution can make healthy people cough and wheeze, and send people with
asthma or chronic pulmonary obstructive disease to the hospital." ALA also commented that
".. .nitrogen dioxide is dangerous.  Science tells us that this noxious gas makes people cough and
wheeze and inflames the lung tissue. Nitrogen dioxide triggers asthma attacks and increases the
likelihood that asthma suffers will have to rush to the emergency department or be admitted to

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the hospital. I highlighted that millions of people face higher risk of health problems from having
to breathe dangerous levels of nitrogen dioxide."

       FOE commented that "NOx is a precursor in the photochemical reaction that causes
ground-level ozone or smog. Smog causes harmful respiratory effects including chest pain,
coughing, shortness of breath, exacerbation of asthma, decreased lung function, inflammation of
the lung tissue, permanent lung damage, aggravation of existing respiratory diseases, and may
impair the body's immune system defenses. 68 Fed. Reg. at 9751. Exposure to smog leads to
increased hospital admissions  and emergency room visits and increases the use of medications.
Id. Children, outdoor workers, and people with compromised respiratory systems are most
severely impacted by these health effects. Id. Recent studies have also linked ozone exposure to
increased cardiopulmonary mortality, especially when combined with exposure to PM. 72 Fed.
Reg. at 69532."

       FOE also commented that secondary and directly-emitted PM from marine diesel engines
are of particular concern to public health. "Recent studies have shown that exposure to fine
particles, such as those emitted by Category 3 marine diesel engines, have been associated with
mortality from cardiopulmonary diseases and lung cancer, and with effects on the respiratory
system, such as decreased lung function and the development of chronic respiratory disease. 71
Fed. Reg. 61144, 61152-54 (October 17, 2006) (EPA's recent revision to the national ambient air
quality standards for PM). Exposure to fine PM can also lead to increased asthma, coughing,
wheezing, and difficulty breathing, increased allergenicity, and premature death. 68 Fed. Reg. at
9752."

       Stephen Crane of the American Thoracic Society commented that exposure to NOx is bad
for your health and that studies have linked NOx exposure with worsening asthma, reduced lung
function and increased ER visits. He commented that PM also has been associated with  a broad
range of health effects, both respiratory and cardiovascular, and that research has linked
exposure to PM with premature mortality.  In addition, he provided two recent editorials that
summarize key findings on health effects of NOx and PM pollution.

       SCAQMD commented that marine vessels significantly contribute to health impacts.

       The City of New York commented that even modest reductions in PM2.5 levels would
have substantial public health benefits for New York City.

       CATF commented that diesel emissions endanger public health and must be substantially
reduced.

       Ryan Wiggins  of the Communities for Clean Ports commented that numerous studies
have confirmed the significant negative effects of diesel PM on public health.

       Ricardo Pulido with the Coalition for a Safe Environment submitted an appendix listing
references to 158 studies about health impacts, PM and traffic.

       Many commenters (listed below) said that they themselves, their families and people in
their communities are  suffering from serious health problems caused or exacerbated by air
pollution coming from ships.

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       Commenters:

       Alyssa Trujillo (0232)
       Elena Rodriguez with Alliance for Citizens of Long Beach (0232)
       Yolanda Chavez (0232)
       Maria Lopez (0232)
       Teresa Trujillo (0232)
       Concepcion Garcia with Long Beach Alliance for Children with Asthma (0232)
       Maria Alcazar (0232)
       Sandra Johnson with Long Beach Alliance for Children's Asthma (0232)
       Martha Cota (0232)
       Juan Garibay with Coalition for a Safe Environment (0232)
       Sofia Carillo with Coalition for a Safe Environment (0232)
       Jesse Marquez with Coalition for a Safe Environment (0232)

       Our Response:

       We agree with the commenters that emissions from marine vessels generate significant
emissions of fine particulate matter (PM2.s), sulfur oxides (SOX) and oxides of nitrogen (NOX).
NOx is a key precursor to ozone and secondary PM formation. Ozone and PM2.5 are associated
with serious public health problems including premature mortality, aggravation of respiratory
and cardiovascular disease, aggravation  of existing asthma, acute respiratory symptoms, chronic
bronchitis, and decreased lung function.  In addition, these emissions contribute to nonattainment
of the National Ambient Air Quality Standards for PM2 5 and ozone and to deposition of
nitrogen, sulfur and PM, visibility degradation and impacts on vegetation due to ozone.

1.1.2 Diesel Exhaust Emissions pose a serious health threat

       What Commenters  Said:

       The Ohio Environmental Council commented that diesel emissions endanger public
health and must be substantially  reduced. They go on to note that diesel emissions contain over
40 different toxics and these compounds are known or suspected human or animal carcinogens,
or have serious non-cancer effects.

       Friends of the Earth commented that diesel exhaust is toxic and carcinogenic and that
exposure to diesel exhaust  can cause increased risk of lung cancer, adverse pulmonary effects,
and allergenic effects such as those associated with asthma or immunologic effects. They also
commented that marine diesel engines produce other air toxics, such as benzene, 1,3-butadiene,
formaldehyde, acetaldehyde,  acrolein, polycyclic organic matter, and naphthalene, exposure to
which can cause or contribute to cancer and non-cancer health effects.

       ALA/EDF commented that because diesel air pollution is a complex mixture of
chemicals, exposure to diesel air pollution is associated with a wide range of non-cancer health
effects, including pulmonary  disease, cardiovascular effects, neurotoxicity, low birth weight in
infants, premature births, congenital abnormalities, and elevated infant mortality rates.  They also
commented that diesel exhaust contains  more than 40 toxic chemicals and that since diesel
exhaust is a highly complex and  variable mixture containing numerous carcinogenic compounds,
it is difficult to quantify the cumulative health effects.  Therefore it is very  likely that significant

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health benefits will accrue with reduced diesel emissions beyond what is measurable in any
current regulatory efforts.

       CATF commented that diesel exhaust is highly toxic.  "Dozens of toxic air contaminants
are found in diesel exhaust, including a variety of highly toxic carbon-core particulate and gas
phase organic carbon compounds such as benzene, formaldehyde,  acetaldehyde, 1,3-butadiene,
acrolein and polyaromatic hydrocarbons. These compounds are known or suspected human or
animal carcinogens, or have serious non-cancer health effects. Of particular concern in diesel
exhaust are a broad array of poly cyclic  aromatic hydrocarbons (PAH) which are emitted as gases
and also are adsorbed onto the surface of diesel exhaust particles where they may be carried deep
into the lung and bloodstream. Medical studies suggest PAH compounds are genotoxic  and form
DNA adducts that have been associated with increased risk of a variety  of cancers, including
lung, prostate, and breast.

       Commenters:

       ALA/EDF
       CATF
       Friends of the Earth
       Ohio Environmental Council et  al
       Our Response:

       We agree that diesel exhaust from diesel engines is a serious public health concern and
that there are public health benefits from the final rule as described in Chapter 2 of the RIA. The
final rule will reduce harmful emissions and protect sensitive groups such as outdoor workers,
children, asthmatics and those with existing heart and lung disease, as well as those in close
proximity to marine ports.

1.1.3 Cancer Risk Associated with Diesel Exhaust Emissions

       What Commenters  Said:

       David Marshall, of the Clean Air Task Force, commented upon the fact that a number of
domestic and international  organizations, including The National Institute for Occupational
Safety and Health, International Agency for Research on Cancer, Health Effects Institute, World
Health Organization, U.S. Department of Health and Human Services National Toxicology
Program, and the U.S. Environmental Protection Agency, have all determined that diesel exhaust
is a probable or likely human carcinogen—that is, it is likely to cause lung cancer. The
commenter also noted that  studies conducted by California as well as the South Coast Air
Quality Management District have estimated that the average cancer risk from diesel paniculate
matter is about 70% of the  cancer risk from all air toxics. According to the commenter, in New
York County, 96% of the air cancer risk is due to mobile sources. Specifically, diesel emissions
are the hazardous air pollutant with the highest contribution to cancer risk—by more than an
order of magnitude.

       CATF and FOE mention in their comments that California has done work looking at
impacts on people living near large diesel emission sources like ports.  They refer to a CARB

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study that indicates that port emissions result in elevated cancer risk within the entire 20 mile by
20 mile study area.

       The SCAQMD commented that average cancer risks due to air pollution exceed 1,200 in
a million, with higher risks near transportation facilities like ports.

       The ALA and EDF commented that diesel air pollution adds to cancer risk all around the
country.  Specifically, in Seattle diesel soot accounts for between 70 and 85% of the total cancer
risk from air toxics, and in the south coast air basin diesel exhaust contributes about 84% of the
cancer risk from air toxics.  ALA/EDF also commented that "The Agency's failure to quantify a
unit cancer risk for diesel exhaust is inconsistent with the extensive body of science in fact
demonstrating such a risk. EPA must promptly move forward and quantify the number of cancer
cases associated with the exposure to diesel exhaust, as this is imperative to better assess the full
health effects of diesel emissions, as well as the benefits of reducing these emissions. This
analysis should account for the advances in diesel engines and the impact of these advanced
technologies in reducing or altering cncer risk. Finally, the fact there is uncertainty involved in
quantifying the dose response relationship does not in any way mean that a rigorous and
quantified cancer risk analyses cannot be produced while accounting appropriately for
uncertainties".

       NRDC commented that Long Beach is in the "diesel death zone" and cited the AQMD
MATES III report which includes information on  cancer risk from air toxics.

       Commenters:

       American Lung Association
       Clean Air Task Force
       Environmental Defense Fund
       Natural Resources Defense Council
       Ohio Environmental Council and others
       South Coast Air Quality Management District

       Our Response:

       We agree that exposure to diesel exhaust has been classified by EPA as being likely
carcinogenic to humans, and our Assessment Document for Diesel Engine Exhaust (Diesel
HAD) provides substantial evidence to support this claim.1 We have reviewed the documents
cited that provide a numerical estimate of cancer risk attributable to exposure to diesel exhaust.
The Agency does not believe that at this time the data support a confident determination of a unit
risk for diesel exhaust and therefore the cancer-related mortality or morbidity associated with
diesel exhaust exposure cannot be determined quantitatively. However, the Agency has
determined that the carcinogenic risk from diesel exhaust may be as high as 10"3 to 10"5  but a
zero risk cannot be ruled out. The basis for these determinations is provided in Chapters 8 and 9
of the Diesel HAD.
1 U.S. EPA. Health Assessment Document for Diesel Engine Exhaust. EPA/600/8-90/057F.
http://www.epa.gov/ncea.

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       We also agree that diesel exhaust from diesel engines is a serious public health concern
and that there are public health benefits from the final rule as described in Chapter 2 of the RIA.
The final rule will reduce harmful emissions and protect sensitive groups such as outdoor
workers, children, asthmatics and those with existing heart and lung disease, as well as those in
close proximity to marine ports.

1.1.4 Health Effects and Need for Reduction of Emissions Locally

       What Commenters Said:

       ALA commented that "Houston has some of the dirtiest air in the country. People living
there face that fact day after day. They have heard for years about the enormous health
consequences of the ozone smog from notorious traffic, the petrochemical industry and the
vessels in the ship channel."

       ALA also commented that "Cruise ships, container ships, tankers and other oceangoing
vessels release tons of diesel exhaust pollution into the atmosphere, the air we breathe. These
ships dock at over one hundred ports along our coastline and along navigable waterways far
inland. Here in New York we have shipping traffic that goes to the ports in Brooklyn and Staten
Island, as well to Manhattan, as well as to the Port of Newark/Elizabeth-Port Authority Marine
Terminal in New Jersey."

       ALA also commented that "The EPA's own proposal noted that 36 million people live
near highways, railroads or ports where they breathe air that is consistently more polluted than in
other parts of the country."

       Many citizens (see list below as well as other comments summarized in this section)
commented at the hearings that their communities are being negatively impacted by the Ports of
Long Beach and Los Angeles. These citizens described their experiences with health impacts
including asthma,  nose bleeds, heart disease, lung cancer and others. The citizens implored EPA
to finalize this rule and help reduce harmful emissions from ships. Several of the citizens urged
EPA to make the rule even more stringent.  See Section 3.2 of the S&A for more information on
the stringency of the standard.

       Juan Garibay of the Coalition for a Safe Environment supports the rule and commented
that air pollution in environmental justice harbor communities  has been increasing for 30 years
and the communities are facing a public health crisis due to international shipping and trade.

       Ricardo Pulido with the Coalition for a Safe Environment submitted an appendix with
references to 158 studies about health impacts, PM and traffic.

       David Pettit from NRDC commented that although the hearing was held in a nice hotel
room, when you walk outside in Long Beach you enter the "diesel death zone".

       Commenters:

       Alyssa Trujillo (0232)
       Elena Rodriguez with Alliance for Citizens of Long Beach (0232)
       Ms. Chavez (0232)

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       Maria Lopez (0232)
       Teresa Trujillo (0232)
       Concepcion Garcia with Long Beach Alliance for Children with Asthma (0232)
       Maria Alcazar (0232)
       Sandra Johnson with Long Beach Alliance for Children's Asthma (0232)
       Martha Cota (0232)
       Juan Garibay with Coalition for a Safe Environment (0232)
       Sofia Carillo with Coalition for a Safe Environment (0232)
       Ricardo Pulido with Coalition for a Safe Environment (0232)
       Jesse Marquez with Coalition for a Safe Environment (0232)
       Ryan Wiggins with Communities for Clean Ports (0232)
       Christopher Patton with Port of Los Angeles (0232)
       Martin Schlageter with the Coalition for Clean Air (0232)
       NRDC (0232)

       Our Response:

       We agree with the commenters that the emissions from C3 marine vessels can cause
serious health effects.  The requirements in this rule will result in substantial benefits to public
health and welfare through significant reductions in NOx,  SOx and diesel PM. Diesel exhaust is
of specific concern because it has been judged to likely pose a lung cancer hazard for humans as
well as a hazard from noncancer respiratory effects. A discussion of the health effects associated
with pollutants being reduced in  this final rule can be  found in Chapter 2 of the RIA or Section II
of the preamble.

1.1.5 Environmental Justice

       What Commenters  Said:

       FOE commented that "While the impacts from marine diesel emissions can affect all
people, those facing the challenges of poverty,  poor access to medical care, very low rates of
insurance coverage,  and virtual exclusion from public policy decisions that most impact them,
are most likely to live and work near pollution  sources such as ports, transportation corridors,
freeways, and industrial centers.  Environmental justice communities often suffer from
disproportionately high cancer, disease, and death rates as they are exposed to the highest levels
of carcinogenic, toxic, and hazardous chemicals.  Without a drastic and immediate reduction in
the emissions coming from Category 3 marine  engines, millions of people will continue to be
exposed to ever-increasing amounts of deadly air pollution and many thousands will continue to
die."

       ALA/EDF commented that "Communities adjacent to ports, identified in the American
Association of Port Authorities map of U.S. Ports, copied below, are likely to be severely
impacted by OGV air emissions. As EPA explains in the NPRM, recent studies show that
populations living near large diesel emission sources such as major roadways, rail yards, and
marine ports are likely to experience greater diesel exhaust exposure levels than the overall U.S.
population, putting them at greater health risks. But toxic diesel emissions from OGV not only
impact local air quality; the emissions also impact air  quality along coastlines adjacent to
shipping lanes".

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       NACAA commented that in many neighborhoods adjacent to marine ports, which are
environmental justice communities, the health risks from exposure to diesel exhaust greatly
exceed levels considered acceptable.

       The CATF commented that toxic diesel emissions pose a great danger to human health,
especially in urban areas where diesel engines and emissions are concentrated in populated
neighborhoods.

       Mr. R. Kassel, of the National Resources Defense Council, testified at the New York
hearing that it's hard to find a better deal in the public health world than $30 worth of benefits for
every dollar spent [referring to the benefit-cost comparison associated with implementing the
coordinated strategy]. He continued by stating that  with the nation engaging in critical debate on
rising health care costs and concerns about an aging population, achieving these health impacts
at such minimal cost is a critically urgent need. He viewed this proposal not just as important for
the nation but also for low income communities of color that typically border many port
communities. He urged EPA representatives to walk around the residential neighborhoods close
to the port terminals of Newark, Elizabeth and Staten Island where you can clearly see that
communities  in those areas bear the brunt of port emissions.

       Alyssa Trujillo, testifying at the Long  Beach hearing, stated that Wilmington, Long
Beach and parts of San Pedro had been suffering from what she defined as an environmental
inequality, or, in her words, "environmental racism."  She believed that if these communities

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were affluent and well-to-do, they wouldn't have had a problem bringing this issue to the
forefront.

       Our Response:

       EPA agrees that environmental justice is an important issue. EPA determined that this
rule does not have a disproportionately high and adverse human health or environmental impact
on minority or low-income populations. Information on how EPA has appropriately addressed
these items can be found in Section XII of the Preamble.

       EPA recently updated a screening analysis of selected marine port areas to begin to
understand the populations living near marine ports.  Of the 45 marine ports studied, the results
indicate that at least 18 million people, including a disproportionate number of low-income
households, African-Americans, and Hispanics, live in the vicinity of these facilities and are
being exposed to annual average ambient DPM levels that are 2.0 |ig/m3 and 0.2 |ig/m3 above
levels found in areas further from these facilities.  Considering only ocean-going marine engine
DPM emissions, the results indicate that 6.5 million people are exposed to annual  average
ambient DPM levels that are 2.0 |ig/m3 and 0.2 |ig/m3 above levels found in areas  further from
these facilities. Because those populations exposed to DPM emissions from marine ports are
more likely to be low-income and minority residents, these populations will benefit from the
coordinated strategy.

       With regard to children, this analysis shows that at least four million children  live in the
vicinity of the marine ports studied  and are also exposed to annual average  ambient DPM levels
that are 2.0 |ig/m3 and 0.2 |ig/m3 above levels found in areas further from these facilities. Of the
6.5 million people exposed to DPM emissions from ocean-going vessel emissions, 1.7 million
are children.  The age composition of the total affected population in the screening analysis
matches closely with the age composition of the overall U.S. population. However, for some
individual facilities, the young (0-4 years) appear to be over-represented in the affected
population compared to the overall  U.S. population.  See section VIII of the preamble to the final
rule and Chapters 2 and 5 of the RIA for a discussion on the air quality and monetized health
benefits of this rule, including the benefits to children's health.

       The emission reductions from the coordinated strategy will have large beneficial effects
on communities in proximity to port, harbor, and waterway locations, including children, low-
income, and minority communities.

1.1.6 Benefits Associated with Reducing Nickel

       What Commenters Said:

       Carter Strickland, Jr. commented on behalf of the City of New York that the proposed
rule understated the  adverse public health effects from the use of residual fuel in ships since
residual oil contains more heavy metals then other fuels when adjusted for energy content.  He
noted that the application of low sulfur fuel should have the significant added benefit of reducing
nickel and other heavy metals  and EPA should continue to monitor fuel content and ambient air
to ensure that heavy metals are reduced with sulfur and to undertake additional rulemakings if
necessary.

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       Our Response:

       We agree that the coordinated strategy will have additional health benefits beyond those
that can currently be quantified and that heavy metals are important. As noted in Section 2.3.2 of
the RIA, shipping emissions of PM2.5 do contain small amounts of metals including nickel.  The
summary of the health effects evidence related to PM2 5 exposures presented in the proposed rule
is based on the 2004 PM Air Quality Criteria Document (AQCD, EPA document number:
EPA/600/P-99/002aF).  We are currently working to update the assessment and integrative
synthesis of the scientific evidence for PM. EPA's National Center for Environmental
Assessment (NCEA) issued a second external review of the Integrated Science Assessment for
Paniculate Matter in July 2009 for review by the Clean Air Scientific Advisory Committee
(CASAC) and public comment (ISA, EPA document number: EPA/600/R-08/139B). This
document includes consideration of the Bell et al. 2009 article titled "Hospital Admissions and
Chemical  Composition of Fine Particle Air Pollution" that Mr. Carter cites. The second draft
PM ISA states that "Overall, the results indicated that many constituents of PM can be linked
with differing health effects and the evidence is not yet sufficient to allow differentiation of those
constituents or sources that are more closely related to specific health outcomes.  These findings
are consistent with the conclusions of the 2004 PM AQCD, that a number of source types,
including motor vehicle emissions, coal combustion, oil burning, and vegetative burning, are
associated with health effects" (ISA, section 2.4.4). The Integrated Science Assessment for
Particulate Matter will be finalized in December 2009.

       The measurement of ambient air pollution in the U.S. is provided through a number of
ambient air monitoring networks operated almost exclusively by State, local, and Tribal air
monitoring programs. This includes measurement of PM2.5 components, including nickel and
other metals at Chemical Speciation Network sites. In addition, the Agency is monitoring for
nickel through the National Air Toxics Trends Stations and the Urban Air Toxics Monitoring
Program.  Data  collected from this monitoring is assessed to detect trends and has been used in
health studies.

       For information on fuel quality please see Section 4.3.2 of this Summary and Analysis of
Comments document.

1.2 Form of Emission Controls

       What Commenters Said:

       The American Lung Association, LBACA, NACAA, and CATF expressed support for
EPA to adopt emission standards for Category 3 marine diesel engines even in the absence of
international standards.

       PMSA, the World  Shipping Council, and Matson Navigation suggested that EPA should
adopt the Annex VI regulator provisions with as little modification as possible, both to minimize
the potential for disrupting global maritime activities and to acknowledge that EPA was part of
the process for adopting the Annex VI standards originally.

       The Chamber of Shipping of America emphasized that marine vessel regulation should
be entirely governed by the International Maritime Organization. They expressed hope that
fmalization of this rule will ensure that its requirements are applied consistently throughout the

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United States and represent the sole strong national program so badly needed to avoid multiple
and potentially conflicting air emissions control programs that apply uniquely at the state or
regional level.

       EMA supported the proposed adoption of the Annex VI standards as an important step to
control emissions in the context of an internationally harmonized requirement. EMA added
several specific concerns, which we address elsewhere in this document.

       Euromot supported adoption of the Annex VI requirements, but urged us to avoid making
any substantial modifications, either in the technical content or the administrative proceedings.

       Santa Barbara had positive response to EPA's proposed coordinated strategy for ocean-
going vessels. While we generally support EPA's proposed standards, we believe that EPA is
required under Section 213 of the Clean Air Act to consider both stricter standards and shorter
implementation timelines. In addition, we recommend several principles that should be
considered as part of this regulatory action.

       NACAA commended EPA for the proposal and reiterated their strong support of decisive
U.S. regulatory action. NACAA expressed strong support for both the U.S. rules and final
implementation of an EGA for North America under the  IMO process to comprehensively
control both U.S. and foreign-flag vessels with C3 marine engines.

       Ryan Boles objected to the proposed rule on the basis that it is ridiculous to threaten the
American people with higher taxes and energy costs, driving up costs, and threatening jobs and
the economy. In contrast, Samuel Chan expressed a desire to see the U.S. EPA lead the world in
setting tough environmental protection rules by following what Hong Kong already requires
regarding sulfur content of marine fuels.

       Several additional commenters expressed a general support for EPA to adopt the Annex
VI standards, many of which pointed to various aspects of our supporting rationale for pursuing
these standards. The general expressions of support focused largely on the expected
environmental benefit or the pursuit of harmonized international standards, or both.

       Our Response:

       EPA was pleased to participate in the MARPOL process that led to the adoption of new
long-term emission standards for marine diesel engines.  These standards are generally consistent
with the requirements we have already adopted for Category 1 and Category 2 marine diesel
engines, and with our interest in adopting standards for Category 3 marine diesel engines under
the Clean Air Act.  Our proposal took the approach of codifying the Annex VI standards and
associated test procedures and certification protocol, with a number of adjustments that were
needed to comply with various legal and procedural imperatives and constraints that apply in the
United States. The Annex VI standards  resulted from a process in which the International
Maritime Organization responded favorably to the U.S. white paper proposing stringent and
appropriate emission standards for the international community. We believe that these standards
will give the greatest degree of emission control achievable considering compliance costs, lead
time, and other relevant factors.
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1.3 Issues Related to Rulemaking Process

       What Commenters Said:

       Several commenters objected to limiting the public comment period to 30 days and
requested that we extend the comment period to at least 90 days. Some wanted EPA to extend
the comment period so EPA will have  a complete record it can consider before finalizing the
standards.  Some commenters in Alaska and the Great Lakes region expressed concern that they
only very recently became aware that the proposed fuel standards would extend to their
geographic region, and that this action was taken without meaningful consultation with affected
parties.

       The Lake Carriers Association
       Canadian Shipowners' Association
       Great Lakes Maritime Task Force
       Bruce Botelho, Mayor, Juneau, AK (0298)
       Mark Begich,  U.S. Senator (AK) (0322)
       State Senator Egan (0323)

       Our Response:

       EPA disagrees that additional time is needed for us to have a complete record for this
rulemaking.  First, although the proposed rule was not published in the Federal Register until
August 2009, commenters in fact had three months to prepare comments on the proposal. The
proposal became available electronically on July 1, 2009, at which time we also provided direct
notification to interested parties to ensure that there was a broad awareness that the proposed rule
was complete and  that we would be taking comment on the proposed provisions. Taking this
pre-publication period into account, prospective commenters had three full months to review the
proposed rule before the end of the comment period, consistent with the commenters' request.

       Second, EPA does not believe the scope of the proposal should have been a surprise to
commenters. The  proposed rule was first preceded by an Advance Notice of Proposed
Rulemaking (ANPRM)  announcing EPA's intent to adopt more stringent emission standards
consistent  with the U.S. position advocating more stringent global and geographic standards for
these vessels under MARPOL Annex VI.

       Given that  the standards we are adopting under the Clean Air Act are largely consistent
with the Annex VI requirements and our ANPRM, and given the opportunity for interested
persons to view the proposal well before it was published, we believe commenters have had
sufficient time to review the substance of the proposal and prepare their written comments. This
is supported by the large number of comments we received on the proposal and the ANPRM
from a wide range of interested parties.

       To see other comments about application of the standards to Alaskan waters, please see
section 2.2.2 of this document. To see other comments about application of the standards to the
Great Lakes, please see  Chapter 10 of this document.
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1.4 Other General Comments

(A)    Why isn't EPA Regulating Auxiliary Boilers to Control Emissions
       During Cargo Loading/unloading?

       What Commenters Said:

       The Coalition for Clean Air (CCA) commented that boilers used to power cranes and
pumps to unload cargo such as crude oil and containers also emit air pollutants including volatile
organic compounds and air toxics. CCA suggested that emissions from these boilers could be
controlled using after-treatment technology, and evaporative emissions of volatile cargo could be
captured with vapor recovery systems, (written copy of hearing testimony)

       Our Response:

       Today's rule primarily addresses the largest (Category 3) propulsion engines on marine
vessels. The fuel used by most auxiliary boilers (those over 130 kw, the power equivalent of a
small car engine) on large ships is subject to international air pollution standards, including
globally-applicable fuel sulfur standards as well as the more stringent fuel sulfur standards
applicable in Emission Control Areas under MARPOL Annex VI.  MARPOL Annex VI also has
a regulation specifically applicable to controlling volatile organic compounds when oil tankers
load and unload their cargo. Further, auxiliary compression-ignition engines on ships may be
classified by EPA as Category 1 or 2 marine diesel engines, which are covered by regulations
under the Clean Air Act at 40 CFR part 1042 and/or part 94. States and port authorities also may
have plans in place to reduce emissions from  ships while engaged in loading and unloading
cargo at port.

(B)    Regulation of Marine Engines as Nonroad Engines

       What Commenters Said:

       Richard Hovan argued that Category 3 marine engines should be treated as stationary
sources and required to meet all New Source Performance Standards monitoring rules.

       Our Response:

       Internal combustion engines on Category 3 marine vessels clearly fall within the
definition of nonroad engine in §1068.30 since they are used on self-propelled vehicles. Nonroad
internal combustion engines are excluded from the New Source Performance Standards (NSPS)
for Stationary Compression-Ignition Internal Combustion Engines because the definition of
stationary internal combustion at 40 CFR 60.4219, excludes nonroad engines, as defined in 40
CFR 1068.30, from that category of stationary sources. It is not clear on what basis the
commenter believes that marine engines should meet monitoring rules.  However, we believe the
requirements we are establishing to certify engines, install diagnostic tools, require emission
measurements following parameter adjustments, and require continuous monitoring related to
on-off controls provides adequate  assurance that in-use engines will control emissions in line
with the original design and certification.
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(C)    Time and Location of Hearing

       What Commenters Said:

       Ricardo Pulido of the Coalition for a Safe Environment commented that the public
hearing was held at a time and place that was very inconvenient for working people to attend,
including logistics and cost of parking.

       Our Response:

       EPA is pleased that four members of the Coalition for a Safe Environment were able to
attend the August 6 public hearing. We do understand that many others who care deeply about
their air quality were unable to attend personally. In choosing to hold our hearing during normal
business hours, we targeted attendees affiliated with organizations that could speak on behalf of
the numerous affected individuals. Our attendee lists from both hearings do include several
unaffiliated individuals, including a number of speakers who took time out of their work
schedules to attend.  With respect to the location of future hearings, we are open to suggestions
for suitable venues that are accessible to public transit as well as regional airports.

       We also note that anyone who was unable to attend the public hearings had an
opportunity to submit written comments on the proposal. We have in fact received a great
number of written comments, both from organizations and from individuals who have no
apparent organizational affiliation.
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CHAPTER 2: Scope and Applicability

       What We Proposed:

       The comments in this section generally correspond to Section V of the preamble to the
proposed rule, where we describe the North American Emission Control Area as well as the
applicability of our program to foreign flag vessels. The comments also correspond to Section
III.B of the preamble where we describe how this program addresses emissions of greenhouse
gases.  See Chapter 5 of this document for a discussion of applicability of standards to other
types of propulsion engines,  and for a discussion of the geographic scope and applicability of
MARPOL Annex VI through APPS.

2.1 Applicability to Foreign Flag Vessels

       What Commenters Said:

 (A)   EPA Should Regulate Foreign-flagged Vessels under the Clean Air Act

       At EPA's public hearing on this rule in Los Angeles, California, Concepcion Garcia of
the Long Beach Alliance for Children with Asthma spoke and expressed her support for EPA's
rule, "under the Clean Air Act to protect the public from the polluted air emitted by low-quality
fuel used by ships arriving in our area."

       South Coast Air Quality Management District, by incorporating by reference their
previous arguments, reiterates their position that EPA has the legal authority to regulate foreign-
flagged vessels under the Clean Air Act.

       NESCAUM urges EPA to take action under the Clean Air Act to reduce pollution from
all ships,  regardless of flag, if the EGA designation is substantially delayed or not approved.

       Natural Resources Defense Council points out that companies, including U.S. companies,
have intentionally created off-shore companies in order to flag in other countries and circumvent
application of U.S. emission standards to their  ships, thus urges EPA to increase the scope of our
rule to  cover foreign-flagged as well as U.S. vessels.

       The Texas Legislative Air Quality  Caucus urges EPA to act quickly under domestic
authority to limit OGV emissions if the EGA is not adopted in March 2010.

       American Lung Association with Environmental Defense Fund commented EPA must
regulate foreign-flagged vessels under the Clean Air Act and apply the same standards to those
ships as it applies to domestic-flagged vessels.  These commenters cite previous comments
submitted by the Harvard Law School's Environmental Law and Policy clinic that read section
213 of the Clean Air Act to require the regulation of foreign-flagged vessels.  They point to the
pollution contribution from foreign-flagged vessels, which according to the U.S. Department of
Transportation Maritime Administration (MARAD) account for 88% of ship emissions at U.S.
ports, as impinging upon the ability of EPA to attain this rule's health benefits without a
coordinated strategy to tackle foreign-flagged vessel emissions.  Further, they call for the

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Agency to be prepared to conduct an additional rulemaking to extend application of this rule to
foreign-flagged vessels in the event that the amendments to Annex VI are not entered into force
by July  1, 2010 or an EGA designation is not adopted by the parties to MARPOL Annex VI in
March 2010.

       Friends of the Earth, Center for Biological Diversity, and Earthjustice comment that
EPA's proposed rule would be strengthened if its Tier 2 and 3 standards and low sulfur fuel
requirements applied to foreign-flagged vessels as well as domestically-flagged vessels. These
commenters note that EPA has not taken a position on whether section 213 of the Clean Air Act
grants EPA authority to regulate foreign-flagged vessels in U.S. waters  and recognizes EPA's
commitment to revisit the issue if an EGA designation is not timely approved. However, these
commenters find flaw in this approach, asserting that "uncertainty and additional delays inherent
in this approach can and should be avoided," and that, "EPA must delineate the specific
supplemental measures that will come into effect if the EA is not approved in March 2010 at
IMO's MEPC 60." These commenters reassert their previous position as to EPA's section 213
authority to regulate foreign-flagged vessels by pointing to the large pollution contribution of
these vessels, the text of section 213, case law regarding other U.S. regulation of foreign-flagged
vessels, international law principles, and the United Nations Convention of the Laws of the Sea
("UNCLOS"). Because  of their position on section 213 and the uncertainty they find with EPA's
reliance on coordination with the EVIO, these commenters urge EPA to apply Tier 2 and 3
standards to foreign-flagged vessels as part of this current rulemaking.

       The Marine Engineers' Beneficial Association, Masters, Mates,  and Pilots, American
Maritime Congress, and  the Maritime Institute for Research and Industrial Development (jointly
as "Maritime Labor") submitted comments to generally support EPA's rule but express concerns
stemming from unequal application of the rule to foreign- and domestically-flagged ships.
Maritime Labor believes that "[i]n order to comply with congressional intent and effectuate the
policies espoused in the Clean Air Act (CAA  and APPS, the EPA must  tie implementation of the
regulations of the U.S. Flag Fleet to regulation of the foreign flag fleet docking in U.S. Ports."
Maritime Labor further points to a U.S. Code  section that expresses congressional intent for the
United States to have a strong and independent merchant marine to argue that the Clean Air Act
and APPS should be interpreted and implemented to further that intent.  Maritime Labor
specifically calls for EPA to "explicitly tie regulation of the U.S. flagged vessels to regulation of
the foreign flag fleet, in time and substance."  In order to attain uniform treatment of foreign- and
domestically-flagged ships, Maritime Labor further believes that enforcement of EPA's current
regulations should be delayed until the Annex VI standards become enforceable.

       Ohio Environmental Council, along with Marsh Area Regional Council,  Earth Day
Coalition, and the Ohio League of Conservation Voters, call for equal application of marine
engine standards to all ships operating on U.S. waters. With regard to EPA's Clean Air Act
authority to regulate foreign-flagged vessels, these commenters continue to believe that EPA can
interpret '"new nonroad  engines' as including 'imported non-road engines' and to include
foreign-flagged ships operating in U.S. waters as  'imported' for Clean Air Act purposes."

       Santa Barbara County Air Pollution Control District ("Santa Barbara") expressed its
"fundamental objection to EPA's approach on foreign flagged marine vessels," and reiterated its
position that EPA has a "nondiscretionary duty" to include these vessels in it regulations issued
pursuant to section 213 of the Clean Air Act.  Based upon that legal position, Santa Barbara
urges EPA to initiate a parallel rulemaking to  subject vessels of all flags to the proposed

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Category 3 emission standards, to fulfill its Clean Air Act duty and as a "backstop" to potential
delays stemming from the IMO.

       Clean Air Task Force, together with American Lung Association of New England,
American Lung Association of New York, Citizen Action (Illinois), Clean Air Carolina, Clean
Water Action, Clean Water Action (of Connecticut, Florida, Maryland, Massachusetts,
Michigan, Minnesota, New Jersey, Pennsylvania, Rhode Island, Virginia, and Cleveland), Earth
Day Coalition (Cleveland), East Michigan Environmental Action Council, Environment Illinois,
Georgia Conservancy, Group Against Smog and Pollution, Marsh Area Regional Council (Lake
County, Ohio), Michigan Environmental Council, Michigan League of Conservation Voters,
Mothers and Others for Clean Air, New York Public Interest Research Group, Ohio
Environmental Council, Ohio League of Conservation Voters, Progress Michigan, Public Citizen
(Texas), Respiratory Health Association of Metropolitan Chicago, Save the River/Upper St.
Lawrence Riverkeeper, Sierra Club (Great Lakes Program), Southern Alliance for Clean Energy,
and Southern Environmental Law Center, expressed general support for EPA's rule but points
out that it is "crucial" that EPA apply the standards to all ships visiting U.S. ports and operating
in U.S. waters in order to attain the rule's public health and environmental benefits.
Furthermore, Clean Air Task Force believes that EPA's approach with regard to foreign-flagged
vessels is a "mistake" because IMO's adoption of the U.S. EGA is not guaranteed, and that
without the EGA adoption EPA cannot apply IMO standards to foreign-flagged vessels through
APPS. For these reasons, Clean Air Task Force incorporates by reference its previously  stated
position that there is no legal impediment to EPA's regulation of foreign-flagged vessels under
the Clean Air Act as "imported non-road engines." Clean Air Task Force additionally points to
the comments received in response to our ANPR from the Environmental Law & Policy Clinic at
Harvard Law School and South Coast Air Quality Management District, which asserted that
foreign-flagged vessels could also be included in EPA's regulation of oceangoing vessels as
"new  non-road engines."

 (B)   Standards for U.S. and Foreign-flagged Vessels Should Be the Same

       American Petroleum Institute, among others, expressed its support for EPA's approach,
to coordinate its Clean Air Act regulation with international emission standards. API believes
that this coordination will result in uniform standards that will apply to all ships trading in U.S.
waters.
       Ricardo Pulido of Coalition for Safe Environment echoed this opinion: "I also ask that all
foreign flag ships that enter U.S. ports be required to meet the same standards." (Ricardo Pulido
of Coalition for Safe Environment, 0227).

       Our Response:

       We appreciate the comments we received and are committed to revisiting the issue if the
U.S. EGA proposal is not timely adopted. However, we continue to believe we need not revisit
this issue at this time given that foreign-flagged vessels will be subject to standards under APPS
that are comparable to those for U.S.-flagged vessels under section 213 of the CAA. The issue
of whether EPA is compelled to cover foreign-flagged vessels under section 213 of the CAA was
raised in Bluewater v. EPA, 372 F.3d 404 (D.C.Cir. 2004), a challenge to EPA's decision in 2003
not to revisit the issue of whether  foreign-flagged vessels may and should be covered by  nonroad
emissions standards issued under section 213 of the CAA.  In finding Bluewater's claim to be

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premature, the Bluewater court referred back to its determination in Engine Mfrs. Ass 'n v. EPA
that "new nonroad engine" as used in 213(a)(3) is ambiguous and reiterated EPA's undisputed
finding that there would be no significant loss of emission reductions by not revisiting the issue.
       We do not believe circumstances have changed to call into question the court's finding as
applied to today's setting. In fact, the only changed circumstances further support EPA's
decision not to revisit the issue. Since issuance of the 2003 final rule and the court's decision in
Bluewater., Annex VI has entered into force, and the United States has become a Party to Annex
VI and has successfully negotiated significant new emission and fuel standards.  In addition,
Congress has adopted amendments to the Act to Prevent Pollution from Ships to implement both
the original and amended Annex VI requirements.  Thus, given that foreign-flagged vessels are
subject to the original and new Annex VI NOx and fuel requirements under the operation of
APPS, we do not believe it is necessary to address whether EPA may or should cover foreign-
flagged vessels under section 213 of the CAA. See South Coast v. EPA, 554 F.3d 1076, 1081
(D.C.Cir. 2009)("Deferring resolution of the issue until it will have an effect remains reasonable
and the petitioners' objection therefore remains premature.").

       However, as noted above, we are committed to revisiting this issue if the proposed EGA,
within which the most stringent NOx and fuel requirements are applicable, is not timely adopted.
Meetings to discuss adoption of the U.S.-proposed EGA are scheduled  shortly after this rule is
finalized, and thus, taking into consideration the lead times adopted, little time is lost in not
revisiting this issue in this rulemaking. We also note that ships that are flagged in nations that
are not a Party to Annex  VI are subject to Annex VI requirements in U.S. waters under the  Act to
Prevent Pollution from Ships.  Our regulations to implement the requirements of Annex VI with
respect to such vessels make clear the applicability of those provisions  to such vessels.
2.2 Emission Control Area

2.2.1 Support the North American ECA

       What Commenters Said:

       In March 2009, Canada was party to the joint submission with the U.S. to IMO to
designate coastal waters of North America as an ECA.  The Government of Canada expressed its
commitment to improving the health, well-being, and safety of our shared ecosystem and its
residents. As a next step, Canada is currently working towards ratifying MARPOL Annex VI
and plans to make the appropriate changes to domestic regulations to implement the North
American ECA.

       A number of commenters expressed support of the proposed North American ECA.
NRDC specifically encouraged EPA to continue to defend the proposed ECA to prevent it from
being weakened or delayed at IMO. EDF and ALA expressed strong support of the in-depth and
well-presented application EPA made to the IMO for a joint U.S./Canada Emission Control
Area. They expressed the belief that the establishment of such an ECA is incredibly important to
protect public health in the U.S. from international shipping emissions. In addition, they support
EPA's coordinated strategy to reduce Category 3 emissions in the U.S., stating that it is
important for EPA to establish timely federal emission and fuel standards that mirror the rigorous
ECA application. Together, the coordinated strategy is capable of bringing necessary emissions
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reductions and important public health and environmental benefits to the U.S. Maersk noted
that, earlier in 2009, it publicly supported the U.S. EPA's Emissions Control Area ("EGA")
proposal to the UN's International Maritime Organization "IMO."

       Over the past two years, NACAA has directly participated in the International Maritime
Organization's (IMO's) activities establishing international marine fuel and engine standards and
providing for Emission Control Areas (EGAs).  NACAA expressed wholehearted support of the
outcomes of these efforts. NAACA stated that they are further encouraged by the progress made
at the July 2009 meeting of the IMO Marine Environmental Protection Committee, at which the
Committee gave its initial approval to a proposal by the U.S. and Canada for the creation of an
EGA along the U.S.  and Canadian coastlines. They look forward to the Committee's final
adoption of the EGA in March 2010. Under a U.S./Canadian EGA, not only domestic vessels, but
also foreign flagged vessels - which account for 90 percent of ships that call on U.S. ports -
must comply with the IMO engine and fuel standards when they are within 200 miles of the
coast. NACAA supports implementation of a comprehensive EGA for all eligible waters in the
U.S. and Canada at the earliest possible date, which would ensure important benefits throughout
both nations. Therefore, U.S. must to stay the course with the IMO and see the U.S./Canadian
EGA through to approval. NAACA also expressed the importance of EPA working concurrently
to finalize a regulation that will ensure that the U.S. has a plan in place and ready for
implementation should action by the IMO not progress as hoped.

       Canada(0252)
       Maersk (0261)
       Texas Legislative Air Quality Caucus (0367)
       NRDC  (0232)
       Communities for Clean Ports (0232)
       Coalition for a Safe Environment (0232)
       AAPA  (0232)
       ALA+EDF (0366)
       NAACA (0246)

       Our Response:

       We appreciate this show of support and  will continue with our efforts as part of the U.S.
Government's  delegation to IMO to promote the adoption, and ultimately entry into force, of the
North American EGA.

2.2.2 Inclusion of Alaska and Hawaii

       What Commenters Said:

       We received comment from a number of entities  that waters of the coast of southeast
Alaska should not be included as part of the North American EGA.  These entities included the
cruise line industry, other shipping interests in Alaska, cruise destination ports and several
elected officials in Alaska.  In addition, CLIA commented that Hawaii should also not be
included in the North American EGA. These comments  are described in more detail below.

       CLIA commented that Alaska and Hawaii should be excluded from the petition until such
time as EPA has adequately and scientifically evaluated the need for inclusion of Alaska and

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Hawaii. EPA's proposal contains insufficient justification for including southeastern Alaska and
eastern Hawaii regions in the proposed EGA while excluding western Hawaii and western
Alaska regions. No dispersion modeling results are presented to justify these decisions and there
is no information on the relative benefits of including (and disbenefits of excluding) these
regions from the EGA.

       CLIA, Governor Parnell, and others commented that neither Hawaii nor Alaska has air
quality exceeding EPA's ambient air quality standards for ozone or PM2 5. Measurements of
ambient PM2.5, NC>2 and SC>2 at three locations in Juneau, Alaska during 2000 and 2001
conducted by the Alaska Department of Environmental Conservation showed concentrations of
all three pollutants were "appreciably below the State and national air quality standards" in both
years.

       TOTE commented that the proposed rule as it is written will require its vessels to use
distillate fuel during the entire 1300 mile voyage from Tacoma to Anchorage.  TOTE's vessels
are never offshore more than 200 miles. TOTE stated that while the 200 mile limit may be
appropriate in some geographic areas it is wholly inappropriate in the area they operate in
because of the low population densities in western Canada and Alaska and because there are no
nonattainment areas in this area, outside of Puget Sound.  As such, the proposed rule should
exclude the majority of this area.  River Adventures commented that they are a small business in
Southeast Alaska and work with all the major cruise lines. If this application were to be granted
they would be hurt by a "double hit." Worksafe commented that it is a highly competitive,
Alaska-based business that must make every penny count. To increase costs of doing business to
address  a non issue is nothing short of economic suicide.  Several commenters argued that
Alaska should not be included in the proposed EGA because no modeling was conducted in
Alaska,  the EGA boundaries only designate part of Alaska, and no economic analysis was
conducted for the impact on Alaska.

       Governor Parnell (AK) commented that EPA needs to collect additional information and
conduct further analyses to support sound conclusions regarding an EGA proposal for Alaska
and requested that EPA evaluate the basis for applying the new standards in Alaska as well as the
economic impacts, especially on the cruise industry.  Governor Parnell noted that the proposal
states that EPA has not yet determined the extent to which Category  3 engines affect air quality
in areas of Alaska west of Kodiak, and as a result, these areas are not included in the proposed
EGA. He suggests that the extent to which Category 3  engines affect air  quality in any area of
Alaska has not been determined. In the absence of any air quality modeling for Alaska, he
recommends that the proposed regulations and the EGA proposal be  modified to exclude areas
off Alaska. Similar comments were received from Congressman Young, Senator Murkowski,
Senator Munroz, Ketchikan, Port of Anchorage, and Sitka.  Some commenters stated that the
IMO requires all EGA applications to consider the cost to implement the  new standards and the
economic impact.  Senator Murkowski commented that while cruise ships do not travel to
Southwest Alaska, freight and cargo vessels certainly do; therefore it seems inconsistent for EPA
to treat southern/western Alaska waters differently since the state's coastal climate will provide
for disbursal of pollutants in similar ways.

       After the comment period, Governor Lingle (HI) sent a letter to Administrator Jackson
expressing concern with the proposed rule. Governor Lingle expressed support for reductions in
fuel emissions, but would like Hawaii's inclusion in the proposed EGA to be based on


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quantitative air quality and economic impact data.  Therefore, the Governor requested that we
delay implementation of the proposed rule in the Southeastern Hawaiian Islands.

       CLIA (0278)
       TOTE (0289)
       River Adventures (0244)
       Governor Parnell (0287)
       Congressman Young (0382)
       Mayor of Ketchikan (0294)
       Port of Anchorage (0299)
       Sitka (0307)
       Representative Munoz (0317)
       Senator Begich (0322)
       Senator Murkowski (0384)
       RDC (0288)
       Julies Fine Jewelry (0339)
       WorkSafe (0369)
       Governor Lingle

       FOE and others commented that the EGA should include all of Alaska. They noted that
the proposed rule relies on the IMO's approval of the U.S. EGA application as the sole
mechanism for addressing emissions from foreign-flagged ships in U.S. waters.  However, the
EGA proposal does not include the Alaskan Arctic. The Aleutian chain and all Alaskan coastline
north thereof has been excluded from the EGA proposal, despite the fact that the Alaska
Department of Environmental Conservation (ADEC) encouraged EPA to consider including the
State's Northwest, and that Western Alaska has consistently higher emissions of "criteria
pollutants" such as NOx, PMio, PM2.5, HC, CO and SO2 than other parts of the state. Because
only U.S.-flagged vessels will be required to meet the heightened emissions standards in the
Alaskan Arctic, the proposed EGA and CAA rulemaking leave critical portions of the U.S.
coastline less protected than the rest of the country. This lack of nation-wide uniformity in the
applicable emissions standards for Category 3  vessels runs counter to the goals of the Clean Air
Act.  Title II of the Clean Air Act directs the federal government to assume primary responsibility
for regulating emissions from mobile pollution sources. The proposed rule would leave large,
environmentally sensitive parts of Alaska less  protected than the rest of the country. This lack of
uniformity runs counter the aims of the statute. Moreover, the application of Tier 3 NOX
standards for U.S.-flagged ships, but not foreign-flagged ships in Arctic Alaskan waters may
place U.S. shippers at a competitive disadvantage,  especially as the number of foreign-flagged
vessels in the Alaskan Arctic increases dramatically with the opening of the Northwest passage
to summertime commercial shipping. These issues should be remedied by including Arctic
Alaskan waters within the EGA proposal, or by making the proposed emissions  standards
applicable to all Category 3 ships in U.S. waters, including Alaskan waters. (FOEI, 0320.1, pp.
10-11)

       Our Response:

       The above comments are specifically focused on the scope of North American EGA
proposal that the U.S. and Canadian governments submitted to the International  Maritime
Organization (IMO) on March 27, 2009. While the NPRM discusses the North American EGA


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and presents it as part of an overall coordinated strategy, this EGA was not proposed as part of
this national rulemaking.  As such, it is not within the scope of this final rulemaking to amend
the North American EGA proposal.

       Although the EGA proposal was not developed as a Clean Air Act rulemaking, it was
developed by the U.S. Government through the processes associated with amending an
international agreement. EPA worked with the U.S. Coast Guard, State Department, the
National Oceanic and Atmospheric Administration and other agencies to develop the analysis
supporting EGA designation for U.S. coasts contained in the U.S. and Canadian submittal to
IMO. In addition, we collaborated with Environment Canada and the California Air Resources
Board. In developing the EGA proposal, EPA consulted with stakeholders including
representatives from the shipping industry, ports, master mariners, environmental interests and
representatives from state and local governments.

       It should be noted that the North American EGA proposal was specifically reviewed by a
technical group of the MEPC and found to fully satisfy the criteria in MARPOL Annex VI,
Appendix III.  Among other things, the criteria include an assessment that emissions from ships
are contributing to ambient concentrations of air pollution or to adverse environmental impacts,
analysis of relative costs of reducing emissions from ships, and evaluation of the economic
impacts on shipping engaged in international trade. The U.S. Government's proposal to IMO
included a complete analysis of how each portion  of the North American EGA addressed these
criteria. As a result, the proposal was approved at MEPC 59, and circulated for  adoption.  The
earliest possible adoption date is at MEPC 60, which will take place in March 2010.

       It should be noted that EPA reached out to the Alaska Department of Environmental
Conservation and the Hawaii Department of Health when developing the EGA proposal.  In
October 2008, Alaska DEC submitted a letter to EPA, providing information on the adverse
impacts of shipping in Alaska and requesting EGA designation for all of the waters along
Alaskan coasts.  In January 2009, the Hawaii DOH submitted a similar letter requesting EGA
designation for the entire Hawaiian Island chain.4

       Commenters raised a number of issues regarding the modeling and analyses supporting
the need for EGA standards in Alaska and Hawaii. The comments on costs and  economic
impacts are discussed in more detail in Chapter 6 and 7 of this document, respectively.
Comments on air quality in Alaska and other environmental impacts of an EGA are addressed in
Chapter 8 of this document.

       At this time, the U.S. Government has not  included northwestern Alaska or western
Hawaii in the proposed EGA. While these areas also experience the environmental impacts of
ship  emissions, further information must be gathered to properly assess these areas and
 International Maritime Organization, "Report of the Marine Environment Protection Committee on its Fifty-Ninth
Session," MEPC 59/24, July 27, 2009.
3 Letter from Clint Farr, Alaska Department of Environmental Conservation, to Mike Samulski, U.S. EPA, OTAQ,
"Statement in Support of EPA Considering Alaska as Part of a Marine Emission Control Area," October 10, 2008.
4 Letter from Wilfred Nagamine, Hawaii Department of Health to Kerry Drake, U.S. EPA, Region 9, "Emission
Control Area Background Information for Hawaii," January 12, 2009.

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determine how EGA controls will help. We will continue to gather information on these areas,
as well as other U.S. territories not included in the EGA proposal, and take action as appropriate.

2.2.3  Other Areas

       What Commenters Said:

       Several commenters expressed support of Mexico joining the EGA. NAACA encouraged
EPA to continue negotiations with Mexico to join the U.S. and Canada in petitioning for an EGA
that would cover the coasts of all three countries. TOTE commented that the wellbeing of West
Coast ports in general is at stake. With Mexico not signing on to the agreement it will give their
ports a significant economic advantage. The new Panama Canal will further allow vessels to
bypass U.S. West Coast ports.  CLIA commented that if Mexico, Bahamas and the Caribbean
nations do not join the EGA, the impact in these regions can be expected to be less dramatic than
for the U.S.

       NAACA (0246)
       AAPA (0232)
       CLIA (0278)
       TOTE (0289)

       Our Response:

       At MEPC 59, Mexico indicated its interest in joining the  North American EGA. We will
continue to work with Mexico, and other neighboring countries to provide support as
appropriate.  We are currently performing analyses to support EGA designation,  if appropriate,
for Puerto Rico and the U.S. Virgin Islands and will be engaging stakeholders. That outreach
will include neighboring countries,  shipping companies, environmental organizations, and other
stakeholders.

2.3 Greenhouse Gases

       What Commenters Said:

       The Clean Air Task Force and associated commenters encouraged EPA to take steps to
reduce emissions of NOx and black carbon from marine diesel engines to reduce the impact of
these engines on global climate change.

       The Carbon War Room insisted that EPA include substantial measures in this rulemaking
to reduce greenhouse gas emissions.  They pointed out that EPA has an obligation to set such
standards under Clean Air Act section 213.
       CLIA commented that viewing and analyzing air emissions from a holistic view
(including factors for greenhouse gases) will be important. Thus  far, all regulatory restrictions on
pollutants have been done without consideration that reduction of one pollutant increases the
production of another. The U.S. needs to join with the industry in developing solutions in a
comprehensive rather than piecemeal approach. (CLIA, 0278)
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       Friends of the Earth, Center for Biological Diversity, and Earth Justice commented that
EPA should exercise its authority under Clean Air Act section 213 to set emission standards to
address climate change.  They argued further that EPA should prohibit the use of residual fuel in
marine vessels under Clean Air Act section 211. (Friends of the Earth and associated
commenters, 0320)

       South Coast AQMD urged EPA to consider whether fuel efficiency and other actions
U.S. EPA is considering to control greenhouse gas emissions from vessels could produce
nitrogen oxide emissions co-benefits earlier than EVIO standards. (South Coast AQMD, 0309)

       The American Lung Association urged EPA to look more closely at the additional
benefits of reduced global warming effects by considering a direct PM emission standard.

       Our Response:

       EPA recognizes the contribution of all mobile sources, including marine vessels, to
national greenhouse gas inventories. In our recently-published NPRM for light-duty vehicles,
we note that we are currently evaluating controls for motor vehicles other than those covered by
that proposal and are reviewing seven petitions submitted by various States and organizations
requesting that we use our CAA authority to take action to reduce greenhouse gas emissions
from ocean-going vessels (74 FR 49507, Septmber 28, 2009;  see also
http://www.epa.gov/otaq/climate/regulations.htm).

       Our recently completed final rule will require engine manufacturers to report their
emission levels of certain greenhouse gases (74 FR 56260,  October 30, 2009). We are also
working with ports, engine manufacturers and other stakeholders to encourage voluntary
measures that would reduce emissions of GHG and criteria pollutants.

       EPA is also a member of the U.S. delegation to the International Maritime Organization
and is participating in discussions with respect to international standards for greenhouse gas
emissions.
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CHAPTER 3:  Engine Standards

       What We Proposed:

       The comments in this section generally correspond to Section III of the preamble to the
proposed rule, where we describe the engine standards for nitrogen oxides (NOx), hydrocarbons
(HC) and carbon monoxide (CO), as well as our approach to address particulate matter (PM)
emissions. Note that some of the comments in this section also correspond to Section VIA of the
preamble, where we describe the PM testing requirements. The applicable regulatory provisions
for these requirements are in 40 CFR part 1042.

       The RIA describes the technical feasibility of engine standards in Chapter 4. Although
issues related to feasibility are discussed here, that RIA chapter includes a much more thorough
discussion of our basis for concluding the standards being finalized are appropriate under the
Clean Air Act.

       See Chapter 4 of this document for a discussion of comments related to the fuel
standards. See Chapter  2 of this document for responses to comments on pollutants not directly
regulated in this action.

3.1 Tier 2 Duty-Cycle NOX Standards

       What Commenters Said:

       We received a number of comments on the feasibility of Tier 2 NOx standards.  These
comments were focused on the technological aspects of our analysis and/or the whether the
amount of lead time provided was appropriate.  These comments are addressed together since the
technological feasibility and lead time are so closely related.

       Several commenters expressed general support for the Tier 2 NOX standards. (ALA,
ATS, CATF, CCP, NESCAUM). However, the Coalition for a Safe Environment asserted that
the Tier 2 standard does not appear to go beyond current practice. They also stated that EPA
should explain how the  claimed reductions will  be achieved and all the available technologies to
achieve them.  One commenter urged EPA to adopt earlier compliance deadlines for new
engines, phase the standards in early for areas with the worst  pollution.

       Our Response:

       As described in the RIA, we believe that the Tier 2 NOx standards will give  the greatest
degree of emission control achievable considering compliance costs, lead time, and  other
relevant factors. We project that these standards will require  manufacturers to incorporate in-
cylinder emission control technologies such as electronically-controlled high-pressure common-
rail fuel systems, turbocharger optimization, compression-ratio changes, and electronically-
controlled exhaust valves. While these technologies are in use for many land-based engines and
some marine engines, applying them to all new  Category 3 engines cannot be required before
2011.  It is important to  emphasize that the Tier 2 NOX requirements are a transitional aspect of


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this program. Manufacturers will also be working to develop technologies to meet the longer
term Tier 3 standards at the same time as they will be working towards the Tier 2 standards.
Finalizing more stringent Tier 2 standards or applying them earlier would likely hinder efforts to
meet the Tier 3 standards.

       Given the very low sales volumes, an earlier phase-in of standards for Category 3 engines
by sales fraction would not be practical. Similarly, the standards cannot be phased-in
geographically because ships are generally not inherently limited to specific areas. In addition a
phase-in would likely have disparate impacts on the manufacturers.

3.2 Tier 3 Duty-Cycle NOX Standard

3.2.1 Feasibility and Lead Time of the Tier 3 NOx Standard

       What Commenters  Said:

       MECA provided  extensive comments supporting the feasibility of the Tier 3 NOx
standard.  Several other commenters supported the proposed Tier 3 standards as feasible without
additional information. To support its belief that EPA should adopt more stringent Tier 3
standards, NESCAUM noted that SCR have been used on marine vessels for years.  They also
noted that in one case SCR was able to reduce NOx emissions by 95 percent in cruise mode.

       Manufacturers and  operators generally supported the 2016 compliance date for the Tier 3
standards as challenging but feasible.  They did not believe the standards could be met earlier.
Others supported the proposal to some extent, but suggested EPA consider implementing the
standards sooner.  SCAQMD urged EPA to also consider phasing in the standards early for areas
with the worst pollution.

       The Ohio Environmental Council reminded us of the statutory provisions describing how
EPA standards, with respect to both stringency and lead time, should be technology-forcing and
not technology-following.

       Our Response:

       While the Tier 2  standards will achieve modest reductions quickly, the Tier 3 standards
are projected to achieve reductions of about 80 percent from the current Tier 1 standards. As
explained in our discussions of regulatory alternatives, we evaluated the possibility of requiring
the Tier 3  limits on an earlier schedule than 2016.  However, we found that a schedule requiring
Tier 3 limits prior to 2016 had significant feasibility issues. Under the  schedule being finalized,
manufacturers of Category 3 engines will have about the same amount of lead time allowed
manufacturers for smaller marine engines and locomotives. Commenters arguing for a more
stringent NOx standard did not address important issues related to in-use compliance throughout
the useful life across the  duty cycle. To comply with the Tier 3 standards manufacturers will
need to design the SCR system to achieve greater than 80 percent reductions at higher power
modes to offset lower efficiency at the 25 percent power mode. The will also need to include a
compliance margin to address in-use deterioration and production variability.  The final
standards are consistent with the statutory direction to set standards requiring the greatest degree
of emission reduction that is achievable in the given time frame.


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       As noted earlier, phasing in standards for Category 3 engines by sales fraction would not
be practical. Similarly, the standards cannot be phased-in geographically because ships are
generally not inherently limited to specific areas. In addition a phase-in would likely have
disparate impacts on the manufacturers.

3.2.2 Alternative NOx Controls

       What Commenters Said:

       Several commenters stated that the Tier 3 emission standards can be met with
technologies other than SCR and that EPA should allow that. Seaworthy stated that they can be
met using exhaust scrubbers and exhaust gas recirculation systems.  EGCSA suggested that they
could also be met using a combination of internal and external measures such as fuel emulsions
and exhaust gas re-circulation and/or NOx scrubbing. API emphasized that Regulation 4 would
not force the allowance of any scrubber technology that does not provide an equal or better result
than Annex VI demands; only those technologies that are at least as effective in terms of
emissions reductions as that required by this Annex.

       Our Response:

       The NOx program is a performance requirement. This is also true for our Clean Air Act
program. Thus manufacturers are not precluded by our regulations from using these
technologies.

3.3 Other Standards

3.3.1 HC and CO Standards

       What Commenters Said:

(A) HC and CO Standards Are Achievable.
       EMA stated that the proposed HC and CO standards should generally be achievable in
combination with the EGA-based NOX standards. However, they also expressed a preference for
full alignment with MARPOL Annex VI requirements.

       The Clean Air Task Force supported the proposed HC and CO standards as a way of
preventing increased emissions in the future. They also anticipated an additional benefit of
limiting CO2 and PM emissions.

(B) HC and CO Standards Are Inconsistent with Annex VI.

       The American Maritime Congress and associated organizations objected to adoption of
HC and CO standards for engines on U.S.-flag vessels only, arguing that this represented an
unfair burden that would not be applied to foreign-flag vessels.  EMA and EGCSA also
expressed a preference for full alignment with MARPOL Annex VI requirements.  They stated
that "in the absence of data to quantify typical current emissions and to quantify the likely
benefits of the  proposed targets it is likely that this requirement will drive away shipbuilding

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from the USA (with the exception of vessels built to the Jones Act)." EGCSA also
recommended that EPA work with EGCSA and its members to undertake trials to quantify
typical emissions of CO & HC, their environmental and human health impacts, and the options
for technological solutions to treat and remove these gases.

(C) HC Standard Should be Replaced by VOC Standards for LNG Engines.
       EMA and Euromot expressed concern with respect to the metric for measuring and
controlling HC emissions from gas-fueled (e.g., LNG -fueled) marine engines.  They stated that
EPA should designate volatile organic compounds ("VOC"), with the additional exclusion of
formaldehyde from the measurement of VOC, as the relevant HC control parameter.  EMA
argued that using VOC would "properly exclude methane and ethane emissions from gas-fueled
engines" based on their low photochemical reactivity.  It would also be fully consistent with
EPA's recently promulgated new source performance standards ("NSPS") for stationary SI
engines. (See 40 CFR 60, Subpart JJJJ.)

       Our Response:

       We continue to believe that the HC and CO standards being adopted (2.0 g/kW-hr and
5.0 g/kW-hr, respectively) are appropriate under the Clean Air Act.  Not finalizing these
standards in order to achieve alignment with MARPOL Annex VI requirements would not be
consistent with the requirements of the Act.  Emission control technologies for C3 marine
engines have been concentrated on reducing NOx and PM emissions. These emission standards
will prevent increases in emissions of HC and CO that might otherwise occur as a result of use of
certain technologies for controlling NOx, such as those that significantly degrade combustion
efficiency. We believe the levels of the emission standards involve some burden to measure and
report emissions, but these standards are not expected to  involve engineering or development
resources to redesign  engines for improving control of HC and CO emissions. As such, we
believe there should be no concern that the burden associated with complying with the HC and
CO standards will pose a competitive disadvantage for U.S.-flag vessels. Also, given the level of
these standards, we do not believe that extensive additional study of these emissions by EPA is
necessary. Nevertheless, we would welcome such information if EGCSA members wish to share
it.

       We are applying emission standards to natural gas engines and we are adopting  the HC
and CO standards as proposed. We already regulate Category 3 marine engines fueled by natural
gas under the Tier 1 standards (see 40 CFR part 94). While natural gas engines have relatively
high emission rates of methane, methane has a very low reactivity with respect to ozone
formation. For this reason, the final approach continues the practice of applying a nonmethane
hydrocarbon standard to control HC emissions from natural gas-fueled engines. We do not agree
that we should adopt special VOC standards for Category 3 engines that would allow
manufacturers to also exclude ethane.  (Note that since formaldehyde is not detected by our
hydrocarbon measurement procedure, both NMHC and VOC standards effectively exclude it.)
While we agree that ethane has a lower reactivity than most other hydrocarbon species, we do
not believe it is present in large enough concentrations to justify the additional measurement
complexity.  Since the HC standard is in place largely to prevent emission increases, we believe
manufacturers will be able to comply with the  standard, including measurement of ethane,
without the need for emission controls beyond that which is described in the Regulatory Impact
Analysis.  The only reason we can see that there would be a significant difference between

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NMHC and VOC measurements would be for testing using fuel with high ethane content.
However, §1065.715 specifies that natural gas test fuels may not contain more than 5.5 percent
ethane. Levels below this limit should not cause problems for manufacturers.

       We note for completeness that the HC and CO standards are not expected to reduce CC>2
or PM emissions. Manufacturers are not expected to incorporate engine controls to control HC
or CO emissions in a way that would improve the engine's efficiency (for reducing CO2
emissions) or substantially change the combustion characteristics (to reduce PM formation).
Nevertheless, the HC and CO standards may prevent manufacturers from relying on certain NOx
emission controls that may have resulted in increased CO2 or PM emissions.

3.3.2 Mode Caps

       What Commenters Said:

       Euromot requested the EPA clarify that the mode caps apply only for Tier 3.

       Our Response:

       Euromot is correct that the mode caps only apply for NOx emissions.

  3.3.3 Particulate Matter (PM) Standard

(A)   EPA Must Promulgate a  PM Standard

       What Commenters Said:

       Several commenters expressed support for the fuel sulfur standards and acknowledged
that in addition to SOx reductions, the use of lower sulfur fuel would result in PM reductions as
well.  However, commenters also noted that we did not propose PM emission standards for
Category 3 marine engines. We received  several comments requesting that we establish PM
standards that go beyond those associated with switching to low sulfur fuel, either in this final
rule or in a follow-up action.

       While the proposed rule is expected to reduce 85 percent of PM emissions, NESCAUM
and NAACA commented that the remaining  15 percent will represent a substantial amount of
PM which is of significant concern to states and local areas. NESCAUM commented that, even
with the fuel standards in place, the remaining PM emissions from ships will exacerbate health
issues associated with PM, such as  cardiovascular morbidity and mortality and an increased
number and severity of asthma attacks.  ALA and EDF commented that Category 3 engines are
responsible for a significant amount of diesel PM emissions. The Port of Long Beach
commented that vessels are the greatest driver to local health risks from port sources, and PM
emissions from  main engines are a  significant contributor. The Port of Los Angeles commented
that additional control of paniculate matter is necessary to continue to reduce adverse health
effects from this source.  NRDC commented that technology forcing PM standards, beyond what
would be gained from a 0.1 percent fuel sulfur standard, would be hugely beneficial for human
health and would be a major step towards helping Southern California attain EPA's national air
quality standards. SCAQMD commented that while significant particulate emission reductions

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will result from IMO fuel sulfur limits, they will not be sufficient to implement the SIP which
assumes 30 percent control in 2014 and 50 percent in 2023. Moreover, particulate emissions
from ocean-going vessels are expected to be a significant contributor to local cancer risks near
ports in coming years. Even with 1,000 ppm sulfur fuel, emissions from ocean-going vessels are
expected to be the largest remaining contributor to local cancer risks near Southern California
ports by 2020, and, given expected cargo growth, a key hurdle in achieving state and local
polices to reduce cancer risks from DPM by 85% by that year. CATF commented that additional
PM control is critically  important in view of the increasingly strong evidence of the enormous
human health, environmental and climate impact of emissions from these engines. Such
emission reductions will also be critical in ensuring compliance with National Ambient Air
Quality Standards in U.S. coastal areas and ports.

       Several environmental organizations commented that while they support EPA's proposal
of initial standards for SOx emissions from Category 3 ships effective in 2015 as a good first
step, the Agency must establish specific PM standards and tighter SOx standards in the future.
Specifically, they urged EPA to commit now to conducting an additional rulemaking within the
next two years that would establish emissions standards for directly emitted PM2.5 (including
black carbon), as well "Tier 2" sulfur in fuel standards, that approach in stringency the levels set
by EPA in its recent highway heavy-duty engine rule and its non-road diesel rule, for effect in
the 2015—2020 time frame.  They commented that while they support EPA's proposal to require
measurement of PM emissions from ships, they do not believe that such a requirement should
delay the promulgation  of PM emissions standards.

       MECA urged EPA to take a leadership position of setting a timetable for further
reductions in the fuel sulfur level. MECA also expressed support for the Agency's plans to
evaluate the impacts of its proposed rulemaking on PM emissions, and to assess the feasibility of
further PM reductions from ocean-going vessels and propose a PM standard if appropriate.

       NESCAUM commented that the Agency should strengthen its commitment by setting a
date certain by which it will complete its  evaluation of the need for further PM reductions. ALA
and EDF commented that EPA should expeditiously examine and address direct PM emissions
from Category 3 ships to protect human health and the environment and take action addressing
direct PM  emissions in this final rule or in an immediate rulemaking that follows this action.
NAACA commented that the agency should pursue future efforts to ameliorate the remaining
PM emissions.

       The ports of Los Angeles and Long Beach commented that EPA should take further
action by working with  IMO to establish PM standards for category 3 engines or to otherwise
develop strategies to control PM beyond lower sulfur fuel.  The Port of Long Beach noted that
while it important to include PM limits in this rule-making, the national rule will only  apply to
U.S. flagged vessels.

       CATF and SCAQMD commented that technology forcing PM emissions reduction
requirements for large new marine diesel engines are legally required under Section 213 of the
CAA.  SCAQMD commented that while achieving additional PM reductions beyond the benefits
of low  sulfur fuel may pose technical challenges, the courts have held that section 213  is a
"technology-forcing" statute. Congress intended EPA to press for development and application
of improved technology rather than be limited by what exists today. The proposed rule and IMO


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standards, however, make no attempt to push PM control technology beyond the benefits of fuel
sulfur limits . EPA has long justified its earlier failure to require any reductions of Category 3
engines by the promise, respected by the courts, that EPA would in the present rulemaking adopt
requirements that fully satisfy the Clean Air Act's mandate. Unfortunately, the proposed rules do
not achieve the "greatest degree of reduction achievable through the application of technology
which the Administrator determines will be available ..." as specified in section 213. Nor do the
rules require such reductions "at the earliest possible date," as also required by Section 213.

NESCAUM(0356)
ALA+EDF (0366, 0227)
NAACA (0246)
NRDC (0227)
SCAQMD (0309)
CATF (0264)
Ohio Environmental Council et. al. (0314)
Port of Los Angeles (0232)
Port of Long Beach (0232)
MECA(0319)

(B)  Technological Feasibility of Further PM Reductions
       MECA commented that there are technologies to reduce PM emissions from new and in-
use marine diesel engines, such as diesel particulate filters (DPFs) and diesel oxidation catalysts
(DOCs), are commercially available today.  These catalyst-based emission control technologies
have already been installed on millions of new light-duty and heavy-duty vehicles and equipment
and as retrofit technology on hundreds of thousands of existing on-road and off-road diesel
engines worldwide to provide significant reductions in PM emissions,  as well as reductions in
hydrocarbon (including toxic HCs, like poly-aromatic HCs) and carbon monoxide (CO)
emissions.

       MECA commented that the successful application of these catalyst-based PM reduction
technologies is dependent on the use of low or ultra-low sulfur diesel fuel since sulfur levels in
the fuel can both deteriorate catalyst performance and contribute to PM emissions through the
formation of sulfate emissions across the catalyst. This is why EPA's recent final rulemakings
covering new highway, off-road, locomotive, and smaller marine diesel engines include  or take
advantage of the mandated use of ultra-low sulfur diesel fuel (15 ppm  S max.) to facilitate the
use of sulfur-sensitive, catalyst-based emission control technologies like DPFs and DOCs, as
well as NOx adsorber catalysts. Similarly, for large ocean-going vessels, the application of
catalyst-based DPFs and DOCs for PM reductions would not be practical until fuel sulfur levels
are reduced to 500 ppm S, or in some cases even 50 ppm S, or lower. In this NPRM, EPA has
only proposed reducing fuel sulfur levels to a minimum of 1,000 ppm for these large marine
diesel engines. MECA supports this 1,000 ppm sulfur requirement, but urges EPA to take a
leadership position of setting a timetable for further reductions in fuel  sulfur to the ULSD level.
This would extend catalyst durability (including SCR catalyst durability) and enable the use of
DOC and DPF technologies for the reduction of PM.

       CATF commented that the reduction of the sulfur content of diesel fuel is critical to
utilization of exhaust control technology that will produce more substantial PM reductions.
CATF commented that U.S. production and sale of ultra-low sulfur diesel fuel is presently or

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will by 2012 be required for all land-based motor vehicles, as well as locomotives and inland and
coastal marine diesel engines. Because USLD will be widely available in the U.S. within that
time frame, we also expect that advanced technologies that require the use of such fuel will then
be feasible for marine engines and thus will then represent the greatest degree of achievable
emission reduction under Section 213(a) of the Act.

       CATF also commented that available data on PM emissions from ships suggests  emission
rates of 0.25 to 0.3 g/kWh as an average, using low sulfur fuel, but significantly higher rates
using residual fuel, primarily due to sulfate particulate. Current on-highway heavy-duty diesel
engines have reduced PM levels to 0.01 g/kwh (combined with low NOx levels), and nonroad
engines will reduce PM levels to between 0.01 to 0.03 g/kwh by 2010. EPA's recent regulations
for Category 1 and 2 marine engines would require PM emissions to be reduced to 0.03 to 0.19
g/bhp-hr. We believe that similar levels are feasible for Category 3 marine diesel engines,
although special requirements may be appropriate for slow speed Category 3 diesels. We note
that such standards would likely require the use of diesel particulate filters that would
substantially reduce emissions of non-sulfate constituents of PM, such as black carbon, which as
noted earlier, is not only harmful to human health and the environment, but is a potent climate
forcing agent as well.

       CATF noted that particulate filter controls for land-based diesels have typically required
the use of a catalyst due to the low exhaust temperature in some applications; in order to achieve
effective operation of these  catalytic filters, ultra low sulfur diesel fuel is required. However,
Category 3 marine engines typically operate at higher temperatures than land-based diesels, and
thus particulate filters may be effective for use on such engines without the need of a catalyst. As
a result, ULSD may not be required for effective particulate control, and particulate filter
technology can be developed for large marine diesels operating on low sulfur distillate fuel.

       The World Shipping Council commented that the use of 15 ppm sulfur fuel in large bore
marine engines would exacerbate lubricity and other technical issues with operation of these
engines.  TOTE stated that the use of ultra-low sulfur fuel would require rebuilding its engines
which is currently not recommended.

       EGCSA stated that it does not agree with the claim that PM controls are not feasible for
engines using residual fuels. EGCSA also contested the claim that "cleaner distillate" is the most
effective means to achieve significant PM and NOx reduction for all marine diesel engines, not
just Category 3 engines. Test work indicates that in fact exhaust gas after treatment is capable of
PM levels lower than can be achieved by an ultra low sulfur diesel fuel.

       MECA(0319)
       CATF, et.al., (0264)
       EGCSA (0305)
       WSC (0325)
       TOTE (0289)

(C) Prevent Trade-offs Between NOX and PM

       Several commeters expressed concern that there is the potential for carbonaceous PM to
increase due to a NOx/PM tradeoff.  NESCAUM commented that, because of the potential for

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carbonaceous PM to increase due to a NOx/PM tradeoff, and because of the lack of certainty that
anticipated reductions in organic PM will actually occur, the Agency should strengthen its
commitment by setting a date certain by which it will complete its evaluation.

       NESCAUM(0356)
       NAACA (0246)
       NRDC (0227)
       CATF (0264)

(D) Other PM comments

       The Clean Air Task Force urged EPA to amend its requirement to measure PM emissions
to also require speciation of the PM to determine the emission rate of black carbon and other
constituents.

       Our Response:

       Even though the sulfur  limit is much lower than current levels, it is not clear if this fuel
sulfur level would be low enough to allow Category 3 engines to be equipped with the catalytic
PM filters similar to those being used by trucks today. If we were to require technology that
needs lower sulfur fuel, such as 15 ppm, ship operators would need to have access to this fuel
around the world and at this time, it is not clear if 15 ppm sulfur fuel could be made available
globally. Operating on higher  sulfur fuel, such as for outside of our waters, could otherwise
result in damage to the PM control equipment.  Also, further evaluation is necessary to determine
if any issues would  arise from operating Category 3 marine engines on ultra-low sulfur fuel.  In
any case, the 1,000 ppm sulfur fuel requirement alone will eliminate 85 percent of PM emissions
from ships operating in EGAs.  The final standards are consistent with the statutory direction to
set standards requiring the greatest degree of emission reduction that is achievable in the given
time frame.

       To further our understanding of PM emissions from ships, we are  requiring engine
manufacturers to measure  and report PM emissions even though we are not finalizing a PM
standard.  The information gathered will help support our efforts as we continue to evaluate the
feasibility of achieving further  PM reductions. It will also help us to better characterize the PM
emission rates associated with operating Category 3 engines on distillate fuel and will also  allow
further evaluation of the PM reduction potential  of exhaust gas scrubbers.  If we determine that
further PM reductions are  feasible or that a specific PM limit is necessary to ensure anticipated
reductions in PM emissions from ships, we may propose PM standards for Category 3 engines in
the future.

       We are not establishing new engine standards for PM or SOx emissions.  We intend to
rely instead on the use of cleaner fuels, or equivalent approaches.  SOx emissions and the
majority of the direct PM emissions from Category  3 marine engines operated on residual fuels
are a direct result of fuel quality, most notably the sulfur in the fuel. Other components of
residual fuel, such as ash and heavy metals, also contribute directly to PM.

       Using cleaner distillate  fuel is an effective means to achieve significant PM and SOX
reductions for Category 3 engines.  We are finalizing requirements to substantially reduce the

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sulfur content of fuel purchased in the U.S. for use in an EGA.  This complements Annex VI
which requires that fuels used in EGAs around the world have sulfur levels no higher than 1,000
ppm.  This sulfur limit is expected to necessitate the use of distillate fuel which will result not
only in reductions in sulfate PM emissions, but also reductions in organic PM and metallic ash
particles in the exhaust. In contrast, any potential increase in carbonaceous PM due to NOx
emission control technology is relatively small.

       We are not setting a date by which we will complete an evaluation of PM emissions. We
cannot accurately predict the rate at which we will gather information from our requirement to
measure and report PM emissions. Sales of Category 3 engines for U.S.-flagged vessels are
unpredictable, but always very low. Moreover, since PM emissions will be reported by family
and we allow manufacturers to recertify using carryover data, the number of PM test results we
receive each year will be often be less than the total  number of Category 3 engines sold in that
year.  To the extent we revisit the issue of further PM emissions control, we will consider the
impact of potential NOx/PM tradeoffs in addition to other issues raised by commenters.

       While we recognize that speciated measurements of PM emissions would be valuable, we
are not finalizing such a requirement at this time.  Requiring full speciation of PM emissions
would add significantly to cost and complexity of the measurement. Moreover, EPA does not
require speciated PM measurements for any other nonroad engine category.
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CHAPTER 4: Fuel Standard and SO2 Controls

       What We Proposed:

       The comments in this section generally correspond to Section IV of the preamble to the
proposed rule, where we describe the changes to our diesel fuel program, and Section V.C where
we discuss equivalent approaches to meeting the fuel sulfur limits. They also correspond to
Sections III.B and VIA, where we describe how our program addresses Particulate Matter (PM)
emissions.  The technical feasibility of our fuel program is described in Chapter 4 of the
Regulatory  Impact Analysis.

       Please see Chapters 2 and 10 of this Summary and Analysis of Comments document for a
discussion of fuel issues related to the North American Emission Control Area and the Great
Lakes, respectively.

4.1 Amendments to the Diesel Fuel Sulfur Program

4.1.1  1,000 ppm Fuel Sulfur Standard

4.1.1.1 General

       What Commenters Said:

       Support

       A number of commenters, in both written comments and hearing testimony, expressed
support for  our proposal to allow for the production, distribution, and sale of 1,000 ppm sulfur
fuel for use in EGAs. Commenters stated that they generally supported the use of lower sulfur
fuels in Category 3 (C3) engines, harmonization with MARPOL Annex VI, and/or the allowance
for U.S. refiners to produce 1,000 ppm sulfur fuel.

       The National Association of Clean Air Agencies (NAC AA) and American Thoracic
Society commented that they support the proposal to include the EGA fuel standard of 1,000
ppm fuel  by 2016 for C3 vessels.

       The Marsh Area Regional Council, Earth Day  Coalition, Ohio Environmental Council,
the Ohio League of Conservation Voters, Johnson Matthey, and the Manufacturers of Emission
Controls Association (MECA) commented that they support the proposed 1,000 ppm sulfur
standard;  however, they also suggested several conditions to this support, including fuel quality
and further  reductions, as noted in section 4.3 below.

       The World Shipping Council (WSC)and the Pacific Merchant Shipping Association
(PMSA) commented that they fully  support the proposal to codify and adopt the Annex VI sulfur
standards, and expressed support for maintaining consistency with the requirements of Annex
VI.  The commenters further stated that they support the revision of the 40 CFR Part 80 fuel
regulations  to allow for the sale and use  of 1,000 ppm fuels, as the commenters believe that
failure to provide these fuels would effectively force the use of 15 ppm fuel in ocean-going
vessels—potentially leading to technical issues (e.g., lubricity, viscosity, etc.) with operation of
these engines with ultra-low sulfur limits.

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       The American Lung Association (ALA) and the Environmental Defense Fund (EDF)
commented that they strongly support EPA's proposal to mirror the fuel standards required in
EGAs, and noted that without this rulemaking, refiners would not be able to produce fuel with a
sulfur level of 1,000 ppm.

       The Engine Manufacturers Association (EMA) commented that it fully supports the
strategy of pursuing harmonized international emission limits for C3 engines, and noted that
otherwise, a distinct EPA program for C3 marine engines would result in ensuring that no C3
engines/vessels would be certified or registered under U.S. regulations which would
disadvantage domestic engine manufacturers and shipbuilders.  The commenter further stated
that it supports the proposal requiring the use of fuel with a maximum sulfur content of 1,000
ppm or an IMO-certified scrubber system.

       The Independent Fuel Terminal  Operators Association (IFTOA) commented that it
commends EPA for the proposal to amend the diesel program to allow for 1,000 ppm sulfur fuel
and supports its adoption.

       The Texas Commission on Environmental Quality (TCEQ) commented that it supports
the 1,000 ppm standard.

       Matson Navigation Company commented that it supports the revision of the diesel fuel
program to allow for the sale and use of 1,000 ppm sulfur fuels in ocean-going vessels (OGVs).

       The Pacific Merchant Shipping Association (PMSA) commented that it strongly supports
the revision of the diesel fuel program to require the use of 1,000 ppm sulfur fuels for OGVs.

       Clean Air Task Force (CATF), et al commented that they support the proposal to
establish enforceable limits on the sulfur content of fuel burned by C3 engines in OGVs.

       Maersk Inc. commented that it supports the proposal to ensure availability of fuels
required for use inside the EGA.

       Oppose

       The Canadian Shipowners Association expressed the concern that no blended fuels
currently meet a 1,000 ppm sulfur limit. The commenter also raised concerns about pricing of
1,000 ppm fuel. Murphy Oil USA commented that there is no cost-effective technology that
would enable the commenter to produce a #6 fuel oil at 1,000 ppm sulfur after 2014. The
commenter noted that at that time, it would need to supply vessels with straight diesel fuel,
which would be a significant increase in costs for its customers.

       Our Response:

       As discussed in Section IV of the preamble to the proposed rule, we believe that because
of the Annex VI limits on the sulfur content of fuel used in EGAs, the existing diesel fuel sulfur
program should be revised  to allow for the production, distribution, purchase, and use of  1,000
ppm sulfur fuel oil for use in C3 marine vessels. Therefore, we are finalizing the new 1,000 ppm
sulfur category for fuel produced and purchased for use in C3 marine vessels (called "EGA
marine fuel") to harmonize EPA's diesel sulfur program with the requirements of Annex  VI.


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       Since the requirements for 1,000 ppm sulfur fuel will apply to any EGA established
around the world, this fuel will likely be produced by refiners in other countries. Under our
diesel fuel program prior to this final rule, fuel meeting a 1,000 ppm sulfur level would likely be
distillate fuel, and thus subject to the 15 ppm NRLM sulfur limit in 2014 and later.  If EPA were
to require that fuel produced, distributed, and sold for use for Category 3 vessels in the U.S. meet
the 15 ppm sulfur standard after 2014, we believe that Category 3 vessel owners would simply
purchase 1,000 ppm sulfur fuel elsewhere to be used here in the North American EGA. This
could be an extremely inefficient process for ship owners, and would mean a loss of sales for
U.S. refiners of fuel that these Category 3 vessel  owners purchase. These impacts would add to
the costs and burdens of the program with no corresponding environmental benefit. Therefore,
we believe that it is important to harmonize our standards with Annex VI by allowing U.S.
refiners and importers to produce 1,000 ppm sulfur fuel for use by Category 3 vessels.

       As discussed in the RIA and in  section IV.C of the preamble to this final rule, we agree
that the fuel sulfur limit of 1,000 will likely lead to the use of distillate fuel. The cost of
switching from residual to distillate fuel is discussed in Chapter 6 of this document. While there
may not currently be blended fuels available at the  1,000 ppm sulfur level, we do believe that
this sulfur limit is achievable (whether  by blending or refining). Please see Chapter 4 of the RIA
for a detailed discussion on feasibility.

4.1.1.2 Proposed Prohibition on Use of Fuel Greater than 1,000 ppm

       What Commenters Said:

       Several commenters expressed concern that the proposed prohibition on U.S. production
and sale of fuel greater than 1,000 ppm sulfur for use in EGAs would conflict with the flexibility
offered under the EGA standards  to use abatement technology in lieu of lower sulfur distillate
fuels. These comments are discussed below in section 4.6 of this  Summary and Analysis of
Comments document. However,  a few commenters did state that  they support the proposal to
prohibit the production and sale of marine fuel oil above  1,000 ppm sulfur for use in any marine
diesel vessel operating within U.S. waters.

       The Exhaust Gas Cleaning Systems Association (EGCSA) commented that the
prohibition of the import, manufacture, and sale of marine fuels with sulfur content greater than
1,000 ppm will have a deleterious impact on a significant area of marine commerce in the U.S.
The commenter stated that it believes that a prohibition on the  sale of these fuels will result in the
majority of internationally trading vessels purchasing bunkers outside the U.S. EGCSA further
commented that such a prohibition will not provide any significant support to the enforcement of
the EGA requirements.  The commenter recommended that EPA fully align with MARPOL
Annex VI and allow the import, manufacture, and sale of all types of marine diesel and residual
fuels.

       CLIA and Chamber of Shipping of America stated that they believe higher sulfur fuel
should also be permitted for sale in the U.S. for use outside the EGA.

       PMSA commented that it believes there needs to be some  flexibility in the rule, and
raised concern about the prohibition of production and sale of higher sulfur fuels. The
commenter stated that we need to ensure that appropriate fuels remain available for steam
propulsion vessels and boilers that are not capable of using distillate fuels. PMSA further

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commented that the rigid fuel requirements could have the unintended consequence of forcing
these vessels out of service or to use unsafe fuels if they cannot obtain the HFOs they require.

       The Great Lakes Maritime Task Force (GLMTF) commented at length that the NPRM
does not contain  material, data, or findings necessary under Clean Air Act (CAA) section 21 l(c)
to ban the use of residual fuels on vessels operating on the Great Lakes. The commenter also
commented that EPA did not adequately explain the health basis or economic effects for
choosing to ban fuels above 1,000 ppm sulfur.

       The International Association of Drilling Contractors (IADC) commented that, with the
proposed elimination of fuel above 1,000 ppm sulfur, all U.S. fuel for marine vessels in domestic
service would then met or exceed the requirements established under MARPOL Annex VI.  The
commenter suggested that, with the timely approval of the [North American] EGA and changes
to the diesel fuel  program, EPA should prepare a notice for submission to IMO stating that the
requirements of regulation 18 (relating to the bunker delivery note and representative fuel
sample) will not be imposed on vessels in domestic service as the U.S. diesel fuel program
ensures that fuel  supplied to such vessels meets or exceeds the Annex VI requirements. (The
commenter also noted that corresponding changes to 40 CFR 1043.60 and other affected sections
would be required.)

       Our Response:

       This rulemaking does not affect the sale of high sulfur residual fuel for use outside of
EGAs (or by a vessel using an equivalent approach, as discussed below in section 4.6). In
addition, higher sulfur residual fuel may be sold for use in any steamships not subject to the fuel
sulfur limits (see Chapter 10 of this Summary and Analysis of Comments document).  Such fuel
must be clearly designated on PTDs, and the use of this fuel in an EGA associated areas (on a
vessel not equipped with a scrubber, or other equivalent technology) could result in an
enforcement action.

       With regard to the comment about EPA submitting a notice to IMO regarding bunker
delivery notes and sampling, we note that vessels that operate only domestically (as specified in
§1043.10(a)(2)) and comply fully with the fuel requirements of 40 CFR part 80 are deemed to
comply fully with the requirements of the Annex (the operating and recordkeeping requirements
of §§1043.60 and 1043.70).

       EPA confirms that it is finalizing the revisions to the fuel sulfur program under
21 l(c)(l)(A).  As explained in the proposed rule, EPA has previously examined the how
emissions products of sulfur in nonroad, locomotive, and marine diesel fuel used in these engines
contribute to PM and SOx pollution.  See 69 FR 38958. The proposed rule also provided
detailed information demonstrating that emissions of these pollutants cause or contribute to
ambient levels of air pollution that endanger public health and welfare.  Control of sulfur to
1,000 ppm for fuel  used in C3 vessels in the EGA and EGA associated areas will lead to
significant, cost-effective reductions in emissions of these pollutants, with the benefits to public
health and welfare significantly outweighing the costs.

       EPA also considered "other technologically or economically feasible means of achieving
emission standards under section [202 of the Act]" as required by 21 l(c)(2)(A). This provision
has been interpreted as requiring consideration of establishing emission standards under section

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202 prior to establishing controls or prohibitions on fuels or fuel additives under section
211(c)(l)(A). See Ethyl Corp. v. EPA, 541 F.2d. 1, 31-32 (D.C. Cir. 1976). In Ethyl, the court
stated that section 21 l(c)(2)(A) calls for good faith consideration of the evidence and options,
not for mandatory deference to regulation under section 202 compared to fuel controls. Id. at 32,
n.66.  As discussed in Chapter 3 of this  document, we are not setting PM standards at this time
and anticipate that the majority of direct PM emissions from C3 marine vessels can be reduced
through lower fuel sulfur standards. Further, as discussed below, we also note that the rule
provides for the sale of higher sulfur fuel if a vessel employs technology that achieves equivalent
reductions in PM.

       EPA disagrees with GLMTF's comment that it has not  satisfied these requirements of the
CAA.  GLMTF argues that EPA's analysis fails to consider that Great Lakes' vessel account for
a relatively small percentage of total emissions from C3 vessels.  Section 21 l(c)(l)(A) of the
CAA requires that before regulating a fuel or fuel additive the Administrator must determine
that, "any emission product of such fuel or fuel  additive causes, or contributes, to air pollution
which may reasonably be anticipated to endanger public health or welfare." The focus of EPA's
required analysis under 21 l(c) is the emission product of a fuel or fuel additive.  Accordingly, as
noted above, in this rule EPA provided information  on the health effects resulting from emission
products (PM and SOx) from marine diesel fuel. EPA's analysis clearly shows that emissions of
PM and SOx cause or contribute to air pollution that endangers public health and welfare.
Importantly, EPA's finding is based on  the nationwide effects of emissions because the rule
applies to C3  vessels nationwide. EPA's analysis is not limited to the Great Lakes because
EPA's rule is not limited to the Great Lakes.

       GLMTF does not dispute this finding but instead argues that EPA had to make a finding
that vessels in the Great Lakes cause or contribute to the endangerment of public health.
However, the CAA does not require that EPA parse its analysis to this level- that is, EPA is not
required to make separate findings for every subsection of an industry or every specific region of
the country. Instead, the CAA requires  that EPA find the emission  product of a "fuel or fuel
additive causes, or contributes," to air pollution that may endanger public health or welfare. The
focus in 21 l(c)(l)(A) is on the fuel or fuel additive, rather than on a particular industry that uses
the fuel or fuel additive. EPA's obligation is to make  a finding based on the scope of its rule
rather than on a subset of the rule.  Therefore, EPA has made the required finding under
21 l(c)(l)(A) based on its analysis of PM and SOX emissions resulting from use of marine diesel
fuel nationwide.

       GLMTF also argues that significant "mode shifting" (i.e., transport of goods via modes of
transportation other than rail) will actually result in an increase in emissions. EPA has provided
a detailed response to this issue in Chapter 10 of this Summary and Analysis of Comments
document.  In sum, while our cost analysis shows that operating costs will increase for all
vessels, including Great Lakes vessels, this increase will not be so high as to cause the removal
of vessels from the U.S. Great Lakes fleet or the shift  of significant amounts of cargo from ships
to land-based transportation in the Great Lakes area.

       Finally, GLMTF argues that EPA's regulation is not adequately tailored, pointing
specifically in several places to steamships in the Great Lakes.  As noted above, the CAA does
not require EPA to determine that particular industries, or subsections of industry, emit
pollutants in levels that cause or contribute to the endangerment of public health or welfare.
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That said, EPA also notes that the final rule exempts steamships that operate in the Great Lakes
from the fuel sulfur requirements. See 40 CFR 1043.95.

4.1.2 Compliance and Implementation

4.1.2.1 Elimination of 500 ppm Sulfur Fuel Standard After 2014

       What Commenters Said:

       Euromot commented that, due to environmental reasons, it does not see any need for
actively phasing out the 500 ppm locomotive and marine (LM) diesel fuel standard. The
commenter stated that C3 engines can operate on 500 ppm fuel as well as on 1,000 ppm fuel.

       IFTOA commented that it strongly endorses the primary proposal to eliminate the 500
ppm LM diesel fuel category, as it is the easiest way to harmonize the C3 rule and the existing
diesel program, and would help to simplify the diesel program's designate and track (D&T)
provisions.  The commenter stated that it believes that the elimination of the 500 ppm LM
standard provides a much simpler solution for the regulatory regime.

       Our Response:

       As discussed in the preamble to the final rule, we are eliminating the 500 ppm LM diesel
fuel standard once the 1,000 ppm standard becomes effective to simplify the diesel sulfur
program. Under the diesel sulfur program prior to this final rule, 500 ppm LM diesel fuel could
be produced by transmix processors indefinitely,  and could be used by locomotives and marine
vessels that do not require 15 ppm. The  original intent of allowing for this fuel was to serve as
an outlet for interface and downgraded diesel fuel post-2014 that would otherwise not meet the
15 ppm sulfur standard. However, we believe that the 1,000 ppm sulfur EGA marine fuel can
now serve as this outlet.  We believe that transmix generated near the coasts would have ready
access to marine applications, and transmix generated in the mid-continent could be shipped via
rail or fuel barge to markets on the coasts.

       Elimination of the 500 ppm LM diesel fuel standard will simplify the diesel sulfur
program such that sulfur can serve as the distinguishing factor for fuels available for use after
2014 (the designated products under the  diesel fuel program will thus be: 15 ppm motor vehicle,
nonroad, locomotive, and marine (MVNRLM) diesel fuel; heating oil; and 1,000 ppm EGA
marine fuel). Further, this will help to streamline the D&T program as there will no longer be a
need for a fuel  marker to distinguish 500 ppm LM diesel  fuel from heating oil and there will not
be a need for the Northeast/Mid-Atlantic (NE/MA) area.

       Regarding the comment from Euromot that the 500 ppm LM diesel fuel standard should
remain for environmental reasons because C3 engines could operate on this fuel, we note that
under the diesel sulfur program prior to this rule,  the 500 ppm LM diesel fuel sulfur standard was
for locomotives and Category 1 and 2 vessels and could be used indefinitely.  Category 3 vessels
could use distillate  or residual fuel with much greater sulfur levels, as the diesel program did not
regulate these heavier fuels (see discussion in section IV.B. 1). Under today's program, with the
elimination of the 500 ppm LM diesel fuel standard,  locomotives and Category 1 and 2 vessels
will now be required to use 15 ppm MVNRLM diesel fuel and Category 3 vessels will now use
fuel with a controlled sulfur level of 1,000 ppm.

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4.1.2.2 Labeling

       What Commenters Said:

       EGCSA commented that fuel pump labeling is unlikely to apply to the bunkering of
merchant ships. The commenter noted that in such cases, the pump may be situated in a pump
room below deck and any labeling would not be visible.

       Our Response:

       We appreciate the commenter's comments on labeling. As we understand that traditional
pump labeling may not be feasible in many situations for 1,000 ppm sulfur EGA fuel, we are
committed to working with industry to develop workable solutions to help encourage proper fuel
usage and discourage misfueling.

4.2 Proposed Alternative Options

       What Commenters Said:

       While it supports the primary proposal to eliminate the 500 ppm LM category after 2014,
IFTOA commented that if it is determined that some railroads require the 500 ppm sulfur fuel in
the mid-continent and the elimination would be significantly detrimental, then the commenter
would support the expanded Northeast/Mid-Atlantic (NE/MA) area.

       Our Response:

       We appreciate the comments on the proposed alternative options.  We did not receive
any comments stating that the elimination of the 500 ppm LM diesel fuel category would be
detrimental to locomotives (or Category 1 and 2 vessels) that would have used this fuel; further,
we believe that simplification of the designate and track program will greatly benefit the fuel
production and distribution industry. Therefore, as noted above, we are finalizing the primary
proposal to eliminate the 500 ppm LM diesel fuel standard when the 1,000 ppm sulfur EGA fuel
standard takes effect in 2014.

4.3 Other

4.3.1 Category 1 and 2 Engines on C3 Vessels

       What Commenters Said:

       Euromot commented that it seeks clarification on fuel use in Category 1  and Category 2
engines onboard Category 3 Vessels.  Specifically the commenter asked if: a) Cl and C2 engines
be subject to the 15 ppm sulfur standard; b) it is envisioned that C2 engines and aftertreatment
systems need to be compatible with 1,000 ppm fuel; c) Cl and C2 engines operating on 1,000
ppm fuel need to comply with C3 emission limits; and d) Cl and C2 engines operating outside
U.S. waters on potentially unspecified fuel with sulfur limits much greater than  15 ppm be able
to comply with the proposed exemption (i.e., EPA's Tier 3 marine standard).
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       NACAA and CATF commented that they are opposed to any relaxation of the 15 ppm
fuel sulfur standard for Cl  and/or C2 engines. CATF further stated that it believes that the
higher sulfur would not only increase emissions from such engines, but would also compromise
the effectiveness of controls for limiting directly emitted PM from those engines.

       ALA and EDF commented that they do not support the use of 1,000 ppm fuel in C2
engines.  The commenters further stated that they do not believe there is any reason to relax the
fuel sulfur standards for C2 engines in this rulemaking.

       EMA commented that it supports the use of 1,000 ppm fuel in C2 engines  installed on
C3-powered vessels (instead of 15 ppm sulfur fuel) when operating in EGAs.  The commenter
noted that these vessels could otherwise have to accommodate three separate fuel  systems (1,000
ppm EGA marine fuel, bunker fuel for use outside EGAs, and 15 ppm diesel fuel for C2
engines), which it believes is unworkable and cost-prohibitive.

       Our Response:

       In general, we are not relaxing the sulfur standards for Category 1 and 2 engines. We are
allowing the use of 1,000 ppm sulfur EGA marine fuel in certain Category  1 and 2 auxiliary
engines installed on Category 3 vessels only.  (See Chapter 5 of this Summary and Analysis
document for additional discussion of this issue.) Category 1 and 2 vessels will still be required
to use NRLM diesel fuel, consistent with the concerns expresses by CATF. Allowing the use of
1,000 ppm sulfur fuel in auxiliary engines on Category 3 vessels will still result in emissions
benefits as most existing Category 3 vessels use residual fuel for their Category 2  auxiliary
engines, and high sulfur distillate fuels for their  Category 1 engines. Note also that this
allowance also does not preclude the use of 15 ppm NRLM diesel fuel in these engines.

4.3.2  Fuel Quality

       What Commenters  Said:

       The Marsh Area Regional Council, Earth Day Coalition, Ohio Environmental Council,
and the Ohio League of Conservation Voters commented that they believe EPA should adopt a
fuel quality standard specifying the sale of distillate fuel for marine use in U.S. waters. The
commenters urged EPA to  adopt minimum fuel  quality requirements for all marine diesel fuel
sold in the U.S. based on the characteristics of marine distillate fuel (MGO or DMA).

       The City of New York commented that EPA should continue to monitor fuel content and
ambient air to ensure that heavy metals are reduced with sulfur and to undertake additional
rulemakings if necessary.

       Our Response:

       We appreciate the commenters' concerns. The regulations at 40 CFR Part 80 Subpart I
currently control sulfur content, and cetane or aromatics. EPA's proposed  action  only proposed
amendments to the fuel sulfur requirements, and we believe that this is appropriate given the
environmental focus of and justification for this  rulemaking. Expanding to other fuel properties
would require a separate justification and action, as it is therefore beyond the scope of what EPA
proposed. EPA notes that fuel quality standards, as recommended by the commenters, are

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generally regulated by the American Society of Testing and Materials (ASTM, the recognized
standard-setting body for fuels and additives in the United States) and the National Institute of
Standards and Technology (NIST, the federal agency that develops and promotes measurement,
standards, and technology). Fuel quality is often handled at the state level by State Weights and
Measures departments.

       Please see section  1.1.6 of this document for a discussion of the City of New York's
comments on heavy metals.

4.3.3 Further Reductions in Fuel  Sulfur

       What Commenters Said:

       The South Coast Air Quality Management District (SCAQMD) commented that it urges
EPA to take additional actions that expedite and strengthen emission reductions; specifically,
that EPA adopt technology-forcing particulate emission limits, and consider lower sulfur fuel
than 1,000 ppm.

       The Marsh Area Regional Council, Earth Day Coalition, Ohio Environmental Council,
and the Ohio League of Conservation Voters commented that they believe additional control
"tiers" containing more stringent sulfur limits in the future as lower sulfur fuel becomes more
widely available, allowing land-based PM control technologies to be applied to large marine
diesel engines.

       CATF et. al. commented that they believe the proposal should have been expanded to set
tighter sulfur standards over the next few years.

       MECA and Johnson Matthey commented that they urge EPA to take a global leadership
position of setting a timetable for further reductions in fuel sulfur to ULSD level, as they believe
that this would extend catalyst durability and enable use of diesel oxidation catalyst (DOC) and
diesel particulate filter (DPF) technologies for the reduction of PM.

       Our Response:

       We note that the lower fuel sulfur standards for C3 marine engines are intended to make
fuel available in the U.S. that is harmonized with the international EGA fuel sulfur standards. If
EPA were to take action to further reduce the sulfur of EGA marine fuel sold in the U.S., we
believe that Category 3 vessel owners would simply purchase 1,000 ppm sulfur fuel elsewhere  to
be used here in the North American EGA. This could be an extremely inefficient process for
ship owners and would not result in any environmental benefit. Further, it could put U.S. entities
that are regulated by this rule at a competitive disadvantage because the U.S. regulations would
then not be harmonized with the standards of the rest of the worldwide maritime industry.  Please
see Section 3.3.3 of this document for further discussion on the relationship between further
reductions in fuel sulfur and PM emissions.
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4.4 Technical Feasibility of Fuel Switching

       What Commenters Said:

       The Canadian Shipowners Association (CSA) raised a number of technical concerns
associated with switching from high sulfur residual fuel to lower sulfur distillate fuel. CSA
commented that vessel owners also have significant challenges with assuring the necessary
modifications are made to vessels engaged in international trade which would call in the U.S.
EGA. In this operating scenario, vessels would have to retrofit fuel storage and supply systems
to enable the carriage and safe switch-over from a non-ECA to an EGA compliant fuel. In
conjunction with this physical retrofit, new procedures and training protocols will need to be
established to assure safe fuel switching occurs prior to the vessel's entry into the EGA. CSA
also commented that there is a substantial loss in speed and therefore of vessel productivity and a
significant increase in daily fuel consumption due to the loss of calorific values in conversion
from residual to distillate fuels.

       Chamber of Shipping of America commented that safety issues have arisen due to fuel
switching. As an example, recently the San Francisco Harbor Safety Committee received input
from U.S. Coast Guard and  San Francisco Bar Pilots concerning propulsion problems while
vessels are using low sulfur fuel as required by the California Air Resources Board (CARB). To
date, at least seven propulsion losses have been documented in Los Angeles/Long Beach and San
Francisco Bay and a number of other instances of reduced maneuverability relating to vessels'
inabilities to go to dead slow ahead or astern at reduced RPMs/low speeds have also been
documented. These issues must be fully identified and solutions found which will eliminate
these situations which have  the potential to negatively the impact in a far more adverse way than
the air emissions they seek to reduce.  Prior to imposing any new low sulfur fuel requirements at
the federal level, EPA is urged to work closely with the USCG in assuring adequate and
environmentally protective resolution of these issues.
       Maersk commented that they have significant experience switching from residual to
distillate fuel on their vessels, noting that they have been an  industry leader in environmental
improvements, in both vessel design and operations. Maersk stated that this is particularly
evident in their ongoing environmental commitment on the U.S. west coast. Since March 2006,
Maersk's ships have voluntarily switched to average 0.1 percent sulfur distillate fuel in both
main and auxiliary engines,  and operated auxiliary engines in "low-NOx mode" on vessels so
equipped when near or in California ports, and while at dock in other west coast ports.
Reductions achieved have been 95 percent of SOx, 86 percent of PM and at least 12 percent of
NOx. Maersk has now made over 1200 vessel calls with this lower sulfur fuel, reducing air
emissions by over 2,400 tons, at a fuel differential cost of over $20 million. Maersk has openly
shared its experiences with the agencies, the public and the industry, and continues to believe
that fuel switching is the fastest and most cost effective way to reduce vessel emissions.

       Chamber of Shipping of America (0256)
       Maersk (0261)

       Our Response:

       In order to continuously operate on a distillate fuel, some vessels - such as the ships that
operate almost exclusively on residual or intermediate fuel blends currently - will have to make

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some modifications to their fuel distribution systems. Since distillate fuel is less viscous than
residual or intermediate fuel oil, fuel system heaters are not required for operating on distillate
fuel. With residual fuel, these heaters are needed to ensure that the fuel is injected into the
engine at the proper temperature and viscosity. Additionally, since the distillate fuel does not
contain the heavy metals or large hydrocarbon compounds typically found in the residual or
intermediate fuels, the vessel will no longer require the extensive filtering / settling tanks within
the fuel distribution lines for the distillate fuel system. In addition, some of these vessels may
require an upgraded fuel injection system as the existing fuel nozzles may not be optimal for
continual use of the lower viscosity fuel.

       However, removal of the settling tanks / extensive filtering systems will allow more room
on the vessel for fuel storage tanks or additional cargo, if the vessel owner chooses to modify the
vessel to only operate on distillate fuel. As the majority  of vessels today carry some form of
distillate fuel for use in emergencies or for routine engine shut-down / start-up for before and
after engine maintenance,  almost all engine manufacturers publish standard operating procedures
for ensuring safe fuel switching between residual or intermediate fuel oil and a distillate fuel.
Provided these recommended operating procedures are followed correctly, onboard the vessel
'incidents' due to operation on or switching to a distillate fuel should be avoided, and as this
procedure could be utilized in  a shipboard emergency, all crew members should be properly
trained in these procedures.

       The marine distillate fuel has a lower energy content on a per volume basis when
compared to the residual fuel;  however, per ton, the distillate fuel's energy density is larger than
the residual  fuel.  This means that when switching from residual fuel to distillate fuel, if the
vessel's tanks are volumetrically limited (i.e., the tanks can  only hold a set quantity of fuel
gallons), the distance and possibly  speed a vessel can travel on the distillate fuel may be slightly
shorter and slower than the distance and speed the vessel could travel on the residual fuel due to
the lower volumetric energy content of distillate fuel, which could require compensation.  This
distance reduction would be approximately 5%, and the vessel could increase the throttle slightly
if the speed  or if maneuverability / operation at the lower speeds was an issue. However, if the
vessel is limited by weight, the higher energy content per ton of fuel would provide an
operational advantage for the vessel.

       Due to emission requirements for the state of California Air Resources Board and
voluntary  environmental measures, Maersk Lines have extensive experience with operating
vessels on - and switching vessels  to - distillate fuel.  In their experience, Maersk operators have
been able to successfully switch between residual fuel oil and distillate fuel oil without incident,
such as propulsion losses,  due to crew training and following proper switching procedures. As
Maersk has been openly reporting their results and procedures with the public, industry, and
federal agencies, their experiences  are available to inform other vessel operators with potential
fuel switching concerns.

       The maritime industry  has analyzed the differences between residual and distillate fuel
compositions to address any potential issues that could arise from switching operation of a
Category 3 engine from residual fuel to distillate fuel,  such as propulsion losses. The results
from this research has evolved into routine operational switching procedures that ensure a safe
and efficient way for the Category  3 engines to switch operation between the residual and
distillate fuels.  Engine manufacturers, fuel suppliers, the American Bureau of Shipping, and the
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U.S. Coast Guard have provided guidance on fuel switching procedures.5'6'7'8'9 More detail on
these fuel switching procedures and technical considerations is provided in the RIA.

4.5 Fuel Availability

       What Commenters Said:

       Several commenters raised concerns regarding fuel availability.  CLIA stated that the
proposed EGA will increase the demand for distillate fuel, particularly in the North American
market.  The recent Secretary General's expert group report estimates that the Baltic and North
Sea SECA's (although very small in size) represent 8 percent of the global fuel demand. The
EPA estimates that the North American EGA (despite its size) will place only a 4% demand for
additional distillate in the world. Potentially other local regulations will increase demand at the
same time. Additionally the European rules for operation in port while alongside requiring 0.1
percent sulfur content fuel will take effect in 2010. Conservatively, these requirements will
require an additional 15 percent production of distillate fuels. These additional demands for
distillate fuel call into question whether enough distillate fuel will be available in 2015 to meet
the requirements identified.

       CLIA also commented that the U.S. and Northern Europe are today net exporters of
distillate fuels with excess refining capacity. Current economic conditions in the world have
depressed the demand for fuels both refined and residual.  It is not clear whether shipping will
recover from the worldwide recession by 2015.  If it does, how much additional demand for
distillate will this create?  Additionally, it is unclear as to whether low sulfur fuels  will be readily
available in select U.S. ports when the EGA comes into force. For example, low sulfur fuels are
currently not available in  Seattle or Vancouver where cruise ships bunker fuel for the Alaska
cruise  season.  Those U.S. refineries that have not been required to comply with emission
controls in the past will have to install new and updated emission controls for all existing and
new capacity; a significant financial  and logistical  disincentive to increase output of distillate
fuels domestically. This requirement calls  into question whether U.S. and possibly Canadian
refineries would be able or willing to invest in additional capacity for the marginally increased
market expected as a result of this rule.  If there is an under supply of distillate fuel in the North
American market as a result, the required distillate fuels will have to be  produced elsewhere and
shipped to the U.S. Likewise, residual fuel will be produced here and shipped to other markets
where  it is still authorized for use.  This increase in the transportation of fuels will  result in an
increase in greenhouse gas production.

       CLIA raised the concern that if additional refining is conducted in developing nations
where  the retrofitting with additional and more modern emission control equipment and systems
5 MAN B&W Diesel, "Operation on Low-Sulphur Fuels; Two-Stroke Engines," 2004.
6 Wartsila, "Low Sulphur Guidelines," January 9, 2006.
7 American Petroleum Institute, "Technical Considerations of Fuel Switching Practices," API Technical Issues
Workgroup, June 3, 2009.
8 American Bureau of Shipping, "ABS Notes: Use of Low-Sulphur Marine Fuel for Main and Auxiliary Diesel
Engines," Fuel Oil Piping, EWZ-001-02-P04-W007, Attachment G - Revision 1.
9 United States Coast Guard, "Avoiding Propulsion Loss from Fuel Switching: American Petroleum Institute,
Technical Considerations," Marine Safety Alert 03-09, June 16, 2009.

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are not required, more CCh, SOx, NOx and particulate matter will be emitted in the production
and transportation of the lower sulfur fuels.

       CLIA commented that this requirement for distillate fuels in the marine industry will
indeed have an impact on other industry segments. While the availability of crude stock may
rise or fall with the world market, there is a limit to the amount of distillate that can be produced
from a given barrel of oil - even with enhanced refining processes.  With the marine industry
now competing for this product, there undoubtedly will be significant upward pressure on the
pricing structure for all industries (as well as the consumer) sharing the demand for distillate
fuels.  In this regard, we do not believe that the indirect economic impact of this regulation on
other industries or communities has been adequately addressed.  For example, there has been no
evaluation of how the increased demand for distillate fuels resulting from the U.S. EGA will
affect home heating oil prices in different regions of the  country or other indirect impacts on
others such as the Department of Defense and Department of Homeland Security.

       Chamber of Shipping of America commented that, at current demand rates (low sulfur in
certain regions including existing SECAs in the Baltic and North Seas), there have already been
documented cases of short or non-existent supplies of low sulfur fuels. Adding demand as will
be the case with the North American EGA adds great uncertainty to the supply and demand
equation, most significantly on the supply side, a situation which will be further exacerbated
should ECA's proliferate worldwide. While less of a concern for U.S. flag vessels that are
engaged solely in domestic trade due to the expected availability from U.S. refineries, vessels of
all flags trading internationally, must be able to procure the low sulfur fuels in other nations for
voyages to the United States.  Capacity within the U.S. refining complex does not equate to
global availability for vessels inbound to U.S. ports.

       Seaworthy commented that international marine  shipping purchases a variety  of fuels
from all around the world. In fact, the United States supplies only a small percentage of the
world's marine fuels. SFC commented that they appreciate that the EPA has included
requirements for fuel production and sales in the Notice  of Proposed Rulemaking, which will
help ensure that the compliance burden is shared equally between shipowners/operators and
refineries. However, SFC questioned the assumptions related to fuel availability for international
vessels. Although the Proposed Rule will ensure that domestic vessels are able to find compliant
fuel in the ports they call, it does not guarantee that such fuel will be available at all the ports a
vessel may transit while en route to U.S. waters. In view of this, SFC recommended that clear
mechanisms (based on Regulation 18 of Annex VI) be developed to cover situations in which a
ship has unsuccessfully tried to obtain compliant fuel.

       One commenter raised concerns that lower sulfur fuel may not be available in Alaska by
2010. Specifically, the commenter noted that EPA has acknowledged the difficulty for Alaska
in-state refineries to convert to low sulfur and ultra low sulfur fuel by providing Alaska refineries
have received a waiver to 2010 to meet ultra low-sulfur diesel. In addition, a December 2008
fire at Petrostar Valdez refinery means it is unlikely that the refinery can physically produce ultra
low-sulfur in the volumes needed by the marine industry by March 2010. Petrostar has
traditionally provided about 90 percent of the marine fuel supplies to coastal ports in Alaska.  If
that refinery can't meet sufficient production, it will require ultra-low sulfur diesel fuel  (ULSD)
to be shipped either to the state from West Coast facilities or to be shipped to coastal  facilities
from either Tesoro's Nikiski or Flint Hill's North Pole refineries - the only other fuel suppliers


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in Alaska and only one of the two is producing ULSD.  In either case, higher transportation costs
for ULSD fuel deliveries were not included in the EPA modeling of transportation costs.

       CLIA (0278)
       Senator Murkowski (0384)
       Seaworthy (0226)
       Chamber of Shipping of America (0256)
       Shipping Federation of Canada (0270)

       Our Response:

       The above comments primarily focus on the impact of the proposed North American
EGA on marine fuel availability. As discussed in Chapter 2 of this document, the EGA proposal
is not within the scope of this rulemaking.  However, this rulemaking does apply EGA standards
to U.S. internal waters.  In addition, this rulemaking is making it possible for 0.1 percent sulfur,
EGA-compliant distillate fuel to be sold in the U.S.  Without these new provisions, marine
distillate fuel sold in the U.S. would generally need to comply with a 15 ppm (0.0015 percent)
fuel sulfur limit. Distillate fuel meeting the 15 ppm fuel sulfur limit is known as ULSD.
Contrary to the comments regarding Alaskan refining, this rulemaking will not require ULSD to
be used in ships in March 2010.

       With respect to the MARPOL Annex VI requirements, Regulation 18 provides relief in
the event that compliant fuel cannot be reasonably obtained by the ship operator. The ship
operator would need to provide evidence that it attempted to purchase compliant fuel oil in
accordance with its voyage plan and, if it was not made available where planned, that attempts
were made to locate alternative sources for such fuel oil and that despite best efforts to obtain
compliant fuel oil, no such fuel oil was  made available  for purchase. We would then take into
account all relevant circumstances and the evidence presented to determine the appropriate
action to take, including not taking control measures. As a party to Annex VI, we would provide
this fuel availability relief provision, even for U.S. internal waters.

       CLIA commented that EPA estimated that the North American EGA would represent 4
percent demand on world distillate fuel. It should be clarified that we estimate that the fuel
consumed in the proposed EGA would represent less than 4 percent of marine bunker fuel
demand, which is less than  1 percent of global distillate demand.  In the modeling performed in
support of the Secretary General experts' group study, a multiple EGA scenario was evaluated.
In this  scenario, it was considered that multiple EGAs encompassing Europe, Mediterranean Sea,
Black Sea, North America,  Tokyo Bay, and Singapore would total about 15 percent of global
marine bunker fuel demand (not global  distillate demand). Based on these, and other analyses,
the recent amendments to Annex VI where approved which include the new EGA fuel sulfur
standards and application criteria. One commenter argued that increased refinery operations and
fuel distribution will result in increased emissions from the modeling. This factor was
considered in the refinery modeling performed for the Secretary General experts' group study.
In response to the  comment that that refining is conducted in developing nations where modern
emission control equipment and systems may not be required, these air pollution issues cannot be
addressed through this rulemaking.  Because the coordinated strategy is expected to have only
minor impact on global  distillate demand, any additional distillate demand coming from these
refineries would be expected to have minor impact on emissions compared to the underlying


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problem, and any emission increase would be expected to be far less than the emission
reductions achieved from shipping.

       In the U.S., Canada, and other parts of the world, distillate fuel is already available which
would meet the long term 0.1 percent fuel sulfur limit that applies in EGAs beginning in 2015.
Although the proposed EGA could result in additional demand for distillate fuel, we expect the
amount of distillate used in the proposed EGA would be a small fraction of the global distillate
usage. Global distillate fuel  demand is projected to grow significantly over the timeframe of the
long term EGA standards. The U.S. Energy Information Administration projects an annual
growth in global demand for refined products of about 1.5 percent per year over the next five
years.10 In comparison to this growth in distillate supply and demand, any effect on demand
from the North American EGA would be small as increased EGA distillate demand is estimated
to be less than 1 percent of global distillate production. Further, as noted in the comments of
CLIA, the recent economic downturn has allowed refining capacity to catch up and actually
exceed current demand for distillate fuel.

       Sophisticated refinery modeling was performed to evaluate the impact of the proposed
EGA on global fuel production and costs. This work was done using the WORLD model, which
is the same model that was used for the  Secretary General's Expert  Study. This modeling
concluded that the additional distillate fuel for the proposed EGA could be produced through
minor expansions in global coking and hydrotreating processes.  This expansion would have a
side benefit of generating additional gasoline, naptha, and liquid petroleum gas, thereby easing
supply on those products. The refinery modeling considers not only refinery upgrades, but the
location of these upgrades and product distribution costs.  It is an economic model and considers
that fuel used in the EGA may be produced outside the U.S. where that is the most economical
solution.  In addition, the model considers the impact of additional distillate demand for the
marine sector on distillate prices in all sectors. As discussed in Chapter 6  of this document, the
cost estimates from this modeling compare favorably with real-world bunker prices. Extensive
detail on this  modeling is included in the EGA proposal, the RIA, and the docket for this rule.

       We think it is important, at this point, to provide the market  with as much certainty as
possible. The best thing we can do to ensure that the infrastructure  exists for lower sulfur fuel
production and supply is to establish a clear standard as early as possible so that companies can
move forward on their business decisions. The sooner the proposed EGA  is adopted under
Annex VI, the sooner refiners can make clear plans to respond to the January 1, 2015 fuel sulfur
requirements.
10 Energy Information Administration, 2008b. "International Energy Outlook 2008" (DOE/EIA-0484(2008));
Washington, DC. (Available at: http://www.eia.doe.gov/oiaf/ieo/)


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4.6 Fuel Equivalency Standard

4.6.1 Exhaust Gas Cleaning Systems

       What Commenters Said:

       A number of commenters expressed concern that the proposed fuel sulfur limit did not
specifically include a provision allowing for the sale of high sulfur fuel, for use in an EGA, when
an equivalent SOx and PM control approach is used.  API stated that the proposed rulemaking
has completely thwarted the use of abatement technology through its simultaneously proposed
fuel standards. Specifically, the EPA has proposed a prohibition on the sale of fuel above 1,000
ppm sulfur for use in all marine vessels operating in the U.S. EGA and U.S. internal waters. Such
a prohibition functionally eliminates the possibility that vessels might choose to satisfy the
MARPOL Annex VI emissions standard through the installation of abatement technology rather
than through the burning of low-sulfur distillate.

       We received several comments stating that not allowing for equivalent approaches would
be inconsistent with MARPOL Annex VI.  Specifically, commenters referenced Regulation 4 of
MARPOL Annex VI which states: "The Administration of a Party may allow any fitting,
material, appliance or apparatus to be fitted in a ship or other procedures, alternative fuel oils, or
compliance methods used as an alternative to that required by this Annex if such fitting, material,
appliance or apparatus or other procedures, alternative fuel oils, or compliance methods are at
least as effective in terms of emissions reductions as that required by this Annex, including any
of the standards set forth in regulations 13  and 14." Regulations 13 and 14 refer to the NOx and
SOx/PM standards respectively.

       Commenters noted that the United States has historically been supportive of performance
based standards. EGCSA commented that the U.S. delegation at EVIO MEPC 59 assured the
meeting that the USA was committed to complete alignment with MARPOL Annex VI and its
Regulations. The current EPA proposals are in direct contradiction to both Regulation 14 and
Regulation 4. The American Petroleum Institutes specifically noted that the United States has
already stated its intent to the international community that it will allow scrubber technology. In
its application for an Emissions Control Area ("EGA"), the United States noted that "[a]s an
alternative, an exhaust gas cleaning  system (EGGS) may be used." API also noted that the
proposal acknowledges that Annex VI allows for alternative compliance strategies in including
the use of exhaust gas cleaning systems and goes on to describe the technological feasibility of
scrubbers and how scrubbers may be used to achieve equivalent emission reductions as fuel
switching.

       Several other commenters promoted exhaust gas cleaning systems (e.g. SOX scrubbers) as
an equivalent alternative to switching to operation on lower sulfur fuel in an EGA. Several
EGGS manufacturers recommended that EPA maintain the inclusion of a technology-based SOx
solution that would complement the low sulfur distillate solution and offer the international ship
owner a business choice to be evaluated on a ship-by-ship basis. They argued that such an
approach fully supports EPA's primary goals of reducing NOx, SOx and PM in engine exhaust
emissions. Commenters stated that EPA should not eliminate of the production and sale of
higher sulfur, residual fuels because these fuels have powered the world's commercial ships for
many decades.  Belco commented that having the option to either purchase the more expensive


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low sulfur fuel or use a scrubbing system with the lower cost high sulfur fuel will provide great
benefit not only to the shipping industry but also to the many air pollution controls companies in
the United States and throughout the world. By applying the proven technologies of exhaust
scrubbers and exhaust gas recirculation systems (used in many industries) to commercial ships,
several commenters stated that SOx, NOx, and particulate matter can be brought into compliance
with the proposed limits.

       EGCSA commented that not only will limiting the sale of higher sulfur fuel prevent the
United States from  benefiting from the reduced emissions that can be achieved with exhaust gas
cleaning technologies but it will almost certainly impact the wider adoption of the technology on
a global basis.  CLIA commented that further development of exhaust gas scrubbers or other
similar technology  and the use of such technology should be encouraged and the manufacture,
offer for sale and sale of residual fuels should not be prohibited for use with such proven
technology. CLIA  went on to say that if technological solutions can only be utilized on engines
that are required to  utilize EGA fuel, then there is no benefit or incentive to either develop or
utilize this promising technology.

       Commenters recommended that we explicitly include the intent of Regulation 4 of
MARPOL Annex VI enabling the use and operation of exhaust gas cleaning technologies on
board vessels operating in or visiting the United States. More specifically, commenters stated
that the final rule should make it clear that the sale of residual fuels is allowed in the United
States for use in vessels equipped with appropriate exhaust gas cleaning systems as well as for
use outside the EGA.  CSA argued that the focus on fuels and alternative compliance
technologies should be on use and not on whether the fuel is manufactured and distributed.
EGCSA stated that the use of exhaust  gas cleaning systems is entirely consistent with the U.S.
Clean Air Act and its implementation in U.S. power utilities where such cleaning systems are
frequently used for reducing PM and SOx emissions.

       Seaworthy (0226)
       DuPontBelco(0362)
       EGCSA (0305)
       Canada(0252)
       Chamber of Shipping of America (0256)
       WSC (0325)
       CLIA (0278)
       API, (0354)
       Shipping Federation of Canada (0270)
       Euromot (0243)
       Canadian Shipowners Association (0245)
       EMA (0265)
       Maersk(0261)
       Lower Lakes (0230)

       Our Response:

       As a Party to Annex VI, we intend to implement the Emission Control Area in a way that
is consistent with Annex VI. Under Annex VI, Regulation 4 provides for alternatives to the
standards,  including the NOX and fuel sulfur limits in regulations 13 and 14, provided that these


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alternatives "are at least as effective in terms of emission reductions."  One of the prominent
technologies that has been discussed as an equivalency for low sulfur fuel is the use of exhaust
gas cleaning units (EGCS), also known as "scrubbers." We have had an active role in tracking
the progress of this technology and in the development of ECGS guidelines through IMO. We
recognize scrubbers  as a promising technology for reducing exhaust emissions of SOx from
ships operating on high sulfur residual fuel.  In fact, the proposed rulemaking includes a detailed
discussion of SOx scrubbers as a potential technical approach to comply with the EGA standards.

       As proposed, ship  operators would have been able to use SOx scrubbers in the EGA,
provided that an equivalency was granted under Regulation 4.  In addition, these vessels would
have been able to use high sulfur fuel in conjunction with the SOx scrubber. However, the
proposed rule did not include an allowance for the higher sulfur fuel to be purchased in the U.S.,
for use with equivalent technology.  As this is inconsistent with Annex VI, we are correcting this
oversight in the final rule. U.S. refiners will be able to sell fuel that does not meet the EGA fuel
sulfur limit, for use in an EGA, in the event  that the vessel uses a SOx scrubber, or other
equivalency, that achieves EGA compliance while operating on high sulfur fuel.
4.6.2 Other Approaches to Equivalency

       What Commenters Said:

       As discussed in 4.5.1 above, many commenters expressed support of equivalency
approaches, as allowed under MARPOL Annex VI, regulation 4. While EGCS were discussed
extensively, commenters raised a number of other approaches. Given the variety of trades, ships,
fuels and ecosystems involved, industry stated that they should have access to a range of options,
and the shipowner should have the final word on how air emission limits will be met.

       Maersk encouraged EPA to keep standards focused on the environmental improvements
while minimizing constraints which reduce operational flexibility or inadvertently inhibit
innovation. For example, the rule should allow the use of a variety of fuels in conjunction with
other exhaust gas cleaning technologies as long equivalent or better air quality is achieved and
other environmental impacts can be appropriately addressed. Many new technologies are now in
development, and this should be  not be discouraged by regulatory impediments.

       CLIA commented that EPA to broadly interpret the "equivalent" regulation to consider a
wide number of strategies.  These strategies are listed below.  In addition, CLIA asked the EPA
to support the development of these alternative compliance mechanisms through the use of pilot
projects, and research and development efforts.

       a. Acceptance of approved EGS technology;
       b. Emission averaging based on the use of shore power while a ship is in port;
       c. Fleet emission averaging if and when one or more of a company's ships utilize
       alternative technology such as gas turbine engines or alternative fuels which result in
       emissions that are much lower than that required for EGA compliance;
       d. Allowing a ship that voluntarily utilizes lower sulfur fuels or technology outside of the
       designated EGA to average its own emissions;
       e. Allowing credits/banking for early implementation of compliance measures;


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       f. Allowing ships to utilize markets available for purchase of SOx and NOx credits to
       offset emissions;
       g. The use of fleet averaging, banking and trading (ABT) as an alternative compliance
       method has previously been accepted by EPA and we would encourage EPA to seek the
       cooperation of EVIO, Canada, and other flag states in implementing ABT within the North
       American EGA. CLIA recognizes that tracking of fleet averaging and an acceptable
       method to prove equivalency will have to be developed and we would encourage EPA to
       support such developments in partnership with the maritime industry.

       CSA commented that the final rule must provide the critical details of equivalency  and
alternative reduction strategies and create a system that provides the maximum flexibility for
vessel owners to choose among a number of alternative equivalent reduction strategies. These
alternative compliance programs should be fully detailed to promote the maximum in
compliance flexibility and incentivize the development  of even more efficient emissions
reductions technologies which address multiple pollutants in a holistic manner. Examples  of
possible alternative programs include fleet averaging and the generation of emissions credits
across a given fleet for cold ironing.

       Maersk(0261)
       Shipping Federation of Canada (0270)
       CLIA (0278)
       Chamber of Shipping of America (0256)

       Our Response:

       As discussed above, we are finalizing regulations that will allow for high sulfur fuel to be
sold in the U.S. for use in vessels that have received an  equivalency under Regulation 4 of
Annex VI, provided that the equivalency allows for EGA compliance with  high sulfur fuel. We
do not believe that it is appropriate to determine the details of equivalency  and alternative
reduction strategies as part of this rulemaking. We would instead evaluate different technologies
and approaches on a case-by-case basis under the provisions of Regulation 4.  We agree with the
comment that many new technologies are now in development, and should be not be discouraged
by regulatory impediments.

4.7 Technical Feasibility of SOx Exhaust Gas Cleaning Systems

4.7.1 SOX Emission Reduction Capability

       What Commenters Said:

       Several commenters stated that exhaust gas cleaning systems may be used to achieve
substantial reductions in SOx emissions from ships.  EGCSA stated that at  least three exhaust gas
cleaning systems are in operation on board merchant vessels and a further 4 to 6 projects are
underway for installation on board vessels later this year or into 2010. EGCSA reported that all
the exhaust gas cleaning systems currently in operation have achieved at least 98 percent
reduction in SOx emissions. Seaworthy commented that the use of exhaust gas scrubbers will
result in compliance with the proposed low SOx discharge  limits irrespective of the original fuel
type and its sulfur level. Such scrubbers offer a certified, proven technology solution which will


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allow vessels to operate in EGAs using a wide range of marine fuels.  Belco commented that
scrubbing systems on ships are now well proven and some have even been certified by the
various agencies. SFC commented that recent tests have shown that exhaust gas cleaning
systems can attain SOx reductions well above 90 percent.

      Krystallon presented test data showing that its sea water scrubbing systems achieve more
than a 98 percent SOx removal efficiency. Krystallon stated that, for the target water flow rate of
45t/MW-hr of engine power, the performance is only slightly affected when operated in brackish
waters such as the inner passage off the Pacific North West coast.  They claimed to have only
limited experience of operation of the scrubbing system in fresh water environments. However,
chemical equilibrium models have indicated that the major issue is not removal of SOx from the
exhaust flow but in rebalancing the pH of the scrubber effluent before discharge. Under such
circumstances Krystallon stated it would expect the addition on an alkaline buffer at the point of
discharge would achieve a satisfactory discharge pH.

      TOTE commented that SOX scrubber technology is far from proven and is too large to be
installed on its existing vessels.  TOTE claimed that Holland America cruise line has tried one
such system on one engine on one vessel with very poor results.

      EGCSA (0305)
      Seaworthy (0226)
      DuPont Belco (0362)
      Shipping Federation of Canada (0270)
      Krystallon (0229)
      TOTE (0289)

      Our Response:

      As discussed in RIA, there are a number of exhaust gas cleaning systems under
development and prototype systems installed on marine vessels. We appreciate the additional
data provided by commenters and encourage further development of EGCS technology as an
equivalent approach to complying with EGA fuel sulfur standards.

4.7.2 Washwater

      What Commenters Said:

      CLIA offered the following comments on SCR by-product and EGCS waste water
effluent (wash water) quality standards: With both the open loop and the closed loop EGCS and
SCR, it will be imperative that EPA quickly develop national standards and capability for the
shoreside discharge of waste and for open loop systems, the overboard discharge of
cleaning/cooling water. EGCS is a promising technological solution that is proven to be able to
significantly reduce both SOx and PM. Holland America Line (a CLIA member cruise ship
operator), with the participation of various government agencies in both the United States and
Canada, has been involved in developing cruise ship application of the EGS. We also note that
the Wartsila SOx scrubber has been granted the Sulfur Emission Control Area (SECA)
Compliance Certificate by the classification societies Det Norske Veritas and Germanisher
Lloyd, thus advancing the technology from testing of proof of concept to commercial

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availability. Others including Krystallon, Aalborg and ECOSPEC are in development. However,
irrespective of how well these systems may perform, their use will be discouraged and in fact, be
prevented if every state and local jurisdiction undertakes and publishes their own local
requirements for EGS/SCR by-products. It is critical to this rulemaking that a national scheme
be quickly developed and put into place so that adequate commercial opportunity is created for
the significant investment required to develop these systems. In this regard, EPA should adopt
or take account the standards for scrubber waste water recently adopted at IMO MEPC 59 in July
of 2009.

       TOTE commented that the use of SOx scrubbers results in discharge in the water that that
is believed to be problematic by the State of Alaska. CSA commented that for some of the
technology based strategies which will be required to meet these requirements, it is essential to
recognize that new waste  streams will be created and thus shore reception facilities must be in
place to receive these residual by-products.  CSA stated that while IMO deliberations are
addressing the nature of these new waste streams and their impact on the environment, it is
critical that shore reception facilities be developed that can manage these wastes in an
environmentally sound manner.  CSA also noted that that even with the lengthy history of other
MARPOL annexes, there  still exist reception facility adequacy issues around the world,
including here in the United States.

       CLIA (0278)
       TOTE (0289)
       Chamber of Shipping of America (0256)

       Our Response:

       The IMO guidelines for the use of exhaust gas cleaning devices such as SOx scrubbers
include recommended monitoring and water discharge practices. The  washwater should be
continuously monitored for pH, PAHs and turbidity. Further, the IMO guidance include
specifications for these same items, as well  as nitrate content when washwater is discharged in
ports, harbors or estuaries. Finally, the IMO guidance recommends that washwater residue
(sludge) be delivered ashore to adequate reception facilities and not discharged to the sea or
burned on board.

       As the commenters recognize, any discharges directly into waters of the United States
may be subject to Clean Water Act or other U.S.  regulation.  The Clean Water Act (CWA)
requires that all point source discharges (which includes certain vessel discharges) must meet
technology-based effluent limitations representing the applicable levels of technology-based
control. Water quality-based effluent limitations (WQBELs) are required as necessary where the
technology-based limitations are not sufficient to meet applicable water quality standards.  To
the extent that the air pollution control technology results in a wastewater discharge, such
discharge is prohibited unless authorized by a Clean Water Act National Pollutant Discharge
Elimination System (NPDES) permit. The 2008 NPDES Vessel General Permit (VGP)
authorizes the discharge of Exhaust Gas Scrubber Washwater, and the discharge must, among
other things, meet conditions found in Part 2.2.26 of that permit. Although the Agency notes that
it is actively seeking to gather additional data on  exhaust gas scrubber discharges for future
permit  issuances, including the metal concentrations and other constituents which may be found
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in the discharge, issues pertaining to the development of CWA discharge standards are outside
the scope of today's rulemaking.

4.8 Impact of Fuel/Equivalency Standards on PM

       What Commenters Said:

       EGCSA stated that test work indicates that exhaust gas after treatment is capable of PM
levels lower than can be achieved by an ultra low sulfur diesel fuel. In two separate laboratory
tests of exhaust gas cleaning systems currently in service,  the reductions in PM that were
recorded, indicate a removal efficiency that achieves an equivalent or a lower PM emission than
could be expected if the test engine was using a 0.1% sulfur marine fuel.

   Seaworthy commented that scrubbers greatly reduce exhaust paniculate matter (80%) while
reducing SOx levels to the equivalent achieved by 0.1% sulfur fuel. Seaworthy went on to claim
that using low sulfur distillates may achieve SOx compliance but only reduces particulate matter
by a nominal amount.  In fact, the cleaner, low sulfur fuels may produce a  greater amount of the
smaller and more harmful particulates PM2.5 in the exhaust gas

       Krystallon commented that the design of its scrubbing systems is primarily for removal
of SOx and stated that this has been the principal target of the EVIO regulations.  Simple mixing
of water and gas is unlikely  to produce an efficient removal of particulate matter. This is
especially true for smaller (PM2.s) particles that are not easily wetted. Krystallon are however
aware of the public and legislative interest in reduction of other particulate species and have
undertaken work on both to  improve removal efficiency and quantify the efficiency of our
current design.  Test data  show PM reductions using Krystallon scrubbing  system. Environment
Canada is quoted as measuring approximately 70 percent reduction in exhaust particulates cross
the scrubber when operated  at full load with two of three stages of the scrubber in operation.
The engine was operated on residual fuel of approximately 1.5 percent sulfur level. Mitsui
Engineering and Shipbuilding indicated a maximum particulate reduction (dust) of 55-60 percent
when operated on a 1.6 percent sulfur fuel.  In addition, Krystallon has also investigated
operation of sea water scrubber designs on distillate fuelled engines. Specific particulate
measurements have not been taken at this point; however analysis of the wash water indicated
around O.lg/kW-hr of particulates were removed from the wash water stream, mainly as carbon.
While not a specific analysis, this would indicate an overall removal efficiency on distillate
fuelled engines of around 50 percent of the total particulate loading in the exhaust stream.  It is
Krystallon's belief, backed by test data, that operation of a scrubbing system designed for
efficient removal of particulates will produce the same or better results than a simple switch from
residual to distillate fuels.

       EGCSA (0305)
       Seaworthy (0226)
       Krystallon (0229)

       Our Response:

       As discussed in the RIA, scrubbers are effective at reducing SO2 emissions and sulfate
PM emissions from the exhaust. However, we recognize that the effectiveness of the scrubber at


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removing PM emissions other than sulfates is dependent on the scrubber design. In addition to
sulfate PM reductions, switching from residual fuel to distillate fuel results in reductions in
organic PM and metallic ash particles in the exhaust.  As such, consideration should be given to
non-sulfate PM when making the determination that using a given ECGS design is "at least as
effective" as operating on lower sulfur fuel to control PM emissions.

       We dispute Seaworthy's claim that low sulfur fuels may produce a greater amount of the
smaller and more harmful particulates PM2 5 in the exhaust gas. In addition to high sulfur levels,
residual fuel contains relatively high concentrations of low volatility, high molecular weight
organic compounds and metals.  Organic compounds that contribute to PM can be present either
as a nucleation aerosol or as a material adsorbed on the surfaces of agglomerated elemental
carbon soot particles and metallic ash particles.  The sulfuric acid aerosol in the exhaust provides
a nucleus for agglomeration of organic compounds. Operation on higher volatility distillate fuel
reduces both nucleation and adsorption of organic compounds into particulate matter. Therefore,
in addition to direct sulfate PM reductions,  switching from residual fuel to distillate fuel reduces
organic PM and metallic ash particles in the exhaust.

4.9 Lead Time for Fuel Use Requirements

       What Commenters Said:

       A number of commenters representing shipping interests on the Great Lakes, stated that
longer lead time is necessary for the fuel sulfur standards noting that this would give the ship
fueling industry to develop an efficient supply chain.  Some commenters stated that a longer lead
time would be consistent with previous EPA rules for land-based engines.

       GLMTF commented that the coordinated strategy will require major changes in fuel and
emissions on the Great Lakes in less than three years. When the agency has addressed other
sources of emissions, the impacted industries  or modes of transportation were given much more
time to comply with the new requirements.  For example, when EPA launched its National Clean
Diesel Campaign, the final rule for Tier 2 Light Duty vehicle engines was published in 1999, but
not fully phased in until this year. Similarly, the new rules for Heavy Duty Highway were
published in 2000, but full compliance will not be achieved until next year.  The final rule for
nonroad diesel engines was published in 2004, but the requirements will not be fully phased in
until 2015. The control of emissions of air pollution from locomotive engines and marine
compression-ignition engines less than 30 liters per cylinder rulemaking dated May 6, 2008 will
not be fully effective until 2015.

       GLMTF also claimed that, in the past, affected industries have been helped with the costs
of switching to new technologies with grants and other incentives. The U.S.-Flag Great Lakes
fleet has been left to face a bill of $286 million (the estimated cost to repower the 13 steamers)
on its  own.

       GLMTF (0269)
       Canadian Shipowners Association (0245)
       Keystone Shipping (0349)
       Midwest Energy Resources (0342)
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       Our Response:

       The lead time requirements associated with the coordinated strategy are appropriate and
consistent with past rulemakings. As discussed in Chapter 3, the exhaust emission standards are
consistent with the statutory direction to set standards requiring the greatest degree of emission
reduction that is achievable in the given time frame.

       We also believe that the implementation dates for the fuel use requirements provide
adequate lead time. Commenters appeared to be most concerned with modifications that would
need to be made to existing steamships on the Great Lakes to burn lower sulfur fuel. In any case,
as discussed in Chapter 10, these ships are excluded from the final rule.  In addition, we believe
most if not all marine diesel engines can operate on lower sulfur distillate fuel with only minor
modifications, if any, to the fuel systems.  As discussed in Chapter 10, the near term standards
can be achieved with residual fuel, and we are finalizing provisions that ensure Great Lakes
vessels will continue to be able to purchase residual fuel on the Great Lakes. The longer term
fuel sulfur standards, which would likely require the use of distillate fuel, do not begin until
2015, providing five years of lead time.

       GLMTF misrepresented the lead time of a number of EPA rules. For instance, the Tier 2
Light Duty final rule was published in 2000 and was phased-in from 2004 through 2007, giving
4 years of lead time. The Heavy-Duty Highway final rule was published in 2001, and the
exhaust emission standards phased-in from 2007 through 2010. The final rule for nonroad diesel
engines was published in 2004 and began phasing-in in 2008.  The locomotive and marine rule
was finalized in 2008 and set near term standards beginning in 2009 and long term standards
beginning in 2014. It should be noted that, these past rules were for the application of advanced
aftertreatment on engines and vehicles, not for fuel sulfur limits. The Heavy-Duty highway rule
included standards for ultra-low sulfur (15 ppm) fuel that began in 2006, providing five years of
lead time, which is consistent with the lead time between this final rule and 1,000 ppm sulfur
fuel EGA requirements.

       It is not clear what grants and incentives that GLMTF is referring to for switching to new
technologies. To the extent that these opportunities exist, they were not included in the standards
setting rulemakings. In any case, the 13 steamships referenced in the GLMTF comments are not
included in this  rulemaking.
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CHAPTER 5: Certification and Compliance

       What We Proposed:

       The comments in this section generally correspond to Section VI of the preamble to the
proposed rule, where we describe the provisions related to certification and compliance of
Category 3 marine diesel engines with applicable standards, including and MARPOL Annex VI
standards through the Act to Prevent Pollution from Ships (APPS). The applicable regulatory
provisions for these proposed requirements are primarily in 40 CFR parts 1042 and 1043.

       See Chapter 11 of this document for a discussion of certification and compliance  issues
that are related to the technical amendments to regulations applicable to other types of diesel
engines.  See Chapter 10 of this document for a discussion of comments received relating
specifically to implementation of the international standards for vessels operating on the  Great
Lakes.

5.1 General Comments

  5.1.1 Comments on Harmonization with IMO Compliance Requirements

       What Commenters  Said:

       Several commenters stated that EPA's requirements should not go beyond what is
required for compliance with Annex VI. Those that offer specific reasons for this position for
certain issues are summarized in other sections. The Transportation Institute expressed this same
general comment with respect to EPA's emission standards and controls for U.S.-flag vessel
operators exceeding Annex VI of MARPOL. Based on their assertion that EPA should not go
beyond what Annex VI requires, they stated that if the proposed EGA is not established, these
requirements should be suspended or withdrawn until such time the requirements would apply
equally to all vessel operators, whether foreign or domestic, transiting our coastal waterways.

       Our Response:

       As a general matter, the specific issues raised by commenters are addressed below.
However, we note that where feasible and appropriate under the Clean Air Act, we provide
flexible approaches for meeting both the Clean Air Act and Annex VI requirements.

       We fully expect the EGA to be established, which would make the Transportation
Institute's comment moot.

  5.1.2 Clarity of the Regulations

       What Commenters  Said:

       Several commenters stated that EPA's regulations were generally unclear.  Those that
mentioned specific regulations are addressed in other sections.
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       Our Response:

       Our intent is to codify our regulations to be as clear as possible for the regulated
community. We have revised our proposed regulatory in several areas to improve clarity. Where
we determine in the future that we can further clarify our regulations we would expect to do so
through technical amendment.

5.2 On-OffNOx Controls

       What Commenters Said:

       EMA asserted that EPA assumes that Tier 3 engines will utilize SCR to comply with the
Tier 3 NOx standards when operating the EGA, and that those systems will not be active when
the vessels are operating outside  of the EGA. EMA also raised several issues relating to fuel-
switching procedures and "on-off' or aftertreatment by-pass strategies. They argued that further
study is need to determine whether exhaust flows should be diverted around the SCR catalyst to
avoid sulfur build-up  and contamination of the system when the SCR system is inactive and
higher  sulfur fuel is being used.

       They also argued that the proposed requirements in §§1042.110(d) and 1042.115(g) for
the design and monitoring of "on-off systems are overly burdensome, costly, go well beyond
what is required under MARPOL Annex VI and will  impose inequitable burdens on
manufacturers seeking to certify  C3 marine engines in the United States.  They stated that EPA
has not demonstrated that NOx sensors and other continuous NOx emissions monitoring systems
are robust or durable enough to be feasibly and cost-effectively utilized in conjunction with very
large C3 engines or in the extreme conditions under which C3 vessels operate.  (As part of their
argument they assert that the objective of this rule is to ensure "harmonization with the
MARPOL Annex VI  requirements for the certification of C3 marine engines."  Finally, they
suggest an alternative approach that would require measurement of exhaust temperatures and
urea flow, stating that such indirect measurement and monitoring would be more practical and
cost-effective.

       Euromot suggested that EPA allow comparable systems in which the aftertreatment
remained operational  outside of EGAs, while the engine operates at a higher NOx  calibration,
provided the emissions met the Tier 2 standard.  As noted in the next section, they also supported
following the IMO regulations for demonstrating NOx compliance, instead of requiring NOx
monitoring.

       Maersk expressed concern that the "on/off requirements are written to include vessels
that have the capability of fuel switching

       Our Response:

       We agree with EMA that manufacturers will need to do some development work to
determine how to design engines and aftertreatment for fuel-switching and on-off emission
controls.  However, we believe that any build-up of sulfur on the SCR components will  not
permanently affect the performance of the SCR components, and that any deterioration in SCR
performance is reversible (i.e. once a sufficiently high exhaust gas temperature is achieved,
sulfur is removed from the SCR). In addition, we believe that any excessive build-up of sulfates

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and/or sulfated compounds on the SCR components due to high fuel sulfur levels can be
removed using existing technologies, such as dust blowers or sonic horns.u  Finally, it is
important to note that most of this work will be necessary to meet the newly adopted MARPOL
Annex VI NOx requirements.

      We are revising our regulations in response to Euromot's suggestion to not limit this
option to disabling aftertreatment.  The final regulations will also allow manufacturers to run the
engine with a different calibration. While we do not dispute that our requirement for NOx
monitoring requirement may go beyond the bare minimum necessary to meet MARPOL Annex
VI requirements, the final rule requirements will allow manufacturers to show compliance with
the CAA and Annex VI allowances for on-off controls using methods allowed by us and
MARPOL Annex VI. This will address our stated goal of allowing manufacturers to "continue
to use a  single harmonized compliance strategy to certify under both systems." This statement
was intended to communicate that we want manufacturers to be able to use a single design that
complies with both the CAA requirements and MARPOL requirements, and be able to use much
of their testing and analysis for both.  The regulations being finalized will allow manufacturers
and operators to meet our requirements for on-off controls using methods also allowed by
MARPOL.

      We are revising the regulations to clarify that the on-off requirements apply for NOx.

5.3 NOX Monitoring and Diagnostics

      What Commenters Said:

      Maersk commented that routine and normal maintenance and operational adjustments to
engine parameters should not require retesting.  They commented on the proposed requirement
that engine manufacturers to exercise good engineering judgment in using measured NOx
concentrations to monitor the emission performance of the engine. They argued that emissions
measurements on  a new engine in a controlled setting predict relative performance, but should
not be expected to define maximum values in a full range of actual uses. They noted that, since
some variation is also to be expected with age regardless of preventive  maintenance, it would not
be reasonable to cap emissions at a particular level determined when an engine is new.

      Euromot supported following the EVIO regulations for  demonstrating NOx compliance,
instead of requiring NOx monitoring.  They  argued that the costs of the proposed monitoring
requirements are not justified by the information that would be gained.

      The World Shipping Council objected to the requirement to perform  emission tests
following parameter adjustments. They noted that this is impractical because Category 3 engines
are subject to continual adjustment; operators would have no useful reference point for deciding
when a test would be necessary.  They also pointed out that anyone making an improper
parameter  adjustment would likely not record this adjustment  or follow it with an emission test,
which limits the effectiveness of the requirement.
11 Holmstrom, Per, "Selective Catalytic Reduction," presentation by Munters at Clean Ships: Advanced Technology
for Clean Air, February 7-9, 2007, Docket ID EPA-HQ-OAR-2007-0121-0013.

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       Matson Navigation, CSA, and the World Shipping Council asked that EPA clarify how
EPA or the Coast Guard will treat emission spikes and other "exceedences" that would be
reflected through use of a CEMS. CSA stated further that monitoring systems are not well
developed.

       EGCSA recommended that EPA consider supporting and encouraging the mandatory
adoption of continuous emissions monitoring and reporting as a more effective and economic
method of assuring protection of the environment and human health.

       Our Response:

       We are not requiring monitors or testing for routine and normal engine adjustments or
repairs. The requirements apply only for engines equipped with on-off controls and when those
controls are used.  The allowance to turn emission controls off is unprecedented in EPA's
nonroad engine program. We have generally not allowed such features partly because of
concerns that the controls might not function properly when turned back on. Since we have this
same concern for Category 3 marine engines, we are finalizing the requirement that engines
equipped with on-off controls incorporate NOx monitors. We note in response to Euromot's
comment that we are not requiring monitoring for informational purposes, but rather as a means
to ensure proper function of the aftertreatment.

       We disagree that onboard monitoring technology is not sufficiently developed to meet the
propose requirement. We discuss this further in  the RIA for this rule. Moreover, since we will
not allow  on-off technology until the Tier 3 time frame, manufacturers will have several more
years before they are required to install onboard  monitors.

       We believe the requirements being finalized will address EGCSA's recommendation that
"EPA consider supporting and encouraging the mandatory adoption of continuous emissions
monitoring and reporting".

       We fundamentally disagree with the implication that engines should not be expected to
meet the standards during actual use.  It is not clear whether this was what Maersk was
suggesting, or whether they mistakenly believed that we proposed that engines should be held to
their certification or sea-trial levels in use.  Rather, the requirement being adopted specifies that
manufacturers should use good engineering judgment to determine concentrations and/or
emission rates for operating modes that would indicate that  a malfunction that would likely cause
the engine to fail the standard if it was tested according to the official test procedure. Such
malfunction or "exceedances" would be treated like all  other malfunctions.  The operator would
be required to repair the malfunction as soon as practical.

5.4 Authority Issues Related to APPS

       Several commenters supported EPA's proposal to apply emission limits to ships
operating within the internal waters of the United States including the Great Lakes.  They argued
that this is necessary due to the impact that such  emissions can have on the people and
environment of U.S. coastal and even inland areas.  (CATF, 0264 and Ohio Environmental
Council etal. 0314)
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       We also received detailed comments challenging our authority under APPS. In
particular, the Great Lakes Maritime Task Force provided the most extensive comments in this
respect. This section 5.4 is structured to be consistent with the structure of their comments. Our
subsections are generally identified by the section headings they used in their comments, which
in most cases serve to summarize the comments. The reader should not infer any agreement by
EPA with their rationale for this structure.

  5.4.1 The APPS Does Not Give EPA Legal Authority to Implement EGAs or to
        Regulate Fuel Use in Internal Waters

       What Commenters Said:

       The Great Maritime Lakes Task Force made the general comment that that the NPRM
was vague, confusing and unclear as to EPA's legal authority to designate the Great Lakes as an
EGA and the omission of a meaningful discussion makes commenting very difficult. In addition,
GLMTF comments that APPS does not give EPA the explicit authority to implement low-sulfur
fuel EGAs in internal waters, and without explicit authority the rulemaking is contrary to law.
GLMTF also states that EPA has no authority to create an EGA for internal waters and that
APPS does not provide such authority.

       Our Response:

       The introduction and overview statement in the NPRM provides that "[t]he amendments
to APPS to incorporate Annex VI provide the authority to ensure compliance with MARPOL
Annex VI by U.S. and foreign vessels that enter U.S. ports or operate in U.S. waters." (74 FR
44444). The authority section of the NPRM provides that section 1903 of APPS "gives the
Administrator the authority to prescribe any necessary or desired regulations to carry out the
provisions of Regulations 12 through 19 of Annex VI".  74 Fed.Reg. at 44446-7.  The
substantive section on this issue reiterates that APPS applies Annex VI to all vessels in U.S.
navigable waters, including internal waters, and further explains that because the U.S.-Canadian
EGA does not expressly include reference to the internal boundaries of the U.S. or Canada, that
clarification on what it means for APPS to apply Annex VI requirements to U.S. internal waters
was both "necessary" and "desired". 74 Fed. Reg. at 44481. Clarification is necessary and
desired to avoid both an under- and over-application of the EGA requirements. The under-
application would involve an inexplicable turn-off of emission controls or diversion to higher
sulfur fuels when entering internal waters from  an EGA.   The over-application could include
compliance with  EGA provisions in areas that are not shoreward of the EGA, such as those in
northwestern Alaska.  74 Fed. Reg. at 44481. Neither approach is intended by Congress'
direction that Annex VI requirements apply to all vessels in U.S. waters.

       In sum, APPS applies Annex VI requirements to domestic vessels wherever located,
including U.S.  internal waters, and to foreign-flagged vessels in U.S. navigable waters (and
beyond in some cases), defined by APPS to include U.S. internal waters.  Contrary to GLMTF's
comment, this is  an explicit, comprehensive application by Congress of Annex VI requirements
to all vessels in U.S. internal waters. Our regulation does not create "new" EGAs, but seeks to
clarify how to apply the Annex VI EGA requirements, given the description of the EGA is by the
outer-boundaries, to U.S. waters within those outer-boundaries. We are avoiding an under-
application of this congressional direction for EGA purposes by specifying what we think is the
obvious - that Congress intends all vessels covered by Annex VI to meet the most stringent of

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the requirements of Annex VI even when within U.S. internal waters.  A contrary reading of
these provisions of APPS leads illogically to congressional allowances for domestic and foreign
flagged vessels to emit greater quantities of dangerous pollutants closer to population centers
than would be required of vessels out to sea. We are also avoiding an over-application of the
most stringent requirements to U.S. internal waters that are not shoreward of an EGA.  Although
these waters are within the internal waters of the U.S., unless and until an EGA is established for
the waters outside those internal water areas, we think it reasonable not to require vessels to meet
the EGA requirements in those areas.

5.4.1.1 APPS Does Not Implement the 2008 Amendments to MARPOL Annex VI

      What Commenters Said:

      APPS does not implement the low-sulfur fuel requirements in the  2008 Amendments and
nothing in APPS gives EPA the authority to create a low-sulfur fuel EGA in U.S. internal  waters.

      Our Response:

      The 2008 amendments to Annex VI include two tiers of global NOx and  fuel sulfur
standards. It also includes two tiers of EGA NOx and fuel sulfur standards.  APPS is clearly
intended to require compliance with Annex VI and these 2008 amendments to Annex VI.
Specifically, APPS provides: "It is unlawful to act in violation of the MARPOL Protocol ..."
(Sec. 1907(a)). APPS defines the MARPOL Protocol to include the Convention, which in turn is
defined as " the International Convention for the Prevention of Pollution from Ships, 1973,
including * * * [Annex] VI thereto, including any modifications or amendments to the
Convention, Protocols or Annexes which have entered into force for the United States." The
2008 amendments  are just such amendments to Annex VI and were contemplated at the time
Congress considered amendments to  APPS to  implement Annex VI.

      The comment regarding creation of an EGA for internal waters is addressed above.

5.4.1.1.1 The Senate Has Not Acceded to the 2008 Amendments to Annex VI

      What Commenters Said:

      The Senate acceded to the MARPOL Annex VI in April 2006. Since MARPOL is not a
self-executing treaty, implementing legislation was  required. Congress therefore enacted
legislation implementing Annex VI in 2008 by amending APPS. Later that year, the IMO
adopted certain amendments to Annex VI, after the  Senate acceded to Annex VI and after
Congress enacted legislation implementing Annex VI. Since the Senate has not  acceded to the
2008 Amendments to Annex VI, those amendments, including the low-sulfur fuel requirements,
are not law in the U.S.  GLMTF refers to  a recent U.S. Court of Appeals case in  the District of
Columbia they argue that concludes that a treaty cannot authorize future changes that would
become binding on the U.S.

      GLMTF also argues that because the U.S. was not permitted to vote on the 2008
Amendments to Annex VI, no branch of the federal government has formally accepted the treaty
obligations which EPA now seeks to impose.
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       Our Response:

       The Senate has given its advice and consent both to MARPOL itself and to Annex VI.
Article 16 of MARPOL sets out a simplified amendment process, which was followed for the
2008 Amendments.

       This kind of amendment procedure is a feature of many treaties to which the United
States is a party and to which the Senate has provided its advice and consent. Indeed, the Senate
Foreign Relations Committee has specifically noted and accepted the simplified amendment
process.  See, for example, the Committee's March 30, 2006 Report, document 109-13.  The
Senate and the Executive Branch have a longstanding, successful practice of working together in
adopting  and implementing amendment procedures such as this.

       The D.C. Circuit case GLMTF cites addressed the impact of "decision" language agreed
to under the Montreal Protocol following ratification  of that treaty. The  court termed such
decisions "post-ratification side agreements." No party to that case claimed that the decisions
were amendments to the treaty. Nor did the court reach a holding on any constitutional issue.
Rather, the court held that the decisions in question were international political commitments.
In reaching this holding, the court looked to the language of the treaty and the Parties' post-
ratification actions. The court noted:  "Nowhere does the Protocol suggest that the Parties' post-
ratification consensus agreements about how to implement [the exemption at issue] are binding
in domestic courts." 464 F.3d  1, 9.  The court further noted: "The Parties' post-ratification
actions suggest their common understanding that the  decisions are international political
commitments rather than judicially enforceable domestic law."  Id. at 10. Thus, the court was
not presented with a situation in which the Senate had ratified a procedure for reaching
agreements intended to be binding in  domestic courts. Here, the Senate has given its advice and
consent to MARPOL and the Annex,  which includes  an amendment process. Thus, NRDC v.
EPA is inapplicable. In enacting and amending APPS, Congress has made clear that Annex VI,
including amendments that are binding on the United States, applies to ships as specified in
APPS, and that EPA and Coast Guard have authority to issue any necessary or desirable
implementing regulations.

       Although the U.S.  had no formal vote in the adoption of the 2008 Annex VI amendments,
the U.S. took an active role in the negotiation of the amendments, which are very  similar to a
proposal  submitted to EVIO by the United States. Moreover, under MARPOL, any Party,
including the U.S., has the opportunity to object to  these amendments, in which case they would
not apply to the objecting Party.  The Senate gave its advice and consent on the procedures, and
Congress approved the legislation authorizing this approach.

5.4.1.1.2  Setting aside Article 16(2), APPS itself is explicit that future amendments to Annex
          VI are subject to Senate advice and consent.

       What Commenters Said:

       Setting aside Article 16(2), APPS itself is explicit that future amendments to Annex VI
are subject to Senate advice and consent:
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       A proposed amendment to the MARPOL Protocol ... may be accepted on behalf of the
       United States by the President following the advice and consent of the Senate, except as
       provided for in subsection (b) of this section.

       The term "MARPOL Protocol" is defined to include "the Convention" which in turn is
defined to include Annex VI.  Therefore, any amendment to Annex VI is subject to Senate
advice and consent. The reference to "subsection (b) of this section" denotes a procedure
whereby the Secretary of State can lodge an objection to the proposed amendment following
consultation with the Secretary of Homeland Security or the EPA Administrator. Subsection (b)
does not address U.S. acceptance of an amendment to an Annex, and therefore does not displace
the requirement for Senate consent before amendments can be accepted by the President.  Article
16(2) does not trump the plain language of APPS, which requires Senate consent before
amendment to Annex VI can be accepted by the U.S.

       Our Response:

       Contrary to the commenter's contention, APPS itself fully anticipates the prospect of
simplified amendments that do not require Senate advice and consent.  As an alternative to
receiving the advice and consent of the Senate, Section 1909(b) explicitly provides that a
proposed amendment to Annex VI,  "may be the subject of appropriate action on behalf of the
United States by the Secretary of State" (emphasis added) following consultation with EPA or
the Secretary of Homeland Security. As provided for in Section 1909(c), the Secretary  of State
may  also make a declaration of nonacceptance of an amendment, following consultations with
the Secretary of Homeland Security. By contrast, Section 1909(a) states that amendments to the
Protocol/Convention itself are subject to Senate advice and consent.

5.4.1.1.3 APPS Expressly Excludes the 2008 Amendments to Annex VI

       What Commenters Said:

       GLMTF stated:

             For purposes of APPS, Congress defined the MARPOL Convention in such a way
       to exclude future amendments. APPS defines the MARPOL Convention as follows:
       "Convention" means the International Convention for the Prevention of Pollution from
       Ships, 1973, including Protocols I  and II and Annexes I, II, V, and VI thereto, including
       any modification or amendments to the Convention, Protocols, or Annexes which have
       entered into force for the United States.

             By contrast, a neighboring  provision of APPS defines another treaty in a
       materially  different manner: "Antarctic Protocol" means the Protocol on Environmental
       Protection to the Antarctic Treaty,  signed October 4, 1991, in Madrid, and all annexes
       thereto, and includes any future amendments thereto which have entered into force.

       Our Response:

       Contrary to the commenters' claim, APPS does not exclude from its scope future
amendments to the Convention, Protocols, or Annexes, either expressly or by implication.
Indeed, APPS expressly includes within the scope of its definition of the MARPOL Convention

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"any modification or amendments to the Convention, Protocols, or Annexes which have entered
into force for the United States." 33 U.S.C. § 1901(a)(5). The United States did not ratify
MARPOL until after enactment of APPS, so at the time that APPS was enacted, there could have
been no amendments binding on the United States. Thus, Congress could only have had
prospective amendments in mind. The same is true regarding Annex VI; Congress was aware
that the U.S. was not yet a party to the Annex, and so could not be bound by any amendments at
the time Congress acted. Finally, the existence of APPS Section 1909, which sets forth a process
for future APPS amendments, demonstrates that Congress intended APPS to implement
MARPOL with such amendments as may enter into force for the United States over time.

5.4.1.1.4 This Rulemaking, at Least as to the Great Lakes, Is Premature

       What Commenters Said:

       The EPA has based its rulemaking authority on the 2008 Amendments to Annex VI, but
those amendments are not scheduled to enter into force until January 2010 and the U.S. could opt
out at any time before then. Thus, even assuming the 2008 Amendments could enter into force
for the  U.S. in the future, the 2008 Amendments are not yet in force and EPA presently lacks any
legal authority to promulgate regulations implementing those amendments. Accordingly, EPA's
rulemaking is premature.

       Our Response:

       Section 1907 of APPS requires compliance with the Convention, which includes Annex
VI and any amendments to it which have entered into force for the United States. The
amendments in question will enter into force for the United States on July 1, 2010, unless the
United States or the  requisite number of Parties objects.12  None of the Annex VI requirements
that are specific to this final rule will be applicable to the regulated community prior to that time
of entry into force for the United States.  This final rule codifies those requirements so that the
regulatory text will identify, for the ease of the regulated community, the Annex VI requirements
subject to section 1907 enforcement.  This final rule also addresses a number of other issues so
the regulated community may ensure it is meeting the requirements of Annex VI and its
amendments before the new global and the EGA standards go into effect. For example, the
regulatory text identifies how and when an engine may be certified to NOx standards, identifies
how foreign nonparty vessels may demonstrate compliance with Annex VI NOx requirements,
and identifies specific exemptions and exclusions.

       The final rule also specifies that the standards applicable in the North American EGA are
intended to apply within U.S. internal waters once the EGA standards  enter into force for the
United States. The earliest date for entry into force of the U.S.-Canada proposed EGA would be
August 2011, given MARPOL's entry into force provisions.  In addition, because of the "grace
period" provided in Reg. 14.7 of Annex VI, the EGA fuel standards for sulfur could not enter
into force until August 2012.  We are aware of no authority preventing EPA from anticipating
the entry into force of the standards. Indeed, any interpretation suggesting otherwise—i.e., that
12 In that case, EPA would need to take appropriate action to make clear that the regulatory requirements associated
with those amendments would not become effective.

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authority to promulgate regulations begins only at the point when the international legal
obligations have taken effect—would effectively require some period of time in which the
United States would be unable to comply with its international legal obligations.

5.4.1.1.5 The Grant of Authority to EPA under APPS Violates the Nondelegation Doctrine

       What Commenters Said:

       GLMTF commented that the grant of authority to EPA under APPS is to promulgate
regulations "necessary or desired" to carry out Annex VI. The standard "desired" lacks an
intelligible principle to which EPA is directed to conform, and thus violates the nondelgation
doctrine. APPS's instructions that EPA promulgate "desired" regulations fall short of any
objective criteria by which the agency's action can be measured. Who but the agency can
determine what it subjectively 'desires"?  Moreover, the EPA cannot "cure an
unconstitutionally standardless delegation of power by declining to exercise some of that
power." EPA can thus not fall back on its authority to promulgate  regulations it deems
"necessary" to  carry out Anne VI because the overall delegation is  unconstitutionally broad.

       Our Response:

       The APPS language raised by GLMTF is the standard language used in APPS  to
authorize issuance of regulations, by Coast Guard and by EPA, to implement MARPOL and its
Annexes as well as  other treaty requirements. EPA presumes that the law is constitutional.

       Moreover, EPA believes that the regulations are necessary and desirable for the effective
implementation and enforcement of Annex VI, insofar as they (inter alia): (1) implement the
mandate in APPS to regulate foreign vessels; (2) clarify the geographic scope of application of
EGA standards; (3) explain how Annex VI equivalence provisions  will be implemented; (4)
explain the process for issuance of EIAPPs, and (5) provide variances from the EGA fuel
requirements for steamships on the Great Lakes and for certain vessels experiencing difficulties,
as later discussed in Chapter 10.

5.4.1.2 APPS Does Not Authorize EPA to Regulate Use of Fuel  in Internal Waters

       What Commenters Said:

       GLMTF state  that even if the 2008 Annex VI amendments  are binding on the U.S. and
incorporated by APPS, nothing in APPS gives EPA the authority to declare that certain U.S.
internal waters will henceforth be EGAs in which low-sulfur fuel must be used.  APPS gives
EPA the authority to prescribe regulations to carry out the provisions of Regulations 13 and 14;
those Regulations define an EGA as an area "designated by the Organization;" and the Great
Lakes are not referenced in the U.S.- Canada proposed EGA.

       Our Response:

       As explained above, APPS requires compliance with Annex VI requirements by domestic
and foreign-flagged vessels in U.S. internal waters.  As further explained above, the Annex  VI
EGA requirements, once adopted and in force, are Annex VI requirements and compliance with
these amendments are compelled by Congress.  Finally, we explain that his rule is intended  to

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clarify what we believe Congress intended in applying these EGA Annex VI requirements, to
domestics vessels "wherever located," including in U.S. internal waters, and foreign-flagged
vessels in U.S. internal waters.

       However even if GLMTF's reading of APPS were correct, provisions such as
§1902(a)(5)(B)(iii) clearly envision regulation of emissions from foreign-flagged vessels in areas
outside of EGAs (which are addressed separately in §1902(a)(5)(B)(ii)) as "areas from which
emissions from ships are of concern."  Had Congress not intended to require foreign vessels to
meet Annex VI EGA requirements in U.S. internal waters by virtue of the plain language
applying Annex VI requirements to foreign-flagged vessels in U.S. internal waters, this provision
provides alternative authority for requiring foreign-flagged vessels in U.S. internal waters to
meet the same requirements as vessels operating in coastal  areas of the United  States. However,
this authority would not apply to domestic vessels, since they are subject to the requirements of
APPS "wherever located."  We do not think Congress intended the incongruent result where
foreign, but not domestic, vessels would be subject to EGA requirements in U.S. internal waters.

5.4.1.2.1 The U.S.-Canada ProposedECA Excludes Internal Waters

       What Commenters Said:

       GLMTF stated that the U.S. and Canada jointly submitted an ECA for EVIO consideration
that "expressly excludes their internal waters," and that EPA's extension of the ECA boundaries
into internal waters "contravenes the very source of authority it invokes for its  regulations."
They stated further that "even if Annex VI applies to U.S. internal waters through APPS, it
would be the pre-2008 fuel standards of Annex VI that are  applicable, not the more stringent
standards implemented by the 2008 Amendments which are not effective with  respect to the U.S.
Finally, they argued that EPA ignored a "glaring omission of internal waters from the U.S.-
Canada ECA," and that EPA's statement that "[v]essel emissions in these [internal] waters affect
U.S. air quality to an equal, if not greater extent than emissions taking place in  coastal waters"
was conclusory. They also seemed to imply that EPA  had no basis for describing the ECA as
being sought to "protect air quality in U.S. ports and internal areas."

       Our Response:

       The proposed ECA does not "expressly exclude" internal waters.  U.S.  internal waters
were not specified in ECA application boundaries because of the sensibility that it is not
appropriate for an international organization to be designating control areas in U.S. internal
waters.  There was no counter-intuitive suggestion that marine emissions in such waters are any
less harmful to U.S. air quality than emissions occurring from the baseline seaward to 200
nautical miles.  Rather, EPA and other federal agencies believed that Congress' direction to
apply APPS requirements to U.S. internal waters confers the authority - if not requires -
application of the ECA standards to emissions in those waters, given that such  emissions are
even closer to U.S. population centers than  are emissions from most parts of the designated ECA.

       The commenter is incorrect when it suggested that EPA ignored the extent to which the
ECA proposed to EVIO included internal waters.  Their suggestion is refuted by EPA's explicit
statement that the regulatory text applying ECA requirements to internal areas  was proposed
under the authority of APPS (74 FR 44481).
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       While we continue to believe the statements GLMTF objects to are self-evident, we note
the following in response to their concerns.  First, if emissions in internal waters affect U.S. air
quality to a lesser extent than emissions taking place in coastal waters (as suggested by GLMTF),
it would necessarily mean that emissions become more harmful the further out to sea they occur.
The logical extension of this would be that emissions in the port would be more harmful than
emissions from land based service equipment and should be controlled more stringently than the
land based equipment. GLMTF provided no basis for the illogical implication that emissions
should be more aggressively controlled out at sea and on land than in internal waters.  With
respect to the second statement, we note that analysis of the impacts of ship emissions on internal
areas was included as part of the supporting information for the EGA proposal.

5.5 Compliance Issues  Related to Implementation of APPS

  5.5.1 EIAPP Certification

       What Commenters Said:

       The World Shipping Council and Matson Navigation Co. stated that manufacturers
should be able to submit a single application for both EIAPP and EPA certificates. They argued
that this would be simpler for the regulated community as well as the EPA and Coast Guard.

       EMA and Euromot argued that EPA should not require a manufacturer to obtain the
EIAPP certificate before an  engine is introduced into U.S. commerce. EMA also expressed
confusion regarding how §1043.10(a)(2) and §1043.30(a) are related for vessels that operate only
domestically.

       Our Response:

       While we do not think it would be practical to structure our certification program to
enable a manufacturer to submit a single application for both EIAPP and EPA certificates, we
plan to harmonize the two processes to the maximum extent possible.  Coast Guard should not be
affected by this certification process, since the same information will be provided in either case.

       It is not clear how the requirement to have an EIAPP  certificate would be enforced if we
followed EMA's suggestion, since they did not suggest any other point at which the requirement
would apply. Without a specific point by which the engine must have an EIAPP, engine and
vessel manufacturers and operators of uncertified engines could  always claim that they had
merely not obtained the certificate yet.

       We  agree with EMA that §1043.10(a)(2) and §1043.30(a) of the proposed regulations are
confusing.  We have revised the regulations to clarify that vessels that operate only domestically
do not need to obtain EIAPPs.  However, to make this allowance fit better into our enforcement
program, we are requiring that engines without EIAPPs that are intended for domestic use (or for
use on public vessels) include a statement on the label to indicate that.
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  5.5.2 Applicability of International Emission Standards to Nonparty Vessels

      What Commenters Said:

      The Chamber of Shipping of America and WSC support the proposal to require vessels
flying the flag of a State not party to MARPOL Annex VI to demonstrate equivalent compliance
with the substantive standards found in Annex VI. They stated that demonstration of compliance
by a non-party vessel should not be limited to documentation only, but should be subject to the
same methods of verification, including physical inspection and testing, as used by U.S.
enforcement personnel when inspecting a vessel flying the flag of a State party to MARPOL
Annex VI.

      Our Response:

      As described in part 1043 of the regulations, we will treat non-Party vessels essentially
the same as Party vessels, except for the requirement to have actual EIAPP certificates for the
engines.  More specifically, the final regulations state that non-Party vessels must comply with
"operating requirements and restrictions specified in 2008 Annex VI (incorporated by reference
in §1043.100) related to Regulations 13, 14, and 18" (in §1043.60) and "must keep all records
required by Regulations 13, 14, and 18 of Annex VI and the NOX Technical Code" (§1043.70).

  5.5.3  In which U.S. waters are Annex VI and its EGA requirements being
        implemented through APPS?

      WSC commented on the description in the NPRM preamble of how the EGA
requirements apply to internal waters.  Specifically they asked about use of the term "generally"
and the phrase "internal waters that can be accessed by ocean-going vessels". WSC also asked
that EPA clarify that the extension of the EGA requirements to internal waters would apply to
both U.S. and foreign-flagged vessels operating in the internal waters of the United States.  The
Chamber of Shipping of America and Maersk ask EPA to clarify the term "U.S. waters"

      Our Response:

      We believe that most of WSC's confusion is related only the preamble language and the
regulations use different wording that is clear.  Since the preamble language is intended to be
more readable for the general public, its wording is sometimes less precise.

      We are finalizing regulations that specify that the requirements apply for any waters that
fall within the scope of the navigable waters of the U.S. or the U.S.  EEZ.  We are also adding a
definition of "EGA associated area" which means U.S. internal waters that are navigable from
the EGA. We also clarify that this term does not include internal waters that are shoreward of
ocean waters that are not part of an emission control area.  It also does not include any waters not
accessible to ocean vessels, such as land-locked internal lakes.  The regulations specify that the
requirements that apply under Annex VI to vessels in EGAs will apply in EGA associated areas.

      In most respects, the regulations of 1043 apply equally to U.S.-flagged and foreign-
flagged vessels of Party states. The only differences are that the following special provisions
apply only for U.S.-flagged vessels:
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    1)  As provided in APPS and Annex VI, section 1043.10 specifies that U.S.-flagged vessels
       must comply with Annex VI in any waters, not just U.S. waters.
    2)  Section 1043.10 excludes U.S.-flagged domestic vessels from Regulation 13.
    3)  Section 1043.40 and 1043.41  specify how manufacturers obtain EIAPP certificates for
       U.S.-flagged vessels.

       We believe that similar provisions will be applied to foreign-flagged vessels by their
respective flag states - whether by statute, regulation, or other policy.  Thus the EGA
requirements in U.S. internal waters will apply equally to U.S.-flagged and foreign-flagged
vessels.

       In most respects,  non-Party vessels will be treated the same under part 1043 as other
foreign-flagged vessels. See section 5.5.2 for a discussion of the differences.
  5.5.4 EPA's extension of an ECA to the Great Lakes violates bilateral treaties
        between the U.S. and Canada

      What Commenters Said:

      The Great Lakes Maritime Task Force (GLMTF) (0269) stated that the U.S. and Canada
have a long tradition of cooperation on matters relating to the environment. Through treaties
such as the Boundary Waters Act of 1909, the Great Lakes Water Quality Agreement of 1978,
the Memorandum of Intent Concerning Transboundary Air Pollution of 1980, the ECE
Convention on Long-Range Transboundary Air Pollution of 1979 and, most relevant here, the
Agreement Between the Government of Canada and the Government of the United States of
America on Air Quality ("Air Quality Agreement"), the U.S. and Canada have agreed to act as
partners in protecting the environment and reducing transboundary air pollution.

      GLMTF commented that a hallmark of these bilateral treaties between the U.S.  and
Canada, and in particular the Air Quality Agreement, is notice and consultation. Numerous
provisions of the Air Quality Agreement require one country to notify  and consult with the other
when taking action to regulate air pollution. For example, Article V(6) requires one party to
"notify and consult the other Party" where it "becomes aware of an air pollution problem that is
of joint concern and requires an immediate response." Article V(3) requires each party to consult
with the other upon request "concerning changes to its laws, regulation or policies that, if carried
out, would be likely to affect significantly transboundary air pollution." Such consultations must
also include "consideration of appropriate mitigation measures." Article V(l) requires each party
to "assess those proposed actions" that "would be likely to cause significant transboundary air
pollution,  including consideration of appropriate mitigation measures."

      GLMTF argued that EPA's unilateral decision to extend the boundaries of the ECA to
include the Great Lakes repudiates the cooperative manner in which the U.S.  and Canada have
historically approached regulation of air pollution, and violates the spirit, if not the express
requirements, of the Air Quality Agreement and related bilaterals. The lack of coordination is
particularly ironic in light of the joint coastal ECA submission by the U.S. and Canada (and the
highly cooperative manner in which the coastal ECA was developed) and the sweeping impact of
this rulemaking on Canadian shipping and industry. The failure to consider these effects and


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consult with our northern neighbor is not only disrespectful to one of our closest allies but a
violation of U.S. treaty obligations.

       Our Response:

       EPA cooperates closely with the Canadian Government on a broad range of
environmental matters.  As the commenter notes, the U.S. and Canada jointly submitted the EGA
proposal to the EVIO. EPA has also consulted informally with the Canadian government with
respect to this rulemaking.  We do not agree that this rulemaking is governed by Article V of the
U.S. - Canada Air Quality Agreement. To the contrary, Article V is intended to address
potential increases in air pollution, not regulatory efforts to reduce it.  For example, Article V.5
provides: "Each Party shall, as appropriate,  take measures to avoid or mitigate the potential risk
posed by actions, activities or projects that would be likely to cause or may be causing
significant transboundary air pollution." Moreover, the "mitigation measures" cited by the
commenter refer to measures to reduce transboundary air pollution, not measures to mitigate  the
economic impact of regulation.

       Finally, we note that the Final Rule provides some relief for Canadian ships operating
solely in the Great Lakes. This is discussed further in the preamble and Chapter 10 of this
document.

5.6 Comments on Testing Requirements

  5.6.1  1065 Test Procedures

       What Commenters Said:

       Manufacturers objected to the provisions specifying the use of the test procedures in 40
CFR part 1065. EMA objected because of the cost of modifying laboratories to test according to
1065. Euromot argued that 1065 procedures could not be readily applied to large volume 2- and
4-stroke engines.  They also requested clarification of the liability for testing performed
according to 1065.

       Our Response:

       We believe these two test methods provide similar emission results. However, we
specified the test procedures in 1065 as the  official test procedures for Category 3 engines
because they are more up to date with current technology and result in more repeatable
measurements.  This is largely because the  1065 regulations are frequently updated to
incorporate new measurement technologies and  knowledge gained from testing.

       While we do not agree with Euromot's comment that Category 3 engines cannot be tested
according to 1065, we recognize EMA's concern that it could be expensive to upgrade a
laboratory to test according to 1065.  That is why we proposed §1042.501(g) which states:

      (g) For Category 3 engines, you may submit test data for NOx, HC, and CO emissions that
      were collected as  specified in the Annex VI Technical Code instead of test data collected
      as specified in 40 CFR part 1065. We may require you to include a brief engineering
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      analysis showing how these data demonstrate that your engines would meet the applicable
      emission standards if you had used the test procedures specified in 40 CFR part 1065.

      However, this provision addresses both issues of cost and feasibility. Manufacturers that
are already testing according to the Annex VI Technical Code could continue to do so. Under
§1042.501(g), such data would be fully acceptable for certification. Nevertheless, we would
expect such manufacturers to be familiar with the 1065 procedures.

      While we believe the Annex VI Technical Code and 1065 procedures will provide very
similar emission results, we recognize that it is theoretically possible for there to be a meaningful
difference in some unusual set of circumstances. It would be inappropriate to allow a
manufacturer to take advantage of any  such differences.  That is why we retain the right under
§1042.501(g) to require manufacturers to perform a brief engineering analysis showing how that
data collected according to the Technical Code are adequate to demonstrate that the engines
would meet the applicable emission standards if they had had been tested according to the test
procedures specified in 40 CFR part 1065.

  5.6.2 Certification Fuel
       What Commenters Said:

       Euromot questioned the need for limits on sulfur in test fuels. They stated that such
limits do not apply for IMO testing and would increase testing costs. EMA also opposed the
revision to the test fuel requirements for C3 marine engines should not be finalized because it
could require engine manufacturers to maintain a separate fuel supply at their testing facilities.

       Our Response:

       As we indicated in 5.6.1, we would accept test data collected according to the Technical
Code, which does not include specifications for fuel sulfur.

  5.6.3 Production-Line Testing

       What Commenters Said:

       Several commenters oppose the requirement to perform an emission test for each
Category 3 engine after it is installed in the vessel. Their objections were based primarily on
cost considerations. Euromot stated that such testing would extend the sea trial by at least one
day. They estimated that extending the sea trial would cost $300,000 per day.  EMA also argued
that portable measurement systems have not been proven.

       Our Response:

       Sections 206 and 207 of the Clean Air Act direct EPA to establish test programs to ensure
that engines are manufactured to conform to the applicable regulations in actual use. Thus, we
do not believe that the Clean Air Act would allow us to have no program to verify emissions
after certification.
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       We have used a variety of programs to fulfill this obligation for other engine sectors.  We
generally include some combination of regular testing of randomly selected engines as they are
being produced (production-line testing), unscheduled testing audits by EPA of engines as they
are being produced (selective enforcement audits), and testing of randomly selected engines in-
use engines.

       Under the existing regulations for Category 3  Tier 1 standards, this obligation was met by
regulations specifying that we could require manufacturers to perform a selective enforcement
audit. However, given the very small sales volumes for Category 3 engines, it is not appropriate
for a long-term program to rely on any method based on testing only a subset of the engines
produced. This is especially true for engines of this size, where a single engine can emit
hundreds of times more pollution than smaller nonroad engines. The reliance  on theoretical
selective enforcement audits was only appropriate as  a transition program implementing an
initial tier of standards.

       In addition, since Category 3 engines are generally not fully assembled in a testable
configuration before being installed in the vessel, a program relying on onboard testing is the
most workable approach.  If the engine must be tested after installation in the vessel, we believe
that testing during the sea trial will be the least burdensome approach.

       We disagree with EMA's assertion that portable measurement systems have not been
proven. They  have been used extensively for a wide variety of application. Moreover, EPA
recently completed a project to demonstrate the use of such systems onboard a marine vessel.

       While we continue to believe this requirement to be essential for the long-term program,
we accept that some manufacturers may need additional lead time to integrate the testing
requirement into their sea trials. Therefore, we will not require such testing until the engines  are
subject to the Tier 3 standards.

  5.6.4 PM Measurement
       What Commenters Said:

       Several manufacturers opposed the requirement to measure particulate emissions during
certification testing of Category 3 engines.  They generally argued that PM emissions from
Category 3 engines cannot be accurately measured under 40 CFR part 1065 or that it would be
prohibitively expensive. Commenters noted problems with measurement variability, fuel sulfur
levels, and the exhaust flow rates/size of the exhaust stacks. Finally they questioned what
benefits would be achieved with this requirement.
       Our Response:
       The PM measurement provisions in 40 CFR  Part  1065 are more than adequate to
accurately and  repeatably measure PM from C3 marine engines. While there have problems
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with measurement variability in past testing, these issues can be avoided by following the latest
part 1065 requirements as discussed below.

       One commenter appears to be basing the concern in part on data for PM measurement
variability that was discussed by Hellen et al, which advocates the use of ISO 9096 over ISO
8178-1, with a fuel sulfur upper limit  of 0.8% for application of ISO 8178-1 and  a CIMAC
recommended  upper limit (CIMAC  Recommendation  23/2005) of  0.05%.  13'14'15  These
recommendations were based on work by Bastenhof as published by CIMAC in 1995, where the
precision in measurement of PM from an engine fueled by residual fuel with 3.66%  sulfur was
±25 %.16   It is  important to note that the  temperature and  relative humidity  of the filter
conditioning room  were not held to a tight tolerance during this testing: temperatures ranged
from 22 to 26 °C and relative humidity from 36 to 58 %.  This variability can greatly affect the
amount of water bound to sulfuric acid trapped on the filter as discussed below.  While this was
not the only source of variability in this work, the lack of precision appears to be associated with
increasing fuel sulfur level.  The error in measurment of the particle phase sulfate can be directly
attributed to the filter conditioning.

       To minimize variability, consistent control of the  sample zone temperature is also very
important,  especially for engines emitting high amounts  of semi-volatile hydrocarbons, as the
temperature controls the deposition of semi-volatile hydrocarbons onto the filter.  Additional
improvements to ISO 8178-1 and 40 CFR Part 1065 since the publication of the Bastenhof paper,
with respect to sample  zone temperature control (47  ±5 °C) and filter conditioning/weighing
room environment  (22 ±1 °C  ambient temperature and 9.5  ±1 °C dewpoint) have  worked to
further lower the variability of these measurment methods, thus  making them appropriate for
measurement  of PM from C3 marine engines.  This  has been further supported by work  by
Agrawal  and Murphy, et al. which  has shown very repeatable measurements using ISO-8178-1
to measure PM on-board ships.17'18

       Further, with respect to measurement of C3 emissions as a whole, 40 CFR Part 1065 is
very robust and more than adequate for measurement of emissions from C3 marine engines. Part
1065 is an improvement over existing test procedures with respect to accuracy and repeatability
and its use would benefit C3 marine emission measurement.
13 "Particulate Emissions of Residual Fuel Operated Diesel Engines - Background, Paniculate Size Distributions,
Measurement Methods, and Potential Abatement Measures", Hellen, G., et al., International Council on Combustion
Engines, Paper No. 56 (2007).
14 ISO 9096, "Stationary Source Emissions - Manual Determination of Mass Concentration of Particulate Matter.
15 CIMAC Recommendation Number 23/2005: Standards and Methods for Sampling and Analysing Emission
Components in Non-automotive Diesel and Gas Engine Exhaust Gasses - Marine and Land Based Power Plant
Sources.
16 "Exhaust Gas Emission Measurements - A Contribution to a Realistic Approach", Bastenhof, D., International
Council on Combustion Engines, 1995.
17 "Emission Measurements from a Crude Oil Tanker at Sea", Agrawal, H., et al., Environ. Sci. Technol. 2008,42,
7098-7103.
18 "Comprehensive Simultaneous Shipboard and Airborne Characterization of Exhaust from a Modern Container
Ship at Sea",  Murphy, S., etal, Environ. Sci. Technol., 2009,  43 (13), pp 4626^640.

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       With respect to test fuel, C3 marine engine manufacturers typically certify their engines
on distillate fuel even if engines operate on HFO.  By requiring a test fuel with a sulfur level of
800 to 2,500 ppm, we will be matching the in-use fuel S concentration for an engine complying
with the Tier III fuel  sulfur requirements and we expect this fuel  sulfur concentration to be
similar to that currently used by engine manufacturers for engine certification.

5.7 Exclusions and Exemptions

       What Commenters Said:

       Several commenters stated there EPA should continue to allow an exemption for
replacement Category 3 engines. EMA emphasized that all of the exemptions provided in
MARPOL Annex VI and under the APPS should be included in EPA's C3 Marine Engine Rule.
In particular, they wanted additional exemptions for emergency and military engines and vessels,
the Annex VI exemption for sea-bed mineral exploration and associated activities (see MARPOL
Regulation 3.1).

       The World Shipping Council stated that replacement of a failing Category 3 engine
would be "extraordinarily rare," given the size and placement of these engines on a vessel.  They
stated further that it  may be completely impractical to upgrade an engine from Tier II to Tier III
if a larger physical infrastructure is required to install the new engine.  They asked that EPA
explain why there is no allowance for a replacement engine exemption for Category 3 engines.

       AWO commented in support of the proposed exemption for vessels that operate only
domestically.

       Our Response:

       We proposed to not allow a replacement engine exemption for Category 3 engines
because we cannot envision a scenario in which it would be necessary to replace an engine with
an uncertified engine or one certified to earlier standards. We still do not believe that such
circumstances will occur. Nevertheless, we accept that we cannot imagine all possible
circumstances. Therefore, the final regulations will allow a manufacturer to request a
replacement engine, but only for very unusual circumstances.

       With respect to the other exemptions, we are finalizing the APPS regulations to include
the same exemptions and exclusions included under Annex VI. However, we are not applying
them to our Clean Air Act regulations. Instead, we are continuing the same exemption
provisions that already apply for marine engines. This includes national security and emergency
exemptions, but does not include any exemption for engines used for sea-bed mineral exploration

5.8 Provisions for Category 1 and 2 Engines

       What Commenters Said:

       EMA also supports the Agency's proposal to adopt compliance flexibility for Cl and C2
vessels that operate primarily in foreign ports. Under that proposal, and beginning in 2016,
vessel owners would be allowed the choice, with respect to Cl and C2 engines, between
complying with EPA's Tier 4 NOx and PM standards or the MARPOL Annex VI standards for

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all CI engines over 130 kW installed on the vessel. EMA encourages the Agency to include
such compliance flexibility in any final C3 rulemaking, and to amend the C1/C2 rule to delete
the compliance requirements for 2016 and later model year engines installed on U.S. vessels
traveling overseas.

       EMA also endorses the additional compliance flexibility that the Agency has proposed
with respect to the temporary exemption program for Cl and C2 vessels that may operate
overseas under contract for extended periods in an area where  15 ppm sulfur fuel may not be
available. That proposed auxiliary emission-control device (AECD) flexibility, however, should
not be limited solely to auxiliary engines. In addition, it should be an option in addition to the
current exemption program, and not a wholesale replacement of it. Including both flexibility
options will provide better assurance of compliance for vessels that are properly engaged in
international commerce.

       Note that other Chapter 4 addresses  other comments opposing allowing Category 1 or
Category 2 engines to use higher sulfur fuel.

       Our Response:

       We are revising §1042.650 to add exemption  provisions for Category 1 and Category 2
auxiliary engines on vessels with Category 3 propulsion engines.  Previously, some such engines
could have qualified for the migratory exemption we adopted in 2008 for vessels for Tier 4
standards. This exemption was intended primarily to address potential problems obtaining 15
ppm fuel overseas. We are finalizing a parallel exemption for  auxiliary engines that would differ
from the existing exemption by including engines on Category 3 vessels that operate
domestically and apply for Tier 3 and earlier standards.

       Under this option, manufacturers of Category  1 and Category 2 engines intended for use
on Category 3  vessels that will not be limited to domestic waters may choose to certify only to
Annex VI NOx standards.  We will not require CAA certification for such auxiliary engines if
the conditions for this flexibility are met.  As is specified in 1043, we will not require an EIAPP
for engines certified under part 1042 if they will be limited to domestic waters. Thus ,  Category
1 and Category 2 engines intended for use on vessels that operate solely in domestic waters may
be certified to either the CAA or the MARPOL Annex VI standard applicable to the model year
engine.

       We are including a provision to address potential an environmental disbenefit during the
transition to the catalyst-based standards.  In order to receive the flexibility described above for
engines on vessels not limited to use in domestic waters, engines that would have been subject to
the Tier 4 standards of part 1042 will be required to meet the Tier III NOx requirements,
irrespective of whether they would be required to comply under Annex VI. For example, this
would affect 2015 Category 2 engines with  a maximum engine power of 3000 kW installed on a
2015 vessel using this option. Since such an engines would have been be subject to the Tier 4
standards under §1042.101, they will be required as a condition of the exemption to meet the
Tier III standards under Annex VI.

       Given the MARPOL Annex VI and  CAA NOX requirements are comparable, with
slightly  different phase-in dates and cut-offs, we believe this approach will be a less burdensome
implementation approach over transitioning years, and will not have a meaningful impact on

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emission reductions. In the absence of this exemption, manufacturers would have been required
to certify special auxiliary engines that met both Annex VI and 1042 requirements for a U.S.
market that could be as small as one engine per year. By allowing manufacturers to meet only
the Annex VI requirements, they would be able to produce a single international engine and
spread the administrative costs over many more engines. It is important to note that we are not
extending this exemption to vessels with Category  1 or Category 2 propulsion engines because
these factors cannot be presumed for such vessels.

5.9 Applicability to Gas Turbine Engines

       What Commenters Said:

       Several commenters objected to EPA's proposal to require marine gas turbine engines to
meet the emission standards that currently apply for Category 1 and Category 2 diesel engines.
Some of these commenters stated that turbines should not be included in the definition  of
"compression ignition" engines and that regulation of turbines does not fit within the scope of
the rule. They argued that the goal of the proposed rule was "to align with MARPOL." They
also  asserted that the proposed requirements would not pass a cost/benefit analysis and that
turbines cannot be tested under the procedures of 40 CFR part 1065.  However, they did not
provide any information about costs, benefits, or test procedures.  Finally, the commenters stated
that EPA was incorrect when we claimed that gas turbines operate at lower air/fuel ratios and
have lower exhaust volumes.

       Our Response:

       We agree that it would be incorrect to define turbine engines as reciprocating or
compression ignition. However, we did not propose to do so.  The commenters are misreading
§1042.1(f), which states:

   (f) The marine engines listed in this paragraph (f) are subject to all the requirements of this
   part even if they do not meet the definition of "compression-ignition" in §1042.901. The
   following engines are deemed to be compression-ignition engines for the purposes of this
   subchapter:

   (1) Marine engines powered by natural gas or other gaseous fuels with maximum engine
   power at or above 250 kW.  Note that gaseous-fueled engines with maximum engine power
   below 250 kW may or may not meet the definition of "compression-ignition" in §1042.901.

   (2) Marine gas turbine engines.

   (3) Other marine internal combustion engines that do not meet the definition of "spark-
   ignition" in §1042.901.

       This provision does subject marine gas turbine engines to the requirements of part 1042,
but it explicitly recognizes that they do not meet the definition of "compression-ignition" in
§1042.901. The confusion seems to arise from the statement that these engines "are deemed to
be compression-ignition engines for the purposes of this subchapter." This statement is merely a
regulatory convention that means the part applies to turbines as if they did meet the definition.
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       The commenters do not dispute the feasibility of these standards. They assert - without
providing supporting information- that regulation of turbines will not be cost-effective.  We
recognize that the number of turbines that will be subject to these standards will likely be small.
(Note that if there are no gas turbine engines manufactured, there would be no costs at all.)
However, the main benefit of this requirement will likely be to prevent vessel manufacturers
from circumventing our regulations by installing turbine engines rather than diesel engines.
Nevertheless, our analysis shows that these requirements will be very cost effective, without
regard to the number of turbines that are ultimately installed in marine vessels.  The commenters
questioning the cost-effectiveness of the requirements did not provide any cost or emission data
to show otherwise, even though they likely had access to detailed cost and emission information.
It is important to note that EPA requested such information years ago as part of its proposal to
adopt new emission standards for Category 1 and Category 2 marine engines (72 FR 16004,
April 3, 2007).

       It is difficult to respond to the commenters' assertion that major revisions would be
required to test turbines under 40 CFR part 1065 since they did not identify any specific
problems. We continue to believe that only minor modifications would be needed and that they
fall within the scope of special test procedures already allowed under §1065.10(c)(2).
Manufacturers planning to certify gas turbine engines that believe they cannot test their engines
according to part 1065, should contact EPA to request permission to use such special test
procedures.

       We do agree that it was incorrect to state that gas turbines operate at lower air/fuel  ratios
and have lower exhaust volumes.  After further review, we recognize that this is not necessarily
true. Both diesel engines and gas turbines can operate over wide ranges of air/fuel ratios, making
categorical comparisons difficult. Nevertheless, we do not dispute the commenters' statement
that modern gas turbine engines will have higher air/fuel ratios and exhaust flow rates than
marine diesel engines.

       Finally,  irrespective of the actual cost for turbines to meet the standards, this requirement
could be considered to be feasible based solely on the fact that vessel manufacturers do not need
to use turbine engines.  As we stated in the preamble for the proposal,

   (T)he only circumstance in which a vessel would actually need a gas turbine engine would be
   for military  purposes where our national security exemption provisions would apply. For all
   other vessels, it is entirely feasible for the vessel to be powered by a diesel engine. In fact,
   that is what is being done today.

The commenters did not dispute this.

5.10 Applicability to Boilers

       What Commenters Said:

       Several  operators on the Great Lakes expressed concern over forced retirement of
steamships as a result of the proposed fuel sulfur requirements.  They stated that the existing
steamships on the Great Lakes cannot operate on distillate fuel for economic and safety reasons.
These comments are discussed in more detail in Chapter 10.
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       In a letter to Senator Murkowski that was later forwarded to EPA, TOTE stated that they
operate two steam propulsion vessels in domestic and international service off the Pacific coast.
It is widely accepted that burning low sulfur fuel in the boilers of old steam vessels is not
advised, and unsafe. Extensive and complex modifications would be required on these vessels to
enable them to burn low sulfur fuels, and major modifications would not be economically
justifiable as the life expectancy of vessels is 10 years or less. There is precedent for legislative
relief in this bill already from congressional leaders from the states bordering on the Great Lakes.
TOTE proposed that steam powered vessels in the U.S. fleet be exempted from the proposed
regulations.

       One commenter noted that the SS. Jeremiah O'Brien is the last working WWII Liberty
ship and is designated as a National Historic Landmark.  Obviously, the ship could not be
modified to burn a low sulfur fuel without destroying its historically integrity. This vessel is
equipped with a reciprocating steam engine and is not equipped to operate on distillate fuel. The
commenter requested that we consider including an exemption for historic vessels in any new
regulations applicable to existing ships.

       Coalition for a Save Environment commented that boilers are used in tanker ships to
pump out crude oil,  fuels, and gas and to operate cranes in container ships.  These boilers release
tons of criteria pollutants and VOCs. Boilers can use high-efficiency aftertreatment technology
to reduce emissions. They raised concern that  no regulations are being proposed for these non-
engine ship toxic emission sources.

       Our Response:

       A number of commenters raised issues  regarding operating Great Lakes steamships on
distillate fuel. As discussed in Chapter 10 of this document, existing Great Lakes steamships are
excluded from this final  rule.

       Similar concerns were raised for the small number of steamships operating along the U.S.
coasts.  As these vessels do not operate exclusively within U.S. internal waters, they fall under
the U.S. Government's (primarily EPA and Coast Guard's) implementation of the EGA
provisions of the EVIO MARPOL Annex VI treaty. The requirements of the MARPOL Annex
VI EGA fuel sulfur limits apply to all vessels and have no exemptions for steamships. It is not
within the scope of this rulemaking to amend the requirements of the MARPOL Annex VI treaty.
However, through the comments and follow-up conversations with ship owners, we agree that
special challenges exist for the use of lower sulfur fuel in steamships.  Therefore, we will
continue to work on this issue with the United  States Coast Guard and other members of the U.S.
Delegation to IMO as well as other interested stakeholders including the affected steamship
operators. We are committed to resolving this  issue before the end of 2011, well in advance of
January 2015 when the 0.1 percent fuel sulfur standard will  enter into force.

       We have added a provision that would allow us to exempt historic steamships from the
lower sulfur fuel requirements for operation in U.S. internal waters. The designated party for the
historic steamship would need to request this exemption from EPA. We would make this
decision on a case-by-case basis.
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5.11 Coordination with Coast Guard

       What Commenters Said:

       CSA stated that the regulations should not be finalized and implemented without
continuing the extensive consultation between Coast Guard and EPA to assure that any
requirements related to emissions reductions from marine vessels do not run afoul of existing
regulations which ensure operational safety and environmental protection.

       We also received a request that EPA more clearly identify how both the proposed U.S.
C3 regulations and IMO regulations will be enforced and what respective roles EPA and the
Coast Guard will have in ensuring compliance with all of the fuel and emission control
requirements.

       Our Response:

       We have consulted with Coast Guard throughout this rulemaking process and will
continue to coordinate with Coast Guard as we move forward. The Act to Prevent Pollution
from Ships authorizes the U.S. Coast Guard and EPA to enforce the provisions of Annex VI
against domestic and foreign vessels and to develop implementing regulations, as necessary. In
addition, APPS gives EPA sole authority to certify engines installed on U.S. vessels to the Annex
VI requirements. This final rule contains regulations codifying the Annex VI requirements  and
regulations to implement several aspects of the Annex VI engine and fuel regulations, which we
are finalizing under that APPS authority. We are currently working with the U.S. Coast Guard to
better define the respective roles of the EPA and Coast Guard.

5.12 Other Marine Certification and Compliance Issues

(A)    Defect Reporting.
       What Commenters Said:

       EMA objected to the proposal to apply the defect reporting requirements of §1068.501 to
Category 3 engines, and reducing the threshold for filing a defect report to two claims. They
argued that the proposed defect reporting threshold is too low and that engine manufacturers
have no meaningful opportunity to monitor, investigate and report on emissions-related defect
claims in a timely manner.  They stated that manufacturers would generally be late in their
submissions of defect reports to EPA if the Agency finalized a reporting threshold of two claims,
and suggested that the actual air quality impacts from such a defect reporting requirement would
be negligible. They recommended that the Agency apply the reporting thresholds already
adopted in §1068.501(f)(2).

       Our Response:

       The threshold specified in §1068.501(f)(2) would be 10 defects.  This is not appropriate
for Category 3 engines because of their extremely low sales volumes.  Under that approach  a
manufacturer that produced five Category 3 engines in a year, would never be required to file a
defect report, even if all of the engines were found to be defective. We also do not accept the
claim that defect reports will inevitably be late, since the regulations only require  the

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manufacturer to submit a report within 21 days once it becomes aware of the occurrence of the
same defect in two or more engines within a family.

(B)    How will standards be enforced?

       What Commenters Said:
       The Coalition for Safe Environment (LB hearing testimony 0232, p56) asked how the
requirements will be enforced, and what the sanctions are for failure to meet these new
standards. Maersk ask that the final rule be very clear as to which sections apply only to U.S.-
flagged vessels vs. all vessels.

       Our Response:

       The CAA standards being adopted would be enforced as specified in 40 CFR part 1068,
especially §§1068.101 and 1068.125. We believe the regulations are fairly clear that part 1043
applies for all vessels, while part 1042 applies only for U.S.-flagged vessels.

(C)    Small Volume Manufacturers.
       What Commenters Said:

       EMA objected to the revised definition of "small-volume engine manufacturer," pointing
out that it would apply a different threshold for companies making Category 2 engines if they
happened to also make Category 3  engines.

       Our Response:

       We acknowledge that the definition as proposed would treat companies differently
depending on whether or not they make Category 3 engines. However, we believe this
highlights the need to revisit this definition more fundamentally. We continue to believe, as
described in the proposed rule, that any manufacturer with the design and  production capabilities
to produce Category 3 engines does not warrant special treatment as a small business, regardless
of the production volumes. Such an engine manufacturer would need very substantial capital
and developmental resources and should not be treated differently  than other manufacturers that
do not qualify as "small."

       Consideration of this comment made clear that, by establishing a threshold of 1000
engines, the definition is appropriate only for Category 1 engines,  which are generally produced
in relatively high volumes. Many manufacturers producing only Category 2 engines will never
exceed production volumes 1000 engines per year. Much like Category 3 engines, these very
expensive engines are produced by capital-intensive companies. We did not propose to change
the definition for these companies, so we are not finalizing any further changes in this rule.
However, we intend to change this definition in the future to more appropriately tailor
rulemaking provisions for small manufacturers to those companies that have limited ability to  do
testing and meet other certification requirements.
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(D)    Re-flagging.
       What Commenters Said:

       Liberty Maritime expressed concern that the proposal would set a significant hurdle to
the reflagging of vessels from foreign flag (built to MARPOL Annex VI standards) to U.S. flag.
They argued that application of the EPA Standards would require ship owners to persuade the
engine manufacturer to carry out extensive, U.S. EPA-unique, testing procedures to seek
certification. Alternatively, the ship-owner would be required to change out or modify the
engines.  Maersk stated that since U.S. fleets often grow by acquiring vessels from outside the
U.S., all requirements for "re-flagging" vessels into U.S. registration need to be clear, and the
process must be timely and responsive to support U.S. companies in dealing with business
changes.  The Word Shipping Council requested that we clarify what certification and
verification requirements  apply for ship that becomes a U.S.-flag vessel after being placed into
service under a different flag.

       Our Response:

       We recognize that reflagging vessels may be common in the coming years as the U.S.
Department of Transportation Maritime Administration (MARAD) implements the Maritime
Security Program (MSP).   The requirements of the MSP may have created confusion for owners
of non-U.S.-flagged vessels regarding their obligation to also comply with EPA's domestic
marine diesel engine emission standards at the time they re-flag for inclusion in the MSF.  We
are revising the regulations to clarify these requirements and, as noted earlier, to provide
exemptions for auxiliary engines on Category 3. First, we are revising §1042.1  to clarify that our
regulations apply for all U.S.-flagged vessels. In conjunction with this, we are revising the
definitions of "model year" and "new marine engine" to clarify that our marine  engine program
applies to all U.S.-flagged vessels regardless of where that vessels is built or operated, and how
the regulations apply for vessels that are re-flagged to be U.S. vessels.

       We are clarifying that engines on foreign vessels that vessels become "new marine
engines"  under part 1042  at the point at which they are reflagged.  As new marine engines, we
would expect them to be covered by valid certificates and/or exemptions prior to being placed
into  service. If engines on U.S.-flagged vessels are not covered by valid certificates and/or
exemptions when they first enter U.S. waters, they would be subject to all of the prohibitions of
part  1068.101. The operator would be in violation of the prohibition against introduction of an
uncertified new engine into U.S. commerce.

       Some of the revisions being finalized are intended to simplify the transition from part 94
to part 1042. Under the revised regulations, part 1042 becomes the default regulatory part for
compression-ignition marine engines.  Section 1043.1 specifies that such marine engines are
subject to part 1042 unless they are certified under part 94. In addition, §1042. l(c) specifies that
the definition of "new marine engine" in §1042.901 applies for engines certified under part 94.
This is important because our standards and prohibitions apply for engines meeting the definition
of "new marine engine".  Thus, to determine whether an uncertified marine engine is subject to
our standards and prohibitions, you must determine whether it meets any  of the  criteria of the
definition of "new marine engine" in §1042.901.
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       Each "new marine engine", is subject to standards based on its model year. The revised
definition of "model year" specifies that engines on re-flagged vessels would generally be
subject to the standards that would have applied in the year they were originally manufactured.
If the engine has a model year before the years the part 94 standards first applied, it would not be
subject to any standards.  If the engine has a later model year but one that is before the years the
part 1042 standards apply, it would be subject to the standards of part 94.  According to
§1042. l(c), if the engine is certified to these part 94 standards, it is not required to comply with
the requirements of part 1042.

       To further smooth this transition, we are finalizing a new interim provision in
§1042.145(1). This provision is intended to apply for vessel operators that were not aware that
their vessels were required to comply with our regulations. Once this amendment takes effect, it
will allow them to operate in U.S. waters until July 1, 2010 without certificates or exemptions for
their engines. After that, it will be a violation of 40 CFR 1068.101 to operate in U.S. waters with
uncertified engines if those engines are subject to our standards. Operation of such vessels in
U.S. waters on or after July 1, 2010 is deemed to be introduction into U.S. commerce of a new
marine engine.

(E)    Penalties for noncompliant operation.
       What Commenters Said:

       The World Shipping Council objected to the regulatory provision identifying each two-
hour period of operation in a noncompliant condition as a separate violation. This could lead to
very high penalties in cases where the operator knows that an engine is in a noncompliant
condition, but they are unable to correct the noncompliance until they arrive at a port where they
can arrange for specialized service. It may be more appropriate to identify a violation as starting
at the earliest practicable point of intervention, consistent with the problem and the required
remediation.  They also requested that we describe the role for manufacturers of aftertreatment
systems in the certification process and clarify whether these companies are liable for in-use
performance for their installed products.

       Maersk also questioned the definition of two hours as a violation, and asked how this
compares to international enforcement requirements for vessels and other mobile  sources. They
suggested an alternative of allowing a vessel which experiences such a malfunction at sea to
make a reasonable attempt to solve the problem, and if not successful, document the attempts
made and correct the equipment problem at the next port call where appropriate facilities,
resources and expertise are available. This should not be considered as multiple violations.

       Our Response:

       We have added the following to §1042.660 in the regulations to address concerns about
malfunctions that occur at sea:

       Note that where a repair (or other maintenance) cannot be completed while at sea, it is
       not a violation to continue operating the engine to reach your destination.

       With respect to the role for aftertreatment manufacturers in the certification process and
their liability for in-use performance, we note that our regulations apply for all persons meeting

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the definition of "manufacturer" in the regulations.  Nevertheless, we generally assign primary
responsibility for in-use performance to the manufacturer that obtains the certificate of
conformity for the engine (including the aftertreatment system).

5.13 Miscellaneous modifications to the proposed regulatory language

       What Commenters Said:

       One commenter expressed concern that it is confusing that the acronym PEMS is used in
part 1065 for "portable emission measurement system" and in part 60 for "predictive emissions
monitoring system".

       Our Response:

       We do not believe that the different uses of this acronym are a problem that needs to be
corrected.  It is not uncommon for this situation to occur where a simple acronym has different
meanings in different contexts. This acronym was established several years ago in part 1065.
Within the regulated community of engine manufacturers it is widely understood to mean
portable emission measurement system in the context of part 1065.  We believe it would be more
confusing to change this acronym or the acronym in part 60.
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CHAPTER 6:  Estimated Costs

       What We Proposed:

       The comments in this section generally correspond to Section VII of the preamble to the
proposed rule, where we describe the expected costs of EPA's coordinated strategy for
addressing ships' emissions. The Regulatory Impact Analysis describes costs in Chapter 5.

       See Chapter 7 of this document for a discussion of comments on the economic impacts of
this strategy.  See Chapter 10 of this document for a discussion of costs and impacts specific to
the Great Lakes region.

6.1 Cost of Engine Technology

       What Commenters Said:

       EMA commented that it has not been established whether or not diesel fuel with a sulfur
content above 1,000 ppm will cause damage to Selective Catalytic Reduction (SCR)-based
aftertreatment systems, even when the system is inactive. Regardless, to account for this
possibility, the commenter stated that EPA should investigate the potential costs of a by-pass to
the SCR system.

       The U.S. Navy commented that their testing indicates that cost of catalyst-based
aftertreatment systems for gas turbine engines would be expected to be considerably higher than
those used on diesel engine exhaust systems, rather than lower. Others commented that applying
these standards to marine turbine engines would not pass a cost/benefit ratio analysis.

       EGCSA commented that EPA's cost estimates for retrofitting existing vessels with
equipment to accommodate the use of lower sulfur fuel were too low.  The commenter noted that
recent discussions with a major tanker owner indicated that fuel line changes alone amounted to
Ł100,000 per ship.  The commenter also noted that many ships, including new builds,  do not
have sufficient tank capacity or segregated fuel tanks that hold both residual and distillate fuel;
therefore, the  options to divide residual fuel tanks or install new separate distillate fuel tanks will
vary from ship to ship. Further, the commenter stated that 'distance from vessel hull regulations'
may also limit options for new tanks. The commenter stated that the minimum cost of
installation of new fuel tanks is unlikely to be less than $100,000 when accounting for all costs
including opportunity cost, and could be in excess of $400,000 for some retrofit applications.

       EMA (0265)
       USN-DoD (0241)
       Solar Turbines (0249)
       GTA (0253)
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       Our Response:

       Through our background work for this rulemaking and for the EGA application, we
sought input from the regulated community regarding the expected future costs of applying the
emission control technologies associated with the coordinated strategy.  EPA contracted with
ICF to research the fixed and variable costs associated with the technologies expected to be used
to meet engine and fuel sulfur requirements, as applied to different engine types and sizes. After
ICF developed their initial cost estimates, they provided surveys to several engine and emission
control technology manufacturers, including at least one member from both EGCSA and EMA to
determine the reasonableness of their approach and cost estimates. Input received from those
surveyed was incorporated into the final cost estimates used in this analysis.

       The costs of bypass systems associated with the use of SCR were investigated for a series
of both slow-speed and medium-speed engine configurations and ranged from $4,700 -$7,500.
Chapter 5 of the RIA presents this information in the discussion on variable costs associated  with
the use of SCR as a Tier III compliance strategy.  These variable costs include: the urea tank, the
reactor, dosage pump, urea injectors, piping, bypass valve, an acoustic horn, a cleaning probe
and the control unit and wiring. The cost of applying SCR technology to gas turbine engines has
been addressed in Section 5.8 of this document.

       The cost estimates developed for the installation of equipment to accommodate the use of
lower sulfur fuel on both new and existing vessels were developed separately. These estimates
were based on the installation of distillate fuel tanks large enough to hold fuel sufficient  for 250
hours of both main and auxiliary engine operation; however, the size of the tank actually
installed on a particular vessel is dependent on the frequency with which the individual ship
owner prefers to fill the lower sulfur fuel tank. The estimated costs were developed for new  and
existing vessels with engine configurations ranging from 4,500 kW medium speed engines to
48,000 kW slow speed engines. The estimated costs  for new vessel installations ranged  from
nearly $34,000 to  $73,000. Retrofitting a vessel is expected to require more effort than making
upgrades during new vessel construction, to  address this, additional labor costs were allocated
for installing equipment to accommodate the use of lower sulfur fuel on existing ships resulting
in cost estimates from $44,000 to $99,000.

       The costs include additional distillate fuel storage tanks, a lower sulfur fuel oil separator,
a residual/lower sulfur fuel oil blending unit, a 3-way valve, a lower  sulfur fuel oil cooler, filters,
a viscosity meter,  and various pumps and piping.  This cost analysis  does not reflect opportunity
costs, such as that of displaced cargo as there are other design options such as partitioning of a
residual fuel tank to allow for lower sulfur fuel capacity which would reduce the amount of
additional space required, nor does this analysis reflect the possibility that some ships may have
already been designed to carry some amount of distillate fuel in separate tanks for purposes other
than continuous propulsion. In fact, of the existing fleet of vessels, less than one-third would
require modifications to carry enough distillate fuel to enable the vessel to travel 1,140 nm, and
of these nearly 75 percent already carry some distillate fuel.

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6.2 Cost of Lower Sulfur Fuel

       What Commenters Said:

       We received a number of comments on the economic modeling that was conducted to
predict the difference in pricing between traditional residual marine fuel oils and distillate marine
fuel oils as well as its expected impact on the various segments of the marine industry. The
majority of these comments were that, based on historical experience, that the price premium for
distillate is much higher than projected by EPA.

       CLIA commented that the use of the global market fuel price  differential is immaterial
when the analysis concerns shipping that will trade almost exclusively within the EGA. Instead,
the analysis should be conducted utilizing historical spot market bunker pricing within the
various geographic areas of the EGA.  CLIA's analysis, for example, indicates a historical 10
year average price differential between distillate and residual fuel in the U.S. Northwest of
approximately $230 per ton. Note that the U.S. Pacific Northwest is the Alaska cruise market
which operates exclusively within the EGA and thus,  EGA compliant fuel must be used
essentially 100% of the time. Thus, the expected fuel  cost premium would be closer to $12-$ 16
per day instead of $7 per day adding approximately $86 to $112 to the price of a typical seven
day cruise itinerary in this region, if historical averages hold true. CLIA also commented that
there is a United States flag cruise ship operating in the State of Hawaii.  Analysis provided by
that operator indicates that the economic impact on Hawaii is consistent with that on Alaska.
That is, an increase of almost $10 per person per day  - a rise of 64%. This equates to an increase
of $70 per person on a 7 day cruise or $280 for a family of four.

       Both CLIA and Chamber of Shipping of America referenced a Final Report of ATEMIA
- University of Antwerp (September 2009) which states: "The price difference between IFO 380
andMGO (0.1% sulphur) fluctuates strongly in time (30% to 250%price difference) with a long
term average of 93% (period 1990-2008).  The price difference between LS 380 andMDO
fluctuates between 40% and 190%,  with a long term average of 87%. In other words, the
specifiedMDO is historically on average 87% more expensive than LS 380. Overall the cost of
marine distillate fuels is about twice what residual fuels costs due to increasing demand and the
cost of the desulphurization process. These are long-term averages. Overall, the effect of the new
Annex VI agreement may be quite costly for the participants in the shipping industry. Based on
historical price differences, the use ofMGO (0.1%) could well imply a cost increase per ton of
bunker fuel of on average 80 to 100% (long-term) compared to IFO 380 and 70 to 90%
compared to LS 380 grades (1.5%). This conclusion is in line with previous studies."

       Chamber of Shipping of America believes that the increases in low sulfur fuel costs are
significantly underestimated in EPA's cost/benefit analysis.  EPA's fuel  cost estimates found in
Table VII-2 at page 44489 utilize the estimates found in the Martin Tallett/Ensys study which
was one basis for the work of the IMO expert group which addressed this issue. The spread
noted in this study between distillate and HFO was cited at 1.45. While this spread may be
closer to reality in the current economic downturn which has resulted in the use of less volumes
of heavy crude oils as well as excess refining capacity, historically we have seen the
distillate/HFO spread closer to 2.0.  Based on the expectation that economic downturns occur
less than 25 percent of the time, a more appropriate spread would reflect "normal" economic
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conditions as well as fully taking into account that distillate demand is expected to increase
significantly with a corresponding decrease in demand for HFO.

       Seaworthy commented that its decades of experience with marine fuels would indicate
that a 70-80% price premium for 0.1 percent sulfur distillate.  TOTE commented that the
additional distillate fuel consumption from vessels forced to use this fuel will immediately
increase the cost of all distillate fuel  in the Puget Sound area. Small changes in consumption
patterns in an already tight Puget Sound fuel market will have a disproportionate effect in this
area.

       SFC commented that by 2015, most (if not all) of the fuel production meeting the EPA's
1,000 ppm sulfur standard will have  to be marine diesel. This means that refineries will have to
make significant investments in conversion technologies, and that shipowners and operators will
likely face increased fuel  prices. A report undertaken for the EVIO by the Informal Cross
Government/Industry Scientific Group of Experts (published in December 2007 ) notes that the
price difference between heavy fuel  oil and distillate fuel has varied from  50 percent to 72
percent between 2000 and 2007 (a qualified estimate was impossible to provide).  The report goes
on to note that although forecasts of fuel prices are based on many variables, one certainty is that
any increase in fuel costs  will be incorporated into the ship's freight rates, which may result in
competition between the marine mode and other transportation modes.

       Governor Lingle of Hawaii commented that the EPA's analysis of estimated fuel costs,
per footnote 130 in the proposed rule, "considers only the lower 48 contiguous states and
southeastern Alaska."

       CLIA (0278)
       Chamber of Shipping of America (0256)
       Seaworthy (0226)
       TOTE (0289)
       Shipping Federation of Canada (0270)
       Governor Lingle (0400)

       Our Response:

       Studies were performed on the impact of a North American EGA on global fuel
production and costs, to inform the application for such EGA.19 These studies were performed
prior to the EGA being defined; thus, we picked a maximum distance boundary to ensure the fuel
volumes used for the cost analysis would be larger than required by the program.  Specifically,
we used the total fuel consumption in the U.S. and Canada exclusive economic zones.20 The
studies are relevant to this regulation as well, because they estimate the cost of 1,000 ppm  sulfur
fuel for Category 3 vessels operating in U.S. waterways.
19 Research Triangle Institute, 2009. "Global Trade and Fuels Assessment— Future Trends and Effects  of
Designating Requiring Clean Fuels in the Marine Sector". Prepared for U.S. Environmental Protection Agency.
Research Triangle Park, NC.
20 In this analysis, the U.S. included the lower 48 contiguous states and southeastern Alaska.

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       To assess the effect on the refining industry of the imposition of a 1,000 ppm sulfur limit
on fuels, we needed to first understand and characterize the fuels market. Research Triangle
Institute (RTI) was contracted to conduct a fuels study using an activity-based economic
approach.  The study established baseline bunker fuel demand, projected a growth rate for
bunker fuel demand, and established future bunker fuel demand volumes.21 These volumes then
became the input to the World Oil Refining Logistics and Demand (WORLD) model to evaluate
the effect of the coordinated strategy on fuel cost.

       The WORLD model was run by Ensys Energy & Systems, the owner and developer of
the refinery model.  The WORLD model is the only such model  currently developed for this
purpose and was developed by a team of international petroleum consultants.  It has been widely
used by industries, government agencies, and Organization of the Petroleum Exporting Countries
(OPEC) over the past 13 years, including the Cross Government/Industry Scientific Group of
Experts, established to evaluate the effects of the different fuel options proposed under the
revision of MARPOL Annex VI.  The model incorporates crude sources, global regions, refinery
operations, and world economics.  The results of the WORLD model have been comparable to
other independent predictions of global fuel, air pollutant emissions and economic predictions.

       The WORLD refinery model was used to evaluate the refinery cost impacts as well as the
prices of supplying distillate and residual fuels in the Base (Business as usual case without an
EGA) and EGA cases.  In determining the prices for distillate and residual fuels, the WORLD
model uses economic factors including refinery expansion projects, refinery operating costs,
crude prices, return on assets, distribution costs, supply and demand of fuels, historical pricing
patterns for fuels in world regions, etc. For the EGA cases, the WORLD model adds refinery
residual coking capacity which converts residual stocks into distillates, increasing the supply of
distillates while decreasing the supply of residual stocks.  Additionally, the model incrementally
increases crude throughput, which also increases the production of distillate stocks relative to the
production of residual stocks.

       The WORLD model was run for 2020, in which the control case included a fuel sulfur
level of 1,000 ppm in the  U.S. The baseline case was modeled as "business as usual" in which
ships continue to use the same fuel as today. Because of the recent increases and fluctuations in
oil prices,  we had additional WORLD model runs conducted.  For these runs, we used new
reference case and high oil price estimates that were recently released by the U.S. Energy
Information Administration (EIA).  In addition to increased oil price estimates, the updated
model accounts for increases in natural gas costs, capital costs for refinery upgrades, and product
distribution costs.

       There are two main components to projected increased marine fuel cost associated with
the EGA.  The first component results from shifting from operation on residual fuel to operation
on higher cost distillate fuel.  This is the dominant cost component.  However, there is also a
small cost associated with desulfurizing the distillate to meet the 1,000 ppm sulfur standard.
Based on the WORLD modeling, the average increase in costs associated with switching from
21 Research Triangle Institute, 2009. "Global Trade and Fuels Assessment— Future Trends and Effects of
Designating Requiring Clean Fuels in the Marine Sector". Prepared for U.S. Environmental Protection Agency.
Research Triangle Park, NC.

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marine residual to distillate will be $145 per metric ton of fuel consumed. This represents a 45
percent increase per metric ton of fuel. Due to the differences in energy density between the two
fuels, this translates to a cost increase of $123 for each metric ton of residual fuel replaced by
distillate fuel.22  This is the cost increase that will be borne by the shipping companies
purchasing the fuel.  Of this amount, $6 per metric ton is the increase in costs associated with
distillate desulfurization.

       A number of commenters stated that the results of the refinery modeling are inconsistent
with the historical price differential between marine distillate oil and residual fuel oil.  One
commenter discussed the Secretary General's expert group report that presented average fuel oil
prices, for Singapore and Fujairah, for the years 2000 through 2007. Over this time period the
percent price premium on marine distillate fuel compared to marine residual  fuel  ranged from 39
to 98 percent. The cost premium based on the refinery modeling was in this  range, at 45 percent.
The price differential over these years, based on the study, ranged from $57/metric ton to
$306/metric ton.  The cost difference predicted by the refinery model was $145/metric ton which
is near the center of this range. Note that the refinery model focuses on fuel  cost impacts, where
the historic fuel prices can be affected by external market impacts.  An  example of external
market impacts that can drive pricing was during the tight distillate market of 2008.  During this
time period, diesel prices in the U.S. were higher than gasoline prices, even though further
refining (more expensive processing) is necessary to produce gasoline than diesel fuel.  This
occurred because of high distillate demand  in India and China outstripping existing distillate
refining capacity.

       For both the Base and EGA cases, the WORLD model grows the supply of all fuels until
the demand of fuels are met, by adding refinery expansion projects.  As a result of this, the
WORLD model projects for the Base case and the EGA cases, that the pricing gap between
distillate fuel and residual fuels will be lower than recent pricing patterns suggest. The prices
projected for residual and distillate stocks in the Base Case and EGA cases are narrower than
they were in recent years because the supply of distillate and residuals stocks are  projected to be
in balance with demand due to the WORLD model adding refinery expansion projects.  In
contrast, the price of distillate  stocks in comparison to residual stocks was elevated much higher
than historical norms from years 2003 until the start of the current financial crisis. The pricing
abnormality during this time interval was due to overall  shortages of refinery capacity needed to
produce the volume of distillate stocks required to fulfill growth in  demand for distillate stocks
throughout the world. In response to this elevated pricing, which started in 2003, refineries
around the world recently made substantial  investments  to add refinery capacity, with the
projects coming on stream now and in the immediate future. Due to these expansions and the
current economic crisis, the current pricing  ratios for distillate and residual stocks have retuned
to differentials that are similar to EGA projections, a time period when refining supply of
distillates and other fuels were in balance with demand.
22 Note that distillate fuel has a higher energy content, on a per ton basis, than residual fuel.  As such, there is an
offsetting cost savings, on a per metric ton basis, for switching to distillate fuel. Based on a 5 percent higher energy
content for distillate, the net equivalent cost increase is estimated as $123 for each metric ton of residual fuel that is
being replaced by distillate fuel.

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       Much of the inconsistency in individual estimates of the price differential between marine
distillate and residual fuel is driven by the differences in the assumption of what the price of oil
will be in the future. As oil prices increase, fuel prices increase correspondingly.  In 2008, West
Texas Intermediate (WTI) oil prices hit a maximum of nearly $150 per barrel and a minimum
close to $40 per barrel. As such, marine bunker prices varied widely in that timeframe. In fact,
these variations in price were greater than the average price difference between marine distillate
and residual fuel.  As discussed above, we used estimates from the EIA for oil prices in 2020.
The reference case WTI oil price was projected to be $57/barrel and the high price estimate was
$92/barrel (in 2006 dollars).

       The estimate of $145/metric ton was based on the reference case oil price projection for
2020. As a check, we compared the projected price differential with actual spot prices on May 4,
2009. This date is interesting because WTI oil price was $54/barrel, making it close to the
projected WTI oil price used in our refinery modeling. On that day, according to the same
source referenced in the Secretary General experts' report, the differential between marine
distillate oil and heavy fuel oil was $143 in Singapore and $146 in Houston. On a percentage
basis, the distillate fuel was 46% more per metric ton than residual fuel in Singapore, and 48%
more in Houston.  These prices compare well with the results of our refinery modeling which
was a price differential of $145, representing a 45% differential per metric ton.

       The total fuel cost estimates included the impacts of an  EGA  surrounding the
Southeastern Hawaiian Islands.  Footnote 130 in the NPRM is simply referring to the initial
analysis of fuel volumes used as an input to the refinery  modeling. The original estimate
actually resulted in a total affected fuel volume estimate  for the proposed EGA which was higher
than later estimated for the proposed EGA. When calculating total fuel costs, the per tonne
increases were applied to fuel consumption in the entire  EGA including the lower 48 states,
Southeastern Alaska, and Southeastern Hawaii.
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CHAPTER 7: Expected Economic Impacts
      What We Proposed:

      The comments in this section generally correspond to Section VII of the preamble to the
proposed rule, where we describe the expected economic impacts of this action and our overall
coordinated strategy. The Regulatory Impact Analysis describes our economic impact analyses
in Chapter 7.

      See Chapter 6 of this document for a discussion of comments on the program's estimated
costs. See Chapter 10 of this document for a discussion of economic impacts specific to the
Great Lakes region.

7.1 General Economic Impacts of Coordinated Strategy

      What Commenters  Said:

      New York City commented that EPA has made the policy decision to focus on high
production volume sectors  ahead of large ships because R&D can be spread over larger number
of engines. This commenter noted that this policy decision overlooks the fact that large
oceangoing vessels are able to spread capital and operating costs over a great number of
containers for cargo and thus over a wide customer base. Commenters noted that the impact of
the proposed standards would have a minimal impact on price of goods, such as  sneakers.
[NY Testimony Comment 0227]

      Our Response:

      The cost and economic impact analyses presented in the RIA considers both operational
and capital (including R&D) costs and the impact of these costs on the  price of goods transported
by ship.
7.2 Economic Impacts on Cruise Industry

       What Commenters Said:

       Several commenters stated that the cruise industry is vitally important to the economy of
Southeast Alaska.  Senator Begich stated that over a million visitors came to Alaska via cruise
ship last summer, and nearly 14 percent of all employment in Alaska is directly tied to the
tourism industry.  Given this year's tourism season has demonstrated the price sensitivity of
American and foreign consumers in the midst of the economic downturn, it is estimated Alaska
will have approximately 140,000 less cruise ship passengers in 2010.  Several commenters
expressed concern that if the rule is finalized without consideration of economic impacts in
Alaska, it may have the unintended consequence of a severe negative impact on the cruise
industry and make Alaska less competitive as a cruise destination.


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       Senator Murkowski commented that in 2009, preliminary estimates are that cruise ship
occupancy has fallen on Alaska cruises to 958,041, a drop of nearly 60,000 passengers from
2007 totals and a drop of about 50,000 passengers from 2008 totals. Senator Murkowski
commented that, according to research by the McDowell Group Consultants in Juneau, 84
percent of tourists coming to Southeast Alaska traditionally arrive on cruise ships. That totaled
more than 1 million tourists in 2007.  Cruise ship passengers in that year spent $390 million
while crew member spending totaled $15 million and cruise line spending on commodities and
fuel reached $77 million. With related indirect spending, the cruise industry added $636 million
to the Alaska economy.

       CLIA commented that EPA has not adequately  predicted the economic costs associated
with this rulemaking.  While the EPA's economic impact analysis evaluated the additional cost
in fuel as well as equipment retrofits for ships to achieve compliance within the EGA, the
analysis did not assume any loss in business to North American ports resulting from the
additional costs associated with the EGA.  This is particularly relevant to smaller ports of call for
cruise ships as operators consider cost -saving options  thus possibly jeopardizing the economic
benefit of a full season of port calls. A more complete economic analysis would also consider
these additional costs.

       Representatives of the cruise industry commented that, unlike the other transportation
services affected by the coordinated strategy, the demand for cruises is not nearly perfectly
inelastic.  These commenters noted that cruises are a recreational activity and consumers are
more sensitive to price changes than consumers of transportations services for containers or bulk
goods. They contend that  if the price of a cruise increases, consumers will choose to spend their
recreational budgets on other activities.

       As an example, CLIA emphasized that the state of Alaska has enjoyed significant growth
in the cruise tourism industry  over the past decade or more. An in-depth analysis for 2008 shows
for this state alone that:

       • Alaska benefits from the cruise industry as the premiere cruise destination market in
       the United States. In 2008, Alaska accounted for $1.2 billion in direct cruise industry
       spending. The state ranks third in the nation in cruise industry expenditures.
       • The cruise industry's spending generated 25,697  full- and part-time jobs and wages
       totaling $1 billion in income for Alaska workers in 2008.
       • During peak season,  the cruise lines directly employed more than 6,000 workers in
       Alaska.
       • During 2008, Alaska ports received 3.9 million cruise passenger visits, 70 percent of
       all port-of-call passenger visits at U.S. ports.
       • While primarily handling port-of-call visits, Alaska has homeporting operations as
       well, generating 184,500 passenger embarkations on turnaround cruises between
       Alaska and Vancouver.
       • Major businesses in Alaska most impacted by  the spending of the cruise industry
       generally include tourism-related industries such as airlines, hotels and tour operators.

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       The state of Alaska recently passed a $50 per person tax on all cruise guests visiting
Alaska. CLIA argued that this tax has had a significant impact on the deployment of ships to
Alaska. This surcharge in this economic environment has resulted in passenger's choosing
alternative, less expensive vacation options. Indeed, several cruise industry operators have
announced redeployment of vessels from the Alaska market in 2010 resulting in approximately
15 percent fewer cruise ship visitors anticipated in 2010. The consequential economic impact of
a 15 percent decrease would represent approximately:

       a. 585,000 fewer visitors to Alaskan ports;
       b. A decrease of approximately $150 million in income for Alaska workers; and,
       c. A decline of approximately  $180 million in direct spending.

       Based on these comments, CLIA expanded that while it is unclear as to the exact impact
of the proposed rule on fuel cost increases, it likely will equate to two to three times the
amount of this recently assessed head tax. As such, CLIA reasoned that there  is clear evidence
from the Alaska head tax that passing on a cost increase of this magnitude to prospective guests
is not possible. It is unreasonable to expect that the market will bear such cost increases without
there being significant impacts on cruise pricing and profitability of affected itineraries. The
overall impact is expected to be significantly negative. The same holds true with regards to the
U.S. flag cruise ship operations in Hawaii. If U.S. based cruise ship itineraries become
uneconomical, decisions to redeploy ships out of the North America market may be required.

       Commenters noted that Alaska cruises are different than other cruises  because they
remain within the EGA boundaries during their entire trip. In fact, the Alaska Cruise Association
estimates that two thirds of all cruise costs within North America will be  attributable to Alaska
cruises. It is very uncertain whether the consumer would be willing to shoulder the burden of
these additional costs, thereby seriously affecting the competitiveness of Alaska as a premier
tourism destination. Commenters noted that EPA's cost analysis concluded that large passenger
vessels would incur an additional $7 per passenger/day cost to pay for the new standards.  Based
on higher fuel cost estimates, CLIA estimated the expected fuel cost premium would be closer to
$12-$16 per day adding approximately $86 to $112 to the price of a typical seven day cruise
itinerary in this region, if historical averages hold true. Alaska Cruise Association analysis put
the additional costs higher at $15 to $18 per passenger day. A $15 per passenger/day increase
would add $100 million to the cost of operating in Alaska for ACA member lines.

       Governor Lingle commented that, with limited refining capacity and capability in the
State of Hawaii and great distances between the State of Hawaii and continental U.S. and foreign
markets, the economic impact of the proposed fuel limits on Hawaii's shipping and cruise
industry has not been quantified and is critical to a fair assessment of the  proposed rule's impact
on Hawaii's marine highway system and sea-based tourism.

       (CLIA, 0278)
       (Gov Parnell, 0287)
       (Mayor of Juneau, 0298)
       (Munoz, 0317)
       (Egan, 0323)
       (Sen. Begich, 0322)


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       (CLIA, 0278)
       (Port of Anchorage, 0299)
       (Mayor of Ketchican, 0294)
       (Sitka, 0307)
       (Murkowski, 0384)
       (RDC, 0288)
       (Governor Lingle, 0400)

       Our Response:

       Commenters noted that the cruise industry generates significant revenue for the Alaskan
economy, due to both direct and indirect spending.  As such they commented that any reduction
in cruise passengers visiting Alaska, due to higher fuel prices, would have a negative impact on
the economy in Alaska. Commenters said similar impacts may be seen for Hawaii, which is
another cruise destination in the proposed EGA. The economic analysis performed for this rule
holds all other aspects of the market constant except for the elements of the coordinated strategy.
It does not attempt to predict future market equilibrium conditions, such as if the cruise market
will recover from the current economic downturn. While the cruise sector may be in difficulty
due to current economic conditions, independent of implementation of MARPOL Annex VI or
the coordinated strategy, it is not possible to predict what the conditions will be when the
coordinated strategy goes into effect in 2016 for Tier 3 engines and 2020 for 1,000 ppm sulfur
fuel or whether the impact of the program will be more serious for these operators. This
approach is appropriate because the goal of an economic impact analysis is to explore the
impacts of a specific program; allowing changes in other market conditions would confuse the
impacts due to the regulatory program.

       We  received comment that suggested that demand in the cruise industry should not be
treated as nearly perfectly inelastic. In  other words, demand may decrease due to higher fuel
costs.  Section 7.4.2 of the RIA provides a discussion of the impact of changing the assumption
of nearly perfectly demand elasticity for marine transportation services in general, and for the
cruise industry specifically.  Relaxing this  assumption is not expected to change the estimated
total social  costs of the program, which are limited by the engineering compliance costs.
However, it would change the way those costs are shared among stakeholders.

       We  acknowledge that,  as a recreational  service, demand for cruises is expected to be
more elastic than demand for other transportation services.  However, an elastic demand for
cruises means that the compliance costs associated with the coordinated strategy will be shared
among the cruise providers and their customers, rather than being passed on completely to the
passengers through higher prices. While this distribution of the compliance burden may offset at
least partially a decline in demand for cruises through smaller price increases, it also means that
cruise ship companies will bear at least part of the compliance costs of the program.
Nevertheless, these compliance costs are still expected to be small compared to the daily costs of
a cruise.  As such, we would not expect the economic impacts on Alaska or Hawaii, associated
with the coordinated strategy, to be significant. While  the cruise sector may be in difficulty due
to current economic conditions, it is not possible to predict what the conditions will be when the
coordinated strategy goes into effecting 2016 for Tier 3 engines and 2020 for 1,000 ppm sulfur
fuel.
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       Commenters did not provide information linking the $50 per passenger tax in Alaska to
the decrease in cruise demand. This tax occurred simultaneously with an economic downturn
that could also explain the decrease in demand. In addition, the State of Alaska, while noting
that "the cruise ship industry and the 1 million passengers who come to Alaska every summer
contribute significantly to Alaska's economy," has stated that it "will  vigorously defend the state
in this lawsuit," referring  to the lawsuit brought by the Alaska Cruise  Association which
challenges the tax.23  This suggests that the State of Alaska does not consider the tax to have a
substantial negative impact on Alaska's economy.

       Based on our analysis, the per passenger price of a  seven-day Alaska cruise on a vessel
operating entirely within waterways covered by the coordinated strategy is expected to increase
about $7 per day, assuming that the total increase in operating costs is passed on to the
passengers of the vessel.  The price of a 7-day Alaska cruise varies from $100 to $400 per night
or more. In that case, a price increase of about $7 per night would be a 1.5 percent to about 6
percent increase.  Ships that spend less time in covered areas, such as a ships operating between
Hawaii  and a destination outside the proposed EGA, would experience relatively smaller
increases in their operating costs. We would not expect the EGA to have a significant impact on
Hawaii's marine highway system due to the relatively small increase in operating  costs
associated with the coordinated strategy, compared to the next cheapest mode of transportation
between the islands. Commenters indicated that the price could be higher, due primarily to
higher projected fuel prices in the future. As future fuel prices are uncertain, and as discussed in
Chapter 4, we believe our fuel price estimates are appropriate for this analysis.

7.3 Other Economic  Impacts in Alaska

       What Commenters Said:

       A number of commenters expressed concern that the proposed EGA will a have a
negative economic impact on the State of Alaska. RDC stated that in addition to requiring
scientific studies to justify an EGA, the IMO requires an economic analysis be done to consider
the cost of implementing new standards, and the subsequent economic impacts to  local
communities. The Alaskan communities served by ocean-going ships, as well as the remainder
of the state's residents, would certainly feel the effect of immense cost increases to vessel
operations. This must be  a factor that is taken into consideration before including Alaska in an
EGA designation. RDC members across all resource sectors stand to  be adversely affected:
transportation companies  that bring goods in and ship cargo out of the state will face significant
cost increases in  continued operations. Exportation of commodities, particularly Alaska's natural
resources like oil and gas, minerals, and timber, will become increasingly  more  expensive if
ships carrying them have  to incur higher operating costs. TOTE commented that the cost of
switching fuels will have  a disproportionate economic impact on the residents of Alaska for no
appreciable improvement in their lives, health or visual air quality. Switching to distillate fuel
will immediately double the cost of fuel based freight charges for goods moving to Alaska by
23 State of Alaska, Department of Law, "Press Release:  Attorney General Will Vigorously Defend Alaska in Cruise
Industry Lawsuit Against the State," September 18, 2009.


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ocean going vessels. Their ability to pay this doubling of costs will affect the viability of TOTE
going forward.

       CLIA commented that although the EPA study addressed the added cost of producing
distillate fuels and has indicated the expected additional cost per ton due to the manufacturing
process, the analysis does not appear to take account of significant secondary impacts or "knock-
on" effects in the distribution of these fuels such as:

       a. The impact to the oil storage and distribution infrastructure in ports to account for
       these dramatic changes.
       b. Whether or not suppliers will be able to remain in business as a result.
       c. Access to credit facilities to fund the required changes in this tight credit
       market may be difficult.
       d. Impact of product quality on the shipping and supply markets - for example, ships
       that are certified to transport heavy grade bunker oils may not be fit for the service of
       transporting distillate fuel. If this is not the case, expensive retrofits may need to be
       undertaken in the tanker industry.
       e. Ship and shipyard capacity may not be available to undertake these ship alterations in
       a timely manner.
       f. There may be a need for new ships and/or barges. If so, and credit, and construction
       capacity to support such an undertaking in a timely manner may be in short supply.
       g. There may not be sufficient U.S. flag tonnage to haul U.S. produced products to U.S.
       markets.

       The Port of Anchorage commented that EGA designation could adversely impact the
critical function of maritime commerce and transportation in Alaska. As a non-contiguous state,
Alaska is dependent on maritime transportation for the economic and efficient movement of
freight and people. Additional regulations and strict environmental  standards will only drive the
cost of freight and transportation upwards, in a state where the cost of living already exceeds the
national average. Without and independent study of these costs and an in-depth look at maritime
transportation in Alaska, the economic impact on Alaskans is unknown.

       Commenters noted that the proposed EGA boundaries will include the Port of Anchorage,
which is of vital significance to most of the population of Alaska. According to the Port of
Anchorage, it serves 85 percent of the state population as the entry point for 90 percent of the
commodities entering Alaska. Consumer industrial goods, and petroleum products that move
through this port, are dispersed to 237 communities lying north, south, east, and west of
Anchorage.  In a recently completed analysis of the Port of Anchorage, the port was found to
contribute over  $1.4 billion annually to the state and local economies. This port is a direct and
indirect employment source for thousands of jobs in the maritime shipping, stevedoring,
trucking, and rail communities.  Commenters argued that implementing the proposed EGA
would substantially drive up Alaska's already high  cost of living and have a negative impact on
employment.

       Governor Parnell expressed concern that the proposals  currently being considered by
EPA could result in significant additional costs to operate the Alaska Marine Highway System.
The Transportation Institute commented that while  there may be nearly inelastic demand for
ocean marine transportation services, this is not the case for domestic container freight to Alaska


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which could also be shipped by truck over the Alaska-Canada (Al-Can) highway. Governor
Parnell commented that Alaska is currently in the process of evaluating potential methods for
dealing with these regulations on State-owned ferries and request that these impacts be
considered in EPA's analysis of the proposed regulations.

       (TOTE, 0289)
       (RDC, 0288)
       (CLIA, 0278)
       (Port of Anchorage, 0299)
       (Munoz, 0317)
       (Mayor of Ketchican, 0294)
       (Gov Parnell, 0287)
       (Transportation Institute)

       Our Response:

       We recognize that an increase in fuel price would result in increases in shipping costs on
goods and commodities to and from Alaska.  This increase in fuel costs is included in the
economic modeling for the coordinated strategy, including shipping in the EGA off of Alaska.
However, we continue to believe that shipping in Alaska, even where the entire trip would be in
the EGA, would be relatively inelastic. This assumption is reasonable because there are no
reasonable alternatives to transportation by ship for most goods.  Several commenters noted that
marine vessels are much more efficient than trucks at moving cargo.  GLMTF stated that for
each gallon of fuel a ship moves more than 10 times as much cargo as a truck.  The anticipated
increase in fuel cost associated with the fuel sulfur standards is very small in comparison.
Therefore, it is not expected that this increase in operation costs would be sufficient to make
trucking more economically attractive than shipping. More discussion on mode shift is included
in Chapter 10. In addition, many communities in Alaska are not connected to the Al-Can
highway. For instance, Juneau is land-locked and can only receive goods by ship or by air. Air
transport is significantly  more expensive than even trucking.  Therefore, we do not expect the
coordinated strategy to have significant adverse economic impacts on ports in Alaska that import
or export these goods.

       In addition, as discussed in Chapter 7 of the RIA, virtually all of the compliance costs
will be borne by the users of marine transportation services in the form of higher prices. The
price increase on goods would be expected to be small as the transportation costs are only a
small fraction of the final purchase price of the goods.  As a result, it is not likely that the
coordinated strategy would have a significant impact on the demand for goods to, or
commodities from, Alaska.

       CLIA raised a number of considerations that it believed should have been included in the
economic impact analysis. Here, they are addressed one-by-one. The refinery  modeling was
based on an economic model that not only included refinery upgrade cost estimates, but the cost
of fuel distribution as well. It was not considered which fuel suppliers would remain in business,
only the costs of supplying the fuel. We recognize that any new standard can result in a shock to
the market, but also recognize that, given proper lead time and incentive, the market will respond
to the demand. Our analysis includes the cost of vessel modifications associated with switching
from operation on residual fuel to distillate fuel. This is described in Chapter 5 of the RIA. We


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believe that enough lead time is available to provide for these modifications, as necessary. In
many cases, the ships are already capable of operating on lower sulfur fuel. As such, it is not
clear why CLIA asserts that there will be a need for new ship and barge construction or why this
rule would affect U.S. cargo carrying capacity.  If the issue is that more barges are needed to
transport the EGA compliant fuel, it should be noted that fuel transportation costs are included in
the WORLD refinery model used to help develop our cost analyses.
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CHAPTER 8: Environmental Impacts

       What We Proposed:

       The comments in this section generally correspond to Section II of the preamble to the
proposed rule, where we describe the air quality, health and welfare effects, as well as the
contribution of Category 3 vessels to national emission inventories. The Regulatory Impact
Analysis describes the air quality, health and welfare effects in Chapter 2 and the emission
inventory development in Chapter 3. Comments pertaining specifically to the Great Lakes are
addressed separately in Chapter 10 of this document.

8.1 Emissions Inventory

8.1.1 Category 3 Vessel Inventory Contributions

       What Commenters Said:

       A number of commenters cited port inventory analyses that indicate that oceangoing
vessels produce more  pollutants than other elements of port operations and are a significant
emissions source.

       ALA stated that shipping is one of the major sources of nitrogen dioxide, and one that is
expected to grow unless we take action. Based on EPA estimates, unless we require this
cleanup, nitrogen dioxide emissions from ships would more than double by 2030, growing to 2.1
million tons per year,  (hearing testimony ALA 0227)

       NACCA commented that, unlike most other significant mobile sources of diesel air
pollution, emissions from C3 marine vessels are virtually uncontrolled. Moreover, based on EPA
estimates, if left uncontrolled the contribution of NOx emissions from C3 vessels will grow from
10 percent of the mobile source inventory to 40 percent in 2030, PM2 5 emissions from 24
percent to 48 percent and SOx emissions from 80 percent to 95 percent. This will make C3
engines a dominant source of mobile source emissions unless controlled effectively. (NACAA,
0246)

       A recent analysis by the New York Port Authority shows that oceangoing vessels
produce far greater emissions of criteria pollutants than tugs and other harbor vessels, cargo
handling equipment, drayage trucks, or other elements of port operations - including 65% of
PMio and 63% of PM2.5. The City of New York also mentioned that more residual oil is used by
the shipping sector than any  other industry in the United States. (City of New York testimony,
0227)

       NRDC commented that the Northeast region is home to many ports and emissions from
category 3 engines are a significant source of NOx, fine particulate, and SC>2.  In 2000,
approximately 230 tons of PM2.5 was emitted by ocean going vessels in that year in the Port of
New York and New Jersey - more than a third of all PM2.5 emissions from port-related activity -
excluding emissions associated with drayage. (NESCAUM, 0356) Ocean-going vessels in the
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region emit 47 percent of the NOx related to port activities in the region and 62 percent of the
fine participate matter related to the port activities in the region. (NRDC testimony, 0227)

       In 2005, large ocean-going vessels produced over forty percent of all the oxide of
nitrogen emissions in Santa Barbara County. SBAPCD stated that, due to increasing cargo
volumes through the Santa Barbara Channel, these emissions are projected to make up close to
three quarters of the County's NOx emissions by 2020. (Santa Barbara County Air Pollution
Control District, 0231)

       Friends of the Earth and others stated that a recent industry report to the IMO on global
emissions from ocean going vessels ("IMO Expert Report") estimates that for the year 2007,
marine engines were responsible for 25.8 million metric tons of NOx, 16.2 million metric tons of
SOx, 1.8  million metric tons of PM, and 1.12 billion metric tons of CO2—more than is emitted
by all of the world's oil refineries. (Earthjustice, Friends of the Earth, and Center for Biological
Diversity joint submittal, 0320)

       ALA and EOF commented that, based on current emission inventory analysis, EPA
estimates that Category 3 engines contributed nearly 6 percent of mobile source NOx, over 10
percent of mobile source PM2.5, and about 40 percent of mobile source SO2 in 2002. EPA has
projected that emissions from these engines will increase significantly through 2030 as a result of
an increase in the use of Category 3 marine engines used for international trade. EPA also
projects that without further controls on these engines, their absolute magnitude will roughly
triple and their relative contribution will increase to about 40 percent of mobile source NOx, 48
percent of mobile source PM25, and 95 percent of mobile  source  SO2 by 2030. Much of the
projected increase in baseline emissions is due to the projected growth in fuel use by Category 3
engines.  As seen in Tables 3-57 and 3-91 from EPA's Draft RIA, EPA estimates that, without
controls, total fuel use will increase from 8.5 million short tons in 2002 to more than 26  million
short tons in 2030 - a 300% increase. (American Lung Association and Environmental Defense
Fund, 0366)

       ICCT commented that ship emissions are projected to grow dramatically in relation to
other sources.  They note that OGV contributed about 6% of transportation-related nitrogen
oxide, 10% of PM and roughly 40% of SOX in the U.S and without further controls pollution will
increase to about 34% of NOX, 45% of PM, and 94% of SOX emissions by  2030.

       Our Response:

       We  agree that emissions from Category 3 vessels are an important emissions source. On
a nationwide basis, Category 3 vessels currently contribute 10 percent of mobile source NOx
emissions, 24 percent of mobile source diesel PM2.s emissions, and 80 percent of mobile source
SO2 emissions. In 2030, absent the controls in this rule, these vessels would become a larger
portion of the total mobile  source emissions inventory constituting 40 percent of mobile source
NOx emissions, 75 percent of mobile source diesel PM2 5 emissions, and 95 percent of mobile
source SO2 emissions. See Chapter 3 of the RIA for more detail on our estimates of Category 3
vessel inventory contributions.
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8.1.2 Contribution of U.S. vs. Foreign-Flag Ships

       What Commenters Said:

       SBCAPCD commented that ninety percent of the annual entrances to U.S. ports in 1999
were made by foreign flagged vessels and over 92 percent of the NOx emissions from transits
through the Santa Barbara channel in 2005 were made by foreign flagged vessels. (Santa Barbara
County Air Pollution Control District, 0231)

       According to ALA and EDF, the U.S. Department of Transportation Maritime
Administration (MARAD) estimates that in 2007, foreign-flagged vessels made up 88% of
Category 3 ship calls on U.S. ports. As a result, about 88% of ocean-going ship emissions at
U.S. ports come from foreign ships. (American Lung Association and Environmental Defense
Fund, 0366)

       Liberty Maritime Corp. commented that MARAD indicates that only 89 U.S.-flag vessels
were engaged in international registry trade for year end-2007. At that time MARAD reported
189 vessels in the U.S. ocean-going fleet (vessels over 10,000 DWT) of which 100 were engaged
in the Jones Act trade and 89 in the foreign trade.  Of the 89 foreign trade vessels, 59 vessels
were enrolled in the Maritime Security Program (MSP) fleet as of April 2009.  In terms of
overall vessel calls, MARAD reports that, in 2007, U.S.-flag ocean-going vessels accounted for
only 12 percent of U.S. port calls.  Jones Act vessels accounted for 78 percent of U.S.-flag calls
and 9 percent of overall calls. MSP vessels accounted for 2 percent of overall calls. "Other
U.S.-flag" ocean going vessels represented 0.4% of U.S. port calls in 2007. (Liberty Maritime
Corp, 0347)

       Our Response:

       We agree that the vast majority of port calls to the U.S. are made by foreign-flagged
vessels and include these vessels in the inventory estimates presented in Chapter 2 of the RIA.
The control reductions resulting from this rule are applied to both U.S. and foreign-flagged
vessels, since the coordinated strategy targets both foreign and domestic ships operating off the
U.S. coasts and within internal waterways.

8.1.3 Growth Rates

       What Commenters Said:

       TOTE commented that Ocean Going Vessel calls in all U.S. ports have declined by
approximately 30 percent in the last year rendering the EPA calculations and future projections
of this source of emissions completely inaccurate.  (TOTE, 0289)

       PMSA commented that graphics and tables from the Port of Los Angeles demonstrate
that the previous cargo forecasts were overly optimistic. The bottom line is the throughput for
2009 is expected to be between 30 to 40 percent lower than 2008 and that equates to a
throughput level roughly comparable to that of 2003. The graphic also shows that the peak
levels seen in 2006 are not expected to be reached again until 2014 and that the rate of growth
going forward is expected to be significantly slower than the previous forecast. (Pacific
Merchant Shipping Association testimony, 0275)

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       PMSA also commented that there has been the perception that the rate of cargo growth is
directly correlated with the increase in emissions. The 2007 emission inventories done by the
Ports of Los Angeles and Long Beach clearly refute that assumption.  Not only are 2007 ship
emission below the 2006 emission for all pollutants, only hydrocarbon emissions show any
increase above 2001 levels.  These emission improvements occurred while container throughput
increased 61 percent from the 2001 levels. (Pacific Merchant Shipping Association testimony,
0275)

       SCAQMD stated that recent lower cargo projections for the Ports of Los Angeles and
Long Beach do not justify adoption of delayed or relaxed controls. Cargo projections have been
incorrect in the past (did not foresee extent of growth to 2006; then over-projected from 2007
through 2023). The Ports are still projecting enormous growth and the same ultimate level of
cargo throughput, about 43 million containers, or TEUs, compared to  14 million in 2005 (the
baseline year for the SIP). The growth will simply be delayed. The ports are expecting 25
million TEUs in 2023 (current ozone attainment year), 35 million TEUs in 2030 (potential
attainment deadline for new ozone standard), and 43 million TEUs in  2035 (prior projection
reached this level in 2023). (South Coast Air Quality Management District, 0309)

       Graphs of cargo container volume in the Port of Los Angeles and Long Beach were
provided by the Coalition for Clean Air. The commenter points out that the decline in the recent
term still represents a significant increase of volume over the long term. (Coalition for Clean Air,
supplemental comment following hearing testimony, 0220)

       Just in their region, the Port Authority of New York and New Jersey expects container
volumes to triple by 2020 from 2006 levels. (NRDC testimony, 0227)

       Friends of the Earth and others commented that a recent industry report to the IMO on
global  emissions from ocean going vessels ("IMO Expert Report") predicts that these emissions
will increase by as much as 40 percent by 2020 and that fuel consumption, the majority of which
is residual fuel consumption, will grow by more than 30 percent.  Already, the United States'
emission inventory for Category 3 marine engines has far surpassed what EPA had previously
predicted for the  year 2030.  See 72 Fed. Reg. at 69526; 68 Fed. Reg.  at 9755. (Earthjustice,
Friends of the Earth, and Center for Biological Diversity joint submittal, 0320)

       Our Response:

       Growth factors were developed for five geographic regions within the U.S. These factors
are based on the expected demand for marine bunker fuels that is associated with shipping goods
into and out of the U.S. This demand is driven by the demand for commodities that are produced
in one location and consumed within another.  The forecast for demand for shipping services and
bunker fuel was determined for each  area using information on commodity flows from Global
Insight's (GI) World Trade Service.  The flow of commodities  is then matched with typical
vessels for trade routes (characterized according to cargo capacity, engine  horsepower, age,
specific fuel consumption, and engine load factors). Typical voyage parameters are then
assigned to the trade routes that include average ship speed, round trip mileage, tons of cargo
shipped, and days in ports. Growth thus depends on commodity projections, ship characteristics,
and voyage characteristics. The analysis also attempted to account for improvements in vessel
fuel efficiency over time.  The analysis does not simply extrapolate from past estimates of cargo
tonnage and/or vessel calls.

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       Although vessel calls may have declined over the past year, it would not be prudent to
project long-term growth based on these short-term changes. Ports are still projecting significant
growth in the long-term.

       As a means of comparison, the IMO Secretary General's Informal Cross
Government/Industry Scientific Group of Experts presented a global growth rate that ranged
from 3.3% to 3.7%. Our estimate of overall U.S. growth is 3.4%, which is consistent with that
range.

8.1.4 Modeling Scenarios

       What Commenters Said:

       While the projected health and social benefits appear to be favorable in so far as the
climatological modeling and health benefits models are correct, CLIA believes that a more
accurate representation, at least for the long term model from 2020 to 2050, should be based on
comparison to the expected 0.5% bunker oil sulfur content global cap expected effective in 2020.
With this in mind, an analysis should be undertaken and the appropriate breadth of the EGA
should be based on the correct analysis. (0278)

       CLIA commented that EPA's analysis of the benefits of establishing an EGA is based on
a comparison of air quality and health and environmental impacts under a 2020 base case (no
EGA) scenario with a corresponding scenario assuming an EGA is in place. EPA's base case
scenario included the assumption that residual oil fuel sulfur (S) levels in 2020 remained at
current average levels (2.5% in the west and 2.7% elsewhere) whereas revisions to MARPOL
Annex VI approved in October 2008 include a worldwide marine fuel sulfur level limit of 0.5%
in 2020. Our analysis shows modifying EPA's 2020 base case to reflect the required use of 0.5%
sulfur fuel reduces the benefits calculated by EPA by approximately 85%. Thus,  85% of the
health benefit attributed by EPA to the EGA will be achieved by Annex VI global sulfur limit.
This in turn leads to an 85% reduction in the monetary benefits calculated by EPA. (0278)

       CLIA also argued that EPA's 2020 base case does not include the additional IMO Annex
VI global NOx control requirements which were approved in October 2008 and which go into
effect prior to 2020 (retrofit of existing uncontrolled engines to meet Tier I control levels and
Tier II NOx control for new engines) whereas the 2020 EGA scenario includes both of these
global controls. As a result, NOx emissions  are overstated in the 2020 base case and benefits
from NOX reductions (which include PM2.5 and ozone reductions) ascribed to implementation of
the EGA are overstated. (0278)

       According to CLIA, EPA's 2020 base case overstates emissions from ships traveling in
California coastal waters and cruise  ship hotelling in California ports because EPA's emission
inventory does not take into account recent California Air Resources Board regulations limiting
fuel sulfur content to 0.1% by 2012  and requiring most ships visiting California ports to turn off
their engines and plug into shore power while hotelling.  Similarly, EPA's base case scenario
overlooks the fact that numerous vessels in other ports are voluntarily plugging into shore power
thereby substantially reducing their emissions in and around U.S. coastal cities. As more ships
are equipped to do so, and ports are  outfitted to provide this service, the effort will  expand to
other locations. (0278)
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       Chamber of Shipping of America stated that the appropriate points for the health benefits
calculation are with the 0.5% global average required by 2020 compared to the 1.0 and 0.1%
EGA requirements as contained in Annex VI. (0256)

       Our Response:

       In the rulemaking, our intent was to present the full costs and benefits of our entire
coordinated strategy, both in the domestic and international arenas. This approach was
consistent with the recommendations of the Office of Management and Budget.

       If we were to model the reduction of fuel sulfur from 0.5% to 0.1%, as several
commenters  suggested and CLIA provided in Annex I of its comments, EPA agrees the scaling
approach is generally sound as a "rough estimate" of benefits. The Agency believes the best
approach would be to model the base case with the global controls and conduct the
CMAQ/BENMap modeling with the actual emissions. However, as a first approximation, it
seems reasonable to assume that the transition from 2.5% to 0.5% fuels would not result in large
spatial differences in impacts, nor would we expect large non-linearities in the response of PM2.5
levels to changes in direct PM or  SO2 emissions. While the scaling approach itself may not  be
inherently flawed, we believe the  conclusion drawn by CLIA that this would lead to a similar
reduction in monetary benefits is flawed.  We would not only have lower benefits (15% of SOx
benefit of lowering from 2.7% sulfur fuel content), but much lower costs ($6 versus $145 or 4%
of fuel cost) as well. As such, it would not be expected to change our decision with regard to the
scope of the proposed EGA.

       For the EGA application,  the modelling focused on the effect of shipping emissions and
EGA  controls  in 2020.  This year was  chosen  for a number of reasons.  First, air  quality
modelling is complex  and time  consuming,  and,  as a result, is typically only performed for
selected years.  In addition to running spatial allocation, air  quality, and  benefit models, a
detailed emission inventory must be  developed to perform this air quality modelling.  This
detailed emission inventory is not only needed for ship emissions, but for all other sources that
contribute to ambient air pollution in the U.S. and Canada.  By choosing 2020,  we were able to
make use of information and tools that had already been developed for wider scale air pollution
modelling efforts.

       With regard to the NOx impacts of the EGA program, while 2020 will include five years
of turnover to the Tier III standards, the long service lives of engines on ocean-going vessels
mean that the fleet will  not be fully turned over, with about one-third of the total  fleet expected
to be compliant with Tier III standards. Therefore the estimate benefits of the program would
not be significantly different than if we had performed the analysis for 2016 when the Tier III
NOx standards begin. We did not include the global fuel sulfur standard in the 2020 EGA
analysis to provide a better estimate of benefits in the early (pre-2020) years of the program.

8.1.5 Fleet Size and Turnover

       What Commenters Said:

       SCAQMD commented that the economy has resulted in idling of vessels thus creating
uncertainty about whether the EPA projections based on historical new vessel construction and

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routing to our ports will hold for the future. Lower new-vessel penetration rates are a distinct
possibility.  (0309)

       Maersk testified that U.S. fleets often grow by acquiring vessels rather than building new
vessels, and the acquired vessels are often purchased outside the U.S. (Maersk testimony, 0227)

       Coalition for a Safe Environment asked, regarding the proposed near-term Tier 2
standards, how many new ships are being proposed to be built in the near term that would
provide a significant near-term public and environmental benefit vs. more stringent standards,
efficient engine designs and emission control add-ons? The commenter requested that EPA
provide the ship builder information, engine manufacturer data and build schedule. (Coalition for
a Safe Environment testimony, 0232)

       Our Response:

       Age distributions were developed based on vessel characteristic data associated with calls
to U.S. ports. Age distributions for Great Lakes vessels were calculated separately, since vessels
in the Great Lakes tend to last longer. While lower new vessel penetration rates are possible,
these could not be estimated accurately. Issues related to re-flagging are discussed in section
5.12(D).

8.2 Air Quality Modeling

8.2.1 Emissions Impacts by Distance from Shore

       What Commenters Said:

       Cruise Lines International Association commented that EPA's proposal  considers only
the establishment of an EGA within 200 nm of shore, irrespective of location along the coast,
despite the fact that emission reductions at 200 nm can be expected to have less of a benefit on
shore than emission reductions occurring much closer to the shore or within harbors. An
ENVIRON photochemical grid modeling study of ocean going vessel (OGV) emission impacts
on PM2.5 and ozone air quality similar to that performed by EPA revealed that impacts drop off
significantly as the distance from shore increases: 66% to 86% of the PM2.5 impacts on Gulf and
east coast cities (except for Miami) and 56 to 80% of the PM2.5 impacts on west coast cities is
accounted for by shipping activity within 39 nm of the coast.  Calculations included in the
ENVIRON study show that the cost effectiveness (expressed as OGV contributions to on-shore
PM divided by OGV fuel consumption in tons) of emission controls within 39 nm of shore are
over 1,000 times greater than controls applied beyond 39 nm out to 200 nm.

       The Chamber of Shipping of America supported comments submitted by the American
Petroleum Institute and their accompanying ENVIRON study which noted decreasing ozone and
PM impacts as the distance offshore increases. The commenter stated that EPA's modeling
indicates that more than 80% of the marine ozone and PM contributions are from vessels less
than 100 nm offshore while the ENVIRON study shows the most cost effective control region is
out to 19 nautical miles.  The commenter strongly urged EPA to review the results of this study
and rationalize the differences in the two very different conclusions.
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       In their comments, the American Petroleum Institute requested that EPA take the
analyses commissioned by commenter into consideration when implementing MARPOL Annex
VI and the North American EGA. In particular, the commenter suggests that the proposed 200
mile boundary on the East Coast may not be cost-effective, citing their finding that the most cost
effective control region would be within 0-19 nautical miles offshore.

       TOTE state that its vessels are never offshore more than 200 miles. While the 200 mile
limit may be appropriate in some geographic areas it is wholly inappropriate in the area they
operate in.  This (pacific northwest/Alaska) area could be addressed by limiting the use of
noncompliant fuels to the more reasonable 40 miles offshore EGA adopted by California.

       Our Response:

      The above comments primarily focus on the geographic boundaries of the proposed North
American EGA.  As discussed in Chapter 2 of this document, the EGA proposal is not within the
scope of this rulemaking and the EGA proposal fully satisfied the criteria in MARPOL Annex
VI, Appendix III.

      With that said, there is a  high level of shipping activity along each of the coasts included
in the proposed EGA, out to 200 nm and beyond, as well as in and out of ports. As  such,
pollution from ships is emitted in all waters contained in the proposed EGA. This air pollution,
even when emitted at 200 nm from shore reaches not only the coast, but well into the interior of
the U.S. and Canada due to local meteorological conditions and the long atmospheric residence
time of SOx, PM, and NOx emissions. Reductions in these ship emissions would lead to lower
particulate matter concentrations and reductions in ground-level ozone.  Reducing air pollution
also reduces SOx and NOx deposition on land and in the water.

       Conventional wisdom suggests that prevailing winds, over the U.S. and Canada, travel
from west to east. On average,  this is true, especially for the north Atlantic and the Pacific
coasts. In the Gulf of Mexico, prevailing winds typically come from the southeast. While the
frequency of maritime influences can vary by location, it is not uncommon for locations all
across the United States to be affected by emissions that originate offshore. An EPA analysis of
air parcel back trajectories over the 12-year period from 1995-2006 concluded that highly-
populated coastal cities in the northeastern U.S. were impacted by marine air masses between 10-
20 percent of the time.  The intent of the EPA analyses was to demonstrate this impact of marine
pollution on inland populations and ecosystems. As such, air pollution off the east coast, even
200 nm from shore, affects the air we breathe. Additional information on the impact of
emissions off the east coast of the U.S. is included in Section 8.2.3 of this document.

       Some of the most compelling evidence supporting the need for the proposed 200nm EGA
designation is reflected in the U.S. and Canadian air quality and deposition maps shown in the
North American EGA proposal, the technical support document for the EGA proposal, and the
RIA.  These maps are based on  complex air quality modeling that considers a number of factors
including where ship exhaust is emitted, weather and wind patterns, and atmospheric chemistry.
This modeling shows that air pollution from ships travels great distances, over water and inland,
on all coasts.
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      The Environ modeling uses a different air quality model than EPA.  However, Environ
states that "despite using different inventories and air quality models, results from both studies
are generally consistent." This statement refers to emission concentrations in the U.S. due to
pollution from ships and to the estimated impact of the proposed EGA on U.S. air quality.
Environ discusses an approach where fuel consumption and emission impacts are presented for
modeled EGAs that extend different distances from shore.  Based on the Environ report, a 19nm
EGA would impact about 40-70% of the Category 3 contribution whereas a 200nm EGA affects
90-95% percent of the emissions that eventually impact AQ concentrations over land. This is not
inconsistent with our modeling. However, what the Environ report does not consider is the
valuation of emission reductions by distance compared to costs.  Although emissions 200 nm
from shore generally have lower impacts on air quality over land than emissions nearer the coast,
those emissions impacts are still significant compared to the cost of emission control.

      The commenter noted that "the cost-effectiveness of applying fuel sulfur controls within
39 nm of shore are over 1,000 times greater than controls applied beyond 39 nm out to 200 nm."
The cost-effectiveness numbers cited by CLIA were based on calculations done by Environ in
their report titled Modeling the Impacts of Marine Vessel Emissions to Ozone, Particulate Matter
and Haze in the Eastern US.  EPA has  not been able to identify any numbers in the Environ
report that would correspond with controls being 1,000 times more cost-effective within 39 nm
of shore. Using data contained in table 3-8 in the Environ report, controls  are approximately 10
times more "cost effective" in the first  39 nm as compared to between 39 and 200 nm from
shore. Note that this "cost effectiveness" metric uses fuel consumption as  a surrogate for cost
and does not quantify the cost. Also note that this analysis ignores capital  costs which would be
incurred regardless of the EGA boundary distance.  In addition, air pollution concentrations are
used as a surrogate for benefits and only receptors where marine vessel contributions exceeded 1
ug/m3days were included. It is not clear why receptors where marine vessels contribute less than
1 ug/m3 were excluded.  Since scientists have not determined a "safe" PM exposure level, the
best  practice is to estimate benefits in all areas of the country (both in areas with poor air quality
and those with acceptable air quality) to more accurately reflect the benefits of regulations for all
of the areas within the U.S.  While the  most cost-effective emission controls are clearly closest to
shore, at distances 200 nm from shore the benefits to controlling OGV emissions still
substantially outweigh the costs.

      It is important to note that the EGA scenario assumes ships meet EGA limits the entire
time they are within the EGA, according to the empirically determined vessel traffic and routing
in the base year. That is, analyses of benefits or costs throughout this application do not assume
ships reroute in a manner perpendicular to the EGA boundary; they assume ships maintain
existing routing. We believe this is a reasonable assumption because it is unlikely that ships
currently operating near the coast would reroute beyond 200 nm from the coast,  due to the time
and expense associated with the additional distances that would need to be travelled. A smaller
EGA could provide an incentive for ships to change their routing in such a way as to disrupt
other operations. An example of this would be the Navy's Point Mugu Sea Range off the
southern coast of California.  By including this missile test range in the proposed EGA, there is
no incentive for ships to divert, from other routes, through this range, to avoid the EGA fuel
sulfur requirements.
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8.2.2 Air Quality in Alaska and Hawaii

       What Commenters Said:

       A number of commenters expressed concern that EPA did not conduct any air quality
modeling for Alaska and that due to the lack of air quality modeling, EPA did not meet the
requirements to include Alaska in the proposed EGA.  A number of commenters added that EPA
should not proceed with adoption of the EGA until Alaska specific air quality, health, or
environmental impact studies are performed.  The commenters wrote that EPA needs to
scientifically evaluate the need for the inclusion of Alaska and Hawaii and provide scientific
evidence that Alaska's coastal communities have an ambient air problem as a result of marine
vessels.

       A number of commenters stated that neither Alaska nor Hawaii has air quality exceeding
EPA's ambient air quality standards for ozone or PM2.5. Many of these commenters go on to say
that measurements of ambient PM2.5, NCh and SCh at three locations in Juneau, Alaska during
2000 and 2001 conducted by the Alaska Department of Environmental Conservation (ADEC)
showed concentrations of all three pollutants were "appreciably below the State and national air
quality standards" in both years and that EPA should not ignore the ADEC's air quality
measurements.

       CLIA commented that EPA's proposal contains insufficient justification for including
southeastern Alaska and eastern Hawaii regions in the proposed EGA while excluding western
Hawaii and western Alaska regions. They add that no dispersion modeling results are presented
to justify these decisions and that there is no information on the relative benefits of including
(and disbenefits of excluding) these regions from the EGA.

       Senator Murkowski of Alaska commented that "unlike in Los Angeles where cruise ship
traffic occurs year-round, vessel traffic in Alaska waters is seasonal for only five  months of the
year, with the peak of traffic occurring during only a 14-week season from early June through
the first week of September. That period also coincides, especially in later summer, with
increased winds in coastal Alaska that serve to reduce the frequency of air inversions and
disperse emissions. In Juneau, the town that has the most cruise ship visits in Alaska waters -
about 99 percent of all of the 43 vessels coming to Alaska in 2009 docking in Juneau (Juneau
having 581 port calls this year) - winds average 7 miles an hour year-round, but rise as the
summer advances. Given the unique geographic and climatic conditions in Southeast and
Southcentral Alaska, a single nationwide pollutant model is unlikely to accurately forecast air
quality impacts in the State."

       Governor Lingle of Hawaii commented, after the close of the comment period, that EPA
does not have air quality data beyond the 48 contiguous states supporting EGA designation in
Hawaii and the Hawaii Department of Health has not provided EPA with quantitative air quality
data supporting Hawaii's inclusion in accordance with EGA criteria.

       Senator Murkowski (0384)
       Representative Munoz (0317)
       RDC (0288)
       River Adventures (0244)


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       CLIA (0278)
       Mayor Williams - Ketchikan (0294)
       Finkenbinder - Sitka (0307)
       TOTE (0289)
       Governor Parnell (0287)
       Congressman Young (0382)

       Our Response:

      The above comments primarily focus on the geographic boundaries of the proposed North
American EGA. As discussed in Chapter 2 of this document, the EGA proposal is not within the
scope of this rulemaking and the EGA proposal fully satisfied the criteria in MARPOL Annex
VI, Appendix III.

       EPA performed detailed emission inventory modeling of pollution from ships operating
off U.S. coasts, including the coasts of Alaska and Hawaii.  This modeling not only quantified
emissions from ships, but estimated where the emissions would  occur off the coasts. Within the
proposed EGA for Alaska, ships are expected to emit 32,000 tons of NOx, 21,000 tons of SOx,
and 3,000 tons of PM2.5 in 2020. Within the proposed EGA for Hawaii, ships are expected to
emit 53,000 tons of NOX, 34,000 tons  of SOX, and 4,000 tons of PM2.5 in 2020.

       Air pollution from ships impacts communities not just in ports and near coastlines, but
also hundreds of miles inland.  When people breathe this polluted air, their health is adversely
affected, leading to lost productivity due to increased illnesses, hospitalizations, and even
premature deaths.  In our analysis, we assessed whether emissions from ships would reach
populated areas in Alaska or Hawaii based on meteorological data. This analysis concludes that
ships are contributing to  ambient air concentrations of ozone and PM2.5 in Southeastern and
Southcentral Alaska, where most of the population resides.  In setting the EGA boundary, EPA
balanced considerations of protecting human health with impacts on the regulated community.
Two of Alaska's three major population centers (Juneau and Anchorage) are on the coast in
Southeastern  Alaska and were included in the proposed EGA. The third major population center,
Fairbanks, is inland of the proposed EGA. The Hawaiian Islands included in the proposed EGA
are where the vast majority of the state's population resides.

       Based on ambient air quality monitoring in Alaska, much of the state enjoys air quality
that is generally cleaner than our National Ambient Air Quality  Standards (NAAQS). However,
Alaska does have some areas that have measured levels of ambient particulate matter near or
above current NAAQS, particularly near Anchorage, Fairbanks and Juneau.  On October 8, 2009,
EPA issued final area designations for the 24-hour national  air quality standards for fine
particulate matter (PM2 5). Portions of Fairbanks North Star County in Alaska were designated
nonattainment for this new 24-hr PM2 5 standard.  The correspondence between EPA and ADEC
in the years prior to this designation provided EPA with valuable information with which to
assess the need for emission controls from ships.

       Furthermore, scientists have not identified any ambient threshold for particulate matter
below which no damage  to health is observed.  Thus, air pollution below the levels of the
NAAQS for particulate matter is still harmful and the health of over a quarter million residents of
Alaska can be enhanced by improving air quality further.  It is highly beneficial, from a public


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health perspective, to control PM because even short-term exposures (hours to days) to ambient
PM can cause coughing, difficulty breathing, changes in lung and heart function and premature
death.

       It is also highly beneficial, from a public health perspective, to control ozone because
exposure to ozone can cause throat irritation and make it more difficult to breathe deeply. Ozone
can also aggravate asthma, leading to more asthma attacks. There are adverse human health
effects caused by direct inhalation of SOx or NOx alone. However, due to the imprecise science
of discerning those effects that are due solely to SOx versus its PM derivatives (i.e. sulfate
particles) or to NOx versus its derivatives, ozone and PM, EPA's monetized benefits from the
EGA do not separately quantify the human health impacts from exposure to direct SOx and NOx.

       As stated is Chapter 2 of this document, at this time, the U.S. Government has not
included northwestern Alaska or western Hawaii in the proposed EGA. While these areas also
experience the environmental impacts of ship emissions, further information must be gathered to
properly assess these areas and determine how EGA controls will help. We will continue to
gather information on these areas, as well as other U.S. territories not included in the EGA
proposal, and take action as appropriate.

       We agree that cruise ship traffic in Alaska is seasonal and that seasonal fluctuations in
wind speed can impact the dispersion of emissions. However daily meteorological conditions
can vary from climatological averages so that there can  still be days with slower winds and
potential for inversions. In addition, increased wind speed can cause emissions to be transported
further distances and impact additional areas.

       The air quality modeling analyses focused  on the 48-State contiguous portion of the
United States, but the same meteorological conditions that result in potential impacts of ship
emissions on air pollution over land in that region  (e.g.,  prevailing winds, atmospheric stability,
and precipitation patterns) can also result in potential impacts over Alaska and Hawaii. In fact,
the oceanic influence is likely greater over the Hawaiian Islands and the coastal environs of
Alaska (typically more populated than the interior portions of that State).

       Because of its great expanse, the climatology of Alaska can differ widely depending upon
latitude, altitude, and proximity to the ocean. Generally, the state's meteorology is classified in
three zones: maritime, continental,  and arctic. The weather in the maritime locations is strongly
influenced by the relatively steady-state Pacific Ocean and as a result there are relatively small
variations in prevailing winds, humidity  levels and temperatures by season and location.24
Without the stabilizing influence of the ocean waters, the continental and arctic regions can
experience large seasonal extremes in temperature, humidity, precipitation, and wind direction.
The local meteorology in these two zones is driven by the topography of the surrounding areas,
the altitude, and the fraction of sea  ice in the Arctic Ocean.

       The proximity of the maritime regions to the shipping lanes lead to the conclusion that
populations in these areas would be most likely to be adversely impacted by air pollution
originating from ships. While wind directions at measuring sites in Alaska can be strongly
  Alaska Climate Research Center, 2009. Alaska Climatology,http://climate.gi.alaska.edu/Climate/index.html.

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influenced by topography, the winds typically have an easterly component in populated locations
like Anchorage, Juneau, Sitka, and Kenai.25  The steering winds indicate the potential for the
transport of shipping emissions in the North Pacific (shipping routes from Asia to North
America). These winds are driven by common synoptic features that govern weather in this
region, specifically the Aleutian low pressure cyclone in the winter and a northeastern Pacific
anticyclone in the summer.

       Not surprisingly, Hawaiian meteorology is also subject to strong maritime influences.
Global circulations such as the Hadley cell establish east-northeasterly trade winds as the
predominant flow pattern in Hawaii, especially in the warm season. These trade winds can
comprise 50-90 per cent of the hourly wind directions over the region. Typically, the average
height of the surface layer ranges from 1500-3000 m above ground level in all seasons in
Hawaii. Any emissions input to this layer will remain in this layer unless ventilated by
convection or removed by deposition. Ultimately, as there are shipping lanes  on all sides of the
main Hawaiian Islands; regardless of which way the wind blows, there is a high potential for
ship emissions to affect air pollution over land.
8.2.3 Pollution Transport in the Air Quality Modeling

       What Commenters Said:

       The Canadian Shipowners Association commented on the air quality modeling which
they say "suggests that marine pollution is carried uniformly inland from the east coasts".  They
reference a 2009 study of global marine emissions as evidence that emissions on the east coast
are carried out to sea by prevailing winds.

       The Chamber of Shipping of America commented that the basis for much of EPA's
modeling data is questionable, including assumptions that weather and wind conditions are
similar at all U.S. coastlines.

       CLIA commented that with prevailing winds blowing from west to east over much of the
country, the benefit of emission reductions in the outer waters can be expected to be significantly
less along eastern shorelines.

       ALA commented that "I am keenly aware of the impact that air pollution from these
ships has on the health of millions of people across the nation. The pollution from these vessels
jeopardizes the health and the lives of those who live and work along the nation's coastline,
including the Great Lakes. But it does not stop there. The smog and soot forming exhaust from
these ships travels hundreds of miles inland, threatening millions more who have no idea they
breathe pollution that began in the boiler rooms in the harbors in far off Newark, Houston, LA
and Chicago."
25 Western Regional Climate Center, Alaska prevailing wind directions,
http://www.wrcc.dri.edu/htmlfiles/westwinddir.html.
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       Our Response:

       Conventional wisdom suggests that prevailing winds, over the U.S. and Canada, travel
from west to east. On average, this is true, especially for the north Atlantic and the Pacific
coasts. In the Gulf of Mexico, prevailing winds typically come from the southeast. However,
winds fluctuate in speed and direction, and are less consistent on the north Atlantic coast than
other coasts. As such, air pollution off the east coast, even 200 nm from shore, affects the air we
breathe.

       We agree that emissions on the northeast coast can be carried out to sea by prevailing
winds. As seen in Figure 2-38 of the RIA, the largest predicted improvements in sulfur
deposition from the proposed reduction in emissions along the eastern coasts of the U.S. and
Canada occur over the Atlantic Ocean. It is reasonable to assume that if the EPA modeling
domain extended further east, the simulation would have shown large improvements far out to
sea.  However, prevailing wind patterns can vary by season and by location; and daily
meteorological conditions can certainly vary from climatological averages. While the frequency
of maritime influences can vary by location, it is not uncommon for locations all across the
United States to be affected by emissions that originate offshore. An EPA analysis of air  parcel
back trajectories over the 12-year period from 1995-2006 concluded that highly-populated
coastal cities in the northeastern U.S. were impacted by marine airmasses between 10-20 percent
of the time. The intent of the EPA analyses was to demonstrate this  impact of marine pollution
on inland populations and ecosystems.

       One advantage of the annual (2002) MM5 meteorological modeling that was used to
drive the air quality modeling simulations performed for the EPA analysis, is that it employed a
fine horizontal grid resolution of 12 km. Unlike the coarse-resolution global modeling
mentioned in the comment (where  the grid resolution was 1.8 x 1.8 degrees latitude/longitude),
the EPA MM5 modeling was able  to capture important smaller scale phenomena like the sea
breeze. These local circulations are well-known to result in the onshore transport of any air
pollution trapped near the surface over large water bodies.  In addition, EPA's evaluation of the
meteorological modeling inputs closely matched observations for 2002. Therefore it was an
appropriate dataset for assessing the frequency and magnitude of shipping emissions on inland
locations.

8.3 Other Environmental Impacts

8.3.1 Ecosystem Impacts in Alaska

       What Commenters Said:

       Governor Parnell and Senator Murkowski noted that the proposal references a U.S. Forest
Service study that attributes a reduction in lichen growth on Mt. Robers above downtown Juneau
as potentially the result  of sulfur and nitrogen emissions emitted by cruise ships.  The proposal
also notes that lichen is  a food source for caribou, such as the Southern Alaska Peninsula
Caribou herd. These commenters stated that while caribou do rely on lichen as a food source, no
caribou live in the area of Southeast Alaska where the U.S. Forest Service study was conducted.
In addition, the Southern Alaska Peninsula Caribou herd is located outside the emission control
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area, on the other side of the Gulf of Alaska.  This is given as an example that better Alaska-
specific analysis is needed.

       (Gov. Parnell, 0287)
       (Sen Murkowski, 0384)

       Our Response:

       There are a number of important quantified relationships between nitrogen deposition
levels and ecological effects.  Certain lichen species are the most sensitive terrestrial taxa to
nitrogen with species losses occurring at just 3 kg N/ha/yr in the Pacific Northwest, southern
California and Alaska.  A United States Forest Service study conducted in areas within the
Tongass Forest in Southeast Alaska found evidence of sulfur emissions impacting lichen
communities.26  The authors concluded that the main source of nitrogen and sulfur found in
lichens from Mt. Roberts (directly north of the City of Juneau in southeastern Alaska) is likely
the burning of fossil fuels by cruise ships and other vehicles and equipment in Juneau.
According to the Alaska DEC, damage to lichen populations has widespread effects in Alaskan
ecosystems.27

       We recognize that the discussion of the importance to lichen to caribou may have been
misleading. The discussion of impacts on the Southern Alaska Peninsula caribou herd was based
on information supplied by the Alaska DEC in promoting an EGA for all of Alaska. As such, it
is not specifically relevant to the proposed rule.  However, although caribou do not live in
Juneau, there are caribou herds living inland of the proposed EGA for southeastern Alaska.
8.3.2 Reduction of Ozone and PM Pollution or Protection of Public Health and
      NAAQS Attainment

       What Commenters Said:

       NAG AA commented that "C3 marine engines emit very large quantities of oxides of
nitrogen (NOx), sulfur oxides (SOx) and fine particulate matter (PM2.5), and myriad toxic air
contaminants - all of which lead to degraded air quality and associated adverse
health impacts. In many instances these engines contribute to nonattainment of the health-based
National Ambient Air Quality Standards. In particular, these pollutants pose serious adverse air
quality impacts on port cities across the nation, as well as areas downwind of these ports. Air
pollution from ships is a significant component of the air quality problem in these communities."

       The SCAQMD commented that "Deadlines to attain national ambient air quality
standards in the South Coast Air Basin cannot be met unless emissions from ocean-going vessels
are substantially and timely controlled.  Nevertheless, the proposed rule and IMO standards will
26 Dillman, K., Geiser, L., & Brenner, G. (2007). Air Quality Bio-Monitoring with Lichens. The Togass National
Forest. USDA Forest Service. Retrieved March 18, 2009 from http://gis.nacse.org/lichenair/?page=reports.
27 Alaska Department of Conservation, "Statement in Support of EPA Considering Alaska as Part of a Marine
Emission Control Area," October 1, 2008.

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likely fall significantly short of achieving the emission reductions needed in the South Coast Air
Basin by federal attainment deadlines".

       ALA/EDF commented that as of December 2008 there were 211 counties that either do
not meet the 2006 PM2 5 NAAQS or contribute to violations in other counties and there were 293
counties in violation of the 2008 eight-hour ozone standard. ALA/EDF also commented that
climate change will exacerbate ozone and PM air pollution in the future, challenging compliance
and public health protection.

       The Ohio Environmental Council commented that reductions in NOx and 862 are critical
to ensure compliance with the NAAQS.  They went on to detail that Ohio has four counties that
are failing the particle pollution standard and in addition there will likely be counties that will
fail the 2008 ozone standard.

       The Santa Barbara County Air Pollution Control District commented that failing to
reduce emissions from marine shipping may cause districts such as Santa Barbara to fall back
into nonattainment for the federal ozone standard.

       The Texas Commission of Environmental Quality commented that the adoption of the
proposed emissions standards would contribute to the air quality goals of Texas and the U.S.

       Chris Salmi on behalf of the Ozone Transport Commission (OTC) commented that many
areas in the OTC region either currently do not meet the standards for ozone and PM2.5 or are
expected to be designated nonattainment and that attaining and maintaining these standards poses
a significant challenge to the  states.

       Carter Strickland, on behalf of the City of New York, commented that the city is already
nonattainment for PM2.5 and ozone and that they will need help from this rule to meet their air
quality goals.

       Christopher Patton, an officer at the Port of Los Angeles,  commented that federal
partnership on engine and fuel control strategies for oceangoing vessels is essential to the
regional attainment of NAAQS.

       Texas Commission of Environmental Quality (0340)
       NACAA (0246)
       Port of LA (0232)
       SCAQMD (0309)
       ALA/EDF (0366)
       Ohio Environmental Council et. al. (0314)
       Santa Barbara County Air Pollution Control District (0231)
       City of New York (0227)
       Ozone Transport Commission (0227)

       Our Response:

       We appreciate the comments that these commenters provided.  We agree with the
commenters that emissions from ocean going vessels contribute to ozone and particulate
pollution and that this rule is  a crucial  component of the effort to  meet health based air quality

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standards, such as the NAAQS. For the final rule we project that reductions of PM2.5, NOx, and
SOx emissions from marine diesel engines will produce nationwide air quality improvements.
For instance, there are three counties whose projected design values go from being above the
annual standard in the base case to being lower than the annual PM2.5 standard with the
coordinated strategy controls.  Descriptions of the changes in design values for counties
projected to be nonattainment in the future are provided below.

       According to air quality modeling performed in conjunction with this rule, for the
coordinated strategy, on a population-weighted basis, in 2030 the average modeled future-year
annual PM2.5 design values will decrease by 0.98 |ig/m3 and the average modeled future-year 24-
hour PM2.5 design values will decrease by 1.29 |ig/m3.  Those counties that are projected to be
above the PM2.5 standard in 2030 will  have even larger decreases from the emission controls
associated with the coordinated strategy. On a population-weighted basis, the average modeled
future-year annual PM2.5 design values for counties whose design values were greater than 15
|ig/m3 will decrease by 2.03 |ig/m3 in 2030. In addition, on a population-weighted basis, the
average modeled future-year 24-hour PM2.5 design values for counties whose design values were
greater than 35 |ig/m3 will decrease by 1.12 |ig/m3 in 2030.

       The coordinated strategy will also result in nationwide ozone benefits.  On a population-
weighted basis, the average modeled future-year 8-hour ozone design values will decrease by
0.97 ppb in 2030. . In addition, those counties that are projected to be above the 2008 ozone
standard in 2030 will have even larger decreases from the coordinated strategy. On a population-
weighted basis, the average modeled future-year 8-hour ozone design values for counties whose
design values were greater than 75 ppb will decrease by 1.60 ppb in 2030.

8.1.3  Air Quality Impacts from Ocean-going Vessels also Occur Away from
Ports

       ALA/EDF commented that emissions from OGV  can have a tremendous negative impact
on air quality outside of ports.  They went on to cite studies that have looked at emissions from
OGV and find that most shipping  emissions occur away from port and conclude that the
proximity of shipping lanes to coastlines has resulted in the movement of pollutants into  coastal
areas.  They also note that the movement of ships through inland waterways can be expected to
impact air quality in the communities they pass by. ALA/EDF also mention several studies that
have looked at the impact of OGV emissions and find that emissions can impact well inland from
the coastline.

       The State of Texas commented that "These engines emit significant amounts of air
pollution that contribute to ozone  and particulate pollution in both coastal and inland areas in
Texas and nationwide".

       ICCT  commented that pollution from ships not only impacts coastal regions but is also
carried hundreds of kilometers inland.

       ALA stated that beyond the pollution that is emitted here in the New York metropolitan
area, the EPA estimates that pollution  from these ships extends hundreds of miles inland, all the
way to the Midwest. (ALA, 0227)
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       ALA stated that Texans, such as the commenter, are all too familiar with the blowing
wind and with the air pollution that travels miles from its source, threatening people living and
breathing down wind. The commenter was surprised to learn how far inland the pollution blows
from these huge ships. EPA's analysis shows that the pollution from oceangoing vessels travels
hundreds of miles inland. My neighbors and I certainly had no idea that these ships in Houston,
over 160 miles away from Austin, are probably polluting the air that we breathe in our own
backyard.  (ALA, 0227)

       Our Response:

       We agree that the emissions from ocean-going vessels contribute to air pollution impacts
far from the source. The maps presented in Chapter 2 of the RIA highlight the impact of the
coordinated strategy inland as well as near the coasts.  See Section 8.2 of this S&A for additional
information on the meteorology used in the air quality modeling analysis and transport of
pollutants.

8.1.4 Environmental Impacts Associated with Emissions from Ocean-going Vessels

       What Commenters Said:

       FOE and others commented that, in addition to health concerns, emissions from large
marine diesel engines also harm the environment and public welfare by degrading visibility,
contributing to haze, acid rain, eutrophication and nitrophication of watersheds, and reducing
crop yields and productivity of forest ecosystems. Id at 69534-36. Particulate matter also causes
soiling and erosion damage to materials, including culturally important objects, and promotes
and accelerates the corrosion of metals, degrades paints, and deteriorates building materials. Id.
at 69536.  (Friends of the Earth, 0320)

       Commenters stated that pollution from ocean-going vessels not only fouls our air, but
impacts our water ways. The nitrogen oxides that are emitted are stripped from the air during
precipitation events and washed into our waterways contributing to algal blooms and deadening
of the waterway. It also causes acid deposition, watershed eutrophication and nitrification,
adverse impacts on vegetation and ecosystems, materials damage and soiling and regional haze.
EPA described these effects in its proposal.  (Ohio Environmental Council et. al., 0314)

   •   Diesel  air pollution impairs visibility. The same fine particles that have adverse health
       effects cause the haze that pollutes scenic vistas in national parks and wilderness areas,
       and creates brown clouds in our urban centers.
   •   Diesel  air pollution threatens ecosystems across the country. The constituents of diesel
       exhaust contribute to the acid rain and nitrogen deposition that continues to harm
       sensitive ecosystems in the Adirondack Mountains, southern  Appalachians and high
       elevation ecosystems in the western United States.

       EDF and ALA support EPA's application to IMO for a U.S. Emission Control Area and
EPA's Coordinated Strategy to reduce C3 emissions: "The emissions reductions from the
coordinated strategy are also predicted to significantly reduce the annual total sulfur and nitrogen
deposition occurring in sensitive U.S. ecosystems including forests, wetlands, lakes, streams, and
estuaries. For sulfur deposition, adopting the coordinated strategy would result in reductions
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ranging from 5% to 30% by 2020. Nitrogen deposition reductions would range from 3% to over
20%. 74 Fed Reg at 44,458." (0366)

       CATF commented that diesel emissions also contribute to numerous adverse welfare and
environmental effects. These include acid deposition, watershed eutrophication and nitrification,
adverse impacts on vegetation and ecosystems, materials damage and soiling and regional haze.
EPA described these effects in its proposal.  (Clean Air Task Force, 0264)

       ICCT stated that marine shipping is one of the major sources of NOx, SOx, and PM.
Nitrogen oxides (NOx), including nitrogen monoxide (NO) and nitrogen dioxide (NO2)
emissions are major contributors to acid rain, leading to the over-fertilization of lakes as well as
the formation of smog. The working temperature and pressure of the engines have a very
significant influence on the emission of NOx. Sulfur oxides (SOx), including sulfur dioxides
(SO2) and sulfur trioxide (SO3), lead to acid rain and have detrimental effects on vegetation and
human health. SOx emissions are proportional to the sulfur content of the fuel and the total fuel
consumption.  Particulate matter is a generic term for a broad class of chemically and physically
diverse substances. Of the precursor gases emitted by ships, SOx and NOx can directly lead to
the formation of secondary PM.  (The International Council on Clean Transportation, 0227)

       Friends of the Earth (0320)
       Ohio Environmental Council et. al. (0314)
       American Lung Association and Environmental Defense Fund (0366)
       Clean Air Task Force and many sign-ons  (0264)
       The International Council on Clean Transportation (0227)

       Our Response:

       We agree that emissions from C3 engines contribute to environmental effects. In the
preamble EPA states "Emissions of NOx and SOx from ships contribute to atmospheric
deposition of nitrogen and sulfur in the U.S.  Atmospheric deposition of nitrogen and sulfur
contributes to acidification, altering biogeochemistry and affecting animal and plant life in
terrestrial and aquatic ecosystems across the U.S."  The emissions reductions being finalized in
this rule will help to reduce environmental effects associated with the emissions from C3 diesel
engines.  Air Quality modeling done for the coordinated strategy shows that adopting the
coordinated  strategy will result in sulfur deposition reductions ranging from 5% to 20% in 2020
along the entire Atlantic and Gulf coasts with higher levels of reduction, exceeding 25%,
occurring in the near-land coastal waters of the U.S. Nitrogen deposition reductions will range
from 3% to 7% along the entire Atlantic, Pacific and Gulf Coasts.

       We also agree that C3 engines impact visibility. Air Quality modeling done for the
coordinated  strategy shows that improvements in visibility due to OGV emissions reductions will
occur in all 133 mandatory class I federal areas in the future with the average visibility on the 20
percent worst days at these scenic locales is projected to improve by 0.22 deciviews, or 1.4
percent in 2020 and by 0.43 deciviews or 2.7% in 2030.
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8.4 Benefits Analysis

8.4.1 Citation of Existing Health Impacts Literature and Data

       What Commenters Said:

       Alyssa Trujillo, testifying at the Long Beach hearing, stated that in a past letter to EPA,
she implored the Agency to intervene in this matter because people were so sick and dying.  She
wondered how many people in the last 20 years might have died because of the environmental
pollution that we experienced, either as a direct cause or as a secondary cause.  She suggested
that to find out, the Agency could utilize existing data such as regional claims for Social Security
disability and SSI, while stating that she didn't think the correlation between the pollution that
we are experiencing and health problems has really been made strong enough. She felt that the
existing studies have not been done the way they should have, and that the Agency does not
realize there is information out there that can be accessed.

       Our Response:

       While the Agency does not have an estimate of total premature deaths due to air pollution
over the last 20 years, EPA agrees that ship emissions contribute to large numbers of adverse
health impacts within the U.S. and internationally.  For example, we estimated that in 2020, ships
emitting at their current performance would be responsible for approximately 4,300 - 9,800
cases of premature mortality in adults in the U.S. (range based on the health impact function used
- Pope et al., 2002 and Laden et al., 2006, respectively).28

       We also estimated that ships are responsible for a large number of PM2.5-related
morbidity impacts. For example, we estimate that in the U.S. in 2020, ships emitting at their
current performance would be responsible for approximately 4,300 cases of chronic bronchitis,
8,900 non-fatal heart attacks, 5,600 hospital admissions and emergency room visits, 580,000
days of work lost, and 3,400,000 days of restricted physical activity.

       Similarly, ship emissions contribute to adverse health impacts associated with ozone
exposure. For example, we estimate that in the U.S. in 2020, ships emitting at their current
performance would be responsible for approximately 370 - 1,700 cases of premature mortality,
depending on the health impact function, 6,600 hospital admissions and emergency room visits,
810,000 days of school absence, and 2,300,000 day of restricted physical activity.

       There are several types of data that can support the determination of types and magnitude
of health effects associated with air pollution exposures. These sources of data include
toxicological studies (including animal and cellular studies), human clinical trials, and
observational epidemiology studies. All of these data sources provide important contributions to
the weight of evidence  surrounding a particular health impact, however, only epidemiology
28 Refer to EPA's application for an Emission Control Area designation to the International Maritime Organization:
http://www.epa.gov/otaq/regs/nonroad/marine/ci/mepc-59-eca-proposal.pdf Accessed Thursday, November 19,
2009.

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studies provide direct concentration-response relationships that can be used to evaluate
population-level impacts of reductions in ambient pollution levels.

       For the data-derived estimates, EPA relies on the published scientific literature to
ascertain the relationship between PM and ozone and adverse human health  effects. We evaluate
epidemiological  studies using selection criteria that includes consideration of whether the study
was peer-reviewed, the match between the pollutant studied and the pollutant of interest, the
study design and location, and characteristics of the study population, among other
considerations.  The selection of concentration-response functions for the benefits analysis is
guided by the goal of achieving a balance between comprehensiveness and scientific
defensibility.

8.4.2 Related Estimates of Health Impacts

       What Commenters Said:

       In separate comments, the Clean Air Task Force, the International Council on Clean
Transportation, a group of four Ohio-based organizations, and a joint submission by the Friends
of the Earth, Earthjustice, and the Center for Biological Diversity, all referenced a study
published in the December 15, 2007 issue of the American Chemical Society journal
Environmental Science & Technology (hereinafter the "Corbett and Winebrake Study").  The
study examined the link between international shipping emissions and human health impacts,
including premature mortality, and demonstrated that these  emissions have significant global
impacts on human health.

       As reported by the commenters, the Corbett and Winebrake Study estimated that the
global cardiopulmonary and lung cancer mortality in 2002 from PM air pollution emitted by
oceangoing ships would grow by 40% by 2012 along with a continued large increase in global trade
and shipping traffic.  Adverse morbidity and environmental impacts were also estimated to grow,
though they were not quantified.

       The Clean Air Task Force also stated that despite the considerable regional variability  in
the constituents of particulate matter, the epidemiological evidence that ambient exposures to
particulate matter are associated with numerous adverse health effects is remarkably clear and
consistent. The commenter noted that the consistency of the data makes it feasible to quantify the
benefits for a suite of health indicators, including: premature mortality, bronchitis, hospital
admissions for both respiratory and cardiovascular events, emergency room  visits for asthma,
nonfatal heart attacks, lower and upper respiratory illness, minor restricted-activity days, work
loss days, asthma exacerbations, respiratory symptoms (asthmatic population), and infant
mortality. The commenter also cited a study conducted by Abt Associates on behalf of the Clean
Air Task Force that associated excess diesel exhaust particle exposure in the U.S. with an
estimated 21,000 annual premature deaths, 27,000 heart attacks and 2.4 million work loss days,
12,000 cases of chronic bronchitis, 15,000 emergency room visits for asthma and 600,000 cases
of respiratory symptoms.

       A group of four Ohio-based organizations submitted a sign-on letter  that also commented
on the Abt study, noting that the health impact from diesel pollution in four PM nonattainment
counties located within Ohio is measurable.  For example, the study estimated 183 annual early
deaths, 231 heart attacks and 17,450 work loss days in this four county region.

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       The South Coast Air Quality Management District commented that they had made
significant progress in controlling emissions from sources within its regulatory authority, but that
their region still has the worst air quality in the country with serious health impacts. They cited a
number of statistics: 6,200 people die prematurely every year in this region due to fine
particulate pollution; average cancer risks due to air pollution exceed 1,200 in a million with
higher risks transportation near facilities like ports; and 52% of population-weighted exposure of
all Americans to fine particulates is in the South Coast District.

       Commenters from the Friends of the Earth, Earthjustice, and the Center for Biological
Diversity noted that the public health  impacts to citizens in California cities and towns from
Category 3 marine vessel  pollution are acute. The commenters cited a CARB report which
indicated that mortality  attributed to ocean going vessels will more than double from 210 (in
2005) to 540 by 2020, while most other inventory sources' contributions to mortality will
decrease or increase only  slightly.

       Martin Schlageter, from the Coalition for Clear Air, testified at the Long Beach hearing
that some 3,700 people  die prematurely every year in California due to port and freight
transportation pollution. He stated that they had established standards and set some targets. He
also stated that should federal and international standards be set, the leadership of businesses and
ports and regulatory agencies and the  State of California will not be at a disadvantage; rather you
will have the opportunity to level that playing field for business that is operating here in
California and attempting to address the air pollution crisis.

       The American Lung Association commented that air pollution is a threat to families,
children, teenagers, elders and people who have chronic lung disease, heart disease and diabetes.
The commenter also noted that air pollution sends people with lung disease to the hospital,
shapes how children's lungs develop, causes heart attacks and can even kill. The commenter cited
EPA's  analysis estimates that the coordinated strategy will prevent between 13,000 and 33,000
premature deaths each year by 2030.  The International Council on Clean Technology also
referenced EPA's benefits analysis, citing the quantified and monetized health impacts and
noting that the benefits of the coordinated strategy far outweigh the costs.

       Our Response:

       We agree with commenters that there are significant health concerns associated with PM-
and ozone-related emissions.  Scientific studies show ambient PM and ozone is associated with  a
series of adverse health  effects.  PM health effects are discussed in detail in the 2004 EPA
Particulate Matter Air Quality Criteria Document (PM AQCD), and the 2005 PM Staff Paper.29'30
Further discussion of health effects associated with PM can also be found in the RIA for this
29 U.S. EPA (2004) Air Quality Criteria for Paniculate Matter (Oct 2004), Volume I Document No. EPA600/P-
99/002aF and Volume II Document No. EPA600/P-99/002bF. This document is available in Docket EPA-HQ-
OAR-2003-0190.
30U.S. EPA (2005) Review of the National Ambient Air Quality Standard for Paniculate Matter: Policy Assessment
of Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-05-005. This document is available in
Docket EPA-HQ-OAR-2003-0190.


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rule. The health and welfare effects of ozone are well documented and are assessed in EPA's
2006 Air Quality Criteria Document (ozone AQCD) and 2007 Staff Paper.31

       In the proposed RIA, we estimated that the coordinated strategy will result in between
5,300 and 14,000 cases of avoided PM2.5-related premature deaths annually in 2020 and between
13,000 and 33,000 avoided premature deaths annually in 2030. For ozone-related premature
mortality, we estimated a range of 61 to 280 fewer premature mortalities as a result of the
coordinated strategy in 2020 and a range of 210 to 920 fewer premature mortalities in 2030.  The
increase in annual benefits from 2020 to 2030 reflects additional emission reductions from
coordinated strategy, as well as increases in total population and the average age (and thus
baseline mortality risk) of the population. The RIA presents a number of additional morbidity-
related health impacts avoided as a result of the coordinated strategy and talks about those health
and environmental impacts that we were unable to quantify, but will be reduced as a result of the
coordinated strategy.

8.4.3 PM-related Premature Mortality

       What Commenters Said:

       The Chamber of Shipping of America noted that in its proposal, EPA estimated
premature mortalities associated with a coordinated strategy to control shipping emissions of
5,300 in 2020 rising to!3,000 in 2030. The commenter also stated that CSA members do not
have expertise in toxicology, but that they knew from an examination of the record on the PM
NAAQS and referenced material from CASAC that there is considerable discussion and
disagreement over the methodologies for the estimation of premature mortality. The commenter
noted specifically:

           •   The validity of the single concentration response function for PM based on the
              ACS and Six-Cities studies when there are  other seemingly more appropriate
              studies available (e.g. Enstrom and Beelen),

           •   The apparent variability in health impact from the various forms of PM - e.g.
              scientific literature indicating soluble forms of PM such as nitrate, sulfate and
              ammonium PM exhibit lower toxicity potential than carbonaceous PM,

           •   The lack of inclusion of the effects of other confounders, e.g. smoking, and

           •   The use of a linear no threshold approach for sulfate PM when there are
              indications that a threshold may exist near the current NAAQS limit, which would
31 U.S. EPA. (2006). Air Quality Criteria for Ozone and Related Photochemical Oxidants (Final). EPA/600/R-
05/004aF-cF. Washington, DC: U.S. EPA. Retrieved on March 19, 2009 from Docket EPA-HQ-OAR-2003-0190 at
http://www.regulations.gov/.,  U.S. EPA. (2007). Review of the National Ambient Air Quality Standards for Ozone:
Policy Assessment of Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-07-003. Washington,
DC, U.S. EPA. Retrieved on March 19, 2009 from Docket EPA-HQ-OAR-2003-0190 at
http://www.regulations.gov/.

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              imply overestimation of premature mortality in areas with total concentrations
              below the NAAQS, i.e.  in PM attainment zones - most of the U.S. coast line.

       The commenter concluded by stating that as a small industry without experience in
toxicology, the marine community relies on EPA to follow well-balanced scientific evidence.
They noted that commentary from the broader U.S. industry on the PM NAAQS tends to indicate
an overstatement of the health impacts from shipping emissions and that the EPA's Integrated
Science Assessment for PM confirms that this is a complicated topic that should not be treated
with the certainty implied in this rulemaking.

       Our Response:

       EPA relies on the published scientific literature to ascertain the relationship between PM
and adverse human health effects. We evaluate the epidemiological studies using a well-
established set of selection criteria.  These criteria include consideration of whether the study
was peer-reviewed, the match between the pollutant studies and the pollutant of interest, the
study design and location, and characteristics of the study population, among other
considerations. The selection of concentration-response functions for all of EPA's benefits
analyses is guided by the goal of achieving comprehensiveness and scientific defensibility.

       In addition to the above selection criteria, EPA relies on the guidance provided by
internal and external review panels, comprised of distinguished scientists, engineers, and
economists who are recognized, non-governmental experts in their respective fields. EPA
consults with the Science Advisory Board's Health Effects Subcommittee (SAB-HES) and Clean
Air Science Advisory Committee (CAS AC) in the development and improvement of methods we
use to estimate and value the potential reductions in health effects associated with air quality
improvements. All of EPA's regulatory analyses also are reviewed extensively by the Office of
Management and Budget (OMB). EPA also looks to recommendations provided by panels such
as those convened by the National Academy of Sciences (NAS) to specifically address facets of
our cost and benefits analyses.

       EPA currently draws its effect coefficients from epidemiology studies examining two
large population cohorts: the American Cancer Society cohort (Pope et al.,  2002) and the
Harvard Six Cities cohort (Laden et al., 2006). These are logical  choices for anchor points in our
analysis because, while both studies are well designed and peer reviewed, there are strengths and
weaknesses inherent in each, which we believe argues for using both studies to generate benefits
estimates.  Previously, EPA had calculated benefits based on these two empirical studies, but
derived the range of benefits, including the minimum and maximum results, from an expert
elicitation of the relationship between exposure to PM2.5 and premature mortality (Roman et al.,
2008).32 In the RIA that accompanied the proposal, we included  the benefits estimates derived
from the concentration-response function provided by each of the twelve experts to better
characterize the uncertainty in the concentration-response function for mortality and the degree
of variability in the expert responses.  Because the experts used the two cohort studies mentioned
above to inform their concentration-response  functions, benefits estimates using these functions
32 Please see the Section 5.2 of the Portland Cement RIA in Appendix 5A for more information regarding the change
in the presentation of benefits estimates.

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generally fall between results using these epidemiology studies. In general, the expert elicitation
results support the conclusion that the benefits of PM2.5 control are very likely to be substantial.

       EPA strives to use the best available science to support our benefits analyses, and we
recognize that interpretation of the science regarding air pollution and health is dynamic and
evolving. Based on our review of the body of scientific literature, EPA applied the no-threshold
model in its analysis of the coordinated strategy. EPA's draft Integrated Science Assessment,33'34
which was recently reviewed by EPA's Clean Air Scientific Advisory Committee,35'36 concluded
that the scientific literature consistently finds that a no-threshold log-linear model most
adequately  portrays the PM-mortality concentration-response relationship while recognizing
potential uncertainty about the exact shape of the concentration-response function.37 Although
this document does not represent final agency policy that has undergone the full agency scientific
review process, it provides a basis for reconsidering the application of thresholds in PM2.5
concentration-response functions used in EPA's RIAs.38 It is important to note that while
CASAC provides advice regarding the science associated with setting the National Ambient Air
Quality Standards, typically other scientific advisory bodies provide specific advice regarding
benefits analysis.39 This approach reflects EPA's most current interpretation of the scientific
33 U.S. Environmental Protection Agency (U.S. EPA).  Integrated Science Assessment for Paniculate Matter
(External Review Draft). National Center for Environmental Assessment, Research Triangle Park, NC.
EPA/600/R-08/139. December. Available on the Internet at
.
34 U.S. Environmental Protection Agency (U.S. EPA).  Integrated Science Assessment for Paniculate Matter
(Second External Review Draft). National Center for Environmental Assessment, Research Triangle Park, NC.
EPA/600/R-08/139B.  July. Available on the Internet at
.
35 U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). Review of EPA's Integrated
Science Assessment for Paniculate Matter (First External Review Draft, December 2008). EPA-COUNCIL-09-008.
May. Available on the Internet at
.
36 U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). Consultation on EPA's
Paniculate Matter National Ambient Air Quality Standards: Scope and Methods Plan for Health Risk and Exposure
Assessment. EPA-COUNCIL-09-009. May.  Available on the Internet at
.
37 It is important to note that uncertainty regarding the shape of the concentration-response function is conceptually
distinct from an assumed threshold.  An assumed threshold (below which there are no health effects) is a
discontinuity, which is a specific example of non-linearity.
38 The final PM ISA, which will have undergone the full agency  scientific review process, is scheduled to be
completed in late December 2009.
39 In the proposed Portland Cement RIA, EPA solicited comment on the use of the no-threshold model for benefits
analysis within the preamble of that proposed rule. The comment period for the Portland Cement proposed
NESHAP closed on September 4, 2009 (Docket ID No. EPA-HQ-OAR-2002-0051 available at
http://www.regulations.gov). EPA is currently reviewing those comments.  U.S. Environmental Protection Agency.
(2009). Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants from the Portland
Cement Manufacturing Industry. Office of Air and Radiation. Retrieved on May 4, 2009, from
http://www.epa. gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf

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literature on PM2.5 and mortality.  Please refer to the proposed Portland Cement MACT RIA for a
description of the history of the treatment of thresholds in our analyses.
40
       In regard to the comment that these studies lack the inclusion of effects of other
confounders such as smoking, we respond that there is abundant evidence of significant
associations between various measures of long-term exposure to PM and elevated rates of annual
mortality. Most of the published studies have found positive (but not always statistically
significant) associations with available PM indices such as total suspended particles (TSP).
However, exploration of alternative model specifications sometimes raised questions about
causal relationships. These early "ecological cross-sectional" studies were criticized for a
number of methodological limitations, particularly for inadequate control at the individual level
for variables that are potentially important in causing mortality, such as wealth, smoking, and
diet. Over the last 15 years, several studies using "prospective cohort" designs have been
published that appear to be consistent with the earlier body of literature. These new "prospective
cohort" studies reflect a significant improvement over the earlier work because they include
individual-level information with respect to health status and residence. The most extensive
analyses have been based on data from two prospective cohort groups, often referred to as the
Harvard "Six-Cities Study" (Dockery et al., 1993; Laden et al, 2006) and the "American Cancer
Society or ACS study" (Pope et al., 1995; Pope et al, 2002; Pope et al, 2004); these studies have
found consistent relationships between fine particle indicators and premature mortality across
multiple locations in the United States. Please refer to the second draft PM ISA for a complete
discussion of the available PM-related mortality literature.

       The Agency also responds that current evidence is not sufficient to estimate benefits by
PM component. The 2009 second draft PM ISA states: "[MJany constituents of PM can be
linked with differing health effects and the evidence is not yet sufficient to allow differentiation
of those constituents or sources that are more closely related to specific health outcomes."

       The National Research Council (NRC)41 highlighted the need for EPA to conduct
rigorous quantitative analysis of uncertainty in its benefits estimates and to present these
estimates to decision makers in ways that foster an appropriate appreciation of their inherent
uncertainty. In response to these comments, EPA's Office of Air and Radiation (OAR) is
developing a comprehensive strategy for characterizing the aggregate impact of uncertainty in
key modeling elements on both health incidence and benefits estimates. Components of that
process include emissions modeling, air quality modeling, health effects incidence estimation,
and valuation.

       In benefit analyses of air pollution regulations  conducted to date, the estimated impact of
reductions in premature mortality has accounted for 85% to 95% of total benefits. Therefore, it
is particularly important to characterize the uncertainties associated with reductions in premature
mortality. The health impact functions used to estimate avoided premature deaths associated
40 U.S. Environmental Protection Agency. (2009). Regulatory Impact Analysis: National Emission Standards for
Hazardous Air Pollutants from the Portland Cement Manufacturing Industry. Office of Air and Radiation.
Retrieved on May 4, 2009, from http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf
41 National Research Council (NRC). (2002). Estimating the Public Health Benefits of Proposed Air Pollution
Regulations. The National Academies Press: Washington, D.C.

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with reductions in ozone have associated standard errors that represent the statistical errors
around the effect estimates in the underlying epidemiological studies.42 In our results, we report
credible intervals based on these standard errors, reflecting the uncertainty in the estimated
change in incidence of avoided premature deaths. We also provide multiple estimates, to reflect
model uncertainty between alternative study designs.

       For premature mortality associated with exposure to PM, we follow the same approach
that has been used in several recent RIAs.43'44'45 First, we use Monte Carlo methods for
estimating random sampling error associated with the concentration response functions from
epidemiological studies and economic valuation functions.  Monte Carlo simulation uses random
sampling from distributions of parameters to characterize the effects of uncertainty on output
variables, such as incidence of premature mortality. Specifically, we used Monte Carlo methods
to generate confidence intervals around the estimated health impact and dollar benefits.
Distributions for individual effect estimates are based on the reported standard  errors in the
epidemiological studies.

       Second, as a sensitivity analysis, we use the results  of our expert elicitation of the
concentration response function describing the relationship between premature mortality and
ambient PM2.5 concentration.46' 47 Incorporating only the uncertainty from random sampling
error omits important sources of uncertainty (e.g., in the functional form of the model; whether
or not a threshold may exist).  This second approach attempts to incorporate these other sources
of uncertainty.

8.4.4 Value of a Statistical Life

       What Commenters Said:

       The Chamber of Shipping of America noted that the estimated benefits  of the coordinated
strategy  rise from $45 billion in 2020 to $110 billion in 2030.  They noted that  the bulk of these
benefits  are related to the reduction in premature mortalities each year and that, assuming the
42 Health impact functions measure the change in a health endpoint of interest, such as hospital admissions, for a
given change in ambient ozone or PM concentration.
43 U.S. Environmental Protection Agency, (2004a). Final Regulatory Analysis: Control of Emissions from Nonroad
Diesel Engines.  EPA420-R-04-007.  Prepared by Office of Air and Radiation.  Retrieved on April 10, 2009, from
http://www.epa.gov/nonroad-diesel/2004fr/420r04007.pdf
44 U.S. Environmental Protection Agency, (2005). Regulatory Impact Analysis for the Clean Air Interstate Rule.
EPA 452/-03-001. Prepared by Office of Air and Radiation.  Retrieved on April 10, 2009, from
http://www.epa.gov/interstateairquality/tsd0175.pdf
45 U.S. Environmental Protection Agency, (2006). Regulatory Impact Analysis for the PMNAAQS. EPA Prepared
by Office of Air and Radiation. Retrieved on April 10, 2009, from
http://www.epa.gov/ttn/ecas/regdata/RIAs/Chapter%205~Benefits.pdf
46 Expert elicitation is a formal, highly structured and well documented process whereby expert judgments, usually
of multiple experts, are obtained (Ayyb, 2002).
47 Industrial Economics, Inc. (2006). Expanded Expert Judgment Assessment of 'the Concentration-Response
Relationship Between PM2.5 Exposure and Mortality. Prepared for EPA Office of Air Quality Planning and
Standards, September. Retrieved on April 10, 2009, from
http://www.epa. gov/ttn/ecas/regdata/Uncertainty/pm_ee_report.pdf

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calculation of premature mortality was correct, the value associated with each premature
mortality appears to the commenter to be high perhaps by as much as two orders of magnitude.
In 2030, the EPA uses a value of statistical life (VSL) of $7.9 million. The commenter stated
that while they are not experts in this field, this VSL, when applied to a number that is essentially
the shortening of life by a matter of months at the end of life, appears to be excessive. The
commenter contrasted the U.S. value with the EU's valuation of life year (VOLY) values that are
on the order of €50,000.  According to the commenter, applying a value of $100,000 to each
mortality would lower benefits to $1.3 billion and total benefits to about $11.3 billion.  This
approach would substantially change the benefit/cost ratio and, according to the commenter,
points out the need to be more accurate on the estimate of health impacts, both for mortality and
morbidity.

       Our Response:

       EPA agrees that there is a large amount of uncertainty in the VSL for application to
environmental policy analysis. However, as noted in the RIA, the SAB Environmental
Economics Advisory Committee has advised that the EPA "continue to use a wage-risk-based
VSL as its primary estimate, including appropriate sensitivity analyses to reflect the uncertainty
of these estimates," and that "the only risk characteristic for which adjustments to the VSL can
be made is the timing of the risk"(EPA-SAB-EEAC-00-013).48 The Agency therefore applies
the VSL that was vetted and endorsed by the Science Advisory Board in the Guidelines for
Preparing Economic  Analyses (U.S. EPA, 2000) while the Agency continues its efforts to update
its guidance on this issue. 9  This approach calculates a mean value across VSL estimates
derived from 26 labor market and contingent valuation studies published between 1974 and
1991. The mean VSL across these studies is $6.3 million (2000$).  In developing our estimate of
the benefits of premature mortality reductions, we also discount the VSL over a lag period
between exposure and premature mortality,  but we do not adjust the VSL to reflect any
differences across age groups, consistent with SAB advice.

       The Agency is committed to using scientifically sound, appropriately reviewed evidence
in valuing mortality risk reductions and has made significant progress in responding to the SAB-
EEAC's specific recommendations. The Agency anticipates presenting results from this effort to
the SAB-EEAC in Spring 2010  and that draft guidance will be available shortly thereafter.
48 U.S. Environmental Protection Agency (EPA).  July 2000a. "An SAB Report on EPA's White Paper Valuing the
Benefits of Fatal Cancer Risk Reduction." EPA-SAB-EEAC-00-013.
49 In the (draft) update of the Economic Guidelines, EPA retained the VSL endorsed by the SAB with the
understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near future.
Therefore, this report does not represent final agency policy. The 2000 guidelines can be downloaded here:
http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html, and the draft updated version (2008) of the
guidelines can be downloaded here: http://yosemite.epa.gov/ee/epa/eerm.nsf/vwRepNumLookup/EE-
0516?OpenDocument

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CHAPTER 9: Alternative Program Options

       What We Proposed:

       The comments in this section generally correspond to Section IX of the preamble to the
proposed rule, where we describe the programmatic alternatives that were considered. The
Regulatory Impact Analysis describes alternatives in Chapter 9.

       See Chapter 3 of this document for a discussion of issues related to the technical
feasibility and lead time of emissions controls.

9.1 Land-Side Controls

       What Commenters Said:

       Maersk agreed with EPA's decision not to act on mandatory cold ironing requirements at
this time, as international standards for power delivery are not yet established, and funding for
infrastructure and power availability may be problematic in many U.S. ports. Maersk believes
that investments in solutions that travel with the vessels are the most effective in achieving wide-
spread environmental benefits, because these can usually be implemented more quickly and
provide greater flexibility for operations and route redeployments. (Maersk, 0261)

       Earthjustice et al commented that the use of shore power or "cold ironing" can result in
tremendous public health benefits, and encouraged EPA to consider voluntary and incentive-
based measures to encourage use of shore power if EPA doesn't mandate its use. Examples given
include working with state and local agencies and port authorities to develop programs to reduce
electricity rates for participants, establishing federal grants for ship-side shore power installation,
and instituting differentiated dockage fees and privileged docking. (FOE,  0320)

       Our Response:

       Some port authorities already require cold-ironing for frequent-calling vessels and are
pursuing additional reductions from shoreside port equipment.  EPA is working with East Coast
ports to develop plans for shoreside power as part of port development plans.  As discussed in
the proposal and RIA, EPA believes the infrastructure to support shore power needs more time to
develop before shore power could be adopted on a national basis. Thus, we are not adopting any
provisions in this rule with respect to cold ironing or other land-side power emission reduction
programs.

9.2 Program for Existing Engines

9.2.1  Voluntary Program

       What Commenters Said:

(A)    We support development of a Voluntary Program for In-Use Engines

       In response to EPA's request for comment on the possibility of a Voluntary Marine
Verification Program for in-use engines, many commenters supported this idea and encouraged

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EPA to consider incentives and voluntary programs to reduce emissions from in-use Category 3
engines.

       Commenters Supporting a Voluntary Verification Program:

       Texas Legislative Air Quality Caucus. (0367)
       MECA(0319)
       NESCAUM(0356)
       Canadian Shipowners' Association (0245)
       American Lung Association (0227)
       CATF (0335)

       MECA commented that PM and NOx emission control technology options have already
been developed and demonstrated on existing large marine vessels, suggesting that a large-scale
retrofit program could be technically feasible. "The program could provide incentives for
demonstrations of advanced technologies that provide emission reductions in advance of the
effective dates of the proposed Tier 2 and Tier 3 standards or that provide emission reductions
beyond the proposed standards." (0319)

       Maersk expressed interest in initiatives such as the Voluntary Marine Verification
Programs described in this section, and requested additional information on how these programs
might work.  "We would also like to offer to assist in developing ideas for effective incentive
programs which will further accelerate emissions reductions. In terms of existing vessels, the
U.S. EGA proposal is on track and other EVIO requirements are already in place to achieve
reductions from these vessels. Since the U.S. is now a signatory to MARPOL, U.S. regulations
should align fully with MARPOL requirements." (0261)

(B)    We Encourage EPA to Develop other Incentive Programs
       SCAQMD urges EPA to fund demonstration of early implementation of needed
technologies, and develop incentive or other programs for early development and deployment of
retrofit kits and for routing  of the cleanest vessels to areas with the worst air pollution. (0309)

       The Ozone Transport Commission members encourage the EPA to evaluate additional
methods including faster turnover of the existing fleet so that air quality benefits may accrue in a
more expeditious manner. (0227)

       Earthjustice et al suggested that EPA carefully structure any incentive programs or grants
to encourage broader participation in voluntary programs, and provided examples of European
programs. (03 20)

       SBAPCD offered to work with EPA and other stakeholders to evaluate potential
incentive based approaches to cleaning up the existing fleet.  SBAPCD noted that EPA should
evaluate California's successful Carl Moyer program for reducing mobile source emissions while
creating partnerships with operators, in terms of its applicability to ships. SBAPCD also
suggested the approach of differential  port fees as an incentive for ships to use cleaner engines
and conduct retrofits. (0231)
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(C)    Voluntary Measures should supplement, not obviate regulation
       Earthjustice et al commented that "the voluntary measures that EPA outlines in its
proposed rule, while in some respects commendable, are not sufficient to achieve the levels of air
emission reductions needed to protect public health and the environment. Insufficient attention is
paid to the potential degree of industry participation and actual reductions that may or may not
be realized under such programs. EPA's proposal lacks a detailed description of specific
voluntary programs; fails to establish safeguards, incentives, monitoring, and goals; and
summarily rejects some promising voluntary measures. In light of this, voluntary measures
should be enhanced, but they should be considered supplemental to, and not in lieu of, regulatory
mandates to attain air pollution objectives from existing U.S.-flagged vessels." (0320)

       Our Response:

       While we are not adopting any provisions in this rule to establish voluntary programs or
other incentives to reduce emissions from existing vessels, we will continue to work with
interested stakeholders to further these goals.

9.2.2 Regulatory Program

(A)    Mandatory Retrofits are Needed

       Several commenters encouraged EPA to regulate existing Category 3 engines,
particularly in the form  of a mandatory retrofit program, similar to the current program for
Category 1 and 2 marine engines.

       We encourage EPA to  extend this rule to in-use as well as to new engines. (NRDC 0232)
       SBAPCD offered to work with EPA and other stakeholders to evaluate potential
regulatory approaches to cleaning up the existing fleet (0231).

       The Ozone Transport Commission commented that EPA should examine the availability
of NOx reducing technologies such  as engine timing, engine cooling and advanced computer
controls and similar technologies as retrofits to the existing fleet (0227).

       As EPA itself acknowledges, ocean-going vessels have a very long life. While the
standards EPA has proposed for new engines will ultimately lead to a much cleaner fleet of
ocean-going vessels, it will be decades before the full suite of emission reductions are achieved.
Moreover, securing emissions  reductions from existing engines is often a very cost-effective
means  of lowering pollution on a much faster time frame. Our comments on NOx standards for
existing C3 ships apply  to all existing C3 ships in U.S. waters regardless of nationality.
(ALA/EDF, 0366)

       SCAQMD stated that the MARPOL retrofit program is inadequate and compliance
deadlines for new engines are too late to meet local air quality planning needs. Also, EPA should
treat major maintenance as making the engine new. Further, other technical approaches  such as
water injection and humid air motor used in combination may provide sufficient benefits to
achieve the Tier 3 standard and may be easier to retrofit than SCR. (0309).
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       Earthjustice et al also commented that, "while some may contend that existing vessels are
subject to MARPOL Annex VI standards pursuant to the Act to Prevent Pollution from Ships,
only ships built from  1990 to 1999 with an available certified remanufacture system fall under
that Act's standards. Furthermore, ships older than 1990 are omitted from any regulation." (FOE
0320)

       We also strongly request EPA to set NOx limits for existing engines that mirror the
MARPOL Annex VI  amendments. In this NPRM, EPA is proposing not to establish NOX
standards for existing engines, but instead to  rely on the  Act to Prevent Pollution from Ships and
Annex VI. We believe EPA should also ensure the implementation of these standards under the
Clean Air Act. (ALA/EDF, 0366)

       Earthjustice et al commented that EPA's decision to not acknowledge a remanufacturing
process for Category 3 ship engines or "like new" engines effectively rejects regulation of
existing vessels. Since EPA has found that the engines used in  such ships tend to be integral to
the vessel, and because they are very difficult to remove, owners and operators of commercial
vessels regularly rebuild existing engines to extend their service lives rather than install a
completely new engine. Thus, a remanufactured engine criteria or threshold should be
established for Category 3 engines. (FOE, 0320) "Technologies and approaches, such as humid
air motors, emulsified fuel, selective catalytic reduction  retrofits, and vessel design
improvements, could  be applied now to existing vessels  which would, in combination, produce
NOX reductions of 85 to 90 percent or more."(FOE, 0320)

       In-use requirements to be applied at the time of major engine servicing are necessary to
address the NOx emissions from the legacy fleet of vessels which will continue to call at our
ports for  many years to come. Based upon our forecasting, controlling NOx emissions from
vessels in the future will be one of our most significant challenges. The new [built] standards
will help, however in-use requirements will also be necessary.  [Port of Long Beach, 0232, 0365]
Port of Los Angeles echoed the port of Long Beach's comments regarding extension of this rule
to address in-use vessel operations. (0232)

       The Clean Air Task Force and the Ohio Environmental Council et al both requested that
EPA require marine vessels to meet emission standards when engines are rebuilt. They believe
EPA's proposal can be strengthened by promulgating measures to reduce non-sulfur related (ie
NOx) emissions from existing C3 ships.  They both also  commented that EPA should explore
additional approaches to reduce emissions of NOx and PM from the existing fleet of ships
travelling in  U.S. waters. (0264, 0314)
       SCAQMD suggested that EPA make  use of a policy to  define engines undergoing major
maintenance as "new," similar to U.S. EPA policy for locomotives. (0309)

       Substantial reduction of NOx emissions from existing ships is critical. In addition, a failure to
reduce existing emissions from ships will provide unregulated ships with a competitive advantage
over cleaner ships. (CATF 0264)

       The Ohio Environmental Council et al., and CATF both urge EPA to use all means at its
disposal to reduce NOx emissions from existing  ships, including engine rebuild standards, low
sulfur distillate fuel requirements, operational restrictions and economic incentives. "We
specifically support EPA's proposed Voluntary Marine Verification Program, which we believe
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will complement EPA's NCDC. EPA should establish emission standards for NOx, CO, HC and
PM from remanufactured marine engines. EPA includes substantially modified vessels within its
definition of "new vessel." We urge EPA to do the same with respect to its definition of "new
marine engine." EPA states in the C3 Marine Engine NPR that it is not practical to adopt a
remanufacturing program for C3 engines because such engines are not "remanufactured" all at
one time, but rather engine components may be replaced as needed at different times. We do not
believe that this is a bar to a requirement that a ship's engine meet tightened emission levels
when a certain aggregate portion of its major components have been replaced (e.g., 50%), even if
those replacements do not all occur at the same time; we urge EPA to adopt such a requirement."
(0264,0314)

       The Ohio Environmental Council et al., and CATF both urge EPA to adopt requirements
that simply require available control technology to be used on existing engines. "Specifically, we
urge EPA to require all C3 engines built prior to 2000 to comply with EPA's Tier 1 NOx limits,
and for engines built after 2000 to comply with EPA's Tier 2 standards, provided that there is an
approved remanufacture kit available for that engine meeting the applicable standard." (0264,
0314)

(B)    Retrofits Might Not  Be Beneficial
       The Chamber of Shipping of America supported EPA's decision to not pursue standards
for existing engines at this time.  They agreed with EPA's determination that remanufacturing
programs for Category 3 engines are inappropriate. "Cat 3 engines are not in a practical sense
subject to rebuilding as are smaller diesel engines used in locomotive and other heavy duty
engines. Further, these Cat 3 engines have long life spans due to the rigid daily maintenance
programs which limit major work to relining of cylinders and valve replacements. Further, the
cylinder liner replacements should not be considered a "remanufacture" as is the case with
smaller diesel engines." They also expressed concerns about costs and safety. (0256)

       The Pacific Merchant Shipping Association and the World Shipping Council commented
that development of a remanufacturing requirement for  Category 3 marine  diesel engines is
unlikely to produce significant emission benefits in light of the longevity of these slow-speed, 2-
stroke engines. (0275, 0325)

(C)    U.S. Regulations for Existing Vessels Should Align with MARPOL

       Maersk commented that the U.S. EGA  proposal  is on track and other EVIO requirements
are already in place to achieve  reductions from existing vessels.  Since the U.S. is now a
signatory to MARPOL, Maersk commented that U.S. regulations should align fully with
MARPOL requirements (0261).

(D)    EPA Should Require PM Reporting from  Existing Vessels
       Earthjustice et al commented that EPA possesses the authority to require PM reporting on
existing U.S. ships with remanufactured engines that are functionally equivalent to freshly
manufactured engines. EPA's goals in establishing the PM reporting requirement are furthered
by the inclusion of existing vessels, especially  because existing ships represent the largest ship
demographic (FOE, 0320)
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(E)    Comments on EPA's Authority to Regulate In-use Vessels

       NRDC commented that EPA has the legal authority to regulate in-use vessels, and
pointed to the passage of the enabling legislation for MARPOL Annex VI as evidence of such
authority. (0232)

       SCAQMD noted that the level of maintenance triggering "new" designation is not
specified in the Clean Air  Act and EPA thus has discretion to broadly define this. They also
expressed concern that further  delays could occur if EVIO action is denied or delayed, while EPA
determines whether it has  authority to regulate in-use vessels, and adopts such regulations.
(0309)

       Our Response:

       We agree that it would  be desirable to achieve emission reductions from existing
Category 3 marine engines. However, although Category 3 engines may remain in the fleet for
several decades, they are not maintained in the same way as Category 1 or Category 2 engines.
Because there is no specific maintenance action common to all Category 3 engines that (1)
would return an engine to  as-new condition and (2) could be used to identify engines as being
remanufactured and therefore "new," we conclude it is not possible to extend the marine
remanufacture program to Category 3 engines at this time.
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CHAPTER 10: Application of EGA Requirements in the Great
                  Lakes

       What We Proposed:

       The comments in this section relate to Sections IV and VLB.5 of the preamble, with
respect to applying the CAA marine fuel sulfur program and the EGA requirements within the
Great Lakes. These include comments related to the applicable regulations, the emissions
inventory, and the air quality and human health benefits on the Great Lakes. See Chapter 2 of
this Summary and Analysis document for a discussion of general EGA-related comments, and
Chapter 5 for a discussion of comments related to implementation of Annex VI through APPS in
U.S. internal waters. See Chapter 8 for a discussion of other comments related to environmental
impacts and benefits.

       In Section IV of the preamble, we proposed fuel sulfur limits under section 21 l(c) of the
Clean Air Act that match the limits that apply under Annex VI in EGAs. The adoption of such
standards would: (1) forbid the production and sale of fuel oil above 1,000 ppm sulfur for use in
the waters within the proposed EGA (as well as internal U.S. waters); and (2) allow for the
production and sale of up to 1,000 ppm sulfur fuel for use in C3 marine vessels.

       In Section VLB. 5 of the preamble, we proposed regulatory text under APPS that  clarifies
that the NOx and fuel sulfur requirements set out in MARPOL Annex VI Regulations  13, 14, and
18 generally, and the requirements that apply in designated EGAs specifically, would apply to
internal waters such as the Mississippi River and the Great Lakes that can be accessed by ocean-
going vessels. We noted that vessel emissions in these waters affect U.S.  air quality to an equal,
if not greater extent that emissions taking place in coastal waters.  This provision would apply
only to those internal waters that are shoreward of an EGA designated under Annex VI; internal
waters that are adjacent to northwestern Alaska and western Hawaii would therefore not  be
affected. This provision is necessary because the recent USG proposal for EGA designation that
was submitted to IMO, although intended to protect air quality in U.S. ports and internal areas,
does not explicitly state that it applies to internal waters.

       We received a large number of written comments with respect to these provisions and
their application to vessels that operate on the Great Lakes.  These written comments were
submitted by about 50 entities representing a wide spectrum of entities that would be affected by
the application of the EGA requirements within the Great Lakes. These include companies than
own vessels, and their employees; companies that use the products transported by ship on the
lakes, including steel and utility companies; regional associations; port authorities; fuel
providers; and environmental and governmental groups. Many of these commenters also
provided testimony at the public hearings for this rule.

10.1 General Comments Supporting or Opposing Application of EGA
    requirements within the Great Lakes

       We received comments on our proposal to apply the EGA requirements within the Great
Lakes from the following:  Agri-Fine, OAR-2007-0121-0315;  American Great Lakes Ports
Association,OAR-2007-0121-0262; American Iron and Steel Institute, OAR-2007-0121-0295;
American Maritime Officer Services, OAR-2007-0121-0364; American Maritime Officers of the

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Great Lakes, OAR-2007-0121-0318; ArcelorMittel USA, OAR-2007-0121-0280; Calumet Area
Industrial Commission, OAR-2007-0121-0332; Canadian Shipowners' Association, OAR-2007-
0121-0227, 0245 and 0297; Canadian Steel Producers Association, OAR-2007-0121-0359;
Central Marine Logistics, Capt. Tom Wiater, OAR-2007-0121-0276 and 0304; Employees of
Central Marine Logistics, OAR-2007-0121-0234, 0236, 0237, 0238, 0239, 0240, 0260, 0293,
and 0371; Chamber of Marine Commerce, OAR-2007-0121-0353; Chamber of Shipping of
America, OAR-2007-0121-0256 and -0227; City of Sarnia, ON, CAN, OAR-2007-0121-0306;
City of Superior, WI, OAR-2007-0121-03 52; Clean Air Task Force, OAR-2007-0121-0264,
0227 and 0335; Cleveland Port Authority, OAR-2007-0121-0310; Cliffs Natural Resources Inc.,
ArcelorMittel USA, US Steel Corp., OAR-2007-0121-0376; Council of Great Lakes Industries;
OAR-2007-0121-0296, 0312 and 0363; CSX Transportation, OAR-2007-0121-0300; Detroit
Regional Chamber, OAR-2007-0121-0248 and 0274; The Development Association, OAR-
2007-0121-0279 and 0290; DTE Energy, OAR-2007-0121-0328; Duluth Chamber of
Commerce, OAR-2007-0121-0282; Duluth Propeller Club, OAR-2007-0121-0292, 0313 and
0399; Duluth Seaway Port Authority, OAR-2007-0121-0283; Great Lakes Maritime Task Force,
OAR-2007-0121-0269 and -0329; Great Lakes Metro Chambers Coalition, OAR-2007-0121-
0258; Greater Cleveland Partnership, OAR-2007-0121-0330; Interlake Steamship, OAR-2007-
0121-0268 and 0357; Keystone Shipping Company, OAR-2007-0121-0273, 0311, and 0349;
Kinder Morgan, OAR-2007-0121-0326; KindraLake Towing, OAR-2007-0121-0291; Lafarge
North America, OAR-2007-0121-0383; Lake Carriers' Association, OAR-2007-0121-0233 and
0345; Lower Lakes Towing, OAR-2007-0121-0230; Maritime AFL-CIO, OAR-2007-0121-
0321; Midwest Energy Resources Co., OAR-2007-0121-0342; Minnesota Chamber of
Commerce, OAR-2007-0121-0350; Murphy Oil, OAR-2007-0121-0301; Ohio Environmental
Council, Earth Day Coalition, Marsh Area Regional Council, Ohio League of Conservation
Voters, OAR-2007-0121-0314; Ozinga Materials, OAR-2007-0121-0343; Raffin Construction
Co., OAR-2007-0121-0344; Robertson, Paul, Economic Minister, Government of Canada, OAR-
2007-0121-0252; Shipping Federation of Canada, OAR-2007-0121-0270; Soo Marine Supply
Inc., OAR-2007-0121-0351; Stupak, Bart, Representative, US Congress (MI), OAR-2007-0121-
0338; Transportation Institute, OAR-2007-0121-0302 and 0355; Two Harbors Area Chamber of
Commerce, OAR-2007-0121-0324; Warner Petroleum Corporation, OAR-2007-0121-0251;
Wisconsin Commercial Ports Association, OAR-2007-0121-0368

10.1.1 General Support for Application of EGA to the  Great Lakes

      What Commenters Said:

      The environmental groups (e.g., Clean Air Task Force, 0265; Marsh Area Regional
Council et al, 0314) and the Shipping Federation of Canada (0270) are supportive of the
application of EGA requirements within the Great Lakes. For example, Marsh Area Regional
Council, et al., notes that "emissions from Great Lakes Shipping can travel into the heart of the
Midwest, and must be controlled (Marsh Area Regional Council et al, 0314).  The Shipping
Federation of Canada cites the benefits of harmonized standards, and offers three
recommendations to improve the program: to clarify the standards are performance based and
would allow the use of scrubbers; specify procedures that would apply when ships cannot
purchase compliant fuels; and create an incentive  program to reduce the overall carbon footprint
of the supply chain that would acknowledge the potential of intermodal shifts (Shipping
Federation of Canada, 0270). Similarly, the Canadian Shipowners Association indicated they
support the objective of reducing air emissions, but that such reductions must be achieved in a
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manner than minimizes the risks of modal shift and industrial diversions to mitigate the adverse
unintended consequences of modal shift, fuel supply disruption and lost economic activities
(CSA, 0245).

       Our Response:

       We agree that application of the EGA requirements within the Great Lakes will provide
environmental benefits.

       With regard to the recommendations of the Shipping Federation of Canada, our final rule
clarifies that the use of equivalent technology will be permitted, and we provide procedures that
would apply when ships cannot purchase compliant fuels generally, including in internal waters
(see Chapter 4 of this document).

       We also provide a separate provision that will allow operators on the Great Lakes to
purchase marine residual fuel through 2014 if even if compliant 10,000 ppm S fuel is
unavailable. Under this provision, if marine residual fuel meeting the 10,000 ppm S standard is
not available, it will not be a violation of our standards for owners of vessels operating on the
Great Lakes to purchase and use marine residual fuel with sulfur content above 10,000 ppm S
provided the fuel they purchase is the lowest sulfur marine residual  fuel available at that port.

       With regard to an incentive program to reduce the overall  carbon footprint of the supply
chain, we will consider this suggestion as part of any future consideration of GHG emissions
from vessels.

10.1.2 General Opposition of Application of EGA to the Great Lakes

       What Commenters Said:

       A wide spectrum of commenters voiced opposition to the  application of the EGA to the
Great Lakes.  Many of these commenters cited a lack of environmental and economic analysis to
support application of these requirements.  Some of these commenters were concerned about
EPA's authority to set standards for fuels sold on the Great Lakes. Others said that EPA did not
do appropriate analysis to justify applying the EGA requirements  within the Lakes. Many said
the economic impacts to the Lakes will  be severe, with at least one commenter saying that this
proposed rule would cause the greatest disruption of commerce in the history of the Great Lakes
(Great Lakes Maritime Task Force, 0269).  Many of these commenters asserted that the
provisions will result in transportation modal and industrial source shifts that will result in
increased emissions.  Other commenters said that 30 days was not enough time to review the
proposal for the Lakes, with some urging EPA to exempt the Lakes or to postpone such a
decision until more analysis can be carried out.  Several  commenters noted that the impacts on
Canada and on small businesses were not addressed

       Our Response:

       Our responses to each of these sets of comments  are set out below.
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10.2 EPA does not have legal authority to extend the ECA requirements
    within the Great Lakes

       What Commenters Said:

       The Great Lakes Maritime Task Force commented that EPA made this proposal without
the legal authority to do so, either under the Act to Prevent Pollution from Ships or the Clean Air
Act (GLMTF, 0269).  They argue that APPS does not implement the 2008 Amendment to Annex
VI and that APPS does not authorize EPA to regulate the use of fuel in internal waters, let alone
the Great Lakes.  They also argue that prior to enacting a ban on residual fuel, including such a
ban on the Great Lakes, EPA must make certain findings under CAA §21 l(c)(2)(A). Several
other commenters also questioned whether EPA met its legal obligation in proposing applying
the ECA requirements within the Great Lakes. Similar comments were made by other
stakeholders, with Canadian Shipowners Association noting their concern that EPA is taking
liberties with the  ambiguities of APPS and that there is no real authority to include the internal
waters of the U.S. when implementing ocean-going IMO standards. They recommended that the
rule be postponed until EPA has a clear legal basis (CSA, 0245)

       Our Response:

       See Chapter 5 of this document for a discussion of our authority to extend the ECA
requirements within U.S. internal waters generally.

       See Chapter 4 of this document for a discussion of the requirements to restrict the
production and sale of residual fuel in the United States generally.

10.3  EPA has not justified extending the ECA requirements within the Great
    Lakes

       We performed an extensive economic analysis to examine the inventory contribution, air
quality impacts, benefits, and costs for all vessels covered by this rule, including Great Lakes
vessels. In response to the comments in this section we also prepared a Note to the Docket that
organizes the Great Lakes-specific analyses in a single place.50  That Note explains how the
Great Lakes were taken into account in our inventory, air quality, benefit, and cost analyses. It
also provides a brief analysis of the potential for modal and source shifts as a result of this rule.
It also provides additional information regarding impacts on the Great Lakes marine
transportation market.
50 Memorandum to Docket EPA-HQ-OAR-2007-0121 from Michael J. Samulski. Control of Emissions from New
Marine Compression-Ignition Engines at or above 30 Liters per Cylinder - Information in Support of Applying
Emission Control Area (ECA) Requirements to the Great Lakes Region.

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10.3.1 Extending the EGA requirements within the Great Lakes is not supported by
      EPA's analysis

       What Commenters Said:

       Many of the commenters who oppose application of the EGA requirements within the
Great Lakes insisted that EPA is doing so without adequate analysis, and that the proposed rule
would expand, without explanation or justification, the scope of the regulation to vessels in the
Great Lakes (Agri-Fine, 0315; Duluth Seaway, 0283; KindraLake Towing, 0291; Minnesota
Chamber of Commerce, 0350; Duluth Area Chamber of Commerce, 0282; Calumet Area
Industrial Commission,  0332 Superior WI, 0352). Others said that EPA appears to have casually
and carelessly included  "internal waters" (i.e.: Great Lakes) within the scope of this regulatory
action, with little understanding of the unique impacts of the proposal on the region's economy
and environment.  (American Great Lakes Ports Association, 0262; Wisconsin Commercial Ports
Association, 0368). Warner Petroleum Corporation stated that the inclusion of the Great Lakes
as in EGA in the proposed rule is an afterthought and that potential environmental, economic,
and hardship assessments have not been conducted for these navigation waterways. Great Lakes
Maritime Task Force said that EPA does not provide the factual basis for applying the EGA
requirements within the Great Lakes and that the analysis that was performed focuses on the
coasts. Therefore, the public cannot comment on the need for these controls on the Lakes
(GLMTF, 0269). The Canadian Shipowners Association also argued that EPA did not conduct
proper analysis of air emissions or adequately identify negative environmental and commercial
effects of the proposal (CSA, 0245).

       Other commenters said EPA never gave any clear indication it was considering EGA
designation for the Great Lakes before the proposed rule.  ArcelorMittal noted that there was
only limited discussion of this provision in the ANPRM, and that the EGA submission was
ambiguous about the Great Lakes. However, the proposed rule provides almost no support for
EPA's current position to designate the Great Lakes as an EGA (ArcelorMittal, 0280).
Transportation Institute stated that they were "blindsided by the sudden turn of the EPA's
regulatory fevor to determine ... 'coasts' and 'coastal waters' somehow now mystically
encompasses the American vessels plying the freshwaters of the Great Lakes" and noted that
while EPA proudly denotes its efforts to provide incentives and publicize emissions issues
among maritime interests along the East and West Coasts, no similar demonstrable effort is
noted or apparent for the Great Lakes region (Transportation Institute, 0302). GLMTF also notes
that the coastal EGA has been in the works for many years through a transparent, meticulous and
science-based process, but it appears that the Great Lakes were just tacked onto the EGA with a
simple justification that vessel emissions in internal waters affect U.S. air quality to an equal if
not greater extent" with no clarification of that statement, and with no consideration of key
differences between OGV and vessels that operate on the Great Lakes (GLMTF, 0269). Marine
Trade Department commented that EPA's perfunctory approach to the Great Lakes EGA is
particularly shocking in that this region would negatively impact the Great Lakes shipping
business and shoreside industries more than any other region in the country. (Maritime Trades
Department, 0321). Canadian Shipowners Association noted that EPA did not include the
Pacific U.S. territories, smaller Hawaiian Islands the U.S. territories of Puerto Rico, the U.S.
Virgin Islands, or Western Alaska and the Aleutian Islands in the EGA submitted to EVIO
because further information is required, and suggested that the Great Lakes not be included into
an EGA for the same reason (Canadian Shipowners Association, 0245).


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       Warner Petroleum Corporation also commented that the proposal does not present data to
demonstrate the lakes meet the EGA criteria and so inclusion of the great lakes in the EGA is not
justified by the standards and criteria established by EPA (Warner Petroleum Corporation, 0251).

       See also comments from Calumet Area Industrial Commission (0332); (Canadian
Shipowners' Association, 0245); Interlake Steamship (0268); CSX Transportation, 0300);
Greater Cleveland Partnership (0330); Congressman Stupak (0338); Chamber of Marine
Commerce (0353); ArcelorMittel USA (0280); Canadian Shipowners' Association (0245);
Keystone Shipping (0349);

       Our Response:

       The main emphasis of these comments is that our analyses do not take into account the
peculiarities of the Great Lakes region, with regard to operating profiles, average sulfur content
of fuel sold on the Lakes, attainment status of coastal areas, and the existence of transportation
alternatives for Great Lakes marine transportation service consumers.

       The Great Lakes were included in all aspects of the analysis supporting this rule. The
national inventory estimates were broken out by regions in our NPRM, including the Great
Lakes, Gulf Coast, and other areas (see Chapter 3  of the  Draft RIA). However, the air quality
impacts and benefits modeling which relies on those regional inputs are reported out for the
nation as a whole.  The justifications for regions such as the Gulf of Mexico and the  Great Lakes
were presented with equal weight in the NPRM. Nevertheless, in response to this comment, we
prepared a Note to the Docket that organizes the Great Lakes-specific analyses in a single place.
This Note explains how the Great Lakes were taken into account in our inventory, air quality,
benefit, and cost analyses. It also provides a brief analysis of the  potential for modal and source
shifts as a result of this rule.51

       In addition, in response to these comments and as suggested by Congress, we will
perform an additional analysis of the economic impacts of the application of the EGA
requirements on ships operating on the Great Lakes.  This study, which we expect to complete by
summer 2010, will be developed cooperatively with stakeholders  and will  examine the economic
impacts of the rule on Great Lakes shipping including whether these standards may lead to a
modal shift away from marine transportation and toward transportation by rail or truck. We will
take into account data and studies submitted by  participants as well as other information.

       Based on our analysis in the NPRM and subsequently in our docket note, we are
finalizing this rule as proposed, including the Great Lakes in the internal waterways  to be
covered by the EGA requirements through our authority  granted in the Act to Prevent Pollution
from Ships (see Sections 5.4 and 5.5 of this document for more information about APPS).
51 Memorandum to Docket EPA-HQ-OAR-2007-0121 from Michael J. Samulski. Control of Emissions from New
Marine Compression-Ignition Engines at or above 30 Liters per Cylinder - Information in Support of Applying
Emission Control Area (EGA) Requirements to the Great Lakes Region.

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10.3.2 Specific comments on inventory inputs and assumptions for the Great Lakes

       What Commenters Said:

       Several commenters are critical of the assumptions we used in our air emission inventory
modeling for the Great Lakes, alleging that the analysis does not accurately and fully reflect the
unique characteristics and contribution of the vessels that ply the Great Lakes. (Keystone
Shipping Co., 0349)

       The Lake Carriers' Association (LCA) indicated that their analysis of EPA's 1999
National Emission Inventory found it to vastly  overstate vessel emissions  in the Port of
Cleveland, Ohio.  Those flawed Cleveland findings were then extrapolated to other Great Lakes
port states, cities, and counties based on port tonnages. LCA fears the RIA analysis may be a
repeat of this overestimate for the Great Lakes. (Lake Carriers' Association, 0345, p.  12-13)
Although LCA has previously provided the EPA with data on laker vessel efficiency  and
demonstrated that the EPA data on emissions at Great Lakes ports was in  error by a factor of
more than 300 percent, the EPA neither recognized the laker vessel efficiencies nor corrected
their erroneous data. (Canadian Shipowners Association, 0245, p. 4 and p. 37) In comments
provided by Keystone Shipping Co., they acknowledge that it appears the more recent analysis of
Great Lakes port air emissions was referenced and used in some of the studies referenced in the
RIA; however, it is not certain nor could it be determined how that data was incorporated into the
final Regional analysis conclusions. (Keystone Shipping Co., 0349, Appendix 1, p. 4)

       Other comments concerning the inputs to our inventory modeling include the  following:

          •  Great Lakes bulkers stay in port in populated areas for much shorter periods of
             time that ocean going ships do.  Nearly all Great Lakes Bulk Carriers are
             equipped with self-unloading equipment that allows them to unload in a matter of
             hours, versus the days that ocean going vessels often spend in port. (Interlake
             Steamship, 0268, p. 3)

          •  Two or three ports were used to extrapolate emission contributions for all ports on
             the Great Lakes and for in-transit times. Although certainly more appropriate
             than extrapolating from the port of Long Beach, we question the validity of using
             those ports to determine emissions for the entire Great Lakes Region.  One cannot
             calculate emissions from laker vessels through mathematical formula from one or
             two ports because of the vast differences in port facilities and traffic activity.
             (Great Lakes Maritime Task Force, 0269, p. 24 and p. 37)

          •  The analysis for "in transit" time as applied to the Great Lakes fleet is flawed and
             incomplete. (Great Lakes Maritime Task Force, 0269, p. 24) While the global
             model used may be suitable for ports that are geographically separated and may
             have accuracy for coastal ports with foreign voyages, there are over 70 ports in
             the relatively small geographic area of the Great Lakes and it is not clear how the
             modeling accounted for such a large number of ports in the confined geographical
             location. (Keystone Shipping Co., 0349, Appendix 1, p. 3)
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          •  Even EPA's use of a predictive emissions model, such as the STEEM analysis
             presented in the Regulatory Impact Analysis, does not clearly take steamers into
             account. (Great Lakes Maritime Task Force, 0269, p. 28)

          •  Vessels like Interlake's, that operate exclusively within the Great Lakes, typically
             last decades longer than those that operate on the oceans. (Interlake Steamship,
             0268, p. 4)

          •  The environmental benefits of the EGA are based on very large growth estimates
             for ocean shipping, with high horse-powered engines, and these estimates are not
             at all  representative of the Great Lakes region. (Canadian Shipowners
             Association, 0245, p. 4)

          •  The baseline inventory is established in 2002 and there has been substantial
             refinement in the Great Lakes vessel port and vessel information since that time
             particularly on the Great Lakes. (Keystone Shipping Co., 0349, Appendix 1, p 3
             and p. 4)

       We also received comments on the fuel sulfur content level used in our inventory
modeling. While an ocean-going vessel can currently purchase and burn up to 4.5 percent
sulphur in fuel, the reality for the Canadian fleet in the Great Lakes is a fleet average sulphur
content of only 1.7 percent. (Canadian Shipowners Association, 0245, p. 15) Based on "business
confidential" fuel analysis previously provided to EPA, a Great Lakes Maritime Task Force
member calculated that the weighted average sulfur position of more than 130 million gallons of
fuel (Heavy  and Intermediate Fuel Oil) burned over the post 4.5 years in the Great Lakes is 1.5
percent. (Great Lakes Maritime Task Force, 0269, p. 5) The average sulfur content for all
residual fuel consumed by the eight Key Lakes vessels from 2006 through August 2009 was 1.62
percent. By assuming a higher sulfur content of 2.7 percent, EPA inflates the current
environmental impact of the Great Lakes ships and overstates the benefits of reducing the sulfur
content in fuels. (Keystone Shipping Co., 0349, p. 2)  The sulphur content of residual fuel sold
for use on the Great  Lakes has a dramatically lower sulphur content (approximately 1.7 percent)
than similar  fuels on a global basis (approximately 3.5 percent - 4.5 percent). (Lower Lakes
Towing LTD, 0230,  p. 1) The average sulfur content for all residual fuel consumed by
Interlake's vessels from 2006 through August 2009 was 1.8969 percent. However, because
Interlake's vessels consume MDO during maneuvering and while in port, the weighted average
sulfur content for all fuels used by Interlake's vessels impacted by the proposed rule  is 1.6818
percent. (Interlake Steamship, 0268, p. 3)

       Our Response:

       Since the development of the 1999 National Emission Inventory, the Category 3 vessel
inventory for the U.S., including the Great Lakes, has been updated. We agree that earlier
analyses overestimated the emissions of Category  3 vessels in the Great Lakes, by including
some Category 2 vessels. For this rule, the Category 2 vessels were carefully removed from the
call data for  the Great Lakes ports.

       We agree that marine transportation on the Great Lakes has unique characteristics that
need to be taken into consideration. While the overall methodology for inventory development
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outlined in the RIA applies to all areas of the U.S., this methodology allows for and uses a
number of inputs specific to the Great Lakes.  The LCA port data for Cleveland and Duluth-
Superior were used to develop the port time-in-mode data for the Category 3 vessels operating
on the Great Lakes.  In addition, U.S. Army Corp of Engineers (USAGE) call data and vessel
characteristics specific to each Great Lakes port was used; call data for Cleveland and Duluth-
Superior were not simply applied to the other Great Lakes ports. Although it would have been
preferable to use port-specific information for every port, this approach uses all Great Lakes port
data available at the time of the analysis.

       The Great Lakes do include a large number of ports in a rather small geographical
location.  Ports were each treated separately for the purposes of inventory estimation.  There are
four modes of port operation included in the port inventories: hotelling, maneuvering, reduced
speed zone (RSZ), and cruise. The hotelling and maneuvering emissions are assigned to a single
latitude/longitude coordinate point using the port center as defined by the Army Corp  of
Engineers in the Principal Ports of the United States dataset. The RSZ and cruise routes were
modeled as lines.  The RSZ distance for each  Great Lake port was fixed at three nautical miles.
The cruise mode emissions assume a 7 nautical mile distance beyond the RSZ.  Because some
ports are confined to a rather small location, the RSZ and cruise mode links overlap. In these
cases, the  emissions for those ports, once calculated, were allocated to the same links, such that
the total emissions allocated to the links are the sum of emissions from all of the ports sharing
that link.

       The interport emissions were estimated using the Waterway Network Ship Traffic,
Energy, and Environmental Model (STEEM).  STEEM uses a spatially-defined waterway
network based on empirical shipping information.  Emissions along the waterway network are
calculated using entrances and clearances data in conjunction with vessel characteristics such as
vessel speed and engine power. In the Great Lakes, the waterway network,  call data, and vessel
characteristic data used to develop interport emissions are specific to the Great Lakes. Although
the STEEM inventory is not segregated by ship type, steamers are included in the STEEM
inventory.

       Other inputs specific to Great Lakes include age distributions and growth. Age
distributions by engine type were developed specifically for the Great Lakes. Age distributions
were determined using USAGE entrances and clearances data for 2005 linked with Lloyds data
to determine ship engine characteristics and build date.  The age distributions for Great Lakes
vessels reflect more aged vessels than those for ocean-going vessels, as some commenters have
suggested. Similarly, an average annualized growth rate was developed specifically for the
Great Lakes.  The growth rate for the Great Lakes (1.7 percent) is the lowest regional growth rate
used in the analysis; the range of regional growth rates used is 1.7 to 5.0 percent.

       Inventories are one  of the first products required at the start of the rulemaking process.
The inventories for this rule were developed several years ago.  Calendar year 2002 was used as
the base year, since it was the latest year for which information was available at the time the
analysis was done.  These emission inventories are then used as the basis for air quality
modeling, which feeds into the benefit and deposition modeling. Unfortunately, it would be a
considerable effort to update both the port and interport (STEEM) portions of the inventory to
incorporate more recent data and carry these updates through all of the subsequent modeling and
analysis.
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       Our analysis uses a baseline residual fuel sulfur level of 2.7 percent in the Great Lakes,
which is based on the global average.  To the extent that Great Lakes vessels would use lower
sulfur fuel than currently modeled, even without an EGA, the realized benefits (and to some
extent the incremental costs) would be lower.  However, due to the high benefit to cost ratio of
this program, we can still conclude that the benefits would still greatly outweigh the costs.

10.3.3 Specific comments on the inventory contributions of Great Lakes vessels

       What Commenters  Said:

       Several commenters asserted that the contribution of Great Lakes shipping to national
inventories is not significant. These include comments that EPA's own analysis demonstrates
that vessels operated on the Great Lakes are not a major contributor to the U.S. C3 vessel
emissions inventory. (Great Lakes Maritime Task Force, 0269, p. 32; Keystone Shipping Co.,
0349, p. 3)  The 1998 Emission Inventory shows that the Great Lakes shipping accounts for 3
percent of the NOx and PM emissions from commercial marine vessels. (Greater Cleveland
Partnership, 0330, p. 3) A comparison of the contribution of Great Lakes steamer fleet emissions
to the total national U.S. C3 vessel emissions confirms that the Great Lakes steamers'
contribution is extremely small, far  less than one percent. (Great  Lakes Maritime Task Force,
0269, p. 24 and p. 27)  The actual Great Lakes steam vessel contribution relative to the EPA
provided numbers for the Great Lakes in the RIA is quite small and nearly insignificant
particularly for NOX, HC, and CO. (Keystone Shipping Co., 0349, Appendix 1, p. 6) The EPA
models used to support the proposal for a North American Emission Control Area show that the
marine industry's contribution to total sulphur deposition is generally less than 2 percent and
rarely more than 5 percent  of the total throughout the Great Lakes region.  This is in marked
contrast to the IMO  SECA targeted  West coast,  for example, where in many areas marine
sulphur emissions account  for more than 60 percent of the total. (Canadian Shipowners
Association, written hearing testimony, 0227,  p. 3)

       Finally, one commenter noted that the  contribution of steamers to this inventory is also
quite small.  When comparing EPA recommended emission factors for various marine vessels,
steamers' emissions are a small fraction of diesels' emissions for HC, NOx, and CO; [i]t's really
only in Particulate Matter that diesels are superior. (Lake Carriers' Association, 0345, p. 14)

       Our Response:

       The analysis for this rule agrees with earlier estimates that the Great Lakes contribution
to national NOx and PM emissions from Category 3 vessels is 2-3 percent. However, this does
not reduce the need for emission control for vessels that operate on the Great Lakes. Their
relative contribution to localized inventories, such as the air inventories for Duluth, Chicago,
Detroit, Cleveland, and other areas along the lakes, can be substantial.

       The impacts  of these inventories on the Lakes region can be seen more clearly on the air
quality maps developed for this rule, shown in Chapter 2 of the RIA. Many of the port and
coastal areas of the Lakes are in nonattainment for ozone, PM, or both, in part due to emissions
from vessels that are the subject of this action. Reductions in the sulfur content of fuel used in
lake vessels and in their engine emissions will assist these areas in their attainment plans.
Emissions from lake vessels are also transported inland, affecting air quality in areas far from the
lakes.

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       Similarly, we agree that the Great Lakes steamers' contribution to the national total
would be less than one percent. Our marine diesel engine inventory takes into account the
different emission rates for steamships operating on the Great Lakes (further evidence we
considered the Great Lakes with some specificity).  The emission factors for steamships are
estimated to be lower than slow-speed or medium-speed diesel engines for HC, CO, and NOx
and comparable for PM but much higher for CO2.  Generally, the low relative emission
contribution from a subcategory of engines does not lead us to exempt engines and their fuels
from regulation.  This is because all broad categories of mobile sources can be broken into small
enough categories as to make only a small contribution. However, as discussed below in section
10.4.3, we are excluding Great Lakes steamships from the EGA fuel sulfur requirements.  For the
purpose of this exclusion, Great Lakes steamships means vessels, operating exclusively on the
Great Lakes and Saint Lawrence Seaway, whose primary propulsion is a steam turbine or steam
reciprocating  engine. In addition, these steamships must have been in service on the Great Lakes
prior to October 30,  2009.  This does not include diesel propulsion Category 3 vessels with
auxiliary boilers.

10.3.4 Specific comments on air quality modeling inputs and assumptions for the
      Great Lakes

      What Commenters Said:

       The Canadian Shipowners Association commented that the analysis of the benefits of the
coastal EGA is not directly transferable to inland waters such as the Great Lakes.  This is because
the amount of marine sulfur emissions from ships is smaller and because the prevailing winds are
different. In addition, they question the air quality modeling which they say "suggests that
marine pollution is carried uniformly inland from the east coasts".  They reference a 2009 study
of global marine emissions as evidence that emissions on the east coast are carried out to sea by
prevailing winds. (Canadian Shipowners Association, 0245, page 15)

       The Chamber of Shipping of America commented that the basis for much of EPA's
modeling data is questionable, including assumptions that weather and wind conditions are
similar at all U.S. coastlines.

       Our Response:

       The commenters are incorrect in assuming EPA's analysis only considered coastal
emissions.  The air quality modeling analysis performed for the coordinated strategy takes into
account the location and amount of marine sulfur emissions in the Great Lakes region as well as
elsewhere.  In addition the meteorological inputs to the air quality model closely match observed
meteorology for 2002 including within the Great Lakes region.

       Conventional wisdom suggests that prevailing winds, over the U.S. and Canada, travel
from west to east. On average, this is true, especially for the north Atlantic and the Pacific
coasts. In the Gulf of Mexico, prevailing winds typically come from the southeast.  However,
these winds fluctuate in speed  and direction, and are less consistent on the north Atlantic coast
than other coasts.  As such, air pollution off the east coast, even 200 nm from shore, affects the
air we breathe.
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       We agree that emissions on the northeast coast can be carried out to sea by prevailing
winds. As seen in Figure 2-38 of the RIA, the largest predicted improvements in sulfur
deposition from the proposed reduction in emissions along the  eastern coasts of the U.S. and
Canada occur over the Atlantic Ocean. It is reasonable to assume that if the EPA modeling
domain extended further east, the simulation would have shown large improvements far out to
sea.  However, prevailing wind patterns can vary by season and by location; and daily
meteorological conditions can certainly vary from climatological averages. While the frequency
of maritime influences can vary by location, it is not uncommon for locations all across the
United States to be affected by emissions that originate offshore. An EPA analysis of air parcel
back trajectories over the 12-year period from 1995-2006 concluded that highly-populated
coastal cities in the northeastern U.S. were impacted by marine airmasses between 10-20 percent
of the time. The intent of the EPA analyses was to demonstrate this impact of marine pollution
on inland populations and ecosystems.

       One advantage of the annual (2002) MM5 meteorological modeling that was used to
drive the air quality modeling simulations performed for the EPA analysis, is that it  employed a
fine horizontal grid resolution of 12 km. Unlike the coarse-resolution global modeling
mentioned in the comment (where the grid resolution was 1.8 x 1.8 degrees latitude/longitude),
the EPA MM5 modeling was able to capture important smaller scale phenomena like the sea
breeze. These local circulations are well-known to result in the onshore transport of any air
pollution trapped near the surface over large water bodies.  In  addition, EPA's evaluation of the
meteorological modeling inputs closely matched observations for 2002 and therefore were an
appropriate dataset for assessing the frequency and impact magnitude of shipping emissions on
inland locations.

       Note that there were additional comments on this topic  which were not specific to the
Great Lakes.  See Section 8.2.4 of this document for additional information on transport of
emissions  and prevailing winds.

10.3.5 Specific comments on benefits for the Great Lakes

       What Commenters Said:

       The Canadian Shipowners Association commented that The rule poses a higher economic
burden on Great Lakes shipping while achieving only 1/5 of the benefit - this is not an equitable
outcome of the proposed rule.

       Our Response:

       We disagree with the commenter's assertion that the coordinated strategy will place a
higher economic burden on shipping activity within the Great Lakes region while achieving only
1/5 of the benefit. In a memo published to the docket ("Regulatory Impacts of Proposed
Category 3 Vessel Emission Standards on Great Lakes Shipping," Docket EPA-HQ-OAR-2007-
0121), we  found that emissions from shipping on the Great Lakes affects air quality in the mid-
western U.S. and that the benefits associated with the coordinated strategy that will accrue to the
six U.S. states that border the Great Lakes will greatly outweigh the costs

       The report estimated that for the Great Lakes fleet, in 2030, the costs of control will be
$49 million compared to national costs of $3.1 billion. Approximately 1.6 percent of the total

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costs of the program are therefore incurred by vessels operating on the Great Lakes.  In terms of
cost-effectiveness (a ratio of engineering costs incurred per ton of emissions reduced), the NOx,
SOx and PM emissions reductions from the proposal compare favorably to other land-based
control programs that have been implemented. For the national program, we estimated a cost
effectiveness of $510/ton NOX, $930/ton SOX, and $7,950/ton PM. The cost effectiveness of PM
and SOx emission control is not significantly different for the Great Lakes vessels versus ocean-
going vessels.  The reason for this is that costs associated with PM and  SOx emission reductions
are primarily driven by fuel costs, which are a function of how much the ship operates in the
EGA. To determine the cost effectiveness of NOx emission reductions  in an EGA, the analysis
considered both hardware costs (SCR unit) and operational costs (urea consumption) to
determine the cost effectiveness of NOx emission reductions in an EGA. As the amount of
operation in the EGA increases, urea consumption increases proportionately with emission
reductions. However, hardware costs remain constant. Therefore, increasing the amount of ship
operation included in an EGA increases the estimated emission reductions per dollar spent on
hardware.  This results in a directionally improved NOx cost effectiveness for Great Lake
vessels.

       The report also estimated the health-related benefits associated with the coordinated
strategy in the 6 western states that border the Great Lakes (IL, IN, MI,  MN, OH, and WI).  In
the analysis, we disaggregated the PM2.5-related benefits  that accrue to these states from the
nationally aggregated PM2.5 benefits totals presented in the rulemaking support documentation
that accompanied the NPRM.  The monetized PM-related  benefits in the 6 states accounts for
between 1.4 and 1.7 percent of the nationally-aggregated monetized benefits ( and saving
between 180 and 450 lives in 2030). Note that improvements in air quality that occur in Canada
as a result of ships operating in the U.S. portion of the EGA are not accounted for in these
benefits.

       For both the national program as a whole, and the Great Lakes specifically, the monetized
health benefits of the Category 3 marine vessel program greatly outweigh the associated costs.
Nationally, in 2030, the estimated monetized PM2.5 benefit of the proposed standards would be
between $110 and $270 billion.  The annual costs would be significantly less, at approximately
$3.1 billion. For the six western states  bordering the Great Lakes, the estimated monetized
PM2.5 benefits in 2030 would be between $1.6 and $3.8 billion.  In comparison, the total
projected costs for Great Lakes vessels, in 2030 would be  $0.05 billion.

       The benefits considered here are the focused on the monetized human health benefits
associated with reductions in PM2.5 emissions. Additional benefits that would be expected were
not considered in these calculations. These additional benefits would include human health
benefits associated with improvements  in ozone concentrations, and benefits to ecological
systems associated with improvement in air quality and acid deposition. At the same time, all
costs of emission control are considered.
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10.4 The economic impacts of applying the ECA requirements on the Lakes
    will be severe

       The majority of the comments we received with respect to our proposal to apply the ECA
requirements within the Great Lakes expressed concern about the continued viability of marine
transportation in that region.  These commenters note that marine transportation is an efficient
mode of transportation in the Great Lakes.  Many commenters describe the adverse impacts that
are expected if the provisions for the Great Lakes are finalized. These adverse impacts are
expected to occur because the provisions will force the retirement of steamer vessels and will
raises operating costs for vessels that use intermediate fuel, making them less competitive
compared to rail and truck alternatives. The result of these adverse impacts is expected to be
modal shifts away from marine transportation as well as source shifts as manufacturers relocate
in response to increased transportation costs.  This section summarizes comments from:
American Great Lakes Port Association, 0262; Wisconsin Commercial Ports Association, 0368;
American Maritime Officers Service, 0364; American Maritime Officers, 0318; ArcelorMittel
USA, 0280; Canadian Shipowners' Association, 0245; Mr. Grzesiek, 0234; Lower Lakes
Towing Ltd., 0230; Keystone Shipping Co (0349); Warner Petroleum Transportation, 0251;
Government of Canada, 0252; Chamber of Shipping of America, 0256;  (Great Lakes Metro
Chambers Coalition, 0258; American Great Lakes Ports Association, 0262; Interlake Steamship,
0268; Shipping Federation  of Canada, 0270; Capt. Wiater, 0276, 0304; Duluth Seaway, 0283;
Duluth-Superior Propeller Club; AISI, 0295; CGLI, 0296; Murphy, 0301; Transportation
Institute, 0302; Port of Cleveland, 0310; Marine Trades Department, 0321; Congressman Stupak,
0338; Midwest Energy Resources, 0342; Soo Marine Supply, 0351; CSPA, 0359; USS, 0376;
Larfarge, 0383; Keystone Shipping, 0349, Lake Carriers' Association, 3045; Great Lakes
Maritime Task Force; 0269; Canadian Shipowners Association (0245).

       After summarizing this set of comments by issue area, we respond to the ensemble of
these concerns in Section 10.4.4.  See also our note to the docket explains how the Great Lakes
were taken into account in our inventory, air quality, benefit, and cost analyses and provides an
analysis of the potential for modal and source shifts as a result of this rule. 2

10.4.1  The Great Lakes are an efficient transportation mode

       What Commenters Said:

       One theme that was repeated throughout many of the comments we receive with respect
to the Great Lakes is their importance as a transportation corridor for a variety of manufacturing
activities including steel, cement,  electricity, and agricultural goods particularly grain.
Manufacturers receive inputs (e.g., iron ore, limestone, coal) from the upper Lake region, and
transport finished goods (steel, cement, grain) throughout the region.  Many commenters note
that the Great Lakes fleet is small, with 55 U.S. vessels (13 steamships, 13 vessels that burn
intermediate fuel, and 29 other vessels). These vessels moved about 101 million tons of dry-bulk
cargo in 2008. The 26 most effected vessels represent about 50 percent of the capacity needed to
  Memorandum to Docket EPA-HQ-OAR-2007-0121 from Michael J. Samulski. Control of Emissions from New
Marine Compression-Ignition Engines at or above 30 Liters per Cylinder - Information in Support of Applying
Emission Control Area (ECA) Requirements to the Great Lakes Region.

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meet the demand for moving iron ore, coal, limestone, and cement. Several commenters noted
that the Great Lakes and St. Lawrence Seaway are over 2,000 miles long, although the largest
vessels are captive on the lakes since they are too large for the locks on the St. Lawrence and
Welland Canal are limited to 740 ft.  This is important because vessels would have to comply
with the EGA fuel requirements virtually all of the time and would not be able to save costs by
fuel switching, an option available to ocean-going vessels that operate on the coasts and spend
most of their time outside the EGA.

       Citing various studies, including a recent study by the U.S. Army Corps of Engineers,
commenters noted that marine transportation is the most efficient transportation in the region.
Because there is less friction as a vessel moves through water, less power is needed.  As a result,
a laker can move one ton of goods 607 miles on one gallon of fuel. The same ton of goods could
be moved only 202 miles on a gallon of fuel by rail, ad only 59 miles by truck.  Another
comparison notes that it would take 700 rail cars (with 14 to 21 engines) to transport the same
quantity of bulk good that can be moved in one 1,000 foot laker, or 2,800 trucks.  This would
result in the additional consumption of tens of millions more gallons of fuel - up  to 85 million
more in the case of trucks.  In addition to fuel costs, there are the costs of manufacturing and
maintaining these extra rail cars, tires, and transportation congestion issues. For all of these
reasons, marine transportation is very economical, with commenters noting the USAGE study
conclusion that the next least costly mode of transportation would result in an addition $3.6
billion of transportation costs per year for Great Lakes industries.  The USAGE study estimates
there are 44,000 U.S. jobs directly dependent on Great Lakes shipping, with tens  of thousands of
additional jobs in shipping-dependent Industries.  Finally, the Transportation Institute, the
Government of Canada and Canadian Shipowners' Association, among others, noted that this
rule will undercut the current U.S./Canada joint effort to promote short sea shipping to reduce
greenhouse gas emissions, improve the environment, relieve land-side infrastructure congestion,
limiting harmful  surface runoff, and avoid highway fatalities.

10.4.2 The economic impacts of applying the EGA requirements  within the Great
      Lakes will be substantial

       What Commenters Said:

       Several commenters expressed concern that the application of the EGA requirements
within the Great Lakes would be detrimental to the local economy. As expressed by one
commenter, the rule will cause irreparable damage to Great Lakes Shipping industry, industries
which rely on it, the economic health of the Great Lakes region and the environment due to the
dramatic increase in cost and resultant modal shift to less efficient modes of transportation
(Lower Lakes Towing Ltd., 0230). This section summarizes comments describing these adverse
impacts; comments discussing the causes of these impacts  are summarized in later sections.

       Several commenters noted that the primary industries serviced by Lakers were built
around the Great Lakes to take advantage of the proximity to natural resources and the
economics of scale provided by waterborne transportation - a dramatic increase in operating
costs passed onto these companies would limit their ability to compete in the global economy
(Lower Lakes Towing Ltd., 0230). Including the Great Lakes in the EGA and enacting an
almost immediate ban on the use of residual and heavy blended fuels will dramatically impact
every port and port community along this bi-national waterway (Duluth-Superior Propeller
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Club).  SOO Marine Supply stated they are starting to see a glimmer of hope in 2010 that
business may return with some normality... half of their customer base will be eliminated
overnight (Soo Marine Supply, 0351). Banning the use of residual fuel will significantly
challenge our ability to get economical raw materials required in the manufacturing process. The
proposed regulations will also jeopardize our ability to move our products to their end markets.
(Lafarge, 0383)

       One commenter stated that EPA has no grounds to extend the EGA approach to the Great
Lakes, and doing so would effectively bring the majority of the fleet currently in operation in the
Great Lakes to a halt. The implications of such a move would be disastrous to the national
economy, as well as to our members in the Detroit region (Detroit Regional Chamber, 0248)

       Warner Petroleum commented that imposing more restrictive regulations at a faster pace
than currently called for in international agreements poses a serious threat to jobs, the economy
and the very survival of the Great Lakes shipping industry.  ... The increased fuel costs alone
will create a major disincentive for steel companies, limestone, cement and other major freight
customers to continue operating within the Great Lakes region ... The region will also become
far less attractive for the newly emerging alternative energy industry ... ability to move large
turbine components cost-effectively will negatively impact our competitiveness with other
regions and countries... Warner Petroleum has invested more than $7.9 million in the past 3
years; many of the jobs we've created would be lost (Warner Petroleum Corporation, 0251)

       Great Lakes Metro  Chambers Coalition stated that the application of an EGA to the Great
Lakes appears to have been a last-minute idea, and we fear that it will be counter-productive to
interconnected goals of clean air, energy efficiency, and economic sustainability...  The rule
would  have a devastating job impact on the Great Lakes shipping industry, raw material
shippers, fuel suppliers, and end users, including the steel, automobile, power, and
manufacturing industries. The new rule comes at a time when the states in the highly-integrated
Great Lakes/Midwest manufacturing belt have been among the hardest hit by the recession.
(Great Lakes Metro Chambers Coalition, 2058)

       ArcelorMittal noted that their 25 million tons of annual North American steelmaking
capacity ... are located on the Great Lakes [because it] requires approximately 40 million  tons of
iron or and stone ... 100 percent of which is delivered by Lake freighters. Efficient lake bulk
transportation is why these plants are cited where they are, and also explains why many facilities
without lake access have been shut down. ...  Although the Great Lakes received sparse attention
in the Proposed Rule and underlying record, the rule nonetheless threatens severe harm to the
future of Great Lakes Shipping, would impair the viability  of the industries which depend on that
shipping capacity and risks causing significant harm to the environment. ... Nor does the
Proposed Rule contain any distinct analysis of the economic impact that imposing an EGA would
have on the Great Lakes shipping and the industry it supports. (ArcelorMittal, 0280) Kindra
Lake Towing was also concerned that the provisions would put the American steel industry at
risk (Kindra Lake Towing, 0291).  AISI noted that well over half of the U.S. production of steel
takes place at facilities located in the Great Lakes states, and as such those facilities rely heavily
on Great Lakes shipping of raw materials that feed those operations. ... Much of the inputs are
moved by vessels on the Great Lakes.  In addition, finished products also are transported within
the region. For this reason, the proposed rule's applicability to Great Lakes vessels is of vital
concern to the North American steel industry. ... Steel production levels have begun to climb.
Hundreds of thousands of jobs are at stake if transport of materials cannot be accomplished

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efficiently, economically, and safely. ... Added costs for steelmaking will have cascading effect
... and provide a competitive advantage to foreign steel importers (AISI, 0295) US Steel noted
that American steel industry is heavily depending on Great Lakes shipping and would see its
costs increase significantly without concomitant environmental benefits. It takes 2.2 tons of raw
materials to make a single ton of steel, so cost effective, environmentally sound and efficient
bulk transportation is critical to the steel industry ... all of those raw materials as well as the
finished product would move within the EGA at a higher transportation cost under the proposed
EPA rule (USS, 0376)

       DTE noted that their largest coal fired power plant in Monroe, MI, uses a flue gas
desulfurization system that requires limestone.  Escalated fuel costs may significantly impact the
quarry if it can't transport product via vessels because lakers have been taken out of service.
Plant can't accommodate trucks or rail.  Construction of those facilities would be expensive and
those costs would be passed on to  electrical customers. Also, the air use permit for the facility
requires delivery of limestone by freighter and the permit does not have a provision for
additional potential truck or rail traffic.  There is a similar issue for coal, especially at the
Monroe power plant since the rail  lines to that plant are already congested. (DTE,  0328)

10.4.2.1 EPA's rule will upset the advantages of marine transportation in the Great Lakes
        region

       What Commenters Said:

       Commenters expect that the above-described economic impacts will occur because the
proposal will result in the early retirement of the steamer fleet and increased fuel prices that will
make it harder for vessels that use intermediate fuel to compete.  The resulting loss of capacity
and increased operating costs will  make lakers less able to compete with land-based
transportation, leading to modal shifts, source shifts, and adverse economic impacts for the
region. Each of these is described below.

10.4.2.2 Steamships on the Great Lakes Cannot Comply with ECA Fuel Sulfur Levels

       What Commenters Said:

       There are 13 steam vessels in the U.S. Great Lakes fleet.  The Great Lakes Maritime Task
Force and Lake Carriers'  Association, among others, commented extensively on the safety
concerns associated with using distillate fuel  in steamers.  These safety reasons stem from the
design and operation of these vessels. Their engines designed with heavy,  high BTU fuel in
mind. While boilers can be safety lighted with distillate fuel, this can be done only during cold
start-up and only for as long as necessary for atomization and heating of the primary fuel. Even
if engines could be modified for fuel switching, the constant mode shifting that is necessary for
lake operations would create a safety hazard.  Specifically, according to the GLMTF, as boilers
are added or turned off, it creates the possibility that unburned fuel will be  present  in the firebox
for a short period of time. This could lead to an explosion as the fuel ignites. They note that
boiler explosions can result in loss of life. Many commenters cited a statement from the
American Bureau of Shipping, the U.S. classification society for marine vessels with regard to
the use of distillate in these  boilers advising that:  "... a) unburnt fuel may be admitted to a hot
furnace, following flame failure. This could result in an explosion in the furnace..."
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       In addition, there are issues with the flame pattern and burning of fuel, having to do with
the possibility of issues with the distribution of the flame inside the boiler that would cause
uneven heating of the tubes that surround the firebox, which could crack and expose engine room
personnel to boiling hot water and steam. Finally, there are issues with the flash point of the
fuel, since lakers are required by Coast Guard to use products with a minimum flash point of 60
degrees C.

       Consequently, a requirement for steamships to comply with the EGA fuel requirements
would result in the immediate and permanent retirement of the 13 steam vessels in the United
States fleet, which are about 25 percent of the U.S. vessel fleet on the Lakes and a significant
portion of total shipping capacity.  This loss of capacity would adversely affect the steel and
utility industries that rely on bulk shipment of raw inputs to their plants by ship, as well as for the
transportation of their production.  An alternative method would need to be found to move those
inputs and outputs, which would have to be rail or truck.  This would be especially unfortunate
because shipping is so much more efficient than rail or truck transportation.  One commenter
explained that the Great Lakes fleet has an extraordinarily low horsepower/cargo tonnage ratio:
0.2 to 0.3, compared to 1:1 for rail and 15:1 for trucks.  One steamer carries about 2.7 million net
tons of cargo, equivalent to 135,000 truckloads.  Therefore, the modal  shift from marine to rail or
truck will result in increased emissions and increased safety hazards from more congestion on
the railways and highways.

       Lake Carriers' Association, GLMTF, Keystone Shipping, and others commented that the
option of converting  steamships to motor vessels is  not feasible given the cost ($22 million per
ship), the lack of shipyard capacity to convert all steamships, the time required, and the loss of
capacity while the ships are being  retrofit.  For similar reasons it is not possible to build new
vessels to replace these older steamships.

10.4.2.3 Operating cost for vessels that use intermediate fuel will be significantly higher

       What Commenters Said:

       In addition to the steamships that cannot use distillate fuel, a significant number of the
remaining Great Lakes vessels will also have difficulties complying with the EGA fuel
requirements.  These are the 13 U.S. vessels that have Category 3 marine diesel propulsion
engines and currently use residual or  intermediate fuels in their engines. Several  commenters
wrote that while these vessels can  switch to distillate, the additional cost would threaten their
long-term viability and result in their losing business to rail and truck transportation.

       Another commenter noted that vessels previously burning intermediate fuel would face
increased costs of $ I/gallon. These costs would apply all the time; these vessels cannot engage
in fuel switching to reduce costs because they would operate 100 percent of the time in the EGA.
Others noted that the operating cost increase will be even higher when the distillate requirement
begins in 2015; commenters said that currently distillate fuel on the lakes is priced 3 times more
than residual fuel.  Some commenters questioned whether these ships could switch to 1.0 percent
S fuel by 2012 because the fuel won't be available (see 10.4.2.4, below), forcing them to switch
to distillate fuel earlier.

       Some commenters noted that mandating these intermediate-fuel vessels to burn low
sulfur distillate fuel could require retrofitting or replacing some vessel engines at significant

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expense to accommodate the cleaner but far more expensive, and its not clear if these retrofits
could be made given cost and shipyard constraints (American Maritime Officers, 0318; Midwest
Energy Resources, 0342),

       Some of these commenters pointed out that there is already fierce competition between
lake and rail transportation for some services, and an increase in lake transportation operating
costs would result in the loss of business to rail or even truck. According to this commenter,
marine freight rates are low because ships don't need to be replaced. If owners incur large
capital costs to enable fuel switching or to employ an alternative technology to comply with the
rule, the higher freight rates could mean loss of business to rail or truck since haulage or freight
contracts can be lost to  shipping and railroad competitors for just pennies a ton. Some
commenters argued that these increased operating costs cannot be easily passed on to customers.
Some commenters also noted that the EGA fuel requirements could come on top of requirements
for ballast water and future energy efficiency standards, and that the combination of all of these
requirements will make land-based transportation more attractive.

       Interlake Steamship noted that they recently repowered 2  steam vessels with Tier 2
engines, and is planning to repower another. They said the $60M investment was based on the
ability to use intermediate fuel; these projects would have very low or possibly negative return if
the proposed rule is implemented (Interlake Steamship, 0268).  Similarly, CSPA noted that for
vessels costing on average $50 million and having decades-long lifespan, it is unrealistic to
implement wholesale changes over only a two to five-year period. They said emission
reductions can necessarily only take place within the investment profile of the current fleet and
the difficult economic climate in both the U.S. and Canada.  The  Seaway is operating at
approximately 50 percent capacity due to the economic crisis, and the proposed program would
result in further reductions in traffic and economic activity, affecting their revenues and
profitability (CSPA, 0359).

10.4.2.4 Fuel meeting the 1.0 percent fuel sulfur standard for  2012 will  not be available on
        the Great Lakes

       What Commenters Said:

       Several commenters, expressed concern that a 1.0 percent fuel sulfur standard would
drive the use  of distillate fuel. Canadian Shipowners Association commented that, based on a
recent survey of fuel refiners in Canada conducted by their members, there  is little likelihood of
residual fuels with a sulfur content of less than 1.0 percent being  available to support the Great
Lakes market in 2012. Canadian Shipowners Association claimed that, due to fuel stability
issues, it is not technically feasible to blend intermediate fuel oils with MDO beyond a certain
proportion; usually, 30  or 40 centistokes is the lower threshold of viscosity  below which the fuel
becomes unstable and therefore unusable.  At this level of blending, it may be possible to meet
the 1.0 percent limit, but this is highly unlikely. As a result, the 1.0 percent sulfur limit for 2012
effectively means that vessels will be forced to burn distillate fuel while in  waters covered by the
proposed rule (including all of the Great Lakes) in order to be certain that the 1.0 percent limit
has been met. Effectively, this imposes the 0.1 percent sulfur limit in 2012, not in  2015,  as it
should be under MARPOL Annex VI.  Effectively, according to Canadian Shipowners
Association, the marine industry will have no alternative but to switch to distillate fuels once the
fuel standard is reduced to 1.0 percent sulfur content.
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       Matson Navigation Company expressed concern whether the fuels that would be required
for a North American EGA would be available in 2012 and 2015.  They stated there are
indications that fuel suppliers will not provide such fuels in California and some other states
which would effectively force Matson to use ultra low sulfur fuel in boilers, propulsion and
auxiliary engines onboard vessels for an extended period of time.

       The American Petroleum Institute commented that removal of sulfur from heavy fuel oil
is technically more difficult and much more costly than is the case for gasoline or diesel fuel,
which are core refinery products. They stated that large volumes of low-sulfur residual marine
fuel cannot reliably be produced at sulfur contents  below 1.0 percent due to technical, quality,
and economic  constraints. In contrast, Murphy  Oil, which supplies marine fuel to the Great
Lakes, commented that they intend to meet the  1.0 percent fuel sulfur standard in 2012 with a
residual fuel that will be created by blending with ultra low sulfur diesel fuel.

       The Canadian shipowners also noted that U.S. refineries are designed to produce
gasoline, and that the Montreal refinery may close, further affecting the availability of fuel on the
Lakes.

10.4.2.5 The ECA requirements will  lead to a transportation modal shift on the Great
        Lakes

       What Commenters Said:

       The above comments raise two sets of issues: those associated with the use of lower
sulfur fuel in steamships, and those associated with the increase price of fuel for other vessels
that use residual or intermediate fuels.  As a result  of these effects, commenters predict there will
be a serious transportation modal shift  on the Great Lakes, away from marine shipping and
toward rail and truck transportation.  Many of these commenters criticize EPA for not
considering the potential of modal shift with respect to the environmental  impacts and increased
congestion stemming from a significant increase in rail and truck traffic.  Some of these
commenters suggest that, unlike the demand for ocean marine transportation services, the
demand for marine transportation on the Lakes is not inelastic and that increases in marine
freight rates due to compliance with the fuel requirements could lead marine transportation
consumers to use other modes of transportation. The Chamber of Marine  Shipping cites a
Canadian study that says shifting to distillate could induce a shift of 10-20 percent of existing
market share to other modes of transportation (Chamber of Marine Shipping, 0353). More
specifically, the Canadian Shipowners  Association estimates that fuel costs will increase up to
about 63 percent, resulting in operating costs increasing about 32 percent. This translates to a 15
to 20 percent increase in commodity freight rates which will lead at least some commodities
(aggregates, possibly some Canadian agricultural movements) to switch to other transportation
modes. (Canadian Shipowners Association, 0245)

       The Canadian Shipowners Association also noted that in addition to increased fuel prices,
the use of lower sulfur fuel will lead to increased transportation time making ship transportation
less attractive.  MDO has a higher calorific value by weight but a lower calorific value by
volume.  As a  result, engine rack settings will have to be increased by about 10 percent to obtain
the same power output, and it is unknown if fuel racks will be able to adjust to these changes due
to the age of the ships.  This could lead to a speed loss of 2.5 to 5 percent, although this has not
been quantified.

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       One commenter noted that freshwater shipping has been a major factor in controlling rail
costs and absent that control railroads would raise their rates - potentially to the rates charged by
trucks. Thus the higher operating costs will result in modal shift to rail and trucks, whose rates
will also increase.  One commenter noted that the increased fuel prices will affect more than just
the vessels that operate exclusively on the Lakes. This commenter noted that foreign vessels will
not want to incur the additional cost of EGA-compliant fuel for the 2,340 mile voyage up the
seaway system to discharge or pick up cargo on the Lakes.  Instead, they will call on coastal
ports, leading to more traffic by rail or truck to  move bulk materials to those ports.  The net
result is that the costs for everything using these materials, from electricity to steel,  will increase.

10.4.2.6 The ECA requirements will lead  to source shifts on the Great Lakes

       What Commenters Said:

       Several commenters raised the possibility of source shifts as a result of the application of
the ECA requirements within the Great Lakes.  According to these commenters, centers of
production will move from the Great Lakes  to other areas of the country, or even to other
countries where the environmental laws are  less stringent.

10.4.2.7 The ECA requirements will lead  to Refinery Product Shifts

       What Commenters Said:

       Murphy Oil commented that they can blend fuel to meet the 1.0 percent standard.
However, the product that they currently sell to ships on the Great Lakes (#6 fuel oil), will need
to find a different market beginning in 2015, since it cannot meet the 0.1 percent fuel sulfur limit.
This fuel oil will need to be transported to other locations by rail and/or truck, which will result
in additional emissions.

10.4.3 Our Response

       The stakeholders who  submitted the  comments summarized above voiced the concern
that the program will have significant adverse effects on Great Lakes transportation. With regard
to steamers, the concern is that these vessels cannot safely use compliant fuel and will therefore
be removed from the fleet. This removal of marine transportation capacity will necessarily result
in a modal shift to rail and truck since new cargo vessels cannot be built in time to replace this
ship capacity and, even if they could, the cost would be prohibitive. With regard to vessels that
use intermediate fuel, there are two concerns. The first concern is that 1.0 percent sulfur residual
fuel will not be available  in 2012, forcing vessels to use distillate fuel.  The second  concern is
that the additional operating costs associated with lower sulfur fuel are so high as to render
marine transportation noncompetitive with rail and truck. If vessels owners lose freight, there is
a risk their operations will become financially unsound and these ships will also be  withdrawn
from the fleet, adding to a transportation modal shift.  The loss of capacity and increased
operating costs will also lead to  source shifts for the steel, cement, and oil industries. These
modal and source shifts will lead to more, not less, air pollution, and will put the local economy
at risk.

       With regard to the steamship concerns, these comments and follow-up conversations with
ship owners have clarified the special challenges posed by the use of lower sulfur fuel distillate

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fuel in steam engines.  While we continue to believe this is a technical problem that can be
solved, we acknowledge that this safety concern must be addressed for existing steamships.
These technical concerns led us to consider a number of options to address the safety issue.
Since our proposal was published, however, Congress acted to address this concern by placing a
prohibition on EPA's use of funds, in this fiscal year, to finalize application of the EGA fuel
sulfur requirements to internal waters for existing steamships that operate exclusively within the
Great Lakes. Therefore, we are excluding Great Lakes steamships from the EGA fuel sulfur
requirements. For the purpose of this exclusion, Great Lakes steamships means vessels,
operating exclusively on the Great Lakes and Saint Lawrence Seaway, whose primary propulsion
is a steam turbine or steam reciprocating engine.  In addition, these steamships must have been in
service on the Great Lakes prior to October 30, 2009. The exclusion does not extend to diesel
propulsion Category 3 vessels with auxiliary boilers.  The immediate impact of this revision to
our program is that the existing 13 U.S.-flag steamships may continue to operate on the Great
Lakes with no change to their operation, and thus this pressure for a modal shift from marine to
land-based transportation is removed.

       With regard to the availability of 1 percent sulfur intermediate fuel on the Lakes,  studies
performed in support of the 2008 Amendment to Annex VI and the North American EGA
application conclude that 1.0 percent sulfur fuel will generally be available in the marine fuels
market. The International Maritime Organization established a Cross Government/Industry
Scientific Group of Experts to evaluate the effects of the various fuel standard options under
consideration at that time.  This expert  group engaged the services of EnSys to assess the impact
of these fuel options using the WORLD model.  The final report from the Experts Study presents
contains details on the capabilities of the WORLD model and explains why the WORLD model
was chosen as the appropriate tool for modeling the economic impacts of the different fuel
options.  Two of the scenarios modeled in support of this effort were consideration of a 1.0
percent sulfur global requirement and evaluation of a 1.0 percent sulfur requirement for multiple
EGAs (North America, Europe/Mediterranean Sea/Black Sea, and Asia) totaling 15 percent of
global bunker fuel consumption.  The supporting work performed by EnSys for API, considered
a global 1.0 percent fuel sulfur requirement to drive the use of distillate fuel, but the multiple
EGA scenario to be met through the use of lower sulfur residual fuel.  In its final report, EnSys
stated that it would require a sulfur standard below 0.5 percent to force a conversion to distillate
fuel. They did note that refiners may choose to blend residual fuel with  distillate blendstocks to
comply with a 1.0 percent sulfur requirement rather than investing in residual fuel processing
equipment. This modeling suggests that 1.0 percent sulfur residual fuels can be supplied in
quantities large enough to support the proposed North American EGA in addition to existing
EGAs in the Baltic and North Sea. In response to the comments from the Canadian Shipowners
Association, the characteristics of U.S.  refineries (designed to produce gasoline) were reflected
in this analysis. While the WORLD  model may not have taken into account the situation at the
Montreal refinery, it is not clear from these comments why the Montreal refinery is expected to
close or whether it is likely to be a direct result of this program.

       API's comments are consistent with the EnSys study. API suggested that removing
sulfur from residual fuel is difficult and costly. The EnSys study noted that refiners  would
choose to blend distillate into bunker fuels rather than remove sulfur through residual fuel
processing.  API expressed concern over whether large volumes of lower sulfur residual fuel can
be produced, not whether it can be produced at all.  The EnSys study shows that lower sulfur
residual fuel could be produced in sufficient quantities for multiple EGAs in quantities greater


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than needed to supply the U.S./Canada EGA and all other known EGAs, but not for a global
requirement.  In addition, to the extent that equivalent technology, such as SOx scrubbers, is used
to comply with this requirement, the demand for 1.0 percent sulfur fuel would be reduced.

       Canadian Shipowners' Association commented that blending current residual fuel with
enough distillate to reduce the sulfur content below 1.0 percent could result in very low viscosity
fuel. However, this argument focuses on blending distillate fuel into current residual fuel rather
than producing a lower sulfur residual fuel. In other words, CSA did not consider the amount, or
fuel sulfur content, of the distillate that must be blended into the refinery bottoms to create the
marine residual oil in the first place. By blending a low sulfur distillate into the refinery
bottoms, a lower sulfur residual fuel oil can be produced.  This lower sulfur residual fuel could
then be blended with marine distillate oil, under current practices, to make the various IFO
grades.  Finally, Murphy Oil, which supplies bunker fuel to the Great Lakes carriers, stated that it
can produce the 1.0 percent sulfur residual fuel.

       We acknowledge that just because 1.0 percent sulfur fuel is available, either through
refining or blending, this does not necessarily mean it will be available on the Great Lakes.  As
noted above, Great Lakes shippers raised concerns that it would not be available and they would
be required to purchase distillate fuel to comply with the 1.0 percent sulfur requirement.
However, we note that they also commented that residual fuels used on the Great Lakes have
much lower baseline sulfur levels than residual fuels used in vessels operating in the oceans.
This is important because it means that less processing or blending of the fuel would be
necessary to meet the 1.0 percent sulfur limit.  Based on this observation, and the comments
from Murphy Oil, we continue to expect that bunkering terminals on the Great Lakes will be able
to supply 1.0 percent residual fuel.

       Nevertheless, this final rule  contains a provision that would allow ships on the Great
Lakes to purchase fuel with fuel sulfur content in excess of 1.0 percent to comply with the EGA
requirements.  Specifically, in lieu of a study of the availability of 1.0 percent sulfur fuel on the
Great Lakes recommended by Congress, we are including a provision that would allow the use of
1.0 percent fuel sulfur (10,000 ppm) standard if residual fuel meeting that standard is not
available on the Great Lakes. This  provision will ensure that operators on the Great Lakes will
be able to buy marine residual fuels when the 10,000 ppm S standard applies even if compliant
10,000 ppm S fuel is not available.  Under this provision, if marine residual  fuel meeting the
10,000 ppm S standard is not available,  it will not be a violation of our standards for vessel
operators to bunker and use marine residual fuel with sulfur content above 10,000 ppm S
provided the fuel they purchase is the lowest sulfur marine residual fuel available at the port.  We
believe this market based approach will provide a significant incentive to fuel suppliers to
provide 10,000 ppm S fuel, while giving Great Lakes shippers confidence that marine residual
fuel will  be available for their use during the 10,000 ppm S  fuel program.

       With regard to the cost of 0.1 percent sulfur fuel on the Great Lakes, many commenters
are concerned about price differential between residual and distillate fuel. Some commenters
said distillate costs three times more than residual; others said that distillate  costs $1.00 per
gallon more.  The Canadian Shipowners Association study of potential mode shifts on the Lakes
as a result of applying the EGA fuel requirements estimated fuel cost increases in 2012 and
2015. Using publicly posted prices at Sarnia for various marine fuels for 2008, and spot prices
for June 7, 2008 and July 10, 2009, they estimate that fuel costs will increase up to 63 percent in
2012 (based on the June 7, 2008 price differential between Bunker C and MDO) and up to 76

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percent in 2016 (based on the differential between Bunker C and MGO plus a $100 premium
reflecting a "likely" cost increase by refiners). Their study estimates price differential to be
between $86 and $116 per tonne for MDO, and $106 to $130 per tonne for MGO+$100,
compared to Bunker C. However, it should be noted that these price differentials for Bunker C,
MDO, and MGO+$100 (fuel prices for 2008 on average and June 7, 2008 specifically) occurred
during a period of extreme prices for distillate. The world fuel market was experiencing very
strong demand for distillate in the mid-2008 period which pushed up the price for distillate to
near-historic highs.  This market condition persisted until it peaked in August, 2008; by
December 2008 prices dropped significantly and prices in 2009 have more closely tracked
historic rates. Therefore, a more appropriate comparison is the July 10, 2009 baseline. When the
data reported in the  Canadian study for these prices is used, they  estimates fuel cost increases of
28 percent for 2012 (based on the differential between Bunker C  and MGO) and 47 percent for
2015 (based on the differential between Bunker C and MDO+$100), which are estimated to
increase operating costs by about 6 and 9 percent, respectively.

       A price  differential of $1.00 per gallon is about the same  as a differential of about $500
per tonne of fuel.  While such a differential is possible, having occurred in rather unique
circumstances in the past, and is unlikely to recur if the supply and demand fuel markets remain
roughly in equilibrium (i.e., there are no unexpected shocks in the market that would lead the
price of residual or distillate fuel to be abnormally high) and the oil prices are close to those
being projected by EIA. On December 6, the WTI oil price was  $75.47 per barrel.  This is
significantly higher than the $57/barrel WTI used on our refinery modeling, yet the price
difference between residual and distillate fuel is close to our estimate of $145/tonne, or
$0.30/gallon (see Table 10-2). Because residual and distillate fuel are  commodities, there is no
reason to believe that the price differential between residual and distillate fuel on the Great Lakes
will be vastly different from the differential on the world market.

                   Table 10-1 Fuel Price Differential, Residual and Distillate Fuels

$/tonne
Distillate
IFO 380
Difference
$/gallon
Distillate
IFO 380
Difference

WTI

distillate
IFO 380

Houston

$642.5
$459.5
$183.0

$2.03
$1.69
$0.34
Singapore

$627.0
$472.5
$154.5

$1.99
$1.74
$0.25
Rotterdam

$619.5
$454.0
$165.5

$1.96
$1.67
$0.29
Fujairah

$634.5
$472.0
$162.5

$2.01
$1.74
$0.27

$75.47

$3 15. 80 gallon/tonne
271.56 gallon/tonne

Source: www.bunkerworld.com, 12/7/2009
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              Table 10-2 Estimated Marine Fuel Costs (Source: RIA, Chap 5)
FUEL
MGO
MDO
IFO
UNITS
$/bbl
$/tonne
$/bbl
$/tonne
$/bbl
$/tonne
REFERENCE CASE
Baseline
$ 61.75
$ 464
$ 61.89
$ 458
$ 49.87
$ 322
ECA
$ 62.23
$ 468
$ 62.95
$ 466
$ 49.63
$ 321
HIGH PRICE CASE
Baseline
$ 102.70
$ 772
$ 102.38
$ 757
$ 83.14
$ 538
ECA
$ 103.03
$ 775
$ 103.70
$ 767
$ 82.52
$ 534
       With regard to transportation modal shift, the analysis for this program relies on the
assumption of nearly perfectly inelastic demand for marine transportation services.  For ocean-
going vessels, this effect is fairly clear: to ship a container from Asia to the United States there
are only two options: ship or air, and air is several times more expensive than ship  and therefore
is not a feasible option for all but the lightest or most perishable goods.

       We acknowledge that there are alternative, land-based modes of transportation available
for goods that are moved on the Great Lakes (truck and rail). However, as noted by many of the
commenters, the USAGE study shows that the next least costly mode of transportation would
result in an addition $3.6 billion of transportation costs per year for Great Lakes industries. The
study also reports that a Great Lakes bulk carrier can move one ton of cargo 607 miles on one
gallon of fuel; a train can move a ton of cargo only 202 miles on one gallon of fuel, and a truck
only 59 miles. The Great Lakes St. Lawrence Seaway Study performed by Transport Canada et
al. (2007) provides an estimate of the cost savings offered by the Great Lakes St. Lawrence
Seaway by commodity (Table 3.1, reproduced below).  This information shows that the next
least expensive form of transportation would cost an addition $9.35/ton transported , for metallic
minerals and ores, and the average cost savings for shipping by the Lakes is about $14.80 per
ton.  In comparison, the fuel requirements will impose an addition  cost of about $0.40 per ton.
Given all of this information, it is hard to imagine that the additional fuel costs associated with
using EGA-compliant fuel will result in a large transportation modal shift,  especially since rail
and truck transportation will be required to use ULSD in the same time frame.

       Table 10-3  Transportation Savings Offered by the GLSLS  by commodity
       (in descending order of total shipper savings, numbers rounded to nearest 1,000)
COMMIDITY GROUP
Aggregates and Slag
Metallic Minerals and Ores
Coal, Coke, Pet Code
Iron, Steel and Other Metals
Non-metallic Minerals
Wheat
Petroleum Products
Other Grains and Feed
Ingredients
Soybeans
Corn
Total
SAMPLE SIZE TONS
37,813.000
62,395,300
40,783,600
12,872,200
8,883,600
8,046,500
3,932,500
1,819,400
1,691,800
1,169,300
179,407,200
SAVINGS/TON
$16.03
$19.35
$13.36
$32.49
$19,50
$17.37
$18.60
$28.20
$22.26
$23.61
$14.80
TOTAL SAVINGS
$605,988,000
$583,464,000
$544,961,000
$418,219,000
$173,224,000
$139,776,000
$73,137,000
$51,330,000
$37,667,000
$27,614,000
$2,665,360,000
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Source:  Great Lakes St. Lawrence Seaway Study, Final Report, Fall 2007, available at http://www.glsls-
studv.com/Supporting%20documents/GLSLS%20finalreport%20Fall%202007.pdf	

       The price differentials provided in the study performed for the Canadian Shipowners
Association suggests that the rate increases associated with fuel cost increases along the order
expected to result from this program are small: 6 percent rate increase in 2012 and 9 percent
increase in 2015 as a result of switching to MDO (2012) and MGO+$100 (2015). These rate
increase are not likely to be high enough to provoke shippers to switch to higher cost rail or truck
transportation. It should be noted that even at the higher price differentials cited by the Canadian
Shipowners Association, their study suggests that while such high fuel prices would lead to a 20
percent shift in the aggregate/construction market, the main impacts on the salt and  Canadian
petroleum industries would be an inability  to re-capture market share already lost to rail. Also,
while they note agricultural freight could decrease by 12.3  percent,  this would be constrained by
the carrying capacity of the rail system.

       In addition, it is common practice in the marine industry to include a fuel cost differential
in transportation contracts, passing those costs on to the industrial transportation purchaser.  As
long as the capacity is there, and as noted above the provision for steam ships and the special
provisions for 1.0 percent sulfur fuel are designed to retain the shipping capacity on the Great
Lakes, the fuel differential for ships will be much less than shifting to rail or truck.  This is
particularly true given the limited capacity for the rail and truck industries, and the infeasibility
of a construction program to provide sufficient rail cars, locomotives, and trucks to replace the
Great Lakes vessels. As noted by several commenters, there currently aren't enough rail cars
and truck to take over the transportation of aggregates, iron ore, coal, and other bulk goods to
facilities along the lakes, and such a building campaign would cost  many times the increased
costs associated with the program. This will also limit any possible modal shift caused by
increased operating costs on the Great Lakes. Also would need to be considered are the
additional costs in  road congestion, both on the rails and on the interstates, the additional costs in
time, for loading and unloading individual  railcars and trucks, as well as movement over these
different distances. Finally, operating costs for rail and truck transportation will be  changing,
due to the requirements  for ultra-low sulfur diesel fuel, and personnel costs may be different.

       In sum, while our costs analysis shows that operating costs will increase for all vessels,
including Great Lakes vessels, this increase will not be so high as to cause the removal of vessels
from the U.S. Great Lakes fleet or the  shift of significant amounts of cargo from ships to land-
based transportation in the Great Lakes area. It should be noted that about half of the large U.S.
Great Lakes cargo vessels already operate on distillate fuel and have for some time. These U.S.
vessels are subject to our domestic federal  engine standards and are already unable to purchase
distillate fuel in the United  States that  is not compliant with the EGA requirements.  Also, at least
some of the  Great Lakes vessels currently operating on residual fuel are ocean-going vessels that
will be required to comply with the relevant engine and fuel requirements as they pass through
the North American EGA on their way to the Lakes.

       With regard to the potential speed reductions that may result from using MDO, the
Canadian comments were unsure about the actual impacts. However, a speed reduction of 2.5 to
5 percent may be within the existing speed variations on the Lakes due to weather, congestion at
the locks, port scheduling, etc.  Also, shipowners have indicated to EPA that they are constantly
changing their scheduling based on market needs, and therefore it may be difficult to estimate
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with any precision the "typical" time of a ship voyage on the lakes and timing changes that may
be associated with fuel changes.

       We acknowledge that investing in upgrades and retrofits in an uncertain regulatory
climate is difficult. At the same time, however, we cannot delay implementation of standards
due to private investment decisions.  We expect that most companies that operate on the Lakes
will be able to accommodate the new requirements.  To address those cases of extreme hardship,
we have developed an economic hardship provision that may help companies in these situations
adjust to the new regulatory regime.  This is discussed in more detail in Section VI of the
preamble.   Specifically, at the suggestion of Congress, we are finalizing a provision that provides
for relief in the event of serious economic hardship that allows Great Lakes shippers to petition
EPA for a temporary exemption from the 2015 fuel sulfur standards (0.1 percent sulfur).  The
shipper must show that despite taking all possible business, technical, and economic steps to
comply with the fuel sulfur requirements, the burden of compliance costs would create a serious
economic hardship for the company. Once again, this provision will help reduce the likelihood
of a reduction in carrying capacity on the Lakes.

       The combination of these three provisions (steamers, 1.0 percent fuel requirement,
economic hardship) is expected to reduce or eliminate any pressure for transportation  modal shift
on the Great Lakes.

       For similar reasons, we do not expect there to be a source shift as a result of the provision
extending the EGA requirements within the Great Lakes. We do not expect there to be a
reduction in shipping capacity on the Great Lakes, and therefore bulk carriers will continue to be
able to provide transportation for the steel, cement, utility,  and refining industries.  While the
fuel price differential will increase operating costs, this increase will not be large enough to
warrant taking steel or other production offshore, or to the interior of the country, since the costs
of moving a plant are not likely to exceed the additional  operating costs associated with the
program. For example, if steelmakers shut Great Lakes furnaces and take steel production
offshore, they will incur not only the costs of ramping up production elsewhere but also the costs
associated with transporting the finished product back into the United States, including the
additional costs associated with operating in the coastal EGA and the additional costs  associated
with moving the goods by rail or truck to the plants where they will eventually be used as inputs
to make other goods.

       With respect to a refinery shift, it is not clear that transporting #6 fuel to other  facilities
for their use will necessarily result in increased emissions.  This will depend on how much fuel is
transferred, the final use of the fuel (e.g., in a power plant subject to emission controls) and how
the fuel is transferred (by low-emission heavy-duty trucks or locomotives equipped with Tier 3
or Tier 4 engines). Any resulting emission impacts should be compared to the emissions from
Category 3  engines that currently operate on the Lakes and that use higher  sulfur residual fuel
emissions, making them the equivalent of an uncontrolled power plant operating on the lakes. In
any case, it is not  clear that moving large amounts of #6  fuel away from the Lakes will be
necessary as it may be used offered for sale for use outside the EGA or for  use on vessels with
SOx scrubbers or  vessels that operate outside of the EGA.
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       Finally, in response to these comments and at the suggestion of Congress53, we will
perform an additional analysis of the economic impacts of the application of the EGA
requirements on ships operating on the Great Lakes. This study, which we expect to complete by
summer 2010, will be developed cooperatively with stakeholders and will examine the economic
impacts of the rule on great lakes shipping including whether these standards may lead to a
modal shift away from marine transportation and toward transportation by rail or truck.  We will
take into account data and studies submitted by participants as well as other information.

       In the meantime, we are finalizing this rule as proposed, including the Great Lakes in the
internal waterways to be covered by the EGA requirements through our authority granted in the
Act to Prevent Pollution from Ships (see Sections 5.4 and 5.5 of this document for more
information about APPS).

10.5 Comments on EPA's Economic Impact Analysis regarding the Great
    Lakes

       We performed an Economic Impact Assessment to estimate the social costs associated
with the proposed program and how those costs will be shared across stakeholders. This analysis
was performed at the national level, for the program as a whole.  The total estimated  social costs
of the coordinated strategy in 2030 are equivalent to the estimated engineering compliance costs
of the program, at approximately $3.1 billion. We estimate that compliance with the coordinated
strategy would increase the price of a new vessel by 0.5 to 2 percent, depending on the vessel
type. The price impact of the coordinated strategy on the marine transportation services sector
would vary, depending on the route and the amount of time spent in waterways covered  by the
engine and fuel controls (the U.S. EGA and U.S.  internal waters covered by the coordinated
strategy).  For example, we estimate that the cost of operating a ship in liner service between
Singapore, Seattle, and Los Angeles/Long Beach, which includes about 1,700 nm of operation in
waterways covered by the coordinated strategy, would increase by about 3 percent. On the
Lakes, operating costs would increase by the full amount of the fuel price increase (see response
in Section 10.4.3, above).

       What Commenters Said:

       Several commenters suggested that EPA is incorrect in assuming nearly perfectly
inelastic demand for marine transportation services on the Lakes. Unlike ocean-going marine
transportation, Great Lakes marine transportation market is elastic because there are alternative
modes of transportation available in this geographic market,  namely rail and truck.
(ArcelorMittal, 2080).  The Transportation Institute notes considerable attention and  effort has
been given to encourage shippers to consider waterborne transportation for coastwise movement
of cargo that otherwise would be carried on truck or rail, with the goal of relieving traffic
congestion, saving infrastructure dollars, reducing greenhouse gases, limiting harmful surface
runoff, and avoiding highway fatalities. This suggests that demand for this transportation is
more elastic.  (Transportation Institute, 0302).
53 111th Congress, "Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010" and
associated legislative report.

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       Our Response:

       As explained in the RIA for this rule and in the discussion in Section 10.4.4, our
assumption that the demand for marine transportation services is nearly perfectly inelastic relies
on the observation that most cargoes shipped by vessel over the Great Lakes could be shipped by
rail or truck only at great expense: by using hundreds of rail cars or thousands of trucks per load.
This makes demand for marine transportation inelastic since, as noted above, the next most
favorable mode is expensive and difficult. The price differential between shipping by vessel and
shipping by rail favors shipping in most cases, and the small increase in operating costs
associated with this rule is not likely to change that dynamic, especially given the upcoming
stringent standards for rail engines and fuels.

       Nevertheless, in response to these comments and as suggested by Congress, we will
perform an additional analysis of the economic impacts of the  application of the EGA
requirements on ships operating on the Great Lakes. This study, which we expect to complete by
Summer, 2010, will be developed cooperatively with stakeholders and will examine whether
these standards may lead to a modal shift away from marine transportation and toward
transportation by rail or truck. We may reconsider the assumption of nearly perfectly inelastic
demand for marine transportation services on the Great Lakes, depending on the outcome of this
study.

       In the meantime, we are finalizing this rule as proposed, including the Great Lakes in the
internal waterways to be covered by the EGA requirements through our authority granted in the
Act to Prevent Pollution from Ships (see Sections 5.4 and 5.5 of this document for more
information about APPS). If the study referred to above suggests a different approach is more
appropriate, it will be addressed in a separate future rulemaking.

10.6 Comments Requesting Extended Comment Period, Separate Rule

10.6.1 EPA Should Extend the Comment Period for this Rule

       What Commenters Said:

       Several commenters requested that EPA extend comment period to raise issues so EPA
will have a complete record it can consider before finalizing the standards. Several of these
commenters expressed concern that EPA only recently extended the proposed regulations to
include vessels that operate solely on the Great Lakes,  and that this action was taken  without any
meaningful consultation with affected parties and with only 30 days to provide comment on the
rule. See Calumet Area Industrial Commission (0332); Calumet Area Industrial Commission
(0332); Duluth Area Chamber of Commerce (0282); Keystone Shipping (0349); ArcelorMittel
USA, 0280; Greater Cleveland Area Partnership; Great Lakes  Metro Chambers Coalition.
Others requested 90 additional days for comment (Agri-Fine, 0315; Development Association,
0279; Kindra Lake Towing, 0291; CSX, 0300; Superior Mayor (0352); City of Sarnia, ON
(0306). The Canadian Shipowners Association stated that while the proposal was made available
7/1/09, it was not published until 8/29/09; published rule set out comment period deadline of
9/28/09. They noted that normal practice is  to allow 30-90 days after publication, and stated that
more time is needed to give this issue the consideration it requires and therefore EPA should
allowed the maximum permitted time for comment on the official, published version of the
proposed rule if it intends on  proceeding to the final rulemaking with this flawed regulation

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(Canadian Shipowners Association, 0245).  Kinder Morgan, Raffin Construction Co., Two
Harbors Area Chamber of Commerce, and Ozinga Materials also requested a 90-day extension of
the comment period (Kinder Morgan, 0326; Raffin Construction Co., 0344; Two Harbors Area
Chamber of Commerce, 0324; Ozinga Materials, 0343)

       Some commenters noted that the 3 0-day s comment period of the proposed rules and the
short planned implementation scheduled remove any feasible option for the development and
implementation of survival business options (Warner Petroleum Corporation, 0251; Keystone
Shipping, 0349)

       Our Response:

       EPA began this action with an Advance Notice of Proposed Rulemaking, published on
December 7, 2007 (72 FR 69522). We received specific comments on the application of a fuel
standard on the Great Lakes from the Lake Carriers'  Association (see EPA-HQ-OAR-2007-
0121-0101).

       Given that the standards we are adopting under the Clean Air Act are largely consistent
with the Annex VI requirements and our ANPRM, and given the opportunity for interested
persons to view the proposal well before it was published, we believe commenters have had
sufficient time to review the substance of the proposal and prepare their written comments.  This
is supported by the large number of comments we received  on the proposal and the ANPRM
from a wide range of interested parties. See response in Section 1.3 for additional discussion.

       Our proposal was a direct outgrowth of the ANRPM and our March 2009 proposal.  The
NPRM was signed June 26, 2009 and was made available on our website on July 1, 2009
(www.epa.gov/otaq/oceanvessels.htm). An e-mail note informing all parties that commented on
our ANRPM notifying them that the NPRM was available was sent by EPA on July 1, 2009.
The comment period was extended to September 28, 2009.  We have accepted and responded to
comments received as late as November 30, 2009.

       The implementation schedule for the EGA fuel requirements will not begin earlier than
August 2012 and this final rule contains various provisions  that will help owners of Great Lakes
vessels as they develop their compliance plans.

10.6.2 EPA Should Establish a  Separate Action for the Great Lakes

       What Commenters Said:

       Several commenters were concerned that EPA did not adequately study the effects of
applying the EGA requirements on the Great Lakes, with once commenter stating that EPA must
simply concede that it lacks the scientific data ... to justify extending the coastal EGAs to the
Great Lakes; this commenter recommended EPA postpone implementation until the need has
been substantiated (Lake Carriers' Association, 0345).  Other commenters requested that EPA
suspend application of EGA rules to the Great Lakes region and establish a separate regulatory
action to focus on appropriate and workable emission regulations for Great Lakes vessel
operators.  As a part of a separate regulatory action, they asked that EPA conduct a thorough
analysis of the impact of emissions from Great Lakes vessels on regional air quality, an analysis
of the technical challenges unique to Great Lakes vessels, an analysis of potential modal shift

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impacts, and an analysis of employment impacts in the Great Lakes region. EPA should develop
and disclose sound scientific data to show whether and to what extent fuel from these vessels
presents risks to public health; give the public adequate time to consider the data; and disclose
alternatives that will both reduce pollution and preserve the economic activity that relies on
movement of cargo across the Great Lakes. Finally, they urged EPA to work cooperatively with
Great Lakes vessel operators to determine if there are alternative options available, such as
exhaust emission control technologies. Several of these commenters also requested that EPA
suspend application of the EGA to the Great Lakes until such an action is completed.  Keystone
Shipping enclosed a copy of their report, Great Lakes Steam Vessels Regional Contribution for
consideration.  (American Great Lakes Ports Association, 0262; Wisconsin Commercial Ports
Association, 0368; American Maritime Officers, 0318; ArcelorMittel USA, 0280; Great Lakes
Metro Chambers Coalition, 0258; Wisconsin Commercial Ports Association, 0368; Duluth
Seaway, 0283; Duluth-Superior Propeller Club, 0292; AISI, 0295; CGLI, 0296; Transportation
Institute, 0302; Port of Cleveland, 0310; DTE, 0328; Greater Cleveland Partnership, 0330;
Midwest Energy Resources, 0342; Minnesota Chamber of Commerce, 0350; Chamber of Marine
Commerce, 0353; CSPA, 0359; USS, 0376; Lafarge, 0383;  Duluth Area Chamber of Commerce,
0282; Calumet Area Industrial Commission, 0332); Government of Canada, 0252; Great Lakes
Metro Chambers Coalition, 0258; Keystone Shipping, 0349; Lake Carriers' Association, 0345;
Great Lakes Maritime Task Force, 0269;

       Our Response:

       For all of the reasons explained elsewhere in the RIA for this rule and in this S&A
document concerning the inventory and air quality impacts  of ships that operate on the Great
Lakes,  we are not excluding the Great Lakes from this final rule.

       Nevertheless, in response to these comments and as  suggested by Congress, we will
perform an additional analysis of the economic impacts of the application of the EGA
requirements on ships operating on the Great Lakes. This study, which we expect to complete by
Summer, 2010, will be developed cooperatively with stakeholders and will examine the
economic impacts of the rule on great lakes shipping including whether these standards  may lead
to a modal shift away from marine transportation and toward transportation by rail or truck.  We
will take into account data and studies submitted by participants as well as other information.

       In the meantime, we are finalizing this rule as proposed, including the Great Lakes in the
internal waterways to be covered by the EGA requirements  through our authority granted in the
Act to Prevent Pollution from Ships (see Sections 5.4 and 5.5 of this document for more
information about APPS).

10.7 Other Comments on EPA's Analysis for the Great Lakes Region

10.7.1  EPA must consider National Security impacts and energy impacts

       What Commenters Said:

       One commenter noted that 50 percent of lakers have been laid up for past 2 years.  The
industry expected recovery by 2012 but with EGA that is not likely. This means that more
mariners will lose their jobs to injudicious regulation and the result will be fewer merchant
marines available for national security functions (American Maritime Officers, 0318)

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       Another commenter expressed concern that modal transportation shift from marine to rail
and truck transportation would also compromise efforts to reduce dependence on foreign
supplies of petroleum products (AISI, 0295)

       Our Response:

       We understand the importance of the merchant marine to the national security of the
United States. However, we do not think that our rule, in and of itself, will result in a change in
the amount of goods transported on the lakes by vessels or the number of merchant mariners
employed in this sector. Nevertheless, we can consider this aspect of the fuel requirements in the
study which we plan to complete by Summer 2010 to look at the economic impacts of the
application of the EGA requirements within the Great Lakes.

       For the reasons  discussed in 10.4.3, above, we do not expect there to be a transportation
modal shift from marine to rail or truck. Therefore, we do not expect increases in fuel
consumption from that  shift and greater dependence on foreign energy than would otherwise be
the case.

10.7.2 EPA must consider the Impacts on the Canadian Economy

       What Commenters Said:

       The Maritime Trades Department and  The Great Lakes Maritime Task Force commented
that EPA did not take into consideration the impact of this rule on Canada, its maritime industry,
or the related industries there and in the U.S.  (Maritime Trades Department, 0321; Great Lakes
Maritime Task Force, 0269). Canadian Shipowners Association recommended that EPA should
develop a binational, cooperative approach for the Lakes with Canada (Canadian Shipowners
Association, 0245)

       Our Response:

       We are not legally required to take into account the economic impacts of regulatory
action on the Canadian economy. However, Canadian vessels were included in the analysis
performed for this rule  in the foreign vessel category for our inventory and cost analyses.

10.7.3 EPA must consider the impacts on small businesses that operate on the Great
      Lakes

       What Commenters Said:

       The Great Lakes Maritime Task Force (0269), among others, noted that EPA is required
by the Regulatory Flexibility Act to consider the impacts of the proposed program on small
businesses. The Proposal completely ignores  the impact on shippers who are small businesses.

       Our Response:

       We have examined the impacts of this requirement on small businesses  operating
regulated vessels on the Great Lakes for the final rule. It can be found in Chapter 8 of the RIA
for this rule.  Based on  this analysis, we find that this provision will not have a  significant impact


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on a substantial number of small businesses.  In addition, as noted above, we are including
provisions with respect to steamships, fuels, and economic hardship that may help any small
businesses who have difficulty complying with the requirements.

10.7.4 EPA Must Consider Alternative Approaches for the Great Lakes

       We received comments urging us to consider alternatives. One set of comments
recommended a different fuel sulfur limit.  Another recommended an averaging program.

10.7.4.1 EPA should consider an alternative fuel sulfur  limit

       What Commenters Said:

       Some commenters suggested EPA consider alternative programs for ships that operate on
the Great Lakes.

       A number of commenters stated that the residual fuel used by Great Lakes vessels has a
lower sulfur content than residual fuel used by ships operating in the ocean. Several commenters
said that the sulfur content in residual fuel sold in the Great Lakes is less than 2.5 percent but not
as low as 1.0 percent. The Canadian Shipowners Association (CSA) commented that he current
bunker fuel range is 1.6-2.7 percent  sulfur and this is blended with various proportions of marine
diesel oil (MDO). CSA and Lower Lakes Towing commented that the current sulfur content of
residual fuels sold on the Great Lakes is 1.7 percent. Keystone stated that the average sulfur
content for all residual fuel consumed by their eight vessels, from 2006 through August 2009,
was 1.62 percent and that the weighted average for all heavy fuel burning Jones Act vessels is
estimated at about 1.55 percent sulfur. Great Lakes Marine Task Force commented that one of
their members calculated an average fuel sulfur level of the heavy and intermediate fuel they
consumed over the past 4.5 years was 1.5 percent.  Murphy Oil commented that its refinery
terminal is the only fuel supply location for vessels operating in the upper Great Lakes and that
its residual fuel averages about 1.5 percent sulfur.

       CSA and Lower Lake Towing recommended that the 1.0 percent fuel sulfur standard be
replaced with a 1.5 percent fuel sulfur standard that applies until 2020, with further reductions as
technology and fuel supplies will allow for. They commented that fuel suppliers would be able
to make 1.5 percent fuel residual fuel available on the  Great Lakes.  Keystone recommended a
2.5 percent fuel sulfur standard for domestic Great Lake shipping beginning in 2012, followed by
a 0.1 percent sulfur standard in 2020.

       One commenter suggested a  solution that would preserve net environmental benefits
would be to reduce the fuel sulfur limit from 4.5 percent to 1.5 percent in the Great Lakes until
2020.  This would allow these inland vessels to continue to burn residual fuels at or below 1.5
percent, the current EGA limit, and would allow time for those vessels to be phased out and new,
more efficient vessels be built to replace them (Canadian Shipowners, hearing testimony).

       Keystone Shipping (0349) provided a range of options for EPA to consider for the Great
Lakes, including:

       a. Remove the designation of the Great Lakes  as an EGA
       b. Exempt Jones Act trade from the Great Lakes EGA

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       c. Exempt steam ships from the EGA
       d. Extend the phase-in period for vessels physically confined to the Great Lakes, i.e.,
          cannot ever and will not ever trade outside the EGA
       e. Apply global PM and SOX controls to the Great Lakes (2012: 3.5 percent sulfur; 2020:
          0.5 percent sulfur)
       f. Apply PM and SOx controls  - more stringent than global, but less imminently
          devastating to the U.S. domestic Great Lakes shipping (2012: 2.5 percent sulfur:
          2020: 0.1 percent sulfur)

       Our Response:

       The approach described by the Canadian Shipowners would be difficult because of the
complications it would create for foreign vessels that operate on the Lakes. Foreign vessels
account for about one-third of the vessels on the Lakes. This alternative would allow them to
also use the higher sulfur fuels. But because they would be required to comply with the EGA
outside the Great Lakes system, this means they would either have to use  1.0 percent sulfur fuel
while operating in the Lakes or install yet another fuel  tank for the 1.5 percent fuel that they
would use in a "relaxed" EGA on the Great Lakes.  This would add greater complication to the
compliance program for the EGA.  Further, these foreign ships could be held in noncompliance
at their period surveys if they use a higher sulfur fuel in an EGA.  Finally, it's not clear how
these vessels would  refuel on the Lakes.

       We do not agree with comments that the near term fuel sulfur limit for the Great Lakes
should be raised to a higher limit of 1.5 percent  or 2.5 percent  as suggested by some commenters.
As discussed above, we believe that 1.0 percent fuel will be available in the Great Lakes when
the EGA standards go into place.  In addition, we are finalizing near-term relief provisions with
respect to the availability of compliant  residual fuel on the  Great Lakes. We also do not agree
that the long term standard of 0.1 percent sulfur should be delayed or relaxed for the Great
Lakes. As discussed above, we expect this fuel  to be widely available in 2015.

       Finally, and perhaps most importantly, allowing the use of 1.5 percent sulfur fuel on the
Lakes until 2020 will not achieve the same environmental goals as requiring the use of 1.0
percent fuel sulfur as required by Annex VI and APPS, which  reduces the fuels sulfur content
level to 0.1 percent by 2015. The net result of such an alternative would be additional emissions
from ships until 2020.

10.7.4.2 EPA should consider a fleet averaging approach

       What Commenters Said:

       In their supplemental comments, Canadian Shipowners Association requested that EPA
consider a fleet averaging approach.  This program would extend the 0.1 percent sulfur fuel
requirement to 2020, but require the fuel sulfur content of fuel used in a fleet to meet a declining
average, beginning in 2011.  This approach would allow owners time to investigate alternative
technologies and implement investment options. It also avoids any issues associated with fuel
blending. Specifically, shipowners could meet the declining average through using any one or
more of several options:

          o   Retire older less fuel efficient vessels (steamships)

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          o  Invest in new more fuel efficient vessels
          o  Use alternate abatement technology (freshwater scrubbers)
          o  Change existing vessels over to MDO
          o  Retrofit marine engines to improve fuel efficiency and fleet average
          o  Consider alternative fuels such as biodiesel and natural gas

      Our Response:

       While we are not generally opposed to averaging provisions in our mobile source
programs, the programs that we do have (e.g., manufacturer fleet averaging programs) are
feasible because these program will not, on average, have a detrimental impact on human health
and the environment. Most of these programs are designed to provide flexibilities to
manufacturers as they phase in production of new emission technology.  In this case, we are not
revising our program to adopt an averaging approach in this final rule. We received no detailed
analysis that estimates the benefits of such  a program. In addition, we are not persuaded a fleet-
wide averaging approach would yield the same air quality and environmental benefits as the
proposed program, due to variability in where ships operate, the  amount of time they operate,
and the variability in the actual operations between ships.

10.7.5 Vessels that Operate on the Great Lakes Already Participate in a Program to
      Reduce Emissions.

       What Commenters Said:

       The Canadian Shipowners' Association noted that ships on Lakes already participate in
Green Marine program to reduce their emissions (Canadian Shipowners' Association, 0245).
This program, described in more detail at http://www.green-marine.org/action.html, was created
for the St. Lawrence and Great Lakes regions. It is a voluntary industry-led environmental
program whose focus is environmental protection and sustainability. It provides three tools to
help member businesses achieve even more effective environmental management:  training,
research and development, and adoption of an environmental management system.  Participants
that have fulfilled the requirements of the program receive the Green Marine seal of certification.
Many ships also have Environmental Management systems, and shipowners are constantly
optimizing vessel schedules  and routes to transport the maximum amount of goods in the most
efficient way possible.  See also comments from Chamber of Marine Shipping, 0353, Canadian
Steel Producers Association, 0359.

       Our Response:

       We applaud the  creation of the Green Marine program, and acknowledge that these
voluntary industry programs can have a significant positive impact on the environment in the
Lakes. However, EPA is legally required by the Clean Air Act to address air emissions from
Category 3 marine diesel engines that operate in the Great Lakes region  through mandatory
emission standards.  In addition, we believe it is most equitable to extend the international
program to the Great Lakes through an enforceable program. However,  we are optimistic that
the results of this program can be augmented by the Green Marine program which takes into
account all aspects of ship emissions, not just air emissions.
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10.7.6 Low-Speed 2-stroke engines are designed to operate on heavy fuel

       What Commenters Said:

       Canadian Shipowners Association commented that low-speed 2-stroke engines are
designed to operate on heavy fuel, and that Wartsila warned in a 2002 paper that a switch from
high-sulfur heavy fuel oil to low-sulfur fuels can lead to engine issues. They noted that a
permanent switch to MDO will require consultation with engine manufacturers to determine
proper modifications (Canadian Shipowners Association, 0245).

       Our Response:

       Both Wartsila and MAN B&W, the main Category 3 marine diesel engine manufacturers,
have issued guidance about fuel switching. For Wartsila, see LOW SULPHUR GUIDELINES
(Made: 23rd March, 2005; Updated: 9th January, 2006; available at
http://www.wartsila.comAVartsila/global//docs/en/ship_power/media_publications/technical_pap
ers/1 ow_sulphur_guidelines.pdf).  For MAN B&W, see Operation on Low-Sulphur Fuels - Two-
Stroke Engines (available at
http://www.manbw.com/files/news/filesof5271/Operation%20on%20Low-Sulphur%20Fuels.pdf

       More discussion of this issue can be found in Chapter 4 of the RIA for this rule.
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CHAPTER 11: Technical Amendments

       What We Proposed:

       The comments in this section generally correspond to Section IV.E of the preamble to the
proposed rule, where we described several amendments to the regulations that apply for various
highway and nonroad engine programs. The applicable regulatory provisions for these
requirements are in 40 CFR parts 86, 89, 92, 94, 1027, 1033, 1039, 1045, 1048, 1051, 1054,
1060, 1065, and 1068. These regulations apply to a variety of sizes and classes of diesel and
gasoline engines, both land-based and marine.

       We received some comments regarding minor typographical errors.  We are finalizing
these changes, but are not summarizing them in this chapter.  We also received comments related
to the testing provisions in part 1065 that are summarized in a separate memorandum to the
docket.

       The following sections summarize and respond to the remaining comments.  We start
with issues of general interest, followed by a separate discussion of issues for each category of
engines.

11.1 General Compliance Provisions (40 Part 1068) and Other Broadly
    Applicable  Comments

       Comment:  EMA objected to the proposed amendment at §1039.240 and §1048.240
requiring that all test points over the durability demonstration meet the emission standard,
especially on account of the variability associated with measuring very low emission levels.
They also pointed  out that the proposed language would be problematic for carry-across
deterioration factors where it would be unclear how to evaluate an engine's compliance at mid-
life measurement points.

       Response:  Our interpretation of this longstanding requirement is that engines must meet
emission standards "throughout the useful life." It would not be appropriate to certify an engine
family if we can expect from the durability demonstration that the engine will be exceeding
emission standards for some portion of the engine's useful life.  This is a concern especially as
we consider the potentially opposing trends for changing HC and NOx emission levels relative to
an NOx+HC emission standard. An engine might have higher emission levels at some mid-life
point than at the end of the useful life.

       We have modified the regulatory language to more carefully specify that the durability
demonstration applies within the engine family. In other words, for a given engine family, all
measured results are expected to be below the applicable standard. This applies for individual
test points and the full-life value after applying the deterioration factor. When applying a carry-
across deterioration factor to a different engine family, the compliance demonstration for the
second engine family would be based solely on the official emission result (from the low-hour
test) and the deteriorated emission result, which results fro m applying the deterioration factor to
the official emission result.
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Issue
§ 1027.105: EMD requested that we update the fee
values in the regulations since they have changed
substantially from the published values that applied in
2005.
Response
The regulations provide a means of calculating the
applicable fees for each new calendar year. It is true that
the tabulated numbers are outdated, but this would occur
again in another year.  We plan to revise this approach in
the future, likely to replace the table of values (for
illustration) with a link to an EPA website that is
updated regularly to include the current figures. In the
meantime, this information  is available in guidance
letters we post on the Internet at:
http://www.epa.gov/otaq/guidance.htm
§ 1068.1: EMA requested that we add text to clarify that
land-based turbines are not subject to part 1068, and that
marine turbines are not subject to part 1068 before they
are subject to emission standards under part 1042.
We have revised §1042.670 to explicitly exclude marine
gas turbine engines from part 1068 until those engines
are subject to standards. For land-based engines, we are
relying on the language of § 1068.1 and § 1068.260 to
make this clear.  Section 1068.1 states that the part
applies to engines that are regulated by one of the
applicable standard-setting parts. Land-based gas
turbine engines are not subject to emission standards.
Also, §1068.260 specifies that the presumption that
engines are subject to part 1068 does not apply for gas
turbine engines.
§1068.25, §1068.105, §1068.261, §1068.501: Impco
supports the proposed changes.
We are adopting the changes as proposed.
EMA expressed a concern about the wide range of
regulatory provisions requiring manufacturers to get
EPA approval.  With no deadline for EPA decisions on
those requests for approval, manufacturers are concerned
that they may be forced into a need to make decisions
regarding their products before the EPA decision is
made and communicated. EMA recommends that EPA
implement formal response deadline and develop a
process for manufacturers to presume EPA approval
under certain circumstances.
We agree that waiting for EPA approval can be difficult
for manufacturers. That is why some provisions allow
manufacturers to presume approval or automatically
grant approval when a certificate is issued.  However, in
certain cases these approaches are not appropriate.  We
commit to evaluate our review practices to eliminate any
unnecessary delays for approvals.
§1033.801: EMD objected to the proposed change to the
definition of "total hydrocarbon" and "total hydrocarbon
equivalent," pointing out that the specified hydrogen-to-
carbon ratio should be characterized as an atomic ratio,
not a mass ratio.
We agree with the comment and have revised the
regulation accordingly. This change applies for several
engine categories.
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Issue
EMA recommended clarifying the regulations where we
define engine families to give examples of "cylinder
arrangements", such as in-line or v-block construction.
This applies across engine categories.
Response
We agree with the comment and have revised the
regulation accordingly. This applies for everything
except locomotives.
EMA noted that the provisions in §1039.235 related to
EPA testing were misplaced, given that the section
heading describes only manufacturers' testing
responsibilities. They also objected to the specific
provision allowing EPA to adjust engines differently
than the manufacturers' settings/adjustments for their
own testing. It was also unclear whether this provision
applied only for certification, or also for selective
enforcement audits.
We agree that the section heading should be revised to
reflect the fact that EPA may also perform tests related
to certification.  These provisions do not apply for
selective enforcement audits, though we may consider
adding comparable language to §1068.410 in the future.
We have revised the regulation to clarify that the
adjustments in question are those that the manufacturer
applies during production.  If the engine might be
calibrated or assembled with a certain degree of
variability, we specifically should not be constrained to
test engines only in the configuration selected by the
manufacturer. This is the primary purpose for
manufacturers to identify the production variability in
their application for certification.

We are making these changes in §1039.235 and
§1042.235. We intend to make these same changes for
nonroad spark-ignition engines in a later rulemaking to
ensure that affected companies will have the opportunity
to comment on the changes.
§1039.715(b): EMA recommended that we the term
"reserved credits" in paragraph (b) to define the term..
We agree with the comment and have revised the
regulation accordingly. This also applies for §1033.715
and §1042.715. We intend to make these same changes
for nonroad spark-ignition engines in a later rulemaking.
§1039.735: EMA suggested that we revise the regulation
to accommodate the fact that engine manufacturers do
not always know the ultimate purchaser for their
engines, which is already reflected in current EPA
implementation of the emission-credit provisions.
We agree with the comment and have revised the
regulation accordingly. This also applies for § 1042.735.
We intend to make these same changes for nonroad
spark-ignition engines in a later rulemaking.
EMA, Impco, and the Industrial Truck Association
objected to the proposed definition of "carryover,"
pointing out that the language seemed to prevent
manufacturers from making any changes if they wanted
to use carryover emission data to certify an engine
family for a subsequent model year.  They recommended
removing the second sentence of the proposed
definition.
We did not intend for the proposed language to be
limiting as understood by the commenters, since it
referred "generally" to the fact that things don't change
from year to year. However, we acknowledge that the
proposed language could continue to cause confusion.
We agree that a shorter definition referring to the actual
carryover provisions in the regulations is sufficient.
This change applies for §1033.901, §1042.901,
§1039.801, and §1048.801.
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Issue
EMA recommended revising the ABT reporting
requirements to refer to "U.S.-directed production
volumes" rather than "engines with a point of first retail
sale in the United States."  This would allow for
manufacturers to make a good-faith effort to determine
whether engines are destined for customers in the United
States or not.
Response
We agree with the comment and making this change in
§1033.730, §1039.730, §1042.730, and §1054.730. We
intend to make these same changes for Marine SI
engines and recreational vehicles in a later rulemaking to
ensure that affected companies will have the opportunity
to comment on the changes.
§ 1068.103(a): EMA shared a concern that limiting
engine families to a certain set of engine configurations
without a proper definition could cause confusion.  In
particular, they noted that the engine configuration
should not be defined by parts that are not emission-
related.
We have adopted a definition of "engine configuration"
in most of the standard-setting parts that would address
EMA's concern. We have revised part 1068 to include
this definition.
§ 1068.105(a): EMA and NMMA recommended adding a
provision specifically allowing equipment manufacturers
(or boat builders) to install engines built before new
standards started to apply if they were held in the engine
manufacturer's inventory.
We agree with the comment and have revised the
regulation accordingly.
§1068.240: EMA recommended making several minor
changes to the section as proposed: (1) correcting cross
references to the revised paragraphs, (2) revising the
labeling requirements to avoid differentiating the
different kinds of replacement engines, (3) revising the
description of "installation instructions" to refer instead
to assembling complete engines.
We agree with the corrected references and have revised
the regulation accordingly.  We also agree that it is not
necessary for labels to differentiate among the different
kinds of replacement engines (this is already the case for
replacement engines under §1068.240(b).  Finally, we
specifically intend for the manufacturers installation
instructions to be something they can provide by, for
example, posting on a publicly accessible website.
§1068.240: EMA suggested that we clarify that
replacement engines meeting the tracking requirements
of § 1068.240(b) not count toward the sales limit for
untracked replacement engines even if it was not clear at
the point of initial shipment to a distributor that the
engine would meet all these requirements.
We agree with the comment and have revised the
regulation accordingly.
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Issue
§1068.240: EMA requested that we accommodate
shipment of engines over 7 liters per cylinder to
distributors before they made the demonstrations
required under § 1068.240(b).  This would allow them to
respond more quickly if an operator would have an
urgent need for a replacement engine.
Response
We understand that manufacturers want to be responsive
to demand for replacement engines, but we are aware
that there is a risk to selling noncompliant engines to a
distributor and trusting the distributor to follow
regulatory requirements in spite of the potential to sell
the  engine as if it were certified. We are therefore
adopting a provision to allow this practice, but are
including a requirement for the manufacturer to report to
EPA annually regarding the disposition of the engine.
The manufacturer would also need to send a final report
after the engine is sold as a replacement engine,
describing how all the requirements and conditions
associated with the exemption were met.  If an engine is
installed in a vessel in a way that does not meet the
requirements of the replacement engine exemption (or
Annex VI, as applicable), the manufacturer would be
found in violation of § 1068.101.
§1068.40: EMA suggested a general change to allow for
lead time to implement technical amendments, providing
an automatic period of 90 days after publication of a
final rule in the Federal Register, or until the start of the
next model year.
Most of the changes we make under part 1068 do not
require lead time because they deal with compliance
provisions describing what to do if something goes
wrong, or the changes add in flexibility. We are revising
§1068.40 in two ways to address EMA's concern. First,
we are adding a provision that specifically allows lead
time for the changes we are making to § 1068.240. If we
are aware of any similar changes that call for lead time,
we can include those with a date for applying the new
requirements. Second, we are including an automatic
60-day grace period for any changes that require a
change in production procedures (including labels), a
redesign of the product, or a change in the information
required for an application for certification. We believe
that any other changes to the  regulation should apply
immediately when the rule change goes into effect.
§1068.225: EMA pointed out the need for a correction to
a reference in paragraph (b).
We agree with the comment and have revised the
regulation accordingly.
§1068.260(a) and (b): EMA requested that we clarify
how these two paragraphs apply for emission-related
components that are not covered by the delegated-
assembly provisions of §1068.261.
We have modified these paragraphs to more clearly state
how we allow manufacturers to ship partially assembled
engines, whether the emission-related components are
shipped along with the engine, or whether they are
shipped separately. In particular, for parts that are not
covered by §1068.261, we would generally  allow for
separate shipment, but we may specify certain
conditions to ensure that engines will eventually be
assembled in a certified configuration.
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Issue
§1068.261: EMA recommended that we clarify which
parts of aftertreatment systems and air intake systems
are subject to the delegated-assembly provisions,
including several specific recommendations about which
parts to include and which parts to exclude.
Response
We are not prepared to make final determinations in this
regard in the current rulemaking. We look forward to
working with engine manufacturers in the future to
further clarify these provisions.
§1068.260(c): EMA recommended that we revise this
provision to mirror § 1068.26 l(b), where manufacturers
keep records instead of asking for approval for an
exemption related to intra-company shipments.
We agree with the comment and have revised the
regulation accordingly.
       In addition, we are making minor changes to the regulations describing how to amend an
application for certification.  In particular, we specify that the application must be amended
based on new information that should be included in the application, rather than referring only to
information that is included in the application. We are also cleaning up the characterization of
what information must be included in the amendment.  We are making these changes to
§§1033.225, 1039.225, and 1042.225.  We intend to make these changes to other parts in a later
rulemaking.
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11.2 Land-based Nonroad Spark-ignition Engines above 19 kW (40 Part 1048)
Issue
Response
§1048.240(e): Impco and the Industrial Truck
Association were concerned that the proposed language
would prevent manufacturers from demonstrating
compliance with the field-testing standards using
engines that no longer qualified as low-hour engines.
We agree that there was no intent to limit testing to low-
hour engines. We have revised the regulatory text to
require manufacturers to demonstrate that engines
comply with field-testing standards "throughout the
useful life." Depending on the circumstances,
manufacturers might apply deterioration factors to
emission results from low-hour engines, but other
approaches may also be acceptable.
§1048.405: Impco and the Industrial Truck Association
objected to the proposed change to allow 24 months to
complete testing after EPA received an in-use test plan
(rather than starting the clock after approving the plan),
recommending that the language remain unchanged to
avoid penalizing manufacturers if EPA takes a long time
to review the plan, or revise the regulation to specify that
plans are presumed to be approved within 30 days.
EMA suggested that we omit the 24-month specification
and replace it with a 36-month requirement from the
point of selecting a family for in-use testing.  EMA also
suggested adding a provision to allow EPA to approve
an extension of the deadline for circumstances beyond
the manufacturer's control.
We believe EMA's suggested approach of specifying a
36-month deadline for the overall testing program is the
most effective way to address the various concerns for
EPA and manufacturers.  We are also including in the
final rule a requirement that manufacturers respond to an
EPA request for additional information within 30 days.
This would address the problem we have experienced
recently by multiple manufacturers that submitted
incomplete or inadequate testing plans and were not very
responsive to requests for complete and correct
information.

The regulation currently allows us to cancel the test plan
for circumstances beyond the manufacturers' control.
We agree that it would be appropriate to allow us instead
to extend the deadlines.
§1048.30: EMA objected to the proposed provision
requiring manufacturers to keep records for one year if
the records are not related to certification.
The regulations specify several recordkeeping
requirements that are unrelated to certification, such as
records related to exempt engines. Unless we state how
long these records must be kept, any such recordkeeping
requirement will not be meaningful or enforceable. It is
therefore not appropriate to make the suggested change.
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11.3 Locomotives (40 Parts 92 and 1033)

       Locomotives Operating in Mexico

       Comment: Under current regulations, EPA does not allow locomotive manufacturers to
introduce engine designs that increase NOx emissions when the locomotive is operating in
Mexico, even if the engine design would reverse the adjustment to allow the locomotive to
conform to NOx emissions standards when it returns to the United States. EPA noted its
concerns over the potential adverse impacts on U.S. air quality, recognizing that emissions that
occur outside the territorial boundaries of the U.S. can impact air quality within the U.S.
Locomotive manufacturers had objected to these regulations, claiming EPA had no authority to
prevent such designs. We did not propose to change these provisions, but we requested
comment on what conditions we should set if we allow such designs, including whether to
approve the design only if it was calibrated to remain in the low NOx mode until it was at least
200 miles away from the U.S. border.

       Two locomotive manufacturers commented that EPA does not have authority to prevent
these engine designs because they affect emissions performance  outside the United States. They
also provided additional comments with respect to how EPA should apply and enforce an
allowance to include such features. EMA commented that EPA should not allow such features
for Tier 4 locomotives because of concerns about catalyst damage.

       Response: The two commenters who support these engine designs continue to argue that
EPA does not have authority to prevent these engine designs because they affect emissions
performance outside the United States.  The commenters did not support EPA allowing such an
engine design only if it operates beyond 200 miles beyond U.S. territory,  saying any limitation of
operation outside of the United States is inappropriate.  As we stated previously, we disagree
with the commenters' claim that EPA does not have the authority to restrict the types of AECDs
in question for locomotives introduced into U.S.  commerce.  Section 203(a)(3) of the CAA gives
EPA broad authority to prohibit the installation of components that render emission controls
inoperative. As we have stated, emissions that occur in Mexico can and do affect U.S. air quality,
and EPA is authorized to deny introduction of locomotives and locomotive engines into
American commerce that adversely effect air quality in the United States. Neither commenter
disputes that emissions outside the U.S. can affect U.S. air quality. Neither the Clean Air Act
nor the existing regulations require any exceptions for AECDs that only operate outside the U.S.

       In addition, the comment from EMA indicates that, at least with regard to one type of
emission control (SCR), extended disabling of the emission control could lead to deterioration or
malfunction of the emission control that would prevent the controls from  performing as intended
when they would be reactivated. This is further reason not to allow such AECDs in these
engines that go back and forth over the United States border. We reject the commenters'
argument regarding EPA authority, and for the reasons discussed above, EPA will not change its
regulations to allow such AECDs.
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Energy Saving Design Features

    Comment: GE opposed the proposed change to §1033.530(h) to limit this provision to new
features that were not commonly incorporated into locomotives in 2008.  In particular they were
concerned about distributed power technology that uses radio controls to optimize operation of
locomotives throughout a train.  Such technology was being incorporated into some but not all
newly manufactured locomotives in 2008, but not incorporated into most older locomotives.

    Response: We agree with GE that the case of distributed power technology is not clear.
Therefore, we are adding a special provision to §1033.530(h)  to address it. This provision
specifies that the adjustment for incorporating distributed power in freshly manufactured
locomotives will be prorated by 50 percent.  This proration reflects that fact that the fraction of a
manufacturer's new sales that included distributed power has  varied over the last few years and
varied by manufacturer.  In some cases, it has been as low as zero percent, while in others it has
been essentially all locomotives.
Issue
Response
GE asked that hotel power for passenger locomotives be
excluded from the definition of AECD.
We continue to believe that hotel power falls within the
proper scope of what is an AECD. However, GE's
concern is being addressed by clarifying that hotel
power is not a defeat device, provided the same emission
controls are applied in hotel and non-hotel modes (as
was already specified in the existing regulations) or we
approve necessary modification of the emission controls.
EMD requested that we modify the interim test fuel
allowances of §92.12 and §1033.150.
This issue was addressed in a previous rulemaking (73
FR 3797).
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11.4 Land-based Nonroad Diesel Engines (40 Parts 89 and  1039)
Issue
Response
§1039.125: EMA recommended changing the
maintenance specifications for paniculate traps and
trap oxidizers to allow for replacement of these
components, not just cleaning and repair.
In practice, the filters on such parts may be cleaned in place
on the equipment but may also be removed from the
equipment and cleaned in a separate location (making it
impractical to install the  original filter). If the filter is
cleaned in a separate location, then a previously cleaned
alternate filter could be installed in its place.  We believe the
existing regulatory language that allows for the cleaning of
such parts allows for the  installation of an alternate cleaned
filter. Under such practice the replacement filter should be
comparable to the original filter since the filter must enable
the engine to meet the same emission standard and
subsequent maintenance  intervals as the originally certified
configuration.
§ 1039.125 EMA also requested that we allow
manufacturers to schedule maintenance more
frequently, and that we allow them to replace old
trap-related components with new components.
We agree with EMA's suggestion that we allow scheduling
shorter intervals and replacement with new components,
provided that manufacturers pay for the maintenance and
they demonstrate to our satisfaction that such maintenance
will be performed according to the specified schedule.  We
are also finalizing the proposed revisions to § 1039.125(a)(5),
which allows the manufacturer to request shorter
maintenance intervals under limited conditions.  Any shorter
maintenance intervals approved by EPA under
§1039.125(a)(5) do not require the manufacturer to pay for
such maintenance unless the manufacturer chooses to do so
to fulfill the requirements of § 1039.125(a)(l).
§1039.135: EMA pointed out that they will need
lead time to implement the revised labeling
requirements. They also requested that we clarify
that a flexible approach to identifying dates of
manufacture is acceptable to avoid potentially
conflicting requirements.  Dates may be expressed
for example as 06/2009 or 2009/06.
We agree that manufacturers may need several months to
modify their labeling practices. We have included a
provision in §1039.104 to specify that the new requirement
does not start until the 2011 model year.

As we noted in an earlier rule, "We intend to further
standardize labeling with further specification related to the
format of the build date. For example, we believe it is not
appropriate to identify the date with coded alphanumeric
characters intended to disguise the information from anyone
who is not privy to the coded meaning. Spelling out the full
date is clearly acceptable.  We would also consider acceptable
certain standard abbreviations, such as Sep 10 or 09/10 to
indicate September 2010.  We plan to propose detailed
specifications in a future rulemaking to describe a range of
acceptable ways to identify an engine's build date."  We
would also agree that reversing the month and year is
acceptable.
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Issue
§1039.201(h): EMA questioned whether the
proposed provision allowing for alternate
certification processes was necessary considering
that §1039.605 seems to address a similar concern.
EMA requested that we at least clarify that
manufacturers modifying certified engines and
recertifying them in a different configuration are
responsible for their work. EMA recommended the
following language: "The alternate certification
provisions identified are the responsibility of the
party responsible for the conversion of the engine
from its original certified motor vehicle
configuration to  its nonroad configuration."
Response
The provisions of §1039.605 describe how a company can
avoid re-certifying an engine that is adapted for use in an
application that differs from the original certification. There
are circumstances where a different kind of conversion or
modification would occur that would require recertification.
It may be difficult to follow all the normal certification
procedures under these circumstances (such as doing a low-
hour test and applying a deterioration factor to an engine that
has already undergone substantial operation in the field). We
need to be able to adjust the certification protocol for these
unusual circumstances. It should be clear that the
manufacturer that modifies and recertifies the engine is
responsible for their work, both to certify the engines and to
modify them in a way that is consistent with their
certification. Note also that the prohibitions identified in
§1068.101 apply to the company that introduces engines into
commerce.
§1039.225(1): EMA objected to the regulatory
language specifying that manufacturers raising their
PEL for a family mid-year must use the higher PEL
for the whole model year (unless they raise the PEL
to reflect a new engine configuration in the family).
The proposed approach is something we have already
adopted in most of our nonroad programs.  Manufacturers
establish an PEL for the emission family based on
certification testing with the worst-case engine configuration.
If manufacturers add a new configuration that has higher
emissions than the original certification engine, they should
be able to raise the PEL  starting with the introduction of the
new engine configuration. Absent such a change, it is not
clear that there would be any technical basis for changing the
PEL only after some point in time.  If the engine family
needs a higher PEL to ensure compliance, then this
conclusion should apply for the whole engine family. We
note further that the provision in question specifies only that
the higher PEL applies for calculating emission credits at the
end of the model year; it does not address in-use compliance.
§1039.245: EMA suggested revising the regulatory
text to refer to "steady-state and transient test
cycles" instead of "duty-cycle emission standards".
EMA properly interpreted the regulatory provision as
proposed. We refer to "duty-cycle emission standards" and
"duty-cycle testing" in various places in the regulations to
contrast these with not-to-exceed testing and standards,
which do not involve operation over a specific duty cycle.
We believe this change is not necessary.
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Issue
§1039.715: EMA recommended that we revise the
description of banked emission credits. (1)
Paragraph (a) should continue to limit credit
banking.  (2) Use the term "reserved credits" in
paragraph (b) to define the term..
Response


Part of the rationale for making the changes to §1039.715
was to clarify the relationship between banking and
averaging. Banking refers simply to carrying over a balance
of emission credits; this involves no transaction or use of the
credits. Manufacturers "spend" these credits by trading them
or using averaging to demonstrate compliance in a given
model year.  It is not necessary to limit banking to an
averaging set because there is no transaction. We limit credit
exchanges to an averaging set for trading and averaging,
where there is a transaction to use up the credits.

We agree that paragraph (b) should identify reserved credits
and have revised the regulation accordingly.
§1039.801: EMA pointed out that the definition of
"new nonroad engine" mistakenly omitted the table
describing when emission standards started to
apply.
We agree with the comment and have revised the regulation
accordingly.
§89.109(c)(4): EMA suggested adding in a specific
allowance to schedule maintenance involving
replacement of certain components.
The provisions of §89.101(b) already allow for
manufacturers to include part replacements in their scheduled
maintenance, since this is consistent with the approach
specified in § 1039.125 starting with Tier 4 standards.  We
will approve any request to apply this Tier 4 provision early.
§1039.627(a)(3): EMA pointed out that the
references to §1039.102 should point to paragraph
(e), not (d).
We agree with the comment and have revised the regulation
accordingly.
11.5 Evaporative Emission Standards for Nonroad Spark-ignition Engines
     and Equipment (40 Part 1060)
Issue
    Response
§1060.520: MTD pointed out that our sample calculation
for determining a mass emission rate did not match the
lead-in description and appeared to include an error in
the final value.
    We agree with the comment and have revised the
    regulation accordingly.
§ 1060.137: EMA suggested making a broader
accommodation to omit labeling of very small
components.
    We agree with the comment and have revised the
    regulation accordingly.
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11.6 Heavy-Duty Highway Engines
Issue
Response
§86.1001-84: EMA suggested allowing manufacturers of
heavy-duty vehicles certified using chassis-based test
procedures to use the SEA provision in part 86, subpart
G, or in part 1068, subpart E.
We agree with the comment and have revised the
regulation accordingly.  This provision is stated in
§86.601-84.
§1068.410: EMA suggested that we specify that the idle-
speed adjustments not apply for heavy-duty highway
engines.
We believe it is appropriate to omit the specified idle-
speed adjustment for all manufacturers. This is most
likely to apply for Small SI engines and we concluded
that this provision should not be part of production-line
testing for those engines.
§1068.415(a): EMA recommended that we add
regulatory text to preserve the current policy describing
which test procedures apply for selective enforcement
audits with heavy-duty engines.
We agree with the comment.  We have included the
paragraph in question in the revised §86.1001, and not in
part 1068, since part 86 is the standard-setting part for
heavy-duty highway engines.
§ 1068.415(c): EMA expressed a concern that an
expectation for testing two engines per day was
unreasonable in many cases.  Paying for outside testing
would be very costly, would  add complexity with
respect to quality control, and would be difficult to
justify.  EMA requested that we clarify that limited
testing capability in existing certification test cells
should be a valid bases for approving a reduced testing
rate.
We are aware that selective enforcement audit testing
would pose a challenge for manufacturers that likely
have a full schedule of testing for their test labs.  We
will take this into account as best we can in the effort to
complete the audit in a timely way.

We expect to revisit this provision in a future rule to
more carefully specify minimum testing rates for
engines tested under selective enforcement auditing.
§1068.440: EMA recommended revising the text to
avoid using the term "production-line testing," since this
may be understood to imply a requirement for
manufacturers to perform routine testing with production
engines.  This would not be appropriate for heavy-duty
highway engines.
We agree with the comment and have revised the
regulation accordingly.
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11.7 Marine Spark-ignition Engines (40 Part 1045)
Issue
Response
§1045.405: Impco and the Industrial Truck Association
objected to the proposed change to allow 24 months to
complete testing after EPA received an in-use test plan
(rather than starting the clock after approving the plan),
recommending that the language remain unchanged to
avoid penalizing manufacturers if EPA takes a long time
to review the plan, or revise the regulation to specify that
plans are presumed to be approved within 30 days.
EMA suggested that we omit the 24-month specification
and replace it with a 36-month requirement from the
point of selecting a family for in-use testing.  EMA also
suggested adding a provision to allow EPA to approve
an extension of the deadline for circumstances beyond
the manufacturer's control.
We believe EMA's suggested approach of specifying a
36-month deadline for the overall testing program is the
most effective way to address the various concerns for
EPA and manufacturers.  We are also including in the
final rule a requirement that manufacturers respond to an
EPA request for additional information within 30 days.
This would address the problem we have experienced
recently by multiple manufacturers that submitted
incomplete or inadequate testing plans and were not very
responsive to requests for complete and correct
information.

The regulation currently allows us to cancel the test plan
for circumstances beyond the manufacturers' control.
We agree that it would be appropriate to allow us instead
to extend the deadlines.
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