[Federal Register Volume 66, Number 137 (Tuesday, July 17, 2001)]
[Rules and Regulations]
[Pages 37156-37165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17563]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-7011-2]
RIN 2060-Ai98


Regulation of Fuel and Fuel Additives: Reformulated Gasoline 
Adjustment

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: With today's action, EPA is adjusting the volatile organic 
compound (VOC) performance standard under Phase II of the reformulated 
gasoline (RFG) program for ethanol RFG blends containing 3.5 weight 
percent oxygen (10 volume percent ethanol) sold in the Chicago and 
Milwaukee RFG areas. As discussed in the Notice of Proposed Rulemaking 
for this adjustment, the EPA is exercising its discretion under Section 
211(k)(1) of the Clean Air Act which directs EPA, in promulgating 
emission reduction standards for RFG, to consider the cost of achieving 
such emission reductions as well as any nonair-quality and other air-
quality related health and environmental impacts.
    This adjustment reduces by 2.0 percentage points (equivalent to an 
increase in Reid Vapor Pressure (RVP) of approximately 0.3 pounds per 
square inch (psi)) the summertime VOC performance standard applicable 
to RFG blends containing 10 volume percent ethanol.

DATES: This rule is effective on July 17, 2001. For additional 
information on the effective date, see SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: For further information about this 
rule, contact Barry Garelick, Environmental Protection Specialist, 
Office of Transportation and Air Quality, Transportation and Regional 
Programs Division, at (202) 564-9028.

SUPPLEMENTARY INFORMATION: EPA believes that it is appropriate to make 
today's final rule effective immediately upon today's publication in 
the Federal Register. Because of the limited geographic scope of this 
rule, and because this rule generally provides for additional 
flexibility, it should not be problematic for regulated parties to 
immediately utilize and/or comply with the provision of this rule. 
Although this final rule includes some new requirements, these 
requirements are reasonable and necessary to provide the increased 
flexibility also included in this rule. EPA notes that the general 
requirement in 5 U.S.C. 553(d) of the Administrative Procedure Act 
(APA), concerning publication or service of a substantive rule not less 
than 30 days prior to its effective date, does not apply here. CAA 
section 307(d)(1) provides that section 553 of the APA does not apply 
to promulgation or revision of any regulation pertaining to fuels or 
fuel additives under section 211 of the CAA. Even if section 553(d) of 
the APA were to apply, there is good cause under section 553(d)(3) to 
provide less than 30 days notice, for the reasons noted above.
    The purpose of the RFG program is to improve air quality in 
specified areas of the country by requiring reductions in emissions of 
ozone-forming volatile organic compounds (VOCs) and oxides of nitrogen 
(NOX), and in emissions of toxic air pollutants, through the 
reformulation of gasoline, pursuant to 211(k) of the Clean Air Act (CAA 
or the Act), as amended. In the Act, Congress specified that RFG 
contain at least 2.0 weight percent oxygen. MTBE and ethanol are the 
two forms of chemical oxygen (or oxygenates) that gasoline producers 
most commonly use to add oxygen to gasoline. MTBE and ethanol have also 
been used in conventional gasoline, as octane enhancers, since the 
1970s.
    In September 1996, EPA awarded a contract to the National Research 
Council (NRC) to determine whether the reactivity (i.e., ozone-forming 
capacity) of VOCs can be taken into account in the RFG program without 
adversely impacting RFG's air quality benefits. In a report released in 
May 1999, the NRC found significant air quality benefits from RFG and 
recommended that ``the contribution of carbon monoxide (CO) to ozone 
formation should be recognized in assessments of the effects of RFG.'' 
Ozone-Forming Potential of Reformulated Gasoline, National Academy 
Press, at p. 6 (1999). Mobile sources are a major source of CO 
emissions, contributing approximately 90 percent of the total CO for 
Chicago and Milwaukee.
    In December 1998, EPA established the Blue Ribbon Panel on 
Oxygenates in Gasoline, a panel of independent experts, to examine 
MTBE's performance in gasoline, its presence in water, and alternatives 
to its use. (While EPA established the panel for reasons that were 
independent of ethanol issues and the NRC study on RFG, its relevance 
to this rulemaking is discussed further below.) Panel recommendations 
made to EPA in July 1999 include:
     Ensure no loss of current air quality benefits from RFG.
     Reduce the use of MTBE, and seek Congressional action to 
remove the RFG oxygen requirement in the Act.
     Strengthen the nation's water protection programs, 
including the Underground Storage Tank (UST), Safe Drinking Water, and 
private well protection programs.
    On July 12, 2000, EPA proposed to adjust the VOC performance 
standard for RFG with 3.5 weight percent oxygen (equivalent to 10 
volume percent ethanol) by 1.0 percentage point. As proposed, this 
adjustment to the VOC performance standard would apply to RFG marketed 
in all areas of the nation using RFG. As discussed in the Notice of 
Proposed Rulemaking for this

[[Page 37157]]

adjustment (65 FR 42922; July 12, 2000), EPA proposed to exercise its 
discretion under Section 211(k)(1) of the Clean Air Act which directs 
EPA, in promulgating emission reduction standards for RFG, to consider 
the cost of achieving such emission reductions as well as any nonair-
quality and other air-quality related health and environmental impacts. 
The intent of the proposed rule was to increase the flexibility 
available to refiners to formulate RFG with ethanol while continuing to 
achieve ozone benefits similar to those of the current Phase II RFG 
program. Finally, the proposed rule was also intended to implement the 
NRC recommendation that EPA take into consideration the contribution of 
CO to ozone formation.\1\
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    \1\ Additionally, the NPRM discussed reduction and avoidance of 
increased MTBE as a potential benefit. We recognize, however, that 
EPA's evaluation of the potential water quality impacts of using 
MTBE and the strategies available to minimize any such impacts is 
incomplete. Therefore, we believe that today's rule is appropriate 
regardless of any effects on MTBE use. We do not specifically rely 
on MTBE-related benefits as a justification for this adjustment of 
the VOC performance standard.
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    In the proposal for the 1.0 percentage point adjustment (equivalent 
to an increase in RVP of approximately 0.2 psi), we also solicited 
comment on a recommendation by the Illinois Environmental Protection 
Agency (IEPA) for a VOC adjustment of 3.7 percentage points (equivalent 
to an increase in RVP of 0.5 psi). IEPA's recommendation was based in 
part on a photochemical modeling study conducted for the lower Lake 
Michigan region.
    We received approximately 30 comments on the proposed rule, from 
states and state associations, refiners and their trade associations, 
automobile manufacturing associations, oxygenate producer associations, 
and 200 post cards from citizens of Illinois advocating adoption of the 
larger adjustment recommended by IEPA. Comments from refiners generally 
expressed concern that the adjustment as proposed would not provide 
sufficient flexibility to switch from MTBE to ethanol because the size 
of the adjustment would not result in a significant cost reduction. 
Ethanol industry representatives commented that the adjustment should 
be larger than proposed, specifically endorsing IEPA's recommendation 
of an adjustment equivalent to a 0.5 psi increase in RVP. States were 
divided on the proposal which was not restricted to Chicago and 
Milwaukee; some maintained that the adjustment would have an adverse 
effect on air quality, while others supported an adjustment.
    Refiners and representatives of the ethanol industry opposed the 
proposed prohibition of oxygen credit generation for batches of RFG 
that comply with the adjusted VOC standard and argued that the 
prohibition might increase the use of MTBE among refiners that would 
otherwise rely upon such credits. Refiners also opposed the Product 
Transfer Document requirements, claiming that they would result in 
higher costs because refiners would need to build more tankage to 
ensure segregation of VOC adjusted RFG from other RFG.
    After evaluating all of the comments, EPA has decided to finalize 
the VOC adjustment rule, with certain modifications and clarifications. 
We are limiting application of the adjusted VOC standard to the Chicago 
and Milwaukee RFG areas where ethanol RFG currently makes up 100 
percent of the market. With 100 percent ethanol penetration, there is 
no mixing of ethanol and non-ethanol RFG in vehicle gas tanks. When 
gasoline with ethanol is mixed with non-ethanol gasoline in a car's 
fuel tank (often referred to as ``commingling''), the evaporation rate 
of the mixture is increased, resulting in an increase in emissions of 
smog-causing pollutants and which is not currently accounted for in the 
RFG program. In areas like St. Louis, where less than 100 percent of 
the RFG contains ethanol, the rule as proposed had the potential to 
cause more ethanol RFG to be made in these mixed RFG areas. If more 
ethanol RFG is used, the amount of commingling will tend to increase, 
resulting in an increase in emissions of VOC in addition to those 
associated with the adjustment to the VOC performance standard itself. 
To avoid the possibility of any significant VOC increases associated 
with commingling (which EPA has not fully analyzed or evaluated), the 
rule as finalized will be restricted to Chicago and Milwaukee. Analysis 
and quantification of the VOC increases--as well as the existing 
unaccounted for VOC emissions--associated with commingling would need 
to be factored into any consideration of a potential adjustment of the 
RFG performance standard in areas outside of Chicago and Milwaukee. 
Finally, the adjusted standard is based on photochemical modeling 
conducted by IEPA that is unique to the Chicago/Milwaukee area 
(discussed in further detail in Section I.G. below). We do not believe 
that the results of this modeling can be extended to areas outside this 
region and we currently lack photochemical modeling similar to IEPA's 
for other regions that would allow us to make conclusions about the 
appropriateness of adjustments to the VOC standard in other RFG areas.
    While we are not adopting IEPA's recommended adjustment of 3.7 
percentage points, we are increasing the 1.0 percentage point 
adjustment to 2.0 percentage points (equivalent to an increase in RVP 
of approximately 0.3 psi). We have concluded that IEPA's approach does 
not provide sufficient confidence that adverse ozone effects would not 
occur in the Chicago nonattainment area with the larger adjustment of 
3.7 percentage points. We found several deficiencies in the emission 
calculations which IEPA used in its justification of a 0.5 psi 
adjustment. These are discussed in detail in Section I.G. below.
    Finally, we are not taking or proposing action at this time 
regarding elimination or adjustment of the 1.5 weight percent oxygen 
minimum. We are continuing to review the comments received, however, 
and may consider action in the future.
    The contents of today's preamble are listed in the following 
outline.

I. Adjusted VOC Standard Under Phase II of the RFG Program
    A. Regulated Entities
    B. Regional Applicability
    C. Commingling Effects
    D. Oxygen Credit Generation for VOC Adjusted RFG
    E. Segregation
    F. Effect of Rule on NOX and Toxics
    G. Consideration of Recommendation of Illinois EPA
    H. Impact of Adjusted Standard on SIPs
II. Administrative Requirements
    A. Submission to Congress and the Comptroller General
    B. Executive Order 12866
    C. Executive Order 13132 (Federalism)
    D. Executive Order 13084: Consultation and Coordination With 
Indian Tribal Governments
    E. Regulatory Flexibility
    F. Paperwork Reduction Act
    G. Unfunded Mandates Reform Act
    H. Executive Order 13045: Children's Health Protection
    I. National Technology Transfer and Advancement Act of 1995 
(NTTAA)
    J. Statutory Authority
    K. Executive Order 13211 (Energy Effects)

I. Adjusted VOC Standard Under Phase II of the RFG Program

A. Regulated Entities

    Regulated categories and entities potentially affected by this 
action include:

[[Page 37158]]



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                                                Examples of regulated
                 Category                             entities
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NAICS 32411...............................  Refiners, importers,
                                             oxygenate producers, and
                                             oxygenate blenders of
                                             reformulated gasoline.
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could be potentially regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
an entity is regulated by this action, one should carefully examine the 
RFG provisions at 40 CFR Part 80, particularly Sec. 80.41 dealing 
specifically with the RFG standards. If you have questions regarding 
the applicability of this action to a particular entity, consult the 
person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

B. Regional Applicability

    EPA has determined that a 2.0 percentage point adjustment to the 
VOC performance standard for 10 percent ethanol RFG (equivalent to an 
increase in RVP of approximately 0.3 psi) is appropriate in the Chicago 
and Milwaukee RFG areas. As expressed in our notice of proposed 
rulemaking (65 FR 42920, 42924, July 12, 2000), EPA's intent is to 
offset partially the incremental cost associated with the production of 
ethanol-blended RFG in order to provide additional flexibility to 
refiners.\2\ EPA is also taking a reasonable approach to ensure that 
RFG will continue to provide a similar level of overall benefits.
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    \2\ The ethanol industry originally feared that the increased 
stringency of the Phase II VOC standard would result in ethanol 
being ``locked out'' of the RFG market. Last summer's RFG market 
proved otherwise, however. This suggests that with economic 
conditions similar to last summer's the current Phase II standard 
should not prevent refiners from making RFG with ethanol. More 
importantly, however, it suggests that an adjustment will offer 
increased flexibility to refiners. Thus even if market conditions 
change, we believe an adjustment will provide an incentive to make 
more RFG with ethanol than without such adjustment. Finally, one 
refiner commented that the 1 percentage point adjustment would 
result in that refiner making approximately 5 percent more RFG with 
ethanol than without the adjustment. We believe, therefore that the 
2 percentage point adjustment will allow even greater flexibility to 
refiners, and will help to prevent increased use of MTBE in these 
areas.
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    By limiting application of the VOC adjustment to the Chicago and 
Milwaukee RFG areas, we will provide additional flexibility for fuel 
providers that currently produce RFG for ethanol blending in the two 
metropolitan areas that use ethanol exclusively in RFG. This 
flexibility will help to ensure that the refiners that make ethanol RFG 
are able to continue to do so at reduced cost. Moreover, we are 
confident based on modeling that Illinois Environmental Protection 
Agency (IEPA) has conducted (discussed in more detail in Section I.G.) 
that a 2.0 percentage point adjustment to the VOC standard (equivalent 
to an RVP increase of approximately 0.3 psi) for these areas will still 
realize ozone benefits similar to those of the current Phase II 
program.
    Based on our evaluation of the relevant data, however, we have 
concluded that there is sufficient uncertainty regarding the potential 
for adverse environmental consequences from a VOC adjustment in RFG 
areas outside of Chicago and Milwaukee to allow such an adjustment at 
this time. Specifically, several commenters \3\ pointed out that in 
areas where both MTBE-blended and ethanol-blended RFG are used, 
increased VOC emissions could occur due to the additional commingling 
of MTBE and ethanol RFG in automobile gasoline tanks. (See the 
discussion of commingling in section I.C. for further details.) 
Therefore, commenters suggested that if EPA established a VOC 
adjustment for RFG areas where ethanol is not the predominant oxygenate 
(i.e., areas other than Chicago and Milwaukee), EPA would need to 
consider the emissions impact of commingling. Additionally, several 
comments suggested that any increase in ethanol use might be 
accompanied by an increase in evaporative VOC emissions due to 
increased permeation of ethanol through vehicle fuel system components 
such as hoses and seals. We agree that any evaluation of the 
appropriateness of a VOC adjustment should include consideration of 
commingling and permeation as well as other emission-related impacts. 
Based on uncertainty regarding the potential emissions impact of mixed 
ethanol/MTBE pools in RFG areas outside of Chicago and Milwaukee, we 
are unable to conclude at this time that a VOC adjustment is 
appropriate for such areas.
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    \3\ Commenters were Alliance of Automobile Manufacturers, 
Oxygenated Fuels Association, American Lung Association, California 
Air Resources Board, and NESCAUM.
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    In addition, the size of the adjusted VOC standard itself is 
derived from data specific to the Chicago/Milwaukee region. As 
discussed in detail in Section I.G below, the 2.0 percentage point 
adjustment (equivalent to an RVP increase of 0.3 psi) was based on 
photochemical modeling that Illinois Environmental Protection Agency 
(IEPA) conducted. The modeling represents the specific lower Lake 
Michigan region to which the standard will apply. As such, because the 
modeling results are dependent on the pollutant mix and geographic and 
meteorological features specific to that region, the photochemical 
modeling results cannot be extended to other areas.
    Overall, we believe that a 2.0 percentage point adjustment to the 
VOC performance standard (equivalent to an RVP increase of 
approximately 0.3 psi) is appropriate for RFG with 10 volume percent 
ethanol sold in the Chicago and Milwaukee RFG area. Because ethanol RFG 
constitutes virtually 100 percent of the RFG market in the Chicago and 
Milwaukee area, they are significantly different from other RFG areas. 
Today's rule is unlikely to change this market share. For this reason, 
and because EPA is relying on modeling data specific to these areas, we 
believe it is appropriate to limit the rule to Chicago and Milwaukee. 
(See Section I.C. for a more detailed discussion of commingling.)
    Several questions remain regarding the impact that such a VOC 
performance standard adjustment might have on overall emissions from 
RFG in the future. Specifically, newer car technology and low sulfur 
gasoline will tend to lower CO emissions generally, and therefore 
decrease the amount of CO reduction resulting from the higher oxygen 
levels associated with RFG containing 10 volume percent ethanol. Also, 
while it is our expectation that the market share of ethanol-blended 
RFG in the Chicago and Milwaukee areas will remain at 100 percent, some 
question exists regarding the future market share of ethanol blends in 
these areas based in part on future demand for ethanol in other areas 
of the U.S. and how that might affect supply, prices, and penetration 
level in the Midwest. Therefore, EPA will continue to evaluate the 
effect of Tier 2 technology and Tier 2 low sulfur gasoline on CO 
emissions as well as market conditions with respect to ethanol and MTBE 
use.

C. Commingling Effects

    Several parties commented that, in areas that currently use RFG 
with MTBE, increases in the use of ethanol-blended RFG associated with 
the proposed rule would result in an increase of commingling of MTBE 
and ethanol RFG blends in automobile gasoline tanks. Since the presence 
of ethanol causes an increase in the volatility of gasoline (as 
measured by Reid Vapor Pressure or RVP), such additional commingling 
would

[[Page 37159]]

contribute to an increase in VOC emissions beyond that associated with 
the adjustment itself. Some comments raised this issue, and pointed out 
that our estimates of VOC emission increases resulting from the VOC 
adjustment should have taken commingling effects into account.
    In Chicago and Milwaukee, however, virtually 100 percent of the RFG 
has been oxygenated with ethanol since 1995, and EPA generally does not 
expect that pattern to change significantly in the foreseeable future; 
in fact, one of the outcomes of this rule is to help ensure that this 
pattern continues, by making ethanol use more cost-effective. EPA 
believes that this rule will not result in any additional VOC emissions 
due to commingling in the Chicago and Milwaukee RFG areas.
    Given that there may be unaccounted commingling emissions in other 
areas (unlike in Chicago and Milwaukee), and that EPA has not fully 
evaluated such areas, we are finalizing the VOC adjustment only for the 
Chicago and Milwaukee areas.

D. Oxygen Credit Generation for VOC Adjusted RFG

    Today's final rule allows refiners to trade oxygen credits that are 
generated by production of VOC adjusted RFG. EPA proposed to prohibit 
refiners from generating oxygen credits for adjusted VOC RFG because we 
believed that trading such credits might result in less overall ozone 
reduction from the oxygen content requirement than the statute 
implicitly anticipates. Many comments opposed EPA's proposed 
prohibition on oxygen credit generation for adjusted VOC RFG, arguing 
that the prohibition would limit refiner flexibility and could result 
in increased use of MTBE by refiners that would otherwise rely on 
oxygen credits. Comments further argued that the emission benefits in 
the region where RFG containing 3.5 weight percent oxygen is used are 
not diminished even if the oxygen credits are traded, because such 
credits are traded to other areas that use predominantly MTBE.
    Currently, some RFG contains oxygen in excess of 2.0 weight percent 
(e.g., most ethanol blends contain 3.5 weight percent oxygen). Such 
blends provide greater CO reductions than RFG blends with 2.0 percent 
or lower oxygen. Oxygen trading allows refiners to bank and trade 
credits for the oxygen content of their RFG above 2.0 by weight (or 
above 2.1 percent if the refiner complies on average). The refiner may 
then sell these credits to other refiners that produce RFG with less 
than 2.0 weight percent oxygen, allowing them to meet the oxygen 
content limit. However, no gallon of RFG may contain less than 1.5 
weight percent oxygen (subject to EPA raising--or ratcheting--the per 
gallon minimum if an RFG area fails an annual oxygen content survey). 
See 40 CFR 80.67. The oxygen credit trading program may result in 
different CO benefits for different areas of the country; i.e., where 
oxygen is used at higher rates, RFG provides a greater CO benefit, and 
where oxygen is used at lower rates, RFG provides less CO benefit. The 
minimum oxygen requirement, however, limits the potential for differing 
effects and assures some degree of CO benefit everywhere RFG is used.
    The RFG program has not generally accounted for the impact that its 
various requirements may have on CO emissions. Today's rule is the 
first rule under the RFG program that attempts to take CO emissions 
into account. Nonetheless, this rule is not intended to establish a 
comprehensive mechanism for recognizing the CO benefits of the RFG 
program.
    Conceptually, a limit on the trading of oxygen credits for VOC 
adjusted RFG might help to ensure that the greater CO benefits from 
ethanol RFG areas are not used to both offset a VOC increase in the 
ethanol RFG areas and result in less CO benefits in non-ethanol RFG 
areas through credit trading. However, this would be, at best, an 
indirect approach to addressing the issue of a comprehensive accounting 
for CO. Additionally, such a restriction would not, in fact, have 
provided any assurance that greater CO reductions would have actually 
been achieved by non-ethanol blends. That is, refiners wishing to 
market gasoline with less than 2.0 percent oxygen by weight might 
simply turn to other sources of oxygen credits.
    Moreover, because the actual gasoline oxygen content in a non-
ethanol RFG area is not likely to be below 2.0 weight percent for all 
the gasoline in the area (and if it is, there is already a mechanism in 
the regulations to address the situation), and because the level cannot 
fall below 1.5 percent for any gallon of RFG (subject to ratcheting), 
the reduction in CO benefits for non-ethanol areas (if any) will be 
small relative to the increase in benefits associated with ethanol RFG. 
In any event, implementation of today's VOC adjustment, without any 
restriction on credit generation or trading, will not result in any 
increase or change in emissions in non-ethanol areas above current 
levels.
    Finally, because oxygen credits are generally used by refiners 
producing non-ethanol gasoline sold in Northeast RFG areas, any 
shortage of credits resulting from a trading restriction is likely to 
result in an increase in MTBE use in the Northeast, which would run 
directly contrary to one of the reasons for today's action.
    Based on the above considerations, EPA has determined that it is 
not appropriate at this time to prohibit the generation and trading of 
oxygen credits for batches of RFG that are subject to the adjusted VOC 
standard.

E. Segregation

    In the proposed rule, we introduced a requirement that refiners 
identify RFG blendstock for oxygenate blending (RBOB) destined to be 
used in making adjusted VOC RFG. We also proposed that the Product 
Transfer Document specify the use of the RBOB. Several comments pointed 
out that EPA's establishment of VOC adjusted RFG would create 
additional slates of RFG requiring segregation. Additional tankage for 
segregation would increase refiner costs and the complexity of gasoline 
storage and distribution.
    Since EPA is not requiring refiners to choose between taking 
advantage of the adjusted VOC standard and generating oxygen credits, 
as we proposed, segregation is of minimal importance. EPA expects that 
refiners providing RFG for the Chicago and Milwaukee markets will 
produce adjusted VOC RFG. Enforcement of the downstream per-gallon VOC 
standard in the Chicago and Milwaukee RFG areas will be to the level of 
the adjusted VOC standard. Mixtures of adjusted VOC RFG with non-
adjusted VOC 10 volume percent ethanol RFG will not result in VOC 
noncompliance, since the non-adjusted standard is stricter. As a 
result, EPA does not believe that mixing VOC adjusted and non-VOC 
adjusted RFG together will result in any harmful environmental 
consequences. For RFG sold in areas outside the Chicago and Milwaukee 
RFG areas, the downstream per-gallon VOC standard will be enforced to 
the ordinarily applicable Phase II limit.
    For the reasons above, therefore, EPA is not requiring segregation 
of VOC adjusted RFG from non-VOC adjusted RFG in those areas where the 
VOC adjustment applies. In the final rule, segregation is not required 
downstream of the refinery. Refiners must still keep track of the 
volume of adjusted VOC RFG or RBOB that they produce, but the Product 
Transfer Document will not track whether RBOB is destined to be used 
for adjusted VOC gasoline beyond the refinery gate. Instead, we will 
require refiners to specify on the

[[Page 37160]]

Reformulated Gasoline and Anti-Dumping Batch Report that RFG with 10 
volume percent ethanol complies with either the current (i.e., non-
adjusted) VOC performance standard, or the adjusted standard as 
``adjusted VOC gasoline'' per the fuel certification procedures in 40 
CFR 80.40.

F. Effect of Rule on NOX and Toxics

    Some comments stated that the VOC adjustment rule could adversely 
impact NOX and toxics overcompliance in the RFG program 
because RFG areas that switch from MTBE to ethanol may experience 
increased toxics, mostly attributable to increased acetaldehyde 
emissions, and increased NOX, from increased oxygen. EPA 
does not believe any loss of overcompliance is likely. In December 
2000, EPA promulgated a gasoline toxics emission performance standard 
that will maintain the current level of toxics overcompliance in the 
RFG program. Additionally, changes in NOX performance are a 
function of many fuel properties, particularly sulfur content and 
olefins. The overall impact of the VOC adjustment on NOX 
emissions is highly uncertain given the variety of other fuel 
parameters such as aromatics, olefins, and other gasoline components 
that can affect NOX emissions. Specifically, there is no 
adequate basis to conclude what the effect on NOX would be 
absent information about what impact this rule (or oxygen levels) will 
have on how refineries reformulate their gasoline for all of the fuel 
parameters relevant to NOX. In any event, today's action 
will not result in an increase in ethanol use in the Chicago and 
Milwaukee RFG areas above current levels.

G. Consideration of Recommendation of Illinois EPA

    As discussed in the Notice of Proposed Rulemaking for this 
adjustment (65 FR 42922; July 12, 2000), the VOC adjustment is 
motivated primarily by Section 211(k)(1) of the Clean Air Act which 
directs EPA, in promulgating emission reduction standards for RFG, to 
consider the cost of achieving such emission reductions as well as any 
nonair-quality and other air-quality related health and environmental 
impacts. We then proposed an adjustment to the VOC performance standard 
specific to that provision in the Clean Air Act in order to limit cost, 
but based the adjustment ultimately on a level that we felt achieved 
ozone air quality benefits similar to those for the Phase II RFG 
program.
    Prior to publication of the Notice of Proposed Rulemaking (NPRM), 
the Illinois Environmental Protection Agency (IEPA) submitted to EPA a 
proposal and supporting analysis which suggested that EPA should allow 
a VOC adjustment of 3.7 percentage points, approximately equal to an 
increase in RVP of 0.5 psi, for RFG using 10 percent volume ethanol. 
(See Documents II-D-4, 5 and 6 in Docket A-99-32.)
    Briefly, IEPA's analysis compared the VOC and CO emissions 
associated with a complying fuel with an RVP of 6.8 psi, and an oxygen 
content of 2.0 weight percent, to the emissions associated with a fuel 
having an RVP of 7.3, representing an increase in RVP of 0.5 psi, and 
an oxygen content of 3.5 weight percent. IEPA concluded that the ozone 
impact of these two fuels would be identical, and that EPA should 
therefore provide an adjustment that corresponds to an RVP increase of 
0.5 psi.
    The IEPA analysis used a combination of urban airshed modeling (see 
Document II-D-4 in Docket A-99-32), and VOC and CO emission 
calculations (see Document II-D-6 in Docket A-99-32) to establish the 
relationship between VOC and CO and its effect on ozone formation. We 
evaluated IEPA's analysis (see Document II-D-13 in Docket A-99-32) and 
believe that the photochemical modeling portion of the analysis is 
generally useful for evaluating the conditions studied in the Chicago 
area. While the modeling covered only a portion of the Lake Michigan 
airshed and a single 4-day ozone episode, this portion of the airshed 
contained projections of significant ozone violation. Also, the episode 
was fairly typical of ozone episodes in the lower Lake Michigan region 
inclusive of Milwaukee, based on geographic proximity and the lake-
influenced meteorology.
    In contrast, we found several deficiencies with IEPA's emission 
calculations \4\ which were used in their justification of a 0.5 psi 
adjustment. Specifically, the motor vehicle VOC emission rates were 
taken from the EPA Complex Model and represent emissions from solely 
1990 model year vehicles rather than those of the in-use fleet post-
2000. IEPA then obtained the emission factor for CO by multiplying the 
Complex Model-derived VOC emission factor by a ratio of nationwide CO 
to VOC emissions for onroad vehicles, taken from the 1997 EPA Emissions 
Trends report rather than using values contained in the emission 
inventory for this region. This method is highly inaccurate, in that it 
represents a blend of emissions in areas with conventional and 
reformulated gasoline, summer and winter conditions and a wide range of 
local emission control programs, such as I/M, rather than the specific 
conditions existing in Chicago during the ozone episodes. Finally, 
IEPA's estimate of a 10 percent reduction in CO due to 10 volume 
percent ethanol in RFG relative to the required 2.1 weight percent 
oxygen is overstated; using draft MOBILE6 methodology, \5\ we estimate 
a reduction of approximately 7 percent. We therefore found that their 
approach did not provide adequate technical support for an adjustment 
to the VOC standard of 3.7 percentage points (0.5 psi). Also, IEPA 
relied upon the use of relative reactivity factors for exhaust and 
evaporative VOC emissions. EPA does not support the use of relative 
reactivity factors, for reasons stated in the preamble of the NPRM. See 
65 FR 42924.
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    \4\ IEPA compared the emissions (expressed in mg/mi) of a 
``complying fuel'' (assumed to have an RVP of 6.8 psi and 2.0 weight 
percent oxygen; other parameters are described in Document II-D-6 in 
Docket A-99-32) with an alternative fuel consisting of a 7.3 psi RVP 
and 3.5 weight percent oxygen, with the other parameters defined for 
the complying fuel held constant). IEPA calculated the ozone impact 
from the ``complying fuel'' versus the 7.3 psi fuel using a 
relationship of ozone forming potential between CO and VOC derived 
from photochemical modeling. Using this technique, IEPA calculated 
that the ozone capacity of complying fuel is 4,289 mg ozone/mi and 
the ozone capacity of the 7.3 psi fuel with accompanying CO 
reductions due to the 3.5 weight percent oxygen would be 4,291 mg 
ozone/mi-a comparable amount.
    \5\ MOBILE is an integrated set of FORTRAN routines for use in 
the analysis of the air pollution impact of gasoline-fueled and 
diesel-powered highway mobile sources. MOBILE is used in the 
preparation of all projection year emission inventories required by 
the Clean Air Act Amendments of 1990 for non-California areas. 
MOBILE calculates emission factors for gasoline-fueled light-duty 
vehicles (LDGVs), light-duty trucks (LDGTs), heavy-duty vehicles 
(HDGVs), and motorcycles. MOBILE also contains provisions for 
modeling the impact on emission factors of oxygenated fuels (i.e., 
gasoline/alcohol and gasoline/ether blends) and of participation in 
the reformulated gasoline (RFG) program under the 1990 Clean Air Act 
Amendments.
---------------------------------------------------------------------------

    While we do not accept IEPA's recommendation for an adjustment 
equivalent to 0.5 psi, we find that the photochemical modeling that 
IEPA conducted does reasonably support a larger adjustment to the VOC 
standard than we originally proposed when more recent information on 
emissions of CO and VOC from onroad vehicles is used. The photochemical 
modeling consisted of a four day ozone episode from 1991. IEPA modeled 
reductions in VOC and CO emissions independently, determining the 
impact of each on peak ozone during each day. A comparison of the 
impact of differing levels of VOC and CO emissions on peak ozone during 
each day showed that, on a mass basis,

[[Page 37161]]

CO was 4.3 to 8.6 percent as effective in producing ozone as VOC.
    At the lower end of this range, the results indicate that for each 
ton of VOC increase, approximately 23 tons of CO decrease are necessary 
to maintain ozone levels. At the high end of the range, a 12 ton 
reduction in CO emissions would be required to compensate for a one ton 
increase in VOC emissions. As discussed in the Response to Comment 
Document for this rulemaking (see Document II-B-3 in Docket A-99-32), 
at the VOC adjustment level of 1.0 percentage point (i.e., an 
equivalent RVP increase of approximately 0.2 psi), CO emissions would 
be reduced by 45 tons for each one ton increase in VOC emissions.\6\ We 
believe that in light of IEPA's photochemical model results, the 
proposed level of 1.0 percentage point (0.2 psi equivalent increase in 
RVP) is overly conservative.
---------------------------------------------------------------------------

    \6\ We calculated the ratio of CO decrease to VOC increase for 
varying adjustments of RVP using the following procedure: Using the 
MOBILE 5.b model, we calculated VOC emissions for RVP varying from 
6.7 to 7.7 psi in increments of 0.1 psi. We multiplied the resulting 
VOC emission rates (expressed in g/mi) by the respective Vehicle 
Miles travelled (VMT) estimates for Chicago and Milwaukee to obtain 
the tons per day VOC emissions for each RVP level in each area. (VMT 
was obtained from the 1996 inventories of the Illinois Environmental 
Protection Agency (IEPA) and Wisconsin Department of Natural 
Resources (DNR), respectively.) Taking 6.7 psi RVP as the baseline, 
the increase in VOC for each 0.1 psi incremental increase above 6.7 
was computed for the two areas. To calculate the CO decrease EPA 
obtained the baseline CO emission rates at 2.0 weight percent oxygen 
from the Chicago and Milwaukee inventories (from IEPA and Wisconsin 
DNR) inventories. We then computed the emission rates for gasoline 
at 3.5 weight percent oxygen using an equation derived from those in 
MOBILE 6 and which have undergone peer review. This equation is 
discussed in further detail in the Response to Comment document for 
this rulemaking (EPA 420-R-01-017). We then calculated the ratio of 
CO decrease to VOC increase for the varying RVP values. Since CO is 
a function of oxygen content, the CO reduction is constant, while 
the VOC emissions, which are a function of RVP, vary. The emission 
increases for the Mobile 5b runs as well as the respective ratios of 
CO decrease to VOC increase are summarized in Table 1 of the 
Response to Comment document.
---------------------------------------------------------------------------

    The mean value of the CO to VOC ozone forming capacities obtained 
from IEPA's analysis is 6.8 percent, at which level the minimum ratio 
of CO reductions to VOC increase needed to maintain ozone levels is 
14.7:1. As shown in the above referenced Response to Comment Document 
for this rulemaking, we determined that the use of RFG with ethanol at 
10 volume percent (3.5 weight percent oxygen) in these areas can 
generally be expected to reduce emissions of CO (compared to RFG with 
2.0 weight percent oxygen) by approximately 15 tons for every 1 ton 
increase in VOC emissions associated with a VOC adjustment of 2.0 
percentage points (i.e., the equivalent RVP increase of 0.3 psi).
    Significantly, the modeled day producing the ratio of 15:1 yielded 
the highest ozone concentration of the four days modeled. Because the 
highest ozone concentration is associated with the 15:1 ratio, 
adjustments based on lower ratios (i.e., 12:1 and 13:1) should not be 
used. We believe, therefore, that IEPA's analysis provides reasonable 
assurance that the 0.3 psi adjustment level is appropriate and would 
tend to preserve the ozone air quality benefits of the Phase II RFG 
program.
    Finally, we note that the photochemical analysis for Chicago can be 
said to be generally representative of the Milwaukee area due to the 
similarity in fuel formulations (100 percent ethanol blended RFG), 
their geographical proximity (less than 100 miles apart), and the fact 
that lake effects on local meteorology would be expected to be 
similarly important in the formation of ozone in these two areas.
    Consequently, we are promulgating an adjustment of 2.0 percentage 
points to the VOC performance standard for 10 percent ethanol RFG sold 
in the Chicago and Milwaukee RFG areas (RVP equivalent increase of 
approximately 0.3 psi). We believe that IEPA's photochemical modeling 
reasonably supports a finding that the level of CO decrease likely to 
occur in the Chicago and Milwaukee areas will offset the potential 
ozone air-quality impacts of a 2.0 percentage point adjustment to the 
VOC performance standard (0.3 psi equivalent RVP increase). As such, we 
believe the adjustment will result in ozone air quality benefits 
similar to those generally achieved under Phase II of the RFG program.

H. Impact of Adjusted Standard on SIPs

    In the proposal, EPA explained that it believed states should not 
be required to account in their ROP plans, in the near term, for any 
potential increase in mass VOC emissions associated with the VOC 
adjustment, based on uncertainty related to market conditions and the 
predictability of such emission. We proposed to amend the ``Guidance on 
the Post-1996 Rate-of-Progress Plan and the Attainment Demonstration'' 
to indicate that, for several years, states are not required to 
evaluate whether their ROP plans would be affected by will be an 
increase in mass VOC emissions as a result of adjusted VOC gasoline. We 
also proposed to assess the impact of any mass VOC increases on state 
attainment of the 3.0 percent rate of progress goal at a later date, 
when more data on oxygenate use and distribution and the effect of the 
VOC adjustment are available. No comments were received on the 
appropriateness of this approach, and we will assess the impact of any 
VOC increases on state attainment of the 3.0 percent rate of progress 
goal as a component of our continued evaluation of this adjustment.

II. Administrative Requirements

A. Submission to Congress and the Comptroller General

    Under 5 U.S.C. 801 (a)(1) (A), as added by the Small Business 
Regulatory Enforcement Fairness Act of 1996, generally provides that 
before a rule may take effect, the agency promulgating the rule must 
submit a report, which includes a copy of the rule, to each House of 
the Congress and to the Comptroller General of the United States. We 
will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the publication 
of the rule in today's Federal Register. This is not a ``major rule'' 
as defined by 5 U.S.C 804 (2).

B. Executive Order 12866

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order.
    The Order defines ``significant regulatory action'' as one that is 
likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another Agency;
    (3) Materially alter the budgetary impact of entitlement, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    The Agency has determined that this regulation results in none of 
the adverse economic effects set forth in Section 1 of the Order 
because it generally relaxes the requirements of the RFG program by 
providing regulated parties with more

[[Page 37162]]

flexibility with respect to compliance with the RFG requirements. 
Pursuant to the terms of Executive Order 12866, OMB has notified EPA 
that it considers this a ``significant regulatory action'' within the 
meaning of the Executive Order because it raises novel legal or policy 
issues. EPA submitted this action to OMB for review. Changes made in 
response to OMB suggestions or recommendations will be documented in 
the public record.

C. Executive Order 13132 (Federalism)

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.'' Under 
Executive Order 13132, EPA may not issue a regulation that has 
federalism implications, that imposes substantial direct compliance 
costs, and that is not required by statute, unless the federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by state and local governments, or EPA consults with 
state and local officials early in the process of developing the 
proposed regulation. EPA also may not issue a regulation that has 
federalism implications and that preempts state law unless the agency 
consults with state and local officials early in the process of 
developing the proposed regulation.
    If EPA complies by consulting, Executive Order 13132 requires EPA 
to provide to the Office of Management and Budget (OMB), in a 
separately identified section of the preamble to the rule, a federalism 
summary impact statement (FSIS). The FSIS must include a description of 
the extent of EPA's prior consultation with state and local officials, 
a summary of the nature of their concerns and the agency's position 
supporting the need to issue the regulation, and a statement of the 
extent to which the concerns of state and local officials have been 
met. Also, when EPA transmits a draft final rule with federalism 
implications to OMB for review pursuant to Executive Order 12866, EPA 
must include a certification from the agency's Federalism Official 
stating that EPA has met the requirements of Executive Order 13132 in a 
meaningful and timely manner.
    This final rule does not have federalism implications. It will not 
have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. The rule provides regulatory 
relief, by adjusting the VOC performance standard, for refiners that 
choose to make RFG with 10 volume percent ethanol. As discussed in the 
preamble, we believe that the increased VOC associated with the 
adjusted VOC standard should not affect states' ROP plans in the near 
term, and does not impose any substantial direct effects on the states. 
Thus, the requirements of section 6 of the Executive Order do not apply 
to this rule.

D. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    On November 6, 2000, the President issued Executive Order 13175 (65 
FR 67249) entitled, ``Consultation and Coordination with Indian Tribal 
Governments.'' Executive Order 13175 took effect on January 6, 2001, 
and revokes Executive Order 13084 (Tribal Consultation) as of that 
date. EPA developed this final rule, however, during the period when 
Executive Order 13084 was in effect; thus, EPA addressed tribal 
considerations under Executive Order 13084.
    Under Executive Order 13084, EPA may not issue a regulation that is 
not required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments, or EPA consults with those 
governments. If EPA complies by consulting, Executive Order 13084 
requires EPA to provide to the Office of Management and Budget, in a 
separately identified section of the preamble to the rule, a 
description of the extent of EPA's prior consultation with 
representatives of affected tribal governments, a summary of the nature 
of their concerns, and a statement supporting the need to issue the 
regulation. In addition, Executive Order 13084 requires EPA to develop 
an effective process permitting elected and other representatives of 
Indian tribal governments ``to provide meaningful and timely input in 
the development of regulatory policies on matters that significantly or 
uniquely affect their communities.''
    Today's rule does not significantly or uniquely affect the 
communities of Indian tribal governments. Today's rule does not create 
a mandate for any tribal governments. This rule applies to gasoline 
refiners, blenders and importers that supply gasoline to RFG areas. 
Today's action generally relaxes certain RFG requirements, and does not 
impose any enforceable duties on communities of Indian tribal 
governments. Accordingly, the requirements of section 3(b) of Executive 
Order 13084 do not apply to this final rule.

E. Regulatory Flexibility

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this final rule. EPA has also 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. For purposes of assessing 
the impact of today's rule on small entities, small entities are 
defined as: (1) A small business that has not more than 1,500 employees 
(13 CFR 121.201); (2) a small governmental jurisdiction that is a 
government of a city, county, town, school district or special district 
with a population of less than 50,000; and (3) a small organization 
that is any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field.
    After considering the economic impacts of today's final rule on 
small entities, EPA has concluded that this action will not have a 
significant economic impact on a substantial number of small entities. 
In determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analysis is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the proposed rule on small entities.'' 5 U.S.C. 
sections 603 and 604. Thus, an agency may conclude that a rule will not 
have a significant economic impact on a substantial number of small 
entities if the rule relieves regulatory burden, or otherwise has a 
positive economic effect on all of the small entities subject to the 
rule. Today's rule provides regulatory relief by making the VOC 
standard for RFG that contains 10 volume percent ethanol used in 
Chicago and Milwaukee slightly less stringent. This action will provide 
more flexibility for refiners to

[[Page 37163]]

reduce MTBE use by decreasing the cost of ethanol-blended RFG. We have 
therefore concluded that today's final rule will relieve regulatory 
burden for all small entities.

F. Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An Information 
Collection Request (ICR) document was prepared by EPA (ICR No. 1591.11) 
and a copy may be obtained from Sandy Farmer by mail at OP Regulatory 
Information Division; U.S. Environmental Protection Agency (2137); 401 
M St., SW; Washington, DC 20460, by e-mail at [email protected], or 
by calling (202) 260-2740. A copy may also be downloaded off the 
internet at http://www.epa.gov/icr.
    The action will result in revision of the Reformulated Gasoline and 
Anti-Dumping Batch Report form (EPA Form 3520-20C) that refiners must 
complete. The form would be revised to include under Item 4.0 a new 
product type called ``Adjusted VOC gasoline.'' This revision does not 
represent significant new reporting requirements, nor a substantial 
increase in the amount of time spent filling out the form.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, disclose or provide 
information to or for a federal agency. This includes the time needed 
to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information. An agency may not 
conduct or sponsor, and a person is not required to respond to a 
collection of information unless it displays a currently valid OMB 
control number. The OMB control numbers for EPA's regulations are 
listed in 40 CFR Part 9 and 48 CFR Chapter 15.

G. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to state, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed, 
under section 203 of the UMRA, a small government agency plan. The plan 
must provide for notifying potentially affected small governments, 
enabling officials of affected small governments to have meaningful and 
timely input in the development of EPA regulatory proposals with 
significant federal intergovernmental mandates, and informing, 
educating, and advising small governments on compliance with the 
regulatory requirements.
    Today's final rule contains no federal mandates (under the 
regulatory provisions of Title II of the UMRA) for state, local or 
tribal governments or the private sector. The rule imposes no 
enforceable duty on any state, local or tribal governments or the 
private sector. This rule applies to gasoline refiners, blenders and 
importers that supply RFG areas. Today's action provides regulated 
parties with more flexibility with respect to compliance with RFG 
requirements.

H. Executive Order 13045: Children's Health Protection

    Executive Order 13045, Protection of Children from Environmental 
Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to 
any rule that: (1) Is determined to be economically significant as 
defined under Executive Order 12866, and (2) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets 
both criteria, the Agency must evaluate the environmental health or 
safety effects of the planned rule on children, and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency.
    EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that are based on health or safety risks, such that 
the analysis required under section 5-501 of the Order has the 
potential to influence the regulation. This final rule is not subject 
to Executive Order 13045, Protection of Children from Environmental 
Health Risks and Safety Risks (62 FR 19885, April 23, 1997), because it 
does not involve decisions on environmental health risks or safety 
risks that may disproportionately affect children. For reasons stated 
in the preamble, we believe that the adjusted VOC standard for RFG with 
10 volume percent ethanol will continue to provide a similar level of 
ozone benefits to those anticipated from the current standard, and will 
assure that the Phase II RFG program will continue to achieve the 
significant environmental benefits that it was designed to provide.

I. National Technology Transfer and Advancement Act of 1995 (NTTAA)

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. The NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This rule does not involve technical standards, and does not 
specify the use of technical methods. Therefore, EPA did not consider 
the use of any voluntary consensus standards.

J. Statutory Authority

    Sections 114, 211, and 301(a) the Clean Air Act as amended (42 
U.S.C. 7414, 7545, and 7601(a)).

K. Executive Order 13211 (Energy Effects)

    This rule is not subject to Executive Order 13211, ``Actions 
Concerning

[[Page 37164]]

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use'' (66 FR 28355 (May 22, 2001)) because it is not a significant 
regulatory action under Executive Order 12866.''

List of Subjects in 40 CFR Part 80

    Environmental protection, Fuel additives, Gasoline, Imports, 
Labeling, Motor vehicle pollution, Penalties, Reformulated gasoline, 
Reporting and recordkeeping requirements.

    Dated: July 5, 2001.
Christine Todd Whitman,
Administrator.

    For the reasons set forth in the preamble, part 80 of title 40, of 
the Code of Federal Regulations is amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    1. The authority citation for part 80 continues to read as follows:

    Authority: Sections 114, 211, and 301(a) of the Clean Air Act as 
amended (42 U.S.C. 7414, 7545, and 7601(a)).

    2. Section 80.40 is amended by adding paragraph (c) to read as 
follows:


Sec. 80.40  Fuel certification procedures.

* * * * *
    (c)(1) ``Adjusted VOC gasoline'' for purposes of the general 
requirements in Sec. 80.65(d)(2)(ii), and the certification procedures 
in this section is gasoline that contains 10 volume percent ethanol, or 
RBOB intended for blending with 10 volume percent ethanol, that is 
intended for use in the areas described at Sec. 80.70(f) and (i), and 
is designated by the refiner as adjusted VOC gasoline subject to the 
less stringent VOC standards in Sec. 80.41(e) and (f). In order for 
``adjusted VOC gasoline'' to qualify for the regulatory treatment 
specified in Sec. 80.41(e) and (f), reformulated gasoline must contain 
denatured, anhydrous ethanol. The concentration of the ethanol, 
excluding the required denaturing agent, must be at least 9% and no 
more than 10% (by volume) of the gasoline. The ethanol content of the 
gasoline shall be determined by use of one of the testing methodologies 
specified in appendix F to this part.
    (2) Refiners may choose not to designate as adjusted VOC gasoline 
or RBOB that otherwise meets the requirements of paragraph (c)(1) of 
this section, in which case the more stringent VOC standards in 
Sec. 80.41 apply.
    (3) For purposes of Sec. 80.78(a)(1)(v), the ``Adjusted VOC 
gasoline'' standards under Sec. 80.41 are the applicable VOC emissions 
performance standards only for adjusted VOC gasoline that is intended 
for use in or sold for use by an ultimate consumer in the covered areas 
described at Sec. 80.70(f) and (i). For purposes of 
Sec. 80.78(a)(1)(v), gasoline designated as adjusted VOC gasoline that 
is intended for use or that is sold for use by an ultimate consumer in 
any covered area in VOC-Control Region 2 other than those described at 
Sec. 80.70(f) and (i), is subject to the VOC performance standards in 
Sec. 80.41 applicable to all other gasoline designated for VOC-Control 
Region 2.

    3. Section 80.41 is amended by revising paragraphs (e) and (f) to 
read as follows:


Sec. 80.41  Standards and requirements for compliance.

* * * * *
    (e) Phase II complex model per-gallon standards. The Phase II 
``complex model'' standards for compliance when achieved on a per-
gallon basis are as follows:

              Phase II--Complex Model Per-Gallon Standards
------------------------------------------------------------------------
 
------------------------------------------------------------------------
VOC emissions performance reduction
 (percent):
    Gasoline designated for VOC-Control     27.5
     Region 1.
    Adjusted VOC gasoline designated for    23.9
     VOC-Control Region 2.
    All other gasoline designated for VOC-  25.9
     Control Region 2.
Toxic air pollutants emissions performance  20.0
 reduction (percent).
NOX emissions performance reduction
 (percent):
    Gasoline designated as VOC-controlled.  5.5
    Gasoline not designated as VOC-         0.0
     controlled.
Oxygen content (percent, by weight).......  2.0
Benzene (percent, by volume)..............  1.00
------------------------------------------------------------------------

    (f) Phase II complex model averaged standards. The Phase II 
``complex model'' standards for compliance when achieved on average are 
as follows:

                Phase II Complex Model Averaged Standards
------------------------------------------------------------------------
 
------------------------------------------------------------------------
VOC emissions performance reduction
 (percent):
    Gasoline designated for VOC-Control
     Region 1
        Standard..........................  29.0
        Per-Gallon Minimum................  25.0
    Adjusted VOC gasoline designated for
     VOC-Control Region 2
        Standard..........................  25.4
        Per-Gallon Minimum................  21.4
    All other gasoline designated for VOC-
     Control Region 2
        Standard..........................  27.4
        Per-Gallon Minimum................  23.4
Toxic air pollutants emissions performance  21.5
 reduction (percent).
NOX emissions performance reduction
 (percent):
    Gasoline designated as VOC-controlled.  6.8
    Gasoline not designated as VOC-         1.5
     controlled.
Oxygen content (percent, by weight):
    Standard..............................  2.1
    Per-Gallon Minimum....................  1.5
Benzene (percent, by volume):
    Standard..............................  0.95
    Per-Gallon Maximum....................  1.30
------------------------------------------------------------------------


[[Page 37165]]

* * * * *

    4. Section 80.65 is amended by revising paragraph (d)(2)(ii) and by 
removing ``[Reserved]'' in paragraph (d)(2)(iii), to read as follows:


Sec. 80.65  General requirements for refiners, importers, and oxygenate 
blenders.

* * * * *
    (d) * * *
    (2) * * *
    (ii) In the case of gasoline or RBOB designated as VOC-controlled:
    (A) Either intended for use in VOC-Control Region 1 or VOC-Control 
Region 2 (as defined in Sec. 80.71); or
    (B) Designated as ``adjusted VOC gasoline'' (as defined in 
Sec. 80.40(c)(1));
* * * * *
    4. Section 80.67 is amended by revising paragraph (g)(1) to read as 
follows:


Sec. 80.67  Compliance on average.

* * * * *
    (g) * * *
    (1)(i)(A)The compliance total using the following formula:
    [GRAPHIC] [TIFF OMITTED] TR17JY01.000
    
Where:

Vi=the volume in gallons of gasoline batch i.
std=the standard for the parameter being evaluated.
n=the number of batches of gasoline produced or imported during the 
averaging period.

    (B) For computation of the VOC performance standard compliance 
total, Std for each VOC control region is determined by the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR17JY01.001

Where, for gasoline and RBOB designated for that VOC control region:

Std=the value to be used in the compliance total formula.
Stdu=the averaged VOC emissions performance reduction 
standard applicable to reformulated gasoline and RBOB not designated 
for compliance with the adjusted VOC gasoline standard.
Stda=the averaged VOC emissions performance reduction 
standard applicable to reformulated gasoline and RBOB designated for 
compliance with the adjusted VOC gasoline standard.
VUi=the volume of batch i not designated for compliance 
with the adjusted VOC gasoline standard.
VAi=the volume of batch i designated for compliance with 
the adjusted VOC gasoline standard.
nu=the number of batches produced or imported and not 
designated for compliance with the adjusted VOC gasoline standard.
na=the number of batches produced or imported and 
designated for compliance with the adjusted VOC gasoline standard.

    (C) The actual total using the following formula:
    [GRAPHIC] [TIFF OMITTED] TR17JY01.002
    
Where:

Vi=the volume in gallons of gasoline batch i.
parmi=the parameter value of gasoline batch i.
n=the number of batches of gasoline produced or imported during the 
averaging period.

    (ii) [Reserved]
* * * * *

    5. Section 80.68 is amended by removing the period at the end of 
paragraph (c)(8)(ii)(B) and adding in its place a semicolon and by 
adding paragraph (c)(8)(ii)(C) to read as follows:


Sec. 80.68  Compliance surveys.

* * * * *
    (c) * * *
    (8) * * *
    (ii) * * *
    (C) For adjusted VOC gasoline sold in the covered areas described 
at Sec. 80.70(f) and (i), the covered area shall have failed the 
complex model VOC survey if the VOC emissions reduction percentage 
average of all survey samples is less than the weighted average of the 
applicable per-gallon standards for VOC emissions reduction calculated 
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR17JY01.003

Where:

WSTD=Weighted average of the applicable per-gallon VOC standards.
VOCU=Per gallon VOC standard applicable in the covered area to RFG 
containing less than 10 percent ethanol by volume.
VOCA=Per gallon VOC standard applicable in the covered area to RFG 
containing 10 percent ethanol by volume.
nu=Number of samples in the VOC survey with oxygen 
content less than 3.5 percent by weight.
na=Number of samples in the VOC survey with oxygen 
content equal to or greater than 3.5 percent by weight.
n=Total number of samples in the VOC survey.

* * * * *

    6. Section 80.69 is amended by revising the introductory text to 
read as follows:


Sec. 80.69  Requirements for downstream oxygenate blending.

    The requirements of this section apply to all reformulated gasoline 
blendstock for oxygenate blending, or RBOB, to which oxygenate is added 
at any oxygenate blending facility, except that paragraph (a)(7) of 
this section does not apply to adjusted VOC gasoline as defined in 
Sec. 80.40(c).
* * * * *
[FR Doc. 01-17563 Filed 7-16-01; 8:45 am]
BILLING CODE 6560-50-P