1
ENVIRONMENTAL
PROTECTION
AGENCY
40
CFR
Part
86
[
AMS­
FRL­__________]

Control
of
Air
Pollution
From
New
Motor
Vehicles
and
New
Motor
Vehicle
Engines;

Proposed
Non­
Conformance
Penalties
for
2004
and
later
Model
Year
Emission
Standards
for
Heavy­
Duty
Diesel
Engines
and
Heavy­
Duty
Diesel
Vehicles
AGENCY:
Environmental
Protection
Agency
(
EPA).

ACTION:
Notice
of
proposed
rulemaking.

SUMMARY:
EPA
is
proposing
that
nonconformance
penalties
(
NCPs)
be
made
available
for
the
2004
and
later
model
year
non­
methane
hydrocarbons
and
nitrogen
oxides
(
NMHC+
NOx)

standard
for
heavy­
duty
diesel
engines
and
vehicles.
In
general,
the
availability
of
NCPs
allows
a
manufacturer
of
heavy­
duty
engines
(
HDEs)
or
heavy­
duty
vehicles
(
HDVs)
(
which
include
heavy
light­
duty
trucks)
whose
engines
or
vehicles
fail
to
conform
with
certain
applicable
emission
standards,
but
do
not
exceed
a
designated
upper
limit,
to
be
issued
a
certificate
of
conformity
upon
payment
of
a
monetary
penalty.
The
proposed
upper
limit
associated
with
the
2004
emission
standard
for
NMHC+
NOx
is
4.5
grams
per
brake­
horsepower­
hour
for
light
and
medium
2
heavy­
duty
engines
and
urban
buses,
and
6.0
grams
per
brake­
horsepower­
hour
for
heavy
heavyduty
engines.

DATES:
Public
comment:
We
must
receive
your
comments
by
February
28,
2002.

Public
hearing:
We
will
hold
a
public
hearing
regarding
this
proposed
rule
on
January
29,

2002,
beginning
at
10:
00
a.
m.

ADDRESSES:
Comments:
We
must
receive
your
comments
by
the
date
indicated
under
"
DATES"
above.
Send
paper
copies
of
written
comments
(
in
duplicate
if
possible)
to
the
contact
person
listed
below.
In
your
correspondence,
refer
to
Docket
A­
2000­
30.
See
Section
VI.
B
for
more
information
on
comment
procedures.

Public
hearing:
We
will
hold
a
public
hearing
on
January
29,
2002
at
the
Washington
Dulles
Airport
Marriott,
45020
Aviation
Drive,
Dulles,
Virginia
20166.
Phone:
(
703­
471­
9500).

If
you
want
to
testify
at
the
hearing,
notify
the
contact
person
listed
below
at
least
ten
days
before
the
date
of
the
hearing.
See
Section
VI.
B
for
more
information
on
the
public­
hearing
procedures.

Public
docket:
EPA's
Air
Docket
makes
materials
related
to
this
rulemaking
available
for
review
in
Docket
No.
A­
2001­
30
located
at
U.
S.
Environmental
Protection
Agency
(
EPA),
Air
Docket
(
6102),
Room
M­
1500,
401
M.
Street,
SW,
Washington,
DC,
20460
(
on
the
ground
floor
in
Waterside
Mall)
from
8
a.
m.
to
5:
30
p.
m.,
Monday
through
Friday,
except
on
government
holidays.
You
can
reach
the
Air
Docket
by
telephone
at
(
202)
260­
4400.
We
may
charge
a
reasonable
fee
for
copying
docket
materials,
as
provided
in
40
CFR
part
2.
3
FOR
FURTHER
INFORMATION
CONTACT:
Margaret
Borushko,
U.
S.
EPA,
National
Vehicle
and
Fuels
Emission
Laboratory,
2000
Traverwood,
Ann
Arbor,
MI
48105;
Telephone
(
734)
214­
4334;
Fax:
(
734)
214­
4816;
E­
mail:
borushko.
margaret@
epa.
gov.

SUPPLEMENTARY
INFORMATION:

Regulated
Entities
This
proposed
action
would
affect
you
if
you
produce
or
import
new
heavy­
duty
diesel
engines
which
are
intended
for
use
in
highway
vehicles
such
as
trucks
and
buses
or
heavy­
duty
highway
vehicles.
The
table
below
gives
some
examples
of
entities
that
may
have
to
follow
the
proposed
regulations.
But
because
these
are
only
examples,
you
should
carefully
examine
the
proposed
and
existing
regulations
in
40
CFR
part
86.
If
you
have
questions,
call
the
person
listed
in
the
FOR
FURTHER
INFORMATION
CONTACT
section
above.

Category
NAICSa
Codes
SIC
Codesb
Examples
of
potentially
regulated
entities
Industry
336112
336120
3711
Engine
and
truck
manufacturers.

a
North
American
Industry
Classification
System
(
NAICS).

b
Standard
Industrial
Classification
(
SIC)
system
code.
4
Access
to
Rulemaking
Documents
Through
the
Internet:

Today's
proposal
is
available
electronically
on
the
day
of
publication
from
the
Environmental
Protection
Agency
Internet
Web
site
listed
below.
Electronic
copies
of
the
preamble,
regulatory
language,
Draft
Technical
Support
Document,
and
other
documents
associated
with
today's
proposal
are
available
from
the
EPA
Office
of
Transportation
and
Air
Quality
(
formerly
the
Office
of
Mobile
Sources)
Web
site
listed
below
shortly
after
the
rule
is
signed
by
the
Administrator.
This
service
is
free
of
charge,
except
any
cost
that
you
incur
for
connecting
to
the
Internet.

Environmental
Protection
Agency
Web
Site:

http://
www.
epa.
gov/
fedrgstr/

(
Either
select
a
desired
date
or
use
the
Search
feature.)

Office
of
Transportation
and
Air
Quality
(
OTAQ)
Web
Site:

http://
www.
epa.
gov/
otaq/

(
Look
in
"
What's
New"
or
under
the
"
Heavy
Trucks/
Buses"
topic.)

Please
note
that
due
to
differences
between
the
software
used
to
develop
the
document
and
the
software
into
which
document
may
be
downloaded,
changes
in
format,
page
length,
etc.

may
occur.
5
Table
of
Contents
I.
Background
and
Statutory
Authority
A.
Background
to
Nonconformance
Penalty
Rules
B.
Statutory
Authority
C.
Heavy­
duty
Diesel
Consent
Decrees
II.
Nonconformance
Penalties
for
2004
and
Later
Heavy­
Duty
Engines
and
Heavy­
Duty
Vehicles
A.
NCP
Eligibility:
Emission
Standards
for
Which
NCPs
are
Proposed
1.
Heavy­
Duty
Diesel
NMHC+
NOx
Standard
B.
NCP
Eligibility:
Emission
Standards
for
Which
NCPs
are
Not
Proposed
1.
Heavy­
Duty
Gasoline
Standards
2.
2004
Tier
2
Medium­
duty
Passenger
Vehicles
&
Heavy
Light­
duty
Trucks
III.
Penalty
Rates
A.
Parameters
1.
Upper
Limit
2.
Parameter
Values
3.
Penalty
Curves
B.
Issues
and
Alternatives
1.
Adjustment
to
Reflect
Differences
in
Performance
(
other
than
fuel
economy)

2.
Projected
Fuel
Price
3.
Discount
Rates
6
IV.
Economic
Impact
V.
Environmental
Impact
VI.
Public
Participation
A.
How
Do
I
Submit
Comments?

B.
Will
There
Be
a
Public
Hearing?

VII.
Administrative
Requirements
A.
Regulatory
Planning
and
Review:
Executive
Order
12866
B.
Regulatory
Flexibility
Act,
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
of
1996
(
SBREFA),
5
USC
601
et.
seq.

C.
Paperwork
Reduction
Act
D.
Unfunded
Mandates
Reform
Act
E.
Executive
Order
13175:
Consultation
and
Coordination
with
Indian
Tribal
Governments
F.
National
Technology
Transfer
and
Advancement
Act
G.
Executive
Order
13045:
Children's
Health
Protection
H.
Executive
Order
13132:
Federalism
I.
Executive
Order
13211:
Energy
Effects
J.
Plain
Language
7
I.
Background
and
Statutory
Authority
A.
Background
to
Nonconformance
Penalty
Rules
Since
the
promulgation
of
the
first
NCP
rule
in
1985,
NCP
rules
have
generally
been
described
as
continuing
"
phases"
of
the
NCP
program.
The
first
NCP
rule
(
Phase
I),
sometimes
referred
to
as
the
"
generic"
NCP
rule,
established
three
basic
criteria
for
determining
the
eligibility
of
emission
standards
for
nonconformance
penalties
in
any
given
model
year
(
50
FR
35374,

August
30,
1985).
For
regulatory
language,
see
40
CFR
86.1103­
87.
First,
the
emission
standard
in
question
must
become
more
difficult
to
meet.
This
can
occur
in
two
ways,
either
by
the
emission
standard
itself
becoming
more
stringent,
or
due
to
its
interaction
with
another
emission
standard
that
has
become
more
stringent.
Second,
substantial
work
must
be
required
in
order
to
meet
the
emission
standard.
EPA
considers
"
substantial
work"
to
mean
the
application
of
technology
not
previously
used
in
that
vehicle
or
engine
class/
subclass,
or
a
significant
modification
of
existing
technology,
in
order
to
bring
that
vehicle/
engine
into
compliance.
EPA
does
not
consider
minor
modifications
or
calibration
changes
to
be
classified
as
substantial
work.

Third,
a
technological
laggard
must
be
likely
to
develop.
Prior
NCP
rules
have
considered
a
technological
laggard
to
be
a
manufacturer
who
cannot
meet
a
particular
emission
standard
due
to
technological
(
not
economic)
difficulties
and
who,
in
the
absence
of
NCPs,
might
be
forced
from
the
marketplace.
EPA
will
make
the
determination
that
a
technological
laggard
is
likely
to
develop,
based
in
large
part
on
the
above
two
criteria.
However,
these
criteria
are
not
always
sufficient
to
determine
the
likelihood
of
the
development
of
a
technological
laggard.
An
emission
8
standard
may
become
more
difficult
to
meet
and
substantial
work
may
be
required
for
compliance,

but
if
that
work
merely
involves
transfer
of
well­
developed
technology
from
another
vehicle
class,

it
is
unlikely
that
a
technological
laggard
would
develop.

The
criteria
and
methodologies
established
in
the
1985
rule
have
since
been
used
to
determine
eligibility
and
to
establish
NCPs
for
a
number
of
heavy­
duty
emission
standards.

Phases
II,
III,
IV,
and
V,
published
in
the
period
from
1985
to
1996,
established
NCPs
that,
in
combination,
cover
the
full
range
of
heavy­
duty
­
from
heavy
light­
duty
trucks
(
6,000­
8,500
pounds
gross
vehicle
weight)
to
the
largest
diesel
truck
and
urban
bus
engines.
NCPs
have
been
established
for
hydrocarbons
(
HC),
carbon
monoxide
(
CO),
nitrogen
oxides
(
NOx),
and
particulate
matter
(
PM).
The
most
recent
NCP
rule
(
61
FR
6949,
February
23,
1996)
established
NCPs
for
the
1998
and
later
model
year
NOx
standard
for
heavy­
duty
diesel
engines
(
HDDEs),

the
1996
and
later
model
year
for
Light­
Duty
Truck
3
(
LDT3)
NOx
standard,
and
the
1996
and
later
urban
bus
PM
standard.
A
concurrent
but
separate
final
rule
(
61
FR
6944,
February
23,

1996)
established
NCPs
for
the
1996
LDT3
PM
standard.
The
NCP
rulemaking
phases
are
summarized
in
greater
detail
in
the
Draft
Technical
Support
Document
for
this
proposal.

B.
Statutory
Authority
Section
206(
g)
of
the
Clean
Air
Act
(
the
Act),
42
U.
S.
C.
7525(
g),
requires
EPA
to
issue
a
certificate
of
conformity
for
HDEs
or
HDVs
which
exceed
a
federal
emissions
standard,
but
do
not
exceed
an
upper
limit
associated
with
that
standard,
if
the
manufacturer
pays
an
NCP
9
established
by
rulemaking.
Congress
adopted
section
206(
g)
in
the
Clean
Air
Act
Amendments
of
1977
as
a
response
to
perceived
problems
with
technology­
forcing
heavy­
duty
emissions
standards.
Following
International
Harvester
v.
Ruckelshaus,
478
F.
2d
615
(
D.
C.
Cir.
1973),

Congress
realized
the
dilemma
that
technology­
forcing
standards
were
likely
to
cause.
If
strict
standards
were
maintained,
then
some
manufacturers,
"
technological
laggards,"
might
be
unable
to
comply
initially
and
would
be
forced
out
of
the
marketplace.
NCPs
were
intended
to
remedy
this
potential
problem.
The
laggards
would
have
a
temporary
alternative
that
would
permit
them
to
sell
their
engines
or
vehicles
by
payment
of
a
penalty.
At
the
same
time,
conforming
manufacturers
would
not
suffer
an
economic
disadvantage
compared
to
nonconforming
manufacturers,
because
the
NCP
would
be
based,
in
part,
on
money
saved
by
the
technological
laggard
and
its
customer
from
the
nonconforming
engine
or
vehicle.

Under
section
206(
g)(
1),
NCPs
may
be
offered
for
HDVs
or
HDEs.
The
penalty
may
vary
by
pollutant
and
by
class
or
category
of
vehicle
or
engine.
HDVs
are
defined
in
section
202(
b)(
3)(
C)
of
the
CAA
as
vehicles
in
excess
of
6,000
pounds
gross
vehicle
weight
rating
(
GVWR).
The
light­
duty
truck
(
LDT)
classification
includes
trucks
that
have
a
GVWR
of
8500
lbs
or
less.
Therefore,
certain
LDTs
may
be
classified
as
HDVs.
Historically,
LDTs
up
through
6000
lbs
GVWR
have
been
considered
"
light
light­
duty
trucks"
(
LLDTs)
and
LDTs
between
6,001
and
8,500
pounds
GVWR
have
been
considered
"
heavy
light­
duty
trucks"
(
HLDTs).

Based
on
various
new
requirements
established
by
the
Clean
Air
Act
Amendments
of
1990,
each
of
these
two
light
truck
categories
has
been
further
subdivided
into
groups
by
weight.
The
LLDTs
are
classified
by
weight
based
on
"
loaded
vehicle
weight,"
or
LVW,
which
maintains
its
10
current
definition:
curb
weight
plus
300
lbs.
The
trucks
up
through
3750
lbs
LVW
make
up
a
subclass
called
light­
duty­
trucks­
1,
or
LDT1.
Those
greater
than
3750
lbs
LVW
but
less
than
or
equal
to
6000
lbs
GVWR
are
the
subclass
light­
duty­
trucks­
2,
or
LDT2.
The
HLDTs
are
divided
at
5750
lbs
"
adjusted
loaded
vehicle
weight,"
or
ALVW.
Adjusted
loaded
vehicle
weight
is
the
average
of
the
curb
weight
and
the
GVWR.
The
HLDTs
that
are
up
through
5750
lbs
ALVW
are
called
light­
duty
trucks­
3,
or
LDT3.
Those
above
5750
lbs
ALVW
but
less
than
or
equal
to
8500
lbs
GVWR
are
light­
duty­
trucks­
4,
or
LDT4.
The
LDT3
and
LDT4
subclasses
make
up
the
HLDT
vehicle
class.
Since
NCPs
can
only
be
established
for
heavy
duty
vehicles
or
engines,

emission
standards
for
light­
duty
trucks
of
the
LDT3
and
LDT4
categories
are
the
only
light­
duty
truck
categories
eligible
for
NCPs.

Section
206(
g)(
3)
requires
that
NCPs:

°
Account
for
the
degree
of
emission
nonconformity;

°
Increase
periodically
to
provide
incentive
for
nonconforming
manufacturers
to
achieve
the
emission
standards;
and
°
Remove
the
competitive
disadvantage
to
conforming
manufacturers.

Section
206(
g)
authorizes
EPA
to
require
testing
of
production
vehicles
or
engines
in
order
to
determine
the
emission
level
on
which
the
penalty
is
based.
If
the
emission
level
of
a
vehicle
or
engine
exceeds
an
upper
limit
of
nonconformity
established
by
EPA
through
regulation,

the
vehicle
or
engine
would
not
qualify
for
an
NCP
under
section
206(
g)
and
no
certificate
of
conformity
could
be
issued
to
the
manufacturer.
If
the
emission
level
is
below
the
upper
limit
but
11
above
the
standard,
that
emission
level
becomes
the
"
compliance
level,"
which
is
also
the
benchmark
for
warranty
and
recall
liability;
the
manufacturer
who
elects
to
pay
the
NCP
is
liable
for
vehicles
or
engines
that
exceed
the
compliance
level
in­
use,
unless,
for
the
case
of
HLDTs,
the
compliance
level
is
below
the
in­
use
standard.
The
manufacturer
does
not
have
in­
use
warranty
or
recall
liability
for
emissions
levels
above
the
standard
but
below
the
compliance
level.

C.
Heavy­
duty
Diesel
Consent
Decrees
On
October
22,
1998,
the
Department
of
Justice
and
the
Environmental
Protection
Agency
announced
settlements
with
seven
major
manufacturers
of
diesel
engines
that
represent
a
majority
of
the
diesel
engine
market.
The
settlements
resolved
claims
that
they
installed
computer
software
on
heavy
duty
diesel
engines
that
turned
off
the
engine
emission
control
system
during
highway
driving
in
violation
of
the
CAA's
prohibition
on
defeat
devices
(
42
USC
7522(
a)(
3)).

The
settlements
were
entered
by
the
Court
on
July
1,
1999.
These
consent
decrees
with
the
Federal
Government
contained
a
number
of
provisions
applying
to
heavy­
duty
on­
road,
and
in
some
cases,
nonroad,
engines.
Specific
to
the
engines
that
would
be
addressed
by
the
proposed
2004
NCPs,
the
decrees
permit
the
continued
use
of
non­
complying
engines
for
a
period
of
time
(
although
emissions
are
capped
by
limits
associated
with
new
supplemental
test
procedures).

Other
elements
of
these
consent
decrees
include
a
program
under
which
the
consent
decree
manufacturers
are
required
to
invest
considerable
resources
to
evaluate
instrumentation
and
methodologies
for
on­
road
testing.
Because
the
Consent
Decrees
refer
to
NCPs
for
the
2004
1
NMHC
stands
for
non­
methane
hydrocarbons,
which
is
a
measure
of
total
hydrocarbons
with
the
methane
emissions
subtracted
out.
For
typical
on­
highway
diesel
fueled
heavy­
duty
engines,
methane
emissions
are
on
the
order
of
10
percent
of
the
total
hydrocarbon
emissions.

12
model
year,
if
published,
promulgation
of
this
rule
would
have
an
impact
on
the
penalties
determined
under
the
Consent
Decrees.

II.
Nonconformance
Penalties
for
2004
and
Later
Heavy­
Duty
Engines
and
Heavy­
Duty
Vehicles
A.
NCP
Eligibility:
Emission
Standards
for
Which
NCPs
are
Proposed
1.
Heavy­
Duty
Diesel
NMHC+
NOx
Standard
As
discussed
in
section
III.
A.,
EPA
must
determine
that
three
criteria
are
met
in
order
to
determine
an
NCP
should
be
established
in
any
given
model
year.
For
the
model
year
2004
heavy­
duty
diesel
NMHC+
NOx
standard,
we
believe
these
criteria
have
been
met
and
it
is
therefore
appropriate
to
establish
NCPs
for
the
2004
model
year
NMHC+
NOx
standard.

The
first
criteria
requires
that
the
emission
standard
in
question
must
become
more
difficult
to
meet.
This
is
the
case
with
the
2004
NMHC+
NOx
standard.
The
previous
emission
standards
for
this
category
are
4.0
g/
bhp­
hr
NOx
and
1.3
g/
bhp­
hr
HC.
The
2004
standards
is
a
combined
NMHC+
NOx
standard
of
2.4
g/
bhp­
hr,
or
optionally
a
2.5
g/
bhp­
hr
NMHC+
NOx
with
a
limit
of
0.5
g/
bhp­
hr
NMHC.
1
When
promulgated,
the
Agency
concluded
that
the
2004
2
See
press
releases
from
Caterpillar
Inc.,
Cummins,
Detroit
Diesel
Corp.
and
Mack,
available
in
EPA
Air
Docket
A­
2001­
30.

13
standard
was
a
technology
forcing
standard,
and
therefore
it
is
logical
to
conclude
the
standard
is
more
difficult
to
meet.

The
second
criteria
which
must
be
met
in
order
for
EPA
to
determine
that
an
NCP
should
be
established
is
substantial
work
must
be
required
to
meet
the
emission
standard.
This
criteria
has
also
been
met.
As
discussed
in
both
the
1997
final
rule
(
See
62
FR
54694,
October
21,
1997)

which
established
the
2004
standards,
as
well
as
the
2000
final
rule
(
See
65
FR
59896,
October
6,

2000)
which
reaffirmed
those
standards,
EPA
projected
that
new
emission
control
technologies
would
be
need
to
achieve
the
2004
standards.
In
these
previous
rulemakings
EPA
pointed
to
technologies
such
as
cooled
exhaust
gas
recirculation
(
EGR)
and
variable
geometry
turbochargers
(
VGT)
as
some
of
the
technologies
manufacturers
could
use
to
meet
the
2004
standards.
Such
technologies
have
not
previously
been
used
in
the
on­
highway
heavy­
duty
diesel
market,
and
EPA
estimated
substantial
research
and
development
efforts
by
the
engine
manufacturers
would
be
undertaken
to
meet
the
2004
standards.
We
continue
to
believe
such
new
technologies
will
be
used
by
a
number
of
engine
manufacturers,
and
in
fact
several
manufacturers
have
indicated
in
recent
statements
they
will
use
new
emission
control
technologies
in
order
to
achieve
the
2004
standards.
2
The
final
criteria
for
EPA
to
determine
that
an
NCP
should
be
established
is
that
a
technological
laggard
is
likely
to
develop.
EPA
has
several
reasons
to
believe
a
technological
14
laggard
is
likely.
First,
during
our
recent
discussions
with
a
number
of
engine
manufacturers,

several
manufacturers
have
indicated
they
may
not
be
able
to
make
the
necessary
technological
changes
to
meet
the
2004
emission
standards
for
some
of
their
high
horsepower
ratings
by
model
year
2004.
Manufacturers
have
indicated
that
while
they
are
continuing
to
develop
cooled
EGR
systems
and
associated
technologies
(
such
as
advanced
turbocharger
technologies)
and
have
reached
no
definitive
conclusion,
they
are
concerned
regarding
their
ability
to
comply
in
2004
with
these
higher
horsepower
engines.
Engines
with
higher
horsepower
ratings
typically
operate
at
higher
boost
levels
(
higher
intake
manifold
pressures),
as
well
as
higher
fueling
rates.
This
is
the
case
on
today's
engines.
With
the
addition
of
cooled
EGR,
boost
levels
must
be
increased
even
further
in
order
to
accommodate
EGR
while
maintaining
the
same
power
ratings.
This
can
push
both
peak
cylinder
pressures
and
turbocharger
designs
to
their
physical
limitations.
While
manufacturers
are
exploring
a
number
of
technologies
to
extend
the
current
limitations,
they
are
concerned
with
their
ability
to
do
so
with
all
of
the
currently
available
power
ratings
between
now
and
2004.

Second,
during
recent
discussions
with
engine
manufacturers,
one
manufacturer
has
indicated
that
some
low
volume
engine
families
currently
available
may
not
be
ready
by
2004.
A
low
volume
engine
family
may
require
specific
and
targeted
research
and
development
efforts
in
order
to
comply
with
the
2004
standards,
and
it
is
reasonable
to
expect
that
manufacturers
may
focus
their
efforts
on
these
low
volume
products
later
in
the
development
process,
and
time
may
be
too
short
to
bring
the
product
into
compliance
for
the
2004
model
year.
3
See
EPA
Air
Docket
A­
98­
32,
comments
from
Navistar
(
item
IV­
D­
29),
Mack
Truck
(
IV­
D­
06),
Detroit
Diesel
Corp.
(
IV­
D­
28),
and
EMA
(
IV­
D­
05).

15
Finally,
in
the
recently
completed
2000
final
rule
which
reaffirmed
the
2004
NMHC+
NOx
standard,
three
engine
manufactures
as
well
as
the
Engine
Manufacturers
Association
(
EMA),

commented
that
EPA
should
establish
NCPs
for
the
2004
standards.
3
EMA
commented
the
standards
"
will
be
technology­
forcing
and
likely
will
result
in
the
inability
of
some
engine
manufacturers
and/
or
engine
families
to
comply
with
the
standards."
Detroit
Diesel
Corp.

commented
"
Meeting
the
2004
standards
will
require
the
use
of
sophisticated
new
emission
control
technology
and
will
require
emission
durability
evaluation
over
a
greatly
extended
useful
life
period......
Any
development
setbacks
or
misjudgement
regarding
the
capability
or
durability
of
the
new
emission
control
technology
could,
at
the
last
minute,
put
an
engine
manufacturer
into
a
laggard
position
and
prevent
certification
of
an
engine
family.
The
likelihood
of
a
technological
laggard
for
2004
is
at
least
as
great
and
probably
much
greater
than
for
other
standards
for
which
NCPs
have
been
provided."
When
we
finalized
the
reaffirmation
of
the
2004
NOx+
NMHC
standard
in
2000
we
agreed
that
the
standards
were
technology­
forcing
and
that
sophisticated
technologies
would
be
required,
and
thus,
that
the
first
two
eligibility
criteria
were
likely
met.
However,
we
concluded
at
the
time
that
it
was
too
early
to
determine
the
likelihood
of
a
technological
laggard,
and
further,
that
it
was
not
necessary
to
attempt
to
make
such
a
judgement
at
that
time.
Now
we
are
a
year
closer
to
implementation
of
the
2004
standards,
and
manufacturers
have
not
revoked
their
claims
that
the
likelihood
of
a
technological
laggard
is
high.
The
fact
that
several
engine
manufacturers
as
well
as
a
major
trade
organization
16
have
indicated
they
believe
a
technological
laggard
is
likely
to
develop
is
an
important
indicator
for
the
Agency
regarding
the
technological
laggard
criteria.

Based
on
this
information,
the
Agency
believes
it
is
reasonable
to
conclude
that
a
technological
laggard
is
likely
to
develop
for
the
2004
NMHC+
NOx
standards.

B.
NCP
Eligibility:
Emission
Standards
for
Which
NCPs
are
Not
Proposed
1.
Heavy­
Duty
Gasoline
Standards
In
a
final
rule
published
on
October
6,
2000
(
65
FR
59896),
EPA
established
more
stringent
emission
standards
for
all
heavy­
duty
gasoline
(
or
"
Otto­
cycle")
vehicles
and
engines.

These
standards
took
two
forms:
a
chassis­
based
set
for
complete
vehicles
under
14,000
pounds
GVWR
(
the
chassis­
based
program),
and
an
engine­
based
set
for
all
other
Otto­
cycle
heavy­
duty
engines
(
the
engine­
based
program).
Each
of
the
two
programs
has
an
associated
averaging,

banking,
and
trading
(
ABT)
program.
The
new
standards
generally
take
effect
starting
with
the
2005
model
year,
but
manufacturers
are
provided
with
two
additional
options
for
early
compliance,
each
of
which
provides
additional
flexibility
relative
to
the
2005
model
year
compliance
option.

We
have
considered
the
potential
need
for
NCPs
to
be
provided
for
the
new
standards
applicable
to
Otto­
cycle
heavy­
duty
engines
and
vehicles,
and
have
concluded
at
this
time
that
17
NCPs
are
not
required
for
any
of
these
standards.
We
recognize
that
in
general
these
new
standards
represent
an
increase
in
stringency
over
the
prior
federal
standards,
and
thus,
that
the
first
criterion
for
NCP
eligibility
is
satisfied.
While
some
additional
work
is
likely
required
to
meet
these
new
standards,
the
second
and
third
eligibility
criteria
are
not
satisfied.

With
respect
to
the
chassis­
based
standards,
manufacturers
will
largely
be
using
vehicles
already
certified
to
California
standards
to
meet
the
federal
requirements.
The
new
federal
chassis­
based
standards
effectively
extend
the
current
California
medium­
duty
vehicle
standards
to
a
nationwide
basis.
California
began
requiring
some
vehicles
to
meet
these
standards
in
1998,
and
the
phase­
in
reached
completion
in
the
2001
model
year.
Thus,
manufacturers
will
be
producing
a
fleet
of
vehicles
for
California
that
meets
the
new
federal
chassis­
based
requirements
several
years
prior
to
having
to
introduce
the
vehicles
on
a
nationwide
basis.
The
technology
required
to
meet
the
new
federal
standards
has
therefore
already
been
successfully
demonstrated
on
this
class
of
vehicles,
and
manufacturers
have
up
to
several
additional
years
to
further
develop
and
improve
these
systems
prior
to
introducing
them
nationwide.
Therefore,
for
vehicles
required
to
meet
the
chassis­
based
standards,
we
do
not
believe
that
substantial
work,
as
described
above,
will
be
necessary
to
meet
the
new
standards.
For
similar
reasons,
as
well
as
the
fact
that
manufacturers
have
not
raised
the
possibility
of
requiring
NCPs,
we
do
not
believe
that
a
technological
laggard
is
likely
to
develop
for
this
class
of
vehicles.

Vehicles
meeting
the
new
engine­
based
standards
will
generally
be
employing
more
advanced
versions
of
technologies
that
are
currently
in
use,
such
as
advanced
catalytic
converters
18
and
closed
loop
electronic
control
of
the
air­
fuel
ratio.
All
heavy­
duty
Otto­
cycle
engines
are
already
equipped
with
three­
way
catalysts,
and
some
recently
introduced
engines
featuring
precise
air/
fuel
control
and
superior
catalyst
designs
have
been
certified
at
levels
below
the
most
stringent
standards
included
under
the
three
optional
compliance
programs.
In
fact,
the
level
of
the
enginebased
standard
under
the
optional
programs
that
manufacturers
are
likely
to
select
(
1.5
grams
per
brake­
horsepower­
hour)
is
consistent
with
the
recommendations
of
two
manufacturers
providing
comment
on
the
rule.
Given
these
factors,
we
do
not
believe
that
a
technological
laggard
is
likely
to
emerge.
Thus,
for
vehicles
required
to
meet
the
engine­
based
standards,
we
do
not
believe
that
substantial
work,
as
described
above,
will
be
necessary
to
meet
the
new
standards.

In
addition,
the
three
compliance
options
that
we
included
in
the
rule
were
developed
through
discussions
with
manufacturers,
and
based
on
those
discussions
we
believe
that
these
options
are
viable
options
that
provide
a
range
of
choices
and
offer
manufacturers
flexibility
to
fit
the
program
with
their
product
planning.
Due
to
the
availability
of
these
options
and
the
discussions
with
manufacturers,
we
do
not
believe
that
a
technological
laggard
is
likely
to
develop
with
respect
to
any
of
the
new
Otto­
cycle
heavy­
duty
vehicle
or
engine
standards.
The
ABT
programs
also
offer
considerable
additional
flexibility
to
meet
the
new
standards.

In
conclusion,
based
on
the
factors
described
above,
we
do
not
believe
that
there
is
sufficient
evidence
at
this
time
that
either
substantial
work
is
required
to
meet
the
new
standards
or
that
a
technological
laggard
is
likely
to
develop.
Therefore,
we
are
not
proposing
NCPs
for
any
of
the
Otto­
cycle
heavy­
duty
emission
standards.
19
2.
2004
Tier
2
Medium­
duty
Passenger
Vehicles
&
Heavy
Light­
duty
Trucks
In
December
1999,
EPA
promulgated
a
new
set
of
emission
control
requirements
for
heavy­
duty
vehicles
with
a
GVWR
between
6,001
and
10,000
lbs.
(
See
65
FR
6698,
February
10,
2000).
These
requirements
were
implemented
as
part
of
EPA's
Tier
2
vehicle
emission
control
program.
Beginning
in
2004,
heavy
light­
duty
trucks
(
HLDTs)
and
medium­
duty
passenger
vehicles
(
MDPVs)
are
combined
in
an
averaging
set
which
must
meet
a
fleet
average
NOx
emission
standard
of
0.20
g/
mi.
The
program
phases
in
at
25/
50/
75/
100%
of
each
years
sales
over
the
period
2004­
2007.
Those
not
included
in
this
fleet
average
must
meet
the
current
standards.
This
is
referred
to
as
the
interim
program.
Beginning
in
2008,
the
fleet
must
average
50%
at
0.20
g/
mi
NOx
and
the
remaining
50%
at
0.07
g/
mi
NOx
on
average.
And,
by
2009
the
fleet
must
average
0.07
g./
mi
NOx.
This
is
referred
to
as
the
Tier
2
program.
This
fleet
average
includes
all
covered
vehicles
without
regard
to
fuel­
type
or
combustion
cycle.
To
be
considered
as
part
of
the
average,
vehicle
families
must
certify
to
NOx,
NMOG,
CO,
HCHO,
and
PM
standards
in
one
of
a
number
of
the
emission
"
bins."
There
are
11
bins
available
for
the
interim
program
and
eight
for
the
Tier
2
program.
In
order
for
a
family
to
qualify
for
the
program
it
need
only
be
able
to
certify
in
the
top
bin
of
each
program.

EPA
believes
that
NCPs
are
not
necessary
for
either
the
interim
or
Tier
2
programs
applicable
to
HLDTs
and
MDPVs.
While
the
standard
will
be
more
difficult
to
meet,
it
does
not
involve
"
substantial
work"
as
defined
in
the
regulation
and
discussed
above,
nor
does
EPA
expect
20
there
to
be
a
"
technological
laggard."
The
technology
needed
to
meet
these
standards
is
well
understood
now,
and,
as
discussed
in
the
rulemaking,
there
are
already
a
number
of
vehicle
families
capable
of
meeting
the
requirements.
To
enable
this
technology
further,
EPA
has
promulgated
fuel
quality
requirements
for
gasoline
and
diesel
fuel
aimed
at
substantially
reducing
sulfur
content
and
thus
enabling
highly
efficient
aftertreatment
technology.

Beyond
that,
these
programs
are
constructed
with
a
phase­
in,
which
means
that
there
is
ample
opportunity
for
technological
development
with
the
potentially
more
difficult
vehicle
configurations
deferrable
until
the
final
year
of
each
program's
phase­
in.
Furthermore,
the
programs
are
based
on
fleet
average
standards
independent
of
fuel
or
combustion
cycle
and
do
not
limit
emission
standards
to
the
fleet
average.
In
order
to
be
certified,
a
vehicle
family
need
only
qualify
in
one
of
the
emission
bins.
For
the
interim
and
Tier
2
programs
there
are
three
bins
above
the
average.
Generally,
the
top
bin
in
the
interim
program
was
constructed
such
that
current
technology
vehicles
could
qualify.
The
top
bin
of
the
Tier
2
program
was
set
at
the
fleet
average
value
of
the
interim
program.

The
program
also
includes
a
number
of
flexibilities
designed
to
enhance
compliance.

These
include
a
provision
to
allow
the
generation
of
credits
through
early
banking,

manufacturerdeveloped
alternative
phase­
in
schedules,
deficit
carryforward
for
the
fleet
average,
and
a
number
of
technology
phase­
in
flexibilities
such
as
in­
use
standards
and
alternative
certification
testcycles
21
In
conclusion,
given
the
significant
flexibilities
and
options
contained
in
the
Tier
2
rule,
we
are
not
proposing
NCPs
for
2004
and
later
model
year
HLDTs
or
MDPVs.

III.
Penalty
Rates
This
proposed
rule
is
the
most
recent
in
a
series
of
NCP
rulemakings.
The
discussion
of
penalty
rates
in
the
Phase
IV
rulemaking
(
58
FR
68532,
December
28,
1993),
Phase
III
rulemaking
(
55
FR
46622,
November
5,
1990),
the
Phase
II
rulemaking
(
50
FR
53454,
December
31,
1985)
as
well
as
the
Phase
I
rulemaking
(
50
FR
35374,
August
30,
1985)
are
incorporated
by
reference.
This
section
briefly
reviews
the
penalty
rate
formula
and
discusses
how
EPA
arrived
at
the
penalty
rates
in
this
proposed
rule.
22
A.
Parameters
As
in
the
previous
NCP
rules,
we
are
specifying
the
NCP
formula
for
each
standard
using
the
following
parameters:
COC
50,
COC
90,
MC
50,
F,
and
UL.
The
NCP
formula
is
the
same
as
that
promulgated
in
the
Phase
I
rule.
As
was
done
in
previous
NCP
rules,
costs
include
additional
manufacturer
costs
and
additional
owner
costs,
but
do
not
include
certification
costs
because
both
complying
and
noncomplying
manufacturers
must
incur
certification
costs.
COC
50
is
an
estimate
of
the
industry­
wide
average
incremental
cost
per
engine
(
references
to
engines
are
intended
to
include
vehicles
as
well)
associated
with
meeting
the
standard
for
which
an
NCP
is
offered,

compared
with
meeting
the
upper
limit.
More
precisely,
the
values
of
COC
50
presented
here
are
estimates
of
the
sales
weighted
mean
incremental
cost.
We
request
comment
regarding
whether
it
would
be
more
appropriate
to
set
COC
50
equal
to
the
50th
percentile
costs
of
compliance
(
i.
e.,

median)
instead
of
the
mean
costs.
Commenters
supporting
the
use
of
the
median
costs
should
address
whether
such
an
approach
would
reveal
confidential
business
information.

COC
90
is
EPA's
best
estimate
of
the
90th
percentile
incremental
cost
per­
engine
associated
with
meeting
the
standard
for
which
an
NCP
is
offered,
compared
with
meeting
the
associated
upper
limit.
MC
50
is
an
estimate
of
the
industry­
wide
average
marginal
cost
of
compliance
per
unit
of
reduced
pollutant
associated
with
the
least
cost
effective
emission
control
technology
installed
to
meet
the
new
standard.
MC
50
is
measured
in
dollars
per
g/
bhp­
hr
for
HDEs.
F
is
a
factor
used
to
derive
MC
90,
the
90th
percentile
marginal
cost
of
compliance
with
the
NCP
standard
for
engines
in
the
NCP
category.
MC
90
defines
the
slope
of
the
penalty
rate
curve
near
23
the
standard
and
is
equal
to
MC
50
multiplied
by
F.
UL
is
the
upper
limit
above
which
no
engine
may
be
certified.
UL
is
specified
for
each
of
the
four
service
classes
for
which
NCPs
are
being
proposed.

The
derivation
of
the
proposed
cost
parameters
is
described
in
a
support
document
entitled
"
Draft
Technical
Support
Document:
Nonconformance
Penalties
for
2004
Highway
Heavy­
Duty
Diesel
Engines,"
which
is
available
in
the
public
docket
for
this
rulemaking.
All
costs
are
presented
in
2001
dollars.
Because
we
are
trying
to
account
for
cost
differences
at
the
point
of
sale,
all
costs
were
converted
to
net
present
value
(
NPV)
for
calendar
year
2004
using
a
discount
rate
of
7.0
percent.
The
upper
limits
applicable
to
a
pollutant
emission
standard
are
described
in
the
following
section.

We
requested
cost
information
from
several
of
the
engine
manufacturers
for
each
engine
model
that
they
plan
to
produce
for
model
year
2004.
We
used
these
estimates
along
with
all
other
available
information
to
estimate
the
average
and
90th
percentile
compliance
costs.

However,
as
we
have
in
previous
NCP
rules,
we
relied
heavily
on
the
manufacturers'
projections
of
their
own
costs,
especially
for
fixed,
hardware,
and
warranty
costs.
We
request
comment
on
the
availability
of
other
data
to
estimate
these
costs
on
a
manufacturer­
specific
basis.

It
is
important
to
note
that
this
analysis
differs
from
the
analyses
for
the
model
year
2004
standard­
setting
rulemakings
in
three
basic
ways:

(
1)
The
goal
of
this
analysis
is
to
estimate
manufacturer
and
operator
costs
during
the
first
year
of
the
new
standards
rather
than
to
project
the
long­
term
costs.
24
(
2)
The
baselines
for
calculation
of
compliance
costs
differ
significantly
due
to
issues
associated
with
the
Consent
Decrees.

(
3)
We
now
have
more
detailed
information
about
costs
identified
in
the
earlier
analysis,
as
well
as
cost
categories
not
previously
included.

Thus,
the
costs
estimated
here
are
not
comparable
to
the
estimates
described
in
the
standardsetting
rulemakings.
These
differences
are
discussed
in
detail
in
Chapter
3
of
the
Draft
Technical
Support
Document
for
this
rulemaking,
and
only
a
summary
will
be
presented
here.

First,
it
is
necessary
for
this
NCP
analysis
to
focus
solely
on
the
compliance
costs
associated
with
the
first
year
of
production,
while
standard­
setting
analyses
require
a
longer
term
view.
This
is
most
significant
with
respect
to
the
costs
associated
with
hardware,
reliability
(
warranty,
repairs,
and
associated
costs),
and
fuel
consumption.
Manufacturers
often
make
significant
progress
in
reducing
these
costs
with
additional
time.

Second,
as
is
discussed
in
Section
III(
A)(
1)
of
this
preamble,
the
engine
designs
currently
produced
and
sold
under
the
Consent
Decrees
lead
us
to
propose
an
Upper
Limit
value
of
6.0
g/
bhp­
hr
NMHC+
NOx,
for
the
heavy­
heavy
duty
service
class,
which
fundamentally
changes
the
cost
analysis.
The
penalty
rate
factors
are
based
on
the
compliance
costs
associated
with
lowering
the
emissions
from
model
year
2001
engines
to
the
2004
standard.
For
heavy­
heavy
duty
engines
the
NCPs
are
therefore
based
on
the
compliance
costs
associated
with
lowering
the
emissions
from
6.0
g/
bhp­
hr
NMHC+
NOx
to
the
2004
standard
of
2.5g/
bhp­
hr
NMHC+
NOx.
This
analysis
was
not
performed
in
the
standards­
setting
rules,
and
therefore
the
costs
estimates
in
the
standard­
setting
rule
and
this
NCP
proposal
are
not
comparable.
For
the
standard­
setting
rules,

we
estimated
the
compliance
costs
associated
with
bringing
an
engine
which
meets
the
current
25
NOx
standard
of
4.0
g/
bhp­
hr
into
compliance
with
the
2.5g/
bhp­
hr
NMHC+
NOx.
Even
for
the
other
service
classes,
where
we
have
proposed
an
Upper
Limit
based
directly
on
the
4.0
g/
bhp­
hr
NOx
standard,
the
impact
on
engine
designs
of
the
alleged
defeat
device
strategies
used
by
a
number
of
engine
manufacturers
over
the
past
decade
makes
comparison
between
the
standard­
setting
rule
cost
analysis
and
this
analysis
difficult.

Finally,
for
this
NCP
proposal
we
have
received
new
information
since
the
standard­
setting
FRMs.
This
included
more
detailed
estimates
of
actual
manufacturer
costs,
plus
data
on
a
few
additional
cost
items
which
were
not
part
of
the
standards­
setting
rulemaking
analysis.
Specifically,
we
have
included
new
cost
items
for
vehicle
manufacturer
costs,

post­
warranty
repairs,
and
revenue
impacts
(
lost
revenue
due
to
the
increased
weight
of
the
engine
and
the
loss
in
freight
capacity).
We
did
not
have
this
information
during
the
standard­
setting
rule.
As
a
result
of
the
three
factors
summarized
above,
the
costs
estimated
in
this
NCP
proposal
are
not
directly
comparable
to
the
estimates
described
in
the
standard­
setting
rulemakings.

The
significance
of
the
various
cost
categories
varied
with
service
class.
For
example,
the
largest
costs
for
light­
heavy
duty
were
hardware
costs,
while
fuel
costs
were
relatively
low.

However,
for
heavy­
heavy
duty,
the
fuel
costs
represent
about
half
of
the
total
cost
of
compliance.

1.
Upper
Limit
26
The
upper
limit
is
the
emission
level
established
by
regulation
above
which
NCPs
are
not
available
and
a
heavy
duty
engine
cannot
be
certified
or
introduced
into
commerce.
CAA
section
206(
g)(
2)
refers
to
the
upper
limit
as
a
percentage
above
the
emission
standard,
set
by
regulation,

that
corresponds
to
an
emission
level
EPA
determines
to
be
"
practicable."
The
upper
limit
is
an
important
aspect
of
the
NCP
regulations
not
only
because
it
establishes
an
emission
level
above
which
no
engine
can
be
certified,
but
it
is
also
a
critical
component
of
the
cost
analysis
used
to
develop
the
NCP
factors.
The
regulations
specify
that
the
relevant
NCP
costs
for
determining
the
COC
50
and
the
COC
90
factors
are
the
difference
between
an
engine
at
the
upper
limit
and
one
that
meets
the
new
standards
(
see
40
CFR
86.1113­
87).

The
regulatory
approach
adopted
under
the
NCP
rules
sets
the
Upper
Limit
(
UL)
at
the
prior
emission
standard
when
a
prior
emission
standard
exists
and
that
standard
is
changed
and
becomes
more
stringent.
EPA
concluded
that
the
UL
should
be
reasonably
achievable
by
all
manufacturers
with
vehicles
in
the
relevant
class.
It
should
be
within
reach
of
all
manufacturers
of
HDEs
or
HDVs
that
are
currently
allowed
so
that
they
can,
if
they
choose,
pay
NCPs
and
continue
to
sell
their
engines
and
vehicles
while
finishing
their
development
of
complying
engines.

A
manufacturer
of
a
previously
certified
engine
or
vehicle
should
not
be
forced
to
immediately
remove
an
HDE
or
HDV
from
the
market
when
an
emission
standard
becomes
more
stringent.

The
prior
emissions
standard
meets
these
goals,
because
manufactures
have
already
certified
their
vehicles
to
that
standard.
27
EPA
also
concluded
that
the
prior
emission
standard
is
the
appropriate
upper
limit
when
an
emission
standard
is
tightened
by
operation
of
another
standard.
EPA
recognized
that
the
previous
standard
would
not
necessarily
represent
the
level
that
is
reasonably
achievable
by
all
manufacturers
with
engines
in
the
relevant
class,
but
in
practice
the
prior
standard
should
be
achievable
in
almost
all
cases.
EPA
rejected
a
suggestion
that
the
upper
limit,
in
such
cases,

should
be
more
stringent
than
the
prior
emission
standard,
because
it
would
be
very
difficult
to
identify
a
limit
that
would
be
within
reach
of,
and
could
be
met
by,
all
manufacturers.

In
this
case,
the
new
standard
is
a
limit
on
the
combination
of
NOx+
NMHC,
while
the
prior
regulatory
standards
are
separate
limits,
one
for
NOx
and
one
for
total
HC.
For
a
large
portion
of
the
industry,
there
are
also
emissions
limits
set
under
judicial
Consent
Decrees,
many
of
which
vary
from
the
regulatory
standards,
in
particular
for
the
heavy­
heavy
service
class
as
discussed
latter
in
this
section.
In
this
situation,
there
is
no
simple
way
to
determine
the
appropriate
prior
emission
standard
to
use
as
an
Upper
Limit.
One
option
would
be
to
add
the
current
NOx
and
HC
standards
together,
resulting
in
a
5.3
NOx+
NMHC
standard.
Another
option
would
recognize
that
the
HC
standard
has
resulted
in
emissions
of
NMHC
that
are
generally
at
0.5
or
below,
producing
NOx+
NMHC
levels
consistent
with
a
standard
of
4.5
for
engines
meeting
a
4.0
g/
bhp­
hr
NOx
standard.
If
there
were
no
Consent
Decree
emissions
limits,

and
the
entire
industry
was
already
operating
at
these
levels,
a
4.5
standard
would
be
more
consistent
with
the
policy
and
purposes
of
40
CFR
86.1104­
91,
the
general
regulatory
provision
addressing
Upper
Limits.
A
NOx+
NMHC
standard
of
5.3
would
in
effect
allow
for
increases
in
NOx
above
the
current
regulatory
emissions
standards,
because
there
is
no
reason
to
expect
4
EPA
Memorandum
"
Summary
of
Model
Year
2001
Heavy­
duty
Diesel
Engine
HC
and
NOx
Certification
Data",
copy
available
in
the
docket
for
this
rulemaking.

28
NMHC
levels
would
increase
above
0.5.
The
UL
is
designed
to
allow
continued
production
of
current
engines,
but
not
to
allow
backsliding.

EPA
also
considered
the
CD
emissions
limits
in
this
analysis,
as
they
establish
legally
binding
requirements
on
the
manufacturers
that
directly
affect
the
way
engine
manufacturers
design
their
engines.
In
many
cases
it
is
the
CD
limits,
and
not
the
regulatory
standards,
that
are
the
controlling
factor
and
dictate
the
level
of
emissions
control
required
on
engines
produced
during
the
term
of
the
Decrees.
Since
the
role
of
an
NCP
is
to
address
the
real
world
problems
associated
with
a
transition
from
a
prior
emissions
requirement
to
a
new
more
stringent
requirement,
it
is
appropriate
to
take
the
CD
requirements
into
account
where
the
levels
required
under
the
CD
are
in
fact
the
controlling
factor
in
establishing
the
prior
level
of
control.

For
light
heavy­
duty,
medium
heavy­
duty,
and
urban
bus
engines,
the
CD
requirements
are
consistent
with
the
regulatory
requirements
for
FTP
standards
and
the
defeat
device
prohibition.

Manufacturers
are
currently
certifying
to
the
emissions
levels
provided
under
the
CD.
An
examination
of
model
year
2001
certification
data
shows
that
for
both
CD
and
non­
CD
engine
manufacturers,
engines
are
generally
being
certified
with
HC
emissions
below
0.3
g/
bhp­
hr,
and
no
engines
in
these
service
classes
certified
to
the
4.0
g/
bhp­
hr
NOx
standard
have
a
combined
NOx
plus
HC
emission
level
greater
than
4.5
g/
bhp­
hr.
4
Hence,
an
UL
of
4.5
NOx+
NMHC
on
the
FTP
would
be
most
consistent
with
the
policy
approach
embodied
in
40
CFR
86.1104­
91.
5
EPA
Memorandum
"
Summary
of
Model
Year
2001
Heavy­
duty
Diesel
Engine
HC
and
NOx
Certification
Data",
copy
available
in
the
docket
for
this
rulemaking.

29
For
heavy
heavy­
duty
engines,
however,
the
CD
provides
a
significantly
different
approach.
For
these
engines,
limits
are
set
for
Euro
III
and
NTE
levels
that
allow
for
significantly
higher
emissions
off
the
FTP
than
EPA
would
expect
to
allow
under
the
defeat
device
prohibition.

While
the
FTP
standard
under
the
CD
is
the
same
as
in
the
regulations,
it
is
the
level
of
off­
cycle
control
that
drives
the
design
requirements
for
the
engine
manufacturers.
They
are
the
legal
requirements
that
drive
the
level
of
control
embodied
in
the
engine
design.
Model
year
2001
certification
data
shows
that
combined
HC
and
NOx
emissions
for
these
engines
are
at
or
below
6.0
g/
bhp­
hr
when
measured
using
the
Euro
III
test.
5
This
NCP
rulemaking
focuses
on
technological
laggards,
which
would
be
those
heavyduty
engines
that
need
more
lead
time
to
comply
with
the
2004
NOx+
NMHC
standard.
For
heavy
heavy­
duty
engines,
the
prior
actual
level
of
control
that
they
are
now
achieving
and
certifying
to
is
driven
by
the
CD
levels.
As
such,
an
UL
at
the
level
of
control
required
under
the
CD
would
set
a
level
that
is
within
the
reach
of
all
such
manufacturers,
including
the
technological
laggards.
It
would
be
reasonably
achievable
by
all
manufacturers
in
this
class,
and
would
avoid
forcing
the
technical
laggards
to
remove
an
engine
from
the
market
when
the
2004
emissions
standards
go
into
effect.
This
UL
would
be
consistent
with
the
policy
embodied
in
the
NCP
regulations.
30
EPA
recognizes
that
under
the
CD
this
group
of
heavy­
duty
engines
is
also
required
to
achieve
the
2004
emissions
levels
by
October
2002.
However,
as
discussed
before,
EPA
has
determined
that
there
is
likely
to
be
a
technological
laggard
for
purposes
of
meeting
this
standard
in
2004.
The
prior
deadline
in
the
CD
does
not
change
this
determination,
and
means
only
that
such
manufacturers
would
also
be
subject
to
the
constraints
in
the
CD,
including
its
compliance
and
enforcement
provisions.
EPA
also
recognizes
that
the
CD
calls
for
compliance
with
a
4.0
NOx
standard
on
the
FTP
with
a
6.0
NOx
standard
for
the
Euro
III,
and
the
UL
we
are
proposing
is
for
the
FTP.
Setting
the
UL
at
6.0
NOx+
NMHC
for
the
FTP
would
be
expected
to
allow
continued
production
of
engines
with
NOx
at
their
CD
levels,
as
the
Euro
III
levels
would
not
be
expected
to
raise
serious
concerns
about
compliance
with
the
defeat
device
prohibition.

EPA
also
considered
an
UL
or
4.5
or
5.3
for
the
heavy
heavy­
duty
engines
An
UL
of
4.5
NOx
+
NMHC
would
significantly
reduce
the
level
of
off­
cycle
emissions
for
these
engines,
but
would
do
it
by
requiring
significant
design
changes
at
the
same
time
design
work
is
underway
to
meet
the
2.5
standard.
It
is
questionable
whether
there
is
adequate
lead
time
to
accomplish
this
in
time
for
2004
model
year,
and
it
is
not
consistent
with
the
policy
underlying
the
NCP
regulation
concerning
ULs.
In
addition,
the
majority
of
the
heavy­
heavy
cost
numbers
obtained
by
EPA
from
industry
involved
bringing
an
engine
to
compliance
from
the
CD
levels
to
the
2004
levels,

and
not
for
reducing
from
some
third
level
to
the
2004
levels.
EPA
does
not
believe
it
could
readily
develop
the
cost
figures
for
such
a
development
phase.
An
UL
of
5.3
NOx+
NMHC
would
involve
a
hybrid
of
these
two
options
­
it
would
involve
some
change
from
the
CD
levels,
but
less
of
a
change
than
going
to
the
4.5
level.
31
Of
the
three
possible
ULs
for
heavy
heavy­
duty
engines,
EPA
believes
that
6.0
NOx+
NMHC
is
most
consistent
with
the
policy
approach
embodied
in
40
CFR
86.1104­
91.
The
cost
calculation
in
this
proposal
are
based
on
this
as
the
UL.
However,
EPA
invites
comment
on
using
an
UL
of
either
5.3
or
4.5
NOx+
NMHC,
including
information
on
the
technology
such
an
engine
would
use
to
comply
with
either
5.3
or
4.5,
as
well
as
the
costs
associated
with
these
options.

2.
Parameter
Values
We
propose
that
the
values
in
Table
1
(
in
2001
dollars)
be
used
in
the
NCP
formula
for
the
2004
and
later
model
year
NMHC+
NOx
standard
of
2.5
g/
bhp­
hr
for
diesel
heavy­
duty
engines
and
diesel
urban
bus
engines
at
full
useful
life.
The
derivation
of
these
parameters
is
described
in
the
Draft
Technical
Support
Document
for
this
rulemaking.
We
request
comment
on
our
estimates
of
these
parameters.
32
Table
1:
Proposed
NCP
Calculation
Parameters
Parameter
Light
Heavy­
Duty
Diesel
Engines
Medium
Heavy­
Duty
Diesel
Engines
Heavy
Heavy­
Duty
Diesel
Engines
Urban
Bus
Engines
COC50
$
1,080
$
3,360
$
8,940
$
4,400
COC90
$
2,610
$
6,870
$
14,790
$
7,120
MC50
$
2,000
per
gram
per
brake­

horsepowerhour
$
1,800
per
gram
per
brake­

horsepowerhour
$
7,200
per
gram
per
brake­

horsepowerhour
$
4,900
per
gram
per
brake­

horsepowerhour
F
1.3
1.3
1.3
1.3
UL
4.5
g/
bhp­
hr
4.5
g/
bhp­
hr
6.0
g/
bhp­
hr
4.5
g/
bhp­
hr
3.
Penalty
Curves
The
calculation
parameters
listed
in
Table
1
are
used
to
calculate
the
penalty
rates
for
each
heavy­
duty
service
class.
These
parameters
are
used
in
the
penalty
rate
formulas
which
are
defined
in
the
existing
NCP
regulations
(
See
40
CFR
86.1113(
a)(
1)
and
(
2)).
Using
the
parameters
in
Table
1,
and
the
equations
in
the
regulations,
we
have
plotted
penalty
rates
versus
compliance
levels
for
each
service
class
in
Figures
1­
4
below.
These
penalty
curves
are
for
the
first
year
of
use
of
the
NCPs,
that
is,
the
annual
adjustment
factors
specified
in
the
regulations
have
been
set
equal
to
one.
33
2004
Light­
heavy
Duty
Diesel
Engine
NCPs
$
0
$
500
$
1,000
$
1,500
$
2,000
$
2,500
$
3,000
2.5
3.0
3.5
4.0
4.5
NMHC+
NOx
Compliance
Level
(
g/
bhp­
hr)
$/
engine
penalty
Figure
1:
Light­
heavy
Penalty
Curve
2004
Medium­
heavy
Duty
Diesel
Engine
NCPs
$
0
$
1,000
$
2,000
$
3,000
$
4,000
$
5,000
$
6,000
$
7,000
$
8,000
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
NMHC+
NOx
Compliance
Level
(
g/
bhp­
hr)
$/
engine
penalty
Figure
2:
Medium­
heavy
Penalty
Curve
34
2004
Heavy­
heavy
Duty
Diesel
Engine
NCPs
$
0
$
2,000
$
4,000
$
6,000
$
8,000
$
10,000
$
12,000
$
14,000
$
16,000
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
NMHC+
NOx
Compliance
Level
(
g/
bhp­
hr)
$/
engine
penalty
Figure
3:
Heavy­
heavy
Penalty
Curve
2004
Urban
Bus
Heavy­
duty
Engine
NCPs
$
0
$
1,000
$
2,000
$
3,000
$
4,000
$
5,000
$
6,000
$
7,000
$
8,000
2.5
3.0
3.5
4.0
4.5
NMHC+
NOx
Compliance
Level
(
g/
bhp­
hr)
$/
engine
penalty
Figure
4:
Urban
Bus
Penalty
Curve
35
B.
Issues
and
Alternatives
The
Clean
Air
Act
requires
EPA
to
set
the
NCPs
`
to
remove
any
competitive
disadvantage
to
manufacturers
whose
engines
or
vehicles
achieve
the
required
degree
of
emission
reduction'.

The
analysis
presented
in
detail
in
the
Draft
Technical
Support
Document
deals
with
an
assessment
of
the
cost
of
compliance,
using
essentially
the
same
methodology
that
has
historically
been
used
to
establish
NCPs.
We
believe
that
our
estimates
of
the
costs
are
appropriate
and
that
the
methodology
is
sound.
In
establishing
prior
NCP
rules,
we
have
frequently
made
it
clear
that
satisfying
the
statutory
objective
of
protecting
the
complying
manufacturer
was
paramount.

The
NCP
generic
rule
establishes
an
approach
which
attempts
to
remove
any
competitive
disadvantage
to
complying
manufacturers
by
assessing
a
cost
to
the
manufacturer
of
a
noncomplying
engine
in
the
form
of
an
NCP,
with
the
expectation
that
this
cost
is
at
least
equivalent
to
or
exceeds
the
value
of
the
competitive
benefit
gained
by
building
a
noncomplying
engine.

Imposing
such
a
cost
is
a
way
to
level
the
playing
field
without
interfering
in
the
actual
marketing
or
pricing
of
the
engines.
The
problem
here
is
that
for
some
factors
it
is
hard
to
quantify
with
certainty
the
value
of
this
competitive
benefit,
and
EPA
is
concerned
that
the
calculation
may
not
remove
all
competitive
disadvantages.

1.
Purchaser
Perception
Effects
on
Competition
36
A
manufacturer
of
a
non­
complying
engine
generally
gains
a
competitive
advantage
or
benefit
of
two
types.
The
first
typically
involves
production
expenses
saved
by
not
producing
a
complying
engine,
such
as
fixed
costs,
hardware
costs,
and
the
like.
The
second
category
involves,
in
some
cases,
the
competitive
benefits
gained
by
producing
an
engine
that
has
better
performance
characteristics
compared
to
a
complying
engine,
including
reduced
operating
expenses
for
the
purchasers
of
noncomplying
engines.
In
addition,
manufacturers
may
realize
a
reduced
number
of
warranty
claims
by
producing
current
technology
noncomplying
engines.

The
first
category
is
easier
to
quantify,
as
it
involves
considering
costs
directly
incurred
by
the
industry,
and
it
is
generally
easier
to
get
a
fuller
quantification
of
amounts
in
categories
such
as
hardware
costs.
The
second
category
is
much
harder
to
quantify
with
certainty.
For
example,

as
discussed
below
with
respect
to
fuel
economy,
the
actual
amount
of
savings
to
the
operator
will
vary
based
on
several
factors.
An
even
harder
to
quantify
competitive
advantage
is
the
benefit
in
the
marketplace
from
producing
an
engine
that
is,
or
may
be
perceived
to
perform
better,
such
as
being
more
durable
or
reliable,
and
thus
less
prone
to
malfunction
or
breakdown.

Including
the
cost
of
warranty
claims
and
related
expenses
for
the
new
technology
engines
in
the
NCP
is
one
way
to
take
into
consideration
the
expected
durability
of
complying
engines.

Including
this
cost
helps
to
level
the
playing
field
with
respect
to
this
increased
cost
experienced
by
manufacturers
of
complying
engines.
This
cost
component
of
the
NCP
is
therefore
like
the
costs
in
the
first
category
­
out
of
pocket
expenses
experienced
by
complying
manufacturers
that
a
non­
complying
manufacturer
might
otherwise
avoid.
37
There
is
significant
uncertainty
as
to
whether
warranty
and
related
costs
in
the
NCP
calculation
fully
reflect
the
competitive
benefit
gained
in
the
marketplace
by
a
non­
complying
engine.
This
competitive
benefit
could
readily
be
greater
than
the
out­
of­
pocket
warranty
expenses
paid
by
the
manufacturer
of
a
complying
engine.
For
example,
non­
complying
engines
may
be
either
perceived
or
may
in
fact
be
more
reliable
during
the
early
years
of
the
transition
to
the
new
technology
engines.
This
difference
in
performance
gives
a
competitive
advantage
to
producers
of
noncomplying
engines.
In
order
to
remove
this
advantage,
the
cost
of
an
NCP
needs
to
account
for
the
marketplace
value
of
this
difference
in
performance.

However,
it
is
hard
to
quantify
this
value
with
certainty.
For
example
it
is
hard
to
quantify
in
dollar
terms
the
value
purchasers
will
attribute
to
a
real
or
perceived
difference
in
durability
or
reliability.
There
is
little
real
world
experience
with
the
new
technology
engines;
hence
it
will
be
hard
for
a
purchaser
to
judge
with
certainty
the
actual
difference
in
reliability
and
the
increased
costs
associated
with
it.
It
is
also
unlikely
that
the
dollar
amount
of
a
warranty
claim
would
fully
reflect
the
loss
in
value
expected
from
a
malfunction
or
breakdown.
The
purchaser
experiences
both
the
repair
expenses
as
well
as
down
time
for
their
equipment,
disruption
of
their
business,

and
other
potential
adverse
impacts,
which
may
not
be
fully
covered
by
payment
of
a
warranty
claim.
Especially
where
there
is
little
historical
evidence
to
rely
on
regarding
a
new
technology,

there
may
be
significant
uncertainty
concerning
the
reliability
of
new
technology
engines
when
they
are
first
introduced,
and
the
value
a
purchaser
places
on
the
proven
reliability
of
an
older
technology
engine
may
therefore
be
magnified.
While
this
proposal
includes
costs
related
to
downtime
and
demurrage
expenses
during
warranty
repairs
in
the
NCP,
it
is
not
clear
how,
as
part
38
of
a
business
decision,
the
engine
purchasers
will
trade­
off
higher
purchase
costs
for
the
noncomplying
engine
versus
the
uncertainty
of
the
reliability
and
durability
of
the
new
technology.

This
is
potentially
a
significant
issue
in
this
action
because
there
is
reason
to
believe
that
manufacturers
may
choose
to
make
extensive
use
of
NCPs
and
continue
to
produce
pre­
2004
technology
engines.
As
has
been
the
case
in
past
NCP
rules,
where
a
noncomplying
manufacturer
does
essentially
nothing
in
terms
of
new
technology
(
i.
e.,
produces
an
upper
limit
engine),
it
must
pay
an
NCP
based
on
COC
90.
The
noncomplying
manufacturer
would
then
raise
prices
on
its
engines
to
levels
comparable
to
those
for
complying
engines
in
order
to
be
able
to
capture
back
at
least
part
of
that
NCP
(
the
portion
related
to
first
price
increase).
The
noncomplying
manufacturer
may
even
be
able
to
charge
a
premium
(
relative
to
the
first
price
increase
of
the
complying
manufacturer)
if
the
engine
purchaser
perceives
its
"
old
technology"
engine
to
be
more
desirable
than
the
relatively
unproven
new
technology
engine.

Thus,
in
summary,
we
have
three
related
factors
affecting
the
issue
of
whether
the
proposed
NCP
would
remove
competitive
disadvantage
(
purchase
price,
operating
cost,

purchaser
perception).
Even
with
an
NCP
set
at
a
level
which
addresses
quantifiable
cost
differences
between
complying
and
non­
complying
engines,
in
the
eyes
of
the
purchaser
there
still
may
be
an
advantage
to
paying
the
higher
first
cost
for
an
engine
(
including
the
NCP)
with
known
performance.
39
It
is
difficult
to
establish
the
degree
to
which
the
NCP
calculation
discussed
above
will
fully
remove
any
competitive
advantage
for
non­
compliers
attributable
to
purchaser
perception.

Therefore,
EPA
is
requesting
comment
on
whether
there
is
an
additional
factor
that
should
be
included
in
the
NCP
calculation
and
on
methods
to
value
these
potential
performance
advantages.

If
engine
purchaser
perception
favors
noncomplying
engines,
this
affects
market
share
and
thus
business
viability,
per
engine
amortized
fixed
costs,
and
overall
profitability.
Therefore,
we
are
considering
adding
a
factor
to
the
NCP
formula
to
address
such
an
advantage
if
it
exists,
and
there
is
an
appropriate
way
to
quantify
it.
Conceptually,
such
a
factor
would
need
to
be
equal
to
the
purchase
price
difference
at
which
a
potential
purchaser
would
be
indifferent
between
purchasing
a
complying
and
non­
complying
engine,
after
accounting
for
all
of
the
factors
that
are
currently
included
in
the
proposed
NCP
calculation
(
e.
g.,
fuel
costs,
maintenance,
warranty,
demurrage,

and
the
revenue
impact
of
additional
engine
weight.
These
factors
are
discussed
in
more
detail
in
the
draft
Technical
Support
Document
for
this
proposal.
EPA
requests
comment
on
whether
such
an
additional
factor
is
needed
here
and
if
so
what
is
the
appropriate
means
to
implement
this
adjustment.
Commenters
who
believe
that
such
a
factor
is
appropriately
included
in
the
NCP
calculation
should
provide
an
empirical
and
quantitative
basis
for
calculating
the
appropriate
level
at
which
to
set
it.

2.
Projected
Fuel
Price
One
of
the
most
significant
categories
of
cost
is
the
impact
of
the
standards
on
fuel
consumption
rates.
However,
this
cost
element
is
difficult
to
estimate
because
actual
fuel
costs
40
will
vary
based
on
the
price
of
the
fuel
and
on
the
vehicle
operation.
We,
therefore,
are
requesting
comment
on
our
estimates
of
the
economic
impact
of
increased
fuel
consumption.

Fuel
price
varies
with
time
and
with
location.
According
to
the
Energy
Information
Administration
(
EIA),
the
national
average
highway
diesel
fuel
price
in
February
of
1999
was
95
cents
per
gallon
(
with
taxes),
but
in
October
of
2000
it
was
$
1.67
per
gallon
(
with
taxes).
That
represents
a
76
percent
increase
in
the
fuel
price
within
a
two
year
period.
The
average
price
for
diesel
fuel
over
the
past
five
years
was
$
1.25
per
gallon.
This
kind
of
variation
makes
it
difficult
to
project
future
prices.
For
our
analysis,
we
estimated
the
fuel
price
to
be
$
1.50
for
2004
and
2005.
This
is
equal
to
the
national
average
highway
diesel
fuel
price
for
last
year.
We
are
requesting
comment
on
the
use
of
the
five­
year
average
price
of
$
1.25
per
gallon.
Our
analysis
projects
that
fuel
costs
will
be
five
cents
per
gallon
higher
after
2005
to
account
for
the
additional
cost
of
the
very
low
sulfur
fuel
that
will
be
required
beginning
in
2006.
This
would
also
be
true
if
we
started
with
the
five­
year
average
price
instead
of
the
2000
price.
Given
the
difficulty
in
projecting
future
fuel
prices,
we
are
also
requesting
comments
on
the
concept
of
adjusting
the
NCP
based
on
price
of
diesel
fuel.
This
could
be
done
in
two
ways.
First,
we
could
adjust
the
NCP
by
regulation
before
the
beginning
of
the
2004
model
year
if
we
determine
that
the
fuel
price
used
to
determine
the
NCP
inputs
is
no
longer
appropriate.
Second,
we
could
finalize
in
this
rulemaking
a
regulatory
provision
that
makes
COC
50,
COC
90
and
MC
50
functions
of
the
national
average
highway
diesel
fuel
price
in
the
preceding
year
(
or
preceding
five
years).
This
would
be
similar
to
the
use
of
the
Consumer
Price
Index
to
adjust
the
penalties
for
inflation
(
see
40
CFR
41
86.113­
87(
a)(
4).
The
NCP
could
be
adjusted
"
automatically"
using
the
latest
EIA
estimate
of
national
average
highway
diesel
fuel
price,
or
some
other
independent
estimate.

In
addition,
at
any
given
time,
fuel
prices
before
taxes
can
vary
regionally
by
as
much
as
±
10
percent
from
the
national
average.
This
is
compounded
by
differences
in
state
taxes,
which
vary
from
8
to
29
cents
per
gallon.
This
regional
variability
is
potentially
significant
for
our
90th
percentile
analysis.
Some
trucks
may
operate
locally
in
an
area
that
has
fuel
prices
significantly
higher
than
the
national
average.
However,
we
believe
that
the
number
of
these
trucks
will
be
relatively
small,
and
thus
did
not
include
a
regional
fuel
price
component
in
our
90th
percentile
analysis.
Nevertheless,
we
request
comment
on
this
issue.

Another
important
factor
in
estimating
fuel
cost
is
how
much
fuel
a
model
year
2004
vehicle
will
use
over
its
lifetime.
This
is
most
important
for
heavy­
heavy
duty
engines.
Some
vehicles
may
be
scrapped
after
their
useful
life
(
435,000
miles)
while
others
may
be
rebuilt
more
than
once
and
not
be
scrapped
until
after
2
million
miles.
Thus,
the
fuel
cost
could
vary
by
a
factor
of
four
from
one
vehicle
to
another.
The
mileage
estimates
that
we
used
in
our
analysis
are
shown
in
the
table
below.
You
should
read
the
Draft
Technical
Support
Document
for
more
information
about
how
we
used
these
mileage
estimates.
42
Estimates
of
Lifetime
Vehicle
Miles
Traveled
(
VMT)
Used
in
Cost
Analysis
VMT
for
Average
Vehicle
VMT
Used
for
COC
90
Analysis
Light
Heavy
209,000
280,000
Medium
Heavy
262,000
343,000
Heavy
Heavy
767,000
1,000,000
Finally,
our
methodology
for
calculating
the
cost
of
changes
in
fuel
consumption
uses
estimates
of
average
miles
driven
per
gallon
of
fuel
used.
These
estimates
are
14.0,
8.0
and
6.0
miles
per
gallon
(
MPG)
for
light­,
medium,
and
heavy­
heavy
duty,
respectively.
We
used
these
same
estimates
for
both
the
COC
50
and
COC
90
analyses.
Using
different
estimates
could
significantly
change
the
projected
costs.
For
a
typical
light­
heavy
duty
vehicle,
where
we
are
projecting
a
decrease
in
the
brake­
specific
fuel
consumption
rate,
using
a
higher
MPG
rate
would
increase
net
costs
for
a
given
number
of
miles
traveled
because
the
fuel
savings
would
be
reduced.

The
opposite
is
true
for
medium­
and
heavy­
heavy
duty,
where
we
project
increases
in
brakespecific
fuel
consumption
rates.
For
these
larger
engines,
using
a
higher
MPG
rate
would
decrease
net
costs
for
a
given
number
of
miles
traveled.
We
request
comment
on
these
MPG
estimates.

3.
Discount
Rates
All
of
the
compliance
costs
in
this
analysis
are
presented
in
terms
of
net
present
value
(
NPV)
for
calendar
year
2004.
This
means
that
costs
that
occur
before
2004
are
adjusted
43
upward,
and
costs
that
occur
after
2004
are
adjusted
downward
to
reflect
the
time
or
opportunity
value
of
the
money
involved.
(
i.
e.,
discounted).

In
our
analysis,
each
manufacturer's
pre­
production
investment
costs
were
adjusted
upward
to
reflect
the
lost
opportunity
cost
or
the
cost
of
borrowing
the
capital
for
the
investment.

A
manufacturer
would
typically
seek
to
set
its
prices
to
recover
this
adjusted
investment
from
sales
within
the
first
several
years
of
production.
We
used
a
seven
percent
annual
discount
rate
for
these
costs,
as
we
have
done
in
previous
analyses
for
pre­
production
costs.
EPA
also
used
a
seven
percent
discount
rate
in
Regulatory
Impact
Analyses
for
the
1997
and
2000
FRMs
that
established
the
2004
standards.
This
rate
is
based
on
studies
which
indicate
that
this
has
been
a
reasonable
opportunity
cost
of
diverting
private
capital
to
support
Federal
regulatory
objectives
(
See
OMB
Circular
A­
94;
available
at
www.
whitehouse.
gov/
omb/
circulars/
a094/
a094.
html).

We
request
comment
in
whether
this
rate
is
appropriate
for
the
opportunity
costs
for
the
period
of
1998
through
2003,
the
time
period
when
the
2004
model
year
investment
is
being
made
by
the
manufacturers.

The
NPV
analysis
also
requires
that
all
in­
use
operating
costs
be
adjusted
downward
to
reflect
the
time
value
of
money
for
future
costs.
More
specifically,
the
stream
of
operating
costs
must
be
discounted
to
make
them
equivalent
to
costs
incurred
at
the
time
of
purchase.
Truck
purchasers
would
use
this
approach
before
purchase
when
comparing
future
operating
costs
of
two
or
more
engines
before
purchase.
We
used
a
seven
percent
discount
rate
for
these
costs
as
well.
However,
there
is
evidence
in
other
contexts
that
users
might
apply
a
different
discount
rate
44
than
seven
percent
when
considering
future
operating
costs
during
a
purchase
decision.
We
request
comment
on
whether
there
is
evidence
to
support
the
application
of
such
an
alternative
discount
rate
to
operating
costs
in
the
various
segments
of
the
heavy
duty
engine
market.
Your
comments
in
support
of
an
alternative
discount
rate
(
a
higher
or
lower
value)
should
include
a
discussion
of
the
supporting
economic
and
business
rationale
for
the
alternative
rate.
We
have
included
an
example
of
the
impact
on
the
NCP
parameters
from
using
a
smaller
discount
rate
(
three
percent)
in
the
draft
Technical
Support
Document
for
this
proposal.

IV.
Economic
Impact
Because
the
use
of
NCPs
is
optional,
manufacturers
have
the
flexibility
and
will
likely
choose
whether
or
not
to
use
NCPs
based
on
their
ability
to
comply
with
emissions
standards.
If
no
HDE
manufacturer
elects
to
use
NCPs,
these
manufacturers
and
the
users
of
their
products
will
not
incur
any
additional
costs
related
to
NCPs.
NCPs
remedy
the
potential
problem
of
having
a
manufacturer
forced
out
of
the
marketplace
due
to
that
manufacturer's
inability
to
conform
to
new,
strict
emission
standards
in
a
timely
manner.
Without
NCPs,
a
manufacturer
which
has
difficulty
certifying
HDEs
in
conformance
with
emission
standards
or
whose
engines
fail
a
SEA
has
only
two
alternatives:
fix
the
nonconforming
engines,
perhaps
at
a
prohibitive
cost,
or
prevent
their
introduction
into
commerce.
The
availability
of
NCPs
provides
manufacturers
with
a
third
alternative:
continue
production
and
introduce
into
commerce
upon
payment
of
a
penalty
an
engine
that
exceeds
the
standard
until
an
emission
conformance
technique
is
developed.
45
Therefore,
NCPs
represent
a
regulatory
mechanism
that
allows
affected
manufacturers
to
have
increased
flexibility.
A
decision
to
use
NCPs
may
be
a
manufacturer's
only
way
to
continue
to
introduce
HDEs
into
commerce.

V.
Environmental
Impact
When
evaluating
the
environmental
impact
of
this
proposed
rule,
one
must
keep
in
mind
that,
under
the
Act,
NCPs
are
a
consequence
of
enacting
new,
more
stringent
emissions
requirements
for
heavy
duty
engines.
Emission
standards
are
set
at
a
level
that
most,
but
not
necessarily
all,
manufacturers
can
achieve
by
the
model
year
in
which
the
standard
becomes
effective.
Following
International
Harvester
v.
Ruckelshaus,
478
F.
2d
615
(
D.
C.
Cir.
1973),

Congress
realized
the
dilemma
that
technology­
forcing
standards
were
likely
to
cause,
and
allowed
manufacturers
of
heavy­
duty
engines
to
certify
nonconforming
vehicles/
engines
upon
the
payment
of
an
NCP,
under
certain
conditions.
This
mechanism
would
allow
manufacturer(
s)
who
cannot
meet
technology­
forcing
standards
immediately
to
continue
to
manufacture
these
nonconforming
engines
while
they
tackle
the
technological
problems
associated
with
meeting
new
emission
standard(
s).
Thus,
as
part
of
the
statutory
structure
to
force
technological
improvements
without
driving
manufacturers
out
of
the
market,
NCPs
provide
flexibility
that
fosters
long­
term
emissions
improvement
through
the
setting
of
lower
emission
standards
at
an
earlier
date
than
could
otherwise
be
possible.
By
design,
NCPs
encourage
the
technological
laggard
that
is
using
NCPs
to
reduce
emission
levels
to
the
more
stringent
standard
as
quickly
as
possible.
46
However,
we
believe
that
the
potential
exists
for
there
to
be
more
widespread
use
of
the
NCPs
proposed
in
this
rule
in
comparison
to
prior
NCPs,
thus
indicating
the
possibility
for
an
environmental
impact
somewhat
greater
in
magnitude
than
we
have
suggested
in
prior
NCP
rules.

Nevertheless,
we
believe
that
any
such
impacts
would
be
short­
term
in
nature.
By
including
an
annual
adjustment
factor
that
increases
the
levels
of
the
penalties,
the
NCP
program
is
structured
such
that
the
incentives
to
produce
engines
that
meet
the
standards
increase
year­
by­
year.
The
practical
impact
of
this
adjustment
factor
is
that
the
NCPs
will
rapidly
become
an
obsolete
option
for
non­
complying
manufacturers.
However,
we
have
no
way
of
predicting
at
this
time
how
many
manufacturers
will
make
use
of
the
proposed
NCPs,
or
how
many
engine
families
would
be
subject
to
the
NCP
program.
Because
of
these
uncertainties
we
are
unable
to
accurately
quantify
the
potential
impact
the
proposed
NCPs
might
have
on
emission
inventories,
although,
as
stated
above,
any
impacts
are
expected
to
be
short­
term
in
nature.

VI.
Public
Participation
We
request
comment
on
all
aspects
of
this
proposal.
This
section
describes
how
you
can
participate
in
this
process.

A.
How
Do
I
Submit
Comments?

We
are
opening
a
formal
comment
period
by
publishing
this
document.
We
will
accept
comments
for
the
period
indicated
under
DATES
above.
If
you
have
an
interest
in
the
program
47
described
in
this
document,
we
encourage
you
to
comment
on
any
aspect
of
this
rulemaking.
We
request
comment
on
various
topics
throughout
this
proposal.

Your
comments
will
be
most
useful
if
you
include
appropriate
and
detailed
supporting
rationale,
data,
and
analysis.
If
you
disagree
with
parts
of
the
proposed
program,
we
encourage
you
to
suggest
and
analyze
alternate
approaches
to
meeting
the
air
quality
goals
described
in
this
proposal.
You
should
send
all
comments,
except
those
containing
proprietary
information,
to
our
Air
Docket
(
see
Addresses)
before
the
end
of
the
comment
period.

If
you
submit
proprietary
information
for
our
consideration,
you
should
clearly
separate
it
from
other
comments
by
labeling
it
"
Confidential
Business
Information."
You
should
also
send
it
directly
to
the
contact
person
listed
under
FOR
FURTHER
INFORMATION
CONTACT
instead
of
the
public
docket.
This
will
help
ensure
that
no
one
inadvertently
places
proprietary
information
in
the
docket.
If
you
want
us
to
use
your
confidential
information
as
part
of
the
basis
for
the
final
rule,
you
should
send
a
non­
confidential
version
of
the
document
summarizing
the
key
data
or
information.
We
will
disclose
information
covered
by
a
claim
of
confidentiality
only
through
the
application
of
procedures
described
in
40
CFR
part
2.
If
you
don't
identify
information
as
confidential
when
we
receive
it,
we
may
make
it
available
to
the
public
without
notifying
you.

B.
Will
There
Be
a
Public
Hearing?
48
We
will
hold
a
public
hearing
in
the
Washington,
DC
area
on
January
29,
2002.
The
hearings
will
start
at
10:
00
am
and
continue
until
everyone
has
had
a
chance
to
speak.

If
you
would
like
to
present
testimony
at
a
public
hearing,
we
ask
that
you
notify
the
contact
person
listed
above
at
least
ten
days
before
the
hearing.
You
should
estimate
the
time
you
will
need
for
your
presentation
and
identify
any
needed
audio/
visual
equipment.
We
suggest
that
you
bring
copies
of
your
statement
or
other
material
for
the
EPA
panel
and
the
audience.
It
would
also
be
helpful
if
you
send
us
a
copy
of
your
statement
or
other
materials
before
the
hearing.

We
will
make
a
tentative
schedule
for
the
order
of
testimony
based
on
the
notifications
we
receive.
This
schedule
will
be
available
on
the
morning
of
each
hearing.
In
addition,
we
will
reserve
a
block
of
time
for
anyone
else
in
the
audience
who
wants
to
give
testimony.
We
will
conduct
the
hearing
informally,
and
technical
rules
of
evidence
won't
apply.
We
will
arrange
for
a
written
transcript
of
the
hearing
and
keep
the
official
record
of
the
hearing
open
for
30
days
to
allow
you
to
submit
supplementary
information.
You
may
make
arrangements
for
copies
of
the
transcript
directly
with
the
court
reporter.

VII.
Administrative
Requirements
A.
Regulatory
Planning
and
Review:
Executive
Order
12866
49
Under
Executive
Order
12866
(
58
FR
51735,
Oct.
4,
1993),
the
Agency
is
required
to
determine
whether
this
regulatory
action
would
be
"
significant"
and
therefore
subject
to
review
by
the
Office
of
Management
and
Budget
(
OMB)
and
the
requirements
of
the
Executive
Order.
The
order
defines
a
"
significant
regulatory
action"
as
any
regulatory
action
that
is
likely
to
result
in
a
rule
that
may:

°
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;

°
create
a
serious
inconsistency
or
otherwise
interfere
with
an
action
taken
or
planned
by
another
agency;

°
materially
alter
the
budgetary
impact
of
entitlements,
grants,
user
fees,
or
loan
programs
or
the
rights
and
obligations
of
recipients
thereof;
or,

°
raise
novel
legal
or
policy
issues
arising
out
of
legal
mandates,
the
President's
priorities,
or
the
principles
set
forth
in
the
Executive
Order.

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.
EPA
has
submitted
this
action
to
OMB
for
review.
Changes
made
in
response
to
OMB
suggestions
or
50
recommendations
will
be
documented
in
the
public
record.
This
regulation
is
intended
to
assist
manufacturers
that
are
having
difficulty
developing
and
marketing
vehicles
which
comply
with
the
2004
NMHC+
NOx
standard
for
diesel
heavy­
duty
engines
and
heavy­
duty
vehicles.
Without
this
proposed
rule,
a
manufacturer
experiencing
difficulty
in
complying
with
this
new
emission
standard
(
after
the
use
of
credits)
has
only
two
alternatives:
fix
the
non­
conforming
engines
for
the
associated
model
years
or
not
sell
them
at
all.
NCPs
provide
manufacturers
with
additional
time
to
bring
their
engines
into
conformity.
In
addition,
NCPs
are
calculated
to
deprive
nonconforming
manufacturers
of
any
cost
savings
and
competitive
advantages
stemming
from
marketing
a
non­
conforming
engine.
Thus,
NCPs
will
not
have
significant
adverse
effects
on
competition,
employment,
investment,
productivity,
innovation
or
on
the
ability
of
United
States­
based
enterprises
to
compete
with
foreign­
based
enterprises
in
domestic
or
export
markets.

B.
Regulatory
Flexibility
Act,
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
of
1996
(
SBREFA),
5
USC
601
et.
seq.

The
Regulatory
Flexibility
Act
(
RFA)
generally
requires
an
agency
to
prepare
a
regulatory
flexibility
analysis
of
any
rule
subject
to
notice
and
comment
rulemaking
requirements
under
the
Administrative
Procedure
Act
or
any
other
statute
unless
the
agency
certifies
that
the
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
Small
entities
include
small
businesses,
small
organizations,
and
small
governmental
jurisdictions.

For
purposes
of
assessing
the
impacts
of
today's
rule
on
small
entities,
small
entity
is
51
defined
as:
(
1)
a
small
business
that
has
no
more
than
1,000
employees;
(
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
proposed
rule
on
small
entities,
I
certify
that
this
action
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
This
proposed
rule
will
not
impose
any
requirements
on
small
entities.
The
nonconformance
penalties
that
would
be
established
by
this
proposed
rule
are
for
emission
standards
that
pertain
to
heavy­
duty
diesel
engines.
When
these
emission
standards
were
established,
the
final
rulemaking
(
65
FR
59895,
October
6,
2000)
noted
that
only
two
small
entities
were
known
to
be
affected.
Those
entities
were
small
businesses
that
certify
alternative
fuel
engines
or
vehicles,
either
newly
manufactured
or
modified
from
previously
certified
gasoline
engines.
The
emission
standards
for
heavy­
duty
diesel
engines,
for
which
NCPs
are
proposed,
do
not
pertain
to
the
engines
manufactured
by
these
businesses.

C.
Paperwork
Reduction
Act
The
information
collection
requirements
in
this
proposed
rule
will
be
submitted
for
approval
to
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
will
be
prepared
and
52
its
availability
for
comment
will
be
announced
in
a
separate
Federal
Register
document
when
the
ICR
is
sent
to
OMB.

The
existing
regulations
in
40
CFR
part
86,
subpart
L
require
that
manufacturers
seeking
NCPs
annually
conduct
a
Production
Compliance
Audit
(
PCA)
for
each
engine
configuration.

This
means
that
they
must
perform
additional
emission
testing.
This
testing
is
necessary
to
determine
more
precisely
the
emission
levels
for
engine
configurations
that
exceed
an
applicable
emission
standard.
While
the
use
of
NCPs
is
voluntary,
manufacturers
choosing
to
use
them
must
submit
the
additional
testing
information
(
40
CFR
§
86.1106­
87).
Manufacturers
may
assert
that
some
or
all
of
the
information
provided
is
entitled
to
confidential
treatment
as
provided
by
40
CFR
part
2,
subpart
B.

EPA
has
previously
estimated
the
annual
burden
associated
with
NCPs
to
906
hours
and
$
51,786,
based
on
a
projection
of
six
respondents
per
year.
We
estimated
the
average
burden
hours
per
response
to
144
hours
for
reporting,
and
7
hours
for
recordkeeping.
Burden
means
the
total
time,
effort,
or
financial
resources
expended
by
persons
to
generate,
maintain,
retain,
or
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
53
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.

D.
Unfunded
Mandates
Reform
Act
Title
II
of
the
Unfunded
Mandates
Reform
Act
of
1995
(
UMRA),
P.
L.
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.
54
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.

This
proposed
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
proposed
rule
would
impose
no
enforceable
duty
on
any
State,
local
or
tribal
governments
or
the
private
sector.

EPA
has
determined
that
this
rule
does
not
contain
a
Federal
mandate
that
may
result
in
expenditures
of
$
100
million
or
more
for
State,
local,
and
tribal
governments,
in
the
aggregate,
or
the
private
sector
in
any
one
year.
Because
the
use
of
NCPs
is
optional,
manufacturers
have
the
flexibility
and
will
likely
choose
whether
or
not
to
use
NCPs
based
on
their
ability
to
comply
with
emissions
standards.
The
availability
of
NCPs
provides
manufacturers
with
a
third
alternative:

continue
production
and
introduce
into
commerce
upon
payment
of
a
penalty
an
engine
that
exceeds
the
standard
until
an
emission
conformance
technique
is
developed.
Therefore,
NCPs
represent
a
regulatory
mechanism
that
allows
affected
manufacturers
to
have
increased
flexibility.

Thus,
today's
rule
is
not
subject
to
the
requirements
of
sections
202
and
205
of
the
UMRA.
55
E.
Executive
Order
13175:
Consultation
and
Coordination
with
Indian
Tribal
Governments
Executive
Order
13175,
entitled
"
Consultation
and
Coordination
with
Indian
Tribal
Governments"
(
65
FR
67249,
November
6,
2000),
requires
EPA
to
develop
an
accountable
process
to
ensure
"
meaningful
and
timely
input
by
tribal
officials
in
the
development
of
regulatory
policies
that
have
tribal
implications."
"
Policies
that
have
tribal
implications"
is
defined
in
the
Executive
Order
to
include
regulations
that
have
"
substantial
direct
effects
on
one
or
more
Indian
tribes,
on
the
relationship
between
the
Federal
government
and
the
Indian
tribes,
or
on
the
distribution
of
power
and
responsibilities
between
the
Federal
government
and
Indian
tribes."

This
proposed
rule
does
not
have
tribal
implications.
It
will
not
have
substantial
direct
effects
on
tribal
governments,
on
the
relationship
between
the
Federal
government
and
Indian
tribes,
or
on
the
distribution
of
power
and
responsibilities
between
the
Federal
government
and
Indian
tribes,
as
specified
in
Executive
Order
13175.
The
proposed
non­
conformance
penalties
and
associated
requirements
for
heavy­
duty
diesel
engine
manufacturers
in
this
proposal
would
have
national
applicability,
and
thus
would
not
uniquely
affect
the
communities
of
Indian
Tribal
Governments.
Thus,
Executive
Order
13175
does
not
apply
to
this
rule.

In
the
spirit
of
Executive
Order
13175,
and
consistent
with
EPA
policy
to
promote
communications
between
EPA
and
tribal
governments,
EPA
specifically
solicits
additional
comment
on
this
proposed
rule
from
tribal
officials.
56
F.
National
Technology
Transfer
and
Advancement
Act
Section
12(
d)
of
the
National
Technology
Transfer
and
Advancement
Act
of
1995
(
NTTAA),
Section
12(
d)
of
P.
L.
104­
113,
directs
EPA
to
use
voluntary
consensus
standards
in
its
regulatory
activities
unless
it
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)
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
proposed
rulemaking
does
not
involve
technical
standards.
Therefore,
EPA
is
not
considering
the
use
of
any
voluntary
consensus
standards.

EPA
welcomes
comments
on
this
aspect
of
the
proposed
rulemaking
and,
specifically,

invites
the
public
to
identify
potentially­
applicable
voluntary
consensus
standards
and
to
explain
why
such
standards
should
be
used
in
this
regulation.

G.
Executive
Order
13045:
Children's
Health
Protection
Executive
Order
13045:
"
Protection
of
Children
from
Environmental
Health
Risks
and
Safety
Risks"
(
62FR19885,
April
23,
1997)
applies
to
any
rule
that:
(
1)
is
determined
to
be
57
"
economically
significant"
as
defined
under
E.
O.
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
E.
O.
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
proposed
rule
is
not
subject
to
E.
O.
13045
because
it
does
not
establish
an
environmental
standard
intended
to
mitigate
health
or
safety
risks.

H.
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."
58
This
proposed
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.
This
proposed
rule
proposes
to
adopt
non­
conformance
penalties
for
national
emission
standards
for
certain
categories
of
motor
vehicles.
The
requirements
of
the
proposed
rule
would
be
enforced
by
the
federal
government
at
the
national
level.
Thus,
Executive
Order
13132
does
not
apply
to
this
rule.

In
the
spirit
of
Executive
Order
13132,
and
consistent
with
EPA
policy
to
promote
communications
between
EPA
and
State
and
local
governments,
EPA
specifically
solicits
comment
on
this
proposed
rule
from
State
and
local
officials.

I.
Executive
Order
13211:
Energy
Effects
This
proposed
rule
is
not
a
"
significant
energy
action"
as
defined
in
Executive
Order
13211,
"
Actions
Concerning
Regulations
That
Significantly
Affect
Energy
Supply,
Distribution,

or
Use"
(
66
FR
28355,
May
22,
2001)
because
it
is
not
likely
to
have
a
significant
adverse
effect
on
the
supply,
distribution,
or
use
of
energy.
As
described
in
the
2000
final
rule
in
which
we
affirmed
the
2004
standard
(
65
FR
59896,
Oct.
6,
2000),
we
have
concluded
that
there
would
be
no
net
long­
term
change
in
the
fuel
consumption
performance
of
heavy­
duty
diesel
engines
as
a
result
of
the
2004
model
year
emission
standards.
However,
there
may
be
the
potential
for
higher
fuel
consumption
rates
in
the
short
term
as
diesel
engine
manufacturers
work
to
balance
the
59
inherent
tradeoff
between
control
of
NOx
emissions
and
fuel
consumption.
The
availability
of
NCPs
for
the
2004
and
later
model
years
provides
manufacturers
with
another
option
for
balancing
this
tradeoff
and
working
towards
optimizing
fuel
consumption
and
emissions
­
they
would
be
able
to
use
NCPs
to
emit
somewhat
higher
NOx
levels
than
they
would
otherwise
be
allowed,
while
at
the
same
time
avoiding
undesirable
fuel
consumption
impacts.
Thus,
we
have
concluded
that
this
proposed
rule
is
not
likely
to
have
any
significant
adverse
energy
effects.

J.
Plain
Language
This
document
follows
the
guidelines
of
the
June
1,
1998
Executive
Memorandum
on
Plain
Language
in
Government
Writing.
To
read
the
text
of
the
regulations,
it
is
also
important
to
understand
the
organization
of
the
Code
of
Federal
Regulations
(
CFR).
The
CFR
uses
the
following
organizational
names
and
conventions.

Title
40­­
Protection
of
the
Environment
Chapter
I­­
Environmental
Protection
Agency
Subchapter
C
 
Air
Programs.
This
contains
parts
50
to
99,
where
the
Office
of
Air
and
Radiation
has
usually
placed
emission
standards
for
motor
vehicle
and
nonroad
engines.

Subchapter
U
 
Air
Programs
Supplement.
This
contains
parts
1000
to
1299,
where
we
intend
to
place
regulations
for
air
programs
in
future
rulemakings.

Part
86­­
Control
of
Emissions
from
New
and
In­
use
Highway
Vehicles
and
Engines.

Provisions
of
this
part
apply
generally
to
highway
vehicles
and
engines
used
in
highway
vehicles.
60
Each
part
in
the
CFR
has
several
subparts,
sections,
and
paragraphs.
The
following
illustration
shows
how
these
fit
together.

Part
86
Subpart
A
Section
86.1
(
a)

(
b)

(
1)

(
2)

(
i)

(
ii)

(
A)

(
B)

A
cross
reference
to
Sec.
1048.001(
b)
in
this
illustration
would
refer
to
the
parent
paragraph
(
b)
and
all
its
subordinate
paragraphs.
A
reference
to
"
Sec.
1048.001(
b)
introductory
text"
would
refer
only
to
the
single,
parent
paragraph
(
b).

List
of
Subjects
in
40
CFR
Part
86
Administrative
practice
and
procedure,
Confidential
Business
Information,
Incorporation
by
reference,
Labeling,
Motor
vehicle
pollution,
Reporting
and
record
keeping
requirements.
61
Dated:
______________________

____________________________

Christine
Todd
Whitman
Administrator
62
2004
NCP
NPRM
Regulations
v.
4
For
the
reasons
set
forth
in
the
preamble,
chapter
I,
title
40
of
the
Code
of
Federal
Regulations
is
proposed
to
be
amended
as
follows:

PART
86
­­
CONTROL
OF
EMISSIONS
FROM
NEW
AND
IN­
USE
HIGHWAY
VEHICLES
AND
ENGINES
1.
The
authority
citation
for
part
86
continues
to
read
as
follows:

Authority:
42
U.
S.
C.
7401­
7671q.

2.
Section
86.1105­
87
is
proposed
to
be
amended
by
revising
paragraph
(
e)
and
by
adding
paragraph
(
i),
to
read
as
follows:

Sec.
86.1105­
87
Emission
standards
for
which
nonconformance
penalties
are
available.

*
*
*
*
*

(
e)
The
values
of
COC
50,
COC
90,
and
MC
50
in
paragraphs
(
a)
and
(
b)
of
this
section
are
expressed
in
December
1984
dollars.
The
values
of
COC
50,
COC
90,
and
MC
50
in
paragraphs
(
c)

and
(
d)
of
this
section
are
expressed
in
December
1989
dollars.
The
values
of
COC
50,
COC
90,

and
MC
50
in
paragraph
(
f)
of
this
section
are
expressed
in
December
1991
dollars.
The
values
of
COC
50,
COC
90,
and
MC
50
in
paragraphs
(
g)
and
(
h)
of
this
section
are
expressed
in
December
1994
dollars.
The
values
of
COC
50,
COC
90,
and
MC
50
in
paragraph
(
i)
of
this
section
are
63
2004
NCP
NPRM
Regulations
v.
4
expressed
in
December
2001
dollars.
These
values
shall
be
adjusted
for
inflation
to
dollars
as
of
January
of
the
calendar
year
preceding
the
model
year
in
which
the
NCP
is
first
available
by
using
the
change
in
the
overall
Consumer
Price
Index,
and
rounded
to
the
nearest
whole
dollar
in
accordance
with
ASTM
E29­
67
(
reapproved
1980),
Standard
Recommended
Practice
for
Indicating
Which
Places
of
Figures
are
to
be
Considered
Significant
in
Specified
Limiting
Values.
The
method
was
approved
by
the
director
of
the
Federal
Register
in
accordance
with
5
U.
S.
C.
552(
a)
and
1
CFR
part
51.
This
document
is
available
from
ASTM,
1916
Race
Street,

Philadelphia,
PA
19103,
and
is
also
available
for
inspection
as
part
of
Docket
A­
91­
06,
located
at
the
Central
Docket
Section,
EPA,
401
M
Street,
SW,
Washington,
DC
or
at
the
office
of
the
Federal
Register,
800
North
Capitol
Street,
NW,
suite
700,
Washington,
DC.
This
incorporation
by
reference
was
approved
by
the
Director
of
the
Federal
Register
on
January
13,
1992.
These
materials
are
incorporated
as
they
exist
on
the
date
of
the
approval
and
a
notice
of
any
change
in
these
materials
will
be
published
in
the
Federal
Register.

*
*
*
*
*

(
i)
Effective
in
the
2004
model
year,
NCPs
will
be
available
for
the
following
emission
standard:

(
1)
Diesel
heavy­
duty
engine
non­
methane
hydrocarbon
plus
oxides
of
nitrogen
standard
of
2.4
grams
per
brake
horsepower­
hour
(
or
alternatively,
2.5
grams
per
brake
horsepower­
hour
with
a
limit
on
non­
methane
hydrocarbon
emissions
of
0.5
grams
per
brake
horsepower­
hour),
in
§
86.004­
11(
a)(
1)(
i).

(
i)
For
light
heavy­
duty
diesel
engines:
64
2004
NCP
NPRM
Regulations
v.
4
(
A)
The
following
values
shall
be
used
to
calculate
an
NCP
in
accordance
with
§
86.1113­
87(
a):

(
1)
COC
50:
$
1080.

(
2)
COC
90:
$
2610.

(
3)
MC
50:
$
2000
per
gram
per
brake
horsepower­
hour.

(
4)
F:
1.3.

(
5)
UL:
4.5
grams
per
brake
horsepower­
hour;
notwithstanding
§
86.1104­
91.

(
B)
The
following
factor
shall
be
used
to
calculate
the
engineering
and
development
component
of
the
NCP
for
the
standard
set
forth
in
§
86.004­
11(
a)(
1)(
i)
in
accordance
with
§
86.1113­
87(
h):
0.333.

(
ii)
For
medium
heavy­
duty
diesel
engines:

(
A)
The
following
values
shall
be
used
to
calculate
an
NCP
in
accordance
with
§
86.1113­
87(
a):

(
1)
COC
50:
$
3360.

(
2)
COC
90:
$
6870.

(
3)
MC
50:
$
1800
per
gram
per
brake
horsepower­
hour.

(
4)
F:
1.3.

(
5)
UL:
4.5
grams
per
brake
horsepower­
hour;
notwithstanding
§
86.1104­
91.

(
B)
The
following
factor
shall
be
used
to
calculate
the
engineering
and
development
component
of
the
NCP
for
the
standard
set
forth
in
§
86.004­
11(
a)(
1)(
i)
in
accordance
with
§
86.1113­
87(
h):
0.167.

(
iii)
For
heavy
heavy­
duty
diesel
engines:
65
2004
NCP
NPRM
Regulations
v.
4
(
A)
The
following
values
shall
be
used
to
calculate
an
NCP
in
accordance
with
§
86.1113­
87(
a):

(
1)
COC
50:
$
8940.

(
2)
COC
90:
$
14790.

(
3)
MC
50:
$
7200
per
gram
per
brake
horsepower­
hour
(
4)
F:
1.3.

(
5)
UL:
6.0
grams
per
brake
horsepower­
hour;
notwithstanding
§
86.1104­
91.

(
B)
The
following
factor
shall
be
used
to
calculate
the
engineering
and
development
component
of
the
NCP
for
the
standard
set
forth
in
§
86.004­
11(
a)(
1)(
i)
in
accordance
with
§
86.1113­
87(
h):
0.067.

(
iv)
For
diesel
urban
bus
engines:

(
A)
The
following
values
shall
be
used
to
calculate
an
NCP
in
accordance
with
§
86.1113­
87(
a):

(
1)
COC
50:
$
4400.

(
2)
COC
90:
$
7120.

(
3)
MC
50:
$
4895
per
gram
per
brake
horsepower­
hour
(
4)
F:
1.3.

(
5)
UL:
4.5
grams
per
brake
horsepower­
hour;
notwithstanding
§
86.1104­
91.

(
B)
The
following
factor
shall
be
used
to
calculate
the
engineering
and
development
component
of
the
NCP
for
the
standard
set
forth
in
§
86.004­
11(
a)(
1)(
i)
in
accordance
with
§
86.1113­
87(
h):
0.136.

(
2)
[
Reserved]
