Lawn and garden equipment Monday January

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					Monday,
January 12, 2004




Part III


Environmental
Protection Agency
40 CFR Part 90

Amendments to the Phase 2 

Requirements for Spark-Ignition Nonroad 

Engines at or Below 19 Kilowatts; Direct 

Final Rule and Proposed Rule

1824                       Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

ENVIRONMENTAL PROTECTION                                                   limited credit deficits during the phase-                        should be submitted to Public Docket
AGENCY                                                                     in period (through 2007) provided the                            No. OAR–2003–0195 at the following
                                                                           deficits are made up within a set period                         address by the date indicated under
40 CFR Part 90                                                             of time. The amendments also contain                             DATES above.
[AMS–FRL–7606–1]                                                           minor changes to the certification                                 Docket: Materials relevant to this
                                                                           requirements intended to help                                    rulemaking are in Public Dockets A–96–
RIN 2060–AL88                                                              manufacturers respond in a more                                  55 and OAR–2003–0195 at the following
                                                                           efficient manner to unexpected                                   address: EPA Docket Center (EPA/DC),
Amendments to the Phase 2                                                  variations in the emission levels from
Requirements for Spark-Ignition                                                                                                             Public Reading Room, Room B102, EPA
                                                                           production engines while still achieving                         West Building, 1301 Constitution
Nonroad Engines at or Below 19                                             the required emission objectives.
Kilowatts                                                                                                                                   Avenue, NW., Washington, DC. The
                                                                           DATES: This direct final rule is effective                       EPA Docket Center Public Reading
AGENCY: Environmental Protection                                           on March 12, 2004 without further                                Room is open from 8:30 a.m. to 4:30
Agency (EPA).                                                              notice, unless we receive adverse                                p.m., Monday through Friday, except on
ACTION: Direct final rule.                                                 comments by February 11, 2004 or                                 government holidays. You can reach the
                                                                           receive a request for a public hearing by                        Air Docket by telephone at (202) 566–
SUMMARY: EPA adopted Phase 2                                               January 27, 2004. We are also                                    1742 and by facsimile at (202) 566–
requirements for spark-ignition nonroad                                    publishing a notice of proposed                                  1741. You may be charged a reasonable
handheld engines at or below 19                                            rulemaking in the ‘‘Proposed Rules’’                             fee for photocopying docket materials,
kilowatts in April 2000. The Phase 2                                       section of today’s Federal Register,                             as provided in 40 CFR part 2.
requirements are being phased-in                                           which matches the substance of this
between 2002 and 2007. Based on initial                                    direct final rule. If we receive any                             FOR FURTHER INFORMATION CONTACT: Phil
experience with the Phase 2 program for                                    adverse comments on this direct final                            Carlson, Assessment and Standards
handheld engines, we are adopting                                          rule or receive a request for a hearing                          Division, e-mail carlson.philip@epa.gov,
several amendments intended to                                             within the time frame described above,                           voice-mail (734) 214–4636.
provide additional compliance                                              we will publish a timely withdrawal in                           SUPPLEMENTARY INFORMATION:
flexibility to engine manufacturers to                                     the Federal Register informing the
smooth the transition to the Phase 2                                       public that this rule will not take effect.                      I. General Information
requirements. The amendments contain                                       We will then take final action to amend                          A. Regulated Entities
two revisions intended to increase                                         the Phase 2 requirements for spark-
flexibility in the averaging, banking, and                                 ignition nonroad engines at or below 19                            This action will affect companies and
trading program as it applies to                                           kilowatts in a final rule based on the                           persons that manufacture, sell, or
handheld engines. First, the credit                                        accompanying proposal. We will not                               import into the United States spark-
discounts and credit bonuses will be                                       institute a second comment period.                               ignition nonroad handheld engines at or
eliminated from the program. Second,                                       ADDRESSES: Comments: All comments                                below 19 kilowatts. Affected categories
manufacturers will be allowed to carry                                     and materials relevant to this action                            and entities include the following:

                                                                                                                                NAICS
                                                       Category                                                                                 Examples of potentially affected entities
                                                                                                                                Code 1

Industry ....................................................................................................................      333112    Lawn & Garden Equipment Manufacturers.
Industry ....................................................................................................................      336618    Other Engine Equipment Manufacturers.
   1 North    American Industry Classification System (NAICS).


  This list is not intended to be                                          whose disclosure is restricted by statute.                       publishes Federal Register notices and
exhaustive, but rather provides a guide                                    The official public docket is the                                related documents on the secondary
regarding entities likely to be affected by                                collection of materials that is available                        Web site listed below.
this action. To determine whether                                          for public viewing at the Air Docket in                            1. http://www.epa.gov/docs/fedrgstr/
particular activities may be affected by                                   the EPA Docket Center, (EPA/DC) EPA                              EPA-AIR (either select desired date or
this action, you should carefully                                          West, Room B102, 1301 Constitution                               use Search features).
examine the regulations. You may direct                                    Ave., NW., Washington, DC. The EPA                                 2. http://www.epa.gov/otaq (look in
questions regarding the applicability of                                   Docket Center Public Reading Room is                             What’s New or under the specific
this action as noted in FOR FURTHER                                        open from 8:30 a.m. to 4:30 p.m.,                                rulemaking topic).
INFORMATION CONTACT.                                                       Monday through Friday, excluding legal                             Please note that due to differences
                                                                           holidays. The telephone number for the                           between the software used to develop
B. How Can I Get Copies of This                                                                                                             the documents and the software into
                                                                           Public Reading Room is (202) 566–1744,
Document?                                                                  and the telephone number for the Air                             which the document may be
  1. Docket. EPA has established an                                        Docket is (202) 566–1742.                                        downloaded, format changes may occur.
official public docket for this action                                        2. Electronic Access. This direct final
under Air Docket Number OAR–2003–                                          rule is available electronically from the                        C. How and to Whom Do I Submit
0195. The official public docket consists                                  EPA Internet Web site. This service is                           Comments?
of the documents specifically referenced                                   free of charge, except for any cost                                You may submit comments
in this action, any public comments                                        incurred for internet connectivity. The                          electronically, by mail, by facsimile, or
received, and other information related                                    electronic version of this final rule is                         through hand delivery/courier. To
to this action. Although a part of the                                     made available on the date of                                    ensure proper receipt by EPA, identify
official docket, the public docket does                                    publication on the primary Web site                              the appropriate docket identification
not include Confidential Business                                          listed below. The EPA Office of                                  number in the subject line on the first
Information (CBI) or other information                                     Transportation and Air Quality also                              page of your comment. Please ensure
               Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                        1825

that your comments are submitted             identified in ADDRESSES above. These        Phase 2 standards for handheld engines,
within the specified comment period.         electronic submissions will be accepted     the expected costs of their
Comments received after the close of the     in WordPerfect or ASCII file format.        implementation, and the technologies
comment period will be marked ‘‘late.’’      Avoid the use of special characters and     that we expected manufacturers would
EPA is not required to consider these        any form of encryption.                     use to meet the standards. The January
late comments.                                 2. By Mail. Send two copies of your       1998 NPRM also discussed the potential
   1. Electronically. If you submit an       comments to: Air Docket,                    costs and benefits of adopting more
electronic comment as prescribed             Environmental Protection Agency,            stringent standards such as the second
below, EPA recommends that you               Mailcode: 6102T, 1200 Pennsylvania          phase of standards that were under
include your name, mailing address,          Ave., NW., Washington, DC, 20460,           consideration by the California Air
and an e-mail address or other contact       Attention Docket ID No. OAR–2003–           Resources Board (ARB) at that time.
information in the body of your              0195.                                          Upon reviewing information supplied
comment. Also include this contact             3. By Hand Delivery or Courier.           during and after the comment period for
information on the outside of any disk       Deliver your comments to: EPA Docket        the January 1998 NPRM, we determined
or CD ROM you submit, and in any             Center, Room B102, EPA West Building,       that it was desirable to get further
cover letter accompanying the disk or        1301 Constitution Avenue, NW.,              details regarding the technological
CD ROM. This ensures that you can be         Washington, DC, Attention Air Docket        feasibility, cost and lead time
identified as the submitter of the           ID No. OAR–2003–0195. Such deliveries       implications of meeting handheld
comment and allows EPA to contact you        are only accepted during the Docket’s       engine standards more stringent than
in case EPA cannot read your comment         normal hours of operation as identified     those contained in the January 1998
due to technical difficulties or needs       in ADDRESSES above.                         NPRM. For the purpose of gaining
further information on the substance of        4. By Facsimile. Fax your comments        additional information on feasibility,
your comment. EPA’s policy is that EPA       to: (202) 566–1741, Attention Docket ID     cost and lead time implications of more
will not edit your comment, and any          No. OAR–2003–0195.                          stringent standards, we had several
identifying or contact information                                                       meetings, phone conversations, and
provided in the body of a comment will       II. Summary of Rule                         written correspondence with specific
be included as part of the comment that      A. What Is the History of the Phase 2       engine manufacturers, with industry
is placed in the official public docket,     Handheld Engine Rule?                       associations representing engine and
and made available in EPA’s electronic                                                   equipment manufacturers, with
public docket. If EPA cannot read your         The development of the Phase 2            developers of emission control
comment due to technical difficulties        regulations for handheld nonroad spark-     technologies and suppliers of emission
and cannot contact you for clarification,    ignition (SI) engines at or below 19        control hardware, with representatives
EPA may not be able to consider your         kilowatts (kW) started in 1992 while the    of state regulatory associations, and
comment.                                     Phase 1 standards were also being           with members of Congress. We
   i. EPA dockets. Your use of EPA’s         developed. Initially, a formal regulatory   published a Notice of Availability on
electronic public docket to submit           negotiation process was attempted.          December 1, 1998 (see 63 FR 66081)
comments to EPA electronically is              After it became clear that the            highlighting the additional information
EPA’s preferred method for receiving         disparate interests of the multiple         gathered in response to the January 1998
comments. Go directly to EPA Dockets         parties would not result in an              NPRM and continued having
at http://www.epa.gov/edocket, and           agreement, the regulatory negotiation       discussions with various parties
follow the online instructions for           process concluded without reaching          regarding low emission technologies for
submitting comments. Once in the             consensus in February 1996. Thereafter,     the small SI handheld engine market.
system, select ‘‘search,’’ and then key in   EPA developed the framework for a              After the publication of the Phase 2
Docket ID No. OAR–2003–0195. The             Phase 2 handheld rule which was             NPRM in January 1998, members of the
system is an ‘‘anonymous access’’            described in a Statement of Principles      industry provided data to EPA which
system, which means EPA will not             signed by manufacturers representing a      indicated that rapid advances in
know your identity, e-mail address, or       significant portion of the United States    emission reduction technologies for
other contact information unless you         handheld equipment market and by            handheld engines were in the offing.
provide it in the body of your comment.      other stakeholders. The Statement of        After having reviewed the most up-to-
   ii. E-mail. Comments may be sent by       Principles was issued as part of an         date information available on these new
electronic mail (e-mail) to a-and-r­         Advance Notice of Proposed                  technologies, we believed the
docket@epa.gov Attention Air Docket ID       Rulemaking on March 27, 1997 (see 62        information supported Phase 2
No. OAR–2003–0195. In contrast to            FR 14740). The Statement of Principles      standards for handheld engines that
EPA’s electronic public docket, EPA’s e-     for handheld engines formed the basis       were significantly more stringent than
mail system is not an ‘‘anonymous            of requirements proposed in the Phase       those proposed in the January 1998
access’’ system. If you send an e-mail       2 Notice of Proposed Rulemaking             NPRM and even more stringent than the
comment directly to the Docket without       (NPRM) on January 27, 1998 (see 63 FR       second phase of standards that, by that
going through EPA’s electronic public        3950). (The January 1998 NPRM               time, had been adopted by the
docket, EPA’s e-mail system                  proposed standards for both handheld        California ARB. In light of this new
automatically captures your e-mail           and nonhandheld nonroad SI engines at       information, and in the interest of
address. E-mail addresses that are           or below 19 kW. We finalized Phase 2        providing an opportunity for public
automatically captured by EPA’s e-mail       standards and compliance program            comment on the stringent levels being
system are included as part of the           requirements for Class I and Class II       considered for the Phase 2 handheld
comment that is placed in the official       nonhandheld nonroad SI engines at or        engine emission standards and the
public docket, and made available in         below 19 kW in a separate final             potential technologies available for
EPA’s electronic public docket.              rulemaking on March 30, 1999 (see 64        meeting such standards, we reproposed
   iii. Disk or CD ROM. You may submit       FR 15208).)                                 Phase 2 regulations for handheld
comments on a disk or CD ROM that              The January 1998 NPRM contained a         engines in a July 28, 1999 Supplemental
you mail to the mailing address              lengthy discussion of the proposed          NPRM (see 64 FR 40940). The July 1999
1826                        Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

Supplemental NPRM proposed Phase 2                                            requirements for a production line                                     standards are scheduled to take effect.
hydrocarbon plus oxides of nitrogen                                           testing program. Most of the proposed                                  In response to comments submitted on
(HC+NOX) standards of 50 grams per                                            compliance program changes were                                        the July 1999 Supplemental NPRM, the
kilowatt-hour (g/kW-hr) for Class III and                                     intended to make the handheld engine                                   standards and implementation schedule
Class IV engines and of 72 g/kW-hr for                                        compliance program the same as the                                     contained in the Phase 2 final rule for
Class V engines, phased in over several                                       requirements finalized for nonhandheld                                 handheld engines reflected a four year
years. The reproposal also proposed to                                        engines in March 1999 and to establish                                 phase in schedule instead of a five year
include handheld engines in an                                                a consistent approach to compliance for                                phase in schedule as proposed in the
averaging, banking, and trading program                                       all nonroad small SI engines.                                          Supplemental NPRM. When fully
for all nonroad small SI engines that had                                        The Phase 2 final rule for Class III,                               phased in, these Phase 2 standards were
been adopted in the separate March                                            Class IV, and Class V handheld engines                                 projected to result in an estimated 70
1999 final rule for nonhandheld                                               was finalized on April 25, 2000 (see 65                                percent annual reduction in combined
engines. The July 1999 Supplemental                                           FR 24268). Table 1 summarizes the                                      HC+NOX emissions from small SI
NPRM also proposed revised                                                    Phase 2 HC+NOX emission standards                                      handheld engines compared to the
compliance program requirements for                                           adopted for Class III, Class IV, and Class                             Phase 1 emission requirements for such
handheld engines, including                                                   V handheld engines and when the                                        engines.

                                         TABLE 1.—PHASE 2 HC+NOX EMISSION STANDARDS FOR HANDHELD ENGINES
                                                                                                                                   HC+NOX standards (g/kW-hr) by model year
                                             Engine class                                                                                                                              2007 and
                                                                                                                  2002               2003            2004       2005       2006          later

Class III ..................................................................................................             238                175          113         50           50         50
Class IV ..................................................................................................              196                148           99         50           50         50
Class V ...................................................................................................    ................   ................       143        119           96         72



  Table 2 summarizes the technologies                                         compression wave technology and the                                    the great majority handheld
we concluded were capable of meeting                                          stratified scavenging with lean                                        applications.
the newly adopted Phase 2 standards for                                       combustion design are based on 2-stroke
handheld engines by engine class. The                                         engine designs which are used to power

                TABLE 2.—POTENTIAL TECHNOLOGIES FOR MEETING THE PHASE 2 STANDARDS FOR HANDHELD ENGINES
                                Engine class                                                                                                     Technologies

III ..................................................................................   —Compression wave technology + low-medium efficiency catalyst.
                                                                                         —Stratified scavenging with lean combustion + medium-high efficiency catalyst.
                                                                                         —4-Stroke.
IV ..................................................................................    —Compression wave technology.
                                                                                         —Compression wave technology + low efficiency catalyst.
                                                                                         —Stratified scavenging with lean combustion + medium efficiency catalyst.
                                                                                         —4-Stroke.
V ...................................................................................    —Compression wave technology.
                                                                                         —Stratified scavenging with lean combustion.
                                                                                         —4-Stroke (on certain applications).



   To help engine manufacturers meet                                          engines. However, to address comments                                  such that the average emissions in a
the Phase 2 HC+NOX standards, we                                              submitted on the July 1999                                             given model year from all of the
adopted provisions to include Phase 2                                         Supplemental NPRM relating to the                                      manufacturer’s families (weighted by
handheld engines in the averaging,                                            stringency of the phase-in standards and                               various parameters including engine
banking and trading (ABT) program,                                            the periods, we adopted a number of                                    power, useful life, and number of
previously adopted in the March 1999                                          unique provisions for handheld engines.                                engines produced) are at or below the
final rule for Phase 2 nonhandheld                                               The ABT program is an integral part                                 level of the emission standard. Banking
engines. The combination of the                                               of the Phase 2 HC+NOX standards                                        means the retention of emission credits
declining Phase 2 handheld standards                                          adopted for handheld engines.                                          by the engine manufacturer generating
and the ABT program were intended to                                          Averaging means the exchange of                                        the credits for use in future model year
help manufacturers make an orderly and                                        emission credits among engine families                                 averaging or trading. Trading means the
efficient transition from their existing                                      within a given engine manufacturer’s                                   exchange of emission credits between
Phase 1 engine designs and technologies                                       product line. Averaging allows a                                       engine manufacturers which then can be
to those able to meet the Phase 2                                             manufacturer to certify one or more                                    used for averaging purposes, banked for
requirements and to provide an                                                engine families to Family Emissions                                    future use, or traded to another engine
incentive for the early introduction of                                       Limits (FELs) above the applicable                                     manufacturer.
clean engines. The basic framework of                                         emission standard. However, the                                          Under the April 2000 rule’s ABT
the ABT program adopted for handheld                                          increased emissions have to be offset by                               provisions for handheld engines (those
engines is the same as the program                                            one or more engine families certified to                               promulgated in §§ 90.201 through
previously adopted for nonhandheld                                            FELs below the same emission standard,                                 90.220), manufacturers are able to select
               Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                           1827

from two options for the purpose of          certified with an FEL below specified         the initial test results indicate the
generating credits. One we refer to as       levels in the first two years of the phase-   design is well below the applicable
the ‘‘Normal’’ program, the second as        in period.                                    standards, few engines need to be
the ‘‘Optional Transition Year                  ‘‘Optional Transition Year’’ credits       tested. For those designs where the test
Program.’’ These two programs have           have a limited life and application           results indicate emission levels are very
some significantly different design          under the April 2000 regulations. They        close to the applicable standards,
parameters, so credits from the two          may be used without limitation through        additional tests are required to make
programs may be used only in the             the 2007 model year. For model years          sure the design is being produced with
program in which they are generated.         2008 through 2010, they may also be           acceptable emission performance. The
   Under the ‘‘Normal’’ credit program of    used, but only if the manufacturer’s          PLT program requires manufacturers to
the April 2000 rule, manufacturers           production- and power-weighted                conduct testing on each of their engine
certifying Class III or IV engine families   average HC+NOX emission level is              families (unless they have been relieved
with FELs at or below 72 g/kW-hr and         below an emission level determined by         of this requirement under a small-
Class V engine families with FELs at or      production-weighting the                      volume flexibility provision). The
below 87 g/kW-hr may generate credits        manufacturer’s product line assuming          maximum sample size required for each
that have an unlimited credit life. Such     emission levels of 72 g/kW-hr for Class       engine family is 30 engines or 1 percent
credits are available to the manufacturer    III and IV engines and 87 g/kW-hr for         of a family’s projected production,
for the duration of the Phase 2 program      Class V engines. The ‘‘Optional               whichever is smaller. However, the
and are not discounted in any manner.        Transition Year’’ program expires at the      actual number of tests ultimately
Under the ‘‘Normal Credit’’ program,         end of the 2010 model year, under the         required is determined by the testing
credits generated by Class III or IV         April 2000 rules.                             results.
engine families certified with FELs             The provisions related to credit             In adopting the Phase 2 standards for
above 72 g/kW-hr and Class V engine          generation in these two programs were         handheld engines, we concluded that
families with FELs above 87 g/kW-hr          revised in the April 2000 final rule in       the standards adopted, considering the
can be used by a manufacturer in the         response to comments on the                   lead time provided and other flexibility
model year in which they are generated       Supplemental NPRM. At the time, we            provisions such as averaging, banking,
for its own averaging purposes, or           believed the approach adopted in the          and trading, were technologically
traded to another manufacturer to be         final rule was necessary to ensure that       feasible for the handheld industry and
used for averaging purposes in that          the ABT program did not contribute to         appropriate under section 213 of the
model year. However, such credits may        a significant delay in implementation of      Clean Air Act. At the same time, we
not be carried over to the next model        the low-emitting technologies                 recognized that certain manufacturers
year (i.e., the credits cannot be banked),   envisioned under the Phase 2 program,         who would be subject to the Phase 2
including when traded to another             a risk under the proposed program             provisions believed that the standards
manufacturer.                                which commenters raised to us in              may not be technologically feasible for
   Alternatively under the April 2000        comments on the Supplemental NPRM.            them. This issue was most clearly raised
regulations, a manufacturer may choose       Without the limitations on credit             with respect to the Class V standards.
to have a family participate in the          generation, we were concerned that            While EPA’s adoption of the standards
‘‘Optional Transition Year’’ credit          manufacturers could certify marginally        reflected our view that the Class V
program. Under this program, any             cleaner engines, especially during the        standards were achievable, we also
family with FELs below the applicable        first years of the phase in period when       believed that it was appropriate in
phase-in standards shown in Table 1 is       the fleet average standards were the          responding to the manufacturers’
eligible to generate credits. However,       highest, and generate enough credits to       comments and concerns to invite all
these credits are progressively              significantly delay implementation of         members of the regulated industry as
discounted the higher the family’s FEL       technologies meeting the long term            well as other interested parties to
is compared to the final standards for       standards (i.e., 50 g/kW-hr for Classes III   continue to explore the issue of
that class. For example, in Class IV, a      and IV and 72 g/kW-hr for Class V) for        technological feasibility of the Class V
family with an FEL of 87 g/kW-hr or          a significant portion of the fleet. We        standards as industry made progress in
higher in model year 2002 would have         noted that generation of a significant        moving towards implementation of the
its credits discounted by 75 percent if      amount of credits through short-term          Phase 2 program. Therefore, in the April
they are to be banked for use in future      engine improvements that would not            2000 final rule, we stated our intent to
model years. If the family’s FEL was         result in compliance with either              perform a study of the technological
equal to 72 g/kW-hr but less than 87 g/      California’s standards or the final Phase     feasibility of the Phase 2 Class V
kW-hr, its credits would be discounted       2 standards was an unacceptable               standards, to be completed by the end
by 50 percent before being banked for        outcome if it caused delay of the             of 2002. We noted that the intent of the
use in future model years. This              ultimate transition to cleaner                technology study was to focus on
combination of ability to generate           technology.                                   availability of technology, certification
credits with families of higher emission        We also adopted a Production Line          data, in-use performance, and other
levels but discounting the credits for       Testing (PLT) program for Phase 2             factors of interest.
these higher-emitting engines was            handheld engines. The intent of the PLT         Shortly after the April 2000 final rule
intended to provide an increased             program is to require a sample of             was published, two members of the
incentive for manufacturers to make          production line engines to be tested for      industry sued EPA over the Phase 2
interim emission improvements while          emission performance to assure that the       handheld engine requirements. There
preserving the environmental benefits of     certified emissions levels demonstrated       were three main points in the lawsuit.
the Phase 2 program. The ‘‘Optional          on production prototypes are being            First, they claimed that the Phase 2
Transition Year’’ program also provides      achieved in mass production. The              standards did not meet the Clean Air
an additional incentive for                  amount of PLT testing required by the         Act requirement to provide the best
manufacturers to produce especially          manufacturer depends on how close the         balance of factors. Second, they claimed
clean equipment by providing a 25            test results from the initial engines         the standards were not supported by
percent credit bonus for engines             tested are to the applicable standards. If    substantial evidence in the record. Last,
1828           Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

they claimed that we did not follow         4-stroke engine to 245 g/kW-hr HC+NOX           In follow-up to the meetings with
proper procedural requirements of the       on a 2-stroke engine. (This range is         OPEI and EUROMOT, we held
Clean Air Act with regard to changes        based on Class IV certification              individual discussions with eight
made between the Supplemental NPRM          information; for Classes III–V, most         handheld engine manufacturers to
and the FRM, specifically citing the 4-     industry sales are in Class IV.) The         explore the status of each
year phase-in period and the                technologies being used currently are        manufacturer’s progress on the Phase 2
significantly revised ABT programs. In      mostly 2-stroke engines with a limited       program and to better understand each
June, 2001, the United States Court of      number of 4-stroke engines as well. For      manufacturer’s perspective on the issues
Appeals for the District of Columbia        the 2-stroke engines, there are a number     highlighted by OPEI and EUROMOT.
Circuit rejected all of industry’s          of stratified scavenging designs as well     The eight manufacturers represent over
substantive and procedural challenges       as a number of engines equipped with         90 percent of total handheld engine
to the Phase 2 rule, and upheld EPA’s       catalysts.                                   sales in the United States. Although
rules as reasonably supported by              With regard to the ABT program,            each manufacturer’s situation is
substantial evidence. Husqvarna AB v.       manufacturers are using the program          different, there were several common
EPA, 254 F.3d 195 (DC Cir. 2001).           primarily for averaging purposes.            themes raised during our discussions
  In the Fall of 2001, EPA began            Contrary to our earlier concerns about       about the Phase 2 program. A summary
preliminary investigation of industry’s     manufacturers certifying marginally-         of our findings is presented below.
progress in complying with the fully        cleaner engines and earning significant         With regard to the Phase 2 standards,
phased-in Class V emission standard of      credits which could delay the transition     we found that all of the manufacturers
72 g/kW-hr HC+NOX. (As noted earlier,       to the final Phase 2 standards, the sales-   expect to be able to comply with the
as part of the April 2000 FRM we            weighted certification levels for            ultimate standards of 50/50/72 g/kW-hr
committed to perform a study of the         individual manufacturers in model year       HC+NOX for Classes III/IV/V,
technological feasibility of the Phase 2    2002 and 2003 have been near the             respectively, although, as noted below,
Class V standards.) The investigation       required average standard. Because most      several raised concerns about being able
focused on certification information for    manufacturer’s average emission are          to comply with the timing of the phase-
engines currently certified to meet the     near the phase-in standards, there has       in. Manufacturers view the emission
Phase 2 standards and on discussions        been only limited use of the banking         standards and ABT program as an inter-
with certain manufacturers regarding        provisions.                                  related package. Since the declining
promising Phase 2 technologies.               In April and November of 2002, the         average emission standard is expected
  The results of the preliminary            Outdoor Power Equipment Institute            to be met on a power/life/sales weighted
investigation showed that                   (OPEI), a trade organization that            average basis for all families in Classes
manufacturers were focusing their Phase     represents most of the manufacturers of      III–V, it is important that the ABT
2 development efforts primarily on          handheld engines in the United States,       program be structured such that it
Class IV engines. (As noted earlier in      met with EPA to raise concerns about a       maximizes the opportunity to gain extra
Table 1, the Phase 2 standards for Class    number of the Phase 2 provisions for         and early emission reductions. The
IV engines took effect in 2002—two          handheld engines. EUROMOT, a trade           manufacturers stressed the
years before the Class V standards—and      organization that represents European        technological and practical challenges
become more stringent each year until       handheld engine manufacturers also           of meeting the emission standards in all
2005.) The investigation also showed        met with EPA in August 2002 to discuss       of their different engines/equipment and
that while a small number of Class V        their concerns with the Phase 2 program      emphasized the need for an ABT
engine families were certified with         for handheld engines. OPEI and               program which functioned as intended
HC+NOX levels below 72 g/kW-hr, little      EUROMOT highlighted similar areas of         in order to meet the declining average
work had been done with regard to the       concern in the meetings. First, they         emission standards.
majority of Class V engines. Given the      noted concerns over the Class V                 It appears that the technology to be
limited information available on Class V    schedule of emission standards,              used most widely for complying with
engines, we drafted a memorandum and        indicating that the Phase II standards       the final Phase 2 standards will be the
placed it in the small engine Phase 2       were more challenging than first             stratified scavenging 2-stroke design,
docket (EPA Air Docket A–96–55) in          thought and that they were pushing           with or without a catalyst. There will
early 2002 noting that it would be          hard to meet the Class III and IV            also be a number of 4-stroke engine
premature to initiate the Class V           requirements with the hope and               designs and limited engines equipped
feasibility study described in the April    expectation that this experience would       with the compression wave technology.
2000 final rule. We also noted that we      enhance their Class V compliance.            While the compression wave technology
would continue to monitor the status of     Second, they noted their desire to revise    was touted by some as a simple solution
technology development for handheld         the two ABT programs for handheld            to meeting the Phase 2 standards during
engines and make further progress in        engines into one program without the         the rulemaking, it is not expected to see
conducting the Class V technology           discounting provisions of the current        widespread use.
review during 2002.                         programs. They provided data which              Based on their experience to date in
  Beginning in 2002, the Phase 2            showed that there were relatively few        developing technologies for Phase 2,
requirements for Classes III and IV         credits being generated (compared to         manufacturers raised concerns about
began to take effect. As noted earlier in   EPA’s original concern) and they             their ability to comply with the set of
Table 1, the Phase 2 standards are based    claimed that in some cases the               declining average phase-in standards,
on a declining average over four years      provisions of the two ABT programs           especially in the later years of the phase
in each class. (The Phase 2 standards for   created a disincentive to introduce clean    in and in Class V. Manufacturers have
Class V engines do not start until 2004.)   technology as soon as otherwise              been focusing their design efforts on
As expected, manufacturers have             possible. Finally, they noted their          Class III and IV engines because the
certified a number of different             interest in gaining some flexibility in      Phase 2 standards for those classes took
technologies with a wide range in           the PLT program, especially with regard      effect first. Manufacturers are finding it
emission levels with certification levels   to the procedure for revising Family         more challenging than expected to
ranging from 16 g/kW-hr HC+NOX on a         Emission Limits (FELs).                      develop their Phase 2 designs for all of
                Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                             1829

their engine families across the wide         ahead of clean technologies because of        one year delay in the phase-in schedule
range of applications in which they are       the steep discounts placed on credits in      or a change in the level of the standards
used. Many engines are used in multiple       the program. Because of the high level        during the phase-in). Second, OPEI
types of equipment applications,              of competition in the marketplace,            requested that the ‘‘Optional Transition
resulting in significant design               especially for residential equipment          Year’’ credit program be eliminated, and
challenges as the manufacturers need to       which makes up the large majority of          that FEL caps that apply for banking
ensure compliance with the emission           equipment in Classes III and IV, the          credits in the ‘‘Normal Credit’’ program
standards while maintaining acceptable        incentive to pull ahead cleaner, more         be dropped. Finally, OPEI requested
operating characteristics, including          expensive engine designs has been             that manufacturers be allowed to
temperature issues and the need for           removed by applying such high levels of       generate and use credits for averaging
additional cooling associated with the        discounting for any engines not meeting       purposes in the PLT program in a given
use of catalysts. There are                   very low emission levels. Because most        model year. A copy of the petition has
approximately 275 Class III–V engine          of the residential equipment is sold to       been placed in the public docket for this
families and many of these are used in        large retailers, small differences in price   rulemaking.
multiple equipment designs and cover          between manufacturers, can result in             This action is a fulfillment of the
both residential and commercial               lost sales. Manufacturers have been           technology review concerning the Class
applications.                                 unwilling to take the business risk to        V standards and also is responsive to
   Because of the need to focus on Class      pull ahead the introduction of any            OPEI’s request that we reopen the Phase
III and IV engines and the challenges of      significant number of clean engines           2 handheld rule. We believe that these
applying new designs across their entire      especially whenever the ABT program           amendments sufficiently resolve all
product mix, manufacturers of Class V         heavily discounts the value of credits        issues related to these matters, and
engines (all of which are heavily             that might be earned from these engines.      expect to take no further action in
involved in Class III and IV as well)         In addition, because of the continuing        response to OPEI’s petition or in
have not focused as much effort on their      efforts to address Class V engines            relation to the technology review
Class V engines designs which are             discussed above, manufacturers are less       beyond that in this final rule.
scheduled to begin to phase in during         certain regarding the ability to rely on         We also note that while OPEI in its
2004. While Class V manufacturers             the April 2000 rule’s ABT programs for        petition relied upon section 307(c) of
expect to use the same basic                  help in complying with the Phase 2            the Clean Air Act, 42 U.S.C. 7607(c), as
technologies as they are employing in         standards in Class V.                         a basis for its requests, we do not agree
Class III and IV, they are still addressing      One final issue raised by                  that section 307(c) has any applicability
the technical challenges facing Class V       manufacturers was related to the              to either OPEI’s petition or to our action
engines.                                      production line testing program               in response. Nor are EPA’s rulemakings
   Unlike most Class III and IV engines       required under the Phase 2 rules.             regarding nonroad engines under CAA
which are used primarily in residential       Manufacturers believe they need               section 213 subject to section 553(e) of
applications, Class V engines are used        additional flexibility beyond that            the Administrative Procedure Act, 5
almost exclusively in commercial              currently allowed in the event that they      U.S.C. 553(e), another provision relied
applications. Commercial equipment is         need to revise the FEL limits because of      upon by OPEI in its request. See CAA
operated under much more rigorous             unexpected variations in production           section 307(d)(1), 42 U.S.C. 7607(d)(1).
conditions than residential equipment         engine emission levels. Manufacturers         Finally, we disagree with OPEI’s
and is operated for much longer periods       are allowed to make such changes under        suggestion that, pursuant to section
of time by professionals in forestry and      the current rules, but must notify EPA        307(b)(1) of the CAA, 42 U.S.C.
lawn care operations. Class V engines,        and await approval before continuing          7607(b)(1), OPEI has presented
which have the largest displacement of        production of the engine. If approval is      ‘‘grounds arising after [the] sixtieth day’’
all handheld engines, also have the           not received quickly, a manufacturer is       following publication of the April 2000
largest volume of exhaust.                    forced to stop production. As                 final Phase 2 rule, such that a new
Manufacturers expect to use catalysts on      manufacturers are making the transition       petition for judicial review of that rule
at least some of their Class V designs.       to new technologies to comply with the        could be filed in the DC Circuit Court
Manufacturers are still working to            Phase 2 standards, the potential for          of Appeals in the absence of further
address the best way to incorporate           producing new designs on an assembly          final regulatory action on EPA’s part. As
catalysts on such large engines, while        line where the emission levels of             OPEI is aware, in the face of a challenge
maintaining current levels of                 production engines (which are tested          by one of OPEI’s member companies
performance and addressing weight             under the PLT program) are not at the         that court has already fully affirmed
concerns and temperature issues with          levels expected is increased.                 EPA’s Phase 2 handheld regulations,
the need for upgraded cooling.                Manufacturers would like to be able to        and the court did not retain jurisdiction
   With regard to ABT, we found that          revise their FELs, provided they have         of the case pending any possible
manufacturers are using the current           data to support their changes, without        ongoing technology review or
ABT programs primarily for averaging          prior EPA approval so that the                discussions with industry. Husqvarna
purposes and are not significantly below      production of engines is not interrupted.     AB v. EPA, 254 F.3d 195 (D.C. Cir.
the fleet average levels required in Class       Shortly after completing our               2001).
III and IV in the first two years of the      discussions with engine manufacturers,
Phase 2 program. There is some banking        OPEI, on behalf of their members,             B. What Amendments Are We Adopting
of credits taking place, but at relatively    submitted an administrative ‘‘Petition        Today?
low levels. This is in stark contrast to      for Reopening’’ the Phase 2 handheld            Based on our analysis of the
the concerns cited in the April 2000          rules to EPA in February 2003. The            information gathered under the Class V
final rule over the potential for             petition contained a request to modify        technology review and our assessment
significant levels of ‘‘windfall’’ credits    the Phase 2 program for handheld              of the petition presented by industry,
from marginally cleaner engines.              engines in three areas. First, OPEI           we do not believe it is necessary to
Manufacturers believe the current ABT         requested a delay in the Class V              revise our April 2000 final rule
programs have discouraged the pull            implementation schedule (citing either a      determination that the Phase II
1830           Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

handheld standards are technologically       the next model year (i.e., banked),         average HC+NOX standards, but the
feasible and otherwise appropriate           including when traded to another            certification compliance margins have
under the Act. Thus, we are not taking       manufacturer.                               generally not been large and there have
action to revise the standards and              Alternatively under the April 2000       not been a large number of credits
phase-in schedule of the Phase II            final regulations, a manufacturer may       generated. The ‘‘windfall’’ credit
handheld program (Classes III–V) and         choose to have a family participate in      generation concern discussed in the
they remain as promulgated. However,         what is referred to as the ‘‘Optional       April 2000 final rule has not occurred
we also believe that several relatively      Transition Year’’ credit program. Under     and would not have occurred even if the
modest changes to the rule are               this program, any engine family with        ‘‘credit program trigger level’’
appropriate to ensure an orderly             FELs below the applicable phase-in          provisions of the Normal ABT program
transition to compliance with the Phase      standards shown in Table 1 is eligible      and the discount and multiplier
2 standards for the industry as a whole.     to generate credits. However, as is         provisions of the Optional Transition
Toward that end, we are promulgating         described in 40 CFR 90.216, these           Year program were not in place. Thus,
three changes to the Phase II program.       credits are progressively discounted or     to enable the ABT program to better
These changes facilitate transition to the   in some cases multiplied depending on       fulfill its intended purpose and avoid
Phase 2 standards while retaining all of     the certification FEL. This combination     maintaining unnecessary restrictions,
the long term emission control benefits      of ability to generate credits with         EPA is revising the ABT program for
of the program. Each of these changes is     families of higher emission levels for      2003 and later model years: ABT credit
discussed below.                             current year averaging but adjusting the    program trigger levels are eliminated as
   Because EPA views the provisions of       credits for these higher/lower-emitting     are the credit discount and multipliers
the action as noncontroversial and does      engines for purposes of banking was         and limits on credit life. Essentially, the
not expect adverse comment, it is            intended to provide an increased            program is being revised to follow a
appropriate to proceed by direct final       incentive for manufacturers to make         simple ABT program such as was
rulemaking. If we receive adverse            interim emission improvements while         discussed in the July 1999
comment on one or more distinct              preserving the environmental benefits of    Supplemental NPRM. Provisions related
amendments, paragraphs, or sections of       the Phase 2 program. ‘‘Optional             to credits generated in model year 2002
this rulemaking, we will publish a           Transition Year’’ credits have a limited    and earlier would not be changed. In
timely withdrawal in the Federal             life and application under the April        assessing the appropriateness of this
Register indicating which provisions         2000 final regulations. They may be         change, EPA examined the potential
will become effective and which              used without limitation through the         future emissions impact of the removing
provisions are being withdrawn due to        2007 model year. For model years 2008       the discounts and multipliers as part of
adverse comment. Any distinct                through 2010, they may also be used,        the ABT program changes for 2003 and
amendment, paragraph, or section of          but only if, prior to the use of any        later. Using 2003 certification
today’s rulemaking for which we do not       credits, the manufacturer’s production-     information, we have estimated that
receive adverse comment will become          and power-weighted average emission         these ABT changes could potentially
effective on the date set out above,         level is below a level determined by        result in about 3,000 tons of future new
notwithstanding any adverse comment          production-weighting the                    ABT program credits in 2003 and 2004
on any other distinct amendment,             manufacturer’s product line by emission     with the in-use emissions impact spread
paragraph, or section of today’s rule.       levels of 72/72/87 g/kW-hr for Classes      out over the next five to seven years.
                                             III/IV/V. The ‘‘Optional Transition         This represents less than one percent of
1. Averaging Banking, and Trading
                                             Year’’ credit program expires at the end    the emission reductions from the Phase
(ABT)
                                             of the 2010 model year, under the April     2 standards over these years. EPA
   The first set of changes is related to    2000 final rule.                            expects these credits will be used to
the certification ABT programs. As              When we adopted the April 2000 final     comply with the Class V standards
discussed above, the April 2000 final        rule, we believed the ABT provisions        during the transition years.
rule for handheld engines contained two      contained therein were necessary to
ABT programs, referred to as the             ensure that neither the ‘‘Normal’’ credit   2. Class V Credit Deficit Carryforward
‘‘Normal’’ credit program and the            program nor the ‘‘Optional Transition          Several manufacturers have indicated
‘‘Optional Transition Year’’ credit          Year’’ credit program would contribute      that the engines used in Class V present
program.                                     to a significant delay in implementation    the biggest technological challenge and
   Under the ‘‘Normal’’ credit program,      of the low-emitting technologies            assert that progress in Class V has been
manufacturers certifying Class III or IV     envisioned under the Phase 2 program.       slowed by the need to meet the
engine families with FELs at or below        Without the limitations on credit           standards in Classes III and IV in earlier
72 g/kW-hr and Class V engine families       generation, we were concerned that          model years. Manufacturers are likely to
with FELs at or below 87 g/kW-hr may         manufacturers could certify marginally      adapt the technologies used in Class IV
generate credits that have an unlimited      cleaner engines, especially during the      engines into Class V. They have
credit life and are not discounted in any    first years of the phase in period when     indicated that they are confident that
manner. (We refer to these as the ‘‘credit   the new equipment standards are the         the long-term standards are feasible for
program trigger levels.’’) Under the         highest, and generate enough credits to     Class V, but that they may need
‘‘Normal Credit’’ program, credits           significantly delay implementation of       additional transition flexibility. Even
generated by handheld engine families        technologies meeting the long term          with the cross class averaging and the
certified with FELs above the credit         standards shown in Table 1 for a            ABT program changes made above,
program trigger levels can be used by a      significant portion of the equipment        compliance during the transition years
manufacturer in the model year in            population.                                 may depend on the expected success of
which they are generated for its own            There have now been several model        technological progress, meeting
averaging purposes, or traded to another     years of experience with certifying Class   expected sales goals in other Classes for
manufacturer to be used for averaging        III and IV Phase 2 engines. The results     purposes of credit generation, and a
purposes in that model year. However,        indicate that the manufacturers have        favorable sales mix among the products
such credits may not be carried over to      been able to comply with the declining      and Classes. Toward that end, as a
                Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                           1831

transition tool, we are revising the          unexpected emissions variability and            • Raise novel legal or policy issues
certification provisions to facilitate        performance shortfalls during the            arising out of legal mandates, the
compliance for Class V.                       transition from prototype to mass            President’s priorities, or the principles
   Specifically, and only for Class V, we     production. Manufacturers account for        set forth in the Executive Order.
are revising the certification and            this in setting their FELs, but even so         This direct final rule is not a
compliance provisions to allow for            there are times when an FEL adjustment       significant regulatory action as it merely
credit deficit carryforward flexibility for   is needed. Under the April 2000 final        amends previously adopted
model years 2004 through 2007. Under          rule, manufacturers identifying an           requirements for handheld engines to
these provisions, a manufacturer who          emissions problem with its production        provide additional compliance
certifies Class V equipment during the        engines must contact EPA to get              flexibility to manufacturers in meeting
transition period (model years 2004           approval to change its FEL upward and        the Phase 2 requirements. There are no
through 2007) may run a net                   subsequently to implement a                  new costs associated with this rule. A
accumulated credit deficit within its         certification running change to fix the      Final Regulatory Support Document was
three Class average (III–V) for a given       problem and reduce the FEL. This             prepared in connection with the original
model year if the deficit is attributable     process is time consuming for EPA and        Phase 2 regulations for handheld
to negative credits from Class V engine       the industry and can result in               engines as promulgated on April 25,
families. Such credit deficits are            production line slowdowns and                2000 (65 FR 24268) and we have no
permitted in any model year of the            stoppages as manufacturers await EPA         reason to believe that our analysis in the
transition, but cannot occur for more         approvals. In this rule, we are revising     original rulemaking is inadequate. The
than two consecutive model years. Once        the process to adjust FELs upward and        relevant analysis is available in the
a deficit occurs, a manufacturer could,       downward during the production year.         docket for the Phase 2 rulemaking (A–
in the first subsequent model year, cover     Specifically, we are streamlining the        96–55) and at the following Internet
it at a 1:1 rate with credits from any or     certification FEL change process (up or      address: http://www.epa.gov/otaq/
all of the handheld or non-handheld           down) through a regulatory revision to       equip-ld.htm. The original action was
equipment classes. In the second and          permit changes without pre-approval.         submitted to the Office of Management
third following model years the deficit       Any changes to FELs must be based on         and Budget for review under Executive
payback rate would be 1.1:1. In the           engineering evaluation and emission          Order 12866.
fourth following model year, the deficit      test data which justifies the new FEL        B. Paperwork Reduction Act
payback rate would be 1.2:1.                  and be submitted to EPA within three
Manufacturers with a credit deficit are                                                       This direct final rule does not include
                                              working days. Failure to meet these
prohibited from trading credits to other                                                   any new collection requirements. The
                                              requirements would be a violation of the
manufacturers (although manufacturers                                                      information collection requirements
                                              certificate for any engines produced         (ICR) for the original Phase 2
would be allowed to purchase credits          during the interim period. EPA believes
from other manufacturers in trading),                                                      rulemaking (65 FR 24268, April 25,
                                              such a provision streamlines both its        2000) were approved on September 21,
and from banking credits for future use.      internal processes and those of the
Any positive credit balance must be                                                        2001 by the Office of Management and
                                              manufacturers without compromising           Budget (OMB) under the Paperwork
applied to that deficit. A manufacturer       the emission reductions associated with
can use banked or traded credits to                                                        Reduction Act, 44 U.S.C. 3501 et seq.
                                              the standards.
cover deficits.                                                                            C. Regulatory Flexibility Analysis
   As with the April 2000 regulations,        III. Statutory and Executive Order
two groups of engines are excluded from       Reviews                                         EPA has determined that it is not
the ABT program. California certified                                                      necessary to prepare a regulatory
                                              A. Executive Order 12866: Regulatory         flexibility analysis in connection with
sales in non pre-empted classes would
                                              Planning and Review                          this direct final rule. EPA has also
not be included in the program in any
way. Small volume manufacturers and              Under Executive Order 12866 the           determined that this rule will not have
small volume families which have              Agency must determine whether the            a significant economic impact on a
extended compliance dates under the           regulatory action is ‘‘significant’’ and     substantial number of small entities. For
April 2000 final rule (an extra three         therefore subject to review by the Office    purposes of assessing the impacts of this
years beyond the last of the transition       of Management and Budget (OMB) and           final rule on small entities, a small
years) would not be included, unless the      the requirements of this Executive           entity is defined as: (1) A small business
manufacturer opted to pull-ahead              Order. The Executive Order defines a         that meets the definition for business
certification of such engines for the         ‘‘significant regulatory action’’ as any     based on SBA size standards; (2) a small
purpose of generating credits.                regulatory action that is likely to result   governmental jurisdiction that is a
   EPA implemented a deficit                  in a rule that may:                          government of a city, county, town,
carryforward provision in its Tier 2             • Have an annual effect on the            school district or special district with a
automotive rule (65 FR 6867, February         economy of $100 million or more or           population of less than 50,000; and (3)
10, 2002) and its recreational vehicle        adversely affect in a material way the       a small organization that is any not-for-
rule (67 FR 68389, November 8, 2002)          economy, a sector of the economy,            profit enterprise which is independently
to address similar concerns in the            productivity, competition, jobs, the         owned and operated and is not
affected industries. This approach has        environment, public health or safety, or     dominant in its field. In determining
the benefits of assuring the expected         State, Local, or Tribal governments or       whether a rule has a significant
emission reductions are achieved while        communities;                                 economic impact on a substantial
providing both the industry and EPA              • Create a serious inconsistency or       number of small entities, the impact of
the flexibility to attain an orderly          otherwise interfere with an action taken     concern is any significant adverse
transition to the new standards.              or planned by another agency;                economic impact on small entities,
                                                 • Materially alter the budgetary          since the primary purpose of the
3. Production Year FEL Changes                impact of entitlements, grants, user fees,   regulatory flexibility analysis is to
   The implementation of new                  or loan programs, or the rights and          identify and address regulatory
technology often brings with it               obligations of recipients thereof; or        alternatives ‘‘which minimize the
1832           Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

significant economic impact of the          governments as defined by the                 authority, EPA also must consult, to the
proposed rule on small entities.’’ 5        provisions of Title II of the UMRA. The       extent practicable, with appropriate
U.S.C. 603 and 604. Thus, an agency         rule imposes no enforceable duties on         State and local officials regarding the
may conclude that a rule will not have      any of these governmental entities.           conflict between State law and
a significant economic impact on a          Nothing in the rule would significantly       Federally protected interests within the
substantial number of small entities if     or uniquely affect small governments.         agency’s area of regulatory
the rule relieves regulatory burden, or     EPA has determined that this rule             responsibility.
otherwise has a positive economic effect    contains no Federal mandates that may
on small entities subject to the rule.      result in expenditures of more than             This rule does not have federalism
This direct final rule merely amends the    $100 million to the private sector in any     implications. It will not have substantial
previously adopted Phase 2                  single year. This direct final rule merely    direct effects on the States, on the
requirements for handheld engines to        amends previously adopted                     relationship between the national
provide additional compliance               requirements for Phase 2 handheld             government and the States, or on the
flexibility to engine manufacturers,        engines to provide additional                 distribution of power and
including small entities, and will reduce   compliance flexibility to manufacturers.      responsibilities among the various
regulatory burden.                          The requirements of UMRA therefore do         levels of government, as specified in
                                            not apply to this action.                     Executive Order 13132. This direct final
D. Unfunded Mandates Reform Act
                                            E. Executive Order 13132: Federalism          rule merely amends previously adopted
   Title II of the Unfunded Mandates                                                      requirements for Phase 2 handheld
Reform Act of 1995 (UMRA), Public              Executive Order 13132, entitled            engines to provide additional
Law 104–4, establishes requirements for     ‘‘Federalism’’ (64 FR 43255, August 10,       compliance flexibility to manufacturers.
Federal agencies to assess the effects of   1999), requires EPA to develop an
their regulatory actions on State, local,   accountable process to ensure                 F. Executive Order 13175: Consultation
and tribal governments and the private      ‘‘meaningful and timely input by State        and Coordination With Indian Tribal
sector. Under section 202 of the UMRA,      and local officials in the development of     Governments
EPA generally must prepare a written        regulatory policies that have federalism
statement, including a cost-benefit         implications.’’ ‘‘Policies that have             Executive Order 13175, entitled
analysis, for proposed and final rules      federalism implications’’ are defined in      ‘‘Consultation and Coordination with
with ‘‘Federal mandates’’ that may          the Executive Order to include                Indian Tribal Governments’’ (59 FR
result in expenditures to State, local,     regulations that have ‘‘substantial direct    22951, November 6, 2000), requires EPA
and tribal governments, in the aggregate,   effects on the States, on the relationship    to develop an accountable process to
or to the private sector, of $100 million   between the national government and           ensure ‘‘meaningful and timely input by
or more in any one year. Before             the States, or on the distribution of         tribal officials in the development of
promulgating an EPA rule for which a        power and responsibilities among the          regulatory policies that have tribal
written statement is needed, section 205    various levels of government.’’               implications.’’ ‘‘Policies that have tribal
of the UMRA generally requires EPA to          Under Section 6 of Executive Order         implications’’ is defined in the
identify and consider a reasonable          13132, EPA may not issue a regulation         Executive Order to include regulations
number of regulatory alternatives and       that has federalism implications, that
                                                                                          that have ‘‘substantial direct effects on
adopt the least costly, most cost-          imposes substantial direct compliance
                                                                                          one or more Indian tribes, on the
effective, or least burdensome              costs, and that is not required by statute,
                                            unless the Federal Government provides        relationship between the Federal
alternative that achieves the objectives
of the rule. The provisions of section      the funds necessary to pay the direct         Government and the Indian tribes, or on
205 do not apply when they are              compliance costs incurred by State and        the distribution of power and
inconsistent with applicable law.           local governments, or EPA consults with       responsibilities between the Federal
Moreover, section 205 allows EPA to         State and local officials early in the        Government and Indian tribes.’’
adopt an alternative other than the least   process of developing the regulation.            This rule does not have tribal
costly, most cost-effective, or least       EPA also may not issue a regulation that      implications. It will not have substantial
burdensome alternative if the               has federalism implications and that          direct effects on tribal governments, on
Administrator publishes with the final      preempts State law, unless the Agency         the relationship between the Federal
rule an explanation of why such an          consults with State and local officials       Government and Indian tribes, or on the
alternative was adopted.                    early in the process of developing the        distribution of power and
   Before EPA establishes any regulatory    regulation.                                   responsibilities between the Federal
requirements that may significantly or         Section 4 of the Executive Order
                                                                                          Government and Indian tribes, as
uniquely affect small governments,          contains additional requirements for
                                                                                          specified in Executive Order 13175.
including tribal governments, it must       rules that preempt State or local law,
                                            even if those rules do not have               This rule does not uniquely affect the
have developed under section 203 of the
                                            federalism implications (i.e., the rules      communities of Indian Tribal
UMRA a small government agency plan.
The plan must provide for notifying         will not have substantial direct effects      Governments. Further, no circumstances
potentially affected small governments,     on the States, on the relationship            specific to such communities exist that
enabling officials of affected small        between the national government and           would cause an impact on these
governments to have meaningful and          the States, or on the distribution of         communities beyond those discussed in
timely input in the development of EPA      power and responsibilities among the          the other sections of this rule. This
regulatory proposals with significant       various levels of government). Those          direct final rule merely amends
Federal intergovernmental mandates,         requirements include providing all            previously adopted requirements for
and informing, educating, and advising      affected State and local officials notice     Phase 2 handheld engines to provide
small governments on compliance with        and an opportunity for appropriate            additional compliance flexibility to
the regulatory requirements.                participation in the development of the       manufacturers. Thus, Executive Order
   This rule contains no Federal            regulation. If the preemption is not          13175 does not apply to this rule.
mandates for State, local, or tribal        based on express or implied statutory
               Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                            1833

G. Executive Order 13045: Protection of        This direct final rule does not involve     Subpart B—Emission Standards and
Children From Environmental Health           technical standards. This direct final        Certification Provisions
and Safety Risks                             rule merely amends previously adopted
                                             requirements for Phase 2 handheld             ■ 2. Section 90.122 is amended by
  Executive Order 13045, ‘‘Protection of
                                             engines to provide additional                 revising paragraphs (e)(1) and (e)(2) to
Children from Environmental Health
                                             compliance flexibility to manufacturers.      read as follows:
Risks and Safety Risks’’ (62 FR 19885,
                                             Thus, we have determined that the
April 23, 1997) applies to any rule that                                                   § 90.122 Amending the application and
                                             requirements of the NTTAA do not
(1) is determined to be ‘‘economically                                                     certificate of conformity.
                                             apply.
significant’’ as defined under Executive                                                   *     *      *      *    *
Order 12866, and (2) concerns an             J. Congressional Review Act                     (e)(1) Alternatively, an engine
environmental health or safety risk that        The Congressional Review Act, 5            manufacturer may make changes in or
EPA has reason to believe may have a         U.S.C. 801 et seq., as amended by the         additions to production engines
disproportionate effect on children. If      Small Business Regulatory Enforcement         concurrently with amending the
the regulatory action meets both criteria,   Fairness Act of 1996, generally provides      application for an engine family as set
section 5–501 of the Order directs the       that before a rule may take effect, the       forth in paragraph (a) and (b) of this
Agency to evaluate the environmental         agency promulgating the rule must             section. In these circumstances the
health or safety effects of the planned      submit a rule report, which includes a        manufacturer may implement the
rule on children, and explain why the        copy of the rule, to Congress and the         production change without EPA pre-
planned regulation is preferable to other    Comptroller General of the United             approval provided the request for
potentially effective and reasonably         States. We will submit a report               change together with all supporting
feasible alternatives considered by the      containing this rule and other required       emission test data, related engineering
Agency.                                      information to the U.S. Senate, the U.S.      evaluations, and other supporting
  This rule is not subject to the            House of Representatives, and the             documentation is received at EPA
Executive Order because it is not            Comptroller General of the United             within three working days of
economically significant, and does not       States before publication of the rule in      implementing the change. Such changes
involve decisions on environmental           the Federal Register. A major rule            are ultimately still subject to the
health or safety risks that may              cannot take effect until 60 days after it     provisions of paragraphs (c) and (d) of
disproportionately affect children.          is published in the Federal Register.         this section.
H. Executive Order 13211: Actions That       This action is not a ‘‘major rule’’ as          (2) If, after a review, the
Significantly Affect Energy Supply,          defined by 5 U.S.C. 804(2). This direct       Administrator determines that
Distribution, or Use                         final rule is effective on March 12, 2004.    additional testing or information is
                                                                                           required, the engine manufacturer must
   This rule is not a ‘‘significant energy   K. Statutory Authority                        provide required test data or
action’’ as defined in Executive Order         The statutory authority for this action     information within 30 days or cease
13211, ‘‘Actions Concerning Regulations      comes from sections 202, 203, 204, 205,       production of the affected engines.
That Significantly Affect Energy Supply,     206, 207, 208, 209, 213, 215, 216, and        *     *      *      *    *
Distribution, or Use’’ (66 FR 28355, May     301(a) of the Clean Air Act as amended
22, 2001) because it is not likely to have   (42 U.S.C. 7521, 7522, 7523, 7524, 7525,      Subpart C—Certification Averaging,
a significant adverse effect on the          7541, 7542, 7543, 7547, 7549, 7550, and       Banking, and Trading Provisions
supply, distribution or use of energy.       7601(a)). This action is a rulemaking
This direct final rule merely amends         subject to the provisions of Clean Air        ■ 3. Section 90.203 is amended by
previously adopted requirements for          Act section 307(d). See 42 U.S.C.             revising paragraphs (e)(1), (e)(5), (g)(1),
Phase 2 handheld engines to provide          7606(d)(1).                                   and the second sentence of paragraph (h)
additional compliance flexibility to                                                       to read as follows:
manufacturers.                               List of Subjects in 40 CFR Part 90
                                               Environmental protection,                   § 90.203   General provisions.
I. National Technology Transfer and          Administrative practice and procedure,        *      *     *     *     *
Advancement Act                              Air pollution control, Confidential              (e) (1) A manufacturer may certify
  Section 12(d) of the National              business information, Imports, Labeling,      engine families at Family Emission
Technology Transfer and Advancement          Reporting and recordkeeping                   Limits (FELs) above or below the
Act of 1995 (‘‘NTTAA’’), Public Law          requirements, Research, Warranties.           applicable emission standard subject to
104–113, section 12(d) (15 U.S.C. 272                                                      the limitation in paragraph (f) of this
                                              Dated: December 23, 2003
note) directs EPA to use voluntary                                                         section, provided the summation of the
                                             Michael O. Leavitt,
consensus standards in its regulatory                                                      manufacturer’s projected balance of
                                             Administrator.                                credits from all calculations and credit
activities unless doing so would be
inconsistent with applicable law or          ■  For the reasons set out in the preamble,   transactions for all engine classes in a
otherwise impractical. Voluntary             title 40, chapter I of the Code of Federal    given model year is greater than or equal
consensus standards are technical            Regulations is amended as follows:            to zero, as determined under § 90.207.
standards (such as materials                                                               Notwithstanding the previous sentence,
                                             PART 90—CONTROL OF EMISSIONS                  a manufacturer may project a negative
specifications, test methods, sampling       FROM NONROAD SPARK-IGNITION
procedures, and business practices) that                                                   balance of credits as allowed under
                                             ENGINES AT OR BELOW 19                        § 90.207(c)(2).
are developed or adopted by voluntary        KILOWATTS
consensus standards bodies. NTTAA                                                          *      *     *     *     *
directs EPA to provide Congress,             ■ 1. The authority citation for part 90          (5) In the case of a production line
through OMB, explanations when the           continues to read as follows:                 testing (PLT) failure pursuant to subpart
Agency decides not to use available and        Authority: 42 U.S.C. 7521, 7522, 7523,      H of this part, a manufacturer may
applicable voluntary consensus               7524, 7525, 7541, 7542, 7543, 7547, 7549,     revise the FEL based upon production
standards.                                   7550, and 7601(a).                            line testing results obtained under
1834           Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations

subpart H of this part and upon              family with an FEL below the applicable     percent of the deficit). Deficits carried
Administrator approval pursuant to           emission standard may generate credits      into the fourth model year must be
§ 90.122(d). The manufacturer may use        for use in future model year averaging      offset by credits at a rate of 1.2:1 (i.e.,
credits to cover both past production        and trading.                                120 percent of the deficit);
and subsequent production of the             *     *     *     *     *                      (iii) An engine manufacturer who has
engines as needed as allowed under                                                       a credit deficit may use credits from any
                                             ■ 6. Section 90.206 is amended by
§ 90.207(c)(1).                                                                          class of spark-ignition nonroad engines
                                             revising paragraph (a) to read as follows:
*      *     *     *    *                                                                at or below 19 kilowatts generated or
   (g)(1) Credits generated in a given       § 90.206 Trading.                           obtained through averaging, banking or
model year by an engine family subject          (a) An engine manufacturer may           trading to offset the credit deficit; and,
to the Phase 2 emission requirements         exchange emission credits with other           (iv) An engine manufacturer must not
may only be used in averaging, banking                                                   bank credits for future use or trade
                                             engine manufacturers in trading, subject
or trading, as appropriate, for any other                                                credits to another engine manufacturer
                                             to the trading restriction specified in
engine family for which the Phase 2                                                      during a model year in which it has
                                             § 90.207(c)(2).
requirements are applicable. Credits                                                     generated a deficit or into which it has
                                             *       *     *    *       *                carried a deficit.
generated in one model year may not be
                                             ■ 7. Section 90.207 is amended by           *       *     *      *    *
used for prior model years, except as
                                             redesignating paragraph (c) as paragraph       (g) Credit deficits. (1) Manufacturers
allowed under § 90.207(c).
                                             (c)(1), adding a new paragraph (c)(2), and must offset any deficits for a given
*      *     *     *    *                    adding a new paragraph (g) to read as
   (h) * * * Except as provided in                                                       model year by the reporting deadline for
                                             follows:                                    the fourth model year following the
§ 90.207(c), an engine family generating
negative credits for which the               § 90.207 Credit calculation and
                                                                                         model year in which the deficits were
                                             manufacturer compliance with emission       generated as required in paragraph (c)(2)
manufacturer does not obtain or
                                             standards.                                  of this section. Manufacturers may offset
generate an adequate number of positive
                                                                                         deficits by generating credits or
credits by that date from the same or        *       *     *    *       *
                                                                                         acquiring credits generated by another
previous model year engines will violate        (c)(2) For model years 2004 through
                                                                                         manufacturer.
the conditions of the certificate of         2007, an engine manufacturer who               (2)(i) Failure to meet the requirements
conformity. * * *                            certifies at least one Class V engine       of paragraph (c)(2) of this section within
*      *     *     *    *                    family in a given model year may carry      the required timeframe for offsetting
■ 4. Section 90.204 is amended by            forward a credit deficit for four model     deficits will be considered to be a
adding a sentence to the end of              years, but must not carry such deficit      failure to satisfy the conditions upon
paragraph (a) and adding a sentence to       into the fifth year, provided the deficit   which the certificate(s) was issued and
paragraph (c) immediately after the first    is attributable to negative credits from    the individual noncomplying engines
sentence to read as follows:                 its Class V engine families, subject to     not covered by the certificate must be
                                             the following provisions:                   determined according to this section.
§ 90.204 Averaging.                             (i) Credit deficits are permitted for       (ii) If deficits are not offset within the
   (a) * * * A manufacturer may have a       model years 2004 through 2007 but           specified time period, the number of
negative balance of credits as allowed       cannot occur for more than two              engines which could not be covered in
under § 90.207(c)(2).                        consecutive model years for a given         the calculation to show compliance
*      *     *     *    *                    manufacturer;                               with the fleet average HC+NOX standard
   (c) * * * Credits generated under the        (ii)(A) If an engine manufacturer        in the model year in which the deficit
previously available ‘‘Optional              calculates that it has a credit deficit for occurred and thus are not covered by
transition year averaging, banking, and      a given model year, it must obtain          the certificate must be calculated using
trading program for Phase 2 handheld         sufficient credits from engine families     the methodology described in paragraph
engines’’ of §§ 90.212 through 90.220,       produced by itself or another               (g)(2)(iii) of this section.
since repealed, may also be used in          manufacturer in a model year no later          (iii) EPA will determine the engines
averaging. * * *                             than the fourth model year following the for which the condition on the
*      *     *     *    *                    model year for which it calculated the      certificate was not satisfied by
                                             credit deficit. (Example: if a              designating engines in the Class V
■ 5. Section 90.205 is amended by
                                             manufacturer calculates that it has a       engine family with the highest HC+NOX
revising paragraphs (a)(4) and (a)(5) to
                                             credit deficit for the 2004 model year, it FELs first and continuing progressively
read as follows:
                                             must obtain sufficient credits to offset    downward through the Class V engine
§ 90.205 Banking.                            that deficit from its own production or     families until a number of engines
   (a) * * *                                 that of other manufacturers’ 2008 or        having a credit need, as calculated
   (4) For the 2002 model year, a            earlier model year engine families.);       under paragraph (a) of this section,
manufacturer of a Class III or Class IV         (B) An engine manufacturer carrying      equal to the remaining deficit is
engine family may bank credits for use       the deficit into the first model year       reached. If this calculation determines
in future model year averaging and           following the year in which it was          that only a portion of engines in a Class
trading from only those Class III or Class   generated must generate or obtain           V engine family contribute to the deficit
IV engine families with an FEL at or         credits to offset that deficit and apply    situation, then EPA will designate a
below 72 g/kW-hr. Beginning with the         them to the deficit at a rate of 1:1. An    subset of actual engines in that engine
2003 model year, a manufacturer of a         engine manufacturer carrying the deficit family as not covered by the certificate,
Class III or Class IV engine family with     into the second and third model years       starting with the last engine produced
an FEL below the applicable emission         must generate or obtain credits to offset   and counting backwards. EPA may
standard may generate credits for use in     that deficit and apply them to the deficit request additional information from the
future model year averaging and trading.     at a rate of 1.1:1 (i.e., deficits carried  manufacturer that would help identify
   (5) Beginning with the 2004 model         into the second and third model year        the actual engine not covered by the
year, a manufacturer of a Class V engine     must be repaid with credits equal to 110 certificate.
               Federal Register / Vol. 69, No. 7 / Monday, January 12, 2004 / Rules and Regulations                             1835

  (iv) In determining the engine count,      for sale of engines not covered by a          section, a failure to satisfy the
EPA will calculate the mass of credits       certificate, pursuant to paragraph (g)(2)     conditions upon which a certificate(s)
based on the factors identified in           of this section.                              was issued and hence a sale of engines
paragraph (a) of this section.                  (4) If a manufacturer that has a deficit   not covered by the certificate, all occur
                                             ceases production of handheld engines,        upon the expiration of the deadline for
  (3) If a manufacturer is purchased by,     the manufacturer will be considered           offsetting deficits specified in paragraph
merges with or otherwise combines with       immediately in violation of paragraph         (g)(1) of this section.
another manufacturer, the manufacturer       (g)(1) of this section and may be subject
continues to be responsible for offsetting   to an enforcement action for sale of          §§90.212, 90.213, 90.214, 90.215, 90.216,
any deficits outstanding within the          engines not covered by a certificate,         90.217, 90.218, 90.219, 90.220 [REMOVED]
required time period. Any failure to         pursuant to paragraph (g)(2) of this
offset the deficits will be considered to                                                  ■ 8. Sections 90.212 through 90.220 are
                                             section                                       removed.
be a violation of paragraph (g)(1) of this      (5) For purposes of calculating the
section and may subject the                  statute of limitations, a violation of the    [FR Doc. 04–458 Filed 1–9–04; 8:45 am]
manufacturer to an enforcement action        requirements of paragraph (g)(1) of this      BILLING CODE 6560–50–P