Control of Emissions From New Marine Compression-Ignition Engines at or Above 30 Liters per Cylinder

Note: EPA no longer updates this information, but it may be useful as a reference or resource.
PDF Version (155 pp, 3388K, About PDF)

[Federal Register: August 28, 2009 (Volume 74, Number 166)]
[Proposed Rules]
[Page 44441-44595]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28au09-23]
[[Page 44442]]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 80, 85, 86, 94, 1027, 1033, 1039, 1042, 1043, 1045,
1048, 1051, 1054, 1060, 1065, and 1068
[EPA-HQ-OAR-2007-0121; FRL-8926-5]
RIN 2060-AO38

Control of Emissions From New Marine Compression-Ignition Engines
at or Above 30 Liters per Cylinder

AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed Rule.

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SUMMARY: EPA is proposing emission standards for new marine diesel
engines with per cylinder displacement at or above 30 liters (called
Category 3 marine diesel engines) installed on U.S. vessels, under
section 213 of the Clean Air Act (CAA or ``the Act''). The proposed
engine standards are equivalent to the nitrogen oxides (NO_X)
limits recently adopted in the amendments to Annex VI to the
International Convention for the Prevention of Pollution from Ships
(MARPOL Annex VI) and are based on the position advanced by the United
States Government as part of those international negotiations. The
near-term standards for newly-built engines would apply beginning in
2011. Long-term standards would begin in 2016 and are based on the
application of high-efficiency aftertreatment technology. We are also
proposing a change to our diesel fuel program that would forbid the
production and sale of marine fuel oil above 1,000 ppm sulfur for use
in the waters within the proposed U.S. ECA and internal U.S. waters and
allow for the production and sale of 1,000 ppm sulfur fuel for use in
Category 3 marine vessels.
    This proposal is part of a coordinated strategy to ensure that all
ships that affect U.S. air quality meet stringent NO_X and
fuel sulfur requirements. In addition, on March 27, 2009, the U.S.
Government forwarded a proposal to the International Maritime
Organization (IMO) to amend MARPOL Annex VI to designate an Emission
Control Area (ECA) off U.S. coasts. If this proposed amendment is not
timely adopted by IMO, we intend to take supplemental action to control
emissions from vessels affecting U.S. air quality.
    We project that in 2030 this coordinated strategy would reduce
annual emissions of NO_X and particulate matter (PM) from
ocean-going vessels by 1.2 million and 143,000 tons, respectively.
These reductions are estimated to annually prevent between 13,000 and
32,000 PM-related premature deaths, between 220 and 980 ozone-related
premature deaths, 1,500,000 work days lost, and 10,000,000 minor
restricted-activity days. The estimated annual monetized health
benefits of this coordinated strategy in 2030 would be between $110 and
$280 billion, assuming a 3 percent discount rate (or between $100 and
$260 billion assuming a 7 percent discount rate). The annual costs
would be significantly less, at approximately $3.1 billion.
    The proposed regulations also include technical amendments to our
motor vehicle and nonroad engine regulations. Many of these changes
involve minor adjustments or corrections to our recently finalized rule
for new nonroad spark-ignition engines, or adjustment to other
regulatory provisions to align with this recent final rule.

DATES: Comments must be received September 28, 2009. Under the
Paperwork Reduction Act, comments on the information collection
provisions are best assured of having full effect if the Office of
Management and Budget (OMB) receives a copy of your comments on or
before September 28, 2009, thirty days after date of publication in the
Federal Register.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2007-0121, by one of the following methods:
    • http://www.regulations.gov: Follow the on-line instructions
for submitting comments.
    • E-mail: a-and-r-docket@epa.gov.
    • Fax: (202) 566-9744.
    • Mail: Air Docket, Environmental Protection Agency,
Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. In
addition, please mail a copy of your comments on the information
collection provisions to the Office of Information and Regulatory
Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for
EPA, 725 17th St., NW., Washington, DC 20503.
    • Hand Delivery: EPA Docket Center, (Air Docket), U.S.
Environmental Protection Agency, EPA West Building, 1301 Constitution
Ave., NW., Room: 3334, Mail Code: 2822T, Washington DC. Such deliveries
are only accepted during the Docket's normal hours of operation, and
special arrangements should be made for deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2007-0121. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
http://www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://
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is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses. For additional information about EPA's public
docket visit the EPA Docket Center homepage at http://www.epa.gov/
epahome/dockets.htm. For additional instructions on submitting
comments, go to Section I.A of the SUPPLEMENTARY INFORMATION section of
this document, and also go to Section X.A of the Public Participation
section of this document.
    Docket: All documents in the docket are listed in the http://
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy at the EPA-HQ-OAR-2007-
0121 Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW.,
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding legal holidays. The telephone
number for the Public Reading Room is (202) 566-1744, and the telephone
number for the EPA-HQ-OAR-2007-0121 is (202) 566-1742.

[[Page 44443]]


FOR FURTHER INFORMATION CONTACT: Amy Kopin, U.S. EPA, Office of
Transportation and Air Quality, Assessment and Standards Division
(ASD), Environmental Protection Agency, 2000 Traverwood Drive, Ann
Arbor, MI 48105; telephone number: (734) 214-4417; fax number: (734)
214-4050; e-mail address: Kopin.Amy@epa.gov, or Assessment and
Standards Division Hotline; telephone number: (734) 214-4636.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

    This action will affect companies that manufacture, sell, or import
into the United States new marine compression-ignition engines with per
cylinder displacement at or above 30 liters for use on vessels flagged
or registered in the United States; companies and persons that make
vessels that will be flagged or registered in the United States and
that use such engines; and the owners or operators of such U.S.
vessels. Additionally, this action may affect companies and persons
that rebuild or maintain these engines. Finally, this action may also
affect those that manufacture, import, distribute, sell, and dispense
fuel for use by Category 3 marine vessels. Affected categories and
entities include the following:

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                                                        Examples of
           Category               NAICS Code \a\    potentially affected
                                                          entities
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Industry......................  333618...........  Manufacturers of new
                                                    marine diesel
                                                    engines.
Industry......................  336611...........  Manufacturers of
                                                    marine vessels.
Industry......................  811310...........  Engine repair and
                                                    maintenance.
Industry......................  483..............  Water transportation,
                                                    freight and
                                                    passenger.
Industry......................  324110...........  Petroleum Refineries.
Industry......................  424710, 424720...  Petroleum Bulk
                                                    Stations and
                                                    Terminals; Petroleum
                                                    and Petroleum
                                                    Products
                                                    Wholesalers.
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Note:
\a\ North American Industry Classification System (NAICS).

    This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists the types of entities that EPA is now aware
could potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your company is regulated by this action, you should carefully examine
the applicability criteria in 40 CFR 80.501, 94.1, 1042.1, and 1065.1,
and the proposed regulations. If you have questions, consult the person
listed in the preceding FOR FURTHER INFORMATION CONTACT section.

B. What Should I Consider as I Prepare My Comments for EPA?

    1. Submitting CBI. Do not submit this information to EPA through
http://www.regulations.gov or e-mail. Clearly mark the part or all of
the information that you claim to be CBI. For CBI information in a disk
or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM
as CBI and then identify electronically within the disk or CD ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
    2. Tips for Preparing Your Comments. When submitting comments,
remember to:
    • Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).
    • Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
    • Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
    • Describe any assumptions and provide any technical
information and/or data that you used.
    • If you estimate potential costs or burdens, explain how you arrived
at your estimate in sufficient detail to allow for it to be reproduced.
    • Provide specific examples to illustrate your concerns, and
suggest alternatives.
    • Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
    • Make sure to submit your comments by the comment period
deadline identified.

II. Additional Information About This Rulemaking

    The current emission standards for new compression-ignition marine
engines with per cylinder displacement at or above 30 liters per
cylinder were adopted in 2003 (see 68 FR 9746, February 28, 2003). This
notice of proposed rulemaking relies in part on information that was
obtained for that rule, which can be found in Public Docket EPA-HQ-OAR-
2003-0045. This docket is incorporated into the docket for this action,
EPA-HQ-OAR-2007-0121.

Table of Contents

I. Overview
    A. What Are the Elements of EPA's Coordinated Strategy for
Ocean-Going Vessels?
    B. Why is EPA Making this Proposal?
    C. Statutory Basis for Action
II. Air Quality, Health and Welfare Impacts
    A. Public Health Impacts
    B. Environmental Impacts
    C. Air Quality Modeling Results
    D. Emissions From Ships With Category 3 Engines
III. Engine Standards
    A. What Category 3 Marine Engines are Covered?
    B. What Standards are we Proposing for Freshly Manufactured Engines?
    C. Are the Standards Feasible?
IV. Fuel Standards
    A. Background
    B. Current Diesel Fuel Standards
    C. Applicability
    D. Fuel Sulfur Standards
    E. Technical Amendments to the Current Diesel Fuel Sulfur Program Regulations
V. Emission Control Areas for U.S. Coasts
    A. What is an ECA?
    B. U.S. Emission Control Area Designation
    C. Technological Approaches to Comply With ECA Standards
    D. ECA Designation and Foreign-Flagged Vessels
VI. Certification and Compliance Program
    A. Compliance Provisions for Category 3 Engines
    B. Compliance Provisions To Implement Annex VI NO_X
Regulation and the NO_X Technical Code
    C. Changes to the Requirements Specific to Engines Below 30
Liters per Cylinder
    D. Other Proposed Regulatory Issues
    E. Coast Guard's Marine Vessel Certification Program
VII. Costs and Economic Impacts

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    A. Estimated Fuel Costs
    B. Estimated Engine Costs
    C. Cost Effectiveness
    D. Economic Impact Analysis
VIII. Benefits
    A. Overview
    B. Quantified Human Health Impacts
    C. Monetized Benefits
    D. What Are the Limitations of the Benefits Analysis?
    E. Comparison of Costs and Benefits
IX. Alternative Program Options
    A. Mandatory Cold Ironing Requirement
    B. Earlier Adoption of CAA Tier 3 standards
    C. Standards for Existing Engines
X. Public Participation
    A. How Do I Submit Comments?
    B. How Should I Submit CBI to the Agency?
    C. Will There Be a Public Hearing?
    D. Comment Period
    E. What Should I Consider as I Prepare My Comments for EPA?
XI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income Populations
XII. Statutory Provisions and Legal Authority

I. Overview

    This proposal is part of a coordinated strategy to address
emissions from ocean-going vessels and is an important step in EPA's
ongoing National Clean Diesel Campaign (NCDC). In recent years, we have
adopted major new programs designed to reduce emissions from new diesel
engines, including those used in highway (66 FR 5001, January 18,
2001), nonroad (69 FR 38957, June 29, 2004), locomotive, and marine
applications (73 FR 25098, May 6, 2008). When fully phased in, these
programs will significantly reduce emissions of harmful regulated
pollutants from these categories of engines and vehicles. This Notice
of Proposed Rulemaking (NPRM) sets out the next step in this ambitious
effort by addressing emissions from the largest marine diesel engines,
called Category 3 (C3) marine diesel engines. These are engines with
per cylinder displacement at or above 30 liters per cylinder, which are
used primarily for propulsion power on ocean-going vessels (OGV).
    Emissions from OGV remain at high levels. The Category 3 engines on
these vessels use emission control technology that is comparable to
that used by nonroad engines in the early 1990s, and use fuel that can
have a sulfur content of 30,000 ppm or more. As a result, these engines
emit high levels of pollutants that contribute to unhealthy air in many
areas of the U.S. Nationally, in 2009, emissions from Category 3
engines account for about 10 percent of mobile source nitrogen oxides
(NO_X) emissions, about 24 percent of mobile source diesel
PM_2.5 emissions (with PM_2.5 referring to
particles with a nominal mean aerodynamic diameter less than or equal
to 2.5 [micro]m), and about 80 percent of mobile source sulfur oxides
(SO_X) emissions. As we look into the future, however,
emissions from ocean-going vessels are expected to become a dominant
inventory source. This will be due to both emission reductions from
other mobile sources as new emission controls go into effect and to the
anticipated activity growth for ocean transportation. Without new
controls, we anticipate the contribution of ocean-going vessels to
national emission inventories to increase to about 24 percent, 34
percent, and 93 percent of mobile source NO_X,
PM_2.5, and SO_X emissions, respectively in 2020,
growing to 40 percent, 48 percent, and 95 percent respectively in 2030.
The coordinated emission control strategy will lead to significant
reductions in these emissions and important benefits to public health.
    The evolution of EPA's strategy to control mobile source diesel
emissions has followed a technology progression, beginning with the
application of high-efficiency advanced aftertreatment approaches and
low sulfur fuel requirements first to highway vehicles, then to nonroad
engines and equipment, followed by locomotives and smaller marine
diesel engines. The benefits of this approach include maximizing air
quality benefits by focusing on the largest populations of sources with
the shortest service lives, allowing engine manufacturers to spread
initial research and development costs over a larger population of
engines, and allowing manufacturers to address the challenges of
applying advanced emission controls on smaller engines.
    EPA has been working with engine manufacturers and other industry
stakeholders for many years to identify and resolve challenges
associated with applying advanced diesel engine technology to Category
3 engines to achieve significant NO_X emission reductions.
This work was fundamental in developing the emission limits for
Category 3 engines that we are proposing in this action and informed
the position advocated by the United States in the international
negotiations for more stringent tiers of international engine emission limits.
    Our coordinated strategy to control emissions from ocean-going
vessels consists of actions at both the national and international
levels. It includes: (1) The engine and fuel controls we are proposing
in this action under our Clean Air Act authority; (2) the proposal \1\
submitted by the United States Government (USG) to the International
Maritime Organization (IMO) to amend Annex VI of the International
Convention for the Prevention of Pollution from Ships (MARPOL Annex VI)
to designate U.S. coasts as an Emission Control Area (ECA) \2\ in which
all vessels, regardless of flag, would be required to meet the most
stringent engine and marine fuel sulfur requirements in Annex VI; and
(3) the new engine emission and fuel sulfur limits contained in the
amendments to Annex VI that are applicable to all vessels regardless of
flag and that are implemented in the U.S. through the Act to Prevent
Pollution from Ships (APPS).
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    \1\ Proposal to Designate an Emission Control Area for Nitrogen
Oxides, Sulphur Oxides and Particulate Matter, Submitted by the
United States and Canada. IMO Document MEPC59/6/5, 27 March, 2009. A
copy of this document can be found at http://www.epa.gov/otaq/regs/
nonroad/marine/ci/mepc-59-eca-proposal.pdf.
    \2\ For the purpose of this proposal, the term ``ECA'' refers to
both the ECA and internal U.S. waters. Refer to Section VI.B. for a
discussion of the application of the fuel sulfur and engine emission
limits to U.S. internal waters through APPS.
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    The amendments to APPS to incorporate Annex VI provide the
authority to ensure compliance with MARPOL Annex VI by U.S. and foreign
vessels that enter U.S. ports or operate in U.S. waters. In light of
this, we are deciding not to revisit our existing approach with respect
to foreign vessels in this rule. However, the MARPOL Annex VI Tier III
NO_X and stringent fuel sulfur limits are geographically
based and would not become effective absent designation of U.S. coasts
as an ECA. As noted above, the United States forwarded a proposal to
IMO to amend Annex VI to designate U.S. coasts as an ECA. If this
amendment is not adopted in a timely manner by IMO, we intend to take
supplemental action to control emissions from vessels that affect U.S.
air quality.
    Our coordinated strategy for ocean-going vessels would
significantly reduce emissions from foreign and domestic

[[Page 44445]]

vessels that affect U.S. air quality, and the impacts on human health
and welfare would be substantial. We project that by 2030 this program
would reduce annual emissions of NO_X and particulate matter
(PM) by 1.2 million and 143,000 tons, respectively, and the magnitude
of these reductions would continue to grow well beyond 2030.\3\ These
reductions are estimated to annually prevent between 13,000 and 32,000
PM-related premature deaths, between 220 and 980 ozone-related
premature deaths, 1,500,000 work days lost, and 10,000,000 minor
restricted-activity days. The estimated annual monetized health
benefits of this coordinated strategy in 2030 would be between $110 and
$280 billion, assuming a 3 percent discount rate (or between $100 and
$260 billion assuming a 7 percent discount rate). The annual cost of
the overall program in 2030 would be significantly less, at
approximately $3.1 billion.
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    \3\ These emission inventory reductions include reductions from
ships operating within the 24 nautical mile regulatory zone off the
California Coastline, beginning with the effective date of the
Coordinated Strategy program elements. The California regulation
contains a provision that would sunset the requirements of the rule
if the Federal program achieves equivalent emission reductions. See
http://www.arb.ca.gov/regact/2008/fuelogv08/fro13.pdf at 13 CCR
2299.2(j)(1).
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A. What Are the Elements of EPA's Coordinated Strategy for Ocean-Going Vessels?

    Our coordinated strategy for ocean-going vessels, including the CAA
emission standard proposed in this action, continues EPA's program to
progressively apply advanced aftertreatment emission control standards
to diesel engines and reflects the evolution of this technology from
the largest inventory source (highway engines), to land-based nonroad
engines, to locomotives and marine diesel engines up to 30 liters per
cylinder. The results of these forerunner programs are dramatic
reductions in NO_X and PM_2.5 emissions on the
order of 80 to 90 percent, which will lead to significant improvements
in national air quality.
    The combination of controls in the coordinated strategy for ocean-
going vessels is expected to provide significant reductions in
PM_2.5, NO_X, SO_X, and toxic compounds,
both in the near term (as early as 2011) and in the long term. These
reductions would be achieved in a manner that: (1) Is very cost
effective compared to additional controls on portside vehicles and
equipment and other land-based mobile sources that are already subject
to stringent technology-forcing emission standards; (2) leverages the
international program adopted by IMO to ensure that all ships that
operate in areas that affect U.S. air quality are required to use
stringent emission control technology; and (3) provides the lead time
needed to deal with the engineering design workload that is involved in
applying advanced high-efficiency aftertreatment technology to these
very large engines. Overall, the coordinated strategy constitutes a
comprehensive program that addresses the problems caused by ocean-going
vessel emissions from both a near-term and long-term perspective. It
does this while providing for an orderly and cost-effective
implementation schedule for the vessel owners and manufacturers, and in
a way that is consistent with the international requirements for these vessels.
    The human health and welfare impacts of emissions from ocean-going
vessels, along with estimates of their contribution to national
emission inventories, are described in Section II. The proposed new
tiers of Clean Air Act engine emission standards to address these
emissions, and our justifications for them, are discussed in Section
III. Section IV contains proposed changes to our existing marine diesel
fuel program. In Section V, we describe a key component of the
coordinated strategy: the recently-submitted proposal to amend MARPOL
Annex VI to designate U.S. coasts as an ECA, as well as the IMO
approval process.
    In addition to the new emission limits, we are proposing several
revisions to our Clean Air Act testing, certification, and compliance
provisions to better ensure emissions control in use. We are also
proposing several regulations for the purpose of implementing MARPOL
Annex VI pursuant to the Act to Prevent Pollution From Ships (33 USC
1901 et seq.). These revisions are described in Section VI. Sections
VII and VIII present the estimated costs and benefits of our
coordinated program to address OGV emissions, and Section IX presents
the analysis of programmatic alternatives and a discussion of a
potential Voluntary Marine Verification Program.
(1) What CAA Standards Is EPA Proposing?
    We are proposing new tiers of Category 3 marine diesel engine
standards under our Clean Air Act authority, as well as certain
revisions to our marine fuel program.
    Category 3 Engine Standards. Our current standards for Category 3
engines were adopted in 2003. These Tier 1 standards are equivalent to
the first tier of MARPOL Annex VI NO_X limits and require the
use of control technology comparable to that used by nonroad engines in
the early 1990s. We did not adopt PM standards at that time because the
vast majority of PM emissions from Category 3 engines are the result of
the sulfur content of the residual fuel they use and because of
measurement issues.\4\ The combination of the engine and fuel standards
we are proposing in this NPRM and the USG proposal for ECA designation
will require all vessels that operate in coastal areas that affect U.S.
air quality to meet advanced engine standards and fuel controls.
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    \4\ As explained in the NPRM, there were no acceptable
procedures for measuring PM from Category 3 marine engines.
Specifically, established PM test methods showed unacceptable
variability when sulfur levels exceed 0.8 weight percent, which was
common at that time for both residual and distillate marine fuels
for Category 3 engines, and no PM test method or calculation
methodology had been developed to correct that variability for these
engines. See 67 FR 37569, May 29, 2002.
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    We are proposing to revise our CAA engine program to include two
additional tiers of NO_X standards for new marine diesel
engines with per cylinder displacement at or above 30 liters (Category
3 engines) installed on vessels flagged or registered in the United
States. The proposed near-term Tier 2 standards would apply beginning
in 2011 and would require more efficient use of engine technologies
being used today, including engine timing, engine cooling, and advanced
computer controls. The proposed long-term Tier 3 standards would apply
beginning in 2016 and would require the use of high-efficiency
aftertreatment technology such as selective catalytic reduction.
    Because much of the operation of U.S. vessels occurs in areas that
would have little, if any, impact on U.S. air quality, we are proposing
that our Clean Air Act program allow the use of alternative emission
control devices (AECDs) that would permit a ship to meet less stringent
requirements on the open sea. The use of these devices would be subject
to certain restrictions, including a requirement that the AECD not
disable emission controls while operating in areas where emissions
could reasonably be expected to adversely affect U.S. air quality, and
that the engine is equipped with a NO_X emission monitoring
device. In addition, the engine would be required to meet the Tier 2
NO_X limits when the AECD is implemented, and an AECD would
not be allowed on any Tier 2 or earlier engine.
    In addition to the NO_X emission limits, we are proposing
standards for emissions of hydrocarbons (HC) and carbon monoxides (CO)
from new Category 3 engines. As explained in

[[Page 44446]]

Section III.B.1, below, we are not proposing to set a standard for PM
emissions for Category 3 engines. However, significant PM emissions
benefits will be achieved through the ECA fuel sulfur requirements that
will apply to ships that operate in areas that affect U.S. air quality.
We are also proposing to require engine manufacturers to measure and
report PM emissions pursuant to our authority in section 208 of the Act.
    Fuel Sulfur Limits. EPA is in this notice proposing fuel sulfur
limits under section 211(c) of the Clean Air Act that match the limits
that apply under Annex VI in ECAs. First, we are proposing to forbid
the production and sale of fuel oil with a sulfur content above 1,000
ppm for use in the waters within the proposed ECA (as well as internal
U.S. waters). Second, we are proposing a revision to our existing
diesel fuel program to allow for the production and sale of 1,000 ppm
sulfur fuel for use in Category 3 marine vessels. This would allow
production and distribution of fuel consistent with the new sulfur
limits that will become applicable, under Annex VI, in ECAs beginning
in 2015. Our current diesel fuel program sets a sulfur limit of 15 ppm
that will be fully phased-in by December 1, 2014 for nonroad,
locomotive, and marine (NRLM) diesel fuel produced for distribution/
sale and use in the U.S. Without this proposed change to our existing
diesel fuel regulations, fuel with a sulfur content of up to 1,000 ppm
could be used in C3 marine vessels, but it could not be legally
produced in the U.S. after June 1, 2014.
(2) What is the United States Government Proposal for Designation of an
Emission Control Area?
    MARPOL Annex VI contains the international standards for air
emissions from ships, including NO_X and SO_X /PM
emissions. The Annex VI NO_X and SO_X /PM limits
are set out in Table I-1. Annex VI was originally adopted by the
Parties in 1997 but did not go into force until 2005, after it was
ratified by fifteen countries representing at least 50 percent of the
world's merchant shipping tonnage. The initial program consisted of
engine NO_X emission standards and fuel sulfur limits. The
NO_X standards apply to all engines above 130 kW installed on
a ship constructed on or after January 1, 2000 and were intended to
reduce NO_X emissions by about 30 percent from uncontrolled.
There were two fuel sulfur limits: A global limit of 45,000 ppm and a
more stringent 15,000 ppm limit that applies in SO_X Emission
Control Areas (SECAs). This approach ensured that the cleanest fuel was
used in areas that demonstrated a need for additional SO_X
reductions, while retaining the ability of ships to use higher sulfur
residual fuel on the open ocean.
    Annex VI was amended in October 2008, adding two tiers of
NO_X limits (Tier II and Tier III) and two sets of fuel
sulfur standards.\5\ These amendments will enter into force on July 1,
2010 unless an objection is raised before January 1, 2010 by at least
one-third of the parties to the Annex or by parties that represent at
least 50 percent of the world's gross merchant tonnage. The most
stringent NO_X and fuel sulfur limits are regionally based
and will apply only in designated ECAs.
---------------------------------------------------------------------------

    \5\ Note that the MARPOL Annex VI standards are referred to as
Tiers I, II, and III; EPA's Category 3 emission standards are
referred to as Tiers 1, 2, and 3.

                                           Table I--1--Annex VI NOX Emission Standards and Fuel Sulfur Limits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Less than 130
                                                                                                RPM              130-2000 RPM \a\         Over 2000 RPM
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOX.....................................  Tier I.....................          \b\ 2004              17.0       45.0 [middot] n(-0.20)               9.8
                                          Tier II....................              2011              14.4       44.0 [middot] n(-0.23)               7.7
                                          Tier III...................              2016               3.4        9.0 [middot] n(-0.20)               2.0
--------------------------------------------------------------------------------------------------------------------------------------------------------


--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Global
                                                                  ECA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel Sulfur..............................              2004  45,000 ppm \c\................                         2005  15,000 ppm \c\
                                                       2012  35,000 ppm \c\................                         2010  10,000 ppm \c\
                                                       2020  5,000 ppm c d.................                         2015  1,000 ppm \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Applicable standards are calculated from n (maximum in-use engine speed in revolutions per minute (rpm)), rounded to one decimal place.
\b\ Tier 1 NOX standards apply for engines originally manufactured after 2004, and proposed to also to certain earlier engines.
\c\ Annex VI standards are in terms of percent sulfur. Global sulfur limits are 4.5%; 3.5%; 0.5%. ECA sulfur limits are 1.5%; 1.0%; 0.1%.
\d\ Subject to a feasibility review in 2018; may be delayed to 2025.

    To realize the benefits from the MARPOL Annex VI Tier III
NO_X and fuel sulfur controls, areas must be designated as
Emission Control Areas. On March 27, 2009, the U.S. and Canadian
governments submitted a proposal to amend MARPOL Annex VI to designate
North American coastal waters as an ECA (referred to as the ``U.S./
Canada ECA'' or the ``North American ECA'').\6\ A description of this
submittal and the IMO approval process is set out in Section V. ECA
designation would ensure that ships that affect U.S. air quality meet
stringent NO_X and fuel sulfur requirements while operating
within 200 nautical miles of U.S. coasts. We expect the U.S./Canadian
proposal will be adopted by the Parties to MARPOL Annex VI in March
2010. If, however, the proposed amendment is not adopted in a timely
manner, we intend to take supplemental action to control harmful
emissions from vessels that affect U.S. air quality.
---------------------------------------------------------------------------

    \6\ Proposal to Designate an Emission Control Area for Nitrogen
Oxides, Sulphur Oxides and Particulate Matter, Submitted by the
United States and Canada. IMO Document MEPC59/6/5, 27 March, 2009. A
copy of this document can be found at http://www.epa.gov/otaq/regs/
nonroad/marine/ci/mepc-59-eca-proposal.pdf.
---------------------------------------------------------------------------

(3) Regulations To Implement Annex VI
    The United States became a party to MARPOL Annex VI by depositing
its instrument of ratification with IMO on October 8, 2008. This was
preceded by the President signing into law the Maritime Pollution
Prevention Act of 2008 (Pub. L. 110-280) on July 21, 2008, that
contains amendments to the Act to Prevent Pollution from Ships (33
U.S.C. 1901 et seq.). These APPS amendments require compliance with
Annex VI by all persons subject to the engine and

[[Page 44447]]

vessel requirements of Annex VI. The amendments also authorize the
United States Coast Guard and EPA to enforce the provisions of Annex VI
against domestic and foreign vessels and to develop implementing
regulations, as necessary. In addition, APPS gives EPA sole authority
to certify engines installed on U.S. vessels to the Annex VI
requirements. This NPRM contains proposed regulations to implement
several aspects of the Annex VI engine and fuel regulations, which we
are proposing under that APPS authority. Our cost and benefit analyses
for the coordinated strategy includes the costs for U.S. vessels of
implementing those provisions of the MARPOL Annex VI program that are
in addition to the ECA requirements.
(4) Technical Amendments
    The proposed regulations also include technical amendments to our
motor vehicle and nonroad engine regulations. Many of these changes
involve minor adjustments or corrections to our recently finalized rule
for new nonroad spark-ignition engines, or adjustment to other
regulatory provisions to align with this recent final rule.
(5) Summary
    The coordinated strategy emission control requirements are the
MARPOL Annex VI global Tier II NO_X standards included in the
amendments to Annex VI and the ECA Tier 3 NO_X limits and
fuel sulfur limits that will apply when the U.S. coasts are designated
as an ECA through an additional amendment to Annex VI. The Annex VI
requirements, including the future ECA requirements, will be
enforceable for U.S. and foreign vessels operating in the United States
waters through the Act to Prevent Pollution from Ships.
    We are also adopting the engine controls for Category 3 engines on
U.S. vessels under our Clean Air Act program, as required by Section
213 of the Act.
    Finally, we are proposing additional requirements that are not part
of the Annex VI program or the ECA. These are: Limits on hydrocarbon
and carbon monoxide emissions for Category 3 engines; PM measurement
requirement, to obtain data on PM emissions from engines operating on
distillate fuel; and changes to our Clean Air Act diesel fuel program
to allow production and sale of ECA-compliant fuel. We are also
considering changes to our emission control program for smaller marine
diesel engines to harmonize with the Annex VI NO_X
requirements, for U.S. vessels that operate internationally.

B. Why is EPA Making This Proposal?

(1) OGV Contribute to Serious Air Quality Problems
    Ocean-going vessels subject to this proposal generate significant
emissions of PM_2.5, SO_X, and NO_X that
contribute to nonattainment of the National Ambient Air Quality
Standards (NAAQS) for PM_2.5 and ground-level ozone (smog).
NO_X and SO_X are both precursors to secondary
PM_2.5 formation. Both PM_2.5 and NO_X
adversely affect human health. NO_X is a key precursor to
ozone as well. NO_X, SO_X and PM_2.5
emissions from ocean-going vessels also cause harm to public welfare,
including contributing to deposition of nitrogen and sulfur, visibility
impairment and other harmful environmental impacts across the U.S.
    The health and environmental effects associated with these
emissions are a classic example of a negative externality (an activity
that imposes uncompensated costs on others). With a negative
externality, an activity's social cost (the costs borne to society
imposed as a result of the activity taking place) is not taken into
account in the total cost of producing goods and services. In this
case, as described in this section below and in Section II, emissions
from ocean-going vessels impose public health and environmental costs
on society, and these added costs to society are not reflected in the
costs of providing the transportation services. The market system
itself cannot correct this externality because firms in the market are
rewarded for minimizing their production costs, including the costs of
pollution control. In addition, firms that may take steps to use
equipment that reduces air pollution may find themselves at a
competitive disadvantage compared to firms that do not. To correct this
market failure and reduce the negative externality from these
emissions, we propose to set a cap on the rate of emission production
from these sources. EPA's coordinated strategy for ocean-going vessels
will accomplish this since both domestic and foreign ocean-going
vessels will be required to reduce their emissions to a technologically
feasible limit.
    Emissions from ocean-going vessels account for substantial portions
of the country's ambient PM_2.5, SO_X and
NO_X levels. We estimate that in 2009 these engines account
for about 80 percent of mobile source sulfur dioxide (SO₂)
emissions, 10 percent of mobile source NO_X emissions and
about 24 percent of mobile source diesel PM_2.5 emissions.
Emissions from ocean-going vessels are expected to dominate the mobile
source inventory in the future, due to both the expected emission
reductions from other mobile sources as a result of more stringent
emission controls and due to growth in the demand for ocean
transportation services. By 2030, the coordinated strategy would reduce
annual SO₂ emissions from these diesel engines by 1.3
million tons, annual NO_X emissions by 1.2 million tons, and
PM_2.5 emissions by 143,000 tons, and those reductions would
continue to grow beyond 2030 as fleet turnover to the clean engines
continues. While a share of these emissions occur at sea, our air
quality modeling results described in Section II show they have a
significant impact on ambient air quality far inland.
    Both ozone and PM_2.5 are associated with serious public
health problems, including premature mortality, aggravation of
respiratory and cardiovascular disease (as indicated by increased
hospital admissions and emergency room visits, school absences, lost
work days, and restricted activity days), changes in lung function and
increased respiratory symptoms, altered respiratory defense mechanisms,
and chronic bronchitis. Diesel exhaust is of special public health
concern, and since 2002 EPA has classified it as likely to be
carcinogenic to humans by inhalation at environmental exposures. Recent
studies are showing that populations living near large diesel emission
sources such as major roadways, rail yards, and marine ports are likely
to experience greater diesel exhaust exposure levels than the overall
U.S. population, putting them at greater health risks.7 8 9
---------------------------------------------------------------------------

    \7\ U.S. EPA. (2004). Final Regulatory Impact Analysis: Control
of Emissions from Nonroad Diesel Engines, Chapter 3. Report No.
EPA420-R-04-007. http://www.epa.gov/nonroad-diesel/2004fr.htm#ria.
    \8\ State of California Air Resources Board. Roseville Rail Yard
Study. Sacramento, CA: California EPA, California Air Resources
Board (CARB). Stationary Source Division. This document is available
electronically at: http://www.arb.ca.gov/diesel/documents/
rrstudy.htm.
    \9\ Di, P., Servin, A., Rosenkranz, K., Schwehr, B., Tran, H.,
(2006). Diesel Particulate Matter Exposure Assessment Study for the
Ports of Los Angeles and Long Beach. Sacramento, CA: California EPA,
California Air Resources Board (CARB). Retrieved March 19, 2009 from
http://www.arb.ca.gov/regact/marine2005/portstudy0406.pdf.
---------------------------------------------------------------------------

    EPA recently updated its initial screening-level analysis \10\ of
selected marine port areas to better understand the populations that
are exposed to diesel particulate matter emissions from

[[Page 44448]]

these facilities.11 12 13 14 This screening-level analysis
focused on a representative selection of national marine ports.\15\ Of
the 45 marine ports selected, the results indicate that at least 18
million people, including a disproportionate number of low-income
households, African-Americans, and Hispanics, live in the vicinity of
these facilities and are being exposed to ambient diesel PM levels that
are 2.0 &mu; g/m\3\ and 0.2 &mu; g/m\3\ above levels found in areas
further from these facilities. Considering only ocean-going marine
engine diesel PM emissions, the results indicate that 6.5 million
people are exposed to ambient diesel particulate matter (DPM) levels
that are 2.0 &mu;g/m \3\ and 0.2 &mu; g/m\3\ above levels found in
areas further from these facilities. Because those populations exposed
to diesel PM emissions from marine ports are more likely to be low-
income and minority residents, these populations would benefit from the
controls being proposed in this action. The detailed findings of this
study are available in the public docket for this rulemaking.
---------------------------------------------------------------------------

    \10\ This type of screening-level analysis is an inexact tool
and not appropriate for regulatory decision-making; it is useful in
beginning to understand potential impacts and for illustrative
purposes. Additionally, the emissions inventories used as inputs for
the analyses are not official estimates and likely underestimate
overall emissions because they are not inclusive of all emission
sources at the individual ports in the sample.
    \11\ ICF International. September 28, 2007. Estimation of diesel
particulate matter concentration isopleths for marine harbor areas
and rail yards. Memorandum to EPA under Work Assignment Number 0-3,
Contract Number EP-C-06-094. This memo is available in Docket EPA-
HQ-OAR-2007-0121.
    \12\ ICF International. September 28, 2007. Estimation of diesel
particulate matter population exposure near selected harbor areas
and rail yards. Memorandum to EPA under Work Assignment Number 0-3,
Contract Number EP-C-06-094. This memo is available in Docket EPA-
HQ-OAR-2007-0121.
    \13\ ICF International, December 10, 2008. Estimation of diesel
particulate matter population exposure near selected harbor areas
with revised harbor emissions. Memorandum to EPA under Work
Assignment Number 2-9. Contract Number EP-C-06-094. This memo is
available in Docket EPA-HQ-OAR-2007-0121.
    \14\ ICF International. December 1, 2008. Estimation of diesel
particulate matter concentration isopleths near selected harbor
areas with revised emissions. Memorandum to EPA under Work
Assignment Number 1-9. Contract Number EP-C-06-094. This memo is
available in Docket EPA-HQ-OAR-2007-0121.
    \15\ The Agency selected a representative sample from the top
150 U.S. ports including coastal and Great Lake ports.
---------------------------------------------------------------------------

    Even outside port areas, millions of Americans continue to live in
areas that do not meet existing air quality standards today. With
regard to PM_2.5 nonattainment, in 2005 EPA designated 39
nonattainment areas for the 1997 PM_2.5 NAAQS (70 FR 943,
January 5, 2005). These areas are composed of 208 full or partial
counties with a total population exceeding 88 million. The 1997
PM_2.5 NAAQS was recently revised and the 2006
PM_2.5 NAAQS became effective on December 18, 2006. As of
December 22, 2008, there are 58 2006 PM_2.5 nonattainment
areas composed of 211 full or partial counties. These numbers do not
include individuals living in areas that may fail to maintain or
achieve the PM_2.5 NAAQS in the future. Currently, ozone
concentrations exceeding the 8-hour ozone NAAQS occur over wide
geographic areas, including most of the nation's major population
centers. As of December 2008, there are approximately 132 million
people living in 57 areas (293 full or partial counties) designated as
not in attainment with the 8-hour ozone NAAQS. These numbers do not
include people living in areas where there is a potential that the area
may fail to maintain or achieve the 8-hour ozone NAAQS.
    In addition to public health impacts, there are serious public
welfare and environmental impacts associated with PM_2.5 and
ozone emissions. Specifically, NO_X and SO_X
emissions from diesel engines contribute to the acidification,
nitrification, and eutrophication of water bodies. NO_X,
SO_X and direct emissions of PM_2.5 can contribute
to the substantial impairment of visibility in many parts of the U.S.
where people live, work, and recreate, including national parks,
wilderness areas, and mandatory class I Federal areas.\16\ The
deposition of airborne particles can also reduce the aesthetic appeal
of buildings and culturally important articles through soiling, and can
contribute directly (or in conjunction with other pollutants) to
structural damage by means of corrosion or erosion. Finally, ozone
causes damage to vegetation which leads to crop and forestry economic
losses, as well as harm to national parks, wilderness areas, and other
natural systems.
---------------------------------------------------------------------------

    \16\ These areas are defined in section 162 of the Act as those
national parks exceeding 6,000 acres, wilderness areas and memorial
parks exceeding 5,000 acres, and all international parks which were
in existence on August 7, 1977. Section 169 of the Clean Air Act
provides additional authority to address existing visibility
impairment and prevent future visibility impairment in the 156
national parks, forests and wilderness areas categorized as
mandatory class I Federal areas.
---------------------------------------------------------------------------

    While EPA has already adopted many emission control programs that
are expected to reduce ambient PM_2.5 and ozone levels,
including the Nonroad Spark Ignition Engine rule (73 FR 59034, Oct. 8,
2008), the Locomotive and Marine Diesel Engine Rule (73 FR 25098, May
6, 2008), the Clean Air Interstate Rule (CAIR) (70 FR 25162, May 12,
2005) and the Clean Air Nonroad Diesel Rule (69 FR 38957, June 29,
2004), the Heavy Duty Engine and Vehicle Standards and Highway Diesel
Fuel Sulfur Control Requirements (66 FR 5002, Jan. 18, 2001), and the
Tier 2 Vehicle and Gasoline Sulfur Program (65 FR 6698, Feb. 10, 2000),
the additional PM_2.5, SO_X and NO_X
emission reductions resulting from the coordinated approach described
in this action would assist states in attaining and maintaining the
PM_2.5 and ozone NAAQS near term and in the decades to come.
    Air quality modeling conducted by EPA projects that in 2020 at
least 13 counties with about 30 million people may violate the 1997
standards for PM_2.5 and 50 counties with about 50 million
people may violate the 2008 standards for ozone. These numbers likely
underestimate the impacted population since they do not include the
people who live in areas which do not meet the 2006 PM_2.5
NAAQS. In addition, these numbers do not include the additional 13
million people in 12 counties who live in areas that have air quality
measurements within 10 percent of the 1997 PM_2.5 NAAQS and
the additional 80 million people in 135 counties who live in areas that
have air quality measurements within 10% of the 2008 ozone NAAQS. The
emission reductions resulting from this coordinated strategy would
assist these and other states to both attain and maintain the
PM_2.5 and ozone NAAQS.
    State and local governments are working to protect the health of
their citizens and comply with requirements of the Clean Air Act. As
part of this effort, they recognize the need to secure additional major
reductions in diesel PM_2.5, SO_X and
NO_X emissions by undertaking numerous state level actions,
while also seeking Agency action, including the setting of the CAA
Category 3 engine standards being proposed in this NPRM and the U.S.
proposal to IMO to amend Annex VI to designate U.S. coastal areas as an
ECA, and related CAA certification and fuel provisions to complement
that ECA proposal. EPA's coordinated strategy to reduce OGV emissions
through engine emission controls and fuel sulfur limits would play a
critical part in state efforts to attain and maintain the NAAQS through
the next two decades.
    In addition to regulatory programs, the Agency has a number of
innovative programs that partner government, industry, and local
communities together to help address challenging air quality problems.
Under the National Clean Diesel Campaign, EPA promotes a variety of
emission reduction strategies such as retrofitting, repairing, replacing
and repowering engines, reducing idling and switching to cleaner fuels.
    In 2008, Congress appropriated funding for the Diesel Emissions

[[Page 44449]]

Reduction Program (DERA) under the Energy Policy Act of 2005 (EPAct
2005) to reduce emissions from heavy-duty diesel engines in the
existing fleet. The EPAct 2005 directs EPA to break the funding into
two different components: A National competition and a State allocation
program. The National Program, with 70 percent of the funding, consists
of three separate competitions: (1) The National Clean Diesel Funding
Assistance Program; (2) the National Clean Diesel Emerging Technologies
Program; and (3) the SmartWay Clean Diesel Finance Program. The State
Clean Diesel Grant and Loan Program utilizes the remaining 30 percent
of the funding. In the first year of the program, EPA awarded 119
grants totaling $49.2 million for diesel emissions reduction projects
and programs across the country for cleaner fuels, verified
technologies and certified engine configurations.
    Through $300 million in funding provided to the DERA program under
the American Reinvestment and Recovery Act of 2009, EPA will promote
and preserve jobs while improving public health and achieving
significant reductions in diesel emissions.
    Furthermore, EPA's National Clean Diesel Campaign, through its
Clean Ports USA program, is working with port authorities, terminal
operators, shipping, truck and rail companies to promote cleaner diesel
technologies and strategies today through education, incentives, and
financial assistance for diesel emissions reductions at ports. Part of
these efforts involves clean diesel programs that can further reduce
emissions from the existing fleet of diesel engines. Finally, many of
the companies operating in states and communities suffering from poor
air quality have voluntarily entered into Memoranda of Understanding
(MOUs) designed to ensure that the cleanest technologies are used first
in regions with the most challenging air quality issues.
    In addition to the above innovative programs, we are seeking
comment on a Voluntary Marine Verification Program to address emissions
from existing Category 3 engines. This voluntary program would extend
our existing diesel retrofit verification program to these largest
marine vessels. The concept is described in Section IX.C.3 below.
    Taken together, these voluntary approaches can augment the
coordinated strategy and help states and communities achieve larger
reductions sooner in the areas of our country that need them the most.
The Agency remains committed to furthering these programs and others so
that all of our citizens can breathe clean healthy air.
(2) Advanced Emission Technology Solutions are Available
    Air pollution from marine diesel exhaust is a challenging problem.
However, we believe it can be addressed effectively through the use of
existing technology to reduce engine-out emissions combined with high-
efficiency catalytic aftertreatment technologies. As discussed in
greater detail in Section III.C, the development of these
aftertreatment technologies for highway and nonroad diesel applications
has advanced rapidly in recent years, so that very large emission
reductions in NO_X emissions can be achieved.
    Control of NO_X emissions from Category 3 engines can be
achieved with high-efficiency exhaust emission control technologies.
Such technologies have already been applied to meet our light-duty
passenger car standards and are expected to be used to meet the
stringent NO_X standards included in EPA's heavy-duty highway
diesel, nonroad Tier 4, and locomotive and marine diesel engine
programs. They have been in production for heavy duty trucks in Europe
since 2005, as well as in many stationary source applications
throughout the world. These technologies are discussed further in
Section III.C. While these technologies can be sensitive to sulfur,
their use will be required only in ECAs designated under MARPOL Annex
VI, and they are expected to be able to operate on ECA fuel meeting a
1,000 ppm fuel sulfur. With the lead time available and the assurance
of 1,000 ppm fuel for ocean-going vessels in 2015, as would be required
through ECA designation for U.S. coasts, we are confident the proposed
application of advanced NO_X technology to Category 3 marine
engines will proceed at a reasonable rate of progress and will result
in systems capable of achieving the proposed standards on the proposed
schedule. Use of this lower sulfur fuel will also result in substantial
PM emission reductions, since most of the PM emissions from Category 3
engines is due to the use of high sulfur residual fuel.

C. Statutory Basis for Action

    Authority for the actions proposed in this documents is granted to
the Environmental Protection Agency by sections 114, 203, 205, 206,
207, 208, 211, 213, 216, and 301(a) of the Clean Air Act as amended in
1990 (42 U.S.C. 7414, 7522, 7524, 7525, 7541, 7542, 7545, 7547, 7550
and 7601(a)), and by sections 1901-1915 of the Act to Prevent Pollution
from Ships (33 U.S.C. 1909 et seq.).
(1) Clean Air Act Basis for Action
    EPA is proposing the fuel requirements pursuant to its authority in
section 211 (c) of the Clean Air Act, which allow EPA to regulate fuels
that contribute to air pollution which endangers public health or
welfare (42 U.S.C. 7545(c)). As discussed previously in EPA's Clean Air
Nonroad Diesel rule (69 FR 38958) and below in Section II of this
preamble, the combustion of high sulfur diesel fuel by nonroad,
locomotive, and marine diesel engines contributes to air quality
problems that endanger public health and welfare. Section II also
discusses the significant contribution to these air quality problems by
Category 3 marine vessels. Additional support for the procedural and
enforcement-related aspects of the fuel controls in the proposed rule,
including the record keeping requirements, comes from sections 114(a)
and 301(a) of the CAA (42 U.S.C. Sections 7414 (a) and 7601 (a)).
    EPA is proposing emissions standards for new Category 3 marine
diesel engines pursuant to its authority under section 213(a)(3) of the
Clean Air Act, which directs the Administrator to set standards
regulating emissions of NO_X, volatile organic compounds
(VOCs), or CO for classes or categories of engines, like marine diesel
engines, that contribute to ozone or carbon monoxide concentrations in
more than one nonattainment area. These ``standards shall achieve the
greatest degree of emission reduction achievable through the
application of technology which the Administrator determines will be
available for the engines or vehicles, giving appropriate consideration
to cost, lead time, noise, energy, and safety factors associated with
the application of such technology.''
    EPA is proposing a PM measurement requirement for new Category 3
marine diesel engines pursuant to its authority under section 208,
which requires manufacturers and other persons subject to Title II
requirements to ``provide information the Administrator may reasonably
require * * * to otherwise carry out the provisions of this part* * *''
    EPA is also acting under its authority to implement and enforce the
Category 3 marine diesel emission standards. Section 213(d) provides
that the standards EPA adopts for marine diesel engines ``shall be
subject to Sections 206, 207, 208, and 209'' of the Clean Air Act, with
such modifications that the Administrator deems appropriate to the

[[Page 44450]]

regulations implementing these sections.'' In addition, the marine
standards ``shall be enforced in the same manner as [motor vehicle]
standards prescribed under section 202'' of the Act. Section 213(d)
also grants EPA authority to promulgate or revise regulations as
necessary to determine compliance with and enforce standards adopted
under section 213.
    As required under section 213(a)(3), we believe the evidence
provided in Section III.C of this Preamble and in Chapter 4 of draft
Regulatory Impact Analysis (RIA) indicates that the stringent
NO_X emission standards proposed in this NPRM for newly-built
Category 3 marine diesel engines are feasible and reflect the greatest
degree of emission reduction achievable through the use of technology
that will be available in the model years to which they apply. We have
given appropriate consideration to costs in proposing these standards.
Our review of the costs and cost-effectiveness of these standards
indicate that they will be reasonable and comparable to the cost-
effectiveness of other mobile source emission reduction strategies that
have been required. We have also reviewed and given appropriate
consideration to the energy factors of this rule in terms of fuel
efficiency as well as any safety and noise factors associated with
these proposed standards.
    The information in Section II of this preamble and Chapter 2 of the
draft RIA regarding air quality and public health impacts provides
strong evidence that emissions from Category 3 marine diesel engines
significantly and adversely impact public health or welfare. EPA has
already found in previous rules that emissions from new marine diesel
engines contribute to ozone and CO concentrations in more than one area
which has failed to attain the ozone and carbon monoxide NAAQS (64 FR
73300, December 29, 1999).
    The NO_X and PM emission reductions expected to be
achieved through the coordinated strategy would be important to states'
efforts to attain and maintain the Ozone and the PM_2.5 NAAQS
in the near term and in the decades to come, and would significantly
reduce the risk of adverse effects to human health and welfare.
(2) APPS Basis for Action
    EPA is proposing regulations to implement MARPOL Annex VI pursuant
to its authority in section 1903 of the Act to Prevent Pollution from
Ships (APPS). Section 1903 gives the Administrator the authority to
prescribe any necessary or desired regulations to carry out the
provisions of Regulations 12 through 19 of Annex VI.
    The Act to Prevent Pollution from Ships implements and makes Annex
VI requirements enforceable domestically. However, certain
clarifications are necessary with respect to implementing Regulation 13
and the requirements of the NO_X Technical Code with respect
to issuance of Engine International Air Pollution Prevention (EIAPP)
certificates, approval of alternative compliance methods. Clarification
is also needed with respect to the application of the Annex VI
requirements to certain U.S. and foreign vessels that operate in U.S. waters.

II. Air Quality, Health and Welfare Impacts

    The proposed NO_X limits combined with the ECA
designation for U.S. coasts and related proposed fuel standards are
expected to significantly reduce emissions of NO_X, PM, and
SO_X from ocean-going vessels. Emissions of these compounds
contribute to nonattainment of the NAAQS for PM and ozone. In addition
to contributing to PM nonattainment, these engines are emitting diesel
particulate matter, which is associated with a host of adverse health
effects, including cancer. In addition to their health effects,
emissions from these engines also contribute to welfare and
environmental effects including deposition, visibility impairment and
harm to ecosystems from ozone.
    This section summarizes the general health and welfare effects of
these emissions. Interested readers are encouraged to refer to the
draft RIA for more in-depth discussions.

A. Public Health Impacts

(1) Particulate Matter
(a) Background
    Particulate matter is a generic term for a broad class of
chemically and physically diverse substances. It can be principally
characterized as discrete particles that exist in the condensed (liquid
or solid) phase spanning several orders of magnitude in size. Since
1987, EPA has delineated that subset of inhalable particles small
enough to penetrate to the thoracic region (including the
tracheobronchial and alveolar regions) of the respiratory tract
(referred to as thoracic particles). Current NAAQS use PM_2.5
as the indicator for fine particles (with PM_2.5 referring to
particles with a nominal mean aerodynamic diameter less than or equal
to 2.5 [micro]m), and use PM₁₀ as the indicator for purposes
of regulating the coarse fraction of PM₁₀ (referred to as
thoracic coarse particles or coarse-fraction particles; generally
including particles with a nominal mean aerodynamic diameter greater
than 2.5 [micro]m and less than or equal to 10 [micro]m, or
PM_10-2.5). Ultrafine particles are a subset of fine particles,
generally less than 100 nanometers (0.1 &mu;m) in aerodynamic diameter.
    Fine particles are produced primarily by combustion processes and
by transformations of gaseous emissions (e.g., SO_X,
NO_X and VOC) in the atmosphere. The chemical and physical
properties of PM_2.5 may vary greatly with time, region,
meteorology, and source category. Thus, PM_2.5 may include a
complex mixture of different pollutants including sulfates, nitrates,
organic compounds, elemental carbon and metal compounds. These
particles can remain in the atmosphere for days to weeks and travel
hundreds to thousands of kilometers.\17\
---------------------------------------------------------------------------

    \17\ U.S. EPA. (2005). Review of the National Ambient Air
Quality Standard for Particulate Matter: Policy Assessment of
Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-
05-005a. Retrieved March 19, 2009 from http://www.epa.gov/ttn/naaqs/
standards/pm/data/pmstaffpaper_20051221.pdf.
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(b) Health Effects of PM
    Scientific studies show ambient PM is associated with a series of
adverse health effects. These health effects are discussed in detail in
EPA's 2004 Particulate Matter Air Quality Criteria Document (PM AQCD)
and the 2005 PM Staff Paper.\18\ Further discussion\19\ of health effects
associated\20\ with PM can also be found in the draft RIA for this rule.
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    \18\ U.S. EPA (2004). Air Quality Criteria for Particulate
Matter. Volume I EPA600/P-99/002aF and Volume II EPA600/P-99/002bF.
Retrieved on March 19, 2009 from Docket EPA-HQ-OAR-2003-0190 at
http://www.regulations.gov/.
    \19\ U.S. EPA. (2005). Review of the National Ambient Air
Quality Standard for Particulate Matter: Policy Assessment of
Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-
05-005a. Retrieved March 19, 2009 from http://www.epa.gov/ttn/naaqs/
standards/pm/data/pmstaffpaper_20051221.pdf.
    \20\ The PM NAAQS is currently under review and the EPA is
considering all available science on PM health effects, including
information which has been published since 2004, in the development
of the upcoming PM Integrated Science Assessment Document (ISA). A
first draft of the PM ISA was completed in December 2008 and was
submitted for review by the Clean Air Scientific Advisory Committee
(CASAC) of EPA's Science Advisory Board. Comments from the general
public have also been requested. For more information, see 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=201805.
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    Health effects associated with short-term exposures (hours to days)
to ambient PM include premature mortality, aggravation of
cardiovascular and lung disease (as indicated by increased hospital
admissions and

[[Page 44451]]

emergency department visits), increased respiratory symptoms including
cough and difficulty breathing, decrements in lung function, altered
heart rate rhythm, and other more subtle changes in blood markers
related to cardiovascular health.\21\ Long-term exposure to
PM_2.5 and sulfates has also been associated with mortality
from cardiopulmonary disease and lung cancer, and effects on the
respiratory system such as reduced lung function growth or development
of respiratory disease. A new analysis shows an association between
long-term PM_2.5 exposure and a measure of atherosclerosis
development.22, 23
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    \21\ U.S. EPA. (2006). National Ambient Air Quality Standards
for Particulate Matter; Proposed Rule. 71 FR 2620, January 17, 2006.
    \22\ K[uuml]nzli, N., Jerrett, M., Mack, W.J., et al. (2004).
Ambient air pollution and atherosclerosis in Los Angeles. Environ
Health Perspect.,113, 201-206
    \23\ This study is included in the 2006 Provisional Assessment
of Recent Studies on Health Effects of Particulate Matter Exposure.
The provisional assessment did not and could not (given a very short
timeframe) undergo the extensive critical review by CASAC and the
public, as did the PM AQCD. The provisional assessment found that
the ``new'' studies expand the scientific information and provide
important insights on the relationship between PM exposure and
health effects of PM. The provisional assessment also found that
``new'' studies generally strengthen the evidence that acute and
chronic exposure to fine particles and acute exposure to thoracic
coarse particles are associated with health effects. Further, the
provisional science assessment found that the results reported in
the studies did not dramatically diverge from previous findings, and
taken in context with the findings of the AQCD, the new information
and findings did not materially change any of the broad scientific
conclusions regarding the health effects of PM exposure made in the
AQCD. However, it is important to note that this assessment was
limited to screening, surveying, and preparing a provisional
assessment of these studies. For reasons outlined in Section I.C of
the preamble for the final PM NAAQS rulemaking in 2006 (see 71 FR
61148-49, October 17, 2006), EPA based its NAAQS decision on the
science presented in the 2004 AQCD.
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    Studies examining populations exposed over the long term (one or
more years) to different levels of air pollution, including the Harvard
Six Cities Study and the American Cancer Society Study, show
associations between long-term exposure to ambient PM_2.5 and
both total and cardiopulmonary premature mortality.\24\ In
addition\25\, an extension\26\ of the American Cancer Society Study
shows an association between PM_2.5 and sulfate
concentrations and lung cancer mortality.\27\
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    \24\ Dockery, D.W., Pope, C.A. III, Xu, X, et al. (1993). An
association between air pollution and mortality in six U.S. cities.
N Engl J Med, 329, 1753-1759. Retrieved on March 19, 2009 from
http://content.nejm.org/cgi/content/full/329/24/1753. 
    \25\ Pope, C.A., III, Thun, M.J., Namboodiri, M.M., Dockery,
D.W., Evans, J.S., Speizer, F.E., and Heath, C.W., Jr. (1995).
Particulate air pollution as a predictor of mortality in a
prospective study of U.S. adults. Am. J. Respir. Crit. Care Med,
151, 669-674.
    \26\ Krewski, D., Burnett, R.T., Goldberg, M.S., et al. (2000).
Reanalysis of the Harvard Six Cities study and the American Cancer
Society study of particulate air pollution and mortality. A special
report of the Institute's Particle Epidemiology Reanalysis Project.
Cambridge, MA: Health Effects Institute. Retrieved on March 19, 2009
from http://epa.gov/ncer/science/pm/hei/Rean-ExecSumm.pdf.
    \27\ Pope, C. A., III, Burnett, R.T., Thun, M. J., Calle, E.E.,
Krewski, D., Ito, K., Thurston, G.D., (2002). Lung cancer,
cardiopulmonary mortality, and long-term exposure to fine
particulate air pollution. J. Am. Med. Assoc., 287, 1132-1141.
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(c) Health Effects of Diesel Particulate Matter
    Marine diesel engines emit diesel exhaust (DE), a complex mixture
composed of carbon dioxide, oxygen, nitrogen, water vapor, carbon
monoxide, nitrogen compounds, sulfur compounds and numerous low-
molecular-weight hydrocarbons. A number of these gaseous hydrocarbon
components are individually known to be toxic, including aldehydes,
benzene and 1,3-butadiene. The diesel particulate matter (DPM) present
in DE consists of fine particles (< 2.5 [micro]m), including a subgroup
with a large number of ultrafine particles (< 0.1 [micro]m). These
particles have a large surface area which makes them an excellent
medium for adsorbing organics and their small size makes them highly
respirable. Many of the organic compounds present in the gases and on
the particles, such as polycyclic organic matter (POM), are
individually known to have mutagenic and carcinogenic properties.
Diesel exhaust varies significantly in chemical composition and
particle sizes between different engine types (heavy-duty, light-duty),
engine operating conditions (idle, accelerate, decelerate), and fuel
formulations (high/low sulfur fuel). Also, there are emissions
differences between on-road and nonroad engines because the nonroad
engines are generally of older technology. This is especially true for
marine diesel engines.\28\
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    \28\ U.S. EPA (2002). Health Assessment Document for Diesel
Engine Exhaust. EPA/600/8-90/057F Office of Research and
Development, Washington DC. Retrieved on March 17, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060. pp. 1-1 1-2.
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    After being emitted in the engine exhaust, diesel exhaust undergoes
dilution as well as chemical and physical changes in the atmosphere.
The lifetime for some of the compounds present in diesel exhaust ranges
from hours to days.\29\
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    \29\ U.S. EPA (2002). Health Assessment Document for Diesel
Engine Exhaust. EPA/600/8-90/057F Office of Research and
Development, Washington DC. Retrieved on March 17, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060.
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(i) Diesel Exhaust: Potential Cancer Effects
    In EPA's 2002 Diesel Health Assessment Document (Diesel HAD),\30\
exposure to diesel exhaust was classified as likely to be carcinogenic
to humans by inhalation from environmental exposures, in accordance
with the revised draft 1996/1999 EPA cancer guidelines. A number of
other agencies (National Institute for Occupational Safety and Health,
the International Agency for Research on Cancer, the World Health
Organization, California EPA, and the U.S. Department of Health and
Human Services) have made similar classifications. However, EPA also
concluded in the Diesel HAD that it is not possible currently to
calculate a cancer unit risk for diesel exhaust due to a variety of
factors that limit the current studies, such as limited quantitative
exposure histories in occupational groups investigated for lung cancer.
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    \30\ U.S. EPA (2002). Health Assessment Document for Diesel
Engine Exhaust. EPA/600/8-90/057F Office of Research and
Development, Washington DC. Retrieved on March 17, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060. pp. 1-1 1-2.
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    For the Diesel HAD, EPA reviewed 22 epidemiologic studies on the
subject of the carcinogenicity of workers exposed to diesel exhaust in
various occupations, finding increased lung cancer risk, although not
always statistically significant, in 8 out of 10 cohort studies and 10
out of 12 case-control studies within several industries. Relative risk
for lung cancer associated with exposure ranged from 1.2 to 1.5,
although a few studies show relative risks as high as 2.6.
Additionally, the Diesel HAD also relied on two independent meta-
analyses, which examined 23 and 30 occupational studies respectively,
which found statistically significant increases in smoking-adjusted
relative lung cancer risk associated with exposure to diesel exhaust of
1.33 to 1.47. These meta-analyses demonstrate the effect of pooling
many studies and in this case show the positive relationship between
diesel exhaust exposure and lung cancer across a variety of diesel
exhaust-exposed occupations.31,32
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    \31\ Bhatia, R., Lopipero, P., Smith, A. (1998). Diesel exposure
and lung cancer. Epidemiology, 9(1), 84-91.
    \32\ Lipsett, M., Campleman, S. (1999). Occupational exposure to
diesel exhaust and lung cancer: a meta-analysis. Am J Public Health,
80(7), 1009-1017.
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    In the absence of a cancer unit risk, the Diesel HAD sought to
provide additional insight into the significance of the diesel exhaust-
cancer hazard by

[[Page 44452]]

estimating possible ranges of risk that might be present in the
population. An exploratory analysis was used to characterize a possible
risk range by comparing a typical environmental exposure level for
highway diesel sources to a selected range of occupational exposure
levels. The occupationally observed risks were then proportionally
scaled according to the exposure ratios to obtain an estimate of the
possible environmental risk. A number of calculations are needed to
accomplish this, and these can be seen in the EPA Diesel HAD. The
outcome was that environmental risks from diesel exhaust exposure could
range from a low of 10-4 to 10-5 to as high as
10-3, reflecting the range of occupational exposures that
could be associated with the relative and absolute risk levels observed
in the occupational studies. Because of uncertainties, the analysis
acknowledged that the risks could be lower than 10-4 or
10-5, and a zero risk from diesel exhaust exposure was not ruled out.
(ii) Diesel Exhaust: Other Health Effects
    Noncancer health effects of acute and chronic exposure to diesel
exhaust emissions are also of concern to the EPA. EPA derived a diesel
exhaust reference concentration (RfC) from consideration of four well-
conducted chronic rat inhalation studies showing adverse pulmonary
effects.\33,34,35,36\ The RfC is 5 &mu;g/m \3\ for diesel exhaust as
measured by DPM. This RfC does not consider allergenic effects such as
those associated with asthma or immunologic effects. There is growing
evidence, discussed in the Diesel HAD, that exposure to diesel exhaust
can exacerbate these effects, but the exposure-response data are
presently lacking to derive an RfC. The EPA Diesel HAD states, ``With
DPM [diesel particulate matter] being a ubiquitous component of ambient
PM, there is an uncertainty about the adequacy of the existing DE
[diesel exhaust] noncancer database to identify all of the pertinent
DE-caused noncancer health hazards.'' (p. 9-19). The Diesel HAD
concludes ``that acute exposure to DE [diesel exhaust] has been
associated with irritation of the eye, nose, and throat, respiratory
symptoms (cough and phlegm), and neurophysiological symptoms such as
headache, lightheadedness, nausea, vomiting, and numbness or tingling
of the extremities.''\37\
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    \33\ Ishinishi, N. Kuwabara, N. Takaki, Y., et al. (1988) Long-
term inhalation experiments on diesel exhaust. In: Diesel exhaust
and health risks. Results of the HERP studies. Ibaraki, Japan:
Research Committee for HERP Studies; pp. 11-84.
    \34\ Henrich, U., Fuhst, R., Rittinghausen, S., et al. (1995).
Chronic inhalation exposure of Wistar rats and two different strains
of mice to diesel engine exhaust, carbon black, and titanium
dioxide. Inhal Toxicol, 7, 553-556.
    \35\ Mauderly, J.L., Jones, R.K., Griffith, W.C., et al. (1987).
Diesel exhaust is a pulmonary carcinogen in rats exposted
chronically by inhalation. Fundam. Appl. Toxicol., 9, 208-221.
    \36\ Nikula, K.J., Snipes, M.B., Barr, E.B., et al. (1995).
Comparative pulmonary toxicities and carcinogenicities of
chronically inhaled diesel exhaust and carbon black in F344 rats.
Fundam. Appl. Toxicol, 25, 80-94.
    \37\ U.S. EPA (2002). Health Assessment Document for Diesel
Engine Exhaust. EPA/600/8-90/057F Office of Research and
Development, Washington DC. Retrieved on March 17, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060. p. 9-9.
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(iii) Ambient PM_2.5 Levels and Exposure to Diesel Exhaust PM
    The Diesel HAD also briefly summarizes health effects associated
with ambient PM and discusses the EPA's annual PM_2.5 NAAQS
of 15 &mu;g/m \3\. There is a much more extensive body of human data
showing a wide spectrum of adverse health effects associated with
exposure to ambient PM, of which diesel exhaust is an important
component. The PM_2.5 NAAQS is designed to provide protection
from the noncancer and premature mortality effects of PM_2.5
as a whole.
(iv) Diesel Exhaust PM Exposures
    Exposure of people to diesel exhaust depends on their various
activities, the time spent in those activities, the locations where
these activities occur, and the levels of diesel exhaust pollutants in
those locations. The major difference between ambient levels of diesel
particulate and exposure levels for diesel particulate is that exposure
accounts for a person moving from location to location, proximity to
the emission source, and whether the exposure occurs in an enclosed
environment.
Occupational Exposures
    Occupational exposures to diesel exhaust from mobile sources,
including marine diesel engines, can be several orders of magnitude
greater than typical exposures in the non-occupationally exposed
population.
    Over the years, diesel particulate exposures have been measured for
a number of occupational groups. A wide range of exposures have been
reported, from 2 &mu;g/m \3\ to 1,280 &mu;g/m \3\, for a variety of
occupations. As discussed in the Diesel HAD, the National Institute of
Occupational Safety and Health (NIOSH) has estimated a total of
1,400,000 workers are occupationally exposed to diesel exhaust from on-
road and nonroad vehicles including marine diesel engines.
Elevated Concentrations and Ambient Exposures in Mobile Source-Impacted
Areas
    Regions immediately downwind of marine ports may experience
elevated ambient concentrations of directly-emitted PM_2.5
from diesel engines. Due to the unique nature of marine ports, emissions
from a large number of diesel engines are concentrated in a small area.
    A 2006 study from the California Air Resources Board (CARB)
evaluated air quality impacts of diesel engine emissions within the
Ports of Long Beach and Los Angeles in California, one of the largest
ports in the U.S.\38\ The port study employed the ISCST3 dispersion
model. With local meteorological data used in the modeling, annual
average concentrations were substantially elevated over an area
exceeding 200,000 acres. Because the ports are located near heavily-
populated areas, the modeling indicated that over 700,000 people lived
in areas with at least 0.3 &mu;g/m \3\ of port-related diesel PM in
ambient air, about 360,000 people lived in areas with at least 0.6
&mu;g/m \3\ of diesel PM, and about 50,000 people lived in areas with
at least 1.5 &mu;g/m \3\, of ambient diesel PM directly from the port.
This study highlights the substantial contribution ports can make to
elevated ambient concentrations in populated areas.
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    \38\ Di, P., Servin, A., Rosenkranz, K., Schwehr, B., Tran, H.,
(2006). Diesel Particulate Matter Exposure Assessment Study for the
Ports of Los Angeles and Long Beach. Sacramento, CA: California EPA,
California Air Resources Board (CARB). Retrieved March 19, 2009 from
http://www.arb.ca.gov/regact/marine2005/portstudy0406.pdf.
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    EPA recently updated its initial screening-level analysis of a
representative selection of national marine port areas to better
understand the populations that are exposed to DPM emissions from these
facilities.39, 40, 41, 42 As part of this study,

[[Page 44453]]

a computer geographic information system (GIS) was used to identify the
locations and property boundaries of 45 marine ports.\43\ Census
information was used to estimate the size and demographic
characteristics of the population living in the vicinity of the ports.
The results indicate that at least 18 million people, including a
disproportionate number of low-income households, African-Americans,
and Hispanics, live in the vicinity of these facilities and are being
exposed to ambient DPM levels that are 2.0 &mu;g/m \3\ and 0.2 &mu;g/m
\3\ above levels found in areas further from these facilities. These
populations will benefit from the combination of the proposed CAA
standards along with ECA designations through MARPOL Annex VI. This
study is discussed in greater detail in Chapter 2 of the draft RIA and
detailed findings of this study are available in the public docket for
this rulemaking.
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    \39\ ICF International. September 28, 2007. Estimation of diesel
particulate matter concentration isopleths for marine harbor areas
and rail yards. Memorandum to EPA under Work Assignment Number 0-3,
Contract Number EP-C-06-094. This memo is available in Docket EPA-
HQ-OAR-2007-0121.
    \40\ ICF International. September 28, 2007. Estimation of diesel
particulate matter population exposure near selected harbor areas
and rail yards. Memorandum to EPA under Work Assignment Number 0-3,
Contract Number EP-C-06-094. This memo is available in Docket EPA-
HQ-OAR-2007-0121.
    \41\ ICF International, December 10, 2008. Estimation of diesel
particulate matter population exposure near selected harbor areas
with revised harbor emissions. Memorandum to EPA under Work
Assignment Number 2-9. Contract Number EP-C-06-094. This memo is
available in Docket EPA-HQ-OAR-2007-0121.
    \42\ ICF International. December 1, 2008. Estimation of diesel
particulate matter concentration isopleths near selected harbor
areas with revised emissions. Memorandum to EPA under Work
Assignment Number 1-9. Contract Number EP-C-06-094. This memo is
available in Docket EPA-HQ-OAR-2007-0121.
    \43\ The Agency selected a representative sample from the top
150 U.S. ports including coastal, inland, and Great Lake ports.
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(2) Ozone
(a) Background
    Ground-level ozone pollution is typically formed by the reaction of
VOC and NO_X in the lower atmosphere in the presence of heat
and sunlight. These pollutants, often referred to as ozone precursors,
are emitted by many types of pollution sources, such as highway and
nonroad motor vehicles and engines, power plants, chemical plants,
refineries, makers of consumer and commercial products, industrial
facilities, and smaller area sources.
    The science of ozone formation, transport, and accumulation is
complex.\44\ Ground-level ozone is produced and destroyed in a cyclical
set of chemical reactions, many of which are sensitive to temperature
and sunlight. When ambient temperatures and sunlight levels remain high
for several days and the air is relatively stagnant, ozone and its
precursors can build up and result in more ozone than typically occurs
on a single high-temperature day. Ozone can be transported hundreds of
miles downwind from precursor emissions, resulting in elevated ozone
levels even in areas with low local VOC or NO_X emissions.
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    \44\ U.S. EPA. (2006). Air Quality Criteria for Ozone and
Related Photochemical Oxidants (Final). EPA/600/R-05/004aF-cF.
Washington, DC: U.S. EPA. Retrieved on March 19, 2009 from Docket
EPA-HQ-OAR-2003-0190 at http://www.regulations.gov/.
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(b) Health Effects of Ozone
    The health and welfare effects of ozone are well documented and are
assessed in EPA's 2006 Air Quality Criteria Document (ozone AQCD) and
2007 Staff Paper.45,46 Ozone can irritate the respiratory
system, causing coughing, throat irritation, and/or uncomfortable
sensation in the chest. Ozone can reduce lung function and make it more
difficult to breathe deeply; breathing may also become more rapid and
shallow than normal, thereby limiting a person's activity. Ozone can
also aggravate asthma, leading to more asthma attacks that require
medical attention and/or the use of additional medication. In addition,
there is suggestive evidence of a contribution of ozone to
cardiovascular-related morbidity and highly suggestive evidence that
short-term ozone exposure directly or indirectly contributes to non-
accidental and cardiopulmonary-related mortality, but additional
research is needed to clarify the underlying mechanisms causing these
effects. In a recent report on the estimation of ozone-related
premature mortality published by the National Research Council (NRC), a
panel of experts and reviewers concluded that short-term exposure to
ambient ozone is likely to contribute to premature deaths and that
ozone-related mortality should be included in estimates of the health
benefits of reducing ozone exposure.\47\ Animal toxicological evidence
indicates that with repeated exposure, ozone can inflame and damage the
lining of the lungs, which may lead to permanent changes in lung tissue
and irreversible reductions in lung function. People who are more
susceptible to effects associated with exposure to ozone can include
children, the elderly, and individuals with respiratory disease such as
asthma. Those with greater exposures to ozone, for instance due to time
spent outdoors (e.g., children and outdoor workers), are of particular concern.
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    \45\ U.S. EPA. (2006). Air Quality Criteria for Ozone and
Related Photochemical Oxidants (Final). EPA/600/R-05/004aF-cF.
Washington, DC: U.S. EPA. Retrieved on March 19, 2009 from Docket
EPA-HQ-OAR-2003-0190 at http://www.regulations.gov/.
    \46\ U.S. EPA (2007). Review of the National Ambient Air Quality
Standards for Ozone: Policy Assessment of Scientific and Technical
Information, OAQPS Staff Paper. EPA-452/R-07-003. Washsington, DC,
U.S. EPA. Retrieved on March 19, 2009 from Docket EPA-HQ-OAR-2003-
0190 at http://www.regulations.gov/.
    \47\ National Research Council (NRC), 2008. Estimating Mortality
Risk Reduction and Economic Benefits from Controlling Ozone Air
Pollution. The National Academies Press: Washington, DC.
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    The 2006 ozone AQCD also examined relevant new scientific
information that has emerged in the past decade, including the impact
of ozone exposure on such health effects as changes in lung structure
and biochemistry, inflammation of the lungs, exacerbation and causation
of asthma, respiratory illness-related school absence, hospital
admissions and premature mortality. Animal toxicological studies have
suggested potential interactions between ozone and PM with increased
responses observed to mixtures of the two pollutants compared to either
ozone or PM alone. The respiratory morbidity observed in animal studies
along with the evidence from epidemiologic studies supports a causal
relationship between acute ambient ozone exposures and increased
respiratory-related emergency room visits and hospitalizations in the
warm season. In addition, there is suggestive evidence of a
contribution of ozone to cardiovascular-related morbidity and non-
accidental and cardiopulmonary mortality.
(3) NO_X and SO_X
(a) Background
    Nitrogen dioxide (NO₂) is a member of the NO_X
family of gases. Most NO₂ is formed in the air through the
oxidation of nitric oxide (NO) emitted when fuel is burned at a high
temperature. SO₂, a member of the sulfur oxide
(SO_X) family of gases, is formed from burning fuels
containing sulfur (e.g., coal or oil derived), extracting gasoline from
oil, or extracting metals from ore.
    SO₂ and NO₂ can dissolve in water vapor and
further oxidize to form sulfuric and nitric acid which react with
ammonia to form sulfates and nitrates, both of which are important
components of ambient PM. The health effects of ambient PM are
discussed in Section II.A.1 of this preamble. NO_X along with
non-methane hydrocarbon (NMHC) are the two major precursors of ozone.
The health effects of ozone are covered in Section II.A.2.
(b) Health Effects of NO_X
    Information on the health effects of NO₂ can be found in
the U.S. Environmental Protection Agency Integrated Science Assessment
(ISA) for Nitrogen Oxides.\48\ The U.S. EPA has

[[Page 44454]]

concluded that the findings of epidemiologic, controlled human
exposure, and animal toxicological studies provide evidence that is
sufficient to infer a likely causal relationship between respiratory
effects and short-term NO₂ exposure. The ISA concludes that
the strongest evidence for such a relationship comes from epidemiologic
studies of respiratory effects including symptoms, emergency department
visits, and hospital admissions. The ISA also draws two broad
conclusions regarding airway responsiveness following NO₂
exposure. First, the ISA concludes that NO₂ exposure may
enhance the sensitivity to allergen-induced decrements in lung function
and increase the allergen-induced airway inflammatory response at
exposures as low as 0.26 ppm NO₂ for 30 minutes. Second,
exposure to NO₂ has been found to enhance the inherent
responsiveness of the airway to subsequent nonspecific challenges in
controlled human exposure studies of asthmatic subjects. Enhanced
airway responsiveness could have important clinical implications for
asthmatics since transient increases in airway responsiveness following
NO₂ exposure have the potential to increase symptoms and
worsen asthma control. Together, the epidemiologic and experimental
data sets form a plausible, consistent, and coherent description of a
relationship between NO₂ exposures and an array of adverse
health effects that range from the onset of respiratory symptoms to
hospital admission.
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    \48\ U.S. EPA (2008). Integrated Science Assessment for Oxides
of Nitrogen--Health Criteria (Final Report). EPA/600/R-08/071.
Washington, DC: U.S.EPA. Retrieved on March 19, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=194645.
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    Although the weight of evidence supporting a causal relationship is
somewhat less certain than that associated with respiratory morbidity,
NO₂ has also been linked to other health endpoints. These
include all-cause (nonaccidental) mortality, hospital admissions or
emergency department visits for cardiovascular disease, and decrements
in lung function growth associated with chronic exposure.
(c) Health Effects of SO_X
    Information on the health effects of SO₂ can be found in
the U.S. Environmental Protection Agency Integrated Science Assessment
for Sulfur Oxides.\49\ SO₂ has long been known to cause
adverse respiratory health effects, particularly among individuals with
asthma. Other potentially sensitive groups include children and the
elderly. During periods of elevated ventilation, asthmatics may
experience symptomatic bronchoconstriction within minutes of exposure.
Following an extensive evaluation of health evidence from epidemiologic
and laboratory studies, the EPA has concluded that there is a causal
relationship between respiratory health effects and short-term exposure
to SO₂. Separately, based on an evaluation of the
epidemiologic evidence of associations between short-term exposure to
SO₂ and mortality, the EPA has concluded that the overall
evidence is suggestive of a causal relationship between short-term
exposure to SO₂ and mortality.
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    \49\ U.S. EPA. (2008). Integrated Science Assessment (ISA) for
Sulfur Oxides--Health Criteria (Final Report). EPA/600/R-08/047F.
Washington, DC: U.S. Environmental Protection Agency. Retrieved on
March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=198843
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B. Environmental Impacts

(1) Deposition of Nitrogen and Sulfur
    Emissions of NO_X and SO_X from ships
contribute to atmospheric deposition of nitrogen and sulfur in the U.S.
Atmospheric deposition of nitrogen and sulfur contributes to
acidification, altering biogeochemistry and affecting animal and plant
life in terrestrial and aquatic ecosystems across the U.S. The
sensitivity of terrestrial and aquatic ecosystems to acidification from
nitrogen and sulfur deposition is predominantly governed by geology.
Prolonged exposure to excess nitrogen and sulfur deposition in
sensitive areas acidifies lakes, rivers and soils. Increased acidity in
surface waters creates inhospitable conditions for biota and affects
the abundance and nutritional value of preferred prey species,
threatening biodiversity and ecosystem function. Over time, acidifying
deposition also removes essential nutrients from forest soils,
depleting the capacity of soils to neutralize future acid loadings and
negatively affecting forest sustainability. Major effects include a
decline in sensitive forest tree species, such as red spruce (Picea
rubens) and sugar maple (Acer saccharum), and a loss of biodiversity of
fishes, zooplankton, and macro invertebrates.
    In addition to the role nitrogen deposition plays in acidification,
nitrogen deposition also causes ecosystem nutrient enrichment leading
to eutrophication that alters biogeochemical cycles. Excess nitrogen
also leads to the loss of nitrogen sensitive lichen species as they are
outcompeted by invasive grasses as well as altering the biodiversity of
terrestrial ecosystems, such as grasslands and meadows. Nitrogen
deposition contributes to eutrophication of estuaries and the
associated effects including toxic algal blooms and fish kills. For a
broader explanation of the topics treated here, refer to the
description in Section 2.3.1 of the draft RIA.
    There are a number of important quantified relationships between
nitrogen deposition levels and ecological effects. Certain lichen
species are the most sensitive terrestrial taxa to nitrogen with
species losses occurring at just 3 kg N/ha/yr in the Pacific Northwest,
southern California and Alaska. A United States Forest Service study
conducted in areas within the Tongass Forest in Southeast Alaska found
evidence of sulfur emissions impacting lichen communities.\50\ The
authors concluded that the main source of nitrogen and sulfur found in
lichens from Mt. Roberts (directly north of the City of Juneau in
southeastern Alaska) is likely the burning of fossil fuels by cruise
ships and other vehicles and equipment in Juneau.
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    \50\ Dillman, K., Geiser, L., & Brenner, G. (2007). Air Quality
Bio-Monitoring with Lichens. The Togass National Forest. USDA Forest
Service. Retrieved March 18, 2009 from http://gis.nacse.org/
lichenair/?page=reports. 
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    Lichen are an important food source for caribou. This is causing
concern about the potential role damage to lichens may be having on the
Southern Alaska Peninsula Caribou Herd, which is an important food
source to local subsistence-based cultures. This herd has been
decreasing in size, exhibiting both poor calf survival and low
pregnancy rates, which are signs of dietary stress. Currently, there is
a complete caribou hunting ban, including a ban on subsistence hunting.
    Across the U.S., there are many terrestrial and aquatic ecosystems
that have been identified as particularly sensitive to nitrogen
deposition. The most extreme effects resulting from nitrogen deposition
on aquatic ecosystems are due to nitrogen enrichment which contributes
to ``hypoxic'' zones devoid of life. Three hypoxia zones of special
concern in the U.S. are the zones located in the Gulf of Mexico, the
Chesapeake Bay in the mid-Atlantic region, and Long Island Sound in the
northeast U.S.\51\
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    \51\ U.S. EPA. (2008). Nitrogen Dioxide/Sulfur Dioxide Secondary
NAAQS Review: Integrated Science Assessment (ISA). Washington, DC:
U.S. Environmental Protection Agency. Retrieved on March 18, 2009
from http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=180903
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(2) Deposition of Particulate Matter and Air Toxics
    The combination of the proposed CAA NO_X standards along
with ECA designation through amendment to MARPOL Annex VI would reduce
NO_X, SO_X, and PM_2.5 emissions from ships.

[[Page 44455]]

Ship emissions of PM_2.5 contain small amounts of metals:
nickel, vanadium, cadmium, iron, lead, copper, zinc,
aluminum.52 53 54 Investigations of trace metals near
roadways and industrial facilities indicate that a substantial burden
of heavy metals can accumulate on vegetative surfaces. Copper, zinc,
and nickel are directly toxic to vegetation under field conditions.\55\
While metals typically exhibit low solubility, limiting their
bioavailability and direct toxicity, chemical transformations of metal
compounds occur in the environment, particularly in the presence of
acidic or other oxidizing species. These chemical changes influence the
mobility and toxicity of metals in the environment. Once taken up into
plant tissue, a metal compound can undergo chemical changes, accumulate
and be passed along to herbivores, or can re-enter the soil and further
cycle in the environment.
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    \52\ Agrawal H., Malloy Q.G.J., Welch W.A., Wayne Miller J.,
Cocker III D.R. (2008) In-use gaseous and particulate matter
emissions from a modern ocean going container vessel. Atmospheric
Environment, 42(21), 5504-5510.
    \53\ Miller, W., et al. (2008 June 10). Measuring Emissions from
Ocean Going Vessels. Presentation presented at the Fuel, Engines,
and Control Devices Workshop, San Pedro, California.
    \54\ Isakson J., Persson T.A., E. Selin Lindgren E. (2001)
Identification and assessment of ship emissions and their effects in
the harbour of Gteborg, Sweeden. Atmospheric Environment, 35(21), 3659-3666.
    \55\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Washington, DC: U.S. Environmental Protection Agency.
Retrieved on March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=87903
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    Although there has been no direct evidence of a physiological
association between tree injury and heavy metal exposures, heavy metals
have been implicated because of similarities between metal deposition
patterns and forest decline.56 57 This correlation was
further explored in high elevation forests in the northeast U.S. and
the data strongly imply that metal stress causes tree injury and
contributes to forest decline in the Northeast.\58\ Contamination of
plant leaves by heavy metals can lead to elevated soil levels. Trace
metals absorbed into the plant frequently bind to the leaf tissue, and
then are lost when the leaf drops. As the fallen leaves decompose, the
heavy metals are transferred into the soil.59 60
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    \56\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Washington, DC: U.S. Environmental Protection Agency.
Retrieved on March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=87903
    \57\ Gawel, J. E.; Ahner, B. A.; Friedland, A. J.; Morel, F. M.
M. (1996) Role for heavy metals in forest decline indicated by
phytochelatin measurements. Nature (London), 381, 64-65.
    \58\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Washington, DC: U.S. Environmental Protection Agency.
Retrieved on March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=87903
    \59\ Cotrufo M.F., De Santo A.V., Alfani A., Bartoli G., De
Cristofaro A. (1995) Effects of urban heavy metal pollution on
organic matter decomposition in Quercus ilex L. Woods. Environmental
Pollution, 89(1), 81-87.
    \60\ Niklinska M., Laskowski R., Maryanski M. (1998). Effect of
heavy metals and storage time on two types of forest litter: basal
respiration rate and exchangeable metals. Ecotoxicological
Environmental Safety, 41, 8-18.
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    Ships also emit air toxics, including polycyclic aromatic
hydrocarbons (PAHs), a class of polycyclic organic matter (POM) that
contains compounds which are known or suspected carcinogens. Since the
majority of PAHs are adsorbed onto particles less than 1.0 &mu;m in
diameter, long range transport is possible. Particles of this size can
remain airborne for days or even months and travel distances up to
10,000 km before being deposited on terrestrial or aquatic
surfaces.\61\ Atmospheric deposition of particles is believed to be the
major source of PAHs to the sediments of Lake Michigan, Chesapeake Bay,
Tampa Bay and other coastal areas of the U.S.62 63 64 65 66
PAHs tend to accumulate in sediments and reach high enough
concentrations in some coastal environments to pose an environmental
health threat that includes cancer in fish populations, toxicity to
organisms living in the sediment, and risks to those (e.g., migratory
birds) that consume these organisms.67 68 PAHs tend to
accumulate in sediments and bioaccumulate in fresh water, flora and fauna.
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    \61\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Washington, DC: U.S. Environmental Protection Agency.
Retrieved on March 18, 2009 from http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=87903
    \62\ Dickhut R.M., Canuel E.A., Gustafson K.E., Liu K., Arzayus
K.M., Walker S.E., Edgecombe G., Gaylor M.O., MacDonald E.H. (2000).
Automotive Sources of Carcinogenic Polycyclic Aromatic Hydrocarbons
Associated with Particulate Matter in the Chesapeake Bay Region.
Environmental Science & Technology, 34(21), 4635-4640.
    \63\ Simcik M.F., Eisenreich, S.J., Golden K.A., et al. (1996)
Atmospheric Loading of Polycyclic Aromatic Hydrocarbons to Lake
Michigan as Recorded in the Sediments. Environmental Science and
Technology, 30, 3039-3046.
    \64\ Simcik M.F., Eisenreich S.J., Lioy P.J. (1999) Source
apportionment and source/sink relationship of PAHs in the coastal
atmosphere of Chicago and Lake Michigan. Atmospheric Environment,
33, 5071-5079.
    \65\ Poor N., Tremblay R., Kay H., et al. (2002) Atmospheric
concentrations and dry deposition rates of polycyclic aromatic
hydrocarbons (PAHs) for Tampa Bay, Florida, USA. Atmospheric
Environment, 38, 6005-6015.
    \66\ Arzavus K.M., Dickhut R.M., Canuel E.A. (2001) Fate of
Atmospherically Deposited Polycyclic Aromatic Hydrocarbons (PAHs) in
Chesapeake Bay. Environmental Science & Technology, 35, 2178-2183.
    \67\ Simcik M.F., Eisenreich, S.J., Golden K.A., et al. (1996)
Atmospheric Loading of Polycyclic Aromatic Hydrocarbons to Lake
Michigan as Recorded in the Sediments. Environmental Science and
Technology, 30, 3039-3046.
    \68\ Simcik M.F., Eisenreich S.J., Lioy P.J. (1999) Source
apportionment and source/sink relationship of PAHs in the coastal
atmosphere of Chicago and Lake Michigan. Atmospheric Environment, 33, 5071-5079.
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    The deposition of airborne particles can reduce the aesthetic
appeal of buildings and culturally important articles through soiling,
and can contribute directly (or in conjunction with other pollutants)
to structural damage by means of corrosion or erosion.\69\ Particles
affect materials principally by promoting and accelerating the
corrosion of metals, by degrading paints, and by deteriorating building
materials such as concrete and limestone. Particles contribute to these
effects because of their electrolytic, hygroscopic, and acidic
properties, and their ability to adsorb corrosive gases (principally
sulfur dioxide). The rate of metal corrosion depends on a number of
factors, including the deposition rate and nature of the pollutant; the
influence of the metal protective corrosion film; the amount of
moisture present; variability in the electrochemical reactions; the
presence and concentration of other surface electrolytes; and the
orientation of the metal surface.
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    \69\ U.S. EPA. (2005). Review of the National Ambient Air
Quality Standards for Particulate Matter: Policy Assessment of
Scientific and Technical Information, OAQPS Staff Paper. Retrieved
on April 9, 2009 from http://www.epa.gov/ttn/naaqs/standards/pm/
data/pmstaffpaper_20051221.pdf.
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(3) Impacts on Visibility
    Emissions from ships contribute to poor visibility in the U.S.
through their primary PM_2.5 emissions, as well as
NO_X and SO_X emissions which contribute to the
formation of secondary PM_2.5.\70\ Visibility can be defined
as the degree to which the atmosphere is transparent to visible light.
Airborne particles degrade visibility by scattering and absorbing
light. Visibility is important because it has direct significance to
people's enjoyment of daily activities in all parts of the country.
Individuals value good visibility for the well-being it provides them
directly where they live and work and in places where they enjoy
recreational opportunities. Visibility is also highly valued in
significant natural areas such as national parks and wilderness areas,
and special emphasis is given to

[[Page 44456]]

protecting visibility in these areas. For more information on
visibility, see the final 2004 PM AQCD as well as the 2005 PM Staff
Paper.71, 72
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    \70\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Volume I Document No. EPA600/P-99/002aF and Volume II
Document No. EPA600/P-99/002bF. Washington, DC: U.S. Environmental
Protection Agency. Retrieved on March 18, 2009 from 
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=87903
    \71\ U.S. EPA. (2004). Air Quality Criteria for Particulate
Matter (AQCD). Volume I Document No. EPA600/P-99/002aF and Volume II
Document No. EPA600/P-99/002bF. Washington, DC: U.S. Environmental
Protection Agency. Retrieved on March 18, 2009 from http://
cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=87903
    \72\ U.S. EPA. (2005). Review of the National Ambient Air
Quality Standard for Particulate Matter: Policy Assessment of
Scientific and Technical Information, OAQPS Staff Paper. EPA-452/R-
05-005. Washington, DC: US Environmental Protection Agency.
---------------------------------------------------------------------------

    EPA is pursuing a two-part strategy to address visibility. First,
to address the welfare effects of PM on visibility, EPA has set
secondary PM_2.5 standards which act in conjunction with the
establishment of a regional haze program. In setting this secondary
standard, EPA has concluded that PM_2.5 causes adverse
effects on visibility in various locations, depending on PM
concentrations and factors such as chemical composition and average
relative humidity. Second, section 169 of the Clean Air Act provides
additional authority to address existing visibility impairment and
prevent future visibility impairment in the 156 national parks, forests
and wilderness areas categorized as mandatory class I Federal areas (62
FR 38680-81, July 18, 1997).\73\ In July 1999, the regional haze rule
(64 FR 35714) was put in place to protect the visibility in mandatory
class I Federal areas. Visibility can be said to be impaired in both
PM_2.5 nonattainment areas and mandatory class I Federal areas.
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    \73\ These areas are defined in section 162 of the Act as those
national parks exceeding 6,000 acres, wilderness areas and memorial
parks exceeding 5,000 acres, and all international parks which were
in existence on August 7, 1977.
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(4) Plant and Ecosystem Effects of Ozone
    Elevated ozone levels contribute to environmental effects, with
impacts to plants and ecosystems being of most concern. Ozone can
produce both acute and chronic injury in sensitive species depending on
the concentration level and the duration of the exposure. Ozone effects
also tend to accumulate over the growing season of the plant, so that
even low concentrations experienced for a longer duration have the
potential to create chronic stress on vegetation. Ozone damage to
plants includes visible injury to leaves and a reduction in food
production through impaired photosynthesis, both of which can lead to
reduced crop yields, forestry production, and use of sensitive
ornamentals in landscaping. In addition, the reduced food production in
plants and subsequent reduced root growth and storage below ground, can
result in other, more subtle plant and ecosystems impacts. These
include increased susceptibility of plants to insect attack, disease,
harsh weather, interspecies competition and overall decreased plant
vigor. The adverse effects of ozone on forest and other natural
vegetation can potentially lead to species shifts and loss from the
affected ecosystems, resulting in a loss or reduction in associated
ecosystem goods and services. Lastly, visible ozone injury to leaves
can result in a loss of aesthetic value in areas of special scenic
significance like national parks and wilderness areas. The final 2006
ozone AQCD presents more detailed information on ozone effects on
vegetation and ecosystems.

C. Air Quality Modeling Results

    Air quality modeling was performed to assess the impact of the
combination of the proposed CAA NO_X standards along with ECA
designation through Amendment to MARPOL Annex VI. We looked at impacts
on future ambient PM_2.5 and ozone levels, as well as
nitrogen and sulfur deposition levels and visibility impairment. In
this section, we present information on current levels of pollution as
well as model projected levels of pollution for 2020 and 2030.\74\
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    \74\ As discussed in Section 3.7 of the draft RIA, the
inventories used for the air quality modeling in 2020 and 2030
differ slightly from each other. The difference between 2020 and
2030 is small and was due to an error in calculating the 200
nautical miles distance. In addition, as discussed in Section 3.7 of
the draft RIA, the 2020 air quality control case does not include
global controls for areas that are beyond 200 nautical miles but
within the air quality modeling domain. The impact of this latter
difference is expected to be minimal.
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    The air quality modeling uses EPA's Community Multiscale Air
Quality (CMAQ) model. The CMAQ modeling domain is rectangular in shape
and encompasses all of the lower 48 states, portions of Canada and
Mexico, and areas extending into the ocean up to 1,000 nautical miles
(nm), depending on the coast. The smallest area of ocean coverage is
over the northeast U.S. In places like Maine and Cape Cod, the
easternmost points of the contiguous U.S., the distance to the edge of
the CMAQ modeling domain is approximately 150 nm. The rest of the U.S.
shoreline has at least 200 nm between the shoreline and boundary of the
air quality modeling. The CMAQ modeling domain is described in more
detail in Section 2.4.5.2 of the draft RIA. The performance of the CMAQ
modeling was evaluated over a 2002 base case. More detail about the
performance evaluation is contained within the Section 2.4.5.4 of the
draft RIA. The model was able to reproduce historical concentrations of
ozone and PM_2.5 over the land with low amounts of bias and
error. While we are not able to evaluate the model's performance over
the ocean, there is no evidence to suggest that model performance is
unsatisfactory over the ocean.
(1) Particulate Matter
    The vast majority of PM emissions from Category 3 engines are the
result of the sulfur content of the residual fuel they use (67 FR
37569, May 29, 2002).\75\ Although this proposed rule would not set PM
standards, ECA designation would require the use of fuel meeting the
most stringent MARPOL Annex VI fuel sulfur limits, yielding significant
PM and SO_X reductions.
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    \75\ As explained in the NPRM, there were no acceptable
procedures for measuring PM from Category 3 marine engines.
Specifically, established PM test methods showed unacceptable
variability when sulfur levels exceed 0.8 weight percent, which was
common at that time for both residual and distillate marine fuels
for Category 3 engines, and no PM test method or calculation
methodology had been developed to correct that variability for these engines.
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(a) Current Levels
    PM_2.5 concentrations exceeding the level of the
PM_2.5 NAAQS occur in many parts of the country. In 2005, EPA
designated 39 nonattainment areas for the 1997 PM_2.5 NAAQS
(70 FR 943, January 5, 2005). These areas are composed of 208 full or
partial counties with a total population exceeding 88 million. The 1997
PM_2.5 NAAQS was recently revised and the 2006 24-hour
PM_2.5 NAAQS became effective on December 18, 2006. Area
designations for the 2006 24-hour PM_2.5 NAAQS are expected
to be promulgated in 2009 and become effective 90 days after
publication in the Federal Register.
(b) Projected Levels
    A number of state governments have told EPA that they need the
reductions the coordinated strategy will provide in order to meet and
maintain the PM_2.5 NAAQS.\76\ Most areas designated as not
attaining the 1997 PM_2.5 NAAQS will need to attain the 1997
standards in the 2010 to 2015 time frame, and then maintain them
thereafter. The 2006 24-hour PM_2.5 nonattainment areas will
be required to attain the 2006 24-hour PM_2.5 NAAQS in the
2014 to 2019 time frame and then be required to maintain the 2006 24-
hour PM_2.5 NAAQS

[[Page 44457]]

thereafter. The fuel sulfur emission standards will become effective in
2010 and 2015, and the NO_X engine emission standards will
become effective in 2016. Therefore, the coordinated strategy emission
reductions will be useful to states in attaining or maintaining the
PM_2.5 NAAQS.
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    \76\ See the Advanced Notice of Proposed Rule Making at Docket
Number: EPA-HQ-OAR-2007-0121.
---------------------------------------------------------------------------

    EPA has already adopted many emission control programs that are
expected to reduce ambient PM_2.5 levels and which will
assist in reducing the number of areas that fail to achieve the
PM_2.5 NAAQS. Even so, our air quality modeling for this
proposal projects that in 2020, with all current controls but excluding
the reductions expected to occur as a result of the coordinated
strategy, that at least 13 counties with a population of almost 30
million may not attain the 1997 annual PM_2.5 standard of 15
[micro]g/m \3\.\77\ These numbers do not account for additional areas
that have air quality measurements above the 2006 24-hour standard of
35 [micro]g/m\3\. The numbers also do not account for those areas that
are close to (e.g., within 10 percent of) the 1997 or 2006
PM_2.5 standard. These areas, although not violating the
standards, will also benefit from the additional reductions from this
rule ensuring long term maintenance of the PM_2.5 NAAQS.
---------------------------------------------------------------------------

    \77\ See Section 2.4.1.2.2 of the draft RIA, specifically Table
2-9, for more detail.
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    Air quality analysis modeling the expected impacts of the
coordinated strategy shows that in 2020 and 2030 all of the modeled
counties would experience decreases in their annual PM_2.5
design values. For areas with current annual PM_2.5 design
values greater than 15 [micro]g/m\3\, the modeled future-year,
population-weighted annual PM_2.5 design values are expected
to decrease on average by 0.8 [micro]g/m\3\ in 2020 and by 1.7
[micro]g/m\3\ in 2030.\78\ The maximum decrease for annual
PM_2.5 design values are projected to be in Miami, FL, with a
3.1 [micro]g/m\3\ decrease for 2020 and a 6.0 [micro]g/m\3\ decrease
for 2030. The air quality modeling methodology and the projected
reductions are discussed in more detail in Chapter 2 of the draft RIA.
---------------------------------------------------------------------------

    \78\ Note that the 2030 projections are based on a 100 nm ECA so
are an underestimate of likely changes to PM_2.5 design
values. Additional detail on the air quality modeling is included in
Chapter 2 of the draft RIA.
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(2) Ozone
(a) Current Levels
    The U.S. EPA has recently amended the ozone NAAQS (73 FR 16436,
March 27, 2008). That final 2008 ozone NAAQS rule set forth revisions
to the previous 1997 NAAQS for ozone to provide increased protection of
public health and welfare. As of March 4, 2009, there are 57 areas
designated as nonattainment for the 1997 8-hour ozone NAAQS, comprising
293 full or partial counties with a total population of approximately
132 million people. These numbers do not include the people living in
areas where there is a future risk of failing to maintain or attain the
1997 8-hour ozone NAAQS. The numbers above likely underestimate the
number of counties that are not meeting the ozone NAAQS because the
nonattainment areas associated with the more stringent 2008 8-hour
ozone NAAQS have not yet been designated. Table II-1 provides an
estimate, based on 2005-07 air quality data, of the counties with
design values greater than the 2008 8-hour ozone NAAQS of 0.075 ppm.

   Table II-1--Counties With Design Values Greater Than the 2008 Ozone
                NAAQS Based on 2005-2007 Air Quality Data
------------------------------------------------------------------------
                                             Number of
                                             counties     Population \a\
------------------------------------------------------------------------
1997 Ozone Standard: counties within the             293     131,977,890
 57 areas currently designated as
 nonattainment (as of 4/3/09)...........
2008 Ozone Standard: additional counties             227      41,285,262
 that would not meet the 2008 NAAQS \b\.
                                         -------------------------------
    Total...............................             520     173,263,152
------------------------------------------------------------------------
Notes:
\a\ Population numbers are from 2000 census data.
\b\ Attainment designations for the 2008 ozone NAAQS have not yet been
  made. Nonattainment for the 2008 Ozone NAAQS will be based on three
  years of air quality data from later years. Also, the county numbers
  in this row include only the counties with monitors violating the 2008
  Ozone NAAQS. The numbers in this table may be an underestimate of the
  number of counties and populations that will eventually be included in
  areas with multiple counties designated nonattainment.

(b) Projected Levels (Including Ozone Welfare)
    States with 8-hour ozone nonattainment areas are required to take
action to bring those areas into compliance in the future. Based on the
final rule designating and classifying 8-hour ozone nonattainment areas
for the 1997 standard (69 FR 23951, April 30, 2004), most 8-hour ozone
nonattainment areas will be required to attain the ozone NAAQS in the
2007 to 2013 time frame and then maintain the NAAQS thereafter. Many of
these nonattainment areas will need to adopt additional emission
reduction programs, and the NO_X and VOC reductions that
would result from the combination of the proposed CAA NO_X
standards along with ECA designation through amendment to MARPOL Annex
VI would be particularly important for these states. In addition, EPA's
revision of the ozone NAAQS was completed with the final rule published
on March 27, 2008. The ozone NAAQS revision in 2008 started the process
for nonattainment areas to be designated under that standard. While EPA
is not relying on the 2008 standard for purposes of justifying this
rule, the emission reductions from this rulemaking will also be helpful
to states for the more stringent ozone NAAQS.
    EPA has already adopted many emission control programs that are
expected to reduce ambient ozone levels and assist in reducing the
number of areas that fail to achieve the ozone NAAQS. Even so, our air
quality modeling projects that in 2020, with all current controls but
excluding the reductions achieved through the coordinated strategy, up
to 50 counties with a population of almost 50 million may not attain
the 2008 ozone standard of 0.075 ppm. These numbers do not account for
those areas that are close to (e.g., within 10 percent of) the 2008
ozone standard. These areas, although not violating the standards, will
also benefit from the additional reductions from this rule ensuring
long-term maintenance of the ozone NAAQS.

[[Page 44458]]

    These air quality modeling results suggest that the proposed
emission reductions would improve both the average and population-
weighted average ozone concentrations for the U.S. in 2020 and 2030. In
addition, the air quality modeling shows that on average the
coordinated program described in this action would help bring counties
closer to ozone attainment as well as assist counties whose ozone
concentrations are within 10 percent below the standard. For example,
in projected nonattainment counties, on a population-weighted basis,
the 8-hour ozone design value will on average decrease by 0.5 ppb in
2020 and 1.6 ppb in 2030.\79\ The air quality modeling methodology and
the projected reductions are discussed in more detail in Chapter 2 of
the draft RIA.
---------------------------------------------------------------------------

    \79\ Note that the 2030 projections are based on a 100 nm ECA so
are an underestimate of likely changes to ozone design values.
Additional detail on the air quality modeling is included in Chapter
2 of the draft RIA.
---------------------------------------------------------------------------

    It should be noted that even though our air quality modeling
predicts important reductions in nationwide ozone levels, four counties
(of 661 that have monitored data) are expected to experience an
increase in their ozone design values in 2030. There are two counties
in southern California, Orange County and San Bernardino County, and
two counties in Washington, Clallam County and Clark County, which
would experience 8-hour ozone design value increases due to the
NO_X disbenefits which occur in these VOC-limited ozone
nonattainment areas. Briefly, NO_X reductions at certain
times and in some areas can lead to increased ozone levels. The air
quality modeling methodology (Section 2.4.5), the projected reductions
(Section 2.4), and the limited NO_X disbenefits (Section
2.4.2.2.2), are discussed in more detail in Chapter 2 of the draft RIA.
(c) Case Study of Shipping Emissions and Ozone Impacts on Forests
    The section below attempts to estimate the impacts of the
coordinated strategy on ecological impacts through a case study.
    Assessing the impact of ground-level ozone on forests in the
eastern United States involves understanding the risk/effect of tree
species to ozone ambient concentrations and accounting for the
prevalence of those species within the forest. As a way to quantify the
risk/effect of particular plants to ground-level ozone, scientists have
developed ozone-exposure/tree-response functions by exposing tree
seedlings to different ozone levels and measuring reductions in growth
as ``biomass loss''.\80\
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    \80\ Chappelka, AH, Samuelson, LJ. (1998). Ambient ozone effects
on forest trees of the Eastern United States: a review. New
Phytologist, 139, 91-108.
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    With knowledge of the distribution of sensitive species and the
level of ozone at particular locations, it is possible to estimate a
``biomass loss'' for each species across their range. EPA performed an
analysis for 2020 in which we examined biomass loss with and without
ship emissions to determine the benefit of reducing these emissions on
sensitive tree species in the eastern half of the U.S.\81\ The biomass
loss attributable to shipping appears to range from 0-6.5% depending on
the particular species. The most sensitive species in the U.S. to ozone
related biomass loss is black cherry (Prunus serotina); the area of its
range with more than 10% total biomass loss in 2020 decreased by 8.5%
in the case in which emissions from ships were removed. Likewise,
yellow-poplar (Liriodendron tulipifera), eastern white pine (Pinus
strobus), aspen (Populus spp.), and ponderosa pine (Pinus ponderosa)
saw areas with more then 2% biomass loss reduced by 2.1% to 3.8% in
2020. This 2% level of biomass loss is important, because a consensus
workshop on ozone effects reported that a 2% annual biomass loss causes
harm due to the potential for compounding effects over multiple years
as short-term negative effects on seedlings affect long-term forest
health.82, 83
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    \81\ Note that while the coordinated strategy does not eliminate
ship emissions, it will be directionally helpful in reducing ship
emissions.
    \82\ Prasad, A.M, Iverson L.R. (2003). Little's range and FIA
importance value database for 135 eastern US tree species.
Northeastern Research Station, USDA Forest Service, Delaware, Ohio.
[online] Retrieved on March 19, 2009 from http://www.fs.fed.us/ne/
delaware/4153/global/littlefia/index.html. 
    \83\ Heck W.W., Cowling E.B. (1997) The need for a Long Term
Cumulative Secondary Ozone Standard--an Ecological Perspective. Air
and Waste Management Association, EM, 23-33.
---------------------------------------------------------------------------

(3) Nitrogen and Sulfur Deposition
(a) Current Levels
    Modeling conducted by the EPA for the coordinated strategy shows
that in 2020 ships would add significant amounts to sulfur deposition
in sensitive ecological areas across the U.S., ranging from 10% to more
than 25% of total sulfur deposition along the entire Atlantic, Gulf of
Mexico, and Pacific coastal areas of the U.S. This same level of impact
would extend inland for hundreds of kilometers, affecting thousands of
sensitive ecological areas. This deposition would contribute to the
serious problem acidification causes in terrestrial and aquatic ecosystems.
    Nitrogen deposition contributes to both acidification and nutrient
enrichment. In 2020, ships would contribute a significant percentage of
the annual U.S. total nitrogen deposition to many terrestrial and
aquatic areas within the U.S. that are potentially sensitive to excess
nitrogen. The contribution from ships would range from about 9% to more
than 25% along the entire U.S. Atlantic, Pacific and Gulf of Mexico
coastal regions. See the draft RIA for more information and detailed
maps on sulfur and nitrogen deposition.
(b) Projected Levels
    The emissions reductions that would result from the combination of
the proposed CAA NO_X standards along with ECA designation
through amendment to MARPOL Annex VI and related proposed fuel
standards would significantly reduce the annual total sulfur and
nitrogen deposition occurring in sensitive U.S. ecosystems including
forests, wetlands, lakes, streams, and estuaries. For sulfur
deposition, adopting the coordinated strategy would result in
reductions ranging from 5% to 20% along the entire Atlantic and Gulf
coasts with higher levels of reduction, exceeding 25%, occurring in the
near-land coastal waters of the U.S. In a few land areas on the
Atlantic and Gulf coasts, such as the southern parts of the States of
Louisiana, Texas, and Florida, 2020 sulfur deposition reductions would
be much higher, i.e., over 30%. Along the Pacific Coast, sulfur
deposition reductions would exceed 25% in the entire Southern
California area, and the Pacific Northwest. For a map of 2020 sulfur
reductions and additional information on these impacts see Section
2.4.3 of the draft RIA.
    Overall, nitrogen deposition reductions in 2020 resulting from the
coordinated strategy described in this action are less than sulfur
deposition reductions. Nitrogen deposition reductions would range from
3% to 7% along the entire Atlantic, Pacific and Gulf Coasts. As with
sulfur deposition reductions, a few areas such as the southern parts of
the States of Louisiana, Texas, and Florida would experience larger
reductions of nitrogen up to 9%. The Pacific coastal waters would see
higher nitrogen reductions, exceeding 20% in some instances. See
Section 2.4.3 of the draft RIA for a map and additional information on
nitrogen deposition impacts.

[[Page 44459]]

(4) Visibility
(a) Current Levels
    As of March 12, 2008, over 88 million people live in nonattainment
areas for the 1997 PM_2.5 NAAQS. These populations, as well
as large numbers of individuals who travel to these areas, are likely
to experience visibility impairment. In addition, while visibility
trends have improved in mandatory class I Federal areas, the most
recent data show that these areas continue to suffer from visibility
impairment. In summary, visibility impairment is experienced throughout
the U.S., in multi-state regions, urban areas, and remote mandatory
class I Federal areas.
(b) Projected Levels
    The air quality modeling conducted for the coordinated strategy
also was used to project visibility conditions in 133 mandatory class I
Federal areas across the U.S. in 2020 and 2030. The results indicate
that improvements in visibility due to OGV emissions reductions would
occur in all 133 class I Federal areas in the future, although all
areas would continue to have annual average deciview levels above
background in 2020 and 2030.\84\ The average visibility on the 20
percent worst days at these scenic locales is projected to improve by
0.21 deciviews, or 1.2 percent.
---------------------------------------------------------------------------

    \84\ The level of visibility impairment in an area is based on
the light-extinction coefficient and a unit less visibility index,
called a ``deciview'', which is used in the valuation of visibility.
The deciview metric provides a scale for perceived visual changes
over the entire range of conditions, from clear to hazy. Under many
scenic conditions, the average person can generally perceive a
change of one deciview. The higher the deciview value, the worse the
visibility. Thus, an improvement in visibility is a decrease in
deciview value.
---------------------------------------------------------------------------

    The greatest improvements in visibilities would occur in coastal
areas. For instance, the Agua Tibia Wilderness area (near Los Angeles)
would see a 9% improvement (2.17 DV) in 2020 as a result of the
emission reductions from the coordinated strategy. National parks and
national wilderness areas in other parts of the country would also see
improvements. For example, the Cape Romain National Wildlife Refuge
(South Carolina) would have a 5% improvement in visibility (1.16 DV)
and Acadia National Park (Maine) would have a 4% improvement (0.76 DV)
with a 200 nm ECA. Other areas would experience important benefits as
well due to the contribution of OGVs to visibility impairment. For
example, in 2002, about 3% of visibility impairment in southern
Florida's Everglades National Park was due to international shipping
(0.61 DV), and this will double to 6% (1.35 DV) by 2020. Even in inland
class I Federal areas, international shipping activity is contributing
to visibility degradation. In 2020, about 2.5% (0.28 DV) of visibility
degradation in the Grand Canyon National Park located in the state of
Arizona will be from international shipping, while almost 6% (0.81 DV)
of visibility degradation in the State of Washington's North Cascades
National Park would be from international shipping emissions. For the
table which contains the full visibility results over the 133 analyzed
areas see Section 2.2.4.2 of the draft RIA.

D. Emissions From Ships With Category 3 Engines

(1) Overview
    This section describes the contribution of Category 3 vessels to
national emission inventories of NO_X, PM_2.5, and
SO₂. A Category 3 vessel has a Category 3 propulsion engine.
Emissions from a Category 3 vessel include the emissions from both the
propulsion and auxiliary engines on that vessel. Propulsion and
auxiliary engine emissions were estimated separately to account for
differences in emission factors, engine size and load, and activity.
    We estimate that in 2009, Category 3 vessels will contribute almost
913,000 tons (10 percent) to the national mobile source NO_X
inventory, about 71,000 tons (24 percent) to the mobile source diesel
PM_2.5 inventory, and nearly 597,000 tons (80 percent) to the
mobile source SO₂ inventory. Expressed as a percentage of
all anthropogenic emissions, Category 3 vessels contribute 6 percent to
the national NO_X inventory, 3 percent to the national
PM_2.5 inventory, and 11 percent to the total SO₂
inventory in 2009. In 2030, absent the strategy discussed in this
proposal, these vessels will contribute about 2.1 million tons (40
percent) to the mobile source NO_X inventory, 168,000 tons
(75 percent) to the mobile source diesel PM_2.5 inventory,
and about 1.4 million tons (95 percent) to the mobile source
SO₂ inventory. Expressed as a percentage of all
anthropogenic emissions, Category 3 vessels will contribute 19 percent
to the national NO_X inventory, 5 percent to the national
PM_2.5 inventory, and 15 percent to the total SO₂
inventory in 2030. Under this strategy, by 2030, annual NO_X
emissions from these vessels would be reduced by 1.2 million tons,
PM_2.5 emissions by 143,000 tons, and SO₂
emissions by 1.3 million tons.\85\
---------------------------------------------------------------------------

    \85\ These emission inventory reductions include reductions from
ships operating within the 24 nautical mile regulatory zone off the
California Coastline, beginning with the effective date of the
Coordinated Strategy program elements. The California regulation
contains a provision that would sunset the requirements of the rule
if the Federal program achieves equivalent emission reductions. See
http://www.arb.ca.gov/regact/2008/fuelogv08/fro13.pdf at 13 CCR
2299.2(j)(1).
---------------------------------------------------------------------------

    Each sub-section below discusses one of the three affected
pollutants, including expected emission reductions that would result
from the combination of the proposed CAA NO_X standards along
with the ECA designation through amendment to MARPOL Annex VI and
related proposed fuel standards. Table II-2 summarizes the impacts of
these reductions for 2020 and 2030. Table II-3 provides the estimated
2030 NO_X emission reductions (and PM reductions) for the
coordinated strategy compared to the Locomotive and Marine rule, Clean
Air Nonroad Diesel (CAND) program, and the Heavy-Duty Highway rule.
Further details on our inventory estimates are available in Chapter 3
of the draft RIA.
    As described in Chapter 3 of the draft RIA, the ocean-going vessel
emission inventories presented in this section are estimated by
combining two sets of emissions inventories, one for U.S. port areas
and one for operation on the open ocean. With regard to operation on
the open ocean, it was necessary to specify an outer boundary of the
modeling domain; otherwise, emissions from ships operating as far away
as Asia or Europe would be included in the U.S. emission inventory. For
simplicity, we set the outer boundary for inventory modeling roughly
equivalent to the U.S. Exclusive Economic Zone (EEZ). It consists of
the area that extends 200 nautical miles (nm) from the official U.S.
baseline, which is recognized as the low-water line along the coast as
marked on the official U.S. nautical charts in accordance with the
articles of the Law of the Sea. The U.S. region was then clipped to the
boundaries of the U.S. EEZ. While this area will exclude emissions that
occur outside the 200 nm boundary but that are transported to the U.S.
landmass, it has the advantage of corresponding to an area in which the
United States has a clear environmental interest. This area also
corresponds well to the CMAQ modeling domain for most coasts.

[[Page 44460]]

 Table II-2--Estimated National (50 State) Reductions in Emissions From
                Category 3 Commercial Marine Vessels \a\
------------------------------------------------------------------------
    Pollutant [short tons]          2020                  2030
------------------------------------------------------------------------
NOX:
    NOX Emissions without           1,361,000                  2,059,000
     Coordinated Strategy....
    NOX Emissions with                952,000                    878,000
     Coordinated Strategy....
    NOX Reductions Resulting          409,000                  1,181,000
     from Coordinated
     Strategy................
Direct PM2.5:
    PM2.5 Emissions without           110,000                    168,000
     Coordinated Strategy....
    PM2.5 Emissions with               16,000                     25,000
     Coordinated Strategy....
    PM2.5 Reductions                   94,000                    143,000
     Resulting from
     Coordinated Strategy....
SO2:
    SO2 Emissions without             928,000                  1,410,000
     Coordinated Strategy....
    SO2 Emissions with                 51,000                     78,000
     Coordinated Strategy....
    SO2 Reductions Resulting          877,000                  1,332,000
     from Coordinated
     Strategy................
------------------------------------------------------------------------
Notes:
\a\ Emissions are included within 200 nautical miles of the U.S. coastline.

   Table II-3--Projected 2030 Emissions Reductions From Recent Mobile
                      Source Rules (Short Tons) \a\
------------------------------------------------------------------------
                  Rule                          NOX            PM2.5
------------------------------------------------------------------------
Category 3 Marine Proposal..............       1,181,000         143,000
Locomotive and Marine...................         795,000          27,000
Clean Air Nonroad Diesel................         738,000         129,000
Heavy-Duty Highway......................       2,600,000         109,000
------------------------------------------------------------------------
Notes:
\a\ Locomotive and Marine Rule (73 FR 25098, May 6, 2008); Clean Air
  Nonroad Diesel Rule (69 FR 38957, June 29, 2004); Heavy-Duty Highway
  Rule (66 FR 5001, January 18, 2001).

(2) NO_X Emission Reductions
    In 2009, annual emissions from Category 3 commercial \86\ marine
vessels will total about 913,000 tons. Earlier Tier 1 NO_X
engine standards became effective in 2000, but the reductions due to
the Tier 1 standards are offset by the growth in this sector, resulting
in increased NO_X emissions of 1.4 million tons and 2.1
million tons in 2020 and 2030, respectively.
---------------------------------------------------------------------------

    \86\ These engines are included within EPA's commercial marine
category to differentiate them from recreational marine engines.
---------------------------------------------------------------------------

    As shown in Table II-2, the coordinated strategy would reduce
annual NO_X emissions from the current national inventory
baseline by 409,000 tons in 2020 and 1,181,000 tons in 2030.
    As shown in Table II-3, the 2030 NO_X reductions for the
coordinated strategy would exceed those for the other two nonroad rules.
(3) PM_2.5 Emissions Reductions
    In 2009, annual emissions from Category 3 commercial marine vessels
will total about 71,000 tons. By 2030, these engines, absent the
coordinated strategy, would contribute about 168,000 tons.
    As shown in Table II-2, the coordinated strategy would reduce
annual PM_2.5 emissions by 94,000 tons in 2020 and 143,000
tons in 2030. As seen in Table II-3, the 2030 PM_2.5 emission
reduction would be larger than any of the reductions achieved with
other recent rules.
(4) SO₂ Emissions Reductions
    In 2009, annual emissions from Category 3 commercial marine vessels
will total about 597,000 tons. By 2030, these engines, absent the
coordinated strategy, would contribute about 1.4 million tons.
    As shown in Table II-2 the coordinated strategy would reduce annual
SO₂ emissions by 877,000 tons in 2020 and 1.3 million tons in 2030.

III. Engine Standards

    This section details the emission standards, implementation dates,
and other major requirements being proposed under the Clean Air Act. A
detailed discussion of the technological feasibility of the proposed
NO_X standards follows the description of the proposed program.
    Other elements of our coordinated strategy to control emissions
from OGV are discussed in subsequent sections. Provisions related to
our Clean Air Act fuel controls are described in Section IV. Section V
summarizes the U.S. and Canada's recent proposal to amend MARPOL Annex
VI to designate much of the U.S. and Canadian coasts as an Emission
Control Area.\87\ Finally, provisions revising our Clean Air Act test
procedures and related certification requirements, provisions to
implement MARPOL Annex VI through APPS, and various changes we are
considering to our Categories 1 and 2 (marine diesel engines with per
cylinder displacement less than 30 liters per cylinder) marine diesel
engine program are described in Section VI.
---------------------------------------------------------------------------

    \87\ The ECA proposal and associated Technical Support Document
can be found at http://www.epa.gov/otaq/oceanvessels.htm
---------------------------------------------------------------------------

A. What Category 3 Marine Engines are Covered?

    Consistent with our existing marine diesel emission control
program, the proposed engine emission standards would apply to any new
marine diesel engine with per cylinder displacement at or above 30
liters installed on a vessel flagged or registered in the United States.
    With regard to marine diesel engines on foreign vessels that enter
U.S. ports, we are proposing to retain our current approach and not
apply this Clean Air Act program to those engines. This is appropriate
because engines on foreign vessels are subject to the same
NO_X limits through MARPOL Annex VI, and the United States
can enforce compliance pursuant to Annex VI and the recent amendments
to the Act to Prevent Pollution from Ships (33 USC

[[Page 44461]]

1901 et seq.). At the same time, however, the effectiveness of this
approach is contingent on the designation of U.S. coasts as an ECA
pursuant to MARPOL Annex VI, since the Annex VI Tier III NO_X
limits are geographic in scope and apply only in designated ECAs. We
anticipate that MARPOL Annex VI will be amended to include the U.S. and
Canadian government proposal. If, however, the proposed amendment is
not adopted in a timely manner by IMO, we intend to take supplemental
action to control harmful emissions from all vessels affecting U.S. air
quality. Section V contains a description of the ECA designation
process and further discussion of the application of the Act to engines
on foreign vessels if ECA designation is delayed or not approved.
    The combination of this Clean Air Act program, MARPOL Annex VI, and
APPS will apply comparable emission standards to the vast majority of
vessels entering U.S. ports or operating in U.S. waters.\88\ Most
significantly, these vessels will be required to meet the
NO_X limits described below. As is described later in this
Section III and in Section VI, there would be some minor differences
between the proposed Clean Air Act program and the requirements that
apply under MARPOL Annex VI. Nevertheless, with respect to U.S. air
quality, these differences would have a negligible effect on emissions
from foreign vessels.
---------------------------------------------------------------------------

    \88\ Certain foreign public vessels such as military vessels and
foreign vessels in innocent passage may be exempt.
---------------------------------------------------------------------------

    Although we are not proposing standards for existing engines on
vessels already in the U.S. fleet, we are seeking comment on a
programmatic alternative that would help reduce emissions from those
engines. This Voluntary Marine Verification Program is described in Section IX.

B. What Standards are we Proposing for Freshly Manufactured Engines?

    This subsection details the emission standards (and implementation
dates) we are proposing for freshly manufactured (i.e., new) Category 3
engines on U.S. vessels. As described in Section III.C, we believe the
proposed standards will be challenging to manufacturers, yet ultimately
feasible and cost-effective within the proposed lead time. These
standards, along with other parts of our program, are the outcome of
our work with stakeholders to resolve the challenges associated with
applying advanced diesel engine technology to Category 3 engines to
achieve significant NO_X reductions.
(1) NO_X Standards
    We are proposing new NO_X emission standards for Category
3 marine diesel engines. Our existing Tier 1 NO_X standards
for Category 3 engines are dependent on the rated speed of the engine
for speeds between 130 revolutions per minute (rpm) and 2000 rpm. Fixed
standards apply for lower and higher speeds. Thus, the standards are
expressed as an equation that applies for speeds between 130 rpm and
2000 rpm, along with fixed values that are calculated from the equation
for 130 rpm and 2000 rpm that apply for lower and higher speeds. This
was done to account for the fact that brake-specific NO_X
emissions are inherently higher for lower speed engines (and lower for
higher speed engines). Note that this same approach is used by the IMO
for the same technical reasons. We are proposing to continue this
approach for Tier 2 and Tier 3, as shown in Table III-1.

                  Table III-1--Proposed NOX Emission Standards for Category 3 Engines (g/kW-hr)
----------------------------------------------------------------------------------------------------------------
                                                                   Less than 130   130-2000 RPM
                                                                        RPM             \a\        Over 2000 RPM
----------------------------------------------------------------------------------------------------------------
Tier 1..........................................        \b\ 2004            17.0   45.0 [middot]             9.8
                                                                                        n(-0.20)
Tier 2..........................................            2011            14.4   44.0 [middot]             7.7
                                                                                        n(-0.23)
Tier 3..........................................            2016             3.4    9.0 [middot]             2.0
                                                                                        n(-0.20)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Applicable standards are calculated from n (maximum in-use engine speed in RPM), rounded to one decimal place.
\b\ Tier 1 NOX standards apply for engines originally manufactured after 2004, and proposed to also to certain
  earlier engines.

    Our analysis, which is described in the draft RIA, shows that these
standards will give the greatest degree of emission control achievable
considering compliance costs, lead time, and other relevant factors.
The technological bases are also discussed briefly below.
    Note that other important provisions related to compliance with
these standards are described in Section VI. This includes provisions
to ensure effective control of NO_X emissions over a broad
range of operating conditions.
(a) Tier 2 NO_X Limits
    We are proposing new Tier 2 NO_X emission standards for
Category 3 marine diesel engines. In-cylinder emission control
technology for Category 3 marine engines has progressed substantially
in recent years. Significant reductions can be achieved in the near
term with little or no impact on overall vessel performance. These
technologies include traditional engine-out controls such as
electronically-controlled high-pressure common-rail fuel systems,
turbocharger optimization, compression-ratio changes, and
electronically-controlled exhaust valves. We are setting a near-term
NO_X emission standard requiring a reduction of approximately
20 percent below the current Tier 1 standard beginning 2011.
(b) Tier 3 NO_X Limits
    While the Tier 2 standards will achieve modest reductions quickly,
the proposed Tier 3 standards are intended to achieve much greater
emission reductions through the use of advanced aftertreatment such as
selective catalytic reduction (SCR). These standards would achieve
reductions of about 80 percent from the current Tier 1 standards. As
explained in Section IX.B below regarding regulatory alternatives, we
evaluated the possibility of requiring the Tier 3 limits on an earlier
schedule than 2016. However, we found that a schedule requiring Tier 3
limits prior to 2016 had significant feasibility issues, and are
therefore proposing the 2016 implementation date for Tier 3 standards.
Under the proposed approach, manufacturers of Category 3 engines will
have about the same amount of lead time allowed manufacturers for
smaller marine engines and locomotives.

[[Page 44462]]

(2) PM and SO_X Standards
    We are not proposing new engine standards for PM or SO_X
emissions. We intend to rely instead on the use of cleaner fuels as
described in Section IV and V. SO_X emissions and the
majority of the direct PM emissions from Category 3 marine engines
operated on residual fuels are a direct result of fuel quality, most
notably the sulfur in the fuel, and engine-based PM controls are not
currently feasible for engines using these fuels. Other components of
residual fuel, such as ash and heavy metals, also contribute directly to PM.
    Using cleaner distillate fuel is the most effective means to
achieve significant PM and SO_X reductions for Category 3
engines. We are proposing substantial reductions in the sulfur content
of fuel purchased in the U.S. for use in an ECA. This complements Annex
VI which requires that fuels used in ECAs around the world have sulfur
levels below 1,000 ppm. This sulfur limit is expected to necessitate
the use of distillate fuel which will result not only in reductions in
sulfate PM emissions, but also reductions in organic PM and metallic
ash particles in the exhaust.
    Even though the sulfur limit is much lower than current levels, it
is not clear if this fuel sulfur level would be low enough to allow
Category 3 engines to be equipped with the catalytic PM filters similar
to those being used by trucks today. If we were to require technology
that needs lower sulfur fuel, such as 15 ppm, ship operators would need
to have access to this fuel around the world. Operating on higher
sulfur fuel, such as for outside of our waters, could otherwise result
in damage to the PM control equipment. At this time, it is not clear if
15 ppm sulfur fuel could be made available around the world. In any
case, the 1,000 ppm sulfur fuel requirement alone will eliminate 85
percent of PM emissions from ships operating in ECAs.
    To further our understanding of PM emissions from ships, we are
proposing to require engine manufacturers to measure and report PM
emissions even though we are not proposing a PM standard. The
information gathered will help support our efforts as we continue to
evaluate the feasibility of achieving further PM reductions through
engine-based controls. It will also help us to better characterize the
PM emission rates associated with operating Category 3 engines on
distillate fuel. If we determine that further PM reductions are
feasible or that a specific PM limit is necessary to ensure anticipated
reductions in PM emissions from ships, we may propose PM standards for
Category 3 engines in the future.
(3) HC and CO Standards
    We are proposing HC and CO standards of 2.0 g/kW-hr and 5.0 g/kW-
hr, respectively. Emission control technologies for C3 marine engines
have been concentrated on reducing NO_X and PM emissions, but
these emission standards will prevent increases in emissions of HC and
CO that might otherwise occur as a result of use of certain
technologies for controlling NO_X, such as those that
significantly degrade combustion efficiency.
(4) CO₂ Standards
    We are not proposing to adopt CO₂ standards for marine
diesel engines at this time. Marine diesel engines are included in
other ongoing Agency actions, including our Advance Notice of Proposed
Rulemaking (ANPRM) for mobile sources (73 FR 44353, July 30, 2008) and
our Greenhouse Gas Reporting Rule (74 FR 16448, April 10, 2009). In
addition, EPA is participating in the U.S. Government delegation to
IMO, which is currently engaged in negotiations for an international
program to address greenhouse emissions from ships.

C. Are the Standards Feasible?

    We have analyzed a variety of technologies available for
NO_X reduction in the Category 3 marine sector. As described
in more detail in our draft RIA, we are projecting that marine diesel
engine manufacturers will choose to use in-cylinder, or engine design-
based emission control technologies to achieve the 15 to 20 percent
NO_X reductions required to meet the proposed Tier 2
standard. To achieve the 80 percent NO_X reductions required
to meet the proposed Tier 3 standard, we believe many manufacturers
will choose SCR exhaust aftertreatment technology. In addition,
manufacturers may choose a combination of other in-cylinder
technologies, such fuel-water emulsification, direct water injection,
intake air humidification, or exhaust gas recirculation (EGR) to reduce
NO_X emissions and meet the proposed standards. These ``in-
cylinder'' approaches could be calibrated and applied in one manner to
achieve Tier 3 NO_X levels when operating with an ECA, and
then adjusted, or re-calibrated, in another manner to achieve Tier 2
NO_X levels when operating outside an ECA.
    The in-cylinder, or engine-out, NO_X emissions of a
diesel engine can be controlled by utilizing engine design and
calibration parameters (e.g., fuel delivery and valve timing) to limit
the formation of NO_X. NO_X formation rate has a
strong exponential relationship to combustion temperature. Therefore,
high temperatures result in high NO_X formation
rates.89 90 Any changes to engine design and calibration
which can reduce the peak temperature realized during combustion will
also reduce NO_X emissions. Many of the approaches and
technologies for reducing in-cylinder NO_X emissions are
discussed in our draft RIA.
---------------------------------------------------------------------------

    \89\ Flynn, P., et al, ``Minimum Engine Flame Temperature
Impacts on Diesel and Spark-Ignition Engine NO_X
Production'', SAE 2000-01-1177, 2000.
    \90\ Heywood, John B., ``Internal Combustion Engine
Fundamentals'', McGraw-Hill, 1988.
---------------------------------------------------------------------------

    SCR is a commonly-used technology for meeting stricter
NO_X emissions standards in diesel applications worldwide.
Stationary power plants fueled with coal, diesel and natural gas have
used SCR for three decades as a means of controlling NO_X
emissions, and European heavy-duty truck manufacturers are currently
using this technology to meet Euro 5 emissions limits. To a lesser
extent, SCR has been introduced on diesel engines in the U.S. market,
but the applications have been limited to marine ferryboat and
stationary electrical power generation demonstration projects in
California and several of the Northeast states. SCR systems are
currently being designed and developed for use on ocean-going vessels
worldwide, and we project that SCR will continue to be a viable
technology for control of Category 3 NO_X emissions. A more
detailed discussion of SCR technology can be found in our draft RIA.

IV. Fuel Standards

A. Background

    EPA is proposing emissions standards for Category 3 (C3) engines
that are consistent with those recently adopted as amendments to MARPOL
Annex VI. As amended, Annex VI includes revised fuel sulfur standards
for use in engines onboard ships, and it also set more stringent fuel
sulfur limits for ``any fuel oil used onboard ships * * * operating
within an Emission Control Area'' (Annex VI, Regulation 14).
    Under the Annex, the process by which an Emission Control Area
(ECA) is to be designated is through amendment of the Annex. The U.S.
and Canadian governments have submitted a proposal to amend MARPOL
Annex VI to designate an ECA to include much of the U.S. and Canadian
coastlines. Specifically, the proposed ECA would

[[Page 44463]]

include the entire coastline for the contiguous 48 states, Southeastern
Alaska, and the Main Hawaiian Islands, extending to a distance of 200
nautical miles from the coastline. We anticipate that this amendment
will be considered at the next Marine Environment Protection Committee
(MEPC 59) which is scheduled for July 2009. We expect that the
amendment will be adopted in March 2010, at MEPC 60. This approval date
is roughly three months after the intended date for promulgation of the
final rule.
    EPA is in this notice proposing fuel sulfur limits under section
211(c) of the Clean Air Act that match the limits that apply under
Annex VI in ECAs. The adoption of such standards would: (1) Forbid the
production and sale of fuel oil above 1,000 ppm sulfur for use in the
waters within the proposed ECA (as well as internal U.S. waters); \91\
and (2) allow for the production and sale of up to 1,000 ppm sulfur
fuel for use in C3 marine vessels.\92\
---------------------------------------------------------------------------

    \91\ For the purposes of this proposal, the term ``ECA'' as it
is used in this Section IV refers to both the area of the proposed
ECA and internal U.S. waters. Though the outer limits of the
proposed sulfur limitation are the same as for the proposed ECA, the
sulfur limitation in this proposal is not dependent on MEPC approval
of the ECA.
    \92\ For the purpose of the discussion in this section,
``Category 3 vessel'' refers to a commercial vessel with a Category
3 propulsion engine; ``Category 2 vessel'' refers to a commercial or
recreational vessel with a Category 2 propulsion engine; and
``Category 1 vessel'' refers to a commercial or recreational vessel
with only Category 1 or smaller engines. The proposed fuel
provisions here apply to all of the engines on a given vessel.
---------------------------------------------------------------------------

    The majority of vessels with a C3 propulsion engine operate on
high-sulfur, heavy fuel oil (HFO) (also known as residual, or bunker,
fuel). Due to their use of heavy fuel, these marine diesel engines have
very high PM and SO₂ emissions. Sulfur in the fuel is
emitted from engines primarily as SO₂; however a small
fraction is emitted as sulfur trioxide (SO₃) which
immediately forms sulfate and is emitted as PM by the engine. In
addition, much of the SO₂ emitted from the engine reacts in
the atmosphere to form secondary PM. Reductions in residual fuel sulfur
levels would lead to significant sulfate PM and SO₂ emission
reductions which would provide dramatic environmental and public health
benefits. However, in most cases, fuels that meet the long-term fuel
sulfur standards will likely be distillate fuels, rather than HFO. In
addition to reductions in sulfate PM, switching from HFO to distillate
fuel may reduce black carbon emissions, fine particle counts, organic
carbon, and metallic ash particles.
    HFO sold for use by these vessels is currently not subject to any
EPA sulfur limits (as it is not regulated by our current sulfur
program) and generally has very high levels of sulfur. The proposed
modifications to our existing diesel fuel program will prohibit the
production and sale of this fuel for use in an ECA. Instead, fuel sold
for use in an ECA would not be allowed to exceed a sulfur content of
1,000 ppm. In a complementary fashion, the amendment to MARPOL Annex VI
designating the U.S. ECA will ensure that fuel used in an ECA,
including fuel purchased in another country but used within the U.S.
ECA, also meets a 1,000 ppm sulfur limit. Under our proposed
regulations, fuel sold for use by C3 vessels in the U.S. ECA will be
allowed to have a sulfur content as high as this 1,000 ppm sulfur
limit, while fuel sold for use in Category 1 (C1; marine diesel engines
up to 7 liters per cylinder displacement) and Category 2 (C2; marine
diesel engines from 7 to 30 liters per cylinder) vessels would continue
to be subject to the nonroad, locomotive, and marine \93\ (NRLM) diesel
fuel sulfur requirements. In the event that the U.S. ECA is not
approved in a timely manner, we will revisit the standards being
proposed here in that context.
---------------------------------------------------------------------------

    \93\ For the purposes of this proposal (and the proposed 40 CFR
Part 80 regulations), the term ``marine'' as it is used here refers
to Category 1 and 2 marine diesel engines unless otherwise stated.
---------------------------------------------------------------------------

B. Current Diesel Fuel Standards

    The Nonroad Diesel program (finalized on June 29, 2004 (69 FR
38958)) reduces the sulfur content of NRLM diesel fuel from
uncontrolled levels down to a maximum sulfur level of 15 ppm. Refiners
and importers are required to produce or import all NRLM diesel fuel at
a sulfur level of 15 ppm or less by June 1, 2014. The main compliance
mechanism of the diesel sulfur program is the Designate and Track (D&T)
provisions, which allows NRLM diesel fuel to be distinguished from
similar products (e.g., heating oil) and yet provides a means for
diesel fuel to be fungibly transported through the fuel production and
distribution system. Under D&T, refiners and importers are required to
designate the type and sulfur level of each batch of fuel produced or
imported. As this fuel is transferred through the distribution system,
product transfer documents (PTDs) must be exchanged each time the batch
changes custody. Along with PTDs, other required elements of D&T
include quarterly and annual reporting, fuel pump labeling, and recordkeeping.
    The Nonroad Diesel program also contains certain provisions to ease
refiners' transition to the lower sulfur standards and to enable the
efficient distribution of all diesel fuels. These provisions, as
discussed more below in Section IV.B.2, include special provisions for
qualified small refiners, transmix processors, and entities in the fuel
distribution system.
(1) Scope of the Nonroad Diesel Fuel Program
    The sulfur standards finalized by the Nonroad Diesel rule apply to
all the diesel fuel that is produced and sold for use in NRLM diesel
applications (all fuel used in NRLM diesel engines, except for fuels
heavier than a No. 2 distillate used in Category 2 and 3 marine engines
\94\ and any fuel that is exempted for national security or other
reasons). While the Nonroad Diesel rule did not set sulfur standards
for other distillate fuels (such as jet fuel, heating oil, kerosene,
and No. 4 fuel oil), it did implement provisions to prevent the
inappropriate use of heating oil and other higher sulfur distillate
fuels in NRLM and locomotive and marine (LM) diesel applications. Sale
of distillate fuels for use in nonroad, locomotive, or marine diesel
engines will generally be prohibited unless the fuel meets the diesel
fuel sulfur standards of 40 CFR Part 80.\95\ The regulated fuels under
our diesel fuel sulfur program include those fuels listed in the
regulations at 40 CFR 80.2(qqq).
---------------------------------------------------------------------------

    \94\ Category 3 marine engines frequently are designed to use
residual fuels and include special fuel handling equipment to use
the residual fuel.
    \95\ For the purposes of the diesel sulfur program, the term
heating oil basically refers to any No. 1 or No. 2 distillate other
than jet fuel, kerosene, and diesel fuel used in highway or NRLM
applications. For example, heating oil includes fuel which is
suitable for use in furnaces and similar applications and is
commonly or commercially known or sold as heating oil, fuel oil, or
other similar trade names.
---------------------------------------------------------------------------

    The current sulfur standards do not apply to: (1) No. 1 distillate
fuel used to power aircraft; (2) Number 4, 5, and 6 fuels (e.g.,
residual fuels or residual fuel blends, intermediate fuel oil (IFO)
Heavy Fuel Oil Grades 30 and higher), used for stationary source
purposes; (3) any distillate fuel with a T-90 distillation point
greater than 700 [deg]F, when used in Category 2 or 3 marine diesel
engines (this includes Number 4, 5, and 6 fuels (e.g., IFO Heavy Fuel
Oil Grades 30 and higher), including fuels meeting the American Society
for Testing and Materials (ASTM) specifications DMB, DMC, and RMA-10
and heavier); and (4) any fuel for which a national security or research
and development exemption has been approved or fuel that is exported from

[[Page 44464]]

the U.S. The criterion that any distillate fuel with a T-90 greater
than 700 [deg]F will not be subject to the sulfur standards when used
in Category 2 or 3 marine engines was intended to exclude fuels heavier
than No. 2 distillate, including blends containing residual fuel. In
addition, residual fuel is not subject to the sulfur standards.
    While many marine diesel engines use No. 2 distillate, ASTM
specifications for marine fuels identify four kinds of marine
distillate fuels: DMX, DMA, DMB, and DMC. DMX is a special light
distillate intended mainly for use in emergency engines. DMA (also
called marine gas oil, or ``MGO'') is a general purpose marine
distillate that contains no trace of residual fuel. These fuels can be
used in all marine diesel engines but are primarily used by Category 1
engines. DMX and DMA fuels intended for use in any marine diesel engine
are subject to EPA's fuel sulfur standards.
    DMB, also called marine diesel oil, is not typically used with
Category 1 engines, but is used for Category 2 and 3 engines. DMB is
allowed to have a trace of residual fuel, which can be high in sulfur.
This contamination with residual fuel usually occurs due to the
distribution process, when distillate is brought on board a vessel via
a barge that has previously contained residual fuel, or using the same
supply lines as are used for residual fuel. DMB is produced when fuels
such as DMA are brought on board the vessel in this manner. EPA's
sulfur standards do apply to the distillate that is used to produce the
DMB, for example the DMA distillate, up to the point that it becomes
DMB. However, DMB itself is not subject to the EPA sulfur standards
when it is used in Category 2 or 3 engines.
    DMC is a grade of marine fuel that may contain some residual fuel
and is often a residual fuel blend. This fuel is similar to No. 4
diesel, and can be used in Category 2 and Category 3 marine diesel
engines. DMC is produced by blending a distillate fuel with residual
fuel, for example at a location downstream in the distribution system.
EPA's sulfur standards apply to the distillate that is used to produce
the DMC, up to the point that it is blended with the residual fuel to
produce DMC. However, DMC itself is not subject to the EPA sulfur
standards when it is used in Category 2 or 3 marine engines.
    Residual fuel is not covered by the sulfur content standards as it
is not a distillate fuel. Residual fuel is typically designated by the
prefix RM (e.g., RMA, RMB, etc.). These fuels are also identified by
their nominal viscosity (e.g., RMA10, RMG35, etc.). Most residual fuels
require treatment by an onboard purifier-clarifier centrifuge system,
although RMA and RMB do not require this.
    The distillation criterion adopted by EPA, T-90 greater than 700
[deg]F, was designed to identify those fuels that are not subject to
the sulfur standards when used in Category 2 or 3 marine diesel
engines. It is intended to exclude DMB, DMC, and other heavy
distillates or blends, when used in Category 2 or 3 marine diesel
engines. We are not proposing to amend this provision in this action.
However, under this proposal, all of these fuels, and any other diesel
fuels or fuel oils, would be subject to a 1,000 ppm sulfur limit if
they are produced or sold for use in an ECA.
(2) Flexibilities
    Compliance flexibilities were provided in the nonroad diesel sulfur
regulations for qualified small refiners (69 FR 39047; Section IV.B.1)
and for transmix processors (69 FR 39045; Section IV.A.3.d). Small
refiners were provided, among other flexibility options, additional
time for compliance with the 15 ppm NRLM standard, until June 1, 2014.
Transmix processors, who distill off-specification interface mixtures
of petroleum products from pipeline systems into gasoline and
distillate fuel, have a simple refinery configuration that does not
make it cost-effective for them to install and operate a hydrotreater
to reduce distillate fuel sulfur content. As a result, transmix
processors were provided with the flexibility to continue to produce
all of their NRLM diesel fuel to meet the 500 ppm sulfur standard until
June 1, 2014, and all of their LM diesel fuel to meet a 500 ppm sulfur
limit indefinitely. The latter flexibility also allows for an outlet
for off-spec fuel that may be produced in the distribution system.
    The D&T provisions, first established to distinguish highway from
nonroad 500 ppm fuel, were thus continued beyond 2014 to ensure that
500 ppm NRLM could be distinguished from similar fuel (e.g., heating
oil that has a sulfur level of 500 ppm). In 2014 and beyond, D&T is
essential to ensure that heating oil is not being inappropriately
shifted downstream of the refiner into the NRLM and LM diesel fuel
markets, circumventing the NRLM standards (as mentioned above in
Section IV.B.1). Provisions in the Nonroad Diesel rule to ensure that
heating oil is not used in NRLM applications include the use of a fuel
marker to distinguish heating oil from NRLM and LM diesel fuel, dye
solvent yellow 124, which is added to heating oil at the terminal
level. The D&T provisions also provided parties in the diesel fuel
industry with inherent flexibility. D&T maximizes the efficiency of the
distribution system by allowing for fungible distribution of physically
similar products, and minimizing the need for product segregation.
Under D&T, diesel fuel with similar sulfur levels can be fungibly
shipped up to the point of distribution from a terminal (where off-
highway diesel fuels must be dyed red, pursuant to Internal Revenue
Service (IRS) requirements, to indicate its tax exempt status).
(3) Northeast/Mid-Atlantic Area
    In the Northeast, heating oil is distributed in significant
quantities. Discussions with terminal operators in the Northeast (and
other representatives of heating oil users and distributors) during the
development of the Nonroad Diesel rule revealed concerns that the
heating oil marker requirement would represent a significant burden on
terminal operators and users of heating oil given the large volume of
heating oil used in the Northeast. These parties suggested that if EPA
prohibited the sale and use of diesel fuel produced by those utilizing
the flexibilities described above, this area could be exempted from the
marker requirement.
    Thus, the Northeast/Mid-Atlantic (NE/MA) area was developed (69 FR
39063, Section IV.D.1.b.ii; see also 40 CFR 80.510(g) for the specific
states and counties that comprise the NE/MA area). As there would be no
way to distinguish heating oil from 500 ppm NRLM and 500 ppm LM diesel
fuel in 2014 and beyond without the fuel marker, these fuel types are
not allowed to be produced/imported, distributed and/or sold in the NE/
MA area during this time period (500 ppm NRLM diesel fuel may not be
produced/imported, distributed and/or sold in the NE/MA area after 2012).
    Similarly, high sulfur NRLM (HSNRLM) produced through the use of
credits is not allowed in Alaska. However, EPA-approved small refiners
in Alaska may produce HSNRLM diesel fuel. To receive this approval, a
small refiner must provide EPA with a compliance plan showing how their
HSNRLM diesel fuel will be segregated from all other distillate fuels
through its distribution to end-users.
(4) Nonroad Diesel Program Transition Schedule
    The transition to lower sulfur diesel fuel for NRLM equipment is
depicted in Figure VI-1 below. The transition for urban (areas served
by the Federal Aid

[[Page 44465]]

Highway System) and rural Alaska are shown below in Figure VI-2.

                                                        Highway and Nonroad Diesel Fuel Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Who                             Covered fuel            2006     2007     2008     2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Highway diesel fuel.........        80% 15 ppm/20% 500 ppm
                                                      100% 15 ppm (including small refiner fuel)
                                          --------------------------------------------------------------------------------------------------------------
Large Refiners/Importers.................                    NR                       500      500      500       15       15       15       15       15
Large Refiners/Importers.................                    LM                       500      500      500      500      500       15       15       15
                                            NRLM w/credits (not in NE/MA or AK)        HS       HS       HS      500      500      500      500       15
Small Refiners...........................  NRLM (not in NE/MA, w/approval in AK)       HS       HS       HS      500      500      500      500       15
Transmix Processor & In-use..............         NR (not in NE/MA or AK)              HS       HS       HS      500      500      500      500       15
Transmix Processor & In-use..............         LM (not in NE/MA or AK)              HS       HS       HS      500      500      500      500      500
2006 dates for HW diesel fuel: June 1 for refiners/importers, September 1 for downstream parties, and October 15 for retailers and wholesale purchaser-
 consumers.
2010 dates for HW diesel fuel: As of the following dates, all HW diesel fuel must meet the 15 ppm standard--June 1 for refiners/importers, October 1 for
 downstream parties, and December 1 for retailers and wholesale purchaser-consumers (WPCs).
2007 dates for NRLM diesel fuel: June 1 for refiners, downstream requirements for NE/MA area* only (August 1 for terminals, October 1 for retailers/
 WPCs, and December 1 for in-use).
2010+ dates for NRLM diesel fuel: June 1 for refiners, August 1 for terminals, October 1 for retailers/WPCs, and December 1 for in-use.
** Anti-downgrading provisions begin October 15, 2006 **
*NOTE--No small refiner or credit NRLM can be used in the NE/MA area. Thus, the large refiner NRLM standard is also the in-use standard in the NE/MA
 area.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Figure IV-1 Highway, Nonroad, Locomotive, and Marine Diesel Fuel Sulfur Standards


------------------------------------------------------------------------

-------------------------------------------------------------------------
Urban AK (areas served by the FAHS)
HW--
    • pre-2006: HS/uncontrolled.
    • 2006: 6/1/06--refiners to 15; 9/1/06--pipelines & terminals
     to 15; 10/15/06--retail & WPC to 15.
NRLM--
    • pre-2007: HS/uncontrolled.
    • 2007: 6/1/07--refiners to 500; 8/1/07--pipelines &
     terminals to 500; 10/1/07--retail & WPC to 500; 12/1/07--in-use,
     farm & construction tanks to 500 (note--urban AK is on same
     downstream schedule as NE/MA).
    • 2010: 6/1/10--refiners to 15 NR; 8/1/10--pipelines &
     terminals to 15 NR; 10/1/10--retail & WPC to 15 NR; 12/1/10--in-
     use, farm & construction tanks to 15 NR.
    • 2012: 6/1/12--refiners to 15 LM; 8/1/12--pipelines &
     terminals to 15 LM; 10/1/12--retail & WPC to 15 LM; 12/1/12--in-
     use, farm & construction tanks to 15 LM.
**Urban AK is on the same schedule as the main HW & NR diesel programs
 (except they're on the same downstream schedule as the NE/MA for NRLM
 in 2007); permanently exempt from dye & marker requirements **.
Rural AK
HW--
    • pre-2010: HS/uncontrolled.
    • 2010: 6/1/10--refiners to 15 HW; 8/1/10--pipelines &
     terminals to 15 HW; 10/1/10--retail & WPC to 15 HW; 12/1/10--in-
     use, farm & construction tanks to 15 HW.
NRLM--
    • pre-2010: HS/uncontrolled.
    • 2010: 6/1/10--refiners to 15 NRLM; 8/1/10--pipelines &
     terminals to 15 NRLM; 10/1/10--retail & WPC to 15 NRLM; 12/1/10--in-
     use, farm & construction tanks to 15 NRLM.
** Downstream transition dates are same for HW & NRLM in rural AK;
 permanent exemption from dye & marker requirements **.
General Note--credit & transmix fuel cannot be used in any area of AK;
 small refiner fuel can be used with approval (and only if properly
 labeled and segregated).
------------------------------------------------------------------------
Figure IV-2 Highway, Nonroad, Locomotive, and Marine Diesel Fuel Sulfur
  Standards for Alaska

C. Applicability

    Assuming adoption of an amendment to MARPOL Annex VI establishing a
U.S. ECA, the fuel used in that ECA cannot exceed 1,000 ppm sulfur
beginning January 1, 2015.\96\ As mentioned above, we are proposing to
incorporate a similar 1,000 ppm sulfur limit into our CAA regulations
at 40 CFR Part 80 through both a prohibition on the production and sale
of fuel oil above 1,000 ppm sulfur for use in any marine vessels (C1,
C2, and C3) in the area of the U.S. ECA, and an allowance for the
production and use of 1,000 ppm sulfur fuel to be used in any engine on
C3 marine vessels. We are proposing that fuel produced and sold for use
in any engine on C1 and C2 marine vessels would continue to be subject
to the existing diesel sulfur requirements which are more stringent
than those being proposed in this action for C3 marine vessels;
however, we request comment on whether engines on C2 marine vessels
should also be allowed to use 1,000 ppm ECA fuel similar to those on C3
marine vessels.
---------------------------------------------------------------------------

    \96\ Annex VI, Regulation 14 (located in the rulemaking docket,
EPA-HQ-OAR-2007-0121-0107).
---------------------------------------------------------------------------

    Discussions with stakeholders in the diesel fuel production and
distribution industry have indicated that they anticipate that most (if
not all) fuel oil that could meet a 1,000 ppm sulfur standard would be
considered a distillate or diesel fuel, because at a

[[Page 44466]]

1,000 ppm sulfur level it is nearly impossible for fuel to have a T-90
distillation point at or above 700 [deg]F (i.e., be considered residual
fuel). As discussed in Section IV.B.1, fuel with a T-90 less than 700
[deg]F would be required to meet the standards of our existing diesel
sulfur program which, in 2014 and beyond, is 15 ppm. We believe that
because of the limits on the sulfur content of fuel used in ECAs, the
existing diesel fuel sulfur program should be revised to allow for the
production, distribution, purchase, and use of 1,000 ppm sulfur fuel
oil for use in engines on C3 marine vessels. Therefore, we are
proposing a new 1,000 ppm sulfur category for fuel oil produced and
purchased for use in any engine on a C3 marine vessels (called ``ECA
marine fuel''). This proposed fuel sulfur requirement would largely
supplement the existing diesel fuel sulfur requirements and would
harmonize EPA's diesel sulfur program with the requirements of Annex
VI. Under this proposed action, owners of Category 3 marine vessels
would be able to purchase and use 1,000 ppm sulfur fuel, which will
allow those vessels to comply with the sulfur limits in the U.S. ECA
(and any other ECA worldwide) and in U.S. internal waters.

D. Fuel Sulfur Standards

    As discussed above in Section IV.C, in addition to the prohibition
on the sale of fuel greater than 1,000 ppm sulfur for use in any marine
vessel operating within the U.S. ECA, we are also proposing the
allowance of the production, distribution, and sale of 1,000 ppm sulfur
ECA marine fuel, which we discuss more in this section.
    Prior to this action and, pending the establishment of the North
American ECA, the kind of fuel produced and sold for use by C3 marine
vessels had uncontrolled sulfur levels as it was not subject to the
NRLM sulfur limits. This was reflected in the regulations by exempting
these kinds of fuel from the definition of NRLM diesel fuel and the
NRLM sulfur limits (40 CFR 80.2(nnn)). The combined effect of Annex VI
and these regulations is to require that any fuel sold for use in any
engine on a C3 marine vessel operating in an ECA be 1,000 ppm sulfur or
lower. Fuel oil used or sold for use in C3 marine vessels in an ECA
will therefore go from uncontrolled, high sulfur levels to no higher
than 1,000 ppm sulfur. Under Annex VI, fuel with sulfur levels greater
than 1,000 ppm cannot be used in a marine vessel operating in an ECA,
no matter where the fuel is purchased. Consistent with this, the
proposed section 211(c) controls would prohibit the production and sale
of any fuel for use in the U.S. ECA that is above 1,000 ppm sulfur.
    The requirements for 1,000 ppm sulfur fuel oil apply to the North
Sea, the Baltic Sea, and any other ECAs established around the world,
so this fuel will be produced by refiners in other countries. Under
EPA's current NRLM program, this 1,000 ppm sulfur fuel would be subject
to the 15 ppm NRLM sulfur limit in 2014 and later. If EPA were to
require that fuel produced, distributed, and sold for use for C3
vessels in the U.S. ECA meet the 15 ppm sulfur standard after 2014, we
believe that C3 vessel owners would simply purchase 1,000 ppm sulfur
fuel elsewhere to be used here in the U.S. ECA. This could be an
extremely inefficient process for ship owners. It would also mean a
loss of sales for U.S. refiners of fuel that these C3 vessel owners
purchase. These impacts would add to the costs and burdens of the
program with no corresponding environmental benefit. Therefore, we
believe that it is reasonable to allow U.S. refiners and importers to
produce 1,000 ppm sulfur fuel for use by C3 vessels. Thus, we are
proposing and requesting comment on a new fuel sulfur standard of 1,000
ppm for fuel produced, distributed, and sold for use in C3 marine
vessels. While we would expect use of this fuel to be concentrated in
the area of the U.S. ECA (and any other ECA) and U.S. internal waters,
we are allowing its use by C3 marine vessels in all locations, to
encourage its general use. We are proposing that after 2014, no fuel
above 15 ppm could be used in C1 or C2 vessels; however, we request
comment on whether or not C2 vessels should be treated similarly to C3 vessels.
    We note that the combination of the Annex VI ECA provisions and the
modifications proposed in this action for the diesel sulfur program
will achieve very significant benefits compared to the existing
program. The production and use of 1,000 ppm ECA marine fuel, as well
as 15 ppm NRLM diesel fuel, will replace much higher sulfur fuel usage,
and there is no additional benefit to be gained by requiring the sale
of 15 ppm sulfur diesel fuel for use by C3 vessels as a practical
matter because we believe C3 vessels will simply purchase 1,000 ppm
sulfur fuel elsewhere. In order to incorporate these modifications into
our existing program under the Clean Air Act, we need to create a new
fuel designation for allowable fuel under our program.
(1) Proposed Amendments to the Existing Diesel Fuel Sulfur Program
    We are proposing to prohibit the production, distribution, and sale
or offer for sale of any fuel for use in any marine diesel vessels (C1,
C2, and C3) operating in the U.S. ECA that is greater than 1,000 ppm
sulfur. We are also proposing and requesting comment on allowing a
sulfur limitation of 1,000 ppm for fuel produced, distributed, and sold
or offered for sale for use in C3 marine vessels. To simplify the
existing diesel fuel sulfur program, we are also proposing to eliminate
the 500 ppm LM diesel fuel standard once the 1,000 ppm standard becomes
effective. Under the existing diesel sulfur program, 500 ppm LM diesel
fuel can be produced by transmix processors indefinitely, and can only
be used by locomotives and marine vessels that do not require 15 ppm.
The original intent of allowing for this fuel was to serve as an outlet
for interface and downgraded diesel fuel post-2014 that would otherwise
not meet the 15 ppm sulfur standard. However, we believe that the 1,000
ppm sulfur ECA marine fuel could now serve as this outlet. We believe
that transmix generated near the coasts would have ready access to
marine applications, and transmix generated in the mid-continent could
be shipped via rail to markets on the coasts, and we request comment on this.
    Elimination of the 500 ppm LM diesel fuel standard would simplify
the diesel sulfur program such that sulfur could serve as the
distinguishing factor for fuels available for use after 2014 (the
designated products under the diesel fuel program would thus be: 15 ppm
motor vehicle, nonroad, locomotive, and marine (MVNRLM) diesel fuel,
heating oil, and 1,000 ppm ECA marine fuel). With this proposed
approach, beginning in 2014, only 15 ppm NRLM diesel fuel could be used
in locomotive and C1/C2 marine diesel applications (and 1,000 ppm ECA
marine fuel could be used in any engine on C3 marine vessels). Further,
this would help to streamline the D&T program as there would no longer
be a need for a fuel marker to distinguish 500 ppm LM diesel fuel from
heating oil. Below, we discuss the aspects of D&T that we are proposing
to change, which we believe will greatly simplify the diesel sulfur program.
(a) Compliance and Implementation
(i) Northeast/Mid-Atlantic Area and the Fuel Marker
    With the proposed elimination of the 500 ppm LM designation in
2014, parties in the fuel production and distribution industry would still be

[[Page 44467]]

required to register and designate their products and adhere to PTD,
fuel pump labeling, and recordkeeping requirements. But we believe that
the tracking portion of D&T can be simplified. Currently, annual
reporting is required under Sec.  80.601 for D&T through June 30, 2015
(the final annual report is due August 31, 2015). This final reporting
period is to ensure that heating oil is not being inappropriately
shifted into the 500 ppm LM diesel fuel pool. However, with the
proposed elimination of this fuel designation, we request comment on
ending D&T annual reporting in 2014, rather than 2015. Under such a
scenario, the final annual reporting period would instead be July 1,
2013 through May 31, 2014, with the report due to EPA on August 31, 2014.
    We believe that the proposed elimination of the 500 ppm LM diesel
fuel designation would also, beginning June 1, 2014, negate the need
for the heating oil marker and the NE/MA area. After 2014, the heating
oil marker requirement in the existing diesel sulfur program is for the
sole purpose of distinguishing heating oil from 500 ppm LM diesel fuel,
to prevent heating oil from swelling the 500 ppm LM diesel fuel pool.
Also, as there is no marker requirement for heating oil in the NE/MA
area, the diesel sulfur program currently does not allow for 500 ppm LM
diesel fuel to be produced, distributed, or purchased for use in the
NE/MA area after 2012. However, if 500 ppm LM diesel fuel did not
exist, there would no longer be a need for the heating oil marker; fuel
designations and sulfur level could serve as the distinguishing factor
between the available fuels (15 ppm MVNRLM diesel fuel, 1,000 ppm ECA
marine fuel, and heating oil). Further, there would not be a need for
the NE/MA area if there were no heating oil marker.
(ii) PTDs and Labeling
    We are proposing new PTD language for the 1,000 ppm ECA marine fuel
designation at draft regulation Sec.  80.590. As stated in draft
regulation Sec.  80.590(a)(7)(vii), we are proposing that the following
statement be added to PTDs accompanying 1,000 ppm sulfur ECA marine
fuel: ``1,000 ppm sulfur (maximum) ECA Marine Fuel. For use in Category 3
marine vessels only. Not for use in engines not installed on C3 marine vessels.''
    Appendix V of Annex VI also includes language that is required on
bunker delivery notes. Compliance requirements of this action, such as
PTDs, are not intended to supplant or replace requirements of Annex VI
(and we encourage regulated entities to consult Annex VI to ensure that
they are fully aware of all requirements that must be met in addition
to EPA's requirements). However, if a party's bunker delivery note also
contains the information required under our regulations for PTDs, we
would consider the bunker delivery note to also suffice as a PTD.
    We are also proposing new pump labeling language for the 1,000 ppm
sulfur ECA marine fuel designation at regulation Sec.  80.574. Diesel
fuel pump labels required under the existing diesel sulfur regulations
must be prominently displayed in the immediate area of each pump stand
from which diesel fuel is offered for sale or dispensing. However, we
understand that there may be cases where it is not feasible to affix a
label to a fuel pump stand due to space constraints (such as diesel
fuel pumps at marinas) or where there is no pump stand, thus the
current regulations allow for alternative pump labels with EPA
approval. Previously approved alternative fuel pump labels have
included the use of permanent placards in the immediate vicinity of the
fuel pump; we request comment on other possible alternative labeling
schemes for situations where pump labeling may not be feasible. As
stated in draft regulation Sec.  80.574, we are proposing to replace
the 500 ppm LM diesel fuel pump label language with the following fuel
pump label language for 1,000 ppm sulfur ECA marine fuel: ``1,000 ppm
SULFUR ECA MARINE FUEL (1,000 ppm Sulfur Maximum). For use in Category
3 marine vessels only. WARNING--Federal law prohibits use in any engine
that is not installed on a C3 marine vessel; use of fuel oil with a
sulfur content greater than 1,000 ppm in the U.S. Emission Control Area
and all U.S. internal waters is illegal.'' We also request comment on
whether or not fuel pumps are (or can be) used to fuel C3 marine
vessels; and if they are not used, if PTDs or some other documentation
is a more appropriate mechanism to convey the fuel sulfur level to a C3
marine vessel operator.
    Under this program, we are also proposing to eliminate MVNRLM
diesel fuel labeling requirements from EPA's regulations. In 2014 and
beyond, EPA will not require ``visible evidence'' of red dye in off-
road fuels; however this requirement still exists in IRS's taxation
regulations to denote that off-road fuels are untaxed. EPA's required
label for 15 ppm NRLM diesel fuel (instead of one 15 ppm MVNRLM diesel
fuel label) is mainly to denote that 15 ppm NRLM will be dyed red,
while 15 ppm MV diesel fuel will not. Further, after October 1, 2014,
all MVNRLM diesel fuel available for purchase and/or distribution will
be 15 ppm. We believe that it is not appropriate for EPA to retain a
labeling requirement for MVNRLM diesel fuel given the fact that the red
dye provision is no longer EPA's requirement. Please note, however,
that if MVNRLM labeling requirements were removed from EPA's
regulations, marketers and wholesale purchaser-consumers would still be
free to continue to label their pump stands to help with consumer
awareness. Labeling will continue to be required for heating oil and,
as proposed above, for ECA marine fuel.
    Additionally, if labeling requirements for MVNRLM diesel fuel were
to be removed from EPA's regulations, EPA would consult with IRS
regarding handling labels in IRS's regulations at Title 26 of the Code
of Federal Regulations.
(b) Timing of the Standard
    Currently, all refiners and importers are required to produce all
of their NRLM diesel fuel to meet the 15 ppm standard beginning June 1,
2014. To allow transition time for the distribution system, terminals
are allowed until August 1, 2014 to begin dispensing 15 ppm NRLM diesel
fuel, retailers and wholesale purchaser-consumers are allowed until
October 1, 2014, and end-users are allowed until December 1, 2014. To
be consistent with the existing diesel program, we are proposing to
allow refiners to begin producing 1,000 ppm sulfur ECA marine fuel
beginning June 1, 2014, and downstream parties would follow the current
NRLM transition schedule (August, October, and December). We believe
that following the same transition schedule as the existing diesel
sulfur program would best facilitate the availability of 1,000 ppm ECA
marine fuel for purchase and use by the Annex VI January 1, 2015 date.
We request comment on the concept of a transition period of June 1-
December 1, 2014 for the 1,000 ppm sulfur standard.
(2) Alternative Options
    We have identified two potential alternatives to the proposed
changes to the existing diesel fuel sulfur program, above. We request
comment on any related aspects of these alternative options, as well as
any additional alternative options.
(a) Creation of Expanded NE/MA Area
    While the proposal of a 1,000 ppm sulfur standard is to incorporate
the benefits of this more stringent standard for fuel used in engines
on C3 marine vessels into our current diesel program

[[Page 44468]]

and harmonize the current program with Annex VI, our intent is to do so
with the least amount of impact on the existing diesel sulfur program,
so we believe that this rulemaking also presents us with an opportunity
to simplify the designate and track requirements.
    We request comment on an alternative to the proposed general
program: to expand the NE/MA area to cover all coastlines that border
the proposed U.S. ECA. This alternative would keep the requirements of
the diesel sulfur program largely the same as the existing program.
Further, this option would allow for 500 ppm LM diesel fuel to continue
to be utilized by the locomotive industry (and the marine industry) in
the mid-continent (outside the expanded NE/MA area) and to serve as an
outlet for off-spec and transmix diesel fuel. As discussed above in
Section IV.B.3, under our current diesel fuel sulfur program, 500 ppm
LM diesel fuel cannot be used in the NE/MA area (or Alaska) after 2012.
Under the ``expanded NE/MA'' area option, designate and track would be
simplified in the expanded NE/MA area as the only distillate fuels
available would be 15 ppm MVNRLM diesel fuel, heating oil, and 1,000
ppm ECA marine fuel. The reduction in types of fuel available for use
in this area would also allow for sulfur level to serve as the
distinguishing factor, and no additional markers or dyes would be
necessary to differentiate fuels in this area.
    The creation of an expanded NE/MA area, however, would mean that an
additional mechanism to distinguish 500 ppm LM diesel fuel from 1,000
ppm ECA marine fuel would still be needed in non-NE/MA areas.
    We request comment on the creation of an expanded NE/MA area.
(b) Retention of 500 ppm LM Diesel Fuel Standard
    Another alternative to the option of replacing the 500 ppm LM
diesel fuel standard with the 1,000 ppm sulfur standard would be to
retain the 500 ppm LM diesel fuel standard such that both 500 ppm LM
diesel fuel and 1,000 ppm ECA marine fuel would be available. Under
such an option, sulfur would not be able to serve as the distinguishing
factor to maintain segregation of 1,000 ppm fuel from other EPA
distillate categories. The fuel marker would still be needed to
distinguish 500 ppm LM from heating oil.
    This option would allow for 500 ppm LM diesel fuel to still be
utilized by the locomotive and marine industries (for those engines not
requiring 15 ppm sulfur diesel fuel) and also serve as an outlet for
off-spec and transmix diesel fuel. However, this option would not serve
to streamline D&T, and 500 ppm LM diesel fuel would not necessarily be
needed along the coastlines (as 1,000 ppm sulfur fuel would be
available for use by C3 marine vessels). We request comment on the
option of retaining the 500 ppm LM diesel fuel standard nationwide
along with the proposed 1,000 ppm ECA marine fuel sulfur standard.
    We request comment on the proposed program and alternative options,
the proposed prohibition on the sale of fuel above 1,000 ppm sulfur for
use in all marine vessels operating in the U.S. ECA and U.S. internal
waters, and any related compliance aspects.

E. Technical Amendments to the Current Diesel Fuel Sulfur Program Regulations

    Following publication of the technical amendments to the Highway
and Nonroad Diesel Regulations (71 FR 25706, May 1, 2006), we
discovered additional errors and clarifications within the diesel
regulations at 40 CFR part 80, Subpart I that we are addressing in this
action. These items are merely typographical/printing errors and
grammar corrections. A list of the changes that we propose making to
Subpart I is below in Table IV-1. We welcome comments on any of these
proposed amendments to the regulations.

   Table IV-1--Proposed Technical Amendments to the Diesel Fuel Sulfur
                               Regulations
------------------------------------------------------------------------
                  Section                       Description of change
------------------------------------------------------------------------
80.525(a)-(d).............................  Removal of the term ``motor
                                             vehicle'' from this
                                             section.
80.551(f).................................  Correction of printing
                                             error.
80.561....................................  Correction of typographical
                                             error in title.
80.593....................................  Correction of typographical
                                             error in introductory text.
80.599(e)(4)..............................  Correction of printing error
                                             in definition of terms
                                             ``#1MV15I'' and
                                             ``NPMV15I''.
80.600(a)(12).............................  Amended to correct date
                                             (``May 31, 2014'' instead
                                             of ``June 1, 2014'').
80.600(i).................................  Amended to remove duplicate
                                             sentence.
80.601(b)(3)(x)...........................  Amending to correct dates
                                             (``August 31'' instead of
                                             ``August 1'').
80.612(b).................................  Amended to fix typographical
                                             error in paragraph.
------------------------------------------------------------------------

V. Emission Control Areas for U.S. Coasts

    The proposed Clean Air Act standards described above are part of a
coordinated strategy for ensuring that all ships that affect U.S. air
quality will be required to meet stringent NO_X and fuel
sulfur requirements. Another component of this strategy consists of
pursuing ECA designation for U.S. and Canadian coasts in accordance
with Annex VI of MARPOL. ECA designation will ensure that all ships,
foreign-flagged and domestic, are required to meet stringent
NO_X and fuel sulfur requirements while operating within 200
nautical miles of most U.S. coasts. This section describes what an ECA
is, the process for obtaining ECA designation at the International
Maritime Organization, and summarizes the U.S. and Canadian proposal
for an amendment to MARPOL Annex VI designating most U.S. and Canadian
coasts as an ECA (referred to as the ``U.S./Canada ECA'' or the ``North
American ECA''), submitted to IMO on March 27, 2009.\97\ We also
discuss how emissions from foreign OGV may be covered should approval
of the U.S. ECA be delayed.
---------------------------------------------------------------------------

    \97\ Proposal to Designate an Emission Control Area for Nitrogen
Oxides, Sulphur Oxides and Particulate Matter, Submitted by the
United States and Canada. IMO Document MEPC59/6/5, 27 March, 2009. A
copy of this document can be found at http://www.epa.gov/otaq/regs/
nonroad/marine/ci/mepc-59-eca-proposal.pdf
---------------------------------------------------------------------------

A. What is an ECA?

(1) What Emissions Standards Apply in an ECA?
    MARPOL Annex VI contains international standards to control air
emissions from ships. The NO_X and SO_X/PM programs
each contain two sets of standards. The global standards for the sulfur
content of fuel and NO_X emissions from engines apply to
ships at all times. In recognition that some areas may require further
control, Annex VI also contains more stringent NO_X and
SO_X/PM geographic-based standards that apply to ships
operating in designated Emission Control Areas.

[[Page 44469]]

    The current global fuel sulfur (S) limit is 45,000 ppm\98\ S and
will tighten to 35,000 ppm S in 2012. Depending on a 2018 fuel
availability review, the MARPOL Annex VI global fuel sulfur limit will
be further reduced to 5,000 ppm S as early as 2020. In contrast, ships
operating in designated ECAs are subject to a fuel sulfur limit of
15,000 ppm S. The ECA limit is reduced to 10,000 ppm S in March 2010
and 1,000 ppm S in 2015. In addition, Tier 3 NO_X standards
will apply to new engines operating in ECAs beginning in 2016. These
Tier 3 NO_X standards represent an 80% reduction in
NO_X beyond current Tier 1 standards and are anticipated to
require the use of aftertreatment technology such as SCR. We are
proposing to adopt similar Tier 3 standards as part of our Clean Air
Act program (see Section III).
---------------------------------------------------------------------------

    \98\ Note that MARPOL Annex VI expresses these standards in
units of % (m/m) sulfur. 10,000 ppm S equals 1 percent S.
---------------------------------------------------------------------------

    There are currently two ECAs in effect today, exclusively
controlling SO_X; thus they are called Sulfur Emission
Control Areas, or SECAs. The first SECA was designated to control the
emissions of SO_X in the Baltic Sea area and entered into
force in May 2005. The second SECA was designated to control the
emissions of SO_X in the North Sea area and entered into
force in November 2006.
(2) What is the Process for Obtaining ECA Designation?
    A proposal to amend Annex VI to designate an ECA can be submitted
by a party to Annex VI. A party is a country that ratified Annex VI.
The proposal for amendment must be approved by the Parties to MARPOL
Annex VI; this would take place at a meeting of the Marine Environment
Protection Committee (MEPC). The U.S. deposited its Instrument of
Ratification with the IMO on October 8, 2008. Annex VI entered into
force for the U.S. on January 8, 2009, making the U.S. eligible to
apply for an ECA.
    The criteria and procedures for ECA designation are set out in
Appendix III to MARPOL Annex VI. A proposal to designate an ECA must
demonstrate a need to prevent, reduce, and control emissions of
SO_X, PM, and/or NO_X from ships operating in that
area. The specific criteria are summarized below:
    • A delineation of the proposed area of application;
    • A description of the areas at risk on land and at sea,
from the impacts of ship emissions;
    • An assessment of the contribution of ships to ambient
concentrations of air pollution or to
    • Adverse environmental impacts;
    • Relevant information pertaining to the meteorological
conditions in the proposed area of
    • Application to the human populations and environmental areas at risk;
    • Description of ship traffic in the proposed ECA;
    • Description of the control measures taken by the proposing
Party or Parties;
    • Relative costs of reducing emissions from ships compared
with land-based controls; and
    • An assessment of the economic impacts on shipping engaged
in international trade.
    An amendment to designate an ECA must be adopted by the Parties to
Annex VI, as an amendment to Annex VI. Assuming the USG proposal to
amend Annex VI is considered at MEPC 59, the earliest possible adoption
date is the following MEPC meeting, MEPC 60, which is anticipated to
take place in March 2010. Given the MARPOL amendment acceptance process
and the lead time specified in the regulations, an ECA adopted on this
timeline could be expected to enter into force as early as August 2012.

B. U.S. Emission Control Area Designation

    EPA worked with the U.S. Coast Guard, State Department, the
National Oceanic and Atmospheric Administration and other agencies to
develop the analysis supporting ECA designation for U.S. coasts
contained in the U.S. and Canadian submittal to IMO. In addition, we
collaborated with Environment Canada. As a result, the proposal for ECA
designation that was submitted to IMO was for a combined U.S./Canada
ECA submission. This approach has several advantages. First, the
emission reductions within a Canadian ECA will lead to air quality
improvements in the U.S. Second, a joint ECA helps minimize any
competitive issues between U.S. and Canadian ports, such as in the
Puget Sound area, that could arise from ECA standards. Third, IMO
encourages a joint submittal where there is a common interest in
emission reductions on neighboring waters.
(1) What Areas Would Be Covered in a U.S./Canada ECA?
    The area included in the U.S. and Canadian submittal to IMO for ECA
designation generally extends 200 nautical miles from the coastal
baseline, except where this distance goes beyond the Exclusive Economic
Zones (EEZ) of the U.S. and Canada, in which case the ECA would be
limited by the boundary of the applicable EEZ. This area would include
the Pacific Coast, the Atlantic/Gulf Coast and the Southeastern
Hawaiian Islands. On the Pacific Coast, the ECA would be bounded in the
north such that it includes the approaches into Anchorage, Alaska, but
not the Aleutian Islands or points north. It would continue
contiguously to the south including the Pacific coasts of Canada and
the U.S., with its southernmost boundary at the point where California
meets the border with Mexico. In the Atlantic/Gulf Coast, the ECA would
be bounded in the west by the border of Texas with Mexico and continue
contiguously to the east around the peninsula of Florida and north up
the Atlantic coasts of the U.S. and Canada and would be bounded in the
north by the 60th North parallel. The Southeastern Hawaiian Islands
that were included in the ECA submittal are Hawaii, Maui, Oahu,
Molokai, Niihau, Kauai, Lanai, and Kahoolawe.

[[Page 44470]]
[GRAPHIC] [TIFF OMITTED] TP28AU09.000

    Not included in the ECA submittal were the Pacific U.S.
territories, smaller Hawaiian Islands, the U.S. territories of Puerto
Rico and the U.S. Virgin Islands, Western Alaska including the Aleutian
Islands, and the U.S. and Canadian Arctic. The U.S. and Canada did not
make a determination or imply that these areas suffer no adverse impact
from shipping. Further information must be gathered to properly assess
these areas. If further information supports the need for expansion of
the ECA to other U.S. or Canada areas, we would submit a future, supplemental

[[Page 44471]]

proposal for ECA designation of these areas.
(2) What Analyses Were Performed in Support of a U.S./Canada ECA?
    We performed a comprehensive analysis to estimate the degree of
human health risk and environmental degradation that is posed by air
emissions from ships operating in their ports and along our coasts. To
evaluate the risk to human populations, state-of-the-art assessment
tools were used to apply widely accepted methods with advanced computer
modeling techniques. The analyses incorporated detailed ship traffic
data, the most recent emissions estimates, detailed observed
meteorological data, current scientific understanding of exhaust plume
behavior (both physical dispersion and photochemical reaction) and the
latest epidemiologic databases of health effects attributable to
pollutant exposure levels to estimate the current impacts of shipping
on human health and the environment. In addition, sulfate and nitrate
deposition modeling was performed to assess the impacts of nitrogen
nutrient loading and acidification on U.S. ecosystems.
    Two contrasting future scenarios were evaluated: one in which ships
continue to operate with current emissions performance while operating
in the specified area, and one in which ships comply with ECA
standards. The analysis demonstrated that ECA designation for U.S.
coasts could save thousands of lives each year, relieve millions of
acute respiratory symptoms, and benefit many of the most sensitive
ecosystems. This analysis is consistent with, and incorporated in, the
benefits estimates presented in Section VIII.

C. Technological Approaches To Comply With ECA Standards

    When operating within the ECA, all ships would have to comply with
the 0.1% fuel sulfur limit and vessels built after December 31, 2015
would have to comply with the Tier 3 NO_X limits described
above. This section describes how ships would comply with these requirements.
(1) How Will Ships Comply With the ECA NO_X Standards?
    Ships constructed beginning in 2016 will have to comply with the
MARPOL Annex VI Tier III NO_X limits. These are equivalent to
the Tier 3 NO_X limits we are proposing in this action under
our Clean Air Act authority. These standards are geographic in nature,
in that they apply to any vessel built beginning in 2016 while it is
operating in an ECA. Once a U.S./Canada ECA is designated through
amendment to MARPOL Annex VI, the requirements will be enforceable for
most vessels through the Act to Prevent Pollution from Ships (see Section VI.B).
    As explained in Section III, we anticipate that SCR would be the
most likely approach to meet these NO_X limits. When
operating in the ECA, SCR units would be active, meaning that urea
would be injected into the exhaust to facilitate catalytic reduction of
NO_X emissions. When outside of the ECA, the unit would
likely be inactive, meaning that urea would not be injected into the
exhaust. When the SCR unit is inactive, the exhaust flow could either
continue to pass through the SCR unit or be diverted around the catalyst.
    Under the MARPOL NO_X Technical Code, a means for
monitoring the use of urea must be provided which must include
``sufficient information to allow a ready means of demonstrating that
the consumption of such additional substances is consistent with
achieving compliance with the applicable NO_X limit.'' In
addition, where an NO_X reducing device, such as SCR, is
used, one of the options for providing verification of compliance with
the NO_X standard is through direct measurement and
monitoring of NO_X emissions.
    When operating in an ECA, as discussed below, it is anticipated
that vessels will operate on lower sulfur fuel than outside the ECA.
Therefore, lower sulfur fuel will primarily be used when the SCR unit
is active. However, ship operators may use an exhaust gas scrubber as
an alternative to lower sulfur fuel to meet the SO_X/PM ECA
requirement. In this case, the SCR unit would likely be optimized for
operation on higher sulfur fuel, with the SO_X scrubber
situated downstream of the SCR unit.
(2) How Will Ships Comply With the ECA Fuel Sulfur Standards?
    As discussed above, the MARPOL Annex VI fuel sulfur limit for ships
operating in an ECA is 15,000 ppm today and reduces to 10,000 ppm in
March 2010 and further to 1,000 ppm in 2015. We anticipate that the
1,000 ppm fuel sulfur limit, beginning in 2015, will likely result in
the use of distillate fuel for operation in ECAs. This would require
the vessel to switch from a higher sulfur fuel to 1,000 ppm S fuel
before entering the ECA. The practical implications of fuel switching
are discussed below. As an alternative to operating on lower sulfur
fuel, an exhaust gas cleaning device may be used to remove sulfur from
the exhaust. These devices, which are colloquially known as
SO_X scrubbers, are also discussed below.
(a) Fuel Switching
    Currently, the majority of ocean-going vessels use residual fuel
(also called HFO or IFO) in their main propulsion engines, as this fuel
is relatively inexpensive and has a good energy density. This fuel is
relatively dense (`heavy') and is created as a refining by-product from
typical petroleum distillation. Residual fuels typically are composed
of heavy, residuum hydrocarbons and can contain various contaminants
such as heavy metals, water and sulfur compounds. It is these sulfur
compounds that cause the SO_X emissions when the fuel is
combusted. If the vessel does not employ the use of a sulfur scrubber
or other technology, it will most likely operate on a marine distillate
fuel while in an ECA in order to meet the sulfur emission requirements.
    The sulfur in marine fuel is primarily emitted as SO₂;
however, a small fraction (about 2 percent) is converted to
SO₃. SO₃ almost immediately forms sulfate and is
emitted as direct PM by the engine. Consequently, emissions of
SO₂ and sulfate PM are very high for engines operating on
residual fuel. Switching from high sulfur residual fuel to lower sulfur
distillate fuel results in large reductions in SO₂ and
sulfate PM emissions. In addition to high sulfur levels, residual fuel
contains relatively high concentrations of low volatility, high
molecular weight organic compounds and metals. Organic compounds that
contribute to PM can be present either as a nucleation aerosol or as a
material adsorbed on the surfaces of agglomerated elemental carbon soot
particles and metallic ash particles. The sulfuric acid aerosol in the
exhaust provides a nucleus for agglomeration of organic compounds.
Operation on higher volatility distillate fuel reduces both nucleation
and adsorption of organic compounds into particulate matter. Therefore,
in addition to direct sulfate PM reductions, switching from residual
fuel to distillate fuel reduces organic PM and metallic ash particles
in the exhaust.
    In the majority of vessels which operate on residual fuel, marine
distillate fuel is still used for operation during routine maintenance,
prior to and immediately after engine shut-down, or in emergencies.
Standard procedures today have been established to ensure that this
operational fuel switchover is performed safely and efficiently.
Mainly, in order for the vessel to completely switch between residual
and distillate fuel, the fuel

[[Page 44472]]

pumps and wetted lines will need to be completely purged by the new
fuel to ensure that the ship is burning the correct fuel for the area.
This purging will vary from ship to ship due to engine capacity,
design, operation, and efficiency. Provided the ship has separate
service tanks for distillate and residual fuel (most, if not all,
vessels do), fuel switching time should be limited only by maximum
allowable rate of fuel temperature change. Additionally, for a longer
operation period such as would occur while in an ECA, we investigated
several other fuel switching topics to ensure that vessels would not
have long-term issues from operating on the marine distillate fuels.
    Marine distillate fuels are similar in composition and structure to
other petroleum-based middle distillate fuels such as diesel and No. 2
heating oil, but they have a much lower allowable sulfur content than
residual fuels. This lower sulfur content means that by combusting
marine distillate fuel in their propulsion engines, vessels operating
within the ECA would meet the stricter SO_X requirements.
However, sulfur content is not the only difference between the marine
residual and distillate fuels; they also have different densities,
viscosities, and other specification limits.
    The maritime industry has analyzed the differences between residual
and distillate fuel compositions to address any potential issues that
could arise from switching operation of a C3 engine from residual fuel
to distillate fuel. The results from this research has evolved into
routine operational switching procedures that ensure a safe and
efficient way for the C3 engines to switch operation between the
residual and distillate fuels. A brief summary of the fuel differences,
as well as any potential issues and their usual solutions, is presented below.
(i) Fuel Density
    Due to its chemical composition, residual fuel has a slightly
higher density than marine distillates. Using a less dense fuel could
affect the ballast of a ship at sea and would have to require
compensation. Therefore, when beginning to operate on the distillate
fuel, the vessel operator would have to pay attention to the vessel's
ballast and may have to compensate for any changes that may occur. We
anticipate that these procedures would be similar to operating the
vessel with partially-full fuel tanks.
    Another consideration when switching to a lower density fuel is the
change in volumetric energy content. Distillate fuel has a lower energy
density content on a per gallon basis when compared to the residual
fuel; however, per ton, distillate fuel's energy density is larger than
the residual fuel. This means that when switching from residual fuel to
distillate fuel, if the vessel's tanks are volumetrically limited
(i.e., the tanks can only hold a set quantity of fuel gallons), the
distance a vessel can travel on the distillate fuel may be slightly
shorter than the distance the vessel could travel on the residual fuel
due to the lower volumetric energy content of distillate fuel, which
could require compensation. This distance reduction would be
approximately 5% and would only be of concern while the vessel was
operating on the distillate fuel (i.e., while in the U.S. ECA) as the
majority of the time the vessel will be operating on the residual fuel.
However, if the vessel is limited by weight, the higher energy content
per ton of fuel would provide an operational advantage.
(ii) Kinematic Viscosity
    Residual fuel's kinematic viscosity is much higher than marine
distillate fuel's viscosity. Viscosity is the `thickness' of the fuel.
If this parameter is lowered from the typical value used within a pump,
some issues could arise. If a distillate fuel is used in a system that
typically operates on residual fuel, the decrease in viscosity could
cause problems with high-pressure fuel injection pumps due to the
increased potential for internal leakage of the thinner fuel through
the clearances in the pumping elements. Internal leakage is part of the
design of a fuel pump and is used in part to lubricate the pumping
elements. However, if this leakage rate is too high, the fuel pump
could produce less than optimal fuel injection pressures. If the
distillate fuel's lower viscosity becomes an issue, it is possible to
cool the fuel and increase the viscosity above 2 centistokes, which is
how most vessels operate today during routine fuel switchovers.
(iii) Flash Point
    Flash point is the temperature at which the vapors off the fuel
ignite with an outside ignition source. This can be a safety concern if
the owner/operator uses an onroad diesel fuel rather than a designated
`marine distillate' fuel for operation because marine fuels have a
specified minimum flash point of 60 [deg]F (15.6 [deg]C) to ensure
onboard safety, whereas onroad diesel has a minimum specified flash
point of 52 [deg]F (11.1 [deg]C). However, since most distillate fuels
are created in the same fashion, typical flash points of onroad diesel
are above 60 [deg]F (15.6 [deg]C), and would meet the marine fuel
specification for this property. If the flash point of the fuel being
used on-board the vessel becomes a concern, the operator/bunker
supplier would have to ensure that the vessel is obtaining fuel with a
minimum flash point of 60 [deg]F (15.6 [deg]C) via the bunker delivery
note or through fuel testing.
(iv) Lubricity
    Lubricity is the ability of the fuel to lubricate the engine/pump
during operation. Fuels with higher viscosity and high sulfur content
tend to have very good lubricity without the use of specific lubricity-
improving additives. Refining processes that lower fuel sulfur levels
and their viscosities can also remove some of the naturally-occurring
lubricating compounds. Severe hydrotreating of fuel to obtain ultra-low
sulfur levels can result in poor fuel lubricity. Therefore, refineries
commonly add lubricity improvers to ultra-low sulfur diesel. This will
most likely become a concern when very low levels of sulfur are present
in the fuel and/or the fuel has been hydrotreated to reduce sulfur,
e.g., if ultra-low sulfur highway diesel (ULSD) is used in the engine.
Several groups have conducted studies on this subject, and for some
systems where fuel lubricity has become an issue, lubricity additives
can be utilized or the owner/operator can install a lubricating system
for the fuel pump.
(v) Lube Oil
    Lube oils are used to neutralize acids formed in combustion, most
commonly sulfuric acids created from sulfur in the fuel. The quantity
of acid-neutralizing additives in lube oil should match the total
sulfur content of the fuel. If excessive amounts of these additives are
used, they may create deposits on engine components. Marine engine
manufacturers have recommended that lube oil only needs to be adjusted
if the fuel is switched for more than one week, but the oil feed rate
may need to be reduced as well as engine operating power. Additional
research has been conducted in this area and several oil companies have
been working to create a lubricating oil that would be compatible with
several different types of fuel.
(vi) Asphaltenes
    Asphaltenes are heavy, non-volatile, aromatic compounds which are
contained naturally in some types of crude oil. Asphaltenes may
precipitate out of the fuel solution when a fuel rich in carbon
disulfide, such as residual fuel, is mixed with a lighter hydrocarbon
fuel, such as n-pentane or

[[Page 44473]]

n-heptane found in some distillate fuels. When these heavy aromatic
compounds fall out of the fuel solution, they can clog filters, create
deposition along the fuel lines/combustion chamber, seize the fuel
injection pump, or cause other system troubles. This risk can be
minimized through onboard test kits and by purchasing distillate and
residual fuel from the same refiner. However, according to the
California Air Resources Board, the formation of asphaltenes is not
seen as an issue based on data from previous maritime rules.
    As can be seen, if vessel operators choose to operate on marine
distillate fuel while in the ECA, some prudence is required. However,
as described above, any issues that could arise with switching between
residual and distillate fuel are minimal and can be addressed through
changes to operating procedures. To conduct a successful switchover
between the residual and marine distillate fuels, vessel operators will
need to keep the above issues in mind and follow the engine
manufacturer's standard fuel switching procedure.
(b) SO_X Scrubber
    Annex VI allows for alternative compliance strategies in including
the use of exhaust gas cleaning systems (EGCS). EGCS systems used today
for sulfur control are commonly known as SO_X scrubbers. This
section describes the technological feasibility of scrubbers and how scrubbers
may be used to achieve equivalent emission reductions as fuel switching.
    SO_X scrubbers are capable of removing up to 95 percent
of SO_X from ship exhaust using the ability of seawater to
absorb SO_X. SO_X scrubbers have been widely used
in stationary source applications, where they are a well-established
SO_X reduction technology. In these applications, lime or
caustic soda are typically used to neutralize the sulfuric acid in the
washwater. While SO_X scrubbers are not widely used on ocean-
going vessels, there have been prototype installations to demonstrate
their viability in this application such as the Krystallon systems
installed on the P&O ferry Pride of Kent and the Holland America Line
cruise ship the ms Zaandam. These demonstrations have shown scrubbers
can replace and fit into the space occupied by the exhaust silencer
units and can work well in marine applications.
    There are two main scrubber technologies. The first is an open-loop
design which uses seawater as exhaust washwater and discharges the
treated washwater back to the sea. Such open-loop designs are also
referred to as seawater scrubbers. In a seawater scrubber, the exhaust
gases are brought into contact with seawater, either through spraying
seawater into the exhaust stream or routing the exhaust gases through a
water bath. The SO₂ in the exhaust reacts with oxygen to
produce sulfur trioxide which then reacts with water to form sulfuric
acid. The sulfuric acid in the water then reacts with carbonate and
other salts in the seawater to form sulfates which may be removed from
the exhaust. The washwater is then treated to remove solids and raise
the pH prior to discharge back to the sea. The solids are collected as
sludge and held for proper disposal ashore.
    A second type of SO_X scrubber which uses a closed-loop
design is also feasible for use on marine vessels. In a closed loop
system, fresh water is used as washwater, and caustic soda is injected
into the washwater to neutralize the sulfur in the exhaust. A small
portion of the washwater is bled off and treated to remove sludge,
which is held and disposed of at port, as with the open-loop design.
The treated effluent is held onboard or discharged at open sea.
Additional fresh water is added to the system as needed. While this
design is not completely closed-loop, it can be operated in zero
discharge mode for periods of time.
    Exhaust gas scrubbers can achieve reductions in particulate matter
as well. By removing sulfur from the exhaust, the scrubber removes most
of the direct sulfate PM. Sulfates are a large portion of the PM from
ships operating on high sulfur fuels. By reducing the SO_X
emissions, the scrubber will also control much of the secondary PM
formed in the atmosphere from SO_X emissions. However, simply
mixing alkaline water in the exhaust does not necessarily remove much
of the carbonaceous PM, ash, or metals in the exhaust. While
SO₂ associates with the washwater, particles can only be
washed out of the exhaust through direct contact with the water. In
simple scrubber designs, much of the mass of particles can reside in
gas bubbles and escape out the exhaust.
    Manufacturers have been improving their scrubber designs to address
carbonaceous soot and other fine particles. Finer water sprays, longer
mixing times, and turbulent action would be expected to directionally
reduce PM emissions through contact impactions. One scrubber design
uses an electric charge on the water to attract particles in the
exhaust to the water. In another design, demisters are used that help
effectively wash out PM from the exhaust stream. In either of these
designs, however, the systems would be effective at removing
SO₂ from the exhaust even if the additional hardware needed
for non-sulfate PM reduction were not used.
    Annex VI does not present specific exhaust gas limits that are
deemed to be equivalent to the primary standard of operating on lower
sulfur fuel. Prior to the recent amendments to Annex VI, Regulation 13
included a limit of 6 g/kW-hr SO₂ as an alternative to the
15,000 ppm sulfur limit for sulfur emission control areas. Under the
amended requirements, the specific SO₂ limit was removed and
more general language on alternative approaches was included.
Specifically, Regulation 4 of MARPOL Annex VI now states ``The
Administration of a Party may allow any fitting, material, appliance or
apparatus to be fitted in a ship or other procedures, alternative fuel
oils, or compliance methods used as a alternative to that required by
this Annex if such fitting, material, appliance or apparatus or other
procedures, alternative fuel oils, or compliance methods are at least
as effective in terms of emissions reductions as that required by this
Annex, including any of the standards set forth in regulations 13 and 14.''
    IMO is developing guidelines for the use of exhaust gas cleaning
devices such as SO_X scrubbers as an alternative to operating
on lower sulfur fuel.\99\ These draft guidelines include a table of
SO₂ limits intended to correspond with various fuel sulfur
levels. Based on the methodology that was used to determine the
SO₂ limit of 6.0 g/kW-hr for existing ECAs, the
corresponding limit is 0.4 g/kW-hr SO₂ for a 1,000 ppm fuel
sulfur limit. This limit is based on an assumed fuel consumption rate
of 200 g/kW-hr and the assumption that all sulfur in the fuel is
converted to SO₂ in the exhaust. The draft IMO guidelines
also allow for an alternative approach of basing the limit on a ratio
of SO₂ to CO₂. This has the advantage of being
easier to measure during in-use monitoring. In addition, this ratio
holds more constant at lower loads than a brake-specific limit, which
would approach infinity as power approaches zero. For the existing
15,000 ppm fuel sulfur limit in ECAs, a SO₂ (ppm)/
CO₂(%) limit of 65 was developed. The equivalent limit for a

[[Page 44474]]

1,000 ppm fuel sulfur level is 4.0 SO₂ (ppm)/CO₂(%).
---------------------------------------------------------------------------

    \99\ ``Proposed amendments for resolution MEPC.170(57)--
Guidelines for Exhaust Gas Cleaning Systems,'' Submitted by the
Institute of Marine Engineering, Science and Technology, to the 59th
session of the Marine Environment Protection Committee,
International Maritime Organization, MEPC 59/10/5, April 10, 2009.
---------------------------------------------------------------------------

    Scrubbers are effective at reducing SO₂ emissions and
sulfate PM emissions from the exhaust. However, as discussed above, the
effectiveness of the scrubber at removing PM emissions other than
sulfates is dependent on the scrubber design. In addition to sulfate PM
reductions, switching from residual fuel to distillate fuel results in
reductions in organic PM and metallic ash particles in the exhaust. As
such, consideration should be given to non-sulfate PM when making the
determination that using a given ECGS design is ``at least as
effective'' as operating on lower sulfur fuel to control PM emissions.
    We would not consider an exhaust gas scrubber to be an acceptable
control strategy for reducing NO_X emissions. In a typical
diesel exhaust gas mixture, NO_X is composed of roughly 5-10%
NO₂, with the majority of the remainder in the form of NO.
NO₂ is soluble in water, and therefore may be removed by the
water in the scrubber. It is possible to treat the exhaust upstream of
the scrubber to convert more of the NO_X to NO₂,
thereby facilitating the use of a scrubber to remove NO₂.
However, we are concerned that this would add to nitrogen loading of
the water in which the ship is operating. As discussed in Section
II.B.1, nitrogen loading can lead to serious water quality impacts. The
issue of NO_X scrubbing is addressed in the draft IMO EGCS
guidelines by limiting the amount of NO_X that may be removed
by the scrubber.
    Water-soluble components of the exhaust gas such as SO₂,
SO₃, and NO₂ form sulfates and nitrates that are
dissolved into the discharge water. Scrubber washwater also includes
suspended solids, heavy metals, hydrocarbons and polycyclic aromatic
hydrocarbons (PAH). Before the scrubber water is discharged, there are
several approaches that may be used to process the scrubber water to
remove solid particles. Heavier particles may be trapped in a settling
or sludge tank for disposal. The removal process may include cyclone
technology similar to that used to separate water from residual fuel
prior to delivery to the engine. However, depending on particle size
distribution and particle density, settling tanks and hydrodynamic
separation may not effectively remove all suspended solids. Other
approaches include filtration and flocculation techniques.
Flocculation, which is used in many waste water treatment plants,
refers to adding a chemical agent to the water that will cause the fine
particles to aggregate so that they may be filtered out. Sludge
separated from the scrubber water would be stored on board until it is
disposed of at proper facilities.
    The draft IMO guidelines for the use of exhaust gas cleaning
devices such as SO_X scrubbers include recommended monitoring
and water discharge practices. The washwater should be continuously
monitored for pH, PAHs and turbidity. Further, the IMO guidance include
specifications for these same items, as well as nitrate content when
washwater is discharged in ports, harbors or estuaries. Finally, the
IMO guidance recommends that washwater residue (sludge) be delivered
ashore to adequate reception facilities and not discharged to the sea
or burned on board. Also note that any discharges directly into waters
of the United States may be subject to the Clean Water Act or other
U.S. regulation.

D. ECA Designation and Foreign-Flagged Vessels

    In our previous marine diesel engine rulemakings, EPA did not
extend our Clean Air Act standards to engines on vessels flagged by
other countries. In our 2003 rule, many states and localities expressed
concern about the high levels of emissions from ocean-going vessels. We
examined our position and concluded that no change was necessary at
that time because the Tier 1 standards we adopted for Category 3
engines on U.S. vessels were the same as those contained in MARPOL
Annex VI. We indicated we would re-examine this issue in our current
rulemaking and would also review the progress made by the international
community toward the adoption of new more stringent international standards
that reflect the application of advanced emission control technologies.
    We received comments from a broad range of interested parties on
the Advance Notice of Proposed Rulemaking (ANPRM) for this rulemaking.
Generally, these commenters remain concerned about the contribution of
ocean-going vessels to their air quality. Many took the position that
EPA should cover engines on foreign-flagged OGV under Clean Air Act
section 213 since they account for the vast majority of OGV emissions
in the United States and because of their perception, at the time these
comments were submitted, that the international process to set
stringent standards was stalled.
    In this section, we provide background on EPA's past statements
with regard to the application of our Clean Air Act section 213
standards to engines on foreign-flagged vessels, and summarize comments
we received on this issue in response to our ANPRM. Because the
NO_X standards adopted in the amendments to Annex VI are
comparable in stringency and timing to our proposed CAA NO_X
standards, we do not believe it is necessary to extend our Clean Air
Act Tier 2 and 3 standards to engines on foreign-flagged vessels at
this time. Therefore, this proposal does not seek to resolve the issue
of whether section 213 of the Act allows us to set standards for
engines on foreign-flagged vessels. However, as further explained
below, our decision rests on the timely adoption of an amendment to
Annex VI designating the U.S. coastal waters as an ECA, since the most
stringent of the NO_X standards will be applicable in such
areas. If the amendment designating a U.S. ECA is not timely adopted by
the Parties to IMO, we will revisit this issue.
    We request comments on all aspects of this discussion.
(1) What Is EPA's Current Approach for Engines on Foreign-Flagged Vessels?
    Section 213 of the Clean Air Act (42 U.S.C. 7547) authorizes
regulation of ``new nonroad engine[s]'' and ``new nonroad vehicle[s].''
Because Title II of the Clean Air Act does not define either ``new
nonroad engine'' or ``new nonroad vehicle,'' our early interpretations
of these terms with regard to our other nonroad programs were
reasonably modeled after the statutory definitions of ``new motor
vehicle engine'' and ``new motor vehicle'' found in section 216(3) of
the CAA.\100\ Those early interpretations focused on engines and
vehicles freshly built or imported.
---------------------------------------------------------------------------

    \100\ Proposed Rule, 56 FR 45,866 at 45867 (1991); Final Rule 59
FR 86969, 86971 (1994); see Engine Manufacturers Assoc. v. EPA, 88
F.3d 1075, 1087 (D.C.Cir. 1996).
---------------------------------------------------------------------------

    Similarly, in our first phase of marine diesel emission standards
(our 1999 rule), we modeled our definitions of ``new'' marine engine
and vessel after the existing ``new nonroad engine'' and ``new nonroad
vehicle'' regulatory definitions.\101\ We also referred to Department
of the Treasury rulings on the meaning of ``import'' for customs
purposes.\102\ Specifically, Treasury rulings for marine engines and
vessels include as imports only those marine engines and vessels
intended to remain in the United States permanently. Because engines on
foreign-flagged

[[Page 44475]]

vessels were only entering U.S. ports temporarily, with no intention to
remain permanently, we declined to treat those engines and vessels as
imported and, thus, we determined that these engines are not ``new''
marine engines or vessels for purposes of section 213 of the CAA.
Therefore, in that first rulemaking for diesel marine engines, we did
not apply the CAA program to engines on foreign-flagged vessels.
---------------------------------------------------------------------------

    \101\ Control of Emissions of Air Pollution From New Marine
Compression-Ignition Engines at or Above 37 kW; Final Rule, 64 FR
73300 (December 29, 1999).
    \102\ Control of Emissions of Air Pollution From New Marine
Compression-Ignition Engines at or Above 37 kW; Final Rule, 64 FR
73300 (December 29, 1999) at 73302, discussing American Customs
Brokerage Co., Inc., a/c Astral Corp. v. United States, 375 F.Supp.
1360, 1366 (Cust.Ct. 1974).
---------------------------------------------------------------------------

    In our subsequent rulemaking to establish Clean Air Act emission
standards for Category 3 engines,\103\ we re-examined this background
to re-consider the issue of whether engines on foreign-flagged vessels
should be included within the scope of our Clean Air Act standards.
Because the NO_X standards we adopted in that rule were near-
term standards that were equivalent to the then-MARPOL Annex I
NO_X standards, and because we adopted a regulatory deadline
to consider an additional tier of NO_X standards (which are
the subject of the current rulemaking), we deferred making a decision
on whether we have the discretion to set standards for such engines
until the present rulemaking. We decided that even if we have the
discretion to interpret ``new marine engine'' to include engines on
foreign-flagged vessels, it would be appropriate not to exercise such
discretion at that time since the near-term standards that we would be
adopting in that rule already applied to foreign-flagged vessels
through Annex VI. We explained that foreign-flagged vessels were
expected to comply with the current MARPOL standards whether or not
they were also subject to the equivalent Clean Air Act standards and,
consequently, no significant emission reductions would be achieved by
treating foreign-flagged vessels as ``new'' for purposes of the near-
term standards in that final rule. However, we also indicated that we
would consider, in the subsequent rulemaking, whether we need to
resolve under what circumstances we may or should define new nonroad
engine and vessel to include foreign-flagged engines and vessels. As
part of that determination, we indicated we would also assess the
progress made by the international community toward adopting new more
stringent international consensus standards that reflect advanced
emission-control technologies.
---------------------------------------------------------------------------

    \103\ Control of Emissions of Air Pollution From New Marine
Compression-Ignition Engines at or Above 30 Liters/Cylinder; Final
Rule, 68 FR 9746 at 9759 (February 28, 2003).
---------------------------------------------------------------------------

    Accordingly, we raised this issue in our 2007 ANPRM,\104\
indicating that we would evaluate whether we should re-define new
nonroad engines and vessels to include foreign-flagged engines and
vessels. Likewise, we indicated that as part of that evaluation, we
would also assess the progress made by the international community
toward the adoption of new more stringent international standards that
reflect advanced emission-control technologies.
---------------------------------------------------------------------------

    \104\ Control of Emissions From New Marine Compression-Ignition
Engines at or Above 30 Liters per Cylinder: Advanced Notice of
Proposed Rulemaking, 72 FR 69522 at 69545 (December 7, 2007).
---------------------------------------------------------------------------

(2) Is EPA Proposing To Change the Current Approach to Engines on
Foreign-Flagged Vessels?
    Since the ANPRM was published, the International Maritime
Organization adopted amendments to MARPOL Annex VI. These amendments,
adopted in October 2008, contain stringent new tiers of NO_X
emission limits for marine diesel engines as well as new fuel sulfur
limits.\105\ These requirements are applicable in the United States to
both domestic and foreign-flagged vessels through operation of the Act
to Prevent Pollution from Ships (APPS), as amended in 2008.\106\
Amendments to the Act to Prevent Pollution from Ships were adopted in
2008 specifically to provide the statutory mechanism to enforce the
Annex VI requirements on domestic and foreign-flagged vessels and to
enforce the ECA requirements once a U.S. ECA is designated under Annex VI.
---------------------------------------------------------------------------

    \105\ Resolution MEPC.176(58), ``Amendments to the Annex of the
Protocol of 1997 to Amend the International Convention for the
Prevention of Pollution from Ships, 1973, As Modified by the Protocol
of 1978 Relating Thereto,'' MEPC 58/23/Add.1 Annex 13, October 10, 2008.
    \106\ 33 U.S.C. 1901-1912.
---------------------------------------------------------------------------

    The most stringent of the new Annex VI standards requires engines
to meet Tier III NO_X standards. Under the Annex, these
requirements would apply in designated ECAs. At the time the amendments
were adopted, countries were invited to propose areas for ECA
designation so that the full benefit of these technology-forcing
standards could be realized by areas that demonstrate a need for them.
As explained above, the United States and Canada recently submitted a
proposal to amend MARPOL Annex VI to designate U.S. and Canadian
coastal areas as an ECA. Due to the human health and welfare needs for
these controls as documented in the ECA application, we expect that the
Parties to Annex VI will adopt this amendment at the 60th Session of
the Marine Environment Protection Committee (MEPC), to be held in March
2010. Once the ECA is adopted by the Parties and enters into force,
U.S.- and foreign-flagged ships will be subject to the stringent
provisions of MARPOL Annex VI within the ECA. Since the ECA was
developed to protect air quality in port and inland areas, these
requirements will also apply in U.S. internal waters. The U.S. will
enforce these requirements pursuant to APPS.
    More specifically, under the recently-adopted NO_X
amendments to Annex VI, in 2016, the engines on new ships operating in
ECAs must meet Tier III NO_X standards requiring advanced-
technology engines designed to cut emissions of ozone-forming
NO_X by roughly 80%. These MARPOL Annex VI Tier III
NO_X standards are comparable to the CAA Tier III
NO_X standards we are proposing in this Federal Register
notice and are more fully described in Section III. When operating
outside a designated ECA, the engines must meet the global Tier II
NO_X standard, which otherwise applies to engines on ships
beginning in 2011 and will require a 20% reduction from the current
Tier I levels. Thus, assuming the U.S. ECA is adopted, NO_X
standards comparable to those we are proposing in this NPRM under
section 213(a)(3) of the CAA will be applicable to engines on foreign-
flagged vessels operating in all U.S. waters and will be enforced under
the authority of APPS.
    Because we expect the proposed amendment to Annex VI designating a
North American ECA will be adopted in a timely manner, the result of
the combined CAA program and the ECA designation will be the
application of comparable NO_X standards to domestic- and
foreign-flagged vessels which will be enforceable under a combination
of the Act and APPS. As a result, it would not be necessary to resolve
the issue of whether we have the authority to impose section 213 CAA
standards on foreign-flagged vessels. For this reason, we are not
proposing to change our current approach with regard to the application
of the Clean Air Act marine diesel engine standards to engines on
foreign-flagged vessels. The conditions that led us to this conclusion
in 2003 are the same today, assuming approval of the North American
ECA. Because this decision not to address our authority to regulate
foreign-flagged vessels at this time is predicated upon timely approval
of the U.S.-Canada proposal to amend Annex VI to designate the North
American ECA, we will revisit this approach if the ECA is not adopted
as expected.

[[Page 44476]]

(3) What Comments Did EPA Receive on This Issue?
    EPA received a number of comments in response to the ANPRM on the
issue of whether EPA should or could address emissions from engines on
foreign-flagged vessels. Most commenters express a need to include
engines on foreign-flagged vessels given the significant contribution
of such vessels' emissions to the air pollution problem we are
addressing.\107\ Most of these same commenters also express the
position that EPA has the authority to include engines on foreign-
flagged vessels as part of its section 213 emission reduction
program.\108\ Other comments take the position that EPA not only has
the authority to cover such engines and their emissions, but EPA has an
obligation to do so.\109\ In contrast, EPA also received comments
opposing the view that EPA has such authority and encouraging EPA to
work with international bodies to resolve concerns about such
emissions.\110\ A brief summary of these positions follows.
---------------------------------------------------------------------------

    \107\ See, e.g., South Coast Air Quality Management District
(SCAQMD), EPA-HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008);
Clean Air Task Force (CATF), EPA-HQ-2007-0121, Document No. 0086.1
(March 6, 2008); Environmental Defense Fund (EDF), EPA-HQ-2007-0121,
Document No. 0097.1 (March 6, 2008); Earthjustice, EPA-HQ-OAR-2007-
0121, Document No. 0093.1 (March 6, 2008); Environmental Law &
Policy Clinic at Harvard Law School (HLS), EPA-HQ-OAR-2007-0121,
Document No. 0082.1 (March 6, 2008).
    \108\ See, e.g., South Coast Air Quality Management District
(SCAQMD), EPA-HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008);
Clean Air Task Force (CATF), EPA-HQ-2007-0121, Document No. 0086.1
(March 6, 2008).
    \109\ See, e.g., Environmental Law & Policy Clinic at Harvard
Law School (HLS), EPA-HQ-OAR-2007-0121, Document No. 0082.1 (March
6, 2008).
    \110\ See, e.g., American Petroleum Institute (API), EPA-HQ-OAR-
2007-0121, Document No. 0098.2 (March 6, 2008) and American
Petroleum Institute (API), EPA-HQ-OAR-2007-0121, Document No. 0098.6
(March 6, 2008).
---------------------------------------------------------------------------

    Generally, environmental non-governmental organizations and state
air quality control authorities commenting on the ANPRM support the
view that EPA should include engines on foreign-flagged vessels in its
Clean Air Act emission reduction program. They state that ``there is no
legal impediment to regulating the emissions of foreign-flagged ships
operating in U.S. waters. U.S. courts have long held that U.S. laws
apply only within the territorial jurisdiction of the U.S., at least in
the absence of evidence of contrary Congressional intent.'' \111\
---------------------------------------------------------------------------

    \111\ Clean Air Task Force (CATF), EPA-HQ-2007-0121, Document
No. 0086.1 (March 6, 2008) at 25.
---------------------------------------------------------------------------

    South Coast Air Quality Management District (SCAQMD) takes the
position that a U.S. statute is presumed to apply to a foreign-flagged
vessel in United States waters unless the statute sought to regulate
``matters that involve only the internal order and discipline of the
vessel'' or ``only the internal operations of the ship.'' \112\ Because
the United States has a vital interest in reducing pollutants from all
visiting ships and because ``the `physical structure' of a ship is not
a matter that `concerns only the internal operations of the ship,' ''
SCAQMD believes that section 213 of the CAA should be presumed to apply
to engines on foreign-flagged vessels. Moreover, SCAQMD comments that,
even if a clear statement of intent to cover engines on foreign-flagged
vessels were required, sections 213(a)(3) and (4) unequivocally apply
``to all such nonroad engines, without qualifications.'' \113\
---------------------------------------------------------------------------

    \112\ South Coast Air Quality Management District (SCAQMD), EPA-
HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008) at 6 and 7,
quoting Spector v. Norwegian Cruise Line Ltd., 545 U.S. 119, 131
(2005) (emphasis added by commenter).
    \113\ South Coast Air Quality Management District (SCAQMD), EPA-
HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008) at 8.
---------------------------------------------------------------------------

    Similarly, the Environmental Law & Policy Clinic at Harvard Law
School (HLS) identifies examples of agencies applying statutory
requirements to foreign-flagged vessels, even if significant
modifications to the vessel may be required and ``when the governing
statute does not explicitly direct or otherwise authorize the agency to
exempt [such vessels].'' \114\
---------------------------------------------------------------------------

    \114\ See, Environmental Law & Policy Clinic at Harvard Law
School (HLS), EPA-HQ-OAR-2007-0121, Document No. 0082.1 (March 6,
2008) at 3 and 4.
---------------------------------------------------------------------------

    On interpretation of the term ``new nonroad engine,'' commenters
supporting regulation of emissions from foreign-flagged vessels believe
that section 213 provides broad authority to regulate any emissions
from new nonroad engines and vehicles, and although the statute does
not define what a ``new nonroad engine'' is, neither does the statute
distinguish ``between U.S.-flagged and foreign-flagged ships for
purposes of emission standards.'' \115\ Thus, the ambiguity, if any,
should be resolved in favor of regulating such engines.
---------------------------------------------------------------------------

    \115\ Clean Air Task Force (CATF), EPA-HQ-2007-0121.1, Document
No. 0086.1 (March 6, 2008) at 25.
---------------------------------------------------------------------------

    In that vein, SCAQMD would identify any engine or vessel
constructed after the effective date of an EPA rule as ``new'' and
subject to the applicable standard ``regardless of whether those
vessels are foreign-flagged'' and regardless of whether the engine or
vessel is imported. Further, SCAQMD stated that: ``While it might not
be known with certainty for some ships at the time they are built
whether they are going to travel to U.S. ports, in most cases it is
likely that this would be known, and the shipbuilder could always
preserve the ship's ability to do so by meeting EPA's standards.'' \116\
---------------------------------------------------------------------------

    \116\ South Coast Air Quality Management District (SCAQMD), EPA-
HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008) at 5.
---------------------------------------------------------------------------

    SCAQMD also addresses an EPA position in an earlier rulemaking
regarding EPA's interpretation of ``new'' to include ``import'' as that
term is interpreted under U.S. customs laws, and whether engines on
foreign-flagged vessels visiting the U.S. are therefore imported. In
that context, SCAQMD states: ``the fact that a vessel is not imported
does not mean it is not `new' within the ordinary meaning of the term.
* * * The inclusion of the term `imported' was to cover vessels that
otherwise would not be considered `new,' in order to prevent
circumvention. Thus, the definition of `imported' does not limit EPA's
ability to apply its rules to vessels that are in fact `new,' even
though foreign-flagged. We believe the ordinary meaning of `new' is
sufficient to cover this concept.'' \117\ HLS similarly comments that:
``Section 213 can reasonably be interpreted to exclude cars and trucks
that have neither been manufactured in nor imported into the United
States because those excluded cars and trucks do not pollute air in the
U.S. Neither Section 213 nor Section 216, however, authorizes EPA to
exclude marine vessels that do use and pollute U.S. ports, whether
those vessels can somehow be deemed `imported' or `not imported.' '' \118\
---------------------------------------------------------------------------

    \117\ South Coast Air Quality Management District (SCAQMD), EPA-
HQ-OAR-2007-0121, Document No. 0084.1 (March 6, 2008) at 6.
    \118\ Environmental Law & Policy Clinic at Harvard Law School
(HLS), EPA-HQ-OAR-2007-0121, Document No. 0082.1 (March 6, 2008) at
5 (emphasis included with comment).
---------------------------------------------------------------------------

    In contrast, Clean Air Task Force (CATF) believes it would be
``reasonable for the Agency to continue to interpret `new nonroad
engine' as including `imported' nonroad engines,'' but that EPA is not
obligated to ``defer to interpretations of that term under U.S. customs
laws, in view of the dramatically different purposes of such laws.''
\119\ CATF explains that ``[w]hile the purpose of application of the
customs laws to `imports' is to impose a duty on merchandise that is
brought into the country on a permanent basis, the purpose of the
application of the Clean Air Act to `imports' is far different: that
is, to reduce pollution

[[Page 44477]]

from sources operating within the United States, including its
territorial waters and ports. Therefore, it is reasonable to conclude
that under the Act, whether a vessel is operating in U.S. waters
permanently, or whether it is flying a U.S. flag of registry, should
not be conditions for regulating its emissions.'' \120\
---------------------------------------------------------------------------

    \119\ Clean Air Task Force (CATF), EPA-HQ-2007-0121, Document
No. 0086.1 (March 6, 2008) at 25.
    \120\ Clean Air Task Force (CATF), EPA-HQ-2007-0121, Document
No. 0086.1 (March 6, 2008) at 25-26.
---------------------------------------------------------------------------

    Some commenters, however, take the opposite position. API comments
that ``EPA's authority to regulate non-U.S. vessels/engines that are
temporarily in U.S waters turns on whether such vessels/engines are
`imported' under the CAA,'' that EPA appropriately relied in the past
on the customs law's interpretation of ``import,'' and that ``Congress
did not intend to grant authority to EPA to regulate non-U.S. flagged
vessels that are only in U.S. waters temporarily.'' \121\
---------------------------------------------------------------------------

    \121\ American Petroleum Institute (API), EPA-HQ-OAR-2007-0121,
Document No. 0098.6 (March 6, 2008) at 2-3.
---------------------------------------------------------------------------

    EPA appreciates all of the comments we received on this. Although
we continue to believe it is reasonable not to amend our current
definition of new engine, we intend to revisit that issue without delay
if the U.S. ECA is not timely considered and adopted.

VI. Certification and Compliance Program

    This section describes the regulatory changes proposed for the CAA
Category 3 engine compliance program. In general, these changes are
being proposed to ensure that the benefits of the standards are
realized in-use and throughout the useful life of these engines, and to
incorporate lessons learned over the last few years from the existing
test and compliance program.
    The most obvious change is that we are proposing to apply the plain
language regulations of 40 CFR 1042 to Category 3 engines. These part
1042 regulations were adopted in 2008 for Category 1 and Category 2
engines (73 FR 25098, May 6, 2008). They were structured to contain the
provisions that are specific to marine engines and vessels in part
1042, and apply the parts 1065 and 1068 for other provisions not
specific to marine engines. This approach is not intended to
significantly change the compliance program from the program currently
applicable to Category 3 engines under 40 CFR part 94, except as
specifically noted in this notice (and we are not reopening for comment
the substance of any part of the program that remains unchanged
substantively). As proposed, these plain language regulations would
supersede the regulations in part 94 for Category 3 engines beginning
with the 2011 model year.
    The changes from the existing programs are described below along
with other notable aspects of the compliance program. These changes are
necessary to implement the new standards as well as to implement the
Annex VI program as required under the amendments to the Act to Prevent
Pollution from Ships.
    Finally, we are also including several proposed changes and
clarifications to the compliance program that are not specific to
Category 3 engines. Some of these would apply only for marine diesel
engines below 30 liters per cylinder displacement.

A. Compliance Provisions for Category 3 Engines

    In general, we are proposing to retain the certification and
compliance provisions finalized with the Tier 1 standards for Category
3 engines. These include testing, durability, labeling, maintenance,
prohibited acts, etc. However, we believe additional testing and
compliance provisions will be necessary for new standards requiring
more advanced technology and more sophisticated emission control
systems. These changes, as well as other modifications to our
certification and compliance provisions for Category 3 engines, are
discussed below.
    Our certification process is similar to the process specified in
the Annex VI NO_X Technical Code (NTC) for pre-certification.
However, the Clean Air Act specifies certain requirements for our
certification program that are different from the NTC requirements. The
EPA approach differs most significantly from the NTC in three areas.
First, the NTC allows but does not require certification of engines
before installation (known as pre-certification under the NTC), while
EPA does require it. Second, we include various provisions to hold the
engine manufacturer responsible for the durability of emission
controls, while the NTC holds the engine manufacturer liable only
before the engine is placed into service. Finally, we specify broader
temperature ranges and allow manufacturers less discretion in setting
engine parameters for testing, with the goal of adopting test
procedures that represent a wide range of normal in-use operation. We
believe the regulations in this final rule are sufficiently consistent
with NTC that manufacturers can continue to use a single harmonized
compliance strategy to certify under both systems.
(1) Testing
    We are proposing to largely continue the testing requirements that
currently apply for Category 3 engines with a few exceptions.
(a) General Test Procedures
    We are proposing to apply the general engine testing procedures of
40 CFR part 1065 to Category 3 engines. This is part of our ongoing
initiative to update the content, organization and writing style of our
regulations. For each engine sector for which we have recently
promulgated standards (such as smaller marine diesel engines), we refer
to one common set of test procedures in part 1065. This is because we
recognized that a single set of test procedures would allow for
improvements to occur simultaneously across engine sectors. A single
set of test procedures is easier to understand than trying to
understand many different sets of procedures, and it is easier to move
toward international test procedure harmonization if we only have one
set of test procedures.
    These procedures replace those currently published in parts 92 and
94 and are fundamentally similar to those procedures. The primary
differences are related to tighter tolerances to reduce test-to-test
variability. In most cases, a manufacturer should be able to comply
with 1065 using its current test equipment. Nevertheless, full
compliance with part 1065 would take some effort on the part of
manufacturers. As such, we are proposing some flexibility to make a
gradual transition from the part 92 and 94 procedures. For several
years, manufacturers would be able to optionally use the part 1065
procedures. Part 1065 procedures would generally be required for any
new testing by 2016 (except as noted below). This is very similar to
the allowance already provided with respect to Category 1 and Category
2 engines.
    We are also proposing to allow Category 3 manufacturers to submit
data collected using the test equipment and procedures specified in the
NO_X Technical Code, even after 2016. The procedures in 1065
would still be the official test procedures, however, and manufacturers
would be liable with respect to any test results from 1065 testing.
Thus, we do not believe this allowance would have any effect on the
stringency of the standards, or how manufacturers design and produce
their engines.
(b) Test Fuel
    Appropriate test procedures need to represent in-use operating conditions as

[[Page 44478]]

much as possible, including specification of test fuels consistent with
the fuels that compliant engines will use over their lifetimes. Our
current regulations allow Category 3 engine testing using distillate
fuel, even though many vessels with these engines currently use less
expensive residual fuel. This provision is consistent with the
specifications of the NO_X Technical Code. We are proposing
to continue this approach for Tier 2 and Tier 3. Our primary reason for
continuing this approach is that we expect these Category 3 engines
will generally be required to use distillate fuels in areas that will
affect U.S. air quality for most of their operational lives. (We expect
this because we expect IMO to approve our proposal to amend Annex VI to
designate the U.S. coastal waters as an ECA.) However, since these
engines will not be required to use low-sulfur or ultra low-sulfur
fuel, we are also proposing to add an explicit requirement that a high-
sulfur distillate test fuel be used for both Tier 2 and Tier 3 testing.
Our testing regulations (40 CFR 1065.703) are being revised to specify
that high-sulfur diesel test fuels contain 800 to 2500 ppm sulfur. This
would be lower than the current specification of 2000 to 4000 ppm. This
will allow manufacturers to test with fuels near the ultimate in-use
limit of 1000 ppm. We request comment on applying this approach to
Category 1 and/or Category 2 engines on Category 3 vessels. Commenters
supporting this approach should address how such engines could meet the
applicable PM requirements. For example, should EPA allow these engines
to show compliance using emission credits? Would this require us to set
a higher Family Emission Limit cap for engines using this allowance?
See also Section VI.C.1 for further discussion of these engines.
(c) Testing Catalyst-Equipped Engines
    In our existing programs that require compliance with catalyst-
based engines (such as the Category 1 & 2 engine program), we require
manufacturers to test prototype engines equipped with prototype
catalyst systems. However, it is not clear that this approach would be
practical for Category 3 engines. These are problematic because of
their size and because they tend to be a least partially custom built.
Requiring a manufacturer to construct a full-scale catalyst system for
each certification test would be extremely expensive.
    We are proposing an optional special certification procedure to
address this concern. The provisions are in Sec.  1042.655 of the
proposed regulations. The emission-data engine must be tested in the
specified manner to verify that the engine-out emissions comply with
the Tier 2 standards. The catalyst material must be tested under
conditions that accurately represent actual engine conditions for the
test points. This catalyst testing may be performed on a benchscale.
Manufacturers must include a detailed engineering analysis describing
how the test data collected for the engine and catalyst material
demonstrate that all engines in the family will meet all applicable
emission standards. Manufacturers must verify their design by testing a
complete production engine and catalysts in its final assembled configuration.
(d) Testing Production Engines
    Under the current regulations, manufacturers must test a sample of
their Category 1 and Category 2 engines during production. We are now
proposing similar provisions for Category 3 engines. While in the past
we did not believe that such testing was necessary, circumstances have
changed in two important ways. First, relatively inexpensive portable
test systems have recently become available. This greatly reduces the
cost of testing an engine in a ship. Second, the need to verify that
production engines actually comply with the emission standards
increases as standards become more stringent and emission control
technologies become more complicated.
    Specifically, we are proposing that every new Tier 2 or later
Category 3 engine be tested during the vessel's sea trial to show
compliance with the applicable NO_X standard. Any engine that
fails to comply with the standard would need to be repaired and
retested. Since we are not proposing PM standards for Category 3
engines, and because PM measurement is more difficult than measuring
only gaseous emission, we would not require PM measurement during testing
after installation, provided PM emissions were measured during certification.
    One concern that manufacturers have raised in the past is that it
can be difficult to achieve the exact test points in use. Therefore, we
are proposing to allow manufacturers flexibility with respect to test
points when testing production engines, consistent with the equivalent
allowance under the NO_X Technical Code. Where manufacturers
are unable to duplicate the certification test points during production
testing, we are proposing to allow them to comply with an alternate
``at-sea standard'' that is 10 percent higher than the otherwise
applicable standard. This is specified in Sec.  1042.104(g).
    Since we are proposing to require testing of every production
engine, we are also proposing to exclude Category 3 engines from
selective enforcement audits under 40 CFR part 1068.
(e) PM Measurement
    We are proposing to require manufacturers to measure PM emissions
along with NO_X, HC, and CO during certification testing to
report these results along with the other test data. This is similar to
our recently proposed requirement for manufacturers to measure and
report certain greenhouse gas emissions for a variety of nonroad engine
sectors.\122\ Manufacturers should be able to collect these data using
stand-alone partial flow PM measurement systems. In recent years,
several vendors have developed such systems to be compliant with the
requirements of 1065.
---------------------------------------------------------------------------

    \122\ 74 FR 16448, April 10, 2009.
---------------------------------------------------------------------------

    It is worth noting that in the past, there has been some concern
regarding the use of older PM measurement procedures with high sulfur
fuels. The primary issue of concern was variability of the PM
measurement, which was strongly influenced by the amount of water bound
to sulfur. However, we believe improvements in PM measurement
procedures, such as those specified in 40 CFR 1065, have addressed
these issues of measurement variability. The U.S. Government recently
submitted proposed procedures for PM measurement to IMO.\123\
---------------------------------------------------------------------------

    \123\ ``Measurement Method For Particulate Matter Emitted From
Marine Engines,'' Submitted by the United States to the
International Maritime Organization Intersessional [sic] Meeting Of
the BLG Working Group On Air Pollution, 5 October 2007.
---------------------------------------------------------------------------

(2) Low Power Operation and Mode Caps
    Emission control performance can vary with the power at which the
engine operates. This is potentially important because Category 3
engines can operate at relatively low power levels when they are
operating in port areas. Ship pilots generally operate engines at
reduced power for several miles to approach a port, with even lower
power levels very close to shore. The International Organization for
Standardization (ISO) E3 and E2 test cycles, which are used for
emission testing of propulsion marine engines, are heavily weighted
towards high power. In the absence of other requirements, it would be
possible for manufacturers to meet the cycle-weighted average emission
standards without significantly reducing emissions at low-power modes.
This could be especially problematic for Tier

[[Page 44479]]

3 engines relying on urea-SCR for NO_X control, since the
effectiveness of the control is directly affected by the amount of urea
that is injected and there would be an obvious economic incentive for
manufacturers and operators to minimize the amount of urea injected.
    We are addressing these concerns in two ways. First, we are
applying mode caps for NO_X emissions that will ensure that
manufacturers design their emission controls to be fully effective at
25 percent power. This would require that manufacturers meet the
applicable NO_X standard at each individual test point, and
not merely as a weighted average of the test points. The caps would
only apply for NO_X emissions, and manufacturers would not be
required to meet the HC and CO standards at each test point. For HC and
CO, manufacturers would only be required to meet the applicable
standards as a weighted average of the test points
    The other concern is related to power levels other than the test
points. To address this, we will continue to rely on our prohibition of
defeat devices to ensure effective control for lower powers. Most
significantly, this would prohibit manufacturers from turning off the
urea supply to SCR systems at these points, unless the exhaust gas
temperature was too cool for the SCR catalyst to function properly.
(Urea at these low temperatures does not react with NO_X
molecules and can lead to high emissions of ammonia.)
(3) On-Off Technologies
    One of the features of the SCR technologies that are projected to
be used to meet the Tier 3 NO_X standards is that they are
not integral to the engine and the engine can be operated without them.
They will also require the operator to supply the proper reductant.
Thus, these technologies are potentially ``on-off'' technologies.
Switching to distillate fuel instead of residual fuel to reduce
SO_X and PM emissions can be thought of in the same way.
    The increased operating costs of such controls associated with urea
(or other reductants) or with distillate usage suggest that it may be
reasonable to allow these systems to be turned off while a ship is
operated on the open ocean, far away from sensitive areas that are
affected by ship emissions. This is the basis of the MARPOL Annex VI
ECA approach, with one set of limits that would apply when ships are
operated in sensitive areas and another that would apply when ships are
operated outside those limits.
    We are proposing a new regulatory provision in Sec.  1042.115(g) to
address the use of on-off technologies on Category 3 engines subject to
the Tier 3 standards. This provision would require the manufacturer to
obtain EPA approval to design the engines to have on-off features. It
would also require the engine's onboard computer to record the on-off
operation (including geographic position and time) and require that the
engine comply fully with the Tier 2 standards when the Tier 3 controls
are turned off. We request comment on applying this approach to
Category 1 and/or Category 2 engines on Category 3 vessels.
    At this time, our goal is to require manufacturers to comply with
the Tier 3 standards in all areas that will ultimately be included in
any Emission Control Area, which should include all areas for which EPA
has determined that Category 3 engines significantly affect U.S. air
quality. As discussed in Section V.A, we have not yet determined the
extent to which Category 3 engines affect air quality in the U.S.
territories, areas of Alaska west of Kodiak, or the smallest Hawaiian
islands. Therefore, we are proposing to include an interim provision to
exclude those areas with respect to the Tier 3 standards at this time.
We will revisit this should our review of available modeling results or
other information indicate that compliance with the Tier 3 standards
should be required for some or all of these areas.
(4) NO_X Monitoring
    We are proposing that Category 3 engines equipped with on-off
controls must be equipped to continuously monitor NO_X
concentrations in the exhaust. Engine manufacturers would be required
to include systems to automatically alert operators of any operation
with the emission controls on where NO_X concentrations
indicate malfunctioning emission controls. We would also require the
engine to record in nonvolatile computer memory any such operation.
However, we would not require monitoring NO_X concentrations
during operation for which the emission controls are allowed to be
turned off, provided the record indicated that the controls were turned
off. Where the NO_X monitor system indicates a malfunction,
operators would be required to investigate the cause and make any
necessary adjustments or repairs.
    We are proposing to define as a malfunction of the emission
controls any condition that would cause an engine to fail to comply
with the applicable NO_X standard (See Section VI.A.1.d for a
discussion of standards that would apply for installed engines at sea).
Such malfunctions could include maladjustment of the engine or
controls, inadequate reductant, or emission controls turned off
completely. We recognize that it is not possible to perfectly correlate
a measured NO_X concentration with an equivalent cycle-
weighted emission result. Therefore, the proposed requirement would
allow engine manufacturers to exercise good engineering judgment in
using measured NO_X concentrations to monitor the emission
performance of the engine. We request comment on the need for less
subjective approaches. For example, should we establish caps for
concentrations based on the concentrations measured during certification?
(5) Parameter Adjustment
    Given the broad range of ignition properties for in-use residual
fuels, we expect that our current in-use adjustment allowance for
Category 3 engines would result in a broad range of adjustment. We are
therefore considering a requirement for operators to perform a simple
field measurement test to confirm emissions after parameter adjustments
or maintenance operations, using onboard emission measurement systems
with electronic-logging equipment. We expect this issue will be equally
important for more advanced engines that rely on water injection or
aftertreatment for emission reductions. Onboard verification systems
could add significant assurance that engines have properly operating
emission controls.
    We envision a simpler measurement system than the type specified in
Chapter 6 of the NO_X Technical Code. As we described in the
2003 final rule, we believe that onboard emission equipment that is
relatively inexpensive and easy-to-use could verify that an engine is
properly adjusted and is operating within the engine manufacturer's
specifications. Note that Annex VI includes specifications allowing
operators to choose to verify emissions through onboard testing, which
suggests that Annex VI also envisioned that onboard measurement systems
could be of value to operators. We request comment on requiring onboard
verification systems on ships with Category 3 marine engines and on a
description of such a system. In particular, we request comment on
whether the continuous NO_X monitoring system described in
the previous subsection would be sufficient to address these concerns.

[[Page 44480]]

(6) In-Use Liability
    Under the existing Tier 1 program for Category 3 engines, owners
and operators are required to maintain, adjust, and operate the engines
in such a way as to ensure proper function of the emission controls.
These requirements, which are described in 40 CFR 94.1004, are being
continued in the regulations in part 1042 (See Sec.  1042.660 of the
proposed regulations for these requirements). Specifically, these
provisions require that all maintenance, repair, adjustment, and
alteration of the engine be performed using good engineering judgment
so that the engine continues to meet the emission standards. Each two-
hour period of operation of an engine in a condition not complying with
this requirement would be considered a separate violation. Owners will
also continue to be required to keep certain records onboard the vessel
and report annually to EPA whether or not the vessel has complied with
these and other requirements.
(7) Replacement Engines
    The existing provisions of Sec.  1042.615 provide an exemption that
allows manufacturers to produce new uncertified engines when they are
needed to replace equivalent existing engines that fail prematurely.
For many engine sectors, this practice is common, but represents a very
small faction of a manufacturer's total engine production. However,
since we do not believe this practice is either common or necessary for
Category 3 engines, we are proposing to not allow this exemption for
Category 3 engines.

B. Compliance Provisions To Implement Annex VI NO_X
Regulation and the NO_X Technical Code

    In addition to the Clean Air Act provisions being proposed in this
action, we are also proposing new regulations to implement certain
provisions of the Act to Prevent Pollution from Ships. These
regulations are proposed as a new part 1043 of title 40.
    The Act to Prevent Pollution from Ships establishes a general
requirement for vessels operating in the exclusive economic zone and
navigable waters of the United States to comply with MARPOL Annex VI.
It also gives EPA and the Administrator the authority to further
implement MARPOL Annex VI. Many of the requirements relating to
NO_X emissions and fuel sulfur limits can be implemented
without the need for further elaboration in that the Annex, along with
the NO_X Technical Code, provides instructions on how to
demonstrate compliance with those requirements. However, APPS
authorizes the Administrator to prescribe any necessary or desired
additional regulations to assist in carrying out the provisions of
Regulations 12 through 19 of Annex VI (see 33 USC 1903(c)(2)).
Specifically, the regulations being proposed in this NPRM in part 1043
of title 40 are intended to assist in the implementation of the engine
and fuel requirements contained in Regulation 13, 14, and 18 of MARPOL
Annex VI.. They address such issues as how to obtain an Engine
International Air Pollution Prevention (EIAPP) certificate (which is
equivalent in many ways to a Clean Air Act certificate of conformity),
exemptions for vessels used exclusively in domestic service, and requirements
for vessels not registered by a country that is a Party to Annex VI.
    In contrast to the compliance program for Category 3 engines
described in Section VI.A, the 1043 regulations described in this
section would apply to all marine diesel engines above 130 kW.
Similarly, the MARPOL Annex VI fuel requirements apply to all fuel oil
used onboard a vessel, defined as any fuel delivered to and intended
for combustion purpose for propulsion or operation on board a ship,
including distillate and residual fuels.
(1) EIAPP Certificates
    In general, an engine can be dual-certified under EPA's Clean Air
Act marine diesel engine program and the MARPOL Annex VI/APPS program.
However, we propose to require that engine manufacturers submit
separate applications for the 1042 and EIAPP certificates. The proposed
regulations in part 1043 specify the process that would apply. The
process for obtaining the EIAPP is very similar to the process for
obtaining a certificate of conformity under part 1042, and although
there are differences between the programs, manufacturers should be
able to comply with both programs with very little additional work. The
primary differences are that, to certify to the MARPOL Annex VI
standards, the manufacturer must include a copy of the Technical File
and onboard NO_X verification procedures (as specified in
Section 2.4 of the NO_X Technical Code) and is not required
to provide information about useful life, emission labels,
deterioration factors, or PM emissions.\124\ Currently engine
manufacturers will be able to apply for both certifications using the
certification templates and test data.
---------------------------------------------------------------------------

    \124\ See 68 FR 9746, February 28, 2003, at 9774-5 for a discussion
of these differences as they relate to Category 3 marine diesel engines.
---------------------------------------------------------------------------

    Consistent with our 1042 program, our proposed 1043 program would
require that each engine installed or intended to be installed on a
U.S.-flagged vessel have an EIAPP before it is introduced into U.S.
commerce. The proposed regulations would create a presumption that all
marine engines manufactured, sold, or distributed in U.S. commerce
would be considered to be intended to be installed on a U.S.-flagged
vessel, although this presumption could be rebutted by clear and
convincing evidence to the contrary (evidence that the engine is
intended for export, for example).
(2) Approved Methods
    The 2008 amendments to MARPOL Annex VI added a new provision to the
engine standards in Regulation 13 that extends the Tier I
NO_X limits to certain engines installed on ships constructed
on or after January 1, 1990 through December 31, 1999. Specifically,
engines with power output greater than 5,000 kW and with per cylinder
displacement at or above 90 liters installed on such ships would be
required to meet the Tier I NO_X limits if a certified
Approved Method is available. An Approved Method may be certified by
the Administration of any flag state, but once one is registered with
the IMO the owner of such an engine must either install the Approved
Method or demonstrate compliance with the Annex VI Tier I limits
through some other method. We are proposing to include a regulatory
section codifying this requirement. These regulations are contained in
Sec.  1043.50.
(3) Other Annex VI Compliance Requirements
    Engine manufacturers, vessel manufacturers, vessel owners, and fuel
providers, fuel distributors, and other directly regulated stakeholders
are required to comply with all aspects of Regulations 13, 14, and 18
of Annex VI as well as the NO_X Technical Code. These include
requirements for engine operation, fuel use, fuel oil quality, and
various recordkeeping requirements (e.g., record book of engine
parameters, engine technical file, fuel switching procedures, bunker
delivery notes and associated fuel samples, and fuel sampling
procedures). While certification, compliance, and verification
procedures are set out in the Annex and related documents, we
nonetheless seek comment on whether additional regulatory provision
under APPS would be necessary or helpful.

[[Page 44481]]

For example, the contents of a bunker delivery note are set out in
Appendix V to MARPOL Annex VI and Sec.  1043.80. Are there aspects of
these criteria that should be further clarified, or are there
parameters required in Regulation 18 that should also be included on
the bunker delivery note? Similarly, the process for verifying the
sulfur content of fuel oil samples is set out in Appendix VI to the
amended Annex VI. Is there any aspect of this procedure that requires
further clarification? Commenters supporting the inclusion of
additional language related to these or other requirements are
encouraged to include specific recommendations.
(4) Non-Party Vessels
    The proposed regulations specify that vessels flagged by a country
that is not a party to MARPOL (known as non-Party vessels) must comply
with Regulations 13, 14, and 18 of Annex VI when operating in U.S.
waters. This requirement would fulfill the requirement of 33 U.S.C.
1902(e), which requires the adoption of regulations for non-Party
vessels such that they are not treated more favorably than vessels of
countries that are party to the MARPOL Protocol. However, since such
vessels cannot get EIAPP certificates, this proposed provision requires
non-party vessels to obtain equivalent documentation of compliance with
the NO_X standards of Annex VI. We request comment on this provision.
(5) Internal Waters
    APPS applies Annex VI requirements, including amendments to Annex
VI (such as ECA designations) that are binding on the United States, to
all persons in navigable waters of the U.S., including internal waters.
However, our recent proposal for ECA designation that was submitted to
IMO, although intended to protect air quality in U.S. ports and
internal areas, does not explicitly state that it applies to internal
waters. Therefore, we are proposing regulatory text under the authority
of APPS, in order to avoid confusion on whether vessels must meet ECA
requirements in internal waters. The text clarifies that the ECA
requirements generally apply to internal waters, such as the
Mississippi River and the Great Lakes, that can be accessed by ocean-
going vessels. Vessel emissions in these waters affect U.S. air quality
to an equal, if not greater extent that emissions taking place in
coastal waters. Specifically, the proposed rule would require
compliance with the fuel sulfur requirements and the NO_X
emission standards of Regulations 13, 14, and 18 in internal waters.
However, the ECA requirements do not apply in internal waters, such as
those in northwestern Alaska, that are not shoreward of an ECA
designated under Annex VI; rather the non-ECA requirements of Annex VI
apply for these waters.
(6) Exemptions and Exclusions
    Under MARPOL Annex VI and APPS, certain vessels are excluded from
some or all of the requirements. Consistent with Annex VI and APPS, the
regulations in 1043 would exclude public vessels and engines intended
to be used solely for emergencies. For the purpose of this provision,
the term ``public vessels'' includes all warships and naval auxiliary
vessels, as well as any other vessels owned or operated by a sovereign
country engaged in noncommercial service. Consistent with the
provisions in APPS, we are not proposing to apply the Annex VI
requirements to U.S.-flagged public vessels. It should be noted,
however, that not all public vessels are exempt from our Clean Air Act
engine and fuel requirements. Only public vessels covered by a national
security exemption under Sec.  94.908 or Sec.  1042.635 are exempt from
the Clean Air Act program.
    The category of emergency engines includes engines that power
equipment such as pumps that are intended to be used solely for
emergencies and engines installed in lifeboats intended to be used
solely in emergencies. It should be noted that the emergency engine
provisions in the Annex and part 1043 are similar but not identical to
the emergency engine provisions in our Clean Air Act program or the
process of obtaining our CAA exemptions. In particular, the emergency
engine exemption from the CAA requirements applies only with respect to
the catalyst-based Tier 4 standards.
    We are exempting from the MARPOL Annex VI NO_X standards
engines installed on vessels registered or flagged in the United States
provided the vessel remains within the EEZ of the United States. These
engines would still be required to meet stringent emission standards
since they are covered by our Clean Air Act program. In addition, the
fuels used by these vessels are also covered by our Clean Air Act
program, which has more stringent fuel requirements than Annex VI.
Therefore, we are also proposing that as long as the operators of these
domestic vessels comply with these more stringent Clean Air Act fuel
requirements, they will be deemed to be in compliance with the Annex VI
requirements. The combination of these proposed provisions would mean
that a fishing vessel that operates out of a U.S. port and that never
leaves U.S. waters would not be required to have an EIAPP for all
engines above 130 kW, a record book of engine parameters and a
technical file for each engines, and vessels over 400 gross tons would
not be required to maintain bunker delivery notes (vessels under 400
gross tons are not required by Regulation 18 of MARPOL Annex VI to have
bunker delivery notes). Instead, the engines on that vessel would be
required to be in compliance with our marine diesel engine standards
and be required to comply with manufacture requirements with regard to
the fueling of those engines. We are also proposing to explicitly
preclude these engines from being certified to use residual fuel if
they are exempt from the part 1043 requirements. Thus, these engines
would be required to always use cleaner fuels than are required by
Annex VI. U.S. vessels that operate or may operate in waters that are
under the jurisdiction of another country are not exempt from these
provisions, and the owner of any such vessel may be required by that
country to show compliance with Annex VI. Therefore, the owner should
be sure to maintain the appropriate paperwork for that engine and have
the appropriate engine certification. It should be noted that engines
that must show compliance with the Annex VI standards are not exempt
from EPA's standards for Category 1 or Category 2 engines. We are
requesting comment on this overall approach for domestic vessels. In
particular, we are requesting comment on whether we should extend this
exemption to U.S. vessels that sometimes leave the EEZ of the United
States, but that never enter waters under the jurisdiction of another country.
    Finally, spark-ignition, non-reciprocating engines, and engines
that do not use liquid fuel are not included in Regulation 13 of the
Annex VI program and therefore we are not proposing that they be
covered by the proposed APPS regulations with respect to NO_X
emissions. However, the MARPOL Annex VI fuel requirements do apply for
these vessels. These engines are generally subject to separate Clean
Air Act requirements and therefore will generally be in compliance with
the fuel sulfur limits.

C. Changes to the Requirements Specific to Engines Below 30 Liters per Cylinder

    The amendments to MARPOL Annex VI were adopted in October of 2008,
after we finalized our Clean Air Act Tier 3 and Tier 4 standards for
Category 1 and Category 2 engines (May 6, 2008, 73 FR 25097). While
these two programs are very similar, there are a few

[[Page 44482]]

differences between them with regard to their engine requirements. We
continue to believe that our Tier 3 and Tier 4 standards will yield the
greatest degree of emission reduction that is technologically feasible,
taking into account costs, safety, and other factors for those engines.
However, we are considering changes to our CAA program to facilitate
compliance with both programs. We seek comment on these potential
changes, described below.
    In addition, some of the provisions described in Section VI.D may
also apply to Category 1 and Category 2 marine diesel engines,
regarding non-diesel engines and technical amendments to our current program.
(1) MARPOL Annex VI and EPA's Standards for Category 1 and Category 2 Engines
    As discussed throughout this notice, we are proposing to adopt the
new Annex VI NO_X limits under our CAA program for Category 3
engines. Specifically, we are proposing to adopt the Tier II and Tier
III standards as our Tier 2 and Tier 3 standards for engines above 30
liters per cylinder. The new Annex VI NO_X limits are shown
in Table III-1 in Section III.B.1 above.
    With regard to Category 1 and Category 2 marine diesel engines, the
Annex VI standards are different from our Clean Air Act program in
several ways. First, with regard to the NO_X limits, EPA's
Tier 2 NO_X limits, which are similar in stringency to the
Annex VI Tier II limits, have been in effect since 2004-2007, depending
on engine size. EPA has intermediary Tier 3 NO_X limits,
which begin in 2012-2014, depending on engine size, and are more
stringent than the Annex VI Tier II standards that apply beginning in
2011. Also, while EPA's Tier 4 NO_X limits for Category 1 and
Category 2 engines are similar in stringency to the Annex VI Tier III
NO_X limit, they apply only to engines above 600 kW.\125\
---------------------------------------------------------------------------

    \125\ We continue to believe it is not appropriate to adopt SCR-
forcing Tier 4 standards for engines below 600 kW in our national
program, for the reasons described in our 2008 Final Rule (May 6,
2008, 73 FR 25097) . Specifically, there are significant challenges
regarding the ability of manufacturers of the small vessels that use
these engines for propulsion to incorporate SCR systems into their
vessel designs. These concerns are not as significant for auxiliary
engines used on OGV.
---------------------------------------------------------------------------

    Second, in addition to NO_X, EPA's marine diesel engine
program includes limits for PM, HC, and CO emissions. Annex VI, in
contrast, addresses marine diesel PM emissions through fuel standards
(see Section III.B.2 above for an explanation for why this is
appropriate for Category 3 engines). EPA's Tier 4 PM standards for
Category 1 and Category 2 engines are expected to be met through PM
aftertreatment technology, which will require the use of ultra-low
sulfur diesel fuel. Owners of vessels that operate internationally,
including ocean-going vessels, were concerned with the availability of
this ultra-low sulfur fuel, i.e., 15 ppm sulfur fuel, outside of the
United States. In response to concerns with fuel availability, we
created a provision that would exempt Category 1 and Category 2 engines
installed on certain OGV from the Tier 4 standards. This permanent
exemption from the Tier 4 standards is available to owners that can
demonstrate their vessel will operate primarily outside the United
States, as evidenced by obtaining and maintaining certification for the
International Convention for the Safety of Life at Sea (SOLAS) for the
vessel. The exempted engines are required to meet EPA's Tier 3
standards, which consist of interim NO_X and PM standards.
Note that we indicated we do not expect to issue any permanent
exemptions until 2021; prior to that time, it is our expectation that
fleets would use their existing pre-Tier 4 vessels for operations where
ULSD may not be available.
    Third, and finally, EPA's marine diesel engine compliance
requirements are slightly different from the MARPOL Annex VI program,
regarding engine durability, test fuels (in EPA's program, an engine
must be certified on the fuel type it will use in operation; see 40 CFR
1042.104 and 501), and some testing parameters. However, the programs
are sufficiently consistent that engine manufacturers can use a single
harmonized compliance strategy to certify under both systems.
(2) Tier 4 Compliance Option for Category 1 and 2 Engines on U.S.
Vessels That Operate Internationally
    Engines on U.S. vessels that comply with EPA's Tier 2 or Tier 3
standards will be in compliance with the Annex VI Tier I and Tier II
NO_X limits, since EPA's limits are similar in stringency or
are slightly more stringent.
    Beginning in 2016, however, some engines in U.S. vessels that
operate internationally could be out of compliance with the MARPOL
NO_X limits, even though they comply with EPA's CAA program.
This would occur in two situations. If an owner obtained a permanent
exemption from the EPA's Tier 4 standards for engines above 600 kW, as
described above, those engines would not meet the Annex VI Tier III
NO_X limits. If the vessel has engines below 600 kW, which
are only subject to EPA's Tier 3 standards for NO_X and PM,
then those engines would also not meet the Annex VI Tier III
NO_X limits. If a vessel is found to be in non-compliance with Annex
VI, it can be detained in a foreign port until the deficiency is corrected.
    Therefore, as a result of the new situation brought about by the
Annex VI amendments, we are considering revising our program for
Category 1 and 2 engines. To avoid U.S. vessels being found in non-
compliance with the Annex VI NO_X limits in foreign ports, we
are considering rescinding the permanent exemption for EPA's Tier 4
standards for Category 1 and 2 engines and, instead, adopting a
compliance flexibility that would give owners the choice between
complying with EPA's Tier 4 NO_X and PM standards or the
MARPOL Annex VI Tier III NO_X standards for all engines
installed on a vessel. This flexibility would ensure that owners of OGV
that will operate in any ECA are in compliance with MARPOL Annex VI,
while allowing owners of vessels that never operate in waters under the
jurisdiction of another country to comply with the U.S. program instead.
    This compliance option would be available beginning in 2016. The
flexibility would be limited to vessels that are operated primarily
outside of the United States, as evidenced by the vessel obtaining and
maintaining SOLAS certification and appropriate EIAPP certification
demonstrating compliance with Annex VI. U.S. vessels that are Jones Act
vessels and/or that are used primarily between U.S. ports would not be
eligible for this compliance flexibility given they do not have the
concerns causing the need for an exemption from our CAA Tier 4
standards (i.e., availability of 15 ppm sulfur fuel). The exercise of
the compliance flexibility would take the form of a formal election to
comply with the Annex VI Tier III NO_X limits in lieu of
EPA's Tier 4 marine diesel engine emission limits. This formal election
would be deposited with EPA and would be necessary so the engine
manufacturer can provide an Annex VI-compliant engine to the vessel
builder in lieu of a CAA Tier 4 engine.
    This compliance option could yield additional NO_X
emission benefits to U.S. air quality over the current permanent
exemption approach. Under the current program, exempted engines would
meet only the Tier 3 standards. For engines up to 3,300 kW, this is
about a 20 percent reduction from Tier 1 (for larger engines, the Tier
3 NO_X limit is the same as the Tier 2 limit because the Tier
4 standards begin earlier, in 2014). Under the revised

[[Page 44483]]

approach, all vessels would need to meet aftertreatment-forcing
NO_X limits when operating in ECAs. The choice of either the
EPA Tier 4 limits or the Annex VI Tier III limits is expected to yield
similar NO_X benefits. While the Annex VI Tier III
NO_X limits are slightly less stringent (an 80 percent
reduction from Tier 1 compared to an 85 percent reduction from EPA's
Tier 4 standard), the Annex VI program covers more engines (those 130-
600 kW). Applying either of these programs could represent a significant
NO_X reduction over the Tier 3 limits that would otherwise apply.
    The main difference between the two programs is that the Annex VI
program does not include PM standards. This means that instead of
meeting EPA's Tier 3 PM standards (which are about a 45 percent
reduction from the Tier 2 PM limit), the engines that exercise the
Annex VI Tier III option would be unconstrained for PM. However, this
will be offset by the greater reductions in NO_X (and
associated indirect PM) emissions that would be achieved through the
application of SCR-forcing standards to all engines above 130 kW
installed on the vessel.
    Owners of qualified vessels that operate in ECAs would be expected
to choose the Annex VI Tier III option to ensure that their engines
below 600 kW are in compliance in those areas. Owners of vessels that
never operate in any ECA, including the North American ECA, may also
choose that option if they are concerned with availability of ultra-low
sulfur diesel fuel that would be required for EPA's Tier 4 PM controls.
    Annex VI Tier III engines that are used in this program would be
required to be certified by EPA, although we would accept test data
obtained for compliance with the IMO program for this program.
    We are also seeking comment on whether we should consider such a
compliance option to replace our temporary exemption program for
Category 1 and 2 engines. The temporary exemption was designed to
address the case in which a U.S. vessel is contracted to operate
overseas for an extended period of time in an area in which 15 ppm fuel
is not available. Owners of vessels that obtain this exemption can
disable the Tier 4 controls on Category 1 and Category 2 engines. The
exemption is temporary in that the controls must be re-enabled before
the vessel is returned to service in the United States. It should be
noted that while the compliance flexibility described above would
ensure that the vessel achieves the Annex VI Tier III standards while
operating in another country, it also means that the vessel would not
achieve EPA's Tier 4 PM requirements when it is returned to service in
the United States.
(3) On/Off Technology for Category 1 and 2 Engines
    As described in Section VI.A.3 above, we are proposing to allow the
use of auxiliary emission control devices (AECDs) that would allow
modulation of emission control equipment on Category 3 engines outside
of specific geographic areas. These AECDs would be subject to certain
restrictions: (1) The AECD would be available for the Tier 3 standards
only; (2) the AECD would modulate emission controls only while
operating in areas where emissions could reasonably be expected to not
adversely affect U.S. air quality; and (3) and an engine equipped with
an AECD must also be equipped with a NO_X emission monitoring device.
    Ocean-going vessels with Category 3 propulsion engines have several
smaller Category 1 and Category 2 engines to provide auxiliary power.
In addition, while most U.S. vessels with Category 1 or Category 2
propulsion engines operate primarily or exclusively on our inland
waterways, in our commercial ports, or in areas close to our coastlines,
there are Category 1 and 2 vessels that operate more like ocean-going vessels.
    Our current program for Category 1 and Category 2 engines does not
allow the use of AECDs on these engines. Instead, it requires the
NO_X and PM aftertreatment devices on these engines to be
functional at all times unless the owner of the vessel has obtained
from EPA either a temporary or permanent exemption from the Tier 4 standards.
    Most U.S. vessels with Category 1 or Category 2 propulsion engines
do not operate outside of our inland and coastal water systems, and
therefore would not benefit from a provision that would allow AECDs.
Additionally, we are concerned that use of this technology/strategy
could have detrimental air quality impacts if operated inappropriately
in or around U.S. waters. However, we are seeking comment as to whether
we should consider allowing such an AECD provision to apply to other
categories of marine diesel engines.
    First, we seek comment on whether the application of this provision
should be limited to Category 1 and Category 2 engines used as
auxiliary engines on ocean-going vessels with Category 3 propulsion
engines, to Category 1 and Category 2 engines installed on vessels that
operate primarily outside the United States, or to some other group of vessels.
    Second, if we allowed AECDs on engine categories with a PM emission
standard, we seek comment on whether they should be limited to
NO_X emissions only.
    Third, we request comment on the NO_X (and potentially
PM) levels that would need to be achieved while then AECD is in
operation: the Annex VI Tier II NO_X limits or EPA's Tier 3
NO_X and PM limits.
    Finally, we seek comment on whether an AECD provision should be
used instead of the temporary exemption program for Category 1 and 2
engines. In this case, instead of extending the compliance flexibility
to these vessels as described in Section VI.C.1, owners of a vessel
that is contracted to operate outside the United States for an extended
period of time could purchase and use engines equipped with on/off
features, provided the emission control devices were operational when
the vessel is operating in areas that affect U.S. air quality. We seek
comment on whether the AECD approach is more useful for these vessels
or the compliance flexibility described above.

D. Other Proposed Regulatory Issues

    In addition to the changes described in Sections VI.A and VI.C, we
are also proposing changes that would apply to Category 1 marine
engines in general, and/or to other types of engines.
(1) Non-Diesel Engines
    Most of the preceding discussions have focused on conventional
diesel engines using either diesel fuel or residual fuels. It is
important to highlight two other types of engines being affected by
this proposal: engines using other fuels and gas turbine engines.
(a) Engines Not Using Diesel Fuel
    For all categories of marine engines, our existing standards apply
to all engines meeting the definition of compression-ignition,
regardless of the fuel type. For example, compression-ignition Category
3 engines that burn natural gas are currently subject to our Tier 1
standards and would be subject to our proposed Tier 2 and Tier 3
standards. We are proposing to continue to apply this approach for all
marine engines subject to our standards.
    The testing regulations in part 1065 include test fuel
specifications for diesel fuel, residual fuel, and natural gas (as well
as for gasoline and liquefied petroleum gas, which would not typically
be used in a compression-ignition engine). To certify an engine for a
different fuel type, a manufacturer would need to obtain EPA approval to

[[Page 44484]]

use an alternate fuel which it recommends for testing. All other
aspects of certification would be the same.
(b) Gas Turbine Engines
    Gas turbine engines are internal combustion engines that can
operate using a variety of fuels (such as diesel fuel or natural gas)
but do not operate on a compression-ignition or other reciprocating
engine cycle. Power is extracted from the combustion gas using a
rotating turbine rather than reciprocating pistons. The primary type of
U.S.-flagged vessels that use gas turbine engines are naval combat
ships. While a small number have been used in commercial ships, we are
not aware of any current sales for commercial applications. They can
range in size from those equivalent in power to mid-size Category 1
engines to those that produce the same power as Category 3 engines.
None of these engines are currently subject to our standards because
they do not meet the definition of compression-ignition engines in our
existing regulations.
    To date, this omission has not been a concern because only a small
number of turbine-powered vessels have been produced and nearly all of
them would have been eligible for a national security exemption.
However, we are concerned that this exclusion may become a loophole in
the future for operators hoping to avoid using engines with advanced
catalytic emission controls. To a lesser degree, we also have concerns
about the possibility of other non-reciprocating engines being
excluded. We are proposing to close this potential loophole by revising
the regulations to treat new gas turbine engines (as well as other non-
reciprocating engines) as compression-ignition engines and applying our
standards for new Category 1 and Category 2 engines (including
NO_X, HC, CO, and PM standards) to gas turbine engines.
    To incorporate this approach in our marine emission control
program, we are proposing a change to our definitions of Category 1 and
Category 2 to include gas turbine engines. Since turbine engines have
no cylinders, we need to address how to apply any regulatory provisions
that depend on a specified value for per-cylinder displacement. A
reasonable approach would be to apply the standards based on equivalent
power ratings, to the extent possible. Specifically, we are proposing
to redefine ``Category 1'' to include gas turbines with rated power up
to 2250 kW and to redefine ``Category 2'' to include all gas turbines
with higher power ratings. This would mean we would not consider any
gas turbines as ``Category 3'' engines. The largest gas turbine engines
would be considered to be Category 2 engines, even those that had rated
power more typical of Category 3 diesel engines.
    We are aware that some companies are manufacturing new high-
performance recreational vessels using gas turbine engines. In at least
some cases, the engines are modified from surplus military aircraft
engines. We have not yet determined whether such recreational engines
should be held to the same standards as conventional diesel engines. It
is also important to note that under our current regulations, diesel
engines meeting the definition of ``recreational marine engine'' in
Sec.  1042.901 are not subject to catalyst forcing standards. This
approach was applied because of factors such as the usage patterns for
recreational diesel engines. We would expect these same factors to
apply for recreational gas turbine engines. Thus, we are not as
concerned about a potential gas turbine loophole for recreational
engines as for commercial engines. We also do not have enough
information at this time to know how feasible it would be for gas
turbine engine manufacturers to comply with the standards for
recreational diesel engines, or to accurately assess the environmental
impact of these vessels. Nevertheless, it is clear that the
environmental impact of such small numbers of these engines cannot be
large. Thus, at this time, we are not proposing to apply this
regulatory change to recreational gas turbine engines (i.e., that is
gas turbine engines installed on recreational vessels). Nevertheless,
we will continue to investigate these engines and may subject them to
standards in the near future.
    Our diesel engine program contains a national security exemption
that automatically exempt vessels ``used or owned by an agency of the
Federal government responsible for national defense, where the vessel
has armor, permanently attached weaponry, specialized electronic
warfare systems, unique stealth performance requirements, and/or unique
combat maneuverability requirements.'' Since it is not our intent to
prohibit naval vessels from using turbine engines, we are proposing to
revise this provision to automatically exempt military vessels owned by
an agency of the Federal government responsible for national defense
powered by gas turbine engines.
    We are confident that gas turbine engines could use the same type
of aftertreatment as is projected for diesel engines. The basic
reactions through which SCR reduces NO_X emissions can occur
under a wide range of conditions, and exhaust from gas turbine engines
is fundamentally similar to exhaust from diesel engines. Moreover,
since gas turbines operate at lower air/fuel ratios and have lower
exhaust volumes, they can actually use smaller less expensive catalysts
than diesel engines of the same rated power. Viewed another way,
however, this requirement can be considered to be feasible based on the
fact that the only circumstance in which a vessel would actually need a
gas turbine engine would be for military purposes where our national
security exemption provisions would apply. For all other vessels, it is
entirely feasible for the vessel to be powered by a diesel engine. In
fact, that is what is being done today.
    This program for gas turbine engines would apply to freshly
manufactured engines only. We are not proposing to apply our marine
remanufacture program to gas turbine engines. Because there are so few
engines in the fleet, it is not possible to know what common rebuilding
process are or whether and how those practices would return an existing
engine to as-new condition. We may review this approach in the future
if there is an increase in the number of gas turbines in the fleet.
(2) Technical Amendments
    The proposed regulations include technical amendments to our motor
vehicle and nonroad engine regulations. These changes are generally
corrections and clarifications. A large number of these changes are the
removal of obsolete highway engine text that applied only for past
model years. Many others are changes to the text of part 1042 to make
it more consistent with the language of our other recently corrected
nonroad parts. The last large category of changes includes those
related to the test procedures in part 1065. See the memorandum in the
docket entitled ``Technical Amendments to EPA Regulations'' for a full
description of these changes.\126\
---------------------------------------------------------------------------

    \126\ See ``Proposed Technical Amendments to EPA Regulations,''
EPA memorandum from Alan Stout, in the docket for this proposed
rule, Docket No.: EPA-HQ-OAR-2007-0121.
---------------------------------------------------------------------------

(3) Locomotives Operating Outside of the United States
    Locomotive manufacturers have raised an issue similar to the issue
of on-off technologies discussed in Section VI.A.3. They have objected
in the past to EPA's refusal to certify engine designs that increase
NO_X emissions when the locomotive is operating in

[[Page 44485]]

Mexico, even though the engine design would reverse the adjustment to
allow the locomotive to conform to NO_X emissions standards
when it returns to the United States. Engine manufacturers have wanted
to use such engine designs to improve fuel consumption by readjusting
injection timing while the locomotive is operating in Mexico.
    In our recent locomotive rulemaking, we responded to these
manufacturer concerns by noting that we have ``prohibited such AECDs
because of concerns over their potential adverse impacts on U.S. air
quality,'' recognizing that ``emissions that occur outside the
territorial boundaries of the U.S. can impact air quality within the
U.S.'' Since we also committed to reconsider the issue more broadly in
this current rulemaking, we are requesting comment on whether we should
allow manufacturers to certify such engine designs.
    In particular, we are requesting comment on what conditions we
should set if we allow such designs. For example, should we approve the
design only if it was calibrated to remain in the low-NO_X
mode until it was at least 200 miles away from the U.S. border? Should
we allow such designs if they would conflict with Mexican law? Should
we also consider operation in Canada or Central American countries?
Commenters should also address the degree to which such designs would
be tamper-proof and whether special recordkeeping or reporting
requirements should be included. Finally, commenters should also
address how EPA should respond if such a locomotive was found to be
operating in the U.S. in the high-NO_X configuration and such
high-NO_X operation was not caused by tampering. Should it be
treated merely as a defect that must be reported, or should it be
treated as different violation, e.g., introduction into commerce of an
engine not in substantial conformance to its certificate?
(4) Stockpiling of Model Year 2009 Highway Engines
    EPA is also proposing to add language in part 85, applicable to
heavy-duty motor vehicles and heavy-duty engines used in motor
vehicles, which codifies that the ``stockpiling'' of engines to avoid
compliance with later, more stringent emission standards is considered
a circumvention of the Clean Air Act and is prohibited. The proposed
provisions are consistent with existing stockpiling provisions for
nonroad engines and equipment in part 1068 and are intended to codify
the prohibition for heavy-duty motor vehicles and heavy-duty engines.
Stockpiling of engines is the practice of keeping in inventory more
engines than a manufacturer normally keeps in inventory, in particular
when those engines do not meet the more stringent standards. EPA
believes this prohibition is necessary to ensure that engine and
vehicle manufacturers comply with the same compliance ``clock'' while
allowing for minimum but necessary flexibility during the transition of
model years. We recognize there will be the need for some market
transition when standards change but believe this regulatory clarification
will help provide guidance to the vehicle and engine manufacturers.
    EPA is proposing to add this language to clarify EPA's longstanding
policy that considers stockpiling to be a circumvention of the Act,
including the terms of section 203(a)(1). During and after the
transition to the 2007 heavy-duty diesel emission standards EPA met
with several manufacturers to understand their production plans and
their concerns regarding all manufacturers' timely compliance with the
new emission standards. EPA has begun to have similar discussions with
and inquiries from manufacturers for the transition to the 2010 model
year.\127\ The Agency has also been conducting some analysis of market
practices. Given this experience EPA believes it appropriate to clearly
set forth the stockpiling prohibition.
---------------------------------------------------------------------------

    \127\ For example, EPA received a request for guidance from
Volvo on April 13, 2009 seeking clarification on the transition to
the 2010 model year standards for both vehicle and engine
manufacturers. Docket No.: EPA-HQ-OAR-2007-0121.
---------------------------------------------------------------------------

    Therefore, for example, an engine manufacturer who sells engines to
a vehicle manufacturer cannot sell engines in a current model year for
the purpose of having them installed in a future model year's vehicles
when the engine sale is beyond that required to meet normal production
lead time requirements. Likewise, a vehicle manufacturer cannot order
or install engines from a prior model year when the number of such
engines exceeds that needed to meet normal inventory requirements. This
will prevent vehicle manufacturers from avoiding compliance with
emission requirements which would otherwise apply during the model year
of the vehicle. Other indicators that illegal stockpiling may have
occurred include build up of excessive inventory or volume of engines
prior to a future model year that is inconsistent with historic
production volumes, actions to create a market for the sale of engines
meeting earlier standards in a future year, and the sale of previous
model year engines representing a disproportionate amount of total
sales in the subsequent model year. If emissions standards for the
engine do not change in a given model year, a manufacturer may continue
to install engines from a previous model year without restriction.
    EPA will also consider many factors in assessing whether an engine
manufacturer has caused or aided in the prohibited act of stockpiling.
For example, contractual (or otherwise established) business
relationships of those persons involved in producing and/or selling new
engines and vehicles could be evidence of the ability of the person to
cause a violation. In addition, we would consider the particular
efforts or influence of the alleged violator contributing to, leading
to, or resulting in the prohibited act. On the other hand, we would
also consider a person's efforts to prevent such a violation as
evidence that they did not cause the violation.

E. Coast Guard's Marine Vessel Certification Program

    The U.S. Department of Transportation Maritime Administration
(MARAD) oversees the Maritime Security Program (MSP) established by the
Maritime Security Act of 1996 and reauthorized by the Maritime Security
Act of 2003 (MSA). The MSA requires that the Secretary of
Transportation, in consultation with the Secretary of Defense,
establish a fleet of active, commercially viable and militarily useful
vessels to meet national defense and other security requirements and
maintain a U.S. presence in international commercial shipping. The
fleet consists of privately-owned, U.S.-flagged vessels known as the
Maritime Security Fleet (MSF). 46 U.S.C. 53102 outlines that vessels
complying with applicable international agreements and associated
guidelines are eligible for a certificate of inspection from Coast
Guard, and thus inclusion in the MSF.
    The requirements of the MSP may have created confusion for owners
of non-U.S.-flagged vessels regarding their obligation to also comply
with EPA's domestic marine diesel engine emission standards at the time
they re-flag for inclusion in the MSF. We want to remind vessel owners
that the MSA does not preempt the Clean Air Act or alleviate their
obligation to comply with EPA's marine diesel engine program, or any
other EPA requirements that apply to marine vessels. Each U.S.-flagged
vessel must comply with all of EPA's domestic standards, regardless of
whether the vessel was flagged in the

[[Page 44486]]

U.S. upon original delivery into service. Specifically, model year 2004
and later marine diesel engines installed on these vessels must be
covered by a certificate of conformity issued under 40 CFR Part 94 or
40 CFR Part 1042, unless covered by a specific exemption or exclusion
in those regulations.
    Owners that wish to re-flag a vessel for U.S. service in the MSF
should contact EPA to determine the specific compliance requirements
that must be met.

VII. Costs and Economic Impacts

    In this section, we present the projected cost impacts and cost
effectiveness of the coordinated emission control strategy for ocean-
going vessels. We also present our analysis of the economic impacts of
the coordinated strategy, which consists of the estimated social costs
of the program and how those costs will likely be shared across
stakeholders. The projected benefits and benefit-cost analysis of the
coordinated strategy are presented in Section VIII.
    We estimate the costs of the coordinated strategy to be about $1.85
billion in 2020, increasing to $3.11 billion in 2030.\128\ Of the 2020
costs, nearly 89 percent or $1.64 billion are attributable to the ECA
fuel sulfur provisions. The total operational costs are estimated to be
$1.82 billion in 2020. The costs to apply engine controls to U.S.-
flagged vessels are expected to be $31.9 million in 2020, increasing to
$47.4 million in 2030 as more ships are built to comply with Clean Air
Act (CAA) Tier 3 NO_X limits. All costs are presented in 2006
U.S. dollars.
---------------------------------------------------------------------------

    \128\ These total estimated costs are slightly different than
those reported in the ECA proposal, because the ECA proposal did not
include costs associated with the Annex VI existing engine program,
Tier II, or the costs associated with existing vessel modifications
that may be required to accommodate the use of lower sulfur fuel.
Further, the cost totals presented in the ECA package included
Canadian cost estimates.
---------------------------------------------------------------------------

    When attributed by pollutant, at a net present value of 3 percent
from 2010 through 2040, the NO_X controls are expected to
cost about $510 per ton of NO_X reduced, SO_X
controls are expected to cost about $930 per ton of SO_X
reduced, and the PM controls are expected to cost about $7,950 per ton
of PM reduced ($500, $920, and $7,850 per ton of NO_X,
SO_X, and PM respectively, at a net present value of 7
percent over the same period.) These costs are comparable to our other
recently-adopted mobile source programs, and are one of the most cost-
effective programs in terms of NO_X and PM when compared to
recent mobile and stationary programs. The coordinated strategy also
provides very cost-effective SO_X reductions comparable to
the Heavy-Duty Nonroad diesel rulemaking.
    The social costs of the proposed program are estimated to be
approximately $3.1 billion in 2030. The impact of these costs on
society is estimated to be minimal. For example, we estimate the cost
of shipping a 20-foot container on the Pacific route, with 1,700 nm of
operation in the ECA, would increase by about $18, or less than 3
percent. Similarly, the price of a seven-day Alaska cruise that
operates mainly in the ECA is expected to increase by about $7 per day.
    The estimated costs presented in this section are for the entire
coordinated strategy, including those requirements that are the subject
of this proposal and those that are associated with the proposed ECA
designation. Table VII-1 sets out the different components of the
coordinated strategy and our ECA designation package, for 2020. The
costs of the coordinated strategy consists of the costs associated with
the MARPOL Annex VI global standards that we are implementing through
APPS, some of which we are also adding to our CAA emission control
program for U.S. vessels (Tier 2 and Tier 3 NO_X emission
control hardware for U.S. vessels; operating costs for the Tier 2
NO_X requirements; controls for existing vessels; certain
compliance requirements). Also included are the costs associated with
the U.S. portion of the ECA package (Tier 3 hardware and operating
costs; fuel sulfur hardware and operating costs). The costs associated
with the Canadian portion of the ECA package are not included in the
costs of the coordinated strategy.
    Note that, with regard to hardware costs, the coordinated strategy
includes the entire cost for new U.S. vessels to comply with the Tier 3
NO_X standards and ECA fuel limits, even though some of the
benefits from using these emission control systems will occur outside
the United States. Conversely, we do not include any new vessel Tier 3
or fuel hardware costs for foreign vessels that operate in U.S. waters
even though a significant share of the benefits of the coordinated
strategy will arise from foreign vessels that comply with the ECA
engine and fuel sulfur limits while operating within the U.S. ECA. An
alternative approach would be to allocate a portion of hardware costs
of complying with the Tier 3 NO_X standards and the fuel
sulfur limits to the coordinated strategy. For example, analysis of
MARAD port entrance data shows that about 30 percent of the vessels
that enter U.S. ports account for about 75 percent of the vessel
entrances. This suggests it may be reasonable to allocate the hardware
costs for 30 percent of the new foreign vessels to the coordinated
strategy. Similarly, it may be reasonable to discount the share of
estimated hardware costs included in the coordinated strategy costs for
those U.S. vessels that do not operate primarily between two U.S.
ports. We request comment on the allocation of hardware costs and on
whether the U.S. should adopt the alternative approach described above
or some other method to allocate these costs.
    The regulatory changes proposed for Category 1 and 2 engines are
not included in this cost analysis as they are intended to be
compliance flexibilities and not result in increased compliance costs.
Similarly, the technical amendments proposed for other engines, would
not have significant economic impacts and are therefore not addressed
here. Finally, compliance costs for gas turbine engines are not
addressed separately because they would be similar to those for diesel
marine engines.

[[Page 44487]]
[GRAPHIC] [TIFF OMITTED] TP28AU09.001
[[Page 44488]]

    This cost analysis relies on a number of assumptions about the
prices of various engine and fuel hardware components, as well as fuel
consumption, the number of affected vessels, and their operation. We
seek comment on all aspects of this analysis, including all of these
assumptions and the methodology we used to estimate the costs of the program.

A. Estimated Fuel Costs

    Although the ECA fuel sulfur limits are not part of this proposal,
they are part of the coordinated strategy and we are including them in
this cost analysis. However, we consider the costs and benefits of ECA
designation in this proposal, as they are part of our coordinated
strategy for ocean-going vessels.
    Current regulations impose a sulfur limitation of 15 ppm for
distillate fuels produced at refineries in the U.S. The coordinated
strategy would impose no additional costs for refiners in the U.S. and
would actually allow additional flexibility. Specifically, we are
proposing to allow distillate fuel to have up to 1,000 ppm sulfur for
use in OGVs. The ECA fuel requirements will impose a cost to the ship
owners. This section presents estimates of the cost of compliance with
the 1,000 ppm sulfur limit in the U.S. ECA.
    Distillate fuel will likely be used to meet the 1,000 ppm fuel
sulfur limit, beginning in 2015. As such, the primary cost of the fuel
sulfur limit for ship owners will be that associated with switching
from heavy fuel oil to higher-cost distillate fuel. Some engines
already operate on distillate fuel and would not be affected by fuel
switching costs. However, distillate fuel costs may be affected by the
need to further refine the distillate fuel to meet the 1,000 ppm sulfur limit.
    To investigate these effects, studies were performed on the impact
of a North American ECA on global fuel production and costs, to inform
the application for such ECA.\129\ These studies were performed prior
to the ECA being defined; thus, we picked a maximum distance boundary
to ensure a conservative cost analysis. Specifically, we used the total
fuel consumption in the U.S. and Canada exclusive economic zones.\130\
As a result, the modeled fuel volumes are higher than would be affected
by the proposed ECA. The studies are relevant to this regulation as
well, since they estimate the cost of 1,000 ppm sulfur fuel for ships
operating in such ECA zones.
---------------------------------------------------------------------------

    \129\ Research Triangle Institute, 2009. ``Global Trade and
Fuels Assessment-- Future Trends and Effects of Designating
Requiring Clean Fuels in the Marine Sector''. Prepared for U.S.
Environmental Protection Agency. Research Triangle Park, NC.
    \130\ In this analysis, the U.S. included the lower 48
contiguous states and southeastern Alaska.
---------------------------------------------------------------------------

    To assess the effect on the refining industry of the imposition of
a 1,000 ppm sulfur limit on fuels operating in the ECA, we needed to
first understand and characterize the fuels market. Research Triangle
Institute (RTI) was contracted to conduct a fuels study using an
activity-based economic approach. The study established baseline bunker
fuel demand, projected a growth rate for bunker fuel demand, and
established future bunker fuel demand volumes.\131\ These volumes then
became the input to the World Oil Refining Logistics and Demand (WORLD)
model to evaluate the effect of an ECA on fuel cost.
---------------------------------------------------------------------------

    \131\ Research Triangle Institute, 2009. ``Global Trade and
Fuels Assessment-- Future Trends and Effects of Designating
Requiring Clean Fuels in the Marine Sector''. Prepared for U.S.
Environmental Protection Agency. Research Triangle Park, NC.
---------------------------------------------------------------------------

    The WORLD model was run by Ensys Energy & Systems, the owner and
developer of the refinery model. The WORLD model is the only such model
currently developed for this purpose and was developed by a team of
international petroleum consultants. It has been widely used by
industries, government agencies, and Organization of the Petroleum
Exporting Countries (OPEC) over the past 13 years, including the Cross
Government/Industry Scientific Group of Experts, established to
evaluate the effects of the different fuel options proposed under the
revision of MARPOL Annex VI. The model incorporates crude sources,
global regions, refinery operations, and world economics. The results
of the WORLD model have been comparable to other independent
predictions of global fuel, air pollutant emissions and economic predictions.
    The WORLD model was run for 2020, in which the control case
included a fuel sulfur level of 1,000 ppm in the U.S. The baseline case
was modeled as ``business as usual'' in which ships continue to use the
same fuel as today. Because of the recent increases and fluctuations in
oil prices, we had additional WORLD model runs conducted. For these
runs, we used new reference case and high oil price estimates that were
recently released by the U.S. Energy Information Administration (EIA).
In addition to increased oil price estimates, the updated model
accounts for increases in natural gas costs, capital costs for refinery
upgrades, and product distribution costs.
    Because only a small portion of global marine fuel is consumed in
the ECA, the overall impact on global fuel production is small. Global
fuel use in 2020 by ships is projected to be 500 million metric tonnes/
yr. Of this amount, 90 million metric tonnes of fuel is used for U.S./
Canadian trade, or about 18 percent of total global fuel use. In the
proposed ECA, less than 20 million metric tonnes of fuel will be
consumed in 2020, which is less than 4 percent of total global marine
fuel use. Of the amount of fuel to be consumed in the proposed ECA in
2020, about 4 million metric tonnes of distillate will be consumed in
the Business as Usual (BAU) case, which is about 20 percent of the
amount of total fuel to be consumed in the proposed ECA.
    There are two main components to projected increased marine fuel
cost associated with the ECA. The first component results from shifting
from operation on residual fuel to operation on higher cost distillate
fuel. This is the dominant cost component. However, there is also a
small cost associated with desulfurizing the distillate to meet the
1,000 ppm sulfur standard in the ECA. Based on the WORLD modeling, the
average increase in costs associated with switching from marine
residual to distillate will be $145 per metric tonne.\132\ This is the
cost increase that will be borne by the shipping companies purchasing
the fuel. Of this amount, $6 per metric tonne is the increase in costs
associated with distillate desulfurization.
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    \132\ Note that distillate fuel has a higher energy content, on
a per ton basis, than residual fuel. As such, there is an offsetting
cost savings, on a per metric ton basis, for switching to distillate
fuel. Based on a 5 percent higher energy content for distillate, the
net equivalent cost increase is estimated as $123 for each metric
ton of residual fuel that is being replaced by distillate fuel.
---------------------------------------------------------------------------

    Table IV- summarizes the fuel cost estimates with and without an
ECA. In the baseline case, fuel volumes for operation are 18% marine
gas oil (MGO), 7% marine diesel oil (MDO), and 75% IFO. Weighted
average baseline distillate fuel cost is $462/tonne. In the ECA, all
fuel volumes are modeled as MGO, at $468/tonne.

[[Page 44489]]

                 Table VII-2--Estimate Marine Fuel Costs
------------------------------------------------------------------------
             Fuel                   Units         Baseline       ECA
------------------------------------------------------------------------
MGO..........................  $/bbl..........       $61.75       $62.23
                               $/tonne........          464          468
MDO..........................  $/bbl..........        61.89        62.95
                               $/tonne........          458          466
IFO..........................  $/bbl..........        49.87        49.63
                               $/tonne........          322          321
------------------------------------------------------------------------

    The increased cost of distillate desulfurization is due both to
additional coking and hydrotreating capacities at refineries. Cokers
crack residual blends in IFO bunker fuel into distillates, using heat
and residence time to make the conversion. The process also produces
useful byproducts such as petroleum coke and off gas. The WORLD model
did not use hydrocracking technology to convert residual fuels into
distillates for either the reference or high price crude cases. Because
of the higher capital and operating costs of hydrocrackers, the WORLD
model favored the use of coking units. As such, the WORLD model assumed
that cokers would convert the residual blendstocks in Intermediate Fuel
Oil grades to distillates. The model added coking processes to
refineries located in the U.S. and, to a lesser extent, to refiner
regions outside of the U.S. Specifically, the model added one
additional coking unit with a capacity of 30 thousand barrels per
stream day (KBPSD), and one to two hydrocracking units representing 50
and 80 KBPSD additional capacity.
    The WORLD model also added new conventional distillate
hydrotreating capacity to lower the sulfur levels for the marine
distillate fuel, in addition to the existing slack distillate
hydrotreating capacity that existed in refiner regions for these fuels.
In addition, the model used lighter crudes and adjusted operating
parameters in refineries. This had the effect of increasing the
projected production of lower sulfur distillate fuels in lieu of adding
distillate hydrotreating capacity. The model elected to use lower
sulfur crudes and used operational adjustments. Higher capital and
operating costs of new units under the high-priced crude scenario
favored use of existing refinery capacity made available from lower
global refiner utilizations.

B. Estimated Engine Costs

    To quantify the cost impacts associated with the coordinated
strategy, we estimated the hardware and operational costs to U.S.-
flagged ships, as well as affected foreign-flagged ships. The hardware
costs are only applied to U.S.-flagged vessels, and include those
associated with the CAA Tier 2 and Tier 3 NO_X standards, the
Annex VI existing engine program, and the use of lower sulfur fuel.
Tier 2 hardware costs consist of changes to the engine block and the
migration from mechanical fuel injection to common rail fuel injection
systems. Tier 3 hardware costs include engine modifications, the
migration from mechanical fuel injection to common rail fuel injection
systems, and the installation of Selective Catalytic Reduction (SCR).
Hardware costs associated with the use of lower sulfur fuel are from
applying additional tanks and equipment to enable a vessel to switch
from residual fuel to lower sulfur fuel. These equipment costs were
applied to those new vessels that may need additional hardware, and
also include the estimated cost of retrofitting the portion of the
fleet that may require additional hardware to accommodate the use of
lower sulfur fuel in 2015. The hardware costs also include a per engine
cost of $10,000 associated with the proposed requirement to test each
production engine (Sec.  1042.302). These are the sole engine hardware
costs specifically attributable to our Clean Air Act rule. The
programmatic changes under consideration for Category 1 and 2 engines
(see Section VI.C, above), would not impose compliance costs but
instead are intended to facilitate compliance with both Annex VI and
our Clean Air Act requirements for those engines.
    Although we have developed hardware cost estimates for all ships
that may enter U.S. ports, we do not believe that it is appropriate to
attribute all of these costs to emissions reductions in the U.S.
Clearly, this technology will be used globally and will result in
emissions reductions in many other countries. At the same time, some
amount of the hardware costs should be attributed to the emissions
reductions achieved in the U.S. To address these considerations, we
include the hardware costs for only U.S.-flagged vessels in our cost
estimates, and present the hardware costs for foreign-flagged vessels
as a separate analysis. The operational costs, which represent the
majority of the costs to ships, are included in our cost totals for
both U.S.- and foreign-flagged vessels.
    The operational costs were applied to both U.S.- and foreign-
flagged vessels and include additional operational costs associated
with the applicable NO_X limits and the use of lower sulfur
fuel. The operational costs for NO_X controls consist of the
additional fuel required due to an estimated two percent fuel penalty
associated with the use of technologies to meet CAA Tier 2 and global
Tier II NO_X standards, and the use of urea for ships
equipped with an SCR unit to meet CAA Tier 3 and global Tier III
NO_X standards. The operational costs associated with the use
of lower sulfur fuel include both the differential cost of using lower
sulfur fuel that meets ECA standards instead of using marine distillate
fuel, and the differential cost of using lower sulfur fuel that meets
ECA standards instead of using residual fuel.
    To assess the potential cost impacts, we must understand (1) the
makeup of the fleet of ships expected to visit the U.S. when these
requirements go into effect, (2) the emission reduction technologies
expected to be used, and (3) the cost of these technologies. Chapter 5
of the draft RIA presents this analysis in greater detail. The total
engine and vessel costs associated with the coordinated strategy are
based on a cost per unit value applied to the number of affected
vessels. Operational costs are based on fuel consumption values
determined in the inventory analysis (Section 5.2). This section
discusses a brief overview of the methodology used to develop the
hardware and operational costs, and the methodology used to develop a
fleet of future vessels to which these hardware and engineering costs
were applied.
(1) Methodology
    To estimate the hardware costs to ships that may be affected by the
coordinated strategy, we used an approach similar to that used to
estimate the emissions inventory. Specifically, the same inputs were
used to develop a fleet of ships by ship type

[[Page 44490]]

and engine type that may be expected to visit U.S. ports through the
year 2040. In order to determine the cost of applying emission
reduction technology on a per vessel basis, ICF International was
contracted by the U.S. EPA to conduct a cost study of the various
compliance strategies expected to be used to meet the new
NO_X standards and fuel sulfur requirements.\133\ ICF was
instructed to develop cost estimates covering a range of vessel types
and sizes, which could be scaled according to engine speed and power to
arrive at an estimated cost per vessel.
---------------------------------------------------------------------------

    \133\ ICF International, ``Costs of Emission Reduction
Technologies for Category 3 Marine Engines,'' prepared for the U.S.
Environmental Protection Agency, December 2008. EPA Report Number:
EPA-420-R-09-008.
---------------------------------------------------------------------------

    A series of both slow-speed and medium-speed engine configurations
were selected and used to provide an understanding of the costs of
applying emission control technologies associated with the coordinated
strategy. The engine configurations were selected based on a review of
2005 U.S. Army Corps of Engineers `Entrances and Clearances' data which
was used to determine the characteristics of engines on those vessels
that call on U.S. ports most frequently. This data represents a broad
range of propulsion power for each engine type (slow and medium speed
engines). The costs developed for these engine configurations were used
to develop a $/kW value that could be applied to any slow or medium
speed engine. Using the average propulsion power by ship type presented
in the inventory analysis, the per-vessel hardware costs were then
applied to the estimated number of applicable vessels built after the
standards take effect.
(a) Hardware Costs
    The hardware cost estimates include variable costs (components,
assembly, and the associated markup) and fixed costs (tooling, research
and development, redesign efforts, and certification). Hardware costs
associated with the Annex VI existing engine standards were applied to
the portion of existing U.S.-flagged vessels built between 1990 and
1999 expected to be subject to these standards (engines with a per-
cylinder displacement of at least 90 liters and a power output of over
5,000 kW) in 2011 when the standards go into effect. These costs were
applied over a five year period beginning in 2011 where 20 percent of
the total subject fleet was estimated to undergo service each year. The
existing engine program fixed costs were phased in over a five year
period beginning in 2010 and applied on a per-vessel basis.
    Hardware costs associated with the CAA Tier 2 program were applied
to all new U.S.-flagged vessels beginning in the year 2011 when the
standards take effect. The fixed costs associated with Tier 2 standards
are expected to be incurred over a five year period; however, as the
Tier 2 standards take effect in 2011, it was assumed that manufacturers
are nearing the end of their research and development. In order to
capture all of these costs, all fixed costs that would have been
incurred during that five year phase-in period were applied in the year 2010.
    Hardware costs associated with Tier 3 were estimated for U.S.
vessels and were applied as of 2016. Because of the global scope of the
Tier III standards, and the fact that other ECAs exist today and more
may exist in the future, we do not include hardware costs for Tier III
emission controls on foreign-flagged vessels. However, for
completeness, Section 5.2 of the draft RIA presents these hardware cost
estimates separately. The fixed costs associated with Tier 3 were
phased in over a five year period beginning in 2011.
    Hardware costs associated with the use of lower sulfur fuel are
estimated separately for both new and existing vessels that may require
additional hardware to accommodate the use of lower sulfur fuel. The
costs expected to be incurred by U.S.-flagged vessels are included in
the total cost of the coordinated strategy, while the cost to foreign-
flagged vessels is presented as a separate analysis. The fuel sulfur
control related hardware costs for new vessels begin to apply in 2015,
while all retrofit costs are expected to be incurred by 2015 and as
such are applied in this year. The fixed costs for both new and
existing vessels that may require additional hardware to accommodate
the use of lower sulfur fuel are applied on a per-vessel basis and are
phased in over a five year period beginning as of 2010.
(b) Operational Costs
    The operational costs estimated here are composed of three parts:
(1) The estimated increase in fuel consumption expected to occur with
the use of Tier II technologies on U.S.- and foreign-flagged vessels,
(2) the differential cost of using lower sulfur fuel applicable for
both U.S.- and foreign-flagged vessels, and (3) the use of urea with
SCR as a Tier III NO_X emission reduction technology on both
U.S.- and foreign-flagged vessels. The fuel consumption values
associated with Tier II and Tier III standards were determined in the
inventory analysis (see Chapter 3 of the draft RIA), with an estimated
Tier II fuel consumption penalty of 2 percent (see Chapter 4 of the
draft RIA) The two percent fuel penalty estimate is based on the use of
modifications to the fuel delivery system to achieve Tier II
NO_X reductions, and does not reflect the possibility that
there may be other technologies available to manufacturers that could
offset this fuel penalty. Additionally, Tier III will provide the
opportunity to re-optimize engines for fuel economy when using
aftertreatment, such as SCR, to provide NO_X reductions
similar to the compliance strategy for some heavy-duty truck
manufacturers using urea SCR to meet our 2010 truck standard. The
differential cost of using lower sulfur fuel is discussed above in
Section VII.A of this Preamble. The estimated urea cost associated with
the use of Tier III SCR is derived from a urea dosage rate that is 7.5
percent of the fuel consumption rate.
    Operating costs per vessel vary depending on what year the vessel
was built, e.g., vessels built as of 2016 will incur operating costs
associated with the use of urea necessary when using SCR as a Tier III
NO_X emission control technology, while vessels built prior
to 2016 do not use urea but will incur operating costs associated with
the differential cost of using lower sulfur fuel. Further, we have
assumed vessels built as of 2011 that meet Tier II standards will incur
a 2 percent fuel consumption penalty; see Table 5-31 of the draft RIA
for further details on fuel costs and fuel volumes. In addition,
vessels built as of 2016 that meet Tier III NO_X standards
while traveling in an ECA are still required to at least meet Tier II
NO_X standards outside of an ECA and will continue to incur
the associated fuel penalty. Therefore, an estimated fleet had to be
developed over a range of years, and provide a breakout of ships by age
in each year.
(2) Fleet Development
    There are currently no available estimates of the number of ships
that may visit U.S. ports in the future or comprehensive engine sales
predictions. Therefore, to develop the costs associated with the
coordinated strategy, an approximation of the number of ships by age
and engine type that may visit U.S. ports in the future was
constructed. To characterize the fleet of ships visiting U.S. ports, we
used U.S. port call data collected in 2002 for the inventory port
analysis (see Chapter 3 of the draft RIA) which included only vessels
with C3 engines where the engine size and type was

[[Continued on page 44491]]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]]                        

[[pp. 44491-44540]]
Control of Emissions From New Marine Compression-Ignition Engines
at or Above 30 Liters per Cylinder

[[Continued from page 44490]]

[[Page 44491]]

identified.\134\ We used this data with the growth rates developed in
the inventory analysis to estimate how many ships, by ship type and
engine type, would visit U.S. ports in future years. Due to the long
life of these vessels, and the fact that there has been no significant
event that would have changed the composition of the world fleet since
this baseline data was taken, it is reasonable to use 2002 data as the
basis for modeling the future fleet upon which to base hardware cost
estimates. An analysis is presented in Section 5.1.2.2 of Chapter 5 of
the draft RIA which confirms the reasonableness of this assumption
using 2007 MARAD data. The research performed for this cost analysis
was based on differentiating between slow-speed diesel (SSD) and
medium-speed diesel (MSD) engines, and separate $/kW values were
developed for each of these engine types. The separation by engine type
was also necessary to allow for the use of the age distribution formula
determined by the inventory analysis (see Chapter 3 of the draft RIA)
to determine how many vessels the hardware and/or operational costs are
applicable to in each year.
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    \134\ In order to separate slow speed engines from medium speed
engines where that information was not explicitly available, 2-
stroke engines were assumed to be slow speed, where 4-stroke engines
were assumed to be medium speed.
---------------------------------------------------------------------------

    The ship type information gathered from this baseline data, for the
purposes of both this analysis and the inventory, was categorized into
one of the following ship types: Auto Carrier, Bulk Carrier, Container,
General Cargo, Miscellaneous, Passenger, Refrigerated Cargo (Reefer),
Roll-On Roll-Off (RoRo), and Tankers. Average engine and vessel
characteristics were developed from the baseline data, and these values
were used to represent the characteristics of new vessels used in this
cost analysis (see Chapter 3 of the draft RIA). Estimated future fleets
were developed by ship type and engine type through the year 2040 for
both new and existing vessels and both U.S.- and foreign-flagged
vessels. Hardware costs were applied on a per-vessel basis.
    Although most ships primarily operate on residual fuel, they
typically carry some amount of distillate fuel as well. Switching to
the use of lower sulfur distillate fuel is the compliance strategy
assumed here to be used by both new and existing ships in 2015 when the
new lower sulfur fuel standards go into effect. To estimate the
potential cost of this compliance strategy, we evaluated the distillate
storage capacity of the current existing fleet to estimate how many
ships may require additional hardware to accommodate the use of lower
sulfur fuel. We performed this analysis on the entire global fleet
listed in Lloyd's database as of 2008.\135\ Of the nearly 43,000
vessels listed, approximately 20,000 vessels had provided Lloyds with
fuel tankage information, cruise speed, and propulsion engine power
data. Using this information, we were able to estimate how far each
vessel could travel on its existing distillate carrying capacity.
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    \135\ http://www.sea-web.com 
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    In order to determine if the current distillate capacity of a
particular ship was sufficient to call on a U.S. ECA without requiring
additional hardware, we evaluated whether or not each ship could travel
1,140 nm, or the distance between the Port of Los Angeles and the Port
of Tacoma. This distance was selected because it represents one of the
longer trips a ship could travel without stopping at another port, and
should overestimate the number of vessels that would require such a
modification. The resulting percentages of ships estimated to require a
retrofit were then applied to the number of existing ships in the 2015
fleet to estimate the total cost of this compliance strategy for
existing ships built prior to 2015. The same percentages were also
applied to all new ships built as of 2015 to determine the number of
ships that may require additional hardware and estimate the cost of
this compliance strategy for new vessels.
(3) NO_X Reduction Technologies
(a) Tier 2
    Most engine manufacturers are expected to be able to meet Tier 2
NO_X standards using engine modifications. This cost estimate
includes the hardware costs associated with the use of retarded fuel
injection timing, higher compression ratios, and better fuel
distribution. There are no variable costs associated with the engine
modifications as the changes are not expected to require any additional
hardware. Some engines may also be equipped with common-rail fuel
systems instead of mechanical fuel injection to meet Tier 2
NO_X standards. It is expected that approximately 75 percent
of SSD and 30 percent of MSD engines will get this modification for
Tier 2. The Tier 2 hardware costs developed here include the costs of
the migration of some engines to common-rail fuel systems. It was also
estimated that these technologies may increase fuel consumption by up
to 2 percent; this fuel penalty is included in the Tier 2 operational
costs. Tier 2 hardware costs included in the total estimated cost of
the coordinated strategy are only associated with U.S.-flagged vessels;
operational costs are applied to both U.S.-and foreign-flagged vessels.
(b) Tier 3
    Tier 3 NO_X standards are approximately 80 percent below
Tier 1 NO_X standards, and are likely to require exhaust
aftertreatment such as SCR. ICF performed a detailed cost analysis for
the U.S. EPA that included surveying engine and emission control
technology manufacturers regarding these advanced technology strategies
and their potential costs. Tier 3 NO_X standards are
projected to be met through the use of SCR systems. While other
technologies such as EGR or those that include introduction of water
into the combustion chamber either through fumigation, fuel emulsions,
or direct water injection may also enable Tier 3 compliance, we assume
they will only be selected if they are less costly than SCR. Therefore,
we have based this analysis on the exclusive use of SCR.
(c) Engine Modifications
    In addition to SCR, it is expected that manufacturers will also use
compound or two-stage turbocharging as well as electronic valving to
enhance performance and emission reductions to meet Tier 3
NO_X standards. Engine modifications to meet Tier 3 emission
levels will include a higher percentage of common-rail fuel injection
coupled with two-stage turbocharging and electronic valving. Engine
manufacturers estimate that nearly all SSD and 80 percent of MSD
engines will use common-rail fuel injection. Two stage turbocharging
will most likely be used on least 70 percent of all engines required to
meet Tier 3 emission levels. Electronically- (hydraulically) actuated
intake and exhaust valves for MSD and electronically-actuated exhaust
valves for SSD are necessary to accommodate two-stage turbocharging.
Additionally, the remaining SSD engines still using mechanical
injection (approximately 25 percent mechanically-controlled, and 75
percent electronically-controlled) are expected to migrate to common
rail for Tier 3, while an additional 40 percent of MSD engines are
expected to receive common rail totaling approximately 80 percent of
all MSD engines. The engine modification variable costs were applied to
all new U.S.-flagged vessels equipped with either SSD or MSD engines.
Costs to foreign-flagged vessel expected to visit U.S. ports are
presented as a separate analysis in Chapter 5 of the draft RIA, and are
not included in the

[[Page 44492]]

total estimated cost of the coordinated strategy.
(4) SO_X/PM Emission Reduction Technology
    In addition to Tier 3 NO_X standards, the IMO ECA
requirements also include lower fuel sulfur limits that will result in
reductions in SO_X and PM. Category 3 marine engines
typically operate on heavy fuel oil with a sulfur content of 2.7
percent, therefore significant SO_X and PM reductions will be
achieved using distillate fuels with a sulfur content of 0.1 percent.
This cost analysis is based on the assumption that vessel operators
will operate their engines using lower sulfur fuel in the proposed ECA.
We believe fuel switching will be the primary compliance approach; fuel
scrubbers would be used in the event that the operator expected to
realize a cost savings and are not considered in this analysis. In some
cases, additional capacity and equipment to accommodate the use of
lower sulfur fuel may need to be installed on a vessel. The potential
costs due to these additional modifications applied to new ships as
well as retrofits to any existing ships are discussed here, and these
hardware costs are included as part of the total cost of this
coordinated program.
    Although most ships operate on heavy fuel oil, they typically carry
small amounts of distillate fuel. Some vessel modifications and new
operating practices may be necessary to use lower sulfur distillate
fuels on vessels designed to operate primarily on residual fuel.
Installation and use of a fuel cooler, associated piping, and viscosity
meters to the fuel treatment system may be required to ensure viscosity
matches between the fuel and injection system design. While there are
many existing ships that already have the capacity to operate on both
heavy fuel oil and distillate fuel and have a separate fuel tank
systems to support each type of fuel, some ships may not have
sufficient onboard storage capacity. If a new or segregated tank is
desired, additional equipment for fuel delivery and control of these
systems may be required.
(5) NO_X and SO_X Emission Reduction Technology Costs
(a) NO_X Emission Reduction Technology
    The costs associated with SCR include variable and fixed costs. SCR
hardware costs include the reactor, dosage pump, urea injectors,
piping, bypass valve, an acoustic horn or a cleaning probe, the control
unit and wiring, and the urea tank (the size of the tank is based on
250 hours of normal operation when the ship is operating in the ECA and
the SCR system is activated.) The size of the tank is dependent on the
frequency with which the individual ship owner prefers to fill the urea
tank. The methodology used here to estimate the capacity of the SCR
systems is based on the power rating of the propulsion engines only.
Auxiliary engine power represents about 20 percent of total installed
power on a vessel; however, it would be unusual to operate both
propulsion and auxiliary engines at 100 percent load. Typically, ships
operate under full propulsion power only while at sea when the SCR is
not operating; when nearing ports, the auxiliary engine is operating at
high loads while the propulsion engine is operating at very low loads.
    In this analysis, we determined the average number of hours a ship
would spend calling on a U.S. port: If the call was straight in and
straight out at 200 nm, the average time spent was slightly over 35
hours. If the distance travelled was substantial, such as from the Port
of Los Angeles to the Port of Tacoma, or 1140 nm, the average time
spent travelling was approximately 75 hours. Therefore, the size of the
tanks and corresponding $/kW values estimated here to carry enough urea
for 250 hours of continuous operation may be an overestimate. Based on
250 hours of operation, a range of urea tank sizes from 20 m\3\ to
approximately 256 m\3\ was determined for the six different engine
configurations used in this analysis.
    To understand what impacts this may have on the cargo hauling
capacity of the ship, we looked at the ISO standard containers used
today. Currently, over two-thirds of the containers in use today are 40
feet long, total slightly over 77 m\3\ and are the equivalent of two
TEU.\136\ The urea tank sizes estimated here reflect a cargo
equivalence of 0.5-2 TEUs, based on a capacity sufficient for 250 hours
of operation. The TEU capacity of container ships, for example,
continues to increase and can be as high as 13,000 TEUs;\137\ while not
all ports are equipped to handle ships of this size, feeder ships
(ships that carry containers to ocean-going vessels in smaller ports)
have also increased in size to carry as much as 2,000 TEUs. Based on a
rate of approximately $1,300 per TEU to ship a container from Asia to
the U.S., a net profit margin of 10%, and an average of 16 trips per
year, the estimated cost due to displaced cargo to call on a U.S./
Canada ECA may be $2,100.\138\ The cost\139\ analysis\140\ presented
here does not include displaced cargo due to the variability of tank
sizes owners choose to install.
---------------------------------------------------------------------------

    \136\ http://www.iicl.org,  Institute of International Container
Lessors.
    \137\ Kristensen, Hans Otto Holmegaard, ``Preliminary Ship
Design of Container Ships, Bulk Carriers, Tankers, and Ro-Ro Ships.
Assessment of Environmental Impact from Sea-Borne Transport Compared
with Landbased Transport,'' March, 2008.
    \138\ http://people.hofstra.edu/geotrans/eng/ch2en/conc2en/
maritimefreightrates.html.
    \139\ http://moneycentral.msn.com/investor/invsub/results/
hilite.asp?Symbol=SSW. 
    \140\ Based on a container ship carrying nearly 9,000 TEUs
traveling from Hong Kong to the Port of Los Angeles (approximately
6,400 nm) with a cruise speed of 25 nm/hr, the round trip time is
nearly 21 days and this trip could be made roughly 16 times per year.
---------------------------------------------------------------------------

    To estimate the SCR hardware costs associated with newly built
ships, we needed to generate an equation in terms of $/kW that could be
applied to other engine sizes. Therefore, the $/kW values representing
the hardware costs estimated for the six different engine types and
sizes used in this analysis was developed using a curve fit for both
SSD and MSD engines. The resulting $/kW values range from $40-$80 per
kW for MSD, and $40-70 for SSD. These costs were then applied based on
the characteristics of the average ship types described in the
inventory section of the draft RIA (see Chapter 3) to the
representative portion of the future fleet in order to estimate the
total costs associated with this program. Table VII-4 presents the
estimated costs of this technology as applied to different ship and
engine types representing the average ship characteristics discussed in
Section VII.A.2.
(b) Lower Sulfur Fuel Hardware Costs
    This cost analysis is based on the use of switching to lower sulfur
fuel to meet the ECA fuel sulfur standards. The costs presented here
may be incurred by some existing and some newly-built ships if
additional fuel tank equipment is required to facilitate the use of
lower sulfur fuel. Based on existing vessel fleet data, we estimate
that approximately one-third of existing vessels may need additional
equipment installed to accommodate additional lower sulfur fuel storage
capacity beyond that installed on comparable new ships. In order to
include any costs that may be incurred on new vessels that choose to
add additional lower sulfur fuel capacity, we also estimated that one-
third of new vessels may require additional hardware. Separate $/kW
values were developed for new and existing vessels as the existing vessel

[[Page 44493]]

retrofit would likely require more labor to complete installation.
    The size of the tank is dependent on the frequency with which the
individual ship owner prefers to fill the lower sulfur fuel tank. The
size of the tanks and corresponding $/kW value estimated here will
carry capacity sufficient for 250 hours of propulsion and auxiliary
engine operation. This is most likely an overestimate of the amount of
lower sulfur fuel a ship owner would need to carry, resulting in an
overestimate of the total cost to existing and new vessels. The tank
sizes based on 250 hours of operation and based on the six different
engine configuration used in this analysis range from 240 m\3\ to
nearly 2,000 m\3\. This would be the equivalent of 6-50 TEUs. This cost
analysis does not reflect other design options such as partitioning of
a residual fuel tank to allow for lower sulfur fuel capacity which
would reduce the amount of additional space required, nor does this
analysis reflect the possibility that some ships may have already been
designed to carry smaller amounts of distillate fuel in separate tanks
for purposes other than continuous propulsion. The $/kW value hardware
cost values for the six data points corresponding to the six different
engine types and sizes used in this analysis are $2-7 for SSD and $3-8
for MSD. A curve fit was determined for the slow-speed engine as well
as for the medium speed engines to determine a $/kW value for each
engine type. Table VII-3 presents the estimated costs of the
technologies used to meet the different standards as applied to
different ship and engine types representing the average ship
characteristics discussed in Section VII.A.2. The estimated hardware
costs of retrofitting existing U.S.-flagged vessels that may require
additional hardware to accommodate the use of lower sulfur fuel is
estimated to be $10.4 million in 2015.
---------------------------------------------------------------------------

    \141\ The values presented in Table VII-3 are provided only to
show what the estimated costs would be for a range of vessel types
given average characteristics (such as DWT, total main, and total
auxiliary power) for both SSD and MSD engine types. Not all vessels
will require all of these technologies; for example, it is estimated
that only 30 percent of MSD will get common-rail fuel injection
systems for Tier II.

              Table VII-3--Estimated Variable Costs of Emission Control Technology on a Per-Ship Basis--by Ship Type and Engine Type \141\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Lower sulfur
                                                          Average      MFI to common   EFI to common    Tier 3 (SCR   fuel hardware--  Lower Sulfur fuel
             Ship type                 Engine speed     propulsion         rail            rail         and engine      new vessels   hardware--existing
                                                        power (kW)                                    modifications)                        vessels
--------------------------------------------------------------------------------------------------------------------------------------------------------
Auto Carrier.......................  MSD                        9640         $80,500          30,400        $566,000          42,300           $56,400
Bulk Carrier.......................  MSD                        6360          67,200          24,600         479,000          36,900            48,500
Container..........................  MSD                       13878          92,300          35,400         678,000          49,200            66,600
General Cargo......................  MSD                        5159          60,400          21,700         448,000          34,900            45,600
Passenger..........................  MSD                       23762         109,600          42,800         939,000          65,400            90,400
Reefer.............................  MSD                        7360          71,900          26,600         506,000          38,500            50,900
RoRo...............................  MSD                        8561          76,700          28,700         538,000          40,500            53,800
Tanker.............................  MSD                        6697          68,800          25,300         488,000          37,400            49,300
Misc...............................  MSD                        9405          79,800          30,000         560,000          41,900            55,800
Auto Carrier.......................  SSD                       11298         152,400          55,500         819,000          48,000            64,800
Bulk Carrier.......................  SSD                        8434         132,900          48,400         669,000          42,700            57,700
Container..........................  SSD                       27454         211,600          77,200       1,521,000          63,900            86,700
General Cargo......................  SSD                        7718         127,000          46,200         630,000          41,100            55,500
Passenger..........................  SSD                       23595         201,500          73,500       1,374,000          61,200            83,000
Reefer.............................  SSD                       10449         147,200          53,600         776,000          46,500            62,900
RoRo...............................  SSD                       15702         174,300          63,500       1,034,000          53,900            72,900
Tanker.............................  SSD                        9755         142,600          51,900         739,000          45,300            61,200
Misc...............................  SSD                        4659          93,300          33,900          50,000          32,000            43,100
--------------------------------------------------------------------------------------------------------------------------------------------------------

(6) Total Costs Associated With the Coordinated Strategy
    The total hardware costs associated with the coordinated strategy
were estimated using the number of new ships by ship type and engine
type entering the fleet each year. Table VII-4 presents the total
hardware costs to U.S.-flagged vessels associated with the coordinated
strategy. These costs consist of the variable and fixed hardware costs
associated with the Annex VI existing engine program, Tier 2 and Tier 3
standards, and additional components that may be required to
accommodate the use of lower sulfur fuel on both new and existing
vessels. This table also presents the total estimated operational costs
associated with the coordinated strategy. These costs consist of the 2
percent fuel consumption penalty associated with Tier 2 (Annex VI Tier
II), the use of urea on vessels equipped with SCR systems, and the
differential cost of using lower sulfur fuel; these costs are incurred
by both U.S.- and foreign-flagged vessels. The total estimated cost of
the coordinated strategy is $3.41 billion in 2030. The total costs from
2010 through 2040 are estimated to be $42.9 billion at a 3 percent
discount rate or $22.1 at a 7 percent discount rate.

                               Table VII-4--Total Hardware and Operational Costs Associated With the Coordinated Strategy
                                                                    [Thousands of $]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Total operating costs        Total costs
                                                          Total hardware     Total new                   --------------------------------   associated
                          Year                               costs for        engine       Total vessel                                      with the
                                                             existing     hardware costs  hardware costs     U.S. flag     Foreign flag     coordinated
                                                              engines                                                                        strategy
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010....................................................          $9,400            $319            $166              $0              $0            $485
2011....................................................         161,000           3,580             173             173           1,130           5,060

[[Page 44494]]

2012....................................................         153,000           3,700             179             841           5,590          10,300
2013....................................................         145,000           3,830             186          32,400         213,000         249,000
2014....................................................         137,000           3,960             192          34,400         226,000         265,000
2015....................................................         131,000           4,100          11,100         180,000       1,190,000       1,390,000
2016....................................................               0          27,300             691         189,000       1,250,000       1,470,000
2017....................................................               0          28,500             717         199,000       1,330,000       1,560,000
2018....................................................               0          29,600             745         210,000       1,410,000       1,650,000
2019....................................................               0          30,700             773         221,000       1,500,000       1,750,000
2020....................................................               0          31,900             803         233,000       1,590,000       1,860,000
2021....................................................               0          33,200             834         246,000       1,680,000       1,960,000
2022....................................................               0          34,600             866         258,000       1,770,000       2,060,000
2023....................................................               0          35,900             899         272,000       1,880,000       2,190,000
2024....................................................               0          37,400             934         286,000       1,980,000       2,300,000
2025....................................................               0          38,800             970         300,000       2,090,000       2,430,000
2026....................................................               0          40,400           1,010         315,000       2,200,000       2,560,000
2027....................................................               0          42,100           1,050         330,000       2,310,000       2,680,000
2028....................................................               0          43,700           1,090         345,000       2,430,000       2,820,000
2029....................................................               0          45,500           1,130         362,000       2,550,000       2,960,000
2030....................................................               0          47,400           1,180         378,000       2,680,000       3,110,000
2031....................................................               0          49,300           1,220         395,000       2,810,000       3,260,000
2032....................................................               0          51,300           1,270         413,000       2,950,000       3,420,000
2033....................................................               0          53,400           1,320         431,000       3,080,000       3,570,000
2034....................................................               0          55,500           1,370         451,000       3,240,000       3,750,000
2035....................................................               0          57,900           1,430         471,000       3,390,000       3,920,000
2036....................................................               0          60,200           1,490         494,000       3,560,000       4,120,000
2037....................................................               0          62,800           1,540         517,000       3,740,000       4,320,000
2038....................................................               0          65,300           1,610         541,000       3,930,000       4,540,000
2039....................................................               0          68,000           1,670         566,000       4,110,000       4,750,000
2040....................................................               0          70,800           1,740         591,000       4,310,000       4,970,000
                                                         -----------------------------------------------------------------------------------------------
    NPV @ 3%............................................         677,000         663,000          26,500       5,260,000      36,900,000      42,900,000
    NPV @ 7%............................................         610,000         346,000          16,900       2,730,000      19,000,000      22,100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Cost Effectiveness

    One tool that can be used to assess the value of the coordinated
strategy is the engineering costs incurred per ton of emissions
reduced. This analysis involves a comparison of our proposed program to
other measures that have been or could be implemented. As summarized in
this section, the coordinated strategy represents a highly cost
effective mobile source control program for reducing NO_X, PM
and SO_X emissions.
    We have estimated the cost per ton based on the net present value
of 3 percent and 7 percent of all hardware costs incurred by U.S.-
flagged vessels, all operational costs incurred by both U.S. and
foreign-flagged vessels, and all emission reductions generated from the
year 2010 through the year 2040. The baseline case for these estimated
reductions is the existing set of engine standards for C3 marine diesel
engines and fuel sulfur limits. Table VII-5 shows the annual emissions
reductions associated with the coordinated strategy; these annual tons
are undiscounted. A description of the methodology used to estimate
these annual reductions can be found in Section II of this preamble and
Chapter 3 of the draft RIA.

        Table VII-5--Estimated Emissions Reductions Associated With the Coordinated Strategy (Short Tons)
----------------------------------------------------------------------------------------------------------------
                                                                                 Reductions (tons)
                          Calendar year                          -----------------------------------------------
                                                                        NOX             SOX             PM
----------------------------------------------------------------------------------------------------------------
2010............................................................          47,000               0               0
2011............................................................          54,000               0               0
2012............................................................          70,000               0               0
2013............................................................          88,000         390,000          48,400
2014............................................................         105,000         406,000          50,400
2015............................................................         123,000         641,000          68,000
2016............................................................         150,000         668,000          70,800
2017............................................................         209,000         695,000          73,700
2018............................................................         279,000         724,000          76,800
2019............................................................         349,000         755,000          80,000
2020............................................................         409,000         877,000          94,100
2021............................................................         488,000         916,000          98,200

[[Page 44495]]

2022............................................................         547,000         954,000         102,000
2023............................................................         634,000         995,000         107,000
2024............................................................         714,000       1,040,000         111,000
2025............................................................         790,000       1,080,000         116,000
2026............................................................         866,000       1,130,000         121,000
2027............................................................         938,000       1,170,000         126,000
2028............................................................       1,020,000       1,220,000         131,000
2029............................................................       1,100,000       1,280,000         137,000
2030............................................................       1,180,000       1,330,000         143,000
2031............................................................       1,260,000       1,390,000         149,000
2032............................................................       1,330,000       1,450,000         155,000
2033............................................................       1,410,000       1,510,000         162,000
2034............................................................       1,500,000       1,580,000         169,000
2035............................................................       1,590,000       1,650,000         177,000
2036............................................................       1,690,000       1,720,000         184,000
2037............................................................       1,810,000       1,800,000         193,000
2038............................................................       1,920,000       1,880,000         201,000
2039............................................................       2,020,000       1,970,000         210,000
2040............................................................       2,130,000       2,050,000         220,000
                                                                 -----------------------------------------------
    NPV at 3%...................................................      14,400,000      19,100,000       2,100,000
    NPV at 7%...................................................       6,920,000      10,100,000       1,090,000
----------------------------------------------------------------------------------------------------------------

    The net estimated reductions by pollutant, using a net present
value of 3 percent from 2010 through 2040 are 14.4 million tons of
NO_X, 19.1 million tons of SO_X, and 2.1 million
tons of PM (6.9 million, 10.1 million, and 1.1 million tons of
NO_X, SO_X, and PM, respectively, at a net present
value of 7 percent over the same period.)
    Using the above cost and emission reduction estimates, we estimated
the lifetime (2010 through 2040) cost per ton of pollutant reduced. For
this analysis, all of the hardware costs associated with the Annex VI
existing engine program and Tier 2 and Tier 3 NO_X standards
as well as the operational costs associated with the global Tier II and
Tier III standards were attributed to NO_X reductions. The
costs associated with lower sulfur fuel operational costs as applied to
all vessels visiting U.S. ports and the hardware costs associated with
accommodating the use of lower sulfur fuel on U.S.-flagged vessels were
associated with SO_X and PM reductions. In this analysis,
half of the costs associated with the use of lower sulfur fuel were
allocated to PM reductions and half to SO_X reductions,
because the costs incurred to reduce SO_X emissions directly
reduce emissions of PM as well. Using this allocation of costs and the
emission reductions shown in Table VII-5, we can estimate the lifetime
cost per ton reduced associated with each pollutant. These results are
shown in Table VII-6. Using a net present value of 3 percent, the
discounted lifetime cost per ton of pollutant reduced is $510 for
NO_X, $930 for SO_X, and $7,950 for PM ($500, $920,
and $7,850 per ton of NO_X, SO_X, and PM,
respectively, at a net present value of 7 percent.) As shown in Table
VII-6, these estimated discounted lifetime costs are similar to the
annual long-term (2030) cost per ton of pollutant reduced.
---------------------------------------------------------------------------

    \142\ The $/ton numbers presented here vary from those presented
in the ECA proposal due to the net present value of the annualized
reductions being applied from 2015-2020, and the use of metric
tonnes rather than of short tons.

 Table VII-6 Coordinated Strategy Estimated Aggregate Discounted Lifetime Cost per Ton (2010-2040) and Long-Term
                                        Annual Cost per Ton (2030) \142\
----------------------------------------------------------------------------------------------------------------
                                                             2010 thru 2040    2010 thru 2040
                                                               discounted        discounted      Long-term cost
                         Pollutant                            lifetime cost     lifetime cost     per ton (for
                                                              per ton at 3%     per ton at 7%         2030)
----------------------------------------------------------------------------------------------------------------
NOx.......................................................              $510              $500              $520
SOx.......................................................               930               920               940
PM........................................................             7,950             7,850             8,760
----------------------------------------------------------------------------------------------------------------
Note: These costs are in 2006 U.S. dollars.

    These results for the coordinated strategy compare favorably to
other air emissions control programs. Table VII-7 compares the
coordinated strategy to other air programs. This comparison shows that
the coordinated strategy will provide a cost-effective strategy for
generating substantial NO_X, SO_X, and PM
reductions from ocean-going vessels. The results presented in Table
VII-7 are lifetime costs per ton discounted at a net present value of 3
percent, with the exception of the stationary source program and
locomotive/marine retrofits, for which annualized costs are presented.
While results at a net present value of 7 percent are not presented, the results

[[Page 44496]]

would be similar. Specifically, the coordinated strategy falls within
the range of values for other recent programs.

 Table VII-7--Estimated $/Ton for the Coordinated Strategy Compared to Previous Mobile Source Programs for NOX,
                                                  SOX, and PM10
----------------------------------------------------------------------------------------------------------------
                                           Implementation
           Source category \A\                  date          NOX cost/ton      SOX cost/ton      PM10 cost/ton
----------------------------------------------------------------------------------------------------------------
Coordinated Strategy NPRM, 2009.........              2011               510               930             7,950
Nonroad Small Spark-Ignition Engines....              2010   \B,C\ 330-1,200  ................  ................
73 FR 59034, October 8, 2008
Stationary Diesel (CI) Engines..........              2006        580-20,000  ................      3,500-42,000
71 FR 39154, July 11, 2006
Locomotives and C1/C2 Marine (Both New                2015           \B\ 730  ................   \D\ 8,400 (New)
 and Retrofits).........................                                                              \E\ 45,000
                                                                                                      (Retrofit)
73 FR 25097, May 6, 2008
Heavy Duty Nonroad Diesel Engines.......              2015         \B\ 1,100               780            13,000
69 FR 38957, June 29, 2004
Heavy Duty Onroad Diesel Engines........              2010         \B\ 2,200             5,800            14,000
66 FR 5001, January 18, 2001
----------------------------------------------------------------------------------------------------------------
Notes:
\A\ Table presents aggregate program-wide cost/ton over 30 years, discounted at a 3 percent NPV, except for
  Stationary CI Engines and Locomotive/Marine retrofits, for which annualized costs of control for individual
  sources are presented. All figures are in 2006 U.S. dollars per short ton.
\B\ Includes NOX plus non-methane hydrocarbons (NMHC). NMHC are also ozone precursors, thus some rules set
  combined NOX + NMHC emissions standards. NMHC are a small fraction of NOX so aggregate cost/ton comparisons
  are still reasonable.
\C\ Low end of range represents costs for marine engines with credit for fuel savings, high end of range
  represents costs for other nonroad SI engines without credit for fuel savings.

D. Economic Impact Analysis

    This section contains our analysis of the expected economic impacts
of our coordinated strategy on the markets for Category 3 marine diesel
engines, ocean-going vessels, and the U.S. marine transportation
service sector. We briefly describe our methodology and present our
estimated expected economic impacts.
    As described below and in more detail in the draft RIA, our
economic impact analysis uses a competitive model approach for all
affected markets. We request comment on this approach, or whether an
alternative modeling approach should be used for these markets.
    The total estimated social costs of the coordinated strategy in
2030 are equivalent to the estimated compliance costs of the
coordinated strategy, at approximately $3.1 billion.\143\ These costs
are expected to accrue initially to the owners and operators of
affected vessels. These owners and operators are expected to pass their
increased costs on to the entities that purchase international marine
transportation services, in the form of higher freight rates.
Ultimately, these costs will be borne by the final consumers of goods
transported by ocean-going vessels in the form of slightly higher
prices for those goods.
---------------------------------------------------------------------------

    \143\ The costs totals reported in this NPRM are slightly
different than those reported in the ECA proposal. This is because
the ECA proposal did not include costs associated with the Annex VI
existing engine program, Tier II, or the costs associated with
existing vessel modifications that may be required to accommodate
the use of lower sulfur fuel. Further, the cost totals presented in
the ECA package included Canadian cost estimates.
---------------------------------------------------------------------------

    We estimate that compliance with the coordinated strategy would
increase the price of a new vessel by 0.5 to 2 percent. The impact of
the coordinated strategy, including the ECA controls, on the price of
ocean marine transportation services would vary, depending on the route
and the amount of time spent in the proposed U.S. ECA. For example, we
estimate that the cost of operating a ship in liner service between
Singapore, Seattle, and Los Angeles/Long Beach, which includes about
1,700 nm of operation in the proposed ECA, would increase by about 3
percent. For a container ship, this represents a price increase of
about $18 per container, assuming the total increase in operating costs
is passed on to the purchaser of the marine transportation services.
This would be about a 3 percent price increase. The per passenger price
of a seven-day Alaska cruise operating entirely within the ECA is
expected to increase by about $7 per day. For ships that spend less
time in the ECA, the expected increase in total operating costs, and
therefore the impacts on freight prices, would be smaller.
    It should be noted that this economic analysis holds all other
aspects of the market constant except for the elements of the
coordinated strategy. It does not attempt to predict future market
equilibrium conditions, particularly with respect to how excess
capacity in today's market due to the current economic downturn will be
absorbed. This approach is appropriate because the goal of an economic
impact analysis is to explore the impacts of a specific program;
allowing changes in other market conditions would confuse the impacts
due to the proposed regulatory program.
    The remainder of this section provides detailed information on the
methodology we used to estimate these economic impacts and the results
of our analysis.
(1) What Is the Purpose of an Economic Impact Analysis?
    In general, the purpose of an Economic Impact Analysis (EIA) is to
provide information about the potential economic consequences of a
regulatory action, such as the proposed coordinated strategy to reduce
emissions from ocean-going vessels. Such an analysis consists of
estimating the social costs of a regulatory program and the
distribution of these costs across stakeholders.
    In an economic impact analysis, social costs are the value of the
goods and services lost by society resulting from (a) the use of
resources to comply with and implement a regulation and (b) reductions
in output. There are two parts to the analysis.
    In the market analysis, we estimate how prices and quantities of
goods directly affected by the emission control program can be expected
to change once

[[Page 44497]]

the program goes into effect. In the economic welfare analysis, we look
at the total social costs associated with the program and their
distribution across key stakeholders.
(2) How Did We Estimate the Economic Impacts of the Coordinated Strategy?
    Our analysis of the economic impacts of the coordinated strategy is
based on the application of basic microeconomic theory. We use a
competitive market model approach in which the interaction between
supply and demand determines equilibrium market prices and quantities.
For markets in which there are many producers, such as the vessel
building and transportation services markets, this approach is
reasonable.\144\ For the Category 3 engine market, the market structure
and therefore the choice of model is more complicated. This market
consists of a small number of manufacturers (2 companies comprising
about 60 percent of the market, with two others having a notable
share), which suggests that an oligopolistic modeling approach may be
more appropriate. In markets with a small number of producers, it is
not uncommon for manufacturers to exercise market power to obtain
prices above the competitive market clearing price, thereby securing
greater profits. In such markets, market prices would increase more
than the compliance costs of the regulatory program. However, an
oligopoly market structure does not necessarily mean that the firms
behave non-competitively. According to the Bertrand competition model,
price competition among even a few manufacturers achieves socially
optimal results similar to a competitive market.\145\ The Bertrand
competition model relies on price competition between the firms; price
competition among the firms may be reduced when the manufacturers face
sharply rising marginal costs, when they compete repeatedly, or when
their products are differentiated. We request comment on whether
Category 3 engine manufacturers behave competitively, competing on
price, or whether some other modeling approach should be used for this market.
---------------------------------------------------------------------------

    \144\ Stopford describes these markets as competitive. See
Stopford, Martin. Maritime Economics, 3rd Edition (Routledge, 2009), Chapter 4.
    \145\ Tirole, Jean. The Theory of Industrial Organization
(1989). MIT Press. See pages 223-224.
---------------------------------------------------------------------------

    In a competitive structure model, we use the relationships between
supply and demand to simulate how markets can be expected to respond to
increases in production costs that occur as a result of the new
emission control program. We use the laws of supply and demand to
construct a model to estimate the social costs of the program and
identify how those costs will be shared across the markets and, thus,
across stakeholders. The relevant concepts are summarized below and are
presented in greater detail in Chapter 7 of the draft RIA.
    Before the implementation of a control program, a market is assumed
to be in equilibrium, with producers producing the amount of a good
that consumers desire to purchase at the market price. The
implementation of a control program results in an increase in
production costs by the amount of the compliance costs. This generates
a ``shock'' to the initial equilibrium market conditions (a change in
supply). Producers of affected products will try to pass some or all of
the increased production costs on to the consumers of these goods
through price increases, without changing the quantity produced. In
response to the price increases, consumers will decrease the quantity
they buy of the affected good (a change in the quantity demanded). This
creates surplus production at the new price. Producers will react to
the decrease in quantity demanded by reducing the quantity they
produce, and they will be willing to sell the remaining production at a
lower price that does not cover the full amount of the compliance
costs. Consumers will then react to this new price. These interactions
continue until the surplus is removed and a new market equilibrium
price and quantity combination is achieved.
    The amount of the compliance costs that will be borne by
stakeholders is ultimately limited by the price sensitivity of
consumers and producers in the relevant markets, represented by the
price elasticities of demand and supply for each market. An
``inelastic'' price elasticity (less than one) means that supply or
demand is not very responsive to price changes (a one percent change in
price leads to less than one percent change in quantity). An
``elastic'' price elasticity (more than one) means that supply or
demand is sensitive to price changes (a one percent change in price
leads to more than one percent change in quantity). A price elasticity
of one is unit elastic, meaning there is a one-to-one correspondence
between a percent change in price and percent change in quantity.
    On the production side, price elasticity of supply depends on the
time available to adjust production in response to a change in price,
how easy it is to store goods, and the cost of increasing (or
decreasing) output. In this analysis, we assume the supply for engines,
vessels, and marine transportation services is elastic: an increase in
the market price of an engine, vessel or freight rates will lead
producers to want to produce more, while a decrease will lead them to
produce less (this is the classic upward-sloping supply curve). It
would be difficult to estimate the slope of the supply curve for each
of these markets given the global nature of the sector. However, it is
reasonable to assume that the supply elasticity for the ocean marine
transportation services market is likely to be greater than one. This
is because output can more easily be adjusted due to a change in price.
For the same reason, the supply elasticity for the new Category 3
engine market is also likely to be greater than one, especially since
these engines are often used in other land-based industries, notably in
power plants. The supply elasticity for the vessel construction market,
on the other hand, may be less than or equal to one depending on the
vessel type, since it may be harder to adjust production and/or store
output if the price drops, or rapidly increase production if the price
increases. Because of the nature of this industry, it would not be
possible to easily switch production to other goods, or to stop or
start production of new vessels.
    On the consumption side, we assume that the demand for engines is a
function of the demand for vessels, which is a function of the demand
for international shipping (demand for engines and vessels is derived
from the demand for marine transportation services). This makes
intuitive sense: Category 3 engine and ocean-going vessel manufacturers
would not be expected to build an engine or vessel unless there is a
purchaser, and purchasers will want a new vessel/engine only if there
is a need for one to supply marine transportation services. Deriving
the price elasticity of demand for the vessel and engine markets from
the international shipping market is an important feature of this
analysis because it provides a link between the product markets.
    In this analysis, the price elasticity of demand for marine
transportation services, and therefore for vessels and Category 3
engines, is nearly perfectly inelastic. This stems from the fact that
for most goods, there are no reasonable alternative shipping modes. In
most cases, transportation by rail or truck is not feasible, and
transportation by aircraft is too expensive. Approximately 90 percent
of world trade by tonnage is moved by ship, and ships provide the most
efficient method to transport these

[[Page 44498]]

goods on a tonne-mile basis.\146\ Stopford notes that ``shippers need
the cargo and, until they have time to make alternative arrangements,
must ship it regardless of cost * * * The fact that freight generally
accounts for only a small portion of material costs reinforces this
argument.'' \147\ A nearly perfectly inelastic price elasticity of
demand for marine transportation services means that virtually all of
the compliance costs can be expected to be passed on to the consumers
of marine transportation services, with no change in output for engine
producers, ship builders, or owners and operators of ships engaged in
international trade.
---------------------------------------------------------------------------

    \146\ Harrould-Koleib, Ellycia. Shipping Impacts on Climate: A
Source with Solutions. Oceana, July 2008. A copy of this report can
be found at http://www.oceana.org/fileadmin/oceana/uploads/Climate_
Change/Oceana_Shipping_Report.pdf 
    \147\ Stopford, Martin. Maritime Economics, 3rd Edition.
Routledge, 2009. p. 163.
---------------------------------------------------------------------------

    The economic impacts of the coordinated strategy presented in this
section rely on the estimated engineering compliance costs described in
Sections VII.A (fuels) and VII.B (engines) above. These costs include
hardware costs for new U.S. vessels to comply with the Tier 2 and Tier
3 engine standards, and for existing U.S. vessels to comply with the
MARPOL Annex VI requirements for existing engines. There are also
hardware costs for fuel switching equipment on new and existing U.S.
vessels to comply with the 1,000 ppm fuel sulfur limit; the cost
analysis assumes that 32 percent of all vessels require fuel switching
equipment to be added (new vessels) or retrofit (existing vessels).
Also included are expected increases in operating costs for U.S. and
foreign vessels operating in the inventory modeling domain, including
the proposed ECA. These increased operating costs include changes in
fuel consumption rates, increases in fuel costs, and the use of urea
for engines equipped with SCR.\148\
---------------------------------------------------------------------------

    \148\ The MARPOL amendments include Tier II and Tier III
NO_X standards that apply to all vessels, including
foreign vessels. While the analysis does not include hardware costs
for the MARPOL Tier II and Tier III standards for foreign vessels
because foreign vessels operate anywhere in the world, it is
appropriate to include the operating costs for these foreign vessels
while they are operating in our inventory modeling domain. This is
because foreign vessels complying with the Tier II and Tier III
standards will have a direct beneficial impact on U.S. air quality,
and if we consider the benefits of these standards we should also
consider their costs.
---------------------------------------------------------------------------

(3) What Are the Estimated Market Impacts of the Coordinated Strategy?
(a) What Are the Estimated Engine and Vessel Market Impacts of the
Coordinated Strategy?
    The estimated market impacts for engines and vessels are based on
the variable costs associated with the engine and vessel compliance
programs; fixed costs are not included in the market analysis. This is
appropriate because in a competitive market the industry supply curve
is generally based on the market's marginal cost curve; fixed costs do
not influence production decisions at the margin. Therefore, the market
analysis for a competitive market is based on variable costs only.
    The assumption of nearly perfectly inelastic demand for marine
transportation services means that the quantity of these services
purchased is not expected to change as a result of costs of complying
with the ECA requirements. As a result, the demand for vessels and
engines would also not change compared to the no-control scenario, and
the quantities produced would remain the same.
    The assumption of nearly perfectly inelastic demand for marine
transportation services also means the price impacts of the coordinated
strategy on new engines and vessels would be equivalent to the variable
engineering compliance costs. Estimated price impacts for a sample of
engine-vessel combinations are set out in Table VII-8 for medium speed
engines, and Table VII-9 for slow speed engines. These are the
estimated price impacts associated with the Tier 3 engine standards on
a vessel that will switch fuels to comply with the fuel sulfur
requirements in the ECA. Because the standards do not phase in, the
estimated price impacts are the same for all years, beginning in 2016.

            Table VII--8 Summary of Estimated Market Impacts--Medium Speed Tier 3 Engines and Vessels
                                                   [$2006] \a\
----------------------------------------------------------------------------------------------------------------
                                                               New vessel
                                                              engine price     New vessel fuel
                Ship type                      Average      impact (new tier      switching     New vessel total
                                          propulsion power   3 engine price    equipment price    price impact
                                                               impact) \b\       impact \c\
----------------------------------------------------------------------------------------------------------------
Auto Carrier............................             9,600          $573,200           $42,300          $615,500
Bulk Carrier............................             6,400           483,500            36,900           520,400
Container...............................            13,900           687,800            49,200           736,000
General Cargo...........................             5,200           450,300            34,900           475,200
Passenger...............................            23,800           952,500            65,400         1,107,900
Reefer..................................             7,400           511,000            38,500           549,500
RoRo....................................             8,600           543,800            40,500           584,300
Tanker..................................             6,700           492,800            37,400           530,200
Misc....................................             9,400           566,800            41,900           608,700
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The new vessel engine price impacts listed here do not include a per engine cost of $10,000 for engines
  installed on U.S. vessels to comply with the proposed production testing requirement (Sec.   1042.302)
\b\ Medium speed engine price impacts are estimated from the cost information presented in Chapter 5 using the
  following formula: (10%*($/SHIP--MECH[rarr]CR))+(30%*($/SHIP--ELEC[rarr]CR))+(T3 ENGINE MODS)+(T3SCR))
\c\ Assumes 32 percent of new vessels would require the fuel switching equipment.

[[Page 44499]]

             Table VII--9 Summary of Estimated Market Impacts--Slow Speed Tier 3 Engines and Vessels
                                                   [$2006] \a\
----------------------------------------------------------------------------------------------------------------
                                                               New vessel
                                               Average        engine price     New vessel fuel
                Ship type                    Propulsion     impact (new tier      switching     New vessel total
                                                Power        3 engine price    equipment price    price impact
                                                               impact) \b\       impact \c\
----------------------------------------------------------------------------------------------------------------
Auto Carrier............................            11,300          $825,000           $48,000          $873,000
Bulk Carrier............................             8,400           672,600            42,700           715,300
Container...............................            27,500         1,533,100            63,900         1,597,000
General Cargo...........................             7,700           632,900            41,000           673,900
Passenger...............................            23,600         1,385,300            61,200         1,446,500
Reefer..................................            10,400           781,000            46,500           827,500
RoRo....................................            15,700         1,042,100            53,900         1,096,000
Tanker..................................             9,800           744,200            45,300           789,500
Misc....................................             4,700           453,600            32,000           485,600
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The new vessel engine price impacts listed here do not include a per engine cost of $10,000 for engines
  installed on U.S. vessels to comply with the proposed production testing requirement (Sec.   1042.302)
\b\ Slow speed engine price impacts are estimated from the cost information presented in Chapter 5 using the
  following formula: (5%*($/SHIP--MECH[rarr]CR))+(15%*($/SHIP--ELEC[rarr]CR))+(T3 ENGINE MODS)+(T3 SCR))
\c\ Assumes 32 percent of new vessels would require the fuel switching equipment.

    The estimated price impacts for Tier 2 vessels would be
substantially lower, given the technology that will be used to meet the
Tier 2 standards is much less expensive. The cost of complying with the
Tier 2 standards ranges from about $56,000 to $100,000 for a medium
speed engine, and from about $130,000 to $250,000 for a slow speed
engine. Again, because the standards do not phase in, the estimated
price impacts are the same for all years the Tier 2 standards are
required, 2011 through 2015.
    These estimated price impacts for Tier 2 and Tier 3 vessels are
small when compared to the price of a new vessel. A selection of new
vessel prices is provided in Table VII-10; these range from about $40
million to $480 million. The program price increases range from about
$600,000 to $1.5 million. A price increase of $600,000 to comply with
the Tier 3 standards and fuel switching requirements would be an
increase of approximately 2 percent for a $40 million vessel. The
largest vessel price increase noted above for a Tier 3 passenger vessel
is about $1.5 million; this is a price increase of less than 1 percent
for a $478 million passenger vessel. Independent of the nearly-perfect
inelasticity of demand, price increases of this magnitude would be
expected to have little, if any, effect on the sales of new vessels,
all other economic conditions held constant.

                                       Table VII-10--Newbuild Vessel Price by Ship Type and Size, Selected Vessels
                                                                    [Millions, $2008]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Vessel type                        Vessel size category                        Size range (mean) (DWT)                      Newbuild
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bulk carrier................................  Handy..........................                                    10,095-39,990 (27,593)           $56.00
                                              Handymax.......................                                    40,009-54,881 (47,616)            79.00
                                              Panamax........................                                    55,000-78,932 (69,691)            97.00
                                              Capesize.......................                                  80,000-364,767 (157,804)           175.00
Container...................................  Feeder.........................                                      1,000-13,966 (9,053)            38.00
                                              Intermediate...................                                    14,003-36,937 (24,775)            70.00
                                              Panamax........................                                    37,042-54,700 (45,104)           130.00
                                              Post Panamax...................                                    55,238-84,900 (67,216)           165.00
Gas carrier.................................  Midsize........................                                      1,001-34,800 (7,048)            79.70
                                              LGC............................                                    35,760-59,421 (50,796)            37.50
                                              VLGC...........................                                   62,510-122,079 (77,898)           207.70
General cargo...............................  Coastal Small..................                                       1,000-9,999 (3,789)            33.00
                                              Coastal Large..................                                    10,000-24,912 (15,673)            43.00
                                              Handy..........................                                    25,082-37,865 (29,869)            52.00
                                              Panamax........................                                    41,600-49,370 (44,511)            58.00
Passenger...................................  All............................                                      1,000-19,189 (6,010)           478.40
Reefer......................................  All............................                                      1,000-19,126 (6,561)            17.30
Ro-Ro.......................................  All............................                                      1,000-19,126 (7,819)            41.20
Tanker......................................  Coastal........................                                      1,000-23,853 (7,118)            20.80
                                              Handymax.......................                                    25,000-39,999 (34,422)            59.00
                                              Panamax........................                                    40,000-75,992 (52,300)            63.00
                                              AFRAmax........................                                  76,000-117,153 (103,112)            77.00
                                              Suezmax........................                                 121,109-167,294 (153,445)            95.00
                                              VLCC...........................                                 180,377-319,994 (294,475)           154.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Lloyd's Shipping Economist (2008), Informa (2008), Lloyd's Sea-Web (2008).

[[Page 44500]]

(b) What Are the Estimated Fuel Market Impacts of the Coordinated Strategy?
    The market impacts for the fuel markets were estimated through the
modeling performed to estimate the fuel compliance costs for the
coordinated strategy. In the WORLD model, the total quantity of fuel
used is held constant, which is consistent with the assumption that the
demand for international shipping transportation would not be expected
to change due to the lack of transportation alternatives.
    The expected price impacts of the coordinated strategy are set out
in Table VII-11. Note that on a mass basis, less distillate than
residual fuel is needed to go the same distance (5 percent less). The
prices in Table VII-11 are adjusted for this impact.
    Table VII-11 shows that the coordinated strategy is expected to
result in a small increase in the price of marine distillate fuel,
about 1.3 percent. The price of residual fuel is expected to decrease
slightly, by less than one percent, due to a reduction in demand for that fuel.

                         Table VII-11--Summary of Estimated Market Impacts--Fuel Markets
----------------------------------------------------------------------------------------------------------------
                                                                                   Adjusted for
             Fuel                     Units       Baseline price   Control price  energy density     % change
----------------------------------------------------------------------------------------------------------------
Distillate....................  $/tonne.........             462             468             N/A            +1.3
Residual......................  $/tonne.........             322             321             N/A            -0.3
Fuel Switching................  $/tonne.........             322             468             444           +38.9
----------------------------------------------------------------------------------------------------------------

    Because of the need to shift from residual fuel to distillate fuel
in the ECA, ship owners are expected to see an increase in their total
cost of fuel. This increase is because distillate fuel is more
expensive than residual fuel. Factoring in the higher energy content of
distillate fuel relative to residual fuel, the fuel cost increase would
be about 39 percent.
(c) What Are the Estimated Marine Transportation Market Impacts of the
Coordinated Strategy?
    We used the above information to estimate the impacts on the prices
of marine transportation services. This analysis, which is presented in
Chapter 7 of the draft RIA, is limited to the impacts of increases in
operating costs due to the fuel and emission requirements of the
coordinated strategy. Operating costs would increase due to the
increase in the price of fuel, the need to switch to fuel with a sulfur
content not to exceed 1,000 ppm while operating in the ECA, and due to
the need to dose the aftertreatment system with urea to meet the Tier 3
standards. Table VII-12 summarizes these price impacts for selected
transportation markets. Table VII-12 also lists the vessel and engine
parameters that were used in the calculations.

                    Table VII-12--Summary of Impacts of Operational Fuel/Urea Cost Increases
----------------------------------------------------------------------------------------------------------------
                                           Vessel and engine
             Vessel type                      parameters                   Operational price increases
----------------------------------------------------------------------------------------------------------------
Container--North Pacific Circle Route  36,540 kW, 50,814 DWT...  $17.53/TEU.
Bulk Carrier--North Pacific Circle     3,825 kW, 16,600 DWT....  $0.56/tonne.
 Route.
Cruise Liner--(Alaska)...............  31,500 kW, 226,000 DWT,   $6.60/per passenger per day
                                        1,886 passengers..
----------------------------------------------------------------------------------------------------------------

    This information suggests that the increase in marine
transportation service prices would be small, both absolutely and when
compared to the price charged by the ship owner per unit transported.
For example, Stopford notes that the price of transporting a 20 foot
container between the UK and Canada is estimated to be about $1,500; of
that, $700 is the cost of the ocean freight; the rest is for port,
terminal, and other charges.\149\ An increase of about $18 represents
an increase of less than 3 percent of ocean freight cost, and about one
percent of transportation cost. Similarly, the price of a 7-day Alaska
cruise varies from $100 to $400 per night or more. In that case, this
price increase would range from 1.5 percent to about 6 percent.
---------------------------------------------------------------------------

    \149\ Stopford, Martin, Maritime Economics, 3rd Edition.
Routledge, 2009. Page 519.
---------------------------------------------------------------------------

(4) What Are the Estimated Social Costs of the Coordinated Strategy and
How Are They Expected To Be Distributed Across Stakeholders?
    The total social costs of the coordinated strategy are based on
both fixed and variable costs. This is because fixed costs are a cost
to society: they displace other product development activities that may
improve the quality or performance of engines and vessels. In this
economic impact analysis, fixed costs are accounted for in the year in
which they occur, with the fixed costs associated with the Tier 2
engine standards accounted for in 2010 and the fixed costs associated
with the Tier 3 engine standards and the ECA controls accounted for in
the five-year period beginning prior to their effective dates.
    The social costs of the coordinated strategy are estimated to be
the same as the total engineering compliance costs. These costs for all
years are presented in Table VII-4. For 2030, the social costs are
estimated to be about $3.1 billion.\150\ For the reasons described
above and explained more fully in the draft RIA, these costs are
expected to be borne fully by consumers of marine transportation services.
---------------------------------------------------------------------------

    \150\ The costs totals reported in this NPRM are slightly
different than those reported in the ECA proposal. This is because
the ECA proposal did not include costs associated with the Annex VI
existing engine program, Tier II, or the costs associated with
existing vessel modifications that may be required to accommodate
the use of lower sulfur fuel. Further, the cost totals presented in
the ECA package included Canadian cost estimates.
---------------------------------------------------------------------------

    These social costs are small when compared to the total value of
U.S. waterborne foreign trade. In 2007, waterborne trade for government
and non-government shipments by vessel into and out of U.S. foreign
trade zones, the 50 states, the District of Columbia, and Puerto Rico
was about $1.4 trillion. Of that, about $1 trillion was for imports.\151\
---------------------------------------------------------------------------

    \151\ Census Bureau's Foreign Trade Division, U.S. Waterborne
Foreign Trade by U.S. Custom Districts, as reported by the Maritime
Administration at http://www.marad.dot.gov/library_landing_page/
data_and_statistics/Data_and_Statistics.htm, accessed April 9, 2009.

---------------------------------------------------------------------------

[[Page 44501]]

    If only U.S. vessels are considered, the social costs of the
coordinated strategy in 2030 would be about $427.5 million. Again,
these social costs are small when compared to the annual revenue for
this sector. In 2002, the annual revenue for this sector was about
$19.8 billion.\152\
---------------------------------------------------------------------------

    \152\ U.S. Census Bureau, Industry Statistics Sampler, NAICS
48311, Deep sea, coastal, and Great Lakes transportation, at http://
www.census.gov/econ/census02/data/industry/E48311.HTM, assessed on
April 9, 2009.
---------------------------------------------------------------------------

(5) Alternative Analysis
    The above analysis is based on the assumption of near-perfectly
inelastic demand for ocean marine transportation services. In this
section, we discuss the implications of relaxing this assumption to
consider the impacts of the coordinated strategy if consumers of marine
transportation services were able to react to an increase in prices by
reducing their demand for these services.
    The marine transportation services market is a global market, which
makes it complicated to estimate the price sensitivity of demand. In
addition, that sensitivity would likely vary depending on the types of
goods transported and the type of vessel used. For example, the demand
elasticity for bulk cargo transportation services would likely vary
depending on the type of bulk (e.g., food, oil, electronic goods) and
the type of vessel (bulk/tramp or liner). Instead of estimating these
price elasticities, this alternative analysis relies on the price
elasticities we developed for our 2008 rulemaking that set technology-
forcing standards for Category 1 and Category 2 engines (73 FR 25098,
May 6, 2008). Although these price elasticities of demand and supply
were developed using data for United States markets only, they reflect
behavioral reactions to price changes if alternative modes of
transportation were available. The values used for the behavioral
parameters for the Category 1 and 2 markets are provided in Table VII-13.

                                   Table VII-13--Behavioral Parameters Used in Locomotive/Marine Economic Impact Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Sector                        Market             Demand elasticity            Source           Supply elasticity            Source
--------------------------------------------------------------------------------------------------------------------------------------------------------
Marine.............................  Marine Transportation   -0.5 (inelastic)......  Literature Estimate..  0.6 (inelastic)......  Literature
                                      Services.                                                                                    Estimate.
                                     Commercial Vessels \a\  Derived...............  N/A..................  2.3 (elastic)........  Econometric
                                                                                                                                   Estimate.
                                     Engines...............  Derived...............  N/A..................  3.8 (elastic)........  Econometric
                                                                                                                                   Estimate.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Commercial vessels include tug/tow/pushboats, ferries, cargo vessels, crew/supply boats, and other commercial vessels.

    The alternative price elasticity of demand for marine
transportation services is inelastic, at -0.5. This means a one percent
increase in price will result in a 0.5 percent decrease in demand. This
inelastic demand elasticity will yield inelastic demand elasticities
for both engines and vessels. The estimates of the price elasticity of
supply are elastic, consistent with the primary analysis described above.
    Rather than create a computer model to estimate the economic
impacts of the coordinated strategy using this revised set of
assumptions, we examine their impact qualitatively. In general,
relaxing the condition of nearly perfectly inelastic demand elasticity
would result in the compliance costs of the coordinated strategy being
shared by consumers and suppliers. In the engine and vessel markets,
the share borne by producers would nevertheless be expected to be
small, given the elastic supply elasticity compared to the inelastic
demand elasticity. Because suppliers would bear part of the compliance
costs, the price increase for engines and vessels would be smaller than
the per-unit engineering compliance costs. In the marine transportation
market, the price impacts would be shared more equally between
producers (vessel owners) and consumers (firms that purchase marine
transportation services), due to the nearly identical price elasticity
of supply (0.6) and demand (-0.5). However, given the relatively small
per unit engineering costs, the total impacts on prices and quantities
in these markets would still be expected to be modest.
    In addition, there would be a small change in demand since
consumers would react to an increase in price by reducing their
consumption of marine transportation services. Again, because the
relative price impact is small, the impact on quantity would also be small.
    The distribution of compliance costs from our earlier rule are
presented in Table VII-14. While the emission control requirements and
the compliance cost structure of the coordinated strategy are somewhat
different, these results give an idea of how costs would be shared if
the assumption of nearly perfectly inelastic price elasticity of demand
for the transportation services market in the ocean-going marine sector
were relaxed.

  Table VII-14--Distribution of Social Costs Among Stakeholder Groups--
                Category 1 and Category 2 Engine Program
------------------------------------------------------------------------
            Stakeholder Group             2020 (percent)  2030 (percent)
------------------------------------------------------------------------
Marine engine producers.................             0.8             0.5
Marine vessel producers.................            10.7             3.8
Recreational and fishing vessel                      8.4             4.1
 consumers..............................
Marine transportation service providers.            36.4            41.5
Marine transportation service consumers.            43.8            50.0
                                         -------------------------------

[[Page 44502]]

    Total...............................           100.0           100.0
------------------------------------------------------------------------

VIII. Benefits

    This section presents our analysis of the health and environmental
benefits that are estimated to occur as a result of EPA's coordinated
strategy to address emissions from Category 3 engines and ocean-going
vessels throughout the period from initial implementation through 2030.
We provide estimated benefits for the entire coordinated strategy,
including the Annex VI Tier 2 NO_X requirements and the ECA
controls that will be mandatory for U.S. and foreign vessels through
the Act to Prevent Pollution from Ships. However, unlike the cost
analysis, this benefits analysis does not allocate benefits between the
components of the program (the requirements in this rule and the
requirements that would apply through MARPOL Annex VI and ECA
implementation). This is because the benefits of the coordinated
strategy will be fully realized only when the U.S. ECA is in place and
both U.S. and foreign vessel are required to use lower sulfur fuel and
operate their Tier 3 NO_X controls while in the designated
area, and therefore it makes more sense to consider the benefits of the
coordinated strategy as a whole.
    The components of the coordinated strategy would apply stringent
NO_X and SO_X standards to virtually all vessels
that affect U.S. air quality, and impacts on human health and welfare
would be substantial. As presented in Section II, the coordinated is
expected to provide very large reductions in direct PM, NO_X,
SO_X, and toxic compounds, both in the near term and in the
long term. Emissions of NO_X (a precursor to ozone formation
and secondarily-formed PM_2.5), SO_X (a precursor
to secondarily-formed PM_2.5) and directly-emitted
PM_2.5 contribute to ambient concentrations of
PM_2.5 and ozone. Exposure to ozone and PM_2.5 is
linked to adverse human health impacts such as premature deaths as well
as other important public health and environmental effects.
    Using the most conservative premature mortality estimates (Pope et
al., 2002 for PM2.5 and Bell et al., 2004 for ozone),\153\\,\ \154\ we
estimate that implementation of the coordinated strategy would reduce
approximately 13,000 premature mortalities in 2030 and yield
approximately $110 billion in total benefits. The upper end of the
premature mortality estimates (Laden et al., 2006 for PM2.5 and Levy et
al., 2005 for ozone) \155\\,\ \156\ increases avoided premature
mortalities to approximately 32,000 in 2030 and yields approximately
$280 billion in total benefits. Thus, even taking the most conservative
premature mortality assumptions, the health impacts of the coordinated
strategy presented in this proposal are clearly substantial.
---------------------------------------------------------------------------

    \153\ Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D.
Krewski, K. Ito, and G.D. Thurston. (2002). Lung Cancer,
Cardiopulmonary Mortality, and Long-term Exposure to Fine
Particulate Air Pollution. Journal of the American Medical
Association, 287, 1132-1141.
    \154\ Bell, M.L., et al. (2004). Ozone and short-term mortality
in 95 US urban communities, 1987-2000. Journal of the American
Medical Association, 292(19), 2372-2378.
    \155\ Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery.
(2006). Reduction in Fine Particulate Air Pollution and Mortality.
American Journal of Respiratory and Critical Care Medicine. 173, 667-672.
    \156\ Levy, J.I., S.M. Chemerynski, and J.A. Sarnat. (2005).
Ozone exposure and mortality: an empiric bayes metaregression
analysis. Epidemiology. 16(4), 458-68.
---------------------------------------------------------------------------

A. Overview

    We base our analysis on peer-reviewed studies of air quality and
human health effects (see U.S. EPA, 2006 and U.S. EPA, 2008).\157\\,
\\158\ These methods are described in more detail in the draft RIA that
accompanies this proposal. To model the ozone and PM air quality
impacts of the proposed CAA standards and requirements and the ECA
designation, we used the Community Multiscale Air Quality (CMAQ) model
(see Section II). The modeled ambient air quality data serves as an
input to the Environmental Benefits Mapping and Analysis Program
(BenMAP).\159\ BenMAP is a computer program developed by the U.S. EPA
that integrates a number of the modeling elements used in previous
analyses (e.g., interpolation functions, population projections, health
impact functions, valuation functions, analysis and pooling methods) to
translate modeled air concentration estimates into health effects
incidence estimates and monetized benefits estimates.
---------------------------------------------------------------------------

    \157\ U.S. Environmental Protection Agency. (2006). Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Retrieved March, 26, 2009 at http://www.epa.gov/
ttn/ecas/ria.html.
    \158\ U.S. Environmental Protection Agency. (2008). Final Ozone
NAAQS Regulatory Impact Analysis. Prepared by: Office of Air and
Radiation, Office of Air Quality Planning and Standards. Retrieved
March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \159\ Information on BenMAP, including downloads of the
software, can be found at http://www.epa.gov/air/benmap/.
---------------------------------------------------------------------------

    The range of total ozone- and PM-related benefits associated with
the coordinated strategy to control ship emissions is presented in
Table VIII-1. We present total benefits based on the PM- and ozone-
related premature mortality function used. The benefits ranges
therefore reflect the addition of each estimate of ozone-related
premature mortality (each with its own row in Table VIII-1) to
estimates of PM-related premature mortality. These estimates represent
EPA's preferred approach to characterizing the best estimate of
benefits associated with the coordinated strategy. As is the nature of
Regulatory Impact Analyses (RIAs), the assumptions and methods used to
estimate air quality benefits evolve to reflect the Agency's most
current interpretation of the scientific and economic literature. This
analysis, therefore, incorporates four important changes from recent
RIAs released by the Office of Transportation and Air Quality (OTAQ):
    • As is the nature of Regulatory Impact Analyses (RIAs), the
assumptions and methods used to estimate air quality benefits evolve
over time to reflect the Agency's most current interpretation of the
scientific and economic literature. For a period of time (2004-2008),
the Office of Air and Radiation (OAR) valued mortality risk reductions
using a value of statistical life (VSL) estimate derived from a limited
analysis of some of the available studies. OAR arrived at a VSL using a

[[Page 44503]]

range of $1 million to $10 million (2000$) consistent with two meta-
analyses of the wage-risk literature. The $1 million value represented
the lower end of the interquartile range from the Mrozek and Taylor
(2002) \160\ meta-analysis of 33 studies and $10 million represented
the upper end of the interquartile range from the Viscusi and Aldy
(2003) \161\ meta-analysis of 46 studies. The mean estimate of $5.5
million (2000$) \162\ was also consistent with the mean VSL of $5.4
million estimated in the Kochi et al. (2006) \163\ meta-analysis.
However, the Agency neither changed its official guidance on the use of
VSL in rule-makings nor subjected the interim estimate to a scientific
peer-review process through the Science Advisory Board (SAB) or other
peer-review group.
---------------------------------------------------------------------------

    \160\ Mrozek, J.R., and L.O. Taylor. (2002). What Determines the
Value of Life? A Meta-Analysis. Journal of Policy Analysis and
Management 21(2):253-270.
    \161\ Viscusi, V.K., and J.E. Aldy. (2003). The Value of a
Statistical Life: A Critical Review of Market Estimates Throughout
the World. Journal of Risk and Uncertainty 27(1):5-76.
    \162\ In this analysis, we adjust the VSL to account for a
different currency year (2006$) and to account for income growth to
2020 and 2030. After applying these adjustments to the $5.5 million
value, the VSL is $7.7m in 2020 and $7.9 in 2030.
    \163\ Kochi, I., B. Hubbell, and R. Kramer. 2006. An Empirical
Bayes Approach to Combining Estimates of the Value of Statistical
Life for Environmental Policy Analysis. Environmental and Resource
Economics. 34: 385-406.
---------------------------------------------------------------------------

    During this time, the Agency continued work to update its guidance
on valuing mortality risk reductions, including commissioning a report
from meta-analytic experts to evaluate methodological questions raised
by EPA and the SAB on combining estimates from the various data
sources. In addition, the Agency consulted several times with the
Science Advisory Board Environmental Economics Advisory Committee (SAB-
EEAC) on the issue. With input from the meta-analytic experts, the SAB-
EEAC advised the Agency to update its guidance using specific,
appropriate meta-analytic techniques to combine estimates from unique
data sources and different studies, including those using different
methodologies (i.e., wage-risk and stated preference) (U.S. EPA-SAB,
2007).\164\
---------------------------------------------------------------------------

    \164\ U.S. Environmental Protection Agency (U.S. EPA). 2007. SAB
Advisory on EPA's Issues in Valuing Mortality Risk Reduction. 
http://yosemite.epa.gov/sab/sabproduct.nsf/
4128007E7876B8F0852573760058A978/$File/sab-08-001.pdf.
---------------------------------------------------------------------------

    Until updated guidance is available, the Agency determined that a
single, peer-reviewed estimate applied consistently best reflects the
SAB-EEAC advice it has received. Therefore, the Agency has decided to
apply the VSL that was vetted and endorsed by the SAB in the Guidelines
for Preparing Economic Analyses (U.S. EPA, 2000) while the Agency
continues its efforts to update its guidance on this issue.\165\ This
approach calculates a mean value across VSL estimates derived from 26
labor market and contingent valuation studies published between 1974
and 1991. The mean VSL across these studies is $6.3 million (2000$).\166\
---------------------------------------------------------------------------

    \165\ In the (draft) update of the Economic Guidelines, EPA
retained the VSL endorsed by the SAB with the understanding that
further updates to the mortality risk valuation guidance would be
forthcoming in the near future. Therefore, this report does not
represent final agency policy. The 2000 guidelines can be downloaded
here: http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/
Guidelines.html, and the draft updated version (2008) of the
guidelines can be downloaded here: http://yosemite.epa.gov/ee/epa/
eerm.nsf/vwRepNumLookup/EE-0516?OpenDocument.
    \166\ In this analysis, we adjust the VSL to account for a
different currency year (2006$) and to account for income growth to
2020 and 2030. After applying these adjustments to the $6.3 million
value, the VSL is $8.9m in 2020 and $9.1m in 2030.
---------------------------------------------------------------------------

    The Agency is committed to using scientifically sound,
appropriately reviewed evidence in valuing mortality risk reductions
and has made significant progress in responding to the SAB-EEAC's
specific recommendations. The Agency anticipates presenting results
from this effort to the SAB-EEAC in the Fall 2009 and that draft
guidance will be available shortly thereafter.
    • In recent analyses, OTAQ has estimated PM_2.5-
related benefits assuming that a threshold exists in the PM-related
concentration-response functions (at 10 [micro]g/m\3\) below which
there are no associations between exposure to PM_2.5 and
health impacts. EPA strives to use the best available science to
support our benefits analyses, and we recognize that interpretation of
the science regarding air pollution and health is dynamic and evolving.
Based on our review of the body of scientific literature, EPA applied
the no-threshold model in this analysis. Removing the threshold
assumption is consistent with the approach taken in the recently
published Portland Cement MACT RIA.\167\ EPA's draft Integrated Science
Assessment (2008g), which was recently reviewed by EPA's Clean Air
Scientific Advisory Committee (CASAC),168, 169 concluded
that the scientific literature consistently finds that a no-threshold
log-linear model most adequately portrays the PM-mortality
concentration-response relationship while recognizing potential
uncertainty about the exact shape of the concentration-response
function. Although this document does not represent final agency policy
that has undergone the full agency scientific review process, it
provides a basis for reconsidering the application of thresholds in
PM_2.5 concentration-response functions used in EPA's RIAs.
It is important to note that while CASAC provides advice regarding the
science associated with setting the National Ambient Air Quality
Standards, typically other scientific advisory bodies provide specific
advice regarding benefits analysis. Because the Portland Cement RIA was
completed while CASAC was reviewing the PM ISA, we solicited comment on
the use of the no-threshold model for benefits analysis within the
preamble of that proposed rule. The comment period for the Portland
Cement proposed NESHAP has been extended until September 4, 2009.\170\
Please see Section 6.4.1.3 of the RIA that accompanies this preamble
for more discussion of the treatment of thresholds in this analysis.
---------------------------------------------------------------------------

    \167\ U.S. Environmental Protection Agency. (2009). Regulatory
Impact Analysis: National Emission Standards for Hazardous Air
Pollutants from the Portland Cement Manufacturing Industry. Office
of Air and Radiation. Retrieved on May 4, 2009, from http://
www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf
    \168\ U.S. Environmental Protection Agency--Science Advisory
Board (U.S. EPA-SAB). 2009. Review of EPA's Integrated Science
Assessment for Particulate Matter (First External Review Draft,
December 2008). EPA-COUNCIL-09-008. May. Available on the Internet
at http://yosemite.epa.gov/sab/SABPRODUCT.NSF/
81e39f4c09954fcb85256ead006be86e/73ACCA834AB44A10852575BD0064346B/
$File/EPA-CASAC-09-008-unsigned.pdf.
    \169\ U.S. Environmental Protection Agency--Science Advisory
Board (U.S. EPA-SAB). 2009b. Consultation on EPA's Particulate
Matter National Ambient Air Quality Standards: Scope and Methods
Plan for Health Risk and Exposure Assessment. EPA-COUNCIL-09-009.
May. Available on the Internet at http://yosemite.epa.gov/sab/
SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86e/
723FE644C5D758DF852575BD00763A32/$File/EPA-CASAC-09-009-
unsigned.pdf.
    \170\ Readers interested in commenting on the use of the no-
threshold model for benefits analysis should direct their comments
to Docket ID No. EPA-HQ-OAR-2002-0051 (available at http://
www.regulations.gov) before the comment period closes.
---------------------------------------------------------------------------

    • For the coordinated strategy, we rely on two empirical
(epidemiological) studies of the relationship between ambient
PM_2.5 and premature mortality (the extended analyses of the
Harvard Six Cities study by Laden et al (2006) and the American Cancer
Society (ACS) cohort by Pope et al (2002)) to anchor our benefits
analysis, though we also present the PM_2.5-related premature
mortality benefits associated with the estimates supplied by the expert
elicitation as a sensitivity analysis. This approach was recently
adopted in the Portland Cement MACT RIA. Since 2006, EPA has calculated
benefits based on these two empirical studies and derived the range of
benefits, including the minimum and maximum results, from an expert
elicitation of the

[[Page 44504]]

relationship between exposure to PM_2.5 and premature
mortality (Roman et al., 2008).\171\ Using alternate relationships
between PM_2.5 and premature mortality supplied by experts,
higher and lower benefits estimates are plausible, but most of the
expert-based estimates have fallen between the two epidemiology-based
estimates (Roman et al., 2008). Assuming no threshold in the
empirically-derived premature mortality concentration response
functions used in the analysis of the coordinated strategy, only one
expert falls below the empirically-derived range while two of the
experts are above this range (see Tables 6-5 and 6-6 in the draft RIA
that accompanies this preamble). Please refer to the Portland Cement
MACT RIA for more information about the preferred approach and the
evolution of the treatment of threshold assumptions within EPA's
regulatory analyses.
---------------------------------------------------------------------------

    \171\ Roman, Henry A., Walker, Katherine D., Walsh, Tyra L.,
Conner, Lisa, Richmond, Harvey M., Hubbell, Bryan J., and Kinney,
Patrick L. (2008). Expert Judgment Assessment of the Mortality
Impact of Changes in Ambient Fine Particulate Matter in the U.S.
Environ. Sci. Technol., 42, 7, 2268--2274.
---------------------------------------------------------------------------

    • The range of ozone benefits associated with the
coordinated strategy is estimated based on risk reductions derived from
several sources of ozone-related mortality effect estimates. This
analysis presents six alternative estimates for the association based
upon different functions reported in the scientific literature. We use
three multi-city studies,172, 173, 174 including the Bell,
2004 National Morbidity, Mortality, and Air Pollution Study (NMMAPS)
that was used as the primary basis for the risk analysis in the ozone
Staff Paper\175\ and reviewed by the Clean Air Science Advisory
Committee (CASAC).\176\ We also use three studies that synthesize ozone
mortality data across a large number of individual
studies.177, 178, 179 This approach is consistent with
recommendations provided by the NRC in their ozone mortality report
(NRC, 2008),\180\ ``The committee recommends that the greatest emphasis
be placed on estimates from new systematic multicity analyses that use
national databases of air pollution and mortality, such as in the
NMMAPS, without excluding consideration of meta-analyses of previously
published studies.'' The NRC goes on to note that there are
uncertainties within each study that are not fully captured by this
range of estimates.
---------------------------------------------------------------------------

    \172\ Bell, M.L., et al. (2004). Ozone and short-term mortality
in 95 US urban communities, 1987-2000. Jama, 2004. 292(19): p. 2372-8.
    \173\ Huang, Y.; Dominici, F.; Bell, M. L. (2005) Bayesian
hierarchical distributed lag models for summer ozone exposure and
cardio-respiratory mortality. Environmetrics 16: 547-562.
    \174\ Schwartz, J. (2005) How sensitive is the association
between ozone and daily deaths to control for temperature? Am. J.
Respir. Crit. Care Med. 171: 627-631.
    \175\ U.S. EPA (2007) Review of the National Ambient Air Quality
Standards for Ozone, Policy Assessment of Scientific and Technical
Information. OAQPS Staff Paper.EPA-452/R-07-003. This document is
available in Docket EPA-HQ-OAR-2003-0190. Retrieved on April 10, 2009,
from http://www.epa.gov/ttn/naaqs/standards/ozone/s_o3_cr_sp.html
    \176\ CASAC (2007). Clean Air Scientific Advisory Committee's
(CASAC) Review of the Agency's Final Ozone Staff Paper. EPA-CASAC-
07-002. March 26.
    \177\ Bell, M.L., F. Dominici, and J.M. Samet. (2005). A meta-
analysis of time-series studies of ozone and mortality with
comparison to the national morbidity, mortality, and air pollution
study. Epidemiology, 16(4): p. 436-45.
    \178\ Ito, K., S.F. De Leon, and M. Lippmann. (2005).
Associations between ozone and daily mortality: analysis and meta-
analysis. Epidemiology. 16(4): p. 446-57.
    \179\ Levy, J.I., S.M. Chemerynski, and J.A. Sarnat. (2005).
Ozone exposure and mortality: an empiric bayes metaregression
analysis. Epidemiology. 16(4): p. 458-68.
    \180\ National Research Council (NRC), 2008. Estimating
Mortality Risk Reduction and Economic Benefits from Controlling
Ozone Air Pollution. The National Academies Press: Washington, DC.

  Table VIII-1--Estimated 2030 Monetized PM-and Ozone-Related Health Benefits of a Coordinated U.S. Strategy To
                                            Control Ship Emissions\a\
----------------------------------------------------------------------------------------------------------------
   2030 Total Ozone and PM Benefits--PM Mortality Derived from American Cancer Society Analysis and Six-Cities
                                                   Analysis\a\
-----------------------------------------------------------------------------------------------------------------
                                                                              Total Benefits     Total Benefits
                                                                            (Billions, 2006$,  (Billions, 2006$,
     Premature Ozone Mortality Function                Reference               3% Discount        7% Discount
                                                                                 Rate)c,d           Rate)c,d
----------------------------------------------------------------------------------------------------------------
Multi-city analyses........................  Bell et al., 2004............         $110--$280         $100--$250
                                             Huang et al., 2005...........           120--280           110--250
                                             Schwartz, 2005...............           120--280           110--250
Meta-analyses..............................  Bell et al., 2005............           120--280           110--250
                                             Ito et al., 2005.............           120--280           110--260
                                             Levy et al., 2005............           120--280           110--260
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Total includes premature mortality-related and morbidity-related ozone and PM2.5 benefits. Range was
  developed by adding the estimate from the ozone premature mortality function to the estimate of PM2.5-related
  premature mortality derived from either the ACS study (Pope et al., 2002) or the Six-Cities study (Laden et
  al., 2006).
\b\ Note that total benefits presented here do not include a number of unquantified benefits categories. A
  detailed listing of unquantified health and welfare effects is provided in Table VIII-2.
\c\ Results reflect the use of both a 3 and 7 percent discount rate, as recommended by EPA's Guidelines for
  Preparing Economic Analyses and OMB Circular A-4. Results are rounded to two significant digits for ease of
  presentation and computation.

    The benefits in Table VIII-1 include all of the human health
impacts we are able to quantify and monetize at this time. However, the
full complement of human health and welfare effects associated with PM
and ozone remain unquantified because of current limitations in methods
or available data. We have not quantified a number of known or
suspected health effects linked with ozone and PM for which appropriate
health impact functions are not available or which do not provide
easily interpretable outcomes (i.e., changes in heart rate
variability). Additionally, we are unable to quantify a number of known
welfare effects, including reduced acid and particulate deposition
damage to cultural monuments and other materials, and environmental
benefits due to reductions of impacts of eutrophication in coastal
areas. These are listed in Table VIII-2. As a result, the health
benefits quantified in this section are likely underestimates of the
total benefits attributable to the

[[Page 44505]]

implementation of the coordinated strategy to control ship emissions.

   Table VIII-2--Unquantified and Non-Monetized Potential Effects of a
           Coordinated U.S. Strategy to Control Ship Emissions
------------------------------------------------------------------------
                                             Effects not included in
           Pollutant/Effects                  analysis--changes in:
------------------------------------------------------------------------
Ozone Health\a\........................  Chronic respiratory damage.\b\
                                         Premature aging of the
                                          lungs.\b\
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-).\e\
Ozone Welfare..........................  Yields for:
                                            --commercial forests,
                                            --some fruits and
                                             vegetables,
                                            --non-commercial crops.
                                         Damage to urban ornamental
                                          plants.
                                         Impacts on recreational demand
                                          from damaged forest
                                          aesthetics.
                                         Ecosystem functions.
                                         Exposure to UVb (+/-).\e\
PM Health\c\...........................  Premature mortality--short term
                                          exposures.\d\
                                         Low birth weight.
                                         Pulmonary function.
                                         Chronic respiratory diseases
                                          other than chronic bronchitis.
                                         Non-asthma respiratory
                                          emergency room visits.
                                         Exposure to UVb (+/-).\e\
PM Welfare.............................  Residential and recreational
                                          visibility in non-Class I
                                          areas.
                                         Soiling and materials damage.
                                         Damage to ecosystem functions.
                                         Exposure to UVb (+/-).\e\
Nitrogen and Sulfate Deposition Welfare  Commercial forests due to
                                          acidic sulfate and nitrate
                                          deposition.
                                         Commercial freshwater fishing
                                          due to acidic deposition.
                                         Recreation in terrestrial
                                          ecosystems due to acidic
                                          deposition.
                                         Existence values for currently
                                          healthy ecosystems.
                                         Commercial fishing,
                                          agriculture, and forests due
                                          to nitrogen deposition.
                                         Recreation in estuarine
                                          ecosystems due to nitrogen
                                          deposition.
                                         Ecosystem functions
                                         Passive fertilization
CO Health..............................  Behavioral effects
HC/Toxics Health\f\....................  Cancer (benzene, 1,3-butadiene,
                                          formaldehyde, acetaldehyde).
                                         Anemia (benzene).
                                         Disruption of production of
                                          blood components (benzene).
                                         Reduction in the number of
                                          blood platelets (benzene).
                                         Excessive bone marrow formation
                                          (benzene).
                                         Depression of lymphocyte counts
                                          (benzene).
                                         Reproductive and developmental
                                          effects (1,3-butadiene).
                                         Irritation of eyes and mucus
                                          membranes (formaldehyde).
                                         Respiratory irritation
                                          (formaldehyde).
                                         Asthma attacks in asthmatics
                                          (formaldehyde).
                                         Asthma-like symptoms in non-
                                          asthmatics (formaldehyde).
                                         Irritation of the eyes, skin,
                                          and respiratory tract
                                          (acetaldehyde).
                                         Upper respiratory tract
                                          irritation and congestion
                                          (acrolein)
HC/Toxics Welfare......................  Direct toxic effects to
                                          animals.
                                         Bioaccumulation in the food
                                          chain.
                                         Damage to ecosystem function.
                                         Odor.
------------------------------------------------------------------------
Notes:
\a\ The public health impact of biological responses such as increased
  airway responsiveness to stimuli, inflammation in the lung, acute
  inflammation and respiratory cell damage, and increased susceptibility
  to respiratory infection are likely partially represented by our
  quantified endpoints.
\b\ The public health impact of effects such as chronic respiratory
  damage and premature aging of the lungs may be partially represented
  by quantified endpoints such as hospital admissions or premature
  mortality, but a number of other related health impacts, such as
  doctor visits and decreased athletic performance, remain unquantified.
\c\ In addition to primary economic endpoints, there are a number of
  biological responses that have been associated with PM health effects
  including morphological changes and altered host defense mechanisms.
  The public health impact of these biological responses may be partly
  represented by our quantified endpoints.
\d\ While some of the effects of short-term exposures are likely to be
  captured in the estimates, there may be premature mortality due to
  short-term exposure to PM not captured in the cohort studies used in
  this analysis. However, the PM mortality results derived from the
  expert elicitation do take into account premature mortality effects of
  short term exposures.
\e\ May result in benefits or disbenefits.
\f\ Many of the key hydrocarbons related to this rule are also hazardous
  air pollutants listed in the CAA.

[[Page 44506]]

B. Quantified Human Health Impacts

    Tables VIII-3 and VIII-4 present the annual PM_2.5 and
ozone health impacts in the 48 contiguous U.S. states associated with
the coordinated strategy for both 2020 and 2030. For each endpoint
presented in Tables VIII-3 and VIII-4, we provide both the mean
estimate and the 90% confidence interval.
    Using EPA's preferred estimates, based on the ACS and Six-Cities
studies and no threshold assumption in the model of mortality, we
estimate that the coordinated strategy would result in between 5,300
and 14,000 cases of avoided PM_2.5-related premature deaths
annually in 2020 and between 13,000 and 32,000 avoided premature deaths
annually in 2030. As a sensitivity analysis, when the range of expert
opinion is used, we estimate between 1,900 and 18,000 fewer premature
mortalities in 2020 and between 4,500 and 42,000 fewer premature
mortalities in 2030 (see Tables 6-5 and 6-6 in the draft RIA that
accompanies this proposal).
    For ozone-related premature mortality, we estimate a range of
between 61 to 280 fewer premature mortalities as a result of the
coordinated strategy in 2020 and between 220 to 980 in 2030. The
increase in annual benefits from 2020 to 2030 reflects additional
emission reductions from coordinated strategy, as well as increases in
total population and the average age (and thus baseline mortality risk)
of the population.

Table VIII-3--Estimated PM2.5-Related Health Impacts Associated With a Coordinated U.S. Strategy To Control Ship
                                                  Emissions \a\
----------------------------------------------------------------------------------------------------------------
                                                              2020 Annual reduction in  2030 Annual reduction in
                        Health effect                          ship-related incidence    ship-related incidence
                                                                   (5th%-95th%ile)           (5th%-95th%ile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Derived from epidemiology literature:
 \b\
    Adult, age 30+, ACS Cohort Study (Pope et al., 2002)....                    5,300                    13,000
                                                                         (2,100-8,500)            (5,000-20,000)
    Adult, age 25+, Six-Cities Study (Laden et al., 2006)...                   14,000                    32,000
                                                                        (7,400-20,000)           (18,000-47,000)
    Infant, age <1 year (Woodruff et al., 1997).............                       20                        37
                                                                                (0-55)                   (0-100)
Chronic bronchitis (adult, age 26 and over).................                    3,800                     8,500
                                                                           (700-6,900)            (1,600-15,000)
Non-fatal myocardial infarction (adult, age 18 and over)....                    8,800                    22,000
                                                                        (3,200-14,000)            (8,100-35,000)
Hospital admissions-respiratory (all ages) \c\..............                    1,200                     2,900
                                                                           (590-1,800)              1,400-4,200)
Hospital admissions-cardiovascular (adults, age >18) \d\....                    2,700                     7,100
                                                                         (2,000-3,200)             (5,000-8,300)
Emergency room visits for asthma (age 18 years and younger).                    3,500                     8,100
                                                                         (2,000-4,900)            (4,800-11,000)
Acute bronchitis, (children, age 8-12)......................                    8,500                    19,000
                                                                            (0-17,000)                (0-37,000)
Lower respiratory symptoms (children, age 7-14).............                  100,000                   220,000
                                                                      (49,000-150,000)         (110,000-330,000)
Upper respiratory symptoms (asthmatic children, age 9-18)...                   77,000                   170,000
                                                                      (24,000-130,000)          (54,000-290,000)
Asthma exacerbation (asthmatic children, age 6-18)..........                   95,000                   210,000
                                                                      (10,000-260,000)          (23,000-580,000)
Work loss days..............................................                  720,000                 1,500,000
                                                                     (630,000-810,000)     (1,300,000-1,700,000)
Minor restricted activity days (adults age 18-65)...........                4,300,000                 9,000,000
                                                                 (3,600,000-4,900,000)    (7,600,000-10,000,000)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Incidence is rounded to two significant digits. Estimates represent incidence within the 48 contiguous
  United States.
\b\ PM-related adult mortality based upon the American Cancer Society (ACS) Cohort Study (Pope et al., 2002) and
  the Six-Cities Study (Laden et al., 2006). Note that these are two alternative estimates of adult mortality
  and should not be summed. PM-related infant mortality based upon a study by Woodruff, Grillo, and Schoendorf,
  (1997).\181\
\c\ Respiratory hospital admissions for PM include admissions for chronic obstructive pulmonary disease (COPD),
  pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total cardiovascular and subcategories for ischemic heart
  disease, dysrhythmias, and heart failure.
    
---------------------------------------------------------------------------

    \181\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997.
``The Relationship Between Selected Causes of Postneonatal Infant
Mortality and Particulate Air Pollution in the United States.''
Environmental Health Perspectives 105(6):608-612.

Table VIII-4--Estimated Ozone-Related Health Impacts Associated With a Coordinated U.S. Strategy To Control Ship
                                                  Emissions\a\
----------------------------------------------------------------------------------------------------------------
                                                              2020 Annual reduction in  2030 Annual reduction in
                        Health effect                          ship-related incidence    ship-related incidence
                                                                   (5th%-95th%ile)           (5th%-95th%ile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality, All ages \b\

[[Page 44507]]

Multi-City Analyses:
    Bell et al. (2004)--Non-accidental......................                       61                       220
                                                                               (23-98)                  (71-370)
    Huang et al. (2005)-Cardiopulmonary.....................                      100                       370
                                                                              (43-160)                 (140-610)
    Schwartz (2005)--Non-accidental.........................                       93                       340
                                                                              (34-150)                 (100-570)
Meta-analyses:
    Bell et al. (2005)--All cause...........................                      200                       690
                                                                             (100-290)               (330-1,100)
    Ito et al. (2005)--Non-accidental.......................                      270                       980
                                                                             (170-370)               (580-1,400)
    Levy et al. (2005)--All cause...........................                      280                       980
                                                                             (200-360)               (670-1,300)
Hospital admissions--respiratory causes (adult, 65 and                            470                     2,000
 older) \c\.................................................                  (46-830)                (97-3,600)
Hospital admissions--respiratory causes (children, under 2).                      380                     1,200
                                                                             (180-590)               (500-2,000)
Emergency room visit for asthma (all ages)..................                      210                       740
                                                                               (0-550)                 (0-1,900)
Minor restricted activity days (adults, age 18-65)..........                  360,000                 1,200,000
                                                                     (160,000-570,000)       (440,000-1,900,000)
School absence days.........................................                  130,000                   450,000
                                                                      (51,000-190,000)         (150,000-680,000)
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Incidence is rounded to two significant digits. Estimates represent incidence within the 48 contiguous U.S.
\b\ Estimates of ozone-related premature mortality are based upon incidence estimates derived from several
  alternative studies: Bell et al. (2004); Huang et al. (2005); Schwartz (2005) ; Bell et al. (2005); Ito et al.
  (2005); Levy et al. (2005). The estimates of ozone-related premature mortality should therefore not be summed.
\c\ Respiratory hospital admissions for ozone include admissions for all respiratory causes and subcategories
  for COPD and pneumonia.

C. Monetized Benefits

    Table VIII-5 presents the estimated monetary value of reductions in
the incidence of ozone and PM_2.5-related health effects. All
monetized estimates are stated in 2006$. These estimates account for
growth in real gross domestic product (GDP) per capita between the
present and the years 2020 and 2030. As the tables indicate, total benefits
are driven primarily by the reduction in premature fatalities each year.
    Our estimate of total monetized benefits in 2020 for the
coordinated strategy, using the ACS and Six-Cities PM mortality studies
and the range of ozone mortality assumptions, is between $47 billion
and $110 billion, assuming a 3 percent discount rate, or between $42
billion and $100 billion, assuming a 7 percent discount rate. In 2030,
we estimate the monetized benefits to be between $110 billion and $280
billion, assuming a 3 percent discount rate, or between $100 billion
and $260 billion, assuming a 7 percent discount rate. The monetized
benefit associated with reductions in the risk of both ozone- and
PM_2.5-related premature mortality ranges between 90 to 98
percent of total monetized health benefits, in part because we are
unable to quantify a number of benefits categories (see Table VIII-2).
These unquantified benefits may be substantial, although their
magnitude is highly uncertain.

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D. What Are the Limitations of the Benefits Analysis?

    Every benefit-cost analysis examining the potential effects of a
change in environmental protection requirements is limited to some
extent by data gaps, limitations in model capabilities (such as
geographic coverage), and uncertainties in the underlying scientific
and economic studies used to configure the benefit and cost models.
Limitations of the scientific literature often result in the inability
to estimate quantitative changes in health and environmental effects,
such as potential increases in premature mortality associated with
increased exposure to carbon monoxide. Deficiencies in the economics
literature often result in the inability to assign economic values even
to those health and environmental outcomes which can be quantified.
These general uncertainties in the underlying scientific and economics
literature, which can lead to valuations that are higher or lower, are
discussed in detail in the draft RIA and its supporting references. Key
uncertainties that have a bearing on the results of the benefit-cost
analysis of the coordinated strategy include the following:
    • The exclusion of potentially significant and unquantified
benefit categories (such as health, odor, and ecological benefits of
reduction in air toxics, ozone, and PM);
    • Errors in measurement and projection for variables such as
population growth;
    • Uncertainties in the estimation of future year emissions
inventories and air quality;
    • Uncertainty in the estimated relationships of health and
welfare effects to changes in pollutant concentrations including the
shape of the C-R function, the size of the effect estimates, and the
relative toxicity of the many components of the PM mixture;
    • Uncertainties in exposure estimation; and
    • Uncertainties associated with the effect of potential
future actions to limit emissions.
    As Table VIII-5 indicates, total benefits are driven primarily by
the reduction in premature mortalities each year. Some key assumptions
underlying the premature mortality estimates include the following,
which may also contribute to uncertainty:
    • Inhalation of fine particles is causally associated with
premature death at concentrations near those experienced by most
Americans on a daily basis. Although biological mechanisms for this
effect have not yet been completely established, the weight of the
available epidemiological, toxicological, and experimental evidence
supports an assumption of causality. The impacts of including a
probabilistic representation of causality were explored in the expert
elicitation-based results of the PM NAAQS RIA.
    • All fine particles, regardless of their chemical
composition, are equally potent in causing premature mortality. This is
an important assumption, because PM produced via transported precursors
emitted from marine engines may differ significantly from PM precursors
released from electric generating units and other industrial sources.
However, no clear scientific grounds exist for supporting differential
effects estimates by particle type.
    • The C-R function for fine particles is approximately
linear within the range of ambient concentrations under consideration.
Thus, the estimates include health benefits from reducing fine
particles in areas with varied concentrations of PM, including both
regions that may be in attainment with PM_2.5 standards and
those that are at risk of not meeting the standards.
    • There is uncertainty in the magnitude of the association
between ozone and premature mortality. The range of ozone benefits
associated with the proposed strategy is estimated based on the risk of
several sources of ozone-related mortality effect estimates. In a
recent report on the estimation of ozone-related premature mortality
published by the National Research Council, a panel of experts and
reviewers concluded that short-term exposure to ambient ozone is likely
to contribute to premature deaths and that ozone-related mortality
should be included in estimates of the health benefits of reducing
ozone exposure.\182\ EPA has

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requested advice from the National Academy of Sciences on how best to
quantify uncertainty in the relationship between ozone exposure and
premature mortality in the context of quantifying benefits.
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    \182\ National Research Council (NRC), 2008. Estimating
Mortality Risk Reduction and Economic Benefits from Controlling
Ozone Air Pollution. The National Academies Press: Washington, DC.
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    Emissions and air quality modeling decisions are made early in the
analytical process. For this reason, the emission control scenarios
used in the air quality and benefits modeling are slightly different
than the coordinated strategy. The discrepancies impact the benefits
analysis in three ways:
    • The air quality modeling used for the 2020 scenarios is
based on inventory estimates that were modeled using incorrect boundary
information. We believe the impact of this difference, while modest,
likely leads to a small underestimate of the benefits that are
presented in this section. Please refer to the Chapter 3 of the draft
RIA for more information on the emissions excluded from the health
impacts analysis.
    • The 2020 air quality modeling scenarios do not include
emission reductions associated with the implementation of global
controls (set through IMO) beyond the assumed ECA boundary of 200
nautical miles (nm). Again, while we expect the impact of this
difference is modest, the omission of th