Control of Emissions of Air Pollution From Locomotive Engines and Marine Compression-Ignition Engines Less Than 30 Liters per Cylinder; Republication

PDF Version (50 pp, 1246K, About PDF)

[Federal Register: June 30, 2008 (Volume 73, Number 126)]
[Rules and Regulations]
[Page 37145-37194]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jn08-15]

[[pp. 37145-37194]]
Control of Emissions of Air Pollution From Locomotive Engines and
Marine Compression-Ignition Engines Less Than 30 Liters per Cylinder;
Republication

[[Continued from page 37144]]

[[Page 37145]]

production line testing program. For example, given the small sales
volumes associated with marine engines it may be appropriate to include
a production verification program for marine engines as part of a
manufacturer's broader production verification programs for its non-
marine engines. We believe these existing provisions already address
the concerns raised to us by the manufacturers.
    We are adding provisions to allow manufacturers to use special
procedures for production line testing of catalyst-equipped engines.
Under the existing Part 92 and Part 94 programs, a manufacturer of a
catalyst-equipped locomotive or Category 2 marine engine would be
required to assemble and test the engine with a complete catalyst
system. At the manufacturer's choice, the engine could be broken in by
operating it for up to 300 hours or it could be tested in a ``green''
state and its measured emissions adjusted by applying ``green engine
factors''. The new regulations in Parts 1033 and 1042 will continue to
allow these options, but will also include additional options.
    For locomotives, the new regulations will allow a locomotive to be
used in service for up to 1,000 hours before it is tested. This will be
sufficient time to degreen a catalyst. We believe that this approach
should work well for locomotives given the very close working
relationships between the manufacturers and the major railroads. (See
section IV.A.(8) for additional interim provisions related to
production-line testing of locomotives.)
    We do not believe this locomotive approach would work for marine
engines because the marine market is much more diverse and the very
close working relationships cannot be assumed. Therefore, we will rely
on our general authority to approve alternate PLT programs. Should a
consensus develop in the future about how to appropriately verify that
engines and catalysts are produced to conform to the regulations, we
may adopt specific regulatory provisions to address these marine engines.
(12) Evaporative Emission Requirements
    While nearly all locomotives currently subject to part 92 are
fueled with diesel fuel, Sec.  92.7 includes evaporative emission
provisions that would apply for locomotives fueled by a volatile liquid
fuel such as gasoline or ethanol. These regulations do not specify test
procedures or specific numerical limits, but rather set ``good
engineering'' requirements. We are adopting these same requirements in
part 1033.
    We are also adopting similar requirements for marine engines and
vessels that run on volatile fuels. We are not aware of any
compression-ignition marine engines currently being produced that would
be subject to these requirements but believe that it is appropriate to
adopt these requirements now rather than waiting until such engines are
produced. In this final rule, we are adopting requirements for
controlling evaporative emissions that are identical to those for
locomotives. As described in the proposal, we intend to apply to
compression-ignition marine engines and vessels the same requirements
we will be adopting for spark-ignition engines and vessels before the
end of 2008 (as proposed at 72 FR 28098). We therefore intend to modify
part 1042 in the final rule corresponding to that proposal related to
spark-ignition marine engines and vessels. Specifically, if someone
were to build a marine vessel with a compression-ignition engine that
runs on a volatile liquid fuel, the engine would be subject to the
exhaust emission standards of part 1042, but the fuel system would be
subject to the evaporative emission requirements of the recently
proposed part 1045.\160\
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    \160\ Part 1045 was proposed on May 18, 2007 (72 FR 28097).
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(13) Small Business Provisions
    There are a number of small businesses that will be subject to this
rule because they are locomotive manufacturers/remanufacturers,
railroads, marine engine manufacturers, post-manufacture marinizers,
vessel builders, or vessel operators. We largely continue the existing
provisions that were adopted previously for these small businesses in
the 1998 Locomotive and Locomotive Engines Rule (April 16, 1998; 63 FR
18977); our 1999 Commercial Marine Diesel Engines Rule (December 29,
1999; 64 FR 73299) and our 2002 Recreational Diesel Marine program
(November 8, 2002; 67 FR 68304). These provisions, which are discussed
below, are designed to minimize regulatory burdens on small businesses
needing added flexibility to comply with emission standards while still
ensuring the greatest emissions reductions achievable. (See section
IX.C of this rule for discussion of our outreach efforts with small
entities.)
(a) Locomotive Sector
(i) Production-Line and In-Use Testing Does not Apply
    Production-line and in-use testing requirements do not apply to
small locomotive manufacturers until January 1, 2013, which is up to
five calendar years after this program becomes effective.
    In the 1998 Locomotive Rule (April 16, 1998; 63 FR 18977), the in-
use testing exemption was provided to small remanufacturers with
locomotives or locomotive engines that became new during the 5-year
delay, and this exemption was applicable to these locomotives or
locomotive engines for their entire useful life (the exemption was
based on model years within the delay period, but not calendar years as
we are promulgating today). As an amendment to the existing in-use
testing exemption, small remanufacturers with these new locomotives or
locomotive engines must now begin complying with the in-use testing
requirements after the five-year delay on January 1, 2013 (exemption
based on calendar years). Thus, they are no longer exempt from in-use
testing for the entire useful life of a locomotive or a locomotive
engine. We are finalizing this provision to ensure that small
remanufacturers comply with our standards in-use, and subsequently, the
public is assured they are receiving the air quality benefits of
today's standards. In addition, this amendment provides a date certain
for small remanufacturers when in-use testing requirements begin to apply.
    We received a number of comments asking us to clarify whether or
not we were still planning to require production-line audits or
verification for small locomotive remanufacturers during this 5-year
delay (until January 1, 2013). In response, we are clarifying that we
did not intend to exempt small locomotive remanufacturers from
production-line audits during the 5-year delay (our intent was to
exempt these entities from production-line and in-use testing
requirements). We believe this requirement is of minimal regulatory
burden to small locomotive remanufacturers. Moreover, we have clarified
the general auditing regulations to explicitly allow audits to be
conducted by the owner/operator, which further minimizes the burden.
(ii) Class III Railroads Exempt From New Standards for Existing Fleets
    EPA is limiting the category of small railroads which are exempt
from the Tier 0, 1 and 2 remanufacturing requirements for existing
fleets to those railroads that qualify as Class III railroads and that
are not owned by a large parent company. Under the current Surface
Transportation Board classification system, this exemption is limited
to railroads having total revenue less than $25.5 million per year.
This change requires that all Class II

[[Page 37146]]

railroads, when remanufacturing their locomotives, meet the new
standards finalized for existing fleets.
    EPA had requested comment on whether the small railroads exemption
from emissions standards for existing fleets had been effective and
appropriate and whether they should continue under the new program
finalized today. Under part 92, only railroads qualifying as ``large''
businesses, as defined by the Small Business Administration (SBA) were
subject to the standards for their pre-existing fleet. The SBA
definition of a large railroad is based on employment. For line-haul
railroads the threshold is 1,500 or more employees, and for short-haul
railroads it is 500 or more employees. Additionally, any railroad owned
by a parent company that is large by SBA definition is also subject to
the current existing fleet requirements. Although this excludes a
majority of the more than 500 U.S. freight railroads, it addresses the
vast majority of the emissions because it includes all Class I railroads.
    The majority of comments supported revising the criterion for
exempting railroads from emissions standards for existing fleets. While
some of these commenter's felt that a revenue based approach exempting
Class III railroads was appropriate, others disagreed, and argued that
all railroads, regardless of classification or revenues should be
subject to the new emission standards for existing fleets. These
commenters felt no exemption would be legitimate because of both the
extremely long operational life of these locomotive engines and the
predominance of Class II and III railroads in various nonattainment
areas of the country which contribute to air quality problems. Those
commenters opposing any change to the existing exemption scheme argued
that the current approach of exempting all small railroads should be
retained because the costs involved in meeting new standards for
existing fleets would impose a heavy financial burden on small
railroads currently exempt from the program. Additionally, these
commenters argued that small railroads' emissions are trivial and do
not impact air quality.
    In finalizing this new approach, EPA believes that continuing to
exempt Class III railroads with annual revenues under $25.5 million
while including all Class II railroads in the existing fleet program is
a reasonable approach that addresses both industry concerns regarding
costs while also recognizing that small railroads do contribute to air
pollution in areas they service including nonattainment areas
throughout the U.S.
    We are clarifying our definition that intercity passenger or
commuter railroads are not included as railroads that are small
businesses because they are typically governmental or are large
businesses. Due to the nature of their business, these entities are
largely funded through tax transfers and other subsidies. Thus, the
only passenger railroads that could qualify for the small railroad
provisions will be small passenger railroads related to tourism.
(iii) Small Railroads Excluded From In-Use Testing Program
    The railroad in-use testing program continues to apply to Class I
freight railroads only, and thus no small railroads are subject to this
testing requirement. It is important to note many Class II and III
freight railroads qualify as small businesses. This provision provides
flexibility to all Class II and III railroads, which includes small
railroads. All Class I freight railroads are large businesses.\161\
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    \161\ U.S. EPA, Assessment and Standards Division, Memorandum
from Chester J. France to Alexander Cristofaro of U.S. EPA's Office
of Policy, Economics, and Innovation, Locomotive and Marine Diesel
RFA/SBREFA Screening Analysis, September 25, 2006.
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(iv) Hardship Provisions
    Section 1068.245 of the existing regulations in title 40 contains
hardship provisions for engine and equipment manufacturers, including
those that are small businesses. We will apply this section for
locomotives as described below.
    Under the unusual circumstances hardship provision, locomotive
manufacturers may apply for hardship relief if circumstances outside
their control cause their failure to comply and if the failure to sell
the subject locomotives will have a major impact on the company's
solvency. An example of an unusual circumstance outside a
manufacturer's control may be an ``Act of God,'' a fire at the
manufacturing plant, or the unforeseen shut down of a supplier with no
alternative available. The terms and time frame of the relief depend on
the specific circumstances of the company and the situation involved.
As part of its application for hardship, a company is required to
provide a compliance plan detailing when and how it will achieve
compliance with the standards.
(b) Marine Sector
(i) Revised Definitions of Small-Volume Manufacturer and Small-Volume
Boat Builder
    As proposed, we are revising the definitions of small-volume
manufacturer (SVM) and small-volume boat builder to include worldwide
production. Currently, an SVM is defined as a manufacturer with annual
U.S.-directed production of fewer than 1,000 engines (marine and
nonmarine engines), and a small-volume boat builder is defined as a
boat manufacturer with fewer than 500 employees and with annual U.S.-
directed production of fewer than 100 boats. By including worldwide
production in these definitions, we prevent a manufacturer or boat
builder with a large worldwide production of engines or boats, or a
large worldwide presence, from receiving relief from the requirements
of this program. The provisions that apply to small-volume
manufacturers and small-volume boat builders as described below are
intended to minimize the impact of this rule for those entities that do
not have the financial resources to quickly respond to requirements in
the rule.
(ii) Broader Engine Families and Testing Relief
    Broader engine families: We are finalizing as proposed the
provision that post-manufacture marinizers (PMMs) and SVMs be allowed
to continue to group all commercial Category 1 engines into one engine
family for certification purposes, all recreational engines into one
engine family, and all Category 2 engines into one family. As with
existing regulations, these entities are responsible for certifying
based on the ``worst-case'' emitting engine. This approach minimizes
certification testing because the marinizer and SVMs can use a single
engine in the first year to certify their whole product line. In
addition, marinizers and SVMs may then carry over data from year to
year until changing engine designs in a way that might significantly
affect emissions.
    As described in the proposal, this broad engine family provision
still requires a certification test and the associated burden for
small-volume manufactures. We realize that the test costs are spread
over low sales volumes, and we recognize that it may be difficult to
determine the worst-case emitter without additional testing but we need
a reliable, test-based, technical basis to issue a certificate for
these engines. However, manufacturers will be able to use carryover
test data to spread costs over multiple years of production.
    Production-line and deterioration testing: In addition, as
proposed, SVMs producing engines less than or equal to 600 kW (800 hp)
are exempted from production-line and deterioration testing for the
Tier 3 standards. We will assign a deterioration factor for use in

[[Page 37147]]

calculating end-of-useful life emission factors for certification. This
approach minimizes compliance testing since production-line and
deterioration testing is more extensive than a single certification
test. As described in the proposal, Tier 3 standards for these engines
are not expected to require the use of aftertreatment--similar to the
existing Tier 1 and Tier 2 standards. The Tier 4 standards for engines
greater than 600 kW are expected to require aftertreatment emission-
control devices. Currently, we are not aware of any SVMs that produce
engines greater than 600 kW, except for one marinizer that plans to
discontinue their production in the near future.\162\
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    \162\ U.S. EPA, Assessment and Standards Division, Memorandum
from Chester J France to Alexander Cristofaro of U.S. EPA's Office
of Policy, Economics, and Innovation, Locomotive and Marine Diesel
RFA/SBREFA Screening Analysis, September 25, 2006.
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    We are finalizing provisions that require SVMs to undertake
production-line and deterioration testing in the future if they begin
producing these larger engines due to the sophistication of
manufacturers that produce engines with aftertreatment technology. We
believe these manufacturers will have the resources to conduct both the
design and development work for the aftertreatment emission-control
technology, along with production-line and deterioration testing.
    (iii) Delayed Standards
    One-year delay: As described in the proposal, post-manufacture
marinizers (PMMs) generally depend on engine manufacturers producing
base engines for marinizing. This can delay the certification of the
marinized engines. There may be situations in which, despite its best
efforts, a marinizer cannot meet the implementation dates, even with
the provisions described in this section. Such a situation may occur if
an engine supplier without a major business interest in a marinizer
were to change or drop an engine model very late in the implementation
process or was not able to supply the marinizer with an engine in
sufficient time for the marinizer to recertify the engine. Based on
this concern, we are finalizing as proposed to allow a one-year delay
in the implementation dates of the Tier 3 standards for post-
manufacture marinizers qualifying as small businesses (the definition
of small business, not SVM, used by EPA for these provisions for
manufacturers of new marine diesel engines--or other engine equipment
manufacturing--is 1,000 or fewer employees; as defined by the Small
Business Administration's (SBA) regulations at 13 CFR 121.201) and
producing engines less than or equal to 600 kW (800 hp).
    As described above and in the proposal, the Tier 4 standards for
engines greater than 600 kW (800hp) are expected to require
aftertreatment emission-control devices. We will not apply this one-
year delay to small PMMs that begin marinizing these larger engines in
the future due to the sophistication of entities that produce engines
with aftertreatment technology. We expect that the large base engine
manufacturer (with the needed resources), not the small PMM, will
conduct both the design and development work for the aftertreatment
emission-control technology and that they will also take on the
certification responsibility in the future. Thus, the small PMM
marinizing large engines will not need a one-year delay.
    Three-year delay for not-to-exceed (NTE) requirements: As described
in the proposal, additional lead time is also appropriate for PMMs to
demonstrate compliance with NTE requirements. Their reliance on another
company's base engines affects the time needed for the development and
testing work needed to comply. Thus, as proposed, PMMs qualifying as
small businesses and producing engines less than or equal to 600 kW
(800hp) may also delay compliance with the NTE requirements by up to
three years, for the Tier 3 standards. Three years of extra lead time
(compared to one year for the primary certification standards) is
appropriate considering their more limited resources. As described
above and in the proposal, the Tier 4 standards for engines greater
than 600 kW are expected to require aftertreatment emission-control
devices. We do not apply this three-year delay to small PMMs that begin
marinizing these larger engines in the future due to the sophistication
of entities that produce engines with aftertreatment technology. We
expect that the large base engine manufacturer (with the needed
resources), not the small PMM, will conduct both the design and
development work for the aftertreatment emission-control technology and
that they will also take on the certification responsibility in the
future. Thus, the small PMM marinizing large engines does not need a
three-year delay for compliance with the NTE requirements.
    Five-year delay for recreational engines: For recreational marine
diesel engines, the existing regulations (2002 Recreational Diesel
Marine program; November 8, 2002, 67 FR 68304) allow small-volume
manufacturers up to a five-year delay for complying with the standards.
However, as proposed, we will not continue this provision. As discussed
above and in the proposal, the Tier 3 standards for these engines are
expected to be engine-out standards which do not require the use of
aftertreatment--similar to the existing Tier 1 and Tier 2 standards.
The Tier 4 standards will not apply to recreational engines. Also, Tier
3 engines are expected to require far less in terms of new hardware,
and in fact, are expected to only require upgrades to existing hardware
(i.e., new fuel systems). In addition, manufacturers have experience
with engine-out standards from the existing Tier 1 and Tier 2
standards, and thus, they have learned how to comply with such
standards. Thus, small-volume manufacturers of recreational marine
diesel engines do not need more time to meet the new standards. For
small PMMs of recreational marine diesel engines, the one-year delay
described earlier will provide enough time for these entities to meet
today's standards.
(iv) Engine Dressing Exemption
    We are finalizing as proposed that marine engine dresser will
continue to be exempt from certification and compliance requirements.
As described in the proposal, many marine diesel engine manufacturers
take a new, land-based engine and modify it for installation on a
marine vessel. Some of these companies modifying an engine make no
changes that might affect emissions. Instead, the modifications may
consist of adding mounting hardware and a generator or reduction gears
for propulsion. It can also involve installing a new marine cooling
system that meets original manufacturer specifications and duplicates
the cooling characteristics of the land-based engine but with a
different cooling medium (such as sea water). In many ways, these
manufacturers are similar to nonroad equipment manufacturers that
purchase certified land-based nonroad engines to make auxiliary
engines. This simplified approach of producing an engine can more
accurately be described as dressing an engine for a particular
application. As indicated above, engine dressers make changes to an
engine without affecting the emission characteristics of the engine,
which would include modifications that do not affect aftertreatment
emission-control devices or systems (as stated earlier, Tier 4
standards for engines greater than 600 kW (800 hp) are expected to
require aftertreatment).
    Because the modified land-based engines are subsequently used on a
marine vessel, however, these modified engines are considered marine
diesel

[[Page 37148]]

engines, which then fall under these requirements. As described in the
proposal, while we continue to consider them to be manufacturers of a
marine diesel engine, they are not be required to obtain a certificate
of conformity (as long as they ensure that the original label remains
on the engine and report annually to EPA that the engine models that
are exempt pursuant to this provision). This extends section 94.907 of
the existing regulations. For further details of engine dressers
responsibilities see section 1042.605 of the regulations.
(v) Vessel Builder Provisions
    Current recreational marine engines regulations (2002 Recreational
Diesel Marine program; November 8, 2002, 67 FR 68304) allow
manufacturers with a written request from a small-volume boat builder
to produce a limited number of uncertified engines (over a five year
period)--an amount equal to 80 percent of the boat builders sales for
one year. For builders with very small production volumes, this 80
percent allowance could be exceeded, as long as sales did not exceed 10
engines in any one year nor 20 total engines over five years and
applied only to engines less than or equal to 2.5 liters per cylinder.
We are not continuing this provision because recreational marine
engines are subject only to the Tier 3 standards that are not expected
to change the physical characteristics of engines (Tier 3 standards
will not result in a larger engine or otherwise require any more space
within a vessel). Because of the similarity to Tier 2 engine standards
there will be no need for boat builders to redesign engine compartments
thus eliminating the need for this 5 year delay provision.
(vi) Small Vessel Operators Exempt From New Standards for Existing Fleet
    In the proposed rule, we requested comment on an alternative
program option (Alternative 5: Existing Engines) that would for the
first time set emission standards for marine diesel engines on existing
vessels--the marine existing fleet or remanufacture program. As
described earlier in section III.B.2.b, Remanufactured Marine
Standards, we plan to finalize only the first part of this option
requiring the owner of a marine diesel engine (vessel operator) to use
a certified marine remanufacture system when the engine is
remanufactured if such a system is available.
    The marine existing fleet program will apply only to those
commercial marine diesel engines (C1 and C2 engines) which meet the
following criteria:
    • Greater than 600 kW (800 hp);
    • Tier 0 or Tier 1 engines for C1 engines;
    • Tier 0, Tier 1 or Tier 2 engines for C2 engines;
    • Built in model year 1973 or later; and
    • Have a certified kit available at time of remanufacture.
    We estimate that about 4 percent (or about 3,885 of 105,406
engines) of all C1 and C2 engines are subject to the existing fleet
program and are likely to have certified kits available at the time of
remanufacture. Thus, the percentage of vessels impacted by the
remanufacture program is estimated to be similar.
    Industry commented that a small portion of the vessel operators
with engines greater than 600 kW (800 hp) are small businesses that
would be significantly burdened by the existing fleet program. To
address these comments, the requirements of the marine existing fleet
program do not apply to owners of marine diesel engines or vessel
operators with less than $5 million in gross annual sales revenue. This
threshold includes annual sales revenue from parent companies or
affiliates of the owners/operators. (Small Business Administration's
(SBA's) regulations at 13 CFR 121.103 describe how SBA determines
affiliation.) If at some future date gross annual sales revenues are $5
million or more, they become subject to the existing fleet program at
that point. The $5 million limit was chosen because a substantial
sample of data for vessel operators--with vessels that have C1 and C2
engines greater than 600 kW--indicates that a significant portion of
the total revenue for this sample set, about 80 percent, is generated
by operators with $5 million or more in annual sales revenue.\163\
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    \163\ The Waterways Journal, Inc., 2006 Inland River Record.
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    We expect that the amount of emissions from this sector correlates
reasonably well with the amount of revenue generated (anticipate that
revenue corresponds to activity which correlates well to emissions),
and thus, most of the emissions from vessel operators (with engines
greater than 600 kW (800 hp)) is obtained from those operators with $5
million or greater in revenue. The $5 million threshold for annual
sales revenue is estimated to include about 8 percent less of the total
vessel operator revenue compared to a $10 million limit, while
reflecting 15 percent more revenue than a $1 million threshold. About
90 percent of all vessel operators with C1 and C2 engines have less
than $5 million in revenue. The cost to remanufacture engines is a
greater burden to the vessel operators with less than $5 million in
revenue (larger fraction of revenue, etc.) than those above this limit.
Therefore, the $5 million revenue threshold eliminates the regulatory
burden for a substantial number of small vessel operators, while
capturing a significant portion of the emissions from operators in the
marine remanufacture program.
(vii) Hardship Provisions
    Sections 1068.245, 1068.250 and 1068.255 of the existing title 40
regulations contain hardship provisions for engine and equipment
manufacturers, including those that are small businesses. As proposed,
we will apply these sections for marine applications such as PMMs,
SVMs, and small-volume boat builders, which will effectively continue
existing hardship provisions for these entities as described below.
    In addition, for the marine existing fleet or remanufacture
program, we are now providing these same hardship provisions to vessel
operators or marine remanufacturers that qualify as small businesses.
These provisions are described below.
    Post-Manufacture Marinizers (PMMs), Small-Volume Manufacturers
(SVMs), and Vessel Operators (or Marine Remanufacturers): As proposed,
we are continuing two existing hardship provisions for PMMs and SVMs.
In addition, we now extend these two provisions to small vessel
operators or small marine remanufacturers for the marine existing fleet
program. All of these entities may apply for this relief on an annual
basis. First, under an economic hardship provision, PMMs, SVMs, and
vessel operators (or marine remanufacturers) may petition us for
additional lead time to comply with the standards. They must show that
they have taken all possible business, technical, and economic steps to
comply, but the burden of compliance costs will have a major impact on
their company's solvency. As part of its application of hardship, a
company is required to provide a compliance plan detailing when and how
it plans to achieve compliance with the standards. Hardship relief
could include requirements for interim emission reductions and/or
purchase and use of emission credits. The length of the hardship relief
decided during initial review is up to one year, with the potential to
extend the relief as needed. We anticipate that one to two years is
normally sufficient. Also, for PMMs and SVMs, if a certified base
engine is available, they must generally use this

[[Page 37149]]

engine. We believe this provision will protect PMMs and SVMs from undue
hardship due to certification burden. Also, some emission reduction can
be gained if a certified base engine becomes available. See the
regulatory text in 40 CFR 1068.250 for additional information.
    Second, under the unusual circumstances hardship provision, PMMs,
SVMs, and vessel operators (or marine remanufacturers) may also apply
for hardship relief if circumstances outside their control cause the
failure to comply and if the failure to sell the subject engines will
have a major impact on their company's solvency. An example of an
unusual circumstance outside a manufacturer's control may be an ``Act
of God,'' a fire at the manufacturing plant, or the unforeseen shut
down of a supplier with no alternative available (the second example is
mainly for PMMs and SVMs). The terms and time frame of the relief
depend on the specific circumstances of the company and the situation
involved. As part of its application for hardship, a company is
required to provide a compliance plan detailing when and how it will
achieve compliance with the standards. We consider this relief
mechanism to be an option of last resort. We believe this provision
will protect PMMs, SVMs, and vessel operators (or marine
remanufacturers) from circumstances outside their control. We, however,
do not envision granting hardship relief if contract problems with a
specific company prevent compliance for a second time. See the
regulatory text in 40 CFR 1068.245 for additional information.
    Small-volume boat builders: As proposed, we are continuing the
unusual circumstances hardship provision for small-volume boat builders
(those with less than 500 employees and worldwide production of fewer
than 100 boats). Small-volume boat builders may apply for hardship
relief if circumstances outside their control cause the failure to
comply and if the failure to sell the subject vessels will have a major
impact on the company's solvency. An example of an unusual circumstance
outside a boat builder's control may be an ``Act of God,'' a fire at
the boat building facility, or the unforeseen breakdown of a supply
contract with an engine supplier. This relief allows the boat builder
to use an uncertified engine and is considered a mechanism of last
resort. The terms and time frame of the relief depend on the specific
circumstances of the company and the situation involved. As part of its
application for hardship, a company is required to provide a compliance
plan detailing when and how it plans to achieve compliance with the
standards. See the regulatory text in 40 CFR 1068.250 for additional
information.
    In addition, as described in the proposal, small-volume boat
builders generally depend on engine manufacturers to supply certified
engines in time to produce complying vessels by the date emission
standards begin to apply. We are aware of other applications where
certified engines have been available too late for equipment
manufacturers to adequately accommodate changing engine size (for
engines meeting Tier 4 standards, which are described in section
III.B.2 of today's rule) \164\ or performance characteristics. To
address this concern, we are allowing small-volume boat builders to
request up to one extra year before using certified engines if they are
not at fault and will face serious economic hardship without an extension.
See the regulatory text in 40 CFR 1068.255 for additional information.
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    \164\ Tier 3 engine-out standards are not expected to change the
physical characteristics of marine engines. Tier 3 standards will
not result in a larger engine or otherwise require any more space
within a vessel. For Tier 4 standards, we expect that vessels will
be designed to accommodate emission components that engine
manufacturers specify as necessary to meet these new standards (e.g.,
ensure adequate space is available to package aftertreatment components).
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(14) Alternate Tier 4 NO_X+HC Standards
    We proposed to continue our existing emission averaging programs
for the new Tier 4 NO_X and HC standards for locomotives and
marine engines. However, the existing averaging programs do not allow
manufacturers to show compliance with HC standards using averaging.
Because we are concerned that this could potentially limit the benefits
of our averaging program as a phase-in tool for manufacturers, we are
establishing an alternate NO_X+HC standard of 1.4 g/bhp-hr
that could be used as part of the averaging program. Manufacturers that
were unable to comply with the Tier 4 HC standard would be allowed to
certify to a NO_X+HC FEL, and use emission credits to show
compliance with the alternate standard instead of the otherwise
applicable NO_X and HC standards. For example, a manufacturer
may choose to use banked emission credits to gradually phase in its
Tier 4 1200 kW marine engines by producing a mix of Tier 3 and Tier 4
engines during the early part of 2014. NO_X+HC credits and
NO_X credits could be averaged together without discount.
    The value of this alternate standard (1.4 g/bhp-hr) is the rounded
sum of the Tier 4 NO_X and HC standards. We proposed to set
this value at the level of the NO_X standard (1.3 g/bhp-hr).
However, based on the comments received, we no longer believe this to
be appropriate. See the Summary and Analysis of Comments for more
discussion of this issue.
(15) Other Issues
    We are finalizing other minor changes to the compliance program.
For example, engine manufacturers will be required to provide
installation instructions to vessel manufacturers and kit installers to
ensure that engine cooling systems, aftertreatment exhaust emission
controls, and other emission controls are properly installed. Proper
installation of these systems is critical to the emission performance
of the equipment. Vessel manufacturers and kit installers will be
required to follow the instructions to avoid improper installation that
could render emission controls inoperative. Improper installation would
subject them to penalties equivalent to those for tampering with the
emission controls.
    We are also clarifying the general requirement that no emission
controls for engines subject to this final rule may cause or contribute
to an unreasonable risk to public health, welfare, or safety,
especially with respect to noxious or toxic emissions that may increase
as a result of emission-control technologies. The regulatory language,
which addresses the same general concept as the existing Sec. Sec. 
92.205 and 94.205, implements sections 202(a)(4) and 206(a)(3) of the
Act and clarifies that the purpose of this requirement is to prevent
control technologies that would cause unreasonable risks, rather than
to prevent trace emissions of any noxious compounds. This requirement
prevents the use of emission-control technologies that produce
pollutants for which we have not set emission standards but
nevertheless pose a risk to the public. As is described in Section III
and the Summary and Analysis of Comments document, this provision does
not preclude the use of urea-based SCR emission controls.
    Some marine engine manufacturers have expressed concern over the
current provisions in our regulation for selection of an emission data
engine. Part 94 specifies that a marine manufacturer must select for
testing from each engine family the engine configuration which is
expected to be worst-case for exhaust emission compliance on in-use
engines. Some manufacturers have interpreted this to

[[Page 37150]]

mean that they must test all the ratings within an engine family to
determine which is the worst-case. Understandably, this interpretation
could cause production problems for many manufacturers due to the lead
time needed to test a large volume of engines. Our view is that the
current provisions do not necessitate testing of all ratings within an
engine family. Rather, manufacturers are allowed to base their
selection on good engineering judgment, taking into consideration
engine features and characteristics which, from experience, are known
to produce the highest emissions. This methodology is consistent with
the provisions for our on-highway and nonroad engine programs.
Therefore, we are keeping essentially the same language in part 1042 as
is in part 94. We are adopting similar language for locomotives and
will apply it in the same manner as we do for marine engines.

B. Compliance Issues Specific to Locomotives

(1) Refurbished Locomotives
    Section 213(a)(5) of the Clean Air Act directs EPA to establish
emission standards for ``new locomotives and new engines used in
locomotives.'' In the previous rulemaking, we defined ``new
locomotive'' to mean a freshly manufactured or remanufactured
locomotive.\165\ We defined ``remanufacture'' of a locomotive as a
process in which all of the power assemblies of a locomotive engine are
replaced with freshly manufactured (containing no previously used
parts) or reconditioned power assemblies. In cases where all of the
power assemblies are not replaced at a single time, a locomotive is
considered to be ``remanufactured'' (and therefore ``new'') if all of
the power assemblies from the previously new engine had been replaced
within a five year period.
---------------------------------------------------------------------------

    \165\ As is described in this section, freshly manufactured
locomotives, repowered locomotives, refurbished locomotives, and all
other remanufactured locomotives are all ``new locomotives'' in both
the previous and new regulations.
---------------------------------------------------------------------------

    Our new regulations clarify the definition of ``freshly
manufactured locomotive'' when an existing locomotive is substantially
refurbished including the replacement of the old engine with a freshly
manufactured engine. The existing definition in Sec.  92.12 states that
freshly manufactured locomotives are locomotives that do not contain
more than 25 percent (by value) previously used parts. We allowed
freshly manufactured locomotives to contain up to 25 percent used parts
because of the current industry practice of using various combinations
of used and unused parts. This 25 percent value applies to the dollar
value of the parts being used rather than the number because it more
properly weights the significance of the various used and unused
components. We chose 25 percent as the cutoff because setting a very
low cutoff point would have allowed manufacturers to circumvent the
more stringent standards for freshly manufactured locomotives by
including a few used parts during the final assembly. On the other
hand, setting a very high cutoff point could have required
remanufacturers to meet standards applicable to freshly manufactured
locomotives, but such standards may not have been feasible given the
technical limitations of the existing chassis.
    We are adding to Sec.  1033.901 a definition of ``refurbish'' which
will mean the act of modifying an existing locomotive such that the
resulting locomotive contains less than 50 percent (by value)
previously used parts (but more than 25 percent). We believe that where
an existing locomotive is improved to this degree, it is appropriate to
consider it separately from locomotives that are simply remanufactured
in a conventional sense. As described below, we are specifying
provisions for refurbished locomotives that vary by application (switch
or line-haul) and model year (before or after 2015). See also section
IV.B(2), which describes minimum credit proration factors for
refurbished locomotives.
    We are also clarifying that any locomotives built before 1973
become ``new'' and thus subject to our emission standards when
refurbished. In the 1998 rulemaking, we determined that pre-1973
locomotives should not be considered ``new'' when remanufactured.\166\
An important policy consideration in making that determination was our
analysis of the feasibility of such locomotives to meet the Tier 0
emission standards. However, that analysis is not valid for refurbished
locomotives. Given the degree to which such locomotives are redesigned
and reconfigured, there is no reason that they should be considered
differently from 1973 locomotives simply because their frames (or some
other parts) were originally manufactured earlier.
---------------------------------------------------------------------------

    \166\ ``Locomotive Emission Standards: Regulatory Support Document'',
APPENDIX L, ``Exclusion of Pre-1973 Locomotives'', April 1998.
---------------------------------------------------------------------------

    We requested comment on setting more stringent standards for
refurbished locomotives, considering that these locomotives are
restored to a condition likely to allow for many years of continued
service. Industry commenters expressed concern that our subjecting
refurbished locomotives to more stringent standards could prove
counterproductive, because state and local programs that currently help
fund voluntary refurbishments to very clean emission levels could lose
their incentive to continue doing so, given that these refurbishments
would now just be meeting EPA standards. It was further argued that
these refurbishments would also lose any opportunity to generate
valuable ABT credits, given the challenge just in meeting the standards.
    We believe that the need for financial incentives will be just as
clear and just as strong under the new program as before. Refurbishing
a locomotive effectively removes an old, high-emitting locomotive from
the fleet and replaces it with a clean one. The substantial cost of
doing so and the potential that, absent incentives, old locomotives
(especially switchers) would continue in operation almost indefinitely
are the true drivers for creating incentives, regardless of the
standards involved. We expect that state and local government officials
involved in this process are well aware of this and will act
accordingly. The ABT credits that can be gained from these
refurbishments have not been a major factor to date and, considering
that the credits can subsequently be used to produce other, less clean
locomotives, we do not believe that state and local governments would
or should be satisfied to help finance clean locomotives that result in
dirtier locomotives elsewhere. As detailed below, we are therefore
adopting more stringent standards for refurbished locomotives and
phasing in these standards in a way that we believe best facilitates
continued refurbishment of existing locomotives, while recognizing
differences between the switch and line-haul locomotive fleets and the
emission reduction trends resulting from our tiered approach to
standards-setting.
    Currently, small numbers of old low-horsepower locomotives are
being refurbished as significantly lower-emitting switch locomotives.
The regulations in part 92 subject these locomotives to the Tier 0
standards (unless they contain less than 25 percent previously used
parts) and allow them to generate emission credits if they are cleaner
than required. The regulations in part 1033 will continue this approach
through model year 2014. It is important to note that since most of
these locomotives were originally manufactured before 1973, simply by

[[Page 37151]]

meeting the Tier 0 standards they will achieve significant emission
reductions.
    For similar reasons, we are adopting an interim program for
slightly larger locomotives with power between 2300 and 3000 horsepower
refurbished through model year 2014. These locomotives, which are
frequently used as road switchers, would also be subject to the Tier 0
standards for this period.
    We do not believe, however, that it would be appropriate to allow
switch locomotives to be refurbished to the Tier 0+ standards in the
long term. Once the Tier 4 standards begin to apply, we will allow
these locomotives to be certified to the Tier 3 switch locomotive
standards, which will still provide the opportunity to generate some
emission credits as an incentive.
    The story is slightly different for higher power line-haul
locomotives, which are currently not being refurbished. Nearly all of
these remaining in the Class I railroad fleets were originally
manufactured in or after 1973 and are already subject to the Tier 0 or
later standards. Therefore there will be less of an air quality
incentive to fund their refurbishment, and so we are specifying that
refurbished line-haul locomotives be subject to the same standards as
freshly manufactured locomotives. The regulations would treat them the
same except for emission credit proration factors, which are described
in section IV.B.(2)
    Another important consideration is the potential for refurbishment
to be used as a loophole to circumvent the freshly manufactured
standards for line-haul locomotives. Railroads currently turn over
their line-haul fleets much faster than their switch fleets. However,
it is not hard to envision a scenario in which railroads began
refurbishing their locomotives rather than buying freshly manufactured
locomotives, especially as the Tier 4 standards went into effect. A
long-term program requiring that refurbished line-haul locomotives meet
the same standards as freshly manufactured locomotives prevents
refurbishment from being used as such a loophole.

       Table IV-2.--Provisions for Refurbished Switch Locomotives
------------------------------------------------------------------------
                                                              Minimum
                                    Applicable tier of       proration
                                        standards             factor
------------------------------------------------------------------------
Locomotives refurbished before    Tier 0+...............            0.60
 2015.
Locomotives refurbished in 2015   Tier 3................            0.60
 or later.
------------------------------------------------------------------------


      Table IV-3.--Provisions for Refurbished Line-Haul Locomotives
------------------------------------------------------------------------
                                                              Minimum
                                    Applicable tier of       proration
                                        standards             factor
------------------------------------------------------------------------
Locomotives refurbished before    Tier 2+/3.............            0.60
 2015.
Locomotives refurbished in 2015   Tier 4................            0.60
 or later.
------------------------------------------------------------------------

(2) Averaging, Banking and Trading
    For the most part, our new regulations will continue the existing
averaging banking and trading provisions for locomotives. This section
only highlights the provisions that are most significant in the context
of this Final Rule. The reader is encouraged to read subpart H of part
1033 for details of this program.
    In order to ensure that the ABT program is not used to delay the
implementation of the Tier 4 technology, we are applying a restriction
similar to the averaging restriction that was adopted for Tier 2
locomotives in the previous locomotive rulemaking. We are restricting
the number of Tier 4 locomotives that could be certified using credits
to no more than 50 percent of a manufacturer's annual production. As
was true for the earlier restriction, this is intended to ensure that
progress is made toward compliance with the advanced technology
expected to be needed to meet the Tier 4 standards. This will encourage
manufacturers to make every effort toward meeting the Tier 4 standards,
while allowing some use of banked credits to provide needed lead time
in implementing the Tier 4 standards by 2015, allowing them to
appropriately focus research and development funds.
    We proposed to allow the carryover of all Part 92 credits except
for PM credits generated from Tier 0 or Tier 1 locomotives. The Tier 0
and Tier 1 PM standards under part 92 were set above the average
baseline level to act as caps on PM emissions rather than technology-
forcing standards. While Part 92 allows credits generated only relative
the estimated average baseline rather than the standards, we were still
concerned that such credits might have been windfall credits. However,
as is described in the Summary and Analysis of Comments document, after
further analysis we now believe that allowing the carryover of all part
92 PM credits is appropriate and will allow such credits to be used
under part 1033.
    We are also updating the proration factors for credits generated or
used by remanufactured locomotives. The updated proration factors
better reflect the difference in service time for line-haul and switch
locomotives. The ABT program is based on credit calculations that
assume as a default that a locomotive would remain at a single FEL for
its full service life (from the point it is originally manufactured
until it is scrapped). However, when we established the existing
standards, we recognized that technology would continue to evolve and
that locomotive owners may wish to upgrade their locomotives to cleaner
technology and certify the locomotive to a lower FEL at a subsequent
remanufacture. We established proration factors based on the age of the
locomotive to make calculated credits for remanufactured locomotives
consistent with credits for freshly manufactured locomotives in terms
of lifetime emissions. These proration factors are shown in Sec. 
1033.705 of the new regulations. These replace the existing proration
factors of Sec.  92.305. For example, using the new proration factors,
a 15-year-old line-haul locomotive certified to a new FEL that was 1.00
g/bhp-hr below the applicable standard would generate the same amount
of credit as a freshly manufactured locomotive that was certified to an
FEL that was 0.43 g/bhp-hr below the applicable standard because the
proration factor would be 0.43. For comparison, under the old
regulations, the proration factor would have been 0.50.

[[Page 37152]]

    We are correcting how the proration factors apply for refurbished
locomotives to more appropriately give credits to railroads for
upgrading old locomotives to use clean engines, rather than to continue
using the old high emission engines indefinitely. As with the rest of
the program, credits will be calculated from the difference between the
applicable standard and the emissions of the new refurbished
locomotive, adjusted to account for the projected time the locomotive
would remain in service. The correction creates a floor for the credit
proration factor for refurbished locomotives of 0.60. This is equal to
the proration factor for 20-year-old switchers and would also be
equivalent to a proration factor for a locomotive that was just over 10
years old. For example, refurbishing a 35-year-old switch locomotive to
an FEL 1.0 g/bhp-hr below the Tier 0 standard would generate the same
amount of credit as a conventional remanufacture of a 20-year-old
switch locomotive to an FEL 1.0 g/bhp-hr below the Tier 0 standard.
This is because we believe that such refurbished switch locomotives
will almost certainly operate as long as a 20-year-old locomotive that
was remanufactured at the same time. Similarly, we believe that
refurbished line-haul locomotives would likely operate as long as a 10-
year-old locomotive that was remanufactured at the same time.
    Finally, we are finalizing special provisions for credits generated
and used by Tier 3 and later locomotives. Under the current part 92 ABT
program, credits are segregated based on the cycle over which they are
generated but not by how the locomotive is intended to be used (switch,
line-haul, passenger, etc.). Line-haul locomotives can generate credits
for use by switch locomotives, and vice versa, because both types of
locomotives are subject to the same standards. However, for the Tier 3
and Tier 4 programs, switch and line-haul locomotives are subject to
different standards with emissions generally measured only for one test
cycle. We will allow credits generated by Tier 3 or later switch
locomotives over the switch cycle to be used by line-haul locomotives
to show compliance with line-haul cycle standards. As proposed, we are
not allowing such cross-cycle use of line-haul credits (or switch credits
generated by line-haul locomotives) by Tier 3 or later switch locomotives.
    To make this approach work without double-counting of credits, we
are also adopting a special calculation method where the credit using
locomotive is subject to standards over only one duty cycle while the
credit generating locomotive is subject to standards over both duty
cycles (and can thus generate credits over both cycles). In such cases,
we would require the use of credits under both cycles. For example, for
a Tier 4 line-haul engine family needing 1.0 megagram of NO_X
credits to comply with the line-haul emission standard, the
manufacturer would have to use 1.0 megagram of line-haul NO_X
credits and 1.0 megagram of switch NO_X credits if the line-
haul credits were generated by a locomotive subject to standards over
both cycles.
(3) Phase-In and Reasonable Cost Limit
    The new Tier 0 and 1 emission standards become applicable on
January 1, 2010. We also proposed a requirement for 2008 and 2009 when
a remanufacturing system is certified to these new standards. If such a
system is available before 2010 for a given locomotive model at a
reasonable cost, remanufacturers of those locomotives may no longer
remanufacture them to the previously applicable standards. They must
instead comply with the new Tier 0 or 1 emission standards when they
are remanufactured. Similarly, we are requiring them to use certified
Tier 2 systems for 2008 through 2012 when a remanufacturing system is
certified to the new Tier 2 standards. For the purposes of this
provision, ``reasonable cost'' means that the total incremental cost to
the operators of the locomotive (including initial hardware, increased
fuel consumption, and increased maintenance costs) during the useful
life of the locomotive must be less than $250,000. This cost limit is
based on the upper cost we think likely to be required to meet these
standards and reflects comments on our NPRM from remanufacturers.
    As part of this phase-in requirement, we are requiring certifiers
to notify customers that they are applying for certificate such that
their locomotives will become subject to the new standards. We would
then allow owners/operators a minimum 90-day grace period (after we
issue the certificate) in which they could remanufacture their
locomotives to the previously applicable standards once they are
notified by the certificate holder that such systems are available.
This allows them to use up inventory of older parts. However, where the
certifiers do not immediately notify them, railroads would be allowed a
grace period of at least 120 days after they are notified. This
combined approach allows sufficient time to find out about the
availability of kits and to make appropriate plans for compliance. We
are also adding a new provision for owners/operators that limits the
total number of locomotives that would need to meet the new standards
during 2008 and 2009 to a fraction of the total number of
remanufactures they do between October 3, 2008 and December 31, 2009
that are subject to either the old or new standards.
    We are adding provisions that would allow Tier 0/1 remanufacturers
to use during the phase-in period an assigned deterioration factor of
0.03 g/bhp-hr for PM and assume that all other deterioration factors
are zero. We will also apply an in-use PM add-on of 0.03 g/bhp-hr.
These two provisions are intended to address lead time concerns raised
by commenters. The commenters correctly point out that the available
lead time is not sufficient to allow remanufacturers to verify
durability of the emission controls in a more conventional way. By
addressing this lead time issue, we will make it more likely that the
low emission kits will be brought to market early.
(4) Recertification Without Testing
    Once manufacturers have certified an engine family, we have
historically allowed them to obtain certificates for subsequent model
years using the same test data if the engines remain unchanged from the
previous model year. We refer to this type of certification as
``carryover.'' We are also extending this allowance to owner/operators.
Specifically, we are adding the following paragraph to the end of Sec. 
1033.240:

    (c) An owner/operator remanufacturing its locomotive to be
identical to the previously certified configuration may certify by
design without new emission test data. To do this, submit the
application for certification described in Sec.  1033.205, but
instead of including test data, include a description of how you
will ensure that your locomotives will be identical in all material
respects to their previously certified condition. You have all of
the liabilities and responsibilities of the certificate holder for
locomotives you certify under this paragraph.
(5) Railroad Testing
    Section 92.1003 requires Class I freight railroads to annually test
a small sample of their locomotives. We proposed to adopt the same
requirements in Sec.  1033.810, but asked for comments on whether this
program should be changed. In particular, we requested suggestions to
better specify how a railroad selects which locomotives to test, which
has been a source of some confusion in recent years. In this final
rule, we are adopting a revised approach that should reduce this
confusion. The regulations provide four options for railroads to select

[[Page 37153]]

locomotives for testing and require EPA to notify the railroad by
January 1st for any year in which we choose to specify which
locomotives should be tested.
    In addition, the maximum annual testing rate is being lowered to
0.075 percent, from the previously applicable rates of 0.15 to 0.10
percent. This new rate will require Class I railroads to test
approximately 20 locomotives per year. We believe that this number of
tests (in addition to the testing required for certificate holders)
will be enough to allow us to appropriately monitor the emission
performance of in-use locomotives.
(6) Test Conditions and Corrections
    In our previous rule, we established test conditions that are
representative of in-use conditions. Specifically, we required that
locomotives comply with emission standards when tested at temperatures
from 45[deg]F to 105[deg]F and at both sea level and altitude
conditions up to about 4,000 feet above sea level. One of the reasons
we established such a broad range was to allow outdoor testing of
locomotives. While we only required that locomotives comply with
emission standards when tested at altitudes up to 4,000 feet for
purposes of certification and in-use liability, we also required
manufacturers to submit evidence with their certification applications,
in the form of an engineering analysis, that shows that their
locomotives were designed to comply with emission standards at
altitudes up to 7,000 feet. We included correction factors that are
used to account for the effects of ambient temperature and humidity on
NO_X emission rates.
    We are now changing how the regulations deal with the test
temperatures. We are specifying that testing without correction may be
performed down to a lower limit of 60[deg]F. In implementing the prior
regulations, we found that the broad temperature range with correction,
which was established to make testing more practical, was problematic.
Given the uncertainty with the existing correction, manufacturers have
generally tried to test in the narrower range being adopted today.
However, we will still allow manufacturers to test at lower
temperatures but will require them to develop correction factors
specific to their locomotive designs.
    We are also changing the altitude requirements for switch
locomotives in response to a comment noting that switch locomotives
will rarely operate above 5,500 feet. For switch locomotives, we will
only require manufacturers to show that their locomotives comply with
emission standards at altitudes up to 5,500 feet.
(7) Duty Cycles and Calculations
(a) Idle Weighting Adjustments
    While we did not propose any changes to the weighting factors for
the locomotive duty cycles, we did request comment on whether such
changes would be appropriate in light of the proposed idle reduction
requirements. The regulations specify an alternate calculation for
locomotive equipped with idle shutdown features. This provision allows
a manufacturer to appropriately account for the inclusion of idle
reduction features as part of its emission control system. There are
three primary reasons why we are not changing the calculation
procedures with respect to the idle requirements. First, different
shutdown systems will achieve different levels of idle reduction in
use. Thus, no single adjustment to the cycle would appropriately
reflect the range of reductions that will be achieved. Second, the
existing calculation provides an incentive for manufacturers to design
shutdown systems that achieve in the greatest degree of idle reduction
that is practical. Finally, our feasibility analysis is based in part
on the emission reductions achievable relative to the existing
standards. Since some manufacturers already rely on the calculated
emission reductions from shutdown features incorporated into many of
their locomotive designs, our feasibility is based in part on allowing
such calculations.
    We are adopting a slight change to the way this adjustment works as
compared to the previous regulations. We are specifying that idle
emission rates for locomotives meeting our minimum shutdown
requirements in Sec.  1033.115 be reduced by 25 percent, unless the
manufacturer demonstrates that greater idle reduction will be achieved.
(b) Representative Cycles
    We also recognize that the potential exists for locomotives to
include additional power notches, or even continuously variable
throttles, and that the standard FTP sequence for such locomotives
would result in an emissions measurement that does not accurately
reflect their in-use emissions performance. Moreover, some locomotives
may not have all of the specified notches, making it impossible to test
them over the full test. Under the previous regulations, we handled
such locomotives under our discretion to allow alternate calculations
(40 CFR 92.132(e)). We are now adopting more specific provisions in
Sec.  1033.520. In general, for locomotives missing notches, we believe
the existing duty cycle weighting factors should be reweighted without
the missing notches. For locomotives without notches or more than 8
power notches, the regulations reference following information provided
to us by manufacturers for the previous rulemaking that shows typical
notch power levels expressed as a percentage of the rated power of the
engine.
    In response to comments we are also adding provisions to address
locomotives that include new design features that will result in
changes to the in-use duty cycle. Specifically, the regulations state
that manufacturers must notify us if they are adding design features
that will make the expected average in-use duty cycle of their engine
family significantly different from the otherwise applicable test
cycle. They must also recommend an alternate test cycle that represents
the expected average in-use duty cycle. We will specify whether to use
the default duty cycle, the recommended cycle, or a different cycle,
depending on which cycle we believe best represents expected in-use
operation. For locomotives subject to both line-haul and switch cycle
standards, the regulations specify that a single set of standards would
apply for the representative cycle.
(c) Energy Saving Design Features
    We are adopting special provisions for locomotives equipped with
energy-saving design features, such as sophisticated electronic
optimization of throttle and brake settings based on route data or
locomotive operation in a consist, electronically controlled pneumatic
(ECP) brakes, and hybrid technology. The provisions we are adopting
recognize that to whatever degree the total work done by a locomotive
is reduced, the mass emissions would likely also be reduced. For
example, if certain design features reduced by three percent the amount
of work needed to pull a typical train, then the mass emission rate (g/
hr) would generally also be reduced by three percent. Under the new
provisions, manufacturers will be allowed to adjust their locomotives'
emissions to reflect this, based on data gathered prior to certification.
    Manufacturers choosing to adjust emissions under these provisions
must present a test plan to EPA for approval prior generating the in-
use data necessary to estimate their emissions reductions. The degree
to which manufacturers would be allowed to take

[[Page 37154]]

a credit at certification would be determined from a statistical
analysis of their supporting data to address the uncertainty in their
estimate. This would minimize the possibility that manufacturers would
be given credit for emission reductions that did not actually occur.
Later, additional data on the in-use fleet using the feature could be
gathered to improve the statistical certainty and this could then be
factored into subsequent certifications. In concept, however, if we had
perfect data, we would grant the manufacturers full credit for the savings.
    Since our standards are specified as brake-specific emission
limits, no credit or adjustment will be allowed for features that only
improve the engine's brake-specific fuel consumption. The nature of the
test procedure itself already properly credits such features. Thus,
allowing additional credits to be calculated would be double-counting
of credits.
(8) Non-OEM Remanufacturing Parts
    We are adopting measures in Sec.  1033.645 to help provide for the
continued participation in remanufacturing by parts manufacturers
willing to take responsibility for the long-term emissions performance
of their parts but who lack the wherewithal to design and certify
entire locomotive remanufacture systems that may include complex
emissions control systems far beyond their expertise. Under this
program, we would determine, based on an upfront engineering analysis,
that the part supplier has a reasonable basis for concluding that use
of their part would be equivalent to the OEM part in use. We would
later verify its emission performance through in-use emission testing.
    The exact nature of the engineering analysis necessary to
demonstrate that the part supplier has a reasonable basis for
concluding that use of their part (or parts) will not cause emissions
to increase beyond the level expected from the OEM part in use, is
expected to vary. We see four possible paths to accomplish this.
    • The part is shown to be identical to the original part in
all material respects.
    • The part differs physically from the original in a small
number of ways and each of these is evaluated to show that the
aftermarket part will be as good as or better than the original with
respect to emissions performance.
    • Measurable emission-critical parameters such as fuel
injection profile or engine oil consumption rate are established and an
engine (or relevant engine subsystem) using the aftermarket part is
shown through testing to perform as good or better than one with the
original part with respect to these parameters.
    • Emissions testing and durability demonstration is performed in
essentially the same manner as for remanufactured system certification.
    For example, cylinder liners differing only in color and part
number from the OEM liners would be identical in all material respects.
Those having different bore groove patterns would not be considered
identical, but an analysis of the difference this makes in the oil's
interaction with the cylinder wall and rings (which could have an
impact on PM emissions) could suffice to make the demonstration.
Chrome-plated cylinder liners in combination with a specified piston
ring set used in place of original rings and non-plated liners could be
expected to affect the emission-critical parameter of oil consumption,
especially later in the locomotive useful life due to differences in
wear rates. Bench or field testing over time demonstrating lower oil
consumption trends than original equipment could provide a sufficient
demonstration, provided no other emission-critical parameters are
involved. We do not believe it is necessary or even possible to specify
in the regulations the appropriate emission-critical parameters for all
of the locomotive aftermarket components identified in this provision
or to specify the test procedures and criteria by which these
parameters are evaluated. Instead, we are establishing broad criteria
and requiring the part suppliers to propose the appropriate emission-
critical parameters and corresponding test or analytical methods
appropriate to the part they produce.
    We would allow railroads to use the non-OEM part during
remanufacturing once we have approved the supplier's engineering
analysis. Once the part has been installed in at least 250 locomotives,
we would require one of them to be tested. One additional locomotive
would need to be tested from the next additional 500 locomotives that
use the part. If any locomotives fail to meet all standards, we
generally require one additional locomotive to be tested for each
locomotive that fails. We would generally allow the supplier to include
testing performed by others. For example, if a railroad tests a
locomotive with the part under Sec.  1033.810, the supplier could
submit those test data as fulfillment of its test obligations.
    We are adopting these provisions to address the specific issue of
parts that are typically replaced during remanufacturing and for which
there is an active aftermarket. Therefore, we are only specifying
cylinder liners, cylinder heads, pistons, rings, and fuel injectors as
being covered by this program. We reserve the authority to expand the
program to cover other parts.
(9) Use of Nonroad Engines Certified Under 40 CFR Parts 89 and 1039
    Section 92.907 currently allows the use of a limited number of
nonroad engines in locomotive applications without certification under
the locomotive program. We believe a similar allowance should also be
included in the new regulations. However, we are making some changes to
these procedures. In general, manufacturers have not taken advantage of
these previously existing provisions. In some cases, this was because
the manufacturer wanted to produce more locomotives than allowed under
the exemption. However, in most cases, it was because the customer
wanted a full locomotive certification with the longer useful life and
additional compliance assurances. We are adopting new separate
approaches for the long term (Sec.  1033.625) and the short term (Sec. 
1033.150), each of which addresses at least one of these issues.
    For the long term, we are replacing the existing allowance that
relies on part 89 certificates with a design-certification program that
makes the locomotives subject to the locomotive standards in use but
does not require new testing to demonstrate compliance at
certification. Specifically, this program allows switch locomotive
manufacturers using nonroad engines to introduce up to 30 locomotives
of a new model prior to completing the traditional certification
requirements. While the manufacturer would be able to certify without
new testing, the locomotives would have locomotive certificates. Thus,
purchasers would have the compliance assurances they desire.
    As is described in section III B (1)(b), the short-term program is
more flexible and does not require that the locomotives comply with the
switch cycle standards; instead the engines would be subject to the
part 1039 standards. The manufacturers would be required to use good
engineering judgment to ensure that the engines' emission controls
would function properly when installed in the locomotives. For example,
the locomotive manufacturer would need to ensure that sufficient
cooling capacity was available to cool the engine intake air. Given the
relative levels of the part 1039 standards and those being

[[Page 37155]]

proposed in 1033, we do believe there is little environmental risk with
this short-term allowance and thus are not including any limits of the
sales of such locomotives. Nevertheless, we are limiting this allowance
to model years through 2017. This provides sufficient time to develop
these new switchers. These locomotives would not be exempt from the
part 1033 locomotive standards when remanufactured, unless the
remanufacturing of the locomotive took place prior to 2018 and involved
replacement of the engines with certified new nonroad engines.
Otherwise, the remanufactured locomotive will be required to be covered
by a part 1033 remanufacturing certificate.
(10) Mexican and Canadian Locomotives
    Under the prior regulations, Mexican and Canadian locomotives are
subject to the same requirements as U.S. locomotives if they operate
extensively within the U.S. The regulation 40 CFR 92.804(e) states:
    Locomotives that are operated primarily outside of the United
States, and that enter the United States temporarily from Canada or
Mexico are exempt from the requirements and prohibitions of this part
without application, provided that the operation within the United
States is not extensive and is incidental to their primary operation.
    We are changing this exemption to make it subject to our prior
approval, since we have found that the current language has caused some
confusion. When we created this exemption, it was our understanding
that Mexican and Canadian locomotives rarely operated in the U.S. and
the operation that did occur was limited to within a short distance of
the border. We are now aware that there are many Canadian locomotives
that do operate extensively within the U.S. and relatively few that
meet the conditions of the exemption. We have also learned that some
Mexican locomotives may be operating more extensively in the United
States. Thus, it is appropriate to make this exemption subject to our
prior approval. To obtain this exemption, a railroad will be required
to submit a detailed plan for our review prior to using uncertified
locomotives in the U.S. We will grant an exemption for locomotives that
we determine will not be used extensively in the U.S. and that such
operation will be incidental to their primary operation. Mexican and
Canadian locomotives that do not have such an exemption and do not
otherwise meet EPA regulations may not enter the United States.
(11) Other Locomotive Issues
    The regulations in part 92 allow locomotive owners to voluntarily
subject their pre-1973 locomotives to the Tier 0 standards or to
include in the locomotive program low-horsepower locomotives that would
otherwise be excluded based on their rated power. We are also including
these options in the new part 1033. We will also provide two additional
options. First, we will allow Tier 0 switch locomotives, which are
normally not subject to line-haul cycle standards, to be voluntarily
certified to the line-haul cycle standards. Second, we will allow any
locomotives to be voluntarily certified to a more stringent tier of
standards. An example of where these options may be desirable would be
a case in which a customer wants to purchase a refurbished switch
locomotive that meets the Tier 2 standards. While it may seem obvious
that it would be allowed, the old regulations are unclear. The part
1033 regulations eliminate this confusion.
    The existing and proposed regulations both specified that railroads
are required to perform emission-related maintenance. In response to
comments, we have added to the regulations a clarification that
unscheduled maintenance has to be performed in a timely manner, no
later than at the next ``92-day'' inspection required by the Federal
Railroad Administration. Railroads expressed concern that the
regulations, as previously written, would have required them to
immediately remove a locomotive from service to make emission-related
repairs. This was not our intent. Rather, the maintenance provision was
intended to merely require that the maintenance be performed in a
timely manner. For many repairs, it may be appropriate to wait until
the next 92-day inspection. However, for many others it would be
appropriate to make the repair sooner to the extent practical.
    In response to comments, we are adding an interim allowance to
simplify certification testing of locomotive engines. Specifically, for
model years before 2014, we will allow manufacturers to test locomotive
engines for certification without replicating the transient behavior in
the locomotive. This will make it easier for manufacturers to certify new
cleaner remanufacturing systems for the full range of locomotive models.

C. Compliance Issues Specific to Marine Engines

(1) Remanufacturing
    As discussed in Section III, above, we are adopting a marine
remanufacture program for marine diesel engines over 600 kW built from
1973 through Tier 2 that requires the use of a certified remanufacture
system when such an engine is remanufactured, if one is available.
Certified remanufacture systems must achieve at least a 25 percent
reduction in PM emissions. This section briefly describes several
certification and compliance provisions for the marine remanufacture
program; the full program is contained in the regulations for this rule.
    In general, the normal certification requirements for new marine
diesel engines would apply, with minor variations as needed to
accommodate the characteristics of remanufactured engines. For example,
engine families are based on the same criteria as for freshly
manufactured engines, and testing, reporting, the application for
certification, and warranty requirements closely follow the provisions
that apply for freshly manufactured engines.
    In general, remanufactured engines are considered to be ``new''
engines, and they remain new until sold or placed back into service
after the replacement of the last cylinder liner. The standards do not
apply for engines that are rebuilt without removing cylinder liners.
For a new engine to be placed into service, it must be covered by a
certificate of conformity.
    As is the case with our other emission control programs,
certification testing for conformity demonstration will be performed on
the most common configuration within an engine family. An engine family
is a group of engines that have the same characteristics with respect
to combustion cycle and fuel, cooling system, method of air aspiration,
method of exhaust aftertreatment, combustion chamber design, bore and
stroke, and mechanical or electronic controls. Other configurations may
be included if it can be shown based on good engineering judgment that
they are likely to provide a PM reduction similar to the configuration
tested. Compliance for these other configurations is based on an
engineering demonstration that the remanufacturing system reduces PM
emissions by 25 percent without increasing NO_X emissions.
Engine families may also include remanufacturing systems corresponding
to engines that were originally produced over multiple model years, as
long as the configuration does not change in a

[[Page 37156]]

way that affects the validity of certification for the remanufacturing
system.
    To certify a remanufacture system, a manufacturer must measure
baseline emissions and emissions from an engine remanufactured using
its system. A baseline emission rate would be established by
remanufacturing an engine following normal procedures. That engine or a
second engine of the same configuration is then tested for emissions
after remanufacturing with the expected emission controls. The
remanufacturing system meets the emission standards of the program by
demonstrating a minimum 25 percent reduction in PM emissions and no
increase in NO_X emissions (within 5 percent). The
remanufacturer must also demonstrate that the remanufacturing system
does not adversely affect engine reliability or power.
    The remanufacturer must also demonstrate that the total marginal
cost of the remanufacturing system is less than $45,000 per ton of PM
reduction. For the purpose of this demonstration, marginal cost means
the difference in costs between remanufacturing the engine using the
remanufacture system and remanufacturing the engine conventionally.
Total marginal costs over the period of one useful life are divided by
the projected PM emissions over one useful life to obtain the cost of
the remanufacture system per ton of PM reduced. Costs to be considered
include hardware costs, labor costs, operating costs over one useful
life period, and other costs (such as shipping).
    The useful life provisions established for freshly manufactured
engines would apply equally to remanufactured engines. In general,
remanufacturers would be responsible for meeting emission standards for
10 years or 10,000 hours of operation for Category 1 engines, and 10
years or 20,000 hours of operation for Category 2 engines.
    Certification will rely on a deterioration factor, similar to
freshly manufactured engines. The certifying company may either use an
assigned value of 0.015 g/kW-hr for PM or develop a new deterioration
factor based on engine testing. For Tier 2 engines, the certifying
company needs to add the deterioration factor to measured emission
levels for certification. The deteriorated number must be less than the
applicable PM standard. For Tier 1 and earlier engines, the
deterioration factor is added to the emission level established for the
certified configuration and that higher emission level serves as the
emission standard for any in-use testing after certification.
    The regulations allow for simplified certification requirements for
remanufacture systems that are already certified under the locomotive
program. This would require only an engineering analysis demonstrating
that the system would achieve emission reductions from marine engines
similar to those from locomotives. Because the marine remanufacture
program requires only a PM reduction, locomotive remanufacture system
manufacturers may modify those locomotive systems with respect to
NO_X emissions. In that case, the system will have to be
recertified as a marine remanufacture system based on measured values
and subject to all of the other certification requirements of the
marine remanufacture program.
     Remanufactured engines are not eligible for generating or using
emission credits for averaging, banking, or trading. This is
appropriate because the program we are finalizing is only mandatory if
a system has been certified for the relevant engine. We will reconsider
allowing systems to be based on emission credits when we consider
whether to adopt a mandatory marine remanufacture program (Part 2 of
the proposed program) at a later date.
    Not-to-exceed standards do not apply to remanufacturing. This is
appropriate because the base engine in most cases is not subject to NTE
requirements. In addition, NTE is most appropriately considered in the
initial engine design phase; requiring remanufactured engines to meet
the NTE requirements would likely require more intensive engine
redesign than is anticipated by the simpler program we are finalizing.
    Finally, other provisions such as those governing maintenance
intervals, warranties, duty cycles, test fuel, labeling, recordkeeping,
etc. are the same as or similar to those for freshly manufactured engines.
(2) Replacement Engines
    We are revising certain aspects of our existing provisions with
regard to replacement engines, as described below. These requirements
apply to all marine diesel engines, propulsion or auxiliary, regardless
of marine application. Section 1042.601(c) provisions apply instead of
the provision of section 1068.240(b)(3) that applies for other nonroad
engines.
    (a) Replacement With a Freshly Manufactured Engine
    Under the current marine diesel engine program, an engine
manufacturer is generally prohibited from selling a marine engine that
does not meet the standards that are in effect when that engine is
produced. However, we recognize that there may be situations in which a
vessel owner may require an engine certified to an earlier tier of
standards. The two most likely situations are (1) when a vessel has
been designed to use a particular engine such that it cannot physically
accommodate a different engine due to size or weight constraints (e.g.,
a new engine model will not fit into the existing engine compartment);
or (2) when the engine is matched to key vessel components such as the
propeller, or when a vessel has a pair of engines that must be matched
for the vessel to function properly.
    To address these extreme situations, we amended existing regulation
40 CFR 94.1103(b)(3) to allow a manufacturer to produce a new engine
which meets an earlier tier of standards if the Administrator
determined that no new engine certified to the emission limits in
effect at that time is produced by any manufacturer with the
appropriate physical or performance characteristics needed to repower
the vessel. An engine manufactured pursuant to this provision is
subject to certain conditions: The replacement engine must meet
standards at least as stringent as those of the original engine; the
engine manufacturer must take possession of the original engine or
confirm it is destroyed; and the replacement engine must be clearly
labeled to show that it does not comply with the standards and that
sale or installation of the engine for any purpose other than as a
replacement engine is a violation of federal law and subject to civil
penalty.
    We subsequently revised this provision to allow the engine
manufacturer to make the determination of whether an engine compliant
with the current standards would fit a vessel, but solely in cases of
catastrophic failure (see 70 CFR 40419, July 13, 2005). This change was
made to reflect industry concerns that obtaining prior EPA approval
would take too long. The engine manufacturer may make the determination
in catastrophic failure situations provided that the following
conditions are met: The manufacturer must determine that no certified
engine is available, either from its own product lineup or that of the
manufacturer of the original engine (if different); and the engine
manufacturer must document the reasons why an engine of a newer tier is
not usable, and this report must be made available to us upon request.
We also specified in Sec.  94.1103(a)(8) that no other significant
modifications to the vessel can be made as part of the process of
replacing the engine, or for a period of 6 months thereafter.
    In response to comments on the proposal for this rulemaking, we are

[[Page 37157]]

finalizing three additional revisions to the replacement engine
provisions. First, engine manufacturers may now make the determination
with respect to the feasibility of using a current tier engine in both
noncatastrophic and catastrophic situations. This is a significant
change to the program. Engine manufacturers and user groups were
concerned about the amount of time that would be needed to obtain prior
EPA approval, even in these noncatastrophic cases. Even though the
noncatastrophic engine replacement is more typically planned in
advance, it is still the case that the determination must be made in a
timely manner to ensure the engine manufacturer has time to produce the
engine before the vessel is taken out of service for the replacement.
Therefore, we are revising the program to allow the engine manufacturer
to make such determinations, provided certain additional conditions are
met: The engine manufacturer must examine the suitability of
replacement with any current tier engine, either produced by that
manufacturer or any other manufacturer; the engine manufacturer must
make a record of each determination, which must be kept for eight years
and contain specific information; the record must be submitted to EPA
within 30 days after shipping each engine along with a statement
certifying that the information contained in that record is true. We
may reduce the reporting and recordkeeping requirements in this section
after a manufacturer has established a consistent level of compliance
with the requirements of this section.
    These records will be used by EPA to evaluate whether engine
manufacturers are properly making the feasibility determination and
applying the replacement engine provisions. We may void any exemptions
we determine do not conform to the applicable requirements. When
assessing penalties under this provision we would consider whether the
manufacturer acted in good faith. Thus manufacturers are encouraged to
keep additional records to support their good faith attempt to comply
with the regulations. For example, manufacturers could keep records of
requests for replacement engines that are denied.
    In making the determination that a current tier engine is not a
feasible replacement engine for a vessel, we expect the engine
manufacturer will evaluate not just engine dimensions and weight but
may also include other pertinent vessel characteristics. These
pertinent characteristics would include downstream vessel components
such as drive shafts, reduction gears, cooling systems, exhaust and
ventilation systems, and propeller shafts; electrical systems for
diesel generators (indirect drive engines); and such other ancillary
systems and vessel equipment that would affect the choice of an engine.
At the same time, there are differences between the new tier and
original tier engines that should not affect this determination, such
as the warranty period or life expectancy of a newer tier engine, or
its cost or production lead time. These characteristics should not be
part of the determination of whether or not a new tier engine can be
used as a replacement engine. With regard to the warranty period or
life expectancy for the new tier engine, an exception may be if these
are significantly shorter for the new tier engine than for an older
tier engine or the original engine and the shorter warranty period or
life expectancy for the newer model is consistent with industry practices.
    In addition, in the case of a vessel with two or more paired
engines, if the engine not in need of replacement has accumulated
service in excess of 75 percent of its useful life we specify that the
determination must consider replacement of both engines in the pair.
This requirement is necessary to prevent circumvention of the freshly
manufactured engine requirements by replacing one engine at a time and
relying on the need to pair the engines as the sole justification for
producing an engine to an earlier tier. We are also specifying that no
additional modifications may be made to a vessel for six months after
installing a new replacement engine made to a previous tier. This is to
avoid circumvention of the requirement to use a freshly manufactured
engine when a vessel is refurbished such that it becomes a new vessel.
    The second change to the replacement engine provision is necessary
to accommodate the new tiers of standards we are adopting in this
rulemaking. Specifically, in making the feasibility determination the
engine manufacturer is now required to consider all previous tiers and
use any of their own engine models from the most recent tier that meets
the vessel's physical and performance requirements. If an engine
manufacturer can produce an engine that meets a previous tier of
standards representing better control of emissions than that of the
engine being replaced, the manufacturer would need to supply the engine
meeting the tier of standards with the lowest emission levels. For
example, if a Tier 1 engine is being replaced after the Tier 3
standards go into effect, the engine manufacturer would have to
demonstrate why a Tier 2 as well as a Tier 3 engine cannot be used
before a Tier 0 engine can be produced and installed. Similarly, for an
engine built prior to 2004, the engine manufacturer would have to
demonstrate why a Tier 1, Tier 2, or a Tier 3 engine cannot be used. It
should be noted, in the case of Tier 0 engines, that MARPOL Annex VI
prohibits replacing an existing engine at or above 130 kW with a
freshly manufactured engine unless it meets the Tier 1 standards.
    The third change to the replacement engine provisions pertains to
Tier 4 engines. We are making the advance determination that Tier 4
engines equipped with aftertreatment technology to control either
NO_X or PM are not required for use as replacement engines
for engines from previous tiers in accordance with this regulatory
replacement engine provision. Note, however, that Tier 4 engines will
be required to be used as replacement engines if the original engine
being replaced is a Tier 4 engine. We are making this determination in
advance because we expect that installing such a Tier 4 engine in a
vessel that was originally designed and built with a previous tier
engine could require extensive vessel modifications (e.g., addition of
a urea tank and associated plumbing; extra room for a SCR or PM filter;
additional control equipment) that may affect important vessel
characteristics (e.g., vessel stability). It should be noted that by
making this advance determination, EPA is not implying that Tier 4
engines are never appropriate for use as replacement engines for
engines from previous tiers; this determination is intended to simplify
the search across engines and is based on the presumption that Tier 4
engines may not fit in most cases. We are also not intending to prevent
states or local entities from including Tier 4 engines in incentive
programs that encourage vessel owners to replace previous tier existing
engines with new Tier 4 engines or to retrofit control technologies on
existing engines, since those incentive programs often are designed to
offset some of the costs of installing and/or using advanced emission
control technology solutions. This advance determination is being made
solely for Tier 4 marine diesel replacement engines that comply with
the Tier 4 standards through the use of catalytic aftertreatment
systems. Should an engine manufacturer develop a Tier 4 compliant
engine solution that does not require the use of such technology, then
this automatic determination will

[[Page 37158]]

not apply. Instead our existing provision will apply and it will be
necessary to show that a non-catalytic Tier 4 engine would not meet the
required physical or performance needs of the vessel.
(b) Replacement With an Existing Engine
    Our current marine diesel engine program does not contain
provisions that address the case in which an engine is replaced with an
existing used engine. This means that if a vessel owner replaces an
existing engine with a used engine, then that replacement engine is not
required to be certified to our marine standards. It should be noted,
however, that engines greater than 600 kW that are built after 1973
would still be subject to the remanufacture program described in
Section III(C)(2)(b). This means if the existing engine that is the
replacement engine has all of its cylinder liners replaced, it will be
required to be remanufactured using a certified remanufacture system if
one is available for that engine. It is our expectation that a vessel
owner would not replace an existing engine above 600 kW with a
partially-rebuilt engine, and therefore we do not expect to see
replacement engines that are not remanufactured if there is a certified
remanufacture system available.
    These remanufacture requirements would apply whether the owner is
obtaining an identical existing (used) replacement engine due to an
engine failure or through an engine exchange for a periodic engine
rebuild. These requirements would also apply if a vessel owner is
obtaining a different model existing (used) replacement engine, for
whatever reason.
    It should be noted that pursuant to the definition of ``new marine
engine,'' used engines brought into the marine market from other
segments (e.g., locomotive, land-based nonroad, or highway sectors) are
considered to be new marine diesel engines when they are marinized or
modified for use on a vessel, and must meet the standards for newly
manufactured engines in effect when such an engine is marinized or
modified for installation on a vessel.
(c) Swing Engines
    A swing engine is an additional engine that is purchased at the
time the vessel is constructed as part of a rebuild strategy. When an
engine is due for rebuild, that engine is removed from the vessel and
replaced with the swing engine. The removed engine is rebuilt and then
becomes the swing engine. Note that a swing engine is not meant to be a
replacement engine in case of engine failure. Rather, it is a
maintenance practice.
    It is our expectation that the swing engine would undergo a
complete rebuild, including cylinder liner replacement, before it is
made available as the swing engine. That would constitute
remanufacturing, and the engine would be required to comply with the
engine remanufacture requirements. In general, this means that all
engines that are part of a swing engine rebuild practice are expected
to comply with the remanufacture requirements over time, providing a
certified remanufacture system is available.
(d) Vessel Refurbishing
    Our current program specifies that in addition to newly
manufactured vessels, a vessel is considered to be ``new'' if it is
modified such that the value of the modifications exceeds 50 percent of
the value of the modified vessel. Such a refurbished vessel would be
required to have an engine that is compliant with the standards in
place when the vessel is modified. We expect that most vessel
modifications will not trigger this threshold, but the requirement is
necessary to accommodate those cases where a major structural change is
done to a vessel that make it like-new.
    We are revising this provision to specify how temporary
modifications will be treated under this provision. In general,
temporary modifications to a vessel would not be considered to be
vessel refurbishing for the purpose of the ``new vessel'' definition.
We are defining temporary modifications as modifications to a vessel
that are made pursuant to a written contract between the vessel owners
and the purchaser of the vessel's services and that are made for the
purpose of fulfilling the purchaser's marine service requirements. To
be considered to be temporary, the modifications must be removed from
the vessel upon expiration of the contract or after a period of one
year, whichever is shorter. While we will allow a vessel owner to
petition EPA for a longer period of time, we will generally assume that
changes that are necessary for longer than one year are quasi-
permanent. We do not expect there to be many petitions for longer
periods of time because temporary modifications that exceed 50 percent
of the vessel's value would be considerable and would likely involve
the vessel's power plant.
(3) Personal Use Exemption
    The current marine diesel engine emission control program contains
certain exemptions from the standards, including the following: test
engines; manufacturer-owned engines; display engines; competition
engines; export engines; and certain military engines. We also provide
an engine dresser exemption that applies to marine diesel engines that
are produced by marinizing a certified highway, nonroad, or locomotive
engine without changing it in any way that may affect the emissions
characteristics of the engine.
    In addition to these existing exemptions we are also adding a new
provision that exempts an engine installed on a vessel manufactured by
a person for his or her own use (see 40 CFR 1042.630). This is intended
to address the hobbyists and fishermen who make their own vessel (from
a personal design, for example, or to replicate a vintage vessel) and
who would otherwise be considered to be a manufacturer subject to the
full set of emission standards by introducing a vessel into commerce.
The exemption is intended to allow such a person to install a rebuilt
engine, an engine that was used in another vessel owned by the person
building the new vessel, or a reconditioned vintage engine (to add
greater authenticity to a vintage vessel). The exemption is not
intended to allow such a person to order a new uncontrolled engine from
an engine manufacturer. We expect this exemption to involve a very
small number of vessels, so the environmental impact of this exemption
will be negligible, while the cost would otherwise be high to install a
certified compliant engine.
    Because the exemption is intended for hobbyists and fishermen, we
are setting additional constraints. First, the vessel may not be used
for general commercial purposes. The one exception to this is that the
exemption allows a fisherman to use the vessel for his or her own
commercial fishing. Second, the exemption is limited to one such vessel
over a ten-year period and does not allow exempt engines to be sold for
at least five years. We believe these restrictions are not unreasonable
for a true hobby builder or comparable fisherman. Moreover, we require
that the vessel generally be built from unassembled components, rather
than simply completing assembly of a vessel that is otherwise similar
to one that must use a freshly manufactured engine certified to meet
the applicable emission standards. The person also must be building the
vessel him- or herself, and not simply ordering parts for someone else
to assemble. Finally, the vessel must be a vessel that is not classed
or subject to Coast Guard inspections or surveys.

[[Page 37159]]

(4) Lifeboat/Rescue Boat Exemption
    Our current marine diesel engine program does not exempt lifeboats
or rescue boats, and we did not propose to revise that approach. This
approach was developed for the Tier 2 marine diesel engine standards.
As we explained in our 1999 FRM, the technologies that would meet Tier
2 standards would not have inherent negative effect on the performance
or power density of an engine, and we expected that manufacturers would
be able to use the range of technologies available to maintain or even
improve the performance capabilities and reliability of their engines.
We also note that land-based emergency engines such as standby
generators are not exempt from our emission control requirements in
either highway or nonroad applications.
    We received several comments from manufacturers of lifeboats and
rescue boats requesting that we reconsider this approach and exempt
engines on lifeboats and rescue boats from the Tier 3 and Tier 4
standards. They noted that engines on lifeboats and rescue boats are
not regularly used as they are intended for use only during
emergencies, and they are generally only operated for 3 minutes once a
week and are water tested for a short period only a few times a year.
Boat manufacturers were also concerned about the reliability of
electronic controls and advanced technology aftertreatment systems in
these situations, especially when the boats are stored on deck and
exposed to the elements.
    We've also learned that at least some engine manufacturers that
have certified engines in the past for use on Coast Guard approved
lifeboats and rescue boats pursuant to Coast Guard and international
(International Convention for the Safety of Life at Sea--SOLAS)
requirements have not yet done so for Tier 2 engines and may elect not
to do so at all.\167\ The Coast Guard and SOLAS certification
requirements are meant to ensure that an engine will perform after it
is inverted, will operate when submerged up to the crankshaft, and will
readily start at temperatures as low as -15 degrees C. This
certification is expensive and time-consuming, and those costs may be
difficult to recover over the limited U.S. market for lifeboats and
rescue boats (100 to 150 boats per year). Manufacturers of those
lifeboats that use those engines must either find an alternative engine
for their product, and recertify the boats to the Coast Guard and SOLAS
requirements, or exit the market.
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    \167\ See http://www.uscg.mil/hq/g-m/mse4/boatlb.htm#LIFEBOAT_
FOR_MERCHANT_VESSELS  for Coast Guard requirements for lifeboats
and rescue boats.
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    After considering these comments, we conclude that it is reasonable
to modify our program for engines used on Coast Guard approved
lifeboats and rescue boats. First, our final program exempts engines
intended to be used on lifeboats and rescue boats from the Tier 4
standards. This exemption is appropriate for technological reasons. We
expect the Tier 4 standards to be met through the application of
aftertreatment technology. While we believe these technologies will be
durable and reliable, it is also the case the additional complexity
could possibly affect engine performance in an emergency, which is the
sole situation in which these engines would be used. For example, it
would be necessary to ensure the engines on the lifeboat or rescue boat
have onboard at all times an adequate supply of urea that meets the
quality requirements of an SCR system. In addition, if the engine on
the lifeboat or rescue boat is only run for very short periods of time
for periodic onboard tests, the PM filter may not have time to
regenerate. This could result in a small risk of plugging. Therefore,
it is reasonable to exempt these engines from the Tier 4 requirements.
It is worth noting that most lifeboat engines are less than 600 kW and
thus would not be subject to Tier 4 standards.
    Second, to avoid a situation in which an engine certified to the
Coast Guard and SOLAS requirements is not available for use in a
lifeboat or rescue boat application, we are providing an exemption that
would have the effect of delaying the date of the emission standards
for engines used on those boats until SOLAS certified engines of the
respective emissions tier become available. Specifically, we will grant
exemptions for engines not complying with the Tier 3 requirements for
use in a Coast Guard approved lifeboat or rescue boat until such time
as a comparable Tier 3 engine that meets the weight, size, and
performance requirements of the boat is certified under the Coast Guard
and SOLAS requirements. Once such an engine becomes available, the non
Tier 3 compliant engines may not be sold for use in these applications.
This provision is necessary because the Coast Guard has observed a
precipitous drop in available SOLAS certified engines with the
emissions tier change from the Tier 1 emissions standards to the Tier 2
emissions standards. Given the high cost of SOLAS certification and the
low sales of SOLAS certified engines, engine manufacturers have delayed
SOLAS certification of new emission tier engines. After considering the
high cost of SOLAS certification, the need for additional lead time to
complete the SOLAS certification process and the importance of
lifeboats and rescue boats to safety, we have concluded it is
appropriate to provide this exemption. We are not requiring engine
manufacturers to certify these engines by a specified date. However, we
anticipate that engine manufacturers will over time certify their Tier
3 engines to the Coast Guard and SOLAS requirements, or modify their
existing Coast Guard certified engines as necessary to comply with the
Tier 3 requirements. Most of the marine diesel engines used on
lifeboats and rescue boats are derived from land-based highway or
nonroad engines. Once the Tier 3 requirements for those engines go into
effect and the Tier 2 or Tier 1 counterparts are retired from the
fleet, it will become more expensive to continue to provide parts and
service for these older engines, and engine manufacturers will prefer
to provide newer tier engines for lifeboats and rescue boats globally.
Because it is not possible to determine when that change will take
place, the final program specifies that when they do become available,
they must be used.
    Finally, we are extending this exemption to Tier 2 engines as well.
We have learned that some lifeboat and rescue boat manufacturers are
having trouble obtaining engines that meet the Tier 2 standards. Note
that because Tier 2 engines are not regulated under part 1042, this
exemption is included in a new section in part 94 (94.914). As with the
Tier 3 exemption, once a Tier 2 engine becomes available that meets the
weight, size, and performance requirements of the boat and is certified
under the Coast Guard and SOLAS requirements the exemption will no
longer be available for freshly manufactured engines.
    Engines that are produced to an earlier tier pursuant to these
provisions must be labeled to make clear that their use is limited to
lifeboats or rescue boats approved by the U.S. Coast Guard under
approval series 160.135 or 160.156. Using such a vessel as for a
purpose other than a lifeboat or rescue boat is a violation of the
regulations.
    The above provisions are applicable only to engines in lifeboats
and rescue boats used solely for emergency purposes. This is an
important distinction because there are cases in which a lifeboat may
serve dual use on a vessel, both for general transportation (e.g.,
tenders) and for emergencies. Engines in lifeboats and rescue boats that
are not used solely for emergency purposes are not exempt. These engines

[[Page 37160]]

are not expected to remain idle long enough for urea storage or PM trap
regeneration to be a problem. For all these reasons, the Tier 2 and 3
flexibility and Tier 4 exemption will apply only to engines intended
for installation on lifeboats approved by the U.S. Coast Guard under
approval series 160.135 (except those which are also approved for use
as launches or tenders) and rescue boats approved by the U.S Coast
Guard under series 160.156.
(5) Stand-By Emergency Auxiliary Engines
    We are exempting certain stand-by emergency auxiliary engines from
the Tier 4 standards. This exemption is necessary due to the fact that
these engines are rarely used, their operation being limited to
periodic testing of several minutes duration. While the technologies
that will be used to achieve the Tier 4 standards are expected to be
durable, it is also the case that operation for such short periods of
time may not be enough to engage the aftertreatment regeneration
strategy. In addition, these auxiliary engines would need separate urea
tanks, rendering them more complicated to maintain and use in an
emergency situation.
    This exemption is limited to dedicated stand-by emergency auxiliary
engines subject to United States Coast Guard requirements set out in 46
CFR part 112. In general, these stand-by emergency auxiliary engines
are supplemental to the ships' main auxiliary engines. They are located
away from the main engine compartment, have separate fuel tanks, and
are connected to the ships' power system in such a way as to provide
for emergency power only to emergency equipment and not the ship's
power grid generally. These engines must be labeled for use as marine
stand-by emergency auxiliary engines only.
    Marine stand-by emergency engine means any marine auxiliary engine
whose operation is limited to unexpected emergency situations on a
vessel; these engines are subject to testing and maintenance required
by the United States Coast Guard. They are generally used to produce
power for critical networks or equipment (including power supplied to
portions of a vessel) when electric power from the main auxiliary
engine(s) is interrupted. Marine auxiliary engines used to supply power
to the vessel's general electric grid or that are operated on a
constant basis are not considered to be emergency marine auxiliary engines.
    Exempted engines are required to meet the applicable Tier 3
standards (in part 89 or part 94, as applicable). See 40 CFR 1068.265
for the provisions that apply for such exempt engines. The engines must
also be labeled to make clear that they are exempt and their use is
limited to emergency stand-by auxiliary power as specified in United
States Coast Guard requirements set out in 46 CFR part 112.
(6) Gas Turbine Engines
    While gas turbine engines\168\ are used extensively in naval ships,
they are not used very often in commercial ships. Because of this and
because we do not currently have sufficient information, we are not
including marine gas turbines in this rulemaking. Nevertheless, we
believe that gas turbines could likely meet the new standards (or
similar standards) since they generally have lower emissions than
diesel engines and may reconsider gas turbines in a future rulemaking.
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    \168\ Gas turbine engines are internal combustion engines that
can operate using diesel fuel, 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.
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(7) Natural Gas Engines
    The increasing deployment of tankers carrying liquefied natural gas
has led to greater numbers of large marine engines running on natural
gas instead of diesel fuel. Depending on the technological approach
engine manufacturers take, these engines could fall under our
definition for spark-ignition engines even though their design and
development is more like compression-ignition engines. Without some
clarifying provision, these engines would therefore be subject to the
standards that we are developing for inboard spark-ignition engines,
which are based on automotive technologies. Since this is clearly not
appropriate, we are adopting a provision to specify that natural gas
engines above 250 kW are subject to standards for marine compression-
ignition engines regardless of our regulatory definitions for spark-
ignition and compression-ignition engines. Since the analysis of
control technology and the estimated costs and emission reductions are
very similar to that for diesel-fueled engines, we have made no effort
to separately analyze these engines relative to the new emission standards.
(8) Residual Fuel Engines
    The vast majority of Category 1 and 2 marine diesel engines subject
to EPA's emission standards operate on distillate diesel fuel. There
are cases, however, in which the owner of a vessel may prefer to
operate a Category 2 engine on another type of diesel fuel. This is
mainly the case for auxiliary engines on ocean-going vessels, to allow
them to use the same fuel that is used in the propulsion engine
(typically residual fuel). There are also a few vessels operated on the
Great Lakes that use residual fuel or residual fuel blends.
    Our marine diesel engine program requires engine manufacturers to
perform certification testing using the same type of fuel that will be
used in actual engine operation. This requirement, which was also
included in our 1999 Tier 2 rule, is intended to ensure that engines
meet the emission limits in operation. In our proposal, we noted that
engine manufacturers have not certified Category 1 or 2 engines that
can be operated on residual fuel to the Tier 2 standards. Manufacturers
explained that it is not profitable to do so due to the small size of
the U.S. market for these engines. They also informed us that it would
be difficult to meet EPA's PM standards on residual fuel.
    Some owners expressed concern to EPA about the unavailability of
large auxiliary engines certified to the Tier 2 standards on residual
fuel. These owners expressed a preference for auxiliary engines run on
the same fuel as propulsion engines to simplify ship operations. To
respond to this concern, we asked for comment on a compliance
consisting of an alternative PM standard and a tighter NO_X
standard. The alternative standards would be available for auxiliary
engines to be installed on vessels with Category 3 propulsion engines.
Certification testing would still be required on residual fuel but we
would allow alternative PM measurement procedures. To ensure that
questions of test fuel and PM measurement are resolved before
certification testing, manufacturers would have to apply to EPA to
exercise this flexibility.
    The alternative of exempting residual fuel engines from the test
fuel requirement and allowing them to be tested on distillate fuel is
not appropriate. All of our mobile source emission control programs are
predicated on an engine meeting the emission standards in use. The test
fuel requirement is one of several provisions that help ensure in-use
compliance, including useful life periods, emission deterioration
factors, durability testing, and not-to-exceed zone. Amending the test
fuel provisions to allow manufacturers to certify residual fuel engines
using distillate fuel would introduce considerable uncertainty into the
in-use performance of these engines,

[[Page 37161]]

would weaken the emission standards, and would be contrary to the goals
of our program.
    We received no comments supporting the compliance flexibility
described above, and therefore we are not revising our program with
respect to test fuels or the standards that apply to engines with per
cylinder displacement below 30 liters that use residual fuel. We expect
to revisit this issue in the context of our upcoming rulemaking for
Category 3 marine diesel engines.
(9) Duty Cycles for Marine Engines
    Manufacturers pointed out two inconsistencies between the proposal
and existing requirements for marine engines related to the proposed
duty cycles for marine propulsion engines less than 37 kW and the
proposed duty cycle for propeller-law auxiliary engines. We agree that
the existing 4-mode duty cycle (E3) should be used for these
applications and have corrected this in the final rule.
    We received comment that the 8-mode (C1) duty cycle was not
designed to represent variable-speed propulsion engines intended for
use with variable-pitch or electrically-coupled propellers. Caterpillar
provided an example of a power curve for a variable-speed engine
designed to operate with a controllable pitch propeller where the
operation is limited at low and mid-range speeds. In this case, we
agree that the constant speed (E2) test duty cycle, combined with the
NTE requirements, is more representative of the operation of this
engine than the proposed C1 cycle. For this engine, the power and
torque at the C1 intermediate speed is relatively low, leading to a
heavy weighting of low power operation. In addition, the power limit curve,
for overload protection, is at lower power than even the E3 duty cycle.
    Controllable pitch propellers are also used with variable speed
engines that have power curves that are more similar to those seen for
nonroad engines or marine engines used with fixed pitch propellers. We
are concerned that the E2 duty cycle would not be representative of the
operation of these engines. Therefore, we are finalizing the E3 duty
cycle for variable-speed propulsion engines intended for use with
variable-pitch or electrically-coupled propellers. In the case where
the engine is not capable of operating over the E3 duty cycle in-use,
the E2 duty cycle would be used. For the purposes of this requirement,
we consider an engine capable of operating over the E3 duty cycle if
the engine can safely achieve more than 1.15 times the power specified
in the E3 duty cycle at 63, 80, and 91 percent of maximum test speed.
(10) Definition of Recreational Marine Diesel Vessel
    We are adopting a revised the definition of recreational marine
diesel vessel in part 1042 that will essentially return to the
definition we originally adopted in 1999. This revision will
effectively rescind that change we made in our 2003 recreational engine
rule (68 FR 9745, February 28, 2003). As is described later, in that
rulemaking we revised the definition of recreational vessel by adding a
reference to the Coast Guard definition in 46 U.S.C. 2101. However,
since then, it has become clear that the revision resulted in
significant confusion for industry.
    As described above, the Tier 3 standards that apply to recreational
marine diesel engines are different than those that apply to standard
power density commercial engines and recreational engines are not
subject to the Tier 4 standards. Recreational engines are also subject
to different compliance requirements, notably the duty cycle for
certification testing and their useful life. These programmatic
differences reflect the different way in which these engines are used,
with recreational engines generally having a higher power/density
ratio, operating at a higher load, and being used for fewer hours over
their life than commercial engines.
    Recreational engines are defined based on whether or not they are
intended by the engine manufacturer to be installed on a recreational
vessel. In our 1999 Tier 2 marine diesel engine rule, we defined
recreational vessel as a vessel intended by the vessel operator to be
operated primarily for pleasure or leased to another for the latter's
pleasure, with the exception of (i) vessels less than 100 gross tons
that carry more than six passengers; and (ii) vessels more than 100
gross tons that carry one or more passengers, where passenger means
someone who pays to be on the vessel.
    The goal of this definition was to exclude so-called recreational
vessels that are in fact operated like commercial vessels: Those that
are operated many hours a year (for example, charter fishing vessels
and smaller tour vessels that are rented on an individual basis, with
or without a crew). A personal vessel owned by an individual for his
personal use and not for hire was intended to be considered to be a
recreational vessel. For smaller vessels, this is achieved by requiring
that there be fewer than six paying passengers; this allows an
individual to invite friends onboard his or her vessel in return for
some pecuniary arrangement (e.g., paying for the gas). For larger
vessels, above 100 gross tons, the presence of any paying passenger
prevents the vessel from being characterized as recreational; this is
intended to cover luxury yachts that recover costs by taking paying
passengers onboard. The specified paying passenger thresholds are high
enough to make them likely to be known at the time the vessel is purchased.
    In the 2003 rule, we revised the definition of recreational vessel,
by adding a reference to the Coast Guard definition. However, the Coast
Guard definition and EPA's definition have different intents. Coast
Guard's requirements are safety related to ensure adequate lifesaving
equipment is onboard a recreational vessel. For example, the Coast
Guard definitions differentiate between charter and noncharter vessels
based on whether vessels are operated with or without a crew. The
intent of EPA's approach is to identify those vessels that are intended
for pleasure as opposed to commercial applications. Thus our definition
needs to rely on features that can be known at the time of manufacture.
For example, by setting a six passenger threshold for small vessels our
intent was to identify those vessels clearly identified by the
manufacturer as being intended for charter use and not used as a
charter either incidentally or unintentionally.
    Since the Coast Guard definitions do not reflect the intent of
EPA's program and are inconsistent with EPA's definitions, we are
revising the definitions to remove the references to the Coast Guard
definitions and reverting back to the original definitions adopted in
1999. While the new definition is being adopted in part 1042, Sec. 
94.12(i) of part 94 will allow manufacturers to use this new definition
for certification under part 94. Commercial vessels that were
categorized as recreational prior to that time due to confusion about the
meaning of the definitions will not be affected by the revised definitions.
(11) Engine Stockpiling by Vessel Builders
    Our existing marine diesel engine program specifies in Sec. 
94.1103(a)(5) that it is a prohibited act to introduce into commerce a
new vessel containing an engine not covered by a certificate of
conformity applicable for an engine model year the same as or later
than the calendar year in which the manufacture

[[Page 37162]]

of the new vessel is initiated.\169\ However, as an exception, we allow
vessel manufacturers to use up their normal inventory of engines not
certified to new, more stringent emission standards if they were built
before the date on which the new standards apply (subject to
stockpiling prohibitions). With the adoption of the Tier 3 and 4
emission standards, the location of this provision transfers to Sec. 
1068.101(a)(1), including the exception noted above, now being located
in Sec.  1068.105(a).
---------------------------------------------------------------------------

    \169\ The manufacture of a vessel is initiated when the keel is
laid, or the vessel is at a similar stage of construction. ``A
similar stage of construction'' means: (1) the stage at which
construction identifiable with a specific vessel begins, and (2)
assembly of that vessel has commenced comprising at least 50 tons or
one percent of the estimated mass of all structural material,
whichever is less.
---------------------------------------------------------------------------

    The normal inventory approach above was developed in response to
traditional business practice in automotive and other industries where
vehicles and equipment are serially manufactured. Although this scheme
works well for most manufacturers of small, serially-produced marine
vessels, its application to manufacturers of large, commercial marine
vessels may not be so straightforward. In this latter case there are
typically long lead-time build schedules and low production volumes,
which translate to vessel manufacturers maintaining lean inventory
onsite at the shipyard. Vessel manufacturers usually order engines from
dealers upon entering into a vessel construction agreement with an end
customer. Due to lengthy build schedules, which for many projects can
be counted in years, and the location of some shipyards in low-lying
coastal areas subject to seasonal flooding, engines are often delivered
and warehoused at the dealers' offsite location until such time as the
vessels are ready to receive them for installation. Especially in
projects where construction agreements involve multiple vessels,
engines for all vessels may be ordered and delivered to the dealer
during the same year in which construction of the first vessel is
initiated. Due to this type of business practice, we will allow vessel
manufacturers to consider as part of their normal inventory those
engines that are warehoused at offsite dealerships and for which the
vessel manufacturer entered into a purchase agreement prior to a change
in applicable emission standards, provided this practice is consistent
with the vessel manufacturers past engine ordering practices. We will
allow this normal inventory of engines to be used up after new emission
standards apply. It should be noted, however, that this clarification
does not extend to engines that are not the subject of a prior purchase
agreement, and would not allow a vessel manufacturer to search for a
previous tier engine among engine dealers to evade the standards. Also,
if a dealer has previous tier engines that are not the subject of a
prior purchase agreement after a new tier of standards goes into
effect, those engines may be used only as replacement engines, subject
to Sec.  1042.615; those engines may not be sold for use in new vessels.
(12) Other Issues
    Several commenters, including the United States Coast Guard, raised
questions regarding the possibility that advanced aftertreatment based
emission control systems for marine diesel engines may need to be by-
passed or otherwise modified or disabled in order to guarantee safe
operation under emergency conditions. In general terms, the commenters
speculated that the catalyst systems could fail in such a manner as to
restrict exhaust flow reducing engine power and potentially endangering
vessel safety.
    Marine vessels that lose power to a main propulsion engine or
generating engine providing essential power to main propulsion engine
auxiliaries could go adrift with almost no control. Unlike trucks and
locomotives, marine vessels have no brakes and can literally ``coast''
for miles and due to their enormous tonnage have an incredible amount
of momentum and can cause catastrophic damage via collisions,
allisions, and groundings. In the past, main propulsion failures on
marine vessels have resulted in severe loss of life, property, and
damage to the marine environment. Due to this precedent, a loss of main
propulsion is defined as a ``marine casualty or accident'' in 46 CFR
4.03-1(b)(2)(ix) and 46 CFR 4.05-1 requires the occurrence to be
immediately reported to the Coast Guard. To avoid potential loss of
propulsion 46 CFR 58.01-35 effectively requires that main propulsion
auxiliary machinery be provided in duplicate to prevent single point of
failure.
    Our discussions with the engine manufacturers regarding the
technologies they expect to use to comply with the rules we are
finalizing today, lead us to conclude that such failure mechanisms are
extremely unlikely given the robust nature of the technologies.\170\
However, reflecting the high priority everyone places on safety and the
reality that no one can say today with absolute certainty how emission
control systems will be designed in the future, we are continuing
several regulatory provisions that further ensure safe vessel operation
under all circumstances. Consistent with Coast Guard's requirements for
main propulsion auxiliary machinery, we feel these provisions address the
single point of failure concern in the design of emission control systems.
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    \170\ We should note here that the standards in our rules are
performance-based rather than a prescription for the application of
a specific technology. Our rules do not prevent a manufacturer from
developing and applying new or different technology at some future
time as long as it meets the performance basis in the rules (e.g., a
0.04 g/kW-hr standard PM).
---------------------------------------------------------------------------

    First, we are continuing our general regulatory requirement found
in Sec.  1042.115(e) stating that a manufacturer may not design engines
with emission-control devices, systems, or elements of design that
cause or contribute to an unreasonable risk to public health, welfare,
or safety while operating. Likewise, our regulations continue to make
clear that actions taken by the operators of marine vessels in order to
respond to a temporary emergency will not be considered tampering under
Sec.  1068.101(b)(1) provided the system is returned to its proper
function as soon as possible. Lastly, in evaluating auxiliary emission
control devices (AECDs) for marine diesel engines we will continue to
recognize that AECDs, such as those that eliminate a single point of
failure, are not defeat devices as defined under Sec.  1042.115(f) if
the AECDs are necessary to prevent engine (or vessel) damage or
accidents. In the case of AECD approval, we will continue our current
practice of reviewing manufacturer certification applications to ensure
that these provisions are only used when necessary. Further, it is our
general expectation that engine manufacturers will provide diagnostic
systems to alert vessel operators when such AECDs are active and if the
AECD requires the operator to take an action, the diagnostic system should
give the vessel operator as much advance warning as reasonably possible.

V. Costs and Economic Impacts

    In this section, we present the projected cost impacts and cost
effectiveness of the standards, and our analysis of the expected
economic impacts on affected markets. The projected benefits and
benefit-cost analysis are presented in Section VI. The benefit-cost
analysis explores the net yearly economic benefits to society of the
reduction in mobile source emissions expected to be achieved by

[[Page 37163]]

this rulemaking. The economic impact analysis explores how the costs of
the rule will likely be shared across the manufacturers and users of
the engines and equipment that will be affected by the standards.
Unless noted otherwise, all costs are in 2005 dollars.
    The annual monetized health benefits of this rule in 2030 will
range from $9.2 and $11 billion, assuming a 3 percent discount rate, or
between $8.4 billion to $10 billion, assuming a 7 percent discount
rate. The social costs of the new standards are estimated to be
approximately $738 million in 2030.\171\ The impact of these costs on
society are estimated to be small, with the prices of rail and marine
transportation services estimated to increase by about 1 percent.
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    \171\ The estimated 2030 social welfare cost of $738 million is
based on draft compliance costs for this final rule of $740 million
for that year. The final compliance cost estimate for 2030 is
somewhat higher, at $759 million; see section VI.C for an
explanation. This difference is not expected to have an impact on
the results of the market analysis or on the expected distribution
of social costs among stakeholders.
---------------------------------------------------------------------------

    Further information on these and other aspects of the economic
impacts of our final rule are summarized in the following sections and
are presented in more detail in the Final RIA for this rulemaking.

A. Engineering Costs

    The following sections briefly discuss the various engine and
equipment cost elements considered for this cost analysis and present
the total engineering costs we have estimated for this rulemaking; the
reader is referred to Chapter 5 of the final RIA for a complete
discussion of our engineering cost estimates. When referring to
``equipment'' costs throughout this discussion, we mean the locomotive
and/or marine vessel related costs as opposed to costs associated with
the diesel engine being placed into the locomotive or vessel. Estimated
freshly manufactured engine and equipment engineering costs depend
largely on both the size of the piece of equipment and its engine, and
on the technology package being added to the engine to ensure
compliance with the standards. The wide size variation of engines
covered by this program (e.g., small marine engines with less than 37
kW (50 horsepower, or hp) through locomotive and marine C2 engines with
over 3000 kW (4000 hp) and the broad application variation (e.g., small
pleasure crafts through large line haul locomotives and cargo vessels)
that exists in these industries makes it difficult to present an
estimated cost for every possible engine and/or piece of equipment.
Nonetheless, for illustrative purposes, we present some example per
engine/equipment engineering cost impacts throughout this discussion.
This engineering cost analysis is presented in detail in Chapter 5 of
the final RIA.
    Note that the engineering costs here do not reflect changes to the
fuel used to power locomotive and marine engines. Our Nonroad Tier 4
rule (69 FR 38958) controlled the sulfur level in all nonroad fuel,
including that used in locomotives and marine engines. The sulfur level
in the fuel is a critical element of the locomotive and marine program.
However, since the costs of controlling locomotive and marine fuel
sulfur have been considered in our Nonroad Tier 4 rule, they are not
considered here. This analysis considers only those costs associated
with the locomotive and marine program being finalized today. Also, the
engineering costs presented here do not reflect any savings that are
expected to occur because of the engine ABT program and the various
flexibilities included in the program which are discussed in section IV
of this preamble. As discussed there, these program features have the
potential to provide savings for both engine and locomotive/vessel
manufacturers.
(1) Freshly Manufactured Engine and Equipment Variable Engineering Costs
    Engineering costs for exhaust emission control devices (i.e.,
catalyzed DPFs, SCR systems, and DOCs) were estimated using a
methodology consistent with the one used in our 2007 heavy-duty highway
rulemaking. In that rule, surveys were provided to nine engine
manufacturers seeking information relevant to estimating the
engineering costs for and types of emission-control technologies that
might be enabled with ultra low-sulfur diesel fuel (15 ppm S). The
survey responses were used as the first step in estimating the
engineering costs of advanced emission control technologies anticipated
for meeting the 2007 heavy-duty highway standards. We then built upon
these engineering costs using input from members of the Manufacturers
of Emission Controls Association (MECA). We also used this information
in our recent nonroad Tier 4 (NRT4) rule. Because the anticipated
emission control technologies expected to be used on locomotive and
marine engines are the same as or similar to those expected for highway
and nonroad engines, and because the expected suppliers of the
technologies are the same for these engines, we have used that analysis
as the starting point for estimating the engineering costs of these
technologies in this rule.\172\ Importantly, the analysis summarized
here and detailed in the final RIA takes into account specific
differences between the locomotive and marine products when compared to
on-highway trucks (e.g., engine size).
---------------------------------------------------------------------------

    \172\ ``Economic Analysis of Diesel Aftertreatment System
Changes Made Possible by Reduction of Diesel Fuel Sulfur Content,''
Engine, Fuel, and Emissions Engineering, Incorporated, December 15,
1999, Public Docket No. A-2001-28, Docket Item II-A-76.
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    Engineering costs of control include variable costs (for new
hardware, its assembly, and associated markups) and fixed costs (for
tooling, research, redesign efforts, and certification). We are
projecting that the Tier 3 standards will be met by optimizing the
engine and emission controls that will exist on locomotive and marine
engines in the Tier 3 timeframe. Therefore, we have estimated no
hardware costs associated with the Tier 3 standards. For the Tier 4
standards, we are projecting that SCR systems and DPFs will be the most
likely technologies used to comply. Upon installation in a new
locomotive or a new marine vessel, these devices would require some new
equipment related hardware in the form of brackets, new sheet metal,
and a reductant storage and delivery system. The annual variable costs
for example years, the PM/NO_X split of those engineering
costs, and the net present values that would result are presented in
Table V-1.\173\ As shown, we estimate the net present value for the
years 2006 through 2040 of all variable costs at $1.5 billion using a
three percent discount rate, with $1.3 billion of that being engine-
related variable costs.\174\ Using a seven percent discount rate, these
costs are $674 million and $575 million, respectively.
---------------------------------------------------------------------------

    \173\ The PM/NO_X+NMHC cost allocations for variable
costs used in this cost analysis are as follows: SCR systems
including marinization costs on marine applications are 100% NO_X+NMHC;
DPF systems including marinization costs on marine applications are 100%
PM; and, equipment hardware costs are split evenly.
    \174\ Throughout our cost and economic impact analyses, net
present value (NPV) calculations are based on the period 2006-2040,
reflecting the period when the NPRM analysis was completed. This has
the consequence of discounting the current year costs, effectively
2007, and all subsequent years are discounted by an additional year.
The result is a slightly smaller NPV of engineering costs than by
calculating the NPV over 2007-2040 (3% smaller for 3% NPV and 7%
smaller for 7% NPV). The same convention applies for the emission
inventories as shown in Table V-7. We have used 2006 because we
intended to publish the proposal in 2006. For the final analysis, we
have chosen to continue with 2006 to make comparisons between
proposal and final analyses more clear.

[[Page 37164]]

                Table V-1.--Freshly Manufactured Engine and Equipment Variable Engineering Costs
                                           [Millions of 2005 dollars]
----------------------------------------------------------------------------------------------------------------
                                      Engine         Equipment
                                     variable        variable     Total variable                     Total for
              Year                  engineering     engineering     engineering    Total for PM      NOX+NMHC
                                       costs           costs           costs
----------------------------------------------------------------------------------------------------------------
2008............................              $0              $0              $0              $0              $0
2009............................              $0              $0              $0              $0              $0
2010............................              $0              $0              $0              $0              $0
2011............................              $0              $0              $0              $0              $0
2012............................              $0              $0              $0              $0              $0
2015............................             $60             $11             $71             $37             $34
2020............................             $82             $14             $96             $50             $46
2030............................             $99             $18            $117             $61             $56
2040............................             $98             $17            $115             $60             $55
NPV at 3%.......................          $1,255            $220          $1,475            $772            $703
NPV at 7%.......................            $575            $100            $674            $353            $321
----------------------------------------------------------------------------------------------------------------

    We can also look at these variable engineering costs on a ``per
engine'' and a ``per piece of equipment'' basis rather than an annual
total basis. Doing so results in the costs summarized in Table V-2. The
costs shown represent the total engine-related and equipment-related
engineering hardware costs associated with all of the new emissions
standards to which the given power range and market segment would need
to comply. For example, a commercial marine engine below 600 kW (805
hp) would need to comply with the Tier 3 standards as its final tier
and would, therefore, incur no new hardware costs. In contrast, a
commercial marine engine over 600 kW is expected to comply with both
Tier 3 and then Tier 4 and would, therefore, incur hardware costs
associated with the Tier 4 standards. The costs also represent long
term costs or those costs after expected learning effects have occurred
and warranty costs have stabilized.
[GRAPHIC] [TIFF OMITTED] TR06MY08.005

(2) Freshly Manufactured Engine and Equipment Fixed Engineering Costs
    Because these technologies are being researched for implementation
in the highway and nonroad markets well before the locomotive and
marine emission standards take effect, and because engine manufacturers
will have had several years complying with the highway and nonroad
standards, we believe that the technologies used to comply with the
locomotive and marine standards will have undergone significant
development before reaching locomotive and marine production, and

[[Page 37165]]

we have considered this in estimating the costs for research and
development. Chapter 5 of the final RIA details our approach which
differs from our approach in the draft RIA. We anticipate that engine
manufacturers would introduce a combination of primary technology
upgrades to meet the new emission standards. Achieving very low
NO_X emissions requires basic research on NO_X
emission-control technologies and improvements in engine management.
There would also have to be some level of tooling expenditures to make
possible the fitting of new hardware on locomotive and marine engines.
We also expect that locomotives and marine vessels being fitted with
Tier 4 engines would have to undergo some level of redesign to
accommodate the aftertreatment devices expected to meet the Tier 4
standards. The total of fixed engineering costs and the net present
values of those costs are shown in Table V-3.\175\ As shown, we have
estimated the net present value for the years 2006 through 2040 of all
fixed engineering costs at $549 million using a three percent discount
rate, with $471 million of that being engine-related research costs.
Using a seven percent discount rate, these costs are $422 million and
$371 million, respectively.
---------------------------------------------------------------------------

    \175\ The PM/NO_X+NMHC cost allocations for fixed
costs used in this cost analysis are as follows: Engine research
expenditures are 67% NO_X+NMHC and 33% PM; engine tooling
and certification costs are split evenly; and, equipment redesign
costs are split evenly.

                                      Table V-3.--Freshly Manufactured Engine and Equipment Fixed Engineering Costs
                                                               [Millions of 2005 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Total fixed
                  Year                        Engine      Engine tooling      Engine         Equipment      engineering    Total for PM    Total for NOX
                                             research                      certification     redesign          costs                           +NMHC
--------------------------------------------------------------------------------------------------------------------------------------------------------
2008....................................             $34              $0              $0              $0             $34             $11             $23
2009....................................              34               0               0               0              34              11              23
2010....................................              68               0               0               0              68              23              46
2011....................................             114              19               5               0             138              50              88
2012....................................              80               0               0               0              80              27              54
2015....................................              46              17               1              13              76              30              46
2020....................................               0               0               0               3               3               1               1
2030....................................               0               0               0               3               3               1               1
2040....................................               0               0               0               0               0               0               0
NPV at 3%...............................             471              33               6              39             549             194             354
NPV at 7%...............................             371              24               5              22             422             148             274
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Some of the estimated fixed engineering costs would occur in years
prior to the Tier 3 standards taking affect in 2012. Engine
manufacturers would need to invest in engine tooling and certification
prior to selling engines that meet the standards. Engine research is
expected to begin five years in advance of the standards for which the
research is done. We have estimated some engine research for both the
Tier 3 and Tier 4 standards, although the research associated with the
Tier 4 standards is expected to be higher since it involves work on
aftertreatment devices which only the Tier 4 standards would require.
By 2016, the Tier 4 standards would be fully implemented and engine
research toward the Tier 4 standards would be completed. Similarly,
engine tooling and certification efforts would be completed. We have
estimated that equipment redesign, driven mostly by marine vessel
redesigns, would continue for many years given the nature of the marine
market. Therefore, by 2017 all engine-related fixed engineering costs
would be zero, and by 2033 all equipment-related fixed engineering
costs would be zero.
(3) Freshly Manufactured Engine Operating Costs
    We anticipate an increase in costs associated with operating
locomotives and marine vessels. We anticipate three sources of
increased operating costs: Reductant use; DPF maintenance; and a fuel
consumption impact. Increased operating costs associated with reductant
use would occur only in those locomotives/vessels equipped with a SCR
engine using a reductant like urea. Maintenance costs associated with
the DPF (for periodic cleaning of accumulated ash resulting from
unburned material that accumulates in the DPF) would occur in those
locomotives/vessels that are equipped with a DPF engine. The fuel
consumption impact is anticipated to occur more broadly--we expect that
a one percent fuel consumption increase would occur for all new Tier 4
engines, locomotive and marine, due to higher exhaust backpressure
resulting from aftertreatment devices. These costs and how the fleet
cost estimates were generated are detailed in Chapter 5 of the final
RIA and are summarized in Table V-4.\176\
---------------------------------------------------------------------------

    \176\ The PM/NO_X+NMHC cost allocations for operating
costs used in this cost analysis are as follows: Reductant costs are
100% NO_X+NMHC; DPF maintenance costs are 100% PM; and,
fuel consumption impacts are split evenly.

                                       Table V-4.--Freshly Manufactured Engine Estimated Increased Operating Costs
                                                               [Millions of 2005 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Fuel            Total
                          Year                             Reductant use        DPF         consumption      operating     Total for PM      Total for
                                                                            maintenance       impact           costs                         NOX+NMHC
--------------------------------------------------------------------------------------------------------------------------------------------------------
2008....................................................              $0              $0              $0              $0              $0              $0
2009....................................................               0               0               0               0               0               0
2010....................................................               0               0               0               0               0               0
2011....................................................               0               0               0               0               0               0
2012....................................................               0               0               0               0               0               0
2015....................................................              23               0               7              30               4              26

[[Page 37166]]

2020....................................................             143               3              42             187              24             164
2030....................................................             409               8             118             535              67             468
2040....................................................             619              12             175             806              99             707
NPV at 3%...............................................           4,031              75           1,157           5,264             654           4,610
NPV at 7%...............................................           1,575              29             453           2,057             256           1,801
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown, we have estimated the net present value for the years
2006 through 2040 of the annual operating costs at $5.2 billion using a
three percent discount rate and $2.1 billion using a seven percent
discount rate. The operating costs are zero until Tier 4 engines start
being sold since only the Tier 4 engines are expected to incur
increased operating costs (note that operating costs associated with
the remanufacturing programs are discussed below). Reductant use
represents the largest source of increased operating costs. Because
reductant use is meant for controlling NO_X emissions, most
of the operating costs are associated with NO_X+NMHC control.
(4) Engineering & Operating Costs Associated With the Remanufacturing
Programs
    We have also estimated engineering costs associated with the
locomotive and marine remanufacturing programs. The remanufacturing
process is not a low cost endeavor. However, it is much less costly
than purchasing a freshly manufactured engine. The engineering costs we
have estimated associated with the remanufacturing program are not
meant to capture the remanufacturing process but rather the incremental
engineering costs to that process. Therefore, the remanufacturing costs
estimated here are only those engineering and operating costs resulting
from the requirement to meet a more stringent standard than the engine
was designed to meet at its original sale. In addition to incremental
hardware costs, we expect that some remanufactured engines will see a
fuel consumption impact. We expect a one percent fuel consumption
increase will occur for remanufactured Tier 0 locomotives because we
believe that the tighter NO_X standard will be met using
retarded timing. For the same reason, we expect a two percent fuel
consumption increase for remanufactured C2 marine engines. The marine
engines will have timing retarded to the same degree as locomotives,
but the relative degree of timing retard will be greater for marine
engines given their initial state of control. These engineering and
operating costs and how they were generated are detailed in Chapter 5
of the final RIA and are summarized in Table V-5.\177\ As shown, we
have estimated the net present value for the years 2006 through 2040 of
the annual engineering and operating costs associated with the
locomotive and marine remanufacturing programs at $2.1 billion using a
3 percent discount rate and $1.2 billion using a 7 percent discount rate.
---------------------------------------------------------------------------

    \177\ Costs associated with the remanufaturing program are split
evenly between NO_X+NMHC and PM. Note that the costs
associated with the marine remanufacturing program are consistent
with the inventory reductions discussed in section II. Our estimate
of the number of remanufactured engines is presented in a memorandum
from Amy Kopin to the docket for this rule (see Docket Item No. EPA-
HQ-OAR-2003-0190-0847).

   Table V-5.--Estimated Hardware and Operating Costs Associated With the Locomotive & Marine Remanufacturing
                                                    Programs
                                           [Millions of 2005 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Total for
              Year                  Locomotive        Marine           Total       Total for PM      NOX+NMHC
----------------------------------------------------------------------------------------------------------------
2008............................             $59             $16             $75             $38             $38
2009............................              32              21              54              27              27
2010............................              58              27              85              42              42
2011............................             111              32             143              71              71
2012............................              91              44             135              68              68
2015............................              52              37              89              44              44
2020............................              37              26              63              31              31
2030............................              94              12             106              53              53
2040............................             158               3             161              80              80
NPV at 3%.......................           1,669             450           2,120           1,060           1,060
NPV at 7%.......................             864             289           1,153             577             577
----------------------------------------------------------------------------------------------------------------

(5) Total Engineering & Operating Costs
    The total engineering and operating costs associated with today's
final rule are the summation of the new engine and new equipment
engineering costs, both fixed and variable, the new engine operating
costs for freshly manufactured engines, and the hardware and operating
costs associated with the locomotive and marine remanufacturing
programs. These costs are summarized in Table V-6.

[[Page 37167]]

                                          Table V-6.--Total Engineering & Operating Costs of the Final Program
                                                               (Millions of 2005 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Freshly         Freshly       Hardware and
                                             Freshly      manufactured    manufactured   operating costs
                                          manufactured      equipment       engine &     associated with       Total                      Total NOX+NMHC
                  Year                   engine related      related        equipment          the          engineering   Total PM costs       costs
                                           engineering     engineering      operating    remanufacturing       costs
                                              costs           costs           costs          programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
2008...................................             $34              $0              $0              $75            $109             $49             $60
2009...................................              34               0               0               54              87              38              49
2010...................................              68               0               0               85             153              65              88
2011...................................             138               0               0              143             281             121             160
2012...................................              80               0               0              135             215              94             121
2015...................................             123              24              30               89             266             116             150
2020...................................              82              17             187               63             349             106             242
2030...................................              99              20             535              105             759             181             578
2040...................................              98              17             806              161           1,082             240             842
NPV at 3%..............................           1,764             260           5,264            2,120           9,407           2,680           6,727
NPV at 7%..............................             974             122           2,057            1,153           4,307           1,333           2,973
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown, we have estimated the net present value of the annual
engineering costs for the years 2006 through 2040 at $9.4 billion using
a three percent discount rate and $4.3 billion using a seven percent
discount rate. Roughly half of these costs are operating costs, with
the bulk of those being reductant related costs. As explained above in
the operating cost discussion, because reductant use is meant for
controlling NO_X emissions, most of the operating costs and,
therefore, the majority of the total engineering costs are associated
with NO_X+NMHC control.
    Figure V-1 graphically depicts the annual engineering costs
associated with the program being finalized today. The engine costs
shown represent the engineering costs associated with engine research
and tooling, etc., and the incremental costs for new hardware such as
DPFs and reductant SCR systems. The equipment costs shown represent the
engineering costs associated with equipment redesign efforts and the
incremental costs for new equipment-related hardware such as reductant
storage and delivery systems, sheet metal and brackets. The
remanufacturing program costs include incremental hardware and
operating costs for the locomotive and marine remanufacturing programs.
The operating costs include incremental increases in operating costs
associated with reductant use, DPF maintenance, and a one percent fuel
consumption increase for new Tier 4 engines. The total program
engineering costs are shown in Table V-6 as $9.4 billion at a three
percent discount rate and $4.3 billion at a seven percent discount rate.
BILLING CODE 1505-01-D

[[Page 37168]]
[GRAPHIC] [TIFF OMITTED] TR06MY08.006
BILLING CODE 1505-01-C

B. Cost Effectiveness

    As discussed in section VI, this rule is very cost beneficial, with
social benefits far outweighing social costs. However, this does not
shed light on how cost effective this control program is compared to
other control programs at providing the expected emission reductions.
One tool that can be used to assess the value of the final program is
the ratio of engineering costs incurred per ton of emissions reduced
and comparing that ratio to other control programs. As we show in this
section, the PM and NO_X emissions reductions from the new
locomotive and marine diesel program compare favorably--in terms of
cost effectiveness--to other mobile source control programs that have
been or will soon be implemented. We note that today's action builds
upon the efforts undertaken by the engine manufacturing industry to
comply with our recent 2007/2010 heavy-duty highway and nonroad Tier 4
(NRT4) rulemakings. As such, and as discussed at length in Chapter 5 of
the final RIA, much of the research and development associated with
diesel emission controls builds upon the work done to comply with those
earlier rules. This does not change the conclusion that the cost
effectiveness of today's action compares favorably with other actions
deemed appropriate for society.
    We have calculated the cost per ton of our program based on the net
present value of all engineering costs incurred and all emission
reductions generated from the current year 2006 through the year 2040.
This approach captures all of the costs and emissions reductions from
our program including those costs incurred and emissions reductions
generated by the locomotive and marine remanufacturing programs. The
baseline case for this evaluation is the existing set of engine
standards for locomotive and marine diesel engines and the existing
remanufacturing requirements. The analysis timeframe is meant to
capture both the early period of the program when very few new engines
that meet the standards would be in the fleet, and the later period
when essentially all engines would meet the new standards.
    Table V-7 shows the emissions reductions associated with today's
rule. These reductions are discussed in more detail in section II of
this preamble and Chapter 3 of the final RIA.

[[Page 37169]]

        Table V-7.--Estimated Emissions Reductions Associated With the New Locomotive and Marine Program
                                                  (Short tons)
----------------------------------------------------------------------------------------------------------------
                      Year                             PM2.5         PM10 \a\           NOX            NMHC
----------------------------------------------------------------------------------------------------------------
2015............................................           7,000           8,000         161,000          14,000
2020............................................          14,000          15,000         371,000          26,000
2030............................................          27,000          27,000         795,000          40,000
2040............................................          37,000          38,000       1,144,000          52,000
NPV at 3%.......................................         308,000         318,000       8,757,000         492,000
NPV at 7%.......................................         134,000         139,000       3,708,000        221,000
----------------------------------------------------------------------------------------------------------------
Note: (a) Note that, PM2.5 is estimated to be 97 percent of the more inclusive PM10 emission inventory.

    In Section II we generate and present PM_2.5 inventories
since recent research has determined that these are of greater health
concern. Similarly, NMHC is estimated to be 93 percent of the more
inclusive VOC emission inventory. Traditionally, we have used
PM₁₀ and NMHC in our cost effectiveness calculations. Since
cost effectiveness is a means of comparing control measures to one
another, we use PM₁₀ and NMHC in our cost effectiveness
calculations for comparisons to past control measures.
    Using the engineering costs shown in Table V-6 and the emission
reductions shown in Table V-7, we can calculate the $/ton associated
with today's rule. These are shown in Table V-8. The resultant cost per
ton numbers depend on how the engineering costs presented above are
allocated to each pollutant. Therefore, as described in section V.A, we
have allocated costs as closely as possible to the pollutants for which
they are incurred. These allocations are also discussed in detail in
Chapter 5 of the final RIA.

               Table V-8.--Final Program Aggregate Cost per Ton and Long-Term Annual Cost per Ton
----------------------------------------------------------------------------------------------------------------
                                                  2006 thru 2040  2006 thru 2040
                                                    discounted      discounted     Cost per ton    Cost per ton
                    Pollutant                      lifetime cost   lifetime cost      in 2030         in 2040
                                                   per ton at 3%   per ton at 7%
----------------------------------------------------------------------------------------------------------------
NOX+NMHC........................................            $730            $760            $690            $700
PM..............................................           8,440           9,620           6,620           6,360
----------------------------------------------------------------------------------------------------------------

    The costs per ton shown in Table V-8 for 2006 through 2040 use the
net present value of the annualized engineering costs and emissions
reductions associated with the program for the years 2006 through 2040.
We have also calculated the costs per ton of emissions reduced in the
years 2030 and 2040 using the annual engineering costs and emissions
reductions in those specific years. These numbers are also shown in
Table V-8. All of the costs per ton include costs and emission
reductions that will occur from the locomotive and marine
remanufacturing programs.
    In comparison with other emissions control programs, we believe
that the new locomotive and marine program represents a cost effective
strategy for generating substantial NO_X+NMHC and PM
reductions. This can be seen by comparing the cost effectiveness with
the cost effectiveness of a number of standards that EPA has adopted in
the past. Table V-9 and Table V-10 summarize the cost per ton of
several past EPA actions to reduce emissions of NO_X+NMHC and
PM from mobile sources.

   Table V-9.--New Locomotive and Marine Program Compared to Previous
                   Mobile Source Programs for NOX+NMHC
------------------------------------------------------------------------
               Program                          $/ton NOX+NMHC
------------------------------------------------------------------------
Today's locomotive & marine                                         $730
 standards..........................
Tier 4 Nonroad Diesel (69 FR 39131).                               1,140
Tier 2 Nonroad Diesel (EPA420-R-98-                                  710
 016, Chapter 6)....................
Tier 3 Nonroad Diesel (EPA420-R-98-                                  480
 016, Chapter 6)....................
Tier 2 vehicle/gasoline sulfur (65                          1,580--2,650
 FR 6774)...........................
2007 Highway HD (66 FR 5101)........                               2,530
2004 Highway HD (65 FR 59936).......                           250--480
------------------------------------------------------------------------
Note: Costs adjusted to 2005 dollars using the Producer Price Index for
  Total Manufacturing Industries.


  Table V-10.--New Locomotive and Marine Standards Compared to Previous
                      Mobile Source Programs for PM
------------------------------------------------------------------------
               Program                             $/ton PM
------------------------------------------------------------------------
Today's locomotive & marine                                       $8,440
 standards..........................
Tier 4 Nonroad Diesel (69 FR 39131).                              12,630
Tier 1/Tier 2 Nonroad Diesel (EPA420-                              2,700
 R-98-016, Chapter 6)...............

[[Page 37170]]

2007 Highway HD (66 FR 5101)........                             15,990
------------------------------------------------------------------------
Note: Costs adjusted to 2005 dollars using the Producer Price Index for
  Total Manufacturing Industries.

C. EIA

    We prepared an Economic Impact Analysis (EIA) to estimate the
social costs associated with the final control program to estimate the
market-level changes in prices and outputs for affected markets, the
social costs of the program, and the expected distribution of those
costs across stakeholders. As defined in EPA's Guidelines for Preparing
Economic Analyses, 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.\178\
---------------------------------------------------------------------------

    \178\ EPA Guidelines for Preparing Economic Analyses, EPA 240-R-
00-003, September 2000, p 113. A copy of this document can be found
at http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html.
---------------------------------------------------------------------------

    A quantitative Economic Impact Model (EIM) was developed to
estimate price and quantity changes and total social costs associated
with the emission control program.
    The EIM is a computer model comprised of a series of spreadsheet
modules that simulate the supply and demand characteristics of each of
the markets under consideration. The model methodology is firmly rooted
in applied microeconomic theory and was developed following the
methodology set out in OAQPS's Economic Analysis Resource
Document.\179\ Chapter 7 of the RIA contains a detailed description of
the EIM, including the economic theory behind the model and the data
used to construct it, the baseline equilibrium market conditions, and
the model's behavior parameters. The EIM and the estimated compliance
costs presented above are used to estimate the economic impacts of the
program. The results of this analysis are summarized below.
---------------------------------------------------------------------------

    \179\ U.S. Environmental Protection Agency, Office of Air
Quality Planning and Standards, Innovative Strategies and Economics
Group, OAQPS Economic Analysis Resource Document, April 1999. A copy
of this document can be found at www.epa.gov/ttn/ecas/econdata/Rmanual2/.
---------------------------------------------------------------------------

    The engineering costs we used in the EIA are an earlier version of
the estimated compliance costs developed for this final rule. The net
present value of the engineering costs used in the EIA is estimated to
be approximately $9.17 billion (NPV over the period of analysis at 3
percent discount rate), which is about $240 million less than the net
present value of the final estimated engineering costs of about $9.41
billion. This difference is the sum of various cost adjustments, the
largest of which are an increase of about $222 million in operating
costs for the marine markets and $42 million in the operating costs for
the rail markets (NPV over the period of analysis at 3 percent discount
rate). These changes are not expected to have a substantial impact on
the market level results because the differences are relatively small
on an annual basis. For example, operating costs for C2 marine markets
increase by about 15 percent in 2030 (from $107 million to $123
million). The previous estimate of $107 million was associated with an
increase of approximately 1.1 in the price of marine transportation
services and a decrease of approximately 0.5 percent in the quantity of
marine transportation services provided. A small increase in operating
costs is not likely to change those results by very much. The market-
level impacts on the other downstream markets are also likely to be
very small and not economically significant. Finally, the difference in
compliance costs will not affect the distribution of social costs,
which is a function of the price elasticity of supply and demand.
(1) Market Analysis Results
    In the market analysis, we estimate how prices and quantities of
goods and services affected by the emission control program can be
expected to change once the program goes into effect.
    The compliance costs associated with the new locomotive and marine
diesel engine standards are expected to lead to price and quantity
changes in these markets. A summary of the market analysis results is
presented in Table V-11 for 2012, which is representative of the first
year of the Tier 3 standards; 2016, which is representative of the
first year of the Tier 4 standards; and 2030, which represents market
impacts of the program in the long-term. Results for all years can be
found in Chapter 7 of the RIA.
    For all markets, the market impacts for the early years of the
program are driven by the transportation markets. In these years, the
only direct compliance costs are associated with the remanufacture
programs; there are no variable costs associated with the Tier 3
standards and therefore no direct compliance costs. The transportation
markets will experience operating costs increases; these will result in
small increases in transportation market prices, which will translate
to small contractions in demand for locomotives and marine diesel
engines and vessels. This is expected exert marginal downward pressure
on prices in those markets, of less than 0.1 percent. The production
decreases are also expected to be very small, at 0.1 percent or less.
    The Tier 4 programs are expected to result in larger market changes
due to the direct compliance costs associated with Tier 4 standards and
the continuing costs of the remanufacture programs. For the locomotive
markets, the price increases in 2016 are expected to be about 4 percent
for line haul locomotives and about one percent for switchers in 2016.
In the long term (by 2030), prices are expected to increase to about
3.2 percent for line haul locomotives and about 1.5 percent for
switchers. These small price increases reflect the relative amount of
the compliance costs compared to the total cost of a locomotive or
switcher (the engine is only a small part of the total cost of the
locomotive). In all cases, the decrease in the quantity of line haul
locomotives or switchers produced is expected to be less than 0.5 percent.
    In the marine markets, price increases for engines are expected to
be larger in 2016, varying from about 9 percent for C1 engines above
600 kW (800 hp) to 17 percent for auxiliary engines and C2 engines
above 600 kW.\180\ The price increases for vessels that use these
engines, however, are smaller (about 2 percent and 7 percent,
respectively), reflecting the relative amount of the compliance costs
compared to the price of a commercial marine vessel. Production
quantities are expected to decrease by less than 4 percent for engines
and vessels. The long-term price impacts are similar, with expected
price increases of about 12 percent for engines C2 above 600 kW and 7
percent for C1 engines above 600 kW, and vessel price

[[Page 37171]]

increases of less than 5 percent. Long-term production quantity
decreases are expected to be less than 3 percent.
---------------------------------------------------------------------------

    \180\ Results presented in this section are by marine engine
category in kW; the actual EIA analysis presented in Chapter 7 of
the RIA was performed using marine engine categories by hp.
---------------------------------------------------------------------------



                           Table V-11.--Estimated Market Impacts for 2012, 2016, 2030
                                                     (2005$)
----------------------------------------------------------------------------------------------------------------
                                                   Average         Change in price         Change in quantity
                                                   variable  ---------------------------------------------------
                    Market c                     engineering
                                                   cost per     Absolute     Percent      Absolute     Percent
                                                     unit
----------------------------------------------------------------------------------------------------------------
                      2012
Rail Sector:
    Locomotives................................           $0         -535        -0.03           -1         -0.1
    Switcher/Passenger.........................            0         -348        -0.03            0         -0.1
    Transportation Services....................           NA         a NA          0.1         a NA         -0.1
Marine Sector
Engines:
    Auxiliary >600 kW..........................            0          -47         0.00            0         -0.1
        C1>600 kW..............................            0           -8         0.00            0          0.0
        C2>600 kW..............................            0         -139        -0.03            0         -0.1
        Other marine...........................            0            0         0.00            0          0.0
Vessels
    C1>600 kW..................................            0         -174        -0.01            0          0.0
    C2>600 kW..................................            0       -2,419        -0.07            0         -0.1
    Other marine...............................            0           -3         0.00            1          0.0
Transportation Services........................           NA         a NA          0.2         a NA         -0.1
                      2016
Rail Sector:
    Locomotives................................       84,274       83,227          4.2           -1         -0.1
    Switcher/Passenger.........................       14,175       13,494          1.0            0         -0.1
    Transportation Services....................           NA         a NA          0.3         a NA         -0.1
Marine Sector
Engines:
    Auxiliary >600 kW..........................       37,097       35,569         17.1          -11         -3.4
        C1>600 kW..............................       18,483       16,384          8.5          -15         -3.7
        C2>600 kW..............................       71,806       71,602         16.3            0         -0.2
        Other marine...........................            0            0         0.00            0          0.0
Vessels:
    C1>600 kW..................................        8,277     b 34,043          2.1          -14         -3.7
    C2>600 kW..................................       12,107    b 255,143          7.0            0         -0.2
    Other marine...............................            0           -4         0.00           -1          0.0
Transportation Services........................           NA         a NA          0.4         a NA         -0.2
                      2030
Rail Sector:
    Locomotives................................       65,343       63,019          3.2           -4         -0.3
    Switcher/Passenger.........................       21,139       19,628          1.5           -1         -0.3
    Transportation Services....................           NA         a NA          0.6         a NA         -0.3
Marine Sector
Engines:
    Auxiliary >600 kW..........................       28,359       27,021         13.0          -11         -2.8
        C1>600 kW..............................       14,131       12,479          6.5          -13         -2.9
        C2>600 kW..............................       54,893       54,264         12.3           -1         -0.5
        Other marine...........................            0           -1          0.0            0          0.0
Vessels:
    C1>600 kW..................................        6,933     b 25,768          1.6          -12         -2.9
    C2>600 kW..................................       10,169    b 164,774          5.1            0         -0.5
    Other marine...............................            0          -12          0.0           -4          0.0
Transportation Services........................           NA         a NA          1.1         a NA        -0.5
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The prices and quantities for transportation services are normalized ($1 for 1 unit of services provided)
  and therefore it is not possible to estimate the absolute change price or quantity; see 7.3.1.5.
\b\ The estimated vessel impacts include the impacts of direct vessel compliance costs and the indirect impacts
  of engine markets for both propulsion and auxiliary engines. See Chapter 7 of the RIA.
\c\ Results presented in this table are by marine engine category in kW; the actual EIA analysis presented in
  Chapter 7 of the RIA was performed using marine engine categories by hp.

(2) Economic Welfare Analysis
    In the economic welfare analysis, we look at the total social costs
associated with the program and their distribution across key
stakeholders.
    The total estimated social costs of the program are about $221
million, $284 million, $332 million and $738 million for 2012, 2016,
2020, and 2030. These estimated social costs are nearly identical to
the total compliance costs for those years. The slight reduction in
social costs when compared to compliance costs occurs because the total
engineering costs do not reflect the decreased sales of locomotives,
engines and vessels that are incorporated in the

[[Page 37172]]

total social costs. Results for all years are presented in Chapter 7 of
the RIA.
    Table V-12 shows how total social costs are expected to be shared
across stakeholders for selected years.
    We estimate the net social costs of the program to be approximately
$738 million in 2030.\181\ The rail sector is expected to bear about
62.5 percent of the social costs of the program in 2030, and the marine
sector is expected to bear about 37.5 percent. In each of these two
sectors, these social costs are expected to be born primarily by
producers and users of locomotive and marine transportation services
(about 98 percent). The remaining 2 percent is expected to be borne by
locomotive, marine engine, and marine vessel manufacturers and fishing
and recreational users.
---------------------------------------------------------------------------

    \181\ All estimates presented in this section are in 2005$.

           Table V-12.--Summary of Estimated Social Costs for 2012, 2016, 2020, 2030 (2005$, $million)
----------------------------------------------------------------------------------------------------------------
                                                                        2012                      2016
                                                             ---------------------------------------------------
                    Stakeholder group \a\                       Surplus                   Surplus
                                                               change ($)    Percent     change ($)    Percent
----------------------------------------------------------------------------------------------------------------
Locomotives:
    Locomotive producers....................................        -35.1         15.9         -8.3          2.9
    Line haul producers.....................................        -27.8         12.6         -0.9          0.3
    Switcher/Passenger producers............................         -7.2          3.3         -7.4          2.6
    Rail transportation service providers...................        -21.4          9.7        -43.4         15.3
    Rail transportation service consumers...................        -68.4         31.0       -138.9         48.8
    Total locomotive sector.................................       -124.9         56.6       -190.6         67.0
Marine:
    Marine engine producers.................................        -45.8         20.7         -2.1          0.7
    Auxiliary > 600 kW......................................        -16.0          7.3         -0.5          0.2
    C1 > 600 kW.............................................        -19.0          8.6         -1.6          0.5
    C2 > 600 kW.............................................        -10.7          4.9          0.0          0.0
    Other marine............................................          0.0          0.0          0.0          0.0
    Marine vessel producers.................................         -0.3          0.1        -15.8          5.6
    C1 > 600 kW.............................................         -0.1          0.0        -13.5          4.7
    C2 > 600 kW.............................................         -0.1          0.1         -2.2          0.8
    Other marine............................................         -0.1          0.0         -0.1          0.0
    Recreational and fishing vessel consumers...............          0.0          0.0          0.0          0.0
    Marine transportation service providers.................        -11.9          5.4        -18.1          6.4
    Marine transportation service consumers.................        -38.1         17.3        -57.9         20.3
    Auxiliary engines < 600 kW..............................          0.0          0.0          0.0          0.0
    Total marine sector.....................................        -96.1         43.5        -93.8         33.0
                                                             ---------------------------------------------------
        Total Program.......................................       -221.0  ...........       -284.4  ...........
----------------------------------------------------------------------------------------------------------------



                                                                        2020                      2030
                                                             ---------------------------------------------------
                      Stakeholder group                         Surplus                   Surplus
                                                               change ($)    Percent     change ($)    Percent
----------------------------------------------------------------------------------------------------------------
Locomotives:
    Locomotive producers....................................         -1.1          0.3         -3.1          0.4
        Line haul producers.................................         -1.0          0.3         -2.7          0.4
        Switcher/Passenger producers........................         -0.1          0.0         -0.4          0.1
Rail transportation service providers.......................        -46.4         14.0       -109.0         14.8
Rail transportation service consumers.......................       -148.6         44.8       -348.9         47.3
Total locomotive sector.....................................       -196.1         59.1       -461.1         62.5
Marine:
    Marine engine producers.................................         -1.8          0.5         -2.0          0.3
        Auxiliary > 600 kW..................................         -0.4          0.1         -0.5          0.1
        C1 > 600 kW.........................................         -1.3          0.4         -1.4          0.2
        C2 > 600 kW.........................................          0.0          0.0         -0.1          0.0
        Other marine........................................          0.0          0.0          0.0          0.0
    Marine vessel producers.................................        -10.3          3.1         -9.2          1.2
        C1 > 600 kW.........................................         -8.8          2.7         -8.2          1.1
        C2 > 600 kW.........................................         -1.3          0.4         -0.7          0.1
        Other marine........................................         -0.1          0.0         -0.3          0.0
        Recreational and fishing vessel consumers...........          0.0          0.0          0.0          0.0
    Marine transportation service providers.................        -29.5          8.9        -63.3          8.6
    Marine transportation service consumers.................        -94.4         28.4       -202.5         27.4
    Auxiliary engines < 600 kW..............................          0.0          0.0          0.0          0.0
    Total marine sector.....................................       -135.9         40.9       -277.0         37.5
                                                             ---------------------------------------------------
        Total Program.......................................       -332.0  ...........       -738.1  ...........
----------------------------------------------------------------------------------------------------------------
Note: \a\ Results presented in this table are by marine engine category in kW; the actual EIA analysis presented
  in Chapter 7 of the RIA was performed using marine engine categories by hp.

[[Page 37173]]

    Table V-13 shows the distribution of total surplus losses for the
program from 2007 through 2040. This table shows that the rail sector
is expected to bear about 62 percent of the total program social costs
through 2040 (NPV 3%), and that most of the costs are expected to be
borne by the rail transportation consumers. The marine sector is
expected to bear about 38 percent of the total program social costs
through 2040 (NPV 3%), most of which are also expected to be borne by
the marine transportation consumers. This is consistent with the
structure of the program, which leads to high compliance costs for the
rail marine transportation sectors.

            Table V-13. Estimated Net Social Costs 2007 Through 2040 by Stakeholder ($million, 2005$)
----------------------------------------------------------------------------------------------------------------
                                                                            Percent of                Percent of
                   Stakeholder Groups \a\                       Surplus       total       Surplus       total
                                                                 change      surplus       change      surplus
----------------------------------------------------------------------------------------------------------------
Locomotives.................................................       NPV 3%  ...........       NPV 7%
Locomotive producers........................................      -$221.1          2.4      -$160.4          3.8
Line Haul...................................................       -172.2                    -124.5
Switcher/Passenger..........................................        -48.9                     -35.9
Rail transportation service providers.......................     -1,302.7         14.2       -568.6         13.6
Rail transportation service consumers.......................     -4,168.7         45.6     -1,819.5         43.5
Total locomotive sector.....................................     -5,692.6         62.6     -2,548.5         61.0
Marine......................................................
Marine engine producers.....................................       -307.5          3.4       -229.4          5.5
Auxiliary > 600 kW..........................................        -87.3                     -64.0
C1 > 600 kW.................................................       -106.8                     -74.6
C2 > 600 kW.................................................        -56.8                     -42.6
Other marine................................................        -56.7                     -48.1
Marine vessel producers.....................................       -150.0          1.6        -72.5          1.7
C1 > 600 kW.................................................       -126.8                     -60.8
C2 > 600 kW.................................................        -19.7                     -10.2
Other marine................................................         -3.5                      -1.5
Recreational and fishing vessel consumers...................          0.2                       0.1
Marine transportation service providers.....................       -704.6          7.7       -308.4          7.4
Marine transportation service consumers.....................     -2,254.7         24.6       -986.9         23.6
Auxiliary Engines <600 kW...................................        -40.2          0.4        -34.2         -0.8
Total marine sector.........................................      3,456.7         37.8     -1,631.3         39.0
                                                             ---------------------------------------------------
    Total Program...........................................     -9.149.2                  -4,179.8
----------------------------------------------------------------------------------------------------------------
Note: \a\ Results presented in this table are by marine engine category in kW; the actual EIA analysis presented
  in Chapter 7 of the RIA was performed using marine engine categories by hp.

(3) What Are the Significant Limitations of the Economic Impact Analysis?
    Every economic impact analysis examining the market and social
welfare impacts of a regulatory program is limited to some extent by
limitations in model capabilities, deficiencies in the economic
literatures with respect to estimated values of key variables necessary
to configure the model, and data gaps. In this EIA, there three
potential sources of uncertainty: (1) Uncertainty resulting from the
way the EIM is designed, particularly from the use of a partial
equilibrium model; (2) uncertainty resulting from the values for key
model parameters, particularly the price elasticity of supply and
demand; and (3) uncertainty resulting from the values for key model
inputs, particularly baseline equilibrium price and quantities.
    Uncertainty associated with the economic impact model structure
arises from the use of a partial equilibrium approach, the use of the
national level of analysis, and the assumption of perfect competition.
These features of the model mean it does not take into account impacts
on secondary markets or the general economy, and it does not consider
regional impacts. The results may also be biased to the extent that
firms have some control over market prices, which would result in the
modeling over-estimating the impacts on producers of affected goods and
services.
    The values used for the price elasticities of supply and demand are
critical parameters in the EIM. The values of these parameters have an
impact on both the estimated change in price and quantity produced
expected as a result of compliance with the new standards and on how
the burden of the social costs will be shared among producer and consumer
groups. In selecting the values to use in the EIM it is important that
they reflect the behavioral responses of the industries under analysis.
    Finally, uncertainty in measurement of data inputs can have an
impact on the results of the analysis. This includes measurement of the
baseline equilibrium prices and quantities and the estimation of future
year sales. In addition, there may be uncertainty in how similar
engines and equipment were combined into smaller groups to facilitate the
analysis. There may also be uncertainty in the compliance cost estimations.
    While variations in the above model parameters may affect the
distribution of social costs among stakeholders and the estimated
market impacts, they will not affect the total social costs of the
program. This is because the total social costs are directly related to
the total compliance costs. To explore the effects of key sources of
uncertainty on the distribution of social costs and on estimated price
and quantity impacts, we performed a sensitivity analysis in which we
examine the results of using alternative values for several model
parameters. The results of these analyses are contained in Appendix 7H
of the RIA prepared for this rule.
    Despite these uncertainties, we believe this economic impact
analysis provides a reasonable estimate of the expected market impacts
and social welfare costs of the new standards in future. Acknowledging
benefits omissions and uncertainties, we present a best estimate of the
social costs based on our interpretation of the best available
scientific literature and methods supported by EPA's Guidelines for
Preparing Economic Analyses and

[[Page 37174]]

the OAQPS Economic Analysis Resource Document.

VI. Benefits

    This section presents our analysis of the health and environmental
benefits that are estimated to occur as a result of the final
locomotive and marine engine standards throughout the period from
initial implementation through 2030. Nationwide, the engines that are
subject to the emission standards in this rule are a significant source
of mobile source air pollution. The standards will reduce exposure to
NO_X and direct PM emissions and help avoid a range of
adverse health effects associated with ambient PM_2.5 and
ozone levels. In addition, the standards will help reduce exposures to
diesel PM exhaust, various gaseous hydrocarbons and air toxics. As
described below, the reductions in PM and ozone from the standards are
expected to result in significant reductions in premature deaths and
other serious human health effects, as well as other important public
health and welfare effects.
    EPA typically quantifies and monetizes PM- and ozone-related
impacts in its regulatory impact analyses (RIAs) when possible. The RIA
for the proposal for this rulemaking only quantified benefits from PM;
in the current RIA we quantify and monetize the ozone-related health
and environmental impacts associated with the final rule. The science
underlying the analysis is based on the current ozone criteria
document.\182\ To estimate the incidence and monetary value of the
health outcomes associated with this final rule, we used health impact
functions based on published epidemiological studies, and valuation
functions derived from the economics literature.\183\ Key health
endpoints analyzed include premature mortality, hospital and emergency
room visits, school absences, and minor restricted activity days. The
analytic approach to characterizing uncertainty is consistent with the
analysis used in the RIA for the proposed O3 NAAQS.
---------------------------------------------------------------------------

    \182\ U.S. Environmental Protection Agency (2006) Air quality
criteria for ozone and related photochemical oxidants (second
external review draft) Research Triangle Park, NC: National Center
for Environmental Assessment; report no. EPA/600R-05/004aB-cB, 3v.
Available: http://cfpub.epa.gov/ncea/cfm/
recordisplay.cfm?deid=137307 [March 2006]
    \183\ Health impact functions measure the change in a health
endpoint of interest, such as hospital admissions, for a given
change in ambient ozone or PM concentration.
---------------------------------------------------------------------------

    The benefits modeling is based on peer-reviewed studies of air
quality and health and welfare effects associated with improvements in
air quality and peer-reviewed studies of the dollar values of those
public health and welfare effects. These methods are consistent with
benefits analyses performed for the recent analysis of the proposed
Ozone NAAQS and the final PM NAAQS analysis.184, 185 They
are described in detail in the RIAs prepared for those rules.
---------------------------------------------------------------------------

    \184\ U.S. Environmental Protection Agency. August 2007.
Proposed Regulatory Impact Analysis (RIA) for the Proposed National
Ambient Air Quality Standards for Ozone. Prepared by: Office of Air
and Radiation. Available at http://www.epa.gov/ttn/ecas/
ria.html#ria2007.
    \185\ U.S. Environmental Protection Agency. October 2006. Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Available at http://www.epa.gov/ttn/ecas/
ria.html.
---------------------------------------------------------------------------

    The range of PM benefits associated with the final standards is
estimated based on risk reductions estimated using several sources of
PM-related mortality effect estimates. In order to provide an
indication of the sensitivity of the benefits estimates to alternative
assumptions about PM mortality risk reductions, in Chapter 6 of the RIA
we present a variety of benefits estimates based on two epidemiological
studies (including the ACS study and the Six Cities Study) and the
recent PM mortality expert elicitation.\186\ EPA intends to ask the
Science Advisory Board to provide additional advice as to which
scientific studies should be used in future RIAs to estimate the
benefits of reductions in PM-related premature mortality.
---------------------------------------------------------------------------

    \186\ Industrial Economics, Incorporated (IEc). 2006. Expanded
Expert Judgment Assessment of the Concentration-Response
Relationship Between PM_2.5 Exposure and Mortality. Peer
Review Draft. Prepared for: Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency, Research Triangle
Park, NC. August.
---------------------------------------------------------------------------

    The range of ozone benefits associated with the final standards is
also estimated based on risk reductions estimated using several sources
of ozone-related mortality effect estimates. There is considerable
uncertainty in the magnitude of the association between ozone and
premature mortality. This analysis presents four alternative estimates
for the association based upon different functions reported in the
scientific literature. We use the National Morbidity, Mortality and Air
Pollution Study (NMMAPS),\187\ which was used as the primary basis for
the risk analysis in the ozone Staff Paper \188\ and reviewed by the
Clean Air Science Advisory Committee (CASAC).\189\ We also use three
studies that synthesize ozone mortality data across a large number of
individual studies.190, 191, 192 Note that there are
uncertainties within each study that are not fully captured by this
range of estimates.
---------------------------------------------------------------------------

    \187\ 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.
    \188\ 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. This document is available
electronically at: www.epa.gov/ttn/naaqs/standard/ozone/s_o3_cr_sp.html.
    \189\ CASAC (2007). Clean Air Scientific Advisory Committee's
(CASAC) Review of the Agency's Final Ozone Staff Paper. EPA-CASAC-
07-002. March 26.
    \190\ Bell, M.L., F. Dominici, and J.M. Samet. A meta-analysis
of time-series studies of ozone and mortality with comparison to the
national morbidity, mortality, and air pollution study.
Epidemiology, 2005. 16(4): p. 436-45.
    \191\ Ito, K., S.F. De Leon, and M. Lippmann. Associations
between ozone and daily mortality: analysis and meta-analysis.
Epidemiology, 2005. 16(4): p. 446-57.
    \192\ Levy, J.I., S.M. Chemerynski, and J.A. Sarnat. 2005. Ozone
exposure and mortality: an empiric bayes metaregression analysis.
Epidemiology, 2005. 16(4): p. 458-68.
---------------------------------------------------------------------------

    Recognizing that additional research is necessary to clarify the
underlying mechanisms causing these effects, we also consider the
possibility that the observed associations between ozone and mortality
may not be causal in nature. EPA has 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 associated with ozone control strategies.
    The range of total ozone- and PM-related benefits associated with
the final standards is presented in Table VI-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 VI-1) to estimates of PM-related premature mortality, derived
from either the epidemiological literature or the expert elicitation.
The estimates in Table VI-1, and all monetized benefits presented in
this section, are in year 2006 dollars.

[[Page 37175]]

 Table VI-1.--Estimated 2030 Monetized PM- and Ozone-Related Health Benefits of the Final Locomotive and Marine
                                               Engine Standards a
----------------------------------------------------------------------------------------------------------------
                                                            Mean total benefits          Mean total benefits
    Premature ozone mortality          Reference           (billions, 2006$, 3%          (billions, 2006$, 7%
     function or assumption                                 discount rate) c, d          discount rate) c, d
----------------------------------------------------------------------------------------------------------------
         2030 Total Ozone and PM Benefits--PM Mortality Derived From American Cancer Society Analysis a
----------------------------------------------------------------------------------------------------------------
NMMAPS..........................  Bell et al., 2004..  $9.7........................  $8.9.
Meta-analysis...................  Bell et al., 2005..  $11.........................  $9.8.
                                  Ito et al., 2005...  $11.........................  $10.
                                  Levy et al., 2005..  $11.........................  $10.
Assumption that association is not causal............  $9.2........................  $8.4.
----------------------------------------------------------------------------------------------------------------
                2030 Total Ozone and PM Benefits--PM Mortality Derived From Expert Elicitation b
----------------------------------------------------------------------------------------------------------------
NMMAPS..........................  Bell et al., 2004..  $5.2 to $37.................  $4.8 to $34.
Meta-analysis...................  Bell et al., 2005..  $6.2 to $38.................  $5.8 to $35.
                                  Ito et al., 2005...  $6.7 to $39.................  $6.3 to $35.
                                  Levy et al., 2005..  $6.7 to $39.................  $6.4 to $35.
Assumption that association is not causal............  $4.7 to $37.................  $4.4 to $33.
----------------------------------------------------------------------------------------------------------------
Notes:
a Total includes 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 the ACS study (Pope et
  al., 2002).
b Total includes ozone and PM2.5 benefits. Range was developed by adding the estimate from the ozone premature
  mortality function to both the lower and upper ends of the range of the PM2.5 premature mortality functions
  characterized in the expert elicitation. The effect estimates of five of the twelve experts included in the
  elicitation panel fall within the empirically-derived range provided by the ACS and Six-Cities studies. One of
  the experts fall below this range and six of the experts are above this range. Although the overall range
  across experts is summarized in this table, the full uncertainty in the estimates is reflected by the results
  for the full set of 12 experts. The twelve experts' judgments as to the likely mean effect estimate are not
  evenly distributed across the range illustrated by arraying the highest and lowest expert means.
c 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 VI-6.
d 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.

(1) Quantified Human Health and Environmental Effects of the Final Standards
    In this section we discuss the ozone and PM_2.5 health
and environmental impacts of the final standards. We discuss how these
impacts are monetized in the next section. It should be noted that the
emission control scenarios used in the air quality and benefits
modeling are slightly different than the final emission control
program. The differences reflect further refinements of the regulatory
program since we performed the air quality modeling for this rule.
Emissions and air quality modeling decisions are made early in the
analytical process. Chapter 3 of the RIA describes the changes in the
inputs and resulting emission inventories between the preliminary
assumptions used for the air quality modeling and the final emission
control scenario.

Estimated Ozone and PM Impacts

    To model the ozone and PM air quality benefits of this rule we used
the Community Multiscale Air Quality (CMAQ) model. CMAQ simulates the
numerous physical and chemical processes involved in the formation,
transport, and deposition of particulate matter. This model is commonly
used in regional applications to estimate the ozone and PM reductions
expected to occur from a given set of emissions controls. The
meteorological data input into CMAQ are developed by a separate model,
the Penn State University / National Center for Atmospheric Research
Mesoscale Model, known as MM5. The modeling domain covers the entire
48-State U.S., as modeled in proposed ozone NAAQS analysis.\193\ The
grid resolution for the modeling domain was 12 x 12 km.
---------------------------------------------------------------------------

    \193\ See the Regulatory Impact Analysis for the Proposed Ozone
NAAQS (EPA-452/R-07-008, July 2007). This document is available at
http://www.epa.gov/ttn/ecas/ria.html#ria2007.
---------------------------------------------------------------------------

    While this rule will reduce ozone levels generally and provide
national ozone-related health benefits, this is not always the case at
the local level. Due to the complex photochemistry of ozone production,
reductions in NO_X emissions lead to both the formation and
destruction of ozone, depending on the relative quantities of
NO_X, VOC, and ozone catalysts such as the OH and
HO₂ radicals. In areas dominated by fresh emissions of
NO_X, ozone catalysts are removed via the production of
nitric acid which slows the ozone formation rate. Because
NO_X is generally depleted more rapidly than VOC, this effect
is usually short-lived and the emitted NO_X can lead to ozone
formation later and further downwind. The terms ``NO_X
disbenefits'' or ``ozone disbenefits'' refer to the ozone increases
that can result from NO_X emissions reductions in these
localized areas. According to the North American Research Strategy for
Tropospheric Ozone (NARSTO) Ozone Assessment, these disbenefits are
generally limited to small regions within specific urban cores and are
surrounded by larger regions in which NO_X control is
beneficial.\194\ For this analysis, we observed two urban areas that,
to some degree, experience ozone disbenefits: Southern California and
Chicago.
---------------------------------------------------------------------------

    \194\ The NARSTO Assessment Document synthesizes the scientific
understanding of ozone pollution, giving special consideration to
behavior on expanded scales over the North American continent,
encompassing Canada, the United States, and Mexico. Successive
drafts of this Assessment Document experienced progressive stages of
review by its authors and by outside peers, and transcripts were
recorded containing the review comments and the corresponding
actions. This included an external review by the NRC, the comments
of which were addressed and incorporated in the final draft. NARSTO,
2000. An Assessment of Tropospheric Ozone Pollution--A North
American Perspective. NARSTO Management Office (Envair), Pasco,
Washington. http://narsto.org/  Marginal changes in
ozone in these areas are much more dependent
upon baseline air quality conditions than PM due to nonlinearities
present in the chemistry of ozone formation. A marginal decrease in
NO_X emissions modeled on its own in these areas, as

[[Page 37176]]

was done for this analysis, may yield a very different ambient ozone
concentration than if it were modeled in combination with other planned
or future controls. For example, recent California SIP modeling
indicates that with a combined program of national and local controls,
California can reach ozone attainment by 2024 through a mixture of
substantial NO_X (and VOC) reductions.\195\ In areas prone to
ozone disbenefits, our ability to draw conclusions based on air quality
modeling conducted for the final rule is limited because the yet-to-
occur emission reductions in these areas are not accounted for in our
analytical approach. Within these regions, it is expected that the
additional NO_X reductions from SIP-based controls would lead
to fewer ozone disbenefits from the marginal changes modeled here. More
detailed information about the air quality modeling conducted for this
analysis is included in the air quality modeling technical support
document (TSD), which is located in the docket for this rule.
---------------------------------------------------------------------------

    \195\ SCAQMD (2007). Final 2007 Air Quality Management Plan.
Available at: http://www.aqmd.gov/aqmp/07aqmp/index.html. Accessed
November 8, 2007.
---------------------------------------------------------------------------

    The modeled ambient air quality data serves as an input to the
Environmental Benefits Mapping and Analysis Program (BenMAP).\196\
BenMAP is a computer program developed by EPA that integrates a number
of the modeling elements used in previous Regulatory Impact 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.
---------------------------------------------------------------------------

    \196\ Information on BenMAP, including downloads of the
software, can be found at http://www.epa.gov/air/benmap.
---------------------------------------------------------------------------

    The addition of ozone mortality to our health impacts analysis has
led to an increased focus on the issue of ozone disbenefits for two
related reasons: (1) The monetized value of ozone-related benefits, in
terms of ozone's contribution to total rule-related benefits, has
increased due to the inclusion of ozone mortality; and (2) The overall
ozone impacts of NO_X reductions in certain geographic
regions of the U.S., when modeled on the margin, may be negative.
    Figure 1 shows the diurnal pattern of ozone concentrations in the
2030 baseline and post-control scenarios for a grid cell in Orange
County, CA during July. From this figure it is clear that the
disbenefits (points when the control case ozone levels are higher than
the baseline) are occurring primarily during nighttime hours when ozone
is generally low.
    This diurnal pattern means that the extent of the disbenefits is
not as large as one might have thought. Our conversion from using a 24-
hour metric to using the maximum 8-hour average metric in the ozone
mortality studies (see page 6-4 and the health impacts section)
excludes the nighttime hours when NO_X-related disbenefits
are most likely to occur.
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    Table VI-2 presents the estimates of ozone- and PM-related health
impacts for the years 2020 and 2030, which are based on the modeled air
quality changes between a baseline, pre-control scenario and a post-
control scenario reflecting the final emission control strategy.
    The use of two sources of PM mortality reflects two different
sources of information about the impact of reductions in PM on
reduction in the risk of premature death, including both the published
epidemiology literature and an expert elicitation study conducted by
EPA in 2006. In 2030, based on the estimate provided by the ACS study,
we estimate that PM-related emission reductions related to the final
rule will result in 1,100 fewer premature fatalities annually. The
number of premature mortalities avoided increases to 2,600 when based
on the Six Cities study. When the range of expert opinion is used, we
estimate between 500 and 4,900 fewer premature mortalities in 2030. We
also estimate 680 fewer cases of chronic bronchitis, 2,500 fewer non-
fatal heart attacks, 870 fewer hospitalizations (for respiratory and
cardiovascular disease combined), 720,000 fewer days of restricted
activity due to respiratory illness and approximately 120,000 fewer
work-loss days. This analysis projects substantial health improvements
for children from reduced upper and lower respiratory illness, acute
bronchitis, and asthma attacks. These results are based on an assumed
cutpoint in the long-term mortality concentration-response functions at
10 &mu;g/m3, and an assumed cutpoint in the short-term
morbidity concentration-response functions at 10 &mu;g/m3.
The impact using four alternative cutpoints (3 &mu;g/m3, 7.5
&mu;g/m3, 12 &mu;g/m3, and 14 &mu;g/
m3) has on PM _2.5-related mortality incidence
estimation is presented in Chapter 6 of the RIA.
    For ozone, we estimate a range of between 54-250 fewer premature
mortalities as a result of the final rule in 2030, assuming that there
is a causal relationship between ozone exposure and mortality. We also
estimate that by 2030, the final rule will result in over 500 avoided
respiratory hospital admissions and emergency room visits, 290,000
fewer days of restricted activity due to respiratory illness, and
110,000 school loss days avoided.

 Table VI-2.--Estimated Reduction in Incidence of Adverse Health Effects
      Related to the Final Locomotive and Marine Engine Standards a
------------------------------------------------------------------------
                                            2020              2030
------------------------------------------------------------------------
Health Effect                        Mean Incidence Reduction
                                     (5th-95th percentile)
------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
PM-Related Endpoints............................................................................................
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Derived from      Adult, age 30+--ACS      490 (190-790)..........  1,100 (440-1,800)
 Epidemiology Literature.               cohort study (Pope et
                                        al., 2002).
                                       Adult, age 25+--Six-     1,100 (610-1,600)......  2,600 (1,400-3,700)
                                        Cities study (Laden et
                                        al., 2006).
                                       Infant, age <1 year--    1 (1-2)................  2 (1-3)
                                        Woodruff et al. 1997.
Premature Mortality--Derived from      Adult, age 25+--Lower    220 (0-1,100)..........  500 (0-2,400)
 Expert Elicitation \b\.                Bound (Expert K).

                                       Adult, age 25+--Upper    2,200 (1,100-3,300)....  4,900 (2,500-7,500)
                                        Bound (Expert E).
----------------------------------------------------------------------------------------------------------------
Chronic bronchitis (adult, age 26 and over)...................  310 (56-560)...........  680 (130-1,200)
Acute myocardial infarction (adults, age 18 and older)........  1,000 (550-1,500)......  2,500 (1,300-3,600)
Hospital admissions--respiratory (all ages) \c\...............  120 (58-170)...........  270 (130-400)
Hospital admissions--cardiovascular (adults, age >18) \d\.....  240 (150-330)..........  600 (380-820)
Emergency room visits for asthma (age 18 years and younger)...  410 (240-580)..........  890 (520-1,300)
Acute bronchitis (children, age 8-12).........................  1,000 (-35-2,100)......  2,300 (-77-4,600)
Lower respiratory symptoms (children, age 7-14)...............  9,200 (4,400-14,000)...  20,000 (9,700-31,000)
Upper respiratory symptoms (asthmatic children, age 9-18).....  6,700 (2,100-11,000)...  15,000 (4,600-25,000)
Asthma exacerbation (asthmatic children, age 6-18)............  8,400 (920-24,000).....  19,000 (2,000-53,000)
Work loss days (adults, age 18-65)............................  59,000 (51,000-67,000).  120,000 (110,000-
                                                                                          140,000)
Minor restricted-activity days (adults, age 18-65)............  350,000 (290,000-        720,000 (610,000-
                                                                 400,000).                830,000)
----------------------------------------------------------------------------------------------------------------
Ozone-Related Endpoints.........................................................................................
----------------------------------------------------------------------------------------------------------------
Premature Mortality, All ages--        Bell et al., 2004......  13 (-22-49)............  54 (-43-150)
 Derived from NMMAPS.
Premature Mortality, All ages--        Bell et al., 2005......  44 (-47-140)...........  180 (-69-420)
 Derived from Meta-analyses.
                                       Ito et al., 2005.......  60 (-34-150)...........  240 (-14-500)
                                       Levy et al., 2005......  62 (-14-140)...........  250 (44-450)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Assumption that association between ozone  0......................  0
 and mortality is not causal.
Hospital admissions--respiratory causes (children, under 2;     14 (-150-170)..........  260 (-350-890)
 adult, 65 and older) \e\.
Emergency room visit for asthma (all ages)....................  69 (-89-270)...........  250 (-190-830)
Minor restricted activity days (adults, age 18-65)............  84,000 (43,000-120,000)  290,000 (150,000-
                                                                                          430,000)
School absence days...........................................  33,000 (-17,000-77,000)  110,000 (-15,000-
                                                                                          240,000)
----------------------------------------------------------------------------------------------------------------

[[Page 37179]]

Notes:
(a) Incidence is rounded to two significant digits. PM and ozone estimates represent impacts from the final
  standards nationwide.
(b) Based on effect estimates derived from the full-scale expert elicitation assessing the uncertainty in the
  concentration-response function for PM-related premature mortality (IEc, 2006).\197\
The effect estimates of five of the twelve experts included in the elicitation panel fall within the empirically-
  derived range provided by the ACS and Six-Cities studies. One of the experts fall below this range and six of
  the experts are above this range. Although the overall range across experts is summarized in this table, the
  full uncertainty in the estimates is reflected by the results for the full set of 12 experts. The twelve
  experts' judgments as to the likely mean effect estimate are not evenly distributed across the range
  illustrated by arraying the highest and lowest expert means.
(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.
(e) Respiratory hospital admissions for ozone include admissions for all respiratory causes and subcategories
  for COPD and pneumonia.

(2) Monetized Benefits
    Table VI-3 presents the estimated monetary value of reductions in
the incidence of health and welfare effects. Tables VI-4 and VI-5
present the total annual PM- and ozone-related health benefits, which
are estimated to be between $9.2 and $11 billion in 2030, assuming a 3
percent discount rate, or between $8.4 and $10 billion, assuming a 7
percent discount rate, using the ACS-derived estimate of PM-related
premature mortality (Pope et al., 2002) and the range of ozone-related
premature mortality studies derived from the epidemiological
literature. The range of benefits expands to between $4.7 and $39
billion, assuming a 3 percent discount rate, when the estimate includes
the opinions of outside experts on PM and the risk of premature death,
or between $4.4 and $35 billion, assuming a 7 percent discount rate.
All monetized estimates are stated in 2006$. 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.
---------------------------------------------------------------------------

    \197\ Industrial Economics, Incorporated (IEc). 2006. Expanded
Expert Judgment Assessment of the Concentration-Response
Relationship Between PM _2.5 Exposure and Mortality. Peer
Review Draft. Prepared for: Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency, Research Triangle
Park, NC. August.
---------------------------------------------------------------------------

    The above estimates of monetized benefits include only one example
of non-health related benefits. Changes in the ambient level of PM
_2.5 are known to affect the level of visibility in much of
the U.S. Individuals value visibility both in the places they live and
work, in the places they travel to for recreational purposes, and at
sites of unique public value, such as at National Parks. For the final
standards, we present the recreational visibility benefits of
improvements in visibility at 86 Class I areas located throughout
California, the Southwest, and the Southeast. These estimated benefits
are approximately $170 million in 2020 and $400 million in 2030, as
shown in Table VI-3.
    Table VI-3, VI-4 and VI-5 do not include those additional health
and environmental benefits of the rule that we were unable to quantify
or monetize. These effects are additive to the estimate of total
benefits, and are related to two primary sources. First, there are many
human health and welfare effects associated with PM, ozone, and toxic
air pollutant reductions that remain unquantified because of current
limitations in the methods or available data. A full appreciation of
the overall economic consequences of the final standards requires
consideration of all benefits and costs projected to result from the
new standards, not just those benefits and costs which could be
expressed here in dollar terms. A list of the benefit categories that
could not be quantified or monetized in our benefit estimates are
provided in Table VI-6.

         Table VI-3.--Estimated Monetary Value in Reductions in Incidence of Health and Welfare Effects
                                         [In millions of 2006$] \a,\ \b\
----------------------------------------------------------------------------------------------------------------
                                                                          2020                     2030
----------------------------------------------------------------------------------------------------------------
PM2.5-Related Health Effect............Estimated Mean Value of Reductions
                                       (5th and 95th percentile)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Derived from      Adult, age 30+--ACS
 Epidemiology Studies c, d.             study (Pope et al.,
                                        2002)
                                       3% discount rate.......  $3,400 ($810-$7,000)...  $8,100 ($1,900-$16,000)
                                       7% discount rate.......  $3,100 ($730-$6,300)...  $7,300 ($1,700-$15,000)
                                       Adult, age 25+--Six-
                                        cities study (Laden et
                                        al., 2006)
                                       3% discount rate.......  $7,800 ($2,200-$15,000)  $18,000 ($5,100-
                                                                                          $35,000)
                                       7% discount rate.......  $7,000 ($1,900-$13,000)  $17,000 ($4,600-
                                                                                          $32,000)
                                       Infant Mortality, <1
                                        year--(Woodruff et al.
                                        1997)
                                       3% discount rate.......  $7 ($2-$14)............  $13 ($3.5-$26)
                                       7% discount rate.......  $7 ($2-$13)............  $12 ($3.1-$23)
----------------------------------------------------------------------------------------------------------------
Premature mortality--Derived from      Adult, age 25+--Lower
 Expert Elicitation c, d, e.            bound (Expert K)
                                       3% discount rate.......  $1,500 ($0-$7,700).....  $3,600 ($0-$18,000)
                                       7% discount rate.......  $1,400 ($0-$7,000).....  $3,200 ($0-$16,000)
                                       Adult, age 25+--Upper
                                        bound (Expert E)
                                       3% discount rate.......  $15,000 ($4,100-         $36,000 ($9,500-
                                                                 $30,000).                $70,000)
                                       7% discount rate.......  $14,000 ($3,700-         $32,000 ($8,600-
                                                                 $27,000).                $63,000)
----------------------------------------------------------------------------------------------------------------

[[Page 37180]]

Chronic bronchitis (adults, 26 and over)......................  $150 ($12-$500)........  $340 ($28-$1,100)
Non-fatal acute myocardial infarctions:
    3% discount rate..........................................  $110 ($34-$230)........  $260 ($74-$550)
    7% discount rate..........................................  $110 ($31-$230)........  $250 ($69-$540)
Hospital admissions for respiratory causes....................  $2.1 ($1.0-$3.2).......  $4.9 ($2.4-$7.3)
Hospital admissions for cardiovascular causes.................  $6.7 ($4.2-$9.2).......  $17 ($11-$23)
Emergency room visits for asthma..............................  $0.15 ($0.08-$0.23)....  $0.33 ($0.18-$0.49)
Acute bronchitis (children, age 8-12).........................  $0.08 ($0-$0.2)........  $0.17 ($0-$0.42)
Lower respiratory symptoms (children, 7-14)...................  $0.18 ($0.07-$0.33)....  $0.40 ($0.15-$0.73)
Upper respiratory symptoms (asthma, 9-11).....................  $0.21 ($0.06-$0.46)....  $0.46 ($0.13-$1.0)
Asthma exacerbations..........................................  $0.45 ($0.05-$1.3).....  $1.0 ($0.11-$2.9)
Work loss days................................................  $8.9 ($7.7-$10)........  $18 ($16-$21)
Minor restricted-activity days (MRADs)........................  $22 ($13-$32)..........  $46 ($27-$66)
Recreational Visibility, 86 Class I areas.....................  $170 (na)\f\...........  $400 (na)
----------------------------------------------------------------------------------------------------------------
Ozone-related Health Effect
----------------------------------------------------------------------------------------------------------------
Premature Mortality, All ages--        Bell et al., 2004......  $100 (-$170-$420)......  $440 (-$340-$1,400)
 Derived from NMMAPS.
Premature Mortality, All ages--        Bell et al., 2005......  $340 (-$360-$1,200)....  $1,400 (-$550-$3,900)
 Derived from Meta-analyses.
                                       Ito et al., 2005.......  $460 (-$260-$1,400)....  $1,900 (-$120-$4,700)
                                       Levy et al., 2005......  $480 (-$110-$1,300)....  $2,000 ($280-$4,400)
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Assumption that association between ozone  $0.....................  $0
 and mortality is not causal.
Hospital admissions--Respiratory causes (children, under 2;     -$0.54 (-$4.6-$3.3)....  $2.7 (-$11-$17)
 adult, 65 and older).
Emergency room visit for asthma (all ages)....................  $0.03 (-$0.03-$0.1)....  $0.09 (-$0.07-$0.30)
Minor restricted activity days (adults, age 18-65)............  $2.5 (-$4.0-$9.9)......  $8.8 (-$7.8-$28)
School absence days...........................................  $2.9 (-$1.5-$6.8)......  $11 (-$1.3-$21)
Worker Productivity...........................................  $0.53 (na) \f\.........  $2.9 (na) \f\
----------------------------------------------------------------------------------------------------------------
Notes:
(a) Monetary benefits are rounded to two significant digits for ease of presentation and computation. PM and
  ozone benefits are nationwide.
(b) Monetary benefits adjusted to account for growth in real GDP per capita between 1990 and the analysis year
  (2020 or 2030)
(c) Valuation assumes discounting over the SAB recommended 20 year segmented lag structure. Results reflect the
  use of 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines for preparing economic
  analyses (EPA, 2000; OMB, 2003).
(d) The valuation of adult premature mortality, derived either from the epidemiology literature or the expert
  elicitation, is not additive. Rather, the valuations represent a range of possible mortality benefits.
(e) Based on effect estimates derived from the full-scale expert elicitation assessing the uncertainty in the
  concentration-response function for PM-related premature mortality (IEc, 2006).\198\ The effect estimates of
  five of the twelve experts included in the elicitation panel fall within the empirically-derived range
  provided by the ACS and Six-Cities studies. One of the experts fall below this range and six of the experts
  are above this range. Although the overall range across experts is summarized in this table, the full
  uncertainty in the estimates is reflected by the results for the full set of 12 experts. The twelve experts'
  judgments as to the likely mean effect estimate are not evenly distributed across the range illustrated by
  arraying the highest and lowest expert means.
(f) We are unable at this time to characterize the uncertainty in the estimate of benefits of worker
  productivity and improvements in visibility at Class I areas. As such, we treat these benefits as fixed and
  add them to all percentiles of the health benefits distribution.

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

    \198\ Industrial Economics, Incorporated (IEc). 2006. Expanded
Expert Judgment Assessment of the Concentration-Response
Relationship between PM_2.5 Exposure and Mortality. Peer
Review Draft. Prepared for: Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency, Research Triangle
Park, NC. August.

                         Table VI-4.--Total Monetized Benefits of the Final Locomotive and Marine Engine Rule--3% Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        2020                                                                         2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Ozone mortality
      Ozone mortality function              Reference          Mean total benefits          function              Reference         Mean total benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Total Ozone and PM Benefits (Billions, 2006$)--PM Mortality Derived From the ACS Study
--------------------------------------------------------------------------------------------------------------------------------------------------------
NMMAPS.............................  Bell et al., 2004.....  $4.0..................  NMMAPS...............  Bell et al., 2004....  $9.7
Meta-analysis......................  Bell et al., 2005.....  $4.2..................  Meta-analysis........  Bell et al., 2005....  $11
                                     Ito et al., 2005......  $4.4..................  .....................  Ito et al., 2005.....  $11
                                     Levy et al., 2005.....  $4.4..................  .....................  Levy et al., 2005....  $11
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 37181]]

         Assumption that association is not causal           $3.9..................    Assumption that association is not causal   $9.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Total Ozone and PM Benefits (Billions, 2006$)--PM Mortality Derived From Expert Elicitation (Lowest and Highest Estimate)
--------------------------------------------------------------------------------------------------------------------------------------------------------
NMMAPS.............................  Bell et al., 2004.....  $2.1 to $16...........  NMMAPS...............  Bell et al., 2004....  $5.2 to $37
Meta-analysis......................  Bell et al., 2005.....  $2.4 to $16...........  Meta-analysis........  Bell et al., 2005....  $6.2 to $38
                                     Ito et al., 2005......  $2.5 to $16...........  .....................  Ito et al., 2005.....  $6.7 to $39
                                     Levy et al., 2005.....  $2.5 to $16...........  .....................  Levy et al., 2005....  $6.7 to $39
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Assumption that association is not causal           $2.0 to $16...........    Assumption that association is not causal   $4.7 to $37
--------------------------------------------------------------------------------------------------------------------------------------------------------


                         Table VI-5.--Total Monetized Benefits of the Final Locomotive and Marine Engine Rule--7% Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Total Ozone and PM Benefits (Billions, 2006$)--PM Mortality Derived From Epidemiology Studies (ACS and Six Cities)
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                        2020                                                                         2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Ozone mortality
      Ozone mortality function              Reference          Mean total benefits          function              Reference         Mean total benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
NMMAPS.............................  Bell et al., 2004.....  $3.7..................  NMMAPS...............  Bell et al., 2004....  $8.9
Meta-analysis......................  Bell et al., 2005.....  $3.9..................  Meta-analysis........  Bell et al., 2005....  $9.8
                                     Ito et al., 2005......  $4.0..................  .....................  Ito et al., 2005.....  $10
                                     Levy et al., 2005.....  $4.0..................  .....................  Levy et al., 2005....  $10
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Assumption that association is not causal           $3.6..................    Assumption that association is not causal   $8.4
--------------------------------------------------------------------------------------------------------------------------------------------------------



                Total Ozone and PM Benefits (Billions, 2006$)--PM Mortality Derived From Expert Elicitation (Lowest and Highest Estimate)
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                        2020                                                                         2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Ozone mortality
      Ozone mortality function              Reference          Mean total benefits          function              Reference         Mean total benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
NMMAPS.............................  Bell et al., 2004.....  $2.0 to $14...........  NMMAPS...............  Bell et al., 2004....  $4.8 to $34
Meta-analysis......................  Bell et al., 2005.....  $2.2 to $15...........  Meta-analysis........  Bell et al., 2005....  $5.8 to $35
                                     Ito et al., 2005......  $2.3 to $15...........  .....................  Ito et al., 2005.....  $6.3 to $35
                                     Levy et al., 2005.....  $2.3 to $15...........  .....................  Levy et al., 2005....  $6.4 to $35
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Assumption that association is not causal           $1.9 to $14...........    Assumption that association is not causal   $4.4 to $33
--------------------------------------------------------------------------------------------------------------------------------------------------------

  Table VI-6.--Unquantified and Non-Monetized Potential Effects of the
              Final Locomotive and Marine Engine Standards
------------------------------------------------------------------------
                                             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

[[Page 37182]]

                                         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 Clean Air Act.

(3) What Are the Significant Limitations of the Benefit-Cost 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 RIA and its supporting references. Key
uncertainties that have a bearing on the results of the benefit-cost
analysis of the final standards 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 VI-3 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-

[[Page 37183]]

based results of the recently published PM NAAQS RIA. Consistent with
that analysis, we discuss the implications of these results in the RIA
for the final standards.
    • 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 locomotive and 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
(above the assumed threshold of 10 &mu;g/m3). 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 considerable uncertainty in the magnitude of the
association between ozone and premature mortality. The range of ozone
benefits associated with the final standards is estimated based on the
risk of several sources of ozone-related mortality effect estimates.
Recognizing that additional research is necessary to clarify the
underlying mechanisms causing these effects, we also consider the
possibility that the observed associations between ozone and mortality
may not be causal in nature. EPA has 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.
    Despite these uncertainties, we believe this benefit-cost analysis
provides a conservative estimate of the estimated economic benefits of
the final standards in future years because of the exclusion of
potentially significant benefit categories. Acknowledging benefits
omissions and uncertainties, we present a best estimate of the total
benefits based on our interpretation of the best available scientific
literature and methods supported by EPA's technical peer review panel,
the Science Advisory Board's Health Effects Subcommittee (SAB-HES). The
National Academies of Science (NRC, 2002) also reviewed EPA's
methodology for analyzing the health benefits of measures taken to
reduce air pollution. EPA addressed many of these comments in the
analysis of the final PM NAAQS.199, 200 The analysis of the
final standards incorporates this most recent work to the extent possible.
---------------------------------------------------------------------------

    \199\ National Research Council (NRC). 2002. Estimating the
Public Health Benefits of Proposed Air Pollution Regulations. The
National Academies Press: Washington, DC.
    \200\ U.S. Environmental Protection Agency. October 2006. Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Available at http://www.epa.gov/ttn/ecas/
ria.html.
---------------------------------------------------------------------------

(4) Benefit-Cost Analysis
    In estimating the net benefits of the final standards, the
appropriate cost measure is ``social costs.'' Social costs represent
the welfare costs of a rule to society. These costs do not consider
transfer payments (such as taxes) that are simply redistributions of
wealth. Table VI-7 contains the estimates of monetized benefits and
estimated social welfare costs for the final rule and each of the final
control programs. The annual social welfare costs of all provisions of
this final rule are described more fully in Section VII of this preamble.
    The results in Table VI-7 suggest that the 2020 monetized benefits
of the final standards are greater than the expected social welfare
costs. Specifically, the annual benefits of the total program will
range between $3.9 to $8.8 billion annually in 2020 using a three
percent discount rate, or between $3.6 to $8.0 billion assuming a 7
percent discount rate, compared to estimated social costs of
approximately $330 million in that same year. These benefits are
expected to increase to between $9.2 and $22 billion annually in 2030
using a three percent discount rate, or between $8.4 and $20 billion
assuming a 7 percent discount rate, while the social costs are
estimated to be approximately $740 million. Though there are a number
of health and environmental effects associated with the final standards
that we are unable to quantify or monetize (see Table VI-6), the
benefits of the final standards far outweigh the projected costs. When
we examine the benefit-to-cost comparison for the rule standards
separately, we also find that the benefits of the specific engine
standards far outweigh their projected costs.

   Table VI-7.--Summary of Annual Benefits, Costs, and Net Benefits of the Final Locomotive and Marine Engine
                                          Standards (Millions, 2006$) a
----------------------------------------------------------------------------------------------------------------
              Description                  2020 (Millions of 2006  dollars)    2030 (Millions of 2006  dollars)
----------------------------------------------------------------------------------------------------------------
Estimated Social Costs: b
    Locomotive:                           $200..............................   $460.
    Marine:                               $140..............................   $280.
Total Social Costs.....................   $330..............................   $740.
Estimated Health Benefits of the Final
 Standards: c, d, e, f
    Locomotive:
        3 percent discount rate........   $2,000 to $4,400..................   $4,300 to $11,000.
        7 percent discount rate........   $1,900 to $4,000..................   $4,000 to $10,000.
    Marine:
        3 percent discount rate........   $1,900 to $4,400..................   $4,900 to $11,000.
        7 percent discount rate........   $1,700 to $4,000..................   $4,400 to $10,000
Total Benefits:
    3 percent discount rate............  $3,900 to $8,800...................  $9,200 to $22,000.
    7 percent discount rate............  $3,600 to $8,000...................  $8,400 to $20,000.
Annual Net Benefits (Total Benefits-
 Total Costs):
    3 percent discount rate............   $3,600 to $8,500..................   $8,500 to $21,000
    7 percent discount rate............   $3,300 to $7,700..................   $7,700 to $19,000
----------------------------------------------------------------------------------------------------------------
Notes:
a All estimates represent annualized benefits and costs anticipated for the years 2020 and 2030. Totals may not
  sum due to rounding.

[[Page 37184]]

b The calculation of annual costs does not require amortization of costs over time. Therefore, the estimates of
  annual cost do not include a discount rate or rate of return assumption (see Chapter 7 of the RIA). In Section
  V, however, we do use both a 3 percent and 7 percent social discount rate to calculate the net present value
  of total social costs consistent with EPA and OMB guidelines for preparing economic analyses.
c Total includes ozone and PM2.5 benefits. Range was developed by adding the estimate from the ozone premature
  mortality function, including an assumption that the association is not causal, to both estimates of PM2.5-
  related premature mortality derived from the ACS (Pope et al., 2002) and Six-Cities (Laden et al., 2006)
  studies, respectively.
d Annual benefits analysis results reflect the use of a 3 percent and 7 percent discount rate in the valuation
  of premature mortality and nonfatal myocardial infarctions, consistent with EPA and OMB guidelines for
  preparing economic analyses (US EPA, 2000 and OMB, 2003).201, 202
e Valuation of premature mortality based on long-term PM exposure assumes discounting over the SAB recommended
  20-year segmented lag structure described in the Regulatory Impact Analysis for the Final Clean Air Interstate
  Rule (March, 2005).
f Not all possible benefits or disbenefits are quantified and monetized in this analysis. Potential benefit
  categories that have not been quantified and monetized are listed in Table VI-6.

VII. Alternative Program Options
---------------------------------------------------------------------------

    \201\ U.S. Environmental Protection Agency, 2000. Guidelines for
Preparing Economic Analyses. www.yosemite1.epa.gov/ee/epa/eed/hsf/
pages/Guideline.html.
    \202\ Office of Management and Budget, The Executive Office of
the President, 2003. Circular A-4. http://www.whitehouse.gov/omb/
circulars.
---------------------------------------------------------------------------

    The program we are finalizing today represents a broad and
comprehensive approach to reducing emissions from locomotive and marine
diesel engines. As we developed this final rule, we considered a number
of alternatives with regard to the scope and timing of the standards.
After carefully evaluating these alternatives, we believe that our new
program provides the best opportunity for achieving timely and
substantial emission reductions from locomotive and marine diesel
engines. Our final program balances a number of key factors: (1)
Achieving significant emissions reductions as early as possible, (2)
providing appropriate lead time to develop and apply advanced control
technologies, and (3) coordinating requirements in this final rule with
existing highway and nonroad diesel engine programs. The alternative
scenarios described here were constructed to further evaluate each
individual aspect of our program, and have enabled us to achieve the
appropriate balance between these key factors. This section presents a
summary of our analysis of these alternative control scenarios. For a
more detailed explanation of our analysis, including a year by year
breakout of expected costs and emission reductions, please refer to
Chapter 8 of the Regulatory Impact Analysis (RIA) prepared for this
final rulemaking.

A. Summary of Alternatives

(1) Alternative 1: Proposed Program From the Notice of Proposed Rulemaking
    Alternative 1 examines the differences between the program we
proposed and the program we are finalizing in this rulemaking. The
proposal consisted of a three-part program. First, it proposed more
stringent standards for existing locomotives that would apply when they
were remanufactured. These standards would go into effect as soon as a
certified remanufacture system became available. Second, we proposed a
set of near-term emission standards, referred to as Tier 3, for freshly
manufactured locomotives and marine engines that reflected the
application of technologies to reduce engine-out PM and NO_X.
Third, we proposed longer-term standards, referred to as Tier 4, that
utilized high-efficiency catalytic aftertreatment technology enabled by
the availability of ULSD. These standards would phase in over time,
beginning in 2014. In addition, we proposed eliminating emissions from
unnecessary locomotive idling.
    The final rule makes a number of important changes to the program
originally set out in the proposal which we believe will yield
significantly greater overall NO_X and PM reductions,
especially in the critical early years of the program. In particular,
the adoption of standards for remanufactured marine engines and a 2-
year pull-ahead of the Tier 4 NO_X requirements for line-haul
locomotives and for 2000-3700 kW marine engines provide greater near-
term reductions than the proposal. The final rule also expands the
remanufactured locomotive program to include Class II railroads.
    As a stand-alone program, through the year 2040 Alternative 1
provides PM_2.5 reductions of 286,000 tons NPV 3%, or 121,000
tons NPV 7%, and NO_X reductions of 8,140,000 tons NPV 3%, or
3,320,000 tons NPV 7%. The cost of this alternative through 2040 is
estimated to be $8,760 million NPV 3%, or $3,900 million NPV 7%. In
2020, this alternative provides monetized health and welfare benefits
of $3.3 billion at a 3% discount rate, or $3.0 billion at a 7% discount
rate, and $8.8 billion in 2030 at a 3% discount rate, or $8.0 billion
at a 7% discount rate. Through 2040 our final program provides
additional PM_2.5 reductions of 22,000 tons NPV 3%, or 13,000
tons NPV 7%, and additional NO_X reductions of 620,000 tons
NPV 3%, or 390,000 tons NPV 7%. Through 2040, the additional costs of
our final program will be $650 million NPV 3%, or $410 million NPV 7%.
The additional PM_2.5 monetized health and welfare benefits
in 2020 of our final program are $0.6 billion at a 3% discount rate, or
$0.6 billion at a 7% discount rate, while in 2030 the additional
monetized health and welfare benefits total $0.4 billion at a 3%
discount rate, or $0.4 billion at a 7% discount rate.
(2) Alternative 2: Exclusion of Remanufacturing Standards
    Alternative 2 examines the potential impacts of the locomotive and
marine remanufacturing programs by excluding them from the analysis
(see sections III.B.(1)(a)(i), III.B.(1)(b), and III.B.(2)(b) of this
Preamble for more details on the remanufacturing standards). As a
stand-alone program, Alternative 2 provides PM_2.5 reductions
of 240,000 tons NPV 3%, or 96,000 tons NPV 7%, and NO_X
reductions of 7,640,000 tons NPV 3%, or 3,030,000 tons NPV 7%, through
the year 2040. The cost of this alternative through 2040 is estimated
to be $8,080 million NPV 3%, or $3,430 million NPV 7%. In 2020, this
alternative provides monetized health and welfare benefits of $2.5
billion at a 3% discount rate, or $2.3 billion at a 7% discount rate,
and $8.2 billion in 2030 at a 3% discount rate, or $7.5 billion at a 7%
discount rate. Compared to the final program, our analysis shows that
by 2040 eliminating the locomotive and marine remanufacture programs
lessen PM_2.5 emission reductions by 68,000 tons NPV 3%, or
38,000 tons NPV 7%, and NO_X emission reductions by nearly
1,120,000 tons NPV 3%, or 680,000 tons NPV 7%. The cost of this
alternative, as compared to our final program through 2040, is
estimated to be $1,330 million less NPV 3%, or $880 million less NPV
7%. Compared to our final program, eliminating the locomotive and
marine remanufacture programs reduce the monetized health and welfare
benefits by $1.4 billion at a 3% discount rate, or $1.3 billion at a 7%
discount rate in 2020, and $1.0 billion at a 3% discount rate, or $0.9
billion at a 7% discount rate in 2030.
(3) Alternative 3: Elimination of Tier 3
    Alternative 3 eliminates the Tier 3 standards, while retaining the
Tier 4 standards and the combined marine and

[[Page 37185]]

locomotive remanufacturing requirements. As a stand-alone program,
Alternative 3 provides PM_2.5 reductions of 237,000 tons NPV
3%, or 100,000 tons NPV 7%, and NO_X reductions of 8,360,000
tons NPV 3%, or 3,530,000 tons NPV 7%, through the year 2040. The cost
of this alternative through 2040 is estimated to be $9,240 million NPV
3%, or $4,160 million NPV 7%. In 2020, this alternative provides
monetized health and welfare benefits of $2.8 billion at a 3% discount
rate, or $2.6 billion at a 7% discount rate, and $7.8 billion in 2030
at a 3% discount rate, or $7.1 billion at a 7% discount rate. Comparing
this alternative to our final program allows us to consider the value
of the Tier 3 standards on their own merits. Specifically, this
alternative would lessen PM_2.5 emissions reductions by
nearly 71,000 tons NPV 3%, or 34,000 tons NPV 7%, and NO_X
emissions by 400,000 tons NPV 3%, or 180,000 tons NPV 7%. The cost of
this alternative, as compared to our final program through 2040, is
estimated to be $170 million less at NPV 3%, or $150 million less at
NPV 7%. The monetized health and welfare benefits that would be forgone
by eliminating Tier 3 are $1.1 billion at a 3% discount rate, or $1.0
billion at a 7% discount rate in 2020, and $1.4 billion at a 3%
discount rate, or $1.3 billion at a 7% discount rate in 2030. Although
the remanufacturing programs provide substantial benefits in the near-
term, as evidenced by the analysis of Alternative 2, it is clear that
Tier 3 also plays an important role in providing both near- and long-
term emission reductions.
(4) Alternative 4: Tier 4 Exclusively in 2013
    Alternative 4 most closely reflects the program described in our
Advanced Notice of Proposed Rulemaking, whereby we would set new
aftertreatment based emission standards as soon as possible. In this
case, we believe the earliest that such standards could logically be
started is in 2013 (three months after the introduction of 15 ppm ULSD
in this sector). Alternative 4 eliminates our Tier 3 standards along
with the locomotive and marine remanufacturing standards, while pulling
the Tier 4 standards ahead to 2013 for all portions of the Tier 4
program. We are unable to make an accurate estimate of the cost for
such an approach since we do not believe it to be technically feasible
at this time. However, we have reported a cost in the summary table
reflecting the same cost estimation method we used for our primary case
and have denoted unestimated additional costs as `C'. These additional
unestimated costs would include costs for additional engine test cells,
engineering staff, and engineering facilities necessary to introduce
Tier 4 early. As a stand-alone program, Alternative 4 provides
PM_2.5 reductions of 249,000 tons NPV 3%, or 101,000 tons NPV
7%, and NO_X reductions of 8,320,000 tons NPV 3%, or
3,420,000 tons NPV 7% through the year 2040. In 2020, this alternative
provides monetized health and welfare benefits of $3.0 billion at a 3%
discount rate, or $2.8 billion at a 7% discount rate, and $8.4 billion
in 2030 at a 3% discount rate, or $7.6 billion at a 7% discount rate.
Through 2040, this alternative, as compared to our final program, would
decrease PM_2.5 reductions by more than 59,000 NPV 3% tons,
or 33,000 tons NPV 7%, and NO_X emissions by 440,000 tons NPV
3%, or 290,000 tons NPV 7%. Compared to our final program, the
reduction in monetized health and welfare benefits of this alternative
would be $0.9 billion at a 3% discount rate, or $0.8 billion at a 7%
discount rate in 2020, while in 2030 the reductions in monetized
benefits would be $0.8 billion at a 3% discount rate, or $0.8 billion
at a 7% discount rate.

B. Summary of Results

    A summary of the four alternatives is contained in Table VII-1 and
Table VII-2 below. The PM and NO_X emissions reductions from
the alternatives described here compare favorably--in terms of cost
effectiveness--to other mobile source control programs that have been
or will soon be implemented. These alternatives show that each element
of our comprehensive program: the locomotive and marine remanufacturing
programs, the near-term Tier 3 emission standards, and the long-term
Tier 4 emission standards, represent valuable emission control programs
on their own. The collective program results in the greatest emission
reductions we believe to be possible giving consideration to all of the
elements described in this final rule. Overall, our final program will
provide very large reductions in PM, NO_X, and toxic
compounds in both the near-term and the long-term. These reductions
will be achieved in a manner that: (1) Leverages technology
developments in other diesel sectors, (2) aligns well with the clean
diesel fuel requirements already being implemented, and (3) provides
the lead time needed to deal with the significant engineering design
workload that is involved.

                                              Table VII-1.--Summary of Inventory and Costs at NPV 3% and 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Estimated PM2.5      Estimated NOX reductions   Total costs a millions
                                                                              reductions 2006-2040            2006-2040                 2006-2040
              Alternatives                            Standards            -----------------------------------------------------------------------------
                                                                               NPV 3%       NPV 7%       NPV 3%       NPV 7%       NPV 3%       NPV 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule..............................  • Locomotive                   308,000      134,000    8,760,000    3,710,000       $9,410       $4,310
                                           Remanufacturing.
                                          • Marine Remanufacturing,
                                          • Tier 3 Near-term
                                           program,.
                                          • Tier 4 Long-term
                                           standards.
Alternative 1: Proposed Case (NPRM).....  • Proposed Locomotive          286,000      121,000    8,140,000    3,320,000        8,760        3,900
                                           Remanufacturing program,.
                                          • Proposed Tier 3 Near-
                                           term program,.
                                          • Proposed Tier 4 Long-
                                           term standards.
Alternative 2: Exclusion of               • Tier 3 Near-term             240,000       96,000    7,640,000    3,030,000        8,080        3,430
 Remanufacturing Standards.                program,.
                                          • Tier 4 Long-term
                                           standards.
Alternative 3: Elimination of Tier 3....  • Locomotive                   237,000       10,000    8,360,000    3,530,000        9,240        4,160
                                           Remanufacturing,.
                                          • Marine Remanufacturing,
                                          • Tier 4 Long-term
                                           standards.

[[Page 37186]]

Alternative 4: Tier 4 Exclusively in      • Tier 4 Long-term             249,000      101,000    8,320,000    3,420,000      9,070+C       3950+C
 2013.                                     standards only in 2013.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: a `C' represents the additional costs necessary to accelerate the introduction of Tier 4 technologies that we are unable to estimate at this time.


                                              Table VII-2.--Inventory, Cost, and Benefits for 2020 and 2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        PM2.5 emissions      NOX emissions      Total costs\a\       Benefits\b,c\       Benefits\b,c\
                                                       reductions (tons)   reductions (tons)      (millions)       (billions) PM2.5    (billions) PM2.5
                                                     ------------------------------------------------------------  only  3% discount   only 7% discount
                                                                                                                         rate                rate
                                                        2020      2030      2020      2030      2020      2030   ---------------------------------------
                                                                                                                    2020      2030      2020      2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Rule..........................................    14,000    27,000   370,000   790,000      $350      $760      $3.9      $9.2      $3.6      $8.4
Alternative 1: Proposed Case (NPRM).................    13,000    26,000   310,000   780,000       300       750       3.3       8.8       3.0       8.0
Alternative 2: Exclusion of Remanufacturing              8,800    24,000   280,000   760,000       290       720       2.5       8.2       2.3       7.5
 Standards..........................................
Alternative 3: Elimination of Tier 3................     8,800    21,000   350,000   760,000       350       760       2.8       7.8       2.6       7.1
Alternative 4: Tier 4 Exclusively in 2013...........    10,000    24,000   350,000   790,000       360       780       3.0       8.4       2.8       7.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ `C' represents the additional costs necessary to accelerate the introduction of Tier 4 technologies that we are unable to estimate at this time.
\b\ Note that the range of PM-related benefits reflects the use of an empirically-derived estimate of PM mortality benefits, based on the ACS cohort
  study (Pope et al., 2002).
\c\ Annual benefits analysis results reflect the use of a 3 percent and 7 percent discount rate in the valuation of premature mortality and nonfatal
  myocardial infarctions, consistent with EPA and OMB guidelines for preparing economic analyses (US EPA, 2000 and OMB, 2003). U.S. Environmental
  Protection Agency, 2000. Guidelines for Preparing Economic Analyses. http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html.

VIII. Public Participation

    Many interested parties participated in the rulemaking process that
culminates with this final rule. This process provided opportunity for
submitting written public comments following the proposal that we
published on April 3, 2007 (72 FR 15938). We considered these comments
in developing the final rule. In addition, we held public hearings on
the proposed rulemaking on May 8 and 10, 2007, and we have considered
comments presented at the hearings.
    Throughout the rulemaking process, EPA met with stakeholders
including representatives from industry, government, environmental
organizations, and others. The program we are finalizing today was
developed as a collaborative effort with these stakeholders.
    We have prepared a detailed Summary and Analysis of Comments
document, which describes comments we received on the proposal and our
response to each of these comments. The Summary and Analysis of
Comments is available in the docket for this rule at the Internet
address listed under ADDRESSES, as well as on the Office of
Transportation and Air Quality Web site (www.epa.gov/otaq/locomotv.htm
and www.epa.gov/otaq/marine.htm). In addition, comments and responses
for key issues are included throughout this preamble.

IX. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735,
October 4, 1993), this action is an ``economically significant
regulatory action'' because it is likely to have an annual effect on
the economy of $100 million or more. Accordingly, EPA submitted this
action to the Office of Management and Budget (OMB) for review under EO
12866, and any changes made by EPA after submission to OMB have been
documented in the docket for this action.
    In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action. This analysis is contained in the
final Regulatory Impact Analysis that was prepared for this rulemaking,
and is available in the docket at the docket internet address listed
under ADDRESSES above.

B. Paperwork Reduction Act

    The information collection requirements in this final rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. EPA may
not conduct the information collection requirements in this rule and
may not penalize anyone for failing to comply with the information
collection requirements in the rule unless they are currently approved
by OMB.
    EPA plans to collect information to ensure that locomotives and
marine diesel engines conform to the regulations throughout their
useful lives. Section 208(a) of the Clean Air Act requires that
manufacturers provide information the Administrator may reasonably
require to determine compliance with the regulations; submission of the
information is therefore mandatory. We will consider confidential all
information meeting the requirements of Section 208(c) of the Clean Air
Act.
    The annual public reporting and recordkeeping burden for this
collection of information is estimated to be 287 hours per respondent
for locomotives, and 149 hours per respondent for marine. The projected
number of

[[Page 37187]]

respondents and annual reporting, recordkeeping, and cost burdens to
respondents are as follows:
    • Estimated total number of potential respondents: for
locomotives--7; for marine--13.
    • Estimated total annual burden hours: for locomotives--
14,040 (2,010 per respondent); for marine--25,167 (1,940 per
respondent).
    • Estimated total annual costs: for locomotives--$1.65
million ($315,000 per respondent); for marine--$1.45 million ($112,000
per respondent).
    Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is
approved by OMB, EPA will publish a technical amendment to 40 CFR part
9 in the Federal Register to display the OMB control number for the
approved information collection requirements contained in this final rule.

C. Regulatory Flexibility Act

(1) Overview
    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201 (see Table IX-1, below); (2) a small governmental jurisdiction
that is a government of a city, county, town, school district or
special district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.

           Table IX-1.--Primary SBA Small Business Categories Potentially Affected by This Regulation
----------------------------------------------------------------------------------------------------------------
                                                                         Defined by SBA as a small business if
              Industry                        NAICS \a\ Codes                  less than or equal to:\b\
----------------------------------------------------------------------------------------------------------------
Locomotive:
Manufacturers, remanufacturers and    333618, 336510.................  1,000 employees.
 importers of locomotives and
 locomotive engines.
Railroad owners and operators.......  482110, 482111.................  1,500 employees.
                                      482112.........................  500 employees.
Engine repair and maintenance.......  488210.........................  $6.5 million annual sales.
Marine:
Manufacturers of freshly              333618.........................  1,000 employees.
 manufactured marine diesel engines.
Ship and boat building; ship          336611, 346611.................  1,000 employees.
 building and repairing.
Engine repair and maintenance.......  811310.........................  $6.5 million annual sales.
Water transportation, freight and     483............................  500 employees.
 passenger.
Water transportation, freight and     483............................  $25.5 million annual sales.
 passenger--Offshore Marine Services.
Scenic and Sightseeing                487210.........................  $6.5 million annual sales.
 Transportation, Water.
Navigational Services to Shipping...  488330.........................  $6.5 million annual sales.
Commercial Fishing..................  114............................  $4.0 million annual sales.
Boat building (watercraft not built   336612.........................  500 employees.
 in shipyards and typically of the
 type suitable or intended for
 personal use).
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ North American Industry Classification System
\b\ According to SBA's regulations (13 CFR 121), businesses with no more than the listed number of employees or
  dollars in annual receipts are considered ``small entities'' for RFA purposes.

    After considering the economic impacts of today's final rule on
small entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. The small
entities directly regulated by this final rule are shown in Table IX-1
(and are not small governmental jurisdictions or small non-profit
organizations). We have determined that about five small entities
representing less than one percent of the total number of companies
affected will have an estimated impact exceeding three percent of their
annual sales revenues. The vast majority of small entities (about
several thousand small companies) will have an estimated impact of less
than one percent on their annual sales revenues. (An analysis of the
impacts of the rule on small entities was performed for the rule, and
can be found in the docket for this rulemaking.203, 204)
---------------------------------------------------------------------------

    \203\ U.S. EPA, Assessment and Standards Division, Locomotive
and Marine Diesel RFA/SBREFA Screening Analysis, Memorandum from
Chester J. France to Alexander Cristofaro of U.S. EPA's Office of
Policy, Economics, and Innovation, September 25, 2006.
    \204\ U.S. EPA, Assessment and Standards Division, Supplement to
Locomotive and Marine Diesel RFA/SBREFA Screening Analysis--Marine
Existing Fleet Program Impact Analysis, Memorandum from Lucie Audette and
Bryan Manning to Docket EPA-HQ-OAR-2003-0190, December 12, 2007.
---------------------------------------------------------------------------

    Although this final rule will not have a significant economic
impact on a substantial number of small entities, EPA nonetheless has
tried to reduce the impact of this rule on small entities, as described
below.

[[Page 37188]]

(2) Outreach Efforts and Special Compliance Provisions for Small
Entities
    In addition to the inputs we sought prior to issuing the proposed
rule, we also received additional comments following its publication.
First we summarize the pre-proposal outreach, followed by additional
comments we received after the proposal was published.
    Early on, we sought the input of a number of small entities
affected by the rule on potential regulatory flexibility provisions and
the needs of these small businesses. For marine diesel engine
manufacturers, we had separate meetings with the four small companies
in this sector, which are post-manufacture marinizers (companies that
purchase a complete or semi-complete engine from an engine manufacturer
and modify it for use in the marine environment by changing the engine
in ways that may affect emissions). We also met individually with one
small commercial vessel builder and a few vessel trade associations
whose members include small vessel builders. For locomotive
manufacturers and remanufacturers, we met separately with the three
small businesses in these sectors, which are all remanufacturers. In
addition, we met with a railroad trade association whose members
include small railroads. For nearly all meetings, EPA provided each
small business with an outreach packet that included background
information on this proposed rulemaking; and a document outlining some
flexibility provisions for small businesses that we have implemented in
past rulemakings. (This outreach packet and a complete summary of our
discussions with small entities can be found in the docket for this
rulemaking.) \205\
---------------------------------------------------------------------------

    \205\ U.S. EPA, Summary of Small Business Outreach for
Locomotive and Marine Diesel NPRM, Memorandum to Docket EPA-HQ-OAR-
2003-0190 from Bryan Manning, January 18, 2007.
---------------------------------------------------------------------------

    The primary feedback we received from these small entities pre-
proposal was to continue the flexibility provisions that we have
provided to small entities in earlier locomotive and marine diesel
rulemakings. A number of these provisions are listed below. Therefore,
we will largely continue the existing flexibility provisions finalized
in the 1998 Locomotive and Locomotive Engines Rule (April 16, 1998; 63
FR 18977); our 1999 Commercial Marine Diesel Engines Rule (December 29,
1999; 64 FR 73299) and our 2002 Recreational Diesel Marine program
(November 8, 2002; 67 FR 68304).
    In the proposed rule, we requested comment on an alternative
program option--a marine existing fleet or remanufacture program
(Alternative 5: Existing Engines)--and as described earlier in this
preamble, we are finalizing a portion of this alternative. Based on
oral testimony at the hearings and written comments (from trade
associations, small entities, etc.), we are providing flexibilities to
vessel operators and/or marine remanufacturers as described below. For
a complete description of the flexibilities in this final rule, please
refer to the Certification and Compliance Program, section IV.A.(13)--
Small Business Provisions.
(a) Transition Flexibilities
(i) Locomotive Sector
    Small locomotive remanufacturers are granted a waiver from
production-line and in-use testing for up to five calendar years after
this program becomes effective.
    Class III railroads qualifying as small businesses are exempt from
new Tier 0, 1, and 2 remanufacturing requirements for locomotives in
their existing fleets. The Certification and Compliance Program section
IV.A.(13) provides a discussion on the revisions being made in this program.
    Railroads qualifying as small businesses continue being exempt from
the in-use testing program.
(ii) Marine Sector
    Post-manufacture marinizers and small-volume manufacturers (annual
worldwide production of fewer than 1,000 engines) are allowed to group
all engines into one engine family, based on the worst-case emitter.
    Small-volume manufacturers producing engines less than or equal to
600 kW (800 hp) are exempted from production-line and deterioration
testing (assigned deterioration factors) for Tier 3 standards.
    Post-manufacture marinizers qualifying as small businesses and
producing engines less than or equal to 600 kW (800 hp) may delay
compliance with the Tier 3 standards by one model year.
    Post-manufacture marinizers qualifying as small businesses and
producing engines less than or equal to 600 kW (800 hp) may delay
compliance with the Not-to-Exceed requirements for Tier 3 standards by
up to three model years.
    Marine engine dressers (modify base engine without affecting the
emission characteristics of the engine) are exempted from certification
and compliance requirements.
    Post-manufacture marinizers, small-volume manufacturers, and small-
volume boat builders (less than 500 employees and annual worldwide
production of fewer than 100 boats) have hardship relief provisions--
i.e., apply for additional time.
    For the marine existing fleet or remanufacture program, vessel
operators and marine remanufacturers qualifying as small businesses
also have hardship relief provisions allowing them if necessary to
apply for additional time to comply with program requirements.
    Vessel operators who earn less than $5 million in gross annual
sales revenue are exempted from the marine existing fleet or
remanufacture program. If at some future date annual gross revenues
exceed $5 million, they become subject to the existing fleet program at
that point.
(b) Small Entity Compliance Information
    In addition to the above flexibilities, EPA is also preparing
documentation to help small entities comply with this rule. This
documentation will be available on the Office of Transportation and Air
Quality Web site. Small entities may also contact our office to obtain
copies of this documentation.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small

[[Page 37189]]

governments, including tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan. The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory requirements.
    This rule contains no federal mandates for state, local, or tribal
governments as defined by the provisions of Title II of the UMRA. The
rule imposes no enforceable duties on any of these governmental
entities. Nothing in the rule would significantly or uniquely affect
small governments. EPA has determined that this rule contains federal
mandates that may result in expenditures of more than $100 million to
the private sector in any single year. Accordingly, EPA has evaluated
under section 202 of the UMRA the potential impacts to the private
sector. EPA believes that this rule represents the least costly, most
cost-effective approach to achieve the statutory requirements of the
rule. The costs and benefits associated with this rule are included in
the final Regulatory Impact Analysis (RIA), as required by the UMRA.
This analysis can be found in chapter 6 of the final RIA. A complete
discussion of why the approach being finalized in this action was
chosen is located in chapter 8 of the final RIA. EPA has determined
that this rule contains no regulatory requirements that might
significantly or uniquely affect small governments.
    Thus, this rule is not subject to the requirements of sections 202
and 205 of the UMRA.

E. Executive Order 13132 (Federalism)

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    This final rule does not have federalism implications. It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. Although section 6 of Executive
Order 13132 does not apply to this rule, EPA did consult with
representatives of various State and local governments in developing
this rule. EPA consulted with representatives from the National
Association of Clean Air Agencies (NACAA, formerly STAPPA/ALAPCO), the
Northeast States for Coordinated Air Use Management (NESCAUM), and the
California Air Resources Board (CARB). These organizations and other
state organizations submitted comments on the proposed rule. Their
comments are available in the rulemaking docket, and are summarized and
addressed in the Summary and Analysis of Comments document (which is
also available in the rulemaking docket).
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicited comment on the proposed rule
from State and local officials.

F. Executive Order 13175 (Consultation and Coordination with Indian
Tribal Governments)

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (59 FR 22951, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This final rule does not have
tribal implications, as specified in Executive Order 13175. The rule
will be implemented at the Federal level and impose compliance costs
only on locomotive manufacturers, locomotive engine manufacturers,
locomotive operators, locomotive remanufacturers, marine engine
manufacturers, and marine vessel manufacturers. Tribal governments will
be affected only to the extent they purchase and use the regulated
engines and vehicles. Thus, Executive Order 13175 does not apply to
this rule.
    Although Executive Order 13175 does not apply to this rule, EPA did
solicit additional comment on this rule from tribal officials. A
comment was received from one tribal government; that comment is
available in the rulemaking docket, and is summarized and addressed in
the Summary and Analysis of Comments document (which is also available
in the rulemaking docket).

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

    Executive Order 13045: ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies
to any rule that: (1) Is determined to be ``economically significant''
as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, the Agency must evaluate the environmental health
or safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.
    This final rule is subject to the Executive Order because it is an
economically significant regulatory action as defined by Executive
Order 12866, and we believe that the environmental health or safety
risk addressed by this action may have a disproportionate effect on
children. Accordingly, we have evaluated the environmental health or
safety effects of these risks on children. The results of this
evaluation are discussed above in section II of this preamble, and in
chapter 2 of the Regulatory Impact Analysis (RIA).
    EPA recently conducted an initial screening-level analysis of
selected marine port areas and rail yards206, 207 to begin
to understand the populations, including children, that are exposed to
DPM emissions from these facilities. This screening-level analysis
\208\ indicates that at the 47 marine ports and 37 rail yards studied,
at least 13 million people, including 3.5 million children live in
neighborhoods that are exposed to higher levels of DPM from these

[[Page 37190]]

facilities than people living further away and will benefit from the
controls being finalized in this action.
---------------------------------------------------------------------------

    \206\ 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-2003-0190.
    \207\ 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-2003-0190.
    \208\ 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
into our analysis are not official estimates and they likely
underestimate overall emissions because they are not inclusive of
all emissions sources at the individual ports in our sample.
---------------------------------------------------------------------------

    With regard to children, the screening-level analysis shows that
the age composition of the total affected population near both the
marine ports and rail yards matches closely the age composition of the
overall U.S. population. However, for some individual facilities the
young appear to be over-represented in the affected population compared
to the overall U.S. population. See section VI of this preamble and
chapters 2 and 6 of the RIA for a discussion on the air quality and
monetized health benefits of this rule, including the benefits to
children's health.
    This rulemaking will achieve significant reductions of various
emissions from locomotive and marine diesel engines, including
NO_X, PM, and air toxics. These pollutants raise concerns
regarding environmental health or safety risks that EPA has reason to
believe may have a disproportionate effect on children, such as impacts
from ozone, PM, and certain toxic air pollutants.
    EPA has evaluated several regulatory strategies for reductions in
emissions from locomotive and marine diesel engines, and we believe
that we have selected the most stringent and effective control
reasonably feasible at this time (in light of the technology and cost
requirements of the Clean Air Act), which will benefit the health of
children.

H. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

    Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 28355
(May 22, 2001)), requires EPA to prepare and submit a Statement of
Energy Effects to the Administrator of the Office of Information and
Regulatory Affairs, Office of Management and Budget, for certain
actions identified as ``significant energy actions.'' Section 4(b) of
Executive Order 13211 defines ``significant energy actions'' as ``any
action by an agency (normally published in the Federal Register) that
promulgates or is expected to lead to the promulgation of a final rule
or regulation, including notices of inquiry, advance notices of
proposed rulemaking, and notices of proposed rulemaking: (1)(i) that is
a significant regulatory action under Executive Order 12866 or any
successor order, and (ii) is likely to have a significant adverse
effect on the supply, distribution, or use of energy; or (2) that is
designated by the Administrator of the Office of Information and
Regulatory Affairs as a significant energy action.'' We have prepared a
Statement of Energy Effects for this action as follows.
    This rule's potential effects on energy supply, distribution, or
use have been analyzed and are discussed in detail in section 5.8 of
the RIA. In summary, while we project that this rule would result in an
energy effect that exceeds the 4,000 barrel per day threshold noted in
E.O. 13211 in or around the year 2022 and thereafter, the program
consists of performance-based standards with averaging, banking, and
trading provisions that make it likely that our estimated impact is
overstated. Further, the fuel consumption estimates upon which we are
basing this energy effect analysis, which are discussed in full in
sections 5.4 and 5.5 of the RIA, do not reflect the potential fuel
savings associated with automatic engine stop/start (AESS) systems or
other idle reduction technologies. Such technologies can provide
significant fuel savings which could offset our projected estimates of
increased fuel consumption. Nonetheless, our projections show that this
rule could result in energy usage exceeding the 4,000 barrel per day
threshold noted in E.O. 13211.

I. National Technology Transfer Advancement Act

    As noted in the proposed rule, Section 12(d) of the National
Technology Transfer and Advancement Act of 1995 (``NTTAA''), Public Law
No. 104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary
consensus standards in its regulatory activities unless to do so would
be inconsistent with applicable law or otherwise impractical. Voluntary
consensus standards are technical standards (e.g., materials
specifications, test methods, sampling procedures, and business
practices) that are developed or adopted by voluntary consensus
standards bodies. The NTTAA directs EPA to provide Congress, through
OMB, explanations when the Agency decides not to use available and
applicable voluntary consensus standards.
    This rule references technical standards adopted by EPA through
previous rulemakings. No new technical standards are established in
this rule. The standards referenced in today's rule involve test
procedures for measuring engine emissions. These measurement standards
include those that were developed by EPA as well as the International
Organization for Standardization (ISO) engine testing voluntary
consensus standards, adopted in previous rulemakings. These standards
have served EPA's emissions control goals well since their
implementation and have been well accepted by industry. Therefore, EPA
will continue to use the ISO and existing EPA-developed standards
referenced in 40 CFR Parts 94 and 1065.

J. Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it increases the
level of environmental protection for all affected populations without
having any disproportionately high and adverse human health or
environmental effects on any population, including any minority or low-
income population.
    This rulemaking will achieve significant reductions of various
emissions from locomotive and marine diesel engines, including
NO_X, PM, and air toxics. Exposure to these pollutants raises
concerns regarding environmental health for the U.S. population in
general including the minority populations and low-income populations
that are the focus of the environmental justice executive order.
    EPA has evaluated several regulatory strategies for reductions in
emissions from locomotive and marine diesel engines, and we believe
that we have selected the most stringent and effective control
reasonably feasible at this time (in light of the technology and cost
requirements of the Clean Air Act).
    The emission reductions from the stringent new standards finalized
in the locomotive and marine diesel rule will have large beneficial
effects on communities in proximity to port, harbor, waterway, railway,
and rail yard locations, including low-income and minority communities.
In addition to stringent exhaust emission standards for freshly
manufactured and

[[Page 37191]]

remanufactured engines, the final rule includes provisions targeted to
further reduce emissions from regulated engines that directly impact
low-income and minority communities. The idle reduction provision is
one example: ``Even in very efficient railroad operations, locomotive
engines spend a substantial amount of time idling, during which they
emit harmful pollutants, consume fuel, create noise, and increase
maintenance costs. A significant portion of this idling occurs in rail
yards, as railcars and locomotives are transferred to build up trains.
Many of these rail yards are in urban neighborhoods, close to where
people live, work, and go to school'' (from section III.C(1)(c) of this
preamble). The final rule includes a mandatory locomotive idle
reduction requirement that will begin to take effect as early as 2008.
Another example is the emission standards for freshly manufactured
switch locomotives. Switch locomotives are major polluters in urban
rail yards. These standards are earlier and more stringent than the
line-haul locomotive standards, and include incentives for introducing
cleaner switchers using Tier 4 nonroad engines. Further examples can be
found in averaging, banking, and trading program provisions aimed at
ensuring that emissions are not shifted from line-haul locomotives
operating in rural areas to rail yards in urban communities.
    EPA recently conducted an initial screening-level analysis of
selected marine port areas and rail yards 209, 210 to better
understand the populations, including minority and low-income, that are
exposed to DPM emissions from these facilities. This screening-level
analysis \211\ indicates that at the 47 marine ports and 37 rail yards
studied at least 13 million people, including a high percentage of low-
income households, African-Americans, and Hispanics, live in the
vicinity of these facilities and are exposed to higher levels of DPM
than urban background levels. Thus, these residents will benefit from
the controls being finalized in this action. See section II.A and II.B
of this preamble and chapter 2 of the RIA for a discussion on the
benefits of this rule, including the benefits to minority and low-
income communities. Because those living in the vicinity of marine
ports and rail yards are more likely to be low-income and minority
residents, these populations will receive a significant benefit from
this rule.
---------------------------------------------------------------------------

    \209\ 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-2003-0190.
    \210\ 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-2003-0190.
    \211\ This type of screening 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
into our analysis are not official estimates and they likely
underestimate overall emissions because they are not inclusive of
all emission sources at the individual ports in our sample.
---------------------------------------------------------------------------

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A Major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective July 7, 2008.

X. Statutory Provisions and Legal Authority

    Statutory authority for the controls in this final rule can be
found in sections 213 (which specifically authorizes controls on
emissions from nonroad engines and vehicles), 203-209, 216, and 301 of
the Clean Air Act (CAA), 42 U.S.C. 7547, 7522, 7523, 7424, 7525, 7541,
7542, 7543, 7550, and 7601.

List of Subjects

40 CFR Part 9

    Reporting and recordkeeping requirements.

40 CFR Part 85

    Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research, Warranties.

40 CFR Part 86

    Administrative practice and procedure, Confidential business
information, Labeling, Motor vehicle pollution, Reporting and
recordkeeping requirements.

40 CFR Part 89

    Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research, Vessels,
Warranties.

40 CFR Part 92

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Incorporation by reference, Labeling, Penalties, Railroads, Reporting
and recordkeeping requirements, Warranties.

40 CFR Part 94

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Incorporation by reference, Labeling, Penalties, Vessels, Reporting and
recordkeeping requirements, Warranties.

40 CFR Part 1033

    Environmental protection, Administrative practice and procedure,
Confidential business information, Incorporation by reference,
Labeling, Penalties, Railroads, Reporting and recordkeeping requirements.

40 CFR Part 1039

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Incorporation by reference, Labeling, Penalties, Reporting and
recordkeeping requirements, Warranties.

40 CFR Part 1042

    Environmental protection, Administrative practice and procedure,
Air pollution control, Confidential business information, Imports,
Incorporation by reference, Labeling, Penalties, Vessels, Reporting and
recordkeeping requirements, Warranties.

40 CFR Part 1065

    Environmental protection, Administrative practice and procedure,
Incorporation by reference, Reporting and recordkeeping requirements,
Research.

40 CFR Part 1068

    Environmental protection, Administrative practice and procedure,
Confidential business information, Imports, Motor vehicle pollution,

[[Page 37192]]

Penalties, Reporting and recordkeeping requirements, Warranties.

    Dated: March 14, 2008.
Stephen L. Johnson,
Administrator.

• For the reasons set forth in the preamble, chapter I of title 40 of the
Code of Federal Regulations is amended as follows:

PART 9--OMB APPROVALS UNDER THE PAPERWORK REDUCTION ACT

• 1. The authority citation for part 9 continues to read as follows:

    Authority: 7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001, 2003,
2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C. 9701; 33
U.S.C. 1251 et seq., 1311, 1313d, 1314, 1318 1321, 1326, 1330, 1342
1344, 1345(d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR, 1971-
1975 Comp. p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 300g-
1, 300g-2, 300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2, 300j-3,
300j-4, 300j-9, 1857 et seq., 6901-6992k, 7401-7671q, 7542, 9601-
9657, 11023, 11048.

• 2. Section 9.1 is amended in the table by adding the center headings
and the entries under those center headings in numerical order to read
as follows:

Sec.  9.1  OMB approvals under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
                                                            OMB control
                     40 CFR citation                            No.
------------------------------------------------------------------------

                                * * * *
                 Control of Emissions from Locomotives
1033.825................................................       2060-0287
------------------------------------------------------------------------

                               * * * * *
  Control of Emissions From New and In-use Marine Compression-ignition
                           Engines and Vessels
------------------------------------------------------------------------
1042.825................................................       2060-0827

                                * * * * *
------------------------------------------------------------------------

* * * * *

PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES

• 3. The authority citation for part 85 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

Subpart Y--[Amended]

• 4. Section 85.2401 is amended by revising paragraphs (a)(7) and (a)(8)
to read as follows:

Sec.  85.2401  To whom do these requirements apply?

    (a) * * *
    (7) Locomotives (See 40 CFR parts 92 and 1033);
    (8) Marine engines (See 40 CFR parts 91, 94, and 1042 and MARPOL
Annex VI, as applicable);
* * * * *

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES
AND ENGINES

• 5. The authority citation for part 86 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

Subpart A--[Amended]

• 6. Section 86.007-11 is amended by revising paragraph (a)(2)
introductory text to read as follows:

Sec.  86.007-11  Emission standards and supplemental requirements for
2007 and later model year diesel heavy-duty engines and vehicles.

* * * * *
    (a) * * *
    (2) The standards set forth in paragraph (a)(1) of this section
refer to the exhaust emitted over the duty cycle specified in
paragraphs (a)(2)(i) through (iii) of this section, where exhaust
emissions are measured and calculated as specified in paragraphs
(a)(2)(iv) and (v) of this section in accordance with the procedures
set forth in subpart N of this part, except as noted in Sec.  86.007-
23(c)(2):
* * * * *

• 7. Section 86.117-96 is amended by revising the first equation in
paragraph (d)(2) to read as follows:

Sec.  86.117-96  Evaporative emission enclosure calibrations.

* * * * *
    (d) * * *
    (2) * * *
    [GRAPHIC] [TIFF OMITTED] TR06MY08.008
   
* * * * *

Subpart N--[Amended]

• 8. Section 86.1305-2010 is amended by revising paragraph (b) to read as
follows:

Sec.  86.1305-2010  Introduction; structure of subpart.

* * * * *
    (b) Use the applicable equipment and procedures for spark-ignition
or compression-ignition engines in 40 CFR part 1065 to determine
whether engines meet the duty-cycle emission standards in subpart A of
this part. Measure the emissions of all regulated pollutants as
specified in 40 CFR part 1065. Use the duty cycles and procedures
specified in Sec. Sec.  86.1333-2010, 86.1360-2007, and 86.1362-2007.
Adjust emission results from engines using aftertreatment technology
with infrequent regeneration events as described in Sec.  86.004-28.
* * * * *
• 9. Section 86.1333-2010 is amended by adding paragraph (d) to read as
follows:

Sec.  86.1333-2010  Transient test cycle generation.

* * * * *
    (d) Determine idle speeds as specified in Sec.  86.1337-2007(a)(9).

• 10. Section 86.1360-2007 is amended by adding paragraph (b)(3) to read
as follows:

Sec.  86.1360-2007  Supplemental emission test; test cycle and procedures.

* * * * *
    (b) * * *
    (3) For engines certified using the ramped-modal cycle specified in
Sec.  86.1362, perform the three discrete test points described in
paragraph (b)(2) of this section as follows:
    (i) Allow the engine to idle as needed to complete equipment checks
following the supplemental emission test described in this section,
then operate the engine over the three additional discrete test points.
    (ii) Validate the additional discrete test points as a composite
test separate from the supplemental emission test, but in the same manner.

[[Page 37193]]

    (iii) Use the emission data collected during the time interval from
35 to 5 seconds before the end of each mode (excluding transitions) to
perform the MAEL calculations in paragraph (f) of this section.
* * * * *

Sec.  86.1362-2007  [Amended]

• 11. Section 86.1362-2007 is amended by removing and reserving paragraph
(d).

• 12. A new Sec.  86.1362-2010 is added to read as follows:

Sec.  86.1362-2010  Steady-state testing with a ramped-modal cycle.

    This section describes how to test engines under steady-state
conditions. For model years through 2009, manufacturers may use the
mode order described in this section or in Sec.  86.1362-2007. Starting
in model year 2010 manufacturers must use the mode order described in
this section with the following exception: for model year 2010,
manufacturers may continue to use the cycle specified in Sec.  86.1362-
2007 as long as it does not adversely affect the ability to demonstrate
compliance with the standards.
    (a) Start sampling at the beginning of the first mode and continue
sampling until the end of the last mode. Calculate emissions as
described in 40 CFR 1065.650 and cycle statistics as described in 40
CFR 1065.514.
    (b) Measure emissions by testing the engine on a dynamometer with
the following ramped-modal duty cycle to determine whether it meets the
applicable steady-state emission standards:

----------------------------------------------------------------------------------------------------------------
                                           Time in mode
                RMC mode                     (seconds)       Engine  speed \1\ \2\      Torque  (percent) \2\ 3
----------------------------------------------------------------------------------------------------------------
1a Steady-state.........................             170  Warm Idle.................  0
1b Transition...........................              20  Linear Transition.........  Linear Transition.
2a Steady-state.........................             173  A.........................  100
2b Transition...........................              20  Linear Transition.........  Linear Transition.
3a Steady-state.........................             219  B.........................  50
3b Transition...........................              20  B.........................  Linear Transition.
4a Steady-state.........................             217  B.........................  75
4b Transition...........................              20  Linear Transition.........  Linear Transition.
5a Steady-state.........................             103  A.........................  50
5b Transition...........................              20  A.........................  Linear Transition.
6a Steady-state.........................             100  A.........................  75
6b Transition...........................              20  A.........................  Linear Transition.
7a Steady-state.........................             103  A.........................  25
7b Transition...........................              20  Linear Transition.........  Linear Transition.
8a Steady-state.........................             194  B.........................  100
8b Transition...........................              20  B.........................  Linear Transition.
9a Steady-state.........................             218  B.........................  25
9b Transition...........................              20  Linear Transition.........  Linear Transition.
10a Steady-state........................             171  C.........................  100
10b Transition..........................              20  C.........................  Linear Transition.
11a Steady-state........................             102  C.........................  25
11b Transition..........................              20  C.........................  Linear Transition.
12a Steady-state........................             100  C.........................  75
12b Transition..........................              20  C.........................  Linear Transition.
13a Steady-state........................             102  C.........................  50
13b Transition..........................              20  Linear Transition.........  Linear Transition.
14 Steady-state.........................             168  Warm Idle.................  0
----------------------------------------------------------------------------------------------------------------
\1\ Speed terms are defined in 40 CFR part 1065.
\2\ Advance from one mode to the next within a 20-second transition phase. During the transition phase, command
  a linear progression from the speed or torque setting of the current mode to the speed or torque setting of
  the next mode.
3 The percent torque is relative to maximum torque at the commanded engine speed.

    (c) During idle mode, operate the engine at its warm idle as
described in 40 CFR part 1065.
    (d) See 40 CFR part 1065 for detailed specifications of tolerances
and calculations.
    (e) Perform the ramped-modal test with a warmed-up engine. If the
ramped-modal test follows directly after testing over the Federal Test
Procedure, consider the engine warm. Otherwise, operate the engine to
warm it up as described in 40 CFR part 1065, subpart F.

• 13. Section 86.1363-2007 is amended by revising paragraph (a) and the
equation in paragraph (g)(1) to read as follows:

Sec.  86.1363-2007  Steady-state testing with a discrete-mode cycle.

* * * * *
    (a) Use the following 13-mode cycle in dynamometer operation on the
test engine:

----------------------------------------------------------------------------------------------------------------
                                                                   Percent load      Weighting      Mode length
               Mode No.                     Engine speed \1\            \2\           factors       (minutes) 3
----------------------------------------------------------------------------------------------------------------
1....................................  Warm Idle................  ..............            0.15               4
2....................................  A........................             100            0.08               2
3....................................  B........................              50            0.10               2
4....................................  B........................              75            0.10               2
5....................................  A........................              50            0.05               2
6....................................  A........................              75            0.05               2
7....................................  A........................              25            0.05               2
8....................................  B........................             100            0.09               2
9....................................  B........................              25            0.10               2

[[Page 37194]]

10...................................  C........................             100            0.08               2
11...................................  C........................              25            0.05               2
12...................................  C........................              75            0.05               2
13...................................  C........................              50            0.05               2
----------------------------------------------------------------------------------------------------------------
\1\ Speed terms are defined in 40 CFR part 1065.
\2\ The percent torque is relative to the maximum torque at the commanded test speed.
3 Upon Administrator approval, the manufacturer may use other mode lengths.

* * * * *
    (g) * * *
    (1) * * *
    [GRAPHIC] [TIFF OMITTED] TR06MY08.009
   
* * * * *

Subpart P--[Amended]

• 14. Subpart P is amended by removing Sec.  86.1504-94.

Sec. Sec.  86.1501-94 through 86.1544-84  [Redesignated]

• 15. Redesignate Sec. Sec.  86.1501-94 through 86.1544-84 as follows:

------------------------------------------------------------------------
            Old section                          New section
------------------------------------------------------------------------
             86.1501-94                              86.1501
             86.1502-84                              86.1502
             86.1503-84                              86.1503
             86.1505-94                              86.1505
             86.1506-94                              86.1506
             86.1509-84                              86.1509
             86.1511-84                              86.1511
             86.1513-94                              86.1513
             86.1514-84                              86.1514
             86.1516-84                              86.1516
             86.1519-84                              86.1519
             86.1522-84                              86.1522
             86.1524-84                              86.1524
             86.1526-84                              86.1526
             86.1527-84                              86.1527
             86.1530-84                              86.1530
             86.1537-84                              86.1537
             86.1540-84                              86.1540
             86.1542-84                              86.1542
             86.1544-84                              86.1544
------------------------------------------------------------------------

• 16. Newly desginated Sec.  86.1506 is amended by adding paragraph (b)
to read as follows:

Sec.  86.1506  Equipment required and specifications; overview.

* * * * *
    (b) Through the 2009 model year, manufacturers may elect to use the
appropriate test procedures in this part 86 instead of the procedures
referenced in 40 CFR part 1065 without getting advance approval by the
Administrator.

PART 89--CONTROL OF EMISSIONS FROM NEW AND IN-USE NONROAD
COMPRESSION-IGNITION ENGINES

• 17. The authority citation for part 89 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

Subpart J--[Amended]

• 18. A new Sec.  89.916 is added to read as follows:

Sec.  89.916  Emergency-vessel exemption for marine engines below 37 kW.

    The prohibitions in Sec.  89.1003(a)(1) do not apply to new marine
engines used in lifeboats and rescue boats as described in 40 CFR
94.914.

PART 92--CONTROL OF AIR POLLUTION FROM LOCOMOTIVES AND LOCOMOTIVE ENGINES

• 19. The authority citation for part 92 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

• 20. Section 92.1 is amended by revising paragraph (a) introductory text
and adding paragraph (e) to read as follows:

Sec.  92.1  Applicability.

    (a) Except as noted in paragraphs (b), (d) and (e) of this section,
the provisions of this part apply to manufacturers, remanufacturers,
owners and operators of:
* * * * *
    (e) The provisions of this part do not apply for locomotives that
are subject to the emissions standards of 40 CFR part 1033.

• 21. Section 92.2 is amended by revising the definition for ``Freshly
manufactured locomotive'' to read as follows:

Sec.  92.2  Definitions.

* * * * *
    Freshly manufactured locomotive means a locomotive which is powered
by a freshly manufactured engine, and which contains fewer than 25
percent previously used parts (weighted by the dollar value of the
parts). See 40 CFR 1033.640 for information about how to calculate this.
* * * * *
• 22. Section 92.12 is amended by revising paragraph (b) and adding
paragraphs (i) and (j) to read as follows:

Sec.  92.12   Interim provisions.

* * * * *
    (b) Production line and in-use testing. (1) The requirements of
Subpart F of this part (i.e., production line testing) do not apply
prior to January 1, 2002.
    (2) The testing requirements of subpart F of this part (i.e.,
production line testing) do not apply to small manufacturers/
remanufacturers prior to January 1, 2013. Note that the production line
audit requirements apply as specified.
    (3) The requirements of Subpart G of this part (i.e., in-use
testing) only apply for locomotives and locomotive engines that become
new on or after January 1, 2002.
    (4) For locomotives and locomotive engines that are covered by a
small business certificate of conformity, the requirements of Subpart G
of this part (i.e., in-use testing) only apply for locomotives and
locomotive engines that become new on or after January 1, 2007. We will
also not require small remanufacturers to perform any in-use testing
prior to January 1, 2013.
* * * * *
    (i) Diesel test fuels. Manufacturers and remanufacturers may use
LSD or ULSD test fuel to certify to the standards of this part, instead
of the otherwise specified test fuel, provided PM emissions are
corrected as described in this paragraph (i). Measure your PM emissions
and determine your cycle-weighted emission rates as specified in
subpart B of this part. If you test using LSD, add 0.04 g/bhp-hr to
these weighted emission rates to determine your official emission
result. If you test using ULSD, add 0.05 g/bhp-hr to these weighted
emission rates to determine your official emission result.
    (j) Subchapter U provisions. For model years 2008 through 2012,
certain locomotives will be subject to the requirements of this part 92
while others will be subject to the

[[Continued on page 37195]]
Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
Control of Emissions of Air Pollution From Locomotive Engines and Marine Compression-Ignition Engines Less Than 30 Liters per Cylinder; Republication

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