Regulation of Fuels and Fuel Additives: Modifications to the Transmix Provisions Under the Diesel Sulfur Program, 75868-75880 [2012-30960]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Rules and Regulations]
[Pages 75868-75880]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30960]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[EPA-HQ-OAR-2012-0223; FRL-9763-7]


Regulation of Fuels and Fuel Additives: Modifications to the 
Transmix Provisions Under the Diesel Sulfur Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is amending the requirements under EPA's diesel sulfur 
program related to the sulfur content of locomotive and marine (LM) 
diesel fuel produced by transmix processors and pipeline facilities. 
These amendments will reinstate the ability of locomotive and marine 
diesel fuel produced from transmix by transmix processors and pipeline 
operators to meet a maximum 500 parts per million (ppm) sulfur standard 
outside of the Northeast Mid-Atlantic Area and Alaska and expand this 
ability to within the Northeast Mid-Atlantic Area provided that: the 
fuel is used in older technology locomotive and marine engines that do 
not require 15 ppm sulfur diesel fuel, and the fuel is kept segregated 
from other fuel. These amendments will provide significant regulatory 
relief for transmix processors and pipeline operators to allow the 
petroleum distribution system to function efficiently while continuing 
to transition the market to virtually all ultra-low sulfur diesel fuel 
(ULSD, i.e. 15 ppm sulfur diesel fuel) and the environmental benefits 
it provides.

DATES: This rule is effective on February 25, 2013 without further 
notice.

ADDRESSES: EPA established a docket for this action under Docket ID No. 
EPA-HQ-OAR-2012-0223. All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information may not be publicly available, (e.g., CBI or other 
information whose disclosure is restricted by statute). Certain other 
material, such as copyrighted material, will be publicly available only 
in hard copy. Publicly available docket materials are available either 
electronically in www.regulations.gov or in hard copy at the Air and 
Radiation Docket and Information Center, EPA, EPA West, Room 3334, 1301 
Constitution Ave. NW., Washington, DC. The Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Public Reading Room is (202) 
566-1744, and the telephone number for the Air Docket is (202) 566-
1742. You may be charged a reasonable fee for photocopying docket 
materials, as provided in 40 CFR part 2.

FOR FURTHER INFORMATION CONTACT: Jeffrey A. Herzog, Office of 
Transportation and Air Quality, National Vehicle and Fuel Emissions 
Laboratory, Environmental Protection Agency, 2000 Traverwood Drive, Ann 
Arbor, Michigan, 48105; telephone number: (734) 214-4227; fax number: 
(734) 214-4816; email address: herzog.jeff@epa.gov.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose

    EPA is issuing a final rule to amend provisions in the diesel 
sulfur fuel programs. The diesel sulfur amendments provide necessary 
flexibility for transmix processors and pipeline operators who produce 
locomotive and marine diesel fuel. EPA is taking this action under 
section 211 of the Clean Air Act.

B. Summary of Today's Rule

    The diesel transmix amendments will reinstate an allowance for 
transmix processors and pipeline operators to produce 500 ppm sulfur 
diesel fuel for use in older technology locomotive and marine diesel 
outside of the Northeast Mid-Atlantic (NEMA) Area and Alaska

[[Page 75869]]

after 2014.\1\ These provisions were originally put in place as a 
necessary flexibility to address feasibility and cost issues associated 
with handling of the transmix volume generated in the pipeline 
distribution system. These provisions allowed the fuel distribution 
system to continue to function while transitioning to ULSD. The 
technology to economically reduce the sulfur content of transmix 
distillate product to 15 ppm at transmix processor and pipeline 
facilities did not exist, and any alternative measures of disposing of 
transmix were likewise deemed infeasible or cost prohibitive as the 
market was then configured. Thus, in order to implement the ULSD 
regulations, an outlet for the consumption of transmix distillate 
product was necessary. With no outlet, transmix would build up in 
storage tanks and pipelines would need to cease operations. When the 
ULSD standards were expanded to nonroad, locomotive, and marine (NRLM) 
diesel fuel, this would have removed the sole outlet in most areas of 
the country. Consequently, the transmix flexibility was finalized.
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    \1\ The NEMA area is defined in 40 CFR 80.510(g)(1) as follows: 
North Carolina, Virginia, Maryland, Delaware, New Jersey, 
Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, 
Maine, Washington DC, New York (except for the counties of 
Chautauqua, Cattaraugus, and Allegany), Pennsylvania (except for the 
counties of Erie, Warren, McKean, Potter, Cameron, Elk, Jefferson, 
Clarion, Forest, Venango, Mercer, Crawford, Lawrence, Beaver, 
Washington, and Greene), and the eight eastern-most counties of West 
Virginia (Jefferson, Berkeley, Morgan, Hampshire, Mineral, Hardy, 
Grant, and Pendleton).
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    EPA's ocean-going vessels rule, however, removed this allowance 
beginning 2014 to streamline our ULSD compliance provisions and avoid 
additional complications that would otherwise result from adding a new 
stream of diesel, containing up to 1,000 ppm sulfur, for category 3 
(C3) marine. EPA believed at the time that this new 1,000 ppm sulfur 
product could provide a suitable outlet for transmix distillate 
product. Thus, we believed that it was possible to remove the transmix 
flexibility. Transmix processors stated that they were not aware of the 
changes to the 500-ppm LM transmix provisions until after they were 
finalized, and that the C3 marine market would not be a viable outlet 
for their distillate product. Not only are most locations for refueling 
C3 marine vessels not located near transmix facilities, but C3 marine 
terminals also do not lend themselves easily to the receipt of small 
batches of transmix distillate product by tank truck. It might be 
possible over time to modify C3 terminals and fueling operations to 
receive transmix, but such changes were not within their control. Until 
such time, the locomotive and marine diesel market remained the only 
viable market.
    On June 29, 2010, EPA received a petition from a group of transmix 
processors requesting that the Agency reconsider and reverse the 2014 
sunset date for the 500-ppm LM transmix flexibility. Based on 
additional input that we received from transmix processors and other 
stakeholders in the fuel distribution system during our consideration 
of the petition, EPA believed that it would be appropriate to extend 
the 500-ppm diesel transmix flexibility for older locomotive and marine 
engines beyond 2014 for reasons discussed below. On October 9, 2012, 
EPA published in the Federal Register a Direct Final Rule (DFR) and 
parallel Notice of Proposed Rule (NPRM).\2\ The DFR and NPRM also 
included other provisions not relevant to this final rule. The DFR was 
withdrawn on this issue due to the receipt of a negative comment.\3\ 
Based on EPA's consideration of the comments on the NPRM, EPA is 
finalizing the proposal to extend the 500-ppm transmix flexibility 
outside of the NEMA area and Alaska beyond 2014.
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    \2\ Regulation of Fuels and Fuel Additives: Modifications to 
Renewable Fuel Standard and Diesel Sulfur Programs, Direct final 
rule, 77 FR 61281, October 9, 2012. Regulation of Fuels and Fuel 
Additives: Modifications to Renewable Fuel Standard and Diesel 
Sulfur Programs, Notice of Proposed Rule, 77 FR 61313, October 9, 
2012.
    \3\ Regulation of Fuels and Fuel Additives: Modifications to 
Renewable Fuel Standard and Diesel Sulfur Programs, Withdrawal of 
direct final rule, 77 FR 72746, December 6, 2012.
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    In response to industry input, EPA also requested comments in the 
NPRM on whether the 500-ppm transmix flexibility should be extended to 
the NEMA area. Based on EPA's consideration of the comments we 
received, we are extending the transmix flexibility to within the NEMA 
area beginning with the effective date of this final rule.
    Comments on the NPRM stated that the regulations did not provide 
adequate certainty that pipeline operators as well as transmix 
processors may produce 500 ppm LM from transmix. Based on these 
comments we are amending the regulations to provide clarity regarding 
EPA's long standing policy that pipeline operators as well as transmix 
processors may take advantage of the 500-ppm LM transmix flexibility.

C. Costs and Benefits

    The flexibilities promulgated in this rule will provide a feasible 
and cost effective means for the continued operation of the fuel 
distribution system under our ULSD program regulations as the 
locomotive and marine market transitions to equipment that require the 
use of ULSD and until such time as alternative methods of treatment or 
disposal for transmix can be developed. These amendments will impose no 
new direct costs or burdens on regulated entities beyond the minimal 
costs associated with reporting and recordkeeping requirements. These 
amendments will provide significant regulatory relief for transmix 
processors and pipeline operators to allow the petroleum distribution 
system to function efficiently while continuing to transition the 
market to virtually all ultra-low sulfur diesel fuel (ULSD, i.e. 15 ppm 
sulfur diesel fuel) and the environmental benefits it provides.

II. Does this action apply to me?

    Entities potentially affected by this action include those involved 
with the production, distribution and sale of diesel fuel. Regulated 
categories and entities affected by this action include:

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                                                                                                Examples of
          Category                   NAICS codes \a\                SIC codes \b\          potentially regulated
                                                                                                  parties
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Industry....................  324110......................  2911........................  Petroleum refiners.
Industry....................  Various.....................  Various.....................  Transmix processors.
Industry....................  486910......................  4613........................  Refined petroleum
                                                                                           product pipelines.
Industry....................  424710......................  5171........................  Petroleum bulk
                                                                                           stations and
                                                                                           terminals.
Industry....................  424720......................  5172........................  Petroleum and
                                                                                           petroleum products
                                                                                           merchant wholesalers.
Industry....................  454319......................  5989........................  Other fuel dealers.
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\a\ North American Industry Classification System (NAICS).
\b\ Standard Industrial Classification (SIC) system code.


[[Page 75870]]

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could be potentially regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your entity is regulated by this action, you should carefully examine 
the applicability criteria of Part 80, subparts D, E and F of title 40 
of the Code of Federal Regulations. If you have any question regarding 
applicability of this action to a particular entity, consult the person 
in the preceding FOR FURTHER INFORMATION CONTACT section above.

III. Amendments to the Diesel Transmix Provisions

    The final regulations for the nonroad diesel program were published 
in the Federal Register on June 24, 2004.\4\ The provisions in the 
nonroad diesel rule related to diesel fuel produced from transmix by 
transmix processors and pipeline operators were modified by the C3 
Marine diesel final rule that was published on April 30, 2010.\5\ This 
action further amends the requirements for diesel fuel produced from 
transmix by transmix processors and pipeline operators. Below is a 
table listing the provisions that we are amending. The following 
sections provide a discussion of these amendments.
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    \4\ 69 FR 38958 (June 24, 2004).
    \5\ 75 FR 22896 (April 30, 2010).

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Proposed  amendments to the diesel program           Description
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Section:
80.511(b)(4)..............................  Amended to allow for the
                                             production and sale of 500
                                             ppm locomotive and marine
                                             (LM) diesel fuel produced
                                             from transmix past 2014.
80.513 (entire section)...................  Amended to allow for the
                                             production and sale of 500
                                             ppm LM diesel fuel produced
                                             from transmix outside the
                                             NEMA area and Alaska past
                                             2014, to extend this
                                             flexibility to within the
                                             NEMA area, and to provide
                                             additional clarity
                                             regarding the production of
                                             500 ppm LM from transmix by
                                             pipeline operators.
80.572(d).................................  Amended to extend 500ppm LM
                                             diesel fuel label past
                                             2012.
80.597(d)(3)(ii)..........................  Amended to include 500 ppm
                                             LM diesel fuel in the list
                                             of fuels that an entity may
                                             deliver or receive custody
                                             of past June 1, 2014.
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A. Extension of the Diesel Transmix Provisions Outside of the Northeast 
Mid-Atlantic Area and Alaska Beyond 2014

    Batches of different fuel products commonly abut each other as they 
are shipped in sequence by pipeline. When the mixture between two 
adjacent products is not compatible with either product, it is removed 
from the pipeline and segregated as transmix. Transmix primarily is 
gathered for reprocessing at the end of the pipeline distribution 
system and downstream from any refinery that might possibly be able to 
desulfurize the transmix. Transmix is also sometimes gathered at 
intermediate points in the pipeline distribution system. In addition to 
the long and inefficient transportation distances to return transmix to 
a refinery for reprocessing, incorporating transmix into a refinery's 
feed also presents technical and logistical refining process challenges 
that typically make refinery reprocessing infeasible. In particular, 
refineries are not set up to safely receive small batches of feedstock 
by truck, crude towers are not designed to safely handle the large 
swings in distillation range of their feed that would accompany the 
introduction of transmix to the tower, and other locations in the 
refinery (such as hydrodesulfurization units) are not designed to 
safely receive additional feedstock. Thus, transmix processors and 
pipeline facilities that produce diesel fuel from transmix are 
necessary to dispose of transmix and maintain an efficient fuel 
distribution system. However, they can only do so if they can find a 
market that can utilize the transmix they produce.
    Transmix processing facilities handle an average of 5,000 barrels 
per day of transmix compared to an average of 125,000 barrels per day 
of crude oil for diesel fuel refineries. The low volumes handled by 
transmix processors as well as other constraints mean that transmix 
processors are limited to the use of a simple distillation tower and 
additional blendstocks to manufacture finished fuels. Pipeline transmix 
gathering facilities handle even lower volumes of fuel. Such facilities 
manufacture diesel fuel from the transmix that results from the 
interface between batches of ULSD and jet fuel. The presence of diesel 
fuel in the mixture results in the transmix not meeting the stringent 
quality specifications for jet fuel (e.g., distillation and additive 
requirements unique to jet fuel). Because this transmix does not 
contain gasoline, a finished distillate fuel from the transmix can be 
produced without the need for further distillation. However, the high 
sulfur contribution from jet fuel (e.g., maximum 3,000 ppm for jet 
fuel) and other high sulfur products in multi-product pipelines results 
in this transmix not meeting the 15 ppm sulfur specification for ULSD. 
There is currently no desulfurization equipment which has been 
demonstrated to be suitable for application at a transmix processor or 
pipeline transmix gathering facility. The cost of installing and 
operating a currently available desulfurization unit is too high in 
relation to the small volume of distillate fuel produced at such 
facilities. Without an outlet for the transmix, it would build up and 
could eventually force a shutdown of pipeline operations until an 
outlet could be found.
    The engine emission standards finalized in the rulemakings for new 
nonroad, locomotive, and Category 1 & 2 (C1 & C2) marine engines 
necessitate the use of sulfur-sensitive emissions control equipment 
which requires 15 ppm sulfur diesel fuel to function properly.\6\ 
Accordingly, the nonroad rule required that nonroad, locomotive and 
marine (NRLM) diesel fuel must meet a 15 ppm sulfur standard in 
parallel with the introduction of new sulfur-sensitive emission control 
technology to NRLM equipment. Beginning June 1, 2014, the nonroad 
diesel rule required that all NRLM diesel fuel produced by refiners and 
importers must meet a 15 ppm sulfur standard. The nonroad diesel rule 
included special provisions to allow the continued use of 500 ppm 
sulfur locomotive and marine diesel fuel produced from transmix by 
transmix processors and pipeline operators beyond 2014 in older 
technology engines as long as such engines remained in the in-use 
fleet. These provisions along with other now

[[Page 75871]]

expired flexibilities in the diesel program were designed to provide a 
feasible and cost effective means for the continued operation of the 
fuel distribution system under our ULSD program regulations as the 
locomotive and marine market transitioned to equipment that required 
the use of ULSD and until such time as alternative methods of treatment 
or disposal of transmix could be developed.\7\ The 500-ppm LM diesel 
transmix provisions were limited to areas outside of the Northeast Mid-
Atlantic area and Alaska because it was judged that the heating oil 
market in these areas would provide a sufficient outlet for transmix 
distillate in these areas. In addition, the disposition of transmix in 
Alaska is not a concern since there are no refined product pipelines in 
Alaska. Excluding the NEMA area and Alaska allowed us to exempt the 
NEMA area and Alaska from the fuel marker provisions that are a part of 
the compliance assurance regime. The continuation of the 500-ppm LM 
diesel transmix provisions beyond 2014 (finalized in the nonroad rule) 
was supported by ongoing recordkeeping, reporting, and fuel marker 
provisions that were established to facilitate enforcement during the 
phase-in of the diesel sulfur program.\8\
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    \6\ Control of Emissions of Air Pollution from Nonroad Diesel 
Engines and Fuel, Final Rule, 69 FR 38958, June 24, 2004. Control of 
Emissions of Air Pollution From Locomotive and Marine Compression-
Ignition Engines Less Than 30 Liters per Cylinder; Republication, 
Final Rule, 73 FR 37096, June 30, 2008.
    \7\ As discussed in the original nonroad diesel rulemaking, as 
LM equipment is retired from service, the market for 500 ppm LM will 
gradually diminish and eventually disappear. Given the long lifetime 
of LM equipment (in many cases 40 years or more), we anticipate that 
a market for 500 ppm LM will remain for a significant amount of 
time. This phase-out time will allow transmix processors and 
pipeline operators to either transition their >15 ppm sulfur 
distillate product to other markets (e.g. C3 marine, heating oil, 
process heat, export), develop a means to desulfurize fuel at their 
facilities, or to implement other alternatives to dispose of 
transmix.
    \8\ This included the now-completed phase-in of 15 ppm highway 
diesel fuel and 15 ppm nonroad diesel fuel as well as the phase-out 
of the small refiner and credits provisions for LM diesel fuel that 
will be completed in 2014.
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    In the development of the proposed requirements for Category 3 (C3) 
marine engines, EPA worked with industry to evaluate how the 
enforcement provisions for the new 1,000-ppm C3 marine diesel fuel to 
be introduced in June of 2014 could be incorporated into existing 
diesel program provisions.\9\ Our assessment based on input from 
industry at the time indicated that incorporating the new C3 marine 
fuel into the diesel program enforcement mechanisms while preserving 
the 500-ppm diesel transmix flexibility could not be accomplished 
without retaining significant existing regulatory burdens (``designate 
and track'' and fuel marker requirements) and introducing new burdens 
on a broad number of regulated parties. We also believed that the new 
C3 marine diesel market would provide a sufficient outlet for transmix 
distillate product in place of the 500 ppm LM diesel market. Thus, we 
believed the 500-ppm LM diesel transmix flexibility would no longer be 
needed after 2014. Hence, we requested comment on whether we should 
eliminate the 500-ppm LM transmix provisions in parallel with the 
implementation of the C3 marine diesel sulfur requirement. This 
approach allowed for a significant reduction in the regulatory burden 
on a large number of industry stakeholders through the retirement of 
the diesel program's designate-and-track and fuel marker requirements. 
All of the comments that we received on the proposed rule were 
supportive of the approach. Consequently, we finalized the approach in 
the C3 marine final rule that was published on April 30, 2010.\10\
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    \9\ Control of Emissions From New Marine Compression-Ignition 
Engines at or Above 30 Liters per Cylinder; Proposed Rule, 74 FR 
44442 (August 28, 2009).
    \10\ Control of Emissions From New Marine Compression-Ignition 
Engines at or Above 30 Liters per Cylinder; Final Rule, 75 FR 22896 
(April 30, 2010).
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    EPA received a petition from a group of transmix processors on June 
29, 2010, requesting that the Agency reconsider and reverse the 2014 
sunset date for the 500-ppm LM transmix flexibility.\11\ A parallel 
petition for judicial review was filed with the U.S. Court of Appeals, 
D.C. Circuit.\12\ The transmix processors stated that they were not 
aware of the changes to the 500-ppm LM transmix provisions until after 
they were finalized. The petitioners also stated that they believe that 
the C3 marine market would not be a viable outlet for their distillate 
product. Not only are most locations for refueling C3 marine vessels 
not located near transmix facilities, but C3 marine terminals also do 
not lend themselves easily to the receipt of small batches of transmix 
distillate product by tank truck. It might be possible over time to 
modify C3 terminals and fueling operations to receive transmix, but 
such changes were not within their control. Until such time the 
locomotive and marine diesel market remained the only viable market. 
Based on the additional input that we received from transmix processors 
and other stakeholders in the fuel distribution system during our 
consideration of the petition and the comments on the NPRM, EPA 
believes that it is appropriate to reinstate the 500-ppm diesel 
transmix flexibility beyond 2014.\13\
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    \11\ ``Petition to Reconsider Final Rule: Control of Emissions 
from New Marine Compression Ignition Engines at or Above 30 Liters 
per Cylinder; Final Rule,'' 75 FR 22,896 (April 30, 2010), Letter to 
EPA Administrator Lisa Jackson dated June 29, 2010, from Chet 
Thompson of Crowell and Moring LLP, on behalf of Allied Energy 
Company, Gladieux Trading and Marketing, Insight Equity Acquisition 
Partners, LP, Liquid Titan, LLC, and Seaport Refining and 
Environmental, LLC.
    \12\ Petition for Review, United States Court of Appeals for the 
District of Columbia Circuit, Petitioners, Allied Energy Company, 
Gladieux Trading and Marketing, Insight Equity Acquisition Partners, 
LP, LiquidTitan, LLC, and Seaport Refining and Environmental LLC, v. 
Respondent, U.S. Environmental Protection Agency, Case 10-1146, 
Document 1252640, Filed 06/29/2010.
    \13\ See Section IV of today's notice for our summary and 
analysis of comments.
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    These amendments will provide significant regulatory relief for 
transmix processors and pipeline operators to allow the petroleum 
distribution system to function efficiently while contributing to 
transition the market to virtually all ultra-low sulfur diesel fuel 
(ULSD, i.e. 15 ppm sulfur diesel fuel) and the environmental benefits 
it provides. Reinstating this transmix flexibility will provide a 
feasible and cost effective means for the continued operation of the 
fuel distribution system under our ULSD program regulations as the 
locomotive and marine market transitioned to equipment that required 
the use of ULSD and until such time as alternative methods of treatment 
or disposal for transmix can be developed. As the locomotive and marine 
engine fleet turns over to equipment that require the use of ULSD, this 
flexibility will naturally phase out.\14\ Providing additional time for 
transmix processors and pipeline operators will allow them to develop 
other markets for transmix, including perhaps the C3 marine market, 
export, or perhaps treatment technology. Therefore, extending this 
flexibility would reduce the overall burden on industry of compliance 
with EPA's diesel sulfur program and facilitate a smoother transition 
of the entire market to ULSD. EPA will consider removing the 500-ppm 
transmix flexibility when it appears that it no longer serves a 
purpose.
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    \14\ The useful life of LM engines can exceed 40 years. In the 
2011 edition of ``Railroad Facts,'' the Association of American 
Railroads reported that in 2010 approximately 35% of the locomotive 
fleet was at least 21 years old.
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B. Expansion of the Diesel Transmix Provisions To Include the Northeast 
Mid-Atlantic Area

    The nonroad diesel rule specified that the small diesel refiner, 
credit, and transmix provisions would not apply in the Northeast Mid-
Atlantic area. Hence, all LM diesel fuel shipped from refineries, 
transmix processors, and importers for use in the NEMA area was 
required to meet a 15-ppm sulfur standard beginning June 1, 2012 when

[[Page 75872]]

the 15-ppm standard becomes effective for large refiners and 
importers.\15\ This approach allowed the NEMA area to be exempted from 
fuel marker provisions that are a component of the compliance assurance 
provisions associated with the small diesel refiner, credit, and 
transmix provisions. As discussed previously a significant factor in 
the decision made in the nonroad diesel rule to exclude the NEMA from 
the diesel transmix provisions was our assessment that the heating oil 
market provided a sufficient outlet for transmix distillate product in 
this area. Since the publication of the nonroad diesel rule in 2004, a 
number of states in the NEMA area have moved towards implementing a 15-
ppm sulfur standard for heating oil. A significant fraction of heating 
oil in the area will be subject to a 15-ppm sulfur standard beginning 
in 2012, and it is likely that other states will adopt a 15-ppm sulfur 
standard for heating oil in the following years.
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    \15\ LM diesel fuel in terminals located in the NEMA area is 
subject to a 15-ppm sulfur standard beginning August 1, 2012. LM 
diesel fuel at retailers and wholesale purchaser consumers must meet 
a 15-ppm sulfur standard beginning October 1, 2012.
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    Transmix processors and other fuel distributors in the NEMA area 
stated that they were concerned that the changing state heating oil 
specifications would impact their ability to market transmix distillate 
product beginning in 2012. They requested that EPA extend the 500-ppm 
LM flexibility to the NEMA area by 2012 to lessen the impact on the 
fuel distribution system of complying with more stringent federal and 
state distillate sulfur standards. Consequently, we requested comment 
in the NPRM on expanding the 500-ppm LM transmix flexibility to include 
the NEMA area. Based on our review of the comments on the NPRM, today's 
final rule expands the 500-ppm transmix flexibility to include the NEMA 
area beginning on the effective date of today's rule.\16\
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    \16\ See Section IV in today's notice for the summary and 
analysis of comments.
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    Allowing 500-ppm LM from transmix to be used outside of the NEMA 
area after 2014 reinstates a flexibility that was withdrawn by the C3 
marine final rule. Allowing 500-ppm LM to be used inside the NEMA area 
provides flexibility that was previously not included in EPA's diesel 
program to offset a portion of the flexibility lost with the transition 
to ultra-low sulfur heating oil in the NEMA. This will serve to allow 
the ULSD and ultra-low sulfur heating oil provisions to continue to be 
successfully implemented and maintain the integrity of the petroleum 
distribution system. Otherwise, as in the discussion for outside the 
NEMA above, without a practical outlet for the sale/disposal of 
transmix, the pipeline distribution system which provides much of the 
fuel to the NEMA could not continue to function.
    Expanding the transmix flexibility to the NEMA area will provide 
significant regulatory relief for transmix processors and pipeline 
operators to allow the petroleum distribution system to function 
efficiently while continuing to transition the market to virtually all 
ultra-low sulfur diesel fuel (ULSD, i.e. 15 ppm sulfur diesel fuel) and 
the environmental benefits it provides. The same compliance assurance 
requirements that we are finalizing for use outside of the NEMA area 
will be applied within the NEMA area. A substantial fraction of the 
transmix processing industry markets fuel within the NEMA area. Thus, 
the additional time to prepare for a transition to other markets for 
transmix distillate product that is afforded by the extension of the 
500-ppm LM transmix flexibility to the NEMA is particularly 
significant.

C. Transmix Flexibility Emission Effects

    It is difficult to assess the environmental consequences of the 
diesel transmix provisions finalized by today's action because it is 
difficult to know how the market would function without today's action. 
Based on the feedback received, desulfurization of transmix at either 
transmix facilities or refineries is not currently viable and the C3 
marine and other potential markets are not set up to handle the receipt 
and use of transmix. Thus, while it is possible to assess the emission 
impacts associated with the use of transmix in lieu of ULSD in 
locomotive and marine applications, it is difficult to know what the 
baseline for comparison would be, as all other options at present 
appear infeasible. Nevertheless, in order to provide an estimate of the 
potential emission impacts we have conservatively modeled a base case 
where we assume, as in the C3 marine final rule, that the diesel 
transmix could in fact be consumed in the C3 market. Other possible 
assumptions (e.g., export, shipped to a refinery for reprocessing) 
would only add transport distance, increasing the emissions in the base 
case.
    Thus, to evaluate the environmental consequences of the diesel 
transmix provisions finalized by today's notice, we compared the 
potential increase in emissions of sulfate particulate matter (PM) and 
sulfur dioxide (SO2) from the use of 500 ppm LM from 
transmix in older engines to the additional transportation emissions 
associated with shipment of transmix to the Category 3 (C3) marine 
market which might be avoided by allowing continued access to the 500 
ppm LM market. Markets for locomotive and marine diesel tend to be 
nearer to transmix processing facilities than markets for C3 marine 
diesel.\17\ Therefore, the diesel transmix provisions in today's rule 
will result in a reduction in nitrogen oxides (NOX), 
volatile organic compounds (VOCs), carbon monoxide (CO), PM, and toxics 
as well as other emissions that would otherwise be associated with 
transporting diesel transmix to the more distant markets.
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    \17\ Transmix processing facilities are located at downstream 
locations on refined petroleum product pipelines. Such pipeline 
locations are typically not located close to the coasts where a C3 
market exists. A number of such locations are located in the center 
of the United States. Locomotive refueling facilities are located 
throughout the United States and C2 marine refueling locations are 
located on navigable rivers as well as on the coasts.
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    We estimate that approximately 450 million gallons of distillate 
fuel per year is produced from transmix.\18\ However, some of this 
transmix distillate product would continue to be used as heating oil 
regardless of whether the diesel transmix provisions were finalized as 
long at some of that market remained higher than 15 ppm. Given that 
today's rule includes provisions to expand the transmix flexibility to 
the NEMA area where the majority of heating oil is used, we estimate 
that as much as 337 million gallons per year of transmix distillate 
product might be used in older LM engines initially, and then decline 
over time as the locomotive and marine diesel fleet transitions to 
engines requiring ULSD.\19\ An estimated 6,994 million gallons of 
diesel fuel was estimated to be used in locomotive and marine engines 
in 2004.\20\ Thus, the volume of transmix distillate product that may 
be used in LM engines represents at most 4.8% of the total diesel fuel 
use in such engines. Although some batches of diesel transmix may 
approach the 500 ppm sulfur limit, the average sulfur content

[[Page 75873]]

is considerably less. Comments on the NPRM stated that the sulfur 
content of diesel transmix is often 100 ppm to 200 ppm. Based on these 
comments, we have assumed for this analysis that the sulfur content of 
diesel transmix will average about 150 ppm. When burned in non-catalyst 
equipped engines, the vast majority (approximately 98 percent) of 
sulfur in diesel fuel comes out of the exhaust as SO2, with 
the remainder coming out as H2SO4 (sulfate PM). 
Thus, as shown in Table 1, SO2 emissions from locomotive and 
marine diesel engines would be expected to rise nationwide by 
approximately 321 tons, and sulfate PM emissions by about 26 tons.
---------------------------------------------------------------------------

    \18\ Based on information provided by transmix processors, we 
estimate that approximately 750 million gallons per year of transmix 
is produced annually, approximately 60% of the transmix-derived 
product is distillate fuel, and the remainder is gasoline.
    \19\ We estimate that approximately 50 percent of diesel 
transmix is produced by pipelines that serve the NEMA area. We 
believe that it is reasonable to assume that 50 percent of the 
diesel transmix within the NEMA area will continue to be used as 
heating oil despite access to the LM market. Thus, we estimate that 
25 percent of all diesel transmix will continue to be used in 
heating oil.
    \20\ Regulatory Impact Analysis: Control of Emissions of Air 
Pollution from Locomotive Engines and Marine Compression-Ignition 
Engines Less Than 30 Liters per Cylinder, EPA420-R-08-001, February 
2008.
---------------------------------------------------------------------------

    At the same time, emissions from highway diesel engines would be 
expected to decline due to the reduced distances associated with 
transporting diesel transmix to locomotive and marine diesel terminals 
instead of C3 marine terminals. Based on an assessment of the locations 
of potential C3 marine outlets as opposed to locomotive and marine 
outlets, and based on comments we received on the proposal, we estimate 
that allowing the use of transmix in the locomotive and marine diesel 
market would decrease trucking distances by an average of approximately 
250 miles (one way). In reality trucking distances and associated 
emissions could be considerably higher in order to reach a refinery 
that might be reconfigured to process transmix, or to be exported. 
Based on an assumed capacity for a transport truck of 8,000 gallons of 
transmix distillate, and EPA's emission factors for transport trucks, 
as shown in Table 1, allowing diesel transmix to continue to be burned 
in the older locomotive and marine applications thereby resulting in 
deferred additional truck transport of transmix distillate would 
decrease nationwide emissions of NOX by 194 tons, VOC by 19 
tons, CO by 58 tons, PM2.5 by 7 tons, SO2 by less 
than one ton, and small reductions in various air toxic emissions.\21\
---------------------------------------------------------------------------

    \21\ The deferred additional truck transport would also avoid 
the production of 47,380 tons of CO2 emissions. An 
additional 4,220 thousand gallons of diesel fuel would be consumed 
to support the increased truck transport with an associated increase 
in diesel fuel costs of 17 million dollars.

                                                      Table 1--Nationwide Annual Emissions Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Transmix
                                                                    Emissions                         Net emissions                        flexibility
                                                                effects from use  Emission effects   effects of the     ULSD programs       emissions
                                                                 of TDP instead     from avoided        transmix          emissions        effects as
                                                                of ULSD in older  transport of TDP     flexibility     effects (short     percentage of
                                                                   LM engines       (short tons)      (short tons)          tons)       emission effects
                                                                  (short tons)                                                          of ULSD programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOX...........................................................                 0             - 194             - 194       - 4,023,162           - 0.005
VOC...........................................................                 0              - 19              - 19         - 160,350           - 0.012
CO............................................................                 0              - 58              - 58       - 1,912,706           - 0.003
PM............................................................              + 26               - 7              + 19         - 264,492           + 0.007
SO2...........................................................             + 321            - 0.35             + 321         - 516,269           + 0.062
Benzene.......................................................                 0            - 0.19            - 0.19           - 2,330           - 0.008
Formaldehyde..................................................                 0            - 1.45            - 1.45          - 16,816           - 0.009
Acetaldehyde..................................................                 0            - 0.53            - 0.53           - 6,887           - 0.008
1,3-Butadiene.................................................                 0            - 0.11            - 0.11             - 882           - 0.012
Acrolein......................................................                 0            - 0.06            - 0.06             - 200           - 0.030
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As can be seen from Table 1, the diesel transmix provisions being 
finalized today provide on balance small reductions in emissions of 
NOX, VOC, CO, and toxics and small net increases in PM and 
SO2. These emission effects will decline over time as the 
potential market for 500 ppm LM diminishes and eventually disappears. 
Since this final rule is taking an action to allow the ULSD program to 
be feasibly implemented, the emissions effects of this action must be 
viewed in the context of the overall ULSD regulations that this FRM is 
part of. As further shown in Table 1, the net emission impacts of all 
pollutants of this action is very small and we believe will have a very 
small impact in comparison to the benefits of the entire ULSD program 
that is enabled by today's action. The annual emissions reductions 
achieved by EPA's ULSD regulations are enormous compared to the effects 
of this rulemaking. Thus, the clean diesel programs will be providing 
very large emissions benefits which are little affected by the transmix 
flexibility. This transmix flexibility was judged to be a necessary 
component of the clean diesel program when it was finalized. Therefore, 
it is appropriate that the transmix flexibility be reinstated and 
expanded to the NEMA area. The use of 500 ppm LM from transmix would be 
limited to older technology engines that do not possess sulfur-
sensitive emissions control technology. We believe that the 500 ppm LM 
segregation and other associated requirements would prevent misfueling 
of sulfur-sensitive engines.

D. Compliance Assurance Provisions

    Industry stakeholders suggested alternative enforcement mechanisms 
to support the extended flexibility which would not necessitate 
reinstating and expanding the designate-and-track and fuel marker 
provisions that were retired by the C3 marine final rule. Reinstatement 
and expansion of these provisions would likely place an unacceptable 
burden on a large number of stakeholders, most of whom would not handle 
500 ppm LM. The suggested alternative enforcement mechanism would 
impose minimal additional reporting and recordkeeping burdens only on 
the parties that produce, handle, and use 500 ppm LM. We believe that 
this alternative enforcement approach (which we proposed in the NPRM) 
will meet the Agency's goals of ensuring that the pool of 500 ppm LM is 
limited to transmix distillate and that 500 ppm LM is not used in 
sulfur-sensitive emissions control equipment.\22\
---------------------------------------------------------------------------

    \22\ See Section IV in today's notice for the summary and 
analysis of comments.
---------------------------------------------------------------------------

    The compliance assurance provisions that we are finalizing to 
support the extension of the diesel transmix flexibility outside the 
NEMA area and Alaska beyond 2014 and the expansion of the flexibility 
to within the NEMA area are similar to those that were used to support 
the small refiner flexibilities in Alaska during the phase-in of EPA's 
diesel sulfur program.\23\ In addition to

[[Page 75874]]

registering as a refiner and certifying that each batch of fuel 
complies with the fuel quality requirements for 500 ppm LM diesel fuel, 
producers of 500 ppm transmix distillate product would be required to 
submit a compliance plan for approval by EPA. This compliance plan 
would provide details on how the 500 ppm LM would be segregated through 
to the ultimate consumer and its use limited to the legacy LM fleet. 
The plan would be required to identify the entities that would handle 
the fuel and the means of segregation. We believe that it is 
appropriate to limit the number of entities that would be allowed to 
handle the fuel between the producer and the ultimate consumer in order 
to facilitate EPA's compliance assurance activities.\24\ Based on 
conversations with transmix processors, we believe that specifying that 
no more than 4 separate entities handle the fuel between the producer 
and the ultimate consumer would not hinder the ability to distribute 
the fuel.\25\ The plan would need to identify the ultimate consumers 
and include information on how the product would be prevented from 
being used in sulfur-sensitive equipment.
---------------------------------------------------------------------------

    \23\ See 40 CFR 80.554(a)(4).
    \24\ An entity is defined as any company that takes custody of 
500 ppm LM diesel fuel.
    \25\ In most cases, fewer entities would take custody of the 
product. In many cases, only a single entity (a tank truck operator) 
would be in the distribution chain between the transmix processor 
and the ultimate consumer. However, we understand that as many as 4 
separate entities may handle the product between the producer and 
ultimate consumer if it is shipped by pipeline: the tank truck 
operator to ship the product from the producer to the pipeline, the 
pipeline operator, the product terminal that receives the fuel from 
the pipeline, and another tank truck operator to ship the product to 
the ultimate consumer from the terminal.
---------------------------------------------------------------------------

    We understand that some transmix processors currently rely on 
shipment by pipeline to reach the 500 ppm locomotive diesel market.\26\ 
As a result, the regulations allow 500 ppm LM to be shipped by pipeline 
provided that it does not come into contact with distillate products 
that have a sulfur content greater than 15 ppm. The compliance plan 
would need to include information from the pipeline operator regarding 
how this segregation would be maintained. Discussions with transmix 
processors indicate that this requirement would not limit their ability 
to ship 500 ppm LM by pipeline. If 500 ppm LM was shipped by pipeline 
abutting 15 ppm diesel, the volume of 500 ppm LM delivered would likely 
be slightly greater than that which was introduced into the pipeline as 
a consequence of cutting the pipeline interface between the two fuel 
batches into the 500 ppm LM batch. This small increase in 500 ppm LM 
volume would be acceptable.
---------------------------------------------------------------------------

    \26\ 500 ppm LM diesel fuel is shipped by a short dedicated 
pipeline from a product terminal to a locomotive refueling facility.
---------------------------------------------------------------------------

    To provide an additional safeguard to ensure that volume of 500 ppm 
LM diesel fuel does not swell inappropriately, the volume increase 
during any single pipeline shipment must be limited to 2 volume percent 
or less. This limitation on volume swell to 2 volume percent or less is 
consistent with the limitation in 40 CFR 80.599 (b)(5) regarding the 
allowed swell in volume during the shipment of highway diesel fuel for 
the purposes of the determination of compliance with the now expired 
volume balance requirements under 40 CFR 80.598(b)(9)(vii)(B). Industry 
did not object to this requirement, and therefore, we believe that 
limiting the volume swell of 500 ppm LM diesel fuel during shipment by 
pipeline to 2 volume percent or less should provide sufficient 
flexibility.
    Product transfer documents (PTDs) for 500 ppm LM diesel are 
required to indicate that the fuel must be distributed in compliance 
with the approved compliance assurance plan. Entities in the 
distribution chain for 500 ppm LM diesel fuel are required to keep 
records on the volumes of the 500 ppm that they receive from and 
deliver to each other entity. Based on input from fuel distributors, 
keeping these records will be a minimal additional burden, as discussed 
in section IV. Such entities are also required to keep records on how 
the fuel was transported and segregated. We would typically expect that 
the volumes of 500 ppm LM delivered would be equal to or less than 
those received unless shipment by pipeline occurred. Some minimal 
increase in 500 ppm LM volume would be acceptable due to differences in 
temperature between when the shipped and received volumes were measured 
and interface cuts during shipment by pipeline. Entities that handle 
500 ppm LM are required to calculate a balance of 500 ppm LM received 
versus delivered/used on an annual basis. If the volume of fuel 
delivered/dispensed is greater than that received, EPA would expect 
that the records would indicate the cause. If an entity's evaluation of 
their receipts and deliveries of 500 ppm LM fuel indicated 
noncompliance with the product segregation requirements, the custodian 
would be required to notify EPA. All entities in the 500 ppm LM 
distribution chain are required to maintain the specified records for 5 
years and provide them to EPA upon request.

IV. Summary and Analysis of Comments

Need for the Proposed Flexibility

    Comments from transmix processors and pipeline operators support 
allowing 500 ppm diesel fuel to be produced from transmix for use in 
older LM engines outside of the NEMA area and Alaska after 2014, and 
the expansion of this flexibility to within the NEMA area. These 
commenters stated that access to the 500 ppm LM market is critical due 
to the limited alternative markets for transmix distillate product and 
the need for such a market to maintain the flow of products through 
pipelines. Some transmix processors stated that the C3 marine market is 
not a viable outlet for their distillate product due to the long 
shipping distances and limited ability of many C3 terminals to receive 
shipments by tank truck. Transmix processors and pipeline operators 
stated that there would be significant negative consequences if they 
were not allowed additional time to produce 500 ppm LM diesel fuel. 
Some transmix processors stated that their only alternative may be to 
shut down. In such a case, transmix would need to be trucked long 
distance to refineries for reprocessing. They also stated that 
pipelines could be in jeopardy of shutting down if transmix could not 
be cleared in a timely manner from storage facilities in the system. 
They noted that this could result in disruptions to the fuel supply. 
One pipeline operator and transmix processor stated that lack of access 
to the 500 ppm LM market for transmix distillate product could create 
barriers to the continued shipment of jet fuel (with sulfur content as 
high as 3000 ppm) by pipeline. This is because jet fuel is the only 
high sulfur product shipped by the pipeline operator, and if the 
operator bars jet fuel from its system the pipeline's transmix 
processors may be able to produce distillate product that meets a 15 
ppm sulfur specification. If the pipeline operator were able to produce 
a 15 ppm sulfur transmix distillate product, the pipeline's transmix 
processing facilities would no longer need to use the 500-ppm LM 
transmix flexibility, since the fuel could readily be sold into the 
highway and NRLM markets. The commenter stated, however, that 
eliminating jet fuel transportation by pipeline would increase 
transport-related emissions, costs, and safety risks of alternative 
transportation of jet fuel.
Response
    We agree with comments that transmix processors, pipelines, and the 
fuel distribution system as a whole need

[[Page 75875]]

additional time to produce 500 ppm LM diesel fuel from transmix. 
Providing additional time will help avoid potential fuel supply 
disruptions and reduce the overall burden of EPA's diesel sulfur 
program as transmix processors and pipeline operators adjust to the 
continued reduction in outlets for >15ppm diesel fuel.
    The 500-ppm LM transmix flexibility that was originally included in 
the diesel program was necessary to allow the ULSD program to be 
feasibly implemented and enable the large national emissions reductions 
that it provided. The C3 final rule discontinued the 500-ppm LM 
flexibility because the information available to us at the time 
indicated that this would not have a significant negative impact on the 
handling of transmix in the distribution system. We also believed at 
the time that continuing the flexibility after 2014 would unacceptably 
increase compliance burdens given the introduction of C3 marine fuel. 
Since that time, we received input from transmix processors and 
pipeline operators that discontinuing this flexibility could have 
substantial negative impacts on their operations and the fuel 
distribution system as a whole. We have also been able to develop an 
alternative enforcement mechanism contained in this final rule which 
can effectively control the production and distribution of 500 ppm LM 
from transmix while resulting in a minimal compliance burden. Had we 
had this information when the C3 rule was finalized, we would not have 
discontinued the 500-ppm transmix flexibility in the C3 marine final 
rule.

Expansion of the Proposed Flexibility to Within the NEMA Area

    Commenters who support expanding the transmix flexibility to the 
NEMA area stated that the ability to market transmix distillate product 
as heating oil is being progressively reduced by the adoption by states 
of a 15 ppm sulfur standard for heating oil. They claim that not 
allowing the use of 500 ppm LM in the NEMA area creates significant 
costs and transportation overhead, and complexity, as well as increased 
transportation-related emissions, to move the fuel outside the area. 
One pipeline stated that some of the largest volume processors are 
located in the NEMA area.
Response
    When we finalized the original transmix flexibility, we concluded 
that the heating oil market would provide a sufficient outlet for 
transmix distillate product within the NEMA area. This allowed us to 
not extend the 500ppm LM transmix flexibility to within the NEMA area 
at the time, which allowed us to avoid imposing the marker provisions 
in the NEMA. Since that time, several states in the NEMA area have 
begun implementing a 15 ppm sulfur standard for heating oil, which is 
substantially limiting the ability to market transmix distillate 
product as heating oil. Given this development and the availability of 
an appropriate enforcement mechanism for use in the NEMA area, the same 
rationale that supports the need for reinstating the transmix 
flexibility inside the NEMA areas applies for expanding it outside of 
the NEMA area. Not only is it costly and inefficient to ship transmix 
outside of the NEMA area, but if no suitable market can be found the 
distribution of fuel to the NEMA area could be severely constrained. 
This would be particularly a concern during times when the market is 
already experiencing disruptions (e.g., following hurricanes).

Duration of the Flexibility

    Commenters that supported the proposed flexibility stated that EPA 
should not set an expiration date for the flexibility at this time. 
However, the Engine Manufacturers Association (EMA) stated that EPA 
should commit to review whether to sunset the 500-ppm provisions as 
part of any future rulemaking associated with either heating oil or the 
C3 marine sulfur requirements.
Response
    We acknowledge that it is unclear when turnover of the LM fleet to 
equipment that requires 15 ppm fuel will render the 500-ppm LM transmix 
flexibility no longer useful. We agree that EPA should consider 
removing the flexibility when it appears that it no longer serves a 
purpose. However, we do not believe that it is appropriate or necessary 
to commit to a specific timeline when such a review will take place. LM 
equipment lasts for many years, and the location of such older 
equipment in relation to the transmix facilities will have to factor 
into any consideration of whether the provision remains to be useful. 
EPA will continue to monitor fleet turn over and stakeholder 
perceptions regarding when it would be appropriate to retire the 500-
ppm LM transmix flexibility.

Compliance Assurance

    Commenters that supported the proposal stated that the same 
enforcement mechanisms proposed for use outside the NEMA area and 
Alaska could be applied within the NEMA area.
    EMA stated that although they did not object to the adoption of the 
envisioned transmix flexibility, they have concerns about its 
implementation. EMA stated that it was concerned that its members could 
experience increased in-use emissions compliance liability associated 
with misfueling equipment which requires the use of 15 ppm sulfur 
diesel fuel. EMA stated that EPA should shield engine manufacturers, 
vehicles, and equipment that require 15 ppm diesel from potential 
liability resulting from defect reporting, emissions warranty 
obligations, and emission-recall requirements arising from, or in 
connection with misfueling with 500 ppm diesel.
    EMA stated that sufficient infrastructure must be in place to 
segregate 500 ppm from 15 ppm and sufficient training of parties that 
handle 500 ppm must be conducted. EMA further stated that if the 
required infrastructure and training are not in place, then only 15 ppm 
diesel fuel should be allowed. EMA stated that 500 ppm LM must be 
identified and tracked to help ensure that it is only used only in 
engines that do not require 15 ppm diesel fuel. EMA also stated that 
the SY-124 marker should be used to identify 500 ppm LM diesel to help 
prevent misfueling. EMA stated that EPA should eliminate the incentive 
to misfuel by eliminating the accessibility and/or potential financial 
benefit of using higher sulfur fuels.
    EMA stated that EPA should ensure adequate review and approval of 
transmix fuel distribution compliance plans to assure the availability 
of 15 ppm diesel fuel for those engines that need it. EMA states that 
compliance plan approval documents should include information regarding 
enforcement penalties associated with misfueling.
Response
    We believe that the enforcement mechanisms we are finalizing will 
provide an appropriate level of assurance that 500 ppm LM will not 
infiltrate the 15 ppm diesel fuel distribution system and not be used 
to misfuel engines which require the use of 15 ppm fuel. The compliance 
plan required to be submitted by producers of 500 ppm LM will provide 
details on how 500 ppm LM will be segregated through to the ultimate 
consumer and that its use is limited to the legacy LM fleet. The 
compliance plan must demonstrate that the end users of 500 ppm LM will 
also have access to 15 ppm diesel fuel for use in those engines

[[Page 75876]]

that require the use of 15 ppm diesel fuel.
    The compliance plan is required to identify the entities that will 
handle the fuel and the means of segregation. The product transfer 
documents for 500 ppm LM that are required to be retained by all 
parties in the fuel distribution system will provide information on the 
use restrictions for the fuel. EPA approvals of compliance plans will 
include information regarding the enforcement penalties associated with 
misfueling. Given the rather limited and contained nature of the 
refueling infrastructure for LM applications in comparison to other 
highway and nonroad diesel applications, we believe these provisions 
will be entirely feasible and sufficient.
    We do not believe that requiring the use of the SY 124 maker in 500 
ppm LM after 2014 would be useful in helping to prevent the misfueling 
of engines that require the use of 15 ppm diesel fuel. The SY124 marker 
is not visible in itself. Hence, its presence would not serve as a 
visible warning to help deter misfueling. In any event, parties do not 
typically see the fuel as it is being dispensed into a fuel tank. Given 
that an analytical test would be required to detect the marker, it is 
more appropriate to test the sulfur content of the fuel. The SY 124 
marker requirements for 500 ppm LM diesel fuel that were effective from 
June 1, 2010 through May 31, 2012, were put in place to help ensure 
that 500 ppm LM from larger refiners did not inappropriately shift into 
the limited 500 ppm NR diesel fuel pool from small refiners, credit 
users, and transmix processors. These marker requirements were 
discontinued because 500 ppm LM could no longer be produced by larger 
refiners after May 31, 2012. The marker requirements for 500 ppm LM 
were never intended to help prevent the misfueling of LM equipment that 
requires the use of 15 ppm diesel fuel with 500 ppm LM.
    We disagree with EMA's comments that EPA should take additional 
actions to shield engine manufacturers, vehicles, and equipment that 
require 15 ppm diesel from potential liability resulting from defect 
reporting, emissions warranty obligations, and emission-recall 
requirements arising from, or in connection with misfueling with 500 
ppm diesel. EPA has a long history of including flexibilities in its 
diesel program to allow the limited use of higher sulfur fuels in older 
vehicles and equipment that are not sulfur sensitive. The mechanisms 
designed to assign culpability and the consequences for misfueling are 
long established and are functioning adequately. Hence, we believe that 
providing such a blanket waiver of liability is neither necessary nor 
appropriate.

Emission Impacts

    Transmix processors stated that EPA significantly underestimated 
the potential increase in emissions from additional truck transport of 
transmix distillate product if the envisioned flexibility is not 
finalized. One transmix processor in the NEMA area stated that they are 
currently shipping their transmix distillate product over 800 miles to 
find a market, greatly exceeding the 150 miles assumed by EPA in its 
analysis. They also noted the sulfur content for transmix distillate 
product is often in the range of 100 to 200 ppm, which is substantially 
lower that the assumed average sulfur content in EPA's emissions 
analysis. They stated that EPA underestimated the environmental 
benefits of implementation the proposed transmix flexibility by at 
least 40%.
    A comment from a private individual was opposed to extending the 
date beyond which 500 ppm LM diesel fuel could be sold. This commenter 
stated that although the envisioned transmix flexibility might be 
environmentally beneficial on a national basis, the emissions would 
shift from one locale to another, affecting different people. The 
commenter stated that extending the use of 500 ppm LM would have 
substantial adverse health effects. The commenter stated that five 
minute exposures to sulfur dioxide, which is produced from sulfur in 
diesel when it is combusted, can trigger asthma attacks, which can be 
fatal. In addition, the commenter stated that relatively short term 
exposures to PM2.5, which is also produced from combustion 
of diesel, can have adverse health impacts including death.
Response
    The Agency is very concerned about the localized impacts of 
emissions. However, we do not believe that there are potential 
localized impacts from the transmix flexibility that warrant not 
finalizing this action. In addition, not finalizing this action would 
subject the fuel distribution system to the disruption and burden 
resulting from the absence of sufficient flexibility for disposal of 
diesel transmix. The commenter states that the transmix flexibility 
will result in a shift of emissions from one area to another. Under the 
scenario we evaluated, we note that NOX, VOC, PM, 
SO2, CO, and toxics emissions will be avoided on our 
roadways by avoiding the need to transport transmix distillate product 
by truck to distant markets or transmix to refinery processing 
facilities, while at the same time sulfate PM and SO2 
emissions may be increased slightly from the locomotive and marine 
applications along our rail lines and waterways where the transmix 
distillate is burned.\27\ In the case of both the small emissions 
increases and decreases, these emissions impacts will be distributed 
over the broad areas where such equipment operates. The small changes 
in emission levels are expected to have very minimal effect on 
pollutant concentrations in any particular area. The increased 
concentrations resulting from these changes are likely to be 
overwhelmingly offset by the significant decreases in pollutant 
emissions (as a result of the ULSD program) in areas dominated by 
diesel engine sources, such as locations downwind of marine ports and 
rail lines. Studies in those locations report peak SO2 
concentrations below the National Ambient Air Quality Standard for 
SO2 and well below the level at which respiratory symptoms 
are observed in some individuals with asthma.28, 29 
Furthermore, the diesel transmix flexibility, as in the original 
Nonroad, Locomotive, and Marine diesel final rulemaking was necessary 
to allow the distribution system to function while providing ULSD 
product. Without it the emission benefits of the ULSD program could not 
be achieved. When the diesel transmix provisions are viewed in light of 
the broader ULSD regulations of which they are a part, EPA is confident 
that any small increase in local SO2 or PM emissions from 
the burning of transmix will be more than offset by the overall 
emissions reductions resulting from EPA's ULSD program.\30\ Thus, even 
in areas where this transmix distillate product will be burned, the 
clean diesel program will be providing very large emission benefits. As 
the locomotive and marine engines fleet progressively turns over to 
engines that require the use of 15 ppm diesel fuel, the use of 500 ppm 
LM will gradually diminish and eventually disappear. EPA intends to 
evaluate in a later action

[[Page 75877]]

when the 500 ppm LM flexibility is no longer useful and should be 
retired.
---------------------------------------------------------------------------

    \27\ See Section III.C in today's rule for a discussion of the 
emissions effects of the transmix flexibility.
    \28\ Ault, A.P.; Gaston, C.J.; Wang, Y.; Dominguez, G.; 
Thiemens, M.H.; Prather, K.A. (2010) Characterization of the single 
particle mixing state of individual ship plume events measured at 
the Port of Los Angeles. Environ Sci Technol 44: 1954-1961.
    \29\ Vutukuru, S.; Dabdub, D. (2008) Modeling the effects of 
ship emissions on coastal air quality: A case study of southern 
California. Atmos Environ 42: 3751-3764.
    \30\ See Section III.C. of today's notice for a discussion of 
the small emissions effects of the transmix flexibility in 
comparison to the emissions benefits from the ULSD program.
---------------------------------------------------------------------------

    The generation of transmix is a necessary consequence of the 
transportation of the cleaner fuel required by those regulations within 
the current fuel transportation system, and allowing it to be utilized 
in nearby locomotive and marine diesel applications is preferable to 
subjecting the market to supply disruptions or at a minimum requiring 
further transportation of fuel through methods that would increase 
transportation-related emissions.

Due Process

    A private individual stated that although extending the date beyond 
which 500 ppm LM diesel fuel could be sold may be environmentally 
beneficial on a national basis, the shift of emissions from one locale 
to another associated with the flexibility means that the pollution 
will affect different people. The commenter stated that such a shift in 
emissions is unconstitutional, claiming it violates both substantive 
and procedural due process. The commenter stated that procedural due 
process requires more notice than a direct final rule in the Federal 
Register, which the commenter states almost no one reads. Moreover, the 
commenter states that substantive due process does not allow the 
federal government to authorize the killing of U.S. citizens for the 
``convenience'' of a small group of corporations that own transmix 
processing facilities.
Response
    We disagree with the comment that EPA's action is not 
constitutional by violating substantive due process. The commenter 
makes no attempt to justify the statement that EPA is violating 
substantive due process, and provides no legal support for such a 
statement. EPA is acting well within its authority under Title II of 
the Clean Air Act to develop and implement a diesel fuel program. 
Obviously, EPA is not authorizing the killing of U.S. citizens, and, as 
discussed above, the clean diesel program, which this final rule 
supports, actually reduces harmful emissions from diesel engines.
    We further disagree that EPA has not provided sufficient procedural 
due process. EPA published a proposed rule in parallel with the direct 
final rule that was withdrawn due to a negative comment. EPA's 
publication of proposed rules in the Federal Register follows the 
procedure laid out in the Clean Air Act and provides adequate legal 
notice under the Federal Register Act. Publication of proposed EPA 
rules in the Federal Register has been the normal method of providing 
notice for decades, and those wishing to know of EPA proposals are best 
served if EPA continues to use this approach consistently. EPA is 
taking this final action based on our consideration of the comments 
received on that proposed rule.

Effect of Rule on Analyses Under Other Laws

    A private individual stated that the proposed regulatory change 
would adversely impact many analyses under the National Environmental 
Policy Act (NEPA), State NEPAs, the Endangered Species Act, the 
National Historic Preservation Act, and various State laws which have 
assumed the use of 15 ppm sulfur LM diesel fuel. The comment claims 
that many of these analyses assume that 15 ppm sulfur will be used in 
locomotives and marine engines outside of NEMA and that the analyses 
will be incorrect. As an example, the commenter states that the 
Environmental Report for the proposed Amber Energy coal transferring 
facility at Port Morrow, Oregon, assumes that the locomotives and tugs 
will use 15 ppm sulfur diesel fuel. The commenter states that if EPA 
approves this rule, that analysis will be wrong.
    Another commenter representing transmix facilities, responding to 
the previous commenter, stated that the previous comment was general 
and unsupported and pointed to no specific analysis where 15 ppm sulfur 
is assumed, nor did it quantify any net reductions in air pollution 
that would occur. The commenter also stated that the previous commenter 
did not reference analytical assumptions or whether any analysis is 
based on use of 15 ppm sulfur in engines not otherwise required to use 
such fuel. The commenter notes that CAA rulemakings are exempt from 
NEPA and states that the previous commenter does not identify a 
specific nexus between the regulatory action and the Endangered Species 
Act or the National Historic Preservation Act. The commenter also 
states that in the specific example provided in the earlier comment, 
the facility mentioned is currently at the proposal stage and a 
decision has been made to conduct an Environmental Assessment for the 
facility under NEPA. The commenter stated that they believe that no 
final regulatory analysis has been completed that is dependent on the 
use of 15 ppm sulfur diesel.
Response
    EPA believes it is unlikely that the use of limited volumes of 500 
ppm diesel fuel produced from transmix would have a substantial effect 
on NEPA or other analyses, or that it would even be possible to predict 
what volumes of such fuel would be used in a specific local area, for 
the purposes of such an analysis. As discussed in section III.C., EPA's 
analysis of the potential emission impacts nationwide shows no 
significant impacts. Given the relatively small volume of diesel fuel 
produced by transmix compared to the total volume of diesel fuel used 
in locomotives or marine engines, it is unlikely that any single NEPA 
analysis would reach different conclusions. However, EPA notes that 
both NEPA and the Endangered Species Act, at a minimum, provide for 
reconsideration of significant new information where appropriate. To 
the extent that any analysis may have assumed the use of 15 ppm sulfur 
LM diesel fuel, it may be appropriate to review the analysis to 
determine whether any effect resulting from potential use of limited 
volumes of 500 ppm diesel fuel produced from transmix should be 
considered. As the second commenter notes, it is not clear that any 
final regulatory analysis has depended on use of 15 ppm LM diesel fuel 
and would be affected by this final rule. The use of such fuel may 
occur for reasons unrelated to this rule, such as an agreement that 
newer locomotives would be used in connection with the project.
    EPA also agrees with the second commenter that actions under the 
CAA are not subject to NEPA and that the initial commenter has provided 
no context or support for his allegations regarding any nexus between 
this action and analysis under the NEPA, the Endangered Species Act, 
the National Historic Preservation Act, or the ``various State laws'' 
referred to without citation by that commenter. In any case, as EPA 
notes above, the factual circumstances for this rule do not indicate 
any significant effect on any air pollution concentrations, and the 
commenter provides no information regarding the effect of this rule on 
interests affected by the other statutes.

Regulations Related to the Production of 500 ppm From Transmix by 
Pipeline Operators

    A pipeline operator stated that the current rulemaking does not 
provide certainty that pipelines can produce 500 ppm LM diesel and 
distribute that fuel to their customers without requiring the transmix 
to be moved to or through transmix processor facilities.

[[Page 75878]]

Response
    Pipeline processors produce 500 ppm LM from the interface mixture 
between batches of ULSD and higher sulfur distillates (i.e. jet fuel 
and heating oil). The production of such 500 ppm fuel by pipeline 
operators does not require the use of a distillation tower used by 
transmix processors to separate gasoline from distillate fuel.
    We agree that the regulations should be amended to provide clarity 
that pipeline operators as well as transmix processors can produce 500 
ppm LM from transmix. This was EPA's intent when the original 500 ppm 
LM transmix flexibility was finalized in the nonroad diesel rulemaking 
and has been EPA's policy since. However, the regulatory text was 
primarily focused on the production of 500 ppm LM by transmix 
processors.

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    Under Executive Order (EO) 12866 (58 FR 51735 (October 4, 1993)), 
this action is not a ``significant regulatory action.'' Accordingly, 
the Office of Management and Budget (OMB) waived review of this action 
under Executive Orders 12866 and 13563 (76 FR 3821 (January 21, 2011)).

B. Paperwork Reduction Act

    The information collection requirements in this rule will be 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The 
information collection requirements are not enforceable until OMB 
approves them.
    The reporting requirements apply to transmix processors and 
pipeline operators who produce diesel fuel from transmix (all of whom 
are refiners) and other parties (such as carriers or distributors) in 
the distribution chain who handle diesel fuel produced from transmix. 
The collected data will permit EPA to: (1) Process compliance plans 
from producers of diesel fuel from transmix; and (2) Ensure that diesel 
fuel made from transmix meets the standards required under the 
regulations at 40 CFR Part 80, and that the associated benefits to 
human health and the environment are realized. We estimate that 25 
producers of diesel fuel from transmix and 150 other parties may be 
subject to the proposed information collection. We estimate an annual 
reporting burden of 28 hours per producer of diesel fuel from transmix 
(respondent) and 8 hours per other party (respondent); considering all 
respondents (producers of diesel fuel from transmix and other parties) 
who would be subject to the proposed information collection, the annual 
reporting burden, per respondent, would be 11 hours. 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 the 
instructions; develop, acquire, install, and utilize technology and 
systems for the purpose 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 transit or 
otherwise disclose the information. Burden is as defined at 5 CFR 
1320.3(b).
    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, the Agency 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

    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; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of this action on small 
entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. This final 
rule will not impose any new requirements on small entities. The 
amendments to the diesel transmix provisions would lessen the 
regulatory burden on all affected transmix processors and provide a 
source of lower cost locomotive and marine diesel fuel to consumers.

D. Unfunded Mandates Reform Act

    This rule does not contain a Federal mandate that may result in 
expenditures of $100 million or more for State, local, and tribal 
governments, in the aggregate, or the private sector in any one year. 
We have determined that this action will not result in expenditures of 
$100 million or more for the above parties and thus, this rule is not 
subject to the requirements of sections 202 or 205 of the Unfunded 
Mandates Reform Act (UMRA).
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. It only applies to 
diesel fuel producers, distributors, and marketers and makes relatively 
minor modifications to the diesel sulfur regulations.

E. Executive Order 13132 (Federalism)

    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. This action only applies to diesel 
fuel producers, distributors, and marketers and makes relatively minor 
modifications to the diesel sulfur regulations. Thus, Executive Order 
13132 does not apply to this action.

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

    This rule does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249 (November 9, 2000)). It applies to 
diesel fuel producers, distributors, and marketers. This action makes 
relatively minor modifications to the diesel sulfur regulations, and 
does not impose any

[[Page 75879]]

enforceable duties on communities of Indian tribal governments. Thus, 
Executive Order 13175 does not apply to this action.

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

    EPA interprets EO 13045 (62 FR 19885 (April 23, 1997)) as applying 
only to those regulatory actions that concern health or safety risks, 
such that the analysis required under section 5-501 of the EO has the 
potential to influence the regulation. This action is not subject to EO 
13045 because it does not establish an environmental standard intended 
to mitigate health or safety risks.

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

    This action is not subject to Executive Order 13211 (66 FR 28355 
(May 22, 2001), because it is not a significant regulatory action under 
Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. Sec.  272 
note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so will 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. NTTAA directs EPA to 
provide Congress, through OMB, explanations when the Agency decides not 
to use available and applicable voluntary consensus standards.
    This action does not involve technical standards. Therefore, EPA 
did not consider the use of any voluntary consensus standards.

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. In the case of both the 
small emissions increases and decreases, these emissions impacts will 
be distributed over the broad areas where such equipment operates. The 
small changes in emission levels are expected to have very minimal 
effect on pollutant concentrations in any particular area.

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 not a ``major rule'' as defined by 5 U.S.C. 
804(2).

VI. Statutory Provisions and Legal Authority

    Statutory authority for the rule finalized today can be found in 
Section 211 of the Clean Air Act, 42 U.S.C. 7545. Additional support 
for the procedural and compliance related aspects of today's rule, 
including the recordkeeping requirements, come from sections 114, 208, 
and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Confidential business information, Diesel Fuel, 
Transmix, Energy, Labeling, Motor vehicle pollution, Penalties, 
Petroleum, Reporting and recordkeeping requirements.

    Dated: December 14, 2012.
Lisa P. Jackson,
Administrator.
    For the reasons set forth in the preamble, 40 CFR part 80 is 
amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 is revised to read as follows:

    Authority:  42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart I--Motor Vehicle Diesel Fuel; Nonroad, Locomotive, and 
Marine Diesel Fuel; and ECA Marine Fuel

0
2. Section 80.511 is amended by revising paragraph (b)(4) to read as 
follows:


Sec.  80.511  What are the per-gallon and marker requirements that 
apply to NRLM diesel fuel, ECA marine fuel, and heating oil downstream 
of the refiner or importer?

* * * * *
    (b) * * *
    (4) Except as provided in paragraphs (b)(5) through (8) of this 
section, the per-gallon sulfur standard of Sec.  80.510(c) shall apply 
to all NRLM diesel fuel beginning August 1, 2014 for all downstream 
locations other than retail outlets or wholesale purchaser-consumer 
facilities, shall apply to all NRLM diesel fuel beginning October 1, 
2014 for retail outlets and wholesale purchaser-consumer facilities, 
and shall apply to all NRLM diesel fuel beginning December 1, 2014 for 
all locations. This paragraph (b)(4) does not apply to LM diesel fuel 
produced from transmix that is sold or intended for sale in areas other 
than in the area listed in Sec.  80.510(g)(2) (i.e. Alaska), as 
provided by Sec.  80.513(f).
* * * * *

0
3. Section 80.513 is amended as follows:
0
a. By revising the section heading.
0
b. By revising the introductory text.
0
c. By revising paragraphs (d) and (e).
0
d. By adding new paragraphs (f), (g), and (h).


Sec.  80.513  What provisions apply to transmix processing facilities 
and pipelines that produce diesel fuel from pipeline interface?

    For purposes of this section, transmix means a mixture of finished 
fuels, such as pipeline interface, that no longer meets the 
specifications for a fuel that can be used or sold without further 
processing or handling. For the purposes of this section, pipeline 
interface means the mixture between different fuels that abut each 
other during shipment by pipeline. This section applies to refineries 
(or other facilities) that produce diesel fuel from transmix by 
distillation or other refining processes but do not produce diesel fuel 
by processing crude oil and to pipelines that produce diesel fuel from 
transmix.

[[Page 75880]]

This section only applies to the volume of diesel fuel produced from 
transmix by a transmix processor using these processes, and to the 
diesel fuel volume produced by a pipeline operator from transmix. This 
section does not apply to any diesel fuel volume produced by the 
blending of blendstocks.
* * * * *
    (d) From June 1, 2010 through May 31, 2014, NRLM diesel fuel 
produced by a transmix processor or a pipeline facility that produces 
diesel fuel from transmix is subject to the standards under Sec.  
80.510(a). This paragraph (d) does not apply to NRLM diesel fuel that 
is sold or intended for sale in the areas listed in Sec.  80.510(g)(1) 
or (g)(2).
    (e) From June 1, 2014 and beyond, NRLM diesel fuel produced by a 
transmix processor and a pipeline facility that produces diesel fuel 
from transmix is subject to the standards of Sec.  80.510(c).
    (f) From February 25, 2013 through May 31, 2014, LM diesel fuel 
produced by a transmix processor or a pipeline facility that produces 
diesel fuel from transmix that is sold or intended for sale in the area 
listed in Sec.  80.510(g)(1) is subject to the standards of Sec.  
80.510(a) provided that the conditions in paragraph (h) of this section 
are satisfied. Diesel fuel produced from transmix that does not meet 
the conditions in paragraph (h) of this section is subject to the 
sulfur standard in Sec.  80.510(c).
    (g) Beginning June 1, 2014, LM diesel fuel produced by a transmix 
processor or a pipeline facility that produces diesel fuel from 
transmix is subject to the sulfur standard of Sec.  80.510(a), provided 
that the conditions in paragraph (h) of this section are satisfied. 
Diesel fuel produced from transmix that does not meet the conditions in 
paragraph (h) of this section is subject to the sulfur standard in 
Sec.  80.510(c).
    (h) The following conditions must be satisfied to allow the 
production of 500 ppm LM under paragraphs (f) and (g) of this section.
    (1) The fuel must be produced from transmix.
    (2) The fuel must not be sold or intended for sale in the area 
listed in Sec.  80.510(g)(2) (i.e., Alaska).
    (3) A facility producing 500 ppm LM diesel fuel must obtain 
approval from the Administrator for a compliance plan. The compliance 
plan must detail how the facility will segregate any 500 ppm LM diesel 
fuel produced subject to the standards under Sec.  80.510(a) from the 
producer through to the ultimate consumer from fuel having other 
designations. The compliance plan must demonstrate that the end users 
of 500 ppm LM will also have access to 15 ppm diesel fuel for use in 
those engines that require the use of 15 ppm diesel fuel. The 
compliance plan must identify the entities that handle the 500 ppm LM 
through to the ultimate consumer. No more than 4 separate entities 
shall handle the 500 ppm LM between the producer and the ultimate 
consumer. The compliance plan must also identify all ultimate consumers 
to whom the refiner supplies the 500 ppm LM diesel fuel. The compliance 
plan must detail how misfueling of 500 ppm LM into vehicles or 
equipment that require the use of 15 ppm diesel fuel will be prevented.
    (i) Producers of 500 ppm LM diesel fuel must be registered with EPA 
under Sec.  80.597 prior to the distribution of any 500 ppm LM diesel 
fuel.
    (ii) Producers of 500 ppm LM must initiate a PTD that meets the 
requirements in paragraph (h)(3)(iii) of this section.
    (iii) All transfers of 500 ppm LM diesel fuel must be accompanied 
by a PTD that clearly and accurately states the fuel designation; the 
PTD must also meet all other requirements of Sec.  80.590.
    (iv) Batches of 500 ppm LM may be shipped by pipeline provided that 
such batches do not come into physical contact in the pipeline with 
batches of other distillate fuel products that have a sulfur content 
greater than 15 ppm.
    (v) The volume of 500 ppm LM shipped via pipeline under paragraph 
(h)(3)(iv) of this section may swell by no more than 2% upon delivery 
to the next party. Such a volume increase may only be due to volume 
swell due to temperature differences when the volume was measured or 
due to normal pipeline interface cutting practices notwithstanding the 
requirement under paragraph (h)(3)(iv) of this section.
    (vi) Entities that handle 500 ppm LM must calculate the balance of 
500 ppm LM received versus the volume delivered and used on an annual 
basis.
    (vii) The records required in this section must be maintained for 
five years, by each entity that handles 500 ppm LM and be made 
available to EPA upon request.
    (4) All parties that take custody of 500 ppm LM must segregate the 
product from other fuels and observe the other requirements in the 
compliance plan approved by EPA pursuant to paragraph (h)(3) of this 
section.

0
4. Section 80.572 is amended by revising the section heading and 
paragraph (d) to read as follows:


Sec.  80.572  What labeling requirements apply to retailers and 
wholesale purchaser-consumers of Motor Vehicle, NR, LM and NRLM diesel 
fuel and heating oil beginning June 1, 2010?

* * * * *
    (d) From June 1, 2010 through September 30, 2012 and from February 
25, 2013 and thereafter, for pumps dispensing LM diesel fuel subject to 
the 500 ppm sulfur standard of Sec.  80.510(a):
LOW SULFUR LOCOMOTIVE AND MARINE DIESEL FUEL (500 ppm Sulfur Maximum)
WARNING
    Federal law prohibits use in nonroad engines or in highway vehicles 
or engines.
* * * * *

0
5. Section 80.597 is amended by adding paragraph (d)(3)(ii) to read as 
follows:


Sec.  80.597  What are the registration requirements?

* * * * *
    (d) * * *
    (3) * * *
    (ii) Fuel designated as 500 ppm LM diesel fuel.
* * * * *
[FR Doc. 2012-30960 Filed 12-21-12; 4:15 pm]
BILLING CODE P