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Important Clean Air Act Nonroad Regulation Revisions Coming in 2014

Joseph S. Kakesh

January 2014 | Product Stewardship & Sustainability Report

Nonroad engine and equipment manufacturers should be on the lookout in 2014

for two changes to Clean Air Act regulations that may affect their ability to sell

equipment and engines.

Last summer, the U.S. Environmental Protection Agency (EPA) issued direct final

rules that included changes to two important exemptions included in the

Agencys regulations: (1) the technical hardship provision of 40 C.F.R.

1039.625 for nonroad diesel equipment manufacturers; and (2) the replacement

engine provision of 40 C.F.R. 1068.240. See78 Fed. Reg. 36,370 (June 17,

2013). EPA styled these as technical amendments, but issued them as a

proposed rule and invited public comment. See78 Fed. 36,135 (June 17,

2013). EPA also stated that it issued the parallel direct final and proposed rules

in order to expedite the regulatory process, and that it would withdraw all or

part of any rules for which it received relevant adverse comment. See78 Fed.

Reg. at 36,370.

EPAs proposed changes were modest responses to some of the market realities

faced by nonroad engine and equipment manufacturers. These companies must

both meet their emissions obligations and satisfy customer demand.

EPA did receive adverse comments and, in August 2013, withdrew some of the

changes. See78 Fed. Reg. 49,963 (Aug. 16, 2013). But EPA also said that it

intended to consider the comments received and proceed with a new final rule

without holding another comment period. Id. EPAs Fall 2013 regulatory agenda

indicated that the new final rule would be issued by November 2013, a deadline

which wasnot met,but new, final rules should becoming early this year.

Here iswhat EPA originally proposed and some insight into likely revisions

before the regulations finalization:

TPEM technical hardship provision. The Transition Program for EquipmentManufacturers (TPEM) allows nonroad diesel equipment manufacturers to sell a

limited amount of equipment containing previous-tier engines. See40 C.F.R.

1039.625. Some manufacturers who are having particular difficulty retooling

their production processes to meet current-tier emissions standards may be able

to obtain additional engine allowances through the TPEM technical hardship

provision. See 40 C.F.R. 1039.625(m).

Equipment manufacturers currently are eligible for the TPEM technical hardship

provision only for those equipment models for which you, or an affiliated

company, do not also produce the engine. Id. This limitation implements EPAs

preferences that equipment manufacturers not be penalized for an independent

engine manufacturers failure to provide them with current-tier engines, but also

that they not be rewarded with additional TPEM credits if a delay is caused by a

company within their same corporate structure.

In the direct final rule, EPA stated that it wanted to facilitate EPA granting

exemptions to address certain hardship circumstances that were not considered

when the original 2004 final rule was published. 78 Fed. Reg. at 36,382. EPA

thus proposed three changes: (1) removal of limitations on the engine power

categories eligible for additional TPEM allowances (currently, engines above 560

kW are ineligible, and there is limited relief for engines under 37 kW);

(2) removal of limits on the maximum number of additional TPEM allowances;

and (3) removal of deadlines for equipment manufacturers to use the

allowances. Id.at 36,383.

These changes would have given EPA authority to respond, on a case-by-case

basis, to the reality that equipment manufacturers often are completely

dependent on their engine suppliers ability to meet emissions deadlines. Thus,

without these changes, many equipment manufacturers are forced to use their

TPEM allowances in the first year of production (TPEM allowances are ordinarily

spread over seven years) or not sell equipment in certain power categories. Id.

But EPA backed off these proposals after commenters argued that EPA might not

be sufficiently rigorous in granting relief, which would result in an unnecessary

increase in emissions.

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8/11/2019 Important Clean Air Act Nonroad Regulation Revisions Coming in 2014 - Wiley Rein LLP

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9/19/2014 Important Clean Air Act Nonroad Regulation Revisions Coming in 2014 - Wiley Rein LLP

http://www.wileyrein.com/publications.cfm?sp=articles&id=9334

EPAs direct final rule responded responsibly to a very real market problem for

smaller and mid-sized nonintegrated nonroad diesel equipment manufacturers.

In order for the manufacturers to stay competitive in the marketplace, EPA

probably will publish a final rule that puts in place a somewhat more structured

process for granting the additional allowances, giving the Agency the flexibility it

needs while at the same time establishing clear standards.

Replacement engine exemption. EPA regulations include an exemption that

allows nonroad engine manufacturers to provide customers with newly

manufactured engines meeting previous-tier emission standards in order to

replace engines already in use. See40 C.F.R. 1068.240.

In the direct final rule, EPA changed the conditions under which the replacement

exemption could be used: (1) deleting the anti-circumvention condition in 40

C.F.R. 1068.240(g), which stated that engines are eligible for replacementonly when they fail during use; (2) adding a provision stating that only engines

less than 25 years old were eligible; and (3) specifying what engine

manufacturers may do with replaced engines if, pursuant to 40 C.F.R.

1068.240(b), they take possession of them rather than destroy them. See78

Fed. Reg. at 36,381.

With respect to deletion of 40 C.F.R. 1068.240(g), EPA reasoned that there

may be circumstances where replacing an operational, older engine still in use

with a cleaner, new replacement engine could provide a beneficial environmental

impact. EPA noted that California in-use emissions regulations already allow

this. Id. EPA received no adverse comment on the removal of the anti-

circumvention language, and in the direct final rule issued in August 2013, 40

C.F.R. 1068.240(g) was dropped in its entirety. See78 Fed. Reg. at 49,963.

This is a welcome advance for manufacturers seeking increased flexibility to

meet state-specific emissions requirements (such as Cali fornias in-use

emissions regulations) while also continuing to supply their customers with

needed replacements in non-failure situations, so that the customers do not

have to buy new equipment unnecessarily.

EPA did receive adverse comment, however, on the proposed provision limiting

eligibility for the replacement engine exemption to only those engines that are

25 years old or less. Commenters argued that the limitation significantly

burdened those who rely on older equipment and who might be less able to

afford new equipment containing engines certified to current-tier emission

standards. EPA backed off from this proposal in the August 2013 direct final

rule.

EPA also received adverse comment on its proposed revision regarding the

disposition of replaced engines under 40 C.F.R. 1068.240(b). The current rule

includes no language specifying what manufacturers may do with a replaced

engine. EPA did not want those engines put in new equipment, so the direct

final rule and accompanying proposal would have required that, if the old

engines were reintroduced into commerce, they meet all of the requirements

applicable to new engines or new replacement engines, or fall within some

other exemption. See78 Fed. Reg. at 36,382. Commenters argued that the

revised language did not clearly apply to all manufacturers who wanted to use

the replacement engine exemption, or clearly indicate that only used engines

that are being replaced by new replacement engines must meet new

replacement engine requirements. Apparently, these comments were enough

for EPA to hesitate in issuing the proposed revision to 40 C.F.R. 1068.240(b)

unchanged; the proposal was withdrawn.

As with the TPEM hardship provision regulations, we expect EPA to take another

stab at clarifying its replacement engine regulations. However, given EPAs prior

statements regarding the process it has undertaken to make these changes, it is

not at all clear that stakeholders will have much of a further opportunity to

comment on them. Stay tuned.

For more information, please contact Joseph S. Kakeshat 202.719.7435 or

jkakesh@wileyrein.com.

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