SUPPLEMENTAL RFG/ANTI-DUMPING QUESTIONS AND ANSWERS JANUARY 22, 1996 PROHIBITIONS [Note: The following is an update of Question 1, Prohibitions Section, from the October 31, 1995 Question and Answer document, which describes a modified approach for early use of the complex model. This update changes the classification of the gasoline under this modified early complex model approach from complex model gasoline to simple model gasoline. In addition, this update provides additional guidance for issues involving the valid range of the complex model, and for reporting requirements for gasoline produced under the modified early complex model approach.] 1. Question: Under section section 80.78(a)(9), early use of complex model gasoline is limited by the requirement that all such gasoline be segregated throughout the distribution system from the point of production to the point of final sale or use. Because this restriction severely limits the fungibility of the product, in most situations, early use complex model gasoline is not economically viable. However, if an reformulated gasoline manufacturer were to produce early use complex model gasoline meeting all of the early use complex model requirements, and also meet all the simple model requirements applicable to refinery compliance, other than the requirements for sulfur, olefins and T90, would it still be necessary to segregate early use complex model gasoline? Answer: 1. Background. The requirements for segregating early use complex model gasoline throughout the system, under section 80.78(a)(9), is based upon concerns regarding enforcement of standards downstream, e.g., at retail stations, and the effect complex model gasoline would have on the compliance survey. If complex model and simple model gasoline were freely mixed, or if early complex model gasolines from different refineries were mixed, downstream enforcement would be severely complicated since commingled complying gasolines might not meet all of the standards that are enforced downstream. Furthermore, it would not be apparent against which standards such gasoline should be judged for compliance. Similarly, with the compliance survey, it is required that a complex model survey component and a simple model survey component be performed. If simple and complex model gasolines were commingled, survey results could not be appropriately judged against either complex or simple model standards. Both the enforcement concerns and the compliance survey concerns relate, in part, to the possibility that complex model gasoline may not meet the downstream simple model standards specified in sections 80.41(a) and (b). 2. Alternative simple model compliance approach. Certain of the advantages of the early complex model may be obtained without creating the problems associated with commingling simple and complex gasoline, however, and without compromising the environmental benefits intended for reformulated gasoline, in the case of reformulated gasoline that meets a combination of certain of the simple model standards and the early complex model standards. In particular, reformulated gasoline certified under the simple model that meets all of the simple model standards except the standards for sulfur, T-90 and olefins, and that also meets all the early complex model standards, would not create the enforcement and survey difficulties anticipated by section 80.78(a)(9). In effect, this would be simple model gasoline for which an alternative approach is used for showing compliance with the simple model standards for sulfur, T-90 and olefins. Reformulated gasoline produced under this alternative simple model compliance approach would be fungible with other simple model reformulated gasoline downstream of the refinery, because the simple model standards for sulfur, T-90 and olefins are not included in the calculation of any other simple model standards. The environmental benefits associated with the simple model standards for sulfur, T-90 and olefins would be achieved through compliance with the early complex model standards for VOC, toxics and NOx emissions performance. Reformulated gasoline that meets all early use complex model standards would be at least as environmentally clean, and possibly cleaner than, comparable simple model gasoline. Provided that a refiner or importer has completed the notification and reporting requirements discussed below, and has met all other requirements discussed in this Answer, the party would have the option at the conclusion of an averaging period of showing compliance with either (1) all of the simple model standards, including the standards for sulfur, T-90 and olefins, or (2) all of the simple model standards except the standards for sulfur, olefins and T90 and all early complex model standards. The party must show compliance through one of these options, and may use only one of these options for all reformulated gasoline produced at a refinery, or imported by an importer, during the calendar year averaging period. Under section 80.41(h)(2)(iii) a refiner that operates more than one refinery must meet the simple model standards for sulfur, T-90 and olefins using the same refinery aggregations that are elected for conventional gasoline compliance under section 80.101(h). As a result of this grouping requirement, a refiner who operates refineries that are aggregated under section 80.101(h) must make the same election regarding the alternative simple model compliance approach discussed in this Answer for each refinery in an aggregation. For example, consider a refiner who operates refineries A, B and C and who elects under section 80.101(h) to aggregate refineries A and B. If this refiner elects to use the alternative simple model compliance approach for refinery A this same election also must be made for refinery B. The refiner could make a different election for refinery C, however. 3. Standards under the alternative approach. The simple model standards are specified in sections 80.41(a) and (b) (for oxygen, benzene and toxics emissions performance, and RVP in the case of VOC-controlled reformulated gasoline) and in section 80.41(h)(2)(i) (for sulfur, T-90 and olefins). Under the alternative simple model compliance approach only the standards for oxygen, benzene, RVP and toxics emissions performance must be met. The Phase I complex model includes standards for oxygen and benzene that are identical to the simple model standards for these parameters, and standards for VOC, toxics and NOx emissions performance. Under early use complex model, however, the VOC, toxics and NOx emissions reduction levels specified in sections 80.41 (c) and (d) are not used. Instead, under section 80.41(j) refinery- or importer-specific reduction levels for these emissions performances are calculated using, in part, the refinery- or importer-specific baseline values for sulfur, E-300 and olefins. Under section 80.65(c) a refiner or importer must elect to meet the early complex model VOC, toxics and NOx standards either on average or on a per-gallon basis. This election also applies under the alternative approach to simple model compliance. The per-gallon versus average election must be made by importers, and by refiners separately for each refinery. Moreover, this election must be made separately for each of the three emissions performance requirements. In the case of a refiner or importer opting for average compliance for VOC or NOx emissions performance, each batch of reformulated gasoline would be subject to the per- gallon minimum standards that are set in conjunction with the average standards. There is no per-gallon minimum associated with the toxics emissions performance average standard. In the case of a refiner or importer opting the per-gallon standards for either VOC, toxics or NOx emissions performance, each batch of reformulated gasoline would be subject to the per- gallon standard. Under section 80.41(j) the early complex model standards for VOC, toxics and NOx emissions performance are calculated separately for the per-gallon and average standards, and for the per-gallon minimum associated with the average standard. These calculations are based on: The per-gallon standards for oxygen, benzene and RVP under section 80.41(a) (in the case of standards that are met on a per-gallon basis), the average and per-gallon minimum/maximum standards for oxygen, benzene and RVP under section 80.41(b) (in the case of standards that are met on average); The applicable aromatics value, as specified at section 80.41(j)(2); and The refinery's or importer's baseline values for sulfur, E-300 and olefins. Under section 80.67(a) a refiner or importer may meet the reformulated gasoline standards on average only if the survey requirements of section 80.68 are met. Nevertheless, a refiner or importer using the alternative simple model compliance approach could elect to be subject to the average early complex model standards for VOC, toxics or NOx emissions performance without having met the survey requirements. This departure from the requirements of section 80.67(a) is appropriate because the gasoline produced under the alternative simple model compliance approach is classified as simple model gasoline for purposes of the gasoline quality surveys, and no separate complex model surveys would result from operation of this approach. If during any averaging period, including the 1995 averaging period, any batch of reformulated gasoline produced at a refinery or imported by an importer failed to meet the per-gallon or minimum VOC, toxics or NOx emissions performance standards discussed above, that refinery or importer would be ineligible for the alternative simple model compliance approach for that averaging period. The approach discussed in this Answer would not change the manner in which oxygen or benzene credits are created, transferred or used. Oxygen and benzene credits are used only to show compliance with the oxygen and benzene standards, and compliance with all other standards must be shown on the basis of the quality of gasoline produced or imported exclusive of any credit transfers. 4. Testing requirements under the alternative approach. Under section 80.65(e) a refiner or importer is required to determine certain properties for reformulated gasoline prior to the gasoline leaving the refinery or import facility. In the case of reformulated gasoline subject to the simple model standards, these parameters are limited to oxygen and benzene, and RVP for VOC-controlled reformulated gasoline. In contrast, reformulated gasoline subject to the complex model standards must, prior to release, be analyzed for the full slate of properties specified under section 80.65(e). Any reformulated gasoline produced under the alternative simple model compliance approach is classified as simple model gasoline, and, in consequence, the refiner or importer is required only to meet the simple model pre-release sampling and testing requirements. This approach is appropriate because the purpose of the pre-release sampling and testing is to ensure compliance with the downstream standards, and only the simple model downstream standards apply under the alternative simple model compliance approach. 5. Application of model valid range limits. Since under the alternative approach to simple model compliance reformulated gasoline must meet all the requirements of the early-use complex model as well as all the standards under the simple model (except for the caps on sulfur, olefins, and T90), every batch of reformulated gasoline produced or imported under this approach must meet the valid range limits specified for the simple model in section 80.42(c) and those specified for the complex model in section 80.45(f)(1)(i). These valid range limits delineate the range of values within which the compliance models may be used, and outside of which they may not be used. Therefore, the more stringent valid range limits would apply to every batch. For example, for aromatics content the simple model valid range limits are 0 through 55 vol%, while the complex model valid range limits are 0 through 50 vol%. Thus, no batch of reformulated gasoline produced under the alternative simple model compliance approach could have an aromatics content greater than 50 vol%. As discussed above, under the early-use complex model a refiner or importer must determine the VOC, toxics and NOx standards with which its reformulated gasoline must comply according to section 80.41(j), based in part on a refinery's or importer's individual baseline levels for sulfur, olefins and E-300. It is possible, however, that a refinery's or importer's baseline values for one or more of these three parameters may fall outside the valid range limits given in section 80.45(f)(1)(i). If this is the case the refiner or importer nevertheless may use the alternative simple model compliance approach by substituting the section 80.45(f)(1)(i) valid range limit for the baseline parameter outside the valid range. Thus, for example, if a refiner has a baseline olefins level that is greater than the 25 vol% limit under section 80.45(f)(1)(i), the refiner may use a value of 25 vol% for purposes of calculating the early complex model standards under section 80.41(j). Note that this flexibility does not apply to any batch of reformulated gasoline produced under this alternative simple model compliance approach; every batch of reformulated gasoline must have fuel parameters which fall within the complex model range limits specified in section 80.45(f)(1)(i). 6. Implications of alternative approach for conventional gasoline. Any reformulated gasoline for which compliance is achieved under this alternative approach is classified as simple model reformulated gasoline, as described above. As a result, under sections 80.41(i)(1)(ii)(A) and 80.101(c)(1)(i) any conventional gasoline produced at the same refinery or imported by the same importer also must comply with the simple model standards under section 80.101(b)(1). Consequently, the complex model valid range limits, discussed above, are not relevant to the conventional gasoline produced or imported under this approach. The approach discussed in this Answer would not, however, alter the opportunity for a refiner or importer who produces no reformulated gasoline to produce conventional gasoline in compliance with the optional complex model standards under section 80.101(b)(2). 7. Notification and reporting. Any refiner or importer who intends to have the option of using this alternative simple model compliance approach for any calendar year averaging period must notify EPA of this intent with the first quarterly report for that year (due on May 31 of each year). This notification must be made as part of the annual compliance designation, and also must specify, separately for VOC, toxics and NOx emissions performance, whether the early complex standard will be met on a per-gallon basis or on average. In addition, the party must include in all batch reports the information necessary to show compliance with both the simple model standards and the early complex model standards. This reporting requirement is discussed more fully below. In the case of the 1995 averaging period, however, a party could not have satisfied this notification requirement. Therefore, a party who otherwise qualifies may use the alternative simple model compliance approach provided that an updated designation report is submitted with the report for the fourth quarter of 1995 (due on February 29, 1996), and batch reports for all batches produced or imported during the 1995 averaging period are resubmitted at that time to include the necessary information, specified below. EPA will release a revised Annual Compliance Designation form prior to that time. EPA will modify its "Reformulated Gasoline and Anti-Dumping Electronic Data Interchange Technical Guideline" by adding the code "AS" (alternative approach simple model) to code list 07 (section 8.3.1) for use in properly designating gasoline produced under this method in batch reports submitted via EDI. Parties who will use this approach for 1995 and who have previously filed batch reports during 1995 via electronic data interchange (EDI) must resubmit all such batch reports with the correct designation no later than February 29, 1996. Only the compliance method (simple model, complex model, alternative approach simple model) may be changed in these resubmissions. The paper batch report will not be modified because the designation of simple or complex is not currently required on that report (it is covered by the designation form). If at the end of 1996 or 1997, after designating the alternative compliance method for the year, a party wishes to use the simple model standards specified in the regulations, the party may either resubmit the Annual Compliance Designation form or resend all EDI batch reports with the proper designation, and subject to the conditions laid out below, no later than the last day of February immediately following the reporting year. Any party intending to use the approach discussed in this Answer must submit to EPA batch reports with all of the information required to demonstrate compliance with both simple model and early use complex model standards, as discussed above. This requirement applies to batches of reformulated gasoline or RBOB produced in 1994 or 1995 (which must be resubmitted) and to batches produced in 1996 and 1997. Reports previously submitted by independent laboratories need not be resubmitted, however. In addition, in the case of a sample collected by an independent laboratory during the fourth quarter of 1995 which was not analyzed for complex model parameters, if the sample is no longer available the independent laboratory may report only the simple model parameters for that sample. Additionally, since parties using this alternative approach are making early use of the complex model, they must submit to EPA, at the time of designation, a letter stating the calculated early-use complex model VOC, toxics and NOx emissions performance standards applicable to each refinery, or to each importer, which will use this method. The calculation and reporting of these standards is detailed above, and in sections 80.41(j) and 80.75(k). On their batch reports, refiners and importers must then report their VOC, NOx and toxics emissions performance as a percent reduction from these emission standards rather than from the statutory baseline emission standards. Consider, for example, a refiner whose refinery's calculated early-use complex model per-gallon emissions standards are 1036.82 mg/mi for VOC, 38.4311 mg/mi for toxics and 691.6079 mg/mile for NOx. This refiner has elected to meet the early complex model standards on a per-gallon basis. A batch of gasoline produced shows emissions results from the complex model of 1007.53 mg/mile of VOC, 37.0122 mg/mile of toxics and 697.3742 mg/mile of NOx. The refiner would report emissions reductions of 2.8% for VOC (29.29 mg/mi below the applicable standard), 3.7% for toxics (1.4189 mg/mi below the standard) and -0.8% for NOx (5.7663 mg/mi above the standard). This batch would be in violation of the early-use complex model NOx standard, because the NOx emissions performance shows a 0.8% increase in NOx emissions (a -0.8% reduction) relative to the refinery s early complex model NOx standard.