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Federal Register / Vol. 86, No. 169 / Friday, September 3, 2021 / Proposed Rules
After completing testing, manufacturers are required to prepare an official application requesting a certain amount of off-cycle credits for the technology. In accordance with EPA
regulations, the official application request must include final testing data, details on the methodology used to determine the off-cycle credit value, and the official benefit value requested. EPA
anticipated that these submissions would be made prior to the end of the model year where the off-cycle technology was applied.
Each manufacturers application to EPA must then undergo a public notice and comment process if the manufacturer uses a methodology to derive the benefit of a technology not previously approved by EPA. Once a methodology for a specific off-cycle technology has gone through the public notice and comment process and is approved for one manufacturer, other manufacturers may follow the same methodology to collect data on which to base their off-cycle credits. Other manufacturers are only required to submit applications citing the approved methodology, but those manufacturers must provide their own necessary test data, modeling, and calculations of credit value specific to their vehicles, and any other vehicle-specific details pursuant to that methodology, to assess an appropriate credit value. This is similar to what occurred with the advanced A/C compressor, where one manufacturer applied for credits with data collected through bench testing and vehicle testing, and subsequent to the first manufacturer being approved, other manufacturers applied for credits following the same methodology by submitting test data specific for their vehicle models. Consequently, as long as the testing is conducted using the previously-approved methodology, EPA
will evaluate the credit application and issue a decision with no additional notice and comment, since the first application that established the methodology was subject to notice and comment. EPA issues a decision document regarding the manufacturers official application upon resolution of any public comments to the its Federal Register notice and after consultation with NHTSA. Finally, manufacturers submit information after the model year ends on off-cycle technologies and the equipped vehicles in their final CAFE
reports due by March 30th and then in their final GHG Averaging, Banking, and Trading AB&T reports due to EPA by April 30th.
During the 2020 rulemaking, the agencies and manufacturers both agreed that responding to petitions before the
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end of a model year is beneficial to manufacturers and the government. It allows manufacturers to have a better idea of what credits they will earn, and for the government, a timely and less burdensome completion of manufacturers end-of-the-year final compliance processes. EPA structured the A/C and off-cycle programs to make it possible to complete the processes by the end of the model year so manufacturers could submit their final reports within the required deadline 90 days after the calendar year, when CAFE final reports are due from manufacturers.547
However, at the time of the previous rulemaking, manufacturers were submitting retroactive off-cycle petitions for review causing significant delays to review and approval of novel technologies and issuances of Federal Register notices seeking public comments, where applicable. As a result, the agencies set a one-time allowance that ended in May 2020 for manufacturers to ask for retroactive credits or FCIVs for off-cycle technologies equipped on previouslymanufactured vehicles after the model year had ended. After that time, the agencies denied manufacturers late submissions requesting retroactive credits. However, manufacturers who properly submitted information ahead of time were allowed to make corrections to resolve inadvertent errors during or after the model year.
Both EPA and NHTSA regulations fail to include specific deadlines for manufacturers to meet in finalizing their off-cycle analytical plans or the official applications to the agencies. The agencies believed that enforcing the existing submission requirements would be the most efficient approach to expedite approvals and set aside adding any new regulatory deadlines or additional requirements in the previous rulemaking. There were also concerns to provide manufacturers with maximum flexibility and due to the uncertainties existing with the non-menu off-cycle process. However, the agencies anticipated that any timeliness problems would resolve themselves as the off-cycle program reached maturity and more manufacturers began requesting benefits for previously approved off-cycle technologies.
Despite the agencies expectations, the lack of deadlines for test results or the official application has significantly delayed approvals for non-menu offcycle requests. In many cases, EPA has received off-cycle non-menu application requests either late in the model year or 547 40

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after the model year. This falls outside the agencies planned strategy for the offcycle non-menu review process whereas manufacturers would seek approval and submit their official application requests either in advance of the model year or early enough in the model year to allow the agency to approve a manufacturers credits before the end of the model year.
b Proposed Changes to the Off-Cycle Program i Review Process The current review process for offcycle technologies is causing significant challenges in finalizing end-of-the-year compliance processes for the agencies.
The backlog of retro-active and pending late off-cycle requests have delayed EPA
from recalculating NHTSAs MY 2017
finals and from completing those for MYs 2018 and 2019. Fifty-four off-cycle non-menu requests have been submitted to EPA to date. Nineteen of the requests were submitted late and another seven apply retroactively to previous model years starting as early as model year 2015. Since these requests represent potential credits or adjustments that will influence compliance figures, CAFE
final results cannot be finalized until all off-cycle requests have been disposed.
These factors have so far delayed MY
2017 final CAFE compliance by 28
months, MY 2018 by 15 months, and MY 2019 by 4 months.
These late reports amount to more than just a mere accounting nuisance for the agencies; they are actively chilling the credit market. Until EPA verifies final compliance numbers, manufacturers are uncertain about either how many credits they have available to trade or, conversely, how many credits are necessary for them to cover any shortfalls.
For MY 2017, NHTSA will void manufacturers previous credit trades pending the revised final calculations.
Second, until late requests are approved, credit sellers are unable to make trades with buyers having pending approvals or credits are sold whereas the final balance of credits is unknown.
Because credit trades and transfers must be adjusted for fuel savings anytime a change occurs in a manufacturers CAFE
values, the resulting earned or purchased credits must be recalculated.
These recalculations are significantly burdensome on the government to administer and places an undue risk on manufacturers involved in CAFE credit trade transactions.
NHTSA met with EPA and manufacturers to better understand the process for reviewing off-cycle nonmenu technologies. From these
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