STATEMENT OF INTERNATIONAL TRUCK AND ENGINE CORPORATION
HEARING ON U.S. ENVIRONMENTAL PROTECTION AGENCY'S DIESEL FUEL QUALITY RULEMAKING BEFORE THE SENATE ENVIRONMENT AND PUBLIC WORKS COMMITTEE'S SUBCOMMITTEE ON CLEAN AIR, WETLANDS, PRIVATE PROPERTY, AND NUCLEAR SAFETY
SEPTEMBER 21, 2000

International Truck and Engine Corporation ("International") appreciates the opportunity to submit a statement in connection with the Subcommittee's September 21, 2000 hearing on the U.S. Environmental Protection Agency's ("EPA" or "Agency") proposed model year ("MY") 2007 heavy-duty engine and vehicle standards and highway diesel fuel sulfur control requirements. This proposal, which EPA published on June 2 of this year, would require substantial emission reductions by heavy-duty engines ("HDEs") through a "systems approach" premised both on improved fuel quality and advances in engine technology.

EPA's proposed emissions targets are very ambitious. However, our company is making sizable investments to develop engine and aftertreatment technologies that have the potential to achieve major strides in emissions performance for both light-duty and heavy-duty diesel-powered vehicles. These technologies are extremely sulfur-sensitive and will only be effective with the availability of ultra-clean diesel fuel. EPA's proposed sulfur limit of 15 parts per million ("ppm") is the minimum level of sulfur reduction that can "enable" the commercial introduction of the emissions control technologies we are developing.

With the assurance of ultra-clean fuel in 2006, our company is prepared to make every effort to meet EPA's challenging HDE emissions targets for the 2007-2010 timeframe. Since the particulate trap is ready for commercial introduction today, we are confident that, with ultra-low sulfur fuel, we can achieve EPA's 2007 emission standards for particulate matter ("PM"). While the feasibility of NOx adsorber technology is more uncertain, we believe that EPA's proposed Nitrogen Oxides ("NOx") standards should be within reach assuming the 2007-2010 phase-in period under EPA's final rule gives us adequate time to mature this technology with clean diesel fuel.

International does not agree with all aspects of EPA's proposal. We have made detailed recommendations to EPA on how the rule can be improved. However, we support completing the rulemaking promptly on the basis of the extensive record developed by EPA. Postponing the rule is not needed for sound decisionmaking and would create uncertainties that delay investment in the next generation of fuel and engine technologies.

Who is International

International, formerly known as Navistar International Transportation Corp., is a major North American manufacturer of medium and heavy-duty trucks and buses marketed under the "International " brandname. International is the world's largest manufacturer of mid-range (160-300 hp) diesel engines. Our engines are more than 97 percent on-road certified. We supply these engines both to other International divisions and to other customers, including Ford Motor Company. International is Ford's exclusive supplier through the year 2012 of V-8 diesel engines for heavy-duty pickups. These heavy-duty vehicles would be subject to EPA's proposed MY 2007 emission standards for HDEs. We are also planning to supply V-6 engines to Ford for sport utility vehicles subject to EPA's recently issued Tier 2 rule.

Because our trucks and engines are 100 percent dieselized, we have long been a leader in diesel technology and were the first engine manufacturer to introduce several breakthroughs that are now common in the industry. We have also been a leader in environmental improvement and have pioneered many of the advances in emissions performance that diesel technology has recently achieved. We are investing hundreds of millions of dollars in the development of advanced engine and aftertreatment technology to improve engine performance and provide a cost-effective answer to clean air concerns for all the markets heavy-duty and light-duty where our engines are sold.

A major part of our technology program involves Green Diesel TechnologyTM, which utilizes the benefits of the catalyzed particulate filter ("CPF") system and ultra-low sulfur fuel in combination with an exclusive International engine performance design to significantly lower the emissions and odor of diesel-powered buses and trucks. Last year, International conducted a demonstration of a CPF system on a school bus utilizing a heavy-duty diesel engine and run with a special ultra-clean blend of diesel fuel manufactured by BP Amoco. PM levels were reduced to below .01 g/bhp-hr a reduction well in excess of 90 percent from current levels, as well as 50 percent lower than the best 1998 certified compressed natural gas engine. Hydrocarbon emissions were also reduced below measurable levels (which eliminated the odor often associated with diesel engines).

We are pleased to inform the Subcommittee that International's Green Diesel Technology school bus will be offered in 2001 in areas of the country where 15 ppm sulfur fuel is available. BP Amoco will provide the 15 ppm sulfur fuel in California and possibly elsewhere, thus ensuring that greatly improved emissions performance on these vehicles is achieved in the very near future.

With Ultra-Low Fuel Sulfur Levels, EPA's Proposed MY 2007 HDE Emissions Standards Represent Challenging But Reasonable Goals

EPA has proposed 90% reductions from 2004 levels for both NOx and PM emissions by the 2010 timeframe. These would be the largest step reductions ever mandated for either NOx or PM emissions from HDEs in the United States. These emission targets present enormous technical challenges, but there is no credible dispute that the aftertreatment technologies required to bring them within reach will function efficiently and durably only with ultra-clean diesel fuel. We therefore commend EPA for taking steps in the rulemaking to address the critically important issue of diesel fuel quality. Progressive oil companies including BP Amoco already are making commercially available diesel fuel with sulfur levels of 15 ppm or lower. These oil companies have earned recognition and our applause for their efforts to bring clean diesel fuel to the marketplace well in advance of any regulatory requirement to do so.

Focussing on PM control, extensive data indicates that ultra-low sulfur fuel is a prerequisite to the effectiveness and durability of CPF technology, which we believe is the only viable path for reducing PM emissions in 2007 to the near zero levels called for under EPA's proposal. CPF operation is inhibited by sulfur in diesel fuel, as is total PM control effectiveness due to the formation of sulfate PM. Relevant experience with CPF technology, however, shows that ultra-low sulfur levels assure that CPF technology will perform efficiently and durably. As stated above, International has demonstrated the effectiveness of CPF technology, combined with ultra-clean fuel, in reducing PM emissions to levels at or below those proposed by EPA. By the same token, field tests conducted with higher (50 ppm) sulfur levels were much less successful, showing an unacceptable CPF failure rate of 10 percent. In sum, there is no question that the availability of ultra-low sulfur fuel is a critical "enabler" for CPF technology's ability to control PM emissions reliably during vehicle use. Nor is there any question that, when used with low sulfur fuel, this technology will deliver the emission reductions proposed by EPA and is ready for commercial introduction today.

NOx control presents greater challenges at this stage than reducing PM emissions. Here too, however, ultra-low sulfur fuel is essential for progress toward EPA's targets. The NOx adsorber is our technology of choice in meeting the MY 2007 NOx standards but its performance is extremely sensitive to sulfur poisoning. The Diesel Emissions Control Sulfur Effect program, which evaluated various sulfur-sensitive technologies and obtained data on high sulfate conversion levels at high speed and load conditions over a broad range of engine operating conditions, confirms this point. The test program's interim results indicate that, at sulfur fuel levels in excess of 15 ppm, NOx adsorber performance declines significantly after only 150 hours of testing. Diesel Emission Control Sulfur Effects Program, Phase I Interim Data Report No. 2: NOx Adsorber Catalysts, pp. 2, 23 (October 1999). By contrast, with diesel sulfur levels of 15 ppm and below, NOx adsorber technology promises to achieve a high level of emission reduction over a range of engine operating conditions. Accordingly, assuming our recommendations for improving the rule are adopted, International believes that EPA's NOx emission limits represent a challenging but reasonable goal that we should start working toward now using the technological resources and expertise of our industry, aftertreatment suppliers and the refining sector.

We do not accept the argument that fuel and engine requirements should be delayed until control technologies needing ultra-clean fuel have fully matured. For example, some in the refining industry have suggested that, since commercial application of the NOx adsorber technology is now unproven, it is premature to reduce diesel sulfur content to 15 ppm in the belief that clean fuel is needed to enable NOx adsorber technology. From our perspective, this concern misses the point. NOx adsorber technology certainly needs maturation but we know from available data that its commercial deployment by MY 2007-10 is a realistic possibility assuming the corresponding availability of ultra-low sulfur fuel. If fuel and engine requirements were delayed until the technology had been fully demonstrated, companies like International and their suppliers would not be motivated to make large investments in improved emissions performance and progress toward lower emissions would be stymied.

Although recent debate has focussed on the technical uncertainties surrounding EPA's proposal, there are two critical points that are not in dispute: (i) aftertreatment technologies for PM and NOx require fuel sulfur levels of 15 ppm or less to function effectively; and (ii) if these technologies cannot be used because clean diesel fuel is not available, the remaining technology options can achieve at best a 30 percent reduction in PM and NOx emissions. It is not our company's role to set national air quality goals. However, we can say with confidence that, if the public expects a 90 percent reduction in PM and NOx emissions as proposed by EPA, only a rule which maintains a dual focus on improved fuel quality and superior aftertreatment performance and sets aggressive targets for both will enable us to reach that goal.

Recommended Changes in the Rule

Our willingness to accept EPA's rule, however, is conditioned on adoption of the recommendations for modifying EPA's proposal that we have presented in our comments to the Agency. Of greatest importance, while EPA's proposal to phase-in NOx controls between 2007 and 2010 is a step in the right direction, we are concerned that as framed it would call upon the NOx adsorber to achieve a 90% emission reduction immediately upon commercialization. Experience tells us that it will be critically important to have a meaningful transition period during which the adsorber can mature in-use. Therefore, International has proposed that EPA set an interim NOx + NMHC standard of 1.40 g/bhp-hr for all MY 2007-2009 HDEs, with a further drop to 0.30 in MY 2010. In our comments to EPA, we have demonstrated that the International proposal would offer significant environmental benefits over EPA's approach of phasing in the NOx requirements for 25% of the fleet each year between 2007 and 2010. It should be emphasized that our proposed interim NOx limits for the MY 2007-2009 period and the PM emission targets proposed by EPA for 2007 cannot be achieved unless ultra-low sulfur fuel, at or below the 15 ppm level, is available in 2006.

We have also raised concerns with the proposed Not-To-Exceed ("NTE") requirements, which could not be met over the full range of engine operating and ambient conditions given the extremely stringent underlying emissions standards proposed for 2007 and beyond. Our comments further recommend that EPA remove restrictions it has proposed on the use of pre-2007 Averaging, Banking and Trading ("ABT") credits as well as make a number of smaller technical revisions. We hope our proposed modifications are receiving careful consideration by the Agency as it develops a final rule.

EPA Should not Delay Issuance of a Final Rule

Although we recognize the complexities and challenges presented by EPA's 2007 fuel and HDE proposal, our company is already committing hundreds of millions of dollars to development of advanced emission control technology that, with the availability of ultra-clean fuel, can "enable" the commercial introduction of the CPF and NOx adsorber technologies. International believes that, to continue this progress, the engine industry, aftertreatment suppliers and refiners need the motivators provided by clear long-term performance goals for both engines and fuel.

Extended study of the issues and rulemaking delays will create uncertainties and inevitably slow down the R&D; programs that will lead to improved emissions performance. For example, without knowing what level of sulfur reduction will be required and when cleaner fuel will be available, our industry could not determine what emission control technologies to pursue and how great our investment in these technologies should be. The aftertreatment industry would likewise be unable to focus its R&D; efforts on the most promising aftertreatment devices since it would be uncertain what level of sulfur reduction would be available to "enable" these devices to perform effectively. Accordingly, delaying this rule for another year or eighteen months is unlikely to move us closer to answers but could reduce the lead-time which our engineers and production managers have to implement the new requirements.

Extended study of the issues and rulemaking delays will create uncertainties and inevitably slow down the R&D; programs that will lead to improved emissions performance. For example, without knowing what level of sulfur reduction will be required and when cleaner fuel will be available, our industry could not determine what emission control technologies to pursue and how great our investment in these technologies should be. The aftertreatment industry would likewise be unable to focus its R&D; efforts on the most promising aftertreatment devices since it would be uncertain what level of sulfur reduction would be available to "enable" these devices to perform effectively. Accordingly, delaying this rule for another year or eighteen months is unlikely to move us closer to answers but could reduce the lead-time which our engineers and production managers have to implement the new requirements.

Conclusion

In sum, International believes that the rulemaking process for the proposed HDE rule has created a full record on the critical questions EPA must resolve and provides a sufficient foundation for decisionmaking. While we support certain non-fuel related changes in EPA's rule so that its requirements are more reasonable, prompt completion of the rulemaking is a high priority for our company so that we can move forward with our advanced technology program. Accordingly, International urges that any move to slow down completion of the rulemaking or ease the requirements for ultra-low sulfur fuel should be rejected.