MRF Questions and Answers Regarding Proposed EPA Emissions Standards for Street Bikes

May 23, 2003

QUESTION: Everything custom shops are doing today is already illegal.

ANSWER: Not so. First, it's so sweeping a charge, it can't possibly be true. Second, if it were true, such businesses would make lucrative enforcement targets.

We have maintained for two years that this is an assertion, not a statement of fact. Yes, the anti-tampering language has been in the Clean Air Act for decades. That's one reason why we supported the Barcia Bill last year, because a part of that legislation added flexibility to the anti-tampering provision. (Among other things, the Barcia Bill essentially suggested that a motorcycle meet the emissions standard prescribed for that model year - a performance-oriented standard - rather than prohibit modifications which do not result in higher-than-prescribed emissions - a device-oriented standard.)

Because we've lived under a rather liberal emissions standard for decades, we've had very little on our bikes that can be classed as emissions control devices per se.

There is no question that some modifications will produce high emissions that may exceed the level prescribed for a particular model year. However, for the most common of personalization efforts - a pipe change, for example - the emissions change may be measurable, but it is insignificant as long as the bike is not catalyzer-equipped/made to achieve an emissions standard that is catalyst-forcing.

As Mr. Tom Austin of Sierra Research testified in the EPA's public hearing September 17, 2002, on behalf of the Motorcycle Industry Council: "Because the Tier 2 standards will require the widespread use of catalyst[s], much of the theoretical benefit is going to be lost in customer service due to the popularity of aftermarket exhaust systems," and "motorcycles with catalyst systems are likely to have higher emissions with the catalyst removed than motorcycles designed to meet a slightly less stringent standard without catalyst."

Let's take a look at enforcement, too. When the rubber meets the road, what do inspectors look for in terms of signs of "tampering?" Here is an example of what inspectors look for in Ohio, taken from that state's environmental protection agency rules and regs:

"The emission system reference manual or the vehicle control information (VECI) label located on each vehicle shall be used to determine the vehicle emissions systems requiring inspection. If a conflict exists, the VECI label shall take precedence. The emission systems subject to inspection may include, but not be limited to:

(1) Catalytic converter system
(2) Evaporative emission system
(3) Fuel inlet restrictor
(4) Positive crankcase ventilation system
(5) Thermostatic air intake system
(6) Air injection reaction system
(7) Exhaust gas recirculation system
(8) Oxygen sensor
(9) Computer control system."

QUESTION: The Vaughn Study claims that 'California experienced a 7.7% reduction in motorcycle registrations between 1996 and 2001 while motorcycling increased by 32.2% in the other 49 states during the same period.' From 1998 to 2001, California motorcycle registrations increased. Why the disparity?

ANSWER: No matter what years you pick, you see a problem when you compare the California experience to motorcycling activity in the rest of the USA. If you pick registration data from the years 1998 to 2001, you can show an increase in motorcycle registrations in California of 16.7 percent. If you pick the larger number of years chosen by Dr. Vaughn, you document a decline in motorcycling. (If you pick the whole decade, the motorcycling decline is even more dramatic than the years Dr. Vaughn selected!) Even if you prefer to paint the brightest possible picture in California by picking the years 1998 through 2001, a comparison with the other 49 states during that same period dims the picture considerably. From 1998 to 2001 in California, registrations increased 16.7 %, but: in the other states, motorcycle registrations increased by 27.3 %. The variance - 27.3 % as compared to 16.7 % - is substantial and significant. There is a problem in California, and riders know it.

QUESTION: You claim that 'over-regulation' is the only plausible explanation for the variance between California and other states. How do you justify that statement?

ANSWER: In a word, economics, and Dr. Vaughn is prepared to testify before Congress to this effect. Let him testify. First, climate has remained favorable to motorcycling throughout vast portions of California. Second, neither congestion nor gas prices have eased which should make the grid-lock-busting, gas-miserly motorcycle more attractive, not less. Third, population growth has increased in the state, as has per capita income. Fourth, since California was still booming in 1999 and into parts of 2000 (before the bursting of the dot-com bubble), one can reasonably expect that motorcycle registrations in that state would have increased at the same rate, if not a faster rate, than the national experience. Instead, when compared to all other states, motorcycling declined in California - or lagged substantially and significantly, depending on the years you choose to compare. Fifth, it is axiomatic that sales tend to suffer when consumers perceive that discretionary dollars are better spent elsewhere; that is, when tighter regulation adversely influences price and product desirability, sales will be negatively impacted. Again, Dr. Vaughn is happy to testify to these points, and we hope Congress affords him the opportunity to do so.

QUESTION: Why should we honor your claim that independent shops and the aftermarket should be treated as motorcycle makers for the purposes of 'regulatory flexibility'? Doesn't that view strain credibility and won't it invite scrutiny?

ANSWER: The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) was enacted to safeguard small business from needless over-regulation. Since the debate over tougher street bike emissions standards began over two years ago, MRF has been clear and consistent that the vast cottage industry of independent shops and the aftermarket must be treated as small business entities directly impact by this proposed rulemaking. This is analogous to the Bureau of Alcohol, Tobacco and Firearms remaining flexible regarding custom gunsmiths (who make as well as repair firearms) should an ATF rulemaking tend to favor major manufacturers to the detriment of small businesses. With respect to EPA, small motorcycle firms deserve standing and should be fully engaged in the SBREFA process.

EPA interprets the SBREFA law as meaning that only manufacturers of a complete machine should be accommodated under the umbrella expressly fashioned by the Congress to protect directly impacted businesses. We do not agree. From the small business person's point of view, the agency's interpretation is terrifying. From an economist's point of view, its interpretation is absurd. Why should firms that make 100% of a motorcycle achieve standing and enjoy some flexibility in rules that impact their future, while firms that make 30%, 50%, 80% or more of a motorcycle receive no standing and no protection from inflexibility in rulemaking? More to the point, how is it that an independent shop that makes a motorcyle not be considered a maker? To argue otherwise is tantamount to arguing that small businesses must be big enough to be what economists term "vertically integrated" in order to qualify for the modest protection offered by SBREFA. It is not our view but this view that that strains credibility and, we hope, invites considerable scrutiny. Motorcyclists nationwide rely on very small as well as very large businesses. All are deserving of protection in this process.

A mere perusal of HOT BIKE magazine or a catalog from aftermarket giant J&P reveals that the nexus of independent shops and the aftermarket constitutes the smallest of the small volume motorcycle makers. We argue that small business flexibility protections should be extended to this most fragile element of the motorcycle industry. And unlike the automotive industry, there is a progression in this segment of the industry that we should all understand - and that regulators should honor - a progression from pipe dream to place of business.

Consider a fellow named Eddie who found himself out of work in Florida a decade ago. In 1993, Eddie fixed his house, repaired his boat and, out of mere interest as a hobbyist, built a custom motorcycle from the ground-up. He built a few and displayed his rolling art at his tavern, and they attracted more than a little interest. People came up to Eddie and said, "Make me one." He invested, hired friends and eventually hung out a shingle at a facility he obtained. Eddie's bikes attracted even more interest, got some coverage in the popular magazines, and he was on his way. Today, Eddie employs 18 workers and turns out custom machines that go for $39,000 and up. It is absolutely defensible - indeed, it is an ethical imperative - to argue that Eddie's business is a motorcycle-making business. His firm - Eddie Trotta's Thunder Cycles of Florida - is deserving of protection. And this is key: his firm deserves protection even at the earliest stages of its development. If Mr. Trotta pays for a business license or files taxes as a business, his enterprise is a business. If he is making a motorcycle, he is a motorcycle maker. From those humble beginnings ten years ago, Eddie Trotta's Thunder Cycles is now a thriving, 5 million-dollar-a-year small business, and 18 families rely on its survival.

These are truly the smallest of America's small-volume motorcycle makers.

QUESTION: You claim that the future of 10,000 businesses hang in the balance. Why haven't they come to Washington?

ANSWER: They have, and if MRF had the money to take out full-page ads in the popular motorcycle magazines or mount a massive direct-mail campaign, more would come.

In fact, independent shop owners have been present in the ranks of visiting SMRO teams from various states. Many others have written their Congressmen to voice their concern. Many have supported the Vaughn Study, including a three-person shop in Iowa whose $350,000-a-year business was featured by ABATE of IOWA in presentations to their Members of Congress in April, 2003. Among the firms that cause us worry are truly small firms - often two and three-person operations - at a stage of their development that perhaps mirrors where Eddie Trotta found himself in the mid-1990s. These businesses can hardly afford trips to Washington, much less full-time lobbyists and regulatory affairs specialists here to pour through the Federal Register on their behalf, especially when these businesses believe that rider advocacy groups know full well their plight and are working hard in their defense, not as the direct advocates of business but as advocates of riders who rely on those businesses. Should Congress grant us - and them - a hearing on this issue, these small businesses will step forward, speak and be heard.

QUESTION: Okay, so one Small Entity Representative (or SER) shows up for a SBREFA pre-panel briefing and testifies that he would exit the business if Tier II's catalyst-forcing standard is imposed on him. If that businessman testified that he COULD meet the standard, would your argument then be to adopt that standard for all small-volume manufacturers?

ANSWER: Our argument would not necessarily be to follow whatever a single SER happened to say at a SBREFA pre-panel briefing, but rather to call the entire SBREFA process into question - which is precisely what we are doing. The entire thrust of our argument regarding the SBREFA process is that it was not honored, that impacted businesses were not given standing, and that just one SER - culled only from those makers recognized by EPA as directly impacted entities - could not possibly be representative of all directly impacted entities. That said, the one SER who did participate made the unequivocal statement that imposition of Tier II would compel him to end his business.

The question is not whether this lone SER speaks for all impacted businesses - he does not - or whether his statement is the sole driver behind our desire for a non-catalyst-forcing emissions standard - it most assuredly is not.

The question is, did EPA tag the SBREFA base before it began its final sprint to home plate, a sprint being run now? We don't think so. The Vaughn Study calls into question the way EPA played the game. We are asking Congress - chiefly but not exclusively the House Small Business Committee - to make the call as umpire. We are asking individual Congressmen to hold field hearings - so they can make the call as umpire. It is a fair, legitimate request. What's wrong with asking the umpire to make the call? Nothing.

QUESTION: Your claims about a safety problem with catalytic converters on motorcycles really needs to be documented!

ANSWER: You know what? You are absolutely right. And that is why the Motorcycle Riders Foundation has requested a complete, independent and comprehensive study into that very question before the new rule is finalized. And we've requested such a study repeatedly. For more than two years.

Let's run the list, shall we? MRF brought up the safety question in our first comment soon after EPA published its Advanced Notice of Proposed Rulemaking in late 2000.

MRF raised the safety question at a meeting at the White House Conference Center in October, 2001, with a representative of EPA's Office of General Counsel present.

MRF touched on the issue at the September 17, 2002, public hearing in Ann Arbor.

MRF requested a study in both our appeal for a public comment deadline extension September, 19, 2002, and again in our comments on the proposed rulemaking filed January 5, 2003.

The agency's attorney did not say one single word in our October, 2001, meeting.

The agency has yet to provide a single written word to us in response to these many written requests, other than a statement in its proposed rulemaking that the safety problems are "not insurmountable" (a tacit acknowledgement that some problems had to be surmounted).

QUESTION: How many shops and other related small businesses are there, really?

ANSWER: The truth is, no one knows for certain. Based on input from a number of sources, including observations by John Paliwoda of the California Motorcycle Dealers Association and inquiries made by SMROs, we estimate there are at least 10,000 impacted small businesses in the United States. Remember that John Paliwoda of the California Motorcycle Dealers Association testified at the September, 2002, EPA public hearing that his constituency - franchised and non-franchised dealers among them - will be directly impacted. So the number of businesses goes beyond "independent shops" or "custom shops." As ABATE of OHIO indicated in its talks with its Congressional delegation, some entity other than the independent shop may shape the billet, another chrome it, still another manufacture an O-ring, another must ship the part, etc. We believe the number of related businesses (e.g., non-franchised dealers, aftermarket businesses, shops, derivative suppliers, etc.) creates an impacted segment of industry that numbers well above 10,000 entities.

The fact is, because so many small motorcycle businesses are in various stages of development (as discussed above regarding Eddie Trotta Thunder Cycles), it would take additional study well beyond the scope of Vaughn - and additional time - to arrive at a more precise estimate. In our talks with Congress over the last two months and more, we have used the expression "in excess of 10,000 small businesses." In one recent case, ABATE of IOWA presented page after page of impacted businesses, by name, for that state. Everyone is doing his or her part to describe, to the best of our ability, the number and nature of impacted businesses.

But even if we counted all the businesses with laser-precision, the outstanding question is this: regardless of their number, should EPA count them as directly impacted small business entities? We think they should.

QUESTION: You have no data from manufacturers to suggest what percentage of their future models will be equipped with catalytic converters. Why do you predict 'widepread' use of catalyzers?

ANSWER: No, we know of no motorcycle manufacturer data to describe the percentage of catalyzers in their future fleet. In his study, however, Dr. Vaughn chose to cite a reputable source (Mr. Tom Austin of Sierra Research who delivered the Motorcycle Industry Council testimony at EPA's September 2002 public hearing). Representing the motorcycle industry, Mr. Austin expressed "concern" because "the Tier 2 standards will require the widespread use of catalyst[s]..." "Widespread" may not mean 100%, but it certainly denotes extensive, prevalent and common.

QUESTION: You keep emphasizing the benefits of motorcycles as transport, because they conserve fuel, ease traffic congestion and reduce road wear. Aren't motorcycles in the main recreational or supplemental forms of transport?

ANSWER: The motorcycle predates the automobile and is a bonafide, legitimate form of transportation codified as such in federal and state law. Motorcycles conserve fuel, ease traffic congestion and reduce road wear. We believe Congress and the Administration should help increase motorcycling in America, so that America can reap the benefits of this bonafide, legitimate form of transportation.

AND FINALLY: You can't win on the EPA issue.

ANSWER: The Motorcycle Riders Foundation is duty bound to advocate for the street motorcycle rider, represent our members faithfully and fight for what we believe is right. We believe it is right to fight for a reasonable emissions standard that improves pollution control while preserving small business, rider options and increasing motorcycling in America to reap the benefits of fuel conservation, road wear reduction and congestion easing.

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