Replies

I dug this note up:

Sulfur and GA$ CO$T

Chemical Marketing Reporter
5/10/99

Chemical Market Reporter - 10-May-99

Petroleum Industry Attacks Tougher Sulfur Guidelines Proposed by EPA

By Glenn Hess

The Clinton Administration's new clean air plan, which includes a dramatic reduction in the sulfur content of gasoline, is facing strong opposition from petroleum refiners and their allies in Congress.

An Environmental Protection Agency proposed rule, announced on May 1 by President Clinton, would require refiners to lower gasoline sulfur levels from the current national average of 340 parts per million to only 30 ppm by 2006, with about 17 small refineries given until 2008. The proposal would apply to all states except California, which already has a gasoline sulfur standard of 30 ppm.

"Because sulfur clogs and impairs anti-pollution devices, we're proposing to cut the sulfur content of gasoline by about 90 percent," the President remarked in his weekly radio address.

Sulfur, a naturally occurring component in crude oil, is being targeted because it can hinder a vehicle's catalytic converter, leading to greater tailpipe emissions of nitrogen oxides, carbon monoxide and hydrocarbons.

EPA, which expects to issue a final rule by the end of the year, rejected arguments by the oil industry that the sulfur reductions would be overly expensive and force the closing of some refineries.

The average price of gasoline would increase by 1 or 2 cents per gallon, and new emissions technology on cars and light-duty trucks would add $100 to $200 to the price of a vehicle, according to EPA administrator Carol Browner.

"It's not an awful lot to pay for cleaner air," Ms. Browner says, noting that the agency expects the tougher requirements to cost about $4.4 billion.

But the oil industry contends that the sulfur-reduction requirement alone, using existing technology, could raise the cost of making gasoline by more than $7 billion per year, equivalent to about 5 to 6 cents per gallon.

"The case for a national approach has yet to be made," warns William O'Keefe, vice-president of the American Petroleum Institute (API). "An approach that does not recognize regional differences in air quality means that consumers will pay more than necessary, and refiners will be hard pressed to make the reductions on schedule." He adds that the industry will make "a strong case for modification" before EPA's proposal becomes final.

In a joint statement, API and the National Petrochemical Refiners Association (NPRA) say EPA should "build on clean air accomplishments rather than push forward its unnecessarily costly proposal to rapidly reduce nationwide gasoline sulfur levels by 90 percent. The agency should not ignore the nation's different air quality needs and the costs that will be imposed on investors and consumers."

An alternative sulfur reduction plan being touted by the industry would allow higher sulfur concentrations in gasoline sold in the western half of the US, excluding California, than in the East.

Under the industry's plan, gasoline with an average sulfur content of 150 ppm would be sold in all states east of the Mississippi River plus Missouri, Louisiana and the eastern third of Texas. Elsewhere, except for California, gasoline would have an average sulfur level of 300 ppm. The plan would take effect in 2004, with a further reduction to 30 ppm in 2010.

Such an approach would cut nationwide sulfur levels nearly in half, with most of the reduction in the East, which has most of the country's ozone air quality problems, according to API and NPRA. The sulfur cuts would occur in 2004, the same year as EPA's plan, but would account for the fact that less sulfur reduction is needed in the West, where air quality generally meets federal standards.

California would continue to use the reformulated, low-sulfur gasoline that it already requires, and after 2000, retailers in some metropolitan regions outside California would sell reformulated gasoline that is expected to have an average sulfur level of 150 ppm.

"Air quality problems are vastly different across the nation. Yet under EPA's plan, the citizens of Boise, Idaho, will pay as much or more to clean their air as will the citizens in the Bronx, N.Y.," says Bob Slaughter, general council and director of public policy for NPRA.

"This rulemaking has not demonstrated that all regions of the country need the same level of sulfur reductions. The best technology to enable EPA's plan is not yet generally available commercially. As a result, the costs of achieving EPA's plan are too high."

The industry's plan would also require additional sulfur reductions if they are needed--to the 90 percent level of the EPA proposal--but at a later date, allowing for the implementation of new, more cost-effective refinery technology. API and NPRA caution that EPA's rapid schedule could prevent refiners from adopting sulfur reduction technologies that are commercially unproven but potentially more cost-effective. Refiners estimate that under their plan, the capital investment costs for lowering gasoline sulfur levels would be roughly $3 billion, about 2 cents per gallon.

Sen. James Inhofe (R-Okla.), chairman of the Senate clean air subcommittee, says he has already begun drafting legislation to address what he considers the negative economic impacts of the proposed EPA regulation.

"In their rush to issue new environmental regulations, I fear the Administration is short-changing important considerations which need to be addressed in the proposed sulfur rule," says Sen. Inhofe. "The Administration has also consistently failed to provide the Senate with important analysis and justifications for this proposal."

He notes that the Clean Air Act requires EPA standards to be cost-effective. "My subcommittee will ensure that this is the case," he says.