Industry says EPA needs to expand scope of low-sulfur diesel review

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, July 29 -- Oil and gas companies including integrated companies, independent refiners, and pipeline operators urged the US Environmental Protection Agency in comments made public July 25 that the agency must expand the scope of an independent review panel now reviewing low-sulfur diesel standards this summer or face supply worries later on.

EPA recently told stakeholders there is no technical reason why the rules should be delayed or changed. The review panel, which includes refiners, environmental groups, fuel distributors, and state and local governments is slated to issue recommendations to the agency by mid-September on technical considerations that may need to be considered when the agency administers the rule (OGJ Online, Apr. 24, 2002).

Industry unhappy
But industry officials are unhappy with EPA's position. They say regulators are not looking at the whole picture.

"Based on limited data and a narrow focus on specific refinery technologies, EPA's report gives an overly optimistic picture of the implementation of the fuels requirements for the 2007 Heavy Duty Highway Diesel Rule," a group that includes the American Petroleum Institute, the National Petrochemical & Refiners Association, and the Association of Oil Pipe Lines said in written comments that will be discussed at a review panel meeting scheduled for July 30-31 in northern Virginia.

Speaking on behalf of the American Petroleum Institute, Downstream General Manager Ed Murphy said EPA should examine a full range of supply-related issues raised in his group's comments, plus those raised in comments from other parties (e.g., diesel marketers) in order to present a more balanced picture of how the fuels provisions will be implemented.

"We would like them [EPA] to address a whole variety of issues," Murphy told OGJ. "There are, for example. . .12-18 different supply-related issues: things like detection equipment and testing methods, segregation of tanks, etc. They all merit study and, hopefully, we can push EPA in that direction. We need to get more certainty and understanding and more assurance for adequate diesel supply."

API and other industry stakeholders said there is little to argue with in the preliminary data included in the EPA progress review. They draw on public and confidential information and indicate that strategic planning is proceeding on EPA's anticipated timeline.

"As a result, the report leaves too much room for and, perhaps, even invites a potentially misleading inference; namely that all significant problems concerning the fuel implementation aspects of the heavy-duty 2007 program are being adequately addressed," industry comments to EPA said.

Murphy added that EPA needs to take a closer look at the impacts of the rule further downstream. Specifically, the agency needs to look at the entire diesel pool, including the impact the rule will have on heating oil, which has dramatically higher sulfur levels.

When and how EPA's off-road diesel engine rule is finally implemented could also have impacts on how refiners meet the guidelines. The Department of Justice recently said it plans to move forward with an October 2002 emissions standard deadline for large diesel trucks. Under a 1998 consent decree signed by diesel engine-makers and DOJ, the companies agreed to accelerate the timetable under which they would meet tougher diesel pollution standards from 2004 to October 2002 or pay noncompliance penalties. But some diesel engine makers are trying to get a delay through Congress.

Specific worries
Issues industry wants EPA to explore on the refinery side include: non-road diesel requirements; desulfurization technologies, distribution of ultralow-sulfur diesel (ULSD) within refineries, sulfur test methods, potential credit trading program problems, and small-refiner concerns.

For pipelines, the industry coalition listed nine topics its wants the review panel to consider: inline sulfur detection, downgrade volumes, product sequencing, other sources of contamination, 20% downgrade limit, breakout tankage, disposition of downgraded ULSD, and pipeline specifications.

Comments to EPA also list seven terminal and marketing issues: additional tankage for low-sulfur diesel segregation, new tankage requirements for ULSD mixing, necessary changes to minimize contamination and downgrades, disposition of downgraded ULSD volumes, and dependable sulfur field-test methods. Marketing concerns include preventing misfueling and truckstop handling of various diesel grades.

Environmental response
Environmental groups, meanwhile, argue that expanding the panel's scope beyond EPA's desire to focus on technical issues is a ruse to weaken or abandon a rule that the courts have already validated.

"These disingenuous comments do nothing but underscore our longstanding concerns about the entire "clean diesel" panel—namely, that the oil interests are using it to try to rewrite the diesel rule, despite their claim to the contrary," said Frank O'Donnell of Clean Air Trust. "They've lost in court and think they have a more favorable forum here. Most of their concerns would be alleviated if—as environmentalists suggest—they convert all of their on- and off-road diesel to 15 ppm by 2006."

Industry reaction
API officials denied that they are trying to weaken the rule.

"We have no desire to change the level of diesel sulfur or the implementation date," Murphy said. "But we are concerned on a range of issues impacting diesel, and the 2006 rule is part of that," he said.

In the industry testimony, the coalition urged EPA "at the very least" to present a list of issues not considered within its report or by the Clean Diesel Independent Review Panel that are likely to have a significant impact on implementation of this rule. "Such a list should also be included in the final report the panel presents to the agency this fall. The issues so identified may then be taken up in subsequent implementation activities, such as the November workshop discussed by EPA at the late June 2002 panel meeting."

API officials also welcomed a proposal by the White House to take an expanded role in crafting updated pollution rules designed to lower emissions from diesel-powered, non-road vehicles (OGJ Online, May 31, 2002)

EPA officials said their agency and OMB will collaborate on the design of an "innovative" regulatory analysis to support the development of regulatory strategies to reduce emissions from non-road diesel engines. Among other things, this analysis will consider:

-- The use of incentives to encourage the early introduction of "clean" emissions-control technologies and low-sulfur diesel fuel.

-- The potential use of market-based averaging, banking, and trading programs that might include permission to trade emission-reduction credits between off-road and highway engines, thereby stimulating more emissions reductions at less cost.

-- The additional emissions reduction benefits that can be achieved from existing off-road diesel engines through the use of very-low-sulfur diesel fuel.

-- How risks, benefits, and costs might vary by type of off-road engine and geographical location of use.

Public comment on the White House proposal is expected by next year.

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