Industry, government witnesses disagree on need for Tier 3 rules

Proposed regulations to further reduce sulfur content in gasoline by nearly 70% potentially could make refiners significantly alter their plant configurations while reducing product inventories and processing capacity, witnesses from two petroleum industry associations told a House subcommittee. A US Environmental Protection Agency official, meanwhile, said they are necessary nevertheless to protect public health.

“In the decade since we set the Tier 2 vehicle and fuel standards, there have been advancements in vehicle catalyst technology and computer control technology that should enable significant, cost-effective reductions in motor vehicle tailpipe emissions,” Margo T. Oge, who directs EPA’s Transportation and Air Quality Office within EPA’s Air and Radiation Office, told the House Science, Space, and Technology Committee’s Energy and Environment Subcommittee on Nov. 2.

“Tier 3 vehicle and fuel standards have the potential to cost-effectively reduce [nitrogen oxides, particulate matter, and volatile organic compounds] by hundreds of thousands of tons.”

EPA is considering the vehicle and its fuel as an integrated system—an approach that worked well as it developed the Tier 2 standards, which were finalized in 2000, she said in her written testimony. “There [are] extensive data showing that gasoline sulfur degrades the performance of catalytic systems that are key to reducing emissions from gasoline vehicles,” Oge said. “Lowering the sulfur content of gasoline would make emission control technologies more effective for both existing and new vehicles.”

She said gasoline sulfur reductions would help automakers meet new standards while significantly reducing emissions from existing cars and light-duty trucks. The Alliance of Automobile Manufacturers has urged EPA to bring its regulations in line with California’s so automakers could build a single version for nationwide sales, she added.

But witnesses from the American Petroleum Institute and National Petrochemical & Refiners Association told the subcommittee that gasoline sulfur emissions already have been reduced dramatically under existing regulations. “The rule could lead to significant domestic fuel supply reductions, higher petroleum product imports, potentially increased consumer costs, increased refinery emissions, closed US refineries, and reduced energy security,” warned Brendan Williams, NPRA’s senior advocacy director.

Unintended consequence

EPA’s Tier 2 regulations have cut sulfur levels by gasoline by 90% since 2004 from an average 300 ppm to an average 30 ppm today, he said. Hydrotreating, the principal technology used to reduce sulfur levels in gasoline and other motor fuels, requires energy consumption which results in greenhouse gas and other criteria pollutant emissions, Williams explained. “As a result, a regulation requiring a reduction of sulfur in petroleum fuel increases emissions that refiners are being told they must reduce under other Clean Air Act regulations,” he said in his written statement.

From 1990 to 2008, domestic refiners invested $112 billion in environmental improvements, according to Bob Greco, API’s downstream and industry operations group director. “Since 2000 alone, US refiners have spent nearly twice as much on environmental improvements as the government and private sector1 spent on nonhydrocarbon technologies,” he told the subcommittee. “Regulations governing fuel composition, greenhouse gases, and environmental standards have an enormous financial impact on the refining industry, as do financial controls and taxation.”

He suggested that EPA should not issue a Tier 3 proposal without first justifying the costs of reduce vapor pressure as well as sulfur in gasoline. While the agency has said that these changes are necessary to improve air quality and fuel economy, it has not released data which it says justify the proposal, Greco said in his written statement. Researchers at Baker & O’Brien Inc. studied impacts of several Tier 3 scenarios and found that US refiners could face $10-17 billion of up-front capital costs and $5-13 billion of recurring annual operating expenses, he said.

Overall, the Baker & O’Brien researchers estimated that 4-7 US refineries could close because their owners could not make the required investments to comply with the new requirements, Greco said. “This would be in addition to the 66 US refineries that have closed in the last 20 years,” he said. The US Department of Energy has identified the cost of compliance with various regulations as a part of the economic stress that caused the shutdowns. The regulatory burden of Tier 3 requirements would add to this stress.”

Other witnesses at the hearing, which examined the broader subject of motor fuel standards’ conflicts and unintended consequences, included Ingrid Burke, co-chair of the National Research Council Committee on Economic and Environmental Impacts of Increasing Biofuels Production; Jay Kesan, program leader of the Biofuel Law & Regulation Program at the University of Illinois College of Law’s Energy Biosciences Institute; David Hilbert, a thermodynamic development engineer at Mercury Marine in Fond du Lac, Wis.; and Jack Huttner, executive vice president for commercial and government affairs at Gevo Inc., an Engelwood, Colo., renewable chemicals and advanced biofuels company.

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