API warns of possible EPA refinery regulatory 'tsunami'

Proposed US Environmental Protection Agency regulations directed at refiners could put several US refiners out of business and place others at a significant disadvantage to overseas petroleum product manufacturers, American Petroleum Institute officials warned.

“At the same time, data suggest that the environmental benefits would be modest,” API Regulatory and Scientific Affairs Director Howard Feldman told reporters during a Feb. 10 teleconference.

API spent much of 2011 opposing an out-of-cycle proposal that would have imposed more stringent ozone standards, and EPA subsequently withdrew, he said.

Currently, API is concerned with proposed Tier 3 gasoline rules, greenhouse gas emission rules, and new sources performance standards for refiners, the third phase of EPA’s tailoring rule, and the boiler maximum achievable controllable technology rule, Feldman said.

“While the specific elements of these have not all been set forth, they could constitute a veritable tsunami of added requirements that could put some refineries out of business, diminish US fuel manufacturing capacity, and increase our reliance on imported fuels,” he declared.

GHG rules for refiners especially matter since the federal Clean Air Act was not designed to address this question and an open and transparent rule-making process is important, Feldman said.

“We are now past the date the agency said it would propose the new

refinery greenhouse gas rules, but still without clarity on how it will proceed,” he said.

API would like to see EPA start with an advanced notice of proposed rule-making on all its forthcoming refinery rules to allow full consideration of how the GHG regulations could be structured, he said.


Onerous requirements

Feldman said API is concerned that EPA’s proposed third step of its tailoring rule could impose onerous requirements on smaller downstream businesses. EPA has sent the proposal to the White House Office of Management and Budget, where API hopes an objective look will be taken on whether its limited environmental benefits are worth its cost to workers and their families.

“This rule is not needed at this time, and should be pulled back,” he maintained.

Feldman said EPA also is revising its boiler MACT proposal “yet again” and should find a way to accommodate facilities that burn natural gas, and make allowances for refineries on islands without access to gas.

“Finally, we would again call on EPA to not issue a Tier 3 vehicle emission proposal before there is a full airing of the impacts, costs and benefits of further reductions of sulfur and vapor pressure in gasoline,” he said. “Although EPA maintains these changes are needed to improve air quality and fuel economy, it has not produced the data to back up its claims.”

A Baker & O’Brien study, that API commissioned last year, found sulfur reduction requirements under the proposed Tier 3 regulation could have significant adverse impacts, noted Bob Greco, API’s downstream operations director, who also participated in the teleconference.

“The impacts are pretty sobering,” he said. “According to the study, potential refinery costs could reach $17 billion and recurring costs would be $5-13 billion, translating to higher product costs around 5-35¢/gal. All these could lead to a reduction of gasoline supply from US refiners of up to 14% and place domestic refineries at a competitive disadvantage to foreign refineries that are not subject to this rule.”

Feldman said US President Barack Obama called on federal agencies to consider impacts proposed regulations would have on the domestic economy.

“This is an opportunity for EPA to do just that,” Feldman said. “Maintaining a healthy and competitive refinery sector is vital to our energy security, our economic security, and our national security. We must be sure that new regulatory proposals are necessary, practical, and fair.”

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