EPA finalizes Tier 3 motor fuel, other requirements

The US Environmental Protection Agency issued final Tier 3 emissions control requirements for motor fuels and vehicles to meet by Jan. 1, 2017. The regulations address one major concern from refiners by keeping sulfur limits per gallon at existing levels, EPA Administrator Gina McCarthy said.

“Frankly, what [the American Petroleum Institute] and others were relying on was an outdated estimate based on what they thought we’d propose, not what we actually proposed let alone what we actually put in the regulation following public hearings and extensive public comments,” McCarthy said during a Mar. 4 teleconference.

“The per gallon sulfur cap will remain at existing levels,” McCarthy stated, adding, “I think folks need to take a close look at what we’ve actually done.”

The regulations include provisions to help refiners meet the requirement to reduce gasoline sulfur levels to 10 ppm from 30 ppm by 2017, she continued. “We listened very closely to small refiners and delayed the start date for 30 of them until 2020 because it’s important for them to be able to keep operating and supplying products for their customers,” she told reporters.

Other provisions include:

• A credit averaging, banking, and trading (ABT) program that will allow refiners to spread out their investments from 2014 through 2019 and provide for a seamless transition from the Tier 2 ABT program to the Tier 3 ABT program, including the ability to carry over “banked” credits from Tier 2.

• A 1-year deficit carry-forward provision that allows an individual refinery that does not meet the 10 ppm standard in a given year to carry a deficit forward for 1 year if necessary, as long as it makes up the deficit the following year.

• Hardship provisions which allow refiners to petition for compliance assistance on the basis of extreme hardship or extreme unforeseen circumstances.

The regulations also certified gasoline with a 10% ethanol blend and fuel that is 85% ethanol as test fuels under the program, providing additional certainty for refiners and automakers, McCarthy said.

She said EPA was doing more than standing by its estimate that Tier 3 requirements would add 1¢/gal to the cost of gasoline by 2025: It was reducing it.

“Based on additional research and comments, we estimate this will increase costs for gasoline by about 0.65¢/gal and for new cars and light-duty trucks by about $72/vehicle by 2025,” she said. “In 2017, when this fuel is available, cars will be cleaner. It will provide an opportunity for automakers to use more efficient catalytic converters. The costs won’t be immediate, but gradually ramp up.”

The requirements also potentially will affect natural gas liquids plants, NGL and refined petroleum products pipelines, gasoline additive manufacturers, petroleum bulk stations and terminals, ethyl alcohol and denaturant manufacturers, and other basic chemical manufacturing and wholesaling operations.

Reiterate concerns

API and American Fuel & Petrochemical Manufacturers officials reiterated concerns that the new requirements would be costly and unnecessary.

“This rule’s biggest impact is to increase the cost of delivering energy to Americans, making it a threat to consumers, jobs, and the economy,” API Downstream Group Director Bob Greco said on Mar 3. “But it will provide negligible, if any, environmental benefits. In fact, air quality would continue to improve with the existing standard and without additional costs.”

Greco said a study conducted by consulting firm Baker & O’Brien for API determined the new rule could require $10 billion in capital costs and $2.4 billion/year in compliance expenses, equating to a potential 6-9¢/gal increase in the cost of gasoline production. Another study that Environ did for API found the new rule would produce negligible environmental benefits, Greco said.

“We’re also concerned about the timeline of EPA’s new rule,” he added. “The rushed timeframe leaves little opportunity for refiners to design, engineer, permit, construct, start up, and integrate the new machinery required. This accelerated implementation only adds costs and potentially limits our industry’s ability to supply gasoline to consumers.”

AFPM Pres. Charles T. Drevna said EPA’s decision to issue the final Tier 3 rule “is yet the most recent example of the agency’s propensity for illogical and counterproductive rulemaking. Tier 3 not only lacks scientific justification, but in fact will lead to higher greenhouse gas emissions due to the greater energy-intense refining process required to reduce sulfur in gasoline from 30 to 10 ppm.”

He said AFPM was pleased with EPA’s decision to make E10, instead of E15 as was originally proposed, the certified Tier 3 test fuel. “Unlike E10, which constitutes more than 95% of all gasoline sold, E15 is not widely available in the market and is damaging to the majority of vehicles on the road today,” Drevna said on Mar 3. “EPA’s decision is the right choice because there is no market for E15 for one reason: Consumers don’t want the fuel.”

Ignored problems

He said AFPM met with numerous administration officials to outline problems with the proposed standards’ potential impacts and compliance schedule that EPA chose to ignore. “Tier 3 will provide little, if any, benefit, while increasing fuel manufacturing costs on the backs of American consumers,” Drevna said. “Like the Renewable Fuel Standard, [it] not only adds to uncertainty in the market and to potential supply problems, but actually increases greenhouse gas emissions.”

But McCarthy and others who participated in the teleconference said the new regulations provide the most economic and immediate air pollution reductions possible.

“EPA effectively has harmonized the state and federal agencies’ emissions requirements, which allows us to build and calibrate vehicles on a national basis,” said Mike Robinson, vice-president for sustainability and global regulatory affairs at General Motors. “We support lower sulfur emissions requirements for fuels because this is one of the easiest ways to reduce emissions.”

Hundreds of state and local air pollution regulators welcome the new requirements, according to George (Tad) S. Aburn, Jr., co-president of the National Association of Clean Air Agencies and director of the Air and Radiation Management Administration in Maryland’s Department of the Environment. “We know of no other strategy that can clean the air as cost-effectively as Tier 3,” he maintained.

The new requirements will achieve the equivalent of taking 33 million cars off the road in their first year, Aburn continued. “I can say we’ll never achieve air quality attainment standards without the Tier 3 program,” he said, adding, “It will reduce emissions within the necessary time frames at a reasonable cost. It’s particularly important because the federal government is best equipped to tackle mobile source emissions.”

Contact Nick Snow at nicks@pennwell.com

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