It may be early, but there are already signs that 2012's first big downstream oil regulatory battle will be over the US Environmental Protection Agency's proposed Tier 3 gasoline regulations.
Sixty-eight US House members—56 Republicans and 12 Democrats—signed a Dec. 19 letter to EPA Administrator Lisa P. Jackson expressing their concern. They said the proposal would place stringent requirements on motor fuel manufacturers to reduce sulfur and vapor pressure levels.
"Our understanding is that EPA intends to propose this rule early next year, and issue a final rule in 2012," the letter said. "Especially during this time of economic uncertainty, we have concerns about the effects this rule might have on the fuel manufacturing and other industries, the price of [gasoline] at the pump, and domestic fuel supplies."
The proposal continues the systems-based approach EPA used to set standards for both passenger vehicles and their fuels in its Tier 2 vehicle and gasoline sulfur program, which became final in February 2000. It also responds to "antibacksliding" requirements which the 2007 Energy Independence and Security Act incorporated into the Clean Air Act.
"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.
Potential benefits
"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," she continued.
The proposal would cut sulfur levels in gasoline to an average 10 ppm, 70% less than current levels which are already down 90% from 2004, according to the American Petroleum Institute. EPA also hasn't demonstrated the extent to which the proposed further costly sulfur reductions will lead to environmental improvements, it said.
Bob Greco, API's downstream and industry operations group director, noted at the Nov. 2 hearing that Baker & O'Brien Inc. researchers found US refiners could face $10-17 billion of up-front capital costs and $5-13 billion of recurring annual operating expenses under several Tier 3 scenarios. Overall, they estimated, four to seven US refineries could close because their owners could not make the required investments to meet the new levels.
"EPA hasn't done its homework," API Federal Relations Director Misty McGowen said on Dec. 22. "American taxpayers deserve a thorough analysis of the economic and jobs impact before EPA moves forward with its proposal."
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