Gina McCarthy would not be formally nominated as the next US Environmental Protection Agency administrator for 3 more days. But an American Petroleum Institute official was ready on Mar. 1 to tell reporters problems the US oil and gas industry has with some key EPA downstream regulations.
They ranged from EPA's efforts to allow gasoline with a higher ethanol blend to be sold before its effects on engines were fully tested to a biodiesel mandate that requires refiners to meet quotas for a fuel that's barely beginning to be produced.
The agency also is resolutely considering a rule to make refiners reduce gasoline's sulfur content further. API considers these proposed Tier 3 requirements a major mistake that not only would unnecessarily raise fuel manufacturing costs (and raise prices), but also increase greenhouse gas emissions.
Gasoline sulfur content was successfully cut to 30 ppm from 300 ppm under EPA's Tier 2 program. EPA originally planned to come out with the Tier 3 requirement in 2012, but waited a year, according to Bob Greco, API downstream group director. That suggests there are problems with it, he maintained.
He said an independent research firm, Baker & O'Brien, found that reducing sulfur levels in gasoline to 10 ppm, as EPA proposes, would result in nearly $10 billion of refinery capital expenditures, a $2.4 billion annual compliance cost, up to 5¢/gal higher gasoline manufacturing costs—and up to 1% more GHG emissions.
Greco pointed out that US refining supports 500,000 well-paying jobs (with an average income of $94,000/year) and contributes 1.9% to the gross domestic product. It also provides the nation with secure fuel supplies, with nearly 90% of the gasoline consumed refined domestically.
'It makes no sense'
"We can't say how [the additional costs] would play out in the market," Greco said. "But when a part of the economy contributes jobs and improves the recovery from the recession, it makes no sense to increase its costs and reduce its contributions."
Rising retail gasoline costs already had led API Chief Economist John C. Felmy to discuss some of their causes with reporters earlier that week. US Senate Energy and Natural Resources Committee Chairman Ronald L. Wyden (D-Ore.) also was growing concerned. He asked US Energy Information Administrator Adam Sieminski for an explanation on Mar. 11, and said he plans to hold a hearing about it later this spring.