Small refiners may get sulfur rule break

U.S. Environmental Protection Agency may give small refiners 2 more years to meet the agency's proposed gasoline sulfur rule.

Testifying before the Senate environment committee, EPA Administrator Carol Browner strongly defended the rule (OGJ, May 10, 1999, p. 32), which would slash the sulfur content of gasoline to 30 ppm from the current average of 330 ppm during 2004-06. EPA plans to issue a final rule by yearend.

API response

J. Louis Frank, President of Marathon Ashland Petroleum LLC, testified for the American Petroleum Institute. He said the rule would cut U.S. gasoline sulfur levels by about 90%, to the levels that California requires, which he said "is not consistent with air quality needs, technology, or economics."

Frank said the rule would add 5¢/gal to the cost of gasoline, costing U.S. consumers about $5.7 billion/ year.

EPA estimates the cost at 1-2¢ and the potential benefit at up to $16 billion/year in health-related savings.

Frank said, "The impact on refiners would also be considerable. On a nationwide basis, the added costs of EPA's proposal would total more than $7 billion in new investments and substantially increased operating expenses. This would be a daunting challenge for my industry, which is already struggling to provide a satisfactory return on investment for its shareholders.

"Over this decade, the refining industry's return on capital has averaged 3% while operating at maximum capacity, and operating margins have been consumed by increasing environmental mandates.

"For some refiners, EPA's proposed regulation will be the straw that breaks the camel's back. Facilities will close, and jobs will be lost. Since the phase-in of identical sulfur-lowering requirements in California's gasoline in 1996, some 11% of that state's refineries have been shut down."

Small refineries threatened

Clint Ensign, Sinclair Oil Corp.'s government relations vice-president, said the three refineries that his company operates are not eligible for small refinery help under the proposal-a 2-year delay until 2008 to meet the standard.

"Overall, the proposed gasoline sulfur regulation represents the largest and most costly government requirement in the history of our company. If made final as proposed, it directly threatens the future of our Casper, Wyo., refinery."

Ensign said that 53 small refineries, not the 17 that EPA estimated, may have difficulty meeting the new standard.

The Casper refinery's plight got the attention of Sen. Craig Thomas (R-Wyo.), who told Browner that she should have tried harder to reconcile the concerns of both the oil and auto industries in drafting the rule, because the burden of the final rule falls mostly on refiners.