EPA lifts restrictions to ease Midwest gasoline shortage

The US Environmental Protection Agency temporarily eased summertime emissions restrictions Tuesday to channel more reformulated gasoline into the fuel-short markets of Chicago, Ill., and Milwaukee, Wis.

Sam Fletcher
OGJ Online

HOUSTON, Aug. 28 -- The US Environmental Protection Agency temporarily eased its summertime emissions restrictions Tuesday to channel more supplies of reformulated gasoline (RFG) into the fuel-short markets of Chicago, Ill., and Milwaukee, Wis.

EPA officials took that action at the request of Citgo Petroleum Corp., Tulsa, to halt a run-up in Midwest gasoline prices (OGJ Online, Aug. 24, 2001). Regional pump prices for gasoline escalated 20¢/gal last week after a fire knocked out part of the company's 158,650 b/d Lemont, Ill., refinery.

A distillation tower at the refinery's crude unit suffered a structural failure Aug. 17 as a result of the Aug. 14 fire. Citgo officials said it could take 6 months to repair that damage.

The Citgo refinery supplies about 16% of Illinois' total gasoline, officials said. It is one of the few US refineries capable of producing the special gasoline, blended with ethanol, that is mandated by the EPA for the Chicago market to reduce air pollution in that area.

Citgo executives praised the quick response by EPA officials Tuesday.

"It means that we should be able to meet all of our contractual agreements with our branded marketers of RFG and conventional gasoline products. It also demonstrates what can quickly be accomplished when governmental agencies and the private sector work in close cooperation," said W.A. DeVore, senior vice-president of supply, marketing, and lubricants at Citgo.

EPA officials relaxed their summertime restrictions on emissions of volatile organic compounds that otherwise would have extended through midnight Sept. 15. The year-round EPA emissions standards for nitrogen oxides and other air toxics remain in place, however, said company officials.

Under an agreement between Citgo and EPA, distributors and retailers can sell the approved gasoline, which will move through Citgo terminals in Lemont, DesPlaines, and Mt. Prospect, Ill. It also affects gasoline moved through a Milwaukee, Wis., terminal, jointly owned by Citgo and ExxonMobil Corp., and the Premcor Blue Island, Ill., terminal, officials said.

However, Citgo is required to make a payment equal to "the economic benefit" it receives from distribution and sale of the nonstandard reformulated gasoline during the prescribed period. That amounts to the cost difference between the production of the normal "summer blend" of gasoline and the less expensive "winter blend" that Citgo will be selling instead, said company officials.

Meanwhile, Citgo is considering bringing in feedstocks and blending components from other sources, which it can run through undamaged units -- a coker and a catalytic cracker -- at the Lemont facility to produce more gasoline.

Like California, the Chicago-Milwaukee area is an "island" market, dependent primarily on local refiners for its "boutique" blend of gasoline and difficult to supply from other areas of the US where that particular gasoline is not marketed. That dependence on a special blend of gasoline and lack of supplies from other sources resulted in price spikes for the Chicago-Milwaukee market last summer and again early this summer as demand briefly outran supplies.

Contact Sam Fletcher at samf@ogjonline.com

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