Oil groups warn EPA on diesel sulfur rule

The American Petroleum Institute and the National Petrochemical & Refiners Association have warned that a pending rule to reduce the sulfur content in US diesel fuel could cause shortages of the fuel. The groups filed written comments Monday to the US Environmental Protection Agency. It has proposed to cut sulfur content in diesel fuel from the current 500 ppm to 15 ppm by 2006 (OGJ Online, May 17, 2000).


Washington, DC�The American Petroleum Institute and the National Petrochemical & Refiners Association have warned that a pending rule to reduce the sulfur content in US diesel fuel could cause shortages of the fuel.

The groups filed written comments Monday to the US Environmental Protection Agency. It has proposed to cut sulfur content in diesel fuel from the current 500 ppm to 15 ppm by 2006 (OGJ Online, May 17, 2000). A final rule is expected in December. Industry has urged a 50 ppm limit.

Edward Murphy, API�s downstream general manager, said, �We have proposed and strongly support significant reductions in on-highway diesel fuel sulfur. But EPA�s proposed rule affecting the fuel used to transport the majority of the nation�s consumer goods is simply arbitrary and anticonsumer.

�At a time of increased attention on petroleum prices and their impact on consumers and the economy, it is clearly inappropriate for EPA to promulgate a rule that will have severe adverse impacts on US consumers.�

API said the proposed rule did not adequately estimate the costs on industry, the potential for supply shortages, or the effects on consumers. It said EPA �badly underestimated the cost of producing and distributing ultralow-sulfur diesel fuel as well as the technology required to produce it.�

API said a draft Department of Energy study has estimated that the rule would cost from 7.8-10.6�/gal, more than double EPA�s estimates. Whereas a study by Charles River Associates said the industry would have to spend $8 billion to comply with the rule, roughly double EPA�s estimate, says API.

That study estimated that the rule will result in a 320,000 b/d shortfall in 2007, about 12% of estimated demand, and that prices would increase 15-52�/gal, depending on the availability of imports.

NPRA view
The refiners� group urged EPA to reconsider both the level and timing of the diesel sulfur regulation, noting that refinery operations already are strained.

�We remain deeply concerned that EPA�s proposal will sharply reduce available fuel supplies, leading to higher prices and increased market volatility that could have devastating consequences.�

It said the rule could result in a diesel supply shortfall of 10-20% in 2006 �because many refineries, importers, and fuel distributors may find it impossible to comply.�

NPRA noted that the National Petroleum Council, the Energy Secretary�s industry advisory group, had recommended that EPA sequence its fuel specification changes to achieve minimum overlap and avoid product supply imbalances. However, said NPRA, the EPA diesel sulfur rule overlaps the final gasoline sulfur rule, which NPC said would cost refiners $8 billion.

�There are few synergies between the processes for reducing sulfur in gasoline and those needed for diesel fuel,� NPRA noted.

The refiners group suggested that EPA, before issuing its rule, should launch a technology review of engine systems and refinery desulfurization technology.

�EPA should establish a cost-effective standard for engines and fuels that substantially reduces emissions without endangering the adequacy of energy supplies or compromising future economic growth. Unfortunately, the current proposal does not meet this test.�

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