EPA'S REFORMULATED GASOLINE PLAN DRAWS FIRE

Industry groups are criticizing the U.S. Environmental Protection Agency's proposal to require renewable fuels like ethanol in reformulated gasoline (RFG). EPA issued its proposed RFG rule, dropping the Bush Administration's plan to grant ethanol a 1 psi waiver from the Clean Air Act's RFG requirements. But it proposed a separate rule requiring 30% of the compounds used to add oxygen to RFG to come from renewable sources (OGJ, Dec. 20, p. 29). Such sources include ethanol and

Dec. 27, 1993

5 min read

Industry groups are criticizing the U.S. Environmental Protection Agency's proposal to require renewable fuels like ethanol in reformulated gasoline (RFG).

EPA issued its proposed RFG rule, dropping the Bush Administration's plan to grant ethanol a 1 psi waiver from the Clean Air Act's RFG requirements. But it proposed a separate rule requiring 30% of the compounds used to add oxygen to RFG to come from renewable sources (OGJ, Dec. 20, p. 29). Such sources include ethanol and ethyl tertiary butyl ether (ETBE), an ethanol derivatives.

EPA's proposal is subject to a hearing in January 1994 and a final rulemaking in June.

The RFG program is designed for the nine urban areas with the worst ozone levels, but other states and cities may opt in.

The program will be implemented in two phases. The first phase will begin Jan. 1, 1995, and require RFG to achieve a 15-17% reduction in ozone forming volatile organic compound (VOC) emissions and toxics emissions from motor vehicles.

Phase 2, which will begin Jan. 1, 2000, will require a 25-29% reduction in VOC emissions, a 20-22% cut in toxics emissions, and a 5-7% nitrogen oxide reduction.

RFG must contain at least 2 wt % oxygen and no more than 1 vol % benzene.

In the first 3 years of the RFG program (1995-97) refiners may use a "simple model" to certify their reformulated fuels. The model will consider only four parameters: gasoline volatility and oxygen content for VOC control and benzene content and aromatics content for toxics control.

Starting Jan. 1, 1998, refiners will be required to use a "complex model" to certify their fuels. It includes additional parameters such as oxygenate type, sulfur content, olefins content, and fuel distillation parameters.

EPA said the added cost of Phase 1 gasoline is expected to be 5/gal and Phase 2 RFG another 1-1.5/gal.

API REACTS

The American Petroleum Institute said, "We are extremely disappointed and concerned about the EPA's plans to guarantee a market for so-called renewable fuels in the reformulated gasoline program.

"This proposal apparently would mandate the use of ETBE and ethanol to meet reformulated fuel specifications, even though the government itself has questioned whether ETBE makes economic sense and has indicated that ethanol makes ozone pollution worse rather than better.

"In a market economy, this plan is a slap at consumers because such mandates have been demonstrated to be the least affordable or cost effective way to bring about continued improvement in air quality.

"The petroleum industry already uses ethanol and ETBE in fuels where they are economically competitive with other fuel additives and where they appropriately can address environmental concerns such as carbon monoxide.

"This proposal shows a flagrant disregard for those environmental and business groups who worked together with the government on the landmark regulatory negotiation on this issue.

"It is clearly a violation of that agreement which was signed in 1991 by all affected parties, including representatives of the ethanol industry. The future use of regulatory negotiation will be seriously damaged because this action makes it clear that reg-neg is binding only on nongovernment participants."

API said the EPA plan would generate an estimated federal gasoline tax revenue loss of $340 million/year, given ethanol's 54/gal exemption from the federal excise tax on gasoline. .

It said the plan would generate additional state gasoline excise tax losses of $126-189 million, given an average annual state tax loss ranging from 20 to 30/gal of ethanol.

It said the tax losses would deprive the Federal Highway Trust Fund of money while benefiting ethanol producers, particularly Archer Daniels Midland Co.

API said, "The Clean Air Act was intended to improve air quality rather than to be used as a way to insure market share for any fuel. To that end, the 1990 Clean Air Act amendments established performance standards for gasoline regardless of the oxygenate used and does not provide for preferential treatment for any oxygenate or fuel."

OTHER VIEWS

Texaco Inc. said EPA's rule will be costly, "without considering the cost effectiveness of this strategy as compared to requiring nitrogen oxide emissions reductions from other alternative sources, including large utility boilers.

"Nitrogen oxide emissions from these sources can be reduced at a third the cost of reformulating gasolines and achieve eight times the number of tons of nitrogen oxide emission reduction."

Texaco said EPA's order would unnecessarily increase the cost of reformulated gasoline by 2/gal above the 12-14/gal cost increase consumers will pay for EPA's Phase 2 RFG.

"EPA has missed a valuable opportunity to provide leadership and guidance to the states in helping the nation achieve cleaner air at the lowest cost," Texaco said.

The company urged EPA to begin a process to develop a comprehensive nitrogen oxide policy based on the best science and most economical strategies for potential emissions reduction among autos, fuels, and large industrial boilers.

The Natural Gas Supply Association said the ethanol mandate "appears to counter the Clinton administration's support for market based solutions to environmental problems."

It said EPA should preserve industry's willingness to participate in reg-neg talks, but the ethanol mandate "could make industries hesitate to spend valuable resources participating in a reg-neg when unhappy parties can successfully end-run the process.

"In addition, proposals like this have the potential to slow technological progress. As the market for environmentally friendly gasoline expands, chemists will come up with new, improved, and probably less costly formulations.

"We believe they should have full latitude to develop the best product. There should be no guaranteed market share for ethanol, methanol, or anything else."

The Ohio Farm Bureau was disappointed that the administration did not specifically require ethanol in the final RFG formula.

"The administration is hiding behind technicalities by not giving ethanol its stamp of approval. They are choosing the science that best fits their agenda. It seems like another victory for big oil and the Middle East."