EPA'S NEGOTIATED GASOLINE RULE

At times, a little certainty goes a long way. The negotiated Clean Air Act (CAA) amendment rule progressing through the U.S. Environmental Protection Agency provides a measure of certainty to a refining industry that desperately needs it.

Sept. 9, 1991

3 min read

At the very least, refiners won't have to slay legal and technical dragons at the same time. They still must reinvent gasoline in accordance with the 1990 CAA amendments and do so quickly. But signatories to the negotiated EPA rule agreed not to litigate or oppose the proposal over points it covers. Refiners, therefore, have some assurance that EPA's final rule won't differ much from the supplemental notices of proposed rulemaking it will issue soon.

That's important. To meet tight CAA deadlines, refiners must plan and invest now. An early sense of what's required can only help.

SOME WON'T SURVIVE

Another, less fortunate bit of certainty is that some refiners won't survive in the gasoline business. While the negotiated rule makes CAA amendment requirements more reasonable than before in some areas, at least clearer in others, it makes overall compliance no less challenging or expensive. Refiners not only must perform miracles with gasoline chemistry, they eventually will have to make huge investments to retrofit plants and distribution systems. Then they'll have to spend more money than before just to produce each gallon of gasoline, regardless of what happens to crude oil prices. The economic burden will be too much for refiners now barely breaking even, especially those with old plants.

The negotiated rule describes how EPA will certify reformulated gasolines, which the CAA amendments require 'in areas with chronic ozone pollution and which no one yet has commercially produced. It tells how EPA will enforce antidumping provisions preventing refiners from adding to conventional gasoline the troublesome substances they keep out of reformulated fuels. It provides some details of an oxygenated gasoline credit program EPA will recommend. It allows EPA to suspend reformulated fuel requirements when emergencies keep refiners from meeting them. And it defines state and federal relationships in the areas of reformulated gasoline and antidumping.

The negotiated rule does, therefore, begin to clarify some of the CAA amendments' many ambiguities. But major issues remain. For example, the rule does not address oxygenate supply questions. CAA provides for waivers to gasoline oxygenate requirements in case domestic supplies fall short of demand. The negotiated rule doesn't attempt to resolve disputes over what constitutes domestic supply and whether cost should be considered. And it doesn't treat the related issue of how and whether areas with marginal ozone pollution problems can "opt in" to reformulated gasoline mandates. Because reformulated gasoline must contain oxygen, early opt-in by many regions probably would create more oxygenate demand than industry can satisfy in the program's early years.

A PRICE STING

So uncertainties persist, as they will until EPA publishes its final rule and until technology catches up with CAA requirements. But one certainty remains: Because gasoline soon will cost more than ever to make, and because fewer refiners will be making it, fuel prices at the pump will have to climb.

It's folly to predict the amount of increase; there are too many variables. It's enough to say that this year's fuel bargains in the U.S. soon will seem like relics of the distant past. Refiners, therefore, have one more challenge. They must prepare their customers. The coming price sting, in effect a pollution tax, should surprise no one.