Citgo's Thompson: New sulfur rules to cost industry $16 billion

The US refining industry will have to invest an estimated $16 billion to comply with US EPA's low-sulfur gasoline and ultralow-sulfur diesel rules by 2006, said Jerry Thompson in an address Oct. 24.

By OGJ editors

HOUSTON, Oct. 30 -- The US refining industry will have to invest an estimated $16 billion to comply with the US Environmental Protection Agency's low-sulfur gasoline and ultralow-sulfur diesel rules by 2006, said Citgo Petroleum Corp. Sr. Vice-Pres. Jerry Thompson in an address Oct. 24 at the OPIS National Supply Summit in San Antonio. EPA originally had projected the rule ultimately would cost the industry about $4 billion/year (OGJ Online, May 6, 2002).

"The first phase of the low-sulfur gasoline rule, which begins Jan. 1, 2004, requires refiners to meet an annual average sulfur content of 120 ppm, with no single gallon exceeding 300 ppm," he said. "By Jan. 1, 2006, and beyond, refiners must meet an annual average of 30 ppm, with no single gallon exceeding 80 ppm," he added.

Based on discussions with engineering and construction firms, Thompson estimated that refiners responsible for roughly 40% of the US refining capacity have not begun the necessary detailed design engineering on facilities required to produce low-sulfur gasoline. "Most of those refineries that have not yet committed to engineering are probably planning to take advantage of credits and allotments to delay their investment, but some will forego the necessary investment altogether and will eventually shut down," he said.

Ultralow-sulfur diesel fuel regulations, which require refiners to produce 15 ppm sulfur, take effect June 1, 2006, with the same fuel available at the retail level on Sept. 1, 2006. "Charles River & Associates has estimated that as much as 20% of the current on-road diesel supply is at risk because of the ultralow-sulfur diesel rule," he said. "A report published by the National Petroleum Council in the summer of 2000 recognized the risks of overtaxing the refining industry's ability to complete projects to produce both low-sulfur gasoline and low-sulfur diesel within the same time frame and recommended that the rules not overlap," he continued.

Thompson also discussed new vehicle technologies and the fuels that will power them. "The best fuel for the future should be determined by whatever combination of fuel and engine provides the best efficiency at the least cost," he stated. "Today, that is the gasoline-powered internal combustion engine, and I am convinced that gasoline will continue to be the fuel of choice for at least the next 25 years and probably beyond," he concluded.

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