Energy groups urge EPA's Whitman to revamp diesel sulfur rule

A score of associations has urged US Environmental Protection Agency Administrator Christine Todd Whitman to reconsider her agency's rule slashing sulfur in diesel fuel. The rule would require a 97% cut in sulfur levels by June 2006.


By the OGJ Online Staff


HOUSTON, Feb. 22
�A score of associations has urged US Environmental Protection Agency Administrator Christine Todd Whitman to reconsider her agency's rule slashing sulfur in diesel fuel.

The rule would require a 97% cut in sulfur levels by June 2006.

In a letter to Whitman, the groups said, "We believe that a revision of the rule is warranted because of the likelihood that the rule in its current form will result in a shortage of highway diesel fuel. Such a shortage would have a serious negative impact on the economy, because diesel is the nation's premier commercial fuel.

"Most American goods are shipped by diesel trucks, which means that any supply shortage and resulting cost impacts will immediately be felt throughout the national economy. A reliable supply of diesel fuel and engines is critical to the operations of farmers, truckers, bus operators, food distributors, small businesses, and other users."

The associations said they support significant reductions in the sulfur content of highway diesel fuel.

"Prior to promulgation of the rule, we, along with many other organizations, urged the previous administration to adopt a more reasonable and balanced approach in this rulemaking. Such an approach would not compromise the environmental gains of the final rule, but would avert the rule's real potential for supply shortfalls.

"Unfortunately, the previous administration took a rather short-sighted approach and was unwilling to make meaningful changes in the rule to address future supply concerns."

They said, "We are concerned that here, as in the case of California's electricity market, policymakers have taken energy supply for granted in an attempt to attain other policy objectives. We believe that revisions to the diesel sulfur rule can be made to address the potential supply shortage while still meeting environmental protection goals."

The groups noted Charles River Associates has estimated EPA's rule likely would cause a 12% national shortfall in supplies of highway diesel. It said the Rocky Mountain states could see a 37% shortfall.

"Shortfalls of this magnitude, were they to materialize, would likely cause severe market instability and price spikes much greater and over a longer period of time than that experienced in the Midwest gasoline market last summer," the groups said.

Their letter said Charles River Associates estimated diesel prices could jump 15-52�/gal in a shortage. And they noted that the National Petroleum Council has said it is unlikely the US could import enough low sulfur diesel to cover domestic shortfalls.

"The NPC warned that supply shortages would likely result if EPA persisted in its plans to implement its diesel sulfur rule at the same time that the refining industry is implementing an equally ambitious gasoline sulfur reduction program that is effective in 2004-2006."

The groups told Whitman, "Given this situation, we think that it is very important that you proceed with a review of this rule, and that you give strong consideration to revising it to achieve a better balance between environmental objectives and the need to maintain energy supplies."

Among the groups sending the letter were the American Petroleum Institute, the National Petrochemical & Refiners Association, the New England Fuel Institute, the Petroleum Marketers Association of America, the Independent Fuel Terminal Operators Association, the Service Station Dealers of America & Allied Trades, the Society of Independent Gasoline Marketers of America, and the US Chamber of Commerce.

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