WASHINGTON, DC, May 12 -- US motor fuel suppliers apparently are meeting challenges raised by the Energy Policy Act of 2005 (EPACT) and new pollution-reduction requirements from the Environmental Protection Agency, several witnesses told a congressional committee on May 11.
Some of them also joined a representative of state and local air quality regulators in warning that a quick reduction in the number of specially formulated, "boutique," fuels could do more harm than good.
"We believe the ability of states and localities to adopt boutique fuels programs is an essential element in controlling air pollution," said S. William Becker, executive director of the State and Territorial Air Pollution Program Administrators and the Association of Local Air Pollution Control Officials.
He said refiners often helped regions, states, and communities develop special motor fuel formulations as alternatives to more expensive federal standards. "We urge the Congress to not further limit the ability of states and localities to adopt boutique fuel programs," Becker said.
National Petrochemical and Refiners Association Pres. Bob Slaughter said, "There's disagreement in the industry over boutique fuels. We basically feel the issue is not as serious as some people have suggested."
Because desulfurization will make regular gasoline more like reformulated fuel, he said, "Fewer regulators may want to go to a boutique fuel."
The comments came during the second day of House Energy and Commerce Committee hearings on gasoline prices, supplies, and specifications (OGJ Online, May 11, 2006).
Wave of changes
A wave of changes is hitting as US refineries run at more than 90% of capacity, American Petroleum Institute Pres. Red Cavaney observed.
"To address refining capacity concerns, we have spent billions of dollars recovering from last year's hurricanes, and we anticipate bringing an additional 1.3 million b/d of new refining capacity on stream between now and 2011," he said.
The industry also has spent large sums to meet the 4 billion gal renewable fuels standard for 2006 required by EPACT while delivering gasoline with 90% less sulfur and preparing to deliver diesel fuel with 97% less sulfur, Cavaney said.
Slaughter said US refiners will spend an estimated $8 billion to reduce sulfur levels in gasoline and another $8 billion to start producing ultralow-sulfur diesel.
Of the diesel fuel transition, which is a few weeks away, the NPRA executive said, "Refiners have been working closely with all the stakeholders to make it as smooth as possible. We have never made one like this. Our fingers are crossed."
He said refiners have completed their seasonal turnarounds and, for some, the transition from methyl tertiary butyl ether to ethanol as a reformulated gasoline component.
"This should eliminate some of the causes for uncertainty in the marketplace going forward. We continue to be concerned, however, about crude oil price levels, which have increased the cost of refiners' raw material by 40% over last year," Slaughter said.
Renewable Fuels Association Pres. Bob Dinneen questioned the idea that ethanol ran short as refiners switched from MTBE. He said ethanol producers recognized that their product could not be shipped by pipeline and responded by creating a "virtual pipeline" of tank trucks, rail cars, and barges to get ethanol to terminals.
As terminals build more blending facilities, he said, consumers could benefit from lower gasoline prices as more pipeline space becomes available because MTBE is not being shipped.
Dinneen argued against suspension of the tariff on imported ethanol and for retention of subsidies for domestically produced ethanol.
A representative of the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA) said regulations including an EPA proposal to cut gasoline's benzene content are putting pressure on the nation's motor fuel delivery system.
"At a time when the public and many in Congress are calling for policies to increase domestic refining capacity and gasoline production, in reality the nation's existing statutes are working against supply maximization," said Paul D. Reid, president of Reid Petroleum Corp., Lockport, NY.
He said SIGMA and NACS want Congress amend EPACT to reduce, instead of simply cap, the number of boutique fuels in use across the country. The organizations also would like to see federal action addressing what they consider a proliferation of state ethanol, biodiesel, and other alternative fuel mandates.
They do not support proposals in the House and Senate to more quickly reduce the number of fuels used, however. "Such so-called 'fuel slate' proposals are, in our opinion, premature," said Reid. Instead, SIGMA and NACS would like the fuel formulation study required under EPACT to be completed as scheduled by mid-August before steps are taken.
Contact Nick Snow at [email protected].