As you know, the U.S. EPA is planning to announce its proposal to reduce sulfur in gasoline, a goal we share. This proposal is another in a series of efforts stretching back more than 20 years to make gasoline-powered vehicles ever more compatible with clean air goals. Taken together, these improvements and others to follow reinforce the role of gasoline-powered transportation and the mobility and convenience it provides—while at the same time ensuring continuing improvements in air quality.

EPA’s plan follows more than a year of meetings with representatives of the U.S. petroleum industry and others. During our meetings, we provided the agency with information concerning the costs, the supply and distribution challenges, and the technology of sulfur reduction. Our objective was to encourage the development of a rule that is fair, affordable, effective and practical.

The agency’s proposal is a first step toward this goal and should only begin the public dialogue. We believe that it can and should be improved in a number of important ways. Over the next several months before a final regulation is issued, we will continue to make a case for modification. To that end, we’ll continue our discussions with EPA and submit formal written comments.

Under EPA’s proposal, sulfur levels would be rapidly reduced about 90 percent nationwide to levels now only required in California, which still has the nation’s most serious air quality problems. This reduced sulfur gasoline would be marketed beginning in 2004.

We do not believe that a convincing case has been made for a national approach. A regulation that does not recognize regional differences in air quality will cost consumers more than necessary, and it will create extremely difficult challenges for refiners as they seek to implement the reductions on such a tight schedule. We have urged EPA to support a phased, regional approach instead. Under our alternative, in the same year, 2004, the petroleum industry would cut sulfur levels about 50 percent on average nationwide, with most of the reduction weighted toward the East. Less sulfur reduction is needed in the vast heartland of America, including most of the nation west of the Mississippi, because air quality there generally meets federal standards.

Additionally, the industry has proposed further reductions in sulfur, if necessary, to the 90-percent reduction level in EPA’s proposal, but at a later date. This would allow for implementation of new, lower cost refinery processing technology. Time is needed to commercialize promising but unproven advances in technology, and time is needed to make and, hopefully, recover the costs of these very large investments.

Our plan, which is supported by virtually the entire U.S. refining industry, is based on several compelling points:

First, it would substantially cut emissions from pre-Tier 2 vehicles, contributing to further reductions in ozone even before Tier 2 models generate appreciable air quality benefits. Although EPA’s proposal would, initially at least, reduce sulfur more, the difference in impact on ozone levels between the two proposals is likely to be small, perhaps within measurement error.

Second, as the map indicates, our plan tailors sulfur reductions to where they’re needed, minimizing the cost burden on consumers. Sulfur reductions are appropriate in the highly populated eastern U.S., where air pollution problems are more serious. But why should motorists further west have to pay for a much costlier-to-manufacture gasoline? The reductions we’re recommending for the Rocky Mountain region and other clean air areas west of the Mississippi River would leave money in the pockets of motorists to spend in ways that clearly deliver higher value.

Third, our proposal allows for the development and commercialization of promising new cost-effective de-sulfurization technology, which could reduce the costs of cutting gasoline sulfur by as much as half. Today, this technology isn’t commercially proven. As a result, if refiners are compelled to reduce sulfur nationwide in 2004 to California levels as EPA proposes, they will be forced to rely on costlier technology or risk large investments in a technology that may not be ready for widespread application. Either way, there will be unnecessary costs for consumers and economic waste.

Fourth, our plan would be compatible with low emission control technology on automobiles. Peer-reviewed emissions research, which API has provided to EPA, demonstrates that today’s emission control technology can achieve low tailpipe emissions with gasoline sulfur levels that are higher than we are proposing.

The petroleum industry’s proposal has a strong technical and economic foundation. We will continue to work to encourage a final rule that provides adequate flexibility, reflects economic realities, maintains an effective and efficient manufacturing and distribution system for clean burning gasoline and a level playing field for all refiners. We have experience in retooling our facilities to make cleaner and cleaner fuels—and in providing them in the amounts needed at affordable prices, if adequate time is provided.

For these reasons, EPA’s proposal in its current form is cause for concern. It presents a daunting challenge. It requires capital investments for a refining industry that is struggling financially and involves planning, permitting and constructing extensive refinery changes on a very tight schedule. Based on California’s experience with mandating stringent statewide sulfur requirements, we are concerned that some refiners may not be able to implement EPA’s new national requirements on schedule. This could be disruptive to some part of the U.S. gasoline supply system or lead to differential treatment among refiners. Neither outcome is acceptable or necessary.

Over the past 25 years, the petroleum industry has introduced six cleaner fuels. These cleaner fuels, along with improvements in vehicle technology, have contributed to substantial reductions in emissions from cars and trucks. According to EPA statistics, they’ve helped cut total vehicle emissions since 1970 by well over one-half, even though we’ve more than doubled the total miles we drive annually. In fact, since 1970, emission reductions from cars and trucks have exceeded emission declines from all other sources combined. Air quality continues to improve throughout the country, and mobile source contributions to air pollution represent a much smaller part of the problem than at the start of this decade. Improvements in fuel/vehicle technology will make sure that this progress continues. This is a great story that is rarely told.

Through its sulfur reduction proposal, EPA has set the next round of gasoline and vehicle improvements in motion for both the automobile and oil industries. EPA’s emissions goals are ones we support. But elements of the fuel proposal need to be altered. As a nation, we embrace a strong commitment to continued environmental progress, but, as a nation, we should insist that this commitment be achieved through knowledge, technology and collaboration that result in smarter and cheaper regulations.