Petroleum industry proposes regulations for cleaner fuels

The petroleum industry recognizes it must build on the progress it has made providing cleaner burning fuels to the nation. As the next step, the industry is proposing regulations that would permit it to produce cleaner conventional gasoline with two lower sulfur levels at reasonable cost to consumers. These fuels would reduce emissions that contribute to air pollution problems—in part by making it easier for automakers to design cars that meet more stringent future tailpipe emission standards.

Background on gasoline improvements

The industry’s proposal to regulate sulfur in gasoline is the latest chapter in 25 years of improvements aimed at making petroleum fuels cleaner burning. These improvements, made to comply with governmental requirements, included:

• Lead-free gasoline, phased in beginning in the 1970s;
• Low evaporation gasoline, 1989;
• Winter oxygenated gasoline, 1992;
• Diesel fuel with 85 percent less sulfur, 1993;
• Federal reformulated gasoline (RFG), 1995; and
• California cleaner burning gasoline (CBG), 1996.

These enhancements to petroleum fuels have produced substantially cleaner air. According to EPA, the removal of lead from gasoline has helped cut ambient lead concentrations by 97 percent over the past 20 years. The agency also says that federal RFG—which makes up about one-fourth of all gasoline sold—has effectively eliminated the emissions of eight million vehicles. And the state of California, with the worst air pollution in the nation—maintains that its costlier reformulated gasoline, CBG, has had the effect of eliminating the emissions of 3.5 million California vehicles.

Since 1970, these improved fuels—when used in cleaner running vehicles—have helped reduce highway vehicle emissions by an amount that exceeds reductions in emissions from all other sources, according to EPA’s latest air quality trends report. Moreover, the reductions occurred even though people more than doubled their driving (an increase of 121 percent in miles driven) since 1970.

In 2000, the petroleum industry will extend this progress by introducing federal phase II RFG, a reformulated fuel more advanced and cleaner than the federally required RFG now being sold. The gasoline regulations the industry is now proposing would permit it to make lower sulfur conventional gasoline at the time anticipated new vehicle tailpipe emission requirements are implemented, probably beginning in 2004. This new conventional gasoline would ensure that emissions from all vehicles in all parts of the nation are reduced—not just in areas using reformulated gasoline.

Background on sulfur

Sulfur is a natural component of crude oil from which gasoline is made. Sulfur in gasoline diminishes the efficiency of an automobile’s catalytic converter, producing an increase in nitrogen oxide (NOx) and other polluting tailpipe emissions.

Standards established by the American Society for Testing and Materials—and adopted by many states—include a cap on sulfur of 1000 parts per million (ppm). That cap is intended to help prevent engine wear, deterioration of engine oil, and corrosion of vehicle exhaust systems. Automobiles are manufactured to meet today’s tough tailpipe emission standards while operating on gasolines made to comply with the ASTM standards. According to a petroleum industry survey, the national average level of sulfur in today’s conventional gasoline (excluding reformulated gasolines) is 347 ppm, with almost one-fourth having a sulfur level of 500 ppm or higher.

Automobile emission standards

As required by the 1990 Clean Air Act Amendments, EPA is now evaluating whether more stringent tailpipe emission standards will be needed to help the nation achieve its air quality goals. EPA will report its conclusions to Congress this summer.

New vehicles today meet "Tier 1" tailpipe standards set in the 1990 Clean Air Act Amendments. These standards have reduced tailpipe emissions about 95 percent from levels in the 1960s before government imposed standards. Now, as directed by the same law, EPA is considering whether new more stringent "Tier 2" standards should be issued. These would cut allowable emissions by more than half compared with the Tier 1 standards. If, as expected, the agency decides to impose Tier 2 standards, it may propose regulations toward the end of 1998 that would set new gasoline sulfur standards as well as new tailpipe standards. The Tier 2 standards could be issued in 1999, and their implementation would be phased in later, probably beginning in 2004.

Industry’s proposal

Under the regulation proposed by the industry, it would make a cleaner, lower sulfur conventional gasoline that would help meet air quality needs in 22 OTAG (Ozone Transport Assessment Group) states and Washington, D.C. This fuel would feature a summer sulfur average of 150 parts per million (ppm). For parts or all of 27 states where air quality problems are minimal or nonexistent, the industry would make a second lower sulfur gasoline with a sulfur average of about 300 ppm. California would continue to use the special reformulated, low sulfur gasoline it now requires, and some areas outside California would use a federal reformulated gasoline.

A key attribute of this multiple fuel approach is cost-effectiveness. It would match the emission benefits of lower sulfur gasoline to the air quality needs of particular areas. Since reducing sulfur levels in gasoline is costly, consumers would not be faced with a higher cost gasoline than their air quality requirements demanded.

States other than those targeted in the OTAG region for the 150 ppm sulfur gasoline could request approval from EPA to use it based on a demonstration of need under the Clean Air Act. These states should have to meet opt-in requirements established by EPA to provide stability in gasoline markets and to address stranded cost issues.

Implementation timing

Under the industry’s proposal to regulate gasoline sulfur levels, the new fuels would be available by January 2004 or when the first Tier 2 vehicles are introduced, whichever occurs first. This projected lead time is necessary to plan and make the changes to refineries and distribution facilities needed to provide new gasolines to the nation.

Proposal’s cost

Many refineries will need to make significant improvements in facilities and technology to enable them to manufacture the new lower sulfur gasolines. These changes will require capital investments in sulfur reduction processing equipment totaling about $3 billion, which may translate to only a very few cents per gallon of gasoline produced. While greater reductions in sulfur could reduce emissions more, they would also require proportionately greater capital investments, increasing the cost-per-gallon of manufacture. For example, if EPA required maximum sulfur content to be reduced to 80 ppm, the additional cost of manufacture could be as much as 5 cents to 6 cents per gallon above the cost of making today’s conventional gasoline.

The automakers want all gasoline sold in America to contain no more than 80 ppm sulfur. Reducing sulfur this drastically nationwide is unnecessary to achieve or maintain good air quality, unnecessary to implement Tier 2 tailpipe emission requirements, and could result in consumers in some areas paying more for gasoline than necessary. Although the cost to produce lower sulfur gasoline would be higher than today, the price paid by consumers would be determined by the marketplace.

Emission benefits

Lower sulfur gasoline would immediately reduce NOx and other tailpipe emissions, which contribute to air pollution. It would assist in cutting emissions in future Tier 2 cars and also in all existing vehicles, helping cities and states working to comply with the new, recently established national air quality standards for ozone. In quantitative terms, the 150 ppm sulfur average gasoline proposed by the industry would have the effect of eliminating the emissions of nearly 16 million vehicles built to comply with today’s Tier 1 tailpipe standards. This is in addition to benefits provided by Tier 2 vehicle technology.

Compatibility with cars of the future

With lower sulfur gasoline and more advanced catalyst technology likely to be developed in the next few years, future vehicles should be able to achieve the extremely low emissions required by Tier 2. In fact, some current vehicles already can.

For example, a joint auto-oil study conducted by the Coordinating Research Council (CRC) of Atlanta found that some current technology vehicles produce very low emissions—even while burning gasoline with sulfur levels higher than average for today’s gasoline. The Toyota Camry, designed to operate on very low sulfur California gasoline (averaging 30 ppm sulfur), produced emissions that met the prospective federal Tier 2 tailpipe standards for all three measured pollutants—non-methane hydrocarbons, nitrogen oxides, and carbon monoxide—when operating on conventional gasoline with sulfur levels between 500 ppm and 600 ppm.

It is important to understand also that the use of two gasolines with different sulfur levels should not prevent air quality goals from being met in the more polluted areas. While gasoline with higher sulfur does reduce catalyst efficiency, thereby increasing emissions, research conducted by the auto and oil industries on existing vehicles has shown that catalysts quickly and fully reverse this decrease in efficiency with return to use of lower sulfur gasoline. Thus, cars traveling back and forth between areas with different air quality problems using gasolines with different sulfur levels should not present significant emissions problems. API will be soon be conducting additional research on the reversibility of sulfur effects concerning future technology vehicles.