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Gasoline Sulfur Reduction Proposal Needs Changes

Washington, D.C., April 30, 1999 — Consumers would benefit and air quality improvements would continue under a long-term program offered by the U.S. oil refining industry to effectively and affordably reduce sulfur in gasoline beginning in 2004, the U.S. oil refining industry said today.

The American Petroleum Institute (API) and the National Petrochemical & Refiners Association (NPRA) jointly urged the U.S. Environmental Protection Agency (EPA) to build on clean air accomplishments rather than push forward its unnecessarily costly proposal to rapidly reduce nationwide gasoline sulfur levels by 90 percent. The agency should not ignore the nation's different air quality needs and the costs that will be imposed on investors and consumers, the groups said.

Continued air quality improvements could be achieved more affordably and equitably under the petroleum refining industry's two-region, two-phased gasoline sulfur level reduction solution, which would allow for time needed to make investments and facilitate equipment changes, oil industry groups said.

API and NPRA said that under the EPA's proposal, gasoline sulfur levels would be reduced nationwide to the extremely low levels now required in California, which uniquely suffers from the nation's worst air quality. That means all consumers would pay for this costlier-to-manufacture fuel, even those who live in areas where air quality already is very good.

"The case for a national approach has yet to be made and an approach that does not recognize regional differences in air quality means that consumers will pay more than necessary, and refiners will be hard pressed to make the reductions on schedule," said William F. O'Keefe, API's executive vice president. A number of important improvements need to be made in EPA's proposal, he said, and industry will make a strong case for modification before it becomes a final regulation.

The industry urged EPA to support a phased, two-region approach that would cut sulfur levels by nearly half nationwide, with most of the reduction weighted. Gasoline sulfur reductions toward the East where most ozone air quality problems exist. The sulfur cuts would occur in the same year as EPA's plan, 2004, but would account for the fact that less sulfur reduction is needed in the West where air quality generally meets federal standards, excluding California.

"Air quality problems are vastly different across the nation. Yet under EPA's plan, the citizens of Boise, Idaho will pay as much or more to clean their air as will the citizens in the Bronx, New York," said Bob Slaughter, general counsel and director of public policy for NPRA. "This rulemaking has not demonstrated that all regions of the country need the same level of sulfur reductions; the best technology to enable EPA's plan is not yet generally available commercially and, as a result, the costs to achieve EPA's plan are too high," Slaughter said.

Industry's plan also would make additional sulfur reductions if needed -to the 90 percent reduction level in the EPA proposal - but at a later date to allow for the implementation of new, more cost-effective refinery processing technology. EPA's unnecessarily rapid schedule could prevent refiners from using potentially more cost-effective-but commercially unproven-sulfur reduction technology.

With the oil refining industry's proposed lower sulfur gasolines in use, vehicle emissions would be reduced in all cars, old and new. These improvements would build on more than two decades of dramatically successful actions by the oil refining industry to make cleaner burning fuels. In fact, EPA statistics show emission reductions from cars and trucks have exceeded emission declines from all other sources combined. Today's new cars run 95 percent cleaner than those manufactured 30 years ago.

While EPA's proposal initially would reduce emissions more, API and NPRA have estimated that, using existing technology, it also could raise the cost of making gasoline by more than $7 billion a year, equivalent to about 5 to 6 cents per gallon. The difference in impact on ozone levels between the two proposals would be small and hard to measure.

By contrast, refiners estimate that under industry's own proposal the capital investment costs to lower gasoline sulfur levels will only be about $3 billion. This investment plus the operating expenses for this new equipment translates to a cost of about two cents a gallon.

Fact Sheet

Petroleum Refining Industry Gasoline Sulfur Reduction Proposed Plan

Background
Sulfur is a natural component of crude oil from which gasoline is made. Sulfur in gasoline can diminish the efficiency of an automobile's catalytic converter, producing an increase in nitrogen oxide (NOx) and other 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.

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.

Industry's proposal
A cleaner, lower sulfur conventional gasoline made for all states east of the Mississippi River plus Missouri, Louisiana and East Texas-except for those areas using reformulated gasoline with a year-round sulfur average of 150 parts per million (ppm) and a per gallon cap of 300 ppm.

For most of the rest of the nation, where air quality problems are less severe, the industry would make a second lower sulfur gasoline with a year-round sulfur average of 300 ppm and a per gallon cap of 450 ppm. States not targeted for the 150 ppm sulfur gasoline could use it once they demonstrate a need for the fuel under provisions in the Clean Air Act. Opt-in requirements should be developed that would ensure stability in gasoline markets.

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.

Industry has agreed to reduce sulfur levels in 2010 to the levels proposed by EPA unless a joint industry analysis of air quality and technology supported higher levels. This would allow for the implementation of new, more cost-effective refinery processing technology as well as other improvements to be implemented and assessed.

The new fuels would be available by January 2004 or when the first Tier 2 vehicles are introduced, whichever occurs first, which allows for lead time needed to plan and make the changes to refineries and distribution facilities needed to produce new gasolines.

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