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GASOLINE SULFUR RULE COULD AFFECT GASOLINE SUPPLY

December 21, 1999 — The final gasoline sulfur rule announced by the President and EPA today is an extremely ambitious, high-stakes approach to reducing sulfur in gasoline. It requires the refining industry--whose product is vital to the national economy--to make unprecedented investments in unproven technology to meet the rule's timing requirements. It then assumes that those unproven technologies will work without a hitch to maintain the flow of gasoline to consumers without major upsets in supply or price.

"This final EPA rule imposes California's current state gasoline sulfur regulations on the entire United States. It will require substantial refinery investments approximating a total cost of $3-5 billion (roughly 3-5 cents/gallon, on average). We are concerned that extending these sulfur limits to the whole country could lead to supply and price instability nationwide, similar to that which California experienced earlier this year," said Urvan Sternfels, NPRA President.

"From the beginning, the refining industry has supported reduction of sulfur levels. We proposed a more cost-effective, regional plan which better matches the areas required to reduce gasoline sulfur with those needing air quality improvements. Our plan was also ambitious, but it was more cost-effective and better focused. In short, the industry plan is still preferable to that announced by the President today. It would save consumers money and maintain plentiful gasoline supplies, while achieving significant reductions in sulfur levels where they are needed," Sternfels added.

EPA officials asked to hear our views and recommendations throughout the process, but we regret that they rejected our core suggestions which would have reduced the risks of this rule while preserving many of its benefits. Throughout the rulemaking, NPRA asked EPA to allow refiners more time and added flexibility in order to comply with EPA's target of a 90% reduction in gasoline sulfur levels. EPA has made changes which help a little, but probably not enough.

The question of whether this rule is workable will not be answered until we know that refiners will still be able to meet consumers' demand for gasoline. The refining industry is accustomed to challenges, and we will try to make the program work. But we will need the active cooperation and assistance of EPA, as well as state and local officials, as we move forward to implement this rule.

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