Friday, January 13, 2012

Huge Differences In Cost & Benefit Estimates Of Tier 3 Low Sulfur Rules

Jan 12: A bipartisan group of Senators, including Senator James Inhofe (R-OK), Ranking Member of the Senate Committee on Environment and Public Works, Senator Lisa Murkowski (R-AK), Ranking Member of the Senate Committee on Energy and Natural Resources, Senator David Vitter (R-LA), Senator John Barrasso (R-WY), Senator Mary Landrieu (D-LA), and Senator Mark Begich (D-AK) joined in a letter to U.S. EPA Administrator Lisa Jackson expressing concern that EPA's Tier 3 standards will greatly increase the cost of gasoline and put jobs at risk at a time when Americans are struggling to make ends meet in a weak economy.
    On October 31, 2011, the National Association of Clean Air Agencies (NACAA), representing air pollution control agencies in 53 states and territories and over 165 major metropolitan areas across the United States(formerly STAPPA and ALAPCO), released a report on the benefits and costs of implementing the their recommendations for Tier 3 motor vehicle and gasoline standards. NACAA indicated that the amount of air pollution that would be immediately reduced from lowering the sulfur content of gasoline to an average of 10-ppm is equivalent to removing approximately one in eight cars and light trucks from the roads. They said that result would come at a price of $0.008 -- eight-tenths of a cent per gallon. Such cleaner gasoline would also enable improved technologies on cars and light trucks that could yield substantial vehicle emissions reductions at a cost of about $150 per car [See WIMS 10/31/11].
    Specifically, the concerned Senators said EPA is preparing a notice of proposed rulemaking (NPR) that will lower the sulfur content in gasoline from 30ppm to 10ppm -- and they said, "this comes at a high cost." Despite the estimates of NACAA, the Senators cite a study by Baker & O'Brien that estimates the capital and annual operating cost of a 10ppm standard at $17 billion and $13 billion, respectively. They said, "Depending on the stringency of the proposed rule, that could add 12 to 25 cents to each gallon of gasoline." Additionally, they indicated that "several fuel manufacturers will not likely be able to comply, which will force plant closures -- resulting in both direct and indirect job losses." 
    The Senators concluded their 3-page letter saying, ". . ."we urge EPA to reconsider the timing of Tier 3 standards for gasoline. We also ask you to provide Congress and the public with as much notice as possible in advance of any formal proposal. We support clean air, but EPA should provide adequate scientific justification for all aspect of the proposed rule, thoughtfully reflect on the results of the yet-to-be completed anti-backsliding study, and understand the cumulative effects of all existing and pending air regulations on families and workers."  
    Senator Murkowski said, "A high level of bipartisan concern has emerged over EPA's looming Tier 3 regulations. Gas prices are already high, especially in Alaska, and our nation's economy continues to struggle. Despite this, EPA has chosen to proceed with a rulemaking that could lead to added financial burden on families and businesses. I hope that Administrator Jackson will pay close and careful attention to the unintended negative impacts this rule could have, especially in combination with the rest of EPA's regulatory agenda." Senator Landrieu said, "I am deeply concerned that the EPA is crafting these new Tier 3 regulations without regard to the real-world consequences for American consumers and businesses. With Americans already feeling the pinch from high gas prices, these regulations stand to burden our country even further. I urge the EPA to consider the negative consequences that this rule could have on American families and our economy as a whole." 
    S. William Becker, NACAA's Executive Director had a very different view and said in October last year, "As NACAA's report reveals, reducing sulfur in gasoline would not only enable the use of improved emissions control technology on new cars and light trucks, it would also result in an overnight reduction in emissions from the existing fleet -- on the order of approximately 260,000 tons of nitrogen oxides (NOx) -- equivalent to taking 33 million cars off our nation's roads in 2017 when the program begins. I don't know of any other air pollution control strategy out there that can provide emissions reductions as significant and immediate as this."
    NACAA indicated in its report that, to independently determine the cost implications of lower sulfur gasoline, the International Council on Clean Transportation (ICCT) contracted with an expert refinery consulting company, MathPro, to update and slightly modify an earlier study MathPro carried out in 2009. In this new study, MathPro estimates the cost of reducing sulfur in gasoline to 10 ppm under differing sets of assumptions.
    NACAA indicated, "Based on the MathPro study, it appears the most reasonable, but still conservative, assumptions would be: All existing FCC post-treaters would require revamping to meet the 10-ppm sulfur standard; The average capital expenditure for revamping the fleet of FCC post-treaters is 30 percent of the expenditure for grassroots post-treaters (even though some of the existing units may require no revamping); and The target rate of return on refinery investments is 7 percent before tax. Using these conservative assumptions, MathPro concluded that the per-gallon price of 10-ppm sulfur fuel would be just $0.008 -- eight-tenths of a penny."
    When the Baker & O'Brien study was release last summer, Bob Greco of American Petroleum Institute (API) said, "The new EPA requirements could be devastating to consumers and communities across the nation. Consumers would be hurt by the increased cost of fuel projected by the study, and the closing of refineries could put local economies at risk, meaning there would be fewer jobs. In addition, we would be forced to rely even more on foreign fuel supplies, and that can only weaken our nation's economy and national security."
    National Petrochemical & Refiners Association President Charles Drevna said, "These regulations don't make sense environmentally or economically. The proposal would increase greenhouse gas emissions, hurt American consumers by adding billions of dollars to the cost of manufacturing gasoline, hurt communities and workers by threatening to put some fuel manufacturing plants out of business, and weaken America's economic and national security."
    Access the release and letter from the concerned Senators (click here). Access the 96-page Baker & O'Brien study (click here). Access a release from NACAA (click here). Access the complete 32-page NACAA report (click here). Access a Jul 29 release from API (click here). [#Air, #Transport]